Conversion, self-to-adversion, 7.0
Looking at life through the eyes of a tire hoe
Eating seeds is a test time activity
The toxicity of our city, of our city
No!
Body on the world!
Body on the solar!
Disorder, disorder.
Now somewhere between the sacred silence, sacred silence and sleep.
Somewhere between the sacred silence and sleep.
Disorder, disorder, disorder.
Woo!
We are back.
True North, episode 37.
and navigating the storm. Here we go. We're going to get into it. We're going to have some fun
tonight. We've got a bunch of people on the stream and let's let them on and we will start.
Stop sharing my screen here. We've got grain. Okay. Tonight we've got myself, Soleil, Dan Hillary,
Mason, Ben Workman, and Grain of Salt. We are going to get into it and we are going to get
after it. Obviously a lot going on in the market, a ton of noise, and this is the exact reason why
True North exists. True North exists. What is true north? If this is your first time watching
because you're concerned or talking about the markets, true north is the goal is to be the
investment grade Bitcoin podcast, talking about Bitcoin backed securities, Bitcoin backed credit,
their view in the market, experiences operating in capital markets. We'll talk about risk. We'll
talk about volatility. We'll talk about interest rates, macro environment, all those things,
and also market sentiment, which is becoming more and more important within today's trading
environment. So typically we start with leverage. We're going to start with a bit of housekeeping.
And so the first thing I want to bring up here is actually we're going to start with Tim.
Ladies and gentlemen, what you're about to hear may be amazing, but it is not financial advice.
It's for informational and educational purposes only.
Jeff?
Thank you, Tim.
None of this is financial advice.
And the next part I wanted to talk about is that we do not force anybody to watch this show.
We are here sharing information and our perspectives on the market, the marketplace, and we've got people monitoring the chat.
If you are disrespectful in the chat, you will be removed.
Additionally, the people that are here are operating in the capital markets and working
in the Bitcoin space and also retail investors and have backgrounds that are very broad.
The goal of bringing this group together that has very broad backgrounds and perspectives
is to communicate, effectively provide education of what's actually happening in the market.
So it's like a master's in corporate finance without actually having to work in corporate
finance or get educated in corporate finance and the information that we share and the perspective
perspectives that we share are very unique in that you can only get them you can only get these
perspectives having worked in these individual capital markets and have worked with bankers and
worked with different people so it's uh it's separate from or it's different than getting a
like a true traditional education is one of the things that i had a problem with in the getting
educated in finance in college, all of my teachers, none of them actually ever worked for finance
companies. They're all academics and academics don't take on risk. And when you actually work
in risk markets, you learn a lot more about the marketplace in general than you would without it.
So that's what we're going to start with and the agenda today. So we're going to go through
MNAV guidance. We're going to talk about leverage, go into statistics like we do every week.
We're going to talk about the recent noise with the MNAV guidance and walk through it
and just talk about some perspectives there.
Risk and Bitcoin backed credit and the concept of refinancing risk in today's environment.
The market landscape, capital markets and scale, and then just a general broad discussion.
We'll see where we go.
I've been trying to keep these a little bit shorter, but I suspect we're probably going
to go the full two hours because there's a lot of noise around these topics.
So first thing I'm going to jump into is the leverage update. And here back to sharing my
screen. So why do we show this? We show this to give some perspective on what strategy's actual
balance sheet looks like. You can see this information. Oh, let me fix that. You can see
this information summarized effectively on strategy's website, but I like to keep track
of it for my own personal purposes. And as of today, strategy holds 629,376 Bitcoin at a price
of 114,150. So there's $71 billion, $71.8 billion of assets on the balance sheet. The debt that
they have on the balance sheet is 8.2 billion. Of that debt, 3 billion of it is trading in the money.
So it's effectively equity. And they've got 6.3 billion of preferred stock that's got dividends
associated with it. That's where a lot of this noise recently is coming from. So net capital
held on balance sheet, if you just back out the debt, they've had $63 billion of net capital on
their balance sheet. And another way that I'm starting to look at strategy is to look at the
assets minus the debt minus four years of the preferred dividend, just to think about,
just start thinking about leverage from a interest coverage ratio perspective.
So when you're looking at this, the balance sheet, if you are just taking assets minus the debt and
the preferred stock, you're looking at effectively a 20.4% leverage ratio and an 8.7x debt coverage
multiple on the entire balance sheet. The reason we point this out is because most balance sheets
in the market are incredibly levered, 40, 50, 60, 70, 80%, and some even higher. And so when you look
at just a pure balance sheet perspective, it's incredibly healthy. I also like to have this
perspective of a 50% drop. What would the balance sheet look like if the assets on the balance sheet
dropped 50% and the assets go from $71 billion down to $35.9 billion and still would have less
than a 50% leverage ratio, 40.7% leverage ratio. So they can withstand significant volatility on
the balance sheet and still be totally fine. Another interesting perspective to look at the
health of the balance sheet is look at what would the Bitcoin price need to be for the assets to be
worth less than the debt plus four years of the dividend. So the price of Bitcoin would need to
go down to $23,236. So basically got to go down 80%, or if there's a 50% drop, it's got to go down
another 59%. So you guys have anything to add here? Yeah, I have a quick comment. So your
liability, and let me go back to the regular size screen here. So your 20.4% is you call that
liability to asset ratio. So what I would do is your calculation is correct. I would say it's five
to one. And because if you multiply 20 times five, you get a hundred. So anybody that goes to buy a
house in America and they don't want to pay PMI, you have to put down 20%, which is five to one
leverage. So that's the normal way to do it. But this is flipped the reverse way. One to five
leverage. It's one to five. This is flipped the other way. So the leverage is only 20%.
Whereas when you buy a house, you're five to one leverage. So that's where when you show the 20%,
percent. Maybe it's better if you show it as a multiple.
Yeah. Yeah. That's this bottom one, the debt coverage multiple. It's 8.7.
So this is- It's 8.7. Okay.
Well, it's only taking the debt component. So it's taking the assets divided by the debt,
just excluding the preferred stock because it doesn't have a maturity.
Got it.
Okay. Got it.
The coverage multiple is 8.7, which is significantly higher than-
then it's not incredibly healthy.
It's not a lot of leverage.
It's the reverse.
And that's where I think that sometimes people just don't get it
because it's backwards from what it is typically when you take out leverage.
Right.
Exactly.
And I think that's a unique perspective, right?
It's crazy.
You see in the market that there's a lot of people yelling,
oh, this is a Ponzi or there's so much leverage on the balance sheet.
And you go, you look at the actual numbers and as a shareholder, I'm looking at this balance sheet saying, I wish they would, I wish they were able to get more leverage.
I want them to get more leverage.
And it's, it's interesting seeing the dichotomy of people that have no idea what they're talking about.
And the people that actually know are like, have looked at the numbers and looked at what these, what these products are, which kind of gets this risk component too.
So Jeff, I'll chime in here on this part. So I think one of the things that you're trying to
point out here is that MSDR True North, specifically for doing this, we look at these
ratios and understand them. When you say the term bewilderment, what happens is they look
at the total debt numbers in nominal terms. They say, oh, he's levering way up in nominal terms,
and that's your A plus six, that's your $14 billion in debt, correct?
Yeah. Yeah. Yeah. And like, oh my God, he's got $14 billion in debt. But based upon the equity
that he has, that's not a lot of debt at all. And it's the inverse of what it should be.
And so when these people talk about this, they just talk about it as being a big number.
And it's not a big number in comparison to the equity that he has that he's holding. And I think
that's the part that people, that's why they're bewilderment because these numbers make no sense
because this is a very simple concept, but incredibly hard to understand.
Right, exactly. And if you look at the preferred equity, and a lot of people are,
and I like to continue to hit on this, and we'll hit on it a little bit more later, but
the estimated annual dividend from the preferred equity is around $607 million. That's the estimated
annual dividend. If you just take that times four, it's $2.4 billion. So four years of the dividend
is $2.4 billion. That equals what? Oh, that's not quite right. It's a fraction, right? It's a
fraction of the total assets held on the balance sheet. So you could think about this as they're
effectively refinancing. By having the ATM instruments on the ATM, the shelf ATM registration
on all of the preferred equity instruments allows them to refinance 24-7, 365 by issuing
those securities. They can access debt capital very quickly. Typically, if you were to go refinance
your debt, it's a whole process. You got to go out to the market, you do a presentation,
here's what I'm doing, here's my credit quality, here's what my business looks like in the future,
blah, blah, blah, blah, blah. And you got to go spend a lot of human capital, you got to put a
bunch of resource together, you got to go find the capital markets, you got to go do it,
and it takes a whole bunch of time. And when you do get refinanced, you get the capital on the door,
you go pay off the old debt and then you get the new debt, et cetera, et cetera.
And you keep doing this into perpetuity. This has been done in real estate for 100 years.
Like refinancing your debt has been done in real estate for 100 plus years.
Yeah. And I know I keep on jumping in here because this is an important concept to understand.
In the 2009 financial crisis that hit with the housing market, provided that you had a fixed
rate loan, let's say you put down 20% of your house, your house shoots up in value,
and then it drops down. And that 20% that you put down, your house is trading below what you bought
it. And it takes out that 20% because that loan is not callable, just like in this case,
these are not callable instruments that he has, and they're not collateralized by the Bitcoin
that's there. But as long as you're able to make principal and interest payments on your house,
you would not lose your house. The reason why the financial crisis took this out,
and the reason why this is not a problem for strategy was because those loans reset, they were
adjustable rate loans. And in this case, this is not what's going on. These are all fixed rate
PREFs, right? That the yield drops as the price of the underlying instrument goes up,
which is the exact opposite of what happened during the financial crisis. And so this is a
very simple concept that people just can't understand. And so is that fair the way that
I said that, Jeff? Jeff Lerner
Yeah, yeah, no, no.
Jeff Lerner
very fair.
Grant, you've been studying prefs all weekend?
No, you know, I want to tell you something.
I watched-
He's back from the track and he's deep in the prefs again.
Yeah, you're in the books, Grant.
I'm not a bond trader.
I'm a stock guy.
So, I watched your videos.
Okay, somebody wants to know, who do I listen to?
I listen to Dan Hillary.
I listen to Jeff Wall.
I listen to Ben Workman.
But Dan's been killing it with these videos recently and I watch them.
If I don't understand something, I watch it a second time.
And so Dan has been putting out this great information and then it sinks into my head.
But I want I want the people on this call to be able to understand if you cannot if you don't understand it, where you can explain it to somebody else in simple terms in two minutes, then you don't understand it.
And so that's why I see this. And Jeff, you use the term bewilderment.
I can't watch CNBC because these people, they're like, oh, he's got $14 billion of debt.
For fuck's sake, as a percentage of what is going out there, it's only 20%.
And they cannot understand simple terms.
I don't know how much easier I can make this.
Yeah.
Yeah, exactly.
I think somebody brought this up here.
And so somebody asked, it's a fraction of the net capital, but strategy is never selling the Bitcoin to pay for dividends.
That is correct. So the balance sheet leverage, despite it being healthy, isn't relevant.
I think that's incorrect. And I'll tell you why. I think that is incorrect. Because if you look at
this, right, you've got two point, if you take four years of the dividends on the preface, you've
got $2.4 billion of dividend payment, which represents 3.4% of the value of the assets.
if the assets didn't move at all, the assets move 0%, you would theoretically only have to sell off
3.4% of the assets in order to pay that dividend liability. What is that number? That number is a
representation of financial strength. You can go out, what I'm trying to emphasize here is they're
able to go back out to the market and raise more capital in perpetuity to pay off this
based on their financial strength. But the position that they have on the balance sheet,
the assets that they have on the balance sheet and the relative compound annual growth rate of the
assets on the balance sheet This is like the whole concept When somebody underwriting your loan like a loan for a house they look at all your assets they look at all your debt and they tell you whether or not you can afford more debt And as Graeme aptly pointed out you can take five to one leverage to go buy a house
Now you look at the opposite, one to five leverage on a corporate balance sheet holding $71 billion of capital.
