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We're groovin'

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Yeah

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Oh-oh-oh quantitative tool

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All activities can be made

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We are back.

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Here we go.

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True North, the investment grade Bitcoin podcast, episode 29. We are grooving, we are bringing the

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vibes back, and we are cooking. We've got a crew here tonight. We've got myself, Neithu,

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Adrian, and Dan. We are going to get into it. We've got so much data. This is going to be a

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jam-packed episode. We've got a ton of information, a ton of data, a ton of things have happened in

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the last week. We're going to try to get through as much information as we can. We're going to talk

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about MSTR leverage update, STRD, the IPO. We've got new capital coming into Bitcoin on the horizon

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that hasn't been announced yet. Quadruple threat ATM with MSTR, which has never been done before.

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Bitcoin treasury company update. We'll just talk broadly about Bitcoin treasury companies.

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Just given how much data we have, I think we'll keep that relatively minimal. And the rest of the

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community is doing a great and absolutely fantastic job talking about all of the other Bitcoin

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treasury companies um you know meta planet and the smarter web company alt bg the one in europe

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all of those things everybody's doing great content so keep it up uh we'll also get into the

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strf strk strd we'll talk about credit spreads a little bit peg ratios price earning to growth

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ratios and mag 7 and just compare those at scale and we'll do some projections into 2035 we'll get

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a little into the moon math which will be a good time we'll talk about s p 500 tracker market

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bewilderment estimated earnings for a q2 just based on where we're at and what's on the horizon

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we can do a little testing back and forth and see what kind of thresholds we're looking at looking at

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and just talk about the fixed income market in general so i i've got enough content and data

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that i could talk through an entire two-hour episode by myself but i've got the guys here

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on the screen to help keep me honest and bring in other data and information too and give additional

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perspective. So for those that are listening and if you haven't listened before, True North or the

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Investment Grade Bitcoin podcast, we talk about everything that's on the horizon with MSTR,

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Bitcoin equities, and how the financial landscape is changing. Our goal is to unpack these really

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complex topics into digestible pieces of information with data and analysis behind the

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scenes. So we are rogue. We are following this a little bit more closely than the traditional

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financial world. Most analysts, when they look at MSTR or they look at these Bitcoin treasury

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companies, they are completely missing the entire story here. So before we get into

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some of the data information, we've got a quick message from Tim.

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Ladies and gentlemen, what you're about to hear may be amazing, but it is not financial advice.

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It's for informational and educational purposes only. Jeff, back to you.

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Awesome. Thanks, Tim. And Tim runs the Bitcoin Treasuries podcast, and he helps bring the voice

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of all the people that are running all of these different companies that are adding Bitcoin to

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balance sheet and how the market is changing, moving. And go watch Tim's podcast if you haven't

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already. Okay. So that's the intro we got through there. And shall we start with a leverage update?

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And we'll just jump right into the data and get into it because I don't think we should waste any

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time. You guys cool with that? Yeah, let's do it. Cool. All right. So here we go. Back to sharing my

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screen. All right, we show this every week. And the point of this is to show MSTR's leverage,

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right? Because every day you will see a post on Twitter saying that MSTR is over levered,

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or MSTR is incredibly, they're just doing something incredibly risky. They've got so much leverage on

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their balance sheet. They're taking on so much debt to buy Bitcoin. And the purpose of showing

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this and tracking this over time is to show it's actually not that much debt. The leverage ratio is

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is actually incredibly low.

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So over in these two columns here, AS and AT,

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we've been tracking this for quite a while now.

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As of today, so Bitcoin strategy holds 582,000 Bitcoin.

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The price of Bitcoin is around $108,000.

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So assets held on balance sheet is 62.8 billion.

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The amount of debt that they have is 8.2 billion.

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The amount of preferred stock

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with a recent issuance is 3.2 billion.

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So net capital sitting on balance sheet is 51.3 billion.

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So the liability to asset ratio, so their leverage ratio is about 18%, which is incredibly low.

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Many of the other companies in the entire S&P 500 have leverage ratios 60, 70, 80, 90,

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some even greater than 100 because they are betting on future performance of the company.

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So when you see the commentary that MSTR is over levered, you can actually just look at the data

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and say, and you can look on Strategies website and it shows you how much assets they have and

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much debt they have and it's one of the only companies in the world where you can 24 7 365

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you could go see like how collateralized the company is based on you know assets and debt

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which is incredibly transparent and on a pro forma basis so showing this on a pro forma is helpful

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because you know they've got uh about three billion dollars of convertible debt that's currently

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trading in the money as equity and convertible debt that's in the money trading as equity is likely

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already hedged out, meaning that the buyer of the convertible debt has already shorted and bought

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back their position completely such that they have short interest held on the stock, but it's held

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one-to-one with equity. So when those convertible bonds are closed out, there will be a canceling

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out of the short interest and the canceling out of the equity, basically a neutral impact on the

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stock. And that would cancel the technical debt held on balance sheet. So bringing the net capital

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held on balance sheet up to 54.5 billion, dropping their liability asset or their leverage ratio down

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to 13%. And that gives a debt coverage multiple of 7.6 times. Basically, they have 7.6 times the

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amount of assets than they do debt on the balance sheet. So the final two rows down here, I think,

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are important and valuable to look at. So everybody says margin call, right? Like all the bears say

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a margin call, MSTR is over leveraged, they're going to have a margin call. Well, first of all,

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none of the debt is secured. So the Bitcoin, they don't have to sell the Bitcoin at any point. They

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have no covenants within the debt that requires MSTR to sell the Bitcoin. So that's the first

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point. Second point is in order for there to even be any problems to begin with, the price of Bitcoin,

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we need to fall below $14,000 and stay there for an extended period of time while the convertible

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debt comes due, that means the assets held on balance sheet would be worth less than the debt.

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That would be how there would start to be issues if there would start to be issues.

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I guarantee you, everybody listening to this call would be selling their teeth and their

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t-shirts and their Pelotons and their weights and everything to go buy as much Bitcoin as

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humanly possible. And that would be an 87% drawdown from here. And just based on how de-risked

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Bitcoin has become in the last 12 months with government adoption, legislation, SEC, new

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administration, all of that jazz, I think that's a very incredibly low probability.

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Now, the last thing I want to point out here, and maybe I'll zoom in to make this a little bit more

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clear is I wanted to point out the net capital held by MSTR. So this is the net capital. That

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means this is just the general assets less the debt held on balance sheet, right? So as of today,

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62.8 billion of assets, and you've got, what is that? 11.4 billion of debt. So that's $51 billion

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of net capital. Now, just go look at the companies that have $51 billion market caps,

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right? 51 to $54 billion market caps. Basically the net capital that strategy is holding on its

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balance sheet right now is bigger than the entire market cap of FedEx and Aflac and MetLife, like

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large systemically important insurance companies, right? And, you know, distribution companies,

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public storage, energy companies, et cetera. So it's incredibly powerful. That's the reason

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they're trading so high right now. In my opinion, I think they're undervalued and underpriced because

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the amount of capital that they hold is just incredibly strong. This is the strongest financial

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company in the entire market, in my opinion, especially if you're denominating your world

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on a Bitcoin standard. So I will pause there. You guys have anything to add?

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Yeah, I've been thinking about, I know the ATM on the common stock is a dirty word,

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and we've been so excited that we don't even have to use it anymore because we got all the preferreds.

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but using it is what got us into this strong deleveraged position in the first place.

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And, you know, Saylor likes to talk about these closed systems, and it just seems like

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we can heat up the system with the preferreds and we can add leverage, but it's the ATM on the

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common stock that lets us kind of vent that pressure if they were to ever get over leveraged.

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so it's going to be funny to me at some point if people start clamoring for the common uh atm like

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oh we're getting to the top of our leverage and like people start whining and complaining

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uh that they want more atm on the common stock i i just think there's um there's a future where

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that could possibly happen absolutely totally totally agree and one other thing to point out

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here right strategy has told us that their target leverage ratio is between 20 and 30 percent so if

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you look at that pro forma column, that column AT, you're at 13.1% leverage ratio. And now Bitcoin

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price could fall and that leverage ratio could rise. However, there's still room and capacity

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to potentially grow that pretty significantly. They could take a significant increase in the

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amount of debt and leverage held on balance sheet and still be within the target leverage ratios.

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The reason they target that 20 to 30% is because that gives a huge buffer if the price does fall,

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65% in a short period of time, they're still not going to be over levered. And I think it's a

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protection mechanism. Yeah. So, I mean, there's potential, we can talk a bit about stride too

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here. I think talking about stride, yeah, jump into stride. Go ahead. I think that the design

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of stride, the non-cumulative dividend clause was designed such that they could increase the

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leverage ratio in times of distress, right? And that's something I think about a lot too, is

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let's say Bitcoin takes that 60% drawdown, 70% drawdown, that leverage ratio will by design

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increase substantially during that fall, right? If their assets are worth 50% of the current value,

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their leverage ratio should in theory be twice as high. Now, if they have to go back and buy their

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shares by selling preferred, or if they want to just continue increasing BTC yield, then Stride

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has to be able to exceed that 30% threshold and still be a valid over collateralized instrument.

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And since it's non-cumulative, they can exceed that 30% threshold specifically with stride.

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Right. Right. And the reason they would issue stride in that circumstance is because it is

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technically the lowest on the capital stack, right? It is the junk grade fixed income product

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that MSDR is providing, right? You don't want to sell your investment grade product in a time of

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distress. Maybe they will, right? They can have all of these instruments moving at the same time,

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right? This is the fascinating part with this whole thing. You have an ATM on every single

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one of these instruments. And depending on whatever's happening in the market, wherever

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energy is coming from, they're able to capitalize on it. And they're able to have, I'm sure they've

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got algorithms in place such that, you know, if there's, it's probably a VWAP type algorithm,

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where if there's a lot of energy coming in the door and a ton of volume coming in on the stock

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or the preferred instruments, you're able to tap it and tap into that increased volume

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and sell and issue more shares of all those pieces. So yeah, it helps with the timing.

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Totally, totally. But, and think of, and think about the optics. I just think about the optics

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in a bear market. Like let's say they had to sell a preferred equity to continue BTC yield, right?

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They're trying to have consistent BTC yield. If they were already had a 40% leverage ratio just

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by happenstance of Bitcoin falling, and they were going to go out and issue strife, the Bitcoin

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rating on strife would be decreasing with every billion dollars of strife they issue. And so

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that's something they've been able to manage with stride. Now issuing stride, they're increasing the

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the btc rating of strife and strike while issuing this junk preferred so yeah absolutely

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absolutely strd was like the last the last thing that i was you know semi worried about if i wanted

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to steal man a bear argument and actually like make a decent one you know defending that 1x m nav

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was the kind of like the only last remaining uh puzzle piece that i had and strd just solves that

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problem And really the only thing that the next thing that I would be worried about would be like when Bitcoin market cap exceeds the bond market And we a long ways off from that So I not really worried about the stock for quite a while

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Yeah. And there's a good question here from Chris and Dan, maybe you want to take this

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on playbook and sentiment if they miss a payment on stride, because you looked into this, right?

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I mean, these kind of junk, I'm going to say junk because for lack of a better word,

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these junk instruments, they pay the dividend 100% of the time. They don't miss dividends.

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that that's not the that's not the intended goal that missing the dividend is like the last resort

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sort of situation it's like if you're in trouble uh for an extended period of time and you just

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need time that's what these are designed for and in that circumstance the the price of those would

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fall drastically and then the relative yield of those would rise pretty pretty significantly

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and the market would respond i mean these are these are liquid instruments you would see those

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change over time. But go ahead, Dan. Yeah, you're totally right. In my research,

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I found that most preferred non-cumulative preferred equities had made every single payment

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throughout the history of those equities. And then furthermore, even financial institutions that were

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about to go under during the financial crisis were still paying these preferred non-cumulative

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dividends unless the company had actually gone bankrupt. So likely the only scenario in which

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strategy wouldn't pay the cumulative preferreds as if for some reason they had to sell Bitcoin to

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pay the preferred dividend, they had no other access to capital. I would assume, I would imagine

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they wouldn't sell the Bitcoin to cover the preferred dividend or the non-cumulative dividend

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for stride, although they would sell Bitcoin to cover a strife or strike dividend.

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good point and and i'll come back to both those and i'll get the question real quick uh so do they

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when they use the atm on any of these instruments they uh when they issue new shares of stride or

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strife or strike it is at the market value not at par which is super important which is like

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really part of why this whole thing works right because as the price of these instruments rise

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and the technical yield falls, they're able to issue more shares at the new market value price,

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which is significantly more accretive to MSDR, right? Because you're selling less shares for the

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same amount of yield. And so you would have technically less dollar cash flow dividend

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liability on the balance sheet at a future point in time while you're bringing this other capital

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in the door. So as the price of all of these rise, their efficiency increases drastically.

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So that's why these instruments have significant torque on the balance sheet, because as the prices

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rise, as they're more successful, they are more impactful on just overall Bitcoin per share and

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Bitcoin yield. And I think there's two ways to look at that. Let's say Strife rises to $150

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a share and the effective yield is like 6% on Strife. When they issue Strife and buy Bitcoin

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with it, you can think of it two ways. Either they're arbitraging the Bitcoin CAGR versus the

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6% dividend, or they're capturing a $50 gain for each share of Strife they sell. And then they're

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arbitraging the difference between a 10% CAGR on Strife payments and whatever CAGR Bitcoin is.

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So you can almost think of it as Strife appreciates as an immediate capture

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in value for MSTR shareholders because of the difference in liquidation preference and market

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value like Jeff said.

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Right, right.

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There's another good, I mean, Steven, put tops to another good question.

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When will MSDR continue to use the convertibles?

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Are they basically cooled off from them or will they use three other financial products

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ATMs?

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So the convertible bond market is still open for business.

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They can go, they could go issue those instruments like right now today.

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I mean, conditions aren't great.

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IV is low.

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So you'd have to, you'd sell the convertible bond at a lower potential strike price than

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you may want to, and the other instruments are far more efficient. So if you think about just

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how the instruments work, right? Like when you sell a convertible bond, the convertible bond

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buyer is selling the stock immediately. They're selling effectively 70% of the stock that's issued

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to them to hedge their position and hedge their downside. And they're doing that on day one.

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So you get this like massive, like jolt of dilution on day one. Now, if you think about

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these other instruments that they just designed, there isn't dilution on day one. There's dilution

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one quarter down the road and then dilution another quarter down the road when they have

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to pay the dividends. So they are using these other capital raising instruments to pay the

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dividends at a future point in time. So the dilution schedule is significantly more accretive

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for all the other preferred instruments, which is why there's a lot of focus on them and why we're

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talking about them. I would prefer that they use and build out the market for all of these preferred

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instruments because it's significantly more accretive than the convertible bonds. Also,

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there's no time horizon on them. So you have no debt covenant of a specific point in time when

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you have to pay the debt back and refinance or take on additional convertible debt, et cetera,

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et cetera. So I think there's a lot of focus on that. But go ahead.

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Yeah, I was going to say, I think the IV is low just because the leverage ratio is so low.

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So the good news there is that with the preferreds, they can crank up the leverage,

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which would increase the, you know,

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an opportunity for a better environment

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to issue the convertible bonds.

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So it's almost kind of like they control their own destiny

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at this point.

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And yeah, and furthermore,

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I think Bitcoin's vol is just down too.

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Everyone wants to blame MSR's vol relative to Bitcoin's.

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Vol has compressed,

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but Bitcoin's vol is also at an all-time low.

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So like that's just something to consider.

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Yeah, it's been pretty flat, right?

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I mean, all things considered, we haven't seen those big, like, you know, 10,000, 5,000 swing days.

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Hopefully they're on the horizon, but yeah, it's been relatively kind of just up and to the right for the past couple of months.

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So one other thing I wanted to bring up, and Dan, you kind of hit on this, was basically the leverage, right?

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Or if you're in a situation where the price of MSTR is distressed or whatever that may be,

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let's say the price of Bitcoin falls 50%, right?

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If the price of Bitcoin falls 50%, the amount of Bitcoin that strategy would hold falls 50%.

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So now you have $30 billion of debt and $11 billion of liabilities.

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If they need to go raise capital, I would underwrite a loan for them all day. You have $30

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billion of assets and $11 billion of debt, and you're holding Bitcoin. I would be all over

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writing that instrument. There's a lot of capital in the market that would be interested in providing

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them capital. The terms may not be great, but they are significantly over collateralized still,

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even if the price of Bitcoin falls 50%, 60%, 70%, they're still significantly over collateralized

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relative to other financial companies that are in the marketplace.

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So I think that's just a really valuable thing to keep in mind is like, they can go refinance,

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right? Like just as anybody can go refinance their house, like you can go get different debt,

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you can negotiate terms on your convertible debt, like you're the issuer that provide you

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the initial debt, you go negotiate those terms and interact with these players in the market.

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That's a really good point, Jeff. And Saylor mentions that a lot. And a lot of us retail

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overlook that. We don't have the perspective you have. And he keeps saying like an operating

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company, not a closed-end trust can recapitalize and refinance their balance sheet, issue securities,

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buyback securities. And one point I tend to forget to think about is that refinancing mechanism.

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There's so much capital in the market, right? Like the market is $900 trillion, right? There's

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so much capital in the market that you can go attack if you need it. And your ability to refinance

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is just the ability to network, right? And so now you've got Sailor and the strategy team and Fong

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and Sharish and Andrew, they all have all of the connections in the entire market, right? Like

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you got ex-Morgan Stanley, like ex-bankers,

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and they're connected to all these different capital instruments

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via convertible bond and all these guys.

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Like somebody would be willing to give them a loan

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no matter what, pretty much,

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unless like, you know, an asteroid hit,

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even if an asteroid hit the earth,

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like somebody would still probably give them a loan.

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So I think that's just valuable to keep in mind.

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Yeah, and it's in actually these,

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as long as they have assets on the balance sheet

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that someone counterparty believes are creditworthy

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to some degree or worth something,

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they will issue secured, like someone will always issue a secured loan at high interest rates,

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as long as there's capital and strategies balance sheet. So worse, worse, worse, worse case.

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Right. And that's kind of steel manning the other side of this, right? And you don't have,

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Dan, to your point, you don't have that much perspective of working in the capital markets,

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unless you work in the capital markets, right? I've negotiated deals to keep insurance companies

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alive when they, you know, half their portfolio burnt down in the paradise wildfire. Like you

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can wheel and deal on anything. Everything's negotiable, right? Everything's a contract

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and big money and everything's negotiable. So I know you guys were speculating at least

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in our group thread on some additional or future products that may start with STR. You

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guys want to toss out some ideas, what you think might be on the horizon?

