The Breakdown

On this week’s edition of The Breakdown Weekly Recap, NLW argues the big story of the week was actually a set of smaller stories that preview the faultlines and economic debates likely to absorb us in the coming months. 

These include:

• The Federal Reserve signaling that fiscal stimulus needs to do more
• The beginning of the battles on fiscal stimulus
• The introduction of the “not safe to vote” narrative 
• The Big Tech vs. The World fight 
• The beginning of coronavirus lawsuits 
• Back to school
• Jobless claims getting worse
• Kodak and reshoring 

Today on the Brief:

• The DXY hits a 52-week low
• Consumers seeking alternatives to cash 
• Bank of England rebuilds settlement system to work with CBDCs

Our main conversation is with trader and analyst Tony Greer. In this conversation, he and NLW discuss:

• The Federal Reserve’s role in increasing inequality 
• How the Robinhood crowd differs from the 1999 bubble
• Why high-frequency traders might be the real villains when it comes to the retail bubble
• Why gold is surging even though the dollar remains fundamentally sound 
• How to navigate the disparity between markets and the real economy
• Why real estate is doing well even as the economy is floundering 

Find our guest online:

Website: tgmacro.com

Twitter: @TgMacro

Today on the Brief:

• More bad news from jobless claims and the GDP
• The big tech hearing was a whole bunch of nothing; watch TikTok instead
• Robinhood dives into Kodak (but so do illegal insider traders)

Our main conversation is with independent bond strategist George Goncalves.

We discuss:

• How the bond market watches Federal Reserve meetings
• What, if anything, was new about this week’s FOMC meeting
• What it means that the bond market and equities market tell different stories
• Why the bond market has been telling a long-term story of slowing growth
• Whether institutional investors are actually moving away from government debt and into gold 
• Why Judy Shelton should have a place on the Federal Reserve

Find our guest online:

Twitter: @bondstrategist

Today on the Brief:

• Big tech goes to Washington
• The debate on the next COVID-19 relief act heats up
• More on institutional investors’ move into gold 

“Imagine a world without counterparty risk.”

That was Chainlink co-founder Sergey Nazarov’s answer when asked to describe the true disruption of decentralized finance to a traditional finance audience. 

On this episode of The Breakdown, Sergey and NLW discuss:

• Brand-based contracts vs. math-based contracts
• The history of smart contracts
• What it means to build an “abstraction layer” for “universally connected smart contracts”
• Key moments in the history of smart contract infrastructure 
• Where smart contracts and DeFi are in terms of analogies to the early internet 
• Why Sergey believes traditional finance will inevitably shift to a math-based contract model 

Find our guest online:

Website: Chainlink

Twitter: @SergeyNazarov

It was a beautiful Monday. 

Bitcoin crashed through $10,000 and got all the way up to a new yearly high of about $11,000 before retracing slightly. 

As with any dramatic price action, people were quick to start giving their interpretations of why it happened. 

In this episode, NLW explains eight of those interpretations, including:

• Banks stacking due to changes in custody rules
• Money printer go brrr
• Stock to flow model
• Robinhood traders piling in
• DeFi gain recycling 
• Buyers exceeding sellers
• “Perfect storm”
• Dollar crash, negative real interest rates and the search for a new reserve currency

Ultimately, NLW argues that it is this last factor driving up not only bitcoin but gold and silver.

Special purpose acquisition companies have been around since the 1990s, but have seen a significant uptick in popularity in recent years. Companies like Virgin Galactic, Draft Kings and Nikola have changed SPAC’s reputation from a tool for second- and third-tier private equity shops to win fees to a legitimate alternative to initial public offerings. In 2020, SPACs have made up roughly 40% of the IPO market.

Recently, chatter around SPACs reached a fever pitch with the listing of Bill Ackman’s Pershing Square Tontine Holdings - the largest-ever SPAC. 

In this episode, NLW breaks down:

• What a SPAC is
• Standard SPAC terms 
• Why the traditional IPO process has generated growing discontent, especially from Silicon Valley
• The benefits of SPACs for companies and investors
• The downsides of SPACs for companies and investors 
• A number of reasons explaining why SPAC popularity is surging now
• How Robinhood retail traders are creating an important bridge buyer for SPACs
• Why Ackman’s Tontine Holdings SPAC could change how we think about SPACs in the future 
• Are SPACs a bubble?

Cited resources:

SPAC Man Begins - Alex Danco

SPACs as a Call Option on Hype - Bryne Hobart

SPACs: the most ludicrous bubble we’ll ever see… why not $IAC? - Yet Another Value Blog

Return of the SPAC - John Street Capital 

This week on Long Reads Sunday, our selection is “Whose Century?” by Adam Tooze in the London Review of Books. 

Nominally a review of four recent scholarly works on the conflict between the US and China, Tooze main argument is that the central problem with viewing this as a new Cold War is the idea that it is new. 

Instead, we need to understand that, contra Fukiyama’s famous essay, history didn’t end in 1989 - at least not for the Chinese. What’s more, the narrative of having “won” the Cold War fails to take into account our spectacular failures in Asia. 

Only by reframing our understanding can we make sense of the most important geopolitical conflict of the coming century. 

This week on the Breakdown Weekly Recap, NLW covers:

• A terrible week for US-China tensions, with dueling Consulate closures and an incredibly hawkish speech from US Secretary of State Mike Pompeo
• Worsening economic indicators, particularly around jobless claims which saw their first weekly rise in four months
• The likely size of the next US stimulus bill - $1T to $3T

Today on the Brief:

• Which industries are recovering the best
• China retaliates against U.S. after consulate shutdown 
• Dollar heads toward its worst month since 2018

Our main discussion features returning guest Tuomas Malinen, CEO of GnS Economics.

In this discussion, Tuomas and NLW discuss:

• An outline of the European Union’s new recovery plan
• The new debt issuance structure that marks a first for Europe 
• The challenges of currency unions 
• How Europe’s debt crisis changed how Europeans think about economic integration
• Why the current plan amounts to “stealth federalization” 
• Why some member states are in a state of mutiny over the fund

Find our guest online:

Website: GnS Economics

Twitter: @mtmalinen

Today on the Brief:

• Disappointing jobless claim numbers with first increase in 4 months
• US banks now allows to custody crypto
• Senate hears arguments for a digital dollar in the context of US-China economic competition

Our main conversation with Sahil Bloom

Sahil Bloom is an investor with Altamont Capital Partners and a prolific author of financial literacy Twitter threads. 

In this conversation, he and NLW discuss:

• Today’s jobless claims
• Long term economic impacts from COVID in the travel industry
• “Forced efficiency realization” 
• How remote work opens white collar professionals to global competition 
• Whether tech platforms are a destructive or enabling force for small business 
• Why financial education is essential and sorely lacking
• Why the Robinhood rally crowd represents a positive opportunity for bringing new voices into the markets

Find our guest on Twitter: @sahilbloom