Ep.131: Is Bitcoin Heading To $150,000?!

Couple of things we're going to talk about in this episode is Bitcoin, and prices last week have reached back to the levels of around 35,000. It's the highest level since May of 2022. I even got a text this week, very worryingly, from a dear friend of mine that I've known for a long time that I don't speak to that often, and I get a random text and all it said was, "Ant, what's going on with this Bitcoin?" And I was like, "Oh no." You know what the translation of that message actually is?

What they're actually asking, "Should I buy Bitcoin?" Yeah.

And you know what? I sold it and it fell. I don't know if you've seen it's fallen the last, the most recent sessions. No. But yeah, that to me was a good nudge that we probably should comment on this because if that person who has nothing to do with finance is sniffing around Bitcoin again, it's probably worth investigating.

And not—

and we, there are some reasons, and we'll dive into some of those, like ETFs and so on. Uh, we've also had breaking: the FTX founder, your man SBF, Sam the Man, has been convicted of fraud and money laundering by a New York jury. Could face— actually, I think the maximum sentence potentially is 110 years.

Yeah.

In jail. So yeah, bang, bit— it's a bit odd, the maths and how the Americans do this. But yeah, um, we'll, we'll touch on that. And then Apple's earnings came out last night. Their shares actually dipped, um, more than 4%. That's 4% lower. So we'll have a look at why that happened. And then we've had two central bank decisions, Bank of England and the Federal Reserve. The latter actually has been a catalyst for Wall Street to have a really stellar week after everyone was saying that— I can't remember the stat now, it was like the, the month of October, the amount it sold off, or the consecutive sell-off sessions and all this sort of thing. And then here we are, Amazon's up I think 14% on the week or something crazy like that. So such is the, the wonderful world of markets. We'll look to discuss why equities have reacted so positively to what we've heard from the Fed this week. So yeah, maybe we could kick off then with Bitcoin. So prices have been going up. Why?

Well, they've doubled, more than doubled. That's why everyone's like, oh my God, Bitcoin, what's going on? Um, if you go back to January, actually, well, we're going to talk about your man Sam, SBF, um, because actually the reason why I bring that up now is because On my birthday, which actually is not today, by the way, it was yesterday, 2nd of November, on my birthday in 2022, that's when the whole kind of, um, the whole kind of saga kind of imploded. And that's when FTX filed for bankruptcy, which led to— it was the final nail in the Bitcoin coffin of the big sell-off from the peak in 2021. Okay, so there is, there is kind of some, some obviously some connections here between Bitcoin and obviously FTX. And, um, you know that, so we'll come back to that. But yeah, November of 2022, Bitcoin dropped from— it was trading about $22,000 and then it crashed to $15,000. That was the low. Hung around $15,000 till the start of this year. Now it's up, uh, it's trading at $34,362, so it's more than doubled. Um, and yeah, a large part of that— we've had a big rally in the last sort of couple of weeks, and this is mostly around two— well, there's two things. The timing of the, the, the most recent push-up to the highest levels we've seen in 18 months is off the back of, um, some, some news flow, some specific news flow, and this is around the regulators in the US. And the, the word on the street is that the, you know, US SEC, the Securities and Exchange Commission, are most likely apparently going to give BlackRock and other financial companies permission to launch exchange-traded funds that invest directly in Bitcoin. Okay, so it's kind of further legitimize, um, that, that this coin, and therefore by extension, the adoption of the coin should, yeah, increase. So this is all on the demand side, right? All on the demand side. Demand should go up because these factors— and this news on the regulatory side dropped back, uh, I think it was 23rd of October, and you saw a big spike to the upside on that day. And Bitcoin's kind of been trundling higher sort of ever since. So that's, that's, that's, that's your number one story on the demand side. There's then at the same time— oh yeah, cool.

Well, just before, before you, you go on, could just give us a brief one-liner? What is an ETF?

Um, well, so yeah, it's a good question. It's a derivative product. It's a synthetically created market, um, whose underlying physical asset is Bitcoin. So you'd be able to basically trade, trade Bitcoin without having to mess about owning it. And I don't know, getting your digital wallet and where you're going to hold this and all that shenanigans. It means you can get exposure to the price swings in the physical asset Bitcoin by using— I know it's physical assets, probably the wrong terminology given it's a digital asset, but this is derivatives versus, you know, traditional assets. We use that word physical, the real thing, and then you have a derivative on top.

