E84: Markets update, crypto collapse, Russia/Ukraine endgame, state of the podcast

Starting from mid-2022, the process of withdrawing excess liquidity (tightening/quantitative tightening) will take roughly three years in total, with the bottom of the equity bear market not occurring for approximately another 18 months (around late 2023).

“it's it's it's almost half of an entire year's worth of global GDP. It's going to take three years probably of the slow, meticulous, you know, running off of money, you know, not reintroducing new money. So it seems like we're at the beginning of the beginning of something that's going to be long and drawn out... That may mean the bottom doesn't happen for another 18 months.” View on YouTube

Following the mid-2022 selloff in growth stocks, price declines (“carnage”) will subsequently spread to other major asset classes, particularly residential real estate, leading to further significant drops in those markets over the ensuing period of this cycle.

“Well, the stock market, especially growth stocks, may have taken the majority of the carnage. But you're right, there are other asset classes. And I think we're going to see the carnage start to rotate into those... So I think there are going to be more more shoes to drop.” View on YouTube

Over the 3–5 months following late June 2022 (approximately July–November 2022), U.S. CPI inflation prints will remain very high, in the roughly 7–9% year-over-year range.

“you need to buckle your seatbelt, because the next three, four, five months of CPI will probably be very, very bad seven eight 9%.” View on YouTube

(Conditional) If U.S. residential real estate prices fall by around 30% from current levels, it will create serious financial problems for many Americans, especially given rising interest rates and limited ability to refinance.

“Most, most Americans have most of their net worth tied up in real estate. And if we see a 30% correction in real estate, it could be a real problem, particularly with rising interest rates, inability to refinance.” View on YouTube

The U.S. economy will enter a recession in the near term as the Federal Reserve tightens policy to combat inflation.

“And this is a bunch of bad options. I think, you know, we are going to have a recession.” View on YouTube

During this inflation and energy-price cycle beginning mid-2022, average retail gasoline prices in the United States could reach approximately $7 per gallon nationwide.

“We could have $7 gas... Broadly, broadly, we could have $7 gas all throughout the country.” View on YouTube

As the Federal Reserve removes roughly $3–5 trillion of liquidity from mid-2022 onward, U.S. equity markets will lose at least $3–5 trillion in aggregate market capitalization, with an additional repricing from lower earnings likely causing a further 20–30% decline in equity valuations.

“it stands to reason that if the fed is going to take 3 to $5 trillion of value out, then we have to rewrite the equity markets by 3 to $5 trillion at a minimum. And then you have to rerate and Rebaseline for earnings. And so that's probably another 20 or 30%.” View on YouTube

By roughly one year after June 2022 (around mid-2023), the U.S. will be in the middle of a recession, and the amount of available venture capital funding for startups will have fallen by about 75% compared to the prior period, making 3–4 years of runway necessary instead of the previously standard 2 years.

“one of the speakers said that he said that when it comes to runway for startups, 3 to 4 years is the new two years, because if you just have two years of runway, you're going to need to raise in a year, and in a year from now, we're going to be in the middle of a recession. They're predicting they're forecasting that capital availability is going to decline about 75%.” View on YouTube

The bear-market and macroeconomic adjustment process that began before June 2022 is only at its start and will take multiple years—on the order of several years similar to the 2000–2003 downturn—to work through excess liquidity, a recession, and the Russia–Ukraine war, rather than being resolved by just a few rate hikes and months of volatility.

“we're at the beginning of the beginning. Okay. For all of us that lived through 2000, this was four years of sheer hell and a grind. Now we have $30 trillion that we have to work through the economy, a recession. We have to overcome, a war we need to end. And people all of a sudden assume that 2 or 3 rate hikes and 5 or 6 months of headlines are enough... it's just an observation that we're at the beginning of something that just fundamentally has to take some amount of time to work its way through the system.” View on YouTube

The post-2021 downturn (driven by excess debt, a recession, and war) will resemble the 2000 dot-com bust in duration, taking on the order of several years (around four years) to work its way through the system rather than resolving within a few quarters.

“we're at the beginning of the beginning. Okay. For all of us that lived through 2000, this was four years of sheer hell and a grind. Now we have $30 trillion that we have to work through the economy, a recession. We have to overcome, a war we need to end... it's just an observation that we're at the beginning of something that just fundamentally has to take some amount of time to work its way through the system.” View on YouTube

Over the next couple of years (roughly 2022–2024), there will be a large volume of regulatory and prosecutorial enforcement actions in the U.S. against crypto-related entities and individuals (by agencies such as DFS, SEC, DOJ, etc.).

“there will be a lot of action on this over the next couple of years.” View on YouTube

In the winter of 2022–2023, energy shortages and related pressures will significantly increase Putin’s leverage over Europe and will cause visible fractures within the Western alliance that had appeared unified earlier in the Ukraine war.

“by the way. That's coming. You think things are bad right now? Wait until winter and then. And that's only going to increase Putin's leverage. And that's when you're going to see a real fracture in the Western alliance. This idea that Ukraine strengthened the Western alliance. I think you will start to see the fractures come this winter.” View on YouTube

The Ukraine war and its economic fallout will act as a further catalyst for rising nationalist politics globally over the coming years, reinforcing rather than reversing the existing trend toward nationalism.

“The slow march of nationalism will continue, and this will be another catalyzing event.” View on YouTube

Over time (in the coming years), the U.S. will move toward a posture in which European NATO members are expected to bear essentially all (near 100%) of the financial cost of their own defense against Russia, rather than relying heavily on U.S. funding.

“They should be picking up 100% of the cost of that 100%. I don't know why we're paying for rich Europeans when our country is massively in debt. Why aren't we passing the bill to them for that?” View on YouTube

Joe Biden will ultimately choose not to run for re-election in 2024, instead announcing that he will retire and not seek a second term, likely citing age/family reasons amid economic difficulties.

“Well, I don't think he's going to run again. I think they're going to have you don't think Biden's... I think between then and now if the economy keeps going the way it's going, he would be a lame duck and impossible. And I think he might say, you know what, I'm going to retire to spend time with my kids and my golden years, and they might convince him that him running again is a really bad idea.” View on YouTube

The 2024 U.S. presidential election will feature Ron DeSantis as the Republican nominee and Gavin Newsom as the Democratic nominee.

“I think it's going to be DeSantis versus Newsom in 24.” View on YouTube

Ron DeSantis will run for president in 2024 and will win the general election by a large margin (a “landslide”).

“He's gonna run. He's gonna win a landslide.” View on YouTube

For the 2024 U.S. presidential election: (1) If Joe Biden runs as the Democratic nominee, the Republican nominee—whoever it is—will win; (2) If the matchup is Ron DeSantis vs. Gavin Newsom, DeSantis will win; (3) If the matchup is Gavin Newsom vs. Donald Trump, Republicans are likely to lose (i.e., Newsom would probably defeat Trump).

“I think the configurations that win for the Republicans, I think if Biden is on the ticket, I think any Republican wins. I think if it's DeSantis versus Newsom, I think DeSantis wins. I think, however, and this is sort of the nightmare scenario. I think if it's something like Newsom versus Trump, I think Republicans could lose that just because, you know, the people.” View on YouTube