Transcription
I am pretty convinced that the bear market that Bitcoin is, is over. It has been in a bear market for months. I think it's found its bottom. Let's start with the Iran war. It's wildly bullish for gold and Bitcoin because it is a turning point in the history of the last 50 years of US dollar military-backed hegemony. In the last few days, the Iranians were consulting the Chinese and the Russians. China just flexed somewhere between 3 and 4 million barrels per day of oil tolerance in a way that the market had no idea existed. The lower demographic, they are now defaulting at a rate that's rivaling the 2008 great financial crisis. All roads lead to yield curve control. Ultimately, they'll be buying that debt and allow the inflation to run hot. Gold and Bitcoin will rip. This is where space comes in. It's probably a little tinfoil, a little out there.
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All right, so for today we have returning macro heavyweights James Lavish and Doom Berg. And these guys cover everything. And I do mean everything. To help you navigate these crazy times, we discuss how the US acceptance of the Iran agreement was a profound historical shift; the looming debt rollover crisis that's accelerating towards us; and the missing piece that explains the unusual behavior we've seen in the energy markets. Plus, Doom Berg shares a conspiratorial take on space you've never heard before.
All right. Good morning, James, Doom Burg. Thanks so much for coming back on the show. Very excited to have this conversation. We've got a lot to unpack since last time. We got the Iran ceasefire. The space IPO markets are rallying. Oil dropped below 80. But what really caught my attention this morning actually was just how narrative-driven everything feels right now. So Pakistan came out and announced like a written deal on Thursday with a SpaceX IPO there on Friday. And then on Sunday, we had like the deals completed from Trump at the 250th anniversary, on his birthday, on Flag Day. Like all choreographed perfectly, it generally feels like something out of a screenplay. So, James, starting with you, markets are back off to the races, and Bitcoin seems to be responding. Do you think we are genuinely in safe territory now, or are we just writing out a narrative high and optimism before fundamentals reassert?
That's a good question. I think, you know, it's not surprising that a deal was struck this weekend and on the anniversary and all, like you just laid out. We're headed into—I mean, we're deep in, you know, the front end of now—everybody preparing for this midterm election. So I fully expected a deal to be done before, you know, we got into the campaign season, which we are entering. I know the summer slow, but that's when everything gears up. And Trump is well aware that this is a big issue for reelection, for a lot of his, you know, for a lot of the Republicans. So, to win the whole majority, he's going to have to win a lot of seats, or keep a lot of seats. So, is it surprising? No, it's not. And then, of course, he had Friday, like you said, the space hype, and it's real. The hype is real. It's, yeah, through that. I'm not surprised that Bitcoin is recovering. You know, it's acted as a risk asset for a long time here. And it has been in a bear market for months and months here. And so it doesn't surprise me at all. I feel like it had bottomed out, barring any sort of black swan event or negative economic event, geopolitical event. I think it's found its bottom. I do expect it to continue to trade sideways here for a while. It would surprise me if it breaks right back up into the high 80s and low 90s. But, I'm, I—it doesn't faze me at all. The volatility in this name, or this asset, has been pretty steady for a long time. So that all kind of sets up for where we are today, which is the first week that we're going to hear from Kevin Warsh. And that's something we should probably talk about because that, to me, is something that the market's a little bit on pins and needles on. And they're trying to figure out: you've got the Fed funds futures that are still pricing in nearly a full cut—I, yeah, a full raise by December. And I think that this week and these meetings—they're not going to do anything with rates—I don't think he's going to come out and be hardline either way. But people are going to be listening very closely to what words he uses, how he changes that boilerplate press release that they put out every single meeting, what words they change, how they adjust them, and then really what his overall tone is. And that's going to be a very important indicator for the bond market. And as we all know, the bond market is driving all of this, along with the energy markets. And so this is an important week geopolitically and politically. And then, just from the Fed side, it's going to give us an indication of where he sits at this moment. And we can talk through what we really believe is going to come out of that.
Wonderful, Doom. Bring your thoughts, your initial thoughts.