So you, so you are, so you are offsetting some of the risk. And so that incentivizes then more larger scale adoption by institutional holders, right?

Or so, yeah, you, you make, you made a point that I didn't make, which I should have done. ETFs aren't, so you can use ETFs for two things basically. Number one, it's speculative. So you can just buy and sell the ETF trying to profit from the underlying Bitcoin price movement. The other key thing about an ETF is it can be used for hedging. So if you own Bitcoin, the, the actual Bitcoins, and if you're worried that Bitcoin might go down for whatever reasons, then you can actually go short the ETF in order to hedge off and neutralize your exposure to that downside move. So yes, it would make— it would provide a vehicle for owners, for it to be safer to own Bitcoins, therefore further legitimizing and further probably increasing the adoption of this at an institutional level.

Yeah, just, just to, um, get the, get the juices flowing, there was a note out of Bernstein. I don't know if you saw this. No. Obviously they've put a note out. They're all, all these brokers will come out now. They said the price of Bitcoin could rise to, uh, drum roll, $150,000.

Yeah, I did see that.

And they was— they, they expect the ETF approval— so this is the logic— they expect the ETF approval would shift up to 10% of Bitcoin's circulating supply toward ETFs, and the approval would allow conventional investors to get Bitcoin exposure into investment portfolios. The idea being here is there is one, isn't there? There's Grayscale's Bitcoin Bitcoin Trust, I think is the one at the moment, right? Which presently holds around 3% of outstanding Bitcoin.

Okay.

As a context point.

Yep. Yeah.

150,000. Here we go.

Wow.

You know, put your strap in.

Let's go. The circus is back in town.

You know though that that's going to, you know, I'm going to put the title of this podcast, is Bitcoin going to 150,000? Um, we should have a bet.

We should have a bet. When will the first $1 million prediction be?

By the time we reconvene next Friday, there will be one broker that will say it's going to a million. I, I actually know who it is because, uh, I was reading something about Cathie Woods trying to crack Europe, so she's going to be pumping the million call again.

Yeah, yeah, yeah, yeah. So here we go on that. Anyway, there's a second part to this story which isn't quite as Yeah, October the 23rd was when that SEC news kind of dropped. There's another thing that we've been— we've known about for a long time, but now it's actually fast approaching. So this is on the supply side. So this is on the mining where you— your Bitcoin miners, um, basically they get rewarded in Bitcoins for their mining work. And it used to be the case that miners would get 6.25 Bitcoins for every new block. That they mine on the chain. Okay, so they get 6.2 bitcoins for that job. As of 2024, as in January 1st, so in 8 weeks, the, the reward amount halves. So from January 1st, you actually then only get 3.125 bitcoins for each mine blocked. This has been known, it's, you know, it's been preset So it's, it's not knowledge that's new, but that— so this is on the supply side. So the idea being in theory, well, hang on, if, if the reward's getting halved, well, less incentive to mine, therefore less mining action going on, therefore less supply. So here you've got that perfect concoction of expected future increase in demand from this ETF thing at the same time as expected decrease in supply, future supply. So both of those things are positive for price, which is why you've just had this little burst to the upside.

From a macro perspective, geographically, where is the mining concentrated? And I guess my question being, if it's China, and China's having domestic challenges right now, does that impede mining potential?

Probably. And then throw in the cost of electricity, which is, I mean, all right, it's come down, but it's not back to levels sort of pre-Russia-Ukraine war kicking off. So I mean, that's got a factor in as well. But yeah, China, I mean, it's always hard to predict what might happen with regards to Bitcoin mining in China. But yeah, you're always at risk of at any moment Xi Jinping might turn around and make a decision. So yeah, that is, that is at risk always.

But sounds like we're talking the 150 book here. But okay, so, um, unless you have anything else to add on, on Bitcoin.

No.

Um, with FTX, you said it was a year. I'm a little bit shocked that they've managed, given I remember seeing some infographics at the time of this spider web that he had created. I'm gonna say he has created it as much as he'll tell me different. And I just thought that's gonna take years to unpick, but I guess there's so much political will, right, to get him sentenced.

