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We are always running for the three little bit, three little bit, always pushing up the

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the hill searching for the thrill of it all along we are calling out not again never looking down

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i'm just an aura what's in front of me

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i can feel

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Woo! We are back. True North, episode 28, Striding Towards BTC Fixed Income. Here we go. We are back. We've got the crew here. We've got myself, Mason, Dan Hillary, and Soleil, the man, the myth, the legend, Soleil. I think Ben may join us a little bit later today.

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So episode 28, the agenda for today, we have MSTR update and leverage tracking.

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Going to dive in deep dive. We're just going to get right into it. We're going to talk about STRD,

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STRF, STRK, MSTR, the capital stack, the creation of the capital stack, how it all fits together,

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the bits and bobs and the pieces. We'll look at some comps, some other things that sit in the

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market and just try to really wrap our heads around what is really happening right here.

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and the quadruple threat ATM and how that fits into where MSTR may go into the future.

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Then we're going to talk a little bit about the Bitcoin conference. We'll chat through that. We'll

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keep it to a maximum 15 minutes and we'll get through that pretty quickly. Then we'll talk

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about the BTC treasury revolution, get into merger ARB a little bit and some of these structures,

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because I know this is something that is a hot topic everybody's really interested in these days.

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There's a lot of speculation going on throughout the market. We'll get into that. And then we'll

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talk about, if we have any extra time, we'll get into moat. We'll talk about cycle theory.

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We'll play around with it. Talk about S&P 500, BTC lending products, get into equity versus debt.

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We'll talk about maybe Tesla and Elon and all the crazy stuff that's going on there.

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And yeah, we'll see how we go. So without further ado, I forgot to put the video in of Tim Kotzman.

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And while this may be very interesting and exciting and very fun information, none of

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this is financial advice.

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And we are here to talk about what's going on in the Bitcoin treasury landscape.

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We are here to give our opinions and thoughts about what is happening in the market and

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put some education out there to the community because we're following this trade.

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We're following all of these trades.

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following what's going on in the Bitcoin equity space and want to stay at the cutting edge of

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what's going on here. So with that, maybe I'll jump into the leverage update. And I've got that

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up on my screen here. We will share a screen and we've got chat cooking. Where has Ben? NSTY is

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upside protection. Bingo. We've got the chat cooking. And let's get into this. Okay. So leverage

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update. Every week we talk about this. We talk about the leverage of the MSTR balance sheet,

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where it fits in, how the capital stack looks, the health of the capital stack, how it's evolved

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over time, and how things are changing and moving. So these two columns here, AQ and AR, you can see

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as of 6-4-2025, MSTR holds 580,955 Bitcoin. The current price is around $105,000. So they've got

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$61 billion in assets held on balance sheet. Got about $8.2 billion in debt, $1.9 billion in

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preferred equity that's out issued to the market. So net capital on balance sheet about $50.8 billion.

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$50.8 billion, this would be around the 200th largest publicly traded company just on a net

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capital basis. If you're a look, just to compare that net capital to the market cap of the largest

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U.S. companies, that is a very powerful, strong balance sheet with $50 billion in net capital.

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Liability asset ratio, 13.5% and debt coverage multiple of 7.4 times. And you'll see this is

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really the Bitcoin rating, the BTC rating, an over collateralized balance sheet. You've got so much

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capital, so many assets on balance sheet relative to the debt held on balance sheet. So the Bitcoin

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price in order for the assets to be worth less than the liabilities, the Bitcoin price would have

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to be somewhere around $14,000 or less and it'd have to stay there for an extended period of time.

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Now on a pro forma basis column AR, this is outlining the debt net of the convertible bond

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debt that's currently trading in the money like equity. So there's about three billion dollars

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of convertible debt that is trading as equity and it can be closed at some point in time in the

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future which would be we estimate this is probably completely hedged out so if you look at the balance

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sheet and the health of the balance sheet there somewhere around 8.2 leverage ratio or 12.2 times

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debt coverage multiple so incredibly healthy balance sheet there's a reason we're showing this

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you know over time if you look at the last couple of years at the beginning of january 2024 they had

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5.7 billion dollars of net capital held on the balance sheet if you look at the beginning of

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of 2025, they had $34 billion of net capital held in the balance sheet. So significant healthy

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growth here into the future. Anybody else have anything to add there?

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Yeah. Would you say that they have the ability to take on a lot more leverage?

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Yeah. This looks under levered to me. And I think that's the reason they're coming out with all of

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these products is they're looking to tap these different capital pools to add, inject leverage

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onto the balance sheet. Yeah, that's my exact thought. And people are constantly asking me,

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like, where's the implied vol? Why is the implied vol so low? And to me, this just looks like the

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very definition of a coiled spring. Like they have the ability to add leverage and now they're adding

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tools so that they can just add leverage anytime they want. They don't have to wait for a perfect

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convertible bond market. You know, if those opportunities arise, they can slam into them

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as well, but they can just add leverage anytime they want. And it just seems like the spring is

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ready to just spring. I absolutely completely agree. And, you know, let's let's dive into this

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a little bit further. So CJ at strategy put together this post here. This is 365 million

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raised cumulative through strike and strike, strike and strife ATMs. So as of this week,

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in the last week, $75 million of capital was raised in the last week on the two preferred

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instruments. Zero MSTR ATM was used over the last week. And you could see the split between

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strike and strife ATMs is around 50-50. So now we've got multiple instruments that can be used

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ATM to tap these different capital pools, depending on the demand that's coming into the market.

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on any one of these individual instruments. And so this is just showing how it's changed and expanded

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over time, which I think this is incredibly bullish, right? Looking at just the trajectory

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of these orange bars and the orange and green bar combined. This is, you know, in the last three

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months, these products are incredibly new to the market. These ATMs are incredibly new to the

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market. The liquidity is expanding in this marketplace. And as the market begins to digest

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these and understand what's going on, this capacity to utilize these ATM products is going to increase

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drastically over time.

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Can't wait.

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Yeah, that's really the holy grail, right? Everyone's been saying they've been selling

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their MSTR to buy MSTY because Saylor has been hitting the ATM. And now what we're seeing is

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as Bitcoin yield that is generated without common stock ATM. And that's a really scary thing for

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shorts. So I think it's pretty exciting just all around. And then we'll talk about later how that

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really is a defense mechanism against a short attack and why it generates what Mason calls

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perpetual Bitcoin yield into the future, regardless of the market condition, regardless of the demand

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for the common stock. Absolutely. You want to jump right into it? Let's jump into STRD. Dan,

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you want to you want to lead us off and we can jump into the presentation afterwards yeah can

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we do maybe mason's can we leave with mason's questions yeah well dan let's let's let's go through

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yeah because that's i think that's important context okay cool let's do um i'll share my screen

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and we can do it so i did a post today on what stride is um essentially and where it's positioned

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the capital stack and this is oh wait that's my screen no we can keep that up jeff yeah yeah let's

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keep that up it's bigger okay so this is the most important photo for stride right you have to

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understand how we're positioned within this pyramid scheme so you've got the bitcoin which underpins

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the entire entire structure i really like the um the rectangle sometimes they use the rectangle as

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showing the bitcoin collateral and they section off the different priorities in the capital stack

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but regardless the point being is the converts are senior in capital stacks in the case of liquidation

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they get paid out first they get the senior claim over the bitcoin and below that is strf which

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they've considered the crown jewel of the capital structure so their highest in priority they get

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the 10 yield and or well it's originally a 10 yield but this is their investment grade

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preferred product. And so the difference between Strife and Stride is that with Strife, if a

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coupon payment, a quarterly dividend payment is missed, there is a huge list of governance

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features, which essentially force strategy to pay that dividend. So the dividend starts

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compounding against strategy and they owe more every quarter to the shareholders. As the dividend

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payments are missed, if they are missed, then the liquidation preference goes up by 10% a quarter.

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So the holders of Strife get an increased claim to the Bitcoin assets.

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And then finally, if four quarters in a row of Strife payments are missed, then the Strife

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holders are able to vote a Strife preferred board member onto the strategy board to make

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sure these dividend payments get paid.

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So they have a lot of protections surrounding that Strife payment.

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And I thought, yeah, go ahead.

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Let's back up for a second here.

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Let's just look at this pyramid as it's outlined, right?

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The pyramid as it's outlined is the order of the capital stack.

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This is what's most senior is at the very top and what's most junior is at the very bottom.

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So you've got the convertible bonds are the most senior.

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So if there were a liquidation event or bankruptcy at some point, the convertible bond holders are the ones that get paid out first, basically.

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And then it works its way down.

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right? So then you've got the SDRF holders, then you've got the SDRK holders, then you've got the

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SDRD holders, and then you've got MSTR common stock shareholders. In the event of, you know,

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bankruptcies or liquidations at, you know, on any of these other companies out in the market,

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generally, if there's a bankruptcy or liquidation, the stock is generally worthless and the debt,

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the holders are the ones that get any money at the very end. So you think about this as just a

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risk a risk pyramid right so you've got uh the least risky is the convertible bonds uh the second

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least risky is the strf you know strike stride and mstr so there's risk return trade-offs for each

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one of these individual instruments the least risky have less risk and less return and as you

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work your way down you've got higher risk high return metrics as you work your way down that's

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That's a really good way to put it, yeah.

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So I think what you're getting at here, Dan,

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is investment grade, right?

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Like let's talk through this concept of investment grade,

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where you're thinking of STRF,

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and I think this presentation outlines it well.

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And Mason, if you wanna pull up your slide at any point,

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let's go through it here.

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But it's this concept of collateralization, right?

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And so STRF, if you look at this, this slide was really great by Saylor here, right? If you look at assuming $105,000 Bitcoin price, 50% BTC volatility, and actually let's go to a 30% BTC ARR.

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So if you're a Bitcoin maximalist and you think Bitcoin is going up 30% compound annually into perpetuity, you look down here at STRF, which is the most senior preferred equity instrument.

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All of the convertible bonds pay out first.

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And then you look at STRF.

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STRF would be 6.7 times over collateralized.

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That means they have 6.7 times the amount of assets that they do on the balance sheet than the preferred stock that is that is trading within the market.

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So incredibly over collateralized, meaning it's the likelihood, the probability that the strife holders don't get paid out their principal is incredibly low.

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So that gives you some framework, some risk architecture and some framework of what is the risk of these instruments?

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Well, the risk of the instruments is that Bitcoin volatility is really high and the price of Bitcoin falls drastically and they're not able to pay out the liquidation preferences.

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That's the risk.

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That's the risk.

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That's the risk. And when you start to compare this to other instruments in the market,

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I would much prefer digital risk than any sort of physical risk that's likely paying

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significantly less yield. The risk return trade-off on other instruments is significantly worse.

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And I think one of the other points that was made on this slide, which I think is fantastic,

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is that I don't think there's any other instrument in the entire high yield market that is like

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three, even three times over collateralized. I think it was on one of these slides here.

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I don't know exactly where it's at.

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Yeah. Effectively, there's just a slide in the...

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What's that?

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Yeah, I think you're right. They have like a high yield slide.

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Yeah So you know when you look at the probabilities here right if you got something I think that five X or or 6x over collateralized and you got Bitcoin volatility up here on the x you can look at the probability that being under collateralized during a single one horizon

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it's incredibly small. So I think that the strategy team, as they've referenced here,

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are on this crusade talking to the rating agencies to give some guidance on how to begin to rate

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these things, how to think about a Bitcoin backed fixed income instrument. What is the risk? How,

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how does it compare to other things in the market? How do you

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start to frame and understand the risk profile of these different instruments?

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Right. And if you're a fixed income investor, you're looking at, as I understand it, you're

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looking at both exactly what Jeff's saying, the credit worthiness of the security, how

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over collateralized is my principle and then how likely am I to continue getting this dividend? And

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that's kind of where the difference between Stripe and Strike comes into play. But that's effectively

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the same thing. Like to Jeff's point, the over collateralization of the preferred equity

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is the same in saying, how likely am I to continue receiving this perpetual dividend

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from this company? It's all creditworthiness of the security.

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Yeah. And there's a good question on the screen right here. And the question is, why would you

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buy... What's that? Can we keep that slide up? I love that two rectangle slide. Which one? This one?

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Yeah, exactly. Yeah. So why would an investor buy Stride rather than Strife? And I just don't

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understand the benefit to the Stride investor. Well, there's two things that are at play here,

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right? So they've set out this capital structure in the market. So they've got these three different

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instruments right you've got strf strk and strd and the difference between strf and strd actually

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maybe i think it has it outlined maybe let's go that slide and we'll explain it

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where is it at

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primary difference is

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this one okay right let's compare the non-convertible prefs so these do not have a

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conversion. So they're very similar. STRD and STRF are very similar. They both have a 10%

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fixed dividend at par. So really it's a $10 fixed dividend and the price of the instrument can change

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relative to its risk profile. So what we've seen, I think when STRF launched, it was priced at

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something, I think it was around $80. I think as of today, it's trading at $107. So if you would

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have bought the IPO at $80, you would have had, I don't know what that is, maybe a 12% technical

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yield by buying the IPO. And now the market has responded and said that yield is actually really

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high. This is not a very risky instrument. So the price of the preferred equity itself has gone up

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and the relative yield, that $10 per share yield has gone down. So that's the market saying

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that we think that this is a less risky instrument for the market. Okay. Both of these convertible

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preps are perpetual non-callable for life. So they do not have an expiration. They do not have

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a duration. They are in perpetuity. STRF is senior. STRD, so stride, is junior. So you can

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see the effective yields there and then the cumulative dividend. And this is something I

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think Dan hit on at the very beginning. STRF has a cumulative dividend, meaning if the dividend

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isn't paid in any one quarter, the dividend accumulates. So the dividend can stack up over

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time. STRD, if strategy elected to not pay the dividend, they can elect to not pay the dividend

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on any one quarter if they didn't have the ability to raise capital, which I think is a low probability

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based on the existing structure. But those dividends don't add up. And so in any circumstance

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where the dividends didn't add up or accumulate, the relative price of STRD would probably

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drop pretty significantly. And the relative rate that they would pay, the high yield rate would

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increase as the price would drop, because that would be indicative that this is a more risky

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instrument. So why somebody would buy this at the current prices, the spread, right? If you're

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looking at 9.6% and whatever the IPO is on STRD, which is probably maybe 10 to 12%.

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I personally, if I had the option between the two and I wanted a fixed income investment,

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I would be buying Strife all day right now because I don't think the spread between the two

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is priced appropriately.

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Exactly.

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Strife is going to go,

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either the principle of strife is going to increase

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and the yield is going to decrease a lot

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when strides introduced to the market

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or the yield on stride will go up a lot relative to strife.

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Say that one more time

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because I think it's an important point.

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Either strife, it's what Jeff said.

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He used the word credit spread,

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the credit spread, which is the correct term.

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But the way I think about it is just something's mispriced here.

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If Stride is introduced to the market with a 10% dividend, whereas Stride is trading with a 10% dividend, based on the different positions in the capital stack and cumulative clause, either Stride should have a much higher yield or Stride should have a much lower yield based on their credit worthiness and their position in the stack.

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Right.

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And one thing that is, I think, helpful to think about here is the size of the ATMs that they have outstanding on these instruments.

219
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And because STRK, actually, I think it's outlined here.

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Yeah, right.

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So I think this is outlined really well.

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You've got STRF, which is the crown jewel, right?

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This is your investment grade fixed income product, Bitcoin backed.

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What are other fixed income investment grade products paying in the market?

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maybe the risk-free rate plus 100 basis points. Maybe it's 5.5% yield. So if it's 5.5% yield,

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maybe the price of STRF should be more like 200 or 180 to be reflective of a yield that is

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investment grade. So thinking that there's likely some potential price appreciation if you do hold

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strife at a you know at this juncture um ben's in here dropping knowledge bombs in the in the threads

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and he's just critiquing us from yeah of course he is uh marking up our paper the the second thing

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the second thing i point out here so strf has got a 2.1 billion dollar atm so in total i think about

231
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three billion dollars of capital should sit in this fixed income product relative to the rest

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of the products now you look at the strk atm and the potential size about 22 billion dollars of

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capital to be raised from strk that's that's the plan so why is that important well if you think

234
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there's going if you think they're going to raise about 22 billion dollars of capital from strk

235
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that actually pushes STRD closer to risk. Let's just say as of today, and maybe it's helpful to

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look at the leverage. As of today, they've got, what is that? $10.1 billion of debt.

237
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And if this number goes to, let's see, 25, you're now looking at a leverage ratio

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significantly higher, right? You're looking at like a 41% leverage ratio. So that would mean

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that STRD is less collateralized. The BTC rating on STRD would be significantly less.

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And that means it would be higher risk, at which point, more investors would probably be coming

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into buy STRD because there would be a higher yield associated with it because it's higher risk.

242
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Now, most Bitcoin investors like myself and probably Mason and Dan would look at these instruments at a high yield in a potential bear market if they've got a relatively high yield.

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That might be extremely attractive to myself or Mason or somebody else because I think the probability of Bitcoin going to zero is basically zero.

244
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And this is now a really attractive, like high yield savings account for me that I could hold capital in to weather a storm because I don't think MSTR is going away, but it's maybe a good instrument to weather market turbulence.

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Yeah, I like that. I mean, what Dylan LeClaire said, strife is the crown jewel. It's the investment grade and STRD stride is the junk bond.

246
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And I think this fundamentally comes back to the point that people have different preferences.

247
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People have different risk appetites and different wants and needs.

248
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And Saylor is trying to fill that junk bond appetite for people who maybe have a fundamental belief in Bitcoin.

249
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And it's really interesting that you say, you know, cash account.

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I know when Stride first came out, Ben was like, yeah, this is my new cash count.

251
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But maybe Stride takes that place now if you're willing to take the risk.

252
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And I think right now the market for all of this is very nascent.

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The market's kind of figuring it out.

254
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And I think over time we will see these, the market will kind of chew on it

255
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and price these appropriately. So that will be exciting to follow.

256
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Yeah, absolutely. And I think what might be valuable to look at here is this,

257
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the relative seniority relative to the volatility as well. So if you're looking,

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let's theoretically, right? If we experience a situation where we think MSTR is in a blow off top

259
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circumstance, you may be in a position to peel off some capital and park it in STRF if you wanted to

260
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have some stability for a period of time to weather market turbulence. And it would be less

261
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volatile. And then maybe at a future period in time, when you think the tide's turning a little

262
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bit, maybe you throw it into SDRD to get a little bit of a higher yield for a shorter period of time.

