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Thank you.

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Mommy, get away.

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Get a good job with the pain.

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You're okay.

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Mommy, it's a gas.

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Grab that cash in both hands and make a stash

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New car, copy our four-star daydream team

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Like a fine mood of football team

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My name

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Get back

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Woo! Here we go. Welcome back. True North.

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The Investment Grade Bitcoin Podcast. Welcome back to episode 53.

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We've got a whole crew with us today. Let's bring them on stage.

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We've got Soleil, myself, Dan Hillary, and Ben Workman.

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And we are going to get after it today.

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We're going to talk about some of my favorite topics, that being risk.

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and for those of you that are new to True North, the investment grade Bitcoin podcast,

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we talk about everything here. We talk about everything finance, everything Bitcoin and

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every Wednesday night and we touch on Bitcoin treasuries, macro analysis,

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securitization and tokenization of Bitcoin, different products within the market and general

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humanity trends and hit on macro and everything happening in this world because in my opinion,

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This is the biggest story in all of finance and the world is changing as we know it.

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And we want to make sure we're at the front end of what's happening there.

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The people that are on the screen are a mix of people that have been following Bitcoin for an incredibly long time and have been at the front of the securitization within the market and the financialization and integration within these products and the existing financial ecosystem.

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So excited to talk to you about all this stuff tonight.

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We've got a we've got a fun agenda for you.

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I'm just going to pull this up myself. And tonight we're going to talk about macro. We'll

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hit on metals, MSTR statistics update. We'll talk about what is credit, what is credit risk,

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maybe dive into the strategy credit model a little bit and think through it. I think there

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will be some good conversation around that front. We'll contemplate the credit model.

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And then we'll consider downside risk of the perpetual preferred equity. We'll think downside

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risk to the BTC, downside risk to the PREF holder, downside risk to the common stock,

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think about all of those different components. And if we've got some time, we'll get into bad

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bond of the week, which quick hint, it's Japan. And we'll jump in there. So without further ado,

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maybe I'll pass around just just quick thoughts on what people are thinking about. Maybe I'll pass

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it over to you. So lay like, what's that? What's top of mind this week? And we'll, we'll start that

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as a kickoff? Yeah. I mean, my credit score is finally good. And, uh, I wouldn't mind getting

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some credit right about now. There were some times when it didn't look like a good deal for

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the creditors, uh, sending me an application, but I'm all about it now. High credit risk,

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high credit quality, 800 credit score. Right on. Give a kick over, over to you, Ben. I mean,

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we've been, we've been burning the candle on both ends, uh, getting deals done. Uh, we've just launched

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a secondary offering of our perpetual preferred equity SEDA successful $225 million, uh, raised

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there. And, uh, yeah, we're, we're excited. What are you thinking about? It's been a wild couple

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of weeks here for us. I mean, we've, we've been on a tear here to start out the year, but you know,

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mostly the thing that's grabbed me right now is just watching this metals run. I mean, these,

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these metals are on a generational run here at the minute at the minute and i think that you're

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starting to see a lot of uh fomo follow-on starting to happen as we're hitting these peaks

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with the feeling that these things are never coming back down and that they're never gonna

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spin up a little bit on generating more of them and getting more to market but wow what a run

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right and if you had a post earlier today jeff that i was looking at which was

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kind of scaling the magnitude of this run that we saw just with the expansion of the market cap on

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gold. And, you know, Bitcoin's clearly been lackluster during this run, right? You're seeing

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all these store value assets really take off. But now you look at it and you start to see where

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these price levels are getting to. And I have to imagine that these are the levels where doubt

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starts to creep in to some investors' minds as to whether this type of a run can continue to be

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sustained. And if you start getting that capital rotation and it starts looking for a new home

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and even a portion of this flows into Bitcoin, we could be in for some fireworks here over the next

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couple of months. So I'm excited to see how this plays out. These are the strange times that make

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investing in markets so incredibly interesting. And I'm watching this one very closely.

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100%. 100%. Before we go to you, Dan, I've got a quick word from Tim Kotzman.

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

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it's for informational and educational purposes only

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right yeah that was a little bit of a glitch uh everything we talk about here is for informational

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and educational purposes only we're here talking about what we see behind the scenes within the

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market and how we think about the general marketplace from credit perspective, equity

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perspective, all those other things.

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So thank you for that, Tim.

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Pass it over to Dan.

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What are you thinking about?

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What's top of mind?

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Yeah, I think what Ben's talking about obviously is hugely important.

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I've been pretty locked in on the whole stretch thing.

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And I think the stretch behavior, price behavior over the past few weeks has been quite remarkable

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considering that Bitcoin has fallen 30% off its highs.

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and stretch just continues to, you know, march on ahead.

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Saylor's been able to issue a lot of stretch.

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And then, you know, all the behavior at 1XMNAV,

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MSTR common issuance, it's quite remarkable.

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And I think, you know, I don't see a world

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in which the rate of capital acquisition by MSTR slows down.

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And I think there's probably been a lot of hard internal conversations.

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Are we going to expand our balance sheet at 1XMNAV?

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And clearly they are.

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And then furthermore, the market, you know, is liking them at 1XMNAV.

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Like they've issued a lot of equity here and they're not falling below that one times NAV threshold, which I think is massively important.

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It's something we were trying to figure out.

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You know, we talked about it a lot, but now we're seeing it in action.

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Yeah, that's a great point.

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And this is something that, you know, we had a conversation with an investor earlier this week.

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And it's been fascinating to watch just the volume and how these preferred stretch specifically is trading.

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And it's like, who's selling?

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I think the question is who's selling when the price drops and how do you think about these

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things, right? The incentive of the holder is to, if you know that strategy is going to do everything

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in their power to get it back up to a hundred and then they're sitting on it at a hundred,

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you have incentive to be a buyer below a hundred and anything above a hundred,

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you have incentive to be a seller. So it's, it's fascinating when you start to think about the

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infrastructure of and the get into the mind of the buyer, like who's who's buying this

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and who's selling this at those different price points?

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And what what's the reason for buying and selling at those price points?

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It's a it's a fascinating conversation.

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And even even people that are have been working in industry for 30 years are asking the same

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question.

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Yeah.

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And I saw a little thing in the Bitcoin preferred group and some guy was like, yeah, I'm just,

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know, every month's shifting a little bit more of my fixed income portfolio into stretch.

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And, you know, I'm getting to the point where it's, you know, I'm going from 3% annualized

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return on my fixed income portfolio to three and a half to four to five, you know, as stretch

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takes over a majority of that portfolio.

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And I'm like, yeah, that's what's going to happen across the entire market, in my opinion.

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And it's happening in the, you know, BlackRock preferred fund as well.

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Like this is just happening across all fixed income funds.

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And you think this product is what, seven months old?

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And I was trying to calculate like, what is the Sharpe ratio of stretch?

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How would this fit into a portfolio?

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And it's tough because the data is skewed given that they just went through an IPO.

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But if you take the last 60 days of trading data, the Sharpe ratio is like 1.15.

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And that's that's with the big drop that we saw in late November, early December.

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And if if the instrument trades very similar similarly to how it's traded in the last 30 days,

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I think the Sharpe ratio goes significantly higher, like two or three. And so then that

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question becomes like, how do you compare this to anything else within the market? This looks just

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far and away better than a lot of the other fixed income instruments in the market with their

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relative volatility and the return that they're giving in those other instruments. And the fact

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that these are liquid I mean it been trading what did it trade today Another million in volume today It been averaging a in volume every single day for the last month which is crazy That a lot of volume

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I think what's particularly interesting about these, and I think we'll see whether this thesis

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plays out over an extended period of time, because I still think we're kind of in that testing phase

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for these products where the market's really trying to figure out, you know, how do these

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respond across different market conditions? Does the market respect the over collateralization

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positions of these? Do they like the cash reserve positions of these? But what I think is actually

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kind of interesting is that if you wanted to live within the Bitcoin ecosystem and you feel bullish

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about the long-term prospects of Bitcoin, but it doesn't mean that throughout the cycle, you don't

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have periods of time where you want to be risk on and risk off. I wonder if these products with

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their over collateralization and with these extended cash reserves start to become more of

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a risk off play for a lot of investors that are native to this space where say you wanted to

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rotate, you know, say people are holding IBIT for Bitcoin exposure at one point in time and Bitcoin

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goes on run and they start, you know, seeing it look toppy. Do they start rotating out? And is the

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place where you land that in something like Stretch, which is effectively giving you S&P

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returns in what a lot would consider a very risk-off or a low-risk type of a product.

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I think it creates a really interesting value proposition for investors out there. And we've

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been seeing a little bit of it because Bitcoin really hasn't been providing a lot of assistance

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here for this entire sector. And you've seen it kind of across the market in the way that

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common equities are reflecting that and they've drawn down a fair amount you've got a lot that are

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you know at nav slightly below nav hovering in that range and then you just see this continued

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demand for the preferred products you know we saw it obviously with our offer you know getting out

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the gate and doing the ipo where we came out starting to raise 100 million and saw a huge

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amount more demand at 200 million you know we had to go through the process where you're marketing

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that you're having the conversations with the investors and you're going through that education

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learning curve. And then the follow on offering, you know, happened in a matter of days. And the

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investor base was already educated on it. And there was a lot of demand there. And so you were able to

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get that done and find a market clearing price pretty quickly for the scale of the capital that

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we were trying to raise. So the demand is arriving. But I'm going to be very interested to watch how

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these perform, you know, both when the markets start to run, right? Do you start seeing capital

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draw out of these products when it looks like Bitcoin might start going on a run when people

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are no longer looking to go risk off? And does that get reflected with stretch, you know, kind

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of hovering a little below that $100 par mark where they're not able to raise quite as much

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capital, you know, on that one at any given time? And then when people go risk off, do you see that

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demand start to spike? Is this kind of the Bitcoin ecosystem risk off style equity of choice? I'm

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going to be very interested to follow that for a bit. 100%. I think this might be a good time to

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jump into just the statistics that we run through every week because it's a good frame of reference

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to think about like balance sheet risk and where we're at relative to where we've been.

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So on the left-hand side here, so we've got a couple of columns. We show this every week

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and this is MSDR financial leverage. Maybe I'll clean this up and make it look better one of these

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days. But Bitcoin held as of January 15th, follow this column. Bitcoin held is $712,647. Bitcoin

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price, $88,745. Last I looked, MSDR price $158. So they're holding $63 billion of assets. They

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have $2.25 billion USD reserve, $8.2 billion of debt, $8.3 billion of PREF outstanding. So the

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PREFs have now eclipsed the debt, which I think is a huge milestone. There was more PREF outstanding

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than there is convertible debt, a big, big milestone for strategy. Net capital on balance

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sheet, $57 billion, annual PREF payment, $879 million. So if you just take this net capital

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figure, which is the BTC assets priced in USD minus the debt, you get $57 billion.

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dollars. Effectively, they've got 68 years of net capital to pay the dividends. So the leverage

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ratio on the balance sheet, 9.4%, just incredibly under leveraged, right? There's very little

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leverage on the balance sheet. You think of amplification is the notional outstanding,

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plus the debt outstanding gets you to a 25% amplification on the balance sheet.

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Important to note here that the amplification, the PREF equity is equity. It is not debt. There's

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no cliff maturity. They do not have to pay back that number. That's why they're not using it in

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their leverage calculation because there is no repayment of principle. This is like an interest

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only loan effectively into the future. So in order for the Bitcoin price to go or the Bitcoin,

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the value of the Bitcoin they held on the balance sheet to go less than the debt on the balance

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sheet, Bitcoin price would have to drop to $11,210, which is an 87% decline here. I think it's

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incredibly unlikely. So why do I bring this up? And then this is further to the points that Ben

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and Dan were making here. Even if Bitcoin were to drop 50% from here, which I think is also

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unlikely for many reasons, a 50% drop from here would drop the price of Bitcoin to $44,000.

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The 200-week moving average is $57,000. Historically, Bitcoin has gone below the 200-week

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moving average in bear markets for short periods of time. I think the longest period Bitcoin traded

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under the 200 week moving average was the period of 22 to 23, in which we're talking calamity for

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Bitcoin, right? You're coming off the heels of a one in a hundred year pandemic. Interest rates

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were dropped to zero. And then in 22, interest rates ripped to 5%. You had a political regime

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that was trying to kill crypto, Celsius, BlockFi, FTX collapse. You just had calamity across the

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entire ecosystem. And at that point in time, strategy had more debt on their balance sheet

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than they had assets on the balance sheet, yet they still had a long maturity date.

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But thinking about the relative strength of the balance sheet today, you've got 9.4% leverage,

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relative to where they were in 2022, they'd be twice as strong today if there was a 50% drop

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in Bitcoin than they were in 2022. And I think that's just a helpful framework when thinking

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about just where we are in a macro landscape, where we were in the past and thinking about the

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relativity here. And what's on the horizon is a potential change in the chairman of the Federal

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Reserve, who's very pro Bitcoin and probably going to drop interest rates. You've got an election

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coming up in November. All incentives are aligned for the economy to be ripping on all fronts

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in order to retain control and power within the political system.

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And the infrastructure has completely changed. You think about 22, there's no Bitcoin ETF,

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there's no digital credit instruments. All this stuff didn't exist before.

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like the architecture and the plumbing of the market has fundamentally changed.

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So yeah, the strategy balance sheet looks incredibly strong here and stronger than ever.

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I mean, they've got 712,000 Bitcoin on the road to a million with product market fit.

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And we're here at year one of digital credit. And we're going to see what this

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leads to here in the future. Yeah, their credit score is almost as good as mine.

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infinite infinite credit score well uh on that topic actually while we think about the landscape

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here i'm going to quickly jump and shout out our true north event that we have on the horizon coming

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up so we have true north vegas so this is a we've got an event it is an in-person event it is happening

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in las vegas on february 23rd monday february 23rd it is on the front half of strategy world

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It is a four hour in-person event. This event will not be filmed. It will not be recorded.

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You have to be at the event in order to see what's going on. We have 43 tickets left at this event.

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And I just want to paint this picture of where we're at here in this point in time.

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We're in year one of digital credit. This company strategy issued $8 billion of this stuff over the last year.

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and they've got capacity to issue 15 to 20 billion dollars more of this type of instrument

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here over the next year. They've dubbed this their iPhone moment and we're at the precipice of like

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the entire market changing, right? We're talking, Dan's talking to people that are shifting their

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entire fixed income portfolio over to STRC. So there's going to be people within the industry.

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So myself will be there.

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The entire True North team will be there.

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We will have several people that are working in the industry,

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participating and interacting within this event.

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So preliminary schedule, I'll show you guys what this looks like as well

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for those that are interested.

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So the first two hours, the first hour will be kind of a True North discussion.

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I'm picking live True North.

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The second hour will be presentations.

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And then the next two hours will be eight different breakouts.

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sessions. So two sessions will go at a time. These will be led and moderated by members of

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True North, and we will have people participating that operate within the industry. So our goal is

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to give a really unique perspective of what it's like to work in the environment, in the Bitcoin

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treasury environment what people are thinking about what institutions are thinking about I got a handful of big breakout topics and discussion points on the left Is Bitcoin dead Look thinking about macro How are

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corporations and people making Bitcoin productive? Can a portfolio of Bitcoin products beat everything

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in the market? What's it like buying $500 million in Bitcoin? The mind of a digital credit buyer,

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insights from institutions, blazing the trail in the legal environment. Is paper Bitcoin real or a

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myth, retail trading landscape, battling conviction versus emotion, international credit landscape,

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quantifying credit risk from an institutional lens. And our goal is to provide perspectives on

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all these different things with people that are leading the charge there. So I can't confirm

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the exact guests at the moment, but we are working on getting a really exciting panel of guests that

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are there to talk about these topics as well. Some of which you will have known, some of which

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that you are not familiar with and that are sneaky working behind the scenes in the marketplace.

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So it's going to be a lot of fun. After that, we're going to have a party from

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8 to 11. We want this to be an incredibly high alpha session. And then the party from 8 to 11

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is to extend any conversations that you've had at the front half during the panel sessions or any

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of the breakout sessions. So yeah, I think it's going to be a great time. We're going to be prepared

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to throw a good party and really really uh deliver on all of the alpha there

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you guys want to you guys want to add anything else spam and beer at the party spam and beer

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spam hopefully it's slightly better than that but that's gonna be awesome we've already got people

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on the ground in vegas scoping all this out making sure that we get a good setup and you know we're

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We're taking it a little bit of a different direction than we did with the original one

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by bringing in some of those outside perspectives and bringing in people who can have the deep

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conversations from an institutional lens that are operators in the space, that are investors

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in the space, that are capital allocators in the space.

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And I think it's going to provide a really unique insight into this entire sector as

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a whole.

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So I'm really excited about this one.

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It's shaping up to be a really awesome event.

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It's going to be a great time.

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I'm hoping to see a lot of you there.

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Yeah, absolutely.

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Can't wait.

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One other thing, we do have sponsorships available

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at this event.

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If you're interested in sponsoring this event

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and helping us throw a great party,

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they're not needed, but we love our partners.

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We've got a small business partnership

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and then two larger partnership options.

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The larger partnerships options will also include

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a bit of a sponsor banner participation

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in the future on our future streams.

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We're gonna have a banner down here at the bottom

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It shows our partners that help support everything that we've got going on here.

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So if you're interested, there is a sponsor tab on mstrtrtrunorth.com forward slash sponsors.

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If you click this link here, it'll send us an email and we are happy to roll with that.

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Cool.

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Thanks for the support.

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Look forward to meeting everybody in person.

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Okay, cool.

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Should we talk metals?

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Because this is ridiculous.

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these numbers i did this just a few minutes ago like these numbers are insane

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um so as of today silver market cap 6.6 trillion 6.6 trillion okay the middle of last year 7 28 25

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the market cap for silver was 2.1 trillion so right now silver is the second largest asset

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on the planet it's larger than any publicly traded equity i think the largest publicly

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traded equity right now is Nvidia. It's a four and a half trillion. So it's gone from effectively

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below the mag seven to surpassing the mag seven in the last six months, which is a pretty wild

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ride for the price of silver. If you go look at like the 25 year chart, it's just a crazy 25 year

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chart. One thing that is interesting that I've found is an inflation adjusted peak for silver.