Yeah. Where to begin, right? And also, lots of stuff that we're working through that we haven't published or would never publish, but still, things that I'm thinking about, you know. Let's start with the Iran war. Look, I think as time goes by and historians truly assess what happened here, and the spin and politics are sort of put to the side, the U.S. achieve none of its objectives. Like in this excursion against Iran, if you go back—and we have gone back and watch the video that the president released from Mar-a-Lago on the 1st of March—and you compare the stated objectives and justification for the war and where we are now. So it's a profoundly different outcome than the president had been led to believe, or assumed, or was otherwise convinced against his better judgment, however you want to frame it. This is a stunning result, and kudos to the president for taking the out, even though that's not how it's being shaped. But I do think if you start with that as a foundational input into your mental model, it's wildly bullish for gold and Bitcoin and all the US dollar alternatives. Because it is a turning point in the history of the last 50 years of US dollar military-backed hegemony. A mid-tier power before the war absorbed everything that the US and Israel could throw at it. And it has emerged, arguably, as the stronger side in this war. It's just, you can't deny that. And so why were Bitcoin and gold trading, sort of, negative correlation with peace? Because there were some very bad tail risk outcomes on the board that this ceasefire hopefully takes off the board. And you're seeing gold run today. You're seeing Bitcoin run today. You're seeing oil collapse today. Yeah. We have a piece coming up tomorrow, by the way, which we think is a profound outcome from this war, which I'm happy to get into about how China has just proven to the world that it has harmonized hydrocarbon fungibility. And this is a really, really insightful thing that has happened. Our first foray into drawing some conclusions from it comes out tomorrow. So I know that I've covered a lot of ground, but I would say that, if you pushed me, the bear market in Bitcoin is over, absent of restart of the war. There's profound things happening, historic things happening, decades-long trends reversing. You compare what went down in this war to what happened in Desert Storm, right? And we just—and so now you have, by the way, over the weekend in the Financial Times, China boldly announcing grand expansion plans for Enbridge, which is its, you know, one based alternative to Swift. Iran is being compensated. The reason why Iran has been pushing for the freedom to charge fees in the Strait of Hormuz is not about the money; it's about forcing Iran off the sanctions list. You can't pay Iran without violating sanctions, right? So, like, these are spoils of war that Iran is demanding. And I would close by noting that in the last few days, as Iran and the US were pretending as though they were still debating the MoU, the Iranians were consulting the Chinese and the Russians. And the role that the Russians and the Chinese have played in all of this is not to be understated, even though it is under-reported. So, let's just—really historic stuff. I mean, it, I don't want to. One of the things we've really prided ourselves on is not indulging in hyperbole for clicks during this war, and I'm not trying to be hyperbolic now, but it is a profound outcome. And I think sometimes in the heat of the headlines and the spin and the "don't be a panic" on Twitter, and, you know, "Trump is great in UFC" and, you know, "250 Trump's birthday," I get it. But something really important just happened. And it's important, I think, not to lose sight of that.
It's very interesting. Before we get into energies, I'm just curious, James, if you share any of that sentiment, if you do view the outcome of this war as a kind of, at least, a major signpost regards to US dollar dominance around the world.
Yeah. No, it's a really good point. You can't—and that's true—you can't underestimate the involvement of other massive geopolitical interests in this war. And, I mean, you can't understate that, or you can't overstate that. So, look, we talked about, I think last time, one of the largest missteps, I think, that we've had with our sanctions in recent times and in modern times. One of the largest, if not the largest, misstep we've had was freezing Russian assets and kicking them off Swift at the start of the Ukraine war. That was just a catastrophic mistake by the Biden administration, and it put the Treasury in a really difficult position. And so, you know, with us borrowing more than spending more than $2 trillion than we take in, on our, you know, so we're running a $2 trillion deficit annually. We need as many buyers of U.S. Treasuries as we can get. And like Doom just said, removing sanctions is a major, major win for the other side. So, like we expected, Trump had to have something to save face, you know. And so the street is open, oil is dropping. That means that inflation will be coming down. As we all know, oil and energy is the number one component in every single good and service that's sold around the world. And so it's a great talking point for him. But the reality is, I don't—I can't get into what his head was or who was in the room when they decided to attack Iran. What I can surmise is that he had such great swift resolution in Venezuela that his hubris allowed him to believe that they would just swoop in, wipe off the current regime, replace him with a new regime, and go about in the new world order. And that clearly didn't happen. They have plenty of successors in place to battle that. Getting citizens to revolt is not an easy task when you've got a regime that's willing to kill its own citizens to stay in power. That's not. And so I think it was just underestimated, just how strong Iran would be and how difficult it would be to strong-arm them into going down paths that we want them to go down. And so it's not surprising at all. How much does this matter? Well, I think we are witnessing a fact. And, you know, the fracturing—the world is beginning to fracture—and we need as many buyers of Treasuries as we can possibly get. And this hasn't helped it, in my opinion, in any way, shape or form. And so we're going to continue to have to implement ways to get around that. And I'd be interested to hear Doom's take on all that.
