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We'll see you next time.

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Thank you.

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purposes only. Nothing in this discussion should be considered investment advice or the offering

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of any security or other investment product. Please consult your own investment and tax

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advisors. And now I'll hand it over to the True North team for your regularly scheduled programming.

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Woo! Welcome back. True North, episode 61, The Mechanics of Capital and Digital Credit. We are

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back with the Investment Grade Bitcoin podcast, and we are excited to be here. We've got a lot

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to talk about. So many things just continue happening everywhere, all in the market,

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all at once. At the same time, the world just keeps moving forward. And yeah, we've got a crew

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today. We've got myself, Jeff Walton. We've got Ben Workman, Mason Ford, and Grain of Salt,

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and Dan Hillary. We've got a crew here today, and we've got a lot to talk about. We're going to hit

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on... We'll talk about strategy, health of the balance sheet, like we always do. We'll hit on

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the Federal Reserve. New paper came out this last week forecasting what the Fed's plan is over the

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next 12, 24 months. It's a pretty consequential report. We'll kind of think about that a little

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bit. We'll go into sharp ratio, think about risk return, portfolio optimization. Well, that was one

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of the questions that we received on the True North website. I think it's a great question.

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We could dive into it a little bit. We'll hit on like, what is the purpose of holding an equity?

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We'll think through it, the philosophical perspectives of holding equity, like what does it mean and how do we start to think about the whole world together?

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Just kind of take a step back and look at the landscape of the entire equity market, the entire credit market and think through those things and talk about capital structures.

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And, you know, we'll continue to hit on this.

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We will also jump to our website, tnorth.com, which is new.

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It's cooking.

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Everybody go check it out.

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If you haven't had a chance to go do so, please like and subscribe the YouTube video.

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If you're interested and you like this content and you want to see more of it, that helps

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us a lot.

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And we'll hit on some of the questions that people asked on the True North website.

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And we want to make this kind of a continuous thing that we grow into and make sure that

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we are providing content that people want to hear.

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So without further ado, we just launched four people into space to go traverse the moon

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and go around the moon.

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And then we just had the Trump presentation.

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And let's pass it around.

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Let's see what people are thinking about.

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We'll go over to you, Mike.

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We'll start with you.

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You listened in to everything that Trump was talking about.

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Why is the market nuking?

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Why is the market nuking?

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I think the reason why the market's nuking is because if you listen to Trump and you hear it directly from him,

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he seemed like for the next two, three weeks, he's going to continue going against Iran,

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Straits of Hormuz, it doesn't matter. He's relying on that to go back to the Europeans to open that up.

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He's not going to buy any oil from there. So we saw the price of oil spike up.

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And then I think the biggest thing is we don't know if he's going to change his mind tomorrow morning.

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And the market always seeks to have stability. And so with that, the reason why they use the term

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taco, you know, Trump always chickens out. Or that's if you want to say it as an acronym.

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Or if you want to say figuratively, taco, it's like a taco shell.

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He always folds.

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And so I think if the price of oil continues to stay above $100 or $105, whatever the price

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of oil is.

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And I think the biggest disappointment that we all saw was that we want Kevin Warsh to

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come in.

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We wanted the Federal Reserve to cut interest rates.

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But if the price of oil spikes up, that means inflation goes up because oil is used not only

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for people to drive around, but for diesel trucks to deliver food.

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So food prices spike up.

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And so therefore, in order to keep inflation under control, you can't cut interest rates.

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So in typically cutting interest rates is good for risk on assets.

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So I heard this.

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Everybody else can watch it.

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It's 19 minutes.

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But what we see is that he could change his mind.

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He could change his mind in an hour for now.

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And so with that, I look at it and I see it as instability and the market prices in instability.

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That's what I saw.

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And I do have a personal announcement to tell people I will not be moving to Texas and buying a Tesla and using self-driving anytime soon.

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So thank you for everybody that wished me good luck for doing that.

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But I drive my car and I'm old school.

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I like to drive my car.

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Excellent.

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Thanks for the update there.

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And we'll fold that into, we'll talk about the Fed.

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We'll fold that in and kind of think through some of those perspectives a little bit.

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Mason, over to you.

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What are you thinking about?

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You're running into people, you're getting recognized in New York.

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What's cooking?

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Yeah, I had a really interesting encounter with, I was at the park this week.

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It's been nice in New York finally.

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And I saw a guy wearing a Bitcoin shirt and I had to go up and say something.

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And he actually recognized me, which was funny.

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But this was a guy who works in traditional finance, who works in the insurance sector.

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And I immediately thought of you, Jeff. And we started talking about, you know, this guy's been a Bitcoiner since 2019, but he lives the dual lives of being a capital allocator in the traditional financial system and also deeply believing in the future of Bitcoin.

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And what it really came down to was he deeply understood Stretch and Seda and the preferred equities.

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And he believes that they're amazing products.

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And he believes that MSTR is deeply mispriced and Bitcoin is deeply mispriced.

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But there's a few hurdles, which we've touched on in the past, which continue to kind of stifle adoption at this point.

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And that's that's Basel, the banking regulations, which don't give Bitcoin its due.

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And it's also the the fact that Stretch and Seda, these are new products and they're unrated at this point.

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But we all we had a we had a really interesting conversation because, of course, I'm I'm at Melu's and we have an operating business that right now at a, you know, a a.

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We're trading out a very cheap multiple and we also have the Bitcoin, right?

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So from that perspective, from the capital allocator perspective in the traditional financial system, if you are an operating business that has Bitcoin attached to it, it's a much easier sell at this point than, let's say, a pure play or pure Bitcoin exposure.

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just because of the fact that we have an operating business

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and it's digestible to them in a way

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in which maybe the peer plays are not.

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So that was just a really fascinating conversation.

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And I'm really excited that I met this guy

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and we're going to continue to have these conversations.

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Yeah, it's a real life example of the true hurdles

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that we talked about, right?

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Like you ran into somebody and you're actually seeing it.

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It's like, okay, well, he works there and he's telling you I can't do this because this is annoying.

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And so, you know, one of the things that we're thinking about is how do we, one, help change the regulatory environment.

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Two, how can we work around it and work with it?

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Like what are avenues that we can infiltrate without having to come up against that framework?

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Because we've got to go infiltrate all of those first and then kind of build the framework around it.

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And I think one thing that's become really fascinating, and I saw this develop over time,

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and we've talked a lot about private credit market, but kind of what's happened in the

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private credit market, just to give some history, is that they were, the market had started to

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create, you know, find these assets and turn them into cash producing assets with different

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strips of volatility. So for example, you can go buy a natural gas field,

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in Oklahoma. Okay. So that natural gas field, it's going to, you're going to be able to pull

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gas off of that natural gas field. And there's this like curve of what the cashflow looks like.

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And you can structure and tranche that into different security layers. And so the most

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senior security layer is, you know, the most secure it's going to get first dollar. And then

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And if there's volatility in that cash producing asset, the lower tiers don't get as much money.

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They don't get as much return.

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And so what had happened was that credit market was able to go get those tranches rated by

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different rating agencies.

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And so that was an industry that wasn't typically or didn't used to be rated and now is rated.

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or at least some of the pieces are rated. And that kind of gives us a potential framework of

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how to think about writing the instruments that we've got as well. It's almost like you take this

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perpetual preferred equity instrument and how do you almost make it worse by making it more

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illiquid with a term just to appease a regulatory environment? And I think that's an opportunity for

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somebody looking at this landscape and you could potentially create another type of security

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with different layers and different tranches, throw a duration on it. And that might have the

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ability to get rated by an entity because there's now a capital structure on top of a capital

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structure, which sounds crazy, but that has already happened in other asset classes. And that is a

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potential opportunity in this marketplace. So really, really fascinating perspective to kind of

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view that, but that is out there if anybody wants to go pursue that. I'm going to go over to you,

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Dan, tokenization world.

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I mean, what's cooking with you?

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I saw you guys have an office in Florida, which is cool.

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What's cooking?

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Yeah, we've been working in our office.

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Obviously, I've been focused specifically on STRC, looking at the Sharpe ratio on a daily

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basis and tracking the equity issuance.

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I have a video coming out this week on modeling out percentage of Bitcoin traded volume that

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MSTR is doing over time, how that's growing, and specifically how STRC's traded volume

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is growing on a relative basis to MSTR and to Bitcoin itself.

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And I think what's so cool about STRC is finally we've got some traction,

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some real liquidity, some real volume.

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Obviously, we're seeing that with Stata as well.

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And, you know, I've always believed that the preps will be very indicative

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of Bitcoin risk, Bitcoin future expectations, yada, yada, yada.

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And moving forward, we're able to track that interest, that open interest,

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that demand, both with the credit, with the interest rate,

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and with the demand, the liquidity.

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So I think stretch will be a $10 billion unit quite soon.

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And it will also be trading $500 million a day in the near term.

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So psyched to see that happen in real time.

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Yeah, liquidity is getting stronger and stronger across the entire ecosystem.

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It's building and people are starting to find more and more ways to trade around the instrument.

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I think we talked about this last week, but we've got Sata options open, that options market opened.

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we're starting to see some open interest kind of percolate into that market. And I'd be curious to

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get your perspective on this, Dan. And you look at that market, the options market on these

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instruments as well. But I noticed that there's $5 increments on the options market, basically like

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a 95, 100, 105. And it seems pretty silly, right? Like if you've got this instrument that's trading,

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you know, most of its time at $99.99, like, what's the use? What's the value of a $95 strike?

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what's the value of $105 strike? I think that the market could use a $99 strike and a $101

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strike. If the target range is 99 to 101, I would think that $99 strike would be one of the most

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traded strikes in the general options market. Have you thought through that at all or looked into it?

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No, absolutely. A lot of this is up to the broker dealers who are

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hedging and creating the options exposure. So I think these things just take time. And we're only

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starting to see intra-week expirations pop up on Ibit options, which are one of the most liquid

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options markets in the entire Bitcoin ecosystem. We haven't even seen them with MSTR yet.

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But I think you're totally right. We'll see those come online.

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I think you might need to request them. You might need to put a request out there for a $99 strike.

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I think it would be fascinating to see how it operates.

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It should be very indicative of Bitcoin price performance

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or almost like a forward-looking view of the performance of the security

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and with better downside protection much closer to the, I guess, par, much closer to par.

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Yeah, I mean, point me towards the survey monkey.

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I'll pull my request then.

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All right, we'll talk about it afterwards.

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Okay, cool.

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Well, over to you, Ben. We've got a big, exciting week. SEDA hit par for the first time since

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we've done the follow-on offering. So a big week, a lot of news there, a lot of energy.

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How are you feeling? What do you think about it? I'm feeling exhausted, but yeah, I mean,

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it was a really big week and it was really encouraging to see the trading activity going

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into the ex-div date. And we're still so early in these products that we're still gathering the

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data and how these respond as they season out there in the market and as these securities gain

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more and more reach and more and more investors start to understand the risk profiles around them.

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You've started seeing it with Stretch. I think they're in their, what, eighth or ninth month now

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of dividend payments. And so you've started to see that arbitrage that happens on the ex-div date

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where it dips down lower than what the dividend being paid is, which creates an opportunity for

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people that come in and prefer to buy low and take the capital appreciation over the next month and

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try to get out of these as they get closer up to par, which is interesting because they're

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operating both as trading vehicles right now and as income vehicles. So they've got a lot of

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optionality to them right now. Now with the options market out there, it opens up a lot of

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the hedging structures and yeah, more strikes will be very helpful. I think that'll just come in time,

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but it was really fun to to watch it develop you know we we've watched the stretch activity

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for several months and you kind of watch that volume ramp as you come in closer to the x

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dividend date and you watch it start to ramp up and it's really those two days leading in where

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you see the mega volumes you know really spike as people rush in trying to get those dividends

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and so it's fun to watch that play out you know on our own security with seda and to see it get

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up to $100 one month after we made all the changes around it with the target range and

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making sure we stated that we're not sellers of SEDA below $100. And you start to see those

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changes percolate in the market. Now it's a security that feels very familiar to everybody

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out there who's familiar with Stretch. And we saw that show up in the demand leading in in month one

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after all those changes. So really, really like to see that. At the same time, we've got kind of a

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wild market going on around us both in the equities market but also in the treasury space

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you know you're seeing all kinds of different actions being taken by a lot of different companies

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which shows you know how these companies start to diverge during bear markets and it highlights

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you know we i know on this show we've hammered on it a lot about how if you're going to run a

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treasury company you need to build that company for a bear market right you've got to be ready

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to endure a long bear market, the longest bear market.

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And Bitcoin has been about 18 months, so you've got to be planning for 18 months of sideways

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to down action, kind of as your base case to be able to weather it.

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And you're starting to see Bitcoin being sold off.

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You've got activists in the space going after certain companies.

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You've got several companies that have been offloading Bitcoin and other assets.

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And so we're hitting that point now where it's going to be interesting to watch the

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responses kind of across the industry and see, you know, what different pivots these companies

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are going to take. And, you know, we can certainly dive into that more because I think there's a huge

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amount of learnings that you have when you watch this sector develop so closely, like we all have.

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You get kind of an inside view. And then when you're, you know, in the seat actually operating

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one of these, it gives you an entirely different view on what you're looking at and what signals

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that a company is finding success and that demand is coming in from investors.

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So when you start to look at all those indicators, then you start to see stress in the market

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and you see how all of these equities and how all of the management teams are going to respond to that,

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it tells you a lot about what the near and midterm future could be.

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So it's been just fascinating all around for probably the last two, three weeks.

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I think I've seen as much interesting activity as I've seen in a very long time.

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and the longer we get the uncertainty, like what we're seeing at this exact moment out there in the markets where there's just weakness all over the place and uncertainty and volatility everywhere,

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it's going to make sure that we're anything but bored. There's a lot to do.

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And these are the times. One of the things I think a lot of people always ask is, well, what do you do day to day when you're running these treasury companies?

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And Jeff, I think some of the things you just mentioned is a huge amount of it, right?

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You're out there, you're going to these exchange and these broker dealers and you're advocating for your securities.

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You're trying to bring awareness to these other platforms to list them.

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You're trying to get in front of the investors and start to educate the market around these products.

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You're trying to figure out what the right structure is for products.

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You're envisioning new product.

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You know, you're doing all kinds of stuff.

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So the slow times, you get really busy.

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When the markets are hot and everything's going, you can narrow in and you focus on the operations at that time.

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But when it slows down, you know, the activity outside of the day to day capital markets activity just really, really ramps up.

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So it's been one of those really unique Q1s.

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It was incredibly action packed.

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And I don't think Q2 is going to be any slower.

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I mean, we're we're looking at a lot of turbulence here and, you know, that's going to create a lot of activity.

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Yeah.

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Yeah. I will just emphasize a lot of thinking, a lot of communicating, a lot of pushing the

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envelope, seeing where opportunity is, canvassing the market, talking with investors. These things

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don't trade. The strategy doesn't, stretch doesn't trade $500 million a day. They're doing nothing.

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Our instrument doesn't trade 10, 20, $30 million a day. We're doing nothing. We're out there

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constantly canvassing the market. Yeah. I mean, luck is not really a factor to these, right? You

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have to go out and you have to create your own luck in these markets. And we luck back and Jeff,

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you and I were talking about this not too recently where I brought up every single

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action we've taken, we've never once yet gotten an assist from Bitcoin. It's always nuked every

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Every time we had anything going when we had the IPO for SEDA it nuked As soon as we put out the acquisition with Semler it nuked As soon as we did the follow on it nuked As soon as we got

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into our record dates, it nuked. We've never once yet gotten an assist from Bitcoin. But

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what it shows you is that you're not stuck no matter what the market's doing. If you're out

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there and you're having these conversations and you're finding the right strategic investors and

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you're working with banks and you're pushing them to be creative and you're pushing on the lawyers

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and having them be creative and come up with structures and you just find ways to get things

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done. Not doing anything is not the answer. These are the times where you get to separate yourself

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in the market and you have to do that by pushing as hard as possible and going out and creating your

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own interest and educating people on the products you've got out there and finding new structures

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for them and finding ways to build new adoption that's going to have a long runway for you.

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And so when you start to see success out there in the market, it's not accidental,

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right? That's months and months of work and it's people behind the scenes. Some of the

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unsung heroes of this entire industry, no one ever knows who they are. But there's such a huge

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infrastructure behind all of these companies that are out here operating on a decent scale

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that are pushing. They're pushing the boundaries everywhere. They've got specialized knowledge.

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They're outworking all the connections. And it's a huge, huge lift. So it's one of those where you

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get the opportunity to create your own path here. And as soon as we do get that assist from Bitcoin

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and it starts going the other way, these are the cycles Bitcoin goes in. You don't get to tell it

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to go up. But when it does, I think we're in for some fireworks here. So I'm pretty excited for

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that time in the market. Yeah. Luck is where preparation meets opportunity. Exactly. Okay.

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We're going to shift gears. We're going to talk about MSTR balance sheet strength, just a refresher

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of where we're at. We're going to breeze through this. Sharing my screen here, MSTR financial

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leverage. Let's just look at the company from the top. 4126, Bitcoin held 762,000. Bitcoin price

274
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when I did this was 67,000. I think it's now 66,800. Let's just plug that in. Update here.

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Bitcoin assets held on balance sheet. They've got about $51 billion, $2.25 USD reserve, $8.2 billion

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of debt, $10 billion of preferred stock, net capital. They have $44.9 billion of net capital.

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This is backing out debt. The annual preferred dividend payment is about $1 billion. And the net

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capital, if you were to take this $44 billion, almost $45 billion divided by the PREF dividend

279
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payment, you've got 44 years of capital to cover the dividends. So their leverage ratio, 11.8%,

280
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incredibly healthy. The coverage multiple 2.9. So this is just showing the assets,

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the Bitcoin assets plus USD reserve divided by the preferred stock plus the debt. And for the

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Bitcoin price needed for the assets to be less than the debt on the balance sheet is 10,535.