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And there's going to be so much trading between all of these instruments. These are going to be

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the most liquid preferred stocks in history, because there are so many things that you can

265
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do with them that we don't even, we can't even conceptualize yet. Honestly, there will be, um,

266
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algo trading companies that are going to be designed literally to just trade these and other

267
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preferred equity instruments in the market and just ARB between, you know, how capital is moving

268
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between all these different instruments. Yeah, there's still a lot of, um, bewilderment in the

269
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chat. So I'm going to give you all the 80 IQ version. So I was sitting in the airport, uh,

270
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two and a half hours early because I was in the Navy and we don't miss

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movement.

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And,

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um,

274
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I saw the announcement come through and I,

275
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I read it like three times and I was just so confused.

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And,

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um,

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I'm like,

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it's the same as strife,

280
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but they just might not pay the dividend.

281
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I was like,

282
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this doesn't make any sense.

283
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And I was like,

284
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Oh,

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STRD stands for stratarded.

286
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Like,

287
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this is just no way.

288
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And,

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um,

290
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but then I realized it was like,

291
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wait a minute,

292
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it's not supposed to be better than strife.

293
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Okay.

294
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that would be like rug pulling the crown jewel if you if you you know you had your crown jewel

295
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of strife and then you you know it'd be like when they did trump coin and then it came out with

296
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melania it was like okay it's the same shit like they just kind of rug pulled themselves and um

297
00:27:31,608 --> 00:27:37,008
you know mason might hate me for this one but it reminded me of tesla so when tesla came out

298
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they didn't come out with like the 25k car first they came out with an expensive vehicle that they

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could give, you know, put out there to high net worth individuals. And once they got the production

300
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lines going, then they started producing, you know, cheaper cars. And eventually they're going

301
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to have cyber cabs. And this just screams that to me, you know, they came out with Strife.

302
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It's the crown jewel. And, you know, now that this is rolling and the market is like in,

303
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is building, they can build these other products. And the reason that you would buy Stride

304
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is because it's going to be cheaper. Like it's that. So that's, that's a great way to say it.

305
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It's going to be cheaper. Yeah. So you're willing to take the risk of not getting paid one day. If

306
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some catastrophic event happens, you're going to pay less for the shares and you're still going to

307
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get the 10% discount. Other people are going to be like, no way in hell. Maybe their fund

308
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requires that it be the senior super safe asset. And they're going to be willing to pay more for it

309
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to be higher up in the liquidation stack. Yeah, absolutely. And somebody asked,

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why would somebody buy STRD if it's nominally not very different? The answer is insurance companies,

311
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banks, any pension funds, anybody with liabilities that have a specific duration,

312
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or they've got to asset match the liabilities to the assets. The way modern portfolio theory works,

313
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there's a risk return curve and different portfolio constructions of different risk return metrics

314
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can give you a more efficient portfolio with a lower risk and higher return. And that's how

315
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like 99% of these asset allocators have to operate and they have mandates that they got to stay within.

316
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So I suspect there's going to be a point in time in the future where STRF is rated as investment

317
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grade and maybe STRD is not. And maybe it's, you know, double B or even C rated or, you know,

318
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whatever it may be, maybe junk bond status. And those asset allocators can only contribute a

319
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a certain amount of their portfolio to any one of these individual instruments.

320
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Additionally, there are other bonds, there are funds out there in the market,

321
00:30:01,708 --> 00:30:05,308
and now might be a good time to go to this before we jump into your stuff, Dan.

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There are other funds out in the market that

323
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all they do is buy high yield junk bonds,

324
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which is just, which is totally crazy.

325
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Maybe let's jump to it because I think it's funny.

326
00:30:20,068 --> 00:30:22,188
Yeah, Jeff, I just want to jump in here.

327
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The total outstanding value of the global corporate high yield bond market is in the order of roughly $2 trillion, right?

328
00:30:32,188 --> 00:30:47,536
So that Bitcoin market cap right there So this is just once again it a product tailored to a certain risk appetite And it a market that you know maybe as as retail investors we not familiar with

329
00:30:47,536 --> 00:30:51,616
but it's very real. And there's a ton of capital there to be tapped.

330
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100%. And let's jump into this. This is so I just I pulled this fund here is USHY,

331
00:31:03,616 --> 00:31:09,616
which is outlined here in the presentation, you can look at the STRD market comparisons. So

332
00:31:09,616 --> 00:31:14,016
there's all these preferred equity tickers and all of these equity tickers, one of these is the

333
00:31:14,016 --> 00:31:18,976
iShares, which is the BlackRock. This is the $14 billion one. This is all preferred equity

334
00:31:18,976 --> 00:31:24,416
instruments. It's yielding 7%, it's got a 12% volatility, and it's got a 46 basis point fee.

335
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Another benefit of all of the MSTR preferred equities is that they have no fees

336
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and relatively high yields compared to these other instruments. And I looked at the high yield bonds.

337
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So there's this ticker USHY, which is the iShares BlackRock. It's got $23 billion in net assets.

338
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And all this ticker does is invest in high yield bonds. So just think junk bonds. And so I pulled

339
00:31:50,296 --> 00:31:57,716
the holdings just to get some perspective on what this looked like. And maybe we'll hide this so we

340
00:31:57,716 --> 00:32:04,276
see everything and here's here's some of the top holdings in this fund and i i just i highlighted

341
00:32:04,276 --> 00:32:10,436
some because some of the names are familiar and uh you could look at like quick reit holdings so

342
00:32:10,436 --> 00:32:20,676
think of like the concrete company has 64 this blackrock fund holds 64 million dollars of quick

343
00:32:20,676 --> 00:32:32,356
REIT USD high yield corporate bonds. And this bond in particular is paying 6.38% coupon and has a

344
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maturity of 2032, which is just outrageous relative to what STRD and STRF and STRK are paying in the

345
00:32:44,076 --> 00:32:49,776
market relative to these other instruments. And the other one that was publicly traded is

346
00:32:49,776 --> 00:32:57,536
Echo Star Corp. This is a satellite telecom company. BlackRock in this fund holds $90 million

347
00:32:57,536 --> 00:33:06,516
of this fixed income debt, USD high yield debt with a maturity of 2029. It's got a coupon of 10.75%.

348
00:33:07,076 --> 00:33:11,056
Now I looked more into this company. This company has a $4 billion market cap

349
00:33:11,056 --> 00:33:18,516
and they've got $40 million of debt and $60 million of assets. So their debt coverage

350
00:33:18,516 --> 00:33:24,896
multiple is 1.5X. And you look at STRD, right? As announced today, I think it's got a debt

351
00:33:24,896 --> 00:33:29,676
coverage multiple of like six and a half X. So BTC rating of six and a half X. So six times

352
00:33:29,676 --> 00:33:36,056
over collateralized relative to this other comparable debt instrument from a $4 billion

353
00:33:36,056 --> 00:33:42,496
company that makes up the largest weight in this high yield corporate bond ETF. So again,

354
00:33:42,616 --> 00:33:48,136
you have these funds where their mandate is all they have to do is buy high yield corporate bonds

355
00:33:48,136 --> 00:33:52,636
and this would fit into those potential instruments.

356
00:33:53,696 --> 00:33:56,196
And I think they're going to be

357
00:33:56,196 --> 00:34:00,276
the highest performing instruments

358
00:34:00,276 --> 00:34:06,456
in this entire group of high yield corporate bonds.

359
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So I think it's just illuminating

360
00:34:11,416 --> 00:34:14,116
when you start to look at what else is out there in the market.

361
00:34:14,316 --> 00:34:15,916
And you can see like you've got Nissan,

362
00:34:15,916 --> 00:34:22,936
these Nissan fixed income instruments are paying 4.34%, 4.81%, which is pretty low,

363
00:34:23,036 --> 00:34:27,936
but Japan interest rates are practically zero. So that kind of makes sense. We got DirecTV paying

364
00:34:27,936 --> 00:34:37,836
5.88%, DISH Network paying 11.75%, Quikrete paying 6.38%. And yeah, it starts to make all

365
00:34:37,836 --> 00:34:43,136
these other instruments look really good. These are dying companies, right? Like DirecTV,

366
00:34:43,136 --> 00:34:50,016
Dish, these are dying companies and it's just insane that they're even considered.

367
00:34:50,016 --> 00:34:58,136
Yeah, 100%. I think these are companies within companies now. I think DirecTV is owned by

368
00:34:58,136 --> 00:35:02,516
AT&T or something, but they still have to issue debt. They got to go raise capital and

369
00:35:02,516 --> 00:35:07,696
this is how they do it, which is just wild to think that these exist in the market and

370
00:35:07,696 --> 00:35:14,656
trading and people buy them like what like what is the what is the risk what is the risk profile of

371
00:35:15,296 --> 00:35:21,056
direct tv fixed income product yeah look at all these categories somebody was asking like how many

372
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of these products are they going to come out with and i hate to bring up tesla again but it just

373
00:35:25,536 --> 00:35:30,736
reminds me of that because they're gonna they're gonna come out with one product in every single

374
00:35:30,736 --> 00:35:35,296
category and it's going to be a category killer they're just going to have the best product in

375
00:35:35,296 --> 00:35:41,796
every single category and they're just going to dominate that market so the strike holders want

376
00:35:41,796 --> 00:35:47,856
the conversion option strife wants to be at the top of the um the debt structure stride is going

377
00:35:47,856 --> 00:35:52,636
to be like okay yeah i actually some emperor was asking why would anybody buy stride he still

378
00:35:52,636 --> 00:35:59,556
doesn't get it i would i would i would buy stride over strife personally because i have like 0.00001

379
00:35:59,556 --> 00:36:04,516
percent chance that they just won't pay the dividend so i'll pay cheaper for it i'll get

380
00:36:04,516 --> 00:36:12,196
i'll get the same 10 interest and i'll pay less so i'm i'm your uh i guess i'm in your demographic

381
00:36:12,196 --> 00:36:19,236
stride i'm you're i'm talking to me well yeah i mean you you believe in mstr you believe in what

382
00:36:19,236 --> 00:36:24,036
they're creating you believe in the bitcoin safety you may be more interested in taking on

383
00:36:24,036 --> 00:36:31,036
on what probably to you is nominally like zero risk, right?

384
00:36:31,036 --> 00:36:38,036
Like, theoretically to you, you're like, I think the risk difference between Strife and Stride is zero,

385
00:36:38,036 --> 00:36:41,036
but that's not what an insurance company thinks.

386
00:36:41,036 --> 00:36:46,036
So that's not what like a pension fund or a bank thinks that has to allocate to these different types of instruments, right?

387
00:36:46,036 --> 00:36:53,036
They're seeing these as materially different because they're scared of Bitcoin.

388
00:36:53,036 --> 00:36:57,596
right so they just they think they think differently like the whole market thinks differently

389
00:37:01,356 --> 00:37:05,356
yeah it's weird times hey ben you look uh you look pretty bright these days

390
00:37:06,156 --> 00:37:09,516
oh you guys have no idea what type of brightness i can turn on in here now

391
00:37:13,836 --> 00:37:20,476
i've got these insane lights but you know on these streams i've got to reset

392
00:37:20,476 --> 00:37:27,676
that bring myself back into the darkness again because uh it's intense man it's intense when

393
00:37:27,676 --> 00:37:32,636
it's on you all day yeah well when you're getting interviewed by cnbc you kind of need uh you need

394
00:37:32,636 --> 00:37:38,476
more lights i guess yeah on my last episode of between two lamps i uh i had to really light

395
00:37:38,476 --> 00:37:43,916
myself up for that one that was one of my favorite jokes that started circulating about that between

396
00:37:43,916 --> 00:37:49,916
two lamps yeah but anyways on to the interesting stuff yeah like what they're building out here is

397
00:37:49,916 --> 00:37:54,556
really fascinating and i think it's going to take forever for people to figure this out

398
00:37:54,556 --> 00:38:00,396
yeah totally and what they're also not figuring out is that if you own strife you're rooting for

399
00:38:00,396 --> 00:38:05,356
them to launch as many of these below you as possible it just keeps over collateralizing your

400
00:38:05,356 --> 00:38:10,476
position yours just gets stronger and stronger and stronger same thing for strike you're rooting

401
00:38:10,476 --> 00:38:15,036
for stride because it's bringing in more capital it's putting in more assets that are over

402
00:38:15,036 --> 00:38:20,636
collateralizing your positions there i mean what they're doing is fascinating and i think what we

403
00:38:20,636 --> 00:38:27,116
need to add to uh that spreadsheet that you do jeff is i think every week we should actually track

404
00:38:27,116 --> 00:38:32,396
the credit spreads of all of these to see how they're moving because earlier today i was looking

405
00:38:32,396 --> 00:38:39,436
at the credit spreads on strife and strike and the credit spread on strike was you know significantly

406
00:38:39,436 --> 00:38:44,876
lower than it was on strife so i think it would be interesting to start keeping an eye on that

407
00:38:44,876 --> 00:38:50,876
and see how the market starts to normalize these products and watch as those spreads start to

408
00:38:50,876 --> 00:38:55,916
compress over time i think that's going to be really really interesting yeah my first thought

409
00:38:55,916 --> 00:39:01,516
was like why would they do this because you know strife is just going to push strides price down

410
00:39:01,516 --> 00:39:07,596
and i was like no wait a minute i have it backwards stride is going to buoy strife's price up and then

411
00:39:07,596 --> 00:39:13,356
i started trying to gain theory how high could it go and i was like well if strife gets to 200 a share

412
00:39:13,356 --> 00:39:19,356
then i think the interest rate is approximately the same as u.s treasuries so i was like at least

413
00:39:19,356 --> 00:39:25,596
that high yeah i mean it's just going to keep making it more and more valuable i was talking

414
00:39:25,596 --> 00:39:30,076
to people today who were you know wondering are the prices of these going to get driven down

415
00:39:31,036 --> 00:39:35,676
and you know of course anything can happen in the markets here but i don't see a lot of reason

416
00:39:35,676 --> 00:39:40,236
for these to go back to trading below 100 i think that was kind of an anomaly

417
00:39:40,236 --> 00:39:45,216
and people were watching that and they thought that the fair market value on these was going to

418
00:39:45,216 --> 00:39:50,516
be in the you know low 90 range and all of a sudden like with all those products that you

419
00:39:50,516 --> 00:39:55,456
were just highlighting there jeff with all these junk bonds you're realizing once you actually

420
00:39:55,456 --> 00:40:01,996
understand what strategy is and you realize that you've got real-time access to track the

421
00:40:01,996 --> 00:40:08,116
collateral position over top of your preferred equity positions that you're buying this puts you

422
00:40:08,116 --> 00:40:15,956
one of the most secure and monitorable positions you could possibly be in. You can monitor these

423
00:40:15,956 --> 00:40:20,196
in real time and you can make adjustments in your portfolio because you've got a highly liquid

424
00:40:20,196 --> 00:40:24,036
market here where if you started getting uncomfortable, if all of a sudden you only

425
00:40:24,036 --> 00:40:30,116
had a BTC rating on top of these of 1.7 and you started getting nervous, you can start making

426
00:40:30,116 --> 00:40:34,836
changes. Whereas with all these other companies, like you said, who knows what's sitting behind

427
00:40:34,836 --> 00:40:39,316
those? You don't know. Once you buy them, I mean, how many people do you know who are buying bonds

428
00:40:39,316 --> 00:40:43,476
and then going and tracking the positions of the companies and figuring out where they're at in the

429
00:40:43,476 --> 00:40:48,416
capital structure? And, you know, like it's just not happening. But with these strategy offerings,

430
00:40:48,416 --> 00:40:53,996
you can do exactly that. And that's going to be huge because there's going to really be no reason

431
00:40:53,996 --> 00:40:59,656
to sit in any of those underperforming junk bonds when you can come over to these and buy these

432
00:40:59,656 --> 00:41:06,196
preferred equities that are much higher quality, where you can track in real time how much over

433
00:41:06,196 --> 00:41:10,436
collateralization you have against your positions and you can collect higher yields. Why wouldn't

434
00:41:10,436 --> 00:41:17,056
you do that? And for things like strife, it's the easiest one right now. Because, you know,

435
00:41:17,056 --> 00:41:21,096
when you think about that, everything that gets launched here is probably going to be underneath

436
00:41:21,096 --> 00:41:28,196
strife, that collateral position is only going to continue to grow. And so now you've got this

437
00:41:28,196 --> 00:41:33,216
good yield. I mean, the yield is still what, nine, nine and a half, something like that.

438
00:41:33,716 --> 00:41:38,556
And so you've still got this really good yield on this massively over collateralized position.

439
00:41:38,676 --> 00:41:44,836
And even if they do suspend the dividends, those dividends get applied to your liquidation

440
00:41:44,836 --> 00:41:49,876
preference. So now your liquidation preference just starts growing. So in the event that something

441
00:41:49,876 --> 00:41:54,856
happened to strategy, your claim is significantly higher because all those dividends keep getting

442
00:41:54,856 --> 00:42:00,416
added on top of it where they don't with strd it's so if you're sitting and you're just a retail

443
00:42:00,416 --> 00:42:05,236
investor that's holding any of these junk bonds because you wanted the high coupon payments

444
00:42:05,236 --> 00:42:10,956
you have almost no reason not to come over to these they're just much better products and it's

445
00:42:10,956 --> 00:42:17,676
going to take a little bit for the market to you know actually catch up to this but when it does

446
00:42:17,676 --> 00:42:22,856
they're going to be able to move a lot of these products through the atms i think there's going

447
00:42:22,856 --> 00:42:27,616
to be a lot of demand. And the more they build out this capital structure and they kind of align it

448
00:42:27,616 --> 00:42:32,476
to the different tiers that people are familiar with, and that's how they keep describing them,

449
00:42:32,476 --> 00:42:36,296
like STRD is kind of their alignment to the junk bond market, and that's kind of their

450
00:42:36,296 --> 00:42:42,236
competitive product. That makes it understandable for a lot of the bond investors out there, but

451
00:42:42,236 --> 00:42:47,016
these are going to take off and you're going to start seeing those spreads come down

452
00:42:47,016 --> 00:42:52,496
in a pretty big way over time here. But people are asleep at the wheel, but there's a lot of

453
00:42:52,496 --> 00:42:54,656
portfolio rebalancing that's on the way.

454
00:42:54,656 --> 00:42:57,216
I think there's one of two things, right?

455
00:42:57,216 --> 00:43:02,216
Either the entire fixed income market is underpriced,

456
00:43:04,916 --> 00:43:07,116
like should be priced higher,

457
00:43:07,116 --> 00:43:12,116
or the entire strategy catalog of products is underpriced.