So, the next logical—so far I agree with that. And I just pulled up the Bitcoin chart today because I took it off my launchpad a couple of months ago. I just can't look at it. I just don't. I had, you know, for a variety of other reasons, I didn't have space for it. But I am pretty convinced that the bear market that Bitcoin is, is over. And, look, I mean, we have plenty of Bitcoin and actually subscribers. And, you know, as I said last time, I am a no-coiner. But it doesn't mean that I don't call it as I see it. And here's why. So let's follow through James's logic. The next step: so in a multipolar world, the US needs the dollar to be wildly less strong than it is now in order to reconstitute its manufacturing base. And we'll talk about a long-shot, sort of interpretation of the space example, which we would probably never write about, but I'll share with you guys a little later. And I think it's all related to this. But, and the new Fed chair, yada yada, if all roads lead to yield curve control, I mean. And so in a world where they're going to save the bond market and let the currency slide because the Pentagon needs a weaker dollar anyway, it's wildly bullish for gold and Bitcoin. And the other sort of for land and real things, tangible things. You know, inflation in the end, when push comes to shove, they're going to print. And so when I see, you know, Bitcoin at 67,000 today, that's the market telling you something. That the bottom of this bear market—not trading advice, I blah blah blah blah blah—I do think that if we're right, we're entering a phase where even the neocons in Washington have to admit that outsourcing the industrial base to China has led to a diminished military dominance over the rest of the world. This was just proven to all but the most partisan of observers in the Middle East. And the first step is to admit you have a problem. The second step is to begin fixing it. And to fix it, you can't have the US dollar where it is. You can't be reliant on China. All the things that were in place that allowed China to grind away with our help and encouragement at the sort of Western military-industrial complex needs to be undone. Which is why I think this war in Iraq was so foolish to begin with. The proper strategy was what Trump started with, which is: concentrate on the Western Hemisphere, get control of the energy assets, become a global energy superpower, bring in the tariffs, you know, undo the mistakes of the Biden administration. Iran compounded all of those mistakes wildly. And so with the time that Trump has left in office, assuming the midterms are a complete catastrophe, get back on that original track. And so in a multipolar world, what this multipolarity means, it means the US dollar is far weaker than it is. It means there's a place for gold in a settlement of imbalances of international trade. It means, you know, gold for oil is back on a sort of gold for Treasuries. And in that world, Bitcoin, you know, got less Michael Saylor, maybe he got saved by the bell here.
James, I'm curious your thoughts on that. But I also want to add there too, is there anything in particular that you're seeing or interpreting from the bond market? So just looking at the ten-year Treasury, and it seems like we did get a basically a drop in yields following the Thursday announcement and the Sunday announcement as well, too, but it's kind of trickling back up like I would have anticipated. Yields maybe to come back more, but perhaps I'm thinking in the wrong direction.
Yeah. No. Look, like I said, the war is huge. And the impact from energy prices, massive. But you have this meeting this week that the Fed is meeting Tuesday, Wednesday. We're going to hear from the new Fed chair. And so the bond market is a little bit uneasy, like, where is he going to come out? Is he going to be hawkish, like a lot of people have expected him to be because of his past sentiment? Is he going to just cave to Trump's demands and be dovish right out of the gates, which some people believe? I don't believe that's true. And so the bond market is kind of on the fence here, in my opinion, trying to figure out exactly where he's going to start. Now, why does that matter? It matters because of exactly what Doom just said, which is all roads lead to some sort of yield curve control, more printing of dollars. There's just math. The math is the—you can't change it. You can't change the math unless we wake up and somehow balance the budget, get to surplus without impacting Social Security and other services detrimentally, which, good luck with that miracle. You are in a world where there's going to be expansion of the money supply in the United States; there's just no way around it. And so what are the implications of the Fed's actions? Well, you could see today, like I said before, the Fed funds futures are pricing in a 93% probability of a cut—a full cut by January, 80% probability. Counter hike. I'm sorry, hike. I just have "cut" in my head. They've got a hike priced in there for one full hike priced in there for January, and 80% probability of a hike by December. So if he comes out dovish, here's the issue. He comes out dovish. And you hear these politicians say—this is really important for the listeners, this is critical to understand—when you hear politicians and you hear Trump come out and say, "We need to lower rates, we need to lower rates, it's got to help the consumer, it's got to help the consumer." Lower rates on the Fed funds is not going to immediately help the consumer. Let's just be clear about this. If you've got some cash sitting in a money market account, you're going to receive less interest on that cash the moment they lose, they lower rates. It's not going to help. The second thing is, if they lower rates into a strong economy, and the investing base—the bond investors and equity investors—they interpret that as inflationary. The ten-year yield will go up. And the ten-year yield is what every single consumer product is. That is based on debt. It is based on that debt in credit card loans, car loans, auto loans, mortgage securities, mortgage loans, HELOCs, personal lines of credit. Everything is priced off of that ten-year, and it's priced around the world. So that's the benchmark Treasury of the world. And it's the benchmark Treasury of the consumer. So what you're watching is the investors are trying to figure out, are we stepping into a continued inflationary environment, even though the price of oil is coming down and you've got the yields on the ten-year coming down because of this so-called resolution? Let's pretend that it is really done. Then the question is, okay, are we still in a world where inflation is going to continue to heat up? You've seen the graph of the 70s inflation up against the current inflationary environment from 2020 until now. And they're moving lockstep, not the same amount of yield, but the same gravity of it. You can see exactly where that has been. And that's what's in investors' minds. They are worried that are we getting into another 80s-style re-inflationary environment where you're going to need yields higher on the long end of the curve in order to be compensated for that risk, for the duration risk? And you'll get an actual real yield on your investment that will outpace inflation, which gets all the way back to the original point that Doom Berg said. And that means yield curve control, which ultimately means printing more money and more inflation. And so that means that the U.S. government, the Treasury, will refuse to pay a real yield on debt. Why would they do that? They would do that because it debases the dollar. It brings down the value of it in the future, which means that they can pay down that debt, all the debt that's rolling over every single year. It's about $12 trillion now to $13 trillion. When you include all interest, that's going to come due in the next year that they've got to roll back over. And so they can't go out on the curve on that. So they're going to continue to push down that yield curve so they can trim out some debt at some point. But at this point, they're going to be—ultimately they'll be buying that debt to keep those yields down. And to continue this debasement and allow the inflation to run hot. That's just what I see down the future. And in that future and in that world, gold and Bitcoin will rip. They will go much higher than they are today.