283
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So an 84% drawdown in order for the assets to be worth less than the debt.

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So when we're looking at health of a balance sheet here, again, completely different place

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than last in historic bear markets.

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When you're looking at November of 2022, strategies leverage ratio was 130%.

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And they had $2 billion of assets on their balance sheet and $2.7 billion of debt.

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So we're looking at just a completely different company that's incredibly strong

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based on their financial position looking today.

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Okay, now I'm going to shift gears.

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I just want to chime in for one second here.

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Six times 130, right, is what, 780?

293
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Six times?

294
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Six times 130,000 is 780.

295
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Is my math right?

296
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Yeah.

297
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Yeah.

298
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So they have done, November of 2022 is really close to the beginning of 2023.

299
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So 23, 24, 25, sorry, 23, 24, 25, and then 26 from the beginning.

300
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So in three years, they 6X'd the amount of Bitcoin that they have.

301
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And I think that we just glanced at this.

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And if you would have asked me, you know, if you if you look at January 1st, 2024, they had 189,000 Bitcoin.

303
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If you'd say to me, oh, how do we feel about strategy?

304
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You know, are they going to break a half a million Bitcoins?

305
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That's where I always keep on saying counterintuitively on X.

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They're able to acquire more Bitcoin when the price is higher.

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And they had the second best quarter ever of acquiring whatever, 89,000 Bitcoins.

308
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And so when I look at these numbers, I think sometimes we just gloss over them.

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And you look at your row 30, your debt to asset ratio, 130% at the bottom of the bear market, right?

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And now it's 11.8%.

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That's gone one-tenth, right?

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Correct.

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So it's gone the correct way by a factor of 10x, which is an order of magnitude.

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and they've almost got basically, you know,

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it's possible they can get to 1.3 million Bitcoins by what?

316
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Q1, Q2 of 27, which will be a 10X in Bitcoins.

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And I think that that's just, I just think that these are,

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they're real numbers because we're just looking at historicals

319
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and at the rate they're going,

320
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there's nothing to think that they wouldn't be able to do this.

321
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I mean, so how would you feel about a company

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that has one and a half million Bitcoins

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in QT a year from now.

324
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They're going to do it whether you like it or not.

325
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Whether you like it or not.

326
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Now, and so we'll look back at this and be like,

327
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you know, anyway.

328
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So I look at these numbers

329
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and I think I try and think of multiples.

330
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And I did want to just do a quick digression

331
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back to that post that I did comparing Stretch and Seda.

332
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So congratulations for you guys hitting your peg.

333
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I think that is awesome.

334
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And so when I wrote that book about Bitcoin treasuries, it was about efficiency.

335
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And that's how I look at this.

336
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There are multiples.

337
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I can compare strategy against itself.

338
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This is what you did here, Jeff.

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You compared the previous bear market, November 15, 2022, to where we are today.

340
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And we're in another bear market.

341
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Except this bear market, we have six times as much Bitcoin, right?

342
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And we've cut the debt to asset ratio by one tenth.

343
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So again, this is your math.

344
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This is great.

345
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And then when I looked at you guys comparing stretch to Seda, it's a two horse race now.

346
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And this is what I was always thinking with the Bitcoin treasury companies was if the

347
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smaller Bitcoin treasury companies, right, if you do things right, then people say, you

348
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know what?

349
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I'm going to invest in the smaller Bitcoin treasury company because their ratios are about the same as strategy if they are.

350
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But I can now put money into this because it's smaller.

351
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And that was that efficiency that you guys traded seven times as much volume given that you have so much less Bitcoin.

352
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And that's the way the Bitcoin treasury companies should have been structured.

353
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That's the efficiency.

354
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And that's having your multiples in shape.

355
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clean balance sheet, very little debt or no debt, and cash to pay the prefs on hand.

356
00:28:19,158 --> 00:28:23,018
If we would have said November of last year, I don't know when you guys announced your cash

357
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position, but before strategy did this, because it was only in December and now we're in April,

358
00:28:30,138 --> 00:28:34,218
oh, strategy is going to get $200.25 billion in cash. If you would have said that up until

359
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whatever, December 15th, people would be like, that's crazy. But they did do that. And now we're

360
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in a completely different regime that they have whatever. They have basically 24 months of

361
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payments. So when I look at these numbers, everything is different than what it was

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even four months ago. And so I think that people should realize that. And I think what we're seeing

363
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here is I think that stretch in Seda, I think that as the biggest problem that's going to happen

364
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with these two products is that as the Sharpe ratio, it's running four, right? It's a Sharpe

365
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ratio of four. I know we're going to talk about it later. It'll be too good to be true. People

366
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will be like, how do you have a sharp ratio and something that's paying more than 11, 11 and 12

367
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percent a year. And people are going to be like, well, that, that, that, that, that's just wrong.

368
00:29:21,878 --> 00:29:27,278
So thank you for putting this together. Yeah. And why did you pick November 15th of 2022? Was

369
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that the dead bottom? Uh, yeah, I think that was near there. I don't know. I think I just picked

370
00:29:31,978 --> 00:29:38,778
to date of like 16,500 or something like that. Yeah. Pretty close to the bottom. Yeah. Pretty

371
00:29:38,778 --> 00:29:43,238
close. I think you bring up a really interesting point. I mean, yeah, you look at strategies,

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balance sheet or their market cap, they're a $50 billion market cap and they've got the,

373
00:29:48,738 --> 00:29:53,118
I don't know, $10 billion of prep outstanding. We're at $700 million market cap and we've got

374
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427 million prep outstanding. So it's like the relativity and the trading volume, it's fascinating.

375
00:29:59,938 --> 00:30:03,998
Like they're very interesting numbers to compare and contrast.

376
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Yeah.

377
00:30:05,078 --> 00:30:11,018
And by the way, when you look at these multiples, so the Bitcoin did a 6x or almost a 6x, but

378
00:30:11,018 --> 00:30:14,418
the BTC assets and millions of dollars did a 25x.

379
00:30:15,378 --> 00:30:15,858
Yeah.

380
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From 2 billion to 50 billion, right?

381
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It did a 25x.

382
00:30:19,878 --> 00:30:24,618
And you're like, and so when you look at some of this and you see some of these commentaries

383
00:30:24,618 --> 00:30:26,678
on X, and I can be aggressive with them.

384
00:30:26,678 --> 00:30:34,918
It's like, oh, well, what was the purpose of strategy acquiring $50 billion worth of Bitcoin if it trades less than the market, less than the acquisition price?

385
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You see this all the time.

386
00:30:36,578 --> 00:30:38,098
And to them, like, what was the benefit?

387
00:30:38,558 --> 00:30:44,698
Well, they went from being a whatever, a $1 billion company or a $500 million company to a $50 billion company.

388
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And that was the reason why they did it.

389
00:30:47,438 --> 00:30:52,858
So I think these numbers, I think people don't realize what they are.

390
00:30:52,858 --> 00:30:57,058
And the difference is that when you do a spreadsheet like this, you understand it.

391
00:30:57,198 --> 00:30:58,258
So that's my only point.

392
00:30:58,438 --> 00:30:58,838
Thank you.

393
00:30:58,978 --> 00:30:59,298
Absolutely.

394
00:30:59,738 --> 00:31:00,058
Absolutely.

395
00:31:00,518 --> 00:31:04,138
But in being conscious of time here, I'm going to shift gears.

396
00:31:04,238 --> 00:31:06,878
We're going to jump to the Fed, talk a little bit about the Fed.

397
00:31:07,298 --> 00:31:10,138
We'll get into Sharpe Ratio Portfolio Theory, just how we're thinking about some of these

398
00:31:10,138 --> 00:31:12,758
assets, bring Mason, Dan, and the rest of the team in.

399
00:31:12,898 --> 00:31:16,538
But there is a very fascinating paper that came out from the Fed.

400
00:31:16,658 --> 00:31:19,458
This came from, I think the guy's name is Stephen Mirren.

401
00:31:20,138 --> 00:31:21,878
And it's federalreserve.gov.

402
00:31:21,878 --> 00:31:22,718
You can go check it out.

403
00:31:22,718 --> 00:31:28,058
this paper is up there. I highly suggest everybody to go download this paper, plug it into your

404
00:31:28,058 --> 00:31:34,778
favorite AI, and just go ask questions about it and work with your artificial intelligence to

405
00:31:34,778 --> 00:31:40,758
identify how this may impact how you view the marketplace or how the world works. Because

406
00:31:40,758 --> 00:31:46,038
you think about the Fed. What is the purpose of the Fed? And I've got my notes here. The purpose

407
00:31:46,038 --> 00:31:52,478
of the Fed, the mandate of the Fed is max employment, stable prices, and to moderate long-term

408
00:31:52,478 --> 00:31:58,918
interest rates. So they control monetary policy. So if the Fed is making any changes or moves,

409
00:31:59,078 --> 00:32:03,178
if you're interested in anything related to money, you should probably have an understanding

410
00:32:03,178 --> 00:32:10,798
of what the Fed's doing. So that is my explanation for people to go pay attention to this.

411
00:32:11,918 --> 00:32:16,918
Additionally, as time has changed, thinking after the great financial crisis,

412
00:32:16,918 --> 00:32:22,458
there was a kind of second and third order effect of the Federal Reserve. And that was

413
00:32:22,458 --> 00:32:28,958
was to reduce frequency and severity of banking panic and financial crisis and contain systemic

414
00:32:28,958 --> 00:32:36,378
risk and include being the lender of last resort. So this was a result of Dodd-Frank, some of the

415
00:32:36,378 --> 00:32:40,958
regulation and legislation that was put in place after the great financial crisis. And you can kind

416
00:32:40,958 --> 00:32:46,078
of see this outlined here. So, right, we've talked a little bit about there's a new Federal Reserve

417
00:32:46,078 --> 00:32:50,038
Chairman on the horizon. I think Warsh is going in front of the Senate Banking Committee sometime

418
00:32:50,038 --> 00:32:55,618
time in April and gets appointed potentially sometime in May. I think Powell's last day is

419
00:32:55,618 --> 00:33:03,378
middle of May. And this paper is a 53 page paper about here's an a la carte menu of all the things

420
00:33:03,378 --> 00:33:07,458
that we can do on the horizon. So if you're curious about what the Fed may do here in the future,

421
00:33:08,078 --> 00:33:15,658
this is it. Pay attention to this. So what you can see on the screen, this is the balance sheet

422
00:33:15,658 --> 00:33:21,378
of the Fed over time. So looking back 2005 to 2025, 2026. And what you can see here is there,

423
00:33:21,558 --> 00:33:24,658
after the great financial crisis, the balance sheet of the Fed increased dramatically.

424
00:33:25,478 --> 00:33:30,138
So the Federal Reserve was buying assets and they were accumulating assets on the balance sheet.

425
00:33:30,138 --> 00:33:34,278
They were buying all the crap that nobody wanted. And they were accumulating these assets on the

426
00:33:34,278 --> 00:33:40,758
balance sheet to help prevent financial crisis. And that ended up starting this new regime of

427
00:33:40,758 --> 00:33:48,518
what the Fed is into the future. And so what they've said here throughout this paper is that

428
00:33:48,518 --> 00:33:54,038
the plan moving forward is to reduce the assets on the balance sheet. And you can kind of start to

429
00:33:54,038 --> 00:33:57,958
see this happening over time if you look on the right side of this graph. They want to reduce the

430
00:33:57,958 --> 00:34:06,318
assets on the balance sheet, effectively quantitative tightening, and loosen banking

431
00:34:06,318 --> 00:34:11,718
regulations to allow banks to take a little bit more risk, which effectively gives the Fed

432
00:34:11,718 --> 00:34:18,858
a bit more capacity for a future financial crisis. So they can provide tail protection for the market

433
00:34:18,858 --> 00:34:24,658
again. And so it's been fascinating kind of digesting this and reading it and coming back

434
00:34:24,658 --> 00:34:29,738
to it and thinking about it. But there's a few changes here. So they're thinking about, okay,

435
00:34:29,818 --> 00:34:34,138
quantitative tightening. They're going to release these assets off the balance sheet

436
00:34:34,138 --> 00:34:41,258
that should impact the market. However, there's talks of doing this with a rate reduction at the

437
00:34:41,258 --> 00:34:44,818
same time. So you can reduce the assets on the Fed balance sheet and do a rate reduction at the

438
00:34:44,818 --> 00:34:51,078
same time and kind of have the goals to have a net neutral impact. And then this also, again,

439
00:34:51,278 --> 00:34:56,298
gives capacity for a future crisis so the Fed could step in if they needed to step in.

440
00:34:56,938 --> 00:35:02,058
And then on top of that, loosening banking regulations. One of my biggest takeaways

441
00:35:02,058 --> 00:35:09,578
through this entire paper is that I feel like the feds job is very tricky. I feel like they're

442
00:35:09,578 --> 00:35:18,138
trying to balance a feather on a thumbtack. Like, you know, one gust of wind, everything's wrecked.

443
00:35:18,418 --> 00:35:21,998
And you go look through here on all of these different things that they could do.

444
00:35:23,118 --> 00:35:28,198
Complicated acronyms, different second and third or third order impacts everywhere. Like you change

445
00:35:28,198 --> 00:35:32,498
one thing, it changes everything. And then you've got all these different options that they could,

446
00:35:32,778 --> 00:35:35,898
they could, all these different things that they could do. And each one impacts the other.

447
00:35:36,778 --> 00:35:42,158
So you'd think that they're probably using advanced analytic tools, like these intelligence

448
00:35:42,158 --> 00:35:46,738
models that we're using, but all like, they're just models. They could be wrong and they could

449
00:35:46,738 --> 00:35:52,718
miss the reality of how people may react to things in any one circumstance. So anyway,

450
00:35:52,878 --> 00:35:57,238
it's just a fascinating paper. Really encourage everybody to read it. But actually I didn't even

451
00:35:57,238 --> 00:36:02,658
read it. I just plugged it into my AI and I interacted with it. So it was much easier to

452
00:36:02,658 --> 00:36:06,618
consume and digest that way. But I know, Mike, you've had a chance to take a look at this and

453
00:36:06,618 --> 00:36:13,618
you've experienced the GFC a little bit more firsthand. I mean, what's your thought on this?

454
00:36:13,698 --> 00:36:19,878
What's your takeaway here? You know, I think it comes down to, you know, second and third order

455
00:36:19,878 --> 00:36:27,978
effects. So first of all, it's a framework and I read through it. And I think that a couple of

456
00:36:27,978 --> 00:36:34,298
things, they wanted to get this out before Warsh came into this, if he gets elected to lead the

457
00:36:34,298 --> 00:36:41,458
Federal Reserve. And so with that, I think that they're going to study this. They described this

458
00:36:41,458 --> 00:36:46,718
as a slow rollout and they're going to go for stability. And I don't think that they really,

459
00:36:46,718 --> 00:36:51,298
it's really hard to guess what's going to happen. And then if you combine that with the unpredictability

460
00:36:51,298 --> 00:36:57,518
in the markets, and there was a clip of Jerome Powell, like you said, it's like balancing a

461
00:36:57,518 --> 00:37:02,718
feather on a thumbtack. This is not easy because you don't know how the banks or the people that

462
00:37:02,718 --> 00:37:07,558
are going to trade this, you know, when you make these changes. And I think that's the hardest part.

463
00:37:07,878 --> 00:37:12,898
And anyway, that's the way that I look at this. I think that they do need to make changes because

464
00:37:12,898 --> 00:37:17,538
what happened was one of the key goals was they want to get rid of the, not get rid of,

465
00:37:17,798 --> 00:37:22,198
they want to reduce the repo facilities for the banks just looking to make money off by parking

466
00:37:22,198 --> 00:37:29,678
money at the Fed. Like if you have loose monetary and banks are not lending, so that's where the

467
00:37:29,678 --> 00:37:36,138
repo facility comes in. So the Fed juices the market, the money goes to the banks, the bank

468
00:37:36,138 --> 00:37:41,938
can't lend it out fast enough. So they park the money back for the reverse repo back at the Fed.

469
00:37:41,938 --> 00:37:45,218
and it's like it did not do what it was supposed to do.

470
00:37:45,938 --> 00:37:49,778
And so from that perspective, like for instance, money velocity,

471
00:37:50,158 --> 00:37:52,858
we saw that that dropped even though they increased liquidity.

472
00:37:53,018 --> 00:37:55,938
And the whole goal of increasing liquidity was to have more money velocity,

473
00:37:56,018 --> 00:37:57,398
how many times it turns over.

474
00:37:57,398 --> 00:38:00,758
But if you're parking the money back at the Fed on the reverse repo,

475
00:38:00,958 --> 00:38:03,098
it's not doing its intended goal.

476
00:38:03,378 --> 00:38:06,398
The bank is just profiting from leaving it there.

477
00:38:06,738 --> 00:38:08,698
So I think this is really tough.

478
00:38:08,838 --> 00:38:10,178
There's no easy answer here.

479
00:38:10,358 --> 00:38:11,758
And then how does it play out?

480
00:38:11,938 --> 00:38:31,658
Jeff, can you just scroll this? Just go down. And I want to quote, I took a picture of this slide, and this is from El Salvador, and I want to quote Safety in the Moose.

481
00:38:31,658 --> 00:38:37,338
all fiat economics is an elaborate excuse and a cover-up for inflation.

482
00:38:39,878 --> 00:38:44,558
That's what this makes me think when you're looking at all these acronyms.

483
00:38:44,878 --> 00:38:45,778
And then on the slide, he goes,

484
00:38:46,338 --> 00:38:48,398
why does the money supply need to increase?

485
00:38:49,098 --> 00:38:50,458
Zero good answers.

