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Well I won't back down, no I won't back down

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You can stand me up at the gates of hell, but I won't back down

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No, I'll stand my ground

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Won't be turned around

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And I'll keep this world from dragging me down

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I'm gonna stand my ground

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And I won't back down

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I won't back down

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Hey, baby

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There ain't no easy way out

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Hey, I will stand my ground

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And I won't back down

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Well, I know what's right

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I got just one life

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In a world that keeps on pushing me around

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But I'll stand my ground

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And up.

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Woo! Here we go.

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Bitcoin's giving us a bit of a run today.

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We are back for True North episode 46.

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We've titled this one, And They Fight You.

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So we've got the crew on today.

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We are in normal business hours, which is a little new for us.

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A bit odd. It feels a little weird.

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We've got some daylight outside, which is new.

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and uh yeah here we go episode 46 so for those that are joining if this is your first time

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listening uh true north is we've dubbed it the investment grade bitcoin podcast we talk about

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bitcoin we talk about bitcoin securities we talk about the financialization of bitcoin

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uh the evolution of these securities what type of uh people may be interested in these how to

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think about them broadly and really try to take a institutional grade view on risk and analysis,

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which is a bit novel thinking about the asset of Bitcoin itself.

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So without further ado, let's talk through this. We've got a lot to talk about today, man.

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Things are moving. MSTR price is down. It's horrible. We all wish it would be better. That

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would be nice if it caught a bid to the upside. But let's talk through some of the dynamics here.

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So today we're going to talk about MSTR update, price statistics, amplification ratios as we

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normally do. We're going to get into MSCI, which has been a really hot topic. Obviously, JP Morgan,

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which has been really big in the news over the last couple of days. Hypothetical shorting of

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mstr and changing the dynamics behind the scenes but then also coming out with structured products

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as of today we'll talk through implications of that uh the press status volatility and double

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counting i think there's uh some concerns about how like these press are counted we'll kind of

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unpack that and walk through it a little bit health of bitcoin and catalysts on the horizon

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which i think there's a lot there and we can walk through that and then obviously the biggest debate

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of all time is does turkey suck? And would you rather have turkey or ham at Thanksgiving? And

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I feel very strongly about this. So we'll get into that later. And without further ado,

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we'll hand it over to Tim real quick. Hold on. Ladies and gentlemen, what you're about to hear

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may be amazing, but it is not financial advice. It's for informational and educational purposes

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only. Jeff, back to you. All right. Thank you, Tim. We are off and let's get cooking.

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First of all, let's just talk MSDR price. What's it at? 172 as of today.

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Obviously, the price of MSDR has gone down drastically.

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Hold on one second. The price of MSDR is 179. It's up 4% today.

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Okay. Caught a bid. Caught a bid when Bitcoin went up.

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Quite a bit. Bitcoin went up and MSDR. Bitcoin is $89,952. And I don't know, let me see if it's hit $90,000 yet. It has not. It just missed $90,000 by $20. So we got a bid on it. I'm going to do a post on this. The MACD has already crossed over. So I want to talk about some technicals on Bitcoin, but we'll get to MSDR in two seconds.

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So death cross and golden crosses.

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There was a lot of talk about a death cross.

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A death cross is when the 50-day moving average drops below the 200-day moving average.

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The 50-day drops down, that's a death cross.

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On the flip side, there's something called a golden cross.

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A golden cross is here's the 200-day moving average, and the 50-day moving average goes

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above it.

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That's a golden cross.

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So we had this death cross on the daily chart for Bitcoin.

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Now, what's happened is MACD is on a shorter time frame.

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It's 12 and 26 on TradingView as a default timeline.

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The MACD on the daily has now crossed back over bullish.

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And what you're going to find out, if you believe on December 1st, the quantitative

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tightening stops and they start buying treasuries at $50 billion a month, if you believe in

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that and Bitcoin runs to $100,000, you're going to have this cope because Bitcoin is

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going to run up to $100,000.

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They'll be like, I guess you should have bought the dip.

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And it's not financial advice.

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But if things follow through, like this has already been communicated and Bitcoin runs up, then obviously strategy stocks should go up with it.

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And those are technical indicators.

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There's no lines drawn.

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These are all auto drawn based upon those parameters, the moving averages.

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So that's the way I look at it.

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And then talking about MSTR 179, I did a projection.

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I showed this on my, I did all the math.

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It said if Bitcoin grows at 30%, they're very capital efficient, that in five years,

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MSTR stock will be at $3,100 a share.

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And I did all the math on how that happens.

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If somebody does not like my math, that's okay.

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You can plug in your own math and come up with your own projections, right?

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I'm not giving any financial advice, but I base it on a 30% CAGR of Bitcoin, right?

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And that MSTR should double that return, the stock price.

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The current stock price I get is miserable, right?

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Totally get that.

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And in 2030, it would trade, I believe I calculated at a 2.5 MNAP.

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So I'm not calculating some crazy MNAP, but go ahead.

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Yeah, this whole dynamic of Bitcoin treasury companies,

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companies that have Bitcoin on the balance sheet

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and how to value them is so fascinating because it's each one of these companies has their own

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bull and bear cycles within one individual bull cycle of Bitcoin and one individual bear cycle

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of Bitcoin. So you get multiple shots at this thing as it's moving in one trajectory into the

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future. And it's really fascinating when you do start to look at some of the technical analysis.

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I'm not a big, I'm not a huge fan of technical analysis. I'm not a great trader. I don't,

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I don't really trade. I'm just taking a long directional bet. But the, the interesting thing

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is that there are algorithms and mechanics and people that do trade and they do trade off of

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these mechanisms. And when you have a super volatile asset like Bitcoin that, that creates

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multiple types of these setups for people to go, you know, flip bearish, flip bullish, flip bearish,

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flip bush. And, and then you have all of the macro that sits on top of it. So it's just a

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fascinating asset. You've got so many people that are trading and holding this instrument. I mean,

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it trades 60 to $100 billion of liquidity a day, which is just an insane amount of volume.

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And there's, there's people everywhere touching this thing all the time.

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Yeah, Mike, to your point with the, you know, the technical analysis, like if you find TA,

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you just don't get it or you don't want to bother to learn it,

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you still know what a dip is.

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You can always buy the dip.

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And if your time horizon is long enough,

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it kind of doesn't even matter if you're buying the dip

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or buying the top forever, like Sailor,

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because his time horizon is like decades.

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But if you just bought the dips,

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you could probably even outperform Michael.

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So, you know, use your TA or just look at the freaking chart and see is Bitcoin down? Yes, you can buy it and hodl it and should be fine.

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Yeah. And I mean, I was on a call with Strategy yesterday and they're very focused on keeping

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the equity story, the common equity story simple. What is the common equity? It's levered Bitcoin.

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Okay. How do they do that? They use prefs, non-callable, non-term obligations to amplify

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the Bitcoin exposure. Okay. So when do you want to enter that package, that exposure? You want to

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enter it when you get it at a good price. And what is a good price? Book value. And so we're

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approaching, we're at like 1.15 MNAV. I think now is the time to jump back in for the next 10 years

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when you have this levered Bitcoin exposure with no call risk, no sort of termed or refinance

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necessities in the future. And I really, I think people are too bearish now. They're all feeling

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the pain from 450 bucks a share to here when this is now the time to start being optimistic again,

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I think I really do think. And just for more parallels, like Tesla was at 400 a share in 2021,

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I believe, and it was down as low as 100. But was their business worth less when it was 100,

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you know, six to 12 months later? Like, no, it was more valuable. Like they're developing

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freaking robo taxis and optimists, but nobody were nobody was valuing that far out, right? Like

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everyone's forward expectations is like six to 12 months max like hardly anyone is looking out four

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five ten years uh but so if you can imagine how much bitcoin freaking strategy is going to have

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in five or ten years then this doesn't seem like much of a big deal but if you

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if you were hanging your hopes on a six to 12 month trade then yeah you can you can be pretty

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disappointed. But also entry matters. Of course, entry definitely matters. The other thing I want

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to say is that people say transparency, transparency, transparency all the time. They say this. You're

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like, okay. So strategy has got a great dashboard. Many other Bitcoin treasury companies have

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dashboards. So you can see the mark to market price of Bitcoin, how it relates to their MNAP,

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all of their metrics. You can see this. For the typical other companies, I do not know how many

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cars Tesla is shipping on a daily basis. I do not know the breakdown of those models. And I don't

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know the cost basis that it costs them to build those cars on a per minute basis. So is it great

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that strategy has transparency? Yes. And the price goes down. Oh, you see, we went down, but I'm like,

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I cannot tell you, you know, Netflix will come out with their subscriber growth. Do I have a per

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minute tally on how many subscribers Netflix is either growing or losing on a per minute basis?

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No, that dashboard does not exist for the Mag7.

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I don't know how many chips NVIDIA is shipping per minute.

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I don't know that number.

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I get an update once every three months to tell me where they stand, right?

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And so everybody's like, I want transparency.

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First of all, you don't get transparency with the other publicly traded companies.

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You don't get it on a permanent basis.

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You get it once every 90 days.

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You may not get the detail that you want, right?

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And with this, you get it.

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So this transparency cuts both ways.

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You see, it ran up.

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Okay, so that's great.

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The price ran up, so we love it.

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The price runs down.

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See, I told you these guys were turds.

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And so I think that's right.

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Oh, the M-TAP is terrible.

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Well, if you're a buyer, to Dan's point, is your entry point.

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You're waiting for a dip to buy in.

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Great.

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Then you buy on the dips.

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When do you sell?

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I believe you sell high.

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buy low sell high some people be like well if you sell then you have to pay taxes and the reason why

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you i'm gonna tell you the number one reason why people pay taxes it's the p word they made a profit

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like oh i'd rather just have losses all the time because then i don't pay i don't pay taxes

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fuck that so this is where we are your entry point matters and there's a difference between

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technical analysis and drawing lines on a chart yeah the 50 and 200 the 50 day and 200 day moving

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averages are automatically calculated. I'm just saying that these, you look at that,

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that's the analysis. And I'm going to finish my rant here in one second. You're either going to

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believe the math, you're going to believe the fundamentals, or you're going to believe in a

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cheeky meme, right? And some people are like, oh, let's just have a cheeky meme. I'm like, okay,

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then you're just believing the narrative. So pick which would you want. I can tell you right now

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that if I posted cheeky memes and I was good at that,

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I would have 50,000 followers.

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I'm terrible at it.

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I post detailed mathematical analysis

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and that's why I have half the followers that I have,

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but I'm done with my rant.

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Well, the good news is that the entry points

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are easier to find because the dips are obvious,

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but the exit points,

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trying to figure out when the top is,

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that's a lot harder.

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So just buy the dip and move it on.

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But I think what you said about

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the quarterly earnings reports

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for like a Netflix or whatever is important

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because in strategy, like you said,

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they basically have an earnings report every single day.

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365, well, 250 trading days a year.

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We know what strategy's earnings is,

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where other companies, you have to sit there and wait

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and be surprised, hopefully to the upside,

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but you're just as likely to be surprised to the downside.

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I don't think this has bigger implications for the debt.

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Say that again, Dan?

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We can take that.

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Let's talk about that later.

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I don't want to interject,

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But later I want to talk about how the full on 24-7 transparency is really has large implications for the preferreds or the debt.

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Huge, huge. It's calculating risk real time.

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You're smoothing earnings volatility.

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This has never existed before.

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Whereas, you know, there is a future.

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You can imagine a future where every company is operating on a Bitcoin standard and they're buying Bitcoin every week.

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Then earnings calls every quarter are almost irrelevant.

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right there. You would, you would have an understanding of how their business is growing

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and how it's changing over time. And I think that's why it's a, it's a fascinating exercise

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to look at the rest of the world from a Bitcoin perspective, right? Like compare all of the other

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equities and look at their earnings over time priced in Bitcoin, right? Like we, we talk about

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Bitcoin being money, being a store of value. Almost everybody misses this unit of account

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component. Like look at the rest of the world price in Bitcoin, even equities, look at equities,

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Look at debt. Look at all of these other things priced in Bitcoin. And the picture is so clear.

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Like everybody, every company pretty much on the planet, except for some of the Mag7, are going down into the right priced in Bitcoin.

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And that will continue to happen over time. And so you brought up a great point, right?

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You look at the balance sheet and you look at the strength of the company, like your example with Tesla, when Tesla went from 400 down to 100.

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the the was the company any worse no right they were they were you know building more building

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optimists more cars are going out the door gigafactories ai you know like they're doing

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everything collecting more data etc you could take a similar perspective here right you look at

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strategy back in 2024 beginning of 24 beginning of 25 the net capital held on the balance sheet

224
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at the beginning of 2024 is 5.7 billion. That's two years ago. And now the net capital that they

225
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hold on the balance sheet is 49 billion. That's insane. That's insane growth in very short time

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horizon, fueled by yet a little bit of debt and a little bit of debt relative to the assets,

227
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and then the new preferred stock as well. So you look at the debt to asset ratio. So on a leverage

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ratio perspective, looking at the debt relative to the assets, 14% levered and an amplification

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perspective, taking into consideration the notional prep outstanding and the debt,

230
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you get to 27% amplification. That's what you want. You want to buy that package at book value

231
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if you want to be levered along Bitcoin. Right. And I want to deputize everybody on this phone

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call. And what I mean by this is that, so let's say strategy, they have these perpetual preps and

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it pays this yield into perpetuity.

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And they have said there's different numbers out there.

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Given the price of Bitcoin, they could pay that for the next 100 years.

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People are like, see, 100 years is not into perpetuity.

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I'm like, okay, the next time somebody brings up a bond,

238
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the next time you talk to a TradFi guy, say,

239
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how long can you pay out the dividends on your bond?

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Tell me how long that you can pay that.

241
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Oh, until the term and then you refinance and you don't know it.

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this is the part that bugs me the most.

243
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Their cash flow, yeah.

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Their cash flow, that's unknown.

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You don't know what the future is.

246
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This is all unknown that they have.

247
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And so people scrutinize Bitcoin.

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I'm like, well, why don't you scrutinize TradFi

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and say to them, great.

250
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And by the way, if the company goes into bankruptcy,

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which I don't think there's even a remote chance

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of that happening to strategy,

253
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then how would you pay back the bondholders?

254
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And I use this example all the time.

255
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When Blockbuster went into bankruptcy,

256
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See, they had a billion dollar bond that was outstanding.

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What was the collateral on that bond?

258
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It was DVDs.

259
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DVDs are like having bananas in your collateral.

260
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They go bad after two weeks.

261
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They're worthless after two weeks.

262
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And the other thing they had was leaseholds, not real estate, just the leases.

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But once they no longer had cash flow, the bond was basically worthless.

264
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Who made the money on that?

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The lawyers.

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So here we have something like, well, if Bitcoin goes to zero,

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As soon as somebody says that to me, well, I guess that there's a more likely chance that Bitcoin goes to infinity.

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And the look on their face is like, what?

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I'm like, you heard what I just said.

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So I think the point here is that if you're going to be critical of MSTR, of strategy, then take that same critique and apply it to traditional finance.

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And those people will crumble within 30 seconds.

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They'll be like, I never got a question like that.

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Like, why not? Yeah. What's the collateral worth that's in the bond?

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Right. Yeah. A lot of people are not taking that perspective. Yeah. It's a strange phenomenon,

275
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the cognitive dissonance, right? Like you're taking all of this aggression out on this company

276
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because they hold Bitcoin and like not taking that same perspective on any of the other

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companies in the rest of the market. So let's shift over to, let's think about this MSCI topic.

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And we'll talk JP Morgan as well, because I think this is another interesting landscape of where we're at.

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So MSCI came out on October 10th.

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This is two months ago, nearly, that any company that is holding greater than 50% of their balance sheet and digital assets will be removed from MSCI global indices.

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So those are pretty decently sized indexes globally that a lot of capital follows, right?

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So MSCI is a publicly traded company.

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They create these index products for people to follow and buy funds that follow those index products.

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And one thing that's fascinating, if you think about this, right?

285
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If you're an asset manager, that email on October 10th might have been the only email

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that you may have got from MSCI that week.

287
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So if you're following these index funds, you have to take action on that information

288
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because there's a probability, right?

289
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If you look at the letter, it's very clear, actually, that there's a high likelihood that

290
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these companies are going to come out.

291
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There's a list of like, I don't know, 80 to 100 companies.

292
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There's a high likelihood that they're going to come out from the index funds.

293
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So think about the game theory process of going through this, right?

294
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If you wait until January 15th to when they make this decision of whether or not to include them and they exclude them,

295
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the thought is anybody that's following or tracking the index would have to go sell those companies.

296
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Now, you have to take some probability that that's going to happen.

297
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And so if the probability is greater than zero, you're incentivized today to make a decision based on the probability of that decision happening in the future.

298
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So any asset manager, if you're front running, like, again, everybody is front running everybody all the time to the upside and to the downside.

299
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If people are exiting the trade, you are incentivized to front run them and beat them to the door.

300
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So my thought is there's a high likelihood that if any institutional managers are following or tracking this, that they're already exited and out of the trade if they're following the MSCI index just because of the game theory associated here.

301
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There's no benefit of waiting until January 15th when the decision is made.

302
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If you think that the probability is greater than zero, that it's going to be excluded.

303
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So I'm going to start there.

304
00:22:33,000 --> 00:22:34,100
Like, do you guys have thoughts on this?

305
00:22:34,280 --> 00:22:35,900
How are you guys thinking about it?

306
00:22:36,680 --> 00:22:39,960
Obviously, this was made a big deal just last week from JP Morgan.

307
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They just started to make a stink on it.

308
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And we'll tie JP Morgan in next.

309
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But what do you guys think?

310
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Can I quote somebody here?

311
00:22:47,260 --> 00:22:47,740
Yeah, go ahead.

312
00:22:48,260 --> 00:22:49,180
This will be the quote.

313
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I have thoughts on this.

314
00:22:53,100 --> 00:22:53,460
Okay.

315
00:22:53,860 --> 00:22:59,700
So if you don't know, that's a reference to Michael Saylor from when he wrote the book about the mobile wave in 2012.

