URGENT: The Everything Code UPDATE ft. Julien Bittel

29:08But essentially, it's just turned positive for the first time in a long time. That's the point. And now what this suggests is that because financial conditions are advanced by 12 months, is that this should continue. So the balance of probabilities now is, at least as I see it, is inflation is rising from here and not falling. But there's this tug of war dynamic, which means that because these two shelter and core goods and food and energy prices are sort of competing with each other, it's not going to go up in a straight line. It's kind of going to be down one month, maybe up another. And then eventually it'll start to rise as this accelerates.

29:46But I think the best outcome is a slow and controlled sort of rise in inflation because commodity prices are rising, because goods prices are rising. Again, that's a function of a business cycle, right? And also the Fed always come at the final stages of this. So we've still got the cutting cycle to come. That's right. The raising cycle comes when the business cycle is peaking. That's when that all happens. So there's nothing to fear from the Fed about, oh, my God, do they cut less? Maybe, maybe not. We don't think so. But remember, that whole game is later when you're looking for the cycle top, not when we're just pulling off the cycle lows.

30:31Yeah. And the other thing to take into account also, you know, Ralph, that point is the Fed's recently clearly stated that the labor market was, you know, the top priority. Right. So I'll talk about that in a second. But, you know, again, what we're talking about here is early cycle inflation. The Fed and a more hawkish stance from the Fed comes much later within inflation breadth. So the number of subcomponents which are rising in year on year terms is accelerating and we're just nowhere near that. So this keeps the Fed engaged, no problem. And it'll it'll definitely keep the Fed engaged so long as labor market weakness persists, which is what I'm going to talk about in a second.

31:07The other thing to keep in mind is that if we're looking at core PCE, this is the Fed median high and low estimates from the September FOMC meeting. They've given themselves a very wide range to operate in, as you can tell. And these numbers have actually shifted up. So even if we're talking about the median estimate of 3.1, I think we get core PCE numbers tomorrow or the next day. But it's just they've given themselves scope to fulfill their mandate. And also, Raul and I have been talking about a rise in unemployment since basically the start of this year. That's happened. And here again, the unemployment rate is within the Fed's range.

31:49So this gives them the green light to cut. And our lead indicators continue to suggest that unemployment should take a little bit higher. And I'm going to explain the business cycle dominoes to you in a second, which will make this all very clear to you. But on a more kind of forward looking basis, what's important to understand is that people are talking about rising unemployment being a late cycle dynamic. But the reality is, is that unemployment breadth, if we're talking about the number of U.S. states with rising unemployment in year on year terms, peaked over a year ago. It peaked in June of last year at 92%.

32:27We're currently at 48%. And yes, 48 % is still elevated relative to history. But if we're talking purely in quantitative terms, the fact that it's the direction of travel that matters here, it's nothing else. And so this rises into recession. It doesn't fall. And then if we look at overtime hours, so this is a composite of the most cyclical parts of the US economy. Recession has come when this index is trending lower, clearly, and moving towards, let's call it minus two standard deviations. We're just nowhere near that. We're going the opposite direction. And if anything, looking at the August labor market report, it moved higher again.

33:13And then when we now composite this, so overtime hours with things like temporary help services and some other indicators and plot that versus the ISM, which Raul and I have talked about in the past as kind of our go-to business cycle proxy, you can see that it's a great chart. It also shows more what's going on underneath the surface and more consistent within an economy that's early cycle moving towards mid than anything else. And the reason that this works, so I'm just going to explain this, is why do I focus on overtime hours as opposed to unemployment is because full-time hires are expensive, right?

33:54Benefits, pensions, overhead. So before employers commit to permanent staff, businesses typically lean on things like overtime hours or temporary help to ramp up, let's say, how can I say that, production or growth or scale without locking in long-term payrolls.

34:33so you're like okay so the forward-looking elements of employment have already turned but the unemployment rate's still going higher how do you make sense of that well it's this so here we are with the business cycle dominoes and now we're more focused we're gmi financial conditions index is where raul and myself live but we try and live it's our job to live in the future to try and forecast everything else. But now we're looking back more at T equals zero, looking at things like, as you can see, overtime hours, much more coincident with the ISM versus things like unemployment, which lag in rate of change terms, the ISM by six months, cyclical jobs growth and earnings at around five months, industrial production and things like that at three months, GDP at three months, durable goods, capital goods, you get the point.

35:16And then at the end of that is core inflation, essentially driven by core services and wages. And then you see that pink bar, that's central banks, right? So this is where central banks tend to operate and why we're essentially well over 12 months in advance central banks. So as long, their mandate is unemployment and inflation, and those things are extremely lagging. And so to Raoul's point, you know, and we've said this across multiple, multiple cycles, the Fed and major central banks are almost always late to cut and they're always late to hike. Okay. But this chart illustrates very well, this is the Bank of England, a situation where inflation is rising.

36:01Okay. Early cycle inflation. So here, if you look at CPI, It's up around 2.1 % off the September 2024 lows. But even so, right, they've cut by 125 basis points or five rate cuts. So the point here, once again, is that we're still going to get rate cuts because if the ISM moves higher or the durable goods report that we saw today ticks higher, which then there again is a bit lagging versus the ISM, that's just not the kind of data that they're focused on. Their mandate is unemployment and inflation. And so long as that continues to take higher, which our lead indicator suggests should do, that keeps them engaged.

