Preston Pysh (00:03:10):

Yeah, yeah.

Lawrence Lepard (00:03:11):

We’re starting to see it. In a society, in a system that’s built on free money, you take away heroin, and the addict is going to have a withdrawal tantrum, and that’s… We’re in the beginning of that right now. What I think is most interesting is that the leading edge, the bleeding edge of it has been stocks and bit… or I mean, gold and Bitcoin, but those are just the two that are most sensitive to what’s going on with the money. I think what happened to gold and what happened to Bitcoin is about to happen to stocks. I think the stock market is going to have an enormous accident in the next three months.

Preston Pysh (00:03:47):

Yeah.

Lawrence Lepard (00:03:48):

The reason I say that is you look at it, it’s a bubble. It was a bubble. We know that. You look at the charts. I’ve got several in my report upcoming, and we’ve corrected about 20% off the high. When a bubble bursts you, don’t correct just 20%. The S&P 500 in 2000, 2008 was down over 50%. The NASDAQ in the 2000 bubble was down over 80%, and so I think we can point to areas where we know anything that was puffed up based on free money is about to have the wind taken out, I would say. I suspect real estate is going to come down. Obviously, we see oil and copper coming down, and I think the stock market has got a long way to fall.

Preston Pysh (00:04:26):

Yeah.

Lawrence Lepard (00:04:26):

It was priced for perfection, and we no longer have the economic perfection.

Preston Pysh (00:04:30):

It is unbelievable to me when I’m looking at the central bank balance sheet and the expansion of it, and now the contraction of it and how correlated it is to your major stock indexes.

Lawrence Lepard (00:04:44):

Yes.

Preston Pysh (00:04:44):

The major ones, especially this recent COVID liquidity injection that took place and how correlated it is.

Lawrence Lepard (00:04:52):

Yeah.

Preston Pysh (00:04:53):

It almost just seems like there’s no… We can talk about, earnings and we can talk about all these micro ideas of valuation. But when I’m just looking at the macro, it’s just dominating. The currency itself is just dominating everything.

Lawrence Lepard (00:05:08):

Yes.

Preston Pysh (00:05:08):

I mean, everything.

Lawrence Lepard (00:05:08):

Yes. Yeah. I mean, these guys, as Grohmann says, they think they’re dealing with a rheostat that they can change the temperature on slightly. Really, they’re dealing with a nuclear reactor that’s either on or it’s off.

Preston Pysh (00:05:23):

Yeah.

Lawrence Lepard (00:05:25):

When it was on, things were running hot everywhere, and we had a crack up boom underway. Of course, they saw that late, reacted to it, reacted to it violently, started reacting slowly, and then of course, nobody listened to them, and they’re like, “No, no. Really, we’re serious.”

Preston Pysh (00:05:42):

Yeah.

Lawrence Lepard (00:05:42):

“Help.” Powell is channeling his inner Volker, and he is indicating he really is serious. I think he can’t pivot immediately. He just can’t. He knows his credibility would be blown apart.

Preston Pysh (00:05:54):

Yeah.

Lawrence Lepard (00:05:54):

So they’re going to have create more pain, and they will, and the question is, will something break, or how much pain is it going to take before they do pivot?

Preston Pysh (00:06:06):

When I look at the global central bank balance sheets, and I see how much they stepped in, not on this most recent one, collectively, across the globe on the major four central banks, it was about $10 trillion in this last go around.

Lawrence Lepard (00:06:18):

Right.

Preston Pysh (00:06:18):

Before that, I want to say from like the 2016 to about the 2020 period, it was a $5 trillion insertion of liquidity that they let fizzle out, and then COVID hit. It looked like it was already starting to fall apart before COVID even happened.

Lawrence Lepard (00:06:34):

Right.

Preston Pysh (00:06:34):

I’m curious if you think that… Did they step in with $10 trillion on this last realm because up until that point, inflation was nowhere to be found? It was like, “Well, we’ve keep throwing these trillion dollars, and trillions here, and trillions there, and we can’t get inflation anywhere as much as we try. So what the heck? Let’s go in big, and let’s give it $10 trillion, and see if we can even get inflation.” I mean, they got it, obviously, in a major way. Was that an overreaction on their part, and they just completely got duped because they’d been printing so much for literally a decade and never saw anything?

Lawrence Lepard (00:07:11):

I think that’s probably right. I mean, I know there was a lot of talk. Remember Chaney saying deficits don’t matter? For a very long time, they’ve gotten away with a lot, and so they just figured, “Why not? I mean, we can do it.” COVID looked like an existential threat, and it wasn’t, but it looked like it, and they used it as an excuse to do what they wanted to do. I don’t know. It’s so sad. I mean, all of these policies. I mean, these guys are just a gang that couldn’t shoot straight. I mean, really. I’ve used the phrase, “They’re driving a clown car.” They drove it into the inflationary guardrail. They bounced off that. Now, we’re headed towards the deflationary guardrail. We’ll see how long it takes until we bounce off that or if we break right through. I mean, they let this really get going, we’re going to have a severe economic downturn here.

Preston Pysh (00:08:01):

Everyone is talking about the deflation that they’ve started to see over the last couple weeks, and that’s the big story. I know CNBC… I mean, they’re just covering it nonstop, but you don’t see anybody talking about what you, and Greg Foss, and a few others are talking about, which is the CDS market.

Lawrence Lepard (00:08:18):

Oh, absolutely.

Preston Pysh (00:08:18):

And particularly, banks, which I think is the real story here and the real canary in the coal mine as to the fundamental issues that are cropping up in this disaster right now.

Lawrence Lepard (00:08:33):

Well, that’s right, and so that’s the issue. I mean, we know the FED mandate, the three parts, right? Part one is full employment. Part two is… and they’ve got that more or less. Part two is controlled inflation. They obviously don’t have that. Part three is financial continuity or financial stability in the markets, and that’s what they’re going to lose, in my opinion. That’s going to break, and there’s a lot of evidence of it. I mean, the Italian bonds blowing out in an emergency ECB meeting. That doesn’t happen every day. Right? I mean, you look at the Japanese JGB market where they’re using yield curve control. They’re pinning it at 0.25, but overnight, it trades up to 0.45, and they’ve had to bring… I think one chart show they had to bring $80 million to bear to buy more Japanese bonds.

Lawrence Lepard (00:09:18):

In the CDS market, I just tweeted a chart today that showed the Credit Suisse CDS is almost as high as it was in the peak in 2008. It’s another indicator of it. I’m sure there are some others that you can point to, but there are a host of factors that would seem to indicate that there are financial stresses popping up in the system in various pieces. The strong dollar is a wrecking ball, right?

Preston Pysh (00:09:42):

Yeah.

Lawrence Lepard (00:09:42):

I mean, the dollar going straight up. I mean, Sven Henrich had a great chart that just showed how’s that financial stability thing you count on when the dollar is just on a tear and going straight north, and the whole world is based on dollar-denominated debt. Things are going to break. I mean, they’re going to break in a lot of places if they continue with this policy, but they have to because the politics indicate that they’ve got to get inflation under control, and they want to try and maintain some shred of credibility.

Lawrence Lepard (00:10:11):

To their credit, they admitted that they blew the last call. I don’t know what they’re going to say when they have to pivot here. I mean, I’m sure they’re just going to say, “Well.” Hopefully. I think what they’re praying for… and they’re probably pretty pleased to see the price of oil starting to come down. I think what they’re probably praying for is a month or two of good comps. I mean, you saw Powell say in his last press conference if he got two months of good comparative inflation prints, i.e. down from 8.6, that they might think of backing off. So since they can cook that number, maybe they see where that might be possible in the next few months. I don’t know. It could print double digits. Who knows? The numbers that come out of the government, I never really trust anyway, so.

Preston Pysh (00:10:55):

Well, the numbers in Europe, for me, are even crazier because they’re getting 8% and 9% prints, and they haven’t even budged on raising rates over there with the ECB.

Lawrence Lepard (00:11:06):

Well, that’s right. Oh, that’s right.

Preston Pysh (00:11:11):

I mean, it’s crazy.

Lawrence Lepard (00:11:11):

Well, and that’s why the dollar is so strong, I mean.

Preston Pysh (00:11:11):

Yeah.

Lawrence Lepard (00:11:11):

Look, Japan is a really interesting case, and Luke wrote about this recently. I mean, what’s Japan going to do? I mean, what’s the world going to do? I mean, the Japanese currency is going to fall substantially, and they’re going to have massive inflation because they import all their oil. So it’s no way to run a railroad, and it’s making it very tough for all investors, even sound money investors, but it is what it is. I mean, the Mercan Chart is very informative, right? I mean, before a system blows apart, it gets really volatile, and I’ve always said, “Don’t use leverage, and know what you own, and know why you own it because…”

Preston Pysh (00:11:49):

Amen.

Lawrence Lepard (00:11:49):

I mean, look at the crypto space outside of Bitcoin. It’s just been annihilated, and there’s probably a lot more to go.

Preston Pysh (00:11:55):

I think so. I think you’re right.

Lawrence Lepard (00:11:57):

Yeah, yeah.

Preston Pysh (00:11:57):

I think you’re right.

