Macro Outlook (A Discussion with David Lin)

Hey everyone and thanks for jumping back Into the macroverse Today we're going to continue our Collaboration series we have David Lynn From the David Lynn report he has his Own YouTube channel he's also fairly Active on Twitter make sure you guys go Follow him there links to his social Media will of course be in the Description below and the pinned Comments make sure you follow him and And get the latest on a lot of the moves Throughout a lot of different financial Markets as well as some interesting Trends in the technology Market David Pleasure to have you here I'm I'm you Know I went on your channel not too long Ago I'm excited to have you on my Channel and talk about what's going on Within These Within These markets Hey uh Ben thank you for having me and Uh yeah I had you won uh not too long Ago you were fantastic I love your Insights love your channels so very Honored to be on your show now thanks For the invite No problem um I'm sure many people are Familiar with you you've been a very Vocal person in the space here for for Quite some time but you know I'd like to Get your thoughts on a lot of the things Going on in the markets because Oftentimes you're you're interviewing Other people so in this one I want to I

Want to interview you and just get Children your general thoughts the first Question I I really have for you is it's More of a broad-based question I want to Give you the floor to sort of talk about What you think is the most important but Where are we where are we right now Within within sort of the macro Landscape because on one side we have People you know looking at potential Recessions here on the other side we Have the stock market not really seeming To care what's your take on all this Yeah so I'm gonna amalgamate a lot of The views from the people I've talked to My guests Um and then uh insert a few of my own Research points Um so a lot of these talking points you Might have heard already on on my show Some that may have come from you Ben Because you're a very smart guy but um Yeah generally I think we are headed for Recession I've been getting this Question from my friends as well are we Heading for a recession and and what uh What what investments should we buy in Preparation for this and I did a whole Like explainer video on this myself but We're headed for I think a mild Recession it's not going to be a Catastrophic meltdown like some doom and Gloomers have been predicting Um not necessarily with me but you know

I've been seeing this a lot on media I Don't think we're going to get a Complete Wipeout of the financial system In the banking sector but I think we are Headed for a downturn and that's defined By a loss in economic activity uh slowed Down in consumer spending and uh uptick In unemployment let's just talk about The labor market first uh we're seeing Layoffs now in outside of the tech Sector so I was talking to somebody Yesterday he he called this the more Economically impactful processions Meaning Um people that are entrenched the Economy who may find it more difficult To find another job Um I'm talking about companies like McDonald's who over the weekend are have Announced layoffs I mean that's more or Less been telegraphed over the last Couple weeks but they announced it this Weekend and we're going to start seeing Unemployment rise I think over the next Couple of months Um right now we're at 3.6 which is Historically very low and the Politicians in the US have been citing This number as an indicator for why they Don't think a recession is going to come Because it's still at very low levels Historically speaking but you have to Remember that at every single recession In the past the unemployment rate has

Been low in the beginning of the Recession and climbs throughout you We've never had there's been 12 Recessions since 1948 we've never had Any one scenario where an unemployment Rate was already high going into a Recession and stayed at an elevated Level or come down it's always been Relatively low and then going up now Where are we going to go in terms of the Unemployment rate well the last time we Had a recession was 2020 for three Months two two and a half months three Months the nder designated 2020 was a Very as a very brief recession and Unemployment rate went up to 20 but that Was a very Uh that was like a Black Swan anomaly Let's not use that as an indicator Because that's never really happened Before and coincidentally I did a I did a quick analysis on her sessions I'll just share my screen here Um so I I I looked at the last 12 Recessions one since 1948 and it it Coincidentally the last recession that We had was also the worst on record in Terms of GDP lost real GDP declined by Eight and a half percent which was the Most on record Um so again that was that was an anomaly That it typically it varies between uh Two percent uh three percent uh in the Great financial crisis to zero

Um in the in the late 60s uh so eight And a half percent is not really Something that we typically see uh an Employment Rose to 20 last time in 2008 Unemployment went up 10 I think is Closer to that range that we'll see uh Under 10 but not quite over And the reason I don't think it's going To be as bad as 2008 Um let me just share my video again is Because I don't think we're going to Have a systemic wipe out of the entire Financial sector I don't think we're Going to have a huge contagion event uh Throughout all begs Um now what we saw overly uh in 2008 With the collapse of Lehman was a Failure of a lot of the big banks that Have Um that have uh lending in a lot of Other Industries besides what we've seen So far which is Tech encryptos I mean Yes by people have said that the Collapse of silvergate and and Silicon Valley Bank in terms of the size of Assets involves were on par if not Greater than 2008 but yes but you have To remember that the the industry is Involved primarily our Tech Um which has already been suffering on On paper so I I don't personally think There's going to be a huge contagion Wide event Um that I just lose my feet here let me

