MAGGIE LAKE: Hi, everyone, welcome to the Real Vision Daily Briefing. It's Tuesday, May 10th, 2022. I'm Maggie Lake. And here with me today is Tommy Thornton, founder of Hedge Fund Telemetry. And we're also joined by Real Vision's own Ash Benington, who's going to bring us up to date on some serious things happening in the world of cryptos.

Ash let's start with you. We saw this news around Terra, the stablecoin UST, break its $1 peg. You were kind enough to brief us and explain to some of us who aren't as deep in the crypto world as you are. Bring us up to date. It is an experimental coin. Maybe not on everybody's radar, but it does seem to be raising some big questions, including whether there's an impact on Bitcoin so what do we need to be paying attention to here?

ASH BENNINGTON: Yeah, that's exactly right, Maggie. Look, this story gets really complicated really fast. Let me try and break it down for you to get the essential points to understand. There is a project called Terra, also called Luna by its symbol, LUNA. There's a stablecoin associated with it, usually called UST, sometimes called Terra USD. I know this sounds really complicated, but it's important for people to understand that there are a series of interlocking protocols.

UST, exactly, as you said, is a so-called algorithmic stablecoin. The idea here is that a computer code is supposed to keep the value of that stablecoin always at $1. It has plunged dramatically over the weekend down as low as 60 cents. That may not sound like a huge loss, but it is massive for something that is supposed to stay pegged always the dollar at 100 cents, so a 40% decline, a huge decline.

The reason that this is more broadly relevant is that there's been rampant speculation that there are hedge funds out, one in particular, totally uncorroborated right now but speculation on Twitter, Twitter attacking the cryptocurrency complex more broadly, particularly Bitcoin. The question is, what should people be watching?

They should be watching price, they should be watching what's happening not just in UST, which is now trading at around 90 cents on the dollar, having regained from its earlier lows pretty dramatically, and also, they should be watching things like Bitcoin, now trading at around $31,000. Significantly, obviously off its highs. Ethereum below 2500, a key psychological level there, now trading at around 2300. People should be keeping an eye on price and looking to see if, if we see any contagions or broader exposure in the space.

MAGGIE LAKE: That's the worry, isn't it, Ash? Maybe that some of the people who support this or behind this might have to, just like you would in a regular market, liquidate the Bitcoin they hold in order to support it or support that peg. It's not that dissimilar to what we see when people have to sell their winners in order cover a margin call, for example. There is some concern that this could happen. Well, what do we need to be watching? And how much are you hearing about that risk that this could spill over and create maybe more of a crisis of confidence about crypto overall?

ASH BENNINGTON: Well, we're hearing a lot of rumors, which probably isn't surprising with how quickly we've seen these movements in price. But the reality is, I think it's important for people to understand that these algorithmic stablecoins are incredibly interesting from a technology perspective, but they are science experiments. It's extremely early. And with science experiments, when you're wading into the unknown, sometimes the test tubes explode.

This ecosystem is far less-- the Terra ecosystem in general has been around since I believe 2018. This is incredibly new technology. In in a broad ecosystem that's generally quite new, but really early and obviously very volatile, highly experimental people who are watching this space, and particularly people who are putting money into the space need to understand just how experimental these technologies are, Maggie.

MAGGIE LAKE: Yeah, that's right. And as with everything, you've got to be sized appropriately for your risk, know what you're getting into. I know that we're going to be watching closely to see whether there is going to be any crossover or any downside risk from the Bitcoin price because of this, Ash. I know you're all over it. We're going to let you run, because you're super busy, but we appreciate it. And of course, you know where to find Ash on Twitter and as well on the crypto version of Real Vision. Just head over to the website there and you can find out a lot more about this. Appreciate you, Ash.

ASH BENNINGTON: Thanks for having me on, Maggie.

MAGGIE LAKE: Great. Tommy, we talked about this a lot earlier today, because this is the worry, right? This is a volatile time and when you see things like this happen, it just adds to that sense of people waiting for the next shoe to drop and being really risk averse. Were you watching what was happening crypto today? Does that impact you at all?

TOM THORNTON: Well, I don't trade crypto, but I make calls based on the technical work and sentiment work that I deploy across a lot of markets. And I will say that I did put a sell recommendation at 4100, I've been lowering my stop all the way down. And the DeMark sequential is on day nine of 13. And it's also moved now into the fifth and final wave lower.

And the price objective that I'm looking at is around 25,000. If we get there, we get there. It can be a bit more, a little bit less. I'm really more focused on the countdown 13, which would be a buy signal, and probably a pretty good buy signal.

MAGGIE LAKE: Donald from The Exchange put a question in about both Bitcoin and ETH. I hope that answered your question, Donald. But Tommy, of course, the volatility and turmoil are not limited to crypto, we saw equities whipped around today, really trying to come back and successful. The NASDAQ did manage to move up about a percent. It looks like it's settling on.

