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Come on, party everybody!

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We'll see you next time.

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The Red.

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If time is money and money is time, I have to pay for it.

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Because I'm living in the red.

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Yes, I'm living in the red.

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Well, I'm living in the U.S.A.

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And I ain't got a dime to pay.

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Hey, yeah, hey.

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Yes, I'm living in the red.

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Yes, I'm swinging in the red.

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Yes, I'm loving in the red.

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All right.

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Woo!

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Welcome back.

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True North episode 42.

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One year anniversary of True North happening today.

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We've got a couple people on the screen.

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We've got myself.

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Hello.

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Soleil.

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And we've got Tim Kotzman joining us for the Investment Grade Bitcoin Podcast episode 42.

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We are here to talk about strategy.

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We are here to talk about Bitcoin. We are here to talk about Bitcoin as capital. We're here to talk

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about synthetic labor. We're here to talk about the preferred equities, leverage, capital structures,

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and everything under the sun involving Bitcoin in corporate finance and securitization of Bitcoin.

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So this is your first time here. Welcome. Thanks for joining. And we've done 42 episodes of this

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now, and we are here to talk about everything under the sun relating to Bitcoin. We're getting

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a lot of flack recently from bots and people in the community that are just not interested in this

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strategy anymore. But I think something that's very important to remember is just we are incredibly

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early here with the creation of companies putting Bitcoin on their balance sheet and figuring out

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how to use it as collateral. And that is just an incredibly exciting place to be. And I'm just

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incredibly excited to be here. Like this is capital. I used to work in the capital markets,

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worked in the capital markets for 11 years. And here we are. Bitcoin is being used as capital

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in capital markets. And there's no more exciting place to be in terms of creating shareholder value

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and expanding store of value assets on a balance sheet. So incredibly exciting times.

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We've got Tim Kotzman here. He's been running just back-to-back conferences talking about

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Bitcoin treasuries and what all these other people are doing. So thanks for joining, Tim.

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And then Soleil. Soleil's got 400 plus episodes of the Orange Pill Investor podcast talking about selling covered calls.

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Today was episode 500, as a matter of fact.

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500.

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Booyah.

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Well done. 500 episodes. That is commitment. That is back to back. That is showing up even when the markets are red like this.

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Proof of exhaustion.

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Yeah, exactly. Exactly. Obviously, strategy had a tough day trading down to 280 from 300. Pretty bad day unless you're a covered call seller. So shout out everybody selling covered calls like Saleh and Hermes Lux with his 10 Delta strategy that is getting a ton of traction.

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So yeah, exciting times.

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Maybe I'll start with Tim, just kick us off with some not financial advice.

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And then maybe we'll talk about just an update on what you've been up to and how those things

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are going before we get into the just pure numbers side of this episode today.

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Yeah, ladies and gentlemen, what you're about to hear may be amazing, but it's not financial

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advice.

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It's for informational and educational purposes only.

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NFA. That's right. You've got it down. We're going to talk about analysis, right? This is,

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we call it the investment grade Bitcoin podcast because we are taking investment grade perspectives

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on risk, strategy, corporate structure, thinking about the dynamics of all of these things together,

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the interplay of, you know, securities in the market that haven't existed before,

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these different debt structures, et cetera. So it's very complicated. And myself and Tim have a

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view behind the scenes of what is actually happening here within the marketplace. So

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wanted to give that unique perspective of what's going on. So Tim, let's start with you. I know

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you've just interviewed like, I don't know, 20 plus people yesterday. And I mean, what are you

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seeing from across the land in terms of this concept of being early, right? I know you've

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made a couple of posts about this. Can you give us a sense of how early we are and what we are

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seeing in the market? Yeah. I mean, today I was just walking around and the clip that went around

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a little bit ago of actually the very, I think it was the very first True North episode where it's

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just literally a collage of everyone saying, we're early, we're early, we're early, right?

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And like very, I don't know if it's ironic, but it's some word in there where special might be a

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a good word that like dylan was on that episode of true north like that's how early we were back

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then we're still early the takeaways from yesterday in particular you know i don't follow

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all the numbers super closely the way that some of us do but when dylan said they're at like 0.7

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percent leverage right now i was like wow that's like zero zero um and the fact that you know i

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mean sailor famously back in the the tech days the early 2000s you know he was down 99 or 98

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or 99.8 whatever it was um and and recovered from it and some of these stocks they're levered

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long amplified Bitcoin. It's going to be drastic, especially when you add the sentiment into it.

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So I think that's where we are. But like the whole, they're going to explode and they're

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going to, they're over leveraged. Like a lot of these don't have any leverage. And so, you know,

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yeah, Bitcoin itself is trading almost where it was, you know, New Year's Eve of 2024. So

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So I just think we're insanely early.

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Fred Kruger brought up, you know, we're at 4% interest rates.

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You know, very shortly, we could be in the threes and then the twos.

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And these preferreds are going to look a lot more attractive at 2% because he made, I think, the really just realistic point that when you're getting 4%,

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we you know i think ben brought this up on the hurdle rate like we're used to um zero percent

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so you're getting four percent you're just like yeah that's pretty good but when it starts sliding

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down to three two maybe even one ten's gonna look like incredible especially to those that

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um start to really understand and appreciate bitcoin so i think you know all of the lessons

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of the past five years.

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And then if you just take a common stock

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and a preferred stock and you crank that flywheel up,

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I think it's going to be interesting to see what happens,

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especially over the next year.

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Yeah, 0.7% is wild because, I mean,

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I thought I was being bearish

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when I only borrowed half the equity against my house.

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You know, like I'm trying to do the triple maxi thing.

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But yeah, 0.7% is a lot of room to grow there.

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yeah and there's there's been a lot of chatter and communication within the market people still

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don't understand like the how under levered these bitcoin treasury companies are a lot of people are

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saying oh you know these companies got to die somebody's got to die before bitcoin goes higher

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somebody's got to be put on the cross as sacrifice for the bitcoin treasury companies

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and honestly the interest rate environment is actually showing cracks in the traditional

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financial market and you're seeing actual bankruptcies from high risk leveraged companies.

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And that's where we're seeing the cracks like that. There needs to be cracks in that marketplace

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before anything goes higher. There needs to be a purpose for the money printing to continue forward.

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There needs to be a systemic problem. And it looks like it's in potentially the traditional

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financial credit market before it's any of the Bitcoin or crypto back credit markets. Because

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like you said, Tim, most of these are just equity balance sheets are very low leverage,

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under leveraged balance sheets at the moment. And we're going to get into that and the type

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of leverage and we'll talk about that. We'll get in deep. But a couple other pieces of information

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that I think are interesting. So Asia Pacific exchanges crack down on digital asset treasury

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listings. So Hong Kong has challenged or blocked at least five companies trying to pivot into

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digital asset treasuries. I think that's just in the last week, leaning on rules that bar cash

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companies with large liquid holdings. So no digital asset treasuries have been greenlit in

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Hong Kong. India, the India, I think, exchange rejected Jet King's application to list newly

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issued shares after the company disclosed 60% of the proceeds would go to Bitcoin. So again,

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we're seeing like and then they fight you actions in these different exchange environments across

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the globe and then uh australia the australia exchange forbids listed companies from keeping

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over half of their assets in cash or cash like holdings rendering pure digital asset treasuries

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virtually impossible oh damn which like how insane is that it's crazy like you can run a company but

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you can't hold you can't hold cash you can't hold 50 uh you can't keep over half of your assets we're

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early.

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I'm just going to keep saying it.

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You can't store your value.

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That's like saying

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you can't

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have more than 50% of your

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savings account in cash.

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Like the value of your assets.

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Take your entire investment portfolio

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or your assets

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and you can't have more than 50%

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of that in cash. That just seems crazy.

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Especially with

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the vol. I mean, Bitcoin's like a stable coin.

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What's wrong with that?

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I mean, worst case scenario, right?

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100,000, 120,000, that's pretty good.

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Yeah.

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Yeah, so it's just interesting.

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So there's just still continuous roadblocks in different markets that are looking to start

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digital asset treasuries and operate within the capital markets in different ways.

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So I think it's good to keep an eye on what's happening there.

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Again, there's a few other digital asset treasuries that are issuing shares at a premium, like Bitmine, I think issued shares at a $70 a share when the stock was trading at about $60 a share.

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However, there were two free warrants that were included with that share issuance.

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so it was like they sold it at a premium of the stock value but it was at a discount if you factor

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in the warrants that were attached to it so there's just some tricky things and interesting

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dynamics happening in the digital asset treasury market i think they're interesting to follow along

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what's going on there but okay so that's that marketplace digital asset treasury companies

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Obviously, we've seen the treasury companies in the US and other markets just get absolutely hammered on top of strategy, strategy being a leader, along with all of the other digital asset treasury companies.

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But again, as you pointed out earlier, Tim, these companies aren't incredibly levered.

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And the type of leverage that they have is really interesting.

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And what we're here to talk about is strategies, perpetual preferred equity, and walk through some backtesting of that model.

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But first, it would not be a True North episode without going over leverage metrics.

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And this will get us into some of the math.

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Put you guys back on the screen.

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I need some water.

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OK, so got a few new columns here today.

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So 10-22-25, Bitcoin held, 640,418 Bitcoin.

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Bitcoin price, when I put this together, was 108,410.

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MSTR price, 280.

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So the assets held on balance sheet, $69 billion of assets, convertible debt, $8.2 billion,

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notional preferred stock, $6.6 billion.

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Your net capital less the debt is $61 billion.

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The annual dividend liability is roughly around $643 million.

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So this is important to realize here.

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Strategy based on the capital that they have on their balance sheet, they can cover 108

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years of their dividend liability based on the capital that they have.

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This is financial strength, right?

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This is like, we can cover 108 years of our dividend liability.

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Like we are not levered, right?

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Like, and I think that is even, yeah, that's just taking the assets on the balance sheet.

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So then when you look at the liability asset ratio, this is leverage.

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This is total leverage, thinking convertible debt and notional preferred equity, which is what strategy is calling amplification now.

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This is a 21%.

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So this is like total liability or leverage on the balance sheet.

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Their debt coverage multiple or the BTC rating of the entire balance sheet is 4.7.

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So they have 4.7 times the amount of assets over and above the notional value of the liabilities on the balance sheet.

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So the price of Bitcoin, we need to go down to $23,221 for the assets on the balance sheet to be worth less than the notional liabilities outstanding.

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About a 79% decline.

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um this column here shows what the metrics would be if the three billion dollars of the equity was

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of the convertible debt that's trading as equity would be equitized and how that how those numbers

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would filter through obviously the leverage ratios would come down now i created this new column here

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to showcase what a percentage drop on the balance sheet would do to the balance sheet and how that

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would change the metrics. And so looking at a 75% drop in the price of Bitcoin, so the price of

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Bitcoin going from 108,000 down to $27,103, strategy would still have 27 years of dividend coverage

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with a 75% drop in the Bitcoin price. And that is, again, financial strength. I mean,

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the mstr price the equity would be completely nuked i've got the price in there is like i don't

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know because the equity equity would be completely nuked but when you're thinking about the the risk

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to these instruments that they hold on the balance sheet like this these these instruments can handle

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significant shocks with the price of bitcoin which makes them pretty fascinating i mean even if you

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just look today, right? MSTR got nuked. Bitcoin went down quite a bit. And what did STRC drop?

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0.53%. That's fascinating. Just think about how long 27 years is. I don't know if Dylan

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Leclerc is even 27 years old. I don't think he is. It's a long time. It's just a long time, right?

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Yeah, right. It's almost three decades. And that's with a 75% drop. And look, you go 50,

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and then you're looking at 54 years of coverage. You're like,

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I can't even get a 50-year loan on a house. That's just...

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Yet.

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Yeah.

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Yeah, exactly. Okay. So, oh, where'd it go? There we go.

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Okay. So what else do I want to talk about here? So that puts us into looking at some of the

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preferreds and Tim, we'll get into your math here because I think that's interesting as well.

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And we're going to do some math on the fly as if price. Okay. So this is the current price at

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close for the strategy perpetual preferreds. So you got STRF 110, STRC 98, STRK 88, STRD 79,

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This is how they're stacked up in the capital stack, right?

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STRF all the way down to STRD.

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This is the dividend paid in dollars.

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Here's the effective yield, 9.08% for STRF down to 12.6% for STRD.

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And which is pretty fascinating.

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The strike effective yield is higher than strife.

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And there's a call option.

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Yeah, that's wild.

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On the underlying equity.

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That's crazy.

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this seems undervalued relative to some of the other ones yeah and in the heart the weird part

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about having that call option is when i tried to do some analysis on what that call option should

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be worth like how much should that bump the price of strk but the farthest you can go out is like a

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couple of years to find that deep out of the money call and look at its value 10 to 1 conversion so

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you'd like take 10% of that.

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But that's misleading because this is perpetual.

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So the call option is forever.

219
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And call options get more expensive the farther out you go.

220
00:18:47,280 --> 00:18:50,920
So it's kind of impossible to figure out

221
00:18:50,920 --> 00:18:56,640
how much bonus premium STRK should actually be trading at.

222
00:18:59,180 --> 00:18:59,740
Right.

223
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Really tricky.

224
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Super tricky.

225
00:19:02,760 --> 00:19:03,460
Because it's infinite.

226
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It's an infinite call option.

227
00:19:04,480 --> 00:19:07,660
Yeah, what's the value of an infinite column option that never expires?

228
00:19:07,740 --> 00:19:10,620
Like it can never expire worthless because it never expires.

229
00:19:11,080 --> 00:19:13,260
It's weird to think about.

230
00:19:14,560 --> 00:19:14,820
Yeah.

231
00:19:16,200 --> 00:19:19,080
Okay, so we got some weird nuances going on with effective yield.

232
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But let's look at spreads over the 10-year U.S. Treasury.

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And this is what I wanted to do some on-the-fly math with, just based on Tim's comments.

