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Ten31 Timestamp: You're Gonna Need a Bigger Buyback · TFTC: A Bitcoin Podcast

• 0:00
  Bitcoin. We can end it there. That's it. That's all we have for this week.
• 0:09
  Frankie. Thank you, Frankie, for all your contributions.
• 0:17
  What a weekend. If you're watching this, as you may be able to tell, I'm on the road. I'm currently
• 0:21
  in Birmingham, Alabama at an AI power summit gathering of the minds, if you will. Beautiful
• 0:29
  city, by the way, walking around this morning, incredible architecture, a lot of old, beautiful
• 0:33
  buildings. Birmingham slept on, I'll say that. What's not being slept on right now, Bitcoin
• 0:38
  currently charging towards $80,000. Last I checked, it was about $79,000 on the dot. Right
• 0:47
  now it's right below it 78,000 or excuse me just went over a whole volatile 79,000 $20 a lot going
• 0:53
  on over the last four days and a lot of this pertains to what's going on outside of Bitcoin a
• 0:58
  lot of which we've been talking about discussing for the last six months John on that note I'll
• 1:03
  throw it to you how would you describe the setup right now well you know we did say in the last
• 1:08
  episode after the months and months of coiled spring you know Bitcoin usually aggressively moves
• 1:13
  either up or down. So we like, we kind of basically told you what was going to happen.
• 1:18
  Right. So I hope, uh, hope everyone acted on that very clear guidance. No, I mean, it's, uh,
• 1:22
  you were discussing before we went live, uh, is it, is it a bull trap or not? You know, I think
• 1:27
  you break up of ADK and it probably starts to look tougher to call it a bull trap, but,
• 1:32
  you know, I, I really, uh, I don't know that there's a lot of profit in trying to, uh,
• 1:37
  call the direction. I think there are a lot of, uh, headlines that came out last week,
• 1:41
  which we'll discuss, that changed the setup, interestingly, and put this kind of moment in time
• 1:49
  in, I think, relatively unique context relative to prior cycles. So if you gun to my head,
• 1:57
  am I more bullish than bearish? Yeah, but I'm always more bullish than bearish on Bitcoin.
• 2:01
  So take that for what you will. I am too. A permable, if you will. But
• 2:06
  seeped in theory and fundamentals, sound fundamentals, one of the fundamentals of Bitcoin
• 2:10
  And as Satoshi said in the early emails, is that governments and central banks cannot be trusted not to debase the fiat currencies.
• 2:18
  And it seems like we're reentering that here in the United States and not necessarily debasement of the currency, but a backstopping of treasury markets, which, John, to your credit, for many months, we've been following the development and the maturation of the AI theme.
• 2:34
  We made it very clear, abundantly clear that this is a national security issue at the end
• 2:40
  of the day, and the Treasury will pull out all the stops to make sure that this moves
• 2:44
  forward in markets.
• 2:46
  Don't get disturbed and freak out.
• 2:49
  And last week, August 19th, as you've had here, we had basically the starting gun for
• 2:55
  the Bitcoin run.
• 2:56
  I think Bitcoin reacted 45 minutes after this headline hit, but Treasury Secretary Scott
• 3:01
  percent came out and said that they were going to increase the size of nominal long end liquidity
• 3:05
  support. So buybacks from two billion per operation to at least four billion per operation.
• 3:13
  Not a lot nominally, but I think a bigger signal that, okay, we're here to backstop this market.
• 3:19
  Yeah. Yeah. I mean, a ton to say on this. And I think it's, you know, to frame the whole
• 3:25
  discussion, you're right. Like, I mean, it's AI, but it's also a few other themes that we've talked
• 3:30
  about in the past that we're going to definitely have occasion to discuss more on this episode.
• 3:33
  But there are a lot of nationally strategic important things or things that are at least
• 3:38
  believed and perceived to be of strategic importance to the current administration
• 3:41
  kind of in the air right now. The plane is kind of on fire and we are trying to gracefully land it.
• 3:49
  And so I think there's not going to be that the current admin is not going to go down without a
• 3:55
  fight on dealing with with all those things and try to optimize from all at the same time.