316
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So I have thoughts exactly what happened. I think that what Adrian Morris did is a phenomenal timeline. I think that timeline is 100% accurate. I think the narrative is off. I don't think that JP Morgan gives a crap about strategy. Okay. And if people want to go with that narrative, that's fine. I think the timeline, what happened was MSCI published that document. We already knew that Binance had a structural problem that was going on.

317
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So what I think happened is, and anybody can do this, go into the AI of your choice and say, give me 10 parameters for a trading bot on Bitcoin.

318
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And just say, not the actual code, just give me what the parameters are.

319
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So I asked it and it said, scrape the web, scrape Edgar, scrape indexes, scrape this based upon a price change or a volume or a notification of this.

320
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And it says, if this happens, then do this.

321
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and it says, and then it went through,

322
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it gave me these top 10 trading bots.

323
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So what I think happened is exactly the way the timeline said.

324
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We knew there was a problem with Binance,

325
00:24:02,240 --> 00:24:06,420
with the Oracle on Athena, the USD stable coin that existed

326
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because they announced that they had a problem with it

327
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and they were going to go fix it.

328
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Probably not a good idea.

329
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What happened was MSCI puts that out

330
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and then immediately the trading bots see the MSCI thing and say,

331
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oh, this is going to happen with MSTR.

332
00:24:20,560 --> 00:24:28,700
are. Therefore, let's start shorting what's going on in the crypto space. And then Tom Lee comes in

333
00:24:28,700 --> 00:24:35,000
to say, well, if you own a large, your institution owns a large amount of Bitcoin, there's ADL,

334
00:24:35,200 --> 00:24:39,920
the automated deleveraging that comes into effect. And so what happens is you're like, oh crap,

335
00:24:40,000 --> 00:24:45,760
I'm now losing money on my Bitcoin, unrealized gain, unrealized losses. Therefore, I need to

336
00:24:45,760 --> 00:24:51,260
hedge that position. I could do that in IBIT. I called Dan once he says this. I'm like,

337
00:24:51,260 --> 00:24:56,180
which do you think is better, Dan? And you can chime in with here. Would you rather short using

338
00:24:56,180 --> 00:25:02,840
IBIT or short using MSTR to short if you held the position in Bitcoin? Remember what you said to me?

339
00:25:05,220 --> 00:25:09,580
Yeah, I just said the MSTR options market is way more liquid than IBIT. So you're going to

340
00:25:09,580 --> 00:25:12,640
short position there. Plus you have actually levered exposure to the downside.

341
00:25:12,640 --> 00:25:18,920
it. Exactly right. So there it is. So now all of a sudden let's short the hell out of MSTR because

342
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it's bigger by about 30% than Ibit. It's more liquid. It has a levered piece of it. And you

343
00:25:24,780 --> 00:25:29,400
could probably hedge better by holding your Bitcoin and shorting MSTR. So then the narrative

344
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comes out, oh, this is a coordinated thing by JP Morgan. I would say, no, it's a bunch of fund

345
00:25:35,900 --> 00:25:40,440
managers that are like, hey, we have a responsibility to hedge, hence why they're called hedge funds

346
00:25:40,440 --> 00:25:46,420
or hedges to hedge that long position in Bitcoin that they believe is long term by selling MSTR

347
00:25:46,420 --> 00:25:52,660
short. So they drive the price of MSTR down. And that's where we get to today. And I think that

348
00:25:52,660 --> 00:25:57,760
now we seem to be getting a bid on Bitcoin. It's like, well, maybe we reduce some of those

349
00:25:57,760 --> 00:26:03,040
short hedges on MSTR. Maybe. Maybe there's some short covering on MSTR today. That's why it's

350
00:26:03,040 --> 00:26:07,780
jumping up. But that's how I think it played out. You guys could chime in, disagree with me.

351
00:26:07,780 --> 00:26:10,760
But that's how I think that I think that's the Occam's razor.

352
00:26:10,980 --> 00:26:13,500
It's the simplest explanation is most likely to be true.

353
00:26:14,840 --> 00:26:19,860
And people underestimate the fact that all the equity sales reduced the cost to borrow

354
00:26:19,860 --> 00:26:21,820
MSTR drastically over the last year.

355
00:26:21,940 --> 00:26:26,080
So it's just been a kind of a perfect hedge for anyone who was nervous about the four

356
00:26:26,080 --> 00:26:26,840
year cycle in Bitcoin.

357
00:26:27,400 --> 00:26:30,460
And so I think that's kind of some of the, you know, sell pressure we've seen.

358
00:26:32,860 --> 00:26:33,300
Right.

359
00:26:33,340 --> 00:26:34,260
It's put sell pressure.

360
00:26:34,460 --> 00:26:35,180
You've got MSCI.

361
00:26:35,180 --> 00:26:39,100
you've got all of these the confluence of factors that are hitting all at the same time

362
00:26:40,140 --> 00:26:47,260
and you look at uh just the monthly candles for uh or even the weekly candle for mstr mstr

363
00:26:47,260 --> 00:26:52,780
relative to bitcoin and it's down every single week it's read every single week since since

364
00:26:52,780 --> 00:26:59,660
october 10th so that's an that's an interesting phenomenon go ahead dan yeah i think the prefs

365
00:26:59,660 --> 00:27:06,380
unfortunately were since they're novel, since the question of Bitcoin per share came into question

366
00:27:06,380 --> 00:27:11,260
during sort of the introduction of the press, they provided kind of a reset on the MSDR capital

367
00:27:11,260 --> 00:27:17,020
structure. And people were kind of nervous like, oh, this could be not what I thought. Why is the

368
00:27:17,020 --> 00:27:21,820
cost of capital high? Why are these things senior to me in the capital structure? So I think it

369
00:27:21,820 --> 00:27:25,820
caused this kind of reset to book value. And now everyone can take a break and figure out where

370
00:27:25,820 --> 00:27:28,220
where the valuation is going to land over the coming years.

371
00:27:28,220 --> 00:27:35,960
So I really do think the press were kind of the catalyst to a downward move that now is being reset and flushed out and could lead to positive tailwinds.

372
00:27:36,780 --> 00:27:59,181
Right Because previously everybody was saying right strategy just got zero percent interest two billion dollars And you get that capital in the door you go buy Bitcoin and you like wow 0 interest bond Not necessarily thinking about the conversion feature or the back half of that trade the

373
00:27:59,181 --> 00:27:59,781
cost of it.

374
00:28:00,161 --> 00:28:01,141
Hold on one second.

375
00:28:01,361 --> 00:28:03,481
A comment from John's store.

376
00:28:03,701 --> 00:28:05,141
Nice afro, Dan.

377
00:28:05,741 --> 00:28:06,581
Dude, congratulations.

378
00:28:06,961 --> 00:28:08,041
That's a great comment.

379
00:28:10,561 --> 00:28:13,081
I'm not cutting my hair until MSTR is at 1,000.

380
00:28:14,021 --> 00:28:14,861
You know what?

381
00:28:15,401 --> 00:28:16,381
Please do that.

382
00:28:16,781 --> 00:28:17,601
Please do that.

383
00:28:17,681 --> 00:28:20,181
I'm not cutting my hair until MSTR is above 400.

384
00:28:21,181 --> 00:28:21,621
All right.

385
00:28:21,701 --> 00:28:22,881
We'll bite off something we can chew.

386
00:28:23,881 --> 00:28:24,041
Yeah.

387
00:28:26,401 --> 00:28:27,561
Not bullish enough.

388
00:28:29,161 --> 00:28:30,741
Not bullish enough on my hair length.

389
00:28:32,401 --> 00:28:34,201
Maybe there'll be a polymarket swab.

390
00:28:34,321 --> 00:28:35,881
How long does Dan's hair get?

391
00:28:35,981 --> 00:28:36,721
Wait, wait, wait.

392
00:28:38,021 --> 00:28:39,501
How rare is Dan's hair?

393
00:28:39,501 --> 00:28:39,901
You know what?

394
00:28:39,901 --> 00:28:44,541
maybe you should auction off some of your hair because you know teeth aren't you know teeth are

395
00:28:44,541 --> 00:28:48,861
in short short supply the old people will get the reference there but they're not that particularly

396
00:28:48,861 --> 00:28:55,901
valuable that's a good point grand i i also could use it to buy the dip yeah sell your yeah sell

397
00:28:55,901 --> 00:29:02,301
your hair maybe make a meme coin on it as well can we can we beat up on the jp morgan uh announcement

398
00:29:02,301 --> 00:29:07,581
that he did on the note let's do it let's talk about the note yeah let's talk about this this

399
00:29:07,581 --> 00:29:13,501
this note first of all i think overall it's it's bullish for the market that jp morgan has a note

400
00:29:13,501 --> 00:29:18,141
wells fargo is also making money on the note and it's written on the one page now i do find it's

401
00:29:18,141 --> 00:29:22,141
quite odd that this was came out in the end of september and we're just hearing about it now

402
00:29:22,781 --> 00:29:27,181
maybe they market this to institutional or large clients first so maybe that's what's happened with

403
00:29:27,181 --> 00:29:33,501
it but the question is is this a competitor to the prefs on strategy and hear me out the answer

404
00:29:33,501 --> 00:29:40,141
to that is yes, but this is a structured note. If you buy it, you're stuck in it for the term.

405
00:29:40,701 --> 00:29:46,241
There may be a secondary market for you to go sell it. There may be. So when you buy this,

406
00:29:46,501 --> 00:29:52,281
it's not like the prefs. Hey, you buy the prefs. Hey, I'm in them for a year and I want to get out

407
00:29:52,281 --> 00:29:56,421
of them. Then you just sell them. And the other thing about the prefs that everybody knows

408
00:29:56,421 --> 00:30:03,081
is that they're rock, return on capital. So that decreases the amount that your purchase price

409
00:30:03,081 --> 00:30:10,741
over time. The structured note by JP Morgan is not return of capital, or it doesn't mention that

410
00:30:10,741 --> 00:30:16,461
in the document. So again, apply the same level of scrutiny that everybody does to strategy when

411
00:30:16,461 --> 00:30:21,721
a new product comes out and say to them, okay, is it tax efficient? Is it rock capital? Can I get

412
00:30:21,721 --> 00:30:27,621
in and out of it? Is it liquid? The JP Morgan note is completely illiquid. When you're in it,

413
00:30:27,621 --> 00:30:33,481
You're stuck in it. It's basically a private note, right? What's great about doing private

414
00:30:33,481 --> 00:30:39,701
investments, right? Or you do private placements. You get into it and you tend to be locked up for

415
00:30:39,701 --> 00:30:45,321
five to seven years. There may be a secondary market for it. So again, we love liquidity.

416
00:30:45,421 --> 00:30:49,201
We love talking about these terms and everybody's like, oh, JP Morgan's here. It's going to crap.

417
00:30:49,321 --> 00:30:54,061
I'm like, but use that same level of scrutiny for the other products. And by the way,

418
00:30:54,061 --> 00:30:59,081
does JP Morgan have a dashboard to show you that right now this fucker is

419
00:30:59,081 --> 00:31:04,821
trading under value because it was priced at $110,000 on September 29th.

420
00:31:04,821 --> 00:31:06,701
And right now this product is negative.

421
00:31:06,701 --> 00:31:10,881
So it's negative fricking MNAV based upon the multiple to the,

422
00:31:10,881 --> 00:31:15,081
the net asset value put in is now off by 20,000 bucks.

423
00:31:15,221 --> 00:31:18,161
So this thing is trading at 80% MNAV.

424
00:31:18,341 --> 00:31:21,101
I don't know if I can make this any simpler for people that are here,

425
00:31:21,101 --> 00:31:27,761
But because you can't see the dashboard because they don't have one for it, you're like, oh, I guess JP Morgan's beaten up on strategy.

426
00:31:27,981 --> 00:31:29,121
But they don't even know.

427
00:31:29,261 --> 00:31:31,221
It's kind of like having a car without a speedometer.

428
00:31:31,741 --> 00:31:33,681
I think we're going fast, but I don't know how fast.

429
00:31:34,481 --> 00:31:35,201
I'm done with my rant.

430
00:31:35,661 --> 00:31:38,861
And you also think about – I've got so many opinions and thoughts on this.

431
00:31:38,981 --> 00:31:40,161
You also think about the upside.

432
00:31:40,421 --> 00:31:41,461
It's like where does the upside go?

433
00:31:42,221 --> 00:31:43,901
Okay, upside goes to JP Morgan.

434
00:31:45,461 --> 00:31:49,361
So they've got a $4 trillion balance sheet.

435
00:31:49,361 --> 00:31:53,641
Like, okay, they're going to make $100 million on a $4 trillion balance sheet.

436
00:31:53,741 --> 00:31:58,361
Like I'm not buying JP Morgan stock to take the benefit of the long side of the trade here.

437
00:31:58,821 --> 00:32:02,041
If I'm long Bitcoin, then there's so many other things, right?

438
00:32:02,121 --> 00:32:05,901
You hit on a great point, structured note, probably illiquid.

439
00:32:06,241 --> 00:32:08,221
Maybe it's 144A trades.

440
00:32:09,861 --> 00:32:12,881
Who knows where this thing is going to trade or how it's going to trade.

441
00:32:12,881 --> 00:32:21,041
if they want to tap and access larger pools of capital they're going to need to get this product

442
00:32:21,041 --> 00:32:26,241
rated and it's also a bit confusing like it's not super straightforward exactly how it works

443
00:32:26,241 --> 00:32:31,941
i haven't seen like a specific document on this yet and everybody's speculating it's like

444
00:32:31,941 --> 00:32:39,821
the price goes up by 2026 you get um what is it like guaranteed like 16 return but then if it goes

445
00:32:39,821 --> 00:32:45,841
into 2028, you get one and a half times the upside. So it's not very clear.

446
00:32:45,841 --> 00:32:52,541
It caps at 200% of upside. So if Bitcoin does a 4X rep, let's put this into simple terms.

447
00:32:52,961 --> 00:33:01,001
Your upside is capped at 2X. If Bitcoin does a 4X, you just gave that additional 200% to JP Morgan.

448
00:33:01,001 --> 00:33:14,481
Right. So again, you know, you know, this is, you know, what's important about this is that and by the way, the downside protection only leaves you with 12 and a half percent.

449
00:33:14,961 --> 00:33:17,641
You can lose up to 87 and a half percent of your money.

450
00:33:17,641 --> 00:33:28,981
So it's not like this thing is perfectly structured to save all your money because people get, oh, is stretch guaranteed to maintain the peg and you always get back when you could sell it?

451
00:33:28,981 --> 00:33:34,701
No, it's not guaranteed. Oh, well, I can't buy it then. I'm like, oh, well, let's look at the JP Morgan product.

452
00:33:35,301 --> 00:33:42,121
They basically guarantee that if you put in $100,000, they'll guarantee $12,500.

453
00:33:44,681 --> 00:33:47,921
Yeah, this is just another product with different risk return, right?

454
00:33:47,921 --> 00:33:51,561
Yes, it's a competitor to the prefs, but there's so much.

455
00:33:51,901 --> 00:33:55,741
Look, we're tackling a $300 trillion fixed income market.

456
00:33:55,861 --> 00:33:58,221
If you think about real estate too, it's $600 trillion, right?

457
00:33:58,221 --> 00:34:00,201
This is an absolutely enormous marketplace.

458
00:34:00,441 --> 00:34:04,881
And if you think about if they have to unlock additional capital to buy this thing, they

459
00:34:04,881 --> 00:34:09,261
have to go explain the instrument to institutional capital and why they should buy it.

460
00:34:09,701 --> 00:34:10,501
What's my upside?

461
00:34:10,661 --> 00:34:11,401
What's my downside?

462
00:34:11,661 --> 00:34:12,481
Why does it look good?

463
00:34:13,041 --> 00:34:13,301
Okay.

464
00:34:13,681 --> 00:34:17,041
Then if you want to unlock additional capital, you got to go get the product rated.

465
00:34:17,041 --> 00:34:22,341
Well, JP Morgan's got a great issuer credit rating, but this instrument, if it's got a

466
00:34:22,341 --> 00:34:27,261
Bitcoin component to it, is going to get negative treatment from the S&P because they've already

467
00:34:27,261 --> 00:34:31,261
announced they've got negative they've announced negative treatment for bitcoin as capital

468
00:34:32,301 --> 00:34:38,221
so the rating is going to be bad but if it's jp morgan and strategy both pushing the s p for a

469
00:34:38,221 --> 00:34:45,261
rating there's actually a higher likelihood and and for basel accounting uh basel banking accords

470
00:34:45,821 --> 00:34:50,301
there's also a high likelihood that those rules are going to change and if those rules change

471
00:34:50,301 --> 00:34:58,201
then they can't like it. If the rules change for JP Morgan for Bitcoin, if the Basel Accords

472
00:34:58,201 --> 00:35:03,601
change for Bitcoin, then it's also got to be applied to strategy. So this is incredibly bullish.

473
00:35:03,721 --> 00:35:09,501
You've got now multiple large institutions with power that have the ability to potentially push

474
00:35:09,501 --> 00:35:16,201
ratings and open up just huge doors of institutional capital to come in the door. Additionally, you

475
00:35:16,201 --> 00:35:20,261
think about, again, just the payout structure. I don't think this JP Morgan product is

476
00:35:20,301 --> 00:35:24,341
rate, to be honest. I think I would rather buy strike because you're getting paid quarterly,

477
00:35:24,561 --> 00:35:29,761
you get 8% annually, you got downside protection. The balance sheet of strategy, the Bitcoin balance

478
00:35:29,761 --> 00:35:35,001
sheet is what's backing it. And I think the instruments that are created via the press are

479
00:35:35,001 --> 00:35:40,681
just significantly better because they're liquid and you get payment. It looks just so much similar

480
00:35:40,681 --> 00:35:48,141
to a fixed income instrument, like a bond that is easy to put into a portfolio, like a retirement

481
00:35:48,141 --> 00:35:59,001
account or an insurance portfolio, pension fund, et cetera. So to me, this is bullish for Bitcoin.

482
00:35:59,201 --> 00:36:04,841
This is bullish for strategy, despite all of the negative sentiment and JP Morgan shorting,

483
00:36:04,841 --> 00:36:10,081
changing margin requirements, all this other stuff. Is that happening? Is that a targeted attack?

