The Real Plan Behind Trump, Iran, and Oil (with Mel Mattison)

Whether we're talking about the AI story, the war in Iran, things are very nuanced. This is fraught with dangers. I do think it can be pulled off though, but that's a game changer to me in the equation with China. So, I think that's one America first aspect that's not getting a lot of play. There's a game being played with China here. When you look at both Venezuela and Iran,

Mel Madison is a writer, investor, and fintech executive with 25 plus years in US financial infrastructure. A former CEO of three broker dealers, he brings deep expertise in private equity and macroeconomics. He's the author of Quas, a financial thriller exploring the future of quantum AI, central banking, and blockchain.

We could see four rate cuts this year easily, whereas the market right now is only thinking two. If you add in the European commitments and a and a big increase in defense spending from the US and you add in the capex from the hyperscalers, I mean, you're talking about well over a trillion dollars of essentially spending into the economy. I think we're at the verge of breaking one way or the other. If we break lower, I gave you the target range run.

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Hey. Hey guys. Welcome back to Less Noise, More Signal. Today, it's my pleasure to have Mel back on the show. We had him already twice, so it's it's great to have you back, Mel.

Well, thanks for having me. I always enjoy our conversations.

Yes, so do I. Always important to talk to somebody like you who's got quite a good overview on everything that's going on. Obviously, I want to start out talking about the US Israel versus Iran conflict. It's just only recently erupted. I was just recently in Dubai. You know, that's why my family and and and like my wife and everyone was sort of shocked to see that uh there were a couple of bombs dropped down on Dubai and like my my brother was just at a hotel a couple of weeks ago, the Fairmont, the one that was also burning up front. So, h that was kind of surreal to see. Okay, we were just there a couple of weeks ago, but maybe yeah, I'd love to hear your perspective. You know, what is going on? What have you been able to gather so far? And how do you interpret uh yeah what's going on?

Yeah, ex exactly. And I think some of those attacks on some of the the Gulf countries are some of the more surprising outcomes thus far. And it is only about, you know, 2 days in and we're recording here on Monday morning. So the markets have just opened up for the first time. And I think when the news was first released, there's probably an expectation of a pretty big drop. And it's been muted so far, but it's very early. And as as we're speaking, the markets are are coming back. Not quite in positive territory, but definitely not down significantly. Um, I I think this is a very critical thing and it it kind of plays into some general commentaries and thoughts I've had on President Trump for a long time is that his own view of himself as a very important historical figure willing to do things that I think most people did not think, you know, a US president would be willing to do. And I think in his in his first term, he was much more subdued. I think in last year his major shock to the system was obviously the tariffs and the and the way those were rolled out and I think this year definitely the Maduro raid was shocking and now and I think history and time will tell whether or not this was a good decision. I think right now within the market whether we're talking about the AI story, the war in Iran, things are very nuanced. They're very uncertain and they're also very conflicted. And I think even before this, the market has been conflicted. Since October, especially in the US, you know, talking about the US market, we've just been trading in a range. If you look at other places around the world, emerging markets, South Korea, certain sectors like chips and memory and different things, uh, materials, energy, there there's been a very strong bull market going on. And so, it's been very, as I say, kind of nuanced, uncertain, and, um, really just kind of a complicated picture. And the market's trying to make sense of all this. And I think this just adds a whole another element of what to try to make sense of. And I I find it actually very a sign of the market's strength that that the money has been rotating around and not really just flushing out of equities completely. And that's why the S&P is only down 2 or 3% from the highs as we speak. If that can continue for how long, who knows? But I do think it we're getting close to a point where it needs to kind of break one way or another. So to give you my broad outlook, I think medium and longer term, I'm bullish on equities in the US, for example. In the short term, I think we can go either way. I think we could have a quick 10% correction with everything that's going on, a big flush out. I don't think it would be as deep as April of last year. I think it would be more something around the um 10 12% range from the highs, which would basically kind of take us back to the all-time highs in February of last year before the tariff tantrum was around 615 on the spy. And that would be a a painful correction to go through for the markets. You know, as we speak, we're we're not too far away from 7,000 on the S&P. to to get closer down into that six range. But I do think that would probably be healthy and and a buying opportunity even though it would be scary if it happens. On the other hand, with all those negative things we've talked about, you also have these positive crossurrens going on. You have a lot of capex spending. You have, I believe, a potential for more rate cuts. You have fiscal spending. You have an election year where the administration is going to want to kind of throw out all the stops to to get this economy going. You have the potential for even more fiscal stimulus. It could be obviously the tariff refund checks are aren't going to happen, but you've had with this war really now beginning kind of a necessitation for a lot of the contemplated military spending to actually happen. Trump has talked about wanting to raise the defense budget to 1.5 trillion. Obviously, the European nations have committed to spending more on defense. So, I mean, if you add in the European commitments and a and a big increase in defense spending from the US, and you add in the capex from the hyperscalers, I mean, you're talking about well over a trillion dollars of essentially spending into the economy. And so, if all of that happens, those types of things are normally positive. And so this is where I get into my complex, nuanced, you know, uncertain picture. Recently, the sentiment has been very negative. I think because of this uncertainty, a lot of people have decided to sell, take profits, ask questions later. But I think time's going to tell whether we break out of this range up to the upside or take a brief dip lower. But I feel pretty confident that in the medium to longer term, we are going to go higher. We can get into why. And I'm just kind of positioned for either one of those outcomes by not having a lot of kind of short-term options, things of that nature, and having some protection and then being invested in some of the sectors that I think regardless of what we do are going to be doing well. Some of the emerging markets I think are going to do well. And so that's kind of my overall read on the the economic and financial situation right now.

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Yes, lots of great points to unpack there. Maybe maybe I want to get into the entire macro view a little later, but maybe stay with the situation at hand just for now. You know, like you mentioned Trump and I feel like you're exactly right. He wants to build this statue for himself. It almost feels like okay, he has this one last uh run to go, you know, and then he wants to make history in that sense. But then I mean, how do you interpret now what he's doing to Iran? Like what's his bigger goal here? Because with the Trump like the tariffs, you know, a lot of people felt like, okay, it's about balancing trade. He's got these papers that they published way back in 2024. So, it sort of kind of makes sense. But now with Iran and also maybe Venezuela, like with these actual conflicts, you know, what is the target here? Is it like so resourcing um resources or is it trying to hurt somebody else economically or Yeah. What's it about?

