AMA: How The Everything Code Changed The World Forever ft. Julien Bittel

25:52Don't forget the last time around it happened, it was because of COVID. Before that, we haven't had a recession since 2008. And arguably, we wouldn't have had a recession if we didn't have COVID. So everyone remembers COVID, recession, stocks fell. In this environment, it's highly unlikely because we have the cowbell to debase the currency that pushes up asset prices. So the slower the economy is, the more the probability of more cowbell, more liquidity comes into the system. RAOUL PAL You just have to think back. You just have to think back to sort of COVID, right? We went through and we talked about this.

26:32What was the last video that we did just recently? We did an AMA for which one was it? For the MIT. I'm turning into Biden here.

26:47Is in COVID, what happened is basically the economic data fell off a cliff and people were forecasting the deepest, most entrenched recession of all time. And when you're looking at the data and you're thinking about the consequences of a global pandemic, you're thinking, OK, yeah, this could be really bad. And that actually caught me off guard personally. And I've talked about this in the past when I was still managing money. I was short to buy back in because I was thinking it would be a lot more drawn out. But the reality is the Fed noticed, I mean, the Fed and the Treasury noticed at that period that they could just inject liquidity and turn the economy around on a dime.

27:23And they've done it. And they won't shy away from it this time because of the everything code. So again, if you haven't read the everything code, go back and read that. They just can't afford to let the economy fail because of basically baby boomer balance sheets. And it would just be generational pain if they did. So the worst things get here, it can only mean more cowbell in our opinion. And when you're talking about unemployment, unemployment has ticked higher. We're at levels historically which have resulted in Fed rate cuts. I think the unemployment rate can go to the Fed's 2024 higher bound projection of around 4.4%, which I think would bring rate cuts forward also with core PCE coming lower.

28:13But if you look, as I mentioned earlier, if you look at forward-looking indicators of unemployment, overtime hours have really started to base in non-durable and durable good manufacturing sectors. Also, if you look at the NABE, so that's the National Association of Business Economics, and you look at their profit margin survey, that's turned sharply higher, and that leads all of the employment surveys. So we're talking about the ISM Employment Index, services, NFIB hiring plans. So what that's suggesting is that now, although unemployment can still weaken a little bit just because that data is so lagging, it shouldn't spiral out of control.

28:56but it'll be enough to get the Fed's intention. And that's what's important. And when we're talking about Fed rate cuts in the market selling off, yeah, look, that can happen. But what we don't think is that this is similar to the 2008 and 2000 rate cutting cycle, where essentially that marked the top in markets, because the way that we're thinking about it is if you get rate cuts, given that the dollar is linked so close to the hip with what's being priced into the forward curve in the two January of next year, that the dollar coming lower would ease financial conditions and financial conditions leave the ISM and everything else.

29:31So that should be business cycle positive. Those of you who want to know more about the business cycle, Julian and myself write something called the macro investing tool, MIT, that comes out weekly, where Julian runs through this in specific detail. People are saying, how do I get pulse of liquidity? How do I understand this? The macro investing tool is your hack to understand how to allocate assets according to the business cycle. It's a huge amount of work from Julian in this. It's part of the Real Vision Plus subscription. If you haven't got a Plus subscription that is an offer, I would go for it.

30:07It will literally change your life because it makes it come alive in how to do this. And those of you who aren't on the Real Vision platform watching this on YouTube, come across to realvision.com and you can see from there the macro investing tool and stuff like that and how to subscribe to it. Also, if you're watching on YouTube, please hit the subscribe button to the channel. That helps us a lot. So appreciate that. Okay, next question. Sanchik coming back with a question, who is the crypto newbie, if you remember, is this the right time to buy more and more of the three major coins or should we wait for collapse?

30:43So my view is we have been consolidating for three months. And the work that Julian and I have done suggests that the next move is higher. So we think this entry level is a decent entry level. I put out a flash update that's on the platform now. So you can go and have a look at that. OK, J &J.

31:06With institutions coming into crypto gradually and it being a high risk, high beta risk asset, Do you see a normal four-year cycle being disrupted in the coming years, especially if equity valuations come back down to earth and BTC remains correlated to US stocks? Why would equity valuations come down to earth? If you remember from the Everything Code, equity valuations, the earnings are driven by GDP. The price is driven by debasement. P ratios and valuations keep going higher. The four-year cycle is driven by the debt cycle. And the debt cycle is the liquidity cycle. So it's very difficult to see that changing.

