The Pomp Letter

Today’s letter is brought to you by Cal.com!

What do I have in common with Chad Hurley (YouTube), Tobi Lütke (Shopify), and Alexis (776/Reddit)?

We are all early investors in Cal.com and we use it instead of Calendly. Cal.com is the leading open-source scheduling platform, which gives you the same superpowers of efficiency previously reserved for elite corporations and tech gurus.

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To investors,

There was peak hysteria at the top of the market in 2021. Most people were convinced that stocks, real estate, bitcoin, and other assets could only go up. Amid that chaotic environment, there were a few sane voices that issued words of caution.

Lux Capital’s Josh Wolfe was one of them. Here was the tweet that caught my eye back then:

At the time, I agreed with Josh that the market was frothy, but I disagreed with his conclusion that young people would get wrecked by a market correction. In fact, I made the opposite argument. I wrote on December 1, 2021 to each of you the following in a letter titled Young People Have Lived Through More Market Downturns Than Any Other Generation In History:

“The public narrative is that young people have never experienced a market downturn. The older generations, the cynics, and the persistent bears like to propel a narrative that asset prices are being pushed up by young, naive investors who have never seen a bear market. That simply isn’t true though.

The generation of investors who are under the age of 35 have actually lived through worse financial markets than any other generation of financial investors. How many of them can claim to have lived through at least five market downturns in 12 years? Additionally, how many folks in the older generations can say they lived through an 80-95% market downturn and didn’t sell their assets, but instead bought more?

Young investors are the most resilient investors in history. They truly have diamond hands. The incumbents don’t have the stomach for this type of volatility. You could actually argue, digital natives are just built different. They store majority of their wealth in assets that have 80 vol and fluctuate 5-10% a day.

This is what happens when we live in a world with undisciplined monetary and fiscal policy. The young people refuse to play the game based on old rules. They understand that bear markets in the stock market have been outlawed and market corrections are banned. The central bank and politicians have to step in every time and prop up asset prices. And alternative assets, like bitcoin and cryptocurrencies, are the only honest market left.”

My perspective was not popular at the time. The commonly held belief by people in traditional finance is that market corrections hurt retail investors, but can be navigated by expert financial minds. This thought process presents the idea that inexperienced investors will simply get shaken out of their positions and sell at an inopportune time of market despair.

That may have been true in past market cycles and with other asset classes, but as I said — bitcoin holders are built differently.

Since my letter in December 2021, we have seen Wolfe’s prediction of a market crash play out. The S&P dropped about 25% from the market high to the market low in October 2022. Bitcoin was much more volatile. The digital currency dropped from a high of $69,000 to under $17,000 within less than a year.

This nearly 80% drop in bitcoin was right in line with my analysis from previous market crashes.

So what did these young, digitally-native investors do? Did they fall victim to human nature and sell in a panic as prices fell? Or did they brush off the market crash as a nothing burger as I had predicted they would?

Two years later we finally have our answer — bitcoin holders have the strongest hands in financial markets.

First, we can see that more than 57% of all bitcoin in circulation did not move in the last two years. This means that nearly 2 out of every 3 bitcoin being held was unfazed by a drop from $69,000 to sub-$17,000, followed by a rapid rise from sub-$17,000 to nearly $45,000. That is a drop of 80% quickly followed by an almost 300% increase.

This would be an insane data point if it merely showed that bitcoin holders didn’t sell. But that is only the start of the story. These holders were not only refraining from selling, but they appear to have been buying aggressively once we got to the market bottom.

We can see that bitcoin wallet addresses with at least $100 of bitcoin have been growing aggressively since November 2022, including a severe acceleration in the last month that brought us to a new all-time high in the measurement.

So the market crash came as many intelligent people in the traditional financial world anticipated, but the young people allocated to bitcoin didn’t sell and instead began buying discounted bitcoin at the market bottom. I am not sure we have ever seen something like this before.

Many of you will ask why I think this has happened — my best answer is that the culture around bitcoin has taught holders to dollar cost average into the digital currency and then never sell. You see it in marketing materials. You see it in the memes online. At every turn, a bitcoin holder is having great financial discipline reinforced to them.

Yes, dollar cost averaging and never selling a great asset is financial discipline. Warren Buffett is famous for saying, “Our favorite holding period is forever.” Although he doesn’t like bitcoin, he has a lot more in common with the bitcoin holders than he realizes.

Ok, now we know that these maniacs are not selling, but what about the dollar cost averaging strategy?

Bitcoin analyst Dylan LeClair pointed out last week that someone who dollar cost averaged every day starting on January 1, 2021 would be up approximately 46% on their investment.

That includes buying throughout the bull market at elevated prices and buying as the price fell 80%. If you closed your eyes and didn’t look at the price of an asset, here is how you would have done across asset classes during this time frame:

* Bitcoin: +46%

* Nasdaq: +17%

* Gold: +11%

* S&P 500: +9%

* U.S. Bonds: -15%

It is crazy to think that bitcoin has doubled the performance of these other assets, even though it had the largest drawdown by far.

This brings me to my conclusion from these various data points — bitcoin is disciplined financial investing codified. It takes the wisdom of Warren Buffett’s “never sell a great asset” and combines it with “keep buying over time regardless of price.”

Your financial advisor or wealth manager may not like it, but bitcoin has taught an entire generation to be fantastic investors. And just as I suspected, this generation used the bear market to make even more money.

Hope you all have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

If you enjoyed this letter, you should consider subscribing to the Pomp Letter. I write 3-5x per week and explain in simple language what is happening in the economy, financial markets, and bitcoin.

Peter Berg is a Managing Partner at M12, Microsoft’s venture capital arm. He leads the fund’s vertical SaaS invests & work. Peter is also a two-time founder, and most recently ran strategy & business development for Very Good Security.

In this conversation, we talk about corporate venture capital, success stories for M12 & his career, artificial intelligence, recent OpenAI news, and advice for founders & entrepreneurs.

Listen on iTunes: Click here

Listen on Spotify: Click here

Earn Bitcoin by listening on Fountain: Click here

Anthony Pompliano’s Fox Business Appearance From Friday

Podcast Sponsors

* Cal.com - Changing the calendar management game. Use code “POMP” for $500 off when you sign up.

* Trust & Will - Estate planning made easy. They are fast, secure, and simple to use. Get your will or trust created today.

* Auradine - A new bitcoin miner powered by the world’s first 4 nanometer silicon chip technology.

* Base: Base is shaping the future of the on-chain world with near-zero gas fees and rapid transaction speeds.

* ResiClub: Your data-driven gateway to the US housing market.