36:39And even then, because inflation breadth is still subdued, they still have the green light to bring rates lower. Anything to add, Raoul? So far, so good. That look good? Cool. Let's go to liquidity. So, you know, we've done a lot of work on this over the years. And just, you know, visually, if I plot this versus the Nasdaq, you can clearly see that these two lines are correlated at times they diverge. But over the long term, since I think this starts at 2009, it's been an extremely, extremely important driver of tech stocks. Right. And the same is true of Bitcoin. But in order to really appreciate the correlation, what you actually have to do is put it into a scatter chart.

37:30And what you can see here is that liquidity, our total liquidity composite, explains around 96 % of the variability in tech stocks and around 90 % of the variability in Bitcoin. going. So the point here is that, yes, other things matter. Geopolitical risks at times matter. Tariffs at fears at times matter. But overall, most of this is noise if we're talking about an investment time horizon. The way I try and put this is it is the single most dominant macro variable we've ever had. This is what the everything code is about. It is so dominant that only 3 % of the NASDAQ variability is based on other factors.

38:16Now, the NASDAQ and crypto are both in secular uptrends built by network adoption models. But 8 % of that is entirely just the debasement. The rest, the excess returns on that is the network adoption model. But this factor is so dominant and so important that it's all that really matters. And that's why Julian and I keep saying everything else is noise. Yeah. So we'll keep going. And here's just another way of kind of visualizing that data, right? Here's our GMI total liquidity index again versus Bitcoin. You can see when it breaks out and moves higher, this is typically a good situation for risk assets, Bitcoin included.

39:01Obviously, the exception was COVID back in 2020, which I highlighted very clearly. But the point is, is this index is still rising. And then when we talk about global M2, and Raul had discussed this on drinks yesterday, you know, yes, there's been a gap that's opened up. And that's pretty evident here. But I think, again, he covered this yesterday, so I won't touch on it too long. But essentially, this divergence started opening up in July of this year, right? So that's when the divergence started building. But what we also know, if we look at the 16th of July, that was also when the Treasury General account started to rise.

39:42And the Treasury General account is essentially the Treasury's checking account at the Fed. So all federal receipts, be it taxes and payments like Social Security and defense, they all go through this, okay? Right. So when they actually when they increase the Treasury General account back up to the 800 billion dollar level, what they're actually doing is taking liquidity from the system because it's now stuck in their accounts and not going around the system. So this increase is always the rate of change that matters. This rate of change matters because it was 500 billion dollars. 2023, we saw a large rise in the Treasury General account.

40:21And guess what? Crypto markets were sideways to soggy, as they are today when this happens. But we're very near the peak. And Julian will come on to that in a sec. But it's a very crucial thing what happened because it was a big withdrawal of liquidity that happened fast. And crypto is the furthest out on the risk curve. So it's the marginal effect hits crypto more than anything else. Yeah. And the TGA is recorded as a liability on the Fed's balance sheet.

40:49So as adding liquidity. And the way, you know, I think part of the way to explain this divergence is if we just take into account that Bitcoin's market cap is around 2.2 trillion, this is a$500 billion drain. And we just assume just for a second, hypothetically, that all 500 billion of this would flow into Bitcoin. Okay. That means that Bitcoin prices would be around 23 % higher, if this TGA rebuild never happened. And so that would put Bitcoin, if we're looking at prices today, we're at around 111 ,000, 140 ,000. Now, again, it's unreasonable to assume all this liquidity would go there. But I'm just saying, I think if we take this into account, this explains partially - It also explains why the year-on-year rate of change of global total liquidity - Yes, has ticked down a little bit.

41:46tick down because it's the US rebuilding its general account. Now, again, we're not expecting M2 to be perfect. What we're saying is explaining is why it's diverging now. And it's not some other weird factors. It's just it's the furthest out of the liquidity curve, and a bunch of liquidity has been withdrawn. And this is all to do with the debasement idea and how debasement flows through the system. So it's pretty consistent. Yep. And the good news is, though, and I was hoping that we would already get the nine today is the DMARC indicators, you know, Raoul and I have used for a long, long time.

42:24And unbelievably, they work well on economic data and macro data, liquidity data as well. And what you can see is that nines have typically been consistent with inflection points. Now we're supposed to get the data today, and I'm expecting it obviously to go higher, just above, let's say, well, I don't know, it could be 0.8, slightly higher. But the point is we're going to trigger a nine reversal. And the nine reversal is exactly what triggered the reversal back in July, right? And also at the tops back in December of last year. So this should now reverse and work lower into year end, which then will drive our liquidity composites higher, coupled with the fact that the PBOC, so the Central Bank of China, their balance sheet's already at all-time high.

43:10So that's kind of what's offset liquidity, but this is what's impacted the drain, particularly in the US. And we believe is what is currently explaining this kind of sideways chop. But the point is, is that's all about to change. Now, the next section I'm going to talk about is Bitcoin is a macro asset. Now, when Raoul and I first started working together, we were looking at this chart and this is basically Bitcoin within a log regression channel. The way to think about it is, you know, the red line could be considered fair value, the gray lines plus one minus one standard deviations, which is what they are.