• 3:59
  I think this is an interesting development for a variety of reasons. I mean, number one, you said the headline here is Treasury doubles buyback support starting next month. And that's like that's factually true. But we're also talking about going from, you know, two billion to four billion per monthly operation here, a program that's already kind of been up and running.
• 4:19
  You think about relative to the size of monthly or quarterly auctions, I guess, for the longer end, monthly auctions for the shorter end, the size of those, the size of the outstanding U.S. debt burden.
• 4:30
  Interesting to see that this got so many feathers ruffled and got the debasement trade moving so hard on just what is ultimately not only like a very small amount of buyback increase.
• 4:42
  Right. So that's kind of number one, number two. And, you know, we don't have a chart on this, but I think this happened and yields on the long end came down by 10 or 15 basis points kind of immediately.
• 4:54
  The headline was a greater liquidity support for long end.
• 4:59
  And then 24 hours later, basically yields were kind of back
• 5:01
  to where they were prior to the announcement.
• 5:03
  And I think there was a lot of like,
• 5:06
  depending on who you are a lot of like either hand wringing or victory lapping on basically treasury being out of control And you know this is it Here comes the here comes the massive printing or here comes the collapse of the treasury market
• 5:19
  Here comes, you know, the Weimar Republic kind of phase for the U.S. dollar.
• 5:24
  And I think it's I guess the logic of that being like, you know, investment has lost control.
• 5:29
  And even his increased buybacks can't do anything for, you know, to hold long end yields down more than like 24 hours.
• 5:35
  But I think, you know, if you flip to maybe the next slide, there are a couple of like really interesting things to consider here.
• 5:41
  And I think we should say as an asterisk to what I'm about to say, it's totally correct that I think there are like nonlinear things that can happen and nonlinear shocks to the system that can happen.
• 5:51
  That can throw everything that I think Besson is looking at out of whack and, you know, move everything back quickly to kind of printing the difference and doing what needs to be done to keep the flaming plane kind of in the air.
• 6:04
  But with that said, I think there's probably like an understatement or a lack of sufficient characterization of the toolkit and the weapons that the Treasury has to kind of do what they want to do here.
• 6:17
  This headline was not this top headline was not in the newsletter from last week because it just hit this morning.
• 6:22
  But, you know, there are sources are saying, right, like many people are unidentified sources are saying that the TGA.
• 6:28
  So the Treasury is basically like checking account could be used to fund bond buybacks.
• 6:32
  Um, that's, uh, basically trillion dollars right now, you know, it varies kind of seasonally.
• 6:36
  Generally, I believe they like to keep it at like, you know, no lower than a few hundred
• 6:41
  billion to maybe 500 billion.
• 6:42
  And so there's, uh, limits to what could be done there.
• 6:46
  But I think first off, just from a TGA perspective, like if they were going to use, you know,
• 6:51
  the TGA to fund this, and you can imagine that if this headline hit CNBC, you know,
• 6:55
  Monday morning before market open, then the, um, the, the source of it might be a guy who
• 6:59
  looked like Scott Besson in Groucho glasses. But if that's going to happen, okay, well,
• 7:05
  that's a lot of higher power in the first place. And the other piece to think about is how big is
• 7:09
  a short-end issuance that would be needed to fund these buybacks in the first place.
• 7:14
  The numbers escape me, but we're talking like hundreds of billions per, I believe,
• 7:19
  per month, maybe per quarter. But in any case, it's quite a lot bigger than 4 billion.
• 7:22
  So I think the operative question is like, what do you need to do just to keep the plane going,
• 7:28
  to keep bond volatility dampened, to keep yields in a place that are where they can be like stomached for the short term.
• 7:34
  You know, I don't think it's necessarily like, you know, 200 billion dollars a month.
• 7:38
  Right. Is it is it six? Is it eight? Is it 10? I don't know.
• 7:41
  And I think it's ultimately probably above my pay grade and maybe more closer to the pay grades of the guys in this screenshot that we'll talk about.
• 7:49
  But your point is, I think the market is perhaps all the headlines that are saying like, oh, they've lost control.