458
00:43:13,016 --> 00:43:15,076
And there's going to be a market equilibrium

459
00:43:15,076 --> 00:43:19,516
of all these physical risks, crappy, trash,

460
00:43:19,516 --> 00:43:22,336
high yield instruments that are going to be

461
00:43:22,496 --> 00:43:28,496
rushing for the door to go buy higher quality instruments in significant fashion. I think

462
00:43:28,496 --> 00:43:36,316
there's going to be this landslide of capital that finds equilibrium and comes in the door here. I

463
00:43:36,316 --> 00:43:39,216
think there's going to be a ton of demand for these products once the market starts to figure

464
00:43:39,216 --> 00:43:43,436
out what these are. If there's a credit rating on any one of these individual products, I mean,

465
00:43:43,536 --> 00:43:48,256
we're off to the races. I know somebody asked about credit spreads. There's a couple of ways

466
00:43:48,256 --> 00:43:51,496
you could calculate it. You may want to look at the credit spreads relative to each other,

467
00:43:51,496 --> 00:43:56,776
right? You might want to look at the, what is the credit spread between SDRK, SDRF, and SDRD,

468
00:43:57,176 --> 00:44:01,996
but you could also look at what is the spread between, let's say the risk-free interest rate,

469
00:44:02,056 --> 00:44:06,076
which might be US 10-year treasury or US 30-year treasury or the Fed funds rate,

470
00:44:06,176 --> 00:44:12,136
and look at that relativity and how that changes over time. Because I think we will see those

471
00:44:12,136 --> 00:44:19,356
spreads relative to the risk-free rate come down probably pretty drastically. I do personally think

472
00:44:19,356 --> 00:44:25,116
there will be a point in time where STRF will flip the US 30-year treasury, where the yield

473
00:44:25,116 --> 00:44:34,316
on STRF will be less than the US 30-year treasury, right? You compare the two risk profiles. You look

474
00:44:34,316 --> 00:44:40,236
at the US government, which got 800% under collateralized, right? They've got eight times

475
00:44:40,236 --> 00:44:44,596
the amount of debt than they do the assets. And you look at strategies, balance sheet, and STRF,

476
00:44:44,636 --> 00:44:48,216
and you're like, this is six times over collateralized. The risk profiles are drastically

477
00:44:48,216 --> 00:44:54,056
different. So I think it's redefining what is risk in this new digital capital environment and

478
00:44:54,696 --> 00:45:01,576
rethinking like Bitcoin as the hurdle rate. Like what is your hurdle rate for investment? What is

479
00:45:01,576 --> 00:45:06,696
your opportunity cost of capital? How do you think of opportunity cost of capital? And the entire

480
00:45:06,696 --> 00:45:11,816
market is going to have to start rejiggering how they think about the world with these new financial

481
00:45:11,816 --> 00:45:18,456
instruments in the market i'm i'm all bowled up this is this is huge right this is absolutely huge

482
00:45:21,256 --> 00:45:26,856
is strategy letting these products run and letting that price expand in the market i think that's

483
00:45:26,856 --> 00:45:32,296
the beauty of these products they don't have to right because these are all driven by these yields

484
00:45:33,016 --> 00:45:37,176
and so as long as these yields remained undervalued relative to all the other products

485
00:45:37,176 --> 00:45:40,936
out there in the market the demand is going to keep coming in it's going to keep driving the price up

486
00:45:40,936 --> 00:45:46,736
and so they're probably using the atm constantly like i'm expecting to see atm on these pretty

487
00:45:46,736 --> 00:45:52,016
much every week at least on strike and strike where they have the atm right now and so they're

488
00:45:52,016 --> 00:46:05,884
probably selling these into the market but my hunch is the demand is enough to eat it up and they just can drip out enough of it right now because they don have quite enough liquidity in the market for them to sell it in huge chunks yet but it scaling up

489
00:46:05,884 --> 00:46:10,924
and they're starting to do that quickly so i don't think we're far away from you know seeing 100

490
00:46:10,924 --> 00:46:18,444
million plus in each product coming out per week and that'll be you know when this all really picks

491
00:46:18,444 --> 00:46:22,604
up and when you look back to that torque measurement right these are the products that make a big

492
00:46:22,604 --> 00:46:26,524
difference in that Bitcoin yield metric, and they're going to want to hammer that as hard as

493
00:46:26,524 --> 00:46:32,444
they can. So, you know, these being self-correcting, self-healing products, right? They use the ATM.

494
00:46:33,324 --> 00:46:38,164
You drive the price down, the yield goes up, new buyers come into the market trying to get the high

495
00:46:38,164 --> 00:46:43,264
yields. It drives that price right back up. They can go right back to the well with the ATM on

496
00:46:43,264 --> 00:46:49,724
these. So these are perfect products to have in the arsenal for any type of market condition. But

497
00:46:49,724 --> 00:46:56,704
Just imagine these when market conditions are bad, when you don't want to use any of the common stock equity, when the market's not there for converts.

498
00:46:57,084 --> 00:47:04,264
You can lean on any one of these, whichever one's going to get you the highest value for your shareholders and Bitcoin per share.

499
00:47:04,544 --> 00:47:08,964
They can go hit that no matter what the market conditions are, because there's always a demand for yield.

500
00:47:10,244 --> 00:47:11,384
And we can talk about rebalance.

501
00:47:12,664 --> 00:47:13,064
Yeah.

502
00:47:13,144 --> 00:47:16,084
When November happens again, that's my dry powder.

503
00:47:17,044 --> 00:47:18,404
Stride is going to be my dry powder.

504
00:47:18,404 --> 00:47:19,604
I'm moving right into it.

505
00:47:19,724 --> 00:47:26,544
that's it's a no-brainer i'm not sitting in cash that's doesn't make any sense silly yeah that's

506
00:47:26,544 --> 00:47:30,984
how i've been using them like strife or strike have always been my that's where my trades end

507
00:47:30,984 --> 00:47:34,704
up settling to right if i'm sitting on anything that i'm not deploying and i just want to sit

508
00:47:34,704 --> 00:47:39,164
that's where i park it now for a while and uh absolutely worked out quite well

509
00:47:39,164 --> 00:47:48,284
yeah i think he's go ahead mace no no no sorry i i just think we should get to to uh defending

510
00:47:48,284 --> 00:47:57,404
one m nav with uh strd and well i think dan dan killed it so dad do you want to talk on that

511
00:47:59,484 --> 00:48:04,524
uh yeah i mean i think it kind of stemmed from josh's idea like josh had been kind of putting

512
00:48:04,524 --> 00:48:09,164
a lot of info out there saying shorts are attacking the stock and i know sailors aware of what josh

513
00:48:09,164 --> 00:48:13,884
has been saying and what um and just you know there's been a lot of short pressure on the equity

514
00:48:13,884 --> 00:48:14,884
itself.

515
00:48:14,884 --> 00:48:18,044
And so that's very nerve wracking considering like, okay, so let's say the shorts really

516
00:48:18,044 --> 00:48:19,044
take hold.

517
00:48:19,044 --> 00:48:24,524
They start shorting strategy MSTR class A down to a lower multiple.

518
00:48:24,524 --> 00:48:29,924
And then, you know, if they're trading at a 1-3 multiple or a 1M NAV, they can't generate

519
00:48:29,924 --> 00:48:32,764
yield in the form of common stock issuance.

520
00:48:32,764 --> 00:48:33,764
Right.

521
00:48:33,764 --> 00:48:34,764
And so that's a really tricky situation.

522
00:48:34,764 --> 00:48:36,364
Let's say it's a bear market.

523
00:48:36,364 --> 00:48:42,064
Everyone's bearish on Bitcoin strategies trading at 1M NAV say, and they can't generate Bitcoin

524
00:48:42,064 --> 00:48:43,064
yield.

525
00:48:43,064 --> 00:48:45,004
It's a really bleak circumstance.

526
00:48:45,224 --> 00:48:46,944
They're by no means over leveraged.

527
00:48:47,424 --> 00:48:50,344
There's nothing wrong, but it's just their Bitcoin yield will fall.

528
00:48:50,344 --> 00:48:56,464
And so what do you do to jack up the Bitcoin yield to get the premium juiced again?

529
00:48:56,624 --> 00:48:58,324
You need Bitcoin yield to justify the premium.

530
00:48:58,584 --> 00:49:03,244
Obviously, the leverage justifies the premium if you're bullish on Bitcoin in the long term, but that Bitcoin yield helps.

531
00:49:03,244 --> 00:49:13,164
So what they can do now is they can issue stride and buy back their shares at a sub 1M NAV price, which creates Bitcoin yield.

532
00:49:13,264 --> 00:49:17,944
It's the inverse of selling shares at a 1,5M NAV and capturing that spread.

533
00:49:18,144 --> 00:49:28,664
If the shares are trading at a discount to the Bitcoin and you sell an asset that represents a claim over the Bitcoin to purchase the shares, to buy back the shares, you're essentially selling.

534
00:49:28,664 --> 00:49:35,324
you're selling Bitcoin at one and buying it for 0.7 by buying back the MSDR common equity.

535
00:49:35,604 --> 00:49:40,984
So it's a defense mechanism and it disincentivizes the shorts from taking a hostile short position

536
00:49:40,984 --> 00:49:47,004
down below one MNAV. But the really key thing, I think, with STRD here is like, for example,

537
00:49:47,104 --> 00:49:53,144
let's say strategy levers up to a 25% leverage ratio of converts, strike and strife relative

538
00:49:53,144 --> 00:49:58,644
to their Bitcoin holdings. In this hypothetical scenario, likely Bitcoin would have fallen by 50%.

539
00:49:58,664 --> 00:50:03,684
So now the leverage ratio is up closer to 50% of their total equity stack, right?

540
00:50:04,004 --> 00:50:10,504
So it would be actually, it would be irresponsible for them to go out and issue strife to buy

541
00:50:10,504 --> 00:50:13,984
back their shares if they're trading at a discount because it would jeopardize the

542
00:50:13,984 --> 00:50:15,024
credit worthiness of strife.

543
00:50:15,164 --> 00:50:15,324
Correct.

544
00:50:15,964 --> 00:50:20,364
But when they do this with STRD, they're increasing the credit worthiness of strife

545
00:50:20,364 --> 00:50:24,804
and strike while also being able to buy back shares and keeping that classified as a jump

546
00:50:24,804 --> 00:50:25,024
bond.

547
00:50:25,024 --> 00:50:32,164
So the stride is the only feasible mechanism with which they can sell preferred equity and buy back their shares at a discount.

548
00:50:32,484 --> 00:50:36,124
They couldn't do that in good faith with strife or strike realistically.

549
00:50:36,704 --> 00:50:46,744
And because it's a high yield, because it's a high risk, high yield junk bond, the yield would reflect that as well.

550
00:50:48,224 --> 00:50:48,544
Exactly.

551
00:50:48,544 --> 00:50:52,164
So it is reflective of being that higher risk position.

552
00:50:52,164 --> 00:50:57,604
right and if that if that were if that were to be the case right if the m nav were to fall

553
00:50:58,724 --> 00:51:04,964
the there would be more risk associated with strd than the than the other products and so it would

554
00:51:04,964 --> 00:51:11,124
demand a higher yield yeah i think i think you outlined it perfectly yeah and i think it it

555
00:51:11,124 --> 00:51:19,444
satisfies one of my remaining like legit bear cases because we were we were talking at um dinner

556
00:51:19,444 --> 00:51:23,424
and it was just beer for dinner, but we'll just call it dinner.

557
00:51:24,484 --> 00:51:28,444
And, you know, people were saying, what's your legit bear case?

558
00:51:28,504 --> 00:51:30,304
Like what would get you to sell strategy?

559
00:51:31,304 --> 00:51:35,904
And one of the only things that I could really come up with is in a bear market,

560
00:51:35,904 --> 00:51:40,244
if they were trading below 1x MNAV and they don't buy the stock back,

561
00:51:40,364 --> 00:51:44,244
because that would increase your Bitcoin per share, right?

562
00:51:44,584 --> 00:51:48,984
You're not going to sell into the common ATM to buy more Bitcoin.

563
00:51:48,984 --> 00:51:50,904
That wouldn't make any sense below 1xMNAV.

564
00:51:52,984 --> 00:52:00,584
But they've painted themselves into a corner to a certain extent because you never sell your Bitcoin enough times, like you just can't do it.

565
00:52:00,684 --> 00:52:03,564
Even though that would make mathematical sense below 1xMNAV.

566
00:52:04,504 --> 00:52:14,944
And so my response to the question was, if they don't sell the preferreds into the ATM and buy their stock back with it, I would have to think about moving off the stock.

567
00:52:15,144 --> 00:52:17,024
Because you have to.

568
00:52:17,024 --> 00:52:20,184
I would even consider it like their fiduciary responsibility to do so.

569
00:52:21,904 --> 00:52:25,904
And so with this stride coming out, I was like, they nailed it.

570
00:52:26,004 --> 00:52:30,444
Like that was one of the last remaining bear cases that I could actually steal, man.

571
00:52:31,364 --> 00:52:32,404
And I was like, you know what?

572
00:52:32,464 --> 00:52:36,004
Sailor's bugging the entire casino because he's just like listening to our conversations.

573
00:52:36,384 --> 00:52:38,184
And then like, yeah, I got something for your ass.

574
00:52:38,264 --> 00:52:39,044
It's just you wait.

575
00:52:39,204 --> 00:52:42,484
And like a week later, he's like, here, I got something for you.

576
00:52:43,484 --> 00:52:45,824
Yeah, building out the entire yield curve.

577
00:52:45,824 --> 00:52:48,764
Okay, so we've been steel manning this thing.

578
00:52:49,204 --> 00:52:52,364
Can we talk about the bull scenario, which is cool too?

579
00:52:52,604 --> 00:52:55,744
Like, you know, we've hit on all these bear scenarios.

580
00:52:56,444 --> 00:52:59,224
What if interest rates drop, right?

581
00:52:59,344 --> 00:53:06,904
If interest rates drop, all of the prices of these instruments rise, all of them.

582
00:53:07,324 --> 00:53:11,824
And so that means that the amount of capital that they raise is going to be that much more accretive.

583
00:53:11,824 --> 00:53:15,664
they're going to be able to raise that much more Bitcoin with less leverage and less dilution on

584
00:53:15,664 --> 00:53:22,164
the stock, which is incredibly powerful. You've got the quadruple threat ATM. You've got all of

585
00:53:22,164 --> 00:53:29,284
these products that could all be operating simultaneously, generating capital from all

586
00:53:29,284 --> 00:53:36,244
of these different pools when there's surges of demand in any circumstance. If we see another

587
00:53:36,244 --> 00:53:43,284
surge of demand from uh you know potential s p 500 inclusion mstr atm if you see interest rates drop

588
00:53:43,284 --> 00:53:50,084
and maybe uh the the strf gets an investment grade uh rating boom you've got an instant atm you're

589
00:53:50,084 --> 00:53:54,244
able to tap it and get that capital it's going to be is that an instant is that an instant reprice

590
00:53:55,204 --> 00:54:00,884
if they get a high rating on the preferred like they just immediately become more valuable i i

591
00:54:00,884 --> 00:54:05,204
think so yeah if they get an investment grade rating i think that would be a like slingshot

592
00:54:05,204 --> 00:54:11,844
reprice uh in this in the stock i mean it would instantly drop to like a six percent yield and

593
00:54:11,844 --> 00:54:19,924
what is it what is it today like 9.6 so yeah i mean it might go to 180 like 200.

594
00:54:21,364 --> 00:54:25,924
i i would i would think right the market would have to reprice it if it goes to investment grade

595
00:54:25,924 --> 00:54:30,484
i mean any any anybody in their mother that has an investment grade fixed income portfolio would

596
00:54:30,484 --> 00:54:36,304
would be buying buying the hell out of it yeah the most bullish thing for me about this is like

597
00:54:36,304 --> 00:54:42,524
just the threat of stride being used or being able to be used to buy back the stock that's like a

598
00:54:42,524 --> 00:54:50,984
shot across the bow to all the shorts like i double dog dare you because you know just the

599
00:54:50,984 --> 00:54:56,664
threat of it like you'd only have to do it once i think because you're just going to pump the the

600
00:54:56,664 --> 00:55:02,604
stock price back up and there's no way that the shorts would be able to to cover at that point

601
00:55:02,604 --> 00:55:07,844
and then you've just got that threat forever yeah the forever threat if you can ever get it down to

602
00:55:07,844 --> 00:55:13,444
that low again guess what we're gonna do and it's just like they got the guns ready and and and the

603
00:55:13,444 --> 00:55:20,824
reason the reason this works is because you have a you have an instrument you have bitcoin which is

604
00:55:20,824 --> 00:55:25,064
a fixed supply and you're shoving all of that capital that you're getting in the door you're

605
00:55:25,064 --> 00:55:29,204
shoving that into the network with a fixed supply. And you know that the supply curve of that is

606
00:55:29,204 --> 00:55:36,144
decreasing at an increasing rate over time. So that's what makes this concept possible

607
00:55:36,144 --> 00:55:43,204
is because you can't make any more Bitcoin, right? The network is going to get stronger and

608
00:55:43,204 --> 00:55:51,744
stronger. You couldn't do this with gold, right? Because gold supply is technically infinite,

609
00:55:51,744 --> 00:55:56,144
right like you'd find gold on different asteroids or different planets and or somebody can make it

610
00:55:56,144 --> 00:56:04,624
chemically or you know whatever that may be um you know the the supply is increasing over time

611
00:56:05,904 --> 00:56:11,904
mason you want to walk through this spreadsheet yeah yeah so can i add one more thing out there

612
00:56:11,904 --> 00:56:15,744
on the yeah go ahead move on to something else i mean there's there's one piece that

613
00:56:16,624 --> 00:56:23,104
doesn't get compared enough to like bond coupons which is that these preferreds are qualified

614
00:56:23,104 --> 00:56:29,024
dividends oh and that's really massive because you know for a qualified dividend to get the

615
00:56:29,024 --> 00:56:35,584
qualified rate you typically have to hold it for like a 60-day period within 121 day window around

616
00:56:35,584 --> 00:56:41,824
the dividend the ex-dividend date but when you do you get taxed at a lower rate whereas your bond

617
00:56:41,824 --> 00:56:47,024
coupon payments will come in at your ordinary income tax rate. So there's also a tax advantage

618
00:56:47,024 --> 00:56:52,564
to holding these versus the bonds. So I think that one's really important as people start to

619
00:56:52,564 --> 00:56:58,544
figure this out. The other thing is I just went and started modeling Strife to figure out what

620
00:56:58,544 --> 00:57:06,124
the price of Strife would need to be for it to be in the range of a AA rating, right? Which the

621
00:57:06,124 --> 00:57:12,564
credit spread on that would be like 60 to 85 basis points. And it would be trading at $180 a share.

622
00:57:13,004 --> 00:57:13,724
Yeah, that sounds about right.

623
00:57:13,724 --> 00:57:20,564
To be double A rating. So you can see, you know, how far we are from where fair market probably is

624
00:57:20,564 --> 00:57:25,004
on these. So while people are watching these drift up from 100 to 107 and thinking that that's as far

625
00:57:25,004 --> 00:57:30,744
as they can go. Once people realize the credit quality of these, they can go much, much higher.

