Preston Pysh (00:03:00):

I didn’t know that. I didn’t know you guys knew each other.

Steven McClurg (00:03:02):

Yeah. We both have similar backgrounds in the more esoteric bond space. Well, we were both traders, but he was primarily on the sell side, and I spent a lot of time on the buy side. So we actually have to hold the risk. One of the things that people don’t don’t really understand about bonds, they think it’s this really boring asset class where you buy US treasuries and you get paid 2% for holding it over 10 years. A lot of cases, it actually is pretty plain vanilla, pretty boring, but you can get into some really interesting lending structures through fixed income.

Steven McClurg (00:03:40):

One of the things that a lot of people don’t understand about bonds is that it’s quite a large pool of capital. It’s probably about 10 times the size of equities. Most people are familiar with equities because you can open up a Schwab account. You can trade Apple or whatever it is that you’re trading. A lot of companies that people know if you’re trading equity and, say, let’s take an example, American Airlines, you know exactly what you’re getting or at least you think you know what you’re getting. If you’re buying American Airlines stock, you can see it’s priced to multiple. The economy’s doing great. It travels up. It should do well.

Steven McClurg (00:04:18):

Then if you start looking at American Airlines bonds, it can get quite complicated because every time they issue debt, it’s structured slightly different than the last time they issued debt. So it’s not just a simple, “Oh, it’s more debt issued by American. Let’s go buy it,” there’s a lot of things to consider. There’s call features, there’s the maturity of the bonds. There are covenants, both restricted and non-restrictive, and you really have to dig into every single bond venture to understand what it is that you’re buying.

Steven McClurg (00:04:51):

A lot of times people think it’s like, “Okay. Well, if American Airline goes under, then they’ve got all these airplanes,” but actually they don’t because they issue another set of bonds called asset-backed securities where they take all their aircraft or they take their aircraft engine or machinery or all these other things and structure them in special purpose vehicles that are bankrupt remote then lend against itself and then have income coming in from the parent company.

Steven McClurg (00:05:19):

So when you’re in the bond world, you understand all of these structures where it’s like, “Okay. That’s a certain type of ABS. That’s a certain type of company-issued fixed income,” and everyone is very different. I say that because there’s some real interesting intricacies in that market where it’s not just boring, treasuries or foreign debt. There is a lot of asset-backed securities that get really intricate and it actually applies quite interestingly to crypto.

Steven McClurg (00:05:54):

I know we’re going off on a tangent here, but I wanted to explain that. There’s a lot of intricacies to the bond market. It’s very large compared to equities. It’s hard to understand except for the plain vanilla side and about 50% of it’s not plain vanilla, but the bond market is really what drives most pricing in the economy. That’s why when people like me or Greg, when they say, “Hey, look, the 2s 10s curve right now is inverted by negative 15 basis points,” what that means is the yield on the 2s, which is two-year treasuries, is actually higher than tenure treasuries.

Steven McClurg (00:06:37):

That’s important because that usually is what comes before a recession, and that’s where we are right now. So the bond market is usually a leading indicator of what’s going to happen next in the economy. Even when we talk about the fed, a lot of people in blockchain have gotten really interested in what the fed is doing because it’s causing markets to go up, it’s causing markets to tank. Really, what they’re doing is manipulating the price of bonds, very simply, and then the price of bonds is what’s driving the rest of the economy. So I’ll pause there for a second and then if you have any other questions around that before we get into deeper.

Preston Pysh (00:07:17):

I love these points that you bring up with the American Airlines example, and the reason why is because what you’re talking about is something that’s actually securitized for me versus something that might not be securitized when you’re talking about debt and how it precedes equity in common stock. This is things that I used to talk about a lot on the show back when we were covering traditional markets, but when I’ve been doing so much Bitcoin conversations, it’s not something that we talk about a whole lot, but for people that are putting deposits on exchanges and they’re not thinking through all of this risk that you’re talking about, whether it’s securitized or not, they’re going to learn a painful lesson, real fast too, because like we always say risk comes at you pretty dang fast.

Preston Pysh (00:08:05):

So talk to us maybe just a little bit, and I don’t want to get too far off topic here because I really want to stay in this fixed income space for a little bit with you, but talk to us about what some of that means to you when you’re thinking about exchanges and securitization and this borrowing and lending space, which has had a face-melting meltdown as of recently to help educate people on things to think about and things to look at.

Steven McClurg (00:08:30):

Yeah. Well, that’s actually a really good question, Preston, because securitization, all the devil is in the details, right? You have to understand exactly how the structure works. You have to understand what the underlying security is. I’m going to take us back in time to the financial crisis that some people might remember, some people might not, they may have been too young, but I’m one of the old guys that remember several financial crises, but back in 2007 and 2008, you had to look really closely at secure type structures.

Steven McClurg (00:09:06):

One good example is in the world of non-mortgage related asset-backed securities, we just talked about the example of aircraft paper where securitized by aircraft. There’s also paper that’s securitized by automobiles, locomotives, cellphone towers, container ships, boats, right?

Steven McClurg (00:09:27):

So in 2008, all that paper traded off, and if you started trying to pick through and find the winners, you would say, “Okay. The aircraft paper looks really good,” because aircraft have really long lives. Commercial aircraft has about 30 year lives. Military aircraft can have, my God, how long has a B-52 been around, right? So you’ve got this underlying collateral that’s very valuable or if you look at boats, you’re like, “Okay. Well, how well do boat sales work in a recession?” Not very well at all. The maintenance is really high, and the storage is really high. So you might want to skip over the boats. You might want to sift through some of the cars, the autos. You might want to pick up the aircraft. Some of them have really light securitization. Mortgage-backed securities were pretty light in the way that they were securitized.

Steven McClurg (00:10:19):

Then you had these things called CDO, CDO squared, CDO cubed, which is basically securitized by securitization by securitization of a mortgage that may have been subprime. When you look at the dangers of some of that securitized paper, the good stuff versus the bad stuff, it’s very similar to stable coins, right?

Steven McClurg (00:10:45):

At Valkyrie, for instance, most of our team or a lot of our team is old bond guys like myself. We look at things as if they’re asset-backed securities, right? So if you have USDC versus Gemini coin versus Tether versus Terra coin, and some of these other ones, we used to pick through that. When I say we used to, before Terra blew up, we would look at those different structures and say, “Okay. What are they holding? What’s its underlying? Is it dollars? Is it US treasuries in some cases? Is it nothing? Is it Phantom like Terra?”

Steven McClurg (00:11:25):

If it was really structured poorly and held nothing and was really held together by an algorithm like UST or Terra was, then we would avoid it. If it was something like USDC, which was I would say a little bit more plain vanilla without a lot of the risk, then we would hold that. The problem with some stable coins about probably three, six months ago was they had a lot of backing by bonds.