• 7:55
  They have no idea what they're doing and they don't have any more firepower, I think, are not realizing that what we're looking at here is much more looks to me like more of an opening salvo than, you know, a last shot.
• 8:06
  Right. Yeah. I mean, I tweeted it out or I wrote a newsletter on a Friday just like to your point.
• 8:11
  I think because of your your guidance week in, week out on the show, I have the John Arnold little angel on my shoulder when I'm thinking about like jumping on Scott Bissett in the Treasury.
• 8:22
  little angel John Arnold pops up.
• 8:25
  He's like, there's a bigger plan to this.
• 8:27
  And that's why I wrote about it on Friday.
• 8:28
  It's like, hey, you may disagree.
• 8:30
  You may think things are crazy and you may not agree with the posturing.
• 8:34
  But if you take a step back and like we discussed last week,
• 8:36
  like lead up to all the coil, we had some pretty good predictive power
• 8:41
  last Monday when we met.
• 8:42
  But like we said last week, you have the Treasury going to do whatever.
• 8:46
  Now almost implicitly coming out this morning with sources
• 8:49
  and saying we'll do whatever it takes, like somewhat of a Mario Draghi.
• 8:52
  moment. But then you have all these things moving in the background with the OCC, the SEC, the CFTC
• 8:57
  basically saying, we don't care about Clarity Act. We're going to go make these rules and
• 9:02
  rejigger the architecture on the back end to facilitate these digital assets, which could,
• 9:08
  I mean, again, implicitly support the treasury markets. And then on top of that, I think,
• 9:14
  to your point, this is an opening salvo. I tweeted out this morning. I mean, you compare
• 9:17
  the support that Scott Bissett and the Treasury are giving to the bond market right now.
• 9:23
  And you compare it to something like the 2023 banking crisis where they had Jerome Powell to
• 9:29
  step in with BTFP. You compare it to 2020, obviously with COVID, Fed and the Treasury
• 9:34
  to step up with big support and then go all the way back to 2008. This is really interesting that
• 9:40
  we have like a whatever it takes moment when you have stocks near all time highs, you have
• 9:44
  economic data within a range of healthiness, I would say. And I think we're in a very risk on
• 9:50
  moment as well. So I just think comparing it to other interventions, whether it's via the Fed or
• 9:55
  the Treasury in the past, it is kind of unique where we are right now. Yeah, no, it's fair. And
• 10:00
  it's a good point. I think, I mean, you could make the other argument that, you know, is this,
• 10:05
  is this like 07, right? Like right before all the shoes start to drop and, you know, you're at or
• 10:10
  near all time highs and everyone's feeling good
• 10:12
  with their cheap ARMs and the cascading consequences
• 10:19
  of subprime had not become fully apparent and maybe you right at the Pico top and it all about to come crashing come crashing down I think for a variety of reasons it doesn the setup doesn look really remotely like that but it be fair to keep that in the back of back of our
• 10:31
  minds. And I, I, you know, I want to make it clear too, that I'm not like, I really not like a
• 10:35
  Besant fanboy or a fanboy of, of anyone who, you know, works in Washington. I just think it's,
• 10:40
  it's useful and helpful to, you know, revisit, probably revisit priors and not just map the,
• 10:45
  you know, they say like generals always fight the last war, you know, as you're looking at your
• 10:50
  portfolio, looking at how you want to structure your, you know, your life and plan out for the
• 10:53
  next 10, 20 years. Like it's, it's helpful to not just say, well, this, this kind of thing happened
• 10:58
  last time under a totally different set of circumstances. So it's definitely gonna happen
• 11:01
  exactly the same way again. And I think, uh, the, to, to maybe dive in a little bit to the,
• 11:06
  to that point, to this chart here on the bottom, uh, which I just ripped shamelessly from
• 11:10
  Mindprint Ash, um, with Cameron Tsuga and Matt Dines, again, highly recommend everyone go listen
• 11:14
  And Dines will explain it a lot better than I can.
• 11:17
  And I recommend you just hear what he has to say.