* Bay Area Times: A visual newsletter explaining the latest tech & business news.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

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To investors,

The United States government has a heavy hand. Administration after administration spends billions of dollars, and untold amounts of time and energy, to concoct new rules and regulations for a variety of industries.

One of the most popular areas of conversation in the last two years has been bitcoin and cryptocurrencies. There have been politicians calling for the banning of the technology. Others have tried to drastically increase the tax treatment to be more abrasive. Some have suggested that anyone using this technology is a criminal or nefarious actor. And plenty of politicians and regulators have regurgitated warnings of danger related to the industry by invoking phrases like money laundering, terrorism financing, fraud, and a plethora of other words that the American people have been trained to fear.

The short story is that most of these fears are unfounded.

Chainalysis, a blockchain analytics firm, has been studying illicit transactions for years and consistently finds that less than 1% of all bitcoin transactions are related to some sort of illegal nature.

The facts don’t seem to matter in conversation between politicians and big bank executives though. Yesterday, Senator Elizabeth Warren and JP Morgan’s Jamie Dimon had an exchange that went viral online. In it, Dimon stated “the only true use case for it [cryptocurrencies] is criminals, drug traffickers, money laundering, and tax avoidance.”

He went on to say that if he were the US government, he would shut down the crypto industry.

Let’s put aside the hyperbole for a second and look at this situation more closely. First, the data suggests that less than 0.5% of all transactions in 4 of the last 5 years has been for illicit purposes. So Dimon’s claim is inaccurate.

The more eye-opening thing, which the internet peanut gallery was quick to point out, is that JP Morgan has been fined $39 billion in the last 15 years for various violations and illegal activity. To put that number in perspective, if you spent one bitcoin per day at today’s price, it would take you 2,430 years to spend enough bitcoin to equal the amount of fines that JP Morgan has paid in the last 15 years.

If you look at all major banks since the year 2000, the total fined amount grows to more than $300 billion. That is more than 1/3 of the total market cap of bitcoin right now.

But this is not an eye-for-an-eye though. The fact that JP Morgan and other large banks have been fined so heavily is a testament to the fact that bad people will use whatever means necessary to do bad things. It doesn’t matter how transparent bitcoin’s protocol is, nor does it matter how big the compliance team is at a big bank.

Nefarious actors will slip through the cracks in the traditional system and they will slip through the system in the new digital world as well.

We have to be very careful that we don’t overreact though. One historical example is the War on Drugs. Since President Nixon announced the global effort to crack down on illicit drugs in the US in 1971, we have seen a constant rise in drug use in America. Think of how prevalent the opioid pandemic is today — that flies in the face of the stated goal of the War on Drugs.

The harder that the system squeezed an action that citizens wanted to participate in, the more popular that action became.

Could that happen with cryptocurrencies? Well, it may already be happening.

Qiao Wang tweeted yesterday:

“Learned something wild today. It’s now well known that USDT dominates USDC in Africa. But the reason is the compliant nature of USDC causes people to perceive it to be the “USA government coin” that can be censored. Whereas USDT is viewed as the wildwest uncensorable coin.”

That may seem insane to people in the Western world but the data appears to back up the claim. We have seen USD Tether gaining in popularity, while USDC has been falling in recent months. Quite literally, the world is adopting the less regulated stablecoin.

Additionally, we can see from Google trends that the United States is the only area where USDC interest appears to be the dominant interest for stablecoins. (Blue is USDC and red is USDT below).

So why does all of this matter? Majority of market participants would agree that money laundering, terrorist financing, fraud, and other financial crimes are bad. We don’t want people doing that nefarious activity. Unfortunately, the activity is going to happen in any financial system, regardless of how abrasive the rules are against criminals.

Remember, criminals don’t follow the rules!

Lastly, if the United States overreaches in their attempt to control a decentralized, open-source industry, than they will see global adoption rise at a faster pace and the United States will have a smaller upside in that development.

I don’t envy policy makers and politicians in this situation. They have an impossible job. You don’t want bad actors. You also (hopefully) want the US to benefit from new technology. So how can they do this? The only viable path I see is to have the United States embrace the technology and work diligently to be responsible for as much of the innovation as possible.

If you like bitcoin and crypto, this is a big win for you. If you hate bitcoin and crypto, I will remind you to keep your friends close and your enemies closer.

Hope each of you has a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

If you enjoyed this letter, you should consider subscribing to the Pomp Letter. I write 3-5x per week and explain in simple language what is happening in the economy, financial markets, and bitcoin.

Darius Dale is the founder & CEO of 42Macro.

In this conversation, we talk about their Weather Model, economy & financial market conditions, and his brand new strategy that incorporates bitcoin to outperform the standard 60/40 portfolio.

Listen on iTunes: Click here

Listen on Spotify: Click here

Earn Bitcoin by listening on Fountain: Click here

Darius Dale Reveals Bitcoin Strategy

Podcast Sponsors

* Cal.com - Changing the calendar management game. Use code “POMP” for $500 off when you sign up.

* Trust & Will - Estate planning made easy. They are fast, secure, and simple to use. Get your will or trust created today.

* Auradine - A new bitcoin miner powered by the world’s first 4 nanometer silicon chip technology.

* Base: Base is shaping the future of the on-chain world with near-zero gas fees and rapid transaction speeds.

* ResiClub: Your data-driven gateway to the US housing market.

* Bay Area Times: A visual newsletter explaining the latest tech & business news.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

Today’s letter is brought to you by Trust & Will!

Trust & Will is the most trusted name in online estate planning and settlement.

The company has helped hundreds of thousands of families create their estate plans, and they’re just getting started. Trust & Will enables every American to create a plan that’s customized to fit their needs, their life, and their legacy.

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To investors,

Bitcoin mining continues to be an area worth paying attention to, regardless of what role you play in the market. First, we can see the hash rate has been parabolic since the launch of the bitcoin protocol in 2009.

This trend is even more pronounced if you zoom in on the timeframe from the 2018 bear market to today. You can see that hash rate has continued to accelerate even though China banned bitcoin mining when more than 50% of all mining was within the country’s border.

As hash rate increases, competition for the block subsidy becomes more intense. What exactly is the financial reward for winning that competition today? There was $40.4 million paid out in the last 24 hours to miners.

That is $14.7 billion annualized. There is almost no scenario where hash rate is going to stop growing when more than $14 billion in revenue is up for grabs on an annual basis.

Another area to pay attention to is miner revenue from transaction fees. Usually transaction fee revenue would spike in the bull market — tons of people are trying to use the blockchain during the euphoric phase of the market cycle, so you have to pay higher prices to use the finite amount of block space.