Steven McClurg (00:11:54):

You’d think, “Okay. Well, that can’t be that bad. It’s just holding US treasuries.” Well, if you looked at bond prices from the time that the fed mentioned that they were going to start quantitative tightening back in October, then bond prices actually went down as yields went up, which meant that the bonds that were being held as collateral and things like Tether, it wasn’t all of Tether but a certain percentage of Tether was held in bonds. If those bonds dropped in price, then that means that if there was a massive redemption, then you might not be getting one for one. You might be getting 96 cents on the dollar.

Steven McClurg (00:12:32):

We looked at those types of things when we … Tether was never really an issue, but for us it was a big enough risk where we got out of it for a little bit, but we stayed in things like USDC and Gemini point for our dollar-based stuff. So when you look at that and then you look at this at the exchanges that are sponsoring or holding those particular things, you’ve got to look at the underlying of some of these exchanges and lending platforms too. You’ve got examples like BlockFi and Celsius, where there wasn’t a whole lot of transparency.

Steven McClurg (00:13:10):

When you tried to do due diligence, it was just like, “Hey, trust me. My name’s Alex. I’m good,” and we can’t trust that, right? We could trust the places like Gemini and Coinbase and a few others, but we couldn’t trust Voyager. We couldn’t trust BlockFi. We couldn’t trust Celsius so we never used them. It ended up working out for us, and it harmed a lot of other people, but you have to look at that underlying. You have to understand when you put your money in, who owns that money? Do you have a right to it? Do you have a claim to it?

Steven McClurg (00:13:45):

Just like bonds, right? When you hold a bond, you might say, “Oh, well, this Russian bond, this Russian corporate bond looks really good. It’s yielding 12%.”

Steven McClurg (00:13:54):

It’s like, “Okay. Well, what if they go bankrupt? Do you fly to Russia and sit in Russian bankruptcy court and try to get your money back? How’s that going to work against the oligarch that backs Putin?”

Steven McClurg (00:14:06):

So you’ve got to look at all those different types of things in a bond, and you’ve got to look at all those different types of things on exchanges and some of these securitized tokens as well.

Preston Pysh (00:14:16):

You live in the fine print.

Steven McClurg (00:14:18):

Live in the fine print. Devil is in the details.

Preston Pysh (00:14:20):

Yeah. It’s interesting you had mentioned about the stable coins and the backing, and you can see how when you live in an environment where you have a positive yield over the inflation prints, the CPI inflation prints, how they have an incentive to try to get into longer duration stuff because they’re able to capture more yield, and it gives them more of a incentive for profit as they’re running that, but as you’re well versed on, if you start to get in an environment where it starts selling off aggressively because you have higher CPI prints than what they’re yielding, that long duration stuff, the price moves way harder than anything else.

Preston Pysh (00:15:04):

So what I find fascinating is the government has an incentive to try to issue the long duration stuff as much as they can, but it appears like a lot of these stable coins, and I’m sure a lot of the Euro Dollar debt or just offshore dollars have an incentive now to consume or to have on their balance sheet much shorter duration things to guard against this negative rate environment that we’re in real terms environment that we’re currently sitting in. So it almost seems like a dichotomy between what the government wants and what everybody else might be demanding in the market.

Steven McClurg (00:15:44):

Yeah. Well, and one of the things that drives the bond market too is there are a lot of very large investment organizations that have a mandate to hold a certain percentage of bonds, right? This might be pension funds-

Preston Pysh (00:15:57):

With response to duration or with-

Steven McClurg (00:16:00):

Well, just to hold bonds, period.

Preston Pysh (00:16:02):

Period. Okay.

Steven McClurg (00:16:03):

Okay. So because of that, if you’re managing money for a large pension fund or insurance company, what you can’t do is just say, “Oh, well, CPI is well above any yield that I can get no matter where it is on the curve. I’m just going to rotate into equities.” You can’t do that. So what bond managers have to do is they have to manage the yield curve, and there’s two ways to manage the yield curve, one that you just mentioned, where it’s like, “Okay. I need to buy longer duration paper.”

Steven McClurg (00:16:37):

By the way, duration, just for people listening, most people when they hear duration they think, “Oh, that’s the life of the bond.” Duration is actually a calculation based on the combination of the life of the bond or the expected life of the bond because some bonds are callable. We don’t want to get into that, but the expected maturity. Maybe we’ll say that, and the expected yield to worst. Okay? The yield to worst is calculated based on several different factors of if it might be called or when it could be mature.

Steven McClurg (00:17:14):

So generally, the longer the maturity is, the longer the duration is, but also, yield is a factor. The higher the yield, the lower the duration. So duration is a risk management. We call it duration risk, right? So a high yielding bond, a 10-year bond that’s a junk bond has a lot more yield than a 10-year treasuries. So duration will be actually a lot less. Because it’s so high already, your duration risk is lower and duration is lower.

Preston Pysh (00:17:50):

That’s because they have an incentive to roll it over?

Steven McClurg (00:17:53):

Well, they do have an incentive to roll it over, but what happens is the other factor of really what duration is if you say … Okay. If duration is X, that means that as interest rates go up or interest rates go down, that duration calculation is what the math that you apply to the principle, the current principle value of the bond to calculate what the price is. The principle stays the same, but the price will adjust based on what the risk-free rate is. The higher or the longer the duration, the more it fluctuates when interest rates are changing.

Steven McClurg (00:18:36):

So if you have a 30-year treasury and really long duration, it’ll go down in price very quickly when interest rates go up. So this is why, for instance, in the six-month period between October of last year till March of this year, October is when the fed announced that they were going to start quantitative tightening, March is when it really started taking effect, but in the meantime, the risk-free rate started going up. 30-year treasuries dropped about 30% in price during that six-month period because they’re so long.

Steven McClurg (00:19:15):

Now, 10-year bonds or I would say, just in general, the Barclays ag, which is an index that measures just a basket of bonds, and its average duration is somewhere between five and seven, which means that it’s closer to eight to 10-year bonds, it only dropped about 6% or 6% to 8%. So that’s why these longer bonds have much more duration risk than shorter dated bonds and higher yielding bonds.

Steven McClurg (00:19:45):

So I know we went off on a weird tangent there, but what’s important there is when interest rates really started going up, that 30-year bond took a massive hit. So if you think you’re say holding 30-year treasuries, your price goes down. So some of these stable coins that were holding bonds against it, so if they’re holding just say an index of bonds, well, that’s where I get the math for what the price action for Tether was. The underlying had gone down in price at least 6%, depending on what the duration was of what they were buying.