43:44And the green lines are plus two minus two. Just to add to that, these log regression channels work spectacularly well for these network adoption model assets like Bitcoin, NASDAQ, Google, Microsoft, Facebook. the whole lot of them all have the same kind of channel and it works really well for even overbought, oversold levels. Yeah. And we'll talk actually more about that later. But staring at this, I was like, okay, being a multi-asset fund manager before, I've invested in EM equities. I understood small cap versus large cap, high yield bonds, commodities, FX, Right. But in order for me to make sense of Bitcoin within a macro framework, I had to make sense of it as an input to the business cycle.

44:34And we were looking at this and we were like, well, this actually kind of looks like a business cycle, which is just in a logarithmic trend higher based on network adoption, which we'll talk about in a second. So when I de-trended this and put it versus the ISM, you get this. And it's like, oh, and this was a big aha moment for me because up until basically we started working together, the only thing I was hearing about Bitcoin was it's some schizophrenic asset class. It doesn't bear any resemblance to the real economy. It's not governed by the same economic fundamentals as an equity risk premium or a credit spread or what have you.

45:11But actually, no, it's a macro asset and it works in the business cycle. And the larger thing at play here is it's also a network value asset, which I'll talk about. So but here's the point. Bitcoin is the ISM. The year on year rate of change of equities is the ISM. Small cap equities, the ISM. Cyclicals versus defenses. Here we're talking about things like consumer discretionary stocks, industrials, materials versus things like consumer staples and utilities, a function of the business cycle. Crude oil prices, the business cycle. Industrial metals, the business cycle, emerging market equities, clearly on the basis that the dollar has weakened this year is now pricing in a big recovery in the ISM, right?

45:54The business cycle. And here's just another way of looking at that, right? Typically, the big moves in crypto tend to occur when the ISM crosses above 50 and moves into its late cycle peak, call that around 60. Okay. So you can see that. And this is also why as the business cycle accelerates, ETH outperforms BTC because block space usage is a function of economic activity. So as economic activity goes up, demand for block space increases, right? As more people are coming to use it. And then this is just a great chart. This is the first time we're showing it. It'll obviously be copied. But it also explains, as it explains BTC, it also explains Bitcoin dominance entirely, right?

46:42So So much like you would go from, as the business cycle accelerates, you would go from growth to value, right? Perhaps, or large cap into small cap equities or investment grade bonds into high yield bonds or cyclicals into defenses, sorry, defensives into cyclicals. As the business cycle accelerates, confidence improves as main street does better, earnings rise, and this increases risk appetite. So as per my previous example, if we just take small cap over large cap equities, investors begin to reach further out what we call the crypto risk curve into smaller cap tokens and earlier stage products.

47:16And the opposite is also true. So if the ISM is in a situation where it's trending towards 60, Bitcoin dominance will fall. It also explains why there is this phasing of the alt season that people don't yet understand. So people think, oh, the moment Bitcoin dominance drops, all my bag of shit alts are all going to rally. It doesn't work that way. It always goes into the next safest asset, which is ETH. We've had some new cycle plays. We had the recovery of Solana. And then we've had Sui have been some of the dominant ones, Hyperliquid, a few others. But really what happens is it goes from Bitcoin to ETH into the other layer ones and larger projects.

48:03And then eventually, as Bitcoin dominance collapses and the ISM goes up, only then do you get the rest of it. It all lies ahead. And you're all getting frustrated. And you're getting frustrated because A, you've probably got the wrong allocation for this point in the cycle. Or B, the ISM has been lower for longer, which is why we've not seen this yet. And that's why both Julian and I keep saying, you've got to have patience. You only get one piece of economic data a month. This thing is not real time, but you're trading your shitcoin portfolio in real time. That's not how it works. So that's to bear in mind.

48:43But what's, yeah. And so what's important here is that if we look at our leads, right? So here, our GMI interest rate model, which is advanced by six months, ISM is heading higher. Financial conditions index, which is the index I talked about earlier, a regression on commodity prices, interest rates, and the dollar higher. On the basis that central banks, over 90 % of central banks are cutting rates, advanced by nine months, higher. And then when we lump all of these together, we're in a situation where lead indicators of growth momentum are rising. And once again, yes, I'm the person who names these, and they're just the most ridiculous names ever.

49:28Whatever the GMI, Central Bank Policy Liquidity and Leading Indicators of Growth Momentum Index. But the point is, is that you can see very clearly over the next nine months, we're in a situation where the ISM or the probability of the ISM rising is a lot higher than falling. Okay. Now, this is why I don't get the recession talk. Look, people are looking at present day. And the key, even Stan Drucker-Miller talks about this, the key to macro, in fact, the key to all investing is to live in the future. So there is no evidence at all of a recession. All the evidence points to economic expansion.

50:09And people who are calling for recessions don't understand the business cycle and don't do the work on the business cycle. They just look around them today and say, well, things are sluggish. Look at unemployment. We see this all the time. And everybody is wrong with this. This is the framework we've used for literally, I've used 25 years of investing, 20 years of GMI. It's this stuff that matters. I think the mistake, just before we continue, that's happening here is if we just reference a data point I've seen floating around recently is heavy truck sales in the US. People are showing that in nominal index terms.