Yeah. He basically conned like your big celebrities, your big venture capital firms like Sequoia. He conned, you know, he was funding political campaigns. I mean, Yeah, this, this is like, it's punishment. It's almost like if you, if you went back 5 years and you said, right, let's create a sensational, the most wildly sensational story that we could possibly come up with, with all these characters, and then basically this is it. It's literally the best script. It's the best fictitious novel that you could possibly, possibly ever come up with. And this is why, of course, it's such such a huge story and obviously the media are absolutely loving it. But in a nutshell, it's just a guy that ultimately, wow, I mean, to start off with, to be fair, set up this company that just went through the roof. His timing was perfect. It just, he wasn't equipped. To, well, run a company. Let's just put it like that. Never mind a company that's rapidly growing and a company that's becoming hugely successful. And the wheels came off and he was woefully ill-equipped to deal with the wheels coming off and just went to straight out fraud and panic to try and plug the holes in the hull. Yeah, did basically committed every securities and wire fraud that you can possibly imagine to try and stop it all imploding. I think he'd built a pedestal for himself. Probably it's the shame of it all that probably drove him. I would say that not wanting it to be revealed that he's actually not this kind of demigod that, you know, a lot of people had started to kind of post him as. But yeah, I mean, in short, so in 2021, it's kind of amazing. He did— I mean, he raised so much capital, and Sequoia, one of the biggest, you know, VC funds, they paid— they bought a chunk and actually valued the firm at $30 billion. This is FTX, valued at $30 billion in 2021. 2 years ago, wow, it was worth $30 billion. 12 months after that, they filed for bankruptcy. 12 months after that, he's guilty and he's going away for 100 years. So, um, it's quite an extraordinary, um, story. But in a nutshell, there's two entities here. I'm not going to go into it in any detail because, I mean, I'm sure people have been reading about this, but you've got FTX, which is the crypto exchange, um, and then you've got Alameda, which is the crypto hedge fund. Okay, now this guy, Sam Bankman-Fried, he had a bit of a track record, you know, very smart kid. I can't remember which uni— did he go to Harvard or was it Stanford? It was one of those, um, or maybe it was MIT, I can't remember. Anyway, then job at Jane Street as a trader, like grad position, like one of the, the best grad roles you could possibly get on the street in terms of earning. Was very successful there for a few years, then he jumped out and set up Alameda, um, to, to kind of continue his trading. Um, and then, then he kind of separately set up FTX, which is a crypto exchange. Okay, now obviously in 2021, what happened in 2021? What was the price of Bitcoin, for example, um, in 2021? Well, in October, well, actually again, my birthday. I don't know what's going on with my birthday and crypto and Sam Bankman-Fried, but basically on my birthday it hit a high, $64,000. $65,000, um, in 2021. So of course, you know, he's running a crypto hedge fund, um, he's running a crypto exchange. Crypto is like going to the moon, everything's amazing. His company's worth $30 billion, okay? But of course then the, you know, the crypto winter set in and crypto— Bitcoin went from $65,000, as we've just discussed, down to $15,000. And so of course with that, his hedge fund started to hemorrhage cash and, and, you know, their trades and the valuation of their positions were collapsing. Um, and so they started to do some dodgy dealings between FTX and Alameda, and they started like these kids, and they were kids really, woefully inexperienced people to be running these businesses. They started to basically fabricate their balance sheet, and I think One of the hugely, amazingly ridiculous things, they had 7 different balance sheets, 7 versions of the Alameda balance sheet, all on just an Excel spreadsheet. And depending on who they were talking to, they would decide which balance sheet they should use for this conversation, which is obviously illegal, highly illegal. And one of the counts that he's being done on and will go to prison for. Um, but basically they were covering it all up, and ultimately Coinbase, um, in the end leaked one of the balance sheets of Alameda. And on the back end, basically it just showed that Alameda's capital was just purely— it got down to just— it was just FTT-based capital. It was all FTT. FTT being Sam Bankman-Fried's FTX coin that they had created themselves. So all of the worth was just all in their own coin that they had created. Okay, and then it was all dodgy. Hang on, what are all these wires going from FTX to Alameda? And hang on, what's going on? And basically, you know, basically Sam Bankman-Fried was, you know, bought, you know, bought raising capital from Sequoia, was also taking money out of people's accounts to plug holes. All a massive fraud and an implosion. But yeah, then the final nail in the coffin, which adds another little twist to the whole story, there's another rival exchange called Binance. And your guy CZ, who's the CEO of—

This has to become Netflix, isn't it?