Steven McClurg (00:20:23):

So that’s why I said it’s possible that it was down at 94 cents on the dollar. Our math was somewhere closer to 97 or 98 cents on the dollar, but that was just the price action of the bonds underlying in that six-month or even nine-month period till today. So that’s why you have to be really careful is they think they’re really smart by buying a bunch of bonds because, well, it’s US treasuries, they’re going to pay, but you don’t think about the price, and then when redemptions happen when the price is low, that’s when you get wiped out. That’s how bankrupts happen too, by the way.

Preston Pysh (00:20:53):

Yeah. Hey, so when you’re a, when you’re trading bonds, you have to be an expert on the policy. You have to be an expert on when they’re going to pivot, if they’re going to pivot, if they’re just … The forward guidance in this last decade has just been crazy, Steven. I mean, they’re saying as little as they can in as many words as possible. Give us the interpreter. Give us the little red decoder thing that comes in these games to what they’re saying right now as we’re looking at the market here at the end of the summer, going in the middle of July, I should say, in 2022. What are they saying right now? If you were going to tell a bond investor or an equity investor what to expect in the coming two quarters, what’s your interpretation right now?

Steven McClurg (00:21:47):

Investing in the bond market used to be a lot easier before 2008. Really, we were in a generational bull market starting at about 1982 when interest rates had peaked and interest rates slowly came down, which means that you buy bonds, and it’s always going to be a winner because it’s always going to go over price a little bit and the rates are high, but it got to a point where you really had to watch the fed a lot more closely I’d say in the last 14 years. The fed has had a lot to do with bond prices and the economy.

Steven McClurg (00:22:25):

So first of all, the great recession was largely caused by the fed. They kept rates too low for too long, which allowed people to speculate on real estate and to package up really exotic, and allow people like us to package up really exotic instruments to sell to other people and sell to the market and to keep driving rates down and it caused a lot of speculation.

Steven McClurg (00:22:53):

Then when they finally caught up with themselves, it was almost too late, and then they tanked the market, right? That’s really what happened in 2007. Going into 2008, they waited too long and then they moved too fast, and then they had to move too fast in the other direction, which was in 2009. February 2009 was really an interesting time because that is when the market turned on a dime, and it was when the fed decided that, “Look, we’re going to implement measures that have previously been unheard of. We’re going to print as much money as possible. We’re going to ease as much as possible to turn this economy around.”

Steven McClurg (00:23:38):

The fed went from a mandate of a stable rate of inflation of 2% to 2.5% to a dual mandate of stable inflation and full employment. During the great recession, what happened was unemployment were really high and they needed to get that back under control. Full employment is at 5%. So we went from a world where you invested more in the structure of things and the viability of companies to you could pretty much hold a basket of anything because the fed’s going to bail out the banks, and all rates converged regardless of where the risk was.

Steven McClurg (00:24:28):

From about 2012 to about 2018, everything converged. So it was really a game of buying the curve, and you had to watch feds speak very closely. So analyzing everywhere that the fed says, you got to listen to the governors, you got to listen to the underlying current. So for instance, back in October, I called a top in the market and I said, “Look, this is probably the top of Bitcoin. It’s probably the top in equities for now. It’s the top in bonds,” because I’m listening to what the fed is saying, and the fed is essentially saying, “We’re now noticing that inflation is maybe not transitory, which we’ve been saying it wasn’t transitory for a long time, and we’re going to start unwinding the balance sheet by March.”

Steven McClurg (00:25:23):

What that told me was … Okay. So they were still increasing the size of the balance sheet between October and March, but what that told me was is by March, they’re sloping up, and then by March, they were going to start unwinding and they’re going to have to start implementing rate increases because we all knew that inflation was here to stay, and if they didn’t do something soon, then it was going to get out of control, and sure enough, it has gotten out of control. The time to start raising rates and unwinding the balance sheet was a year ago, but-

Preston Pysh (00:26:00):

Steven, I don’t want to take words out of your mouth, but are you suggesting that they’re really not going to change course whether they’re expanding or contracting the money supply? They’re not going to do that on a whim. They’re going to give you a quarter’s notice before they start doing that so that everyone can start forward pricing it. Is that what you’re suggesting with your comment?

Steven McClurg (00:26:20):

Yeah, absolutely. I mean, they start showing you their hand a quarter before, a month before. In October, I mean, they let us know six months ahead of time. It was on the quiet. It’s like, “Okay. We’re going to start unwinding the balance sheet. We think the economy’s pretty good,” and those of us that are really the fed watchers were like, “No. It’s not going to end there because that’s not enough.” We knew that their hand was going to be forced and that they were quietly saying that they might have to start raising rates in March, and sure enough, they did.

Steven McClurg (00:26:58):

Even this last rate hike that we got, the fed had said one number and they ended up going with a higher number. Why? Because the market knew that inflation needed to be resolved and started pricing it in as if the fed was going to do it because they were fearful that the fed would have to, and then the fed came back and said, “Oh, okay. Well, I guess the market’s priced it in. I guess we’ll …”

Preston Pysh (00:27:23):

“So let’s do that.”

Steven McClurg (00:27:23):

Yeah, exactly, exactly. That’s actually pretty rare that they don’t signal exactly what they’re going to be before they do it because they order the markets, but if the market’s already orderly, it gives them the opportunity to actually raise rates at a higher clip. Now, what’s interesting about this particular FOMC meeting coming up at the end of July is they’ve already indicated 75 basis points at the last one because we were going up by clips of 50, and then the last FOMC was just a surprise 75, and then people started speculating, “Oh, they’re going to go to 100.”

Steven McClurg (00:28:01):

Well, I wasn’t so sure that they were going to go to 100. The market started pricing it in and I said, “Well, it’s possible, but there’s two things happening right here, right?” In the back end, the fed is looking at a few different things. They’re looking at, number one, inflation, which they have to contain, and they’re going to do what it takes to contain it no matter if they tank the markets or not. They don’t care. Number two, full employment.

Preston Pysh (00:28:24):

When you say tank the market, you’re talking stock market.

Steven McClurg (00:28:27):

Stock market. That’s all they care about, right? If it goes down 30%, doesn’t matter, right. They need to get inflation under control at the expense of the markets. The second piece is, well, where’s unemployment. Well, unemployment’s lower than 5%. It’s 3.6. So if 5% is full employment and we’re at 3.6, okay, we’re safe there. We can do what we want. Okay, but then there’s this third issue, and that is the foreign markets. That was the reason why I’m not so sure that … I’m going to be contrary to what the markets are saying or what the markets were saying a couple of weeks ago. They’re saying, “Oh, yeah, they’re going to go to 100. After that CPI print, they’re going to 100.”

