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Why Is Trump Nuking Markets? | Felix Jauvin
Recorded: April 7, 2025 Duration: 1:02:13Space Recording
Short Summary
In a lively discussion, traders explore the intersection of macroeconomic factors and crypto trading, highlighting strategies for navigating market volatility and the potential for growth in the crypto space amidst changing economic conditions.
Full Transcription
nice we're alive we're alive we're doing welcome welcome to the stream everybody
what is up everybody
i guess we'll just uh we'll let a few people trickle in but we're doing it
joanie you have the nicest background i think i've ever seen in a live recording that i've been
in so props to that thank you um i live in a nice recording that I've been in. So props to that. Thank you. I live in a
nice area. It's really, really beautiful here. I would say it's definitely a good place to forget
about how much money I'm losing. And I would be recording next to the usual white wall, but
that area is out of commission at the moment. So you're stuck with me outside with the crappy
microphone. Doing well. I love it. Jonah, you stuck with me outside with the crappy microphone.
Doing well. I love it. Jonah, you know that, you know,
the background I miss the most, that butterfly gun.
That was a good one. I don't know if you've ever seen this thing.
I don't think so. No. Jonah, why don't you explain your butterfly gun?
So during the crazy flash crash bear market of 2018, or just before it, I decided to buy a piece of art.
It's a North Korean AK-47 covered in dead butterflies, and the bullets are filled with different commodities.
And I thought, this is a good commodity trader art piece.
So I commissioned it from the artist, told him I'd pay for it in cash to get a discount.
And then he started working on it.
And then this was sort of at the peak of a very good year. And then the market basically, my P&L went down by 80% between when I said done on that to when I owed the money and got it delivered but I
didn't flake I took delivery and now I have the hardest thing that you could
possibly import from London to Los Angeles a North Korean fully automatic
gun covered in dead animals. That sounds like something that should be in the Denver airport, you know?
They have those insane graffitis.
Oh, yeah.
You've heard all the conspiracy theories there.
Oh, yeah.
It's like Illuminati on a world face.
Yeah.
Okay, I think we have enough people in here that we can stop shitposting
and actually get down to the brass tacks.
Good to see you guys.
It's been a couple weeks.
We all got together at the Digital Assets asset summit and it was a ton of fun and yeah it's just fun to
you know collide the different worlds of of my macro world and and your guys's crypto trading
world and and see where we intersect and you know there's a lot of cross currents too you know jonah
you were you were trading oil when i was probably five years old so you know there's a there's a lot
of different cross currents there. So yeah, man,
I thought it'd be fun to just chop it up and see how we're thinking about
things.
Yeah. Yeah. I mean, so, so far, so far, so good.
I'm glad that you pointed out Jonah is an old man.
I like to say that to him as well, but you know, by, by being,
by being an old man,
he has some actually pretty amazing perspectives on how these types of markets trade.
As a guy that has not been through monumental shifts in global economic order before in my trading career,
I have to say this has been one of the more difficult things that I've had to do is navigate this without blowing up.
I think a lot of people, you can kind of sleep
on what happened. Prior to it actually happening, there are a lot of people, okay, yeah, maybe
he'll put tariffs on. I think even heading into Liberation Day, if you had pulled the
vast majority of market participants, I don't think they would have said you're going 20% or 16% straight down
in three days. I'll share mine, but I'm curious about your guys' thought process going into that
because I was there watching the live stream that day and going into it, I was 50-50 on what was
going to happen and was just ready to hit the green button or hit the red button, depending on how things are going to transpire.
I know myself personally, we got that initial Wall Street Journal.
It's just been a nightmare the past week for these news media putting out these headlines and just swinging multi-trillion dollar assets in one direction or another.
multi-trillion dollar assets in one direction or another and this all started when initially during
that tariff announcement wall street journal i think was the one that came out with the 10
flat terrace universal terrace which if you looked at expectations that was pretty strong on the
lower than expected side of things and then you know i saw that and hit the green button and then
pretty quickly the you know the almighty chart of doom came out and just sent everything spiraling in
the other direction and had to quickly get out of those at break even and then just you know went
the other direction and just got out of almost everything else i had and you know it's the beauty
of being just singular traders right you know we're not i mean maybe you guys are trading multi
billion dollar books but i'm not so you know i could just pretty much get out instantly and it feels like
what has happened the last three days since like market trading day since has just been everybody
else catching up because you know the pod monkeys the multi-strats and the ctas it takes a lot
longer for those guys to unwind their books and you know the last especially friday to me seemed
really interesting in terms of just all out degrossing you know there's gold down you know equities were down and then we started to see rest of world equity down which
was a new thing that really didn't transpire so yeah it just felt like we're finally we saw the
full-on on wind of all those books and yeah like what were you guys thinking about going into it
versus what happened well going going into it i wasn't let's put it like this. I was not expecting the Trump administration to be calculating tariff rates by dividing,
you know, imports versus exports.
Like I was not, that was not on my radar.
And I have to say that to me is what made it a very dangerous situation because it takes
away the logic of a lot of it, right?
And you're actually seeing that play out right now. If prior to that, you were thinking, okay,
these guys are going to, you know, Trump is going to get out there and he's going to put on
a ton of tariffs on these countries in order to get them to reduce their tariffs. That's actually
a lot easier to solve than the situation that we're in today. Like Vietnam comes back and they say, well, we'll go to zero tariffs.
And Trump says, no, no, no.
There are all these other things that you're doing.
Vietnam's like, what, what can you, can you explain it?
And then there's no like real explanation for, for what,
what the other things, you know,
it's like vague accusations of currency manipulation and,
and we need to export more to you than, than, than you export to us.
So it makes the actual calculus for getting out of this,
I think, a lot more difficult in my personal opinion.
And so I think that the idea of,
okay, well, this is a negotiation tactic to,
maybe these things are sticking around for a long time,
I think is why the market reacted the way that it did.
Because prior to Liberation Day,
I think even the top 25% of bears were probably thinking this is a negotiation tactic.
And I think that has shifted a ton now to,
hey, maybe these things are sticking around for a while.
That's what the bears are thinking.
That's what I was wondering to articulate.
This certainly wasn't in my playbook.
I didn't expect this either.
