Cem Karsan Owns the Call He Missed on the Fed

0:00 Doing great. Good to see you guys. Happy Friday. >> Good to see you. >> Happy Friday. >> Happy Friday. Uh what do you we got bunch of questions for you, buddy, but before you we we ask you questions. I just curious, what are you looking at today on this expiration Friday? >> So, um couple couple big things. Um first of all, that reversal was kind of something we've talked about was likely coming in this window between the Fed meeting and the end of the month, right? a little bit of a market down, you know, two and a half, three, you know, uh, negative two and a half, three standard deviations in the 20-day, a a little bit of a ball expansion um, into that decline and then catch people off guard on uh, and reverse. And I

0:46 think that catching of shorts was an important thing that needed to happen here in September. I will highlight that unless this thing starts kind of breaking back down in a meaningful way, the path of least resistance is higher in the midterms. Okay. Um it is not going to be a straight path. Uh but this is you know this is the window we had and we you know there's maybe a week or so more but at this point they've caught some shorts. Uh it wasn't as big as we would have liked. It wasn't as much of a vol expansion as we would like. But I do think uh at this point the administration is going to do everything they can to lean on this and to keep pushing forward. You have a weekend which is very important. Want to put this on everybody's radar. I don't think enough people are talking about it. I don't know why it's not a bigger deal but Bet is meeting with uh Vice Premier

1:34 Lefang over the weekend. This is exactly March 15th 16th similar setup right. Uh and there's a question on whether Xi is coming to the US on the 24th. I want to be clear, we are amidst a World War II. That's not bombastic. It just feels different. We are what's going on in the street of Hormuz, bombing of pipelines, the energy crisis. All of this ties into now, by the way, also China coming back to the market, pressuring oil prices, right? Starting to buy. All of this is culminating in increasing tensions. And at that moment, imagine you have the two heads of those those countries or the head of that kind of global conflict meeting over the

2:22 weekend. So, it's a big deal. I don't think there's enough press about it. What we didn't get a lot of verbiage of what was coming out, what came out of that that time in March, but guess what? Immediately after that, what happened? The administration started to move. uh we you know uh two weeks later we have a we have a deal in the Middle East we'll have a deal in two weeks right this was because of the reaction function of the US to what China and the US talked about at that time okay so just know that this is also end of the quarter also very important for the administration that we don't get a markdown into the end of the quarter if anything we get a mark up there's lots of massive liquidity effects that are uh that matter into the end of the quarter where things mark at the end of the quarter is very important important and so uh going into the

3:09 midterm uh they they want to turn this thing so I would I would expect um continued pressure uh to push this thing higher. So dips are to be bought from here on out. Um I can dive into other parts but I think that is the biggest most important uh thing going on at the at the broad market level. >> What's your take away from the Fed meeting man? I know you were calling for and I know a lot of it has to do with the Kabuki theater we talk about often between uh between Bessant and and and Worsh and they're traveling together and you know so on and so forth opposing forces >> we were wrong you and I talked about this >> like on Monday uh you know together Jamal but you know once those odds changed once the realities of the market got to pricing 85 90% of a of of a you

3:57 know Fed raise uh at that point the number one thing they don't want to do is surprise the market, right? They don't want to. And so my opinion is there was a certain amount of um you know having to raise rates uh to plate the market. Now the projections and and you know going forward of raising rates I think um we'll see. I'm I I am very skeptical that any of that's going to matter after the midterms. So some of that was I think placating the market. Um but I think this price action into that um has been you know given given what that generally means historically is positive. So I think um that was a perfect setup to get people bearish to

4:44 turn the market right. It seemed obvious to everybody that's bearish market got taken down. Guess what? Um perfect reversal here. So, I do think that will uh eventually um help to take this market down after the midterms. I think the the and I do think longer the curve is, you know, historically when they raise rates, it pushes everything higher. Um so, um but but u but yeah, this is an important weekend conversation. uh the Fed uh itself and its action uh create a wall of worry if anything here. Um and uh the macro is getting worse and worse and worse. We all know that. But in the short term, you can often see a a macro

5:32 what's clearly poor from a macro perspective create a wall of worry. And if you have an administration who has a wall of worry on their side and a distinct desire to squeeze things higher, uh that is a dangerous combination. So I would be careful just looking at the macro right now and getting too bearish. Uh again, this going into the fall, we were very much look this market doesn't have a lot of upside. You want to be cautious here. Uh you want to be buying calendar spreads and preparing for the um for later. We've gone through that period, right? We've gone through that period. We didn't get a big enough pullback. We got a lot more people a lot more bearish though through this action. You look at sentiment relative to where it was a month ago and go a lot more bearish. Um

