The Breakdown

Today on the Brief: Market reaction to Pres.Trump contracting COVID-19 Subpar September jobs report Decentralized exchanges have third straight 100%+ growth month Our main discussion features Stephen Palley and Preston Byrne of Anderson Kill. Yesterday, BitMEX was targeted with both civil and criminal complaints, with the CTO being arrested for violation of the Bank Secrecy Act. In this conversation, NLW talks to two crypto legal experts to discuss: The specifics of the charges How long this investigation has been in the works Whether there was anything surprising to legal experts Why the criminal complaints represent an escalation of enforcement Whether there are implications for other industry areas, particularly decentralized finance Find our guests online: Stephen Palley: @stephendpalley Preston Byrne: @prestonjbyrne Anderson Kill: andersonkill.com

When popular finance writer Morgan Housel asked followers on Twitter to share the commonly held investing beliefs they most disagreed with, the internet responded with vigor. A thousand or so replies later, NLW ranks the top 10 investing ideas we should be questioning, including: Ignoring compounding interest in our 20s Buying homes rather than renting The idea US Treasury bonds are risk-free Listen to hear the full list.

Today on the Brief: Coinbase offers severance to employees who want to leave over new politics policy Long-term job cuts hamper any idea of V-shaped recovery Last chance for a stimulus package before the U.S. presidential election Our main discussion is a narrative shift from DeFi back to bitcoin. Over the summer, DeFi led the crypto charge. From growth in total value locked to narrative dominance to even leadership in the all important category of crypto drama, DeFi was it. Now, as a potentially turbulent macro environment rears its head, the narrative is shifting back to a focus on bitcoin.

Monday, Coinbase CEO Brian Armstrong published the innocuously titled “Coinbase Is a Mission-Driven Company.” While the post talked a lot about Coinbase’s core mission, its real goal seemed to be to make clear Coinbase would not be engaging with any other social or political issues beyond that, and to the extent employees wanted to do so they needed to do it on their own time. The reactions were intense, immediate and in many instances, totally opposite. In this episode, NLW breaks down the entire social media reaction and the arguments for and against this policy.

DeFi is one of the breakout crypto categories of 2020. Indeed, yield farming and the grand game of “money legos” has been so profitable that many are following every new protocol with rapt attention. This is all the more true for projects graced by YFI creator Andre Cronje. So when word got out about a new, pre-release game economy engine called “Eminence,” the DeFi degens took advantage of the permissionless nature of DeFi to pump $16 million or so into EMN. What happened next was arguably the first pre-release hack in DeFi’s history. This episode breaks down what happened and what it means for the fledgling field.

Today on the Brief: After four weeks down, bitcoin bounces back on suspicions that recent bearishness was overblown KuCoin exchange gets hacked for somewhere between $150 million and $280 million Jack Dorsey outlines Twitter’s blockchain and bitcoin beliefs during Oslo Freedom Forum appearance Our main discussion: Digging in to bitcoin’s 64-day run over $10,000 Bitcoin has been above $10,000 for longer than any time in its history. Its volatility is also at recent historic lows. In this episode, NLW puts this in the context of broader market movements and explains why new price floors are self-reinforcing.

This week’s Long Reads Sunday is a reading of “The Currency Cold War: Four Scenarios” by Jeff Wilsner – part of CoinDesk’s Internet 2030 series. In it, Wilsner talks to experts about four scenarios: A multi-currency scenario, where exchange is abstracted away via digital wallets A China-led scenario A U.S.-led scenario A bitcoin/non-state currency-led scenario In addition to reading, NLW gives his take on which scenario is most likely.