Anybody, anybody is going to give them more capital.
The debt markets are going to give them more capital if they provide instruments that the market can digest.
anybody is going to give them more capital if they can understand the risk they could understand
the risk profile and that is what this entire strategy team is doing is they're going to talk
about what is the risk profile here if the risk of bitcoin going to zero is is dropped off the table
like if if you don't think bitcoin's going to zero the there's such a fat positive tail here on
Bitcoin, the asset itself. And you've got that, you know, generating more returns on your balance
sheet in perpetuity. So like, that's the concept. They're like refinancing 24 seven, 365 at speed,
which is an innovation that's never existed before.
So that $2.4 billion, right? So four years of the PREF dividends. What's your guess
at what that is as a percentage of daily trading volume?
$2.4 billion as a percentage of daily trading volume. That's probably 20% of daily trading
volume. It's higher than that. It's 50%. So it's 50% of one day's trading volume if I average the
last 30 days of trading. So it just tells you, yes, there's the security of the assets that are
over collateralizing all this, but you've still also, and I know we'll get to the common ATM
because that's certainly going to be a topic for a while here. But when you've got that type of
liquidity in your common equity, where you're talking about half of the volume of one trading
day of the year, resulting in four years of estimated annual dividend payment cash.
So now you combine those two. Not only are you wildly over collateralized with the Bitcoin,
you've also got another asset, which is the common equity that you can utilize
and pretty easily given how liquid it is to raise that capital to fund these.
So now you shrink that risk even further.
So I think when people look at this, yeah, the narrative out there that happens a lot
is about how highly leveraged this is and he's playing a dangerous game of chicken with leverage.
But the leverage right now is so low and they have so many tools at their disposal
to cover these obligations right now.
And because these are perpetuals, there's no principal repayment on these.
So what they're managing for is the annual dividend obligation.
So that's what they're starting to manage now,
particularly as converts roll off over time and they clear that off the balance sheet.
Guys, I'm curious.
So you guys are in the market more than me.
You're talking with the big bankers, the highfalutin individuals.
Does this objection come up a lot that they're over leveraged?
uh yeah it's what it's what they see in news sources like every conversation well not every
conversation a lot of the conversations I've had thus far most people just don't even know what's
going on in this space they haven't even heard of it I haven't even heard of MSTR like let alone
leverage, leverage on MSTR. So we got to start at square one of a Bitcoin, you know, a Bitcoin
treasury company. So that's been one of the biggest surprises to me. And then we talk about leverage,
and you talk about balance sheet, then you talk about strength, then you talk about securitization,
you talk about risk profile, then talk about volatility. It's like the education curve here is
so big. It's so big. Everybody that's been here watching this stock for the last eight months,
You have eight months of education moat.
When you go to the banks in particular, and when you look at a lot of these transactions
that are getting closed, you're going to start seeing a lot of repeat banks showing up.
So there's a few bankers out there that have taken the time to start getting educated in this space.
And because of that, they're the ones that are able to push these transactions.
I would tell you it's becoming less where I'm hearing the concerns about the leverage from the banking community.
But when you go and do media and they start talking to you about the questions that they want to talk about,
it almost always goes back and you almost always see the phrase dangerous leverage almost every time you go there.
So that's the narrative most people are seeing is what comes out through the media.
and you know there's still definitely a learning curve in the banks i've been very surprised
by how slow they've been to pick up in this space particularly because of the incentive structure
for them right i mean these companies are a home run as an investment banker if you're one of these
investment bankers that really starts to understand this space and you know how to structure the
products and you know the right timing to structure the products and how to price them to move them
within the institutional investor community. These are career maker companies. If you become
the preferred banker for, say, the three to five largest of these that are going to be issuing
securities regularly, you've got a continuous pipeline of bonuses effectively coming in for
closing these transactions. So this is massive in that community. So I've been very surprised
by how little engagement there's been. And I think a lot of that was because
for the longest time, it was really one company. And that company already had bankers and they
were already getting moved into the bulge bracket by the time that they'd scaled.
And once you're in the bulge bracket, all the mid-tier banks, they know, right? A lot of them
will always tell you, we want to be your banker until Goldman Sachs comes and takes over. And
then they're just happy to let you go work with Goldman Sachs or Marcus Stanley or one of these
really big banks. So it has been really enlightening to have those conversations,
to hear it. It's evolved, but not as quickly as I thought it would, given the insight to that group.
Yeah. And another interesting thing I hear a lot, I hear it from specifically my friends at,
my friends of friends at JP Morgan and Goldman Sachs, and they say, but these are analysts,
you know, young guys, whatever. Why does MSTR trade a premium? A lot of these guys are on the
deal teams of the, you know, convertible pricing, convertible notes. They're just,
you know, they're trying to figure it out. Why does MSTR trade a premium? I mean,
should we start to square one? Like, I think that's a really good,
that's the only objection I hear prior to their over leverage.
And I would say they go hand in hand. When someone asks me,
why is MSDR traded premium? I say, you know, from square one, I go, well,
they have leverage in capital structure. If you think Bitcoin's going up,
that awards a premium, that warrants a premium.
So I think those two things are kind of interesting to talk about together.
Yeah. And they control the leverage. So Ben,
your point about the liquidity and Jeff,
your point about the ease at which they can just go out and raise capital with the preferreds.
They don't have that hurdle of convertible bond deals anymore. They're completely vertically
integrated. They don't depend on anyone. If they want more leverage, they have more leverage on
demand. If they want to delever, they can delever on demand. And it's kind of like Elon says the
best part is no part, the best process is no process. And they're just eliminating all of
these external dependencies and they basically just control their own destiny at this point.
Yeah, I would say that's the state they're trying to get to. Right now, I think you've been seeing
that the ramp up in some of the prefs has been probably a little slower than a lot of people
would have expected. And because that ATM was getting used and the liquidity was so good that
even if they were taking a small percentage of the daily volume, it was delevering them really,
really quickly. And so now, you know, now they're getting all the tools out in market and they have
them now. Now they just need to scale them. And I think that was, you know, part of what originally
brought them to create the guidance that they did was an acknowledgement that they got 2D levered,
right? I mean, they were down, I don't know if they got to sub 10, but they were at like 11%
at one point or something. It was really low. And, you know, so they were getting 2D levered
And they needed to find a way to ease off that because the more and more that they were using the common stock ATM, yes, they were acquiring a ton of Bitcoin.
And that's going to result in a ton of Bitcoin dollar gains here down the road with everything that they accumulated.
But it was dragging that leverage down and they couldn't put the leverage on quick enough to be able to sustain that.
So that was why in the past I always thought that we would start to see a convert pop in periodically to kind of inject that leverage as they were getting to delevered.
But then these prefs came out and they launched way more of these prefs than I thought they would.
You know, you see the first one come out, you think maybe there will be two or three.
And, you know, within a few months, we've already got four.
So, you know, they got these into the market.
They got the ATMs open and they're moving towards the point where they're now going to control their own destiny.
And to your point, be able to build leverage on demand.
So as these scale, I think that'll be helpful.
But it seems, you know, the market gave them a little slap on the wrist here this week.
And so we'll see what that means in terms of any announcements that they put out next week with Bitcoin purchases and where that capital came from.
Yeah. So I want to talk about leverage ratio for a second.
So and we talk about banks for basically deposits.
It's according to ChatGPT real quickly.
You only need to have 4% tier capital.
So if you only have 4% in tier one capital in your bank and you're loaning out, that means your ratio is 25 to 1.
And this is, you know, 1 to 5.
And so what happens is in order to understand a Bitcoin treasury, you need to understand Bitcoin.
And if you think it's some magical Internet money invented by a fictitious person that nobody knows who it is and you've got this code and you're like, and who sets the price of it?
I get that question all the time.
It's consensus driven just like gold.
So if they don't understand Bitcoin, then we apply it to a Bitcoin treasury company like Strategy.
Next thing is, Saylor petitioned the Financial Accounting Standards Board,
changed the way that accounting was done for this for indefinite lived intangible assets.
That was approved in August of 23.
You could have implemented it early in 24 and you had to do it in 2025.
So if there's a chief financial officer that doesn't know what Bitcoin is, doesn't get it,
right, and goes through all these things, doesn't get that a bank is 25 to 1 leverage
because they're only holding 4% in assets.
And then you want them to understand Bitcoin on a balance sheet.
We talk about MNAV, all the KPIs that came out with Bitcoin Torque, Bitcoin Dollar Gain.
And so we have all these new metrics, but they don't even understand the way the system
works today.
And then you got to say, oh, and by the way, accounting laws changed or ruling by FASB.
They're unaware of this.
And you're like, it's not even bewilderment.
They're not able to process what I just said.
And they could be a CFO for 20 years.
And it's like, and so Jeff, you keep on saying, let's educate these people.
They just want to keep their jobs so they could pay their bills and retire in 10 to 15 years.
and they just don't have the mental flexibility
or intellectual curiosity.
And that's why I have a catchphrase,
I'm going to grab a Diet Coke
because I'd rather talk to the younger people
on the call to say,
if you're going to get ahead,
you better understand how Bitcoin works.
You better understand everything we just said
about the macroeconomics.
And then from there,
you can understand a Bitcoin treasury company
because you're not ingrained with the traditional thought
that, oh, it only has to work this way.
And when the ratios are flipped,
and I say it to somebody, they look at me and I have a choice right then and there.
And I keep this inside my head. I cannot say this to somebody that's a CFO of a publicly traded
company that you're the, you might be the dumbest person I've met in the past six months. I just
can't say that out loud. And that's why I have that catchphrase. And I just walk away from them
because there's so much, yeah, there's so much of an intellectual gap here that I cannot bother to
explain this and then when they say what do you mean it's this simple sometimes the hardest thing
to understand is the simplest concept it's it's it's it's going to get wider you're right i mean
this this education's gap is going to get wider it's going to get greater with ai it's going to
get even worse um and so it's like that's why everybody is preaching even sailors like use the
use the ai tools last night i was building a project in ai i was you know dumping files in
there so it could read the files and think like me and i like put some things in there so it's all
um completely agree and one other point i wanted to hit on is that you know again more ponzi comments
in the uh in the thread here this isn't a ponzi because they're buying an asset that's globally
liquid 24 7 365 on an exchange nakamoto went and bought 750 million dollars of bitcoin they just
bought one million dollars per minute and the market ate it up this is this is a huge marketplace
it's not like uh you know one one equity that's trading on one exchange this is otc markets that
are spread broadly and there are many people that are buying this asset this isn't like hot air
of holding some some promise of um an asset that doesn't exist so it's very different um shall we
talk about the elephant in the room mnav guidance sure should we get there mason mason you had a uh
a really good uh explanation of it uh i think so basically in the q2 earnings call which happened
what was it four weeks ago yeah 20 20 days ago july 31st july 31st july 31st 20 days ago
we got some explicit guidance from mstr that they were changing their or they were altering their
ATM strategy to not use the ATM to raise capital between one MNAV and two and a half MNAV. And then
above between two and a half and four, it was strategically use it. And then above four, it was
like, we will, we will use the MSTR ATM. And then it had prices associated with it.
Should we pull up the slide?
Exactly.
Yeah, go for it. If you got it, let's go, let's go for it.