50:50But by definition, a business cycle is not a nominal index, not about the level of interest rates. It's not about the level of heavy truck sales sales. It's not about the level of building permits. It's about the rate of change in these inputs or these indices or whatever. And so when you take the year-on-year rate of change of heavy truck sales and you plot it versus the ISM, it lags the ISM by five months. Job openings in year-on-year terms are rising, right? But they also lag the ISM by a couple of months, right? So when people are showing new home sales in just nominal index terms without taking the year-on-year rate of change, by the definition, they're not taking into account the business cycle.

51:38the acceleration and deceleration of data over time. So I think that's part of the confusion, whereas here the ISM is a diffusion index, which is why it works with all the year-on-year comps. So it's really about the year-on-year rate of change because this is what markets price off of. If the economy was slowing, risk assets would not be repricing an ISM that is rising. EM equities would not be rising, right? None of this would be happening is, I think, the point. The next thing, as I said, Bitcoin is a macro asset, but something Raul's talked about before is it's also a network value asset. Now, Raul's going to go into the Metcalfe law stuff a little bit more later.

52:20But so if we think about this, Metcalfe law is time, right? That's adoption. but the business cycle is the rate of adoption across the business cycle. So what I mean by that is as time goes on, but as time passes, because Bitcoin is a network value asset and it's trading within a long regression channel, the more time extends, the higher the price targets become. So here, if we're just looking into year end, let's say Bitcoin does nothing from here and just stays between the fair value, call it, and the minus one standard deviation over sold level, we basically will approach, let's say 210 ,000, right?

53:00If we get to one standard deviation, it's 412 ,000. If we get to two standard deviations oversold, right, which has happened every other cycle in the past, we're looking at something and I admit that that green's a little bit hard to read. It's like 800 ,000, 805 ,000. But here's the thing, because we detrend Bitcoin and we know it's a function of the business cycle, now all of a sudden you can loosely infer levels of the ISM that would correspond with certain price targets within Bitcoin, right? So for Bitcoin to reach 210 ,000, as I had referenced before, that's equivalent to an ISM of 52, something like a plus 110 deviation, 57.6, that would be Bitcoin around 400 ,000.

53:41And then an ISM of, again, hard to see with the green 63.3 would be Bitcoin at around 800 ,000, right? So you see, So as time goes on, the prices move higher. And because the ISM is confidence, earnings, the business cycle, everything else, then that all of a sudden accelerates the move. And where things get really interesting is here I've pushed out the targets another year to year end of 2026. And you can see just by way of this log regression channel and the passage of time, now the targets are higher. So ideally, what you need for, let's say, Bitcoin to hit$700 ,000 in price is you would need the business cycle to extend to year end of next year, right?

54:30And the ISM to be strong. Okay. But what we know right now is already our lead indicators are suggesting the ISM will be strong. And nine months from now, we should be in a situation where the ISM is in its mid fifties, as opposed to the current level of 48.7. So in a situation where the business cycle extends into 2026, how far, we don't know yet, but already this has us into Q2 of next year. So that's that passage of time, plus the strength of the cycle. If we get to that 55, you have to think about higher price targets okay now the scarring here i believe comes from this 2020 yeah i mean the scarring everybody is scarred because a everyone has this framework that that used to be around about the halving then it was like you know and i still get the thing about the eeth blow off top that i was expecting last time around didn't get i didn't understand this then it's the work that we've done subsequently you've always got to go and do the work when you're wrong to understand okay why was i wrong and what is the the key factors and people are still so scarred by this that i think it's going to fuck up people because if we're right the cycle extends longer and if we're right prices go further than expected and it will not end this year and i i know everyone says yeah this time is different sure from all of the work that we do probabilistically speaking it's got an extremely high probability of going well into 2026.

56:11Right. And just to kind of visualize that scarring, if we come back to that four-year cycle, and say we're in three, the third year of that four-year cycle cycle, you can see here. that if we look back to 2013 and 2017, we had these really big moves. And we'll talk about the 2017 cycle in a minute. But then you look at 2021 and you're like, hey, what gives? Why was that a truncated cycle? Well, the answer is because in March of that year, guess what? Liquidity peaked and went down in a straight line as central banks withdrew liquidity. And right now, we're still just hovering around zero, right?

56:52And again, the key point being, even if you look at the 2018 peak, it was the peak in liquidity. Liquidity was still coming into the system. It was the rate of change that stops it, right? Again, it's hard to get your head around, you know, because you'll still see global liquidity hitting new highs, but it's the rate of change that matters the most. Yeah, and the other point to that is, no, I've heard certain people, we haven't had a business cycle, But we also really haven't had a liquidity cycle quite yet. Yes, global M2 is moving higher on the basis that the dollar is easing financial conditions.

57:24But actually, if you look at central banks, we haven't had a liquidity cycle. And the reason being is the debt doesn't need to be rolled until now going forwards. That's the key difference. So it doesn't have to get rolled. Rates haven't had to come down. Liquidity hasn't had to be injected in large, gigantic amounts yet. But that's all going to change. Yeah, because the everything code happens in two phases. First, rates come lower. Then the debt can be rolled at obviously more manageable and sustainable levels when rates come lower. Okay, so liquidity peaked in March 2021. Although, sorry, Julian, just to bear in mind is that people think it's all about interest rates.