On this edition of The Breakdown weekly recap, NLW looks at the fourth painful week for traditional markets in a row. He discusses the factors contributing to the trouble, including: A normal correction from too-high valuations The return of COVID-19 lockdowns The end of easy recovery gains Diminishing likelihood of a stimulus bill Election volatility

Sven Henrich is the founder and lead market strategist at NorthmanTrader. Well known for his appearances on CNBC, CNN Business and MarketWatch, Sven is also the host of the Straight Talk podcast. In this conversation, he and NLW discuss: The ever-weakening economic cycle Why the Fed has boxed itself in Why the asset price bubble is contributing to wealth inequality How market capitalization-to-GDP reached all-time highs What the election means for markets Find our guest online: Twitter: NorthmanTrader Website: northmantrader.com

Today on the Brief: Initial U.S. jobless claims up to 870,000 Partial lockdowns begin in earnest in Europe and Israel The global demand for American stocks Our main discussion: Did corporate insiders perfectly time the market top? August saw the largest volume of insider selling since 2015, with more than 1000 corporate officers offloading $6.7B in stock. Subsequently, the market has seen a 10% decline since the S&P500 all time high of Sept. 2. What’s more, according to new statistics, insider selling is happening at the fastest pace since 2012. The question is: What do these executives know that the rest of the market doesn’t?

Corey Hoffstein is the founder and Chief Investment Officer of Newfound Research LLC, a quantitative research and investment fund. He is also the host of the “Flirting with Models” podcast. His most recent research is “Liquidity Cascades: The Coordinated Risk of Uncoordinated Market Participants.” In it, he examines three popular narratives about what is driving radical swings in markets, including: The increased role of the Fed The rise of passive and index investing The growth of volatility-correlated strategies He finds that, individually, none could explain the radical market shifts we’ve seen. However, when combined, they create a market incentive loop that is causing markets to move and react to exogenous shocks more quickly and aggressively than ever before. Find our guest online: Twitter: @choffstein Website: Newfound Research

Today on the Brief: Where the digital euro fits in Lagarde’s economic integration plans New stablecoin guidance from the OCC Mnuchin and Powell head to the Hill Our main discussion features Marty Bent. Marty is the author of one of the best known daily bitcoin newsletters, as well as the host of “Tales From The Crypt” podcast. He also is one of the leaders of Great American Mining, a new project using bitcoin mining to make big energy more efficient and profitable. In this discussion, we talk about how bitcoin and big energy are unlikely allies, how that alliance can bring more bitcoin mining back to America, and how it is working to reduce America’s energy dependence. Find our guest online: Twitter: @MartyBent Twitter: @GAMdotAI Website: https://gam.ai

Today on the Brief Stocks down, dollar up on COVID-19 resurgence fears People’s Bank of China says digital yuan needed to fight USD dominance 140,000 have claimed UNI tokens Judge stops Trump WeChat ban Nikola founder resigns Our main discussion: The FinCEN Files The FinCEN Files are a leaked cache of suspicious activity reports filed by banks with the U.S .Financial Crimes Enforcement Network. The more than 2,000 files, representing $2 trillion in transactions, were leaked to BuzzFeed News more than a year ago. BuzzFeed, in turn, shared them with the International Consortium of Investigative Journalists, who then helped distribute them to 108 publications in 88 countries. This episode provides an overview of the leaks and explains why they show that, despite lots of PR bluster, banks are happy to file their reports and then keep on banking likely money launderers.

On this week’s “Long Reads Sunday,” NLW reads macro analyst Lyn Alden’s latest: “A Century of Fiscal and Monetary Policy: Inflation vs Deflation” The article looks at: When monetary policy is effective versus when fiscal policy needs to take over How short-term debt cycles add up to long-term debt cycles that have very different remedies Why long-term debt cycles inevitably end in default or devaluation Why the conclusion of the last long-term debt cycle in the U.S. – the 1930s and 1940s – suggests that devaluation is the most likely outcome

On this edition of The Breakdown weekly recap, NLW looks at: DEXetition – Uniswap’s battle with SushiSwap heats up as the former dropped the UNI governance token in what some likened to a crypto stimulus check The Fed has no clothes – After another FOMC meeting of “nothing new,” the mirage of Federal Reserve omnipotence is fading TikTok and WeChat banned from U.S. app stores – Is it just a negotiating technique? Whatever the case, people are not happy Kraken becomes a bank – What it means now that Kraken has been approved for a Wyoming Special Purpose Depository Institution charter

