Transcription
Bitcoin one year from now, I think, is something around $250,000. Joining us now is the legendary Tom Lee, who, I mean, you get great ratings on this show. This is "Speak Up" with Anthony Scaramucci, but it could end up becoming "Speak Up" with Tom Lee because when I bring you on, we get way better ratings than I'm doing this myself. But you are the chief investment officer of Fundstrat and the head of research, is that correct, Tom? Did I get that right?
Yes, that's right.
All right. But you are also, I can see, around corners, which is very hard to do. It's impossible to do on Wall Street, but it's very hard to do in life. But you're doing it exceptionally well on Wall Street. So I follow you; the people that listen to the show follow you. Let's get right to it. What the hell is going on in the stock market? We're at an all-time high. There's a lot of canary value people that are flashing warning signals. Let me give you one of them. There's a gentleman by the name of Warren E. Buffett, who has accumulated something like $325 billion of cash. He's at the highest cash level as a percentage of his portfolio in 20-plus years. So what do you see? Is it different from what they see?
You know, I think that markets are at, I think, like a friction point right now because we've had two really good back-to-back year gains. I mean, anyone holding at the start of 2023 is up nearly 50% since then. So I think for anyone looking forward, the risk-reward next year is quite different. So I can really sympathize with someone raising cash like Warren Buffett. Part of his selling he had been doing throughout 2024 may have been in anticipation of potential changes in tax policy, like paying a capital gains tax increase. But that being said, if we didn't look at the level of improvement of stocks for the last two years but just over the next 12 months looked at what lays ahead, I think someone can be optimistic because we know the Fed is cutting interest rates but at a time when the business cycle is still healthy.
In the seven times the Fed did cut while we weren't in a recession, you know, markets actually did really well over that period as the cost of money falls. The second is that I think some uncertainties have been cleared up. I think so much of the summer our clients were sitting on cash and getting nervous, and you could see it in the VIX Index because they didn't know who was going to be president. But now that election is behind us, and while I don't think anyone knows what policies are going to emerge because there's a lot of radical policies being offered, including cutting government spending, etc., I think it's going to create opportunities for many companies.
I'd say that the way we would sort of look at that is we'd want to be looking at smaller-cap stocks because they've really been held back the most. The third thing I guess is constructive is, by the measures of how people have deployed cash, it's still a pretty cautious market because margin debt hasn't risen for five months now. So that's not typically a sign of euphoria; it's usually a sign of exactly what you said: people getting cautious. Even like investor sentiment, like AAII, actually has fallen away. So we're not at that level where people are so bullish that you have to start to turn bearish.
Okay, so we're still bullish. Older people are concerned because they see some of these metrics that they historically have worked, but there's a lot of innovation and so forth going on, which may elongate the bull market. Fair to say?
Yes, that's right. And I think when it comes to earnings and saying earnings are extended, the one thing that has happened this year is earnings have been beating by a huge margin. You know, even third-quarter earnings have beat by 5%. So I think that the trajectory of profits is still better than most people have modeled, and that's a source of positive surprise.
So you were very helpful with this, so thank you for it. We're about to publish this. Hopefully, you'll make my book part of it. Michael helped me write it; you helped me write it; Max helped me write it. There's a whole group of people that are in here, but you are genius-level at predictions.
Okay, so last time I had you on the show, Bitcoin was in the mid-50s to high 60s range. You said we're going to 100,000. I said, "When are we getting to 100,000?" You said, "By the end of the year."
Okay, yeah. So why did you say that? What did you see, and what do you see for Bitcoin over the next six months?
Part of the reason we have stayed constructive on Bitcoin is the price is following closely the prior halving cycles. The halving cycle, for your viewers, is when the block reward gets cut in half. That happened earlier this year, so there's a reduction in new supply. The sweet spot of that price gain, as supply cuts start to happen, is towards the end of this year and then into next year. I think that has supported why we expected Bitcoin to be 100,000. Over the next 12 months, I think something over 250,000 is possible, but maybe highly probable based on just following this price cycle.
The second reason I think Bitcoin has maybe more upside than that is because the new administration has run on a pro-Bitcoin platform. I think that the possibility of the U.S. not only legitimizing Bitcoin but making it a strategic reserve asset raises what would be the possible price scenarios for Bitcoin. Because if the U.S. government, as they intend, ultimately gets to a million Bitcoin, they'll be the largest holder of Bitcoin in the world, and they exert enormous positive influence on legitimizing Bitcoin.