Just restart that and and I think that Uh generally speaking it's going to be Okay let me just My webcam Um failed so I'll just use this for now Until that recovers Um speaking of technological failures There's one example uh but to my point Of um of the economy uh there we go it's Back Um so yeah I think we are headed for a Recession unemployment will take up to I Think in the um five to seven percent Range is the consensus I've heard From analysts Um in terms of uh in terms of GDP Decline nowhere anywhere near eight Percent Um I would say zero to I would say maybe One to two percent to maybe three Percent the Atlanta fed GDP now tracker Is a pretty accurate estimate of where GDP is going so I encourage everyone to Check that out it's been it's still in The positive territory but it's starting To decline and starting to roll over and Um yeah I think we are headed for uh for A mild recession over the next uh year Or two and uh most recessions have Lasted in the past again going back to My table the average duration of a Recession was 10 10 months with uh with The average frequency of about 6.25 Years which means on average a recession

Happens every 6.25 years so not discount Not not ignoring the last one we had Um it's been two years but if we Completely just ignore that anomaly We're overdue for a correction of the Economy By far because the last one was 2008 Which was 15 years ago so that's what I Think brought overview no I appreciate That I think you covered most bases There and speaking of the Atlanta fed I I saw recently they they revised their Estimate for q1 GDP down quite a bit I Think they had at it another three Percent recently but I I think they even Brought it back down to 1.7 uh and I I Think we might even be due for another Update today in fact if I'm not mistaken But well I by the time people are Watching this I think that that update Will already be out but my I guess the The the one thing I I keep thinking About with these markets is it seems Like we're chasing whatever the most Recent narrative is you know and it's Been like this for for basically the Last year it was you know inflation is Is is crazy and it's only ever going to Go up and we need you know 75 basis Points and 100 basis points and whatever To get it back under control and then And then we went into sort of like the Soft Landing camp and then we saw Inflation come back with the you know

Core inflation uh and you know we've Just been chasing one narrative after Another and I guess one question I have For you Is we we've seen inflation uh start to Come down over the last few months I Mean headline inflation is down there Are some elements of of core inflation And and uh core services ex-housing that Have remained stickier or do you think That inflation is still on a you know do You think it's on a downward path if if We're if we're getting a recession or do You think it's it's likely going to Remain stickier far longer than we might Otherwise want it to Well I think there's going to be certain Elements of inflation that are going to Be sticky like wages for example are Always more sticky downwards and perhaps Commodities but overall I think that I Think you're referring to the overall CPI index which is a basket of all goods And services I think that's going to Continue coming down and I think for for Two reasons I mean I'm not in any one Particular school of thought I'm not Advanced enough to label myself a Monetary risk or a fiscalist or anything Like that but the monetary's view is That Inflation is a product of the money Supply and it's a function of how much The money is applied has grown and let's

Just take that narrative for for a Minute the money the M2 money supply has Grown at an unprecedented rate during The pandemic which broadly according to The monitoris view broadly explains why Inflation Rose to nine point I think What I think it was 9.1 percent was the Peak in June Um of last year And it's since been coming down because It's perfectly correlated with a decline In the growth of the M2 money stock if You look at the M2 on um on the St Louis Let's just pull that up right now so we Can show the audience Um M2 money stock let me share my screen If you take Can you share can you see my screen yeah All right so let's take let's take M2 And here we see the nominal level let's Just take it by percentage change from a Year ago Um you see this massive drop here that Has more or less coincided with uh Inflation actually I did um I was Curious to see if this was this Relationship was a one-off but actually If you go back to like the last 40 years There's been a pretty much perfect Correlation between uh change in the CPI Known as the inflation rate and change Of the M2 So I'm not saying that's a causation but It is a perfect correlation so if you if

You can if you consider that this is a Leading indicator for inflation uh then Then yes I think inflation is going to Continue coming down and it kind of Makes sense I mean uh with with with Less liquidity in the system you have Less credit available people are going To spend less there's going to be less Lending from the banks Um and there's going to be less money to Spend But um the other the other reason I Think inflation is going to come down Is is really If you look at Okay so Yeah the the fiscalous view is that uh Uh is that uh the taxes are also Responsible for for uh for for uh Changes in inflation um I I'm not I'm Not too sure about that one but I will Say that um The CPI has been coming down Uh partly due to how much the CPI has Risen over 2021 and so the base effect Is largely responsible for I guess a uh A normalization of inflation rates Um and with supply chain issues having Fixed themselves Over the last six months I think that Issue has also resolved itself Um and yeah I think inflation is going To come down not to the two percent Target that the Federal Reserve has uh