626
00:57:31,224 --> 00:57:35,184
So you might not even be buying these for capital appreciation and it might just happen anyways.

627
00:57:35,184 --> 00:57:39,884
us. So, you know, it's kind of a fascinating phenomenon because we're in this weird spot

628
00:57:39,884 --> 00:57:44,104
where people don't understand the collateral that's backing these and don't understand,

629
00:57:44,324 --> 00:57:49,684
you know, all the different qualities that these products hold that are superior to their bond

630
00:57:49,684 --> 00:57:56,524
portfolios. But man, when they do and you wake up and Strife is, you know, $150 to $175 a share,

631
00:57:56,584 --> 00:57:59,964
and all of a sudden you got massive capital appreciation on something you bought for a

632
00:57:59,964 --> 00:58:03,444
nine and a half percent yield one day. It's a pretty good surprise.

633
00:58:04,684 --> 00:58:08,304
The end. And if the, if interest rates drop, it goes even higher, right?

634
00:58:08,304 --> 00:58:11,664
If interest rates go to zero, it goes to, it goes to 250.

635
00:58:11,844 --> 00:58:13,724
And rates are going to come down over time. Right? I mean,

636
00:58:13,724 --> 00:58:14,784
that's going to be unavoidable,

637
00:58:14,784 --> 00:58:17,504
particularly given everything you're seeing happening out there in the macro

638
00:58:17,504 --> 00:58:21,084
environment, like they're going to come down and when they do, yeah,

639
00:58:21,084 --> 00:58:23,004
those cash flows get more valuable.

640
00:58:23,004 --> 00:58:26,484
And so that's going to push the prices up as well. So, okay.

641
00:58:26,484 --> 00:58:31,604
just a really interesting setup and people are incredibly sleeping on these products. I've had a

642
00:58:31,604 --> 00:58:37,364
lot of people ask me, why would I be holding these when I could hold several other equities in the

643
00:58:37,364 --> 00:58:43,204
space? And I go, well, it's the stable part of my portfolio that I still think has capital

644
00:58:43,204 --> 00:58:48,804
appreciation. Plus it throws off really good cash flow. Why wouldn't I hold some of these?

645
00:58:49,684 --> 00:58:54,964
You've already got your foundational Bitcoin allocation out there. You've got your MSTR that

646
00:58:54,964 --> 00:59:00,644
you're going and trying to outperform on. There's no shame in holding these products because these

647
00:59:00,644 --> 00:59:07,044
are useful products. This is changing the way people can structure their portfolios to enhance

648
00:59:07,044 --> 00:59:12,244
their lives. I think that's really important. If you look back in time where being a two-income

649
00:59:12,244 --> 00:59:17,204
household used to be a very abnormal thing, there used to be all the jokes about it and everyone

650
00:59:17,204 --> 00:59:22,724
was rolling in money. Now, you have to be a two-income household basically just to survive

651
00:59:22,724 --> 00:59:28,724
at status quo. So products like these where you can park capital and generate meaningful income,

652
00:59:28,724 --> 00:59:32,164
you know, is going to give people a fighting chance if they want to go back to what that old

653
00:59:32,164 --> 00:59:37,524
model looked like. And I think that's, you know, a really underrated part of these products. And

654
00:59:37,524 --> 00:59:42,244
it's why you see so much demand for all the income products, I think, right now, because we just have

655
00:59:42,244 --> 00:59:49,364
this massive societal issue going on that, you know, doesn't seem to have a fix anywhere in the

656
00:59:49,364 --> 00:59:52,804
future here it just seems like it's going to get worse you know the money is going to keep getting

657
00:59:52,804 --> 00:59:57,604
devalued they're going to keep spending like crazy like you have to opt out of that at some point

658
00:59:57,604 --> 01:00:03,524
you've got to find products that are able to augment or at least stabilize your life and

659
01:00:03,524 --> 01:00:07,684
these are those types of products that give you that option with very limited downside to it

660
01:00:07,684 --> 01:00:12,244
because you can see the collateral position and they're really really powerful right these are

661
01:00:12,244 --> 01:00:17,604
easier to understand than you know like a misty or an imstr for a lot of people so

662
01:00:17,604 --> 01:00:23,184
So even if it's just 10%, right, that's huge for a lot of people.

663
01:00:23,504 --> 01:00:24,964
So, you know, these are going to be popular.

664
01:00:26,244 --> 01:00:27,184
Got a prediction.

665
01:00:28,184 --> 01:00:30,224
Interest rates drop, strife rises.

666
01:00:30,784 --> 01:00:35,404
At some point, the government will have to raise interest rates again in a cycle.

667
01:00:35,884 --> 01:00:38,204
And that's when the flipping will happen.

668
01:00:38,204 --> 01:00:44,824
Like the price of strife might just stay high and the yield might just stay there, even if interest rates change.

669
01:00:44,824 --> 01:00:49,764
I mean, the next four years of watching this stuff is going to be so fun.

670
01:00:49,944 --> 01:00:56,064
I mean, these products, the use cases here are going to be fascinating to see how these

671
01:00:56,064 --> 01:00:57,684
products are used as collateral, right?

672
01:00:57,764 --> 01:01:01,004
Like, you know, we talk about Bitcoin as collateral.

673
01:01:01,684 --> 01:01:03,424
These products can be used as collateral, right?

674
01:01:03,544 --> 01:01:05,824
I mean, Dan, you've got strike on margin, right?

675
01:01:07,704 --> 01:01:08,424
100%, baby.

676
01:01:08,884 --> 01:01:09,404
100%.

677
01:01:09,404 --> 01:01:14,704
I just found my margin rate lower to match strikes, interest payment today.

678
01:01:14,824 --> 01:01:17,664
I call it fidelity, but I needed to match guys.

679
01:01:17,664 --> 01:01:19,124
Make it happen for me or else I'm going on.

680
01:01:19,152 --> 01:01:23,072
be the same. So you got a free call option, basically, you've got fidelity on margin,

681
01:01:23,072 --> 01:01:26,752
and you got a free call option because you're holding, but none of this is financial advice.

682
01:01:28,752 --> 01:01:32,272
But Stripe is going to be the blue chip of these products in the market,

683
01:01:32,272 --> 01:01:36,992
right? Like, I really believe that that is going to be the standard bearer for the fixed income

684
01:01:36,992 --> 01:01:43,072
market, just because of the scale they're achieving and that every single action they're taking just

685
01:01:43,072 --> 01:01:48,832
makes that one stronger. So eventually, you're going to be very hard pressed to go find anything

686
01:01:48,832 --> 01:01:53,552
that provides anything remotely close to the characteristics that strife is providing with the

687
01:01:53,552 --> 01:01:58,512
same over collateralization that it has it's going to be very hard to find in the market so that's

688
01:01:58,512 --> 01:02:02,272
going to become that benchmark over time that all these other products are going to have to compare

689
01:02:02,272 --> 01:02:06,352
against and i mean bonds in that as well not just other preferred equities that are going to come

690
01:02:06,352 --> 01:02:11,392
from other bitcoin treasury companies because those are going to come too and people can structure

691
01:02:11,392 --> 01:02:16,912
them in different ways to try to lure in investors but right now when you start talking about moats

692
01:02:16,912 --> 01:02:23,312
this product has a massive moat right now huge huge and the volume that they could bring in like

693
01:02:23,312 --> 01:02:27,792
the capacity that they could bring in on these instruments is just like enormous relative to

694
01:02:28,752 --> 01:02:33,392
even if the next closest bitcoin treasury company launched this today all of these products today

695
01:02:34,512 --> 01:02:41,712
they're they're only be able to pull in one tenth of the capacity and the entire market would be

696
01:02:41,712 --> 01:02:47,632
looking at strategy still, they would be looking at strategy in a better light because of its

697
01:02:47,632 --> 01:02:54,832
collateralized nature, the scale of the collateral and how big it is, right? This is the blue chip.

698
01:02:55,312 --> 01:02:59,632
MSTR is the investment grade Bitcoin security company.

699
01:03:00,912 --> 01:03:05,552
Pull up my slideshow. Perfect setup. Perfect setup. I mean,

700
01:03:05,552 --> 01:03:06,992
Yeah, here you go. Okay.

701
01:03:08,272 --> 01:03:15,732
Yeah, so Dan and I, I mean, we sat down and so the conference, I think we'll talk about the conference a little later.

702
01:03:16,152 --> 01:03:20,992
Everyone's talking about different Bitcoin treasury companies.

703
01:03:21,532 --> 01:03:25,012
And a lot of them are extremely interesting.

704
01:03:25,292 --> 01:03:26,292
Some of them are not.

705
01:03:26,292 --> 01:03:30,552
I think everyone should do their own research and come to their own conclusions.

706
01:03:30,552 --> 01:03:37,172
But we kind of sat down and we said, all right, what makes a Bitcoin treasury company investment grade?

707
01:03:38,332 --> 01:03:45,852
And long story short, strategy, you know, ticks all these boxes because of course it does.

708
01:03:45,852 --> 01:03:50,072
But we boil it down to three things.

709
01:03:50,312 --> 01:03:52,292
And the first one's trust and reputation.

710
01:03:52,912 --> 01:03:54,872
Strategy has been doing this since 2020.

711
01:03:55,752 --> 01:03:59,552
It prioritizes Bitcoin yield and it holds.

712
01:03:59,552 --> 01:04:04,652
and it never sells and it's earned market confidence, right? That's number one. And

713
01:04:04,652 --> 01:04:14,932
you could say all of these are reinforcing their moat. So I think that's another thing to think

714
01:04:14,932 --> 01:04:19,812
about. The second thing, Jeff, you've been pounding on this lately is the scale of the

715
01:04:19,812 --> 01:04:25,492
Bitcoin collateral, right? There's no second best. It's the largest Bitcoin treasury reserve.

716
01:04:25,492 --> 01:04:43,312
And because of that, they can issue these fully liquid collateral instruments at a scale and at a pace that other treasury companies haven't been able to achieve quite yet.

717
01:04:43,312 --> 01:04:57,552
The third thing is, and this came to me today because of Stride and what Dan was saying about defending the 1MNAV, perpetual Bitcoin yield, premium agnostic.

718
01:04:57,552 --> 01:05:08,952
So even if they go below 1MNAV, they can sell Stride, buy back the shares, and it's Bitcoin accretive, right?

719
01:05:08,952 --> 01:05:32,592
And yeah, we just had two different options for how they could or how a Bitcoin treasury company could potentially create perpetual Bitcoin yield either through their operating business or creating something like Stride or a different unsecuritized credit-worthy instrument.

720
01:05:33,712 --> 01:05:38,032
So yeah, that's basically what we came to.

721
01:05:38,032 --> 01:05:43,552
This would represent a AAA caliber investment grade. You've got trust and reputation,

722
01:05:44,112 --> 01:05:52,432
enormous pile of capital, right? And just a pile of capital that you can't compete with. And then

723
01:05:52,432 --> 01:05:57,952
the ability, the instruments to generate perpetual Bitcoin yield, depending on any market condition.

724
01:05:58,592 --> 01:06:04,752
If things are roaring, awesome. They're generating tons of Bitcoin yield and they're,

725
01:06:04,752 --> 01:06:08,272
you know pumping it into bitcoin the price of bitcoin is going higher collateral is getting

726
01:06:08,272 --> 01:06:13,872
safer and if the conditions are bad they they still have instruments that they can use because

727
01:06:13,872 --> 01:06:18,192
the market always wants yield there's always going to be demand for any of these instruments

728
01:06:18,992 --> 01:06:25,952
instruments which would protect the more investment grade or convertible bonds that they

729
01:06:25,952 --> 01:06:31,392
hold on their on their balance sheet yeah i'm so glad you did this because i've been racking my

730
01:06:31,392 --> 01:06:40,272
brain around um you know every cycle we have shit coiners and when i'm talking to them i usually say

731
01:06:41,632 --> 01:06:47,392
you know when someone mentions whatever they're into and i don't attack their coin directly i'll

732
01:06:47,392 --> 01:06:54,992
usually just say well look if a coin has any of these red flags of a scam coin then i avoid it

733
01:06:54,992 --> 01:06:58,772
And for me, those red flags are, you know, did they have a pre-mine?

734
01:06:59,012 --> 01:06:59,832
Are they centralized?

735
01:07:01,512 --> 01:07:02,712
And is it proof of stake?

736
01:07:03,232 --> 01:07:06,372
If it's got any of those red flags, I'm like, okay, that's a scam coin.

737
01:07:07,252 --> 01:07:14,572
And this is giving me the ammo that I need to discuss what a legit Bitcoin treasury company

738
01:07:14,572 --> 01:07:15,252
looks like.

739
01:07:15,712 --> 01:07:19,432
You know, if they're not the real deal, if they don't have the trust, if they don't have

740
01:07:19,432 --> 01:07:22,012
the scale, and if they don't have the perpetual yield.

741
01:07:22,012 --> 01:07:32,692
So it's just the perfect talking points when you're talking to somebody and they want to know what's a legit Bitcoin treasury company.

742
01:07:35,452 --> 01:07:38,372
Apparently we're getting audio problems, but I hear you just fine.

743
01:07:38,832 --> 01:07:40,192
I hear you guys a little bit.

744
01:07:40,652 --> 01:07:42,412
Yeah, I think we'll just keep cooking.

745
01:07:44,892 --> 01:07:47,552
Can you see someone in the comments?

746
01:07:47,552 --> 01:07:52,392
And this is a mature investment grade, AAA caliber treasury company.

747
01:07:52,592 --> 01:07:59,972
That doesn't mean there couldn't be another treasury company that's well on their way to become such a corporation.

748
01:08:00,192 --> 01:08:07,472
But this is once it's mature, like what are the necessary ingredients and what should a Bitcoin treasury company strive to generate for themselves?

749
01:08:07,872 --> 01:08:15,252
And that other clause operating business that covers liabilities and sweeps free cash flow into Bitcoin in a meaningful Bitcoin yield manner.

750
01:08:15,252 --> 01:08:18,852
that's really important because I think there's going to be a world in which not every company has

751
01:08:18,852 --> 01:08:23,652
to create a full financialized Bitcoin stack of fixed income products like strategy. You can just

752
01:08:23,652 --> 01:08:29,492
be a company making money and having a Bitcoin treasury strategy, but that will satisfy these

753
01:08:29,492 --> 01:08:36,372
criterion if you do it effectively with your free cash flows. So there's two ways to do it. Either

754
01:08:36,372 --> 01:08:40,772
you have to have this comprehensive structure, that strategy, or at least strive to have this

755
01:08:40,772 --> 01:08:45,172
comprehensive structure like strategy, or you just have to be very diligent in creating Bitcoin yield

756
01:08:45,252 --> 01:08:48,852
your operating business and you can't become over leveraged essentially like that

757
01:08:51,172 --> 01:08:58,612
i think different different markets um provide different opportunities right metaplan space

758
01:08:58,612 --> 01:09:06,212
out of japan i think they have a mo in or or they're they have a regional moat right that

759
01:09:06,212 --> 01:09:14,692
strategy uh may have a hard time attacking or or another company so i think i think there there's

760
01:09:14,692 --> 01:09:21,252
honestly more to this, but I was just trying to come down to fundamentals of what should you be

761
01:09:21,252 --> 01:09:26,692
looking for? Or at least me personally, this is investment advice, this is what I look for.

762
01:09:30,692 --> 01:09:37,892
Yeah. And I mean, to your point, you can have technical investment grade over collateralization

763
01:09:37,892 --> 01:09:44,052
of a balance sheet, but it just may not be the same scale. You can have a $4 billion company that

764
01:09:44,052 --> 01:09:46,712
that offers an investment grade product,

765
01:09:46,712 --> 01:09:49,772
but the scale that they're going to be able to do that at

766
01:09:49,772 --> 01:09:53,632
is very different than a hundred billion dollar company

767
01:09:53,632 --> 01:09:56,352
that's offering these instruments to the market.

768
01:09:56,352 --> 01:10:01,352
And that scale is pretty important.

769
01:10:01,992 --> 01:10:04,912
But also I think another important part here

770
01:10:04,912 --> 01:10:06,712
is this operating business perspective, right?

771
01:10:06,712 --> 01:10:08,072
Like if you had a company like Nike,

772
01:10:08,072 --> 01:10:11,132
it's just got massive cash flows coming in the door.

773
01:10:11,132 --> 01:10:13,672
And if they decided to adopt a Bitcoin treasury strategy

774
01:10:13,672 --> 01:10:15,852
and they're just pumping all of their cash flows into Bitcoin.

775
01:10:16,372 --> 01:10:20,112
That's going to be a different type of company than, you know,

776
01:10:20,232 --> 01:10:25,292
a company like Strategy that's designed based on, you know,

777
01:10:25,352 --> 01:10:28,172
its financial strength and all the products are a function of the financial

778
01:10:28,172 --> 01:10:29,972
strength and how that operates within the market.

779
01:10:29,972 --> 01:10:33,292
And I mean, finance is getting redesigned, right?

780
01:10:33,372 --> 01:10:36,772
Like that's the whole takeaway of this whole thing is like finance is getting

781
01:10:36,772 --> 01:10:39,492
redesigned. People have to think differently because the world's moving faster.

782
01:10:39,952 --> 01:10:42,452
It's digital. There's digital capital available.

783
01:10:42,452 --> 01:10:47,432
risks in the physical market are probably mispriced. Risks in the digital market are

784
01:10:47,432 --> 01:10:52,852
mispriced. There's going to be an equilibrium redefining how companies work and operate with

785
01:10:52,852 --> 01:10:59,572
all of these different forms of ways to store your value. Really good. Yeah, it might've been

786
01:10:59,572 --> 01:11:04,452
a little harsh. You don't have to do all of these. You can just buy Bitcoin and you're a good company.

787
01:11:04,452 --> 01:11:12,032
Right. But if you want this triple A investment grade, I don't know, I guess extra Bitcoin premium

788
01:11:12,032 --> 01:11:15,312
you might have to adopt some of these.

789
01:11:16,172 --> 01:11:17,772
So I think that's a great point

790
01:11:17,772 --> 01:11:21,652
because not every company that buys Bitcoin

791
01:11:21,652 --> 01:11:23,672
is going to be a Bitcoin treasury company.

792
01:11:24,292 --> 01:11:26,372
There's going to be companies who buy Bitcoin

793
01:11:26,372 --> 01:11:28,452
and put it on their balance sheet,

794
01:11:28,812 --> 01:11:29,692
put it in their treasury,

795
01:11:29,912 --> 01:11:34,092
but they're not necessarily running the strategy playbook.

796
01:11:34,192 --> 01:11:35,912
I actually don't think, you know,

797
01:11:36,192 --> 01:11:39,492
not every company can do what strategy has done.

