#882 Bitcoin & Ethereum Are Going To Break Out Of Bear Market w/ Darius Dale

Darius Dale is the Founder & CEO of 42 Macro, the leading macro risk manager adviser. In this conversation, we discuss the macro economy, what's happening in the financial markets, how Darius is looking at various metrics, and what you should be considering as you're investing your capital. Darius joins us every Thursday on "The Best Business Show." To see the video with the corresponding charts that Darius references throughout the interview, go to "The Best Business Show: LIVE" YouTube Channel ======================= Crypto is all about giving the power back to the people and our sponsor, Pipe, is doing that in a big way. Pipe is the world’s first trading platform that allows you to trade recurring revenue streams for up-front capital. And with Pipe’s new API, companies with recurring revenue can build seamless, embedded financing options into their platforms. One of the most interesting uses for Pipe’s new API right now is Compass Mining’s “Mine Now, Pay Later” which powers payment plans on bitcoin mining hardware so more miners can start or scale with a smaller up-front investment. Whether you’re looking for mining hardware or scaling any business with recurring revenue, check out Pipe to access growth capital with: No loans. No dilution. No restrictive covenants or warrants. Just growth on your terms And right now, Pomp Podcast listeners can access tens of thousands of dollars even millions fee-free for 12 months. Whether you are a bitcoin mining company looking to enable financing for your customers or a SaaS, DTC, or any business that has recurring revenue, sign up at pipe.com/pomp to start trading today. ======================= 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. =======================

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 Pipe. Crypto is all about giving the power back to the people, and our sponsor Pipe is doing that in a big way. Pipe is the world's first trading platform that allows you to

• 0:46Anthony Pompliano?

  trade recurring revenue streams for upfront capital. And with Pipe's new API, companies with recurring revenue can build seamless embedded financing options into their platforms. One of the most interesting uses for Pipe's new API right now is Compass Mining's "Mine Now, Pay Later," which powers payment plans on Bitcoin mining hardware, so more miners can start or scale with a smaller upfront investment. Whether you're looking for mining hardware, or scaling any business with recurring revenue, check out Pipe to access growth capital with no loans, no dilution, no restrictive covenants or warrants, just growth on your terms. And right now, Pomp Podcast listeners can access tens of thousands of dollars, even

• 1:27Anthony Pompliano?

  millions, fee-free for 12 months. Whether you are a Bitcoin mining company looking to enable financing for your customers, or a SaaS, DTC, or any business that has recurring revenue, sign up at pipe.com/pomp. Again, pipe.com/pomp to start trading today. 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 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 market.

• 2:10Anthony Pompliano?

  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 Monty 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 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%

• 2:51Anthony Pompliano?

  APY on stable coins 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. All right, let's get in this episode. I hope you guys enjoy this one.

• 3:15Speaker 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.

• 3:39Anthony Pompliano?

  All right, Darius, how are you?

• 3:40Speaker 02

  I'm freaking great. Is this an appropriate interjection? But

• 3:45Anthony Pompliano?

  Fire away, my friend. If we're going to set the world on fire, let's do it again.

• 3:50Speaker 02

  I don't come here to set the world on ice.

• 3:55Speaker 02

  No, let me start by saying, I don't, is, is Amazon the appropriate comparison? Shouldn't it be more like a Facebook, like a social network type deal?

• 4:02Anthony Pompliano?

  Or It could be any of them. My point was just like, I think right now, if you said like, uh, to somebody on Wall Street, like, hey, pick one stock that you have to hold for the next 20 years or 50 years or whatever. Amazon would be in that conversation. There's probably, I don't know, a dozen other companies, right? Even maybe a Berkshire Hathaway or whatever. And I think that if you zoom out a hundred years and you said to me, what's more likely to be there? That stock or Bitcoin? I think Bitcoin is the more durable asset over the next century. And it's not a knock against the company. It's just that from a durability standpoint, like Bitcoin is a very special thing and has special properties that are built for durability. The decentralization is very powerful.

• 4:40Speaker 02

  I'm telling you, man, I tweeted this a few weeks ago, but I think one of the most positive things for the whole cryptocurrency ecosystem is the fact that Citadel and Ken Griffin are getting involved in it. I mean, these guys are real slouches. They're, you know, he's probably one of the most respected, thoughtful, smartest, successful people in financial history. And so, you know, whenever he puts his, uh, his battleship, you know, to, to a task, they'd succeed at that task. I mean, they went from being, you know, arguably the world's best hedge fund, or one of the top two or three best hedge funds, to still maintaining that dominance in the hedge fund space, but then becoming the best market maker, just like overnight because they decided to, and they had the capital to do so, so.

• 5:16Anthony Pompliano?

  Do you think that he is doing it because he truly believes in it? Or he just wants to make markets in it and make money? Or does it not even matter because if they're involved, that's a good sign?

• 5:24Speaker 02

  I don't think it matters, right? Like even if you're like, like they're, they're a hedge fund, they're long and short all these different companies and credits. They can be long and short all these different, uh, you know, digital asset ecosystems, right? So like, I don't think it matters. I think the fact that they're involved tells you this has legs.

• 5:38Anthony Pompliano?

  Yeah.

• 5:38Speaker 02

  It ain't going anywhere.

• 5:40Anthony Pompliano?

  When you think about, uh, where we are right now, commodity prices, we had Peter Zeahan come on earlier this week. And, uh, I mean, he was just in prime form.

• 5:51Anthony Pompliano?

  And, uh, and he was talking about wheat, he was talking about fertilizer, I mean, the whole, the whole nine yards. What's your read on a lot of this? And like, what are you talking to clients about when it comes to commodities right now, given the Russia, Ukraine stuff?