Lawrence Lepard (00:11:58):

So.

Preston Pysh (00:12:00):

It’s a lesson, and I think it’s a lesson for what’s to come in traditional markets that I think a lot of people in traditional markets, especially if you’re under the age of 35 or 40 years old, have never experienced because they’ve never gone through the 2008 and how much counterparty risk explosions there are. Everyone in the digital asset space is experiencing that right now, and they’re seeing how quickly that type of stuff happens, but think of traditional markets. There’s going to be a wake-up call here in the coming quarter or two with respect to some of that stuff.

Lawrence Lepard (00:12:33):

Absolutely.

Preston Pysh (00:12:33):

Yeah.

Lawrence Lepard (00:12:36):

If your investment perspective is 2008 to today, the correct response at any point of a pullback has been to buy the dip.

Preston Pysh (00:12:40):

Yeah, yeah.

Lawrence Lepard (00:12:40):

The dip buyers in the first quarter just got their ass handed to them, and there are probably some people buying the dip right now, and they’re going to get their handed to them.

Preston Pysh (00:12:49):

Yeah.

Lawrence Lepard (00:12:50):

I mean, I fully believe, and this is just… I’m wrong all the time, so don’t bet on this. But personally, my gut tells me the market is going down another 10% to 30% in the next three or four months.

Preston Pysh (00:13:00):

Yeah.

Lawrence Lepard (00:13:00):

That’s going to wake some people up. I mean, market down 20%, that’s bad. Everyone knows we’re hurting, and everyone knows things are changing. The market goes down another 10% or 20%, and you’re going to start to see people thinking, “This is my savings. This is my retirement. I’m scared. I got to get out, and I got to cut back. I got to do whatever I got to do.” Everyone who’s out on skis is going to be in trouble.

Preston Pysh (00:13:22):

Larry, what would you say is the rash? So a person would hear that and be like, “Well, why do you think that? Is it the negative spread that you’re still seeing between inflation prints and the yields on everything?”

Lawrence Lepard (00:13:33):

Yeah, yeah. It’s that, and it’s also just… Look, the FED doesn’t have any good choices right now, and so we can criticize what they’re doing, but almost anything they do would be wrong. It more has to do with the symmetry of bubbles. I mean, this bubble got so far out of whack that it’s not going to… Down 20%, that’s a rounding error. This thing is overvalued by 3X. I mean, for the value buyer to start stepping into the stock market, it’s got to be at least 30% lower than it is today. It’s already down 20%. So that would mean a 50% wipe out. I mean, Ronnie Stoeferle had a great tweet on Twitter. He showed that $31 trillion of global stock and bond wealth has disappeared in the last six months. $31 trillion. US GDP is $20.1 trillion. Okay? So we’ve wiped out one and a half years’ worth of US GDP in asset valuations. That’s going to leave a mark.

Preston Pysh (00:14:33):

Yeah.

Lawrence Lepard (00:14:34):

Do you know what I mean? By the way, it’s going to get worse because people are going to look at those stocks, and they’re going to fear losing more, and they’re going to say, “I need that money to pay for these higher gasoline bills. I need it to pay for my higher interest costs on my house.” I mean, this is just everybody. It’s the sad thing. It’s what happens when you have a rollercoaster bust and boom economy based on a FED that’s mispricing the cost of money. I mean, this thing happened in the ’29 period.

Lawrence Lepard (00:15:06):

I mean, a quick personal story. My grandfather was a man over in Michigan. He was in the home furniture sales business out of a house. The ’20s were so big and so good for him that he was selling furniture hand over fist, and he’s selling it out of the first floor of his house. It wasn’t big enough. So he went to the bank in ’27 or ’28. He borrowed a bunch of money, and he doubled the size of the house. He turned it into a store. So now, he had a larger furniture store where he could sell the furniture out of them.

Lawrence Lepard (00:15:32):

That was in 1928. He got the wrong signals from the FED. We went over the top. The economy collapsed. He had five or six employees. He was doing great. Of course, nobody would buy any furniture because nobody had any money. Throughout the ’30s, he spent the whole ’30s. He and his wife ran it solo, and he went every weekend to go to the bank and beg them not to foreclose. All because the FED printed money and stoked the stock market bubble of the ’20s and led business people to make the wrong decisions.

Preston Pysh (00:16:02):

Yeah.

Lawrence Lepard (00:16:03):

That’s what’s happened here. I mean, all the money in cryptocurrencies, the wrong decision. All the money in NFTs, the wrong decision. There’s been a ton of mal-investment, and when you have broken money, which is what we have, you have interest rates that don’t represent the true cost of capital, you end up getting huge misallocations, and then everybody wakes up to the misallocation and says, “Oh my God, we blew it.” Suddenly, everything resets to a new set of prices. They’re more in line with reality, and that’s what we’re going through right now. We’ve just begun. I mean, look, the first quarter, most of the stock indices were down low… mid to high signal digits. Now, the stock indices are down 20%.

Lawrence Lepard (00:16:49):

I know people were saying, “Oh, this is still not that big a deal. It will recover. This is a good buy.” No, it’s not. This is a bubble bursting, and we’ve seen the pattern that happens when bubbles burst. They go back to their base, and we’re a long way from the base. I have charts in my report that will show that. There are a lot of charts out on the web. John Hussman has done a great job of documenting how overvalued stock market is. It’s got a long way to fall, in my opinion, and that negative wealth effect, it’s going to be a big deal.

Preston Pysh (00:17:18):

Yeah.

Lawrence Lepard (00:17:18):

I know a lot of people who thought they were wealthy based on the stocks they own. They take their stocks down 50%, and they’re not going to go buy that new car and use leverage to do it. Their lives are going to change.

Preston Pysh (00:17:32):

Especially with interest rates being over.

Lawrence Lepard (00:17:34):

Yeah, and interest rates are going up, and so on, and so forth. Again, it’s sad. It’s really, really sad the way we allow a committee of people to set the most important price in the world. It’s tragic. It causes enormous human pain. I mean, think of the human pain that people went through in 2008. I mean, I was in the business at the time. My sister lost her house. A lot of people lost their jobs. A lot of people lost their houses. This boom bus cycle is… It’s enormously painful, and it turns everybody into a gambler and a speculator rather than being just an honest citizen trying to add value and build businesses. You can’t build businesses when the price of capital is grossly mispriced because what happens is people speculate, and the speculators get rich theoretically on paper before it ends, and then they get wiped out. The people who follow them get wiped out too. It’s a very bad system as you know.

Preston Pysh (00:18:39):

I want to shift gears real fast, Larry.

Lawrence Lepard (00:18:42):

Sure.

Preston Pysh (00:18:43):

So the futures manipulating the spot price of commodity markets, and it comes down to the settlement. Explain some of this for people in a really simple way that… If you were trying to explain it to somebody who really doesn’t even understand the context of the question, lay it out for them, and then I’m curious to hear some of your thoughts on Bitcoin versus other commodities.

Lawrence Lepard (00:19:08):

Yeah. It’s a great question. I’ll do the best I can on it. I mean, in theory, if you and I are trading something back and forth, we have the physical thing, and we set a price, and we sell it. We deliver the thing back and forth. Let’s say a third friend showed up and said, “You don’t necessarily want the physical thing. I’ll sell you a paper claim on the physical thing because you’re not going to use it right away. By the way, I’ve got a ton of those paper claims, and I’ll put them all on the market, and I’ll put them all on the market at a lower price or a higher price, whatever.”

Lawrence Lepard (00:19:35):

That’s a futures contract, and that futures contract can manipulate the underlying price of the thing itself. If the futures market becomes… because every sale is created at the margin based on a price. The futures price and the spot price tend track one another. So if somebody comes along and introduces a bunch of paper futures and paper claims on something, and introduces them to the market, and sells into it, they can drive down the price because they’ve pretended that they have something they don’t have, and they’ve created a paper claim and supply. It all works until the person who bought the paper claim says, “Give me the real thing.” Okay?

Lawrence Lepard (00:20:13):

That’s what’s been going on in the gold market for decades in enormous size, and the paper contracts in gold are hundreds of times the underlying physical commodity itself. That’s how they’ve suppressed the price, and that’s why if we use the 7-1 standard, the price of gold today would be $80,000 an ounce plus, but it’s not because there’s a lot of paper gold that’s been used to suppress the price. This is beginning in Bitcoin, but it’s very early days, and it’s much smaller. The way we measure it in the gold space is you look at the total derivative context outstanding divided by the physical trade, and we get the 100-1 ratio. Today, Bitcoin… I just checked it on CoinMarketCap. Bitcoin is trading about $20 billion worth of value a day, and the total outstanding Glassnode tells us that the total outstanding Bitcoin in futures contracts are about $20 billion, so…

Preston Pysh (00:21:04):

Is that cash, or is that…

Lawrence Lepard (00:21:06):

Well, it’s cash, but futures are cash-settled. They don’t have the Bitcoin, but that’s just an agreement between… That’s me selling you a Bitcoin that I don’t have and you agreeing. So, at the end of the day, when we close that contract out, however, the prices move, either I owe you money or you owe me money, but neither of us have a coin at the time. It’s just a futures contract, an agreement at some point in time when it gets closed out. So with $20 billion outstanding and $20 billion trading a day, and 20 times 365, so I don’t know. There’s $700 billion worth of Bitcoin trading a year. There’s roughly just under $400 billion worth of Bitcoin out there, and the futures market is $20 billion. I don’t think the futures market and Bitcoin today is manipulating the Bitcoin price that much. I mean, these are not the kind of ratios and numbers that exist in the gold market, which is heavily manipulated.

