Well I won't back down, no I won't back down
You can stand me up at the gates of hell, but I won't back down
No, I'll stand my ground
Won't be turned around
And I'll keep this world from dragging me down
I'm gonna stand my ground
And I won't back down
I won't back down
Hey, baby
There ain't no easy way out
Hey, I will stand my ground
And I won't back down
Well, I know what's right
I got just one life
In a world that keeps on pushing me around
But I'll stand my ground
And up.
Woo! Here we go.
Bitcoin's giving us a bit of a run today.
We are back for True North episode 46.
We've titled this one, And They Fight You.
So we've got the crew on today.
We are in normal business hours, which is a little new for us.
A bit odd. It feels a little weird.
We've got some daylight outside, which is new.
and uh yeah here we go episode 46 so for those that are joining if this is your first time
listening uh true north is we've dubbed it the investment grade bitcoin podcast we talk about
bitcoin we talk about bitcoin securities we talk about the financialization of bitcoin
uh the evolution of these securities what type of uh people may be interested in these how to
think about them broadly and really try to take a institutional grade view on risk and analysis,
which is a bit novel thinking about the asset of Bitcoin itself.
So without further ado, let's talk through this. We've got a lot to talk about today, man.
Things are moving. MSTR price is down. It's horrible. We all wish it would be better. That
would be nice if it caught a bid to the upside. But let's talk through some of the dynamics here.
So today we're going to talk about MSTR update, price statistics, amplification ratios as we
normally do. We're going to get into MSCI, which has been a really hot topic. Obviously, JP Morgan,
which has been really big in the news over the last couple of days. Hypothetical shorting of
mstr and changing the dynamics behind the scenes but then also coming out with structured products
as of today we'll talk through implications of that uh the press status volatility and double
counting i think there's uh some concerns about how like these press are counted we'll kind of
unpack that and walk through it a little bit health of bitcoin and catalysts on the horizon
which i think there's a lot there and we can walk through that and then obviously the biggest debate
of all time is does turkey suck? And would you rather have turkey or ham at Thanksgiving? And
I feel very strongly about this. So we'll get into that later. And without further ado,
we'll hand it over to Tim real quick. Hold on. Ladies and gentlemen, what you're about to hear
may be amazing, but it is not financial advice. It's for informational and educational purposes
only. Jeff, back to you. All right. Thank you, Tim. We are off and let's get cooking.
First of all, let's just talk MSDR price. What's it at? 172 as of today.
Obviously, the price of MSDR has gone down drastically.
Hold on one second. The price of MSDR is 179. It's up 4% today.
Okay. Caught a bid. Caught a bid when Bitcoin went up.
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.
So death cross and golden crosses.
There was a lot of talk about a death cross.
A death cross is when the 50-day moving average drops below the 200-day moving average.
The 50-day drops down, that's a death cross.
On the flip side, there's something called a golden cross.
A golden cross is here's the 200-day moving average, and the 50-day moving average goes
above it.
That's a golden cross.
So we had this death cross on the daily chart for Bitcoin.
Now, what's happened is MACD is on a shorter time frame.
It's 12 and 26 on TradingView as a default timeline.
The MACD on the daily has now crossed back over bullish.
And what you're going to find out, if you believe on December 1st, the quantitative
tightening stops and they start buying treasuries at $50 billion a month, if you believe in
that and Bitcoin runs to $100,000, you're going to have this cope because Bitcoin is
going to run up to $100,000.
They'll be like, I guess you should have bought the dip.
And it's not financial advice.
But if things follow through, like this has already been communicated and Bitcoin runs up, then obviously strategy stocks should go up with it.
And those are technical indicators.
There's no lines drawn.
These are all auto drawn based upon those parameters, the moving averages.
So that's the way I look at it.
And then talking about MSTR 179, I did a projection.
I showed this on my, I did all the math.
It said if Bitcoin grows at 30%, they're very capital efficient, that in five years,
MSTR stock will be at $3,100 a share.
And I did all the math on how that happens.
If somebody does not like my math, that's okay.
You can plug in your own math and come up with your own projections, right?
I'm not giving any financial advice, but I base it on a 30% CAGR of Bitcoin, right?
And that MSTR should double that return, the stock price.
The current stock price I get is miserable, right?
Totally get that.
And in 2030, it would trade, I believe I calculated at a 2.5 MNAP.
So I'm not calculating some crazy MNAP, but go ahead.
Yeah, this whole dynamic of Bitcoin treasury companies,
companies that have Bitcoin on the balance sheet
and how to value them is so fascinating because it's each one of these companies has their own
bull and bear cycles within one individual bull cycle of Bitcoin and one individual bear cycle
of Bitcoin. So you get multiple shots at this thing as it's moving in one trajectory into the
future. And it's really fascinating when you do start to look at some of the technical analysis.
I'm not a big, I'm not a huge fan of technical analysis. I'm not a great trader. I don't,
I don't really trade. I'm just taking a long directional bet. But the, the interesting thing
is that there are algorithms and mechanics and people that do trade and they do trade off of
these mechanisms. And when you have a super volatile asset like Bitcoin that, that creates
multiple types of these setups for people to go, you know, flip bearish, flip bullish, flip bearish,
flip bush. And, and then you have all of the macro that sits on top of it. So it's just a
fascinating asset. You've got so many people that are trading and holding this instrument. I mean,
it trades 60 to $100 billion of liquidity a day, which is just an insane amount of volume.
And there's, there's people everywhere touching this thing all the time.
Yeah, Mike, to your point with the, you know, the technical analysis, like if you find TA,
you just don't get it or you don't want to bother to learn it,
you still know what a dip is.
You can always buy the dip.
And if your time horizon is long enough,
it kind of doesn't even matter if you're buying the dip
or buying the top forever, like Sailor,
because his time horizon is like decades.
But if you just bought the dips,
you could probably even outperform Michael.
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.
Yeah. And I mean, I was on a call with Strategy yesterday and they're very focused on keeping
the equity story, the common equity story simple. What is the common equity? It's levered Bitcoin.
Okay. How do they do that? They use prefs, non-callable, non-term obligations to amplify
the Bitcoin exposure. Okay. So when do you want to enter that package, that exposure? You want to
enter it when you get it at a good price. And what is a good price? Book value. And so we're
approaching, we're at like 1.15 MNAV. I think now is the time to jump back in for the next 10 years
when you have this levered Bitcoin exposure with no call risk, no sort of termed or refinance
necessities in the future. And I really, I think people are too bearish now. They're all feeling
the pain from 450 bucks a share to here when this is now the time to start being optimistic again,
I think I really do think. And just for more parallels, like Tesla was at 400 a share in 2021,
I believe, and it was down as low as 100. But was their business worth less when it was 100,
you know, six to 12 months later? Like, no, it was more valuable. Like they're developing
freaking robo taxis and optimists, but nobody were nobody was valuing that far out, right? Like
everyone's forward expectations is like six to 12 months max like hardly anyone is looking out four
five ten years uh but so if you can imagine how much bitcoin freaking strategy is going to have
in five or ten years then this doesn't seem like much of a big deal but if you
if you were hanging your hopes on a six to 12 month trade then yeah you can you can be pretty
disappointed. But also entry matters. Of course, entry definitely matters. The other thing I want
to say is that people say transparency, transparency, transparency all the time. They say this. You're
like, okay. So strategy has got a great dashboard. Many other Bitcoin treasury companies have
dashboards. So you can see the mark to market price of Bitcoin, how it relates to their MNAP,
all of their metrics. You can see this. For the typical other companies, I do not know how many
cars Tesla is shipping on a daily basis. I do not know the breakdown of those models. And I don't
know the cost basis that it costs them to build those cars on a per minute basis. So is it great
that strategy has transparency? Yes. And the price goes down. Oh, you see, we went down, but I'm like,
I cannot tell you, you know, Netflix will come out with their subscriber growth. Do I have a per
minute tally on how many subscribers Netflix is either growing or losing on a per minute basis?
No, that dashboard does not exist for the Mag7.
I don't know how many chips NVIDIA is shipping per minute.
I don't know that number.
I get an update once every three months to tell me where they stand, right?
And so everybody's like, I want transparency.
First of all, you don't get transparency with the other publicly traded companies.
You don't get it on a permanent basis.
You get it once every 90 days.
You may not get the detail that you want, right?
And with this, you get it.
So this transparency cuts both ways.
You see, it ran up.
Okay, so that's great.
The price ran up, so we love it.
The price runs down.
See, I told you these guys were turds.
And so I think that's right.
Oh, the M-TAP is terrible.
Well, if you're a buyer, to Dan's point, is your entry point.
You're waiting for a dip to buy in.
Great.
Then you buy on the dips.
When do you sell?
I believe you sell high.
buy low sell high some people be like well if you sell then you have to pay taxes and the reason why
you i'm gonna tell you the number one reason why people pay taxes it's the p word they made a profit
like oh i'd rather just have losses all the time because then i don't pay i don't pay taxes
fuck that so this is where we are your entry point matters and there's a difference between
technical analysis and drawing lines on a chart yeah the 50 and 200 the 50 day and 200 day moving
averages are automatically calculated. I'm just saying that these, you look at that,
that's the analysis. And I'm going to finish my rant here in one second. You're either going to
believe the math, you're going to believe the fundamentals, or you're going to believe in a
cheeky meme, right? And some people are like, oh, let's just have a cheeky meme. I'm like, okay,
then you're just believing the narrative. So pick which would you want. I can tell you right now
that if I posted cheeky memes and I was good at that,
I would have 50,000 followers.
I'm terrible at it.
I post detailed mathematical analysis
and that's why I have half the followers that I have,
but I'm done with my rant.