• 6:02Speaker 02

  Yeah, so we're, we're long, I mean, you know, I don't particularly have anything that's new to offer in terms of being long energy and ag. But with respect to commodities, to me, I think it's about the duration with which investors can anticipate, you know, the supply chain disruptions, not supply chain disruption, sorry, the supply shortages to persist, right? I think there's a sort of underlying hope in the market that I can see sort of starting to peel away with respect to, you know, how quickly this, this conflict is going to drag out. And I don't necessarily mean the physical conflict, right? Obviously, you know, there's tragic stuff going on physically on the ground in Ukraine, but I mean, the sort of conflict between the West and Russia and potentially the West, Russia and China as it relates to, you know, sanctions and the dollar system and all that. You know, I think the most important

• 6:47Speaker 02

  news item of this week, you know, because obviously we got a lot of, you know, commentary out of the Fed last couple of days, last couple of weeks. And, you know, it's just been chatter nonstop. But the most, to me, the most important thing was Putin said they that basically or gas problem stopped taking payment in euros. And so if you recall, like Europe's basically gas prom is this Dr. Daddy for for Europe in terms of gas, you know, it's like 30 or 40% of their imports. And so by doing that, they're effectively sort of forcing Europe to abandon the sanctions. Now, I don't believe that they're Europe's going to go along with it. But it's a big deal because now they're effectively saying, we don't want your dollar system. Get scram.

• 7:26Anthony Pompliano?

  What what happens? Like, how can Europe not go along with it? If Russia just says, hey, we're only going to take rubles. Or I saw they may only take gold. And then there's a video this morning that even somebody were trying to translate like, I think they said Bitcoin, which I don't know if that's true or not. But let's just, let's just say that they're non Euro, non dollar currencies. If they're demanding that, can Europe say like, no, we're going to give you euros, take them? Or like, how does that work?

• 7:48Speaker 02

  So Europe is, they're really acting tough. I mean, you're starting to see cracks, right? Like Hungary backed off a little bit, Germany backed off a little bit in terms of their willingness to sort of include Russian oil and gas exports in the embargo. But, you know, President Biden's over there now for the NATO meeting in Brussels. And you know, he's going to make his sort of heartfelt pitch to these guys to hold the line, hold firm. And really, all it comes down to is how secure do the Europeans feel with respect to US promises that are being made on liquid national gas exports? I mean, we have the ability to, you know, to supply Europe. I don't know that we have the infrastructure yet. I don't know that Europe has the storage infrastructure to deal with, to deal with the big transition like that. It's going to be very costly. It's going to, you know,

• 8:30Speaker 02

  be, you know, fraught with friction. But will they feel secure enough to say, okay, I'm going to leave Big Daddy Gas Prom and go to Big Daddy Biden? And, you know, I don't know if that Europe's Germany certainly didn't seem that willing to do that earlier this week. So we'll see what happens in this meeting.

• 8:46Anthony Pompliano?

  You want to hear a wild story?

• 8:47Speaker 02

  Yep.

• 8:48Anthony Pompliano?

  So, most people have no clue how the history of this came together. One of my favorite documentaries in the world is an eight-part series from the History Channel called The Men Who Built America.

• 8:57Speaker 02

  Oh, I love that.

• 8:58Anthony Pompliano?

  And it goes through John Rockefeller, JP Morgan, a bunch of these, Andrew Carnegie, etc.

• 9:03Speaker 02

  Totally.

• 9:03Anthony Pompliano?

  And while you're watching this, one of the things that just blows your mind is they used to, obviously, take the oil. They would refine it, and then they would move it to wherever it needed to go. And the way they would use that is they would use rail.

• 9:15Speaker 02

  Yep.

• 9:16Anthony Pompliano?

  And at one point, there became this kind of domestic chess game of who could basically build a monopoly and prevent their competitors from some portion of that supply chain. So, somebody grabbed, okay, I'm gonna be the person who gets all the oil out. And then Rockefeller was like, well, actually, I don't want to be drilling it. Maybe I want to be the one refining it. And then, okay, well, now I have to put it onto these rail. But the rail operators won't work with me because they're gonna try to basically cut me out of my own business. And so, the whole way that we got oil pipelines is he had this grand idea. He was like, well, why don't I not use the rails? Why don't I just build a big-ass pipe to New York City?

• 9:59Anthony Pompliano?

  And I'll take my refined oil, I'm gonna push it through this pipe.

• 10:02Speaker 02

  Savage move, yeah. Build the pipeline next to the train tracks, too.

• 10:06Anthony Pompliano?

  I mean, like, literally, okay, cool, you're not gonna put it on the rail? I'm just gonna build a big-ass pipe. And everybody's like, ha, ha, ha.

• 10:11Speaker 02

  It's the easiest place to put a pipeline, by the way.

• 10:12Anthony Pompliano?

  And then he was like, watch this. And he built a big-ass pipeline. And he was like, I don't need your rail, like, screw you, I'm gonna go around you. And so, like, the reason why I tell that story is, we don't remember or think about it because it happened before we were all born.

• 10:24Speaker 02

  Totally.

• 10:25Anthony Pompliano?

  That, like, that's how this stuff happens, is literally, there's an entrepreneur somewhere who's like, I have a problem. How do I do this? Okay, I'm gonna build a big-ass pipe. And it sounds insane.

• 10:34Speaker 02

  Yeah.

• 10:34Anthony Pompliano?