I was bullish coming into this whole thing
and happy to own that and tell people
how I think about trading when you are wrong
and get punched on the chin
because it's very important to not fall into
a couple of obvious traps in a situation like this.
If you're somebody like me, I'm not currently trading a multi-billion dollar book. I'm trading
my own book. So I don't have like a risk manager tapping me on the shoulder and telling me to get
out of stuff, which helps. You know, I think the interesting thing is I am pretty well connected
in the pod shop world. And I've heard that a lot of pods have blown up over the course of the last month and a
half, particularly in the last three days. So I think, Felix, you mentioned gold being down.
That shows you that there are forced liquidations going on in portfolios. And so Ballyasny or
Millennium or Citadel will fire the portfolio manager, delete their login information, and then
somebody else at the fund is responsible
for liquidating that particular book, right? And it can get sloppy. So I think that's,
you're seeing a lot of that right now, which is why everything, including gold, is down.
Yeah. And so, you know, we can get into some of the frameworks of how we're thinking about this
in terms of like the economic impact, but that reason is mostly why I've started to buy somewhat aggressively is Friday.
And then also today in some respects,
we've seen a lot of those forced sellers,
that forced deleveraging,
which we haven't seen in the weeks lead up.
Friday is when it started.
I think that's, I saw a chart in the daily shot
suggesting that last Friday on US exchanges, all of them combined,
more shares of equity traded than ever before. It was the most active single day in US equity
market history on a just like obviously dollar notional basis, but also shares basis, which
really tells you something. So I think that, you know, Avi and I talk about this a lot on our crypto pod.
When you see big volumes and a reduction in open interest, that usually gives you a sign that the
move is almost done. Yeah, yeah, exactly. So that's why you got to start thinking about just,
I hosted the Ford Guidance Roundup with Quinn and the Macro Dirt Boys, Tony Greer and Jared
Dillion, who are awesome veteran traders. And it's just great to discuss these ideas of just how do you
go about cashing these knives where you see these four sellers and you're like, okay, this is a
rational selling. When I think about equities down 20%, we're getting into pretty decent pricing
of a recession. So you start to see on start to see on, you know, trading around the margins here
that you want to be getting in front of that. And to get in front of that is, you know, the way we
put it on that roundup is that you have to eat a few shit sandwiches before you really catch that
bottom and start to see the other side of things. Because, you know, like I think about the last
time that we went through one of these was March, 2020. And I made the mistake of having a shopping
list and getting excited, but always thinking there thinking there's you know there's going to be
the next leg lower and then that's where i'm just gonna you know buy everything all at once and then
bottom take it to perfection and then ride that you know into eternity and you know i'll i'll be
happy to admit that i missed i missed that pico bottom because of that reason whereas and i'm sure
you guys can explain
how you think about this, but you know,
you gotta tranch it out and get in front of this thing
a little bit at one point,
even though you may think that it'll go lower.
And that's the situation that I feel like we're in right now.
I already ate a couple of shit sandwiches
on the way down here and I'm done with that.
So basically what I'm doing now is I'm afraid
to catch this falling knife, but I don't think I'm good. I might not bottom ticket, pico bottom ticket, but I do plan to buy
more when the thing looks like it's starting to like grind higher, right? Like once I don't want
to try and catch the falling knife. I want to try and buy a green shoot style rally. Avi always has
a slightly different perspective on this than I do,
but that's how I look at it. Yeah. I'm more of a trader like you, Felix. I try to wave it in when
things look like they're imploding. I mean, the best thing that any trader can do is buy
for selling because it's very scary actually to buy selling and you don't understand why it's happening.
Because what that means is that somebody else knows a lot more than you.
And somebody else is probably selling for a reason that you haven't figured out yet.
And then you just end up totally nuked.
But that was actually kind of what tipped me off is when everything started going lower.
Exactly.
When you have gold lower, when you have, I mean, the bonds started going lower. Exactly. When you have gold lower, when you have, I mean, the bonds started going lower and, you know, equities were going lower.
It was correlation of one.
On the first day on Liberation Day, if I remember correctly, that was not the case at all, actually.
No, it wasn't.
Yeah, that day.
Gold was up.
I think things were, the market was reacting kind of the way that it was supposed to
react, which makes it, you know, okay, I don't know, maybe there's just a massive repositioning.
But once everything starts reacting one to one, then you can say, okay, I'm going to start
nibbling. Now, the issue is, you never know how far that's going to go. And so what you try to do
is basically just chip in when things look nuts and then give
it give yourself give yourself wiggle room.
Right. So that you're not completely out the way that I like the out of out of dry powder.
The way that I like to do it is basically I look I basically just look at the charts and I go,
this is this kind of my like my line in the sand.
Like this is like a really you know know this is the most extreme that I could that I think is a five percent chance of this actually happening
and at that point is when I want to be a hundred percent long and then I'm gonna scale in scale
in until there so for me um that was uh actually for 460 on uh on spy was like my, okay, that's like where I'm shoving absolutely everything in.
And let me get up to like, you know, because I say it's,
I think it's a 5% chance of that happening.
Like I'll deploy 80% of capital before that point.
And then like, you know, save, like at that point,
I'm probably only buying like 10, 20, 10, 15%.
If that makes sense.
Like I try to, that's what I'm trying to do.
So I'm never fully filled unless something like literally insane happens.
I think that's a bit of PTSD from March of 2020.
Like when I just got like completely blown out, that was painful.
And I think that's kind of stuck with me.
I've been in crypto too long.
But somehow these big jackknifes lower in price when the asset that you trade is as volatile as Bitcoin or worse, one of these altcoins, somehow this doesn't feel that dire.
And I certainly, you know, I think Avi and I always talk about trying to maintain a strong balance sheet in either your personal book or your workbook and not be forced to sell.
So I, you know, I've heeded my own advice here, so I don't feel that scared.
I'm definitely done trying to pick the bottom.
I'm going to be buying when it grinds higher again, which, you know, I may miss a V-shaped
recovery, but I'll certainly catch a U-shaped recovery.
