Forward Guidance: Fiscal Dominance Is Breaking The 60/40 Portfolio | Matt Hougan & Bob Haber

Sourced by podcast-ingest on 2026-09-03. Auto-transcribed via AssemblyAI (universal-2, en). Speakers identified by AssemblyAI Speaker Identification using the per-podcast host/regulars hints; the resulting label→name mapping is in the frontmatter. Duration: 44m. Episode page: (not provided). Audio: https://traffic.megaphone.fm/BWG5978082076.mp3.

Show notes (from RSS)

The 60/40 portfolio was built for an old regime, but what replaces bonds when fiscal dominance and currency debasement become structural?

This week, Bitwise CIO Matt Hougan and Proficio CIO Bob Haber join the show to explore how hard assets fit into modern portfolio construction.

We discuss how Bitcoin and gold, bond-market risk, fiscal dominance, precious metals, and the Fed’s shrinking influence come together to shape a new investing regime. Enjoy!

TIMESTAMPS:

00:00 Intro

04:38 Is The 60/40 Portfolio Broken?

10:23 From QE To Fiscal Dominance

12:45 Is Bitcoin Digital Gold Again?

18:30 Sizing Bitcoin And Gold

23:59 Why Gold Miners Look Attractive

27:56 The Opportunity In Silver

29:53 Will Central Banks Buy Bitcoin?

32:24 Who Buys $12T Of Treasuries?

36:28 Can AI Solve The Debt Problem?

41:01 Are Bond Investors The Patsy?

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DISCLAIMER

Nothing said on Forward Guidance is a recommendation to buy or sell securities or tokens. This podcast is for informational purposes only. Any views expressed are opinions, not financial advice. Hosts and guests may hold positions in the companies, funds, or projects discussed.

Transcript

Felix: Nothing said on Ford Guidance is a recommendation to buy or sell any investments or products. All right, everybody, welcome back to another episode of Forward Guidance. And I'm very excited today to be joined by two veterans of the asset management space and who have come together, of course, Matt Hogan, who's been on the show many times before, circumstances, CIO at Bitwise, and also excited to be joined today by Bob Haber, who's the founder, partner and CIO at Proficio, who have been joining together on a debasement ETF that they partnered up on this year. And it just felt like a really timely moment because, of course, the. The idea of the debasement trade has. Has gotten hot into the press again. Markets are moving. Bitcoin's been ripping. Gold's been ripping. So really wanted to get you both on the show to unpack how to think about these debasement assets in consideration in a portfolio. So excited to have you both. Would love to just give a quick preamble on how this came together, what both of your firms do, and how you're thinking about the debasement etf. So, Matt, I'll let you start here.

Matt Hougan: Yeah, absolutely. It's great to be back, Felix. I'm really excited to be on here with Bob, of course, Matt Hogan, CIO of Bitwise. Bitwise is a global crypto asset manager. We manage a wide variety of ETFs, and because we were early in this space, we've been focused on sort of the concept of debasement and protecting yourself from debasement since our inception. Obviously, in Cryptoland, the primary way you do that is through Bitcoin, but it's not the only way you can do that. Gold has been providing that hedge for a long time. Other metals and other assets have been providing those sorts of hedges for a long time. When we met the team at Proficio and Babel Proficiency provide the background, we were just incredibly impressed by the depth of their expertise around this very topic, by the sincerity of their concern about this, and the view that every portfolio needs to hedge against this exposure, and they have a strategy that allows people to do exactly that. So it was wonderful to be able to partner with them and bring BPro, our debasement ETF, to market. I think it's an incredible tool for investors.

