On Bitcoin Volatility and Sinking ARKs

Plus, Jerome Powell with a stunning admission, a word or two about pan-handling politicos and a lukewarm defense of English cask ales...

(Source: Getty Images)

Joel Bowman, reckoning this Sunday from Tenerife, Spain...

Welcome to another Sunday Sesh, that time of the week where we pull up a virtual barstool at the local watering hole and sort through the world’s myriad confusions, conundrums and quandaries, one glass of malbec barraquito at a time...

And here, a quick side note to a reader who wrote in after last week’s Sunday Sesh, which we filed from the UK, “What pub is that you’re drinking in?” Kevin L. wanted to know. “Warm beer? Not anymore, surely?”

As sure as you need to pack your brolly, good sir! The pub/office for that particular arvo was The White Swan and the malty, room temperature beverage of choice was Abbot Ale, described here.  

Is it tasty? Not particularly. Does it get the job done late on a Sunday afternoon in a rainy, countryside pub in Ol’ Blighty after the worst start to the year for markets in half a century? Absolutely!

But enough of the cures to life’s ails... what of the many causes? Here’s one to whet your palate... 

A Stunning Confession

Speaking in Sintra, Portugal, last week, Jerome Hayden Powell offered up the following, stunning confession, cloaked in false modesty: “I think we now understand better... how little we understand [audience laughter] about inflation.” 

The Chairman of the Federal Reserve, the government entity specifically tasked with understanding and controlling inflation, went on to explain that, “This was unpredicted. I was looking at the time of our June meeting from one year ago. Of the thirty-five people who filed, with the survey of professional forecasters, thirty-four of them had inflation below four percent for the last year. And of course it was way above four percent.”

Check out the statement (and the interviewer’s confused expression at the end of the clip) here...

Now imagine, just for one terrifying second, if Mr. Powell and the 400 or so PhD economists currently lunching out on the Fed’s payroll, had opted for... oh, say... engineering as their chosen profession instead of economics. Or cardiology. Or... gulp... vaccinology.

“Well... 34 of our 35 civil engineers predicted the bridge would carry the load...”

“Sorry, ma’am... all but one of our 35 surgeons assured us your husband’s heart was in tip-top shape...”

As for our last hypothetical, we don’t need to imagine Mr. Powell’s grasp of the subject matter at all... here he is again, at the same conference, on the same stage, blaming inflation on “unseen supply-side issues” like (wait for it... ) not enough Americans getting vaccinated and getting back to work! 

Tom Elliott @tomselliott

The @federalreserve’s Powell blames Americans not getting sufficiently vaccinated for his inflation crisis.

It’s All Their Your Fault

And here we come to the cold, dark heart of the matter. You see, dear reader, properly viewed, the failings of the elites are really the result of your failings... 

Your refusal to solve the $5 per gallon gas crisis, for example, by simply buying a $55k electric car... 

... your stubborn refusal not to “flatten the curve” by getting a vaccine that neither prevents infection nor stops transmission, but that may result in serious side effects up to and including death... 

... not to mention your refusal to support your impecunious congressional leaders by funding their latest pet causes, when all they do is bend over backwards on your behalf...

How is Nancy Pelosi going to leverage the SCOTUS decision to overturn Roe vs. Wade to get herself reelected in November without your “gifts”? 

Barely had the ink dried on the Supreme Court’s recent decision when the permanently startled speaker of the house stuck out her partly human hand...

“Can you chip in $15 so we can WIN these midterms and finally codify reproductive rights into law?” she texted constituents mere minutes after the decision was made public (almost as if she had it scheduled to send...)

“Our ONLY option is to marshal a response so historic — 100,000 gifts before midnight — that we DEFEAT every anti-choice Republican that made this happen, EXPAND our Majorities, and FINALLY codify our reproductive rights into law. So, can I expect to see your name on my ‘Pro-Choice Champion’ list tomorrow morning?”

How else would Mrs. Pelosi, worth a paltry $114.7 million herself, come up with $1.5 million to get herself reelected... if not for shaking down minimum wage constituents by sending them fundraising texts while they’re busy pulling double shifts at In-N-Out Burger? 

And how about Mark Warner, the democratic senator from Virginia who quickly endorsed the nationwide fundraising effort? The poor man is down to his last $214 million...

So too Don Beyer, another democratic house member from Virginia and co-chair of the Safe Climate Caucus, who has just $124 million to spare. And Dean Phillips, house member from the great state of Minnesota, where the average per capita income is $38,800. Why, the humble “civil servant” has a mere $123 million to his name. 

Here’s a vulgar but on-point video (Warning: Clip features grown-up language) of a frustrated man who, as one astute commenter observed, “half gets it.”

