A macro framework for buying the dip, with Kyle Reidhead

Transcript

GM. Good morning. Welcome to the Milk Road Show, the daily crypto show where we wait for Trump's next tariff comment like it's the season finale of White Lotus. I'm your host Jay Hamilton. It's Tuesday, April the 8th. Everybody is panicking. Markets are dumping, not just crypto everywhere. Although we are up a little bit today and looking a little bit green, but everything's puking. Panic is widespread. Fear is low or fear is I should say fear is high. The fear and greed index is low. I don't know about you guys, but I am waiting and praying that Trump pauses tariffs on Wednesday before they go into effect.

You know what that means? We need a macro update. And there's nobody better to give that than Milkroads head of research and co-owner Kyle Reedhead. What is going to happen if tariffs go ahead on Wednesday? Why is the Dixie and the 10year so important right now? Will the Fed save us? And what does all of this mean? all this noise, all this tariff talk, what does it all mean for Bitcoin and the rest of your assets? Before we jump in, Kyle and the rest of the Milkro team have been cooking something. We're going to get that from Kyle in just a second, but mark your calendar. Tomorrow we are going live at 12:05 p.m. Eastern on YouTube and on Twitter with the one and only Benjamin

Cohen from Into the Cryptoverse. Come out, hang out with the squad, ask your questions live, and you can get a question to Benjamin. Today's episode is brought to you by Moon Pay. Trade crypto fee free, fast, and on your terms. It's also brought to you by Coin Shift, powering top crypto treasuries with their yield bearing stable coin, CSUSDL. Kyle, welcome back to the show. Thank you, Jay. Glad to be here. Okay, before we get your macro framework right now and a summary of all the many things that are happening, first tell us uh what what have you been cooking? Yeah.

So, one of the things we've learned at Milk Road over the the years is that people are starting to really like macro content. And so, we've included a ton of it. Jay has macro content on on this podcast. Um, we have a lot of macro content in the Milk Road newsletter. Um, and what we want to do is actually bring you guys more of that so that you can continue to navigate the markets and not just focus on crypto, but also understand macro because I know that matters for maybe real estate that you're buying, matters for when you want to, you know, start a company, get a job, any of that kind of stuff. And of course, it matters for your assets, whether it's stocks, crypto, etc. And so, we excited to announce that we are launching Milkroad Macro, a new show uh on the podcast. Well, for now, it's on

this podcast on Milkroad Show. you'll find it here where every week uh myself, Jay, and other guests uh we'll be talking only specifically macro. We'll be kind of building on our macro frameworks um and interviewing other people to kind of get their opinions on that and we'll help kind of build a story around macro so you guys can continue to navigate what's going on. We will soon be bringing on a new macro uh host and probably co-host as well to replace Jay and I over the next month or so. Uh and that will actually be its own show on a different feed. So, not today, but soon we will launch our own podcast feed and our own YouTube channel specifically Milk Road Macro. And so, those that don't care about macro, just want to learn about crypto, you'll still have your, you know, this normal show

here, although I'm sure there'll be some macro stuff because it's just so intertwined, but there'll be a show dedicated specifically to macro. There will also be a newsletter coming dedicated specifically to macro. I think you can get on a wait list uh in the link um in the show notes below. Um you will hear about it in the newsletter anyway. So, everyone that follows our newsletter, you'll get it there, but you can sign up, put your email in there. That just lets us know if there's actual demand for this if you guys want it. Um, but soon you will also see Milk Road Macro in the newsletter as well. And again, that's going to be its own newsletter in the coming weeks um too. So, this way you can kind of customize.

Do you want crypto content? Do you want macro content? You'll be able to have um whatever you'd like. So, we're really really excited for this. We do believe that milk or sorry, that macro is so important and so that's why we're launching a new brand called Milkroad Macro. Let's go. bullish macro bearish macro actually I don't know bullish macro road macro now you can tell us are we bullish or are we bearish on the current macro setup Kyle what's what's your macro framework and maybe give us a little bit about as you said the what's the macro story right now what are you paying attention to so first of all if this excites you if you guys like this please comment below let us know because we want to know if this is a good idea or not we're doing it anyway but we want to

know uh and then also as we look for a host. Please comment names of people that you follow. We're either um you know, happy to potentially acquire or hire people uh that's going to host this. So, if there's someone that you listen to that is a an, you know, a gem on Twitter or on YouTube or whatever that you're like, hey, they'd be good under the Milk Road brand um because they really get macro and they need a bigger following. Um then let us know. We're we're reaching out. We're interviewing right now trying to find people that we think might be a good fit to partner with here uh and to lead our Milk Road Macro um show that's going to be coming. So please let us know in the comments and uh and that'd be cool. In terms of macro framework, are we talking

about what's matters right now in this very moment or broader? Okay, right now I mean right now what matters obviously is uh is Trump and tariffs and what's going on here. We are literally in the middle of a global trade war which is pretty wild that we're we're going through this and it's the only thing that matters for basically all markets at the moment. So, you know, if you're not paying attention to that, that is obviously what's causing anything that's going on in markets. And so, you know, I don't know if we need to do a full summary. I think everyone kind of knows what's going on, but basically Trump slapped a bunch of crazy tariffs all over basically every country, uh, reciprocal tariffs. So, if you tariff the US, he's going to tariff you. They made up this kind of crazy formula based off imports and exports. And, um, and so

some countries are getting like 90%, 60%, 30% tariffs. Some are getting like the minimum of 10%. So basically, this obviously is what's what's controlling the markets. We had, you know, markets puked on Thursday, puked again Friday, and uh for the third day in a row, I think it was one of the worst we've ever seen in history. We had a third day of another massive puke over on Monday, and as you said, markets are starting to see a little bit of of um a little bit of healing today, but I wouldn't get too excited over it. We still are in the thick of things. Um nothing has really been decided yet. We were hoping that on Wednesday when this whole tariff idea was going to come out, that would be like the certainty we needed. But we're even more uncertain than we were when when that happened because now there's