Oh my gosh, best movie. Anyway, it's a guy called Changpeng Zhao, but CZ as he's known. He is— well, and if you believe Sam Bankman-Fried's story, he collapsed FTX by basically after this Coinbase leak, uh, CZ, who held and owned a lot of FTT tokens, sold— one of the biggest holders of those tokens sold all of his tokens, basically just collapsing the FTT market. Collapsing the value of FTT, which was the only asset that Alameda had. And so the value of all of Alameda's assets collapsed to basically zero and it all went bankrupt. And there we are.

Would you, stepping out of the, the kind of madness for a second and looking more long-term, do you think that this situation actually has done crypto a favor in potentially legitimizing it more because of increased scrutiny and therefore an, uh, a speed up in regulatory kind of intervention. And so actually there's, someone's gotta be a fall guy and that's FTX, but it's a, it's a good thing for those more bullish of, of crypto, even though Obviously the economic climate is really not particularly conducive of like it was a couple of years ago.

Yeah.

But more long-term in terms of adoption, wide scale.

Yeah. I think along this journey of crypto, I think this is an important milestone, an important chapter, if you like, of, yeah, cleaning it up, you know, getting rid of the fraudsters. And I think that it's not a surprise that something like this happens. You know, I think basically this is just the latest episode of, you know, in the hundreds of years of assets, right? This is a brand new— a brand— still a brand new asset, right? It's like the Wild West, like literally completely unregulated landscape. And if you've got the Wild West, well, of course you're going to get people that are trying to jump on the bandwagon and like Sam Bankman-Fried trying to exploit the fact there's no regulation, trying to make money fast. And then it's obviously a wild ride. And when things, as I said, when the wheels come off or as the tide goes out, you find out who's not wearing any swimming trunks. And Sam Bankman-Fried didn't have any trunks on.

Ah, you love that analogy.

I do.

It's a reason you always go to that. It's like your go-to.

It's my favorite.

Well, on that, on that visual, we'll move on to Apple. So Apple shares, as I said at the top of the show, they, they dropped about 4% after market. This is following the release of their latest quarterly earnings. Just having a quick look through some of the numbers The EPS, the earnings per share, beat expectations, uh, $1.46. The revenues, um, did beat expectations, $89.5 billion. That was just a touch above expectations. I'll get into why that's— why that's not as good as it might seem in a moment. Just quick run-through of the other kind of line items that make up the, the main focus that investors look at. The iPhone was in line. Mac sales were a large miss. iPad was a slight beat. Wearables was a miss. Services was a miss. Gross margins were up a touch. So first of all, when you look at through that, that list, that product list, if you like, well, including services and things like that, normally you're used to just seeing beat, beat, beat, beat, beat, beat, and it's almost a guarantee. So point one is There's a couple of negatives there just in terms of major revenue centers. Revenue though, as you were just about to allude to, was a key one. So revenue came in at $89.5 billion, expectations are for $89.3 billion. The only problem is that that just meant that overall sales now have declined at the firm for a fourth quarter in a row. And that hasn't happened since 2001. So we're going back a long time where we've seen a continuous decline in revenues at Apple, being such a beast that it is. Um, some of the other things that I saw that were negative, because I'm going to stick on that side given the share price reaction, um, was they, they don't give a defined outlook like other companies do. It's one of those things that I always think they really are the master tacticians. They've somehow managed to engineer a way where they can just get away with not giving an outlook, and people are okay with that, even though all of the other big tech firms like Amazon, for example, they'll have to give a, a definitive dollar value range.

Yeah, a revenue range. I said Apple don't give a revenue range. Do they not?

They don't.

Wow. I didn't know.