I've got the original one and the revision together. Here we go.
can you guys see this
nope i see everybody else it's our meeting oh god one second guys
i did like that people were calling out that dan put his rally cap on though
he's ready to turn these markets himself if he has to
you guys see this this is the original weird if it works
It's weird if it doesn't work.
The updated guidance.
Yep.
Yep Below the 2 FNAF strategy will not issue on MSTR except for one except to one pay interest on debt obligations and two fund preferred equity dividends the updated guidance was strategy this
was eight it was 16 days later 18 days later guys i think it was august 18th this monday
so that would be august 18th yeah 18 days later strategy will technically issue msdr to pay interest
on debt obligations fund preferred equity dividends and three otherwise deemed advantage
to the company so there are seven words there that changed a lot of people's fates let's uh
take a moment and understand the anxiety that they probably had when they issued that
like what do you think they were thinking about i'll tell you what they weren't thinking about
What they weren't thinking about was a troll like Jim Chanos posting this with Andy Constant, and I'll call him out, doesn't understand anything.
How that guy got where he did, he was very good at what he did to make the money that he did, but Lynn Alden was very nice to him.
And so what happened was Jim Chanos then posted these two things that you just showed, Dan, and said, what's the difference?
And then Andy Constant chimes in on this, and it was the FUD, fear, uncertainty, and doubt.
And I think sometimes, I think they probably thought about it, but they didn't think about what happens when a naysayer like Jim Chanos just says, oh, well, this is it.
And it started a FUD machine that went unstoppable for three days.
And I think that's what people need to think about is that that guy just wants to be short MSTR long Bitcoin.
And you guys fed right into it.
He played the social media really well for a freaking boomer.
So, yeah, go ahead. Go ahead, Ben. You got something there.
I was just going to say, I think one thing you have to consider when you look at any new guidance
is what investor group are you looking at? So, for instance, what you just said right now,
about Chanos and these other guys being on social media, you look at which group are they playing to,
right where are they breaking sentiment and they're breaking sentiment in the retail communities
right you spin up all this energy you tell everyone how wrong they've been you start getting
people panicking what i think people are are overlooking is who are the actual primary
shareholders of this company both the common stock equity the preferred equities the convertible bonds
it's major institutions so i i think the lens you probably have to put this through
is what were they thinking when they saw that guidance right these are the people that are
actually bringing the real capital in and when you see more than four billion dollars a day
trading hands and micro strategy that's not retail right retail not moving this thing around i know
that it's the loudest in retail. And that's because that's the echo chamber that we've
all gotten ourselves into here. We're in that community. But I like to look at it through
what's the lens of their largest partners. So what does a capital group think about this?
This is exactly what I'm talking about.
That guidance, right? I'm not so sure. I think we kind of came into this two wrongs scenario.
right i i think that the first mistake was issuing that guidance to begin with i don't think agreed
very yeah i think that it seemed like a no-brainer to put that out there because people had been
calling for it they started to want some certainty around the way that they were going to treat the
atm and for them they looked at it and said this is pretty you know low risk for us because the
name of the game for us right now is going to be to put the leverage back on right we're trying to
lever back up now so if we're not going to be using the tool to deliver ourselves and it's going to
take us a very long time to issue these prefs to get into the 30 40 leverage range based on the
presentation that they had i think it seemed like an easy handoff win to the community that had been
calling for it. So I think that might have been mistake number one, was actually giving that
guidance. I don't think it was necessary. Things had been performing fine. And then that causes the
second one, which is if you're dealing with these large institutions and they don't like what you're
doing, when you see a sell-off happen, you know, to me, I look at that and go, that's not just a
retail sell-off. That's not people out on X getting upset and selling their shares that's
causing that type of a drawdown. You might be getting your wrist slapped by a large institution
saying they don't appreciate that guidance. And then you've got to reverse and go, well,
it's not exactly what we meant. You know, like kind of walk it back. So you're almost in like
the two wrongs and you've got to learn as you go. And I don't think that there was anything
malicious about this whole transaction. I think people are trying to make this a very
malicious endeavor that happened where people were deeply wronged. I'm not so sure that's how
it played out. I think that they did what they thought was right. They got the feedback that
perhaps it wasn't, and then they had to correct it. And now, I don't know what you do. Do you
correct the correction? I don't know. I don't know what you do from here yet. I think it's a tricky
situation that's going to navigate. But when you see the amount of correction in that market,
to me, that feels like bigger selling than what retail is going to cause.
Thank you, Ben. I want to chime in. So I think this is okay to say. We have a prep call on
Monday nights, always before the Wednesday call. And we talk about what topics we're going to talk
about, who's going to join the call and so forth. And I believe on the call, Jeff, you were talking
about this, is that what Saylor is doing, specifically him and coming up with this,
having a founder-led company, there is no playbook for a Bitcoin treasury company.
They had to build this and they're charting new territory. And I don't remember, was it Ben,
you said or Jeff, one of you two guys said that on the call on Monday. And so what's happening
here is that they're charting new territory. They didn't invent perpetuals, these preferreds,
and they're sorry, the perpetual payments. And so what's happened here is that they're giving
the guidance for something that they built. And from that perspective, just because you can build
something, you don't know what happens when you put it out in the wild. And going back to what you
said about the announcement about the guidance, you take it through legal, you talk to some,
maybe some outside companies, if you can, banks. If you're not allowed to do that,
you put it out there and then you have to pivot. And what we didn't like was this pivot happening
in a short period of time. But realistically, the concept of MNAV, I believe it's either Jeff,
you or Ryan came up with this a year and a half ago, right? The whole concept of multiple net
asset value. And so from that perspective is we have brand new metrics that we talk about.
And then what should that number be? Like PE. We all know that a PE of sub 10 is probably
a pretty low volatility company and not going anywhere. But a PE of 300 is absurd. Or a PE of
zero is crazy. It means there's no earnings per share. But for MNAV, it's all over the range of
where it should be. And I think this is where we're trying to figure out what is the range that
these metrics should play in. And if you give guidance on it, can we hit those objectives?
So I think what I'm trying to say here is that it's kind of hard to figure this out until you
do it. And this is the first company to do it. I think you've also got to, I always try to give
people in this position the benefit of the doubt where I can, because anybody who's in these
positions making decisions this quickly, you're going to have some missteps. Not everything's
going to be perfect. And I do think that they're trying to do this, you know, the right way.
And they thought that putting out that guidance was the right way. And then you also get to the
question, because I've heard people say, well, all they needed to do was wait for a couple of months
before they changed the guidance. And, you know, I'd ask you which one would be more disingenuous
if they knew they were going to change the guidance and didn't do it. Exactly. So they sat on it and
They gave you a couple of months and then they changed it, but they knew months before that,
that they were already going to make that change.
I think that's consideration.
I think they did it as soon as they realized it was a mistake.
Now, clearly timing, not great.
I mean, I would acknowledge that.
That's a tough look.
It's a really tough look.
But I do think that there is a component of this where you're learning on the fly and you put things out
and you run through a presentation and then all of a sudden you get overwhelming feedback on that,
you know, probably behind closed doors and publicly out on the internet. And sometimes
you'll learn that you may have made a mistake there. I don't even think it's verbal feedback.
If you just look at MST or IBIT, we kind of puked after their earnings there.
That's the ultimate feedback, right? Capital gives the feedback, right? Capital is going to move.
And if the capital is upset with something, it's going to move somewhere else.
Yeah.
Yeah, exactly.
At first, I was really pro equity guidance because I thought it was a good idea.
And I think they kind of went through in the earnings call of why it was a good idea.
And it's exactly what Graeme said.
They're flying this ship or flying this plane in the air.
And they're trying to figure out how this works in real time.
And I think what they couldn't account for was the second and third order effects of putting out that equity guidance.
And you don't know how the market's going to respond until you do it.
And I think they are a fairly agile team and they're receptive to all different types of players.
And I think they're just trying to do what they think is best for common shareholders.
So I think at first I was kind of like, you know, what the hell?
but but the more i thought about it the more i looked into what the actual price was doing
what the what the preferreds were doing it made sense to me that the the the pivot was not for
nothing yeah it's it's also entirely possible that that's still their intent but they just needed to
provide themselves with that flexibility to be able to operate and just to keep that as an option.
And maybe that appeases some investors that are upset by the original guidance saying,
you're giving up this tool. This is one of your most powerful tools that you're holding and you're
giving it up. And there's no guarantee that the market's ever going to reward you at a 2.5,
right? That's not necessarily up to you. And so I could see where there would be a reaction
against that type of a move happening.
And you're getting that feedback in real time
and you're trying to make the changes
and capital starts leaving, right?
It started leaving the common stock equity.
It started leaving the preferreds.
I think Dan called out a few times,
it was a little surprising to see
how much capital left the preferreds.
And I think what's going to be really interesting
is when you see new 13Fs start to roll out in the future
and you can start comparing holdings of these institutions over time to see who moved, right?
Who might have been upset by this? Because if you're moving, I think a lot of the, if you
would go look at the prefs, I think a lot of those are going to be held by institutions. Now,
we might not be able to see the moves in some of those because I think some of them haven't had a
reporting cycle yet to be able to measure against. But like Strike, I know that information's out
there. So you'll be able to watch that one and see which capital moved. So, you know, this is
going to be a major, major learning event here for strategy and for everyone else that's watching.
Being the biggest and tripping up gets all the headlines. And the problem with that
is it has ripple effects through the entire ecosystem, right? It wasn't just strategy that
got hit. I mean, it was every Bitcoin treasury company and that Bitcoin started. I mean, it was
just a confluence of red. And so, you know, in August, on top of that, in the middle of August
summer, while the S&P is puking and everybody's like awaiting guidance from the Fed and speculation
everywhere. It was just like horrible timing, like just absolutely horrible timing all around.
Dan, I want to ask you a question and I want you to put your strife hat on.
Let's say you're a strife holder.
I'm all ears.
And you don't believe in MSTR at all.
You're like, this is some bullshit.
But you're a strife holder and you don't believe in MSTR.
But you're like, they've got so much money.
This thing can puke so hard.
And I'm safe because I'm most senior in the capital stack, aside from the converts.
I think if MSDR trades at a premium-
Hold on.
How do you feel about the guidance that they came out with?
I see exactly the question you're trying to ask me, and I know the proper answer.
But I think as a common shareholder myself, I totally understand the reason for which they issued the guidance and took it back,
especially considering that equity issuance creates a larger capital base, a larger collateral base for the preferreds.
That's a huge part of kind of the overall capital structure.
But that's not to say it should affect the price of the preferreds.
If the preferreds are forward looking in their expectations.
What if they just sell, though?
No.
What if they're like, I don't want to be a part of it?
My point's a value point.
If 10x over collateralized isn't enough for Strife to be a creditworthy instrument.
Like, you can't.
What do you want?
You want 20x over collateralized, 30x over collateralized?
You want to ATM it to fucking all hell?
like i'm not saying whatever but my point is is like i think there is a a manage it's balancing
those expectations strife is credit worthy strife is credit it is credit right now as it stands
actually with the converts out of the picture with the converts out of the picture that is the most
credit worthy instrument in the entire market i just looked through the entire was on my interactive
brokers bond screener looking at all the high yield bonds all freaking day and what and what i
was doing i was looking oh okay let's look at jet blues bond they're you know they're 20 31 bonds
yielding 10% between now and 2031. Okay, cool. That's the same as Strife, give or take. What's
their overall capital structure? Well, they have 16 billion worth of assets and 12 billion worth of
debt. It's all short-term debt, but the principal do. Oh, good Lord. And they're a dying business,
and the cash flow doesn't even cover the obligations. So it's a complete disaster,
right? Okay, so Strife is a much more credit-worthy instrument. And then you go out and think, okay,
well, if the common equity trades at a premium, then you know the dividend payments of Strife
are guaranteed They 100 guaranteed If MSDR traded at a discount the coupon payments of Strife are still guaranteed because there would be four sellers of BTC to cover the Strife coupon payments But the fact that MSDR trades at a premium is literally it almost an implicit guarantee
that the Strife coupons will be paid.
