Wall Street Unplugged
Episode: 1009February 16, 2023

Why the Fed is f***ed

This morning’s Producer Price Index (PPI) data came in hotter than expected—showing a 0.7% increase, vs. 0.4% estimates. It’s just one of several signs that inflation has surged over the past few weeks.

Daniel and I discuss the growing disconnect between what the Fed is saying and what the market is hearing… why investors need to be prepared for more rate hikes… and why the Fed is fighting a battle it can’t win.

Charlie Munger is in the news for his latest anti-Bitcoin comments… even praising China for banning it. Daniel rants about Munger’s belligerent stance—and the hypocrisy of a lifelong capitalist praising communism/authoritarianism.

I also share how regulation could act as a tailwind for the crypto market in the coming years.

Lastly, I’m curious: For those of you who didn’t sell Bitcoin last year amid all the bankruptcies, fraud, and volatility… is there anything that would convince you to sell? Send me your answers.

Inside this episode:
  • Breaking down the latest PPI data [1:45]
  • Forget about a soft landing for the economy [7:10]
  • The Fed’s no-win situation [12:25]
  • Why Charlie Munger is a hypocrite [20:00]
  • What would it take to make you sell your Bitcoin? [28:15]
Transcript

Wall Street Unplugged | 1009

Why the Fed is f***ed

Announcer: Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media to bring you unscripted interviews and breaking commentary direct from Wall Street right to you on Main Street.

Frank Curzio: What’s going on out there? It’s February 16th. I’m Frank Curzio, host of the Wall Street Unplugged podcast, where I break down the headlines and tell you what’s really moving with these markets. This is Thursday, a lot going on. Market’s coming down, CPI numbers, and bringing in Daniel Creech to discuss this as well.

Daniel Creech: Hello, Frank.

Frank Curzio: Have some fun with this. What’s going on, man? How you doing?

Daniel Creech: Wednesday’s going into Thursdays, I like this.

Frank Curzio: I know. This is awesome. Well, and the Wall Street Premium, Wall Street Unplugged Premium, which is coming out not next week, the week after. So, everything you’re going to get now is for free. You’re only going to have one free podcast, going to be about 20 minutes, but that is coming out two weeks from now.

Frank Curzio: So, March 1st, where a lot of this is going to be behind a pay wall for $10 a month, and we’re going to include lots of stuff, and picks, and newsletters behind it, and provide tons of value for you guys. But it’s nice to have you back in the studio for two days in a row, man. That’s awesome.

Daniel Creech: I know it’s a streak. We’re a country song.

Frank Curzio: I know.

Daniel Creech: One in a row, now we’re on to two.

Frank Curzio: I haven’t seen anyone complain. No emails. What’s your email?

Daniel Creech: Yeah, they probably didn’t listen to yesterday’s, daniel@curzioresearch.com. They’re probably delayed, Frank.

Frank Curzio: They might be delayed.

Daniel Creech: They’re coming up to a long weekend too. I didn’t even realize that. Do you know the markets are closed Monday?

Frank Curzio: I only know because my kids told me a million times because they have off, so.

Daniel Creech: Nice.

Frank Curzio: And sometimes you’re like, “Yeah, yeah.” But then, you realize, oh, my God, my kid’s going to be home every second of the day. Which, is cool.

Daniel Creech: Yeah, I get the memo, which we’re not closed here. We’ll be here working.

Frank Curzio: Which is awesome. That might sound bad that I just said that, but it’s awesome. But it’s just with everything going on with my house, and hectic, and nonsense, and stuff, so gives a few more days of packing to try to get out of here in a couple weeks in my new house.

But let’s go over today. The market’s coming down. We’re doing this after the market opened, and it’s coming down because we just saw really another bad inflation number, right? Which is the Producer Price Index Wholesales. This is interesting, Daniel.

Frank Curzio: Okay? Because I want you to hear me out, because I want to go over this timeline, and this timeline isn’t even a year. Some people have timelines of 20, whatever. This is, I’m talking about since February 2nd. February 2nd, last Fed meeting Powell purposely use the word disinflation. Remember how many times?

Daniel Creech: Eleven?

Frank Curzio: I think it was 11 times to explain how inflation’s coming down. This is-

Daniel Creech: Sorry, you’re talking about literally a couple weeks ago, this month, February?

Frank Curzio: Yeah, this month, February.

Daniel Creech: Okay.

Frank Curzio: February 2nd, right? So, this is, we’re at February 16th.

Daniel Creech: Yeah. Gotcha.

Frank Curzio: All right. So, again, disinflation on purpose, made sure he purposely used that word, even though it just means… It’s not deflation or anything. Inflation is coming down, which we all knew inflation is coming down.

Frank Curzio: It was coming down pretty quick, and all of a sudden, we’re getting this news out. But then, on February 7th, he had that event in Washington, which you know kind of ripped them for because you thought it was ended up joking around a lot.

Daniel Creech: Oh yeah, it was lack of days. It was terrible.

Frank Curzio: Yeah, it was broadcasted live on every single financial news channel, and he used the word disinflation again. Again, saying inflation’s coming down. His tone, his language, speaking language, and his body language resulted in this bullish sentiment.

Frank Curzio: And people were thinking, hey, it looks like inflation’s going to come down. We’re not going to see a recession. The Fed’s going to stop raising rates pretty soon, and it’s likely the Fed’s going to cut later this year. That was the sentiment.

Frank Curzio: Remember, we’re talking about February 2nd and February 7th. It’s February 16th right now, okay? So, a little more than a week later, we just saw the CPI numbers come out hotter than expected. No matter how you break it down, it’s the core which, right?

Frank Curzio: Which, excludes food, energy, which I get. But now, they have the supercore, which excludes food, energy, and services, the supercore. So, I’m waiting for them, Daniel, to do the super-duper-duper core CPI, which will include every single thing we spend money on.