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Yeah, I think Adrian's got that one.

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Oh, well, yeah, we came up with, what was it, Smurf, Strip, and Slurp.

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Slurp.

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Yeah, so I don't think those are going to be necessarily viable in the market.

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But with regards to other offerings, I've actually been playing around with that idea.

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At the current time, I don't know if they have a need to.

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I think they have every kind of offering that they would need for the near-term future.

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And it makes far more sense for them to grow these markets and grow these offerings and

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grow the market cap of those before they would further add additional offerings to the market

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and potentially remove interest from those offerings. Because if you think about strike,

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it's giving you that potential upside with a dividend. If you think about strife, it's acting

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like the bond. And now you have stride acting as that quote unquote, the junk bond. What other

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offering do they really need at this point? They have them all sitting around the primary equity

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of mstr and we have three five four flywheels operating i call it the 4tm that's what i started

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calling it in the um on on twitter they have that run they have the ability that they're going to

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start running that because you know he's going to do it on stride it's only a matter of time

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so i i think they would actually and i don't want to use the term hurts but they may hamper

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the impact long term in the market of these three offerings that they bring in another one anytime

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soon i can see them looking into it probably by the next cycle but i don't know if they have a

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need for it within the next two three years i just don't see it what about foreign capital markets

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adrian foreign yeah foreign well would that be the same product that's actually a question i have for

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you guys would they just offer stride in foreign markets or would they have to create a different

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security to offer in these foreign jurisdictions so i i think they can potentially do stride in

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in those different jurisdictions.

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Where it gets complicated is where does the money sit

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and how does it interact?

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Oh, God.

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So, like, apparently that's some of the issue

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where it's like, okay, let's say you raise this capital

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in this other jurisdiction and you buy Bitcoin with it.

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Do you buy the Bitcoin and send it to the US?

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Like, they don't want you to do that, right?

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So, do you buy Bitcoin with it?

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Does it sit in that jurisdiction?

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How does it move?

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Do you have to have an entity in that jurisdiction?

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When you file for that product on that marketplace, what are the rules and regulations that exist in that marketplace?

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Is it better to just have a whole separate instrument with a separate sidecar vehicle that sits in that country and all the capital sits there?

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And there's some kind of interaction between the parent company.

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So I think it's incredibly complex and a little bit harder, more difficult than we may think it might be.

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But one thing that's really unique about the three products that they've done right now is that they all hit different market needs.

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They hit different pools of capital.

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It's not like they threw out these three products and hitting the same group of capital.

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I mean, retail has access to them.

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But you've got the investment grade bucket that's fixed income with the least amount of risk.

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You've got the junk bucket, which is higher yield, like high yield savings account kind of thing with, you know, anybody that's looking for junk bond status type instruments.

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And then you've got the convertible preferred, which is anybody that wants, you know, that equity like upside with downside protection.

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So it fits three different solutions.

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And I think there are other pools of capital out there that may have similar type solutions.

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I mean, they could potentially offer one that's got a monthly dividend, right?

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like that would be appealing right all the three instruments that they've got right now have a

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quarterly dividend and maybe they right yeah they so they can do that but i would almost see so this

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is why i said that at the current juncture they don't i don't know if they have the need for it

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it would make more sense in my mind for these three offerings to scale much larger before they

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would look into doing something that's monthly right now that because that does make sense so

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it'll be a different offering different dividend percentage they can do it monthly but like the

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foreign markets one i see that being viable when they're much much larger when i see what i think

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when the market cap of the company is approaching like i don't know 500 billion that can make a lot

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of sense for them to have foreign offerings on top of monthly offerings on top of quarterly offerings

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because at that point you're essentially operating as a i don't know i don't even know what you

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classify them at that point if if i really had to think about it but that is the kind of feature i

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can see just that near term i think they are they're very very it's very very beneficial for

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them to scale these three as large as they can get near term and ride the um the market that they

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create to scale and um besides that though i mean there's all kinds of things that they can do once

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that once that once that threshold's hit yeah i mean i kind of disagree right the the only reason

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is it just takes time for the market to be built on these.

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And if you've seen how the sailor moves, the team moves fast and they get the products

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out to market And he over here pounding the silicone on the AI of like what the next product i want to i want to issue to the market what the next best capital uh pool that i could go tackle and uh

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you know i think they could do another one in a in a couple of months if they're able to

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like these all they all have runways right where they you have to get it out to the market for the

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market to digest it and figure out what it is right i mean dan how long did it take before

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you it strike clicked for you and you pay attention to stuff every day yeah it took a long time took

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like three months right and and that was just taking time thinking about okay how does this

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work how does it work together who would want to buy this why would they want to buy it and you're

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paying attention to the stock every day now take a traditional bond manager or like a preferred

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equity manager and they see this instrument come out and they're like well you know what is this

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thing and they've got to they've got to start at ground zero of learning this company so it behooves

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them to get all these instruments just like get them out to market even if they don't um if they're

353
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not super attractive right away just because you have you have those instruments in those markets

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and it's going to take time for the education to grow so i think our job is going to be harder here

355
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in the new future uh with more instruments potentially on the horizon maybe they take a

356
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little bit of a break but i wouldn't i would think market saturation would be a concern in terms of

357
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just perception but i i don't know it's possible that they can they can spool up another one

358
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really really quickly i just i'm trying to take the approach of what what is the net benefit

359
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moving fast and consistently moving fast or letting them letting the market build and scale

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and then seeing what you can do after the fact because they've already gone from

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having the the primary equity to three offerings right in a matter of six months

362
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Yeah, five.

363
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Five, right.

364
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So I'm just thinking to myself,

365
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what is the net benefit of saturating the market

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with more offerings at this point?

367
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I know what you're saying,

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that it takes time for these things to build,

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but the opposite could also be true.

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Once they have the scale,

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it will be easier for them to build it.

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I think the point is you're not saturating the market,

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you're just hitting a different market.

374
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Like there would be, you know what I mean?

375
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It's like you'd be tackling different pools of capital

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with a different instrument.

377
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all tied to the same company. I'm just thinking about market perception is what I mean.

378
00:32:38,416 --> 00:32:43,716
Yeah. I mean, people are going to be bewildered, right? Like who cares, right? If you, if you know

379
00:32:43,716 --> 00:32:47,936
how the math works and you know, the numbers, who cares? People are going to short the stock.

380
00:32:48,036 --> 00:32:50,656
Jim Chanos is going to short the stock. Jim, I hope you're watching this Jimbo.

381
00:32:50,896 --> 00:32:57,196
Thanks for all the conversations recently. It's been great. Um, but, uh, yeah, I, I think that,

382
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I think there's more on the horizon. I don't know. We'll see.

383
00:32:59,876 --> 00:33:24,136
You know, we could try to reverse engineer it from what we've seen them do already. Right. So we know strife is going to be at the top. So they're not going to rug pull their own crown jewel to create something that has the same interest rate or the same dividend and is just as safe. Right. So they came out with STRD and they had to end really that clause where they can maybe not pay the dividend.

384
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And that's really only there to just like, you have to rig it in such a way that it is inferior.

385
00:33:29,976 --> 00:33:36,976
So it will trade at a discount so that it's a little bit more risk for a little bit more reward.

386
00:33:37,976 --> 00:33:40,816
And somebody in the chat was asking why retail would buy it.

387
00:33:40,936 --> 00:33:46,116
And it's because it's paying an ungodly interest rate right now.

388
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And it should always trade at a discount to Strife.

389
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So if you want to take a little bit more risk and get paid more and buy in for cheaper than you could for SDRF, then you'd go for it.

390
00:34:00,416 --> 00:34:12,076
All I'm saying is that there is a definite, since sentiment drives a lot of this, there's a definite consideration for market perception and the market perceiving it as too much saturation with too many offerings too quickly.

391
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That's the only thing I'm raising for consideration.

392
00:34:14,636 --> 00:34:16,316
I'm not saying that the market will be right.

393
00:34:16,956 --> 00:34:18,736
I'm saying that it could be a consideration.

394
00:34:18,736 --> 00:34:33,436
Yeah. And when that time is right, I was trying to figure out other niches that they could do. And one would be something that is a variable rate.

395
00:34:33,436 --> 00:34:41,536
and a year ago I did not realize I was going to be like internet sleuthing freaking different types

396
00:34:41,536 --> 00:34:49,036
of preferred stocks but you know they could tie it to the overnight rate something like that

397
00:34:49,036 --> 00:34:54,616
there's preferreds that are doing that they could the other niche that I was thinking that I found

398
00:34:54,616 --> 00:35:01,856
that they could potentially do would be a fixed duration so 5 10 or 30 years and and it could

399
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actually you just know upfront how long you were going to be able to hold this thing before it was

400
00:35:07,416 --> 00:35:14,216
going to mature. They can they can play around with those things with the with the dividends.

401
00:35:15,116 --> 00:35:20,636
And I don't know if they would know exactly where they would fit in the stack. But you'd know when

402
00:35:20,636 --> 00:35:25,936
that once they hit the market and whatever the market decides they're priced at, you'd end up

403
00:35:25,936 --> 00:35:28,756
with, you know, one more thing to compare with.

404
00:35:31,036 --> 00:35:33,276
We're gonna see so much arbitrating

405
00:35:33,276 --> 00:35:35,436
between all of these different instruments as well.

406
00:35:35,436 --> 00:35:37,436
Like we're gonna see people that are,

407
00:35:37,436 --> 00:35:39,776
because these are the most liquid preferred instruments

408
00:35:39,776 --> 00:35:41,756
in the market that the market has ever seen,

409
00:35:41,756 --> 00:35:44,276
there's gonna be trading amongst all of them.

410
00:35:44,276 --> 00:35:46,216
And I think that's one huge benefit here

411
00:35:46,216 --> 00:35:48,256
that is probably overlooked by most people

412
00:35:48,256 --> 00:35:50,876
is that because these are liquid fixed income instruments,

413
00:35:50,876 --> 00:35:53,256
the most liquid fixed income instruments,

414
00:35:53,256 --> 00:36:01,876
You have a whole host of arbitrage opportunities against other fixed income instruments based on how fast they move relative to interest rates, et cetera, et cetera.

415
00:36:02,936 --> 00:36:07,536
And I think the liquidity is also incredibly helpful, right?

416
00:36:07,536 --> 00:36:19,176
This isn't like an OTC fixed income bond on some podunk tiny little company that's just not liquid in the market, right?

417
00:36:19,176 --> 00:36:25,436
This is, you're getting yields that are higher than Podunk company that is not liquid.

418
00:36:26,456 --> 00:36:33,456
You know, DISH, like a DirecTV corporate bond is not liquid, but this is incredibly liquid

419
00:36:33,456 --> 00:36:34,856
and it's paying a higher yield.

420
00:36:35,356 --> 00:36:39,296
So the attractiveness of these instruments is really high right now.

421
00:36:39,376 --> 00:36:45,276
And I think it's just only a matter of time before the market begins to see how attractive

422
00:36:45,276 --> 00:36:46,356
they really are.

423
00:36:46,356 --> 00:36:51,636
so i did want to get into this and i think it's a good timing when we're talking about these

424
00:36:51,636 --> 00:36:58,056
these things so this what you're seeing on the screen here this is the yield of these different

425
00:36:58,056 --> 00:37:05,336
instruments over time since inception so down on the bottom here this is uh this is the 10-year

426
00:37:05,336 --> 00:37:09,636
u.s treasury over time so you can see it's relatively flat at the beginning of february

427
00:37:09,636 --> 00:37:15,596
is about 4.5 percent and as of today is about 4.4 percent so relatively flat the blue line

428
00:37:15,596 --> 00:37:20,836
this is STRK. So this is the lowest yielding product at the moment, but remember it's got

429
00:37:20,836 --> 00:37:27,236
that convertibility option. So it can convert 10 shares of STRK can convert into one share of

430
00:37:27,236 --> 00:37:33,336
MSTR at a future point in time. So there is a, not only are you getting paid 7.4%, which is a big

431
00:37:33,336 --> 00:37:40,336
Delta between the 10 year US treasury, you also get a call option on MSTR into perpetuity forever.

432
00:37:40,336 --> 00:37:47,396
So it's just a really fabulous product there. And then the black line is STRF. So this is the

433
00:37:47,396 --> 00:37:51,456
investment grade product. This is the least risky product. So in the capital stack,

434
00:37:51,496 --> 00:37:58,496
it goes convertible bonds, STRF, STRK, STRD. And that one's currently paying around 9.5,

435
00:37:58,536 --> 00:38:03,936
9.6% as of today. But you can see the general trend here. Since it launched, it paid,

436
00:38:03,936 --> 00:38:09,676
I'll say around a 12% dividend. It got a little bit worse and it has been drastically

437
00:38:09,676 --> 00:38:15,876
dropping over time. Again, this is incredibly powerful because as the price of these products

438
00:38:15,876 --> 00:38:22,536
rise and the relative yield drops, they become more beneficial to the MSTR shareholders because

439
00:38:22,536 --> 00:38:28,836
the capital that you're bringing in the door on each one of these ATMs is directly going to buy

440
00:38:28,836 --> 00:38:34,436
Bitcoin and you're taking on the excess risk that these fixed income holders do not want to take on.

441
00:38:34,436 --> 00:38:38,756
So it's just a great product.

442
00:38:38,756 --> 00:38:40,216
And then the last one here is STRD.

443
00:38:40,216 --> 00:38:43,636
As of today, it's trading at 11.3% yield.

444
00:38:43,636 --> 00:38:45,296
So highest on the stack.

445
00:38:45,296 --> 00:38:49,136
And we'll follow how these change over time.

446
00:38:50,636 --> 00:38:53,816
Now over to the right is credit spreads.

447
00:38:53,816 --> 00:38:58,736
So this is mapping the delta between these two instruments,

448
00:38:58,736 --> 00:39:01,556
the STRK instrument, the STRF instrument

449
00:39:01,556 --> 00:39:03,596
and the 10-year US Treasury.

450
00:39:03,596 --> 00:39:07,836
So this is basically known as like the risk premium, right?

451
00:39:07,836 --> 00:39:11,596
So the gap between the risk-free rate,

452
00:39:11,596 --> 00:39:14,036
which 10-year US Treasury in this case,

453
00:39:14,036 --> 00:39:16,156
is the credit spread.

454
00:39:16,156 --> 00:39:18,596
And the gap between the black line and the red line

455
00:39:18,596 --> 00:39:20,516
is the credit spread for STRF.

456
00:39:20,516 --> 00:39:24,276
So this is how much additional risk the market is pricing in

457
00:39:24,276 --> 00:39:25,776
relative to the risk-free rate.

458
00:39:27,276 --> 00:39:29,536
So we'll go over to it here.

459
00:39:29,536 --> 00:39:32,656
And so I'll draw your attention.

460
00:39:32,656 --> 00:39:36,076
This looks very similar to the last chart is

461
00:39:36,076 --> 00:39:38,696
you could see the credit spread change over time.

462
00:39:38,696 --> 00:39:43,696
But basically what this is showing is that the credit,

463
00:39:43,696 --> 00:39:46,556
the credit quality, the market has said

464
00:39:46,556 --> 00:39:49,776
that the credit quality of these instruments is improving.

465
00:39:49,776 --> 00:39:53,536
That's effectively what this table is showing.

466
00:39:53,536 --> 00:39:56,096
You could see the blue line is kind of went up

467
00:39:56,096 --> 00:39:58,736
over the first couple of months as it was trading.

468
00:39:58,736 --> 00:40:10,896
But since April, the price of these products has been rising and the market is starting to understand the value, the relative credit of these instruments relative to the 10-year U.S. Treasury.

469
00:40:12,036 --> 00:40:14,716
So you start to think about like, what are the risks, right?

470
00:40:14,836 --> 00:40:18,356
What are the risks for any of these instruments?

471
00:40:18,416 --> 00:40:19,836
And we kind of hit them at the beginning.

472
00:40:21,156 --> 00:40:22,796
You've got digital risk.

473
00:40:22,816 --> 00:40:23,796
You've got collateral risk.

474
00:40:23,796 --> 00:40:26,636
You've got potential custodian risk.

475
00:40:26,636 --> 00:40:35,176
and you have to compare how these risks stack up relative to your effective risk-free rate,

476
00:40:35,176 --> 00:40:40,616
your ability to print money. And I think there is going to be a point in time in the future

477
00:40:40,616 --> 00:40:49,136
where the STRF product does flip the US 10-year treasury and the relative yield of

478
00:40:49,136 --> 00:40:56,096
the credit spread between STRF and the 10-year US Treasury will flip negative,

479
00:40:56,576 --> 00:41:02,436
aka meaning that the strategy preferred instrument will be less risky than potentially

480
00:41:02,436 --> 00:41:07,976
what the US government is offering. I think that's a possible horizon. That's what I'm here for. I'm

481
00:41:07,976 --> 00:41:14,016
excited for that potential future. I think we'll be positioned pretty well. And the reason being

482
00:41:14,016 --> 00:41:18,876
is that they are managing the collateral incredibly well. The balance sheet is incredibly strong.

483
00:41:18,876 --> 00:41:21,256
They've got 10x more Bitcoin than anybody else.

484
00:41:21,776 --> 00:41:26,296
And the size and scale is the real moat here.

485
00:41:26,556 --> 00:41:29,596
They have a digital capital moat, which is a dollar moat.

486
00:41:29,796 --> 00:41:32,496
And I think they're going to be the strongest financial company the world's ever seen.

487
00:41:32,876 --> 00:41:35,356
And we can get into some of that data in a bit.

488
00:41:36,536 --> 00:41:38,416
So you guys have any questions on this, like the credit spread?

489
00:41:38,576 --> 00:41:39,436
I've got it lined out here.

490
00:41:42,436 --> 00:41:46,156
When I first learned about credit spreads, I thought it was some wicked complicated metric

491
00:41:46,156 --> 00:41:48,376
to calculate, but then I realized it was just a difference.

492
00:41:48,876 --> 00:41:51,476
And it made it a lot simpler.

493
00:41:51,676 --> 00:41:53,916
So for anyone listening, credit spread is just the difference.

494
00:41:53,916 --> 00:41:54,436
It's just the delta.

495
00:41:54,796 --> 00:41:57,676
Yeah, just a simple delta.

496
00:41:59,336 --> 00:42:03,376
It's kind of saying credit spread is like the equivalent of Jeff Park saying risk vector.

497
00:42:03,376 --> 00:42:03,616
Yeah.