Steven McClurg (00:29:12):

The reason they can’t go to 100 is this, okay? If they were to raise rates 100 basis points in two weeks, then the dollar would strengthen even more than it’s already strengthen against a basket of currencies. Okay? We’re almost at parity with euro. We’re last I looked was 125 against pound sterling. That’s a lot of strength against two massive economies that are already probably in recession that have higher inflation than we are. So we’re essentially exporting our inflation away.

Steven McClurg (00:29:54):

Here’s the important part. If we get too far ahead of ourselves and ahead of them, and particularly, we’re ahead of Japan right now, Japan’s going the other direction, they have an aging population that relies on a pension so they have to drive asset prices higher so that they don’t have to deal with the Social Security issue, right? So that’s why they’re continuing to go in the other direction. They’re worried about that retiree population.

Steven McClurg (00:30:22):

If we get too far ahead of ourselves and the dollar strengthens too much, then it kills manufacturing in the US because a strong dollar means that our goods are priced too high for other countries to buy. If we’re priced too high, then that means competitive goods from places like Japan, Europe, Korea, UK, China are then cheaper to the global economy and people will buy their goods and not ours. So there’s one thing to tank the markets. It’s an entirely different thing to tank our actual economy, especially the manufacturing base.

Steven McClurg (00:31:03):

So that speculation of, “Oh, it’s going to be 100,” and the fed probably thought about it for a moment and said, “Yeah, the market’s priced it in. May not be too bad of a thing,” and I guarantee you, the advisors to the fed said, “Hey, hold up. We’ve got to think about manufacturing and we’ve got to think about the strength of the dollar because it’ll essentially just create a death loop.” So that’s why there was that leak that came out that they were only going to do 75. So I don’t think that we’re going to see 100 for a while. It’s probably going to be 75, probably another 75 in September. We’ve got to manage that side of things while fighting inflation at the same time.

Preston Pysh (00:31:42):

So when you look at the CPI numbers, how do you see this playing out going into the fall? Do you think oil is going to just go sideways here and maybe even keep running? A lot of people are saying that the demand is going to dry up and you’re going to see everything really go deflationary and go into a recession, but do you buy that?

Steven McClurg (00:32:06):

Yeah. I don’t really buy demand drying up on oil or gas or diesel. There’s still a demand for things like food. Food gets to our tables by petroleum and a lot of different ways, whether it’s fertilizer, whether it’s the trucks that are taking it from the farm to our table. So that’s not going away. People are going to eat, and we still have money to pay for it. The bigger issue is probably supply, and the supply issue is we don’t have enough supply.

Steven McClurg (00:32:43):

A lot of the supply was really shut down in the last year. So there were a lot of environmental policies that had come out that really caused various areas to shut down drilling or to shut down pipelines. Not that’s good or bad, it’s just it is what it is. Then we looked at the possibility of releasing some of our national reserves, and it looks like we didn’t necessarily released it into our own economy. We released it to China, which I think is pretty alarming. Then of course, you have the energy crisis in Europe, right?

Preston Pysh (00:33:23):

Yeah. So this is even worse over there, way worse.

Steven McClurg (00:33:26):

Yeah. Yeah. I mean, Germany is something like 85% dependent on Russian gas to heat homes or to heat their stoves, right? I mean, it’s summertime, you’re not really heating your home so much, but gas is really the major thing that they use for food preparation and home heating. Whereas here, it’s a combination of electrical and gas.

Preston Pysh (00:33:52):

So the concern that I, and I agree with everything, obviously, I agree with everything that you just said, my concern is at what point does the fed have to reverse course? Is it because they break something? Is it because there’s some type of credit issue or there’s so much impairment in the debt markets that it forces them to go back to a QE type setting? Walk us through when you would think something like that, the earliest and maybe the latest, that we could see something like that play out, and maybe where you see some of those vulnerabilities or some of those weaknesses in the market today.

Steven McClurg (00:34:35):

Yeah. Well, one of the things that I’ve been saying all year is midterm elections is a good reason to slow things down because what you don’t want is people’s portfolios and pension funds to be down 30% going into midterms. That’s really bad for the current administration, but you also don’t want gasoline to be too expensive. You don’t want food to be too expensive. So it’s a double whammy, and they’re really going to have to balance that.

Preston Pysh (00:35:03):

How? Because you can’t really do one and do the opposite and the other. I don’t know how you could do that.

Steven McClurg (00:35:12):

So if the markets are going down by too much closer to the midterms, we might see either a reversal or a pause on the current direction just so that markets can catch up a little bit as long as inflation is under control, as long as we don’t see a double digit print, which by the way is entirely possible. Inflation right now is really caused by wage growth. It’s one of the reasons why we didn’t see inflation from 2009 until 2020. We had a lot of easy monetary policy, but wages remained relatively flat versus the amount of money that was in the system. Then when wages started going up and that was really triggered by COVID, by the way, or the policies that resulted from the COVID lockdowns, when wages started going up and there’s really no end in sight for wages going up, then that’s when inflation set in, and you really can’t control inflation until you clamp down on spending. Okay?

Steven McClurg (00:36:15):

All the monetary tightening in the world isn’t going to cause inflation to stop. It has to be government spending at this point in time or a combination of both. So when will we see the reversal? Well, that reversal will probably not happen until we see inflation go below 3% or until unemployment gets above five and a half.

Preston Pysh (00:36:39):

… or if there’s a major meltdown in the credit markets.

Steven McClurg (00:36:44):

Hmm.

Preston Pysh (00:36:44):

Really? You don’t think so?

Steven McClurg (00:36:48):

Well, I just don’t see a major meltdown happening in the credit markets.

Preston Pysh (00:36:51):

Really?

Steven McClurg (00:36:51):

I mean, yeah, fixed income might go down in price, but the type of meltdown that would be needed in order to really sway the fed would be for banks to go down, right? Right now, the major banks are fine. I’m actually more worried, I actually do have some concern about regional banks and any kind of bank that’s that’s consumer banking only. We can get into that if you want, but the major banks that have diversified businesses across things like capital markets and investment banking and banking itself, they’re fine. Where we might have meltdowns in credit markets is we might have a very high default rate on high yield bonds. By the way, that’s needed. We have so many zombie companies out there right now. They need to default. They need to go away.

Preston Pysh (00:37:45):

So whenever I think about banks really running into credit issues is when you have an inverted yield curve or it persists where the short end of the curve is yielding way more than the long end of the curve because for all intents and purposes, that really causes major challenges for their balance sheet management for any bank. When we’re starting to see that, you had mentioned the 2s and 10s. Explain for people what the 2s and 10s are, and just to give people an idea, you said it’s negative. It’s at negative 19% right now.