Frank Curzio: They’ll say, “Oh, it’s not being raised based on if you eliminate every single thing in the Index.” Because the supercore is funny. I’ll be honest with you, that’s new to me. But now, it’s supercore. Then, we saw what? Retail sales come out a couple days ago, right? And come out red, red, red-hot.

Frank Curzio: I mean, that was red-hot where we saw prices surge in almost everything. Food services and drinking places were 7.2% rose. Motor vehicles parts was 5.9%. Remember all the used cars and stuff coming in? No longer.

Frank Curzio: Furniture rose 4.4%. Electronics and appliance went up 3.5%. I’m not cherry-picking here. Almost every single thing in that Index went up, right? Online retail says up. And up faster, right? Because you could argue, “Well, it’s still coming down.” But they is going to come down a lot faster.

You have US storage prices still climbing up 10% from last year. Rentals have bottomed. Last month they started to tick higher again. And then, what do we have today? And this is in the next, that’s widely used.

Frank Curzio: Because this is on a wholesale level, and if you’re seeing prices come down a lot quicker, then it should filter out to other suppliers, which is why Walmart’s telling their suppliers enough if you want to sell your stuff in our stores.

Frank Curzio: Which, whatever it is, a hundred thousand retailers, you’re going to sell stuff in our stores, you better stop raising prices because we’re not going to use you. So, they actually said to their suppliers.

Frank Curzio: So, the CPI is what I looked at, right, from the wholesale level, and this was much, much, much hotter than expected. Almost double, right? They were expecting a 0.4% increase. We got a 0.7% increase, which is why stocks are selling off today as we’re taping this.

Frank Curzio: Again, you could say wholesale prices over the past 12 months, Daniel, that they’re slowing still. You could be like, “Oh, they’re still slow.” They’re still up 6% year over year. That’s three times higher than the Fed target.

Frank Curzio: All right? So, I’m not sure if you guys are paying attention at home. I am. I don’t know if you saw the mortgage rates and how much they’ve gone up incredibly in advance.

Daniel Creech: They went above six again, right?

Frank Curzio: Yeah. I think it’s 6.5. Not only did they go up, they were below five and they’re at six point… That’s a major, major move, right? A major move. The 10-year yield is rising sharply. This six month T-Bill surge of 5%.

Frank Curzio: The last time we saw that happen, Daniel, listen, May 2007 and October 2000. Think about those time periods. Just ahead of two 30% plus declines in the market. And by the way, the Fed was lowering rates back then. Not raising while shrinking its balance sheet, which is QT, which they’re doing right now at the same time.

Frank Curzio: The two years up 60 basis points. Sometimes, people like basis points and don’t know what that means. Again, I like to put things in perspective to let everyone know what’s going on here. This is in the last two weeks. All right? That’s how much. That’s a significant, that’s a monster move.

Frank Curzio: Now, one point when you see a divergence like that between a two-year surging by that amount, right? And then, we have equities, and we’re looking at equities, right? When you see other divergences like this, right? Again, between two year and how much that has moved, you usually see, historically, we’ve seen the NASDAQ pull back between five and 10% in the past.

Frank Curzio: Yet, stocks are going up. And you might be asking why I’m using NASDAQ, because the most risky stocks usually get smashed when rates start to surge and they’re surging again. So, the bond market is telling you that the Fed’s not even close to being done. It’s telling you that don’t even think about it.

Frank Curzio: It’s basically a zero chance, unless we get this massive recession and huge just sell off and everything, but there’s zero chance that they’re going to lower at the end of the year. So, it takes away those bullish claims. And even yesterday alone, the Index in the most heavily shorted stocks was up 4% on the day.

Frank Curzio: So, what’s going on right now, we usually see the exact opposite. We usually see risky stocks sell off incredibly when we see interest rates go higher. But when you’re looking at that inflation data, and remember, this comes alongside where we just had a terrible earning season.

Frank Curzio: We’re going to be declining 2.2% around year-over-year, and then next year, it’s come down so much where we’re going to see close to a 5% decline in earnings. I think that’s going to be more like 20%. There’s a lot of stuff out there that’s a major disconnect that should be worrying you, and the numbers are starting to confirm it.

Frank Curzio: So, for me, when I look at this and people are like, “Well, the trends is your friend that’s high.” You’re right, it is. It is higher. You can point to technicals, but eventually, this is going to come… I mean, we’re going to come down pretty hard.

Daniel Creech: Come home to roost.

Frank Curzio: Come home to roost. But yeah, this is going to come… I mean, we’re looking at a very, very hard landing now because we’re seeing the data move in the wrong direction. The bond market’s telling the Fed that, “Hey, you know what? You’re not even done.”

Frank Curzio: But the fact that Powell, two weeks ago, less than two weeks ago, and even a week ago was just smiling and disinflation coming down and three straight indicators a week later, it wasn’t just these small increases. This is across the board.

Frank Curzio: You’re seeing inflation, I mean, it’s coming down very, very slow. Much slower than they thought it was coming down, especially in the past months. And now, you’re seeing it where used car price starting to go up, you’re seeing rentals start to tick up again. We’re starting to see upticks on a lot of this stuff, and that’s not good if you think the Fed is done raising rates.

Daniel Creech: No, and I continue to… Shocked or surprised isn’t the correct word here. You reference Powell’s latest speeches, the Fed meeting, and then the interview. In his Q&A on February 2nd, he literally said, if I’m not mistaken that they’re not raising or cutting rates this year.

Daniel Creech: He doesn’t see that. Nobody at the Fed sees that. And yet, if you turn on financial media, which we’re a part of, you hear a lot on CNBC and everybody else saying, “Oh, yeah, but the market still believes this.”

Daniel Creech: And to your point, if you just try to step back for a moment and think through, and again, here’s the answer of how to handle this, you just really know what you own, and own quality, and protect yourself. That’s too easy of an answer.

Daniel Creech: When you know what you own and you look at this big picture to your point, hey, prices don’t have to follow what they did historically. But you do want to take that as a data point to think, hey, what’s the risk-reward?

