Compiled & Translated by: Deep Tide TechFlow
Guest: Luke Groman, Founder of FFT LC, Institutional Macro Strategist
Podcast Source: Coin Stories
Original Title: The $40K Bitcoin Bottom Coming?
Air Date: June 5, 2026
Key Summary
US long-term Treasury futures have depreciated 90% against gold over the past 10 years, yet GDP is still growing—this means 90% isn't enough. This is the wake-up call macro strategist Luke Groman, founder of FFT LC with 30 years of experience on Wall Street, delivers to all investors.
In this dialogue, he presents a cold and coherent analytical framework: superficially, the S&P 500 is hitting new highs, but in reality, it's being propped up by just seven AI stocks, while Bitcoin, the "last smoke alarm for liquidity," is sending warning signals.
If you want to know why Groman sold most of his Bitcoin near the top but hasn't bought back yet, why he believes stocks denominated in dollars will continue to rise but decline against gold and Bitcoin, and why technical indicators point to Bitcoin possibly retesting the $40,000 range, this podcast is worth a listen.
Highlights Summary
Why Hasn't Luke Groman Re-bought Bitcoin Yet?
- "I bought a little, but basically the answer is no. I haven't really bought back in. I didn't sell everything, but I sold most of it."
- "I'm watching. Bitcoin has had a pretty rough time recently."
The Divergence Puzzle: Stocks Hit New Highs, Bitcoin Liquidity Dries Up
- "Bitcoin is the smoke alarm for liquidity, probably the last one still working properly, and it's telling us something is not good."
- "AI is sucking all the oxygen out of the room, sucking all the liquidity. I think that's also happening to Bitcoin."
The Illusion of Value: How Accounting Methods Inflate AI Valuations
- "The faster you build, the less cash flow you have, yet your reported profits are higher and faster—but you'll be severely cash-poor."
- "Once construction slows and revenue growth decelerates, the lag effect of amortization catches up, and then the situation reverses."
Rising in Dollar Terms, Falling in Gold and Bitcoin Terms
- "My base case is: stocks surge in dollar terms but plummet in terms of gold and Bitcoin."
- "Over the past 10 years, US long-term Treasury futures fell 90% against gold, yet GDP is still growing—this shows 90% is not enough."
China's Control Over Rare Earths
- "Tens of trillions of dollars in US stock market value—especially tech stocks, but not limited to them—all rest upon rare earths, a commodity that's minuscule in volume."
- "China dominates this field. They've achieved this—first, by working on it for 30 years; second, by having more engineers than anyone else and less environmental regulation."
- "The US government is now explicitly involved in this area. Historically, when governments get involved with companies, those are rarely good stocks to hold."
The Strait of Hormuz: America's "Suez Moment"
- "My base case is, it's like a person jumping off a 100-story building, passing the 40th floor and saying: 'Hey, this feels like flying, it's great.' It's not the fall that kills you; it's the sudden stop."
- "When you see this level of complacency, this level of inventory drawdown... why hasn't it reopened yet? That's what keeps surprising us 'tail-end' people."
Why Would Iran Keep the Strait of Hormuz Closed?
- "Rationing demand by price means recession. That's what it implies. And it will be accompanied by inflation—a stagflationary recession."
- "If I were in Iran's shoes—I've been bombed, I've held out this long, prepared for this day for 40 years, dug all those tunnels, they've destroyed far less than they think they have."
Surge in "Non-Monetary" Gold Exports from the US to China
- "In five of the past six months, non-monetary gold has been the single largest US export commodity."
- "There are many Trump supporters who've made statements like: 'Look how much Trump reduced the trade deficit!' The trade deficit did shrink, and the biggest marginal change was—gold exports."
Building a "Ticket-In-Hand" Proof-of-Work System
- "The world is moving toward a 'no ticky, no washy' system. What does that mean? It means—the US wants rare earths, bring gold, or the next shipment won't arrive; China wants oil, bring gold, or the next shipment won't arrive."
