Transcription
That's melt up. How many times do we talk about what happened over here in 2019 as the Fed began raising their balance sheet? Now, we're focused on Bitcoin. We love, we love, we love the corn. We're focused on Bitcoin and we're talking about what expectations could be. It takes several weeks to stabilize and we could see a lower low or two, as happened last time. We did see a lower low and it doesn't look like the or two is going to happen this time.
Now, this is the bull and the bear case aligned together, and you see you have them aligned off of the all-time high, and then you will have them aligned off of the February low. Yesterday, we looked at and talked about how why aligned off of that February low, it actually, it, it's a, it's a much, much better fit. Some people are wondering, hey, well, how could that be if you look at what's happening here with the institutional flows and we've talked about the spot ETF flows holding it up. The drawdown significantly less than previous cycles. That's something you have to contend with. But, let me just continue forward.
The bull and bear case lined up together, they basically say that they're both are exceptionally bullish, right? The bull and bear case is simply deciding, you know, how soon do we begin the loft up? Now, some people do believe that, hey, listen, we could have, you know, by September through November window, we could have another 50% correction. I'll see you at $40,000 Bitcoin. That would be tracking if that were to happen, that would be tracking what happened in 2008 when we saw Bitcoin just like for months flatline out and then boom, jump down. And don't forget, that was triggered by Fed policy. Fed comes out tomorrow and they're like, yeah, we're getting ready to tighten. Is that, that doesn't seem to align with with Fed policy?
We're going to talk about and look at Fed policy in one second. But right now, I'm going to say to you, listen, there was a different market. A much, it was a retail-driven market. It was retail that led to that 2017 blow-off top euphoria and then the massive ramification of it. This is not a retail-driven market. But guys, this is the early adopter phase. Retail this point is irrelevant, which is why for the last 3 years, when everyone's been asking, "Where is retail?" I said, "It doesn't even matter at this point in time."
We've seen and we looked at very clearly yesterday what the difference was between this point over here when Bitcoin made the new all-time high in right over here into October of 2025. And we saw from April until the peak over there that the spot ETFs added over 20 billion dollars of inflows. Absolutely, absolutely insane. It's not the same market. We also saw during the April 2025 drawdown, that's from then on they've been stacking. And in the latest drawdown, what, what can we call the latest drawdown? The geopolitical risk runs the market? Or, um, what I don't know what you want to call it. Um, buy max 7 opportunity. I sold too soon. Um, listen, that, that's probably has the least probability of an outcome.
Now, what could we see that it takes months and especially during a midterm election year when we normally see, really from right now, from May through September, a lot of running sideways, a lot of drawdown. Could we shouldn't say a lot of drawdown. Drawdown, running sideways, not really that ascent. Could we see Bitcoin meander, muddle along over here, and that would be a lot more probable if that were to happen. And look, that's, that's also probably not the most probable, but that's definitely in the cards. And then I think you have to fast forward. We looked at what happens even midterm election years as you get through October and into the end of the year when the seasonalities and the flo- and the flo- the, the flows really take shape. I was trying to pull up a picture of the seasonalities. That's not even including just midterm election years. That should help Bitcoin find that ascent that you normally see coming out of a bottom. So even if you're bearish, you're quite bullish right now.
What I meant to pull up, and I got a little sidetracked over here, was what happened over here the last time the Fed was running the balance sheet up. Guys, you know, for the past 2 and 1/2 years, I've been talking about the Fed playbook. I've been talking about a liquidity. I've been talking about the Fed cycle in a way that you do not hear from any other macro analyst. And what I was saying to you the last time that happened, what happened was tech led, and I've used these words so many times. Tech actually melted up. And it did until they locked down the globe. We saw the S&P 500 rising 14% in months. We have the same situation evolving right now. Of course, it's similar. It's not the same, but it's strikingly similar. And in this time, instead of tech just going boing, this time we did have the tension of what, what, what's going to be the result. And it's not gone, by the way. It looks like right now, right on time as we enter into the weekend, obviously conflict keeping up, now becoming a lot more kinetic. And whether or not it gets better or worse from here remains to be seen. There are still ramifications unknown. We're not getting comfortable, but we are following price, and price is saying that last time Fed playbook, they began raising the balance sheet, we saw it took several weeks for Bitcoin to stabilize. Happened again, made a lower low, happened again. Last time it swept the low before finding it. This time it hasn't swept the low because that does look like it does look like capitulation. Whether it is, it isn't, we'll find out soon. It does look like capitulation. But, we did see tech melting up. This time it took a little bit longer, but now we are in the process over the last 5-6 weeks of tech once again melting up.