MicroStrategy made waves when it announced in early August it was moving $500,000,000 in treasury reserves out of cash. At least $250 million were to be moved into bitcoin. Earlier this week, the company announced its final bitcoin purchases totaled $425 million. In this conversation with NLW, MicroStrategy CEO Michael Saylor explains: Why he’s always treated the company with a long time horizon Why the asset inflation rate is the real inflation rate How he became convinced that bitcoin is the best treasury asset in the world Why Michael believes some other companies will follow suit, but better do so quick Why the intensity of maximalists is actually part of the reason he grew conviction around the asset Why he would buy every bitcoin if he could

Raoul Pal is CEO and co-founder of Real Vision, a platform fundamentally disrupting macroeconomics and financial media. In this wide-ranging conversation, he and NLW discuss: Hot takes on the most recent Jerome Powell/Federal Reserve press conference Why central banks can’t do anything more until they merge with treasury departments Why stablecoins are disrupting how we think about global reserve assets Why traditional financial media missed an entire generation of investors Why all macro debates are boring

Today on the Brief: Kraken is the first crypto exchange to become a U.S. bank FTC preparing antitrust lawsuit against Facebook Gold-standard fan Judy Shelton doesn’t have the votes to be confirmed as Federal Reserve governor Our main discussion: The battle for the soul of finance. In this episode, NLW looks at the power competition between governments on the one hand and the decentralized network-driven finance alternatives that would reshape that power. Interestingly, in this competition corporations may play a role that benefits both sides at different times and in different ways.

Today on the Brief: MicroStrategy increases its bitcoin reserves by $175 million The Oracle-TikTok deal starts to smell fishy The SEC is investigating claims of fraud involving Nikola Corp. Our main discussion: The rise of zombie firms. A zombie firm is a company that can’t afford to service its debt from operating income. These companies are made possible by artificially low interest rates, and they drain resources from the economy. On today’s episode, NLW explains: Why there are more zombie companies than ever The negative impact they have on the economy How they could drive a new financial crisis

Today on the Brief: Crypto exchange volume sees highest month-over-month increase since February 2018 Uniswap overtakes SushiSwap in total value locked What Coinbase vs. Apple means for the future of decentralized applications Our main discussion: NLW looks at the business of geopolitical competition, including: TikTok, Oracle and the new politics of deal making in the “new Cold War” “Mulan” controversy around Uyghurs and Hong Kong police support The real motivation for China’s digital currency

On this week’s Long Reads Sunday, NLW looks at recent statistics suggesting that, based on a comprehensive set of measures of well-being, U.S. citizens are worse off than they were a decade ago. One potential explanation is the U.S.’ “USD Dutch Disease” - a peculiar set of consequences resulting from the role of the U.S. dollar in the world. This week’s reading is “How to Diagnose Your Own Dutch Disease” from the Financial Times.

On this edition of the Breakdown Weekly Recap, NLW looks at: The “holding pattern economy” – why stocks, jobs and central bank policy seem stuck in place Why Joe Biden’s China plan shows that, no matter who wins the presidential election, U.S. economic policy towards China is likely to get more aggressive The surveillance state gets stronger as Amazon appoints a former NSA head to its board of directors The SUSHI saga and why there’s no capitalism more savage than the competition in open source networks

Tavi Costa is a portfolio manager at Crescat Capital. In this conversation with NLW, he discusses: The credit exhaustion moment in the engines of global growth The race to the bottom for fiat currencies The explosive moment for precious metals Where bitcoin might fit in this larger framework Find our guest online: Twitter: @TaviCosta Instagram: @TaviCostaMacro Website: https://www.crescat.net

Today on the Brief: Jobless claims slightly exceed expectations at 884,000 ECB keeps policy unchained; euro rises versus dollar Survey: What’s the right way to understand the business and market cycle in the U.S. today? Our main discussion: interest rates and the undermining of American resilience. In this discussion, NLW looks at a number of artifacts of the low interest rate world, including: Increasing cost of child care Declining share of total net worth held by bottom 50% New startups using lottery tactics to incentivize savers

