As we wrap up the year and celebrate the festive season, we wanted to share some of our favorite moments from one of your favorite Wealthion interviews from 2024: Tom Lee with Anthony Scaramucci. Enjoy!
All the best for a happy, healthy, and prosperous New Year!
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Original interview: https://youtu.be/znHVPu0jp7M
Andrew Brill 0:00
Happy Holidays from all of us here at wealthion. To all of you, I’m one of your hosts here at wealthion. Andrew brill, we took a look back at this year, and hope you enjoy these favorite guest moments from one of our best interviews of 2024
Anthony Scaramucci 0:18
Tom is the co founder and head of research for fun, strat global. He’s a financial analyst, a strategist, an investor, a businessman, an entrepreneur, but he’s also a fortune teller. Okay, you just have to be you have to admit that about yourself. Tom, you are a fortune teller because you see the future before we do which is why you’re probably the most one of the most popular guests I’ve had on speak up. So let’s start with your fortune telling skills. Talk about the economy. Where is it today and where is it going? Mr. Lee,
Tom Lee 0:49
thank you for having me, Anthony. It’s always great to have a conversation with you. So I’m glad to be here. In terms of the economy, I think the economy has defied the expectations of many, because it remains pretty robust, you know, mainly because we haven’t over invested capital in the private sector. You know, companies have been cautious the last couple of years, because since 2021 the Fed has signaled its war to fight inflation. It kept a lot of companies from overspending on capex. But there is a recession in durable goods and in auto sales and in housing. I mean, we saw that with existing home sales yesterday. I mean, they’re just absolutely getting obliterated. And all of those three things in recession are really interest rate sensitive. So I think the economy probably is at a knife point where, if the Fed begins to ease at the right time, and I don’t know when that right time is, I think it staves off what could be a larger softening economy. But there is softness. Let’s talk
Anthony Scaramucci 1:58
about that for a second. Let’s make you the Fed chair for a sec. Would you be cutting rates now? Would you be waiting? I understand that they’re fearful of going too early because of the inflation dynamic, but it seems like if they don’t go soon, you’re gonna have a steeper, deeper recession than is necessary. So where would you pull the trigger?
Tom Lee 2:21
Well, I agree with your last point, Anthony. I think waiting any longer really does risk. What is a cascade effect? Right? As things start to slow, you unravel things very quickly. So to me, if I was the Fed, I’d be a lot less concerned about a second wave of inflation, which has haunted many FOMC members with the realization that the things that have been sticky on inflation, like housing and auto insurance, they’re finally turning and there’s not a goods reinflation cycle underway. So I I would be cutting sooner. I mean, I think even the idea of a July cut makes sense,
Anthony Scaramucci 3:00
but you’re bullish. I mean, every time I see your interview, you know, I You’re, you’re on, you’re one of the people in my life that I have on Google Alert. Okay, I think if you’re talking, I need to be listening. So when I hear your interviews, you’re bullish. Why are you bullish?
Tom Lee 3:16
Well, I’m bullish. Now, in fact, you know, I think today I would be buying small cap stocks pretty confidently. Because, one, I think that we are entering a growth scare because things are slowing. But to me, that’s only a scare because they turn on a dime or inflict as soon as the Fed starts cutting. You know, housing demand is going to come back big once people are confident that it’s going to cut commercial real estate finds its bottom, et cetera. I think a second reason we’re bullish is that when we speak to our institutional investors, and we have hundreds of institutional clients in 26 countries, and we speak to them frequently, they’re far more cautious and far more skeptical of inflation, and I think, have been more risk averse than we believe. And so When, when, when institutional managers are so cautious at a time when we’re relatively optimistic versus consensus, that’s also bullish, we also know there’s a lot of cash on the sidelines. There’s $6 trillion in money market balances. I mean, that’s just a mountain of cash. Granted, it’s earning 5% but it won’t earn that forever. And then when we look at demographic trends, like millennials, I mean, they are really entering their prime working years, so there’s a life cycle driver to their spending patterns. And I think there has been benefits from the the growth of immigrants in the US. I know it’s it we’re seeing the liability side at the moment, but that, you know, that’s a very large labor supply that keeps the labor market from overheating. So I think there’s many reasons to be bullish. So.
