Who Will Win the Fed’s Tug-of-War? ft. Jim Bianco

26:28I think it tells us that beyond a few sectors, the gold sector, the Max 7 stocks, some healthcare stocks, a few others, the broad measure of the market has had an okay year, but not nearly as good a year as the headline indices have been implying. Let me take one last thought on this. You mentioned the stock market is up 29 % this year. It was up 23 % or 24 % last year. So it's had two good years in a row. The problem with the marketplace is everybody defaults to momentum. And what that means is, what is the outlook for next year? Well, it was up 29 % this year, was up 23 % last year. So I guess it keeps going up 20 % a year.

27:15That's kind of a minimum investment is 20 % because that's what it's been doing. No, that's not necessarily the case. That just because the market was up big last year or the previous period means that it's going to be up a lot the next period. And that momentum, the problem with momentum, to quote that famous line from the movie Top Gun, is that some of the best flying I've ever seen, some of the best investing I've ever seen, right up until the moment momentum stops, right up until the moment you were killed. And that's the problem with momentum. If you're a momentum investor, my God, look how much money I'm making until that moment I'm killed, and it all goes away when the momentum disappears.

27:54Because momentum can disappear quickly and abruptly and without warning. And that's the problem with being a momentum investor. So turn that around. Let's look at valuation. Now, most people say that valuation cannot be used as a timing tool, and they're 100 % correct. Valuation does not mean that the market can't go up another 20 % in 2025. It can. But what valuation typically will do is give you an expectation. What should you expect the stock market to do from December 20th forward? Forget what it's done until this day. What should you expect over, say, the next 10 years going forward? Start with valuation.

28:38The valuation in the stock market is extraordinarily high. If you look at some of the work that Professor Siegel at Wharton University is, at Wharton University, or Penn Wharton School, if you look at the work that Bob Shiller has done at Yale University, they've done a lot of work on valuations. In fact, Bob Shiller won the Nobel Prize in economics on his equity valuation work about 15 years ago. They would tell you that from this moment forward, over the next several years, given the high valuation in the stock market, you should expect a 6 % or 7 % return in the stock market. The bond market is offering you 5 % yields.

29:20And so that is really the type of environment we're in. Now, I know when I say that, the crypto bros are like, you mean 6 % or 7 % a week, right? Not 6 % or 7 % a year. You mean that Tom Lee is saying that the Bitcoin should be$250 ,000 next year. It's going to go up 150%. Those are the types of returns that we expect. Well, maybe that happens over a shorter period. But given these stretched valuations, it's going to be very difficult to see those outsized gains. Remember, if you go back to the late 2022, the stock market had already declined 25 % in 22 for most of the year. So we started from a very cheap valuation, much lower base.

30:11Now we're into record territory, both in prices and near record territory in valuation. And that's why I think it doesn't mean the stock market has to go down. Sure, it could have another decent year in 25, but then this same argument I would give you would be even worse in 365 days, saying looking forward over the next several years. The argument you would make that 25 is going to be a good year is a momentum argument. And like I said, that will work until the moment it stops working. That's the nature of momentum. It stops working without warning and reverses badly. and that's what you have to be careful of is being a momentum investor.

30:52The problem with being a valuation expectation investor, expectations, you might say, look, the stock market might give me 6 % or 7%, I'll stay invested in it. But if the bond market can offer me lower volatility and 5%, I'll put some of my money in that. And then everything, momentum takes over in the first quarter and the stock market's up 8 % in three months and you feel like a chomp because you didn't play that game. But like I said, at any moment, momentum investing can end without warning. So that's the discipline you have to have with investing. What do you expect? What if it doesn't work out the way you think?

31:30How are you supposed to invest in it? And my discipline now says, look, 6 % or 7 % is a good investment. 5 % is a good investment if we are in a 3 % to 4 % inflation world. Over time, that will create wealth for you. But unfortunately, we're a gambling society. We're not thinking about overtime. We're DraftKings. We're FanDuel. We're Bitcoin. We want to score a huge killing now. And that seems to be what's overriding that. Jim, so well said. Such an important arrangement of all of those data points in that narrative. Look, I used to have an uncle, a late uncle, who was a passionate amateur recreational parachute jumper used to say, it isn't the first 10 ,000 feet.