So that's the thing I don't understand.
Like there are mispricings between these two securities because they represent a claim
over the same collateral.
Right.
So risk is mispriced globally.
There's $300 trillion of that stuff.
Right.
Right. So Dan, I'm going to reframe what you just said. And that's the video I watched right before this, right? I listened to you.
Go watch it.
Yeah, go. It's awesome. This guy, Dan Hillary, is great. So the point here is, first of all, with JetBlue, if the price of fuel goes up, then they're like screwed or God forbid there's another global COVID thing.
You know, it's like, how do they even pay that?
And so for this perspective, the Bitcoin has the whole monetary network behind of the community of it.
So from that perspective, we don't have to worry about it.
But this is the problem, Dan.
You implicitly understand this at a 25-year veteran level of what you just said.
But the 25-year veteran of existing bond pricing is like 25 years below.
There's like a 50-year spread between the common understanding of bonds, right, the way that they've been functioning for the past 100 years, and what you just described right now.
And the problem is compressing or bringing those people up through education is largely impossible.
So what we have to do is switch to the entities that could buy strife instead of trying to convince these other bondholders to do it.
And the way they do that is by offering this yield and the coupon payment.
So I totally get it.
And by understanding the leverage ratio.
So the takeaway for this is, Dan, you totally get this.
Jeff, you get this.
Ben, you get this.
The problem is, is that they're not even bewildered, Jeff.
They just don't get it.
I don't know how else to say that.
They think that Bitcoin has a probability of going to zero.
And everybody on the screen thinks Bitcoin does not have a probability of going to zero.
That's it.
Right.
That's a really good point.
If you take that probability off, the skew of returns for Bitcoin are fat.
Like they break models.
They break risk models.
You can't even, it doesn't fit into anything else.
So what's, but I feel like they issued, so this comes back to the idea of guidance of
BTC over collateralization. They had a little pyramid of strife, strike, stretch, stride,
and the BTC rating on each of those, the target BTC rating, which I think was both an underappreciated
and highly relevant slide in the Q2 earnings report. And we saw that both strife and strike,
or sorry, stretch, have a targeted 10x over collateralization rating of BTC. I think strike
may have been eight and then stride was three or strike was five and then stride was three,
something along those lines. I feel like why wouldn't they, shouldn't common equity issuance
guidance be essentially, we will expand our collateral base to support the given guidance
on BTC credit ratings across all our different securities, right? That would be number one
in changing marketing conditions following bitcoin environment we will bolster the credit worthiness
of the company by issuing common equity to to reinforce these credit ratings which we have
put forth for each of our securities and that's how you know you're buying a different tronch of
risk along the capital stack i think that's kind of how you you you break it up i think you've got
multiple things there i think you're i think you're right and i directionally i think this is moving
that way. I've got a couple perspectives that I would challenge and I think this is an evolution
of how this market moves. BTC rating is great. I think the market will start to move as they
remove converts from their balance sheet, the market will start to move to interest coverage
ratio. How many years of interest do you cover? Not necessarily the debt, the BTC rating itself.
so i think that is a future evolution of like what a future credit rating here looks like
because the number it can non-existent right now it's basically zero they can pay 120 years
they can lever up the capital stack with like 100 liquidation preference over the btc that would be
a game changer for the common equity it would be really scary but it could be highly successful
it would be scary now now here's here's the two here's two elements uh that i think apply to this
mnav situation and kind of your conversation here when anybody buys an equity you have to trust the
company like there is a just general there's an element of trust if you do not want to buy a trust
a product where you have to have trust go buy bitcoin that's something we've talked about from
the very beginning like if you want a trustless asset go buy bitcoin hold it in cold storage i i
think everybody is not financial advice should go through that process in order to have conviction
and what you're holding here, you should understand how Bitcoin works and you should have done a cold
storage Bitcoin transaction. And if you want a no trust system, you could do that. Now, anybody that's
here, if you hold any equity, you have to trust that the team is aligned with you and is going to
operate in best interest of the equity holder. And so there's this trust element. And if you buy
the securities, the credit backed securities, you also have to have another level of trust that
they're going to manage the capital and the collateral ratio, particularly because of the small
component of profitability of their software business. So you've got just multiple layers
and elements of trust that I think can evolve. That's why I'm working in this space. I think
this trust space can evolve drastically. And you think about the, to Ben's point earlier,
how people are involved.
Sailor owns 7.1%.
You know, I'm going to share my screen
because I looked this up
because I was curious too on 13Fs.
And maybe I'll make this a little bigger
so people can see here.
So this is the institutional holders.
This is the top 100 I've got listed in this list here.
The top 10 institutional holders of MSTR
hold $27.6 billion.
That's a lot.
That's a lot of capital.
If any of these guys call you at any point in time and they tell you to jump, the only
response is how high?
How high do you jump?
And that is, I think we've got to take that into consideration.
Again, do I think anything that happened was ideal?
No, but this is like, you think about the scale of Twitter.
and all the people that hold capital on twitter you know i i um i'm not even a blip on this radar
josh and all of his followers a lot of respect to josh but josh and all of his followers like
are not a blip on this radar you go down to the hundredth largest holder here
100th largest holder has 32 million dollars of this stuff and this is what's publicly filed this
is not this is what's publicly filed in the us that doesn't take into consideration um international
sovereign wealth funds or anything anybody that doesn't report in the us so if you just take
sailor and fong which this is actually an interesting data point fong has 1.3 million
shares which about 477 million dollars another interesting data point if you take all of the
institutions and that that file in the us plus sailor and fong you've got 56 of the ownership
there. And you got to trust that they're operating in best interest of the common equity shareholder
and everybody's aligned. So, I mean, we're probably going to get roasted for saying that, but
it is what it is. All equities have a trust element. If you buy Tesla, you got to go trust
that Elon Musk isn't going to start getting into hentai anime porn, which I think is a pretty big
risk right these days. So, you know, that's just that's like, that's where we're at. And
it's just kind of how I see the world. It's like, it's rational. Like you,
you start to take a rational perspective here. And I think the,
they're kind of screwed either way to your point, Ben, you had like,
you like two mistakes. And then how do you, how do you fix it? They're probably just frozen.
And they see everything that's happening in the marketplace right now. They know,
So like Sailor watches this stuff.
You know, everybody sees this stuff.
Yeah, if you're trying to build trust,
like are you going to wait two months to fix a mistake for better optics?
That's not the way to go.
And I didn't like the original guidance.
I actually prefer the revised guidance.
So I'm glad they did it sooner than later.
When I saw the original guidance,
I started feeling real good about my covered calls.
I was like, oh, okay, cool.
I got a framework.
I can just plug it in.
And if I'm feeling good about my covered calls, that means I'm worried about my long calls.
And I know that that was something that they wanted to solve.
Like that was something that they thought they were solving with the guidance.
And I was like, oh no, this was like right up my alley.
And I don't want to feel confident in the covered calls.
Like that's not how you should feel.
You want that uncertainty.
And so the revised one built in that uncertainty of giving the company the ability to do what they need to do for the company without it being too obvious.
So I would have preferred that the whole guidance was proprietary.
Like I don't mind them having guidance and thinking about it.
But it kind of just reminds me of one of my favorite lines from Office Space when they just stopped paying that guy that they had fired a long time ago.
And they said, we fixed the glitch.
So, you know, there was a glitch in the guidance and they fixed the glitch and, you know, better sooner than later.
Yeah, I think the table you were showing, Jeff, it does just put numbers to that point where we have to regularly remind ourselves who's actually in control here.
And it is none of us on Twitter. None of us. Right.
I mean, those are huge numbers. And if you're getting that call through your IR, you're taking it and you're listening very closely. Because if capital comes out and says, we don't like it, we're out and they're offloading, what do they have? $5 billion worth of MSDR stock? You're going to feel that.
right those are partner level investments in these companies and so you have to be cognizant of who
are the true partners here right we look at it through the investing lens of a retail audience
because that's what most of us have spent most of our time around right we invest like retail
investors do that's our view of things we get the information we get it's a different ball game for
these companies that are investing you know four or five six billion dollars into one of these
companies that's a very different type of relationship that you form with these companies
and you're going to be in regular communication with them and they're going to be the ones that
give you feedback really really quickly but you know putting out a blueprint like that to what
saleh just said that's something that they may not appreciate at that level having a blueprint
that's that spelled out for that reason. You know, there's some questions that came in,
you know, what do we do about financial education? Really, Saylor has to educate the top 10 here.
That's it. That's the key institutions that need to understand. It's not an insurmountable task.
So if these 10 are all on board, which I believe they probably are, that there's really only maybe
10 or 20 other large institutions that he has to basically onboard in order to understand what a
Bitcoin treasury's company and what he's specifically doing. The other question I saw that came up is,
what about the prefs? If we're not going to use a common stock ATM and you're not going to do the
converts, do more prefs. Well, the catch of the prefs is that the maximum it pays is 10%.
And so what happened is that if you have a straight MSTR stock and when they did the converts,
and let's assume that they were 40% convert with no coupon, that 40% got achieved very quickly.
And so what happened was the class of investor that did the converts that then Delta hedged it,
so they protect their downside, right, is that all of a sudden those went into the money very
quickly. So that was like, oh, that was like a really good play or instrument. On the prefs,
given a 10% coupon and the yield goes down as the price goes up, it's like, oh, interesting,
kind of cool. Will it take the bond market? Probably when, take some more time. But that
volatility leads to slower adoption in my view. And so educating those bond buyers that would buy
that instrument is a slower cohort of individuals or institutions. Whereas the ones that are used to
the converts or as dan said is buying the the dog crap jet blue what was it 16 billion dollars in
assets 14 billion dollars in liability i mean it's a turd right it's a turd and and what's the coupon
on it same as the same 10 10 and it's a turd and they've been able to people buy this oh it's jet
Louis because it's like, oh, it's an airline. It moves a person from point A to point B through
the air on a Boeing airplane. Oh, I understand that. I'm like, yeah, you're real smart.
So I think my point about this is that it's like if they think they, because they go on an airplane,
they get it. But because Bitcoin, you can't touch it. They're like, oh, and I don't know who invented
it. And it's only used for money laundering and drug deals. Therefore, I'm not going to even give
a second thought. And so I think that that's hopefully not your target audience, but that's
where we are with this. So I think that the prefs will move as they become more comfortable with it.
And because they're relatively new, they don't have a five-year history. Now, MSTR stock has
been around for whatever, 27 years, but the converts and MSTR on a Bitcoin treasury have
been around now for half a decade. So that's a much different timeframe to understand what the
behavior of these instruments are in the real world and that's why it could be more comfortable
because you could look at the value of this how it moved through crypto winters
and i think that comfort factor just comes with time yeah and uh this risk element which
dan i i love that you're leaning into this uh the fixed income space because this is uh
it's super fascinating but but like that jet blue bomb the jet blue prep it's probably got zero
liquidity right like if if you held it if you wanted to get rid of it it's probably so hard
to get rid of like off if you tried to offload it and there's probably just not a lot of buyers there
and this um this element of liquidity and these new instruments uh they're coming out which are
hyper liquid and well i guess we're we're seeing how liquid and how transactional they are now but
there is a market there.
interesting to see how this whole thing evolves and um i started thinking back to this uh
this book uh against the gods uh it's called the remarkable story of risk and i i need to go back
and reread this but like this whole concept of probability and risk is only like 600 years old
maybe 700 years old um and it's continuously evolving and like we're literally at the forefront
of a new evolution of risk framework
that doesn't fit within like traditional models.
