Sankalp Shangari on China's stimulus, recession fears and crypto

Transcript

GM good morning welcome to the milk Road show The Daily crypto show that's as rewarding as finding a hidden $20 in your pocket I'm your host Jay Hamilton and today we're joined by Sunny sop shangari previously a csvp at JP Morgan and now managing director of rising capital in today's episode we're going to step back and take a big picture view of the current macro situation we're going to talk in depth about the China stimulus what that means what's happened so far and what we can expect and then we're going to end with what does it all mean for crypto what do we expect to see for the rest of this year and into 2025 before we jump into Today's show I

want to know are you going to permission list next week or do you want to go because myself Kyle and a bunch of the milk Road team are going to be at permission list next week in Salt Lake City October 8th to 11 and if you're there we'd love to meet you in person so comment wherever you're listening with your telegram handle we're going to start a telegram group and we're going to get everybody in it we're going to meet up and have some drinks also if you are not already planning to go to permission list and you want to go we have a 30% discount code just for milk Road fans go to permission list enter code milk3 to get 30% off your ticket right now and we will see you guys there before we start today's episode let's

just take a quick moment to to hear from our friends over at Gemini discover Gemini The us-based Exchange built for new and advanced Traders as a special welcome gift they are offering new customers $15 in Bitcoin just for trading at Gemini security is the top priority as a licensed full Reserve exchange and custodian your assets are well protected plus they offer cuttingedge security features like pass keys to keep your account safe this exchange is setting the standard for compliance and Innovation so you can trade with confidence head over to gemini.com for /m milroad and start trading today to earn your $15 in Bitcoin sign up now and get ready to join the trading fund Sunny welcome to the milk Road show thank you Jay thank

you so much uh good to be here yeah great to have you uh let's start with um sort of a macro update of what happened in the last week a big question on everybody's mind is the US headed into a recession what are the numbers telling you well well we've been we've been writing a lot about it week on week uh last uh few months uh especially the market has been uh rebating with the fact that uh we are we are gradually going into a recession and this is not the Goldilocks that everybody hoped for uh fed is uh behind the curve and so on and so forth uh we've always maintained The View yes

uh the growth is slowing clearly the data is showing the growth is slowing but but uh it's nowhere close to recession and and there were also some temporary hiccups which had some temporary effect on the data uh which which meant that the market overreacted and then exaggerated by the August 5th uh situation with the Yen carry trade Etc um uh and and and as you can see we we the data is back the data you know the payroll numbers are back to 4.1% uh inflation literally has been uh under control for for the last few months now uh yes manufacturing growth has slowed a bit uh but but uh nowhere

close to recession and as we wrote in our uh newsletter today as well uh there is no recession uh even the Atlanta GDP uh is estimating a 3% growth uh which is which is really good and and that recession scale was was just that a scare it was overstated so no no no recession sir ding ding ding ding ding woohoo woohoo everybody party this is what we're talking about pour yourself a glass of milk things are looking good in the US that's great to see uh there is some Global coordination happening right now as us is not the only one trying to avoid a recession and an economic

downturn what are we seeing when we zoom out and look around the world what other countries and nations are acting to support the economy moving forward that's a very good question and and I have a conspiracy theory around this uh I think um people always for for for decades and decades people underestimate that uh Central Bankers have infinite tools to to inflate uh the economy inflate the assets and and that is what is happening on a on a global scale again once again it happened in 200 8 when when I was in banking it

happened before that in in during the internet crisis and we saw it last year with the btfp program as well uh but but this is on a global scale now where where beginning of the year we saw uh the Yen the Japanese Yen started to slide towards 140 and then uh eventually went went to around 160 uh uh end of uh end of July uh at the same time uh Chinese uh property markets Chinese stock markets have have literally collapsed uh month on month they've been declining and and same was happening in Europe this year with German

