This episode explores the ripple effects of Trump's proposed economic policies—tariffs, tax cuts, and spending reductions—on crypto, macro markets, and the potential for a stagflationary environment.
Episode Introduction
- This episode explores the ripple effects of Trump's proposed economic policies—tariffs, tax cuts, and spending reductions—on crypto, macro markets, and the potential for a stagflationary environment.
Structured and Narrative Organization
Macroeconomic Uncertainty and Trump's Policies
- The discussion begins with the panel analyzing a tweet from Bloomberg columnist Noah Smith, highlighting concerns about Trump's proposed trillions in tax cuts, soaring interest costs, and potential economic damage from tariffs. James Safer, the host, sets the stage by emphasizing the current "hot topic" of potential stagflation.
- The panel dives into the disconnect between perceived and actual inflation. Romal Alawalia points out that while perceived inflation is high due to specific items like eggs and mortgage rates, actual inflation in goods and services is decreasing.
- "I think the perceived inflation is higher because you have products like eggs which have gone higher and people anchor to that..." - Romal Alawalia
Tariffs, Repatriation, and Global Stimulus
- Noelle Acheson argues that the uncertainty surrounding tariffs, rather than the tariffs themselves, is causing market paralysis.
- Joe McCann builds on this, highlighting the "repatriation trade"—foreign investment leaving the U.S. due to tariff uncertainty, potentially leading to stimulus measures in countries like Germany and China.
- Joe mentions the uncertainty index is at the highest level it has been in years.
- The panel discusses how potential Chinese stimulus, coupled with a declining dollar, could create a bid for commodities, despite Middle East tensions.
Market Correction and Mechanistic Selling
- The conversation shifts to the recent stock market correction, with James noting significant drops in small-cap and large-cap stocks.
- Joe explains the "mechanistic selling" driven by multi-platform hedge funds and their risk models, leading to forced liquidations in crowded trades like the "Mag 7" stocks.
- "...these pods have billions of dollars and there's dozens of them across all these multiplatform hedge funds...that's about $400 billion...wrapped up in that...about 10% of the market but they use leverage so that leverage is actually closer to three to four trillion notional..." - Joe McCann
- Rom emphasizes that this market correction was a momentum factor unwind, citing John Templeton's quote about bull markets dying in euphoria.
Fiscal Dominance and the Fed's Diminishing Role
- The panel debates whether Trump's administration is truly committed to reducing spending, given a proposed reconciliation bill eight times larger than the 2022 infrastructure bill.
- Noelle emphasizes the importance of liquidity, noting that 33% of outstanding debt matures this year, raising questions about refinancing.
- "The way to fix this you make America the best home for capital in the world..." - Noelle Acheson
- Noelle champions the concept of "fiscal dominance," arguing that the Fed is becoming increasingly irrelevant, and global capital flows are now the primary driver.
- The panel discusses the potential end of Quantitative Tightening (QT) and its impact on market sentiment.
Gold's Rally and Bitcoin's Divergence
- The discussion turns to gold's recent all-time high, with Noelle attributing it to global uncertainty and a shift towards physical delivery, indicating a desire for a resilience asset.
- Rom views gold's rally as "late momentum," suggesting it might be nearing a peak.
- "...it is a resilience asset and you this then brings the next question well why is Bitcoin not rallying the same well that's in a slightly different bucket because it is also a risk asset..." - Noelle Acheson
Stablecoin Bill and Potential Treasury Demand
- James highlights potential progress on a stablecoin bill, suggesting it could create a new source of demand for U.S. Treasuries, similar to Tether's role.
- Joe expresses skepticism about the narrative of U.S. Treasury auctions failing to clear, arguing that rates and regulators will ensure demand.
- "...if this can be repeated there's a huge potential buyer of US treasuries and we're kind of propagating digital dollars around the world..." - Joe McCann
Elon Musk's "Magic Money Computers"
- The panel discusses a clip of Elon Musk describing "magic money computers" at various government agencies that issue payments without a direct link to bank account balances.
- Rom and Joe connect this to broader concerns about fiat currency and the potential appeal of alternative systems like Bitcoin.
- "Humans are the only species that will create stories and myths about the meanings of things like money and borders..." - Deepseek, quoted by Rom.
Bitcoin, Altcoins, and the Future of Crypto Assets
- Rom suggests Bitcoin is at a long-term support level and could rally, while Joe expresses skepticism about an "alt season" due to Bitcoin's rising dominance.
- Joe speculates that institutional interest in altcoins might emerge if protocols demonstrate real revenue generation, potentially leading to ETF-like products.
- "...if there is no retail bid behind alts Bitcoin I think by definition in the crypto asset space has to benefit the most on a relative basis." - Joe McCann
Solana Futures, ETFs, and the Expanding Crypto Landscape
- Joe discusses the launch of CME Solana futures, emphasizing its signaling power to traditional finance and institutions, even if the short-term trading impact is limited.
- James provides an extensive overview of the numerous ETF filings for various cryptocurrencies, including index funds, leveraged products, and spot ETFs for altcoins.
- The panel anticipates potential approvals for index funds holding multiple cryptocurrencies by July.
- "...we are going to see index funds of the crypto space the problem is these altcoins that would go in there are going to be very small percentages..." - James Safer
Reflective and Strategic Conclusion
- The episode underscores the profound impact of policy uncertainty and fiscal dominance on crypto and macro markets. Investors should closely monitor tariff developments, stablecoin regulation, and the evolving institutional landscape for Bitcoin and altcoins to navigate this complex environment.