Yeah, I I I personally think there's a lot going on. I think there's a game being played with China here when you look at both Venezuela and Iran as uh big providers of the one thing that China really needs but doesn't have which is oil and energy. Um I think there is a, you know, historical uh legacy aspect to it. Um, and I think, you know, I'm basically of the age where, uh, you know, I know this whole regime right. So I remember the first ayatollah. I remember when this current the the recently deceased ayatollah came in and Iran has been constantly throughout my entire life this kind of thorn in the side of both peace in the Middle East and they really have been a rogue nation. I mean, you know, whether or not this was a good idea, we we can talk about, but I think there's no doubt that Iran is kind of up there with North Korea as one of these states that has really decided we don't care if we're a pariah of the world system. We want to basically make money with blackmail, with corruption, with terror, you know, and it's very ideological and religiously motivated. I don't doubt and I don't make fun of the faith of these people. I think that these there are some people at the top of this theocracy who truly do want to eliminate Israel from the face of the earth. They truly want to eliminate the United States. And when they say death to America and enrich uranium to 60 or 70%, I think it's a pretty big gamble for the world to just say, well, we don't think they're going to, you know, really create a weapon. And and I think the what what's been the status quo is keep an eye on them, keep them on sanctions, but let's not take that step that Trump has just taken because it's a very risky step, right? And I think what probably brought Trump over to do it is I think perhaps for the first time he has some backing from other countries in the region beyond just Israel for this. I think Saudi Arabia in particular, but I think a lot of these countries, they they're a little bit like, you know, they know they're sitting on a lot of oil that's bringing in a lot of money and they hate the fact that kind of Israel is there in one sense, but they're willing to tolerate that and work in the system and have their private jets and their yachts and provide for their citizens and they know this oil isn't going to last forever and they want to take advantage of it while they have it. And Iran just keeps being this kind of thorn, you know, in the side. There's also the internal relig religious differences, the the Shia Sunni aspects to this. And so I think even if you look at the European nations, I mean, not one of them has said, well, we think Iran as a sovereign country has a right to have a nuclear weapon. I think most people understand, like I said, it's just kind of too big of a gamble in such a economically sensitive area of the world, the Middle East, because of oil, to allow a large nation with over 90 million people to have nuclear weapons and the type of havoc that that creates. Saudi Arabia has said, "If Iran gets a weapon, we're going to need to get a weapon. You're going to you start an AR." I mean the the type of things that would spiral and and I think the the push back is well you know they haven't gotten a nuclear weapon yet and and I think to some extent they have used it as blackmail and they've they've they've they've played this line of we're going to get close but we're not going to do it that way they won't do what just happened but in the meantime it gives us kind of leverage and and we can play these games and so on. And I think in some sense it reminds me a little bit of a situation of let's say like you're like a guy like The Rock and you constantly go to this bar, right? Like you know year after year you regularly go to this place and there's this kind of smaller guy there who's always kind of trying to cause you trouble, heckle you, start a fight and you're always kind of like this guy's a jerk. He's a pain in my butt, but he's not worth my time. And you never know what can happen. And the guy could have some hidden brass knuckles, a 9 mm, some friends waiting to jump in. Obviously, probably I could kick his butt in two seconds, but you know what? It's not worth it. I'm just going to deal with it. He wants to heckle me and I'll go on with my evening. And like after years and years and years of it, it's like one day The Rock comes in and says, "You know what? I had enough. And we're going to see what happens. You know, we're going to see if it does work out or not." And I think there's a good chance it does work out. I also think there's a whole other element here with Israel that a lot of people are upset about. The fact that it's it's a little more nuanced to see the American benefits to this. I think they have to do with controlling more oil in China. Um and and and playing that game. And I also think they have to do with Trump's vision of peace in the Middle East and being a historical figure. But I think there's also legitimate criticism that a lot of people make that the powerful Israeli lobby, Benjamin Netanyahu, a lot of the big billionaire backers of Trump in the United States have kind of pushed him into this. And I think there might be some of that going on. And so I, like I said, it's nuanced. It's complex. It's not like, oh, this is the greatest thing since sliced bread. It's about time we did it. Let's go. There's not going to be any problems. This is totally America first. No, not at all.

This is fraught with dangers. I do think it can be pulled off though, but we will see.

Yeah, exactly. That's that's a great point that you just raised, you know, because the America first, you know, that's something in Europe all the people still have in front of their eyes when they when they think about Trump. And now I guess a lot of people are like, "Okay, even legitimately like, okay, how does this help the average American, you know, like him being this rock bully who now kind of >> says enough is enough, you know, and he really wants to go after these villains, which rightly so is maybe the the right thing to do, playing this geopolitical chess and and as you said, he might be successful after all and the world in and of it such will be a better place. Let's hope." But then, yeah, there are midterms coming up. You know, people are like Why isn't Trump more focused on his own people? Shouldn't that be the his primary goal? And so, you have any thoughts on this? Because that's an argument that I've been hearing people make, you know?