Today on the Brief: Markets recover slightly but vaccine trade falters as AstraZeneca pauses trials Bitcoin and gold correlation increases sharply around dollar instability Mastercard launches simulation tools to help develop central bank digital currencies Our main discussion: Stan Druckenmiller speaks! NLW breaks down the famed investor’s interview with CNBC today, including: The merging of the Fed and the Treasury Mania in financial assets A growing fear of future inflation Why the next three to five years are going to be extremely difficult

Today on the Brief: Stock market continues its descent Insider stock selling reached five-year high in August President Trump promises more aggressive decoupling from China Our main discussion: Investors and the BTC price dip. Over the last several weeks, bitcoin has pulled back from $12,400 to around $10,000. This dip has happened alongside a broader retracement in equities, led by falling tech stocks. While some have levied correlation to equities as a failure of bitcoin, NLW argues this critique misunderstands the narrative that has driven accumulation from new holders over the last six months.

On this special Labor Day edition of The Breakdown, NLW is doing a reading of Nic Carter’s most recent essay “The Crypto-Dollar Surge and the American Opportunity.” In it, Carter argues that rather than fight the tide, the U.S. government should accept and take advantage of its unique position in the emerging world of global crypto monies.

Earlier this week, news broke that David Graeber, author of influential works such as “Debt: The First 5000 Years,” had passed away. In his memory, today’s Long Reads Sunday is a reading of his 2013 piece “A Practical Utopian’s Guide to the Coming Collapse.” In it, he argues the impact of the revolutionary period of the 1960s was much more profound than popular opinion has it, and that the age of revolution is far from complete.

On this episode of The Breakdown Weekly Recap, NLW looks at the full story the stock markets are telling us about the economy, including: SoftBank unmasked as the “Nasdaq whale” playing the same options game with stocks as r/WallStreetBets The Tesla stock split game: Does this just mean it’s for n00bs and rubes? The VIX shows November nervousness Can you hear it? As stocks slide, the money printer is revving again

Inspired by Michael Batnik’s “All Wrapped In One,” this episode examines eight moments from history that can help us make sense of one of the most chaotic years of our lives. Income inequality of the Gilded Age The election of 1896 The pandemic of 1918 The economy of 1929 The social movements of the 1960s The stock market of 1987 The speculation of 1999 The housing market of 2006

Today on the Brief: Traditional markets falter, led down by tech stocks Bitcoin falls under $11,000 for the first time since July Stablecoins mint $100m daily since mid-July Our main discussion is about DeFi’s “degens.” NLW talks about: The numbers behind DeFi’s recent run up What “degen” means in this context Why degen is in part a reaction to previous bitcoiner critiques of Ethereum Why degen is (in even bigger part) a reaction to a no-yield, artificially low interest world

Today on the Brief: Debt will exceed U.S. GDP for the first time since 1946 SPACs in action! Decentralized exchange volume flippens centralized exchanges Our main conversation is with Luke Gromen, founder of the Forest for the Trees consulting firm. In this conversation, we discuss: Chairman Powell’s speech and whether this is a true policy departure The evolving relationship between the Federal Reserve and Treasury Department What it would mean to get China to start “footing the bill” The gold narrative Why stock price gains are unlikely to keep U.S. citizens satisfied with the economy for long Find our guest online:Website: fftt-llc.comTwitter: @LukeGromen

August has come to a close. In this recap and “best of” episode, NLW looks at the big themes that defined the month. Most notable was the discussion of inflation culminating in the Federal Reserve’s newly announced policy of average inflation targeting. This episode featured commentary from: Tony Greer - Author, Morning Navigator Keith McCullough - CEO, Hedgeye Chris McCann - General Partner, Race Capital Adam Tooze - Chair of History, Columbia University George Selgin - Director at the Cato Institute Center for Monetary and Financial Alternatives Hugh Hendry - Legend

Today’s episode of The Breakdown looks at the stories the stock market is trying to tell, including: New all time high in total market capitalization to GDP ratio (higher than dotcom bubble) “No precedent for how high” valuations can go Fed denies asset bubble; intimates it wouldn’t care about asset bubbles if full unemployment comes with it Bezos at $200,000,000,000 Percentage of stocks traded by individuals reaches all time high of 20% Robinhood leads in FTX complaints Buffett’s Japan trading firm bet

This week’s episode of Long Reads Sunday is a reading of the latest essay from Tyler and Cameron Winklevoss. The essay looks systematically at the problems of the slate of current store-of-value assets, including the U.S. dollar, oil and gold. The brothers argue why those assets have, or are starting to have, value in their safe haven function, while bitcoin is on the rise.