all these negotiations. Will these tariffs actually remain or will they not remain? There's negotiations. I think the last I saw was 70 different countries currently are at the table negotiating with Trump. Um, but the biggest one of them all, what matters is China, which was they were given a 34% tariff. That's been increased, I think, to 50%. And last I saw but just before we started recording is I think China need to respond in the next like few hours or he was going to slap that 50% on which is just insane. Now um look I'm not a tariff expert but I think we will game out some scenarios here of what to what's what's happening what could happen uh and what you want to do with your portfolio and that but basically it's all about tariffs right now. And so one advice I would give is like this is

just a geopolitical thing. None of us have any edge here. None of us know what Trump is thinking. At any point these tariffs could go away and all of a sudden we're going to go back up to, you know, where we were before all this. At one point maybe the Fed could pivot and, you know, print a bunch of money to save things and, you know, come in to like prop up the market. Now, do I think that happens? No. But these things can happen and anything can change. And so, generally in geopolitical moments like this, it's best to just do nothing and just chill and wait it out. There will be answers. We'll get clarity soon. Uh, well, I don't know soon, but at some point. And at that point, you can start to make decisions on where you should invest and what you should do. For now,

just relax. Try to remain calm while everyone else is not calm and just like, let's see what happens here. Now, I think we'll game out what we think might happen. But at this point, no one understand no one really has an edge. So, like, don't be investing off what people are saying right now. Like, just do nothing is the best advice I can give until we figure out what is actually happening here because there's a lot of different scenarios that could play out. got up on screen here. Poly market giving Trump a 22% chance that he will pause any reciprocal tariffs before Wednesday. I don't need you to comment on what you think the chances here because as you just said, none of us know and none of us have an edge in trying to guess that chance. Now, what I do want to talk about is I want to talk

about the different scenarios of what happens if he doesn't pause, what happens if we do pause, what are the likely scenarios. But before we do that, I just want to give some context because I think this is really important is to understand what Trump and his team are trying to do. They are trying to create a new economy, a new economic strategy for America and you kind of need and they're and they're talking about it very openly. We've seen Trump, Scott Bessant, Howard Lutnik, many people on his team out in the open discussing this. So can you just give us the what are they trying to do because you need to in first you need to understand that and then we can talk about the outcome of tariffs. Yeah. So this is kind of

what Trump was voted in for was to think completely different about the US, bring jobs back into the US, you know, stop having this huge massive deficit. Like it was for change. And they said this entire time that this was their plan. And I'm a little bit pissed at myself for not I mean look we called that there was going to be a pullback in December but not because of this. We thought because global liquidity etc. But he literally was telling everyone he was going to do this this whole time. But I think including myself I just didn't take it seriously that he was going to do it this much. But if you want to create change you actually do need to do this. And so what is he trying to do? Um there's there's sort of like I would say three three things that he's really

trying to do here. So previous to Trump coming in when Biden was was running show, all the growth that happened in the US came from the public sector. It came from the the government essentially, right? They would print a bunch of money. They would hire all these people into the government and they just kept growing the government getting bigger and bigger and bigger, spending more and more and more, right? And that was the growth. That's what made the US economy great. And I put that in quotations who who aren't watching because that's not a sustainable thing, but it does bring growth, right? if you have more people getting jobs, they can buy more things, you can consume more. Um, but nothing was being created in the US and it was all these like zombie jobs at the government level that were being subsidized by printing money, right? And

that's not a a long-term strategy for a country that wants to be the dominant player in the world. When COVID happened, they quickly realized like, holy the US is actually not in a good position globally because we don't make anything in this country. they couldn't get the things the medicines they needed and the the the equipment they needed. They were screwed on a lot of different things and so it created a lot of problems. They realized that the supply chain in in the US was broken and and honestly a lot of countries realize it's not just the US but the re the the one thing that um Scott Besson always says is that um economic security is national security and they realize that economically they're not in a good place because they just don't make anything.

And so Trump's big thing was, hey, they're going to come in. They're going to try to shrink the government and stop with this like public sector growth that is like subsidizing growth in the US. They're going to try to bring that back to the private sector, right? Meaning actual companies that like exist and and and generate profit and like generate real jobs that can exist for forever without the need for low interest rates and printing money. So that's number one. They wanted to shrink the public sector, grow the private sector. Okay. The next thing they want to do is bring manufacturing back into the US. So right now over the last 20 30 years basically everything has started to be built in other countries. Vietnam, China, Taiwan, etc. You name it, the US is not really building much anymore. The US is a

service-based country, right? They provide services. They're a smart country, but they don't make anything anymore. And that's a big problem. And so they want to bring that back. If we can start to manufacture things in the US, that is their economic security that they're talking about. So that's a really big deal. Uh so that's the number two thing. And then the third thing is, you know, the goal is eventually to balance the deficit, right? Which is basically those two things are going to help to do that. Um, and so it's a it's a big change. It's a radical movement. No government has really really tried to they all say they're going to do this. No one actually does it. And I think we all kind of thought Trump was probably going to be the same thing or he'd like slowly push us that way. But if you

think about what they need to do here for big change to happen, they need to make really really big moves and to all of a sudden bring manufacturing back into the US. like these are the kind of things they have to do and so it's very aggressive. It's very scary for a lot of people and I think a lot of people are not agreeing with it which I get like this is they've tanked the markets. It's tough but ultimately this is what it's going to take to to make this happen. Now a few things I would just say here is this is like a long process manufact just by putting on tariffs a bunch of countries doesn't mean all of a sudden like all of a sudden matric manu manufacturing and factories are built in the US and like boom all a sudden Nike is all good and they just make all their

clothes in the US that's not happening that's going to take years to happen and and to be quite frank like do we even have the labor market in the US or do they even have it to actually do that like maybe not one thing Bessin has said is they'll well they'll use AI they'll use robotics to replace a lot of it because we don't have the labor market in the US. So like there's a lot of nuances here that again you can't just take what one person says it's not that easy. It's not just like oh jobs are coming back to the US. It's not going to work that way, right? And so but ultimately what I think Trump is trying to do here right now, whether you agree with it or not. And I think the big lesson I think everyone needs is remove