Well, the good news is that the entry points
are easier to find because the dips are obvious,
but the exit points,
trying to figure out when the top is,
that's a lot harder.
So just buy the dip and move it on.
But I think what you said about
the quarterly earnings reports
for like a Netflix or whatever is important
because in strategy, like you said,
they basically have an earnings report every single day.
365, well, 250 trading days a year.
We know what strategy's earnings is,
where other companies, you have to sit there and wait
and be surprised, hopefully to the upside,
but you're just as likely to be surprised to the downside.
I don't think this has bigger implications for the debt.
Say that again, Dan?
We can take that.
Let's talk about that later.
I don't want to interject,
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.
Huge, huge. It's calculating risk real time.
You're smoothing earnings volatility.
This has never existed before.
Whereas, you know, there is a future.
You can imagine a future where every company is operating on a Bitcoin standard and they're buying Bitcoin every week.
Then earnings calls every quarter are almost irrelevant.
right there. You would, you would have an understanding of how their business is growing
and how it's changing over time. And I think that's why it's a, it's a fascinating exercise
to look at the rest of the world from a Bitcoin perspective, right? Like compare all of the other
equities and look at their earnings over time priced in Bitcoin, right? Like we, we talk about
Bitcoin being money, being a store of value. Almost everybody misses this unit of account
component. Like look at the rest of the world price in Bitcoin, even equities, look at equities,
Look at debt. Look at all of these other things priced in Bitcoin. And the picture is so clear.
Like everybody, every company pretty much on the planet, except for some of the Mag7, are going down into the right priced in Bitcoin.
And that will continue to happen over time. And so you brought up a great point, right?
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.
the the was the company any worse no right they were they were you know building more building
optimists more cars are going out the door gigafactories ai you know like they're doing
everything collecting more data etc you could take a similar perspective here right you look at
strategy back in 2024 beginning of 24 beginning of 25 the net capital held on the balance sheet
at the beginning of 2024 is 5.7 billion. That's two years ago. And now the net capital that they
hold on the balance sheet is 49 billion. That's insane. That's insane growth in very short time
horizon, fueled by yet a little bit of debt and a little bit of debt relative to the assets,
and then the new preferred stock as well. So you look at the debt to asset ratio. So on a leverage
ratio perspective, looking at the debt relative to the assets, 14% levered and an amplification
perspective, taking into consideration the notional prep outstanding and the debt,
you get to 27% amplification. That's what you want. You want to buy that package at book value
if you want to be levered along Bitcoin. Right. And I want to deputize everybody on this phone
call. And what I mean by this is that, so let's say strategy, they have these perpetual preps and
it pays this yield into perpetuity.
And they have said there's different numbers out there.
Given the price of Bitcoin, they could pay that for the next 100 years.
People are like, see, 100 years is not into perpetuity.
I'm like, okay, the next time somebody brings up a bond,
the next time you talk to a TradFi guy, say,
how long can you pay out the dividends on your bond?
Tell me how long that you can pay that.
Oh, until the term and then you refinance and you don't know it.
this is the part that bugs me the most.
Their cash flow, yeah.
Their cash flow, that's unknown.
You don't know what the future is.
This is all unknown that they have.
And so people scrutinize Bitcoin.
I'm like, well, why don't you scrutinize TradFi
and say to them, great.
And by the way, if the company goes into bankruptcy,
which I don't think there's even a remote chance
of that happening to strategy,
then how would you pay back the bondholders?
And I use this example all the time.
When Blockbuster went into bankruptcy,
See, they had a billion dollar bond that was outstanding.
What was the collateral on that bond?
It was DVDs.
DVDs are like having bananas in your collateral.
They go bad after two weeks.
They're worthless after two weeks.
And the other thing they had was leaseholds, not real estate, just the leases.
But once they no longer had cash flow, the bond was basically worthless.
Who made the money on that?
The lawyers.
So here we have something like, well, if Bitcoin goes to zero,
As soon as somebody says that to me, well, I guess that there's a more likely chance that Bitcoin goes to infinity.
And the look on their face is like, what?
I'm like, you heard what I just said.
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.
And those people will crumble within 30 seconds.
They'll be like, I never got a question like that.
Like, why not? Yeah. What's the collateral worth that's in the bond?
Right. Yeah. A lot of people are not taking that perspective. Yeah. It's a strange phenomenon,
the cognitive dissonance, right? Like you're taking all of this aggression out on this company
because they hold Bitcoin and like not taking that same perspective on any of the other
companies in the rest of the market. So let's shift over to, let's think about this MSCI topic.
And we'll talk JP Morgan as well, because I think this is another interesting landscape of where we're at.
So MSCI came out on October 10th.
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.
So those are pretty decently sized indexes globally that a lot of capital follows, right?
So MSCI is a publicly traded company.
They create these index products for people to follow and buy funds that follow those index products.
And one thing that's fascinating, if you think about this, right?
If you're an asset manager, that email on October 10th might have been the only email
that you may have got from MSCI that week.
So if you're following these index funds, you have to take action on that information
because there's a probability, right?
If you look at the letter, it's very clear, actually, that there's a high likelihood that
these companies are going to come out.
There's a list of like, I don't know, 80 to 100 companies.
There's a high likelihood that they're going to come out from the index funds.
So think about the game theory process of going through this, right?
If you wait until January 15th to when they make this decision of whether or not to include them and they exclude them,
the thought is anybody that's following or tracking the index would have to go sell those companies.
Now, you have to take some probability that that's going to happen.
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.
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.
If people are exiting the trade, you are incentivized to front run them and beat them to the door.
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.
There's no benefit of waiting until January 15th when the decision is made.
If you think that the probability is greater than zero, that it's going to be excluded.
So I'm going to start there.
Like, do you guys have thoughts on this?
How are you guys thinking about it?
Obviously, this was made a big deal just last week from JP Morgan.
They just started to make a stink on it.
And we'll tie JP Morgan in next.
But what do you guys think?
Can I quote somebody here?
Yeah, go ahead.
This will be the quote.
I have thoughts on this.
Okay.
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.
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.
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.
And just say, not the actual code, just give me what the parameters are.
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.
And it says, if this happens, then do this.
and it says, and then it went through,
it gave me these top 10 trading bots.
So what I think happened is exactly the way the timeline said.
We knew there was a problem with Binance,
with the Oracle on Athena, the USD stable coin that existed
because they announced that they had a problem with it
and they were going to go fix it.
Probably not a good idea.
What happened was MSCI puts that out
and then immediately the trading bots see the MSCI thing and say,
oh, this is going to happen with MSTR.
are. Therefore, let's start shorting what's going on in the crypto space. And then Tom Lee comes in
to say, well, if you own a large, your institution owns a large amount of Bitcoin, there's ADL,
the automated deleveraging that comes into effect. And so what happens is you're like, oh crap,
I'm now losing money on my Bitcoin, unrealized gain, unrealized losses. Therefore, I need to
hedge that position. I could do that in IBIT. I called Dan once he says this. I'm like,
which do you think is better, Dan? And you can chime in with here. Would you rather short using
IBIT or short using MSTR to short if you held the position in Bitcoin? Remember what you said to me?
Yeah, I just said the MSTR options market is way more liquid than IBIT. So you're going to
short position there. Plus you have actually levered exposure to the downside.
it. Exactly right. So there it is. So now all of a sudden let's short the hell out of MSTR because
it's bigger by about 30% than Ibit. It's more liquid. It has a levered piece of it. And you
could probably hedge better by holding your Bitcoin and shorting MSTR. So then the narrative
comes out, oh, this is a coordinated thing by JP Morgan. I would say, no, it's a bunch of fund
managers that are like, hey, we have a responsibility to hedge, hence why they're called hedge funds
or hedges to hedge that long position in Bitcoin that they believe is long term by selling MSTR
short. So they drive the price of MSTR down. And that's where we get to today. And I think that
now we seem to be getting a bid on Bitcoin. It's like, well, maybe we reduce some of those
short hedges on MSTR. Maybe. Maybe there's some short covering on MSTR today. That's why it's
jumping up. But that's how I think it played out. You guys could chime in, disagree with me.
But that's how I think that I think that's the Occam's razor.
It's the simplest explanation is most likely to be true.
And people underestimate the fact that all the equity sales reduced the cost to borrow
MSTR drastically over the last year.
So it's just been a kind of a perfect hedge for anyone who was nervous about the four
year cycle in Bitcoin.
And so I think that's kind of some of the, you know, sell pressure we've seen.
Right.
It's put sell pressure.
You've got MSCI.
you've got all of these the confluence of factors that are hitting all at the same time
and you look at uh just the monthly candles for uh or even the weekly candle for mstr mstr
relative to bitcoin and it's down every single week it's read every single week since since
october 10th so that's an that's an interesting phenomenon go ahead dan yeah i think the prefs
unfortunately were since they're novel, since the question of Bitcoin per share came into question
during sort of the introduction of the press, they provided kind of a reset on the MSDR capital
structure. And people were kind of nervous like, oh, this could be not what I thought. Why is the
cost of capital high? Why are these things senior to me in the capital structure? So I think it
caused this kind of reset to book value. And now everyone can take a break and figure out where
where the valuation is going to land over the coming years.
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.
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
cost of it.
Hold on one second.
A comment from John's store.
Nice afro, Dan.
Dude, congratulations.
That's a great comment.
I'm not cutting my hair until MSTR is at 1,000.
You know what?
Please do that.
I'm not cutting my hair until MSTR is above 400.
All right.
We'll bite off something we can chew.
Yeah.
Not bullish enough.
Not bullish enough on my hair length.
Maybe there'll be a polymarket swab.
How long does Dan's hair get?
Wait, wait, wait.
How rare is Dan's hair?