But closer to maybe four percent five Percent by the end of the year we're Already at I think six percent so I Think the next print is going to be even Lower Um I've been hearing stagflation fears I I Don't think that's gonna happen it's my View because I think we are going to get A decline in inflation uh and we are Going to get a decline in economic Growth and keep in mind to answer your Earlier question about how inflation Performs during a recession of the last 12 recessions there has never been one Recessionary period where inflation has Risen during the course of the recession So if you were to hold the view that There is going to be recession going Forward uh which I do Uh then you should expect a softening in In the CPI The uh the M2 chart that you showed is Is really interesting and I I've seen That a lot recently looking at this sort Of like this change in the M2 and and How it can be seen as a potential sort Of leading indicator on inflation coming Back down so with that in mind it raises The question I think of is the Fed Overdoing it I mean you know if if we Already have M2 coming down this quickly And I mean it it seems like things are

Slowing down within the US economy we Just had the ism come out and and you Know we've got lots of things coming in Below uh especially where they were Expected to be and they continue to be In in you know large declines even in The services sector new orders Etc you Know is the Fed over doing it because we Know the FED is is a more reactionary Body than than one that predicts Um so do you think that there's a a risk Here of them over doing it or do you Think that what they're doing is you Know it makes sense in line with the Current inflation readings that we have Um this is a really interesting chart so To answer your question yes I do think They're overdoing it um this isn't Necessarily my view because this is out Of the purview of my own knowledge but I'm quoting um somebody I've had on the Show many times before which is uh Professor Steve Henke who was the Professor of Applied economics at Johns Hopkins University he was he was Involved in the 90s in reconstructing a Lot of broken economies helping restore If uh price stability and a lot of Economy that have been hyperinflating in Eastern Europe for example Um and we can talk about hyperinflation If you like but Um his view is that yes the FED is Overdoing it there's no reason to shrink

The balance sheet to negative negative Growth territory uh maintaining a growth Of two percent in his view I think was Would have been sufficient to bring down Inflation Um yeah this is over tightening it Overdoing it and it's not just in terms Of the it's not just in terms of the uh Interest rate going up is it what's What's equally important is the acid Acid side the total assets the balance Sheet of the Federal Reserve which is What this chart shows Um it's been coming down steadily Interestingly it's spiked up recently And a lot of people have said that That's mainly due to uh bailouts of the Banking crisis Um either way this down curve here uh That that is overdoing it The view of Professor hanke is that this This chart should have just been flat Um creating this kind of uh a negative Growth but what we saw was the biggest Shock in in liquidity injection in History over 2020 and 20 20 21 and now We're seeing the biggest uh contraction Of liquidity in history in a relatively Short amount of time so this extreme is Going to cause consequences for economic Growth and the downside and I think yeah I think they have overdone it and time Will tell how much they've overdone it By but I think the results will be lower

Lower economic activity Recession Um at least two quarters of negative GDP Growth and much higher unemployment Yeah I mean it's interesting because the Fad has I mean they've raised rates back To five percent which they haven't been A five percent in an extremely long Period of time and Um now that we're at these levels you Know if you if you look at at what what The Market's predicting for rate Cuts It's very different from what Powell and And people at the Federal Reserve have Been saying for a long time and not so They don't really expect to cut rates This year you know and Powell has said This many many times in fact it was I Think the last thing he said at the left The last fomc as he sort of begrudgingly Walked off stage was that like we're not We're not looking to cut rates this year That's not in their base case mark it Doesn't believe them you know I mean the Market just simply does not believe them And and it and it varies as to when when Rate cuts are being you know sort of Priced in but I I think it's sort of Going back back and forth between like You know June or the sometime in the Summer or or in September do you think That Um The market is too optimistic on on when

These rate cuts are coming especially if If we get a recession I mean so I guess It depends on when the recession starts If it starts in Q2 or if it starts in Q3 But do you think that that the market is Being a bit too optimistic on on when These rate cuts are coming and and if They are I'd like to know what your Viewpoint on on how that would affect Markets yeah I think first of all in Terms of recession timing we don't Really know When a recession hits us until three Months later initially so the the nbe Are the National Bureau of economic Research is the body that officially Designates with sessions and they they Usually do it with a bit of a leg and so Even if we're in a recession now we Won't hear about it until a few months Later Um very rarely I think in the past if We've known about it in real time Um I remember even in 2008 we people Were talking about a recession and you Know are we going into a recession People were asking that question as the Recession was happening we've only known Afterwards that that period was already Designated A procession but uh to your Point about Um the markets uh being overly Optimistic about a rate cut I think Whoever

