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Our weekly show is hosted by Michael Nadeau (The DeFi Report) and Ryan Sean Adams (Bankless). Each week, we discuss how we approach managing our own portfolio and the data, research, and analytical frameworks that inform those decisions — for educational and informational purposes.
Ryan Sean Adams:
[0:09] Welcome to the DeFi Report. Today's report, it's going to be a macro update today. What's the bond market telling us as crypto stalls in this low range? The biggest question right now, and a question that Mike has answered on today's report, where are risk-on equities going? Where's the risk-on market going? There are some clues in the bond market. They might be flashing a warning sign for U.S. Stocks. Is the AI bubble about to burst? I'm going to ask Mike that question. And also,
Ryan Sean Adams:
[0:40] Question of whether Bitcoin is the canary in the coal mine for all of these risk-on assets. We've got to figure out what's going to happen next, as always. Stay tuned until the end. You'll get details on how this impacts Mike's portfolio. And honestly, some adjustments that I am making personally in my portfolio as a result of reading today's report. Also, we have our first friend and sponsor at the DeFi Report. This is Galaxy. This one's for the institutions. Whether you are looking at the future of finance or the backbone of the next industrial revolution, Galaxy is a name you need to know. They've established themselves as a global leader, not just in digital assets, but also in critical data center infrastructure that's powering AI.
Ryan Sean Adams:
[1:25] So this is kind of a dual thing, crypto plus AI. What's unique about Galaxy is the way they are bridging these two worlds. They are providing a full stack platform for digital finance. So, you know, this means institutional training, custody, tokenization, and they're also building a next-gen industrial revolution through AI-ready data centers, including their Helios site with a staggering 1.6 gigawatts of approved power. This is a publicly traded company, you know, the ticker GLXY, and the leadership is bringing a level of transparency and durability. It's pretty rare in the crypto and AI space. If you want to see how Galaxy helps institutions invest, build, and transform relentlessly, go check them out. There's a link in the show notes, bankless.cc slash galaxy. Okay, we got a level set this episode. The positioning right now is kind of risk on. We got one fat pitch.
Ryan Sean Adams:
[2:20] We're waiting for the next. Mike is positioned 66% cash. He's got a Bitcoin position. There's two other crypto assets in the portfolio. We'll give you details at the end. This report, though, is about the bond market and what it's telling us. Mike, why the bond market? The bond market feels so boring. Are there clues in here for investors?
Michael Nadeau:
[2:39] You know, it's time to take a look at what's going on in macro land again. And that's what we're going to do in this week's episode. Some interesting stuff happening in the bond market. You know, this is very, very early stage, but we've got a chart up right now just looking at the long bond and the 30-year treasury yield. And we had a pretty, you know, a decent little move last week, which I would say is like not, you know, nothing to write home about just with that little move. But there was a treasury auction last week for 30-year treasuries.
Michael Nadeau:
[3:11] And this is where the signal is. What we saw with this auction is that there were just a lot more buyers. There was a lot more demand for long bonds than we've seen more recently. So the bid-to-cover ratio was 2.66, which is much higher than normal. And the primary dealer take rate was... Was much lower than what we would expect. So I want to kind of dig into like, what are some of the signals? What are some of the takeaways with sort of this early kind of warning signal that we're seeing coming from the bottom of the market?
Ryan Sean Adams:
[3:49] Okay. I don't often look at bonds. So, and I think many listeners are probably with me in that and we might need to level set. I do, however, enjoy bond macro takes because some of my favorite investors in space, like people like Howard Marks. I mean, these guys are bond investors. So there's something you can tell about the bond market that affects all other assets, because everything at some level is downstream. But going into this episode, in general, my take has been long-term bonds are kind of trash, right? Fiat, they're going to evaporate against other hard assets from a you know, a duration perspective and from a time perspective, I don't want to hold them in the portfolio. I think this report has maybe changed my mind slightly, but we'll get to that. But what we're looking at here on screen is the 30-year treasury yield. So these are long, long bonds. And there's a chart here and that's showing us something. And then you also said there was a February 12th auction, bond auction. So every once in a while at some interval, Treasury auctions a set of bonds. These are 30-year long duration bonds. And I think what you're saying is there was pretty high demand for these bonds in that investors wanted these long bonds. Previously, the demand had been lower. Is that what you're saying?