486
00:38:51,098 --> 00:38:53,478
Austrian economics makes you understand what is going on

487
00:38:53,478 --> 00:38:56,878
and leads you to hold hard assets, which protects you from inflation.

488
00:38:57,418 --> 00:39:01,338
So, yeah, I mean, we could spend all day.

489
00:39:01,338 --> 00:39:10,198
We could spend all day looking at this, but at the end of the day, it's an elaborate excuse to print more money.

490
00:39:10,478 --> 00:39:14,498
And we all know that's ultimately where all of this ends up.

491
00:39:15,978 --> 00:39:17,258
And that's why we're in Bitcoin.

492
00:39:17,958 --> 00:39:19,238
At least that's why I'm in Bitcoin.

493
00:39:19,898 --> 00:39:20,338
Exactly.

494
00:39:20,438 --> 00:39:21,038
That's why we're here.

495
00:39:21,538 --> 00:39:22,098
That's why we're here.

496
00:39:22,718 --> 00:39:30,858
And one of the fascinating parts is, so the Fed can't regulate the banks, but I think they can, I think Congress regulates the banks.

497
00:39:31,338 --> 00:39:38,138
but the fed has some tools that impact how the banks treat reserves so there's like a a pseudo

498
00:39:38,138 --> 00:39:45,338
regulation uh that exists there and if if the whole goal of this is to reduce reserves on the

499
00:39:45,338 --> 00:39:53,658
fed's balance sheet and allow banks to take more risk like that that's that's the incentive structure

500
00:39:53,658 --> 00:39:57,898
is not aligned with everybody else like the banks are going to they're going to take more risk it

501
00:39:57,898 --> 00:40:07,518
just puts us back into a situation where we were at previously. And so I was looking at past times

502
00:40:07,518 --> 00:40:11,718
where there's been quantitative tightening. There were multiple times. It was 2019, there was a

503
00:40:11,718 --> 00:40:16,498
liquidity crisis. 2023, there was a liquidity crisis. Basically, the Fed took it to the brink

504
00:40:16,498 --> 00:40:19,838
of reducing their balance sheet as much as they could, and it ended up resulting in a liquidity

505
00:40:19,838 --> 00:40:26,178
crisis that needed to be addressed as quickly as possible. So the only way to get around that is to

506
00:40:26,178 --> 00:40:31,758
loosen how reserves are treated on banks, banks balance sheets. But yeah, it's a great point,

507
00:40:31,858 --> 00:40:36,158
Mason. I think that's hits the nail on the head. That was my biggest takeaway is like,

508
00:40:36,198 --> 00:40:42,938
this is a lot of words. This is a lot of words to say, yeah, we're just going to step in if the

509
00:40:42,938 --> 00:40:49,638
market freaks out. Yeah. So I wanted to chime in. So what happened was I wanted to figure out

510
00:40:49,638 --> 00:40:54,958
because Jerome Powell made the comment that they no longer look at money supply. And so I was like,

511
00:40:54,958 --> 00:41:00,738
well, this is kind of odd because Milton Friedman at Chicago School of Economics,

512
00:41:01,298 --> 00:41:07,798
what happened was, and the timeline's important. So in the 1950s to 1970s, this is when Friedman

513
00:41:07,798 --> 00:41:12,058
was, Milton Friedman, the economist, Austrian economics was more dominant. And what happened

514
00:41:12,058 --> 00:41:19,098
was that's when it was monetarism, looking at the monetary supply. In 1979 to 82, Paul Volcker

515
00:41:19,098 --> 00:41:24,458
began experimenting with money targeting, but it did not work to control inflation. Basically,

516
00:41:24,458 --> 00:41:28,958
basically from 1982 and onward, that's when they started doing yield curve control.

517
00:41:28,958 --> 00:41:34,298
And they switched from looking at monetary supply as being, how do we control this with

518
00:41:34,298 --> 00:41:46,436
interest rates And that when it basically took over And then you bring in Alan Greenspan where it brought it to the next level And so what you see happens it like people are like well how does money change

519
00:41:46,916 --> 00:41:53,656
The dollar bill may be the same, but how it's controlled through interest rates versus monetary supply.

520
00:41:53,796 --> 00:41:56,176
So now they don't look at monetary supply for the most part.

521
00:41:56,376 --> 00:41:57,756
They look at these yield controls.

522
00:41:57,916 --> 00:41:59,776
And then that's the purpose of this document.

523
00:41:59,956 --> 00:42:02,136
Again, it's like these things change.

524
00:42:02,176 --> 00:42:03,716
And then they roll out over time.

525
00:42:03,716 --> 00:42:07,776
And then when you look back at the history, you're like, oh, they used to look at the monetary supply.

526
00:42:07,896 --> 00:42:11,436
But then they stopped because inflation got out of control.

527
00:42:11,696 --> 00:42:14,816
And oh, my God, when did inflation get out of control?

528
00:42:14,876 --> 00:42:20,416
During the oil embargo of 79, which caused interest rates to go to whatever, 16.

529
00:42:20,596 --> 00:42:27,476
People were getting 30-year interest rates for 30-year mortgages at 15%, 16%.

530
00:42:27,476 --> 00:42:30,416
But somebody will say, oh, grain, you're a boomer.

531
00:42:30,496 --> 00:42:31,496
No, I'm Gen X.

532
00:42:31,496 --> 00:42:37,436
But when my parents bought a house back then when I was in kindergarten, the house was $40,000.

533
00:42:38,096 --> 00:42:40,176
So things were a lot different.

534
00:42:40,376 --> 00:42:42,816
We didn't have $39 trillion in debt.

535
00:42:43,176 --> 00:42:45,676
Anyway, with that said, these things are important.

536
00:42:45,796 --> 00:42:47,096
They roll out over time.

537
00:42:47,716 --> 00:42:53,276
And when you combine it all together, that's how you figure out where things are going.

538
00:42:53,396 --> 00:42:54,436
So things do change.

539
00:42:57,416 --> 00:42:58,796
Nothing stops this train, though.

540
00:42:58,916 --> 00:42:59,916
Nothing stops this train.

541
00:42:59,916 --> 00:43:00,336
It's still going.

542
00:43:00,336 --> 00:43:11,536
And even if you get rid of the yearly deficit, which is not going to happen because it's $1.7 trillion, that does not get rid of the $39 trillion debt.

543
00:43:11,696 --> 00:43:12,536
That's still there.

544
00:43:13,036 --> 00:43:14,196
You have to pay the interest on that.

545
00:43:14,256 --> 00:43:15,276
It's the second largest payment.

546
00:43:15,656 --> 00:43:18,376
We keep on beating these in every week.

547
00:43:18,856 --> 00:43:19,996
But anyway, nothing changes that.

548
00:43:20,076 --> 00:43:20,496
But continue.

549
00:43:20,856 --> 00:43:20,956
Yeah.

550
00:43:21,296 --> 00:43:22,816
So that was a good paper.

551
00:43:23,336 --> 00:43:24,476
This is a great segue.

552
00:43:25,756 --> 00:43:27,216
Yeah, this is a great segue.

553
00:43:27,216 --> 00:43:29,916
And we'll talk a little bit about our website here.

554
00:43:30,336 --> 00:43:32,536
Um, and we'll get into the Astro North.

555
00:43:32,636 --> 00:43:33,616
We'll get into this first question.

556
00:43:33,676 --> 00:43:36,096
Let's talk, which hits on some of all of these topics.

557
00:43:36,376 --> 00:43:38,716
But, uh, first off let's hit on an event.

558
00:43:38,896 --> 00:43:41,836
We have an upcoming event, true North networking event, Bitcoin Vegas.

559
00:43:41,976 --> 00:43:45,636
This is on Tuesday of the Bitcoin conference out in Vegas.

560
00:43:45,916 --> 00:43:47,796
It will be held at Gatsby's again.

561
00:43:47,936 --> 00:43:54,556
We, we have a hundred slots available and, uh, the tickets are $50, uh, for the first

562
00:43:54,556 --> 00:43:58,456
50 and a hundred dollars for the second 50 that just supports us to help break even on

563
00:43:58,456 --> 00:43:58,896
this event.

564
00:43:58,896 --> 00:44:01,716
and look forward to seeing everybody there that's going to be there.

565
00:44:02,116 --> 00:44:04,696
We also have a Bitcoin for Business event coming up in May.

566
00:44:04,856 --> 00:44:06,096
We will talk more about that later.

567
00:44:07,496 --> 00:44:09,936
The quick update, there's also,

568
00:44:10,316 --> 00:44:13,996
we are putting together a recurring series called the Weekly Signal.

569
00:44:14,196 --> 00:44:16,916
This is in analysis and commentary under the research tab.

570
00:44:17,256 --> 00:44:21,276
Please click subscribe if you would like to get email spammed this once a week.

571
00:44:21,976 --> 00:44:23,716
This is not a fee.

572
00:44:23,716 --> 00:44:26,676
It's just a subscribe if you want to follow along to everything we got going on.

573
00:44:26,676 --> 00:44:30,016
And we try to summarize all that information there in one direct location.

574
00:44:30,556 --> 00:44:34,636
But continue to point out that we've got articles all coming in here.

575
00:44:34,716 --> 00:44:38,216
If you want just one place to look for all this information, it will all be there.

576
00:44:39,796 --> 00:44:40,076
Cool.

577
00:44:40,396 --> 00:44:42,896
Shifting next, we've got this new section, Ask True North.

578
00:44:42,896 --> 00:44:47,396
One of the biggest and most hit on topics or the questions here is,

579
00:44:47,536 --> 00:44:52,656
could you ask the presenters to discuss optimal allocation strategy of strategy and strive funds and portfolio,

580
00:44:52,656 --> 00:44:57,256
So, selected percentage of the funds and optimal addition and how you adjust the allocation.

581
00:44:57,836 --> 00:44:57,956
Okay.

582
00:44:58,856 --> 00:45:03,116
So, so many topics in this one question.

583
00:45:03,716 --> 00:45:11,116
Sharp ratio, portfolio optimization, age, interest, return metrics, volatility, type

584
00:45:11,116 --> 00:45:12,656
of assets, the world of assets.

585
00:45:12,776 --> 00:45:13,796
What's the point of holding a stock?

586
00:45:13,876 --> 00:45:15,056
What's the whole point of holding credit?

587
00:45:15,496 --> 00:45:16,776
What's the risk profile?

588
00:45:16,776 --> 00:45:22,796
All of these things can be covered within this one question.

589
00:45:23,016 --> 00:45:28,636
So first of all, I'm going to start with just thinking about portfolio theory and capital

590
00:45:28,636 --> 00:45:30,456
structures, and we'll dive into this a bit.

591
00:45:30,616 --> 00:45:35,736
And I think, Ben, you've probably got a really good perspective on this, given some of your

592
00:45:35,736 --> 00:45:36,396
family's connections.

593
00:45:37,316 --> 00:45:42,856
So thinking about portfolio theory, portfolio optimization, different assets have different

594
00:45:42,856 --> 00:45:43,736
risk return metrics.

595
00:45:43,736 --> 00:45:48,116
If you have, if you're looking at optimizing portfolio, this is a, this is a Nobel prize

596
00:45:48,116 --> 00:45:53,356
winning theory. If you're interested in this, go look up a Markowitz modern portfolio theory.

597
00:45:53,356 --> 00:45:58,576
It's the mathematics behind diversification. It means if you have different portfolios,

598
00:45:58,656 --> 00:46:03,216
different risk return metrics, if you add different instruments to a portfolio, it can

599
00:46:03,216 --> 00:46:07,156
increase the return and reduce the risk of your portfolio. Now, if you're thinking about duration,

600
00:46:07,436 --> 00:46:10,476
you know, how long do you hold these instruments? Now that has an impact on

601
00:46:10,476 --> 00:46:15,076
how much risk and volatility you may be willing to hold in your portfolio at any point in time.

602
00:46:15,696 --> 00:46:21,976
If you've got a longer horizon before you need to access the capital, you would theoretically want

603
00:46:21,976 --> 00:46:29,056
to be taking the high volatility assets with the highest return potential or having a heavier

604
00:46:29,056 --> 00:46:33,356
weighting distribution on that front versus if you have a lower or shorter time horizon,

605
00:46:33,596 --> 00:46:37,736
you want to focus towards shorter duration assets with less volatility if you need that money in

606
00:46:37,736 --> 00:46:44,776
a very short amount of time. Now, this concept in theory applies to every corporation, every person,

607
00:46:45,236 --> 00:46:51,336
everybody thinking about capital allocation, capital optimization. For example, insurance

608
00:46:51,336 --> 00:46:55,656
companies, you think about liability profile of curve of liabilities you've got to pay out in the

609
00:46:55,656 --> 00:47:00,996
future. I need my assets to be stacked up and matched perfectly to that so I can optimize for

610
00:47:00,996 --> 00:47:09,676
the best risk return trade-off. So one of the stats that's available on all instruments is a

611
00:47:09,676 --> 00:47:17,536
Sharpe ratio. And this is something that strategy has continued to hit on very, a lot with STRC,

612
00:47:17,676 --> 00:47:23,796
the Sharpe ratio. How many units of risk volatility are you taking on for the yield that you get on

613
00:47:23,796 --> 00:47:30,956
a certain or specific instrument? So that's why pointing towards a higher Sharpe ratio is

614
00:47:30,956 --> 00:47:36,916
theoretically you're taking less units of risk per unit of yield. So when you think about where

615
00:47:36,916 --> 00:47:44,636
I plot that in the world of assets, typically assets with higher sharp ratios are a better

616
00:47:44,636 --> 00:47:49,516
allocation to your portfolio to help increase your return and reduce the risk of your portfolio.

617
00:47:49,516 --> 00:47:55,456
So it's these instruments as the volatility starts to dampen over time, they start to become

618
00:47:55,456 --> 00:48:03,296
very interesting portfolio allocations that reshape your efficient frontier of risk return

619
00:48:03,296 --> 00:48:11,696
metrics and can alter the trajectory of the math associated with it. So I'm going to pause there,

620
00:48:11,856 --> 00:48:16,656
toss it over to you guys. Sharp ratio, portfolio optimization. What are you guys thinking?

621
00:48:17,856 --> 00:48:24,796
I actually start far more fundamental because I think for most people, they actually probably

622
00:48:24,796 --> 00:48:31,256
never get to that level. When you think about how people are investing for their futures, a lot of

623
00:48:31,256 --> 00:48:36,396
times it goes on these autopilot programs, and I don't think there's a lot of deeper level thought

624
00:48:36,396 --> 00:48:43,016
there. But there's a reality out there where everybody's situation is so drastically different

625
00:48:43,016 --> 00:48:48,516
that the way you're going to structure a portfolio is going to need to be different than the way I

626
00:48:48,516 --> 00:48:54,436
structure a portfolio. So for instance, coming out of college, you're just getting into the workforce

627
00:48:54,436 --> 00:49:00,776
right away. You've got a lot of expenses that are coming up. You've got to spend a lot of time

628
00:49:00,776 --> 00:49:06,076
focusing on building the foundation of your portfolio, right? In the early True Norris,

629
00:49:06,076 --> 00:49:09,676
I used to always talk about this, about, you know, build the base, never risk the base,

630
00:49:09,856 --> 00:49:13,696
right? And then you can take risk from there. You know, I think that's incredibly important.

631
00:49:14,276 --> 00:49:19,516
I always say in the first 10 years, once you get out of college, you know, you should be hyper

632
00:49:19,516 --> 00:49:26,896
focused on building that base and putting away as much money as you possibly can. Because if you

633
00:49:26,896 --> 00:49:32,096
are really aggressive in the first 10 years, you get to maximize the compounding effect.

634
00:49:33,016 --> 00:49:36,536
And it's overlooked by a lot of people. A lot of people will play the catch-up game, right? Well,

635
00:49:36,556 --> 00:49:41,216
I'll start putting in more later and later in my career when I'm making more money. The most

636
00:49:41,216 --> 00:49:48,576
valuable money you can put away is early on. And to your point, Jeff, it then depends on what your

637
00:49:48,576 --> 00:49:54,096
risk tolerances, right? Is this money you might need or is this money you definitely don't need

638
00:49:54,096 --> 00:49:59,136
until you're going to be in retirement age? That changes the way that you would allocate those.

639
00:49:59,976 --> 00:50:05,156
Now, I can't skip past digital credit as a concept in here because I actually think it's

640
00:50:05,156 --> 00:50:11,476
very disruptive to this entire model. And the reason I think it's so disruptive to this entire

641
00:50:11,476 --> 00:50:17,276
model is that, you know, originally what you would put digital credit against would be the fixed

642
00:50:17,276 --> 00:50:23,136
income or the bond portion of people's portfolios. So normally what happens would be earlier in your

643
00:50:23,136 --> 00:50:27,536
career while you've got a long timeline, you've got a salary, you have income coming in, you don't

644
00:50:27,536 --> 00:50:31,956
need this investment capital, you would go further out the risk curve, you'd allocate out into

645
00:50:31,956 --> 00:50:36,296
equities because you can take that excess risk to get bigger returns during that portion of your

646
00:50:36,296 --> 00:50:42,896
career. As you shift more towards retirement, traditional FAs would tell you you've got to now

647
00:50:42,896 --> 00:50:48,416
rebalance your portfolio, you need to start taking less risk, allocating more to the fixed

648
00:50:48,416 --> 00:50:53,116
income portion of your portfolio as you prepare for retirement where you need to live on those assets.

649
00:50:54,576 --> 00:50:59,896
Now what's happening is if you look at products like STRC and SATA,

650
00:51:01,116 --> 00:51:07,516
while we initially were always talking about these products through the lens of fixed income

651
00:51:07,516 --> 00:51:12,376
vehicles and competing with the fixed income market and having that be kind of the TAM for

652
00:51:12,376 --> 00:51:19,016
these products. There's an interesting component to this, which is that the yields on these products

653
00:51:19,016 --> 00:51:23,416
are better than equity returns, right? So if you were putting equities in your portfolio,

654
00:51:23,416 --> 00:51:29,356
you would go and put the S&P 500, you'd put the Qs, you'd put all the standard funds in there,

655
00:51:29,396 --> 00:51:33,776
and that would kind of be the core portion of what someone's retirement portfolio would look like.