Recently, we have seen two major spikes in transaction fee revenue although we are in a bear market though. These are largely driven by Ordinals/Inscriptions, but still signal a significant departure from past trends and it has provided additional economic incentive for miners to continue competing for revenue.

So how exactly have miners been performing? We can look at publicly traded miners to get a sense of how the industry players are doing this year:

* Marathon Digital: +359%

* Iris Energy: +356%

* Cleanspark: +356%

* Riot Platforms: +349%

* Hive Digital: +159%

* Terawulf: +128%

* Hut 8 Corporation: +1,228% (note: they just completed an equal merger)

This type of financial performance is impressive by itself, but it becomes even more eye-opening when you realize that 5 of the 7 companies listed have more than doubled the performance of bitcoin year-to-date.

Another interesting data point is how miners are handling the bitcoin on their balance sheet. You can see that miners have been net sellers since the start of November, which suggests that these organizations are taking advantage of the recent price appreciation and selling into the strength to drive further cash reserves.

Overall, bitcoin mining seems to be in a great spot. Hash rate is at all-time high levels. Miners are pulling in $14+ billion in annualized revenue. The stock price of publicly traded companies is wildly outperforming bitcoin’s price performance. And we have not yet experienced the bitcoin having slated for early Q2 2024.

The narrative in the bitcoin community of buying and exclusively holding bitcoin sounds good as a talking point, but it is essential that you think critically about what you are trying to accomplish from an investment perspective. It is hard to ignore the benefit of bitcoin miners based on the market factors and stock performance.

The gold community has long debated the pros and cons of holding gold vs buying gold mining stocks. The bitcoin community is following fast on their heels with a similar debate. But as with most things in life, maybe the truth can be found closer to the middle ground than the extremes.

Hope you all have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

If you enjoyed this letter, you should consider subscribing to the Pomp Letter. I write 3-5x per week and explain in simple language what is happening in the economy, financial markets, and bitcoin.

Bradley Tusk is a venture capitalist, political strategist, writer, and owner of P&T Knitwear bookstore. 

In this conversation, we talk about his brand new book, called “Obvious in Hindsight.” It is all about a fictional story of innovative technology, flying cars, and what they have to go through with politicians, mafia members, etc. This is a great conversation about how technology meets politics, and the reality on the ground.

Listen on iTunes: Click here

Listen on Spotify: Click here

Earn Bitcoin by listening on Fountain: Click here

Anthony Pompliano’s CNBC Appearance From Yesterday

Podcast Sponsors

* Cal.com - Changing the calendar management game. Use code “POMP” for $500 off when you sign up.

* Trust & Will - Estate planning made easy. They are fast, secure, and simple to use. Get your will or trust created today.

* Auradine - A new bitcoin miner powered by the world’s first 4 nanometer silicon chip technology.

* Base: Base is shaping the future of the on-chain world with near-zero gas fees and rapid transaction speeds.

* ResiClub: Your data-driven gateway to the US housing market.

* Bay Area Times: A visual newsletter explaining the latest tech & business news.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

Today’s letter is brought to you by Cal.com!

What do I have in common with Chad Hurley (YouTube), Tobi Lütke (Shopify), and Alexis (776/Reddit)?

We are all early investors in Cal.com and we use it instead of Calendly. Cal.com is the leading open-source scheduling platform, which gives you the same superpowers of efficiency previously reserved for elite corporations and tech gurus.

Stop wasting your time with scheduling software that doesn’t work. Use technology to make your life easier.

Cal.com is transforming sophisticated calendar management into an accessible tool for all via a user-friendly interface. Set up is quick, easy, and you will never go back to your boring calendar tool.

Exclusive for Pomp Letter subscribers, use code “POMP” for $500 off when you set your team up with Cal.com. Save time. Save money. Use Cal.com.

To investors,

Gold and bitcoin surged in price over the weekend. Gold hit an all-time high crossing over $2,130. Bitcoin touched $42,000 early this morning. These meaningful movements in price say more about the state of fiat currencies than it does about hard assets.

Both communities of hardcore believers want to believe their asset is special, but ultimately global liquidity & currency debasement tell the story. The market is continues to accelerate their expectation of a return to loose monetary policy, including quantitative easing and interest rate cuts.

It is notable that gold’s all-time high coincides with bitcoin still being approximately 40% below it’s 2021 high of $69,000. Gold bugs will argue this is bearish, while bitcoiners will claim it is bullish. Frankly, I don’t think it is either. The comparison of these two assets may be intellectually stimulating, but it is not productive.

As bitcoin rises, there are some significant data points worth paying attention to.

First, bitcoin’s market cap is now higher than Berkshire Hathaway’s market cap. This is a completely worthless point, except that it reinforces to the bitcoin community “we are right!” in the face of critique from Warren Buffett, one of the best investors in the world.

Second, Nvidia was outperforming bitcoin over the last 5 years until the digital currency’s price appreciation over the last 24 hours. While that may not be what you expected, it speaks to the severity of bitcoin’s bear market drawdown and the rotation of capital to artificial intelligence. Now that bitcoin is once again prevailing in this comparison, we should start to see more bitcoin/crypto-centric media headlines. Historically this has led to additional capital flows and higher prices.

Speaking of prices, bitcoin holders don’t appear to have any interest in selling into the strength of bitcoin’s price. Although the price is up almost 150% year-to-date, the amount of bitcoin in circulation that hasn’t moved in 1+ year hit a new all-time high over the weekend of 70.5%.

This increasing lack of liquidity in the circulating supply creates a positive feedback loop on an increasing asset price because it takes less net new dollars to move the price upwards in the future. I don’t think I’ve ever seen an asset this large (~$800 billion) have such high illiquidity at the same time that the price is aggressively moving higher.

So what does this mean for bitcoin holders?

Let’s take a look at nation states first. El Salvador’s President took to Twitter/X this morning to highlight that the country’s bitcoin holdings are now profitable again. He said “Of course, we have no intention of selling; that has never been our objective. We are fully aware that the price will continue to fluctuate in the future, this doesn’t affect our long-term strategy.”

El Salvador is not alone. Michael Saylor’s Microstrategy was underwater on their bitcoin holdings for almost a year, but now they have returned to an unrealized profit as well. The company now holds 174,530 bitcoin on their balance sheet.

The nation states and corporations are not the only beneficiaries of the recent bitcoin price increase though. As Dylan LeClair pointed out, bitcoin is the significant winner if you had dollar cost averaged with $10 into various assets every day since 1/1/2020.