Lawrence Lepard (00:21:55):

Having said that, the $20 million has grown steadily over time, and somebody on your thread asking questions did a nice chart that showed how it’s been slowly, but consistently getting larger. The reason the people were able… The reason that governments were able to manipulate the gold market is they had unlimited balance sheets, and they used Cayman Islands amenities, and the BIS, and lots of other proxies, including JP Morgan to basically sell this paper into the market and suppress the price. They had a printer, and I think they do all this stuff off balance sheet, and they can make up for whatever losses are necessary, and they view it as in the national strategic interest to hold the price of gold down because it makes the dollar look stronger.

Lawrence Lepard (00:22:33):

My sense is when Bitcoin went from $5,000 to $50,000 that somebody… Alarm bells went off at the government, “We can’t have this thing be a threat to Fiat,” and they started thinking and becoming more active in this market. How active they are, I don’t know, but as I said earlier, the numbers we just talked about are not big enough numbers that I think they’re… It’s the tail wagging the dog yet, but it’s something to watch. Caitlin and I have talked about it because it could become bigger, and it could become an issue.

Lawrence Lepard (00:23:02):

One thing that defends Bitcoin, makes it like a porcupine, is that gold never goes up 5X in a six-month timeframe. So if you’re manipulating gold, you’re JP Morgan, so on and so forth, I mean, they’re pretty good at selling it when it looks hot, and then waiting for it to cool off and buying it back. So they can actually even make money on the manipulation by capping it and buying… creating negative settlement and buying it when it’s cheap. But as I say, gold doesn’t do five baggers in six months. Okay?

Lawrence Lepard (00:23:29):

Bitcoin. I mean, the volatility, which some people criticize, it actually is a defense mechanism for Bitcoin because if JP Morgan were to nakedly go get short Bitcoin in the futures market without having the government backing them up, and then Bitcoin were to do one of its traditional five-bagger runs where it went from, say, call it $40,000 to $200,000, that would rip their face off, and they would need the backstop of the government to protect them from it. So the volatility in Bitcoin actually, I think, will help it to be less subject to futures manipulation because… and hedge funds too.

Lawrence Lepard (00:24:05):

I mean, you don’t necessarily want to short something that’s got a fixed supply, and that can go up and has historically gone up 5X in multiple times. Right? That can be a dangerous trade. So my hope is that we’ll be able to… Bitcoin will be able to crash the Fiat system in a timeframe that allows us to get Bitcoin-oriented people into government that allows us to ban these derivatives in general because derivatives allow the person with the biggest balance sheet to win, and the government has the biggest balance sheet by definition. That’s part of what’s broken.

Preston Pysh (00:24:39):

Do you think the ease of taking a physical settlement also helps defend? You’re talking about the volatility.

Lawrence Lepard (00:24:46):

It definitely does. Yeah. Somebody else made this point in another podcast I was on recently. Yes, gold. The fact that gold lent itself to derivative is just so damn hard to divide, and move, and settle on.

Preston Pysh (00:24:57):

Mm-hmm. Yeah.

Lawrence Lepard (00:24:57):

It also led to the derivative markets. Yes, it definitely helps, but don’t make no mistake about it. If the government through the FED, the Treasury, the CIA, whoever it might be, decided that it was in the national interest to have a lower Bitcoin price, they could figure out a way to get into the futures market and probably make that happen. I mean, I think they they’ve done that with gold.

Preston Pysh (00:25:19):

Do you think that this is all part of the reason of why you’re not seeing a spot ETF being approved?

Lawrence Lepard (00:25:26):

Oh, definitely. Yeah. Doomberg had a great piece on that, which I recommend everyone to read. He just retweeted it this morning. There’s no doubt. If they approved the futures, they didn’t approve the spot ETF. I mean, the futures are just people gambling on the price, and they want people gambling on the price, especially on the short side. Spot ETF takes money out of their system. I mean, what they don’t want. They want to keep people locked in their system. They want to block the exits, and gold is an exit, and Bitcoin is an exit. They want to block those exits very, very clearly, and ETF is an exit.

Preston Pysh (00:25:59):

Yeah.

Lawrence Lepard (00:25:59):

Yeah.

Preston Pysh (00:25:59):

So with that said, there’s a whole bunch of other countries in the world that aren’t blocking a spot ETF.

Lawrence Lepard (00:26:07):

That’s right.

Preston Pysh (00:26:08):

So is this one of those things that all you can do is put some bandages on the wound, but the patients can bleed out?

Lawrence Lepard (00:26:18):

Well, I don’t know. I mean, yeah, I’m not sure. I mean, two things, and your questions ask this. I mean, one is GBTC is an alternative, right?

Preston Pysh (00:26:28):

Mm-hmm.

Lawrence Lepard (00:26:28):

Although it sells at a discount, and I’m very well at risk of not your keys, not your coins. I know the people there. I think they have the coins they say they have, but obviously, it’s a honey pot, and there’s always risk there. Yeah. I mean, it’s definitely an issue that they have not done it. Back to Gensler for a minute, I’m quite sure… I’m not sure. I strongly believe that Gensler has faced enormous pressure from the banking lobby and the treasury to not approve this thing. I mean, I can’t imagine. Hell, they approved a short Bitcoin ETF, didn’t they, as I recall?

Preston Pysh (00:27:06):

Yeah, yeah.

Lawrence Lepard (00:27:07):

Right? I mean, what’s that all about? “You can have one where you can short it. We’ll approve that, but we won’t let you have a regular ETF.” I mean, what more do you need to know? Right?

Preston Pysh (00:27:16):

I mean, is he hooking the plebes up? Is he hooking the people who have a long…

Lawrence Lepard (00:27:22):

I don’t know.

Preston Pysh (00:27:22):

Well, I’m saying it more in terms of… If you have a very long view on it, and your goal is to accumulate as much as possible in the coming 10 years, I mean, you could make the argument that he’s doing all those people a favor by allowing the place to get suppressed.

Lawrence Lepard (00:27:36):

Oh, yeah. Very possibly. Yeah, very possibly.

Preston Pysh (00:27:38):

Yeah.

Lawrence Lepard (00:27:38):

I’m not sure. I’m not sure he necessarily sees it that way, but you and I looking at it, it’s like, “Yeah.”

Preston Pysh (00:27:40):

Yeah.

Lawrence Lepard (00:27:44):

I mean, yeah, if it forces people to learn how to self-custody, that’s a good thing.

Preston Pysh (00:27:47):

Yeah.

Lawrence Lepard (00:27:47):

Right?

Preston Pysh (00:27:48):

Yeah.

Lawrence Lepard (00:27:48):

I mean, an ETF is a third party, and they’re all inferior, and GBTC is inferior. There are risks with GBTC, and I recognize those, but it’s a small piece of my Bitcoin holdings, but I like how easy it is to trade in it, and I like the fact that there is some chance that over time, the discount will go away. I mean, I think the pressure…

Preston Pysh (00:28:09):

Oh, yeah.

Lawrence Lepard (00:28:10):

They’re suing the government, and I’m not quite sure where that will go. I’ve heard various legal people tell me different sides of that, but I think it’s not inconceivable that they’ll win the suit. If that happens, there’ll be an instant 30% pickup because you’re trading in a nice discount.

Preston Pysh (00:28:27):

Yeah, yeah. This question here I think is unfair and difficult. Near impossible.

Lawrence Lepard (00:28:38):

That’s all right. I’ll take it. The world is unfair, bro. You know that.

Preston Pysh (00:28:40):

Near impossible to answer. People want to know. When do you think the central bankers collectively are going to pivot here, and when are they going to go back to their QE or additional yield curve control? I mean, Japan is still QE. I mean, they’re doing yield curve control. It’s QE on steroids, so. Okay.

Lawrence Lepard (00:28:59):

I’m not smart enough to know. I mean, I know Luke thinks it happens within days, if not months. I mean, it could happen tomorrow.

Preston Pysh (00:29:05):

Yeah.

Lawrence Lepard (00:29:07):

I mean, show me a stock market collapse in the middle of July where… or show me a March 2020 market event, and you’ll have your pivot.

Preston Pysh (00:29:16):

Yeah.

Lawrence Lepard (00:29:17):

I mean, in March of 2020, the treasury bond market went no bid, and your pivot occurred. Bang. So that could happen in a week. Is it going to happen in a week? Probably unlikely, but it could, which is why it’s so hard to… I haven’t traded out of my risk asset positions in spite of the fact that I’m getting punched in the face every day for the last three months. I think a more likely probability is that… You can see this. I mean, there’s an election coming up, and he said he wants a couple of months of down. It feels to me like this fall. You know what I mean?