31:47That being said, I don't believe that we will be looking for a recession in the next 2026 down cycle. So we were more likely to see withdrawal liquidity and markets like the NASDAQ may be trading down 20%, which to me is a sideways market, as opposed to the down 30, down 40 % that we saw in 2022, which was driven by this inflation pulse. So it's kind of a pause that refreshes that may go on for a year before the next leg higher, which gives me a probability that we may end up with a full bubble cycle going into 2030. But we'll have to wait and see. Yeah, Bernstein. Hello, master of macro. If the economy continues to be strong, do you see a scenario where Fed keeps Fed funds around 5 % for much longer than the market anticipates.

32:39And if that's the situation, how will the market react to a higher rate regime? So we actually, Julian and I, wrote about this in GMI a while ago. 1994, rates have been coming up in 93, 92, 93, into 94. The bond market cracked. Inflation was high. Everybody thought there was going to be a massive recession. The equity market had a big correction. The Fed in 94 cut rates twice only, 25 basis points, 50 basis points, and they never came anywhere near the low that got taken out in 2000. So what happened over that period was, okay, rates remained relatively high versus the previous cycle. And most people say, well, obviously, equity markets, There must have been a nightmare.

33:30No, it was the single best performing equity market period in all recorded history. So stability in rates is enough. Even if they were to hike once, it really wouldn't make a difference to the rate of change. So I think that's all a red herring. And liquidity is the dominant driver and not rates. That's the one that matters the most. Rates are just a lagging factor from liquidity. I'm just going to chime in for a second there, because I think that's not an important part, is when we talk about this year, we came into the year, if you remember, with six rate cuts being priced into the curve. At the time in Global Macro Investor, Rahul and I were saying that we could price out around four of them and it wouldn't be an issue for equity markets because equity markets would be more focused on the earnings cycle now that we've pulled out of an earnings recession.

34:18Because the way it works is last year, prices were accelerating higher, especially when we're talking about long duration equity plays like technology, consumer discretionary, home builders, everything was ripping and people were like, well, this is not supported by the fundamentals. Earnings are still too weak. But prices move with the liquidity cycle and earnings move with the business cycle. So as long as earnings are continuing to continue to improve here, that will justify the 2023 valuation premium. And that's currently what's happening. So earnings revisions, if we look at the S &P 500, are still trending higher.

34:50So suggesting that the business cycle is recovering. And when we said that we could price out for rate cuts, that's exactly what we did this year. At one point, we almost priced out five. And even then, the Nasdaq is still up 20 percent. Bitcoin's up, what, 50 percent or so, as is Ethereum. So it just tells you that this is not what markets are focused on. And our view is that even if they cut once, very similar to the mid-1990s cycle, it'll signal to the market that the Fed is here to support the business cycle. And that's the most important thing, especially with once they start cutting, it's the beginning of a cutting cycle.

35:34And so the market, in our opinion, will see that as favorable. So, Macik, this is a question about, you know, if I sell crypto for a thousand at the peak and then it falls 80 percent, I wouldn't need to use the full thousand to buy back the same amount of the token. The point being is you will end up with less exposure and you'll be chasing it all the way up. I've done this. We've all done it. Who knows if you're going to time the cycle properly? Again, I did a whole piece on this and on how to take profits and when I'm going to sell and all of that. So I'd refer to that piece.

36:18Armani Yadzi, what's your forecast for Dogecoin, considering Elon's role, if integrated across Elon's thing? Look, Elon has plenty of fights to have right now. and as he's putting together the past parts of his ridiculous mission to get to mars the last thing he wants to do is have a fight with every government about money so i think it comes but not yet i think um it will be the last fight he'd want to have libra facebook went down that route and they got shut down very fast um

37:01P.M., do you think it's worth liquidating tax-advantaged stock portfolios and moving into crypto? I wonder if the tax incentives counterbalance the upside of crypto. I know this sounds ridiculous. I don't know. I don't live in a tax jurisdiction, so I don't have taxes. And it's different countries, different rules, different stuff. I mean, I was at the Melbourne Real Vision meetup with a bunch of Real Vision members last week. and I suddenly found out that in Australia, it's 50 % capital gains. So if you're trying to trade the cycle, you can't because even if you were to sell out at the top, you'll really make a 50 % haircut.

37:39So what's the point of getting out of the cycle? So you need to think through some of this stuff.