656
00:51:34,396 --> 00:51:40,276
And when you're doing that, you're targeting an average return of 8%, 9%, 10%, right? That's what

657
00:51:40,276 --> 00:51:44,256
you're hoping for out of those types of funds on an average over time, right? You're hoping to

658
00:51:44,256 --> 00:51:49,556
average that. Well, now you've got these new instruments with an entirely different risk

659
00:51:49,556 --> 00:51:57,396
profile to them. And obviously they're young, but they're disruptive because they're providing

660
00:51:57,396 --> 00:52:02,496
higher annual returns just through the dividend income than you're getting in your equities

661
00:52:02,496 --> 00:52:09,136
portfolio. So now there's a new option that people have, which is I might not need to transition my

662
00:52:09,136 --> 00:52:14,536
portfolio at all because I'm getting equity returns. And if I don't need the dividends,

663
00:52:14,536 --> 00:52:20,096
I can reinvest or reallocate the dividends to something else. And then when I slide into the

664
00:52:20,096 --> 00:52:25,776
retirement portion of my life, now I've got the fixed income and I can live off those investments.

665
00:52:25,776 --> 00:52:30,296
So they're these weird blended vehicles. And so I think we actually have done ourselves a little

666
00:52:30,296 --> 00:52:37,156
bit of a disservice early on talking about these as only really targeting the fixed income markets

667
00:52:37,156 --> 00:52:42,536
because I actually think it's the entire equity market. It's the entire equities market. And when

668
00:52:42,536 --> 00:52:46,816
you start looking at what's happening now, right, you go out and you look at the futures and they're,

669
00:52:46,816 --> 00:52:52,976
you know, nuking like crazy right now. Like there's so much volatility out there that people

670
00:52:52,976 --> 00:52:57,376
are having a hard time stomaching it. You know, we're the, we're out, we're as far out the risk

671
00:52:57,376 --> 00:53:01,556
curve as you can get in a lot of our portfolios. Although now I think a lot of us is that have

672
00:53:01,556 --> 00:53:04,996
actually reined in, you know, look at all the time we spent talking about fixed income products,

673
00:53:04,996 --> 00:53:10,236
but you know we got comfortable with the bitcoin risk and the volatility in bitcoin and that's a

674
00:53:10,236 --> 00:53:14,956
different feeling a lot of people can't stomach the volatility in their just their standard equities

675
00:53:14,956 --> 00:53:21,196
portfolio and the world's gotten really uncertain so the volatility is ramped up across these entire

676
00:53:21,196 --> 00:53:27,016
portfolios and now even during these periods of volatility you're seeing these instruments

677
00:53:27,016 --> 00:53:34,856
providing equity plus returns and tax advantage structures that are holding stable prices

678
00:53:34,856 --> 00:53:36,316
The volatility is compressing.

679
00:53:36,416 --> 00:53:37,856
That Sharpe ratio is going up.

680
00:53:38,696 --> 00:53:46,876
So I actually think these are like revolutionary products for a portfolio because of that unique

681
00:53:46,876 --> 00:53:48,096
structure that's out there.

682
00:53:48,876 --> 00:53:50,376
You don't find that everywhere else.

683
00:53:50,456 --> 00:53:54,276
If you wanted to get a 10% plus return, you had to slide so far out the risk curve.

684
00:53:54,456 --> 00:53:56,036
You had to be off in the tech sector.

685
00:53:56,216 --> 00:53:58,556
And well, that's anything but certain these days.

686
00:53:58,636 --> 00:53:59,496
We've been watching that.

687
00:53:59,596 --> 00:54:01,236
All the big names start getting disrupted.

688
00:54:01,396 --> 00:54:02,756
All these new products are coming out.

689
00:54:02,896 --> 00:54:04,496
There's anything but stability there.

690
00:54:04,496 --> 00:54:11,136
cash flows are under attack with all the innovation happening and all the ai tools coming out you're

691
00:54:11,136 --> 00:54:18,016
not certain how how strong future cash flows are which starts to bring into question you know your

692
00:54:18,016 --> 00:54:25,136
pe ratios out there are those pe ratios significantly inflated because there was this unfounded belief

693
00:54:25,136 --> 00:54:28,896
in the future cash flows that were going to be coming in the future earnings of all these companies

694
00:54:28,896 --> 00:54:33,056
is that is certain anymore is there an adjustment that has to happen to the broad pe ratios

695
00:54:33,056 --> 00:54:41,496
like the markets are changing and it's it's calling into question you know very interesting

696
00:54:41,496 --> 00:54:47,156
portfolio construction ideas it's changing the way that you you have to look at those

697
00:54:47,156 --> 00:54:53,376
and so i think we're just in this really unique point in time now where these products are

698
00:54:53,376 --> 00:54:58,236
emerging they're still in the battle testing phase obviously obviously you have to have the

699
00:54:58,236 --> 00:55:04,396
belief that Bitcoin doesn't disappear, right? Which is the same risk you're taking with a company as

700
00:55:04,396 --> 00:55:08,996
well, right? You're planning on that company being around, not getting disrupted, not getting pushed

701
00:55:08,996 --> 00:55:15,716
out of business. Same risk profile there. You're seeing all the mega players come in, right? Morgan

702
00:55:15,716 --> 00:55:21,576
Stanley's coming out. They undercut everyone on fees on their new Bitcoin ETF, which certainly is

703
00:55:21,576 --> 00:55:26,776
not an accident, right? They're not playing to be second or third. So I think there's no mistake

704
00:55:26,776 --> 00:55:28,476
for why they undercut IBIT.

705
00:55:29,336 --> 00:55:30,776
And so now you're starting to see

706
00:55:30,776 --> 00:55:32,796
all these traditional financial institutions

707
00:55:32,796 --> 00:55:35,236
get heavily involved with an incentive structure

708
00:55:35,236 --> 00:55:36,976
that leads them to support this area.

709
00:55:37,096 --> 00:55:39,536
So you start to feel more comfortable

710
00:55:39,536 --> 00:55:40,896
with the risk profile of Bitcoin.

711
00:55:41,156 --> 00:55:42,236
And if you feel more comfortable

712
00:55:42,236 --> 00:55:43,716
with the risk profile of Bitcoin,

713
00:55:44,536 --> 00:55:45,956
you start to feel far more comfortable

714
00:55:45,956 --> 00:55:49,196
with the risk profile of the preferred equities.

715
00:55:50,756 --> 00:55:53,576
And so we're in this transition period now

716
00:55:53,576 --> 00:55:56,036
that I think is going to change the way

717
00:55:56,036 --> 00:56:03,036
people think about their portfolios. I also think that there's a bit of a

718
00:56:03,596 --> 00:56:11,116
second effect here for products where the return is not just shown in like the price of the stock

719
00:56:11,116 --> 00:56:15,516
and the total value, right? There's a different feeling that people get when a dividend payment

720
00:56:15,516 --> 00:56:19,676
comes in, feels more familiar and the more frequent they are, right? Like there's almost

721
00:56:19,676 --> 00:56:24,916
a calming effect to that when you start to see it coming in month after month and week after week.

722
00:56:24,916 --> 00:56:31,436
And so it's just a, it's a unique structure and a unique product to fit into a portfolio that I

723
00:56:31,436 --> 00:56:35,716
think is going to change portfolio construction here over the next, you know, two, three years,

724
00:56:35,716 --> 00:56:42,436
where this could be a core base allocation within a portfolio because of the equity returns,

725
00:56:42,436 --> 00:56:47,156
the tax advantage structure and the fixed income component to it.

726
00:56:47,536 --> 00:56:52,696
Absolutely. People are used to income just broadly. You don't have to make a decision.

727
00:56:52,696 --> 00:56:56,336
if you're in a position where you don't have to make a decision that's far easier and one thing

728
00:56:56,336 --> 00:57:01,136
you said at the very beginning here ben is i think valuable to think about is uh your time

729
00:57:01,136 --> 00:57:07,756
and energy is also an asset so like if it you can think about where do you want to where do you want

730
00:57:07,756 --> 00:57:13,776
to spend your time and energy like for me like i resonated with what how you explain that because

731
00:57:13,776 --> 00:57:18,676
early on i built a base foundation i got rid of the debt on my balance sheet i cleared my student

732
00:57:18,676 --> 00:57:25,896
loans and I built a base. And then, uh, and then over time I started taking riskier bets with

733
00:57:25,896 --> 00:57:28,996
riskier assets because I was like, I don't want to work where I'm working right now.

734
00:57:29,456 --> 00:57:35,696
So I'm going to go riskier. And if I can get an even larger base, build that base even larger,

735
00:57:35,696 --> 00:57:41,036
then I could take more risk in my personal life, which is what I wanted to do. Take more risk with

736
00:57:41,036 --> 00:57:46,376
my energy and time. And that's ultimately how I've kind of landed here today, which is an

737
00:57:46,376 --> 00:57:51,536
interesting way to think about it. Yeah, risk is a luxury and it comes with that early planning,

738
00:57:51,816 --> 00:57:56,736
right? Not everyone has the luxury of being able to take risks. So you have to stack the deck in

739
00:57:56,736 --> 00:58:02,896
your favor and be willing to sacrifice a little early on to put yourself in the position to take

740
00:58:02,896 --> 00:58:07,656
the swings that make the difference, right? Everyone that's on here, that was a whole part

741
00:58:07,656 --> 00:58:11,556
of what happened, right? We all had high conviction. We'd all put ourselves in positions

742
00:58:11,556 --> 00:58:17,396
where we can take big swings and then we took big swings and you know that's that's how this happens

743
00:58:17,396 --> 00:58:22,156
but you know for a lot of people you know there's an acknowledgement that not everyone's gotten to

744
00:58:22,156 --> 00:58:26,916
that point right you're still dealing with student loans and you're still dealing with car loans and

745
00:58:26,916 --> 00:58:31,116
mortgages and all these things and wages not keeping up the cost of things which is taking

746
00:58:31,116 --> 00:58:36,216
away the amount you can put into your investment accounts right like there is certainly that type

747
00:58:36,216 --> 00:58:43,776
of a crisis but I think that's why this type of education early on is so critical like I have no

748
00:58:43,776 --> 00:58:48,996
doubt that you know Mason and Dan are going to be richer than all of us like they got the foundation

749
00:58:48,996 --> 00:58:54,716
it clicked for them way earlier than it clicked for you know any of the rest of us like so in that

750
00:58:54,716 --> 00:59:01,596
we're having that time in front of you is such a valuable tool particularly when you understand

751
00:59:01,596 --> 00:59:06,516
all these different concepts and put that structure in place to let you go a little

752
00:59:06,516 --> 00:59:10,956
further out that risk curve to try to get those higher returns over time, that compound.

753
00:59:12,816 --> 00:59:16,456
Another really fascinating thing that's evolving here is that if you wanted to live in an entire

754
00:59:16,456 --> 00:59:22,096
Bitcoin-denominated ecosystem and just disregard the other equity world, you could.

755
00:59:22,796 --> 00:59:27,076
You could take different risk-return volatilities across the Bitcoin ecosystem.

756
00:59:27,076 --> 00:59:33,576
And I even pulled together an illustrative example based on some example risk tolerances.

757
00:59:34,656 --> 00:59:36,996
These are purely illustrative.

758
00:59:37,456 --> 00:59:41,936
I know this is financial advice, but looking at different color schemes here, high volatility,

759
00:59:42,096 --> 00:59:45,596
Bitcoin equity, Bitcoin, Bitcoin backed digital credit, traditional cash and treasuries.

760
00:59:46,136 --> 00:59:51,056
Now, the typical Bitcoiner that thinks the entire world is going to collapse is going

761
00:59:51,056 --> 00:59:52,476
to disagree with all of this stuff.

762
00:59:52,636 --> 00:59:54,616
But that is a different mindset.

763
00:59:54,616 --> 01:00:02,196
but this is a perspective that you could have on a portfolio allocation depending on your risk

764
01:00:02,196 --> 01:00:07,376
tolerances having different exposure depending on different points in time depending on how

765
01:00:07,376 --> 01:00:14,556
how much how much time you have towards your horizon of when you want to use those assets

766
01:00:14,556 --> 01:00:19,096
this is what a typical framework would have been historically something something like this

767
01:00:19,096 --> 01:00:21,116
Jeff, can I hop in here?

768
01:00:21,356 --> 01:00:21,796
Absolutely.

769
01:00:22,336 --> 01:00:33,396
Because, you know, I kind of deject the traditional notion that volatility is risk, right?

770
01:00:33,956 --> 01:00:36,196
Like, for example, bonds.

771
01:00:36,436 --> 01:00:42,336
Bonds are not very volatile, but for Dan and I, they're incredibly risky, right?

772
01:00:42,336 --> 01:00:45,776
Like, imagine us holding a 30-year bond.

773
01:00:45,776 --> 01:00:53,356
Like, it should be illegal for anyone under the age of, you know, like 60 to hold bonds.

774
01:00:54,096 --> 01:01:03,356
But yeah, like, from my perspective, I'm a young Bitcoin maximalist.

775
01:01:03,476 --> 01:01:07,356
And that's how I'm viewing my own portfolio and how I'm viewing the world.

776
01:01:07,616 --> 01:01:15,656
And I also, like another factor here, and Jeff, you touched on it, but is counterparty risk?

777
01:01:15,776 --> 01:01:19,856
Like that is a very real thing.

778
01:01:19,856 --> 01:01:27,856
And this reminds me of Dan and I's presentation in Strategy World, which is coming out shortly.

779
01:01:28,116 --> 01:01:33,856
But we put a chart that compared the S&P and gold.

780
01:01:34,196 --> 01:01:37,676
And I think from 2000, gold has outperformed.

781
01:01:39,036 --> 01:01:40,856
And gold is a better asset.

782
01:01:41,236 --> 01:01:43,296
You know, that's something that you could have just had in your basement.

783
01:01:43,296 --> 01:02:07,296
And every night you could have looked at it and said, no, it's still gold. It's still there. And you could have done that for decades and you would have outperformed the S&P. And the S&P is a far more dynamic, complex, obfuscated system where you really don't know what risk you're taking.

784
01:02:07,296 --> 01:02:10,096
There's no way to fully comprehend that.

785
01:02:10,096 --> 01:02:13,836
So Bitcoin allows you to eliminate counterparty risk.

786
01:02:13,836 --> 01:02:17,896
Of course, you're taking personal risk, and that's scary as well.

787
01:02:17,896 --> 01:02:22,016
That's why I think there is room for both.

788
01:02:22,016 --> 01:02:53,194
And that how I think about my portfolio is you do want to eliminate counterparty risk because there a long duration Like I plan to live for a while and I only see kind of the entropy or chaos in the world increasing unfortunately as there these forces of populism technological disruption multipolarism

789
01:02:53,194 --> 01:02:55,634
And I think that's the word.

790
01:02:57,274 --> 01:02:57,754
Around.

791
01:02:58,134 --> 01:02:58,554
Yeah.

792
01:02:59,634 --> 01:03:00,654
Yeah, yeah, yeah.

793
01:03:01,314 --> 01:03:02,434
Around the world.

794
01:03:02,674 --> 01:03:02,734
Yeah.

795
01:03:02,734 --> 01:03:03,874
Becoming more polarized.

796
01:03:04,634 --> 01:03:04,874
Yeah.

797
01:03:04,974 --> 01:03:06,734
So there's a lot of chaos.

798
01:03:07,054 --> 01:03:13,274
So I do think like for me, the foundation is Bitcoin, bearer asset.

799
01:03:13,514 --> 01:03:14,774
And I don't view that as risky.

800
01:03:14,914 --> 01:03:18,774
Yes, it's incredibly volatile, but I want to embrace the volatility because I'm young.

801
01:03:19,134 --> 01:03:23,014
I'm making a cash flow and I don't need the cash right now.

802
01:03:23,194 --> 01:03:45,434
Now, I'll move on. On the equity side, I'm just looking at equities denominated in Bitcoin. Which equities are going to beat Bitcoin? The equities that have more Bitcoin over time, right? How do you beat Bitcoin? More Bitcoin. That's like the iconic Michael Saylor quote.

803
01:03:45,434 --> 01:03:54,214
and um and then finally i i think for short-term cash something like if you are holding money for

804
01:03:54,214 --> 01:03:59,814
taxes or or if you are uh you have some cash that you're going to need to access in under

805
01:03:59,814 --> 01:04:06,114
probably four years then something like stretch or seda is extremely attractive and it can fill

806
01:04:06,114 --> 01:04:14,254
that role which otherwise hadn't been available uh until you know eight months ago so those are

807
01:04:14,254 --> 01:04:18,974
incredible products that I can now utilize as a part of a broader strategy.

808
01:04:20,494 --> 01:04:27,114
Yeah, it's all dependent on perspective, time horizon, your age, your understanding of the

809
01:04:27,114 --> 01:04:31,394
world and where you want things to be and where you want to be, how much risk you want to take

810
01:04:31,394 --> 01:04:38,254
in different places. I mean, I agree with you. I view Bitcoin as not risky, as volatile, yes,

811
01:04:38,314 --> 01:04:43,474
but I view it as saving. So it's like, we view that world that way. But if I go talk to some of

812
01:04:43,474 --> 01:04:50,114
old colleagues in the insurance world, like they don't. So you've got to meet them where they're at.