In terms of how this recovers, I would love to get you guys' take because this is, you know, even though
I'm an old man, I'm not as old as Jared Dilley and he and I both worked at Lehman Brothers,
but I'm still pretty old. I've never seen anything quite like this before because this is a man-made
calamity. Everything was just great before Trump decided to royal things. On the one hand,
part of me thinks this should be a lot less scary than an exogenous, you know, out of left field thing like a global respiratory virus pandemic or the global financial crisis, which sort of just spiraled out of control and started for, and he could unwind it with a tweet. And I don't know whether that makes this a way easier buy than those previous two crises I mentioned,
or a way harder buy, because maybe Trump is just so insane that he's just going to keep pushing the envelope.
What do you guys think?
Yeah, Jonas, so the issue, this is what I'm debating a lot with, too.
And I tweeted something along those lines earlier today as well, mentioning that it's just crazy that this is self-inflicted the issue
is if this keeps on for long enough it has it scars the economy regardless of if we revert back
so there's a few ways you could look at this so you know we've seen the atlanta fed gdp now that
has been coming out and it's just completely off the rails and completely skewed by
some very, very, you know, like outlier events that are impacting imports data in terms of trade.
So, you know, regardless of, say, for example, Trump tweeted out, okay, just kidding, you know,
let's turn all these tariffs off. We're all good. The fact is that there's already a ton of imports
that have landed on the economy. There's already a ton of delays in terms of hiring plans and CapEx investment plans from companies.
There's already all these dynamics happening.
And you make this point that everything was fine and dandy going into this.
I actually disagree somewhat.
You know, in mid-December, I started to talk about a gross slowdown in the economy.
And I think, you know, I was pretty
strong on the camp that it wouldn't be a recession by any means. I'm still not fully sold on the idea,
although it's very close right now. But even if we took out the tariff stuff and the Trump fiscal
retrenchment, there's already beginning to be some signs of the labor market slowing. And some of
these more in the weeds data points that told me that the economy was more
fragile than I think a lot of people expected and thought. So I think that there was that nasty
combination of like a nasty recipe that was created of those dynamics paired with highly
overvalued US equities. If you looked know, broad surveys of institutional books, they were all in on US. The idea was you never need to own rest of world equity again. So there's like these, these technical factors paired with that, that I think set up the ideal catalyst. So, you know, now I think about it, okay, what would happen if, you know, we get to Wednesday and we learned that a lot of these, these tariffs, at least, you know, if we say that the 10% is,
you know, flat and there for good,
which I think it is,
but the reciprocal tariff stuff,
you know, we're starting to see some discussions of,
you know, do some countries decide to retaliate
like China's doing,
like Europe is starting to talk about doing,
or is it the other side of the boat of,
you know, the Vietnams,
or we'll get into this, I'm sure,
but there's talk of Scott Besson going to
lead the negotiations with Japan as opposed to Lutnik, which is very interesting. That was a
pretty key signal for me. But what if we get to Wednesday and this all reverts somewhat?
Does that undo the effect on the economy? I don't think so entirely.
effect on the economy? I don't think so entirely. But I do think it would be enough to see a very
solid bounce and rally. But would it completely revert? I don't think so. That's how I'm thinking
about it. Yeah, it's kind of hard to thread that needle. I'll say that the move today
reminded me a lot of the fake ETF headline that Bitcoin had a while ago.
Do you remember that?
Where you kind of just cleared out, you just like cleared out a ton of positioning.
And then everyone started going, wait a second.
If that's how Bitcoin is going to react to the ETF, I better get in.
And I think that could contribute here to a similar mentality with this whole, wait,
think that could contribute here to a similar mentality with this whole wait if if Nasdaq's
up seven percent in 10 minutes because of a fake announcement I mean imagine what's going to happen
on a on a real announcement and so I think that's probably enough for for for a bear market rally
um which is kind of what I'm kind of what I'm betting on the the issue is that I do think that these tariffs are a lot stickier than people are giving them credit for in the long term.
And so if I start with that view and I go, OK, Trump's been talking about tariffs for 40 years.
He's finally got them in place.
He really does, genuinely wants to increase manufacturing output of america
that doesn't happen in a situation where the tariffs immediately go away like i think the
rest of the world tariffs might be a negotiating tactic but the tariffs of china i'm not so sure
about yeah and so i think i think those end up those end up sticking which is what I'm nervous about but there's a lot of
potential good news for the rest of the world that could come out in the next call it week or so
which I think would send up the market a lot and you would see an extremely aggressive bear market
rally yeah um Avi I'm glad you brought up the China thing because I think that's really really
important um the way I spent the hour before
this live stream digging into a few different press releases and stuff that happened today we
had the Council of Economic Advisors Chair Stephen Moran had a speech and there were some some
interesting tidbits in there that that paired with a friend of mine Danny Dayan who's been on the show
a bunch of times he has a sub stack he put out this free note where he was gaming out what's the big goal here?
What are we actually trying to do behind all the chaos and the volatility?
And he really thinks that this is about aligning Western countries to go after China at full force.
