In short
Podcast Summary: Raoul Pal: The Journey Man - Crypto Daily Briefing Special: Raoul Pal AMA
Overview In this episode of "The Journey Man," host Ash Bennington interviews Raoul Pal, CEO and co-founder of Real Vision, during a lively Ask-Me-Anything (AMA) session. The discussion centers on the current state and future of crypto, the macroeconomic landscape, and the transformative impact of technology on wealth creation and the economy.
Key Themes and Concepts
Current Market Sentiment
- Crypto Optimism: Investors are feeling optimistic due to recent gains in Bitcoin and Ether prices.
- Central Bank Influence: Pal discusses the correlation between central bank balance sheets and asset prices, highlighting a trend of asset inflation attributed to currency debasement.
Economic Framework
- The "Magic Formula": Pal outlines a formula for GDP growth, which consists of population growth, productivity growth, and debt growth. He emphasizes:
- Declining populations in developed nations.
- Stagnating productivity.
- Limitations of debt growth post-2008.
The Everything Code
- Concept Introduction: Pal introduces the "Everything Code," a broad thesis suggesting that the correlation between liquidity (central bank policies) and asset prices can forecast future market behaviors.
- Historical Context: He links the economic cycles since 2008 to a cyclical pattern where interest payments need to be continuously monetized by central banks.
Exponential Age
- Technological Influence: Pal argues that technological advancements, particularly in crypto and AI, will drive productivity and economic growth in the coming years.
- Demographic Shifts: He mentions the potential for increased per capita income as baby boomers retire and the workforce changes.
Wealth Disparity
- Purchasing Power Concerns: A striking finding is that the median American can now purchase significantly less of the S&P 500 than in 1980, illustrating the erosion of purchasing power due to income stagnation.
- Role of Crypto: Pal views crypto as a democratizing asset class that allows more individuals to participate in wealth creation.
Regulatory Environment
- Government and Crypto Interaction: Pal discusses the evolving relationship between government regulations and crypto markets, including the implications of potential ETFs and the actions of major institutions like BlackRock.
Impacts of AI
- AI and Crypto Synergy: The conversation touches on how AI technology can enhance crypto applications, including identity verification and security measures.
Key Takeaways
- Long-Term Outlook: Pal emphasizes the importance of having a long-term investment horizon and filtering out market noise.
- Asset Allocation: He advocates for focusing on technology and crypto assets as the most promising investment opportunities.
- Market Dynamics: The interplay between central banks' liquidity management and economic conditions will significantly influence market outcomes.
Audience Engagement
- The episode features a robust Q&A segment where listeners pose questions on topics including Bitcoin ETFs, the future of Coinbase, and the implications of recent regulatory movements, allowing Pal to elaborate on his views and predictions.
Conclusion Raoul Pal's insights highlight the rapid changes in the macroeconomic landscape and the transformative potential of technology, particularly in the realms of crypto and AI. His optimistic outlook on the future of asset classes, alongside a call for critical analysis of current narratives, provides valuable perspectives for investors navigating this complex environment.
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For further exploration and in-depth analysis, listeners are encouraged to engage with the Real Vision community and access additional resources available on their platform.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Transcript
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1:31What's up, everybody? It's Ash Bennington. Today, I'm joined by the one and only Raoul Pal, CEO and co-founder of Real Vision. Welcome to Crypto Daily Briefing, Raoul. Thank you, Ash, and hello, everyone. Good to see you all. Well, Raoul, it's fantastic to have you here today. And excited to talk about the everything code, something that you've been thinking about for some time. I have to just give a little bit of context and background on this. You know, you and I have been working together for a lot of years now, and you've got a lot of views on the world. To me, this is the period where everything seems to come together.
2:05Debt and deflation, demographics, globalization, central bank policy, and yes, of course, digital assets and crypto. What's the narrative, Raul? It's difficult to put it all into one place. But essentially, the world that we knew is broken. It's broken because of demographics. So if you think of, I call it the magic formula. What is GDP growth? GDP growth is basically population growth plus productivity growth plus probably debt growth. And debt growth kind of robs the future to create current growth. And when you look at those three factors, most of the Western world plus China are seeing shrinking populations.
2:50The US is kind of flattening, not shrinking, which is why the US trend rate of GDP growth is somewhat higher than Europe and Japan. And China is still a bit different because of the stimulus packages. Then we look at productivity growth and it's been declining for a very long time now. And so we have a decline in productivity, either a decline in population or slow down of population growth, and debt growth reached its limit in 2008. And this is the key part. So really what GDP growth does is finance investment and also debt payments. when a when a government gets to 100 % of GDP in debt which the EU Japan US did and UK's just done so last week if they're 100 % in debt and the trend rate of GDP is let's say 2 % to make easy maths and interest rates are at 2%, 100 % of GDP growth goes to paying interest.
4:05Because every year you've got to pay the interest that needs to come out of GDP. So that means the economies wouldn't grow. Now, it used to be covered up by debt growth. But what happens now is that the private sector is over 100 % of GDP in debt as well. So you're competing for the GDP to service the debt payments. And the answer ended up being in 2008 is we will just put it on the balance sheet of the central bank. And the everything code, part of the everything code, which is a very big, broad thesis, proves as much as I can that all interest payments are just the monetization of the debt from about three and a half years ago.
4:51Why three and a half years ago? It's this three to five year window. the economy has come very cyclical because in 2008 we actually got the great reset that people have been waiting for the reset was saying okay interest rates don't count anymore they're all going to zero so everybody can service their debt right people haven't framed it in these terms but that's what it was and then everybody refied their debt and governments have generally and corporations generally have refi in the three to five year sector. So you get this three and a half year cyclicality of the economy that debt payments come due, the economy slows down, rates get cut, and we keep going through the same cycle over and over and over again.