Maybe I would just add to that it's almost like taking a playbook for MicroStrategy because MicroStrategy has proven that using Bitcoin as a balance sheet asset has really created a lot of value for MicroStrategy shareholders.
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So I'm a Bitcoin holder; I believe you're a Bitcoin holder. There are other coins out there. Some of those coins have not done well at all; they've diverged from Bitcoin. And there's a few coins, like Solana, that have done quite well. I had an investment in something that I think you did some research on called Algorand; unfortunately, it has not done well. So away from Bitcoin, are there things that you like? Are there tokens that you think, from a utility perspective, from a use case perspective, that you like away from the store of value Bitcoin?
Yeah, I mean, the answer is yes. We've recommended to our clients that if they didn't want to be Bitcoin-only, that they could look at Bitcoin, Ethereum, and Solana because we put those largely in the same category as sort of core cryptos. We are also entering what I think is an alt season. You know, next year is really when I think the crypto market could broaden, and this is where those who are really experts on crypto—and I know you run a crypto fund—actually are going to have some alpha because that is actually when many altcoins could do really well.
I think that the stronger Bitcoin is, the stronger the ecosystem becomes. So many of these utility tokens and things that are tokenizing really start to have a lot of expected value. But I don't follow this as closely; Sean Friel is much closer to sort of how to play alt season.
Of course, SkyBridge, well, I mean, listen, you know, we own things like Avalanche; we own Polkadot; we own Solana. We don't have lots of altcoins, but our performance has been great. But I think this whole thing's been driven by Bitcoin. If Bitcoin goes down, Tom, I don't think these altcoins go up, right? They're very correlated. Wouldn't that be fair to say?
Yes, that's right.
Yeah, so next year could be a good year for Bitcoin, but then the alts do even better. So like what people would measure, Bitcoin dominance could fall next year. So Bitcoin's total share of the market cap could actually decline because other things do better. That makes sense.
Let me pin you because you're Mr. Prediction and you're Mr. Accurate. It's a year from now; we're celebrating Thanksgiving dinner, and both of us hopefully will have a lot to be thankful for, knock on wood. Where is Bitcoin one year from now?
You know, Bitcoin one year from now, I think, is something around $250,000.
$250,000?
Okay, so it's early then. If you could buy a stock at $10 and you know in a year it could trade to $25, that's a pretty good investment, right?
Yeah, very good.
But knowing that it is hyper-volatile, right?
Right. People don't like the volatility; I understand.
Yeah, Mark Newton, our technician, thinks that the cycle of Bitcoin turns a little bit down early next year, so maybe Bitcoin gets to the 60s before 250.
Yeah, I can see that.
All right, let's go to regulation. And what I mean by regulation is not just crypto regulation, but more broad regulation. Republicans and President Trump are known for deregulating. How much impact do you think that will have on food, energy? Give me some insight into your opinion of what's going to happen with taxes. Will the corporate taxes be extended and tariffs? So the question is regulation, tariffs, taxes.
Yeah, well, these are all areas that we're all going to be watching very closely. On food, because you mentioned food, to me the most important really is grain prices, you know, because they've actually been softening. That would be really welcome if grain prices fell because that would take the front end of food inflation out. Some of that could be because markets are trying to price in an ending of the conflict in Ukraine because that would help bring down grain prices because it would just take away friction from the market.
With regard to tariffs, I think that there is a lot of saber-rattling because, you know, throwing 300% tariffs on products would be, of course, very economic. It would just create so much turmoil in the economy. But what I have heard from Chinese manufacturers—because I was on the West Coast this week meeting with some, you know, a group of businesses—is that China has already reduced the tax refund for Chinese exporters, meaning like someone who makes an air fryer, if they were getting a tax refund from the government, that's how they're subsidized. That amount is reduced, so they're essentially rolling back the subsidy. I think that will have the effect of negating the need for tariffs, especially because I think China's economy is a bit weaker.
So if those tariffs were designed to get China to not try to engage in hostilities economically, I think it's actually probably working. I mean, that may be a surprise because I'm not sure it's widely known. I asked a lot of folks if they'd heard this, but that's what I've heard from a manufacturer.
And then I think the market is trading the way you're thinking, though. Am I wrong? People think that in the market, right?