- "No one trusts anyone anymore. And in such a world, what will the world move toward? It moves toward what you can't trust a ledger for—you need trustless settlement."
When Debt-to-GDP Hits 130%: What Happened in 58 out of 58 Cases
- "Over 150 years, 58 countries reached a 130% debt-to-GDP ratio. To date, 58 out of 58 have defaulted—primarily through a period of significant inflation."
- "If AI doesn't destroy jobs, then it's not the greatest thing since the internet and doesn't deserve these valuations. If it truly is the greatest thing and valuations are justified, then white-collar jobs are about to be slaughtered—and US employment contributes half of tax revenue."
Do Technical Indicators Point to a $40,000 Bitcoin Bottom?
- "If you actually buy back in the $40,000 to $50,000 range, you become an epic legend—because you sold pretty close to the top."
- "They predict a bottom around Q3 or Q4, roughly in the $40,000 range. I genuinely think we might actually see that price."
Why Hasn't Luke Groman Re-bought Bitcoin Yet?
Host Natalie Brunell: Let's start with the Bitcoin question on everyone's mind: Have you started buying back in, or are you waiting for Bitcoin to fall further? Because its performance in recent days hasn't been great.
Luke Groman:
It's taken a big hit in recent days. I nibbled a tiny bit, but basically the answer is: I haven't truly re-entered. I didn't sell my entire position, but I sold most of it. Bitcoin's recent moves—especially in the last three or four days—have been through a pretty rough period.
The Divergence Puzzle: Stocks Hit New Highs, Bitcoin Liquidity Dries Up
Host Natalie Brunell: Can you break down why this is happening? We see the stock market with such strong momentum, constantly hitting new all-time highs. This reminds me of the stock market in 2021—new high after new high every other day. But back then, Bitcoin performed very well too; we were in a bull market. So what exactly is this divergence today?
Luke Groman:
I'm not sure, but my working hypothesis is: if you look at the underlying foundation of this market move, it's actually not healthy. The indices are making new highs, new highs, and new highs, but frankly, it's just seven stocks. I saw a chart yesterday: after excluding AI-related names, the S&P 500 is actually down slightly from its pre-Iran-war levels. I saw another chart: if you compare the US MSCI to the MSCI ex-US emerging markets, and then remove TSMC, Samsung, and another large AI or memory-related company from the emerging markets index—it superficially looks like emerging markets are crushing the US, but after removing those three or four AI-related companies, emerging markets are actually getting crushed. That's a breadth issue. There's been a lot of discussion about market breadth, and I think the breadth corresponding to the current headline index levels is extremely poor. What ultimately happens is, AI is sucking all the oxygen out of the room, sucking all the liquidity, concentrating it in one area. I think this is also happening to Bitcoin; it's a victim of this situation. I think Bitcoin is the smoke alarm for liquidity, probably the last one still working properly, and it's telling us something is not good. Meanwhile, oil is also sucking liquidity, or perhaps we should say the Trump administration, the US, is trying everything to push oil prices lower, mainly through verbal intervention, Western SPR releases, and such. But oil is still rising. Since the war broke out, even at current relatively lower levels, it's up about 50%. So I think oil is sucking liquidity, commodities are sucking liquidity, AI is sucking liquidity. From a liquidity perspective, any asset that isn't one of these three or directly related to them isn't doing well, basically flat or even down.
The Illusion of Value: How Accounting Methods Inflate AI Valuations
Host Natalie Brunell: Regarding AI companies, an interesting point is: some say it's a bubble, others say it's not. Their P/E ratios aren't actually that high, completely different from the dot-com bubble era; they believe there's still a lot of room. But I recall you writing about accounting treatment—something about them front-loading demand, all investment happening now, but actual revenue generation is many years away. Those data centers will be built and generate real growth many years later—but all the investment is being dumped in now.
Luke Groman:
The issue isn't that real growth isn't happening, but more about the accounting treatment. Because the way accounting works is you book the construction costs upfront, amortize the revenue forward, and spread the expenses over some longer period. The impact of this accounting on reported earnings is: the faster you build, the less cash flow you have, yet your reported profits are higher and faster. But you'll be severely cash-poor because you're constantly spending cash, even though reported profits are high.