Daniel Creech: And we were joking about earlier on CNBC and Santelli and them guys joking this morning about how everything’s efficient and hey, whatever the price is, that’s the accurate price. I couldn’t disagree with that… There’s no way I could disagree with that more.

Daniel Creech: Yet, I don’t know what the market is listening to Powell and saying… I mean, they must fear either China closing down, I don’t know. And I admit, I’m sorry, I don’t know what would cause a sudden drop of the hat, snap of the fingers, terrible recession, or outside of some huge major event like war or some terrible event, I just don’t see how demand falls off a cliff overnight.

Daniel Creech: And I think that that’s what basically is needed in order to get these rate cuts anytime soon. You can still be long and participate everything. Again, you don’t have to have a crystal market in knowing where it’s going, just know the odds aren’t in your favor of the next move to be 25% higher than lower, and that’s okay.

Frank Curzio: I think this is a sentiment out there, and we’re long in all portfolios, right? We’ve been calling and saying, “Listen, there’s a good shot this market come down a lot.” But we’ve been very selective in the stocks we pick and doing very, very well as the market goes higher, right?

Frank Curzio: While protecting ourselves and almost beating the major indices. Which is something that, again, I highlight my mistakes all the time. Something I’m very proud of, because I know that my subscribers are doing well, right?

Frank Curzio: Because we’re able to protect ourselves and fine, you might be losing money temporarily because you bought long-dated puts, which are out of the money right now, may be worthless right now, but they’re long-dated. But you’re protecting yourself while still participating, and that’s what you need to do even more now than ever.

Frank Curzio: But when I see a market like this and why it’s different is from my experience doing this, Daniel, 30 years, you brought up a good point. It’s the biggest market collapses come on kind of black swan events. The credit crisis, nobody knew the full extent and they thought they had a control.

Frank Curzio: They didn’t know AIG was insuring everybody, and AIG was going to go under, and then, all investment banks were done and everyone was over-leverage, right? We didn’t know to the extent until well into 2008, right?

Frank Curzio: Even though the foundation started cracking in 2007. You have COVID, right? Nobody models for 90% revenue declines where you have total lockdowns and shutdowns, and the government just-

Daniel Creech: I was going to say, you don’t factor in authoritarian government controlling. Yeah, that-

Frank Curzio: Yeah, that they spend and hand checks and hand money to everyone, even the people that don’t need it. When you got guys like Harvard and major schools with massive multi-billion dollar endowments applying for loans and stuff and free money from the government, that’s just, listen, they’re doing it because they’re giving away money for free, and they’re going to line up for it.

Frank Curzio: Everybody is. Even the rich going to line up probably more than the poor when that happens. This is different. I feel like it’s a 2000 to 2002 type market where slowly it’s just this drain, and you have these rains that are constantly going to be holding you back. Every time you get forward, it’s going to pull you back, pull you back.

Frank Curzio: It’s going to continue to pull you back where it’s almost impossible to get traction on this. And you see the market trying to get traction. You see a lot of the riskiest assets go higher. But now, you could say, “Well, I think we’re going to control inflation. I think we’re going to be perfectly fine.”

Frank Curzio: The Fed’s fighting a battle can’t win. I think people need to realize that. There’s absolutely no way, there’s no way that we’re not going to go in recession, and that you’re going to control inflation. Okay?

Frank Curzio: You’re either going to crash the market in a recession, it’s the only way to deal with this type of inflation. We’ve seen that in the eighties in a playbook. And we know that they’re going to be serious and adamant about not reversing costs and reversing policy from tightening to easing anytime soon, because there was the biggest mistake arguably in the history of the Fed, which is well documented.

Frank Curzio: Recessions aren’t documented. I’ll ask you, when’s the last five recessions? Most people might be able to name two of them, but they’re not really too sure. I mean, it’s not like, “Who’s the Fed governor, or the Fed chair?” You’re not going to be able to name them. It’s not a big deal. Recessions happen. They happen every six years on average usually.

Frank Curzio: But that is well-documented about the mistakes that were made. And I know that Powell, his history, his legacy, he’s not going to do that. So, if you think that they’re going to lower rates at the end of this year, I mean, I thought I was crazy even before these numbers came out. But these numbers, this isn’t like, “Oh, it’s a blip.” Right?

Frank Curzio: Oh, well, this reading because of this, because of holiday sales, or because of the weather. You’re seeing all these numbers, okay? And when you start saying things like weather and things, be very, very careful. Just be very careful because right now, you’re seeing spending, you’re seeing it.

Frank Curzio: If you are listening to this podcast, forget about what you listen on TV. Forget about what those economists who are filthy rich listen to, because all they do is lock themselves in rooms and look at charts. They don’t look at real-world stuff. Are you paying more than you’ve ever paid right now for most of your bills? And the answer is yes.

Frank Curzio: You’re not seeing inflation come down. Nobody’s seeing inflation come down. If you go into a restaurant, you’re not like, “Holy shit, that bill was… I only paid 70 bucks, and that bill was $90 last month.” There’s not one person that’s saying that.

Daniel Creech: That was a great deal.

Frank Curzio: They’re not one person. You get the fluctuation in energy prices here and there. They’re up year-over-year, but maybe down whatever period again over the year. You could say they’re down from their highs, but they’re still up incredibly over the last year.

Frank Curzio: And again, there’s manipulation there, which is done by every president into an election cycle. I’m just surprised that they’re still doing it, which is drain the strategic reserves. And they’re still doing it, right? They’re still doing it because Russia now.

Frank Curzio: And now you have this geopolitical risk, which we’re not going to talk about when it comes to Russia, when it comes to China. Threats being thrown back and forth right now. I mean, it’s pretty hot. So, when I see a market like this, it’s not like a catalyst. Wow, stock’s going to…

Frank Curzio: I just think it’s going to be a long haul of downward pressure, constant downward pressure. Listen, the bond market’s telling you that. It’s going to be ugly, that’s why rates are going back up. The biggest companies in the world are telling you that as well.