Yes, yeah, I think it should, at least in the beginning. It makes sense to expect, even if it hasn't been delivered. On taxes, as you know, a lot of folks have been writing that it'd be very difficult for the U.S. fiscally to actually extend or even expand the tax cuts. I think the bond market's going to really ultimately decide that because if yields keep creeping up because of growing deficits, I think it's going to be hard for the White House to accomplish that.
I mean, the White House is watching the stock market. The stock market would come under a lot of pressure if the bond yields keep going up. So I would say to me, even though that's a goal, like tax cuts, I'm not sure that that's going to be achieved without some way to convince bond markets it's not that someone else will pay the bill. Maybe that's because maybe you need a crypto strategy before you can actually do that.
Well, I mean, if you put a billion Bitcoin tokens on the balance sheet and Bitcoin goes to 250, you know, you've got extra reserves on your balance sheet. Psychologically, I think that could help. But you're in a box if you're the Fed.
First of all, will Donald Trump keep Jerome Powell? Remember, he appointed Jerome Powell, so he rails on him, but he did appoint him. Okay, so the question is, will he keep him, and what does Jerome Powell do over the next 12 months?
Yeah, the Fed, you know, I think Fed Chair Powell is really independent. You know, he's done, in my opinion, a great job. I mean, he's navigated the U.S. financial system through the pandemic and then an inflation war and then actual wars. And I think he's handling the threats of his lack of independence well. You know, I think he's done a great job.
If inflation doesn't provide the visibility that it's falling and the labor markets aren't faltering, I think it makes a lot of sense for the Fed to slow the pace of cuts because I don't think they're turning hawkish; they're just simply trying to keep a lot of dry powder in case they need to make cuts later. So I think their strategy makes a lot of sense, but also I don't think it's negative for stocks.
But yes, I mean, it's going to be, you know, as you know, like a lot of well-known investors have warned that the U.S. does have a more tenuous fiscal position. So I think that's why the Fed is going to be very important in the next few years, really trying to contain market fears.
You previously predicted that the S&P would reach 15,000 by 2030, and what I loved about what you said is it would be factors like Gen Z finally entering into the market, advancements in AI. Are you sticking with that? Have you moderated it in any way? If so, how, and what are some of the key drivers that support your forecast?
Yeah, that's still our case. You know, our base case is that we're in an earnings-driven cycle aided by AI, also supported by this prime-age workforce surge coming from Millennials and then also Gen Z because those two generations are larger than Gen X. So Gen X is the generation born between 1960 to 1980, roughly, and those folks are just in the heart of the prime ages now, and now they're exiting. Now you have two huge generations behind it.
So think of it as like a second wave driving further growth. S&P earnings next year are roughly 300 for, let's say, just sort of simple measures. And so that's why S&P 6000 is just 20 times earnings, which I don't think is that demanding. By 2030, we estimate S&P earnings could be 600 to 650. And I think multiples will be higher because of the larger share coming from AI and technology earnings, which naturally have higher P/E multiples.
So if you just apply a 20 to 25 multiple, you're getting, you know, 15,000. So I know it sounds like people say, "Well, 15,000 sounds crazy," and two years ago it might have sounded crazy, even though that forecast was in place more than two years ago. You know, that forecast has been in place probably for five or six years. But you know, now that we're at 6,000, we're that much closer to 15,000. It's not a quantum leap any longer.
My last question before I go on to the audience questions: how do you assess the impact of artificial intelligence? You know, is it all positive? Could it be dystopian? Could military adversaries get a hold of it? Could someone figure out how to put an artificially intelligent worm into our Pentagon or our power system, or are you just not worried about any of that?
I would say, based on my conversations with our clients and with other folks following this, I do think we're underestimating the negative consequences of AI. You know, foremost because in our human endeavors, we work with ethical boundaries. Because even though there might be a shortcut, like let's say you're waiting for coffee, you know, you wait in line, and other people are in front of you. But in an AI world, there's no benefit to being ethical. You know, so in the AI world, that machine will just cut the line in front of everybody to get coffee.
I haven't seen any attempts to create ethical boundaries within AI, especially other nations pursuing it. So to me, this means there's going to be a much greater risk of cybersecurity hacks, and it's going to be much harder for us to protect our identities in this world of AI and social engineering and generative AI videos. It'll be very easy to spoof people.