The S&P also up about a quarter, but the Dow in the red, the Russell down a third. And we saw that interestingly, the yields on the US 10y moving lower and back below 3%. When we look at those markets, what are you seeing under the hood of this market action? Does it feel like equities are trying to find a bottom here?

TOM THORNTON: I don't have every one of my indicators exactly calling a buy right now. But I did change some of my exposure today. Partly because the bullish sentiment that I use is at 9% bulls, it actually broke below the February and March levels. And when you get into single digits, and I've been on this show when it was at 90, or 91 at peak levels on the opposite side, I know that it can't stay down at these levels this extreme for that long.

But I do have DeMark downside sequential and combo signals that are, let's say they vary between day 9 of 13 to day 12 of 13. I like to see all those lineup together. That gives me a lot of confidence to put a long position on, but I did cover some shorts today. I covered half of my SPY and Q positions. I actually covered half of my Tesla position with a 9% gain, that was nice.

But I'm looking and trying to game what the market reaction with the CPI tomorrow is and that's the thing that is the great unknown of how the market will react. If it's a lower CPI, lower than consensus, consensus is year over year 8.1 from last month 8.5. If it goes a little lower than that, I think the market will react positively. It's not necessarily all clear inflation has been whipped, we won and the Fed's not going to do any more tightening, the Fed is on a path to tighten, and they haven't started the QT.

I think it'd be premature to think that it's an all clear and now, the other thing that is really starting to come in the forefront is that we're starting to see some earnings results that are a little squishy and you're seeing a lot of sketchy, well, let's say speculative stocks that were highfliers absolutely get crushed. And I think you're going to start to see some takeover or takeunder activity. I think private equity is probably circling Peloton.

I wouldn't get too excited about what price they're going to get for it because I think they just need capital. Sometimes it gets to the survival place, but my view is if we do drop-- guys, I can't talk right now. Bloomberg, something's going on. If we do drop, I think that 3,700 on the S&P to maybe 3,800, those have been my target prices.

MAGGIE LAKE: Well, this is a foreshadowing of what's to come, Tom. Messages are blowing up. Stuffs are exploding off the [?] filter, guys. I'm getting worried that the spirits are trying to tell us something.

TOM THORNTON: I know. But anyway, live TV, people. Live TV. Anyway, I think that this has been a very typical bear market. And I think the bear market will last longer. And it will be more severe. But it's a bear market because nothing has worked. Everything-- well, except the US dollar-- has been hit, even gold, Bitcoin, all the safe haven, non-correlated stuff, those are highly correlated, and I'm looking at gold miners going down. Uranium, people love uranium, I still think that that's probably going lower. I put that out recently.

We could get a bounce, the market is jittery and wants a bounce really bad. And that's not necessarily what you see at true bottoms. But if a bounce happens, I'll position for it, and we'll take advantage of it. The underlying internals are ripe for a bounce. Let me just preface that. We have enough that could spark a bounce.

But I'm looking at call buying on what is it, the TQQQ, the triple levered psycho Qs. People were buying tons of weekly calls on that today. I got pinged on that one earlier. I was like, oh, my God, people are just dying to be in this market.

MAGGIE LAKE: What do they say-- explain to people, when you see that happening, what does that tell you?

TOM THORNTON: Well, I'd rather see really heavy put buying because that says that when you see that type of activity, and there has been heavy put buying on this down move. But that's not a bearish sign. That's actually bullish, because it's just like people are shorting a stock, you could have a put squeeze, and you get a lift that I've seen happen three or four times this year that just these things add up.

And at the top, you see call buying, and it's different from some people that think that the smart money are buying calls. No, that's actually when you see that heavy activity, that's the wrong thing. That's just people buying in too late.

MAGGIE LAKE: This is a very-- from what you're saying-- a very short-term market, a very technical-- people are really trying to navigate day in and day out, because it's gotten murky, perhaps worrisome picture when you pull the lens out. For the last two weeks, we've been running a special series, trying to dig beneath the headlines and ask some of the best and brightest to walk us through.

What are the risks? Are we at risk for global recession? How is that going to impact markets or change the framework you work from? And I want to play a clip from a conversation Raoul had with Dwight Anderson from Osprey Management who looks at commodities, he's looking at the economy, let's have a listen to that.

DWIGHT ANDERSON: That world 2030 and forward, they'll be moving too in terms of the efficiencies of batteries and storage, and renewable energy, and hydrogen and all of those will have that time for us to learn how to make, how to scale, to invest to them. I also, sadly, really do think like you touched on that we're going to buy some time via a recession, whether that recession is caused by some combination of interest rates going up quick enough. And I think we're almost faced with a very stark binary decision, I'll get to it in a minute.

But another aspect is if you run out of counters, you can't have economic growth, like in increments, a unit of economic growth requires an energy counter. If you have no spare capacity of that, you have to create a recession. Some combination of the retardance economic effect of materially higher energy prices and interest rates, we are worried that the Fed has waited too long in what was a semi-artificially stimulated environment to respond and react to that.