You know what?
maybe you should auction off some of your hair because you know teeth aren't you know teeth are
in short short supply the old people will get the reference there but they're not that particularly
valuable that's a good point grand i i also could use it to buy the dip yeah sell your yeah sell
your hair maybe make a meme coin on it as well can we can we beat up on the jp morgan uh announcement
that he did on the note let's do it let's talk about the note yeah let's talk about this this
this note first of all i think overall it's it's bullish for the market that jp morgan has a note
wells fargo is also making money on the note and it's written on the one page now i do find it's
quite odd that this was came out in the end of september and we're just hearing about it now
maybe they market this to institutional or large clients first so maybe that's what's happened with
it but the question is is this a competitor to the prefs on strategy and hear me out the answer
to that is yes, but this is a structured note. If you buy it, you're stuck in it for the term.
There may be a secondary market for you to go sell it. There may be. So when you buy this,
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
of them. Then you just sell them. And the other thing about the prefs that everybody knows
is that they're rock, return on capital. So that decreases the amount that your purchase price
over time. The structured note by JP Morgan is not return of capital, or it doesn't mention that
in the document. So again, apply the same level of scrutiny that everybody does to strategy when
a new product comes out and say to them, okay, is it tax efficient? Is it rock capital? Can I get
in and out of it? Is it liquid? The JP Morgan note is completely illiquid. When you're in it,
You're stuck in it. It's basically a private note, right? What's great about doing private
investments, right? Or you do private placements. You get into it and you tend to be locked up for
five to seven years. There may be a secondary market for it. So again, we love liquidity.
We love talking about these terms and everybody's like, oh, JP Morgan's here. It's going to crap.
I'm like, but use that same level of scrutiny for the other products. And by the way,
does JP Morgan have a dashboard to show you that right now this fucker is
trading under value because it was priced at $110,000 on September 29th.
And right now this product is negative.
So it's negative fricking MNAV based upon the multiple to the,
the net asset value put in is now off by 20,000 bucks.
So this thing is trading at 80% MNAV.
I don't know if I can make this any simpler for people that are here,
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.
But they don't even know.
It's kind of like having a car without a speedometer.
I think we're going fast, but I don't know how fast.
I'm done with my rant.
And you also think about – I've got so many opinions and thoughts on this.
You also think about the upside.
It's like where does the upside go?
Okay, upside goes to JP Morgan.
So they've got a $4 trillion balance sheet.
Like, okay, they're going to make $100 million on a $4 trillion balance sheet.
Like I'm not buying JP Morgan stock to take the benefit of the long side of the trade here.
If I'm long Bitcoin, then there's so many other things, right?
You hit on a great point, structured note, probably illiquid.
Maybe it's 144A trades.
Who knows where this thing is going to trade or how it's going to trade.
if they want to tap and access larger pools of capital they're going to need to get this product
rated and it's also a bit confusing like it's not super straightforward exactly how it works
i haven't seen like a specific document on this yet and everybody's speculating it's like
the price goes up by 2026 you get um what is it like guaranteed like 16 return but then if it goes
into 2028, you get one and a half times the upside. So it's not very clear.
It caps at 200% of upside. So if Bitcoin does a 4X rep, let's put this into simple terms.
Your upside is capped at 2X. If Bitcoin does a 4X, you just gave that additional 200% to JP Morgan.
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.
You can lose up to 87 and a half percent of your money.
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?
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.
They basically guarantee that if you put in $100,000, they'll guarantee $12,500.
Yeah, this is just another product with different risk return, right?
Yes, it's a competitor to the prefs, but there's so much.
Look, we're tackling a $300 trillion fixed income market.
If you think about real estate too, it's $600 trillion, right?
This is an absolutely enormous marketplace.
And if you think about if they have to unlock additional capital to buy this thing, they
have to go explain the instrument to institutional capital and why they should buy it.
What's my upside?
What's my downside?
Why does it look good?
Okay.
Then if you want to unlock additional capital, you got to go get the product rated.
Well, JP Morgan's got a great issuer credit rating, but this instrument, if it's got a
Bitcoin component to it, is going to get negative treatment from the S&P because they've already
announced they've got negative they've announced negative treatment for bitcoin as capital
so the rating is going to be bad but if it's jp morgan and strategy both pushing the s p for a
rating there's actually a higher likelihood and and for basel accounting uh basel banking accords
there's also a high likelihood that those rules are going to change and if those rules change
then they can't like it. If the rules change for JP Morgan for Bitcoin, if the Basel Accords
change for Bitcoin, then it's also got to be applied to strategy. So this is incredibly bullish.
You've got now multiple large institutions with power that have the ability to potentially push
ratings and open up just huge doors of institutional capital to come in the door. Additionally, you
think about, again, just the payout structure. I don't think this JP Morgan product is
rate, to be honest. I think I would rather buy strike because you're getting paid quarterly,
you get 8% annually, you got downside protection. The balance sheet of strategy, the Bitcoin balance
sheet is what's backing it. And I think the instruments that are created via the press are
just significantly better because they're liquid and you get payment. It looks just so much similar
to a fixed income instrument, like a bond that is easy to put into a portfolio, like a retirement
account or an insurance portfolio, pension fund, et cetera. So to me, this is bullish for Bitcoin.
This is bullish for strategy, despite all of the negative sentiment and JP Morgan shorting,
changing margin requirements, all this other stuff. Is that happening? Is that a targeted attack?
Maybe. But ultimately, like this is what's happening right now is a power grab for as much Bitcoin as humanly possible.
And this is BitBonds accelerating in the market.
And I pulled another example of this.
I think just last week, New Hampshire launched the first Bitcoin backed municipal bond.
Okay, so now you got states offering municipal bonds.
You got JP Morgan pushing some sort of BitBond.
Wait, we got Texas bought it.
Texas bought it.
They just bought it.
They just bought Bitcoin.
But they just bought Ibit, which is great.
But the bond structure is growing.
And that's what we're here for.
We're here to tackle the entire bond.
By the way, the cope that happened.
So I forgot which economist guy said this.
It was either, I don't want to say which one it was.
One of these economists said, oh, but they only bought, they allocated 10 million and bought 5 million.
And the response was, oh, but they only bought $5 million.
It's a small number.
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?
I mean, so I was like, well, this wasn't a big number.
I'm like, yeah, but it starts small and goes big.
You know, the most successful growing and largest spot, you know, ETF is IBIT.
It's the fastest growing ETF of all time.
It way outpaces gold.
And what is it currently at $80 billion in two years, right?
Or the value that fluctuates.
So we've been doing this.
Eric Balkunas has been doing great information what's grown on the space.
So I think that you have a wide variety of these products.
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.
And again, go back to liquidity.
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.
yeah and what you said about the bullishness as far as the the ratings agencies are concerned
is critical i think because when we discussed the uh smp rating to begin with it was like okay
they can afford to do this to strategy now because they're the only one but what blackrock does is it
validates the thesis that this is a legit product um i know you can't talk about it but sata did the
same thing. But that was from the perspective of someone who's already oriented to Bitcoin.
This is a TradFi company. These are people who are aligned with the ratings agencies to begin with.
So now they can't just kind of screw strategy over with a low rating. There are going to be
some powerful people in the TradFi space whose incentives are now aligned with strategy. So I
think you're right that this is this is a bullish event and by the way we can go take if for any
reason this is a long shot not a prediction but if strategy gets s&p 500 inclusion if it just does
then that like i did a post on be poetic justice and if bitcoin look i believe it's not if it's
just when bitcoin continues to run it will retake its all-time high whenever the price goes down
People are like, oh, you got a dip.
You're buying it?
No, it's going to zero.
It runs back up.
Same question as I always get from people like, oh, when should I buy?
I guess when there's a dip, but you'll think it's going to zero, so you won't buy it.
And you're like, well, that's a nasty remark.
And I'm like, but we just had the dip.
And people are like, well, it could go to 50,000.
So I think where we stand today is that either you believe in the macro indicators, and I
think that's where, you know, talking about M2, but going back to the rating agencies,
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?
If they want to just have that novelty value of it, right?
And that Bitcoin is real because they can't put any of the spot Bitcoin ETFs in it.
There's no commodities that's in the index, but they can't put MSTR in it.
And I think for them, speaking as a tech guy, that's called competitive advantage.
And they would have something in their index, which MSCI wants to take out of it.
And by the way, what's the precedent for this?
Jeff, is it correct that MSTR used to be in the S&P 600?
That's correct.
Right.
So it's like, oh, grain's making stuff up.
I'm like, no, it used to be a part of it.
Now all of a sudden it's like, oh, I guess we didn't see that coming.
So do I think that it's going to happen?
No.
But if it does happen, I will take the victory lap.
And everybody that believes in MSDR, take the victory lap.
I have some interesting thoughts and a little bit of analysis on the prefs.
So I'd love to switch there and talk about how they're trading relative to Bitcoin.
And it's on what you're saying, Jeff, and I'll let you guys jump in first.
But I apologize, there's a car going past me here.
But these prefs are a weird hybrid between a fixed income instrument and an equity.
Because technically, they're an equity, right?
It's a preferred equity.
It's not a bond.
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.
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?
You can go long the superior product and short.
So like, for example, right?
I think an interesting trade is like your long stretch, sorry, your long strife and short stride, right?
Because if a dividend payment was ever missed, stride would effectively get smoked, like smoked very hard.
But strife has the cumulative dividends, which are essentially dividends that are missed or compounded and owed to the shareholders.
So strife may be fine.
Stride might take a bigger hit.
That's your hedge position.
You may take the hedge off during the next dividend dates.
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.
