The Practical Islamic Finance Podcast

Recession or Moon?

March 21, 2024 Rakaan Kayali
The Practical Islamic Finance Podcast
Recession or Moon?
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Recession or Moon?

In this episode we will discuss:

  • Jerome Powell's reassuring statements on inflation and the labor market sparked optimism in the markets.
  • Discussion on the implications of potential rate cuts, particularly for sectors like Bitcoin and national debt.
  • Emphasis on the importance of diversification and conducting due diligence before making investment decisions.
  • Interactive engagement with the audience, addressing queries on halal investment options and market dynamics.
  • Observations on the broader economic landscape and the significance of owning hard assets in times of monetary uncertainty.
  • Exploration of the differences between hard and soft assets, with a focus on their investment potential.
  • Insights into the PIF membership benefits, including access to investment portfolios, educational resources, and community discussions.



Our podcast is about helping people ethically build wealth. We cover a broad range of topics including stock and crypto investing, product reviews, and general financial well-being.


Anything you hear in this video is an opinion. It is not personalized financial advice. Make sure you do your due diligence before making any investment decisions.

As-salamu alaykum everyone. Big day in the markets today. Jerome Powell couldn't have been more friendly with the markets and basically gave investors and told them everything they wanted to hear. We had concerns about rising prices. He said, you know what, we're not going to pay too much attention to these two months. There are bumps in the road, but overall inflation is falling. We were concerned about the very strong labor market. And he said, basically, don't worry about that either. It's on its own. It's not going to cause me to keep rates where they are. So that's what the market wanted to hear. And the rest was history, as they say. So let's look at exactly what happened and look at the road ahead inshallah. So without further ado, let's get started. Not financial advice. Be sure to do your own due diligence before making any investing decisions. As-salamu alaykum and Ramadan Mubarak to everyone in the chat. So the two things that Jerome mentioned, higher inflationary data hasn't changed its overall trend downward. He mentioned, I think they haven't really changed the overall story in reference to the data points in January and February that came in a bit hotter than expected. And the story is that inflation is moving down gradually on a sometimes bumpy road towards 2%. That's exactly what the market wanted to hear. He also said strong hiring wouldn't push Fed to delay rate cuts. Strong hiring in and of itself would not be a reason to hold off on rate cuts, he said. Not only that, an unexpected weakening in the labor market could also warrant a policy response. So basically what Jerome Powell is saying is that he's basically looking for any reason to cut. He's not considering raising rates right now, but he is looking for any reason to cut. And I mentioned yesterday some reasons why I thought that might be the case. We have a non-trivial number of banks that are on the brink, smaller banks. We have a debt burden that is getting out of control in this country. And servicing this debt is becoming increasingly difficult. And therefore, keeping rates as high as they are is simply untenable. And the dot plot for the Fed came out basically the same as it was when they were pulled in December of 2023. So they're basically expecting three rate cuts. I mentioned before that I expected two to three rate cuts this year. So they're expecting basically 75 basis points, three quarters of one percentage point to be cut. And if you're wondering what you're looking at, so they're basically this is the March 2024 survey. And they're expecting at the end of 2024 for the rate. So each basically FOMC meeting member is putting a dot on this chart. And this dot represents where they think the rate will be. So at the end of 2024, they expect it to be four and a half to 4.75. At the 2025, they expect it to be just below four. And then in the longer run, you can at least the members of the committee are expecting something just above 2%. The first rate cut is expected to be in June. This is according to the market's pricing. And we saw earlier this week, the probability was closer to 50%. But now we're closer to 70% in terms of the probability of a rate cut in June. And so this explains the general euphoric response that the market had. So markets rejoiced. As we mentioned, we broke above 5,200 for the first time. And I expect the days when prices of assets, hard assets go down in relation to the dollar to be the exception. As I said yesterday, the general trend here in terms of the prices of hard assets is up. The days or the periods where we experience declines in the prices of these hard assets in relation to the U.S. dollar will be fewer and further between. So this is good when you own hard assets. It's not good when you don't. And we'll talk about that in a second. So Bitcoin miners soared today. We saw, you know, Iris and CLSK have spoken about these two miners on this channel before. We hold them in our growth portfolio, stock growth portfolio. They were both up close to 25% today, numbers two and three in terms of highest gainers. And we will. I know I've kind of been wanting to do this for a while, but I've been waiting for the right point in time. And specifically, I was hoping to add towards the end of the