your biases. Whatever your feelings tell you about what's happening right now, remove that because if you want the US to remain the dominant country in the world, they have to fix this problem. They have such a deficit in trade right now that China is quickly becoming the dominant country in the world if they don't do something here. And so US doesn't have a long time left to actually make a difference here because at some point China could make a move and then the US is screwed because we they just don't make anything anymore. Right now the US is still a dominant country and so this is the time for them to make the move. They still are the global reserve currency. They still are the power. They have all the military etc. But even their military buys all their stuff from other countries. like that could stop at any point. And so by

putting on these tariffs, this isn't what everyone thinks right now is he's like picking on the whole world. He's actually not. I think what he's really trying to do here is this is all about China. This the only thing that matters here is China. And you can see it, right? So there's all these, you know, 70 countries that are negotiating with Trump right now trying to get these tariffs down because like it's going to crush a lot of economies if if these stick around. And he's kind of playing hard ball even on them. Like Vietnam has tried to come back and say, "Hey, we'll do zero." Taiwan has said we'll do zero. Bunch of others and they still have said no. Right? Even Europe came yesterday and said we'll do zero tariffs and he said no. He said we'll only do this if it's zero tariffs and you bring $350

billion of investments into energy in the US. So like he is going as hard ball as it possibly gets which is the only way that this actually works. So again as much as people hate this I'm Canadian so like I hate what he's done. Um, but ultimately if you want to win, especially against China, like you're going to have to take very very rash measures. So, I don't know if we want to get into the gaming out what's going on here, Jay. But that's sort of my big take on on what's happening and what he's trying to do. Let's be honest, everything in crypto comes with fees. But here's a nice surprise. Moon Balance doesn't take a cut. You heard that right. No Moonay fees when you buy or sell crypto with your Moonay balance.

Top up with dollars, pounds, or euros. Then you're ready to trade instantly whenever the market moves. And if you change your mind, withdraw your cash. No Moonpay fee there either. Simple, fast, ready when you are. Check it out at milkroad.com/moonay. Disclaimer: Network and ecosystem fees [Music] apply. Meet CSUSDL, the stable coin built for institutions and Dows. Don't just hold basic stable coins. Earn yield all without compromising security. Backed by regulated real world assets and secured with institutional-grade risk management by our friends at Stake House Financial.

Put your treasury cash to work, earning native yields and protocol rewards. Built by the team behind Coin Shift, which is trusted to manage over 1 billion in business treasuries on chain, including a Gitcoin, and hundreds of leading institutions. See why CSUSDL is gaining traction at milkroad.com/coinshift. Mhm. Yeah. Uh I want to go next to me and Leandro were cooking this morning and we made the milkman's tariff index. Okay. So on the far left we got tariffs remain and on the far right we've got tariffs removed from new deals and then obviously everything in between. So I

would say there's three scenarios I would love you to walk us through. Walk us through a scenario where in the short term some deals are made and tariffs are removed. What is a short-term scenario look like that if that happens? Walk us through a scenario where tariffs remain and nothing happens in the maybe more short to medium term and then walk us through the more longer term scenario of we end up somewhere in the middle of this. Yeah. So somewhere in the middle is what's going to have to happen because there's a lot of countries that that can't do what Trump wants them to do, right? Like this tariff percentage that they made was based off of the trade deficit. So how much does that country buy in the US versus how much

does the US buy to them? And something like let's say I don't know Vietnam, Madagascar, like they can't afford to buy the things that are made in the US. They're just they're not buying Salesforce and they're not buying like Netflix subscriptions. They're not buying like that kind of stuff. They never will because that's their economy is not strong enough, right? And so like it just it actually can't become even. It's just not possible. And so those are going to have to go back in a different way or he you know it just doesn't make sense. And so I think it is going to be a middle ground regardless. But ultimately what I think happens uh in the short term here is some deals are going to be made right. Um but again it's not about zero zero tariffs. It's about can I get more invest like he's

going even harder than that. I don't want to just get it to zero. I want it to zero and I want you to invest in our country, right? like I want this to be like he's trying to win us all right now which is you know you got to do you got to go all in or not and so I think we'll start to see that with probably Europe and and Vietnam and and Taiwan and things like that but and so those will probably come we'll start to get that kind of good news coming here is my guess but the one thing you got to remember is the only thing that matters is China this is the this is the purpose of all this right now is China and so part of what I think he's doing here is he might not actually approve any of

these other deals for a little bit here Because what he can start to do is say, "I'm not going to improve your deal unless you do this to China, right? Because remember, US has all the leverage. They're the they they consume the most in the entire world, right? And so they have some leverage here. And so he can say, "Vietnam, I know you need this deal, but I won't give you this deal unless you do X thing to China. You stop trading with them or you stop doing this or you you go to China and you tell them, hey, you need to make this deal with the US, otherwise we're not going to give you this anymore." And he'll do that with Taiwan. and he'll do that with, you know, country after country after country. And so I think what's happening here is we're we're actually

going to get a bigger um a a new global trade like order, right? We have this kind of global trade order now, which is like this world one where everything works. He's either trying to get China out of it or he's trying to get China to come in it but at a much less, you know, um uh level playing field kind of thing. And so I think he's going to start to use these other countries to to kind of help with his negotiations. So, I don't even know that we get these short-term deals. I hope we do. I really, really hope we do. That will, if we do, that's going to alleviate the markets a little bit, but I think we're at a point now where everyone's eyes are on China because that's the biggest trade partner that we have and our biggest like I say