Preston Pysh (00:29:53):

Yeah.

Lawrence Lepard (00:29:55):

September, October.

Preston Pysh (00:29:56):

I completely agree with you on that.

Lawrence Lepard (00:29:57):

That’s how it feels.

Preston Pysh (00:29:58):

Yes.

Lawrence Lepard (00:30:01):

They’ll say, “Well…” They’ll be able to claim they’re beating inflation, which they’re not, but they’ll be able to claim they are. Oil prices will be down a bit. Gas will come in a bit. Unemployment will be going up, for sure, but things won’t be desperate. The stock market will have come down a good bit more. They’ll forgive the student debt, and then they’ll pray that they can win the election, and there’ll be a lot…

Preston Pysh (00:30:20):

Oh, you think that’s going to happen before the election then?

Lawrence Lepard (00:30:23):

Oh, yeah. They need those millennial votes. Yeah. I think they’re going to forgive all that student debt before the election with a…

Preston Pysh (00:30:29):

Really?

Lawrence Lepard (00:30:30):

Oh, absolutely. Absolutely.

Preston Pysh (00:30:31):

Not all of it, but like a $10,000 kicker.

Lawrence Lepard (00:30:34):

Well, the $10,000 is done. I mean, they’ve already signaled that, but I think they might forgive all of it. Yeah.

Preston Pysh (00:30:39):

Oh my Lord.

Lawrence Lepard (00:30:41):

Oh, yeah. I mean, why not? Right? It’s money for the people.

Preston Pysh (00:30:45):

I’ve said though to people, and I’m not trying to defend any of this by any shape of the imagination, but I say to students that are going down that path that they want the student forgiveness. I’m like, “If you have any idea how much money they have pumped into the bond market over the last decade, it makes the trillion or whatever they would throw at that particular problem look like a joke.”

Lawrence Lepard (00:31:06):

Absolutely.

Preston Pysh (00:31:07):

It would be a total joke and…

Lawrence Lepard (00:31:09):

Yeah.

Preston Pysh (00:31:10):

Yeah.

Lawrence Lepard (00:31:11):

So the answer on the pivot is that, right? Who knows? I mean, look, if you want to get conspiratorial about it, the boomers who have the money that are like Powell, they actually want their dollars to hold their value, and he does want to go down as vulgar, and maybe he doesn’t pivot. Maybe he really does drive this thing into some kind of a depressionary condition wherein they think it will be easier to put in the CBDC and to use UBI. I mean, think about…

Preston Pysh (00:31:40):

They’re not going to be at a CBDC… I mean, I think technically, they’re not even close to being able to roll something like that out.

Lawrence Lepard (00:31:48):

You’re probably right, but they’ve got guys at MIT working on it. They had a task group. I don’t know. I just don’t know, but I’m just saying that as you game theory it out, you have to ask your question of, “Could they continue to be hawkish for a very long time?” I mean, the answer is they can. The stock market is going to go to zero.

Preston Pysh (00:32:08):

Well, I think even being…

Lawrence Lepard (00:32:09):

The economy is going to grind to a halt.

Preston Pysh (00:32:12):

I think you’re going to have so many issues in Europe and Japan by the fall to winter that they are going to be screaming, screaming for them to ease up on the doll, like the dollar has got to get weaker.

Lawrence Lepard (00:32:29):

Yeah. Well, they’ll create new programs. I mean, they’re going to probably give Japan’s swap lines, right? Maybe we’ll start buying Japanese bonds. I think it’s entirely possible that if the stock market goes down another 20%, somebody is going to float the idea… Maybe the US government needs to support the stock market. I mean, Switzerland does it. Other countries do it. It will be the save the USA’s 401(k) program or IRA program, and they’re going to try everything they can to extend their broken system as long as they can.

Preston Pysh (00:33:03):

Yeah.

Lawrence Lepard (00:33:04):

They’re the ultimate can-kickers, and they’ll keep taking another swipe at kicking the can. What’s so sad about it all is it hurts people. It hurts us. It makes it very, very hard, even when you understand what’s going on as I think you do and I do. Probably most of the listeners in this podcast do. It still makes it tough to figure out what the hell to do.

Preston Pysh (00:33:25):

Yeah.

Lawrence Lepard (00:33:26):

We’re just trying to stay on the right side of the trade. I mean, I’m not concerned with becoming a gazillionaire, and I’m just trying to defend what I got so I can retire and feel like I’m secure in my old age. I know a lot of people listen to that probably feel the same way, and it’s probably tough.

Preston Pysh (00:33:45):

If I was going to just hit that with an exclamation is… So when we talk about how they could pivot tomorrow, they could pivot next week, they could pivot by the fall, a person who’s sitting in risk on, or equities, or however you want to phrase that, you’re caught in this situation where if you pull your money out right now, you’re going to pay an enormous amount of capital gains, depending on how long you’ve been sitting on the position. Especially with the bump that you got since COVID, you’re going to pay a lot in capital gains. Is that going to be enough by the time, assuming you’re right that it’s going to continue to sell off? Are you able to buy it back at a level before they pivot again? So it’s almost like, what do you do? You’re just going to sit there like somebody is robbing you, and do you run, or do you stand there and hope that they change their mind, or what’s going on?

Lawrence Lepard (00:34:39):

Yeah. Yeah. It’s a great question, but again, I think… Look, with respect to bonds, I think it’s pretty easy. I mean, I think we know that they have to either let the whole system collapse. It’s debase or default. So I think bonds are pretty easy to get out of. I think even when they pivot, there will be a serious equity bounce, but we’re not going back to the conditions ex-ante. I mean, we’re not going back to those bubble conditions. Those bubble conditions were outrageous. I mean, people don’t understand just how overvalued the stock market was. I mean, look at all the names that were in there, and look at what’s happened to those names. I mean, look, there will be good things to buy at the bottom of the stock market, but we’re not even in the zip code of cheap yet. I mean, we’ve still got another 50% to 60% to fall. So I would not worry. If I had stock positions with big capital gains, I would sell them down hard, unless they were in commodity producers or…

Preston Pysh (00:35:42):

Yeah.

Lawrence Lepard (00:35:42):

I think there’s been a big shift. I mean, one thing we do know for sure is there’s been a big secular shift from the disinflation theme to the inflation theme. We’ve underinvested in commodity and oil production, and oil is correcting now and will probably correct some more, but I think in this new environment, we’re talking about the next 10 years as being an environment that’s basically inflationary and basically favors commodities versus technology.

Lawrence Lepard (00:36:06):

I mean, if you look at the ratio of technology companies to commodity companies, it just got so far out of whack, and that’s got to mean revert. So if I had big gains in oil stocks, I wouldn’t necessarily sell them. They might come down a bit because they’ve run up nice and heavily here, but I don’t think we’re going to see $30 oil again in our lifetimes, unless we have the Great Depression. I think they will stop before we have the Great Depression.

Lawrence Lepard (00:36:32):

That’s one other thing I wanted to add to the pivot comment. Keep in mind that the longer they wait to pivot… Okay. Fine. That’s painful, painful for all of us who are in things that aren’t benefiting as a result of that, but what it does, what it means, and it’s… Of course, they were late on attacking inflation, and look how aggressive they had to be just to get oil to come down 20 bucks. Okay? If they’re going to be late on pivoting and when they do pivot, it’s going to be because things are pretty damn bad, and they are going to have to print until their eyes bleed.

Lawrence Lepard (00:37:04):

I mean, they could pivot right now and maybe wouldn’t have to be as accommodated. They could do a soft pivot and maybe just talk back off the rhetoric, and that’s what they’re going to try to do. I mean, they’re going to try to drive the road somewhere between massive inflation and massive deflation. I mean, I can see why they got as hawkish as they got. I mean, things were pretty frothy. I mean, we all saw it, right?

Preston Pysh (00:37:26):

Yeah.

Lawrence Lepard (00:37:27):

Inflation was pretty out of control. They had to do something, and they did it. If I were in their shoes and I were running it today, I would pivot sooner rather than later. I think they’ve got a better chance of keeping their system together longer if they don’t go too far in this direction because once this becomes self-reinforcing, it’s going to be very hard. They could pivot now and maybe not have to print any more money. If the stock market falls apart and the bond market continues to fall apart, which it would be ironic if it did in light of a deflationary backdrop, but it could if people are losing faith in bonds, then they’re going to have to print like crazy to get us out of that deflationary spiral. Right?

Preston Pysh (00:38:09):

Which happened so fast.

Lawrence Lepard (00:38:12):

Which has happened very fast, and so the last time…

Preston Pysh (00:38:15):

Yeah.

Lawrence Lepard (00:38:16):

I mean, the last time, we did $3 trillion in QE-1, 2, and 3. We did $5 trillion this time. I mean, what’s the next one? 10.

Preston Pysh (00:38:22):

Well, collectively, I would tell you from a global central bank standpoint, it was 10 on the COVID. Yeah.

Lawrence Lepard (00:38:27):

10? I was talking US numbers.

Preston Pysh (00:38:30):

Just US. Yeah.

Lawrence Lepard (00:38:31):

Yeah, same. Yeah.

Preston Pysh (00:38:32):

Yeah.