manufacturing and and uh the bond yields etc etc uh but but everything starts with the center of the World which is the US dollar and which is which is obviously controlled by treasury on one side and fed on the other side uh and and as as soon as they decided to cut the rates 50 basis points uh it it was not the an overnight decision and it was long time coming uh I I think I think the first step was that they uh the Japanese were kind of forced to create that scarce because the the Yen was was just just just not not under control and

they couldn't do anything about it and they had to take that step which which which then forced the FED to to to cut by 50 basis points instead of 25 and and and at least show that they are proactive and not reactive every time uh and then that followed with the Chinese then immediately coming with a bazooka of stimulus that you have seen in the last four five days and and and one would be very naive to think that this was not coordinated uh this was this was totally coordinated this was a plan uh especially going into the election year CA and the boys don't don't want uh to to to for the stock market to really go down that's where

everyone's money is these days before we talk about the Bazooka that China showed last week uh we also are at quarter end right now Q3 is just ending what are the quarter end effects that you're seeing right now every every month end especially at the quarter end uh uh there is uh all these Banks and financial institutions large funds asset managers uh they they have to do something uh We've Come to know as window dressing where all these Banks adjust their balance sheets to to kind of present like a like a healthier picture on on on the end of the quarter because that is their uh reporting

period uh and and what they really do is the entire month and the entire quarter they're taking riskier bets and towards the end uh last week especially they would start moving their assets to a to a more safer a more liquid asset and that's typically uh uh the the government facilities the federan facilities like the RP the the reverse repo purchase facilities um so that so that even if they move their cash from a risky to a liquid asset it's it's earning something and in the last four days I think we've seen about 100 billion dollar worth of RRP move into 100 billion doar worth of cash move into RP uh which which will wind

down as soon as the quarter is over from 1 October onwards uh which is tomorrow and and I think that's where uh we we start seeing assets go up again in October October as we all love to call it it's coming everybody uh it's a re re is over although September didn't end so bad so far that's for sure okay let's talk yeah exactly I think we all we all had a nice little end of September um let's talk about China uh so first off can you just break down what is the stimulus package that China announced last week

so so generally a government can can uh instill two kinds of stimulus which is a monetary and a fiscal what China has done is a monetary uh stimulus which is what uh the FED has been doing all along but but fed obviously because of the US dollar PO is they can pretty much do anything they like uh but but China uh cannot at the risk of devaluing the currency too much uh but but once uh the fed uh went for a 50 basis cut that gave some room for the Chinese to to unleash that monetary stimulus uh so what what did they do uh they first of all uh the they lowered the 14-day repo rate by 10

basis points uh which basically uh is kind uh kind of injecting about uh uh 30 35 billion dollars into the banking system uh uh and and and and then the pboc the the Central Bank of China they cut the rrr the the reserve requirement ratios by 50 basis points uh which again unleashes another uh trillion uh unan of liquidity around 140 uh dollars of liquidity into the system they also reduced the 7day reverse SEO rate uh and and and also the rates on existing home morgage Lo so basically they they're

kind of striking from every and any angle they can in the morning stimulus uh package packages that they have uh they've not done this before they've done peac mail things because um like I said they couldn't risk their uh unan to to go lower uh and and and blatantly for the first time they also provided uh 800 billion un support for stocks uh basically the brokerages can now borrow directly uh from the central bank to to to fund purchase of of equities this this is this is uh you know something like what fed did last year when the Silicon Val Bank Saga happened by providing a a back stop to

all the banks and uh with the btfp program they had U now now this is this is all good and and we had some some Mayers come in today as well where where PBC said that that they're going to cut Mage rates for first and the second home buyers by around 50 PES points and and it's going to be effective immediately by the end of October uh what we haven't seen is so far any physical stimulus any any tax cuts any subsidies any uh you know basically doing money directly out to the to the populace uh although president shei came out and and he said