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If you go back to the seventies, when there was another kind of blow off top for silver,

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the inflation adjusted peak is around $148 per ounce. So I think this thing could have more room

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to run. I don't necessarily want to touch it. I don't want to touch anything that looks as

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completely vertical as this thing does. But I think the reality is you got silver is used in

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a lot of infrastructure, right? It's used in, it's conducted for electricity. So it's used in

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you know building electricity units it's used in computers it's used all over the place but i think

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the relative size and scale of its use case is uh is relatively small i looked i looked the other

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day it's uh so there's two billion computers on the planet and and the each computer uses like a

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gram of silver so if you were to double the number of computers on the planet it it would be something

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like you need eight billion dollars worth of silver at today's prices which is like on a size

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and scale perspective the size of campbell's campbell's noodle soup market cap it's just like

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so small on a relative basis but you know there are many other industrial use cases but um

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it seems like that that concept of its industrial use case might be like slightly overblown i mean

301
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when people need to buy these things like compute for computers and stuff the price doesn't matter

302
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if the demand is so high so it's a bit difficult to rationalize some of these things oh but it tells

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you that you could see consumer good prices go up that are using it right that's going to be one of

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one of the problems here when you look at any of these metals that are used for any of these

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products is that when these prices spike like this you know there is the incentive for the miners to

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to get out there and start mining more of this stuff and getting it to the market because you've

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got huge demand right now. You're going to have companies panicking for supply because you're

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worried about these runaway costs of these inputs that go into your products. It's going to create

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some ripple effects out there beyond just how we traditionally view these, just in that store

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value category and people kind of hoarding them as investments. On that utility side of it,

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it's going to create some downstream impacts to the products that we see. And particularly,

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you're going to see it in the electronics clearly because you're seeing them used there so it's a

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little bit scary to watch it run away like this you know the one thing that you always have to

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train yourself for is is the fact that nothing goes up in a straight line forever right we've

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seen that play out several times we've seen don't tell peter schiff that peter schiff thinks uh you

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know gold's going to fifteen thousand dollars and he was on spaces yesterday going uh ape shit so

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yeah okay well yeah i guess whatever but it's going vertical forever apparently but you start

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to see and now you go look at you know top assets by market cap and now it's number one gold number

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two silver and just a few months ago i think silver was what seven or eight so they were down

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there a little little way so they made a massive jump i mean they basically triple it's basically

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true talk about they like it's a person but it effectively tripled since like september right

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It's been just on this massive run, which, you know, you got to ask yourself what it is that's driving that and how scary is it to see this much demand going into these metals and to see this consistent.

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Right. It hasn't been, you know, a flash over a matter of three or four weeks.

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It's been that sustained demand and the sustained drive up in the price here over the last, you know, call it four or five months.

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And so you wonder how many people that are in the paper products are trying to get physical delivery at the moment.

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And, you know, what you're seeing there, if you're finding out that there's issues in that chain, it's just really, really fascinating to watch because it's a pretty large macro indicator when things like this happen that something's showing some cracks out there.

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Yeah, that's a good point about people waiting for physical delivery because, you know, a lot of people are like, oh, well, let me just take an SLV position or a GLD position.

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But if they force majeure and just decide to sell some of these paper contracts in cash, you may not do as well as someone holding physical that can really just get the physical price.

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But then, of course, if you've got physical, you have to find someone that will actually be willing to take it from you.

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And, you know, they're going to shave off a little percent for themselves as well.

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So it's not always going to be exactly the advertised price that you're going to be able to get.

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and you have to be a little bit careful trading trading the paper contracts.

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It's interesting with the physical metal because you actually see a fair amount of it like if you

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go and visit pawn shops and things people go in there and try to try to sell it there you try to

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00:29:36,464 --> 00:29:41,624
buy it you're usually you know within a couple of dollars or whatever that spot price is but I was

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seeing some reports that that had widened and what they would actually offer you was something

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like 15 below the spot price right now.

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And you were just hearing that there were all kinds of people in trying to start to offload

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their physical metals here at this price.

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So I'm going to be curious to see if that ultimately translates into a pullback here.

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But, you know, it's incentivizing some people to really think about this, because if you'd

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been holding this for a long time and all of a sudden it's worth a significant amount,

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there might be some people that are ready to increase the quality of their life a little

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bit beyond being able to look at the shiny stones. So I won't be surprised to see some

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incentives that drive people to sell some of their actual physical holdings here in the near term.

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Yeah, you guys are gold bears, I feel like. I don't know.

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Is it going to 15,000, Dan? Tell us. Inform us.

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I mean, the gold chart is super weird. So I'm not sitting here betting it will go down,

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especially if these are sovereign buyers right Like this behavior aren like it not the same thing as when Bitcoin ripped to 17 in 2017 Like these are real sovereign kind of a chain in the hedge

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in the monetary order in the world.

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So like, yeah, I'm definitely not sitting here

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like thinking it's going to go down.

353
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But I think, you know, the tether story is really, really interesting.

354
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I think they're buying what?

355
00:31:06,536 --> 00:31:10,636
Multi-billion dollar allocations of gold every week, right?

356
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So they're becoming one of the biggest sovereign holders of gold in the world.

357
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And so that's crazy.

358
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And then that intermixed with the stablecoin story.

359
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Obviously, Tether released a US Genius Act compliant stablecoin recently,

360
00:31:23,936 --> 00:31:28,856
but they're also buying gold reserves and Bitcoin reserves for their Tether stablecoin.

361
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So I think it's really interesting to think,

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is there a world in which Tether completely pivots away from short-term treasuries,

363
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especially if short-term treasuries go down to 2% at Trump's bidding next year. That could be a

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00:31:42,156 --> 00:31:48,036
crazy macro catalyst. And also, we talk about it sometimes at Buck, Tether has such a great

365
00:31:48,036 --> 00:31:52,876
business. They make the most profitable company in the world per employee just because they sit

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and collect the short-term treasury bill rates in their treasury. But they're already diversifying

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away from the US sovereign debt. And so why are they taking that, what could be conventional

368
00:32:05,216 --> 00:32:09,296
considered a risk in diversifying into gold, into Bitcoin, in this kind of stuff. And it's because

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00:32:09,296 --> 00:32:16,436
I think that smart big money is realizing that this sovereign debt is in fact as safe as people

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00:32:16,436 --> 00:32:21,616
want it to be. So maybe it's just like a massive repricing. Yeah, it does seem like it's supply

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driven, not necessarily like debasement trade, store of value driven. And I'm not calling that

372
00:32:28,256 --> 00:32:34,396
it's probably got room to grow. I mean, double, triple, whatever. But eventually, people are going

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to attack those profit margins and the supply will have to come up and meet demand eventually.

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And the question that I'm really asking myself is, do I want to wait another 20 years for

375
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this to happen to metals again or own Bitcoin?

376
00:32:50,116 --> 00:32:55,096
And, you know, we've got that statistic that nobody that's ever bought Bitcoin and held

377
00:32:55,096 --> 00:32:57,876
it for four or five years has ever, you know, lost money.

378
00:32:57,876 --> 00:33:01,456
and looking at the 20-year chart on gold and silver,

379
00:33:02,356 --> 00:33:04,996
it's like, okay, I don't have that kind of patience.

380
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I know I'm supposed to be low time preference,

381
00:33:06,576 --> 00:33:08,276
but that's a little bit much for me.

382
00:33:10,256 --> 00:33:12,816
So Dan, you bring up a good point about Tether

383
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and I agree with you.

384
00:33:14,456 --> 00:33:16,216
I think there are a lot of companies

385
00:33:16,216 --> 00:33:17,216
that are starting to do this,

386
00:33:17,276 --> 00:33:17,976
thinking about reserves,

387
00:33:18,176 --> 00:33:20,656
thinking about lack of confidence

388
00:33:20,656 --> 00:33:25,836
in the sovereign US debt, US treasuries

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that they're keeping on their balance sheet.

390
00:33:27,876 --> 00:33:34,976
My only caveat to that is gold in the last five days has gone up 5.2 trillion.

391
00:33:35,876 --> 00:33:37,416
Let's say 5.1 trillion.

392
00:33:38,376 --> 00:33:45,016
That's 5,100 billions in five days.

393
00:33:46,036 --> 00:33:53,276
Even if Tether's slanging $60 billion of, let's just say, $5 billion a week,

394
00:33:53,276 --> 00:34:12,396
that's $20 billion a month times 12 is $140 billion. We're talking like $5,100 billion

395
00:34:13,836 --> 00:34:17,596
has moved in five days. You lost me with the numbers, Jeff. I totally agree.

396
00:34:17,596 --> 00:34:21,496
The scale is just like totally mind numbing, right?

397
00:34:21,616 --> 00:34:22,596
Like it just...

398
00:34:23,376 --> 00:34:26,156
I think it just goes to show people need to realize there's a lot of money out there.

399
00:34:26,516 --> 00:34:28,476
And like ultimately, like the price of Bitcoin goes up,

400
00:34:28,536 --> 00:34:32,816
not because there isn't an ample amount of capital sitting around waiting to go into it,

401
00:34:33,016 --> 00:34:35,516
but it's because like, you know, it gets adopted slowly.

402
00:34:35,696 --> 00:34:40,636
So I think people are too quick to compare, you know, Bitcoin to gold right now.

403
00:34:40,736 --> 00:34:44,896
Like I think we're obviously expanding the total addressable market for digital sound money

404
00:34:44,896 --> 00:34:46,156
as Bitcoin goes up.

405
00:34:46,156 --> 00:34:47,056
And I think it's a really good thing.

406
00:34:47,056 --> 00:34:53,976
I think that the number of like the total asset number in the world has got to be like massively gone up in the last six months.

407
00:34:54,196 --> 00:34:59,216
I haven't checked. Right. Like the Jesse Myers in nine hundred trillion dollars.

408
00:34:59,776 --> 00:35:04,436
Like just looking here at silver and gold going from from twenty five trillion to forty five trillion.

409
00:35:04,536 --> 00:35:09,876
You're up you're up twenty trillion. But the rest of the stock market is also at all time highs.

410
00:35:11,536 --> 00:35:14,496
The equity market still is like pushing all time highs.

411
00:35:14,496 --> 00:35:23,156
the bond market is still high. There's more money out there. Yeah, there's a lot of money out there.

412
00:35:23,256 --> 00:35:27,116
It's just interesting to see how that is playing out. Let me put some more relativity here.

413
00:35:27,116 --> 00:35:32,696
In the last 184 days, the market cap of these two combined has gone up $20 trillion.

414
00:35:33,856 --> 00:35:40,216
Average market cap change per day is $100 billion. The MAG7 today is $21.5 trillion.

415
00:35:40,216 --> 00:35:50,916
So over the last 184 days, silver and gold have gone up an entire mag seven, like the best seven companies in America, their entire value of their market cap.

416
00:35:51,116 --> 00:35:54,316
That's what silver and gold have done in the last 184 days.

417
00:35:56,256 --> 00:35:57,316
That's crazy.

418
00:35:59,496 --> 00:36:00,616
That is nuts.

419
00:36:00,896 --> 00:36:02,216
That's just a crazy relativity.

420
00:36:03,036 --> 00:36:09,796
Like that's the best performing companies on the planet combined their entire equity market cap value.

421
00:36:09,796 --> 00:36:11,396
That's a crazy number.

422
00:36:12,236 --> 00:36:19,336
No, and I mean, this would not have been on the bingo card in 2014, 13,

423
00:36:19,536 --> 00:36:21,116
as QE was starting to ramp up,

424
00:36:22,216 --> 00:36:26,076
that Gold Rock would outperform the greatest capital market in the world.

425
00:36:27,496 --> 00:36:27,676
Yeah.

426
00:36:29,016 --> 00:36:30,556
Yeah, interesting stuff.

427
00:36:30,876 --> 00:36:31,776
Interesting times.

428
00:36:32,796 --> 00:36:37,596
It's fun listening to Peter Schiff spit talk on the spaces

429
00:36:37,596 --> 00:36:40,296
and just completely dunk on the Bitcoiners.

430
00:36:40,376 --> 00:36:41,196
I think we'll have our time.

431
00:36:41,736 --> 00:36:44,976
If any of this gets remotely interested in digital scarcity, right?

432
00:36:45,056 --> 00:36:46,196
Like this is a scarcity.

433
00:36:46,396 --> 00:36:47,616
Gold is a scarcity story.

434
00:36:48,316 --> 00:36:49,496
Silver is a utility story.

435
00:36:49,956 --> 00:36:54,096
If there's any interest in going from physical scarcity to digital scarcity,

436
00:36:54,096 --> 00:36:59,576
I think like a splash of this capital moves Bitcoin very quickly.

437
00:37:00,676 --> 00:37:03,616
So yeah, it will be, I mean, time will tell.

438
00:37:03,856 --> 00:37:04,376
We'll figure it out.

439
00:37:04,976 --> 00:37:07,356
Yeah, you got to give the bull guys like shift there.

440
00:37:07,596 --> 00:37:11,696
their time right now, right? I mean, you can't look at them and say, you know, at the moment,

441
00:37:11,736 --> 00:37:16,636
he's definitely right. You know, it's, it's been a pretty, pretty impressive run here. So

442
00:37:16,636 --> 00:37:22,656
I'm not mad at it. I think it shows that we've got a significant weakening in the confidence

443
00:37:22,656 --> 00:37:29,536
of sovereigns right now. I mean, clearly you've just got this disaster kind of brewing over there

444
00:37:29,536 --> 00:37:33,616
in Japan. Everyone's constantly watching what's happening there. You know, that's sort of a

445
00:37:33,616 --> 00:37:39,516
canary in the coal mine there with the Japanese yen. We talked, I can't remember when it was,

446
00:37:39,656 --> 00:37:46,516
but we were talking about the perception of the risk-free rate. And the risk-free rate is feeling

447
00:37:46,516 --> 00:37:51,796
more and more risky every day now. People are starting to dig into these balance sheets of

448
00:37:51,796 --> 00:37:55,876
these sovereigns. You're starting to see the weakness in the policies. You're starting to see

449
00:37:55,876 --> 00:38:02,576
the way that they're managing the economies and trying to drive the GDP growth. And a lot of that

450
00:38:02,576 --> 00:38:08,356
focuses on the U.S. We got the news today, right? They're not cutting rates, even though when you go

451
00:38:08,356 --> 00:38:13,996
and look at the truflation data right now, I think it's got inflation down at like 1.18 or something

452
00:38:13,996 --> 00:38:20,436
to that nature. Which is pretty insane. And they're referencing figures from November. And

453
00:38:20,436 --> 00:38:27,456
you're starting to see that and you wonder if we're at kind of a standstill here until Powell

454
00:38:27,456 --> 00:38:31,596
moves on from that role, right? Is he just kind of digging in in place here and we're not really

455
00:38:31,596 --> 00:38:36,316
going to see anything move maybe until May. And it's starting to create some uncertainty when

456
00:38:36,316 --> 00:38:41,456
you're seeing a lot of these numbers that are tracked pretty regularly by these more open source

457
00:38:41,456 --> 00:38:48,896
providers that have been relatively accurate. And you're seeing that number come down. And there's

458
00:38:48,896 --> 00:38:54,116
a lot of weakness out there in the macro environment. So I'm not entirely surprised to see a

459
00:38:54,116 --> 00:39:01,576
lot move into these metals. We all look at digital scarcity and it makes complete sense to us.

460
00:39:01,596 --> 00:39:05,796
You've got the ability to transact value anywhere in the world using this.

461
00:39:05,976 --> 00:39:11,256
There's massive utility in the financial rails around a store of value asset like Bitcoin.

462
00:39:12,036 --> 00:39:14,836
But metals have been around for thousands of years.

463
00:39:15,036 --> 00:39:21,976
And so I'm not surprised when we look at, Jeff, we were talking about this earlier, how small the Bitcoin world feels.

464
00:39:22,416 --> 00:39:28,196
You go to all these conferences, you're bumping into a lot of the same people, you're having a lot of the same conversations.

465
00:39:28,196 --> 00:39:35,936
you know, we're still at the very early phases of seeing the major Bitcoin adoption.

466
00:39:37,016 --> 00:39:41,476
And I think it's going to come. The world's obviously transitioning to digital. I don't

467
00:39:41,476 --> 00:39:46,616
see us going backwards from that. It's accelerating forward. So that's going to be a reality of what

468
00:39:46,616 --> 00:39:51,716
the world looks like in the future. And I think that, you know, having a digital asset with true

469
00:39:51,716 --> 00:39:56,036
defined scarcity like Bitcoin that can transact in a digital world as well is going to be something

470
00:39:56,036 --> 00:40:01,956
that's massively, massively valuable. But at the moment, when people are scared,

471
00:40:02,996 --> 00:40:07,876
they revert back to what they've always known. And what they've always known in the past,

472
00:40:07,976 --> 00:40:13,056
what their parents knew, what their grandparents knew was you've got to have some gold. And I think

473
00:40:13,056 --> 00:40:17,116
you see some of that right now. And plus, you see the sovereigns, right? And obviously, the

474
00:40:17,116 --> 00:40:22,436
sovereigns are not immediately going to go pile into Bitcoin right away. I think it would be naive

475
00:40:22,436 --> 00:40:27,616
of us to think that there was that was just going to turn on a dime here. So not surprising, you

476
00:40:27,616 --> 00:40:32,096
know, and to Dan's point, this this could extend for a lot longer. And I wasn't necessarily, you

477
00:40:32,096 --> 00:40:38,276
know, calling for gold to pull back and stop running entirely. My point was more things don't

478
00:40:38,276 --> 00:40:42,716
go in straight lines forever. Right. You tend to get some turbulence along that path. And so it's

479
00:40:42,716 --> 00:40:47,956
entirely possible that it continues to see sustained demand as long as people are starting to lose

480
00:40:47,956 --> 00:40:52,876
some confidence here in these governments to manage their economies.

481
00:40:52,876 --> 00:40:54,796
So we'll have to see how it plays out.

482
00:40:54,796 --> 00:40:57,076
Yeah. What's the top?

483
00:40:57,076 --> 00:41:00,456
Is it like 60 trillion?

484
00:41:00,456 --> 00:41:01,536
Could it double from here?

485
00:41:01,536 --> 00:41:02,656
Was that rational?

486
00:41:02,688 --> 00:41:08,908
there's no fiat bottom right there's no fiat bottom that's true that's true it's all about

487
00:41:08,908 --> 00:41:14,228
what the value is being denominated in at the time and if your denominator is broken yeah so

488
00:41:14,228 --> 00:41:19,208
if your denominator is broken and maybe it's front-running news new money supply

489
00:41:19,208 --> 00:41:26,188
didn't sailor say that like the master plan for the u.s would be to sell all their gold

490
00:41:26,188 --> 00:41:32,728
buy Bitcoin and then just announce it and just drop the bottom right out of gold and Bitcoin

491
00:41:32,728 --> 00:41:38,168
pumps. I mean, 2026 would be the perfect time to do that. So I'm sure I have tons of government,

492
00:41:38,348 --> 00:41:43,728
important government people watching me. So I think it feels like right now they could just

493
00:41:43,728 --> 00:41:49,088
revalue the gold at these levels, right? Really improve the balance sheet with that. That was a

494
00:41:49,088 --> 00:41:53,048
conversation a long time ago and they were looking for budget neutral ways to build out a Bitcoin

495
00:41:53,048 --> 00:41:58,848
reserve and one of those was to revalue the gold reserves you know now it would seem like a pretty

496
00:41:58,848 --> 00:42:02,668
good time to revalue the gold reserves if you wanted to really you know pump that number up

497
00:42:02,668 --> 00:42:07,908
and see what you're working with but yeah i mean that was that was one of the guys there's no gold

498
00:42:07,908 --> 00:42:13,728
in the vault actually yeah yeah is empty and we can't we actually can't revalue it the pawn shop

499
00:42:13,728 --> 00:42:21,648
might have more gold than fort knox yeah yeah interesting but i think even if the u.s was going

500
00:42:21,648 --> 00:42:27,868
to do that like i think you would want to see some more adoption of countries globally first

501
00:42:27,868 --> 00:42:34,028
knowing that you're the one that can step in and really kind of take over because you know you've

502
00:42:34,028 --> 00:42:38,568
got the stronger reserve currency that you can print yourself so your ability to accumulate is

503
00:42:38,568 --> 00:42:43,048
going to outpace everyone else's so i think you'd kind of want them in the game a little bit

504
00:42:43,048 --> 00:42:50,728
and then uh let them know that size of your economy matters the amount of currency you got

505
00:42:50,728 --> 00:42:56,468
matters, having a money printer matters in the transition to where that's no longer a viable

506
00:42:56,468 --> 00:43:04,388
option. That's a very fiat game to play when you can print the currencies. And the danger in an

507
00:43:04,388 --> 00:43:09,788
asset like Bitcoin to these countries is it completely changes the way that they operate.