• 11:20
  But I think this gets at the question of firepower and kind of the question of like, what are we actually optimizing for here if you're the treasury?
• 11:28
  And Matt pulled together data from basically the last kind of rolling five years of last year, this year, last year, and then the three-year average before of basically the composition of the takedown of new long-end treasury auctions.
• 11:40
  So who were the buyers, right, by different categories?
• 11:43
  The font may be too small to see here, but the numbers that stand out, those big lines are investment funds broadly.
• 11:49
  I think that can mean a lot of different things, whether that's like your, I think he gives the example of PIMCO.
• 11:54
  So like your classic, like massive bond fund, or also like potentially like hedge funds and more and more levered vehicles.
• 12:01
  It all kind of flows into that investment funds category.
• 12:04
  And his point is like they're the big buyers right now.
• 12:07
  The marginal major kind of offtake valve is not really the Fed.
• 12:10
  The Fed's on there at the far left.
• 12:13
  It's not really the Fed anymore. It's these big investment funds. And so what you kind of need
• 12:17
  is a way for that game to continue to be played, for the music to keep going, for big investment
• 12:24
  funds to come in and remain like a meaningful marginal buyer of new issuance at the long end.
• 12:30
  And there's all of these, a lot of them sit with these investment funds. They also sit at other
• 12:34
  accounts, but there's a massive amount of long end treasuries trading below par that were issued
• 12:40
  prior to the massive rate hike cycle of 22 and 23.
• 12:44
  So you've got all these bonds that are underwater.
• 12:47
  And can you go in and basically,
• 12:50
  through some amount of regular buyback,
• 12:52
  take those out of circulation,
• 12:54
  take them out of sitting in these investment funds portfolios
• 12:58
  and in so doing add back capacity for them to come back in
• 13:01
  and buy new issuance at higher rates.
• 13:05
  And can you also kind of separately help to pump equity markets
• 13:09
  or at least keep them going such that there's kind of a rebalancing effect where if you have,
• 13:14
  you know, both broadly speaking stocks and bonds, stocks go up, need to rebalance to maintain
• 13:19
  certain ratios. Okay, well, that's more, you know, buying pressure as well into long end treasuries.
• 13:24
  And so there's a lot there. Again, I recommend you listen to kind of Matt on it. But I think
• 13:29
  the question is like, the operative question to me, which I wrote about this week is like,
• 13:33
  well, how much are we talking in any given month, any given quarter to kind of keep that line on
• 13:38
  the chart, those lines on the charts, kind of, you know, where they are or increasing, like,
• 13:42
  what's the capacity that you need to, you know, to come in and take out. And it's a game that's
• 13:46
  played at the margin, right? You don't need to do hundreds of billions, probably, right, per month
• 13:51
  to kind of keep that flywheel going. You need famous last words. Well, yeah, hey, you know what,
• 13:57
  and I think we'll get to it at the end. If you need hundreds of billions per month, the good
• 14:00
  thing is that kind of the conclusion is going to be the same either way, as it relates to maybe
• 14:05
  asset allocation and what we're bullish on. Because I think there are a couple of different
• 14:08
  ways it could play out and they both kind of lead to one path. But all that is to say, like,
• 14:13
  if you were of the view that there is some marginal offtake that needs to happen to kind of
• 14:19
  keep this going for longer, you don't have to be, as the saying goes, you don't have to be faster
• 14:24
  than the bear. You have to be faster than the slowest guy running from the bear. And similarly,
• 14:29
  you don't necessarily need to solve what is, without a doubt, a meaningful, massive, long run,
• 14:34
  unsustainable fiscal situation today. You just need to not get shaken out of your trade today.
• 14:39
  And the trade being like Iran, the trade being, you know, uh, established new dollar system. That's,
• 14:46
  you know, maybe more favorable to the U S government, um, trade being, uh, established
• 14:49
  new relationships with, uh, with China and the rest of the world vis-a-vis, vis-a-vis trade.
• 14:53
  Well, we'll talk about that in a second, but I think that's basically the fundamental intuition.