he's going to do that but but let's see how how that works out to be yes incredible that what they've done already is around 500 billion in stimulus if you were to add up all these various uh channels that they're funneling stimulus through but as you said they still could do fiscal stimulus in the future which they haven't even done that yet so let's just take a step back what does this I'm actually going to bring up a chart just to show uh the immediate impact that this had uh this is a tweet from bespoke uh and it's a chart that shows the Shanghai stock market and it shows the last 12 months

and we hit the all-time high in in the year and the all-time low in the year within a one basically close to a onewe period a few week period um within a two- we period what does this say to you Sunny this tells me you cannot plan things in life you got to be very lucky that uh nobody knew this was coming like nobody knew the fifth August thing was coming um and and and and that's okay and that's okay when you are a Trader in life uh you don't need to panic and and go and buy uh these markets will will settle down because uh keep in mind uh

um a lot of damage has been done to the the local population sentiment uh people have lost almost $1.5 trillion dollar worth of uh property Assets in A5 trillion doll property Market in China you're talking about China specifically yeah and and that that money is not coming back that that sentiment is not coming think think about it you know uh you you you own a house which you have really saved money and youve built it and then suddenly uh and that's your biggest s usually that is the biggest asset in a in a middle class family and and you lose 25 to 50%

of its value uh Ju Just to bring it back to that uh it's it's going to take years and and and uh you know I I live in Singapore there is Singapore is is uh there is so much inflation here largely because of of the Chinese money coming in here same for uh Canada and same for Australia that money is never going back once once the money is out of countries like China or India uh you know Argentina Pakistan of course but but that that money never goes back so so yes they they are doing a lot but there's so much more to do and there so much time is going to take and people

are going to sell Ries people have been hedge funds have lost money funds have lost money uh hedge funds that were shot uh you know they they they are just uh in a in a very difficult situation now and what does the let's look at two perspectives what does the Chinese stimulus mean for China and what what have we seen so far and then what does it mean for the rest of the world for China obviously it means that first of all there is now a put on on on the bottom that that stocks are not going to go below this property is not going to go below this so so as a

savy Trader you could you could really sell a put at those levels and and be happy about it um second what what does it mean for China is that uh uh you could the Chinese uh Chinese inherently are gamblers and and a lot of those Chinese will come back to the stock market we we've already seen uh brokerages struggling to open accounts in the last 3 four days there's so much demand suddenly from from from the the the the Traders uh so I think I think that stock market will revive a little bit which will push the big stocks um and and then rest is a to be seen I

think rest a lot depends on uh the the economic data that comes out gradually what it means for the world that uh all the China related proxy assets I think uh you talk about copper which is also a proxy to AI trade these days or or iron or or the Aussie dollar everything is ring except oil uh I think I think oil is oil is been in a terrible situation throughout the year uh but but I but but but but again you know we were we were really really at the bottom like the chart that you showed uh there was there was bottom for the year so this is more of a one it is a KNE reaction second it is uh hedge funds Ling to you

know cut their shots uh and and as that data comes from China I think we will see this proxies rally more and more uh if the data is positive of course but but the first first that kneejerk is done uh I think I think uh uh uh end of the week onwards will will start to see some stabilization in in the Chinese stocks but it's but it's very good for the globe you know it's a like we just discussed macro is great in us you know it's it's awesome in China now two two largest economies uh Japan is not going to mess up again with the rates what can go wrong uh probably the only thing that

worries me is is a is escalation in the in the Middle East Side yeah it certainly is feeling like one of the best setups we've had in a while and everything is looking good let's go to crypto and what is it all mean for crypto first uh let's take a look at the immediate impact of the China stimulus and where we are right now heading into uh October uh you shared an interesting chart in your newsletter this week of the price change across major tokens uh walk us through this chart for everybody listening in tell them what they're see what you're looking at here the only thing we're looking at is a spike in the

so token uh which is uh driven by by market makers and the ponies uh there's no activity there's no real daps on so there's no real daps on anywhere in crypto um I I I I'm in Singapore and of every year we attend this token 2049 massive event we had 20,000 people come down to Singapore just just crypto people and uh wrote a massive article on that uh and the state of crypto so so so I'll tell you what's happening this this year the only trade um only people who have made money is is Bitcoin thanks to the ETF anticipation and then the flows