* Bitcoin: +106%

* Nasdaq: +28%

* S&P 500: +18%

* Gold: +16%

* U.S. Treasury Bonds: -20%

This is an important point because it shows that an investor, regardless of sophistication, would have been able to drive a material return by dollar cost averaging through the boom and bust of the pandemic era.

Lastly, there is quite a bit of excitement about the incoming bitcoin spot ETF. I want to issue a word of caution about its potential ramifications. Here is some quick math — bitcoin is ~ $800 billion asset. Only 30% of that supply has moved in the last year, so that is $240 billion. If the spot bitcoin ETF gathered $50 billion overnight, which would be more than Grayscale’s GBTC had in assets at the 2021 peak, then we would only see an approximately 20% increase in capital compared to the liquid circulating supply.

That would 100% lead to a material increase in price, but it won’t triple the value of bitcoin overnight as some are predicting. What would the exact price impact be? It is nearly impossible to predict because there are numerous factors that we can’t know the answer to (for example - how many people will sell on ETF news?). It is fun to get excited about major milestone events like the ETF approval, but just do your best to refrain from being sucked into the crazy price predictions from anonymous people online.

Trust me, I’ve had my fair share of fun trying to predict the future. Even when you are directionally correct, you can never get it perfectly right. As the old saying goes, time in the market is more important than timing the market. Bitcoin has proven that statement true over and over again.

Think long-term. Enjoy the fun on the internet. And don’t try to outsmart the market. Hope you all have a great start to your week. I will talk to each of you tomorrow.

-Anthony Pompliano

If you enjoyed this letter, you should consider subscribing to the Pomp Letter. I write 3-5x per week and explain in simple language what is happening in the economy, financial markets, and bitcoin.

Bradley Tusk is a venture capitalist, political strategist, writer, and owner of P&T Knitwear bookstore. 

In this conversation, we talk about his brand new book, called “Obvious in Hindsight.” It is all about a fictional story of innovative technology, flying cars, and what they have to go through with politicians, mafia members, etc. This is a great conversation about how technology meets politics, and the reality on the ground.

Listen on iTunes: Click here

Listen on Spotify: Click here

Earn Bitcoin by listening on Fountain: Click here

Bradley Tusk On How Startups Can Beat Politicians & Regulations

Podcast Sponsors

* Cal.com - Changing the calendar management game. Use code “POMP” for $500 off when you sign up.

* Trust & Will - Estate planning made easy. They are fast, secure, and simple to use. Get your will or trust created today.

* Auradine - A new bitcoin miner powered by the world’s first 4 nanometer silicon chip technology.

* Base: Base is shaping the future of the on-chain world with near-zero gas fees and rapid transaction speeds.

* ResiClub: Your data-driven gateway to the US housing market.

* Bay Area Times: A visual newsletter explaining the latest tech & business news.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

Today’s letter is brought to you by Trust & Will!

Trust & Will is the most trusted name in online estate planning and settlement.

The company has helped hundreds of thousands of families create their estate plans, and they’re just getting started. Trust & Will enables every American to create a plan that’s customized to fit their needs, their life, and their legacy.

Their mission is to make estate planning simple, affordable, and inclusive.

All of Trust & Will’s documents have been designed and approved by estate planning attorneys to meet the highest legal standards. Their process is simple, secure, complete, and customized for your specific needs and state requirements.

To investors,

Most of the investor interest in cryptocurrencies has historically been concentrated in the digital tokens. Retail investors were first to the party, followed by family offices, corporations, and financial institutions. The big hope from many is that nation states will be the next big shoe to drop in the adoption curve.

At the same time that adoption was sequentially moving from small accounts to large accounts, capital allocators were also moving horizontally through the market as well. First, investors were buying bitcoin, then Ether, and now a plethora of other crypto assets that push them further out on the risk curve.

These are all digital tokens though. One of the areas that “crypto investors” seem to always leave as an afterthought is the public equities involved in the crypto market. For example, Alyssa Choo from Bitwise pointed out this week that 2023 continues to be a good year for crypto equities:

* Coinbase $COIN: +263% YTD

* Riot Platforms $RIOT: +274% YTD

* Marathon Digital $MARA: +260% YTD

* Galaxy Digital $GLXY: +114% YTD

The first three companies on this list have more than doubled the return of bitcoin year-to-date. While true, these results are not necessarily reflected in the public narrative at the moment.

But the recent past results are not necessarily indicative of future performance. Some investors are bearish on the ability for a crypto-native firm like Coinbase to succeed against a litany of traditional financial firms competing for customers and assets. Maybe these bears are right, maybe they aren’t. Predicting the future is hard.

Put that debate aside for a second though. A narrative that is forming around Coinbase specifically is that the company’s stock price will hit $1,000 during the bull market. If you search Twitter/X for “$COIN $1000” you will see many different accounts all but predicting this milestone as an eventuality. Again, I have no clue what will happen, and predicting the future is very hard, but let’s take a look at what it would take for that milestone to be achieved.

Juan Leon from Bitwise broke down the financials of Coinbase and extrapolated the metrics needed to drive the ~8x share price increase to reach $1,000. Juan wrote:

* 2023 Net Revenue Estimate: $2.6B

* 2025 Net Revenue Estimate: $14.5B

* 2023 Monthly Transacting Users Estimate: 8.5M

* 2025 Monthly Transacting Users Estimate: 32M

* 2023 Assets on Platform Estimate: $130B

* 2025 Assets on Platform Estimate: $500B

This means that Juan’s analysis concludes that Coinbase’s stock would reach $1,000 if the company hit $14.5 billion in net revenue, 32 million monthly transacting users, and $500 billion of assets on the platform.

Those are a significant increase from the current position, but a strong capital inflow during a bull market is the perfect tailwind to help a company like Coinbase achieve stunning potential growth like this.

As many of you know, I have had financial exposure to Coinbase through the Morgan Creek Digital Assets fund for a number of years. The thesis ~ 5 years ago in the private market was that Coinbase would serve as the best US-based, regulated exchange. They had great brand awareness, the team continued to innovate on the product in an impressive way, and the institutional offerings were starting to serve as the default for large capital allocators as they came into the market.

Each of these components of the thesis still remains true today. Additionally, Coinbase appears to have transitioned a big part of their business into a crypto-native format. According to Qiao Wang, “the most impressive thing about Coinbase is they transformed themselves from a CEX to a crypto-native organization: wallet, L2, onchain identity, payment, and more.”