Lawrence Lepard (00:38:32):

Yeah. No, it will be 20. Right? So it’s very problematic for them, obviously.

Preston Pysh (00:38:39):

Here’s an interesting question that I’m curious to hear your thoughts on. How do you see Russia getting what they want, and then what is it that they want?

Lawrence Lepard (00:38:54):

Yeah. I don’t know. Yeah. I really don’t know what they want. I can’t get inside that guy’s head. I know what he doesn’t want. What he got fed up with was being paid in script for things that were real.

Preston Pysh (00:39:04):

Yes. Yes.

Lawrence Lepard (00:39:06):

He finally said, “Okay. Enough is enough. You’ve gone too far, and I can see you’re out over your skis. I can see you’ve manipulated the price of gold. I can see you’ve created a world that really benefits you, and I’m going to throw sand in those gears. It’s not working for me.”

Preston Pysh (00:39:23):

He doesn’t want the paper promises.

Lawrence Lepard (00:39:25):

Yeah, “And I just don’t want these paper promises anymore, and so they’re my commodities. It’s your problem.” I’ve contended. I mean, I don’t love the guy. He’s not stupid though. I’ve contended all along, I mean, and our leaders are such idiots. Again, he’s an evil guy in many ways, but truly, a part of what he wanted here was just a seat at the table, and we haven’t just given him basic human respect. We argue because he’s a bad guy, he doesn’t deserve that. I would submit that no, he’s a human, and he runs a country that’s got nuclear weapons. We owe him basic human respect, and we haven’t given it to him. I think that’s what caused him to throw sand in the gears, and it’s sad because I don’t think this war needed to happen and people are dying. We made a lot of promises to him that we broke and…

Preston Pysh (00:40:15):

With respect to the NATO… Yeah.

Lawrence Lepard (00:40:17):

With respect to NATO, and expansion, and everything else. If Ukraine were to have missiles and we’re to become part of NATO, I mean, we would have a nuclear strike capability in under an hour from Ukraine to Moscow. I mean, this would be like missiles in Cuba or to us. I mean, I can understand why the guy is not exactly thrilled about that, and so it’s… But again, we’re run by a bunch of people that are beholden to the military industrial complex, and they keep giving the Ukraine billions of dollars, and those billions flow right into the coffers of Raytheon, and Lockheed, and everybody who’s supplying these guys with the weapons of war. That’s good for those companies and the senators that live in those states.

Lawrence Lepard (00:41:11):

I mean, it’s sick stuff, and it just shouldn’t be going on, but it is. Again, it’s all fueled by the Fiat money. We’ve got to drain the swamp, and the way we drain the swamp is we get rid of Fiat. The way we get rid of Fiat is we push, and support, and develop, and go with the alternatives, non-state money, gold and Bitcoin. Bitcoin is the fastest growing and the sharpest spear, but gold is there too. I mean, there are people who don’t like the volatility of Bitcoin, so gold is a decent choice for them, so.

Preston Pysh (00:41:43):

I mean, at the end of the day, the paper promises have ruled, ruled the world for 40 years.

Lawrence Lepard (00:41:49):

Oh, yeah. Oh, yeah. Yeah.

Preston Pysh (00:41:49):

That’s been the environment, and it seems like we’re at a very… You saw this with the Zoltan piece that came out I don’t know how many months ago where it’s really money that is backed by energy itself is going to rule the coming decades. I’m obviously very biased and that I think I know what energy money it is, but…

Lawrence Lepard (00:42:13):

Look, I’m with you. I mean, don’t get me wrong. I’m a Maxwellist, and I think Bitcoin will beat gold out over time. I just think there’s a role for gold in the transition. Yeah. No. I mean, look, the fact that we don’t have a neutral reserve currency, that we created difference dilemma by being the military power of the world and the monetary standard of the world, I mean, it hurt us in many ways that we didn’t foresee. I mean, look at the Midwest. I mean, we hollowed out our entire manufacturing base. Hell, we couldn’t even go to war with China basically because they have stuff we need. I mean, we couldn’t build all the modern stuff we need without a relationship with China.

Lawrence Lepard (00:42:47):

The world is such now that we all need each other, and I think if you really look at the core of decent human beings, and the world has many of those, although there are a few psychopaths, most decent human beings just want fair play. A neutral reserve currency would lead to fair play. Whereas it’s very obvious that having a reserve currency controlled by one set of politicians who can manipulate that currency does not lead to fair play. So that’s really the fundamental issue. So we got to get to a neutral reserve currency, but we will because… I think it was you that said the contractions are getting closer. Right? I mean.

Preston Pysh (00:43:25):

Yeah, speeding up.

Lawrence Lepard (00:43:27):

I mean, it’s picking up. I mean, I can’t believe what’s been going on. I feel like I’m in an airplane, and the dials are starting to go nuts.

Preston Pysh (00:43:35):

Yeah.

Lawrence Lepard (00:43:36):

I mean, I don’t know if I’m upright, upside-down. It’s like the AI. It’s like the attitude indicator just tumbled, and I’m like, “Which way is up?” This is the mask.

Preston Pysh (00:43:43):

I can only imagine if you’re a capital intensive business that requires a lot of CapEx, and here you are buying materials and, “Do I stock pile them, or do I try to get them out the door as fast as possible?” because that’s the shift in thinking that just happened over the last two weeks. Right? Like, “What the hell do I do?”

Lawrence Lepard (00:44:04):

Yeah. Right. “Do I do long-term contracts, or do I do short-term contracts?”

Preston Pysh (00:44:06):

Yeah.

Lawrence Lepard (00:44:08):

Imagine you’re a home builder, you know?

Preston Pysh (00:44:10):

Oh my God. Yeah.

Lawrence Lepard (00:44:11):

“Do I build that next set of homes? Mortgage rates just doubled.”

Preston Pysh (00:44:14):

Yeah.

Lawrence Lepard (00:44:14):

I mean, it’s really hard.

Preston Pysh (00:44:16):

You know what? When you look across the things that are constructed and built here in this country and all around the world, right, a house is really not that complex. You’re dealing with… I could go through and name the pieces and parts, but when you get into some of these other technologies, like a laptop computer, I mean, and that’s not even a…

Lawrence Lepard (00:44:36):

Yeah.

Preston Pysh (00:44:37):

I mean, it’s at a whole different level of complexity in ordering and stockpiling parts and pieces, and just trying to do economic calculation on that in this environment. I just can’t even imagine.

Lawrence Lepard (00:44:50):

No, and that’s why the metaphor I’ve used is like the FED is swinging this wrecking ball around. I mean, it just made it…

Preston Pysh (00:44:56):

Yeah.

Lawrence Lepard (00:44:59):

I mean, isn’t it ironic that raising… So part of the reason why we have these commodity price inflation is because we haven’t invested enough in all the productive capacity that we need.

Preston Pysh (00:45:09):

Yes.

Lawrence Lepard (00:45:10):

Right? I mean, we’ve underinvested in commodities, and so now when we need them and things are tight, we have a commodity price inflation. Okay. So what’s needed? More CapEx in those areas to create more production. Okay? What would you like to have… In order to do more CapEx, what would you like to have? Low interest rates, but what are we doing? We’re raising interest rates.

Preston Pysh (00:45:29):

Yeah.

Lawrence Lepard (00:45:29):

So we’re making that CapEx more expensive, and once again, it’s because the capital was mispriced. We didn’t invest in the right things, and that’s…

Preston Pysh (00:45:40):

Yeah.

Lawrence Lepard (00:45:43):

You’re trying to build a house with a measuring stick that… I mean, imagine your measuring tape just kept changing. You just can’t do it. [inaudible 00:45:51].

Preston Pysh (00:45:50):

Well, you’re seeing it with the oil industry. Yeah. You’re seeing it with the oil industry right now where they’re like, “You need to produce more,” and they’re like, “Uh, yeah. No. We’re good. We’re not going to make any investments in that,” because they know what’s coming next because they’ve seen it for a decade straight is they’ve made a little bit of margin, and now they want them to reinvest that into their CapEx, and to expand, and do all those things. They’re like, “Uh, no. I think we’re good. We don’t want to go out and do that risky type thing only for you to pull the rug out from underneath.”

Lawrence Lepard (00:46:21):

Well, I’d say it doesn’t help when the president is saying that they’re evil profit-mongers, that they’re going to get back so on and so forth.

Preston Pysh (00:46:27):

Yes. Yeah.

Lawrence Lepard (00:46:27):

I mean, yeah, there’s no industrial policy here. There’s no thought. There’s just a bunch of wokeism, stupid people running our government and…

Preston Pysh (00:46:38):

Lynn talks about the comparisons, and I think Dalio is pretty big on talking about the comparisons of the 1940s. I think that there are a lot of parallels, but when I’m looking at these types of behaviors, and you look at the just sheer stupidity of where we’re at right now, and the demand for handouts and the demand for, “Let’s not do anything. Let’s just print it and stuff it into the hands of everybody with more paper promises,” I don’t think that you had that cultural mindset back then.

