WHEN: Today, Tuesday, December 12, 2017
Where: CNBC's "Fast Money"
Following is the unofficial transcript of a CNBC interview with Galaxy Investment Partners CEO Mike Novogratz and CNBC's Melissa Lee on CNBC's "Fast Money" (M-F 5PM-6PM) today, Tuesday, December 12, 2017. Following is a link to video from the interview on CNBC.com: https://www.cnbc.com/video/2017/12/12/the-man-who-called-the-bitcoin-rally-sees-this-for-litecoin.html?play=1.
All references must be sourced to CNBC.
MELISSA LEE: FOR MORE ON LITECOIN'S METEORIC MOVE AND THE CRYPTO PHENOMENON, LET'S BRING IN MIKE NOVOGRATZ OF GALAXY INVESTMENT PARTNERS. HE CALLED BITCOIN 10K AND THE RECENT MOVE AS WELL. HE IS THE ORIGINAL CRYPTO BALLER, A FRIEND OF "FAST MONEY," OR "FAST CRYPTO" AS WE LIKE TO CALL IT THESE DAYS. WELCOME BACK TO THE SHOW.
MIKE NOVOGRATZ: THANK YOU.
LEE: SO, IN TERMS OF THIS MOVEMENT, LITECOIN. DO YOU LIKE LITECOIN? WHERE DO YOU STAND ON LITECOIN?
NOVOGRATZ: YOU KNOW, I ACTUALLY CALLED LITECOIN THE POOR MAN'S BITCOIN I THINK MAYBE LAST TIME I WAS ON THIS SHOW. AND SI I'LL HAVE TO EAT MY HAT. I'M GLAD I WASN'T SHORT. LISTEN, I THINK THEY'VE GOT A VERY AGILE PROMOTER. THEY'VE GOT AN OKAY TECHNOLOGY. YOU KNOW, THIS LIGHTNING NETWORK, WHICH A LOT OF PEOPLE HAVE BEEN TALKING ABOUT, I THINK IS A WHY IT MOVED TODAY. I DON'T THINK WE'LL HAVE THE SAME LEGS THAT BITCOIN WOULD. I'D SELL IT HERE VERSUS BUYING BITCOIN. YOU HAVE TO REMEMBER, THIS IS WHAT A SPECULATIVE MANIA FEELS LIKE. WE ARE IN THE MIDDLE OF A SPECULATIVE MANIA. AND KIND OF PHASE ONE OF THIS WHOLE CYRPTO DECENTRALIZED REVOLUTION IS SELLING THE STORY. NONE OF THESE PROTOCOLS ARE GOING TO BE READY FOR PRIME TIME FOR AT LEAST TWO TO THREE YEARS. AND SO WE'RE SELLING THE STORY ABOUT WHAT THE FUTURE IS GOING TO BE AND PEOPLE ARE PILING ON. AND SO RIGHT NOW, EVERYTHING IS STORE VALUE. AND SO WHY DOES BITCOIN GO UP AND THE OTHER ONES LAG AND THEN IT GOES UP? BECAUSE MOST CRYPTO PLAYERS DON'T WANT TO GO BACK INTO FIAT BECAUSE THEY DON'T WANT TO PAY TAX. AND THEY THINK IF THEY GO BACK INTO FIAT, THE TAX MAN MIGHT CATCH THEM.
LEE: SO THEY KEEP IT IN CRYPTO? AND YOU JUST MOVE IT AROUND?
NOVOGRATZ: THEY KEEP IT IN CRYPTO. I THINK IN THE LONG RUN THAT'S A –THEY'RE GOING TO HAVE TO PAY THEIR TAX, THEY'RE SUPPOSED TO PAY THEIR TAX. I THINK THE IRS WILL GET PRETTY SMART, PRETTY QUICK NOW THAT THE DOLLARS ARE GETTING PRETTY BIG.
LEE: RIGHT. AS YOU – I FEEL LIKE EVERY SINGLE TIME WE HAVE YOU ON, YOU HAVE AN EVEN BOLDER AND BOLDER CALL WHEN IT COMES TO WHATEVER CRYPTOCURRENCY WE'RE TALKING ABOUT, SPECIFICALLY BITCOIN. I'M WONDERING WHEN YOU TALK ABOUT THAT MANIA AND BEING IN THE MIDST OF THAT MANIA, DOES IT MAKE YOU CONCERNED THAT THE MANIA SEEMS TO BE PROGRESSING MAYBE EVEN FASTER THAN YOU THINK?