498
00:42:05,556 --> 00:42:14,276
So one thing that's also pretty neat here is you can look at when the credit spreads of each of these peaked, the 10-year U.S. Treasury was at its lowest.

499
00:42:14,276 --> 00:42:28,036
And so as the 10-year US Treasury has been rising in recent weeks, the relative price of these other instruments is falling and the yield is falling.

500
00:42:28,176 --> 00:42:31,996
So you're getting this like compounded effect of the credit spread, right?

501
00:42:32,316 --> 00:42:40,016
Your risk-free rate is rising and the relative premium, the risk premium of these other instruments is dropping.

502
00:42:40,176 --> 00:42:42,396
So you get this kind of compounded effect on the credit spread.

503
00:42:42,396 --> 00:42:45,156
So you see this, the delta is dropping quickly.

504
00:42:45,336 --> 00:42:46,856
So you could look at the linear trend.

505
00:42:47,376 --> 00:42:50,776
The trend lines are the dotted lines behind each of these.

506
00:42:50,876 --> 00:42:55,356
The blue dotted line is the linear trend since inception of STRK.

507
00:42:55,556 --> 00:42:59,036
The black one is the linear trend since inception of STRF.

508
00:42:59,116 --> 00:43:05,016
And the relativity is relative to the 10-year US treasury, which has been slightly up over the same time horizon.

509
00:43:09,196 --> 00:43:09,676
Cool.

510
00:43:09,676 --> 00:43:14,396
Yeah, no, I think that's really like if you're in this trade and you're looking at strategy,

511
00:43:14,396 --> 00:43:19,756
you're looking at MSTR and then you see all of what's going on here. I mean, I think a lot of

512
00:43:19,756 --> 00:43:28,396
this first time repricing of these debt instruments up to their actual effective or risk credit

513
00:43:28,396 --> 00:43:33,196
spread that should be appropriate is a once in a lifetime kind of capital ramp up. And that's why

514
00:43:33,196 --> 00:43:39,036
I've been loading up on strike is I just believe that this is kind of a once in a lifetime opportunity

515
00:43:39,036 --> 00:43:40,536
to realize that appreciation.

516
00:43:41,216 --> 00:43:41,416
Yeah.

517
00:43:41,556 --> 00:43:42,596
Why don't you walk through that?

518
00:43:42,736 --> 00:43:44,056
Because I think a couple of people,

519
00:43:44,056 --> 00:43:46,076
you've been posting that you've got these products,

520
00:43:46,336 --> 00:43:48,496
which is, I think, a great idea.

521
00:43:48,816 --> 00:43:51,616
And walk through that, say that exact same thing

522
00:43:51,616 --> 00:43:53,716
and explain why you're holding these.

523
00:43:55,976 --> 00:43:56,416
Yeah.

524
00:43:56,656 --> 00:43:58,756
Well, because if you look at the capital stack there,

525
00:43:59,196 --> 00:44:01,356
you know, five to 10 to even more,

526
00:44:01,416 --> 00:44:02,176
I haven't checked recently,

527
00:44:02,536 --> 00:44:04,116
over collateralized by the Bitcoin holdings,

528
00:44:04,136 --> 00:44:06,416
which is something that most fixed income products

529
00:44:06,416 --> 00:44:12,696
or even preferred equities aren't by their principal companies. And so what I believe is

530
00:44:12,696 --> 00:44:18,116
that these should be trading at maybe 100 basis points or 200 basis points above the risk-free

531
00:44:18,116 --> 00:44:24,976
rate of like 4% or so. And so what does that mean? Well, it means the principal has to appreciate

532
00:44:24,976 --> 00:44:30,896
such that that yield declines relative to its value. But the way I look at strike, at least,

533
00:44:30,996 --> 00:44:35,436
is strike has that convertible option and then also the cash on cash yield. So I think strike

534
00:44:35,436 --> 00:44:41,316
is just this weird instrument where you're getting like 11% or 12% yield on the cash portion you hold

535
00:44:41,316 --> 00:44:45,636
that doesn't represent the convertible option. Whereas then the convertible option itself is

536
00:44:45,636 --> 00:44:53,196
actually in a way a superior MSTR product because you get that $100 liquidation preference. So I

537
00:44:53,196 --> 00:44:58,176
still think the market's underpricing strike in a way that is tough to explain without visualizing

538
00:44:58,176 --> 00:45:03,816
it. And finally, what I want to say on that is it's a one-time thing. Once the market believes

539
00:45:03,816 --> 00:45:08,916
Bitcoin credit is a thing. It's not going to fluctuate. And I know Penny Ethers in the

540
00:45:08,916 --> 00:45:14,616
chat talking about how the reason this is changing is because of the price of Bitcoin

541
00:45:14,616 --> 00:45:19,156
and the over collateralization. I argue that market participants aren't going to value

542
00:45:19,156 --> 00:45:32,394
this Bitcoin credit differently whether it 5x or 6x over collateralized in the capital stack They going to have to come to terms with the fact that Bitcoin is in fact collateral And that what we seeing right now in the price appreciation of Strike and Strife It the

543
00:45:32,394 --> 00:45:36,874
fact that the market's coming to terms with Bitcoin as collateral and the idea that MSTR

544
00:45:36,874 --> 00:45:41,854
can cover those dividend payments by selling equity. And it's not dilutive in a sense. So

545
00:45:41,854 --> 00:45:47,494
I think it's not necessarily just the amount of over collateralization, but instead the

546
00:45:47,494 --> 00:45:52,754
concept itself, which is a one-time deal. And these are fixed income instruments. You need

547
00:45:52,754 --> 00:45:57,394
to compare them to fixed income instruments, not the underlying asset that MSTR holds.

548
00:45:58,354 --> 00:46:04,634
That's the product. It needs to be compared relative to the risk-free rate. And that's how

549
00:46:04,634 --> 00:46:08,954
the market is going to start looking at these products is the delta between the risk-free rate

550
00:46:08,954 --> 00:46:15,174
and this risk product. These are risk products that are paying you a yield for taking on that

551
00:46:15,174 --> 00:46:22,534
taking on that risk. And Dan, I think your point is really important. This is kind of like a one-time

552
00:46:23,654 --> 00:46:28,054
benefit where once the market does realize the relative credit rating of these instruments,

553
00:46:28,054 --> 00:46:32,294
the collateral of these instruments, understanding what the risks are, if they get rated, they're not

554
00:46:32,294 --> 00:46:36,614
going to get unrated. They may get rating downgraded or upgraded at future points in time,

555
00:46:36,614 --> 00:46:40,614
but they're not going to get unrated. And once these instruments are rated, you're going to have

556
00:46:40,614 --> 00:46:45,254
a whole nother entire you know 90 of the fixed income market can potentially buy these things

557
00:46:46,054 --> 00:46:52,614
so that's a that's a huge huge uh benefit uh coming for these instruments at a future point

558
00:46:52,614 --> 00:46:57,094
in time also if you get to a situation where interest rates drop the relative yield of these

559
00:46:57,094 --> 00:47:05,574
products looks significantly better than if the interest rates drop the yield is going to look

560
00:47:05,574 --> 00:47:14,534
high relative to the risk-free rate. So that credit spread may stay constant, but the price

561
00:47:14,534 --> 00:47:19,254
of these instruments may rise and the yield may fall in line with the credit spread,

562
00:47:19,254 --> 00:47:27,734
offering additional principal price appreciation. So it's good stuff. Great products.

563
00:47:29,654 --> 00:47:33,494
Yeah, great products, really. And oh, interesting thing I learned today was that

564
00:47:33,494 --> 00:47:40,054
strike and strife are both marginable securities on fidelity whereas strd is not yet and i don't

565
00:47:40,054 --> 00:47:43,974
know if that's the difference between the cumulative nature of the strd dividend the

566
00:47:43,974 --> 00:47:48,134
fact that it hasn't been trading for more than a single trading day uh x y and z but that's an

567
00:47:48,134 --> 00:47:55,574
interesting distinction uh on fidelity brokerage as i was trying to buy stride on my you're like

568
00:47:55,574 --> 00:48:01,494
how can i buy these on margin right on i'm like well i can buy yeah x amount of stride or i can

569
00:48:01,494 --> 00:48:09,254
buy double out of the strike. Yeah. How long does it take to get these rated? Who knows? It could

570
00:48:09,254 --> 00:48:14,214
take a while for these to get rated. There are several rating agencies out in the market, three

571
00:48:14,214 --> 00:48:20,694
big ones. You've got S&P 500, Moody's and Fitch. And it just takes some time getting in front of

572
00:48:20,694 --> 00:48:24,854
them. I'm sure that they're on this marketing campaign and Blitz trying to explain what these

573
00:48:24,854 --> 00:48:32,454
products are doing. And each one of these credit rating agencies would put their neck out to put a

574
00:48:32,454 --> 00:48:36,294
like to put a rating on any of these products. It is a risk for them.

575
00:48:36,934 --> 00:48:43,174
Right. What happened in the 2007, 2008, 2009 financial crisis is all of these investment grade

576
00:48:43,174 --> 00:48:51,254
instruments ended up going bankrupt and they were worthless. And go watch the big short. And

577
00:48:51,254 --> 00:48:58,074
And they now have rules in place to prevent that from happening again. They're a little bit more

578
00:48:58,074 --> 00:49:03,254
strict on what the ratings may be. So now you come in the door with this completely novel

579
00:49:03,254 --> 00:49:11,274
instrument backed by Bitcoin, which is unknown by many and many people don't understand what

580
00:49:11,274 --> 00:49:15,394
these things are. And then you have a company that's taking leverage on Bitcoin in different

581
00:49:15,394 --> 00:49:19,734
ways and offering these new products that are created by AI that the world has never seen before.

582
00:49:19,734 --> 00:49:27,254
And it's just so many things that you have to explain to a group of people that maybe

583
00:49:27,254 --> 00:49:31,114
are a little bit archaic and slow in how they look at things.

584
00:49:31,114 --> 00:49:33,914
And so it may take a long time.

585
00:49:33,914 --> 00:49:38,714
And I suspect that a sailor and a strategy team want to make sure that they get the right

586
00:49:38,714 --> 00:49:39,714
rating as well.

587
00:49:39,714 --> 00:49:43,354
I don't think they're going to get a rating on these instruments just to get a rating.

588
00:49:43,354 --> 00:49:49,154
I'm sure these companies are saying, hey, we'll give you a triple B or double B, whatever

589
00:49:49,154 --> 00:49:54,894
it may be, but the team might say, well, yeah, strife should be investment grade because it's

590
00:49:54,894 --> 00:49:59,814
six times, seven times over collateralized. And I'm not taking your double B. This is investment

591
00:49:59,814 --> 00:50:04,654
grade and you rate it investment grade or we're just not going to get it rated. And I think that's

592
00:50:04,654 --> 00:50:10,354
probably where the conversation's at right now. And the market can just price it as they see fit

593
00:50:10,354 --> 00:50:14,314
as well. Right. And that's kind of what we're seeing slowly over time. So hopefully the market

594
00:50:14,314 --> 00:50:19,834
just prices it. The market will adjust, but the market will adjust even more when more capital

595
00:50:19,834 --> 00:50:31,354
can buy these things. It takes more volume. You need significantly more volume. There just needs

596
00:50:31,354 --> 00:50:37,274
to be a lot more people that want to buy these things and that will drop the credit spread

597
00:50:37,274 --> 00:50:42,634
relative to the risk-free rate. Cool. Shall we shift gears? Dan, there was something that you

598
00:50:42,634 --> 00:50:48,314
wanted to go over we're at 50 minutes here we're cooking yeah it actually is is uh exactly what

599
00:50:48,314 --> 00:51:01,914
we're talking about now so let me pull it up here boom gotcha did you see it hit it cool okay

600
00:51:02,794 --> 00:51:07,914
it looks like a bunch of numbers but it's pretty straightforward uh for all of us so right now this

601
00:51:07,914 --> 00:51:13,594
is the leverage ratio x stride so this doesn't include stride and the whole idea here is that

602
00:51:13,594 --> 00:51:18,394
stride is like a unique sort of product in that you don't have to fit that 20 to 30 percent

603
00:51:18,394 --> 00:51:22,314
leverage ratio which i think could be the case i'm not sure how they're going to use it regardless

604
00:51:22,314 --> 00:51:27,834
so we're at a 16.1 leverage ratio without stride uh annual interest expense expense with stride is

605
00:51:27,834 --> 00:51:34,394
336 million dollars and that includes convertible debt all the prefers now so at these different

606
00:51:34,394 --> 00:51:41,354
Bitcoin prices here and at a 582,000 Bitcoin count, this is the effective leverage ratio without

607
00:51:41,354 --> 00:51:49,274
stride. So if Bitcoin were to fall to $60,000 flat, you'd be looking at a 30% leverage ratio with

608
00:51:49,274 --> 00:51:58,154
stride. Now, these three boxes here represent the billions of dollars they could issue in stride

609
00:51:58,154 --> 00:52:05,674
up to these leverage ratios. Because like my whole thing and the thing I've been thinking about a lot

610
00:52:05,674 --> 00:52:11,354
is like, okay, you see a 60% drawdown, the multiple compresses, it goes below one, you have to buy

611
00:52:11,354 --> 00:52:16,154
back the shares, whatever, or you have to continue yielding Bitcoin. So you have to be issuing a lot

612
00:52:16,154 --> 00:52:23,114
of stride. So how much can you realistically issue up to certain thresholds? And I think a 50%

613
00:52:23,114 --> 00:52:30,474
leverage ratio during a bear market using stride between the 30% and 50% leverage ratio is completely

614
00:52:30,474 --> 00:52:36,394
100% appropriate. And so you'd see here if Bitcoin waterfall to 60,000 with the current leverage

615
00:52:36,394 --> 00:52:43,914
stack, equity stack, they'd have about 7 billion worth of room to issue stride up to a 50% threshold.

616
00:52:43,914 --> 00:52:47,674
So that's something you can look at and consider. Oh, wow. Okay. Hold on. So walk through that

617
00:52:47,674 --> 00:52:52,154
again. So you're looking at the delta, you're looking at the delta between your... So everything

618
00:52:52,154 --> 00:53:00,094
in column F is a 50% threshold and you were saying you could go from 29.5% to 50%, you'd

619
00:53:00,094 --> 00:53:03,154
raise 6.9 billion via stride.

620
00:53:03,154 --> 00:53:05,154
Oh, exactly.

621
00:53:05,154 --> 00:53:06,154
Yeah.

622
00:53:06,154 --> 00:53:12,414
If you were to lever up that, so in this case, you're at a 30% leverage ratio with your high

623
00:53:12,414 --> 00:53:18,494
quality instruments, that 20% delta using stride represents $7 billion.

624
00:53:18,494 --> 00:53:21,234
So that's how much stride you could ethically issue.

625
00:53:21,234 --> 00:53:22,074
They could issue more.

626
00:53:22,074 --> 00:53:26,554
60% leverage ratio of stride. Well, it just kind of depends on the performance of that instrument,

627
00:53:26,554 --> 00:53:31,354
how much liquidity is there as well. Because you want to manage the interest expense. And if that

628
00:53:31,354 --> 00:53:37,034
thing just gets hammered because the price falls and the yield goes up to 20, which I doubt is

629
00:53:37,034 --> 00:53:42,874
going to happen. But if it did, Soleil would be all over it. If the yield goes up to 20, he's like,

630
00:53:42,874 --> 00:53:50,234
hell yeah. I think we'd all be buying it. Actually, that's an interesting thought. And Dan,

631
00:53:50,234 --> 00:53:53,594
I know we talked about this, right? If you're in a position and you think the market's overheated,

632
00:53:55,354 --> 00:54:00,874
you could, the trade may be going from, now this is financial advice, the trade may be going from

633
00:54:00,874 --> 00:54:09,354
leverage to strife for stability. And if you see that the market does potentially fall,

634
00:54:10,314 --> 00:54:16,474
then you would want to jump into stride because the yield of stride would probably be rising,

635
00:54:16,474 --> 00:54:19,914
which would be much more attractive. You can think of it as like a high yield savings account.

636
00:54:20,234 --> 00:54:27,334
And then when you think the tide has turned and Bitcoin is looking good again, you go back into leverage.

637
00:54:28,174 --> 00:54:31,554
And you just kind of run that cycle over and over again.

638
00:54:31,654 --> 00:54:34,474
And you just kind of, you know, your own little flywheel.

639
00:54:36,934 --> 00:54:38,934
That's an interesting, interesting talk.

640
00:54:39,514 --> 00:54:40,134
That's really interesting.

641
00:54:40,414 --> 00:54:44,814
I have one more thing I want to mention later on that, but I'll go here in a second.

642
00:54:44,894 --> 00:54:46,614
So this is the same deal.

643
00:54:46,854 --> 00:54:48,734
It's just with an increased Bitcoin count.

644
00:54:48,734 --> 00:54:53,134
I think strategy will have 650,000 Bitcoin at least by the end of the year.

645
00:54:53,874 --> 00:54:58,154
So if you think you're going to see a bear market in 26, how do the numbers change?

646
00:54:58,994 --> 00:55:10,094
And with their current debt structure, it just means in a bear market, if we go down to 60,000 in 26, they could issue 8 billion up to that 50% ratio.

647
00:55:10,414 --> 00:55:17,834
But bearing all the liquidity and concerns Jeff mentioned earlier, with even more Bitcoin, same deal here.

648
00:55:17,834 --> 00:55:22,394
You could offer even though. Yeah, exactly. That's the point I'm trying to illustrate.

649
00:55:22,874 --> 00:55:26,514
I see somebody in the comments. If it's at 50%, that means they aren't paying the dividend. That's

650
00:55:26,514 --> 00:55:33,314
just completely wrong. They're going to be raising so much capital, even at a 50% leverage ratio.

651
00:55:33,414 --> 00:55:38,534
They've got plenty of capital to pay the dividend. Yeah. Considering the dividend

652
00:55:38,534 --> 00:55:48,134
payments right now are only 330. So again, that would be 10% of... So here, right now,

653
00:55:48,134 --> 00:55:55,174
the dividend payment is 336 million annually. If we were to fall to that 60,000 price and they were

654
00:55:55,174 --> 00:56:03,814
to issue here, 7 billion worth of debt, they'd be paying roughly 10% on that 7 billion, which is

655
00:56:03,814 --> 00:56:11,734
another 700 million. So that's a billion a year in debt expense, which I think they could cover

656
00:56:11,734 --> 00:56:19,054
quite frankly. Yeah, absolutely. And that's a dramatic situation. I don't think they issue

657
00:56:19,054 --> 00:56:23,334
7 billion worth of stride in the bottom of a bear market. I don't really see that as being like...

