Over the last week or so, I've seen a TONNE of posts describing the FTX disaster (and that is what it is, a fraudulent, unmitigated and damning disaster) as a 'Lehman Moment'.

I think there's a few reasons why people are referencing this, but it's wrong.

I want to dive into a little bit of economic and regulatory history, as well as the more realistic parallels.

So I called Tim and we had a chat about it all.

Transcript and video below!

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FTX is more MF Global, FXCM with a hint of Enron than Lehman Brothers, mainly due to the lack of broader economic effects stemming from the fraud.


This editable transcript was computer generated and might contain errors.

David: Good morning guys. It's me and Tim. We're back after a very long hiatus away from doing videos because I think we've got something quite important to say that, you know, I guess it's just a kind of lack of maybe understanding, maybe lack of knowledge of past issues in the market, to put it quite softly, but we want to talk today about why Ftx isn't a Lehman moment because I've seen so many articles online saying, Oh, yes, the Lehman moment is this that when there's actually kind of better parallels, better comparisons to be made, but Tim, let's get started on why we're in the same hoodie.

Tim: Because we've just done this on the fly and we don't coordinate anything.

David:  No, exactly. Yeah. It's it's pretty pretty cringe though but I think something that's maybe more cringe is what's happened over the last week for the entire crypto industry is, you know, it is quite an embarrassment and I was actually talking to someone who works in the industry and he was like, I'm genuinely embarrassed to to work here. You know, in terms of how people perceive the industry now from the outside. What has happened to Ftx is probably one of the largest frauds ever? And yes it's likely isolated to the crypto industry which is maybe one of the reasons why I'm saying that. It's not a Lehman moment but still it's just despicable. I don't know what you think.

Tim: Yeah, my absolutely absolutely. I mean there's always been, there's always been suspicions that only isn't as it seems. And we've spoken about about the relationship with Animator a few times as well. You know, that this dotty stuff so going on in the background but, I don't think anyone are saying anyone, I don't think many people really realize the scale of what was going on, you know, the fact they had the back door built into it. It's just like, it makes it seem as if it was deliberate from the get-go but then you exactly what they were doing. You know, whether they knew the implications of it or whether they thought they were untouchable was maybe another another matter but yeah, it's absolutely despicable and it's gonna take time for the the confidence and everything to to come back to crypto. I think, you know, there's sort of there was this whole narrative that we just don't know cusp of institutional involvement and I think that's got to be what, it's got to put back by at least a year, I would say, while all of this sort of comes out because he's gonna put their clients funds to work. Now, when you've got all of this,

Tim:  Kind of opacity that's kind of obviously exists now but you don't necessarily know where it's hiding.

David: Yeah, I think that's quite a key word. There is opacity, and it's something that I've mentioned quite a lot. Over the last couple of years is that, you know, when rates are low, you can, you can hired a lot of stuff, but the second rates start going higher in the risk-free rate increases. And, you know, people actually demand an adequate return above what that risk-free rate is, that's when things start unraveling, you know, we saw it with Chinese property.

Tim:  Yeah.

David: For example, we saw it even with stocks means stocks and things like that, you know, they've on one heavily and But I think something else that you said there's quite key is to do with the the relationship between Ftx and Alabama. One thing that I'm not sure people are aware of is that something kind of similar happened with Fxcm which is still a broker that's around today. But basically what happened with Fxcm and I think around 2012 ish, I can't remember the dates. It was obviously over quite a long. Long span is that they had an equity stake in another firm. And they were effectively.

David:  B booking, which is market making trading against their own clients. But to do that, you need a specific license in the US and pretty much under every single regulatory body but no one was aware of this. You know, it's kind of the same with Alameda except it it was known but also wasn't known. They said they were just providing liquidity. They were just market making that kind of thing when in actual fact they were doing that plus you know it's kind of a pyramid they were doing that plus worse things plus even worse things plus f****** diabolical things

Tim: Yeah.

David: And it's that middle bit. Where the comparisons are is where in terms of where it's yeah. Worse things whereby. Yeah, they would they were practically trading against their own clients. While providing the credit on the exchange I saw a stat that they had a 98.1% cancellation rate of their limit orders,…

Tim: Jesus just briefing. Yeah.

David: so they were spooking their own exchange. there was that story that came out about them where the whole run-up was perceived to actually be based on, you know, liquidity generated purely from Alameda, it's insane, but I think that specific component there…


Tim:  Hmm.