37:47Sam Smith, do you think there's any merits in the thesis to the left translated cycle idea? Julian, have any thoughts? I'm not sure I know what that is. Well, that means that crypto goes higher, faster, peaks early. Oh, right. Is it all over this year? I mean, I don't think so. So the way what happened the last cycle was that liquidity rolled over a lot earlier than I think most people were expecting. Now, when we talk about fall, macro fall, which we think comes next year, which would then also correspond with crypto fall, that's a really difficult environment to navigate because on one hand, you know, wages are probably reaccelerating.

38:34Inflation at both a headline and a core level are also moving higher. It's likely that central banks, you know, are becoming more restrictive. You know, margins are being squeezed. So when you listen to a typical strategist on the street, they're saying, okay, well, the S &P 500 should be lower. And as a result, risk assets are all trading lower. But it's also an environment where, as Raul touched on earlier, speculation comes into play. And largely because even though the business cycle has peaked liquidity is still rising. So we just have to see when we get there. I think we have the tools to be able to detect that.

39:12We'll see. But I think that crypto will peak with the business cycle. And I don't think the business cycle peaks out until next year. Yeah, it makes sense to me. Okay, I'm going to scroll through because we're quite behind in the sections.

39:31Latin bunny, which variables go into the everything code implied liquidity trajection? so the way to think about that is we know that liquidity is a function of the business cycle because central banks operate as a lag with a lag to the liquidity cycle as a means to offset weaker growth momentum meaning that they inject liquidity when the business cycle is weak so actually what we found out in the everything code is we know that we have these three and a half year business cycles. So that since 2008, really, the ISM has become perfectly cyclical, which means that the future ISM highs are currently corresponding with current ISM lows.

40:20And because of the correlation with liquidity on a lagging basis, I'm projecting out what we call total liquidity. So it's a composite of public and private liquidity. So what that is, is looking at on the public side, you can't just take balance sheets anymore because we know that central banks are getting more and more clever with backdoor liquidity facilities. For example, if you remember back last year when Raul and I were talking about liquidity rising, most people were saying, how can liquidity be rising when the Fed's still doing QT and rates are still as high as they are? And that's, first of all, because of the second derivative and the rate of change.

41:03But it's also because they were using backdoor liquidity facilities to offset entirely QT. And so what I'm saying is you have to look at the net liquidity equations on the public side. And then on the private side, it's a global M2 measure. So we lump those two together. And that's what we use for liquidity. Now, Jonathan Poulter is asking a question. Now, this is exactly the kind of stuff that Julian answered in the MIT AMA that he and I did, I think it was last week or the week before. And again, Julian covers in MIT in great detail. So that's a plus tier or above. And the question from Jonathan is, again, Julian covers this in such huge detail every week that you'd be remiss not to be in the plus tip.

41:59Julian mentioned we're in macro summer environment, which I understand is an environment of rising growth and inflation. It's the rate of change of inflation. It's not the second derivative is one thing you need to understand. However, I'm struggling to understand how this can be as most countries, including the US, still has an ISM less than 50. So it's still shrinking, although improving. So, no, I mean, if you look at over the last six months, and again, I would encourage you and everyone, as I say, we just published the latest MIT report an hour ago or so. And I talk a lot about unemployment and PMIs.

42:31So, you know, 60, actually, I think it's closer to 80 percent of PMIs are on a six month basis are up and over 50 percent of them are back in expansion territory. So, you know, that's not true. And also, when you look at China, China's been above 50 for quite a while now, as has Germany, as has Sweden. And actually, when I talk about Sweden and I put a chart in there on this, Sweden is one of my favorite ones to track. And I've written quite extensively about this in GMI. And it's largely because it's just a small export oriented country, which means that when the business cycle starts to improve, Sweden is one of the countries where you see it first.

43:16And the chart that's really bonkers in the latest MIT update is when you look at Sweden PMI new orders to inventories versus the ISM, which, of course, would be more leading versus the ISM because of the dynamics I just mentioned. And it's gone nowhere but up. And the other thing I'm going to say is with the global PMI in May, so we're still awaiting all the PMIs now right for June, but the global PMI accelerated to the fastest pace in over 12 months in May. So the cycle is improving. It's just some macro is sometimes like watching paint dry. It can be a very slow moving process. us um there's a lot of questions about eth solana switching from eth to solana all of that just check on the platform and check on uh youtube i just did a video about this it came out today about an hour ago so there's a lot of questions that can be answered there do that if you're on youtube obviously please subscribe to the channel hit the likes all of that kind of stuff um okay Okay.