658
00:56:24,054 --> 00:56:29,254
Yeah. Maybe they would though. I mean, if the market's there.

659
00:56:29,254 --> 00:56:36,114
and then you're just you're getting bitcoin at a discount right like that's if you're just the

660
00:56:36,114 --> 00:56:41,754
long bitcoin all the time if the market if the if the volume is there why wouldn't you

661
00:56:41,754 --> 00:56:48,194
yeah because you're totally right because you're going to be scooping up bitcoin when nobody else

662
00:56:48,194 --> 00:56:51,314
is scooping up bitcoin because you have the instrument that can scoop up the bitcoin

663
00:56:51,314 --> 00:56:58,174
right i don't know that's kind of how i see it

664
00:56:58,174 --> 00:57:06,634
uh yeah i mean crazy holy moly okay um i've got some realize i was i wasn't bullish enough

665
00:57:06,634 --> 00:57:11,294
yeah i saw this i i don't think i don't think we're bullish enough i before we jump into some

666
00:57:11,294 --> 00:57:15,954
more data i mean adrian sole did you have anything you guys you guys want to hit on or topics you

667
00:57:15,954 --> 00:57:22,174
want to kind of riff on before we jump into some more data here no i just think that um these are

668
00:57:22,174 --> 00:57:27,054
these offerings their their impact on the market and their impact on what strategy you can do

669
00:57:27,054 --> 00:57:34,074
So it's going to be very, very, very interesting to see it play out over the next six months, six to 12 months, and especially into next cycle.

670
00:57:34,414 --> 00:57:37,854
I'm looking at where strategy was in August of 2020.

671
00:57:37,854 --> 00:57:44,994
I'm just trying to project forward what this will be like by this time in 2027 or 2028.

672
00:57:45,114 --> 00:57:48,214
That's the thing I'm having a lot of fun trying to figure out in my head.

673
00:57:48,714 --> 00:57:52,834
So, yeah, I think these instruments are genius moves.

674
00:57:52,834 --> 00:57:57,894
and I think their impact is going to be disproportionate.

675
00:57:58,074 --> 00:57:59,634
It's just a matter of in which ways.

676
00:58:00,114 --> 00:58:00,694
So, yeah.

677
00:58:01,234 --> 00:58:04,174
Yeah, I can't wait to see if the people running the playbook

678
00:58:04,174 --> 00:58:05,934
are going to be able to repeat this as well.

679
00:58:06,314 --> 00:58:07,694
Because I know Dan was saying that Strike,

680
00:58:08,734 --> 00:58:11,394
the price right now is kind of like a one-time deal,

681
00:58:11,534 --> 00:58:13,934
but if somebody comes out with their own version

682
00:58:13,934 --> 00:58:15,414
of Strike, Strike, and Stride,

683
00:58:16,194 --> 00:58:19,634
will the market already have figured out the strategy versions

684
00:58:19,634 --> 00:58:22,214
or will this all just kind of like play out

685
00:58:22,214 --> 00:58:25,534
in a smaller scale with these other companies?

686
00:58:25,754 --> 00:58:26,534
It's going to be fun to watch.

687
00:58:27,234 --> 00:58:28,834
I don't know if many of them can even do it.

688
00:58:29,954 --> 00:58:30,654
They should.

689
00:58:31,734 --> 00:58:32,774
All of them should.

690
00:58:33,274 --> 00:58:34,534
They should, but could they?

691
00:58:34,754 --> 00:58:36,514
Would the interest be there?

692
00:58:36,914 --> 00:58:38,894
If you already have strategy doing this,

693
00:58:38,894 --> 00:58:40,814
would they have the same level of interest?

694
00:58:41,074 --> 00:58:42,194
The interest would be there.

695
00:58:42,294 --> 00:58:43,274
The yields would just be higher.

696
00:58:44,774 --> 00:58:45,214
Really?

697
00:58:45,534 --> 00:58:46,374
Yeah, the yields would be higher.

698
00:58:46,874 --> 00:58:48,614
There's more risk associated with...

699
00:58:48,614 --> 00:58:50,374
Depending on the over collateralization.

700
00:58:50,374 --> 00:58:51,574
Yeah, well, yeah, right.

701
00:58:51,614 --> 00:58:55,574
It depends on the collateralization, but also like a smaller company is more risky than a larger company.

702
00:58:56,414 --> 00:58:56,854
Period.

703
00:58:56,994 --> 00:58:57,254
Totally.

704
00:58:57,494 --> 00:58:59,114
And they don't necessarily have the track record.

705
00:58:59,114 --> 00:59:04,694
So, so like, yeah, and that's, I mean, there's going to be R being in between all those products, right?

706
00:59:04,754 --> 00:59:07,974
Imagine a thousand Bitcoin treasury companies with fucking preferred instruments.

707
00:59:08,134 --> 00:59:16,314
And there, and there's just algos that are R being between like the price of Bitcoin and all of these different instruments and different yields and between the common.

708
00:59:16,314 --> 00:59:23,154
and it's just going to be a whole frenzy of algos between all of these different liquid instruments

709
00:59:23,154 --> 00:59:29,694
that have never existed before yeah there's gonna be a lot of algos guys a lot of algos

710
00:59:29,694 --> 00:59:32,574
so you're saying there's not going to be a shortage of things for us to cover

711
00:59:32,574 --> 00:59:40,174
i don't think so yeah i don't think so but stride like look at stride right it it launched at 85

712
00:59:40,174 --> 00:59:47,214
$85 and it traded up to $89 today. Like with a cumulative, it took strike and strife trade,

713
00:59:47,214 --> 00:59:52,574
didn't they, they traded up very, very slowly at the beginning. And Stride is essentially a

714
00:59:52,574 --> 00:59:57,934
worse product in theory, but it's already trading up because people know it's going to close that

715
00:59:57,934 --> 01:00:05,454
liquidation gap, I think. And I mean, what this last week, the amount of capital that they raised

716
01:00:05,454 --> 01:00:07,414
is going up, right?

717
01:00:07,414 --> 01:00:10,654
Like this is a, we're looking like an exponential trend

718
01:00:10,654 --> 01:00:14,554
here every single week when they're issuing these,

719
01:00:14,554 --> 01:00:16,154
or the ATM, right?

720
01:00:16,154 --> 01:00:17,494
I'm gonna pull up the graph.

721
01:00:18,774 --> 01:00:20,394
Yeah, let's look at the graph.

722
01:00:20,394 --> 01:00:21,554
Yeah, back to the data.

723
01:00:21,554 --> 01:00:24,034
We're gonna look for it, throw the graph up.

724
01:00:24,034 --> 01:00:26,734
Also, penny ether is a total bear.

725
01:00:26,734 --> 01:00:27,574
What the heck?

726
01:00:30,214 --> 01:00:31,654
Okay, here's the graph.

727
01:00:31,654 --> 01:00:33,854
Okay, this looks pretty exponential to me.

728
01:00:33,912 --> 01:00:36,172
Shout out CJ that's tracking this.

729
01:00:36,252 --> 01:00:40,852
I know a bunch of other people are tracking this, but everything in the orange is STRK

730
01:00:40,852 --> 01:00:42,952
and everything in the green is STRF.

731
01:00:43,092 --> 01:00:46,112
And eventually there's going to be an STRD ATM that sits on top of this.

732
01:00:46,632 --> 01:00:51,412
So just last week, they issued $112 million of these instruments.

733
01:00:51,412 --> 01:00:55,892
And you can see the interest is continuing to rise as the market is figuring out what

734
01:00:55,892 --> 01:00:57,532
these potential products are.

735
01:00:58,212 --> 01:00:59,812
So can this continue?

736
01:01:00,092 --> 01:01:01,752
I believe it can.

737
01:01:02,292 --> 01:01:02,852
What's the limit?

738
01:01:02,852 --> 01:01:07,252
I have no idea. We're going to see weeks that these numbers are going to be down because the

739
01:01:07,252 --> 01:01:10,752
markets just may not be there. And there's going to be weeks where this is higher, et cetera,

740
01:01:10,832 --> 01:01:14,732
et cetera. But I think the general trend, if you zoom out, they're going to be raising

741
01:01:14,732 --> 01:01:18,792
significantly more capital as the market is figuring these products out.

742
01:01:21,312 --> 01:01:25,772
Yeah, I think these products are, there's going to be massive demand for them. That's something I

743
01:01:25,772 --> 01:01:28,872
wrestle with too. I've thought about it a lot. It's like, will there always be a demand for an

744
01:01:28,872 --> 01:01:33,132
equity at a premium or a leveraged Bitcoin equity? I mean, I don't know, but will there

745
01:01:33,132 --> 01:01:38,412
always be demand for 10% yield? I mean, yeah. Like so long as there's fixed income products in the

746
01:01:38,412 --> 01:01:44,252
market, there will be a demand for a high dividend over collateralized equity. And that's just

747
01:01:44,252 --> 01:01:48,212
something I keep thinking about, thinking about, thinking about. Yeah. And STRK here is the other

748
01:01:48,212 --> 01:01:51,432
interesting, and just thinking about the structure and where they sit in the capital stack, right?

749
01:01:51,692 --> 01:01:58,612
STRF, STRK, STRD, as they issue more STRK, that pushes STRD closer to risk too. So there's this

750
01:01:58,612 --> 01:02:05,732
dynamicism of like how close each one of these instruments is to risk because of the size and

751
01:02:05,732 --> 01:02:11,012
of the issuance of each one of these products. So, and the underlying price of the Bitcoin,

752
01:02:11,012 --> 01:02:15,412
which will be again, something that people are going to be tracking. There's going to be algos

753
01:02:15,412 --> 01:02:21,012
that are spinning 24, 7, 365, moving around between all these different capital instruments.

754
01:02:23,012 --> 01:02:25,652
Yeah. Bitcoin's going to tick down 1%. They're going to have an exact,

755
01:02:25,652 --> 01:02:32,092
you know, fair value price for STRF based on that Bitcoin move based on everything. It's going to be

756
01:02:32,092 --> 01:02:37,292
nuts. But I think that I think the large general thesis here is that the entire fixed income market

757
01:02:37,292 --> 01:02:44,732
is mispriced. Either all of these instruments are mispriced or the entire fixed income instrument,

758
01:02:45,092 --> 01:02:48,852
the entire fixed income market is mispriced. And I think it's a little bit of combination of both,

759
01:02:48,932 --> 01:02:54,012
right? So we're talking like a 600, I'm looking at you, Penny Ether, we're talking a 600 trillion

760
01:02:54,012 --> 01:03:00,432
dollar market that's mispriced with physical risk, vacancy risk, things blowing up, tax risk,

761
01:03:00,732 --> 01:03:04,112
all of these different things, right? You think about real estate, you've got all those issues.

762
01:03:04,212 --> 01:03:09,152
You think about fixed income, you look at comparable fixed income instruments in the

763
01:03:09,152 --> 01:03:14,772
market, like the PG&E preferred equities paying six and a half percent interest.

764
01:03:15,032 --> 01:03:19,792
They just had a $10 billion loss in 2018 from the wildfires in California,

765
01:03:19,792 --> 01:03:24,912
right? Like that's a completely different risk profile than anything that's digital

766
01:03:24,912 --> 01:03:29,712
and six times over collateralized, right? Like the entire fixed income market is mispriced.

767
01:03:30,832 --> 01:03:38,272
And that capital is hungry for better products. And here you now have better products in a slightly

768
01:03:38,272 --> 01:03:44,992
different vehicle that are powered by Bitcoin. And the demand is going to be off the fricking charts.

769
01:03:44,992 --> 01:03:51,072
Like, yeah, totally. Really well. We're in like, we're in month five of these things.

770
01:03:52,432 --> 01:03:57,072
Like, everyone can make money on them. That's a beautiful thing. If you're here and you believe

771
01:03:57,072 --> 01:04:00,912
this, if you think everything we're saying is true, you can go out and buy them and make money.

772
01:04:00,912 --> 01:04:04,512
It's a beautiful thing. Yeah. Yeah. It's great. That's great.

773
01:04:05,392 --> 01:04:09,472
Um, okay. So we shift gears. So we look at some fricking data. I've got a bunch of data

774
01:04:09,472 --> 01:04:14,192
and some moon math. We'll go through it. Should be good. That'd be fun. I've got some, I've got

775
01:04:14,192 --> 01:04:18,192
some serious moon math sorry about people's screens we're going to have a lot of white

776
01:04:18,192 --> 01:04:25,632
excel here for quite a while um rip anybody that's watching this on a big screen so uh we're going to

777
01:04:25,632 --> 01:04:29,472
we're going to jump right into it and you guys stop me at any point if you get any questions

778
01:04:29,472 --> 01:04:37,152
and i'm just going to run through this so this is the q2 earnings estimate uh you know before taxes

779
01:04:37,152 --> 01:04:43,952
so take that into consideration uh bitcoin price has it today 108 500 and so the gain on the

780
01:04:43,952 --> 01:04:50,472
the Bitcoin held from Q1 is about $13.7 billion. Now, Bitcoin accumulated in Q2, you got 53,000

781
01:04:50,472 --> 01:04:56,572
Bitcoin and the gain on the Q2 Bitcoin because the average price of the Bitcoin purchased in Q2 is

782
01:04:56,572 --> 01:05:06,132
$95,000, made about 678 million on that Bitcoin held in Q2. So the net gain in Q2 is 14.3 billion.

783
01:05:07,572 --> 01:05:11,452
This clears the positive earnings over the last four quarters threshold by $9 billion.

784
01:05:11,452 --> 01:05:17,052
dollars. Let's just do a quick, some quick math. If the Bitcoin price fell to $94,000 today,

785
01:05:17,612 --> 01:05:26,092
this, the earnings for the period of $5.9 billion would still clear the last four quarters of net

786
01:05:26,092 --> 01:05:32,972
income and it would still be positive, thus qualifying for the S&P 500 by $605 million.

787
01:05:33,372 --> 01:05:40,252
So basically we've got a pretty big buffer left between where the Bitcoin price is today and where

788
01:05:40,252 --> 01:05:46,972
it may close at the end of Q2 for strategy to have positive earnings at Q2, thus qualifying for the

789
01:05:46,972 --> 01:05:52,012
S&P 500, which I think is going to be the biggest story of 2025. Like a lot of attention is focused

790
01:05:52,012 --> 01:05:58,332
on the Bitcoin treasury companies at the moment, but I really think that this S&P 500 potential

791
01:05:58,332 --> 01:06:03,612
and the bewilderment potential associated with that is the biggest story of the year. I mean,

792
01:06:03,612 --> 01:06:09,612
it's a significant amount of capital that may be coming into MicroStrategy and it could drastically

793
01:06:09,612 --> 01:06:18,012
change the capital landscape. So part two here is I wanted to look at the trailing 12 months

794
01:06:18,012 --> 01:06:25,292
earnings. So I wanted to get a true PE ratio. So if you go on like Yahoo Finance and go look at PE

795
01:06:25,292 --> 01:06:32,492
ratio, it's zero because technically last quarter they were negative. And FASB Fair Value Accounting

796
01:06:32,492 --> 01:06:38,812
was taken into consideration for the last year in 2024. So they actually didn't reflect the $12.7

797
01:06:38,812 --> 01:06:45,452
billion dollar gain that they had in 2024. So all of the websites that track PE ratio are incorrect

798
01:06:45,452 --> 01:06:49,572
because they have the wrong earnings number. So I wanted to back into what the earnings number

799
01:06:49,572 --> 01:06:56,312
actually should be and what the PE ratio should be. So I wanted to see the trailing 12 months

800
01:06:56,312 --> 01:07:04,092
earnings on the Bitcoin that they've purchased in the last 12 months. So in the last four quarters,

801
01:07:04,092 --> 01:07:10,212
they purchased 367,600 Bitcoin, which is a shitload of Bitcoin. And the gain on that Bitcoin is $6.6

802
01:07:10,212 --> 01:07:16,592
billion. The amount of Bitcoin that they purchased prior to 12 months ago was 214,000. And their

803
01:07:16,592 --> 01:07:22,812
average cost basis on that 214,000 is 67,000. So the gain on the Bitcoin that they purchased prior

804
01:07:22,812 --> 01:07:30,792
to 12 months ago is 8.8 billion. So a composite net income before taxes, right? So this number is

805
01:07:30,792 --> 01:07:39,452
skewed of $15.4 billion. So the share is outstanding, $279,525,000, a trailing 12-month

806
01:07:39,452 --> 01:07:47,592
earning per share estimate of $55. So the current MSTR price is $387. And that brings a trailing 12-month

807
01:07:47,592 --> 01:07:56,112
PE ratio of seven. The S&P 500 average PE ratio is 26. The QQQ average PE ratio is 35.

808
01:07:56,112 --> 01:08:02,792
MAG-7 average PE ratio is 31. So if you were to take any of those PE ratios and apply it to MSDR's

809
01:08:02,792 --> 01:08:09,312
trailing 12-month earnings, you'd get a price between $1,400 and $1,700 as kind of fair if

810
01:08:09,312 --> 01:08:15,132
you were to take the average PE ratio for the MAG-7 companies. What is the primary difference

811
01:08:15,132 --> 01:08:20,112
between all of these other companies or all of these other categories of stocks and their PE

812
01:08:20,112 --> 01:08:25,432
ratios? It's primarily inclusion in the S&P 500, right? Like all of the MAG-7 is included in the

813
01:08:25,432 --> 01:08:34,632
S&P 500. S&P 500 holds anywhere from 5% to 7% of the MAG7 stocks. So these are passive flows

814
01:08:34,632 --> 01:08:40,812
that are coming in from insurance companies, 401ks, and everybody that's buying the S&P 500,

815
01:08:41,432 --> 01:08:45,012
which is trillions of dollars of capital that's following the S&P 500.

816
01:08:45,692 --> 01:08:49,792
So it's a really big deal. Any questions on that so far?

817
01:08:49,792 --> 01:08:53,272
No, we're cooking.

818
01:08:54,412 --> 01:08:55,532
It all seems good to me.