It is not every day that you see a public company rebuild the plane while in flight with such ease. I have no plans to change my personal portfolio based on these recent public comments from various analysts, nor do I ever recommend selling anything in crypto pre-halving, but I am curious to hear what each of you thinks about Coinbase. Here are the income statement, balance sheet, and cash-flow statement.

Leave a comment or reply to this email with your thoughts. There is great debate in the market around this company, and the market will be the ultimate referee of who is right and wrong, but that doesn’t prevent the rest of us from discussing our personal opinions.

I look forward to learning from each of you. Hope you have a great day. I’ll talk to you tomorrow.

-Anthony Pompliano

If you enjoyed this letter, you should consider subscribing to the Pomp Letter. I write 3-5x per week and explain in simple language what is happening in the economy, financial markets, and bitcoin.

Oliver Rust is the Head of Product at Truflation.

In this conversation, we talk about outdated process used for calculating CPI, what Truflation is doing with new data collection, how good data would change Fed’s response & lead to better decision making, why Truflation believes inflation will be sticky in 2024, and what success looks like for Truflation.

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Here Is Proof That Inflation Data Is Wrong…

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Today’s letter is brought to you by Cal.com!

What do I have in common with Chad Hurley (YouTube), Tobi Lütke (Shopify), and Alexis (776/Reddit)?

We are all early investors in Cal.com and we use it instead of Calendly. Cal.com is the leading open-source scheduling platform, which gives you the same superpowers of efficiency previously reserved for elite corporations and tech gurus.

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To investors,

After an explosion in asset prices and inflation in 2020-2021, the Federal Reserve has remained committed to destroying demand and getting the economy under control. The fastest interest rate hikes in history since March 2022 had the desired effect of destroying investment demand.

We saw the S&P 500 drop more than 20% from the peak of Q4 2021. TLT, the 20 Plus Year Treasury Bond ETF, is down more than 12% in the last 12 months.

But seeing investment values fall significantly is only one part of the equation. Citizens have three options with their money — they can invest it, they can spend it, or they can save it.

If the Fed is able to discourage people from investing, they still need to discourage people from spending the money if they want to succeed in their fight against a hot economy. The data from Black Friday suggests that the consumer may not be listening to the Fed nearly as much as the central bank would like.

Rebecca Picciotto writes for CNBC:

“Black Friday e-commerce spending popped 7.5% from a year earlier, reaching a record $9.8 billion in the U.S., according to an Adobe Analytics report, a further indication that price-conscious consumers want to spend on the best deals and are hunting for those deals online…

… [Vivek] Pandya noted that impulse purchases may have played a role in the Black Friday growth since $5.3 billion of the online sales came from mobile shopping. He noted that influencers and social media advertising have made it easier for consumers to get comfortable spending on their mobile devices.”

These are very large numbers. Stripe, the fast-growing payments company, built a live dashboard to track various metrics for Black Friday & Cyber Monday. As of 8:30am EST this morning, the dashboard showed more than 166 million transactions and $13 billion in transaction volume.

These numbers are exclusively for Stripe, so you can imagine how much larger the numbers get when you incorporate all payment processors. Unfortunately we won’t have that data for a few more days.

Another interesting data point from Salesforce that was highlighted by Bay Area Times, and supports Pandya’s analysis of impulse purchases, is that 79% of all purchases came from mobile, rather than the majority being driven by desktop users.

So what does this have to do with the Federal Reserve and inflation? While the central bank has been successful in destroying investor demand, they seem to have failed at destroying consumer demand so far.

That doesn’t mean they will not be successful in the future, but so far the data is overwhelming in proving that consumers are still ready to spend money on consumption.

An important question to ask is where all this money is coming from that the consumer is spending. According to the New York Fed, the Q3 data shows that households continue to take on more debt across various debt types.

“Total household debt rose by 1.3 percent to reach $17.29 trillion in the third quarter of 2023, according to the latest Quarterly Report on Household Debt and Credit. Mortgage balances increased to $12.14 trillion, credit card balances to $1.08 trillion, and student loan balances to $1.6 trillion. Auto loan balances increased to $1.6 trillion, continuing the upward trajectory seen since 2011.”

Matt Egan explained for CNN why this rising debt situation, especially for consumer credit cards, is important to pay attention to:

“In 2022, about one in 10 (9.9%) general purpose credit card accounts in the United States were in “persistent debt” — a difficult-to-escape situation where borrowers are charged more in interest and fees than they pay down in principal, according to a new Consumer Financial Protection Bureau report shared first with CNN.

That’s up from 8.4% in 2021, a trend that the CFPB blames on shrinking paychecks (after adjusting for inflation) and rising borrowing costs.”

To make matters worse, Egan continues:

“Americans were hit with $105 billion in credit card interest last year alone, according to the CFPB’s biennial consumer credit card report. That includes $30.5 billion in the fourth quarter, the highest since at least 2015.”

The problem is only going to get worse unfortunately. Interest rates on credit cards have been spiking in a fairly insane manner. The average interest rate on all credit card accounts in the US is now over 21%. Just look at this chart from LendingTree showing historical credit card interest rates:

Not exactly what you want to see if the American consumer is using credit card debt to continue to spend enormous amounts of money on consumptive goods.

So we have an economy that is still showing a strong consumer spending pattern, but it appears to be financed increasingly with debt. Where else have we seen this happen? The US government. Spending from the federal government has continued to increase, along with more and more borrowing. We are turning into a nation of borrowers. There is no fiscal discipline at the government or individual level on average.

There is still time to turn around both ships, but the probability gets lower with each passing day. Never bet against America. But America better hurry up and get back into strong financial shape, so we are prepared to deal with a recession if it ever comes.

Hope you all have a great day. I”ll talk to everyone tomorrow.

-Anthony Pompliano

If you enjoyed this letter, you should consider subscribing to the Pomp Letter. I write 3-5x per week and explain in simple language what is happening in the economy, financial markets, and bitcoin.

Cliff Weitzman is the founder & CEO at Speechify.

In this conversation, we talk about the explosion in audio content on the internet, how text to speech audio has become so great, why exactly so many people are now listening vs reading or watching, and how this impacts content creators and human productivity.

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* ResiClub: Your data-driven gateway to the US housing market.

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You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

Today’s letter is brought to you by Cal.com!

What do I have in common with Chad Hurley (YouTube), Tobi Lütke (Shopify), and Alexis (776/Reddit)?

We are all early investors in Cal.com and we use it instead of Calendly. Cal.com is the leading open-source scheduling platform, which gives you the same superpowers of efficiency previously reserved for elite corporations and tech gurus.

Stop wasting your time with scheduling software that doesn’t work. Use technology to make your life easier.

