Guest: Tom Lee, Co-founder and Head of Research at Fundstrat Global Advisors
Host: Amit Kukreja
Podcast Source: https://x.com/Amitisinvesting/status/1941184140969378170?t=731
Organized and compiled by: ChainCatcher
ChainCatcher Editor's Note
Tom Lee is the co-founder and head of research at Fundstrat Global Advisors, and one of the first people on Wall Street to systematically study Bitcoin and emerging asset allocation. He was the chief strategist at JPMorgan Chase for 16 years, known for his data-driven and contrarian predictions. When most institutions were bearish, he predicted the bull market rebound in advance, was optimistic about the underlying value of Ethereum, and successfully captured multiple cycle turning points. His judgments are not only for institutional reference, but also become an important basis for countless retail investors to lay out against the wind.
This podcast had an in-depth discussion on topics such as whether the current bull market has started? Why did institutional investors miss the opportunity to lay out at the bottom? And the new role of retail investors in the market.
ChainCatcher has organized and compiled the content (with deletions).
Key points summary
That period in the 90s when people cared about stocks will come back. Our research indicates that millennials are the largest generation in history, with a total population of 98 million, 40% more than the previous generation. Sooner or later, this generation will refocus on the stock market.
Retail investors treat the market as a stock market, such as holding Palantir and Meta, they will not be bearish on this company because of tariffs. But institutions are trapped in macro narratives.
Institutions say that breaking through 6141 points is the start of a bull market, but retail investors entered the market at 4800 points. They are the ones who really bought at the bottom.
The Fed releasing liquidity only gave money to banks, and if banks don't lend, it's useless. What really drives the market is retail investor money. At the low point in April, the only net buyers were retail investors.
For example, if the US government taxes gasoline, the CPI will rise, but that just means consumers' wallets are thinner. The money flows to the government and is spent again, it's not inflation, it's just a transfer.
Stablecoins are the crypto ChatGPT, and Ethereum is their infrastructure. It mints more than 50% of stablecoins and accounts for 30% of Ethereum's Gas fees.
The number of Ethereums in an ETF is fixed, but treasury companies can increase the number of token units through premium issuance, convertible bonds, staking, etc., to achieve compound growth.
Tesla is like a Da Vinci painting, the valuation model tells you it's worth 12 cents, but 100 people in the market are willing to pay $100 million, that's the logic of scarce assets.
1. Contrarian Predictions and Financial Philosophy
Amit: From 2022 to 2023, you predicted the market bottom and the start of the bull market against the trend. Your judgments are based on data, not conspiracy theories, and have influenced tens of millions of investors. I want to ask: When your voice can change the future wealth of a generation, how do you feel?
Tom Lee: This is exactly what we originally intended when we founded Fundstrat in 2014. I worked in large investment banks for many years, and was the chief strategist at JPMorgan Chase for nearly 16 years. At that time, I kept thinking: Can we build a company that can provide institutional-level research and is also understandable to ordinary people?
In 2014, retail investors' interest in the stock market had clearly decreased, and the market was almost dominated by institutions. But I remember in the 90s, the public paid a lot of attention to the stock market. I always felt that that era would come back again, so we were actually betting that the public would return to the market and be willing to listen to what we were saying.
Amit: How did you make such a judgment before the Robinhood generation arrived? What kind of data or logic supported it?
Tom Lee: At the time, our research focused heavily on evidence-driven approaches, especially in demographics. We wrote many reports analyzing the impact of different generations on the market. We published a white paper that pointed out that millennials are the largest generation in history, with a population of 98 million, 40% more than the previous generation. From a generational cycle perspective, each generation begins to care about the stock market at some point, while the previous generation may lose confidence in the market due to some events.
Many of my peers at the time thought the stock market was no longer worth paying attention to, but for those who started investing after 2009, the market was full of opportunities. So we saw this opportunity for a generational shift. In fact, I once suggested to executives at a JPMorgan Chase managing partner meeting that they try to enter the retail brokerage business, but they felt it was simply a sunset industry and not worth doing. But if you look back, it would actually be a very smart strategic move.
