Transcription
This new, I will call it paradigm shift at the Federal Reserve. I would argue it's probably the most impactful FOMC that we've had really since, I don't know. I mean, you have to go back to the Bernanke era. He's opening the door to do what the administration was pounding the table on for the whole last year, which is lower rates. I think it's probably more impactful than anything that happened under Powell.
I would agree with everything Joe just said, and I think the tell for everything has been the price action of the dollar since Powell started speaking. So, the markets are taking seriously what's going on. I'm not saying we're starting a massive deflationary bust, but this is what happens. People crowd into the dollar and they sell everything. I'm uh very much looking forward to seeing how the world changes here.
If they all of a sudden completely unexpected came out with a cut, I imagine the market might respond really, really bullish. Can you shock it to the upside?
So, shocking it to the upside, the most notable example is during COVID.
We got lots to get into, Bitcoin, markets, AI, geopolitics, but I want to start with a bit of the bigger picture. So, Joe, starting with you, what's your current kind of 30,000-ft view of the situation? What has your attention, and where do you think we're going?
Uh well, the the first and foremost, I I'm I I'm really focused on uh this new sort of uh I will call it paradigm shift at the Federal Reserve. Um I followed very closely the last FOMC. I would argue it's probably the most impactful FOMC that we've had really since I don't know. I mean, you have to go back to the Bernanke era. I think it was probably more impactful than anything that happened under Powell. Um this idea that we're going to remove from the marketplace, or at least uh at this point, telegraph they're going to remove from the marketplace any forward guidance. And we're going to talk less and just act in a very limited fashion, you know, completely rewriting the statement, completely rewriting sort of the the normal expectations that we have from the Federal Reserve. That's massive. Um what I what I always think about in that situation is, you know, they give forward guidance. They always try to move and jawbone the market for a purpose. The purpose is because in certain circumstances where, you know, either inflation was was trickling up or economic growth was going down, they wanted to sort of get ahead of it and telegraph. Um there's a famous quote that uh the the Fed's most powerful policy tool is to talk, right? The ability to jawbone. Um so, if you're going to say, "Well, we're not going to jawbone anymore. We're not going to give forward guidance. We're just going to let the market uh figure it out." There are a lot of situations and circumstances in history where what the market has done is it's thrown a tantrum. And it's like a baby crying. Are you just going to leave the baby there to cry and not go uh deal with the market uh because uh if you do do that, um bad things can happen. They can happen really quickly. So, anyway, that's what's got my attention right now, but I'm sure you want to talk about Bitcoin. As we're recording this, I'm just looking at a whole lot of red on my screen.
Oh, yeah.
Bitcoin's down 5% uh after being down 3% yesterday. The Nasdaq's down another 1%. It uh looks pretty ugly. And gold, our favorite yellow metal, is now back below $4,000.
Silver went below 60 bucks, I think, today and ounces as well, too. Everything all the sound money camp was just getting hit hard. Before I have uh Dr. Jeff and Hoddle jump into that, Joe, I do want to quickly tag on to that. Do you have any Do you have any suspicions or uh guesses as to why they're dropping forward guidance at the Fed?
I think what one of the reasons is it's just a different view of what the Fed's role should be. I think the you know, it's interesting. In Bitcoin circles, we talk a lot about Lyn Alden's sort of phrase, the fiscal dominance, right? But the implication behind fiscal dominance that the Treasury spending is really the the primary influence on our economy. What what's behind that is really saying the the monetary authorities, the the Fed, that's sort of like in an uh indominate role. That's a a less in impactful role. That's really you're going to say, "We want Treasury to have more of the ability, and the executive branch, and we want sort of a a Fed that has a uh diminished role in analyzing all these things. So, to me, that's really interesting like the idea of it I think of follow through which the administration seems to think listen, you guys take a backseat, we'll lead things over here with Treasury, and we'll you guys follow our lead on whatever we're trying to put forward. That that seems to be the cause of all this. It's sort of a re-imagination of what it is, and you know, there are people out there ringing their hands about Fed independence being lost, and you know, there's plenty of times in American history where I think the Fed is the the central bank as a whole has been less {quote} independent. I think it's never really purely independent. So, I think that that that little bit of that sky falling sort of rhetoric is probably not called for, but the curious thing to me is like again, it's very easy to say you're not going to get forward guidance, you're not going to calm down the markets when everything's going well. It's much harder to do that when things are getting really ugly. That's generally where where where they have to talk or they they at least have talked in the past.
I love it. Dr. Jeff?