484
00:36:10,081 --> 00:36:22,641
Maybe. But ultimately, like this is what's happening right now is a power grab for as much Bitcoin as humanly possible.

485
00:36:22,861 --> 00:36:26,561
And this is BitBonds accelerating in the market.

486
00:36:26,561 --> 00:36:30,341
And I pulled another example of this.

487
00:36:31,521 --> 00:36:39,181
I think just last week, New Hampshire launched the first Bitcoin backed municipal bond.

488
00:36:40,081 --> 00:36:43,501
Okay, so now you got states offering municipal bonds.

489
00:36:43,581 --> 00:36:45,761
You got JP Morgan pushing some sort of BitBond.

490
00:36:45,781 --> 00:36:47,001
Wait, we got Texas bought it.

491
00:36:47,181 --> 00:36:48,221
Texas bought it.

492
00:36:48,361 --> 00:36:49,341
They just bought it.

493
00:36:49,921 --> 00:36:50,761
They just bought Bitcoin.

494
00:36:51,201 --> 00:36:52,781
But they just bought Ibit, which is great.

495
00:36:52,881 --> 00:36:56,661
But the bond structure is growing.

496
00:36:57,801 --> 00:36:59,381
And that's what we're here for.

497
00:36:59,581 --> 00:37:01,501
We're here to tackle the entire bond.

498
00:37:01,501 --> 00:37:04,121
By the way, the cope that happened.

499
00:37:04,461 --> 00:37:08,201
So I forgot which economist guy said this.

500
00:37:08,201 --> 00:37:10,721
It was either, I don't want to say which one it was.

501
00:37:10,721 --> 00:37:15,661
One of these economists said, oh, but they only bought, they allocated 10 million and bought 5 million.

502
00:37:15,881 --> 00:37:18,441
And the response was, oh, but they only bought $5 million.

503
00:37:18,761 --> 00:37:19,521
It's a small number.

504
00:37:19,861 --> 00:37:25,661
I'm like, you know how hard it is to get a state, whether it's New Hampshire or Texas, to actually buy some of this stuff?

505
00:37:26,001 --> 00:37:28,541
I mean, so I was like, well, this wasn't a big number.

506
00:37:28,661 --> 00:37:30,681
I'm like, yeah, but it starts small and goes big.

507
00:37:30,681 --> 00:37:39,521
You know, the most successful growing and largest spot, you know, ETF is IBIT.

508
00:37:39,641 --> 00:37:41,881
It's the fastest growing ETF of all time.

509
00:37:42,281 --> 00:37:43,681
It way outpaces gold.

510
00:37:44,181 --> 00:37:47,721
And what is it currently at $80 billion in two years, right?

511
00:37:47,781 --> 00:37:49,581
Or the value that fluctuates.

512
00:37:49,941 --> 00:37:51,101
So we've been doing this.

513
00:37:51,201 --> 00:37:54,121
Eric Balkunas has been doing great information what's grown on the space.

514
00:37:54,501 --> 00:37:56,961
So I think that you have a wide variety of these products.

515
00:37:56,961 --> 00:38:04,081
I think the fact that JP Morgan is offering a structured products to their high net worth clients, these are not for their regular clients.

516
00:38:04,661 --> 00:38:06,381
And again, go back to liquidity.

517
00:38:06,601 --> 00:38:16,701
Oh, like you said, Jeff, it'd be better to buy Strike or Stretch or one of the preps because if you want to sell for whatever reason, you could do that at any time.

518
00:38:16,701 --> 00:38:23,021
yeah and what you said about the bullishness as far as the the ratings agencies are concerned

519
00:38:23,021 --> 00:38:30,281
is critical i think because when we discussed the uh smp rating to begin with it was like okay

520
00:38:30,281 --> 00:38:37,201
they can afford to do this to strategy now because they're the only one but what blackrock does is it

521
00:38:37,201 --> 00:38:45,441
validates the thesis that this is a legit product um i know you can't talk about it but sata did the

522
00:38:45,441 --> 00:38:51,121
same thing. But that was from the perspective of someone who's already oriented to Bitcoin.

523
00:38:51,401 --> 00:38:56,921
This is a TradFi company. These are people who are aligned with the ratings agencies to begin with.

524
00:38:57,381 --> 00:39:03,881
So now they can't just kind of screw strategy over with a low rating. There are going to be

525
00:39:03,881 --> 00:39:10,321
some powerful people in the TradFi space whose incentives are now aligned with strategy. So I

526
00:39:10,321 --> 00:39:17,781
think you're right that this is this is a bullish event and by the way we can go take if for any

527
00:39:17,781 --> 00:39:24,801
reason this is a long shot not a prediction but if strategy gets s&p 500 inclusion if it just does

528
00:39:24,801 --> 00:39:31,761
then that like i did a post on be poetic justice and if bitcoin look i believe it's not if it's

529
00:39:31,761 --> 00:39:37,121
just when bitcoin continues to run it will retake its all-time high whenever the price goes down

530
00:39:37,461 --> 00:39:38,961
People are like, oh, you got a dip.

531
00:39:39,021 --> 00:39:39,501
You're buying it?

532
00:39:39,581 --> 00:39:40,461
No, it's going to zero.

533
00:39:40,561 --> 00:39:41,361
It runs back up.

534
00:39:41,621 --> 00:39:45,181
Same question as I always get from people like, oh, when should I buy?

535
00:39:45,261 --> 00:39:48,481
I guess when there's a dip, but you'll think it's going to zero, so you won't buy it.

536
00:39:48,521 --> 00:39:50,301
And you're like, well, that's a nasty remark.

537
00:39:50,681 --> 00:39:52,321
And I'm like, but we just had the dip.

538
00:39:52,401 --> 00:39:54,061
And people are like, well, it could go to 50,000.

539
00:39:54,521 --> 00:39:58,501
So I think where we stand today is that either you believe in the macro indicators, and I

540
00:39:58,501 --> 00:40:02,721
think that's where, you know, talking about M2, but going back to the rating agencies,

541
00:40:02,721 --> 00:40:16,241
I think that if it does get S&P 500, if the standard reports wants to stick it to MSCI for a competitive advantage, they could say we put MSTR into the index, right?

542
00:40:16,261 --> 00:40:20,381
If they want to just have that novelty value of it, right?

543
00:40:20,541 --> 00:40:25,581
And that Bitcoin is real because they can't put any of the spot Bitcoin ETFs in it.

544
00:40:25,881 --> 00:40:29,621
There's no commodities that's in the index, but they can't put MSTR in it.

545
00:40:29,621 --> 00:40:34,901
And I think for them, speaking as a tech guy, that's called competitive advantage.

546
00:40:35,441 --> 00:40:40,021
And they would have something in their index, which MSCI wants to take out of it.

547
00:40:40,041 --> 00:40:41,561
And by the way, what's the precedent for this?

548
00:40:41,981 --> 00:40:46,141
Jeff, is it correct that MSTR used to be in the S&P 600?

549
00:40:46,561 --> 00:40:47,001
That's correct.

550
00:40:47,921 --> 00:40:48,281
Right.

551
00:40:48,461 --> 00:40:50,321
So it's like, oh, grain's making stuff up.

552
00:40:50,421 --> 00:40:52,121
I'm like, no, it used to be a part of it.

553
00:40:52,181 --> 00:40:56,221
Now all of a sudden it's like, oh, I guess we didn't see that coming.

554
00:40:56,701 --> 00:40:58,201
So do I think that it's going to happen?

555
00:40:58,201 --> 00:40:58,761
No.

556
00:40:58,761 --> 00:41:01,681
But if it does happen, I will take the victory lap.

557
00:41:02,301 --> 00:41:05,381
And everybody that believes in MSDR, take the victory lap.

558
00:41:06,761 --> 00:41:11,541
I have some interesting thoughts and a little bit of analysis on the prefs.

559
00:41:12,041 --> 00:41:14,761
So I'd love to switch there and talk about how they're trading relative to Bitcoin.

560
00:41:15,021 --> 00:41:18,501
And it's on what you're saying, Jeff, and I'll let you guys jump in first.

561
00:41:19,201 --> 00:41:21,081
But I apologize, there's a car going past me here.

562
00:41:21,201 --> 00:41:25,061
But these prefs are a weird hybrid between a fixed income instrument and an equity.

563
00:41:25,181 --> 00:41:26,481
Because technically, they're an equity, right?

564
00:41:26,501 --> 00:41:27,221
It's a preferred equity.

565
00:41:27,221 --> 00:41:28,061
It's not a bond.

566
00:41:28,061 --> 00:41:37,781
So it's not a debt. It's not a bond. It has no maturity. Similarly, if you look at their capital structure, they're calling them amplification, not debt, because the principle never comes due.

567
00:41:38,101 --> 00:41:47,041
Okay. So how are they going to trade on the market? Are people going to draw TA lines and take a long levered long on stride? Are they going to short stride relative to stretch?

568
00:41:47,041 --> 00:41:50,481
You can go long the superior product and short.

569
00:41:50,921 --> 00:41:51,921
So like, for example, right?

570
00:41:51,981 --> 00:41:57,661
I think an interesting trade is like your long stretch, sorry, your long strife and short stride, right?

571
00:41:57,801 --> 00:42:03,421
Because if a dividend payment was ever missed, stride would effectively get smoked, like smoked very hard.

572
00:42:03,881 --> 00:42:09,781
But strife has the cumulative dividends, which are essentially dividends that are missed or compounded and owed to the shareholders.

573
00:42:10,361 --> 00:42:11,781
So strife may be fine.

574
00:42:11,941 --> 00:42:13,161
Stride might take a bigger hit.

575
00:42:13,441 --> 00:42:14,801
That's your hedge position.

576
00:42:14,961 --> 00:42:16,661
You may take the hedge off during the next dividend dates.

577
00:42:16,661 --> 00:42:26,981
There's different ways to do it. But what's been really interesting, and I'm just going to share my screen really quickly, is the correlation between Stride and Bitcoin.

578
00:42:26,981 --> 00:42:35,241
So Stride is actually trading at like 1.5x beta to Bitcoin. So it's actually right now,

579
00:42:35,521 --> 00:42:40,481
Stride is trading like leveraged Bitcoin, which kind of makes sense considering Bitcoin is in

580
00:42:40,481 --> 00:42:46,261
fact the collateral for this offering. And it's the junior most security and strategy capital

581
00:42:46,261 --> 00:42:51,741
stack above the common. So I don't know how this is going to play out in real time moving forward.

582
00:42:52,101 --> 00:42:56,001
And it's something we talked about, I think a year ago, Jeff, when this is all coming out in

583
00:42:56,001 --> 00:43:00,881
grain and soleil is like we're talking about people are going to be arbing trading hedging

584
00:43:00,881 --> 00:43:05,761
and there's going to be massive liquidity in these products the way they're behaving so i think

585
00:43:05,761 --> 00:43:12,561
back and forth between all of them yeah right yeah it'd be like okay stride is below its par value

586
00:43:12,561 --> 00:43:18,121
technically it's at 0.75 m nav like if bitcoin per share is a thing in the case of liquidation

587
00:43:18,121 --> 00:43:23,341
so bitcoin per share is the amount of bitcoin you have in liquidation essentially then stride is 0.75

588
00:43:23,341 --> 00:43:30,501
MNAP. Okay. So it's trading at 0.75 MNAP. And like, maybe that is a levered long that's actually

589
00:43:30,501 --> 00:43:35,121
superior to MSTR in that case. And then it's like, okay, now there's an options market on this.

590
00:43:35,501 --> 00:43:40,461
So I've bought the absolute maximum amount of stride calls I've been able to buy because like

591
00:43:40,461 --> 00:43:45,941
the volume, the daily volume is like one. And the bid ask spread is like three bucks. It bids two

592
00:43:45,941 --> 00:43:51,321
bucks. The ask is like five bucks. But like if Bitcoin runs, and this was a little report I did,

593
00:43:51,321 --> 00:43:56,161
If Bitcoin runs, there's no reason that thing shouldn't trade at one MNAV.

594
00:43:56,661 --> 00:44:01,821
And I like thinking about the press in terms of MNAV because they're equity, not debt.

595
00:44:02,221 --> 00:44:03,861
So at one MNAV, it's $100.

596
00:44:04,301 --> 00:44:06,681
Those call options create a crazy return.

597
00:44:07,061 --> 00:44:08,041
Then you've got all this stuff.

598
00:44:08,141 --> 00:44:11,661
Now you have these options like, okay, I want to collect the December 19th dividend on Strife.

599
00:44:11,921 --> 00:44:12,921
I think we all do.

600
00:44:13,121 --> 00:44:14,641
It's $2.5 per share.

601
00:44:14,761 --> 00:44:16,101
So it's essentially 2.5%.

602
00:44:16,101 --> 00:44:21,441
okay, now I want to sell my upside and lock in even more profit during that hold period.

603
00:44:21,921 --> 00:44:25,561
So I sell a call. I sell the upside to someone else. Like me, I'm buying the upside, right?

604
00:44:25,901 --> 00:44:31,701
So now you have a 3.5% dividend on that quarter annualized at whatever, 15% by holding something

605
00:44:31,701 --> 00:44:36,761
like Strife. So these markets, I don't think we're even scratching the surface at how mature

606
00:44:36,761 --> 00:44:41,841
these things are going to get. Yeah. I don't know. It's crazy. There's no other products like this.

607
00:44:41,841 --> 00:44:50,281
There's going to be all sorts of algorithmic ways you can think about this and trade in and out of all of them with different perspectives.

608
00:44:50,561 --> 00:44:52,681
That's an interesting way to look at it.

609
00:44:53,521 --> 00:44:59,701
So when you're thinking about any of these products as a 1MNAV, you're just using the liquidation preference, right?

610
00:44:59,741 --> 00:45:03,021
If it's trading at what stride is at 75 cents on the dollar.

611
00:45:04,641 --> 00:45:05,121
Exactly.

612
00:45:05,421 --> 00:45:07,361
Because what is 1MNAV for the common?

613
00:45:07,361 --> 00:45:21,101
It's just like if everything, if the company were to roll up and everyone were to get paid out the Bitcoin, they are technically, they're not owed, but paid out the Bitcoin equivalent in USD, then right now the MNAV of common is 1.15.

614
00:45:21,521 --> 00:45:31,981
So you'd have like for every $175 of MSTR common you own, you wind up with like $155 of Bitcoin in the case of liquidation, if it all worked perfectly, right?

615
00:45:31,981 --> 00:45:39,121
with stride if strategy were to liquidate tomorrow with the same bitcoin price i know this is this is

616
00:45:39,121 --> 00:45:44,081
a scenario that is impossible but let's just for the sake of argument as a stride holder you would

617
00:45:44,081 --> 00:45:49,401
be paid out a hundred dollars for each 75 dollars you own if strategy were liquidated liquidate

618
00:45:49,401 --> 00:45:55,321
tomorrow so that's a negative m now negative book value it's trading at a discount to its book value

619
00:45:55,321 --> 00:46:00,161
discount to its book value i could think you could think of it that way when i listen to dan talk i

620
00:46:00,161 --> 00:46:04,001
just think to myself, tell me you're an engineer without telling me you're an engineer. Like

621
00:46:04,001 --> 00:46:12,461
the way he thinks about investing. I, I'm never, you know, obviously, I like the guy, but his

622
00:46:12,461 --> 00:46:16,561
creativity with the way that he thinks about these things is frickin unmatched. It's kind of

623
00:46:16,561 --> 00:46:23,781
ridiculous. Yeah, yeah, yeah, you're, you're at the forefront of developing cutting edge, you know,

624
00:46:23,781 --> 00:46:29,181
ways to interact and trade between these things, right? Like, I think you're absolutely right.

625
00:46:29,181 --> 00:46:36,621
I think the volume and the liquidity of these instruments is going to increase so drastically just because there are these fixed income instruments.

626
00:46:37,361 --> 00:46:39,741
Most of the fixed income instruments are not liquid.

627
00:46:39,881 --> 00:46:42,901
And now you have kind of liquid fixed income instruments.

628
00:46:44,421 --> 00:46:54,221
And the ability to trade in between in and out of them and Bitcoin and MSTR, the whole ecosystem and SATA and, you know, all of these other things.

629
00:46:54,221 --> 00:46:54,541
Right.

630
00:46:55,461 --> 00:46:57,681
And that could be a and Bitcoin.

631
00:46:57,681 --> 00:47:03,361
And that could be a whole algorithmic trading model that I'm sure people are working on right now.

632
00:47:04,041 --> 00:47:04,741
Like, well, think about it.

633
00:47:04,781 --> 00:47:05,441
Like, think about this.

634
00:47:05,561 --> 00:47:07,901
Like, so right now you just look at the numbers.

635
00:47:08,501 --> 00:47:11,341
Stride is like, it's actually like 1.5x levered Bitcoin.

636
00:47:11,461 --> 00:47:13,221
That's the way it's been behaving since inception.

637
00:47:13,401 --> 00:47:15,561
So Stride, the junior debt.

638
00:47:15,921 --> 00:47:17,661
What happens if Bitcoin rips to 300k next year?

639
00:47:19,481 --> 00:47:20,601
Does it stop at 100?

640
00:47:21,841 --> 00:47:24,541
Yeah, that's a good, well, how much press?

641
00:47:24,641 --> 00:47:24,961
I don't know.

642
00:47:25,301 --> 00:47:26,421
How much press get issued?

643
00:47:26,421 --> 00:47:32,241
and rates are lower you're right the point so so like issuance would put a cap on the price

644
00:47:32,241 --> 00:47:38,061
right so if if they're like if bitcoin rips at 300 like the capacity to issue prefs like

645
00:47:38,061 --> 00:47:45,361
five x is you know like so so so wait but this becomes an important point and and mark harvey

646
00:47:45,361 --> 00:47:52,121
wrote this what he says is look there's there's a dividend yield rate look as everybody knows as

647
00:47:52,121 --> 00:48:00,561
If the price with bonds and the prefs are trade like a bond, although they're equities, as Dan said, as the price goes up, the yield goes down.