I was going to go back over here onto the daily just to get a quick view of it. I mean, tech is melting up right on time. My expectation was, and going back to the Bitcoin, is let me find a nice chart over here and just zoom in a little bit. And then let me just go boom, boom, boom, boom. I'm probably going to pop a 3-day chart over here just to make it a little bit easier. And I'm going to where we were, and I'm going to highlight this portion over here. That portion is very important. We have obviously the global, global lockdown anomaly. I call it anomaly. Some people take, you know, like, well, you, you can't, you can't do that. It's in the cycle. It'll be an uh aliens? I don't know. Listen, today the aliens were, were, were files were released. Nothing we knew. We all knew what Apollo saw out the window for years. Not for years, for decades. Yeah, it's just a. Anyway, here we go.
So, could something else happen this time around? 100%. If they need to inject liquidity, and don't forget September 2019 when the Fed stopped QT, there was an outright need and they were talk, we were talking about here live on CTM why the Fed needed to inject money. It wound up being the COVID response, the global lockdown response that allowed it to happen. Always, we're not seeing a similar situation at the moment, but we are seeing a need for a couple of things. We're seeing a need of a $40 billion a month of organic balance sheet expansion now called reserve management purchases. Yeah, they need to, they need to buy treasuries and they're issuing short-term treasuries and that, that, and the Fed is buying it and then they're using money they have for buying back longer-term duration. It is yield control curve control curve happening. It is all highly conducive to liquidity. Things could change that will take, will that will change this period of liquidity rising and don't forget another thing that I talked about. Again, I haven't seen it elsewhere. I pointed it out to a lot of people was the monetary base total. It is now rising and when it does, Bitcoin rises. M2 is poor at best. I've talked. Here we go.
But you saw during this massive drawdown, this is massive drawdown the over here which stabilized the moment. This is when Bitcoin was under its most pressure. That has now changed over here and we are now working our way up and it seems that the, the Fed playbook cycle according to CTM is once again playing out and almost exactly right on time. What I was trying to do is set expectations by highlighting this area. My expectation were, and again, this isn't trying to point out an anomaly, it happened that this should be Bitcoin's path more or less. Not just like straight up ready to moon. Tech leads here. Tech is leading. Tech is actually melting up. Bitcoin set to stabilize, which means upward sloping channel, until we get to boom, >> [clears throat] >> the bull of all bulls running again. Could things happen to derail all of this at any moment in time. We're going to continue to stay in front of it and watch it as it unfolds.
I have to say this chart is unbelievable. And then when you look at the S. This one over here is probably my favorite chart right now. It's seeing. This is like something once-in-a-lifetime. And we don't know what happens next. We don't. When I say that tech from, from just watching the technicals. Jordan, focus on the technicals. This is massive when you have a 100-year upward sloping channel breakout, retest, resumption. Guys, that anytime you get a breakout of an upward sloping channel, it suggests that there should be either a big move to the upside that yes, will end in mean reversion, and/or a fake, a liquidity grab. And I mean, the liquidity grab is has a less probability now that this held. We had a breakout, a retest, and a resumption above. So, right now, we're in melt-up phase. And we have to watch for the bubble phase, and that's what we're going to take a look at today in this session together and do our best to keep in front of that and do our best from kind of just view this from first principles.
So, a couple of other things we need to talk about. If we get back down below here, yeah, that, that takes us from melt-up phase to highly cautious because it was a potential liquidity grab. If we're breaking down from the 2008 slope, the guys, you're going to love this as I bring up this next chart for you. You're going to see that it, it basically put our two charts together once again. That's a may. That's bad news bears. Anytime that breaks. That is, you know, the buried stock market crash coming. That's great depression. That's not happening right now. Um, and then this chart I have to bring up. This is just zooming in over here more, getting the angle not from the 2007-8 great financial crisis, but from the bull market breakout over here. Close your eyes. That breaks melt up and we're, we're coming towards an area that we could see that while this could be an area where the part major resistance. Could we end up over there by the end of the year? It's certainly a target to be watching. As well as any type of rejection. It all looks good.