NOVOGRATZ: SO YOU KNOW, I UNDERESTIMATED THE VIRAL NETWORK. ACTUALLY, I SHOULD HAVE LEARNED, JUST BEING ON TWITTER FOR THE LAST MONTH, I'M NEW TO TWITTER, WATCHING JUST HOW FAST INFORMATION MOVES AND SO THIS IS – THIS IS LITERALLY MOVING AT LIGHTNING SPEED AROUND THE WORLD. AND SO WE'RE ACCELERATING WHAT WOULD BE A NORMAL BULL MARKET PHASE, I MEAN. YOU LOOK AT THIS ON ANY CHART, I WAS WRITING LOGARITHMIC CHARTS TODAY, AND IT'S DOING THINGS THE MARKET HAS NEVER SEEN. AND SO IT'S A BIG CAUTION. YOU'VE GOTTA BE – LISTEN, MARKET CAP IS NOW A HALF A TRILLION DOLLARS. I THOUGHT END OF LAST YEAR IT COULD BE A TRILLION. HECK, IT COULD BE THERE IN THREE MONTHS. BUT IN A SPECULATIVE PHASE, YOU KNOW, SHORTING IT IS REALLY DANGEROUS. BUT I WOULDN'T RECOMMEND, YOU KNOW, GOING OUT ON YOUR CREDIT CARD OR MORTGAGING YOUR HOUSE TO BUY ANY OF THIS STUFF.
LEE: SO, YOU HAD SAID THE LAST TIME YOU WERE ON THIS SHOW THAT BITCOIN COULD HIT 40, 40,000, SOMETIME IN 2018. DO YOU ACCELERATE THAT CALL? DO YOU SAY, YOU KNOW WHAT, WE'VE MOVED THIS FAR, IT'S GOING VIRAL, IT'S GOT TO BE HIGHER.
NOVOGRATZ: SO I THINK, LISTEN, AT THIS PACE IT COULD HIT 40,000 IN THREE MONTHS, TWO MONTHS. THERE ARE RISKS OUT THERE. I MEAN, THE BIGGEST RISK IS MR. AND MS. REGULATOR ARE GOING TO COME OUT AND SAY, LOOK, WHAT WE'VE GOT TOO MANY STORIES OF PEOPLE STARTING TO BORROW FROM THEIR CREDIT CARD. AND WHEN PRICES ARE MOVING THIS FAST, IT GETS REGULATORS NERVOUS.
BRIAN KELLY: SO, MIKE, YOU TALKED ABOUT THE LAST TIME YOU WERE HERE, THAT THE HERD IS COMING, THE INSTITUTIONAL INVESTORS ARE COMING. YOU'RE OUT THERE TALKING TO INSTITUTIONAL INVESTORS. WHERE DO THEY STAND? ARE THEY IN THIS MARKET? OR—
NOVOGRATZ: ABSOLUTELY NOT. I WAS ACTUALLY, SPEAKING OF ONE OF THE BIGGEST PENSION FUNDS IN THE WORLD, AND THEY HAVE 50 PEOPLE IN THEIR OFFICE. THEY KNEW MORE ABOUT CRYPTO THAN MOST OF US. THEY'RE DOING THEIR HOMEWORK. THEYRE NOT IN AS AN INSTITUTION. MY SENSE—
LEE: CAN THEY NOT BE BECAUSE OF THEIR MANDATE? AND WILL THEY CHANGE THEIR MANDATE?
NOVOGRATZ: NO, NO. ALL OF THESE GUYS ARE LOOKING AT THIS AS A POTENTIAL ASSET CLASS. AND I THINK, MARK MY WORDS, WHEN GOLDMAN SACHS STARTS TRADING IT, YOU'RE GONNA SEE THE BIG PENSIONS START COMING IN, RIGHT. SO AS MORE AND MORE CREDIBILITY COMES, THE FUTURES WAS A BIG DEALM AND GETTING SOME OF THE BANKS TO PARTICIPATE. THAT WILL GET THE PENSION FUNDS IN. SO I DON'T THINK THE SPECULATIVE PHASE OF THIS IS OVER. I THINK IT'S GONNA BE BUMPIER THAN IT HAS BEEN. AND I DON'T KNOW IF IT LASTS THREE MONTHS, 18 MONTHS, TWO YEARS. IT WILL END AT ONE POINT AND THE SECOND CHAPTER OF THIS DECENTRALIZED REVOLUTION WILL BE WHEN THESE ACTUALLY PROTOCOLS START WORKING.