You can expect to see earnings estimates constantly revised up, stock prices responding and rising, and you can expect to see them go from financing with cash, to needing to borrow, to needing to borrow more—and we're already seeing all that happen. Where it really gets tricky is when this construction cycle slows for any reason—whether because we can't buy physical raw materials, or chip supply disruptions, or permitting issues for data centers everywhere—whatever the reason, once construction slows, your revenue growth starts to decelerate, and the lag effect of amortization starts to catch up, and then the situation reverses. Earnings will decelerate sharply or even start to decline, but most of that decline will be non-cash, and you'll see cash flow actually rising.
So the question is: how will the market treat this situation? Will it think "earnings are decelerating but cash flow is now healthy"? On one hand, these stocks aren't expensive valuation-wise, suggesting it's not necessarily a disaster. On the other hand, they have huge momentum and are sucking all the liquidity. So if earnings start to decelerate, why would I hold them instead of any other asset that had its liquidity sucked away earlier? Will capital start leaving this area and flowing elsewhere? I suspect the latter is more likely—at that point, they'll languish for a while.
But this also involves a difficult question: when does that deceleration happen? What triggers it? There are many different factors that could cause it. And I think there's another complicating factor today that didn't exist in 1999: in '99, we had free markets. You could say the government wasn't involved; it was "peak America." Now the government is deeply involved. Back then we were a unipolar hegemony; now we're not—we're in a new great power competition. So, the dot-com bubble burst under its own weight back then. Today, I would also think this rally will collapse or reverse under its own weight at some point, but it won't be allowed to collapse on its own because AI has been identified as a key battleground in great power competition. That's the tricky part—the government is very likely to step in to support it, take whatever actions they deem necessary to keep this construction expansion going. And that means it will continue to suck oxygen from everything else, creating more problems. There's a lot that reminds me of 1999-2000, but also some things I think are different.
Rising in Dollar Terms, Falling in Gold and Bitcoin Terms
Host Natalie Brunell: Actually, many people are saying the stock market is about to crash, we're near a top, but it sounds like this rally could last quite a while longer. I know you're cautious about the stock market overall; you've been very focused on gold and infrastructure. Do you think gold and Bitcoin prices will be suppressed? For Bitcoiners, I recall you saying it might meander in the $58,000 to $72,000 range for quite some time.
Luke Groman:
That was somewhat of a half-joking comment, but I do see that when you observe some of what's happening now, it seems the US is trying to push decoupling from China. Therefore, politically, certain things need to be achieved: you need the yen weak, the won weak, to help shift capacity out of China; you need the dollar weak to push onshoring. And all these things should be, in essence, very good for gold and Bitcoin. However, there are domestic forces in the US that don't want to see this because a rise in gold and Bitcoin would send a signal to the world: "You're just printing money recklessly." That would create problems in Treasury market financing, especially given the move in the 10-year yield since this war started.
I think the way they'll achieve it is—expanding the derivatives market, like they've done historically with gold. Long-term, I don't think they can do this to Bitcoin; but short-term, as long as you can amplify derivatives, you can. Someone mentioned a while back that a lot of people are selling call options—essentially passively shorting. You're meeting demand: someone wants Bitcoin exposure, but they don't buy Bitcoin itself; they buy Bitcoin call options. If these derivatives didn't exist, there'd be only one way to get Bitcoin exposure—buy Bitcoin. Now, you can buy derivatives, things become loose, fuzzy. Long-term none of this matters, but short-term it can work—depending on what policymakers want the surface numbers to look like. Short-term they can manage the appearance of many things; long-term they can't.
Host Natalie Brunell: Does the stock market have to crash first before gold can start rising? Or could there be a scenario where all assets rise together, Bitcoin rejoins the rising camp? Or will it be a seesaw, one crashes and the other surges?