into Bitcoin or or uh or the mcoin Mania no most of the VCS have not made money most of the Traders have not made money uh uh and and thanks to the meme coins exchanges have made money uh it it's it's the same same culture that's been that's been going on for for 11 years now in crypto uh I I've seen which is trading and gambling makes money or the infrastructure on trading and gambling uh uh we we we obviously wanted uh when we came in crypto that will revolutionize the world and there will be apps and there will be things that

that crypto will be built on but but nothing so far honestly nothing um eth had had a bad year uh uh uh you know Bitcoin Bitcoin stays the king it will stay the king because now it is institutionalized uh not just we have a spot and Futures on the CME uh in fact open interest on CME is much higher than binance now and and we also the SEC has approved options which opens a plethora of structured trades on bitcoin so Bitcoin stays and every year we have seen year on year every year along Ong with Bitcoin there is one one one of the alts which does well this year it was

Solana but and things have structurally changed or or let's call it broken or or corrected I don't know what which word to use but every uh bull cycle so far in the last 14 15 years we've seen that money used to rotate from Bitcoin to e e to alts alts to shitcoins and back and and that cycle continue it did not happen this year why because the money that has gone to the ETFs is is very smart money it's the it's the institutions it's the corporates the even the sovereigns the the Pension funds those guys are I I

call it sticky money they're not in the business of trading day in and day out with the swing trades once they put money they stay there and for them the easiest money to put is in the Bitcoin ETF no custody required no headache required regulated etc etc so that money has not flown into the ethereum and that money has not flown into the altcoin so practically no new money has come into the the entire crypto system it's just us deons moving from one mem coin to another and and one pon to another one uh pump. fun to a Tron sun. pump to a

base to a blast and and and but the same money same people so because the new money has just not come in and I don't see it coming I uh coming for what coming because because there is any consumer app that that carries a little bit of traction uh goes bust as soon as the token comes out friend. tech and and you you will see see will happen with uh with this poly Market as well as soon as the token is out you know because because we just want to move to the next big things the influencers are pushing that everything is pushing that so my my my take is take is really that that you know we have a lot of great businesses can be built on bitcoin as the new

digital gold it truly is a digital gold now uh trade five products can be built around it it doesn't mean alts will die or or there will will be infrastructure improvements there will be winners and losers every year but but in the long run I think uh Bitcoin stays the king uh and and and this's one another thing that has happened this year which which which uh largely people ignore is is the rise of AI and and thanks to that equities and mag 7 and generally stocks have done very very well so if my Nvidia is giving me better returns than bit coin why do I need to come to crypto MH

right and that's continuing you've seen in the last two weeks as well fed raises by 50 basis points NASDAQ and S&P are alltime high we are still struggling to break 64k MH so so why will the new money or smart money come to crypto I I cannot understand and and then we talk about global liquidity Global liquidity is coming you know this is global liquidity definitely is coming but again why will the global liquidity not go to the meta and apple and and the mag 7 and theia of the world why why will it go to SOI and and the next Celestia or or whatsoever sorry long answer no it's a

it's a it's a it's a good question to ask uh it's a little bit of a bearish take and maybe not the most uh exciting thing to hear for everybody listening in that's hoping that their their all their bags are going to pump but certainly it is has been so far a different cycle how does it make you think about your trades and your portfolio and the way you look at the markets does that mean that you're pulling out of crypto and focused more on mag 7 AI stocks uh where do you think how are you making your own decisions based upon this thesis great question so so first of all

we have a newsletter called 52 trades in 52 weeks where every Thursday we take a trade transparently and then we publish it very transparently and there's a Google sheet which is live all the time um uh we have taken all kinds of Trades from Sundog to Vista to mother in fact we had a large largest position in mother and and and thanks to that our returns have been awesome so so so the short answer is we we're not going away I've spent 11 years in crypto uh but but you have to be pragmatic at some point uh and and you have to go where where the money is