So let me connect two things James just said because I think it's important. Yes. The ten-year is, in fact, the global benchmark for a lot of very important things, but also because of an inability to auction sufficient quantities of long-term debt to satisfy the ever-growing budget deficit. You're seeing—started with Yellen and continued with Passant, despite Passant's criticism of Yellen for doing it prior to ascending into the chair—that the US government is shortening the duration of the debt outstanding by issuing short-term paper. And when the Fed quote cuts rates or increases rates, the Fed is increasing or cutting rates on the short end of that curve. And that is now becoming a larger and larger direct bill to Congress in the form of increased interest charges. As this—yeah, there you go. As this paper is being shortened and shortened in duration. And so that's where we're skipping a step where the Fed tries to pretend like it can hike rates. And then, you know, next thing you know, you have to do yield curve control because you just have too much debt rolling over. Now, this is where space comes in. Are we ready?
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All right. Let's get back into it. I'm so curious. Go for it. Just to let people know what we showed here is this is the amount—these are the treasuries that are they're maturing this year, Wow, and next year. And so you could see just how much Yellen and the Senate have been playing basically playing chicken with the Fed saying, "We're not going to turn out the debt. We're going to just keep issuing T-bills, issuing T-bills to manage that deficit." So, but yeah, let's go on to a space. Let me give you a, like, a wild again. It's a type of lateral thinking that we do, and we're not going to write about it, but I'll share it with you guys on the podcast: Ponzi as financial suppression. So what do I mean by that? If I was facing a wall of short-term paper that needed to be rolled over, I'd be interested in juicing tax receipts. And so let's just imagine we invent a company and tell the world is worth 2 trillion. I'm speaking, in extremes to make the point, sort of a classic lateral thinking tactic like, "Let's just go to infinity." So we're just going to tell everybody this company's worth 2 trillion, and there's a whole bunch of well-heeled VC investors in it, special purpose vehicles in it, and they're all in it at vanishingly small tax bases. So that which was marked at 100 billion a year ago, 200 billion a year ago, we're just going to say it's worth 2 trillion now, as the IPO rolls out and the insiders start selling well, every transition of a share from an insider to a 401 K or a retail investor or a global investor creates a taxable event. Capital gain. Let's just say for round numbers that the increase in tax receipts from this IPO, this year will be 300 billion. It's not that crazy. A trillion rolls over. You have—I mean, if you're sitting on $50 million a space stock and you invested at a million many years ago, what are you doing? You're selling going to buy me some treasuries, taxes along the way. And so, okay, what IPO is 15% of the bogey? Now we have OpenAI coming. We haven't Tropic coming. So if you just create paper gains and force retirees and convince retailers to buy it at ridiculously high prices, all the people doing the selling are going to be sharing that with Uncle Sam.
Yeah. Sort of our moment this weekend as we gave this a deep think, which is maybe it's not as bad. So when we were talking earlier, you know, "there's no way around it." Well, there is a way around. It was just a trick, people, that something's worth 10 trillion have 3 trillion of it come in the form of receivables. And we wipe out some of that. That and also stablecoin issuance and all the other things that we're seeing as sort of a soft form of financial suppression. There's the this part of the story where you just go and take it from people's 41K accounts, you know. That's one way, but the other way is you indirectly take it by dropping bags on them to to speak bluntly. And, it's probably a little tinfoil, a little out there. But if, if they if, if space immediately is included in the end, you know, the index 100, Yeah, and there there's plenty of shares that that would have to be bought there. I don't know exactly what the exact calculation or if you've done it. I think, it's, it's it's a lot of shares, but you—because, like, with every unlock, you're creating new taxable events for people dumping like it's up. And then and then it gets. But you're stuffing it back into four one K's and IRAs through the ETFs that follow the Nasdaq 100 or the S&P. Eventually, when they do get a profit. Forget space. Let's just take that as a hypothetical and broaden it. If I wanted to indulge in financial suppression, I would want to do it in a way that made it seem like you were selling dreams. This is basically a lottery of, this is essentially a lottery taken to an extreme level. Right. And so there is a path where you make a bunch of people rich, you close the deficit and the, the, you know, what is spread over a much wider, unsuspecting audience, which is a classic definition of financial suppression. So there's there's things going on, you know, that that are hard to explain. How could like, for example, like SpaceX, like they SpaceX makes up 25 bucks. What's that 300 trillion in market cap in a day? Just goes to show you how wild the stock market is, right? Like that that a you know, the company that does a couple of Deca billion dollars in revenue is swinging in value of 300 billion based on, you know, what everyone agrees are unrealistic sci fi type, you know, musings of a relatively odd man. And so what's going on? There's a deeper meaning, you know. That's our long shot. You. Sorry. That was do what I said jump in there because that was dope. But that was, that was part of this whole thing that was driving me a little bit crazy with the initial launch. Like, I'm not saying that Elon's not great and we're not getting cool stuff out of this. And, man, the comments. If you start to question it a little bit, they were really coming at me pretty hard for not understanding, but I was looking at