Luke Groman:
My inference is: stocks surge in dollar terms but plummet in terms of gold and Bitcoin. In that world, the 10-year yield is probably around 4% to 4.5%—maybe 3.75% to 4.5%—that's what I think the long-term base case end-state is. We've actually been in this world since 2022, though Bitcoin performed terribly in 2022. But if you count from when the Fed started hiking, stocks are down about 40% in gold terms.
That's the medium- to long-term outlook of the current situation. When you talk about onshoring, about a weaker dollar, about trade rebalancing—none of these things can happen unless the dollar weakens significantly against the yuan, which is already happening; even against the yen and euro. Of course, in a free market, these assets would trade this way anyway. But we're not in a free market; the US needs the yen weak because it wants to shift capacity out of China; the US wants the yuan strong, they want a stronger yuan, and that's happening. So my medium- to long-term view is: the ultimate path for these things will be—gold rises a lot, Bitcoin rises a lot, stocks rise a lot in dollar terms but fall in gold and Bitcoin terms, and the bond market stays stable. Of course, bonds have already been crushed relative to gold and Bitcoin. Over the past 10 years, US long-term Treasury futures are down 90% against gold. And GDP grew during that period, which can only mean, down 90% is not enough.
China's Control Over Rare Earths
Host Natalie Brunell: You've also written a lot about rare earths, and how China almost monopolizes the entire processing chain. You've talked about where these rare earths go: electric vehicles, radar systems, our phones, military equipment, etc. How big is this market? If investors agree with your view that we need a lot of these materials, and we currently lack the production and mining capacity needed for refining—how can they invest?
Luke Groman:
"How big is the market?" is a tricky question. From a monetary market cap perspective, it's not large; from annual import tonnage, it's not huge either. But to ask "how big is the market?" is a bit like an inverted Exter's Pyramid. Tens of trillions of dollars in US stock market value—especially tech stocks, but not limited to them, even globally—all rest upon rare earths, a commodity that's minuscule in volume. So it's extremely valuable, but it's not priced that way. And the tricky part is, China dominates this field. They've achieved this for two reasons. First, they've worked on it for 30 years. Second, they have more engineers than anyone else and less environmental regulation. At least in the early stages; maybe slightly improved in some areas now, but still looser than the US and Europe. They've indeed found some very good ways to do these things at extremely low cost. What they control isn't just the usual "they have reserves, they do refining"—the innovation in refining machinery and processes they have is rarely mentioned. There are things we can do too: for example, you could build these facilities on military bases, avoid NIMBY issues in the US. But even so, there's a long way from start to finish: mines, refining, engineering base, education base, and the refining machinery you might use—a large part comes from China, and China might not want to sell it to you. The last point is: the US government is now explicitly involved in this area. So the question becomes: will this still be a good business? Historically, when governments get involved with companies, those are rarely good stocks to hold. Of course, this rule has been broken a lot in the past 12 months, with Intel and some other companies Trump's government has taken stakes in performing well.
The Strait of Hormuz: America's "Suez Moment"
Host Natalie Brunell: Let's talk about the Iran war. You're one of the few analysts who predicted the Strait of Hormuz would remain closed for so long, and I think this still isn't fully priced in by the market. There seems to be a consensus—we still have military might to do whatever we want globally. But regarding the Strait of Hormuz, it hasn't reopened. The puzzle I don't quite understand is: why? Other countries also suffer from the closure, Iran itself should suffer too. So first, why can they keep it closed for so long—it seems the whole world should be impacted because we're an interconnected economy? Also, what did you mean by the "Suez moment" you mentioned earlier?
Luke Groman:
Let me be clear: I was right about the Strait of Hormuz, but my call on the market's reaction has been wrong so far. Around March 3rd or 6th, I said we should start preparing for this, it might still be closed on July 4th. People thought I was crazy then. And indeed, it will still be closed on July 4th. In fact, I guess last night a major brokerage came out saying it might still be closed by Labor Day. Now, tell me, if on March 6th it was 100% certain it would be closed on June 3rd, likely July 4th, even Labor Day—how should the market trade? Oil should be far above today's WTI ~$95, and the stock market should be far below now. Yields have risen; the 10-year US Treasury yield is up 50-60 bps since the war started, Japanese and Korean yields have risen a lot, we've seen massive bond selling, essentially to manage current account imbalances from having to import more expensive oil, but it's not a disaster yet.