going this year the money has gone to meme coin so we have updated ourselves right now I don't know where the next narrative is next money is going uh uh so so so Bitcoin I I definitely see especially if Trump wins we could we could uh touch 100K but there's a lot of smart money OG's from the day I know who are who are just sitting on the sidelines ready to sell at 90k they're not waiting for 100k but you know whales who've got thousands of Bitcoins they can't just sell 10,000 Bitcoin at 100K so they have to start selling at 85 90 95k uh

so so we are how we are I personally for me we uh uh I think I think the in the portfolio construction uh Bitcoin and salana are our biggest bags have been throughout the year thankfully uh we had some ether which we got rid of I think sometime in June or July um uh there is there is uh and then about have about 20% in various alts uh which will stay uh we we pick up more alts in the last couple of months and and they they are they are doing well uh and there is a 5% portfolio which will stay in meme coins but right now the meme coin trade feels like dying as well uh as in the New Meme

coin trade uh the easiest trade right now is like like if whff goes back to 150 it's a great by why do you want to do it or or mother goes back to uh 0.075 or 0.040 like last time that's a that's a massive buy MH uh but if you were to ask me what narratives of the future I am personally very bullish on the intersection of crypto and AI I think I think AI has proven itself rest everything uh rwa or deep in or or or all the new acronyms uh are are yet to improve uh in in real life uh and and and

decentralized AI there is room for it centralized AI is obviously there it's here to stay it'll keep on exponentially growing uh so so I think where we are going we are we are investing a portfolio in this uh composition but we are also aggressively learning and looking on on the AI side of things CU because next 10 15 years is all about AI yeah uh I want to mention since you brought up uh suie a few minutes ago and it's massive week last week uh we did an episode all about sui and Aptos last week uh I'll tease

you guys it very much aligns with what Sunny is saying which is there is not a lot of fundamentals right now Behind These Chains but there is a narrative of who will be the next L1 and sui is well positioned to be in that narrative and so suie could be a nice play throughout the rest of this cycle I won't get your take on that what I want your take on Sunny though is okay if you believe Ai and crypto where where are you getting exposure to that is there a token that you really like in that space are you more focused on uh just investing in AI in the more traditional Ways by by investing in Nvidia what is the ways

that you're getting act getting exposure to AI so so yes we we we taking uh exposure on tokens uh my favorite is atth ather uh uh I I like that I think I think they have uh the team is good and they have massive things coming up we're not investors uh in that so so there is no disclaimer here but uh but uh but I like that uh uh I think near is also starting to make some noise in the AI space render I like as well um there is no clear winner yet but I think there are at least five six good coins spec is another one of them uh which which will do good uh we are also taking Equity

exposure in non- crypto AI stocks U again uh at this juncture it's more learning than anything else I think I think uh U we are we are not AI we have not traditionally been AI people for 11 years but last six months we've been aggressively learning writing uh talking to Founders investors I'm LP and couple of AI funds just to learn and and then deploy our own Capital uh if if you guys want to see uh Kyle's take on AI we did a show all about uh bit tensor or too and their token last week which has had a great

rise uh so go back and check out that episode Sunny thank you so much for joining us today thanks for staying up late in Singapore as Sunny mentioned he's got a great newsletter highly recommend you check that out lots of great takes in that also might want to follow sunny over on Twitter where he's active as well Sunny hopefully we'll get you back on the show again soon this has been a really great conversation thank you sir thank you for having me really enjoyed this yeah everybody listening in uh I want to know if you guys are going to be at permission list because the milroad team is going to be at permission list next week uh so comment in the comments if you're going to be a permission list throw your telegram handle in there we're going to start a

telegram group we're going to get everybody together in person and if you want a discounted ticket to permission list we've got that for you as well thanks so much for listening in everybody have a wicked awesome day thank you thank you Jay have fun 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 5 minute 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 day