LEE: SO RIGHT NOW, YOU'RE PLANNING TO LAUNCH YOUR FUND NEXT YEAR, EARLY NEXT YEAR OR SO?
NOVOGRATZ: YOU KNOW, END OF THE WEEK.
LEE: THE END OF THE WEEK. DID YOU MOVE THAT UP?
NOVOGRATZ: WE HAD -- LISTEN. LAUNCHING A FUND IS ALWAYS CHALLENGING. I WISH WE HAD LAUNCHED IT THREE MONTHS AGO.
LEE: SURE.
NOVOGRATZ: BECAUSE IT WOULD HAVE BEEN MUCH, MUCH EASIER INVESTING. AND SO AT ONE POINT YOU JUST START. AND SO WE'RE GOING TO START. AND WE'LL SEE FROM THERE.
LEE: I SO THINK I ASKED YOU THIS QUESTION LAST TIME, BUT WHAT IS DOES YOUR RIGHT NOWM WHAT ALLOCATION LOOK LIKE? GIVEN THE RUNS WE'VE SEEN AND EVERYTHING THAT'S GONE ON SINCE THE LAST TIME WE SPOKE.
NOVOGRATZ: LISTEN, I'M A TRADER AT HEART. AND SOMETIMES I TRADE, AND I SEEM SMART. LAST TIME I SOLD A BUNCH OF BITCOIN AT 10,000, 11,000, AND I DIDN'T BUY THOSE BACK, YOU CAN IMAGINE HOW MUCH THAT COST. I'M GUESSING, ON A DOLLAR BASIS, ABOUT HALF INVESTED AT THIS POINT, HAVING TAKEN PROFITS ON SOME THINGS, WAITING FOR VOLATILITY.
LEE: ARE YOU PERSONALLY OR THROUGH YOUR FUND GOING TO BE LOOKING AT OTHER WAYS TO INVEST IN BITCOIN OR BLOCKCHAIN, WHETHER IT BE INVESTING IN SOME SORT OF EXCHANGE OR A PLATFORM TO TRADE OR ANYTHING LIKE THAT?
NOVOGRATZ: YOU KNOW, OUR COMPANY, WE HAVE INVESTMENTS IN EXCHANGES, AND IN COMPANIES ALL ACROSS THE ECOSYSTEM, AND IN MINING. SO—. ORIGINALLY I HAD THIS THESIS, YOU'RE NOT SMART ENOUGH TO PICK JUST THE WINNER SO SPREAD YOUR BETS. AND SO I SPREAD MY BETS ALL OVER THE TABLE.
LEE: AND OUT OF THE INVESTMENTS OR THE TYPES OF INVESTMENTS THAT ARE OUTSIDE THE ACTUAL CRYPTOCURRENCY, WHAT DO YOU THINK COULD BE THE MOST DISRUPTIVE, AT THIS POINT? AND GRANTED A LOT COULD CHANGE OVER THE NEXT COUPLE OF YEARS.
NOVOGRATZ: WELL LISTEN, THE BEST INVESTMENTS BY A LONG SHOT HAVE BEEN THESE THE EXCHANGES. THE EXCHANGES ARE PRINTING MONEY RIGHT NOW. AND SO GOD, YOU WISH YOU OWNED A BIG CHUNK OF COIN BASE OR BITFINEX OR ANY OF THESE BIG EXCHANGES.
LEE: DO YOU THINK IT'S GONNA BE A RACE TO THE BOTTOM IN TERMS OF THE COMMISSIONS? BECAUSE THAT SEEMS LIKE THE NEXT – YOU KNOW, ONCE YOU HAVE A LOT OF EXCHANGES AND A LOT OF PLATFORMS, IT'S LIKE THE E*TRADE/AMERITRADE/SCHWAB SORT OF WAR THAT WE'VE SEEN ONGOING.
NOVOGRATZ: YOU KNOW WE'RE STILL EARLY ON IN THE BUILDING OF THIS THING. THE HARD PART IS GETTING MONEY FROM THE EXCHANGE TO THE EXCHANGE. AND SO WE'VE LOOKED AT BANKS THAT ARE FUNDING THESE EXCHANGES. THE TRADITIONAL BANKS HAVEN'T WANTED TO PARTICIPATE IN CRYPTO SPACE. THAT'S PARTLY REPUTATIONAL. THAT'S PARTLY PROTECTING THEIR OWN TURF.
