We'll see you next time.
Thank you.
purposes only. Nothing in this discussion should be considered investment advice or the offering
of any security or other investment product. Please consult your own investment and tax
advisors. And now I'll hand it over to the True North team for your regularly scheduled programming.
Woo! Welcome back. True North, episode 61, The Mechanics of Capital and Digital Credit. We are
back with the Investment Grade Bitcoin podcast, and we are excited to be here. We've got a lot
to talk about. So many things just continue happening everywhere, all in the market,
all at once. At the same time, the world just keeps moving forward. And yeah, we've got a crew
today. We've got myself, Jeff Walton. We've got Ben Workman, Mason Ford, and Grain of Salt,
and Dan Hillary. We've got a crew here today, and we've got a lot to talk about. We're going to hit
on... We'll talk about strategy, health of the balance sheet, like we always do. We'll hit on
the Federal Reserve. New paper came out this last week forecasting what the Fed's plan is over the
next 12, 24 months. It's a pretty consequential report. We'll kind of think about that a little
bit. We'll go into sharp ratio, think about risk return, portfolio optimization. Well, that was one
of the questions that we received on the True North website. I think it's a great question.
We could dive into it a little bit. We'll hit on like, what is the purpose of holding an equity?
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?
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.
And, you know, we'll continue to hit on this.
We will also jump to our website, tnorth.com, which is new.
It's cooking.
Everybody go check it out.
If you haven't had a chance to go do so, please like and subscribe the YouTube video.
If you're interested and you like this content and you want to see more of it, that helps
us a lot.
And we'll hit on some of the questions that people asked on the True North website.
And we want to make this kind of a continuous thing that we grow into and make sure that
we are providing content that people want to hear.
So without further ado, we just launched four people into space to go traverse the moon
and go around the moon.
And then we just had the Trump presentation.
And let's pass it around.
Let's see what people are thinking about.
We'll go over to you, Mike.
We'll start with you.
You listened in to everything that Trump was talking about.
Why is the market nuking?
I think the reason why the market's nuking is because if you listen to Trump and you hear it directly from him,
he seemed like for the next two, three weeks, he's going to continue going against Iran,
Straits of Hormuz, it doesn't matter. He's relying on that to go back to the Europeans to open that up.
He's not going to buy any oil from there. So we saw the price of oil spike up.
And then I think the biggest thing is we don't know if he's going to change his mind tomorrow morning.
And the market always seeks to have stability. And so with that, the reason why they use the term
taco, you know, Trump always chickens out. Or that's if you want to say it as an acronym.
Or if you want to say figuratively, taco, it's like a taco shell.
He always folds.
And so I think if the price of oil continues to stay above $100 or $105, whatever the price
of oil is.
And I think the biggest disappointment that we all saw was that we want Kevin Warsh to
come in.
We wanted the Federal Reserve to cut interest rates.
But if the price of oil spikes up, that means inflation goes up because oil is used not only
for people to drive around, but for diesel trucks to deliver food.
So food prices spike up.
And so therefore, in order to keep inflation under control, you can't cut interest rates.
So in typically cutting interest rates is good for risk on assets.
So I heard this.
Everybody else can watch it.
It's 19 minutes.
But what we see is that he could change his mind.
He could change his mind in an hour for now.
And so with that, I look at it and I see it as instability and the market prices in instability.
That's what I saw.
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.
So thank you for everybody that wished me good luck for doing that.
But I drive my car and I'm old school.
I like to drive my car.
Excellent.
Thanks for the update there.
And we'll fold that into, we'll talk about the Fed.
We'll fold that in and kind of think through some of those perspectives a little bit.
Mason, over to you.
What are you thinking about?
You're running into people, you're getting recognized in New York.
What's cooking?
Yeah, I had a really interesting encounter with, I was at the park this week.
It's been nice in New York finally.
And I saw a guy wearing a Bitcoin shirt and I had to go up and say something.
And he actually recognized me, which was funny.
But this was a guy who works in traditional finance, who works in the insurance sector.
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.
And what it really came down to was he deeply understood Stretch and Seda and the preferred equities.
And he believes that they're amazing products.
And he believes that MSTR is deeply mispriced and Bitcoin is deeply mispriced.
But there's a few hurdles, which we've touched on in the past, which continue to kind of stifle adoption at this point.
And that's that's Basel, the banking regulations, which don't give Bitcoin its due.
And it's also the the fact that Stretch and Seda, these are new products and they're unrated at this point.
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.
We're trading out a very cheap multiple and we also have the Bitcoin, right?
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.
just because of the fact that we have an operating business
and it's digestible to them in a way
in which maybe the peer plays are not.
So that was just a really fascinating conversation.
And I'm really excited that I met this guy
and we're going to continue to have these conversations.
Yeah, it's a real life example of the true hurdles
that we talked about, right?
Like you ran into somebody and you're actually seeing it.
It's like, okay, well, he works there and he's telling you I can't do this because this is annoying.
And so, you know, one of the things that we're thinking about is how do we, one, help change the regulatory environment.
Two, how can we work around it and work with it?
Like what are avenues that we can infiltrate without having to come up against that framework?
Because we've got to go infiltrate all of those first and then kind of build the framework around it.
And I think one thing that's become really fascinating, and I saw this develop over time,
and we've talked a lot about private credit market, but kind of what's happened in the
private credit market, just to give some history, is that they were, the market had started to
create, you know, find these assets and turn them into cash producing assets with different
strips of volatility. So for example, you can go buy a natural gas field,
in Oklahoma. Okay. So that natural gas field, it's going to, you're going to be able to pull
gas off of that natural gas field. And there's this like curve of what the cashflow looks like.
And you can structure and tranche that into different security layers. And so the most
senior security layer is, you know, the most secure it's going to get first dollar. And then
And if there's volatility in that cash producing asset, the lower tiers don't get as much money.