819
01:08:55,592 --> 01:09:00,372
Okay. So there's one other component here that I think is missing. And so you've got about $3

820
01:09:00,372 --> 01:09:06,032
billion of shares that are currently trading in the money from the convertible debt. And so when

821
01:09:06,032 --> 01:09:09,532
you look at the market cap of the company, the market cap of the company is a reflection of the

822
01:09:09,532 --> 01:09:16,172
shares outstanding, not fully diluted shares. And there's roughly 14.7 million shares that are

823
01:09:16,172 --> 01:09:22,932
currently trading as equity. They're pegged to the convertible debt. And I think the market cap

824
01:09:22,932 --> 01:09:28,932
of MSTR is probably understated by about 5.7 billion. So those 14.7 million shares that are

825
01:09:28,932 --> 01:09:34,032
currently trading in the money that are hedged one-to-one to shorts at the MSTR price of $387

826
01:09:34,032 --> 01:09:40,332
would be about a $5.7 billion market cap understatement. So just throwing that out there,

827
01:09:40,452 --> 01:09:46,132
another piece of data that's really interesting. All right. Now I wanted to shift gears and this

828
01:09:46,132 --> 01:09:49,572
we get into the moon math. Maybe I'll make this a little bit bigger so you guys can see it.

829
01:09:49,572 --> 01:09:56,372
And this is going to be confusing. So hang, hang with me here. So I wanted to get to a price

830
01:09:56,372 --> 01:10:04,692
earnings to growth, a peg ratio, which is how most of the large mag seven stocks are compared

831
01:10:04,692 --> 01:10:09,492
against each other. So this is price earnings to growth. Basically, what is the expectation?

832
01:10:10,132 --> 01:10:16,052
What is the expectation of the growth and earnings for any one of these large companies?

833
01:10:16,052 --> 01:10:21,652
Why is this important? This is important because the Mag7 stocks basically pay zero dividend.

834
01:10:22,292 --> 01:10:28,612
Like some of them pay dividends, but it's like 0.71% dividend. Nobody's buying Microsoft for the

835
01:10:28,612 --> 01:10:34,212
yield, the dividend yield. So what's the point of holding the company? What's the point of holding

836
01:10:34,212 --> 01:10:41,652
the equity? You want price appreciation and some sort of growth of that earnings. And the price

837
01:10:41,652 --> 01:10:48,012
will reflect the growth of that earnings in a future point in time. So I wanted to compare

838
01:10:48,012 --> 01:10:56,092
that concept to how strategies earnings can grow into the future, right? Because we're calculating

839
01:10:56,092 --> 01:11:01,032
a PE ratio and the relative earnings. So I looked at the Bitcoin that they hold on the balance sheet

840
01:11:01,032 --> 01:11:08,472
today. So that's in this column here, 582,000 Bitcoin. And I wanted to project an estimated

841
01:11:08,472 --> 01:11:15,352
Bitcoin yield into the future such that in 2035, we can see, all right, how much Bitcoin would they

842
01:11:15,352 --> 01:11:22,912
hold net of dilution in 2035? So I think it's actually probably helpful to take a pause real

843
01:11:22,912 --> 01:11:29,332
quick and talk about what is Bitcoin yield. Bitcoin yield is the percentage change. Hold on.

844
01:11:30,972 --> 01:11:35,412
Yeah. BTC gain and Bitcoin yield. BTC yield is the percentage change in BTC per share.

845
01:11:35,412 --> 01:11:42,172
and Bitcoin gain is the BTC acquired without shared dilution. So in both of these considerations,

846
01:11:42,792 --> 01:11:49,692
it's when I'm looking at Bitcoin yield, I want to keep share price constant. And I want to look at

847
01:11:49,692 --> 01:11:55,932
the amount of Bitcoin that I project MSTR to hold in year 2035 while holding share count constant

848
01:11:55,932 --> 01:12:02,872
and not taking into consideration dilution. Actually, it is taking into consideration,

849
01:12:02,872 --> 01:12:07,072
just omitting the dilution and the Bitcoin acquired with dilution. So it's omitting both

850
01:12:07,072 --> 01:12:12,412
of those components. So I've got a Bitcoin yield rate up here at the top in each one of these

851
01:12:12,412 --> 01:12:18,392
columns. So in 2025, I'm estimating a Bitcoin yield for the rest of the year of 20%. They're

852
01:12:18,392 --> 01:12:24,252
at 17% right now through June 11th. So if they doubled what they had today, that'd be another,

853
01:12:24,252 --> 01:12:30,852
that'd be another 20%. And projecting at 2026, 10%, 7.5% for the next four years,

854
01:12:30,852 --> 01:12:34,452
and then three and a half percent for the next four years into 2035.

855
01:12:36,392 --> 01:12:43,952
Dan, you follow? Soleil, you follow? I like this. Okay. So I'm projecting a Bitcoin yield. Again,

856
01:12:44,312 --> 01:12:47,692
I want to think of net of dilution. I want to keep the share count constant.

857
01:12:48,812 --> 01:12:54,152
Right. And then I looked at Bitcoin CAGR. So I wanted to play out a compound annual growth rate

858
01:12:54,152 --> 01:12:59,432
into the future. And what I use for the compound annual growth rate is I used the assumptions from

859
01:12:59,432 --> 01:13:05,352
strategies, Bitcoin 24 model. And this is from a sailor Sharice and CJ over at MSTR.

860
01:13:06,072 --> 01:13:13,112
And I've taken their annual rate of return projections from 24 all the way to 2035. And

861
01:13:13,112 --> 01:13:16,792
you can see it's going down, right? The trend of the compound annual growth rate is an assumption

862
01:13:16,792 --> 01:13:22,632
that it's going down over time as the scale gets larger and it's harder to grow the relative network.

863
01:13:23,992 --> 01:13:28,952
Cool. Yeah. I love that. It's a great model. It's a good base case.

864
01:13:29,432 --> 01:13:38,792
Okay. So now based on that, in this scenario here, I've got in 2035, I've got strategy holding 1.2

865
01:13:38,792 --> 01:13:48,152
million Bitcoin based on these Bitcoin yield assumptions. And the Bitcoin gain, so this

866
01:13:48,152 --> 01:13:53,172
column here, or this row is reflecting the amount of Bitcoin that's gained in each one of the years,

867
01:13:53,172 --> 01:13:58,592
right? So from in 2026, it's just taking the difference between the Bitcoin in 2026 minus

868
01:13:58,592 --> 01:14:07,232
Bitcoin in 2025. And then the year over year Bitcoin gain is the relative, that's the Bitcoin

869
01:14:07,232 --> 01:14:15,612
gain times the Bitcoin price. So it's reflective of the multiplication of those two. And then I

870
01:14:15,612 --> 01:14:21,092
follow the Bitcoin price here just based on these CAGR assumptions going into the future. So in 2035,

871
01:14:21,092 --> 01:14:28,372
we're looking at holding 1.2 million Bitcoin and a Bitcoin price of $2.9 million. That might be high

872
01:14:28,372 --> 01:14:35,432
that might be low, but I think it's a good potential projection on what we might see at

873
01:14:35,432 --> 01:14:41,472
a future point in time. So in 2035, and maybe let's just focus on 2035 and just kind of forget

874
01:14:41,472 --> 01:14:49,052
all these other years, but now that you guys get a lay of the land, right? So in 2035, if the Bitcoin

875
01:14:49,052 --> 01:14:57,312
price is $2.9 million, that means strategy would hold $3.6 trillion in assets. $3.6 trillion in

876
01:14:57,312 --> 01:15:01,212
assets. The largest company on the planet right now is Microsoft and it's $3.4 trillion. Just

877
01:15:01,212 --> 01:15:08,372
to put that into perspective. And the rest of the capital markets will grow and those companies will

878
01:15:08,372 --> 01:15:14,232
grow. Right. Because fiat's going to keep getting printed. Right. So then I wanted to see, all right,

879
01:15:14,232 --> 01:15:20,212
what is the earnings that they made that year based on our BTC yield estimate and the Bitcoin

880
01:15:20,212 --> 01:15:26,332
CAGR? Right. So I wanted to take the Bitcoin gain. So the earnings and the Bitcoin held

881
01:15:26,332 --> 01:15:31,012
is a function of actually we got a nine here

882
01:15:31,012 --> 01:15:34,732
the earnings on the bitcoin held

883
01:15:34,732 --> 01:15:49,544
this is just gross it not taking into consideration tax is the Bitcoin price in 2035 minus the Bitcoin price in 2034 Okay So it the delta between the two So how much did the

884
01:15:49,544 --> 01:15:55,864
price of Bitcoin increase from 2034 to 2035 multiplied by the Bitcoin that's held in the

885
01:15:55,864 --> 01:16:02,664
prior year? Does that make sense? Yep. So basically how much did the Bitcoin price increase in that

886
01:16:02,664 --> 01:16:05,944
year? And I want to multiply it by the Bitcoin held in the prior year. And that's, you know,

887
01:16:05,944 --> 01:16:09,944
those assets that are held in the prior year are going to appreciate to that new price in the future

888
01:16:09,944 --> 01:16:15,704
year. So, and I'm not even taking into consideration any gain, any dollar gain,

889
01:16:15,704 --> 01:16:20,184
Bitcoin dollar gain on the Bitcoin gain during that time period.

890
01:16:21,704 --> 01:16:25,704
Which I think is fair. I actually think that's just conservative as shit, right? Just super

891
01:16:25,704 --> 01:16:30,904
conservative. And that brings us to a- And it's the most synonymous earnings.

892
01:16:30,904 --> 01:16:41,784
It's new money. Right. So that in 2035 would lead to a $700 billion earnings in 2035.

893
01:16:43,544 --> 01:16:53,944
If all of this math, if we agree with this, we think that strategies BTC yield will decrease

894
01:16:53,944 --> 01:17:02,584
over time and the Bitcoin CAGR will decrease over time. And if a 3.5% Bitcoin yield in 2035

895
01:17:02,584 --> 01:17:05,544
is reasonable, I mean, we could probably argue till we're blue in the face about that, but

896
01:17:08,424 --> 01:17:14,264
it's an interesting starting point. And that would result in an earnings of $700 billion in 2035.

897
01:17:15,624 --> 01:17:22,264
So I just assumed a blended strike, strife and stride yield on that 700 billion, the amount of

898
01:17:22,264 --> 01:17:26,904
of preferred instruments that they would have to pay that would result in about a $30 billion

899
01:17:26,904 --> 01:17:34,204
dividend payment that the strategy would have to pay out. However, they have $3.6 trillion of

900
01:17:34,204 --> 01:17:40,304
assets, and that would only be less than 1% of the total assets held that they would have to pay

901
01:17:40,304 --> 01:17:45,564
out annually. So they're still incredibly strong financially. And then I wanted to back into,

902
01:17:45,564 --> 01:17:50,984
okay, what would a price be? If we still compare the rest of the market,

903
01:17:50,984 --> 01:17:58,564
on some sort of reasonable metric. The current shares outstanding is 279 million. You've got

904
01:17:58,564 --> 01:18:06,764
earnings per share of roughly $2,506 per share. Let's just say you've got an EPS multiple of 15,

905
01:18:06,764 --> 01:18:10,884
which is well below what all the other market is trading at. That would bring a price,

906
01:18:11,564 --> 01:18:18,104
bring MSTR to a price of $37,604 in 2035 and a market cap of 10.5 trillion,

907
01:18:18,104 --> 01:18:26,944
which might be the largest company on the planet at that time. But right, if Microsoft compounds at

908
01:18:26,944 --> 01:18:34,584
6.5% annually, they still might be playing around near the top five, top 10 publicly traded companies.

909
01:18:35,584 --> 01:18:42,764
And I wanted to take a step back, right? And how does this compare to MAG7? What is the compound

910
01:18:42,764 --> 01:18:47,564
annual growth rate of the earnings? And how does this all look relative to another? So the compound

911
01:18:47,564 --> 01:18:54,444
annual growth rate of the earnings is 49.3%, so about 50%. The compound annual growth rate of

912
01:18:54,444 --> 01:18:59,484
Bitcoin in this horizon on the next 10-year horizon is 39%. Again, we can argue till we're

913
01:18:59,484 --> 01:19:06,264
blue in the face about that. Maybe it's 20, maybe it's 40, maybe it's 50. And the CAGR of the BTC

914
01:19:06,264 --> 01:19:16,804
yield I have at 7.7%, which I think is a reasonable conservative estimate on how the

915
01:19:16,804 --> 01:19:20,024
compound annual growth rate of the Bitcoin yield moves into the future.

916
01:19:21,904 --> 01:19:27,224
I think you're right. I actually, I did a similar model like this, Jeff, and it wasn't laid out this

917
01:19:27,224 --> 01:19:32,984
well, but I think I actually had a, and I'm typically pretty bearish, but I had a much more

918
01:19:32,984 --> 01:19:38,084
aggressive CAGR of Bitcoin yield. And I think there's a real scenario in which the Bitcoin

919
01:19:38,084 --> 01:19:41,384
yield is higher than this because of the preferred, specifically because of the preferred.

920
01:19:41,384 --> 01:19:47,704
I walked through that and we'll hit that next. So the current trailing 12 month PE ratio is eight,

921
01:19:48,264 --> 01:19:54,024
once I say seven. So that would bring the price earnings to growth ratio down to 0.13.

922
01:19:54,024 --> 01:19:57,624
Josh thought I was insane for saying this, but I think this is actually a conservative estimate.

923
01:19:57,624 --> 01:20:02,264
If you're taking a 10 year horizon on the growth rate of the potential earnings, you got to go look

924
01:20:02,264 --> 01:20:06,424
at what is the earnings look like in year 10. Right? Like what does the company look like 10

925
01:20:06,424 --> 01:20:13,384
years from now and i gotta peel it back to today and the re and the re and in order to normalize

926
01:20:13,384 --> 01:20:22,264
this relative to like the mag 7 the the earnings the the peg ratios of like apple is two the peg

927
01:20:22,264 --> 01:20:32,104
ratio of microsoft is like 1.5 which means they're relatively overvalued relative to strategy and how

928
01:20:32,104 --> 01:20:38,504
how it fits in the market. And it's a matter of whether you think they'll be repriced down or

929
01:20:38,504 --> 01:20:43,464
whether strategy will be repriced up to their multiple, to their earnings multiple. And I

930
01:20:43,464 --> 01:20:47,664
actually think the Bitcoin yield is going to be much higher than this. And we'll go through that.

931
01:20:47,984 --> 01:20:52,344
I personally don't believe they're going to be priced up to the current earnings multiple of

932
01:20:52,344 --> 01:20:56,984
Mag7. I think they'll be repriced down to strategy to earning multiple. But my price per share in

933
01:20:56,984 --> 01:21:00,964
year 2035 is actually higher than yours, Jeff. So even for the people out there that don't think

934
01:21:00,964 --> 01:21:04,444
they'll be repriced higher in an earnings per share basis. There's still a lot of hope.

935
01:21:04,444 --> 01:21:08,624
Yeah. And that's, you can, there's so many variables here, right? Like this is a really

936
01:21:08,624 --> 01:21:13,224
complicated model and there's a ton of variables that you can play with. The one thing I wanted

937
01:21:13,224 --> 01:21:18,984
to put into perspective is the BTC gain. So I took the cumulative sum of the BTC gain across the

938
01:21:18,984 --> 01:21:26,764
entire horizon from 25 to 23, and that's $550 billion. So that's effectively, just to put it

939
01:21:26,764 --> 01:21:32,944
perspective, that's like raising $550 billion in the preferred income on the prefs over the next

940
01:21:32,944 --> 01:21:40,064
10 years. Do I think that's reasonable? Well, what does the fixed income market look like in 2035

941
01:21:40,064 --> 01:21:47,244
based on a 6.5% compound annual growth rate? And so I did that math and I looked at the fixed

942
01:21:47,244 --> 01:21:53,344
income market starting today is 318 trillion. The real estate market starting today is 367 trillion.

943
01:21:53,344 --> 01:21:58,924
And if you compound that at six and a quarter percent interest rate into 2035, the monetary

944
01:21:58,924 --> 01:22:05,004
supply increase, you're looking at the fixed income market being 583 trillion and the real

945
01:22:05,004 --> 01:22:06,824
estate market being 672 trillion.

946
01:22:07,204 --> 01:22:11,104
So 1.2 quadrillion between those two markets.

947
01:22:11,944 --> 01:22:18,404
And in that circumstance, the Bitcoin raised, the BTC gain effectively, how much capital

948
01:22:18,404 --> 01:22:28,224
to be raised from the prefs of 550 billion would only be 0.09% of the fixed income market.

949
01:22:29,904 --> 01:22:38,844
So I think this is bearish. I think this is like a conservative estimate of what the BTC gain

950
01:22:38,844 --> 01:22:46,364
could be in the future, especially if the market starts to reprice all of these different instruments.

951
01:22:48,404 --> 01:23:06,164
Yeah, and it's all because of the preferred equity. It's all because of the preferred equity. Because when you think about it, as those assets are compounded, Bitcoin will hit a point at which there's a terminal CAGR, right? Much like the S&P or anything like that, where the CAGR stops decreasing, in my opinion, whether that's 10%, 5%, or 20%.

952
01:23:06,164 --> 01:23:25,104
As it's compounding continuously, the actual assets on strategy's balance sheet, they're yielding Bitcoin via these preferred equity offerings into the market backed by their Bitcoin stack. So they're having essentially, they have compound yield, exponential yield on an exponential asset at some point.

953
01:23:25,104 --> 01:23:29,924
So that's the real unlock here is the yield from their Bitcoin stack via preferred offerings.

954
01:23:30,024 --> 01:23:31,364
And I think people aren't thinking about that.

955
01:23:31,444 --> 01:23:35,064
They're just thinking, oh, well, you know, size of the company.

956
01:23:35,764 --> 01:23:41,444
If you use ATM to acquire Bitcoin as the company reaches terminal velocity, that's going to effectively slow down.

957
01:23:42,164 --> 01:23:50,724
The thing is, is the preferred equity offerings play the other side of that, where these actually are an exponential growth on the assets on the balance sheet.

958
01:23:52,764 --> 01:23:53,644
Yeah, I follow.

959
01:23:53,644 --> 01:23:54,384
I follow.

960
01:23:55,104 --> 01:24:06,524
One other thing I'm thinking about here is, right, the world has never seen an asset like Bitcoin before, where you can efficiently store your energy without decay.

961
01:24:07,844 --> 01:24:16,604
So if you think about what that means and the implications of that, that means that you're going to see more abundance.

962
01:24:16,604 --> 01:24:22,004
So back to your comment on, you know, Mag7 getting repriced down.

963
01:24:22,424 --> 01:24:25,144
Maybe it gets repriced down a little bit, but it doesn't have to.

964
01:24:26,404 --> 01:24:26,884
Right?

965
01:24:26,964 --> 01:24:31,224
Because MSTR and Bitcoin is capturing value without decay.