648
00:48:00,821 --> 00:48:01,701
So what does that mean?

649
00:48:01,821 --> 00:48:03,021
It's an inverse relationship.

650
00:48:03,781 --> 00:48:06,181
So they say this all the time on CNBC.

651
00:48:06,361 --> 00:48:07,981
As the price of the bond goes up, the yield goes down.

652
00:48:08,361 --> 00:48:13,561
So if you have a bond that's priced at $100 and it pays 10%, you're like, OK, great.

653
00:48:13,561 --> 00:48:20,681
But if that bond goes to $300, you're still getting paid the 10% on $100 on the original par value.

654
00:48:20,681 --> 00:48:26,681
But as a percentage, that drops down to the effective yield on that is 3%.

655
00:48:26,681 --> 00:48:28,521
And why did that yield go down?

656
00:48:28,601 --> 00:48:30,761
You're still like, but I'm still getting my $10 a year.

657
00:48:31,061 --> 00:48:32,141
You're like, why did it go down?

658
00:48:32,321 --> 00:48:34,881
No, because the underlying value now tripled to $300.

659
00:48:35,481 --> 00:48:37,521
So effectively, you're only making 3%.

660
00:48:38,181 --> 00:48:41,001
And if people don't understand this, right?

661
00:48:41,161 --> 00:48:41,741
This is critical.

662
00:48:41,881 --> 00:48:46,481
This, Jeff, goes back to what you keep on saying, that in years down the road, as the

663
00:48:46,481 --> 00:48:53,301
compounding effects as Bitcoin continues to go up, the yield that's paid out is 10% and it's in

664
00:48:53,301 --> 00:48:58,641
fiat dollars, but you have an underlying collateral that's growing at 20, 30% a year.

665
00:48:58,921 --> 00:49:04,661
So you're still going to get what they promised to you, but you're not participating in the upside.

666
00:49:04,661 --> 00:49:09,401
You're like, well, that doesn't sound good. And what happens is strategy is basically offered

667
00:49:09,401 --> 00:49:15,321
five or six products, right? Stride has the most volatility to it. It has more of the upside.

668
00:49:15,701 --> 00:49:16,721
Strike has a conversion.

669
00:49:16,921 --> 00:49:18,901
Then you have stretch and so forth.

670
00:49:19,361 --> 00:49:21,941
And so you could pick, do you want the highest volatility?

671
00:49:22,421 --> 00:49:24,981
Buy the MSTR common shares, right?

672
00:49:25,021 --> 00:49:26,561
And then you have a range of the preps.

673
00:49:26,601 --> 00:49:28,641
And then you have the converts at the top of the capital stack.

674
00:49:29,081 --> 00:49:31,821
So he's like, pick the volatility that you want.

675
00:49:31,821 --> 00:49:33,061
What can you stomach?

676
00:49:33,341 --> 00:49:37,041
Can you stomach a 40%, 50% downturn in MSTR?

677
00:49:37,661 --> 00:49:38,001
No.

678
00:49:38,161 --> 00:49:39,681
Well, I guess maybe you should buy the preps.

679
00:49:39,761 --> 00:49:40,981
And how many preps does he offer?

680
00:49:41,501 --> 00:49:41,881
Who does he offer?

681
00:49:42,001 --> 00:49:42,661
Five right now?

682
00:49:42,881 --> 00:49:43,481
A whole bunch.

683
00:49:44,001 --> 00:49:45,061
Five different preps.

684
00:49:45,061 --> 00:49:47,241
So pick your volatility profile.

685
00:49:47,781 --> 00:49:52,401
And so I think what he's done is, you have to understand, this is a feature, not a bug.

686
00:49:52,581 --> 00:49:59,381
When Saylor says that he strips out the volatility, he's stripping out that upside that exists

687
00:49:59,381 --> 00:50:01,381
in some of the prefs, right?

688
00:50:01,501 --> 00:50:03,141
In stretch, you don't get that upside.

689
00:50:03,341 --> 00:50:05,341
All you get is the 10.5% coupon.

690
00:50:05,701 --> 00:50:06,941
It's not a bug.

691
00:50:07,581 --> 00:50:10,201
The prefs were designed to have income coming in.

692
00:50:10,541 --> 00:50:12,781
And therefore, he's got to strip out the volatility.

693
00:50:12,781 --> 00:50:15,161
So you don't participate in a 2X upside.

694
00:50:18,341 --> 00:50:18,861
Right.

695
00:50:19,001 --> 00:50:21,101
You're trading excess.

696
00:50:22,541 --> 00:50:26,981
You're getting rid of excess return in exchange for reducing the excess volatility.

697
00:50:27,301 --> 00:50:28,601
But hold on.

698
00:50:28,681 --> 00:50:34,741
But it gets paid out either in a quarterly, right, for most of the preps, or you get paid out monthly yield.

699
00:50:35,161 --> 00:50:36,621
Look, the biggest problem with Bitcoin.

700
00:50:36,761 --> 00:50:38,161
Let me tell you what the biggest problem is with Bitcoin.

701
00:50:39,121 --> 00:50:41,401
You buy Bitcoin at whatever price.

702
00:50:41,401 --> 00:50:42,741
It doubles in value.

703
00:50:42,781 --> 00:50:45,641
And what happens is it's like a Veblen good.

704
00:50:46,121 --> 00:50:49,661
And what a Veblen good means is as the value goes up, you hold on to it harder.

705
00:50:49,921 --> 00:50:53,281
Typically, what happens is, right, you don't want to sell it.

706
00:50:53,481 --> 00:50:56,101
Well, if you sell it, I'm never going to be able to buy it at that price again.

707
00:50:56,161 --> 00:50:57,301
So you hodl forever.

708
00:50:57,761 --> 00:51:02,121
What the prefs are designed to do is you buy the prefs and you're going to get either a

709
00:51:02,121 --> 00:51:04,221
monthly or quarterly yield paid to you.

710
00:51:04,381 --> 00:51:07,101
And if you get enough money into the prefs, you don't have to work again.

711
00:51:07,761 --> 00:51:07,901
Yeah.

712
00:51:08,221 --> 00:51:12,181
And so you trade off that upside by getting that yield that comes to either monthly or

713
00:51:12,181 --> 00:51:12,561
quarterly.

714
00:51:12,781 --> 00:51:16,061
So for Bitcoin, everybody's like, well, how do I get a yield on Bitcoin?

715
00:51:16,401 --> 00:51:17,881
You could do some DeFi thing.

716
00:51:17,981 --> 00:51:19,181
You could lend against it.

717
00:51:19,601 --> 00:51:23,441
But with this, no, you buy the preps and you can get in and out whenever you want to.

718
00:51:23,541 --> 00:51:24,961
And besides, it's return of capital.

719
00:51:25,601 --> 00:51:25,721
Yeah.

720
00:51:26,221 --> 00:51:30,461
The one thing that's so interesting that comes up a lot, like how are they going to pay the dividends, right?

721
00:51:30,481 --> 00:51:31,341
How are they going to pay the dividends?

722
00:51:31,521 --> 00:51:37,221
Well, that's the risk that strategy the company is taking on, right?

723
00:51:37,321 --> 00:51:38,261
How do they pay the dividends?

724
00:51:38,261 --> 00:51:42,161
Well, you could sell equity via MSTR to do that, right?

725
00:51:42,161 --> 00:51:46,001
which means the equity common stock shareholder is taking the volatility on the forehead,

726
00:51:46,521 --> 00:51:51,781
right? Like who's stomaching the volatility of the excess Bitcoin? It's the common stock

727
00:51:51,781 --> 00:51:57,701
shareholder. Everybody knows this. But if you're long Bitcoin, you want that excess volatility.

728
00:51:57,701 --> 00:52:04,261
You want that. If you're long Bitcoin and you believe in it, the excess return, the excess

729
00:52:04,261 --> 00:52:08,941
upside and the excess downside is appealing to you if you have a long enough time horizon.

730
00:52:08,941 --> 00:52:33,321
So you think about the common stock shareholders taking the excess volatility on the forehead, right? The price of Bitcoin goes down, you get this leveraged impact to the downside, reflexivity in both directions. And they can sell the Bitcoin, that's always an option, right? Bitcoin has traded $60 billion of volume today, strategy's annual interest obligation is $757 million.

731
00:52:33,321 --> 00:52:41,761
And the amount that they need to raise or figure out how to pay per day is like $2 million on a stock that trades $2 billion a day.

732
00:52:42,181 --> 00:52:43,421
It's minuscule.

733
00:52:43,741 --> 00:52:44,741
It's so tiny.

734
00:52:45,461 --> 00:52:47,041
It's a complete nonsensical argument.

735
00:52:47,221 --> 00:52:51,581
And I've been a bear for the past three months because of the press and the press are gaining adoption.

736
00:52:51,701 --> 00:52:55,541
So I'd be the first one to say, oh, they have a problem with interest obligations.

737
00:52:55,721 --> 00:52:56,141
They don't.

738
00:52:56,201 --> 00:52:57,861
It's a completely nonsensical argument.

739
00:52:58,341 --> 00:53:03,101
During 2022 and 2023, they sold equity to buy more Bitcoin at a discount.

740
00:53:03,321 --> 00:53:07,801
like they were trading at a discount. They use the ATM. No one cared because they weren't in the

741
00:53:07,801 --> 00:53:12,021
spotlight. That could happen again here. And I think they would, even as a common equity shareholder,

742
00:53:12,241 --> 00:53:17,541
if they sold common equity at a 0.95 MNAV to fund the divs, I wouldn't mind at all. I don't think

743
00:53:17,541 --> 00:53:22,341
it's that big a deal. If we're at 0.7 MNAV, that's a different story, but fluctuating around one MNAV,

744
00:53:22,661 --> 00:53:26,421
issuing common equity is a tax efficient way to cover the dividend payments. And there's no

745
00:53:26,421 --> 00:53:31,041
problems there in my mind whatsoever. Like think about Mara, they've been issuing 40% annually

746
00:53:31,041 --> 00:53:33,941
outstanding common equity

747
00:53:33,941 --> 00:53:36,661
and just wrecking their shareholders for years.

748
00:53:39,961 --> 00:53:41,601
To pay CapEx, son.

749
00:53:42,321 --> 00:53:43,881
At a discount, whatever.

750
00:53:44,461 --> 00:53:45,221
No one cares there.

751
00:53:46,901 --> 00:53:49,641
Well, don't let the fat get in the way of a good story, Dan.

752
00:53:49,801 --> 00:53:50,421
I mean, you know,

753
00:53:50,481 --> 00:53:53,701
I think we have an inverse indicator here

754
00:53:53,701 --> 00:53:56,681
that if you basically get rid of your Afro

755
00:53:56,681 --> 00:53:58,061
and then you think the price is going to spike

756
00:53:58,061 --> 00:53:59,401
because when you had the shortest there,

757
00:53:59,661 --> 00:54:00,881
the price was the highest.

758
00:54:01,041 --> 00:54:03,901
Yeah, I'm walking in.

759
00:54:04,321 --> 00:54:09,361
Well, I've got some analysis on this Bitcoin per share thing, which I think is an interesting

760
00:54:09,361 --> 00:54:12,781
question that a lot of people have brought up.

761
00:54:12,781 --> 00:54:20,141
This concept of like double counting preferred stock per share or Bitcoin per share and thinking

762
00:54:20,141 --> 00:54:21,121
about how you look at it.

763
00:54:21,781 --> 00:54:23,821
And I'm just going to pull up my screen and we'll walk through it.

764
00:54:23,821 --> 00:54:31,881
But before I even do that, I think it's an interesting argument to unpack.

765
00:54:32,421 --> 00:54:34,241
And it's an easy one to hang on to.

766
00:54:35,941 --> 00:54:48,241
However, no companies, zero companies on the planet show their balance sheet on how much money people would get if we liquidated everything today.

767
00:54:49,221 --> 00:54:49,901
I completely agree with that.

768
00:54:50,021 --> 00:54:51,641
That just doesn't exist.

769
00:54:51,641 --> 00:54:54,141
Like, like, why would any company ever do that?

770
00:54:54,181 --> 00:54:55,841
Just like, it's a stupid argument.

771
00:54:56,061 --> 00:55:00,561
Like there's no company on the planet that shows how much money anybody would get if

772
00:55:00,561 --> 00:55:01,461
the company were liquidated.

773
00:55:02,121 --> 00:55:09,081
So I'm going to start there and then show, show this via math in a Excel spreadsheet,

774
00:55:09,081 --> 00:55:12,281
because I think it's interesting to think about this.

775
00:55:13,021 --> 00:55:18,801
So what I've done here, and maybe I'll just hide everything here just to focus on this

776
00:55:18,801 --> 00:55:19,921
real quick.

777
00:55:19,921 --> 00:55:23,261
So I've got two columns here and I just made the math simple.

778
00:55:23,261 --> 00:55:39,041
I didn use strategies specific math and how much Bitcoin they hold But I just I said let look at company a Company A doesn issue any preferred equity They have a million Bitcoin and a billion common shares So the amount of

779
00:55:39,041 --> 00:55:45,581
sats per common share is 100,000 sats per common share. You got zero pref raise, etc. So the total

780
00:55:45,581 --> 00:55:53,122
shares outstanding is a billion. Okay, now your Bitcoin price is 90,000. The USD Bitcoin unbalance

781
00:55:53,122 --> 00:56:01,282
sheet is 90 billion. And so the net USD per balance sheet per all shares traded is $90.

782
00:56:02,282 --> 00:56:09,402
Now, when you look at company B over here, that's issued $20 billion of prefs and sold it at a 20%

783
00:56:09,402 --> 00:56:16,722
discount. So sold at 80%. So they sold $20 billion of prefs, but they raised $16 billion.

784
00:56:16,722 --> 00:56:23,662
dollars. That's a 20% discount. And the par liquidation price is 100. So the amount of

785
00:56:23,662 --> 00:56:30,782
pref shares outstanding is 200 million. Everything's the same. And then I assumed that the capital

786
00:56:30,782 --> 00:56:36,822
raised, the $16 billion of capital goes to buy Bitcoin. So in this scenario with Company B,

787
00:56:37,302 --> 00:56:45,942
Company B has 1.177 million Bitcoin. Okay. Now the simple analysis here is if you look at the

788
00:56:45,942 --> 00:56:53,142
number of sats per common share, the sats per common share is increased by 17.8% because you've

789
00:56:53,142 --> 00:57:00,702
got more Bitcoin that you purchased with the PREF raise. Now, if you look at the amount of sats per

790
00:57:00,702 --> 00:57:05,222
every share outstanding, assuming all shares are traded equal, you've got common and preferred

791
00:57:05,222 --> 00:57:13,202
shares, the actual number of sats per share goes down by 1.9%. Okay, but what's the problem with

792
00:57:13,202 --> 00:57:19,882
this perspective. The problem with this perspective is that your liquidation preference is priced in

793
00:57:19,882 --> 00:57:27,342
fiat, not in Bitcoin. And I think that's kind of what this boils down to. So if you look at this

794
00:57:27,342 --> 00:57:33,122
perspective down here, you would say this looks like a bad idea, right? Because in the event of

795
00:57:33,122 --> 00:57:39,602
liquidation, strategy has got to pay or company B would have to pay out $20 billion and their net

796
00:57:39,602 --> 00:57:45,782
net capital on balance sheet after the liquidation preference is $86 billion,

797
00:57:46,402 --> 00:57:56,202
aka there's less dollars per common share net after the prefs. So basically the net USD

798
00:57:56,202 --> 00:58:00,462
on balance sheet after paying liquidation preference of the prefs is down 4%.

799
00:58:00,462 --> 00:58:05,282
So you'd look at this and you'd say like, this is a bad idea.

800
00:58:06,021 --> 00:58:08,222
That's why I think we common equity is down, by the way.

801
00:58:08,222 --> 00:58:10,142
Quite possibly.

802
00:58:10,282 --> 00:58:10,782
In the short term.

803
00:58:11,202 --> 00:58:12,541
In the short term.

804
00:58:13,422 --> 00:58:21,862
But then you run the math on this and the liquidation preference is fixed in fiat.

805
00:58:23,802 --> 00:58:30,541
Okay, so in this second example here, I look at, okay, well, this is assuming a price of Bitcoin at $90,000.

806
00:58:30,922 --> 00:58:33,521
What if the price of Bitcoin is $150,000?

807
00:58:33,521 --> 00:58:41,362
Well, if the price of Bitcoin is $150,000, the net USD per common share is actually up 4%.

808
00:58:41,942 --> 00:58:46,982
And the net USD balance sheet per all shares outstanding is down 2%.

809
00:58:47,482 --> 00:58:52,541
You're essentially outlined, this is the mechanism of amplification.

810
00:58:52,942 --> 00:58:54,142
This is amplification, exactly.

811
00:58:54,561 --> 00:58:57,742
This is amplification, 100%.

812
00:58:57,742 --> 00:58:58,501
It's like debt.

813
00:58:58,682 --> 00:59:01,822
It's like the liquidation preference is the debt.

814
00:59:01,822 --> 00:59:08,802
Yeah. So let me, let me take this back into, to what I said before. So if you've got DVDs,

815
00:59:08,802 --> 00:59:13,561
which are the equivalent of bananas and the company goes out of business, those DVDs become

816
00:59:13,561 --> 00:59:17,902
worthless because once they're viewed, the value goes from 30 bucks down to a dollar.

817
00:59:18,501 --> 00:59:22,242
And everybody's like, well, okay, what's the common, what's, what's the relevance to this?