They don't get as much return.
And so what had happened was that credit market was able to go get those tranches rated by
different rating agencies.
And so that was an industry that wasn't typically or didn't used to be rated and now is rated.
or at least some of the pieces are rated. And that kind of gives us a potential framework of
how to think about writing the instruments that we've got as well. It's almost like you take this
perpetual preferred equity instrument and how do you almost make it worse by making it more
illiquid with a term just to appease a regulatory environment? And I think that's an opportunity for
somebody looking at this landscape and you could potentially create another type of security
with different layers and different tranches, throw a duration on it. And that might have the
ability to get rated by an entity because there's now a capital structure on top of a capital
structure, which sounds crazy, but that has already happened in other asset classes. And that is a
potential opportunity in this marketplace. So really, really fascinating perspective to kind of
view that, but that is out there if anybody wants to go pursue that. I'm going to go over to you,
Dan, tokenization world.
I mean, what's cooking with you?
I saw you guys have an office in Florida, which is cool.
What's cooking?
Yeah, we've been working in our office.
Obviously, I've been focused specifically on STRC, looking at the Sharpe ratio on a daily
basis and tracking the equity issuance.
I have a video coming out this week on modeling out percentage of Bitcoin traded volume that
MSTR is doing over time, how that's growing, and specifically how STRC's traded volume
is growing on a relative basis to MSTR and to Bitcoin itself.
And I think what's so cool about STRC is finally we've got some traction,
some real liquidity, some real volume.
Obviously, we're seeing that with Stata as well.
And, you know, I've always believed that the preps will be very indicative
of Bitcoin risk, Bitcoin future expectations, yada, yada, yada.
And moving forward, we're able to track that interest, that open interest,
that demand, both with the credit, with the interest rate,
and with the demand, the liquidity.
So I think stretch will be a $10 billion unit quite soon.
And it will also be trading $500 million a day in the near term.
So psyched to see that happen in real time.
Yeah, liquidity is getting stronger and stronger across the entire ecosystem.
It's building and people are starting to find more and more ways to trade around the instrument.
I think we talked about this last week, but we've got Sata options open, that options market opened.
we're starting to see some open interest kind of percolate into that market. And I'd be curious to
get your perspective on this, Dan. And you look at that market, the options market on these
instruments as well. But I noticed that there's $5 increments on the options market, basically like
a 95, 100, 105. And it seems pretty silly, right? Like if you've got this instrument that's trading,
you know, most of its time at $99.99, like, what's the use? What's the value of a $95 strike?
what's the value of $105 strike? I think that the market could use a $99 strike and a $101
strike. If the target range is 99 to 101, I would think that $99 strike would be one of the most
traded strikes in the general options market. Have you thought through that at all or looked into it?
No, absolutely. A lot of this is up to the broker dealers who are
hedging and creating the options exposure. So I think these things just take time. And we're only
starting to see intra-week expirations pop up on Ibit options, which are one of the most liquid
options markets in the entire Bitcoin ecosystem. We haven't even seen them with MSTR yet.
But I think you're totally right. We'll see those come online.
I think you might need to request them. You might need to put a request out there for a $99 strike.
I think it would be fascinating to see how it operates.
It should be very indicative of Bitcoin price performance
or almost like a forward-looking view of the performance of the security
and with better downside protection much closer to the, I guess, par, much closer to par.
Yeah, I mean, point me towards the survey monkey.
I'll pull my request then.
All right, we'll talk about it afterwards.
Okay, cool.
Well, over to you, Ben. We've got a big, exciting week. SEDA hit par for the first time since
we've done the follow-on offering. So a big week, a lot of news there, a lot of energy.
How are you feeling? What do you think about it? I'm feeling exhausted, but yeah, I mean,
it was a really big week and it was really encouraging to see the trading activity going
into the ex-div date. And we're still so early in these products that we're still gathering the
data and how these respond as they season out there in the market and as these securities gain
more and more reach and more and more investors start to understand the risk profiles around them.
You've started seeing it with Stretch. I think they're in their, what, eighth or ninth month now
of dividend payments. And so you've started to see that arbitrage that happens on the ex-div date
where it dips down lower than what the dividend being paid is, which creates an opportunity for
people that come in and prefer to buy low and take the capital appreciation over the next month and
try to get out of these as they get closer up to par, which is interesting because they're
operating both as trading vehicles right now and as income vehicles. So they've got a lot of
optionality to them right now. Now with the options market out there, it opens up a lot of
the hedging structures and yeah, more strikes will be very helpful. I think that'll just come in time,
but it was really fun to to watch it develop you know we we've watched the stretch activity
for several months and you kind of watch that volume ramp as you come in closer to the x
dividend date and you watch it start to ramp up and it's really those two days leading in where
you see the mega volumes you know really spike as people rush in trying to get those dividends
and so it's fun to watch that play out you know on our own security with seda and to see it get
up to $100 one month after we made all the changes around it with the target range and
making sure we stated that we're not sellers of SEDA below $100. And you start to see those
changes percolate in the market. Now it's a security that feels very familiar to everybody
out there who's familiar with Stretch. And we saw that show up in the demand leading in in month one
after all those changes. So really, really like to see that. At the same time, we've got kind of a
wild market going on around us both in the equities market but also in the treasury space
you know you're seeing all kinds of different actions being taken by a lot of different companies
which shows you know how these companies start to diverge during bear markets and it highlights
you know we i know on this show we've hammered on it a lot about how if you're going to run a
treasury company you need to build that company for a bear market right you've got to be ready
to endure a long bear market, the longest bear market.
And Bitcoin has been about 18 months, so you've got to be planning for 18 months of sideways
to down action, kind of as your base case to be able to weather it.
And you're starting to see Bitcoin being sold off.
You've got activists in the space going after certain companies.
You've got several companies that have been offloading Bitcoin and other assets.
