We'll be right back.
I think that any others could love it
So I knew what I could did
Feel the thing they would fit in my eyes
And say, you ain't seen nothing yet
Baby, you just ain't seen nothing yet
Here's something that you never want to forget
Baby, you just ain't seen nothing yet
Woo! Here we go. Welcome back. True North, episode 35, the iPhone moment. We are going
to get into it. We're going to have some fun today. And we're back after a week off. And
you know, we have lives and it's summer and sometimes we need to focus on other things.
And we're excited to be here. So going to be fun one today. I've got Ben. He went to
go get some booze and uh there we go he's back and here comes grain i think he's gonna jump on
at some point but we've got four of us and we are gonna have a good time we are going to
get into quite a few things and we're gonna try to do this in 90 minutes and chop off half an hour
of uh fluff perhaps that maybe we've had in past episodes and i don't know we'll try this mode and
see how it goes. So agenda for today, we are going to do the classic MSTR leverage and statistics
update. We're going to do a Q2 2025 earnings call review and discussion. That will probably be the
bulk of this conversation today. We'll go through some of the slides. We'll think about what it means
and how we're thinking about it and how we look at things. Lay the land of the BTC treasuries.
there's at least 10 figures of dollars in USD that are sitting in escrow right now ready to buy
Bitcoin. So it's exciting time to be looking at this space and analyzing what's going on.
And then lastly, I've been personally making a really big push on Bitcoin as a unit of account
and starting to think of the rest of the world in Bitcoin terms and what that means and starting to
take this stepping stone into a Bitcoin denominated future or thinking about equities or fixed income
denominated in Bitcoin or pricing the existing equity market using a Bitcoin framework. Bitcoin
risk-free rate, STRF is the risk-free rate, discounted cash flow models using different rates,
et cetera. So yeah, we'll jump right into it. It's going to be a good time. And I will start
with the typical leverage update. Let me share my screen here. And we share this every week.
Actually, before we get into this, a word from Tim Cosma.
Ladies and gentlemen, what you're about to hear may be amazing, but it is not financial advice.
It's for informational and educational purposes only. Jeff, back to you.
Bingo. Thank you, Tim. And here we go. So, and I'll make this bigger.
my screen. We'll focus on it. Okay. So True North, the investment grade Bitcoin podcast.
What is this about? We talk about everything going on in the Bitcoin treasury ecosystem. We talk about
using Bitcoin as capital, Bitcoin being the hurdle rate, companies that are adopting a Bitcoin
treasury strategy with a really huge focus on MSTR because they are the pioneer and leader in
the space and they're providing capacity and ability for all of these other treasury companies
to operate and innovate in the space. So they're really lifting the floor and providing opportunity
for others to operate here. And we focus on leverage because this is a big topic. Everybody
in the market is, in the past, has said strategy is going to blow up, somebody is going to blow up
because people have blown up by being over leveraged on their crypto in the past. And this story is
completely different. And it's different because it's got a very professional financial framework
that is conservative and sustainable. And it's really important to highlight this consistently
because one of the common pieces of feedback in the market is strategy is going to blow up.
There's going to be a margin call. There's too much leverage. They're way leveraged.
But when you actually look at the balance sheet and you look at the numbers,
they're actually very conservative and they're doing everything they can possibly
to increase their leverage because they feel under-levered. And that's why we show these
numbers. So in this column here, BF, so as of 8-6-2025, we are getting deep in this spreadsheet.
We're at least 100 columns into the spreadsheet. So Bitcoin held on balance sheet, 628,791.
Bitcoin price, $115,000 as of today. So the assets held on balance sheet, they've got $72
billion of assets, and they've got $8.23 billion of debt and $6.3 billion of preferred stock
outstanding. So when you look at the net capital held on balance sheet, you just take the pure
math, $72 billion minus eight plus six, you get $57 billion of net capital held on balance sheet.
So you look at the liability to asset ratio. If you just take a pure liability to asset ratio,
you're looking at a 20% leverage ratio and a debt coverage multiple of 5x.
And what does that debt coverage multiple mean?
That means they have five times the amount of assets than they do debt on the balance
sheet.
So if you were to think about any bear potential scenario here, the price of Bitcoin would
need to go down to $23,162 for the assets to be worth less than the debt held on the
balance sheet.
So you need an 80% decline in the price of Bitcoin and sustained for a long period of
time with strategy to not have any other ability to raise capital in order for there to potentially
truly be any issues in the future. So very low likelihood, a very strong financial position,
and very strong moving forward into the future. And we also show this other column here,
the 8625 pro forma, we subtract out the $3 billion of equity that's currently trading into money.
It's effectively equity at this point with where the stock is trading. And if you pull this $3
billion of debt out, you've got a 15.7% leverage ratio, 6.4x debt coverage multiple. So again,
incredibly financially strong. Now, I've included this new column, and I think this is how some
people should start to look at strategy and think about these preferred equity instruments and
leverage and different types of leverage. And this is something that Ben and I and Matt Cole
have talked about in the most recent hurdle rate podcast. And we saw with the earnings call this
last week, there are different types of leverage. Convertible bond has a maturity, preferred equity
does not have a maturity. And when you think about what is the risk to the company, a debt that has
a maturity is higher, more risk than an instrument that does not have a maturity. So when you think
about the leverage ratio, if they're taking on more leverage with preferred equity, it may not
be necessarily more, or it's just not as risky as convertible debt because there isn't a maturity
where those dollars come due. So you can think of the leverage framework a little bit differently
with the preferred instruments. And they're a little bit more efficient and higher torque
on the balance sheet, the asset side of the balance sheet.
So what does that mean and why is that important? So if you look at a 50% drop in the price of
Bitcoin, with the price of Bitcoin going down to $57,500 in this scenario, strategy would still
have $36 billion of assets on the balance sheet. And what is this? About $14.5 billion of debt,
$8.2 billion of that being convertible debt. And so the net capital that you have on the balance
sheet, you still have $21 billion of capital on the net capital free, you call this free capital
on the balance sheet. And the reason I point this out is because it's an incredibly strong financial
position. And how I explained this this last weekend at the Portland Bitcoin conference,
for those of you that weren't there, let's just take this column here and chop a couple zeros off.
So let's say you are a personal investor and you have $7 million in assets.
If you needed to borrow $50,000, like a $50,000 or $60,000 loan,
as an underwriter, if you put your underwriter hat on, would you underwrite that loan?
I'd say yes, 100% of the time, because you're good for it, right?
You have strong enough capital position that you're going to figure out how to repay me
at some point in time, because you can go access different capital markets.
You could sell assets.
You can do a plethora of different things.
Now, take the same exercise, and you drop the assets by 50%.
Well, now you've got $3.6 million of assets, and you still have a $60,000 loan.
Would you underwrite that loan?
The answer is yes, absolutely, because they're good for it.
And you have a plethora of different avenues to go raise capital or sell your assets in case if you did need to at any point in time.
So the goal and the purpose of this is a corporation has significant access to capital and these different instruments where they can tap different capital pools in different markets at different points in time and market cycles.
And that's the real innovation here is that these new preferred instruments all have different volumes every day.
They have different volumes.
They have different people that are buying and selling them.
Algos are now getting involved in selling them.
On the common equity, you have different people that are buying and selling it.
And then you've also got this access to the convertible debt market, which they would like to not use here in the future.
But it's always there.
This is always another pool of capital that you can access.
or you can access fixed debt markets or do private placements or these other things that
people don't even talk about. So they're in an incredibly strong financial position and that
access to capital is what makes this whole thing work. I'm going to pause there. I'm going to kick
it over to Ben, Soleil, Grain. Initial thoughts. I think the spreadsheet is going to get a lot
bigger. I think there's a lot more metrics that we're going to have to build into this to keep an
eye on it now that we know. It kind of started. Okay, good. Yeah, I was going to say that's going
to become the focus. Yeah. Right. I mean, these preferred stocks, and it was pretty clear, and I
know we'll get into earnings here a little bit later, but because it's so clear that they have
a path now that they're going down and they're saying, let's get rid of any maturity or any
principal repayment risk in this entire model, right? Let's streamline this thing. Let's make
it highly efficient. And let's raise in such a manner that we really have one category that
we're going to have to focus on. And that's annual dividend obligations. And I think that's something
that a lot of people are missing because they're still looking at, you know, kind of that total
debt structure because we still have all the convertible bonds out there. But as those start
to roll off and this gets much more streamlined, people are still looking at the notional value
of the preferreds, but you have to realize that because these are perpetual preferreds,
there's no repayment to that principle coming at any point. So really what they're starting to
focus on is just managing that annual dividend obligation. And that's actually a much bigger
shift than people think it is. Because the reason why originally you had that 20 to 30% leverage
ratio that strategy was really starting to target is it's because it allowed you to really monitor
what type of a drawdown you could absorb for an extended period of time when you have debt on the
books that has a maturity point where you are responsible for either rolling or redeeming or
whatever the action is that you're going to take at the time you have a different type of risk
in that model and i think that's part of the reason why all of these new companies that are
that are coming into the market,
and particularly the companies
that are gonna achieve enough scale
to be able to participate in this preferred market,
I think you're just gonna see them completely bypass.
Because if you can get large enough,
and this is where I think we're gonna start
blowing out this spreadsheet
and really starting to track it more.
And if people saw me frantically looking around over here,
it's because I'm in the nerd data at the moment,
calculating out, what does this look like
if the convertible bonds are gone?
How much coverage do they have
the annual debt obligations then.
Oh, the coupons were gone.
That's in there.
You already have it.
It's in their presentation.
120 years.
Yeah.
I was going to say I've got 124 right here.
Yeah.
Today.
So then I was modeling.
Well, okay.
What if there's an 80% reduction in the Bitcoin fair market value that they're holding?
So, you know, they're down to $14.4 billion worth of Bitcoin.
And then what does that give you?
that's 25 years of coverage at an 80% drawdown.
At a 90% drawdown, they've got 12 years of coverage.
And that's if you had to use assets
to cover the dividend obligations, right?
So that's if you had to sell Bitcoin
to cover the dividend obligations.
So then you look at, well,
what kind of liquidity do you have out here?
And what does that look like?
How many days worth of the trading volume
would you need to be able to fund this obligation?
And right now, if you've got 12.1 million shares trading hands every day, that's about $4.6 billion that's trading around the common stock equity every single day.
So right now, it takes about 12.5% of one day's trading volume to fund the annual dividend obligation.
so it takes very little for them to use that atm on the common stock to actually pay that dividend
and then when you get down to 80 it would take you a little bit over a day assuming it was trading at
one times nav so it'd be trading at about 46 a share if there was an 80 drawdown in bitcoin
and then you normalize that out there at about 46 a share so that would be 105 of the daily
trading volume that would be required to fund the dividend obligation. And if it goes down 90,
then it would take two days, assuming the volume milk, obviously it would drop down.