Michael Nadeau:
[5:11] Yeah, that to me is the signal. And this is like very early stage. It's one auction. But what stood out here is the bid to cover ratio. And you're right. I think the narrative or at least, you know, appetite for bonds has been very low. And so that's, you know, most people are looking at the fiscal setup. You know, the bond market doesn't run on sort of vibes and, you know, speculation. Like it's it's very like math driven. It's looking at growth. It's looking at inflation. And so when we see a rush to buy bonds, the signal is potentially that the bond market thinks growth is potentially slowing, that inflation. I think there's like kind of dueling views out there. Some people think that growth is slowing. Some people think inflation is still a problem.
Michael Nadeau:
[6:01] And to me, when you see this demand for treasuries and, you know, we've got a chart here just looking at real interest rates and breakeven inflation, and they're both coming down. And to me, these are pretty clear signals that inflation is not the issue right now. And I think that is why you're seeing some of this demand for treasuries. And what's interesting is when they do these auctions, there's a primary dealer banks and 25 to 30 banks, that's the big Wall Street banks, they have to support the treasury in these auctions. So basically, whatever the rest of the market doesn't sop up, the primary dealer banks take those treasuries. And what we saw last week was that there was only 5.9% of the offered treasuries that went to the primary dealer banks. And historically, we typically see that's like in the 10% to 20% range, sometimes 25% to 40%. So to me, the takeaway was that there is a large fire in the market. Is it pension funds? The pension funds, they have to balance their liabilities. So are they looking out and saying, we think rates are coming down. Let's buy these bonds now so that we can pay out our liabilities at these higher rates. And then what does that signal? But like I said, one auction, but this was a little bit of a phase shift from what we've typically been seeing in the bond market.
Ryan Sean Adams:
[7:30] So early signs of a phase shift, and you wrote this, it appears that the bond market believes that, number one, growth is slowing. Number two, inflation is cooling. And number three, monetary policy may be restrictive. But I got to say here, Mike, this feels like it's somewhat of a narrative violation. Okay. And let me tell you what the narrative is. The narrative is the debasement trade. Gold is going up. Long-term bonds are trashed. You don't want to hold them because they are going to debase against harder assets. If you want to play, maybe you do U.S. equities because AI is massive, but you don't want long-term bonds. The idea that bonds, U.S. Bonds, and particularly long duration, are a risk-off asset, well, that goes against the debasement trade because capital is fleeing the U.S. Because the dollar is debasing. And you're saying the opposite. You are kind of a counter, the narrative of the basement trade, if I'm understanding you correctly here.
Michael Nadeau:
[8:31] That's right. Yeah, I think that that's exactly right. And what I'm seeing here is, and I think the bond market, I tend to sort of, you know, think that the bond market's usually right, right? Because I said, like I'm saying, it's very just kind of like math and data driven. And, you know, if people are looking out and seeing and going out to buy bonds, it's telling you that they think growth is slowing, inflation is rolling over, the Fed is potentially, you know, restrictive. And that's not an environment where, you know, a debasement trade is typically on. I think that a basic country could potentially come back, you know, if you saw the monetary policy or fiscal policy shift in response to this. But we're not we're not right there just yet.
Ryan Sean Adams:
[9:15] Okay, so you think that this is basically following Michael Howell's asset allocation cycle, and we are currently in the late cycle. So commodities have outperformed, and commodities are generally the last asset class to go. And then what happens is investors turn to bonds, treasuries,
Ryan Sean Adams:
[9:35] of course, but even mid-duration and long-duration bonds. And so you're starting to see in the macro setup, some of that playing out, which means we are phasing into the risk off mode of the cycle. And what gets punished in risk off mode and what gets rewarded? It sounds like bonds would be, they'd hold up well. They are essentially the flight to safety. But what gets punished in this scenario if this setup is correct?