Uh yeah, I would agree with everything Joe just said, and I think that the tell for everything has been the the price action of the dollar since Powell started speaking it, right? I think when he started it was below 100 sitting at like 99.60 something. Now it's up to the Dixie is up to 101.63 as we record. That's a big move for the dollar. Like currencies rarely move like that, especially the dollar. So, so the markets are taking seriously what's going on. Um this is a you know, a typical risk-off day where all risk assets are you know, they they reach a correlation of one as we like to say that this only happens in these kind of deflationary bust. Now, this is just a one-day sample. I'm not saying we're starting a massive deflationary bust, but this is what happens. People crowd into the dollar, and they sell everything. They sell their stocks, they sell their Bitcoin, they sell their gold, they sell their silver, they sell everything else. And so we're seeing a lot of that happen right now. So that's very interesting. So I agree with Joe. I'm I'm very much looking forward to seeing how the world changes here. And it's it's always interesting. Every day there's there's some new interesting news piece. I also agree that, you know, we've gone from the saying that was popular after the GFC was don't fight the Fed. I think that's no longer the case. It's now don't fight the fiscal stimulus or don't fight the federal government. And and that's just how it is. People are like, well, why isn't Bitcoin going up? You know, why are, you know, AI stocks going up and Bitcoin's going down? Blah, blah, blah. It's because there's a limited amount of dollars, right? And those dollars are being shunted in very specific places. They're being shunted into AI and into energy and into rare earth type things. And there which means that there's a paucity of capital for these other things like Bitcoin. And so Bitcoin just, you know, kind of left on the sidelines right now. All of the promises of the Trump administration that he's pro Bitcoin and that we're going to get the, you know, strategic Bitcoin reserve, all that stuff. Where'd that go, right? I mean, I'm still waiting for that. I've been holding my breath for two years, I think now. And it's getting tougher to hold my breath, but I'm still holding my breath for that to happen. So.
Well, Joe, you you're
Definitely got it. We got a strategic Bitcoin reserve established by executive order.
Yes. I'm sorry. I'm sorry, yes. They did confiscate Bitcoin from people and took their other people's Bitcoin and bragging about taking Iran's Bitcoin as well. So shout out to the US for our strategic Bitcoin reserve. Anyways, I'm I'm a little
And and a digital asset stockpile. We got a digital asset stockpile too. I don't know I don't know why they don't dump that. They should have they should dump it right now.
Yeah, I get snarky.
I get snarky talking about it, so I'll stop talking about that. Hoddle, what do you think?
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Uh well, on the digital asset stock pile, that is one of the plans is to dump it for Bitcoin, you know. Um hopefully they do do that. I think, you know, these guys, Joe's given a very ivory tower, what's the Fed doing? I'll give you a I'll give you a perspective from the ground with the normal people. Sucks out here. Uh I'm half as rich as I used to be. Things are painful. Uh Chipotle suddenly seems expensive to me. I used to think it was cheap. It's very expensive now. The other day they charged me $37 for a burrito bowl. So, I'm dying out here. I might have to start eating cat food. The burrito bowl was $37 because I got six meats on it. That's why. It's my own behavior problem. I can admit that. I'm brave enough to admit that. No, I One thing I'm curious to ask Joe about is um the jawboning or I think a word the Bitcoin audience is more um familiar with is sciopping. It has been extremely useful for the market. And if there is no forward guidance, how does the market begin to price things in? And if there is, you know, these sort of um these shocks to the market coming from the Fed just acting rather than telegraphing are is is so is sort of the theory that you can shock the market upwards? Cuz at when I first hear it at first blush, it sounds like, "Oh, no, they're going to shock it to the downside because the market, you know, it's been so high for so long. Like, how could it be anything other than a shock to the downside at this point?"
So, you're asking now if you think that this the the they could use it to shock the market up. Or I mean, we've seen plenty of times
What's the rationale here? Is that part of the thinking? I'm just thinking out loud cuz I can't understand.
Well, even quickly, Joe, before I jump in there, too. To Huddle's point, if they all of a sudden completely unexpected came out with a cut, then I imagine the market might respond really, really bullish. But, like it it it cuz they do it's it's odd. All right, can you shock it to the upside?