5:35This one got somewhat skewed by COVID and what it did to supply. So it created a larger inflation shock. But generally, the framework is still there, that the central banks need to monetize the interest payments or the economy compounds negative forever. That's a big thing to get your heads around. And I've proven that the US has done it, Europe's done it, Japan has done it, and the UK have done it. I think there is a global central bank agreement that they need to keep interest rates down below trend rate of GDP growth when it comes to rolling these payments. The way of traditionally getting it down is having a recession, but that credit mechanism is there anyway.
6:31So that is the key part. And those interest payments are what's driving up the central bank balance sheets. The central bank balance sheets are liquidity, and we'll talk a bit about the liquidity element later, but what they actually are is debasement of currency. You're basically borrowing money to pay off the interest on the other money, and that's a pure debasement of currency. And that optically makes assets go up in price, optically because it's actually the denominator that's falling and not the asset prices. So with part of the everything code, I changed the denominator for all assets to the global central bank balance sheets and found out that most markets had gone nowhere.
7:18Once you look at it in those terms, they and they all look more like Europe did, which was a sideways ranging market. And that was the S &P went nowhere. Real estate went nowhere. Gold went nowhere. But there were two that did, which was technology and crypto. And I'm like, huh, what's that all about? And that was this realization that got me to the exponential age, which preceded this whole thesis, that those are not only driven by the debasement, but they outperform because they're driven about technological adoption. So they're driven by Metcalfe's law and other factors. so what i then found out is when i used we built a a liquidity formula for gmi myself and julian bittle and we found that according to our measures of liquidity the nasdaq the s &p all of these things let's use the nasdaq 97 correlated with liquidity particularly the central bank balance because it's the denominator.
8:29And we can then forecast into the future by using a lot of the work that we do in GMI, where liquidity is going to go. We also know what the central banks are going to do because they monetize their debt three and a half years later. So we can actually build out models into the future where we think liquidity goes. And if assets are 97 % correlated, we can forecast assets out into the future as well, which is what makes it in everything code. Now, it's a hypothesis, a thesis needs to be tested. It's very bullish on assets going forwards, because we're in the point in the cycle where economic growth is falling, inflation is falling, unemployment will start rising.
9:13And at that point, you tend to get stimulus over time. And we've seen the central bank balance sheets. The Fed used theirs for the banks. We saw Japan with the yield curve control, the UK bailing out its pension system. So bit by bit, we're starting to see the return of the debasement. And over time, it should accelerate at this point in the cycle. And that gives us a very good backdrop to assets, particularly crypto, which is the fastest horse in the race. Yeah. We're going to talk a lot more about crypto and some of the other new technologies in just a second here, but I wanted to raise two points from this report.
9:50I read this a number of times. It's a big thesis to get your head around, but I wanted to just raise a couple of points and have you talk about them because I think they're incredibly powerful. The first is this idea that the SPX and Fed balance sheet have, if you look at the S &P 500 relative to the Fed balance sheet, zero excess return when you look at real estate and gold net losses. So what that means, because people are like, okay, I don't really understand what it means. What it means is you've got no wealthier by owning the S &P 500, even though it's gone up. Right. So what an asset is, is future deferred consumption.
10:31You buy an asset to maintain value so you can do something with it. Now, the S &P has done a good job at offsetting debasement, but it hasn't gone up. So you haven't actually got richer. You've maintained the same. Real estate is the little bit confusing. Well, gold, let's deal with gold. Gold has done a terrible job in all of this, which was surprising to me. I thought it would have done better. Real estate does underperform, but don't forget most real estate uses leverage. So it actually probably ends up a bit better. So it probably looks more like the S &P. But none of these things have added to your wealth.
11:08The only things that have added to your actual wealth, i.e. your ability to buy more in the future of other assets or whatever is technology and crypto. Hey, everyone, we're going to take a quick pause and hear a word from our partners. We'll be right back.
11:29Yeah, here is the piece, the second point that was just a gut punch when I read it. The median American can buy less of the S &P than in 1980 by 89%, 90 % reduction in purchasing power relative to the S &P. That's a gut punch, Ralph. So here's the other issue, right, is debasement of currency, fiat currency, optically pushes asset prices up. The issue is income is not correlated to the balance sheet. It's a variable. The others are scarce as supply assets. So variable assets are not correlated. So what you found that is in real terms, wages haven't gone up since 1972. So nobody can afford assets because they keep getting debased, which is why the rich get richer because they own assets and the poor don't because they don't have assets.
12:29And this is part of the thesis that got me into crypto, because here is a new asset that is basically fractionized. So everybody can put in a percentage of their net worth and participate. And it's a faster growing asset. So it gives you a chance. Remember back a long time ago, I did that big video about demographics. that has millions of views on YouTube. Part of that thesis was you need to own something like crypto because it's got a right tail. It has a potential to generate higher returns because people are so in the hole from their real wages never going up. And then they're so in the hole that they've just borrowed money endlessly.
13:19And so that's a horrible situation where you don't own assets and you just have more debt. Because in the end, your house isn't much of an asset because you need to live somewhere.
13:32There's a way of talking about this that you have called the renaissance, where you talk about this broader sort of context of what's happening and how the establishment views it versus what the technology is driving. Unpack the renaissance. So, OK, I've set up the problem set, which is that we're all fucked. Our wages don't go up in real time. People can't afford many assets. We now know what drives the assets. But the issue is here. It's being driven by this printing of money to pay the interest. How do we get out of that? Because you're never going to go into the big debt jubilee default. That happened in 2008.
14:15The debt jubilee was setting all interest rates to zero. And people are expecting the calamitous crash, but it won't happen. It just keeps debasing. And like the Venezuelan stock market, the stock market keeps rising because you're debating the currency. So how the hell do you get out of this trap? And this was part of that how to unfuck the future piece that I did for Real Vision. The answer is you need to increase productivity. That's the only way because you can't change demographics and debt hit its limits in terms of interest payments. Magic formula. Yeah. So how do you change productivity?