David: where I see more parallels, Because I think it's important to be specific. When you're comparing things, you can't just say. Oh it's a Lehman moment, you know, it's like with the Chinese property stuff. They said, Oh yes, the Lehman moment. Well, it's not, there's varying degrees just because something looks bad and it kind of rhymes, it doesn't mean it's exactly the same. And so I think the comparisons with fxcm are very apt in terms of that sort of conflict of interest in various relationship,…

Tim:  Yeah.

David: and it just, it really just isn't a Lehman moment because if you consider what elite, what happened with Lehman Brothers, it was backed by actual tangible assets that affect the economy. Crypto affects people's, you know, affects people's back pockets. Not to the same extent because this might be a 10 billion dollar issue. Lehman was, you know, multiple hundreds of billions and also reached into other counterparties, which will go on to, in a bit as to what happened post, then But it's just not the same scale. And, you know, a systemic risk. The definition of a systemic risk, relies upon the economy being affected by the downturn. And so, you know, there's there's more parallels with another firm as well called MF Global.

David: Who were facing some trouble into 2007. Who effectively? Had to take customer funds when a liquidity crunch came to. Make the regulatory reporting look good and then put them back at the end of the day, that's what's happening. So segregated client funds would be taken much. Like in Ftx's case, you know,…

Tim:  Yep.

David: except they actually trading with them. And you know, these segregated client funds are not to be touched by the actual broker. Again, this is where other parallels come with with FTX. No, it's more MF, global more fxcm and probably a bit of Enron in terms of accounting for all and stuff like that. It's just not the same scale as as Lehman Brothers.

Tim:  Yeah.

David: It just doesn't make sense to keep compared it's like a lazy comparison, you know, I mean

Tim: Yeah. It's that's the thing. I think, everyone loves to sort of just say, Oh, it's a lima moment because that's something that everyone kind of can relate to, you know, that. Oh, yeah, basically, it's just shorthand for this is, this is really s***. Basically, it's a really s*** problem.

David: yeah, and I think, you know, It generates clicks but I don't I don't like it…

Tim:  Yeah.

David: because it's not specific you know I I would much prefer for people to actually be educated from different case studies about things like no market history,…

Tim:  No, that's the problem.

David: economic history, and things like that. Like it's not sufficient to just say Oh yes the Lehman moment because Stemming from this. I don't see necessarily they're having to be the same massive, reaching regulations come. Affecting Crypto. I've really, really don't see it happening because they're so they're trying to basically What the regulations will try and amount to is enforce in traditional finance, regulations onto crypto, which largely is decentralized. Even if you considered exchanges, not to be centralized, they're still largely decentralized, you know, storage on wallets and things like that.

David: Um, it's, it's not gonna induce central banks to have complete oversight of investment banks. It's not going to induce any kind of g-sib scores, so globally, systematic important bank scores which you know, effectively came into into playoff the financial crisis, It's not going to have global liquidity regulations introduced you know with the capital requirement directive for example from Basel Three. It's not gonna have all of these, you know, multi decade regulations being enforced. You know, which will put into process from say 2010 2011 and it's still being discussed today. I just don't see it happening in the same the same scale and and that all stemmed from Lehman Brothers really. And so,…

Tim: Yeah.

David: you know, it's it's just not the same.

Tim: Now I think I think there is like say there's a few little parallels in there. Like for example, the attitude to risk or in one of the reasons why layman kind of failed was because of their attitude to risk. Was he sent?

David:  Yeah.

Tim: You know, they, I think they're going to problems around. Was Yeah, around the time LTCM. I think they're going to travel and they had to get themselves out at that hole. They're just about fixed it and then about 2006. They're in right? Yes, it was sorted. Now, let's pull back part of the risk back on and there was a kind of culture there. Where I think it was the, was it the director or CEO? I can't remember his name. Now, terrible stuff like little details. And Lehman.


David:  At where at Lehman. Dick formed.

Tim: I say Yeah. Yeah, by name and nature.

David:  Yeah.

Tim: And yeah. So, you know, we're basically he was like, you know, you you can argue with him, he was like he will seeing Guy and, you…

David:  Yeah.