798
01:11:39,492 --> 01:11:47,732
um it just wouldn't make sense we would we would quickly go to a a hyper bitcoinized world so

799
01:11:47,732 --> 01:11:56,032
there's going to be companies that are somewhere in between right on somebody there were a couple

800
01:11:56,032 --> 01:12:00,472
of people bringing up proof of reserves and i know that was a big topic at the the bitcoin

801
01:12:00,472 --> 01:12:06,952
conference and you know i i think a lot of the market misconstrued sailors comments is you know

802
01:12:06,952 --> 01:12:13,612
not showing proof of reserves was a security risk to, was a Bitcoin security risk. And I think that

803
01:12:13,612 --> 01:12:22,532
was just totally misconstrued. And the risk with, you know, having public addresses is not Bitcoin

804
01:12:22,532 --> 01:12:29,412
risk, it's human risk, right? It's social engineering risk. The fact that those wallets

805
01:12:29,412 --> 01:12:35,772
exist, you can potentially attack or go find who the custodian is. You could go find who manages

806
01:12:35,772 --> 01:12:41,052
the custody you could try to attack or get away into uh some of the keys you kidnap somebody you

807
01:12:41,052 --> 01:12:49,612
ransom somebody all of a sudden you have issues that you didn't want to to have uh you know on

808
01:12:49,612 --> 01:12:53,692
your on your corporate balance sheet that being said i know arkham funds has already they've

809
01:12:53,692 --> 01:12:59,772
already mapped what they think to be like 95 of msdr's bitcoin holdings there's so many nuances to

810
01:12:59,772 --> 01:13:04,572
how this works right like you've got i think they've got thousands of different wallets uh

811
01:13:04,572 --> 01:13:08,892
the way like some of these insurance programs are designed on these individual wallets each each

812
01:13:08,892 --> 01:13:14,092
wallet may only be insured up to 100 million dollars so if the price of bitcoin rises and

813
01:13:14,092 --> 01:13:17,772
you have more than 100 million dollars in a wallet there needs to be a rebalancing so you may be in

814
01:13:17,772 --> 01:13:22,572
a situation where you've got that you know a couple hundred wallets that are rebalancing and moving

815
01:13:22,572 --> 01:13:27,452
capital so they can stay within the guidelines of what the insurance policy may be and that could

816
01:13:27,452 --> 01:13:31,852
cause a big stir within the market of you know all strategies selling all their bitcoin because it

817
01:13:31,852 --> 01:13:37,092
moved. You know, we've seen this with people talking about the US government, but maybe they

818
01:13:37,092 --> 01:13:42,752
just did a rebalance. And there's all of these things that may happen or occur that are just

819
01:13:42,752 --> 01:13:48,312
risks of having these out in the market. Do I think it would be ideal if strategies showed

820
01:13:48,312 --> 01:13:52,892
proof of reserves? Absolutely. Like that would be awesome. But also, I don't think that they

821
01:13:52,892 --> 01:13:58,392
don't have the Bitcoin. I don't think the price of Bitcoin would be where it's at today if they

822
01:13:58,392 --> 01:14:02,632
have the bitcoin i don't think capital group would have a heavy position in their company if

823
01:14:02,632 --> 01:14:09,592
they didn't have the bitcoin the big four like all of their executives in c-suite would go to jail

824
01:14:09,592 --> 01:14:14,312
if they lied on their annual audit about how much bitcoin they had like the auditors would go to

825
01:14:14,312 --> 01:14:20,392
jail i don't think anybody wants to go to jail over this whole scenario and that's like a very

826
01:14:20,392 --> 01:14:27,352
serious consequence of you know lying on those on those annual audits so it's also acknowledged that

827
01:14:27,352 --> 01:14:33,752
this proof of reserves thing is very much a retail investor gripe at the moment none of the

828
01:14:33,752 --> 01:14:39,592
institutional guys are asking for this right they know that an audit is effectively proof of reserves

829
01:14:39,592 --> 01:14:46,872
right that's what that is and you know i i personally don't see it as this big issue i get

830
01:14:46,872 --> 01:14:53,272
it that it's you know something you can do with bitcoin and it's very cool but i don't think it's

831
01:14:53,272 --> 01:14:59,192
necessary for a company like strategy that's in the u.s trade on the u.s stock exchange big four

832
01:14:59,192 --> 01:15:03,512
auditors that are going in doing audits every single quarter on the largest asset holding

833
01:15:04,232 --> 01:15:08,712
that they have like i just you know this is going to be noisy in the retail community it's not going

834
01:15:08,712 --> 01:15:12,952
to be noisy anywhere else right so the vast majority of their shareholders are not demanding

835
01:15:12,952 --> 01:15:18,792
this from them and i don't think that they're going to make that move so the other thing that

836
01:15:18,792 --> 01:15:24,012
I like is there's been a lot of conversation around whether the market's too saturated

837
01:15:24,012 --> 01:15:30,332
with these types of companies. And what makes me laugh is that you go and you look at, you know,

838
01:15:30,352 --> 01:15:35,452
like the Bitcoin Treasuries website, and you just pull up every company that has over a thousand

839
01:15:35,452 --> 01:15:41,852
Bitcoin and count how many of them are actively pursuing the strategy playbook. And it's like four.

840
01:15:41,852 --> 01:15:51,392
so for us to think that this market is saturated at this point is is hilarious because we've hardly

841
01:15:51,392 --> 01:15:56,612
started what there's like a million strategy has such a runaway advantage at the moment because of

842
01:15:56,612 --> 01:16:01,592
the scale they've achieved but you know you got strategy you know you can count 21 even though

843
01:16:01,592 --> 01:16:06,192
they're not fully rolling yet because that's back all still has to settle and all the companies have

844
01:16:06,192 --> 01:16:12,792
to merge together. So then you've got MetaPlanet, you've got Semmler, keep going down the list.

845
01:16:13,152 --> 01:16:21,652
Fold has done a little bit of it, but not a ton. And that's kind of it. So no, we're not saturated

846
01:16:21,652 --> 01:16:26,092
in this market. There's a lot of room for people to come in and run the Sailor playbook. And there's

847
01:16:26,092 --> 01:16:32,272
a lot of room for people to customize that playbook and do it their own way based on what

848
01:16:32,272 --> 01:16:43,974
fits their business which I think is going to be one of the coolest things to watch emerge But like everyone was saying you don even have to run the playbook if you don want to Just accumulating Bitcoin through your cash flows

849
01:16:43,974 --> 01:16:48,694
is likely to get rewarded by the market as well, because the market's seeing the power of just

850
01:16:48,694 --> 01:16:53,234
having a Bitcoin treasury. And when you watch all the news coming out, you see all these massive

851
01:16:53,234 --> 01:16:58,714
spending bills coming out, and you see that truly nothing stops this train, you're going to want the

852
01:16:58,714 --> 01:17:02,494
companies that have the hard asset balance sheet, right? That's what you're going to want. You're

853
01:17:02,494 --> 01:17:06,954
going to want that digital capital war chest. And that's what investors are going to be looking for.

854
01:17:07,134 --> 01:17:13,054
So I think the biggest cohort we see over the next 12 to 18 months is just going to be exactly that.

855
01:17:13,594 --> 01:17:17,794
Just companies making the move to convert treasuries and converting excess cash flow into

856
01:17:17,794 --> 01:17:22,474
Bitcoin. And I think even those companies are going to get rewarded. It's not quite as active

857
01:17:22,474 --> 01:17:27,854
as some of these other ones for us high octane junkies out here. You know, that's not going to,

858
01:17:27,854 --> 01:17:31,534
probably not going to do it for a lot of our investing needs, but you know, for a lot of people,

859
01:17:31,534 --> 01:17:35,534
it's going to be a big stabilizing factor in a lot of these companies that would otherwise see their

860
01:17:35,534 --> 01:17:42,234
equity prices start to get ground down over time as that asset value erodes. So I think we got a

861
01:17:42,234 --> 01:17:47,654
big wave coming of the more organic style of the Bitcoin treasuries. And my hunch is we still get

862
01:17:47,654 --> 01:17:53,474
another 10 to 20 of these strategy style playbooks that come into the market. So I don't think we're

863
01:17:53,474 --> 01:17:58,774
anywhere near finished seeing capital flow into this. And I think the easy answer with what you're

864
01:17:58,774 --> 01:18:04,534
talking about, Ben, and how proof of reserves applies to that is just put it in your valuation

865
01:18:04,534 --> 01:18:10,634
model. So if you want to compare strategy's price to another Bitcoin treasury's price,

866
01:18:10,914 --> 01:18:18,274
and if you think 400 a share is fair valuation for strategy, but then there's a 1% chance they

867
01:18:18,274 --> 01:18:24,254
don't have the Bitcoin and the price of strategy crashes to 200, okay, there's a 1% chance of a

868
01:18:24,254 --> 01:18:34,214
$200 loss, which is $2. So now your fair valuation model has dropped from 400 to 398 because of proof of reserve risk.

869
01:18:34,374 --> 01:18:40,554
So just stick it in the valuation model and then buy whichever company you think is the most valuable.

870
01:18:41,214 --> 01:18:43,834
Well, and some companies are going to do the proof of reserves, right?

871
01:18:43,954 --> 01:18:49,074
And for the people that are cheering for the proof of reserves, then that's the asset for you to invest in.

872
01:18:49,074 --> 01:18:55,674
Right. I mean, that's the beauty of differentiation in the market is if you don't like the way that strategy does it, you've got other options.

873
01:18:55,674 --> 01:18:59,214
Right. MetaPlanet does proof of reserves. Go invest in MetaPlanet.

874
01:18:59,214 --> 01:19:07,174
Like there's a flavor for everybody. And if that's the level that you need to have to be comfortable making an investment, then you've got choices for that in this space.

875
01:19:07,174 --> 01:19:11,994
So, you know, you don't need to pick a fight with all the other companies that are doing it a different way.

876
01:19:11,994 --> 01:19:16,914
You just vote with your capital and you move your capital to the one that supports your belief system.

877
01:19:16,914 --> 01:19:20,434
and that's great there you go i don't have any issue with people doing proof of reserves i just

878
01:19:20,434 --> 01:19:25,154
personally don't think it's necessary if you've been a part of a big four audit you know you'd

879
01:19:25,154 --> 01:19:30,114
know you'd rather have a spinal tap than go through one of those right so i i just you know

880
01:19:30,114 --> 01:19:35,954
there's proof of reserves happening every quarter i'm not concerned about that but even so if that's

881
01:19:35,954 --> 01:19:40,274
something that's a big sticking point for you you move on to one of the other companies that's doing

882
01:19:40,274 --> 01:19:43,954
that there's a flavor for everybody out there now there you go

883
01:19:43,954 --> 01:19:52,594
Jeff, do you mind if we get into, I have a little document prepared of preferred non-cumulative

884
01:19:54,034 --> 01:20:02,674
equities. Yeah. Preferred non-cumulative preferred stocks. So exactly what STRD

885
01:20:02,674 --> 01:20:08,034
represents for strategy. And they tend to be from banks and utility companies, financial

886
01:20:08,034 --> 01:20:13,074
institutions and utility companies. And the point I'm trying to illustrate here is that it's very

887
01:20:13,074 --> 01:20:18,754
unlikely that strategy will defer on any of these payments and there is like a historical precedent

888
01:20:18,754 --> 01:20:26,434
for that. So General Electric offers a 5% fixed, this one's a little weird, but it was a fixed 5%

889
01:20:26,434 --> 01:20:34,994
between 2016 and 2021. And then it switched to a 300 basis point spread over the LIBOR,

890
01:20:34,994 --> 01:20:39,394
which I don't know what that interest rate is set to. Do you know Ben or Jeff?

891
01:20:39,394 --> 01:20:41,634
That's LIBOR. Yeah.

892
01:20:41,634 --> 01:20:47,954
LIBOR. Yeah. Okay. So that's been the interest rate on this preferred non-cumulative equity

893
01:20:48,594 --> 01:20:54,434
since 2021. So that's been trading since 2016. Bank of America offers a 7.25%

894
01:20:54,994 --> 01:20:59,154
non-cumulative perpetual convertible preferred stock, perpetual convertible. So this is

895
01:20:59,714 --> 01:21:04,994
essentially strike, but it's different in the non-cumulative clause. That's been trading,

896
01:21:04,994 --> 01:21:11,474
x-rated from 2008 to 2017 17 years never missed a payment same with general electric never missed a

897
01:21:11,474 --> 01:21:16,754
payment although the clauses are both non-cumulative like stride and then finally georgia power

898
01:21:16,754 --> 01:21:23,314
utility company they have a 6.5 preferred stock non-cumulative par value of 100 pretty much

899
01:21:23,314 --> 01:21:30,834
exactly the same as strd and it was announced in 2007 and it was redeemed in 2017 10 years

900
01:21:30,834 --> 01:21:34,594
and there was no record of a missed dividend payment. So in all these instances,

901
01:21:34,594 --> 01:21:39,154
it's in the company's best interest to continue paying that dividend while the company stands

902
01:21:39,154 --> 01:21:47,874
in good credit. It's really like a survival feature, right? Like if all hell breaks loose

903
01:21:48,594 --> 01:21:55,874
and for a year, I could not pay the dividend for a year, the price of that instrument is going to

904
01:21:55,874 --> 01:22:01,234
get hammered and the yield is going to rock it the technical yield is going to rock it

905
01:22:01,234 --> 01:22:08,814
but it's a it's a survival feature it's like okay we're going to last another year and figure out

906
01:22:08,814 --> 01:22:14,194
what's going on here so i'm sure it's coming to play on some of these instruments that have gone

907
01:22:14,194 --> 01:22:22,074
bankrupt at a a point in time but you know maybe with your with your research it didn't show up

908
01:22:22,074 --> 01:22:26,654
I looked at the longest standing ones.

909
01:22:26,654 --> 01:22:28,314
So I didn't look at distressed companies.

910
01:22:28,314 --> 01:22:30,494
I just looked at companies that were still in good standing.

911
01:22:30,494 --> 01:22:33,654
So I think the underlying assumption is if you think MSDR will be in good standing in

912
01:22:33,654 --> 01:22:38,314
five, 10 years, you can assume yes to RG dividends will be paid out.

913
01:22:38,314 --> 01:22:39,314
Yeah.

914
01:22:39,314 --> 01:22:42,514
I think one more thing to hit on is the dividend itself, right?

915
01:22:42,514 --> 01:22:46,074
Because you've seen a lot of people running around like, what is the dividend come from?

916
01:22:46,074 --> 01:22:49,474
You know, it's mainly just OG Bitcoiners that don't understand what's going on or don't

917
01:22:49,474 --> 01:22:55,674
understand capital strength or refinancing or how this whole thing is working. But they put a great

918
01:22:55,674 --> 01:23:02,074
slide on this in the presentation as well. The equity ATM uses. So I really like the statistic

919
01:23:02,074 --> 01:23:06,494
that they had here at the bottom, the annual fixed obligations as of today. So their total annual

920
01:23:06,494 --> 01:23:11,854
obligation is $235 million, which is laughable based on how much capital they raised. Because

921
01:23:11,854 --> 01:23:19,774
the year to date this year, the strategy has raised $9.1 billion year to date, primarily through the

922
01:23:19,774 --> 01:23:24,894
MSTR ATM, but through the other instruments as well. So you look at the annual fixed obligations

923
01:23:24,894 --> 01:23:30,814
as a percent of the daily traded volume, the daily traded volume being 5.6 billion. So the annual,

924
01:23:33,054 --> 01:23:39,134
the fixed obligation for the entire year is 4.2% of what the daily traded volume is. So this is

925
01:23:39,134 --> 01:23:43,214
generally not an issue based on how much capital is coming the door and how much stock is being

926
01:23:43,214 --> 01:23:51,614
traded day to day. And as a percentage of the equity raised, it's 0.9%. And as a percentage of

927
01:23:51,614 --> 01:23:58,574
the traded volume, it's 0.02%. So it's the last 12 months traded volume, 0.02%.

928
01:24:00,014 --> 01:24:06,574
So how's the dividend getting paid? It's getting funded by any of the different instruments or the

929
01:24:06,574 --> 01:24:10,974
capital raises that they're utilizing any of the atm instruments any of the convertible debt

930
01:24:10,974 --> 01:24:17,374
instruments and the the ability to raise this raise capital has been very apparent for mstr

931
01:24:18,094 --> 01:24:23,774
as these instruments grow that may be more of a concern at a future point in time but looking at

932
01:24:23,774 --> 01:24:31,374
just the statistics that are available today it is a fraction of you know the capital that they've

933
01:24:31,374 --> 01:24:39,054
raised in a very short time horizon. Cool. All right. So we shift gears. We want to talk about

934
01:24:39,054 --> 01:24:44,014
the Bitcoin conference. I think we've hit these over the head. Yeah. Let's talk about the conference.

935
01:24:44,894 --> 01:24:51,054
Let me take my screen off. Who wants to go first? Takeaways, thoughts, ideas?

936
01:24:52,734 --> 01:24:57,454
You got to get to one of these things. It was the first one that I had ever been to

937
01:24:57,454 --> 01:25:06,594
and just hanging out and arguing about proof of reserves and op return and

938
01:25:06,594 --> 01:25:14,854
store of value versus medium of exchange and just all of the nerd shit that you want to

939
01:25:14,854 --> 01:25:21,974
talk about with people that you just can't and they're just everywhere and you know people that

940
01:25:21,974 --> 01:25:26,774
you you just all you've seen is their profile pic on x or whatever and then they're just across the

941
01:25:26,774 --> 01:25:32,354
table from you. It was, it was, it was freaking amazing. Yeah. What there's supposedly 35,000

942
01:25:32,354 --> 01:25:36,494
people there and went for, it went for three days. It was pretty electric. I mean, there were,

943
01:25:36,594 --> 01:25:42,054
there were tons of people there. Uh, the expo was kind of interesting, uh, you know, walking through

944
01:25:42,054 --> 01:25:47,874
the expo territory. I think there were, I don't know, but probably a hundred companies there,

945
01:25:48,014 --> 01:25:54,854
uh, a bunch of them brand new or, you know, doing weird things, mining, lending, a lot of mining,

946
01:25:54,854 --> 01:26:00,414
model and a lot of mining, a lot of lending and custody solutions were pretty hard in my

947
01:26:00,414 --> 01:26:04,214
opinion to kind of like pick through them and kind of understand what was going on there.

948
01:26:04,214 --> 01:26:09,014
But yeah, it was a, you definitely felt like a real person.

949
01:26:09,014 --> 01:26:10,614
You could talk to anybody, right?