So anyways, it's going to be interesting to start monitoring this because it's a completely
different risk profile. And you're really starting to focus more in these models,
one on the resiliency aspect, right? And I think that's that coverage that how many years of
coverage do you have on the dividends like you're showing on this slide here. But then the other
metric to start watching is you continue to monitor that trading volume, right?
How much activity is there around this equity?
How much liquidity is out there that they're able to tap to pay these annual
dividend obligations? And then you can model, you know, what is the risk, right?
When does it become a heavy burden on drawing out of the common
shares via an ATM to fund these dividends?
And it could be a very, very long time.
A lot of ways to pay these.
Yeah.
Well I think this is just being completely missed at the moment How much more resilient this model makes them than when they were using convertible bond debt I know there a lot of people championing convertible bonds at the
moment out there, and I think they're good. And I think there's going to be a lot of companies
that are going to move into that niche because I think a lot of the companies that don't get large
enough to issue these preferreds very quickly, I think that they're going to have to find a market
where they can start to scale, and they're just going to need to be accepting of the fact
that there are different types of risk that come into the model when you have to use something that
has a maturity aspect to it. But I think that for the ones that scale enough, it's an absolute
no-brainer for them to bypass it if they can and go straight into the preferred market and really
focus on managing that annual dividend obligation and building a model that's incredibly resilient
to massive drawdowns. I love that Saylor answered that question so clearly. I think it was
lynn that asked that question and he started giving the examples of you know at 80 nothing
happens you know at 90 you know i guess it starts getting fun right they're gonna dance it a little
but uh it's just a total shift so you know i know as we go through the earnings but i just you know
as i was looking at the numbers it was even surprising me just how much coverage they would
have in the event of a massive massive drawdown so i'll clean it up and make it pretty and put it
out in a poster at some point, but I just thought it was an interesting observation.
And the cool part is when you start to conceptualize that the scale of capital that would come in the
door to even get to that point where it would be an issue, it would be an astronomical number
that's going to buy Bitcoin that hasn't existed before. It's going to put us into new territory.
And thinking about that concept is pretty cool. But I think you're right, Ben, the convertible
debts could be really valuable to the extent that strategy is going to retire these.
That market is going to look for a place to park that capital. And since they've succeeded,
they're going to be hungry. They're going to be hungry. And those small companies,
that they could have a really big opportunity to get to that next level.
And it might be, they might have to work through it, right?
And maybe go through a bear cycle like strategy did,
where people are yelling about their stock and just wait it out
and get to a new echelon where they can start running these instruments
and moving a bit quicker.
So it's going to be useful for a lot of those smaller companies, I think.
Yeah, I mean, strategy being, you know, for the last year, the largest issuer in the convertible bond market, you know, that does leave a pretty major vacuum out there. And I think that a lot of these convertible ARB desks, because they realize just how powerful holding corporate bond paper that's tied to Bitcoin is for them to implement their own trading strategies, you know, there's going to be a lot of demand.
And because of that, I think now there's an opportunity for that to get spread out amongst more of these companies.
So I'm not expecting the convertible bond market to just disappear from the strategy.
Quite frankly, we should acknowledge that it's really what got strategy to the dance in the first place.
So you can't even look back at strategy and go, well, that was a bad idea.
Well, that was the idea that got them to the dance.
It built the scale that they needed to evolve into this next form.
Now, going backwards, knowing what they know, you know, yes, they may have deployed the strategy differently, but it doesn't mean that it served no utility or that it put too much risk into the model.
They were very conscientious about how they did it, and it gave the market a massive education
in how to manage that risk that comes with these, including things like building out that debt ladder
and staggering your maturities and giving yourself a full Bitcoin cycle to allow for these to perform.
But we'll see what happens, because obviously in that market, it's tied to what the volatility is doing.
And volatility has been pretty low recently, so that's going to drain some of that excitement.
out of that market you might not have the same level of capital available but this goes in cycles
right volatility comes volatility goes so i think it's it's far from over in the convert market
and you know i'll be watching for which companies do pop up that start filling that void because i
think there's going to be several that try to achieve their scale and that's going to be the
the tool and the capital to do this i don't think
you know it's been yeah it just makes sense to move to the prefs if you can right you're
targeting a much bigger market and you get to be creative you know you don't get to be so creative
in the convertible bond market the creativity was the fact that these were all bitcoin driven
instruments right by the volatility on the balance sheet of these bitcoin treasury companies
and so that made for wildly volatile equities that people were embracing instead of viewing as a risk
so that created that opportunity but now in the prefs now that you know that you can basically just
you know hammer the silicon and create your own products and tailor make these for specific use
cases i think there's gonna gonna be a lot of excitement in the preferred markets yeah it's
not that the bonds are bad you know they're like training wheels if you can't go straight to the
preferreds you know it's okay to uh walk before you run well and i think in the early days you'll
see people go to them as well because they're not immediately dilutive and you can raise at a premium
right so for some companies if you've got the option of going straight pipe type of a transaction
where it's completely equity and you maybe you're a smaller issuer and you're looking to minimize the
amount of shares you're putting out early and you want to be able to raise some of that capital at
a premium you know you might get out of the gate with a convertible bond so you know i think they'll
serve utilities given the various phases that these companies are at and sometimes that's going
to be the market that's open right these markets aren't open all the time it's part of the reason
why getting to a model like strategy has now i know people get sick of us for you know praising
strategies model and all this but they're the ones innovating here and you know that's something that
i'm not going to shy away from acknowledging the reason this entire industry exists is really
because strategy really pushed the envelope here and gave everyone else the confidence to be able
to pursue this. And they're the ones that are ahead of the curve in all the products that they're
issuing and now the structure for how they're deploying them. And one of the things I look at
now is as this market evolves, how do you get to a place where you can execute efficiently and
within your own control? And those two things are very important to me as I look at this model,
because recognizing that these different markets aren't always available to you. It's not like you
can just go to the convertible bond market and get a deal done whenever you want to. It's not like
you can just go and do a private placement pipe deal whenever you want to. And there's always
capital there that's available. That's not how it works. A lot of it is tied. Yeah, it oscillates.
And a lot of it depends on what the latest deal in the market was and how that deal performed for
the investors as to whether they've got the appetite to re-up and redeploy that capital
back into the market. Convertible bonds, obviously, it's all about the volatility and you want to get
a good premium and you want to get a good coupon rate so that you're not straining your business.
So those markets aren't always available to you. So when I look at these models now,
part of what I put a huge amount of value on when I'm looking at these companies is how efficient
is the execution going to be? And by that, I mean, if you look at strategies model and where
they're moving. So say they shed the convertible bonds. Now look at how they're raising capital.
You've got the common stock ATM that's out there and always available for you, but the ATM on the
common stock is a delevering tool. So they're moving away from that for now, but that lever's
always available and they can pull it whenever they want to. Now you go into the preferreds.
Well, it's the same structure. You go through the IPO process and that, don't understate how much
work it is to go through an IPO. That's a pretty difficult process. And the fact that they've been
throwing these out as rapid fire as they have is a pretty impressive feat in its own right.
But once you get through that initial IPO, and once they get the products out there that build
this yield curve for them, now you're back into the ATM model for the preferreds. So even for the
products where you're raising the most accretively, you're using an ATM, which gives you ultimate
flexibility for your execution. So you build the foundation of this. You go out and you get the
approvals for all the capacity on all these products through your filings. And now you're
in total control over when and how rapidly you raise capital. You're not going through the
constant sales cycle and doing the roadshows and doing all of this stuff. It becomes very efficient
the way you raise capital. So right now what I see them doing is building out the framework and
getting all the pieces of the puzzle in place so that at that point, the team can now focus on
optimizing for which ones of these products they're raising at based on any given market condition.
And they're going to start scaling them so that they can acquire really rapidly.
And because of the characteristics of these products and because of how much coverage they
have, right, that 124 years on the preferred so far before they scale them even more and they buy
more Bitcoin, they're just going to be in such a sound place where if you look across the industry
and you go, who's the lowest risk play? If I want to buy one of these fixed income products,
you're competing on the credit quality. And right now that's coming through strategy. So
I've kind of shifted in the way, well, it's not really a shift. It's evolved right in front of me,
right? I didn't see all of this coming, but now that it's out here and you start looking at what's
the board i really value that efficiency of execution right for the company to have control
over their own future and their own execution as the opportunities present themselves i don't think
you can understate how valuable that is they built a robot for capital raising it's like
hershey's chocolate before like if you're make hershey's chocolate bars you got to do a lot of
work as a human and you make a chocolate bar and then you got to wrap it and then you sell it
and you go back to the beginning you got to build the machine before you can put it on right so
a bar you wrap it you send it out you go back to the beginning but now you put a robot in place
you're like okay let's just take all that work out of it let's just put a robot in place and
we just put the ingredients in and we get the chocolate bar it's already wrapped out and then
we send it out the door and like that's what they did with the press and the atm on the press is it
just automated the whole system so they're able to bring that capital in the door when there is
appetite and energy flow coming in the door on those different instruments which is
i mean monumental but totally totally monumental and the the innovation here right this is like
they they went through the challenges of the convertible bonds and saw okay this isn't the
this isn't the best and let's go try these things where it's a little bit more efficient but the the
other thing that you mentioned ben which i think is really good to point out is the convertible bond
terms are the the interest rate and the premium are terms that can be levered in different directions
depending on the type of company you have so if you're a company with like really high cash flow
maybe you crank up the dividend to instead of zero percent maybe crank it up to ten percent and you
drop the you drop the premium the conversion premium by 50 and maybe that's how you get out
the door it's like okay let's go raise 100 million dollars or 250 million dollars but
we make it a little bit more favorable because our our business model's got great cash flow
and there's there's going to be so many more players coming to the space here and there's
gonna be opportunity for people to raise capital with those vehicles so yeah you're gonna need
another line in the spreadsheet because it's almost like the convertible bond leverage ratio
is completely different than the post convertible bond era leverage ratio because the bond era had
higher risk even with the same number you need a weighted average a risk adjusted uh torque
adjusted leverage ratio as a function of your actual annual liabilities or like your maturity
liability risk. So yeah, but I was I was glad to see it. I was looking like grumpy cat with the low
leverage, you know, the last few months. But the joke was on me because that that slide that they
showed with the yield curve that they're building out, and there's that big blank space in the
middle. And there's room for at least two. I mean, if I want to squeeze them in there,
yeah, exactly right there, the future opportunity. I mean, I'm figuring there's room for two to
six more preferreds. I mean, I don't know how many AIs got lined up for them, but it just,
you know, I was thinking, okay, they're going to knock out all these convertible bond deals,
but they didn't need to. They really needed to keep that leverage ratio low to make room
for the preferreds that they knew they were coming out with, but we didn't, you know what I mean?
Like I didn't know. So I'm just clamoring for the convertible bond deals, but of course they've,
they've been planning these things for months. So, you know, they made room and they needed to
make room. So it just kind of all worked out according to plan, I'm sure.