966
01:24:31,884 --> 01:24:34,244
And so there can be more value in the market.

967
01:24:35,964 --> 01:24:36,484
Theoretically.

968
01:24:37,044 --> 01:24:37,524
Right?

969
01:24:39,764 --> 01:24:40,464
I don't know.

970
01:24:40,504 --> 01:24:42,604
That's a weird, that's a brain breaker.

971
01:24:42,804 --> 01:24:44,264
That's a Jeff Booth comment.

972
01:24:44,264 --> 01:24:46,564
We need Mason and Jeff Booth on the scene.

973
01:24:46,604 --> 01:24:50,264
what do you think so what do you think of this model do you want to play with this at all like

974
01:24:50,264 --> 01:25:01,284
what uh yeah i think it's pretty conservative bitcoin kagger um projection especially because

975
01:25:01,284 --> 01:25:04,624
like inflation is just going to keep

976
01:25:04,624 --> 01:25:11,924
going up exponentially too so i don't see how bitcoin's kagger can drop too far too fast

977
01:25:11,924 --> 01:25:15,164
so the numbers are just going to be insane

978
01:25:15,164 --> 01:25:22,044
right it's tricky this is a tricky analysis to do because it's all it's also all dependent on

979
01:25:22,044 --> 01:25:29,584
bitcoin yield in the early years right like if uh if you crank up these numbers like let's just

980
01:25:29,584 --> 01:25:35,124
say there is some frenzy and the bitcoin yield in 2025 is like 50 the remaining bitcoin yield

981
01:25:35,124 --> 01:25:41,764
in 2025 is like 50 i mean that totally changes you go from 700 billion dollars of earnings to

982
01:25:41,764 --> 01:25:50,144
a trillion dollars of earnings in year 2035, right? Which is just insane. So the early years,

983
01:25:50,224 --> 01:25:54,944
because all of this compounds, which is where the torque comes into play, right? And they tried to

984
01:25:54,944 --> 01:26:00,924
show this in their earnings reports where this thing goes exponential because the existing Bitcoin

985
01:26:00,924 --> 01:26:07,264
that you have is earning more value over time. It's earning more value over time. You get this

986
01:26:07,264 --> 01:26:13,864
Bitcoin income, BTC income from all of the Bitcoin you've acquired in the early years, which is just

987
01:26:13,864 --> 01:26:21,844
shows, again, the compound value of the ATM and utilizing the balance sheet early to accumulate

988
01:26:21,844 --> 01:26:30,124
as much Bitcoin as humanly possible. So anyway, that's my moon math for the day.

989
01:26:31,524 --> 01:26:35,544
Yeah, I love it, Jeff. Absolutely. And I mean, shoot, in this scenario,

990
01:26:35,544 --> 01:26:43,344
Right? Look, I just, the only thing I changed was the Bitcoin yield in year one. I took it from 20

991
01:26:43,344 --> 01:26:51,864
to 50. That changed the earnings from 700 billion to a trillion. That brings the price estimate to

992
01:26:51,864 --> 01:26:58,324
59,000 in year 2035. The market cap to 16.4 trillion. Maybe that's, that could be realistic,

993
01:26:58,584 --> 01:27:04,484
right? I think that it sounds crazy to say, sounds crazy to say, but I think that could be realistic.

994
01:27:04,484 --> 01:27:13,244
by 2035 that's not that crazy yeah i mean it just those numbers sound like weird to say right like

995
01:27:13,244 --> 01:27:19,124
16 trillion nothing 16 trillion yeah there's there isn't there isn't a company that's 16 trillion

996
01:27:19,124 --> 01:27:25,104
yet yeah right and now now you've got chris here we go this is perfect well here's the thing if we

997
01:27:25,104 --> 01:27:30,284
if we roll this back in the past if anyone had said that amazon or microsoft or apple or meta

998
01:27:30,284 --> 01:27:36,124
or Tesla or any of these companies would be in something called the Mag 7, where they're all

999
01:27:36,124 --> 01:27:41,344
valued at either close to or over a trillion dollars. That would have seemed crazy too,

1000
01:27:41,424 --> 01:27:48,604
right? In like 1995. But things change. Well, let's compare this too. I've got this data,

1001
01:27:48,664 --> 01:27:55,724
which I think is super valuable as well. And this is the Mag 7. And basically Microsoft right now

1002
01:27:55,724 --> 01:28:04,284
is valued at $3.5 trillion. They hold zero Bitcoin. And the value of Microsoft is 32 million Bitcoin,

1003
01:28:05,244 --> 01:28:12,004
which is also just crazy to say. Now I looked at the top 10 companies and I took the cumulative

1004
01:28:12,004 --> 01:28:18,104
market cap. So the top 10 companies are valued at 20.2 trillion, which is 187 million Bitcoin.

1005
01:28:18,104 --> 01:28:28,124
so that's 8.9 times about nine times the amount of bitcoin that will ever be mined ever and if we

1006
01:28:28,124 --> 01:28:32,764
think about any of these companies starting to store their value in bitcoin instead of dollars

1007
01:28:32,764 --> 01:28:41,444
this equation gets really crazy really fast right like the the kagger may rocket in the early years

1008
01:28:41,444 --> 01:28:47,704
and then start to decay over time and as you have this exponential growth of humanity like with ai

1009
01:28:47,704 --> 01:28:50,524
and you've got a store of value that doesn't have decay,

1010
01:28:51,064 --> 01:28:55,124
we could see a world of abundance in 10 to 15, 20 years from now,

1011
01:28:55,144 --> 01:28:56,424
which is super hopeful.

1012
01:28:58,364 --> 01:28:59,164
Super hopeful.

1013
01:29:00,184 --> 01:29:01,144
Unique place to be.

1014
01:29:02,744 --> 01:29:03,584
Yeah, completely.

1015
01:29:03,864 --> 01:29:07,324
It's crazy to me that people are bored with strategy right now.

1016
01:29:09,204 --> 01:29:11,484
I'm over here like, oh my God.

1017
01:29:11,484 --> 01:29:16,904
I think they're bored because they can't conceptualize the scale.

1018
01:29:16,904 --> 01:29:21,064
right like i just said it's weird to say it's 16 trillion dollar company nobody knows what that

1019
01:29:21,064 --> 01:29:28,184
means right like it's just it's another comma but no it's like it's it's literally orders of magnitude

1020
01:29:28,824 --> 01:29:37,464
greater orders of magnitude and uh people can't conceptualize that right because they they're

1021
01:29:37,464 --> 01:29:41,704
you chase shiny things because it's maybe a faster horse for a shorter time period right like

1022
01:29:41,704 --> 01:29:48,644
I think there are ample opportunities out there to make a ton of money in the Bitcoin treasury space right now.

1023
01:29:50,324 --> 01:29:59,684
But the best risk adjusted return, in my opinion, is strategy because of their size, their scale, and their ability to tackle these markets greater than anybody else.

1024
01:29:59,684 --> 01:30:07,524
Nobody else has the size and scale to go issue $100 billion of preferreds, $500 billion of preferreds in the next 10 years.

1025
01:30:07,524 --> 01:30:14,584
you need massive scale and that scale is going to just get even exponentially larger right as they

1026
01:30:14,584 --> 01:30:17,844
as they continue to issue these prefers they just get more of a lead

1027
01:30:17,844 --> 01:30:22,044
and they're able to issue more and more because their relative risk is significantly better

1028
01:30:22,044 --> 01:30:27,924
and i mean it's going to be hard there's gonna be a lot of fallen soldiers along the way like

1029
01:30:27,924 --> 01:30:31,784
people are gonna get shaken out and i mean you know we've all felt it like why isn't the price

1030
01:30:31,784 --> 01:30:37,504
going up why isn't the price going up but if this if these uh models teach you anything it's

1031
01:30:37,504 --> 01:30:40,124
The numbers are small at the beginning, but it's growing exponentially.

1032
01:30:40,124 --> 01:30:43,544
It's the classic scenario of, you know, everybody's got that uncle

1033
01:30:43,804 --> 01:30:57,756
that bought Apple or could have bought Apple in 1989 for or you know 50 cents or 25 cents or whatever And he like well I didn And you like well they tell the story over Thanksgiving holiday And you like well

1034
01:30:57,976 --> 01:31:02,056
cool story, man. Like you wouldn't have held it anyway. This is one of those scenarios. You've

1035
01:31:02,056 --> 01:31:07,716
got this opportunity to hold this, like probably the best performing instrument on the planet for

1036
01:31:07,716 --> 01:31:13,936
the next 20 years. And people are over here, like picking up pennies in front of a steamroller.

1037
01:31:13,936 --> 01:31:15,836
so it's just

1038
01:31:15,836 --> 01:31:18,556
a really unique place to be

1039
01:31:18,556 --> 01:31:20,456
for me personally

1040
01:31:20,456 --> 01:31:21,936
I

1041
01:31:21,936 --> 01:31:24,776
just don't want to mess

1042
01:31:24,776 --> 01:31:25,196
up

1043
01:31:25,196 --> 01:31:28,516
Jeff I'm short calls

1044
01:31:28,516 --> 01:31:30,536
I'm short calls

1045
01:31:30,536 --> 01:31:32,336
they're very far out of the money

1046
01:31:32,336 --> 01:31:33,576
you do weeklies

1047
01:31:33,576 --> 01:31:34,836
you do weeklies right

1048
01:31:34,836 --> 01:31:37,316
that's fair right you do weeklies like

1049
01:31:37,316 --> 01:31:39,356
$200 out of the money that's fine

1050
01:31:39,356 --> 01:31:42,056
yeah

1051
01:31:42,056 --> 01:31:42,636
thanks boss

1052
01:31:42,636 --> 01:31:51,036
look even the the only people that that i've you know twitter there's a bunch of people just

1053
01:31:51,036 --> 01:31:56,756
getting bored with strategy but i was i was tracking the um msty and imst positions the

1054
01:31:56,756 --> 01:32:03,736
last few days and they're actually taking long positions both of the funds both of the funds

1055
01:32:03,736 --> 01:32:11,216
have uncovered long positions and i was like okay covered long positions like uh are they options

1056
01:32:11,216 --> 01:32:18,736
or are they just like buying the shares um imst was like synthetics so it's basically

1057
01:32:18,736 --> 01:32:24,456
like holding shares and then msty they actually had like some debit spreads

1058
01:32:24,456 --> 01:32:31,396
and and there was some like yolo next week type shit and i was like okay

1059
01:32:31,396 --> 01:32:39,016
isn't there a big option expiration on next friday oh man i haven't checked that in a while

1060
01:32:39,016 --> 01:32:46,056
there's a pretty big off for what june 20th i think um this friday is not small and then the

1061
01:32:46,056 --> 01:32:53,456
following friday is pretty big yeah maybe that's what it's about but i was i was kind of floored

1062
01:32:53,456 --> 01:33:01,016
yeah like the whole thing is short volatility and they're like nah we're just gonna go long

1063
01:33:01,016 --> 01:33:06,536
instead we're long here sometimes you gotta be there's still yeah

1064
01:33:06,536 --> 01:33:09,496
what are you going to say

1065
01:33:09,496 --> 01:33:10,476
what's the options chain

1066
01:33:10,476 --> 01:33:13,716
oh no

1067
01:33:13,716 --> 01:33:15,396
they're still slamming their

1068
01:33:15,396 --> 01:33:19,576
shorts but they're using that money to buy

1069
01:33:19,576 --> 01:33:21,496
some long positions too and they're just

1070
01:33:21,496 --> 01:33:23,356
keeping some upside out there

1071
01:33:23,356 --> 01:33:24,936
just in case it rips

1072
01:33:24,936 --> 01:33:27,556
so hopefully they see

1073
01:33:27,556 --> 01:33:27,896
some

1074
01:33:27,896 --> 01:33:30,856
code in the matrix or something

1075
01:33:30,856 --> 01:33:32,276
they know something's going to happen

1076
01:33:32,276 --> 01:33:35,656
yeah we should probably

1077
01:33:35,656 --> 01:33:40,376
do an update on uh on the options chain at some point in the near future i mean danny if you're

1078
01:33:40,376 --> 01:33:47,896
following this i i pulled up june uh i can't i don't have a sense on scale if there's a website

1079
01:33:47,896 --> 01:33:52,376
that pulls us together but we might want to look at that options chart option it's called like

1080
01:33:52,376 --> 01:33:57,256
optionscharts.io they'll give you all the open interest by strike on mstr and we can pull it up

1081
01:33:57,256 --> 01:34:07,336
there we go there we go search ticker mstr the thing with people getting bored with strategy

1082
01:34:07,336 --> 01:34:14,656
that's kind of odd is that um sailor's been saying for quite some time now that the plan

1083
01:34:14,656 --> 01:34:21,016
is to hold for years whether it's bitcoin whether it's strategy so i don't know how

1084
01:34:21,016 --> 01:34:26,756
well let me rephrase that i do know how people saw the number go up a lot in the last four or

1085
01:34:26,756 --> 01:34:30,756
five years and now they're like, well, do something. Why are you 3Xing yet? Right.

1086
01:34:31,436 --> 01:34:39,796
But his whole, his whole model has been you buy, you hold, that's how you, that's how you

1087
01:34:39,796 --> 01:34:45,216
accumulate wealth. I mean, what did he say in the Jordan Peterson interview, right? He bought stuff

1088
01:34:45,216 --> 01:34:50,956
when it was low, he held it for years, decades, and that's how he got rich. He didn't get rich

1089
01:34:50,956 --> 01:34:58,316
trading in and out of positions. So I'm kind of perplexed by the more information that comes out

1090
01:34:58,316 --> 01:35:04,216
about him and the more information that shows that he is a buy, hold, innovate kind of guy.

1091
01:35:04,356 --> 01:35:09,476
Why are people expecting him to create a stock or have a dynamic where everything is supposed to be

1092
01:35:09,476 --> 01:35:12,516
ripping up 3x and crashing, then ripping, then crashing, then ripping, then crashing?

1093
01:35:12,956 --> 01:35:17,016
Obviously, this is a longer term play and that's what he's building out. So I think a lot of people

1094
01:35:17,016 --> 01:35:22,536
to probably reassess what it is they think about strategy perhaps or maybe i'm just being too harsh

1095
01:35:22,536 --> 01:35:32,136
i don't know yeah i mean it's built on an equity that no one has ever lost money on if they held

1096
01:35:32,136 --> 01:35:41,096
it for four or five years so if you haven't held it for four or five years you really have no

1097
01:35:41,096 --> 01:35:46,936
complaints i don't think yeah and adrian to your point like the uh on that interview was great right

1098
01:35:46,936 --> 01:35:52,776
you saw the iPhone and you realized, oh my God, everyone's going to have one of these in their

1099
01:35:52,776 --> 01:36:00,216
pocket. Right. And I think what you've got now with MSTR is you see these preferred instruments

1100
01:36:00,216 --> 01:36:03,976
and you go, oh my God, everyone's going to have one of these in their portfolio.

1101
01:36:05,436 --> 01:36:10,456
Everyone. That's at least how I see it. Right. Like I look at the landscape of fixed income

1102
01:36:10,456 --> 01:36:15,676
market. I look at this, it's, this looks like the most attractive thing on the planet in a rapper

1103
01:36:15,676 --> 01:36:18,376
that they can consume.

1104
01:36:18,636 --> 01:36:19,756
It fits within their mandates.

1105
01:36:21,016 --> 01:36:21,316
And so

1106
01:36:21,316 --> 01:36:25,036
that's kind of how I see it, right?

1107
01:36:26,276 --> 01:36:27,016
Well, yeah.

1108
01:36:27,536 --> 01:36:29,236
Because while Saylor wrote the mobile wave,

1109
01:36:29,436 --> 01:36:30,596
I think you've read it, I've read it.

1110
01:36:30,616 --> 01:36:32,176
I'm not sure if everyone in June North

1111
01:36:32,176 --> 01:36:33,136
has read it fully yet.

1112
01:36:33,556 --> 01:36:35,416
But he's identified trends.

1113
01:36:36,576 --> 01:36:38,016
He's got in on those trends

1114
01:36:38,016 --> 01:36:39,116
and that's how he's made his money.

1115
01:36:39,216 --> 01:36:40,516
Right now, what he's doing with Bitcoin,

1116
01:36:40,696 --> 01:36:43,276
he's identifying a financial trend, right?

1117
01:36:43,376 --> 01:36:45,316
So he's building all these offerings

1118
01:36:45,316 --> 01:36:51,556
on top of it he's built his company around it it's either going to be along for the ride or

1119
01:36:51,556 --> 01:36:56,516
you're going to get off the train is what is what i think i'm trying to get at if you're not a person

1120
01:36:56,516 --> 01:37:01,076
that can handle the fact that this is a long-term hold and look at see all the moon math you just

1121
01:37:01,076 --> 01:37:07,556
did how the years went on 20 26 27 28 right if you can't stick with it throughout that time and

1122
01:37:07,556 --> 01:37:13,476
realize that appreciation i think you're just going to end up getting frustrated but on the

1123
01:37:13,476 --> 01:37:18,356
flip side i don't understand how people can get frustrated they really sit down and understand

1124
01:37:18,356 --> 01:37:22,676
what's what's going on so that's something i've been wrestling with myself with you know the

1125
01:37:22,676 --> 01:37:27,476
chatter that we see and people getting bored and whatnot like how to how else do we put this

1126
01:37:27,476 --> 01:37:31,156
message across to make them understand that this is what's being done i don't know if there's

1127
01:37:31,156 --> 01:37:34,836
anything else we can do besides you know managing the portfolios for them but we're not going to do

1128
01:37:34,836 --> 01:37:41,636
that so you know it's just an interesting thing to see play out in real time yeah you just got to

1129
01:37:41,636 --> 01:37:46,756
give perspective right like uh the the people didn't see the iphone right maybe they saw the

1130
01:37:46,756 --> 01:37:51,076
ipod and they're like yeah okay whatever maybe so so the iphone they're like yeah okay whatever

1131
01:37:51,076 --> 01:37:54,436
but they didn't understand that like eight billion people on the planet are going to have these or

1132
01:37:54,436 --> 01:38:00,116
want to have one of these and the price of it's going to come down it's going to get cheaper

1133
01:38:00,116 --> 01:38:03,396
but they came out and they were like what i don't know eight hundred dollars in like 2008.