Frank Curzio: They’re telling you the same exact thing. They’re not balls to the wall spending. They’re cutting R&D, they’re cutting the advertising budget, they’re cutting all the spending across the board. They’re laying off employees. That’s how they’re being estimates. They’re not being estimates because we’re seeing massive demand. Holy cow.

Frank Curzio: Some companies are, some companies, but the majority including the large tech companies are laying off employees right now. So, when I see a market like this, I see through maybe 12, 18, 24 months of just a painful market where you’re not going to see the major catalyst in a 10% decline in a day.

Frank Curzio: But what you’re seeing right now, the bond market is telling you that the Fed’s not even close. They’re not even close to stopping that tightening policy. Right? They’re going to continue to tighten and I wouldn’t be surprised if we see more data come out, especially over the next few weeks, showing that inflation’s actually starting to tick higher.

Frank Curzio: I said this a month and a half ago, I was surprised because Muhamed El-Erian, who I like a lot, said the same thing. The Fed should have raised by 50 basis points instead of 25 basis points. Just get it done. I think we’re going to see another 50 basis point hike.

Frank Curzio: And that’s not even being priced into the market right now, but based on these numbers, it changes the entire outlook where the terminal rate was 4.7, that’s the highest it was going to be. It was 4.7, I think it was 4.8. Because we’re at 4.75 and I think it was… I mean, what is it? Between 4.5, 4.75, right? So it was 4.8 I think.

Frank Curzio: So, they thought a lot that we were done seeing rate hikes. Now, it’s 5.3. I mean, we’re talking about in a few weeks. That’s how high it’s gone up. So, that’s going to be the terminal rate. The rate that we’re going to peak at that’ll likely stay there probably for nine to 12 months and staying at those levels. Which is insane when you think about it, considering how low we were a year ago.

Frank Curzio: When I see these conditions just protect yourself. We can go higher. Maybe this is a market where the Nasdaq, the Nasdaq doubled in 1999 when everyone thought it was going to crash completely the whole entire year. It doubled. It went up and then, you saw the 70% collapse over the next two and a half years. Okay?

Frank Curzio: I’m not saying that stock’s going to collapse 70%. Okay? You got better balance sheets, you have a Fed that’s on your side. If we’re seeing that come down, they’re going to probably inject capital into whatever. But a 20, 30% retesting the lows, I know a lot of people have that sentiment and believe that’s going to happen.

Frank Curzio: And they use that against you saying, “Well, most people believe that.” It’s not true. The sentiment indicators, the bull/bear indicators, a lot of these indicators are showing that the lowest levels of people thinking that just the optimism is more higher than it’s been since two years when I track this stuff.

Frank Curzio: So, just don’t think, well, everybody believes that, so it’s not going to happen. Just because the data’s showing that’s going to happen doesn’t mean it’s not going to happen. It could just happen longer than expected, but just protect yourself.

Frank Curzio: Because what’s going on right now as someone who studied the market for 30 years, it’s one of the most dangerous markets that I’ve seen. And now, the bond market is just flashing the red signals that rates are likely to go high, and the Fed’s going to continue on its tightening policy a lot longer than people are expecting.

Daniel Creech: And some of this to me just proves how emotional money is, and a lot of people disagree with that. I know this from conversations in the insurance world and all that kind of stuff. And again, I would disagree with that.

Daniel Creech: You notice Powell talks an awful lot about consumer sentiment and feeling, even their feelings towards inflation. If they think inflation’s going to continue going higher, it will go higher. We need to get them out of that mindset and things. That’s kind of what I’ll be looking for to read between the lines coming up from him.

Daniel Creech: And if you think ah, Frank and Daniel are crazy. You’re pointing out all these negatives, but prices continue to go higher. Overall, things are a lot better. People feel good about things. Well, one reason to that is that prices have been moving higher, and when prices are moving higher, you naturally get more bullish. That’s just the way it is.

Daniel Creech: Vice versa, when prices are falling, nobody comes to your door and nobody buys newsletters going, “Boy, this has got to be a great time.” You get more bearish with that. The other thing is remember, there’s still a lot of money in the economy sloshing around.

Daniel Creech: We’ve talked about this fun stat that COVID relief money and stimulus money peaked around a little over 2 trillion. Some banks have said that that would last in consumers’ pockets until the end of this year, maybe October-ish. Some have moved that up to say the summertime now.

Daniel Creech: The point is, regardless of when that is drained, it will be drained at some point, but that helps influence data from now until then. Think about that.

Daniel Creech: If you still have excess cash and excess savings, which they do, people do, everybody does to a certain extent that that’s going to continue to just kind of murky the waters of all this silliness. Speaking of emotions, can we transform to the 99-year-old emotional, angry, China-loving person events crypto?

Frank Curzio: You’re seeing Bitcoin along the risky assets. Bitcoin is really surging. I mean, it’s real… Yeah, everyone’s like, “It’s going…” It’s so funny. The asset prices, was it closing on 25,000, 24 five now? It was 15,000 around the low and stuff, but it’s up incredibly since then.

Frank Curzio: And they had Munger on, and let me see if I can quote him here. What’d he say? “An absolute horror. Ashamed of my country. Can’t believe government allowed this to exist.” Well, they didn’t really have a choice, right? I mean, they could have tried to shut it down, they just didn’t-

Daniel Creech: Too bad we already gave this away, but until this point it could be a fun game. You don’t know what he’s talking about there. It could be anything. It could be alcohol, it could be gambling, could be crypto.

Frank Curzio: But that’s what he said, gambling, right? He said it’s gambling. It’s stupid. And yet, what did Becky Quick say about gambling?

Daniel Creech: Well, she asked him… This was with the Daily… What’s the Daily, the company he’s part of? Daily, the reason he was talking and taking questions. Daily, the paper I think.

Frank Curzio: I don’t know.

Daniel Creech: Okay, well, anyway-

Frank Curzio: I didn’t see the interview. I just saw the quotes on it.

Daniel Creech: Oh, okay. Gotcha.

Frank Curzio: I’m watching because every time you see-

Daniel Creech: The Daily is something I can deal with.