We were small at the time and didn't have the support of a large platform. So we had to learn how to actively connect with people and expand our influence. That's why we started using Twitter very early and frequently accepted media interviews. It can be said that we built the company slowly using a guerrilla warfare approach.
2. Fed Policy and Inflation Interpretation: Tariffs, Interest Rates, and the Real Estate Market Game
Amit: Next, let's talk about market-related topics. Do you think the Fed should cut interest rates now?
Tom Lee: Frankly, I almost never directly comment on what the Federal Reserve should do. We have about ten thousand registered investment advisor clients, as well as over 300 hedge funds. In the research reports we send to our clients, we usually present the data and evidence and then ask them what they think. But if I were to do an analysis, like what should the Fed do? What metrics are they focusing on? What would be reasonable? Let's look at a fact: If we use the European Central Bank's measurement method, the core inflation in the United States may actually be close to 2%. Because the European Central Bank's core inflation indicator does not include housing costs. If we also exclude housing, the core inflation in the United States would drop from 4.5% to 1.9%, which is lower than the European Central Bank's current 2.5%.
Then why does everyone feel the Fed is more tight? From this perspective, the Fed is a full 200 basis points tighter than the European Central Bank, simply because housing is included in the statistics. Is the Fed really trying to suppress the real estate market? I don't think so.
Amit: But it is indeed confusing.
Tom Lee: Yes, that's what confuses me. Also, the Fed recently said it may postpone rate cuts this summer due to the impact of tariffs. They are worried that tariffs will bring inflation. We recently wrote an article for clients on this and shared some views on Twitter. The core point is: Tariffs are actually a tax, because the money ultimately flows to the government. In other words, suppose the US government suddenly announces that it will charge an additional $6 in tax on every gallon of gasoline, and as a result, the CPI index for gasoline soars, would the Fed raise interest rates because of this? Probably not. Because they know that it's not because the economy is overheating, but because people's wallets are being taxed by the government.
So in this case, it is reasonable to cut interest rates, because consumers' actual purchasing power has been affected, and this money is just taken away by the government and then re-entered into the economy in another way. This is not real inflation, but just a redistribution of funds.
Amit: But from Powell and the Fed's perspective, they may think that companies have raised commodity prices in order to cope with tariff pressure, although some of this spending will be redistributed by the government, but from the CPI perspective, it is indeed still inflation.
Tom Lee: Yes, but the problem is that it is actually a disguised tax. It is not essentially a price increase caused by strong market demand or supply bottlenecks, but is directly driven by policy. It's like we know a traffic ticket is a form of tax, and so are tariffs. No matter where it appears in the supply chain, it is essentially a tax. So, if the Fed treats this type of tax-induced CPI increase as real inflation, it is misjudging the root of the problem.
3. Is the Data Model "Outdated": JOLTS, ADP, and Market Signal Mismatch
Amit: What do you think of the data models we use now to calculate inflation and employment? For example, the Bureau of Labor Statistics' JOLTS data, we just saw yesterday that there were 400,000 new job vacancies, far exceeding expectations. Do you think the way they collect data is outdated?
Tom Lee: I think these data are very incomplete reflections of reality. Especially the response rate is very important. Some CPI-related settings are also strange, for example, the cost reduction brought about by technological innovation is actually deflationary, but they never treat it as deflation. The problem with JOLTS is even more obvious, its response rate is only 40%, and it is not synchronized with other data sources, such as Rackup or LinkedIn data.
Amit: It's really confusing. Most of the audience I face are retail investors, and they saw yesterday that the government said there were 400,000 new job vacancies, but today's ADP data showed a loss of 33,000 jobs, and the expectation was still a positive 99,000. What's going on?
Tom Lee: If you do a little more research, you will find that the reason why JOLTS' job vacancies increased is because many people in industries like restaurants don't come to work. So they have to post more job advertisements, but this is actually a reflection of labor shortages, not new jobs.