Michael Nadeau:
[10:03] Yeah, what gets punished is probably, you know, risk assets, commodities, and, you know, what's where I think people are starting to potentially rotate to and keep an eye on the dollar here as well. So we see the dollar getting bid. That's sort of a signal that people are selling assets going back to dollars. But I think potentially the dollar getting bid and then longer duration bonds getting bid. I think this will be somewhat, you know, temporary because, you know, here we're looking at a chart of the two-year treasury. So we're just we're talking about long bonds. Now we're going to the short end of the curve and the two-year tends to kind of lead the Fed funds rate. There's a lot of kind of history on this. The Fed looks most of the time like it's actually responding to what the two-year treasury yield is doing. And so this is interesting to keep an eye on. And it's actually, you know, somewhat restrictive right now because it looks like monetary policy is restricted because the two year is dropping below the target, you know, Fed funds rate. And it's dropping right into that 3.4% range where it's been really kind of chopping around for, you know, five months or so. And so this.
Ryan Sean Adams:
[11:15] Is- Fed funds is 3.5 to 3.75%. So it's even, it's kind of below that right now.
Michael Nadeau:
[11:20] It's below that. And that's telling you that, you know, it looks like the Fed is restrictive, you know, relative to whatever the neutral policy is. We don't really know what that is, but we think it's kind of what the two-year is trying to tell you. And it looks like it's restricted relative to the two-year. And so that looks like it's bouncing around right on a pretty significant trend line at that 3.4% there. So if we break that trend line, is that going to be a cascade? Or are we just going to kind of come down just a little bit? But that's what I'm watching now is that two-year to see, is it just going to come into the 3.2% range? That would, to me, would signal that the Fed is increasingly restrictive. And I would expect more volatility to come into the markets until the markets got some sort of all clear about, you know, how monetary policy was going to respond to that. And if that two-year drops faster, that would be potentially a scenario where the market would probably start to price in rapid Fed cuts. This is probably not something that I haven't seen too many people talking about this because I think most of the narrative is that we're in a reflation trade, a debasement trade. But the setup does not say that right now to me.
Ryan Sean Adams:
[12:43] Interesting. So the setup is you're seeing early signs of Fed cuts, growth deterioration. This could bring financial stress to risk on assets, which mean equities, which we're about to talk about again.
Ryan Sean Adams:
[12:55] But you're keeping an eye on the two-year yield. Let's talk about then the stock market right now and where we are right now is basically where... In a tech landscape. I won't call this a bubble yet, but you tell me if you think that applies. But equities have been on an absolute tear over the past two or three years, particularly US equities, particularly centered around the NASDAQ and AI stocks and the MAG7. You put it in a tweet here. This is somebody, Michael Batnick saying, this is a wild market. We haven't seen anything like this since the dot-com bubble burst. Over the last eight sessions, 115 stocks in the S&P 500 have declined 7% or more in a single day. The average drawdown when that happens is 34%. Right now we're at 1.5% below the all-time high. He posted that last week on February 12th. Is this just a tweet about growing volatility in the stock market? It's just like a wild market out there, and he brought into play the dot-com bubble burst. Are you seeing signs of something like that?
Michael Nadeau:
[14:02] It's interesting to see, again, this is like a kind of early stage. We've seen this. It's picking up. What's happening is breadth is diverging. So like earlier in the cycle, you know, as, you know, NASDAQ rises or as the MAG-7 rise, like the market has been kind of mostly rising together, right? SOS was performing or SaaS was performing fintech. Now what you're seeing is just like all these different rotations between sectors and assets out there. So I think the thing to pay attention to is just like, okay, something kind of has clearly shifted here. People are going more towards defensive stop talks, towards energy. That's kind of interesting to note. But what we did in this report this week is we try to understand when bubbles break down, if we go back to 99, 2000 and observe what was happening at that time, do we see similarities? I think there are some similarities in terms of the setup, but I don't think we're in as extreme of a potential bubble right now. We haven't had this just extreme blow off top like we had back in 99.
Michael Nadeau:
[15:14] However, there's a lot of similarities. And maybe I'll just read through a few of them here.
Ryan Sean Adams:
[15:19] Yeah, let's do it. This is very interesting. This is, I think, the key question of like, where is risk ongoing? Where are U.S. equities going? Are we in something like 1999 or 2000? So give us the sequence of events from that bubble time and let's compare.
Michael Nadeau:
[15:37] Yeah, so this is the history. And, you know, back in 99, this kind of started like mid-99. So where the bubble kind of like peaked out was like mid-99 to the end of 99. And then in Q1 of 2000 is when it burst. And so over that period, you had breadth diverging. So similar to what we're seeing now, the indices were still rising, but you had fewer stocks that were actually participating in that.