Frank Curzio: And they’re going to ask him about crypto because that’s going to give them the best quotes.

Daniel Creech: Exactly.

Frank Curzio: And give them the best headlines, right? So, that’s what seems to-

Daniel Creech: Yes, and he mentioned, “Oh, it’s just like gambling or it’s a bad way to gamble.” And then, Becky was mentioning that she was asking about other gambling and he doesn’t have near as a problem as that.

Daniel Creech: It’s just this, I’ve said this in the past, this just proves, and I really respect Charlie Munger, he is one of the smartest investors. Him and Warren Buffett are the tag team, of course, of capitalism.

Daniel Creech: This absolutely proves that when you’re rich, people just assume you’re smart across all segments in every aspect of the economy.

Frank Curzio: Daily Journal, by the way.

Daniel Creech: Daily Journal. Charlie Munger is fantastic. However, he is bought and paid for like every other corporate wimp out there in brand that has to bend the need to China and just is all about money. And that’s okay, I’m not saying that he’s a bad person for that.

Daniel Creech: I’m just simply saying that, listen, we’re all hypocrites. Doc Holliday said it best, “My hypocrisy only goes so far,” when he saved Wyatt Earp’s ass in Tombstone.

Daniel Creech: The point is that he’s got… And I don’t mind this, but the way he praises one of the greatest capitalist teams ever to generate massive wealth, billions and billions of dollars, build Berkshire Hathaway, turns around and praises the most terrible communist, cutthroat thumb, foot on your head type government.

Daniel Creech: Tells them to ban everything. Look at how they control their citizens. He’s in favor of this. Now, of course, you can say that from behind the wall of capitalism because guess what? If your name is Jack Ma and you do that crap over in China, what do you do?

Frank Curzio: Disappear.

Daniel Creech: You take a vacation for a long time. Or, if you’re in Saudi Arabia and you’re an uncle of the new prince over there that likes to throw crap around, guess what? You lose a bunch of weight and you stay at the Ritz-Carlton. Now, there’s allegations you might get stripped and hung upside down and beat. Who knows?

Frank Curzio: These Americans, yeah.

Daniel Creech: My point is that this is the biggest hypocrisy, and it’s just hilarious. You just ought to ignore this guy. You ought to absolutely do the exact opposite of what he’s talking about here with crypto. If Charlie Munger every time he comes out, you ought to buy a little bit more allocation to Bitcoin and Ethereum.

Frank Curzio: And we’ll get to crypto in a second. You bring up good points. Because I think people don’t, in America really don’t understand. Most people in America don’t understand. I’m sure most people haven’t traveled outside the country and realize how great this country is.

Frank Curzio: But think about your government and you try to go right now, you have all your money in your bank, whatever, in your brokerage firms, and say if the government shuts it off and says, “You have no more access to the money.” And you have to pay your bills and you can’t, what are you going to do? Who are you going to call? Are you going to call lawyer? You can’t fight the government. The government could be like F- you.

Daniel Creech: Call Charlie.

Frank Curzio: I mean, just think about that. In China, if you speak out against the government, I mean, you see it, right? I mean, this is something that you fear for your life, so you have to be very careful. I don’t care how rich you are, you have to play by the rules. We’re not used to that here.

Frank Curzio: And of course, we have our politicians shouting at the top, both of them yelling at the tech companies for different reasons of why they’re the assholes of the world. Why oil companies are for generating so many profits and hey, we should be taxing them. Why? So, we get to spend more of your money. Our politicians, they’re going to make more money.

Frank Curzio: Not so they can give it back to people who are less fortunate, which is distribution of wealth, which has never worked in the history of any government, any country in the history of the world. But there’s a reason why they do this. They’re calling them out. Why? Because the results are more lobbying.

Frank Curzio: The results are more campaign funding from these companies which fund, there’s a reason why. Think about someone shouting at you, telling you that, “We’re going to regulate the crap out of your company. What are you going to do?” If your government’s telling you that, you’re going to donate a lot of money. It’s a reason why they’re the largest donors, right? It’s pretty obvious.

Frank Curzio: So, this whole game that’s being played out there, actually, it filters into Bitcoin because you could say, “Well, Bitcoin’s going up because all risky assets are going up.” I think it’s a lot more than that. And yes, it could contribute to a little bit of this move.

Frank Curzio: But what we saw last year with the bankruptcies and fraud, which shouldn’t be limited to say FTX is crypto. That’s actual fraud. Okay? When you have a firm that has assets, other people’s assets on a platform that you’re taking and putting them into a hedge fund and nobody knows about, that’s fraud. That’s to do with an asshole.

Daniel Creech: It stealing, yeah.

Frank Curzio: You could say it’s in the crypto industry, but it’s saying that the whole utility industry at the Enron is horrible.

Daniel Creech: Bernie Madoff did not mean that Wall Street is un-investible.

Frank Curzio: Yeah, so a lot of that happened. But if you’re looking at Bitcoin and the case to own Bitcoin, just look at what’s going on in Washington. Okay? It’s incredible. Look at them trying to fight this thing. Look at the news, right? Over the past month is insane when you really look at the news and what’s going on.

Frank Curzio: I mean, just now, you’re trying to go after Stable. Out of everything, out of every single thing you’re going after Stablecoins. Stablecoins, which are money market accounts. You’re going after that, right? Because if you remove that, you’re going to hurt crypto.

Frank Curzio: Now you’re seeing Binance announce that, “Hey, you know what? We’re going to be…” They have Binance US, but the other Binance, we’re not accepting money out from US investors anymore. Kraken just got fined. You’re seeing all these, yet, Bitcoin continues to go higher.

Frank Curzio: And when you look at what’s happening, and you look at even the whole debt ceiling. So, the debt ceiling is just a political, it’s all political nonsense. Why haven’t we heard in a while? Because the Democrats controlled every single branch, right? So, it doesn’t matter they’re passing everything. It doesn’t matter what you say.