our I'm not American. It's the US's biggest trade partner and uh and it's also the the biggest like competitor to to the US. Uh and so I think um it might mean we're in a little bit more pain here until these two kind of figure this stuff out. Yeah. I don't know what what are you thinking about in terms of timing here? Uh because um when you say we might not get anything soon, does soon mean like before Wednesday, before tariffs go in effect tomorrow? Does it mean before the end of the month? Does it mean before June? I just would love to hear how you're thinking about timing. I also got some polymarket stuff I can bring up around timing, too. So this is the thing where again no one knows because we just don't know what is his is he really trying to bring

manufacturing back to the US because if he is then these tariffs are staying right like if he's actually trying to do that and but that's the thing is everyone's kind of like well I don't know if he's really or is he just trying to get better deals right and and that's what we can't tell if it's a better deal then I think you know these things can can end soon and maybe end by by tomorrow you know what I mean because he'll probably close a bunch of these deals but if the goal is hey I actually want to bring manufacturing uh to the US then these could last for months, right? And and that's going to be a long time until we can get factors running and and things actually working there. So that's where we just we actually just don't know and it's it's been so hard to guess

like this whole time because we just don't know what his real goal is. Everything he said is he's trying to bring manufacturing back to the US. The only way you do that is you hold on to these tariffs much longer. That seems like a scary world. Uh and we can talk about what that will look like. But when I say soon, like this could last for much longer. Um, because to make this like new world order of trade that I'm talking about, like a a new Bretonwoods 2.0 kind of thing, that's like I think there is a Brettonwoods meeting coming in like a month or two months from now. And so like there's some speculation that he's trying to like really get the negotiations going until that happens and then it's like boom, all at once here's what happens. So like this this could take a lot longer than we think.

Again, I just don't know. Does he really want manufacturing? Does he really think he can get manufacturing back in the US? If he does, it's long term, like it's months. And if he doesn't think that, he's just trying to get good deals and more investment, then it's this could be over in, you know, hours to days to weeks. You know, why aren't we getting forward guidance from Trump on this exact question, right, of like, hey, man, okay, if you really want manufacturing back, just tell us that tariffs are staying and then people can go ahead and start to build factories and do all the that will take years in order to figure it all out. This is the funny thing. So, everyone is complaining about this on Twitter right now, right? Like, why are you not telling us if you're going to alleviate

these tariffs ahead of time or whatever? And it's like he's in a negotiating position. He's trying to negotiate. The last thing you want to do in negotiation is be like, "Hey guys, I'm strongarming you, but by the way, everyone, I'm going to remove these tax or these tariffs like in a few weeks from now, so like don't actually worry. You can't do that, right? Like he can't publicly do that." And so the only thing he can do is continue to be as hard as he possibly can right now. And we just don't know. Is that so that because he actually wants manufacturing come back or is that so he has a better negotiating negotiating tactic? My guess is it's probably the negotiating tactic, but again, I have no edge here. So, I actually just don't know. But to me, it's obvious why he's not giving forward

guidance because that would ruin his negotiations. And so, I think people got to remember what's happening here. I know a lot of people in this world like they don't have these crazy negotiations. They just work their 9 to5. They're not they've never gone through the stuff. Like, if you've ever gone through like an acquisition of a company, you need to be very quiet about what you're trying to do. You need to be very hard like play hard ball so you can get what you want. Read his book on the art of the deal. Like, this is what he's always done as a businessman. And whether you like it or not, if you want the US to to remain dominant, like these hard conversations, these hard things kind of have to happen. And I'm not saying he's doing them the right way or not. He's doing them the way he knows

how to do it. And whether it works out, I don't know. Again, no edge. What his real plan is, I don't know. No edge. Um, all I know is like if he is trying to negotiate hard, he has to do this. Uh, or if he wants to bring manufacturer back, he has to do this. So, which one is he doing? Again, I don't know. Okay, let's look at some charts. So, let's try to get a little bit of an edge here where we can. Uh let's zoom out beyond just the US economy and what are the when we are in a very macro environment like this. It is important to pay attention to some specific charts. What are the things from a macro side that you are looking at to try to get some edge to try to get some understanding of

where we might be going and what might be happening next and and then how does that apply to markets? Yeah. So, I think there's a few things to remember here. Like as much as these tariffs are front and center, it's all everyone's talking about. It's all we're thinking about. The world still goes on, right? There are still things happening. People are still buying things. There is still trade happening. It's just stunted. The markets of course are always going to overexaggerate to what they think is going to happen. So like but the world does continue. There is still the global liquidity cycle. There is still the business cycle which is ultimately what macro is all about and why we're launching Milk Road Macro which is to cover and basically follow what's going to happen with the business cycle.

What's going to happen with the liquidity cycle right? We still h the world still continues even though it feels like the world is stopping and all that matters is tariffs. It's actually not. Right? It is a big deal. uh and it does matter, but there's still more to consider here. And the business cycle has not ended and the liquidity cycle has not ended. And so I think that's just the key thing for everyone just to realize is like, okay, there's tariffs. What's happening with everything else though? Are we still going to move further in the business cycle? Are we still going to have a liquidity cycle? If we are, well then maybe, you know, this is just a pullback and this is just a scare, right? If it's like, okay, the business cycle is completely cooked, liquidity cycle is cooked, and we're just completely screwed, and no one's

going to trade anymore. We're going into war, and like this is all done, like the world is is screwed, then, okay, you can forget about the business cycle. You can forget about the liquidity cycle, and just like markets are going to zero. But does anyone actually believe that that's the case? I don't, right? I actually think we will continue on with the business cycle. If you really think about what's going on here, when we called for a pullback back in December, we called for that because financial conditions were tightening significantly. And when financial conditions tighten, meaning the dollar was really high, right? Oil was getting really high. Uh inflation was kind of going up at that point and that's because again a lot of people were trying to frontr run what happened with um with tariffs here. Uh and so like we were in this world where where liquidity