Cal.com is transforming sophisticated calendar management into an accessible tool for all via a user-friendly interface. Set up is quick, easy, and you will never go back to your boring calendar tool.

Exclusive for Pomp Letter subscribers, use code “POMP” for $500 off when you set your team up with Cal.com. Save time. Save money. Use Cal.com.

To investors,

Javier Milei became President of Argentina last night. He was originally thought to be a long-shot candidate, but after running a high-energy campaign that embodied unique (and many times controversial) ideas, he prevailed with majority of the vote.

Argentina’s economy and the 46 million citizens have had a tough run for the last few years. Inflation is nearly 140% year-over-year. More than 40% of the country is living in poverty. Farmers experienced the worst drought in over 60 years a few months ago.

The problems were accelerating before the COVID pandemic ravaged the country. In the second half of 2019, Michael Cembalest of JP Morgan Asset Management wrote that Argentina had “defaulted 7 times since its independence in 1816, which has seen the largest relative standard of living decline in the world since 1900, and which is on the brink of political and economic chaos again in 2019.”

To put these challenges in perspective, Cembalest pointed out that Argentina’s per capita GDP has barely doubled in over 100 years.

The existing economic and political plan simply has not worked. The Argentinian people appear to be ready for a radical change.

That is exactly what Javier Milei has promised.

Nicolás Misculin and Walter Bianchi wrote for Reuters:

“Milei is pledging economic shock therapy. His plans include shutting the central bank, ditching the peso, and slashing spending, potentially painful reforms that resonated with voters angry at the economic malaise, but sparked fears of austerity in others…

…But Milei's challenges are enormous. He will have to deal with the empty coffers of the government and central bank, a creaking $44 billion debt program with the International Monetary Fund, inflation nearing 150% and a dizzying array of capital controls.”

While these economic promises may seem extreme in a Keynesian world, Milei is essentially pledging to do the unpopular things that seem to be necessary for the country to get back on track.

One reason why this is interesting is because notable voices in the United States have been calling for similar radical reform. As I wrote to this group on November 1st in my letter titled Entrepreneurs Have To Build Since Government Is Spending Like Drunken Sailors about comments from Stanley Druckenmiller:

“The national debt is over $33.5 trillion according to government measurements. The actual debt, including future entitlements that have been promised, is actually over $100 trillion already. In order to get spending under control, politicians would have to make incredibly difficult decisions that would be unpopular with voters. This would include cutting entitlements (which Druckenmiller has been saying for years) and refraining from sending hundreds of billions of dollars abroad in support of proxy wars.”

The consensus view historically has been that it would be impossible to pledge a significant cut to entitlement spending and get elected. The people of Argentina basically just blew up that theory. In fact, Milei is promising to blow up the central bank and national currency too.

This doesn’t mean that a Presidential candidate could be elected in the United States on an entitlement cut pledge too, but it doesn’t hurt to have people like Stanley Druckenmiller calling for the necessary cuts.

We can take this analysis even a step further. Cardi B, who is better known for her musical talents than her economic analysis, went live on Instagram over the weekend and delivered a profanity-laden rant about the United States’ economic situation. She explicitly called out the Biden administration’s continued funding of two international proxy wars, while places like New York City and other major cities are begging the national government for more monetary relief to handle their mounting budget deficits.

I highly recommend watching the 5-minute video. While the delivery is unique and entertaining, pay attention to the substance of what she is saying. A perfect example of “funds for thee, but not for me.”

Now let’s go back to Javier Milei and his victory in Argentina. I mentioned that he plans to get rid of the national currency, which would open the dollar for the Argentinian goverment to solidify what has already happened in the local economy. The people of Argentina have long used US dollars as their choice currency. It may have been difficult to get ahold of, but the people wanted something that was more stable and trustworthy.

This pursuit of dollars led to a rise in stablecoin usage in the country as well. Davide Montagner writes:

“According to reports from Chainalysis, a blockchain analysis firm, Argentina leads Latin America in raw transaction volume of cryptocurrencies, with more than $85 billion in value received in the year to July 2023. Within that number, the sale of stablecoins amounts to roughly 31% of Argentina’s small retail-sized crypto transaction volume.”

The logical end to Milei’s rise would be a dollarized Argentina, both officially and unofficially. But there is one tail-risk that many people in the mainstream media are completely discounting.

Milei is a hardcore bitcoiner. Dylan LeClair pointed out that Milei previously said in an interview:

“With legal tender, they scam you with the inflationary tax… Bitcoin is the natural reaction against central bank scammers; to make money private again.”

It would be incredibly difficult for Argentina to move exclusively to a bitcoin standard. Even El Salvador, the shining example of a bitcoin country, has been unable to shed US dollars for transactions and general usage.

But maybe the point is not to drop dollars and embrace bitcoin. As I wrote in my letter titled The Dollar And Bitcoin Co-Existing on November 9, 2021 — Michael Saylor and I discussed the idea of US dollars and bitcoin both strengthening simultaneously, while weak fiat currencies fail. Saylor said in one of my interviews with him:

“If I had one request from the bitcoin community, my request would be - focus your guns on gold. Ultimately, gold is being de-monetized. This is not speculation on the part of Michael Saylor. You have all the stats. It has been de-monetized for the past decade. It doesn’t have a country. It doesn’t have an army. It doesn’t collect taxes. There is not a single person on earth that is going to lie down in front of a tank to protect the nation of gold. And yet, gold is the enemy. Because gold is a dumb rock. You can’t mortgage your gold. You can’t lein on your gold. It is hard to rent your gold. Or license it. Or develop it further. Gold is not big tech. You can’t put gold on your iPhone.

There are two things that should succeed and grow — the US dollar, if you live in the United States and believe in western values and freedom and justice and western law and the progressive movement. You want the US dollar to grow. Instead of saying that the dollar is a problem statement, instead say that if you live in Africa and Asia than you would give your left arm to trade in dollars. So the dollar should expand on Lightning rails and bitcoin should expand and they go together. And we all win. We all win. The world is a better place. Every company, everyone wins.”

So maybe the direction of Argentina is the embracing of US dollars AND bitcoin. Not dollars exclusively and not bitcoin exclusively. You need both of them at the moment. And that is what Javier Milei ultimately represents.

A new way of thinking about economics that appears to be built for the 21st century. The change may be bumpy along the way, but it is becoming increasingly obvious that the change is needed.

This is something to keep in mind as we head into the 2024 Presidential election here in America. Multiple candidates have already come out in strong support of bitcoin, which could lead to a similar situation where US dollar dominance is continued and bitcoin is embraced as a digital gold.