Bob Haber: Matt, thank you. Thank you for that. And Felix, thank you for the invite on the show. Yeah. Very brief history of Proficia. We're about 12 years old. We're multifamily in office. Started with two families, my family and my Partner Matt lost family and we've grown to multifamily and have somewhere in the range of about $7 billion under management. The thing that we do differently, I think two things we do differently. We're an asset allocation shop first and foremost, although we do pick lots of securities. But it's based on my long career of running and starting balance funds and asset allocation funds for Fidelity and my own asset management firm for a while. The, the other thing that we do which is kind of unique I think in our space is our families get only what the partners are buying. So to Matt's point, when we come out with a product or whatever we have our families buy, it's because my family or Matt's family is investing right along side in the exact same unit or structure. And that still remains somewhat unique in the family office business. And we just to finalize on, you know, how we got into business with Bitwise is we've been reading, we've been writing about gold and bitcoin as complements in a portfolio. And right around the time of COVID when interest rates kind of hit 0 and 0.5% on the 10 year, we made an internal decision looking at all the fundamentals that we would remove bonds essentially from our portfolio. But we needed a diversifier for equities and we did a lot of study and we came up with gold and we came up with Bitcoin. And somewhere along that path we became very aware of Bitwise's great expertise in the ETF space and with bitcoin and a marriage was conceived there.

Felix: Amazing. All right, so let's get into the brunt of things that you hinted at there, which is just this idea of portfolio diversification. Of course, the standard gold standard for so long has been this 6040 portfolio of 60% equities, 40% bonds. And in light of whether you want to talk about the fiscal outlook, the debt outlook of global markets, global economies, a lot of folks have started to think about what that diversification looks like. And it's really emerged around this idea of debasement, which the term really got a lot of excitement over the last year. Of course, gold's been on an absolute tear. Bitcoin's had its moments as well. Matt, maybe I'll pass it to you. Just would love to hear about your definition of debasement. And what do you look like at to to actually define and track and measure that debasement? Because traditionally, of course, you know, this idea of just correlations like dollar lower, traditionally equities higher, what Makes it so different, these assets and. Yeah, what is your definition of debasement? How do you measure that?

Matt Hougan: Yeah, sure, absolutely. I mean, Bob would be the true expert here, but it's the degradation of the underlying unit of account. The value of the dollar, if you look at the DOL was born, I think it's lost 90 plus percent of its value. I'm not that old. That's an incredible. And we think that's incredible stat, and we think that's, that's only accelerating. The classic way of evaluating it is measuring that dollar value not against other dollar denominated assets, but against hard assets such as gold and we would argue, such as Bitcoin, which I think gets to the core point you were mentioning, which is the sort of evolution of 6040 as a diversified portfolio to something different. As a diversified portfolio. 60:40 is of course 100% allocated to fiat denominated assets and therefore doesn't have that hedge that something like a debasement asset can cover. So from my perspective, that's what we're talking about. We're talking about sort of destroying the underlying value of the unit of account as measured against hard assets in the real world. And I think that's happening at an accelerating rate.

Felix: Bob, anything you want to add there in terms of how you measure and define debasement?

Bob Haber: Yeah, we have a debasement checklist. I would just say to viewers, debasement is literally just a quick American history lesson in five seconds. We started off undebaseable because for the first 150 years we had coins of gold and silver, mostly gold as money. And defined. That's defined actually by the founders. About 100 years ago, we created the Fed and that started slowly but surely debasement. And as Matt mentions, since that day, the value of the quote unquote dollar is down 99 plus percent. So it goes in phases. 50 years ago, we. Roughly 50 years ago, we completely ended the link to gold. And we're in just another phase, which is an accelerant phase, which is that both parties, so this is an apolitical statement, have decided that we should have a lot of things but not pay for them. And that's a classic debasement strategy. So either we have tax breaks or we have free stuff. But because both parties are on, we get tax break entry stuff, but we don't pay for it. And so as citizens, we've decided that's the way we're currently running the country as investors, we don't have to put up with that because the Way they pull that wool over our eyes as investors is by selling a never ending giant amount of government bonds, which, as Matt mentions, are in the fiat currency and there's nothing behind them. So that's when we saw that really moving into the acceleration phase. We said we have to have something which diversifies, diversifies equity, but doesn't count on our government guaranteeing the purchasing power. And, and that's been gold forever. And you know, bitcoin, digital gold, we think it's maybe like especially in the last month or two, that may be ringing super true, which it wasn't for a while, but now it looks like it's coming back on that path. And so these are the key assets to watch if we as a society continue to want to have free things we don't pay for.