So I think profits are going to do fine; there's going to be a much higher cost in the economy around cybersecurity. And already, JP Morgan, you know, 7% of their activity—well, all banks really—7% is now suspicious. It's actually been rising. So in a world of cybersecurity, banks are kind of losing the war because there's more fraud now than less.
I think that makes crypto so much more important because it does secure your information. I think that's one solution. But yes, I think there's a lot of risk, actually. Personally, I think if you unleash AI systems in the financial market, there's going to be a lot of people who make dirty trades that trick people and spoof people, and there'll be fake headlines because that's how you manipulate markets.
All right, I mean, it's great, great stuff. You've laid out a bull case; you've laid out the crypto case; you've given us some common sense on interest rates and tariffs and taxes. Let's go to the questions.
If inflation makes a resurgence in 2025, as some have speculated, do you believe Bitcoin and crypto assets could act as reliable hedges, or are there better options? This is Juan from Florida.
Good question, Juan. Hi. You know, historically, hedges for inflation have been land, like owning real estate, owning gold, which I think is still valid. But I think now there are hedges using crypto because crypto is also a hedge against dollar and currency debasement, which is on top of inflation risk. So I think all of those are valid inflation hedges. Of course, if you are open to alternatives, you know, even things like art and collectibles are pretty good inflation hedges as well.
All right, let's go to the next one.
I agree with that. In the current economic and market climate, which sectors do you believe offer the most attractive investment opportunities? This is Brian from California.
Got it, Brian. For most of this year, what we've recommended to our clients are really four sets of trades. You know, first is AI-related trades. The second is small caps because the Fed is dovish and they're easing, and that's going to boost the small banks within small caps. The third is we've recommended financials and industrials because the Fed is easing. And the fourth is Bitcoin because a dovish Fed along with the cycle.
So those are the four trades. With the new Trump administration, those four trades are also the same recommendation because now you have a White House that wants the stock market to go up. So there's a Trump put now on the stock market, and now there's a Fed put, and that supports small caps, financials, industrials, and Bitcoin. And of course, the AI trade I think remains strong. It didn't need a Fed put or a Trump put.
The four things. Let's go to the next one.
Tom and Anthony, how will Trump's reindustrialization strategy affect liquidity in the coming years? Harry from Switzerland.
I'd love Anthony's views too, but I just share that I know onshoring is something that the U.S. is pursuing, like deglobalization. I think that's what you're talking about. I'm sure companies will only do this if it leads to higher profits. I think a lot of people look at this as companies are going to onshore, and there's suddenly inflation in America. We know that won't happen because if some manufacturer is making a product in America now and it's twice as expensive, they're going to lose all their business because someone will buy cheaper alternatives from other countries.
So I think there's, in my opinion, less of it than people realize, and any of the moves that are made are because the savings from transport more than offset the higher labor costs from trying to do it onshoring.
So I'll just add two cents on that. I do think there will be more reshoring of manufacturing, but I think the age of globalization is never-ending, and it's just the way incentives are around the world. You know, there might be some sanctions here or there or tariffs and so forth. I am a fan of tariffs, though, Tom, that protect U.S. industries from price gouging.
So if a government like the government of China is teaming up with their steel manufacturers to dump steel into our market to kill our market share, it's unfair, and somebody like Robert Lighthizer is probably going to impose tariffs there to create a blocking mechanism on something like that. So, you know, there'll be some frays, but I don't think the adults that are around Donald Trump are going to allow him to presume the rhetoric that he's talked about, and I think the market's also reflecting that.
Let's go to the next question. Could any derail MicroStrategy's stock play? What red flags should we watch for? Good question. Lon from Rhode Island.
Lon, I might just need to explain for some other viewers what MicroStrategy is doing. MicroStrategy, around five years ago, transformed the company by using its balance sheet. They had a lot of cash on hand to buy Bitcoin. So instead of the stock being valued on its actual software business, which had been languishing, it's valued as a holder of Bitcoin. But as Bitcoin has risen and MicroStrategy's stock has gone up, it's created an opportunity for them to issue convertible bonds and debt to acquire more Bitcoin.
What's been novel is that they've issued these debt securities for almost no interest cost, essentially zero-interest bonds. So they're funding this without having to actually pay for the interest expense. Now, you might think that this is a little bit reckless, but it turns out it's a very novel strategy because they have created a lot of network value. They're one of the largest holders of Bitcoin now, and ultimately they may become the second-largest holder of Bitcoin after the U.S. government, and they're doing this with the ability to borrow at a very low cost.
