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Would you accept this, so to speak, bet on the prediction market? Do you think there is a real chance that the Fed will raise rates this year, this week? I think you know that prediction markets and funds want to hedge against a binary event. That's why we have 30%, because someone needs to insure something, but I would say the probability is low.
I mean, I don't expect them to raise rates. What about any point in the future? As you know, they will watch how the data unfolds. So I think it's not a dependency on data, but a reaction to it. It seems to us that the fundamental story with inflation has really weakened because the housing market is weak, and we will see that tomorrow in the Case- Shiller index.
And if wages are not being squeezed, then the real flow of fundamental inflation that we are seeing now is only tariffs and oil, and these are not the things for which the Fed necessarily needs to start a rate hike cycle. Maybe I don't want to use that bad word " transient". They are potentially temporary , right?
Yes. And oil is falling now because certain negotiations are underway. By the way, it may grow again tomorrow. We have no idea what will happen. Depends on the negotiations. But the bottom line is that if and when a lasting peace comes, oil prices will likely go down again. The market seems to want to push them back down.
This should influence the Fed's thinking. Yes. Because then they just need to see this little bubble that they need to deal with somehow. I think to some extent they can just reduce the balance sheet instead of changing the discount rate, quantitative easing. True. Yes. I think this is the best way to dose.
Maybe they'll say, "Hey, let's try to push growth a little bit , but not to intentionally slow the economy." Cryptocurrency. Yes. And what's been happening lately is fascinating. Let's take a look under the hood of the stock market. Cryptocurrencies, for example, Ether, I think you've heard of it. Ether?
Yes, I heard. and Bitcoin— they are growing. Shares of semiconductor companies are falling. The gap between them is the largest in recent years, if not all time. But correlation does not mean causation . Are these two things related, or is it just a coincidence but interesting ? Yes. Well, the price of crypto doesn't follow people's expectations because they say, "Hey, the Fed might be hawkish, so crypto should go down." Oil prices are high, crypto should fall.
And of course, AI trading is still normal, but cryptocurrency is actually growing. Ethereum's ratio to Bitcoin is growing, although it seems that the " Clarity Act" has really slowed things down. You know that the chances of its adoption this year have dropped to about 30%. One might ask again , why should the "Clarity Act" be passed?
What is he, what exactly is he doing? Thus, the " Clarity Act" creates a national authority to regulate cryptocurrencies in the United States. So, the only structure that will be the CFTC. This is important because, as you know, big banks and asset managers are tokenizing assets and want to build stablecoin networks.
If they have to obey state rules or local regulators, it will make many hesitate. But are they "for" or " against" this? Many asset managers are in favor. Charles Schwab, Franklin Templeton Digital Assets. Because that's it, and sorry if I don't remember the years exactly. I believe the SEC was created in 1934, I think.
This is a 1934-level moment . And the reason the SEC was created was because with state regulators having one set of rules in Indiana and another in Virginia, investors were saying, "I can't manage both sets of rules." Bitcoin, like all cryptocurrency, is experiencing the same moment as in 1934 . True.
That's right. In addition, cryptocurrency turns money into software. Many things can become money: loyalty points, reputation. Then you need a governing body to oversee all of this. Currently, Japan, Russia, and Europe are already passing bills similar to the “ Clarity Act.” So the US risks being left behind.
That's why I think cryptocurrency is making a comeback, because it's being accepted outside the US . Although you say you actually think they only have a few legislative days left before the midterm elections. Do you think this could be a solution to the lame duck period? Well, I believe many still hope that something can be offered.
But it seems that many concessions have been made, but those who oppose the bill want something more, so anything can happen. Okay, Tom Lee, I really appreciate your time, as always, my friend. Thank you very much.
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