234
00:19:29,480 --> 00:19:31,600
So the spread over the U.S. 10-year Treasury.

235
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So the 10-year US Treasury is 3.95%. So STRF is trading at a 5.14 spread. So 514 basis points

236
00:19:48,660 --> 00:19:58,020
over and above. Is it 5,000 basis points? Anyway, 5.14% over and above the 10-year US Treasury.

237
00:19:58,020 --> 00:20:05,120
so with it paying what is that 9.8 percent significant spread here so what i wanted to do

238
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is i wanted to take these numbers uh paste those values and say okay well what if we kept the spread

239
00:20:13,320 --> 00:20:23,000
the same right and we dropped interest rates uh 75 basis points or 100 basis points yeah yep

240
00:20:23,000 --> 00:20:33,020
so we go this minus one. Oh, by the way, the fact that you're doing public math, I mean,

241
00:20:33,020 --> 00:20:37,220
a lot of people have publicly said they will not do public math. So,

242
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oh, I love this. This is, this is good stuff. Okay. So, um, what would the price be if you

243
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kept the spread the same? And, um, if you kept the spread the same and us 10 year treasuries go

244
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down a hundred basis points.

245
00:20:55,620 --> 00:20:57,180
So how do we back into that?

246
00:20:57,260 --> 00:21:01,440
So now you got to go, okay, well, the yield has got to be this plus this.

247
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So the effective yield is going to be 8.8%.

248
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And I've got to fix this.

249
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Hold on.

250
00:21:14,560 --> 00:21:15,000
Okay.

251
00:21:15,040 --> 00:21:16,400
So that's got to be the effective yield.

252
00:21:17,440 --> 00:21:20,640
So to back into that, that's...

253
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This 8.8%.

254
00:21:23,920 --> 00:21:29,540
I think we got to divide it by that.

255
00:21:31,480 --> 00:21:31,840
Wait.

256
00:21:34,580 --> 00:21:35,820
Go back into that.

257
00:21:36,640 --> 00:21:37,500
Oh, now I'm frozen.

258
00:21:38,040 --> 00:21:38,220
Okay.

259
00:21:38,380 --> 00:21:38,880
8%.

260
00:21:38,880 --> 00:21:41,520
$10 is 8% of what?

261
00:21:47,100 --> 00:21:47,580
123.

262
00:21:47,860 --> 00:21:48,280
There it is.

263
00:21:49,280 --> 00:21:49,460
Boom.

264
00:21:49,460 --> 00:22:02,200
10. There we go. There we go. Okay. So if the spreads stay the same,

265
00:22:03,580 --> 00:22:11,540
okay. And interest rates drop a hundred basis points, the price of STRF should go from 110 to

266
00:22:11,540 --> 00:22:29,360
123. So what is that on a percentage basis? That's a 12% increase. So significant upside

267
00:22:29,360 --> 00:22:35,740
in the principal appreciation of these fixed income instruments, right? So this is appreciation

268
00:22:35,740 --> 00:22:46,980
as if price effective yield.

269
00:22:49,980 --> 00:22:50,500
Right.

270
00:22:50,640 --> 00:22:51,820
So Tim, to your point earlier,

271
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if interest rates come down 100 basis points,

272
00:22:57,980 --> 00:23:00,120
that could be incredibly bullish.

273
00:23:00,300 --> 00:23:01,780
If spreads stayed the same

274
00:23:01,780 --> 00:23:04,960
for all of the existing strategy preferred instruments,

275
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Their cost of capital is going to go down from an average of, what is this, about 9.6% to probably something about 8.6%, which if you're borrowing at 8% to buy Bitcoin, that looks great.

276
00:23:23,300 --> 00:23:24,000
That's a great trade.

277
00:23:24,940 --> 00:23:25,800
That's really great.

278
00:23:25,900 --> 00:23:26,800
Oh, I think we lost him.

279
00:23:27,520 --> 00:23:28,360
We lost him.

280
00:23:28,620 --> 00:23:29,060
That's okay.

281
00:23:30,100 --> 00:23:33,440
Anyway, I think that's really interesting.

282
00:23:33,440 --> 00:23:34,260
That's a great trade.

283
00:23:34,960 --> 00:23:41,320
Okay, now let's back into dividend payable.

284
00:23:41,440 --> 00:23:46,060
So total dividend payable for the four instruments outstanding is $642 million a year.

285
00:23:46,960 --> 00:23:50,600
So you ready to get in some math about risk?

286
00:23:50,800 --> 00:23:52,660
Thinking about what is the risk of these instruments?

287
00:23:52,760 --> 00:23:53,120
Oh, yes.

288
00:23:54,240 --> 00:23:56,260
Okay, cool.

289
00:23:56,800 --> 00:24:01,840
All right, so I created this tab, which we'll try to zoom in and make this as clear as possible.

290
00:24:01,840 --> 00:24:08,000
okay so what i wanted to do here is show

291
00:24:08,000 --> 00:24:15,900
this you know i came up with this concept i was thinking about this last night really um

292
00:24:15,900 --> 00:24:19,680
i'd be curious to get your take on this because i got a lot of flack for it

293
00:24:19,680 --> 00:24:28,600
um the perpetual preferred instruments reflect synthetic labor

294
00:24:28,600 --> 00:24:37,380
okay now let me tell you how i got here so when you buy a piece of real estate

295
00:24:37,380 --> 00:24:48,700
okay that real estate doesn't if you want to earn yield on it you need labor like somebody needs to

296
00:24:48,700 --> 00:24:56,580
work right you need you need to pay for labor in order to make that piece of real estate a

297
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a yield producing asset.

298
00:25:00,240 --> 00:25:01,240
Okay.

299
00:25:02,120 --> 00:25:03,120
Right.

300
00:25:03,820 --> 00:25:06,700
Now, if you're paying and if you don't pay somebody,

301
00:25:06,700 --> 00:25:21,137
it like just you doing it right If it just you you own a piece of real estate and you want to earn a yield on it it like okay well you got to take care of it You got to go find a tenant for it You got to go make a tenant you know agreement so you can get a tenant in the door and you

302
00:25:21,137 --> 00:25:25,377
got to deal with it. Right. And that doesn't scale. You have to hire people if you want to

303
00:25:25,377 --> 00:25:30,057
scale it up as well. That doesn't scale. Exactly. So in that scenario,

304
00:25:30,057 --> 00:25:34,997
as you just owning a piece of real estate,

305
00:25:35,337 --> 00:25:38,477
you get the margin of your labor

306
00:25:38,477 --> 00:25:39,597
because you're the one working

307
00:25:39,597 --> 00:25:42,317
and you also get the yield.

308
00:25:43,457 --> 00:25:44,377
Okay, so there's two pieces.

309
00:25:46,517 --> 00:25:49,837
Like you're working for your margin

310
00:25:49,837 --> 00:25:50,757
and you also get the yield.

311
00:25:50,757 --> 00:25:52,537
You turn that into a,

312
00:25:52,637 --> 00:25:54,357
you monetize that specific asset.

313
00:25:54,977 --> 00:25:57,977
Now with the strategy perpetual preferreds,

314
00:25:58,077 --> 00:25:59,597
I think one thing that,

315
00:26:00,057 --> 00:26:03,797
That's really interesting. And I think you can see it with the math here.

316
00:26:04,757 --> 00:26:11,617
Every unit that they sell of the perpetual preferred is earning income over time.

317
00:26:12,377 --> 00:26:19,937
It is effectively labor. Like it is, it is a worker that is monetizing the Bitcoin.

318
00:26:19,937 --> 00:26:24,837
So it's the same way, like what, when you buy a dividend producing asset,

319
00:26:24,837 --> 00:26:34,697
When you hold a portfolio of dividend producing assets, you're holding the labor, like the productivity of that company.

320
00:26:34,697 --> 00:26:43,137
You're holding the labor of that company and the productivity monetizing whatever they're doing.

321
00:26:44,097 --> 00:26:48,997
Like when you actually hold a yield producing asset, like you're holding labor.

322
00:26:49,477 --> 00:26:52,217
You're holding somebody else's labor.

323
00:26:52,217 --> 00:27:18,057
Now with the strategy instruments, it's the same concept. You're holding the labor. Those assets are being produced because the company is monetizing this asset class. You take the same concept of real estate. You've got digital real estate and you're now monetizing it, monetizing a yield.

324
00:27:18,057 --> 00:27:24,017
but there's actual strategy has to figure out how to do that. They got to figure out how to pay you.

325
00:27:24,977 --> 00:27:32,017
That's either sell pieces of the Bitcoin or operating business or utilize ATM or something

326
00:27:32,017 --> 00:27:38,177
like that. But that's labor. So you kind of think of this as like every unit that you own,

327
00:27:38,637 --> 00:27:46,777
you own, uh, if you own 10 units, you're owning 10 labor units. Each one of the products

328
00:27:46,777 --> 00:27:50,837
is a different form of labor, right?

329
00:27:50,917 --> 00:27:54,697
STRF is like, I guess you could think of like white collar,

330
00:27:55,217 --> 00:27:57,337
like low risk labor.

331
00:27:57,597 --> 00:28:00,677
And you could think of STRD as like blue collar,

332
00:28:00,897 --> 00:28:02,437
maybe higher risk labor.

333
00:28:03,137 --> 00:28:05,657
You kind of think of that like spectrum there.

334
00:28:07,137 --> 00:28:09,237
And from strategy side,

335
00:28:09,737 --> 00:28:12,357
every one of these instruments that they sell

336
00:28:12,357 --> 00:28:20,657
is monetizing the labor. And I'll walk you through the math here, right? Okay. So let's just,

337
00:28:20,657 --> 00:28:26,897
let's do it on a single, um, a single equity sold at a hundred dollars.

338
00:28:27,677 --> 00:28:33,077
Let's just say the interest rate is 10 and everything here is on like one, uh,

339
00:28:33,237 --> 00:28:40,097
one unit sold. I want to focus on like the marginal unit and then we can extrapolate this

340
00:28:40,097 --> 00:28:46,457
into a portfolio, right? Like I want to focus on the marginal unit sold. So you got a hundred

341
00:28:46,457 --> 00:28:52,917
dollars capital raised interest rate of 10 annual interest cost is $10. We follow, right? $10 part

342
00:28:52,917 --> 00:29:01,177
of a hundred. Your monthly interest cost is a dollar. It's 80 cents. So your, if you make an

343
00:29:01,177 --> 00:29:06,957
assumption of annual compound, annual growth rate assumption of 21%, which we can play with this,

344
00:29:06,957 --> 00:29:12,117
anything in yellow here, we can toggle and play with it. So your asset, your monthly compound

345
00:29:12,117 --> 00:29:19,457
annual growth rate assumption is 1.75%. So what I built here is a little bit of a simulation model.

346
00:29:19,617 --> 00:29:23,737
This is one simulation model of like eight that we're going to run through. So I hope you're,

347
00:29:23,737 --> 00:29:32,677
hope you're ready. So in year one, month zero, your BTC value is a hundred. Your BTC value post

348
00:29:32,677 --> 00:29:42,937
compound annual growth rate, which is 100 times 1.75 is $102. Here, Tim, we're doing math on the

349
00:29:42,937 --> 00:29:50,577
fly, which is probably just giving you anxiety the whole time. Okay. So your BTC gain in this month

350
00:29:50,577 --> 00:29:55,957
is $1.75. This is again, assuming everything's constant and flat. Your annual compound annual

351
00:29:55,957 --> 00:30:02,577
growth rate is constant and flat. Monthly interest paid on month zero is $0. So your net Bitcoin is

352
00:30:02,577 --> 00:30:10,837
$101.75. So your BTC income in that month is $1.80. Here, let's just extrapolate this too.

353
00:30:12,797 --> 00:30:18,697
So in month one, where you have to pay a dividend, your BTC value is $101.75, right? You're taking

354
00:30:18,697 --> 00:30:24,057
it from the prior month, the end of the prior month. The BTC value post compound annual growth

355
00:30:24,057 --> 00:30:37,537
rate is $103.53. So it's $101.75 times $1.0175. BTC gain that month is $1.78. The interest paid is

356
00:30:37,537 --> 00:30:48,657
$0.80. In this model, I have assumed you sell the Bitcoin to pay the interest. Okay? Very clear.

357
00:30:48,657 --> 00:30:54,097
In this model, you sell the Bitcoin to pay the interest. You don't even consider ATM. You don't

358
00:30:54,097 --> 00:30:58,957
even consider a operating business. You just consider it. You consider the concept of just

359
00:30:58,957 --> 00:31:05,057
selling the Bitcoin to pay the interest. Now you sell the Bitcoin to pay the interest. You still

360
00:31:05,057 --> 00:31:10,177
have $102 and 73 cents a Bitcoin. So the Bitcoin income you earned that month is 98 cents.

361
00:31:10,977 --> 00:31:15,777
Now this compounds, right? So you take the, what you took at one note to 73, you put it back in

362
00:31:15,777 --> 00:31:22,957
month too. You've got 102.73 to start. That compounds at 1.75. You get it 104.53. BTC gain

363
00:31:22,957 --> 00:31:31,817
$1.80. Interest paid $0.80. You sell the Bitcoin. You end up with $103.73. Your Bitcoin income that

364
00:31:31,817 --> 00:31:37,437
month is $1. And you could start to see this, right? You start to see the compounding in real

365
00:31:37,437 --> 00:31:46,577
time. You can see the arbitrage of the CAGR. That's the point of showing this. You can see

366
00:31:46,577 --> 00:31:55,877
the arbitrage of the CAGR. This business model works if you sold the Bitcoin, let alone having

367
00:31:55,877 --> 00:32:01,237
a big capital stack and having the ability to monetize the capital stack with utilizing ATM,

368
00:32:01,437 --> 00:32:06,757
taking on different debt, raising capital in different places, et cetera. This works even

369
00:32:06,757 --> 00:32:11,777
if you just sold the Bitcoin. Okay. So you can see how this like rolls down through here.