And you start to see that that that coin telegraph analog headline
this morning you know it was so specific it was so confusing for that to come out and not be real
that you know you gotta wonder for some sort of trouble in because if it were to occur i think it
does make sense for okay you know let's we're keeping the 10 on everybody and then the reciprocal
stuff let's get to let's get to the table and negotiate get those deals done but china we're actually doubling down on you and i think there's a lot
of focus on on completely reshaping the economy and you know you can set aside your your personal
opinions of the execution of all of this and i do think it's been been quite poor but i think there
is some some valid pursuits that need to occur in in this reordering of the
global economic order i you know you you look at you know i'm canadian i'm i'm the victim of this
idea of of you know trying to become the 51st state and this this pursuit of greenland and the
panama canal and uh you know i'm a total geopolitical larp but you know you just think
about what what are they trying to do in terms of just solidifying the Western base
to go against China in terms of these capital and trade wars. And so I do think there's something
there that we need to keep in mind. And to that point, I don't think this is something that just
reverses randomly, especially for China. I mean, I think the blue sky scenario for Trump
is that you have extreme tariffs against China and negligible tariffs against everybody
else. And based on the way things are already going, you know, early reports of Ursula von
Leyen coming to the table to negotiate a 0% for 0% free trade agreement with the United States,
Japan, you know israel already lowered
their tariffs to zero it doesn't seem out of the question to you know it's optimistic for sure but
it's not out of the question to say hey in three months there could be basically a new wto that
doesn't include china like the united states could have agreements with most major trading hubs Southeast Asia um you know
including Japan uh the EU and Latam and Canada just you know this new sort of trade paradigm
where there's no tariffs and then China could be 150 percent tariffs is that trading you know that
sort of trade war escalates I think that's what Trump's end game is and I think that the you know, that sort of trade war escalates. I think that's what Trump's end game is. And I think that the, you know, I think a lot of people out there, pretty much, it's a universal
consensus amongst the financial market participants, both on Twitter and who I speak to in my circles,
that Trump has made a terrible decision. I don't, my bubble doesn't really include like
the opinions of too many blue collar, you know, laborers in middle America, just because I happen to live on one of the coasts and I worked in London and my background, you know, I would love to get the take of like somebody who's who's doing, you know, theoretically, the main street type people that Bessent is referring to saying this is helping. I'm not sure it helps them. I'm sure they're in favor of it, but that's
not who we speak to in the forward guidance or the 1000X telegram rooms, more like young risk-taking
types. So it's not clear to me whether this is a popular decision or not, but I think Trump is
taking too much flack from the people that I speak to. I think that obviously if this is the
beginning and the end of his strategy, he just hikes a bunch of tariffs, drops the mic, and goes much flack from the people that I speak to. I think that if obviously if this is the beginning
and the end of his strategy, he just hikes a bunch of tariffs, drops the mic and goes golfing for the
rest of his term. Yeah, that's obviously terrible policy. It's a huge policy error and the economy
is going to get destroyed. But I think instead of that, my sense is that this is more like a
Queens, New York style real estate negotiation where somebody comes up to Trump and says, how much for your building?
It's not for sale. A trillion dollars, right?
Like some crazy, stupid opening gambit.
And, you know, as I close out this thought here, just one final Boomer reference.
I don't know how many of you youngsters have seen the movie Zoolander, but in it, Hansel says and i quote don't you know i'm loco man
um and i think that quote is kind of uh kind of what trump's trying to do here i think he's just
gone so over the top to make everybody think wow this guy means business he doesn't care he's
golfing today um in the midst of all this chaos like it does if if you were gonna if you were
gonna like if you're a foreign leader who's just been tariffed, and you're trying to decide between, hey, do I retaliate?
Do I just wait this out?
Do I try to come to the negotiating table?
I think that Trump's crazy enough that maybe it incentivizes coming to the negotiating table.
Yeah, so, yeah, in that Stephen Moran piece I mentioned, there was, you know, they released the remarks, and'll just read out a couple of points to tie in this whole game theory of getting the Western world together, getting the rest of the world to pay their fair share for this U.S. security guarantee.
So he says, in my view, to continue providing these twin global public goods, there needs to be improved burden sharing at the global level.
If other nations want to benefit from the U.S. geopolitical and financial umbrella,
then they need to pull their weight and pay their fair share. The cost cannot be solely borne by everyday Americans who have already given so much. And so he also pairs in and says, you know,
what forms can that burden sharing take? He gave these five options. So first, other countries can
accept the tariffs on their exports without retaliation, providing revenue to the U.S.
Second, they can stop unfair and harmful trading practices
by opening their markets and buying more from America.
Third, they can boost defense spending
and procurement from the US, buying more US made goods
and taking strain off our service members
and creating jobs here.
Fourth, they can invest in and install factories in America.
And fifth, which is the most interesting one for me,
is you said they can simply write checks to Treasury that help us finance global public goods.
So you hear all of that, and then you see what's going on in terms of
these geopolitical games that we're just speculating on at this point.
But a lot of times... I'm sorry, write checks to the Treasury?
Yeah. That's hilarious.
Okay, yeah, but think about what he's saying there is is you know we've heard this talk
and a lot of it came from from him is like you know issuing these century bonds where
other countries need to buy these hundred year bonds you know that are zero coupon bonds they
get no coupon you know if if inflation goes up they're just they're going to get wrecked on the
price of those bonds that's just the cost of doing business uh for those security entries that's their
perspective that's not my own i'm just saying that might be how they're
thinking about it.
Yeah, I mean, it kind of
makes sense from that perspective.
I mean, I'm just thinking out loud here.
If your goal
as Trump is to isolate
China and attack China, you
know what they're going to do. You know they're going to be offloading
a ton
of your debt and you need to figure out how to get people to buy it. And basically what you're saying and what he's
saying is that I'm going to I'm going to use, you know, if you go in there and you buy up a bunch
of our debt, that's a way to get out of this for you. So, you know, he puts everybody in a tough
position. He only wants one person to actually be there. But the you know, the selling of the
treasuries that China is doing because he put everyone else in a tough position actually be there. But the selling of the treasuries that China is doing,
because he put everyone else in a tough position, will be absorbed. I think maybe there's a little
bit of that game going on. Yeah, there is this whole idea, today, treasury bonds sold off pretty
aggressively for where the market was at. And there are some people speculating that it was
China selling. I think it was more so just market dynamics.
Friday, the market panic priced in outright recession.
And I think it's just some big players taking some profits,
rotating target date funds,
rebalancing from bonds that have been doing well into equities,
that sort of thing.
But I think underneath, there is also some validity to the idea that
if we're getting into a capital war, the most powerful tool they have is to market sell bonds.
So it's a distinct possibility.
I don't think it explains the entirety of the price action today, but it's definitely something to think about.
No, it's something to think about.
to think about and i mean if if you if you go with the if you go with the angle that he's he's
really he's really thinking about this um you know deeply the only thing that makes sense that we've
been able to come up with collectively is that he's at he's he's targeting china and and he's
he's targeting that air that area of the world and so the the idea here would be a controlled
demolition like what you don't you what you do what you don't want to do is have them accumulate all of this leverage and basically sit on it until the moment where they could use it the most.
Right.
Like imagine a hot war breaks out and then suddenly like the financing costs on America's debt go through the roof because of what China does.
Exactly.
You really don't want that.
So might as well force them out now
when it's not the maximum pay to sell it.