space. And in terms of from what I could find, that the Starlink is actually profitable and bringing in about 11 plus billion per year. But the SpaceX side of it and the AI side of it are both losing money. And I think early on like 18 point something billion there in total. So I'm like, it's great. But going back to even the initial question that we kicked off the conversation with it seems like it feels very—this is terrible—it feels very ICO. It feels very like NFTs in a way that like, we had this grand vision for where this is going, and we're basing the valuation on that, but it's it's pure hype and they're like, "There actually isn't the way." Just say the product's not to market yet. In my in our mental model that none of that matters. All that matters is people have to believe it. And so like, you know, save all the comments. Not that anyone's going to get this deep into the podcast that they're looking to rag on you in the comments. But like, all you need is, is literally enough people to believe, right? Because, you know, the point of the exercise, the purpose of a system is what it does is it creates an enormous amount of tax receipts with very little friction. Who's complaining? Right. And that's a good point. I mean, if even if you get to. Goldman has almost a half $1 trillion, estimated revenue by 2030, I think. And, you know, I mean, there's 25 times growth between now and then or whatever it is. And, you know, I mean, so, if a if, let's just pretend that that they hit on all cylinders, they and they and they hit that they you still need to believe. Think it's like eight times revenue for it to, for you get a double from here. You still need that. So you've got this is price of utter perfection. Right. And then now that you when you say that though doom burg it, you know, brings up the thought again. Now you have another little thought process and, and, you, you look at Poly Market and Calcify and you think about, well, there's so much money in betting now, people spend they spend more money on betting than they have in on music, movies and books Whoa. Which is just insane. And you think about that. But every single time one of those bets is settled, that's a taxable event. And you have to put your you have to put your ID on there. You have to be, you know, there's a it's a KYC on those, on those, apps. I know because I got on to Poly Market and I can't even, I can't even not that I bet in the, in the poly market market I can I get enough going on. to see how they work, I know that you can't bet here in Nevada in on sports or politics because they're that you're you're blocked out from the casino. Whatever. How are they politics that, so but you have a settlement on every single one of these trades. If you bought the Knicks and you won, that's settled. That's a taxable event. And so it's not like these where you buy space, you sit on it for five years. Yeah. You've got a taxable gain, but there's no way to sit on a taxable event there a non you there's no way to sit on a taxable event unless you've got a very long contract that you're betting in. So it's it's pretty. you know. No long term parlays. It's right. There's no long term parlays. This is now, now you're now you're starting to think like doom for James. God help me. Yeah. You don't want to raise taxes on people, you just you do things like this, you make, you know, nihilism is a great way to, to have people part with, with their money. So in that world, you know, I want to own things like Bitcoin and gold. Yeah it's financial repression. And it either way you even if you you do wear the tinfoil hat and you believe that which it's not really that far of a putt, but let's just say that you believe that there are ways that that we're creating large taxable gains, that that really what do what do these what do they do. Well, they they end up exacerbating the k-shaped economy. They end up exacerbating that separation of wealth. It's just it's just what it is. And so all paths again, to lead to some sort of debasement and printing and, or that financial repression and, and exacerbation of separation of wealth. So.
I want to emphasize because this is actually sometimes why we're often or sometimes misunderstood when we use the word mental model. And we exercise in lateral thinking. The most important skill of lateral thinking is not constraining yourself as to whether or not the axiom is correct or not, just whether it works so axiom is that Ponzi has suppression not. And I get I'm not calling space. I'm using that generally create something, give it far more value than it's worth, and then have people speculate on it and collect the taxes. That's what we mean by that, by that label. It doesn't actually have to be true as long as you continue to predict. So in that mental model where the were all bets are off, you can gamble, you can do things, you can speculate, you can make exaggerated claims as, as a CEO about what you're going to do. You're not going to face the consequences. The SEC is going to be defanged all those things are consistent with the need to generate nihilistic type capital gains to tax. And so it whether or not we're right is irrelevant. It is it is is the model currently operative like and in our view we'll see how OpenAI does. We'll see how Tropic does one counter to that for example, was the S&P not including SpaceX in shortly after the IPO that was that ran counter to our mental model. And so, okay, that's that's a cut against it. If we get a few more cut against it, we just discard it. And so thinking in that way is what leads us to make the occasional long shot prediction, but it also means we're not afraid to be wrong and we just move on when we are.
I want to just double tap on that for a second, because that really hit me, this idea of lottery and like how profitable lotteries are for state tax revenue. I just looked it up quickly here. The US state lottery is bringing 30 billion in tax revenue. If you need more tax receipts coming in, it's a very nefarious and you're right, kind of nihilistic. And I don't know there's something very dark about we're going to be able to gamble and speculate their money back into the US coffers, or to pull it in in tax receipts.