370
00:32:12,777 --> 00:32:18,177
And I think strategy tried to show this as BTC income. And it really, I think you can start to

371
00:32:18,177 --> 00:32:24,937
think of it like that because, um, and what I did over here on the right-hand side is look at what,

372
00:32:24,937 --> 00:32:34,977
so every instrument that's sold is making income every month because it's, it's income is the

373
00:32:34,977 --> 00:32:42,997
arb of the CAGR. 21% over 10%. Now, what do we know about Bitcoin? Super volatile, right? I'm

374
00:32:42,997 --> 00:32:46,637
sure people are in the chat just kind of roasting me on volatility because there's a lot of different

375
00:32:46,637 --> 00:32:54,077
assumptions being made here. But in this scenario, which I think we've got a modest compound annual

376
00:32:54,077 --> 00:33:05,077
growth rate in this scenario in year one that single instrument sold would make 15 of income

377
00:33:05,077 --> 00:33:11,977
in year one if everything is constant and you just sold the bitcoin to pay the dividend obligation

378
00:33:11,977 --> 00:33:20,457
but you see that that compounds over time because this these are compound annual growth rates so

379
00:33:20,457 --> 00:33:25,157
that that initial CAGR like the biggest risk in selling any of these instruments is in year one

380
00:33:25,157 --> 00:33:32,197
it's what is the performance when you sell the instrument because if you sell the instrument

381
00:33:32,197 --> 00:33:38,937
it goes down immediately like there's more risk in the instrument but if you sell the instrument

382
00:33:38,937 --> 00:33:46,017
and it's going up like it it's compounding right it like compounds on top of itself so then it's

383
00:33:46,017 --> 00:33:52,097
going down. Like your risk is going down and each one of the instruments sold is earning money. So

384
00:33:52,097 --> 00:33:56,717
this is why, this is why I was saying like every single one of these instruments, if you think

385
00:33:56,717 --> 00:34:03,697
about it on the margin is making income for strategy. Yeah. Like this is the, this is the

386
00:34:03,697 --> 00:34:11,217
cash flowing business right here. Somebody said they need to be producing income. This is like,

387
00:34:11,217 --> 00:34:16,597
They just recognize 100% of the income on day one, and they earn it out over time.

388
00:34:17,737 --> 00:34:24,417
Yeah, this is the almost identical calculation that you use if you want to know if you can retire on your stack.

389
00:34:25,497 --> 00:34:31,137
It's just, are my expenses less than Bitcoin's CAGR?

390
00:34:31,857 --> 00:34:35,977
And if it is, then you can retire, and you just keep getting richer forever.

391
00:34:36,597 --> 00:34:38,277
And if it's not, then you have to keep stacking.

392
00:34:39,017 --> 00:34:41,377
But let me see if I understand this correctly.

393
00:34:42,297 --> 00:34:44,277
I'll try to do the ADIQ version.

394
00:34:45,077 --> 00:34:49,657
So you're a business owner, and let's say you've got to hire people at $20 an hour.

395
00:34:50,177 --> 00:34:55,697
If they can generate $25 an hour of income, then you hire as many as you possibly can.

396
00:34:56,697 --> 00:34:59,917
And if they're not making $20 an hour, you don't hire any.

397
00:35:00,717 --> 00:35:03,397
But yeah, that seems reasonable to me.

398
00:35:04,277 --> 00:35:05,557
Yeah, you hit the nail on the head.

399
00:35:05,557 --> 00:35:07,456
This is business 101.

400
00:35:08,277 --> 00:35:18,357
Right? Like, except strategies, labor is digital. You have digital capital, you have digital labor.

401
00:35:19,557 --> 00:35:26,837
Like, all they have to do is pay the dividend. They got to figure out how to do it. But they

402
00:35:26,837 --> 00:35:32,137
can do it at scale. Like you're so when you own the perpetual preferred equities, you're like

403
00:35:32,137 --> 00:35:39,817
you're owning a fleet of labor like digital labor yeah and this model is what what leveraged

404
00:35:39,817 --> 00:35:44,517
bitcoiners have been doing for years it's you just you borrow against it and you can just literally

405
00:35:44,517 --> 00:35:50,797
peel off a few sats to pay the monthly interest and then you know maybe it goes down in a bear

406
00:35:50,797 --> 00:35:57,697
market but then when it goes up 5x in the bull then you know you're leveraged to the upside and

407
00:35:57,697 --> 00:35:58,017
You're fine.

408
00:35:59,456 --> 00:35:59,677
Bingo.

409
00:36:00,257 --> 00:36:00,537
Okay.

410
00:36:00,617 --> 00:36:02,317
So let's get crazy here, right?

411
00:36:02,397 --> 00:36:03,517
Like let's just do 15%.

412
00:36:04,197 --> 00:36:07,617
Your CAGR assumption goes to 15%.

413
00:36:07,617 --> 00:36:09,477
Like this is still a great trade.

414
00:36:10,757 --> 00:36:15,657
You deployed a laborer for $100.

415
00:36:16,237 --> 00:36:23,157
You got $100 in the door and you make $7 in year one, $7 in year two, $8 in year three.

416
00:36:23,937 --> 00:36:25,277
And like, what did you put at risk?

417
00:36:27,697 --> 00:36:33,817
right like this is again assuming you just sold the bitcoin like this is this this is not even

418
00:36:33,817 --> 00:36:38,077
assuming you have access to an atm this is like at the margin right if you just sold the bitcoin

419
00:36:38,077 --> 00:36:47,877
to do this like this has this model works without even without an atm so like conceptually anybody

420
00:36:47,877 --> 00:36:54,857
can run this you could go like any public company or actually oh anybody yeah i was trying to convince

421
00:36:54,857 --> 00:36:59,817
my grandpa like hey grandpa can you give me a hundred thousand dollars and i'll go buy a bitcoin

422
00:36:59,817 --> 00:37:07,757
and i'll just give you you know ten thousand dollars a year like anybody could do it it's

423
00:37:07,757 --> 00:37:12,997
like all right well i as long as i feel like i can manage that risk and i'm like uh what is the

424
00:37:12,997 --> 00:37:18,877
downside you know anybody can run this methodology okay you're ready to take this to level two i've

425
00:37:18,877 --> 00:37:27,777
got level two and level three here. Can I jump in with a little journey about actual labor?

426
00:37:28,777 --> 00:37:37,757
I mean, I'm sure we've all, or we know people who have worked lots of different labor sort of jobs.

427
00:37:37,757 --> 00:37:43,537
When I started out, I was working at Kmart stocking the shelves with oil before I got into

428
00:37:43,537 --> 00:37:50,837
actual oil and I was making $5.15 an hour. And I'm sure they loved that. Right. But then I went

429
00:37:50,837 --> 00:37:56,537
to Ace Hardware and I made $5.25 an hour. And I was literally putting together, assembling

430
00:37:56,537 --> 00:38:04,577
wheel, wheelbarrows. I still can't say that word very well, but you know, and you can hear stories

431
00:38:04,577 --> 00:38:10,177
in any diner across the country, probably across the world about how hard it is to find good,

432
00:38:10,177 --> 00:38:18,377
good people and things of that nature. And then, you know, I went bartending and working in

433
00:38:18,377 --> 00:38:23,237
restaurants. And when you're managing a restaurant and a bunch of people call off, it's like, what

434
00:38:23,237 --> 00:38:27,456
are you going to do? Go through the phone book and call random people and try to get them to come

435
00:38:27,456 --> 00:38:32,717
in? Like, it doesn't actually work that way. It can be super stressful. I mean, there were times

436
00:38:32,717 --> 00:38:37,157
when I was bartending seven nights a week because people were just like, oh, you can have my shift.

437
00:38:37,157 --> 00:38:42,797
you can have my shift. Really good people are hard to find. So then I was like, all right,

438
00:38:42,857 --> 00:38:50,197
let's do something to try to progress up the career ladder. And so I was flipping real estate.

439
00:38:50,337 --> 00:38:54,057
Well, flipping real estate sounds really fun, especially when you watch it on HGTV.

440
00:38:54,717 --> 00:39:06,057
The reality is the first property I bought, I bought for $25,000. And I had friends that were

441
00:39:06,057 --> 00:39:11,357
contractors. I said, great, you guys do the work and I'll pay you. And a week went by and two weeks

442
00:39:11,357 --> 00:39:15,017
went by and three weeks went by and they didn't show up because they were still on some other job.

443
00:39:15,537 --> 00:39:19,456
And I was in another town trying to launch another business, drove two hours back,

444
00:39:19,937 --> 00:39:25,017
ripped up the carpet with my bare hands. I was so upset and just like started,

445
00:39:25,017 --> 00:39:30,697
at least started the process. Ended up making money on my first flip. I was all excited that

446
00:39:30,697 --> 00:39:37,077
the market was turning, the same contractors at me as the GC, I should have fired them,

447
00:39:37,217 --> 00:39:42,977
hired someone else because I didn't. And I just waited a month. I lost money on a project that I

448
00:39:42,977 --> 00:39:48,937
was partnered on with my uncle instead of making money. And we're talking losing 10, 20, 30, 40,

449
00:39:49,057 --> 00:39:55,217
$50,000. And this is almost 20 years ago. I mean, it was a significant amount of money for someone

450
00:39:55,217 --> 00:40:03,157
in their 20s. And so all of this just to illustrate like the digital version of all this,

451
00:40:03,197 --> 00:40:10,197
and we've heard Sailor and everyone else, you know, tell these stories and analogies for a while

452
00:40:10,197 --> 00:40:17,417
now, but I just can't, I don't think it can be overstated that physical labor is just like,

453
00:40:18,557 --> 00:40:21,757
I don't know, at a certain point, you can't even feel good about it. Like you're giving someone a

454
00:40:21,757 --> 00:40:26,917
job, but it's like, what if we can, the more things we can make digital, um, and the more

455
00:40:26,917 --> 00:40:32,097
opportunities we can give people, I think the better. Yeah. Bitcoin doesn't take days off.

456
00:40:32,877 --> 00:40:42,057
No call outs. Yeah. And you're, you're taking this proof of work and now you're, you know,

457
00:40:42,057 --> 00:40:48,737
throwing synthetic labor at it to be able to monetize it into a yield, like without like

458
00:40:48,737 --> 00:40:50,997
Holding MSTR doesn't give you any yield.

459
00:40:52,097 --> 00:40:53,597
It's amplified Bitcoin exposure.

460
00:40:53,817 --> 00:40:56,617
You get increasing Bitcoin per share, but holding MSTR doesn't give you.

461
00:40:56,797 --> 00:41:01,997
So in order to turn it into a yield producing asset, there needs to be work involved.

462
00:41:03,217 --> 00:41:06,437
And that work is risk taking.

463
00:41:08,097 --> 00:41:10,317
Risk taking on digital assets.

464
00:41:10,937 --> 00:41:12,777
All you got to do is move your mouse.

465
00:41:14,937 --> 00:41:15,417
Right?

466
00:41:15,417 --> 00:41:22,897
All you got to do is do some thinking and maybe some Monte Carlo simulations and feel comfortable with your capital.

467
00:41:24,077 --> 00:41:26,797
And boom, you monetize that instrument into yield.

468
00:41:28,197 --> 00:41:29,557
Would you rather do that?

469
00:41:30,277 --> 00:41:44,597
Would you rather own those assets or would you rather own the income producing assets on real estate like Tim's talking about where people are going down on their hands and knees and ripping carpet out themselves for an asset that underperforms these by almost 3x?

470
00:41:45,417 --> 00:41:52,277
you know, like, what'd you rather hold? I, I, these things are incredibly appealing.

471
00:41:52,377 --> 00:41:58,877
They're so over collateralized. The risk on these is just so small. Um, and let's get into part two,

472
00:41:58,997 --> 00:42:07,997
201. Uh, I think he doesn't like this because I did some back testing. Same thing. Okay. Same exact,

473
00:42:07,997 --> 00:42:17,777
same exact chart. But what I did is I went back. So let's just, let's just use a million dollars

474
00:42:17,777 --> 00:42:23,617
to make it, make it like more like a portfolio. Okay. Interest rate of 10% annual interest costs

475
00:42:23,617 --> 00:42:30,837
of $96,000 monthly interest cost of $8,000. The annual CAGR assumption I used is the actual,

476
00:42:30,837 --> 00:42:41,357
I used the actual CAGR assumption starting in November 30th of 2020, not even like the top or not even the bottom, right?

477
00:42:41,416 --> 00:42:45,837
Like November 30th, I think Bitcoin price is around $20,000.

478
00:42:46,697 --> 00:42:47,337
Okay.

479
00:42:47,377 --> 00:42:49,637
So we're starting with the Bitcoin price around $20,000.

480
00:42:49,637 --> 00:43:08,497
And I used historical CAGRs to run the same exact back test to determine how much BTC income would be made on a million dollars of capital raised over that lifespan of those instruments, assuming 100% of the dividends were paid by selling Bitcoin.

481
00:43:08,497 --> 00:43:16,857
so over the life of that if you convince somebody to give you a million dollars on november 30th

482
00:43:16,857 --> 00:43:24,177
2020 and all you did was go buy bitcoin and at the end of the every month you sold

483
00:43:24,177 --> 00:43:28,017
eight thousand dollars worth of the bitcoin that you originally bought

484
00:43:28,017 --> 00:43:33,217
at the end of the five-year period you'd be sitting on 5.5 million dollars

485
00:43:33,217 --> 00:43:43,597
of income. That's income generated on top of the value of the net Bitcoin. So at the end of the

486
00:43:43,597 --> 00:43:51,997
scenario, you actually have $6.5 million worth of Bitcoin held. Somebody gave you a million dollars

487
00:43:51,997 --> 00:43:56,157
on November 30th and you sold the Bitcoin to pay that interest obligation over time.

