Forward Guidance Host: My Macro Outlook & Main Portfolio Strategy

Transcript

Why is July sketchier than other months ahead? Like what's particularly got your attention there? It's been this interesting situation where we've started to see the limits of that approach. We've seen how, you know, you can't just go out and just tear up the entire world. Where does this end? Do we ever bring it back down to Earth or do we just Is this really a runaway train? [Music] Welcome back to the world. We are your hosts. I'm Andy. I'm Robbie. And this is your home to learn from the biggest guests, the brightest minds at the tip of innovation. Our goal is to help spread the collective knowledge of

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Felix, good to see you, man. Uh, thanks for joining us. Big fans of your podcast. Also had Arthur Hayes on at a similar time that we did when he was gigab bullish and everybody was not. So, it's good good to see you, man. Yeah, thanks. Happy to be here. Big uh big fan. Make sure you're unmuted in Google Meet so we can hear you. Oh, there there you guys hear me. Okay. Nice. Yeah, happy to happy to be here. big fan of you guys' work and uh yeah, excited to chat. Yeah, man. So, Robbie is our local macro analyst. Guy listens to the All-In podcast. He listens to Forward Guidance. He listens to all of Bessin's speech. So, I'm going to sit back a little bit on on this one and uh see what Rob's got for you, Felix. Sounds

good to me. I don't have anything too specific at this point. I I do tend to tend to think of macro as the dog wagging the tail of crypto because it's just even if if you're looking at the crypto asset class and maybe it's you know a few trillion that's that's pocket change in in the grand scheme of of things and so the bigger liquidity picture is is uh is is what leads the the charge and kind of dictates the show. So when when you think about this is that really the case? Can can crypto do well despite, you know, global liquidity coming out of the system? And then maybe we'll get into, you know, whether or not you think liquidity is going to be added or taken out of the system.

Sure. Yeah. I'll start off by saying that I think there's there's too much of a focus on within the realm of global liquidity in terms of what the Fed and central bank policy makers are doing. I have completely shifted a lot of my macro focus towards the fiscal side of things because that has actually been the driver and that is why you've seen Bitcoin do so well since 2022 even though we've seen the fastest hiking cycle in history. That is very counterintuitive and that's also at a time where we've seen the dollar absolutely surge as well. I think that caught off guard a lot of different people because they were too focused on oh the Federal Reserve balance sheet is coming down. they're doing QT, they're

hiking rates. There's no way we can have a risk-on environment for for crypto and Bitcoin. And the last few years have completely proven that case that we can. And that's because we're living in this world of, you know, you've heard it called fiscal dominance. And I I don't know if I'd go as far as that, but I would say that we are, you know, heavily at the whim of the fiscal impulse now. And that's that's one of the biggest drivers that drove my my bull thesis for Bitcoin back in at the lows of April was looking at the fiscal dynamics of things. So, I totally think that we have a lot more upside from here based on those fiscal impulses. And we can get into that if you'd like, but overall I would say is that, you know, there's it doesn't quite matter as much what the

Federal Reserve balance sheet is doing or or what the Fed is doing. That's you can quantify it. And it's it's it's been a bit of a sideshow compared to what's really driving things, which is just these huge fiscal deficits that have been running in the US since CO. They they've had the largest fiscal deficit. Um, and now we're in the point now, and this is something I talked about in that original Bitcoin bull thesis, is that now we're having every other country in the world start to join the party as well, and they're going to increase their deficits. Yeah, we we had uh Arthur on the show and and um we also brought up with him this question where I we had seen Scott Besson say something that you know the countries that are in the deficit uh versus the countries in the surplus are

actually in the stronger position when it comes to trade talks because the consumer buying power exists here and we can always you know uh bring the demand to another supplier and so you know when you're looking at the deficits who do you think is in the stronger position when it comes to some of these trade negot negotiations. Do you think the it's really just a song and dance to try to, you know, continue the narrative or do you think there's a deal that's going to be done here? So, I think it's been an interesting sequence of events where, you know, we're talking I was talking there about the uh the fiscal deficit. Now, we're talking about trade deficits, which are, you know, you know, you hear this talk about twin deficits. That's what we're referring to here. So speaking about the trade deficit side of things, we've seen