Now, a cynic might wonder why Pelosi et al. didn’t “FINALLY” codify Roe into law when they held a supermajority during Obama’s first term. Hmm... could it be that drumming up support and rattling the donation can around controversial issues is more profitable for super wealthy politicians than actually doing what they say they’ll do... but never actually do? Hmm…

But enough about politicians' money... and more about yours! This week, we offer a few snippets (lightly edited for clarity) from the transcript of our recent Fatal Conceits podcast with ByteTree founder and editor of the Fleet Street Letter, Mr. Charlie Morris. Please enjoy...

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On Bitcoin Volatility and Sinking ARKs

A conversation with Joel Bowman and Charlie Morris

[Ed. Note: While the Fatal Conceits podcast itself will remain gratis for all readers... these transcripts will become a benefit for paying readers only in the near future. Please consider this a courtesy heads up. If you’d like to join us at Bonner Private Research, you can do so today by locking ion our special introductory price here. Within the next week or two, that price is set to increase significantly (another heads up)... so don’t dilly-dally and get on board today!]

Joel Bowman:

Welcome back to another episode of the Fatal Conceits Podcast, dear listeners, a show about money, markets, mobs, and manias... not necessarily in that order. If you haven't already done so, please head over to our Substack page. You can find us at bonnerprivateresearch.substack.com, and there you'll locate articles on everything from high finance to lowly politics and plenty in between, including many more episodes of the Fatal Conceits Podcast just like this one. 

I'm very excited today to welcome back a good friend of mine, Mr. Charlie Morris, a man who wears many hats. He is the founder of ByteTree and the editor of the Fleet Street Letter, one of the UK's longest-running financial publications, and also the visionary behind BOLD, which we'll get into in this conversation. First of all, Charlie, welcome back to the show, mate. Good to see and hear from you.

Charlie Morris:

Fantastic. Glad to be here.

Joel Bowman:

Now, we're actually not so far apart as we usually are. Usually I bring our listeners these episodes from Buenos Aires but, as we were just discussing off-camera, I'm here in Paddington, London. Now, what's going on? The last time we spoke, you'd just entered another lockdown here in the UK, and pubs were closed, and now there's a rail strike. It's chaos.

Charlie Morris:

Well, I think that we have a secret desire in this country for everything to go wrong. I think the British aren't happy unless they're miserable. So, when things are going too well, you've got to make sure that we induce the self-harm.

Joel Bowman:

A little self-inflicted pain?

Charlie Morris:

Exactly.

Joel Bowman:

Now, as we were discussing, I was listening to a little bit of our last chat on this podcast back in February of 2021. We were talking about Bitcoin, you were giving us some of your prognostications and telling us a little bit about the work you do with ByteTree, and the Fleet Street Letter, and beyond. It's a year since then in human terms, but it's a thousand lifetimes when it comes to the crypto-verse. We've seen the price of Bitcoin, just to contextualize the conversation for our listeners, shoot up from around $40,000 when we last spoke, when it rallied to around $60,000 - these are, of course, rough numbers - then it collapsed to $30,000, moonshot back to $70,000, is now languishing around $20,000 again. Pronounced dead for the umpteenth time along the way, of course.

Let's talk about volatility, Charlie, because one of the early propositions, and something that I wrote about quite a bit myself back in the day, was that with increased liquidity and a larger, more mature, let's call it a "market cap" in Bitcoin as an asset class, that we thought that volatility might smooth out, that it would stop behaving like an impetuous micro-cap. I don't think we can quite claim that it has come about as predicted. What's your read on that?

Charlie Morris:

Well, Joel, I mean this probably won't surprise you, but Bitcoin volatility has actually been falling. Now, the way you just described it, what did you say? 40 to 60 to 30 to 70 to 20. Sounds like volatility, doesn't it?

Joel Bowman:

It does, yes.

Charlie Morris:

But oil does that, doesn't it?

Joel Bowman:

That's true.

Charlie Morris:

Just taking the last 20 years, oil sort of started at something like 10, and then went to nearly 150, and then to 37, and then to 100, and then to negative 40, and then to +130. There are other assets that are crazy and oil's very much part of our lives. But, I'd like to highlight that in the past Bitcoin bear markets, and there's no doubt what we've just experienced, I think it'd probably be safe to call it a bear market. 2014, we had volatility of 150%. 2018, bear market, we had around 90%. And, this time we're looking at about 70. That's using 90-day, three-month numbers.

So, that's progress, isn't it? Personally, I think that it's not going to get much worse than it's got for Bitcoin this cycle, because it's come down to our valuation territory, good valuation territory. So, you sort of flushed out the 2021 hype cycle led on by Michael Saylor, Elon Musk, people like that.

Joel Bowman:

Yep.