6:18 and and that's likely now as we come out of the fall reason to be optimistic about markets. Um so I'll I'll stop there. But yeah, the Fed the Fed situation uh you know it did surprise me a little bit. Um, but I will say, uh, I think some of that's the market moving and them having to react to keep that Kabuki theater, good cop, bad cop routine going. >> Round of applause, sir. Round of applause for for for saying you were wrong. That's that seriously, that's admirable. And um, but again, I know you were calling for it because I felt like you were calling for it because you wanted to see destruction and mayhem, honestly. Because that's exactly what would have happened if they didn't raise rates. It would have been destruction and mayhem for sure. And people that thought I was crazy were saying when they hike rates market's gonna go higher. And yeah, it didn't happen that day, but that's exactly what we saw

7:03 yesterday. Speaking of yesterday, and I know Mike's got questions for you, too, but I I um I'm not going to take the Bitcoin one. I I'm going to ask you about uh uh the idea of oil and rates. Like what do you think is the idea going forward here? I mean, are we just going to see higher prices and and specifically rates until they they hike again, which they're expected to do in October, or what what's your feeling? They want to look it's it's a secular move higher I want to be clear this is not a short-term move this is a secular move we will see higher oil prices secularly and higher yields until things break okay but I want to be clear you have different time frames over what we're looking at and in the shortterm meeting

7:50 over the next two months They are going to do everything they can to tell the market story, convince the world uh in some form or another, do whatever they have to do, lie, cheat, and steal uh to to convince the markets and to push, you know, hold the price of oil down and uh and push, you know, hold the yields down. Um, and I think you're about to get something that looks like we call them all tacos now. They're not really a taco. He's not really turning on anything, but something to to help uh relieve some of that pressure. And it won't just be intervention from the uh from Bentall. It'll be narrative. And again, I think that's part of why this weekend is so important.

8:37 >> Yeah. I think the the most interesting thing to me after we get the after we got the 25 basis point hike is the now ch d d d d d d d d d d d d d d d d d d d d draically ch d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d drastically changed probabilities going forward. So like October looking at the CME Fed watch tool, we now have a 60% probability that we get another 25 basis point hike in October. And I feel like before this happened this week, it was much more like, hey, maybe maybe December we get another 25 base point hike. Talk to us a little bit about that. Do you think this is just the reaction of of what we're seeing in the market right now? And maybe this shifts back to holding the current rate and then getting to December because now in December, we've got a 50/50 split between arriving at

9:22 425450, which is uh 75 basis points total this year, which is crazy. >> Yeah. The fact that the market is up from where this all started is a positive, right? You've created po you've digested what's happened so far on that pricing on the bond curve. Yet here we are. So that that represents the way I think about this is that's potential now positive energy that could push this higher right in the context of of what's happened uh with rates. um you know we are here. So so yes I think now there's a chance now they've gained themselves a a something to push on to squeeze this higher. Um I I do see that

10:09 at this point as um unlikely again I was wrong before. I could be wrong again, but I do do see that uh as long as it stays in that 50 60 40% area, I see them if anything uh not doing it going into the midterms. I will highlight I think this is important too, the midterms. Um there's some important kind of news coming out midterm related. U I've been tracking very closely what's happened in the midterms. I don't think we're talking enough about the midterms. I think that given how um >> I think that's going to change this week. >> Yeah. Listen, given how important the scent and this administration are to supporting these markets,

10:55 I think the midterms are way more important than historically elections are. Um I do not think people are pricing like if they lose the Senate, they begin to lose some control, right? Control over market. So there's a much bigger effect here and and pricing evolve that needs to be happening around this midterm. We've talked about it was underpriced. It has come up a bit in terms of relatively to other parts of the curve, but it is still underpriced. The midterms on back are underpriced. Not to mention for the simple fact that you better believe if it looks like they're going to win the Senate, it's going to be contested. There's going to be all kinds of voting uh shenanigans, etc. We've seen it again and again. people forget so quickly and that is

11:41 volatility inducing right and we are in a political environment if that happened that the you know that could be ugly as well so I just want to highlight the midterms are coming everybody's in this kind of false sense of calm um descended all have managed this well they're going to continue to you know don't fight the Fed and don't fight the Treasury for now but I want to be clear that after midterms or going in the midterms that VA is too cheap. Okay. Um and and again, like I I was saying, new newish news, you know, really today, um you know, out of uh you know, several different kind of generally well- reggarded places like Nate Silver, right? Uh increased the odds of Senate control for um for