Well, I I think maybe we we could get into this later too with the macro finance side of kind of like an anti- centrini like uber positive possible scenario for markets which I think is you know there's tail risks on both sides of this market also to the downside but also to the upside over the next couple of years but I I think if I was going to say like the the overall strategy for the golden age for the containment policy of China is the US has constantly ly spent a lot of time and effort in the Middle East. The US strategically would like to pivot more to Asia and China containment as well as shore things up in the Western Hemisphere. As I mentioned earlier, two of the major sources of oil for China at a discounted price have been Venezuela and and Iran. Um, and so if the United States has a little bit more sway over those parties, this is actually a little reminiscent of World War II where the United States controlled essentially the oil that Japan needed. And even though the United States was not yet at war with Japan, they essentially shut off the spot because they had some level of control. And most historians will argue that this was one of the primary reasons, if not the main and almost only reason Japan didn't want to start a war with the United States, but they were being denied oil by the United States in the Pacific, and they felt the need to take over the the Pacific in order to get the oil from that region that that was available there that the US was denying them. And so if you give the United States essentially more control over that oil, that is a big card in Trump's parlance. Who has the cards? That would be a ace in ace in the hole, so to speak, that the US now gets from a geostrategic standpoint. I haven't heard a lot of people talk about this. It's one of the first things that came to my head when I saw this Venezuela next Iran thing and the one connection between them is this oil to China connection. I think that that's maybe on purpose not being talked that much about in the mainstream media because it's antagonistic to China and we don't want to we want to we want people to somewhat think this is just about like Trump being in the back pocket of Israel. And so that's a much more easy narrative for China maybe to stomach than this is about the US as the world's largest oil producer exerting more control in the largest oil producing region of the world as well as the largest oil producer not oil producer but the largest known oil reserves in the world in Venezuela. Imagine that the US has some level of control over the largest reserves in Venezuela, the largest producer in the United States and has partners in Saudi Arabia and maybe a more friendly regime in Iran. That that that's a gamecher to me in the equation with China. So I think that's one America first aspect that's not getting a lot of play. I think secondarily is the the Middle East if Iran is gone with the crown prince in Saudi Arabia who is more progressive and a newer generation willing to accept and perhaps recognize Israel that there there's this potential for the Middle East to produce more oil more cheaply. Trump has always wanted low oil. He's a drill baby. He believes and I think rightly so that oil is very largely tied to inflation. If oil prices can can get low and stay low, it opens up the window for more rate cuts which can help housing which can help stimulate the economy. And so I think the big disaster would be this turns into a longer war, creates a long-term spike in oil, creates inflation. I mean that's what I've talked about in the game. This is very fraught with risk. This is a high-risk highreward play. If it works out and in 3 or 4 months, we've got crude kind of stuck in the 50s or 60s for as far as the eye can see and the US doesn't have to maybe spend as much attention and and military assets in the Middle East on an ongoing basis and has these this greater grip of control on oil, then then you're talking about, you know, a like I said a game changer visav China. So I think those are the American first aspects. But I also don't deny that there are very large powerful political donors in the United States that are have essentially a dual allegiance between Israel and the United States. Some of them might be US citizens, but they might even have a more deep deep allegiance to Israel. And so those elements are there. I think they they can be acknowledged. But I don't think it's fair to say that there's no conceivable reason from an America first perspective for this to take place.

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Yeah, it's well argued. I mean I just just remember this uh chart that I saw a couple of days ago where people were showing that the US like this shift away from from importing crude oil you know, from Saudis and then also other cuade Bahrain all these sort of Gulf states. I mean it's been going down only ever since like the US has really diversified they got their own I guess by now and and and they are really sort of prepared for this as well. It's not that it's just shooting out of the hip, you know, and so I think it might not hurt the US after all that much and it might hurt the Europe and China as you said, you know, who are maybe not as well prepared for something like this to really escalate. So these are some great points, but maybe my last question on this is, you know, what to watch now. Like you said, if this were to really spiral into a longer term or prolonged conflict, then things might be sort of worse. I know a lot of people say you always just want to fade geopolitical risk. You know, it's always been the right play, but like what what are you looking at? you know, is it this strait of Hormuz that there are people are talking about if this gets shut down or like more oil infrastructure is getting sort of damaged or or the OPEC countries if they maybe not increase production if we get some sort of supply shock. What is it that you're looking at to kind of assess the situation?

I will answer that. Just one last thing to add on that last point too about the US currently being the largest producer. A lot of this is from the the fracking. It's from, you know, we're we're essentially we have a lot of these refineries that were set up to kind of mine like heavier crude and a lot of the easy fracking except for maybe areas in the Peran Basin, it they're kind of getting a little depleted. And so I think that's one of the looks at the Venezuela thing is while right now the US is kind of in a capird seat as a massive producer, it doesn't seem like there's much for us for us to expand. And so that that ties into the to the Venezuela thing. Again, I I didn't I never bought that the Venezuela thing was about narot trafficking, right? To get into I'm sorry, what what the the oh the down possible downsides, the risks and where well I think that this could go really wrong. I think you know the United States does not have a lot of ammunition, you know, a lot of ordinance. We we have given or sold a lot to Ukraine. We don't have a mobilized beefed up industrial capacity. We can make a very limited number of things like Patriot missiles or the THAAD anti- anti-missile systems yearly and those will obviously get ramped up. The defense stocks are obviously soaring today. But, you know, I think that's one of the reasons if you actually think about the name epic fury, it is the Fury part of it is this recognition. This needs to be like a quick UFC knockout fight. This can't be a 13 round, you know, Rocky Balboa, Apollo Creed, Rocky one, you know, battle to the final bell. Because because honestly, Iran can go people can go into caves. They they can go underground areas. They have a population that is divided. Some of the a lot of a number of the population has their economic ties to the regime. You know, I I think like 20% or something like that are somehow connected. They have like a million men army. So there's a lot of people on both sides and there's only one side that has guns. You know, it's not like the United States where every house has like three guns in it. So, you know, the million troops that they have there, the the Iranian Republican Guard Corps and the Iranian Republican militia are are a sizable force. And so, and they have shown that they're not afraid to kill thousands of their own citizens as they did last month. So, what if this gets out of hand into a civil war and it gets drawn out in four or five weeks from now, I kind of think it needs to end sooner than that to be honest with you. I I kind of think this needs to somehow wrap itself up in the next one to two weeks because I do think that that the the the US political desire for it will fade very quickly. I think that our ammunitions will fade and defense things will fade very quickly. There's a good argument to be made that the 12-day war last year was ended because basically the US and Israel were running out of ways to shoot down Iranian missiles and they needed to tie a bow on that thing because otherwise Tel Aviv and places like and US bases were going to be sitting ducks. So I think this needs to be a furious type pace and I think that's what they're attempting to do here. I do think like I said I'm not you know saying anything negative about people's religious beliefs. I do think there's a number of people that believe over there in martyrdom. They have a culture of it, the virgins, all of that. And so it's a different type of a calculus than a group of people in Venezuela who maybe hated Maduro were promised a bunch of stuff from the US and said, you know, adios, you know, to Maduro, you know, we never liked you anyways. We'll play a little ball with the US here. Line our pockets and on we go. I think this is a this is a different animal entirely and and so you you don't want to project your own kind of western values onto a culture that sees things differently and think that if we just inflict a bunch of pain then um you know they'll give in in two weeks and so if that doesn't happen and then you mentioned the straight of Hormuz 20% of the world's oil goes through there it's not just Iranian oil and you know we destroyed a lot of their navy ships yesterday We have mind sweepers I'm sure in the region and different things. But you know if these ships are not going to be able to get insurance to go through there and different things. On the other hand you also have an Iranian backer in China who again does not want to see the straits of Hormuz close for a long time. And so you have these competing you know elements of why I personally think if it is ever if traffic is cut off it can't it won't be cut off for too long days a week two weeks but at some point something will be done to do it now if that's unsuccessful there Iran is somehow able to shut down the straight for a month and like I said we get this prolonged oil shock there will be significant economic damage damage. There will be inflationary pressures. There will be stock market turmoil. There will be basically a disaster waiting for Trump and team in the midterms. So, I'm confident they're going to do everything they can that doesn't happen. That doesn't mean it's not a possibility.