Thinks that we're getting a ray cut may Be in for a surprise I personally don't Think we're going for a ray cut and I'm Not even convinced that the overall Market is pricing that in um I think What their pricing in is probably just Uh an end of fed hikes But not so much a cut I mean Jerome Powell and the FED have been you know When they're cryptic about certain Things we can make assumptions but he's Been pretty clear answering a reporter's Question I remember at the last press Conference that somebody asked him are You going to cut this year and he he Said no I mean that was just he was There was no ambivalence there like he Just said no we're not cutting the doll Plots indicate that as well it's not Just Powell Um most Governors don't think a cut is Happening this year and actually I want To show you the um Uh CME fed watch tool this changes every Hour right the probability of a of a Hike or cut or no cut no change rather Um for as long as I can remember this Chart has been pretty accurate now as we Go as we approach the May meeting Um we're gonna get updates for sure the Next one's on May May 3rd And I I fully expect this to change Um I don't see any indication of a cut Priced in it's right now markets are

Leading towards no change so an end of Rate hikes and perhaps uh uh perhaps a Slight possibility of of a of an Increase that's actually that's actually Come down there was like 40 something Percent just yesterday so So yeah I I think let's check back a Little bit closer to may but I'm not Expecting a cut anytime soon The FED has usually not cut until a few Months into a recession anyway if you if You just take a look at past um uh Easing Cycles So I I don't think it's coming right Away especially I don't expect it by June it's interesting because a lot of The sort of the the talking points on You know throughout you know fin twit or On YouTube whatever for a long time has Been a Fed pivot right uh history shows This little pivot isn't really a great Thing for markets in general and uh one Of the reasons I I suppose is that you'd Have to think about What would it take for the FED to Pivot You know like what like think about how Bad things would have to get for them to Want to Pivot within the next few months Right especially considering inflation Is is so high do you think that a Fed Pivot would be immediately bullish for Risk Assets in general or uh would it You know would it make more sense to Still be somewhat cautious knowing that

The stock market has historically gone Down after the FED starts to cut rates I think QE would be bullish for stock Markets okay I mean it's perfectly Possible to have in theory QE during a Tightening cycle Um I don't think that's entirely what They're doing now but uh let's take a Look at what the FED has done in Prior Uh Prior cycle so this is the Fed funds Chart if we go back 20 years let's just Say To the early 2000s all right And and we had a recession in 2008. We had a recession in 2020 Both recessions coincided with a decline In the FED funds rate But and actually the FED started cutting Raids right before the recession the the Recession in 2008 officially started in December 2007 so the fed's already been Cutting rates whether or not they Telegraphed a downturn Um I can't remember but they were Already in the process of cutting rates So it wasn't entirely reactionary to the Recession it already started happening In 2020 it was purely a reaction to Covid Uh now we're entering unprecedented Waters because in no prior recession Over the last 70 years have we had the

FED tightening into a recession now if You believe that the FED has one more Rate hike which some people I've talked To believe then we are tightening into a Recession if you believe that we're done Then then that argument doesn't apply But still they've been raising rates Into the possibility of a recession and Keep in mind we did have two quarters of Two consecutive quarters of negative GDP Decline last year in q1 and Q2 so the Textbook definition of a recession Already applied it's just that the NBR The nber looks at a lot of other things Like personal income and retail sales And consumption in order to make that Assessment and they determined that the Economy wasn't as bad Um to to warn calling it a recession Uh I think your question is do you do I Think that uh a Fed pivot would be good For the markets I think the markets have Largely priced in Um a pause in the rate hikes and so a Surprise pivot would be absolutely good For the markets Um in a surprise pivot I think would be June I think the assumption that the Markets are pricing it in the pivot by June I I don't think that's entirely True I think they're pricing in perhaps Uh no no hike at all but a surprise Pivot earlier than expected would Definitely be positive for the markets

And um going back to that chart let's Take a look at when they might pivot if History is any indication at all Historically they they've left rates Unchanged for at least six to eight Months Right so Um I I don't I don't know that they're Going to Pivot right away even if we do Get a recession something with the Unemployment rate would have to spike up To like 10 overnight for them to Warrant That decision and I don't think that's Going to happen keep in mind the FED is One of the few central banks in the World that has two mandates control the Inflation and controlling unemployment And chairman Powell was pretty clear in Saying at the last in the last pressure That he would need to see unemployment With a labor market softened before he Makes any decision to ease monetary Conditions and I think there's been Speculation that he doesn't want to make The mistake Um in of uh of past fed Governors which Is to ease too soon because that could Create problems in its own especially on The inflation front they're in a tricky Place because if they do ease too soon They run the risk of of of Raising inflation again which has Already been coming down so they're Going to undo everything that they've