Ryan Sean Adams:
[16:03] That's what you mean by breadth diverging? Exactly. Diverging? It's like fewer stocks are getting the upside and leaving everything else behind?
Michael Nadeau:
[16:10] Yeah, there's just kind of rotation happening, new positioning, and just not just like a rising tide lifting all boats. And so yeah, so we did have this, you know, in the middle of 99 or so, we saw the same, you know, extreme levels of concentration. It's actually, it's actually more concentrated in like the MAG7 today than even it was with the top five to seven stocks back then. And so you did have, you know, concentration and returns were really consolidating. And we also started to see dispersion amongst the winners, right? This is also happening. The Mag 7 there, we're starting to see some Mag 7 players like Microsoft not do so well and others, you know, do better like Google. So we're actually, there's some similarities there. The other thing is the Fed was restrictive back then, but the Fed was actually hiking rates. So it wasn't neutral or cutting like we're seeing today, but they were actually hiking rates and they were restricted relative to neutral rates.
Michael Nadeau:
[17:12] But there was no signal of it in the economy like, you know, in 1999 or mid to late 99. So, again, some similarities here. And then, you know, when we get to stage step five here, you know, growth started to slow. Hiring started to slow. There were some leading indicators like these are the things that we're, you know, trying to keep an eye on now. Things like, you know, quits in the labor market. Like the labor market is mostly holding up. But we're trying to see if there's, you know, signals in terms of confidence and things like that. And we're starting to see that. Like, I think there is evidence that growth is slowing and some of these lead indicators are rolling over. And then what is the sort of next thing that you typically see is the bond market is usually the first ones to kind of sniff that out.
Michael Nadeau:
[18:00] And that's the big question. It's like, is that what we're seeing now is kind of a similar setup where you had this sort of like rush into tech, you know, basically this sort of like new industrial revolution that we have going on, all the investment that's going on with that and how everyone has kind of gotten a little overstretched. And the narrative is that you don't want to hold cash, you don't want to hold bonds, there's nobody in these assets. That is sort of the setup for the rotation. So we'll see. I think this is early, but I think it's important to kind of just observe what's happening out there and be prepared for what can come.
Ryan Sean Adams:
[18:43] And then what happened? So that was step six. And then what happened is, of course, the catalyst hit. And that happened in March, April 2000. There was all sorts of news of there was news of recession in Japan. It was a Microsoft antitrust ruling at that point in time. And I barely remember that. And then the narrative completely shifted and it shifted in a hurry. And then, of course, we saw a tech sell off. That was the dot com bubble bursting.
Ryan Sean Adams:
[19:11] NASDAQ dropped 78%. Oh my God, it's trading like an altcoin. From March 2000 to October 2002, bonds, of course, rallied as the defensive asset, the safe harbor asset. Defense sectors also performed, I guess that would be September 11th on the back of that. Now, if you compare that setup in those sort of eight steps to what we're seeing today, we're seeing some of these things, right? So the breadth diverging, the extreme concentration, that's clearly, we've already seen that. I mean, that's played out over the past 18 months, two years. The dispersion, you mentioned that's playing out. Step four, which is a restrictive Fed, we might be actually seeing early signs of that.
Ryan Sean Adams:
[19:57] The growth slowing, step five, I'm not sure that we're seeing it. At least it's not clear right now. Maybe inflation is cooling, as you say. housing markets seems like it could be weakening um retail sales being flat, so consumer confidence. Maybe we're seeing that. It's hard to tell. That's somewhat murky. And then number six, the bonds rallying. Well, this is what your entire report today is about. It's seeing early signs of bonds rallying. Now, of course, we haven't seen step seven and step eight when the market goes terminal and we actually get kind of a big sell off in a crash. But if you squint, I suppose you can see something similar that played out in the end of 1999 and early 2000. Now, the end of 1999, if I recall, and into 2000, there was like the mother of all candles up, right? It was like there was a massive end surge of the bull rally before all of this chaos happened. And we haven't seen that yet. So maybe there's one more candle ahead if this plays out exactly the way it did previously but again we're not guaranteed that it'll play out previously so it's not quite a one to one match but I guess if you squint you can see it
Michael Nadeau:
[21:17] Yeah, I think that's kind of like how I'm thinking about this. You know, the differences here are that, like you said, we didn't have the big, you know, blow off top. And also, like, we're dealing with like Mag7 companies that are, you know, very profitable, you know, mature companies. So these are not just, you know, just names or just software companies.