32:15It's the last six inches that kill you. This is the challenge with momentum in markets. You made so many good points. I just want to start unpacking some of them here. The first is this idea of the sequential declines here in the market the last, whatever the number was, 13 or 14 days in a row. Probably important to point out when you look at that on a 30-day chart, it does not look dramatic. It does not look ugly. These are not what really matters in terms of declines, which are percentage declines. This is the number of days with sequential decline closes down from open. One interesting metric to look at, but perhaps overstated in terms of its significance for what it actually means to markets.

32:55But the point that you did make there that was really interesting there too, this idea of valuation and equity premium on the one end and concentration risk on the other, when greater and greater returns come from a smaller and smaller percentage of issues in the market, Often a signal of trouble if you look back to the nifty 50. I mean, this is a decades long pattern that we see. How significant do you think this concentration risk is in markets? Is it just a function of the way that markets are trading or is there some underlying tie in with the real economy that's causing this that perhaps signals something in the way of concentration or inequality risk broader in the society and in these companies?

33:40Last week, Goldman Sachs had an investment conference, and they had Mark Rowan speak at it. He's the head of Apollo. You might also remember that Trump interviewed him to potentially be Treasury Secretary. At the investment conference, he talked about the current state of investing. And he said, when it comes to the stock market, and this gets to your point about concentration, the single most important person in 2025 for the stock market is not Donald Trump, It's not Scott Bessett, the presumed incoming Treasury Secretary. It's not Jay Powell. It's not Mark Rohn. It's Jensen Hong, the president or the head of founder of NVIDIA.

34:24Everybody who owns equities has got their fortune tied to NVIDIA. Whether you own it directly, you own it in a concentrated tech fund, or you own a broad based index of the S &P 500. So goes NVIDIA. So goes everybody else's investing. So you've now made a decision on a portfolio. You've made decisions on stocks. You've made a decision on being long or short than NVIDIA. No, I didn't. I don't own NVIDIA. I didn't consider NVIDIA. It matters that much. And if you broaden that out to the Magnificent Seven stocks, it matters what they do for everybody's returns. the influence, the impact it will have on world stocks is going to be huge.

35:12Those stocks as a group are up about 60 % this year. And so with its strong momentum and with its hope that AI is coming, you know, can be when their momentum turns, it can be very, very painful. It could be very strong. Look, is AI coming? Yes. Can AI be bigger than the internet? Yes. But that's not good enough. That's not good enough to say that I need it here by the end of 25 or early 26. I need to see business models and lifestyle changes that are coming because of AI in 12 to 15 months. Like we've seen lifestyle changes because of the invention of the internet and social media bring about the way we live our lives has changed because of that.

36:03I need AI to be that fast. If it isn't, those stocks might be ready to fall. If you tell me, no, be patient, it's coming in three to five years, they're not priced for it to come in three to five years. They're priced for it to come in 12 to 15 months. And that is the concern you have. Now, if you're going to tell me, no, there's going to be this massive AI, boom, there's going to be hundreds of thousands of people that are going to be displaced from their jobs before the end of next year. We're going to create an entirely new industry because of AI and what we can do with jobs. OK, make me the case that it's going to happen that fast, because I don't see it happening that fast.

36:40I'll give you one overlay on this. In December of 99, Jeff Bezos was Time Magazine's Person of the Year. He was Person of the Year because of what Amazon represented, and Amazon represented a whole new way of doing retailing. 13 years later in 2012, Amazon stock was at the same price that it was in 99. Where's this retailing boom that you guys were talking about? We're 13 years later and it didn't do anything. Then the stock went up 300x. After that, we got the major retailing boom. The 99 story was not wrong about what Amazon was going to do in terms of its impact on retailing, so much so that Jeff Bezos was man of the year.

37:28It just took a lot longer than everybody thought for it to unfold. I'm not saying that NVIDIA is going to be the same price in 12 years. I'm saying that when you get this kind of move, you got to be, it's not good enough to tell me what their chip is going to do. It's not going to be enough to tell me what large language models are going to do. You've got to give me the date at this point. That's what happens when you get these big numbers. Otherwise, markets get very impatient, and they could correct and could correct very hard. And so that's what concentration does. And that's what the concentration means.

38:02I am, you are, everybody's listening to us. Jensen Hong is going to be a major player in our investment returns next year. Whether we own his stock, considered his stock or not, it's going to matter for everything. So many important points there to talk about. By the way, I wrote up a document about this. It was so powerful when I looked back at that case study. Amazon lost on a peak to trough basis 95 % of its value between December 1999 and September 2001. To your point, the revolution was digitized. They did, in fact, create a massive value for shareholders by revolutionizing the shopping model and then doing cloud and a whole bunch of other things.

