Transcription
All right, good morning everybody. So, the title of this presentation is Full Send. Um, as many of you know, I spend a large part of the year skiing, mostly in Japan, in Hokkaido, in the back country. And if you are a skier or a snowboarder and you spent time skiing where there's no lifts, you understand that you probably should have a little bit more caution when approaching, you know, jumps and cliffs and different things because, you know, if you your your up, you could actually just freeze to death out there. And so going full send on anything is quite risky. And you never exactly know what the landing is like or what the snow pack is going to be like once you drop a cliff or something like that, but you do it anyways because it's fun. And so the that's why I tell this presentation full send. It's time to go long everything. It's time to back the truck up. Buy Bitcoin. Buy shitcoins at some point in the near future. And obviously the future isn't known. We don't know exactly what's going to happen. But I think after this 18 minutes, I should give some of you a little bit more confidence that what we're seeing today in terms of a market setup we've seen before, as you know, as sort to go as 2022 in September in the third quarter.
So ask yourself this question: Back in September, October, November of 2022, were you buying Bitcoin? Or were you afraid of something that prevented you from hitting that buy button, prevented you from loading up on risk assets in your portfolio so you could outperform the debasement of fiat currency? So 2022 was a very scary time. Central bankers, the people that have, you know, pumped our bags since 2008, were actually restricting monetary conditions. They were raising rates. Here's a chart from Ned Davis Research, and it shows the number of central banks that were hiking versus reducing interest rates. And in the third quarter of 2022, almost 100% of central banks that they monitor were actually in a hiking cycle, which obviously weighed negatively on risk assets globally. 2022 was scary for the bond market. I don't know if you remember, um, back in 2022, US Treasury bonds had some of their worst performance since the war of 1812, 200 years. Volatility was spiking in the third quarter of 2022 as yields were approaching 5% on the 30-year bond, above four and a half percent on the 10-year bond, and people just didn't want to own fixed income in any way, shape, or form.
And 2022 was very scary for our industry because Sam Bankman-Fried stole 10 million of people's money. And if you want to think about the, you know, the poster child of good crypto, it was Sam. He donated $100 million to the Biden campaign. His parents are very politically connected. Here he is on stage with Bill Clinton and Tony Blair at a conference in in the Bahamas. And yet he's a complete and utter fraud. So if he is stealing the money, what about the rest of us DJs? What do people think about us? But with with all that was going on in 2022, if you were focused on all the negative things, you missed what was really going on behind the scenes, and that we handed the baton off from the Fed to the Treasury, at least in America, and the rest of the central banks followed suit.
So here's a little uh catchy BT-inspired blister pack of, you know, one of my favorite government officials, uh, Bad Girl Yellen. She's got a pair of uh Louis Vuitton stilettos that she's gonna bash Jerome Powell's head with and an infinite money printer. Now, what her and her department did in 2022 to address this problem of dysfunction in the Treasury market and falling stock market was to pump two and a half trillion dollars via draining the reverse repo program, which is where a lot of cash is parked after stimulus checks in 2020 and 2021. And this money was sitting there doing nothing. And she thought, "Okay, let me tinker with how I issue bonds. I can issue more short-term debt, issue less long-term debt, give an incentive for those who have money in the reverse repo program to buy my debt and thus relever it in the financial system." And so she did this starting in the third quarter of 2022. If you look at the chart, and I'll show you in a second, the uh high point of $2.5 trillion for the reverse repo program was about September 30th. By early this year, it was down to about 200 billion. And this was a story of the rocking and roaring 2022 to 2025 markets where Bitcoin and a lot of other things did very, very well.
So here's a an index chart; 100 is where we started in November 30th, sorry, December 1st, 2022. Bitcoin 6x great, gold and stocks doubled almost. And the white line there is reverse repo balances, and as you can see, declined about 80%. So Janet Yellen and her activist treasury issuance policy was directly responsible for the bull market that started with the collapse of FTX when Bitcoin went from 15,000 to over 100,000 earlier this year. So what did we learn that we can apply to the current situation? There's an index called the move index. It measures bond market volatility. If there's anything that you guys take away from this presentation, this is the thing that you need to watch to understand when financial authorities will step in and print more money. So when this index gets at about 140, you have an immediate response from policy makers. Back in 2022, this index hit about 140. Janet Yellen swung into action and essentially printed $2.5 trillion.
Now, quantitative easing is a bad word. Everybody in this room knows it means money printing. Everybody outside this room who isn't a crypto investor knows it means money printing. And we know that money printing means inflation. And if you're a democratically elected politician, inflation is death. It means you do not get reelected. And so you can't have the Federal Reserve or the Treasury doing something that everybody knows is inflationary. We know what quantitative easing means: buy bonds, stock market rips, inflation goes up, wealth inequality expands, people get upset, and they vote in another party. Can't do that. We have to do something else, something a bit more um tricky. The people aren't going to understand that it's money printing. So that's why everything you see out of the Treasury technically isn't quantitative easing. It's something else. But the end result is there's more dollars, more yen, more euros, more yuan in the system, and Bitcoin pumps. So why aren't you buying Bitcoin right now on your phones? We got internet here. Buy some Bitcoin. You guys are all rich. What are you scared of?