488
00:43:56,157 --> 00:44:04,857
what do we think about that five x in five years uh i'll take it it's pretty that's pretty great

489
00:44:04,857 --> 00:44:11,757
right like this isn't even assuming like this is again a hundred percent assumption that you sell

490
00:44:11,757 --> 00:44:16,677
the bitcoin to pay the dividends you don't even have access to an atm and this is just showing the

491
00:44:16,677 --> 00:44:22,456
actual uh delta between the cager and what the interest rate would have been so like going back

492
00:44:22,456 --> 00:44:29,237
to think about if strategy had these instruments in play in November of 2020, instead of the

493
00:44:29,237 --> 00:44:34,037
convertible debt, this would be very interesting. Like they'd sell a million dollars of this and

494
00:44:34,037 --> 00:44:42,897
they make $5.5 million of like BTC income. That's incredibly interesting. Now, uh, what's the next

495
00:44:42,897 --> 00:44:51,237
thing? Okay. What if you did, what if you had access to an ATM, right? Instead of using a hundred

496
00:44:51,237 --> 00:45:00,017
of your, instead of selling 100% of the dividend obligation with Bitcoin, what if you did 100%

497
00:45:00,017 --> 00:45:07,697
with the ATM? How would that change? So instead, that BTC income number goes from 5.5 million to

498
00:45:07,697 --> 00:45:17,177
6.8 million. So it increases, what is that? 30%, just about 30%. Okay. So somebody asked here,

499
00:45:17,177 --> 00:45:21,797
and you know what, I'll address this. What happens when the investor wants his capital back? Guess

500
00:45:21,797 --> 00:45:27,677
what? You have to sell the instrument. You don't get it back. This is an equity. When you buy the

501
00:45:27,677 --> 00:45:33,497
equity, you give the money away in exchange for that liability. You get paid in the future.

502
00:45:33,977 --> 00:45:38,537
You don't get your money back. Like that is a one-way transaction. You can sell the instrument

503
00:45:38,537 --> 00:45:44,537
to get your principal back, but that's on the open market. Okay. Let's keep cooking here.

504
00:45:44,537 --> 00:45:57,477
All right. But Jeff, this is during a zero interest rate environment and you're cherry picking dates and the CAGR is not going to be the same. And this is a skewed perspective.

505
00:45:57,677 --> 00:46:01,657
People are assuming we're going to go to zero interest rates?

506
00:46:03,037 --> 00:46:11,857
No, no, no. This is saying that I can't use past CAGRs for the future.

507
00:46:11,857 --> 00:46:18,357
and this was during zero interest rate environment. So let's look at a tighter

508
00:46:18,357 --> 00:46:27,077
capital environment. Okay. So I run another scenario. Okay. What if you assume a combat,

509
00:46:27,197 --> 00:46:31,077
what if you assume a hundred percent of the dividend is paid with Bitcoin sales

510
00:46:31,077 --> 00:46:38,517
and we back test this going back to January, 2024. Okay. Just, just to when the ETFs were

511
00:46:38,517 --> 00:46:46,677
released. Okay. January 30, January 31st, 2024. Okay. So just for about two years.

512
00:46:47,397 --> 00:46:52,777
So in this scenario, if you were to launch in January of 2024, again, a million dollar capital

513
00:46:52,777 --> 00:46:57,537
raised, you paid a hundred percent of the dividends with BTC sales. You would still make

514
00:46:57,537 --> 00:47:04,677
$1.3 million of BTC income. Okay. So the value of the Bitcoin at the end of the period would be

515
00:47:04,677 --> 00:47:10,737
$2.3 million, you would have made $1.3 million if you had issued in January of 2024. Okay. That

516
00:47:10,737 --> 00:47:18,157
looks incredibly appealing. What if you used 100% of the, you used the ATM to pay for the dividend

517
00:47:18,157 --> 00:47:24,456
instead of selling the Bitcoin? Okay. In this scenario, that jumps from, what was that?

518
00:47:25,117 --> 00:47:26,157
1.3 to $1.5.

519
00:47:26,157 --> 00:47:32,277
$1.3 million, 1.5. Not that big of a difference, but it's great. It's a creative, right? Like any

520
00:47:32,277 --> 00:47:37,456
additional income that you can keep and store in the Bitcoin is compounding consistently over time.

521
00:47:38,657 --> 00:47:45,317
Okay. Now, Jeff, you're still like you're cherry picking this ETF, Bitcoin ETF came out

522
00:47:45,317 --> 00:47:51,697
and it's still too good. Let's go even, let's go worse. Let's get a worse scenario.

523
00:47:52,916 --> 00:48:00,757
Okay. So I wanted to start with April, 2022, where Bitcoin over three months in a row went

524
00:48:00,757 --> 00:48:07,617
negative 17%, negative 16%, and negative 38%. So I wanted to start off like, let's just say you

525
00:48:07,617 --> 00:48:12,456
issued it in the worst possible time, and then you just get absolutely hammered in Bitcoin price.

526
00:48:13,677 --> 00:48:18,637
Right? And you have to sell the Bitcoin in order to pay your dividend obligations.

527
00:48:19,257 --> 00:48:25,657
Again, we're looking at this on the margin, not assuming any of your using any of your

528
00:48:25,657 --> 00:48:33,397
existing collateral stack. This is just what you have. So in this scenario, very clearly,

529
00:48:33,397 --> 00:48:37,017
the first three months you get absolutely hammered, right? Your value of your Bitcoin

530
00:48:37,017 --> 00:48:42,517
goes from a million down to 828,000. You lose 171,000. You're probably starting to sweat it

531
00:48:42,517 --> 00:48:49,217
a little bit, right? You got to pay $8,000. You pay your $8,000. You sell the Bitcoin,

532
00:48:49,337 --> 00:48:54,897
you pay your $8,000. You got 800,000 left. Then you get hammered again. Go 820 down to 691.

533
00:48:54,897 --> 00:49:01,157
691 to 683 and then you get hammered like even harder just like max pain you get hit 30 like

534
00:49:01,157 --> 00:49:08,257
down 38 you're sitting at 425 000 but you still have like max conviction you're max long

535
00:49:08,257 --> 00:49:16,456
somebody says what if btc goes to below zero it's so funny uh btc negative you lose 258 000

536
00:49:16,456 --> 00:49:20,837
in this month you pay the 8 000 and you're struggling right you're down here at 417 000

537
00:49:20,837 --> 00:49:26,737
dollars, you're starting to think this is a really bad deal. And you enter a long bear market where

538
00:49:26,737 --> 00:49:37,237
interest rates are ripping, risk off, FTS collapse, max pain scenario. Now, even in this environment,

539
00:49:38,637 --> 00:49:45,097
just selling the Bitcoin over a four-year horizon, it's actually positive. Your BTC income is

540
00:49:45,097 --> 00:49:52,537
actually positive. You make $413,000 of BTC income on this instrument just based on the CAGR over

541
00:49:52,537 --> 00:49:58,017
that period of time, which is crazy, right? You look at the math and here at the end,

542
00:49:58,777 --> 00:50:04,077
here to where we are today, 10, 22, 25, that Bitcoin, that million that you were given at

543
00:50:04,077 --> 00:50:11,557
the very beginning would be worth 1.4. Even if you started issuing it at like max pain,

544
00:50:11,557 --> 00:50:13,057
You get absolutely hammered.

545
00:50:13,057 --> 00:50:13,956
FTX collapse.

546
00:50:14,617 --> 00:50:15,657
All the crap happens.

547
00:50:15,936 --> 00:50:16,916
You still are paying the dividend.

548
00:50:17,797 --> 00:50:29,973
And you still have greater than the notional value at the end of the period here in October of 2025 Again this works because this is an ARB

549
00:50:30,093 --> 00:50:31,133
This is a one-way trade.

550
00:50:32,013 --> 00:50:36,093
You are ARBing the CAGR, the compound annual growth rate of Bitcoin,

551
00:50:36,273 --> 00:50:38,873
which is growing drastically over time.

552
00:50:39,653 --> 00:50:42,013
And you have a fixed fiat liability.

553
00:50:43,113 --> 00:50:46,673
Okay, people are asking me if I can change and look at the different preferreds.

554
00:50:47,213 --> 00:50:49,093
The preferred doesn't really matter here, right?

555
00:50:49,093 --> 00:50:52,933
like I could change this to 12%. And what, what did that change? The BTC income?

556
00:50:54,973 --> 00:51:00,453
10%. What is this? 12. Oh, I gotta make that, that.

557
00:51:09,133 --> 00:51:18,533
Oh, shoot. Sorry guys. Bear with me here. Boom. Okay. So from 10%,

558
00:51:19,093 --> 00:51:25,333
372 000 you make that 12 you still make 170 000 again you're you're talking about issuing it the

559
00:51:25,333 --> 00:51:32,213
the absolute worst possible time in history uh for issuing a perpetual preferred equity

560
00:51:32,213 --> 00:51:37,973
and going through ftx collapse and all that stuff so you're still technically making money

561
00:51:37,973 --> 00:51:42,693
on those instruments over that time horizon again assuming a hundred percent of your

562
00:51:42,693 --> 00:51:45,853
your dividend is used by paying or selling Bitcoin.

563
00:51:46,053 --> 00:51:50,913
If you change that to a hundred percent as used via ATM,

564
00:51:51,433 --> 00:51:53,333
you know,

565
00:51:53,373 --> 00:51:54,773
the numbers actually look really good.

566
00:51:59,413 --> 00:52:01,913
10% you make $1.3 million.

567
00:52:04,073 --> 00:52:04,593
12%.

568
00:52:06,653 --> 00:52:07,213
Oh,

569
00:52:07,294 --> 00:52:07,933
that didn't,

570
00:52:07,933 --> 00:52:08,794
that didn't sum right.

571
00:52:09,673 --> 00:52:10,433
Something's going on there.

572
00:52:12,013 --> 00:52:12,533
Anyway,

573
00:52:12,533 --> 00:52:17,533
you get the gist. Yeah. Jeff, I had someone text me and say, is this published somewhere? I said,

574
00:52:17,553 --> 00:52:21,933
I don't think so. It's just Jeff's spreadsheet. And they said, brilliant. I love it.

575
00:52:23,073 --> 00:52:28,753
Yeah. So, so this is, this is a backtesting, right? All right. So you think about like,

576
00:52:28,773 --> 00:52:33,773
what is the risk of a perpetual preferred equity? How do you look at it? Like, how do you look at

577
00:52:33,773 --> 00:52:39,693
risk? All right. Well, what would have it done? What would have it, what would it have done in

578
00:52:39,693 --> 00:52:44,314
the past. This is the exact way that I would look at risk in the reinsurance world. Like if I sold

579
00:52:44,314 --> 00:52:51,393
a tranche of $50 million of hurricane risk in excess of a hundred million dollars in Florida,

580
00:52:52,173 --> 00:52:57,973
I need to go look at the history. Like what would history show me the loss to that specific layer

581
00:52:57,973 --> 00:53:02,913
would be based on hurricanes hitting, you know, over the last 50 years. And then I'd pull out,

582
00:53:02,953 --> 00:53:07,173
you know, averages and data and standard deviation and I run it through a catastrophe model and get

583
00:53:07,173 --> 00:53:11,713
some Monte Carlo simulations and you look at all these different things and that all gives you a

584
00:53:11,713 --> 00:53:15,814
view of risk, right? That gives you a view of like, what is the downside here? What are the,

585
00:53:15,814 --> 00:53:23,713
what are the, um, spectrum of outcomes that could potentially happen here? And so this can do it,

586
00:53:23,713 --> 00:53:27,193
right? Like this starts to get you there. All of these different scenarios and different back

587
00:53:27,193 --> 00:53:31,453
testing tools can get you there. Like, what if I sell Bitcoin? Okay. Boom. What if I use,

588
00:53:31,453 --> 00:53:37,673
what if I use ATM? What does the ARB look like? How does that, you know, change over time? What

589
00:53:37,673 --> 00:53:42,233
does that look like? You know what? I got Jesse. Jesse's been a real pain in the butt.

590
00:53:42,853 --> 00:53:47,213
The ARB has understood other factors are at play. Thank you, Jesse, for that incredible insight.

591
00:53:49,933 --> 00:53:56,433
Let's talk about model output and Monte Carlo simulations, because I built a Monte Carlo

592
00:53:56,433 --> 00:53:59,794
simulation model looking at three different probabilistic models in the perpetual pervert

593
00:53:59,794 --> 00:54:10,453
equity. And assuming you did sell Bitcoin to pay the dividends into the future, and what would the

594
00:54:10,453 --> 00:54:17,733
probabilistic outcomes look like based on three different views of risk? So I've got three

595
00:54:17,733 --> 00:54:22,653
different lines here. I've got the log normal distribution, jump diffusion distribution,

596
00:54:22,653 --> 00:54:29,233
and the GARCH model, GARCH distribution model. So I'll give you a quick run through here.

597
00:54:29,794 --> 00:54:38,133
All right. So the log normal. So the reason I ran these is because while this is one view of risk.

598
00:54:39,753 --> 00:54:42,773
Where you can take into consideration historical variance.

599
00:54:44,593 --> 00:54:47,334
Historical variance is not predictive of future variance.

600
00:54:48,133 --> 00:54:54,173
Right. So you got to think of, OK, well, what what is this math behind historical variance?

601
00:54:54,294 --> 00:54:58,713
And how can I use that to try to predict what the future variance may be?

602
00:54:58,713 --> 00:55:08,373
And let me run 10,000 simulations of what the future variants will be based on math.

603
00:55:09,633 --> 00:55:12,433
Okay, so that's what this modeled output is.

604
00:55:12,913 --> 00:55:16,113
So these three distributions here, so log normal model.

605
00:55:16,373 --> 00:55:20,453
This model assumes that Bitcoin price changes smoothly over time with regular market volatility.