Already done uh but if they wait too Long the recession could drag on for Longer than expected Um so I I'm expecting a rate cut Possibly by next year but not this year What do you think about you know some of The signals coming from precious metals We've seen gold start to move up Recently I mean I think it's around 2000 Or so silver I believe is is around 25 And you know silver recently broke out From the sort of this down this downturn That it had been in since early 2021 do You think that the these these precious Metals that haven't really seen a a true Bull market in the sense of what we saw Back in say like the 70s and what we saw Back in say like the 2000s do you think They're on the verge of of breakouts That could be sustained for longer Um or do you think that you know this is Just going to be another sort of a false Attempt and it's just and they're just Going to come back down So I I expect uh further Tailwinds for Gold and the precious metals to be Sustained over the next coming months I Think the the run-up in gold and silver By the way silver uh typically follows Gold just with a higher beta so they Typically move in tandem um so if we Talk about gold I think the run-up in Gold has been primarily due to the right To the decline of the US dollar the dxy

So here's a dxy chart it's the dxy and Gold Have perf have basically held a Perfect inverse correlation Uh throughout history uh with with some Exceptions but usually it's been pretty Uh pretty consistent Um the the decline in the dxy could be Attributed to the fact that the markets Are priced in Um a slower pace of rate hikes if not an End to the rate hikes altogether while Other central banks around the world are Still catching up to that and um I don't Think other central banks around the World are done raising rates and so the Rate differential yeah the interest rate Differential is favoring other Currencies and not the US dollar which Is why we've seen a dxy decline which Has pushed up gold I don't think gold is Necessarily telepathing anything and Actually if we if we take a look sorry Let me go back to my Excel sheet I've Done this for gold as well Um has gold in historically uh Telegraphed recessions Um gold has done very well during Recessions if you take a look at uh at The gold chart that I'm about to show You here Um So Gold has In the last

Let's say six six recessions since 1980 Gold has achieved uh zero if not Positive returns during the course of Every recession now when markets crash Um gold tends to crash alongside Alongside stocks initially this was this Was seen in 2008 and in 2020. uh the Reason that gold was able to close in in Positive if not uh zero territory by the End of the recession is that gold has in The past two recessionary periods Recovered faster than stocks Um but initially it tends to you know as The saying goes correlations across Assets tend to uh tend to move towards One during big Panic sales and gold is No exception I don't think gold is necessarily Telegraphing a major downturn as much as It is just reacting to this to the Weakness of of the txy and I want to Show you something else that's very Interesting Um this is the uh real interest rate uh This Is The Fez calculation uh if you Take the nominal rate minus the Inflation rate should be negative Territory but but that the direction is Still the same the real interest rate Has been going up as inflation has come Down the nominal rates stay elevated Inflation's come down and so nominal Minus inflation rate real interest rates Gone up now this is interesting because

The real interest rate and gold have Historically held a perfect negative Correlation meaning if one goes up the Other goes down usually gold responds to The real interest rate even more Strongly than the dollar Um not ignoring this year the Correlation between the real interest Rate uh inverted versus the gold price Has been about 95 over the last five Years Um yeah the r coefficient has been has Been 95 and so this is a very Interesting chart for me because For the First time in a long time we've seen a Massive uh Divergence between two Variables that have traditionally been Perfectly inversely correlated with each Other they've both moved up together Um this shows to me that gold could Potentially be overvalued in the short Term Um and we could potentially see a Correction to the downside Uh if if this Divergence were to to Disappear I do think that if the dollar continues To weaken in the sense that if central Banks around the world continue to Tighten them while the FED pauses we Could we could see further strength and Gold as a response to a weakening dollar Um But uh and and I do think that we could

Once we have a dip gold could break out To two thousand dollars again and Sustain that level but I don't think We're gonna have a huge breakout to two To like three thousand dollars or five Thousand dollars in the next year it's Um I've heard some predictions before And I don't I don't I don't see that Happening with the dollar you know you Bring up some I mean the dollar has Shown a lot of weakness recently I mean Really it's it's been on a downtrend for Several months now and and it also seems Like we're starting to see headlines About you know like the US dollar in General losing its World Reserve Currency status Um you know is that something that you You see playing out here in the short Term or do you think that that some of These headlines are are getting somewhat Overblown uh which could lead to a I Mean if if they are that could lead to What you're talking about a potential uh Move back down in gold which I guess Would be supported on a rally by the US Dollar Yeah first of all um I I don't think the Dollar is losing its status as a global Reserve currency in my lifetime I mean I'm in my early 30s now so let's assume Average life expectancy of 78 79 I've Got 50 more years to live is a dollar Gonna lose its status as a soul not soul