14:55That's the exponential age. You know, that's the mass adoption of crypto rails for retooling the entire financial system, make it more efficient, faster, fairer. It's the adoption of AI technology to extend the power of human beings. It is the use of alternative energy sources to drive productivity growth, because productivity really all technology is basically trying to drive productivity from the same unit of energy. Now, energy, if I look at the inflation adjusted chart of oil for the last 60 years, is forty dollars doesn't move. Even with the shale revolution, didn't really move because China came on.
15:43You know, we had different demand structure. Now, technology keeps driving productivity growth, but it's not having a big enough difference yet. The real answer is to lower the price of energy. And that comes by spending a lot of money on building out new sources of energy, whether it's nuclear, whether it's green energy, where you collapse the cost of energy. And if you collapse the cost of energy to$10, you've got a massive multiplier effect on productivity. then with the growth of technology from robotics, AI, genetic sciences, cryptocurrencies, distributed computing, quantum computing, all of these things, internet of things, self-driving cars, all of this creates a technological revolution of which mankind has never lived through.
16:31I think people are starting to get their heads around it. When I first started talking about the exponential age about two years ago, everyone thought I was a moron and now they saw ai and they realize holy shit within two years tesla's cars will be self driving and waymo and all of this and your uber won't have somebody in it you know that's two three four years away we've got quantum computing moving very fast we had a piece on real vision about it recently okay that's going to happen that changes everything we're seeing chip technology improvements we're seeing distributed computing power and everything is going crazy right now and it's only going to go more so.
17:09Over in Europe, they're accelerating this. I think, again, the central banks and the governments actually understand what the game is. And Europe has played the card much like the New Deal card from the US, which was we are going to force the cost of energy down by injecting huge amounts of capital into the green revolution in Europe. That wins for them because they create new job opportunities. It wins for them because they lower the cost of energy. And it wins for them because they lower their resilience on other nation states who own the energy. You might take some short-term pain. You might not.
17:50We don't know yet. A lot of people, skeptics will say, well, everyone's going to get screwed with higher energy prices in Europe until they sort this out. Let's see. But anyway, there's a big thing. There's some really big things going on. So we've got a technological revolution that could provide the answer to the productivity issue. The other part of it will be demographics as the baby boomers leave the workforce. So what I'm thinking is we will drive up GDP growth and we will lower the number of people in populations. The net result is a higher per capita income, which we've seen in Japan and other countries.
18:25And I think we can accelerate that process so people get richer. Now, there is other issues about will jobs be replaced? How do we replace that? That's one step at a time. So I'm actually very optimistic, firstly, about asset prices. Because of this issue of debasement, we can make money from it. And we know which assets rise more, crypto technology. So that's going to help us unfuck our future. And this productivity miracle is where the answer is going to lie. So, you know, I'm very much in line with Neil Howell's fourth turning. I think this is a fourth turning moment. I think what is going on is of an order of magnitude, the largest technological change mankind has ever seen in the shortest period of time.
19:07And it's amazing to be alive in a period like this. Yeah. And it's just changing and moving so incredibly quickly. You know, it's interesting when you think about AI. AI was something that was always six months away for 10 years. And then we woke up one morning and the entire world had changed. Yes. And we've got many of those moments still to come. I mean, people don't realize that a third of the Amazon workforce is now robots. And one day it'll all be robots. And we'll be going, oh, my God. You know, if Elon and others get their technology right, we will have human robots. robots and this this technology is not that far away by the end of the decade i mean really and are cars that drive us so they are now intelligent robots that drive us i mean we're look what we're doing in space as well i mean there is so much going on that you can't fathom it here's a quote that you include from a tweet from sam altman uh obviously at open ai that talks about precisely these points quote a new version of moore's law that could start soon the amount of intelligence in the universe doubles every 18 months it took me a minute to get my head around that yes emma mostax talked about this so all of technology up until this moment was basically scaling man's physical abilities you know even spreadsheets and everything else scaled from us having to put it in a ledger, whatever it is, right?
20:48Everything has been that. This scales intelligence, which was a scarce supply only held by humans. We've now made intelligence infinite. That is what he's talking about. That is a very, very disruptive big idea. The one thing that we thought was scarcity, was knowledge and intelligence, is now infinite. you know it's like if we get to an energy price that is essentially somewhere near zero if you have infinite intelligence and pretty much marginal energy costs what the fuck does that mean there are no constraints i mean it's terrifying and exciting at the same time and it's not going to come super fast but you know my guess is by the time you're at 2040, you're thinking about this stuff all day.
21:50And I think it's one of the reasons Elon has said repeatedly, the biggest problem the world faces is lack of population, not excess population. And people don't really understand what he's saying, but I know what he's saying. What he's saying is we are currently incentivized to replace the missing workers by robots and AI. and by doing that we will sow the seeds of our own demise
22:21and therefore you need a plan b which is a colony on mars whether he gets there or not it's irrelevant but his thought process is right it's towards the singularity is what happens on the other side hey everyone we're gonna take another quick break and hear a word from our partners we'll be right back to the real vision crypto daily briefing
22:43Sam Altman echoes this sentiment a second quote that you included in this piece quote the future can be so good that it's hard for any of us to imagine my basic take on this is that we will have unlimited intelligence and energy and that will unlock this and here's the interesting part at the end but the risks grow with the upside so basically unlimited upside unlimited risk it's a hard idea to get your head around yeah and humans don't deal with exponentiality very well. We can't think in those terms. And what we're dealing with here is not just Metcalfe's law of kind of network adoption, but we're dealing with all of these things compounding on each other, which is called Reid's law.
23:23It's very, very, very hard to get your head around. And I don't think our current infrastructure of government and establishment can even vaguely deal with it. I mean, look, they haven't dealt with regulation of the internet, let alone bloody crypto how the hell are they going to deal with this i mean they're just not set up to do it because nobody knows because it's moving too fast you know they tried to call a six month moratorium on ai that never happened so you know everybody's just heads down building more because now it's a competitive race because you've got money as the output so everyone's like well we just need to win so then google accelerates microsoft accelerates stability i accelerates everybody accelerates because that's the game.