508
00:43:09,988 --> 00:43:15,328
You can no longer just fund everything you do by clicking the magic money button all the time

509
00:43:15,328 --> 00:43:18,608
and pretending it's not happening or having an impact,

510
00:43:18,948 --> 00:43:23,188
you've got an actual finite, scarce value asset

511
00:43:23,188 --> 00:43:24,808
that you have to work within now.

512
00:43:25,128 --> 00:43:27,688
And that brings a lot more honesty to the process.

513
00:43:27,808 --> 00:43:30,048
And I don't think we're quite ready for that yet

514
00:43:30,048 --> 00:43:31,108
at the government level.

515
00:43:31,248 --> 00:43:32,848
I don't think they're quite ready for that yet.

516
00:43:33,468 --> 00:43:35,268
Honesty and accountability is not exactly

517
00:43:35,268 --> 00:43:37,128
in high supply these days.

518
00:43:39,088 --> 00:43:42,648
Man, if somebody sold all the gold

519
00:43:42,648 --> 00:43:43,928
and bought Bitcoin with it,

520
00:43:43,928 --> 00:43:49,528
I mean, that's probably if a country did that, I would say that's probably a black swan positive event.

521
00:43:53,048 --> 00:43:54,548
That's difficult to quantify.

522
00:43:56,568 --> 00:44:04,048
Speaking of fiat reserves, shall we talk about credit model on the PREF equities?

523
00:44:04,548 --> 00:44:07,488
Because this is something I've been thinking about a lot.

524
00:44:07,488 --> 00:44:11,788
Actually, before we get there, this is kind of to tie this together here.

525
00:44:11,788 --> 00:44:15,628
is thinking about the physical world versus the digital world.

526
00:44:16,408 --> 00:44:18,708
This is something I've been speculating and thinking about a lot

527
00:44:18,708 --> 00:44:23,228
is how computers interact with assets today

528
00:44:23,228 --> 00:44:26,128
and how they will interact with assets in the future

529
00:44:26,128 --> 00:44:30,148
and how value is stored and held within computers

530
00:44:30,148 --> 00:44:32,728
and how that will change into the future.

531
00:44:34,068 --> 00:44:38,488
It's hard to ignore and deny that that trend is going up into the right.

532
00:44:38,668 --> 00:44:40,008
Computers are making more decisions.

533
00:44:40,348 --> 00:44:41,068
It's going up in the right.

534
00:44:41,068 --> 00:44:47,968
Computers have completely surpassed human intelligence far and away.

535
00:44:48,668 --> 00:44:54,448
I pretty much use AI like a calculator now for just kind of everything.

536
00:44:55,668 --> 00:45:09,908
And these computers, I know that banks and high-frequency trading companies already have tons of computer algorithms that are tied into equity markets and things that move quickly.

537
00:45:09,908 --> 00:45:14,048
and they're harvesting fractions of pennies on a dollar

538
00:45:14,048 --> 00:45:16,588
just based on being in different positions

539
00:45:16,588 --> 00:45:17,448
at different points in time.

540
00:45:18,288 --> 00:45:20,188
And when you think about the future

541
00:45:20,188 --> 00:45:24,468
of underwriting an asset,

542
00:45:24,988 --> 00:45:29,348
underwriting an asset that's native to the decision-making

543
00:45:29,348 --> 00:45:31,668
is going to be preferred.

544
00:45:33,148 --> 00:45:36,048
And what I mean by that is the fact that a digital asset

545
00:45:36,048 --> 00:45:37,768
like Bitcoin is native to a computer,

546
00:45:37,768 --> 00:45:43,228
whereas a physical asset like gold is native to humans like the computers will prefer interacting

547
00:45:43,228 --> 00:45:51,168
with bitcoin because it can underwrite it could underwrite the supply within the protocol like it

548
00:45:51,168 --> 00:45:58,328
it's harder for a computer to underwrite like the geological supply of gold because that's unknown

549
00:45:58,328 --> 00:46:03,968
like a computer can't know know what that is and know how society interacts with that supply

550
00:46:03,968 --> 00:46:09,228
whether it's mining it or spending it or transacting with it etc like the computers will

551
00:46:09,228 --> 00:46:18,108
prefer to interact with a native asset or native type money and i mean how long will that take

552
00:46:18,108 --> 00:46:23,508
might take a long time it might take a decade it might take 20 years but i think the world is

553
00:46:23,508 --> 00:46:32,028
trending in that direction um like as as you know grandparents die away and they stop hoarding their

554
00:46:32,028 --> 00:46:38,508
gold, the younger people take it and they convert it into what's native to them. So yeah, go ahead,

555
00:46:38,588 --> 00:46:43,288
Dan. Yeah. I mean, I was just talking to my dad about this actually. Like we're in this weird

556
00:46:43,288 --> 00:46:48,188
exponential phase where technology is progressing exponentially, right? Like you guys have probably

557
00:46:48,188 --> 00:46:55,428
started messing around with Claudebot and like, I mean, AIs are really interacting on behalf of

558
00:46:55,428 --> 00:47:00,608
humans and interacting with native kind of software in a way that is absolutely mind blowing. The

559
00:47:00,608 --> 00:47:05,408
applications are insane, but still economic values tied to the individual and the human.

560
00:47:06,048 --> 00:47:10,408
Right. So like while people can't figure out where the value is being accrued, and I think part of

561
00:47:10,408 --> 00:47:15,348
this gold thesis is that like no one understands where the value is going to be accrued. Like in a

562
00:47:15,348 --> 00:47:20,268
year's time, like right now, I think Opus 4.5 is absolutely hands down the best model out there.

563
00:47:20,748 --> 00:47:25,688
You know, the open source Chinese models will be light years better than Opus is now in six months

564
00:47:25,688 --> 00:47:31,168
time, 70 months time, right? So who's going to capture this economic value, if it's all being

565
00:47:31,168 --> 00:47:35,848
pushed to the marginal cost production? And like, there's a lot of boomers, like, who think and I

566
00:47:35,848 --> 00:47:40,348
think you're starting to realize like, like, yes, during, you know, the mobile wave, like the network

567
00:47:40,348 --> 00:47:45,088
companies were able to capture all the the dominant networks were able to capture all the value.

568
00:47:45,208 --> 00:47:49,328
But like, it's tough to say who's going to capture the value here, because I don't believe there's

569
00:47:49,328 --> 00:47:53,508
going to be sort of fiat monetary capturing the way there has been with permission networks over

570
00:47:53,508 --> 00:47:59,108
the past 10 20 years so like where does that leave value and people are starting to chase scarcity

571
00:47:59,108 --> 00:48:05,108
right and they're chasing gold but it's because it you know money's still analog like money is tied

572
00:48:06,068 --> 00:48:11,508
to your personhood via a traditional you know ledger system in the banking

573
00:48:11,508 --> 00:48:17,108
on the traditional banking rails so like that will change but slowly and so like economic value is

574
00:48:17,108 --> 00:48:22,148
slow but you know um the sort of technological progress is exponential

575
00:48:23,508 --> 00:48:52,268
Yeah. And it's happening at light speed right now. It's like, uh, deciding which AI model to use. It's like, there's a new one every week, right? It's insane. I'm like, and I, I'm, I'm like asking, uh, my analyst, Hey, go look at what's going on here. Uh, because I'm using this, but should I be using that? And I like, don't even have time to go analyze whether or not I should be like jumping and using that model or, you know, it's like, it's all moving so fast.

576
00:48:52,268 --> 00:48:57,808
and like some people are dedicating their entire life to understanding how these things are moving

577
00:48:57,808 --> 00:49:03,848
it's just it is mind-blowing it is totally mind-blowing and if you're if you're at a company

578
00:49:03,848 --> 00:49:11,668
where you cannot use ai you're gonna get left behind like if you're only using ai in your spare

579
00:49:11,668 --> 00:49:18,028
time like like you'd read a book after you're done with work you're you are totally gonna get

580
00:49:18,028 --> 00:49:24,508
left behind everybody that's using these things are uh they're accelerating just incredibly fast

581
00:49:24,508 --> 00:49:29,528
that they're pushing the pushing the bounds of progress incredibly incredibly quickly i totally

582
00:49:29,528 --> 00:49:35,668
agree i think i but the thing i've been thinking about recently is anyone with ideas is just in a

583
00:49:35,668 --> 00:49:42,808
position of infinite scale and and implementation i saw a funny meme or something it was like

584
00:49:42,808 --> 00:49:47,268
it's something along the lines of it's like hiring senior idea guy, junior,

585
00:49:47,648 --> 00:49:54,628
you know, assistant idea guy, guy to go get lunch, you know?

586
00:49:54,688 --> 00:49:58,848
So like, I think there's, there's merit to that. Honestly,

587
00:49:58,848 --> 00:50:04,908
like if you have the ideas implementation becomes free and that is a crazy

588
00:50:04,908 --> 00:50:05,388
idea.

589
00:50:06,468 --> 00:50:09,508
Yeah. I mean, just the fact that I was able to, you know,

590
00:50:09,508 --> 00:50:11,948
I use cursor code and I'm building like dashboards myself.

591
00:50:11,948 --> 00:50:16,388
And I don't, I don't like, I have the idea and I just go instantly type it in

592
00:50:16,388 --> 00:50:18,308
in plain English, like what I want to see.

593
00:50:18,408 --> 00:50:20,328
And it's like, boom, it's there in front of my face.

594
00:50:20,368 --> 00:50:22,848
And I was like, I didn't even have to learn any of the technicals.

595
00:50:22,888 --> 00:50:24,368
Like that is, that is just insane.

596
00:50:25,508 --> 00:50:26,528
Yeah, it's insane.

597
00:50:26,708 --> 00:50:27,548
So I think there's value.

598
00:50:27,968 --> 00:50:28,408
Go ahead.

599
00:50:28,608 --> 00:50:28,868
Go ahead.

600
00:50:29,108 --> 00:50:31,648
No, I was going to say for people that don't feel like, you know,

601
00:50:31,668 --> 00:50:33,828
or maybe a little depressed, like I'm never going to be able to keep up with

602
00:50:33,828 --> 00:50:36,128
this because it's going to be kind of impossible.

603
00:50:36,128 --> 00:50:39,368
It's just going to be, you know, the best AIs right now,

604
00:50:39,368 --> 00:50:47,608
we're going to be free apps on our phone in five years or whatever. But because Bitcoin captures

605
00:50:47,608 --> 00:50:56,068
all of the deflationary advancements, all you have to do is buy Bitcoin. Like if you personally

606
00:50:56,068 --> 00:51:04,028
can't keep up with AI and technology, Bitcoin captures all of that on its own. So you can just

607
00:51:04,028 --> 00:51:09,028
stack sats and let technology go to the moon

608
00:51:09,028 --> 00:51:26,520
and you can basically cement your position in time now and just ride Bitcoin on AI coattails I think the risks that are going to come with all these AI tools right I think you getting

609
00:51:26,520 --> 00:51:36,240
efficiency and convenience at the risk of privacy now. We live in a world where even minor

610
00:51:36,240 --> 00:51:40,860
inconveniences will stop us from doing something. And so being able to plug in tools and have it do

611
00:51:40,860 --> 00:51:46,240
everything for us. I was looking at this Claudebot or Moltbot, which is what it seems to be now.

612
00:51:47,260 --> 00:51:52,180
And it lives on your computer. It's basically got access to everything. It's got your emails.

613
00:51:52,420 --> 00:51:57,460
It's got access to files. It'll integrate into your Telegram and your Twitter and all of your

614
00:51:57,460 --> 00:52:03,400
social media. You're providing full access, basically, across your entire life. Every bill

615
00:52:03,400 --> 00:52:06,780
that's going to come into your email is going through that thing. And it's at the convenience

616
00:52:06,780 --> 00:52:09,880
of effectively having a virtual assistant for yourself.

617
00:52:10,980 --> 00:52:13,980
And so I'm always a little slow to adopt some of those,

618
00:52:14,220 --> 00:52:17,020
just because anytime I'm putting something on

619
00:52:17,020 --> 00:52:18,580
that's now got access to everything,

620
00:52:18,680 --> 00:52:20,380
even when they tell me that it's private,

621
00:52:20,420 --> 00:52:21,740
it makes me a little bit nervous.

622
00:52:22,500 --> 00:52:24,580
But it's clear that this is the direction

623
00:52:24,580 --> 00:52:25,560
that things are going.

624
00:52:26,440 --> 00:52:28,160
And I think that convenience

625
00:52:28,160 --> 00:52:30,220
and the speed of innovation and efficiency

626
00:52:30,220 --> 00:52:34,340
is going to take over what we used to focus on

627
00:52:34,340 --> 00:52:35,720
with privacy, right?

628
00:52:35,720 --> 00:52:44,640
Because now you've got to have everything out there in the open to integrate it all together, to make it really efficient, to allow you to be hyperproductive, which is where a lot of people are going.

629
00:52:44,780 --> 00:52:47,600
And to Dan's point, there's really no idea you can't build now.

630
00:52:48,660 --> 00:52:54,840
You know, there's no, and a lot of times, sometimes when you get stuck with one of the AIs, you go to the other AI to ask what's wrong with the first AI, right?

631
00:52:54,900 --> 00:52:56,360
And it'll fix the problem for you.

632
00:52:56,360 --> 00:53:05,120
Like the amount of time it takes to get from idea to product, as long as it's a digital product, is incredibly fast.

633
00:53:05,720 --> 00:53:11,320
I mean, I had an idea for something the other day and I built it in like an hour and a half and it was exactly what I would have wanted.

634
00:53:11,320 --> 00:53:20,580
If I was back in my old life and I was writing that code myself, it would have been months to get that done, to get through all the testing, to write all the unit tests, figure out the right way to deploy it.

635
00:53:20,720 --> 00:53:26,380
Just to get everything done would have taken a huge amount of manual effort and that's no longer the case.

636
00:53:26,380 --> 00:53:36,420
So, you know, it's a beautiful and a scary time to be alive right now because you're watching the pace of the speed up and not slow down.

637
00:53:36,940 --> 00:53:42,200
And with every step, we're trying to take friction out of our day to day lives.

638
00:53:42,720 --> 00:53:44,540
And sometimes that can be a slippery slope.

639
00:53:44,620 --> 00:53:47,120
So you just got to be aware of what you're doing with this stuff.

640
00:53:48,940 --> 00:53:55,700
Yeah, I've seen all the all the posts where it's a cloud bot lost all my money and traded.

641
00:53:55,700 --> 00:53:58,500
It's a trade to a million dollars, make no mistakes.

642
00:53:58,860 --> 00:54:01,820
And it's Claude Bott lost all my money.

643
00:54:02,920 --> 00:54:05,240
It drove me back in time where we were doing the risk,

644
00:54:05,380 --> 00:54:06,360
and I'm going to date myself,

645
00:54:06,480 --> 00:54:08,520
but it was the risk reward analysis of, you know,

646
00:54:08,580 --> 00:54:11,220
downloading a song on LimeWire or Napster or something.

647
00:54:11,220 --> 00:54:13,720
And you were just fully taking on the risk

648
00:54:13,720 --> 00:54:15,540
that that thing was just going to break your computer

649
00:54:15,540 --> 00:54:16,800
with some virus, you know.

650
00:54:17,540 --> 00:54:20,100
But you could get that song that you could now listen to

651
00:54:20,100 --> 00:54:22,660
all the time without having to like record it off the radio

652
00:54:22,660 --> 00:54:23,120
or something.

653
00:54:23,120 --> 00:54:30,940
Yeah, I still have an iPod full of, you know, thousands of songs that I've downloaded. Shout out LimeWire. Good times.

654
00:54:31,820 --> 00:54:36,340
I think it is an interesting development in having all your context sit in one space.

655
00:54:36,800 --> 00:54:39,500
Because like ultimately the models are becoming like interchangeable.

656
00:54:40,020 --> 00:54:49,940
And once you have personalized context that gets built up over time, like I'm going to probably be using context that I'm developing now from my thoughts and actions and prompts and all that stuff.

657
00:54:49,940 --> 00:54:52,740
in five years time, the same context,

658
00:54:53,120 --> 00:54:55,320
it'll be like a massive hard drive.

659
00:54:55,320 --> 00:54:56,920
Right now, it's a cloud.

660
00:54:57,580 --> 00:54:59,480
Yeah, but you'll be able to port that

661
00:54:59,480 --> 00:55:01,700
into new models over time.

662
00:55:01,800 --> 00:55:03,120
So it's like the models are a commodity.

663
00:55:03,640 --> 00:55:05,060
It's just your context, your authenticity.

664
00:55:05,380 --> 00:55:07,540
That's like the only thing I can think of

665
00:55:07,540 --> 00:55:09,160
of value in the whole loop right now.

666
00:55:11,840 --> 00:55:14,020
And then this last week,

667
00:55:14,580 --> 00:55:17,200
ChatGPT is trying to take some percentage

668
00:55:17,200 --> 00:55:23,040
of like innovations that come using chat gpt ai like that's a i mean that's a risk too like who

669
00:55:23,040 --> 00:55:29,000
owns it yeah you got to be able to own your context and your branding i mean digital id i

670
00:55:29,000 --> 00:55:33,660
mean i know they've been like struggling with this like my dad tried to do a digital id startup like

671
00:55:33,660 --> 00:55:40,080
100 years ago and they've been working on these sorts of these problems for like a long long time

672
00:55:40,080 --> 00:55:44,580
then we saw strategy orange with like the same digital id i think there's going to be real use

673
00:55:44,580 --> 00:55:49,680
case, but like, does it get decentralized into Nostra? Like where does your digital signature,

674
00:55:49,940 --> 00:55:54,780
you know, reside? Like in much in the same way, people like classic cars. I think in the future,

675
00:55:54,780 --> 00:56:00,380
people are going to like classic analog videos of people that record it themselves. So like in the

676
00:56:00,380 --> 00:56:05,960
same way you verify a 1975 911T and make sure all the parts are the same, the engine stock,

677
00:56:06,000 --> 00:56:09,900
and there hasn't been any modifications. People are, I think are going to do that on videos of

678
00:56:09,900 --> 00:56:16,600
people and want to see humans actually, you know, creating. So I mean, I don't know what that's

679
00:56:16,600 --> 00:56:22,080
going to look like, but I think there's a massive market there. I mean, the lawyers are going to have

680
00:56:22,080 --> 00:56:28,460
a heart attack when they have all these lawsuits about who owns, who owns what, where the property

681
00:56:28,460 --> 00:56:37,320
rights sit for all of the digital output that comes out of it. Oh my God. Good thing I'm not

682
00:56:37,320 --> 00:56:43,880
lawyer and uh i think about risk okay wait until someone builds the next you know like black rock

683
00:56:43,880 --> 00:56:48,520
aladdin platform using an ai tool and then it turns out that all that ip actually belongs to

684
00:56:48,520 --> 00:56:55,560
the ai provider and now they own that tool yeah exactly and then it's then it's gone yeah yeah

685
00:56:55,560 --> 00:57:02,760
then black software is going to zero like software you can make software so quickly now it's just

686
00:57:02,760 --> 00:57:10,200
Anytime someone asks for predictions for 10 years in the future, I have no freaking idea.