Let me know what you think. Hope you all have a great start to your week. I’ll talk to everyone tomorrow.

-Anthony Pompliano

If you enjoyed this letter, you should consider subscribing to the Pomp Letter. I write 3-5x per week and explain in simple language what is happening in the economy, financial markets, and bitcoin.

Aaron Ginn is the CEO & co-founder of Hydra Host, revolutionizing the way data centers operate by bringing GPUs everywhere to you easily and quickly. He also is the founder of the Lincoln Network, which connects the tech industry with policy makers.

In this conversation, we talk about the state of venture capital, advanced computing, geopolitical conflict, politics, contrarian ideas, and more.

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You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

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To investors,

Almost one month ago to the day (October 19th), I warned you to be fearful if we ever saw a barrage of articles claiming that a soft landing was going to happen. In that letter, I wrote the following and included this chart:

“Bloomberg recently did a study that showed a rapid increase in articles talking about a soft landing was usually followed by a recession. You can see the large spike in recent articles mentioning a soft landing would suggest that a recession is incoming. Humans are optimistic and like to think that bad things are not on the horizon, but this study shows that we should be fearful when others are not.”

I wish that I had better news, but it appears that the barrage of “soft landing” articles is upon us. James Lavish pointed out the rapid increase in frequency earlier this week.

This phenomenon is not exclusive to the Bloomberg Terminal. A quick Google search turns up plenty of articles predicting a soft landing across every major media platform, including CNBC, Wall Street Journal, Financial Times, and many more.

We don’t have to merely rely on the mainstream media’s sudden obsession with a soft landing to find reasons to be concerned.

The real-time Sahm Rule Recession Indicator, which “signals the start of a recession when the three-month moving average of the national unemployment rate rises by 0.50 percentage points or more relative to the minimum of the three-month averages from the previous 12 months,” is the highest it has been since the Global Financial Crisis if you ignore the COVID anomaly.

We can also look at the Conference Board’s Leading Economic Index (LEI). According to Justyna Zabinska-La Monica, Senior Manager of Business Cycle Indicators at The Conference Board:

“The LEI for the US fell again in September, marking a year and a half of consecutive monthly declines since April 2022. In September, negative or flat contributions from nine of the index’s ten components more than offset fewer initial claims for unemployment insurance. Although the six-month growth rate in the LEI is somewhat less negative, and the recession signal did not sound, it still signals risk of economic weakness ahead. So far, the US economy has shown considerable resilience despite pressures from rising interest rates and high inflation. Nonetheless, The Conference Board forecasts that this trend will not be sustained for much longer, and a shallow recession is likely in the first half of 2024.”

I have no idea whether a recession will actually come. Even if we have two consecutive quarters of negative GDP growth, which historically marked a recession, the government and economic organizations may not acknowledge it as they did in 2022.

Predicting the future is hard. But it increasingly feels like the public narrative is offsides. We are not out of the woods yet, so people celebrating the Fed’s avoidance of a recession should be more cautious.

Hope you all have a great weekend. I’ll talk to everyone on Monday.

-Anthony Pompliano

If you enjoyed this letter, you should consider subscribing to the Pomp Letter. I write 3-5x per week and explain in simple language what is happening in the economy, financial markets, and bitcoin.

Aaron Ginn is the CEO & co-founder of Hydra Host, revolutionizing the way data centers operate by bringing GPUs everywhere to you easily and quickly. He also is the founder of the Lincoln Network, which connects the tech industry with policy makers.

In this conversation, we talk about the state of venture capital, advanced computing, geopolitical conflict, politics, contrarian ideas, and more.

Listen on iTunes: Click here

Listen on Spotify: Click here

Earn Bitcoin by listening on Fountain: Click here

This Founder Raised $10 Million To Protect Artificial Intelligence From Governments

Podcast Sponsors

* Cal.com - Changing the calendar management game. Use code “POMP” for $500 off when you sign up.

* Trust & Will - Estate planning made easy. They are fast, secure, and simple to use. Get your will or trust created today.

* Auradine - A new bitcoin miner powered by the world’s first 4 nanometer silicon chip technology.

* Base: Base is shaping the future of the on-chain world with near-zero gas fees and rapid transaction speeds.

* ResiClub: Your data-driven gateway to the US housing market.*

* Bay Area Times: A visual newsletter explaining the latest tech & business news.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

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To investors,

The national debt is over $33.7 trillion. The US government paid approximately $659 billion on net interest payments last fiscal year. The problem has only become worse and the US is now spending more than $1 trillion annualized on net interest payments for the national debt.

Sounds like madness, right?

The global situation is not much better. There is an article in the Wall Street Journal this morning titled “The $2 Trillion Interest Bill That’s Hitting Governments,” which reveals the shocking statistic that governments around the world are going to spend $2 trillion annually on net interest payments in 2023.

There are estimates that the interest payment bill could blow past $3 trillion by 2027, which would accelerate a number of issues in the US economy and abroad.

According to the Wall Street Journal, here is how we could fix the problem:

“The surge in interest costs leaves governments with difficult choices. As debt servicing takes up more revenue, politicians face unpopular decisions to raise taxes, cut spending or keep running deficits that will add to interest costs. That comes as they face higher military spending amid escalating geopolitical uncertainty, as well as the costs of responding to extreme and costly weather events and caring for rapidly aging populations.”

The challenge with raising taxes, cutting spending, or running deeper deficits is that no one can agree on the correct path forward. You will be hard pressed to find someone who wants to pay more taxes to a government that has proven to be inept at managing their budget. Every time someone suggests cutting spending, especially around the necessary bloat of entitlements, there is an uproar across society. And running a deeper deficit is subject to the constant critique of the population who blames politicians for their errors.

As an example, 2024 Presidential Candidate Nikki Haley was on CNBC this morning talking about the “hard truth” of cutting entitlements. Forget about politics for a second — it could have been any Presidential candidate saying this. It has become obvious that we will have to make drastic changes to the system if we want to avoid bankruptcy, not only for these individual entitlement programs but also the larger economy as well.

Here is the thing though — we never hear a plan to conduct zero-based budgeting for government spending. If the US government was a corporation, which it is not, and it had run into significant financial trouble, there would be an internal push to start the budget over from $0 and add back anything that was absolutely necessary.

This zero-based budget allows for a complete reduction in bloat, bureaucracy, and waste. It preserves the essential spending components of the budget, but only after the new leadership team agrees that the spending item is actually defendable as “essential.”

If we were to pursue zero-based budgeting for the government, my guess is that we could reduce hundreds of billions, if not more than $1.5 trillion, in wasteful spending. Why is that an important number? That is approximately the annual deficit level, so this zero-based budget would allow us to balance the budget for the first time since 2001.