Lawrence Lepard (00:47:13):

No. I know you didn’t. From the experience of my grandparents, I mean, the whole notion of taking help was something to be very embarrassed about. Whereas now, it’s almost like people feel entitled to it. I know in the student loan forgiveness, a lot of people feel like it’s their right and they just should have those loans forgiven. What does that say about everybody who paid those loans? Again, the Fiat money corrupts everything. It corrupts the morals of society all the way through. It leads to profiteering. It leads to the wrong incentives. We’re so far gone, Preston. I mean, it’s really sad. We are so far gone, but it’s going to take a really difficult and brutal, painful collapse for people to go back to the basics and learn some of those fundamental lessons.

Preston Pysh (00:48:06):

Pain.

Lawrence Lepard (00:48:06):

But I sincerely believe that that will happen and that people will learn those lessons, that there’s a remnant of good, hardworking, honest people in this country. In fact, it’s the largest group of people in the country. They will help one another, and we will go back to some timeless values that will make this a much better place that was much more in the way it was when I was growing up. It wasn’t perfect then because I grew up in the Vietnam era, but it was different. It certainly wasn’t the way it is now.

Preston Pysh (00:48:36):

Yeah. Hey, here’s a fun one. Advice for orange pilling retired folks.

Lawrence Lepard (00:48:41):

Yeah. Yeah. It’s hard. I mean, I try and orange pill everybody I meet. I show them a manual, and I transfer some money to them. I show them how easy it is. I keep it pretty simple. I say, “Look, this is a new form of money that a lot of people have accepted. The dogs are eating the food. There’s increased adoption all the time, and there’s a limited supply. So think that through. If there’s increased adoption, a limited supply, what’s going to happen? Price is going to go up.”

Preston Pysh (00:49:08):

Yeah.

Lawrence Lepard (00:49:09):

Some people in the gold community, a lot of people say to me, “I don’t like it because it’s not physical. It’s not real. It’s funny-money.” They point to all the other cryptos, which anger me, and I say, “This is different. It’s a true technological innovation, solved a problem that hadn’t been solved before. Think of it as being like the printing press or the light bulb. It will never be solved again, but now that it’s solved, it really matters. It’s a secure digital ledger. We never had digital scarcity before. Now, we do, and this is what it looks like.”

Lawrence Lepard (00:49:38):

So you’ve got a chance to buy your spot on the ledger, and you might think, “Well, it’s not a commodity.” A lot of people say, “Well, you can’t touch it or feel it. Therefore, it’s got no value.” I counter that by saying, “Well, okay, but before gold even existed or we used anything like cattle or wheat as money, we sat in caves, and we had ledgers on the wall where you had sticks, and you mark down how many deer I killed and how many deer you killed. We kept track of who owed who how many deer.” So, really, money is just social obligations, and at its highest level, money is just a ledger. I mean, there’s nothing physical in your bank. There’s just a statement that you see that says you have X number of dollars in your account.

Lawrence Lepard (00:50:14):

So once you understand and you can grok that money is a ledger, and then you can further understand that technologically, there’s an innovation here that created a completely immutable, secure ledger with 100% guarantee, mathematical certainty of not dilution, and not being overprinted, and no double spend, then you should go, “Aha, this is a superior form of money. It’s even better than gold, and it’s easy to move. It’s easy to transfer. It’s easy to store, and it’s defensible against armies because you’ve got your 12 words. Unless they beat it out of you, they can’t steal it from you.” So those are the arguments I use, and smart people generally eventually come to it. They have a lot of concerns, but I have an answer for every concern. I think you can orange pill people at any age. The people who don’t seem to be very susceptible to being orange pilled are people who are arrogant. Seriously, I’ve noticed that.

Preston Pysh (00:51:11):

It’s so true. It’s so true. It’s so true.

Lawrence Lepard (00:51:11):

Right? I mean, I Peter Schiff. I mean, this entail of… It’s almost a perfect correlation, and to me, that’s because they’re trapped. We’re moving into a paradigm where the ego is not as important. I mean, Jeff Booth just started this great venture capital firm called Ego Death Capital, which I think is a great name for a firm. So with the ego being less important and collective… this woo-woo-y stuff, but collective, all of us doing well together, working as individuals and in a team is I think the paradigm that’s going to emerge in the next hundred years. Decentralized, not centralized. Centralized stuff is evil. Centralized stuff leaves to guys like Hitler at the top doing bad shit.

Lawrence Lepard (00:51:57):

So it’s all based on… You’ve got your ego out of it, and you’re trying to think, “Well, what’s the best for everybody involved?” Not what’s the best for me, not what’s my reptile brain telling me, “Oh, ego-wise, I got to do this,” but there are a lot of reptile brains out there still running around pounding their chest because they’re fearful, and they can’t see what other people see. They think that by professing their own brilliance on subjects and stroking their ego that will keep them secure, and it prevents them from seeing something that’s very obvious when placed right in front of their face. That’s how I see it.

Preston Pysh (00:52:35):

I love that.

Lawrence Lepard (00:52:38):

Ego Death. It’s a great name, right?

Preston Pysh (00:52:40):

How does the bond market finally find Bitcoin?

Lawrence Lepard (00:52:45):

Well, I don’t know. I mean, the bond market is going to have to because it’s in a lot of trouble.

Preston Pysh (00:52:49):

Is it persistent negative spread?

Lawrence Lepard (00:52:52):

Yeah, I think so. I think that’s right. A question that has been asked a lot is, “How do we live with a world that’s deflationary?” For that, you got to read Jeff Booth’s book. I’m sure you have. I think others listening should read it.

Preston Pysh (00:53:06):

Yeah.

Lawrence Lepard (00:53:07):

I mean, it’s going to be different. In the world that’s coming, there’s not going to be a need to build up the big credit structure that we’ve had, like the world we’ve had looking backwards. Actually, if you just hold your wealth in the form of Bitcoin or even other property, you’re going to get wealthier every year because prices are going to continually fall. I mean, technology leads to everything becoming cheaper over time, and that’s always been true. So there won’t be as big a bond market. People say, “Well, how? Are there going to be loans in a deflationary environment?” The answer is yes, there will be loans. But again, you’ll really want to make sure that the project pays back the loan and the person making the loan will probably be willing to make it at a low level of interest. The reason they’re willing to do that is that they know that the fundamental principle will have more buying power in the future.

Lawrence Lepard (00:53:49):

I mean, imagine a world where your money got more valuable over time. I know that’s really hard to understand, but it’s actually a much better world. It’s actually a much, much better world, and we had a version of that between 1789 and 1913 because we didn’t have a credit-driven society. So, at that point in time, everything… There were a lot of gold mines built. There were a lot of businesses built in that timeframe, and they were all built with equity capital, not debt. There was very little debt in that timeframe, and I think that’s how it’ll look going forward. I don’t think the debt market will be nearly as important or nearly as big a thing. The debt market is as big as it is because we’re trying to build a Keynesian system that relies on continual growth as the metric for success, and that needs debt to create that growth. Both of those are a dead-end road. I mean, this is the St. Matthew’s Island.

Preston Pysh (00:54:42):

Everyone is a slave in the end.

Lawrence Lepard (00:54:43):

Yeah. Everyone is a slave, and it’s the reindeer problem. I mean, continual growth in a finite planet with finite resources. I mean, how does that work?

Preston Pysh (00:54:52):

Yeah.

Lawrence Lepard (00:54:53):

Yeah. I mean, the only way that it can work is with increasing… I mean, the issue, the thing we should be measuring… Not growth. The thing we should be measuring is productivity. How do we get the most for the least? More productivity is a deflationary thing.

Preston Pysh (00:55:07):

Yeah.

Lawrence Lepard (00:55:07):

So everyone’s got to change their mindset. We got to throw canes out. We got to get rid of this whole growth mentality. We got to get rid of this whole credit-based growth mentality, and we got to go back to a mentality of equity-based capital for doing things more efficiently, better, cheaper, faster for less. That’s what it’s all about. How do we get more for less? That’s a deflationary mindset, and that’s the mindset we’ve got to go toward. By the way, that fits perfectly with Bitcoin because Bitcoin is a deflationary currency, and so [inaudible 00:55:38].

Preston Pysh (00:55:37):

It’s how nature operates, you know?

Lawrence Lepard (00:55:39):

Yeah.

Preston Pysh (00:55:41):

This is silly, but my kids and I, we recently were growing crystals. We got a little crystal kit, and we mix the solution.

Lawrence Lepard (00:55:49):

Oh, they’re neat. Yeah. Yeah.

Preston Pysh (00:55:50):

Yeah. We mix the solution together, and then you put it in a dark spot for two weeks or whatever, and just naturally, the molecules that are all of the same type are trying to assemble themselves in the most efficient way possible, and that’s how they grow their shapes. So you just think about like fundamental, and that’s not even anything that’s living or alive. Right? It’s trying to figure out the most efficient use of energy in order to assemble itself, and so it just makes sense that that’s how things should work. Right?

Lawrence Lepard (00:56:22):

Right.

Preston Pysh (00:56:22):

If that’s how the nature works, that’s how you would think that we would assemble ourselves as well.

Lawrence Lepard (00:56:27):

Yeah.