44:30Mark Wells, housing market, many regional areas have had an 80 % plus of real estate transactions by corporations and offered as rental properties. We see significant cracks, especially in Florida, Nevada, Arizona, Texas, with pockets of over 1 ,000 % plus inventory numbers. These properties were purchased with massive leverage, and in most cases, their portfolio span many areas of states. For example, the Atlanta Metro, 83 % of single-family homes have been purchased by corporations in the last two and a half years by four companies. Recently, housing costs have continued to rise, all-time highs, affordability is at lows, et cetera.

45:05What are your thoughts on housing? My thoughts on this are there is a demographic demand for housing. Right now, interest rates are too high. That's making the market somewhat stagnant. That's rising inventories. The moment rates come down or earnings go up and the business cycle goes up, the housing market will free up. There is a structural shortage of housing still in the United States, still in Australia, still in most of Europe, still in the UK. So I'm not bearish on housing. Also, debasement of currency allows housing to go up. Julian, any different views? Yeah, no, I've got exactly the same view.

45:37And I was just looking at some of the data. If you look at like kind of pending home sales, which were released, I think it was this week. Also, people are looking at new single family home sales and showing the index in kind of nominal index terms. You need to think about this stuff in business cycle terms as well. That's the way I've kind of come to terms with it. And pending home sales in Q4 of 2022 fell to a record low and are since coming higher. And so what you're currently seeing with some of the housing data rolling over, it's because at this stage in the business cycle, the year on year comps start to fade out a little bit.

46:10So growth momentum slows. And if you pull up, let's say, the chart of new single-family home sales and you look at it in year-on-year terms, you can go back to, let's say, 1970 or so. And you'll see every time we come out of a significant dip in new single-family home sales, we go higher. And that's like the initial phase where the market starts to grind higher. And then we come a little bit lower again to kind of post a lower high just because of the year-on-year comps, so the base effect. And with Raul talking about rates, yeah, rates are still too tight. And if you overlay 30-year mortgage rates versus something like home builder sentiment, it's kind of the same chart.

46:50So the minute that rates start to come lower, we should see the entire housing complex start to improve again. RAOUL PAL, Sanchi, I see you asking the same question over and over and over and over again about what weighting should I have? How do I do it? I don't understand it. I think familiar yourself with the content on Real Vision will help you have a better understanding. We can help you, but we can't really fully hold your hand. However, if you want to summarize the everything code, Here's the hack. Watch the video and then click on the plus button at the bottom right. That'll give you access to the AI, the Real Vision bot.

47:31You can ask the bot to summarize the video and it will create a whole summary. Then make that a note and it will save the note into your section, your library. Then have a look at if you hit the explore all button at the top, you can see all member notes and you'll see other people have written notes on the everything code so that'll help you do that read what other people's notes are ask the ai to help summarize stuff and it should really help you in your journey um

48:09so i'm trying to go through while you process that can i just butt in for one second just because I pulled up the MIT report. I just, because I was thinking about the PMI data. So just to come back to that, 61 % of countries are currently above 50 and 82 % of countries are showing signs of improvement over the last six months and 50 over the last three months. So it's a pretty broad-based recovery for now. So I just wanted to clarify that. So another question about real estate from Apurov. looking for US and India because he wants to take some lifestyle chips off at some point, he's an MIT member.

48:53The point being is, India, you can't be bearish real estate. Yeah, they end up in bubbles, but Christ, they've got an average age of 28 years old. There's a massive structural impediment to property there because of all of the old buildings and all of that. So yes, it's a very positive trade over time. The US has a similar dynamic, not obviously quite as strong. So I'm not bearish real estate. It's a stable asset to keep your money in overall, as long as you're not using excess leverage.

49:30Glenn, all the speculation discussion of the 2024 fall having great rises. I'm confused. Didn't the real gains in the last cycle occur the following spring and summer? And look forward to 2025. Do I have the timing of the cycle wrong? Yes. You're using the literal seasons and not the macro crypto seasons. So the literal seasons are not what this has to do with. When we're talking about macro summer, it's year three of the bull market. Macro fall or macro autumn is year four of the bull market. It's not correlated. It just so happens we're transitioning from spring to summer, right at that spring-summer transition.

50:11But they're not related. I know it's a bit confusing sometimes when it matches up, but that's not that.

