The Breakdown

Today on the Brief:

• New Federal Reserve research suggests reaction to Facebook’s Libra basket approach was overblown
• Italian Banking Association pushing to test a digital euro
• U.S. housing has worst month since 2010

Our main conversation:

Earlier this month, Messari hosted the Mainnet virtual summit. At that event, NLW moderated a session called “Macro Investors Sound Off!” featuring BlockTower Capital’s Ari Paul, Blockchain Capital’s Spencer Bogart and Arca’s David Nage. 

The discussion included:

• The evolution of the Fed put and how it shapes the markets 
• How the collision of Bitcoin’s halving and the Fed’s reaction to COVID-19 created a powerful narrative moment
• Why the “Money Printer Go BRR” meme was so effective
• Why the Paul Tudor Jones letter was hugely influential within family offices
• Why these investors expect to see some significant announcements around bitcoin exposure from traditional investors in the months to come 

Find our guests online:

Ari Paul: @AriDavidPaul

Spencer Bogart: @CremeDeLaCrypto

David Nage: @DavidJNage

Watch the rest of Messari’s Mainnet 2020 sessions.

A reading of two pieces

How I Learned to Stop Worrying and Love the Money Printer

by Jill Carlson | CoinDesk

+

Fight the Fed

Jesse Felder | The Felder Report 

The big narrative in financial media for the last few weeks has been the insurgent Robinhood rally, led by the AC/DC-blaring Pied Piper Dave Portnoy, owner of Davey Day Trader Global Global (DDTG Global). 

As people try to make sense of the strange retail trading phenomenon, one perspective is the participants (average age of 31 on Robinhood) are reacting to a market that has left them behind. In this view, they are assaulting the market with otherwise outrageous and ludicrous strategies because, otherwise, how will they get their piece? 

This week’s Breakdown Weekly Recap looks at this in the context of some surprising (and frankly depressing) stats about the millennial generation’s current wealth, as compared to where boomers were at the same time in their careers. 

Today on the Brief:

• FTX lists two Compound tokens
• Reddit partners with Ethereum Foundation on Layer 2 scaling
• Black-In Freedom Festival reimagines Juneteenth

Our main topic: 

Dr. Vikram Mansharamani is a lecturer at Harvard and author of “Boombustology: Spotting Financial Bubbles Before They Burst” as well as the just released “Think for Yourself: Restoring Common Sense in an Age of Experts and Artificial Intelligence.” 

In this wide-ranging conversation, he and NLW discuss:

• Why our relationship with experts and expertise is leading us astray
• How COVID-19 shows the downside of both over-reliance on, and complete rejection of, experts 
• How the economic crisis surrounding COVID-19 is bursting bubbles and moving us from a period defined by deflation to one defined by inflation
• Why “monetary debasement is here to stay”
• Why the U.S.-China relationship is the key backdrop for understanding the next 10 years of global economic reality 
• Why inequality threatens the fabric of our economy and our society, and what might be done about it

Find our guest online:

• Twitter: @mansharamani

Today on the Brief: 

• Powell says private companies shouldn’t be involved in Central Bank Digital Currencies
• According to former NSA head John Bolton, Trump told Mnuchin to go after Bitcoin
• Interest around Compound driving speculation around a DeFi-driven bull run 

Our main topic: 

This week’s U.S. jobless report brought bad news. Whereas economists had expected new claims to fall to 1.29 million from 1.57 million the week before, claims fell just 58,000 to 1.51 million.

Continuing claims fared even worse. Economists predicted these claims would fall 600,000+ to 19.9 million. Instead, they fell a tenth of that - 62,000 - to leave total continuing claims at 20.5 million.

In this episode, NLW breaks down what we can learn from these numbers when they’re combined with the previously released May jobs report.