687
00:57:11,060 --> 00:57:15,900
Because it wasn't too long ago where the thing that was getting touted around was learn to code.

688
00:57:17,100 --> 00:57:22,360
You were definitely going to be saved if you knew how to code because those jobs were always going to be in demand.

689
00:57:22,720 --> 00:57:23,760
Applications were gaining.

690
00:57:23,940 --> 00:57:25,780
Everything in your life was going to be applications.

691
00:57:26,580 --> 00:57:29,800
These AI tools come out and that is just getting kneecapped right now.

692
00:57:29,800 --> 00:57:35,500
like now it's back to what they said it was going to be before where you know it was all the trades

693
00:57:35,500 --> 00:57:40,080
they thought were going to start going away and automated find the handyman to save your life

694
00:57:40,080 --> 00:57:45,500
right like nobody knows how to do anything anymore and so it's it you know in the real world not the

695
00:57:45,500 --> 00:57:49,980
digital world a lot of people know how to do things in the digital world now but um it's just

696
00:57:49,980 --> 00:57:54,080
fascinating to watch this develop so you know people always ask like what does this look like

697
00:57:54,080 --> 00:58:00,020
in 10 years, I have no freaking idea, but I'm pretty sure the world's going to be more digital.

698
00:58:00,720 --> 00:58:06,040
And I think that that's kind of how I'm going to align my investment thesis here over the next 10

699
00:58:06,040 --> 00:58:11,420
years, because I don't see that train slowing down one bit. I only see it exponentially increasing

700
00:58:11,420 --> 00:58:16,820
because I've seen it in the last six months. Yeah. Here you go. Somebody just posted this.

701
00:58:17,180 --> 00:58:23,440
I'm a developer and no longer code. I just use it. Yeah. Exhibit A.

702
00:58:24,080 --> 00:58:31,840
Wow, that's crazy. Okay, let's switch gears a little bit, but also kind of in the same vein.

703
00:58:32,720 --> 00:58:38,720
And I want to talk about the preferred equity a little bit in the credit model. And think through

704
00:58:38,720 --> 00:58:44,800
this a bit, because this is, again, interaction between analog and digital, just on the credit

705
00:58:44,800 --> 00:58:53,160
front. And I had an interesting thought experiment the other day. And I'm going to share it with

706
00:58:53,160 --> 00:59:02,540
everybody here while we go and pull up the credit model. And my question to everybody here is,

707
00:59:02,540 --> 00:59:10,180
at what amplification percentage do the strategy preferred instruments

708
00:59:10,180 --> 00:59:14,680
have risk return parity with high yield corporate debt?

709
00:59:14,680 --> 00:59:25,440
and that's a that's a pretty big question because it there are multiple things that are that you've

710
00:59:25,440 --> 00:59:32,260
got to think through here with that question what is amplification is amplification a measure of

711
00:59:32,260 --> 00:59:40,520
risk what is risk is risk volatility or is risk default uh what is credit like what what is a

712
00:59:40,520 --> 00:59:47,320
credit claim? What does that look like? How does it look relative to the rest of the market?

713
00:59:48,280 --> 00:59:52,280
Does the denominator, like is your balance sheet denominated in fiat or Bitcoin? And how do you

714
00:59:52,280 --> 01:00:01,220
start to think about these things compared to each other? And so what I did is I jumped into

715
01:00:01,220 --> 01:00:07,140
the strategy credit model. And I think, I would love to talk to strategy folks about this, but I

716
01:00:07,140 --> 01:00:23,520
I think this credit model needs to be expanded on and built on quite a bit, particularly because no changes have been made since the addition of the USD reserve here, the 2.25 billion of USD reserve that's been added.

717
01:00:23,520 --> 01:00:29,760
none of the BTC rating, BTC risk or BTC credit takes into consideration of the 2.25 billion of

718
01:00:29,760 --> 01:00:36,620
USD reserve, which I think that needs to be folded in here into at least the BTC risk and

719
01:00:36,620 --> 01:00:42,820
the BTC credit pile. So for those that are unaware of what's going on here, this is on the strategy

720
01:00:42,820 --> 01:00:49,860
website. You can click to the credit tab and you can look at the relative risk profile of at least

721
01:00:49,860 --> 01:00:52,860
what strategy is indicated as the relative risk profile, these particular instruments.

722
01:00:53,860 --> 01:01:01,240
So BTC risk being the probability that BTC rating. So the collateral, effective collateral rating

723
01:01:01,240 --> 01:01:06,200
over coverage rating falls below one X at the end of the duration period. And it's,

724
01:01:06,240 --> 01:01:12,800
it's the cumulative probability. And all of that is based on the underlying assumptions. So it's

725
01:01:12,800 --> 01:01:17,260
the price of Bitcoin today, the BTC volatility, your assumption of volatility into the future

726
01:01:17,260 --> 01:01:21,980
and the BTC ARR, so the annual rate of return that you select.

727
01:01:21,980 --> 01:01:24,020
Let's just put 30 in here.

728
01:01:26,980 --> 01:01:40,912
So why do I think this needs to be changed And maybe let walk through this a little bit more Duration So this duration number is the number of years to the put date for Converse and the Macaulay duration for preferred equity

729
01:01:40,912 --> 01:01:42,992
So if you look down here at the preferred stock,

730
01:01:42,992 --> 01:01:46,712
effectively what this duration number means

731
01:01:46,712 --> 01:01:49,232
is the number of years that you would need to hold

732
01:01:49,232 --> 01:01:51,512
the instrument in order to get your money back.

733
01:01:53,552 --> 01:01:55,592
So that's helpful when you're thinking about

734
01:01:55,592 --> 01:01:57,232
like a risk profile of this instrument.

735
01:01:57,232 --> 01:02:07,592
Like what if I bought it today and held it for, you know, I would need to hold it for 10 years in order to get my principal all the way back out effectively that you put in on day one.

736
01:02:10,012 --> 01:02:13,132
And so it's helpful thinking about it in that context.

737
01:02:13,352 --> 01:02:18,992
And bond managers, when they're thinking about portfolio, they're thinking about, okay, duration, like how long do I hold this?

738
01:02:19,152 --> 01:02:21,172
That's going to give me cash flow for that amount of period.

739
01:02:21,352 --> 01:02:23,112
I'm going to double my money in that time period.

740
01:02:23,572 --> 01:02:26,692
And all of this is a function of the underlying interest rate.

741
01:02:26,692 --> 01:02:39,652
So if you look at Macaulay duration of other bonds in the market or other perpetual preferred equities with lower interest rates, the durations will be significantly longer because the rates are much lower.

742
01:02:40,432 --> 01:02:42,932
If rates are lower, the duration goes further out.

743
01:02:44,632 --> 01:02:44,912
Okay.

744
01:02:45,352 --> 01:02:46,692
Any questions there, team?

745
01:02:48,452 --> 01:02:49,052
No.

746
01:02:49,712 --> 01:02:49,992
Okay.

747
01:02:50,452 --> 01:02:50,812
Cool.

748
01:02:50,812 --> 01:02:58,332
So let's jump to this BTC risk calculation for a moment because I think there's a critical

749
01:02:58,332 --> 01:03:05,752
question here. So the cumulative probability that BTC rating falls below 1x at the end of

750
01:03:05,752 --> 01:03:14,652
the duration period. Okay. So my question to you guys and maybe to the audience as well is

751
01:03:14,652 --> 01:03:19,112
And why is it structured like that?

752
01:03:19,112 --> 01:03:25,412
What does the BTC rating falling below 1x at the end of the duration period mean?

753
01:03:25,412 --> 01:03:31,332
And does that mean that strategy is not credit worthy if the value of the Bitcoin fell below

754
01:03:31,332 --> 01:03:37,392
the notional value of the preferred equity at the end of the duration period?

755
01:03:37,392 --> 01:03:43,292
So effectively, what I'm asking is, does the notional value of the preferred equity even

756
01:03:43,292 --> 01:03:44,292
matter?

757
01:03:44,652 --> 01:03:51,932
if there's no, if the preferred equity cannot call, like if there's no maturity risk of the

758
01:03:51,932 --> 01:03:56,732
preferred equity, like does the notional outstanding number even really matter?

759
01:03:58,492 --> 01:04:03,612
We'll start there. Yeah. So my gut response to that would be because it matters in the MNAV

760
01:04:03,612 --> 01:04:09,452
calculation. And unfortunately the markets, it's going to be difficult for a market. So I don't

761
01:04:09,452 --> 01:04:15,672
think markets give Bitcoin a premium like they would expectations of future cash flow, even if

762
01:04:15,672 --> 01:04:21,472
we may believe Bitcoin will CAGR into the future. I don't think equities will price the Bitcoin CAGR

763
01:04:21,472 --> 01:04:27,312
into the current price of the equity because then you would just price the future CAGR of Bitcoin

764
01:04:27,312 --> 01:04:33,552
into the current price of Bitcoin now. But so that being said, I don't believe that you could have

765
01:04:33,552 --> 01:04:39,192
real value in the equity if the total outstanding liabilities in the form of liquidation preference

766
01:04:39,192 --> 01:04:41,472
exceed the entire collateral stack.

767
01:04:42,232 --> 01:04:45,152
So if we had 100% amplification,

768
01:04:45,692 --> 01:04:49,952
then the total outstanding liquidation preference

769
01:04:49,952 --> 01:04:53,552
would cover the entire Bitcoin on strategy's balance sheet.

770
01:04:54,032 --> 01:04:55,492
And so it would be difficult to say

771
01:04:55,492 --> 01:04:58,332
that strategy's equity would be worth anything.

772
01:04:58,752 --> 01:04:59,912
I'm not talking about MSTR.

773
01:05:00,572 --> 01:05:01,892
I'm talking about the prefs.

774
01:05:03,072 --> 01:05:04,412
No, yeah, but I'm talking about

775
01:05:04,412 --> 01:05:06,312
what amplification ratio is appropriate.

776
01:05:06,452 --> 01:05:07,072
Is that what we're talking about?

777
01:05:07,612 --> 01:05:08,692
Yeah, it's a little bit of that,

778
01:05:08,692 --> 01:05:10,372
but it's also the relative risk here.

779
01:05:10,452 --> 01:05:11,452
I mean, like, does it matter though?

780
01:05:11,572 --> 01:05:15,092
Because it's the value, keep going, keep going.

781
01:05:15,292 --> 01:05:16,252
Yeah, I'm just saying.

782
01:05:16,492 --> 01:05:18,232
So I think ultimately it's a function

783
01:05:18,232 --> 01:05:19,772
of how much amplification ratio

784
01:05:19,772 --> 01:05:22,212
can you apply to the capital structure

785
01:05:22,212 --> 01:05:24,332
in such a fashion that it's still

786
01:05:24,332 --> 01:05:26,032
a credit worthy instrument.

787
01:05:26,732 --> 01:05:28,872
Is that the question kind of?

788
01:05:29,032 --> 01:05:30,012
Maybe I'm hearing off.

789
01:05:30,132 --> 01:05:31,592
Yeah, a little bit, yeah.

790
01:05:32,452 --> 01:05:35,072
But my point is if the liquidation preference

791
01:05:35,072 --> 01:05:38,252
gets to 100% of the total outstanding assets,

792
01:05:38,252 --> 01:05:46,132
then it would be difficult to assign a value to the common equity without expecting a future price

793
01:05:46,132 --> 01:05:51,192
appreciation of Bitcoin. There are times when the market does not price in a future expectation of

794
01:05:51,192 --> 01:05:55,392
Bitcoin. So it'd be difficult in that scenario to raise capital. So the point being is if you

795
01:05:55,392 --> 01:06:00,832
reached a 50% amplification ratio and Bitcoin would fall 50%, then you'd be sitting at like

796
01:06:00,832 --> 01:06:07,452
100% amplification ratio. That, in my opinion, would be a risky scenario. So I think it's a

797
01:06:07,452 --> 01:06:13,072
function of where you expect Bitcoin to fall or appreciate to and how much amplification you have.

798
01:06:17,192 --> 01:06:24,232
Yeah, I think there's a few things there, right? So you've got, if you think about amplification

799
01:06:24,232 --> 01:06:29,852
at 100%, so you've got your notional outstanding, let's just say flat interest rate, right? Let's

800
01:06:29,852 --> 01:06:37,732
just do it right now on today. If they had, um, let's see, what's the, what's the Bitcoin? No,

801
01:06:37,812 --> 01:06:45,132
BTC reserve 60, $62 million. Let's think about this. Actually, I did this in Excel. Let's go to

802
01:06:45,132 --> 01:06:55,472
Excel. Um, right here, right here. Okay. All right. There's a lot here. I basically just rebuilt

803
01:06:55,472 --> 01:06:59,052
the credit model and it did an Excel. Cause I wanted to do some, I wanted to do some analysis

804
01:06:59,052 --> 01:07:08,172
here. So, okay, Dan, my question then also becomes if strategies amplification goes to a hundred

805
01:07:08,172 --> 01:07:15,972
percent, but they still had two and a half years of dividend reserve, would you still buy the credit

806
01:07:15,972 --> 01:07:22,352
product? Yeah, I think that's a good question to pose. Right, right. Like, like, would you,

807
01:07:22,352 --> 01:07:29,792
like they're still credit worthy yeah and the notional outstanding then even at that point like

808
01:07:30,352 --> 01:07:37,872
you would have uh even at a hundred percent your your dividend liability would be ten percent of

809
01:07:37,872 --> 01:07:43,952
that annually so you'd still technically have like six uh or you'd have ten years of dividend

810
01:07:43,952 --> 01:07:49,152
coverage if your amplification was a hundred percent and a two and a half your dividend

811
01:07:49,152 --> 01:07:54,292
in reserve. You know what I mean? So like, like there is a point at which like the dividend rate

812
01:07:54,292 --> 01:07:59,192
becomes attractive again, based on the Macaulay duration going up for every, you know, a hundred

813
01:07:59,192 --> 01:08:05,672
basis points of yield that the, you know, uh, yield increases. So like, so 10% to 15%, your

814
01:08:05,672 --> 01:08:12,672
Macaulay duration got chopped at half. Yeah. So, so my question in is at a hundred percent

815
01:08:12,672 --> 01:08:18,992
amplification, are the strategy credit products still better than high yield corporate debt?

816
01:08:19,152 --> 01:08:21,152
It's a tough one.

817
01:08:21,152 --> 01:08:23,152
It's a tough one, right?

818
01:08:23,152 --> 01:08:29,152
Like, because you're like, well, they have the money, but they've got two and a half years.

819
01:08:29,152 --> 01:08:32,152
They've got two and a half years of dividend payment.

820
01:08:32,152 --> 01:08:38,152
Like if the price of Bitcoin fell, I mean, shit, they would have to fall like 70% here

821
01:08:38,152 --> 01:08:41,152
in order for them to get to 100% 100% amplification.

822
01:08:41,152 --> 01:08:46,152
But even if it did, they'd have two and a half years of dividend payment.

823
01:08:46,152 --> 01:08:53,932
they'd have two and a half years of dividend coverage already just in cash liquid.

824
01:08:53,932 --> 01:08:55,512
You know you're going to get that.

825
01:08:57,272 --> 01:08:59,432
And then you have to make an assumption on Bitcoin.

826
01:08:59,572 --> 01:09:00,972
You've got to underwrite Bitcoin into the future.

827
01:09:02,832 --> 01:09:05,892
Which that's tricky, right?

828
01:09:05,992 --> 01:09:07,872
And that's what I'm trying to wrap my head around.

829
01:09:07,872 --> 01:09:16,372
is like, I don't know if that, if risk return parity between high yield corporate debt

830
01:09:16,372 --> 01:09:19,532
and these preferred equity instruments exists.

831
01:09:21,672 --> 01:09:26,772
Yeah. You do almost wonder if, if a part of that, and I love that this is a conversation,

832
01:09:26,932 --> 01:09:31,832
right? It tells you how you, this space is just in general, because, you know, when's the last

833
01:09:31,832 --> 01:09:36,212
time that you heard these types of discussions around any investments really, where people are

834
01:09:36,212 --> 01:09:42,672
analyzing them at this depth, but you almost wonder if the Macaulay duration is what becomes

835
01:09:42,672 --> 01:09:48,712
effectively the most important metric to track, because are you really monitoring

836
01:09:48,712 --> 01:09:57,552
for the point where the collateral base plus cash reserve would fall below the asset value

837
01:09:57,552 --> 01:10:05,432
for full principal repayment over the Macaulay duration? Is that kind of the tipping point

838
01:10:05,432 --> 01:10:07,252
in that whole equation ultimately?

839
01:10:07,632 --> 01:10:08,572
Like, is it not the notion?

840
01:10:08,692 --> 01:10:09,972
Like, I get what Dan's saying

841
01:10:09,972 --> 01:10:11,492
about the liquidation preference, right?

842
01:10:11,492 --> 01:10:15,012
If you're evaluating it from a bankruptcy scenario,

843
01:10:15,272 --> 01:10:17,852
you know, and if that's why you're buying these instruments,

844
01:10:18,112 --> 01:10:19,492
like, well, then that's going to be

845
01:10:19,492 --> 01:10:20,732
what's very important to you.

846
01:10:21,352 --> 01:10:23,792
But if you're looking at this from,

847
01:10:24,032 --> 01:10:24,752
are they credit worthy?

848
01:10:24,912 --> 01:10:26,592
Can they continue to meet their obligations?

849
01:10:26,592 --> 01:10:28,752
And when does that start to become a concern?

850
01:10:29,892 --> 01:10:31,652
You know, the Macaulay duration

851
01:10:31,652 --> 01:10:33,132
may actually play into that

852
01:10:33,132 --> 01:10:35,032
because what you're looking at

853
01:10:35,032 --> 01:10:40,152
the overall asset base relative to the dividend obligations which is the obligation right there's

854
01:10:40,152 --> 01:10:45,432
no principal repayment of the notional by the time you get to the liquidation preference conversation

855
01:10:46,152 --> 01:10:50,632
you're in bankruptcy right so a lot of things have happened already by the time you get there

856
01:10:50,632 --> 01:10:57,672
so in the meantime before you get to that type of a scenario you're really focused on the management

857
01:10:57,672 --> 01:11:03,272
of the dividend obligations and i do think that that's probably the balance it's probably where

858
01:11:03,272 --> 01:11:06,412
the assets come within striking range of the Macaulay duration.

859
01:11:06,412 --> 01:11:12,692
And then you're starting to take more outsized risk relative to the investment.

860
01:11:12,692 --> 01:11:16,192
Because if you're looking at it and the assets match your Macaulay duration,

861
01:11:16,192 --> 01:11:19,932
you're effectively down to being able to break even over that period of time.

862
01:11:20,072 --> 01:11:20,532
Get your money back.

863
01:11:20,892 --> 01:11:26,472
If the assets maintain value over that extended period of time.

864
01:11:27,952 --> 01:11:28,472
Right.

865
01:11:28,872 --> 01:11:30,212
I think that's a good point, Ben.

866
01:11:30,312 --> 01:11:30,572
Yeah.