606
00:55:20,453 --> 00:55:25,373
commonly used in finance to represent asset prices because it reflects their tendency to

607
00:55:25,373 --> 00:55:31,814
compound and ensures simulated prices never go negative provides a baseline model normal risk

608
00:55:31,814 --> 00:55:38,773
scenario for treasury stress testing so what i did in this model i can put oh i almost spilled

609
00:55:38,773 --> 00:55:44,893
my water what i could do is i could pull it up here i got some python code backing up here

610
00:55:44,893 --> 00:55:54,073
so i looked at strategies initial bitcoin holding 640 000 the bitcoin price as of today 108 500

611
00:55:54,073 --> 00:56:01,273
the pref equity raised 6.6 billion dividend rate composite about 9.6 percent uh duration you

612
00:56:01,273 --> 00:56:06,573
nobody can see this but uh duration average duration around 10 years monthly dividend this

613
00:56:06,573 --> 00:56:12,093
all kind of factors in i'm assuming that the dividend 50 of the dividend is paid by selling

614
00:56:12,093 --> 00:56:16,473
Bitcoin to pay the dividend, which again, we know that historically hasn't been the case.

615
00:56:16,873 --> 00:56:21,953
I want to run 10,000 simulations. And I'm looking at these three different models and I want to get

616
00:56:21,953 --> 00:56:26,273
the probabilistic outcomes of those 10,000 simulations of what is the probability of

617
00:56:26,273 --> 00:56:32,973
failure? I want to get, what is the probability that strategy does not have any capital or that

618
00:56:32,973 --> 00:56:38,873
does that the assets on the balance sheet are worth less than the notional value at the end

619
00:56:38,873 --> 00:56:46,533
of the period. Based on these simulations of this data going into this, what is the outcome? What is

620
00:56:46,533 --> 00:56:50,893
the probabilistic scenario of outcomes? And what is the value of the balance sheet at the end of

621
00:56:50,893 --> 00:57:00,834
that period? Okay. So that's the output here. And again, these three models. Okay. Log normal model,

622
00:57:00,913 --> 00:57:05,993
we went through that. Jump diffusion model. So this model captures both regular price movements

623
00:57:05,993 --> 00:57:14,193
and rare sudden Bitcoin shocks, which we know happen, right? Like a couple weeks ago, we saw

624
00:57:14,193 --> 00:57:20,433
the price of Bitcoin went from, what is it, 124,000 down to 103,000 on a Friday. So you see

625
00:57:20,433 --> 00:57:26,834
these like rare shocks, large regulatory events or market panics. And so this model adds in random

626
00:57:26,834 --> 00:57:36,253
jumps, like movements in Bitcoin prices that are like shocks, market shocks, and incorporates

627
00:57:36,253 --> 00:57:41,453
routine fluctuations as well. So this is like a more realistic model for an asset like Bitcoin that

628
00:57:41,453 --> 00:57:49,913
has typically made these huge jump models and extreme moves. And then the last one is the

629
00:57:49,913 --> 00:57:56,193
GARCH model. So the GARCH model simulates volatility itself and its changes over time.

630
00:57:56,433 --> 00:58:04,153
So it replicates like boom and bust dynamics and allows for like volatility cluster periods.

631
00:58:04,413 --> 00:58:09,433
So like with Bitcoin, you see periods of like low volatility and then you see periods of high

632
00:58:09,433 --> 00:58:16,473
volatility. And so it captures like those changing volatility periods over time rather than keeping

633
00:58:16,473 --> 00:58:20,993
them constant. So you can see the output of these three different models over here on the left-hand

634
00:58:20,993 --> 00:58:29,233
side. The log normal distribution has the like highest, um, I guess stability and relative mean

635
00:58:29,233 --> 00:58:33,593
kind of right in the middle of that blue line jump diffusion has a little bit bigger of a downside

636
00:58:33,593 --> 00:58:37,193
and a little bit lower of an upside again, because you've got these bigger shocks.

637
00:58:38,033 --> 00:58:45,073
And then the Garch model has a lot bigger upside and then obviously a bigger downside because this

638
00:58:45,073 --> 00:58:50,893
assumes effectively like the price of Bitcoin goes to zero in within this model. Okay. Any

639
00:58:50,893 --> 00:58:59,273
questions there? Yeah. Explain this to me again, which where the, um, what would the chart look

640
00:58:59,273 --> 00:59:07,373
like if it did exceed the threshold? Where, where would the lines be going? What, what would,

641
00:59:07,533 --> 00:59:13,273
if what exceeded? So, um, if, if they ended up not having enough value to cover the notional,

642
00:59:13,273 --> 00:59:22,653
the green goes to zero basically basically this x this x-axis is zero so any of these lines would

643
00:59:22,653 --> 00:59:28,713
go to zero so it's the same garch model has a 25 chance of that happening i'll walk through the

644
00:59:28,713 --> 00:59:33,613
numbers over here on the right hand side yeah so what what this what this image on the left-hand

645
00:59:33,613 --> 00:59:38,653
side is showing this is called like an oep curve so occurrence exceedance probability

646
00:59:39,613 --> 00:59:50,633
So at these different percentiles, it shows you what the collateral value would be at the end of the duration period in these different models.

647
00:59:52,113 --> 00:59:56,433
Right. And so at the let's start with the log normal distribution.

648
00:59:57,173 --> 01:00:04,493
So in the log normal distribution, the mean of this model, so the average of all of the 10,000 simulations of this outcome,

649
01:00:04,493 --> 01:00:15,653
the average balance sheet of all of these simulations in 10 years is assumes 105 was this

650
01:00:15,653 --> 01:00:22,993
yeah is this 105 trillion dollar balance sheet i think it's 105 trillion dollar balance sheet

651
01:00:22,993 --> 01:00:30,033
no 105 billion dollar balance sheet sorry 105 billion dollar balance sheet

652
01:00:30,033 --> 01:00:41,253
wait that can't be right hold on sorry real quick I gotta jump over here what is this number

653
01:00:41,253 --> 01:00:46,513
one second

654
01:00:46,513 --> 01:00:52,173
I had to put some commas in here

655
01:00:52,173 --> 01:01:04,173
there you go millions billions trillions no okay so i guess that is an actual huh

656
01:01:04,173 --> 01:01:11,953
the mean out man the numbers are so big in year in 10 years the mean and the log normal distribution

657
01:01:11,953 --> 01:01:19,073
is 105 trillion dollars in the log normal bottle in the jump diffusion model they're 15 it's 15

658
01:01:19,073 --> 01:01:24,673
trillion. And in the Garch model, it's in the quadrillions, like the mean of this distribution,

659
01:01:25,473 --> 01:01:32,033
which is assuming that there's massive money printing. That's just kind of built into the

660
01:01:32,033 --> 01:01:37,413
historical model using Bitcoin price action over time, historically taking into consideration the

661
01:01:37,413 --> 01:01:46,053
actual jumps and the shocks that Bitcoin has experienced over time. So it's a big distribution

662
01:01:46,053 --> 01:01:53,973
here. So yeah, what this is showing, Soleil, basically at this, within this model, the only,

663
01:01:54,314 --> 01:02:04,473
the only model that shows strategy having less than, less capital on the balance sheet than they

664
01:02:04,473 --> 01:02:10,013
have notional outstanding is the GARCH model. And it's below the 25% probability threshold,

665
01:02:10,233 --> 01:02:15,633
but you can see how, how heavily weighted it is towards the tail on the upside too. So like,

666
01:02:15,633 --> 01:02:18,773
It captures both the tail to the upside and the tail to the downside.

667
01:02:20,473 --> 01:02:27,033
So these are three ways, again, to start to think about, like, what is the risk of these instruments?

668
01:02:27,773 --> 01:02:33,253
And what does it look like over time if you simulate it out over into, like, a different horizon?

669
01:02:33,633 --> 01:02:34,413
Is this perfect?

670
01:02:34,993 --> 01:02:35,373
No.

671
01:02:37,373 --> 01:02:38,713
No models are perfect.

672
01:02:38,713 --> 01:02:45,693
but this is one way that I'm trying to like wrap my head around how to think about the risk and

673
01:02:45,693 --> 01:02:50,873
communicate this risk externally to, um, to stakeholders, right? Like what, what would this

674
01:02:50,873 --> 01:02:55,373
risk look like in the future? Like what would my balance sheet look like under different assumptions?

675
01:02:56,153 --> 01:03:04,193
And this is how like actuaries can communicate. Um, if I, if I went to some of my old actuary

676
01:03:04,193 --> 01:03:09,873
friends and i sent them this model they'd be able to read this right like it's it's challenging to

677
01:03:09,873 --> 01:03:15,633
explain i was a broker so i like worked with the actuaries that people called me kind of like the

678
01:03:15,633 --> 01:03:21,153
brokishuary i was able to like do a lot i was i was able to do a lot of the math but i was also

679
01:03:21,153 --> 01:03:26,273
able to communicate it as well um but it was great like working with all the actuaries because they

680
01:03:26,273 --> 01:03:32,113
did most of this math stuff but um most of my actuary friends would be able to like read this

681
01:03:32,113 --> 01:03:39,593
and explain it as well. So this is bullish to me. I think this is bullish.

682
01:03:42,073 --> 01:03:47,814
What I'm trying to do is think about the downside of all of these products.

683
01:03:49,553 --> 01:03:56,673
And like, what would happen if you had to sell your Bitcoin to pay the dividend liability?

684
01:03:57,033 --> 01:04:01,973
What would that look like on a modeled scenario over time? What if you didn't? What if you had

685
01:04:01,973 --> 01:04:07,073
an ATM and you were able to access that? What if you had perpetual preferred equity or different

686
01:04:07,073 --> 01:04:11,953
debt facilities where you're able to access debt capital to raise that money to move forward into

687
01:04:11,953 --> 01:04:18,113
the future? And what does that downside look like? And ultimately what the models are showing

688
01:04:18,113 --> 01:04:24,493
from a stochastic simulation perspective, 10,000 simulations in different iterations,

689
01:04:24,493 --> 01:04:32,873
like in the jump diffusion model a 50 probability shows strategy having a 663 billion dollar balance

690
01:04:32,873 --> 01:04:37,334
sheet in 10 years assuming no additional bitcoin added to their balance sheet today

691
01:04:37,334 --> 01:04:42,553
the value of the bitcoin growing into the future and paying the dividend obligations

692
01:04:42,553 --> 01:04:49,334
by selling 50 of the dividend obligation in the bitcoin so no more orange dots and it's still

693
01:04:49,334 --> 01:04:55,393
no no more orange dots and it's still 663 billion

694
01:04:55,393 --> 01:05:00,693
and these other models have it in the trillions which i think is crazy

695
01:05:00,693 --> 01:05:07,393
maybe i need to go back and play with the assumptions but i mean the model

696
01:05:07,393 --> 01:05:19,373
the model was fit to bitcoin actual performance from 2017 forward

697
01:05:19,373 --> 01:05:28,893
so like that's the underlying like mean and variance information that's going into the

698
01:05:28,893 --> 01:05:35,653
underlying uh python code when does it get to a quadrillion dollar market cap

699
01:05:35,653 --> 01:05:47,653
Yeah. So in the, okay, actually, no, this is good to explain. So good question, Tim. So

700
01:05:47,653 --> 01:05:55,633
this distribution on the left-hand side, you can see 1%. So equals one divided by that.

701
01:06:00,314 --> 01:06:00,794
Okay.

702
01:06:00,794 --> 01:06:07,513
and someone in the comments is saying all of our models are going to be destroyed which i agree with

703
01:06:09,033 --> 01:06:15,033
i i hope that i i hope that's the case um so what this uh

704
01:06:17,273 --> 01:06:23,433
so there's two ways to view probability you have the downside scenarios which are here anything at

705
01:06:23,433 --> 01:06:29,753
the 50 and above is a downside scenario anything at the 50 and above is an upside scenario so this

706
01:06:29,753 --> 01:06:32,153
This is why it's called a probabilistic curve.

707
01:06:32,633 --> 01:06:34,973
These are your probabilistic distributions of outcomes.

708
01:06:41,093 --> 01:06:48,814
And so in the 1% probability, so you could think of it that way, Tim,

709
01:06:48,913 --> 01:06:55,173
like there's a one in a hundred year chance that the strategy balance sheet

710
01:06:55,173 --> 01:06:58,273
at the end of 10 years is worth a quadrillion.

711
01:06:58,273 --> 01:07:00,493
So you're saying there's a chance.

712
01:07:01,693 --> 01:07:02,213
Jigs.

713
01:07:02,633 --> 01:07:02,893
Jigs.

714
01:07:03,613 --> 01:07:04,213
Yeah.

715
01:07:04,913 --> 01:07:05,513
Yeah.

716
01:07:06,133 --> 01:07:06,834
Yeah, exactly.

717
01:07:07,533 --> 01:07:10,373
So that's the way you can start to think about it, right?

718
01:07:10,473 --> 01:07:19,794
Like there's a 50% chance that the strategy balance sheet is $10 trillion or greater.

719
01:07:20,354 --> 01:07:26,093
Or, you know, there's a 1% chance that the strategy balance sheet is $71 billion or greater.

720
01:07:28,273 --> 01:07:32,893
The probability, this is an interesting one as well, like the probability of deficit.

721
01:07:33,573 --> 01:07:39,153
So the probability of strategy having less capital on the balance sheet than the notional

722
01:07:39,153 --> 01:07:41,374
outstanding in each of these three different models.

723
01:07:41,933 --> 01:07:46,433
So in this model, the log normal model, the probability of having a deficit is 0.1%.

724
01:07:46,433 --> 01:07:50,213
The jump diffusion model is 3.9%.

725
01:07:50,213 --> 01:07:51,893
The Garch model is 16.6%.