Yeah. I mean, you you have these people now uh coming out of their hiding, you know, calling for for oil to creep up to $100 a barrel. You know, they're they're already uh seeing this happen. But I feel like as you just said, I mean things would have to escalate quite quickly and and and for a prolonged time and I guess nobody is sort of interested in this. I mean there is this meme, you know, nothing ever happens and so we'll see. At some point maybe things uh spiral out of control, but maybe it's for another for another day and let's not hope it will happen. And yeah, I mean inflation is sort of a key word, you know. What's the general view on inflation then? like uh notwithstanding that there might be an oil shock or whatever. So like where do you see this going because like I think we just also had ISM up in January and I we got just the latest numbers I guess it was also still above 50 came in 52 I guess you know just 0.2% 2% lower than than in January. And a lot of people were saying, well, in January, you know, this just this increase reflected posthol restocking, frontloading, preemptive buying ahead of more expected terrorists, but now we get another ISM that is sort of above this magic line of 50 and things seem to be reacelerating. And so, yeah, what's your view on inflation?

I do think the economy is re accelerating and I think that we do tend to see higher inflation prints in the beginning of the year. They try to seasonally adjust these things, but you tend to get the higher prints that wind up being usually above expectations in the first quarter. They start to ease out in the second and third quarters and it simmer down and and you start to get the below expectation prints probably just in time for when Kevin Worsh takes over. uh which I think is like 96% likelihood. I think there with Trump, you never know, you know. I mean, could always be a last minute change of mind or something happens. Um, but I do I do think that uh inflation is also, you know, heading heading down. Um, I think that there are these massive kind of structural deflationary forces in the economy, not the least of which is AI. Um productivity increases. Um, and I think that uh low oil prices I'm a big believer that oil is if you overlay an oil chart with CPI, it's amazing how how correlated they are. Um, and you know, let's remember that like people are are flipping out about oil like spiking to $72 a barrel or whatever it did today. Um, you know, I think Brent touched 80 or something like that. th those are still relatively low numbers. Um I mean you go back to 2007 when crude was almost likeund almost $150 a barrel and then you adjust that for inflation that's well over $200 a barrel. I mean we're like a third of the inflationadjusted high price in crude right now. um even with all of this going on and so I I think a lot of people didn't understand also how much I I think the pandemic really low and as long as the along with electrification has really lowered the demand for crude because there are a lot of people in western countries that work remotely and don't drive as much and maybe going to the office two or three days a week instead of five or different things and then you have the electric cars which are not huge but that makes a dent. You have even with the gasoline powered vehicles are a lot more efficient than they used to be. There's a lot of hybrids on the road and I think if if energy can stay low then I think inflation will be under control and nothing to worry about and will open the door for more rate cuts which will probably be needed. think, you know, we haven't really gotten into AI yet, but I think that has profound implications for monetary policy going forward and how loose central banks can be, um, which is much looser than what I think the market expects. And so, I I think there's a lot of there's a lot on the line with this Iran thing and and that inflation because of these deflationary forces, because of the subdued oil prices and energy prices, natural gas is subdued as well. there there's potential for us to get below 2% by the end of the year um on PCE um the Fed's target and if it is and we're seeing weak hiring environments because of AI and the Federal Reserve has a full employment mandate unlike the ECB only focused on inflation and you've got a guy like Worsh who thinks as long as you're not printing money you can keep rates pretty low you know we we could see four rate cuts this year easily whereas the market right now is only thinking two

yeah that's is actually one of the questions I'm asking myself as well. I mean the market is currently just pricing 50 basis cut points of cuts you know and and and you're thinking it might be somewhere higher. I mean, yeah, there was also this chart that I saw people share, you know, that uh like if you compare these short-term futures, uh 2017 to 2016, I guess they've been falling off a cliff, you know, also kind of telling us that the market is expecting that they're yeah, that the rates will just be lower in 2027 as well. I mean, you spoke of I AI, you know, and and that's maybe a topic I want to turn to, you know, this uncertainty. I guess nobody really knows where it's going, you know, because we had this Catrini article. You probably saw it as well, you know, that where he laid out this sort of future scenario, but I feel like you have like these two options, you know, on the one hand there's a deflationary boom, you know, that raises living standards faster than any prior technology before. That's maybe something that's in the cart, but then on the other hand, you have this sort of structural disruption coming to the labor income consumption loop. you know as you said you know just disrupting just the way we work and stuff and so the whole sort of economy would be kind of disrupted you know because if that gets sort of disrupted as well so yeah, I don't know what is your what is your thoughts there how how do we it's sort of also conflicting in some sense at least in my mind