867
01:11:30,572 --> 01:11:35,292
Maybe the McCullough direction is a lot more important than we're giving a credit for but but that's but that's assuming

868
01:11:35,792 --> 01:11:37,592
BTC flat zero

869
01:11:37,592 --> 01:11:40,812
Completely was like yeah, you have to model your own assumption

870
01:11:41,132 --> 01:11:44,172
You have to model your own assumptions for what you think Bitcoin is gonna do right?

871
01:11:44,172 --> 01:11:58,904
That the whole model around this It why all of these businesses are so polarizing is because everyone has a as their own for what Bitcoin is going to do here over the long duration right You got the bears that say it going to zero and then got the bulls that say you know we one day away

872
01:11:58,904 --> 01:12:03,524
from infinity tomorrow and you're just, reality is going to be somewhere in the middle there. But

873
01:12:03,524 --> 01:12:08,344
that's what ultimately makes these. And what's interesting is you're seeing now billions and

874
01:12:08,344 --> 01:12:14,204
billions of dollars of investor capital being willing to underwrite that risk now.

875
01:12:14,704 --> 01:12:19,424
which is what's been so impressive about the scaling in the preps and the amount of demand

876
01:12:19,424 --> 01:12:25,104
and not you know there's a lot of retail demand on these you know we saw it going through the ipo

877
01:12:25,104 --> 01:12:29,184
and we had a book and there was a heavy amount of retail demand that came through in that ipo

878
01:12:29,984 --> 01:12:34,464
but you're also seeing it on the institutional side you have major institutional holders of

879
01:12:34,464 --> 01:12:40,224
these products as well and you know that that demand is increasing so they're more and more

880
01:12:40,224 --> 01:12:45,464
willing to continue to underwrite Bitcoin as a growing asset here into the future.

881
01:12:45,464 --> 01:12:47,544
And they're willing to allocate capital according to that.

882
01:12:47,564 --> 01:12:50,704
And I think that's a hugely positive sign for the entire space here.

883
01:12:50,704 --> 01:12:57,344
But this discussion about how the market and how these allocators are viewing risk, to

884
01:12:57,344 --> 01:13:01,004
be honest, I'm not even sure this level of discussion has happened yet.

885
01:13:01,244 --> 01:13:03,784
You get into the early days where you've clearly got a buffer.

886
01:13:03,984 --> 01:13:05,544
You're not in a stress situation.

887
01:13:05,784 --> 01:13:07,204
You've got over collateralization.

888
01:13:07,344 --> 01:13:08,264
You have cash reserves.

889
01:13:08,264 --> 01:13:15,144
you're in a pretty solid footing position at the moment. And so the focus really becomes on

890
01:13:15,144 --> 01:13:18,984
the dividend yield and how that can impact your overall portfolio.

891
01:13:19,644 --> 01:13:24,124
If we start to see one of these drawdown events in Bitcoin, where all of a sudden we do see

892
01:13:24,124 --> 01:13:30,704
Bitcoin at the 200 week moving average or something like that, all of a sudden, now you start to see

893
01:13:30,704 --> 01:13:36,384
how people start to shift the risk parameters in real time, which is part of the weird answer here

894
01:13:36,384 --> 01:13:40,464
is there is no singular model at any point in time, right?

895
01:13:40,484 --> 01:13:42,344
It is the risk on risk off model

896
01:13:42,344 --> 01:13:44,064
and it does adjust in real time

897
01:13:44,064 --> 01:13:45,464
based on those market conditions.

898
01:13:46,504 --> 01:13:48,084
And so you start to look at

899
01:13:48,084 --> 01:13:49,644
where does that focus shift,

900
01:13:49,944 --> 01:13:51,904
you know, in a risk off scenario,

901
01:13:51,904 --> 01:13:54,724
then what does the focal point come on?

902
01:13:54,784 --> 01:13:56,984
And as I've, you know, kind of talked myself into it,

903
01:13:56,984 --> 01:13:59,564
I'm starting to like the Macaulay duration match

904
01:13:59,564 --> 01:14:03,204
of the assets as an anchoring point.

905
01:14:03,324 --> 01:14:04,224
I got to play with it more

906
01:14:04,224 --> 01:14:06,524
because I haven't really thought that through all the way yet.

907
01:14:06,624 --> 01:14:08,424
But I like that as an anchoring point

908
01:14:08,424 --> 01:14:10,544
and then it flexes one way or another here.

909
01:14:11,144 --> 01:14:15,904
So I think one of my favorite parts about this discussion

910
01:14:15,904 --> 01:14:18,224
is tying back what we were talking about earlier

911
01:14:18,224 --> 01:14:22,104
is like being digitally native risk.

912
01:14:22,364 --> 01:14:24,024
Like this is digitally native risk.

913
01:14:24,604 --> 01:14:25,904
Okay, that hasn't existed before.

914
01:14:26,004 --> 01:14:27,024
You're not talking about physical risk.

915
01:14:27,024 --> 01:14:30,864
You're talking about underwriting the risk of an asset.

916
01:14:30,864 --> 01:14:42,824
okay, now put yourself in the computer's shoes. I would want to arbitrage any discrepancies in

917
01:14:42,824 --> 01:14:51,064
risk across assets that are similar or slightly different. If you believe you have the model of

918
01:14:51,064 --> 01:14:57,044
risk, you would want to trade in and out of these digitally native risk instruments

919
01:14:57,044 --> 01:15:00,364
where there's opportunity, arbitrage opportunity.

920
01:15:00,664 --> 01:15:02,364
That risk is mispriced in different places,

921
01:15:02,584 --> 01:15:05,504
especially if you have a clean expression of a balance sheet,

922
01:15:05,924 --> 01:15:08,084
like what strategy is putting together here

923
01:15:08,084 --> 01:15:10,344
and our goal at Strive.

924
01:15:11,624 --> 01:15:14,584
So that's an interesting concept, right?

925
01:15:15,264 --> 01:15:16,744
I've talked about this previously.

926
01:15:16,884 --> 01:15:18,184
We've got all these preferred instruments

927
01:15:18,184 --> 01:15:20,764
and the preferred instruments are creating

928
01:15:20,764 --> 01:15:22,904
without infinite trading pairs

929
01:15:22,904 --> 01:15:25,624
where you can calculate risk in real time.

930
01:15:25,624 --> 01:15:29,844
if you come up with a risk calculation

931
01:15:29,844 --> 01:15:31,684
and you think the market is starting to think that way.

932
01:15:32,564 --> 01:15:36,644
And that's, I think, an interesting concept,

933
01:15:36,824 --> 01:15:37,904
an interesting topic.

934
01:15:38,604 --> 01:15:39,184
Mike's here.

935
01:15:39,244 --> 01:15:40,124
I'm going to throw him in as well.

936
01:15:41,824 --> 01:15:42,624
What's up, Mike?

937
01:15:45,004 --> 01:15:47,624
And the...

938
01:15:49,624 --> 01:15:51,964
Oh, the other thing I was thinking about,

939
01:15:52,104 --> 01:15:54,624
and this came up from a conversation with...

940
01:15:54,624 --> 01:16:04,044
It was Udi was trying to call me out on the old Twitter sphere and was saying like, okay, what happens if the price of STRC drops to 50?

941
01:16:05,224 --> 01:16:10,204
Like, okay, well, the price of STRC drops to 50, the yield of it rips to the roof.

942
01:16:10,324 --> 01:16:12,104
They still have two and a half years of dividend coverage.

943
01:16:12,664 --> 01:16:13,324
Are you a buyer?

944
01:16:14,604 --> 01:16:16,044
Are you a buyer of STRC?

945
01:16:16,644 --> 01:16:18,104
That's a good question for you, Dan.

946
01:16:18,524 --> 01:16:18,724
Right?

947
01:16:18,744 --> 01:16:20,684
Like, are you a buyer of STRC at 50?

948
01:16:20,684 --> 01:16:25,284
like if bitcoin price fell the price of sdrc dropped to 50.

949
01:16:27,024 --> 01:16:30,664
yeah i mean i'm just trying to figure out how to lever up on stretch as hard as i can

950
01:16:30,664 --> 01:16:37,844
but not not even then i just mean now because i like the more i think about it to your point like

951
01:16:37,844 --> 01:16:44,884
the less i think the probability of it falling falling that low it quite frankly is especially

952
01:16:44,884 --> 01:16:48,624
with the depth of liquidity that we're seeing now like you know you could in the early days we saw

953
01:16:48,624 --> 01:16:55,364
that dip down to 90 and the volume was you know half on a daily basis of what it is now and so i

954
01:16:55,364 --> 01:17:00,704
think as the volume profile gets more robust and and every month that goes by and those dividends

955
01:17:00,704 --> 01:17:07,604
get paid it's more of kind of a proof of concept uh seasoned issuer profile so i don't know i just

956
01:17:07,604 --> 01:17:15,024
i think you'd want to buy like three times as much stretches triple triple leveraged

957
01:17:15,024 --> 01:17:25,244
I think there's this perception out there because I've heard the term, you know, like bank run and, you know, the infinite spiral of the interest rate.

958
01:17:25,244 --> 01:17:29,344
And I think people forget that the interest rate adjustments are discretionary.

959
01:17:29,684 --> 01:17:38,944
Like while there is a mechanical component to it in terms of how they're tracking the VWAP to figure out, you know, what they're planning to do on the adjustments.

960
01:17:38,944 --> 01:18:03,124
If you get into one of these scenarios where either you've got a black swan event that drags us down 50% again, or you get some weird market correction in these instruments where you see the price flash down, even if the balance sheet hasn't significantly contracted, it doesn't mean that they're going to start spiraling up the interest rates during that time period.

961
01:18:03,124 --> 01:18:31,144
Like an answer can be sit still. Don't have to issue more. Don't have to raise the rates. You've got the flexibility at management discretion to be in a holding pattern in those types of events. And so you don't end up in this position where you're compounding your obligations, which I think there's a misnomer out about there because I've seen a lot of people like, well, if people just drive it down, they'll just have to increase the interest rate to infinity. And then they, you know, they're busted.

962
01:18:31,144 --> 01:18:33,844
So it's the, it's the, that's not real, right?

963
01:18:33,844 --> 01:18:36,104
That's not actually the mechanics of how it works.

964
01:18:36,104 --> 01:18:41,724
And so there's plenty of things to do during times of duress in the market, or even in

965
01:18:41,724 --> 01:18:47,744
just the specific equities where you can control that outcome and manage your assets effectively.

966
01:18:47,924 --> 01:18:51,184
So I think that that narratives is quite overblown on these.

967
01:18:51,844 --> 01:18:51,924
Yeah.

968
01:18:52,004 --> 01:18:53,344
You know, let me chime in here.

969
01:18:53,484 --> 01:18:57,984
So, so Jeff, I think that your response was, was great to Udi.

970
01:18:57,984 --> 01:19:03,004
And the part here is because it seems like people don't understand bonds.

971
01:19:03,704 --> 01:19:07,484
And as bond prices go down, the effective yield goes up.

972
01:19:07,884 --> 01:19:12,984
So let's just assume on STRC, its annual percentage rate is 11%.

973
01:19:12,984 --> 01:19:21,944
If the price goes down to $50 and strategy does not change the yield component at 11% per year,

974
01:19:22,184 --> 01:19:23,984
the effective yield is 22%.

975
01:19:23,984 --> 01:19:31,104
percent. And people are like, which craft did you just use? I'm not a bond guy, but what I do know

976
01:19:31,104 --> 01:19:40,304
is if I could now buy something for 50 bucks and it pays 11%, that 11% was based upon a target

977
01:19:40,304 --> 01:19:47,384
price of between 99 and 101, assume a hundred bucks. So 11% of a hundred bucks is what it pays.

978
01:19:47,384 --> 01:19:50,444
if the price that it's trading at is $50,

979
01:19:51,504 --> 01:19:54,044
strategy, let's assume they just don't change anything.

980
01:19:54,384 --> 01:19:57,104
The effective yield becomes 22 bucks, right?

981
01:19:57,364 --> 01:19:59,784
Because you drop, the price now is half as much.

982
01:20:00,324 --> 01:20:02,484
And I don't know why people don't understand bonds.

983
01:20:02,484 --> 01:20:05,464
On the flip side, if the price was to go to 200,

984
01:20:05,884 --> 01:20:11,224
your effective yield would drop to 5.5, right?

985
01:20:11,284 --> 01:20:12,944
Even though they're still paying 11%,

986
01:20:12,944 --> 01:20:14,824
that's just the way that bonds

987
01:20:14,824 --> 01:20:16,504
and the way the prefs, they work.

988
01:20:16,504 --> 01:20:18,904
And that response that you gave to him was great.

989
01:20:19,244 --> 01:20:25,784
And that's when somebody would say to me, well, now what Ben is saying is if there's

990
01:20:25,784 --> 01:20:29,544
this tail risk that happens, of course, guys, I want you to realize something.

991
01:20:29,764 --> 01:20:33,044
These black swan events, I mean, they happen like every year.

992
01:20:33,204 --> 01:20:37,644
I mean, the yen carry trade, 10, 10, when you had some exchange blow up.

993
01:20:37,704 --> 01:20:39,804
I mean, we get a black swan event every six months.

994
01:20:40,244 --> 01:20:40,844
I don't know.

995
01:20:40,884 --> 01:20:42,244
We seem to keep on surviving it.

996
01:20:42,304 --> 01:20:44,904
But anyway, with that said, I don't know why people don't understand the mechanics.

997
01:20:44,904 --> 01:20:50,304
so i i was i was thinking about this a little bit more too it's like okay if the price of strc went

998
01:20:50,304 --> 01:20:56,684
down to 50 and there's no buyers you know who's a buyer is strategy probably because they sold it at

999
01:20:56,684 --> 01:21:06,764
90 and always buy it back i want to comment on that somebody made this comment that that strc

1000
01:21:06,764 --> 01:21:11,624
has a range between $90 and $100, right?

1001
01:21:12,044 --> 01:21:15,144
And I'm like, no, this was by design.

1002
01:21:15,384 --> 01:21:21,264
The IPO was done at $90 in order to attract those investors to make that difference.

1003
01:21:21,324 --> 01:21:23,124
We said, hey, we're going to issue these at $90.

1004
01:21:23,624 --> 01:21:27,524
And when it goes up approximately 11%, in addition to the yield,

1005
01:21:27,844 --> 01:21:31,764
that's what attracts the investors to go in to create a market for it.

1006
01:21:31,764 --> 01:21:38,384
And so the casual observer or on X is like, oh, no, it's trading between 90 and 100.

1007
01:21:38,604 --> 01:21:40,124
No, this was by design.

1008
01:21:40,384 --> 01:21:44,544
And after a while, it just gets tiresome to report to, you know, to reply to these people

1009
01:21:44,544 --> 01:21:46,524
because they didn't do any homework.

1010
01:21:46,524 --> 01:21:47,484
And you're like, really?

1011
01:21:49,024 --> 01:21:49,844
Am I wrong?

1012
01:21:49,884 --> 01:21:51,324
You guys correct me if I'm wrong.

1013
01:21:51,724 --> 01:21:54,524
No, no, that was the whole idea behind this.

1014
01:21:54,524 --> 01:21:58,984
It's like, oh, my God, they just never heard of, you know, we're going to launch a new

1015
01:21:58,984 --> 01:22:05,344
product and we'll do some incentive pricing to get people to see how great it is. In addition to already being

1016
01:22:05,376 --> 01:22:07,136
double the typical rate.

1017
01:22:09,476 --> 01:22:11,336
By the way, I've been listening to you guys for the past hour.

1018
01:22:11,436 --> 01:22:12,496
I think you did a great job.

1019
01:22:13,876 --> 01:22:17,656
I'm going to jump into this model here because I tried to break it.

1020
01:22:18,296 --> 01:22:23,256
And maybe we'll think through this a little bit because I was working with Matt.

1021
01:22:23,256 --> 01:22:25,756
And Matt's CEO of Strive.

1022
01:22:25,816 --> 01:22:28,676
He's got an institutional background of fixed income working at CalPERS.

1023
01:22:29,356 --> 01:22:34,696
And we came up with this concept and this idea of BTC earnings-driven interest coverage.

1024
01:22:34,696 --> 01:22:43,556
It's this sell over here. And what this concept is, is like if you make an assumption on Bitcoin

1025
01:22:43,556 --> 01:22:46,416
rate of return, which I've got over here on the left side, I put in here at 20.

1026
01:22:47,436 --> 01:22:54,416
What this is doing is if Bitcoin gain is treated as earnings, and if you're taking an average time

1027
01:22:54,416 --> 01:23:00,156
horizon of Bitcoin going up to the right, how much are the earnings on your balance sheet

1028
01:23:00,156 --> 01:23:09,296
increasing relative to your dividend obligation. And so this is actually a similar framework to

1029
01:23:09,296 --> 01:23:15,896
comparing bonds in the traditional market. So you can look at interest coverage ratio. So if you look

1030
01:23:15,896 --> 01:23:21,716
at this table here, again, none of this is financial advice, but this is a perspective.

1031
01:23:21,716 --> 01:23:28,016
And this is an NYU study that was done in January of 2025. It was looking at large non-financial

1032
01:23:28,016 --> 01:23:33,216
service firms and their credit, their relative credit rating, which is this third column here,

1033
01:23:33,216 --> 01:23:39,776
based on the interest coverage ratio. Anything at the yellow line and above or below, sorry, is

1034
01:23:40,896 --> 01:23:45,616
considered investment grade by rating agencies and anything below the yellow line is considered

1035
01:23:45,616 --> 01:23:53,696
junk bond. So what I'm showing here on the on this, this number here, BTC earnings driven interest

1036
01:23:53,696 --> 01:23:57,616
coverage for strategy, I've got at 7.03 and this is based on their existing balance sheet.

1037
01:23:58,016 --> 01:24:05,316
Okay. This is based on $64 billion in assets, $16.5 billion of notional outstanding. That gets

1038
01:24:05,316 --> 01:24:11,176
us to an interest coverage ratio using a Bitcoin annual rate of return assumption of 20%. So if

1039
01:24:11,176 --> 01:24:18,196
you're thinking long-term strategy would have on an earnings, their earnings would be seven times

1040
01:24:18,196 --> 01:24:25,356
the annual interest obligation. Okay. So where would that map? That would map relative to

1041
01:24:25,356 --> 01:24:33,376
non-financial service firms somewhere in the AA category. In terms of large non-financial service

1042
01:24:33,376 --> 01:24:39,876
firms, this is interest coverage ratio is pretty much the highest tier investment grade.

1043
01:24:41,216 --> 01:24:47,236
Obviously, there's volatility around that, but that's just using a 20% ARR. If I change that

1044
01:24:47,236 --> 01:24:52,976
number to 30, let's just change it to 30 for funsies. That number goes from seven to 10.

1045
01:24:52,976 --> 01:25:01,036
effectively the balance sheet is growing 10 times or 10x greater than the dividend obligation on the

1046
01:25:01,036 --> 01:25:07,756
balance sheet obviously that would be the highest highest grade investment grade so what i tried to

1047
01:25:07,756 --> 01:25:17,836
do was i tried to break this i tried to understand how much how much stretch could strategy issue

1048
01:25:17,836 --> 01:25:26,736
in order for the BTC earnings-driven interest coverage to drop into the C category,

1049
01:25:27,076 --> 01:25:34,336
which is where most high-yield corporate debt is, is the junk bond category. So I'm trying to get

1050
01:25:34,336 --> 01:25:39,516
this number down to like 1.5. And so I had to come up with some underlying base assumptions.