Preston Pysh (00:38:22):

Just for context for people listening, we had just touched it. Basically, zero in, what was this? September of 2019 for what looks like a day, and we hadn’t had a negative spread between the 2s and 10s since the 2007 time period. Just to give people some context of what Steven’s talking about here. So explain that a little bit, and then talk to us about this inverted yield curve and how it makes it difficult for banks to manage their balance sheets.

Steven McClurg (00:38:56):

Yeah. So in really simple terms, banks typically borrow money at the short end and they lend at the long end, right? So I’ll give you an example. If you go to your bank and you want a car loan or you want a mortgage, your mortgage is going to be 30-year mortgage, your car loan’s going to be six years is what they’re doing a lot of times right now, and car loan’s a little bit higher, but it doesn’t matter. They’re lending at that rate. So if the lending rate or the rate that they’re lending to make money is lower than what they’re able to borrow at, then that’s what creates the dislocation.

Preston Pysh (00:39:39):

Asset.

Steven McClurg (00:39:39):

Right, because they’re always borrowing at the short end, especially members of the members of the fed, right? So they’re borrowing on the fed window, right? That’s where they’re borrowing money, and that dislocation causes a dislocation in lending versus borrowing for banks, and it’s very difficult for them to make money at that level. If it gets too high, like mortgages for instance, they become unaffordable and they stop going to the banks to get mortgages, right?

Steven McClurg (00:40:14):

People, they’ll buy a home, they’ll end up falling out of escrow because the rate’s six and a quarter as opposed to 3% a year ago. You’re seeing a lot more of that and that’s, for instance, a lot of the big banks right now and their quarterly announcements are stating that they’re letting go, JP Morgan, for instance, is letting go a large portion of their mortgage unit because they just can’t make money there, and people don’t care if they get mortgages at that rate.

Preston Pysh (00:40:48):

In fact, they’re going out and buying homes with BlackRock.

Steven McClurg (00:40:52):

Exactly.

Preston Pysh (00:40:52):

Talk to us about that. So if I was going to explain it simply, and correct me if you don’t see it this way, but when you’re the patsy at the table, you can start taking the opposite position of what you were doing before, which was borrowing and lending, and you start becoming the buyer because you see that for them to unwind this behemoth, they want to own the equity with very little down. So A, do you see it that way? Would you agree with that description? More importantly, what’s your description, Steven?

Steven McClurg (00:41:25):

Man, I remember back in 2011 I started getting all these decks come across my desk is I would have some traditional finance from names that you mentioned saying, “Hey, we’re going to be launching this fund. We’re raising billions of dollars to go out and buy single family homes.” It’s like, “Wait, what?”

Steven McClurg (00:41:46):

I mean, you used to come across that all the time for commercial mortgages or commercial property, but wait, BlackRock is buying single family homes or all these other hedge funds are now opening up a hedge fund to just buy single family homes and so on? It’s like, “Yeah. Our assessment is that there’s a lot of easy monetary policy right now. There’s easy money, and prices are going to go up,” which they did, right? I mean, it’s quite a brilliant trade.

Steven McClurg (00:42:19):

What ended up happening is people, first time home buyers, are now competing with hedge funds on single family homes all over the place, right? They’re buying them up in blocks, and sometimes they’re just buying and sitting on them, not even renting them out, not even getting a mortgage behind it. Now, they might take a group of these single family homes and getting some lending against it and collateralizing the portfolio so that they can actually leverage up that portfolio. So they might be doing that, but it’s not your traditional mortgage.

Steven McClurg (00:42:52):

Even in this timeframe right now where you think, “Oh, okay. Surely, housing prices are going to drop right now because they’re not affordable anymore. Rates have literally more than doubled and people have a little bit less money to put into the market, but guess what? Inflation.”

Steven McClurg (00:43:11):

So due to inflation, asset prices will continue to rise. If you can’t make money lending to people, well, you’re just going to invest in a portfolio that’s going to go out and buy the homes and sit on them and inflation will take that value up and you don’t have to worry about the 6% because you’re going to earn 6% a year in inflation or more, which drives real estate prices up. So yeah, it’s a really interesting time and there’s more and more of these portfolios that have come into existence in the last five years.

Preston Pysh (00:43:44):

That’s crazy. Hey, so you’re an expert in just ETFs, ETNs, trusts, all of this stuff because with Valkyrie, you guys have a product, which please tell people about what that is, but more importantly, talk to us about the mechanics of these various vehicles because this is something that we’ve never talked about on the show about the underpinning of how these things work, and there’s no better person to describe it than you because you understand this stuff at a very high level. So if you were going to make it simple for everyone, how would you describe these things?

Steven McClurg (00:44:22):

Yeah. So what I like to do is let’s talk about Bitcoin from just very specifically Bitcoin. There’s a lot of different vehicles that you can buy Bitcoin through. I like to diversify because I’m not the smartest guy in the room. If I put all my Bitcoin on a hardware wallet, it’ll probably break or get lost in a voting accident. So you can buy it directly, put it on a wallet. You can go through one of these exchanges or custodians and then on down the line for less sophisticated people like me, you might want to buy through an ETF, a trust or some other type of vehicle like a private vehicle.

Steven McClurg (00:45:07):

So there’s really three different things at play here, and a lot of people throw on the terms, like you said, ETN, ETF, a trust. What those are is different structures that can be publicly traded. A trust, for instance, can be private or it could be publicly traded like a lot of trust that we know about, right? The trust structure really is a more tax efficient structure, where you essentially don’t have to have a K1 because it’s like owning property as long as it’s a single token.

Steven McClurg (00:45:42):

So if you own Bitcoin through a trust, you actually have ownership of a piece of that trust, your percentage of it based on how much you own. Then of course, the manager or the trust manager charges a small fee for holding it, for securing it, for putting it on a custodian. So for instance, the funds are pretty safe in that structure.

Steven McClurg (00:46:06):

What’s unique about the trust structure, again, is there’s no K1s because it’s a single asset property trust. When you move over to an ETF, well, the other thing about a trust too is if it’s publicly traded, you can’t necessarily redeem your shares directly. You have to sell them on the open market. So that’s why, for instance, the trust that exists right now have large discounts because it’s still liquid, right? You can only sell the shares to somebody else. You can’t actually redeem your shares out of it. That’s the difference between a trust and an ETF, and ETF is designed so that on a daily basis, if there’s sufficient demand to liquidate it, you have to liquidate it, right?

Steven McClurg (00:46:49):

So if I say, “Hey, I’ve got $1,000 worth of Bitcoin sitting in this ETF over here. I want my Bitcoin,” well, they have to honor that on that day, and that’s why ETFs typically trade very closely to the net asset value of the underlying as opposed to a wide premium or a wide discount. They have daily liquidations, whereas trust have no liquidations. It’s essentially closed ended.