38:47But boy, was it absolutely brutal. For those of us who were working on Wall Street at the time, as I was, I remember it like it was yesterday. Yeah, you're right. And in 01, 95%, that means you need a 20x return just to get back to those 95 levels. And the market was still, by 2012, at those, I'm sorry, 99 levels. So that peak in 99 was still there as late as 2012. It was well off that 2001 low. But yeah, I mean, that was the thing about Amazon. Where is this retailing revolution going to come from? I get the idea in the abstract, but in the reality is, where is it? Well, it came. It came in a big way.

39:27And Amazon also created AWS, created Prime, created a lot of other things along the way that was an adjunct to that as well, too. But it took a lot longer than we thought. But when it did arrive, it was culture shifting. It was lifestyle changing. We all live our lives differently because Amazon was created. And that could very well be the case with AI. I have no doubt. But like I said, when a stock like NVIDIA goes to$3 trillion, and when Tesla starts to take off, and Alphabet takes off as well, too, and Meta starts roaring ahead on the whole idea that we're going to have this AI revolution. revolution.

40:14It has to happen now. It's not somewhere in the future there will be wonderful things coming because of AI. They're putting a time limit on it. And that's what you have to be careful of when you see big momentum in stocks like that. Yeah, and it's such an important point. The revolution came, but it did not come on the time horizon that U.S. equity market investors were pricing the cash flows, which gets back to your earlier point. Maybe we You can just talk a little bit more about this. I know we're probably running out of time, but this is such a great conversation, Jim. It's one that I don't want to end, and I'm sure our viewers and our listeners don't want to end either.

40:49You mentioned the work of Robert Schiller, Kate, the cyclically adjusted price to earnings ratio, the valuation of this market, the valuation of those future cash flows in terms of investor expectations. Talk a little bit about that because it's so critical to understanding the really longer-term view of the market as a weighing machine rather than as a voting machine to borrow from Warren Buffett and Charlie Munger. Yeah. So you're right. Schiller's work, he created the cyclically adjusted P.E. ratio, which is like a 10-year average of the price-to-earnings ratio. If you take the reciprocal of that, you get the earnings yield.

41:26if you compare that to real bond yields, which is what he does, what is the bond market off? Remember the bond market destroyer of worlds. So that comes in full center in his calculation. This is what I can get in the bond market after inflation. This is the earnings yield that the stock market is offering me. And he comes up what's called the excess, the CAPE excess yield. And the higher the valuation, the lower the excess yield becomes. And right now, what he's basically telling us is the bond market can offer you about 1.5 % more than the inflation rate, and the stock market offer you about 1.2 % above that.

42:07And that's not, you know, given the risk that you have in the bond market, to just get 1.2 % more than the bond market, and that's the CAPEXS yield, is not a very good deal. I mean, or I shouldn't say it's not a very good deal. It makes the bond market very competitive to it. It's a far cry from where it was in 2019 when the gap was 6 or 7 or 800 basis points or 8 full percent. That was the Tina years of there is no alternative, get out of bonds, get into stocks. But that's not the case anymore. Now, if you take these yields, and remember, we're talking about rising yields. You take an NVIDIA, you take a Meta, you take a Google, and you say, OK, AI is going to mean these types of returns in the future?

42:52Well, you have to discount them by an interest rate to say, what is that worth today? What is those future returns worth today? And when interest rates go up, those future far out returns get discounted a lot more. They're worth a lot less today because they're out in the future. So the valuation idea is if interest rates are going up and you're telling me there's going to be an AI revolution, but push it out a couple of more years, it's not going to happen in the next 12 to 15 months. It might happen in three to five years. Well, as higher interest rates go and the further out those future profits become, they're worth way less today than they would have been if they were going to be in two years with lower interest rates.

43:42If they're in five years with higher interest rates, they're worth a lot less. And that's the thing that could wind up killing momentum. So that's why I said the problem with momentum is it's impatient. The market is pricing in gains, profits from AI now, and you have to deliver it now. You cannot have a problem. You cannot say, it's coming, trust me. That's what happened with Amazon. That's why Amazon took 13 years, we so priced in the AI revolution, which did come, it just came much slower than we thought, which is why it took so many years to make a profit. And that is, for any momentum-driven investing, the same thing is like you could say with crypto.