Ryan Sean Adams:
[21:40] It's not like debt funded yet, is it? It's mostly cash funded.
Michael Nadeau:
[21:43] Mostly, most of the build out has been funded with free cash flow. That's shifting a little bit this year. So the market's starting to process that a little bit. But yeah, definitely some differences. And so that's one of the reasons why I think if we do, if this starts to kind of like play out the way it's trending, in my opinion, I think, you know, maybe we get a bear market, but I'm not expecting it to be like a 78%, you know, NASDAQ drawdown or something like that. I think probably be more of like a 2022, you know, type of bear market for NASDAQ, maybe even like more mild. But important to keep an eye. We have a number of indicators here that we're just going to keep an eye on and update people in some of this research.
Ryan Sean Adams:
[22:29] Let's steel man the other side of this. Because so you've given kind of the bear case for risk on assets and why equities and NASDAQ could sell off.
Ryan Sean Adams:
[22:39] But now let's go to the other side because everywhere I look I still see bull case type signs from AI like something new with AI wows me on almost like a daily basis like the tech is real it feels more substantial than dot com stuff did you know hard to tell of course but what is the bull case if you were to steal man the other side of the argument that like what's the case for why AI stocks will continue to outperform here and we won't go in full risk-off mode.
Michael Nadeau:
[23:12] Yeah, and I think you can make a compelling case here. So I always want to entertain kind of the other side here. But I think one thing you would point to is the amount of capex spent, right? So Amazon, Google, Microsoft, Meta, for the MAG-7, you know, in aggregate announced $700 billion of capex spending this year. So that's significant, right? That's a lot of capital going into the economy. The way I sort of think about that is, you know, I sort of think it may be like sort of a rotation from Wall Street to Main Street, just because a lot of that, like we just said, this has been funded historically from free cash flow. A lot of those free cash flows are also used to buy back stock. So you're potentially taking, you know, tens of billions of dollars that would have gone into stock buybacks, which is, you know, supporting valuations. Is clearly good for Wall Street. And then now you're going to direct that money into good paying jobs. But some of these are like blue collar paying jobs and things like that. So to me, it's almost like a rotation from Wall Street to Main Street.
Ryan Sean Adams:
[24:23] You're talking about like data center build out that requires construction workers and electricians and all of the trades and all of the contractors there.
Michael Nadeau:
[24:33] Yeah.
Ryan Sean Adams:
[24:34] Okay, that's a good take. And I think that could be the case. But let me ask you, wouldn't that be good for labor markets? And if labor markets are good, that kind of takes one of the prongs out of the bear case that you were talking about earlier.
Michael Nadeau:
[24:47] Yeah, I agree. Yeah, I think this is good for job creation and especially like the like these kind of more blue color jobs. I think where the job weakness is potentially going to come from and the labor market tends to follow the financial markets. So I would expect that labor, like we did see the unemployment rate go up. I would expect that to come after. The stock market went down or so. But to me, the area that would probably be weak would be the white collar. We're seeing some signs of this already with young people, college graduates having trouble getting entry-level white collar jobs. So I think that's sort of an interesting setup there.
Ryan Sean Adams:
[25:33] That could be a rotation in and of itself. But you also mentioned in the bull case here, the counterpoint tax refunds.
Michael Nadeau:
[25:39] Yeah. Yeah. Yeah. So this is also something that's on the horizon and this is going to start to play out, I think, really over the next 60 to 90 days. We do have some larger than expected than normal tax refunds that are anticipated over here in the US. Bank of America is projecting that it's like $65 billion, about an 18% increase. And so we you think most of that would get potentially spent out into the economy. I think most of the probably, most people that are receiving an extra thousand dollars or so, I think are probably likely to spend that into the economy. So JP Morgan's estimating that if 80% of that is actually, you know, spent, that could boost the GDP by like 0.27% or so.
Ryan Sean Adams:
[26:29] And that's all downstream of the big, beautiful bill that was just signed last summer.
Michael Nadeau:
[26:32] Exactly. So that's tax refunds, potentially some stimulus out there. And then the other thing is just the Treasury. So the Treasury has been collecting a lot of tariff revenues. We are in a midterm year. Trump, even just a few weeks ago, was talking about how he'd love to send out $2,000 checks to everybody.