1051
01:25:39,516 --> 01:25:45,896
And this is tricky, and we can play with this a little bit. So I've got in here in this column,

1052
01:25:45,896 --> 01:25:48,556
I could put in additional STRC sold.

1053
01:25:49,336 --> 01:25:51,556
And let's just start with $300 billion.

1054
01:25:53,096 --> 01:25:53,696
300E9.

1055
01:25:55,356 --> 01:25:55,676
Okay.

1056
01:25:56,216 --> 01:25:59,736
At $300 billion, thinking of fees of 1%,

1057
01:25:59,736 --> 01:26:03,496
strategy would net $297 billion.

1058
01:26:03,496 --> 01:26:07,156
And I assumed of this cash that they raised,

1059
01:26:07,236 --> 01:26:12,216
they store two and a half years of dividend right off the bat.

1060
01:26:12,976 --> 01:26:14,256
Just all of the capital that they bring in,

1061
01:26:14,256 --> 01:26:18,976
they're just storing two and a half years of dividend in USD right off the bat. So that means

1062
01:26:18,976 --> 01:26:25,776
that of the 300 billion sold, they'd hold 82.5 billion. And then their net to buy Bitcoin would

1063
01:26:25,776 --> 01:26:31,216
be 214 billion. Obviously at today's Bitcoin prices, that would be just a ton of Bitcoin,

1064
01:26:31,336 --> 01:26:36,596
2.4 million, the price would run. So it's not completely realistic, but the coverage ratios

1065
01:26:36,596 --> 01:26:42,236
are still helpful to consider. So the interest, the incremental dividend obligation at that point

1066
01:26:42,236 --> 01:26:48,896
in time would go up by $33 billion. They'd have $33 billion of annual interest obligation,

1067
01:26:50,036 --> 01:27:01,656
but they're also storing $82 billion of USD off selling the stretch in this example scenario.

1068
01:27:01,896 --> 01:27:06,856
I'm not forecasting what they will be doing, but I think this is an interesting concept.

1069
01:27:06,856 --> 01:27:10,916
And so at that point in time, they'd have an $84 billion USD reserve.

1070
01:27:12,436 --> 01:27:14,576
And they would hold, what is this?

1071
01:27:15,216 --> 01:27:16,576
276 billion worth of Bitcoin.

1072
01:27:18,396 --> 01:27:23,176
So with a BTC ARR, let's drop this back to 20.

1073
01:27:23,896 --> 01:27:31,596
That would bring the BTC earnings driven interest coverage ratio down to two, which would still

1074
01:27:31,596 --> 01:27:36,656
be double B plus in this scenario using a 20% BTC ARR.

1075
01:27:36,856 --> 01:27:40,716
And that's with Bitcoin at 87,000 where it's at today.

1076
01:27:41,476 --> 01:27:41,756
Okay.

1077
01:27:41,936 --> 01:27:45,196
So, and that gets them to an amplification ratio of 88%.

1078
01:27:45,196 --> 01:27:46,976
All right.

1079
01:27:47,036 --> 01:27:52,096
And I think the question that I've been trying to wrap my head around is like, does that

1080
01:27:52,096 --> 01:27:52,636
make sense?

1081
01:27:53,236 --> 01:28:02,496
Does it make sense to hold USD reserve on any share of STRC sold?

1082
01:28:03,876 --> 01:28:05,096
That's an interesting question.

1083
01:28:05,096 --> 01:28:10,476
And this is what kind of made me realize also that the USD reserve, like if strategy is going

1084
01:28:10,476 --> 01:28:15,336
to maintain a two and a half year USD reserve, and they're going to sell the absolute crap out

1085
01:28:15,336 --> 01:28:19,516
of these preferred equity products, that USD reserve is going to grow relatively quickly.

1086
01:28:19,896 --> 01:28:26,956
And they're likely going to be a very large continuous purchaser of US treasuries, which

1087
01:28:26,956 --> 01:28:30,536
would make them like systemically important because they're continuously buying them.

1088
01:28:30,536 --> 01:28:36,656
if they're selling this preferred equity as quickly as we think they may here in the horizon,

1089
01:28:37,036 --> 01:28:46,096
if we understand the risk appropriately. And that's an interesting value proposition.

1090
01:28:46,356 --> 01:28:50,476
And then another question that comes up here when you're thinking about such a large USD reserve is,

1091
01:28:50,476 --> 01:28:59,036
does that impact return of capital dividends? Does that matter? Are the institutions that

1092
01:28:59,036 --> 01:29:06,176
buying this, do they even care? And how does that flow through? And I think this is all an

1093
01:29:06,176 --> 01:29:12,396
interesting calculus. And the other thing I did is I assumed, let's just assume they issued

1094
01:29:12,396 --> 01:29:22,776
$300 billion of this stuff. And they bought, for practical purposes, 2.4 million Bitcoin.

1095
01:29:22,776 --> 01:29:26,756
and then the price of Bitcoin immediately falls to $50,000.

1096
01:29:27,756 --> 01:29:31,156
And the amplification ratio increases up to 131%.

1097
01:29:31,156 --> 01:29:39,196
The earnings-driven interest coverage ratio at that point drops down to 1.38x,

1098
01:29:39,916 --> 01:29:46,156
which in this scenario, I think they're starting to approach parity

1099
01:29:46,156 --> 01:29:49,096
with high yield corporate debt

1100
01:29:49,096 --> 01:29:53,276
with a very large issuance

1101
01:29:53,276 --> 01:29:55,616
and effectively two and a half years

1102
01:29:55,616 --> 01:29:59,796
of coverage based on the USD reserve.

1103
01:29:59,956 --> 01:30:02,776
I guess the BTC rating at that point

1104
01:30:02,776 --> 01:30:03,676
would fall below one,

1105
01:30:03,756 --> 01:30:06,676
which I think that may potentially be a concern

1106
01:30:06,676 --> 01:30:10,856
if the notional value outstanding

1107
01:30:10,856 --> 01:30:13,836
is an important statistic.

1108
01:30:14,396 --> 01:30:14,896
I don't know.

1109
01:30:16,156 --> 01:30:29,956
It's one of the reasons I've landed here is because my past life working in insurance companies, working with insurance companies, insurance companies were leveraged 300%.

1110
01:30:29,956 --> 01:30:41,676
They had, they were taking in, they had significantly more risk on their balance sheet than premium dollars that they were taking in annually.

1111
01:30:41,676 --> 01:30:49,316
so in like the business model it's like not very sexy right they're making eight percent returns

1112
01:30:49,316 --> 01:30:53,916
annually because of the float they're taking the premium they buy an asset and then they pay out

1113
01:30:53,916 --> 01:30:58,856
the risk into the future based on actuarial tables and all this other information and

1114
01:30:58,856 --> 01:31:04,836
so i was starting to conceptualize like there's a hundred percent plus amplification makes sense

1115
01:31:04,836 --> 01:31:10,496
like does that break the model uh and how like how can we start to think about it especially

1116
01:31:10,496 --> 01:31:17,376
because it's equity, right? These aren't cliff maturity debt obligations. This is equity. And

1117
01:31:17,376 --> 01:31:21,616
is that like, how do we start to think about this stuff? Obviously not a problem that strategy has

1118
01:31:21,616 --> 01:31:28,976
to deal with right now. They've issued $8 billion of this stuff and I'm modeling adding 300 billion,

1119
01:31:28,976 --> 01:31:34,656
but I think it's a valuable analysis. Based on what metals did, that's a drop in the bucket.

1120
01:31:34,656 --> 01:32:02,216
It is. But you know what, Jeff? Strategy already lived through a Black Swan event. It already lived through 2022 and 2023. And the company survived. Everything with Bitcoin, it's like, well, you better get Bitcoin because when the US dollar takes a billion dollars to go buy a bunch of bananas, you're going to need Bitcoin, gold, and lead.

1121
01:32:02,216 --> 01:32:03,056
People are like, lead?

1122
01:32:03,056 --> 01:32:03,976
Yeah, for bullets.

1123
01:32:03,976 --> 01:32:05,256
I mean, it's always that.

1124
01:32:05,256 --> 01:32:09,336
With strategy, it's always like, okay, tell me what happens when it goes to bankruptcy.

1125
01:32:09,336 --> 01:32:14,296
It's like, okay, what happens if Bitcoin trash retraces 70%?

1126
01:32:14,936 --> 01:32:26,542
Okay well that already happened for strategy and they survived it So I think what we keep on hearing with this is that there always some cataclysmic event that about I mean this yen carry trade blowing up

1127
01:32:26,562 --> 01:32:31,102
that seems to happen every year now, right? For the past few years. And I'm like,

1128
01:32:31,522 --> 01:32:37,342
I don't know, I survived the yen carry trade, not that I participate in it. And it's like these

1129
01:32:37,342 --> 01:32:41,982
black swan events keep on coming. When the next black swan event comes? I'm like, I don't know,

1130
01:32:41,982 --> 01:32:48,142
you seem to be worried about this a lot. And I wrote a whole article about this,

1131
01:32:48,562 --> 01:32:55,242
was hiding in plain sight. The strategy has these three buckets. It has MSTR that it uses to buy the

1132
01:32:55,242 --> 01:33:00,502
majority of the Bitcoin that it holds. It has the prefs. And then, so that's two fuel tanks.

1133
01:33:00,582 --> 01:33:07,562
And the third fuel tank is the cash. And up until December 1st of last year, their cash holdings was

1134
01:33:07,562 --> 01:33:14,262
basically zero. So we're basically seven weeks later, they have two and a quarter billion dollars,

1135
01:33:14,382 --> 01:33:21,342
whatever it is, 30 months outstanding. I think that they push that to whatever, 36 months,

1136
01:33:21,342 --> 01:33:26,562
48 months of cash, not because they want to. I think they never touch it. And it's just to make

1137
01:33:26,562 --> 01:33:31,722
the S&P, the ratings company feel good that they have four years of payments in cash. They could

1138
01:33:31,722 --> 01:33:36,382
write a check anytime. And they just say, look, we can make our payments for the next four years

1139
01:33:36,382 --> 01:33:42,382
there's a down market okay how many years of cash do you need for a down market in something that

1140
01:33:42,382 --> 01:33:47,502
never matures i mean it's not a rhetorical question it's a straight question so all the

1141
01:33:47,502 --> 01:33:52,302
modeling you did here it all makes sense i mean if you change this to a more reasonable number

1142
01:33:52,302 --> 01:33:59,742
if you say they're just going to do 12 billion dollars a stretch this year so 20 yeah that's 20

1143
01:33:59,742 --> 01:34:08,062
billion, right? So one additional piece to add here, Mike, and this is, I was just thinking about-

1144
01:34:08,062 --> 01:34:11,262
But scroll down a bit. I want to see where four falls out, 4.1x.

1145
01:34:11,262 --> 01:34:12,782
Or it's investment grade, it's A.

1146
01:34:13,502 --> 01:34:18,302
Right. And I'm not, that's not a crazy, let's make it more realistic. Say 10 billion.

1147
01:34:20,062 --> 01:34:26,302
10 billion. They raised two and a half billion dollars at IPO. So at 10 billion, it puts it at

1148
01:34:26,302 --> 01:34:34,462
5.08 by your own calculations and it's it it's you know a2 or higher so that's that's a reasonable

1149
01:34:34,462 --> 01:34:41,022
number for them to raise this year 10 billion so so so mike one of the things that i was thinking

1150
01:34:41,022 --> 01:34:46,462
about and when i was modeling this wait hold on one second i have never seen this your table before

1151
01:34:46,462 --> 01:34:52,062
ever right correct uh if you looked at the sata presentation at the ipo you would have seen it but

1152
01:34:52,062 --> 01:34:54,582
but that would be the only time.

1153
01:34:54,742 --> 01:34:55,722
It was deep in the presentation.

1154
01:34:55,742 --> 01:34:56,642
I did not see it.

1155
01:34:56,762 --> 01:34:56,922
Okay.

1156
01:34:57,182 --> 01:34:58,462
I'm just admitting, I never saw this before.

1157
01:34:58,522 --> 01:34:58,862
Go ahead.

1158
01:35:00,542 --> 01:35:05,742
One of the interesting concepts in this is

1159
01:35:05,742 --> 01:35:10,762
what I wanted to do was

1160
01:35:10,762 --> 01:35:14,562
see if I could create a model that

1161
01:35:14,562 --> 01:35:20,482
where like, would you buy the common equity of this company?

1162
01:35:20,482 --> 01:35:23,282
Like, let's go back to the extreme example, right?

1163
01:35:24,482 --> 01:35:25,002
300E9.

1164
01:35:26,462 --> 01:35:26,982
Okay.

1165
01:35:27,782 --> 01:35:30,922
Obviously, them acquiring 2.4 million Bitcoin right now

1166
01:35:30,922 --> 01:35:31,762
doesn't make a ton of sense.

1167
01:35:31,822 --> 01:35:33,762
But just look at the USD numbers, right?

1168
01:35:34,162 --> 01:35:40,482
If this company held 277 billion in Bitcoin

1169
01:35:40,482 --> 01:35:44,802
and they had an $84 billion USD reserve

1170
01:35:44,802 --> 01:35:48,962
and a $33 billion interest liability,

1171
01:35:48,962 --> 01:35:54,962
is this a sexy common equity would you like it

1172
01:35:55,762 --> 01:36:02,142
you know like i like that that's what i'm that's what i'm trying to wrap my head around

1173
01:36:02,142 --> 01:36:07,902
and like this assumption let's go back to the 20 or the the 10 like you were you were talking

1174
01:36:07,902 --> 01:36:15,122
about earlier this assumption mike assumes zero common equity dilution so that assumes

1175
01:36:15,122 --> 01:36:17,582
is zero additional capital raised on the common stock.

1176
01:36:18,362 --> 01:36:20,282
Okay. Is that an interesting model?

1177
01:36:21,802 --> 01:36:23,702
Like what does that look like?

1178
01:36:23,922 --> 01:36:27,082
And again, you're thinking about credit in isolation,

1179
01:36:27,082 --> 01:36:29,522
like on any one individual day, which is difficult.

1180
01:36:30,102 --> 01:36:32,042
You have to model this stuff out in scenarios

1181
01:36:32,042 --> 01:36:37,282
because the hardest part to model here

1182
01:36:37,282 --> 01:36:40,462
is that strategy has access to the common stock ATM

1183
01:36:40,462 --> 01:36:41,982
to pay the dividends too.

1184
01:36:41,982 --> 01:36:50,222
which it's tricky to model that third component like i think if you look at this business model

1185
01:36:50,222 --> 01:36:56,042
in isolation at the margin even if you didn't have access to a common stock atm to pay the dividends

1186
01:36:56,042 --> 01:36:59,762
i think the business model as we've shown previously in some past episodes

1187
01:36:59,762 --> 01:37:06,022
that business model i think is still pretty interesting like if somebody gave you a bitcoin

1188
01:37:06,022 --> 01:37:12,762
today and you had to pay them $11,000, I don't know, $10,000 a year from here on out for the

1189
01:37:12,762 --> 01:37:16,562
rest of your life. Actually, Mike, this is a good question for you. I asked this to somebody earlier

1190
01:37:16,562 --> 01:37:22,982
this week and I kind of got poo-pooed on. Ben's laughing because he was on the call.

1191
01:37:24,122 --> 01:37:31,582
Mike, if you had the ability today to get an interest only loan on a house, but you had to

1192
01:37:31,582 --> 01:37:35,722
pay the interest for the rest of your life and you never had to pay the principal back,

1193
01:37:36,022 --> 01:37:42,582
would you do it? And it was fixed. Fixed rate for the rest of your life. Boom.

1194
01:37:43,742 --> 01:37:51,742
Fixed rate and fixed payments? And the answer to that is yes.

1195
01:37:52,942 --> 01:37:59,142
And that might sound like a pretty bad idea, but it's not. And I'll give a good reason for that.

1196
01:37:59,642 --> 01:38:03,802
First of all, if it's interest only, you're not paying back any principal. So when you get past

1197
01:38:03,802 --> 01:38:10,242
a 15-year mark, it doesn't change. And that always, that interest, as long as in America,

1198
01:38:10,242 --> 01:38:14,902
it's deductible. So I have this deduction. So what happens is I'm not paying back the principal

1199
01:38:14,902 --> 01:38:22,322
on the house, right? And the dollar gets inflated, right? And Chris said the same thing here also.

1200
01:38:22,822 --> 01:38:28,282
So would you do that? Well, sure, because you buy the house for a million dollars, right?

1201
01:38:28,282 --> 01:38:29,382
You know, you're in Calgary.

1202
01:38:29,502 --> 01:38:31,942
Okay, you buy the house for 500 grand, right?

1203
01:38:32,502 --> 01:38:36,322
You know, at 6% interest, I think you end up paying triple the value of the house if

1204
01:38:36,322 --> 01:38:39,162
you paid out over 30 years, given about a 6% interest rate.

1205
01:38:39,542 --> 01:38:40,742
Somebody can track me on that.

1206
01:38:41,262 --> 01:38:46,922
But on this, you think about how long am I, you know, in 30 years from now, I'd be 88

1207
01:38:46,922 --> 01:38:47,762
years old.

1208
01:38:48,022 --> 01:38:52,982
I'm like, at 88 years old, you know, then I'd have a paid off house.

1209
01:38:53,222 --> 01:38:55,402
You know, I'd sell it and give it to my, you know, to the kids.

1210
01:38:55,402 --> 01:38:59,442
In this case, what happens to the house after I die?

1211
01:38:59,562 --> 01:39:00,862
That might be a viable question.

1212
01:39:01,222 --> 01:39:01,862
Yeah, fair.

1213
01:39:02,542 --> 01:39:05,902
For the most part, the end of it, the perpetual.

1214
01:39:06,842 --> 01:39:07,322
Perpetual.

1215
01:39:07,822 --> 01:39:10,762
If you can pass it down, the house and the loan.

1216
01:39:11,202 --> 01:39:11,402
Yeah.

1217
01:39:11,602 --> 01:39:16,702
And so at that point, the question is that money that you'd put into it.

1218
01:39:17,322 --> 01:39:19,662
I'll give you a real world example.

1219
01:39:20,462 --> 01:39:24,422
Back in the olden days, the really olden days, 2005,

1220
01:39:24,422 --> 01:39:31,942
this was before the 2008 financial crisis or i bought my first house and and it was in san jose

1221
01:39:31,942 --> 01:39:36,922
the house was 540 000 the market was kind of weird the interest rate was about six percent

1222
01:39:36,922 --> 01:39:44,982
so the dot-com bubble had burst in 2000 and the market kind of went down and so you could do an

1223
01:39:44,982 --> 01:39:49,422
interest only loan but what happened was i had money in my ira account which i did not want to

1224
01:39:49,422 --> 01:39:57,002
take out and pay any form of taxes on it. And they had a no money down deal. So I had a great job. I

1225
01:39:57,002 --> 01:40:04,022
had great income. So I did not take an interest only loan. I took a no money down deal. And what

1226
01:40:04,022 --> 01:40:11,722
happened to that house in the olden days in 2005, I sold that house in January of 2018.

1227
01:40:11,722 --> 01:40:15,042
and I get I'm in Silicon Valley.

1228
01:40:15,642 --> 01:40:21,542
And on that house, the net gain was a shade under $1 million.

1229
01:40:22,182 --> 01:40:25,122
Now, I lived in that house for 13 years.