this interesting sequence of events where when the Trump admin came in, there's a lot of focus on the current account deficit, which is goods coming into the US and then dollars going out and that mechanically leads to a capital account surplus on the other side of things because those dollars are going to the rest of the world and then you know for the goods that are coming into the US. So that is the mechanics behind why you've seen such a huge current account deficit. And now we're in this situation where they want to find a way to rebalance the terms of trade or the balance of payments. And so the original approach, Liberation Day, was all about tackling the current account deficit side of things. let's put on a bunch of tariffs so that we can narrow down the current account trade deficit and

therefore also narrow the capital account surplus and as well as the the current account surpluses of those other exporting countries like like China etc. So it's been this interesting situation where we've started to see the limits of that approach. We've seen how you know you can't just go out and just tariff the entire world. Um you know there there's there's diminishing returns to that approach. So we've seen them, you know, originally liberation day saw 30% effective tariff rate. We're we're now with this walking back at around I think 15ish% assuming that the uh the litigation in the courts remain and and these act those tariffs actually stay.

We're around 50%. And I think that's a level that global trade can work around and digest and alter to, but I think there's limits to that approach now. So I think what's really important, this is something actually Arthur Hayes wrote a piece about recently. I don't know if he talked about it on the show, but he he's been on top of this, which is, well, what if we focus on the capital account side of things? What if instead of just trying to tariff goods and squeeze the consumer, we just lower the capital account surplus side of things? And that looks very different. And it and it squeezes very different people. It does not squeeze the consumer. It squeezes people with a lot of assets, especially foreign asset holders of US assets. So, we've started to see hints of this start to percolate in in in first off the

fiscal bill that's going through right now. There's some hints in there where they're talking about taxing remittances from the US to the rest of the world. There's a lot of these different crossurrens and I think this is a much more tenable approach to what they actually want to achieve, which is basically to they they want to narrow that that deficit one way or another. They can go about it with the tariff side of things. We're seeing the limits of that now and that's pretty much played out. So, I think we're going to see this this pivot towards the capital, you know, I'm talking about capital controls here. Really, I'm saying that let's put up, you know, headwinds to make it so that people don't want to own US assets. And this to me is is the big next driver of global capital flows. And I think that's where Bitcoin sits at a

really inter interesting intersection of it all. Right. So the the thesis is that people foreigners particularly aren't are forced out or taxed heavily on US equities, land, bonds and therefore they find an alternative asset class to store wealth. Yeah, exactly. And so that can look like a lot of different things. Obviously one of the huge benefactors has been gold which has been on an absolute tear uh for good reason today as well. Yeah, exactly. So, you know, that's an asset class that is getting the bid from central banks because central banks have foreign exchange reserves. They they they hold them strategically. They're not at the point yet where they want to own Bitcoin. I think that's a discussion for a few years from now. But we're seeing that in

gold. We're seeing that in the euro, which is probably the the closest currency competitor to the US, even though it's still very far away in terms of its ability to be a reserve currency, but still you're seeing that diversification. And my argument is that perhaps a level down from central banks, you know, talking about pension funds, insurance uh firms, and the like, I could see them start to diversify a little bit more into Bitcoin, too, because let's let's frame this around what Bitcoin has been for the last 5 years. It's it's basically just been a a risk on high beta correlation to US equities, right? So, within that dynamic, it it's been hard to really sell it as a as a as a unique asset. I think it's just been, you know, just a high beta play. But now when you when

you incorporate what I just talked about, which is that we're going to put capital controls on the NASDAQ on the MAG 7, I think that's still coming. It's a multi-year trend, right? Like we can have short-term bounces like we're seeing right now for sure. But in terms of of where the flows are headed for the next 5 years, I think the the case for Bitcoin starts to really emerge right now because you're seeing, you know, you don't really see capital controls on Bitcoin, right? it it's more so going to be the the benefactor of those diversification tailwinds. So I think this is all coming together in a lot of different cross periods right now. Yeah.