James, I want to quickly touch on and I do want to get to the energy and your outlook on energy markets as well. But I want to quickly touch on the K-shaped economy. Since the last time we spoke, is it still kind of going ahead full steam, or are we seeing any further breakdown on either of those k-shaped legs?
No, I think it's going full steam that, what you're seeing is the continued, they're the, the lower demographic is taking on more and more credit card debt in particular. And they are now defaulting at a rate that's, that's rivaling the, the, 2008 great financial crisis. Well. the lower demographic is struggling and I, I, I know it because I can see it from some friends and friends of friends who are just they're, they're they're just wage earners just trying to get by. And it's been a difficult period for them to keep up with the inflation. Why is that? It's not just that their wages, the wages supposedly are keeping up, according to economists, but they lag so severely. Number one and number two, they're they're keeping up with maybe CPI measures that are faulty. And in real life, you can't buy insurance at the rate that we talked about this last time, car insurance. Health insurance. Yeah. Any any house insurance. You can't buy that insurance at a rate that a quarter. According to CPI. So, it's just those are big things. Daycare costs. So you can have a dual income family the, the. So anyways but we're seeing that the the New York Fed just put out their their latest quarter. Remember this is severely lagging to these these numbers are so lagging the you can see that the economy the the the consumer is not doing great on average. If you just slice it down the middle, on the face of it, you go to restaurants, therefore you go to you, you go to try to buy a Knicks ticket. They were what how much were they in the $10,000 for a ticket to go to a basketball game, like something insane. So, but by and large, when you go to these restaurants, you're not seeing young kids and they're you're not seeing kids with families, you know, young families. And they're you're seeing boomers, you're seeing older people. You're seeing people who have assets they're drawing from, who have made out in this economy. I'm not blaming these people that benefited from the system that they bought into Gen X, I think Doom burger, Gen X two, we were sold this system that says, "You go find a company, work for the company, work for them for 20, 30, 40, 50 years. You can have a, a pension, a for one K, you'll leave and you'll retire. You'll have a great life at 65 and on you'll be taken care of." Well, that completely collapsed in our generation. And unfortunately, some of us made out okay on the way along. But millennials got utterly destroyed in this whole machine. They got ground in and said, "You you go to college, you take out the debt, you get a job, you stay with the company, you make sure you're loyal and they'll take care of you." And lo and behold, pensions got scrapped for one K's. Are there some of them? A lot of them are off the table. And so you're standing there and you have to switch jobs 4 or 5, six times just to keep up. And now your wife is working. You've got daycare. So the, the that's a long way of saying that. No, I don't I think that the, the lower demographic is struggling more today than the last time we talked.
Let's take space. I saw numbers, who knows what the numbers are? 10,000 paper millionaires. Let's pick the number right early employees. Look, I saw in the private world offerings for SpaceX maybe a half a dozen times in my career. In our private life, you know, "Hey, I'm a friend of Elon, and I've got this speed, and I'm going to do a two and 20, and, you know, I'm going to get you into space at, you know, 30 bucks a share." Now it's, you know, 190 today or whatever. There's a whole pyramid, pun intended of, of very well, well, by definition, to have participated in space prior to the IPO and to have not been an employee required you to be a, sophisticated investor. What's the Yeah. And an accredited investor. Yeah. And have and have and have the contacts to get to. Yeah. you've created you've taken all of these and credited investors who are by definition, worth more than $1 million. And on the right side of the K that James was talking about, and now there's 10,000 of them that just collected seven figure checks, some of them Well. of them nine figure checks, and they're paying taxes on that. You know, back to the point, earlier. So that is the people getting it now, like James said, right. If you're buying it now at 2.2 trillion valuation or whatever it is today, and maybe, maybe it does get to 4 trillion, but the big huge money, the, the, you know, multiple multiple ten Xers, 30 x 40 x 100 They're made. Yeah. made. And that's not made by Joe Sixpack.
No. Sorry, I'm only laughing because it's so cynical to pretend otherwise. That's right. And that's so that just exacerbates it too. And so, but and here's and here's the, here's the report from the fed right here. You can see it that these delinquencies on student loans of course nobody's paying the student loan. They're just they're delinquent on those. And then here's your credit cards. Yeah. Delinquency on credit cards. Who's on credit cards? They do. You use a credit card because you want points. You pay it off every month like I do, you know, spying on me mean, that's what that's what you do. You get the points, but you pay it off. These are not being paid off. And then. have a confession. me. millionaire. billionaire. No, I'm just the points are worth nothing. Now. They just keep. And so and you can see the amount of debt that's just up and to the right here. So, it's, it's a problem, and it's not getting better. And that's an interesting, take on that though. But like you said, and that's the Cantillon effect that we talked about, is that the Cantillon effect is if you're the the he who is closest to the money spigot is the one who makes out the best. And how do you get close to the money spigot? Well, you can you can become a congressman. You can or senator, you can be close to fed officials. You could be you could know people and be very close to banks. Who are those people? Hedge funds, investors, large investors, high net worth investors and who they how do how are they close to the money spigot? Well, it's kind of like what Denmark just said is that you get the call in space on day one that, "Hey, we're going to raise a, a, a first round, a seed round a friends and family round, and you're going to be included on this." And lo and behold, a year, two years, three years, four years later, your million dollars becomes 500 million. It's like, wow, well done. So, but who can do that? You have to be an accredited investor and you have to know people. You have to be close to those, those sources. And that's, that's that's the essence of a Cantillon effect right there.