It's like a person jumping off a 100-story building, passing the 40th floor and saying: "This feels like flying, it's great." But it's not the fall that kills you; it's the sudden stop. In this context, the sudden stop is the moment you hit the bottom of storage tanks. ExxonMobil and Chevron, and multiple Middle East energy officials have said, "This is reaching an extremely dangerous point." ExxonMobil and Chevron said within the next two to three weeks... Middle Eastern authorities or officials had similar comments. It won't be evenly distributed. You can already see some supply issues in Asia. And the level of market complacency remains shocking. There was a meme the other day, the bell curve I posted—one end idiot, the other genius, the middle everyone, and the middle filled with analysts' heads, you could put my face there too because I've said similar things. But looking at the numbers, you can't help but feel: this doesn't make sense. There's an issue here. And the views at both ends of the curve are: "Oil doesn't matter." and "The Strait of Hormuz closure doesn't matter either." Yes, so far. When you face this level of complacency, this level of inventory drawdown—I think this might be the biggest surprise for all of us at the tail end of the bell curve: that you could draw down that much inventory, that fast.
Why hasn't it reopened yet? To me, it's still a huge surprise. Because that's exactly the question those of us "at the tail" keep asking—because not enough good information is coming back from the ground. Like it took eight weeks to leak that we were almost bombed out of all our Middle East bases by Iran; like our air defense hasn't worked well; like the Congressional report two weeks ago revealing we lost more planes than previously disclosed. You could almost ask: what's Occam's razor? The Occam's razor answer is, the Iranians have more fire control over the Persian Gulf than people are willing to admit. That's what's happening. Of course, there's the insurer factor, but insurers' logic is simply because they don't like their ships getting blown up.
This connects to the US "Suez moment" you mentioned. Again, when I first wrote this in early to mid-March, I wrote it with trepidation—I said this is a risky thing, could happen by late March/early April. Later I changed to: this is now the base case. Last week, Robert Kagan—founding director of the Project for the New American Century, hawkish on Iran, hawkish on Israel, loves any regime change war—husband of Victoria Nuland (Obama administration Assistant Secretary, also involved in Ukraine regime change, famously said "F**k the EU" in that call). Kagan wrote two articles within three weeks, saying this is a major strategic loss for the US. I think he's right. This guy isn't an outsider; he understands war, strategy. He wrote it twice; he sees the US suffering a strategic loss to Iran in the Persian Gulf no matter what, and he's trying to get ahead, preemptively steer the narrative to "it's all Trump's fault, not the neocons' fault, we didn't want this war." What are you talking about? This is the neocons' ultimate fantasy for 40 years. Now you get the fight you always wanted, you finally caught the car you've been chasing for 40 years, and you don't know what to do with it.
So what does it mean for markets? After the British had their Suez moment in 1956, for the next 20 years, the UK's median annual inflation rate was—close to 7% per year for nearly 20 years. It's a loss of status of sorts. It means an admission—in the US context: the US defense umbrella. "Why should I pay the Americans for a defense umbrella?" I think this actually gives the US some real choices—look, if we no longer need to provide this umbrella, we can invest more domestically; those bases, if they're already damaged, we can leave, let others deal with it. Of course, "let others deal with it" likely means China deals with the Iranians, Iranians maintain control of the Strait of Hormuz, multi-currency energy pricing accelerates away from the dollar. That's what it looks like, and why I think it's ultimately structurally inflationary and dollar-negative. Because at the end of the day, if you can buy energy and commodities in your own currency, you don't need to hold as many dollars in global reserves. And if you don't need to hold as many dollars, you need to hold more gold. It also means someone has to buy those US Treasuries. We really can't afford the 10-year yield above 4.6% to 4.8%. So at some point, that "someone" will be the Fed—with printed money, or agencies in the banking system, however it's done. And that will be inflationary long-term—just like the Fed's balance sheet expanding from $800 billion to $6 trillion over 20 years was inflationary all along.