So, you know, like, like everything, like they won't report specific iPhone unit sales. They, they kind of strip out anything that could create, it's like a black box, negative headwinds. And so, yeah, essentially on the, the outlook, what they did say is that one of the things that, um, so how this will work is after the earnings come out, the, the CFO typically, but in this case Tim Cook would join the call. And that would be a call with analysts where they talk through the presentation of earnings. And one of the big points that the company gets pressed on at this time of year is we're going into peak consumer period, which is obviously the Christmas season. And so they were probed for a little bit of guidance at least about what do they think about that period, because it's a key one from, from revenue perspective. Um, and they said December quarter revenue is going to be about the same as last year, which is effectively a 5, 5% miss against what Wall Street estimates were, um, when he made that comment. So they're basically saying revenues have gone down for the fourth quarter in a row, and also we're going to have a pretty lackluster Christmas period as well. Not only that, the final one The trio of arrows here is the, um, increased competition. And they were talking about China, and China was interesting on a few different levels because I, I believe Huawei came out with a bit of a, a bolt from the blue with a shock new release of a new product, and it had domestically made chip within it. And it was like, I think it caught Apple a bit blindsided. So competition has increased. And because the chip— I was reading one take on this was that because the chip is Chinese-made, there are some people who are feeling patriotic, are drawn to the product for the sake that it's Chinese, not American, given the then political tensions, which is the next point within that mix that can impact them in China. And then there's the economic situation that's just happening, unfolding at the moment domestically in China anyway. So all of this meant that revenue in Greater China declined 2%. And this is becoming an increasingly, uh, kind of a strategic pivot that China have been trying to do, which is engineer growth in that region.

Yeah.

And Greater China revenues were down 2%. So yeah. Any, anything in those that, that were a surprise or?

Yeah, on that China front, I guess. So the revenue was $15.1 billion. So yeah, as you said, down 2%. But that was more than— not only is it down, it was more than $2 billion below expectations. So that was definitely one of the most notable negative surprises in this whole report, even though there are a few negatives. Obviously, the headlines are going to be revenues dropped. And look, well, and I'll talk about the share price in a minute. Just back to services that you mentioned. So services are stuff like App Store, a bit of advertising in there, stuff like their iCloud, uh, video, Apple TV, it's like Apple Care, this kind of stuff, right? So you mentioned they missed expectations, but I mean, given the fact revenue at a top line didn't grow, or in fact dropped, so the services revenue was up 16.3%. So it is the growth part of their business, and it's actually about 25% now. Of the total revenue. So, and, and the great thing about their services business is much higher margin. So because an ever larger proportion of their revenue is from the higher margin services bit, it means their margin overall as a company is improving, which means therefore their profitability is incre— is improving. So actually their EPS, their earnings per share was actually 13% up at $1.46. So they made slightly less revenue, but their profits were up. And look, I think like in many ways there's some parallels between Apple and the other big, big tech giants in that they've got, they've got a product that made them the iPhone. Okay, now you could say like, I don't know, with Amazon It was their online retail store, right? Or Google, it's search, or, you know, Meta, it's Facebook, and Microsoft, okay, it's Windows. Okay, you got the big core product that made them, but as time's gone on, they've been diversifying and, you know, spinning off other stuff that's higher margin. So here with Apple, iPhone sales are becoming a an ever less, an ever smaller proportion of their total business because it's not growing like the services side, right? Amazon, it's with AWS, that's the big growth part of their business, and that's much higher profit margin. Microsoft, it's with Azure, you know, um, and so on. You can go through the list. So yeah, I do think we're in that kind of limbo period where the big product iPhone is still the dominant part of their revenue, and therefore they're at risk for stuff like China demand and so on. Um, and, and those services side are still the smallest part of their business. But I don't know, in 5 years' time, I would think the balance of power would have shifted and services will be on net probably the biggest part of their business, right? And so Yeah, it's an interesting limbo period we're in. Final point for me, I think, is just then you got to realize with the share price— fine, the share price is down 3%, um, and it's actually down— it's been trending lower for, for 3 months now. The high of 2023 was actually on 31st of July, um, so yeah, we're kind of over 3 months now of a downward trend. But what happened before the 31st of July? Well, the share price went up 50% on the 31st of July. Apple's share price was 50% up on the year. 50%. So yeah, it's just come off the top because these Magnificent Seven, you know, unless your numbers are magnificent, then it's not good enough because of what's already happened to the share prices. So yeah.

So, so again, step out. I'm gonna sound like a broken record here. You step out of this short-term noise and actually they're down 3, 4% and you step back and you look at these revenue numbers and you're like, hang about, these, some of these numbers have missed, but they're clocking in $7.5 billion of Mac revenue, $6.5 billion of iPad revenue. Nearly 10 billion of wearable revenue. And then you think, I read a line that their active devices within the Apple ecosystem continues to get bigger and bigger. It's at an all-time high, which some would suggest then that there's plenty of upside for the services revenue division because the device ecosystem is forever growing. And so there's more market there to penetrate. So Again, is this a necessary evil where you cannot live in a world where a share price is priced for perfection? And so you get rid of some of the froth, and actually this is a healthy reversal for a longer-term trend higher for a company that is only really going to get bigger, I think.