813
01:04:50,114 --> 01:04:58,514
And I mean, these new design of these securities provides that framework for their ability to

814
01:04:58,514 --> 01:05:05,954
digest it, which I think is fascinating. And one last point, and Ben touched on this, is I think

815
01:05:05,954 --> 01:05:12,034
equities in general are becoming more volatile as there's more disruptive technologies. And that,

816
01:05:12,034 --> 01:05:27,394
I think that is a systemic change in the equity market, which I don't think it's a coincidence that digital cap or digital credit is coming in at this time of increased volatility.

817
01:05:28,334 --> 01:05:36,214
And I think this is the main catalyst to that disruption.

818
01:05:36,214 --> 01:05:40,594
We'll force allocators into looking at alternatives.

819
01:05:40,594 --> 01:05:45,654
100. Yeah, completely agree. And now I think this next topic ties all of us together,

820
01:05:45,654 --> 01:05:49,614
like Fed, sharp ratio, portfolio optimization, allocation, et cetera.

821
01:05:50,534 --> 01:05:53,374
What is the point of holding an equity?

822
01:05:55,534 --> 01:06:02,554
Question mark. Anybody take it like, what's the point? What's the point of holding an equity?

823
01:06:02,554 --> 01:06:23,794
So the classic term that I would describe it as, and also Josh Mandel, welcome him back to X, was an equity, a non-dividend paying equity is the fact that it should be based upon a future claim of cash flow of the company.

824
01:06:24,614 --> 01:06:26,434
But it doesn't actually have a claim on it.

825
01:06:26,434 --> 01:06:34,674
So the stock, if the company makes more earnings per share, then in theory, the value of it would go up or you'd have a PE expansion.

826
01:06:34,814 --> 01:06:37,134
That's the way I would look at it in the traditional sense.

827
01:06:37,974 --> 01:06:47,154
On a Bitcoin treasury company for strategy, MSTR would be betting on the equity of the company based upon the future appreciation value of Bitcoin.

828
01:06:48,334 --> 01:06:49,674
That's the way I would look at it.

829
01:06:51,594 --> 01:06:56,354
I was aiming for this question to be like philosophical, right?

830
01:06:56,354 --> 01:06:57,654
Because how did we get here?

831
01:06:58,154 --> 01:07:01,354
How did we get to this world where there are however many equities?

832
01:07:01,414 --> 01:07:02,654
You could go buy any of them.

833
01:07:02,894 --> 01:07:04,554
You could go buy any of these equities.

834
01:07:05,374 --> 01:07:08,534
And people are just buying them because everybody before them bought them.

835
01:07:08,534 --> 01:07:10,814
And they've got these portfolios full of them.

836
01:07:11,234 --> 01:07:23,714
Jeff, I've been thinking about this because ultimately, in the cultural zeitgeist of America,

837
01:07:23,714 --> 01:07:32,834
it is known that you make your money and you put it in an IRA 401k and that money is going into

838
01:07:32,834 --> 01:07:42,954
bonds and equities. And I think that structure, um, it was, it was created by the fact that

839
01:07:42,954 --> 01:07:50,394
like, I think, I think intuitively maybe not, uh, maybe, maybe they don't understand this,

840
01:07:50,394 --> 01:07:57,074
you know, like really, but intuitively they know that they can't hold cash because it's melting.

841
01:07:58,114 --> 01:08:05,014
So you, you, you need to, you need to add some risk in order for it to be inflation. And that's

842
01:08:05,014 --> 01:08:12,434
what, you know, if you think the S and P is, is at, what was it done? You know, 9% historically

843
01:08:12,434 --> 01:08:18,894
and inflation is 7% that, that allows you to tread water. Whereas if you're not doing that,

844
01:08:18,894 --> 01:08:26,194
you're getting crushed. Yeah. Well, you just have to think about how inflation trickles down

845
01:08:26,194 --> 01:08:33,294
to the companies, right? So if all the goods start costing more, that means they have to raise their

846
01:08:33,294 --> 01:08:40,114
prices every year to maintain just top line, bottom line. So revenues are perpetually going up,

847
01:08:40,414 --> 01:08:45,694
bottom lines are perpetually going up in raw dollar amounts, right? So that inflation is just

848
01:08:45,694 --> 01:08:51,114
trickling down into the financials of all of these companies. And then as those financials show higher

849
01:08:51,114 --> 01:08:56,834
and higher figures for revenues and bottom line, the equities keep expanding with it, right? So

850
01:08:56,834 --> 01:09:01,654
you're just hoping that the equity expands more than the debasement is during that time.

851
01:09:02,174 --> 01:09:08,714
Yeah. And so it is all a system that's built on around that one fundamental understanding.

852
01:09:08,954 --> 01:09:12,754
I won't say understanding because I don't think most people actually understand it, but

853
01:09:12,754 --> 01:09:19,194
That one fundamental issue, which is the money is going to be debased, where do you put it in?

854
01:09:19,234 --> 01:09:25,334
Well, you have to put it into something where that debasement is going to show up in something that generates value somewhere.

855
01:09:25,834 --> 01:09:27,554
Now, it doesn't mean it's real value, right?

856
01:09:27,554 --> 01:09:37,394
If you go and take the S&P 500 returns and you normalize it and you back out monetary debasement over that time, the M2 money supply, it's basically flat.

857
01:09:38,114 --> 01:09:39,234
It's done nothing.

858
01:09:39,234 --> 01:09:47,534
there's been no real growth no real value driven out of there it's almost all monetary or m2 money

859
01:09:47,534 --> 01:09:54,394
supply growth so it's just interesting that you get conditioned that way because you just see these

860
01:09:54,394 --> 01:09:59,954
these equities always going up as long as you own a basket right if you're spreading that

861
01:09:59,954 --> 01:10:03,814
counterparty risk you were talking about mason you're going i'm not going to be a stock picker

862
01:10:03,814 --> 01:10:13,634
So I'm just going to take on a tiny piece of everybody's counterparty risk into this one basket, which used to be mutual funds, and now it's ETFs or indexes or whatever.

863
01:10:14,434 --> 01:10:21,214
And I'm going to put that into my portfolio, and this monetary debasement is going to trickle down, and it's going to help the revenues increase.

864
01:10:21,214 --> 01:10:22,954
It's going to help the bottom lines increase.

865
01:10:23,294 --> 01:10:25,954
And over time, those equities are going to keep being more valuable.

866
01:10:26,094 --> 01:10:29,294
And you see that with that steady line that just keeps going up.

867
01:10:29,734 --> 01:10:33,554
Little blips once in a while when you get a black swan, but then it always keeps going up.

868
01:10:33,814 --> 01:10:37,574
And that's just structural because of the problem with the money.

869
01:10:37,574 --> 01:10:47,254
And that's why I think all of us have become so comfortable with Bitcoin is because you realize the value of scarcity.

870
01:10:47,854 --> 01:10:51,214
It doesn't exist almost anywhere out there.

871
01:10:51,994 --> 01:11:00,014
And so when you find something that's truly scarce that is also designed for the world we're moving into.

872
01:11:01,434 --> 01:11:02,914
Gold was great forever.

873
01:11:02,914 --> 01:11:10,274
like it's there's not really a big fight between bitcoiners and gold bugs right i think that's more

874
01:11:10,274 --> 01:11:16,274
sport than anything like we all see the same problem we disagree on the solution for the

875
01:11:16,274 --> 01:11:21,934
future moving forward right gold served well for thousands of years it was great but we're not in

876
01:11:21,934 --> 01:11:28,014
that age anymore now we're in a digital age and all the value is being created and transmitted

877
01:11:28,014 --> 01:11:34,214
digitally and so you want scarcity that's native to digital rails you're not living you know and

878
01:11:34,214 --> 01:11:38,394
just operating in some small community where you've got 200 people around you and you're all

879
01:11:38,394 --> 01:11:42,994
trading and passing currencies back and forth in physical form anymore right the world has got

880
01:11:42,994 --> 01:11:49,134
global it's flattened out you know so there's no no more barriers and so an asset like bitcoin that

881
01:11:49,134 --> 01:11:56,854
has that ultimate scarcity but is also natively aligned to where the world is moving like that's

882
01:11:56,854 --> 01:12:04,634
the bigger bet, right? We think we found the scarcity that's in the form that is functional

883
01:12:04,634 --> 01:12:10,014
for the future. I don't see gold as being functional for the future. Does it mean it's

884
01:12:10,014 --> 01:12:15,034
not going to hold value? No, it might. I'm not against people that want to hold gold. If that's

885
01:12:15,034 --> 01:12:18,474
comfortable to you, have at it. I don't think it's the right answer for where we're going,

886
01:12:19,154 --> 01:12:23,594
right? All you have to do is look at the last decade and go, do you think we're going to revert

887
01:12:23,594 --> 01:12:29,514
back to a more analog system or are we going to go more and more digital now you've got ai agents

888
01:12:29,514 --> 01:12:33,514
people are giving them bitcoin wallets they're allowing them to transact there's no intermediaries

889
01:12:33,514 --> 01:12:38,954
it's the only decentralized asset that's out there that they can utilize right otherwise they gotta

890
01:12:38,954 --> 01:12:43,354
you know play with some crypto token with a central issuer that can change the supply roll back the

891
01:12:43,354 --> 01:12:48,794
chains whatever you want like that doesn't function the same way as something truly decentralized when

892
01:12:48,794 --> 01:12:51,614
when you move into a trustless world.

893
01:12:51,614 --> 01:12:53,654
You don't want to have to trust anybody anymore.

894
01:12:53,654 --> 01:12:57,254
And so transmitting value on those rails

895
01:12:57,254 --> 01:13:00,274
only works with one asset, that's going to be Bitcoin.

896
01:13:00,274 --> 01:13:02,814
And so that's the new bet, right?

897
01:13:02,814 --> 01:13:04,294
So we see that.

898
01:13:04,294 --> 01:13:05,634
It doesn't mean the US dollar

899
01:13:05,634 --> 01:13:07,014
is going to get ripped out of the system.

900
01:13:07,014 --> 01:13:08,694
I don't think that's realistic,

901
01:13:08,694 --> 01:13:10,734
not probably in our lifetimes.

902
01:13:10,734 --> 01:13:13,614
And I think if it did, it would be catastrophic.

903
01:13:13,614 --> 01:13:16,674
When you look at how big like the credit markets are

904
01:13:16,674 --> 01:13:18,794
that are out there, like imagine unwinding

905
01:13:18,794 --> 01:13:23,574
all of that overnight. Oh my God, no. Everything denominated in the US dollar, you evaporate

906
01:13:23,574 --> 01:13:30,014
quadrillions of dollars of wealth out there and you just move on to a Bitcoin. That's not realistic.

907
01:13:30,014 --> 01:13:34,934
There's got to be a transition. Yeah, that'd be scary. Which is why the other reason I think that

908
01:13:34,934 --> 01:13:42,414
these digital credit products are so transformative is because it's providing the first time that you

909
01:13:42,414 --> 01:13:47,694
have an off-ramp from the credit products that are denominated in US dollars and you're now

910
01:13:47,694 --> 01:13:52,794
moving that into a system that's backed by something, right? It's backed by that scarcity

911
01:13:52,794 --> 01:13:58,374
that the Bitcoin that's being held. And so it's providing an off ramp for the credit markets. And

912
01:13:58,374 --> 01:14:02,274
I think over time, it's going to draw more and more capital out of those as these weaknesses

913
01:14:02,274 --> 01:14:05,754
bubble up and start to show themselves in the market, it's going to become unavoidable.

914
01:14:06,194 --> 01:14:11,594
So I think there's a long transition period here, but I do think it's coming.

915
01:14:11,594 --> 01:14:21,334
So I want to boil it down even more, which sounds crazy, but what's the purpose of equity?

916
01:14:22,474 --> 01:14:31,394
Why does it exist at its foundational form? It exists because the Dutch East India Company

917
01:14:31,394 --> 01:14:38,974
wanted to go raise capital. It exists because a company in the 1600s wanted to go raise capital.

918
01:14:38,974 --> 01:14:41,934
They're like, you know what? I'll give you a piece of my company in exchange for money today.

919
01:14:42,654 --> 01:14:46,674
And I don't have to pay you back, but you can get a piece of my company. If somebody's willing to

920
01:14:46,674 --> 01:14:53,954
trade it, go for it. But the whole entire purpose was to raise capital. Why do companies IPO?

921
01:14:54,434 --> 01:15:00,374
The IPO, because they want to go raise capital and go operate into the world. Go ahead, Mike.

922
01:15:00,414 --> 01:15:05,374
You want to jump in there? Yeah. So I looked at it from the investor's perspective,

923
01:15:05,374 --> 01:15:09,834
but what you're saying is 100% true from the company's perspective.

924
01:15:10,374 --> 01:15:12,054
So exactly right.

925
01:15:12,374 --> 01:15:13,274
What can you do?

926
01:15:13,354 --> 01:15:15,394
You could float a bond, right?

927
01:15:15,394 --> 01:15:22,054
You could take out a loan or invented the equities where you don't pay that back.

928
01:15:22,214 --> 01:15:25,414
And the benefit is that there's a secondary market for it where it could trade.

929
01:15:26,114 --> 01:15:27,314
And you're exactly right.

930
01:15:27,594 --> 01:15:32,674
And so if you look at it from that perspective, yeah, that's why we talk about the difference

931
01:15:32,674 --> 01:15:36,094
between with the capital stack.

932
01:15:36,214 --> 01:15:37,974
And you look at the prefs and you look at the equities,

933
01:15:38,194 --> 01:15:40,034
where they're in that capital stack.

934
01:15:40,034 --> 01:15:44,214
And then you look at bonds or the converts

935
01:15:44,214 --> 01:15:46,594
for strategy being the highest in the capital stack.

936
01:15:47,334 --> 01:15:50,054
And then with the converts,

937
01:15:50,294 --> 01:15:51,614
if they don't hit those converts,

938
01:15:51,934 --> 01:15:54,214
they have to pay either in either a converts

939
01:15:54,214 --> 01:15:57,094
or it's cash in stock or it's all cash.

940
01:15:57,754 --> 01:15:58,714
And so go ahead.

941
01:15:58,934 --> 01:15:59,114
So yeah.

942
01:15:59,314 --> 01:16:00,934
So we're operating in this ecosystem

943
01:16:00,934 --> 01:16:02,654
that's existed forever, right?

944
01:16:02,674 --> 01:16:07,374
It's existed for a really long time because a company in the 1600s wanted to go issue equity.

945
01:16:07,534 --> 01:16:10,094
And that actually created, oh, let's create a capital structure.

946
01:16:10,254 --> 01:16:11,394
Let's have equity at the bottom.

947
01:16:11,634 --> 01:16:14,254
And then if I have debt, I could...

948
01:16:14,254 --> 01:16:24,694
Everything that's operating and happening right now with strategy and our company and everything that we're doing, it's all happened before.

949
01:16:25,414 --> 01:16:27,454
Capital structure has been around for a really long time.

950
01:16:27,454 --> 01:16:31,794
And I was just playing around here with the perplexity.

951
01:16:31,794 --> 01:16:37,154
and I think this information is fun to share. Equity is an ownership claim on the net assets

952
01:16:37,154 --> 01:16:43,714
of a firm. Assets minus liabilities, equity holders are residual claimants. They get what

953
01:16:43,714 --> 01:16:49,074
is left after all the debts and other fixed claims are paid. So thinking about this,

954
01:16:50,594 --> 01:16:56,594
a company issues equity to raise capital, but there's a claim on the residual assets of the

955
01:16:56,594 --> 01:17:01,074
company. Now, one thing that's fascinating, and this is where I'm trying to tie this all back

956
01:17:01,074 --> 01:17:06,754
together to like where we're at today because historically like right now today the entire

957
01:17:06,754 --> 01:17:13,394
equity market is is pretty focused on cash flow and it has been for like the last 40 or 50 years

958
01:17:14,034 --> 01:17:22,194
and there was actually an inflection point and it was the 80s uh before the 80s uh most companies

959
01:17:22,194 --> 01:17:27,714
had far stronger balance sheets most companies were balance sheets companies and surprisingly

960
01:17:27,714 --> 01:17:32,634
enough, right? Like, you know, we go off the gold standard, fiat liabilities, rocket, and then

961
01:17:32,634 --> 01:17:36,574
everybody's really focused on cash flow because it's all about what can you do in the future?

962
01:17:36,694 --> 01:17:42,594
Like, what can your capital do today? Can it do in the future? Because you understand, like,

963
01:17:42,594 --> 01:17:51,034
I think naturally investors saw that, you know, the dollar was fleeting and I needed to, you know,

964
01:17:51,154 --> 01:17:56,254
go out into the future in order to get value as opposed to the value of a company that's existed

965
01:17:56,254 --> 01:18:05,034
today. So it's, go ahead, jump in Mason. Yeah. And this goes back to like why, why investors

966
01:18:05,034 --> 01:18:13,234
invest in equities in the first place. Corporations can short fiat cheaper than an individual can.

967
01:18:15,934 --> 01:18:20,154
Right. Like, like, like, like, like, they've got more money. They've got more money. They

968
01:18:20,154 --> 01:18:24,534
could short fiat because they've got a capital infrastructure. They're making more money than,

969
01:18:24,534 --> 01:18:27,834
than individuals are.

970
01:18:28,234 --> 01:18:31,214
And I think something about the corporate entity,

971
01:18:31,854 --> 01:18:33,674
it's not an individual.

972
01:18:34,054 --> 01:18:35,114
It's a little bit more,

973
01:18:35,894 --> 01:18:40,914
it's less risky in the eyes of a lender.

974
01:18:41,654 --> 01:18:46,274
And so 1971, we come off the gold standard.

975
01:18:46,274 --> 01:18:47,774
You're saying in the 80s,

976
01:18:48,614 --> 01:18:52,334
did companies essentially take on more debt?

977
01:18:52,334 --> 01:18:54,674
Is that what happened?

978
01:18:56,114 --> 01:18:59,554
So an explosion happened in technology as well at the same time.