Why Would Iran Keep the Strait of Hormuz Closed?
Host Natalie Brunell: But doesn't keeping the strait closed hurt Iran itself? Or have they bypassed it via the railway system you mentioned earlier—through China? Why would they keep it closed?
Luke Groman:
It's a contest of endurance, a test of pain tolerance. Closing the strait isn't in their interest, but you have to understand some context: Russia is supplying them somewhat via the Caspian Sea, China is also supplying via the railway system—neither is enough to cover all losses, at best a dose of morphine. On the other side of the ledger, you have a world short oil. And the oil shorts are being supported by SPR releases and global inventory drawdowns. So you're really in this painful race—on one side inventory drawdown, on the other Iran's backdoor supply via the Caspian and railway to avoid internal political and economic collapse. The common saying is "once we hit tank bottom, we'll ration demand by price." I'd say, yeah. The problem is those who say "globally ration demand by price"—they either won't say, or they should know but don't: rationing demand by price means recession. That's what it implies. And it will be accompanied by inflation—a stagflationary recession, and no Western country can withstand falling income (which happens in recession) while rates rise (which happens with inflation). So if we hit tank bottom and have to ration demand, we'll be in a bind: Western countries' interest expense moves the wrong way, and federal revenue—Western fiscal revenue—also moves the wrong way, both lines blowing out rapidly. In the US, at least for now, similar in the UK, your welfare spending plus interest is already near or just about 100% of your fiscal revenue. So your income will fall, your interest expense will rise, and then things get very tricky. That's the nature of the painful race between the two sides.
If I were in Iran's shoes—I've been bombed, I've held out this long, prepared for this day for 40 years, dug all those tunnels, they've destroyed far less than they think they have. Now I have a chance to negotiate—it won't be called a "toll," it'll be an "environmental fee." Look, Iran suddenly cares about the environment, who knew?
Host Natalie Brunell: I've seen some reports saying they set up some kind of Bitcoin payment system. Is that real?
Luke Groman:
I saw those reports, but haven't seen much follow-up. I saw Treasury Secretary Bessent boasting over the weekend about seizing all their crypto assets.
Host Natalie Brunell: Theoretically, they can't seize Bitcoin unless it's on an exchange.
Luke Groman:
If they were doing any Bitcoin operations of any scale, I don't think Bitcoin would still be around $68,000—it'd probably be $168,000. So who knows? The other area we've really seen explode is CIPS—China's Cross-Border Interbank Payment System. Transaction volume has exploded since March, indicating lots of trade is being settled in yuan via CIPS. And in fact, that means gold's involvement.
Surge in "Non-Monetary" Gold Exports from the US to China
Host Natalie Brunell: Before we start wrapping up, glad you brought up gold again. If gold is used to settle trade, why is it called "non-monetary" gold? Doesn't that mean it is money? But anyway, can you talk about how we're seeing us ship out our gold, and presumably ultimately to China—whether via Switzerland or London?
Luke Groman:
We imported a lot of gold in Q1 2025—around Trump's re-election—and then the gold price rose a bit. Then around last October, we saw—actually around the US-China Busan meeting—in five of the past six months, non-monetary gold has been the single largest US export commodity. Bigger than aircraft, bigger than pharmaceutical preparations. The one month it wasn't the largest, it was second—after pharmaceutical preparations. There's a view that "we're just shipping back the gold we brought in." Some of that gold did come in due to tariff concerns. But I don't think all of it was due to tariffs, because gold is a political metal: if you're these players and you call the White House asking "are you putting tariffs on?" you don't move that much gold from London, Switzerland, etc., even if you don't believe them. Why? And anyway, the tariff issue was resolved in July. And exports didn't really start ramping massively until October—slight uptick in Q2, then faded, then really spiked in Q4 and after. So, in effect, this is net settling trade. We can track where it goes—from here mainly to Switzerland, some to China; and the part going to Switzerland and the UK, their largest export destination is China or Hong Kong.