Daniel Creech: Well, and it doesn’t, the real nervousness for another month or two, I mean, they don’t have to do it tomorrow, that’s why they’re still kicking it.

Frank Curzio: No, it’s going to happen I believe in the summer. However, however, and I don’t know if people know this, but we did actually reach those limits. Right? So, we reached those limits and this was in January, right?

Frank Curzio: And then Yellen came out and said, “Hey, you know what? We’ve actually turned out that debt, we hit these limits, the debt ceiling, we reached that covered debt limit. And then, we got to take extraordinary measures to allow the government to continue borrowing to meet its obligations and stuff.”

Frank Curzio: So, now, we have debt ceiling coming up, and we go back to the Trump era and there’s the back and forth. But we even go back to when the Democrats with the Obama era, and this is where it started. Because Obama actually conceded a little bit and said, “Okay, we’re not going to spend as much on certain things.”

Frank Curzio: And whether it was reform of social security, Medicare, Medicaid, and he never got forgiven for that. Right? So, you’re going to see all this nonsense going on right now for the Democrats to be like, “All right, we have to pass this, we have to pass this, we have to pass this.” Right? It doesn’t matter what side you’re on.

Frank Curzio: If you think they should pass, if you think that they’re going to concede. It’s all about them getting more money on both sides and how are they going to benefit themselves in order to get all the votes to pass this, right?

Frank Curzio: And they’re going to threaten the end of the United States, and no one’s going to get paid, and it’s going to be default, and the US is going to defaults massive deal. It’s going to go on for a couple months and that’s going to be a headwind. That’s been a headwind almost all the time when we see this happen during a debt ceiling.

Frank Curzio: But the bottom line is when you’re looking at the debt ceiling, this is a reason why to own Bitcoin, because Congress has voted to increase the debt limit, and this is over the past 25 years. We’re supposed to worry about this and say, “Okay, we want to lower our debt.” The past 25 years, they increased it more than a dozen times.

Frank Curzio: So, you know every single government, every central bank, they’re going to spend as much money as they can because there’s no repercussions. There’s no checks and balances. They don’t care. It’s just spend, spend, who cares? It’s more money for them in their pocket. So, a lot of people disagree. You’re supposed to be representing your constituents. They don’t.

Frank Curzio: So, it’s keep raising, raising, raising. Just raise no matter what. Keep spending, spending, spending no matter what. That’s why it’s always good to have a government that’s split no matter what side are you on. Now, it’s split, it’s good that they’re having these talks.

Frank Curzio: But to see all the bullshit around the debt limit and people being worried now when this has been going on for decades, and they raised the debt limit more than a dozen times past 25 years. What are you going to think is going to happen next 25 years? Constant spending, spending, spending, which is why you’re seeing Bitcoin become more of a religion to people.

Frank Curzio: And the fact that these people are still in Bitcoin and people haven’t sold it. If you didn’t sell it last year, which is the worst environment I’ve seen for a sector maybe in my life for one particular sector. A reason to totally get out of it and be like, “Holy cow, no.” And now, you’re seeing this thing rise and come back.

Frank Curzio: If you didn’t sell it then, please, tell me, frank@curizoresearch.com. Email me. What is going to make you sell Bitcoin going forward? If you didn’t sell it then, what could possibly happen? Yes, you’re seeing limits in the US. I think the more the US tries to stop this or put curbs around it, the stronger the case gets for this to exist where this is how people move money in and out of countries. It’s going to exist.

Frank Curzio: It’s how Russia’s using it when you closed the SWIFT system, this is for them. And it’s here, it’s not going away. But just to see it rise in an environment like this and go through everything that they went through is really, really incredible. It really is when I see it.

Frank Curzio: So, the Bitcoin move to me, it is surprising that it hasn’t stayed lower, that it’s coming back, but I just don’t know who will be selling this and what black swan event, or what event’s going to make you sell Bitcoin if you haven’t sold it ready after all the negative news, and bankruptcies, and all the shit you went through last year and yeah, I just don’t see it. I don’t know.

Daniel Creech: I agree. That’s a good point. I look for some emails. I would like to know about that as well. Maybe they’re just buy and forget about it. If it goes to a certain price level, whatever. That will be interesting. Quickly, on the front page of the Wall Street Journal today, “The SEC moves to tighten rules for advisors handling crypto.”

Daniel Creech: The long and short of this article is that crypto firms are going to have to get more licenses, jump through more hoops, basically be treated more like banks. Kraken, the big takeaway there was listen, the more you see the revolving door or the game plan of typical Wall Street.

Daniel Creech: And what I mean by that is that when you’re a bank, you can pay fines, admit to no wrongdoing, and continue business as normal. You rinse and repeat. Now, Kraken, they had to stop their yielding earning programs where they give interest on stuff. However, they paid a fine, they’re not being shut down.

Daniel Creech: There is rumors out there this morning and articles about Binance is preparing, hey, we’re going to pay fines and then we’re going to move on. Coinbase, they’re still doing staking and things like that. They’re trying to talk with the SEC. If you think that they’re going to shut down Coinbase and delist it and make it go to zero, I just agree to disagree.

Daniel Creech: I think that there will be huge fines paid. There’ll be a lot of jargoning back and forth. To keep this as extremely simple, and I know I’m onto something right here because it pisses everybody off. That’s so damn smart, Frank. The idea that your average person isn’t going to find value, we can debate about what number that is, what value that is.

Daniel Creech: You don’t think that the average person to your great point about what’s going on in politics now and has been forever, and we’ll continue to do so for the future as long as we’re here. If you don’t think that a finite fixed amount of something like Bitcoin only having 21 million, if you don’t think that that resonates with the individual, then tell me how something goes from zero to $24,000 and 10 years, and then it’s just a scam, and for drug dealers, and all this.

Daniel Creech: Real quick, Charlie Munger was answering a question. Becky Quick talked about this, and somebody set him up and said, “Listen, when you gave a speech back at this whatever college ceremony, you mentioned you should never talk about something unless you have a better counter-argument.” So, if you’re going to say, “Hey, I don’t like X, Y, Z, be prepared to say that.”