Hey, I had one, a new... Yeah, go ahead, go ahead, Graeme.
Yeah, so you know what? Could you go to slide number 19?
Yeah, we're going to come back to this. Yeah, absolutely.
I wanted to make this comment relative to what you were talking about in the very beginning.
I think we should have two metrics, MSTR and the Bitcoins that are held on balance sheet,
and obviously the debt and also the rest of the preferreds added together, which is in the right
column, the enterprise value. And I think that as those begin to grow, the enterprise value,
that's what we should look at as the market cap of strategy. There's a market cap of each one of
these instruments, MSTR, strike, strike, stride, and so forth. And so when you add, so Ben, please
correct me, there is no partitioning or securing any of these Bitcoins to any of these instruments.
They're just in one pot, so to speak.
And then all of these assets have...
Now, there's a difference in the capital stack.
And you guys, the preferences, sorry, the relative...
I'm not changing that.
But I'm saying, I think that the enterprise value is how we should look at the market cap of strategy.
And when somebody says MSTR, market cap, they're talking about just the market cap of MSTR, not strike, strife, and stride.
And stretch.
Right.
Right. And all of these can be that size and can be $112 billion.
Right. So if the person that we think, you know, Fred Kruger, I don't know if he's listening,
but he actually thinks it stretches a good idea, STRC. And if that can go to, you know,
$100 billion by itself without diluting MSTR shares, I think that's what I posted about a
couple of days ago. And a lot of other people have posted some great content on this in the
past few days. That's why I'm so excited about MSTR because of the guidance that was in Q,
that they put out. There was guidance. There was guidance.
This is the first time they've ever put guidance out. First time we ever had that. So I don't want
to derail anything. We can jump to the quarterly report. But I think that in your chart in the
beginning I think you should make a new column and put in stride strike stretch and stref Enterprise value Right Or FCKD
Yeah, absolutely.
And going back to this, the opportunity, like the future opportunity here, medium duration.
I think there's also an opportunity on the really, really short end duration, right?
STRC has a one month duration.
What about a daily duration, a money market fund, like an overnight, single day
money market fund where there's a daily yield?
I think that's an awesome idea.
There are so many banks. Well, I guess there are probably potential issues there.
But think about this. They've got the perpetuals, which is the long end. I mean, you don't get anything longer than perpetual. So the idea behind this is they had an overnight that would be even better. And that's probably the shortest duration you could possibly do.
Yeah. Yeah, there's more here. And I don't know how much more here, but I think there's a lot more here.
Yeah. And I'm not going to give financial advice, but if somebody wanted to go into this space and they don't buy individual stocks, that's a red flag right there.
Like if you can't buy Apple stock or Microsoft stock, buying MSTR is pretty crazy.
But if you were to say, look, for the proverbial $10,000, you divide it up into five buckets of $2,000 each and you buy five racehorses, it's the same 10 grand.
and you put it in MSTR and all the preferreds, that's your five assets. And then you watch five
racehorses. And it's all based on Bitcoin. Yeah, they synergize.
Right. You tell people, you don't tell anybody to buy anything, but you buy them all on the same
day, the same dollar amount in fiat terms, and then you watch what happens over six months.
The problem is when the cycle is high, they're like, oh my God, I should have bought more MSTR.
are. And then when it dips down because of the volatility, not risk, because of the volatility,
they're like, well, I'm happy that I have the preps.
Yeah, the low-level.
Right, I have those. And so that's where people will watch the same company. I think this is the
only time where we could see this. The only company that has the same asset, like we said,
that's not partitioned, but yet there's five different flavors of returns. And some returns
are paid as dividends and stable price and others, there's no dividends and only paid as appreciation.
Absolutely. Absolutely. Shall we jump in a little bit further into this thing? Because I think this
was another monumental earnings call for many reasons. One, they provided guidance. Two, they
went through all of the different preferred instruments and gave us an outline of exactly
how these preferred instruments work. They outlined the general liquidity, the collateralization of
these instruments relative to everything in the market. It was just an incredibly data-heavy
presentation that just showed all of this information in really condensed ways.
So I'm going to go through a few slides that were really impactful to me. Maybe we'll just
kind of unpack them and talk about them. And if you guys want to walk through anything or if
anything coming to mind let's talk about it and i'm going to start yeah i'm going to chime in real
quickly um and we're not going to talk about this now you you can go through this out the most
impactful thing on the q2 report jeff was your question you had the last question and and i i
dialed in at 45 minutes in and i and i said i said to friends how to go i got in 45 minutes late
and i still listen to it for an hour and a half but your question at the very end that was the
question I want asked. And Lynn had a great question in the beginning, but you had the best
question and we'll get to that. But I wanted this to be in the beginning of the recording,
you know, to have people, so they listen to the recording, they can listen to that.
But your question was the best question, but go ahead.
Yes. The characteristics, you know, the characteristics of the leverage, which is kind
of what we hit on here in the beginning, the characteristics of the leverage have changed
now that they're rolling off the convertible debt and you could take on more leverage,
hypothetically with the preferreds because there is no maturity and you can just you just have to
finance the dividend obligation how are you going to pay the dividend obligation well look at the
look at this what you're seeing on the screen look at the liquidity of all of these instruments
look at how liquid these things are look at how they've traded look at their relative risk profile
relative to everything else in the market there's no doubt that the rest of the market is going to
catch up to these or they're going to identify these as opportunity because they outperform
everything. It's not like they're a little bit better than the existing things in the market.
They absolutely crush everything. Absolutely crush everything on every characteristic.
So when people used to look at Bitcoin, they would see Bitcoin as career risk. Like, oh,
if I took a, if I got Bitcoin exposure on my balance sheet and that's, I'm taking career risk.
If this blows up, I'm screwed.
I'm out of a job and I get fired.
I can never get the job again.
Now, the plumbing and architecture has changed.
There's going to be a scenario within the next four years.
If you're not looking at these instruments and you're a money manager,
you have career risk.
If you are actively seeking to not take exposure to these things,
that is a position.
You are short these instruments.
If you're holding all of these other instruments, you're not holding these.
You are short those instruments.
And that's going to be a form of career risk, in my opinion, in this fixed income money market,
money manager space. If you don't have Bitcoin backed credit in your portfolio, you're going to
get killed by anybody else that does. And that capital is going to flee. They're going to say,
hey, why is my fixed income portfolio underperforming Joe Schmoes over there
by 200 basis points. Like, how are you getting crushed by 200 basis points? Like, what are they
doing? And it's like, well, they leaned into Bitcoin back to credit and they're outperforming
the market. And it's like, well, okay, I'm going to go over there. And you've got this entire
generation baby boomers that is leaning into their fixed income portfolios and relying on
their fixed income portfolios and their real estate portfolios. And they need these things.
they need these products and they're too good to not hold.
So how long is it going to take before we see massive inflows in these things?
I have no idea.
I have no idea how long it's going to take.
I've got a comment about this very particularly.
So in my family, there's some older family members.
Obviously, they know exactly what I've done,
but they still believe in CDs, certificates of deposits.
What I tell people to do a certificate of deposits
when I talk about this is, again, the proverbial $10,000.
If you're going to do a six-month CD,
don't put the 10 grand in at one time
and then have to wait six months in order to get it.
Take a quarter of it, 2,500 bucks, put it in, wait six months,
build out the same ladder, the same dollar amount,
whatever you get, you get.
And that way it rolls over.
So if you need the cash that comes out,
you don't have to wait the full six months obviously after the first time you do it you
have to do it so you then stagger the maturities of your cds now the people on this you're sounding
ancient grain i mean cds no no no no no no no listen how this is related so now if you if you
buy strc there is no ladder there's no ladder you just buy it and then you get out and it's liquid
you can't sell a portion of a cd with this you could sell to to the boomers and the old people
you say, hey, you can't sell a portion of a CD and lose that interest, which is minuscule on this.
If you buy this, right, not with all your money. And if you buy this, you can sell a portion of it
at any time. And that way you have a conversation that somebody can understand that's older.
Right. Yeah.
Right. It's a benefit over a CD.
It's liquid. It's just liquid.
It's liquid. That's why I'm on this page. Like this liquidity is a,
And we talked about this on the hurdle rate. Liquidity is a risk, like lack of liquidity gets a risk charge. If you're holding, you know, $100 million of Boeing preferred stock and you need to get out of it.
Well, it's like how liquid is Boeing preferred stock? How many people in the market want $100 million of Boeing preferred stock? It's pretty limited. So you have to take into consideration like the liquidity of these instruments and how quickly you can get in and out.
if you can't hold through the duration of them.
And now you have liquid instruments that outperform the yield that you can buy and sell at any point in time.
And they're absolutely crushing everything in the market that deserves a premium.
The yield on these should be far lower because of how liquid they are.
And this is huge.
This is like so this is so, so, so, so, so big.
and people 99 of people don't get it and they don't they don't understand how like monumentally
enormous this is and they're going to continue to be more liquid because there's going to be a lot
of people buying these and selling these buying these and selling these moving in and out moving
between mstr and stride and strife and strike and there's gonna be algos trading all of them
there's gonna be these huge pools of liquidity and all these instruments and they're just going
to continue to grow especially as institutions wrap their heads around this yeah one of the
So all of us were there. There's a picture of us at the Bitwise event in New York City.
And it was after the event was over. And Sailor, we go up and we talk to Sailor. In fact,
I'm actually in the picture showing my face. I'm reading all the comments that come up here.
And so I was there, but I was credited. But everybody's like, which one's green? But anyway,
the important part about this, and Jeff, you remember this because I was standing next to you.
and Saylor just goes on this epic rant for 45 minutes talking about the treasuries and exactly
what you just said. I am not a bond trader. That is not my area of expertise. And he's like looking
at us like, Jeff, and what do you think about this? And do you remember this, Jeff? And he's
going on and what about the, and he goes on. Like I'm selling these to insurance companies.
Right. And he's saying this to us with this passion. Now he did not disclose anything to us
about STRC or what was happening. But obviously he knew about this because it takes months to get
this done, like Ben said, to do an IPO and ends up being the biggest IPO of the year.
And he's talking to this and he's so animated, excited about this. And people, if you could ever
go see Saylor in person and you go up and you just talk, introduce yourself and say hi and ask him,
I asked him a question that was a dud, but it may become important. The question was,
will you trade these in other currencies? And he's like, no, because I can raise tons of money in US
dollars. And then it clicked in my head recently. What happens is strike is available. I'm sorry,
STRC is available in another currency like yen or euros or pounds. So-
Oh yeah, this thing is revamping the entire financial world.