At this point, you're almost faced with the choice of either a hard landing, or structurally higher inflation, because a good amount of this inflation is being caused, has been caused by supply shocks. You can't solve that necessarily in the short term with normalized interest rates, you have to actually stop the economy, or that commodity price will.

MAGGIE LAKE: And you can see that full interview and the series available on our website. Tommy, I think this is what people are struggling with. It feels like the market wants to move higher or bounce. But then we've got this picture of so many people who were saying, listen, a hard landing looks inevitable. The risk of global recession or something of that magnitude is not looking good. Look at bonds, that's what it's telling us. How are you thinking about that and commodities against the backdrop of that?

TOM THORNTON: I think that we will have a recession, we could be closer to a recession than many people think. Regardless, even if we don't go into a technical recession, which I think we will, we went up such a steep climb with the economy, with the equity markets. I think that there is a reckoning that will happen. And I do think that you're going to see unemployment start to tick up. Actually, I track-- I'll put this on Twitter, but I track with the DeMark indicators, the unemployment rate, and I also track the CPI.

And the unemployment rate just gave a buy signal. In other words, I think you're going to start to see the unemployment rate go up. Now, keep in mind, it's a monthly chart so it will take time, but it's been spot on many, many times. And the CPI also has almost a peak exhaustion signal as well. It's crazy. But yeah, I think we're see a recession, unfortunately. I think you're start to see the layoffs that typically come. It's a bear market, and people have to be prepared and be cautious.

MAGGIE LAKE: Yeah. Let's get to some questions. We have some great ones coming in. Achilleas on The Exchange. Tom, do you think oil and gas producers still have some upside in 2022? Or are they topped out?

TOM THORNTON: I basically was looking at OIH, the oil service ETF, and it had an exhaustion 13 signal on the exact high. I did short it back then and I covered it within four days, because it went down really, really fast. But now, it's making a lower low. And I think that with crude at 100, I think crude could go a little bit lower. And part of the reason is I think that the China shutdown, I think, has taken a lot of crude off the market. And we've had a supply demand issue of I think that you could see crude move lower.

I do have a DeMark downside signal countdown going lower. And look, all bets are off, as I've said, with commodities if something more serious happens with Russia and Ukraine, or any other type of geopolitical issue, but for right now, I think these are going to go lower before they go higher.

MAGGIE LAKE: El Matthias on The Exchange has a great question. Given the impact of pension plans and the continuing negative stock market trend at a critical time in Baby Boomer retirement, could we see Fed intervention to prevent voter fallout? Jared and I talked about this yesterday, Jared Dillian, do you see the switch from-- everyone's trying to figure out, what's the switch that moves the political pressure from inflation to, oh, my God, well, there's wealth destruction everywhere. You and I talked before about retail investors.

TOM THORNTON: I think the Fed's mandate is to control inflation. And I believe that they will ignore the stock market and financial conditions, there's a bunch of factors that go into financial conditions, and one of them is the stock market. And I think the Fed put, as they say, is somewhere between 3500 and 3600, maybe 3700 if things really start to feel bad, and there's some deeper economic stuff. But that's where I'm at right now. I don't think the Fed's really watching the equity market like they did to try and keep things moving in forward progress.

MAGGIE LAKE: Bo from the RV side has another great question. To that point, is it about the level or is it the speed of the drop? Like, if we get there in an orderly fashion, it feels different than if we're legging it down 1000 points at a time on the Dow and 3%, 4% every day on the NASDAQ.

TOM THORNTON: Well, anytime there's a significant rate of change, and it can be either in the bond market, equity market, you're see things break. And the Fed could certainly come in and do something. If we had a 1987 type crash, something where the financial markets, the capital markets froze up, I can definitely see them coming in. If it's something very sharp and fast and felt very out of control, I could see them at least saying something and that's all it really took in December of 2018 Powell to pivot, and the markets went right back up.

MAGGIE LAKE: There was an article out today about-- speaking about things breaking, about hedge fund, Tiger Global, losing 17 billion during the technology selloff. People have been, even the best professionals, trying to pick a bottom, trying to get in, trying to get ahead of a turn and they've been wrong. Do you worry we could see a firm or fund blow up? You talked about the M&A and companies in distress, how bad could this get, Tommy?

TOM THORNTON: I think really bad and Tiger Global, great firm I had an ex-partner that was there. He was a rainmaker there and he left in 2019, pretty good exit if you ask me. But they're under real pressure, and so is Softbank and a lot of these hedge funds and investment firms, they have a lot of private assets, and they're going to have to mark those down significantly. And a lot of the exit strategies for them to go public or merge with another company, that's starting to unwind as well.

One thing, InterActive Corp., which is Barry Diller's company, and they invest in a lot of different startup type tech companies, they came out and said last night they're expecting tech valuations to decline even more. And they were thinking the private valuations. And they actually want that because they want to buy more companies at a significant lower price than where we are right now.

Yeah, I think hedge funds