it's very conflicting and I mean in the catrini piece in the beginning he says look this is just a plausible situation it's not even necessarily my base case it's just kind of amusing of what could potentially happen in a few years. And I think there is, you know, potential for some of those types of things to occur and they probably would be relatively disastrous for equity prices and markets in the economy. I also think there's a plausible ultra uber bullish situation that I don't think is my base case, but like I could write a contraini note if I wanted to. like here's my 2028 macro newsletter and it's like you know S&P is hitting 10,000 because of X Y and Z. we could get into what what that would mean. And I think at the end of the day, nobody really knows. And and so this this is where I go back to my original thing, nuanced and uncertainty are are two key theme points. And I think the uncertainty is really, you know, it's killing markets. It's like people say, you know, it's like a lot of the value equities are long duration assets. A lot of the value is determinal value. You know, what what's going to happen? Do I think like software is a good thing to buy? No. I've never thought software is a good thing to buy really in a in a long time. I've always been more focused on gold, Bitcoin, emerging markets, physical world, materials, gold miners. You know, these have been my my my bread and butter ways to play the rebound. I I always would tell people, hey, yeah, the S&P was great was pretty good last year, but you know, Brazil was up 50%. And and you know, I So, you know, a day like today, you know, emerging markets came in. And that was one of the few things I bought at the open this morning because I think the dollar, you know, spiked at the open quite a bit. And, you know, I'm I'm going to wait and see what happens. Right now, as we're talking at, you know, 11:00 on Monday, we've got the S&P back up uh almost to positive territory. Um, you know, which I think a lot of people thought was crazy. I I I posted a tweet on Saturday right after the news broke like I'm not going to be surprised if we hit over 700 in the S&PS by the end of the week and this thing has a little bit of a bow on it. And I think a lot of people would think that's absolutely nuts. I'm not saying that's again my base case, but what I am saying is there's those two aspects I go to in the beginning where when you have this long consolidation, the S&P and Q's kind of trading in this balance range for months, it needs to relieve that tension at some point. And when it does, it usually does so in a big way. It could be a quick break down all the way to that, you know, February 2025 high of like 615, 620 on the spies. It could also be a nice break up to something like the 725 730 range on spies by the end of next month. Um, and so we've got this dichotomy dichotomy of this bifurcation going on right now because of how things could play out with the Trump administration. You just don't know. This could turn into a protracted ridiculous mess and we could be at 620 on the spies in two weeks. Or on Wednesday he could announce that talks are restarting in Geneva. I found someone I think would be a good fit to run Iran and we're we're I said we're closing out the week at at record highs. I mean that is the type of uncertainty that you're seeing which is kind of infuriating to a lot of investors and frustrating because there's not this consistent trend but it does provide some opportunities but uncertainty again is a great keyword you know that I want to double check or to double click on. I mean because you know Bitcoin it's been not doing well ever since October 10th you know where we had this huge deleveraging event and obviously I I myself I'm focused on Bitcoin as well and now a lot of people have been pointing to this correlation to software you know that you just mentioned and software certainly hasn't been the talk of the town or at least not among investors who want to make money but then now why is Bitcoin lagging is is it because of this correlation is it lumped into the same bucket or is it because of the huge uncertainty that we have right now or is it just other things are playing right now? It's the global industrials, it's defense stocks, it's all these sort of other things that are withdrawing liquidity from Bitcoin and and so yeah, how do you interpret this?

Bitcoin is something that I've gotten wrong in recent months. Um, and so I've dialed back like the risk I have in it. I still have my large core position in it and I still believe that it is going higher and I still believe there is potential for it to outperform gold this year as was one of my beginning of the year predictions. It's still you know March 2nd as we're talking. So there's a long long time left in this year. I think gold's going to have a spectacular year. That's my largest position always is gold and gold related stocks and you know, but Bitcoin I think a number of things are going on and I think for a long time the tight correlation between Bitcoin and software was a little bit masked because there was such a tight correlation between the NASDAQ and software that everybody just said Bitcoin is a risk-on asset. That's what it's correlated to. And what we've seen is this separation where software is going into like a bare market. NASDAQ's kind of trading in this range not really too far away from highs. >> And Bitcoin has been tracking the IGV. You know, I you lay over an IGV, the software ETF to Bitcoin. And I think that we could be at the beginning of a decorrelation from that. And that is a huge thing. And just last night when futures opened and equities futures were were down significantly, you know, Bitcoin was up along with gold. And so if people are beginning to realize, as I think they will, that you need to you need to get this decoupling and it's not going to be a quick and easy process. On the one hand, Bitcoin being up could have been an early tell that there really wasn't a lot of huge selling pressure today. As we're speaking, like I said, the S&P is kind of flat, which is probably shocking to a lot of people after this weekend. But the that early separation is people recognizing that if they're uncertain about equities, particularly tech in the United States, the largest sector, you add tech and communication services, it's just massive waiting in the US, which has become a massive waiting of global equities. That money needs to come out of there and go other places. Those other places are where I want to have my money. Those other places are things like emerging markets, international materials, physical world, as Jordy Der likes to talk about, scarcity, not abundance. And then I think Bitcoin needs to become something like that because the thing with with these software names is like, okay, you want to have some sort of a reasonable valuation based on a terminal value and say, you know, what's going to happen if you don't know that, where are you going to put the money? as as some of these other asset classes get kind of the the gas tanks are getting filled on them. So, you know, Brazil was at like seven or eight times the earnings last year. Now it's, you know, closer in the teens. You know, as some of the valuations go up in some of these other assets that have been underowned for years and those gas tanks get full, you've got two main gas tanks that I think you you got two main gas tanks out there that are not tied to like valuations or cash flows, right? you've got gold and you and you've got Bitcoin and and so it's a it's a place for excess money and this will tie into the longer term strategic view that if we are going to need to essentially flood the system with liquidity because of deflationary AI pressures and this money needs to go somewhere and people don't want it to put it into housing it's already full of values they don't want to put into the S&P it's full up values they don't want to put into, you know, we're filling up the tank on international and the emerging markets and the chip stocks are starting to get a little crazy and it's like okay now where you know, and where can you go where there's like a financial justification or perhaps more properly said where can you go where there's not a financial dejustification if that's even a word where like you know if gold isn't based on cash flows if Bitcoin is not based on cash flows you can't argue oh the valuation's too high you know and that's why I think gold can go to $20,000 an ounce and Bitcoin can go to $200,000 an ounce in the next couple year or 200,000 a coin in the next couple of years. Um these things are all very

possible because these stores of values essentially they re they they reorientate the world's economic system towards a more neutral reserve asset. I think that is going to be gold. I don't think the central banks are going to start piling into Bitcoin.