And today's ADP data shows that the categories with negative growth are financial services, professional services, and education. The education item is likely affected by summer vacation. The decline in professional services and finance may be related to the contraction of consulting business. For example, didn't McKinsey lay off 10%? This kind of change is often related to government contracts and US aid cuts, which affect the real demand of the service industry, rather than simple tariffs or macroeconomic shocks.
4. Institutional Hesitation VS Retail Investor Determination: Who bought at the bottom?
Amit: You mentioned on April 2 that despite retaliatory tariffs, you don't think Trump will violate the core principles of capitalism. But the reality is that the stock market fell back to 2022 levels, hitting 4800 points. You said there would be a V-shaped rebound at the time. So I want to ask, why didn't your institutional clients realize that Trump saying he was going to impose a 90% tariff on Zimbabwe was just scaring the market and was unlikely to be taken seriously?
Tom Lee: That's really ironic. He sometimes throws out some very outrageous numbers, but you know, institutional investors are constrained by rules, for example, when the VIX index rises, they have to reduce positions; when the market fluctuates, they also have to reduce risk. So once the market declines or fluctuates, they are often forced to sell by the rules, rather than make proactive judgments.
Amit: You said before that rebounds after such a big drop are usually V-shaped. Why are you so confident?
Tom Lee: Because we studied data from the past 100 years and found that most rebounds after a big drop are V-shaped as long as they don't trigger a recession impulse. This is a very regular market behavior.
Amit: So why did you realize that relying on the Fed to save the market is actually an illusion?
Tom Lee: I think this is really a misunderstanding. The Fed releasing liquidity is just giving money to banks, but if banks don't lend, that money is just stored as reserves and won't enter the market. So what is really more driving is retail investors' money.
Amit: So who do you think are the real participants in the market now?
Tom Lee: I think there are currently roughly four types of market participants: institutional investors, non-US investors, high-net-worth individuals, and retail investors. Institutions and high-net-worth individuals often refer to the views of hedge funds, and they are relatively more pessimistic. Company stock buybacks are another form of participation. And at the low point in April, the only ones who really stepped in to buy were retail investors.
Amit: In March and April, retail investors had net inflows of $40 billion, right? And the reason they dared to buy was partly because they listened to your analysis. So why do you think retail investors see more clearly?
Tom Lee: I think it's because retail investors look at specific stocks. They might think: "I bought Palantir, Meta, they won't be ruined because of tariffs, right?" They focus on the business itself, not macro sentiment. In contrast, institutional investors get caught up in macro concerns, like is Trump going to lead us into the abyss? Is the Fed going to destroy the market? These emotions can easily bias them. When the real economy doesn't collapse according to their framework, but instead rebounds, they think the market is crazy, this rebound is too stupid, only retail investors are buying. But they don't realize that they have cash on hand but missed the entire V-shaped recovery. That's why this rebound is called the most hated V-shaped rebound.
5. The Start of the Bull Market and Market Differentiation
Amit: You have now clearly expressed your position that we are at the beginning of a new bull market. I guess when you say this to institutional clients, they might have some kind of meltdown. Can you briefly explain why you have this judgment?
Tom Lee: Actually, this is a judgment based on facts. We experienced a correction of more than 20%, and now we have reached a new high. From the perspective of commodity trading advisors, as long as they experience a deep correction and then break through to a new high, it can be defined as the beginning of a bull market. For institutions, this means that the bull market actually started on the day when we recently broke through 6141 points. But retail investors had already entered the market at 4800 points, and institutions are just starting to admit that the bull market has arrived.
Amit: Do you think the participation of retail investors is a good thing? Why do you say that?
Tom Lee: I think today's stock market is experiencing a profound structural change, and retail investors are playing a very active role in it. In fact, I would attribute the rise of this force to Twitter, because it gives the best companies the opportunity to turn shareholders into customers. Let me give you a typical example: MicroStrategy. Now many people choose to hold MicroStrategy's stock not because they are optimistic about its securities business, but because they believe Michael Saylor can continue to bring more Bitcoin value. A similar situation exists with Palantir, Alex Karp is a very charismatic founder, and his and the company's vision has attracted a large number of loyal users. These changes are changing the relationship between investors and businesses, and it is also part of the bull market momentum.