58:09It's not. They operate at the margin here. It's the liquidity that matters. So when we go to 2017, that strong 16, 17, the Fed were raising rates. They were shrinking the balance sheet. People have in their minds, you need quantitative easing and you need rate cuts because that's what happened in 2021. It didn't matter because what was happening is China and Europe were injecting vast amounts of liquidity into the system. It was total global liquidity that matters the most. So everyone needs to understand that. Yep. Good, good. Fair point. So in March of 2021, liquidity peaked, but guess what else peaked?

58:50The business cycle. So you have the two most important drivers, as we've outlined here, peaked in March of that year and just went down basically in a straight line. And here's what's important is had we been sitting together, all together in Q1 of 2021, this is what we would have been looking at. We would have been looking at a situation where financial conditions were tightening. So as the red line moves lower, it means financial conditions are tightening. The ISM is at 63.8. And we were projecting a decline in the ISM over the next nine months to go down to 53.8. We obviously know it went lower than that.

59:30But here's where we are today. And I'm going to skip back and forth. I think this is quite powerful. It's where we are today. This is where we were then, today. OK, so the business cycle and the liquidity cycle are in a very different place today than we were back then, because on one hand, the business cycle is still, well, the ISM is still below 50. Right. And but, you know, directionally moving higher. OK. And the liquidity cycle, right. RER, GMI, total liquidity index, you know, is moving higher. And the other point I'm just going to mention, if I skip back to this chart, what also truncated the 2020-2021 cycle was the fact that, once again, the ISM is a diffusion index, but it behaves like a year-on-year comp, which is why all the year-on-year comps correlate versus the ISM.

1:00:26But what happened in COVID is in April of 2020, the ISM dropped to 41.8, which then all of a sudden meant from a base effect perspective that it had to go up in a straight line, right? That's how the year and year comps work, which then meant the ISM went up, well, in a straight line, and that truncated the cycle. Whereas here, as you can see, we're just kind of slowly moving higher, which is an ideal scenario because it actually means I think the business cycle extends further, as I explained a minute ago. So liquidity is higher. And at the same time, some of our top cycle indicators are just nowhere near traditional levels, which would correspond with a major peak.

1:01:13And here's just another one. And I think we must have, I don't know, mate, like 20 of these. But the point is, is that we're just not there. Now, if we come back to 2017 for a minute and we start with the dollar, basically in Q4 of last year, Raoul and I were making the case that the dollar would go higher on the basis that people would see Trump 2.0 just as they saw Trump 1.0 implementing tariffs and that being inflationary, and that would drive the dollar and bond yields higher as rate cuts got priced out. And that's exactly what happened. So here we are, here's basically the dollar August of 2016 to January of 2018 and the dollar today.

1:01:56So the dollar went higher in Q4 of that of last year and 2016, that tightened financial conditions, economic activity went lower for a period of time. And then Trump said, came out back in 2017, said the dollar is too strong. Because why? Because he knows that the dollar slows exports, it decreases corporate profitability, and it generally just weakens growth. So Besson, Vance, Trump, they all knew that they had to get the dollar lower. And then we said in January, had you been following along in our reports, that the dollar was basically going to go down. And it's done exactly that. And that's also meant that if we look at global M2 now versus back then, it just went up and it's still going up.

1:02:39Bond yields, what I had been saying earlier in the year when rates were moving a little bit higher, was as long as rates don't trend higher, it wouldn't be a problem. And the dollar decline would offset any move in rates. And here again, it's not a perfect correlation, but you can see rates have basically done exactly what happened back in 2017. range bound and actually started the year and ended the year flat back in 2017. So if anything, rates have actually come down this year. And then if we look at what happened back in Q4 of 2017, because guess what? The 12-week lead of Global M2 worked back then as well.

1:03:16We saw a 500 % move basically from mid-September to call it the first couple of weeks of December. And well, why? Well, first of all, GlobalM2 was moving higher, right? And yes, there are divergences at times. We've never said it would fit perfectly. It's the direction of travel, which is important here, right? So that was moving higher. But you also have to remember that in terms of seasonality, this is the average Bitcoin price move looking back since inception. It's really the next couple of months where things get really interesting, right? And over the long term, we have the best couple of months.

1:03:57Generally speaking, crypto returns all come in a six-month period. It's Jan to March, and it's October to end of the year. Which is exactly kind of what we've felt over the last couple of years, right? Yeah. We've seen a zone from very seasonal. Yeah. So anyway, there's that. And then if I overlay Bitcoin's price today versus that 2017 analog, this directionally is what we have in mind. Will it end the year at 220, 200? I don't know. What I'm trying to say, much like the global M2 chart, is the macro backdrop is very similar. Rates did the same thing. The dollar did the same thing. Economic data did the same thing.

1:04:42Global M2 and liquidity did the same thing. And so I think balance of probabilities is that the next couple of months are going to be very strong. So I'm going to stop there and hand it back to Raoul. Yeah. And also bear in mind that this is through to the end of the year. We actually think it extends into 2026. And that's going to be an important factor. And our view is Q2 almost certainly, but it could even be longer than that. We don't know. We have to assess as we go. So people say, you forecast this. What we're saying is probabilistically speaking with the data that we have today, it'll be this.

1:05:21It is extremely unlikely that it tops this year because ISM is just not there and global liquidity isn't either. And the structure of the debt cycle explains that. So hopefully we've got across that. Hopefully we've got across that recession fears are completely wrong. They're the wrong way around. People are looking at lagging stuff. That what we will see is a stronger business cycle, which will drive this. So you've seen a whole amount of depth of work that goes into this. And behind all of this, there's about another 50 indicators on each one of these points. And that's the depth that we go into a global macro investor.