uh or sorry financial conditions were extremely tight and so generally what that means is over the coming months we need the the markets need to retract in that world. Okay. And so that's what's actually played out here. It's probably been a little bit overexaggerated well a lot over exaggerated now because of the tariffs. But now the question is where do things go from here? And the first thing I would look at is liquidity. So I'll just pull up this chart here. And if we look at liquidity, we actually just reached all-time highs this week in global liquidity. And so a big reason of why did we just reach all-time highs in global liquidity? Well, uh a few things have happened that actually we needed to happen for the the business cycle to actually continue and for global liquidity to actually continue. And so

let me just um let me just pull up uh some charts here. The first was if we go back to the dollar since all this has happened, the dollar has absolutely just tanked, right? So back when we said financial conditions are tight, the dollar was sitting at 110. Today we're sitting at 103. So that's a pretty big it's one of the fastest drops we've seen in the dollar like in history, right? And it was even we were down at 101 uh like 2 days ago. Right now we reverted back which again normal but ultimately we are still on this path down. So that means financial conditions as much as it seems scary everything financial conditions are actually loosening at the moment. Right? The Dixie has gone much lower. What else is causing financial conditions to loosen? uh oil is down, commodities are just getting absolutely

crushed on this global trade war. And so these fears of inflation that were happening, they're gone. They are absolutely gone because the dollar has loosened, right? And look at oil. Oil has gone just from I mean this is like a few years now of it going down, but up at 130 was this 130 uh back in 2022 and now it sits at 60 bucks. We were down into the 50. What did we hit? 57 or something. What was the low? Doesn't really matter. But anyway, whatever it was, we were in the 50s. And so, I don't know if you saw, but gas is like 20 cents lower, 30 cents lower than it was like has been for for years all of a sudden. And so, again, these are financial conditionings loosening. This is actually a really good sign.

Although, I know again the tariff thing over here is scaring everyone. Ultimately, inflation is lowering like crazy. Eggs have gone down like crazy. You know, like the commodities are going down like crazy. And you can see this in the true chart. Look at this thing. It's absolutely just fallen off a cliff here um in the last like few months. Again, inflation was like rising in December when Trump, you know, when he won and everyone's getting all excited and now everything's loosening now. Why did uh conditions get so tight there? One, it was like everyone was like, "Okay, pro- US. US is going to, you know, be the best ever because of Trump, blah blah."

And so like the dollar went went up really high. Um but also a lot of um because of of tariff fears what happened was a lot of imports came into the US. Gold moved in records amounts over into the US. Commodities other things like inventory just moved into the US like crazy because people were front running tariffs. So it made it look like the business cycle was picking up like crazy which causes inflation to go up because there was so much demand. What we realized is that was actually just front running of of um of these tariffs. And so now there's not that much demand anymore. And so now we're seeing inflation just lower like crazy. So on the 10th on April 10th, which is this Thursday, um people are very afraid if inflation doesn't go down, you know, the

Fed can't respond to what's going on with tariffs, we can't lower rates, etc. I got a feeling we're going to see a massive massive drop for the next few uh inflation prints. And so that's actually again liquidity or sorry financial conditions are loosening. Now this is a really good sign. If we look at financial conditions, I have a chart up on the screen here. This is financial conditions globally uh in a three-month lead compared to Bitcoin. And this is the price movements of of Bitcoin month over month. Okay? Or three months over three months. Look at what happens when financial conditions go up and down. You can see exactly it following, right? So financial conditions um had loosened loose and loosened. So what's that mean?

Or sorry, financial conditions had tightened. So Bitcoin went down down down down. And now and this was again starting in December and now we're loosening. And so Bitcoin is getting a lot more room to start to go up here. And they've loosened a ton at the moment because what else is happening here? Well, now that the dollar has come down, other countries around the world can start to lower rates, can start to print money. China is printing a ton of money. They just devalued their currency, I think yesterday. Uh and so again, as much as this these tariffs are bad, we don't know what's going to happen from it. But one of the results is central banks are going to have to lower rates.

They're going to have to help companies and people uh because of the changes that's happening with supply chains and stuff from this. And so again, we're going to loosen financial conditions, which ultimately is what matters for assets like Bitcoin and what matters for, you know, even tech stocks, etc. Now, in the tech stock world, it's a bit different. You have to weigh the loosening of financial conditions to the increasing of costs of their manufacturing or their inventory because obviously they have tariffs. Like Nike, it's going to be a lot more expensive, right, if those tariffs don't go away. So, it's a weird dynamic, but something like Bitcoin, there's no tariffs, right?

there's no this doesn't really matter to them other than obviously we are in a riskoff a growth scare but ultimately financial conditions are losing and as we can see that is what ultimately correlates with Bitcoin and so this actually looks like we're going into a very good moment at least for Bitcoin I don't know about stocks because again there's just weird dynamics with their supply chains but when you think of something like gold or Bitcoin it's not impacted by this um it actually looks like we're going into a really good moment here for for for assets like that so I think that's actually quite exciting And there, and let's be clear, there could never be tariffs on Bitcoin. There could be tariffs on physical gold. Like, you could tariff physical gold, buying, selling, moving physical gold around the world. That happens a lot a lot. So, you

could they didn't they have not done that yet, but they could. Anyways, uh let's Okay, keep keep going on. Uh, oh, the other one other thing I'll say that's really important just want to make sure everybody caught is you mentioned that central banks are going to lower their interest rate to ease financial conditions to support through this period. And the biggest thing that everyone needs to know is the reason they can do that is because inflation is so low like they are in a position where they can do that if they need to. Often they're not in a position where they can do that because inflation is high then they can't and to inflation has been low in most parts of the world to be completely honest. It's just the US that has kind of had some stronger inflation because of this demand that drove

because of Trump winning the election, right, and front running tariffs. So, the rest of the world could. The problem was the Dixie was too strong, the dollar was too strong. And so, China, etc., they couldn't devalue their currency because then their currency would just if they started printing money while the dollar strong, their currency then just like spirals out of control, right? So, now that the Dixie has gone lower, we're starting to see that they can devalue their currencies. They can start to print money. The problem was the Fed couldn't lower rates because their inflation was getting too high, right? And that was not good. But now I'm pretty sure the US, we'll see what happens on Thursday, but I'm pretty sure it's going to be much lower. And so this gives room finally for the Fed to play ball. Now there's again more nuances