And so we're hitting that point now where it's going to be interesting to watch the
responses kind of across the industry and see, you know, what different pivots these companies
are going to take. And, you know, we can certainly dive into that more because I think there's a huge
amount of learnings that you have when you watch this sector develop so closely, like we all have.
You get kind of an inside view. And then when you're, you know, in the seat actually operating
one of these, it gives you an entirely different view on what you're looking at and what signals
that a company is finding success and that demand is coming in from investors.
So when you start to look at all those indicators, then you start to see stress in the market
and you see how all of these equities and how all of the management teams are going to respond to that,
it tells you a lot about what the near and midterm future could be.
So it's been just fascinating all around for probably the last two, three weeks.
I think I've seen as much interesting activity as I've seen in a very long time.
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,
it's going to make sure that we're anything but bored. There's a lot to do.
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?
And Jeff, I think some of the things you just mentioned is a huge amount of it, right?
You're out there, you're going to these exchange and these broker dealers and you're advocating for your securities.
You're trying to bring awareness to these other platforms to list them.
You're trying to get in front of the investors and start to educate the market around these products.
You're trying to figure out what the right structure is for products.
You're envisioning new product.
You know, you're doing all kinds of stuff.
So the slow times, you get really busy.
When the markets are hot and everything's going, you can narrow in and you focus on the operations at that time.
But when it slows down, you know, the activity outside of the day to day capital markets activity just really, really ramps up.
So it's been one of those really unique Q1s.
It was incredibly action packed.
And I don't think Q2 is going to be any slower.
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.
Yeah.
Yeah. I will just emphasize a lot of thinking, a lot of communicating, a lot of pushing the
envelope, seeing where opportunity is, canvassing the market, talking with investors. These things
don't trade. The strategy doesn't, stretch doesn't trade $500 million a day. They're doing nothing.
Our instrument doesn't trade 10, 20, $30 million a day. We're doing nothing. We're out there
constantly canvassing the market. Yeah. I mean, luck is not really a factor to these, right? You
have to go out and you have to create your own luck in these markets. And we luck back and Jeff,
you and I were talking about this not too recently where I brought up every single
action we've taken, we've never once yet gotten an assist from Bitcoin. It's always nuked every
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
into our record dates, it nuked. We've never once yet gotten an assist from Bitcoin. But
what it shows you is that you're not stuck no matter what the market's doing. If you're out
there and you're having these conversations and you're finding the right strategic investors and
you're working with banks and you're pushing them to be creative and you're pushing on the lawyers
and having them be creative and come up with structures and you just find ways to get things
done. Not doing anything is not the answer. These are the times where you get to separate yourself
in the market and you have to do that by pushing as hard as possible and going out and creating your
own interest and educating people on the products you've got out there and finding new structures
for them and finding ways to build new adoption that's going to have a long runway for you.
And so when you start to see success out there in the market, it's not accidental,
right? That's months and months of work and it's people behind the scenes. Some of the
unsung heroes of this entire industry, no one ever knows who they are. But there's such a huge
infrastructure behind all of these companies that are out here operating on a decent scale
that are pushing. They're pushing the boundaries everywhere. They've got specialized knowledge.
They're outworking all the connections. And it's a huge, huge lift. So it's one of those where you
get the opportunity to create your own path here. And as soon as we do get that assist from Bitcoin
and it starts going the other way, these are the cycles Bitcoin goes in. You don't get to tell it
to go up. But when it does, I think we're in for some fireworks here. So I'm pretty excited for
that time in the market. Yeah. Luck is where preparation meets opportunity. Exactly. Okay.
We're going to shift gears. We're going to talk about MSTR balance sheet strength, just a refresher
of where we're at. We're going to breeze through this. Sharing my screen here, MSTR financial
leverage. Let's just look at the company from the top. 4126, Bitcoin held 762,000. Bitcoin price
when I did this was 67,000. I think it's now 66,800. Let's just plug that in. Update here.
Bitcoin assets held on balance sheet. They've got about $51 billion, $2.25 USD reserve, $8.2 billion
of debt, $10 billion of preferred stock, net capital. They have $44.9 billion of net capital.
This is backing out debt. The annual preferred dividend payment is about $1 billion. And the net
capital, if you were to take this $44 billion, almost $45 billion divided by the PREF dividend
payment, you've got 44 years of capital to cover the dividends. So their leverage ratio, 11.8%,
incredibly healthy. The coverage multiple 2.9. So this is just showing the assets,
the Bitcoin assets plus USD reserve divided by the preferred stock plus the debt. And for the
Bitcoin price needed for the assets to be less than the debt on the balance sheet is 10,535.
So an 84% drawdown in order for the assets to be worth less than the debt.
So when we're looking at health of a balance sheet here, again, completely different place
than last in historic bear markets.
When you're looking at November of 2022, strategies leverage ratio was 130%.
And they had $2 billion of assets on their balance sheet and $2.7 billion of debt.
So we're looking at just a completely different company that's incredibly strong
based on their financial position looking today.
Okay, now I'm going to shift gears.
I just want to chime in for one second here.
Six times 130, right, is what, 780?
Six times?
Six times 130,000 is 780.
Is my math right?
Yeah.
So they have done, November of 2022 is really close to the beginning of 2023.
So 23, 24, 25, sorry, 23, 24, 25, and then 26 from the beginning.
So in three years, they 6X'd the amount of Bitcoin that they have.
And I think that we just glanced at this.
And if you would have asked me, you know, if you if you look at January 1st, 2024, they had 189,000 Bitcoin.
If you'd say to me, oh, how do we feel about strategy?
You know, are they going to break a half a million Bitcoins?
That's where I always keep on saying counterintuitively on X.
They're able to acquire more Bitcoin when the price is higher.
And they had the second best quarter ever of acquiring whatever, 89,000 Bitcoins.