But I do think that there is a space for Bitcoin and at a $ two trillion dollar less than $2 trillion market cap right now. It doesn't take a whole ton of that software money to come into Bitcoin to really make the price. And then if we can get some clarity, so no pun intended, but the Clarity Act passed, but get some clear regulation. Then if we start to see some real use cases of the whole blockchain technology through AI agents and greater adoption of stable coins and people start saying, "Hey, this crypto is a real deal and Bitcoin is kind of the big daddy, you know, gold standard of crypto. I want to have a piece of that." You can start to rebuild the bullish narrative and price always leads to narrative. So we need to start seeing it in price and maybe we're starting to see that. you know, maybe Bitcoin is bottom. Um, on on some of my chart work, it definitely looks like where we hit it makes a lot of sense for for a bottom and we can start going higher. And I think if we get Bitcoin stabilizing, software stabilizing, maybe even rebounding a little bit because there are some babies that were thrown out with the bathwater there. I mean, I I don't think like people are going to start using OpenClaw to do enterprise cyber security, you know? I mean like I mean I I I think the whole way this thing is going to play out is very it's very nuanced. It's not like even even if you're talking about I I do think margins will get hurt. You know I I think I think the whole per se pricing and the premium and the and really when you think about it it makes sense. I mean, these these software companies have these ridiculous margins and >> those are going to get compressed. And when you're dealing with one of the the largest sectors in the US market, that's why I don't have like a 9,000 target on the S&P or or or NASDAQ this year because, you know, I think these are going to kind of tread water. they'll have bounces, you know, but I don't know that they're necessarily as a as a group going to go significantly lower in the in in the medium short term. Um, and I think that the market can have a way of kind of grinding higher even with an important sector not going crazy. And and the example I'd give of that would be prior to the great financial crisis, financials were the largest sector in the S&P and they were extremely important. We bottomed and there are names like Croup that aren't even half of what they were valued at pref GFC. There are names like Bank of America that are just now, you know, I I think last year made made a new postGFC high. So the largest sector basically did nothing and is still basically negative in some respects. Um because the XLF if you look at the sector includes things like Visa Master you look at these big banks I mean basically nothing for 15 years in a lot of these things really um and still the markets climb significantly. Um, so I don't think it's impossible to have the major indexes, particularly the S&P, less so the NASDAQ, but particularly S&P, have a good year and and continue to go higher, even if we don't see, you know, Monday.com going to new highs, which I doubt it ever will.

>> Yeah, that's an interesting comparison for sure. I've never heard this, but it makes a lot of sense to me. You mentioned the capback spending. You know, that's something that that I I was thinking of, you know, because I heard this theory tied to to AI, you know, it's kind of far-fetched or kind of wonky, but I just want to put it out there. Some people were saying you know we're seeing sort of the rotation happening in labor markets right now from from information to construction mostly also because probably software has been lagging and stuff and on the other side you know all these AI uh data centers need be need to be built and that's why sort of we see this expansionary momentum going on in the economy but then some people were saying what if like at some point these humanoids come you know back to Jordy Fister he's saying they're coming maybe at the end of this year and then you they will start taking over and and do the work for us, you know, and and so you could have these cyclical indicators all points higher accelerate into a recession sort of that's that's sort of the the thing that I heard. So I don't know, maybe this is a far-fetched argument, but how do you think about stuff like this? Because yeah, I said we don't know how also disruptive AI will be, but once they get connected to physical stuff, I feel like yeah, that's going to be big.

Well, I mean I I I do think that that's an important thing to consider and like I said, it's one of the reasons why, you know, I have very little, you know, kind of allocation to us and to to US tech in particular is it so I do think like you know there's this democratization of entrepreneurship of code the moes break down and you know a number of these large enterprises are going to go out of business. I mean that their shares are going to go to zero and it just depend how quickly and how many of them right I mean if this is something that happens over the course of the rest of the decade and at the same time you've got other things going on this is kind of my uber bullish case which is that it doesn't happen so fast that it catches society too offguard that and we're starting to think about it policy makers will start to think about it we'll start to see it in some of the data where unemployment rates are creep ing up. Hiring rates are not where they should be, which we're already seeing. And people say we need to try to get ahead of this. We don't want to ruin the consumer. Maybe there is over the course of the next decade a change in the way that Americans and Western economies work. Maybe the 5day work week is a thing of the past. Maybe the recognition of the deflationary aspects of AI opens the door, not necessarily for UBI, but for more fiscal spending without the inflationary ramifications that then flood the system with liquidity. And so you get a nominal gain in stocks, but you get an even greater gain in things like gold and Bitcoin. And so this has kind of been a long theme that I I've been talking about for for really a as long as I've been kind of talking publicly is that I believe ultimately that there's very little restriction on money printing in a deflationary environment that that there there essentially keep nominal values rising. Um, now the key is you want to you want to you don't want to have nominal values rising and wages not keeping up. That was what we had post pandemic. Part of that in the United States was, you know, a flood of immigration which is being addressed. And I think people on both sides of the aisle do not want a completely open border in the United States where millions of people just walk in with no idea who they are, where they're coming from, and drain social services, etc. I think the United States has always been built on immigration, continued to have immigration, but um I think that the the amount of people that came in kind of really hurt the working class because it really put downward pressure on wages at a time when they should have been going up because of the inflation in the system. So if we get into this rosy anti-atrini 28 2029 version of a deflationary environment that creates a potential for uber looseness across the board with major central banks a reduction in the work week and work time so that people are the layoffs are not as extreme as I think in Catrinia it was like over 10% maybe it's 6 or 7% but maybe there's the money there to really provide the social services and that other people that do still have their jobs are working less, spending more time at restaurants or on vacations or you know that there is an an upside to productivity and so if this could be managed again this is very this is the uber optimistic one this is not my plausible base case what's happening you know a Iran thing's going to work out um you know uh oil is going to stay low we're going to be inflation AI is going to happen at a pace that gets manageable other sectors of the markets are going to do really well and they're going to be able to overcome a weakness in certain software names and nominate nominal terms markets are going to continue to to significantly rise so that the 401ks of the United States don't crash which essentially the entire pension system is based upon in this country which is a lot of political rationale for why that that's what leaders are going to want you know if all of this happens you then get into this very rosy situation probably where we wind up is going to be something in between what I just laid out and what was in that piece. Um, and so I think that it's just again, you know, the uncertainty, the nuance that is the the conflict right now is these is these competing forces. And then we just threw some, you know, geopolitical icing on top of the cake this weekend. And so to me, it's actually shocking that S&P 500 is down 045% as we speak. You know, 30 handles, that's it on this news and not willing to break the the downward rage yet. That doesn't mean that a news piece comes out in 15 minutes that Iran struck an oil tanker and there's a massive spill in the straight of Hormuz and you know we're going to be down 2%. And and before you can make a trade, the alos are going to you. So th this is a dangerous time. That's why I said in the very beginning I have almost no kind of I have very little like ultrash short-term risk. I have some kind of tail risk, >> you know, upside tail risk things put on like April 725 spy calls, but they're not like a large huge position. Most of the actual capital I'm managing right now is more in these things that really should not be too affected by this like you know Brazil you know you know different you know Alibaba which has been sold off a lot lately and they have you know arguably one of the best you know open source models in in Quen there's different there's different things out there that I like but even that is still dialed down a lot I still have a good amount of cash I I still have the the large gold position. I have the core bitcoin position. I have these physical world US assets and and then I have you know some protection for extreme downside moves and some protection also on the upside. So I you know the spy position I have is just calls and puts both you know because I think we're I think we're at the verge of breaking one way or the other. If we break lower, I gave you the target range around 615 620 uh 10 11% pullback from the highs, uh February 2025 highs, and then I think we're going to bounce from there, everything will be flushed out. But if we break higher, then like I said, I could see 7:30 by the end of next month. So th those are kind of where I'm where I'm sitting.