Matt Hougan: That's right. Can I add one thing on top of that, Felix, is that all right? And then I'd love to talk about why bitcoin is having its moment now. The thing about that history that Bob mentions is that literally everyone that's working today has only been working in the 50 years since we've been off of the gold standard. And so to us, the normal is this fiat world where the dollar is not backed by anything. But I'm reminded of that joke that David Foster Wallace tells about the fish, two little fish swimming along in the water. And the old fish comes by and says, how's the water? And the fish look at each other. They're like, what's water? Because that's been their only experience. They can't imagine a world outside of that. I think that's a little bit true here. We've been living in this, in this fiat only world where this aggressive level of debasement is possible, but that's actually not the norm on the historical framework. And I think a little bit of what we're experiencing now is sort of coming to the end of that time frame and more back to a normalization. It's hard for people in it to realize that the world we've existed in has been the outlier. But it really has been the outlier when you measure against a broader time frame.

Felix: Yeah, 100%. Do I get into bitcoin? In a minute. But I do want to just go one notch deeper in terms of these regimes because I think I've been thinking a lot about is it feels like we've had these regimes of the style of debasement we've had, maybe you could say like in the 2000s, obviously we had the QE area and a lot more, you know, heavier footprint on markets from the Fed and multiple of these, these QE regimes. And during that time, you know, gold didn't necessarily perform all that well. It was at a time where bonds are obviously performing still quite well. Whereas post Covid, we've actually had regimes of quantitative tightening and that sort of thing. But it seems more so that now that we've transitioned to this regime of a heavier hand from actually the treasury side of things, and more intentional government intervention, that sort of feels like what has really started to accelerate this, this regime. So I'm just curious, how do you think about those different regimes where during those 2010s we had the Quantitative easing? You would, you would surmise that that would be heavy debasement, but golden necessary perform. Of course, bitcoin had its moments there as it was starting to turn into this institutional asset. But yeah, post Covid, as we flipped to this heavier hand from actual, you know, fiscal policymakers, it seems like that's really been the thing that's really started

Matt Hougan: to accelerate things on the gold side of things. Yeah, yeah, absolutely. Look, I think gold did respond during QE just in a softer way than bitcoin did, and it's doing some catch up from there. I think there's an additional catalyst to gold, which is in the post Russia, Ukraine war era, concerns about having an asset that you can custody directly without relying on a third party have become paramount to nation states around the world. So, but you're absolutely right that we're moving from an era dominated by the Fed and quantitative easing policies to an era where it's more the treasury and it's more the debt that are primary drivers in that space. That's certainly what we've seen over the last few weeks. I think that is actually what the core debasement argument has always been. Over time, QE was like a temporary accelerant, but the core focus has been on this enormous fiscal cliff that we're all facing, that we're accelerating. And I think that's finally sort of coming to the fore right now.

Felix: Let's talk a bit about bitcoin. Feels like that's really started to come back in earnest. Of course, over the last, I don't know, six to eight months. There was plenty of excitement in gold and it seems like a lot of that was actually being driven by China and the central bank there seemed to be purchasing a lot of gold. So there's a lot of excitement there. But then bitcoin was really struggling and it seemed like there was a lot of frustration about is it losing that idea of this premise of being digital gold or not? And then suddenly those correlations have flipped. I saw a chart the other day that the correlation between gold and bitcoin is the highest it's been in a very long time. So I'm curious, what's your read on bitcoin and what do you think has been driving there recently?