And so when I look at these numbers, I think sometimes we just gloss over them.
And you look at your row 30, your debt to asset ratio, 130% at the bottom of the bear market, right?
And now it's 11.8%.
That's gone one-tenth, right?
Correct.
So it's gone the correct way by a factor of 10x, which is an order of magnitude.
and they've almost got basically, you know,
it's possible they can get to 1.3 million Bitcoins by what?
Q1, Q2 of 27, which will be a 10X in Bitcoins.
And I think that that's just, I just think that these are,
they're real numbers because we're just looking at historicals
and at the rate they're going,
there's nothing to think that they wouldn't be able to do this.
I mean, so how would you feel about a company
that has one and a half million Bitcoins
in QT a year from now.
They're going to do it whether you like it or not.
Whether you like it or not.
Now, and so we'll look back at this and be like,
you know, anyway.
So I look at these numbers
and I think I try and think of multiples.
And I did want to just do a quick digression
back to that post that I did comparing Stretch and Seda.
So congratulations for you guys hitting your peg.
I think that is awesome.
And so when I wrote that book about Bitcoin treasuries, it was about efficiency.
And that's how I look at this.
There are multiples.
I can compare strategy against itself.
This is what you did here, Jeff.
You compared the previous bear market, November 15, 2022, to where we are today.
And we're in another bear market.
Except this bear market, we have six times as much Bitcoin, right?
And we've cut the debt to asset ratio by one tenth.
So again, this is your math.
This is great.
And then when I looked at you guys comparing stretch to Seda, it's a two horse race now.
And this is what I was always thinking with the Bitcoin treasury companies was if the
smaller Bitcoin treasury companies, right, if you do things right, then people say, you
know what?
I'm going to invest in the smaller Bitcoin treasury company because their ratios are about the same as strategy if they are.
But I can now put money into this because it's smaller.
And that was that efficiency that you guys traded seven times as much volume given that you have so much less Bitcoin.
And that's the way the Bitcoin treasury companies should have been structured.
That's the efficiency.
And that's having your multiples in shape.
clean balance sheet, very little debt or no debt, and cash to pay the prefs on hand.
If we would have said November of last year, I don't know when you guys announced your cash
position, but before strategy did this, because it was only in December and now we're in April,
oh, strategy is going to get $200.25 billion in cash. If you would have said that up until
whatever, December 15th, people would be like, that's crazy. But they did do that. And now we're
in a completely different regime that they have whatever. They have basically 24 months of
payments. So when I look at these numbers, everything is different than what it was
even four months ago. And so I think that people should realize that. And I think what we're seeing
here is I think that stretch in Seda, I think that as the biggest problem that's going to happen
with these two products is that as the Sharpe ratio, it's running four, right? It's a Sharpe
ratio of four. I know we're going to talk about it later. It'll be too good to be true. People
will be like, how do you have a sharp ratio and something that's paying more than 11, 11 and 12
percent a year. And people are going to be like, well, that, that, that, that, that's just wrong.
So thank you for putting this together. Yeah. And why did you pick November 15th of 2022? Was
that the dead bottom? Uh, yeah, I think that was near there. I don't know. I think I just picked
to date of like 16,500 or something like that. Yeah. Pretty close to the bottom. Yeah. Pretty
close. I think you bring up a really interesting point. I mean, yeah, you look at strategies,
balance sheet or their market cap, they're a $50 billion market cap and they've got the,
I don't know, $10 billion of prep outstanding. We're at $700 million market cap and we've got
427 million prep outstanding. So it's like the relativity and the trading volume, it's fascinating.
Like they're very interesting numbers to compare and contrast.
Yeah.
And by the way, when you look at these multiples, so the Bitcoin did a 6x or almost a 6x, but
the BTC assets and millions of dollars did a 25x.
Yeah.
From 2 billion to 50 billion, right?
It did a 25x.
And you're like, and so when you look at some of this and you see some of these commentaries
on X, and I can be aggressive with them.
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?
You see this all the time.
And to them, like, what was the benefit?
Well, they went from being a whatever, a $1 billion company or a $500 million company to a $50 billion company.
And that was the reason why they did it.
So I think these numbers, I think people don't realize what they are.
And the difference is that when you do a spreadsheet like this, you understand it.
So that's my only point.
Thank you.
Absolutely.
But in being conscious of time here, I'm going to shift gears.
We're going to jump to the Fed, talk a little bit about the Fed.
We'll get into Sharpe Ratio Portfolio Theory, just how we're thinking about some of these
assets, bring Mason, Dan, and the rest of the team in.
But there is a very fascinating paper that came out from the Fed.
This came from, I think the guy's name is Stephen Mirren.
And it's federalreserve.gov.
You can go check it out.
this paper is up there. I highly suggest everybody to go download this paper, plug it into your
favorite AI, and just go ask questions about it and work with your artificial intelligence to
identify how this may impact how you view the marketplace or how the world works. Because
you think about the Fed. What is the purpose of the Fed? And I've got my notes here. The purpose
of the Fed, the mandate of the Fed is max employment, stable prices, and to moderate long-term
interest rates. So they control monetary policy. So if the Fed is making any changes or moves,
if you're interested in anything related to money, you should probably have an understanding
of what the Fed's doing. So that is my explanation for people to go pay attention to this.
Additionally, as time has changed, thinking after the great financial crisis,
there was a kind of second and third order effect of the Federal Reserve. And that was
was to reduce frequency and severity of banking panic and financial crisis and contain systemic
risk and include being the lender of last resort. So this was a result of Dodd-Frank, some of the
regulation and legislation that was put in place after the great financial crisis. And you can kind
of see this outlined here. So, right, we've talked a little bit about there's a new Federal Reserve
Chairman on the horizon. I think Warsh is going in front of the Senate Banking Committee sometime
time in April and gets appointed potentially sometime in May. I think Powell's last day is
middle of May. And this paper is a 53 page paper about here's an a la carte menu of all the things
that we can do on the horizon. So if you're curious about what the Fed may do here in the future,
this is it. Pay attention to this. So what you can see on the screen, this is the balance sheet
of the Fed over time. So looking back 2005 to 2025, 2026. And what you can see here is there,
after the great financial crisis, the balance sheet of the Fed increased dramatically.