Steven McClurg (00:47:18):

Then what a lot of people also hear about is an exchange traded note versus an exchange traded fund. Really, it’s not that different. A fund is managed by a fund manager. They’re a fiduciary, they’re an RIA, typically. We’re an RIA. So the ETFs that we manage are funds. We can also manage ETNs. That’s fine too, but an ETN is essentially a note where it’s almost like a note as if it’s a loan. So anything you hold inside of it or when you buy it, it’s more like a lend to as opposed to a direct holding ownership. In practicality, it’s not that much difference. It’s just the structure of it.

Preston Pysh (00:48:07):

Got it. Recently, Doomberg had a thread on Twitter where he was describing why he thinks the SEC is not approving an ETF and, effectively, it came down to he thinks that they don’t want that buying power leaving the dollar system and they’re just trying to drag their feet as long as possible. I’m curious your point of view or if you think that that’s truly what it is, and you feel free to describe what you’ve heard to date on the SEC and why they’re not allowing a long ETF. They have approved a short ETF. Talk to us a little bit about some of those ideas and just maybe some of your opinions on why you think some of it’s happening.

Steven McClurg (00:48:54):

Yeah. So there’s really two things at play. I spent a lot of time, actually, I think since 2017, working with regulators like the SEC to try to bring something to market. The biggest issue back then and up until pretty recently was really custodial issues. There’s been Mt. Gox, there’s been other custodians or exchanges where people have run off with the money or there’s been a hack or there’s been other issues, and what they don’t want is that type of thing to happen, and it’s very understandable, by the way, right?

Steven McClurg (00:49:32):

If you own Apple stock, yeah, somebody might be able to hack your account or hack the transfer agent where the actual equities are held, but there’s provisions to be able to claw back. It’s like a bank, right? Everybody’s like, “Well, be your own bank. Hold your own Bitcoin.” Well, if you hold money in a bank, yeah, there’s other issues. Sometimes you can’t get access to your funding, but if you lose your password, you call your banker and they reset it for you. If you lose your keys, it’s gone. It’s gone forever, right?

Steven McClurg (00:50:10):

So that used to be a worry. We’re not going to put something in the public markets that has these issues right now. By the way, most of those issues have been resolved. I would say between the years of about 2017 to about mid 2020, we got through a lot of those issues with them, right? Really, hats off to Gemini and Coinbase. I mean, they worked really hard to get the SEC to understand that they had these valuable custodian solutions that they were trying to protect investors, that they felt like they had a fiduciary obligation to their investors, and it was a lot of work, and we finally got there.

Steven McClurg (00:50:53):

The issue now I would say has more to do with transparency on trading itself, and they just can’t get their heads around that, right? It’s like, “Okay. Well, most markets have an efficient way of showing price, transparency of price like bonds and equities, and you can look them up, you can see them, you can see exactly who sold it to you, who didn’t. When it comes to Bitcoin, a lot of times you just see the wallet. Is it some wallet from North Korea? Is it some wallet from Russia?”

Steven McClurg (00:51:27):

We’ve got issues with those states right now. We just don’t know. We’re getting there, we’re getting close, but I still think it’s another couple of years, but it really is the trading and the issues around the exchanges. This is why Ginsler is very adamant about oversight of the exchanges in the US before they allow it. That really is the last piece, and it’s a difficult one because the SEC really only has purview on securities, and Bitcoin’s not a security.

Steven McClurg (00:51:58):

So if there was an exchange that only traded Bitcoin, should it be under the SEC? Probably not, but who’s going to regulate that exchange. CFTC thinks it should be them. A lot of people, I agree. I think the CFTC should really be monitoring that, but that’s why we have some of these other products. We got a Bitcoin futures, ETF launch. There’s a short one out there. Really, all they’re doing is utilizing futures, but the futures are monitored by, and there’s oversight from the CFTC, and it’s on regulated exchanges. So that’s why they’re behind futures and not behind Bitcoin spot yet.

Preston Pysh (00:52:39):

All right. Circling back to fixed income, these are questions. This is a little bit selfish on my part, but you have such an expertise in this area that I want to learn as much as I can. Your opinions on yield curve control. So we have this happening over in Japan right now. Where do you see it showing up next? I’m assuming you see it showing up somewhere next. Walk us through some of your thoughts around this.

Steven McClurg (00:53:09):

Well, I’ve been saying for a while now that what the feds should be doing right now and should have been doing this for a while, inflation’s gotten out of control, is they really should be unwinding their balance sheet more aggressively and not so focused on short term rates because that unwinding of the balance sheet will actually drive the long end of the curve up because it creates more supply versus the demand that’s there, and that inversion that it’s creating is really causing a problem. So there should be a more aggressive unwinding of the balance sheet.

Steven McClurg (00:53:51):

Now, the problem with that is if you own most of the treasuries, US treasuries in the world that are long dated and you’re aggressively unwinding it, guess what? You’re selling it off at a price that’s lower than where you bought it. That’s a whole other issue within itself, right? So you’re buying it at par. You might be selling it at 70 cents on the dollar, 80 cents on the dollar just to unwind the balance sheet.

Steven McClurg (00:54:17):

So the fed is in a bit of a hard place. They have a habit of acting too aggressively too late, and once the damage is already done, then they try to reverse course really quickly. This is exactly what’s happening right now, and we’ll probably see that same type of behavior when like, “Oh, shoot, we went too far. Now, let’s go the other direction really quickly.”

Steven McClurg (00:54:46):

So I actually expect that soon, and I’m not saying within the next month or two, but I’m saying probably within the next year we’re going to get to a point to where they said, “Oh, we went too far. The economy has completely tanked. Unemployment is skyrocketing. We still have inflation. Oops, but we’re going to have to reverse course here or else we’d into a really, really deep recession.” By the way, we’re probably already in the recession.

Preston Pysh (00:55:19):

Powell had mentioned that he’s trying to roll off the balance sheet by two trillion. Do you think that they can get to that number? That seems like a really big number to get to without breaking something?

Steven McClurg (00:55:30):

I think they can get there. I think two trillion is doable, but it probably should be more, but it won’t be, right? I mean, they’re offsetting what should be more with more aggressive rate height policy on the short end, but no, two trillion, it’s possible.

Preston Pysh (00:55:46):

It seems like there’s so many problems over in Europe and Japan that are going to force them to pivot faster, to me at least, but I mean, that’s just seat-of-the-pants opinions, right? I’m not basing it on anything other than seat-of-the-pants.