On the Brief:

• Big tech vs. the American political right and left
• Why TikTok users are pretending to love China for clout
• Decentralizing venture capital 

Our main conversation:

The Crypto Dog is one of crypto Twitter’s best known characters. In this conversation, he and NLW discuss:

• Mining bitcoin in 2011
• The difficulty of hodling across a decade
• The emergence of the crypto trader in the Ethereum era
• Trader agnosticism 
• Pseudo-anonymity and social media 
• Developing the character behind the avatar 
• Global nomadism and the acceleration of “work from anywhere” 
• The vibe and feel of Hong Kong today

Find our guest online:Twitter: @TheCryptoDog

Today on The Brief:

• An unexpectedly good retail sales report drives market confidence 
• Are we in for a second wave of white-collar layoffs? 
• The latest rumblings in central bank digital currencies

Our main conversation:

Jesse Felder is an independent financial analyst and one of the best financial curators on Twitter. 

In this wide ranging conversation, he and NLW discuss:

• The Robinhood rally and what makes it both alike and different from previous manias 
• The illusion of American recovery and the disconnect between markets and fundamentals 
• The Federal Reserve’s role in increasing economic inequality 
• Why the dollar is significantly overvalued relative to other currencies 
• Why financial assets could be poised for a rough decade 

Find our guest online:

• Twitter: @jessefelder

Today on the Brief:

• Stocks down on coronavirus fears
• Demand destruction
• The looming retirement crisis

Our main theme: 

Bitcoin is up more than 30% on the year. After a crash alongside equities, it has proved incredibly resilient. There are famous new entrants to the space like Paul Tudor Jones II. 

So how can a Bloomberg editor argue the year has been bad for bitcoin? 

In this response podcast, NLW argues that most of the arguments are about narrative, not the underlying fundamentals. He presents six reasons why not only has it not been a bad year, but the exact opposite is true:

• Demonstrated institutional uptake
• Demonstrated resilience 
• New champions 
• Narrative fundamentals  
• Need in emerging markets 
• End of economic orthodoxy

After a week where bankrupt Hertz pumped 890%, the question is: what is the historical precedent? 

Luckily, we have finance history guy Jamie Catherwood to fill us in. In this essay "Rubbish Rallies" (written by Jamie, read by NLW), Catherwood tells the story of an 1820s scam that turned into an 1860s market mania - even though everyone knew it had been a scam the first go around. 

History might not repeat, but it certainly rhymes. 

This is a bonus episode of The Breakdown, recorded originally last week as part of a private beta test for new content forms. If you like this type of episode, let me know @nlw on Twitter. 

The stock market has long been disconnected from the underlying economy, but much of what happened this week - particularly the pumping of bankrupt company stocks - suggests that something new is afoot. 

In this episode, NLW breaks down three long-term trends suggested by the so-called Robinhood Rally, including:

• The “insurgency” aspect of a generation of young professionals who are willing to play the financial game rather than have it be played for them
• A totally new force in financial media, which could hit like a wrecking ball in one of the stodgiest, traditional media industries 
• An embrace of a certain type of cynicism or nihilism when it comes to the values of financial markets 

This week on The Breakdown:

Monday | Why War Reporting Is the Right Mental Model for Today’s Media, Feat. Jake Hanrahan

The founder of Popular Front joins NLW for a discussion about protests, media and how the people being covered tend to not reflect divisive politics.

Tuesday | What the Stock Market’s ‘Robinhood Rally’ Means for Bitcoin

The largest 50-day rally in stock market history and even shares of bankrupt companies are up more than 100%. What is going on?

Wednesday | A Vision for Digital Property Rights, Feat. Nic Carter

Most people today look at social platforms like any other private company, but what if we saw them as alternative jurisdictions with a new set of property rights?

Thursday | Why the Fed Keeps Denying Its Role in Increasing Inequality

The Federal Reserve expects low inflation, says rates will stay close to zero through 2022 and keeps lying about the role of central banks in increasing inequality.

Friday | Bitcoin Is More Than an Inflation Hedge

While fears of a “great monetary inflation” have driven the recent bitcoin narrative, other aspects like censorship resistance and peaceful protest matter just as much.

Saturday | The Chad Index Versus Doomer Internet Money: The Breakdown Weekly Recap

This week, the wildest, most nonsensical, volatile part of the market wasn’t bitcoin, it was the “Robinhood Rally” in equities.