So the Federal Reserve was buying assets and they were accumulating assets on the balance sheet.
They were buying all the crap that nobody wanted. And they were accumulating these assets on the
balance sheet to help prevent financial crisis. And that ended up starting this new regime of
what the Fed is into the future. And so what they've said here throughout this paper is that
the plan moving forward is to reduce the assets on the balance sheet. And you can kind of start to
see this happening over time if you look on the right side of this graph. They want to reduce the
assets on the balance sheet, effectively quantitative tightening, and loosen banking
regulations to allow banks to take a little bit more risk, which effectively gives the Fed
a bit more capacity for a future financial crisis. So they can provide tail protection for the market
again. And so it's been fascinating kind of digesting this and reading it and coming back
to it and thinking about it. But there's a few changes here. So they're thinking about, okay,
quantitative tightening. They're going to release these assets off the balance sheet
that should impact the market. However, there's talks of doing this with a rate reduction at the
same time. So you can reduce the assets on the Fed balance sheet and do a rate reduction at the
same time and kind of have the goals to have a net neutral impact. And then this also, again,
gives capacity for a future crisis so the Fed could step in if they needed to step in.
And then on top of that, loosening banking regulations. One of my biggest takeaways
through this entire paper is that I feel like the feds job is very tricky. I feel like they're
trying to balance a feather on a thumbtack. Like, you know, one gust of wind, everything's wrecked.
And you go look through here on all of these different things that they could do.
Complicated acronyms, different second and third or third order impacts everywhere. Like you change
one thing, it changes everything. And then you've got all these different options that they could,
they could, all these different things that they could do. And each one impacts the other.
So you'd think that they're probably using advanced analytic tools, like these intelligence
models that we're using, but all like, they're just models. They could be wrong and they could
miss the reality of how people may react to things in any one circumstance. So anyway,
it's just a fascinating paper. Really encourage everybody to read it. But actually I didn't even
read it. I just plugged it into my AI and I interacted with it. So it was much easier to
consume and digest that way. But I know, Mike, you've had a chance to take a look at this and
you've experienced the GFC a little bit more firsthand. I mean, what's your thought on this?
What's your takeaway here? You know, I think it comes down to, you know, second and third order
effects. So first of all, it's a framework and I read through it. And I think that a couple of
things, they wanted to get this out before Warsh came into this, if he gets elected to lead the
Federal Reserve. And so with that, I think that they're going to study this. They described this
as a slow rollout and they're going to go for stability. And I don't think that they really,
it's really hard to guess what's going to happen. And then if you combine that with the unpredictability
in the markets, and there was a clip of Jerome Powell, like you said, it's like balancing a
feather on a thumbtack. This is not easy because you don't know how the banks or the people that
are going to trade this, you know, when you make these changes. And I think that's the hardest part.
And anyway, that's the way that I look at this. I think that they do need to make changes because
what happened was one of the key goals was they want to get rid of the, not get rid of,
they want to reduce the repo facilities for the banks just looking to make money off by parking
money at the Fed. Like if you have loose monetary and banks are not lending, so that's where the
repo facility comes in. So the Fed juices the market, the money goes to the banks, the bank
can't lend it out fast enough. So they park the money back for the reverse repo back at the Fed.
and it's like it did not do what it was supposed to do.
And so from that perspective, like for instance, money velocity,
we saw that that dropped even though they increased liquidity.
And the whole goal of increasing liquidity was to have more money velocity,
how many times it turns over.
But if you're parking the money back at the Fed on the reverse repo,
it's not doing its intended goal.
The bank is just profiting from leaving it there.
So I think this is really tough.
There's no easy answer here.
And then how does it play out?
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.
all fiat economics is an elaborate excuse and a cover-up for inflation.
That's what this makes me think when you're looking at all these acronyms.
And then on the slide, he goes,
why does the money supply need to increase?
Zero good answers.
Austrian economics makes you understand what is going on
and leads you to hold hard assets, which protects you from inflation.
So, yeah, I mean, we could spend all day.
We could spend all day looking at this, but at the end of the day, it's an elaborate excuse to print more money.
And we all know that's ultimately where all of this ends up.
And that's why we're in Bitcoin.
At least that's why I'm in Bitcoin.
Exactly.
That's why we're here.
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.
but the fed has some tools that impact how the banks treat reserves so there's like a a pseudo
regulation uh that exists there and if if the whole goal of this is to reduce reserves on the
fed's balance sheet and allow banks to take more risk like that that's that's the incentive structure
is not aligned with everybody else like the banks are going to they're going to take more risk it
just puts us back into a situation where we were at previously. And so I was looking at past times
where there's been quantitative tightening. There were multiple times. It was 2019, there was a
liquidity crisis. 2023, there was a liquidity crisis. Basically, the Fed took it to the brink
of reducing their balance sheet as much as they could, and it ended up resulting in a liquidity
crisis that needed to be addressed as quickly as possible. So the only way to get around that is to
loosen how reserves are treated on banks, banks balance sheets. But yeah, it's a great point,
Mason. I think that's hits the nail on the head. That was my biggest takeaway is like,
this is a lot of words. This is a lot of words to say, yeah, we're just going to step in if the
market freaks out. Yeah. So I wanted to chime in. So what happened was I wanted to figure out
because Jerome Powell made the comment that they no longer look at money supply. And so I was like,
well, this is kind of odd because Milton Friedman at Chicago School of Economics,
what happened was, and the timeline's important. So in the 1950s to 1970s, this is when Friedman
was, Milton Friedman, the economist, Austrian economics was more dominant. And what happened
was that's when it was monetarism, looking at the monetary supply. In 1979 to 82, Paul Volcker
began experimenting with money targeting, but it did not work to control inflation. Basically,
basically from 1982 and onward, that's when they started doing yield curve control.