We're scared of the Trump man. He's got a cardboard. He went out. He went out to the Rose Garden with a piece of cardboard. 2025 and said, "I've got these tariffs. And I'm going to beat you over the head with them." And they were so big. His tariffs were so big. They were bigger than anyone would have thought they would be. And completely crashed the financial markets. And now people have a lot of uncertainty. They don't want to invest. They don't want to trade. They don't know what to do. It's scary because we have Jerome Powell. And here's uh my little blister pack of Powell. He's got a little Paul Volcker ghost. He's gonna keep monetary conditions tight because he really hates Trump and he wants to stick it to him. And so Powell is not going to provide the monetary easing that this transition requires from a hegemonic state to a multipolar situation, some of the things that Bellagi was talking about uh in the previous presentation. So Powell is not on our side. He's not printing any more money. He says Trump. I'm gonna sit over here and you know be all poker-like. April 2025 is scary because tech stocks got the stick. There's this narrative going on right now that Bitcoin and crypto is just a high beta version of the NASDAQ. So the NASDAQ is down, you know, at least when I took this chart to early April, something like 20%, entering a corrective situation. People are people's risk appetite is diminished because the best-performing tradable asset, US tech stocks, are getting absolutely crushed.
April 2025 was scary because the bond market volatility spiked once more. So after April 2nd, you know, liberation day when the tariffs were announced, by the end of that week, the move index hit an intraday high of 172. It has never it it has hit that level almost three times uh past history during the global financial crisis and one other time. So this was an oh-my-god moment. It's about to break. And what do we say about what happens when this index hits 140? We get an immediate policy response. Now this is uh, you know, ChatGPT wouldn't let me put the BBC; it thought that was sexually explicit content. So I put the big boy. You guys get the message. He's got a floppy noodle and he's gonna, you know, beat Jerome Powell over the head with his, you know, method of quantitative easing. And so Yellen went on television on April, I think 10th or 11th to Bloomberg. And the journalist asked him, you know, the Fed is keeping money tight. The financial markets, there's issues. Trump called it, I think, um, queasy or something. What are you, as a Treasury Secretary, going to do to help the markets? And he responded, "I have this thing called buybacks, and I'll get to them in a second." And subsequently to that date, April 9th, uh, you know, that weekend, we have been up only, I'll show a chart in a second, up about 30% since that date. But again, what have we reaffirmed here? We have to learn 140 on the move index. Immediate policy response. The second it hit 140, Jamie Dimon, CEO of JPMorgan, gets on television at CNBC, says Trump's a, in his own very politically correct way. Trump immediately pivots. Tariffs are paused for 90 days for everyone except China. Yellen gets on the speaking tour talking about how she's going to do buybacks and how that's going to restore the integrity of the US Treasury market. And Susan Collins, the Boston Fed uh governor, went on and gave an interview with the Financial Times stating that the Federal Reserve stood ready to do whatever it took to make sure that the financial markets were well functioning. Again, this is all subsequent to 140 on the move index. If this only thing you guys take away from this presentation is that level.
And so if you don't understand buybacks, here's a very simple um explanation. Essentially, it's a budget-neutral, supply-neutral way for the US Treasury to influence how much leverage is given to marginal buyers of Treasury debt. And so, what they do is they issue a new bond, they take those proceeds and they buy an older bond. Now, this is important because there's a large section of Treasury traders, these hedge fund managers, and what they do is they buy a bond in the cash market, they sell a futures contract, and they wait for that very narrow spread to collapse. And if you apply a lot of leverage to that, you can make good money. So the uh the gaining factor in how much they can do, how much they can show up at the auction and buy is how much leverage the banking system can give them. And on the banking side, a new bond that's liquid has a less capital charge than an old bond that's illiquid. So if Yellen is able to take these old illiquid bonds off of these RVs' trading books, then these guys can relever, go to the bank, get more leverage, create more money, show up at the auction and buy debt at whatever price Yellen wants to sell it at. So the these RV hedge funds are the marginal buyer of Treasury debt, and Yellen is doing all she can to make sure that they can show up and participate and make sure the US government is funded at a very affordable level. And this is how liquidity is pumped into the market. So yes, technically speaking, a buyback is not quantitative easing. It is not money printing. It does not really influence the amount of dollars in the system, but the second-order effects are positive for dollar liquidity and obviously for our bags.