So Felix in the very beginning when when you were talking more about the actual um you know fiscal uh deficit and dominance side of things and then now into the trade thing one thing that you said that stuck out that I think is uh compelling to people is that the actual liquidity flows you think matter less per se than some of these more intricate kind of fiscal details. But one of the charts that gets the people the most bullish on crypto Twitter is just mapping the M2 and putting the Bitcoin chart over it and being like, "Look guys, there's an 87 day lag. It happens every time." So, so are you saying that this is like this is one of those correlation does not equal causation type of things or or saying that uh that the reason for Bitcoin's potential

future success um you know is is more entrenched in these uh you know let's just call them more complex reasonings than than smooth brain can just go like look chart go up number go up type of thing. Yeah totally. Um, so yeah, I would say it's a it's a spurious correlation. And when you talk about sperious correlations, what it means from like a statistically trained perspective is that there's a third variable driving it that is unknown in the statistical analysis. So my argument and I wrote this in that that piece again as well is that Bitcoin is a global liquidity asset. And so the reason it's been driven so heavily by the US side of things over the past few years is if you just look at fiscal

deficits as a percentage of GDP, the US is at 7% of GDP. This is typically what the fis what the US government runs during a recession. So we're running a recessionary fiscal deficit during a positive growth regime. So no wonder it's been the key driver. But now you look at the rest of every other country. You know, I'm I'm in Canada. our fiscal deficit of percentage of GDP is only 2%. And people are shocked to hear that because they think oh yeah up here in you know the socialist communist regime of Canada they must have a huge fiscal deficit but no it's been 2% versus US is seven and so my my bullish dynamic is that every other country because of the impact of what Trump is doing in terms of tariffs and you know talking about

every other country trying to increase their percentage of spending uh for NATO and the military etc. every other country is going to come and meet the US at those higher levels. So, how this incorporates into the M2 dynamic, first off, my main criticism with the M2 analysis is that it yeah, it's it's it's quite noisy. I mean, there's plenty of times in 2022 where liquidity quote unquote was surging higher and Bitcoin wasn't. It just so happens that we're in this regime right now. And so my argument is that the key driver is these these powerful fiscal impulses and that does trickle into M2 because when you have a high fiscal deficit that's creating, you know, higher interest payments. Higher interest payments leads

to income for people that own T bills that leads into higher M2 growth. So my main criticisms are just a lack of specificity in terms of what are the actual drivers. So yes, for the most part, I feel like it's it's somewhat useful as a heruristic to just have a look at what M2 is doing and know that you're probably on the right side of things. Um, but for practitioners like myself who are very passionate about macro. I'm more interested in diving deep into what are the actual causal drivers because to me, again, that's just a a spurious correlation. So, you know, I don't have any big issues with it. I I do have big issues when people start to like look at every single tick and be like, "Oh, in a week from now, we're going to go down 4.458%."

And it's like that's just ridiculous. Yeah, man. So, if we're looking forward then to, you know, the end of Q2 into Q3, um, you know, I I'm quite bullish. I think you are as well, but you put out a tweet recently that said, uh, you know, July could be sketchy. Why is July sketchier than other months ahead? Like, what's particularly got your attention there? Yeah, so there's a few few different short-term things. So yeah, put it simply 8 to I don't know 16 month time horizon. I'm obscenely bullish.

Short-term here there's a few different crossurrens that come together in July. So the first one is the positive economic data is in a bit of a weird I've been calling it a mirage right now where we've seen this today. We got the Atlanta Fed GDP now print and it's at like 4.6% growth which is just absolutely insane. And a lot of that is just due to the whipsaw effects of tariffs. So we saw the negative print last quarter that got everybody in a fuss and calling for a recession. And that was just because of a huge amount of imports which decreases GDP mechanically. And now we're on the other side of things where we're seeing a huge slowdown in imports because everybody's already imported everything in the leadup to the tariffs and that increases GDP. So you have this sequence, you have