And the share price is 31% up on the year.

Yeah.

Oh yeah, you can't argue with that. Although I will say, technically, I've just had a look at the chart Some— if you're into your technicals, some are quite interested in this little slide. Not, not necessarily off the earnings last night, but just over the last, let's say, 4 weeks. This kind of the latest leg lower in this slight sort of downtrend we've had. We've actually broken below some of the key tops from 2021 and 20— yeah, so the 2021 and the 2022 all-time— well, no, It's not all-time highs because we broke it summer of 2023, but, um, the, the top in 2021, which is quite a key top for tech because most of the tech industry, their all-time high is the 2021 high when we're in that kind of bubble. Um, not many stocks have then gone and beaten that share price since. Apple has. Um, but this latest move lower has taken us down below that high. That high is like around about $175, and we're now trading at $171. So technically there's a bit of a key support level that's been broken, which is a technical negative.

Um, but that technical negative, then where does the next line in the sand sit? Out of interest, this—

that's— I, I would probably call it— well, you probably got to go to 155 to find the next kind of, kind of key technical support. That was the, the summer— yeah, August high in 2021. And then also another key top, October '22 and, uh, January 2023. So yeah, right about 155. Okay.

All right, well, let's, let's go on to the third segment where, just briefly to, to wrap things up, a quick word on the fact that Wall Street has rallied super aggressive. So for anyone who's I guess new to markets, often you can get quite kind of drawn into the mass media. And certainly when things are negative, that really taps into the human psyche and, and it kind of perpetuates. But actually, if you look at this week, I was just looking at the heat map. And the heat map, essentially, for those who, who don't know what that is, is basically you can look at different stock indices, but people tend to look at the S&P 500. So it's the 500 largest listed companies in the US, and it gives you a nice— I think it's 11 sectors, so good representation across the different mix of different types of companies. So you've got technology in there, uh, consumer cyclicals, financials, energy, real estate, everything in between. Uh, and it gives you a color representation of the week. And if you were to look at this heat map for this week, apart from a couple of, um, individual sectors, it looks like namely healthcare drug manufacturers, have had a pretty tough week. So I'm sure there's some news that's probably regulatory or some ruling that's weighed on them because all the biggies are down— Merck, Pfizer, and so on. Uh, Chevron also down. But if you look over in the tech space, Amazon is up almost 16%. This is one week. Um, Apple's up 6.5%, although all that's going to be paired a little bit. So even on the week Yeah, they're up, up despite the headline. Uh, Microsoft up over 6%, Nvidia up nearly 8%, Tesla up over 6%. So what on earth is driving a lot of these gains? And the main thing here is about the Fed. If you actually look, um, at what Jerome Powell was saying, and again, this is one of those things where it's a very nuanced thing when you're monitoring the speeches out of these central bankers because they never will pre-commit for fear of then having to live up to that. And I guess conditions changing and then not being able to fulfill that forward guidance and therefore total loss of credibility. So here it was all about what did Powell say, and the reason why is because interest rates were expected to remain on hold at the current range. And what he said was, slowing down is giving us, I think, a better sense of how much more we need to do, if we need to do more.

There you go.

And that was a trigger. I mean, at the time, stocks bolted upward at the time, and the 10-year US Treasury yield fell, because remember, as the Treasury yields— I think when you and I last spoke a week or two ago, everyone was panicking about, um, they tumbled below 4.75%, and that's the first time in a fortnight I think it's gone back below that level.

It's trading 4.66 now. It was about 5%, um, yeah, 2 weeks ago.

So, so interesting, isn't it? It's like, it feels— and I think I, I do say this often, that markets always overlean into a lot of these subjects, like the yield thing. It was kind of like, oh my God, hysteria, this is it, this is what's going to break the camel's back in the equity market. And then here we are a week later and the S&P's rallied like 300 points. Um, yeah, so behavioral.