1134
01:38:03,956 --> 01:38:08,996
um and it was just like who's who's going to have one of these it's kind of clunky moves kind of

1135
01:38:08,996 --> 01:38:13,556
slow more than that actually more than that yeah it's got a glass screen you know everybody's

1136
01:38:13,556 --> 01:38:17,636
dropping them they're shattering you're like oh this thing is totally dead you couldn't send

1137
01:38:17,636 --> 01:38:21,396
pictures you're going to send texts you couldn't send multimedia messages i remember that yep

1138
01:38:21,396 --> 01:38:26,436
meanwhile the rate the razor looked super sick it was like super durable you know you could get

1139
01:38:26,436 --> 01:38:30,036
thrown in the pool with it and still works when you come out and you could send all your text

1140
01:38:30,036 --> 01:38:35,076
messages the blackberries sending emails and it's got a full keypad you're like okay

1141
01:38:35,076 --> 01:38:37,096
You can see all these execs using Blackberries.

1142
01:38:38,156 --> 01:38:43,496
And it was, I mean, you could have seen it, right?

1143
01:38:43,516 --> 01:38:45,576
If you were a bit of a visionary, right?

1144
01:38:45,576 --> 01:38:47,496
Like this is a significantly better product

1145
01:38:47,496 --> 01:38:49,296
and it will be more desirable

1146
01:38:49,296 --> 01:38:50,436
because it's going to get better.

1147
01:38:50,516 --> 01:38:51,336
It's going to get cheaper.

1148
01:38:51,516 --> 01:38:52,476
Internet's going to get faster.

1149
01:38:53,796 --> 01:38:55,936
You're going to have AI platforms on these things.

1150
01:38:55,936 --> 01:38:57,516
You're going to be able to learn incredibly quickly,

1151
01:38:58,296 --> 01:39:01,816
communicate fast and communicate with memes and images

1152
01:39:01,816 --> 01:39:02,936
and all these different things.

1153
01:39:02,936 --> 01:39:13,416
and it took thinking ahead and you didn't have information very quickly back then too so like

1154
01:39:13,416 --> 01:39:18,436
you know you'd have to go get your news and information from newspapers or magazines or

1155
01:39:18,436 --> 01:39:24,516
you go on the internet and everybody's got you know dial up internet and reading forums back in

1156
01:39:24,516 --> 01:39:29,616
the day just access to information wasn't wasn't very good and now we have access to information

1157
01:39:29,616 --> 01:39:31,456
that's significantly better.

1158
01:39:32,256 --> 01:39:33,416
We've got groups of people

1159
01:39:33,416 --> 01:39:35,036
that are meeting on the internet.

1160
01:39:35,496 --> 01:39:37,596
Like all of us literally met on the internet

1161
01:39:37,596 --> 01:39:40,456
talking about a stock that we like

1162
01:39:40,456 --> 01:39:42,496
because we think it's the best stock on the planet

1163
01:39:42,496 --> 01:39:43,776
because of the internet money.

1164
01:39:44,296 --> 01:39:46,876
Like what kind of timeline is this?

1165
01:39:46,896 --> 01:39:47,436
This is crazy.

1166
01:39:48,156 --> 01:39:53,176
And now we can do that visionary process together

1167
01:39:53,176 --> 01:39:56,036
and we can share it with 8,000 people, right?

1168
01:39:56,076 --> 01:39:57,676
That are watching us right now.

1169
01:39:57,676 --> 01:40:03,076
And that's just a completely different landscape than where we were like 2007.

1170
01:40:03,256 --> 01:40:06,256
Just access to information was just completely, completely different.

1171
01:40:07,536 --> 01:40:13,836
So anybody betting against this right now is like, I just, it's just crazy to me on people

1172
01:40:13,836 --> 01:40:18,996
that are betting against this because Bitcoin holders are the strongest, like hardened people

1173
01:40:18,996 --> 01:40:19,536
on the planet.

1174
01:40:20,156 --> 01:40:25,816
And they're just going to hold this stuff forever and like work really hard to build

1175
01:40:25,816 --> 01:40:27,596
the future of the Bitcoin network too.

1176
01:40:27,676 --> 01:40:34,576
Well, is anyone doubting the moon math also coming to your point about pushing it forward

1177
01:40:34,576 --> 01:40:36,716
and being a visionary and trying to be able to see forward?

1178
01:40:37,856 --> 01:40:41,256
And I know people say this and it seems cheesy, but when it comes to Bitcoin adoption, we

1179
01:40:41,256 --> 01:40:42,136
are still very early.

1180
01:40:43,516 --> 01:40:46,376
There's millions of people that have adopted Bitcoin, right?

1181
01:40:46,416 --> 01:40:47,236
Not billions yet.

1182
01:40:47,416 --> 01:40:49,836
So billions is a thousand fold increase from here.

1183
01:40:50,956 --> 01:40:54,676
Just imagine what that means in terms of strategy.

1184
01:40:54,816 --> 01:40:56,876
Just imagine what that means in terms of market cap.

1185
01:40:56,876 --> 01:41:03,436
imagine what that means in terms of Bitcoin's price. And then I think Jeff's numbers look kind

1186
01:41:03,436 --> 01:41:12,796
of conservative by comparison, right? And when it hits the point where we actually have billions

1187
01:41:12,796 --> 01:41:19,036
of people onto Bitcoin and you have the price appreciation, you have what strategy is,

1188
01:41:19,036 --> 01:41:22,716
I think it's going to make things like Berkshire Hathaway look quaint in comparison when we look

1189
01:41:22,716 --> 01:41:27,516
back on it and the mag seven and so on and so forth. It's going to be an entirely different

1190
01:41:27,516 --> 01:41:31,596
dynamic or different paradigm. Yeah. It's going to be an entirely different paradigm that just

1191
01:41:31,596 --> 01:41:36,876
doesn't exist yet. And to you, Solay, when you said, well, inflation is going to be out of control,

1192
01:41:36,876 --> 01:41:42,716
right? They're going to be printing like crazy. They have to. Exactly. So throw a few inflationary

1193
01:41:42,716 --> 01:41:47,436
cycles into that, throw a few printing cycles into that. Then you know they're going to have

1194
01:41:47,436 --> 01:41:51,756
to lower interest rates again, because that's just what's going to have to happen. Then inflation

1195
01:41:51,756 --> 01:41:55,276
is going to go up even more and the price is going to appreciate even more you see what i'm saying so

1196
01:41:56,556 --> 01:42:02,076
looking back on it we're probably going to say to ourselves here we were kind of undershooting it

1197
01:42:02,076 --> 01:42:06,316
because to what to what sailor says it's either going to zero or it's going to like

1198
01:42:06,316 --> 01:42:12,396
tens of millions i i think that that binary is very very very much the case so

1199
01:42:14,956 --> 01:42:19,836
as long as they continue to manage this thing the way they are very very effectively very very

1200
01:42:19,836 --> 01:42:23,596
strategically and they're doing financial engineering and they're doing you know that

1201
01:42:23,596 --> 01:42:30,956
they're they're not over leveraging themselves i have a hard time seeing how they fail yeah

1202
01:42:32,476 --> 01:42:37,116
yeah i completely the other thing that's being rethought right now and and it's probably very

1203
01:42:37,116 --> 01:42:42,476
similar to everybody rethinking how they used communication modes uh with the creation of

1204
01:42:42,476 --> 01:42:48,796
the iphone is like what's the point of holding an equity like why do you hold equity why do you

1205
01:42:48,796 --> 01:42:51,636
Why do you hold an equity that doesn't pay a dividend?

1206
01:42:53,276 --> 01:42:55,496
Well, essentially you're hoping for price appreciation.

1207
01:42:55,676 --> 01:42:56,296
That's pretty much it.

1208
01:42:56,836 --> 01:42:56,996
Yeah.

1209
01:42:57,436 --> 01:43:00,376
So like price appreciation as a function of what?

1210
01:43:01,236 --> 01:43:01,636
Well, right.

1211
01:43:01,756 --> 01:43:01,896
Yeah.

1212
01:43:04,476 --> 01:43:07,196
And that's kind of part of my general thesis.

1213
01:43:07,376 --> 01:43:12,916
Like what's the point of holding the MAG-7 if they don't pay you a dividend?

1214
01:43:12,916 --> 01:43:18,776
And it's like, okay, some expectation at a future point in time of some earnings number

1215
01:43:18,776 --> 01:43:24,896
based on my perception of how big that market is and how much of that market that they're

1216
01:43:24,896 --> 01:43:25,456
going to have.

1217
01:43:26,676 --> 01:43:27,476
Think of it this way.

1218
01:43:27,536 --> 01:43:28,276
Equity is hope.

1219
01:43:28,356 --> 01:43:31,336
People are hoping that they have the right read on it and that equity is going to give

1220
01:43:31,336 --> 01:43:36,616
them, they're paying now for what value they think they can accrete from it in the future.

1221
01:43:36,616 --> 01:43:41,236
But to your point, that is all, I don't want to say it's smoke and mirrors, but in a lot

1222
01:43:41,236 --> 01:43:47,916
of ways it is based upon future expectations that you hope that will come to pass. While

1223
01:43:47,916 --> 01:43:55,056
strategy, Bitcoin, represents a far more concrete example because as it stands right now, even

1224
01:43:55,056 --> 01:44:00,736
without global adoption, we still have a very concrete use case of 15 plus years or going

1225
01:44:00,736 --> 01:44:05,276
on 15 plus years where we've seen adoption growth, we've seen utility growth, we've seen

1226
01:44:05,276 --> 01:44:10,276
an entire new class of equities built on top of it.

1227
01:44:11,216 --> 01:44:12,656
The MAG7 doesn't quite have that.

1228
01:44:12,736 --> 01:44:14,956
Well, let me qualify that statement.

1229
01:44:15,396 --> 01:44:16,556
AI is its own thing.

1230
01:44:17,396 --> 01:44:19,816
So any company that is focused on AI

1231
01:44:19,816 --> 01:44:22,356
that is building out that in the future, I think,

1232
01:44:22,796 --> 01:44:23,776
that's a different thesis.

1233
01:44:24,156 --> 01:44:26,716
But all of the MAG7 companies can't fully go into that.

1234
01:44:26,796 --> 01:44:28,096
Some of them are going to sort of taper off.

1235
01:44:28,496 --> 01:44:29,736
So then you're left with what?

1236
01:44:29,836 --> 01:44:31,476
You're left with Bitcoin, strategy,

1237
01:44:32,116 --> 01:44:33,736
maybe a few of the MAG7 companies,

1238
01:44:33,736 --> 01:44:42,856
than ether is what you're left with essentially and you have to hope that your equity investments

1239
01:44:42,856 --> 01:44:49,176
your bonds whatever beat inflation outperform the list goes on and on and on so yeah what's

1240
01:44:49,176 --> 01:44:56,216
the market look like when every company has bitcoin and you don't have to just search for

1241
01:44:56,216 --> 01:45:01,496
the company that's going to give you the biggest returns because they're all expected to at least

1242
01:45:01,496 --> 01:45:09,856
least give you a Bitcoin return plus some kind of venture return on top of it and you can just buy

1243
01:45:09,856 --> 01:45:16,016
the company that you agree with their mission you can just get rid of all the bullshit research

1244
01:45:16,016 --> 01:45:21,456
and just be like this company is trying to cure cancer I want to invest in it this company's doing

1245
01:45:21,456 --> 01:45:26,476
this I just want to invest in it it's going to be a completely different mindset so I think there's

1246
01:45:26,476 --> 01:45:29,316
two things that are going to happen I do think that they're going to be companies that just don't

1247
01:45:29,316 --> 01:45:35,016
adopt it and they're going to die off. And I think there's going to be companies that get eaten by AI

1248
01:45:35,016 --> 01:45:41,336
and then you're going to have whatever's left over that's going to have to adopt to this new

1249
01:45:41,336 --> 01:45:48,256
paradigm of having this hard asset on their balance sheet. Now, whether all of them do it

1250
01:45:48,256 --> 01:45:52,316
by holding Bitcoin directly or in custody, or maybe they do it by some derivative means,

1251
01:45:52,376 --> 01:46:04,828
I don know But I do think that the future I not certain that going to be every single company holding Bitcoin in whole storage through custody I think that you have some using IBIT

1252
01:46:04,968 --> 01:46:07,328
You'll have some using derivatives and a blended model.

1253
01:46:07,328 --> 01:46:22,048
But one way or another, I do think that if we fast forward several decades, at some point, every company, either passively or directly, will have exposure to Bitcoin.

1254
01:46:22,048 --> 01:46:24,568
I think that's a likely future.

1255
01:46:25,448 --> 01:46:26,368
Everyone having it in the store,

1256
01:46:26,628 --> 01:46:28,588
I don't know if everyone's going to hold it themselves,

1257
01:46:28,728 --> 01:46:29,768
but exposure to it,

1258
01:46:29,848 --> 01:46:31,388
I think that's going to be part for the course.

1259
01:46:32,948 --> 01:46:33,968
And Bitcoin yield, right?

1260
01:46:34,088 --> 01:46:35,288
Bitcoin yield is going to be,

1261
01:46:35,388 --> 01:46:36,668
I think what people would be chasing,

1262
01:46:37,808 --> 01:46:38,868
right?

1263
01:46:38,928 --> 01:46:41,288
Which would be a function of the products

1264
01:46:41,288 --> 01:46:45,428
that you're offering to the market, right?

1265
01:46:45,448 --> 01:46:48,088
How much Bitcoin yield can you generate

1266
01:46:48,088 --> 01:46:50,228
compared to everybody else?

1267
01:46:52,048 --> 01:47:14,928
And also, Bitcoin could become a weird differentiator if you are a company that holds, and this sounds like a stupid example, but bear with me. If you're a company that holds Bitcoin directly in cold storage or Bitcoin through a custodian versus in this future model, a company that has Bitcoin and Bitcoin derivatives, does that now become a different differentiator in the market?

1268
01:47:14,928 --> 01:47:22,748
if you are a company that has you know great devices great products and whatnot and everything

1269
01:47:22,748 --> 01:47:26,968
somewhat becomes streamlined because of ai because of bitcoin because of all these different

1270
01:47:26,968 --> 01:47:31,868
these different i like to call them excluding factors that are going to bleed out the market

1271
01:47:31,868 --> 01:47:36,828
that we're going to see over the next several decades does how you manage your bitcoin treasury

1272
01:47:36,828 --> 01:47:42,108
become a differentiating factor like you have the pure play of strategy right because they're just

1273
01:47:42,108 --> 01:47:49,188
doing Bitcoin. Securitize instruments. Yeah. Yeah. Well, essentially. But what I mean by pure

1274
01:47:49,188 --> 01:47:55,308
play is that they are a company that either will eventually hold all their Bitcoin in some form

1275
01:47:55,308 --> 01:48:00,408
of self-custody or all their Bitcoin through self-custody and custodians, right? So they're

1276
01:48:00,408 --> 01:48:03,748
not having any derivatives. They're creating the derivatives that are not holding any derivatives.

1277
01:48:04,508 --> 01:48:07,948
But in this future, if you have companies that are holding the Bitcoin derivatives

1278
01:48:07,948 --> 01:48:11,528
and they have a blended model,

1279
01:48:11,948 --> 01:48:13,608
does that become a differentiating factor?

1280
01:48:15,048 --> 01:48:19,328
Like how many layers of scaling are we going to see

1281
01:48:19,328 --> 01:48:21,448
and layers of differentiation are we going to see

1282
01:48:21,448 --> 01:48:22,988
when everyone has Bitcoin?

1283
01:48:23,908 --> 01:48:25,608
Because I don't think it's going to be possible

1284
01:48:25,608 --> 01:48:29,348
for all companies to be able to have actual physical Bitcoin.

1285
01:48:29,888 --> 01:48:31,908
I think things are going to get so tight

1286
01:48:31,908 --> 01:48:33,428
that they're going to have to go to derivatives.

1287
01:48:34,408 --> 01:48:35,388
And if they go to derivatives,

1288
01:48:36,108 --> 01:48:37,668
are those companies perceived differently?

1289
01:48:37,948 --> 01:48:39,148
is what I'm getting at.

1290
01:48:40,288 --> 01:48:41,588
Yeah, that's an interesting point.

1291
01:48:41,748 --> 01:48:42,028
I agree.

1292
01:48:42,108 --> 01:48:43,408
Well, they're taking more leverage

1293
01:48:43,408 --> 01:48:47,028
or stability or different products.

1294
01:48:47,568 --> 01:48:51,908
It's a fascinating concept.

1295
01:48:52,108 --> 01:48:52,728
I mean, this whole,

1296
01:48:53,528 --> 01:48:55,968
just thinking about Bitcoin yield

1297
01:48:55,968 --> 01:48:58,788
in the year 2050, right?

1298
01:48:58,828 --> 01:48:59,448
It's like, okay,

1299
01:48:59,928 --> 01:49:01,388
the Bitcoin yield might be,

1300
01:49:03,208 --> 01:49:04,628
we probably need to rethink it.

1301
01:49:04,688 --> 01:49:06,128
It needs to be like sat yield.

1302
01:49:06,828 --> 01:49:07,868
At that point, yeah.

1303
01:49:07,948 --> 01:49:15,788
to be sat it's going to be sat yield and it's like okay our sat yield is i don't know a thousand or

1304
01:49:15,788 --> 01:49:19,868
you know 500. like the numbers might be higher because you're just you're doing it in like sats

1305
01:49:19,868 --> 01:49:25,868
not in bitcoin it's like the the fact that it's bitcoin yield right now is crazy because every

1306
01:49:25,868 --> 01:49:32,588
bitcoin is 100 million sats so it's really there should be a lot more man we should we should

1307
01:49:32,588 --> 01:49:39,148
calculate the sat yield and publish that well if it gets to a point where we have that dollar parity

1308
01:49:39,788 --> 01:49:44,268
yeah like imagine we get to a point where it's sat dollar parity right so whatever the dollars

1309
01:49:44,268 --> 01:49:50,268
money bucks 10 million bucks yeah yeah 100 million bucks right then we get what if it gets to a point

1310
01:49:50,268 --> 01:49:58,108
where it's like one set is 10 bucks do you see what i'm saying like decimals well it get it gets

1311
01:49:58,108 --> 01:50:03,388
goofy when you really start to to think about that right it really really does get goofy so

1312
01:50:04,348 --> 01:50:06,428
that that's where that's where the uh

1313
01:50:09,388 --> 01:50:14,428
you know the fact that this asset has never existed before an asset where you can store

1314
01:50:14,428 --> 01:50:19,708
your energy without decay is incredibly important that's why it's so that's why it's so goofy

1315
01:50:19,708 --> 01:50:24,748
it's so hard to conceptualize like you're you're actual like everybody should be fabulous fabulously

1316
01:50:24,748 --> 01:50:33,388
wealthy on the planet because the world is deflating, but you've got a monetary system

1317
01:50:33,388 --> 01:50:39,388
that's inflating net of deflation, right? Like all of the increase in technology for humanity

1318
01:50:39,388 --> 01:50:45,668
should go to society. In theory, it should. It should go to society, right? So like the entire

1319
01:50:45,668 --> 01:50:52,508
technological revolution in the entire 2000s and from where we are at today should have been

1320
01:50:52,508 --> 01:51:01,568
like deflationary for humanity, but we had a fiat system. I mean, granted, you're going to have

1321
01:51:01,568 --> 01:51:06,868
things that are, you know, destroy value, like catastrophes, like hurricanes and, you know,

1322
01:51:06,948 --> 01:51:10,688
wars and stuff. But eventually those things become unprofitable ventures because

1323
01:51:10,688 --> 01:51:19,388
they don't make sense to do anymore. Yeah, this whole thing, Bitcoin is just so crazy

1324
01:51:19,388 --> 01:51:25,928
to conceptualize, especially on a long-term time horizon. It's hard to wrap your head around.