Preston Pysh (00:56:27):

Hey, this question I really liked, and I’m curious to hear your answer to it. What are your top three charts that you pay attention to?

Lawrence Lepard (00:56:35):

Oh, that was a great question.

Preston Pysh (00:56:36):

Yeah.

Lawrence Lepard (00:56:38):

So I keep it pretty simple, to be honest with you, because I just look at big investment categories. I drill down to things like the two-year, and so on, and so forth. But in general, I’m looking at the stock market, just equities. I’m looking at the bond market, the 10-year yield and the pattern there. I’m looking at the dollar, I’m looking at gold, and I’m looking at Bitcoin. These are all interrelated in terms of investment choices and investment flows.

Preston Pysh (00:57:05):

Yeah.

Lawrence Lepard (00:57:06):

They all tell you part of the picture. I mean, the fact that the dollar is as strong as it is right now tells you the FED is not printing enough. We’ve got a deflationary impulse going on right now. The fact that the bond market is rallying right now, same story, although I’m not sure that rally is going to last. The fact that the stock market is rolling over right now tells you in my mind that we had a bubble and there’s not any real value there.

Lawrence Lepard (00:57:29):

The fact that Bitcoin and gold are getting hammered right now tells you that the cutting edge of the liquidity spigot, which is Bitcoin and gold, the most… I mean, Bitcoin is the most volatile and the… Bitcoin is the leading indicator, in my opinion, of liquidity in the system, and that’s why it’s been hammered so hard right now because the FED is working very hard to take… They’ve signaled that they’re going to take liquidity out of the system, and so the most liquid thing is telling you where everything else is going to go, and bonds are going to follow… Bonds and stocks are going to follow Bitcoin lower. Then, they’re going to pivot, and Bitcoin is going to rip, and it’s going to go to 200,000, and gold is going to go through 2,000, and silver is going to go through 35. We’re going to have an inflationary impulse that’s going to blow people’s minds. Gold is going to go… or oil is going to go to 200. But right now, we’re in one of those down waves.

Lawrence Lepard (00:58:23):

I mean, google the Mercan Chart on Twitter. When you get a monetary system breaking up, you get really wild swings. It’s very tough. It’s very tough as an investor. I mean, I feel for everybody on this call. This is not an easy environment to be investing, and you’ve got to have a steady hand on the tiller, but I’m also very convinced that we’re all on the right side of it because the government is faced with one of two choices. They can either debase or default, and they will not default. They can’t. That’s instant death. So they will debase.

Lawrence Lepard (00:59:00):

Now, on what time scale, in what ways, what measures? Who the hell knows? I mean, they’re good at hiding that, moving the piece and shells there, but they’ll do it. They have to do it. We know that, and there’s no debasing Bitcoin. They’re $21 million, period, and there’s adoption continuing to grow. So I sleep very well at night knowing that my wealth is safe in Bitcoin. I mean, I’m absolutely very peaceful about it all. I worry for the country, and I see all the stuff going on. That all really upsets me a great deal. But in terms of knowing that my savings capital is in the right place, I’m extremely comfortable with that.

Preston Pysh (00:59:45):

That makes two of us.

Lawrence Lepard (00:59:47):

Yeah. Exactly. I mean, it’s… but watching the moves, I mean, Jesus Christ. Right? I mean, it’s [inaudible 00:59:54].

Preston Pysh (00:59:54):

Oh, it’s wild. Yeah, it’s wild.

Lawrence Lepard (00:59:56):

Yeah.

Preston Pysh (00:59:57):

Hey, I would summarize the charts you’re looking at is really trying to understand the liquidity in the system. My three charts, because the person asked, “Preston…” They said, “Preston…”

Lawrence Lepard (01:00:07):

Yeah. What were yours? Yeah.

Preston Pysh (01:00:07):

What were my three? So I have a chart that was inspired by that Yardeni PDF that’s updated every day, and it’s a consolidation of the central bank balance sheet. So I’ve created one inside Trading View that I consolidated the FED, the ECB, the Bank of Japan, and the People’s Bank of China. I’ve consolidated all of those balance sheets, central bank balance sheets into a single chart. Then, I’m looking at it, and oh my Lord, you can’t believe how much correlation there is to the major stock indices. So I’m looking at that, and I’m seeing… and you’re talking about the liquidity coming out of the system. I can tell you in the last 10 years, this is the fastest pace you’ve seen the liquidity coming out of the system since the 2008 crisis.

Preston Pysh (01:00:58):

The other chart that I have is a consolidated global equity market where I’ve taken the US, Europe, Japan, China, and the Hong Kong stock exchange. Then, I market cap wait based on their size globally, and I’ve smooshed them all into a single chart. The reason I’m looking at that is also to identify whether I think liquidity is coming into the global economy or being sucked out. Then, like you, I’m looking at the treasury yields. I’ve been paying a lot of attention to the oil market recently and obviously, the dollar index, but those are the ones that I’m really watching because… I mean, at the end of the day, I’m seeing it as a “you want to own cash or you want to own Bitcoin” kind of world these days. If they’re tightening collectively on a global scale, I want to be stacking dollar so that I can buy a bunch of Bitcoin when they change their mind. That’s pretty much it.

Lawrence Lepard (01:01:52):

I think that’s right. Yeah. Some people on the questions asked, do I think… I think the bottom is in for Bitcoin at 17.5, but I’ve often been wrong on this. It could go lower. I’ve got a really great chart that maybe I’ll shoot you, and you put it in the show notes. It was done by an Elliot Wave guy that shows 13.8 on Bitcoin is a 78.6 retracement. So if we have one more impulse move down there, that would probably be where it would stop. If it does, my sense is you might have to be very quick. It might not be there for very long.

Preston Pysh (01:02:21):

Yeah.

Lawrence Lepard (01:02:21):

I actually honestly think we’re done at 17.5, was it? But to be fair, back in 2017, when we went from 17,000 down to 9, I thought we were done at 9, and then we went to 3,500.

Preston Pysh (01:02:34):

Yeah.

Lawrence Lepard (01:02:34):

So I could be wrong. It could go a bit lower, but they’re not making any more of it. I mean, they are making more, but as you know, this applies growing very slowly, and the adoption is just… I mean, the only two things that would ever concern me would be if the technology were in some way proven to be flawed. It hasn’t been for a long time now. So I’m not too worried about that anymore, or if the adoption were to stop, or slow, or reverse. I just don’t see that, everywhere I go, everything I read, everybody I talk to, there’s just more and more people using it every day. The use cases are just so… They’re so fabulous. I don’t know if you’ve done transactions with Muun and the Lightning Wallet, but…

Preston Pysh (01:03:11):

Oh, it’s unreal.

Lawrence Lepard (01:03:13):

If you’ve read Alex Gladstein’s book about how he’s orange pilling people all over the world, I mean… I’m telling you, man. People everywhere are starting to use this stuff more and more. Once you get hooked on it, and you realize what you can do with it, you’re not going back.

Preston Pysh (01:03:28):

Yeah. No.

Lawrence Lepard (01:03:29):

So there’s a fixed supply, so it’s all pretty good. What other questions did you have for me?

Preston Pysh (01:03:35):

This is my last one for you, Larry.

Lawrence Lepard (01:03:37):

Okay.

Preston Pysh (01:03:38):

Boy, that hour went fast, let me tell you.

Lawrence Lepard (01:03:40):

That was an hour? We can go longer if you want.

Preston Pysh (01:03:42):

That went really fast. Your philosophy, values on living a worthwhile life for my last question.

Lawrence Lepard (01:03:49):

Yeah. That’s a great question. Well, I’ll say right up front and proudly. I’m a Christian, raised and believed deeply in that, but I don’t criticize anyone who’s not because I think that more broadly, I’m spiritual, and I know a lot of people don’t like organized religion. I think we’re all put here for a higher purpose. We all have a mission, and we’re here to do our job. We just got to do the best we can do, and live honorable lives, and contribute what we’re capable of contributing, and respect everybody else in what they’re trying to do and what they’re contributing. To the degree that we see things that we think aren’t right, we’re told to stand up to it and to try and fight it.

Lawrence Lepard (01:04:32):

So, in my particular case, like my highest and best use is figure it out. I’ve always been an analyst. I like analyzing stuff. It’s fun, and I’m decent at it. Then, what I see as wrong is what has happened, what some powerful people have done and have lived off a system that has benefited them at the expense of millions. So I view it to the degree that I’ve got the strength and the will to do it is important to fight, to fight that. So I’m very vocally and not ashamedly an advocate for sound money and critical of people who I think have made this world a worse place. I point directly at the central banks.

Preston Pysh (01:05:14):

Yeah.

Lawrence Lepard (01:05:16):

Ben Bernanke is not a hero. I want to see Ben Bernanke in the history books as John Law, which is where he belongs. He’s a fraud and a charlatan, and he’s caused enormous pain for lots of people. He wasn’t the first. I mean, there have been plenty before him, and there will be more after him. So I guess you could call me kind of a Christian warrior for the values that I believe in, and I want that to be my legacy.

Preston Pysh (01:05:48):

I love that. I love that. It’s not being a parasite.