Matt Hougan: Yeah, I mean, the thing about bitcoin is that you can never give a monocausal explanation for what's driving it. It's an asset that's pulled by multiple factors. It's pulled by macro factors when they're extremely strong. It's pulled by regulatory factors, it's pulled by wealth management decisions, it's pulled by technological developments that are specific to bitcoin. It's pulled by the bitcoin cycle. And at any given moment, any one of those factors may be the dominant driver of returns in bitcoin. I think where people sort of run afoul is when they try to always view it from a singular lens. So, for instance, from October to June, the biggest factor driving the price of bitcoin was sort of the historical cycle and the deleveraging moment that was taking place across the crypto industry. That was a larger factor than any of those other specific drivers. What we've seen recently is the macro factor has come back in force with the steps that Besson has been taking on the treasury side, and it's now front page headlines and it's a big force and it's overwhelming all the other factors that are driving bitcoin. In fact, if you look at a chart of the historical correlation of bitcoin and gold, the two times it's been highest are right now when you have Besant interfering in the treasury market, or at least hinting that he's going to do that in a major way. And back at the sort of tail end of COVID when you had the enormously aggressive stimulus package that sort of overwhelmed everything else in the market. And in both of those moments, just the macro factor pulling on bitcoin was really significant and it overwhelmed all the other factors. For me, what that tells me is that when you need it to act as a deep debasement hedge, Bitcoin in fact does that. It is in fact digital gold, but it's not exactly gold. It of course, has the other other factors driving it. And that's why you see that correlation come down during periods where the macro driver is, is maybe weaker than it is at this particular moment.

Felix: Yeah. But I would love to just ask you your perspective from a portfolio management perspective on that, that transient correlation that Bitcoin often has, where, of course, yeah, over the last month it's been, it's had a pretty strong positive correlation with gold, but other times it seems a lot more idiosyncratic. How do you think about that in terms of portfolio composition?

Bob Haber: Yeah. Our job as the portfolio manager B Pro is to find those things that will actually outperform gold. And so we watch that set of correlations very closely and we follow, just as Matt's suggesting, what C seems to be the key driving factor. And it really is, at least since we've been looking at it potentially here, a very unique time where the investing public in Bitcoin has decided they, they want to use Bitcoin as a digital gold, whereas before it wasn't always as clear. And since we think this is a long term move, if that continues, then I think we'll have a large chunk potentially of Bitcoin in the etf. But it's our job, like silver or platinum or miners of gold, to make sure we, we have those, let's call them secondary debasement units when they're doing better than gold.

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Felix: Yeah, that makes a lot of sense. I feel like the other big component to talk about as we think through portfolio composition is the volatility is obviously very different between gold and bitcoin. And especially when you start to think about like when you look at the holdings of the Basin etf, for example, there's a lot of also considerations around physical gold versus maybe a claim on it as a contract. And so, yeah, Chris, Matt, how do you think about when you're talking to those that are considering changing their portfolio composition from something like 60, 40 towards these diversifiers? And then the next thing that they have to think about is, all right, you have to decide how do I size these things? Obviously the volatility in bitcoin is a lot larger than the volatility in gold. And I'm curious, what's your perspective there and how to size that?

Bob Haber: That.

Matt Hougan: Yeah, I think there's a lot of historical studies that look at that question. Certainly as you're hinting at what you would see if you had isolated assets in there, if you had gold or bitcoin in there, you have to size the portfolios differently. You have to have a lot more gold than you do bitcoin if you're building a standalone single asset edition to a traditional portfolio. I think the beautiful thing about the BPro ETF is that when you combine them, you can sort of take advantage of of the different cyclical regimes, always try to have the best in breed and you get more like that gold like volatility, but maybe some, some outsized returns. We've seen allocations on the bitcoin side traditionally run in the like 2 to 5% range. I think when you look at gold being used as the basement in a portfolio, you often see allocations that run like sort of from 5 to 25% range. You see really high allocations as a fairly standard number. And that's just because you need more, more exposure to get the same bang for your buck. Right. And that is, is one of the efficiencies of bitcoin. But it does come with different risks and of course it really does do different things in a portfolio than gold. Historically.

Felix: I feel like the last time we talked it seemed like it was quite common around the, you know, more traditional asset manager spaces to consider, I don't know, like a 1 to 2% allocation to Bitcoin or you know, one option to there is say you, if you really want to manage the volatilities, you take a certain amount of cash. You know, say you have $100,000 and then you hold that cash alongside the bitcoin as a way to just manage that volatility. Has, has that perspective changed? Have, like those allocations been increasing or what's. What's the read there currently?