Anthony Scaramucci 4:59
So Bill Dudley, the president of the Fed, the former president of the New York Fed, is out with an op ed today on Bloomberg saying that he got it wrong. He’s changed his mind. He wants to cut rates immediately. Do you agree with him? Yes, I
Tom Lee 5:15
I’ve been following his comments because he does. He is influential as a former member, and he has been one of those higher for longer, as you said, to inflect now and to call for cuts, to me, that’s appropriate, and I think it’s a recognition, and he’s one of the earlier pundits to recognize this is that there is a lot of softness out there, and if inflation isn’t threatening. I’m not sure it makes sense to wait another eight weeks to actually cut rates. So it’s, you know, it’s a pretty big air gap at the moment, and I think people get too caught up in the political noise, thinking that this has anything to do with the election.
Anthony Scaramucci 5:56
Well, would you cut 50 basis points?
Tom Lee 6:01
I think the Fed could even signal that September is a definite cut date, and if it even is just one this year, I think it really reverses a lot of the softness, because the markets would take that cue from there and price in a series of future cuts, which is really the market sort of has a lot of has a lot of skepticism about how much cutting the Fed might actually do, but yeah, I would do at least 25 in July.
Anthony Scaramucci 6:27
All right, so, so 25 in July? Is it crazy to get more than one cut this year?
Tom Lee 6:36
Markets are pricing in 2.8 cuts, so almost three cuts this year. To me, the drop in core inflation justifies far more cuts from the Fed. Because, you know, if we think of core PC running at two, six right now, and fed funds are at five, three, that’s 2.7 percentage points are real rates. I mean, that’s a that’s a penalty rate. I mean, that’s the rate that you want to choke off the economy. And it’s been in place for more than a year now. We fix the deficit through growth, or we have a huge deflation of the dollar. And in that case, of course, if that’s the as how it’s resolved. You really want to own something that’s not dollar denominated, and it could be equities, but very likely it should be something like Bitcoin or gold.
Anthony Scaramucci 7:29
Okay, so let’s talk about that. Bitcoin has done great this year. It’s up 50% of the ETFs. You see this cascade of money, this waterfall of money exactly as you predicted, the having happened. And so for those listeners that may not know what bitcoin does in terms of the network, the network spits out about 900 coins a day. And then sometime in April, it cut that coin distribution in half to 450, coins a day, and so the less supply you would think would move the price. The price has more or less been treading water. Here. You’ve got overhang issues. You had the supply onboarding of the government of Germany. You’ve got the Mt Gox issue. Tell us about Bitcoin. Here are you still as bullish as you were? And what do you think happens a Bitcoin by the end of the year?
Tom Lee 8:25
Yeah, we’re still bullish on Bitcoin. You know, bitcoins become an asset class now. You know, it’s now supported by a growing financial infrastructure, including BlackRock. I mean, you know, when you get the Blackrock validating that as an asset class, you know, it’s, it’s not even close to being a flash in the pan. And I think many people forget that this is more of a signal of how much this asset class will grow over time. Because when institutions got into private equity or venture capital as asset classes, something you know really well, Anthony, that signaled, you know, a decade, multi decade period where institutional sponsorship and ownership would grow. So I think we’re only in the earliest stages of where demand is coming from, a new source for Bitcoin that hadn’t existed, really since the first Satoshi was minted. And so I think that Bitcoin, unfortunately, is affected by, it’s a hyper volatile asset, so it’s affected by supply perceptions, not just demand perceptions. And on the supply side, you’re exactly right. MT Cox is finally being resolved. That’s really been one of the biggest expected overhangs since the since the original hack. And so when the distribution, which is in July, when that’s behind us, and markets, see that there hasn’t been cataclysm, I think that’s going to be a case for why Bitcoin does really well in the second half the Germany distribution. You know that that’s very strange timing, but that’s our. Be behind us now, and I’d say the only thing that I think would hurt crypto is that it’s still correlated and viewed as a risk on assets. So if the Fed is somehow unexpectedly tight, I think it would act as a headwind. But if Fed starts cutting, I think you’re going to see a move in Bitcoin that would correlate to what small caps would be doing as well. There’s a lot of things correlated to a Fed starting a cutting cycle.
Anthony Scaramucci 10:26
So 100,000 by the end of the
Tom Lee 10:28
year? Is that possible? Yeah, I think that 100,000 or even higher is possible. Thanks again
Andrew Brill 10:35
for watching these favorite moments of 2024 and we hope we can continue to provide you with information that will help you invest wisely and be financially resilient. Wishing all of you a healthy, happy, safe and prosperous 2025!