Well, sure. I mean, like so shocking it to the upside, the most notable example is during COVID, right? When the Fed came out and said it was going to buy, you know, various junk bonds, okay, and ETFs. Like that was the bottom. Before they had purchased anything. Like they just said, "This is the plan." And then, you know, off to the races. That was I think March, I don't know, Jeff may remember, March 15th or whatever it was in 2020. Uh that was like the telegraph. So, like when they announced something that that that's the that's the that's the impetus behind this. It's actually the change of policy. The Powell pivot, right? That came without actually a change in policy. The policy was then coming in the subsequent meetings. And the same is true here, you know, when when you know, Jerome Powell said there was a long way to go before we were talking about rate hikes and rolling off the balance sheet and these things. Those were comments made well in advance of the actual policy change. So, you know, the market is always forward-looking. So, that's why you know, generally what they do is they they everybody knows that that that it's going to be a card or a you know, a a pause or a hike. It's very rare that you get a surprise, right? But what they always look at is is the forward guidance that's given in the economic projections, the summary of economic projections, which Warsh did not sign, right? He did not join in the actual summary. That's a big deal. He's telling you I don't really put a whole lot of stock in this and he's got all these committees to rewrite the guidance they're going to use and rewrite what they're going to rely on for economic data, which again, to me, the only reason you do that is cuz you want to change the inflation framework. You want to have a a basis to say, "Don't look over here with this past data. It's all noise. We want to look forward. So, we're looking at these new indicators that show it's perhaps more interesting to more more helpful to cut, right? The most The most key part of the entire presser was when he had this discussion on the transcript where he said, "You know, how can you justify whether things are slow here, whether there's whether the policies are restrictive?" He said, "I think it's somewhat restrictive on balance. You can look at things like real estate to show that it's restrictive." But then he went said, "Beyond that," he said, "Look, when you talk about a 2% target, which we will maintain that 2% target," he said, "I focus on the left of the decimal point rather than the right of the decimal point, right?" And then he said, "The left of the decimal point is the number two. And the right of the decimal point, that's the number zero, right? So, what he's saying he's focusing less on the right versus the the the left. What I view that is is him basically telling you I'm going to be perfectly comfortable with 2.8 or 2.7 or 2.9% uh you know, in inflation. That is That is entirely consistent with my mandate and I'm not going to be too freaked out the fact that it's 2.8 versus 2.2 or 2.2 2.3. He's opening the door to do what the administration was pounding the table on for the whole last year, which is lower rates. And uh you see a little bit of evidence of that today. Look, I see the 10-year's down pretty big. It's down almost 10 bips.
It's a strong move. Huddle, I'd be curious your response to that before we're going to dive in with Jeff. And also want to throw in there cuz I'm curious, you know, from that from the boots on the ground view, you and I were talking a little bit about playing with AI before hitting record here. And I'm curious your thoughts on SpaceX kind of round tripping the uh the IPO launch there and going back to where they started.
I I think that was expected. I mean, I I personally didn't trade the SpaceX IPO launch. I think if you've been looking at um the way IPOs have been moving for the last, I don't know, 6 7 8 9 10 years is that these these valuations are so high that uh you can't It's hard to view it as anything other than a liquidity event for insiders. And so, you know, if you're smart money either is saying, "Hey, I want to trade it on the way up and then bail." or I want to wait and let the market sift it over the course of like a year. I think the lockups on SpaceX were about a year long. So, maybe there's still room to wait uh before you take a position in SpaceX if you're interested in it. This is even By the way, this is just the financial dynamics before you even get into the business model of like uh you know, it is is uh are space data centers the real deal? Is Elon squatting elliptical orbits for the government? Is that you know, it's like all this stuff Are Are we going to do heavy mining in space in the future? Like we're going to start mining the moon or something. It's like I don't know. A lot of it seems kind of if I'm being straight up honest about it.
[laughter]
I personally wouldn't invest
I personally would not invest in SpaceX. I am a little bummed that Elon beat Satoshi to the trillion-dollar club. I thought Satoshi would make it there first, you know, cuz at a million dollars Bitcoin Satoshi is a trillionaire. Um yeah, I I think like looking at all and by the way back to Joe's point I I think I take everything that Joe said. Um, it sounds accurate to me. I I just I am interested because we have been living in this era of jawboning for so long. I'm interested to see how it plays out when we don't have it anymore.
Very interesting, very interesting. Dr. Jeff, I'd be very curious your thoughts and also tagging on there in the previous conversation you guys have with Preston. You're talking a lot about like the geopolitical moves. I'm wondering how much of what's going on with Iran is still factoring into what we're seeing in the markets and your projections on where that might be going.
Okay, that's pretty loaded. I'll say for Joe first of all, you guys are all too young to remember Alan Greenspan because this is the way back in the '90s when you guys were probably still in the cradle back then. But this the the the Kevin Warsh policy is very similar to Greenspan, right? Like he was very secretive. He he did not like to give his playbook out to the general public and they love to surprise the markets and it seems to me they're just going back to that old school style of doing it which I actually kind of like personally and I and I also think that they're going to take this opportunity to update the way they do data. They've always been backwards looking. That's been a huge, you know, issue with the Fed since this, you know, as long as I've been an investor and I think they'll become a little bit more forward-looking because of this. So I'm actually optimistic they'll increase their data sets and improve their data sets a little bit. Um, Uh, oh, hold on. I want to read what you're saying here. Sorry.
I had a quote. I just put a quote. It's right in front of me.
Yeah. That's what I was thinking about.
Yeah, Alan Greenspan Alan Greenspan, November 4th, 2025. If I seem unduly clear to you, you must have misunderstood what I said. Speaking to the Senate Committee. I love I literally like my goal is to obfuscate and not answer.
Up the whole game on the Fed chairman, you know, it's like yep.
That's awesome.
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