1230
01:40:25,222 --> 01:40:28,662
I put money into it and I took a $500,000 deduction.

1231
01:40:29,302 --> 01:40:33,002
So 20% on the remaining $400,000 was $80,000.

1232
01:40:34,262 --> 01:40:36,562
And people were like, oh, I never make money on a house.

1233
01:40:36,722 --> 01:40:38,442
Well, maybe you bought the house in the wrong neighborhood.

1234
01:40:38,902 --> 01:40:40,502
Maybe you didn't live in it long enough.

1235
01:40:40,502 --> 01:40:47,742
and so I did that and I refinanced it and wait you want to hear the craziest part about this

1236
01:40:47,742 --> 01:40:53,362
Jeff this was the craziest part about this in the old days so it was a no money down deal

1237
01:40:53,362 --> 01:40:59,442
but I'd have to pay right it was a no money down deal and I'd have to pay PMI so my loan broker

1238
01:40:59,442 --> 01:41:05,082
said dude you don't want to pay PMI and I'm like no I don't and he goes he says me oh I'll get you

1239
01:41:05,082 --> 01:41:12,122
out of this, no problem. And I'm like, tell me how. He goes, we'll finance the house for 540 grand

1240
01:41:12,122 --> 01:41:19,082
with a $400,000 primary loan, no money down with $140,000 home equity loan.

1241
01:41:19,402 --> 01:41:20,482
The HELOC, so you had a double.

1242
01:41:20,482 --> 01:41:21,242
The HELOC.

1243
01:41:21,422 --> 01:41:29,822
So that became the 20% down. And I said, and so I didn't have to pay PMI. And this was all legal.

1244
01:41:29,962 --> 01:41:31,302
This is in America, in California.

1245
01:41:31,302 --> 01:41:32,222
I did that in 21.

1246
01:41:32,882 --> 01:41:33,162
Right.

1247
01:41:33,422 --> 01:41:33,662
Yeah.

1248
01:41:33,802 --> 01:41:34,062
Right.

1249
01:41:34,102 --> 01:41:34,762
I did the same thing.

1250
01:41:35,082 --> 01:41:42,742
Yeah. And so I said to them, I said, wait a second, I'm taking even more risk and you got me out of paying PMI. And the guy goes like this to me.

1251
01:41:43,482 --> 01:41:46,862
Don't tell anybody. And you did this in 2021.

1252
01:41:47,162 --> 01:41:48,102
I did it in 21. Yeah.

1253
01:41:49,162 --> 01:41:57,122
After the great financial crisis, it's like, oh my God. And people are like, oh, I never heard this before. Well, talk to somebody that's done it before. I didn't know that it existed. Wow.

1254
01:41:57,122 --> 01:42:06,902
I did 10% down and I took 10% HELOC, which got me to the 20% threshold so I could get into a conforming loan.

1255
01:42:07,102 --> 01:42:11,022
So I didn't have PMI, but it was like same concept, but it wasn't zero down.

1256
01:42:11,622 --> 01:42:19,562
No, but so the point here is this, is that when anybody ever makes the claim, oh, strategy or strive or any Bitcoin, they're just doing financial engineering.

1257
01:42:20,222 --> 01:42:20,942
Like what?

1258
01:42:21,042 --> 01:42:21,162
Yeah.

1259
01:42:21,162 --> 01:42:25,542
everybody if you're not doing financial engineering then you're not playing the game

1260
01:42:25,542 --> 01:42:40,788
you know hate the game not the player i i didn define these rules 100 some somebody wanted me to plug in a trillion here so i gonna do that 2012 guys guys I got to jump off a little earlier tonight All right Later Dan See you Dan Um

1261
01:42:42,308 --> 01:42:44,628
even if you plug in a trillion here, like, uh,

1262
01:42:44,628 --> 01:42:49,188
if they sold a trillion of SDRC and they held two

1263
01:42:49,188 --> 01:42:53,888
and a half years of cash back, obviously like these numbers don't make sense.

1264
01:42:53,888 --> 01:42:55,668
Like Bitcoin would have to go nuclear higher.

1265
01:42:55,668 --> 01:42:59,968
They're not able to acquire 8 billion, 8 million of Bitcoin, um,

1266
01:42:59,968 --> 01:43:02,908
at $88,000, it's just impossible.

1267
01:43:03,868 --> 01:43:04,028
Yeah.

1268
01:43:04,128 --> 01:43:05,888
But like you look at the interest coverage,

1269
01:43:06,088 --> 01:43:09,328
like that concept is just like, it's still,

1270
01:43:09,968 --> 01:43:12,148
this is where I was like trying to wrap my head around,

1271
01:43:12,248 --> 01:43:14,268
like does parity even exist?

1272
01:43:14,268 --> 01:43:17,908
Like does parity between high yield corporate debt

1273
01:43:17,908 --> 01:43:19,828
and digital credit?

1274
01:43:19,988 --> 01:43:24,088
I think there's actually a gap between digital credit

1275
01:43:24,088 --> 01:43:26,288
and high yield corporate debt that like,

1276
01:43:26,408 --> 01:43:28,648
I don't think there's an amplification number.

1277
01:43:28,648 --> 01:43:36,308
maybe it's like 200 maybe it's 300 where like that like there's actual there's actual parity

1278
01:43:36,308 --> 01:43:43,108
there that was the uh game i was trying to work through you brought up another interesting

1279
01:43:43,108 --> 01:43:52,988
question earlier jeff and i'd be curious everyone's response to this say strategy lost rock status

1280
01:43:52,988 --> 01:43:59,348
right oh yeah you've got this massive reserve they're generating too much income off of it

1281
01:43:59,348 --> 01:44:06,748
or they you know can't find ways to neutralize it what percentage of the demand for call it stretch

1282
01:44:06,748 --> 01:44:08,768
do you think goes away

1283
01:44:08,768 --> 01:44:19,268
i i don't think it changes i don't think i don't think it changes i don't think it changes because

1284
01:44:19,268 --> 01:44:24,308
even like i'm we're talking about we're talking about risk i'm trying to break the risk model i'm

1285
01:44:24,308 --> 01:44:29,188
trying to break strategies risk model here and i'm like cranking i'm like cranking it as hard as i can

1286
01:44:29,828 --> 01:44:36,708
and i'm like this risk still still looks better than high yield corporate debt like on a relative

1287
01:44:36,708 --> 01:44:40,468
basis i mean who knows how this thing would trade like maybe it's more volatile maybe not i don't

1288
01:44:40,468 --> 01:44:45,108
know it might be so liquid at that point if there's 300 billion of this stuff outstanding like

1289
01:44:45,108 --> 01:44:54,108
Like I, I, I just, it's just so far, like the, the relative return for the risk profile

1290
01:44:54,108 --> 01:44:55,528
of it is so far.

1291
01:44:55,528 --> 01:44:59,728
Like even if there isn't rock status, like you get qualified dividends, it still beats

1292
01:44:59,728 --> 01:45:00,168
everything.

1293
01:45:01,208 --> 01:45:01,228
Yeah.

1294
01:45:01,228 --> 01:45:02,488
Rock just seems like gravy.

1295
01:45:02,748 --> 01:45:06,388
It's like not the primary, but then people were saying, oh, and it's rock.

1296
01:45:06,448 --> 01:45:06,848
Like what?

1297
01:45:07,368 --> 01:45:08,028
And it's rock.

1298
01:45:08,588 --> 01:45:10,448
Well, it's interesting, right?

1299
01:45:10,448 --> 01:45:19,288
I mean, ROC is a really interesting feature if you're an individual holding it in a taxable account.

1300
01:45:20,388 --> 01:45:22,228
Then it's a massive benefit.

1301
01:45:22,868 --> 01:45:28,068
But if you're an individual holding it in a retirement account or you're an institution,

1302
01:45:29,608 --> 01:45:33,868
like maybe you're a hedge fund and at the hedge fund level, you're not paying the taxes.

1303
01:45:34,128 --> 01:45:37,268
So maybe it matters to some of your investors if it's passed through from there.

1304
01:45:37,268 --> 01:45:57,528
But for a lot of the other institutions that are running pensions and endowments and all these other things, they're tax exempt anyways. So there's not really a rock benefit to them. And so the question really becomes what percentage of the demand is coming through retail brokerage accounts that are taxable.

1305
01:45:57,528 --> 01:46:13,248
And that could also be coming through like the FA channel as well, right? People with financial advisors and they're managing the accounts. That's probably where some of those taxable accounts would sit. But what percentage of the demand is that cohort of investors?

1306
01:46:13,248 --> 01:46:33,468
And so while I think if it came to the point where they lost the Rockstat as there would initially be a big uproar, but I agree, I don't actually think it would really dampen the demand at all because I think that these products are so unique and so attractive.

1307
01:46:34,248 --> 01:46:40,568
Even just the yields they're paying out, it's higher than the average S&P 500 return.

1308
01:46:40,568 --> 01:46:47,608
And so it's already an attractive instrument. So I just don't think it draws down that much.

1309
01:46:47,668 --> 01:46:52,508
I used to think very differently. I used to think there would be this massive outrage and there'd be

1310
01:46:52,508 --> 01:46:56,568
this huge period of time where all of a sudden you'd see this wild volatility in it because

1311
01:46:56,568 --> 01:47:01,248
everyone would be rethinking the product. But then I had to really get down to, well,

1312
01:47:01,588 --> 01:47:08,368
what percentage of these investors get that benefit? And I think it's a lot smaller than

1313
01:47:08,368 --> 01:47:14,608
people would expect. I don't know if it's 3%, 2%. I don't know, but I'm guessing it's small

1314
01:47:14,608 --> 01:47:21,708
because there's such a huge amount of institutional ownership in these products. And that's not really

1315
01:47:21,708 --> 01:47:30,048
a consideration for them. Ben, I'll give you a point here. Look, with all the stable coins that

1316
01:47:30,048 --> 01:47:34,108
are coming out and the purpose of the Clarity Act, what I believe is that they want the stable coins

1317
01:47:34,108 --> 01:47:37,728
to be able to pay some form of yield to people that hold the stable coins.

1318
01:47:38,188 --> 01:47:41,328
I have not checked on this and I could type it in right now into AI,

1319
01:47:41,828 --> 01:47:46,928
but I would guess right now that those dividends that will be paid on a stable coin will not be rock.

1320
01:47:50,068 --> 01:47:50,928
Yeah, probably.

1321
01:47:51,468 --> 01:47:51,808
Probably.

1322
01:47:52,168 --> 01:47:55,928
So, yeah, so we got 10 minutes left.

1323
01:47:56,068 --> 01:47:58,508
I just wanted to cover up the last few things here.

1324
01:47:58,788 --> 01:47:59,628
You know, I joined late.

1325
01:47:59,788 --> 01:48:01,608
Look, I think this analysis is great.

1326
01:48:01,608 --> 01:48:08,288
But what I've witnessed over the past couple of weeks is that people are still struggling

1327
01:48:08,288 --> 01:48:10,328
with FASB fair value accounting.

1328
01:48:11,868 --> 01:48:11,908
Okay.

1329
01:48:12,428 --> 01:48:12,648
So-

1330
01:48:12,648 --> 01:48:13,568
Was it 2024?

1331
01:48:14,788 --> 01:48:15,168
Yeah.

1332
01:48:15,488 --> 01:48:18,668
And it went into effect January 1st of 2025.

1333
01:48:18,668 --> 01:48:24,328
You could have done it January 1st of 2024, but now it's two years later and I get on

1334
01:48:24,328 --> 01:48:26,548
calls and people consistently don't know this.

1335
01:48:27,148 --> 01:48:29,348
And so for the people on here, I just want to say this real quickly.

1336
01:48:29,348 --> 01:48:36,868
it doesn't matter what Bitcoin treasury company you are, who has it, the 12, you know, at 12 PM,

1337
01:48:37,408 --> 01:48:43,348
you know, sorry, 12 at night, 1159, 59 seconds, the price of Bitcoin at the end of the quarter.

1338
01:48:43,348 --> 01:48:48,028
And then at the end of the quarter, if the price of Bitcoin is higher, it's positive, you know,

1339
01:48:48,028 --> 01:48:52,328
from the starting price, or if it's lower, it's a loss. That is the same for all Bitcoin. If it's

1340
01:48:52,328 --> 01:48:55,828
even, it's even. Same for all Bitcoin treasury company. It's not the total amount of Bitcoin

1341
01:48:55,828 --> 01:49:00,748
you bought with your average price and the difference between the two, it works each

1342
01:49:00,748 --> 01:49:02,048
quarter and it resets.

1343
01:49:02,328 --> 01:49:03,068
You guys all agree?

1344
01:49:04,008 --> 01:49:04,208
Yep.

1345
01:49:04,768 --> 01:49:04,968
Right.

1346
01:49:04,968 --> 01:49:11,728
And then if it's, so people were, so originally the Black Swan event last year at Strategies

1347
01:49:11,728 --> 01:49:18,528
event was, oh, so they implement FASB, they have positive EPS, they never sell the Bitcoin.

1348
01:49:18,968 --> 01:49:23,088
Oh my God, that's going to trigger corporate alternative minimum tax.

1349
01:49:23,088 --> 01:49:27,788
We were all sitting there. We're like, we want to talk to the accountants to get an answer on it.

1350
01:49:27,888 --> 01:49:31,648
And then whatever. Yeah. Last May, we were all over it.

1351
01:49:31,868 --> 01:49:34,428
Yeah. Everybody's like, this is horrible. They don't even sell the Bitcoin.

1352
01:49:34,548 --> 01:49:36,728
They got to pay taxes on it, even though the EPS is positive.

1353
01:49:37,168 --> 01:49:41,268
Well, then it comes out. And this is the important part. FASB is used for GAAP accounting.

1354
01:49:42,088 --> 01:49:49,908
IRS is taxes. FASB and GAAP, IRS over here, two separate groups.

1355
01:49:49,908 --> 01:49:55,608
and the IRS comes treatment says, no, if you don't sell it, even if it's positive EPS,

1356
01:49:55,688 --> 01:50:02,168
it's not taxable. And strategy says this. Even to this day, people are like, so if I said about,

1357
01:50:02,168 --> 01:50:07,328
you know what CAM is? You know, C-A-M-T? Yeah. Okay. Now reconstruct that back to me.

1358
01:50:07,848 --> 01:50:11,588
I don't want to destabilize people on a phone call. I don't have time to listen to somebody

1359
01:50:11,588 --> 01:50:15,368
fump for over this. And so I just say it directly to him. This is what it means.

1360
01:50:15,368 --> 01:50:17,108
And I had a guy fighting me on this.

1361
01:50:17,648 --> 01:50:21,868
Oh, they got to sell the Bitcoin in order for it to be positive EPS.

1362
01:50:22,168 --> 01:50:23,148
I go, no.

1363
01:50:23,848 --> 01:50:25,028
He's like, yes, it does.

1364
01:50:25,228 --> 01:50:27,108
I said, then you did not pay attention.

1365
01:50:27,668 --> 01:50:32,208
And so, Jeff, what you've shown in this chart right over here, and this is the fault that

1366
01:50:32,208 --> 01:50:35,468
we hear, oh, we're a bunch of podcasters, don't know what we're talking about.

1367
01:50:35,828 --> 01:50:41,628
Okay, you go produce your Excel spreadsheet with your analysis and take me through it.

1368
01:50:41,728 --> 01:50:42,908
And they never do it.

1369
01:50:43,508 --> 01:50:47,328
And so my takeaway with this, with everybody, is that I love talking about this.

1370
01:50:48,128 --> 01:50:50,708
And I saw Dana's comment in the spaces.

1371
01:50:51,088 --> 01:50:53,228
You guys get out of paying PMI and how to pay it.

1372
01:50:53,908 --> 01:50:59,128
If the person you're talking to, financial advisor, your doctor, your lawyer,

1373
01:50:59,328 --> 01:51:05,688
if they don't know something, they can't tell you anything about it because they don't know about it.

1374
01:51:05,948 --> 01:51:10,108
If they do know about it, if your real estate broker, your mortgage broker,

1375
01:51:10,108 --> 01:51:12,208
knows about how to get out of paying PMI,

1376
01:51:12,408 --> 01:51:15,848
then they have the opportunity to present that to the option to do that.

1377
01:51:16,168 --> 01:51:18,188
If they don't know about it, they can't present it.

1378
01:51:18,328 --> 01:51:20,908
And everybody's like, well, this guy's been doing the job for 20, 30 years.

1379
01:51:21,548 --> 01:51:23,988
He might not know, you know, that person might not know squat.

1380
01:51:24,548 --> 01:51:26,548
And so listening to on these spaces,

1381
01:51:26,548 --> 01:51:28,728
there's a lot of people that don't know squat.

1382
01:51:29,288 --> 01:51:31,748
And after a while, I can't call them out,

1383
01:51:31,748 --> 01:51:34,788
but I just wanted to wrap up with this, that I think that, you know,

1384
01:51:34,828 --> 01:51:35,988
you guys do a great job.

1385
01:51:36,048 --> 01:51:38,868
I listened to you guys here for, you know, an hour and a half before I joined.

1386
01:51:38,868 --> 01:51:47,008
and you know and i just the last thing that came up was this it came up again today with jameson

1387
01:51:47,008 --> 01:51:53,288
lopp it's like strategy doesn't doesn't you know post the proof of reserves i'm like for god's

1388
01:51:53,288 --> 01:51:59,788
sakes we went through this in may of last year sailor talked about it and i had this invention

1389
01:51:59,788 --> 01:52:06,368
i don't know if you guys know about it it's called the google type in sailor proof of reserves

1390
01:52:06,368 --> 01:52:11,568
wow there's the article there's sailor and said why he doesn't want to do proof of reserves it's

1391
01:52:11,568 --> 01:52:17,788
the google not even ai it took me one second to do that then i used ai and i said look at all the

1392
01:52:17,788 --> 01:52:24,688
sec filings and tell me how they handle their custodians and i found that that took like yeah

1393
01:52:24,688 --> 01:52:29,768
you get custody information i mean it tells you everything i said here's the filing the pay it's

1394
01:52:29,768 --> 01:52:35,108
58 pages it's like amazing that i can screenshot it and send it to the person when i start to do it

1395
01:52:35,108 --> 01:52:37,608
took me like three minutes.

1396
01:52:37,608 --> 01:52:39,908
Look, I don't want everybody to say that AI is so great

1397
01:52:39,908 --> 01:52:42,488
and then they don't know how to use AI or Google.

1398
01:52:42,488 --> 01:52:43,928
You can't have both.

1399
01:52:45,388 --> 01:52:59,814
You just can Oh AI is so easy to use but I don know how to use it You can tell I a little fired up But anyway wrapping down here Well I mean like you think about 700 coins you like holy shit billion

1400
01:53:00,094 --> 01:53:00,574
It's crazy.

1401
01:53:00,654 --> 01:53:01,394
It's a lot of coins.

1402
01:53:01,534 --> 01:53:04,174
But it's what, three and a half percent?

1403
01:53:05,634 --> 01:53:05,774
Right.

1404
01:53:05,854 --> 01:53:13,134
So like historically, a lot of people have been selling Bitcoin that have been in Bitcoin for a very long time.

1405
01:53:13,214 --> 01:53:14,494
You've got that switching hands.

1406
01:53:14,534 --> 01:53:15,774
It's changing over to corporations.