Steven McClurg (00:56:02):

Yeah. I mean, and you have to look at economies collectively. What’s China doing, right? What’s UK doing? What’s Europe doing? What’s Japan doing? I mean, those are the major, major economies that we’re competing with from a manufacturing perspective. Japan just has issues. I think we act independently of what Japan does regardless of what Japan does because they’ve been doing their own thing for two decades now.

Steven McClurg (00:56:29):

Europe is probably the bigger problem. If we completely go in a direction where it assists the squashing of the European economy while a major war is going on, then that’s definitely something that is going to be politicized and the fed has to be cautious of that. It’s not their primary driver. It’s probably the fifth bullet point down, but it is something that they have to be aware of.

Preston Pysh (00:57:01):

So I’m looking at the numbers. So I combined the ECB, the bank of Japan, the fed, and China, and I combined all their balance sheets together into dollar terms. They expanded through COVID, they expanded what looks to be about 11 trillion, and they’ve already bled off already, but they’ve bled off about 1.5 trillion out of that 11 trillion expansion collectively together.

Preston Pysh (00:57:30):

When I look at the last, and I’m just throwing this out here, and if you don’t have any comments, I’m sorry to just like talk here. I’m trying to pick your brain on what I’m seeing here. So on the previous, from 2016 to 2018, they had an expansion collectively, all four of them. They went from 15.5 to 21 trillion. So let’s just call that 5.5 trillion, and they went sideways with the balance sheet from 2018 right up to the COVID period of time, and they drew that down by about a trillion. So it was about a 20% reduction, which would be on par with what Powell was shooting for, which would be a $2 trillion reduction from this most recent, collectively 10 trillion that they inserted, which would imply that they’re about halfway through that.

Steven McClurg (00:58:29):

Yeah. Well, I’m actually looking at my handy chart back over here. I happen to just have it on my desk of details around the federal reserve balance sheet. I’ll just read it. I’ll just read this to you because it’s quite interesting based on what you just said, right? So despite the fact that the fed, they slowed down their purchases of new securities from October to March and they began unwinding, okay, the current balance sheet sits at $8.8 trillion.

Preston Pysh (00:59:11):

On the US’ balance sheet, yup.

Steven McClurg (00:59:14):

A year ago, it was only eight trillion. Just think about that for a moment. So we were adding so much from June all the way to March despite slowing down in October and what we’ve bled off has even come close to what we added since last when I say the end of June. So that’s as of June 30th 2021. So we’re still up almost a trillion dollars from where we were a year ago.

Preston Pysh (00:59:49):

That’s crazy. When you take a step back and you look at it, and anybody who’s been living through these markets since the start of the year is saying, “The pain train is destroying me,” but on a net basis from a year ago, we’re not only up big on what’s been inserted into the system, but up a tremendous amount.

Steven McClurg (01:00:12):

Right. I mean, we’re up 10% as far as assets on the balance sheet. Now, think about that for a moment. We’re up 10% year over year. CPI is up 9.1% year over year. By the way, it’s not that related. It’s actually not that correlated. It’s just a coincidence, but it’s a fun coincidence.

Preston Pysh (01:00:35):

Yeah. I guess this would be my final question. So Jeff Snyder, and I know you haven’t because we were talking about it a little bit before we recorded here, a lot of people online talking about Jeff’s recent interview with Peter McCormick. He’s talking a lot about the Euro dollar system or if I was going to simplify that for anybody, it’s just offshore dollars in foreign bank accounts and they’re not having to basically follow fed policy and US regulatory guidance as far as how many deposits you got to have on hand versus lending out into the system, and you have all this dollar denominated debt all over the world.

Preston Pysh (01:01:15):

So all those dollars that are offshore can fall under whatever regulatory guidance they want, which means you’re going to have a little bit riskier behavior, and it’s almost like holding a gun to the fed’s head because you have impairment in those markets and the feds got to have enough dollars in the system because they’re acting as a global reserve settlement layer. That’s my recap of the Euro Dollar system for people that want to simplify it or make it simple.

Preston Pysh (01:01:42):

I’m curious if you see it differently than how I just described it, but what are some of your thoughts on the Euro Dollar system, and what triggered this going down this path is Jeff had some comments where he does not think that the central bank balance sheets really play any type of correlation into, and I don’t want to take words out of his mouth if he’s not here to defend himself, but he didn’t really see too much correlation to do with any of this balance sheet expansion and contraction and QE and all the things that we were just talking about.

Steven McClurg (01:02:13):

Yeah. So there’s always been this speculation that outside of the US, the people’s bank of China has a lot of control over what we do because they’re one of the largest holders of treasuries and you have all of these other holders of dollars and dollar-denominated debt and treasuries. As a matter of fact, what’s interesting, though, is Chinese holdings of treasuries hasn’t really changed over the last year, even over the last two years. It’s been relatively flat. They simply buy treasuries to manage the renminbi. It’s their way of pegging the renminbi to the dollar. So we complain about China being a currency manipulator by pegging the renminbi to the dollar, but the mechanism to do that is buying US treasuries. So we really don’t complain about them buying the US treasuries, right?

Steven McClurg (01:03:07):

So the point is I actually don’t see it that way. There isn’t a whole lot of control that whether it’s the people’s bank of China or US-denominated debt or euro dollars has over the US market. The US can decide to honor things are not very simply put, and we can simply inflate our way out of issues. We can export our inflation. We can try to manipulate inflation going the other way, but it actually doesn’t have that much of an effect, and there’s not a whole lot of control that comes out of foreign holders of US dollars.

Steven McClurg (01:03:55):

Here’s a good example, Russian debt that was denominated in dollars. We can just simply say, “Yeah, we’re not going to transact in that anymore,” and create a default situation in Russian debt. So yeah, I don’t really buy that theory.

Preston Pysh (01:04:14):

Yeah. I just wonder how much, because it is a huge market, there’s tons of offshore dollars. There’s tons of dollar-denominated debt, and I’m looking at Japan, I’m looking at Europe, and I’m seeing this energy situation that’s about to play out into the fall and into the winter. I suspect it’s going to get really bad. I just wonder how much of that is the tail and how much of that is the dog at this point when you’re talking about offshore dollars, and is it forcing the fed to make policy decisions that might not be in the best interest of the US citizens simply because they have, by defacto, become the globe’s central bank. They have to keep stability in this global system and it has become a global system.

Preston Pysh (01:05:07):

So I’m not trying to argue with your counterpoint, I’m just trying to defend it as best I can to think through how much of this is actually in their control and how much of it are they actually acting on behalf of US citizens versus the global citizens because it almost feels like it’s a little bit more of the latter than the former.