the the pullback of the tariff announcements since liberation day, which is improving sentiment and business decisions. You can see this in the ISM survey data. So all of that together is creating this I wouldn't go as far to say like artificial strength, but some some whipssaw dynamics positively, which we're in the midst of right now. And and my belief is is that'll start to end in July and August. So that's the first one which is that we've seen a whipsaw positively and then I think we're going to, you know, slow down a bit more again here. So there's that. There's the tariff, you know, announcements in terms of the this 90-day pause that's coming to a head in in July. We've already seen I saw a headline right before jumping on that they're trying to get these deals done,

you know, get get people to have their get other countries to have their their proposed deals on the table in the next week or so. So, a lot needs to happen very positively, very quickly. You know, trying to negotiate trade deals with 100 countries in the next month is a pretty insane. Yeah. Who's doing that? Who's going to be on the phone? It's certainly not going to be Trump. That's for sure. Yeah. Exactly. So, there's there's a lot of just tail risk, I would say, in terms of just not meeting expectations. And then the last one is the debt ceiling situation, which is the X date. So the day where basically no matter what, Congress needs to figure out a solution and raise the debt ceiling because the extraordinary measures and running down to the TGA account and all that, you know, Treasury

wonkiness wonkiness to keep them afloat ends in August. And when that happens, basically the Scott Essen and the Treasury are going to need to go into the open market and issue $700 billion of of Treasury bills. And somebody needs to be a buyer of that. And the last time that happened, the buyer of that was the reverse repo facility. So back then, um I'm not sure how deep in the weeds your audience is on on on these like acronyms and facilities, but basically there is, you know, I think like $1.7 trillion sitting in the reverse repo, which is money market fund money. They're the ones that are buying T bills. So they were able to fund the rebuild of the TGA because of that RP. This time the RP is at like 120 billion. Um it's it's it's basically not going to fit the bill. So

that needs to come from the open market. So you're going to have this this sketchy moment I think in July and August where they will need to get they'll need to issue $700 billion and basically pull that out from the open market. And it it'll all depend on who funds that and what they have to sell to fund it. But that will create some some risky scenarios. But you know there everybody's aware of this. The Fed's aware of this. Scott Besson's aware of this. So I do think they'll have some sort of plan which we're not aware of yet. But it's still something to consider. So those three things just create a lot of dynamics for disappointment versus expectations that I think is important to be wary of. But I'm not too concerned because I I do think they'll all be pretty well resolved. Tired of multi-chain

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Now maximize yields on institutionalgrade liquid staking with M. Unlock trillion dollars of capital via F Bitcoin. All of this secured by Mantle's treasury of billions in stables and ETH capital pools. This entire ecosystem is coordinated by a vast network of seasoned VCs that are aiming to create the next generation of banking and financial technology. This is Mantle. Yeah, as I was saying prior to you hopping on, Jordy from uh also kind of said something similar with regards to a potential slower summer than most expect. So um seeing some seeing some

confluence there. Yeah. So despite despite this kind of near-term rockiness in in July and August, you you still remain over overall bullish. So is that mostly due to the capital controls that you expect the US to place on some of these other countries and and therefore liquidity phase in or is there other fiscal impulses maybe from you know Canada or other countries that you're expecting will will drive the market in a bullish direction over the next you know 8 to 16 months as you said. Yeah. Yeah. So correct to all of those basically. So there's a few different crossurrens that come together pretty nicely. So you have every other country in a reaction to the

tariffs is unshackling themselves from fiscal. So the the big example of this right now is Germany where they're pushing through like a $500 billion fiscal bill. Um a lot of it is like defense spending and military spending and that sort of thing. And alongside that they've they've taken off what they've been call what they have is this debt break uh regulation in in their laws where they can't run a certain percent of uh of a deficit. I think it's like 0.5 percent or something very very low. So they've taken that off. They've unshackled themselves. Um and so you have this dynamic of all these different countries start to incorporate higher fiscal deficits basically. Um yeah, same in Canada. You know, we just had an election and and Mark Carney is on the platform of we need to invest in our