979
01:18:59,694 --> 01:19:02,574
So you had more of a focus on quarterly results.

980
01:19:03,074 --> 01:19:04,674
Earnings per share became a term.

981
01:19:05,394 --> 01:19:07,494
Return on equity became a term.

982
01:19:08,014 --> 01:19:14,794
And people were starting to create these new mechanics and statistics based on all this data that was coming out that was novel, like new.

983
01:19:14,994 --> 01:19:16,714
It was happening more often, more frequent.

984
01:19:16,714 --> 01:19:21,034
And then there was development of analysts that were starting to go figure out, like, what are these terms?

985
01:19:21,154 --> 01:19:21,974
Like, what are the value?

986
01:19:22,334 --> 01:19:23,654
How do I compare these companies?

987
01:19:23,934 --> 01:19:26,414
And everybody was operating on the same infrastructure.

988
01:19:27,434 --> 01:19:33,294
And then one other thing that I saw, which is really fascinating, because this is also

989
01:19:33,294 --> 01:19:35,674
an explosion in dividends.

990
01:19:36,754 --> 01:19:41,954
Dividend paying stocks started increasing and number of buybacks.

991
01:19:42,134 --> 01:19:43,774
Buybacks started becoming more popular.

992
01:19:44,314 --> 01:19:48,614
And obviously, they've become very popular here in the last decade, 10, 20 years.

993
01:19:48,614 --> 01:20:00,554
Now, the fascinating thing here is executive incentives. So executives, most executives

994
01:20:00,554 --> 01:20:06,134
throughout all of the equity market have very option heavy pay structures.

995
01:20:06,914 --> 01:20:13,754
And they're all focused on earnings per share. So if you're focused on earnings per share,

996
01:20:13,754 --> 01:20:20,354
How do you grow earnings per share? It's like, okay, well, if I have good earnings and I buy

997
01:20:20,354 --> 01:20:24,434
back my stock, my earnings per share is going to go higher. I'm going to get paid more.

998
01:20:25,054 --> 01:20:31,134
So it was like a little bit of an incentive structure just based on how corporations became

999
01:20:31,134 --> 01:20:34,894
founded and became more popular. Executive comp started ballooning and exploding.

1000
01:20:35,234 --> 01:20:40,814
It was shifting into option structure, which challenges incentives. The board is generally

1001
01:20:40,814 --> 01:20:44,614
aligned with what the executives are doing. They've got similar option type structures.

1002
01:20:44,614 --> 01:20:56,714
So this incentive system has infiltrated and is everywhere in the existing equity market.

1003
01:20:57,434 --> 01:21:01,774
And now you've got question marks on what future cash flows may look like. You've got

1004
01:21:01,774 --> 01:21:08,214
potential volatility in any of these other equities, yet all of that incentive structure

1005
01:21:08,214 --> 01:21:13,014
and everything's still there. So it's just fascinating to unpack it and see like, how did

1006
01:21:13,014 --> 01:21:18,354
we get here? Right? Like a lot of people say, like you mentioned at the very beginning, Mason,

1007
01:21:18,474 --> 01:21:23,554
you get money, you put it in your 401k, you don't even think about it. 99% of people do that.

1008
01:21:24,094 --> 01:21:27,354
Why do they do that? Because they do that because their parents told them to do that.

1009
01:21:27,734 --> 01:21:31,394
Like if you can't buy a house, go just put it in your 401k or like invest your IRA.

1010
01:21:31,814 --> 01:21:35,114
And why do they do it? It's because their parents told them to do it

1011
01:21:35,114 --> 01:21:38,494
or didn't tell them to do it.

1012
01:21:39,074 --> 01:21:41,294
Jeff, what's really fascinating here

1013
01:21:41,294 --> 01:21:43,394
is that I think we've been living through

1014
01:21:43,394 --> 01:21:48,534
one of these periods in the past since 2020, right?

1015
01:21:48,534 --> 01:21:51,494
Since the Bitcoin standard era

1016
01:21:51,494 --> 01:21:53,874
and all these metrics have come up

1017
01:21:53,874 --> 01:21:55,694
like Bitcoin per share

1018
01:21:55,694 --> 01:21:58,654
and now the rise of digital credit.

1019
01:21:58,994 --> 01:22:01,814
But going back to my point about

1020
01:22:01,814 --> 01:22:11,814
uh companies being able to short fiat cheaper than an individual that's like that's why bitcoin

1021
01:22:11,814 --> 01:22:16,774
treasury companies are important and it's not necessarily because they can do it cheaper but

1022
01:22:16,774 --> 01:22:26,454
it's about duration now they can they can you know short fiat at a fixed rate forever yeah yeah more

1023
01:22:26,454 --> 01:22:30,054
More efficiently. Without margin calls.

1024
01:22:30,054 --> 01:22:35,094
That's the best trade in the world. And then you're buying the best asset in the world. And it's like,

1025
01:22:37,254 --> 01:22:38,934
like, how many times can we do that?

1026
01:22:38,934 --> 01:22:46,454
Well, it's a tectonic shift in like how a global financial market could be structured.

1027
01:22:47,334 --> 01:22:51,734
And I think that's the part that like a lot of people can't comprehend. This idea is huge. This

1028
01:22:51,734 --> 01:22:55,174
is one of those ideas when it hits you, you kind of got to like walk around the room a little bit.

1029
01:22:55,174 --> 01:23:01,814
you're like oh my god no way right it's it's just so big right it's hard to wrap your head around

1030
01:23:01,814 --> 01:23:08,374
and you almost can't accept that it shatters your entire reality of everything you've known

1031
01:23:08,374 --> 01:23:13,414
like that's hard that's hard for people to do like shatter and ego really hard to do

1032
01:23:14,694 --> 01:23:19,814
uh and that's that's kind of what we're living in right now and it seems like

1033
01:23:19,992 --> 01:23:26,332
everybody's got like Amazon attention span brains now too. So, you know, like I want,

1034
01:23:26,332 --> 01:23:31,052
I want number go up tomorrow, but the reality is we're living through like this enormous

1035
01:23:31,052 --> 01:23:37,512
tectonic shift in like global financial markets. It doesn't happen overnight. It happens by,

1036
01:23:37,812 --> 01:23:42,972
you know, 10 people working in this ecosystem, then a hundred people working in the ecosystem,

1037
01:23:43,112 --> 01:23:46,612
then a thousand people working in the ecosystem, and then 10,000 people working in the ecosystem.

1038
01:23:46,612 --> 01:23:50,652
It's all it just takes time to infiltrate infiltrate out.

1039
01:23:50,652 --> 01:23:52,772
I mean, look at me like.

1040
01:23:53,652 --> 01:23:55,532
18 months ago, I was working in reinsurance.

1041
01:23:56,852 --> 01:24:00,332
Now, here I am, like having phone calls with investors and, you know,

1042
01:24:00,332 --> 01:24:05,172
rating agencies and stuff about Bitcoin and I'm here

1043
01:24:05,492 --> 01:24:07,332
and I'm going to be here for a long time.

1044
01:24:07,332 --> 01:24:10,932
And I think there are others that are starting to like, I mean, look at you guys.

1045
01:24:11,372 --> 01:24:13,732
You guys, your first jobs are in the Bitcoin ecosystem.

1046
01:24:13,732 --> 01:24:16,372
You know, 12 months ago, you weren't working in this marketplace.

1047
01:24:16,612 --> 01:24:21,332
And, you know, fast forward a year from now, and you're going to have three or four friends

1048
01:24:21,332 --> 01:24:25,212
that were previously working somewhere else that are now working in the Bitcoin ecosystem.

1049
01:24:25,212 --> 01:24:29,812
That just kind of keeps, you know, infiltrating its way because there's so much opportunity

1050
01:24:29,812 --> 01:24:31,912
here, right?

1051
01:24:31,912 --> 01:24:35,852
Like, Dan, your entire business model is a function of the prefs existing.

1052
01:24:35,992 --> 01:24:37,472
The prefs didn't exist eight months ago.

1053
01:24:39,432 --> 01:24:41,332
It's like, come on, guys.

1054
01:24:41,372 --> 01:24:42,032
Like, this is it.

1055
01:24:42,072 --> 01:24:42,732
This is the signal.

1056
01:24:42,832 --> 01:24:44,852
Like, this is the signal of everything that's happening right now.

1057
01:24:44,852 --> 01:24:45,712
Like, right here.

1058
01:24:45,712 --> 01:24:48,852
This is the biggest story in all of finance. I say it all the time.

1059
01:24:51,332 --> 01:24:56,212
Feels like it's one of those items, right? Where I've always had this theory that everybody gets

1060
01:24:56,212 --> 01:25:02,592
about five chances at something that's really big and transformative throughout their life.

1061
01:25:02,772 --> 01:25:10,272
And your decision is whether or not you decide to take that journey or not. And that was one of

1062
01:25:10,272 --> 01:25:16,452
the buckets I put Bitcoin into. And the longer you're in it and the more time you spend on these

1063
01:25:16,452 --> 01:25:23,792
structural issues, you realize how secure you feel in that bet because you quickly understand that

1064
01:25:23,792 --> 01:25:29,512
there's no way for them to unwind what has happened. You can't put that any back in the

1065
01:25:29,512 --> 01:25:36,792
bottle now. It's reached escape velocity, right? Doge was kind of like the last attempt to see if

1066
01:25:36,792 --> 01:25:41,932
there was a way to stem the bleeding long enough to come up with something to stabilize, but you

1067
01:25:41,932 --> 01:25:48,012
realize that the entire system's been built around this existing and continuing to exist. It's how

1068
01:25:48,012 --> 01:25:54,392
you stimulate the growth in the economy. And so when you realize how structural that is,

1069
01:25:55,292 --> 01:25:59,932
taking the other side of that bet, if you're saying, will they print more money? Yes, no.

1070
01:26:01,592 --> 01:26:06,192
Taking the yes side of the bet feels pretty secure. The other thing I was thinking about

1071
01:26:06,192 --> 01:26:10,252
when you were talking about equities, Jeff, is it was kind of, you know, like we're all, there's a lot

1072
01:26:10,252 --> 01:26:16,752
of focus on tokenization right now. You know, equity was kind of the first analog tokenization

1073
01:26:16,752 --> 01:26:20,712
project, right? It was taking an asset someone held, which was ownership in a business and

1074
01:26:20,712 --> 01:26:26,312
fractionalizing it so that they could unlock value out of that and transact it, right? So it was

1075
01:26:26,312 --> 01:26:31,972
really like the first version of tokenization, you know, if you, if you really think about it,

1076
01:26:31,972 --> 01:26:44,632
But what's interesting, and I had one of the partners while I was at KPMG, I was having dinner with him one night and he had built and sold a business.

1077
01:26:45,112 --> 01:26:50,592
And, you know, so I was just asking him, you know, advice about life and finances and things.

1078
01:26:50,592 --> 01:26:52,912
And he goes, there's only one thing you really need to know.

1079
01:26:53,752 --> 01:26:56,172
He goes, nobody gets rich on a salary.

1080
01:26:56,332 --> 01:26:57,752
He goes, you have to own something.

1081
01:26:58,932 --> 01:27:00,532
He goes, it's really that easy.

1082
01:27:00,612 --> 01:27:01,932
You have to own something.

1083
01:27:01,972 --> 01:27:07,252
He goes, and that can be a business you built. That can be an asset you acquired. That can be

1084
01:27:07,252 --> 01:27:12,772
equity ownership and companies. If you're going to really create wealth, you have to own something.

1085
01:27:13,612 --> 01:27:18,652
And so the decision is what's the best thing to own. And that's at the individual level.

1086
01:27:19,432 --> 01:27:26,952
Yeah. And risk. It's like, it's risk analysis, right? It's like, what is, what is risk? How

1087
01:27:26,952 --> 01:27:31,712
much risk am I willing to take? And, and what does that look like? What is the risk return

1088
01:27:31,712 --> 01:27:36,932
trade-off look like for well the big wins are concentrated yeah right but that's uncomfortable

1089
01:27:36,932 --> 01:27:43,252
for a lot of people right diversification is really what comes from you know either being

1090
01:27:43,252 --> 01:27:49,932
unwilling or unable to analyze the risk and the opportunity right if you don't want to put in the

1091
01:27:49,932 --> 01:27:55,252
effort you just spread it around right so we go all right one might lose but maybe one will hit

1092
01:27:55,252 --> 01:28:00,312
you know and that that'll be enough when you actually have the time and you get passionate

1093
01:28:00,312 --> 01:28:04,372
about something and you dig in and you're in a sector and you're focused in and you're finding

1094
01:28:04,372 --> 01:28:08,172
out exactly what's going to be the winner within that sector. And then it becomes so obvious

1095
01:28:08,172 --> 01:28:14,532
that if there's one or two winners out of this 20 company, if you're looking at any sector in

1096
01:28:14,532 --> 01:28:19,192
the market, if I go, these are the two winners, right? Well, then I would concentrate into there.

1097
01:28:20,212 --> 01:28:26,332
And the deeper you're able to go, the more convicted you become in those bets and the more

1098
01:28:26,332 --> 01:28:32,072
you're going to be willing to pursue those. And so I think that this is one of those interesting

1099
01:28:32,072 --> 01:28:38,632
times because this is the first time where I think people have a sector that's understandable

1100
01:28:38,632 --> 01:28:45,412
to them, right? You look at the complexity of all these other businesses. I could never explain to

1101
01:28:45,412 --> 01:28:51,352
you Tesla's business model. You go look at all the business lines and the manufacturing lines.

1102
01:28:51,652 --> 01:28:56,192
I could never explain that to you. I don't know what risk I'm taking on when I do that.

1103
01:28:56,192 --> 01:29:00,632
I like the company, but I couldn't possibly explain it to you at any deep level.

1104
01:29:01,772 --> 01:29:06,572
And so there comes an understanding when something simple to explain, right?

1105
01:29:06,572 --> 01:29:10,432
If I believe printing is going to continue, if I believe they're going to have to continue

1106
01:29:10,432 --> 01:29:17,052
to stimulate and ease to keep the economy growing, to keep the GDP growing, then I want

1107
01:29:17,052 --> 01:29:19,252
to take the bet on the other side of that.

1108
01:29:19,452 --> 01:29:20,732
I want the ultimate scarcity.

1109
01:29:20,732 --> 01:29:29,452
I want the asset that's currently denominated in that whatever they're debasing, US dollars or pick your fiat currency around the world.

1110
01:29:30,072 --> 01:29:36,632
I want the asset with the fixed supply because I am willing to put a long term bet on continued printing.

1111
01:29:37,992 --> 01:29:41,152
So, you know, I agree with what you're saying there, Ben.

1112
01:29:41,232 --> 01:29:44,352
I wanted to briefly talk about the same thing with equities.

1113
01:29:45,172 --> 01:29:58,392
One of the reasons why I never started like a separate side business was because every time I looked at a side business and I said, I thought, oh, I'm going to stick $5,000, $10,000, $30,000 into a side business.

1114
01:29:58,592 --> 01:30:01,232
I was like, how much time can I put into it?

1115
01:30:01,612 --> 01:30:03,252
And will it be successful?

1116
01:30:03,912 --> 01:30:06,752
And do I have to build everything to make it work?

1117
01:30:06,992 --> 01:30:07,592
Do everything.

1118
01:30:07,932 --> 01:30:11,312
The sales, get it running and get it going, hire an employee.

1119
01:30:11,312 --> 01:30:16,392
And then I thought, hmm, if I could start a business, what would I like to do?

1120
01:30:16,492 --> 01:30:22,312
I'd like to be able to make a really cool phone that has all these apps on it, which is impossible.

1121
01:30:22,572 --> 01:30:24,052
But just go buy Apple stock.

1122
01:30:24,212 --> 01:30:29,472
Or when Google came out and you could buy the Google, assume that it's the best search engine.

1123
01:30:29,592 --> 01:30:31,712
Oh, what would I dream up being in Silicon Valley?

1124
01:30:32,012 --> 01:30:33,192
Oh, the best search engine.

1125
01:30:33,352 --> 01:30:34,312
What's easier to do?

1126
01:30:34,692 --> 01:30:36,412
Don't go build a better search engine.

1127
01:30:36,572 --> 01:30:38,732
Just take whatever, $5,000.

1128
01:30:38,952 --> 01:30:40,372
Just go buy the stock in Google.

1129
01:30:40,612 --> 01:30:42,852
I'm not going to build a better search engine than Google.

1130
01:30:43,392 --> 01:30:47,472
And so I looked at my side hustle being investing,

1131
01:30:47,812 --> 01:30:49,932
that I'm not going to build a better phone than Apple.

1132
01:30:49,992 --> 01:30:51,472
I'm not going to build a better search engine.

1133
01:30:51,912 --> 01:30:54,652
I'm not going to be able to do any of those things

1134
01:30:54,652 --> 01:30:56,332
or a social media site like Facebook.

1135
01:30:57,072 --> 01:30:59,392
And so then I just invested that money

1136
01:30:59,392 --> 01:31:01,932
because to me that was a lot less risky.

1137
01:31:02,292 --> 01:31:17,020
And once I put the money in it I kind of do nothing besides buy it and just watch it You just watch it And then and that what I did because when you think about I not trying to be entrepreneurial or say that there anything wrong with that For me

1138
01:31:17,020 --> 01:31:22,240
because I had a really good job in tech, that's what I did. That's how I just looked at it.

1139
01:31:22,660 --> 01:31:28,160
And so I agree with what you guys are saying there. And volatility is not risk. And when you

1140
01:31:28,160 --> 01:31:33,980
say that, Mason, and when I say that to people, I go, when they say, oh, that's risky, I go,

1141
01:31:33,980 --> 01:31:36,060
no, you mean it's volatile.

1142
01:31:36,880 --> 01:31:39,500
And the look on their face is like, what?