Matt Hougan: Yeah, yeah, they've. They've really increased a lot. So I would say now that 2 to 5% is normal and you do see some wealth managers going up to 10%. The thing that's changed, Felix, is that we've written off, I think, largely the go to zero probability when you're talking about a 1% allocation. The people who are making that argument made the argument that if bitcoin goes to zero, 1% won't hurt you. When you remove from your sort of mindset the probability that bitcoin will go to zero and you start looking at it from a historical allocation perspective, you start running it through portfolio optimizers. Those portfolio optimizers tend to point you in the two to five, maybe a little bit more percent range, but they definitely don't point you at one. So I've sort of felt that one has disappeared from the conversation. I haven't heard that number recently. We definitely hear 2 to 5% more. And that's what we're seeing in sort of the recommendations of the large wirehouse platforms that have looked at this. They're seeing the same numbers we see in the historical data, which point in that 2 to 5% range, which is important to note, is 2 to 5 times bigger than 1%. I know the numbers sound relatively small, but to say something silly, 2% is twice as much Bitcoin as 1%. So it does have an important impact in terms of flows and the expectation of flows going forward.

Felix: Bob, curious. Like your perspective on that sizing question around just the volatility difference between gold and bitcoin and how you manage that risk. How do you, how do you think about that in terms of sizing?

Bob Haber: Yeah, so it really. We watched that correlation. We're very quantitatively based. We watch that correlation very closely. And so for a long while, bitcoin was correlated to software stocks, you know, for whatever reason. And so you're not getting much diversification from equity at that moment in time. And so given the higher volume, we would have a much lower percentage as it swings toward highly correlated with gold. Then we're going to start looking at the beta relative to gold and the volatility relative to gold and adjusting it accordingly in there. One of the great things about the ETF B Pro is we can make those adjustments incredibly efficiently and that's some of the brilliance of it. So we don't believe in kind of those static numbers. I understand where they come from, but we, we'd much rather manage it actively and have a static number in, call it gold equivalency. So most of our families have about 25% of their assets in gold equivalency. And through the use of BPro we will now be able to move the constituents around very efficiently. And that's why you would engage an active manager. Other than that, you could have these more static positions and as long as you're comfortable rebalancing, you'll come out in good shape.

Felix: Bob, I'm curious about how you think about the role of gold miners versus holding gold in terms of a portfolio. I know in the ETF you have a bit of both there, but curious, what's your perspective on miners and actually having that as part of the etf?

Bob Haber: Yeah, we're, we're very bullish on miners this trip around. And the reason is they're, they're more correlated to gold but they still get attraction from regular stock pickers. So you have to look at the fundamentals. I've done that for many years and you can think of it. Why would we have it? Well, when we buy gold, when you see it in the etf, we, we own bars of gold that are being stored somewhere. When we buy miners, we're buying gold in the ground somewhere and with leverage. And the leverage is operating leverage. And the companies now are operating in much more efficient manner than they ever have. And they've learned the lesson from what went on with oil and gas. They don't waste money anymore. There's very little exploration, there's a lot of free cash flow and where they're exploring, it's very, very high rates of success. And they want to return capital to shareholders. So there's been a historic 2-3x return of miners relative to gold. And I'm not making any predictions, but if they keep operating like this, we think you'll get at least that and there'll be a lot of acquisitions as well. So we're very high on miners, both gold and silver, probably crypto miners, but we don't really invest in crypto miners.

Felix: Yeah, fair enough. Something I've always wondered for the miners specifically is how do those miners react to. Obviously we've had this huge run up in spot gold price over the last year or so and I always wonder. You talk about just effective risk Management and not getting over their skis because obviously every time you see a big gold run, the miner that was not profitable at 2000 spot gold could be wildly profitable at 4000 spot gold. And I'm just curious, when those big runs happen, how do they manage that? Do you see a lot of these miners go forward and secure forward contracts at these prices and lock those in or do they try to keep some of that open so that if we end up at say 5,000 spot gold that they still see higher margins there? What's your perspective on how they manage that?