Michael Nadeau:
[26:53] And you can't rule it out, right? It would be kind of a weird policy to essentially tax consumption, via tariffs and take that money and then basically send it back to people. You know, that would kind of be the full roundabout there. So we'll see. But I think it's hard for this to actually come together. I think the math is a little bit tight on it. I think, you know, Congress does have to act on something like this. And we are in a midterm year and things are pretty contentious. So that's kind of hard to imagine. And then, you know, we know the Supreme Court's going to know. We're eventually going to hear from the Supreme Court. It's been delayed, I think, multiple times now, but eventually we'll hear from them and whether or not they're going to side with the U.S. Trade courts and whether or not these tariffs are going to be deemed legal. So those are like the three kind of impulses potentially, I think, in the near term here.
Ryan Sean Adams:
[27:52] Yeah, and that tariff check, that 2K tariff check, as you said, the stars would have to align here, right? Because, you know, 2K is more than the tariffs that have been collected. And then we just empty the coffers completely, not paying down any U.S. Debt, not doing anything else, just cutting it back in a check. Congress has to act. And then the Supreme Court thing. So all of that has to happen. So I guess that's the bull case. And, I mean, one thing you didn't mention is some sort of new breakthrough in AI that also just like excites the market in some way. I guess that's, you know, tied up in all of this. As you bring this to a close, as you think about managing the portfolio and what all of this means, what the bond market is telling you, what's the summary here?
Michael Nadeau:
[28:36] Yeah, I think the summary kind of, if you kind of step back a little bit, you know, we think the labor market is showing some signs of weakness. It's not like in an unraveling state, but we're looking at quits. We're looking at jobs hard to get. And those two things are moving in the wrong direction. And, you know, again, just remember that the financial markets do lead the labor market. And so I think if stress comes to the labor markets, it probably comes after a correction. We think inflation's cooling. This is a very debatable topic out there. We're looking at the truflation data. Some of the purists will look at truflation like it's sacrilegious or something, but I think it's more real-time inflation data and it can, I think, give you a little bit more of a real-time view of what's happening out there. And that's down at, you know, 0.96%. So when you see, you know, the bond market telling you that maybe growth is cooling, break-even, inflations are coming down, truflation, like there's enough kind of indicators here that maybe, you know, this is legit. And then when you look at the two-year telling you that, you know, if the bond market thought inflation was an issue, the two-year,
Michael Nadeau:
[29:53] you know, wouldn't be below the Fed funds rate right now. So that's another important thing to pay attention to. And then, you know, liquidity is tightening out there.
Michael Nadeau:
[30:04] We have, you know, real rates, while they've come down a little bit, they are still elevated at like 1.77%. We think, you know, the Fed funds rate is restrictive relative to neutral. And then, you know, something that, you know, I haven't seen a ton of people talking about is just like the refinancings that are starting to play out. Particularly in the commercial real estate sector. We didn't talk about real estate in this episode, but there's a lot of maturing debt that has already been sort of rolled forward. Extend and pretend is kind of what they call that when you extend your debt and just hope that rates come down and you have a chance to refi at better rates. So a lot of that has already been extended. There is, we think, roughly 1.8 trillion of loans that need to get refinanced. potentially this year, and that's going to happen at much higher rates. So that's definitely sort of like a tightening on liquidity. And then another wild card is just tariffs. We know tariffs are taking money out of the economy.
Michael Nadeau:
[31:08] We do think that like the tax refunds are going to offset that on the fiscal side in the near term. And the final thing is the consumer. You know, it's early stage on this, but we see some signs of weakening. And what we're looking at there is the savings rate has dropped to 3.5%. The pre-pandemic normal was around 7.5%. So that is telling you that consumers are spending into their savings.
Michael Nadeau:
[31:37] We've seen that retail sales have been coming in flat for December. And then when you see savings rate declining while credit card debt starts to grow, That's a pretty clear indicator that the consumer is starting to come under a little bit of pressure. So we're starting to see some early signs of this. And then when you look at the confidence stuff, obviously, we have never seen consumer confidence at lower levels than we're seeing right now. A lot of that's related to the K-shaped economy out there. So that's kind of like the, I guess, big picture setup for us and what we're anchoring to in the data.