Yeah, very interesting. I mean, I would have one question, two questions left, you know, and then I think we call it the quits. I mean, in terms of practical advice, you know, I'm a money manager myself. I have a lot of friends hitting me up and like, you know, who have nothing to do with finance and and they've been told, you know, just put your money into one or two ETFs and you'll be fine, you know, because you have other things to do. You're a painter, you're a dentist, you're whatever. And so, over the course of the last couple of years, a lot of people have been putting their money into the S&P 500, you know, that's sort of that's where I thought, okay, the US, it's the biggest force. we have all these software companies, these tech giants, but now ever since like maybe the last 12, 18 months, I feel like this yeah sort of has shifted and and my my sort of easy question or simple question would be is that still an advice we can give to normal people that they should be allocated to the S&P 500 or are you like no, you need to diversify out of this and and and if so, yeah, what is it that you would recommend to like simple people who have been holding the S&P 500 so far.

>> Yeah, I I I think that that's what I give too when like kind of people I don't maybe have time for a whole deep conversation and one of the main things I tell them to do is that I tell them they're probably overexposed to US equities that you know in 2010 if you looked at like a chart of trailing 10-year returns I mean emerging markets just killed everybody. it had amazing uh return and and lowval relative to that return and also US equities as a percentage of global equities were more in I believe around the 40% range that's called in 2010 I think at the beginning of last year they was more in the 70 to 80% range people got way way way way overall allocated to US equities particularly tech particularly the mega caps and that's why I think you can explain these price movements without necessarily painting the doomsday scenario that that that that while I do think margins can press different things that so what I think you want to do is actually be underweight US equities relative and like for I was advising someone European who was living in Dubai you know last year I I said I think the largest equity slug should be a you know MCI all world XUS euro hedged you know you know you know you know you know in in and I think also advocating larger slices of particular emerging markets. Number one was Brazil, Mexico. I wish I would have had South Korea in there, but and not to have those currency hedged because they're uh know there are usets in Europe that are you know MSEIL, World XUS, you know, Euro Euro hedged and that you know that was that was a great way to play it and and I think that that dispersion is going to happen and that all these valuations are eventually going to get kind of full up and and and probably that happens, you know, throughout this year, But as we're there then then then some of these other assets like gold and bitcoin I think will will be beneficiaries.

>> But then you just my follow-up question you think it's not too late to kind of diversify out of this you know to say okay now because it's been going on for a couple of months now already you know and you say no it's still that your cards to play is like try to minimize US exposure in that sense.

Yeah, I I think some of these currency large country equity trends tend to play out over years, sometimes decade or longer. I think if you I think when you look at something like a Brazil, like it peaked kind of relative to the S&P like in 2008, you know, almost 20 years and now it's finally starting to get some outperformance. So, I think these are long long-term trends that probably we're heading back to a point where the US is 40 or 50% of global equities and we're not even anywhere near that yet market cap. And so, I don't think it's too early. I don't think that, you know, because some of these have done so well recently, like in the short term, like because the NASDAQ and some of these, like they could have a pop and people could say, "Oh, I'm the momentum could say, "Oh, I'm taking some money out of my, you know, SKHY and I'm going to put it into Meta because, you know, we're getting a like very short term, we could see, you know, kind of a counteryclical rotation type move there." But I think for like longer term investment horizons, it's definitely not too late. and trying to time it is probably not the best idea to try to say well you know what I'm going to wait for you know U US to to to bounce and then I'll sell it and then I'll get in I would start moving making that allocation change, you know, immediately maybe not all of it at once to whatever the dial you want to set it to but start, you know, making sure if you if you're like 70 80% of equity exposure is US-based and and most of that is software to start dialing that down. Even though yeah, the ideal time to do it would have been last year, but I think waiting and trying to time it perfectly if if you have a long-term horizon, yeah, you might wind up being wrong for the first month or two that you do it if you start doing it now. But it's it's a difficult game to time when you're doing long-term investing as opposed to like ultra short-term trading. I do some of that, but most of my money is more medium longer term. And frankly, I'm not that great of an ultrash short-term trader. I I most of my me and long-term thesis tend to do very well. Most of my short-term tend tend to get screwed up. I'm I'm probably should just dial that back. But, you know, I luckily, you know, like the vast vast majority of the capital I have is in medium long-term thesis plays and and it's more kind of almost gambling with a lot of these short-term bets.