50:28Specific crypto questions. I won't answer because I don't really know. RAOUL PAL, RB, thanks a lot for your eye-opening content. It helps me and I think a lot of other working class people big time. It connects the dots. So thanks again to the RB team. Great. This is what we're trying to do. We're really trying to help get you up the knowledge curve, give you the tools that you need to participate in these massive secular trends, which are game-changing. If Julian and I are right, and crypto goes from$2.5 trillion to $100 trillion over the next eight or 10 years, that's the biggest opportunity any of us are ever going to be given in our lifetimes.

51:08So that's what the whole don't fuck this stuff up thesis is. How to unfuck your future means get on board with these secular trends and they will take care of a lot of the problems that you have in front of you. Paul Casper and XRP said I'm not going to answer single token questions. There's so many people asking about when I take money out, How do I put it back in? Again, watch the video I put on this.

51:39Yes, you can buy more tokens with less. It's the amount of money you're going to put in. You won't put the same amount you take out because you will be fearful. Even if you buy less than you buy less, you're trying to make your wealth compound. You're not trying to rebalance your portfolio. know.

52:00Alexander Tamburello, just got Real Vision, been following on YouTube for a while. Thank you for what you do. Alexander, thank you for joining us over on Real Vision. You'll find there's a home here. There's an amazing community, a lot of knowledge, a lot of information, and we're here to help. Jurij asked this question twice, obviously really keen to get an answer. Hey, guys, what's your opinion on the African continent in terms of demographics long term? view. Demographics of Africa are generally good. North Africa better than others. Nigeria exceptionally good. And so generally speaking, Africa is a story really in 20 years time.

52:42But some of these countries, Nigeria, Morocco, Egypt, tend to do very well. It's all part of monsoon thesis as well.

52:57There's a lot of crypto questions again, major questions I've just answered on a video. Okay, Julian, here's a question for you from James Hu. The question is, really, what is driving the dollar strength right now? Because it's decoupled from rates a bit. Yeah. So the dollar, and again, I wrote quite a bit about this in MIT a couple of months back. Given what's going on on the fiscal side of things, gold is decoupled from pretty much, I'm sorry, the dollar is decoupled from pretty much everything. So gold is telling you that the dollar should be lower, but the dollar is not lower because of the combination of what's happening in terms of fiscal regime, but at the same time, the fact that rates are still high.

53:47So the Fed's still running tight monetary policy. So what's keeping the dollar higher, as I say, is rate expectations haven't yet come lower. And that's giving the dollar some kind of life raft for the time being. The minute the Fed changes their tune on rate cuts, I mean, Rao and I think actually July is underpriced. I think September is more likely for a cut, but we're going to write about that in GMI over this weekend. But the minute that that happens, the dollar has been trading in lockstep with what's being priced in, in terms of rate cuts. And so that's what's currently propping up the dollar, even though, as you say correctly, they've diverged from bond yields, which I don't know really how to explain.

54:41Do you, Raoul? I mean, I don't have a particular view on something like that, so short term. I think it's Dolly Yen just screwed everything up. It's as simple as that. I think just Dolly Yen screwed everything up. Everybody understands that that needs to be resolved. I think it gets resolved. Trevor Booth, Raoul, when are you coming to Perth? I tried to get up on my trip and I couldn't, I just didn't manage to fit it in in the end. So I did Melbourne, Brisbane, Sydney. One thing I do know is it's a fucking long way from anywhere. It took me seven and a half hours from Melbourne to Singapore. I had to overnight at Singapore airport, 19 hour, the longest flight in the world from Singapore to New York.

55:22I had to overnight at JFK and then fly down to Cayman. So I'm not rushing back, even though I actually love Western Australia. It's one of my favorite places in the world. Tiz Ham, thanks to you both. Is it a good time to add Tesla? I think we both like Tesla here. Yeah, I agree.

55:45Okay, I think we have hit the top of the hour. Thank you, everybody, for all of your questions. As I said, on the Real Vision platform, there's quite a lot of content from me and Julian today over the last week. If you're watching this on YouTube, please subscribe to the YouTube channel. Click the like button. Also, do me a favor. I'm trying to help you. So come across to realvision.com. It's free. And those of you watching this on Real Vision, if you want more of this kind of work from Julian and myself, Macro Investing Tool is part of Real Vision Plus. And where the real work happens is in Real Vision Pro, where we put our trade ideas and much more detailed stuff.

56:25If you're interested in pure technology, this is the exponentialist as well. So explore yourself in the Real Vision world. Hopefully we've been helpful to you and we'll see you all next time.

57:04So we get all of that all in one place in Singapore. What more can you ask?

57:15See you at Token 2049.

57:30Thank you.