24:14You know, talking about the current infrastructure, the current regulatory system that we find ourselves in, the current infrastructure from a government perspective, you had a very short, almost throwaway sentence in this piece that I had to read three times because the implications are so profound. And this is about something that's very down to earth. This is about the current system, not about the future. You say this, The Fed and the Treasury are now the same thing. What does that mean? What are the implications? So there was supposed to be central bank independence where money was removed from the order of the business of government.
24:55But when you look at Janet Yellen, who was the ex-Federal Reserve chairwoman, who's now the Treasury secretary, If you have the understanding of the everything code. That the US government issues debts to pay its interest, which is like getting a credit card to pay the interest on your other credit card. And it has to end up on the Fed balance sheet. They have to be working together. There's no way for that not. They have to be the same organization with the same understanding. which is probably why Yellen was in that job because she understands what she has to do because she saw the other side of the equation and I'm sure that's true it's clear it's true in Japan they they lost independence a while ago and it seems to be true in Europe as well I think everybody knows they know what they have to do and they all have to work together I also think all of the central banks and governments at a G7 level understand this.
25:57And here's a laughable thing is the Swiss, I think, have been aware of this. So their version of quantitative easing, they didn't buy US government bonds or anything else because they all get debased. Switzerland's too small for the G7 to bully. So what they bought was technology stocks. right so they've actually outperformed the debasement because they know knew what the game was the game was debasement it was debasement it had to be if you're going to print money to pay your interest that's debasement and it's exactly to your point it's in fact an object lesson in that thesis exactly exactly so once you have this framework and you understand that it is forecastable then our job is to extract it all away and just say I need to own technology and crypto and when we're turning at the turning points in the cycle is when I need to own the most of it you know and so that's been driving me global liquidity bottomed in June that's when I I doubled, well, not doubled, added to my ETH bet.
27:13And ETH was the first to bottom. When we got round to November, when other liquidity measures started bottoming, crypto, in October, Bitcoin and equities bottomed. Perfectly in line. And Ethereum didn't make a new low, so that was an interesting one to me. And that was another point to add to this bet. And then I was waiting for the hypothesis to play out a little bit further. And then I added a lot to as much of this as I could, both in crypto and technology. Now, to be clear, and this is, you know, this is Real Vision Crypto Daily Briefing, crypto massively outperforms technology over this process.
27:55Always has done. When we got to 2019, when we reached this point in 2019, and the Fed stopped hiking, Bitcoin was up over 300 % at one point during that year and finished the year up 90. The Nasdaq finished up about 25 and exponential age growth end of technology stocks finished up about 35. Right now, we've gone through a bigger down cycle. And right now, the Nasdaq's up 36 percent. The exponential age basket is up 55 percent. and Bitcoin's up 80%. I don't know how the year's going to end out. Well, I do, I think, because of the everything code. And I think it's significantly still higher from here, which is a lot of people struggle with this, struggle with why didn't equities have another down leg, you know, because we're going into recession.
28:53And same with crypto. I'm just very, very bullish. Well, in your view, it's more cowbell, More cowbell from the Fed, more cowbell from Treasury. By the way, we've got a lot of people who are watching this live stream right now, Raoul. For people who don't know what more cowbell means, explain that. More cowbell is a meme, and it's a meme of excess. And it came out of a Saturday Night Live sketch where, and people should Google it, and it's amusing. But it's a meme about excess, just going over the top to get an outcome. More cowbell is the cowbell is the stimulus. And that can be fiscal stimulus, rate cuts, or increases in the balance sheet.
29:39It's basically an increase in liquidity. And the outcome to slow growth is more cowbell. And the markets know it. And it's provably so that the correlation is so high, which is 97%. So if you know the economy's slowing, you know, being a macro person needs to live 12 months in advance. 12 months in advance, what are the Fed doing? Are they cutting rates or hiking rates? They're almost certainly cutting rates and therefore the markets trade on the count bill. I should say one thing I have to mention. Part one of the Everything Code is available to Real Vision Essential members. Essential is our entry level macro tier.
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30:20The following parts will be available to our pro members only. You can find the report, of course, on our website, realvision.com. Come download it, think about it, agree with it, disagree with it, debate it with yourself and your friends. There's a lot there. Yeah, look, I don't say these things often. It's the most important comprehensive thing I've written ever. And it's the culmination of 19 years work. I don't think it's, I don't, it's a thesis and a hypothesis and I'm going to test it out and it won't last forever, but I think it'll last for the next cycle or two but let's see it's yet to be proven but it really is the culmination of everything i've ever done ral talking of which we've got an incredible number of questions from our viewers do you want to dive into that any other final points you'd like to mention before we get started with viewer questions um no let's go for it that's why we're here to answer questions absolutely the first one comes to us from samantha on the real vision website does ral have any expectations or insight on how long the approval process may take for the black rock etf they're talking about spot bitcoin etf i think the minimum is 45 days and it could take six months so we just don't know um i think it's a political situation now i think genslin needs to get a he needs to appease people that he's not anti all crypto that you know a bitcoin etf run by BlackRock and other large institutions is acceptable to him.
31:51So he gets less political pressure. So I think he's incentivized to get it through sooner rather than later. Won't that set folks in the crypto community screaming that the largest asset manager in the world is the only one that can get an exchange-traded product on crypto for spot approved? If the bags go up, they'll deal with it. I mean, listen, it's an inclusive world and there will be TradFi as long as there's the ability for new participants to also participate in this. So I think it's very important. But look, new capital into the space will spur new adoption, will spur new innovation and new investment.