Charlie Morris:

And, we've got half the volatility of a decade ago and 25% less than five years ago. So, it is growing up and the asset is more liquid than it's ever been. I mean, I think that the number we still use is about $40 billion a day of liquidity, which mainly comes from the crypto exchanges. But, in terms of real liquidity on chain, that's $7, $8 billion a day. It's a proper asset, Joel.

Joel Bowman:

It has definitely come a long way since its toddler days back in 2008. And of course, along with the maturation of the ecosystem, it still is a kind of wild west in a way, when you compare it with something like gold or other asset classes that have been around for, obviously, a lot longer. 

Now I heard in a recent interview, Charlie, you were speaking of a kind of financial contagion where you called Bitcoin the “canary in the coal mine” after its recent selloff, following the Fed's pretty aggressive inflation print and its response to that, or its promised response to that. Crypto meltdowns do often precede selloffs in the broader markets, as happened just before COVID back in 2020. Are you forecasting more pain to come in, say, the NASDAQ and even more broadly in the markets?

Charlie Morris:

Absolutely. I think that crypto is a convenient scapegoat right now. So, the TradFi, or the old world traditional finance, they're looking at crypto and going, "Ha ha ha. Bitcoin's failed again. It's over. We didn't buy it. Thank God for that. Now, we look clever." But, guess what? Bitcoin has still outperformed mainstream assets over the last two and a half years. If we go back to pre-COVID, which most people would talk about the 1st of January, 2020, of the sort of recent era of finance, if you want to break it down into chapters. I think that is definitely a chapter. And, Bitcoin's still ahead of all the major indices. It's head of gold. It's the head of NASDAQ, ahead of the S&P, ahead of ARK (Cathie Woods ARK Innovation ETF), it’s ahead of all these things that have done well in the last couple of years.

And so, how can something be dead when it's still done well? ARK has not done well, ARK has done badly. That is dead. Of course, the stocks within ARK are not dead and they'll revive from some low price, but Bitcoin, literally, has gone up so much compared to everything else and it's a big liquid asset. The only contender that Bitcoin's really had this cycle has been Tesla, in terms of a big liquid stock that's behaved very differently from many other things. But, I think when you look at the 40-year buildup in valuations or falling bond yields, which are kind of the same thing in reverse, we see long-term valuation measures, which are jaw-dropping. They're scary. The trigger, supposedly, has been increase of rates because inflation's come through but the bond market doesn't believe that inflation's real. The bond market thinks it's going to pass and we'll go back to the old days, and if it's wrong, then the bond yield at three to fight inflation at 8, 9, 10% is not even close.

So, this is chapter one of a 10-chapter book. And, what we'll probably see is these aggressive authorities who want to fight inflation become less aggressive, and stop panicking, and ease off, and reflate the bubble. And, I think that you can look at this whole thing from macroeconomics and sort of not understanding, or you could just remember the simple thing is that, like Bitcoin, stock markets go up and down. They go up for a few years and they go down for a year, and that sort of thing. And then, we always attach narratives to them, but just remember the stock market goes up and down but this time, the difference between the previous bull and bear cycles is the highs are likely to be lower than the old highs and the lows are about are probably going to be lower.

So, that's what I call a secular bear market, one that's going to go on, and on, and on, so each chapter is a bit more painful at the low than the last one, but there are still rallies to buy into and have fun in. So, if you're an investor that understands tactical allocation and you know what you're doing, you're good at it, you've got some experience and you've got some reasoning, then it's not that bad. I'm not saying you're going to clean up but it's not that bad to be able to afford portfolios to withstand those kind of conditions. But, if you are going to sit there and hope that your tech stocks are just going to get higher and higher each year, well, good luck with that...

Ed. Note: Big thanks to Charlie Morris for lending us his time. If you’d like to follow along with Charlie’s work, including his BOLD index, designed to provide a risk-adjusted, Gold and Bitcoin hedge against flailing fiat… check out his ByteTree page here. You can also read his Fleet Street Letter, one of the oldest financial publications in the UK, here.

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And that’s all from us for another week…

As mentioned above, these transcripts will fall behind the paywall in the (very) near future, meaning they will be available as a benefit to paying subscribers only. 

If you’re not already a Bonner Private Research member, please note that the window is closing to get in at the introductory price. For now, you can still grab a subscription at the $10/month or $100/year rate... but that goes away shortly. 

So if you like what you read here and want to get the “full experience”... if you’ve been on the fence until now... putting membership off until another day, now’s the time to get on board. Once the new rates come into effect, that’ll be that. These introductory prices will be long gone... 

Whatever you’re doing this 4th of July holiday weekend, be good... or be good at it. 

Until next time...

Cheers,

Joel Bowman