You might wonder why are bondholders buying these bonds? They're offering for the first time the ability for someone to put a billion dollars' worth in the bond world to own a bond that has exposure to Bitcoin. These have been incredibly high-performing bonds; they've been the best-performing bonds. So they've helped bond managers outperform by buying typical corporate bonds but then with this upside in crypto.
I think that this works unless Bitcoin itself doesn't have a promising future. I think Michael Saylor has not only done something brilliant, but over time, when they do accumulate enough Bitcoin, they're actually going to be able to do quite a lot of novel things with it, whether it's lending Bitcoin or helping some financial system secure Bitcoin as sort of the anchor of that network. MicroStrategy is going to be one of the few companies that has a large holding of Bitcoin that you can actually tap. So it's a very—I kind of applaud the strategy.
So I think that there is a lot of upside in what they do because as long as Bitcoin goes up, MicroStrategy very likely goes up a lot more.
I love it. I love it, and I'm a big MicroStrategy person. Michael Saylor obviously wrote the intro to my book, and so we have a very close relationship.
Let's go to the next one. How would you recommend investors position themselves for political uncertainty in a Trump 2.0 era? Jason from Texas.
Well, I would say that foremost, for the last, you know, eight, nine years, we've operated under what I consider to be an increasingly fractious political system. You know, like there's very little in the middle anymore. I'm actually politically registered as an independent. I no longer see myself affiliated with either the Republican or Democratic party, and I have been for several elections.
If you want to know what to hedge yourself with, just see what's done well in the last eight years as a political hedge. One, it's obvious that Bitcoin's been a great hedge against political uncertainty because, you know, it's censorship-resistant. You know, if you own the keys, you own the coin; no one can seize it from you. Technology stocks have been great political hedges because, at the end of the day, demand for technology has nothing to do with being in favor with one political party or the other. You know, technology companies like the MAG 7 have just changed the world, and they become really important.
So I'd probably say that those two are your safest, and of course, the third would be gold because, you know, as this election went underway, gold actually did very well as people worried about election outcomes.
It's a great answer. I don't really have much more to add to that. I feel the exact same way.
Let's go to the next question. What's your perspective on the risk of over-concentration in specific sectors? Like Anthony Scaramucci, as an example, has 55% of his net worth in Bitcoin. Especially when the recent market has rallied, what do you think? First of all, am I crazy to have 55% of my net worth in Bitcoin? And then what do you think Sally's question is?
Yeah, Anthony, I think the toughest thing people do is when they have a winner, they try to diversify out of a winner. So I think it's important to hold on to some great ideas as long as you have done the work and you're convinced that that great idea still works. So for Anthony, he made some very timely investments in crypto, and it's grown to be a significant part of his portfolio.
And I know he's—remember, it didn't start out there. You know, this is a 6% asset for me; you know, it's just mushroomed to that.
Yeah, but let's go to her question. So what do you think?
So I think you need to hold on to winners. So if you're saying that you ended up with a lot of crypto because it's risen a lot, you just have to—what do they say? HODL, you know? Because you don't know what the ceiling is.
Amen. And Michael Saylor would probably disown me. I can't give up my Bitcoin.
Let's go to the next one. What can investors learn from crypto's recent growth to prepare for the next phase? Daniel from Illinois.
Daniel, the biggest lesson for me, because we've been following crypto for more than nine years now—this is our ninth year, really—you have to—the one thing that people have been saying for many years is that something is going to replace Bitcoin, and so you want to own the next Bitcoin. But all I've seen is Bitcoin's dominance has been really untouched.
So I would just say whatever you do in crypto, just stick with—just know that Bitcoin has to anchor your strategy. And of course, that's why Anthony's book is titled "Not Altcoin," right? Right prominently on the cover of his book.
What you need to know that Wall Street has already figured out—and by the way, many people in retail figured it out before Wall Street, which is odd—but we're here now, and I'm with the legendary Tom Lee from Fundstrat. Thank you again for joining us. Have an awesome upcoming holiday season, and I gotta get you back on. You know, you're stuck with me, Tom. You know I'm like, you know, I'm not Velcro; I'm a little bit more like superglue. You're not going to be able to get rid of me that easily.
I'm glad to. I mean, we could even do it in person sometime together too.
That would be great.
All right, we have a great one.
Yeah, Happy Thanksgiving.
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