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Do do you think the same thing is going to play out with anthropic and, OpenAI, is that like, if you just like 50% plus one, which way those, those IPO's go? Is that where you're leaning?
is a weird one because they tangled with the deo w or Department of Yeah. OpenAI and Elon have this feud, so maybe Elon's. I've saw some, you know, speculation that Elon is, is beating those guys to market and then, There is. know, going to make the pull up the pull up the moat and make life difficult for them. But I mean, broadly speaking, as, as this sort of, repression mental model that I described earlier, you'd need more than just space. SpaceX is just the the exception that proves the rule No. Fair enough. sense for the Department of War and for the, you know, the DoD, the Department of War to declare, investments in these companies as a matter of national security.
It would make sense. So, see that? Yeah. It's, it's, I know it's, it's if we always cover so much territory here. We pack a lot into it. And, you know, just changing gears and making sure we get that one other little aspect in here. Do I want to get your outlook in terms of oil? I mean, like the last time we talked, we really hinted at, we discussed how like everybody would it called for higher WTI prices. But it never, it never happened. Now we're on the other side. We're seeing it come down. It, I saw it drop below 80 for a second. Their instincts would be that we would continue to see oil kind of fall. But I'm very cautious to make any sort of calls on energy right now. So I'm curious what you're thinking is.
Oil is going way lower from here, assuming that, you know, the war doesn't break out again in the, in the assets and Middle East aren't destroyed. And the really profound thing, bunch of profound stuff. So we're publishing this piece tomorrow. I'm not sure when this podcast will. Tomorrow. All right, so, you know, as this comes out, we'll have already published a piece in the morning called, Flex Capacitor. And, China just flexed somewhere between 3 and 4 million barrels per day of, oil tolerance in a way that the market had no idea existed. What am I, what do I mean by that? It has so overbuilt coal to chemicals, LNG import terminals, refining the petrochemical space that I could, it could just decide it was going to stop buying 3 million barrels a day of oil for 100 days and not flinch. And if China has indeed imparted upon the crude oil market 3 million barrels a day of fungibility, the arbitrage in the oil space is going to close much lower. What do I mean by that? Absent crude oil, if you just look across the rest of the hydrocarbon complex, natural gas is trading for $18 a barrel oil equivalent in the US in effectively infinite supply. Natural gas liquids are trading for $30, $40 a barrel. There's an awful lot of, oil and gas in the world. We know where to find it. You have Guyana that, gamut. Venezuela. We're doing a big zoom. Zoom on Vaca Muerta, Argentina here, probably next week. If you can't get to 120, 550, 200 with this FactSet, what do you need to get there? And if everyone knows it's never going there, why do you need to own it?
It's so, you know, there's this whole argument online, which is the opening story to our piece. And kudos to our friend, Jack Johnson over at Market Vibes. They argument was, you know, price as truth versus price manipulated. Those were the two camps. And boy, we, we, we, we, we were wildly surprised at the relative hostility of oil after the war broke out. But we took the pause and said, the market is telling us something different. We're wrong. Let's go find out why. And price is truth. And we do believe price was truth and price has been vindicated. So the big story that came out over the weekend was a Reuters report, a bombshell underreported on Friday that the real bogey wasn't 15 million barrels a day, but the closure of the street. It was more like 5 or 6. And if it was more like 5 or 6, because the oil market knows how to cheat, and China turned its nose at four and didn't flinch, all of a sudden, the fact that the strategic petroleum reserves and the other IEA actions, closed the loop and oil stayed at 90 bucks a barrel. Makes a lot of sense in hindsight. And all the people trapped in oil now think it was going to 150 because of all of this hyperbole on Twitter that we've all seen. Boy, I mean, I've, I've been around when oil traded -30. Yeah. Was trading at -30, you would never have given someone who would trade over 100 again. Well, we saw that, you know, once the street opens, if this is truly peace and all this is predicated on, you know, a full blown war doesn't rekindle and, you know, those assets are destroyed. You're, you're going to see look out below, on oil and, and China has really without any one kind of noticing has done what we've been predicting would eventually get done in the economy, which is a massive wave of engine switching that closes the hydrocarbon arbitrage. And those engines need not be in cars, but they can also be in factories. And, you know, if China can swing 3 to 4 million barrels a day, they just done it. They just proved it. And boy, that's pretty consequential. So that's what's coming out tomorrow. I'm sure we're going to make a lot of friends in the, just price down crowd. But we have to call it as we see it. So.
Nope. Fair enough. James, I want to get your thoughts just on energy markets there. And then also before we reconvene next time, what should people be on the look at? What should people be paying attention to in the weeks going forward?