Bob Haber: Yeah, that was much more common years ago. One of the things they done now still there are still miners that hedge out their forward production but they do it a lot less because they were chastised by investors for missing all the upside. They never get it right. They're no better than, you know, that and they're just not doing that as much. And that's a good thing because we see higher prices for gold so we wouldn't want to get involved in that. Generally there people who haven't looked at the gold miners will, will see a major change in the management suite and also in the strategies. Adding to your point Felix, years ago, the minute they got that second dollar in the door, they were up 5,000ft in the air drilling for the next new thing, whether you know, it was competitive with pricing or not. And we just don't see that now at some point, of course all of that likely to happen at the cyclical business, but we're way away from that. We just don't see it. In fact, I think gold production might be up only 1 or 2% in the next 12 months relative to the prior 12 months. And that's a historic number and it's probably in line with Bitcoin as well. So it's doing its job of, of being a supply constrained hard asset.

Felix: Obviously we've been talking pretty heavily and focused on gold as this component of the precious metals composition of debasement. But yeah, you mentioned there about silver. Curious how you think about silver and other more, you know, long tail precious metals as they, as they form a composition to this portfolio. What's, what's your perspective? There's.

Bob Haber: Yeah, so the thing people have to remember is once you get to silver and platinum, for example, you have industrial uses. So there is a secondary concern or opportunity. In the case of silver, we think it's a huge opportunity because silver has been in primary deficit now for several years. There are very few silver only mines in the world generally you produce gold, you get some silver, or you produce copper, you get some silver. But silver is also a key component in solar energy and that is booming. Maybe not so much in the US as it was a few years ago, but globally it's booming. Silver is necessary because it's one of the best conductors of electricity and it's probably also finding its way into the data center world because of that. So silver's industrial piece is incredibly strong. What we haven't seen yet, which may occur is central bank buying of silver as a reserve asset. We're watching for that hasn't happened yet. Historically that is the case in certain countries, including China. But right now we're looking, for example, with silver at a metal that's in primary deficit and, and the industrial piece is strong growth. Similarly for platinum, but not so for palladium. They have completely different uses. I won't go into it, but so those, you know, those would, would be the primary substitutes for gold. We'll look at when the time is right.

Felix: You mentioned this idea of what central banks buy, which I think is a really important question these days, especially in this era that we live in of de globalization. It's interesting to look at bitcoin and gold as two potential extremes of this deglobalization trend. Because on one side of things you have the central bank of China has been buying gold hand over fist over the last year. And then in the same vein, you have the Trump administration who's very pro crypto, very pro bitcoin and very excited about that. Maybe I'll start with you, Matt. Just get your perspective on in this, you know, geopolitical fracturing, how do you think about whether these different debasement assets begin to get not nationalized. But you know, each country is deciding which asset to focus on.

Matt Hougan: It kind of feels like, yeah, look, I think all countries are going to focus on gold because it's been around for a long time, it's internationally accepted, and the way I think of their interaction with Bitcoin is somewhat like it's still an out of the money call option. So I think there is definitely a potential future where central banks are actively allocating to Bitcoin. I think there's definitely a potential future where bitcoin is used as a tool of international trade. But the realistic worldview from today is that that's unlikely to happen at scale over the next six to 12 months. There's certainly discussion of it. There was the Trump press conference where they talked about it. There are always rumors about it. There are certainly central banks that are evaluating it, considering it. We do discussions with those central banks on a regular basis. But it's still slightly out of the money in terms of its probability. I will say however, that the increased fracturing of the world you can think about as increasing the volatility that surrounds that option. And when you increase the volatility that surrounds an option, it inherently becomes more valuable because it's more probable that it comes into money in the future. So I do think there is some of that optionality value that's going to trickle into bitcoin over time. But if you ask me for my real view, I don't think that's the primary physical buyer of bitcoin for the next cycle. I think that's the wealth management space. I think it's maybe a possible future cycle that is the central bank emergence space. But I think thinking of it through that options lens and the volatility surrounding that option is a reasonable way to think about the impact of that space on bitcoin.

Felix: Bob, how do you think about that?