This is a big deal. Why am I so animated about this? It's because of the guidance
and it's because of strc something that i'll probably i mean maybe i'll use it short term
if i get out of a trade what am i going to put it into i'll put an strc right so it's not it's
not going to get me rich green it's put you're pushing it push if you push the clutch in you
now have an instrument backed by bitcoin where you can you can push the clutch in and still be in
bitcoin which is like come on come on that's awesome i tell you green it's good to have you
back i know you uh i know you left team micro strategy here for a little bit but it's good
it's good to have you back i like this energized grain well maybe being a little bit salty has some
effect hey people just you got to give it time man if you're if you are uh look how old look at this
oh come on grain you're all racing motorcycles and super cars you can't pull the old cars
grows any longer i'm gonna look like santa claus just coursing through his veins he's not an old man
yeah yeah he's just filled with adrenaline i mean you see any picture of grain it's um you know
flying by the edge here you know he's just ripping around corners on racetracks or something this is
an adrenaline guy so i get why he does high octane investing too but i think one of the other things
to focus on here when you look at these charts and you can also look at the next one as well
but look at the grouping on the left i think just because you know this is around these specific
preferreds everyone ignores the massive cluster on the left of the chart yeah those are all
i think strc is also i'm not even talking preferred stuff further oh oh oh yeah yeah yeah these
those are all other products that somebody is buying yeah right so when you look at this and
you go all right well strategy has four of these products in market is this market saturated now
you know this is a what 1.3 trillion dollar market globally the preferred market so far
at the moment and there are buyers holding all of those other products that are massively
underperforming all of these bitcoin back credit instruments by yield by liquidity and on the next
chart it's by collateral position yeah this is i mean these are are such superior products relative
to what all this other capital is holding you know the difference i think is is that these are new
it's a new concept and the market is always going to have to digest new concepts and that's where
opportunity comes in i think one of the most fun things watching all these preferred you know people
are gonna gonna get upset because it's not just mstr and it's not the high octane version of the
I think people are going to stumble into capital appreciation accidentally with these products.
You're going to buy them for the yield while it's down here at the 10%.
And then all of a sudden that risk is going to reprice.
And that yield premium is going to compress.
And all of a sudden it compresses by the price of the shares going higher.
That's what brings down those credit spreads.
So I think there's going to be a lot of people that are accidentally going to stumble into capital appreciation.
on their fixed income products.
And I think that's going to be pretty funny to watch
when the market finally reprices the risk on these.
Yeah, every single one of these is a category killer
and they're going to keep coming out with new ones
until they have one category killer per category.
And they're just going to have the best preferred
in every single category.
Category killer.
Yeah, exactly.
Every single category.
And to the extent they do get repriced down,
There's probably both of these got to move closer to each other.
I would assume both of these move closer to each other and then the strategy instruments get cheaper because they're liquid and less risky and digital compared to physical risk.
So there's going to be like a flippening of.
Wow, that's crazy.
There's going to be a flippening of traditional fixed income and digital fixed income.
Like they look so crazy right now but they going to go the opposite way And that going to bring strategies cost of capital down in half which is like rocket boosters on bringing Bitcoin in the door and on the balance sheet
That's just like, oh my God, this is it. This is the biggest idea in all finance.
That's what they look past is that, you know, as those yields come down, their ability to raise just accelerates or at least, you know, the premium relative to the obligation that they're putting on the books here for these annual dividends, it lowers.
So it's just such a massive shift out here that the market's completely asleep on right now.
But it is a different way of thinking, right?
I mean, when you look at all of these other products, you got to look at what are you betting on, right?
What is backing your belief in this product?
Are you looking at the requirement for the future performance of this company to generate cash flows, to fund these new obligations?
Or with Bitcoin-backed credit instruments, now you're focusing on, well, how over collateralized am I with the asset?
but then you're also looking at what is the liquidity of the engine that's fueling the
payments for all of these products. So it's the combination of the two that makes this so powerful.
So you can look at it from just a collateral perspective and go, wow, this is safe,
right? I'm so over collateralized. I can watch this in real time. I can adjust my positions as
I need to. But then you look at, well, now I need to look at the next layer and go, all right,
If they're not selling the asset that's effectively collateralizing these products, now I want to look at the next layer.
And I want to look at where are they generating the income that's paying for all these dividends.
And then you go down to that level and you realize how deep the liquidity is on the common stock and how little of it it actually takes to fund these obligations.
So everyone who gets upset saying, well, they're using the ATM to fund these.
Well, the ATM of the common stock, the common stock became their primary product that they created and released to the market.
That was a lot of the early day discussions that we had on here was about how they were effectively introducing their equity as their newest product.
Right. It's not a new software platform. It was the stock.
The stock was the product and they were engineering that product to be superior.
And now they're doing that with different categories, but they're using that core product offering to make everything else run.
So it's such a unique way to reframe these types of products and figure out which ones actually offer all the superior characteristics to attract capital.
And when you look at it through this lens, it becomes an absolute no-brainer if you're in this market.
Why would you be holding any of these dots off to the left if they're less collateralized or offering me a lower yield?
Why would I be holding on to those other than that's how these products used to be structured?
I don't understand Bitcoin is probably going to be the main answer, but these things are going to be powerful and it's not going to take that long.
Can we talk about valuation?
We can talk about valuation.
Talk about valuation because I think this is where I get really fired up.
I think I've gotten a lot of flack because I feel like I see the world in a different way than a lot of people, which I think is fine.
I've had a lot of adversity in my life and I'm not going to change the way I see things. So
I'm just going to go for it here. As these instruments become more successful,
you're going to get more Bitcoin held on the balance sheet and the value of the assets held
on the balance sheet is going to rise. The assets that are relative to MSTR are going to continue to
rise. Now, what is the value of the equity? The value of the equity is its ability to store value
or distribute value to any of its holders. And this is like, it's almost like a value investing
thesis. The value of the balance sheet is insulated to any AI innovation disruptions,
and it's going to withstand the future, right? If everybody thinks that Bitcoin is the strongest
asset on the planet, which I personally do, I think this is digital gold. All the characteristics
are much better. I think it's going to go to the top of the leaderboard. It's going to surpass gold
and keep on going. So if that's the case, if I wanted to store value, I can store value in Bitcoin,
I could store value in the company that holds the most Bitcoin or any of these other companies that
are accumulating Bitcoin. And this is really a value play here, because you know that the
architecture of the equity market is a function of the market cap of these instruments. As larger
equities get larger, they have passive index flows that are coming in the door to buy the stock at
any price. This is just the way it works. So like one of the reasons the MAG7 has stayed up at the
MAG7, not only do they have great products, but like really great access to capital, but they also
have continuous passive flows that are coming in the door to buy the stock and to continue to put
them up, push them up there, which continues to give them easy access to capital, which continues
to allow them to do their operations that they normally do. Now, it's a little bit different
here because you have a really strong asset side of the balance sheet, but you know that that asset
side of the balance sheet is going to get significantly larger because of the way these
instruments are designed. So it's only a matter of time before people start to reflect what is the
value of this instrument? What is the value of the future compound annual growth of this instrument?
What is the value of the future accumulation of this instrument? And what is the future value of
the future accumulation of this instrument? And it just kind of compounds on itself. So,
and the architecture of the market continues to push it up there and keep it up there.
So I think it's undeniable that it's going to continue to, the market cap of the underlying
equity is going to go higher because of the structure and the architectural design of the
equity market. And where you get in on that point of time is your perspective on how you view that
equity in the future. Same thing happened with Berkshire Hathaway. And we talked about this,
I think a little bit on the hurdle rate podcast, like Ford, Ford Motor Company used to be a
balance sheet company. Strategy is a balance sheet company. Insurance companies are balance
sheet companies, banks are balance sheet and balance sheet companies, Berkshire Hathaway
balance sheet company.
And Ford, when they were first creating cars, they were obsessed with building their balance
sheet because they wanted to insulate themselves for any downturns that happen in the market.
And if there's downturns in the market, having a strong balance sheet is really helpful
because you can continue to do business into the future.
If you think about any of these companies in the S&P 500 right now, 493 of them are underperforming the S&P 500.
Seven are outperforming the S&P 500.
And those 493, if you don't have a strong balance sheet and the market turns on you, the value of your company disappears.
And having a strong balance sheet gives you continued access to capital and continue to grow.
So it's, I think, largely overlooked by people that are throwing these crazy valuations on equities that have a lot of uncertainty in how they're valued in the future.
And they're really dependent on some future expectation.
But if your assumptions on future expectations change by even a quarter basis point today, your valuation assumptions change drastically.
So, you know, I wanted to chime in here on this.
I think that what Saylor said in the Q2 earnings report was that he's paying 500 bips above
SOFR.
And what I liked about that was that it was a fiat metric.
So his metric is not 10% of the Bitcoin CAGR.
His metric is if interest rates continue to go down, he said 500 bips above it.
But as SOFR goes down, the overall rate goes down on STRC.
Ben, please correct me if I got this wrong.
Right.
So from that perspective, his hurdle rate that he picked, I don't want to, sandbag sounds
terrible, but he picked a lower rate.
And I think that's why if a preferred instrument can't pay 500 bps, a 5% above SOFR, then why
would anybody buy it?
you could just buy you know buy treasuries and that would be you get you know the full faith and
backing of the u.s government provided you believe in that so i think that was it's an easy number
to say i think that's an easy number for people to understand and the fact that it's over collateralized
most times when you look at a um a company bond it's based upon the cash flow of the company
or some assets that they pledge as collateral it's that companies with this it's bitcoin it's
not strategies cash flows from their operating company it's not strategies buildings it's a
non-correlated commodity i think that's that they're that they're accumulating that they're
at an incredible pace right right and with a fixed supply absolutely and it has a network for
delivering it you know roll all the bitcoin you know um awesomeness into it but they have a great
charter and i'll tell you which it is in a second but keep on going yeah it's this uh this concept
there's this concept in finance and this is probably too jargony but there's this concept
of uh weighted average cost of capital and uh one of the one of the uh components of the equation is
the risk-free rate and if you just change your risk-free rate assumptions well what do we know
about the risk-free rate risk-free rate is the the rate at which uh the government pays you to
hold their instruments because you know that the government's not going to fail so all right so
the risk-free rate is at a four four and a quarter well inflation's what we found is like near six
and a half to eight okay so what if you just change that risk-free rate to what like the
inflationary rate is any assumption if you just change your discount factor any assumption on
the valuation of any one of these companies drops the valuation today drops drastically and if you
change that to this inflation factor or STRC or STRF as your risk-free rate,
the way you value these companies probably drops in half because it puts a lot less
value in the future cash flow because your opportunity cost of capital today is so high.
And that's kind of what I've been trying to point out with some of the graphs and charts that I put
together, we're like looking at net income over time priced in Bitcoin. Maybe we'll get there.
Maybe we'll get there a little bit. This is probably a little premature. And we'll talk
about that. But so can you pull up slide number 10? Yeah, you see, I like this slide. And one of
the reasons why I like the slide is that comparing if you look at 2020 to 2023, you see that there
their ability to um has consistently their bitcoin yield since 2020. but if you look
diminishing returns didn't set in what happens is from 23 to 24 it went up 74.3 percent this is
their numbers not mine and then you look at it went up 25 for the first half of this year
so let's assume let's just assume ceteris paribus it all stays the same and it ends up going their
their Bitcoin yield goes up 50% in one year.