Yeah, exactly. That's probably also the way to go. But yeah, last question and I know it's a big one, but I have to ask it anyways because I remember in one of our earlier episodes, we established that Trump is sort of this MMT guy, you know, he's sort of um yeah, maybe he he doesn't call himself an MMT guy, but like judging by his actions, he really is fiscal Trump checks, you know, that he wants to do. who he was also talking about abolishing the debt ceiling and stuff like this. But now I was increasingly wondering is this is this still valid, you know, and and and my my sort of argument is if you listen to Scott Basson, if you listen to Kevin Walsh, you know, that you mentioned as well, I mean, these guys are all about shrinking the public balance sheet and they want to kind of privatize the economy, you know, and and Kevin Walsh also publicly said the Fed's balance sheet is too big. He wants to shrink it. you know, he thinks economic growth should come from the private sector and so like pulling it these tariffs that they have been pulling in as well. I mean, that's been stabilizing the deficit somewhat, you know, and and pulling money out of the private economy. And so, is it still true that we can count on Trump just being this sort of fiscal douff, you know, where he would just go and fiscal flows and stimulus just keep it going or have have we been wrong sort of in that sense?

You know, my inclination was, you know, make some deal with Iran and and don't get involved in a war. You know, we'll see how it works out. My other inclination was of the final four Fed picks, the last one you want to pick is Kevin Worsh. So, you know, I mean, this guy, I mean, there's also this weird Rothschild connection with him and the Estee Lauder connection. um where you know his his wife's father is like the sole heir to the Estee Lauder fortune and is like the president of the World Jewish Congress and the chairman is like David the Rothschild and just getting Rothschild's involved in the Federal Reserve even if it's like ancillary I mean you just make the case that it's it's it's Trump's making it easy for people to make the case he's just a Israeli agent basically at this point you know putting in war and and going into Iran crap. I don't think it's that simple as I spelled out in the beginning of the episode, but I think he's making it an easy case. And the problem with Wars is I think that he thinks that this fiscal monetary printing is not going to be necessary. And I think he thinks that the Federal Reserve has enabled large deficit spending and that it's the Federal Reserve's job to re that in by not always giving in to and I think ultimately he probably and it might need to happen through crisis but we'll we'll have to shift from that view and he did say openly he supported QE in the beginning of the COVID pandemic. he supported it, I think, during the GFC kind of situation, but that he thought it went on too long and too and too much. And as you said, that the Fed balance sheet is too big and it needs to be dialed down and that this is the real driver of inflation. And so I think I think that ultimately, you know, there's a difference between being a governor or being in the private sector and saying these things and being the head of the Federal Reserve when you get these situations. I mean, we see it all the time. I mean, look at Trump, no foreign wars, you know, you you people get into these positions and the realities of the position sometimes impose themselves on the individual. The individual is not as does not have as much freedom of action as that individual thinks because of outside external pressures. And so I think that the economy will get to a point especially if this AI deflationary situation plays out where it is going to need an expanded balance sheet and that maybe the best guy to do that would be a Kevin Worsh because people will give him some credit like he's only doing it because he feels it has to be done whereas if it was a Kevin Hasset doing it people would say he's you know and and it is it is a committee too and and you know if if people if the economy really gets into trouble and and there's massive job losses and stock markets are tanking, you know, that there's there's there's also if he refuses to do it and it happens during Trump's term, I mean, Trump could be bringing up charges, investigating Worsh's mortgages. You know, he probably doesn't have any given his wife's fortune, but you know, he could be pushing for Worsh to be kicked out. That's why I don't know if that was the best choice either, but again, we will see.

Yeah, I know that's great and great greatly said. I mean, in the end, yeah, some people have been fearing that this Fed put you might be gone once Walsh moves into office. But as you just said, you know, if there's one certainty, it's probably that if the market forces his hand at some point, he can say it all along, but you can always say it, but then the market might make him take these actions because it's just a sort of a structural thing, you know, and systemic in that sense. just as you said in the beginning, you know, you're also in the short term kind of weary. You're like, okay, we could see this correction. And that's exactly where I'm like, okay, I hear these people talking like this, you know, speaking like this. They want to rep privatize everything and maybe they want to try something which just doesn't work. and and then and and at some point they will see that they backed themselves into a corner and then they have to turn the wheel around and then and fiscal flows and everything they will just go fire up again and and then yeah, as it's like Bitcoin and other stuff will will go haywire.

Yeah, >> I tend to think ultimately that's what's going to happen regardless of what anybody wants and um >> and that the issue is is that in order to get to that place it might require a crisis. Um, and so, you know, ideally that doesn't happen. Um, I don't think that that crisis would that's not what I'm talking about with the 10% pullback. That would be more of a probably a 2027 type thing where we we're we're really seeing kind of a tanking economy, excuse me, and and higher inflation and like Wars is trying to shrink the balance sheet at that point and credit markets throw a tantrum. And and all of a sudden he's like, "Okay, if I don't reverse on this, then the system's going to crash." And he has said, if you listen to him in podcast, in those types of situations, the Fed needs to do what it needs to do. He's basically said the Fed has it was there created to be lender of last resort and if the system's going to crash because there's not enough liquidity, he's going to be willing to expand the balance sheet. And he, you know, there was a saying in the US that only Nixon could go to China. He was considered kind of a China hawkish guy, but he was the one who was maybe only worse can do, you know, massive queueing.

>> That's a good point. Yeah, exactly. I never thought about it this way, but that could end up being the case. So, yeah, Mel, thanks. Thanks a lot for doing this. I guess we'll we'll call it a day for today. And um yeah, any last words? Where can people find you? Much appreciated that you came online.

Yeah, I mean last words is just this is a crazy conflicted time. Easy to be frustrated with with things. It's a lot nicer like it was last summer where the market just goes up, you know,.3% every day. My words are just, you know, those are times when, you know, you need to preserve capital. You need to keep your options open. you need to, you know, not not beat yourself up too much if if there are some mistakes made. It's always a learning process and, you know, you know, kind of fight through it. And if you're if you're if this is the type of market that you really like to trade, it's definitely given a lot of great range trading opportunities and potential and and a lot of incredible moves in in places like I said like South Korea. So, there's been opportunities in gold. So, if people want to find me, Melmadison1 on Twitter, Mel M- A T I S O N the number one on X and uh mel melmadison.com. Um, and then I have my novel Quas, a financial thriller available wherever books are sold as well as an audio version um which is about kind of central bank intrigue and uh some of some things that are not too distant from the reality of what's going on. Quantum AI computer. Yeah, quantum AI computers and and different things like that. So,

>> yeah, great. Thanks a lot, Mel. Enjoy the rest of your day and uh yeah, see you next time.

>> Thank you.