  And then they go and do it. And now, like, there's pipes everywhere, obviously, all throughout Russia, Ukraine, getting natural gas, getting oil, etc. And so, when you think about that, the reason why I tell the story is not only that, like, there's infrastructure involved, but it's not like we're just gonna, you know, magically teleport oil from the United States now to, like, Germany. Right? Like, this is a real industry with atoms that need to be moved around the world. And it's expensive, it's hard, it's complex, it's logistics, all that stuff.

• 11:00Speaker 02

  It's so oil is if we're in the context of oil and gas, oil is easy. You can just dump a bunch of barrels of oil on a ship and ship it somewhere. That natural gas is extremely dangerous and extremely expensive, extremely hard to transport and store. And that's why there's no sort of global market for natural gas. It just didn't make any lot of economic sense. However, if the price is right, everything makes economic sense, right? I mean, there's a there's a price for everything, you know, you can cure cancer if you throw enough money at the problem. The problem is we don't throw enough money at the problem, you know, we throw off money at the treating of the problem. And so I do believe that, you know, we're heading towards this multipolar world. And again, the fact that Putin really tripled down on this sort of whole idea and concept that, hey, look, we don't care about these sanctions. We don't care. And look, you're going to pay us for what we sell to you.

• 11:45Speaker 02

  And we're going to you're going to pay us in rubles. And to me, that's a real sign and signal that he's in this for the long haul.

• 11:51Anthony Pompliano?

  Is this the is this maybe not the checkmate move? But this is kind of the check on if you're playing out the geopolitical chess, right? And you say, OK, I'm going to go because I have this concern about the NATO expansion. You know, whether you agree that he actually thinks they're going to do it or not, whatever. He pulls the chess move of, OK, I'm going to invade. And it wasn't just I'm going to invade the eastern part of Ukraine. It was like, I'm going to try to take over the whole country. I'm going to bomb the hell out of you. I'm going to come from all sides, whatever. When he does that, I don't think most or I think most people agree that he did not believe that he would get global coordinated sanctions in the in the speed and severity of which they did.

• 12:26Speaker 02

  He thought he had Europe bent over his knee.

• 12:28Anthony Pompliano?

  Correct.

• 12:28Speaker 02

  Yeah.

• 12:29Anthony Pompliano?

  And now, all of a sudden, he's like, OK, I'm backed in this corner. What do I do? I could fight this or you know what? Here's my like escape hatch. I'm just going to say like, I don't care. I've got this whole other system. I'm going to go build us. There's reports that he's trying to build a system, a payment system with Iran. He's got the whole China thing. They're trying to build some sort of Indian rupee like account system with India. Like, does he just say like, oh, you guys are making a mistake? I'm basically going to try to help accelerate the world off the US dollar system. Or like, what's what's going on here?

• 12:58Speaker 02

  Yeah, well, you put in those terms. I mean, like to some people, he might be a hero. Now, that's a very small minority, but you know, the most most any. Body will tell you that the world is moving away from the dollar system, right? It's obviously been a very, very slow pace, but the, you know, the reality is, is we obviously need ever since the global financial crisis, you know, the dollar system has really come under question in terms of its inability to function for the largest parts of society. So maybe this is the catalyst that gets everyone thinking about, okay, how, well, how do I, you know, get off this system? And it's, to me, I think digital assets or in cryptocurrency in general, like it's a, it's such a novel concept in the concept of, okay, wait a minute, we've been using this as an investment vehicle because we see all the nefarious activity going

• 13:43Speaker 02

  on with central banks and fiscal authorities. But now you're actually, we have the technology now to actually get off the dollar system if you wanted to. Now, the reality is, as long as the US has the biggest navy, people aren't really going anywhere if they truly want to maintain.

• 13:56Anthony Pompliano?

  And that world may not be what everyone thinks it's going to be, right? Like, the transfer of a world reserve currency to whatever, it could be the greatest thing since sliced bread. There's a lot of pain, suffering, et cetera, that happens there. And I think that there's folks who maybe haven't thought through that aspect of it.

• 14:11Speaker 02

  Hundred percent. We're not so, we will be, we will probably, you know, our kids will be in college if not, if not older, by the time we fully transfer off of the US dollar reserve system. It could take much longer than that, obviously. And the reason I say that is that you, in order to transfer off of a reserve system, you need to replace the current reserve. Unless you're saying that all current account balances, deficits and surplus are going to go to zero. If you're going to maintain the same imbalances in the world in terms of who produces what and who can over consumes or under consumes what, then you do need to have a reserve asset. And in order to have a reserve asset, you know, one, you have to cede sovereignty, if you're a nation, over your currency and your monetary policy to a certain degree, to get the dollars out the door into those

• 14:52Speaker 02

  capital buffers. And also, you need a big enough liquid bond market or liquid, you know, fixed income market for that to take place. You know, right now, everyone's like, oh, it could be China, it could be, you know, some other country. And it's like, it ain't China. China doesn't have enough money for the system to function. If we switch to China, the entire global economy would shrink really quickly. And so that part of the reason, you know, the global economy is as big as it is, is because we're willing. To run these massive current account deficits and pump so many dollars out the door that capitalize central bank balance sheets that then further capitalize, you know, the growth of credit in all these other economies. So it's a system that works, kind of, but it's just not working at an optimal sort of rate.

• 15:31Anthony Pompliano?

  Correct. You've got three charts for us today. The first one is Bitcoin and Ethereum, and we're going to pull it up here. What are you looking at when you see the Bitcoin and Ethereum kind of charts are related with each other?