44:26Bitcoin's at 100 ,000, and everybody's talking about an adoption cycle. And you might be right, there might be an adoption cycle, but it better be 2025. It better be right now that there's an adoption cycle. Otherwise, going back to interest rates again, those future adoptions become worth less and less if they're pushed out further and further into the future. And so that's why when you have momentum markets, there's an impatience with the market that it has to deliver on that now. What we need to see, say, to stick with crypto at 100 ,000 is, here come the boomers, all right? Give me solid evidence that there are boomers that are transferring serious sums of money to crypto because it's above 100 ,000 and they have to be invested in it.

45:18The Wall Street Journal did a story on this earlier this week. They found one guy in Tennessee that bought$1 ,000 worth of crypto. They found another guy in Finland who bought$1 ,000 worth of Bitcoin for exactly the opposite reason. One guy bought it in Tennessee. He said, I'm buying$1 ,000 worth of crypto because I believe Donald Trump is going to push prices higher. The guy in Finland bought it because he said it's a hedge against the world falling apart. So one guy's optimistic, one guy's optimistic, and you found two guys that bought $1 ,000 worth of it. That's not adoption. Those are kind of exceptions to prove the rule is what that is.

45:54So that is the problem with momentum investing, even in crypto, is that you're betting that there's going to be a TradFi adoption. And there will be one. But it's got to come in 2025. If you tell me that the TradFi adoption is 28 or 29 or 30, three, four or five years from now, there could be a big disappointment. My point is, not that I'm saying the prices will go down, is when you have momentum, there's an impatience in markets. It has to happen now. It's been priced in to happen right away. And if it doesn't, considering the discounted cash flow arguments and stuff, that if that adoption is in the future, then there's a severe disappointment in markets.

46:35Listen to our listeners and viewers. If you're listening to this narrative right now, this is the way that pros think about markets. This is what's so important to understand from an institutional cash flow perspective, to understand those price generations that occur underneath the surface when they don't seem to make any sense, perhaps, to casual investors in these markets. Such an important conversation, Jim, such important insight. Can I add to that about the way the pros think about that, is because if you're a professional investor, you are measured against a benchmark and you are constantly saying, I own Bitcoin, I own stocks, I own bonds.

47:12I could own a myriad of other investments at continuously? I could trade out of these into other investments. Should I be trading out of these into other investments? And that is a continuous question you ask yourself. Pros don't say, which retail, you have an advantage with retail, right? You can say, I'm going to own some Bitcoin and I will look at it for two years and see how it performs. I won't look at it for five years and I know it will be higher. The problem with a pro is he gets paid every quarter. He gets paid every year. He has to constantly beat an investment benchmark. So he's always thinking, well, I was in Bitcoin.

47:49It had a great run since November. But I got to think about how I'm going to beat my benchmark in 25. And if that adoption wave doesn't come, I'm on to something else. I'll come back to it later, maybe when that adoption wave comes. But it's always constantly being measured against alternative investments. And that's why the pros can get very impatient. I need it to happen now. Otherwise, I've got other ideas. Think about it as if you're the general manager of a sports team. Ash, you might have a good slider and a good curveball, but I need you to get people out now because I got 12 other guys in the minor leagues that can get people out.

48:29And if you can't, you're going to get replaced. And that's the way that these investors kind of think. They kind of think the same way like managers or general managers of sports teams are. I need you to get a first down now, Mr. Running Back, if I hand the ball to you. If you aren't getting first downs, I got other running backs that I'm going to try. And that's the way that these investments are as well, too. Yeah. And not only beat their benchmark, but beat their benchmark more than the average of other active managers net of fees. Right. It's a brutal business. It is a brutal business that you've got to earn your, you know, we refer to that as alpha.

49:03You've got to generate alpha, which means above just the benchmark, above just, you know, doing nothing. And you've got to do it all the time. And if you did it last year and you did it last quarter, how are you going to do it next quarter? How are you going to do it next year? That's why it's a very difficult business to be a professional manager. And they're well compensated for it, those that can do this, because they're constantly thinking about at every moment. You know, Paul Tudor Jones, there was a book called Market Wizards written by Jack Swaggart in the late 70s. And Paul Tudor Jones used to talk about every time, and he was a commodity investor.