And they switched from looking at monetary supply as being, how do we control this with
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
The dollar bill may be the same, but how it's controlled through interest rates versus monetary supply.
So now they don't look at monetary supply for the most part.
They look at these yield controls.
And then that's the purpose of this document.
Again, it's like these things change.
And then they roll out over time.
And then when you look back at the history, you're like, oh, they used to look at the monetary supply.
But then they stopped because inflation got out of control.
And oh, my God, when did inflation get out of control?
During the oil embargo of 79, which caused interest rates to go to whatever, 16.
People were getting 30-year interest rates for 30-year mortgages at 15%, 16%.
But somebody will say, oh, grain, you're a boomer.
No, I'm Gen X.
But when my parents bought a house back then when I was in kindergarten, the house was $40,000.
So things were a lot different.
We didn't have $39 trillion in debt.
Anyway, with that said, these things are important.
They roll out over time.
And when you combine it all together, that's how you figure out where things are going.
So things do change.
Nothing stops this train, though.
Nothing stops this train.
It's still going.
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.
That's still there.
You have to pay the interest on that.
It's the second largest payment.
We keep on beating these in every week.
But anyway, nothing changes that.
But continue.
Yeah.
So that was a good paper.
This is a great segue.
Yeah, this is a great segue.
And we'll talk a little bit about our website here.
Um, and we'll get into the Astro North.
We'll get into this first question.
Let's talk, which hits on some of all of these topics.
But, uh, first off let's hit on an event.
We have an upcoming event, true North networking event, Bitcoin Vegas.
This is on Tuesday of the Bitcoin conference out in Vegas.
It will be held at Gatsby's again.
We, we have a hundred slots available and, uh, the tickets are $50, uh, for the first
50 and a hundred dollars for the second 50 that just supports us to help break even on
this event.
and look forward to seeing everybody there that's going to be there.
We also have a Bitcoin for Business event coming up in May.
We will talk more about that later.
The quick update, there's also,
we are putting together a recurring series called the Weekly Signal.
This is in analysis and commentary under the research tab.
Please click subscribe if you would like to get email spammed this once a week.
This is not a fee.
It's just a subscribe if you want to follow along to everything we got going on.
And we try to summarize all that information there in one direct location.
But continue to point out that we've got articles all coming in here.
If you want just one place to look for all this information, it will all be there.
Cool.
Shifting next, we've got this new section, Ask True North.
One of the biggest and most hit on topics or the questions here is,
could you ask the presenters to discuss optimal allocation strategy of strategy and strive funds and portfolio,
So, selected percentage of the funds and optimal addition and how you adjust the allocation.
Okay.
So, so many topics in this one question.
Sharp ratio, portfolio optimization, age, interest, return metrics, volatility, type
of assets, the world of assets.
What's the point of holding a stock?
What's the whole point of holding credit?
What's the risk profile?
All of these things can be covered within this one question.
So first of all, I'm going to start with just thinking about portfolio theory and capital
structures, and we'll dive into this a bit.
And I think, Ben, you've probably got a really good perspective on this, given some of your
family's connections.
So thinking about portfolio theory, portfolio optimization, different assets have different
risk return metrics.
If you have, if you're looking at optimizing portfolio, this is a, this is a Nobel prize
winning theory. If you're interested in this, go look up a Markowitz modern portfolio theory.
It's the mathematics behind diversification. It means if you have different portfolios,
different risk return metrics, if you add different instruments to a portfolio, it can
increase the return and reduce the risk of your portfolio. Now, if you're thinking about duration,
you know, how long do you hold these instruments? Now that has an impact on
how much risk and volatility you may be willing to hold in your portfolio at any point in time.
If you've got a longer horizon before you need to access the capital, you would theoretically want
to be taking the high volatility assets with the highest return potential or having a heavier
weighting distribution on that front versus if you have a lower or shorter time horizon,
you want to focus towards shorter duration assets with less volatility if you need that money in
a very short amount of time. Now, this concept in theory applies to every corporation, every person,
everybody thinking about capital allocation, capital optimization. For example, insurance
companies, you think about liability profile of curve of liabilities you've got to pay out in the
future. I need my assets to be stacked up and matched perfectly to that so I can optimize for
the best risk return trade-off. So one of the stats that's available on all instruments is a
Sharpe ratio. And this is something that strategy has continued to hit on very, a lot with STRC,
the Sharpe ratio. How many units of risk volatility are you taking on for the yield that you get on
a certain or specific instrument? So that's why pointing towards a higher Sharpe ratio is
theoretically you're taking less units of risk per unit of yield. So when you think about where
I plot that in the world of assets, typically assets with higher sharp ratios are a better
allocation to your portfolio to help increase your return and reduce the risk of your portfolio.
So it's these instruments as the volatility starts to dampen over time, they start to become
very interesting portfolio allocations that reshape your efficient frontier of risk return
metrics and can alter the trajectory of the math associated with it. So I'm going to pause there,
toss it over to you guys. Sharp ratio, portfolio optimization. What are you guys thinking?
I actually start far more fundamental because I think for most people, they actually probably
never get to that level. When you think about how people are investing for their futures, a lot of
times it goes on these autopilot programs, and I don't think there's a lot of deeper level thought
there. But there's a reality out there where everybody's situation is so drastically different
that the way you're going to structure a portfolio is going to need to be different than the way I
structure a portfolio. So for instance, coming out of college, you're just getting into the workforce
right away. You've got a lot of expenses that are coming up. You've got to spend a lot of time
focusing on building the foundation of your portfolio, right? In the early True Norris,
I used to always talk about this, about, you know, build the base, never risk the base,
right? And then you can take risk from there. You know, I think that's incredibly important.