And we are literally building it
and designing it as we go.
And that's pretty cool.
It's a neat place to be.
Like this whole concept of this equity
and how it works is,
if you think Bitcoin is directionally going one way
for every four years,
if you look back and you look at four year
compound annual growth rate of Bitcoin
and it's going one direction and you understand the architecture of the equity market and you
know that if my market cap is a function of my underlying Bitcoin holdings and I know that's
going up and I know that 60% of the equity market is passive index funds, I know I'm going to have
liquidity on my stock. It's a directional bet on Bitcoin knowing that you're going to have liquidity
on your stock because of how the architecture of the system is designed and you've got capital
coming in from passive funds consistently. Now you can also take, you can start to issue Bitcoin
backed credit and, you know, use it all together. So yeah, it's neat. Keep leaning into this risk
framework because I think you should probably start going to sell these instruments to big capital,
get paid, get paid a fee to do that. I'm just running a hedge fund, just making my lawn for
trades yeah but i mean what if you went and sold five ten fifteen billion dollars of this stuff
because you knew how crappy everything else was in the market and you're able to communicate it
it's possible dan's the one leaning on micro strategy right now he was upset with the
guidance he took his hedge fund he's leaning on him make the point with the institutional guys
just one last time and then i'll let it go here but if you look at a pref like strike
the same number two holder of msdr common right capital international is also the second largest
holder of strike so when everyone's surprised when you're seeing mstr going down and then you're
seeing the prefs going down as well if you're a big guy and you want to lean on one of these companies
you just turn on a t-wop and start selling until they say mercy you know it's a possibility i don't
know that that's what's happening but when you look at how interconnected the holdings from these
institutions are across this entire portfolio and you're seeing you know this activity in prefs that
you wouldn't expect you know necessarily just because the common stock is going down or at
least to the extent you know you start to look for how are all of these connected and if i was a big
investor and i got upset what would i do to make my point and the only way to make your point is to
use your capital right you can call if you don't get the right answer you start using your capital
so just a theory i don't know but you know you do start to shift up to that level and try to put
yourself in that mindset of who's actually running the show here and how intertwined are they in the
entire ecosystem and when you start looking at that you realize there's a lot of familiar names
that show up across the board for all of this yeah because they don't care you if you if you've got
you know hundreds of billions of dollars you don't care you can use your power however you want you
can you can wield it however you want and like that's i mean look at politics and politics is all
money all this it's the same thing um it also means they could be back quicker than people think
right true they like the change in the guidance and the changes have been made that makes them
back into a comfortable position they could come back right that'll be my my hopium pitch here for
a minute but you know if someone big did start exiting you know because they didn't like that
guidance and the guidance has changed and now they're comfortable again you can see that capital
come right back into the ecosystem so we'll see what happens you know i i want to say that this
also this is i don't think we've mentioned this before um the other thing is that um because the
the bitcoin uh treasury playbook was published in what 2022 sailor published it and then when
And what happened is, and I believe Semler was the first company to adopt it, maybe the
second company to adopt it.
I'm guessing.
I mean, I'm correct.
Semler was, yeah.
It was just number two.
So now what's happened is that you have over 100 publicly traded companies that are all
doing this.
So when MSTR was the only instrument, because you really couldn't buy the converts unless
you were, there's a way to do it now as a retail.
But the only way that you could get access to a leveraged Bitcoin equity, which we didn't
even have the term back then, was just the MSTR as that only instrument that you could buy.
Now, what's happened is, is that because the ecosystem has gotten bigger, there's now other
alternatives to buy, which then that capital moves to other instruments, which may have different
multiples or metrics that they could judge by this. And so that takes some of the buying pressure
off from retail on MSTR. Now that's, you know, there's an old saying, the victim of your success.
And this is the thing where he built this ecosystem and he always planned to do it.
He published these guidance to give to your CFO years ago, three years ago to say, this
is how you do this.
And so what he's done is not only blaze the trail for strategy, is that he's also built
this ecosystem of other companies to copy what he's doing.
And from that perspective, I think that that also happened about the same time from November
of last year to now that you had that took some of the buying pressure off on on strategy and so
i think that all of this came together i think that uh um time and price solves all problems
provided that you don't rent your conviction jeff you said this at the beginning ben oh sorry ben
yeah yeah if you have conviction in bitcoin and you believe in that and that if you had everybody
that's on this call right now listening we have what 5 000 people 7 800 8 500 8 500 people okay
8 500 people on this if somebody came to you and said hey we're gonna let you borrow 50 of whatever
you let's say you have 100 grand and we have one bitcoin we'll let you borrow 100 grand so you're
50 lever to go buy another bitcoin and you got to pay us back in five years and it's 40 you got to
pay back in five years i think everybody listening would be like oh i'll take that deal now that's a
convert that's what it would be we would all take that leverage right there no margin call feature
it goes five years and i only have to pay you 40 of what it is at the initial purchase price on an
agreed amount that it goes to and if it goes way beyond that in five years you don't get the other
side doesn't get the upside you keep this of course you would take that deal so so can we talk about
how freaking cool it is that strategy started talking about this they laid the framework and
And then he goes on just a podcast journey and says, here's what I'm going to do.
I'm going to add Bitcoin to my balance sheet.
I'm going to leverage it.
I'm going to start doing all this other stuff.
And he convinced other people to do it.
Like he imagined like that feeling like as I'm now working for a company that's looking
to do the same thing, it's incredible.
incredible like is a total pioneer like pioneering a space and talking about it like dipped his toe
in the water as I said hey water is warm like come check it out like my company just went from uh
500 million dollars to 70 71 billion dollars of capital in five years and Jeff it's the equivalent
of getting people to use electricity it's yeah it's like hey guys my company you know I'm creating
factory, we're using electricity. Try it out.
Check it out. Yeah. We're like, okay, here we go.
It's pretty good. It's pretty good.
I think it should work. I think it's gonna work. Yeah, it's
it's just a it's a wild phenomenon that's happened in
the market. It's just an exciting time to be.
I think it's pretty ironic that a lot of Bitcoiners are
really defensive when it comes to to bitcoin treasury companies but they they imagine a world
in which every company is using bitcoin right if if simultaneously you believe that one bitcoin is
going to become a global asset which every individual family and company will use and number
two that you believe companies will exist in the future then obviously companies are going to adopt
Bitcoin. And this goes back to an earlier point in the night. Bitcoiners are spending a lot of time
criticizing Bitcoin treasury companies, but they're not talking about JetBlue or they're
not talking about the rest of the landscape, which is awful. Horrible. Risk is mispriced everywhere.
Risk is like vastly mispriced. Horrible. And instead they're choosing to kind of pick on
Bitcoin treasury companies because they're doing, it's doing better than Bitcoin, but,
but there is risk involved potentially. Yeah. I think that they're just scarred from like FTX
and, you know, over leverage plays like, uh, they're, they're, they're scared, right? Like
you think about, uh, some of the people I've met at some of these Bitcoin conferences, they're like,
I mean, they're preppers, right?
Like they're anxious people that are controlling their own assets.
And that's where their mindset is at.
And that's how they communicate in the marketplace.
And some of them are very intelligent.
They're just incredibly anxious.
And that permeates through how they communicate in the market.
And they may have 50,000 followers, 100,000 followers.
Doesn't mean they're not anxious.
and it doesn't mean that you know they don't understand like the traditional like corporate
finance market as well as people that have worked in it for 10 20 30 years that are operating in the
space so yeah it's uh and that that's why like i think i was i'm still on this campaign to like
look at the rest of the market through a lens of bitcoin like go look back at net incomes priced
in Bitcoin on any equity going back in time. Like, Dan, keep doing the analysis on the debt,
like call everybody out, tag them because it's honest and it's true. And you can start to see
this in a data perspective. It's pretty incredible. I think you made the point, and I can't remember
if it was on one of these shows or on one of the other podcasts, they all blur together now, but
you'd made the point that Bitcoiners right now are spending a lot of time infighting
when there's still a huge amount of work to be done out there more broadly on bringing bitcoin
and bringing awareness to bitcoin out there into the masses and so you know the the amount of time
that we're all spending throwing mud at each other and disagreeing and being mad if someone doesn't
adopt your point of view on a topic you know like everybody's pushing for bitcoin here right these
companies are doing a huge amount in raising awareness for Bitcoin, right? Stories like a
strategy that are getting people to wonder what the heck is making all of this work, right? What
is this asset that's doing it? People might show up from there and go get exposure in their brokerage
account to an IBIT or one of the ETFs. And then if that asset performs in their portfolio, now you're
down to the next level, right? Now you're interested in what's actually going on behind the scenes
here next thing you know you're running a node in your basement and you got a miner running and
you're trying to participate in everything you can within the network and you see the value
right you see it and you participate in it and that's when you turn that corner and all this time
you know we're on the internet that is just what comes with the internet right people throw mud
and they hide behind avatars and hurl insults at you and tell you how dumb you are and that's just
you know that's the internet that that comes with the territory but there's such a bigger mission
still out there. Like the penetration of awareness for Bitcoin out there in the broader community,
in the broader corporate landscape is still effectively zero. I mean, there's just nothing
out there. So yeah, I think a lot of the attention is getting wasted fighting amongst people that
already believe in Bitcoin. And really that attention should be spent, you know, getting
the word out there to people that have still probably never heard of Bitcoin. I think there's
There's a lot more of that than we think there is.
You know, I think that this is a problem that's going to come up.
And this is the opposite of what Bitcoiners think.
What some people have said, if the price goes up, then people will get into this because they'll see the success of it.
I think what happens is that if Bitcoin, when, not if, when it runs to $250,000 or to $500,000, I think you're going to see people say, I remember that when it was only 50 grand.
I remember that when it was $100,000 and now it's $500,000.
Oh, I missed it.
Therefore, I won't buy it anymore.
Right.
And I think that because Bitcoin doesn't have a stocks, but I get you could buy sats.
You could buy it in any fiat dollar amount, you know, basically.
And I get that Ibit exists and you have this unit bias.
But I think that some of the success of this will be problematic based upon pricing one
Bitcoin.
And years ago, we discussed we should price this in being in SATs.
So I think that where this is going, I think that to explain to people that as long as you
believe that they're not going to balance the fiscal budget, that they have to print
money, your ability to get into this.
And then I said the hardest part about investing, not trading, is waiting.
I went into this and I waited two years, four years, eight years.
And what happens is I've been in this for eight years now.
And that's the hardest part. But if you're 28 years old, or since I'm the oldest guy here,
if you're a Dan, you're what, 24. So if you're 24 years old, listening to this,
I want to tell you something, eight years will go by very quickly. And you want to think about
where you're going to be when you want to be 32 years old. And that's the way I think Saylor
thinks about accumulating as much Bitcoin as possible, is that if it's $500,000 a coin,
four years from now or two years from now or a year from now.
I want to buy as much of it now, reduce my expenses to acquire as much as I can
to have that increase in market cap.
So I think that that's what we have to look at this.
And that's where I think that people can help explain to people that
the problem that Bitcoin fixes, which is both M2 money printing,
monetary debasement due to deficits and CPI inflation,
those two were not going to be fixed ever.
If they do send them to make, because those people are completely patently wrong.