So Stride is actually trading at like 1.5x beta to Bitcoin. So it's actually right now,
Stride is trading like leveraged Bitcoin, which kind of makes sense considering Bitcoin is in
fact the collateral for this offering. And it's the junior most security and strategy capital
stack above the common. So I don't know how this is going to play out in real time moving forward.
And it's something we talked about, I think a year ago, Jeff, when this is all coming out in
grain and soleil is like we're talking about people are going to be arbing trading hedging
and there's going to be massive liquidity in these products the way they're behaving so i think
back and forth between all of them yeah right yeah it'd be like okay stride is below its par value
technically it's at 0.75 m nav like if bitcoin per share is a thing in the case of liquidation
so bitcoin per share is the amount of bitcoin you have in liquidation essentially then stride is 0.75
MNAP. Okay. So it's trading at 0.75 MNAP. And like, maybe that is a levered long that's actually
superior to MSTR in that case. And then it's like, okay, now there's an options market on this.
So I've bought the absolute maximum amount of stride calls I've been able to buy because like
the volume, the daily volume is like one. And the bid ask spread is like three bucks. It bids two
bucks. The ask is like five bucks. But like if Bitcoin runs, and this was a little report I did,
If Bitcoin runs, there's no reason that thing shouldn't trade at one MNAV.
And I like thinking about the press in terms of MNAV because they're equity, not debt.
So at one MNAV, it's $100.
Those call options create a crazy return.
Then you've got all this stuff.
Now you have these options like, okay, I want to collect the December 19th dividend on Strife.
I think we all do.
It's $2.5 per share.
So it's essentially 2.5%.
okay, now I want to sell my upside and lock in even more profit during that hold period.
So I sell a call. I sell the upside to someone else. Like me, I'm buying the upside, right?
So now you have a 3.5% dividend on that quarter annualized at whatever, 15% by holding something
like Strife. So these markets, I don't think we're even scratching the surface at how mature
these things are going to get. Yeah. I don't know. It's crazy. There's no other products like this.
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.
That's an interesting way to look at it.
So when you're thinking about any of these products as a 1MNAV, you're just using the liquidation preference, right?
If it's trading at what stride is at 75 cents on the dollar.
Exactly.
Because what is 1MNAV for the common?
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.
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?
with stride if strategy were to liquidate tomorrow with the same bitcoin price i know this is this is
a scenario that is impossible but let's just for the sake of argument as a stride holder you would
be paid out a hundred dollars for each 75 dollars you own if strategy were liquidated liquidate
tomorrow so that's a negative m now negative book value it's trading at a discount to its book value
discount to its book value i could think you could think of it that way when i listen to dan talk i
just think to myself, tell me you're an engineer without telling me you're an engineer. Like
the way he thinks about investing. I, I'm never, you know, obviously, I like the guy, but his
creativity with the way that he thinks about these things is frickin unmatched. It's kind of
ridiculous. Yeah, yeah, yeah, you're, you're at the forefront of developing cutting edge, you know,
ways to interact and trade between these things, right? Like, I think you're absolutely right.
I think the volume and the liquidity of these instruments is going to increase so drastically just because there are these fixed income instruments.
Most of the fixed income instruments are not liquid.
And now you have kind of liquid fixed income instruments.
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.
Right.
And that could be a and Bitcoin.
And that could be a whole algorithmic trading model that I'm sure people are working on right now.
Like, well, think about it.
Like, think about this.
Like, so right now you just look at the numbers.
Stride is like, it's actually like 1.5x levered Bitcoin.
That's the way it's been behaving since inception.
So Stride, the junior debt.
What happens if Bitcoin rips to 300k next year?
Does it stop at 100?
Yeah, that's a good, well, how much press?
I don't know.
How much press get issued?
and rates are lower you're right the point so so like issuance would put a cap on the price
right so if if they're like if bitcoin rips at 300 like the capacity to issue prefs like
five x is you know like so so so wait but this becomes an important point and and mark harvey
wrote this what he says is look there's there's a dividend yield rate look as everybody knows as
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.
So what does that mean?
It's an inverse relationship.
So they say this all the time on CNBC.
As the price of the bond goes up, the yield goes down.
So if you have a bond that's priced at $100 and it pays 10%, you're like, OK, great.
But if that bond goes to $300, you're still getting paid the 10% on $100 on the original par value.
But as a percentage, that drops down to the effective yield on that is 3%.
And why did that yield go down?
You're still like, but I'm still getting my $10 a year.
You're like, why did it go down?
No, because the underlying value now tripled to $300.
So effectively, you're only making 3%.
And if people don't understand this, right?
This is critical.
This, Jeff, goes back to what you keep on saying, that in years down the road, as the
compounding effects as Bitcoin continues to go up, the yield that's paid out is 10% and it's in
fiat dollars, but you have an underlying collateral that's growing at 20, 30% a year.
So you're still going to get what they promised to you, but you're not participating in the upside.
You're like, well, that doesn't sound good. And what happens is strategy is basically offered
five or six products, right? Stride has the most volatility to it. It has more of the upside.
Strike has a conversion.
Then you have stretch and so forth.
And so you could pick, do you want the highest volatility?
Buy the MSTR common shares, right?
And then you have a range of the preps.
And then you have the converts at the top of the capital stack.
So he's like, pick the volatility that you want.
What can you stomach?
Can you stomach a 40%, 50% downturn in MSTR?
No.
Well, I guess maybe you should buy the preps.
And how many preps does he offer?
Who does he offer?
Five right now?
A whole bunch.
Five different preps.
So pick your volatility profile.
And so I think what he's done is, you have to understand, this is a feature, not a bug.
When Saylor says that he strips out the volatility, he's stripping out that upside that exists
in some of the prefs, right?
In stretch, you don't get that upside.
All you get is the 10.5% coupon.
It's not a bug.
The prefs were designed to have income coming in.
And therefore, he's got to strip out the volatility.
So you don't participate in a 2X upside.
Right.
You're trading excess.
You're getting rid of excess return in exchange for reducing the excess volatility.
But hold on.
But it gets paid out either in a quarterly, right, for most of the preps, or you get paid out monthly yield.
Look, the biggest problem with Bitcoin.
Let me tell you what the biggest problem is with Bitcoin.
You buy Bitcoin at whatever price.
It doubles in value.
And what happens is it's like a Veblen good.
And what a Veblen good means is as the value goes up, you hold on to it harder.
Typically, what happens is, right, you don't want to sell it.
Well, if you sell it, I'm never going to be able to buy it at that price again.
So you hodl forever.
What the prefs are designed to do is you buy the prefs and you're going to get either a
monthly or quarterly yield paid to you.
And if you get enough money into the prefs, you don't have to work again.
Yeah.
And so you trade off that upside by getting that yield that comes to either monthly or
quarterly.
So for Bitcoin, everybody's like, well, how do I get a yield on Bitcoin?
You could do some DeFi thing.
You could lend against it.
But with this, no, you buy the preps and you can get in and out whenever you want to.
And besides, it's return of capital.
Yeah.
The one thing that's so interesting that comes up a lot, like how are they going to pay the dividends, right?
How are they going to pay the dividends?
Well, that's the risk that strategy the company is taking on, right?
How do they pay the dividends?
Well, you could sell equity via MSTR to do that, right?
which means the equity common stock shareholder is taking the volatility on the forehead,
right? Like who's stomaching the volatility of the excess Bitcoin? It's the common stock
shareholder. Everybody knows this. But if you're long Bitcoin, you want that excess volatility.
You want that. If you're long Bitcoin and you believe in it, the excess return, the excess
upside and the excess downside is appealing to you if you have a long enough time horizon.
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.
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.
It's minuscule.
It's so tiny.
It's a complete nonsensical argument.
And I've been a bear for the past three months because of the press and the press are gaining adoption.
So I'd be the first one to say, oh, they have a problem with interest obligations.
They don't.
It's a completely nonsensical argument.
During 2022 and 2023, they sold equity to buy more Bitcoin at a discount.
like they were trading at a discount. They use the ATM. No one cared because they weren't in the
spotlight. That could happen again here. And I think they would, even as a common equity shareholder,
if they sold common equity at a 0.95 MNAV to fund the divs, I wouldn't mind at all. I don't think
it's that big a deal. If we're at 0.7 MNAV, that's a different story, but fluctuating around one MNAV,
issuing common equity is a tax efficient way to cover the dividend payments. And there's no
problems there in my mind whatsoever. Like think about Mara, they've been issuing 40% annually
outstanding common equity
and just wrecking their shareholders for years.
To pay CapEx, son.
At a discount, whatever.
No one cares there.
Well, don't let the fat get in the way of a good story, Dan.
I mean, you know,
I think we have an inverse indicator here
that if you basically get rid of your Afro
and then you think the price is going to spike
because when you had the shortest there,
the price was the highest.
Yeah, I'm walking in.
Well, I've got some analysis on this Bitcoin per share thing, which I think is an interesting
question that a lot of people have brought up.
This concept of like double counting preferred stock per share or Bitcoin per share and thinking
about how you look at it.
And I'm just going to pull up my screen and we'll walk through it.
But before I even do that, I think it's an interesting argument to unpack.
And it's an easy one to hang on to.
However, no companies, zero companies on the planet show their balance sheet on how much money people would get if we liquidated everything today.
I completely agree with that.
That just doesn't exist.
Like, like, why would any company ever do that?
Just like, it's a stupid argument.
Like there's no company on the planet that shows how much money anybody would get if
the company were liquidated.
So I'm going to start there and then show, show this via math in a Excel spreadsheet,
because I think it's interesting to think about this.
So what I've done here, and maybe I'll just hide everything here just to focus on this
real quick.
So I've got two columns here and I just made the math simple.