month, a third miner, inshallah, in preparation for the Bitcoin halving that happens next month, inshallah. Now, another day, another dollar in debt that the U.S. goes deeper into. So we're now close to $34.5 trillion in debt. And we're basically adding $1 trillion in debt every 100 days or so. So this is spiraling out of control. Now, something like Bitcoin may not necessarily save this system, but it may be a way to save yourself. So I think there's broader sort of policy changes that need to happen. We need to not create money using interest bearing debt. We need to have an entirely different monetary system. And that's not going to be solved by just Bitcoin. There needs to be a structural change here. However, Bitcoin can be a way for you to save yourself and your family. Again, not financial advice, but keeping your money in banks is a very risky thing. And perhaps, you know, previously we would say, you know, Bitcoin is risky. Well, fiat is probably a lot riskier. So make sure you do your own due diligence and make your investing decisions accordingly. And I think that what we're seeing is some amount of financial nihilism setting in to the markets wherein people are coming to the conclusion that their prices are going up so much for, let's say, you know, you want to buy a house in the United States. Prices are just not within the grasp of the normal person anymore. And so people are getting to the point where they're like, well, you know, I'm going to throw whatever little money I can, you know, put together at whatever has a plausible chance of one hundred to a thousand xing and and see what happens. And that's that's what's behind all this trading in meme coins. People are like, well, our money is going to be worthless anyway. It's losing value very quickly anyway. So we might as well just throw it at something that can perhaps a hundred x or a thousand x. And, you know, on Solana alone, in the space of one hour, there was twenty five hundred meme coins created. And meme coins today rallied. They rallied in a very big way. Dogecoin is something that I hold in my portfolio. And I was asked on Discord yesterday, you know, what's the difference between the Dogecoin you hold and all these other meme coins? And I would say probably one of the biggest differences is the fact that it's proof of work. You have to do work in order to generate Dogecoin. These other meme coins, they were just created out of thin air. And I think, you know, in large, they're just schemes to enrich the initial creators, the founders. Whereas with Dogecoin, we know who the founders are and they're far from being rich. So I think there's a fundamental difference here. And I do think that there is some merit. And I mentioned this many times, much to the chagrin of maximalists out there. There's some merit to having a predictable inflation rate in a currency. And Dogecoin has this. It has a predictable, steady, predictable and decreasing inflation rate. The amount of Dogecoin, the absolute number of Dogecoin that can be mined in any one unit of time is fixed. So that causes a steady and predictable and decreasing inflation rate, which also encourages people to exchange the coin, use it in transactions as opposed to hoarding it, which I think having a limited supply causes people to do. Now, this is a chart that will perhaps be, this will perhaps suffice for many to see, to get the idea here, what type of times we live in and how important investing is and how important owning real assets, hard assets is. So if you look at the green line here on this chart, that's the money supply. That's how many dollars there are. If you look at the blue line towards the bottom, that's the net worth of the bottom 50%. If you look at the red line, that's the net worth of the top 0.1%. And you can see that the net worth of the top 0.1% basically moves in tandem with the money supply. Why is that? Because the top 0.1% hold their wealth in hard assets and these hard assets go up in price, the more money there is. The bottom 50%, they don't have enough money to invest in hard assets, or they just don't have the education to know that they need to invest in hard assets. And therefore, their net worth is like a melting ice cube. It's always decreasing the more money supply there is. So remember this chart, the way towards wealth and breaking out of basically financial servitude for the rest of your life. The way to do that is through owning hard assets, things like Bitcoin and stocks, and the very few and far between crypto projects and having a strong bias towards proof of work helps here. So with that, I would encourage you to become part of our PIF community. We are a community of Halal conscious investors that are looking out for one another and trying to do the right thing, both ethically and from a financial perspective. A link to become a member is in the description. So with that, I'll take some questions. Ramadan Mubarak and Assalamu Alaikum to everyone. Rashad is saying, I'm really questioning the 2% that the Fed keeps mentioning. Yeah, I question that too. And if we get hotter inflation numbers, then you can expect the market to react in the opposite way that it reacted today. But from now until we get those numbers, I think the market is going to be buoyed by the very encouraging remarks that Jerome Powell mentioned. Assalamu Alaikum brother Shawak. Ali says, Assalamu Alaikum Rakan, I know you are bullish on BTC even after the huge run up due to the halving and issues associated with devaluations. Are your thoughts on Sol the same even after its incredible run? Good question Ali. Yeah, I think Sol has more to go. There was an article not too