I'm like, well, that's a really great metric.
Now, this is independent of the stock price,
but it shows their ability to raise funds.
So with that said, I like slide number 10.
I mean, I think we should go through the deck
and everybody picks out their favorite slides
and we can talk about them, but this is one of my favorites.
Well, this is the first time
that they actually published this metric, right?
Not the yield, but the actual sats per share.
that's for sure i think a lot of people overlooked that right this is one of the charts i put out all
the time because they would never report on it this was the very first time that they actually
formally put it out so it was cool to finally see it show up in one of these decks you know what ben
it feels like i just put on a nice warm sweater when you said that you can take that off your
plate now ben yeah i guess i could offload that one yeah yeah that one's in sailors hands now i
I think they'll do all right.
I will say just as a general overall, one thing I did really like about this last earnings call was the way that they also put Fong out there a lot, where he was covering a lot more of the discussion as well and kind of giving Saylor a break on some of this.
It was great to see that full team starting to get more and more engaged.
and i think that's critical because anytime you have a figurehead you know that's as inspiring
as a guy like sailor they tend to be the ones that have to carry the load here but it means
that people don't realize what how powerful the team is that's backing this thing i mean it's
incredible anybody you talk to on that team is as sharp as they come and so starting to see them
become more public facing and start doing more of the discussions on these earning calls.
I think that's huge because one of the early days discussions was always around key man risk
in this strategy. And I think we've probably moved past that now. I think that a lot of us,
obviously, you know, Saylor's still the figurehead over here because, you know,
he's the visionary that's made all this possible. But when you know that now at this scale and the
maturity at which they're operating, that you have a team that can carry this load for you,
That's massive in terms of building that confidence in the market.
So I just wanted to say it was really awesome to see that come out in this earnings call.
Yeah, he had one of my favorite quotes, and I can't remember which slide it was, but it was the one where they were listing strategy in the list of sizes.
And he said that they don't want to just be the biggest Bitcoin treasury company.
They want to be the biggest treasury company.
Yes.
and i was like okay fong is just dropping the hammer boom i immediately screenshotted on my
phone i was like screenshot going back to listen again the biggest treasury company and i mean
they're not far yeah and berth berkshire hathaway was at the top so it was like you know okay berkshire
you're gonna buy bitcoin or you're just gonna wait for strategy to acquire you
Right.
You know, another metric that I thought that was awesome from listening to the call, that
at the end, first of all, the amount of people on the call rose the whole time. And anybody that
does a call knows that usually after the first half an hour, people drop off. But when I joined,
there was a little bit under like, maybe like 30,000 people on the call, maybe 40,000. And at
the end of the call two hours and 15 minutes 80 000 people were listening to an earnings call
i mean that's just got to be a wreck i mean i i have no i mean ben you have any idea of what
what happens on a tesla earnings call or a nvidia how many people i mean i have no idea but these
earnings calls in my opinion are one of a kind right most earnings call you go to it seems like
people are reading a hostage statement right like they're captive and they have to read exactly what
what the lawyers told them they could read.
So the ability to do it this way,
where you're using it not just to run through the numbers,
which obviously they do,
and they give you all the normal disclaimers.
But then you use that time
while you've got everyone's attention, right?
Everyone's showing up for an event, the earnings event,
and they want to see what the performance was.
But now that you've got their attention,
you've got the ability to educate them.
And I've seen it over and over now
as they've started doing this more often
that it completely resets market sentiment when they do it
because people reorient themselves to the long-term vision
and they stop looking for optimizations for a day or a week or a month.
And they realize that you're building the framework for something incredible
that's going to be able to last for decades.
And we're all guilty of it too, right?
I mean, you get impatient, you're waiting for things to move.
You don't know what they're doing.
If you don't hear from them all the time, you assume nothing's happening, right?
I mean, that's human nature.
That's just how people get.
But when they do these, and this is really when they take the time to engage investors
in a way that I haven't seen any other company do, you're taking the opportunity to show what the
world looks like through your lens as a corporation, right? Here's how we're going to leverage the
strength we've built. And here's the markets that we're going to go and dominate. And here's exactly
how we're going to do it. And running through that in the detail that they do and level setting it
with data like you're looking on here, this is really data heavy for any of these types of
presentations. Typically, if you're talking to consultants, they would tell you that there's way
too much data and way too many names on this slide and you got to trim it down and have two or three
things. But this is what investors are looking for now. The investors have gotten far more savvy
and they're digging deeper into these companies and they're trying to really understand the nuance
between what makes a successful Bitcoin treasury company. And if we think that this is going to be
a trend that persists. And if you watch the news cycle, it's becoming pretty clear because you're
seeing announcements all the time. You know, this is where you come to get your master's degree,
right? It's these types of presentations. It's hearing from the people that are doing it at the
highest level who have been thinking about this in a way that people who aren't actually sitting
in the seat and executing and talking to the investors and talking to the banks, you're just
unaware of what's even out there. So this is a huge move forward in investor relations to be
able to do this and to empower your investors to now take this data and interpret it and then apply
it broadly across an entire sector that's emerging. This is huge. So yes, I'm sure they're
incredibly comfortable doing it because they're the leader. They are the one leading from the
front. They're setting the framework for how everyone else is going to follow and everyone's
going to tweak and find ways to make the strategy their own and how to optimize it based on their
starting point. But this is how you get the message out. This is how you show that this is not some,
you know, fly by the seat of your pants approach to trying to generate value for your shareholders.
This is incredibly well thought through. You're thinking through every concept from how do we view
MNAV, right? Because the market hasn't even settled on how they view MNAV, right? They just
know they want it to be higher, but they don't know exactly what's going to make it higher.
There's all kinds of arguments out there. So they give you the vision of here's how we view it.
Based on the tools in our toolbox and the amount of Bitcoin we can create and the fact that we're
denominating our performance in Bitcoin terms by focusing on Bitcoin per share and Bitcoin yield,
this is what we think justifies X premium. And here's how you can expand it. Here's what we
think we need to tweak to expand that metric. And here's how we're doing it. That's incredible
transparency. And I think that this is a model that all companies are going to need to deploy
at some point. They won't, but they should, because this is how you build an equity that
has the liquidity profile that MSTR has. You don't get this amount of trading volume. I don't care
what equity it is. If people don't feel comfortable trading in and out of it and knowing that there's
stability here and that this isn't something that's completely erratic. This is incredibly
well thought through. It's incredibly well managed. There's a focus on risk mitigation.
They're constantly finding ways to de-risk the model and the business. And because of that,
investors can deploy huge amounts of capital into this ecosystem. And now you're seeing the benefit
of that. So this is a strategy I always look at. Everyone always wants me to comment on
what's happening this week or next week or at options expiration this month. I don't care.
That's not what I'm focused on. I love the strategy. And I think that if you're looking
at long-term value creation for shareholders, they've been clear, they're not optimizing for
traders. So you have to know that going in. And this is how you show that focus on optimizing for
long-term investors. You're going to reward the long-term shareholders and they're going to
continue to benefit in Bitcoin terms. And that's an incredibly powerful shift in narrative.
Yeah. Your point about the constant optimization, I think is the key because, you know, people will
say that AI is the least powerful it will ever be. And like strategy has 3000% gains over five years.
Bitcoin is like 1000. So they've three X Bitcoin in five years. And this is the least efficient
MSDR will ever be. The future is going to be better than that.
Hell yeah.
Like, you know, the days of them begging the bond market for good rates and favorable terms,
that's all over the days of, you know, being helpless during a Bitcoin market because they
didn't have the preferred tools, that's all over. It's only going to be more efficient.
Wow. Yeah. It's like this.
You know, I'm going to say this to the older people on the call. And I don't want to give
financial advice, but if you think that your job is going to be displaced by AI or a person using
AI, you pretty much have a simple choice. You can either get good at using AI. And if you don't have
interest in doing that, that's probably not good for your career, you better get some Bitcoin in
case it catches on because that's about the only thing that's going to save the white collar 40 to
60 year old person that's going to get displaced by AI by a 25 to 35 year old person that has better
technical skills. This is exactly what happened back in the olden days with the internet bubble.
it's the same thing they got displaced i couldn't understand the internet and now oh i don't
understand ai i don't use it which i think is kind of crazy because chat gpt has 700 million
whatever daily or weekly users so there's a lot of people using it but you better get good at that
and if you don't you better have a plan b or a backup plan yeah strategy is showing you what
happens when you have ai and a vision and you need both of those things right ai tools are as good
as what you're willing to put into them.
And when you have a clear vision
for what you're trying to accomplish,
and you've already decided
that you're going to throw out the old playbook, right?
There's going to be a million,
I'm sure that a lot,
this had to be a very frustrating path,
getting all these preferred products
out into the market for strategy,
because I'm sure at every turn,
the bankers were telling them,
well, this isn't how these work,
or investors aren't going to know
what to make of these products.
So you have to be willing
to utilize that technology in a way that pushes boundaries and create something new.
And what they've created here is spectacular.
And it's scalable.
And it's powered by effectively the capital that opts out of the system that you're watching
be manipulated in front of your eyes.
And you cannot understate how powerful that is that you're backing the entire balance
sheet of a company by truly decentralized capital.
It's crazy.
Yeah.
It's a massive shift.
And then you're building products on top of it that take advantage of the fact that you know, because they tell you that the US dollar or whatever your fiat currency is, if you're issuing preferreds in another country, like it looks like Japan or Metaplanet's going to do in Japan and several others, I'm sure are going to pop up in their own respective markets.
You know, if they're telling you that they're going to be debasing the currencies and you know that you're capitalized on an asset that's truly finite, completely fixed supply.
And you know that no matter the demand that comes in, right, no matter how much corporate demand comes in, no matter how much nation state demand comes in, no matter how much retail demand comes in, there's not going to be any more coming into the market.
The only thing in that model that ultimately is going to give is the price.
And because of that, you can build a long term thesis around that arbitrage.
And that's what you see with these preps.
Right. They're clipping the first, you know, eight to 10 percent of that Bitcoin CAGR.
And they're passing that on to the people that want a fixed payout.
And then the remainder of that flows into the common stock equity holders.
Right. So if Bitcoin continues to perform at a really high level, it's a hugely beneficial ecosystem to be participating in.
in. So it's one of those things that just every time you see a presentation come out like this,
you get excited about it, right? I mean, to sit on an earnings call for two hours to watch people
go through the high-level vision and then explain it to you in granular detail how they see it.
I mean, you know, there's nothing better if you're passionate about an area than having
this type of access to both the minds that are creating it, as well as the output of how they're
thinking. It's a hugely powerful combination here. So I want to hit on a couple more things
and so we could shift gears just recognizing time, but incredibly important parts of this,
they gave Bitcoin guidance. This is the first time they gave Bitcoin guidance. And I think they
kind of underestimated Bitcoin price relative to the analyst Bitcoin prices by the end of the year
that were earlier in the presentation. So they came with a conservative estimate of 150,000.