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
sats per common share is 100,000 sats per common share. You got zero pref raise, etc. So the total
shares outstanding is a billion. Okay, now your Bitcoin price is 90,000. The USD Bitcoin unbalance
sheet is 90 billion. And so the net USD per balance sheet per all shares traded is $90.
Now, when you look at company B over here, that's issued $20 billion of prefs and sold it at a 20%
discount. So sold at 80%. So they sold $20 billion of prefs, but they raised $16 billion.
dollars. That's a 20% discount. And the par liquidation price is 100. So the amount of
pref shares outstanding is 200 million. Everything's the same. And then I assumed that the capital
raised, the $16 billion of capital goes to buy Bitcoin. So in this scenario with Company B,
Company B has 1.177 million Bitcoin. Okay. Now the simple analysis here is if you look at the
number of sats per common share, the sats per common share is increased by 17.8% because you've
got more Bitcoin that you purchased with the PREF raise. Now, if you look at the amount of sats per
every share outstanding, assuming all shares are traded equal, you've got common and preferred
shares, the actual number of sats per share goes down by 1.9%. Okay, but what's the problem with
this perspective. The problem with this perspective is that your liquidation preference is priced in
fiat, not in Bitcoin. And I think that's kind of what this boils down to. So if you look at this
perspective down here, you would say this looks like a bad idea, right? Because in the event of
liquidation, strategy has got to pay or company B would have to pay out $20 billion and their net
net capital on balance sheet after the liquidation preference is $86 billion,
aka there's less dollars per common share net after the prefs. So basically the net USD
on balance sheet after paying liquidation preference of the prefs is down 4%.
So you'd look at this and you'd say like, this is a bad idea.
That's why I think we common equity is down, by the way.
Quite possibly.
In the short term.
But then you run the math on this and the liquidation preference is fixed in fiat.
Okay, so in this second example here, I look at, okay, well, this is assuming a price of Bitcoin at $90,000.
What if the price of Bitcoin is $150,000?
Well, if the price of Bitcoin is $150,000, the net USD per common share is actually up 4%.
And the net USD balance sheet per all shares outstanding is down 2%.
You're essentially outlined, this is the mechanism of amplification.
This is amplification, exactly.
This is amplification, 100%.
It's like debt.
It's like the liquidation preference is the debt.
Yeah. So let me, let me take this back into, to what I said before. So if you've got DVDs,
which are the equivalent of bananas and the company goes out of business, those DVDs become
worthless because once they're viewed, the value goes from 30 bucks down to a dollar.
And everybody's like, well, okay, what's the common, what's, what's the relevance to this?
When FTX went bankrupt, what they did was, and this, this, this made news about a month ago,
they said oh spf sam bankman freed should get pardoned because all of the people that were
involved with it got paid more in fiat dollars so they didn't lose any dollar they didn't lose any
money what they did not pay them back in is the native tokens the bitcoins or whatever coins they
have so this this one thing came out and said well if they made back all their cash right so
now they're not down cash, then there was really no financial loss. And what you're saying here is,
is that if a company bought Bitcoin and the Bitcoin rips higher, for some reason,
declared bankruptcy, the Bitcoin will continue to run up in value because it's independent of
what the company does. Correct? Correct. Yeah. Right. And so therefore the company has more
value because it owns Bitcoin. And if you take it one step further, oh, what's the company with the
most Bitcoin strategy with 650,000 of them. So if something went wrong, they have the best balance
sheet ever because it's a hundred, whether or not they sell the price, let's say they dumped all the
Bitcoin in one day, would it dump the price of Bitcoin? Probably. But the point is, is that it
could be done for all of these other companies, those assets, if it's real estate, it'll take
years to sell off. If it's any other type of asset, it takes years to sell it. With this,
everybody knows it can be sold in a minute. Now, that's probably not a good idea. So I think what
your analysis here is showing is that it's the good and the bad. The good part is strategy as
a dashboard. It shows you all of these metrics in real time, 24 by seven, and you can do it.
And most traditional companies, I'm sure there may be an exception, but I'm not unaware of any
company that shows you real-time metrics in their balance sheet and income statement unaware of it
we all know we all know that if bitcoin is not at 110 000 i believe that's the number by the end of
this year that they'll have negative eps we already know this it's not like oh don't say this grain
it's like we already know the nut because we know the number that was that in last quarter
the question is does the market give a crap whether that strategy has positive eps or negative eps
And I thought, I want to go back to something.
I thought that doing the FASB fair value accounting, because having these huge positive EPS would be massively beneficial to the stock price.
And what we saw, it has almost no bearing on it.
If having a positive EPS doesn't mean the stock rips higher, then it going negative means it probably won't affect it either.
Yeah.
But this analysis is great that you did here, showing that if you have the best, Bitcoin has become the best collateral.
And by the way, the JPMorgan product, they don't buy any real Bitcoin with it.
It's completely done synthetically.
Yeah, it's Ibit, right?
It's Ibit.
And I'm sure they're just buying a put call spread on Ibit.
They may not even be just buying the Ibit because they're going to hedge their position on this.
You're not hedged as the person that buys the product because they're telling you that you could drop down.
You can lose 87.5% of the principal that you put in.
But I want to tell you right now, they are 100% hedged on the downside protection.
Why do I know this?
Because I've already implemented one of these for myself just about a year ago.
So they already do this.
So the product that JP Morgan is doing is a common product.
Yeah.
the completely agree i mean there's a there's a there's a lot there
um a classic grain soliloquy uh the other thing i want to add on this table is i created this
these final three columns k through m here which is just outlining a 20 if you if you sold 20
billion dollars of profit at an 80%, so a 20% discount. And then you sold 20 billion additional
at par. So that increases the amplification. So I think one of the biggest things is that
there is a upfront cost of getting these instruments in place, right? Getting these
instruments out the door, like the common stock shareholder has effectively taken a volatility
on the forehead for the 20% discount or 15% discount or 10% discount sold on any of these
instruments. However, if Bitcoin goes higher, they are the beneficiary of that excess volatility
from the PREF in perpetuity. And any additional capital sold on those preferred instruments
has the potential to be sold at a higher or much closer to par. You think about stretch,
When will Stretch be sold? Stretch will be sold at par. Well, originally the product itself was
launched at 90 cents on the dollar, but that discount is shrinking. And you think about
Strife, they're selling it above par. You think about any of these other instruments,
as they get closer to par, the effective cost of capital and the benefit to the common stock
shareholder as capital is raised on these instruments is getting larger and larger over
time. So like the benefit of these instruments compounds, it compounds forever. And that's,
that's what accrues to the common stock shareholder. That is that compounding effect forever.
So is there, is there a double counting of shares? No, I don't think this double counting thing is,
is, is, I don't think people should think this way because no other company on the planet thinks
about how much Bitcoin am I going to get in liquidation?
The company isn't insolvent.
Why do you even take that perspective today?
Also, the MNAV calculation on strategy dashboard
subtracts out the liquidation preference on the prefs anyway.
So it's a complete non-
Like anyone saying that there is double counting,
you could double count it if you wanted.
And I think there's a solid argument to be made
that Jeff's putting forward, but it's not double counted.
So it's not even an issue.
Yeah.
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.
So it's kind of like there are ways that they can avoid the liquidation issue in the first place.
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.
There's steps that come before that.
Not that I think they would ever do that, but they could.
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.
market cap is total outstanding common shares times the price plus total liquidation preference,
which adjusts for price of all the preferreds times the number of preferreds outstanding,
plus fully diluted share count if all the, or no, they don't add that. So it's the prefs plus
the common divided by the total assets, which is Bitcoin minus the fixed liabilities as a result
of the converts. That's the formula. There's no double counting there. That is a transparent
accounting mechanism of assets and liabilities. Yeah, which is effectively how that's the right
way to look at it, right? Like you, and this is how I viewed MNAM from the very beginning,
when I first calculated this like a couple of years ago, like what's the value of the company?
Well, the value of the company is, what is the value of the assets, less the debt and the debt
obligations that they have on the balance sheet. And then like, how does that compare to the market
gap for the company. It's like a relatively simple way to view it. Yeah. So there's also a complex,
I'll probably do a space on this next week or the week after. So there's also a capital efficiency.
And so what happens here is it's very easy to see, oh, we know exactly how many, well,
the company says how many Bitcoin they have. So that's easy to see on the dashboard, the Bitcoin.
And then that Bitcoin, you could then multiply the Bitcoin times the spot price.
Easy.
So there's a value.
I call it the Bitcoin market cap of the company.
That number is easy to see.
The other part a company has is they have the market cap based upon the share count times the share price.
And the difference between those two is going to show you what your multiple to net asset value is.
Now, there's going to be an enterprise value or book value that you can also take into account with this.
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.
The amount of Bitcoin you have is fixed, right, as a snapshot.
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.
And that's where we talk about the volume and the shorting and what's going on and the derivative markets of this.
So these two things are floating differently.
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.
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.
The prefs have been out for less than a year.
You know, if you want to talk about an IPO moment, how old is, you know, Stretch?
I keep on coming back to the date.
Stretch is maybe what, four months old at most?
Yeah, it's about four months old, four or five months old.
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
or whatever it's worth. It'll grow to 3 billion and so forth. Like, oh, it's only $3 billion.
It can't take over the whole money market fund yet. I'm like, it's not even four months old.
Take over what's been in existence for 40 years. It's like, come on, people.
I bought my first three shares today.