818
00:59:22,602 --> 00:59:28,142
When FTX went bankrupt, what they did was, and this, this, this made news about a month ago,

819
00:59:28,142 --> 00:59:33,942
they said oh spf sam bankman freed should get pardoned because all of the people that were

820
00:59:33,942 --> 00:59:40,322
involved with it got paid more in fiat dollars so they didn't lose any dollar they didn't lose any

821
00:59:40,322 --> 00:59:46,202
money what they did not pay them back in is the native tokens the bitcoins or whatever coins they

822
00:59:46,202 --> 00:59:52,782
have so this this one thing came out and said well if they made back all their cash right so

823
00:59:52,782 --> 00:59:58,402
now they're not down cash, then there was really no financial loss. And what you're saying here is,

824
00:59:58,462 --> 01:00:02,802
is that if a company bought Bitcoin and the Bitcoin rips higher, for some reason,

825
01:00:02,882 --> 01:00:08,442
declared bankruptcy, the Bitcoin will continue to run up in value because it's independent of

826
01:00:08,442 --> 01:00:13,362
what the company does. Correct? Correct. Yeah. Right. And so therefore the company has more

827
01:00:13,362 --> 01:00:18,382
value because it owns Bitcoin. And if you take it one step further, oh, what's the company with the

828
01:00:18,382 --> 01:00:25,481
most Bitcoin strategy with 650,000 of them. So if something went wrong, they have the best balance

829
01:00:25,481 --> 01:00:31,162
sheet ever because it's a hundred, whether or not they sell the price, let's say they dumped all the

830
01:00:31,162 --> 01:00:37,622
Bitcoin in one day, would it dump the price of Bitcoin? Probably. But the point is, is that it

831
01:00:37,622 --> 01:00:43,122
could be done for all of these other companies, those assets, if it's real estate, it'll take

832
01:00:43,122 --> 01:00:49,041
years to sell off. If it's any other type of asset, it takes years to sell it. With this,

833
01:00:49,142 --> 01:00:54,182
everybody knows it can be sold in a minute. Now, that's probably not a good idea. So I think what

834
01:00:54,182 --> 01:01:00,041
your analysis here is showing is that it's the good and the bad. The good part is strategy as

835
01:01:00,041 --> 01:01:04,922
a dashboard. It shows you all of these metrics in real time, 24 by seven, and you can do it.

836
01:01:04,922 --> 01:01:10,202
And most traditional companies, I'm sure there may be an exception, but I'm not unaware of any

837
01:01:10,202 --> 01:01:16,662
company that shows you real-time metrics in their balance sheet and income statement unaware of it

838
01:01:16,662 --> 01:01:24,182
we all know we all know that if bitcoin is not at 110 000 i believe that's the number by the end of

839
01:01:24,182 --> 01:01:29,782
this year that they'll have negative eps we already know this it's not like oh don't say this grain

840
01:01:29,782 --> 01:01:33,682
it's like we already know the nut because we know the number that was that in last quarter

841
01:01:33,682 --> 01:01:40,021
the question is does the market give a crap whether that strategy has positive eps or negative eps

842
01:01:40,021 --> 01:01:42,262
And I thought, I want to go back to something.

843
01:01:42,762 --> 01:01:51,481
I thought that doing the FASB fair value accounting, because having these huge positive EPS would be massively beneficial to the stock price.

844
01:01:51,742 --> 01:01:53,942
And what we saw, it has almost no bearing on it.

845
01:01:54,302 --> 01:02:02,481
If having a positive EPS doesn't mean the stock rips higher, then it going negative means it probably won't affect it either.

846
01:02:03,142 --> 01:02:03,242
Yeah.

847
01:02:03,942 --> 01:02:04,122
Yeah.

848
01:02:04,122 --> 01:02:11,142
But this analysis is great that you did here, showing that if you have the best, Bitcoin has become the best collateral.

849
01:02:11,702 --> 01:02:17,782
And by the way, the JPMorgan product, they don't buy any real Bitcoin with it.

850
01:02:17,862 --> 01:02:19,362
It's completely done synthetically.

851
01:02:20,501 --> 01:02:21,282
Yeah, it's Ibit, right?

852
01:02:21,782 --> 01:02:22,541
It's Ibit.

853
01:02:23,041 --> 01:02:26,162
And I'm sure they're just buying a put call spread on Ibit.

854
01:02:26,162 --> 01:02:30,981
They may not even be just buying the Ibit because they're going to hedge their position on this.

855
01:02:31,302 --> 01:02:36,942
You're not hedged as the person that buys the product because they're telling you that you could drop down.

856
01:02:37,242 --> 01:02:41,162
You can lose 87.5% of the principal that you put in.

857
01:02:41,162 --> 01:02:46,902
But I want to tell you right now, they are 100% hedged on the downside protection.

858
01:02:47,342 --> 01:02:48,222
Why do I know this?

859
01:02:48,382 --> 01:02:52,862
Because I've already implemented one of these for myself just about a year ago.

860
01:02:53,122 --> 01:02:55,162
So they already do this.

861
01:02:55,222 --> 01:02:59,561
So the product that JP Morgan is doing is a common product.

862
01:03:00,561 --> 01:03:00,702
Yeah.

863
01:03:00,981 --> 01:03:09,122
the completely agree i mean there's a there's a there's a lot there

864
01:03:09,122 --> 01:03:19,822
um a classic grain soliloquy uh the other thing i want to add on this table is i created this

865
01:03:19,822 --> 01:03:26,342
these final three columns k through m here which is just outlining a 20 if you if you sold 20

866
01:03:26,342 --> 01:03:33,362
billion dollars of profit at an 80%, so a 20% discount. And then you sold 20 billion additional

867
01:03:33,362 --> 01:03:41,561
at par. So that increases the amplification. So I think one of the biggest things is that

868
01:03:41,561 --> 01:03:47,642
there is a upfront cost of getting these instruments in place, right? Getting these

869
01:03:47,642 --> 01:03:53,021
instruments out the door, like the common stock shareholder has effectively taken a volatility

870
01:03:53,021 --> 01:03:59,282
on the forehead for the 20% discount or 15% discount or 10% discount sold on any of these

871
01:03:59,282 --> 01:04:06,822
instruments. However, if Bitcoin goes higher, they are the beneficiary of that excess volatility

872
01:04:06,822 --> 01:04:13,662
from the PREF in perpetuity. And any additional capital sold on those preferred instruments

873
01:04:13,662 --> 01:04:20,322
has the potential to be sold at a higher or much closer to par. You think about stretch,

874
01:04:21,041 --> 01:04:27,822
When will Stretch be sold? Stretch will be sold at par. Well, originally the product itself was

875
01:04:27,822 --> 01:04:33,942
launched at 90 cents on the dollar, but that discount is shrinking. And you think about

876
01:04:33,942 --> 01:04:38,122
Strife, they're selling it above par. You think about any of these other instruments,

877
01:04:38,222 --> 01:04:42,702
as they get closer to par, the effective cost of capital and the benefit to the common stock

878
01:04:42,702 --> 01:04:47,342
shareholder as capital is raised on these instruments is getting larger and larger over

879
01:04:47,342 --> 01:04:57,882
time. So like the benefit of these instruments compounds, it compounds forever. And that's,

880
01:04:57,922 --> 01:05:03,442
that's what accrues to the common stock shareholder. That is that compounding effect forever.

881
01:05:05,922 --> 01:05:10,541
So is there, is there a double counting of shares? No, I don't think this double counting thing is,

882
01:05:10,642 --> 01:05:15,842
is, is, I don't think people should think this way because no other company on the planet thinks

883
01:05:15,842 --> 01:05:20,541
about how much Bitcoin am I going to get in liquidation?

884
01:05:21,202 --> 01:05:22,541
The company isn't insolvent.

885
01:05:23,282 --> 01:05:25,402
Why do you even take that perspective today?

886
01:05:26,102 --> 01:05:28,922
Also, the MNAV calculation on strategy dashboard

887
01:05:28,922 --> 01:05:33,642
subtracts out the liquidation preference on the prefs anyway.

888
01:05:34,061 --> 01:05:34,902
So it's a complete non-

889
01:05:34,902 --> 01:05:37,021
Like anyone saying that there is double counting,

890
01:05:37,702 --> 01:05:39,782
you could double count it if you wanted.

891
01:05:40,262 --> 01:05:42,481
And I think there's a solid argument to be made

892
01:05:42,481 --> 01:05:44,862
that Jeff's putting forward, but it's not double counted.

893
01:05:44,862 --> 01:05:46,642
So it's not even an issue.

894
01:05:47,842 --> 01:05:47,882
Yeah.

895
01:05:47,922 --> 01:05:55,102
And the only note that I really wrote down on this double counting thing is that the prefs, they can postpone or just not pay out the dividend.

896
01:05:56,041 --> 01:06:00,402
So it's kind of like there are ways that they can avoid the liquidation issue in the first place.

897
01:06:00,882 --> 01:06:09,581
So it's kind of weird to say that it's double counting when they don't really even have to get to that desperation level.

898
01:06:10,021 --> 01:06:11,762
There's steps that come before that.

899
01:06:11,762 --> 01:06:15,501
Not that I think they would ever do that, but they could.

900
01:06:16,662 --> 01:06:26,021
Yeah, like the way they calculate the MNAV on the website, correct me if I'm wrong, but I'm pretty sure I heard it from CJ, was it's market cap divided by total assets.

901
01:06:26,021 --> 01:06:32,802
market cap is total outstanding common shares times the price plus total liquidation preference,

902
01:06:32,942 --> 01:06:37,041
which adjusts for price of all the preferreds times the number of preferreds outstanding,

903
01:06:37,602 --> 01:06:44,202
plus fully diluted share count if all the, or no, they don't add that. So it's the prefs plus

904
01:06:44,202 --> 01:06:49,242
the common divided by the total assets, which is Bitcoin minus the fixed liabilities as a result

905
01:06:49,242 --> 01:06:53,742
of the converts. That's the formula. There's no double counting there. That is a transparent

906
01:06:53,742 --> 01:07:01,521
accounting mechanism of assets and liabilities. Yeah, which is effectively how that's the right

907
01:07:01,521 --> 01:07:06,762
way to look at it, right? Like you, and this is how I viewed MNAM from the very beginning,

908
01:07:06,762 --> 01:07:11,462
when I first calculated this like a couple of years ago, like what's the value of the company?

909
01:07:11,462 --> 01:07:18,822
Well, the value of the company is, what is the value of the assets, less the debt and the debt

910
01:07:18,822 --> 01:07:21,702
obligations that they have on the balance sheet. And then like, how does that compare to the market

911
01:07:21,702 --> 01:07:32,541
gap for the company. It's like a relatively simple way to view it. Yeah. So there's also a complex,

912
01:07:32,882 --> 01:07:38,282
I'll probably do a space on this next week or the week after. So there's also a capital efficiency.

913
01:07:38,902 --> 01:07:43,682
And so what happens here is it's very easy to see, oh, we know exactly how many, well,

914
01:07:43,682 --> 01:07:47,822
the company says how many Bitcoin they have. So that's easy to see on the dashboard, the Bitcoin.

915
01:07:47,822 --> 01:07:51,981
And then that Bitcoin, you could then multiply the Bitcoin times the spot price.

916
01:07:52,162 --> 01:07:52,442
Easy.

917
01:07:52,882 --> 01:07:53,682
So there's a value.

918
01:07:53,782 --> 01:07:56,722
I call it the Bitcoin market cap of the company.

919
01:07:56,902 --> 01:07:58,202
That number is easy to see.

920
01:07:58,442 --> 01:08:04,422
The other part a company has is they have the market cap based upon the share count times the share price.

921
01:08:04,642 --> 01:08:09,422
And the difference between those two is going to show you what your multiple to net asset value is.

922
01:08:09,762 --> 01:08:13,842
Now, there's going to be an enterprise value or book value that you can also take into account with this.

923
01:08:13,842 --> 01:08:20,542
But if you just leave that out, that shows that these two numbers, the Bitcoin's moving like this based upon the price of Bitcoin.

924
01:08:20,822 --> 01:08:23,582
The amount of Bitcoin you have is fixed, right, as a snapshot.

925
01:08:23,941 --> 01:08:29,602
And then the price of the stock is going like this because that's based on fiat dollars based upon the float of the shares.

926
01:08:30,162 --> 01:08:35,222
And that's where we talk about the volume and the shorting and what's going on and the derivative markets of this.

927
01:08:35,702 --> 01:08:38,042
So these two things are floating differently.

928
01:08:38,042 --> 01:08:46,682
And that's why when Saylor created the prefs to take out the volatility over here to make it closer to this and even strip it out on the Bitcoin.

929
01:08:47,302 --> 01:08:53,502
And I think that's the part where, you know, I've talked about a convexity and you're seeing this fundamentally change over time.

930
01:08:53,802 --> 01:08:55,342
The prefs have been out for less than a year.

931
01:08:56,142 --> 01:08:59,882
You know, if you want to talk about an IPO moment, how old is, you know, Stretch?

932
01:08:59,961 --> 01:09:01,361
I keep on coming back to the date.

933
01:09:01,782 --> 01:09:04,521
Stretch is maybe what, four months old at most?

934
01:09:04,882 --> 01:09:06,561
Yeah, it's about four months old, four or five months old.

935
01:09:06,561 --> 01:09:14,602
months old. It's like, oh, it's the biggest IPO of 2025. Oh, it's only 2.8, one out of 2.5 billion

936
01:09:14,602 --> 01:09:19,682
or whatever it's worth. It'll grow to 3 billion and so forth. Like, oh, it's only $3 billion.

937
01:09:20,082 --> 01:09:26,021
It can't take over the whole money market fund yet. I'm like, it's not even four months old.

938
01:09:26,162 --> 01:09:30,342
Take over what's been in existence for 40 years. It's like, come on, people.

939
01:09:31,182 --> 01:09:32,342
I bought my first three shares today.

940
01:09:32,342 --> 01:09:39,861
Yeah, that's a buy and hold. All these things are pretty buy and hold for life. I think one thing

941
01:09:39,861 --> 01:09:45,382
that's really interesting with the change in messaging of Saylor is he's come forth. You know

942
01:09:45,382 --> 01:09:50,282
how, and Grain, you have a good kind of bid on this. It's like, you know, every, he refines his

943
01:09:50,282 --> 01:09:56,441
pitch every six months. Like his whole statement has been updated. And now he's saying we are

944
01:09:56,441 --> 01:10:00,561
financial engineering, right? I think a year or two years ago, financial engineering was not the

945
01:10:00,561 --> 01:10:04,961
word or the terminology used here, but he's acknowledging the fact that financial engineering

946
01:10:04,961 --> 01:10:10,242
is being used, embracing it, and now bringing it to the debt markets. And I think for a lot of older

947
01:10:10,242 --> 01:10:14,682
people and a lot of people that are starting to get more accustomed to these financial markets,

948
01:10:15,021 --> 01:10:20,521
like, for example, I told my dad this, I was like, dad, do you know what share buybacks are

949
01:10:20,521 --> 01:10:25,262
for like MAG7? And grain, you're like a total expert on this, but it's like, this is how they

950
01:10:25,262 --> 01:10:29,742
create ever-increasing EPS. It's not because they're growing their business at a crazy rate,

951
01:10:29,742 --> 01:10:32,842
right? Because it generates massive amounts of cash flows and Apple buys back 100 billion worth

952
01:10:32,842 --> 01:10:37,421
of shares, increasing the earnings per share, not actually increasing the earnings. So that's

953
01:10:37,421 --> 01:10:41,502
financial engineering, right? That's what you say, Grant. And in this way, they're creating

954
01:10:41,502 --> 01:10:47,401
financial engineering layers on top of the Bitcoin block, the Bitcoin foundation. And so I think a lot

955
01:10:47,401 --> 01:10:50,822
of people are starting, I've seen kind of a shift and people are like, oh, that's actually a valid

956
01:10:50,822 --> 01:10:56,342
thing if every company is doing it. So it just takes time. Yeah, we are a structured finance

957
01:10:56,342 --> 01:11:04,021
company right exactly right and so look uh sailor said this and thank you for dan saying about

958
01:11:04,021 --> 01:11:09,542
buybacks what sailor said all the time and easy this is what he said with grant cardone last week

959
01:11:09,542 --> 01:11:16,582
he said look if i do an atm right and let's just say it's a 3mm m nav i know the m nav is compressed

960
01:11:16,582 --> 01:11:22,021
right but back when he said this right so i'm able to sell a stock for three dollars that was

961
01:11:22,021 --> 01:11:27,782
you know, I was able to have a $3 versus $1. So there's a $2 arbitrage that he's capturing,

962
01:11:28,002 --> 01:11:33,502
and he uses that to buy Bitcoin. Everybody's like, where do you get the $2 from? Because he's

963
01:11:33,502 --> 01:11:39,842
selling something at a 3M now. So it's three times the value. The value is $1. He captures the $2.

964
01:11:40,322 --> 01:11:44,342
That's the immediate arbitrage. And then he goes and he buys Bitcoin. Now, how is this related to

965
01:11:44,342 --> 01:11:49,742
what Dan just said about EPS? If you're a company that has massive cash flows, what they do is they

966
01:11:49,742 --> 01:11:53,882
take those cash flows and they say, you know, what can I stick it into? I can go buy a new

967
01:11:53,882 --> 01:11:59,602
factory. I can go hire new people. I can go, you know, expand inventory, whatever I want to do.

968
01:12:00,002 --> 01:12:04,322
Maybe you don't want to expand inventory because you keep a constant bid on the amount of inventory

969
01:12:04,322 --> 01:12:09,441
you have. So you have good pricing. So what do they do? Like, what am I going to do with all

970
01:12:09,441 --> 01:12:14,122
this cash? They're like, oh, I'm going to buy back my own stock. And when you look at Apple

971
01:12:14,122 --> 01:12:19,521
buybacks over time or Nvidia, you're like, oh, now out of the cash, can they buy back enough

972
01:12:19,521 --> 01:12:26,722
stock to make it worthwhile? No. Nvidia borrows $65 billion to go buy back more of their own stock.

973
01:12:27,021 --> 01:12:31,842
Wait a second. They've just made all these billions of dollars. Why do they go borrow money?

974
01:12:31,842 --> 01:12:37,521
Because it's cheaper to borrow money and the stock price will go up. Now, does Jensen Wong

975
01:12:37,521 --> 01:12:43,521
talk about this? No, not at all. He talks about the new chips coming out and what they do and so

976
01:12:43,521 --> 01:12:48,102
forth. He does not ever talk about the financial engineering that's going on here. But we've got

977
01:12:48,102 --> 01:12:52,662
Saylor talking about this for the past five years. And that is the fundamental difference.