950
01:26:10,614 --> 01:26:15,354
And you would be able to speak the same language, which, you know, if I walked to the coffee

951
01:26:15,354 --> 01:26:22,414
shop over here and talk to them about, you know, strategies, Bitcoin or like cut my custody.

952
01:26:22,414 --> 01:26:27,654
oh i ran into this custody uh you know just trying to figure out my multi-sig you know so they'd be

953
01:26:27,654 --> 01:26:32,194
like what the hell are you talking about and you do feel like a normal person as a bitcoin are

954
01:26:32,194 --> 01:26:38,014
going to these things right and maybe that becomes a little bit more normal uh as these things

955
01:26:38,014 --> 01:26:44,114
continue to grow but yeah it's pretty you got to get doc stacks um comment on the screen about us

956
01:26:44,114 --> 01:26:51,114
getting kicked out of the bar oh yeah we did get kicked out of the bar oh yeah oh my god we had too

957
01:26:51,114 --> 01:26:56,814
many people there. We had a true north, uh, we had a true north meetup and I think we, we posted

958
01:26:56,814 --> 01:27:02,334
about it for, I don't know, a few hours beforehand. And yeah, we got kicked out. There were too many

959
01:27:02,334 --> 01:27:06,914
people that showed up. I think you're a hundred to 150 people showed up at this yard house bar

960
01:27:06,914 --> 01:27:10,394
and they, they just didn't like money. They didn't like money apparently. And they were like, you

961
01:27:10,394 --> 01:27:14,794
got to get out of here. There's people are complaining in the booths and they didn't have

962
01:27:14,794 --> 01:27:18,934
space for us. They told us to sit down and we're like, we're not sitting down. Ended up going to a,

963
01:27:18,934 --> 01:27:23,294
an Irish bar a few places down that had like blackjack flipping.

964
01:27:23,554 --> 01:27:25,474
And it was a ton of fun.

965
01:27:25,594 --> 01:27:28,334
I loved meeting everybody that came through.

966
01:27:28,414 --> 01:27:31,474
Thank you to everybody that came through and had a beer with us and chatted and

967
01:27:31,474 --> 01:27:32,534
took pictures and stuff.

968
01:27:32,634 --> 01:27:35,854
It was just electric running into people.

969
01:27:35,854 --> 01:27:38,574
And it was a little bit more, I guess,

970
01:27:38,634 --> 01:27:44,234
kind of retail focused than what strategy world was a few weeks prior.

971
01:27:44,434 --> 01:27:47,434
So it was a fantastic, phenomenal time.

972
01:27:47,534 --> 01:27:47,754
Yeah.

973
01:27:47,754 --> 01:28:02,274
Yeah, that was like 100% definitely the highlight of the whole conference is meeting other people who are interested in these subjects and who are passionate and engaged because, you know, I feel the same way.

974
01:28:02,274 --> 01:28:12,414
And yeah, it's great to connect with people because, again, like sometimes this could be very isolating when in your real life you don't have people to talk to.

975
01:28:12,414 --> 01:28:35,074
But my biggest takeaway from the conference generally is Bitcoin treasuries were the talk of the town. At least it felt like that to me. It was, in my opinion, by far the largest kind of all-consuming topic within this niche space that is Bitcoin.

976
01:28:35,074 --> 01:28:42,834
and it makes sense i mean sailor has made a splash and you know nakamoto sponsored the thing

977
01:28:42,834 --> 01:28:50,034
and there was just a lot of buzz around it i have to say uh jeff and ben your panel with grain was

978
01:28:50,914 --> 01:28:55,234
you know i'm biased but it was like by far the most interesting electric panel of the

979
01:28:55,234 --> 01:29:01,234
whole conference and and you know they're standing room only they needed a bigger room

980
01:29:01,234 --> 01:29:08,014
um it was like a football field line out the door apparently yeah yeah there's there's a line out the

981
01:29:08,014 --> 01:29:16,834
door but i that's on youtube right not yet no not yet no okay well they need to get it up yeah we

982
01:29:16,834 --> 01:29:21,754
reached out about it today we'll hopefully get it out there yeah i didn't realize they were actually

983
01:29:21,754 --> 01:29:26,474
that they shut the doors and people couldn't get into it i didn't realize that part of it that was

984
01:29:26,474 --> 01:29:33,634
kind of crazy. But in our panel, because we're an internet group, we can just have more fun with it.

985
01:29:33,634 --> 01:29:38,994
I think you go to these conferences and everyone gets up on stage and they try to be really serious

986
01:29:38,994 --> 01:29:44,374
and take themselves super serious while they're discussing this. And then here's our True North

987
01:29:44,374 --> 01:29:51,274
group up there just having a blast, happy to be here. It was a ton of fun. And Richard's an

988
01:29:51,274 --> 01:29:56,074
awesome guy. Before we got on stage, I'm back there pitching him like, you know, you're doing

989
01:29:56,074 --> 01:30:01,834
cool things but what would be really cool is if you were in true north we're just telling him i'm

990
01:30:01,834 --> 01:30:06,394
trying to get the group i mean so we're just having fun i mean it was it was a blast even

991
01:30:06,394 --> 01:30:11,034
you know before we went up there we were all just chatting having a great time so i think people

992
01:30:11,034 --> 01:30:19,194
pick up on that and you know because this is such a community focused show they get to kind of be

993
01:30:19,194 --> 01:30:22,714
involved right because it's one of those things where they followed along with us i mean this is

994
01:30:22,714 --> 01:30:27,674
what episode 28 which actually always surprises me that it's that low because it feels like we've

995
01:30:27,674 --> 01:30:31,914
been doing this forever already but people have gotten to know us they've gotten to know our

996
01:30:31,914 --> 01:30:37,914
personalities already i mean we talk enough that this is just who we are in real life too so

997
01:30:37,914 --> 01:30:43,194
conversations come easy with everyone because we're so interested in all the same things i mean

998
01:30:43,194 --> 01:30:48,234
it's just a blast i showed up at the the happy hour jeff had already called it tonight or he was

999
01:30:48,234 --> 01:30:53,834
trying to you know double up his stack on the craps table or something by that time but i showed up at

1000
01:30:53,834 --> 01:30:59,514
11 i don't know 11 15 11 30 something like that and there was still yeah we were there people in

1001
01:30:59,514 --> 01:31:05,194
there still i mean some people are still going man and uh it's just so cool when you've got that type

1002
01:31:05,194 --> 01:31:09,834
of a of a community built up out there where everyone's just out having a blast you know you

1003
01:31:09,834 --> 01:31:15,354
get these few times a year where people can really get together and get to know each other and talk

1004
01:31:15,354 --> 01:31:17,134
and that's what makes these events fun.

1005
01:31:17,254 --> 01:31:18,634
I think it's as much about the things

1006
01:31:18,634 --> 01:31:21,814
that happen outside of the event as the event itself.

1007
01:31:22,534 --> 01:31:24,874
I mean, you just get so much quality interaction

1008
01:31:24,874 --> 01:31:28,274
in a space that we're all diehards in,

1009
01:31:28,354 --> 01:31:30,014
but most of the world just shrugs

1010
01:31:30,014 --> 01:31:31,574
and has no idea what we're talking about.

1011
01:31:32,294 --> 01:31:34,894
Like when you're in a place with 35,000 people there

1012
01:31:34,894 --> 01:31:36,674
for the same thing, you're not the weird one anymore.

1013
01:31:37,454 --> 01:31:39,174
We're the only normal ones in town.

1014
01:31:39,254 --> 01:31:41,514
And I say that loosely because I was walking back

1015
01:31:41,514 --> 01:31:43,214
from the bar and I was following a crowd

1016
01:31:43,214 --> 01:31:44,294
dressed up like wizards.

1017
01:31:44,294 --> 01:31:49,194
So, you know, they were the Bitcoin people from one of the parties going on.

1018
01:31:49,194 --> 01:31:51,874
And I can only imagine what that looks like to everyone else.

1019
01:31:51,874 --> 01:31:53,494
But to me, it hardly even registered.

1020
01:31:53,494 --> 01:32:07,076
So I guess that shows where we at in the cycle Here how your panel that you guys did with Richard Byworth there was a panel right before that that was also about running the MSTR playbook

1021
01:32:07,156 --> 01:32:08,036
but in other countries.

1022
01:32:08,676 --> 01:32:11,716
And they had a guy from India, a guy from France, a guy from China.

1023
01:32:12,756 --> 01:32:14,536
And I'm like, you know what, I'm going to go to that

1024
01:32:14,536 --> 01:32:16,756
and see what they talk about compared to what you guys talk about.

1025
01:32:17,096 --> 01:32:19,256
But also because I wanted to get a seat.

1026
01:32:19,256 --> 01:32:21,176
I wanted to get a good seat.

1027
01:32:21,176 --> 01:32:25,716
so i'm standing in the back and i'm waiting after that one ended and i'm waiting for everybody to

1028
01:32:25,716 --> 01:32:31,856
get up and leave so i could take a seat and fucking almost nobody got up to leave and i was

1029
01:32:31,856 --> 01:32:37,836
like they all had the same idea they were just getting there early for your guys's panel and i

1030
01:32:37,836 --> 01:32:42,936
was like holy crap nobody got up to leave i was so mad i had like squeeze in real quick i saw an

1031
01:32:42,936 --> 01:32:47,336
empty spot and i snuck in and got a seat yeah it was wild people were like sitting on the floor

1032
01:32:47,336 --> 01:32:48,676
Yeah, it was like crisscross.

1033
01:32:48,696 --> 01:32:49,536
They were lined up.

1034
01:32:49,656 --> 01:32:50,436
It's like totally nuts.

1035
01:32:51,216 --> 01:32:51,376
Yeah.

1036
01:32:52,136 --> 01:32:55,316
And Ben, to your comment, it's so funny.

1037
01:32:55,416 --> 01:33:01,436
I mean, one of the comments that almost everybody led with was, I feel like I know you, but you don't know me.

1038
01:33:01,656 --> 01:33:04,736
And it's like almost everybody led with that, which is just so funny.

1039
01:33:04,836 --> 01:33:06,296
It's like you're meeting all of these people.

1040
01:33:07,316 --> 01:33:10,236
It's a very, very humbling experience.

1041
01:33:10,676 --> 01:33:14,456
You know, we just talk about Bitcoin finance.

1042
01:33:14,456 --> 01:33:17,676
This is the biggest story in all of finance, to be fair.

1043
01:33:18,196 --> 01:33:22,116
So, you know, I get that there's a lot of attention on it.

1044
01:33:22,656 --> 01:33:29,516
But it does feel like Bitcoin market is evolving, right?

1045
01:33:29,616 --> 01:33:32,916
I mean, at the Bitcoin conference, it was very clear that big finance was there, right?

1046
01:33:32,976 --> 01:33:38,476
Like in the backstage whale area, you know, capital providers everywhere.

1047
01:33:38,476 --> 01:33:44,156
You know, I ran into people that were in all of the pipe deals for the Bitcoin treasury companies.

1048
01:33:44,156 --> 01:33:53,516
I ran into CFOs. I ran into convertible bond arb traders. I ran into CEOs of custody companies.

1049
01:33:53,516 --> 01:33:58,636
It was very clear that there were like bankers, right? Bankers were there. And it was very clear

1050
01:33:58,636 --> 01:34:09,416
that this is evolving into a new system that includes the traditional financial market landscape.

1051
01:34:09,416 --> 01:34:11,976
and all of these people are seeing opportunity in this market.

1052
01:34:12,756 --> 01:34:17,036
And there's capital coming in the door from that perspective.

1053
01:34:17,316 --> 01:34:18,836
It's going to get bigger, right?

1054
01:34:19,096 --> 01:34:22,556
There's thousands, believe it or not,

1055
01:34:22,776 --> 01:34:25,356
there are thousands of very smart people

1056
01:34:25,356 --> 01:34:26,836
in the traditional financial world

1057
01:34:26,836 --> 01:34:28,376
that have not figured out Bitcoin yet.

1058
01:34:28,836 --> 01:34:30,456
And when they do figure out Bitcoin,

1059
01:34:30,936 --> 01:34:31,936
they're going to be here

1060
01:34:31,936 --> 01:34:34,836
and they're going to be putting their foot on the gas

1061
01:34:34,836 --> 01:34:36,296
because they're going to have access to capital

1062
01:34:36,296 --> 01:34:38,356
and they're going to be doing the same stuff.

1063
01:34:38,356 --> 01:34:46,416
And this is going to get so much bigger because success breeds more success and people will follow success.

1064
01:34:47,196 --> 01:34:49,296
And we're seeing it now with strategy, right?

1065
01:34:49,316 --> 01:34:52,776
And I think that's why we're seeing Bitcoin treasury companies pop up.

1066
01:34:52,836 --> 01:35:02,156
We see a couple of these companies like Nakamoto and ASST, Strive, raising, you know, $700 million in a couple of weeks, which is just crazy.

1067
01:35:02,296 --> 01:35:06,816
That's just a crazy amount of money to be able to raise in a very small time period, right?

1068
01:35:06,816 --> 01:35:15,016
If you were like a startup biotech and you wanted to go raise $700 million, it might take you years.

1069
01:35:16,956 --> 01:35:23,516
And that just shows you the scale of the opportunity of people that are trying to dive into this landscape right now.

1070
01:35:23,696 --> 01:35:25,936
So a lot of opportunity.

1071
01:35:26,216 --> 01:35:27,396
The landscape is evolving.

1072
01:35:28,036 --> 01:35:30,556
It's becoming very different than I think it was in the past.

1073
01:35:30,556 --> 01:35:37,136
a little bit less crypto anarchist and shifting into portfolio managers and bankers and people

1074
01:35:37,136 --> 01:35:42,036
chasing TradFi opportunities. I did also appreciate that there were some people that

1075
01:35:42,036 --> 01:35:47,416
said we shouldn't be there because, you know, we cover MSTR and not Bitcoin. That made me laugh.

1076
01:35:47,956 --> 01:35:53,676
I love that we have all sides of the coin, you know, it's fun. Yeah, but this is important,

1077
01:35:53,916 --> 01:35:58,716
right? This is super important, right? We're talking about the single largest buyer

1078
01:35:58,716 --> 01:36:08,536
of Bitcoin in the entire market and how they're restructuring the capital environment.

1079
01:36:09,036 --> 01:36:14,736
We have a yield curve on Bitcoin now, like a capital yield curve on Bitcoin.

1080
01:36:15,416 --> 01:36:18,916
And you're going to be able to compare that yield curve to other yield curves or the US

1081
01:36:18,916 --> 01:36:25,876
treasury yield curve. That's just like totally reframing how the entire market will operate.

1082
01:36:25,876 --> 01:36:31,976
and yeah it'll take a while and it'll change but i mean this is this is just going to get so much

1083
01:36:31,976 --> 01:36:38,336
crazier well that's the thing with bitcoin right i mean you know bitcoin isn't owned by any one

1084
01:36:38,336 --> 01:36:44,516
person it's got released to the world the world gets to decide how bitcoin's utilized so even

1085
01:36:44,516 --> 01:36:48,256
though you've got a lot of the purists and you got a lot of the ogs that were there at the beginning

1086
01:36:48,256 --> 01:36:55,856
like you can have an idea but the market dynamics are going to win and the people and the people

1087
01:36:55,856 --> 01:37:00,016
the capital that are transferring and siphoning that capital into bitcoin are going to ultimately

1088
01:37:00,016 --> 01:37:05,616
decide what it looks like i mean that's what markets do so you need all conversations that

1089
01:37:05,616 --> 01:37:09,536
are there even the ones that you know people don't like whether that's ours or other ones

1090
01:37:09,536 --> 01:37:13,616
right i'm sure there's plenty of conversations that a lot of us you know wouldn't have thought

1091
01:37:13,616 --> 01:37:18,816
needed to happen there but you know so what right that's what the ecosystem is it's broad everyone

1092
01:37:18,816 --> 01:37:22,976
gets to pick their flavor now figure out how bitcoin becomes a part of your life and what's

1093
01:37:22,976 --> 01:37:27,736
important is that Bitcoin does become a part of your life. That's what you need to happen at the

1094
01:37:27,736 --> 01:37:33,396
end of the day. So everyone makes that journey their own way. But recently, it seems like a

1095
01:37:33,396 --> 01:37:37,116
massive top of funnel for people getting orange filled is coming through the equities market.

1096
01:37:37,996 --> 01:37:42,216
And that's a massive service to Bitcoin because that's how people are finding spot Bitcoin

1097
01:37:42,216 --> 01:37:46,416
holdings and taking them into self-custody and really going down the rabbit hole. So

1098
01:37:46,416 --> 01:37:52,856
it's a different phase of marketing for Bitcoin. It's not just happening. And Reddit,

1099
01:37:52,976 --> 01:37:58,176
chats and 4chan and you know the deep corners of the web anymore it's mainstream and people are

1100
01:37:58,176 --> 01:38:01,856
making a ton of money in the equities market and then they're going man now i got to figure out

1101
01:38:01,856 --> 01:38:05,456
where to put some of this money you know what asset should i be saving this in and then you

1102
01:38:05,456 --> 01:38:09,856
go down the bitcoin rabbit hole next thing you know you're buying hardware wallets from every

1103
01:38:09,856 --> 01:38:14,256
provider you can find and you're nerding out in your basement and starting nodes and running minors

1104
01:38:14,256 --> 01:38:19,056
and doing everything bitcoin has to offer so whether people like it or not bitcoin treasury

1105
01:38:19,056 --> 01:38:24,656
companies are here to stay and they're doing a huge amount of orange billing in the retail investor

1106
01:38:24,656 --> 01:38:31,456
community and i think that's a net positive for this whole space i went to the dentist today and

1107
01:38:32,176 --> 01:38:38,256
they were talking they know that i'm like a a bitcoin influencer and they're like what's going

1108
01:38:38,256 --> 01:38:44,176
on with the bitcoin like i still don't get it and i was like just buy strk my financial non-financial

1109
01:38:44,176 --> 01:38:49,776
advice to just buy strk you know you got upside and downside protection and uh it was just it was

1110
01:38:49,776 --> 01:38:53,616
easy to say that it's like okay here's a ticker right like go to your brokerage account and like

1111
01:38:53,616 --> 01:38:58,496
you can access this ticker and uh to your point ben i mean it's just getting you got to meet the

1112
01:38:58,496 --> 01:39:04,016
investors where they are right like fixed income investors aren't going to go buy bitcoin bitcoin

1113
01:39:04,016 --> 01:39:07,536
was just thought fixed income investors were just going to go buy bitcoin because it's better

1114
01:39:07,536 --> 01:39:12,736
well no it's not going to happen right like they can't they like literally can't because they have

1115
01:39:12,736 --> 01:39:18,176
liabilities come up coming up on the horizon they like literally couldn't but now i'll just i i use

1116
01:39:18,176 --> 01:39:22,896
this analogy a little bit earlier like imagine a fisher a fisherman in the middle of the ocean

1117
01:39:22,896 --> 01:39:30,096
going fishing for halibut right halibut live on the bottom like the sea floor right um trying to

1118
01:39:30,096 --> 01:39:36,016
get a uh a fixed income investor to buy bitcoin is like having a fish hook like hanging on the top of

1119
01:39:36,016 --> 01:39:40,896
the water in the ocean it's like yeah a halibut's never going to come to the top and buy the fish

1120
01:39:40,896 --> 01:39:46,256
hook you need to drop the fish hook all the way down to the bottom so you can catch the halibut

1121
01:39:46,256 --> 01:39:51,216
and bring it all the way back up to the top and like that's what the fixed income products that

1122
01:39:51,216 --> 01:39:55,216
mstr is creating are providing it's like you got to meet the investors where they are you

1123
01:39:55,216 --> 01:40:00,256
got to create the products that they can consume in the wrapper that they they are used to in order

1124
01:40:00,256 --> 01:40:05,056
to get these people in the door that's ibid that's mstr that's all these bitcoin treasury products

1125
01:40:05,056 --> 01:40:12,096
it's strk strd strf right like all of these instruments are created to hit and and meet

1126
01:40:12,096 --> 01:40:17,216
the investors where they are and that's the that's the real unlock of what's happening it's like

1127
01:40:17,216 --> 01:40:26,096
it's like translating bitcoin right it's it's translating bitcoin into a a language into a risk

1128
01:40:26,096 --> 01:40:32,096
framework into the that they that they can understand that's accessible and that feels

1129
01:40:32,096 --> 01:40:41,156
comfortable yeah language I had read the the release on STRD three times through

1130
01:40:41,156 --> 01:40:47,596
and I'm still like still trying to figure it out and my wife's like well you

1131
01:40:47,596 --> 01:40:53,276
know well what do you what are you so you know why so obsessed with this right

1132
01:40:53,276 --> 01:40:56,856
now you don't mean I'm like this is our job like we have to we have to figure

1133
01:40:56,856 --> 01:40:59,816
this out if I'm if I'm gonna explain this to somebody else I have to

1134
01:40:59,816 --> 01:41:03,556
understand it. And so I'm still talking to her about it as we're boarding the plane.