Well I think that the education that Bitcoin ultimately gets people right As it brings you down that rabbit hole of what the heck is going on that makes this asset work over a long period of time What happening And it not
just that the number goes up, right? It's that there's several numbers going up, including the
supply of the one unit or medium of exchange you're used to using, right? The US dollar.
and so when you start to go down the path of asking the right questions right first finding
out what questions should i be asking because most people are totally asleep at the wheel right we
think everybody knows about monetary debasement and inflation and all these things and you know
they don't they're just trying to get they're drafting their fantasy you know just you know go
to chipotle and hopefully you know get guac if things are good that week but when you start
understanding the right questions to ask because you start to understand that there's a significant
long-term impact of ignoring it or not understanding it you know that's when that real education kicks
in and you can start searching for what is the solution to that right how do i get out of that
system if it becomes completely clear to me that i'm being manipulated into being a spender at all
times because every dollar i'm holding is going to devalue out from under me so it's better for
me to at least spend it and have something to show for it today because it's going to be worth more
later you start asking the right questions and when you ask the right questions you know ultimately
it leads you to bitcoin so this is getting bitcoin awareness out there is going to fast track that
education because it starts to highlight here is the question that you need to be asking right this
is what you're ignoring in your own life and it has significant long-term implications for you and
and your family and the younger you are when you figure it out, right? Like the reason Mason and
Dan are going to be way richer than all of us is because they're figuring this out so early
and you have the benefit of time in front of you still for this to benefit you. So you can
take on assets, have that long time horizon you're focusing on and put the fixes in place early that
get you out of that system where you're no longer bound to that. So that's why I think it's important
to really push the Bitcoin narrative alongside all the Bitcoin treasury narrative as well,
because they're connected. One's just doing it at a corporate level. They're saying,
we've got this problem too. And JetBlue hasn't figured out that they have this problem yet,
but they've got this problem too. And they've got to find ways to solve for it. And if you view your
business as an entity that needs to exist 10, 20 years, you've got to solve for this issue
in your corporation as well so to me it's all about getting that that message out there
into the universe getting people to start getting curious about it understanding why these companies
are working why the valuations on them are continuing to go up why bitcoin continues to
appreciate over a long period of time and once they answer that question you know it becomes
rather obvious what to do and and the press are a continuation of that journey i think that's
another thing that like a lot of bitcoiners think that or at least just a general sentiment of like
sailors out to kill this thing which seems kind of strange but like this is this is
i'm gonna get roasted for this this is good for bitcoin like having having companies that are
securitizing bitcoin and creating financial products that are backed by bitcoin is good for
Bitcoin. Why? Because it's bringing people into the network that would never otherwise buy Bitcoin.
David Peterson put this together, but I really liked it. This is an analogy that I made,
is that strategy is effectively fishing in the ocean at different depths for different types of
fish and like these uh big whales that are you know at the bottom of the ocean are not going to
come up to the top and like eat your eat your bait on the top of the ocean they don't like they can't
do it um they're not meant to do that they're never going to bite at the top of the ocean so
you got to drop a hook down to the very bottom to where they're at and like these these pools of
capital are enormous like the in the ocean is enormous the amount of um you know buyers that
could potentially buy these instrument instruments are enormous and there's significant opportunity
here not just for strategy but for other companies to do the same thing which is why you're seeing
other companies start to do this uh because this is a 600 trillion dollar market this is there's
There's like $400 to $600 trillion of capital that could be interested, like total addressable
market that could be interested in these types of products.
And that market is going to continue to grow at the rate of global monetary debasement.
So it's huge.
This is the biggest total addressable market in the planet.
Bitcoin's got money, Bitcoin is sound money, and now you can create these products that
can address and fix the capital markets. So there's a long ways to go.
A lot of work to do.
I did see one funny comment in there, you know,
based on all the guidance stuff, you know,
what would the response of the group be if they decided to put guidance where
they might consider putting Ethereum in their treasury?
Okay. That's fair. That's a fair roast. I'm out. I'm out.
Please do not. I know we're all super fans, but I'm out.
I don't think I'd be able to get out fast enough before everyone else did.
Yeah, I'm out.
The problem with all the other digital asset treasury companies that are out there now,
right?
You're seeing there's Dogecoin treasury companies.
There's all kinds of stuff out there now.
The problem with that is you don't know what problem you're solving for, right?
So like I just went on my long extended rant about all the issues that Bitcoin fixes in
people's lives.
that's a use case that's universal to corporations to individuals right so that asset you can
conceptualize in your mind you understand the use case for it you understand the value that
it's providing to you you know what it's solving for with all these other ones my problem is always
i don't know what they're solving for i've i cannot figure out what they're solving for
so you know while yeah they're they're technologies is how i view them they're not solving a core
fundamental systemic issue like Bitcoin is with monetary debasement. And to me, that's why I look
at all of those and just have absolutely no interest in any of these digital asset treasury
companies. I just don't see the long-term value case. And I think all of them outside of Bitcoin
because of the true decentralized nature of it already and the fact it's achieved this escape
velocity, I think all the other ones are prime for disruption. I think in most of these other ones,
if you're a technology and you're trying to be the foundational layer for one thing or another,
you're in a race to low cost and you're just waiting for another token or chain to come out
that's optimized for low costs for the problem you're trying to fix. And all of a sudden you're
wiped out. Right. So anyways, I just thought it was funny though. When I, when I saw that,
there going you know we're all fans but what would we do if they decided to adopt ethereum
in the treasury and uh my answer is i'm out yeah yeah although all those digital asset treasuries
they're going to zero against bitcoin over a long enough time horizon and in the future
it will be looked on back on so poorly it'll be like you you could have adopted bitcoin
But you chose Dogecoin?
Yeah, those feel a little bit more risky, like clearly more risky, but like, it's almost
like this battle of who's a better capitalist, right?
It's like Tom Lee is leading the charge with, I guess, Bitminer.
And so you've got Tom Lee in the market, the sailor and everybody else that's running Bitcoin
treasury company playbook.
And it's like how it's they're all going to be in the market fighting for the same things.
And it'll be interesting to see how it plays out.
But I think you're right, Mace.
There's just so much of a head start here too.
If you wanted access to leveraged Bitcoin with preferred equities, how many equities
can you buy in the market right now?
There's one.
And that's pretty valuable, right?
That's unique in this landscape.
Anyway, go ahead, Soleil.
What were you going to say?
Yeah.
that um to steel men the case that mason was talking about you know some of these bitcoiners
that are just very suspicious of bitcoin treasury companies i mean some of the treasury companies
coming out right now are legit coiners so i think that's a good use case for us and this show
and and highlighting what a quote-unquote good bitcoin treasury company looks like and um
if anybody missed it, Julie Millard was on Tim Cotsman's digital conference,
that first marathon that he did.
I think she was on the second one as well.
But she discussed what authenticity looks like in the Bitcoin treasury space.
And there was three ideals in there, like true to self and true to ideals,
things like that.
And I think if anybody missed that, go check it out.
And I think this show will be illustrative on, you know, we're going to combat the FUD.
But then if there's something that's a legit complaint, you know, we should be able to mention that as well.
But I think some of these Bitcoiners just have like a revenge fantasy.
Like they want the fiat system to come crumbling down and like the OG Bitcoiners are the only ones that have all the capital.
but you know to mason's point like if all the bitcoiners have all the capital then of course
like the ones with capital are going to be the ones funding companies like or just capitalism
just cease to exist yeah yeah like does capitalism go away no all the bitcoiners have the capital
they're going to invest their capital in companies that's just that's the only way that hyper
bitcoinization can can go and in politics there's uh you know i recently moved to oregon
and one of the guys that lived here, he was like, well, considering moving, Oregon's repulsive to
capital. And the background of that is it's repulsive to some capital companies. It's actually
one of the best states in the US to have an insurance company. And why is that? It's because
the insurance companies have a lot of money and the insurance companies influenced regulation
and politics and like that's that's how these things evolve like with these bitcoin companies
as well they're going to get integrated in different political systems different regulatory
environments and different things because they have the they have power and it's going to take
some time but i think we've seen it right now with like this administration like adopting
just Bitcoin as a narrative and probably having some impact in swinging the election at a certain
direction. So yeah, it's, I mean, the future of this is going to be super fun, but we're still
so early, right? Like there's people, people don't understand what's going on here. Oh,
and another thing that was pretty interesting about kind of what grain was saying a little bit
earlier, let's say Bitcoin goes 10x, just goes to a million. The people that just own Bitcoin
are probably still not going to want to sell Bitcoin at that point either.
Let's just say you have a million dollars of Bitcoin today and it goes to $10 million of
Bitcoin in the future. Well, if it goes to $10 million of Bitcoin in the future,
what is your inflation adjusted return? Maybe it's worth like five today, maybe seven in today's
dollars. That's a decent amount of money, not a ton of money. You're probably going to want to
figure out how you lever your Bitcoin at that point. And that entire time, you're probably
shitting on the company that was leveraging their Bitcoin from the beginning or figuring out how to
leverage their Bitcoin from the beginning. And yeah, space just has so much room to grow and
evolve and change. So Jeff, does your AI agent ever get tired of talking about reinsurance?
you just ask it questions for three hours and it's just like cool you know talking about this
no you know i haven't talked about reinsurance in a long time and then i saw a hurricane
that like was happening and i was like oh my god like that was my past life i don't have to deal
with that anymore um because i used to i used to watch like all these disasters it was the worst
thing jeff wasn't the summer really busy for you summer was horrible i'm like okay where's the next
wildfire and then like we're watching these hurricanes spin up off of like the african coast
and we're like putting bets on where it's going to hit.
You're like, you're like, you're looking at the Noah pass
like every day and we're like posting them on the wall
and we're like, like gambling internally on like,
is this one going to hit the Bahamas or like,
anyway, yeah, it was a pretty crazy.
But since I've shifted and gotten out of that marketplace,
I haven't thought about it much until like really today
when I posted the reinsurance,
like the net capital relative to reinsurance companies,
which is just a crazy statistic.
like i worked in this industry for a decade which is huge there are like there it's it's niche in
the financial world but the amount of capital and it is huge like there's a ton of capital in this
marketplace and like i i used to i used to transact with these people i used to sell tranches of
insurance company volatility to like capital across the globe and get it diversified tranches all over
the place and these are like people that thought were incredibly smart managed capital you know the
the whole thing. And then I took a step back and I'm like, oh my God, these people are poor
relative to strategy, right? Like strategy, the net capital on their balance sheet could be the
third largest reinsurance entity on the planet, like bigger than Lloyd's of London. Like the OG
insurance company, the OG insurance consortium on the planet that's been around since the 1600s.
like what like that's crazy that's a crazy statistic and i don't like people can't
conceptualize like how much how much money that is like totally nuts but anyway yes so
like i the my ai agent should be tired of reinsurance but uh reality is i've had a
break for a little bit it's good jeff can't even ask it regular questions anymore because
that this comes back with as a reinsurance broker.
Can we can we someone commented?
They asked us about S&P 500 odds.
Should we go around?
Oh, man.
What do you think?
Sure.
I like that.
Dan immediately comes back on backwards hat.
Here we go Dan S 500 odds What do you think coin flip 50 50 that a non dan come on
coin flip it it's it's so it's so tough okay so s p like what are the dates to look forward to
september 5th or september 12th i believe september 12th is when the announcement comes
out of the companies that are added and deleted and then september 19th is when it's effective um
It's so hard to say. The S&P has a B minus issuer credit rating on strategy right now.