978
01:12:53,061 --> 01:12:58,441
The Mag 7 do financial engineering and nobody cares about it because the CEO doesn't talk about

979
01:12:58,441 --> 01:13:04,762
it. And they don't take just the cash flow. They borrow money, right, in order to buy back their

980
01:13:04,762 --> 01:13:10,481
own shares. Now, why does Apple do that? Because if they make half of their money from outside the

981
01:13:10,481 --> 01:13:17,202
U.S. If they repatriate those dollars to the U.S. to buy back the stock, they trigger taxes. Oh,

982
01:13:17,422 --> 01:13:21,961
so let's just borrow money so we don't pay taxes to buy back our own shares.

983
01:13:22,461 --> 01:13:27,382
Everybody's like, you went too fast. I'm like, where did I go too fast? Apple does this. You're

984
01:13:27,382 --> 01:13:32,882
a TradFi guy. You're doing this for 15, 20 years. You should intrinsically understand this. And if

985
01:13:32,882 --> 01:13:37,122
you disagree with me, tell me where I'm wrong. Oh, they're just doing financial engineering to

986
01:13:37,122 --> 01:13:41,622
improve the shareholder return. And I'm like, well, that's where sats per share comes in.

987
01:13:42,021 --> 01:13:45,802
And that's what you've been talking about here. If you believe that Bitcoin is the most important

988
01:13:45,802 --> 01:13:51,961
collateral ever, then you want to buy as much of it as possible. And at some point that will take

989
01:13:51,961 --> 01:13:56,521
off. And then we'll sit around and people will be like, oh, you guys got lucky. And I'll be like,

990
01:13:56,521 --> 01:14:04,561
no, we weathered a downturn because Binance had some crap happen, MSCI FUD, the Japan carry trade,

991
01:14:04,561 --> 01:14:10,582
chano's shorting it we can go on with 50 things why the world sucked and then when it rips higher

992
01:14:10,582 --> 01:14:18,622
people like oh well you guys got lucky no we we sat through the bearishness and the fud and people

993
01:14:18,622 --> 01:14:24,582
attacking us oh by the way this is the second downturn of this year and this is it's insane

994
01:14:24,582 --> 01:14:29,162
it's insane what happened in march and then march and april and then oh we were covering

995
01:14:29,162 --> 01:14:34,222
hit an all-time high oh that's not good enough oh now we have it again they're like oh well i would

996
01:14:34,222 --> 01:14:39,262
never buy this thing. It can always go to zero. I'm like, it seems to keep on retaking all time

997
01:14:39,262 --> 01:14:47,061
highs. Yeah. And it's the same idea that happiness is the difference or I think it's happiness or

998
01:14:47,061 --> 01:14:50,861
filling or enjoy or something. It's the difference between expectations and reality. And so I think

999
01:14:50,861 --> 01:14:56,061
that's why end of 25 was so hard for so many people. It's been hard for me too. It's like,

1000
01:14:56,502 --> 01:15:01,102
we had all these expectations and they weren't met. So it almost feels worse than a bear market.

1001
01:15:01,102 --> 01:15:07,802
yeah they there's a there's a thing called the satisfaction gap so if your expectations are

1002
01:15:07,802 --> 01:15:12,582
really high and the outcome comes in with expectations your satisfaction gap is zero

1003
01:15:12,582 --> 01:15:16,222
but if you set your expectations low and the outcome's really high your satisfaction gap is

1004
01:15:16,222 --> 01:15:19,842
really high and it's also the inverse if your expectations are really high it comes in below

1005
01:15:19,842 --> 01:15:25,682
you have negative satisfaction gap uh just inherently psychologically um

1006
01:15:25,682 --> 01:15:34,222
I was going to say, so this actually does point one reason not to hold strategy.

1007
01:15:34,441 --> 01:15:35,981
Like they're going to be attacked.

1008
01:15:36,481 --> 01:15:42,082
Like, you know, when you said this is going to be the most hated rally of all time, like, okay, they are getting attacked by some of these people.

1009
01:15:42,082 --> 01:15:50,481
And whether you say that it's Occam's razor or whatever, like one person's malice is another person's profit.

1010
01:15:50,622 --> 01:15:52,202
So they don't probably see it as malice.

1011
01:15:52,202 --> 01:15:58,662
but um you know if you can't handle them them being under attack and and getting some unfortunate

1012
01:15:58,662 --> 01:16:04,901
uh you know price action because of because of it then you know maybe that volatility is is a

1013
01:16:04,901 --> 01:16:11,002
little too much like i'm bullish af but uh even i some hate the rally sometimes you know at certain

1014
01:16:11,002 --> 01:16:17,542
points of the year so um but for me the worst part is having to like watch the bears tap dance

1015
01:16:17,542 --> 01:16:23,441
in victory you know what i mean like i can diamond hands hodl uh bitcoin and everybody knows it's

1016
01:16:23,441 --> 01:16:29,561
going up forever but uh when when i have to like sit and wait and hope that the bears are wrong

1017
01:16:29,561 --> 01:16:35,222
eventually that just kind of pain in the ass for me uh like when chano's you know tweeted he was

1018
01:16:35,222 --> 01:16:40,961
unwinding his mstr short and people were kind of like giving his giving him his flowers and stuff

1019
01:16:40,961 --> 01:16:47,642
my response was the sun shines on a dog's ass once in a while like i was giving him no credit

1020
01:16:47,642 --> 01:16:54,321
no love like screw that i'm just bitter to the end so yeah a broken a broken clock is right twice

1021
01:16:54,321 --> 01:16:59,002
a day twice a day yeah exactly you know i want to chime in about the financial engineering part

1022
01:16:59,002 --> 01:17:04,061
people talk about this all the time like oh i wish i can do this okay i'll tell you exactly how

1023
01:17:04,061 --> 01:17:09,602
people do financial engineering you buy a house right over time that house will go up in value

1024
01:17:09,602 --> 01:17:35,821
Of course, somebody will chime in. Oh, I bought a house at the peak of the market and then it crashed and then I need to refinance. Well, your entry point matters, quote Dan Hillary from earlier in the space. So you buy a house, you live in the house five, 10 years. Maybe you buy the house before COVID. You refinance sub 3%, right? So now you're sitting in this house. The value of the house jumps up. Why does it jump up? Because a money printer hit because we're $2 trillion a year short on the budget deficit.

1025
01:17:35,821 --> 01:17:40,622
We're 120% of GDP, which is equal to where we were during World War II.

1026
01:17:41,002 --> 01:17:47,802
We've got a $38 trillion debt, which because the big, beautiful bill is allowed to go to $41 trillion, right?

1027
01:17:47,882 --> 01:17:50,602
And we have the money printer going at 6.5% a year.

1028
01:17:51,042 --> 01:17:52,722
People are like, oh, I don't get that.

1029
01:17:52,821 --> 01:17:54,521
What does that have to do with financial engineering?

1030
01:17:54,901 --> 01:17:56,021
Well, I bought my house.

1031
01:17:56,102 --> 01:17:57,321
It's gone up 50%.

1032
01:17:57,321 --> 01:18:01,542
I take out a home equity loan or home equity line of credit, either of the two.

1033
01:18:01,842 --> 01:18:04,582
I am now borrowing against the value of that house.

1034
01:18:04,582 --> 01:18:11,802
I put in a new swimming pool and a barbecue in the backyard, stick a man cave where I can go park a couple of motorcycles and a go-kart for the kids.

1035
01:18:11,922 --> 01:18:14,282
And I get a new kitchen and bathroom for the wife.

1036
01:18:14,521 --> 01:18:16,262
And you're like, oh.

1037
01:18:16,502 --> 01:18:23,182
So now what happens is, huh, the value of the house just went up because I took out a loan against it.

1038
01:18:23,202 --> 01:18:26,582
And I improved it with the swimming pool, kitchens and a man cave and bathrooms.

1039
01:18:27,282 --> 01:18:28,762
And everybody's like, oh.

1040
01:18:28,922 --> 01:18:30,401
And then I get to live in it, right?

1041
01:18:30,401 --> 01:18:33,042
What strategy is doing here is they're just acquiring more Bitcoin.

1042
01:18:33,042 --> 01:18:37,401
and because they have an operating company, they don't need to borrow against it. And it's like,

1043
01:18:37,782 --> 01:18:41,702
and when I give this analogy to TradFi people, they're like, dude, you went way too fast.

1044
01:18:41,981 --> 01:18:46,441
I'm like, where'd I go too fast? Home equity loans and line of credits, they've been available

1045
01:18:46,441 --> 01:18:52,102
for, I don't know, 30, 40 years. So that's what people do. They leverage their balance sheet.

1046
01:18:52,461 --> 01:18:57,021
The house is the balance sheet. And you're like, what do you mean? I'm like, well, when you take

1047
01:18:57,021 --> 01:19:01,342
the loan out against your house, that's a non-taxable event. Now, do you have to pay that

1048
01:19:01,342 --> 01:19:07,461
money back? Sure. But it's over a 10-year term. Again, not financial advice, but you get the

1049
01:19:07,461 --> 01:19:12,561
value. You're hoping, your belief of taking out that home equity loan is that the value of the

1050
01:19:12,561 --> 01:19:18,422
house is growing faster than the percentage rate that you're paying on the loan. Did I go too fast?

1051
01:19:18,461 --> 01:19:26,622
Because that's a carry trade right there. Buy, borrow, die. Because if the value of the house

1052
01:19:26,622 --> 01:19:31,302
does not exceed the value of you borrowed out, you're going to end up losing equity.

1053
01:19:31,342 --> 01:19:36,321
so people think about this all the time and that's why we talk about financial engineering

1054
01:19:36,321 --> 01:19:41,321
and people are like dude you went too fast i'm like no i can't go any slower i'm like because

1055
01:19:41,321 --> 01:19:45,861
you should know all of this and this is why you buy a house versus renting for the rest of your

1056
01:19:45,861 --> 01:19:50,642
life because you have that ability to lever that if you want to rent for the rest of your life

1057
01:19:50,642 --> 01:19:57,422
that's okay but eventually you pay a house off and that's permanent equity i keep on coming back

1058
01:19:57,422 --> 01:20:01,502
to these terms over here. That's permanent equity. Once your house is paid off, all you have to pay

1059
01:20:01,502 --> 01:20:05,441
on is the taxes, utilities, and maintenance because it's permanent equity. The house is

1060
01:20:05,441 --> 01:20:09,882
paid off. There's no refinance risk. Oh, that's the prefs. Yeah. Bingo.

1061
01:20:10,702 --> 01:20:15,762
And you rent out a room to somebody. That's the prefs. You staying in the house is permanent

1062
01:20:15,762 --> 01:20:20,021
equity, renting out a room, putting an ADU in the back, and then having somebody live in there and

1063
01:20:20,021 --> 01:20:24,821
pay you money. That's the prefs. That's your permanent yield that's coming into you because

1064
01:20:24,821 --> 01:20:29,302
you never sold the house. The most annoying complaint that I get about the press is that,

1065
01:20:29,401 --> 01:20:33,622
oh, they used to be able to get convertible bonds at 0% interest and now they're paying 10 or 12 or

1066
01:20:33,622 --> 01:20:39,122
whatever. Like, no, no, that is not the case. Like when I first heard that that strategy was getting

1067
01:20:39,122 --> 01:20:44,321
loaned billions of dollars at 0% interest, I thought that's impossible. And as soon as I

1068
01:20:44,321 --> 01:20:50,542
researched it, it was impossible because they get paid off once the damn strike is reached.

1069
01:20:50,542 --> 01:20:57,521
like they're paid off in shares that amounts to some percentage profit like they're not loaning

1070
01:20:57,521 --> 01:21:04,262
a zero percent no it's like 40 it's like 40 yeah exactly 60 exactly so it's all it was all being

1071
01:21:04,262 --> 01:21:09,582
paid with atm dilution like it that's it's a it's an argument can you can you go to that page go to

1072
01:21:09,582 --> 01:21:15,242
the go to the credit page sorry the debt page on strategy on their dashboard if somebody wants to

1073
01:21:15,242 --> 01:21:21,282
know, well, what are the spreads or what are those strike prices? It's all listed on the strategy

1074
01:21:21,282 --> 01:21:28,742
page. Again, this goes back to a dashboard. Yeah, it's right there. And if you look,

1075
01:21:30,021 --> 01:21:34,561
right, there's a conversion price. So it's telling you the conversion price right there.

1076
01:21:34,762 --> 01:21:40,722
So that the conversion price from the original price that it was done at shows you how much,

1077
01:21:40,722 --> 01:21:45,702
the difference is. Yeah. It's the conversion relative to the reference.

1078
01:21:46,461 --> 01:21:52,302
Right. Exactly. So I think that that's the spread that they're paying in order to do this.

1079
01:21:52,722 --> 01:22:02,222
40%. So this is 40, 50%. 40%. Yeah. Coupons. Yeah. 62 bps, 62 and a half bps,

1080
01:22:02,461 --> 01:22:06,722
but a 40% conversion price. So really you're paying 40%.

1081
01:22:06,722 --> 01:22:13,042
percent right strategy was paying 40 and the reason why they got rid of these was because

1082
01:22:13,042 --> 01:22:17,202
these were delta hedge and this was more of a problem so that's why they invented the preps

1083
01:22:17,202 --> 01:22:22,162
i think what you said earlier in the call dan was that what strategy has consistently done is like

1084
01:22:22,162 --> 01:22:27,521
if he knew that he could have done preps instead of the converts he would have done that he said

1085
01:22:27,521 --> 01:22:33,922
this publicly but at the time that he did this it never popped into his head and so they did this

1086
01:22:33,922 --> 01:22:36,861
based upon the best information at the time.

1087
01:22:37,321 --> 01:22:39,061
And now he's changed his mind

1088
01:22:39,061 --> 01:22:40,262
because he's done these preps

1089
01:22:40,262 --> 01:22:42,002
and these will all roll off.

1090
01:22:42,842 --> 01:22:44,441
So I think that's the key part.

1091
01:22:44,481 --> 01:22:45,061
Totally agree.

1092
01:22:45,162 --> 01:22:45,842
Go ahead, Dan.

1093
01:22:46,742 --> 01:22:48,122
I was going to switch the subject.

1094
01:22:48,922 --> 01:22:49,662
Here, okay.

1095
01:22:49,922 --> 01:22:50,842
Final thought here.

1096
01:22:51,422 --> 01:22:54,642
I think in thinking about common equity accretion

1097
01:22:54,642 --> 01:22:56,602
or dilution or however you want to think about it.

1098
01:22:57,422 --> 01:22:59,361
So if you look at strategy's balance sheet right now,

1099
01:22:59,401 --> 01:23:01,021
they've got 649,000 Bitcoin.

1100
01:23:01,021 --> 01:23:02,102
So on the balance sheet,

1101
01:23:02,102 --> 01:23:07,742
They've got $58 billion at today's price at almost 90,000.

1102
01:23:08,821 --> 01:23:10,002
Fast forward, right?

1103
01:23:10,002 --> 01:23:22,942
If we think Bitcoin is going to and the balance sheet is now about billion large So if strategy is if their goal is to they got about 30 amplification on their balance sheet right now I just rounding

1104
01:23:23,442 --> 01:23:29,602
So about $17 billion of PREF and debt outstanding. If they want to keep that 30% amplification

1105
01:23:29,602 --> 01:23:38,203
at $130 billion balance sheet, that's about $39 billion of debt and PREF outstanding. So they

1106
01:23:38,203 --> 01:23:45,102
would be able to issue another $21 billion of PREF into the market to maintain that same

1107
01:23:45,102 --> 01:23:54,663
amplification ratio. So I think that the days of the MSTR common stock being the primary

1108
01:23:54,663 --> 01:24:02,783
capital raising vehicle, I think are dwindling. And once the balance sheet is so large and the

1109
01:24:02,783 --> 01:24:07,962
price of Bitcoin continues to go up. Like the events that occurred in the last year where

1110
01:24:07,962 --> 01:24:14,423
strategy monetized the premium and the common stock to create this huge stalwart balance sheet

1111
01:24:14,423 --> 01:24:21,123
is allowed for the press to even exist. And there's likely a future where the using the

1112
01:24:21,123 --> 01:24:25,723
common stock ATM to finance additional balance sheet strength, just it doesn't make a ton of

1113
01:24:25,723 --> 01:24:30,903
sense. Like it will make more sense to issue more preferred stock and then issue the common stock in

1114
01:24:30,903 --> 01:24:35,663
order to pay off the dividend of the preferred equity because every dollar of capital that you

1115
01:24:35,663 --> 01:24:40,042
bring in on the pref also strengthens, continues to strengthen your balance sheet because it is

1116
01:24:40,042 --> 01:24:44,703
permanent capital held on the balance sheet. Exactly.

1117
01:24:45,843 --> 01:24:50,683
That's the long-term bull thesis here, right? The long-term bull thesis is that I don't have

1118
01:24:50,683 --> 01:24:54,323
to use the MST or common to strengthen my balance sheet anymore because I'm using the

1119
01:24:54,323 --> 01:24:58,042
press to strengthen my balance sheet because that is equity and I use the common to pay the dividend.

1120
01:24:58,042 --> 01:25:04,462
like that that proportion of common stock equity relative to balance sheet

1121
01:25:04,462 --> 01:25:09,023
atm is going to change over time like it's just it's just math

1122
01:25:09,023 --> 01:25:20,042
yeah i totally agree i totally agree okay go ahead switch topics it's not even a switch it's

1123
01:25:20,042 --> 01:25:25,023
just a brief it's all the same topic i guess but there's a lot of people online saying like

1124
01:25:25,023 --> 01:25:30,442
if you think Bitcoin for the next 10 years is going to be a good investment, you're screwed

1125
01:25:30,442 --> 01:25:34,583
or you're delusional. And because a lot of people are referencing the four-year CAGR.