Bob Haber: Well, we haven't seen any central banks other I think maybe than one or two smaller ones start to use Bitcoin as a reserve. However, this crosses into the border somewhat with stablecoin issues. And that is part of the debasement world in the sense that just to put some numbers for people, the US government needs to finance rollover $12 trillion a year in debt, growing every year. That's a lot. And they're also pushing everything toward the shorter end, the T bill end of the curve. One of the things they're definitely pushing is the stablecoin concept because those stablecoins are required generally to own a high degree of T bills. And so how that interacts with bitcoin. I'm not the expert, but the US government would love to see stablecoins be a multi trillion dollar business because they need guaranteed buyers of those T bills. This is, you know, getting back to the debasement for a while. Somewhere out there there is the possibility that people don't show up to buy that debt as it rolls over. Now that's a long way off. I'm not predicting that. But they need to line people up to buy 12 trillion a year. In three years that number could be 15 to 16 trillion a year. By the way, that's well more than all the savings in a year in the US it's almost half of the savings in the world. So you know, when you get to that point, you better find a lot of customers. So I think there'll be this issue of stablecoins, and they'll also over time force US Banks to buy more T bills and T notes through regulation. So you can see that all coming. These are all we're starting now to see some of these government strategies around forced by debasement. They're not optimal strategies. When Besant goes in the market and does these things, they're not brilliant strategies. It's the forcing of these strategies by the problems of financing where we are as a country. It's called fiscal dominance. And it really is showing now in the U.S. fiscal dominance, meaning the needs of the treasury, the needs of the Republic to finance itself, are starting to cause everyone to have to change their operating procedures. So when you see stablecoin, when you see buying the yen, when you see doing these yield curve twists, these are all band aids on the real problem, which will get bigger and bigger and bigger until we somehow face the real problem.

Felix: Yeah, I mean, I don't think anybody characterizes that, you know, inevitable game theory than Scott Besson as he was a, he was a critic of when Yellen was in the chair and, and you know, focusing on issuance on the short end, wrote these op eds and then lo and behold, when he's in that chair himself also employs these same strategies. It just seems inevitable regardless of who's in the chair. Matt, you look like you have something to say there.

Matt Hougan: No, I think that's right. I mean that it is, it is striking just how similar the policies are between Besant and Yellen. And I think that that says, is that there's only one set of available options. And as Bob mentioned, those options increasingly become interventionist and desperate. And that's the way the train is going. You know, when it, when it finally breaks is a thing to be determined. But the reason you're seeing them do the same thing is that those are the only choices. You can have any color car as long as it's black. Right. You can sell any type of bond as long as it's a short term treasury, because that's the only thing that the market will bear to the tune of 10 to 15 trillion dollars, as Bob said.

Felix: All right, so just shifting into that outlook for the rest of the year here. Of course, we've been heavily focused on what Treasury Secretary Scott Basin's been talking about and fiscal policymakers. But it feels like we're all still trying to figure out what the name of the game of the monetary policymakers that Fed chair Warsh, what his perspective is on the Outlook for the next year. And you know, that's by design. He's been name of the show, forward guidance. He does not like forward guidance. So, you know, it's pretty common now that we go into these, these FOMC meetings with completely split odds in terms of where rate expectations are headed. So maybe, Bob, I'll ask you here, but what is, what is your outlook? At least on the monetary side it's clear. The fiscal side, you know, we can see what, what Besson is doing in the markets, but it feels like there's a lot of question marks still from the monetary side.

Bob Haber: Yeah. And in the short term they're really important. It's a committee. Right. And they're not all just been appointed and they all think of themselves rightfully so as important players. And so we may in this, let's call it fourth quarter, get the Fed to raise once as kind of a, you know, attempt to show that we are, you know, hawkish, so to speak. But I'm, I'm of the opinion that Besson and War believe that we're going to AI our way out of this problem. By that I mean we will get so much productivity growth from AI that we will be able to grow our way out of the debt problem. It's happened once before in the late 90s where we were able to get productivity growth without a change in employment and have debt go down. But we didn't really have any debt in the late 90s. And there are many other differences. And so in order to satisfy all the needy hands, we need productivity growth in the country to triple pretty quickly from where it is that really almost never has happened. So it's an incredibly fine needle they're trying to thread. So in the short term I think they may raise once, but really in their heart of hearts, they want to hold out with a steep yield curve and keep pumping the growth so that AI can deliver all that productivity without delivering it can't deliver unemployment. The minute it delivers unemployment, then the whole bubble breaks because the deficit will generally double as unemployment goes up from four to six because of all the stabilizers in the system. And once that happens, watch out because now you're financing 14, 16 trillion debt will start ballooning and no one will show up to buy the bonds at the current rates and they will go crazy to the upside and raise. So we need everything to go perfectly long. Answer your question. He might have to give in on one raise here. I'd be really shocked if it comes before the election. But hey, you know that's life. That will be a buying opportunity in these assets. That will be a really good chance and maybe one of the last chances because the minute they start seeing employment going the wrong way, panic will set in. That's my projection.