On The Breakdown’s Weekly Recap, NLW looks at the shifting sands of the global economy. He says Federal Reserve Chair Jerome Powell’s speech at Jackson Hole this week was an argument that an era that began in the 1970s is now closing. At the same time, he argues Powell did very little to provide a vision for what comes next. Instead, it is the alternative economic philosophies – Modern Monetary Theory on the one side, bitcoin on the other – that are attracting people for a different vision of the future.

Today on the Brief: Skepticism around Powell’s inflation prognostications The Tesla Stock Split Game China’s COVID-19 vaccine maker presses countries for early adoption Our main discussion: The Anxiety Index We live in an economy organized around consumption and perpetual growth. In that context, factors that cause consumers to be fearful, reduce spending, increase savings, move less and generally slow down can wreak havoc. In this episode, NLW discusses four factors shaping and driving consumer anxiety, including: COVID-19 related concerns, both health and economic Monetary policy questions U.S.-China tensions Election insecurity

Federal Reserve Chair Jerome Powell spoke Thursday at the annual Jackson Hole conference convened by the Kansas City Fed, which was virtual this year due to COVID-19. In the highly anticipated speech, Powell laid out a number of key changes to how the Fed approaches unemployment and inflation. In this recap, NLW looks at how people reacted to the speech. On the one hand, there is disagreement between those who anticipate out of control inflation and those who think the Fed’s track record on achieving even modest inflation is abysmal. On the other, almost everyone seems to think the Fed appears run down, out of tools and increasingly looking to support from Congress.

Today on the Brief The SEC changes accredited investor rules Fintech and crypto investor Ribbit Capital starts $350 million SPAC Previewing Federal Reserve Chair Jerome Powell’s Jackson Hole speech Our main conversation is with Ruben Galindo, CEO and co-founder of Airtm. Airtm is a global dollar account that lets users anywhere access U.S. dollars, powered by cryptocurrency infrastructure and a P2P network. The company is currently working with Juan Guaido’s opposition government in Venezeula to attempt to distribute $18 million in funds the U.S. seized from the Maduro dictatorship. In this conversation, he and NLW discuss: How Airtm works outside of the traditional banking system Why people around the world are hungry for access to dollars What the Health Heroes campaign is trying to achieve How Guaido and Airtm are trying to work around the Maduro government’s attempt to suppress them Find our guest online:Website: airtm.comTwitter: @theairtm

Today’s episode of The Breakdown is an extended edition of the Brief. NLW discusses: The “COVID-19 vaccine trade” on Wall Street kicks markets higher The latest on TikTok vs. the U.S. and what it means for the U.S.-China relationship More companies move reserves from cash to bitcoin The final topic today looks at news that some large money market funds are shifting fees from users and taking the financial hit themselves. This creates a dynamic where only the largest companies can survive long term, and reflects a key unintended consequence of low interest rates.

Our guest today is Adam Tooze. Adam holds the Shelby Cullom Davis Chair of History at Columbia University and serves as director of its European Institute. He is known for his books “The Deluge: The Great War, America and the Remaking of the Global Order” and “Crashed: How a Decade of Financial Crises Changed the World.” In this conversation, he and NLW discuss: Historical analogies for our present moment Federal Reserve policy and independence How much we should fear debt and inflation post-coronavirus How the economic and political crisis of 2020 has changed or reinforced the trajectory of the U.S., China and Europe Why there is no such thing as the post-American era Find our guest online: Website: Adamtooze.com Twitter: @adam_tooze

On today’s edition of The Breakdown’s Long Reads Sunday, our selections have to do with one of the hottest topics in central banking: yield curve control. “What Is Yield Curve Control?” The first piece is from the St. Louis Federal Reserve and is a primer on YCC, including past U.S. implementations as well as versions from Japan and Australia. “Market Jitters Show How Much Fed Medicine Matters” Our second piece is an op-ed about how dramatically markets reacted to this small detail from the Federal Open Market Committee minutes, and what it suggests for their desires involving YCC.