LEE: WE'VE BEEN IN A BULL MARKET FOR BASICALLY EVERYTHING RIGHT NOW, I MEAN, STOCKS, CRYPTO. CAN BITCOIN GO HIGHER IF STOCKS CRASH? I MEAN, IF WE SEE A MAJOR CORRECTION IN STOCKS.
NOVOGRATZ: YEAH, I THINK SO. IF YOU THINK ABOUT TOTAL MARKET CAP OF BITCOIN, BITCOIN IS STILL TWO-THIRDS OF APPLE. IT'S NOT ENOUGH THAT YOU'RE GOING TO SEE THE WEALTH EFFECT SHOT. IF BITCOIN WAS $2 TRILLION MARKET CAP, THEN I THINK THERE WOULD BE A LOT OF CORRELATION, RIGHT. YOU'RE LOSING MONEY IN STOCKS, YOU BETTER TAKE PROFIT IN YOUR BITCOIN. BUT YOU HAVE A DIFFERENT INVESTOR BASE, RIGHT. THE CORE CRYPTO INVESTOR BASE, YOU'RE STARTING TO GET MORE CROSSOVER PEOPLE, BUT THE CORE CRYPTO INVESTOR BASE, THEY'RE NOT LOOKING AT THE S&P. THEY REALLY AREN'T. THEY'RE LOOKING AT ALL THEIR DIFFERENT COINS. AND SO I THINK IT'S STILL A PRETTY UNCORRELATED ASSET.
GUY ADAMI: MIKE, OBVIOUSLY CRYPTOCURRENCIES ARE WANT DISRUPTIVE. I DON'T KNOW THE ANSWER, I DON'T MEAN TO BE GLIB. IF IT'S AS DISRUPTIVE AS WE THINK IT IS, WHAT INDUSTRIES ARE BEING DISRUPTED? THEN THE QUESTION IS, ARE THERE COMPANIES YOU CAN SHORT IN TERMS OF STOCKS?
NOVOGRATZ: SO RIGHT NOW NO INDUSTRIES ARE BEING DISRUPTED. THE BIGGEST INDUSTRY BEING DISRUPTED IS GOLD, RIGHT. SO BITCOIN IS ONE OF THE FEW USE CASES FOR THE BLOCKCHAIN RIGHT NOW. GOLD BEING STORE VALUE. THE REST OF THE COINS ARE PROMISES OF THE FUTURE, RIGHT. THERE WILL BE A DECENTRALIZED UBER, THAT COULD DISRUPT UBER, BUT NONE OF THEM ARE READY TO PLAY, BECAUSE THE PUBLIC UTILITY, IF IT'S ETHEREUM, OR IF IT'S EOS OR IF IT'S HASHGRAPH, THE KIND OF GLOBAL DECENTRALIZED SUPER COMPUTER, ISN'T NEARLY FAST ENOUGH TO PROCESS ANYTHING. AND SO, YOU KNOW, WE'RE TWO TO THREE YEARS OUT FROM WHEN WE'RE GOING TO SEE THE REAL DISRUPTION HAPPEN. BUT THERE'S GOING TO BE DECENTRALIZED CLOUD COMPUTING, DECENTRALIZED FILE SHARING.
LEE: ARE WE ACTUALLY SEEING THE DISRUPTION TO THE GOLD MARKET? I MEAN I KNOW A LOT OF PEOPLE LIKE TO SAY IT'S COMPETITION FOR GOLD BUT IF YOU TAKE A LOOK AT HOLDINGS IN THE GOLD ETF, THEY'VE BEEN AT THE HIGHEST LEVEL SINCE MAY '13. SO I MEAN, MAY OF 2013, NOT MAY 13th. IF IT'S NOT A COMPETITIVE STORE VALUE, CAN WE ACTUALLY SAY IT'S A STORE VALUE? IT SEEMS LIKE WHENEVER YOU ASK SOMEBODY, WELL, WHAT IS IT, IT'S A STORE OF VALUE, IT COMPETES WITH GOLD. WHAT IF IT'S NOT ACTUALLY COMPETING WITH GOLD HERE?