1126
01:25:35,383 --> 01:25:41,462
And I mean, if you looked at the four-year CAGR of Bitcoin, the four-year CAGR during the 2022

1127
01:25:41,462 --> 01:25:46,243
bear market, right? We were sitting below the 2017 all-time high. So you would have been quite

1128
01:25:46,243 --> 01:25:50,623
disappointed at the price performance, but it would have been a fantastic, pretty much a generational

1129
01:25:50,623 --> 01:25:55,942
entry into the asset class. And so, you know, I'm kind of a power law guy in terms of like where

1130
01:25:55,942 --> 01:26:00,583
I think price is going over the long term. It's almost identical to Saylor's base case Bitcoin

1131
01:26:00,583 --> 01:26:10,982
model. And I think people are mistaking picking certain prices in certain snapshots of time,

1132
01:26:10,982 --> 01:26:15,563
and then benchmarking price performance to those periods of time for a highly volatile asset.

1133
01:26:15,563 --> 01:26:23,843
So I actually think right now is the second best entry to the 2022 bear market de-risked.

1134
01:26:24,102 --> 01:26:30,442
And so, I mean, I could go into detail on this, but I think the returns moving forward are going to be absolutely fantastic.

1135
01:26:30,683 --> 01:26:34,542
But there's another guy, Joe McCann. He runs Isometric, which is a hedge fund.

1136
01:26:34,602 --> 01:26:37,602
I think that's down roughly 70% because they blew up perpetrating Solana.

1137
01:26:38,423 --> 01:26:44,363
And he's saying the volatility on Bitcoin is collapsing and Bitcoin is no longer a long-term store of value.

1138
01:26:44,363 --> 01:26:49,063
And that sentiment echoes throughout kind of the ecosystem.

1139
01:26:49,643 --> 01:26:54,623
But I think this is such a flawed kind of way to make decisions around investing.

1140
01:26:54,623 --> 01:26:59,723
One, I started investing in index funds for the longest time when I was a late teenager.

1141
01:27:00,102 --> 01:27:05,663
I still think index funds are one of the best ways to get U.S. equity exposure over long periods of time without picking stocks.

1142
01:27:05,783 --> 01:27:06,783
Bitcoin is now an asset class.

1143
01:27:06,783 --> 01:27:15,042
If you think even a 30K is possible over the next 10 years, which I think it is, then this is what you want to manage volatility.

1144
01:27:15,462 --> 01:27:19,563
And so a chart I like to reference is the NASDAQ after the dot com after 2008.

1145
01:27:20,002 --> 01:27:29,203
So if you looked at returns of the NASDAQ of 1992 up to 2008, it would have been pretty much flat from like 1994 to the bottom in 2008.

1146
01:27:29,583 --> 01:27:32,923
So if you looked at that and been like, yeah, that's actually a bad investment thing only goes down.

1147
01:27:32,923 --> 01:27:37,063
you would have missed the biggest bull market in the history of bull markets on the planet,

1148
01:27:37,303 --> 01:27:41,843
other than the 1950s, in the NASDAQ.

1149
01:27:42,143 --> 01:27:45,283
And I think that's a similar sort of framework that shouldn't be used with Bitcoin.

1150
01:27:46,102 --> 01:27:46,683
Just my two cents.

1151
01:27:47,442 --> 01:27:52,363
Yeah, if I want to do my best impersonation of Mike in some technical analysis,

1152
01:27:52,823 --> 01:27:56,502
if you draw channels on this orange line for your CAGR,

1153
01:27:57,763 --> 01:28:02,102
it proves Dan's point that this should be an excellent entry point

1154
01:28:02,102 --> 01:28:06,143
Because we're right at the bottom, you know, or near the bottom of that channel.

1155
01:28:06,423 --> 01:28:12,223
And if you expect Bitcoin's CAGR, you know, to be anywhere from 30 to 50%, then we should

1156
01:28:12,223 --> 01:28:15,223
march to the other side of that channel, which would be up.

1157
01:28:16,203 --> 01:28:16,602
Yeah.

1158
01:28:16,803 --> 01:28:17,763
So, so I'll make it.

1159
01:28:18,023 --> 01:28:18,823
So thank you.

1160
01:28:18,863 --> 01:28:19,703
I'll make it a little bit simpler.

1161
01:28:20,163 --> 01:28:26,462
Look, when, when, when there's FOMO and people, when, when Bitcoin's at an all time high, that

1162
01:28:26,462 --> 01:28:28,942
means there's a, we see the meme all the time.

1163
01:28:28,942 --> 01:28:32,423
It shows, you know, Bitcoin at 80,000.

1164
01:28:32,583 --> 01:28:35,123
There's a guy there at the table and nobody's buying it.

1165
01:28:35,203 --> 01:28:39,102
And then when it's at an all-time high, it shows this line of 100 people trying to buy it.

1166
01:28:39,623 --> 01:28:46,223
So if you have a long-term belief in a product, I'm not telling any trading advice, no financial advice.

1167
01:28:46,923 --> 01:28:56,042
But if something trades down 30% from its all-time high and you believe in the future that it's going to retake its all-time high,

1168
01:28:56,042 --> 01:29:02,803
buying it when it's 30% below the peak and I just, whatever the number is, then that's probably a good

1169
01:29:02,803 --> 01:29:09,283
entry point. So if one 26 is the peak and right now we're at 90,000 or if it hit 80,000, that

1170
01:29:09,283 --> 01:29:15,903
Delta difference is probably 40%. So I would buy it a 40%, but nobody wants to buy it. They're like,

1171
01:29:15,903 --> 01:29:21,023
oh, I heard it next year. It's going to go to 50,000 or it could go to zero because it's based

1172
01:29:21,023 --> 01:29:26,502
on nothing. So then you psych yourself out and then it runs back up again. And then you have FOMO,

1173
01:29:26,623 --> 01:29:31,023
fear of missing out. You buy the top, it runs back down. You're like, oh, I bought, I bought,

1174
01:29:31,023 --> 01:29:36,502
I'm everybody else's bag holder. And then you sell it. We see this constantly time and time again.

1175
01:29:37,042 --> 01:29:42,263
So my takeaway is there's no TA analysis. You know, the trend analysis is what you're looking

1176
01:29:42,263 --> 01:29:46,863
at. You don't have to draw any channels on this, but I tend, you know, you want to buy something

1177
01:29:46,863 --> 01:29:53,243
low. And then at some point sell it high and reap not all of it, sell some of it, pay taxes and go

1178
01:29:53,243 --> 01:29:59,383
live your life. Or if you buy preps, you don't have to sell them because it pays you a yield.

1179
01:29:59,442 --> 01:30:03,903
It just pays you forever. Yeah. And it's return of capital for 10. Yeah. So then there's that.

1180
01:30:04,002 --> 01:30:06,183
I don't know how many more choices we can give to people.

1181
01:30:07,383 --> 01:30:12,763
Thousands. I mean, this market's just going to explode. Dan, you make some great points here.

1182
01:30:12,763 --> 01:30:15,643
I think I really like this four year CAGR chart.

1183
01:30:15,883 --> 01:30:24,623
Like the way I see this or I look at this is that, you know, every single period in Bitcoin, every single four year compound annual growth rate period in Bitcoin's history is positive.

1184
01:30:24,883 --> 01:30:30,083
And I think if you're creating a fixed income instrument or designing a product around this, like you can underwrite this.

1185
01:30:30,683 --> 01:30:32,923
Like, will it happen into perpetuity?

1186
01:30:33,923 --> 01:30:38,703
You know, tough to say, but this is a this is a great trajectory.

1187
01:30:38,703 --> 01:30:43,143
and you can look at adoption of anything in history.

1188
01:30:43,143 --> 01:30:45,423
You could look at the adoption of like toasters

1189
01:30:45,423 --> 01:30:47,502
and microwave ovens and iPhones

1190
01:30:47,502 --> 01:30:49,123
and how these things change.

1191
01:30:49,863 --> 01:30:51,883
As assets get larger,

1192
01:30:52,223 --> 01:30:55,183
you expect this four-year CAGR number to go down.

1193
01:30:56,143 --> 01:30:58,343
Like you can't expect a $2 trillion asset

1194
01:30:58,343 --> 01:31:00,763
to have the same volatility as a $100 billion asset.

1195
01:31:00,883 --> 01:31:02,083
That's just, that's ludicrous.

1196
01:31:02,243 --> 01:31:03,863
Like that's just irrational thinking.

1197
01:31:04,903 --> 01:31:07,923
Volatility will dampen as there are more people

1198
01:31:07,923 --> 01:31:14,223
that are holding this instrument forever long-term, companies included, like Tether and Strategy,

1199
01:31:15,002 --> 01:31:20,423
and all Bitcoin treasury companies that are holding this as permanent capital and utilizing it into

1200
01:31:20,423 --> 01:31:26,023
the future. One thing that's interesting in looking at this chart, so this blue line is the current,

1201
01:31:26,283 --> 01:31:29,843
so this orange line that you see on the screen, this is the Bitcoin four-year compound annual

1202
01:31:29,843 --> 01:31:34,542
growth rate. It tracks over here to the right-hand side, so you can look at the percentage change

1203
01:31:34,542 --> 01:31:40,283
over time. And then the black line is Bitcoin price. The current four-year compound annual

1204
01:31:40,283 --> 01:31:45,063
growth rate for Bitcoin is right here. As of today, I think it's something like, I don't know,

1205
01:31:45,143 --> 01:31:50,963
15-ish percent. But that four-year reference period, going back four years, so November 26,

1206
01:31:51,143 --> 01:31:58,083
2021, the price of Bitcoin is $53,000. What's going to happen to this orange line over the next

1207
01:31:58,083 --> 01:32:04,203
12, 24 months is that orange line is going to go straight vertical, even if Bitcoin just stays

1208
01:32:04,203 --> 01:32:11,803
flat because you'll see that your base reference point is going on a steady decline from $56,000

1209
01:32:11,803 --> 01:32:14,763
to $17,000 over the next 12 months.

1210
01:32:16,102 --> 01:32:16,883
So great point.

1211
01:32:17,423 --> 01:32:22,163
So, so that, so that, that four-year BTC CAGR, if Bitcoin just stays flat, like that

1212
01:32:22,163 --> 01:32:26,243
four-year BTC CAGR is going to go straight vertical over the next 12 months.

1213
01:32:26,482 --> 01:32:33,743
And if like, if that's your vantage point, like even if Bitcoin doesn't move, right?

1214
01:32:33,743 --> 01:32:36,563
Like, so I think it still looks good.

1215
01:32:36,663 --> 01:32:37,463
It's a really good indicator.

1216
01:32:37,703 --> 01:32:40,343
Don't buy the four-year local top.

1217
01:32:40,502 --> 01:32:41,323
Like, I don't know what to tell you.

1218
01:32:41,542 --> 01:32:45,402
Don't buy Cisco during the dot-com, the top of the dot-com bubble.

1219
01:32:45,623 --> 01:32:50,563
Like, these are things that, like, have negative expected return over time.

1220
01:32:50,923 --> 01:32:52,723
But, yeah.

1221
01:32:53,243 --> 01:33:03,723
So, yeah, another way that I think is fascinating to look at this, and we're trying to build some internal models and have available via a webcast.

1222
01:33:03,743 --> 01:33:08,783
say here in the near future is that you can look at this as a, as its own percentile basis as well.

1223
01:33:09,843 --> 01:33:15,163
And you, right. In, in this history, in this chart that we're looking at, there's about 4,000

1224
01:33:15,163 --> 01:33:21,183
four year compound annual growth rate periods of those 4,000 compound annual growth rate periods,

1225
01:33:21,982 --> 01:33:29,402
90, 98 or 99% of them are above 20%, right? Just, just, you could see it visually here.

1226
01:33:29,402 --> 01:33:37,402
And so the top two worst percent times of holding Bitcoin for four years, you're still positive.

1227
01:33:37,402 --> 01:33:47,402
In the worst four year compound annual growth rate period in Bitcoin's history, you still have a 7.9% four year compound annual growth rate.

1228
01:33:47,402 --> 01:33:49,402
That's pretty good.

1229
01:33:49,402 --> 01:33:52,402
Bonds aren't doing that.

1230
01:33:52,402 --> 01:33:58,643
And so it's, it's a helpful perspective to think, think through it, through that lens,

1231
01:33:58,703 --> 01:34:06,623
a long-term holder lens. Okay. Um, I, you know, I think that's pretty much all I've got. Like what,

1232
01:34:06,743 --> 01:34:11,482
oh, shoot. Well, we didn't know it's not. Go ahead. Yeah. And I don't think we crapped on,

1233
01:34:11,482 --> 01:34:15,663
um, JP Morgan enough. We did not drag them nearly enough. So whenever you're done with this,

1234
01:34:15,663 --> 01:34:23,743
you know i want to i want to let's do it um so i've got i've got some of the news here uh

1235
01:34:23,743 --> 01:34:30,063
right okay so this is all news just really from today in the last couple of days so nasdaq files

1236
01:34:30,063 --> 01:34:36,423
to increase options limit on blackrock spot bitcoin etf to go from 200 i think it's actually

1237
01:34:36,423 --> 01:34:42,703
25 000 contracts to a million contracts i think it's 40 x so significant i'm not exactly sure the

1238
01:34:42,703 --> 01:34:48,663
implications here. I think just increased the liquidity of an ETF, which is great. Texas bought

1239
01:34:48,663 --> 01:34:53,902
the dip, $5 million of Bitcoin purchased. And then also I thought it was very interesting,

1240
01:34:54,663 --> 01:35:02,002
Tether, Apollo from Tether, S&P downgraded Tether from like a four rating to a five rating,

1241
01:35:02,102 --> 01:35:07,042
just basically saying that it's got the worst rating possible. And then they came out with

1242
01:35:07,042 --> 01:35:11,363
this statement, I think this was as of today. Yeah. November 26th. This is this morning.

1243
01:35:12,363 --> 01:35:17,942
We wear your loathing with pride, a classic, a classical rating model built for legacy financial,

1244
01:35:18,083 --> 01:35:23,823
financial institutions basically just goes on to say, we don't fit this model. This doesn't work

1245
01:35:23,823 --> 01:35:30,982
anymore. And it's interesting to see like people attacking this from multiple different angles.

1246
01:35:30,982 --> 01:35:39,843
hey on the on the tether part um i believe that they were the largest buyers of gold this past

1247
01:35:39,843 --> 01:35:49,002
month so higher than sovereign nations so i i think that this you know you know there there's

1248
01:35:49,002 --> 01:35:54,723
a good and bad thing that's going to happen i believe that um ai will displace a vast number

1249
01:35:54,723 --> 01:35:59,383
of workers i believe that there'll be a group of people that are in bitcoin bitcoin derivative

1250
01:35:59,383 --> 01:36:06,423
what I mean by that, Ibit, MSTR, Bitcoin treasury companies that will have, they will look at

1251
01:36:06,423 --> 01:36:11,482
everything forward as a utopia. The world is awesome. It is great. They paid attention.

1252
01:36:12,083 --> 01:36:17,723
They decided to say, hey, the world changed. How do I adapt to that changing world to benefit from

1253
01:36:17,723 --> 01:36:23,223
it? And what's going to happen is those people will have a phenomenal future. Whatever, 6,000

1254
01:36:23,223 --> 01:36:28,203
people listening on this call, you guys will have a great future. Unfortunately, you will be around

1255
01:36:28,203 --> 01:36:33,923
friends that will then say, you got lucky. How did you know it would happen? You bought at a low

1256
01:36:33,923 --> 01:36:40,203
price. Not that you held it for years, you held it through the dip and the Japan carry trade blow

1257
01:36:40,203 --> 01:36:45,963
up and the MSCI bullshit, the Jim Chano shorting, everything that happened, they will just say to

1258
01:36:45,963 --> 01:36:51,002
that, well, you got lucky. And I think what we're seeing here is the signs were there. You just

1259
01:36:51,002 --> 01:36:56,002
chose not to see it, right? And somebody's like, well, I live in Texas. Well, that's where all the

1260
01:36:56,002 --> 01:37:01,803
Bitcoin freaking miners are in data centers and solar power to do this. And you're like, well,

1261
01:37:02,183 --> 01:37:06,663
Texas, the state government allocated $10 million and they bought $5 million of IBIT.

1262
01:37:07,203 --> 01:37:11,663
And you're like, and you just didn't see it happening. So I think what's going to happen

1263
01:37:11,663 --> 01:37:17,063
is the price is going to run back up again. We're going to take our victory laps. And over time,

1264
01:37:17,063 --> 01:37:23,042
a few years, you'll be like, well, it really wasn't obvious back then. No, it was obvious.

1265
01:37:23,042 --> 01:37:28,663
we just had to wait for it to come to fruition. And that's the difference. And with JP Morgan,

1266
01:37:29,023 --> 01:37:33,803
what about a bank or any institution? They could outlive the people that are there.

1267
01:37:34,402 --> 01:37:39,023
Right. And so from that perspective, JP Morgan's optimizing it for themselves.

1268
01:37:39,163 --> 01:37:43,743
They're like, well, screw JP Morgan. Okay. What are you going to do to combat that?

1269
01:37:45,623 --> 01:37:52,442
Yeah. Yeah. Mike, I think Dan's power is about to go. So he's going to do final thoughts if he's

1270
01:37:52,442 --> 01:38:03,243
there final thoughts and turkey v alt meats yeah definitely uh i'm a turkey guy oh plug your nose

1271
01:38:03,243 --> 01:38:12,303
eat it during glass one all right any final thoughts you know what people we did this space

1272
01:38:12,303 --> 01:38:16,843
early go enjoy your thanksgiving your family and friends don't bring up bitcoin unless they bring

1273
01:38:16,843 --> 01:38:24,763
it up and you know if somebody says it well i believe in buy low and sell high you're like

1274
01:38:24,763 --> 01:38:29,143
last thanksgiving everything was ripping higher was great i wasn't gonna buy it then it was too

1275
01:38:29,143 --> 01:38:33,163
high now it's like oh no now it's going to zero it's like you don't want it when it's high you

1276
01:38:33,163 --> 01:38:38,042
don't want it slow so dan dropped off but everybody have a great thanksgiving thank you for putting

1277
01:38:38,042 --> 01:38:44,502
this together uh jeff and doing this and i'll sign off take care all right later mike later

1278
01:38:44,502 --> 01:38:48,783
So let's drag JP Morgan through the mud.

1279
01:38:48,963 --> 01:38:52,823
First of all, you're talking to the man, the carnivore himself.