I always say in the first 10 years, once you get out of college, you know, you should be hyper
focused on building that base and putting away as much money as you possibly can. Because if you
are really aggressive in the first 10 years, you get to maximize the compounding effect.
And it's overlooked by a lot of people. A lot of people will play the catch-up game, right? Well,
I'll start putting in more later and later in my career when I'm making more money. The most
valuable money you can put away is early on. And to your point, Jeff, it then depends on what your
risk tolerances, right? Is this money you might need or is this money you definitely don't need
until you're going to be in retirement age? That changes the way that you would allocate those.
Now, I can't skip past digital credit as a concept in here because I actually think it's
very disruptive to this entire model. And the reason I think it's so disruptive to this entire
model is that, you know, originally what you would put digital credit against would be the fixed
income or the bond portion of people's portfolios. So normally what happens would be earlier in your
career while you've got a long timeline, you've got a salary, you have income coming in, you don't
need this investment capital, you would go further out the risk curve, you'd allocate out into
equities because you can take that excess risk to get bigger returns during that portion of your
career. As you shift more towards retirement, traditional FAs would tell you you've got to now
rebalance your portfolio, you need to start taking less risk, allocating more to the fixed
income portion of your portfolio as you prepare for retirement where you need to live on those assets.
Now what's happening is if you look at products like STRC and SATA,
while we initially were always talking about these products through the lens of fixed income
vehicles and competing with the fixed income market and having that be kind of the TAM for
these products. There's an interesting component to this, which is that the yields on these products
are better than equity returns, right? So if you were putting equities in your portfolio,
you would go and put the S&P 500, you'd put the Qs, you'd put all the standard funds in there,
and that would kind of be the core portion of what someone's retirement portfolio would look like.
And when you're doing that, you're targeting an average return of 8%, 9%, 10%, right? That's what
you're hoping for out of those types of funds on an average over time, right? You're hoping to
average that. Well, now you've got these new instruments with an entirely different risk
profile to them. And obviously they're young, but they're disruptive because they're providing
higher annual returns just through the dividend income than you're getting in your equities
portfolio. So now there's a new option that people have, which is I might not need to transition my
portfolio at all because I'm getting equity returns. And if I don't need the dividends,
I can reinvest or reallocate the dividends to something else. And then when I slide into the
retirement portion of my life, now I've got the fixed income and I can live off those investments.
So they're these weird blended vehicles. And so I think we actually have done ourselves a little
bit of a disservice early on talking about these as only really targeting the fixed income markets
because I actually think it's the entire equity market. It's the entire equities market. And when
you start looking at what's happening now, right, you go out and you look at the futures and they're,
you know, nuking like crazy right now. Like there's so much volatility out there that people
are having a hard time stomaching it. You know, we're the, we're out, we're as far out the risk
curve as you can get in a lot of our portfolios. Although now I think a lot of us is that have
actually reined in, you know, look at all the time we spent talking about fixed income products,
but you know we got comfortable with the bitcoin risk and the volatility in bitcoin and that's a
different feeling a lot of people can't stomach the volatility in their just their standard equities
portfolio and the world's gotten really uncertain so the volatility is ramped up across these entire
portfolios and now even during these periods of volatility you're seeing these instruments
providing equity plus returns and tax advantage structures that are holding stable prices
The volatility is compressing.
That Sharpe ratio is going up.
So I actually think these are like revolutionary products for a portfolio because of that unique
structure that's out there.
You don't find that everywhere else.
If you wanted to get a 10% plus return, you had to slide so far out the risk curve.
You had to be off in the tech sector.
And well, that's anything but certain these days.
We've been watching that.
All the big names start getting disrupted.
All these new products are coming out.
There's anything but stability there.
cash flows are under attack with all the innovation happening and all the ai tools coming out you're
not certain how how strong future cash flows are which starts to bring into question you know your
pe ratios out there are those pe ratios significantly inflated because there was this unfounded belief
in the future cash flows that were going to be coming in the future earnings of all these companies
is that is certain anymore is there an adjustment that has to happen to the broad pe ratios
like the markets are changing and it's it's calling into question you know very interesting
portfolio construction ideas it's changing the way that you you have to look at those
and so i think we're just in this really unique point in time now where these products are
emerging they're still in the battle testing phase obviously obviously you have to have the
belief that Bitcoin doesn't disappear, right? Which is the same risk you're taking with a company as
well, right? You're planning on that company being around, not getting disrupted, not getting pushed
out of business. Same risk profile there. You're seeing all the mega players come in, right? Morgan
Stanley's coming out. They undercut everyone on fees on their new Bitcoin ETF, which certainly is
not an accident, right? They're not playing to be second or third. So I think there's no mistake
for why they undercut IBIT.
And so now you're starting to see
all these traditional financial institutions
get heavily involved with an incentive structure
that leads them to support this area.
So you start to feel more comfortable
with the risk profile of Bitcoin.
And if you feel more comfortable
with the risk profile of Bitcoin,
you start to feel far more comfortable
with the risk profile of the preferred equities.
And so we're in this transition period now
that I think is going to change the way
people think about their portfolios. I also think that there's a bit of a
second effect here for products where the return is not just shown in like the price of the stock
and the total value, right? There's a different feeling that people get when a dividend payment
comes in, feels more familiar and the more frequent they are, right? Like there's almost
a calming effect to that when you start to see it coming in month after month and week after week.
And so it's just a, it's a unique structure and a unique product to fit into a portfolio that I
think is going to change portfolio construction here over the next, you know, two, three years,
where this could be a core base allocation within a portfolio because of the equity returns,
the tax advantage structure and the fixed income component to it.