32:34So you might not like where it's coming from, but you don't get the choice. So we have to deal with it. as long as they allow innovation from outside of the traditional financial space. And if the US doesn't, the UK will. So it'll happen. William on the Real Vision website asks, why is Stan Druckenmiller suddenly so negative on crypto? I haven't seen that. I haven't seen that. I mean, it's pretty difficult to if he's long Nvidia. They're all same kind of bets. So I haven't heard that Stan's negative. I mean, he's got a lot of private investments in the space. He's been an active participant in the space for quite some time.
33:14Most of those big macro guys. So I don't know. Here's a question again about TradFi and the intersection with crypto from Derek on the Real Vision website. Do you think these brokerage platforms going into crypto is just a news pump? Long term, I obviously know crypto will stay with JPM saving the banking sector and also buying into crypto. I know they won't make it illegal, but I still see open bars for lower. talking about edx the exchange uh announced today one of the new site announced i should say earlier this week this is gensler again i think saying we want to have the adults in the room that you know this is very anti-innovation but it wasn't i don't think they're building a retail platform so you know if it brings participation i'm happy with it as long as we're able to have innovation in the private sector outside of the traditional incumbents.
34:09If you're trying to monopolistically create an exchange, not good. If you're just saying, if he's just trying to make the political point, well, if you guys make some grown up version, we'll accept it. Because all the banks want to do crypto, all the asset managers do. But Genza's been stopping it. So he's kind of giving them an ability to participate. And, you know, this was always going to be the fight. Wall Street is a very, very, very big donor. to all political parties because they get so many fees. You know, the business of money is the biggest business of all. And so they will fight for it.
34:46And this is them trying to get their share of it. Do they win or not? I doubt it. Michael on the Real Vision website, precisely to this point. Hello, given you may believe there's another leg down for liquidity slash equities before it explodes up, do you think crypto follows, given a possibly new environment with large institutions now entering heavily into the market exactly at this point? So I don't think markets go down. Yes, we have corrections, you know, 5%, you know, normal running bull market corrections. So I'm not of the view that liquidity dries up all that stuff about the TGA. It was everybody overthinking stuff.
35:21It never happened, which was my viewpoint on it. So the issue is people need to understand is I'm not a short-term person, I don't care if crypto goes up or down 20%. Just I don't care. If it goes down 50%, yes, because I want to buy more, unless something dramatically has changed in the thesis, not driven by FUD. Other than that, I don't really care. But I don't think we get a lot of corrections. Crypto has just had its correction. It's going up. We're getting a rotation out of tech. People are throwing a bit money into crypto again. We've got the institutions will be coming. the RAAs will get access.
35:58When that comes, I don't know. But the market wants to price that kind of stuff in. So I just, you know, I know it's difficult for people. I just remain bullish. And, you know, I filter out a lot of noise. You know, the noise of, oh, my God, BlackRock has done an ETF has been my core thesis forever. So it's like, yeah, fine. You know, this is at that point in the adoption curve that it comes. So it's not new news when you look at it in a longer-term time horizons, it's expected news. Paul on the Real Vision website, speaking of crypto being the fastest horse in the race, which crypto is the secretariat of crypto, and will it win the triple crown?
36:35Bitcoin recently performing ETH. You know, I used to be very generous with my views on stuff, but social media is so spectacularly vile when it comes to anybody sticking their neck out and stuff that it's really not worth it. Generally, as a rule of thumb, I've liked Ethereum over others because it's large, it has a yield, it has massive amounts of applications built on the network, and I think it tends to perform well. That's not anything against Bitcoin. I mean, again, it's weird that you have to give a caveat of, well, I don't dislike Bitcoin because Bitcoin people can be so aggressive over this stuff.
37:15I care much less about Bitcoin. Interested in what UDI's doing and others building on tap routes and the ordinals and other stuff. And I think Solana is probably a decent bet because it's got a lot of developer activity and network activity. Anything else I don't really talk about. Next question. A key thing here is, look, this is a much more difficult space than it used to be because there is so many tokens and there's so many opportunities. and you can make a lot of money, you can lose a lot of money. So how I dealt with this was about a year or so ago, I started an asset management company called Exponential Age Asset Management, XPAM.
37:54You can find it on the internet with XPAM with AA. There, what I decided is the best way is to give it to hedge funds. So it's a fund of funds that allocates to the world's best hedge funds in the crypto space because they know how to navigate this because otherwise it's too hard for individuals to do. But it's a fund of funds. It's not meant for individuals. You have to be accredited investors and all that stuff. Solana also, we should say, pretty beaten down. Basically trailing 12 months, it's down about 50 percent. Bitcoin up about 50 percent trailing 12 months. Yeah. And this year it was up 130 percent, but it's pulled back because of the Coinbase action.
38:34so it's volatile it's earlier stage um it has underperformed because obviously the selling from the ftx estate and other stuff has not helped um but you know that's why i like it you know so an investment like that which at fundamental core is a good network with good traction and good people if it gets discounted massively via fud and flows becomes a very interesting investment. So that's why I was buying it last year in June and November. And Imo Trader, one of our regular viewers and listeners here at Real Vision, has this specific question about a token. The XRP court ruling expected sometime in July appears to pose some macro risk in how future regulation could be interpreted.
39:18What scenarios do you see playing out and how are you managing your crypto risk for that event? Again, it's all noise to me. I actually think they'll get a positive ruling. But I don't know. I don't have an edge in it. But, you know, Brad Gullinghouse has fought the good fight and said, we will not settle. We want a ruling, which is what Brian Armstrong is going to do as well. And we should we should be thankful for these people doing this. Again, I'm not a US citizen doesn't actually matter to me, but it matters to a lot of people in the United States. And I think it's a good thing what he's doing.
39:53The risk can't be, oh, they've ruled negatively because that was already in the price. So it's really, it's the upside that is, I think, mispriced of that. Talking of risk, particularly short-term risk, this is a great question that comes to us from Gary from the Real Vision website. Can or are Real Vision developing a much better user-friendly wallet to store their digital assets? Having been recently scammed out of some of my assets, including my Real Vision Genesis NFT, I realize how vulnerable the current system cold wallets or hot wallets are versus TradFi. No, we're not developing a wallet.