And I'm sure there's probably been some conversations on credit quality over the past, I don't know, 12 months.
and
it's just
I don't
I think it's unlikely
I think there's going to be another period of
they're going to get declined
for X, Y, and Z volatility
and
it gets delayed
to another quarter or another period of time
that's my initial thought
so I think 25% probability
they get included
Sole
given a long enough time horizon it's 100 but if we're just talking about first go yeah probably not
it's tough i mean you look you look back at tesla tesla didn't get included the first time and they
had they had four quarters in a row of of positive earnings now what what people will say is like
strategies had an accounting gimmick to that's led to positive earnings well it's like no that's
that's actual capital like there's actual return that they're holding an unrealized gain on the
balance sheet so you can argue about that but the reality is the company was 500 million dollars
had 500 million dollars in cash five years ago now they got 70 billion dollars in cash
what do you like how how much do you think that's going to scale and grow the next five years the
next 10 years it's it's probably a lot um it's like do you do you want that included in the s p
500 or not how relevant is the s p 500 well it's three of the five largest index etfs on the planet
so it's pretty relevant now but the qqq is what i don't know 10 years old qqq is 10 years old and
now it's the fourth largest index etf on the planet and what's the change of tone jeff i mean
i thought this was a big part of the whole deal what do you mean like i mean we were talking
100 likelihood of s&p inclusion oh no i never i never thought i never thought it was a hundred
percent inclusion he said hold on he said eligibility eligible people thought that it
meant inclusion but what you said was l they will be eligible for fulfilling the requirements based
upon four cumulative quarters of a positive eps yeah right right but i thought s p was kind of the
biggest part of the whole thing like smp the monster that's the final boss it's the final boss
mstr the s p 500 needs mstr mstr doesn't need the sp 500 and that's a stance i've taken this entire
time and i i think it's controversial i think this is the biggest topic of 2025 like in all of finance
um and it will be controversial like i i think they will not get included there's a probability
that they get included i personally think they will not get included and there's going to be a
lot of noise about it and it's going to be like what is this company and you know you have another
quarter q3 like what they're already sitting on a three billion dollar gain with bitcoin at 114
114 000 if that goes back up to where it was earlier uh i don't know a week a week or two ago
you're looking at another eight ten billion dollar gain and it starts to become undeniable
at that point and almost a little bit of a self-fulfilling prophecy and it's like what
does the rest of the year look like what's q3 q4 look like does more capital come in the door
i don't know like how does market cap grow good question do people front run it i don't know what
does that look like i it it's it's bullish it is bullish that it's still on the horizon
and i don't think there's incentive for anybody to sell into inclusion really because this is like
this is a this is a mag 7 asset it's going to the top um it's this is not lululemon where you've got
incentive to front run it and sell the index inclusion and like never hold it again like
this is the final box unless and that was over 2.5 hey hey by the way i just did a poll can you
Can you guys do that?
Please retweet the poll.
I gave you four choices, 0% to 25%, 26% to 50%, 51% to 70%, and so forth.
So please retweet the poll.
Let's get some numbers for the listeners that are in here.
We have, what, 9,000, almost 10,000 people on the thread.
So please respond back to the poll to see what the sentiment is right now.
What I think will happen is I'm one out of four.
So I'm 0% to 25% that it will get in.
What I think will happen is if it does get in, that will validate, and just for lack of a better term, conspiracy theory that they changed the guidance because they knew it was going to happen.
I don't think they know that they're getting in.
I just don't think they do.
But if they do get in, that would seem to be a plausible reason why they changed their guidance.
And so does that matter?
I don't know.
But what I do know is that they are going to get into the S&P 500.
They were in the S&P 600.
And so for this reason, so by the way, Tesla was never in the S&P 600 before the S&P 500.
Is that true?
Yeah, they were never profitable.
They were never profitable.
That's the problem that when your EPS is zero.
And by the way, I do want to say this.
All non-dividend paying stocks subscribe to the greater fool theory equities
because the only way that you could sell that stock and make money
is to some other person or entity that pays you more than what you bought it for.
So all non-dividend paying equities subscribe to the greater fool theory
that you have to have somebody pay you more than what you bought it for.
And so that's an important thing to keep out.
That's different than a Ponzi scheme.
I don't want to talk about that, but that's the way that exists.
And so for this particular case, I think the S&P 500 is important.
I don't think they're going to get in.
I would rather be under-promised and over-deliver and then see what happens.
And I do think that he would have fulfilled basically all of his objectives that he wanted to do.
This is a committee decision that happens behind closed doors.
I mean, I know Josh has come out.
He's super adamant.
He saw it in a timeline that they get added in the S&P 500.
It's just like, I don't know, I'm a bit more rational and think that the committee is likely to, depends if they understand Bitcoin or not, and how long that they've been looking at this.
If they've been looking at it for a long time, maybe they get included.
If they haven't, and the earnings in Q2 was a surprise, then maybe not.
Also, who's the committee?
That's my question.
is it howard lutnik hold on guys it's just a bunch of dudes i'll see if i can find the thread
there was a thread that somebody did a while back and they tracked everybody down they tracked
everybody down yeah they did they tracked out who they were and they were actually they were actually
no they actually figured out who the people were and somebody revert did some like pi work to
figure out who these people were. So I'll see if I can find the old thread. It's on X. Somebody else
could look it up. S&P 500, committee approval, Bitcoin, MSTR is probably the keywords. And they
tracked down all the, they figured out all the people that were on the committee and they said
that these people are Bitcoin friendly. So I think the S&P 500, I think they both need each other.
I think that MSTR needs it to absorb the shares that they sold. And I think that S&P 500
also wants that index to go up and so i think that that would be i think would be a good
inclusion and i think it would be good for mscr do i think it will lead to some god candle no
i think i like i like the probability of it having some time in 2025. i'm not sure about the
the first two two inclusions then so there's september 19th and december 19th jeff i can't
share my screen but oh yeah i made that i made that collage is there any way you could pull that
oh yeah yeah are we talking about 444 after go hit it right now while i pull this out
what do you guys think or we're going to 444 we're going all the way up have you looked at the dtc
if you look at bitcoin price in gold it's possible i just want to say that did you know that four
four did you know that four four four is an angel number is it really yeah i was talking to my wife
and of course you know she doesn't really wait wait wait what's what's an angel no i don't know
what an angel number is yeah exactly it it means stuff it was like uh financial independence and
uh things like that but yeah so you know i'm talking trying to talk to my wife about bitcoin
and strategy and i mentioned this 444 and she's like oh that's an angel number so yeah i was just
just as surprised as you were.
Is it also
a divine intervention?
Is it also one of those
369 numbers? You know how Nikola Tesla
said the key to the universe
lies in the numbers 369?
Probably
because 4 plus 4 plus 4 is 12
and 1 plus 2 is 3.
Okay.
Math.
This is investment-grade stuff, y'all.
This is the investment-grade podcast.
So yeah, I think
if i'm going to 444 you're going to you're going to load up on ibid calls i bet calls
the uh is that financial advice then hillary yeah mason mason and i looked at the numbers
if bitcoin goes to 444 you could 100x your 100 ibit calls not that we're saying you should do that
hold on let's just think about this right now so if bitcoin goes to 444 000
strategy would hold 280 billion dollars of bitcoin how how how many prefs would they
ben you're like whoa how many prefs would they have i don't know let's say like 20 20 billion
20 billion probably the same number they have now if it's the same number they have now like the
beast the b the btc rating on that let's just say it's 7 billion they can only get to 7 billion
the btc rating on that would be almost 40 like for the entire stack
that would be insane like at that point yeah like buried under amount of collateral buried
it's buried under collateral i'm long jet blue bonds just you want that point the other one dan
you should look at quick greet like the concrete there's quick create concrete preferred equity
out there and i think it's also like talk about illiquid it's it's as liquid as the concrete they
sell um and they have like yeah no capital there's a lot of pawns out there there's so many we should
probably start a grassroots effort to you know go out and scrape all these prefs that are out there
and all these bonds that are out there and go find the institutional investors that are holding them
and send them the pitch deck on these prefs and see if we can drain that capital out of those
illiquid nonsense holdings that they've got essentially something with the
dan you can go sell a billion dollars of this stuff but i think i think it's strategy if they're
smart they're going to find uh smart young men and women like like dan hillary over there and and
send them knocking to to capital allocators and and give give them a pitch like i said yeah
very much in their minds and is the capital allocator now yeah that's true everyone's trying
to give dan a new job you know dan is the capital allocator the uh dan you brought up the bitcoin
gold chart and matt was looking at this the other day on the hurdle right podcast and i think it's uh
it's literally it it's an interesting chart yeah it's like the answer to why 444 could happen
like that is the answer yeah because bitcoin has preceded or gold gold run has preceded bitcoin
and that's what it's done in the past too and it once that once that starts to break
it's almost like altcoin season it's like bitcoin is altcoin for gold completely and then also if
you look at bitcoin priced in gold as a power law it is a power law like it's weird because gold is
kind of a speculative asset say that again you know how like you can look at bitcoin price in
usd as a power law right a decaying exponential that's how like it's essentially sailor's model
you can do the same with with gold instead btc gold instead of btc and if you look at it that
way we're along you know how there's different parts of the power law you've got the trend line
you've got the floor and then you've got the bubble area we're we're still on the floor we've
been trending on the floor of the btc gold chart for the past three years we haven't even hit the
the trend line. Yeah. So, you know, it depends how you look at it. I mean, who knows? Meanwhile,
people think it's dead, double topped. We hit 124. We're going back down to 50, 60. And there's
just bearishness everywhere. And I think it's hard to say that because like I've been listening
to and reading a lot of Howard Marks recently and you look at all his work on credit cycles
and historical investing. And if you think of like Bitcoin credit cycles, which I think is
actually kind of interesting now that we're trying to pioneer Bitcoin back credit. I mean,
if the credit spreads are 500 basis points and the best, you know, over collateralized Bitcoin
credit, which is strife, I mean, there isn't a lot of loose capital. And as we've seen the Bitcoin
treasury is tightening up, access to capital and credit in the Bitcoin market isn't that readily
available right now. So I think it's actually a great indicator that, you know, there is room to
run. There isn't euphoria in terms of BTC credit yet. So that's something I'm looking at a lot.
And this also, there's this like kicker element of the market re-evaluating risk.
Like does market re-evaluate risk and like how much capital shakes out of the existing risk infrastructure to adopt the new instruments with a better risk profile?
And what's the speed of that?
what's the speed of that and like that that might that's a good question i have no idea
but i think it could get violent right i think this is an s curve of adoption of people like
wrapping their heads around this it might take a year it might take eight i have no idea
but i think it's quite possible that that that risk component gets re-evaluated everywhere
But let's keep an eye on it.
Let's keep an eye on it.
That's fun stuff.
The investment grade Bitcoin podcast.