726
01:07:51,893 --> 01:08:01,653
so you think of like probability of failure those are your probabilities of failure in those three

727
01:08:01,653 --> 01:08:06,533
scenarios of like bankruptcy i guess you could start to think of it like that

728
01:08:09,253 --> 01:08:12,213
now you start to compare that to other things that are happening in the

729
01:08:13,653 --> 01:08:19,974
debt market like we've been doing over the last couple weeks and you've got companies that are

730
01:08:19,974 --> 01:08:25,573
going bankrupt, right? Prima Lend subprime auto lender just filed bankruptcy weeks after

731
01:08:25,573 --> 01:08:30,153
tricolor collapsed, months after missing debt payments during record subprime auto delinquencies.

732
01:08:30,653 --> 01:08:35,413
When you see one cockroach, there are probably more. There are companies literally going bankrupt

733
01:08:35,413 --> 01:08:44,573
here because they don't have money. They were leveraged to the tits on bad risk in their

734
01:08:44,573 --> 01:08:49,053
portfolio. A lot of people have been really focused on these crypto companies and the

735
01:08:49,053 --> 01:08:53,333
dangerous leverage that they're taking. It's like, look at the rest of the traditional financial

736
01:08:53,333 --> 01:08:59,573
market, right? There's so much leverage at their places. That's probably going to blow up first.

737
01:08:59,573 --> 01:09:05,173
And we're literally seeing it. Right. It's crazy.

738
01:09:09,193 --> 01:09:15,533
Okay. Here we go. We've got a question. First time caller, lockdown listener. Can you explain

739
01:09:15,533 --> 01:09:18,733
why Sailor hasn't been able to get several billion in loans to buy more BTC.

740
01:09:21,173 --> 01:09:26,993
Okay. Well, the Preferreds, I think, in my opinion, have been a really big success. They

741
01:09:26,993 --> 01:09:32,613
raised $6.6 billion so far in, what is this, 10 months on a completely new instrument that's never

742
01:09:32,613 --> 01:09:40,093
before hit the market. I personally think they have raised billions of dollars of loans on these

743
01:09:40,093 --> 01:09:49,673
things um and and we're just beginning to think about how to price them and like analyze the risk

744
01:09:49,673 --> 01:09:58,753
of them yeah and i think my yeah i was gonna say i think he said this in btc dc but it's he said it

745
01:09:58,753 --> 01:10:04,233
took like 20 years or something for him to come up with his first billion dollar idea and then

746
01:10:04,233 --> 01:10:10,413
they came out with their first preferred and they gave them a billion and then that was their you

747
01:10:10,413 --> 01:10:15,354
know the next billion dollar idea and then within a year there was another billion dollar idea and

748
01:10:15,354 --> 01:10:20,273
another billion billion dollar idea and another billion dollar idea and i think he let it slip

749
01:10:20,273 --> 01:10:24,773
because i think he said that 2025 is not even over yet which made me think there's going to

750
01:10:24,773 --> 01:10:31,453
be another one but i don't know if i'm reading in between the lines too much but um yeah i mean

751
01:10:31,453 --> 01:10:38,053
there's several billions every every every single uh one was oversubscribed right and

752
01:10:38,053 --> 01:10:44,413
yeah so yeah and i i mean our company has announced intentions to issue a perpetual

753
01:10:44,413 --> 01:10:54,474
preferred security in 2025 like there's still time left um right like i i was having a

754
01:10:54,474 --> 01:10:59,593
conversation with my friend earlier i was talking to him he's like asking me like how's my new job

755
01:10:59,593 --> 01:11:04,474
you know and uh we're talking about risk a little bit because he was an old insurance guy as well

756
01:11:05,434 --> 01:11:10,793
and he's like man that's crazy like you there's there's no frame of reference like how do you

757
01:11:10,793 --> 01:11:17,434
think about risk here like you can't read a book right like i was like yeah i know i have to make

758
01:11:17,434 --> 01:11:25,434
it like we are we are literally we are making risk curves about how to quantify these risks

759
01:11:25,434 --> 01:11:31,593
like they've never been done before now we've got to go communicate that to the market when the rest

760
01:11:31,593 --> 01:11:38,673
of the market thinks that they need to participate on these high yield you know loan products right

761
01:11:38,673 --> 01:11:46,553
like they need to wrap their head around so many things and then have them someone then have someone

762
01:11:46,553 --> 01:11:52,373
tell them like the math actually looks good too right not only does this product look good

763
01:11:52,373 --> 01:11:56,653
like too good to be true, like the math actually looks good too.

764
01:11:58,333 --> 01:12:03,413
And you've, you've taken this like math capital and you're turning it into like a math instrument

765
01:12:03,413 --> 01:12:08,413
that you're selling to the market that needs to be communicated with math and computers and

766
01:12:08,413 --> 01:12:16,213
simulations and models and providing perspectives of, of risk that haven't existed before. So

767
01:12:16,213 --> 01:12:21,533
anyway, I think these things are going to see a lot more appetite in the future. I mean, a couple,

768
01:12:21,533 --> 01:12:26,553
for a couple of reasons. One, we do think that the likelihood that interest rates come down is

769
01:12:26,553 --> 01:12:31,413
pretty high. Okay. If interest rates come down and these instruments are still trading high,

770
01:12:31,593 --> 01:12:36,894
they're going to look incredibly attractive. So capital can come in the door that way.

771
01:12:39,314 --> 01:12:46,434
We're right. If, if we, if our company is successful and launching a product in 2025,

772
01:12:46,434 --> 01:12:50,833
now you're going to have potentially, you know, more companies out in the market with perpetual

773
01:12:50,833 --> 01:12:55,193
preferred equities. Now you have something to compare against. That's helpful when you communicate

774
01:12:55,193 --> 01:13:02,533
with a credit rating agency or something like that. And the credit rating agency is also trying

775
01:13:02,533 --> 01:13:08,573
to figure out what is the risk of these things. And again, credit rating agencies, my experience

776
01:13:08,573 --> 01:13:13,394
with them, they're some of the least impressive people I've seen in my life. And they've got to

777
01:13:13,394 --> 01:13:18,153
look at these types of things, right? They've got to run Python and Monte Carlo simulations and

778
01:13:18,153 --> 01:13:23,793
think about risk and like volatility and how do I price volatility? Like what is, what are the

779
01:13:23,793 --> 01:13:29,314
risks? How do I put math behind it? And how do I compare it to other things in the market? Like

780
01:13:29,314 --> 01:13:36,573
that's the job of these rating agencies. And once, once that happens and these instruments are rated

781
01:13:36,573 --> 01:13:43,713
to some degree, that does result in a opening of the market opportunity. You can kind of think of

782
01:13:43,713 --> 01:13:50,193
it is like um you ever you ever stir your coffee with one of those like little tiny red straws

783
01:13:50,894 --> 01:13:55,593
you ever try to drink the coffee out of it like you barely get any coffee out of the little like

784
01:13:55,593 --> 01:14:00,953
red stir straw it's like chain it's like upgrading from like a red stir straw to you know like a

785
01:14:00,953 --> 01:14:05,613
milkshake straw in terms of the amount of capital that you can get in the door uh once you have

786
01:14:05,613 --> 01:14:11,553
credit rating agencies to provide some perspective on these instruments yeah i don't drink hot bean

787
01:14:11,553 --> 01:14:20,053
soup but i'll i'll take a milkshake um what what ben say here i believe they raised over a billion

788
01:14:20,053 --> 01:14:25,293
dollars with the pref atms this year the numbers just seem small relative to the strategy scale

789
01:14:25,293 --> 01:14:33,033
yeah i think that's right and that's just the atms that's not the ipos that's just the atm yeah

790
01:14:33,033 --> 01:14:37,873
yeah i mean the ipos were crazy right like every single one of the ipos they're like we're going

791
01:14:37,873 --> 01:14:43,354
to raise $250 million. And then they raised 2 billion. Yeah. It's like, here's a billion.

792
01:14:44,713 --> 01:14:51,913
That's, that's real. That's real, real, real capital. That's working for them. That's productive,

793
01:14:52,133 --> 01:14:57,833
permanent capital. And if you take the, if you subscribe to the synthetic labor idea,

794
01:14:58,693 --> 01:15:03,153
like those are employees that are working like every single one of those, every single share

795
01:15:03,153 --> 01:15:06,553
is an employee that's generating BTC income.

796
01:15:06,713 --> 01:15:09,514
It's written on day one, but it's earned out over time.

797
01:15:12,753 --> 01:15:15,854
Who did you say was the most unimpressive people?

798
01:15:17,593 --> 01:15:18,633
The rating agencies?

799
01:15:19,113 --> 01:15:22,814
So I was watching a pod, and let's try to one-up you on this one.

800
01:15:23,193 --> 01:15:25,934
The guy said, where do the dumbest people in finance work?

801
01:15:26,354 --> 01:15:29,773
And his answer was pension funds.

802
01:15:30,514 --> 01:15:44,170
And he basically said that pensions are terrible they just you know they can compare to you know any of the other funds they don perform and so I think these preferreds are just kind of like a tremendous opportunity to attack the industry and provide real value

803
01:15:44,430 --> 01:15:50,530
So you could kind of argue that the preferreds are a speculative attack on the dumbest people in finance.

804
01:15:51,470 --> 01:15:54,830
Yes, the speculative attack on the dumbest people.

805
01:15:55,430 --> 01:15:57,730
Yes, yes, absolutely.

806
01:15:58,410 --> 01:16:00,930
The numbers are just staggering.

807
01:16:00,930 --> 01:16:09,890
like like like i'll tell a little story when i had a acquisition firm we're buying oil and gas

808
01:16:09,890 --> 01:16:14,170
rights on behalf of a family office we're in pittsburgh pennsylvania so we're buying oil and

809
01:16:14,170 --> 01:16:22,490
gas rights in west virginia ohio and pennsylvania and we had an opportunity to go out and find

810
01:16:22,490 --> 01:16:28,210
another capital partner potentially so i just start cold calling like private equity firms in

811
01:16:28,210 --> 01:16:37,590
New York, right? I am in my 20s. I have no idea what I'm doing. We buy suits. We fly up to New

812
01:16:37,590 --> 01:16:42,610
York. We meet with Apollo. And they're like, oh, it's so nice to meet you. This is great.

813
01:16:43,190 --> 01:16:47,450
And then we're like, okay, we have a follow-up meeting. We fly back to New York. We meet with

814
01:16:47,450 --> 01:16:52,650
Apollo again. And they're like, yeah, you're just like a little too early stage for us. We do

815
01:16:52,650 --> 01:17:00,330
mezzanine financing we're like oh okay that makes sense that's good to know um what'd you think about

816
01:17:00,330 --> 01:17:04,410
our our deck our presentation what'd you think about our pro forma oh the numbers look great

817
01:17:05,530 --> 01:17:12,090
right so it's just like finding the right capital and even meetings where they said hey we'd love to

818
01:17:12,090 --> 01:17:17,770
sponsor you and you know give you hundreds of millions of dollars in capital right but

819
01:17:17,770 --> 01:17:23,210
we have to do this exit first and then we can and then it's like this whole process of a lot

820
01:17:23,210 --> 01:17:28,490
of what we've talked about to date but it's like finding the capital but then finding the right

821
01:17:28,490 --> 01:17:34,890
capital and having enough people on the team to actually make that happen it's like um you know

822
01:17:35,450 --> 01:17:40,090
you can run around and try and do so much but but you kind of need a team of people you kind

823
01:17:40,090 --> 01:17:45,450
of need a team of people that know what they're doing in order to accomplish any of this like

824
01:17:45,450 --> 01:17:52,790
imagine being an executive and just being over, I would assume sometimes overwhelmed with the amount

825
01:17:52,790 --> 01:17:59,950
of things that you need to get done. You know, having some of these conversations and being

826
01:17:59,950 --> 01:18:04,570
advisors to some of these companies, like I see it right where it's like, okay, how can I be

827
01:18:04,570 --> 01:18:11,930
helpful? And it's like, well, just, you know, doing things that are not necessarily hard to do,

828
01:18:11,930 --> 01:18:16,630
But, you know, people only have so much bandwidth and I'm sure you've experienced some of that as well.

829
01:18:16,730 --> 01:18:19,270
Right. Yeah. Yeah. Oh, my God.

830
01:18:19,370 --> 01:18:23,710
I mean, I've sold I've sold probably.

831
01:18:24,770 --> 01:18:29,410
I don't know. Four billion dollars of reinsurance in my life.

832
01:18:29,910 --> 01:18:37,970
OK, so and that's over. I don't know, like 500 different layers over the last 11 years.

833
01:18:37,970 --> 01:18:45,530
um i and i've done a lot of this math and stuff previously so like when you when as a reinsurance

834
01:18:45,530 --> 01:18:51,450
broker like you design these instruments like you look at an insurance company's balance sheet and

835
01:18:51,450 --> 01:18:55,210
you say all right what's the profile of this balance sheet i designed an instrument okay it's

836
01:18:55,210 --> 01:18:59,750
like almost exactly what strategy is doing and i say okay i want to structure the tranche here

837
01:18:59,750 --> 01:19:02,990
and then i gotta go take that tranche and then i gotta go sell it externally

838
01:19:02,990 --> 01:19:08,910
when i go sell it externally you take some of this math and like i remember this vividly

839
01:19:08,910 --> 01:19:16,970
there are some reinsurance underwriters that are just idiots like and then they just don't get it

840
01:19:16,970 --> 01:19:21,370
like they just i don't know how they have a job they're just super simple they like plug a couple

841
01:19:21,370 --> 01:19:27,390
numbers into their model like online and they get their paycheck and they just take any risk on uh

842
01:19:27,390 --> 01:19:31,690
on their balance sheet that they want like as long as it fits into the box after they press press run

843
01:19:31,690 --> 01:19:37,170
on their computer. And then there were other people that I would be able to communicate with

844
01:19:37,170 --> 01:19:42,110
and I would be able to give them like a tranche of risk and say like, here's the story. Like,

845
01:19:42,390 --> 01:19:45,870
here's my back testing. Here's my model. Here's what it looks like. And then you're able to

846
01:19:45,870 --> 01:19:52,130
communicate and negotiate. And when you're able to communicate that risk model, I was able to,

847
01:19:52,130 --> 01:19:55,890
you know, work on pricing. Like, okay, how are you going to price this? And we start to get to

848
01:19:55,890 --> 01:20:03,710
a different price. But, but to your point, like some of the, that tactic did not work with everybody.