Yeah, that's a good question. I mean, look, I can't, dispute what, what, Doom Berg's take is on, on oil. He's much, much deeper in the analysis and geopolitical analysis on that, so, I can't really add anything intelligent to what he said, so, but, yeah. What are we looking at? I mean, really the, like we said, the, the most important thing this week, right? On the, on the docket is the, is the next Fed meeting and Kevin Morse's, his temperature, which is the whole world is the whole world is looking at this and they're trying to figure out which direction is he going to go. And, so that is a really big, important moment in time. Also the Bank of Japan, they meet on the 15th and 16th, is that right? Duisburg. And, so are we going to see where the, where they're willing to to allow these rates to go? And where they're allowing the yen to go? That's that's another important data point. It's important because Japan for so long has been the, the spigot of, of basically free money, yeah, around the world. And so that, that regime has changed and it's changing kind of rapidly. So it's been interesting to watch. We also have, I think we have a 20 year auction, which I don't really, I don't really care about the 20 year that much. It's kind of non-inconsequential in total. But it is, it is a momentary stress test to see where things are shaking out. The, I don't, I think they should honestly just retire the 20 year. It's, it's a, it's a nonsense bond. But, it is for this moment it'll be important to, to kind of see so and, and finally just where is space. Where, where does that end up trading here in the near term? And just how, how wildly optimistic are people going to get and, and unrealistic maybe because as we're talking here, it's not trading at a $185. Is numbing to say the least. It's, it. I look at no investment advice coming from me on this one. Like the Enberg said, basically, the market can stay irrational a lot longer than you can stay. Liquid is that is the saying, and this is one of those. I wouldn't short it. I'd be very careful with it. So but it's trading just a $2.4 trillion market cap. It is now the, sixth largest company in the world. So pretty wild. of capital gains tax just waiting to be harvested there. James. There's a ton. Doom Berg, anything you want to add for things that we should be watching in between the next podcast?
I would keep an eye on Russia, Ukraine. Now that, You're. that Iran is, is on the downslope of, interest and risk. We shall see. Even Trump said, you know, now that Iran is over, I'm going to focus my attention again on, on the war in Ukraine. I'm not sure what he meant by that, but, there are two ways to interpret that statement. You know, there's this, even the mention of Japan earlier, you know, one of the things that we're kind of tinkering with for a future doomsday is, is sort of World War Three is the continuation of World War Two. If you just look at what's going on now. Right? I mean, Germany rearming, Japan rearming, Russia and China getting together, saying, wait a minute, you know, so not uncork that can of worms this late into the podcast, but, that might keep an eye on, on Ukraine in addition to the things that James mentioned, which I think are, absolutely on point as well and done. Great to be back with you guys again. It's always fun. It's been a blast. We'll uncork it next time. Dumper. Where can everybody go to follow you and your work?
Yeah, you can, go to Tim Bergkamp. We have our our subscription there, our pro tier there, our classics read aloud sister publication and also, if you have any hate mail for this, you just send it straight to Nathan. He'll for too long. And we'll just send it to the auto delete folder and, but yeah, that's where you find everything Jim Broadcom. James, Nathan, great to be with you guys. And Some. Bitcoin. May my prediction that the bear market is over come true for you guys. I love it. And, James, where can everybody go to follow your work?
Yeah, so you can likewise. Just like Doom Berg. I'm also on Substack, and you can find me at James Lipscomb, and we have our premium tiers there, too. I have a round table I just launched. So for people who want to get a quarterly call with me that, in a small group setting, that that's something we're doing now and then, of course, if you are interested in Bitcoin investing and you are an accredited investor, you can just go to Bitcoin Opportunity Dot fund. And we're happy to jump on the phone with you and try to see if it's something that would be appropriate for you to be an unlimited partner there. So but I'm always on Twitter. Doom Berg, you know, you, you got off, but, there's it's, there's a lot of noise on there. So. it for inbound open source intelligence. Smart. Yeah. It's, it's, it's a lot of noise. And I'm sure you're, you're sifting through it like I am daily. It's just there's so much noise, but. chapter in the book we're writing on how to open your aperture for information and then categorize. Brilliant. Excellent. So yeah. So it's great to be with both of you guys and, look forward to the next time. These are these are great conversations. We kind of cover a lot of ground that that's unique that that we don't touch on in other podcasts. On. So it's good. You know the world is heading down a dark path. Online censorship, central bank, digital currencies, a complete loss of privacy. And it's only accelerating. Most people are falling behind with the latest technology, and those that aren't are sacrificing their data, their control and their dignity just to keep up. That doesn't have to be you. Here. You'll have everything you need to break free. Over the past decade, I've helped 20 million people take control of their money, their data, and their digital lives. Now I'm bringing everything I've learned to one place. Sovereign sessions is your home to learn, master and live. Freedom tech. Bitcoin. AI, private communications, self-hosted tools. Everything. Each week, I'll walk you through step by step with the most critical tools that put you back in charge. Don't ask permission. Take control. Welcome to the Sovereign Sessions.