1:05:58and those of you who are real vision alpha members you get a lot of this updated um from the macro investing tool report in real vision alpha and the pro guys you get much more of our analysis and nuanced understanding plus the amas where you can actually ask us how it works and also compare it with what um andreas is doing with his team and also what jamie's doing on the crypto side and how that all fits together well and also the trades and also the trade ideas which have been handsome example i mean great year andreas has killed it this year as well fantastic so and and um and as has um jamie so that's kind of how it works gmi is the core of this global macro investor it spills into the macro investing tool because we want to give this kind of knowledge to broader basis possible.

1:06:49The detailed understanding comes in pro, not as detailed, even close as GMI. And then you get the AMAs to be able to find out and then the trade ideas as well. Okay. So I'm going to share the chart, move forwards with our presentation. We told you it's going to take long, but there is a lot to get through. So take into account everything we know about debasement, that it is the massive macro factor, that it drives all assets, including the business cycle, that it's all related. So everything is correlated. So when you start to come that understanding, you start to think, what is the point of diversification?

1:07:27You start to think, actually, what I should be doing is using the most powerful macro variable we've ever had, literally in the history of macro. And it explains most of the price moves. so therefore we trade that and by trading that we start looking for what is the asset you want to own how do i make the most returns from this incredible macro opportunity and we call this the super massive black hole this is why a bunch of macro guys like julian and i in crypto it's why we've ended up in technology stocks. It's this that is the key factor. And this is the megatrend that you need to be aware of.

1:08:15This megatrend, if you think about it, what is debasement? Debasement is scarce assets going optically up in price because the denominator fiat currency has fallen. But the issue that's affecting society globally is that wages and earnings are driven by GDP growth and not debasement. This is why inflation and debasement are two different things. So what we found is that earnings, household earnings, corporate earnings are driven by the business cycle and GDP growth. But the debasement drives the assets. Now, the debasement is at 11 % a year and GDP growth is at 2 % a year. So what you get is everybody getting poorer, the amount that their earnings buys of, whether it's gold, which is the nice pure way of looking at it, is less every year, or of real estate, or of anything, which is why house prices are so expensive now.

1:09:18It's all based on the debasement and the fact that it doesn't help your earnings, which is why we talk about unfucking your future, because you are so fucked if you don't have long-duration assets like crypto or technology in your portfolio because you're just not getting ahead. In fact, you're really hampering yourself. So we'll come on to a bit more of that in a sec because it is the key killer point for you guys and unfucking your future. And while you feel that the world is running away from you and you can't catch up. So when we look at NASDAQ versus total liquidity, so this is the outperformance of NASDAQ versus total liquidity.

1:10:01We can see that it's been doing about 13.8 % in excess returns. So you've been handsomely rewarded by NASDAQ. Why? Because tomorrow is going to be more digital than today. So many people are so stupidly scarred by 2000 when this has been the greatest bull market in history is the NASDAQ going back to 1985, 1990. And yet people still miss it because there was once a bubble that burst. But even then, returns have compounded massively over time. So that looks good. We understand technology investing. We understand the rise of these new giants. We're seeing the change from the internet world to the AI world.

1:10:49That's driving excess returns again. But when we think of Bitcoin, it's actually driven 94 % a year excess returns over the rate of debasement. So you've got this asset that is in la-la land in returns versus anything else. It's 144 % annualized returns. That's including all of the drawdowns. So all of the bullshit nonsense about Bitcoin's too volatile, it's a bubble, it's going to burst. That happens every cycle. People don't understand. It's the duration of your investment that matters. If you have a long-term time horizon, those pullbacks are actually what you look forward to because you can buy more at cheaper prices.

1:11:36Or you can, if you want to, reduce risk from the cycle. I've done both. And I found, generally speaking, if you don't need to take lifestyle chips off, it's better to have the drawdowns and not try and time them because I've done that too. And that's not the easiest one always. And it's also very difficult to put back in what you took out of the peak. You know, if you've taken out 100 grand at the peak and the markets are crashing, everybody hates crypto, you think everybody's going to prison. The last thing you want to do is put your 100 grand at risk back again. So you always do less and you end up actually lowering your returns over time as opposed to adding to it.

1:12:16So you've got these assets that are cyclical, that have this incredible adoption rate that are well in excess of the debasement of currency, which is crucial. And Bitcoin is the one. But let's first look at our asset management firm, XPAM, where we invest in a broad basket of crypto hedge funds. What we're trying to do within XPAM is capture the trend move from$4 trillion of market cap today to$100 trillion. That won't all be driven by Bitcoin. In fact, Bitcoin dominance over time will change. We're trying to capture the megatrend. that mega trend is so powerful because it's how you unfuck your future now if you look at all of the assets on this table what we've got is everything in orange here underperforms the debasement of currency so you're actually getting poorer by owning small caps reits treasuries preferred high yields investment grade bonds everything unless you're using leverage there's only a few the spy well really that's in line with debasement plus inflation so when we're looking at those you've actually only got two asset classes technology stocks and crypto and within crypto you've got these ridiculous returns where bitcoin since 2012 we didn't go 2011 we didn't go back to 2010 or nine because the numbers get too stupid, has analyzed 130 % with that 64 % drawdown, 73 % drawdown, and 56 % drawdown.