country and really just modernize our economy. So it feels like every country is going through this right now. So you have again just think of this idea and at the same time when I wrote that piece originally this is where there was the narrative of the of the fiscal deficit in the US was going to come lower. There was the idea of Doge and all this stuff and we're starting to see that yeah that's not going to happen. We're actually that's completely couched. Yeah. Yeah. If the bill passes as it is Yeah. If the bill passes how it is, it's going to actually go from 7% of GDP to 8%. So that's increasing. And then you have every other country that is going from the the 0 to 2% range to probably like five or something like that. So you have every other country coming to the

party to run their economy hot. And then so you have that you have the capital controls dynamic which is going to lead to a multi-year decline in relative overweight ownership of US assets into other things. So I'm mostly interested in owning other things. I'm I'm super bullish on gold, Bitcoin. I I want to own, you know, those rest of world equities. Um, you know, if you're interested in like, you know, foreign bonds, those are looking a lot more attractive to US bonds right now. So, I just want to be on the other side of things of where all the money is going because all the money is in the US right now. So you have yeah high fiscal deficits, you have this dynamic of capital controls which I think is a unique benefactor to Bitcoin all coming together that these are these are very

durable changes that obviously you know we can get these pullbacks in the summer like that. But I think it's it's it's the recipe that's setting up really nicely for for Bitcoin to show what it was made for which is just this you know immutable asset that's not at the whim of these individual countries. So it just yeah it feels like a really clean trade. I I like owning it alongside gold. I think there's, you know, there's nice there's nice complimentary ownership of both just because of their how their correlations sit. Like, you know, we've seen a little pullback in Bitcoin and gold is up like almost 3% today, for example. So, yeah, it just feels like they're all coming together and and they're they're very long-term changes. It's not just going to be like a quick blip. So, it's it's trying to just sit back and let it work its way

through and, you know, not get too chopped up in these summer months, which, you know, could be a little bleak. And, yeah, it's it's looking good on that long-term horizon. Yeah. Quick quick followup on on these fiscal deficits. You mentioned America's already at a 7%, but most of these other countries are somewhere between 0ero and 2% fiscal deficit. Why is it that this is a follow the leader sort of dynamic? If if America goes up, is it because they're trying to keep their currencies in balance? Why is it that the rest of these countries are going to start to run their economy hot as well? And is this a there's a follow-up to that question as well around, you know, the national debt and kind of a slippery

slope to hyperinflation. Maybe you can get there. We'll you know, we'll pause after this. You know, the the fiscal deficit followed the leader dynamic. Totally. Yeah. bringing up the point of the currencies is important because that is that is where a lot of these effects will actually net themselves out. So, you know, a lot of what we talked about at the beginning in terms of trade could easily lead to a regime for the next couple years. And this is actually another bullish factor, which is that I think the USD is in a pretty major cyclical downturn. I think it's it's you know obviously we'll see like small oversold bounces higher but I I think you know it's I've seen some takes some analysis of like a 20% decline in the US dollar on the table so I think that's totally reasonable um and a lot of the

reason for that so you have to FX is super confusing because there's always like a pair to it so if you think about and it's also an expression of rate differentials so we'll walk through this here which is that okay other countries are going to increase their fiscal deficits spend and more money. Um, that is going to lead to higher inflation, higher growth, higher bond yields, which is going to lead to basically that relative to the US, which is already at that level. So, they're going to catch up. Um, and so overall, you're going to see because of those higher bond yields, more capital going back home to these countries because on like an FX hedge basis, it's it's a lot more attractive for them.

So yeah, there's there's that dynamic basically where the impact and results of the trade is going to lead to these recalibrations in FX currencies. So you have that plus you have the geopolitical dynamic of you know being like oh crap we can't rely on the US for everything anymore. Like it is a fact that the US has been footing the bill for NATO for too many years and you know countries like Canada where I'm at need to step it up as well. So we need to do that. We need to increase our our defense spending. we need to increase, you know, our our investment into just being more resilient as individual economies across the world. So, there's a lot of fundamental reasons, there's geopolitical reasons. Um, and then there could be, yeah, like currency agreement reasons as well, which is that to to net

out in the most clean manner, everything they want to do in terms of normalizing the trade situation is a major weakening of the US dollar. So, a lot it's it's not one answer, it's a lot of different moving parts, but they all go into that direction. Um and yeah, happy to talk about how that leads into this this fiscal path situation you talked about in and hyperinflation. Yeah, because Ray Dallio and you know some of these guys are talking about this inevitable debt death spiral that is caused by us printing money to finance our own debt and interest rates continue to go up as we continue to finance that debt and we have to print more money and the cycle continues. You know, it feels as you described the situation a runaway train.