here. Is the Fed not playing ball because they don't like Trump? Uh is it a political thing? Like we don't know. Um but ultimately they got to make sure that uh you know the the two things they care about is inflation, unemployment. If infl un or if inflation is down, unemployment is beginning to rise, which it has been slowly, um then they're going to have to do something, right? Political or not, they're going to have to do something. Trump has kind of given them with all this scare the reason now to be able to to loosen financial conditions even further. So, there's this dynamic you have to think through of, okay, how much do tariffs matter? How much does the loosening of financial conditions? The one thing I would say and if we look at this chart here which is more like the sentiment style I don't

know how tariffs could get any worse in terms of sentiment right um like the tariffs is going to take a while for it all to play out etc. What really matters in terms of markets is people try to frontr run it all. And so sentiment is about as bad as it's been ever, you know, okay, not ever, but since like the great financial crisis, right? If you look at this right now, here's the percent of stocks trading with the the 14-day um RSI below 30. Okay, so this is like really oversold is what you would call this when you when you're below 30. And we're at the highest it's been since the yen carry trade, which marked the bottom or sorry, since the bottom of the bare market in 2022. uh and which were even higher than that now. So, the only time it's been higher was the the um

sorry, what am I looking at? COVID crash uh and uh and then another kind of recession they had back in like 2018, right? So, it's rarely does it get any worse than this in terms of like sentiment and being oversold. And there's a million charts you could go through. Look at the fear and greed index. It was like four yesterday, I think it was. Right. So, when you try to game where do we go from here? You were asking short-term, medium-term in terms of tariffs. It probably I don't want to say probably. It's likely that it can only get better from here, right? Like, can he tariff any of these countries anymore?

Maybe, but probably not. The more likely thing here is that look, tariffs probably still continue, but they start to alleviate, right? Starts to make the negotiation like I think Scott Besson is on his way to Japan right now, negotiate with them, a big trade partner. If that they come to a deal, okay, boom, that's good news. Vietnam, boom, that's good news. Taiwan looks like they might get a deal there. Boom, that's good news. Europe, they might get a deal there. Boom. That's good news. So, it's like the tariff side, like is the worst of that already priced in? Most likely, right? Um, and so I feels like it can probably only get better on the tariff side of things. Now, again, still supply chain issues with certain stocks and certain equities and things like that.

There's still those problems. Maybe a war happens, but again, I don't think that that happens. And so, like, I was going to say that would be the only thing at this point that could be worse would be escalation into something else, right? Yes. Exactly. Which which is possible. You don't you don't say I'm not saying that that can't happen, but the the greater likelihood is probably they start to reach agreements. No one wants a war. It's not good for anyone's economy. It's not good for Trump. It's not good for China. Like no one really wants that. So like the the greater likelihood is like things do get figured out or slowly get figured out. And I think what we've priced in right now so far is like kind of not the worst because we didn't price in a war, but we've priced in sort of the worst case

scenario for tariffs, I would say, right now. Um now again that doesn't mean things can't go lower from here. They definitely can but the riskreward feels very much more to the upside on the tariff side of things. Then when we think of liquidity side of things as we've already seen um the the financial conditions are loosening. What is the response that most countries can or will do for these tariffs if they remain much longer? So let's say tariffs do just stick around for the next months and months and months. What's going to happen? Well, the US, if they want to get manufacturing in in the US, who's going to pay for that, right? All these countries or all these companies just lost a ton of money and a lot of value, well, they're going to have to have more government spending. The Fed's going to have to lower rates to help out

these businesses so they can take out loans so they can build their factories in the US. That's more liquidity. That's loosening financial conditions. So, the response to these tariffs is even looser financial conditions and very likely even more liquidity. China's already starting to um print a bunch of money, devalue their currency. That's just a small part for what they have to do to actually stimulate their economy and manage what's about to happen if these tariffs don't go away. And so I just think if you look at the response here, it's either we don't have a bunch of money printing because we get rid of the tariffs, bullish, right? Sentiment flips, we go back to where we were, or the tariffs stay. Okay, we're probably already priced in as worse as we are for that. But now liquidity comes in to fix

the situation. That's again US and globally probably. And so I just I don't see a world where liquidity doesn't move up from here. And we're already seeing that as I showed with the chart right here. If you want to bring my screen up again, we just passed all-time highs, which I think was going to happen with or without the tariffs. But if the tariffs remain, it's probably going to be even more so. If we think again the business cycle, I'll show this really this chart which is really cool. This is the macro seasons we always talk about. Spring, summer, fall, and winter. In summer is when we get the most liquidity. We were already tracking for this pre-tariff. With tariffs coming in, if they remain, this is only going to accelerate even further, right? Because if you think of what's going on with tariffs here, it's kind of the same

thing that's happened with with the co response. We locked down economies. We we basically broke the supply chains. What did we do to get our way out of that? We had to lower rates and print money. And if you think if this tariffs really do remain very very bad, again, that's the same response. And so probably this just goes up from here, right? Um, and so again, we're in this weird world where we weren't able to get the ISM up. Let me show I think I have the ISM up here. The ISM is the business cycle, right? This is this is the ISM. And so this is like uh basically the the demand for for products and inventory in in this is particularly in the US. Okay.