1135
01:41:04,256 --> 01:41:09,856
And as I'm talking about how they're offering this dividend, but they can just not pay the

1136
01:41:09,856 --> 01:41:14,656
dividend if the board votes in a certain way or whatever, I can visibly see the guy in front of

1137
01:41:14,656 --> 01:41:19,636
me getting interested. And he starts like turning around, even though we're going this way, he starts

1138
01:41:19,636 --> 01:41:24,776
turning around to face me. And he's like, oh yeah, they do that all the time. All of these dividend

1139
01:41:24,776 --> 01:41:32,716
you know offerings they'll just they put that clause in there just in case and you know i was

1140
01:41:32,716 --> 01:41:37,236
like man i should really just launch into like my orange killing moment you know at this point but

1141
01:41:37,236 --> 01:41:42,776
it was just kind of cool because talking about this type of product this guy was super interested

1142
01:41:42,776 --> 01:41:48,516
in and there's no way in hell he's ever has the slightest idea what bitcoin is so it was cool

1143
01:41:48,516 --> 01:41:54,376
exactly what you're saying is just attracting uh you know people to the products

1144
01:41:54,376 --> 01:42:00,536
Yeah, the chasm is too big, right? You got to shrink the chasm, make it just easy to jump across,

1145
01:42:01,736 --> 01:42:06,536
which is just crazy to think about. But I mean, you got to meet the people where they are. And

1146
01:42:06,536 --> 01:42:12,056
that's what's evolving in the market. Shall we shift gears and talk about BTC treasury companies

1147
01:42:12,056 --> 01:42:17,096
just a little bit more broadly? Because there are a lot hitting the marketplace. And I think a lot

1148
01:42:17,096 --> 01:42:22,536
of people are asking questions on how to do these things. We kind of speak broadly on this kind of

1149
01:42:22,536 --> 01:42:29,416
merger ARB concept, without going into details on any one of these, because we don't want to get

1150
01:42:29,416 --> 01:42:39,016
into any legal ramifications. But there's these opportunities where investors have the ability to

1151
01:42:39,016 --> 01:42:44,456
invest in these Bitcoin treasury companies pre-IPO. So these Bitcoin treasury companies,

1152
01:42:45,816 --> 01:42:50,856
they're getting access to the publicly traded market and they want access to the publicly

1153
01:42:50,856 --> 01:42:56,036
traded market. So they have access to these different capital environments, right? They want

1154
01:42:56,036 --> 01:43:01,656
access to the passively traded index fund ETFs. They want access to the convertible bond market.

1155
01:43:01,896 --> 01:43:06,476
They want access to an ATM. They want access to create preferred shares, do all of those things.

1156
01:43:06,756 --> 01:43:11,796
And the best way to do that is as a publicly traded company, that's highly liquid, right?

1157
01:43:11,796 --> 01:43:15,776
If you've got a really highly liquid asset that you're holding on balance sheet, it's great to

1158
01:43:15,776 --> 01:43:22,676
have it in a publicly traded wrapper. So you can have a highly liquid publicly traded instrument.

1159
01:43:23,676 --> 01:43:26,876
So a lot of these companies are going out to market and raising capital very quickly

1160
01:43:26,876 --> 01:43:37,796
to either go like reverse merger or SPAC, special purpose acquisition vehicle,

1161
01:43:38,636 --> 01:43:44,196
special purpose acquisition corporation. There it is. And they are able to take these private

1162
01:43:44,196 --> 01:43:48,696
companies and make them public in a short timeframe. So that's the reason for a SPAC.

1163
01:43:48,816 --> 01:43:54,336
That's a reason for a reverse merger. And the capital that's coming in the door via Pipe,

1164
01:43:54,336 --> 01:44:03,216
this is a private investment in a public equity, is accessing or providing capital to these

1165
01:44:03,216 --> 01:44:10,656
companies so they can go IPO. And when the companies merge, when there's this private

1166
01:44:10,656 --> 01:44:16,716
company merges with the public company, all of the shares and all of that capital is now liquid

1167
01:44:16,716 --> 01:44:21,876
in the market. So you've effectively got two companies and generally the company that's

1168
01:44:21,876 --> 01:44:28,576
already public is like a very small company. It's just a shell of a company that's small in size,

1169
01:44:28,696 --> 01:44:33,796
small in scale. And you have a lot of capital coming from these private companies. And now

1170
01:44:33,796 --> 01:44:38,016
you take this really small company and make it a really big company. So what's happening is,

1171
01:44:38,016 --> 01:44:48,356
You know, some of the small pieces of these companies, it only represents, you know, maybe one to 5% of what may actually be trading within the market.

1172
01:44:48,816 --> 01:44:54,236
Once these deals do close and all of the capital is potentially trading in the market.

1173
01:44:55,456 --> 01:44:56,276
Pause there.

1174
01:44:56,876 --> 01:44:58,456
Any guys want to add on to that?

1175
01:44:58,456 --> 01:45:14,896
Yeah, I would just say with these target companies for reverse takeovers, typically what's happening is you see a lot of this in the medical space where they might have been going through something like clinical trials and then they didn't get through the clinical trials.

1176
01:45:14,896 --> 01:45:16,996
So now the business is effectively dead.

1177
01:45:17,416 --> 01:45:21,216
But what's really valuable about that is that it's a publicly traded entity.

1178
01:45:21,216 --> 01:45:23,476
They have a reporting history with the SEC.

1179
01:45:23,476 --> 01:45:26,176
They have shelf filings that are available to them.

1180
01:45:26,476 --> 01:45:31,956
And that's what makes it a really expedited way for a private company to get public and

1181
01:45:31,956 --> 01:45:35,096
to have access to everything that comes with being a public company.

1182
01:45:35,536 --> 01:45:41,176
Going through a SPAC process, usually it takes a little bit longer, probably seven to nine

1183
01:45:41,176 --> 01:45:45,656
months, you know, to get that fully closed and to get into the markets and to start opening up all

1184
01:45:45,656 --> 01:45:50,176
the products that you need. So that's a little slower. And then an IPO, you know, comes with its

1185
01:45:50,176 --> 01:45:54,136
own headaches. So a lot of people are going to RTO right now because it's the faster way

1186
01:45:54,136 --> 01:46:01,256
to get into the market. And because of that, you're seeing a huge amount of activity. And

1187
01:46:01,256 --> 01:46:05,436
when you're merging into these small companies, you know, they're usually nano caps that people

1188
01:46:05,436 --> 01:46:10,496
are looking for. So it's, you know, it could be companies with less than a $10 million market cap,

1189
01:46:10,496 --> 01:46:15,236
but they might be already listed on NYSE or NASDAQ or one of the big exchanges, which is a

1190
01:46:15,236 --> 01:46:20,696
huge advantage for all of these companies. So when the private company merges in to the public

1191
01:46:20,696 --> 01:46:27,316
company, the private company becomes the surviving entity of that merger. Typically, they'll take over

1192
01:46:27,316 --> 01:46:32,576
the ticker symbol, they'll take over the corporation, and then the stock will get split up

1193
01:46:32,576 --> 01:46:39,876
however they agree to do that merger. It might be that the public entity gets 5% and 95% is

1194
01:46:39,876 --> 01:46:44,656
the private company that merged in. But what you're seeing in the Bitcoin space is you're

1195
01:46:44,656 --> 01:46:52,276
seeing reverse mergers tied together with pipes, which take a couple of forms. It's usually an

1196
01:46:52,276 --> 01:46:58,016
equity deal where private investors are buying equity before this merger happens. And so that

1197
01:46:58,016 --> 01:47:04,476
gets done at a predefined price. And then usually there's like a convertible bond that's also

1198
01:47:04,476 --> 01:47:09,496
associated with the same transaction. So it's usually like a dual transaction, one parts equity,

1199
01:47:09,496 --> 01:47:25,418
one parts debt And a lot of times that convert still converts after the pipe is done in the public or the company public So that what you seeing happen a lot And I just kind of tossed that grenade out there on Twitter the other day and didn realize how

1200
01:47:25,418 --> 01:47:32,338
many messages I was going to get about that one. But there's a market for everything and there's

1201
01:47:32,338 --> 01:47:39,258
traders around everything. And one of those is merger arbitrage. And what merger arbitrage is

1202
01:47:39,258 --> 01:47:46,298
at the simplest of levels is investors come in and they invest in the pipe. So they've got shares

1203
01:47:46,298 --> 01:47:51,018
coming to them and they know how many shares are coming to them. You get these announcements in the

1204
01:47:51,018 --> 01:47:56,998
market, the stocks skyrocket. And then these guys that have allocations in the pipe will go out and

1205
01:47:56,998 --> 01:48:03,038
try to find shares to short so that they can lock in that gain and they'll close out that short when

1206
01:48:03,038 --> 01:48:08,038
their shares are delivered to them. So at the most basic level, you can think of that as merger

1207
01:48:08,038 --> 01:48:12,958
arbitrage, right? They're taking that difference between the pipe investment and what the market

1208
01:48:12,958 --> 01:48:17,218
reaction is to these. And what you've seen is those market reactions can be significant, right?

1209
01:48:17,218 --> 01:48:24,138
1,500, 2,000%, pretty good gain. The hard part is you can't always find the shares because there's

1210
01:48:24,138 --> 01:48:29,298
low float on the public entity, right? These aren't big companies with a lot of trading volume,

1211
01:48:29,298 --> 01:48:34,598
so you can't always get that short leg of the trade through direct short. So you might have to

1212
01:48:34,598 --> 01:48:39,918
go to things like total return swaps if you can get them, right? Let someone else go try to source

1213
01:48:39,918 --> 01:48:44,918
the shares on your behalf. You might be able to do it through forward sale agreements on the shares

1214
01:48:44,918 --> 01:48:48,378
you've got locked up in the pipe. You might be able to do it with derivatives. You might be able

1215
01:48:48,378 --> 01:48:55,038
to do it with basket hedges. I mean, there's all kinds of ways that these guys will use to try to

1216
01:48:55,038 --> 01:48:59,978
get that short leg exposure on this to lock in their gain. But it's just something to start being

1217
01:48:59,978 --> 01:49:05,658
aware of when you're seeing a lot more of these coming into market because it explains some of the

1218
01:49:05,658 --> 01:49:10,058
activity that happens out there in the equities. So the same way that we got used to things like

1219
01:49:10,058 --> 01:49:14,958
the pricing periods of convertible bonds, and all of a sudden that became an edge because people,

1220
01:49:15,318 --> 01:49:19,958
even after a long time of these happenings, still didn't understand that during those pricing

1221
01:49:19,958 --> 01:49:24,458
periods, there was a huge amount of shorting that was going on. And so those prices were getting

1222
01:49:24,458 --> 01:49:28,438
driven down so you could make short-term trades around the pricing periods that could be pretty

1223
01:49:28,438 --> 01:49:34,598
profitable for you. Now you're going to get some of the same things with mergers. And every merger

1224
01:49:34,598 --> 01:49:38,398
is going to be different. So they're all going to have different structures. They're going to have

1225
01:49:38,398 --> 01:49:41,978
different lockup periods. They're going to have different merger prices. They're going to have

1226
01:49:41,978 --> 01:49:47,458
all kinds of different nuance to them. So the intent when I threw that out there was not to,

1227
01:49:47,458 --> 01:49:52,818
you know, get people to start panicking about mergers or speculate on my investments because

1228
01:49:52,818 --> 01:49:57,738
I'm not trading anything around any of these mergers. So, you know, I'm not in this market,

1229
01:49:57,738 --> 01:50:03,838
But it's just something to be aware of because now we've got a new category of investor that's coming in.

1230
01:50:04,078 --> 01:50:11,378
And there's a lot of capital that's looking to get into these pipe deals because you're getting pricing effectively before they become public and they get that premium on them.

1231
01:50:11,478 --> 01:50:14,418
So there's a huge amount of capital and demand there.

1232
01:50:14,678 --> 01:50:20,138
You saw it with the Trump announcement and all the money that they raised.

1233
01:50:20,578 --> 01:50:26,478
And now you're seeing a lot of these follow-on investments happening and the size of the capital is just huge.

1234
01:50:26,478 --> 01:50:29,838
So with big capital comes big arbitrage opportunities.

1235
01:50:30,618 --> 01:50:32,758
And it's just something to start watching.

1236
01:50:32,958 --> 01:50:35,838
This retail community is going to have to get smart around these,

1237
01:50:36,238 --> 01:50:38,898
start watching the movements, try to figure out what's happening,

1238
01:50:39,078 --> 01:50:41,138
watch the short interest as it's opening up.

1239
01:50:41,758 --> 01:50:46,258
And these are going to be one of the tools you can use to explain what's going on.

1240
01:50:46,278 --> 01:50:47,498
And after we see a few of these,

1241
01:50:47,538 --> 01:50:51,398
we might start to see some patterns that become actionable as investments.

1242
01:50:51,398 --> 01:50:53,458
So that was the intent of me,

1243
01:50:53,678 --> 01:50:55,998
throwing that grenade over the wall and then going to sleep.

1244
01:50:56,478 --> 01:50:58,918
And then saying that Dan and Jeff would figure it out later.

1245
01:51:01,078 --> 01:51:05,438
You know, that was all I was doing was trying to just make people aware that this is a thing.

1246
01:51:06,218 --> 01:51:07,598
Merger arbitrage is very big.

1247
01:51:07,658 --> 01:51:11,038
It was kind of dead for a while because there wasn't a lot of mergers happening like this.

1248
01:51:11,498 --> 01:51:15,898
But all of a sudden now with all these reverse mergers happening, it's going to be back.

1249
01:51:15,898 --> 01:51:17,318
And it's going to be back in a big way.

1250
01:51:17,438 --> 01:51:20,238
So it's just a new concept for investors to get smart about.

1251
01:51:20,238 --> 01:51:40,638
There's a lot of speculation premium that's slammed into these tiny nano market cap companies right away. And that's the ARB, right? The ARB is this unknown element of what is the company worth. And that's what everybody's trying to figure out. That's what the speculation is trying to figure out.

1252
01:51:40,638 --> 01:52:02,538
And that's what some of the investors are interested in. They're interested in what the valuation is in the marketplace and getting a liquidity on initial investment. I mean, these documents are very long. Go look at some of the SEC. They're all SEC filings. You can go look at all of them. They're incredibly complicated, incredibly in-depth.

1253
01:52:02,538 --> 01:52:10,578
there's a reason I haven't spent a ton of time on them is because they are very very complicated

1254
01:52:10,578 --> 01:52:16,298
there's a lot of kind of froth that I think happens around them and I prefer to let something

1255
01:52:16,298 --> 01:52:19,898
personally I prefer to let something start to trade in the market a little bit more

1256
01:52:19,898 --> 01:52:25,038
you know deal once the deal closes once there's more transparency on bitcoin held

1257
01:52:25,038 --> 01:52:30,298
things like that in order to you know have an understanding of the valuation of the company

1258
01:52:30,298 --> 01:52:42,078
Like for me, I love strategy because of the transparency and understanding what a valuation metric may be based on, you know, the Bitcoin that they hold, that they hold on the balance sheet and the math that sits behind it.

1259
01:52:42,178 --> 01:52:48,018
So by far and away, my absolute largest position in the entire, in my entire portfolio.

1260
01:52:51,658 --> 01:52:52,138
Cool.

1261
01:52:52,498 --> 01:52:55,298
That's kind of, that's kind of all I had on the agenda here.

1262
01:52:56,138 --> 01:52:57,358
Should we talk moon math?

1263
01:52:57,358 --> 01:53:02,358
I updated my original spreadsheet on MNAVs for MSTR.

1264
01:53:04,118 --> 01:53:05,118
Might be something good to end on.

1265
01:53:05,118 --> 01:53:06,358
People have asked for it a lot.

1266
01:53:07,358 --> 01:53:08,478
Should we hit it?

1267
01:53:08,478 --> 01:53:09,478
Yeah.

1268
01:53:09,478 --> 01:53:12,198
As long as you don't listen to MNAVs for a three.

1269
01:53:13,478 --> 01:53:16,598
I have, we can go through it.

1270
01:53:16,598 --> 01:53:19,758
I have MNAV up to 40, just in case anybody wants that

1271
01:53:19,758 --> 01:53:22,138
with Bitcoin price up to a million.

1272
01:53:22,138 --> 01:53:24,758
So just throwing out some moon math

1273
01:53:24,758 --> 01:53:26,718
in case the market just decides to repress.

1274
01:53:26,718 --> 01:53:27,818
Kind of bearish, Jeff.