• 14:57
  I think of this chart is like, you know, identify like, what's the, what's the marginal amount we
• 15:02
  need to do just to keep this running and not get shaken out basically by yields and bond volatility
• 15:07
  for the next two years. Yeah. But absolutely. And I want to piggyback on something you said
• 15:13
  in the beginning of that monologue, which is I'm not a fanboy either. I wrote this newsletter on
• 15:17
  Friday. Everybody's like, oh, look at you. You're a suit coiner now. It's like, I'm just trying to
• 15:22
  articulate what I think may be happening. It's not as straightforward as many people are making it
• 15:26
  out the seam And I think it is pretty calculated and it is a go big or go home moment for the US and the treasury specifically to your point we have many different variables one of them being the war in Iran and its effect on oil and gas markets And we had some I guess that positive news today with the crude oil stockpiles increasing
• 15:47
  Yeah, it's, you know, just some, so this is obviously, it flows back into the prior discussions,
• 15:52
  right, is, you know, energy is the massive input to ultimately to rates that the US and all of
• 15:59
  governments don't really have direct kind of control over you can't as the saying goes you
• 16:03
  can't print atoms and you know ripping ripping oil prices are very bad for the the game that's you
• 16:09
  know it's trying to be run right now and i just thought it was interesting kind of like you know
• 16:12
  counter consensus narrative violation that you know we talked we talked about the spr being down
• 16:17
  to 1982 levels and that's no doubt not not what you want to see the flip side being just you are
• 16:22
  seeing this this recent uptick in commercial crude stockpiles and you know it's right in line with
• 16:28
  Interestingly, you can't totally make it out on that chart down on the left, but in line with basically five year average.
• 16:34
  So that's kind of an interesting data point for the direction of energy prices.
• 16:39
  But I think I just want to pause on this thing on the right, which is reporting from Axios, which was later confirmed by, you know, tacitly confirmed by a variety of U.S. military sources.
• 16:50
  Now you could say like that's Axios is propaganda, just like, you know, the Iranian state media is propaganda.
• 16:55
  Okay, maybe. But it looks like the U.S. has been conducting these covert operations literally just in the dark around this Omani traffic lane, basically, to escort a lot of oil out of the straight-up hermooze over the last few weeks.
• 17:10
  And this characterizes it as 10 million barrels a day or about half of pre-war volume.
• 17:14
  So maybe that's helping you see marginal compression of upward price pressure.
• 17:19
  I just I have to like I saw this headline and I was just like cackled because it's like the idea that you're just waiting until dark to to sneak out.
• 17:28
  I would have I would have thought Iranian drones could have, you know, had night vision enabled and that by itself wouldn't have been that much of a benefit.
• 17:37
  But in any case, I just find it hilarious that we're basically just sneaking through under cover of darkness to keep energy prices down.
• 17:44
  But as we talked about, it's one of a million little things you can do on the margin to kind of keep the game going when maybe it wouldn't have been so obvious.
• 17:54
  That's one of a million. And we have a few other of those million here with these headlines, trade war, trade posturing, if you will, the U.S. using and flexing its economic and military might to pressure counterparties in trade to do certain things.
• 18:08
  And we have a few headlines here.
• 18:10
  Trump orders the Pentagon to scale back joint exercises with South Korea.
• 18:14
  Mexico weighs tougher trade rules for China as U.S. talks grind on.
• 18:18
  The move would deepen Mexico's alignment with Washington while President China bomb pursues an extension of the U.S. MCA pact with Trump.
• 18:25
  And then U.S. and Canada getting into it.
• 18:28
  U.S. and Canada failed to reach a tariff deal and have a deepening trade war here.
• 18:33
  And then you have the United States Trade Representative Twitter account come out with a very strongly worded tweet.
• 18:38
  about Canada specifically? Yeah. I mean, I think this is so, you know, I alluded to it earlier,
• 18:43
  but basically, you know, along with AI and Iran, you've got kind of this global economic reordering
• 18:48
  as the Treasury Secretary has put it, you know, that's happening in U.S. trade. And again, you can
• 18:54
  agree with this or disagree with this, but I think there's an interesting set of commonalities
• 18:58
  here on all these. The South Korea one is notable because if you saw our president's
• 19:05
  a true social post about this, you know, he took some time out to praise everyone's
• 19:09
  everyone's favorite neighbor, Kim Jong-un, in talking about how South Korea has not been
• 19:14
  sufficiently kind of grateful to the U.S. for its help in various things, various initiatives.