Let me show you that chart I wanted to show you and jump over here and look at that. This is Jurrien over at Fidelity and macro head of Fidelity or something. And he's putting together market cycles and secular trends, which is cool because you see this pink line, this is our 100-year channel, but he's taking the mean of it, which is pretty nice, pretty cool. He's taking just the mean of it. And obviously we have the top over here in the dot-com bubble. That goes back to the top of the roaring 20s. We have the bottom over here of the great financial crisis. That goes back to the two touches off the bottom of the Great Depression coming out of it. And then he puts in over here the other track, the other angle we're watching off of the 2008. And he's saying that well, we're well within that right now coming up towards that top part. Love the chart work over here. Very nice. He's comparing over here the 2012, uh, 2012, the, the, the dot-com bubble, the, the 1999 run into early 2000 ending in March 2000 of Netscape versus ChatGPT and pointing out the potential way to run. I don't know if ChatGPT is the best analog over here in so much as that. Look, I wouldn't be surprised if their valuation at any point in time was cut, whether that came from ramifications of the lawsuit or if it came from Anthropic. And I, I would expect and I'm wondering what's, what's the ticker on this one over here? Bam, bam, DXYZ. It's been going. DXYZ has been going absolutely parabolic. Remember when I first brought that to people's attention and the comments I got, they charge a 2% fee. I was like, I don't, I don't care. I'm, I'm following price and the, you know, the, the take will be a lot greater than 2%. Another one that we want to, I rarely bring stocks to people's attention. Blocks over here continuing to outperform every Bitcoin ETF and an absolute banger. I feel lucky to have at the right time got involved. Anyway, more importantly, let's get back over here.
I don't know if ChatGPT is the best. I think that Anthropic is taking value, going to continue to take valuation away from ChatGPT. I've seen buzz in the last couple of weeks. Some people like Claude. Claude V7 is is terrible and I prefer V6 and and, you know, oh, Codex is not that bad and and guys, here's the thing is Anthropic needs compute and they're completely lacking the capacity for it. So they have to kind of. But Elon is allowing them to run on his servers, huh? That's going to be exciting I think for Anthropic. Is he doing that? Is it, is Elon doing that in order to kind of like put more pressure out AI. I don't know, but there's going to be pressure on Open AI, including SpaceX IPOing, including if Anthropic IPOs before ChatGPT. There's only so much money out there. So, I don't know if this is the best analog, but it paints a similar story. It's worth it. I don't know what this chart is. Here's the bubble watch. Going to keep moving over here. This one's interesting cuz it talks about how AI is basically carrying the US economy right now, and we're seeing software and IT, uh, IT contributing 134 basis points of GDP growth, 2% of the 2% 60% of all economic growth in the quarter, the largest single quarter contribution in history, beating the 1999.com record by 10 basis points. Strip out AI-driven tech investment and QE's GDP is basically flat. But, here's the thing. It's real. The AI buildout is absolutely real. The increase and expected increase between 2005 and 2026 came in higher than expected. And their likelihood of that continuing into 2007 is pretty substantial. Not only that, back in the dot-com bubble, that was an idea. This was the, like, what is the internet and what's it going to mean for tomorrow? These companies are although they're spending a staggering amount of money, they're still taking in a staggering amount of money, and the odds are that at some point there's going to be a transition from when they are actually spending on this buildout to the to the revenue they're bringing in for it. Look, it's real. It's not fake. There's a reason it's contributing so much to GDP, and that likely continues to increase, not decrease.
You have over here, this is interesting. I think that you should pay attention to this over here. This is looking at wondering why you have not yet hit the like button. CTM Fun Friday, light up the likes. Let's continue over here and get to an important aspect of the conversation. This is the Buffett indicator, the US stock market value to GDP, and a lot of people have been telling you now for years that it's so overvalued. Maybe Buffett himself has been using this, this is why he's so under positioned. I think it's really important to look at this and say that the numerator is global, the denominator is not. The Buffett indicator compares total US stock market to US GDP. But, this is, this is true, listen to this, it's going to make a lot of sense. But, today's largest US companies generate huge amounts of revenue outside the United States, right? Apple, Microsoft, Nvidia, Alphabet, Qualcomm, they, they, you know, 28% of S&P 500's comes from outside the United States, but in tech, that's even larger. We're looking at over 56% of information technology revenues coming from foreign, and the semiconductors gets even higher at 67%. So, this indicator we've been looking at is matching valuation to GDP in the US, but these companies, a large part of their revenue's coming from overseas, in some cases over 50%, and we all know semis are leading at 67% of their revenue. That means the numerator keeps growing from the global expansion, while the denominator does not. That probably is why most people view this as askew. But, Buffett originally used his GNP, not GDP, and almost everyone ignores the GDP. GDP measures production only inside the US. GNP is measuring production generated by US-owned businesses globally. I think it's an important distinction when you see things in your feed about the Buffett indicator and why the market's about to crash and whatnot. And then you also have the this I'm going to go ahead and read it as we finish this conversation up. GDP does not measure the digital economy, Google search, YouTube, Instagram, WhatsApp, Gmail. They generate an enormous economic value but contribute very little to directly to GDP.