1275
01:53:28,558 --> 01:53:33,918
Yeah, MNIV 40, Bitcoin a million.

1276
01:53:34,718 --> 01:53:37,998
MNIV 40, Bitcoin a million, MSCR trading at $81,000.

1277
01:53:38,358 --> 01:53:40,778
Yeah, that would be pretty crazy.

1278
01:53:41,278 --> 01:53:43,278
But, hey, anything's possible.

1279
01:53:43,278 --> 01:53:49,678
You look at how frothy some of the MAG-7 valuations are, the PE multiples.

1280
01:53:50,518 --> 01:53:56,678
You look at their multiple of book value, and you start to reflect on the comparison.

1281
01:53:56,718 --> 01:54:02,898
of the two, right? Like in my opinion, and I've tweeted about this, is like digital capital is the

1282
01:54:02,898 --> 01:54:09,178
final frontier, right? Like all of the mag seven companies, where do they store their value?

1283
01:54:10,298 --> 01:54:15,378
Right. All the, all the earnings that they have every year, where does it go? Like,

1284
01:54:15,398 --> 01:54:22,538
what do they do with it? And the answer is they do stock buybacks or they invest in R and D

1285
01:54:22,538 --> 01:54:26,858
or they hold it in cash for a future point in time or they dividend it out.

1286
01:54:27,258 --> 01:54:29,738
And now you have another option.

1287
01:54:30,018 --> 01:54:31,058
You can buy Bitcoin with it.

1288
01:54:31,818 --> 01:54:36,758
And if the market starts to shift to like what, you know, how do you value this company?

1289
01:54:36,858 --> 01:54:41,318
Well, it's a function of how much Bitcoin you have and how much Bitcoin you can continue

1290
01:54:41,318 --> 01:54:42,078
to have into the future.

1291
01:54:42,198 --> 01:54:45,238
And if all of these AI companies that are at the top of the publicly traded leaderboard

1292
01:54:45,238 --> 01:54:52,098
start, you know, using Bitcoin as their store of value, then that just makes everything

1293
01:54:52,098 --> 01:54:57,458
kind of grow and that puts strategy into this new stratosphere of potential valuation. So

1294
01:54:57,458 --> 01:55:03,278
I think anything can happen. And I still think, you know, like I do think the rest of the equity

1295
01:55:03,278 --> 01:55:10,818
market is probably mispriced. And I do think that strategy is also undervalued and underpriced.

1296
01:55:11,958 --> 01:55:17,378
So is the MNAV of 40 possible? I think there's a probability, there's a probabilistic scenario

1297
01:55:17,378 --> 01:55:23,838
greater than zero that it could happen. So that's why I put it out here. But even just looking at,

1298
01:55:23,898 --> 01:55:30,418
you know, some people talking about 150,000 to 250,000 Bitcoin price in 2025, or I think Tom Lee

1299
01:55:30,418 --> 01:55:37,938
threw out well above 200,000 in 2025 on CNBC the other day. So let's just say 250,000 based on

1300
01:55:37,938 --> 01:55:44,158
580,000 Bitcoin held, $10.1 billion in liabilities, about $51 billion in net assets,

1301
01:55:44,158 --> 01:55:53,758
trading on a multiple of net assets of around 2.07. The peak in 2021, the MNAV in 2021,

1302
01:55:53,958 --> 01:55:59,258
when MSDR was included in the S&P 600 at that point in time, was around a 6X MNAV.

1303
01:55:59,998 --> 01:56:07,418
So $250,000 Bitcoin price around a 6X MNAV, you're looking at something around 2,900 per share for

1304
01:56:07,418 --> 01:56:13,418
MSDR. And that doesn't contemplate the additional torque of any of these instruments, right? And

1305
01:56:13,418 --> 01:56:19,378
And where that would come into play is this publicly available float wouldn't increase

1306
01:56:19,378 --> 01:56:20,578
very much, right?

1307
01:56:20,658 --> 01:56:25,678
The MSTR publicly available float may stay relatively static and may not grow very much,

1308
01:56:25,678 --> 01:56:29,118
but the amount of Bitcoin held on balance sheet may grow drastically.

1309
01:56:29,318 --> 01:56:32,498
That's the whole point of this Bitcoin torque is you're getting more Bitcoin in the door

1310
01:56:32,498 --> 01:56:36,638
for less shares that are trading out the market.

1311
01:56:38,398 --> 01:56:41,098
So you got to love some moon math.

1312
01:56:41,218 --> 01:56:41,978
We'll see where it goes.

1313
01:56:41,978 --> 01:56:46,518
I mean, $500,000 Bitcoin price, you see these numbers get pretty nutty pretty quickly. And

1314
01:56:46,518 --> 01:56:51,158
we haven't seen mania yet, right? You look at any Google search trends, you look at Bitcoin,

1315
01:56:51,278 --> 01:56:58,418
you look at MSTR, we're still very quiet. IV on MSTR is still incredibly low. The possibility of

1316
01:56:58,418 --> 01:57:04,678
S&P 500 inclusion is decently high with the price of Bitcoin at $105,000. Here's my earnings estimate

1317
01:57:04,678 --> 01:57:08,518
that I put through a little bit earlier. I think we talked about this two weeks ago.

1318
01:57:08,518 --> 01:57:17,998
with a Bitcoin price today at $105,000, you're still looking at a $12.3 billion gain before taxes

1319
01:57:17,998 --> 01:57:26,378
in Q2. That would clear the hurdle by $7 billion of having positive net earnings over the last four

1320
01:57:26,378 --> 01:57:34,158
quarters combined. And even if the price of Bitcoin goes down to $96,000, MSTR still has

1321
01:57:34,158 --> 01:57:38,818
positive earnings over the last four quarters of $1.7 billion. So we've got a lot of clearance

1322
01:57:38,818 --> 01:57:45,438
there. I think there's still some, we've got what, 26 days left until the end of the quarter,

1323
01:57:45,438 --> 01:57:50,098
and we'll have more certainty on what that looks like. But if the price of Bitcoin continues to

1324
01:57:50,098 --> 01:57:56,098
rise into the end of Q2, this could be a very, very positive result, thinking about speculation

1325
01:57:56,098 --> 01:58:01,778
for S&P 500 inclusion and what's on the horizon. So I continue to be very bullish. I continue to

1326
01:58:01,778 --> 01:58:06,458
be bullish on these new instruments that are hitting the market, right? Strategies going to

1327
01:58:06,458 --> 01:58:15,178
IPO STRD. STRD will generate, I mean, they're seeking $250 million in the IPO. I suspect they'll

1328
01:58:15,178 --> 01:58:20,658
probably get anywhere from $250 million to $500 million on this product. And that will probably

1329
01:58:20,658 --> 01:58:25,938
be announced in the next week or so. And we've got also ATM happening throughout the week, the

1330
01:58:25,938 --> 01:58:31,138
triple threat, quadruple threat on the horizon. So I'm bulled up.

1331
01:58:31,778 --> 01:58:41,458
i'm i'm excited here any else final thoughts maybe we'll pass it around over to you i saw someone

1332
01:58:41,458 --> 01:58:46,898
post a ticker that was strs and it stood for stress and i think it needs to be like the ultimate junk

1333
01:58:46,898 --> 01:58:53,858
bond where live at the end of every quarter they come on and they spin spin a wheel with 10 slots

1334
01:58:53,858 --> 01:58:59,458
but only three of them have a yield in it and the rest are zero and so the highest yield is like 20

1335
01:58:59,458 --> 01:59:04,578
percent oh my god you could get a live stream on x you know that we can invite them on the show if

1336
01:59:04,578 --> 01:59:08,578
they want to come on the show and do this and people have to sit there and be stressed that

1337
01:59:08,578 --> 01:59:14,418
they might get zero yield on this all year but they might hit it big one quarter so it's like

1338
01:59:14,418 --> 01:59:22,018
the 1080s of preferred yeah exactly you know we'd all hold them just waiting we'd try yeah

1339
01:59:22,018 --> 01:59:29,458
the 1080s of perverts your dividend is a 1080 your dividend is 11080 call

1340
01:59:29,458 --> 01:59:37,918
dividend out the deepest call option for one month out that you can get out get your hands on I like

1341
01:59:37,918 --> 01:59:45,058
it I can't wait till the day when the 1080s are no longer just in the money but it's a conservative

1342
01:59:46,018 --> 01:59:52,978
yeah exactly like i'm just buying 1080s yeah well i mean 1080s will exist again after a stock split

1343
01:59:55,618 --> 02:00:03,058
instead of my that's true my next ticker was strv starve you get a one percent dividend so

1344
02:00:03,058 --> 02:00:07,698
you can eat ramen noodles and then you know you get a 1080 expiring this friday

1345
02:00:07,698 --> 02:00:15,378
yeah one each week i gotta go buy that ticker from matt cole if they want it so

1346
02:00:16,018 --> 02:00:20,978
you know that's true it's available people are probably out reserving all the str tickers they

1347
02:00:20,978 --> 02:00:24,418
can get their hands on right now because it doesn't cost you anything to reserve a ticker so

1348
02:00:25,138 --> 02:00:28,658
i just pumped strv it's gonna open up locking those babies up right now

1349
02:00:29,218 --> 02:00:33,778
yeah if sailor didn't already lock them all up my hunches he went and did that for himself right away

1350
02:00:34,658 --> 02:00:41,298
well he's already he's already used 11 of the letters after str so you know you only got so many

1351
02:00:41,298 --> 02:00:48,818
yep it was funny i i posted today it's like i think mstr i think they will announce a one or a

1352
02:00:48,818 --> 02:00:57,618
10 sat dividend perpetual preferred perpetual and dylan responded well that's mstr it's just tax

1353
02:00:57,618 --> 02:01:02,178
advantaged and you get the bitcoin per share and i was like oh you know it automatically reinvest

1354
02:01:02,178 --> 02:01:09,138
the dividend for you yeah yeah it's been saying this it's a drift yeah it's just a bitcoin dividend

1355
02:01:09,138 --> 02:01:16,978
that's how you have to view it it's a bitcoin drip and in a tax advantage tax advantage bitcoin drip

1356
02:01:18,338 --> 02:01:23,698
yeah it was it was perfect i was like that's a fair response and he's like he's got the sniper

1357
02:01:23,698 --> 02:01:32,018
you know sniping me from behind it was yeah it was amazing anyway uh dan final thoughts um

1358
02:01:32,178 --> 02:01:40,178
This is really exciting. All this stuff is super exciting. Give us something to look into and I think it reinvigorates our interest in the equity. So yeah, it's awesome.

1359
02:01:40,178 --> 02:01:43,178
Did you ever think you'd be a bondman, like a bond trader?

1360
02:01:43,178 --> 02:01:49,178
Yeah, it's so interesting. Like, no wonder all the sharpest people are in bonds. This stuff's fascinating, I think.

1361
02:01:49,178 --> 02:01:52,178
Oh yeah, the world's changing, right?

1362
02:01:52,178 --> 02:01:56,178
They went from 1080s deep out of the money to fixed income maxi.

1363
02:01:56,178 --> 02:02:01,938
Yeah. Now I'm levering up on preferred stocks. I'm like, this is great. It's up 1% every day.

1364
02:02:02,718 --> 02:02:03,518
Best thing ever.

1365
02:02:04,358 --> 02:02:09,978
All right, guys, forget full gamma. What you really need is a fixed dividend payment every month.

1366
02:02:10,278 --> 02:02:13,318
Have you ever thought about just getting 8% every year?

1367
02:02:16,818 --> 02:02:23,378
Dan and I were actually, we did a model this week of like levering up on Strike.

1368
02:02:23,378 --> 02:02:27,138
and it's a pretty cool opportunity.

1369
02:02:27,138 --> 02:02:28,738
Maybe we'll share that next episode.

1370
02:02:28,738 --> 02:02:31,938
We kinda, like as we were doing it,

1371
02:02:31,938 --> 02:02:34,378
Stride came out, so we were like, oh, forget this.

1372
02:02:34,378 --> 02:02:38,238
We need to, like literally as we were doing it,

1373
02:02:38,280 --> 02:02:39,980
We're like, oh, God damn it.

1374
02:02:39,980 --> 02:02:40,980
We have so much to learn.

1375
02:02:41,120 --> 02:02:45,580
Let's go learn about junk bonds for the next day and a half.

1376
02:02:46,680 --> 02:02:49,740
If you haven't watched the Stride presentation, go watch it.

1377
02:02:49,980 --> 02:02:50,700
What is it?

1378
02:02:50,860 --> 02:02:51,580
50 minutes.

1379
02:02:51,720 --> 02:02:53,820
Watch it on one and a half speed.

1380
02:02:55,460 --> 02:02:56,320
Spend the time.

1381
02:02:56,420 --> 02:02:56,680
Do it.

1382
02:02:56,820 --> 02:03:03,540
If you're here listening to this two-hour thing and you haven't listened to the SDRDD presentation, go do it.

1383
02:03:04,900 --> 02:03:06,400
It's fascinating stuff.

1384
02:03:06,940 --> 02:03:07,940
Listen to the credit ratings.

1385
02:03:07,940 --> 02:03:14,820
listen to how they're thinking about it uh totally illuminating stuff so late final thoughts

1386
02:03:15,700 --> 02:03:21,780
yeah i'm gonna double down on that go listen to it and shout out to tim because i think he scooped

1387
02:03:21,780 --> 02:03:26,980
it back when he interviewed fong lee and he straight up asked him would you guys consider

1388
02:03:27,860 --> 02:03:31,620
you know buying the stock back and he's like yeah we'd have to think about it and look if it made

1389
02:03:31,620 --> 02:03:36,780
sense and you know he was just holding his cards like they had to been

1390
02:03:36,780 --> 02:03:41,580
developing this all along and to me it was just the checkmate move I was so

1391
02:03:41,580 --> 02:03:54,974
psyched once I finally understood what it meant you know for the bear market because I think we were trying to we never got that like the uh you know whether the cycle happens or not and it the most bullish thing that i can imagine

1392
02:03:55,774 --> 02:04:01,374
if bitcoin you know continues the four-year cycle but strategy has this lever that they can pull

1393
02:04:02,254 --> 02:04:10,974
i i couldn't be more bullish right now bingo yeah i'll i'll hop in there yeah premium agnostic

1394
02:04:10,974 --> 02:04:17,474
uh perpetual bitcoin yield like wrap your head around that that's that's what i've been wrestling

1395
02:04:17,474 --> 02:04:24,354
with um other than that i think right now it feels really quiet and if you're here like if you got in

1396
02:04:24,354 --> 02:04:28,394
during november and you're still here and you're still watching you're still paying attention

1397
02:04:28,394 --> 02:04:35,574
good for you because this market is just it's designed to shake people out and only the the

1398
02:04:35,574 --> 02:04:38,074
concentrated and dedicated, survive.

1399
02:04:38,074 --> 02:04:40,254
So I think we're having a lot of fun.

1400
02:04:40,254 --> 02:04:42,934
I'm learning so much every day.

1401
02:04:44,034 --> 02:04:46,654
New products come out and it, you know,

1402
02:04:46,654 --> 02:04:49,434
expands a whole world of finance

1403
02:04:49,434 --> 02:04:53,194
that I'd never even considered to look into.

1404
02:04:53,194 --> 02:05:05,788
So I having fun And I think this summer and the rest of the year is gonna be be there going to be some fireworks And if not we just know that the fireworks are coming

1405
02:05:06,088 --> 02:05:07,168
It's on the horizon.

1406
02:05:07,888 --> 02:05:17,148
There's so much trash, fixed income out there that just needs to be repriced or come into Bitcoin and these alternative products.

1407
02:05:17,308 --> 02:05:17,408
Right.

1408
02:05:17,468 --> 02:05:17,948
Completely agree.

1409
02:05:18,248 --> 02:05:22,488
It's so funny you say that, like, if you've been here since November, you know, good for you.

1410
02:05:22,488 --> 02:05:28,248
I was messaging with Gladiator today and he said, it's only a matter of time until it erupts,

1411
02:05:28,488 --> 02:05:32,768
but it could end up testing our patients. And it was so funny. It's like, dude, I've been in this

1412
02:05:32,768 --> 02:05:40,208
trade since 2023, like late 2022. I even bought it in 2020 and 2021. It's tested my patients the

1413
02:05:40,208 --> 02:05:46,328
entire way. I just had a one options trade with 100% of my portfolio for a year and a half.

1414
02:05:47,488 --> 02:05:51,828
It's like, yeah, I could wait a few months to see how this stuff plays out and how this evolves.

1415
02:05:51,828 --> 02:05:57,988
right like this is a it's the most exciting time to be in this trade and um i think it's going higher

1416
02:05:57,988 --> 02:06:04,708
yeah there's a lot of what's he working on because he left mstr then he went to the game he's back

1417
02:06:08,948 --> 02:06:14,362
you know who else is back he max margin on preferred equities like dan yeah yeah

1418
02:06:17,562 --> 02:06:21,962
i want to say uh shout out to ryan because ryan was at the conference he's been more active online

1419
02:06:21,962 --> 02:06:28,042
he just did a uh a thing with anders and brian and just shout out to ryan it's good to see him back

1420
02:06:28,042 --> 02:06:34,522
and it's good to you know hear his voice and have his analysis and uh we all love ryan and i know

1421
02:06:34,522 --> 02:06:39,002
he's asked for a lot and he's back. He's back. So it's good.

1422
02:06:39,522 --> 02:06:41,202
Good to see him out there in Vegas, man.

1423
02:06:41,362 --> 02:06:46,162
He's in the zone. He came to the True North meetup event. Yeah, it was great.

1424
02:06:46,662 --> 02:06:47,162
It was awesome.

1425
02:06:47,822 --> 02:06:49,402
Yeah. Ben, final thoughts?

1426
02:06:50,342 --> 02:06:53,682
No, because if I do, I'll go on another rant and none of us will ever get to sleep.

1427
02:06:53,882 --> 02:06:58,122
I'm the one that needs to get to sleep here. So I'm good, man. I'm bowled up.

1428
02:06:58,382 --> 02:06:58,722
Bowled up.

1429
02:06:58,722 --> 02:06:59,062
Good to go.

1430
02:06:59,502 --> 02:07:00,762
All right. I think we're all bowled up.

1431
02:07:01,262 --> 02:07:01,662
Let's go.

1432
02:07:02,082 --> 02:07:02,902
Yeah, there we go.

1433
02:07:02,902 --> 02:07:16,122
All right. Appreciate everybody for the time and great to see everybody out in Vegas. Thanks for hanging out and listening to Stride. We'll have more content coming out on the horizon. I think we'll be back next week and a lot of things to be excited about. So let's go higher.

1434
02:07:16,802 --> 02:07:17,462
Thanks, guys.

1435
02:07:17,702 --> 02:07:19,142
All right. Cheers. See ya.