40:32A lot of people are. I just use my ledger. You know, just don't interact with the hot wallets for long. Use them for the transaction layer and store it in your ledger, your treasurer, whatever you want to use. I use ledger. It's then off. It's cold. It's out of harm's way. and have operational security around it. Here's a question from Peter on the Real Vision website. Well, this one's back to TradFi. Do you still believe 100 basis point cut by September Q4? There was a Bloomberg report that says real estate is not as big a problem as some people think. Not sure I believe them, Peter says. The 100 basis point cut will only happen if the banks roll over again.
41:14I think they're rolling over, and I think we will see more of a banking crisis later in the summer. and therefore we will see a cut in rates. But it actually depends on that. So you can use the chart of the KRE, the regional bank's ETF, as your way of measuring the probability of emergency rate cuts. It got very oversold. It rallied. It's rolling back down. If that trend continues and it starts breaking new lows, we've got problems. Also, if you look at the Fed emergency lending facility, it's been increasing. So there is still stress there. And if share prices go down, it'll start rising. And share prices go down for A, the rates are too damn high.
41:56B, the yield curve is too damn inverted. And C, all the commercial real estate is worthless. You know, office space. Those three things are very toxic. And that is not a quick fix. By the way, shameless plug, if you're a Real Vision member or would like to become one, I just did a great conversation with Stan Van Nuremberg up at Columbia University, professor there who's got incredibly interesting models for what's happening in commercial real estate, especially office space, talking about significant drawdowns, 40 plus percent drawdowns in that sector. It's really must watch television here on Real Vision.
42:32Next question comes to us from Roger on the Real Vision website. Boy, this is an old one, but good one because it's never been resolved and it's never really been answered in the minds of many of our viewers. Does Raoul have any thoughts on the backing of Tether, also exposure to Chinese real estate debt? everybody in their crypto journey goes through the tether fear cycle my tether fear cycle was 2018 i think it was 70 i can't remember when it was 16 i can't remember um we've all been through it and then after a while you realize that on balance it's a very useful tool and a lot of people use it i think on balance My thought process is that a while ago, many, many years ago, when I first looked at it, they lost.
43:25They had a mismatch between what was actually reported in their balance sheet because they'd made the payment to the loan to Bitfinex. And that was some dodginess in all of that. And I think they solved it. and now they generate so much cash from the U.S. bonds that they own that they're just massively cash flow positive now. I don't have a problem with Tether. I really don't. JJ on the Real Vision website, how can we now remain so certain that Bitcoin will never be broken by some major player or country? By the way, Caitlin Long, who was just on Real Vision earlier this week, who's incredibly bullish on Bitcoin, made the comments a few days ago that essentially you can never rule out the possibility of a zero-day exploit.
44:10Thoughts? You can never rule out the possibility of nuclear war. You can never rule out the possibility of AI destroying humanity. I've got other things to worry about. Here's a question about exactly those worries, Raoul. Tony, on the Real Vision website, does Raoul have an oh shit stop out? What does he think after seeing the potential crash pattern from Julian? Crash pattern? I can't remember what the crash pattern was. I just filter out all that stuff. I have my own framework. I do an enormous amount of work. We write 130 to 150 pages a month of research for Global Macro Investor. We then do massive deep dives for Real Vision Pro Macro.
44:53So it doesn't mean I get everything right, but I don't have a stop out in my stuff because these are secular five-year trends plus. so I'm not looking for a trade and so if it falls because something happens I'm just buy more so yeah I just don't look at the world in that way I stopped doing that a few years ago when I really stopped putting my own narrative onto markets which many people do and started using a completely open mind first principles approach which led to the everything code the exponential age thesis and a whole bunch of these other things. And that was going back to first principles for everything from scratch and trying to ignore everything that I thought I knew.
45:36To the first part of Tony's question, do you have an oh shit stop out? No. None. No, look, I've explained this many times. What I've done is orchestrated my life, I have income, I own my house. So then this is just an option for me that, you know, I sort of go down 70%. My liquid net worth last year, it doesn't worry me because, you know, I live off my income, not off my investments. So no, I just don't trade like that in this kind of bet. Other bets, yes. I mean, I've had a shitty bet for a while now in bonds and I keep almost stopping myself out, then thinking, oh, it's going to, bond yield is going to fall and then it doesn't.
46:24That's different. That's a trading stuff. This is not trading. This is long-term investment. It's like, no, I don't. I would have a thesis stop if something entirely changed. What could that be, Raoul? I have no idea. It would be a black swan, right? So I don't know, but you'd know it when you saw it.
46:51Hakan on the Real Vision website, if Raoul looks into his crystal ball, how does he see the Coinbase SEC action playing out? I don't really have an edge, but I just think that Coinbase has a much higher chance of success. And I think, you know, if Ripple do as well, Coinbase will do, or we get a change of regime. So, yes, I'm actually, I think it's, again, I know I use this term to look much. I think it's noise.
47:24Derek on the Real Vision website, how does Coinbase go public? Then later the SEC goes and makes a lawsuit against him. They had to get audited to go public. But now this, is this Gary again? By the way, we should say Paul Graywall, who just joined me on Real Vision Crypto Daily Briefing, the chief legal officer at Coinbase makes precisely this argument. Hey, guys, we filed an S1. You knew what our business model was. this wasn't a surprise yes but then they there is some argument around approving that and then what happens and i i don't again i don't really know um but yes of course it's gary this is politics it's not about regulation this is all about politics and it's all about if you are the world's reserve currency and you know we have a broken system and you know the banking system needs deposits, then you need to not allow the parallel financial system, the Bitcoin life raft, as I called it, from accelerating a migration.