Steven McClurg (01:05:31):

Yeah. I mean, and I definitely understand the point, but at the same time, that’s a factor that’s very far down the list if it even makes the list at all. The fed doesn’t care if somebody holding dollars just lost 10% due to inflation that they created. They don’t care about that at all. They do care about it from a policy standpoint within the US. You’ve got massive inflation within the US, well, that’s an issue. When its own citizens are experiencing it, that’s an issue. If other people are experiencing it, who cares? Right? It’s a way of essentially taxing anybody but choosing dollars, and it’s something that we’ve been doing since 1971.

Preston Pysh (01:06:19):

I just wonder. So you talked about the full employment, under 5% unemployment, the inflation under control, and then this third mandate of stability. I just wonder how much of that last one is really starting to force them into a corner because it almost seems like as we go further down this concoction of monetary policy that we’ve experienced since 2008-2009, it almost seems like everything is funneling into that last one where they have to have this stability in the system.

Steven McClurg (01:06:58):

I mean, look, when you look at it from the perspective of what we were talking about earlier, where if the dollar becomes too strong versus other currencies, there are issues that it causes, right? So I think it’s more from that perspective.

Preston Pysh (01:07:16):

Gotcha.

Steven McClurg (01:07:17):

Right? They’re not completely done, right? They know that if the dollar strengthens too much, then, okay, now we have a manufacturing problem. Now we have-

Preston Pysh (01:07:31):

An employment concern.

Steven McClurg (01:07:32):

… a trade imbalance, and that’s going to cause problems down the road. Let’s be cognizant of that. Let’s be aware of it. It’s why we’re not going to get 100 basis points versus 75, but we’re still getting 75, right? It has less to do with them caring if other people are paying a tax or inflation or large Euro Dollar concerns. It has more to do with, yeah, like I said, that trade imbalance due to the strength of dollar.

Preston Pysh (01:08:01):

Last question, and you don’t have to answer it if you don’t want to, any bold calls right now in the middle of July of 2022?

Steven McClurg (01:08:11):

Man. Okay. Bold calls in the middle of July, we’ve had quite a rally and that rally’s been due to the leak of, “No, it’s going to be 75 basis points not 100.” We’ve got this relief rally that’s happening. Bitcoin’s lagging in that relief rally. So I think that Bitcoin will probably go up a little bit further from here, but this is a trap. This is a selling opportunity if you’re a trader. We get these rallies, and all these Eth heads are like, “Yeah, we’re up 8%. Now let’s go buy a bunch of Altcoins because they’re lagging.” Sure, they may go up a little bit from here, but once this relief rally is over, what you really have to keep in mind is there’s liquidity going into the system and liquidity coming out of the system.

Steven McClurg (01:09:02):

Right now, liquidity’s coming out of the system and there’s nothing to replace it. So these little relief rallies that you’re getting right here, don’t be fooled by it. Until liquidity starts coming back into the system, I don’t care what the asset class is, if it’s a financial asset, it’s going to go back down. So I’d be selling not buying right here.

Preston Pysh (01:09:26):

I love it.

Steven McClurg (01:09:26):

Bold call? I don’t know if it’s that bold. Bold call?

Preston Pysh (01:09:29):

Hey, some people would strongly disagree. I’ve had them on the show. I argue with them online because I agree with you 100% on that call, Steven. For me, it’s the negative spread. The persistence of these CPIs are just going to be devastating in my opinion until they show some type of dovish transition of, “Oh, yeah. We’re going to start doing QE again,” and whatever else, right?

Steven McClurg (01:09:56):

Yeah. By the way, we have all of this blow back from Terra, Luna. We’ve got these exchanges and lending platforms that are going into bankruptcy proceedings, and the call that most people are saying right now is, “Okay. Well, the worst is behind us.” Well, the worst might be behind us, but there’s a lot of aftershocks that are still coming even within the ecosystem, even outside of macro, right?

Steven McClurg (01:10:29):

So think about this for a moment. If you have money in crypto hedge funds right now and you’re seeing what we are seeing, what are you going to do? Well, you want dry powder right now. So I think we’re going to have massive redemptions coming out of hedge funds over the next six months, which that alone will drive the market down even further, okay? So you couple that with the fed and tighter monetary policy driving down markets, it’s a double whammy. So bold call? Eth 600.

Preston Pysh (01:11:05):

Wow.

Steven McClurg (01:11:07):

Yeah. How about that one?

Preston Pysh (01:11:07):

I love it.

Steven McClurg (01:11:07):

Everybody’s like, “Well, it just almost doubled.” I’m like, “Yeah.”

Preston Pysh (01:11:10):

I love when people take a stand, right? If you’re wrong, you’re wrong. It’s no big deal, at least you actually threw something out there, which I love. So Steven, talk to Valkyrie. Explain people a little bit about yourself, maybe where they can find you online. Just give them the handoff. I’m sure they enjoyed listening to some of your comments here. So give them a handoff.

Steven McClurg (01:11:34):

Yeah, absolutely. You know what? I’m going to be really ashamed to admit. I don’t even know what our website address is. I just know that Valkyrie is our company. Leah is the smart one. She could tell exactly what the website is and everything. I don’t think-

Preston Pysh (01:11:49):

She’s going to be so mad at you.

Steven McClurg (01:11:51):

You’ll be so mad at me. I don’t think I’ve ever looked at our website. I just look at charts all day and I read boring publications and I try to figure out where the markets are going, but yeah, we’re Valkyrie Investments, and we’ve been around for a little bit now. I think Twitter, I’m Steven McClurg. How’s that one?

Preston Pysh (01:12:16):

In the show notes, we’re going to have a link to that. It’s valkyrieinvest.com.

Steven McClurg (01:12:21):

Oh, thank you. Thank you, Preston.

Preston Pysh (01:12:23):

Yes, sir. Yes, sir.

Steven McClurg (01:12:26):

Well, that makes sense because, yeah, okay. Yeah. That’s my email address.

Preston Pysh (01:12:32):

Oh, you’re hilarious. I really enjoyed this. Boy, what a depth of knowledge in the fixed income, and the fed watching stuff I found fascinating. So Steven, thank you so much for making time coming on the show. We’re going to have links in the show notes to all this stuff. So check the show notes and we’ll have it in there.

Steven McClurg (01:12:51):

Awesome. Thanks, Preston. It was great. Great talking to you.

Preston Pysh (01:12:54):

Blast.

Preston Pysh (01:12:56):

If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use. Just search for We Study Billionaires. The Bitcoin-specific shows come out every Wednesday, and I’d love to have you as a regular listener. If you enjoyed the show or you learned something new or you found it valuable, if you can leave a review, we would really appreciate that, and it’s something that helps others find the interview in the search algorithm. So anything you can do to help out with a review, we would just greatly appreciate, and with that, thanks for listening, and I’ll catch you again next week.

Outro (01:13:29):

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