Tim: that risk management everything was just ignored completely. And that's why when it came to it, they just but now this is too far gone. We're not we're not baby you out but say AIG for example who are just entirely, you know, they were backing. I've done how many sort of billions and trillions in the whole system. They're all into linked with and that would have been a whole systemic collapse. If they've been allowed to go, but limit had taken on a load of risky bets And that I think is the big difference between the systemic issue versus the non-systemic issue. You know, it might be, it might be bad in that little corner.

David: It.

Tim: But it wasn't bad in that in the context of the entire system, you know, it was the confidence that came about from that again similar you know, where that kind of you lose confidence in the system because everything you assumed to be true is suddenly you know suddenly found out it suddenly exposed and then You've got a thing. Okay, so what else don't I know what else is hiding under the surface here, I think on that level you can say, Yeah, there's there's good comparisons to make but you could make comparisons about all kinds of things like that doesn't need to be limit.

David: All right.

Tim: That's that's like the whole history of financial markets, that, that just comes up time and time and time again. Someone thinks they can do so much better.

David:  Yeah.

Tim: They can ignore this. Those rules, don't apply to me. Oh s***, I'm liquidated. Yeah.

David: Exactly and it stems from you know leverage as well. So it's all the same. It is the same thing that happened. You know, is success total excess…

Tim: Mmm. Yeah. Yeah.

David: but maybe I've just got something wrong with me and I just want to be very, very specific about things because I find it cringe. When things aren't but, Yeah.

Tim: It's important because people don't learn the lessons. That's the things like being. If you can't learn the lessons from history and you've got to learn the right lessons, otherwise, you're going to repeat them. And I think a lot of time these lazy comparisons,…

David:  Yeah, exactly.

Tim: they they're kind of what perpetuates it. Oh it's just it's like the misunderstanding of the of the banking system. Oh this is just like fraction with a banking, the same thing like Is it though?

David:  It's not not.

Tim: No, exactly exactly. It's not the same thing. Yes, you can draw comparisons, you can draw similarities to try and understand the dynamics of the system, but you can't say, Oh, this is just like that and then just dismiss it and go on my day. Which is…

David:  Yeah.

Tim: what a lot of people seem to want to do. They want to understand everything in like lightning speed, but obviously,…

David:  Yeah.

Tim: you don't get to understand anything. At lightning speed, you gotta take the time to to kind of pick it apart and work out where those sort of threads are all into woven. You can say, Yeah, these things are common in. All of these situations, all these crises have got these things in common. This is how they tend to come about.

David: Well, I think even from You know, an objective monetary perspective. It was only in 2016 when client assets were recovered in the MF global crisis. So it's a quite a good six, six orders and…

Tim:  Yeah.

David: that amounted to I think over 8.1 or 8.6 billion dollars. So we're even looking at the same scale Sorry I've got something more even looking at the same scale of monetary assets there whereas Lehman Brothers. What were the losses? I don't know. Was it a trillion who f****** knows? You…

Tim:  Yeah.

David: it's just totally different scales. And I think measuring it even from that simple perspective of, maybe we get into you know big number buyers or whatever the f*** that theory is called. But You know, that that is it's a totally different scale. Looking at even 8.6 billion to a hundred billion. If you want to take a lower estimate of losses from that, which I believe it was way higher.

David: So, you know, I I just find it lazy journalism and people might say, Oh, yeah, it's, it's cryptos Lehman moment. Well, it's not because the exchange, if you want to call an exchange, a centralized entity. It's the same as a brokerage. you know,…

Tim: Yeah. Yeah.

David: I mean, um, now having said that, if the likes of Binance were to go under That would be a Lehman moment for crypto, because I think that would be more of a, you know, if you look at the amount of Flow that goes through binance and how interconnected they are, pretty much everywhere. That is a different story. I think binance have like, 55% of derivatives flow Crazy. You…

Tim: Yeah.

David: I think it's about 50% of spot volume as well.

Tim:  Yeah, that the white without doubt they're the biggest

David:  Yeah, an FTX or maybe I think it's like eight to twelve percent which is, you know, considering the amount of of noise they were getting is insane. Maybe people should have been looking them. Maybe you know, myself yourself should have been looking at noise to actual flow, you know, why are they so noisy, but they're not at the very, very top next to finance, you know, Who knows?