49:40I'm long corn. I could be short cocoa. I could be long cotton. I could be long bonds. I could be short the S &P. Every moment of every day, I say, if I'm long corn, is that the best investment out there? But at any moment, I could say, no, I'd rather be short cotton. Damn, I just made a change is what they wound up doing. And that's the way that professional investors start always think about these things. They don't rationalize, or at least the good ones, they don't rationalize. They don't say, well, cotton is struggling, but it'll come back or something like that. No, I'm on to the next idea because it's a brutally competitive business.

50:15Such an important insight. And by the way, you want to talk about alpha, add to that the idea of volatility. So even if you are beating your benchmark, even if you are beating your benchmark better than your competition, you don't want someone to say to you, yeah, sure, but you just got lucky this year. You loaded it up on volatility, and that's why you won this year, but maybe next year you'll lose. Right. And the way you kind of get away from that argument that you were just lucky, you made one good bet, or maybe you just, you know, you backed into it is you do it consistently. And then the argument is, what is the probability that you're consistently doing it because of luck?

50:49It goes down and it implies a skill level. And that's how the really good investors get very, very well paid because they're suggesting a skill level because it's a consistency in the way that they do it. Such an important way to think about these markets for people who maybe have not had the opportunity to work on Wall Street to understand the way that this works from a professional institutional investor perspective, which also gives you insight into how you see those institutional flows. Right. And as a retail investor, you don't have to play that game. You could play the game that I like Bitcoin, I like the S &P 500, I like bonds.

51:26I like whatever. And I think that between now and then, if it goes to$300 ,000 in five years, I'll just use the Bitcoin example, I'll be fine. But if it goes to$50 ,000 first, it goes to$50 ,000 first. But a professional investor can't show his investors that in 2024, I returned you 50 % because I had a lot of Bitcoin. But in 2025, Bitcoin halved its price, and I returned you minus 30. And then in 2026, when Bitcoin recovered, I returned you 80. Then the professional investor is losing because people say, you're just, you're random. You're random, and you're not showing a skill set. So you have an advantage if you're a retail investor over the professional investor.

52:15You don't have to play this ulcer-inducing game of constantly trying to beat a benchmark like they do. And the problem is, the reality is, well, why aren't the investors of professional investors, the money raised from professional investors, why aren't they so – the problem is they are the ones that are very impatient. Look at Cathie Wood and look at how she was thought of by 21 or 22. She was being compared to Warren Buffett. And then the market for those tech stocks that she owned fell 60 % or 70%. And then on the upswing, she didn't own the big MAG-7 stocks because that was never her bailiwick.

53:01She wasn't fully in on NVIDIA, wasn't fully in on Meta for the rebound. So while the ARC fund is recovered, it's not back to its old highs that it's set in 2021. So why, you know, you could argue maybe if she was given five or 10 more years, she'll be proven out. And she very well may be. But the problem is it's investors that are impatient with her and move on to the next player. So it's investors that force you to constantly have to beat every quarter and every year because they'll leave. If you're not, they don't have that kind of belief in you or staying power in you. Yeah, so well said. Jim, should we talk a little bit about crypto since you mentioned it?

53:45Sure. Where do you want to go with crypto? What's your big picture take on what's happening right now? Obviously, we've seen a significant rally probably on the idea that there's going to be a decrease in headwinds from a regulatory perspective with the incoming administration versus the outgoing administration. But what's your big picture perspective for 2025 on crypto? I think that that's exactly why we saw the big move from 50, you know, high 50s to 100 ,000 in Bitcoin in 2025 or since November. And what's been interesting about it, of course, is short of Fartcoin, it's been largely a Bitcoin driven invest.

54:23And, you know, ETH has lagged a little bit, although it's catching up somewhat. Sol has lagged a little bit. Some of the other cryptos have lagged a little bit. I think that as far as the regulatory headwind goes, I think that that's largely been removed with Paul Edkins at SEC, Bessett at Treasury, Lutnik at Commerce, and Trump's pro-crypto stance as well. But I think that's already in the price. I've been one that's argued that what ultimately crypto needs to do is break its correlation with the NASDAQ. Let's go Michael Saylor. Michael Saylor has got a forecast out there for 20 years that Bitcoin's going to go to 13 million.