6. Tesla's Scarcity and Disruptive Valuation
Amit: Now let's talk about Tesla. Many institutional investors think that Tesla's price-to-earnings ratio is almost 200 times, and its market value is trillions. Isn't this a bubble? But some retail investors are firm believers. Those people may drive a Tesla every day, personally experience fully autonomous driving, and can even talk about its functions and updates in detail. How do you view this way of understanding a company through experience? Is valuation not so important?
Tom Lee: You asked a very rigorous question. My view is that the group of people who still rely on price-to-earnings ratios to make investment decisions today is actually getting smaller and smaller. Let's think about it from another angle: do you have luxury watches? Or have you ever collected art? Because to me, Tesla is essentially a scarce commodity, like a Da Vinci painting. It is not simply a car company, but a unique existence in the world. You can find other electric car companies on the market, and you can also find companies that make robots or autonomous driving, but it is difficult to find a company like Tesla that combines all these into one and has a fanatical user base. For example, imagine you have a painting in front of you, you evaluate it based on its materials and say it's only worth 12 cents, but there are 100 people next to you bidding for it, they say: "No matter how much the paper is worth, this is a Da Vinci work, I am willing to spend $100 million to buy it." This is the value logic of Tesla.
Amit: In other words, from the perspective of the holder, this is not as simple as a car, but they believe that this company will build the future. And those who have experienced Tesla are more confident in its future imagination.
Tom Lee: That's right. These users are no longer ordinary consumers, but evangelists for Tesla. They use fully autonomous driving every day and know a lot about the product, Elon, and the whole company. They may not draw valuation models, but they know clearly what they are buying. This is a new valuation logic: treating the company as a platform, as a scarce asset, this way is more real and more convincing for them.
7. The Future of Ethereum and Cryptocurrency
Amit: Let's talk about the new move you announced this Monday. You are now the chairman of the board of BitMine and have raised $250 million to buy Ethereum, which is equivalent to creating an Ethereum vault. So my first question is: Why Ethereum?
Tom Lee: I believe most viewers have some understanding of Ethereum. The reason I chose Ethereum is because it is a programmable smart contract blockchain - it sounds a bit technical, but the core behind it is that it provides greater flexibility for building financial systems. More directly, one of the key reasons I chose Ethereum is because stablecoins are developing rapidly.
Amit: Companies like Circle are already unicorns with valuations of billions of dollars.
Tom Lee: Yes, Circle can be said to be one of the most successful IPOs in the past five years. Its valuation reached 100 times EBITDA, which greatly improved the performance of some funds this year, and even helped some people enter the top 1%. In the eyes of Wall Street, Circle is a god-level stock. And stablecoin is the ChatGPT of the crypto world, and its popularity also proves a trend: traditional finance is trying to securitize assets, while the crypto world is promoting the tokenization of equity. Circle is actually a typical example of tokenizing the US dollar.
Amit: But in terms of price performance, Ethereum is still lagging behind Bitcoin. Why do you think this is?
Tom Lee: I think the cryptocurrency space has always been narrative-driven, and its core is trust. We all know that the logic behind Bitcoin is digital gold and value storage, while what Ethereum represents is programmable money. Now everyone is gradually realizing that it's not just about having a programmable coin, but also hoping that this coin runs on a large enough network. And Ethereum, with a market value of 300 billion, is currently the largest smart contract chain. This is exactly where its huge opportunity lies.
Tom Lee: Although I won't specifically talk about BMNR, I can talk about why the vault company model makes sense. Many people will ask, if I want to invest in Ethereum, why not just buy an ETF, or simply buy it on-chain myself? But the problem is that whether it is an ETF or on-chain holdings, you own a constant amount of Ethereum. Vault companies offer five very critical options - it's not just storage, it allows you to participate in the network in more ways.