Tim: I think, I think, I think the noise around them is more because they were seen as the As the disruptor…

David: and yeah,…

Tim: if you like,…

David: the incumbent

Tim: they were the one coming, the challenger, and everyone loves to sort back an underdog back, a challenger, you know, and I don't know, I think maybe maybe there was something more relatable in a lot of ways with, with Sam. You know, like, a lot of people could kind of see themselves, like, they could relate to him more than, maybe they can to just easy, perhaps.

David: Maybe I think I'm behind sight is absolutely 20/20 though, as we've.

Tim:  Hmm. Yeah. Yeah.

David: And you know, looking back, it's unbelievable. Some of the clips I'm seeing now that no one noticed back then, you know, with Caroline Ellison talking about stop losses. What else? The video of her with a missing f****** frame on our glass glasses? You know, all of these weird things are just like, how was it not obvious to us but excuse me, I think that goes to show just how powerful interest rates are How powerful low rates are when there's no hurdle to needing to make money?

Tim:  Yeah.

Tim: Completely completely up. I'll take this one thing. There's one thing about Caroline actually that goes to the point that we sort of started off here, about understanding things completely is that she…

David: You know.

David:  Yeah.

Tim: what she actually said about stop losses as a risk management tool Isn't entirely incorrect.

David:  No, I agree. But but it's the one.

Tim:  You know, but in the context of her saying in that way you kind of go. Yeah. You know you like you're just completely ignoring every risk management technique what so, you know, completely all of them. This isn't just about stop losses. But yeah, the actual thing that the clip that you see of her constantly saying about stop loss is not being the best management. So I kind of looked at that one. Yes, she's probably right about that. This.

David: Yeah, well yeah, I would agree. I think I think It's a very difficult discussion to get into, but I think position size in matters,…

Tim:  Yeah.

David: more, and The fact that I don't know if you saw the debate that I can't remember his name now, but some smart guy. Had with, with Sam a long time ago, I think it was like last year or…

Tim:  Oh, about Kelly about the Kelly stuff.

David: something. Yeah, it was about Kelly and how Kelly Criterion should be your maps there. And Sam said,…

Tim:  Yes.

David: Well, I think that's reasonable but he f****** keeps saying this reasonable word as well and he's a massive c***. Like he's some philosopher. But anyway, and he's he was bet in five times that or like he just didn't think that he thought he thought that Um his Max utility…

Tim:  Yeah, or more? Yeah.

David: which is complete b******* like Max Utility, that's so subjective was the right bet to make and it was five times Kelly which is just stupid.

Tim:  Yeah. Mental.

David: So, um, you know, I think From from that perspective, these warning signs were absolutely there. But you don't want to step in front of the crowd. It's like who's gonna believe you…

Tim:  No.

David: if you're coming out to say, Oh yeah, I think this is fraudulent blood, no one's gonna give Because they,

Tim: It didn't they didn't, there was there was even an acronym before. It was just fun. That was like,…

David:  Yeah, exactly.

Tim: it was part of like, the whole movement, even had that there. As I lied the heart of it. I know you just spreading fat. Just fat. So you couldn't get through to anyone,…

David:  Yeah, and people would find in.

Tim: you can't you know no one's gonna listen. Anyway even if you were entirely right and you went you're all working to presented on a single page in like plain English and everyone just gonna that's just about this off.

David: because I think I think people get confused with the story and then the actual mechanics of the market moving, you know,…

Tim:  Yeah.

David: that if everyone's looking to buy something

David: Then of course, the market's going to shift, but that doesn't mean that it's necessarily representative of this, the story and reality, you…

Tim:  Yeah.

David: and and this is kind of why I think I've made a comment the other day and I said, Maybe we should redefine. A certain style of trading as pure. As pure liquidity seeking or something like that, which obviously sounds like very, very ridiculous. But it's like if you're just looking purely at momentum, And you forget everything else. I reckon you could probably have a decent chance of making some good money and there are my momentum traditional ctas for example, heavily momentum.

Tim: Yeah.

David: Focus trend focused, but I think our natural human biases to wanting a story coming to play.

Tim:  Absolutely.

David: Don't know. And so we, then just want to disregard the other side because then we feel like it doesn't provide us with conviction. whereas, I think your bet size. Combined with weighing up, you know, as many options as you can and prioritize them. Is really how you generate conviction rather than simply, you know. Looking at something and just disregarding it just because of the flow. If you get what I mean. Because the second that tide turns,…

Tim:  Yeah. Yeah.

David: let's say the market's all going. One way. Excuse me. The second that tied turns, that's when I start getting Techy anyway. Not something.