• 15:42Speaker 02

  Yeah, so those two charts are what we call our volatility adjusted momentum signal on the top panel, and the bottom panels are probable range analysis. So without being too technically jargon-y, but what one thing that so the chart on the bottom, the bottom panels where we show the ranges, those ranges are quantitatively linked to the volatility adjusted momentum signal. So if something's bullish, there's more skewed to the upside in the range. If something's bearish, there's more skewed to the downside in the range. When an asset tends to sort of hug the lower boundary or the upper boundary of its probable range, it's usually a leading indicator, nine times out of 10, that, hey, look, I want to transition to a more bullish or bearish state. And so right now Bitcoin and Ethereum have been bearish for a while, as you might imagine, as denoted by the red shading at

• 16:24Speaker 02

  the upper panel. But they've been hugging their probable ranges pretty consistently for the last week or so. And that typically is like, hey, look, I'm sick of being bearish. I want to break out. And when it breaks out, the range shifts and changes. And so I'm watching that like a hawk. You know, that kind of leads me to the second chart, which is where I show net liquidity. So the net liquidity is the Fed's balance sheet minus the Treasury general account balance. That's sort of a more accurate depiction of how much liquidity is being pumped into or moved from asset markets at any given time by the monetary and fiscal authorities. And what you see is that, you know, you pull that chart back as far as it goes, it's a, you know, 0.9 something correlation to the S and P. Well, every once in a while, it deviates, either, you know, S and P goes meaningfully

• 17:06Speaker 02

  higher than it or meaningfully lower than it. The last time we had a meaningfully lower deviation was in September of 2021. And, you know, we had that massive meltup in October of 2021, which, by the way, we nailed. That massive meltup was a function of, look, we deviated too much. The monetary conditions, the net liquidity conditions didn't change. Well, they haven't changed. Much since early 2022, but we've had this massive deviation in S and P terms and risk asset terms away from the net liquidity line. And so the key takeaway was that, okay, now we're on the other side of OpEx. Now we got more color and clarity on the Fed's tightening path. We were still waiting to get more info on quantitative tightening. We're probably going to get that in the Fed's early May meeting. But for now, it seems like the coast is somewhat clear unless

• 17:51Speaker 02

  we get a meaningfully adverse shock from a geopolitical risk perspective. Now, again, I'll say this every week, so I'm blue in the face. I have no idea what we're going to get from a geopolitical risk perspective. No one does. I'm not even sure Putin does. It's a it's a rapid fire game of chess right now. So in the context of not knowing what's going to happen there, we're saying, look, the market could gravitate back towards that blue line. The red line in that chart, the market can gravitate back towards that blue line. And you kind of look at it on, you know, just on like a correlation basis, it's somewhere around like 4,700 on the S and P in terms of where you could get up to before anything else changes. And that to me is that's a that's a that's a if that happened, you know, again, there's a kind of a one or two month window here where that could happen before growth starts to pick up to the downside. And if that does

• 18:34Speaker 02

  happen, obviously, you're probably going to see Bitcoin and Ethereum do some some positive things.

• 18:38Anthony Pompliano?

  When you start to look at inflation as a driver, I know you've got the Europe inflation charts here, but we're obviously seeing this all across the world. Is that a huge tailwind or driver of this? Or do you think that that's more of a narrative on Twitter or in the media, but these assets aren't really trading in any correlation or impact by inflation?

• 18:59Speaker 02

  No. So the so one thing that's happened with with crypto, and this is something I said back in October 2020, I think I was tweeting at you. And I said, hey, look, the more institutional firms adopt cryptocurrency and digital assets in general, the more correlated it's going to become to S and P and NASDAQ, because, you know, they have, you know, sort of fall fall targeting, you know, risk budgets and things of that nature. And so, you know, it's all going to start to become one kind of big trade. And that's exactly what happened. And so, you know, the sort of inflation hedge aspect of the crypto digital asset space sort of got lost or got buried underneath the no way this is as far out on the risk curve, risk spectrum. As you can possibly be in terms of the realized volatility of the asset.

• 19:40Speaker 02

  And so that really, in my opinion, that institutional adoption and obviously the institutional puking of these types of assets really weighed on that. So, you know, I don't believe that it's a loss this inflation, you know, hedge kind of, you know, inflation hedge, you know, ability. It's just that the risk, you know, kind of the widening of risk premia in this most recent kind of, you know, two to three months, really, you know, so going back to November has been kind of overwhelming factor. But it just, in terms of explaining that chart, so that I sent that chart because the topic du jour this week for sure is kind of this meltdown in the bond market. You know, I want to say it's like the worst first quarter on record in the bond market. I mean, as far back as we've got the data, which is, you know, to like 1970 something. So I'm sure there've been worse quarters, you know, historically, but as far back as

• 20:24Speaker 02

  we have that Bloomberg index. And so, you know, one thing that's really been roiling the bond market and keeping me up at night because I'm long bonds like an asshole is the fact that, you know, this European inflation dynamic is really, it's been, it's been a big surprise. Like, we all know the US inflation dynamic has been a big surprise to the upside. That's the blue line in the upper panel. That's the city's US inflation surprise index, which measures kind of like how surprised are economists by inflation at any given time. So the higher the number, the more surprised economists are in terms of their estimates. Well, the blue line is obviously, it's been trending kind of right around its all time high for the past, you know, kind of really nine months. But the red line, I mean, it looks like a, you know, for lack of a better phrase, it looks like Viagra.

• 21:06Speaker 02

  You know, like Europe's inflation surprise momentum and the kind of shocks there, the positive shock to inflation in Europe, has been on the orders of magnitude as a positive shock to inflation in us. And I think about US inflation, it's all we talk about. You're going to leave here, you're going to complain about inflation, you're going to talk about inflation, I'm going to talk about inflation. It's all anyone talks about these days. Now, multiply that times three and that's where Europe is right now. And so that, that big shock to inflation really catalyzed the massive repricing in the European sovereign debt market that started in early January, and it continues. And it's probably going to continue until, you know, sort of, A, those dynamics get under control, i.e. inflation peaks in Europe, our model has that.