I think back to COVID,
when we saw that supply chains
were so dependent on China,
that is something that we didn't really solve since then.
A lot of this,
I mean, there's no shortage of takes
on why this is the stupidest economic move in history.
The Economist published an entire magazine to that effect.
It does, you know, just looking for positives here, it does seem on a number of fronts like, you know, to give Trump the benefit of the doubt, even if he doesn't deserve it, does seem like there were a lot of Band-Aids that needed to be ripped off that he inherited, you know, debt-fueled sort of deficit spending, you know, major supply chain deficiencies that, to Avi's point, you wouldn't want to work out in the middle of a hot war.
debt ownership in the wrong hands,
needing to get shifted to the right hands.
It's, you know, if you're looking to just continue
with the status quo, which, you know,
the economists forecasted would send America
into bankruptcy by 2037 or something,
all else being held equal, you know,
he could have definitely cruised through his term
without making any changes.
He did get elected on, not revolutionary, but like, you know, could have definitely cruised through his term without making any changes he did get elected on not revolutionary but like you know kind of big change
big change uh big talk about big change and so to some extent i feel a little bit stupid for not
sniffing this out right i i came into this term feeling very bullish seeing the bullish reaction
to his election as you know a signal that what he was going
to do in his second term was going to be constructive markets, just like it was during
his first term. I didn't quite grasp the monumental nature of what he was saying.
Like to Avi's point, he's been talking about tariffs for 40 years. I didn't really grasp just
how serious he was about it and how unabashed he was going to be in his execution.
So I don't necessarily blame him.
He hasn't just like, this shouldn't be a surprise.
And I'm annoyed at myself that I kind of got caught wrong handed on it.
But now that we're here and markets are 20% lower,
I maintain the view that we talked about when we were sitting on the floor
at DAS in New York, Fijo. I do think that he doesn't have enough mandate to tank the stock
market that much further from here before basically the midterms, you get a blue wave and
maybe a super majority in Congress could start bypassing his veto
if this really becomes unpopular and too destructive.
So I just, you know, I think we're supposed to expect a U-turn.
Jonah, I felt stupid as well,
because if you really think about it,
he fooled us in the same way that he's fooled so many people.
Like he says so many outrageous things and then acts on a few of them.
But then you don't take any of it seriously.
And so he kind of just comes in and we're like, yeah, he's a pro business president.
Stock market's going to go up, all this other stuff that he's talking about.
Yeah, he's talking a big game.
Who knows if they're actually going to do it?
But then he actually does it.
And that was painful.
What I will say, to bring this full circle back to Bitcoin, this is actually pretty damn good for crypto.
It is.
Not even in the, you know, everyone says midterm to long term.
I actually think this might be very good for crypto in the short term.
Yeah.
Yeah.
Go on, Avi.
Go on.
Tell me more, please.
I'm finally, I'm finally, I'm finally, you know, Jonah likes to say he's so bullish he can't see straight.
Like I can still see a little bit, but I'm pretty bullish.
Yeah.
I'm with you.
I've been buying some Bitcoin as well.
And yeah, I do want to.. Yeah, let's talk about that.
And I also want to pair it with, as traders,
how we're viewing what's priced in terms of these downsides.
So, okay, we've come in with basically,
obviously there's the tail risk of further retaliation cascading.
But for the most part, it feels like a lot of what's out in the market now
is marginally the worst possible outcomes.
You know, we're talking, we have 100% tariffs on China on the tape right now, right?
So it's like, do we go to 200%?
I don't know.
So you think about that.
And then, you know, we have, we're on the other side now.
We've crossed the Rubicon and now we're talking about negotiations.
We've got Scott Besson. So again, talking about negotiations. We've got Scott Besson.
So, again, this was very notable for me because Scott Besson has not been involved in trade talks.
He's going to Japan to lead the trade talk negotiations with the U.S. trade representatives.
It's not Ludnik.
They had the Rottweiler out there for bringing the stick out and whacking them,
but now they're bringing in the carrot potentially.
Scott Besson is a lot more measured in his approach so we're getting to the next phase now where the
only real headlines are going to be negotiation ones um and are we priced for any sort of
negotiation ones and then looking at how that gets paired in you know bitcoin's been very resilient
and wait quick question quick question felix on what you just said uh very quick question did you
do you interpret
you you tweeted that besant is going to negotiate with japan instead of lutnik
i interpreted your tweet to mean uh that lutnik is getting sidelined in the trump administration
did you instead mean hey they've got the good cop besant and the bad cop lutnik and they're
sending in the good cop which means that they want to get a deal done? Like, what did you mean exactly? Yeah, I'm 50-50.
I think it's either, we don't fully know.
It's either, oh shit, you know,
we got a 20% equity correction
and bond yields are still surging.
This is not a good trade-off for us.
Let's pull, let's sideline Lutnik
and get Besson in there.
Or it's what you say,
a good cop backup situation.
It doesn't really matter what the outcome
is the fact is that we're going to go marginally from this insane rhetoric to somebody who's a lot
more measured so i don't know i'm 50 50 but i feel like the outcome is still the same on the margin
of what's priced what do you think um where i i'm expecting a bunch of trade deals where I,
I'm expecting a bunch of trade deals and the market to go back up.
And I've been so wrong.
I didn't expect that.
I thought this would be one of those little 5% sort of pullbacks that you can
buy with both hands.
Like,
like we've seen so many of since the
global financial crisis. I did not expect this. So take what I say with a grain of salt. I remain,
I'm not selling a dime worth of risk assets. I'm not selling crypto. I'm not selling equities.
I think from here, I tend to believe, Avi, that crypto will outperform equities the btc spx ratio has has been more resilient
than i would have expected uh it should which is very very very rare when it goes to the downside
i mean that shouldn't be like that performance is very rare is that what's is that what's making you
bullish in the short term avi i haven't heard you short-term bullish crypto in a while
yeah just because i've been short-term bear for a while. But, you know, and that's just
because I haven't, you know, my, my framework on crypto, which I've repeated so many times that
anyone that's listened to the podcast is going to get sick of hearing this, but it's value and
momentum. You know, in order for crypto to go up, you either need it to be going up already and
people buy into the momentum or you need people to view it as a quote unquote value price.