So, however we want to argue the nature of the Q1 gold inflow, the fact is—it went to China, and at the time we had a huge trade deficit with China, this gold actually reduced our trade deficit, by the way. There are many Trump supporters who've made statements like: "Look how much Trump reduced the trade deficit!" The trade deficit did shrink, and the biggest marginal change was—gold exports. That's actually not a problem. It's exactly what needs to happen. It just needs to happen at a higher gold price, otherwise we'll run out of gold. But in theory, Bessent is a smart guy. If the world sells him gold at $4,500, and he has some deal with China—$4,500 gold buys $6,000 worth of rare earths, that's a good deal. Long-term, the price will gradually go higher, but such operations—there are ways to manage. So why is it called "non-monetary" gold? Non-monetary gold must be declared—I think it's an IMF trade reporting requirement. Monetary gold doesn't need to be declared. If you're a central bank and you buy non-monetary gold, then reclassify it as monetary gold, it never needs to appear in any report. So it's entirely possible: non-monetary gold isn't directly related to any sovereign, purely China's gold demand being met—and this is still effectively net settling the US trade deficit, or at least net shrinking the deficit with China. Via gold. And it's very possible we've shipped a lot of monetary gold to China we don't know about, no one knows, it's not recorded.
Building a "Ticket-In-Hand" Proof-of-Work System
Host Natalie Brunell: Honestly, it's hard to know who to trust. You get data from the People's Bank of China, how do you trust it's accurate? Why wouldn't an adversary country say "yes we have this" but how do we know the truth?
Luke Groman:
Where does all this ultimately lead us? I think, in today's world, no one trusts anyone anymore. And in such a world, what will the world move toward? This phrase is a bit dated, probably politically incorrect—but I'm from Cleveland, so be blunt. My grandfather used to say: "no ticky, no washy," meaning you don't get your dry cleaning without the ticket in hand. The world is moving toward a 'no ticky, no washy' system. What does that mean? It means—the US wants rare earths, bring gold, or the next shipment won't arrive; China wants oil, bring gold, or the next shipment won't arrive. You can see China has been building a system perfectly suited for this for years.
In every major global gold trading hub, there's an offshore yuan clearing bank. There's one in London, one in Switzerland, Dubai, Singapore, Hong Kong, Shanghai. What does that mean? If you happen to have a trade surplus with China—few countries do, except occasional oil exporters, and South Korea occasionally—you'll get some net yuan holdings. Other countries won't get net yuan holdings. You have deficits with China; they hold your currency, you don't hold theirs. But if you do get yuan, what do you do with it? China makes a lot of good stuff, you can buy great BYD cars, Huawei equipment, etc. If you have leftover yuan and don't want to buy more of their stuff—you buy gold. Then you take it out of that gold trading hub and put it in your own vault.
Again, "no ticky, no washy"—no trust required, no proof needed. That's the old-school "proof of work." It's certainly not efficient, certainly not instantaneous, but it's real proof of work—because people have to load those gold bars onto trucks, hire security, ship to the airport, the airport figures out plane loads, right? So, when you saw the news two weeks ago: China's largest courier company—their equivalent of FedEx—is opening a vault at Hong Kong airport capable of storing 2,000 tons of gold. Why would China need a vault if they're doing "paper gold," "credit gold" like the West? Why does their largest courier need a vault? That means... and at an airport, by the way, a big vault next to an airport. Why do they need to set this up? They're setting up a global "no ticky, no washy" system because no one trusts anyone anymore.
I think gold, Bitcoin can ultimately play this role. But I think there are real issues: foreign governments have concerns about exchange backdoors and such. But ultimately, 70-year-old Putin, 70-year-old Xi, 70-year-old Polish president—will they trust Bitcoin more? Or say: "Bring me the gold, I'll put it right here, next to all my tanks and missiles"? They choose the latter. So I agree, there's no trust in this world now, but I think people will still trust what's in the other's vault. To some extent, the world will move toward—"Okay, I don't trust you. I won't accept your IOU for settlement. For settlement, I'll take your paper money, but I'll immediately convert it to something that holds value, not your promise. Give me gold, or give me something I can actually use." I think that's where all this is ultimately headed.