• 21:46Speaker 02

  occurring in the second quarter. But more importantly, you know, that repricing in the European sovereign debt curve is probably still a hostage to, you know, the fiscal response to, to all this inflation pressure because Europe, they're kind of talking about, you know, maybe, cutting gas taxes, issuing checks to households to sort of help, help offset prices, which I think is a stupid, I mean, dear God, that's the dumbest idea I've ever heard in my entire life. Let's increase demand to help fight inflation. I mean, but they'll try it. These people, these people, we've seen enough from these ridiculous economists, you know, over the time. So.

• 22:21Anthony Pompliano?

  They have, they have no choice. They don't know what to do. They're literally, this is my whole theory on this now. Inflation is bad and rather than understand like, hey, if I have a pistol, if I have a machine gun and I have a nuclear weapon, and what is the intended target and what is like the appropriate measure?

• 22:42Speaker 02

  Yeah.

• 22:43Anthony Pompliano?

  They're just like, fire!

• 22:46Anthony Pompliano?

  Shoot everything.

• 22:47Speaker 02

  Water gun, yeah.

• 22:48Anthony Pompliano?

  And next thing they know, they're like, all right, that didn't work. Shoot the next one. Shoot the next one. And they don't stop and just think.

• 22:54Speaker 02

  Yeah.

• 22:54Anthony Pompliano?

  And say to themselves, why is this happening? And I think part of it actually is because they're so deep in the weeds.

• 23:00Speaker 02

  Yeah.

• 23:00Anthony Pompliano?

  It's hard to see the simple idea, stop increasing demand.

• 23:04Speaker 02

  I know.

• 23:05Anthony Pompliano?

  If you stop increasing demand, it may not solve the problem, but it puts us in a path that is more likely to address the problem.

• 23:12Speaker 02

  100% it will solve the problem. It's, price is at, set at the margin of supply, at the intersection of supply and demand. If we know we have supply chain disruptions that we can't do anything about, then you need to shift the demand curve. It's as simple as that. I mean, it's literally, it's as simple as that. This is like macroeconomics 101 or, yeah, it's like, I don't, I don't, I don't understand, or sorry, microeconomics, this is microeconomics. I don't understand the, the kind of the confusion among policymakers, or at least the unwilling, the sort of, the prior willingness, because the Fed has moved, I'll be fair to the Fed now. They had a previous willingness to sort of write off the sort of supply shock driven inflation, which by the way, I was doing some work on this this morning at like 4:45 in the morning.

• 23:55Speaker 02

  We have never had a serious inflation problem in the US without supply issues. So, so what is the Fed's point? Every time we have an inflation problem in this country, it's supply driven. We never had a demand driven inflation. The only time we had that was in the housing bubble. But that's not really, you know, consumer price inflation. That's asset price inflation. It's different. So it's, it's preposterous to me that we have this sort of, they even had that debate. But it seems like they're playing giddy up and more importantly, catch up on a, on a quick basis here.

• 24:23Anthony Pompliano?

  What do you guys think? What question you got?

• 24:25Speaker 02

  Oh, John, what's up, boys?

• 24:29Anthony Pompliano?

  Do you see anything that you think could be a catalyst for Bitcoin specifically?

• 24:33Speaker 02

  Yeah, so I mean, it goes back to, to sort of what I said earlier with respect to that net liquidity. It's like in the absence of a bear catalyst, all things being equal, risk asset should be higher in price.

• 24:45Anthony Pompliano?

  Yeah.

• 24:46Speaker 02

  I mean, I'll, I'll say that quite, quite, you know, seriously. There's no reason for risk assets to be trading at anything much significantly south of, you know, 46, 4700 on the S and P. You know, maybe Bitcoin should probably be closer to 45,000 or 50,000, just based on that chart. And so, you know, the fact that in the absence of incremental negative catalyst, which obviously geopolitical situation can and has proven to provide plenty. You know, you could just see sort of a natural repricing higher as a lot of the light positioning that's, that's kind of, you know, kind of been created by some of the drawdowns, you know, kind of gets, gets tested a little bit. I mean, a lot of folks have sold and a lot of folks have, you know, taken down risk. You know, we've had, you know, lows of OpEx in January, lows of OpEx in February, lows

• 25:28Speaker 02

  of OpEx, already headed into OpEx in this month as well. So we've seen a lot of positioning come down in terms of our analysis. And so maybe people feel a little bit more comfortable after reassessing the situation and saying, hey, look, well, Fed's moving, but rates are only at 50 basis points. They're still deeply negative, you know, maybe I got time on this economic cycle. And I'm starting to hear that actually. You know, we obviously have clients that we speak to on the hedge fund and mutual fund side and, you know, there's certainly a pocket of them that say, yeah, but not, yeah, not, not soon. And I, I tend to agree on the growth side, you know, the growth, the economy. Got PMI data this morning out of Europe, Japan or Europe and Asia. And it was still quite robust. You know, it's slowing still, but you know, it's generally robust and at a level that implies, you know, the economy is still hanging in there.

• 26:12Speaker 02

  And so back to going to my core thesis, which is, you know, the economy is hanging in there now, which keeps a floor under risk assets for now. And in fact, the, the fact that net liquidity is where it is, is actually acting as a magnet for them now in the absence of bad news. Eventually that floor is going to fall out. Once the growth data really starts to pick up to the downside. And again, our, our estimate of when that process is likely to commence is, is kind of late Q2.