And there are two things that can turn Bitcoin into a value buy.
The first is price, just simply price itself.
You know, maybe you go back down to $50,000 and we haven't psychologically you haven't seen $50,000 in such a long time that you think it's
your only chance to ever go buy it level gets defended and then suddenly you're
going back up. Or some good news comes out that is actually beneficial for
Bitcoin and beneficial for crypto. And I think that that's a little bit of what's
happening right now, regardless of what you think of when, you know, are the tariffs good?
Are the tariffs bad?
Regardless of any politics, regardless if you think they're going to stay or they're
going to go, the reality is that we have kickstarted a slow roll into a deglobalized
world.
And I think that is going to continue.
The tides of nationalism are rising both politically, geopolitically, on a local level, on a national level.
People are becoming more concerned within themselves than they are.
Nobody wants to be part of the global community anymore as much as they used to be.
And you're seeing this everywhere.
But there's still a tremendous amount of demand to be interconnected globally.
So if you shut down a ton of different pathways between countries and a ton of different valves of commerce between countries, but you may, but crypto still exists, then crypto inherently, I think, gains a piece of that pie.
Because there's still demand to hold cross-border assets to be to be part
of a global economy uh but if you're getting if that's getting shut down and weaker over the next
six to 12 months and i think that the and because there are sources of demand that are getting shut
down and pick then bitcoin goes up in that yeah in that part. And I think it's also outside of that, just a fear
trade. You know, I think Bitcoin went down and gold went down because of what we were talking
about liquidations across the board. But they're because, you know, they're both now geopolitically
significant assets. Let me give you a concrete example. Let me give you a concrete example of
what you just said, Avi. So Bitcoin is a commodity. I think we can all agree. It's also a currency, but it has a lot of commodity-like characteristics. third-party nations between two trade warring or hot warring nations. So for example, take a
commodity that I know well, crude oil, and take the country India, right? America and Russia don't
do direct trade with each other anymore. India can buy tons of Russian crude oil and tons of
American products, and they can, you know, they're kind of like this transshipment hub
in the global matrix of capital flows
because they're able to buy Russian oil, right?
And as capital controls are a byproduct of tariffs and trade wars
and deglobalization, to use Avi's word.
As the world deglobalizes, you need more transshipment hubs, just like what India's pulled out of their hat,
to sort of intermediate between Russia and America in the middle of that scenario. So I think Bitcoin will end up being one of like kind of an alternative reserve commodity slash currency that can intermediate between different geopolitical hemispheres.
It makes a lot of sense. That's so interesting because I am bullish. I agree with all that,
but I'm bullish on Bitcoin for some other reasons as well. So a couple, actually during the digital
asset summit, during we did a live roundup and i asked um quinn and mike
what was their you know one trade if they wanted to put forth and i put forth one as well and the
trade i put forth was short queues long bitcoin wallet you know vol matched or delta matched or
whatever you want to call it and the reason was because nasdaq and so us the us economy
was pulling back on fiscal retrenchment. The economy was slowing.
And on the other side of the equation was every other country was beginning to stimulate,
fiscally stimulate because of a reaction function to Trump tariffs negotiations. So at the time,
we saw Germany talking about a $500 billion defense spending. And then now if we fast forward to today, we have headlines sitting in the tape about China front-loading stimulus to offset the tariff war.
So, okay, Bitcoin is a global reflection of global liquidity and some other things as well.
But that's one way to think about it.
Qs are specific more to the U.S.
So my idea was to short the Qs because
it's, you know, every signal is going in the wrong direction. The Fed was complacent and not doing
anything and they didn't want to get reactive or proactive, sorry, like they were in September and
start to ease. The fiscal situation was deteriorating and the economy was slowing. So I was bearish on
the NASDAQ, but I thought Bitcoin would outperform relatively speaking.
And that's largely what happened.
And I think, you know, I had that trade on.
I sold it a little too early.
It would have been a really great one to sell on Friday when Bitcoin was doing super well.
And NASDAQ was down 20%, but sold a little early.
But the thesis remains.
So I think that that thesis will continue further.
Bitcoin is a global liquidity asset,
and every other country is going to have to stimulate now
to offset the negative growth shocks that come from,
you know, one of the smartest economists that I've seen,
Brad Setzer, who he focuses on global trade.
The way he framed this whole shock is,
imagine global oil rose 70 bucks overnight.
Like, you understand what that means, Jonah.
It's like the cascading effects are huge, and it does lead to lower growth that needs to be offset so
i think for that reason bitcoin has a lot of upside and i think that's been some of the
resiliency now when i think about when i put my trader hat on on friday i was buying equities
hand over fist and less so bitcoin because i was worried you know that was when everybody was
talking about the decoupling thing and you know bitcoin was was doing its own thing and then you know pretty
quickly it reverted to 76 000 this morning so now that that's complete i'm a lot more excited
a bit bitcoin um good job waiting that out you you you were right about you were right to wait that
out i don't tell you too much i will say i bought a bit on Friday, so I did eat a bit of a shit sandwich.
But yeah, I did mostly wait till today.
If you're right.
I think that's a really phenomenal thesis,
and I think that's accurate.
And I do think that'll continue to happen.
And China's going to do it in a big way
because they're going to have to.
The other thing is,
given all of that, Bitcoin, just from a trading perspective, is in a great position from a risk reward.
You know, just if you're constructing it out, I mean, basically, who are the sellers of Bitcoin?
The sellers of Bitcoin are the people that have made a ton of money on it and want to get out, or they're the short-term traders that want to get out,
you know, because they think momentum is going down and they're coming in and they're shorting
the market. If I go and I look at the order books, the order books are just ridiculously stacked
from 65K to 70, from 73K. So I'm just talking about flows now. And one thing that's really interesting,
I think one of the reasons that Bitcoin did outperformed is because you had so much momentum
and craziness in the equity markets. A lot of those people that were shorting NASDAQ,
three months ago that would have shorted NASDAQ or shorted Bitcoin to catch a down move in NASDAQ, you know, that three months ago that would have shorted NASDAQ or shorted shorted
Bitcoin to get catch a down move in NASDAQ.
We're just shorting NASDAQ.
That's what I'm trying to say is like a lot of the momentum traders were just focused
on equities.