48:24Because if it's an accelerated migration out of a traditional system, you'll lose the deposits in the existing system and it's game over. Right, there's big games to be played here. This is not child's games. This is like, you can't lose everything. So we need to throttle that across. I think if you listen to the banks, you listen to BlackRock, you listen to Goldman, you listen to all of these people, they all know we have to move to digital rails and we have to use blockchain technology. The government's like, please don't let this happen too fast. Because if you do, we can destroy everything.
48:57Right. So in your view, this is essentially about government attempting to throw, basically just to throw a spanner into the works to slow things down a little bit.
49:08what happens next sorry you've frozen the last bit probably with me i'm with you great uh so essentially what you're saying is that this is about governments attempting to throw a spanner into the works to slow things down and to make sure that the ultimate outcome is something that they are comfortable with yes or the speed of which the adoption happens now there's that and then there's this banking lobby that says, we don't want you to disrupt our share of the pie. By the way, we're your paymasters. Those two elements are what's causing this. And a government full of baby boomers who fear change.
49:53It just seems that change is inevitable. I'm just going to give you one example that's come up in the last couple of days on Real Vision, Crypto Daily Briefing and also on Real Vision, which is this concept of bank rooms and where we are with fractional reserve banking. Caitlin Long, who I spoke to a couple of days ago, obviously is building a fully reserved Bitcoin-based bank in Wyoming. That's a project that she's been working on. Obviously, some regulatory headwinds in her process for doing that. But in addition, I did two conversations the same day, one with Caitlin and one with Stan van Nuremberg.
50:22And they both made this point about what happens when you have this period where fractional reserve banking basically is subject to an iPhone. When you find out that the bank that you're banking with is potentially going to experience a bank run, you get on your phone and you start moving assets literally at the speed of light. How does fractional reserve banking, how does the old system survive in a world without crypto, right? Thinking about just the challenges that are implicit in that system, it just seems as though this idea of new digital assets, new payment rails, precisely the points we're making here about crypto, there's just no escaping the fact that the system has to change.
50:58there is no escaping that it has to change there is no way around this um and but you have to manage it so you don't destroy the system well if you do it's just going to end up on the balance sheet of the central banks so with everything else with everything else more cowbell is the answer to everything um so yeah look it's it's it's not easy but look here's a nice little story I have not told yet on Real Vision is I was at the Global Macro Investor Roundtable in Mallorca, Spain, and a good friend of mine ran a large sales and trading at a large Australian bank. And he's just retired. And I said, what have you been up to?
51:41Blah, blah, blah, chatting. He said, I've spent a lot of time in crypto. I mean, everybody does. So I'm like, okay, what have you been up to? He goes, well, we launched five stable coins in different currencies so why are you as a large australian bank one of the largest banks issuing stable coins he's like well understand this the us is moving to t plus one settlement and we are in australia and we've got t plus two t plus three for fx because we can't settle equity trades the system isn't fast enough so we either give a whole you know hundreds of billions of dollars the australian system to their brokers and leave it cash balances which is a very inefficient use of capital and be risky or they need to build up faster payment rails
52:38interesting precisely to that point and that's you know this is not the kind of crypto adoption things that people think about it's built on ethereum as well but it's it's like these are the real needs of the financial system things don't function yeah higher costs and risk yeah final question from the real vision website then we go to our youtube questions in just a second but this is a great one to end this segment on gary on the real vision website wants to know do you have any use case for ai on crypto that will be a game changer what a great question A lot of people ask this question. I don't know.
53:15I think the big use case for crypto for AI is. We don't know who's real and who's not. You need some form of digital immutable ID and whether that's a zero knowledge proof or whatever way of keeping some sort of privacy. Fine. How AI works on the blockchain? I don't know. I mean, these things are very new.
53:40and they will you know all of these technologies overlap each other and will build on each other which is why it's reed's law and not metcalfe's law um so ai changes everything so of course it will change crypto what does that mean you don't know i'll throw out two potential more for you gary uh number one the idea uh to expand on ral's point there is a source of truth from media uh for We're not knowing what's a deep fake and what isn't great use of AI technology going along with blockchains. A second point is going to be we are, I suspect we're going to see something of an offense defense war for security with code audits looking for vulnerabilities in smart contracts.
54:20Huge applications right there. Okay, Raoul, now time for questions from YouTube. And there's some great ones here too. Devine Co on YouTube wants to know, are we on the cusp of a Bitcoin bull cycle? Has the bearish market structure of 2022 been decisively broken? Yes, I mean, I answered that before. I think the low was October 2022, and we've been in a bull market ever since. I referred to it as crypto spring. I think we are still in crypto spring, and we will be moving into crypto summer once we start to see rate cuts and stimulus. Or stimulus and write cards. Here's a question from Kyle Martin from YouTube.
55:01With AI coming from my teaching job, per Robert Kiyosaki, by the way, thank you for watching our Festival of Learning conversation that we did with Robert Kiyosaki. What should I do to transition? I'm a JD MBA before teaching math. I worked for 10 years licensing university patented technologies to companies. It sounds like Kyle's better positioned than most. Why not create an AI around you, Kyle? and you can be a private tutor that scales to hundreds of thousands of people. I mean, that private tutor model now, you know, Zoom changed it, but you can have an AI that you become the private tutor.
55:38That model will happen really fast. So you get a first mover advantage. Or it's just figuring out ways of leveraging AI for education, I think is a very exciting place to think about this. Paul Frederick on YouTube. I think what Raoul went from being a Bitcoin bull to an ETH bull. What's his view on the risk of ETH being declared a security? So I don't live in the United States. I have no restrictions on me, nor do what, 85 % of the world's population or 90 % of the world's population. It doesn't matter. It just matters to US people. And then it only matters to certain people. Because if you're wealthy, you will not get restricted access to ETH.
