This episode unpacks the market chaos following Trump's tariff announcements, as veteran traders Avi Felman and Jonah Van Bourg analyze the fallout, debate recession odds, and explore Bitcoin's surprising resilience and potential decoupling.
Market Reaction to Tariff Shock and Navigating Volatility
- The discussion kicks off acknowledging the recent market turbulence following the Digital Asset Summit gathering.
- Jonah Van Bourg reflects on the difficulty of navigating the current market environment, characterized by monumental shifts in the global economic order.
- Avi highlights that the speed and severity of the market drop post-tariff announcement likely caught most participants off guard, emphasizing the challenge of trading without a historical playbook for such events.
Dissecting the Tariff Announcement and Forced Liquidations
- Felix recounts his real-time reaction to the tariff news, initially positioning long on a Wall Street Journal headline suggesting lower-than-expected 10% flat tariffs.
- He quickly reversed course as the "almighty chart of doom" signaled a sharp downturn.
- He notes the advantage of being a nimble individual trader able to exit positions quickly, contrasting this with the slower unwinding process observed in larger funds.
- The subsequent days showed signs of widespread "degrossing" – reducing overall portfolio risk – evidenced by simultaneous declines in equities, gold, and eventually, rest-of-world equities.
Analyzing the Tariff Logic and Shifting Market Perceptions
- Avi expresses surprise and concern over the seemingly arbitrary method used to calculate some tariff rates (imports vs. exports).
- He argues this lack of clear economic logic makes the situation more dangerous and harder to resolve through negotiation.
- Avi notes the difficulty in understanding the administration's demands beyond tariffs, citing vague accusations against countries like Vietnam.
- This ambiguity, he suggests, has shifted market perception: "prior to Liberation Day I think even... the top 25% of bears were probably thinking this is a negotiation tactic and I think that that has shifted a ton now to hey maybe maybe these things are sticking around for a while."
Trading Strategies Amidst Forced Selling and Pod Shop Blow-Ups
- Jonah candidly admits he was bullish heading into the tariff announcement and emphasizes the importance of managing psychology when trades go wrong.
- He shares insights from his network suggesting significant stress and potential blow-ups within pod shops over the past weeks.
- The observation that even gold was selling off confirms forced liquidations are occurring as funds fire portfolio managers and liquidate their books.
- This forced selling, Jonah argues, is precisely why he began buying aggressively on Friday and Monday.
Strategies for Catching Falling Knives: Timing the Bottom
- The conversation shifts to the tactical challenge of buying into sharp sell-offs.
- Felix references discussions with veteran traders about "eating a few sandwiches" – enduring initial losses – to catch the bottom.
- Avi aligns more with Felix's approach of "waving it in" during implosions, acknowledging the fear associated with buying forced selling but seeing opportunity when correlations go to one.
- Jonah, scarred by past experiences, prefers to wait for signs of stabilization or a "green shoot style rally" before buying significantly.
Is This "Man-Made Calamity" Easier or Harder to Trade?
- Jonah poses a critical question: Does the fact that this crisis stems from a single individual's decisions make it easier to buy or harder due to the unpredictability of that individual?
- This uncertainty highlights a key risk factor for investors – the policy risk is highly concentrated and potentially erratic.
Pre-Existing Economic Fragility and Potential Negotiation Paths
- Felix challenges the notion that the economy was "fine and dandy" before the tariffs, arguing that signs of a growth slowdown and labor market softening were already emerging mid-December.
- He suggests this pre-existing fragility, combined with high US equity valuations, created a vulnerable setup.
Sticky Tariffs, China Focus, and the Potential for a Bear Market Rally
- Avi believes the tariffs, particularly those on China, might be "stickier" than markets anticipate.
- While seeing potential for near-term good news regarding tariffs on other countries to spark a significant "bear market rally," he remains nervous about the long-term implications of entrenched China tariffs.
Geopolitical Endgame: Aligning the West Against China?
- The discussion explores the deeper strategic objective behind the tariff chaos.
- Felix references analysis suggesting the ultimate goal is to align Western allies against China economically.
Trump's Potential Endgame and Negotiation Tactics
- Jonah elaborates on the potential endgame: a new trade paradigm resembling a WTO-minus-China.
- He questions the consensus view among financial participants that Trump's move is purely destructive, suggesting it might resonate differently with other demographics.
- This perspective suggests investors should consider the performance of negotiation tactics.
Burden Sharing: Moran's Framework for Allies
- Felix details points from CEA Chair Steven Moran's speech outlining how allies could achieve "improved burden sharing" to maintain access to the US geopolitical and financial umbrella.
Connecting Burden Sharing, Tariffs, and Treasury Demand
- Avi connects Moran's "write checks" idea to the broader strategy of isolating China.
Treasury Market Dynamics and Capital War Risks
- The recent Treasury bond sell-off is discussed.
- While Felix attributes it mainly to profit-taking and rebalancing after a panic flight-to-safety, he acknowledges the possibility of China actively selling Treasuries as part of a "capital war."
Controlled Demolition Theory and Supply Chain Risks
- Avi introduces the idea of a "controlled demolition" – forcing China to reduce its US debt holdings now.
Reflections on Missed Signals and Political Constraints
- Jonah and Avi reflect on being caught off guard, admitting they underestimated Trump's willingness to follow through on protectionist rhetoric.
The Bull Case for Bitcoin Amidst De-Globalization
- Avi pivots sharply, arguing the current environment is "pretty damn good for crypto."
- His core thesis rests on accelerating de-globalization.
Bitcoin as a Global Commodity and Trans-Shipment Hub
- Jonah builds on Avi's point, framing Bitcoin as a commodity-like asset valuable in a multipolar world.
Bitcoin and Global Liquidity: The Relative Value Trade
- Felix presents his complementary bullish case for Bitcoin, centered on global liquidity dynamics.
Bitcoin Trading Dynamics: Flows, Sellers, and Weekend Action
- Avi shifts to tactical trading insights for Bitcoin, believing sellers may be temporarily exhausted.
Altcoin Dynamics and Trading High-Beta Plays
- Avi shares his recent successful trades: buying altcoins against ETH and BTC during the Friday washout.
Altcoins as Sentiment Indicators and the Broader Crypto Outlook
- The discussion touches on the idea that the "altcoin apocalypse" might be nearing an end, with prices potentially reaching levels where further shorting is risky.
The Fed, Inflation Outlook, and the Path to Easing
- The focus returns to the macro picture influencing US liquidity.
Fed Policy: Timing the Cuts and Powell's Strategy
- Jonah questions why Powell isn't cutting rates immediately.
Final Thoughts: Volatility, Trader Mindset, and Avoiding the "Bear Hold"
- The episode concludes with reflections on navigating high volatility.
- Avi delivers a final warning: "whatever you do do not get bearholdled... this is not about betting on global collapse this is about figuring out when this particular show is going to end."
The conversation underscores how unexpected policy shifts drive cross-asset volatility, positioning Bitcoin uniquely amidst de-globalization and shifting global liquidity dynamics. Crypto AI investors should monitor geopolitical negotiations, global central bank actions, and Treasury market flows closely, as these factors increasingly influence Bitcoin's trajectory relative to traditional risk assets.