It is hard to fathom an economic surplus in the United States at the moment. It is possible though. We just need leadership that would be willing to make the hard decisions. I have no clue which Presidential candidate could actually follow through with this difficult work, but it is more necessary now than ever.

Cutting expenses is not good enough. Raising taxes won’t get it done either. We must have a zero-based budget process. Start over again. Get rid of the waste. Protect the essential expenses. Treat the US financial situation the same way that a corporate leadership team would—their jobs would depend on their success, so our politicians’ jobs should depend on success as well.

A world where the US is paying $1+ trillion in net interest payments is not a sustainable world. Add in the complexity of global governments paying $2-3 trillion annually and you have a debt environment that is begging for problems.

I’ve always liked Warren Buffett’s plan to control the national debt. He once said “I could end the deficit in 5 minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP all sitting members of congress are ineligible for reelection.”

Drastic times call for drastic measures. Making politicians ineligible for re-election is one strategy. A zero-based budget is another. Whatever the solution, we need it now.

Hope you all have a great day. I’ll talk to you each tomorrow.

-Anthony Pompliano

Bailey Pumfleet is the co-founder & co-CEO of Cal.com.

Cal.com is taking open source calendar management to a whole different level. In this conversation, we talk about how to manage your calendar, how to become more efficient, and what Bailey is doing with Cal.com.

Listen on iTunes: Click here

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This 19-Year Old Raised $25 Million To Build A New Calendar

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* Cal.com - Changing the calendar management game. Use code “POMP” for $500 off when you sign up.

* Trust & Will - Estate planning made easy. They are fast, secure, and simple to use. Get your will or trust created today.

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* Base: Base is shaping the future of the on-chain world with near-zero gas fees and rapid transaction speeds.

* ResiClub: Your data-driven gateway to the US housing market.*

* Bay Area Times: A visual newsletter explaining the latest tech & business news.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

Today’s letter is brought to you by Cal.com!

What do I have in common with Chad Hurley (YouTube), Tobi Lütke (Shopify), and Alexis (776/Reddit)?

We are all early investors in Cal.com and we use it instead of Calendly. Cal.com is the leading open-source scheduling platform, which gives you the same superpowers of efficiency previously reserved for elite corporations and tech gurus.

Stop wasting your time with scheduling software that doesn’t work. Use technology to make your life easier.

Cal.com is transforming sophisticated calendar management into an accessible tool for all via a user-friendly interface. Set up is quick, easy, and you will never go back to your boring calendar tool.

Exclusive for Pomp Letter subscribers, use code “POMP” for $500 off when you set your team up with Cal.com. Save time. Save money. Use Cal.com.

To investors,

The United States is in a horrendous economic position. Our country has not had our back up against a wall like this in decades.

Citadel’s Ken Griffin, one of America’s wealthiest investors, was sounding the alarm Thursday in Singapore. His main concerns revolve around inflation and the national debt.

On inflation, Griffin is concerned that the recent rise in de-globalization will lead to a higher baseline of inflation for decades. He pointed out that the Federal Reserve has spent the last 20 years fighting deflationary forces in the economy, which made it difficult for the central bank to hit their 2% inflation target.

Now the organization faces the opposite problem.

The combination of de-globalization and monetization of the national debt provide tailwinds to inflation, which force the central bank to work diligently to suppress CPI as close to 2% as possible.

But our politicians are working against our central bankers. Griffin explained that the government has been spending like drunken sailors and no one was planning on higher nominal and real interest rates when we drove ourselves into a national debt of $33.6 trillion.

How bad is the problem right now?

The United States is officially spending more than $1 trillion on annualized interest payments to service the national debt. That makes it the second largest budget item behind Social Security.

That means we spend more money on interest payments than defense, education, or innovation. Not exactly the situation you want to be in when you are trying to strengthen a country’s financial position.

Add in the fact that Ken Griffin believes interest rates are going to remain higher for the coming years and the outlook becomes even more concerning. This is why Stanley Druckenmiller and others have been vocal about the failure of the government to refinance the national debt at low rates for long durations during the madness of 2020 and 2021.

So what can the government and Federal Reserve do now?

The short answer is nothing easy. One option is for the government to balance the budget, create a surplus, and pay down the debt. This would be the responsible thing to do, yet it seems to be an impossible task at this point. We haven’t run a surplus on the national level since 2001. I wouldn’t hold my breath on this one.

The other option is for the Fed to devalue the dollar in an effort to monetize the debt. Paying down the debt with future dollars that are less valuable has been a strategy long employed by central banks around the world. Unfortunately, this strategy hurts tens of millions of Americans and accelerates the country into a more dire long-term position.

Ken Griffin seems to be worried about this second scenario of debt monetization as well. According to Lulu Yilun Chen and Dexter Low of Bloomberg, Griffin said “the economic consequences would be devastating…the minute we start to print dollars just to deal with the possibility of a default, our economy’s going into a deep tailspin.”

It is not every day that one of the most respected investors in the world is articulating a “deep tailspin” scenario for the United States.

This leads to the question “what can individuals do?”

The answer for individuals is more complex than for the government. Each individual’s situation is different. Young people have a high risk appetite and time is on their side. Older people have the opposite scenario.

I put the options in four major categories:

* Eat inflation on the chin

* Invest in equities

* Invest in hard assets

* Buy bitcoin

The first option, eat inflation on the chin, is the biggest one to avoid in my opinion. Official measurements of inflation appear to undercount the true state of the problem, so people who choose to keep 100% of their savings in dollars will likely be harmed much more than they realize.

The other three options are directionally similar—getting out of a devaluing dollar and into an asset that is priced in dollars. As the dollar devalues, the asset prices will increase leading to an increase in purchasing power and wealth.

The decision to buy equities, hard assets, or bitcoin is heavily dependent on an individual’s situation. For me, bitcoin has served as a great option because I can ride the volatility over the long run. Not everyone will be able to do that with a large percentage of their portfolio, but for those who can bitcoin has served as a great asset through a risk-return lens.

Seeing Ken Griffin sounding the alarm about long-term higher inflation and the worsening national debt situation should get everyone’s attention. The problems are not going to fix themselves. Our leadership does not appear to be attempting solutions either. The responsibility has shifted to the individual and family to ensure they are positioning themselves to benefit from inflation, rather than be harmed by it.

My suggestion is to evaluate your options, make decisions, and then continue to monitor the situation. If you are paralyzed with inaction, it will become harder to recover.

Hope you all have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

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