And as the liquidity goes up and there's more businesses doing more things and doing better and consumers are purchasing etc. there's more spending the ISM goes up. And this is like this is the business cycle and this is what most assets in the world follow. Right? We have had this like two three year sort of like just range. We've just slowly gone up but not much. Right? It's why we've done quite well. But we haven't had this big jump like we always have. Right? Every cycle we kind of had this huge skyrocketing move forward. We thought it was coming uh at the end of last year until we realized, oh, that was actually just tariffs, right? Um, but the reason this wasn't able to go up, if you look at this since 2023, it's kind of just been this like up and down move. Well, that's because financial

conditions have been too tight because oil hasn't really moved in the last two years, right? It's just been up and down. The Dixie hasn't actually, let me zoom out here. This is the monthly. The Dixie for the last two, three years, it's just moved up and down. It has done nothing, right? We haven't been able to get the dollar lower. We haven't been able to get oil lower. We haven't been able to get out of this like weird mode that we're in. And finally, we're doing it. Look at oil is breaking down. The Dixie is breaking down. Everything seems to be going the way that we needed. Um, and so again, we're going into the world where actually on the macro side of things, it looks really good, but again, we got to wait and see what happens with these tariffs because there's still that

world that exists that we've got to figure out. Okay, so let's play out uh some scenarios here. So scenario number one, tariffs get negotiated in some time frame. We don't know. Uh maybe maybe we have a little bit more pain to go if it takes a while, but eventually they get negotiated and we're in a good a good place. another scenario that's probably the best scenario like for for for markets right probably not necessarily the most likely scenario that like everything gets like it is very clear that Trump does want a new uh a new economic strategy for the US so like

probably more likely as you said that we end up somewhere in the middle now as you said very likely that we get that financial conditions are easing very likely that we get some that the Fed Fed will lower rates. They probably are in a position where they could do that outside of conspiracy theories as to whether they dislike Trump and what what the view is there. Uh and and other central banks will also lower rates. Okay, bullish. We get more liquidity. That's great. What the the thing that I can't wrap all of this says to me, Bitcoin looks really good right now.

What I can't wrap my head around is the rest of the crypto market and how the rest of the crypto market responds to these various scenarios. Yeah. So yeah, Bitcoin does look good. Again, it can't be tariffed. Um all that matters is loosening financial conditions for Bitcoin and that is that is happening no matter what. And so it does look really good. Um it looks better than you know probably any stock or anything because of the just you don't have that actual risk of tariffs. Okay. Mainly Bitcoin is priced based off financial conditions. Also a risk-on environment, right, which obviously we don't have right now. But if things do get better and we start to print a bunch of money or whatever, whether it's in China or the US or whatever, that goes more risk on.

Bitcoin does well. Where does the rest of the uh altcoin world go? This one's a bit more difficult to be completely honest because what the basically what altcoins need is the ISM to pick up. It needs the business cycle booming, right? It needs people to be building businesses and consuming and like good earnings etc etc. Now I know crypto tokens don't necessarily have earnings but they match really well to that side of things. So whenever the ISM goes above 50 that is when we have altcoins do really really well. Okay now we went above 50 in December. You saw altcoins do really really well. But we realized that was a fake out. That was a fake out of the ISM. And so we thought and this was you know part of our problem too is like we thought okay this

is it. The business cycle is booming. but it wasn't. So then we came back down. Now the ISM is at 49. We're back below. Probably that actually gets worse, I would say, over the next month or two, I would imagine. But again, I don't know. It's going to h depends on what happens with these tariffs, right? Do we start printing right away? ISM goes up. So it's going to depend here what happens. But I think in the in the months to come, assuming things like we don't go into a crazy war, that is going to pick back up, right? Because we're going to get rid of the tariffs, people can start to consume again. But at the same time, we're also at a world where now we probably have to print some money to get things going here. We're also, if we get investment in the US, they start

building, you know, factories, etc. Like things are going to start to boom again as a result. Probably this is going to be because of, you know, countries around the world doing this, but also because we're lowering rates, printing money, etc. And so in that world, the ISM goes up and likely alts will start to do well during that time. I just don't know that that is going to happen in the short term. And so I'm a little bit more uneasy, I would say, in alts. They're cooked right now. So, like, can they go much lower? Probably not. So, like, still might be a good time to be to be buying these things, at least the good ones. Um, but like, will we have like a memecoin mania in two weeks from now? That sounds like probably not. I would say just like normal, Bitcoin leads us out of this, right? It sniffs

the the good liquidity conditions. It starts to run, which is maybe why it's held so strong here. Um, and then at whatever point all this gets figured out, the ISM gets back above 50 and we kind of like move on with the business cycle, then I think alts do come back and they will do extremely well because especially because they're so cooked right now, right? But again, when does that happen? I don't think that's an immediate thing. It's probably going to take a little bit more time unless we have the COVID response where we print a ton of money right away, which again, I don't know that that's going to happen. I don't that's not my base case. My base case I would say is this is Bitcoin's moment to to do really well here and then alts soon follow assuming a lot of this gets gets kind of you know

put behind us and it feels like um we're not going to it it feels like we're not going to get any immediate relief right now uh from see the only way I see immediate relief is some China America deal being negotiated very quickly which also doesn't feel likely. You've got two very powerful, egotistical men who are going to hold out as long as possible on each other. Yeah. Look, the thing is there's more likelihood of relief than there is the opposite going the opposite way because there is there's okay, the China deal goes away, so much relief, markets go nuts. A bunch of other countries get their deals done like Japan and Taiwan, okay, markets go nuts.

The Fed lowers rates, right? China prints a bunch of money, which is probably going to happen. Like there's a lot of scenarios right now where we can get relief because this is the good thing is that all this is happening when the Fed is still at 4% interest rates and still doing QT, right? Or basically stopping it but not fully stopping it. So it's like there's just so many more good things that can happen than there are bad things that can happen which again this isn't the way you really want to invest totally but for me when I see markets dump I'm a buyer of red news here or or sorry red candles here because of that world. the riskreward is is higher to the upside. Doesn't mean we can't go lower. For sure we can, but like can you go much lower? I don't

think so. Uh and so if you have capital, you sort of slowly just keep buying as as we get these dips here. Um because I think there's more relief that can come than the opposite, you know? Okay. So the final question I have is what are you buying right now? So look, I'm just going to save it with this. I think the best thing you can buy is Bitcoin. If you haven't bought Bitcoin right now, if you don't own any Bitcoin, even if you do own it, I think um it's a good place to be putting it now until we get some resolution, right? You don't want to trade around geopolitics. Like if if I say, you know, I said there's there's a potential chance that bad things can happen. If that does, you know, Bitcoin might go back down to like 72 or 73 or 74, whatever. It's not that