56:23so in the end i don't think it makes a difference and i think the probability of it is very very low the clutchness on youtube route what do you think of cardano i don't think i've ever heard you speak of it would love to hear your thoughts since cardano is essentially a better version of in clutchness's view so i look at all of this space with a simple thing i don't buy the narratives i don't care about any of it i just look at adoption uh carano doesn't have the level of adoption that eth has if it changes i'll be interested but i'm not and that's true for everything i've really down to very few bets in this space it's just it's not i have anything against carano or anything it's like i just use one metric which is you know network adoption it's kind of the the um number of users on the network and the number of applications on the network the interconnectedness and that's the developer camp, which is why Solana actually comes onto my radar screen and others don't.
57:22Doesn't mean it's a bad protocol. Doesn't mean the community's bad. Doesn't mean anything. It just doesn't work for me because I have a framework. Yeah. And beyond that, you're always going to make me miss every early stage token because I don't do that. It's not what I did. You know, that's why I started an asset management firm. So people can figure out and get hedge fund managers whose job is to do that. I can't do that. It's just not my skill set. Yeah. This is a great question to end on because it's international question, something that I know that you spend a lot of time thinking about.
57:49This is from Liquid Gems on YouTube. With both Tim Cook and Elon Musk going to India, will that market always be expensive and it is already too late to invest there? I know you got thoughts on this. I love that question because I have been trying to buy India on and off. I've owned it. And then every time you sell it because you're worried about global events, you never buy back in. It's always expensive. It's got a fucking population age of 28 and they're all being financialized and they're all going to invest in financial products it's always going to trade expensive um it's like the new new u.s stock market it's just always expensive um so i mean in honesty i'm just looking at the chart it's actually been relatively benign this year the one i like is uh reliance industries and it's still flat on the year and the sensex has done not a great deal so you know if you're predisposed to buying india it's not the worst place to to do it right now but yeah it's not an easy market and everybody wants to get involved you know you've got 1.4 billion people the largest population on earth now with an average age of 28 and a very important geopolitical role to play in this new multipolar world and you have an enormous amount of technology and business talent there um and there's a fintech revolution going on amongst other things it's like yeah how could what's there not to love yeah and the world's largest democracy as we see mr biden meet with mr moly yeah now india also the economy no no i take that back yeah look i like it i think angus shillington who was on from van eck came on the platform and said listen be careful with indian indices because you don't want to own old india you want to own new india and i think that's an important point you really want to forget the old india because that world is going to get left behind.
59:59So there'll be a huge change in the structure of the Indian equity markets over time. So, you know, just make sure you get involved with that, which is one of the reasons I like Reliance Industries. I guess the banking sector is always going to do well. It always does in a growing population because, you know, it's a very low household debt market, for example. So as economies mature, household debt market goes up, people financialise, people buy equities, people, you know, do stuff. And what that means is generally the banks get bigger. Yeah, no such thing as a perfect market or a perfect economy, of course.
1:00:32No, no. Raoul, we've just blown through an hour. Hard to believe it's just flown by. Final thoughts, key takeaways that you'd like to leave our listeners and our viewers with today.
1:00:46Just to reiterate that I think a lot of people need to start filtering out more noise and have a longer term time horizon. there is that meme and melton and myself talked about it which is the mid twit meme it's the meme of a bell curve right here it is i think i can share it i'm sure the producer is going to hate me for doing this but i'm going to share it and we're going to tweet it out as well after the show so yeah i don't know if they're not showing it i don't know if they're able to but it's a meme of a bell curve and basically it suggests that you either want to be the moron on the left or the jedi zen master on the right what you don't want to be is the person in the middle arguing over every single small point and over complicating it if you can't distill it down to something simple and understandable you're kind of wasting your time and i really strongly believe in this and you should go back anybody it's not on youtube you might be on youtube by now the melton interview where we talk a lot about this it is what i think one of the most important memes i've ever seen which is why i say a lot of things like it's all noise does it matter for the long-term picture of adoption at many of these things that we fret about all day no is the blackrock etf a game changer once you had the framework that crypto was going to be a hundred trillion dollar plus industry over time no of course it's going to happen so i think simplifying it having the time horizon and then just having the faith and that's all about sizing the whole thing correctly and just getting off twitter a bit and stop listening to everybody throwing poo at each other getting scared oh my god the market's going to crash the market's going to go to the moon market's going to crash oh my god they're going to regulate us out of its existence i mean like i was speaking to an australian family office a couple of nights ago and they're like what what what should we think about the regulation regime in the u.s i'm like exactly how much does it affect you i said it's precisely zero they're like oh yeah i'm like why are you getting involved in this drama it's just not relevant um so that's how i'm really approaching this i try and keep keep as cool as a cucumber and focus on the big picture yeah no drama here by the way talking of which, Raoul, there's a rumor that you're going to be joining us once a month on this show for the rest of the summer to give these thoughts and to continue to fill in this thesis.
1:03:38Yeah, absolutely. I look forward to it. We'll see how wrong or right I am as we go. But I remain very positive. Raoul, thank you so much for joining us. Great to see you. Great to see you all. Thanks for joining. Always fun. Thank you again. Everyone who submitted a question, That's what makes an AMA so great. Great questions here today. That's it for today. Make sure to check out our website. Go to realvision.com forward slash crypto. That's realvision.com forward slash crypto. It's free to sign up for our crypto content. Tomorrow, we'll be joined by the head of ecosystem at Mantle. Make sure to join us live.
1:04:17See you then at 9 a.m. Pacific, noon Eastern, 5 p.m. London time. Thank you for watching this show. Have a great afternoon, everybody. What's up, revolutionaries? Thanks for tuning in. And for more content like this, head over to realvision.com and get unfiltered access to the very best, brightest, and biggest names in finance.
From the publisher
Crypto investors are finally breathing an air of optimism with the price of bitcoin and ether enjoying double-digit percentage gains over the past week. What a great time then for Ash to catch up with Raoul for an Ask-Me-Anything session.
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