1407
01:53:15,954 --> 01:53:17,014
Corporations are accelerating.

1408
01:53:17,014 --> 01:53:22,834
They're buying more. Tyler's buying more. And it's moving from these people that were founders

1409
01:53:22,834 --> 01:53:28,694
in Bitcoin and how Bitcoin's evolved into corporations that are going to hold this for

1410
01:53:28,694 --> 01:53:32,574
the long run. And I mean, that's frustrating to a lot of people, especially people that

1411
01:53:32,574 --> 01:53:40,474
have been in this for a long time. But yeah, we're getting down here. We got seven minutes.

1412
01:53:40,574 --> 01:53:46,214
Let's pass it around. Let's do final thoughts. I mean, Soleil, you've been observing everything

1413
01:53:46,214 --> 01:53:52,414
going on here. What's on your mind? Final thoughts, pass it around. I'm going to go back to

1414
01:53:52,414 --> 01:53:59,194
the gold bugs, you know, slow clap for those guys. It only took you 20 years to be able to dunk

1415
01:53:59,194 --> 01:54:05,714
on everyone else. But the whole, you know, Bitcoin has no utility value isn't the dunk

1416
01:54:05,714 --> 01:54:12,514
that they think it is. The lack of utility value is a feature, not a bug with Bitcoin.

1417
01:54:13,174 --> 01:54:18,774
Utility value is a market distortion for its store of value price,

1418
01:54:18,914 --> 01:54:23,254
and the store of value is a distortion for its utility value.

1419
01:54:23,254 --> 01:54:31,194
So you really don't want these market interferences messing with the price of your store of value.

1420
01:54:31,994 --> 01:54:37,494
There's people saying conspiracy theories that it's been manipulated and held down and things like that.

1421
01:54:37,494 --> 01:54:50,894
And so you really just don't want supply and demand on something that may or may not be used in a computer chip or not. And so Bitcoin is the solution for that as well.

1422
01:54:53,074 --> 01:54:53,674
Absolutely.

1423
01:54:53,674 --> 01:55:05,034
I think the utility value of being able to transfer value between two parties with no middleman is perhaps one of the most important utilities on earth.

1424
01:55:06,154 --> 01:55:08,134
So, you know, they just don't know it yet.

1425
01:55:08,434 --> 01:55:13,674
But that utility value alone is going to be massive.

1426
01:55:15,154 --> 01:55:15,454
Right.

1427
01:55:16,014 --> 01:55:16,794
Yeah, for sure.

1428
01:55:16,794 --> 01:55:30,354
I've had so many experiences this week that show me how powerful it is to be able to send value from one entity to the other entity and just have them get it.

1429
01:55:30,474 --> 01:55:35,934
I can't tell you how frustrating a couple of months have been working through the rails.

1430
01:55:36,194 --> 01:55:41,934
I've never been less bullish on tokenization and all this other stuff that's happening at the back.

1431
01:55:41,934 --> 01:55:56,654
I mean, I've had some really, not something to get into here, but I've had some really enlightening experiences now that let me realize just how nice it is for me to be able to send something to one person and they just receive it with nobody in the middle there.

1432
01:55:57,034 --> 01:55:58,034
It's pretty beautiful.

1433
01:55:58,854 --> 01:56:01,134
I'll just keep rolling here, Jeff, with mine.

1434
01:56:01,654 --> 01:56:03,754
And we're not going to have enough time to talk about this.

1435
01:56:03,914 --> 01:56:10,774
But, you know, one of the topics that I've really been focusing on a lot is liquidity.

1436
01:56:10,774 --> 01:56:22,434
And I think that a lot of investors are skipping what the real measure of demand is in an equity.

1437
01:56:22,874 --> 01:56:28,254
I think they look at the price always and they assume that's the demand, right?

1438
01:56:28,274 --> 01:56:30,114
If the price is low, demand must be low.

1439
01:56:30,714 --> 01:56:37,154
And when you start looking across the sector and you start comparing the volume profiles

1440
01:56:37,154 --> 01:56:42,654
of the securities that are trading, you see massive discrepancies.

1441
01:56:44,054 --> 01:56:48,334
And the reason why, if there was no demand for MSTR,

1442
01:56:50,174 --> 01:56:53,854
strategy wouldn't be able to issue on the ATM.

1443
01:56:54,034 --> 01:56:56,654
The volumes wouldn't be so incredible out there.

1444
01:56:56,994 --> 01:56:58,494
That product is trading.

1445
01:56:58,794 --> 01:57:00,174
There is massive demand.

1446
01:57:00,174 --> 01:57:02,974
It's exchanging hands all day long, tons of it.

1447
01:57:03,534 --> 01:57:06,454
When you look across the sector, it's not the same everywhere.

1448
01:57:07,154 --> 01:57:11,914
It's only certain pockets where you see massive demand. Same thing in the prefs, right? You can

1449
01:57:11,914 --> 01:57:16,174
look at the volume demand across the various prefs and you can see where that demand is. And I think

1450
01:57:16,174 --> 01:57:23,094
people often equate price with demand. And I think that's a mistake because when you look at

1451
01:57:23,094 --> 01:57:30,814
companies like treasury companies, one of the really enlightening moments for me when I started

1452
01:57:30,814 --> 01:57:34,774
looking at these, and it's obviously helpful to be on the inside when you're hyper-focusing on

1453
01:57:34,774 --> 01:57:40,414
some of these things is you realize that that liquidity is your velocity metric.

1454
01:57:40,934 --> 01:57:47,914
It shows you how fast these companies are going to be able to raise capital and acquire Bitcoin

1455
01:57:47,914 --> 01:57:53,014
and generate yield and build up that nav floor and build up that Bitcoin exposure.

1456
01:57:54,294 --> 01:58:01,454
And you can be as excited as you want about individual entities, but if the stock doesn't

1457
01:58:01,454 --> 01:58:07,374
trade and that's one of the products they're selling into the market to raise that capital

1458
01:58:07,374 --> 01:58:13,354
is that equity is that amplified exposure you know the difference between trading a million dollars

1459
01:58:13,354 --> 01:58:18,114
a day and a hundred million dollars a day if you were to raise capital at a you know

1460
01:58:18,114 --> 01:58:27,354
three percent clip is massive and it compounds throughout time if that disparity stands so

1461
01:58:27,354 --> 01:58:33,134
just something to focus on. I think that we should deep dive into that here at some point,

1462
01:58:33,154 --> 01:58:38,794
because I don't think people really have grasped how critical that component of it is.

1463
01:58:39,174 --> 01:58:47,014
Price is going to oscillate, but the real measure of demand is the volume that's out there. So

1464
01:58:47,014 --> 01:58:49,974
food for thought. We'll pick that up again later. It's a long conversation.

1465
01:58:50,574 --> 01:58:54,994
So strategy's market cap as of today is about like 55 billion, something like that,

1466
01:58:54,994 --> 01:58:57,474
but it traded 2.2 billion of stock.

1467
01:58:58,254 --> 01:58:58,694
Yeah.

1468
01:58:59,534 --> 01:59:01,334
So it turned over.

1469
01:59:02,594 --> 01:59:03,614
There's no demand.

1470
01:59:03,734 --> 01:59:04,894
Liquidity would dry up.

1471
01:59:05,234 --> 01:59:05,674
Yeah,

1472
01:59:05,794 --> 01:59:06,094
exactly.

1473
01:59:06,094 --> 01:59:08,654
It wouldn't continue to be elevated and expand.

1474
01:59:09,014 --> 01:59:09,454
Yeah.

1475
01:59:09,574 --> 01:59:09,734
Yeah.

1476
01:59:10,154 --> 01:59:10,894
We'll pick it up again.

1477
01:59:10,954 --> 01:59:11,414
Another week.

1478
01:59:11,794 --> 01:59:12,194
Liquidity,

1479
01:59:12,434 --> 01:59:12,914
liquidity,

1480
01:59:13,054 --> 01:59:13,354
liquidity,

1481
01:59:13,494 --> 01:59:13,754
liquidity.

1482
01:59:14,394 --> 01:59:15,894
You can't get Chick-fil-A on Sunday,

1483
01:59:15,934 --> 01:59:16,774
but you can get Bitcoin.

1484
01:59:18,014 --> 01:59:18,454
True.

1485
01:59:18,854 --> 01:59:19,094
Hey,

1486
01:59:19,174 --> 01:59:21,174
can I wrap up with one last thing on silver?

1487
01:59:21,774 --> 01:59:21,974
Yeah.

1488
01:59:22,054 --> 01:59:22,214
Yeah.

1489
01:59:22,554 --> 01:59:24,414
Let me share my screen.

1490
01:59:24,414 --> 01:59:26,074
Let me share this window here.

1491
01:59:26,594 --> 01:59:27,674
Let's see if I got this working.

1492
01:59:30,254 --> 01:59:31,414
There it is, yeah.

1493
01:59:33,574 --> 01:59:36,294
So this is silver here.

1494
01:59:37,054 --> 01:59:39,474
This is a monthly chart on TradingView.

1495
01:59:40,174 --> 01:59:43,794
The yellow line is the 200 average,

1496
01:59:44,114 --> 01:59:47,514
and the whitish line is the 50 moving average.

1497
01:59:47,994 --> 01:59:50,514
And you can see that here, 50 and the 200.

1498
01:59:50,514 --> 01:59:54,574
So I'm going to do this line right here.

1499
01:59:54,774 --> 01:59:58,814
That is January of 1980.

1500
01:59:59,954 --> 02:00:01,874
Okay, so that's the Hunt Brothers.

1501
02:00:02,734 --> 02:00:10,874
Okay, then what happened was silver spiked over here, which is May of 2011.

1502
02:00:11,394 --> 02:00:13,234
So let me do the math.

1503
02:00:13,774 --> 02:00:17,214
80, 90, 2011.

1504
02:00:17,214 --> 02:00:25,494
and 11. It took 31 years and it barely broke the all-time high. They're like, wow,

1505
02:00:25,774 --> 02:00:30,774
that's a long time to wait. 31 years. Bag holder. It's a big bag holder.

1506
02:00:30,974 --> 02:00:38,574
That's a big bag. Then you got from 2011. Now I'm not that good with math, but I think we're in

1507
02:00:38,574 --> 02:00:46,834
2026. And so what happens is this over here is it then took another 15 years for it finally to

1508
02:00:46,834 --> 02:00:55,074
break the 2011 all-time high and to beat the 2011, sorry, to beat the 1980 all-time high and then the

1509
02:00:55,074 --> 02:01:01,494
2011. So you know what? The people that are in silver, you are much better at hodling than I am

1510
02:01:01,494 --> 02:01:07,194
silver for that amount of time from the Hunt brothers. I get it. You bought it and you waited.

1511
02:01:07,194 --> 02:01:13,134
Even if you bought in 2000 after the, you know, right after the dot-com bubble burst, you had a

1512
02:01:13,134 --> 02:01:19,634
good run for 11 years. But if you look at the price then that happened from that bottom in 2002,

1513
02:01:19,634 --> 02:01:27,254
it was four bucks and it did 10X. That's a good run. But if you didn't time it right,

1514
02:01:27,674 --> 02:01:33,374
what you would have is the exact same bellyaching that we hear all the time. It's like, oh,

1515
02:01:33,554 --> 02:01:39,214
you bought it at the top. You were the exit liquidity for everybody else.

1516
02:01:39,214 --> 02:01:44,674
And so when somebody says to me, you know, the silver people take a victory lap.

1517
02:01:44,834 --> 02:01:48,554
By the way, what you see in there on the monthly, the RSI is at 95.

1518
02:01:49,754 --> 02:01:57,274
I could tell you that this typically bubbles, it's really hard for them to last more than three to four months.

1519
02:01:57,414 --> 02:02:03,974
And that's the longest, typically, whatever, 12 to 16 weeks.

1520
02:02:04,274 --> 02:02:05,714
And that's long.

1521
02:02:05,914 --> 02:02:08,114
In a Bitcoin space, it's usually about 12 weeks.

1522
02:02:08,114 --> 02:02:11,194
but can silver go to a big number?

1523
02:02:11,334 --> 02:02:12,234
Could it double from here?

1524
02:02:12,774 --> 02:02:13,114
Yeah.

1525
02:02:13,314 --> 02:02:14,074
You know what I'm doing?

1526
02:02:14,154 --> 02:02:16,074
I'm not shorting it and I'm not buying it.

1527
02:02:16,734 --> 02:02:17,134
Okay.

1528
02:02:17,574 --> 02:02:18,114
I'm not doing E.

1529
02:02:18,134 --> 02:02:20,374
I'm just going to sit there on the side and watch this.

1530
02:02:20,634 --> 02:02:22,514
Ben would be selling you the covered calls on it.

1531
02:02:22,654 --> 02:02:22,934
Yeah.

1532
02:02:24,374 --> 02:02:25,774
Ben's capable of trading this.

1533
02:02:25,834 --> 02:02:26,274
I'm not.

1534
02:02:26,494 --> 02:02:28,474
I'm just going to watch this on the sidelines.

1535
02:02:28,794 --> 02:02:29,834
And when it's going to crash,

1536
02:02:29,874 --> 02:02:32,894
you're going to hear the exact same thing we hear from the Bitcoin people.

1537
02:02:33,494 --> 02:02:35,474
When's it going to retake the all-time high again

1538
02:02:35,474 --> 02:02:37,514
so I can recover because I bought the top

1539
02:02:37,514 --> 02:02:38,394
But now I got to wait.

1540
02:02:38,714 --> 02:02:39,134
What do you mean?

1541
02:02:39,174 --> 02:02:42,094
I got to wait 15 years for it to retake the all time high again.

1542
02:02:42,734 --> 02:02:43,494
That's terrible.

1543
02:02:44,134 --> 02:02:45,694
The inflation adjusted all time high.

1544
02:02:45,754 --> 02:02:47,674
It was in the Hunt Brothers 1980.

1545
02:02:47,894 --> 02:02:51,454
So you're really looking at like 46 year huddle.

1546
02:02:52,154 --> 02:02:52,814
If you bought the top.

1547
02:02:53,274 --> 02:02:54,674
I was waiting for you to say that.

1548
02:02:54,754 --> 02:02:55,994
So this was not this.

1549
02:02:56,114 --> 02:02:58,174
I could do it versus M2 or something.

1550
02:02:58,174 --> 02:03:00,494
And then the numbers would look horrible.

1551
02:03:00,734 --> 02:03:01,314
They look bad.

1552
02:03:01,754 --> 02:03:02,074
Right.

1553
02:03:02,394 --> 02:03:07,034
So, you know, you know, given right now to, you know, to wrap up with this, you know,

1554
02:03:07,034 --> 02:03:07,994
So,

1555
02:03:08,040 --> 02:03:12,140
I was pretty busy today, but I'm looking at this.

1556
02:03:12,740 --> 02:03:17,680
You know, given, you know, the way I look at strategy right now, you know, am I happy with the price?

1557
02:03:17,760 --> 02:03:18,380
Not really.

1558
02:03:18,780 --> 02:03:21,840
You know, it's trading at, you know, $1,580.

1559
02:03:22,600 --> 02:03:27,140
So for me, I'm like, eh, you know, $1580.

1560
02:03:27,580 --> 02:03:27,940
Right.

1561
02:03:28,120 --> 02:03:28,740
I'm pretty good.

1562
02:03:28,740 --> 02:03:31,880
And so with that, that's all I had to cover tonight.

1563
02:03:32,000 --> 02:03:33,440
But, hey, you guys did a great job.

1564
02:03:33,540 --> 02:03:34,880
I just wanted to jump in at the end.

1565
02:03:35,560 --> 02:03:35,760
Perfect.

1566
02:03:35,760 --> 02:03:41,040
Yeah, my final thoughts are the world is getting far more digital.

1567
02:03:41,280 --> 02:03:43,520
We're seeing it everywhere you look.

1568
02:03:43,620 --> 02:03:48,180
Every corner you turn, you're seeing different AI use cases.

1569
02:03:48,340 --> 02:03:49,640
You're seeing different bots.

1570
02:03:49,840 --> 02:03:51,380
You're questioning what's real.

1571
02:03:52,100 --> 02:03:54,660
People aren't using Photoshop anymore.

1572
02:03:54,860 --> 02:03:55,900
Everything's going to AI.

1573
02:03:56,220 --> 02:03:58,460
The whole world's changing and moving really quickly.

1574
02:03:59,260 --> 02:04:00,540
And it's going to hit finance.

1575
02:04:00,960 --> 02:04:02,900
It will absolutely hit finance.

1576
02:04:02,900 --> 02:04:05,140
It will absolutely hit asset prices.

1577
02:04:05,760 --> 02:04:12,880
When, I don't know, it takes time for this stuff to transition and move, but you think about how

1578
02:04:12,880 --> 02:04:18,480
quickly the world changed with computers hitting the scenes, like in the 2000s,

1579
02:04:18,480 --> 02:04:24,720
in the equity markets, you had a flood of all of these companies that were trying to move as

1580
02:04:24,720 --> 02:04:32,560
close as possible to the New York Stock Exchange so they can get the information a split second

1581
02:04:32,560 --> 02:04:37,240
and faster in their computers so they can make a micro transaction and catch a

1582
02:04:37,240 --> 02:04:40,280
trade in between an actual transaction in between a trade.

1583
02:04:40,840 --> 02:05:00,096
And like that you know moved faster and faster So you got high frequency trading is exploding Algorithmic trading is exploding And that really started with the equity market And now with the advent of these digital credit instruments and algorithmic possibilities risk can be calculated and

1584
02:05:00,096 --> 02:05:08,156
transacted quickly. And I look forward to a world where a lot more of these companies have Bitcoin

1585
02:05:08,156 --> 02:05:13,796
denominated digital credit products where you've got a Bitcoin balance sheet and your business

1586
02:05:13,796 --> 02:05:20,816
is a function of like how that Bitcoin balance sheet grows and then issuing credit products,

1587
02:05:20,816 --> 02:05:26,396
then all of that risk can be traded in real time, near real time, just like the equity market,

1588
02:05:26,476 --> 02:05:30,696
which should foster liquidity. It should foster less risk in the entire bond market. It should

1589
02:05:30,696 --> 02:05:37,696
foster better cost of capital for any businesses. There's so much that can be built by

1590
02:05:37,696 --> 02:05:42,176
integrating all of these things into the equity world. So I think the world is going to be an

1591
02:05:42,176 --> 02:05:46,816
exciting place. I'm an optimist. So I think the world is going to be an exciting place to live in,

1592
02:05:47,936 --> 02:05:53,376
assuming these things get integrated and gold doesn't just keep ripping faces off and become

1593
02:05:53,376 --> 02:05:56,816
the new monetary order and everybody has to report to Peter Schiff. That would suck.

1594
02:05:58,176 --> 02:06:02,736
So anyway, that's my final thoughts. Appreciate the time, everybody. Two hours and five minutes.

1595
02:06:02,736 --> 02:06:08,416
thanks for watching we will see you next week in come to strategy world uh if you if you're

1596
02:06:08,416 --> 02:06:12,496
attending grab a ticket we'd love to see you there meet you in person i think it's going to be a

1597
02:06:12,496 --> 02:06:18,736
great time a lot of alpha uh and please like and subscribe apparently uh my team told me that helps

1598
02:06:18,736 --> 02:06:24,656
so like and subscribe on the youtube and uh appreciate the support catch you next week see ya