Yeah, right, 6 words, isn't it? Like, if you're a trader Um, like back in the day, we would obviously be listening to the Powell press conference live, and you're like, you're hover— you're, you're— it's like your, your hand is on the mouse with your index finger hovering. You're just waiting. You're waiting, right? Is he going to say anything? Is he going to say anything that's significant? And you're just basically waiting to pull the trigger? And can you pull the trigger at the right moment when he said the line? And if we need to do more, that was it. That's when the trigger gets pulled. That's basically, yeah, I mean, it's all very subtle and I guess we read way too much into it as traders, but ultimately translating that, he's basically saying were at the top, we're not going to hike anymore though. And look, I think you might say a lot of people thought that already. I think the chances of another rate hike— I think, uh, you might have to have a little check whilst I'm talking, but I think the, um, the chances of a December hike dropped, um, down to less than 20% maybe. So it was, it was below 50% anyway. So the, you know, a lot of people were thinking the Fed aren't going to hike anymore. But that was pretty much, I guess, Powell's— look, I guess, yeah, my point I want to make, we'd had really strong economic data, right, over the last month. We're going to get non-farm payrolls again today. The non-farm payrolls figure last month was huge, amazing, right? So we've had really strong data which fed into then people worrying the Fed are going to have to hike again, which sent bond yields higher. Sent stock markets down. And then here we are with Powell going, actually, you know what, maybe we won't have to hike again. So that kind of mini panic that the Fed aren't yet at the top— I think what happened this week was that panic, we got over it, and actually the Fed probably are at the top. That's kind of what happened.

Good summary. All right, well then we'll look at the British pound, which actually benefited yesterday after the Bank of England kept interest rates on hold. And despite them keeping on hold, which might then be like, well, why did it rally? Well, one was the context at the time. The Bank of England announcement comes out at 12 o'clock Thursday. The Fed comes out Wednesday night. So just given what you were mentioning, Stocks are rallying, yields are falling, the dollar as a consequence then in that asset class reaction was falling. So you're into a state of a weakening dollar, and then the Bank of England come out, they hold rates, and uniquely to the Bank of England, you get a vote split of the Monetary Policy Committee, the MPC. You don't get this with anyone else, but this acts as a secondary reading into how tight were the deliberations within that committee about what's the best course of action. And that split was 6-3. Um, 3 of these members, for those of interest, Catherine Mann, Megan Greene, and Jonathan Haskel, they all wanted to hike. And their rationale there was that they felt the labor market remained tight along with elevated measures of services inflation. And wage growth. So we need to go again, was their view. And the market was a little bit caught by surprise by the fact that they held such a stance to follow that through and vote against the majority, albeit that they lost 6-3 and the Bank held. Any surprises there at all from your point of view?

Yeah, I mean, slight surprise on that vote count. Yeah. For sure. I mean, I think it's pretty— what the Bank of England said is, because their assessment of economic conditions are pretty negative. And I guess it's quite amazing, thinking back to trying to marry together the US and the UK here, the Fed and the Bank of England. We had that mini panic about the US, oh, they're going to have to hike again. The reason behind that thought was because the US economy is really strong, right? So, but in the UK— and look, to put a number on it, in Q3, the US economy grew at 4.9% annualized growth. Okay, in the UK, well, the economy is not growing, it's flat, but we think there might be another hike. So, so here, this is a very diff— It's the same but different. We're worried the Bank of England are going to have to hike again, but there isn't a really strong economy to offset that and allay concerns. And in fact, the Bank of England's forecast is that there'll be no more growth for the rest of the year and that there'll be no growth at all in 2024. They're not predicting a recession, but they're not predicting any growth either. They're saying it will absolutely flatline. They're saying that consumption's going to flatline. They're saying the unemployment rate's going to go up. All right, not much. They're thinking 4.7%, which is by no means a disaster, but they're saying credit availability for businesses are going to decline. And they think inflation's going to fall back to target later than they had previously thought. So they've now pushed out their expectation that inflation won't get back to 2% till 2025. So basically they're saying economic conditions are weakening. Inflation's not going down as fast as we want, we may well have to hike again. And so that's kind of, yeah, that's like stagflation, right? Whereas in the US it's gone a really strong economy, much stronger than anybody possibly thought could happen, and now the Fed going, actually, we probably won't hike. So that's almost like a double positive over in the US versus that kind of double negative in the UK.

Yeah.

And yet the pound goes up in value. Work that one out.

Cool. All right, well, look, let's wrap the episode up there. Um, thanks, Piers. I know you, you're actually off today to celebrate your birthday, so enjoy your weekend's festivities. And, um, yeah, we'll see you next week.

Have a great weekend.