They bumped up their Bitcoin yield. So they shifted their Bitcoin yield target at the beginning of the year was like 15. They plowed through it. They pushed it to 25. They plowed through 25. They shifted it to 30. And we've got half the year left. And increase their Bitcoin gain, dollar gain target. Awesome. Awesome to see guidance like this.
The other thing is they put out earnings guidance, which is a function of the underlying Bitcoin price.
And you start backing into this earnings guidance relative to some of these other large companies, and it is just monstrous.
And it's insulated.
If there's any change in market sentiment in AI or any blow off top in any of those things,
this is likely to be insulated from any froth because it is value. There's true store value
that they're holding on their balance sheet here, which I think is fascinating. The next one,
this was huge. Josh Mandel was on fire. He was all about this. We got some MSTR MNAV equity
guidance. So it looks like they changed their algorithms for issuing the MSTR equity. So right
now, I think MSTR MNAV, which is the multiple on enterprise value is how they calculate it on
strategy.com. It's the enterprise value as a function of the underlying Bitcoin holdings.
So right now the MNAV is like 1.7 and below two and a half MNAV, they will not be using the MSTR
common atm which has got to make people happy right there's uh jim chano's trade doesn't work
anymore and there is going to be no additional equity issued to the market until two and a half
x m nav and then between two and a half and four they don't even say that they're going to use it
all the time they say they're going to opportunistically issue msdr to acquire bitcoin
so you know it's probably similar to kind of what they have in place right now you know on
you know, good days, positive days, whatever. So I think that's really positive for the underlying
equity. And it was good to see some guidance here. And then STRC credit guidance, they refine this a
little bit, just showing exactly how they're going to try to keep this in the target range between
101 and $99, which this is just going to be such a fascinating product. And I know a lot of people
are fired up about it because once we get to 99 or 100, if there's additional volume coming in the
door, they're going to act, they're going to do a five day BWAP and issue more
shares of this stuff out to the market to bring the price back into target range.
So as the world wakes up to this instrument and that continues to trade up
higher they have the ability to just continuously raise capital If there more volume excess volume coming in the door on these things So I mean I had three conversations with people today about STRC
and there are people I've talked about MSTR for a really long time. They've got a little bit of
MSTR, but they've always been just like a little hesitant about it. And I said,
hey, this is a really cool product. You got to check it out. And that's, I'm just one step at a
time. And, you know, it takes a couple of people having a really improving their life from having
this instrument. It takes a handful of those people telling a handful of people. And all of a
sudden, you're Kevin Bacon, seven layers of separation, and your stretches in every brokerage
accountant of every person in the United States. I think this one becomes massive because one,
it's just got characteristics people like. They don't like to wait till the end of quarters to
get dividends. So if they can get monthly dividends, you know, it feels like it's working
for them more. So I think you see a lot more capital coming in and they're going to be pretty
active trying to keep it capped at 101. But also every month when that dividend gets issued and
you get all the reinvestments that come, right, the drip, they've got an opportunity right there
to effectively try to neutralize that new buying pressure with new shares in the market so they
can recollect that capital. The drip just comes back. Exactly. So this is one they're going to
have to actively hit because you saw what can happen when those dividend reinvestments hit.
We saw it with all the other prefs and things spiked in a really crazy way. So on this one in
particular, they're going to have to be ready for that. And I think they're going to be putting a
ton of shares in at the end of each month when those dividends are getting paid and going back
into the reinvestments. So they've got an ability here to raise a lot of capital. And the larger this
things scales, the larger that opportunity every month comes as well. So I think there's just going
to be a huge amount of capital they're going to be able to raise with STRC. This is going to be a
really powerful tool. And on the MNAV and the ATM, I think it was big, right? I think the timing
was right because the common stock ATM had really become the primary capital raising tool for them
for a very long time, and that's a delevering instrument. So every time they were raising
capital via the common stock ATM, they were adding Bitcoin to the balance sheet. It increases
the fair market value of the Bitcoin. It delevers the balance sheet. And so it was hitting this
point where they were going to become increasingly delevered with time. And now that they're sub,
you know, what are they? Including dead end prefs, like 11% or something like that.
I was in your sheet. I can't remember. Oh, yeah, yeah. 11% leverage. And if they're looking at it,
and on that one slide, they showed that with just the press, because you're managing the annual
dividend obligations, you know, 30% is no longer your ceiling, right? You could go higher on the
leverage, knowing that they have to scale these products now, even in order to relever, they've
got a long runway of raising capital through these preferred products before that leverage
ratio really climbs in a big way. I mean, there's a ton of capital they have to raise to get that up
back to 30%. I do the math here, but I just shut that part down. But we'll figure out what that
number is. But it's a lot of capital to get back up to 30%. It's huge.
They're going to be aggressive here. And I think that the remaining five months of the year,
there's going to be way more capital raised than people are anticipating.
Bigly. A lot of capital. Bigly. Last thing is talk about comparables. I felt really seen by
Phong here. Big shout out to Phong because I've been trying to say a lot of this stuff and they
just put it together in a presentation and they just took it off my back, which is great.
But benchmarking strategy to the top S&P 500 companies, they've got ninth in operating income,
but 96th in market cap. They're 13th in estimated income, but 495th in PE multiple.
I know some people put in the chat, Exxon is a balance sheet company.
Exxon, balance sheet company, 16.5x PE multiple.
Berkshire Hathaway, balance sheet company, 25x PE multiple.
And you look at some of these crazy ones here.
The one that's not on here is Palantir, which there's been a lot of energy and people talk about that today.
But there's a 650, 675x PE ratio.
Is that all?
Yeah, there's a, you know how we talk about real estate?
There's a lot of monetary premium in real estate, and there's going to be a reevaluation of real estate as monetary premium gets sucked out and all this risk gets reevaluated.
I think the same thing exists in 493 of the stocks in the S&P 500.
And you can see it here.
Who's buying Broadcom?
There's no irresponsibly among Broadcom communities out there, right?
Like, I don't know.
Maybe there are.
Just me.
I just haven't looked at it. Like, you know, irresponsible along Walmart. I don't know. And that's even as a Walton saying that, you know, dissing on my name brand, I guess. But yeah, I think there's a lot of opportunity here. And I think the world will eventually wake up to this. And the other interesting part is all of these companies on the right hand side, strategy is the only one that's not actually included in the S&P 500.
As I've mentioned in the past, the S&P 500 holds like 6% of most of these equities on the screen.
So as that continues to change and we see this speculation on whether they get included in the S&P 500, it's just going to be a fun conversation.
You've got these two valuation systems that are clashing in epic proportions.
You've got balance sheet value investing, discounted cash flow, expectation of future cash flow investing.
and the valuations of those two are clashing just monumental proportions.
Do you think that one thing that surprised me when the guidance came out, right? Obviously,
this earnings was a massive deal because this was kind of the culmination of everything that had
been happening for years now. It was the first time that they could realize that value.
You know, and this was what, $10 billion in net income. And now you've got guidance
just for the rest of this year for 24 billion you know if they start showing quarter after quarter
after quarter right if bitcoin continues to perform and if sailors correct that winter's not
coming back and the structural bid builds up underneath bitcoin because all these new
corporations are coming in and other people will get in the mix as well i mean that type of earnings
is pretty incredible and when you see it i think right now you're still in that position where
A lot of people that haven't been following this for a long time will go, yeah, but it's a one-time event.
Right.
They got to recognize it this time, you know, marked it to fair value.
Okay.
One-time event.
I think seeing it multiple quarters in a row, particularly if it happens to be in like, you know, $10 billion type range is going to continue to bring eyes in and start getting people interested about what is going on over here.
What is the model that they're deploying?
Why is this small software company just dominating the fixed income markets?
What is happening?
So I do think that while this was a huge deal, I think that we're still in the phase where
people can shrug it off and go, well, it was one time.
It's not going to happen again.
And now, if it does happen repeatedly, particularly throughout the year, and if they hit that
24 billion mark that they're guiding towards, that's going to be powerful for messaging for
all the Bitcoin treasury companies. If Bitcoin goes to 200,000, the net income goes to 80 billion.
Yeah. That's 80 billion additional. So then they're going to be sitting on $150 billion
of this stuff of Bitcoin, right? They're right below NVIDIA in this chart.
Okay, if Bitcoin goes to a million, that's $500 billion net income.
That's 5x all of these, right?
Those numbers are too big, Jeff.
We need to start with the smaller numbers here that people can conceptualize.
Five years of net income at Google, the biggest net income.
How big is that neighborhood?
There's a million dollar homes in it.
That's a big neighborhood.
We could go back to that one.
Okay, I'm going to stop sharing my screen.
so i get my screen back and well uh man that was cool it was a that was a great earnings call once
again a master class they're just trying to communicate to the market that's all the finance
is is telling a story they just got to tell their story and yeah but but effectively right but jeff
let's be realistic 400 companies out of the s p 500 have a crappy story they don't have a story
It's dead.
They don't have a story.
That's why they…
And so the CFO has got to get on the call and talk about, and if they don't have good
metrics, who wants to be on that call, right, and take questions?
I mean, it's, you know, we've all seen…
Well, so a year ago from Strategy World, the previous year, I was there with Ryan and Plank,
and maybe there was 150 people in the room.
And then this year, it was outrageous.
main stage that he was on with sailor i mean that the tvs were what 20 feet tall and 100 feet wide
i mean it was it was crazy how in one year it just everything had changed and you don't see that like
you know where's the irresponsibly long broadcom group maybe somebody's listening will be like
there is one and we don't know about it but i i want to i want to just say something here um if
people will see that my sentiment has fundamentally changed where it was for the past six months and
and seven months. And the reason why is one of the main reasons because of this earnings call,
because of STRC, because of the guidance, because it was in writing and there are slides in here
talking about this. And so once they give that guidance in terms of the 2.5 MNAV on the common
stock ATM and we see this, they listen to feedback. And if a group don't listen to feedback
And the perception tends to be pretty close to reality sometimes.
And so if that's the case, then they made a course change.
And I commend them for that.
If they're listening, if the execs from Strategy are listening, congratulations.
You listened to what the shareholders were saying.
And we're proud to be part of this group.