Lawrence Lepard (01:05:52):

It’s not like…

Preston Pysh (01:05:53):

The behaviors that we’re seeing right now are so parasitic where they’re taking energy from others for themselves. Right? You’re trying to look for how can we make this an environment that is beneficial for all and…

Lawrence Lepard (01:06:09):

Well, that’s right.

Preston Pysh (01:06:10):

Yeah.

Lawrence Lepard (01:06:10):

Yeah, that’s right. I think all human beings have an innate sense, and they say this even in animals. Chimps have an innate sense of fairness.

Preston Pysh (01:06:21):

Yes.

Lawrence Lepard (01:06:23):

I think that if there’s one role that government can serve or should serve is to try to be a good referee and to keep the playing field level and fair. Unfortunately, I don’t think our government comes anywhere close to that. It doesn’t even begin, but that, to me, that’s… If one is secured enough food and shelter to live a decent life, then helping others or fighting for fairness, I think, are two very noble causes.

Preston Pysh (01:06:51):

Yes.

Lawrence Lepard (01:06:51):

In my case, I don’t help a lot of others, but I am fighting for fairness.

Preston Pysh (01:06:56):

Well, you’re sharing knowledge, and that is a very important thing because then they can share it with others at minimal to no friction. Right?

Lawrence Lepard (01:07:05):

I guess so.

Preston Pysh (01:07:06):

So.

Lawrence Lepard (01:07:06):

Yeah. I guess so. I mean, I’m happy to share knowledge. Yeah. No. It’s good stuff, folks. I mean, we’re all going to be fine. We just got to hang out and keep fighting. This Muun wallet is a powerful thing. M-U-U-N. Anybody who doesn’t have one should get one. You can instantly send an electric… I’m sorry, a lightning transaction. The last one I sent cost me 7 sats. I don’t know what’s 7 sats. Really, there’s about 49…

Preston Pysh (01:07:27):

It’s not much. It’s not much.

Lawrence Lepard (01:07:30):

49 sats to a penny, right? Right? Roughly right now. So, what? 7 sats is one-seventh of a penny? Something like that.

Preston Pysh (01:07:37):

Yeah.

Lawrence Lepard (01:07:38):

Yeah? Yeah.

Preston Pysh (01:07:39):

Yeah. It’s unreal.

Lawrence Lepard (01:07:40):

It is unreal.

Preston Pysh (01:07:42):

I like to send a very small amount over it to demo it. It’s like, “Well, I just sent you half a penny.”

Lawrence Lepard (01:07:48):

Oh, I thought…

Preston Pysh (01:07:49):

It’s like, “What do you mean you sent me…” Immediately, right?

Lawrence Lepard (01:07:53):

Immediate. Yeah.

Preston Pysh (01:07:53):

If I want it to be $10,000, I could have sent you $10,000 immediately. It’s unreal.

Lawrence Lepard (01:08:00):

Yeah. I usually send a buck, and they’re just… I did it the other day with a professor, and he was just blown away.

Preston Pysh (01:08:06):

Yeah.

Lawrence Lepard (01:08:06):

He was like, “What? How much did that cost you?” I said, “It cost me less than a seventh of a penny.” He was like, “That’s impossible.” I said, “No, it’s not.”

Preston Pysh (01:08:12):

No, it’s not.

Lawrence Lepard (01:08:14):

No, it’s not. It’s working.

Preston Pysh (01:08:16):

Yeah, and I love when you can route it through your own node, and it’s like, “Hey, that’s encrypted over Tor and…

Lawrence Lepard (01:08:22):

Yeah. Exactly. Yeah.

Preston Pysh (01:08:24):

Like that, and pinged my house, and then sent you… It’s just crazy. How does anybody stop that?

Lawrence Lepard (01:08:31):

They don’t, and that’s the other beautiful thing about Lightning.

Preston Pysh (01:08:34):

Yeah.

Lawrence Lepard (01:08:34):

My understanding of it. As you know, the chain is pretty easy to do analytics on, and track, and things that work.

Preston Pysh (01:08:39):

Yeah, yeah.

Lawrence Lepard (01:08:39):

I think Lightning is going to be really hard to track.

Preston Pysh (01:08:41):

Super hard, super hard.

Lawrence Lepard (01:08:43):

Right?

Preston Pysh (01:08:43):

Yes.

Lawrence Lepard (01:08:44):

So this whole CBDC, “We’re going to surveil you. We’re going to know where all your money goes,” et cetera, et cetera. Oh, really? With Lightning, I’m not so sure. Then, if you listen to Odell and this FediMint thing that he’s working on, I mean, that’s going to be another layer of security. I mean, the good news is these technologies are coming along so quickly that they don’t have a chance.

Preston Pysh (01:09:05):

Yeah.

Lawrence Lepard (01:09:06):

They just don’t have a chance. We’re going to run these people over, and it’s going to be so much fun. It is really going to be fun, and they so richly deserve it. They really do.

Preston Pysh (01:09:17):

It’s an exciting time to be alive.

Lawrence Lepard (01:09:28):

It is. It really is. I mean, if you can just get over the number, go down.

Preston Pysh (01:09:28):

It’s been a painful couple months for people that are comparing it to the dollar and not looking in a very long time horizon of 5 to 10 years, but yeah.

Lawrence Lepard (01:09:38):

[inaudible 01:09:38]. Life is a lot more than number go up, number go down. Having been in the financial markets for a long time, I can assure people that things are never as bad as they feel in a bear market, and they’re never as good as they feel in a bull market.

Preston Pysh (01:09:49):

In a bull market. Yeah.

Lawrence Lepard (01:09:52):

Yeah, and it’s just… You got to take the good with the bad. I mean, going from 5,000 to 69,000 is pretty damn exciting. A lot of fun. That brings it… check back to 17.5. So be it.

Preston Pysh (01:10:04):

Yeah.

Lawrence Lepard (01:10:05):

I think the next run will probably take us into the low 200s. So that’ll be nice.

Preston Pysh (01:10:10):

Bill Miller talks about him riding Amazon the whole way up and talking about how much volatility was involved in that ride.

Lawrence Lepard (01:10:18):

Oh, really? Oh, God.

Preston Pysh (01:10:19):

Yeah, and it’s just like… People look at it and are like, “Oh, well, you bought Amazon and rode it the whole way to the top like it was just this smooth sailing adventure of just making money the whole ride without any type of volatility that you’re stomaching through that rise, meteoric rise.” This is obviously… I suspect and you suspect that we’re in a [inaudible 01:10:43].

Lawrence Lepard (01:10:43):

Same thing.

Preston Pysh (01:10:43):

Yeah.

Lawrence Lepard (01:10:43):

Same thing. It’s funny too. Amazon informed me on Bitcoin. I mean, it was a network investment, and I didn’t understand it because it didn’t make money, and so I never bought it. It was a big regret on my part that I didn’t buy it. I mean, partly, it was funded by Precapital, so that that was… I just couldn’t buy something that didn’t make money, but the network effect there was extremely powerful.

Preston Pysh (01:11:02):

Yeah.

Lawrence Lepard (01:11:04):

That’s what we got going on with Bitcoin. I mean, I invested in the internet back in ’95 or ’93 actually and did well with it. I was saying on another podcast the other day, this reminds me exactly of the internet. It’s the exact same story.

Preston Pysh (01:11:17):

Yeah.

Lawrence Lepard (01:11:17):

We’re at the point now where this will be ubiquitous within 5 or 10 years.

Preston Pysh (01:11:21):

Yeah.

Lawrence Lepard (01:11:21):

Those of us who are in it now will have benefited very substantially from being in it, so it is exciting. It’s extremely exciting. Let’s just hope that the central banks don’t completely crater the world economy and that some of the psychopaths in our society don’t decide that having a nuclear exchange is a worthwhile thing to do.

Preston Pysh (01:11:40):

Yeah. Well, Larry, give folks a handoff to your Twitter account, which is awesome to follow and anything else you want to highlight.

Lawrence Lepard (01:11:50):

Yeah. Yeah. No. I’ll just say my Twitter account. I do a lot of posting, but I also put some useful stuff on there too. It’s @LawrenceLepard, and then I have a website that has my quarterly letters and a lot of things on there about sound money and a white paper on Bitcoin that I wrote four years ago I guess now. That website is EMA… My business name is Equity Management Associates, EMA, Edward, Mark, Alpha, the number two, dot-com, and that’s all free just information.

Preston Pysh (01:12:16):

Awesome. We’ll have links to that.

Lawrence Lepard (01:12:18):

Thanks very much, Preston. It’s great to see again. I’m sure we’ll see it [inaudible 01:12:19].

Preston Pysh (01:12:19):

Oh, yeah. Likewise, Larry. It was awesome seeing you, and looking forward to the next time we’re able to meet up in person.

Lawrence Lepard (01:12:27):

Yeah, likewise. Okay.

Preston Pysh (01:12:29):

Thank you, sir.

Lawrence Lepard (01:12:29):

Have a good day. Take care.

Preston Pysh (01:12:31):

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. With that, thanks for listening, and I’ll catch you again next week.

Outro (01:13:04):

Thank you for listening to TIP. To access our show notes, courses, or forums, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permissions must be granted before syndication or rebroadcasting.