• 26:36Speaker 03

  Darius, what are your thoughts around Bitcoin and like the relationship and like correlation to other cryptocurrencies, such as like Ethereum? And then you were talking about the S and P correlation as well, how it may become more correlated to the S and P? What are your thoughts around all that?

• 26:49Speaker 02

  Yeah, so I mean, you, you, with any asset market, you know, you want to have positive, positive breadth, like I E., you know, a bunch of the little things, you know, all feeding into the big thing going up is, is a bullish indicator. And so with respect to Bitcoin, Ethereum and all the other kind of, you know, digital assets and shitcoins, poopcoins, whatever you want to call them. If you see sort of like Bitcoin, Ethereum doing okay or reasonably well, but those things not, that's usually like a bearish, like kind of leading indicator, like, okay, you know, these things, the liquidity situation, because liquidity tends to impact sort of more illiquid things most, like at a, at a higher rate. You know, when things, when assets have, um, are, are highly liquid,

• 27:33Speaker 02

  you know, the incremental liquidity doesn't have a big deal. But when something trades like from price A to price B, the bid ask spread is really wide. Those types of, you know, liquidity dynamics really do matter in both directions a lot more. So when you see poopcoins, you know, starting to do well, that's a good sign that Bitcoin and Ethereum probably are about to enter a, a bull market or at the bare minimum of a, a multi-week, multi-month phase within a, bull phase within a bear market, um, which do have, which obviously happen, obviously.

• 27:59Anthony Pompliano?

  I have.

• 27:59Speaker 02

  I'm not sure. By the way, you guys know this better than I do. What are Poop coins telling you right now?

• 28:03Anthony Pompliano?

  Uh, I think that there's two ways to look at the market. People get real mad when I say this, but whatever. I just tell the truth. Uh, it is a casino for the most part, uh, but the whole thing about the casino is that you can win if you play certain ways. And so there are certain games to play that have higher probability. I would also argue that the data suggests, let's take venture capital as an example, uh, the outside of the top five or six firms, the best investors in the world in early stage venture build indexes. So if you look at like all the angel list, uh, research, et cetera, building an index of early stage, uh, opportunities ends up leading to outside returns because it's a power law game. Being in the deal is more important than all of the details around the deal.

• 28:48Speaker 02

  Hundred percent.

• 28:48Anthony Pompliano?

  And that is true. You know, if you were a seed investor, series A or series B, doesn't matter what the valuation was in Facebook, game on, you made a lot of money.

• 28:58Speaker 02

  Made a lot of money.

• 28:58Anthony Pompliano?

  Over and over and over again. So in one way, there's a lot of, uh, asset managers that, you know, reach out to me for various reasons. Uh, and I see them. That's what they're doing. They're building a huge index of this long tail of crypto. And the idea is, uh, some of them are five X, some of them are zero, but some of them are a thousand X.

• 29:18Speaker 02

  Yeah.

• 29:18Anthony Pompliano?

  And maybe the most, um, uh, at least where I know the returns are public, uh, multi coin is a great example. They have a fund where I think, uh, for sure to maybe for thousand X return investments in the same fund. So now they-

• 29:35Speaker 02

  Cash on cash returns. Holy cow.

• 29:37Anthony Pompliano?

  So now they didn't build a 200, you know, uh, kind of investment index, but I don't know. Maybe got 30, 40, like it's not five either, right? So it's not super concentrated, but they did it. And there's a couple of thousand X's in there.

• 29:52Speaker 02

  Yeah.

• 29:53Anthony Pompliano?

  When you start doing portfolio construction, it doesn't matter if you're doing this in the stock market, commodities, crypto, whatever, you're going to have an outperformance and that fund specifically, I think is up over a hundred X, right? Or whatever. And, uh, uh, here's where it gets crazy is in one of the funds that we manage, uh, we were an LP in the fund, a very, very small check and, and, you know, thought these guys were smart and said, Hey, look, we're going to give you a, a small check. Let's see how this goes. We'd like to get to know you better. Maybe we could share some deal flow, whatever.

• 30:22Speaker 02

  Yeah.

• 30:23Anthony Pompliano?

  Nobody, at least us, like if we're really intellectually honest, nobody thought that that was going to happen.

• 30:27Speaker 02

  Yeah.

• 30:28Anthony Pompliano?

  But it's the asymmetry at play, the power law at play. Then if you go and you look, we've seen this in early-stage venture before as well. So I think that's part of it. It's just like, how do you play this crypto market? Right? The second thing that I would say is I think that people are starting to try to wrap their heads around. I don't think there's the right answer. What does it mean if you're the user, but you get some sort of economic exposure to growth? And so, for example, if you're an early user of Facebook, you get to say like, hey, look, this is what I joined.

• 30:58Speaker 02

  Yeah.

• 30:59Anthony Pompliano?

  That's basically your claim to fame, right?

• 31:00Speaker 02

  Yeah, I was.

• 31:02Anthony Pompliano?

  Yeah, or like Twitter or whatever. You can be like, oh, I joined early. But you didn't make any money. You didn't get anything for that, whatever. Now, what I think the promise of these DAOs and all this stuff, which frankly, right now, I don't know if we've seen one like really work yet, but the ones that people are trying, that's their whole thing is, hey, if you're early and you are participating in the community, like, could you get some of the upside? Fascinating idea. Is anyone going to figure out how to do it? Whatever. I don't know, right? I think that's where the market's got to kind of figure it out. So I think that's part of it, too, is similar to how you can buy Bitcoin. You can mine Bitcoin, or you can earn Bitcoin. You can do things and people pay you the Bitcoin.

• 31:38Speaker 02

  Yeah.

• 31:39Anthony Pompliano?