long ago about the price to sales ratio of Sol and the fact that that is actually at, historically speaking, not elevated levels. So I think Sol has more to go. Like I said, I think there's a non-trivial chance that it flips Ethereum this cycle. So it still has a ways to go, I think. Is there any earning service using my crypto Binance that is halal or is it all based on interest? What I would say is staking and liquidity providing are not inherently haram. I think liquidity providing, especially when you're providing liquidity in tokens that are comfortable from a Sharia perspective, that's one way to earn some yield. Another way would be staking something that when you're not verifying transactions that could involve interest paying debt or verifying gambling transactions or something like that, to the extent that that's available, then I'm fine with that as well. What is the difference between hard and soft assets? Well, hard assets have limited supply. So things like real estate, Bitcoin, and the stocks that have, or companies rather, that have dilution incentives that are not adverse to the shareholders. So when you have companies where the incentive is for management is to raise the price of the shares, the share price, then these are, I think, can be considered hard assets. However, there are many companies out there where the management is not necessarily incentivized by share price. And those companies have a tendency to dilute their shareholders. Now, how can you tell between the two companies? Well, one thing is to look at the management compensation. Another thing is like how that's structured. Another thing is to look at how much insider ownership there is. So larger insider ownership means that, you know, insiders don't want to dilute the price of what they own. And also look at insider buying. So if insiders are trying to increase their ownership percentage, this means that there is likely no plans of near-term dilution for the company or the expectation is the share price is going to increase despite that. So I would say value-producing assets, things that have a limited supply, such as, you know, Bitcoin, gold, if you're very traditional, although I think Bitcoin is going to basically eat gold. And things like real estate are hard assets. Soft assets are, you know, mean coins that you can create as many as, you know, the founders want to create. Is it too late to invest in miners? No, I don't think so. No, I think we're just getting started. So let me scroll up here. Can you please include the on PIF website dates, times of market events? That's a good suggestion. Perhaps I will, or I'll link to something that already includes it because there are many places that already have that schedule. Is float the word you're looking for? Perhaps that's not directed to me. So I just wanted to ask about the Zoya app, which tells whether a stock is share compliant or not, because you mentioned PinkBot is one stream a while ago. Yeah, we, but Zoya says it's not. If you don't mind, brother Meher, just provide the reason why whatever app you're using is saying that it's not compliant. I have to know the reason and then I can respond. But I've done the analysis myself and I'm comfortable with it. So I don't, it's not that I have any doubts, but I should have a healthy amount of doubt, but I have a healthy amount of doubt, but I'm pretty confident that if you were to show me the reason why they're saying it's not, I can respond to that. Cool looking shirt. Well, thank you. My wife said this, this shirt is for August. Why are you wearing it? I just felt today that I was in vacation mood. And so I wore this shirt. Not familiar with BoneCoin? How much would you charge for one on one video chat for half an hour? I have a bunch of questions. While we're chatting right now, do you only do spot trading and mining or is there something else as well? Do I only do spot trading and mining? Do you know any other than Zoya? Well, I'm not sure about the, well, so what we do on PIF, we invest in cryptos, growth stocks and dividend stocks. We have three portfolios. Basically I invest real money into these portfolios and I share trade for trade, move for move whenever I buy or sell. And then also you get the discord where we discuss everything about investing Halal and Haram and crypto stocks, etc. You also get our watch list, which has buy and sell prices. So buy below, sell above prices. We're not a day trading service at all. So if you're looking for day trading, don't sign up. We have a longer term view for our investing. And yeah, we have monthly video chats where we talk about our portfolios and with Elite, there's also a course. So if you want to learn investing, you can do so through the Elite membership. So yeah, that's the PIF membership. Leave a like if you enjoyed this live, subscribe and hit the notification bell. So you know when we go live next and until next time, take care of yourself. As-salamu alaykum and peace be upon you all.

Jerome Powell's reassuring statements on inflation and the labor market sparked optimism in the markets.
Discussion on the implications of potential rate cuts, particularly for sectors like Bitcoin and national debt.
Emphasis on the importance of diversification and conducting due diligence before making investment decisions.
Exploration of the differences between hard and soft assets, with a focus on their investment potential.
Observations on the broader economic landscape and the significance of owning hard assets in times of monetary uncertainty.
Insights into the PIF membership benefits, including access to investment portfolios, educational resources, and community discussions.