Tim: Yeah. Yeah.

David: It always my story wrong. You know.

Tim: That's exactly it. That's exactly at that. I think it's the, there's nothing wrong with like, with betting on on sort of liquidity, flows and everything else either. It's just you've got to know what you're betting on. You know, and I think that's, that's where the kind of distinction is. The people didn't understand, like, so the mechanics of it and so that that dynamic is that there's there's a story and then there's the flows that are backing up that story. They're reinforcing that story, you know, which is why you kind of, you know, Price tends to reinforce that the narrative. But then, at some point those flows aren't coming in anymore, which obviously, we see pretty much coincided with with, I don't know. Was it? The first interest rate hike? I think it was around the time of the bank doing and actually, like, interest rates, for the first time, the Fed was starting to determ.

David: We we always we always start things off.

Tim: Yeah. Who is lead the way?

David: I actually think the Bank of England starts things off. Pretty often. It's just no one really notices because they're the unreliable boyfriend and I

Tim:  Yeah. Yeah. But yeah, so that that whole thing was that was when that was when it started to fall apart. It's like knowing what you're betting on, you know? Are you betting on the flows? Are you bet, is it purely liquidity? You know, this is it purely, is it a storage driven thing? Like just basically fear as well? Sometimes that can be that you've got all these different dynamics and the keys, the outsource of separate them out. And look at what, you know, what is supportive of the bet that you're trying to make, you know, is it like three out of five, one out of five, you know, what's doing and, and how much longer, you know, can you expect those things to continue and like liquidity, the obvious one. Like, when you've got crypto and and being such a liquidity play, as it was over, especially over these last couple of years. You know and that liquidity tide starts to go out. You've got start looking at thinking Okay so where's the story where's where's the sort of the real world utility that's going to drive The next phase of this is that coming through behind this and instead of that you got monkey pictures you know and everything everything that went along at the real peak of it.

David: But in low rates are not low rates.

Tim: Now that matters.

David: The story doesn't matter,…

David: you know, we see that

Tim: No, yeah,…

Tim: the story matters. The story matters. Most everything else doesn't

David:  What do you mean? Sorry.

Tim: and for me, in low rates because nothing else matters, all that matters is a good story and…

David:  Yeah, no.

Tim: you think about what the story of CRYPTOS being it's like a good versus evil kind of tribal sort of yeah I mean it's all the things, a good story should be Every single one,…

David: yeah, you

Tim: you know, you're part of a group, it's all going in the right in the same direction. You're doing good. You know, this is the next big thing. You know everything, it was all there.

David: So, yours kind of say, so, this is actually quite an interesting topic. So you're saying that when rates are being cut, just look for the best story or…

Tim: Yeah. Well yeah,…

David: the best storyteller,

Tim: a bit of both. A bit of both, you know, I think you've got to have a good storyteller and a good story. Yeah, absolutely. Because you could have a bad storyteller, could be a good story but someone tells it badly. You know then then it's not gonna get the same traction as if you've got good storytellers. So, yeah, you need the good story and the good storyteller. And you need people to be able to insert themselves into the story in an ideal world as well. And be, you know, on the side of good part, you know, the hero,

David: By that. What do you mean do you mean as in sort of fans of the story? So almost like the story becomes cult. Like If you I'm obviously alluding to like the likes of Tesla, you know, crypto GMC,…

Tim:  Yeah.

David: AMC, not that all of these are and there's definitely other stocks out there that, you know, aren't just means thoughts, but he's the obvious ones that come to mind us to You know, quite a strong story, even if it's tangential to the business. Like the story with AMC, Gme was related to, you know, f****** over the hedge funds, trying to f*** over Citadel, for example, which is insane,…

Tim: Exactly. Yeah,…

David: like it's purely insane but it's a great

Tim: that's it. That's it. Yeah. And that's that's what it's about. It's it's definitely all of those all of those, the story stocks, I would say, You know, with Tesla, it's easy. You…

David:  Yeah.

Tim: you're buying Elon, you know, buying Tesla, you know, people. So look at the defects, you know, there's a defect here on the car and look at this. Look at I

David:  In low rates, they don't care about it. Yeah.

Tim: In low rates, they don't care about that. Exactly, exactly in that environment. It's just all part of the good story. In a good tribe. Those are things,…

David:  Yeah.