Jurrien, once again to close it out, is showing us over here the current CapEx spending. As we Hold on, let me take that in once again over here. I'm trying to look at the 194, which is the estimates going into next year, I'm assuming. Hold on, if someone gets a better read on this chart, let me know. As remarkable as these data points are, we must remember this is a top-heavy market with top-heavy earnings. Again, this is real. These companies are earning a massive amount of money and their earnings continue to increase. Someone was talking about how bad the economy is yesterday. I pointed to a Deutsche Bank report saying that we had the largest. Well, anyway, I can't quote verbatim. It's on my Twitter feed. If you go into replies, you'll see it. It's one of the, the few replies that I've posted in the past 48 hours and it points out to how the earnings growth is the largest in 11 years. Bra bra bra da da da da. So, there's less than meets the eye here as the broader market is producing more typical earnings breadth. Nevertheless, this is the AI CapEx boom in action. Guys, you're we're living through a moment in history that is similar to what happened during the dot-com bubble boom and bust except it's different. It's, it's similar, I'm sure, and it's probably going to end very similar, but it's very real. It's happening. It's probably offering one of the greatest opportunities of our lifetime. And imagine the sentiment. Nevertheless, this is AI capex boom in action. And the next chart illustrates. I don't have the next chart. Um, yeah, okay, that was the one we just looked at since chat GPT. So, I'm trying to see what we're looking at over here. We're looking in black, 12-month trailing, and then we're looking at forward estimates. Exponential growth is very difficult for us to understand.
Some things that could burst the bubble as we speak. Things that we're watching. What could burst? Here's the Fed. The Fed cycle. Fed right now has gone from ultra tight. And as they went from ultra tight, right, the markets during tight monetary policy continued to move up. We've been talking about why for years. If the Fed were to move back towards tight monetary policy, that's something that would derail the current situation. Another thing that will derail the current situation is if we lose the long end over here. We're looking at the 10-year here. It could be coming from the 30-year, but if the 10-year breaks outside of this upside resistance, odds are it's going to be a move to behold. If that's happening, that's something that would obviously cause stock markets to correct and snap back heavily. And that's probably dependent on what happens here with oil. What? Look at that, by the way, that similar trend line over there. I just want to show you how this is structure. I was looking at this another day. Maybe I could find it. Ah, um, maybe it'll come up. Okay. All right. I'll do it again. Look at this over here. I You, you saw that top line I was looking at on the monthly and now you can see how it's continues to be structured. This is the line that I wouldn't be surprised if we do see the straight open up once again over the next few months, maybe longer, but then we see a top in oil and actually it come back down and I would be targeting this lower trend line over here. A liquidity grab taking out that bottom over there. That's what I would deem the most probable. If that's happening, that's going to be a very benign situation compared to what's happening now. If oil breaks out this way and we see oil above 120, 140 and holding there, that's something that's going to cause the yields to blow out. That's something that could derail this current situation. So those are two things. The third thing is if you see a pullback in capex spending. We have these estimates that continue to grow. Last year they. How was 2026 going to turn? No, it was higher than expected. Do we continue to see that trend or do we see a pullback? Those are three easy things I think that we could continue to monitor for something that would derail the current trajectory. Right now, none of them are coming to fruition, but we watch and we wait.
Yeah, this is a hard one to say also. So I could see in the future. I see things like uh Intel continuing to push out more, more semis. I could see. I'm, I'm just talking about right now. Um, Nvidia's monopoly on the market and Nvidia's valuation and then I'm thinking about uh Taiwan Semiconductors. Like I don't even know what to call it. That's more than a monopoly. Uh, but when you look forward and you see that if Elon pulls off the semi fab where you can eat burgers, that's a game changer. And the whole thing is though, that's a game changer potentially to valuations of the likes of of Nvidia and or others, but the thing is is the reason Elon's trying to build that is because of the need. He needs the chips. He can't build the robots without the chips. You're not going to see millions of robots coming without millions of extra chips. Right now, any chip that's made, there's a buyer for it, right? So, to say that they're overvalued, that's hard. Either the, either the, it's, it's forget the energy constraint, there's also a chip constraint. There is both. So for, for today, they're not overvalued. When you move towards a significant um increase in production, yes, then those costs will come down. I don't think we're anywhere close to that at this particular moment. And I think at this particular moment, the need for any chips that are available, there's a buyer for them. So are they overvalued? You know, listen, the build out continues, the build out's real, and we're only getting into the next phase when we see the robots.
Any good comments in here? Let me go ahead and take a look over here. All right, we had the honeymoon here today going on. Come down the baby father. Good look at that, beautiful. Everyone, lots of love. Have a beautiful day. God bless you. I'll see you all back on the inside.