1143
01:31:39,700 --> 01:31:41,720
I go, no, it goes like this, like this,

1144
01:31:41,840 --> 01:31:43,140
but it's volatile,

1145
01:31:43,500 --> 01:31:46,020
but that's not the same as risk.

1146
01:31:47,360 --> 01:31:48,840
You know, I'll give you a good example

1147
01:31:48,840 --> 01:31:50,360
of the difference between volatility and risk.

1148
01:31:52,480 --> 01:31:54,620
TSMC makes the best chips in the world

1149
01:31:54,620 --> 01:31:56,380
and they're in Taiwan, right?

1150
01:31:56,440 --> 01:31:58,540
Maybe the stock is volatile, maybe it's not.

1151
01:31:58,960 --> 01:31:59,800
What's risk?

1152
01:31:59,980 --> 01:32:03,240
If China decides to take Taiwan, that's risk.

1153
01:32:03,980 --> 01:32:05,400
And you're like, well, what's the chance of that?

1154
01:32:05,620 --> 01:32:09,960
Oh, see the Straits of Hormuz with Iran, right?

1155
01:32:10,100 --> 01:32:12,220
A month ago, we weren't thinking about that.

1156
01:32:12,660 --> 01:32:18,100
So as soon as I say to a traditional investor, TSMC makes whatever, the best chips in the world,

1157
01:32:18,420 --> 01:32:20,340
they're like, oh, yeah, it's not really risky.

1158
01:32:20,480 --> 01:32:24,060
Yeah, until China changed their minds and rolls out an aircraft carrier.

1159
01:32:24,100 --> 01:32:25,560
I'm not saying that that's going to happen.

1160
01:32:25,560 --> 01:32:28,940
But that's the difference between volatility and risk.

1161
01:32:29,780 --> 01:32:31,480
And that's the easy way to say this.

1162
01:32:31,700 --> 01:32:33,820
Like oil, was oil risky?

1163
01:32:33,980 --> 01:32:42,140
oil wasn't risky a month ago. It seemed to be trading in a range. And now all of us, then it's

1164
01:32:42,140 --> 01:32:48,720
the biggest rise of oil in the shortest period of time. That's due to risk. But the carbons

1165
01:32:48,720 --> 01:32:54,360
haven't changed. Right. Nothing's changed. And we don't even get our oil from 20% of the world's

1166
01:32:54,360 --> 01:32:59,120
oil goes straight to Hormuz and we're a net exporter. But our oil prices rocketed up and

1167
01:32:59,120 --> 01:33:02,780
We broke $4 a gallon in the U.S. for something that we don't even buy.

1168
01:33:03,380 --> 01:33:05,000
It's like, but that's the way the world works.

1169
01:33:05,140 --> 01:33:07,220
So that's the difference between risk and volatility.

1170
01:33:08,000 --> 01:33:12,200
Jeff, I have a question for you as the chief risk officer.

1171
01:33:13,520 --> 01:33:21,220
Do you see, like, when I think of risk, I guess my question here is, how would you define risk?

1172
01:33:21,220 --> 01:33:28,360
And do you think there's something inherent about risk, which means, like, when I think about risk,

1173
01:33:28,360 --> 01:33:35,400
I think about like existential, like going to zero, like, like in, in grain's analogy,

1174
01:33:36,040 --> 01:33:41,080
uh, Bitcoin's volatile, but you know, it's gone down 80%, but it's never gone to zero.

1175
01:33:41,080 --> 01:33:46,660
Not once has Bitcoin gone to zero. And, and that would be the, that would be, you know, how I would,

1176
01:33:47,660 --> 01:33:53,280
but I guess that's not exactly right because there's a probability.

1177
01:33:53,800 --> 01:33:56,080
I've used another Bitcoin underperforms.

1178
01:33:56,080 --> 01:34:04,880
forms. Yeah. I view risk as a, as a spectrum of probabilities and volatility is just data.

1179
01:34:05,280 --> 01:34:12,360
And so I see data as informing like a risk profile. So like, I don't know the thinking about

1180
01:34:12,360 --> 01:34:23,260
my past life, the insurance, the insurance world, like my job was to offload future volatility of a,

1181
01:34:23,260 --> 01:34:30,780
of an insurance company's balance sheet, like offload catastrophe risk. And you don't know

1182
01:34:30,780 --> 01:34:35,400
what that risk is, but you can create a probabilistic framework to understand what,

1183
01:34:35,660 --> 01:34:41,660
like how it would impact your portfolio if it did happen. So it's the probability distribution

1184
01:34:41,660 --> 01:34:48,080
associated with volatility. And I think that's my perspective on risk. It's like the probability

1185
01:34:48,080 --> 01:34:53,560
distribution associated with the volatility and the outcome. It's like weighing the volatility

1186
01:34:53,560 --> 01:34:59,660
and the outcome of the relative probability distribution and the tail. So it's the distribution,

1187
01:35:00,240 --> 01:35:06,300
the skew, and the tail throughout all of the data and information that you have. So that's like

1188
01:35:06,300 --> 01:35:14,840
my view of the world. And it's all a function of underlying data, like what you know.

1189
01:35:14,840 --> 01:35:20,600
So in underwriting, it's there's qualitative factors and there's

1190
01:35:20,600 --> 01:35:24,840
quantitative factors and qualitative factors, as you mentioned, right?

1191
01:35:24,840 --> 01:35:27,960
Like you could take all of this past data and that gives you one perspective.

1192
01:35:28,600 --> 01:35:32,440
But then there's also this uncertainty element of the qualitative factors, right?

1193
01:35:33,000 --> 01:35:35,080
Regulatory environment, infrastructure,

1194
01:35:36,200 --> 01:35:41,240
you know, future threats, quantum computing, regulatory threats,

1195
01:35:42,040 --> 01:35:44,520
infrastructure threats, etc. It's like,

1196
01:35:44,840 --> 01:35:52,520
the holistic view of the qualitative world and the quantitative world combined together into a view of risk.

1197
01:35:54,320 --> 01:35:55,280
It's how I see the world.

1198
01:35:56,180 --> 01:35:58,160
Do you think humans are good at judging risk?

1199
01:35:58,520 --> 01:35:58,860
No.

1200
01:36:01,000 --> 01:36:02,880
Very bad at judging risk.

1201
01:36:03,080 --> 01:36:06,520
And it's like you could see it everywhere.

1202
01:36:06,760 --> 01:36:08,280
I mean, that's why people buy insurance, right?

1203
01:36:08,560 --> 01:36:12,300
I mean, like most of the time, I don't even want to say this.

1204
01:36:12,300 --> 01:36:13,600
Like most of the time, you're probably better off.

1205
01:36:13,600 --> 01:36:21,980
Like the math says you're better off, like not buying, uh, like insurance most of the time, but like you buy it because of the tail uncertainty of it.

1206
01:36:21,980 --> 01:36:33,040
And, and sometimes you, you just have to, if I want to sleep at night, I need to buy the insurance product because if I don't, I have anxiety.

1207
01:36:33,040 --> 01:36:41,580
So there's like some mental and physiological, uh, elements of risk analysis that break rationality.

1208
01:36:41,580 --> 01:36:46,560
like a lot of people are you guys opened up and rained down golf ball sized hail on my house

1209
01:36:46,560 --> 01:36:54,820
insurance came in kind of handy yeah yeah i mean it's once in a while it pays off oh man yeah it's

1210
01:36:55,660 --> 01:36:59,240
but people buy insurance on on weird things right like you buy a thing on amazon

1211
01:36:59,240 --> 01:37:03,360
and it's like do you want the six dollar insurance on this computer screen that you just bought

1212
01:37:03,360 --> 01:37:08,280
it's like no i don't want the fucking six dollar insurance on the computer screen i just bought

1213
01:37:08,280 --> 01:37:14,780
like somebody's clicking it but oh yeah so many people are clicking it dude it's more financing

1214
01:37:14,780 --> 01:37:20,740
guacamole at chipotle i mean someone's clicking everything yeah yeah i think there's an inherent

1215
01:37:20,740 --> 01:37:27,920
uh and i think that boils down to so many things um and i like the secretary of the church like

1216
01:37:27,920 --> 01:37:33,880
besant was just talking about increasing financial literacy like we made a website so we can increase

1217
01:37:33,880 --> 01:37:40,820
financial literacy it was like well you don't teach any humans about like money in any education

1218
01:37:40,820 --> 01:37:48,600
system ever so like cool you made a website like how about you just teach people about we also made

1219
01:37:48,600 --> 01:37:55,020
a website so we didn't make a website but you know what like the government i mean come on uh

1220
01:37:55,020 --> 01:38:01,520
but like just just that concept right like people don't like people are becoming less literate in

1221
01:38:01,520 --> 01:38:09,200
math uh like money and finances is never taught like instead i learn about um i'm told i have to

1222
01:38:09,200 --> 01:38:15,040
memorize 400 vocabulary words for ap literature it's like okay you know maybe that was helpful

1223
01:38:15,040 --> 01:38:20,840
for how i communicate now but like i probably it would have been nice if i knew how a stock worked

1224
01:38:20,840 --> 01:38:29,420
in you know 2008 2009 like if i were like that would be cool to buy the dip in high school you

1225
01:38:29,420 --> 01:38:37,220
know like uh but you don't like i wasn't so many people don't even graduate high school

1226
01:38:37,220 --> 01:38:43,300
yet you're thrown out into the world and you have no idea how a credit card works you have no idea

1227
01:38:43,300 --> 01:38:50,360
how debt works you have no idea how to buy a house you know like unless taxes taxes right like yeah

1228
01:38:50,360 --> 01:39:23,288
you have to you start working and you get paid and you like cool i got a paycheck now why does 40 percent of it go away you like you don get you don get taught any of that stuff I I had to take a personal finance class my junior year in college That was the first time anybody even brought up taxes which is just insane Like just totally crazy Um so to your question Mason I don think people are very good at analyzing risk period Instead you have to learn trigonometry and sign curves and a bunch of bullshit

1229
01:39:23,288 --> 01:39:25,208
and justify inflation.

1230
01:39:27,368 --> 01:39:27,768
Yeah.

1231
01:39:28,448 --> 01:39:30,328
So they're going to tell you you should have money

1232
01:39:30,328 --> 01:39:31,308
and then you're going to ask,

1233
01:39:31,428 --> 01:39:32,328
well, how much is there?

1234
01:39:32,408 --> 01:39:32,888
And they're going to say,

1235
01:39:32,948 --> 01:39:33,628
don't worry about it.

1236
01:39:35,908 --> 01:39:36,668
My treasury.

1237
01:39:37,368 --> 01:39:37,768
Yeah.

1238
01:39:37,888 --> 01:39:39,288
How much money is there?

1239
01:39:39,848 --> 01:39:40,148
Yeah.

1240
01:39:40,248 --> 01:39:41,268
It's like the universe.

1241
01:39:41,388 --> 01:39:42,708
It's constantly expanding.

1242
01:39:43,268 --> 01:39:44,468
Where does it come from?

1243
01:39:44,528 --> 01:39:45,508
Don't worry about that either.

1244
01:39:47,208 --> 01:39:47,608
Yeah.

1245
01:39:47,608 --> 01:39:48,708
How do I get more of it?

1246
01:39:49,028 --> 01:39:49,188
Yeah.

1247
01:39:49,348 --> 01:39:49,988
Get closer.

1248
01:39:49,988 --> 01:39:52,208
Just get closer to the supply.

1249
01:39:52,908 --> 01:39:53,028
Right.

1250
01:39:53,288 --> 01:40:02,568
buy assets. Yeah. Okay. Well, we're getting close to the end here. I built a retirement optimizer.

1251
01:40:02,748 --> 01:40:07,668
I'm going to save that for another time just to avoid any challenges. But you know what? I'll

1252
01:40:07,668 --> 01:40:17,688
flash it. These AI things are getting so good. I built this in an hour where you can plug in

1253
01:40:17,688 --> 01:40:22,548
different assets and try to optimize an allocation to those different assets based on your time

1254
01:40:22,548 --> 01:40:28,948
horizon, frontier, your portfolio, your growth projections over time, your age, your retirement

1255
01:40:28,948 --> 01:40:34,828
age, what your initial investment is, monthly additional deposit, desired income. Do you

1256
01:40:34,828 --> 01:40:39,248
reinvest the dividends? What's your debasement rate? So you can see how that plays out over time

1257
01:40:39,248 --> 01:40:46,988
and you could simulate this, run Monte Carlo simulations. These AI tools are insane. Use them.

1258
01:40:46,988 --> 01:40:52,428
they are totally incredible and they will change the way that you feel the world so

1259
01:40:52,428 --> 01:40:58,888
check them out jeff can i can i put something out there um maybe once once a week we can look at like

1260
01:40:58,888 --> 01:41:05,728
a use like a a viewer right who's made a model and sent it to us i think that'd be pretty awesome

1261
01:41:05,728 --> 01:41:11,408
oh yeah yeah yeah that's a good idea that's a good idea i've actually got a uh i've got a project

1262
01:41:11,408 --> 01:41:13,568
on the horizon that I'm working through

1263
01:41:13,568 --> 01:41:15,768
to involve the entire community.

1264
01:41:15,948 --> 01:41:18,668
So hopefully we can get that going in Q2,

1265
01:41:19,268 --> 01:41:21,528
maybe later towards the end of Q2.

1266
01:41:21,768 --> 01:41:23,328
I'm excited to tell people about it,

1267
01:41:23,368 --> 01:41:24,448
but that's on the horizon.

1268
01:41:24,568 --> 01:41:27,028
But it's kind of on that same vein.

1269
01:41:27,188 --> 01:41:29,488
It's a great idea and more to come.

1270
01:41:29,648 --> 01:41:31,768
I think there's going to be a lot of energy

1271
01:41:31,768 --> 01:41:34,168
pouring into this space here in the near future.

1272
01:41:35,128 --> 01:41:36,748
But maybe we'll pass around final thoughts.

1273
01:41:37,068 --> 01:41:38,608
I might start with you, Dan.

1274
01:41:38,748 --> 01:41:40,428
It's been a little quiet over there.

1275
01:41:40,428 --> 01:41:42,568
You're out here grinding, working on the press.

1276
01:41:43,208 --> 01:41:47,328
There were a couple of people that were asking about STRF, STRK.

1277
01:41:47,588 --> 01:41:52,308
There were some drops in the STRK price recently this last week.

1278
01:41:52,428 --> 01:42:00,048
I did get a note from one of my friends that margin was increased for STRK this last week.

1279
01:42:00,108 --> 01:42:02,608
I think it was doubled on some brokerage accounts.

1280
01:42:02,688 --> 01:42:03,668
I think interactive brokers.

1281
01:42:04,088 --> 01:42:07,808
So it may have led to a little deleveraging on the STRK instruments.

1282
01:42:07,808 --> 01:42:23,948
Yeah, I think that's an interesting segue and I'll leave my final thoughts as we talked about risk this whole time. And I think, you know, we talked about volatility. Is that different than risk? There's this idea, though, that in these equity instruments is risk illiquidity.

1283
01:42:23,948 --> 01:42:38,128
And I think what we saw with strike over the past few days is that, yes, an illiquid instrument is, in fact, risky, especially if you have to exit the position because you're leveraged elsewhere or you have capital requirements you have to meet.

1284
01:42:38,488 --> 01:42:43,748
So, you know, liquidity is as important as volatility in these markets.

1285
01:42:45,148 --> 01:42:49,928
Yeah, liquidity is an element of like that entire quantitative qualitative equation, right?

1286
01:42:51,488 --> 01:42:52,228
Big element.

1287
01:42:53,228 --> 01:42:53,828
Cool.

1288
01:42:53,948 --> 01:42:57,488
Pass it over to you, Grain. What's your final thoughts? What do you think about?

1289
01:42:58,808 --> 01:43:07,328
Look, I'm really excited that we have two instruments, Seda and Stretch. I think the

1290
01:43:07,328 --> 01:43:12,468
volumes are going to continue to go up. And I think those products, I think they're huge.

1291
01:43:12,668 --> 01:43:17,408
And they're going to continue to put buying pressure on Bitcoin. And it's going to suck up

1292
01:43:17,408 --> 01:43:23,248
the mine supply. And I think that's the biggest thing that we see. We have a large institution.

1293
01:43:23,248 --> 01:43:29,888
We have a super large institutional buyer and we have a smaller one, Strive, buying Bitcoin.

1294
01:43:30,408 --> 01:43:31,168
And it's public.

1295
01:43:31,408 --> 01:43:36,848
We know you guys, what I can tell you is there'll be an announcement sometime in the future and you'll say how much you bought.

1296
01:43:37,128 --> 01:43:38,088
And that'll be great.

1297
01:43:38,148 --> 01:43:40,148
I look forward to reading that when it comes out publicly.

1298
01:43:40,988 --> 01:43:46,448
And for strategy, we'll see on Monday how many, or wait, Monday's, is Monday a holiday?

1299
01:43:47,728 --> 01:43:48,088
No.

1300
01:43:48,168 --> 01:43:48,748
Is it a holiday?

1301
01:43:49,268 --> 01:43:50,048
No, maybe not.

1302
01:43:50,348 --> 01:43:51,488
Is there a holiday in April?

1303
01:43:52,028 --> 01:43:52,228
No.

1304
01:43:52,228 --> 01:43:52,908
You sure?

1305
01:43:53,248 --> 01:43:54,248
Yeah, Easter's on Sunday.

1306
01:43:54,348 --> 01:43:55,268
So it's a Monday's not a holiday.

1307
01:43:55,528 --> 01:43:58,248
So anyway, with that said, we'll find out on Monday.

1308
01:43:58,248 --> 01:44:01,208
Well, we know that strategy typically does their announcement on Monday,

1309
01:44:01,348 --> 01:44:02,568
how many Bitcoin they bought.