Tim: you know, people always want to belong, you know, that's how you end up with this herd mentality as well, because no one. It's like who was saying that like the That like now this is done. People are going to come piling back into Crypto again and I'm like Well I don't think they will. I don't think you're gonna get that even if the price starts going up a bit you know a lot of people like a lot of their friends will have lost like if not everything, a lot of money will be completed his heart and who really wants to be the guy in that community in that in that little social group, that's the one that goes. Now I got back in and now I'm beating on you. You know this it's like you it's like that tall poppy thing that sort of obviously syndrome that people have you don't want to stand out above the the crowd.

Tim: And obviously, when the crowd is all together and everyone's making money together and it drives people mad, they want to make money and that brings more people in than it works reflexively and you get this kind of, you get the melt up that we've seen but then I think when the other side when you get the kind of the doom, I think you're also works that way as well. You don't just, you don't get that same reflexivity back into it again. After each disappointment,…


David: You.

Tim: the disappointments, keep coming, but we're going now, I'm done with that. Now, I don't want to get involved, you know, like, even if it hasn't happened to me or my friends is like someone once removed from that group that it has happened to. It makes you aware that, that can happen and it just kind of works. It's way through and tell you get down to that real depths of delusion of this illusion. You know, and then that's when you might be able to start building something again.

David: I agree. I think my My sort of outcome on. Everything though, is highly highly, just totally dependent on, you know, trying to, in terms of objectivity, I think, you know, it's just highly dependent on the interest rate path. you…

Tim:  Yeah.

David: I think anything can happen when interest rates are coming back down and especially, you know, now that we've seen what governments are willing to do,

David:  in the in the pandemic period in terms of you know that they're willing to monetize that you know, maybe not to the same extent because They will have seen the outcomes of what what that kind of does. And this is, this is, this is someone, you know, me, I was saying that, you know, it inflation, just wouldn't crop up for quite a while, and I think, you know, I was very, very wrong on that, on that view, maybe not wrong on the sort of The the actual transitory timeline. If you look at the meta studies of how long, how long it takes for monetary policy to transmit through through to developed economies. But in practicality gives a f*** about that. It wasn't transitory was it, but I think, yeah, governments might be wary of that now. but, you know, the market doesn't necessarily care the market might say, Oh,

David:  Who knows if they're willing to do that or not? I'm willing to take that bet so things could get even crazier once we have this this downturn over and done with Would you be surprised to see the S&P, 500? It like Eight nine K By the end of the decade. I wouldn't be

Tim: No, I wouldn't. I wouldn't be at all, you know, I think this again, it will depends on what happens, you know? Because, yeah. I mean this, there's so many parts forward. Now, you know, like we've been through this era the way that I sort of are kind of look at it is this era stability you know, with like had that low rate, low inflation, all of those things, and all of those sort of the and the globalization as well. And all of the pillars of that I think are under threat. Maybe, you know, deteriorating as we sort of look ahead, I don't know, you know, whether or not that's gonna that's gonna come about. But this certainly not the foregone conclusions that I think they were for well,…

David: Hmm.

Tim: the entire period after the globe financial crisis, really, until until the pandemic. you know, it was like that was just how things were gonna work and I think that's where That's where the transitive view came from. You actually had that year the you know, the great moderation as well, even saw before that it was all, it's all been that sort of compression, you know, lower rates, lower inflation, lower rates, lower inflation, all the way through.

Tim:  And I don't know that you can definitely say that. Now when you've got China, you know, China looking at the world in a different way. Now, You know, you've got the whole energy situation as well. I mean, who knows what's going to Russia and their production, you know in an already pretty tight energy market globally, you know and you've got higher energy costs coming into it as well because obviously all the like Europe, it's it's all LNG now. Which is a lot more expensive than pipe gas from Russia.

David: Do you think the obvious bet then is on uranium?

Tim: It should be,…

David:  It's such a tricky one because yeah.

Tim: it really should be by just, I don't know. I If you could, if you got overflow with the government and put people in charge, that actually had an understanding of energy policy, then, yes. But that's a pretty tough ask.

David: Yeah. It's so bizarre. as to why there's so much opposition in government, I think the UK is probably, but at the same The traditionally there hasn't been? No, this is the weird thing. If you look at France,…

Tim:  Yep.