Frank Curzio: Of course.

Daniel Creech: And he asked Charlie, “Hey, give me your other argument about Bitcoin or crypto.” And he simply said, and I’m paraphrasing here, but he simply said, “Listen, there isn’t another good argument. I think they’re all idiots.” That is by definition meaning, hey, I’m just old and rich, and I just have a stance, and I’m right and you’re wrong.

Daniel Creech: That’s okay, but don’t take his advice on that. That just proves that you have no leg to stand on. And the idea that everybody, not everybody, but a lot of government and higher up officials tell you that Bitcoin is only for drug dealers. It’s not about freedom. It’s not about limit. It’s not about value.

Daniel Creech: It’s not about personal responsibility. They’re telling you exactly what they’re afraid of. And the whole notion, one last thing here. The greatest thing about crypto is freedom and responsibility. The worst thing about Blockchain will be central bank digital currencies, CBDC. That does not stand for central bank Daniel Creech.

Daniel Creech: Central bank digital currencies will be the absolute… That will lead to one of the biggest uprising and either civil wars or huge wars over the next decade in my opinion. That’s going to be terrible because for the one important reason.

Daniel Creech: When you’re on a central bank digital currency, you can say something that the government doesn’t like, you can dress a certain way, you can call somebody a certain name and they will shut you off electronically and you will not be able to function.

Daniel Creech: That’s a sad situation. So, between now and then, make a shit ton of money and be free, and keep the wolf away from the door as long as possible.

Frank Curzio: That is crazy. You can’t shut down really banks, but I tell you what they’re doing is they’re trying to. And thank you, a good friend of mine, Chang, sent me this. I’m just going to point this out really quick.

Frank Curzio: So, December 7th, Signature, which is one of the most active banks serving crypto clients, announced it intends to half deposits subscribed to crypto clients, give the customers their money back, then shut down their accounts drawing its crypto deposits down from 23 billion to 10 billion. And it’s going to exit Stablecoin.

Frank Curzio: And this from government stuff, right? So, January 3rd, the Fed, FDIC, and the OCC released a joint statement on the risk to banks engaging with crypto. Telling banks, “Listen, if you hold crypto watch out.” Okay? Because strongly discouraging you from doing so based on safety and sound.

Frank Curzio: So, telling the banks, right, not to. You don’t know for the crypto. Adjaranet Metropolitan Commercial Bank with a few banks that serve crypto clients announces a total shutdown of crypto asset related verticals. So, you’re seeing it from the government, right? On the ninth, Silvergate stock crashes 1-6-11-55. You’re seeing this.

Frank Curzio: Again, everyone’s saying it’s fraud, fraud. You have short sellers. I haven’t seen any fraud yet. Just people removing assets from the platform because they’re worried about the FTX situation, and maybe my assets on that platform, maybe if they shut down, I’m not going to get them back.

Frank Curzio: You’re looking at January 21st. Okay, and this is just recent. Finance announces due to this policy of Signature bank, they will only process user fiat transactions more than a hundred thousand. January 27th, Federal Reserve denies crypto bank Custodia’s application to become a member of the Federal Reserve system citing safety and sound risks.

Frank Curzio: Again, Custodia is a very big platform for crypto and banks. Kansas City branch denied Custodia’s application for a massive account, for the master account for cryptos. That was on the 27th but I can keep going here. You’ve just seen the banks put pressure on.

Frank Curzio: I’m seeing it with one company that I’m involved with in crypto asking me and saying, “Frank, we’re starting a US operations. We thought it would be okay to start US operations.” And they’re basically a software company that has a token, but which trades and they do it overseas and stuff like that. But now, they’re expanding and they’re opening US now.

Frank Curzio: And the fact that they’re opening it up in the US, they want to have US operation where they could pay people fiat. So, it’s kind of a subsidiary. They went to Bank of America, which is the bank that I use. I think it’s the most shittiest bank ever. I bet you’ve had experiences like that with other banks as well.

Frank Curzio: It’s just amazing that the six month T-Bills and things like that are 5% and they’re not going to pay you shit in your account until you call them. That’s a bank for you.

Frank Curzio: When they’re trying to open an account, they were able to open it, deposit it with hundreds of thousands of dollars, and they said, “No, no, no, no, no. We just did some research on you and found out the background that you are crypto related, crypto company.” Even though they’re a huge company generating revenue, doing fine.

Frank Curzio: And they asked me, they’re like, “Frank, do you know any banks that we could do this with?” And for me, we opened up a Coinbase and Coinbase put us through the ringer. We are a US based company. We’re not technically a crypto company, but we do have crypto assets.

Frank Curzio: One of our biggest assets is real estate in TCG world, which is one of our largest purchases the company’s ever made, $5 million. And they’re having trouble. So, I think this is extremely bullish for Bitcoin, but there is, especially over the past month and a half, two months, it’s not regulating this stuff and saying, “This is what we need to see.”

Frank Curzio: It’s like, “Hey, you better be careful because if you accept this shit, there’s a good likelihood that we’re going to come after you.” And now, Kraken just paid a big fee. You’re seeing all these big fees. You see tZERO pay a fee. All these guys are just like, “All right, SEC is cracking down. Let’s pay the fees and then adjust.”

Frank Curzio: But it’s funny how the SEC is going after crypto from the banking point of view right now, and let’s see how that turns out. It’s going to result in maybe less crypto, but it’s going to put the US at a significant disadvantage because crypto is the future. This is where they’re going.

Frank Curzio: This is the younger generation. This is the millennial generation, the Gen Z, this is where they’re going. Okay? This is what they’re doing. NFT volume is exploding. They talk about NFTs are all into crypto.

Frank Curzio: And the fact that you’re not regulating it and saying, “Hey, if you’re going to accept this, this is what you have to do.” You’re telling them, “Hey,” you’re not even giving them rules.