12:28 Democrats to 59%. From a 5050. Uh what's driving that? Um uh the latest kind of New York Times Sienna poll uh and uh several other major polls showed a major uptick in Ohio particularly Ohio's now uh Sharon Brown is now favored three to five points in Ohio and that was a tossup. That is a huge deal and again uh not many people are talking about that but people should be thinking about that more than usual given how important winning the Senate is to Republicans. uh uh this time around given how contested the environment is and given how important the current administration is and their control is to this market. So I I would just highlight that as an important thing on the radar that will

13:15 >> as you mentioned that I I know it's you're talking about in terms of Vault and looking out further on the curve, right? Um whether it's that you know they got those NOV three, four and six expirations in SPX, but bigger than that, how talk about how that kind of possibly leads into certain stocks or certain sectors. What does that mean maybe for semis, right? Does that mean some I'm the least I'm literally actually honestly asking. I'm the least political dude. Does that mean something for semis? Does that mean something for the AI buildout? uh is there some opposition and is that some is that going to mean something for certain stocks like SanDisk and WDC or is that mean something more for healthcare like uh is it's going to lead to probably sector rotation do you know do you have any idea >> I think one of the most underpriced trends in this market right now which we are going to start seeing every rating usually front runs this is um what I

14:00 would call strategic businesses US businesses that are not Republican specific infrastructure So uh what type of stuff fits in that category? Something like clean energy, right? That stuff has been kind of forgotten, but it is infrastructure in the US. It is still energy. It is still uh you know something that a simple shift in policy, a simple coming to the middle can change dramatically >> like first. >> Yeah, first solar is a great example. Okay, it's been left for dead, right? Uh a little basing here, we'll call it right now. let's circle it. Let's come back to it. But I could see that being uh you know getting a meaningful move that could then turn into something much

14:47 bigger in the next six months. >> Um uh healthc care broadly healthc care has underperformed this year right health care is infrastructure. It's a different kind of infra infrastructure. I've talked about on here multiple times now where we're going after the midterms post crisis. there's a preparation to roll out a sovereign wealth fund and Trump accounts to buy strategic businesses. This is going to be a much more stun economy. Well, if he's if Trump at all are losing control or at least have to compromise and come to the middle, which is what usually happens in the midterms, again, middle, right? Or at least shift from really far apart towards each other to make a compromise, right? they're going to probably be

15:32 buying strategic businesses that fall out of just their traditional Republican infrastructure businesses, right? So, expand that. What is infrastructure? The theme is uh you really want to be more broad in defining strategic businesses for the US. anything on the budget of the United States government, uh, anything that is, uh, potentially important to the US government as we rebuild internally, deal with a state-run economy, uh, more and more, um, is it should be on the menu. And if it's cheap and that rerating could be could be nice and, you know, a nice look. So, we'll let's come back to that. Uh, keep me honest, Jamal. You're you're good at calling me out when I'm wrong. Uh, we're good at highlighting when we're right. We've had we've had our

16:18 fair share of both. Um but uh but you know this is one I feel pretty good about that I want to be leaning into. >> Yeah, for sure. No, very salient points. Yeah, healthcare and and for soul. I actually just put on the trade in for solar early in the week for no other reason than it was down. I wasn't even thinking about the implications from the standpoint of of of politics. So So that's a really good one. Um speaking of politics, I mean we I'm I'm just curious, man. What's your read on this this Bitcoin and Ether move today? I mean let's talk about politics. Obviously, this is something that uh we just heard it was politicized early this week, right, with the Clarity Act and Mike and I have been talking about it all morning and uh we both have trades in in these via the ETF sort of substitutes. But I mean, this is a weird move, is it not? With dollar up, with yields up, Bitcoin and non-yielding

17:04 instrument, is making a massive move today. >> Yeah. Listen, this is part of the gold and inflationary hedge trade, right? Uh in my view uh these two you know crypto precious metals are two of the most important debasement kind of trades that exist. Okay. Um crypto unlike precious metals has two different types of investors, right? You have tech. Uh think about with with crypto you have uh tech uh kind of revolutionary technology innovative young kind of uh you know asymmetric

17:50 trade crypto bros, right? And then you have increasingly, hey, we need to hedge the risk of debasement globally, right? This goes from everywhere from sovereign to institutional funds. These are different investors who think about it differently. And so when you watch crypto, you need to look at it through the the lens that there's two very different groups of investors. and depending on what's happening to I would general very kind of generally say tech and uh gold or and the basement and tech right uh you are going to get different moves on gold and crypto as a function