But we thought that by selling too many shares on the common stock ATM could depress the price
specifically of MSTR.
are and you you made a change to that so thank you we appreciate that launching strc i hope it's the
iphone product i truly do i think that if they came out with an overnight jeff i think that's
a great idea i i like that i like that idea they could do that repo overnight yeah yeah it's a
daily daily product and brokers would have to figure out how to do a dividend daily and get
comfortable dividend daily because it'd be one day settlement i mean they're probably maybe there
maybe you just do it weekly but if you could do it daily and it just tabulates it daily but it
pays out weekly i i think that that would be the if you have the short duration and you have the
long duration perpetuals you got you've got the yield curve well you got a yield curve there yeah
look all my all my junior enlisted from the navy can you get us like a payday loan version
yeah i'm saying that's what we need give me the dividend up front and uh and i'll hold it
i'll pay you back next friday well however you got back rain we're glad to have you back yeah
well well well thanks and and guys look i of course i want to be on these calls and and add value to
this but you know when i look at it you know there's another great slide if you could pull it up
um slide number 26. yeah let me see and and and the reason why because um there was an interview
with, what's his name?
The guy that's on CNBC, the option guy.
I forgot his name right now.
It was a quick clip.
It was 20 minutes long.
I had reposted it about a week ago.
And what he said was, the question was to Saylor was,
who have you spoken to that would surprise us
without releasing any names?
What company or country?
And Saylor came back and said,
I haven't really spoken to any company
that would really surprise anybody.
But then what he said was the only serious conversations he has
is with the United States.
So he said that.
And then you see slide number 2026 come out here
because this administration has embraced Bitcoin.
And there's people that have been left off of this slide also.
What's his name?
Bo Hines, for instance, is not on the slide.
So there are people that are left off.
And we've talked at the Bitcoin conference.
I talked to a lot of staffers for Cynthia Loomis
and other people there that were bullish,
the younger staffers are bullish on Bitcoin So this is a fundamental shift that he talks about And then not only do you hear about this when he does an interview but then you see it in the Q2
report and you put a picture with a face to it. And so not only did he change the FASB accounting,
but because of the change in the political structure of the US, it got rid of Operation
Chokepoint. And then by the way, if you scroll up or down, blah, blah, blah, hold on one second.
And where's the, there's a slide with the Clarity Act with the three acts in it.
Oh, slide 37.
There's a slide on the FASB, Capital has embraced Bitcoin.
So the Genius Act was approved and got through.
You got the Clarity Act and the Bitcoin Act trying to get those through.
So my takeaway is Bitcoin has to perform because you've got what you saw in this section here.
is being important that these people came in.
There was a change in the political winds in the U.S.
And therefore, now this is the best tailwinds you get for Bitcoin.
It's right.
I mean, does anybody disagree?
I mean, it's fantastic.
I mean, yeah, the architecture, again, has changed.
And going into midterms in like almost a year, that's probably pretty important too.
And what I've seen with very difficult and any political thing is that
once something gets done, it's 10 times harder to undo it. It's very hard to get something
accomplished, but once it's accomplished, to undo it is very hard. So in this particular case,
an Operation Chokepoint did not go through Congress. It was just more like policies were
there. So these undid it by law. And I think that this is a fundamental shift. So again,
what changed my sentiment, it's changed based upon the information that you see in this deck
that may not be, it's directly related to strategy,
but it's related to government and guidance
and sentiment and so forth.
It's really one of the first times
where you look forward into the future
and you don't see nearly as many potential roadblocks
that can be thrown in your way, right?
It feels like from this point,
particularly now that investors are getting easy access
and exposure to Bitcoin through brokerage accounts, which means you've got a lot more
people likely getting that exposure. And obviously the success of the ETFs is proving that out.
Those are important voting blocks. So for any political party to come out now and decide that
they're going to go anti-Bitcoin is going to be a massive, massive risk. The move is really
to go out and say, we're more pro-Bitcoin than the Republicans, or we're more pro-Bitcoin than
the Democrats, right? We're all about empowering you and allowing you to buy whatever commodities
it is you want to buy. It is one of those first times where it feels like we're catching a tailwind
instead of pushing through a headwind. And just that shift alone is huge. And investors are waking
up to that. And I think they're feeling more confident deploying capital into the space,
which means more people are going down the rabbit hole of understanding what Bitcoin actually is,
why they should be holding the asset themselves, right?
Participating in what makes it powerful.
I'd be curious to see the stats on, you know, like home miners that are getting sold,
these small solo miners, because I think that would be a really interesting trend to see,
to see how many people are starting to try to participate more in everything Bitcoin has to offer,
whether it's running a node or running a miner in your basement or whatever.
is you know i think that the uptake in that type of an education and adoption as people understand
just how powerful it is to have a fully self-sovereign asset like bitcoin in your portfolio
can be and then you know obviously brokerage accounts are a massive top of funnel for generating
interest and as their brokerage accounts perform it just sends you deeper down the rabbit hole
because you want to know what is the asset that's making all of this possible
bingo uh we're we're getting close to uh we're over an hour and a half i wanted to try to keep
it at 90 minutes so i've got one final thing to talk about and it's just this bitcoin as a unit
account and maybe maybe we'll make this two hours who knows i don't know but uh i just shifting
gears here a little bit and something i'm noticing in the marketplace and just a just a general trend
and I think it's worth talking about, is a lot of people are doing a ton of analytics on Bitcoin
treasury companies right now. Fantastic. It's absolutely great to see. There are little
communities that are popping up everywhere. They're following these stocks. This is just
great for the entire ecosystem. What I don't like is that it's like infighting between all
of these people. You need to buy this because this metric is slightly better. And this Bitcoin
treasury companies are going to outperform this Bitcoin treasury company. It's like,
you know, whatever anybody does with their investments is fine. I mean, it's all good
for the general Bitcoin ecosystem. And where I think the bigger fight and the bigger argument is
here is against the traditional financial markets. And all of these analytics can be done.
Just take the same framework and apply it to all of the traditional financial ecosystem
them and start seeing the world in Bitcoin and your whole perspective on the rest of the world
completely fundamentally changes. And this is a call to action to people to start to use the same
Bitcoin framework and think about the rest of the equity market and the rest of the fixed income
market. And this is a campaign here. Like we really want Bitcoin to become adopted. There needs
to be stepping stones to get there.
And it's through communication, it's through analysis,
it's through doing things a little bit differently.
It's not through infighting about which treasury company
has the best months to cover MNAV.
I mean, it's great information and it's like great analytics,
but it's not useful time and energy spent.
And I just, this is just an example.
And there's so much opportunity in this space
to like rethink the world in Bitcoin
of all these other things.
And this is just an example
that I've just was starting to come up with.
And I posted this on my Twitter feed is,
so on the left-hand side, this is CrowdStrike.
CrowdStrike was recently added to the S&P 500
because they had four positive quarters in a row.
And I went back and I wanted to see, okay, their net income,
I wanted to price their net income in Bitcoin
at the time they announced earnings.
So I took the price of Bitcoin at the time they announced earnings
and I converted into Bitcoin and I just looked at it over time.
And I wanted to see like how much Bitcoin would they have stacked
if they would have just bought Bitcoin with 100% of their net income?
And like, what would their position be?
And you look at this company CrowdStrike and effectively,
they've lost like 18,000 Bitcoin over this horizon
in net income perspective, which is like a negative $12 billion loss relative to the negative $2
billion loss they actually posted in dollars. But if you think the world in Bitcoin, that's a
significantly bigger loss. Your opportunity cost capital is really high. And it's an interesting
perspective. And then you start to look at this one over on the right-hand side, this is Nike.
And this is net income over time. And you look at during 2020, obviously, they would have purchased
a lot of Bitcoin and same with 2022 in the bear market, which kind of in the middle here.
But on the right hand side, you look at their ability to raise this capital, this permanent
capital and hold into the future is dwindling. And that's just making the moat of any of these
Bitcoin treasury companies greater and greater. You look at a company like Strategy, it holds
600,000 Bitcoin. And even if you combine all of Nike's past 21 quarters here, it's still not more
than 600,000 Bitcoin. It's maybe close, but that's 21 quarters of converting 100% of their net income
into Bitcoin, which they're clearly not going to do. But it's just starting to see the world through
a little bit of a different lens, it could be really helpful in communicating to other people.
I also think that because we're moving into the age of rapid disruption, right, with AI coming,
there's going to be a huge amount of disruption to a lot of different industries.
And one of the things that I've been starting to focus on is looking at more of these traditional
equities and looking at how resilient are they to that disruption from a financial strength
perspective. If they come in, you've seen it with some of the announcements that have come out,
you know, like whenever, what was that AI tool that came out out of China that, you know, said
they basically launched it. Yeah, DeepSeek. And like when that came out, it just totally shocked
everybody, right? Like, oh my gosh, is this industry already getting disrupted? This is
supposed to be the one that does the disrupting, that's going to come for a lot of these other
companies because now you've got these smaller, nimbler companies that are enabled and don't have
all of the built-up overhead of decades of operating and building out org structures and
hiring people. And they're going to be able to build more efficient operating models and better
product sets. And you start to look at what optionality do those companies have if disruption
comes for them. So if you've got this massive war chest on your balance sheet and you've built up a
really resilient balance sheet, you've got the ability to reinvent yourself at some point in
the future if you need to. It's optionality to buy yourself time. In a lot of these companies,
because they have to constantly be reinvesting all of the capital that they bring in the door,
because it's all about expanding the next quarter's earnings. And so they've got to pump it
into sales and marketing and R&D, and they've got to just keep putting all that capital out the door
and they never get to accumulate any, they never get to build a war chest. If they fall behind in
that race and they get disrupted, their timeline is short. Whereas if you're a company that holds
more than 600,000 Bitcoin worth 70 some billion dollars and you've got a relatively low burn,
which is what you're looking at with this annual dividend payout, if you start looking at other
companies through that lens and going, how resilient are they really?
If they get disrupted, how much runway do they have to pivot if they need to?
And the answer in most of these instances is going to be not very long.
Netflix.
Huge overhead.
They've got huge risk associated with those business models.
And I think that that's part of the value proposition of starting to talk to these
companies about the opportunity to stand up a second value creation vertical within
your business, which is completely focused on deploying the balance sheet and building that
war chest while you're still operating your business. Go ahead, keep operating that business,
keep building it, keep making it successful. But on the other side, when you've seen what
strategy's done, where they've deployed this strategy through their treasury and built this
massive war chest and generated additional value for their shareholders that wouldn't have been
created through their standard operations, that's a powerful shift. So I think kind of shifting
the way you view these companies both from the way you were saying jeff looking at you know net
income or converting ebitdao over to bitcoin terms and seeing whether it's you know eroding out from
under them or not and then looking at the composition of the balance sheet and figuring
out just how resilient this company is and what optionality they have for the future
is going to completely change the way that you view companies that you've typically looked at as
bulletproof yeah so that's wild because you're so you know the ai you can leapfrog someone right
you can disrupt them whatever industry you're in you can be disrupted but the only thing that can't
be disrupted is a bitcoin balance sheet because it has a fixed supply so these companies that are
still on zero Bitcoin. They haven't gotten off zero. They don't even have a runway. The only
companies that have runways at all are the Bitcoin treasury companies. And everyone else is just
falling farther behind because they're not even in the race. Yeah. And a lot of these companies,
I mean, their financial performance is reliant on, you know, you're seeing things that pop up like
tariffs that then have to get passed through to the end consumers. And so their cost of goods goes
up. So they get to raise the prices on their products and they're passing that cost down to
the consumers. So it looks like their revenue is continually increasing, you know, quarter over
quarter and their bottom line increases proportionally, but really they're just, you know,
passing through and the debasement of the dollar is what fueling all of that continued growth and all these earnings So I mean it is one of the things that if you an executive you have to focus on that right Because if we learned anything in the last decade it that no business model is safe
Go back 30 years and look at the companies that were dominating the market and see how many of those were resilient over time.