Michael Nadeau:
[32:16] And then, you know, one of these things that I just keep wondering is like, you know, Bitcoin started to correct about four months ago, a little over four months ago. And is that sort of the liquidity index potentially for, you know, the trad fi markets? And is that a leading indicator? We've been looking at and just doing some backtesting and looking at correlation. We have found that, the correlation is stronger during bear markets and that Bitcoin does lead. So the correlation was 3.3 times stronger in bear markets. So something to keep an eye on. So when you add it all up, we're shifting towards like our risk on position here.
Michael Nadeau:
[33:00] But this setup to me feels like sort of a, let's be patient. This is a wait and see sort of market for right now for me.
Ryan Sean Adams:
[33:08] So if you're right and Bitcoin is the canary in the coal mine and it's leading the NASDAQ again and Bitcoin is down, that's just a prophecy as far as what's about to happen with U.S. equities and stocks. And it may not be a dot-com level bust, but you would forecast based on all of this that the evidence is pointing towards risk off, a.k.a. You don't want to be over allocated to stocks at this point. And I would imagine crypto assets, if the NASDAQ falls off, if S&P falls off crypto assets, they're still kind of positioned as risk-off type of assets. They're going to get hit a second time?
Michael Nadeau:
[33:52] Possibly. Possibly. I think, you know, we've already come off quite a bit. I mean, I know people don't want to hear that. I mean, a lot of altcoins are down, you know, 80, 90 percent. Bitcoin's down almost 50 percent. But it's hard to imagine a world where they wouldn't be hidden. And it probably wouldn't be as bad as what we've seen in some of these other drawdowns. But we'll see. It's going to be interesting to see how this starts to play out here. And I don't think anything's imminent. I think it's kind of like a wait and see market where we're roughly four months into this latest Bitcoin bear market. And at least 10 to go, like 12 months or so. So I'm trying to stay patient. I think patience is kind of the name of the game right now.
Ryan Sean Adams:
[34:36] And so that means you are waiting for your next fat pitch, I suppose, for a Bitcoin price. Right now, positioned at 27% of the portfolio in Bitcoin. The other assets you hold in crypto are Ether and coin. You just kept the coin stock. You're still kind of bullish relative to other assets?
Michael Nadeau:
[34:52] Yeah, we sold a decent amount of it, but still held on to a little bit of a coin and potentially looking to add to it. We actually were going to be covering coin on Friday in the watch list. So we're going to have some interesting data and, yeah, a good report on Coinbase. If people want to subscribe to our research, we actually give you the price targets and access to our portfolios if people want to sign up for TDR Pro. Otherwise, the watch list is free and the data that goes with that.
Ryan Sean Adams:
[35:25] The watch list reports are free and those come out on Friday and otherwise almost a 70% cash position. So still kind of waiting. I got to say, after I read this report and weighed it with some of the other things I'm seeing in the market is the way I have adjusted my own personal portfolio is selling some stocks. So, you know, like U.S. equities, it's hard to kind of sell. It's very painful to sell right now when you're looking at everything that's going on in AI. But this has caused me to reallocate a little bit, warm up to long term bonds a bit more. My previous philosophy was like, they're trash, they're going to zero. And while that might be true in the long run, right, if you're doing a cycle type play, they're not bad assets to hold. I choose to generally express my view on your cash assets just through money markets and short duration treasury. So I don't have to play that game.
Ryan Sean Adams:
[36:20] Long-term bonds, mid-term bonds, not too bad right now in this market. So this report and others like it have actually caused me to adjust my own portfolio. So thank you for that. And we'll see if this happens. Guys, of course,
Ryan Sean Adams:
[36:35] you can catch these episodes on a weekly basis. Mike and I drop them every week. You can subscribe on YouTube, Spotify, RSS. I want to thank everyone who gave this podcast a five-star review last week on Spotify. We've seen a whole bunch of those pour in. If you haven't, and you're enjoying this, if this is part of your 2026 crypto journey, go ahead, give us a five-star review on Spotify, comment on YouTube. Otherwise, just engage with the content. That's how we propagate this to more people. Got to let you know, of course, none of this has been financial advice from Mike or myself. We're just investors on the journey alongside you. Until next time, stay curious.