1:13:57Ethereum is doing about the same, about 133%. And we expect it to outperform in this cycle, as it has done in all of its cycles over time. And Solana is currently, because it's newer in its adoption model, has been outperforming Bitcoin. And then if we were to add SUI in here, which Julian and I are heavily invested in, that has outperformed Solana because it's earlier in network adoption where you get the steeper part of the adoption curve. So really speaking, there's not many assets to own unless you want to fuck your future personally. So when you want to unfuck your future, you start to think about, OK, I've got crypto and Nasdaq.

1:14:40And I know a lot of you right now are all trading tech stocks because Bitcoin's been in this kind of sideways chop period. So you're all piling into tech stocks. Julian and I have tons of them in the portfolio. We love the technology trend. It's a really easy trade, has been an easy trade. But if you're honest with yourself, if you were to own one or the other, then you find that the NASDAQ has underperformed Bitcoin by 99.94%. What is the point of owning any other asset? This is the supermassive black hole of assets, which is why we personally are all in on crypto, because this is the big one.

1:15:22This is the greatest macro trade of all time. This is why many of the greatest macro investors of all time have moved across to crypto, because it is such a powerful trend with such powerful returns, and the cyclicality makes it also tradable. It's also the most powerful, the greatest macro trade of all time, because it's driven by network adoption. Remember, Metcalfe's Law is driven by the number of users and the total value transacted on a network. Go back to Amazon, a perfect network adoption model. Metcalfe's Law drives Amazon. People don't understand the valuations of Amazon back in the early days.

1:16:10You see, what happens is they had a number of users and they were only buying books. So the total value of transactions was low, but there was a lot of users. They started adding new products in. The value transacted on that network exploded. As they did that, the number of people using exploded. That is what drives these incredible log charts of all the technology stocks. It also works in crypto. By the way, sorry, I forgot to mention before, we talked about this debasement versus earnings. That is why you see all these people, old school analysts screaming about P ratios. P ratios are back to where they were in 2000s, everything's going to crash.

1:16:52You don't understand. Earnings go with GDP growth and price goes with debasement. P ratio always goes up in periods of debasement. That is how the world works. Which is why valuations look expensive today because prices are rising with debasement. Earnings are still subdued because the business cycle is subdued. So basically, all that needs to happen between now and next year is earnings need to rise to justify the valuation premium, which is already baked into equities. But PEs will still go up. Correct. Just different valuation. PEs will go up, but it won't go up as fast. But it's been driven by this debasement trend.

1:17:32So, okay, let's go back to this chart. This chart is a killer chart and everybody mid-curves this. This is total internet users in millions from 1992 when there was first 5 million users of the internet and crypto users 2016 when there were 5 million. Now, we use wallets as active wallets as a proxy versus active IP addresses. Are they perfect? No. We all have lots of wallets. We all have lots of IP addresses. It is the direction and the rate of change that matters. The internet grew at 76 % a year and then started flattening down to about 43 % a year. That's very typical of network adoption models.

1:18:14Crypto has been growing at twice the speed of the internet. We will have a billion active wallets, and we can proxy that for active users. Yes, there's less active users. I get it. Doesn't matter. Don't get caught on mid-curving it. What it's saying is it's growing twice the speed of the internet. This is the fastest growing technology in all human history up until AI, which is dwarfing it already. But the difference between AI and crypto is you can't own crypto. You can't own AI very easily. And you couldn't own the internet. But here, you're getting a token in the infrastructure layer of the entire new internet, which is blockchain.

1:18:58And blockchain is not just about Bitcoin. It's not just about Ethereum. It's about all of the use cases of these various chains. We've seen the same with cloud compute, and that's split amongst tons of companies. Yes, there'll be some giants. There'll be some fast adoption. There'll be new use cases. It's all coming. And don't forget, here, we're still in the speculation plus stablecoin phase. We haven't started really putting real-world assets on chain. That's coming. We haven't even started putting Web2 into Web3. That's coming. That's a mega trend. That'll suck in the next rise, which is by 2030, we think we get to half the world's population having crypto wallets.

1:19:43Again, don't get stuck on the metric. What we're saying is the growth continues massively, and it will continue to massively outpace the internet. It's basically the future of the internet with different rails. It's the read-write-own-rails of Web3 that will become increasingly important for things like digital identity, how AI agents interact, how the financial system operates, how the system of money operates, how collateral operates. It's all this. So this is the megatrend. This is why we're trading it. This is why it's outperforming everything. You need to understand Metcalfe's law. okay so we go back to this thesis at xpam that we have that right now crypto assets in total all digital assets are four trillion dollar market global real estate 400 trillion global debt 300 trillion global equities 100 trillion etc etc gold 20 trillion now bitcoin probably replaces gold okay so we know where bitcoin's going but the rest of it is going to account for the other part of this equation.

1:20:59And that comes from this total market cap of the entire space. If we just use the same log adoption channel, which works in everything and we've shown it, it tells you we get to 100 trillion in value by somewhere like 2032, if we just follow the fair value curve. So by 2032, seven years from now, this entire space is$100 trillion. If we go above that one standard deviation, it gets there faster, or it gets to a higher valuation by 2032. So that is an astonishing opportunity, considering we're only 4 % of the way there. That's how you need to think about this. Then you need to think, what is the structure of the crypto market going to look like?