18:36 if tech is doing well broadly and the debasement trade is alive and well crypto can scream okay in that environment If they are in contrast to each other, you're going to get muddy action, right? And if they're both the debasement kind of view kind of uh comes off a bit and kind of tech comes down or whatever, that's when you can get real liquidation. Okay, the debasement trade is alive and well and accelerating. I've said that we said early in the year we've been bullish of gold from the very bottom. Everybody can go, you know, we literally called the bottom in late 21. We said buy gold calls, longdated leverage. This is going, it's going to

19:22 be the best performing asset of the next decade. I said early this year, literally January before we started seeing the the poor performance in gold. I said, "This has gotten too far. Silver is exploding higher, become too speculative. You want to take a pause." And I said, "Come back late in the year. You know, let's talk about it. Here we go. Everything's lighting up again." So the debasement trade is back and will be back and is just getting started. Okay, for a second round. This could be three years or two years. Okay, it's not going to be a straight line. Okay, but this is going to be um you know that's what you how we're thinking about that. When you come to crypto though, as I've mentioned the tech part, I think into the end of the year we're going to get a little rally, right? So

20:08 pretty good time for crypto here into the into the midterms. What I've said is post midterms we're going to get uh you know equity poor performance and I think tech will get really hammered. I think the debasement gold will do quite well. So I think you're going to see uh a a better move from crypto here into the midterms. Gold will do fine. It'll be muddy but it'll do fine post midterms. Crypto will be muddier. probably get some of the beta of the market on the way down, but will be supported somewhat by the debasement that's likely coming and the flight to safety coming out of whatever we see I think early to mid next year. Both will scream and particularly crypto could do some crazy things positively coming out

20:55 of the decline that we I think we're going to see next year. Yeah, I think the crypto narrative, even just from a portfolio construction standpoint, it's one of those products that has that asymmetric potential to the upside. And even if it's just a couple percentage points of a portfolio, I think it makes sense to have in there as like a volatility instrument. But in the current landscape that we're in now, to your exact point, like the the narrative is there to where you you could see this go higher just because of everything else that's happening around it. And uh I think for us that's like you said this has been something has that hasn't been talked about a lot. We've been layering into positions in IBIT and ETHA because nobody's talking about it and just getting that longerterm positioning just

21:40 in case there's asymmetry to the upside. We want to be uh a part of that but still doing it responsibly uh with small position sizes. >> I met the Wlvoss brothers uh when I was working at SIBO at the time uh that at that time I was working in regulation. It was weird. I got to tell you, every trader should work in regulation for like a little bit. First of all, they all think I shouldn't say this on air, but whatever. They all think that if you make money in a trade, you're doing something wrong, which is not true. I I most of them thought that. But it's it was interesting to work. I was actually working on the the VIX settlement uh uh sort of looking at at the way they do the VIX settlement, the regulation of it. But uh at the time, SIBO was bringing in obviously a new crypto product and those guys for Gemini, they were working with them. Big dudes, man. Big dudes. I wanted to call them the Winklevi. I know that they don't like

22:27 that. I didn't do it, but I did want to. I'm not going to lie. I thought >> I mean, look, uh, I can't name drop like you can, Jamal. I've never met the Winklevie. Um, but that means I can also call him Winklev. Um, yeah. No, the the the truth of the matter is, I mean, if there's any proof positive that this world we're in a simulation, it's the Winkle Eye and that they exist. I mean, those guys are like they're literally like out of uh out of a cartoon. I can't even like Yeah. Amazing amazing stuff. Yeah. No. Um but you got to hand it to them, man. Uh look, this has been an incredible run for them and they've been leaning into uh leaning into this in the right ways. Um and they're pretty

23:12 connected to the administration. So, I would watch what they do >> uh very closely. That's the last theme I'll leave you with. uh the coming two and a half years, the best way to invest is watch what the administration is buying. Uh I can't emphasize that enough. It seems obvious. It is obvious. Um it is corrupt. It is all the things, but guess what? Government is going to be the primary allocator of capital over the next several years and the driver of signal. And the more you tune into that and the more you invest with that in mind, the better off you're going to do. >> There's no doubt about that. They say don't fight the Fed. Don't fight the US government with their trading because Intel is a perfect example of that and there's plenty of others. Jim Carzan,

23:58 founder of Kai Wealth. Good to see you again, sir. We'll be seeing you on Monday. You and I will uh be talking once again on Tasty Crumbs at 3 p.m. Central time on Monday on the Tasty Live Network. So, have a great weekend and we'll talk. >> Have a great weekend, guys. Take care. Adios.