Yeah, that's a buy and hold. All these things are pretty buy and hold for life. I think one thing
that's really interesting with the change in messaging of Saylor is he's come forth. You know
how, and Grain, you have a good kind of bid on this. It's like, you know, every, he refines his
pitch every six months. Like his whole statement has been updated. And now he's saying we are
financial engineering, right? I think a year or two years ago, financial engineering was not the
word or the terminology used here, but he's acknowledging the fact that financial engineering
is being used, embracing it, and now bringing it to the debt markets. And I think for a lot of older
people and a lot of people that are starting to get more accustomed to these financial markets,
like, for example, I told my dad this, I was like, dad, do you know what share buybacks are
for like MAG7? And grain, you're like a total expert on this, but it's like, this is how they
create ever-increasing EPS. It's not because they're growing their business at a crazy rate,
right? Because it generates massive amounts of cash flows and Apple buys back 100 billion worth
of shares, increasing the earnings per share, not actually increasing the earnings. So that's
financial engineering, right? That's what you say, Grant. And in this way, they're creating
financial engineering layers on top of the Bitcoin block, the Bitcoin foundation. And so I think a lot
of people are starting, I've seen kind of a shift and people are like, oh, that's actually a valid
thing if every company is doing it. So it just takes time. Yeah, we are a structured finance
company right exactly right and so look uh sailor said this and thank you for dan saying about
buybacks what sailor said all the time and easy this is what he said with grant cardone last week
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
right but back when he said this right so i'm able to sell a stock for three dollars that was
you know, I was able to have a $3 versus $1. So there's a $2 arbitrage that he's capturing,
and he uses that to buy Bitcoin. Everybody's like, where do you get the $2 from? Because he's
selling something at a 3M now. So it's three times the value. The value is $1. He captures the $2.
That's the immediate arbitrage. And then he goes and he buys Bitcoin. Now, how is this related to
what Dan just said about EPS? If you're a company that has massive cash flows, what they do is they
take those cash flows and they say, you know, what can I stick it into? I can go buy a new
factory. I can go hire new people. I can go, you know, expand inventory, whatever I want to do.
Maybe you don't want to expand inventory because you keep a constant bid on the amount of inventory
you have. So you have good pricing. So what do they do? Like, what am I going to do with all
this cash? They're like, oh, I'm going to buy back my own stock. And when you look at Apple
buybacks over time or Nvidia, you're like, oh, now out of the cash, can they buy back enough
stock to make it worthwhile? No. Nvidia borrows $65 billion to go buy back more of their own stock.
Wait a second. They've just made all these billions of dollars. Why do they go borrow money?
Because it's cheaper to borrow money and the stock price will go up. Now, does Jensen Wong
talk about this? No, not at all. He talks about the new chips coming out and what they do and so
forth. He does not ever talk about the financial engineering that's going on here. But we've got
Saylor talking about this for the past five years. And that is the fundamental difference.
The Mag 7 do financial engineering and nobody cares about it because the CEO doesn't talk about
it. And they don't take just the cash flow. They borrow money, right, in order to buy back their
own shares. Now, why does Apple do that? Because if they make half of their money from outside the
U.S. If they repatriate those dollars to the U.S. to buy back the stock, they trigger taxes. Oh,
so let's just borrow money so we don't pay taxes to buy back our own shares.
Everybody's like, you went too fast. I'm like, where did I go too fast? Apple does this. You're
a TradFi guy. You're doing this for 15, 20 years. You should intrinsically understand this. And if
you disagree with me, tell me where I'm wrong. Oh, they're just doing financial engineering to
improve the shareholder return. And I'm like, well, that's where sats per share comes in.
And that's what you've been talking about here. If you believe that Bitcoin is the most important
collateral ever, then you want to buy as much of it as possible. And at some point that will take
off. And then we'll sit around and people will be like, oh, you guys got lucky. And I'll be like,
no, we weathered a downturn because Binance had some crap happen, MSCI FUD, the Japan carry trade,
chano's shorting it we can go on with 50 things why the world sucked and then when it rips higher
people like oh well you guys got lucky no we we sat through the bearishness and the fud and people
attacking us oh by the way this is the second downturn of this year and this is it's insane
it's insane what happened in march and then march and april and then oh we were covering
hit an all-time high oh that's not good enough oh now we have it again they're like oh well i would
never buy this thing. It can always go to zero. I'm like, it seems to keep on retaking all time
highs. Yeah. And it's the same idea that happiness is the difference or I think it's happiness or
filling or enjoy or something. It's the difference between expectations and reality. And so I think
that's why end of 25 was so hard for so many people. It's been hard for me too. It's like,
we had all these expectations and they weren't met. So it almost feels worse than a bear market.
yeah they there's a there's a thing called the satisfaction gap so if your expectations are
really high and the outcome comes in with expectations your satisfaction gap is zero
but if you set your expectations low and the outcome's really high your satisfaction gap is
really high and it's also the inverse if your expectations are really high it comes in below
you have negative satisfaction gap uh just inherently psychologically um
I was going to say, so this actually does point one reason not to hold strategy.
Like they're going to be attacked.
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.
And whether you say that it's Occam's razor or whatever, like one person's malice is another person's profit.
So they don't probably see it as malice.
but um you know if you can't handle them them being under attack and and getting some unfortunate
uh you know price action because of because of it then you know maybe that volatility is is a
little too much like i'm bullish af but uh even i some hate the rally sometimes you know at certain
points of the year so um but for me the worst part is having to like watch the bears tap dance
in victory you know what i mean like i can diamond hands hodl uh bitcoin and everybody knows it's
going up forever but uh when when i have to like sit and wait and hope that the bears are wrong
eventually that just kind of pain in the ass for me uh like when chano's you know tweeted he was
unwinding his mstr short and people were kind of like giving his giving him his flowers and stuff
my response was the sun shines on a dog's ass once in a while like i was giving him no credit
no love like screw that i'm just bitter to the end so yeah a broken a broken clock is right twice
a day twice a day yeah exactly you know i want to chime in about the financial engineering part
people talk about this all the time like oh i wish i can do this okay i'll tell you exactly how
people do financial engineering you buy a house right over time that house will go up in value
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.
We're 120% of GDP, which is equal to where we were during World War II.
We've got a $38 trillion debt, which because the big, beautiful bill is allowed to go to $41 trillion, right?
And we have the money printer going at 6.5% a year.
People are like, oh, I don't get that.
What does that have to do with financial engineering?
Well, I bought my house.
It's gone up 50%.
I take out a home equity loan or home equity line of credit, either of the two.
I am now borrowing against the value of that house.
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.
And I get a new kitchen and bathroom for the wife.
And you're like, oh.
So now what happens is, huh, the value of the house just went up because I took out a loan against it.
And I improved it with the swimming pool, kitchens and a man cave and bathrooms.
And everybody's like, oh.
And then I get to live in it, right?
What strategy is doing here is they're just acquiring more Bitcoin.
and because they have an operating company, they don't need to borrow against it. And it's like,
and when I give this analogy to TradFi people, they're like, dude, you went way too fast.
I'm like, where'd I go too fast? Home equity loans and line of credits, they've been available
for, I don't know, 30, 40 years. So that's what people do. They leverage their balance sheet.
The house is the balance sheet. And you're like, what do you mean? I'm like, well, when you take
the loan out against your house, that's a non-taxable event. Now, do you have to pay that
money back? Sure. But it's over a 10-year term. Again, not financial advice, but you get the
value. You're hoping, your belief of taking out that home equity loan is that the value of the
house is growing faster than the percentage rate that you're paying on the loan. Did I go too fast?
Because that's a carry trade right there. Buy, borrow, die. Because if the value of the house
does not exceed the value of you borrowed out, you're going to end up losing equity.
so people think about this all the time and that's why we talk about financial engineering
and people are like dude you went too fast i'm like no i can't go any slower i'm like because
you should know all of this and this is why you buy a house versus renting for the rest of your
life because you have that ability to lever that if you want to rent for the rest of your life
that's okay but eventually you pay a house off and that's permanent equity i keep on coming back
to these terms over here. That's permanent equity. Once your house is paid off, all you have to pay
on is the taxes, utilities, and maintenance because it's permanent equity. The house is
paid off. There's no refinance risk. Oh, that's the prefs. Yeah. Bingo.
And you rent out a room to somebody. That's the prefs. You staying in the house is permanent
equity, renting out a room, putting an ADU in the back, and then having somebody live in there and
pay you money. That's the prefs. That's your permanent yield that's coming into you because
you never sold the house. The most annoying complaint that I get about the press is that,
oh, they used to be able to get convertible bonds at 0% interest and now they're paying 10 or 12 or
whatever. Like, no, no, that is not the case. Like when I first heard that that strategy was getting
loaned billions of dollars at 0% interest, I thought that's impossible. And as soon as I
researched it, it was impossible because they get paid off once the damn strike is reached.
like they're paid off in shares that amounts to some percentage profit like they're not loaning
a zero percent no it's like 40 it's like 40 yeah exactly 60 exactly so it's all it was all being
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
the go to the credit page sorry the debt page on strategy on their dashboard if somebody wants to
know, well, what are the spreads or what are those strike prices? It's all listed on the strategy
page. Again, this goes back to a dashboard. Yeah, it's right there. And if you look,
right, there's a conversion price. So it's telling you the conversion price right there.
So that the conversion price from the original price that it was done at shows you how much,
the difference is. Yeah. It's the conversion relative to the reference.
Right. Exactly. So I think that that's the spread that they're paying in order to do this.
40%. So this is 40, 50%. 40%. Yeah. Coupons. Yeah. 62 bps, 62 and a half bps,
but a 40% conversion price. So really you're paying 40%.
percent right strategy was paying 40 and the reason why they got rid of these was because
these were delta hedge and this was more of a problem so that's why they invented the preps
i think what you said earlier in the call dan was that what strategy has consistently done is like
if he knew that he could have done preps instead of the converts he would have done that he said
this publicly but at the time that he did this it never popped into his head and so they did this
based upon the best information at the time.
And now he's changed his mind
because he's done these preps
and these will all roll off.
So I think that's the key part.