So this is all predicated on: will there be more US borrowing at the federal level? There's a narrative right now that Elon and Doge are going to cut a bunch of stuff and rectify this uh out-of-control spending from the US government. Here's a chart from the Peterson Institute. So the US fiscal year starts in October. Um, so if we look at October to March, this is the latest date we have data from, versus October to March of 2024, we're already tracking 22% higher in terms of a fiscal federal deficit. Joe Biden spent a ton of money. He spent $7.1 trillion. Trump is starting to spend even more than Biden, even regardless of what he's actually saying. The US taxpayer is broke. A large part of the driver of tax returns in the US are capital gains, meaning the stock market. So, I just showed you a chart of the NASDAQ down 20%. People aren't making money in the stock market. They're not paying taxes. So, we don't have their official data out yet, but there's an expectation that the April 15th uh personal tax deadline, um, the amount of money that the Treasury Department received is less than usual. Uh, this this particular uh analyst has up to 500 billion. We'll find out over the next couple of months what that number actually is. And the private sector is broke as well. We printed all this money. We gave people stimulus checks in the United States, and they spent it all. And so they can't park it in the reverse repo. They can't park it in money market funds. They can't show up at Treasury auctions to buy this debt. Which means that Yellen is entirely dependent on relative value hedge funds to come to auctions and fund all the debt that she is issuing. So at the end of the day, who is a sucker who's going to buy all this stuff?
So here's a little rundown of exactly how dollar liquidity is created through buybacks. So essentially, US deficit rises because our tax receipts fall. You know, we talked about that. The US deficit outlays, how much they're spending, cannot be curtailed either legally or structurally. Right? Elon's going around saying he's going to cut all this stuff. Then you have judges saying you can't cut this, you can't cut that. So we don't know where everything washes out in terms of actually the impact of this, you know, government efficiency drive. And then if you think about the United States, the large part of spending is social security, Medicare, healthcare for the old and the sick, and the defense budget. And these are the third rail of American politics. You cannot cut these things, or you will not be reelected. I don't care if you're a Democrat, Republican, or independent. Nobody can touch these things in the US welfare state. And so because the deficit is rising, and I showed you a chart rising 22% already um year over year, they have to fund a larger deficit. Now, if you fund a larger deficit out of savings, there's no net impact to the amount of dollars issued in the world. That's why I showed you this chart of the stimulus checks and how much excess liquidity there is in the private sector in the US. They're broke. They don't have any money. They can't buy any bonds. Okay. Well, next person, the foreign sovereigns. So the China, Japan, Germany, can they buy more bonds? Well, in 2022, the Biden administration decided to steal the largest commodity producers' treasuries, Russia. So if I'm a sovereign manager, do I really want to own a lot of treasuries and possibly get them confiscated if I fall afoul of the whims of whoever's in charge of the United States? No. And that's why we've seen a secular rise in gold and the amount of purchases by sovereign governments of gold since 2022 because they're just afraid of what happens if whatever they do or they say is not really liked in Washington DC. So the China, the Japans, the Germans, Saudi Arabians, they're not showing up at the auction and buying as much debt anymore. And especially after April 2nd when Trump has basically said, "Hey, the US is running a current account deficit, which means a capital account surplus. We want that to go to zero. So if I don't have the dollars as an exporter to buy bonds, I can't buy them mathematically. Therefore, I cannot buy as much." So foreign sovereigns can't fund the increased deficit spending. The Fed won't fund it. I showed you, you know, Powell and the ghost of Volcker. He's not stepping up to the plate and expanding his balance sheet to buy bonds. Maybe that changes at the end of the year. There's some uh rumors about that, but at the at the current state, he's not doing it. The banking system can't fund it. Their balance sheets are full. Basel 3. All these regulations put in after the global financial crisis in 2008 have restrained the ability for the US commercial banks to continue gorging on treasuries. And in actual fact, they got kind of squeezed in 2023 when the bond market collapsed and we had, you know, three banks go bust in the span of two weeks. So the willingness of the banking system to show up at auction and buy really highly priced treasury debt is not there. So the only person or entities left are these relative value hedge funds that I talked about. And what do they need? They need leverage. They need leverage from the banking system. The banking system has too many old bonds. Yellen is going to take those old bonds off their balance sheet, give them new bonds, give them more leverage, and they're going to show up at auction and buy more debt. And this is how dollar liquidity is created in the system.
And so the question is, did you buy Bitcoin on April 9th when we had this policy pivot? 140 on the move index. We had every manner of person within the US administration changing their tune to support the markets, and Bitcoin is up 30% uh around since then. Don't worry, we're going to a million dollars by 2028 because we're going to print more money, and Trump's 2.0 than Biden did in his term. Why? For all the reasons that I just mentioned, we're already tracking at 22% higher. What happens if this China-US sort of uh divorce goes badly and both sides stick to their own guns and don't want to compromise? Well, is Trump and the Republicans going to not win, not try to win a 2026 midterm election? Of course not. They're going to do what they need to do to stimulate the economy to create the impression of growth and strength so that they get reelected, just like any other politician. And so because of this secular change in the relationship between the two largest economic and military powers is going to be funded with printed money, Bitcoin is going to go much higher than it did from 2022 to 2025. And that, ladies and gentlemen, is a road to $1 million Bitcoin. Thank you.