Like, I don't need to go sell more BTC.
There's no reason for me to go do that because I could just sell equities and they're down
I mean, this is this is great.
And I do think there's actually a lot of that.
Just a lot of the pod shops will use Bitcoin,
which is why Bitcoin started selling off on Sunday,
in my personal opinion,
and over the weekend,
because people wanted to bet,
like all these momentum guys,
they wanted to bet on equities opening lower
and how are you going to express that bet on a sunday
you're going to sell you're going to sell bitcoin that's twice sunday morning it starts collapsing
yeah bitcoin is as weekend spooze but if felix is right and bitcoin starts to
a cement like basically decorrelate decouple from queues and outperform to the upside. Oh my God. Like, so yes, Bitcoin.
I don't know if I'm going to hang my head on decoupling,
but I think front running of liquidity.
Well, yeah, front running for sure. So basically the whole point of this,
the whole point of this rant was that I think that there are,
the sellers have sort of exhausted themselves for this,
for this particular market right now.
And there are clearly a lot of buyers waiting
i mean the dip on monday just got eaten up so so so so fast um yeah so i'm i'm of the opinion that
the bitcoin is both has all of the positive things that we just talked about and then also
from a flows basis looks really good
yeah i mean talking about you and momentum
talk some dude i i literally friday the old actually as like as a crypto trader uh that that expresses edge like i just somehow i'm i'm just much better at trading crypto than i am at
you know trading equities obviously i think it's an easier market. Like I was buying all hand over fist on Friday against ETH and VTC. So I was actually shorting
the hell out of ETH and buying a ton of alts when they had that like massive collapse in on themselves. And that's done extremely well today.
And I think that they what you have to look for in these types of situations,
alter alter kind of like, you know, alter Bitcoin or what Bitcoin are equities.
Like they'll often actually bottom before Bitcoin does because they just everyone sells
that first, like everyone gets out of that that that first
and so if you're expressing if you're expressing a view it is a lot of comments saying fart coin
coded it is fart coin coded if you're expressing a view that you think you're close to the bottom
uh actually it's actually historically an extremely good trade uh to try to buy alt and short Bitcoin and ETH against them because
they tend to bounce way harder on the way up.
And everyone's always worried about the downside.
But if you're close to a bottom, you actually have limited downside in alts, in my personal
opinion, or if you view that you're within a day or two, because they've run out of sellers
relative to BTC and ETH.
And that's actually what happened. far coin is an incredible asset to trade like it just
all the all the attention is consolidated that you know when you want high beta and crypto and you
don't want to go on perps it's just like you just go buy far coin and it's it is crazy i don't i
don't understand it i mean to be completely honest honest, I did not buy any Fortcoin.
And it was just nuts I'm looking at.
It's up 23%.
This thing's crazy.
Yeah, the Fortcoin is the greenest thing on my board today.
Also, I think it's so just because of what it is, it will never be an institutional asset.
it is, it will never be an institutional asset.
Imagine buying Fartcoin at Millennium, losing money on it,
and then your division manager, your boss,
comes up to you and says, you lost money on what?
Like that prevents, that skewed,
if you make money on it, who cares?
But if you lose money on it, you're just out the door,
you're sent packing.
So I don't think anyone at any company,
even a crypto trading company will buy it.
It's really just purely a metric of retail sentiment.
So if that thing is bouncing 25% today, it's up more than any other major altcoin.
Maybe the DGens online have finally drawn a line in the sand and decided to buy stuff.
I take your point though, Felix, you bring up a very solid observation that crypto in
general, Bitcoin in particular, is really just a reflection of global liquidity, maybe lagged three
months. So like M1 money supply is three months ahead of Bitcoin prices. And M1 money supply
bottomed out and started rallying pretty meaningfully about three months
ago. So, hey, maybe if rates get cut from here, plus that, maybe we are in a more constructive
general environment for Bitcoin. And to Avi's point, maybe the altcoin apocalypse is finally
over. We've been talking a lot about how inverse alt season is the new alt season, just be short
everything. Looking at the prices of some of these coins even though most of them are completely useless
i wouldn't want to be short anymore it's you playing with fire at these levels yeah i mean
these things are just for like flipping around sorry what were you saying felix yeah i was just
going to say that the framework i have is that we can get we can get a bitcoin all-time high just on
this marginal improvement of global liquidity but you know with without the us but i think for
meaningful breakouts in bitcoin and for alts to really start to perform we do need the us to to
start to play ball and the picture from the fed side of things and the liquidity side of things
is is a bit hairier um you know i i interviewed michael howell who things and the liquidity side of things is a bit hairier.
I interviewed Michael Howell,
who's like the liquidity guy,
a couple of weeks ago.
And he has some really interesting statistical analysis
of Bitcoin correlation
to global liquidity.
And yeah, he thinks
there's an interim upside tailwind for it,
but things get really hairy in the spring slash fall.
And I agree with that.
Now, what we have to piece apart now is that, OK, well, if we have markets totally falling apart, like, you know, the reason they one good part about a hit of 20% to equities
is that, in my opinion,
is the last shoe that needed to be dropped
for inflation to come back down to target.
That paired with oil, you know,
breaking down meaningfully.
It really broke a really key level.
I think it's like 60 bucks now
and, you know, could trend lower.
I don't know if you have thoughts on that, Jonah.
But overall, like you pair those dynamics,
inflation is done. There's going to be the price level increase from tariffs up front but if you look at say if you look at the inflation swaps market like the
one-year inflation swaps are a bit higher but every other swap tenner past that they're all
cratering um so yeah inflation is is is pretty much done so you could see them start to to ease
a bit more but i think
they need to wait for that to come out into the hard data unless or markets fall apart even further
and then they have to intervene quickly um yeah it's really only one threat like just since you
brought up oil there's really only one threat on the table for higher oil prices. And it's still just some kind of flare up in the Persian Gulf,
some sort of kinetic warfare, maybe American-Israeli operation to take out Iranian nuclear
sites and subsequent retaliation. But absent that, oil is going down another 10, 20 bucks.
The front spread is still in backwardation, meaning that the front
future, the price is higher than the price of the second future. That's called backwardation.