  Right? I think people are trying to figure out like, well, what are all the ways that you could get exposure to these other assets? And some people will buy it. Some people will yield farm or whatever their equivalent is. Some people will earn it because another person pays it to them. But some people may just participate in these communities and get it directly from the treasury or something like that. It's fascinating.

• 31:59Speaker 02

  So when you say communities, like, because I was thinking like, you know, with the problem with like VC and that type of finance in C-Fi, in centralized finance, is that the gate is super high, as high as is any gate in centralized finance. You can't get involved in the deal flow. You literally have to be a credited investor and more importantly, a plugged-in and credited investor. Is it the same in this asset space?

• 32:22Anthony Pompliano?

  That's a trillion-dollar question. It's one of the reasons why I'm very cautious, I think, with a lot of this stuff is

• 32:32Anthony Pompliano?

  One of the caveats you have to answer this question is, well, what jurisdiction are you talking about?

• 32:36Speaker 02

  Yeah, sure.

• 32:37Anthony Pompliano?

  So different jurisdictions around the world have different rules. There's obviously some areas where they're like, hey, we want to be a leader here, like guns blazing, everything's game, right? Go. There's other places where it's the exact opposite and they're like, hey, hey, hey, like no ICOs, no this, no this, no this. But I think that there's a moving target. Like, part of the problem right now is that every market participant is simultaneously learning at the same time. So the regulators, the entrepreneurs, the technologists and the investors all are, in the last two years, what's an NFT?

• 33:18Anthony Pompliano?

  So if the people building the airplane kind of in midair are figuring it out, there's no way you can expect, let's say, regulators, politicians, taxation, accountants, lawyers, like, they're also like running along trying to keep up with it. And so like, just at that, you know, framework alone, forget each individual asset or whatever, it's just really hard.

• 33:41Speaker 02

  Yeah.

• 33:41Anthony Pompliano?

  And so when people are like, oh, we need clarity, we need clarity, like, absolutely, we need clarity. But you almost play this cat and mouse game a little bit, like, the entrepreneurs and investors have to figure something out. Then we need the clarity of regulation, then we need this, then this, and you constantly keep going. And if you go back to the example we used in the beginning about the oil pipes.

• 34:00Speaker 02

  Yeah.

• 34:01Anthony Pompliano?

  Like, it was, somebody got presented with a problem.

• 34:03Speaker 02

  Yeah.

• 34:04Anthony Pompliano?

  And they created a solution. I'm sure that there was zero regulation around oil pipelines.

• 34:09Speaker 02

  No, you know, he just started building pipes.

• 34:12Anthony Pompliano?

  You know. And then what did he do? Then he created a problem.

• 34:16Speaker 02

  Yeah.

• 34:16Anthony Pompliano?

  And they were like, hey, we probably shouldn't have that oil pipeline go down Main Street.

• 34:20Speaker 02

  Yeah.

• 34:21Anthony Pompliano?

  So then they're like, we should create rules, right? And then, and then there's another, and so you keep doing this. It's like, this is a story as old as time. This is not unique to Bitcoin, cryptocurrencies, whatever. I think the question is just like, how quick it's all happening, right? And so, uh, it's just complex. And, and I don't know if there's a right answer to it yet, uh, but I do know that from every conversation I've had, I've talked to regulators, politicians, investors, entrepreneurs, and just users, they all are saying, there's value here, we need clarity, go.

• 34:54Anthony Pompliano?

  How that gets figured out, people smarter than me will figure it out.

• 34:57Speaker 02

  That's brilliant, man. I don't have much to add. I just, my, my fear is that because it's happening so fast and obviously the internet enables the speed of these sort of development, right? Like it's, it takes a lot longer to build an oil pipeline from Texas to New York in 1800 something than it does to, you know, create a, you know, digital sort of protocol.

• 35:17Anthony Pompliano?

  Correct.

• 35:17Speaker 02

  And so the speed of it all, I think, might scare regulators into overreacting the second they see something bad happen. And that's typically what happens, right? The regulators show up after the accident.

• 35:28Anthony Pompliano?

  Correct. That's, that's the challenge. And to, to give them credit, I actually think that they have been, I would put them in the box of cautiously optimistic and not nearly as reactive as they could have been.

• 35:46Speaker 02

  Yeah.

• 35:46Anthony Pompliano?

  Now, one of the, the critiques of that approach is people are going to keep running and so they're doing it in an environment where there's no clarity.

• 35:54Speaker 02

  Yeah.

• 35:55Anthony Pompliano?

  So I think that like, you have to ask yourself, would you rather a regulator overreact and come out with clarity immediately and everyone's like, well, that doesn't work.

• 36:01Speaker 02

  Hell no.

• 36:01Anthony Pompliano?

  Right? Or would you rather than be slow, operate with a little bit less clarity, but get it right? And over a long period of time, probably you want the, the latter, right? Is the, the short-term lack of clarity if they get it right. Now, the doomsday scenario is there's no clarity and then they get it wrong and then they come after everybody. Like, it's like, there is bad scenarios as well.

• 36:21Speaker 02

  Yeah. I guess there's bad scenarios, but let's be, let's, what the regulators care about, right? At the end of the day is like the regular mom and pop getting fleeced out of their, their life savings, right? And so as long as that, like the sort of development in the crypto ecosystem isn't designed to just fleece people for money, then I think the regulators are very much inclined to avoid,

• 36:44Anthony Pompliano?

  Listen, listen.

• 36:44Speaker 02

  You know, stymieing the growth.

• 36:45Anthony Pompliano?

  Listen, this is, I just gotta get this off my chest. Do you want to know where mom and pop investors are getting fleeced? Being told to buy negative yielding fixed income.