Is the dominant Global Reserve currency In the next 50 years I don't think so And the reason is that it has such an Overwhelming hegemony right now that you Would need to see a massive decline in Dollar usage year over year over the Next 50 years that to even happen sixty Percent of global trade is conducted in USD which has come down Um Since the 50s but in this in the 70s uh But no I I I think these headlines pop Up every time we see a financial crisis The dollar is going to collapse the Dollar is going to lose its status I've Even seen a headline on some YouTube Video the doll is going to go extinct Ask yourself this question okay if you Were to go to a third world country Right now okay Latin America or Eastern Europe or Africa and you needed some Cash to bribe the local officials with And notwithstanding the local currency What are you bringing are you bringing The U.N with you are you bringing the Euro with you you might bring some gold Coins and silver coins I mean that That's always useful But for bribery money to get myself Around I would bring the green back and That's recognized everywhere in the World Um that's not the definition of a Reserve currency but it comes to show

The confidence in the US dollar all Throughout the world these headlines That the US dollar is going to collapse And we're going to lose value but the Dxy is still at the strongest it's ever Been in the last 20 years related to Other currencies all throughout the last 20 years I've been hurrying the dollar Is going to collapse Um it's not going to collapse anytime Soon uh the dollar is going to show some Short-term weakness because of uh Interest rate differentials but Um it it it's not going to lose its Status as a currency of of of widespread Usage over the next few decades And you know we're seeing headlines pop Up of countries like Brazil uh Transacting and and uh in currencies Other than the US dollar with with a Trade partner we're seeing headlines Like Saudi Arabia and China striking Deals with buying gold in sorry oil Rather and currencies other than the US Dollar uh Russia and China are Conducting trade in okay yes that's fine But how much of that trade Is is what is the percentage of that Trade done across borders in these Countries relative to Total global trade It's not a significant amount and Furthermore the countries have been Transacting in other currencies besides The US dollar amongst themselves forever

I mean not every single cross-border Transaction has to be done with the US Dollar as an intermediaries so I think These headlines tend to focus on Um the outliers not the norm No I think that's a fair statement do You yeah what about um So yeah I mean with regards to the Dollar uh I I I agree you know it seems Like it seems like things are getting Somewhat overblown what's your take on On you know one of the more risky asset Classes uh crypto because you know we've Talked we've touched here on on Um you know stocks we talked a little Bit about about gold and silver and the U.S stock currency index but there's This other asset class in crypto and and Obviously Bitcoin is sort of the one That leads and it's you know over the Last what five months or so it's moved Up from 15 around 15K all the way up to 29k or so is this you know with Bitcoin Sitting at 29k is this a level that you Think it can break through as we as we Sort of inch closer to a recession or do You think it's going to provide provide Some resistance I I'm I'm very curious Like what your what your view is in General on on bitcoin Beyond Beyond just Say short-term price action because no One really no one really knows what's Going to happen tomorrow but Um right how do you how do you see

Bitcoin holding up in you know in a Potential recession I mean we talked Earlier about it seems like we're Heading for one at what point we get When we get in when we don't really know But assuming we get in one What do you think you know what do you Think bitcoin's going to do Well this is this is your expertise not Mine but I won't try to attempt to Answer the question as best that I could Um I think Bitcoin is going to follow The stock markets for the foreseeable Future like it has been uh the breakouts Of 29 has largely mirrored the NASDAQ And the S P 500 over the last couple of Months Um with the higher beta because Bitcoin Is more sensitive to move Um I think the the day Bitcoin Completely diverges from the stock Markets will be the day that we see Bitcoin adoption uh largely Beyond Speculation and investment from the Retail and institutional side Um if we start using Bitcoin as a Currency or if more smart contracts were To be built on layer one uh then perhaps We'll see adoption for Bitcoin Beyond uh Beyond a trading and investment vehicle But for now I think that's what the Markets have shown that to be I don't Know if you have the stats to back this Up I don't know what percentage of

Bitcoin is used primarily as an Investment maybe you'll know Ben Um but certainly I think the markets Have been pricing in that primarily Bitcoin has been used as an investment Vehicle so I think that correlation will Hold and so the question then goes back To what do I think the stock market is Going to do Um and I think the stock markets will As the recession turns or hits I think We're probably going to see uh a decline In inequity value uh I don't think we're Going to get a huge crash down to like 90 crash like some people have been Saying but I think we are going to get a Decline and keep in mind that any Decline of the s p and NASDAQ is going To be Amplified in Bitcoin so uh short Term you know it's it's very possible to Get to 35 000 but um I don't see us Getting to a hundred thousand anytime Soon And I think that You know I hope I'm wrong but I don't See that happening anytime soon I've Heard the argument that because the Banking crisis that there will be more Bitcoin adoption and that is going to go To 100K sooner than expected Um there might be some of that happening In the periphery of people moving their Funds into cryptocurrencies but more by And large we've seen people move their