1:21:46Well, Bitcoin will be the sort of percentage, let's say, that gold is of total assets. Well, total assets here is somewhere close to, I don't know if I'm looking at it, 500, 800, call it$900 trillion and gold is$20 trillion. So Bitcoin will be somewhat similar of the new system. so what we're seeing is the game is yet to be played in much of the component parts of this that's including the applications layer as well who's building what on this this is what's making it such an incredible thing okay let's go to the banana zone the banana zone is what julian and i have talked about as the acceleration phase that happens as they start rolling the debts that's what creates the parabolic.

1:22:37Now, everybody misunderstands this or has a short memory. We said, and I remember it clearly because I came back from Zambia on Safari, came back, did a video, Julia and I, but on its own starts now. That was August, September 2024. four from then on the market ripped higher and we chose various assets we chose suey solana and we said these are going to outperform and they did massively suey put on a five or six x over that period then we said hey global m2 is slowing we're going to see a correction this is we'll call the phase one correction of the banana zone. That was phase one correction. That finished in April.

1:23:29Julian and I came on and said, by the way, this correction's finished based on our work on global liquidity and the markets are going higher and the markets have gone higher. We said Ethereum will start to like to begin to outperform. Solana will come back. Exactly those things started to happen. We are now still in the early phase of phase two. This is not a phase two correction. We've barely broken out. In fact, most other assets, thinking about stuff like total market cap X, Bitcoin and ETH, haven't yet broken. Now, think of the banana zone here. All of these previous three were all only one period wide this one year.

1:24:14This one will be wider. So which is why the market looks less parabolic at this stage. But the parabola will occur, and Julian showed you with that work earlier, and we will have a phase two correction later. Our general viewpoint is the phase two correction is either the one towards the end of the year when people think, well, Bitcoin traditionally tops here, I'm out. Or it's a larger correction from March through till later in the year. It depends how long the cycle plays out, because obviously that March onwards period, again, if it continues to play out until the end of 2026, which is possible, not our highest priority yet.

1:24:59But if it does, then we'll have that period. People say it's all over. But again, it's unlikely to be over. But we don't know that yet. All I know is the next correction will be phase two and not the final one. And that's likely into year end. so hopefully we've given you the full framework of understanding we've gone back to the really big picture demographics we've gone through to debasement of currency why your future's fucked and now we've gone through to how it affects everything the business cycle how it all comes together where inflation fits into the picture where unemployment fits fits into the picture how you think about asset allocation why you're concentrating your portfolio why it's rational that you're trading crypto and tech stocks, and you should be doing that.

1:25:46This is the way, if you follow a framework like this, using the overall structure of this, it will really change how you do things. You won't be lost in markets. You will lengthen your time horizon. You won't be asking me, hey, is this correction over yet today? I don't care. Look at the trend. We're 4 % of the way there. We're going to$100 trillion. Your job is to not fuck this up. Not fuck this up means be careful with your asset allocation. Buy the bigger proven stuff. Generally top 10, top 15 market cap. Don't use leverage because you get washed out every time there's a correction. Expect pullbacks of 20, 30%.

1:26:30They're normal. That's the kind of volatility you will have to suffer if you want these returns and you have to be comfortable with them. Then you need to not get hacked. Do stupid stuff online. Don't lose control of your tokens. Use a ledger device. Use a multi-sig wallet. Do the things to not lose control of your tokens. Be very careful when you're using DeFi. Don't lose control of your tokens. If you lose control of your tokens, you're out of this game. The biggest macro trade of all time. So anyway, we're going to now move across to Real Vision, where we will answer questions on all of this.

1:27:10Hopefully this has helped you. Please share it with everybody. We can't stress how important this is. We're not expecting to be 100 % right. We are honest with ourselves. Things change. Things will adapt. But we have a pretty damn good look into the future. So follow along for the ride. If you're not over in Real Vision, then you should come over there. You can ask us questions. standards macro investing tool will give you the business cycle understanding and some of the secular stuff small amount when you get to real vision pro you'll get much more of this and then when you get to gmi you obviously get the whole thing and the deep discussions and the long conversations but that's not for everybody because it's priced for institutions family offices and others anyway i hope it helps i'm going to go across to real vision now obviously if you're watching YouTube everything else please like all of this share it, it's important alright, see you over in Real Vision Today's video is sponsored by VeChain, the leading layer 1 designed for real world adoption Live since the 1st of July Stargate is VeChain's new VET staking platform built around their updated tokenomic model which forms part of the renaissance upgrade Stargate reduces barriers to entry, improves yield for all participants, and provides a user-friendly staking experience.

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1:29:22Visit stargate.vechain.org today or see links in the description for more information. You obviously enjoyed the episode because you're here with me at the end. But listen, don't forget to go to realvision.com forward slash join and grab a free membership. It's an incredible community packed with alpha, great investment ideas and the research that you need to help you unfuck your future. So get started now. Go to realvision.com forward slash join. Have you ever wanted to trade Bitcoin but haven't dared try? With Plus500 Futures, you can trade crypto without the hassle of opening a wallet. With just a few clicks, you can register and start practicing with their free and unlimited demo.

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