1280
01:38:53,203 --> 01:38:57,683
So I have the definitive opinion on Thanksgiving.

1281
01:38:58,283 --> 01:39:02,263
And I don't really like turkey or ham, but I literally can't stand ham.

1282
01:39:02,763 --> 01:39:03,743
Oh, no.

1283
01:39:04,063 --> 01:39:08,042
Yeah, my wife was like, oh, my God, do I have to cook you a freaking meatloaf for Thanksgiving?

1284
01:39:08,042 --> 01:39:11,563
Like just so you'll eat because I just freaking eat red meat three times a day.

1285
01:39:11,563 --> 01:39:17,442
um no but i think we're gonna do a turkey and um the first we're gonna dispatch cock it which i

1286
01:39:17,442 --> 01:39:20,923
don't even know what the hell that meant until yesterday you gotta like cut it in half and yeah

1287
01:39:20,923 --> 01:39:25,343
and flatten it out so it should shouldn't take us long to to cook but the best turkey i think we

1288
01:39:25,343 --> 01:39:33,442
ever had was a deep fried cajun style turkey that was when we were in naples italy and we um we

1289
01:39:33,442 --> 01:39:39,263
deep fried that bad boy outside and that was pretty damn good yeah i've done i've done turkey

1290
01:39:39,263 --> 01:39:41,243
a couple times. I've

1291
01:39:41,243 --> 01:39:43,283
made my own turkey. I've smoked it. I've done it

1292
01:39:43,283 --> 01:39:45,042
in the big green egg. I've done it in the oven. I've

1293
01:39:45,042 --> 01:39:47,323
spatchcocked it. And you know what? It's just like

1294
01:39:47,323 --> 01:39:49,163
it's so hard. The

1295
01:39:49,163 --> 01:39:51,143
risk-reward is just horrible.

1296
01:39:52,163 --> 01:39:53,123
You can

1297
01:39:53,123 --> 01:39:55,123
overdo it. I got salmonella

1298
01:39:55,123 --> 01:39:56,602
two years ago because I underdid it.

1299
01:39:57,363 --> 01:39:59,083
Yeah, I did. I was just like, you know what?

1300
01:39:59,263 --> 01:40:01,083
Fuck turkey. But that's why we want to spatchcock

1301
01:40:01,083 --> 01:40:03,083
it because it's like, okay, we can actually get it

1302
01:40:03,083 --> 01:40:04,982
cooked all the way into the thigh

1303
01:40:04,982 --> 01:40:07,002
bones without having

1304
01:40:07,002 --> 01:40:08,963
to dry out the fucking breath too much.

1305
01:40:09,263 --> 01:40:18,843
i i'm either pro ham or just go like prime rib or like just do steak like the the risk it's just

1306
01:40:18,843 --> 01:40:24,383
so much better so the risk for it's just way better yeah we we always had to do a turkey but

1307
01:40:24,383 --> 01:40:28,843
my daughter's favorite was ham so we had to do both actually just to make everybody happy

1308
01:40:28,843 --> 01:40:34,283
i love it i love it all right do you want to do you want to drag jp morgan yeah i want to drag jp

1309
01:40:34,283 --> 01:40:39,602
morgan but i mean do we need to dispel the short interest thing that that spread or does everybody

1310
01:40:39,602 --> 01:40:47,502
know i mean that that that that wasn't true like jp morgan being short that they had this 50 or in

1311
01:40:47,502 --> 01:40:52,083
a short position that if it went up 50 they were just going to get you know gamma squeeze or

1312
01:40:52,083 --> 01:41:01,243
whatever um they don't need all of that like um the reality is that they took um profits in q3

1313
01:41:02,183 --> 01:41:11,263
So they still had an extremely long position, but they had enough puts that if they were

1314
01:41:11,263 --> 01:41:15,163
intentionally trying to tank the price, their puts would go about 10 or 15%.

1315
01:41:15,163 --> 01:41:18,502
But they do benefit from this in other ways.

1316
01:41:19,063 --> 01:41:21,783
So it doesn't really have to be a traditional short position.

1317
01:41:23,583 --> 01:41:25,723
They're a market maker, so they get fees regardless.

1318
01:41:26,263 --> 01:41:29,863
So if people are buying, people are panic selling, whatever, they're going to capture

1319
01:41:29,863 --> 01:41:30,442
the spread.

1320
01:41:30,442 --> 01:41:33,803
And the option prices went crazy as well.

1321
01:41:33,902 --> 01:41:40,602
So they're going to capture the spreads on those, you know, millions of dollars a day that they're going to be capturing because of the chaos.

1322
01:41:41,863 --> 01:41:53,083
It's going to give them an opportunity to load up on some cheap IBIT, which, you know, with them having a competitive product, now they can kind of like recruit and get more assets under management.

1323
01:41:54,942 --> 01:41:59,083
And the way that I was kind of looking at it actually was they're basically Emperor Palpatine.

1324
01:41:59,083 --> 01:42:03,643
they can like make money you know you know no matter who wins the freaking clone wars they're

1325
01:42:03,643 --> 01:42:08,923
just on both sides manipulating the whole freaking thing they own the senate they they just own it all

1326
01:42:08,923 --> 01:42:15,723
and uh you know whether it's it's stupidity or malice they're they're just printing on both sides

1327
01:42:15,723 --> 01:42:24,283
of this thing yeah and there's there's so many so many ways to look at this again front running

1328
01:42:24,283 --> 01:42:29,303
index exclusion, you would want to be out of that position before you announced it and you could

1329
01:42:29,303 --> 01:42:34,563
take a negative position. And like the company, JP Morgan, hasn't even put out a report on

1330
01:42:34,563 --> 01:42:40,663
strategy stock. And then they come out with this information on MSCI and how it's changed the index

1331
01:42:40,663 --> 01:42:46,102
just like a week ago. They're like giving it coverage now, even though they've never given

1332
01:42:46,102 --> 01:42:52,963
the stock coverage, which is just an interesting perspective to take. And then come out with the

1333
01:42:52,963 --> 01:43:00,023
new structured product. And at the same time, in the past, they've now said, all right,

1334
01:43:00,023 --> 01:43:03,902
we're accepting Bitcoin as collateral. It's okay. If you're accepting Bitcoin as collateral,

1335
01:43:04,402 --> 01:43:08,163
but you're changing the margin requirements on the company that holds the most Bitcoin from

1336
01:43:08,163 --> 01:43:16,482
50% to 95%. That's just an instant disconnect between what you just said publicly about Bitcoin

1337
01:43:16,482 --> 01:43:20,763
being collateral and now changing the margin requirement on all this stuff. There's so many

1338
01:43:20,763 --> 01:43:30,583
things where you can look at it and it's, it seems a bit skewed. Um, yeah. And Adrian did a pretty

1339
01:43:30,583 --> 01:43:34,743
good takedown and the whole timeline sounds great. Yeah. Like too many coincidences in there,

1340
01:43:34,743 --> 01:43:41,963
you know, to, for it to just be like a nonchalant, like, Oh, this is just normal business as usual.

1341
01:43:42,143 --> 01:43:48,583
And, and there are, there are professional money managers that have done this on JP Morgan in the

1342
01:43:48,583 --> 01:43:54,002
past and you can look at it on YouTube. And I think I posted a clip from it. Like this, this guy,

1343
01:43:54,163 --> 01:44:02,583
he shows, he's got this written on a whiteboard and he shows, it's like, I will, I think JP,

1344
01:44:02,583 --> 01:44:08,902
I think Jamie and diamond explicitly said, I will fire anybody that buys Bitcoin at JP Morgan.

1345
01:44:08,902 --> 01:44:18,763
And that same weekend, the largest buyer of Bitcoin was a JP Morgan fund in Europe.

1346
01:44:19,923 --> 01:44:22,423
And it's just like, what?

1347
01:44:22,982 --> 01:44:24,982
Like that's that's control.

1348
01:44:25,223 --> 01:44:31,303
You can you can see you can see that control being exercised in different in different directions.

1349
01:44:31,303 --> 01:44:33,463
So, yeah, I know that's true.

1350
01:44:33,463 --> 01:44:43,563
I didn't know anyone who worked for JP Morgan, but a friend of mine did work for one of those money managers.

1351
01:44:44,023 --> 01:44:47,123
And I was trying to tell him to buy Bitcoin four or five years ago.

1352
01:44:47,143 --> 01:44:48,663
And he's like, I can't.

1353
01:44:48,663 --> 01:44:50,203
I'm literally not allowed to hold it.

1354
01:44:51,143 --> 01:44:51,243
Crazy.

1355
01:44:51,843 --> 01:44:58,523
So I bought him like, I think I bought him like 0.1 Bitcoin and I just put it in a separate wallet in my cold storage.

1356
01:44:58,803 --> 01:44:59,402
You know what I mean?

1357
01:44:59,442 --> 01:45:01,883
Just so that he would have degrees of separation.

1358
01:45:01,883 --> 01:45:10,482
And at that time, I think Bitcoin was at $5,000, so it only cost me $500 to sock away 0.1 Bitcoin for him.

1359
01:45:12,542 --> 01:45:14,803
Anyway, yeah, workarounds.

1360
01:45:15,942 --> 01:45:16,243
Yeah.

1361
01:45:16,663 --> 01:45:17,542
We can't be stopped.

1362
01:45:18,542 --> 01:45:20,463
I think that's the most fascinating part.

1363
01:45:20,583 --> 01:45:24,002
And I love to see that the community was rallying behind it.

1364
01:45:24,143 --> 01:45:26,923
It's like, okay, rallying behind MSDR.

1365
01:45:26,923 --> 01:45:31,563
Even people that were negative on MSDR in the past are like MSDR bankrupt.

1366
01:45:31,563 --> 01:45:58,923
And meanwhile, they're like, oh, perfect. I can rally against JP Morgan. Then they flip bullish on MSTR because they're rallying against JP Morgan. But some people are drawing some parallels to GME. I think the most fascinating thing here is that even if people short MSTR, even if people short Bitcoin, people believe Bitcoin is money. You can't shut off the buy button on Bitcoin.

1367
01:45:58,923 --> 01:46:08,123
if you shut off the buy button on mstr and bitcoin prints higher like as bitcoin or as mstr like

1368
01:46:08,123 --> 01:46:14,123
turns back on like it should price up higher like it should gap up higher and then you've got this

1369
01:46:14,123 --> 01:46:20,743
you know game of squeeze on top of gamma squeeze with a with an entity that's difficult to price

1370
01:46:20,743 --> 01:46:26,623
and is being used as a hedge against bitcoin in in different ways so like that reflexivity that

1371
01:46:26,623 --> 01:46:32,023
happens to the downside also happens to the upside. I think it's helpful to understand the

1372
01:46:32,023 --> 01:46:36,002
market environment, like the just general market environment that goes along with it.

1373
01:46:37,663 --> 01:46:43,542
Oh yeah. Cool. All right, man. Well, I think I'm going to jump. I've got to get a bunch of emails

1374
01:46:43,542 --> 01:46:49,102
and do an expense report and stuff, but yeah, I'll say I'll do my final thoughts for one last

1375
01:46:49,102 --> 01:46:56,442
JP Morgan drag. So as I'm doing research for this, I just thought to myself, let's ask Grock,

1376
01:46:56,623 --> 01:47:11,902
List JP crimes. And here's what it said. It gave me a laundry list. Over $40 billion in penalties since 2000. And I'm just going to list a few because we would do another hour.

1377
01:47:11,902 --> 01:47:17,703
2024, $348 million for inadequate trade reporting and surveillance.

1378
01:47:18,123 --> 01:47:25,723
2024, $151 million multiple enforcement actions for misleading disclosures and breaches of fiduciary duty.

1379
01:47:26,463 --> 01:47:28,803
2015, antitrust violations.

1380
01:47:29,263 --> 01:47:33,023
I think that one was the $40 million, $40 million.

1381
01:47:33,343 --> 01:47:34,583
I'm sorry, I'm getting ahead of myself.

1382
01:47:34,982 --> 01:47:36,683
Antitrust violations in foreign exchange.

1383
01:47:36,863 --> 01:47:40,343
Guilty plea for rigging bids on investment contracts.

1384
01:47:40,343 --> 01:47:48,102
2013, $13 billion with a B, that's billion with a B, not $13 million, for mortgage-backed securities fraud.

1385
01:47:48,663 --> 01:47:53,823
And that's just a fraction of the 283-plus recorded violations since 2000.

1386
01:47:54,442 --> 01:47:58,723
And then the final, final Grock quote was,

1387
01:47:59,243 --> 01:48:08,883
Ongoing litigation includes hundreds of cases related to anti-money laundering, market abuse, and Epstein-linked activities.

1388
01:48:10,343 --> 01:48:11,823
Wow.

1389
01:48:11,823 --> 01:48:13,982
So, yeah.

1390
01:48:15,023 --> 01:48:19,863
JP can, you know, die in a fire for all I care.

1391
01:48:21,643 --> 01:48:22,042
Yeah.

1392
01:48:22,183 --> 01:48:24,902
I mean, you're going up against the big guns, right?

1393
01:48:24,963 --> 01:48:27,143
The biggest bank in the planet.

1394
01:48:27,923 --> 01:48:28,163
Yeah.

1395
01:48:28,303 --> 01:48:29,602
And that's another one.

1396
01:48:29,723 --> 01:48:30,883
Maybe I'll just mention it real quick.

1397
01:48:31,783 --> 01:48:35,902
I saw you chime in on this one too, but Rohan Harani had a really good post.

1398
01:48:36,002 --> 01:48:37,883
And it was basically like, what did you expect?

1399
01:48:38,542 --> 01:48:40,123
They're about to eat...

1400
01:48:40,343 --> 01:48:46,263
their lunch and these people are going to hit back every way that they can but eventually they

1401
01:48:46,263 --> 01:48:53,223
have to capitulate yeah and it's happening but but they but they're you know they're kind of like

1402
01:48:53,223 --> 01:48:57,843
the press were like a starter's pistol going off and they realized that they weren't even at the

1403
01:48:57,843 --> 01:49:03,363
starting line and so now this is desperation trying to do anything that they can to trip them up

1404
01:49:03,363 --> 01:49:05,042
and try to catch up.

1405
01:49:07,102 --> 01:49:07,923
We'll see.

1406
01:49:09,283 --> 01:49:10,763
The prefs are just so good.

1407
01:49:10,763 --> 01:49:11,482
They're just too good.

1408
01:49:11,602 --> 01:49:13,323
You can't not hold them.

1409
01:49:13,563 --> 01:49:15,423
If you're an institutional money manager

1410
01:49:15,423 --> 01:49:17,002
or an insurance company pension fund,

1411
01:49:17,203 --> 01:49:19,602
they're too good to not hold.

1412
01:49:20,783 --> 01:49:22,223
They beat everything else in your portfolio

1413
01:49:22,223 --> 01:49:23,183
with less risk.

1414
01:49:24,243 --> 01:49:26,023
Anyone who's not offering them

1415
01:49:26,023 --> 01:49:27,663
is screwed.

1416
01:49:28,423 --> 01:49:28,563
Yeah.

1417
01:49:29,843 --> 01:49:31,523
It's adopt Bitcoin.

1418
01:49:32,203 --> 01:49:33,303
Adopt a Bitcoin treasure.

1419
01:49:33,363 --> 01:49:35,442
or get left behind.

1420
01:49:36,783 --> 01:49:36,923
Yeah.

1421
01:49:37,902 --> 01:49:38,343
Right.

1422
01:49:38,602 --> 01:49:40,463
I mean, that's where we're at, right?

1423
01:49:40,523 --> 01:49:43,042
If strategy started with $250 million of Bitcoin

1424
01:49:43,042 --> 01:49:45,442
and now they're holding 50, 60 billion,

1425
01:49:46,383 --> 01:49:47,963
what's it look like 10 years from now?

1426
01:49:50,143 --> 01:49:52,442
You know, they did that in five years.

1427
01:49:52,542 --> 01:49:52,683
All right.

1428
01:49:52,703 --> 01:49:53,843
What's it look like 10 years from now?

1429
01:49:54,402 --> 01:49:56,002
And how much of this instrument

1430
01:49:56,002 --> 01:49:57,523
are they able to issue to the market?

1431
01:49:57,743 --> 01:49:59,482
Yeah, I am excited here.

1432
01:50:00,482 --> 01:50:01,703
I mean, the stock price sucks.

1433
01:50:03,363 --> 01:50:10,402
But it sucks if you're looking to sell and you need to be liquid right now.

1434
01:50:10,783 --> 01:50:13,402
It doesn't suck if you're looking to buy right now.

1435
01:50:14,602 --> 01:50:15,083
Right.

1436
01:50:15,243 --> 01:50:26,183
The relative valuation relative to the Bitcoin that they hold is pretty good compared to where it's been in history.

1437
01:50:26,763 --> 01:50:28,102
So, all right.

1438
01:50:28,102 --> 01:50:30,942
I'm team anti-Turkey.

1439
01:50:31,363 --> 01:50:33,783
And I think I'm going to leave it with that.

1440
01:50:33,883 --> 01:50:34,803
I'm team anti-Turkey.

1441
01:50:35,183 --> 01:50:37,263
Everybody have a great Thanksgiving.

1442
01:50:37,623 --> 01:50:38,363
Enjoy your pie.

1443
01:50:38,523 --> 01:50:39,482
Go stuff your face.

1444
01:50:39,623 --> 01:50:40,423
Enjoy the days off.

1445
01:50:40,563 --> 01:50:41,502
Take advantage of them.

1446
01:50:41,982 --> 01:50:47,623
Because there's only two times throughout the year where you really get a four-day weekend.

1447
01:50:47,723 --> 01:50:48,223
This is one of them.

1448
01:50:48,223 --> 01:50:51,002
So I hope Bitcoin goes higher.

1449
01:50:51,363 --> 01:50:54,383
And I hope MSCR and all the Bitcoin and other stocks go higher.

1450
01:50:54,583 --> 01:50:56,923
And we'll just keep on plowing forward.

1451
01:50:56,923 --> 01:51:00,442
Oh yeah. Thanks, Jeff. Thanks everybody. Cheers, everybody. We'll see ya.