All right Mason you wanted me to share the type of noise screen I loved it Fucking juice wrench I can see any think it just one thing he knows
it feels like it feels to me like someone's paying him and i know that's a little like
weird to see yeah but like out of nowhere and then and then he reads the uh he reads the letter
to mstr investors essentially covering his ass legally which i loved by the way
yeah hilarious i can appreciate good entertainment i mean i know he's basically trolling us but i
can appreciate good entertainment it did make me laugh yeah but i i've just been noticing a pattern
of of a lot of big accounts with i i don't know if it's if the incentive is engagement i don't know
if the incentive is outside money i don't know if if they just generally don't understand it and and
think they're justified and in fighting it um and i think all of these things could be true
simultaneously so it's just something that i i've really noticed the past week or so and i think um
the the equity guidance uh also played a part in that the the update yeah they like recognize that
there's a lot of energy in the market talking about this thing right now and you think about
like uh this choose rich guy and you go look at all of his content it's all like it's clickbait
stuff right it's stuff to like make you watch he's like every single one of his videos he's got his
hand on his head like he's like oh my god you know i just lost a lot of money or whatever like every
single one he's got the same formula for every single one of them and what i think happened is
there was uh he talked about he did his first video on microstrategy it was like lightning in
a bottle right it he he struck gold he saw that the feedback was more electric than anything else
he's posted in the past like a month he's like let me do it again let me see if i can do it again
and like i don't know how much money is he going to make from x on these three posts or four posts
that he put out so so i five grand you know like it's three thousand dollars who knows i mean this
is this is crazy i do want to point i don't think this is on your list there's this guy uh kenneth s
rogoff who's a harvard economist okay and he said it's more likely that bitcoin he just launched his
new book and he's saying it's more likely he said a decade ago it's more likely that bitcoin um will
be worth a hundred dollars than a hundred k and he goes what did i miss and so the guy this this
post is from 14 hours ago or one day ago. And he's saying that it's unlikely to do this. It has
actually done it. And then he doubles down again. And meanwhile, Harvard, I believe, is buying spot
Bitcoin ETF for their endowment. So I don't know how somebody can say that after you were proven
wrong. Why would you even announce that? Can somebody explain that to me? Because I am not
smart enough to understand how somebody could be a Harvard economist and be that freaking dumb.
Am I missing something? No, no. This whole space is really interesting.
Mason, I think you hit on a good point. This is one of the main reasons that we created True North.
I created True North. Anybody's here is that this happened in GameStop as well. There was a period
of time where there was a ton of euphoria and i've talked with uh trollstein in our group as well and
you can pay bots you can you can you can literally pay bots to to do whatever you want them to do
and now you've got ai bots out in the market and a lot of you probably don't even know that they
exist one of them that that's really interesting like you look up site bringer i think is is a ai
agentic bot on twitter that actually has really interesting content but that that's a good example
of like somebody doesn't maybe somebody like oversees it but nobody actually runs it and
these can be deployed very easily and like this is like uh tinder in a dry field where you light
one match and you throw it in and it catches like wildfire and that is social media and like that
energy gets captured and it spreads which is like what anybody that's taking a short thesis would
want uh they they would want an opportunity to capitalize on that potential volatility and the
cost associated with doing that is very small if you have a significant amount of capital at risk
So I wouldn't put it past some of these,
like some of these people are probably paid.
These are, and I mean, they're paid by Twitter
at the end of the day,
because some of the big profiles,
they get paid anyway for making content.
So they either see opportunity to capitalize on the content
or potentially getting paid by somebody else,
or there's bots in between in some of this as well.
So, I mean, that was one of the general reasons
i put this up is to have like rational humans that are actually operating in a space that
can block out some of the noise and provide signal with rationality so hey jeff can i can
i've been researching these when are you going to set loose the positive sentiment bots that's
a good point i gotta show that wait i gotta show this can i show my desk yeah yeah yeah
yeah everybody watch everybody watch jeff's face you ready yeah you have to share your screen
allowed to share screen okay share screen hopefully i don't have anything bad on it
sharing china screen check this out here we go grok referenced you oh you gotta make it you gotta
make it bigger oh sorry how do i make it i just drag it like this zoom just zoom oh just zoom in
hold on one second uh view mclaren mclaren porsche
there you go okay there you go there okay listen look at this based on mstr's 100 billion market
cap positive q2 earnings and liquidity it meets s&p 500 criteria criteria analysts like jeff
walton give 91 percent odds if bitcoin stays above 95k to 114k but bitcoin grok is referencing
wow jeff walton congrats congratulations that's crazy could you did you know this do you know that
rock is i mean it's publicly available dude you made it in the market you made it yeah sure
but maybe point the bots jeff we need you more bullish about s p 500 maybe yeah that was the uh
that was the qualification uh probability um that was when i was calculating it by day
it's like how many days and the probability um that's interesting by the way you know i want to
say this you know everything that we've talked about i want to reflect back and we'll probably
wrap up pretty quickly but you know oh ptc palm beach that's his post congratulations you did that
thank you for using ai you know i i could not predict what would have happened when we we all
met for the first time at in in santa monica in october we're all going to be in new york city
Everybody should come to Tim Kahn's event, the Bitcoin Unconference on September 17th.
But, you know, we talk about these things.
And what's happened is if you were to repeat this back, everything that's happened, and we don't need to go through this because everybody was on this call.
You can't make this stuff up.
You can't make any of this up.
This is like the craziest thing that's happened, but it's all reality.
And for that, I'm happy that I've been in this with this team.
I'm happy that I got to go to Strategy World multiple times.
I met Michael Saylor multiple times and Fong and the exec team over there.
And you guys also to do this.
And sometimes you're like, what am I missing?
Are we sane?
Is this real?
Does Ben have any lights in his basement?
I mean, we're just trying to unravel the mysteries of the world.
And 444 is an angel number.
I am 42's Hitchhiker's Guide to the Galaxy. Perfect numbers, integer, whatever.
And anyway, with that said, I want to thank you guys. I'm going to drop off. I think this is a
great call. I want people to realize that going back to what Ben said, you have to have your own
conviction. You cannot rent it. And so if you have your conviction, if you do your homework,
if you do a proper asset allocation, don't YOLO into things 100%. You don't know anything about it.
don't take massive leverage. I haven't had any options in over four months, zero. So weathering
this downturn for me is I'm enjoying the summer. I think that people should step away from the
screen sometimes, go have some fun, enjoy the next two weeks, come and visit us in New York.
We'll be at PubKey. You'll get to meet us all in person. And thank you guys. It's been a pleasure
working with you guys. I'll be back on a course again. And then that's all I want to say. And Dan,
keep up the great content on bonds because i have to listen to you because i don't really know much
about bonds i didn't need a grand and mason you should chime in more thanks grant agreed agreed
okay let's um let's let's wrap this up a little housekeeping before we do final thoughts uh yeah
to your point the grain uh we will be at tim kotsman's unconference this is uh september 17th
18th, I believe, 17th, September 17th.
You can use the promo code true north.
And I think that's 15% off a ticket.
If you want to go, there are a few tickets left.
Sailor is going to be there.
They've got a whole process set up.
There's going to be some happy hours.
I think we will do like an impromptu true north thing there at some point.
And I think a majority of us will be there.
So if you want to meet us in person, if you want to have a chance to meet
Sailor or any of those other folks in person, check it out.
Also, New York this time of year, it'll be buzzy.
I think it'll be buzzing.
You'll hear a lot of excitement.
People excited about Q3, Q4.
It might be an exciting event to attend.
The code is TRUE NORTH15 for the-
TRUE NORTH15.
All caps?
All caps.
All caps, TRUE NORTH15.
Additionally, this is the last True North episode until September 24th.
And we're probably going to get roasted for this at some point.
If the price of MSTR continues to go down, they're going to say we're fair weather people.
stuck in the market.
Yeah, here's the reality.
There's a ton of travel and there's holidays in between.
So next week, BTC Asia and Hong Kong, I'll be out.
The next week is Labor Day.
People are gonna be taking breaks and vacation.
The following week, I've got a corporate event.
I will be out of town.
The next week after that is Tim Kotzman's UnConference
in New York City.
And then the next week that we could possibly do this
is September 24th.
So we're gonna take a look.
Go ahead.
If we make S&P 500 inclusion, we're going to be on.
Yeah, we're doing one.
If this, we're going to do it live.
If we make an S&P 500, we'll do it live.
I'm sure there will be a little one-off conversations here and there between folks, but we're just, we're taking a break on Wednesdays until September 24th.
And yeah, we'll have conversations separately here and there and continue to put out our research and we'll get back together.
Yeah, I wanted to say real briefly.
So look, the unconference is kind of expensive right now.
The tickets now are $1,000 because it's very expensive to put an event in New York.
With that said, we'll be at PubKey, and I believe we'll be there on Tuesday and Wednesday night.
And those events, I believe those will be free.
So if you can get to New York City, if there's S&P 500 inclusion, that's going to be the biggest party ever.
Well, except for Strategy World, where we had a great time with our own event.
But this will be the biggest party ever, be in New York.
And that announcement you said is on the 12th and that's the Friday before.
And so if you hear that, then we're all going to be in New York City.
Sailor will be there.
Then, you know, the conference will sell out very quickly.
I understand it's expensive, but if you can get to New York City, come to these bar events,
most likely some sponsor will pick up the bar tab.
Nobody heard me say that, but when you come there, it sometimes happens.
So anyway, it'll be fun.
And so I wish that everybody comes to New York.
I think it'd be great.
Bingo. Okay. Final, final thoughts. Do we pass it around? We maybe we'll start with Dan.
Yeah, higher. Dan's going higher.
I bet calls, baby.
I love I love your response on everything. Everything now these days is just I big calls.
I mean, it's a great place to be.
When he closes his eyes, he sees preferreds on his eyelids.
STR on one, and then the other one's like C, K, F, D.
It's just like Rolodex going back and forth.
Exactly.
Dan asked if 444 is related to the 369 numbers.
So 4 plus 4 plus 4 is 12.
1 plus 2 is 3.
444K minus 84K is 360.
36 is a perfect square of 6.
and three plus six is nine so there's your three six nine oh my gosh
higher and uh yeah we're gonna bring soleil a tinfoil hat for the unconference in new york
and we'll keep that going okay mason over to you yeah i think um
regardless of sentiment, just based off of the technicals, the stock is severely undervalued
and a lot of Bitcoin treasuries are severely undervalued.
And if you have a thesis, if you have conviction, these are opportunities you hope to see if you're a long-term investor.
not financial advice not financial advice the sage wise mason all right ben over to you
no i just say uh you know stick to your guns on these things there's a lot of people that are
going to push you to tell you that your opinions are wrong on a topic that you know your long-term
thesis is broken you know that you don't have to adopt that as your opinion just because it's the
loudest noise in the room. So, you know, I know people, it gets really frustrating when you're
in public discourse and people are shouting you down or they're vehemently disagreeing and telling
you you're stupid for not seeing what they see. It's not always the case, right? Stereo runs wild.
And if you've built a thesis on your own and you've built the foundation of your own conviction
and you assess things to not have deviated from your overall thesis, then you stick to your guns.
And you don't need to change with the tides as other people do. If this is a five or 10 year
asset that you're looking at, if you think Bitcoin has a really legendary run coming over
the next 10 years and you're just getting into position, don't let day-to-day noise change that
thesis for you, right?
It's very easy to get scared out of positions.
But if you've done the work, if you've developed your position and it doesn't even need to match mine, you'll be able to hold firm when when the storms kick up and they'll kick up more.
This isn't going to be the last one.
There's going to be a lot of them.
Well said, Ben.
Well said.
OK, my final thoughts are risk.
Is the evolution of risk is what's separated the development of humanity.
and we're on the verge and the birth of digital risk.
And the market hasn't conceptualized it yet.
And we're literally writing the playbook
of what digital capital risk looks like.
And at the end of the day,
Bitcoin securities, Bitcoin backed equities,
leveraged Bitcoin equities or Bitcoin backed credit
isn't for everyone.
And you have the opportunity to just buy the underlying asset
and you can, but if you're interested in these other things, we're here to talk about it. We're
here to talk about our perspectives, our experiences in the market, and how we view the world. If you
want us to view the world in a different way, we're not going to do it because that would not
give us any differentiation in the market. We are giving you our perspective from the cutting edge
of the market, and we will continue to do that. And I will stick to my guns on that. And I think
everybody on the screen will stick to their guns in doing that because it's got us to where we are.
and we will continue pushing that forward.
So appreciate everybody for the time
and we are signing off for episode 37
and we will see you in late September.
Catch you later.