849
01:20:04,550 --> 01:20:12,890
And as, as a broker, you work with like, I mean, I had 30 or 40 reinsurers that I would work with

850
01:20:12,890 --> 01:20:19,190
on any one given deal. So I would have to know like the behavior behind every single one of the

851
01:20:19,190 --> 01:20:24,450
reinsurance underwriters and like what they were interested in and how they thought, because I would

852
01:20:24,450 --> 01:20:30,150
have to sell to them in that way you know like okay this person's not very sophisticated i just

853
01:20:30,150 --> 01:20:34,070
given them a model and like go this person over here is super sophisticated it's going to question

854
01:20:34,070 --> 01:20:37,150
literally every single number in my spreadsheet i got to make sure they're right and then we're

855
01:20:37,150 --> 01:20:40,590
going to have like a really heated negotiation about what this deal should be priced at

856
01:20:40,590 --> 01:20:46,330
and they're not going to do the deal anyway right it's probably a waste of time but you know and

857
01:20:46,330 --> 01:20:52,190
then there's like everything in between and it's so true like so many people just don't have to

858
01:20:52,190 --> 01:20:56,290
have bandwidth. And like, you think about these capital providers and they got all these deals,

859
01:20:56,290 --> 01:21:00,350
right? Like think about how many like public traded equities there are on the market,

860
01:21:00,470 --> 01:21:04,730
everybody that's in the market for capital, how many people are just lying out of their ass

861
01:21:04,730 --> 01:21:13,750
and how many people actually have like value and numbers and math and quantification. And

862
01:21:13,750 --> 01:21:19,610
it's, it's probably very, very far in between. Like a lot of people are selling a dream. Like

863
01:21:19,610 --> 01:21:24,470
you go watch the movie or the TV show, Silicon Valley, there's that famous scene where they say

864
01:21:24,470 --> 01:21:28,930
like, you don't want revenue. You want to be pre-revenue, like the valuation of your company

865
01:21:28,930 --> 01:21:33,350
will be higher, you know? And then you've got other people that actually are trying to build

866
01:21:33,350 --> 01:21:38,190
value creating businesses and they may not get the same attention because it may be less sexy.

867
01:21:38,950 --> 01:21:45,810
And it's a little bit harder to communicate a more sophisticated story to capital providers that

868
01:21:45,810 --> 01:21:49,790
but maybe think a little bit more simply.

869
01:21:50,610 --> 01:21:50,730
Yeah.

870
01:21:51,410 --> 01:21:52,770
It's crazy.

871
01:21:53,130 --> 01:21:56,290
I mean, the capital markets are just so varied.

872
01:21:56,430 --> 01:21:56,590
Yeah.

873
01:21:56,710 --> 01:21:59,170
And you can see who is entrepreneurial.

874
01:21:59,610 --> 01:22:01,490
You can see who iterates over time.

875
01:22:01,590 --> 01:22:07,990
You can see who is actually developing as markets develop.

876
01:22:07,990 --> 01:22:13,810
For example, the family office I was buying minerals for from 2015 to 2019,

877
01:22:13,810 --> 01:22:19,910
their largest LP is the third largest coal company in the Eastern United States.

878
01:22:20,170 --> 01:22:26,510
So they're doing their coal operation. Well, then they were the largest LP in this mineral fund.

879
01:22:26,750 --> 01:22:30,970
Well, then the exit for that mineral fund is they just bought out the whole fund. They bought out

880
01:22:30,970 --> 01:22:37,090
the whole thing. That was the exit. So it's like, all right, coal, oil and gas rights. Well,

881
01:22:37,090 --> 01:22:41,170
then a few years ago, I saw them pop up on an article on Twitter before it was X,

882
01:22:41,170 --> 01:22:48,370
because they were mining Bitcoin as part of their coal operation.

883
01:22:48,570 --> 01:22:51,630
So it's like, all right, coal, oil and gas, Bitcoin.

884
01:22:52,090 --> 01:22:54,770
I mean, you can see the companies that are iterating.

885
01:22:54,770 --> 01:22:57,770
And whether you love Elon or not, right?

886
01:22:57,910 --> 01:23:01,750
I mean, how many years ago now did he put Bitcoin on the balance sheets of his companies?

887
01:23:02,550 --> 01:23:03,670
So I don't know.

888
01:23:03,970 --> 01:23:08,590
Just seeing guys like Jack Dorsey and Elon and Saylor, it's like,

889
01:23:09,230 --> 01:23:11,110
I don't want to bet against these guys.

890
01:23:11,170 --> 01:23:20,530
that doesn't seem like a great idea yeah right yeah so i think going back to where where we

891
01:23:20,530 --> 01:23:24,210
started with this conversation was like how long is it going to take well it's like this is a

892
01:23:24,210 --> 01:23:31,330
complicated story and the story is just being built we're just now beginning to understand

893
01:23:31,330 --> 01:23:37,030
what this can do right you're take like think about how long it took bitcoin to get to where

894
01:23:37,030 --> 01:23:45,350
Bitcoin is today. Okay. So that's, what is that? Almost 15 years. And now we're five years into

895
01:23:45,350 --> 01:23:51,610
like using Bitcoin as capital. And I would say we're really in year one of like the acceleration

896
01:23:51,610 --> 01:23:58,550
of Bitcoin as capital on a treasury balance sheet, right? We've gone from two companies to over 150.

897
01:23:58,810 --> 01:24:03,870
That's going to go from 150 to over a thousand. And that number is going to go up. And now what

898
01:24:03,870 --> 01:24:08,050
can you do with it? Right? That's the big question. Like, what can you do with it?

899
01:24:08,970 --> 01:24:15,170
And I think the market just significantly overlooks that as they're going to chase

900
01:24:15,170 --> 01:24:21,290
other shiny objects in the market, these pre-revenue or like no revenue companies.

901
01:24:22,310 --> 01:24:29,490
And when the actual capital is collateral, it sits on the balance sheet that you can do things with.

902
01:24:29,490 --> 01:24:35,470
Now, the things that you could do with them are unique and a little abstract and they're hard to wrap your head around.

903
01:24:35,730 --> 01:24:37,550
But that's what we're here to do. Unpack it.

904
01:24:39,650 --> 01:24:44,010
So, all right, that's all I got. Do you want to talk innovation, Soleil?

905
01:24:44,230 --> 01:24:52,830
Hell yeah. I've been listening to some history podcasts lately and I can basically just turn everything into a Bitcoin conversation.

906
01:24:52,830 --> 01:25:12,650
So I just kind of can't help myself. But so I was watching this this history pod and the the guy was talking about why China invented gunpowder, but they didn't innovate it beyond being able to, you know, kind of just throw bombs and make fire fireworks.

907
01:25:13,590 --> 01:25:18,430
And instead, it was Europe that innovated with it and basically took over the world.

908
01:25:19,230 --> 01:25:26,870
And the professor said that it was because China had a closed society, and he claimed that innovation thrives in open, competitive competition.

909
01:25:26,870 --> 01:25:29,250
Those were the three words that he highlighted.

910
01:25:30,290 --> 01:25:36,630
And if you look back at that time, actually probably ever since, Europe cultures traded.

911
01:25:37,290 --> 01:25:38,410
They mixed with each other.

912
01:25:38,650 --> 01:25:40,110
They fought wars.

913
01:25:40,230 --> 01:25:40,910
They made alliances.

914
01:25:40,910 --> 01:25:52,330
And so the only cultures that innovated, only the cultures that innovated, excuse me, could dominate. And then another power would have to innovate so that they could disrupt and take over.

915
01:25:53,190 --> 01:25:57,750
And so, of course, that immediately reminded me of the Bitcoin treasury company space where

916
01:25:57,750 --> 01:26:00,050
Saylor, you know, openly shared the playbook.

917
01:26:00,450 --> 01:26:04,390
And then, you know, CEOs are tweeting each other's Bitcoin purchases.

918
01:26:04,830 --> 01:26:11,170
And they're in a competition and it's a race to the most Bitcoin, but it's more of a sport

919
01:26:11,170 --> 01:26:12,710
than a cutthroat activity.

920
01:26:13,570 --> 01:26:18,610
And because that competition is fought with digital power instead of gunpowder, the world

921
01:26:18,610 --> 01:26:20,770
can now innovate without going to war with each other.

922
01:26:20,770 --> 01:26:24,590
and strategies innovated several times.

923
01:26:24,690 --> 01:26:25,670
They had the convertible bonds,

924
01:26:26,170 --> 01:26:27,290
they've had the ATMs,

925
01:26:27,890 --> 01:26:29,130
stretches their iPhone,

926
01:26:29,990 --> 01:26:33,230
but after they've extracted maximum value

927
01:26:33,230 --> 01:26:34,030
from the preferreds,

928
01:26:34,030 --> 01:26:35,450
they'll just innovate to something else.

929
01:26:36,210 --> 01:26:38,350
So I say all that to say this,

930
01:26:38,350 --> 01:26:40,670
the 1x MNAV bears are wrong

931
01:26:40,670 --> 01:26:43,670
because Bitcoin treasury companies will innovate

932
01:26:43,670 --> 01:26:46,090
while the TradFi companies will be left behind

933
01:26:46,090 --> 01:26:47,390
and forgotten by history.

934
01:26:50,770 --> 01:26:55,590
I don't need to, I don't know if I need to say anymore. I agree.

935
01:26:57,670 --> 01:27:03,450
Yeah. What's I think about this often, like what's the point of holding an equity? Okay.

936
01:27:03,450 --> 01:27:07,870
To store value like that to me, that's the point of holding an equity. Like I want to store value

937
01:27:07,870 --> 01:27:13,330
and like grow value. Okay. What's more valuable than the company that holds more store of value

938
01:27:13,330 --> 01:27:18,670
than any other company. And they're working actively to increase the amount of store of

939
01:27:18,670 --> 01:27:24,030
value that they have on their balance sheet. Like what, that's the Bitcoin treasury landscape.

940
01:27:24,970 --> 01:27:32,030
If you truly believe that Bitcoin is the apex asset and should be the unit of account

941
01:27:32,030 --> 01:27:38,830
and is the hurdle rate and we're just early, then I think being along any of these companies

942
01:27:38,830 --> 01:27:43,410
is really appealing. Yeah. And you can already see the innovation in the different markets,

943
01:27:43,470 --> 01:27:48,230
right? Because metaplanets in their own position. So they've got the moving strike warrants.

944
01:27:48,670 --> 01:28:07,670
And I think they probably want to move into the preferred space as well. But, you know, if it's not going to be the preferreds, it'll be something else. But not only that, the companies that are actually innovative are also moving into the Bitcoin space.

945
01:28:07,670 --> 01:28:13,490
So, you know, like you mentioned, Tim, Tesla, they're probably the most innovative.

946
01:28:14,030 --> 01:28:17,910
They were probably the most innovative non-Bitcoin company until they bought Bitcoin.

947
01:28:18,270 --> 01:28:23,070
And so now it's like only Bitcoin treasury companies are going to survive.

948
01:28:23,290 --> 01:28:25,370
Now that Bitcoin exists, it's the only way.

949
01:28:28,070 --> 01:28:28,670
Yeah.

950
01:28:28,890 --> 01:28:35,490
And Saylor actually talked about this recently on the podcast he did with Mark Moss.

951
01:28:35,490 --> 01:28:43,230
and really it was a call to action of like hey just figure out how to create digital credit in

952
01:28:43,230 --> 01:28:50,010
whatever way that you want to do and do it like there there's going to be to your point so there's

953
01:28:50,010 --> 01:28:53,770
going to be thousands of ways companies are going to do this like and he even brought up insurance

954
01:28:53,770 --> 01:28:57,610
he even said the word reinsurance which was a little light bulb going off maybe i've said it

955
01:28:57,610 --> 01:29:03,410
enough that's uh like become something on his radar he said the word reinsurance but he also

956
01:29:03,410 --> 01:29:08,870
like thought of the idea of a bond. Like what if you just, what if you had, um,

957
01:29:09,950 --> 01:29:17,270
what if you issued a 10 year bond? Okay. Like forget the perpetual preferred equity.

958
01:29:17,690 --> 01:29:23,530
What if you just issued a 10 year bond and you refinanced 10% of it every year

959
01:29:23,530 --> 01:29:29,270
and you just kept rolling it and rolling it and rolling it and rolling it and rolling it.

960
01:29:29,270 --> 01:29:35,230
and like the capital you brought in the door you used like you you sell the 10 10 year bond you get

961
01:29:35,230 --> 01:29:41,090
all the capital up front you buy bitcoin with it and you refinance it you know every year that's a

962
01:29:41,090 --> 01:29:46,250
business model somebody could go do that the what i outlined with the perpetual preferred securities

963
01:29:46,250 --> 01:29:53,310
here earlier where you just sell the bitcoin like to all the people that have given everybody so

964
01:29:53,310 --> 01:29:58,830
much like that i've given sailor so much shit for not selling the bitcoin like go create your

965
01:29:58,830 --> 01:30:04,690
own business and sell the Bitcoin to do it. Right. Like nobody's stopping you. Like it works.

966
01:30:04,730 --> 01:30:08,790
Like the math still works. If you want to go do it, go do it. But like, you know, if you don't

967
01:30:08,790 --> 01:30:16,410
have to do it, like as I showed earlier, the math looks better. Right. So like anybody can go do it.