David: there's a s*** ton of nuclear energy. It. I don't understand where the oppositions from and this is where you can probably get into conspiracy theories about, you know, Schroeder for example, being on gas problems board and all of these kind of things. You know, why is there so much opposition to nuclear? Is it because it's not profitable enough

Tim: I think that might be.

David: For automation, is it? Because uranium lasts for a relatively long time, so you don't need to mine as much of it. So is it all of these things? I don't know. You know,…

Tim: No, I'm not sure,…

David: it's just

Tim: but I definitely think the product the profit motive is is part of it because, you know, you can't, I don't think you can push nuclear around as much in terms of pricing, as well. And in terms of like, there's just not as much profit and and in there as a whole, I think it's just a lot more. It's a boring stable, sort of energy technology and…

David: Hmm. It's just This soap is all,…

Tim: I think that's very comes from

David: you know, they complain so much about the ship but then they want to go and close things down and Germany's obviously reverse their decision. Just recently, But it's still a joke that they even thought that it was applicable or it should be something that they would would do. It just makes no sense. And I just wanted to end on. What do we think? Could happen in terms of regulation of crypto, you know, I am. I wrote the article the other day. and kind of alluded to their their having to be some sort of liquidity backstop like there is in traditional markets because at the end of the day It's required to protect consumers and to protect, you know, businesses and capital as well. Obviously there's a lot of leverage in the system which is practically ghost leverage But the same time,…


Tim: Yeah.

David: you know, a lot of people have lost cold hard cash. No, they've just held The deposits in there. One of the things that I sort of proposed this sort of like a decentralized. Entity. I don't know all about this dowel stuff and whatever, but just trying to come together with the the kind of ethos of crypto how it would be palatable with people but also taken from traditional finance. Some of the lessons learned from 2008. In terms of, you know, capital requirements, even in terms of what's on brokers require. Well all brokers actually require in terms of holding a certain amount of regulatory capital, I think there's got to be a full rate into looking at how that can be done.

David: Because it would probably provide more confidence, even if it doesn't necessarily translate into requiring that cash. You see what I mean? It would provide more confidence in the system the same way that you…

Tim: Yeah.

David: QE doesn't necessarily Mean that stocks will go up is just the psychological thought that the central bank is helping a lot of the times you're not mean.

Tim:  Yeah.

David: Obviously, there's component of the risk-free rate in massively suppressed as well. But You…

Tim: Hmm. Yeah I think,…

David: what your thoughts?

Tim: I think, Yeah, I think you've got two, two separate issues there. You've got to look at. I think one that's that the easy to solve. This is what I'll call minimum standards. You know, like you say the capital ratio is all of those things. None of that needs to necessarily be. You don't really need it down or anything like that for that. You can just be kind of agreed, that's the standard. It can be seen on chain as well because obviously, you know, a lot of the exchanges are talking about, you know, full transparency of what they're holding now. So, I think that can be kind of that should that should just be done from my, from my perspective, that should be the simple thing, but when it comes to sort of the self-regulating entity is I think it's a good idea, but it's going to be very, very hard to implement because you still got to look as well, like,

David: Yeah.

Tim: Who's who's bad stopping them? What are they back stopping them with and the whole sort of the whole system of crypto is still backed by by tokens essentially. Now whether you look at it as proof, you know, if you look at Bitcoin, look at theory, we talk about proof of state, proof of work, all those things all within the same system. So it's all at risk regardless and I don't know the inner outside money coming back, it's still going to look at it from that perspective. It's worth a try,…

David: Yeah.

Tim: but it still. It's still very, very interlinked. And I don't know…

David:  Well, I was

Tim: how you can protect people fully. If it's all part of the crypto ecosystem, One day, the government turned around. It says, Right? That's it, no more crypto for argument, safe.

David: Well, this is this is why I think my my solution would have been to hold it in fear. To transfer into money market funds or to have it in Treasury, something like that. Because at least there and I know crypto guys aren't gonna like that, but they're all. So like in this situation at the moment where they've lost all their money in FTX, so pick one at the end of the day and…

Tim:  Yeah.

David: I I don't think it's sufficient just to say, That it is a fraud. I think this is fraud, that is very related to crypto. Because of the ability to create equity out of nowhere,…

Tim:  Oh yeah.

David: fire activity, you know, it it's astounding that people haven't well, something many people out, but many people still argue and against it. Not being a crypto specific fraud. It's very crypto specific.