Funds out of banks out of bank deposits Into money market funds Um there's this perfect inverse Correlation between money market funds I Think you and I talked about this too uh Money market funds and uh banking Deposits uh by the way I want to show People this chart Um commercial uh deposits St Louis fed if people haven't seen it Already Um This is this is kind of what I'm talking About here So if we take a look at Um deposits and Commercial Banks uh you Know rise in nominal value rise rise Rise and then the first time I For the first time since the beginning Of this chart which is 1973 we're seeing A decline in deposits meaning uh net Withdrawals and actually if you take a Look in percentage terms it becomes a Little bit more clear And That that's so it's obviously part of This is due to the fact that we're Normalizing from this huge Um uh increase during covet as people Started putting more money into Banks But uh this negative decline has not Been something that this trend has never Been seen I mean we've had periods of of Zero where negative growth were net

Withdrawals but it hasn't sustained so This is really unprecedented the Question is where are they going and I Believe the answer is short-term um CDs Uh treasuries uh money market funds so Safe cash and cash equivalents uh just Not in Banks I have haven't seen data to Support that this with ball is going Into Bitcoin so the argument that Because banks are on the verge of you Know where some banks have collapsed and So people are taking money out of their Bank accounts and going to bitcoin I'm Not seeing data to support that argument And so I can't and my camera just died And so I can't I can't see Bitcoin going Up because of that Um I can see Bitcoin going up if the Stock market Roars and I think that one Of the conditions for me to see the Stock market do well during a period of Entering into a recession is if this is If the Fed pivots so if I'm wrong and The FED does pivot earlier than expected Then we could see a huge rally but Barring that case I don't see any real Or possible Um scenario in which both the NASDAQ and The Bitcoin rally to um to new Hollies This year Do you you talk some about you know Money markets and whatnot and I mean I Think this goes for both of us because I Think you said earlier that you're in

Your early 30s I I am as well Um and one of the interesting things is That you know the risk-free rate Hasn't really been this High you know During our investing careers Um do you see fixed income investing Right now as as a um as a viable way for People to to invest uh you know earning Say five percent annually and say CDs or In um you know whether it's t-bills or Whatever it is like do you think that With with rates as high as they are it Sort of opened up a new way to invest For people who haven't really who for a Lot of us that we've been deprived of The risk-free rate for you know for the Better part of a decade Um you know it's interesting because I Wasn't born in the 80s I was born in the Early 90s but in the 80s the the risk Freeway was like 20 percent Money markets fund uh money markets Rates in the early 80s uh during the Walker days went up to like double Digits didn't last very long but you Know you're getting like better than Stock market returns today in a Risk-free security which is insane when You think about it I think the question Is how long rates will stay elevated and Like I said I I expect to Pivot by next Year um when the recession hits so I I Don't think raids are going to stay Elevated at five percent forever maybe

It'll come down to to three or four Percent but I also don't think it's Going to go back down to zero anytime Soon I think the end of zero interest Days in sorry the end of uh with the Days of zero interest rates rather are Over for now and I think that the FED Will likely embark on uh uh a monetary Policy of of one to two three percent Interest rates for the future Um that being said I yeah I mean if you Were to ask me where to park my money Right now in the short term for a Risk-free asset it would definitely be In treasuries and and uh even even High-grade corporate bonds I mean Triple A corporate bonds have a very low risk Of default that's why they're Triple A But they're still at six seven percent Interest rates right now which is a very Good return compared to something like Gold which yields nothing and you Actually have to pay to store it if You're buying physical but you can also Buy you know a GLD ETF which is uh which You don't have to pay for but then you Have to pay a a a a a management fee of A few bips Uh the point is safe haven assets like Gold are really in competition right now With uh with yielding Safe Haven assets Like treasuries and so if I'm gonna go Somewhere I'm gonna pick something with Yield

Um at least for the at least for the Short term I think that probably Explains why uh money market funds have Seen such huge inflows in the last uh Couple weeks if not a month Yeah I I think you've provided a lot of Uh great answers and I I think this will Be really great for the audience the Last question that I want to ask you is Is more of like a sort of like a general Question about something so you know People our generation uh and I think This is something that a lot of people Like our age are struggling with to some Degree are that we haven't really lived Through a recession in the same way that You know say investors from a prior Generation have I mean even the Um even the the I mean we had the 2021 Of course but it was so quick right and Then when the FED just printed a way out Of it almost immediately you'd have to Go back to the financial crisis but I Mean I don't know about you but I mean I Was only 18 at the time Um and in the.com Crash I was only 10 Years old so you know these aren't Really things like I can look at them on Paper and I can see like oh like that Looks pretty bad but we haven't really Experienced that sort of thing before Not at least as say like a adults who Are investing you know their own money In so I guess my question is is how do