• 36:57Speaker 02

  Right? You know where else they're getting fleeced?

• 37:03Anthony Pompliano?

  They're getting fleeced by being sold. All kinds of madness. Like if you look at the average age of some of these financial networks, some of these political shows, et cetera, it's 50, 60, 65 year olds, right? And I always say this, watch the commercials.

• 37:24Speaker 02

  Yeah.

• 37:25Anthony Pompliano?

  They are selling these people rocks.

• 37:28Speaker 02

  Yeah.

• 37:28Anthony Pompliano?

  For thousands of dollars. They're like, you know, oh, they.

• 37:31Speaker 02

  Hands open, hands and night.

• 37:35Anthony Pompliano?

  Like, like, young people watching, like, this is insanity. At 2am, you're running commercials and like, the reason why you're running the commercials is because somebody's buying it.

• 37:42Speaker 02

  Right?

• 37:42Anthony Pompliano?

  Totally. And they're selling them like, you ever seen the, in sports, they do the commemorative, like, so and so just won the Super Bowl, get the football and like all this stuff. They do the same shit for like random things and they're like, we stamped this into a gold bar by the commemorative gold bar for the.

• 38:00Speaker 02

  1905 Buffalo nickel.

• 38:03Anthony Pompliano?

  Literally, that's what they're selling.

• 38:04Speaker 02

  What?

• 38:06Anthony Pompliano?

  And so again, like, I understand, I get it. I don't judge the businesses. What I judge is the hypocrisy of like.

• 38:16Speaker 02

  A hundred percent.

• 38:16Anthony Pompliano?

  Don't do this, but we're cool with this.

• 38:18Speaker 02

  Totally.

• 38:19Anthony Pompliano?

  Right? And then like, you just start to unpack it and you're like, dude, we're no complaining, no, anything we say is going to change this stuff, right? What we have to do is we have to compete. And in the market, entrepreneurs and investors have to compete in a way that provides better solutions, superior technology, et cetera. And that's the way you affect change, in my opinion, the most, more so than like, I mean, we could literally kind of, you know how they cut up like football highlights? We could go and take like a late night political channel and just go through the 2am commercials.

• 38:49Speaker 02

  Oh, my God.

• 38:50Anthony Pompliano?

  We'd have a field day.

• 38:51Speaker 02

  Yeah.

• 38:52Anthony Pompliano?

  Like they're selling literally in one commercial, they're selling, what do they call it? What are the listening devices?

• 38:59Speaker 02

  Hearing aids.

• 39:00Anthony Pompliano?

  Hearing aids, they're selling a hearing aid and then they're selling a Buffalo nickel and then they're selling canes with like, what are the, um, knee sleeves, the copper fits, right? We all know the commercials. Like you literally are selling elderly products.

• 39:15Speaker 02

  Yeah.

• 39:15Anthony Pompliano?

  Mixed in with shitty investment products.

• 39:18Speaker 02

  Totally.

• 39:18Anthony Pompliano?

  That's the 2am commercials.

• 39:20Speaker 02

  Yeah. Or the midday, I mean.

• 39:23Speaker 02

  You just fall asleep in your chair and you wake up at 2 a.m. You wake back up at 2 p.m.

• 39:28Anthony Pompliano?

  And like, oh, you bought Copper Fit? Oh, you didn't know that you actually bought a subscription that comes for every, you know, week they deliver. And by the way, you have to call and you need to know six languages to get out of the subscription. You're like, yo, what?

• 39:41Speaker 02

  Yeah. Here's all the Now CDs, now one through 100.

• 39:47Anthony Pompliano?

  You remember those CDs? And now, like, now 2000.

• 39:51Speaker 02

  I used to slap, man. Don't try to play that. Don't play now, now.

• 39:56Anthony Pompliano?

  Like, I just, I don't know, man. It's a...

• 39:59Speaker 02

  You're absolutely right. You're spot on, man. I think there's a, I think that the core of it is there are smart people trying to solve problems. And whenever there are smart people trying to solve problems, naturally, there's going to be some, you know, kind of excess and kind of, you know, all this illicit activities that come along with that. But generally, down the middle, when smart people are trying to solve problems and they're capitalized to do so, good things happen for society. So.

• 40:20Anthony Pompliano?

  Facts. All right. Where can we send people to sign up for 42macro?

• 40:23Speaker 02

  Oh, I'm just a smart person trying to solve problems. I have a big problem right now with bonds. But other than that, 42macro.com. And then come check us out, 42macro, D Dell on Twitter. You know, we all have bad traits.

• 40:34Anthony Pompliano?

  By the way, they, the button on the homepage just says, invest like a champion. You know you're balling if that's what your button says. It doesn't say, sign up. It doesn't say, click here. It says, invest like a champion.

• 40:44Speaker 02

  Invest? Look, I don't want retail investors to invest like retail investors. I want them to invest with the same information and sophistication that, you know, all my hedge fund clients have. You know, they get the same research that Citadel gets.

• 40:55Anthony Pompliano?

  Facts. One last thing I'll add in is I see in the comments, Britt Burns just said, can't forget the drug commercials for combating side effects from other drugs.

• 41:05Speaker 02

  Those are the best. The side effects are like 10 times longer than the cure. It's like, I don't think I want this anymore. No, I'm good with the cancer.

• 41:12Anthony Pompliano?

  They're like, have you ever breathed air in a city in the United States? You may have mesothelialoma.

• 41:20Anthony Pompliano?

  Right. It's like, oh my God, I don't want to go outside. All right, buddy. Thank you so much for coming. Appreciate you guys. Thank you. See you later, man. 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.