When Debt-to-GDP Hits 130%: What Happened in 58 out of 58 Cases
Host Natalie Brunell: I feel like every interview I see with you has a "doom" undertone. Last time we spoke, you said "I'm a bit nervous about the direction of things." I know you paid off all debt and such. So I feel people have put you in the "doomer" box; do you see yourself in that box?
Luke Groman:
There's a quote by William Arthur Ward (I think he's the author): The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails. I think I'm a realist. We have 150 years of history to look at. For 150 years, 58 countries have reached a 130% debt-to-GDP ratio. And data from about three years ago—57 out of those 58 ultimately defaulted, the vast majority by going through a period of significant inflation. I've been in this business 30 years; I can count on one hand—how many times I've faced a historical probability as high as "57 out of 58." And by the way, that one exception three or four years ago was Japan, and now Japan is in inflation, and its debt is effectively collapsing. The Japanese bond market's value is shrinking massively, inflation is picking up, rates are rising, of course stocks are surging, but their stock market is actually down about 20% in gold terms over the past 5 years.
The US crossed the 130% line in summer 2020. Since then, US long-term Treasuries are down about 60% against gold. Another area where I often get labeled a "doomer" is AI. On AI, there's this group of big tech people who on one hand tell you: this is the most revolutionary technology in history, bigger than the internet. And valuations match that. I'm talking valuations relative to total US stock market cap; they've gone to the moon. And yet these same people also tell you: don't worry, AI won't impact jobs. Only one of these can be true. Of course, over a long enough time, both can be true. But for the business case of AI—to make sense at the valuations it has as a percentage of total economic market cap—they must destroy jobs. They must utterly devastate white-collar employment; that's the only way the math works.
You look at this and ask: they won't destroy jobs? Then they're not the greatest thing since the internet and don't deserve these valuations. And once that becomes clear, it will create problems in private credit and such, for everyone lending to these projects. And if they truly are the greatest thing, these valuations are justified, then white-collar jobs are about to be massively slaughtered, and at a time when US employment contributes half of tax revenue, and we're not even covering tax revenue, or tax revenue barely covers welfare plus interest. Which is it? Every time I ask tech leaders this question, dead silence. David Sacks said on X the other day "AI isn't causing unemployment." We only created 95,000 jobs last month. 95,000—like Ben Stiller in Zoolander says, "That's job growth for ants." 95,000 jobs, in a country of 350 million. In my growing-up days, a good month was 200k, 300k new jobs. That was two, three decades ago, with 20% to 30% fewer people. So I'm just looking at this realistically and asking: long-term, we can have booming AI and booming employment. But between now and then, with our debt situation, the math doesn't work; that's the reality. They know it too; they're too smart not to. So why do they say that? Think about it, if they came out and said what I'm saying, what do you think politicians would do? We're already starting to see it; you saw what Bernie Sanders said the other day? "I think every American should get a share of AI companies x because it's taking their jobs." So you see Andreessen, Sacks, etc., come out denying—"there won't be any job losses. These aren't the job losses you're looking for. AI won't take your jobs. Everything will be great." So, you call me a doomer? I don't think it's doom; I think it's realism.
Do Technical Indicators Point to a $40,000 Bitcoin Bottom?
Host Natalie Brunell: I think the challenge is always timing; that's the hardest part, the time dimension is the biggest challenge. I'm also called a "doomer" now because I don't think Bitcoin has bottomed. Northstar Bad Charts (a technical analysis firm), they predict a bottom around Q3, Q4, roughly in the $40,000 range, I genuinely think we might actually see that price.
Luke Groman:
Yeah, they're very good technically, if you actually buy back in the $40,000 to $50,000 range, you become an epic legend—because you sold pretty close to the top.