Not many, right?
They all disappeared and they didn't have the opportunity to reinvent themselves.
They eroded down the value, eroded out, and then they went out of business.
green tell us about kodak tell us a story about kodak please i i have a story about kodak so so
so wait this is crazy so during back in the olden days during the internet bubble i was working for
global crossing and i'm like cool they're going to send me out to global center because global
center housed yahoo and they're going to send me out to santa clara and then after i get the job
they're like dude you're going to rochester new york and that town was built obviously on kodak
And I lived in walking distance from the George Eastman's mansion.
And I lived in a little small house.
But anyway, so I was there.
But while I was there, the next door neighbor was the mayor.
And the mayor did not know that Global Crossing even existed.
Because I was talking to his wife and he said, oh, what are you doing here?
I go, I work for Global Crossing.
They bought Frontier, the phone company.
And they're like, what's Global Crossing?
So this was one of the internet darlings. The mayor of the city did not know that one of the biggest companies during the internet bubble had bought Frontier Networks to get a phone company.
And they were completely, they did not understand anything I was talking about. They had no idea. So you probably don't even know the story that I just told you.
But oblivious to this completely.
And then eventually I made it to Silicon Valley after being there a year and a half.
But they had no idea what was going on.
This is all before the iPhone and all that.
So, I mean, I want to get back to unit of account we're talking about.
And I read these comments.
Look, there are different market structures in different countries, whether it's Japan, whether it's Europe.
And by the way, the UK is different than the European Union because they have a different currency.
and they exited whatever two, three years ago.
Somebody will correct me.
So the point there is that these Bitcoin treasury companies
can have a home field advantage in a different currency
with a different market dynamic.
And if a spot Bitcoin ETF is not available in that country,
then the Bitcoin treasury company may be the only way
that you could acquire shares in a Bitcoin treasury company
is to acquire those shares in that
because you can't easily buy Bitcoin.
So from that perspective,
I want to see other Bitcoin treasury companies to be successful.
And then in their currencies, that'll be great.
Then somebody can say, oh my God,
well, what happens if a spot Bitcoin ETF comes out?
Well, we've already done that in the US.
That happened January 11th of 2023, sorry, 2024.
Is that right?
Yeah, 25.
Right, 2024.
And what happened is strategy stock still continues to go up.
and to beat that MNAB, the multiple of the Bitcoin that it holds.
So what am I seeing for unit of account?
I want other companies to be able to replicate this, to be successful,
because they're buying Bitcoin.
And that reflects the flywheel.
If they could then do that, I already posted about this two days ago.
If they could come out with a stretch product, an STRC,
that does the same thing in their own country, again, that buys Bitcoin.
that drives the price of Bitcoin up.
I don't know why people would be against this.
So I don't like seeing the infighting.
I think that there might not be enough Bitcoin to go around
and the price goes up.
There's nothing we could do about that, okay?
So my takeaway is-
Great for the ecosystem.
Yeah, it's great for the ecosystem.
It brings in other countries,
other people that are excited about this.
You see the picture,
what happened with MetaPlanet,
their earnings call,
the picture, the one they had a year and a half ago,
and there's like six people in the audience and four of them work for the company.
And then you see the next picture and there's 300 people in the room, standing room only.
And I think that getting that narrative and the attention-driven society that this is something
important, it's new, and it could save your retirement. And if you don't understand AI,
you better have a freaking backup plan. Yeah. Another interesting thought I had
just earlier today, I think I saw that like Amazon was making AI available for anybody
they've got on Amazon Prime. And maybe it was ChachiBT. But I was just made this realization
like, oh my God, AI is going to disrupt AI. And so you're going to have all of these AI
companies that are going to get just these like super frothy valuations because it's
like AI, AI, AI, AI. I feel similar to maybe .com, but maybe different because there's
significant efficiency in a lot of these things, but some of them are going to gobble up everything else
and be able to disrupt that industry as well.
We just have no idea what this looks like and how we come out the meat grinder on the other end.
It just never ends.
I don't know.
The weird part about AI is that the people that learned how to code, AI can probably code better than you.
So as long as you could do the prompts and I know people that can code and a year and a half ago, they're saying, ah, the code that came out of it wasn't particularly good.
And now it's like, well, the code comes out 97% great.
And then they just have to go in and debug the last 3%.
And so what I'm seeing, I'm here in Silicon Valley.
So we're seeing this.
So it increased the efficiency of the coders and be like, oh, this is great.
I'm like, you're not particularly smart, are you?
This is how we get to idiocracy.
They need less coders then if one guy's, now if you only had one super coder, now you have one super coder, you have four AI coders and fire the rest of the people.
The problem is it's disrupting everything people didn't think it would, right?
I mean, everyone thought this was going to, that technology would show up, it would take over all the blue collar jobs.
You know, you wouldn't have anybody working in a McDonald's anywhere in the country, all that.
But, you know, where it's starting is it's all of the professional services, high fee, you know, so even things like attorneys are getting disrupted by AI in a big way.
Coders, I mean, software developers just three years ago, that was what everyone was telling you you needed to do to be resistant to disruption.
Right. Go go learn how to code. Right. There was the big push for it.
that was supposed to be the thing that would keep you employable for a long time. And now, yeah, I
mean, the AIs now are very good from a coding perspective. I use them almost daily. By the way,
I just want to say this. Dan's not on the call. Dan Hillary's not on the call tonight. And he did
this great video. And in the backdrop of the video, he was showing like this, and he was showing his
desktop. So he had this great Excel spreadsheet. I don't know, it was six columns and there was at
least whatever, 75 rows in it. I screenshotted it with his picture in it, screenshot it,
uploaded the chat GPT, and I had to analyze all the numbers that he had. And it was able to back
out and figure out all the formulas that he put in for each column. And now I'm going back and
forth with the two Dan's. They're like, you did what? I'm like, dudes, I just screenshot that,
I put in the chat GPT and then I query it for the next 20 minutes.
And then I call you up and see what you guys think.
And I'm telling people, and by the way, Saylor said he does this.
It's not like I figured this out on my own.
Saylor said at Strategy World, he said, I figure out I want to do a new product.
I go into deep research mode.
I go into it.
I figure this out how I want to do it.
And then I copy and paste it into an email.
I send it to the lawyers.
and here's all the citations for everything that has to be done for all the financial information,
go get to work. And he already did six months worth of research for them and he gives it to
them. Now, can you imagine that if you're the lawyer on the other side, you're like, oh crap,
this guy gave us all of this info already. Now we got-
It was a million dollars in billings. Yeah.
Right, right. And then he's like, because you know that as soon as they give the information
back, he copies it, pastes it into AI, and then writes it back to them. I was like, once you see
how fast the permutations, or sorry, iterations, how fast things leapfrog. And so he said this,
and I think that's where people have to understand where this is going.
Yeah. You got to use it. You got to use it.
Strategies using AI to create the preferreds, and then I got to use AI to tell me what it means
when they come out with a new one right and by the way some guy today on on x is like he's like ah
this chart doesn't show me you know doesn't accommodate it showed the amount of debt being
acquired per person over time it doesn't show the rise in wages i copy and paste the chart into it
and i told chat gpt i just said and this is not an advertisement for you could probably do it in
grok or the other ones and i just said i just said could you reanalyze this chart recreate the chart
and accommodate it for the rise in wage, do it on three different y-axis, keep one x-axis
for a time. This took me like three minutes. I just wanted to see how hard it would do it and
I posted it up. Nobody clicked the like button. But when somebody says something to me and they're
like, what does this mean? Or why did you do, or I think it should be like this. Well, why don't you
use ChatGPT or use AI, make your own chart and post up and say, I think you're wrong and here's
the chart and i was smart enough to use ai to do it if somebody can't take that effort to say i
disagree with this chart but then they're too lazy to use ai to refute the chart that is that is
mediocre thinking it's just here's what i'm going to say it's going to get increasingly important
to uh get away from the screens and go outside and touch grass because every algorithm out there
is going to be optimized to keep your attention oh yeah really hard to pull yourself away and you
got to train yourself early to shut it off go outside there's a lot of really cool stuff out
there i know a lot of us probably haven't seen it very much recently but shut down the screens go
outside the ai is always going to be there it's always going to be looking for you i promise yeah
so i'm going to sign off guys look this was a great call but one of the reasons why i've been
missing in action is because I've been enjoying the summer. And I think that sometimes I like to
be inspiration that if you've been on a Bitcoin unit of account for me like eight years, then I
wanted to take off and enjoy the summer. And I got plenty of plans, but I'll be in New York.
Shout out to Tim Kotzman, the Unconference, September 17th, Wednesday, September 17th,
the band, MSTR. Well, are we just True North now? Not MSTR, True North.
True North.
The True North folks, the group's all going to be in New York City Wednesday, September 17th.
We're going to be there.
We're going to have different events on other nights.
Some will be informal.
We'll just show up at Pub Key.
We'll announce this.
So shout out to Tim.
I would recommend everybody getting there.
Sailor will be a co-host.
You'll be able to meet these people, talk to them in person.
If you've never been to an event, get there.
Okay?
Right. Yeah. Go see. Yeah. Meet people in person. It's going to be a good time. It's going to be a great time.
Yeah. And on that on that last point, I guess we'll hit final thoughts. We'll wrap it around.
But yeah, it's summer and go enjoy summer. And we may not do this every week.
And when when we first started this or like, well, let's just chat.
And when it works and it works. And when we're traveling, we're not going to do this.
And if we need to take weeks off, we're going to take weeks off.
So don't go roasting us and trying to say like,
it's true and are dead and falling apart.
It's crazy.
It's like,
what?
Like we have lives guys.
Come on.
Like there's,
there's things going on.
We'll be here every week in the winter guys.
I got nothing else to do.
Yeah.
We'll be here,
but it's sunny outside.
So go take advantage.
Yes.
Enjoy the summer.
Yeah.
Cool.
Final thoughts,
Ben.
Soleil.
I'm good.
Short and sweet for me.
STRC.
Make dry powder great again.
Put it on an orange ball cap.
Put it in the merch store.
Make dry powder great again.
I don't have anything else to add.
We'll end on that.
That's the best way to end it.
That was perfect.
Great.
All right.
Thanks, everyone.
Appreciate the time.
And we had 26,480 people.
Thank you, Sailor, for the retweet.
That always cranks up the numbers.
Hour and 57.
And episode 35 is finished.