• 19:20
  And I think if you look at what kind of just happened, I wrote about in the newsletter,
• 19:24
  but there have been recent, you know, instances of footsie basically between South Korea and China
• 19:30
  and Chinese trade representatives. And so, you know, that's obviously the administration
• 19:34
  trigger point here. And I think there are a lot of people who looked at that true social post and
• 19:38
  were baffled by like, oh, why would you kind of, you know, poke an ally like this, especially one
• 19:44
  that's so helpful in the region. And, you know, I think if you just look at recent headlines,
• 19:49
  like it's pretty clear that they're not happy with the way that that relationship has gone.
• 19:53
  Again, you can agree or disagree with that. But my point is like that Mexico and ultimately Canada
• 19:58
  as well, like all these headlines that hit in the last week on kind of trade and international
• 20:01
  relations, like the Rosetta Stone on that continues to be China, right? If you look at
• 20:05
  what Jameson Greer posted, the US Trade Representative in this tweet, if you're watching
• 20:11
  a video, you know, highlighted the basically the next last paragraph, but talking about how the US
• 20:15
  partnership, the trade agreement that was being discussed between Canada and US, which fell apart
• 20:20
  in the 11th hour, fell apart because Canada was, you know, was not interested in or pushed back
• 20:25
  against the US's focus on cooperating on export controls, combating transshipment, okay, that's
• 20:31
  a big one, scroll down a little bit.
• 20:32
  The offer would have led to supply chain coordination
• 20:34
  on things like unfair trade practices, okay.
• 20:37
  Critical minerals cooperation, okay.
• 20:39
  Increased enforcement against imports
• 20:41
  produced with forced labor, like, okay, like, you know,
• 20:44
  we're saying it without saying it,
• 20:45
  like this is all about China.
• 20:47
  And again, I think if you've been watching this
• 20:49
  Joe for a while, you know, listening to us like that probably won't come across as like too much
• 20:53
  of a surprise. But if you look at the mainstream coverage on this, again, it's just like, oh, why
• 20:56
  would, why would Trump do this to our, our, our closest trade ally, you know, our neighbor to the
• 21:01
  north. And it's like, again, you don't have to agree with it or any of his methods, but like,
• 21:04
  it's not that mysterious what's going on, right? Like it's, uh, this, this all kind of, I think,
• 21:09
  you know, comes through one lens and at the risk of, of man with a hammer syndrome where, you know,
• 21:14
  man with a hammer, everything looks like a nail. Like there's a lot of smoke here again, you know,
• 21:18
  suggesting that there's one focus point and that this is a big piece of the strategy and the plane that they have to land right now.
• 21:25
  So just telling you, like, this continues to escalate and does not look like it's going away.
• 21:31
  No. I mean, you have Mark Carney, you have the Davos, WEF plant as the new prime minister of No Anymore.
• 21:38
  If you're paying attention, listen to your Luongo, listen to your Matt Dines.
• 21:42
  OK, there's there's power moves being made behind the scenes.
• 21:44
  Moving on to something that's not directly connected to any of this, but I think we've been baffled, not baffled, but we've been talking about this through the last week behind the scenes is this headline in, I guess, private credit insurance markets pertaining to the sale of the Los Angeles Lakers and potential sale of Dodgers by Mark Walters, who's an insurer.
• 22:06
  And he's got himself in a bit of a pickle here.
• 22:09
  If you've been listening to Nick Namath, I've had him on the show a couple of times already this year.
• 22:14
  But he's been highlighting that there is some perverse incentives between some of the private credit funds, the private equity funds and insurance companies as it pertains to related party dealings.
• 22:28
  And Mark Walters finds himself at the center of this.
• 22:30
  It's a pretty wild story.
• 22:32
  Yeah.