We're at 7% now. That is increasing. We're not going to get to this 333 plan that Bessin and Dalia are trying to get to. So, where where does this end? Do we ever bring it back down to earth or do we just is this really a runaway train? Yeah. Yeah. It's it's such a difficult conversation to have because yes, the fiscal path is unsustainable, but it's probably also unsustainable for a lot longer than most people think. So, you know, if you just look at interest payments, right? If you if you look at it on like a unnormalized basis, like just the raw numbers, it's it's an upward, it's just a vertical line right now. But when you look at it as like a percentage of GDP, we're actually still

within a range like we're not at all-time highs yet. I think we're still roughly around where we were in like the 70s, which was the last time we saw really high bond yields. Um, so within that dynamic, we're I would say there's still a lot more runway. It's just that the path is unsustainable. And you know, I think Chair Powell is pretty correct in how he describes this, which is that the path is unsustainable, but the current level we're at is pretty sustainable. Um, so yeah, you know, you if you're running a 7% of GDP deficit like we are right now, and then you go into a recession, suddenly we could end up with just because of like the automatic stabilizers that occur in a recession, we could easily see the the deficit double to like 15% of GDP very easily. And in that situation, it it's

it's it's also a bit sketchy, but it's just about the the path of how long you can sustain that. Um, so I think overall, it's it's not sustainable, but it's more sustainable than most people think in the short term, is my opinion. Now, there's also different dynamics and policy choices that they can make to to keep this ball going for a long time with the end goal of running it hot, which is sort of what we've seen has been the policy pivot the last month where we've seen Scott Besson come out and say we're we want to run high a high growth regime and outpace the debt because the debt is fixed, but the the GDP is a nominal term, a nominal metric.

So, you can run the economy hot and then suddenly the debt load becomes a lot more manageable because the levels stay the same. it's it's fixed at those levels. So the goal is to get to that point and basically just just run the economy so hot that the debt becomes manageable, but there's a lot of speed bumps that can hit in that process. So one of the big approaches we've seen is this focus on issuing T bills rather than long bonds. So this has been the the policy that originally is Yelen who implemented it under the Biden regime and we've seen a continuation from Bessant despite him being a critic of the policy which is pretty funny. But overall it looks like you know there's no plan to increase coupon issuance meaningfully on the long end for at least the next year or so. So this the

shift to T bills. There's almost unlimited demand for T bills um in the world. But the the trade-off for this is higher inflation. You know T bills are basically printing money versus if when you issue long bonds they're a lot more like a a risk asset in their in their characteristics. So you can do this for a long time. Um, but it will it will include higher inflation. And it's just I feel like it starts to become more of like a social dynamic in terms of like how much can society be okay with that before it becomes, you know, you start to vote people out and that sort of thing. Yeah. Yeah. Especially with the widening kind of wealth gap as well as in these in inflationary times, you know, it just kind of it affects those in the higher classes in a positive way.

asset appreciation and then those who don't own assets are unfortunately subject to you know likely very little change in wages but higher prices for goods and so just becomes a problematic scenario I mean that's what we saw in 21 um people were calling for a double in back we're calling soft spending and then a double bubble um not sure obviously we haven't had that quite yet um but subject to change if tariffs do stay on and um you know cause that kind of inflationary spike. That seems like what the Fed is basically bracing for.

Um, so that kind of brings me to my last thing for you, Felix, before we let you bounce off. Uh, if you were in control of the U, the US tariff policy, what would your policy be and why? And perhaps it's what changes would you make? What indicators would you look for to inform your choice? What what would your tariff policy be now? Yeah, I' I'd go after the capital account surplus. I think it's it's so much more feasible for society to buy into that because what are you doing? You're taxing rich people. You're taxing rich people from other countries. Like that is just a win for almost everybody versus if you're going on the tariff side of things, what are you doing?

