Start Of Monetary Reset? What’s Next For Bitcoin, Gold, Dollar | Jim Thorne

Here's a comprehensive summary of the YouTube video transcript:

Key Concepts

• Capex Super Cycle: A period of significant investment in capital expenditures by businesses.
• Artificial General Intelligence (AGI): A hypothetical type of artificial intelligence that possesses the ability to understand or learn any intellectual task that a human being can.
• Supply-Side Economics: An economic theory that advocates for lower taxes and deregulation to stimulate production.
• Deficit Friendly: Policies aimed at reducing government budget deficits.
• Fibonacci Retracement: A technical analysis tool used to identify potential support and resistance levels.
• 50-Day Moving Average: A technical indicator representing the average price of an asset over the past 50 days.
• Stablecoins: Cryptocurrencies designed to maintain a stable value relative to a specified asset or basket of assets.
• Genius Act: Legislation potentially mandating stable coin issuances to be backed by US Treasuries.
• Bretton Woods 2.0: A proposed new international monetary system.
• Tokenization: The process of representing ownership of an asset as a digital token on a blockchain.
• Fractionalization: Dividing an asset into smaller, more affordable units.
• Bond Vigilantes: Investors who sell bonds when they believe government fiscal policy is too loose, driving up interest rates.
• Balance Sheet Recession: An economic condition where individuals and businesses focus on paying down debt rather than spending or investing.
• Industrial Policy: Government strategies to promote specific industries or sectors of the economy.

Market Outlook and Asset Allocation

Gold and Bitcoin vs. Real Estate

Jim Thorne predicts that gold and Bitcoin will likely outperform real estate over the next 5 to 10 years. This is a significant shift from real estate's historical leadership position, particularly in Canada post-global financial crisis. While not calling for a real estate crash, Thorne suggests that as interest rates decline, gold and Bitcoin will present more compelling investment opportunities.

The Capex Super Cycle and AGI

A key driver for the market is the anticipated capex super cycle, fueled by President Trump's proposed 100% tax deductibility on capital expenditures until January 2031. This policy is expected to encourage significant business investment. The ultimate goal of this investment is identified as Artificial General Intelligence (AGI), requiring substantial growth in electricity capacity (estimated at 90-100 GW, with a nuclear reactor being 1 GW).

S&P 500 Target

Thorne reiterates his S&P 500 target of 7,500 coming into the year and has not changed it. He anticipates a move to 7,400-7,500 by spring, followed by a normal correction, and then a push to 8,000 by the end of next year.

Gold and Bitcoin Tactical Trade

While a long-term bull on gold, Thorne advises against buying parabolic moves. He suggests that gold is currently taking the front page but will likely pause, with Bitcoin and Ethereum taking the mantle for upside potential in the short term (next six months). He anticipates a retracement in gold to a Fibonacci level of 61.8% (around $3,700) or the 50-day moving average, followed by a sideways grind and then a move higher, mirroring Bitcoin's recent frustrating consolidation.

US Dollar and Treasury Outlook

Thorne disagrees with the narrative of the US dollar and US Treasuries ending. He argues that the US is in a better position than Europe, calling it the "best house in a bad neighborhood." The theory that the US is trying to devalue its debt through stable coins is discussed, with the Genius Act potentially mandating new stable coin issuances to be backed by US Treasuries. This, Thorne suggests, would create demand for Treasuries, effectively forcing people to buy off their debt. He believes the US dollar will remain a major player, potentially experiencing a strong counter-trend rally.

Policy and Economic Drivers

Trump Administration Policies

The most impactful Trump administration policy highlighted is the 100% expensing of capex, which is expected to drive investment in hyperscalers and capital expenditure within the US. This policy is seen as a tangible driver of earnings growth, particularly for companies pursuing AGI. Other pro-growth, supply-side policies from the 1990s are referenced as generating economic growth and strengthening the dollar.

Fiscal and Monetary Policy

The shift from Keynesianism to supply-side economics under the current administration is noted. The Federal Reserve is expected to cut rates and stop Quantitative Tightening (QT). This combination of supportive fiscal and monetary policy is seen as a catalyst for economic growth.

Trade War with China

Regarding the trade war with China, Thorne believes it's part of "the art of the deal" and that Trump and Xi will reach a deal, tempering rhetoric to support market performance before the midterm elections. He is not concerned about tariff fears derailing the market.