big of a deal. You can stomach that. But like, I don't know, your random altcoin could puke another 50%. And that's not what you want. Not in this world. And so I think right now you just buy Bitcoin and you continue to do that. Um and you're probably going to be very happy in a few months from now. Um like I I I really do think we're going to have a very strong run here starting probably by the end of this month. I think Bitcoin is much higher it is today by the end of April and May even higher. Now like we'll have to see what the world looks like in a few months from now after that. Um you know do we go to this 250 that everyone's promised. My views hasn't really changed uh because I think we'll just kind of go back to the

normal business cycle. Um, but we'll have to see, right? Like we kind of just got to play it by ear right now. Which is why in those in that world, I think you mainly just want to be be adding to your Bitcoin position than doing nothing else. Like I wouldn't be selling your Ether, your soul or things like that. Like just leave it as is and see where things go uh in in the next few months. Which, by the way, this is why we're launching Milk Road Macro so we can keep navigating this together and not just have mine and Jay's opinions. hopefully bring in new guests, new co-hosts to take this over from us, but also we'll have tons of new guests that are macro people. I think we've got some already really good guests lined up over the next few weeks here for this Milro macro

show. Um, and just kind of keep navigating that together because macro matters a lot. Um, and so it's just something that I can see with financial conditions loosening, things are probably looking actually really good here. But will that continue? We'll have to see how how the world like what happens with what Trump's trying to do. It's such a good take uh that there is a there is more likelihood that we see relief from here than we see more pain outside of a black black swan event. And that is a very good take that I think it's very hard. You said this at the beginning of the episode. You have to remove your emotional side from this.

You also have to remove even what you think about tariffs and what your country and your media is just dominated right right now by fear right like so much fear and so it is putting everybody into a really paralyzed state right it leads you into the state of like panic paralyzed and there is right now we actually are in a place where the opposite is more likely even though that's not what's being discussed by most like you just look at a chart of anything any time that stocks get this oversold gold, they're always up higher in I think it's like three months, three or four months afterwards, right? Same with crypto like rare unless you have these like long drawn up bare markets which you know um it doesn't feel like

that's the case here again because if we look at macro financial conditions are loosening. You don't get bare markets when financial conditions loosen. You get them when they tighten, right? 2022 that bare market we had that everyone's so afraid of that's happening right now. You get that when financial conditions tighten. 2018 when we had the bare market, that was because financial conditions tightened, right? globally, not just in one part of the world, not in the country you live in, but globally. So, every time we get a bare market, it's because financial conditions tighten. And we're still basically as tight as we've ever been. And we only have room to loosen. So, that's a good sign, right? This is why macro is so important. You got to understand that stuff. Bare markets don't happen because the four-year cycle of charts that people care about or because the four-year cycle of the

happening. That's not the case. It's about financial conditions. And if you don't understand that, then you are lost in markets. Of course, there are these cra like like financial conditions didn't tell you we were gonna have this big pullback. That's for sure. Well, it did, but not this much of a pullback. Yeah, it did. It very much did. We called that. It didn't tell you that we were going to have this other leg down cuz this is those like kind of idiosyncratic events that happened. Geopolitical. You can't do anything really about those. I some people did and some people were able to call that and good for them. We didn't. Um, but ultimately it's what tells you should you stay in the game or not? And when financial conditions are loosening, that's when you want to stay in the game. That's when you want to keep

looking for where should you buy, when should you buy, not I should fully get out, right? And so this is a very different world than the end of 2021 and moving into 2022. I think that's the key thing that I think people need to understand here. And again, why macro is so important because like I don't know, you see crypto get crushed and go down 30%, you're probably like, "Shit, that's we're in a bare market. We're screwed." You know, this is it for the next year. And it's like again that would make sense if financial conditions were tightening, but they're not. And so that doesn't actually make sense. And so I believe strongly that in the next few months we will be at all-time highs. No, maybe though. I don't know if we'll be at alltime highs, but at least in Bitcoin I'm talking. I think we'll be

much higher than we are from here. Incredible. Fantastic episode, Kai. Thank you so much for breaking it down for all of us. I want to know everybody listening, uh, please comment. As Kyle said earlier in the show, if you like the macro content, if you want more of this, we would love to know if this is the direction you want us to go in. Also, if you have anybody that you think we should have on the show as a guest or as a potential host to join the team, let us know. Comment their name. And then finally, if you want to join the wait list to be notified first when the Macro Milk Road when the Wow, I really mumbled that. When the Milk Road Macro show officially launches its own podcast and its own newsletter, which is coming.

If you want to be notified first, hit the link in the show notes. Join the wait list now. Kai, thanks so much again for joining us today. Thank you. It was fun. Thanks so much for listening to today's episode, y'all. Hope you enjoyed it. If you want to go to one of the best crypto conferences of the year, you got to check out Avalanche Summit in London May 20th to the 22nd. One of a kind, it's a retreat style conference, retreat style experience. Super interesting. They've got a whole blend of sessions for developers founders investors the future of crypto. It's going to be a really unique and different type of conference. Highly recommend you guys check it out. Don't miss your chance.

Grab tickets. Click the link in the show notes. Hope to see you there. As always, if you liked today's episode, please hit subscribe and make sure you follow us so you don't miss out on the next one. There's also a link in the description to our free 5minute daily newsletter where we simplify crypto for you while making you laugh. And if you're willing to step up your crypto investing game, we're going to also leave a link for Milk Road Pro. You get access to our portfolio where you can see exactly what we are buying. This is your number one resource to help you invest successfully in crypto. One final note, this show is for educational purposes only and nothing we say is financial advice.

Investing in crypto or any asset is risky and you should never invest more than you can afford to lose. Thanks so much for listening in my friends. Have a wicked awesome