Frank Curzio: We’re just saying, “Hey, it’s probably a good idea that you stop what you’re doing right now, because it’s likely that we’re going to come after you.” So, a bank is going, “Okay, let’s get out it.” And you saw that clearly what Bank of America, which is a company that I deal with, which is amazing, I think that’s a bullish case.

Frank Curzio: It’s going to make an even more bullish case because when you’re looking at Bitcoin, it’s anti-government. They hate the government. And that’s going to continue. And now, the government’s realizing that, holy shit, this is bigger than we ever thought it would be, and it’s going to get bigger and bigger.

Frank Curzio: They thought it was going to dial down, but the fact just the last month and a half, Daniel, that they’re going after all this stuff now is sad. You just fucking regulate it. Regulate the F-ing business.

Daniel Creech: Nah, let’s not get crazy.

Frank Curzio: This is what we need. This is what I need to see. I like what you said about the ETFs. When SEC Chair came out and said, “Look, there’s clear guidelines of how we are going to accept an ETF. If you follow them, we have thousands of securities that trade. But if you’re not going to follow them, that’s fine.”

Frank Curzio: Or, at least you’re providing that framework. Provide the framework, man. You had years and years and years, you still know what you’re doing. Hester Peirce is one of the biggest names in the SEC. I interviewed her personally. She’s pro-crypto.

Frank Curzio: She came out against the SEC and said, “Listen, basically, these guys have no idea what the hell they’re doing. They don’t know anything about crypto, they don’t want to learn about it, but it is the future. Embrace it.”

Frank Curzio: But the fact that they’re going after the banks recently over the past two months is pretty crazy. So, let’s see how this turns out and ensure that Bitcoin continues to go higher, because you’re going to strengthen it. It’s like telling your daughter, right? She’s making a huge mistake by dating this guy.

Frank Curzio: And if you say that she’s going to date him forever and ever and ever and ever and ever until 10 years she realizes, wow, I should’ve listened, right? Anyway, maybe not the best example, but the more you say no to something, the more it’s going to get bigger and bigger and bigger, especially in Bitcoin.

Frank Curzio: It is huge. It’s a religion to these people. They haven’t sold it through one of the worst years ever. I don’t know. But to see where it is very interesting, and I think it’s still going to go a lot higher.

Daniel Creech: I agree. Yeah, I mean, I have nothing to add to that other than profanity and silliness. So, this is a family show, Frank, let’s wrap it up.

Frank Curzio: But Munger, you know what? I respect Munger. You’re 99, say what you want, do what you want and that’s cool. And he’s just against it. That’s fine. Okay?

Daniel Creech: Yeah, I don’t care about, yeah, it’s fine.

Frank Curzio: People agree with it, don’t agree with it. I know a lot of billionaire hedge funds that said the same thing. And when they learned about it, they quickly said, “Okay, you know what? I do get it. I didn’t get it at first, but now I get it.” So, it is interesting.

Frank Curzio: But sometimes I promise myself as I get older, I’ll never get that way where I refuse to learn something else or hear someone else’s opinion if it’s totally different than mine. That’s just the way I am.

Frank Curzio: So, I’m always going to be willing to change because I’ve seen people, especially men as they get older, they’re just set in their ways, they’ll never change. And I never want to be that person that never ever changes because the world is never going to change. It’s going to get… Innovation’s going to be constant.

Frank Curzio: Constant innovation’s going forward, and I want to be part of that even when I’m 60, 70, and 80. Now, I’m 50. But I understand why he’s saying that, I get it, but it doesn’t mean that I agree with it. But it is kind of funny and entertaining and love having him on because why? Because it provides great headlines.

Frank Curzio: So, Daniel, any last words before we go?

Daniel Creech: Nope, daniel@curzioresearch.com. I’ll beat you to it.

Frank Curzio: You’re jumping ahead of the gun. Come on, man, you’re killing me.

Daniel Creech: It’s like I know the cue.

Frank Curzio: Any questions and comments, frank@curzioresearch.com. And this Thursday podcast, we’re going to have one more of these, and then, again, a lot of this stuff’s going to be behind our paywall, Wall Street Unplugged Premium. It’s going to be awesome providing ideas, more research, more details.

Frank Curzio: As you can see, the last two podcasts for about 40 minutes long, we just try to keep them to 30. You’re going to see much more time allocated to ideas and things like that in Wall Street Unplugged Premium, which we are going to launch on the first.

Frank Curzio: And then, you can see Daniel do a portfolio update for Dollar Stock Club, which we’re taking every week, we’re going to have a trading idea that we talk about that’s in the news that we’re going to throw in that portfolio.

Frank Curzio: And every two weeks, Dan’s going to be doing, unfortunately, I think a video update of the portfolio. But no, in all seriousness, it’s really cool. So, you’re going to see him break down some of these things, what to do, and all these trades.

Frank Curzio: And it is a trading portfolio, something that we don’t have in our stable right now, so we’re really, really excited to have an actual trading portfolio of ideas that we are going to be providing.

Frank Curzio: So, questions, comments, feel free to email me at, frank@curzioresearch.com. Thank you so much, and I’ll see you guys next week. Take care.

Announcer: Wall Street Unplugged is produced by Curzio Research, one of the most respected financial media companies in the industry. The information presented on Wall Street Unplugged is the opinion of its host and guests. You should not base your investment decisions solely on this broadcast. Remember, it’s your money and your responsibility.

Frank Curzio
Frank Curzio, founder and CEO of Curzio Research, is one of America’s most respected stock experts. His research is regularly featured on media outlets like CNBC’s Kudlow Report, The Call, CNN Radio, ABC News, and Fox Business News. His Wall Street Unplugged podcast—ranked the No. 1 “most listened-to” financial podcast on iTunes—has been downloaded over 12 million times.

Editor’s note:

Later today, Dollar Stock Club members will receive a new pick from Frank…

A popular gaming platform on track to become a major winner in one of the tech industry’s biggest long-term trends: the metaverse.

Get full access to the latest pick—and the entire Dollar Stock Club portfolio—when you join WSU Premium.

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