Today on The Breakdown’s Weekly Recap: People aren’t buying “the Great American Recovery” Let’s stop considering the economy as one thing Dave Portnoy doesn’t care about your principles DeFi is the Wild West and saved only by the fact that no normie understands what the hell is going on Bitcoin is being compared to the dollar not stocks and that’s serious progress

The “three-body problem” is a physics issue that deals with unpredictable futures. In a recent essay, John Mauldin argues the economy is actually experiencing an “eight-body problem.” On today’s episode, NLW explores each of those dimensions shaping the challenge we face, including: Central bank intervention The destruction of the service industry The implosion of global trade In the end, he argues that in a world ruled by chaos, fighting to control the narrative might be the only rational move. Read Ben Hunt’s essay “The Three-Body Problem”

Today on the Brief: Markets react to FOMC notes Taiwan blocks China streaming services Initial jobless claims back on the rise Our main discussion is a look at the politicians on both sides of the aisle who are pro-digital currencies and, especially, pro-bitcoin. Featuring: Rep. Thomas Massie Governor Jared Polis Andrew Yang Rep. Ted Budd Rep. Trey Hollingsworth Rep. Darren Soto Rep. Stacey Plaskett Rep. Tom Emmer Senate Candidate Cynthia Lummis Rep. Warren Davidson Rep. Patrick McHenry

Today, NLW debuts a new format: “10 Takes in 10(ish) Minutes.” In this analysis, he looks at 10 takes surrounding the S&P 500’s return to positive territory on the year, including: Great American comeback Market disconnect and widening inequality Don’t fight the Fed To the Stoolies go the spoils Stock splits and SPACs It’s Tech vs. everything else Cantillon insiders FTW A new era of global liquidity? You’d have done better with gold You’d have done a lot a lot better with bitcoin

Today on the Brief: Everyone turns bullish as S&P 500 nears all-time highs Emerging market currencies are floundering Bitcoin holding sentiment highest in two years Our main conversation features Race Capital’s Chris McCann. Chris was previously the founder of Startup Digest, building it to 1 million subscriptions long before email newsletters were a thing. He spent four years building the community program at Greylock before launching his own venture firm. In this conversation, Chris and NLW discuss: The relationship between monetary policy and startup finance What changes in startup financing have followed COVID-19 What the emerging fintech stack looks like, outside of crypto Find our guest online: Website: Race Capital Twitter: @mccannatron

There is perhaps nothing more important or contentious in macroeconomics right now than the question of inflation. On the one hand, there is a growing concern that rapidly growing money supply and increasing central bank balance sheets will inevitably lead to inflationary pressures. On the other, critics of that point of view point to significant counterveiling forces such as the 10% unemployment rate and growing savings rate among consumers. So who is right? What are the specific narratives trying to say? What is the evidence and data actually telling us? And how are real people experiencing inflation today?

Earlier this week, the Winklevoss brothers introduced Barstool Sports founder Dave Portnoy to bitcoin. One of the notable parts of the recap video was a discussion of how Elon Musk was set to destroy the value of gold on Earth by mining gold from asteroids. While much meme fun was had, on this week’s Long Reads Sunday NLW has chosen a selection that looks at how fiat beat out gold and how gold beat out silver to provide some – ahem – more immediately relevant lessons on how to explain the benefits of bitcoin. Read:Projection and ThrownessPart III — Bitcoin’s 10x Advantage Over Gold Might Not Lie Where You Think By David Lawant

On this edition of The Breakdown’s Weekly Recap, NLW looks at the strange melange of realities interacting in the new emerging bull market. On the one hand, bitcoin has found narrative relevance and technical importance in a world of social unrest and increased state involvement in economies and citizens’ lives. On the other, insane financial engineering experiments are seeing three-quarters of a billion dollars in value locked up within hours before a bug sees it all go away. In the middle, agents of chaos like new bitcoiner (and LINK-holder) Dave Portnoy. This is going to get weirder before it gets more normal.