1325
01:51:26,448 --> 01:51:31,148
But I think in that, so I think UBI is probably going to be incredibly important at a future point

1326
01:51:31,148 --> 01:51:35,788
in time. People don't want to talk about that, but I fully agree. UBI is probably going to be

1327
01:51:35,788 --> 01:51:40,908
incredibly important. Now, what is the UBI? How's the UBI structured? Is it Bitcoin? Is it strategy

1328
01:51:40,908 --> 01:51:48,368
products? See, that question right there, that's what I'm getting at. When everything becomes

1329
01:51:48,368 --> 01:51:57,568
Bitcoinized, how does everyone get exposure to it in a way that is perhaps not egalitarian,

1330
01:51:57,948 --> 01:52:04,708
but beneficial to society? If you have all the corporations and a collective group of individuals

1331
01:52:04,708 --> 01:52:09,728
that are on the Bitcoin standard, but then everyone is on UBI on a fiat standard still,

1332
01:52:10,328 --> 01:52:17,428
or some kind of equivalent, it's perpetually going to go up. And it's a UBI, so that's

1333
01:52:17,428 --> 01:52:23,028
technically fine but are they going to be just at the subsistence level they'll have all of the

1334
01:52:23,988 --> 01:52:29,588
stuff that they need but no more do you see do you see what i mean like you can't you can't elevate

1335
01:52:29,588 --> 01:52:37,108
past it with a ubi if everything is on a bitcoin standard if you don't have direct access or at

1336
01:52:37,108 --> 01:52:45,908
least to the passive access to bitcoin yeah like this some of the concepts in my in my brain go to

1337
01:52:45,908 --> 01:52:50,388
okay strategy becomes the u.s government and they are issuing the ubi products right like

1338
01:52:51,028 --> 01:52:57,188
like do these preff products become ubi like are these the ubi products uh well it's it's not that

1339
01:52:57,188 --> 01:53:01,348
i mean if you start to game it out it's not as crazy as you think how many corporations hold

1340
01:53:01,348 --> 01:53:10,148
bonds right now i mean a ton right i saw i saw a number recently what is like 45 i saw that number

1341
01:53:10,148 --> 01:53:17,908
Oh, 75% of them hold, or 75% of the bonds in the US have an interest rate less than five.

1342
01:53:19,708 --> 01:53:21,148
So we have that to consider.

1343
01:53:21,428 --> 01:53:24,068
But in terms of, the reason why I bring it up is this.

1344
01:53:24,128 --> 01:53:27,648
What happens when, even before that point, corporations are holding,

1345
01:53:28,528 --> 01:53:30,568
will corporations start holding strife on their balance sheet?

1346
01:53:31,848 --> 01:53:34,688
How are these products going to scale?

1347
01:53:34,688 --> 01:53:38,248
and that's long before we even get to

1348
01:53:38,248 --> 01:53:40,128
Jeff's crazy point about strategy

1349
01:53:40,128 --> 01:53:41,188
being the government, right?

1350
01:53:41,328 --> 01:53:43,008
So we got a lot of years

1351
01:53:43,008 --> 01:53:45,188
before we get to that

1352
01:53:45,188 --> 01:53:46,548
and there's a lot of stuff that can happen.

1353
01:53:46,708 --> 01:53:47,948
What if strife becomes

1354
01:53:47,948 --> 01:53:51,488
the corporate equivalent of Bitcoin exposure

1355
01:53:51,488 --> 01:53:52,828
from a derivative standpoint?

1356
01:53:53,428 --> 01:53:56,308
And what if they have extra products

1357
01:53:56,308 --> 01:53:57,328
that they're offering, right?

1358
01:53:57,368 --> 01:53:58,608
And so on and so on and so forth.

1359
01:53:59,008 --> 01:54:01,488
Like we use the Trojan horse example.

1360
01:54:02,248 --> 01:54:04,148
Strategy is a Trojan horse in a TradFi, right?

1361
01:54:04,148 --> 01:54:07,648
So what if, like what Jeff is saying, they Trojan horse everything.

1362
01:54:09,048 --> 01:54:11,848
They Trojan horse all of Trash 5, all these different offerings.

1363
01:54:12,168 --> 01:54:14,708
And one way or another, companies have it on their balance sheet.

1364
01:54:15,448 --> 01:54:20,348
And that's before we get to that crazy situation where we're talking about one set is $1.

1365
01:54:20,828 --> 01:54:23,168
And that one set is $10 and so on and so forth.

1366
01:54:24,448 --> 01:54:27,448
Will strife interest rate flip negative?

1367
01:54:31,048 --> 01:54:31,948
Oh, hold up.

1368
01:54:31,948 --> 01:54:32,128
What?

1369
01:54:32,128 --> 01:54:37,728
i want to hear dan's thoughts on this too if he's still right he looks frozen but

1370
01:54:37,728 --> 01:54:43,668
i gotta i gotta run um thoughts on that thoughts on that i really don't think

1371
01:54:43,668 --> 01:54:51,648
yeah later we'll see you yeah this is one of the most fun things for me to think about is

1372
01:54:51,648 --> 01:54:59,028
hyper bitcoinization because at that point i think never sell your bitcoin becomes a meaningless

1373
01:54:59,028 --> 01:55:02,648
statement that people will remember that people said back in the day.

1374
01:55:03,648 --> 01:55:11,528
Because if the Jeff Booth future becomes real and all of humanity is getting wealthier forever

1375
01:55:11,528 --> 01:55:19,248
because the benefits of technology and innovation is making us all wealthier,

1376
01:55:19,668 --> 01:55:28,868
then you only have to spend your Bitcoin at a slower rate than we're getting wealthier

1377
01:55:28,868 --> 01:55:30,888
because of innovation.

1378
01:55:32,268 --> 01:55:33,928
And it doesn't really matter

1379
01:55:33,928 --> 01:55:36,468
that you're spending some sats

1380
01:55:36,468 --> 01:55:39,728
because the sats that you still have

1381
01:55:39,728 --> 01:55:42,648
are getting so fabulously more wealthy.

1382
01:55:43,968 --> 01:55:46,268
It just, it becomes meaningless.

1383
01:55:46,988 --> 01:55:48,888
And so I think the new people

1384
01:55:48,888 --> 01:55:50,788
that are going to be born into that world,

1385
01:55:51,088 --> 01:55:52,688
it's really not going to be that hard

1386
01:55:52,688 --> 01:55:54,108
to get your hands on some sats

1387
01:55:54,108 --> 01:55:56,008
because all of the people

1388
01:55:56,008 --> 01:55:58,308
that will be in existence

1389
01:55:58,308 --> 01:56:02,748
will be so wealthy that it's not going to be like now.

1390
01:56:02,828 --> 01:56:04,588
We're like, oh my God, we have to live like monks

1391
01:56:04,588 --> 01:56:08,428
and stack every little single sat that we can.

1392
01:56:09,148 --> 01:56:10,508
There's going to be so much abundance

1393
01:56:10,508 --> 01:56:12,988
that there's going to be more,

1394
01:56:14,028 --> 01:56:15,988
I want to call it charity because it's not charity.

1395
01:56:16,488 --> 01:56:22,688
It's just an interest in sharing that wealth

1396
01:56:22,688 --> 01:56:23,508
and investing.

1397
01:56:23,988 --> 01:56:25,328
And even if you just get equity

1398
01:56:25,328 --> 01:56:28,168
in what some young person is doing,

1399
01:56:28,308 --> 01:56:31,308
they want to form a new company,

1400
01:56:31,308 --> 01:56:33,428
instead of charging them interest,

1401
01:56:33,428 --> 01:56:34,268
you're just going to be like,

1402
01:56:34,268 --> 01:56:36,668
okay, I'll take equity in the company or whatever.

1403
01:56:36,668 --> 01:56:39,408
And there's going to be more and more investment,

1404
01:56:39,408 --> 01:56:41,828
not less, I think.

1405
01:56:41,828 --> 01:56:43,448
Well, in that world you're talking about

1406
01:56:43,448 --> 01:56:46,188
where spending stats becomes a somewhat trivial distinction.

1407
01:56:46,188 --> 01:56:46,968
Why even spend it?

1408
01:56:46,968 --> 01:56:49,448
Why don't I just borrow against it?

1409
01:56:49,448 --> 01:56:51,268
If you have an asset-

1410
01:56:51,268 --> 01:56:52,148
Borrow-

1411
01:56:52,148 --> 01:56:53,308
Yeah, but borrow what?

1412
01:56:53,308 --> 01:56:54,068
Borrow what?

1413
01:56:54,068 --> 01:56:56,308
If everyone's, if the unit of account is Bitcoin,

1414
01:56:56,308 --> 01:56:57,908
Nobody's going to loan you their Bitcoin.

1415
01:56:58,508 --> 01:56:59,688
Well, this is where I differ.

1416
01:56:59,848 --> 01:57:02,028
I don't think the unit of account is ever going to be Bitcoin.

1417
01:57:02,268 --> 01:57:03,608
I don't think fiat's going away.

1418
01:57:04,808 --> 01:57:08,368
Fiat's always going to be, is always going to exist in some form or another is what I think.

1419
01:57:08,828 --> 01:57:17,588
And the reason why I think that's beneficial to Bitcoin is because in this world we're talking about where you have deflationary pressures and you have a deflationary asset.

1420
01:57:19,048 --> 01:57:21,108
It doesn't make sense to spend it at all.

1421
01:57:21,108 --> 01:57:27,668
it makes sense to borrow against it in perpetuity because you borrow against it today and in five

1422
01:57:27,668 --> 01:57:35,428
years alone you took out you can you now do you see what i'm saying or you just never you you

1423
01:57:36,068 --> 01:57:42,068
or you just hold the strategy instruments or that i mean they're paying you that they're paying you

1424
01:57:42,068 --> 01:57:48,548
in some like medium and you could in theory yeah you can have a you can have a perpetual dividend

1425
01:57:48,548 --> 01:57:54,708
paying instrument from strategy or something to that effect and you're living off of that

1426
01:57:54,708 --> 01:58:02,388
that dividend if you need fiat right which i mean let's let's let's go back to that example that i

1427
01:58:02,388 --> 01:58:06,948
gave earlier right actually hold on i'll just pull it up i won't show it but i'll i'll talk through it

1428
01:58:06,948 --> 01:58:14,228
uh okay 23rd let's just say the year's 2035 all right based on all the math that we did earlier

1429
01:58:14,228 --> 01:58:20,308
the year's 2035 based on all the compound annual growth rate assumptions all the most stuff uh the

1430
01:58:20,308 --> 01:58:27,268
assets held on balance sheet for a strategy would be 3.6 trillion dollars and they might only have

1431
01:58:29,508 --> 01:58:37,748
i don't know 600 billion dollars of preferred stock against it so what is that my god that's yeah

1432
01:58:37,748 --> 01:58:49,988
That's a leverage ratio of what? 17%. What instruments are they going to be offering then?

1433
01:58:51,828 --> 01:58:54,028
A weekly dividend, monthly dividend.

1434
01:58:54,028 --> 01:59:01,468
right like uh it's it's the the the bitcoin compound's so big the amount of instruments

1435
01:59:01,468 --> 01:59:09,548
that you can offer on such a huge capital stack is like massive right like we don't know what they

1436
01:59:09,548 --> 01:59:17,228
are yet but i mean we so in that event weekly and monthly doesn't sound crazy at all yeah but i guess

1437
01:59:17,228 --> 01:59:22,508
what i'm getting at is like yeah you're not gonna have to spend your sats you may just convert them

1438
01:59:22,508 --> 01:59:33,128
when maybe maybe you can buy strategies income instruments with sats and so you keep that

1439
01:59:33,128 --> 01:59:38,148
exposure maybe just in a different format that like can help you live the rest of your life i

1440
01:59:38,148 --> 01:59:45,608
don't know i don't know this is getting in the realm of uh tail this is this is uh tail questions

1441
01:59:45,608 --> 01:59:48,648
these are tail questions well there's a dozen different ways you can play it out that's the

1442
01:59:48,648 --> 01:59:52,848
thing. I mean, it's so crazy. If not more. Right. So.

1443
01:59:55,068 --> 01:59:59,328
Huh. All right. Well, we're, we're at two hours. I think we should probably wrap it.

1444
01:59:59,328 --> 02:00:03,228
Uh, yeah, I gotta, I gotta drop myself. So yeah, before we get any weirder,

1445
02:00:03,348 --> 02:00:09,528
it's going to get weird. Yeah. Uh, okay. Wow. Maybe final thoughts. Uh, I will go ahead and

1446
02:00:09,528 --> 02:00:13,788
start. I think there's a lot of, uh, things to be excited about on the horizon. I mean,

1447
02:00:13,788 --> 02:00:19,488
you think about the size and scale of what msdr has got here there's no company that's even close

1448
02:00:19,488 --> 02:00:25,388
to them and i think it's really helpful to try to zoom out and think about like what it means

1449
02:00:25,388 --> 02:00:30,628
to be an order of magnitude larger than another company and what that offers strategy in in the

1450
02:00:30,628 --> 02:00:36,208
future it's helpful to use some math if you need to go back and re-watch you know what what the

1451
02:00:36,208 --> 02:00:41,508
math that we walked through earlier might be helpful but they're the world of future instruments

1452
02:00:41,508 --> 02:00:44,028
the strategy can provide here is huge.

1453
02:00:44,028 --> 02:00:44,768
It's enormous.

1454
02:00:44,768 --> 02:00:47,688
And the scale is going to be beyond comprehension

1455
02:00:47,988 --> 02:00:49,068
with rationality.

1456
02:00:49,068 --> 02:00:51,828
You're going to be able to rationalize a valuation that's so high

1457
02:00:51,828 --> 02:00:54,988
because the market total addressable market of these instruments is so

1458
02:00:55,388 --> 02:00:56,828
vastly large.

1459
02:00:56,828 --> 02:01:00,448
So try to try to conceptualize large numbers.

1460
02:01:01,188 --> 02:01:04,708
It's hard to do, but yeah, try to use the math to help you.

1461
02:01:05,828 --> 02:01:07,748
Maybe over to you, Soleil.

1462
02:01:07,800 --> 02:01:13,580
Yeah, thinking about your moon math, and I didn't realize those were the moons around Jupiter.

1463
02:01:14,380 --> 02:01:17,840
Because those freaking numbers are wild.

1464
02:01:18,840 --> 02:01:23,500
And the future is good.

1465
02:01:24,620 --> 02:01:25,280
The future is bright.

1466
02:01:26,620 --> 02:01:27,340
Adrian?

1467
02:01:27,340 --> 02:01:40,460
patience vision resilience as long as we have those three and we we keep our wits about us i

1468
02:01:40,460 --> 02:01:47,820
think all of us are going to be just fine absolutely yeah we're going higher it's going

1469
02:01:47,820 --> 02:01:51,980
i mean yeah it's not it's not scoring that's all i got uh because the moon math got me thinking

1470
02:01:51,980 --> 02:01:56,700
right the moon math really got me thinking and that's a that's a silly future in a good way

1471
02:01:57,340 --> 02:02:00,500
if we really sit down and think about it,

1472
02:02:01,080 --> 02:02:02,800
that Bitcoin does what we think it's going to do,

1473
02:02:02,880 --> 02:02:04,940
gets $100 million, right?

1474
02:02:05,740 --> 02:02:10,360
Strategy is a company that has 700,000, 800,000 Bitcoin,

1475
02:02:10,960 --> 02:02:13,400
and they have all these different financial instruments.

1476
02:02:14,640 --> 02:02:18,840
It is not unrealistic to think.

1477
02:02:19,100 --> 02:02:21,400
Well, Jeff, to your UBI example,

1478
02:02:22,480 --> 02:02:24,020
did you get your strategy check this week?

1479
02:02:25,640 --> 02:02:26,120
Yeah.

1480
02:02:27,340 --> 02:02:28,340
Yeah.

1481
02:02:28,340 --> 02:02:41,512
We see what it looks like It the US government The US government is strategy Did you get your strats Your strats Oh yeah Your strat check

1482
02:02:41,512 --> 02:02:48,332
I'm just saying this is weird, but we are a capitalistic society.

1483
02:02:48,532 --> 02:02:51,272
So is it outside the realm of reason that a capitalistic,

1484
02:02:51,692 --> 02:02:58,332
like a capital driven company that lifts and shifts itself into the middle

1485
02:02:58,332 --> 02:03:09,252
of this this financial system has this asset and grows so huge that peop that we use capitalism as

1486
02:03:09,252 --> 02:03:14,232
a form of as a form of subsisted ubi at least partially and people are walking around saying

1487
02:03:14,232 --> 02:03:21,192
did you get your strats stacking strats stacking strats there it is tell me that's tell me that's

1488
02:03:21,192 --> 02:03:28,012
out some blade runner my like stacking strats maybe that's the future maybe that's the future

1489
02:03:28,012 --> 02:03:34,612
2049 you know maybe we're all stacking strats and uh you got a ubi paycheck on a preferred

1490
02:03:34,612 --> 02:03:40,772
instrument from strategy's 25 trillion dollar balance sheet the good news is we're all living

1491
02:03:40,772 --> 02:03:45,952
in the future yeah yeah we're all alive yeah we're all cooking yeah we don't need a time travel to

1492
02:03:45,952 --> 02:03:52,712
do it either. So yeah, it's good. Exactly. All right, guys. That is a wrap. We got 9,990 people.

1493
02:03:52,712 --> 02:03:56,932
Thanks for listening and we will catch you next week. Thanks everybody.