This Is The Macro Reset | Nik Bhatia

**Danny Knowles** (0:02)
What would cause a recession now?

**Nik Bhatia** (0:04)
Defaults, financial crisis, central bank bailouts, the whole system does collapse.

**Danny Knowles** (0:09)
People lose their jobs, and they still have a mortgage, they still have credit card debt. I can't see a way that it's not catastrophic.

**Nik Bhatia** (0:17)
Five to 10 percent is going to cause immense damage. When cash flows stop at the margin, everything collapses because of leverage.

**Danny Knowles** (0:26)
At some point, does it break? Does the US dollar dominance break?

**Nik Bhatia** (0:30)
I can see the path to the United States trying to direct capital into Bitcoin. Bitcoin is leading. The bounce that Bitcoin is showing is foreshadowing volatility coming down. Roll it back up and trigger a buy signal sometime in the next few months.

**Danny Knowles** (0:51)
Nick Bhatia, welcome back on What Bitcoin Did, man.

**Nik Bhatia** (0:54)
Thanks, Danny. Great to see you.

**Danny Knowles** (0:56)
I'm the macro world, the world in general is a bit of a mess right now. And one of the questions I've had for you that I've been thinking about a lot before this show is, you've always been the guy who is pretty balanced, pretty nuanced about your takes. You think that strong economic growth is likely, you think sort of tamed inflation has been likely going forward, and then war with Iran. Does that flip everything on its head now? Do we have to reassess the entire macro picture?

**Nik Bhatia** (1:24)
I think it's wise to take a clean slate, and that's what I've done over the past couple weeks. You have to take price as truth. And if prices are moving that don't agree with your narrative, don't agree with your bias, then you have to take a second look. And with the volatility we've seen over the past couple weeks, both in stocks and bonds, so the VIX and the move index, things I watch very closely, they are telling me that you can't just assume we're in a strong economic growth, oil will stay fair, rates will stay fair, and stocks and risk will do well. You have to throw everything out and start over. So stocks are looking weak in terms of a multi-year trend line that I'm watching. That's another thing that, okay, stocks have now broken down.
Volatility is very elevated. So don't just assume everything is going to be good. And that's what I've basically done over the past week or so. Clean slate. I'm not changing my every bias because of what I've seen over the last week. I'm also trying to understand a lot about the war. That way, I can make some baseline expectation of what I think oil will do, and then volatility, and then the rest of the markets from there.

**Danny Knowles** (2:50)
So what are you watching most closely now? I did a show with Luke Groban recently, and he was talking about the price of oil being a very key signal, and was basically saying oil over $100 for any kind of sustained period of time is a real bad situation where it can have an impact on the treasury market, and global recession becomes very, very likely. Is that the most important thing to watch right now?

**Nik Bhatia** (3:12)
Well, oil is at $100 today. So, oil opened up tonight at around $100. It was near $100, and Brent and WTI have both been near $100. Now, they're both above $100 as of tonight. So, instead of thinking, well, if oil goes above $100, what will break? The price is telling you. So you look at oil today at $100, and you look at the treasury market, four and a quarter on tens more or less. Stocks starting to break down.

**Danny Knowles** (3:49)
Four and a quarter, give me some context. Where was it, say, two weeks ago before this war?

**Nik Bhatia** (3:53)
Yeah. Ten-year yields have flirted with below four a little bit earlier this year. And they've been basically in the four to four and a quarter range for several months. And so that's this tamed inflation, stable rates, everything going along well. It's been there. Now, it's back up at the higher end of the range, but it's not even close to six-month highs or 12-month highs. So that is the truth. So if oil was breaking the stock market, we would see it lose bullish momentum and lose some trend. It is doing that. So oil is affecting stocks negatively right now.
It is not affecting the treasury market in anywhere near the same sort of way. And so that's enough information for me. Like, I don't see the treasury market breaking down. It is affecting the dollar a lot. So dollar is getting very strong right now. That's also dangerous for risk, and it's bad for the stock market. And so dollar right now charging up is affecting stocks. It's not, the treasury market is actually hanging in. That's how I would describe it.