Totally agree.
Go ahead, Dan.
I was going to switch the subject.
Here, okay.
Final thought here.
I think in thinking about common equity accretion
or dilution or however you want to think about it.
So if you look at strategy's balance sheet right now,
they've got 649,000 Bitcoin.
So on the balance sheet,
They've got $58 billion at today's price at almost 90,000.
Fast forward, right?
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
So about $17 billion of PREF and debt outstanding. If they want to keep that 30% amplification
at $130 billion balance sheet, that's about $39 billion of debt and PREF outstanding. So they
would be able to issue another $21 billion of PREF into the market to maintain that same
amplification ratio. So I think that the days of the MSTR common stock being the primary
capital raising vehicle, I think are dwindling. And once the balance sheet is so large and the
price of Bitcoin continues to go up. Like the events that occurred in the last year where
strategy monetized the premium and the common stock to create this huge stalwart balance sheet
is allowed for the press to even exist. And there's likely a future where the using the
common stock ATM to finance additional balance sheet strength, just it doesn't make a ton of
sense. Like it will make more sense to issue more preferred stock and then issue the common stock in
order to pay off the dividend of the preferred equity because every dollar of capital that you
bring in on the pref also strengthens, continues to strengthen your balance sheet because it is
permanent capital held on the balance sheet. Exactly.
That's the long-term bull thesis here, right? The long-term bull thesis is that I don't have
to use the MST or common to strengthen my balance sheet anymore because I'm using the
press to strengthen my balance sheet because that is equity and I use the common to pay the dividend.
like that that proportion of common stock equity relative to balance sheet
atm is going to change over time like it's just it's just math
yeah i totally agree i totally agree okay go ahead switch topics it's not even a switch it's
just a brief it's all the same topic i guess but there's a lot of people online saying like
if you think Bitcoin for the next 10 years is going to be a good investment, you're screwed
or you're delusional. And because a lot of people are referencing the four-year CAGR.
And I mean, if you looked at the four-year CAGR of Bitcoin, the four-year CAGR during the 2022
bear market, right? We were sitting below the 2017 all-time high. So you would have been quite
disappointed at the price performance, but it would have been a fantastic, pretty much a generational
entry into the asset class. And so, you know, I'm kind of a power law guy in terms of like where
I think price is going over the long term. It's almost identical to Saylor's base case Bitcoin
model. And I think people are mistaking picking certain prices in certain snapshots of time,
and then benchmarking price performance to those periods of time for a highly volatile asset.
So I actually think right now is the second best entry to the 2022 bear market de-risked.
And so, I mean, I could go into detail on this, but I think the returns moving forward are going to be absolutely fantastic.
But there's another guy, Joe McCann. He runs Isometric, which is a hedge fund.
I think that's down roughly 70% because they blew up perpetrating Solana.
And he's saying the volatility on Bitcoin is collapsing and Bitcoin is no longer a long-term store of value.
And that sentiment echoes throughout kind of the ecosystem.
But I think this is such a flawed kind of way to make decisions around investing.
One, I started investing in index funds for the longest time when I was a late teenager.
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.
Bitcoin is now an asset class.
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.
And so a chart I like to reference is the NASDAQ after the dot com after 2008.
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.
So if you looked at that and been like, yeah, that's actually a bad investment thing only goes down.
you would have missed the biggest bull market in the history of bull markets on the planet,
other than the 1950s, in the NASDAQ.
And I think that's a similar sort of framework that shouldn't be used with Bitcoin.
Just my two cents.
Yeah, if I want to do my best impersonation of Mike in some technical analysis,
if you draw channels on this orange line for your CAGR,
it proves Dan's point that this should be an excellent entry point
Because we're right at the bottom, you know, or near the bottom of that channel.
And if you expect Bitcoin's CAGR, you know, to be anywhere from 30 to 50%, then we should
march to the other side of that channel, which would be up.
Yeah.
So, so I'll make it.
So thank you.
I'll make it a little bit simpler.
Look, when, when, when there's FOMO and people, when, when Bitcoin's at an all time high, that
means there's a, we see the meme all the time.
It shows, you know, Bitcoin at 80,000.
There's a guy there at the table and nobody's buying it.
And then when it's at an all-time high, it shows this line of 100 people trying to buy it.
So if you have a long-term belief in a product, I'm not telling any trading advice, no financial advice.
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,
buying it when it's 30% below the peak and I just, whatever the number is, then that's probably a good
entry point. So if one 26 is the peak and right now we're at 90,000 or if it hit 80,000, that
Delta difference is probably 40%. So I would buy it a 40%, but nobody wants to buy it. They're like,
oh, I heard it next year. It's going to go to 50,000 or it could go to zero because it's based
on nothing. So then you psych yourself out and then it runs back up again. And then you have FOMO,
fear of missing out. You buy the top, it runs back down. You're like, oh, I bought, I bought,
I'm everybody else's bag holder. And then you sell it. We see this constantly time and time again.
So my takeaway is there's no TA analysis. You know, the trend analysis is what you're looking
at. You don't have to draw any channels on this, but I tend, you know, you want to buy something
low. And then at some point sell it high and reap not all of it, sell some of it, pay taxes and go
live your life. Or if you buy preps, you don't have to sell them because it pays you a yield.
It just pays you forever. Yeah. And it's return of capital for 10. Yeah. So then there's that.
I don't know how many more choices we can give to people.
Thousands. I mean, this market's just going to explode. Dan, you make some great points here.
I think I really like this four year CAGR chart.
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.
And I think if you're creating a fixed income instrument or designing a product around this, like you can underwrite this.
Like, will it happen into perpetuity?
You know, tough to say, but this is a this is a great trajectory.
and you can look at adoption of anything in history.
You could look at the adoption of like toasters
and microwave ovens and iPhones
and how these things change.
As assets get larger,
you expect this four-year CAGR number to go down.
Like you can't expect a $2 trillion asset
to have the same volatility as a $100 billion asset.
That's just, that's ludicrous.
Like that's just irrational thinking.
Volatility will dampen as there are more people
that are holding this instrument forever long-term, companies included, like Tether and Strategy,
and all Bitcoin treasury companies that are holding this as permanent capital and utilizing it into
the future. One thing that's interesting in looking at this chart, so this blue line is the current,
so this orange line that you see on the screen, this is the Bitcoin four-year compound annual
growth rate. It tracks over here to the right-hand side, so you can look at the percentage change
over time. And then the black line is Bitcoin price. The current four-year compound annual
growth rate for Bitcoin is right here. As of today, I think it's something like, I don't know,
15-ish percent. But that four-year reference period, going back four years, so November 26,
2021, the price of Bitcoin is $53,000. What's going to happen to this orange line over the next
12, 24 months is that orange line is going to go straight vertical, even if Bitcoin just stays
flat because you'll see that your base reference point is going on a steady decline from $56,000
to $17,000 over the next 12 months.
So great point.
So, so that, so that, that four-year BTC CAGR, if Bitcoin just stays flat, like that
four-year BTC CAGR is going to go straight vertical over the next 12 months.
And if like, if that's your vantage point, like even if Bitcoin doesn't move, right?
Like, so I think it still looks good.
It's a really good indicator.
Don't buy the four-year local top.
Like, I don't know what to tell you.
Don't buy Cisco during the dot-com, the top of the dot-com bubble.
Like, these are things that, like, have negative expected return over time.
But, yeah.
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.
say here in the near future is that you can look at this as a, as its own percentile basis as well.
And you, right. In, in this history, in this chart that we're looking at, there's about 4,000
four year compound annual growth rate periods of those 4,000 compound annual growth rate periods,
90, 98 or 99% of them are above 20%, right? Just, just, you could see it visually here.
And so the top two worst percent times of holding Bitcoin for four years, you're still positive.
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.
That's pretty good.
Bonds aren't doing that.
And so it's, it's a helpful perspective to think, think through it, through that lens,
a long-term holder lens. Okay. Um, I, you know, I think that's pretty much all I've got. Like what,
oh, shoot. Well, we didn't know it's not. Go ahead. Yeah. And I don't think we crapped on,
um, JP Morgan enough. We did not drag them nearly enough. So whenever you're done with this,
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
right okay so this is all news just really from today in the last couple of days so nasdaq files
to increase options limit on blackrock spot bitcoin etf to go from 200 i think it's actually
25 000 contracts to a million contracts i think it's 40 x so significant i'm not exactly sure the
implications here. I think just increased the liquidity of an ETF, which is great. Texas bought
the dip, $5 million of Bitcoin purchased. And then also I thought it was very interesting,
Tether, Apollo from Tether, S&P downgraded Tether from like a four rating to a five rating,
just basically saying that it's got the worst rating possible. And then they came out with
this statement, I think this was as of today. Yeah. November 26th. This is this morning.
We wear your loathing with pride, a classic, a classical rating model built for legacy financial,
financial institutions basically just goes on to say, we don't fit this model. This doesn't work
anymore. And it's interesting to see like people attacking this from multiple different angles.
hey on the on the tether part um i believe that they were the largest buyers of gold this past
month so higher than sovereign nations so i i think that this you know you know there there's
a good and bad thing that's going to happen i believe that um ai will displace a vast number
of workers i believe that there'll be a group of people that are in bitcoin bitcoin derivative
what I mean by that, Ibit, MSTR, Bitcoin treasury companies that will have, they will look at
everything forward as a utopia. The world is awesome. It is great. They paid attention.