• 22:32
  I'm not going to try to dissect the arcana of all of the different kind of relationships here.
• 22:38
  It's quite a complex web that has been woven.
• 22:42
  And you're right.
• 22:42
  Nick has some good coverage on it.
• 22:43
  You've written some newsletters on it.
• 22:45
  If you want, you can kind of go off on some of the details.
• 22:49
  I wanted to throw it on here just because it's,
• 22:52
  you know, a couple of years ago, or maybe like last year,
• 22:54
  Jamie Dimon of JP Morgan said after a couple, you know,
• 22:58
  small issues were popping up in private credit
• 23:00
  or kind of the cuspier you know lower quality parts of the credit market And these small small places you know he was saying like when you see one cockroach you know they a lot more kind of hiding somewhere right So people have been you know waiting for and looking for all the you know the bigger
• 23:13
  cockroaches or the larger group of cockroaches to kind of emerge in private credit and in kind
• 23:18
  of the more exotic, you know, credit complex in the US. And time will tell if this is, you know,
• 23:24
  one of the big starting guns for a lot more of those cockroaches to emerge. I just thought it
• 23:29
  was to be to maintain kind of a balanced view here. I thought it was helpful to keep in mind,
• 23:34
  like this is one of the big, you know, constraints that I think under the hood that the admin's
• 23:41
  current strategy faces, which is that, you know, the US has a massive at the federal level has a
• 23:46
  massive debt problem. There may be a, you know, a meaningful problem in certain parts of kind of
• 23:51
  the private credit complex as well. And, you know, you could say, well, it's it's only X,
• 23:56
  it's only such and such many billions of dollars, hundreds of billions of dollars,
• 24:00
  maybe a trillion dollars of total, you know, uh, total blast radius or whatever. And, you know,
• 24:04
  various different, um, you know, private credit executives have kind of made a point like that
• 24:08
  over the past year that, you know, the, the, the real risk is, is, is quite small and, you know,
• 24:13
  it's only a part of the market and, and maybe that's true. Um, but I think if you look back at
• 24:16
  all, basically all recent, uh, you know, crisis moments in, in U S financial history,
• 24:22
  you know, it's generally touched. The impact is like nonlinear, right? Like it's generally
• 24:25
  touched off by, you know, something that initially looked kind of small, but because of we're in such
• 24:30
  a massive debt based system with all these daisy chaining impacts, like something that starts small
• 24:35
  can have chain reaction impacts you weren't quite expecting around, you know, other other parts of
• 24:40
  the economy, not saying that's going to happen here. But this is the kind of thing that I think
• 24:44
  this is the kind of thing that blows up your strategy, right? If you're if you're trying to
• 24:47
  fight the, you know, the China, the China proxy war and the Iran war, and you're trying to, you
• 24:53
  make sure that there's enough credit and enough general financial liquidity for the AI build out
• 24:57
  and to win on that front. You know, the kind of thing that blows that all up is, you know,
• 25:01
  a daisy chain collapse of exotic credit instruments that, you know, takes down like a regional bank
• 25:07
  or something, right? So just something to watch and something to kind of, you know, as we try to
• 25:11
  take an honest balanced view of like, what are the puts and takes of the US's position? I mean,
• 25:15
  this is obviously one that it could be a major risk to be that strategy going forward I mean this story is wild It a great his insurer owned the TV rights to the Dodgers like as a long asset for backing liabilities It
• 25:33
  pretty insane. Pretty insane. We will, to John's point, who knows whether or not this is systemic
• 25:38
  and it will domino and daisy chain into something much broader and higher impact, but something to
• 25:43
  to keep an eye on as it unfolds.
• 25:45
  Short deck, six slides this week.
• 25:47
  Last slide we have here is on Trump family-backed crypto firm.
• 25:51
  World Liberty gets conditional charter approval from the OCC.
• 25:56
  Big topic.
• 25:57
  This week mentioned the beginning, like I said,
• 25:59
  despite the fact that Clarity Act has not passed,
• 26:02
  looks like the powers that be within the administration
• 26:05
  are going to be pushing forward with the sort of onboarding
• 26:10
  of crypto digital asset firms
• 26:12
  to the traditional financial system.