1310
01:44:03,068 --> 01:44:06,548
And so in a bear market, we have a large institutional buyer

1311
01:44:06,548 --> 01:44:08,748
that appears to be buying every week.

1312
01:44:08,908 --> 01:44:12,728
And then you guys, I hope that your product continues to be successful.

1313
01:44:13,548 --> 01:44:14,708
That's what I'm looking forward to.

1314
01:44:16,288 --> 01:44:17,668
A lot of things moving.

1315
01:44:18,028 --> 01:44:18,708
Yeah, I think it's great.

1316
01:44:18,708 --> 01:44:19,348
A lot of things moving.

1317
01:44:19,448 --> 01:44:19,808
Congrats.

1318
01:44:20,048 --> 01:44:20,448
Absolutely.

1319
01:44:20,668 --> 01:44:21,548
Friday is a holiday.

1320
01:44:21,548 --> 01:44:22,648
for the market.

1321
01:44:22,848 --> 01:44:23,248
It's Friday.

1322
01:44:23,828 --> 01:44:24,268
Wait,

1323
01:44:24,528 --> 01:44:25,688
the stock market's closed on Friday.

1324
01:44:26,388 --> 01:44:26,828
Yep.

1325
01:44:27,268 --> 01:44:27,588
Oh,

1326
01:44:27,748 --> 01:44:28,688
I got it wrong.

1327
01:44:28,908 --> 01:44:29,188
Okay.

1328
01:44:29,188 --> 01:44:29,948
That's good to know.

1329
01:44:31,288 --> 01:44:31,448
Oh,

1330
01:44:31,468 --> 01:44:32,608
it's only one more trading day.

1331
01:44:32,848 --> 01:44:33,208
Okay.

1332
01:44:34,848 --> 01:44:35,328
Mason.

1333
01:44:38,748 --> 01:44:41,888
One thing that we didn't touch on this episode was the,

1334
01:44:41,888 --> 01:44:44,728
the sailor ad.

1335
01:44:48,108 --> 01:44:48,588
That,

1336
01:44:48,668 --> 01:44:49,668
that,

1337
01:44:49,668 --> 01:44:50,708
that blew up.

1338
01:44:51,548 --> 01:44:58,188
And man, I think I got like four or five million views and people were unhappy.

1339
01:44:58,548 --> 01:45:00,508
And, you know, it's a broad range of people.

1340
01:45:00,748 --> 01:45:04,588
It's Jason from All In.

1341
01:45:04,848 --> 01:45:06,168
It's Crypto Bros.

1342
01:45:06,648 --> 01:45:08,408
It's Martin Scarelli.

1343
01:45:08,408 --> 01:45:17,868
it's it's all these like uh traditional finance people or or even crypto bros who haven't done

1344
01:45:17,868 --> 01:45:25,548
like a lick of research into this have done zero math who are just kind of you know sitting in their

1345
01:45:25,548 --> 01:45:33,108
their armchairs and just preying on preying on the downfall of strategy was the ad a little odd

1346
01:45:33,108 --> 01:45:42,908
maybe like maybe and and is that like it was crazy is it is it good publicity is all publicity good

1347
01:45:42,908 --> 01:45:50,148
publicity probably you know at this state but uh something that that got me excited was

1348
01:45:50,148 --> 01:45:56,808
like we have such asymmetric information right now the whole market thinks he's going to blow up

1349
01:45:56,808 --> 01:46:01,528
They're calling it the next Luna, Terra Luna.

1350
01:46:03,608 --> 01:46:06,908
And what I'm really excited for is in three years,

1351
01:46:07,488 --> 01:46:09,088
Stretch is still going to be at $100.

1352
01:46:09,568 --> 01:46:11,068
It's still going to be paying its dividend.

1353
01:46:11,548 --> 01:46:12,728
Bitcoin's going to be higher.

1354
01:46:13,228 --> 01:46:17,768
And all these people who are laughing at it,

1355
01:46:18,768 --> 01:46:23,108
at some point are going to have to deal with the fact,

1356
01:46:23,108 --> 01:46:25,968
look themselves in the mirror and say,

1357
01:46:25,968 --> 01:46:31,968
hey, yeah, the ad was weird, but this is real.

1358
01:46:31,968 --> 01:46:34,708
And this is like a fundamental shift in the market.

1359
01:46:34,708 --> 01:46:36,648
And I actually need to do some research

1360
01:46:36,648 --> 01:46:38,688
because this thing isn't going away.

1361
01:46:38,688 --> 01:46:39,908
Will it take three years?

1362
01:46:39,908 --> 01:46:40,748
Will it take six years?

1363
01:46:40,748 --> 01:46:42,248
Will it take 10 years?

1364
01:46:42,248 --> 01:46:42,928
I don't know.

1365
01:46:42,928 --> 01:46:55,616
But the beauty of it is there a very high probability that all of those people are going to flip at some point And I just excited

1366
01:46:56,896 --> 01:46:58,656
Yeah, the incentive structure, right?

1367
01:46:59,176 --> 01:47:08,376
You think about that ad and the weirdest, most controversial ads are always the most

1368
01:47:08,376 --> 01:47:12,276
viewed and popular because it just stirs people up.

1369
01:47:12,356 --> 01:47:13,836
Like, why did it get 4 million views?

1370
01:47:13,836 --> 01:47:20,256
is because people like didn't like it. People thought it was funny. Right. Like, yeah. So I,

1371
01:47:20,296 --> 01:47:24,556
I think it worked right. If your whole energy, if the whole goal is to get eyeballs on it,

1372
01:47:25,076 --> 01:47:31,816
definitely worked, definitely worked. And you know what, like that, that also increases the energy

1373
01:47:31,816 --> 01:47:36,956
in the common stock too. Right. Because what, what happens, and I've seen this, people are like,

1374
01:47:37,236 --> 01:47:41,976
oh, let's dive into this. And they, they do their very first intro analysis of the capital stack.

1375
01:47:41,976 --> 01:47:44,156
and they're like, how does this work?

1376
01:47:44,216 --> 01:47:45,576
And then they're like, I'm shorting this.

1377
01:47:46,156 --> 01:47:49,276
And okay, well, now you got people shorting the common stock,

1378
01:47:49,376 --> 01:47:52,136
which is increasing the volatility of the common stock,

1379
01:47:52,196 --> 01:47:53,836
which just makes it trade even more,

1380
01:47:53,936 --> 01:47:55,376
which makes the whole thing work

1381
01:47:55,376 --> 01:47:57,716
because there's more trading volume in the common

1382
01:47:57,716 --> 01:48:00,416
and they have more ability to raise capital.

1383
01:48:01,536 --> 01:48:03,336
Yeah, this week made me think,

1384
01:48:04,216 --> 01:48:05,116
Saylor has to quote,

1385
01:48:05,396 --> 01:48:08,916
the only thing worse than being hated is being irrelevant.

1386
01:48:08,916 --> 01:48:17,556
and and we're certain like strategy is certainly not irrelevant right 100 percent

1387
01:48:17,556 --> 01:48:28,336
over to you ben final thoughts yeah i'll just chime in on the ad it worked um all these guys

1388
01:48:28,336 --> 01:48:34,816
you know it's hilarious because the people that hate it the most are advertising it to their

1389
01:48:34,816 --> 01:48:40,096
audience they don't know it but they're advertising that product to their audience so you know all

1390
01:48:40,096 --> 01:48:45,876
these you know shkrellys and all these other guys that are out there that you know dislike everything

1391
01:48:45,876 --> 01:48:52,136
sailors doing are out there advertising his product and what happened it went right to 100

1392
01:48:52,136 --> 01:49:00,956
well in advance of the ex-div date well in advance of the record date so it like it's a lesson in

1393
01:49:00,956 --> 01:49:07,076
being willing to put things out there that you're willing to just live with the ridicule. You also

1394
01:49:07,076 --> 01:49:11,256
learn quickly, and I think we've all learned this, the outrage cycle of Twitter is four days.

1395
01:49:11,496 --> 01:49:16,776
That is the outrage cycle. I've watched this more times. Every time something comes out that

1396
01:49:16,776 --> 01:49:22,936
everybody hates, I like to track. You can do the trends to see how long these terms are out there.

1397
01:49:23,696 --> 01:49:27,856
It's four days, and then everyone's off to something else. We're so distracted these days,

1398
01:49:27,856 --> 01:49:30,536
we can't keep a grudge on anything anymore.

1399
01:49:30,776 --> 01:49:35,556
So, you know, it is a masterclass in marketing

1400
01:49:35,556 --> 01:49:40,556
because what he did was he gained reach into audiences

1401
01:49:40,556 --> 01:49:43,416
that are not his typical followers

1402
01:49:43,416 --> 01:49:45,676
because everyone was passing it around

1403
01:49:45,676 --> 01:49:47,576
and throwing in their comments on it

1404
01:49:47,576 --> 01:49:49,576
and forcing everyone to go watch it.

1405
01:49:49,736 --> 01:49:50,196
Go look at it.

1406
01:49:50,336 --> 01:49:53,516
Watch the ad, you see the rain, you come up

1407
01:49:53,516 --> 01:49:56,076
and you know there were at least a few people that went,

1408
01:49:56,076 --> 01:49:58,116
11 and a half sounds pretty nice.

1409
01:49:58,596 --> 01:49:59,976
It pays me every month.

1410
01:50:00,136 --> 01:50:01,896
That sounds like a good product.

1411
01:50:02,136 --> 01:50:03,356
I might stretch into that.

1412
01:50:04,196 --> 01:50:10,616
Sometimes you have to use the outrage of the internet and all your critics as your greatest marketing distribution tool.

1413
01:50:10,836 --> 01:50:12,576
They work for you and they don't even know it.

1414
01:50:13,496 --> 01:50:18,016
I think the craziest part of it, because the ad was all AI generated.

1415
01:50:18,696 --> 01:50:21,076
What did it cost him to do the ad?

1416
01:50:21,736 --> 01:50:23,496
Whatever the subscription is for that AI.

1417
01:50:24,336 --> 01:50:25,456
It was like nothing.

1418
01:50:25,456 --> 01:50:26,316
five times

1419
01:50:26,316 --> 01:50:27,336
whatever it was

1420
01:50:27,336 --> 01:50:28,656
if you wanted to go

1421
01:50:28,656 --> 01:50:29,536
film that ad

1422
01:50:29,536 --> 01:50:30,456
with a real person

1423
01:50:30,456 --> 01:50:31,356
it would have been

1424
01:50:31,356 --> 01:50:32,376
a quarter million bucks

1425
01:50:32,376 --> 01:50:34,556
and now it's

1426
01:50:34,556 --> 01:50:34,876
whatever

1427
01:50:34,876 --> 01:50:35,456
25

1428
01:50:35,456 --> 01:50:36,256
well then you know

1429
01:50:36,256 --> 01:50:37,316
that they doubled down

1430
01:50:37,316 --> 01:50:37,656
on it

1431
01:50:37,656 --> 01:50:38,456
because then today

1432
01:50:38,456 --> 01:50:39,116
they had the

1433
01:50:39,116 --> 01:50:39,376
you know

1434
01:50:39,376 --> 01:50:40,676
the CEO told me

1435
01:50:40,676 --> 01:50:41,676
you know

1436
01:50:41,676 --> 01:50:42,816
follow up version

1437
01:50:42,816 --> 01:50:43,276
to it

1438
01:50:43,276 --> 01:50:43,556
right

1439
01:50:43,556 --> 01:50:44,196
so they're

1440
01:50:44,196 --> 01:50:45,016
leaning into it

1441
01:50:45,016 --> 01:50:45,776
they know exactly

1442
01:50:45,776 --> 01:50:46,596
what they're doing

1443
01:50:46,596 --> 01:50:48,376
they're rage

1444
01:50:48,376 --> 01:50:49,096
the reality

1445
01:50:49,096 --> 01:50:49,876
that all these

1446
01:50:49,876 --> 01:50:51,456
critics have to live with

1447
01:50:51,456 --> 01:50:51,876
which is

1448
01:50:51,876 --> 01:50:52,576
they are the new

1449
01:50:52,576 --> 01:50:53,616
distribution channel

1450
01:50:53,616 --> 01:50:54,376
and they're the ones

1451
01:50:54,376 --> 01:50:55,436
marketing this product

1452
01:50:55,456 --> 01:51:01,216
you know so here's what it is but anyways that's game theory that's just masterful

1453
01:51:01,216 --> 01:51:07,676
masterful game theory it's max ad is like stretch stretch helps me looks max like

1454
01:51:07,676 --> 01:51:15,436
they they need to lean in outrage right yeah yeah turn it productive broad distribution with it i

1455
01:51:15,436 --> 01:51:20,276
mean it's it's a master class in marketing but uh you know i thought dan brought up a really good

1456
01:51:20,276 --> 01:51:25,476
point right like what's been highlighted here over the last several weeks is liquidity risk and most

1457
01:51:25,476 --> 01:51:31,156
people didn't understand how much of it they were taking in their investments and you're starting to

1458
01:51:31,156 --> 01:51:37,636
highlight just how valuable that is in any of the investment vehicles that you're holding because

1459
01:51:37,636 --> 01:51:42,036
when times get strained and all of a sudden you figure out liquidity doesn't exist that's a risk

1460
01:51:42,036 --> 01:51:47,316
you probably were unaware that you were taking so you know there's there's a shift out there

1461
01:51:47,316 --> 01:51:50,916
and these weaknesses and a lot of investments are starting to get highlighted and it's going

1462
01:51:50,916 --> 01:51:54,116
to change the way people think and when people are looking for new solutions

1463
01:51:54,916 --> 01:52:00,036
i think that's what brings them to what i think is going to be the initial on-ramp for bitcoin which

1464
01:52:00,036 --> 01:52:05,316
is the prefs because they just provide an attractive return profile and cash flow and i

1465
01:52:05,316 --> 01:52:10,116
think ultimately from there it's going to bring people into bitcoin itself you figure out that

1466
01:52:10,116 --> 01:52:15,556
you know you can take ownership of that asset directly you start to see the value in it you

1467
01:52:15,556 --> 01:52:22,356
understand what thesis it's working on and that starts to build that foundational part of your

1468
01:52:22,356 --> 01:52:26,756
portfolio where you're decoupling yourself from all the games that are happening out there you

1469
01:52:26,756 --> 01:52:31,476
know at the fed and the treasury and all across the world so we're in a transformative period

1470
01:52:31,476 --> 01:52:35,956
and it's going to be really awesome to watch this unfold and i think this time next year

1471
01:52:36,996 --> 01:52:40,836
we're going to be in a very different place than we are today i think we're going to be far more

1472
01:52:40,836 --> 01:52:50,416
mainstream. Absolutely. This time next year. Oh my gosh. April, April of 27, man. We're going to

1473
01:52:50,416 --> 01:52:57,296
look back for sure and see where we're at. Hopefully much higher across the board everywhere.

1474
01:52:58,076 --> 01:53:04,956
Okay. Yeah. Thanks, Ben. Appreciate it. And my final thoughts is there's so many things happening

1475
01:53:04,956 --> 01:53:10,456
in, in the entire world right now. There's a lot of chaos everywhere and we've been continuing it

1476
01:53:10,456 --> 01:53:17,016
on this. The Fed is in a difficult position. There's somebody newly, likely going to be newly

1477
01:53:17,016 --> 01:53:21,396
appointed here in May. They've got a bunch of challenging decisions to make on the horizon.

1478
01:53:22,096 --> 01:53:28,336
They've been handed a balance sheet that's chock full of reserves and got to figure out how do I

1479
01:53:28,336 --> 01:53:33,336
manage the entire world economy effectively with all of these second and third order effects that

1480
01:53:33,336 --> 01:53:40,016
I can't control. So some interesting impacts there and the world is changing and these instruments

1481
01:53:40,016 --> 01:53:44,716
are starting to enter into the world into different ways.

1482
01:53:44,716 --> 01:53:47,116
And it's starting to permeate the different capital environments.

1483
01:53:47,236 --> 01:53:50,076
People are starting to figure out how can I create portfolios

1484
01:53:50,076 --> 01:53:51,456
and different things with these instruments.

1485
01:53:51,456 --> 01:53:54,636
And that's only going to get more advanced

1486
01:53:54,636 --> 01:53:56,696
and expand even further into the world.

1487
01:53:56,896 --> 01:54:00,556
So I encourage everybody to use the AI tools,

1488
01:54:00,836 --> 01:54:02,176
figure out what you can build,

1489
01:54:02,996 --> 01:54:04,636
talk to as many people as possible.

1490
01:54:05,196 --> 01:54:06,356
Don't be shy.

1491
01:54:06,536 --> 01:54:09,336
I mean, people are going to hate your ideas 100% of the time.

1492
01:54:09,336 --> 01:54:11,476
and then eventually one will crack

1493
01:54:11,476 --> 01:54:13,956
and you find some people that you can work with

1494
01:54:13,956 --> 01:54:16,396
and start building on new things.

1495
01:54:16,676 --> 01:54:18,116
So encourage everybody to get out there.

1496
01:54:19,256 --> 01:54:20,696
Thank you everybody for your time.

1497
01:54:21,376 --> 01:54:22,336
Go check out our website.

1498
01:54:22,616 --> 01:54:24,396
If you've got some time,

1499
01:54:24,776 --> 01:54:26,776
come see us and hang out with us in Vegas.

1500
01:54:27,096 --> 01:54:28,016
That will be fun.

1501
01:54:28,236 --> 01:54:30,076
Like and subscribe to the YouTube channel if you can.

1502
01:54:30,176 --> 01:54:30,896
That helps us a lot.

1503
01:54:31,316 --> 01:54:34,396
And we will see you next week with episode 62.

1504
01:54:35,536 --> 01:54:35,896
Cheers.

1505
01:54:36,356 --> 01:54:36,716
Thank you.