You're you're taxing goods that people need and you know, you're taxing pharmaceuticals and and that sort of thing coming from China. Like these are people thing people, you know, these are things people need to live every day. So, I would I would heavily focus on the capitalist account of side of things. And I think that's where it's headed. Um, yeah, I would I would I would put in more stringent capital controls to get people to not be so overweight US and and that would, you know, it's it's it's the laws it's a law of nature, balance of payments, which is that if you do that, it'll lower the current account trade deficit as as well without the need for tariffing your allies and that sort of thing. So I think that was a huge

mistake is is the approach they took. I've I've I've kind of held this view that the issues that they're trying to solve I agree with. I think this this huge trade deficit that we're that the US is running is is not sustainable. You know China has been taking advantage. Uh other US nation or sorry Asian nations have been taking advantage by having artificially weak currencies. Something did need to change. It's just the approach of it has been very not great and we've seen that in the walking walking back and so I do think that they're on a better path now if they focus on you know running it hot from a fiscal perspective paired with some of these capital controls and the capital account

side of things. I think you can get to a more durable trajectory to normalize these these these balance of trade issues without getting, you know, the middle class to be the the bearer of it all. I I think that was a very uh significant mistake. And I it does feel like they're they're hitting in the the more correct approach to it now. And that approach is very bullish Bitcoin in my opinion. So I'm not mad about it either. Do you think uh these other countries are kind of bracing for that and saw that saw that coming and you know that was that led to the creation of bricks? Do you see bricks as a real threat?

Maybe a little bit. I mean yeah basically every country is trying to diversify out of the US dollar a little bit. Um whether that's gold, whether that's a bricks thing, whether it's just owning more of other currencies like the euro. Yeah, the trend is that in that direction. Absolutely. um this yeah this dynamic is not sustainable especially when you start to weaponize the US dollar like they did with Russia. Yeah. You know suddenly that was the moment I mean that's when like if you look at a correlation of gold to real rates that was the breaking moment. Suddenly you know for decades gold has been correlated to real rates. So you know when you have negative real rates gold does really well and suddenly we got into this regime of really high real rates and gold was still doing really

well. And you can basically look at a chart of the day that that happened where they weaponized the US dollar swift system as the moment where suddenly every reserve manager in in the central bank was like, "Oh crap, we need to diversify our holdings. We can't just own US treasuries." Felix, one one last question for you. A lot of the things we talked about today point to a weaker dollar through running the the economy hot. the the one counterfactual here is this dollar milkshake theory that you know Santiago Capital talks about and and on the face of it it it seems really really compelling that the dollar will get stronger through through like three different counterparts. Do you think there's any merit to the dollar milkshake theory and it if if so why or

why not? Yeah, I I was a big fan of the dollar milkshake theory still am. Um I don't think Brent predict thought that the US would be the one to catalyze this regime shift. I think he thought that they would be the ones that would be the last to this table. Um because again like the approach of doing what I said in terms of capital controls is a major systemic risk to the reserve US reserve dollar reserve hedgeimony. So I just I think he thought that it we wouldn't get to a moment where society and policy makers were at a point of being willing to do this. So I think it I think it does question the thesis in in a lot of

different ways because the the issue was or the the dynamic that was originally there for the military theory was that every other country is just in a so much worse situation than the US. But yeah, exactly. Suddenly we're in the opposite regime. We're running like the US is running the highest fiscal deficit. the US is the one saying that we want to, you know, lower the capital account surplus. So, yeah, I think you have to reevaluate it in a lot of different ways because, yeah, the the fundamentals have shifted. Um, yeah, Felix, thank you for joining us, man. Appreciate your time. Love your work and uh we'll have to get you on in like 3 to six months and uh do a do a recap of what's going on because it feels like every week is just accelerated and there's just something going on. So, yeah. Thanks, guys. I

really enjoyed that and uh would be happy to come on again. Speak to you soon, man. Thanks. See you.