Felix: I like it. Matt, what's yours?

Matt Hougan: I think that's right. I mean, look broadly. I think we pay too much attention to the Fed in the current market environment. They're not the big dog. They were the big dog in the past when they were doing QE and when rates were moving from 0 to 2 and a half to 0 to 5%. Now we're talking about, you know, 3.5, 3.75, maybe 4, maybe 3.25. It's just not as big from a swing perspective in terms of its impact on the economy. It obviously still matters. But I think this is a fiscally driven environment where that is the defining aspect of what's going to determine what happens in the market. So I'd agree with Bob. If they raise, I think that would be an opportunity. I don't know if they will. I just don't expect them to have the scale of impact that they've had in the past. I think this is more like the sort of late 90s Greenspan fed where rates sort of moved in a, in a, in a, in a bar. I think that's what we're going to see and not the sort of wild swings we've, we've had in the past.

Felix: Well said. All right, last question here to wrap up. Kind of fun, but okay. Say, say for the asset managers that are listening to this who are true believers still in, you know, cash flow generating assets and only want to hold either equities or bonds with a steady coupon and don't like gold because they think it's a pet rock with no cash flow. They don't like Bitcoin because you can't hold it and there's no cash flow. What's the elevator pitch towards that critic? Maybe I'll start with you, Bob.

Bob Haber: I will not take on anyone with their equities. We like equities. We think equities work well in a debasement regime. But if you believe just the obvious, that we are out of control fiscally and are debasing and you're buying bonds of longer duration, you're the patsy. I hate to be that. You're just buying them at the wrong price and you're getting played. And go and look at the return of gold over the last 50 years relative to stocks. It's Pretty competitive. And it's uncorrelated. You can't say that about bonds over the 50 years. And if I'm right about the basement at all, you're buying into the loser. Something had to be the loser. That'll be the loser.

Felix: Nice. Matt, what's your final pitch?

Matt Hougan: Well, I'd make it a two part pitch. The first is that how confident are you in that prediction? Again, I'd go back to the thing. I would say that 6040 is 100% fiat. So do you want to be 100% bet on this or do you want to bet at least a little of the portfolio that this debasement theory plays out the way an increasing number of people, an increasing number of large institutions like the Harvard Endowment and others predict it will play out? I think being 1000 is relatively arrogant given everything that's going on in the world. So that would be the starting point is to at least have some hedge in there. And then the other thing I would remind people is that the idea of the 60:40 portfolio emerged in an environment where we went from 18% interest to 0% interest, which of course makes bonds look like a great investment. We're just in a different regime, but we're using this portfolio strategy from a really unique one off period in history and I don't think we're in that period anymore. We're in a different regime. So having at least a little exposure to something that will hedge you against the debasement that's already there and is accelerating, I don't know, makes a lot of sense to me.

Felix: Very well said. All right, guys, well, really enjoyed that. It was a pleasure to have you both on. I think it was a very timely discussion with debasement being hot and back again. But yeah, I think the outlook is there. Definitely agree with this idea of maybe, maybe one hike if we're, if we're lucky. And I think it'll be a huge fade in buying opportunity. So appreciate that. Hopefully some folks have got some new fodder to consider in there and how they think about these debate in the assets as part of a modern portfolio composition. So I appreciate you both coming on on for guidance.

Matt Hougan: Thanks, Felix.

Bob Haber: Felix, thank you.

Felix: Nothing said on for guidance is a recommendation to buy or sell any investments or products. This podcast is for informational purposes only and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Blockworks. Our hosts, guests and the Blockworks team may hold positions in the company's funds or projects. Discussed. As always, investments in blockchain technology involve risk. Terms and conditions apply. Do your own research.