That's a sign that the market's still a bit constrained, which is bizarre because the price
of oil is sold off so much. You would normally expect prices to fall in a surplus market,
which is associated with contango, meaning price now cheaper than price later it's weird that you're getting a sell-off in backwardation i think that that tells you that
the opex opec plus countries of the world are still trying to prop the thing up which means
that they eventually can get stopped out of their trade as they often have let a bunch of excess
supply into the market and then then prices really. So from just a fundamental supply and demand perspective,
the story of oil is the story of many commodities.
The Bloomberg Commodities Index had its biggest three-day drop in a while
over the last three days.
I think inflation is not...
Unless you get...
Inflation's done.
Unless you get a hot war, it's really hard to imagine inflation coming back here.
100%.
So when's the Fed going to cut?
When are they going to cut our rates to zero and pump our bags?
What's going on here?
Well, that's the thing.
And this is the whipsaw in the bond market and the stir market,
short-term interest rate market.
Friday, they priced.
I think we're at four and a half cuts
pretty quickly we didn't quite get there for a May cut I think that's still you know it's still a
ways away honestly um I think I think we may see some language that gets us pretty close to a May
cut or at least some language in that May in that May meeting that'll lead to some meaningful cuts
but you know
like let's just look here where the two the two-year yield actually interesting it reverted a
lot but still at 3.78 and fed funds is at 4.33 so you know there's there's quite a bit of cuts
being priced in versus the rhetoric that came like powell had a speech on on friday and he sounded like he was not interested at all in cutting but the market's
fading that you know i think we're back to like around three and a half cuts priced
which seems fair for not going into a recession um
The value going on are bond markets right now.
Exactly.
Well, that's, yeah.
The market's pricing 80% or something, 75% this year.
Can you help me understand what JPOW is thinking?
Why wouldn't he cut right away?
I think so.
I think he, yeah, I think he's ecstatic about a 20% hit to equities because, you know, Citrini, if if you guys read him he has some really incredible
analysis and he's been doing a lot of work on this idea of the economy propped up by
the top one percent really the asset owners of the world in this k-shaped world and
the bottom 20 or sorry the bottom like 80 or whatever have been in a software session for
a few years now the consumption is not coming from them it's coming from asset owners who keep getting richer and then keep spending because assets keep
going up and they're also getting four and a half percent on their cash so i think the biggest reason
we haven't seen inflation come back down to target is literally stock prices um also fiscal deficits
as well um but we're seeing both of those revert now. So yeah, I think he wanted to see this.
It reminds me a lot of 2018 where Nasdaq equities went down 20% and then Powell pivoted.
And I think he didn't want to do that pivot on Friday because he has optionality until May. But
I think he just needs to hold that line and make sure that inflation stays durably low here
because if he starts talking dove now a month and a bit before the meeting,
that's not really going to do anything useful for him.
But if he can make sure that inflation gets durably bottomed out,
he can then come in with confidence, I think, in May onwards.
So I think he's just playing a fake game in the meantime just to make sure that this is this is the one
that actually kills inflation so i think that's a non-consensus view versus a lot of people who
think paris is going to create this huge amount of inflation um yeah but i just i don't see it
that's a really uh helpful take i hadn't thought of it that way like that he's kind of playing fed
theater but it makes a lot of sense and i agree with you i also i think that even though sticker
prices will go up on certain foreign goods as a result of these tariffs i don't think we're going
to see broad-based inflation as a result of it if anything i think the economic cooling effect will
result in the opposite yeah yeah i
mean like you know you could walk us through different oil shocks but if you see 70 bucks
rise overnight like yes that'll that'll hurt some inflation initially but really it's a growth thing
that comes afterwards right yeah i i think that we are in for a lot of volatility. So to borrow one of Bobby's ideas, cash is worth a lot more right now than it was three weeks ago.
Sort of play the highs and the lows.
I do think, I don't believe Larry Fink when he says that markets could drop another 20%. I think that if SPY is down 20% from here,
it's like Trump is a lame duck
for the next three and a half years.
And that's not, I think he realizes that.
He's got that intuition and that's not what he wants.
Now, I didn't expect things to get this far,
but we're kind of flirting with the lows
that I was predicting a few weeks back as like a worst case scenario. Like I thought this was a 5% probability of
it possible. And I thought that anything below here was just sort of out of the question.
I kind of maintain that belief. I just don't think there's enough political capital in the
world for a president to tweet the stock market down more than 30%.
Come on.
Yeah.
Yeah.
And I mean, like getting back to the trader mindset part is, you know, we can do all this, this big brain talk of, you know, 40 trust game theory, do the political stuff.
But it's also like, if you get a Vix at 50 and equity is down 20 you sort of
just have to buy a bit um that just those are just times when you just buy a bit and yes it can turn
into bear market rally i'm pretty closely watching whether that's the case to get out of those but
yeah i do i do feel like you just need to get in the front of this thing and eat those shit at the end of the day
there is no alternative
there is no alternative
where's the cash
going to go? It has to go somewhere
cash keeps getting generated
and people aren't going to put it into foreign equities
they're down 20% too
it's got to go somewhere
sorry Avi
people talk about all the time
it's like trump's not doing this for
for for the rich for wall street you know he's
he's doing he's doing this for main street but i think
60 percent of americans own equities
it's a clear majority
own equities and uh you know if equities are off
too far for too long consumption i, the recession is going to be horrific because all of the like what you were saying, all of the consumption comes from the top 20%.
So, you know, I do I do think that there is a point where even Trump feels pain.
Yeah.
But, you know, I agree.
Vixit 50 equities down 20. take a take a stab don't be don't
be don't be don't be a pussy just like buy a little bit just get in front of it man this is
what we live for like it's just this is what we do just just stop like don't get bear hold that's
all i'll say just whatever you do do not get bear hold uh you know at some point everything
is going to start going back up again
like don't don't worry you know this is this is not about betting on global collapse this is about
figuring out when this particular show is going to end yeah all right guys well that was a lot
of fun it's good to catch up again yeah thanks for having us thanks for having us on yeah likewise
always good to do these collabs and chop it up love it thanks everybody for watching too that was awesome thanks yeah thanks for dropping by
adios peace i clicked the end stream button