55:08So it's going to go up 130x. If you've listened to his forecast closely, the problem with when people hear that, and if they're believing that Michael Saylor is right, is what does$100 ,000 buy you today? It buys you a cyber truck, a fully loaded cyber truck, to put an example on it. Well, in 20 years, when it goes to 13 million, does that mean I can buy 130 Cybertrucks? Or if you listen to Sailor, you've got to protect yourself from the traditional financial system. That's a word for inflation. That if it goes to 13 million, that a Bitcoin might still get you one Cybertruck at 13 million, or maybe a used Honda, so you continue with the metaphor.

55:55But if you're in traditional financial assets, you'll be buying a bicycle, is basically what he's saying the day that it hits$13 million. That is a far different scenario. Well, if that's the case, and look, I'll say, look, I'm open to the idea that the traditional financial system might hit headwinds and might have problems. What he's arguing is that crypto Bitcoin is an alternative. Okay, then stop acting like a levered version of the NASDAQ, not the S &P. but of the NASDAQ. It acts like a lever. It goes up 2x when the NASDAQ goes up. It falls 2x when the NASDAQ goes down. It needs to start having a zero correlation to the traditional financial system.

56:37Well, that could come with more development of more protocols that could maybe make it look more like an alternative to the banks and the brokerage firms and the stock exchanges that we have and that we trade dollars on, create crypto banks, brokerage stock exchanges that we create Bitcoin on. And that is coming. But when it arrives, it should have a zero correlation. The problem with it having a high correlation to the NASDAQ is it is correctly impugned by TradFi as a big speculative tool, is all it is. It just goes up and down with the speculative wins in the market. So that's what I'm more concerned about is you've gotten the deregulation story behind you.

57:22It's looking more like a speculative asset than it's looking like an alternative asset. I wish it would start to look more like an alternative asset. That, to me, could then start to really start to see it really start to flower. Because otherwise, what you're really betting on with crypto, and you saw it in the last couple of days, that it went from 107 ,000 to 95 ,000 on the Fed meeting is you're just betting on the same things that TradFi is betting on. You're just doing it with a lot more big, that it just moves in bigger percentages. So what I just said, Ash, we were talking offline about this.

58:01I think what I said is I'm 75 % bullish on crypto, 25 % skeptical on it. I am net full on crypto, but the maxi crowd is, I'm not 100%, so I got to be burned at stake as a heretic. And I'm saying that is also don't fall into that trap too. Every investment has promise. Crypto has promise. I've given you the idea that if it becomes an alternative and breaks the correlation, it's got a lot of promise, but it's got to do that. So the skepticism is fulfill that promise is what the skepticism is. If the argument is the FOMO argument, we hit 100 ,000, so everybody's going to panic and have to get into crypto.

58:41Well, the Wall Street Journal could only find two guys that bought$1 ,000 worth of it for their story. They didn't find somebody at the Greenwich Country Club that sold his S &Ps and bought millions of dollars worth of crypto after it hit about$100 ,000. If your story is FOMO, your story is that somehow people are going to be chasing it because it's a multiple of the NASDAQ. I think that the problem is we're not seeing that right now. And I want to see, and I would last and continue with, if you want the people with a lot of wealth at the Greenwich Country Club to plow it in to Bitcoin, show them that it has got zero correlation.

59:20Show them that it is building something different than what we see from JP Morgan, the New York Stock Exchange, and the Fed. And they will put a lot of money into it. But if your argument is, it's just buying the NASDAQ on leverage, they're going to shrug their shoulders and go, there is an ETF called TQQQ, which is the triple levered QQQs. I'll buy that instead. Thank you very much. Jim, this is why these conversations are so important, because it's a meeting of worlds. You point out there's a different worldview that you have for people in the digital asset, crypto community, Bitcoin community, who are so passionate about these assets.

59:55And then you have a different way of looking at the world that you've just highlighted here today and compare it and contrast them, the way that professional institutional investors look at markets, how they evaluate those investment decisions. You contrast it, you laid it out for us. I think it's so important to have these kinds of conversations where you have you, Jim, one of the few people who are conversant in both of these worlds who has spent the time and invested the energy to understand the way the crypto space works and compare it based on the experience that you have of working for all these decades in traditional finance.

1:00:26So let me finish off a a quick thought to say it a different way. We've got this favorable regulatory environment for digital assets, and Bitcoin is benefited from it. And what you hear, at least maybe I'm too online, is you hear that means now that that's clearing the way for FOMO. No, it should be clearing the way for development. It should be clearing the way that a developer that invents a mixer doesn't go to jail, like we've seen that's happened in the past. You know, Ross Ulbrich gets a pardon because we're not going to create a future Ross Ulbrich. We're going to allow developers to develop things, allow them to create an alternative financial system.