• 26:14
  And speaking of related parties,
• 26:15
  we have World Liberty getting their charter here.
• 26:18
  So just really confirming what we said at the beginning.
• 26:21
  There's nothing stopping this train
• 26:23
  of creating this infrastructure on the backend.
• 26:25
  Yeah, it's, you know, I think there's no,
• 26:30
  I guess, no strong affiliation or strong affinity
• 26:33
  from us towards something like World Liberty Fi
• 26:36
  or, you know, any other,
• 26:38
  someone not me might say things that look like,
• 26:41
  you know, self-dealing among, you know, politicians and, you know, defy in general, right? Like
• 26:46
  whether there's like a self-dealing issue or not, you know, the, a lot of the things that I would
• 26:51
  imagine world liberty fives is going after are not that, don't seem that interesting to me and
• 26:55
  don't seem sustainable. So I'm less, you know, interested in that piece, but just again, as a
• 26:59
  sign of the times of where this administration is focused and you've got the world liberty fives,
• 27:04
  you know, headline, we can kind of, you know, maybe, maybe people can laugh at that or kind
• 27:07
  roll their eyes at that. But I think the OCC statement that, you know, the significant amount
• 27:13
  of new OCC applications for bank charters are related to digital assets, quote unquote, you know,
• 27:19
  up massively from Biden administration. I mean, you're seeing clearly like where the industry is
• 27:24
  trying to move and clearly with the encouragement of the administration, I think especially guys like
• 27:29
  Scott Bussin and the Treasury. And, you know, it's just a bunch of data points stacking up to kind of
• 27:35
  like make you ask the question or make you consider like if there if there is a global economic reordering being attempted and if there is a desire to get within that to rest more control
• 27:47
  of the dollar system away from the kind of international central banking cabal that you
• 27:53
  know some people might call it that again not me and toward a a more let's say like sovereign
• 27:59
  sovereign oriented system uh where the us treasury has you know maybe more control over the dollar
• 28:04
  system and what it means to hold a dollar. If you thought that that might help go a long way to
• 28:09
  explain the administration's interest in stable coins, which if you squint could kind of look like,
• 28:14
  you know, the dollar system pre-1913, where, you know, privately issued bank notes were
• 28:19
  primarily collateralized by US treasuries and T-bills. And if you thought that that was a
• 28:26
  gambit that was being attempted, you might also ask yourself, what would go a long way to further
• 28:33
  making the, you know, the treasury backing of the new digital dollar more appealing and more
• 28:39
  credible. And I think the last quote on here, which we can end on, may help to answer that
• 28:46
  question to some extent. You know, Trump being asked at a crypto press conference, a digital
• 28:50
  assets press conference, you know, on if the U.S. would look to buy significantly more Bitcoin. And
• 28:55
  he basically said, I'll defer to Paul Atkins and the whole group. You know, they'll make a decision
• 28:59
  And I'll listen. I think there are an increasing amount of breadcrumbs suggesting that there is an appetite for a new dollar system run more and influence more by the Treasury that may have certain characteristics that look quite different than what we've had for the last hundred years.
• 29:16
  And so a lot of things can go wrong with that or a lot of things can throw it off the path and make that kind of not manifest in the way that I might be imagining.
• 29:25
  But, you know, I think it's worth considering the right tail implications of that if that plays out.
• 29:32
  Yeah.
• 29:33
  I will say Paul Atkins spotted a PubKey DC a few weeks ago.
• 29:38
  Just something to note there.
• 29:40
  And one more thing I want to say before we wrap up, but I completely, completely forget what I was going to say.
• 29:46
  So, John, we'll end it there.
• 29:47
  We'll be back next week.
• 29:48
  I remember what I was going to say.
• 29:49
  Between now and next week, we'll record Jackson Hole Economic Symposium.
• 29:53
  It's going to happen.
• 29:54
  So we should have some good fodder next week.
• 29:56
  Yep.
• 29:56
  All right.
• 29:57
  See you guys.