Inflation and Real Estate

While acknowledging a potential slight uptick in inflation due to tariffs, Thorne argues that market-based real estate numbers indicate very low inflation. He points to declining new home selling prices and negative rent indices. He believes the employment market is slowing and that the Fed's actions will lead to lower inflation.

Canadian Economic Landscape

Canada's Economic Challenges

Thorne describes the economic policies of Trudeau and Freeland over the last 10 years as a "catastrophe." He believes Canada lacks a cohesive industrial policy and lags the US in tech and AI. The Canadian dollar's weakness is seen as a reflection of productivity issues.

Canada's Playbook

Canada needs to leverage its competitive advantage in natural resources and pivot to becoming an AI superpower. Thorne expects the Keystone pipeline to be built and believes Mark Carney has the power to implement these changes, though recovery will take time. He anticipates Canada will go through a balance sheet recession.

Canadian Real Estate

The sustainability of Canadian real estate valuations, particularly in Vancouver and Toronto, is questioned, given their reliance on foreign buyers and current price slides. Thorne believes that with the Bank of Canada needing to lower rates to around 1%, the question remains whether these markets will see a bounce.

Canadian Dollar Outlook

The Canadian dollar is expected to hang around its current level. However, if industrial policy does not shift westward (focusing on Alberta, Manitoba, and Saskatchewan), the CAD could fall significantly, potentially below 70 to 65-63.

TSX and Gold Weighting

The TSX's significant weighting in gold (13%) is seen as too high, and a pullback is expected. Thorne believes the big run in gold and gold stocks is over, and the TSX's outperformance relative to the S&P 500 is likely to end.

Financial System and Innovation

Regional Banking Issues

Thorne dismisses the idea that current regional banking problems in the US (e.g., Zion's Bankcorp, Western Alliance) are a precursor to a larger systemic banking crisis. He criticizes Jamie Dimon's "cockroach" analogy as lazy and argues that these issues stem from loan portfolio problems, not systemic flaws like those in the 2008 global financial crisis. He believes there are good regional banks currently on sale.

Stablecoins and Banking Innovation

The potential for stable coins to issue yields is discussed, raising the question of why individuals would deposit money in banks. This could theoretically spark bank runs, forcing traditional banks to innovate or face obsolescence.

Blockchain and Wall Street

The transcript highlights the ongoing revolution in Wall Street with blockchain technology. New York City aiming to be a crypto financial center is mentioned, with potential for innovation through tokenization and the integration of financial markets onto the blockchain.

Tokenization of Treasuries

The Treasury website's mention of tokenization making treasuries more accessible through fractionalization is a key point. This could lead to increased demand for US Treasuries, potentially impacting the term premium and the US dollar's role. It's seen as a massive revolution that Wall Street has been resisting.

MicroStrategy and Pristine Collateral

MicroStrategy's Bitcoin holdings are presented as pristine collateral due to their transparency on the blockchain, contrasting with the opacity of some traditional bank balance sheets. This highlights the competitive advantage of blockchain-based assets.

Portfolio Allocation Recommendations

Overweighting Strategies

• Growth: Thorne still likes growth and believes the AI bubble is far from popping.
• Bitcoin and Ethereum: He recommends shifting from gold and silver to Bitcoin and Ethereum for the next month, calling it a "great trade."
• Interest Rate Sensitive Areas: Investors should focus on areas sensitive to interest rates as the Fed is expected to stop QT and cut rates.
• US Economy: The US is in a better economic position than Canada, and with falling rates, the US economy is expected to perform well.

Underweighting Strategies

• Gold and Silver (Tactical): While a long-term bull, Thorne suggests taking profits from gold and silver due to their parabolic moves and the influx of short-term traders.

Interest Rate Projections

• 10-Year Treasury Yield: The next stop is projected to be 3.50% to 3.75%.
• Fed Funds Rate: Thorne believes the Fed should bring the Fed Funds rate down to 2.75% to 2.50% and stop QT.

Conclusion and Key Takeaways

The discussion emphasizes a shift in market dynamics, with gold and Bitcoin poised to outperform real estate. The capex super cycle driven by AI ambitions and supportive fiscal policies are key themes. The US economy is seen as robust, supported by a new fiscal approach and anticipated Fed rate cuts. While acknowledging the challenges in Canada, the potential for resource development and AI leadership is noted. The transcript underscores the transformative impact of blockchain technology and stable coins on the financial system, creating new opportunities and challenges for traditional institutions. Investors are advised to embrace innovation and adapt to these evolving market conditions.