1:01:08That's what you should be looking at with this deregulation wave. Not that we're just going to create a FOMO wave of everybody's got to get into the coin because it's gone up and therefore it will continue to go up on a giant momentum play. If we start to see that being pushed, that it's going to open the rules, open the road for more development, more experimentation, and that we're more of an alternative financial system, then yes, that clears the way for huge price gains on what Michael Saylor was arguing. It's becoming an alternative to what we have. It's becoming somewhere that you want to protect your money with.

1:01:44But like I said, what I'm afraid of is, oh, we're going to get off everybody's back. So now, you know, we can have a giant FOMO wave. I think we already had it. And that's why we're at 100 ,000. And I don't know if we're going to have another one at this point. We need to have a development wave to get higher prices. Yeah, and I think people who are passionate about the technology like me are feeling the exact same way that you are there, Jim, which is this development is so important. And by the way, there are still some real material challenges. You see it in terms of the security incidents, the exploits of some of these protocols, particularly in the DeFi space that we saw so many of, unfortunately, in 2023 and increasing and to perhaps a lesser extent in 2024.

1:02:22And by the way, user experience, user interface issues. My mom still does not have an Ethereum wallet. There is a lot to be done here. So much opportunity for development for the developers, for the builders who are passionate about this space to come in and increase the functionality, increase the usability. decrease some of the risks from a security standpoint. I really hope all of that stuff starts to happen, not just in 2025, but out to 2029 and beyond as we have these conversations, by the way, which I think are so great and so important to have these meeting of the minds talks. You talked about the decrease in regulatory headwinds, some of the mental model stuff that we're talking about, particularly if you want to hear something with regard to Scott Besson, the presumptive incoming Secretary of Treasury.

1:03:06I did a conversation with him on Real Vision, a deep dive like this, a full 60-minute conversation where we explored his just views of the way that markets work. I think it's incredibly helpful to people who are trying to get a sense of what is going to be coming next from the upcoming administration. That is available on the Real Vision platform, of course, but also on YouTube. Go check out my conversation with Scott Besson if you're interested in more. By the way, Jim, we've talked so much about the equity markets, maybe the place to end this conversation, something that I expect our viewers and listeners don't want to end.

1:03:36Talk a little bit about your 2025 outlook for U.S. equity markets. We framed up the broader narrative here. Talk about what you see happening in the short to intermediate term, the next 6 to 12 months in U.S. equity markets. Struggle. Higher prices probably by the end of the year, but a struggle in between. I don't think we're going to have another big kind of gain in the market. I think we're going to see higher interest rates. And that, from a TradFi perspective, is going to be a competitive, is going to be a competitor. Why should I be beating my brains out in the stock market? Remember, from this moment forward, I know you made a lot of money in the last two years, but that's done.

1:04:16What am I going to do in the future? So if we're looking at, you know, mid-single-digit type of gains in the stock market with some volatility, and you could get that in the bond market with a lot less volatility, that's going to be kind of the competition that I think it's going to go through. And I think that what's going to be driving that volatility is going to be what we talked about, that impatience about AI. I get it. I'm there. I think it's bigger than the internet, but it's got to happen now. It cannot be happening somewhere off into the future because it's priced to happen right now.

1:04:52And maybe there's a disappointment that it's coming. It's going to be good, but it isn't happening right now. And those professional investors are saying, well, that those future gains with higher interest rates are worth less. I'm on to something else. I'll be back here later when it's closer to reality. Jim Bianco, I hope you'll come back and join us in the new year to have conversations just like this one. Such an important and powerful one. Jim Bianco, thank you so much for joining us right here on Real Vision. Thank you. Hey, by the way, just a reminder before we go, tickets for the upcoming in-person crypto gathering in Miami up for sale right now.

1:05:25You can get them over on the Real Vision website at realvision.com forward slash CG2025. That's realvision.com forward slash CG2025. I will be there. It's going to be a hell of a lot of fun. Come on. It's Miami Beach in the end of January. You want to not be in New York if you're like me. Get out. Come down. Enjoy the weather. Enjoy the conversation. Thanks so much for joining us. See you soon. See you in the new year. Have a great holiday, everybody. If you liked this episode, I'd love for you to head over to realvision.com forward slash join for a free membership. Start your journey today to unfuck your future.

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