You navigate times like this I mean what Are you relying on the most are you Relying on historical data are you Relying on You know just sort of the momentum of Various markets I'm curious to know like What do you what do you personally rely On during during Times Like These when It seems like we haven't experienced This type this exact type of scenario uh In or I guess we've never experienced This exact scenario but we haven't Experienced a scenario even remotely Similar to this uh you know in more than A decade I I I I I fully agree with you that People our age are have been more or Less insulated Um I was also in high I think you and I Are about the same age I was also in High school during the 08 financial Crisis and I'm you know I was in Canada So we had it even better than the US Like the the recession hit Canada a lot Less than the US so um things were Relatively good here compared to what Happened Um South of the Border so coupled with That with the fact that I was in high School yeah it basically had zero impact On my life because I was in university Um nobody around me were going out of Jobs because everyone was you know even Adults they were they were fine the

Canadian recession was more or less they Started Canadian economy at the time was More or less fine during covet uh the Worst recession on paper everyone was Kind of just working from home Um and so I I had a steady job at the Time It didn't really affect me right it was Obviously the lockdowns were a nuisance But from an economic perspective it Didn't didn't have any impact on me how Do I use Well Ruby we're really entering Uncharted waters aren't we I mean from a Personal standpoint You know I sound personal finance advice I think holds Try to pay off your debt as soon as Possible I I think I think that that Advice is kind of overdue because I Don't think interest rates are going up So even if you have a lot of credit card Debt I don't think your interest Expenses are going to go up from here if You don't pay them off but um but yeah I Mean I don't think interest rates are Going to go back to zero anytime soon Either anyway I think they're going to Stay elevated for a while as the theft Funds rate historically has shown that The chart that I showed you they usually In the past have stayed elevated for six To eight months before a pivot so um Expect interest expenses to remain high

If you still got a lot of personal debt Trying to pay that off Um yeah save money we're not entering Boom times we're entering Um not a bust either it's not I wouldn't Call this a bus I don't think we're Going to get like 2500 unemployment like Like the Great Recession uh depression Rather I don't think we can get 10 like 2020 Um sorry like like 2008 and we're Certainly not going to get anywhere near Covet levels but I do think we have to Brace for Um for Uh less aggregate demand overall Which may be good if you've already got A lot of money saved up because prices Are gonna well I don't think prices will Come down but they're not going to go Back up anytime soon I don't think Inflation is going to return so yeah Save money pay off your debt in terms of Investments I've looked into this the Best um the best sectors that have done Uh during the last two recessions have Been Consumer Staples utilities uh Things that you would you know Intuitively think do well during a Recession so uh I I looked into the best Consumer staple stocks and what what I Found was that Walmart actually Outperformed every single recession Since 1980 Walmart went public in 1970

October 1970 and uh the first recession Its experience was 73 to 75 it declined 38 percent During that recession but every Subsequent recession it's gained a Return I think I I think let me just let Me just pull up this chart because I've Actually done it um and I want to show I'm not saying buy Walmart I'm just Saying that there there are stocks that Have consistently beat recessions so These are all the recessions that Survived since becoming public in the Early 70s uh you can see that in 81 and Actually gained 109 over one Recessionary period Um and I think if you look at if you Look at uh how it's performed over the Last 20 years every single recession has Seen a gain great financial crisis nine Percent eight point five percent during The tech uh.com uh bust early 90s uh This one Um it was a short it was a very short Recession during 2020 and there's a lot Of competition from Amazon and and other Online retailers so But it's still it still beat the markets Is what I'm saying so if you're an Investor get defensive consumer staple Stocks things that people need Regardless of the economic environment Uh tobacco companies have also done Quite well Coca-Cola another consumer

Staple Walmart I just showed you so yeah Um get defensive I wouldn't lever up on Crypto right now I mean feel free to Disagree but any any asset with a high Beta right now Um I would stay away from When you're speaking to someone who Never really lovers up on crypto okay Okay I'll buy it at Uh but David it's been a pleasure having You here I think we'll go ahead and wrap It up here Um guys if you if you're not subscribed To David he's got a great YouTube Channel David Lynn report I will link That down in the description below and Also make sure you follow him on Twitter As well uh we'll link we'll link that in The description below as well David Pleasure to have you here and I look Forward to seeing you again in the Future yeah pleasure was all mine and Please if you haven't subscribed to Ben's Channel like what are you doing do That right now he's got possibly the Best technical analysis on crypto I've Seen so Um which is why I had you on my show Yeah that I've seen I mean uh so yeah Definitely check I mean you've got 700 000 subscribers from from for a reason So um definitely check that out and Thank you for having me Ben that was I Enjoyed that talk I hopefully your

Audience finds that useful no I think They will all right David we'll see you Next time all right cheers thank you

Coinbase
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