They decided to say, hey, the world changed. How do I adapt to that changing world to benefit from
it? And what's going to happen is those people will have a phenomenal future. Whatever, 6,000
people listening on this call, you guys will have a great future. Unfortunately, you will be around
friends that will then say, you got lucky. How did you know it would happen? You bought at a low
price. Not that you held it for years, you held it through the dip and the Japan carry trade blow
up and the MSCI bullshit, the Jim Chano shorting, everything that happened, they will just say to
that, well, you got lucky. And I think what we're seeing here is the signs were there. You just
chose not to see it, right? And somebody's like, well, I live in Texas. Well, that's where all the
Bitcoin freaking miners are in data centers and solar power to do this. And you're like, well,
Texas, the state government allocated $10 million and they bought $5 million of IBIT.
And you're like, and you just didn't see it happening. So I think what's going to happen
is the price is going to run back up again. We're going to take our victory laps. And over time,
a few years, you'll be like, well, it really wasn't obvious back then. No, it was obvious.
we just had to wait for it to come to fruition. And that's the difference. And with JP Morgan,
what about a bank or any institution? They could outlive the people that are there.
Right. And so from that perspective, JP Morgan's optimizing it for themselves.
They're like, well, screw JP Morgan. Okay. What are you going to do to combat that?
Yeah. Yeah. Mike, I think Dan's power is about to go. So he's going to do final thoughts if he's
there final thoughts and turkey v alt meats yeah definitely uh i'm a turkey guy oh plug your nose
eat it during glass one all right any final thoughts you know what people we did this space
early go enjoy your thanksgiving your family and friends don't bring up bitcoin unless they bring
it up and you know if somebody says it well i believe in buy low and sell high you're like
last thanksgiving everything was ripping higher was great i wasn't gonna buy it then it was too
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
don't want it slow so dan dropped off but everybody have a great thanksgiving thank you for putting
this together uh jeff and doing this and i'll sign off take care all right later mike later
So let's drag JP Morgan through the mud.
First of all, you're talking to the man, the carnivore himself.
So I have the definitive opinion on Thanksgiving.
And I don't really like turkey or ham, but I literally can't stand ham.
Oh, no.
Yeah, my wife was like, oh, my God, do I have to cook you a freaking meatloaf for Thanksgiving?
Like just so you'll eat because I just freaking eat red meat three times a day.
um no but i think we're gonna do a turkey and um the first we're gonna dispatch cock it which i
don't even know what the hell that meant until yesterday you gotta like cut it in half and yeah
and flatten it out so it should shouldn't take us long to to cook but the best turkey i think we
ever had was a deep fried cajun style turkey that was when we were in naples italy and we um we
deep fried that bad boy outside and that was pretty damn good yeah i've done i've done turkey
a couple times. I've
made my own turkey. I've smoked it. I've done it
in the big green egg. I've done it in the oven. I've
spatchcocked it. And you know what? It's just like
it's so hard. The
risk-reward is just horrible.
You can
overdo it. I got salmonella
two years ago because I underdid it.
Yeah, I did. I was just like, you know what?
Fuck turkey. But that's why we want to spatchcock
it because it's like, okay, we can actually get it
cooked all the way into the thigh
bones without having
to dry out the fucking breath too much.
i i'm either pro ham or just go like prime rib or like just do steak like the the risk it's just
so much better so the risk for it's just way better yeah we we always had to do a turkey but
my daughter's favorite was ham so we had to do both actually just to make everybody happy
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
morgan but i mean do we need to dispel the short interest thing that that spread or does everybody
know i mean that that that that wasn't true like jp morgan being short that they had this 50 or in
a short position that if it went up 50 they were just going to get you know gamma squeeze or
whatever um they don't need all of that like um the reality is that they took um profits in q3
So they still had an extremely long position, but they had enough puts that if they were
intentionally trying to tank the price, their puts would go about 10 or 15%.
But they do benefit from this in other ways.
So it doesn't really have to be a traditional short position.
They're a market maker, so they get fees regardless.
So if people are buying, people are panic selling, whatever, they're going to capture
the spread.
And the option prices went crazy as well.
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.
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.
And the way that I was kind of looking at it actually was they're basically Emperor Palpatine.
they can like make money you know you know no matter who wins the freaking clone wars they're
just on both sides manipulating the whole freaking thing they own the senate they they just own it all
and uh you know whether it's it's stupidity or malice they're they're just printing on both sides
of this thing yeah and there's there's so many so many ways to look at this again front running
index exclusion, you would want to be out of that position before you announced it and you could
take a negative position. And like the company, JP Morgan, hasn't even put out a report on
strategy stock. And then they come out with this information on MSCI and how it's changed the index
just like a week ago. They're like giving it coverage now, even though they've never given
the stock coverage, which is just an interesting perspective to take. And then come out with the
new structured product. And at the same time, in the past, they've now said, all right,
we're accepting Bitcoin as collateral. It's okay. If you're accepting Bitcoin as collateral,
but you're changing the margin requirements on the company that holds the most Bitcoin from
50% to 95%. That's just an instant disconnect between what you just said publicly about Bitcoin
being collateral and now changing the margin requirement on all this stuff. There's so many
things where you can look at it and it's, it seems a bit skewed. Um, yeah. And Adrian did a pretty
good takedown and the whole timeline sounds great. Yeah. Like too many coincidences in there,
you know, to, for it to just be like a nonchalant, like, Oh, this is just normal business as usual.
And, and there are, there are professional money managers that have done this on JP Morgan in the
past and you can look at it on YouTube. And I think I posted a clip from it. Like this, this guy,
he shows, he's got this written on a whiteboard and he shows, it's like, I will, I think JP,
I think Jamie and diamond explicitly said, I will fire anybody that buys Bitcoin at JP Morgan.
And that same weekend, the largest buyer of Bitcoin was a JP Morgan fund in Europe.
And it's just like, what?
Like that's that's control.
You can you can see you can see that control being exercised in different in different directions.
So, yeah, I know that's true.
I didn't know anyone who worked for JP Morgan, but a friend of mine did work for one of those money managers.
And I was trying to tell him to buy Bitcoin four or five years ago.
And he's like, I can't.
I'm literally not allowed to hold it.
Crazy.
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.
You know what I mean?
Just so that he would have degrees of separation.
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.
Anyway, yeah, workarounds.
Yeah.
We can't be stopped.
I think that's the most fascinating part.
And I love to see that the community was rallying behind it.
It's like, okay, rallying behind MSDR.
Even people that were negative on MSDR in the past are like MSDR bankrupt.
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.
if you shut off the buy button on mstr and bitcoin prints higher like as bitcoin or as mstr like
turns back on like it should price up higher like it should gap up higher and then you've got this
you know game of squeeze on top of gamma squeeze with a with an entity that's difficult to price
and is being used as a hedge against bitcoin in in different ways so like that reflexivity that
happens to the downside also happens to the upside. I think it's helpful to understand the
market environment, like the just general market environment that goes along with it.
Oh yeah. Cool. All right, man. Well, I think I'm going to jump. I've got to get a bunch of emails
and do an expense report and stuff, but yeah, I'll say I'll do my final thoughts for one last
JP Morgan drag. So as I'm doing research for this, I just thought to myself, let's ask Grock,
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.
2024, $348 million for inadequate trade reporting and surveillance.
2024, $151 million multiple enforcement actions for misleading disclosures and breaches of fiduciary duty.
2015, antitrust violations.
I think that one was the $40 million, $40 million.
I'm sorry, I'm getting ahead of myself.
Antitrust violations in foreign exchange.
Guilty plea for rigging bids on investment contracts.
2013, $13 billion with a B, that's billion with a B, not $13 million, for mortgage-backed securities fraud.
And that's just a fraction of the 283-plus recorded violations since 2000.
And then the final, final Grock quote was,
Ongoing litigation includes hundreds of cases related to anti-money laundering, market abuse, and Epstein-linked activities.
Wow.
So, yeah.
JP can, you know, die in a fire for all I care.
Yeah.
I mean, you're going up against the big guns, right?
The biggest bank in the planet.
Yeah.
And that's another one.
Maybe I'll just mention it real quick.
I saw you chime in on this one too, but Rohan Harani had a really good post.
And it was basically like, what did you expect?
They're about to eat...
their lunch and these people are going to hit back every way that they can but eventually they
have to capitulate yeah and it's happening but but they but they're you know they're kind of like
the press were like a starter's pistol going off and they realized that they weren't even at the
starting line and so now this is desperation trying to do anything that they can to trip them up
and try to catch up.
We'll see.
The prefs are just so good.
They're just too good.
You can't not hold them.
If you're an institutional money manager
or an insurance company pension fund,
they're too good to not hold.
They beat everything else in your portfolio
with less risk.
Anyone who's not offering them
is screwed.
Yeah.
It's adopt Bitcoin.
Adopt a Bitcoin treasure.
or get left behind.
Yeah.
Right.
I mean, that's where we're at, right?
If strategy started with $250 million of Bitcoin
and now they're holding 50, 60 billion,
what's it look like 10 years from now?
You know, they did that in five years.
All right.
What's it look like 10 years from now?
And how much of this instrument
are they able to issue to the market?
Yeah, I am excited here.
I mean, the stock price sucks.
But it sucks if you're looking to sell and you need to be liquid right now.
It doesn't suck if you're looking to buy right now.
Right.
The relative valuation relative to the Bitcoin that they hold is pretty good compared to where it's been in history.
So, all right.
I'm team anti-Turkey.
And I think I'm going to leave it with that.
I'm team anti-Turkey.
Everybody have a great Thanksgiving.
Enjoy your pie.
Go stuff your face.
Enjoy the days off.
Take advantage of them.
Because there's only two times throughout the year where you really get a four-day weekend.
This is one of them.
So I hope Bitcoin goes higher.
And I hope MSCR and all the Bitcoin and other stocks go higher.
And we'll just keep on plowing forward.
Oh yeah. Thanks, Jeff. Thanks everybody. Cheers, everybody. We'll see ya.