Tim:  Yeah.

David: You know just things like that is is just like come on, you need to meet me as halfway here like just to protect the industry at the end of the day. I think.

Tim:  Yeah.

David: The next battleground will be. On how do they create palatable crypto regulation? That is that has components of traditional finance but also the ethos of crypto and,

Tim:  Yeah, I saw something actually that I haven't looked into it properly, but I kind of I've got like surface level idea of it is the kind of like the collective farming. Can we not have, you know, you have farming groups and they just kind of they Basically, they form like almost like cooperatives. And that something along those lines.

David: Yeah, like look. Looking milk in the US is set by. I remember, it's called now. It's like milk pulled or something like that and…


Tim: Mm-hmm. Yeah.

David: Yeah, no that yeah. I got

Tim: And the grain industry, I think there's a lot of that as well where they, you know, they've got, you know, caught they have co-ops to kind of to make sure that they can kind of meet the media requirements. You know, the farmers will join up with different co-ops and everything not just in the US. I haven't used it happens, you know, in all farming communities and they it's part of a kind of almost a protection that the, the some of the parts is great in the whole, it's something happens to one of them. At least, they can still meet, you know, they're obligations on the other side of it and Something I think something is sort of parallel that takes, you know, takes lessons from that as well, might be might be good. But you've got a You've got a sort of remove the the gambling casino mentality from it for that to work. I think, you know this,…

David: Yeah.

Tim: that's that's the issue there. It's kind of you've got The idea of crypto is, is kind of community focused.

Tim:  But what we've seen over these last couple of years hasn't been community focused in, you know, in the worst kind of capitalist excess that you could you could ask for really is what's actually played out in terms of like predatory, you know, like fraud scams predatory you know lending you know just everything that's all into linked with it. That's what we've seen.

David: See. I would disagree that. That is capitalism. I don't see,…

Tim: Yeah, okay. Yeah, I know.

David: I don't think. I don't think fraud is capitalism,…

Tim: You mean

David: I think.

Tim: That's the excesses of capitalism. That's what I'm talking about.

David:  Okay, all right.

Tim: Like the worst elements of things that happen also in capitalist systems. Crypto made it easy like crypto basically…

David:  Yeah. Yeah.

Tim: because of the lack of regulation, it's like I saw someone It was a bit hard but someone basically said that, you know, the crypto industries getting like the less, like 50 years of economic history of why. We've got all of these regulations are all being condensed into a year. You know. It's like it's the best, the best historical education. You could have why regulations exists? Well yeah I get the point it. Harsh time is not the best but yeah. You know, that's, that is part of it. But yeah, I mean that's that's sort of I think that's where that's where. Crypto style. And I've wrote an article about six months ago now, you know, redefining crypto and…

David: Yeah, that's good.

Tim: that's that's

Tim: Yeah, I mean that's that's what it needs. Now it needs a new definition that needs to not be a casino kind of Ponzi you know pump it up kind of arena. It's got to be utility and…

David: But then, Yeah. but the irony is,…

Tim: what this solves.

David: is that when rates start getting cut again, no one is going to give

Tim: Mm-hmm, I know. You know it's it's an idealist perspective…

Tim: but yeah that's that's all there's gonna happen. It always happens the same,…

David:  That's it.

Tim: you know, but by my I mean it might be, you know, like everything you're gonna get more applications out of this now and it's just being able to separate that week from the chat, you know, over time. You know. This is this is what we're going to. I think we still got our way to run with this of destruction wise. You know, like getting all of this leverage and all of this sort of, you know, cut the fat if you like in the whole industry. Now all the things that don't really provide any utility that just got the kind of pond you're not mix in that in the tokens and…

David:  Yeah.

Tim: all of that. That's all got to go. That's all gonna be killed, you know, like Shumpert is creative destruction, has to play out now. You know…

David: It's going to be an interesting.

Tim: if we cut rates too soon, that's not going to happen and it will be worse worse in the long run.

David: We'll be a very interesting development. I think to see sort of how it does all play out but I think that's long enough. We've had a ramp for about 40 odd minutes there. Tim thank you guys.

Tim:  That was, easy. Lovely.

David: Thanks for jumping in. Hopefully we'll be back doing doing a couple more now, I'm not at TradingView anymore so I've got more time. Less stress. And yeah just the ability to have a chat with Tim on the important shit anyway. Speech like guys.