NOVOGRATZ: WELL, IT'S DIFFERENT, AGAIN, DIFFERENT USER BASE, RIGHT. AND SO OLD PEOPLE, AND YOU KNOW, TRADITIONAL – 5,000 YEARS, PEOPLE HAVE SEEN GOLD AS A STORE OF VALUE. AND THIS NEW GENERATION SAYS, HEY, THIS COULD BE A STORE OF VALUE. AND SO ARE THERE SOME PEOPLE LONG BITCOIN, SHORT GOLD? VERY FEW, BUT PROBABLY A COUPLE. I THINK GOLD IS PROBABLY GONNA WILL FALL BECAUSE INTEREST RATES ARE GONNA GO HIGHER. I MEAN GOLD'S A PRETTY SERIOUS NEGATIVE CARRY INSTRUMENT.
LEE: I WANT TO SWITCH GEARS HERE. AND I KNOW YOU'RE THE CRYPTO BALLER, WE'D LIKE TO TALK ABOUT CRYPTO, BUT I WANT TO TALK ABOUT TAXES WITH YOU. THERE'S A QUOTE IN A BLOOMBERG ARTICLE, AND YOU TALK ABOUT THE TREASURY SECRETARY, STEVEN MNUCHIN. YOU SAID, ABOUT STEVE, "STEVE MNUCHIN NEVER EVEN MODELED THE THING." THE TAX PLAN. IDIOT. "I-D-I-O-T", SPELLING IT OUT. AND THEN YOU SAY, "GARY COHN SHOULD NEVER BE ABLE TO LIVE WITH HIMSELF."
NOVOGRATZ: FIRST OF ALL, I APOLOGIZE, YOU SHOULD NEVER CALL ANYONE AN IDIOT. AND IT WAS OUT OF CONTEXT. MY THOUGHT WAS THAT IF NO ONE HAD MODELED THAT, THAT'S FAIRLY IDIOTIC. BECAUSE TAX REFORM AND TAX CODE IS COMPLICATED. I LOOK AT THIS TAX PLAN AND I DON'T UNDERSTAND HOW IT TURNED OUT THE WAY IT DID. IT DOESN'T SEEM TO MAKE A WHOLE LOT OF SENSE TO ME. MY THOUGHT ABOUT GARY COHN WAS AS A NEW YORKER, HOW CAN YOU LET IT HAPPEN TO US? BECAUSE IT DOES FEEL LIKE THE TAX CODE IS YOU KNOW, PENALIZING THE COASTS, THE STATES THAT DIDN'T VOTE FOR TRUMP, AT THE BENEFIT OF THE STATES THAT DID. AND THAT DOESN'T SEEM A SMART WAY TO DO TAX.
LEE: YOU LIVE IN NEW YORK?
NOVOGRATZ: I'M A NEW YORKER.
LEE: YOU'RE A NEW YORKER. RIGHT. YEAH, YEAH. YOU COULD HAVE A CRYPTO FUND ANYWHERE IN THE WORLD, MIKE. WOULD YOU MOVE?
NOVOGRATZ: I LOVE NEW YORK CITY.
LEE: YOU'RE GOING TO STAY HERE NO MATTER WHAT, EVEN IF THEY JACK UP YOUR TAXES?
NOVOGRATZ: YES, YES. WE'RE MAKING ENOUGH MONEY IN CRYPTO TO PAY OUR TAXES.
LEE: GOOD ANSWER. LAST QUICK QUESTION, IS TAX REFORM GOING TO BE GOOD FOR THE STOCK MARKET OR IS IT ALL PRICED IN?
NOVOGRATZ: I THINK IN THE SHORT RUN IT MIGHT BE PRICED IN. I THINK WHAT WILL BE GOOD FOR THE STOCK MARKET IS, THE ECONOMY IS GROWING, THE FED IS STILL GOING RELATIVELY SLOW, TAX REFORM IS A NET POSITIVE AND SO I THINK YOU'RE GOING TO SEE SOME CORRECTION IN THE NEXT FEW WEEKS. PEOPLE HAVE BEEN LONG, YOU KNOW, HEDGE FUNDS HAVE HAD LONG SHORT EQUITY FUNDS HAVE HAD GREAT YEARS THERES GOING TO BE TAX SELLING AND END OF YEAR SELLING. AND SO I EXPECT A 3 TO 4% CORRECTION. BUT I DON'T THINK THE BULL MARKET IS OVER.
LEE: MIKE, GREAT TO SPEAK WITH YOU. THANK YOU. HOPE YOU COME BACK.
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