968
01:30:16,410 --> 01:30:20,930
Like you could still go issue these instruments and go operate in the capital market. Just like

969
01:30:20,930 --> 01:30:27,010
there's so much opportunity. Like people are so quick to shit on all of these things

970
01:30:27,010 --> 01:30:34,990
as opposed to identifying the enormous opportunity here to issue Bitcoin back credit in all of these

971
01:30:34,990 --> 01:30:40,770
different marketplaces in different ways. Like you just got to innovate, which is hard and it's

972
01:30:40,770 --> 01:30:45,410
abstract. People are going to yell at you. People are going to call you stupid. 75% of people are

973
01:30:45,410 --> 01:30:51,230
going to yell at you and call you stupid. But like sticking to that, like your vision, right?

974
01:30:51,430 --> 01:30:56,910
Like when the electricity was created, everybody said it was stupid. When the light bulb was

975
01:30:56,910 --> 01:31:03,450
created everybody said it was stupid when like rockefeller was um you know refining oil everybody

976
01:31:03,450 --> 01:31:08,250
thought it was like so stupid he was refining the oil that people were throwing away gasoline used

977
01:31:08,250 --> 01:31:14,830
to be thrown away and rockefeller was like what are you guys doing you guys are idiots like put

978
01:31:14,830 --> 01:31:20,610
that in a car and throw a combustion combustion engine like everybody thought he was stupid for

979
01:31:20,610 --> 01:31:25,250
collecting all this gasoline he's like you're an idiot but guess what like who who is the stupid

980
01:31:25,250 --> 01:31:30,930
one person that was throwing away the gasoline yeah i think the you're an idiot days are are

981
01:31:30,930 --> 01:31:39,890
are very limited very numbered because i had drinks recently with someone here in new york and

982
01:31:39,890 --> 01:31:45,570
they're like hey i might start a digital asset treasury company i spent at least 10 maybe closer

983
01:31:45,570 --> 01:31:51,490
to 20 minutes making a very common sense case for why maybe you just start with bitcoin and

984
01:31:51,490 --> 01:31:58,890
to be thoughtful before you do anything that's not Bitcoin. I received a slide deck today from

985
01:31:58,890 --> 01:32:03,450
someone else that's trying to raise money to do a treasury company. So yes, the markets are

986
01:32:03,450 --> 01:32:11,910
sometimes closed and sometimes more closed, sometimes more open, but like Lynn Alden,

987
01:32:12,190 --> 01:32:17,470
nothing stops his train. When it goes, it's going to go and people are going to be shocked,

988
01:32:17,470 --> 01:32:23,370
I think at like, oh, well, there's just like one company and then MetaPlanet. And now there's a

989
01:32:23,370 --> 01:32:28,730
couple dozen, but things aren't looking so hot. And then it's just going to be like, it's going

990
01:32:28,730 --> 01:32:34,290
to be slow and slow and slow. And then all of a sudden, like everything in life. But for a lot

991
01:32:34,290 --> 01:32:38,690
of people that are only paying attention to the headlines, right? Three, six, nine months from

992
01:32:38,690 --> 01:32:44,970
now, I'd be like, what? It'll be like, some people made it happen. Some people watched it happen.

993
01:32:44,970 --> 01:32:47,390
And some people said, what just happened?

994
01:32:47,490 --> 01:32:48,410
What happened?

995
01:32:48,750 --> 01:32:50,670
And you can write that book if you want to.

996
01:32:51,090 --> 01:32:52,130
Of like, what happened?

997
01:32:52,290 --> 01:32:53,510
And someone will write the book.

998
01:32:53,790 --> 01:32:57,290
But some people are just like literally creating the playbook.

999
01:32:57,370 --> 01:32:59,370
And that's what's super exciting right now.

1000
01:33:00,350 --> 01:33:01,470
Yeah, you've got to do it.

1001
01:33:01,470 --> 01:33:06,550
And like this concept of like synthetic labor that I brought up yesterday.

1002
01:33:06,770 --> 01:33:07,510
It was so funny.

1003
01:33:07,610 --> 01:33:09,850
It was like 75% of the people hated it.

1004
01:33:09,930 --> 01:33:11,730
I'm like, I kind of like that.

1005
01:33:11,730 --> 01:33:16,950
that's how I know I'm like I'm probably on the right page I'm probably thinking about something

1006
01:33:16,950 --> 01:33:23,830
very makes you want to double down yeah it's like oh cool I'm long this I'm long this idea

1007
01:33:23,830 --> 01:33:32,050
um oh I had an I had another idea last night that I really liked um strategy said that uh

1008
01:33:32,050 --> 01:33:40,530
stretch was their iPhone moment and I I really like that concept but I think they're wrong

1009
01:33:40,530 --> 01:33:48,710
and because really the prefs are strategies robo-taxing moment

1010
01:33:48,710 --> 01:33:58,810
like this is this is like this is like systemically larger than the iphone this is like

1011
01:33:58,810 --> 01:34:07,430
going to totally revamp how society interacts and works and it's like digitizing so much

1012
01:34:07,430 --> 01:34:13,130
like it's big i think the robo taxi moment it was like enormous i think we'll see that play out over

1013
01:34:13,130 --> 01:34:18,250
the next decade it's gonna be really big but this is this thing i think it's a little bit more

1014
01:34:18,250 --> 01:34:23,650
comparable because when the iphone come out in like 2007 and what's the robo taxi came out like

1015
01:34:23,650 --> 01:34:28,070
a year ago and like that that thing's going to take over that's going to take over like

1016
01:34:28,070 --> 01:34:34,350
a complete wildfire it's going to totally transform how people move this is going to

1017
01:34:34,350 --> 01:34:40,610
totally transform how people use capital. And, um, I think it's probably a better,

1018
01:34:40,610 --> 01:34:50,350
more modern digital reflection of what's the, the, the size and scope of the innovation,

1019
01:34:50,350 --> 01:34:55,650
but also with like a mag seven comp. Yeah. Well, you were showing the spreadsheets. I,

1020
01:34:55,730 --> 01:35:01,150
I just can't stop thinking about, um, this sailor quote. He said that the, the war for

1021
01:35:01,150 --> 01:35:06,210
the future of money will be one with money. But then he's also talked about the triple maxi plan.

1022
01:35:06,570 --> 01:35:10,610
Basically, you know, you mortgage everything you own to buy Bitcoin. And if we merge those

1023
01:35:10,610 --> 01:35:15,070
two concepts, that means that the war for the future of money will be one with credit.

1024
01:35:16,990 --> 01:35:19,050
And that's everything that you talked about today.

1025
01:35:19,830 --> 01:35:21,630
So say that one more time. Sorry.

1026
01:35:21,730 --> 01:35:27,430
Yeah. So he said that the war for the future of money will be will be one with money. And

1027
01:35:27,430 --> 01:35:30,350
the triple maxi plan is to mortgage everything you own to buy Bitcoin.

1028
01:35:30,910 --> 01:35:32,350
And if you merge those two ideas,

1029
01:35:32,350 --> 01:35:35,850
that means that the war for the future of money will be won with credit.

1030
01:35:37,630 --> 01:35:38,430
This is true.

1031
01:35:40,330 --> 01:35:41,110
Clip that up.

1032
01:35:41,210 --> 01:35:41,370
Yeah.

1033
01:35:42,750 --> 01:35:43,870
He's got to clip that up.

1034
01:35:44,430 --> 01:35:46,250
The war for money will be won with credit.

1035
01:35:46,470 --> 01:35:47,090
I think that's right.

1036
01:35:49,070 --> 01:35:49,470
Honestly,

1037
01:35:49,470 --> 01:35:51,950
we should end it right there because I think that's good.

1038
01:35:52,230 --> 01:35:53,730
That's where we should end it.

1039
01:35:54,430 --> 01:35:55,930
Unless anybody has anything else.

1040
01:35:57,430 --> 01:36:00,830
Um, yeah, I'll do my final thought.

1041
01:36:01,850 --> 01:36:02,650
Yeah, let's go final thought.

1042
01:36:03,250 --> 01:36:04,930
Alchemy is real, right?

1043
01:36:05,150 --> 01:36:06,970
So you can turn lead into gold.

1044
01:36:07,790 --> 01:36:10,710
And by that, I mean you can take fiat and buy Bitcoin with it.

1045
01:36:12,010 --> 01:36:15,970
And so with credit, you can take the first pound of lead,

1046
01:36:16,670 --> 01:36:20,130
borrow another pound, and get two pounds of gold for the price of one.

1047
01:36:20,770 --> 01:36:23,250
So the preferreds are financial alchemy.

1048
01:36:23,850 --> 01:36:25,010
That's my final thoughts.

1049
01:36:26,230 --> 01:36:27,130
Financial alchemy.

1050
01:36:27,430 --> 01:36:33,230
Bingo. Borrow lead and turn it into gold.

1051
01:36:34,290 --> 01:36:39,090
I like it. Borrow lead and turn it into gold. Yeah, I dig it.

1052
01:36:41,290 --> 01:36:49,130
My final thought or takeaway is that we're at the very beginning stages. Risk is mispriced globally.

1053
01:36:49,130 --> 01:36:56,890
a lot of people have not quantified or been able to even have the headspace to think about

1054
01:36:56,890 --> 01:37:03,250
quantifying the risk of any of these instruments. And we're so early days that I think there's a lot

1055
01:37:03,250 --> 01:37:09,310
of alpha to be gained by paying attention to some of these things because the relative risk

1056
01:37:09,310 --> 01:37:16,490
of these instruments is very low. My perspective of that is that the relative risk of these

1057
01:37:16,490 --> 01:37:21,990
instruments is very low relative to everything else in the market. So I'm very bullish on Bitcoin

1058
01:37:21,990 --> 01:37:29,450
backed digital credit. And I think the, from every, like I've tried to surround it, right? Like

1059
01:37:29,450 --> 01:37:33,610
with looking at risk from all perspectives, like what's, what's it look like over here? What's it

1060
01:37:33,610 --> 01:37:39,690
look like over here? What's it look like over here? And every way I look at it, it looks good

1061
01:37:39,690 --> 01:37:48,290
with math right with rationality and with math and that is really exciting i look forward to like

1062
01:37:48,290 --> 01:37:55,630
you know telling that story more i think it's just gonna get better yep we did math we did history

1063
01:37:55,630 --> 01:38:02,590
we got it all covered math history yeah and modern times with tim modern times

1064
01:38:02,590 --> 01:38:10,690
modern times you're just modern like you're you're at the cutting edge yeah i i mean my final thoughts

1065
01:38:10,690 --> 01:38:22,750
study bitcoin because it's a savings technology where you can just save your money because when

1066
01:38:22,750 --> 01:38:29,730
you look at the labor back to that part of life there'll be a lot of great work for everyone to do

1067
01:38:29,730 --> 01:38:36,110
but it's cycling and accelerating at such a pace.

1068
01:38:36,750 --> 01:38:39,450
I mean, Adrian Pruitt walked me through mid journey.

1069
01:38:40,170 --> 01:38:47,010
I maxed out my first month plan of 10 bucks in less than an hour and came up

1070
01:38:47,010 --> 01:38:50,170
with like three or four AI images that were decent.

1071
01:38:50,530 --> 01:38:53,950
I was proud of them, but it's like, I'm like,

1072
01:38:54,130 --> 01:38:56,150
it just wasn't that hard, right?

1073
01:38:56,150 --> 01:38:59,270
It's like 15 minute tutorial. And then I'm just clicking away.

1074
01:38:59,730 --> 01:39:05,730
So, you know, that's the labor side. And a lot of people, I've heard a lot of people say,

1075
01:39:06,330 --> 01:39:13,390
like, business is hard. Like, if you just go talk to people that have started a business,

1076
01:39:14,170 --> 01:39:21,870
and then look at the successful ones. I mean, the one hot tip I've gotten this year is,

1077
01:39:22,510 --> 01:39:26,610
I should probably buy a Tesla at some point, because then whether I'm driving to Long Island,

1078
01:39:26,610 --> 01:39:29,070
or I'm driving to Pennsylvania or I'm driving wherever,

1079
01:39:29,950 --> 01:39:32,390
like it's just easier, right?

1080
01:39:32,470 --> 01:39:34,010
The Tesla kind of drives itself

1081
01:39:34,010 --> 01:39:36,450
if you just kind of look straight ahead and do this.

1082
01:39:37,730 --> 01:39:39,270
And then the robo taxis, yeah,

1083
01:39:39,290 --> 01:39:40,910
when I was out in San Francisco, right?

1084
01:39:40,950 --> 01:39:42,630
I'm like in a car and there's no driver.

1085
01:39:42,930 --> 01:39:44,790
It's like, that's nuts,

1086
01:39:45,150 --> 01:39:47,110
but that's already the world we live in.

1087
01:39:47,210 --> 01:39:49,010
Most people probably haven't had that experience.

1088
01:39:51,050 --> 01:39:53,790
But yeah, Santa Monica,

1089
01:39:53,790 --> 01:39:56,430
I guess it was a Tesla showroom.

1090
01:39:56,610 --> 01:40:04,130
they had one of the robots there um i don't know if it you know if they were demoing it but like i

1091
01:40:04,130 --> 01:40:13,170
was like there's a robot in the storefront that's nuts so like we're we're living in the future and

1092
01:40:13,170 --> 01:40:22,370
like anyone that is studying and and allocating any amount to bitcoin is so far ahead it's just

1093
01:40:22,370 --> 01:40:28,450
kind of wild to think about yeah it's digital labor tesla's got digital labor too

1094
01:40:30,610 --> 01:40:36,530
that's what i think about all right well uh thank you everybody for joining uh we're hour 40 in a

1095
01:40:36,530 --> 01:40:42,530
small panel tonight i appreciate you taking the time and uh sitting through my excel analysis

1096
01:40:44,050 --> 01:40:49,170
and the way i think about things so appreciate the time everybody have a good night catch you later