Absolutely. People are used to income just broadly. You don't have to make a decision.
if you're in a position where you don't have to make a decision that's far easier and one thing
you said at the very beginning here ben is i think valuable to think about is uh your time
and energy is also an asset so like if it you can think about where do you want to where do you want
to spend your time and energy like for me like i resonated with what how you explain that because
early on i built a base foundation i got rid of the debt on my balance sheet i cleared my student
loans and I built a base. And then, uh, and then over time I started taking riskier bets with
riskier assets because I was like, I don't want to work where I'm working right now.
So I'm going to go riskier. And if I can get an even larger base, build that base even larger,
then I could take more risk in my personal life, which is what I wanted to do. Take more risk with
my energy and time. And that's ultimately how I've kind of landed here today, which is an
interesting way to think about it. Yeah, risk is a luxury and it comes with that early planning,
right? Not everyone has the luxury of being able to take risks. So you have to stack the deck in
your favor and be willing to sacrifice a little early on to put yourself in the position to take
the swings that make the difference, right? Everyone that's on here, that was a whole part
of what happened, right? We all had high conviction. We'd all put ourselves in positions
where we can take big swings and then we took big swings and you know that's that's how this happens
but you know for a lot of people you know there's an acknowledgement that not everyone's gotten to
that point right you're still dealing with student loans and you're still dealing with car loans and
mortgages and all these things and wages not keeping up the cost of things which is taking
away the amount you can put into your investment accounts right like there is certainly that type
of a crisis but I think that's why this type of education early on is so critical like I have no
doubt that you know Mason and Dan are going to be richer than all of us like they got the foundation
it clicked for them way earlier than it clicked for you know any of the rest of us like so in that
we're having that time in front of you is such a valuable tool particularly when you understand
all these different concepts and put that structure in place to let you go a little
further out that risk curve to try to get those higher returns over time, that compound.
Another really fascinating thing that's evolving here is that if you wanted to live in an entire
Bitcoin-denominated ecosystem and just disregard the other equity world, you could.
You could take different risk-return volatilities across the Bitcoin ecosystem.
And I even pulled together an illustrative example based on some example risk tolerances.
These are purely illustrative.
I know this is financial advice, but looking at different color schemes here, high volatility,
Bitcoin equity, Bitcoin, Bitcoin backed digital credit, traditional cash and treasuries.
Now, the typical Bitcoiner that thinks the entire world is going to collapse is going
to disagree with all of this stuff.
But that is a different mindset.
but this is a perspective that you could have on a portfolio allocation depending on your risk
tolerances having different exposure depending on different points in time depending on how
how much how much time you have towards your horizon of when you want to use those assets
this is what a typical framework would have been historically something something like this
Jeff, can I hop in here?
Absolutely.
Because, you know, I kind of deject the traditional notion that volatility is risk, right?
Like, for example, bonds.
Bonds are not very volatile, but for Dan and I, they're incredibly risky, right?
Like, imagine us holding a 30-year bond.
Like, it should be illegal for anyone under the age of, you know, like 60 to hold bonds.
But yeah, like, from my perspective, I'm a young Bitcoin maximalist.
And that's how I'm viewing my own portfolio and how I'm viewing the world.
And I also, like another factor here, and Jeff, you touched on it, but is counterparty risk?
Like that is a very real thing.
And this reminds me of Dan and I's presentation in Strategy World, which is coming out shortly.
But we put a chart that compared the S&P and gold.
And I think from 2000, gold has outperformed.
And gold is a better asset.
You know, that's something that you could have just had in your basement.
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.
There's no way to fully comprehend that.
So Bitcoin allows you to eliminate counterparty risk.
Of course, you're taking personal risk, and that's scary as well.
That's why I think there is room for both.
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
And I think that's the word.
Around.
Yeah.
Yeah, yeah, yeah.
Around the world.
Yeah.
Becoming more polarized.
Yeah.
So there's a lot of chaos.
So I do think like for me, the foundation is Bitcoin, bearer asset.
And I don't view that as risky.
Yes, it's incredibly volatile, but I want to embrace the volatility because I'm young.
I'm making a cash flow and I don't need the cash right now.
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.
and um and then finally i i think for short-term cash something like if you are holding money for
taxes or or if you are uh you have some cash that you're going to need to access in under
probably four years then something like stretch or seda is extremely attractive and it can fill
that role which otherwise hadn't been available uh until you know eight months ago so those are
incredible products that I can now utilize as a part of a broader strategy.
Yeah, it's all dependent on perspective, time horizon, your age, your understanding of the
world and where you want things to be and where you want to be, how much risk you want to take
in different places. I mean, I agree with you. I view Bitcoin as not risky, as volatile, yes,
but I view it as saving. So it's like, we view that world that way. But if I go talk to some of
old colleagues in the insurance world, like they don't. So you've got to meet them where they're at.
And I mean, these new design of these securities provides that framework for their ability to
digest it, which I think is fascinating. And one last point, and Ben touched on this, is I think
equities in general are becoming more volatile as there's more disruptive technologies. And that,
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.
And I think this is the main catalyst to that disruption.
We'll force allocators into looking at alternatives.
100. Yeah, completely agree. And now I think this next topic ties all of us together,
like Fed, sharp ratio, portfolio optimization, allocation, et cetera.
What is the point of holding an equity?
Question mark. Anybody take it like, what's the point? What's the point of holding an equity?
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.
But it doesn't actually have a claim on it.
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.
That's the way I would look at it in the traditional sense.
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.
That's the way I would look at it.
I was aiming for this question to be like philosophical, right?
Because how did we get here?
How did we get to this world where there are however many equities?
You could go buy any of them.
You could go buy any of these equities.
And people are just buying them because everybody before them bought them.
And they've got these portfolios full of them.
Jeff, I've been thinking about this because ultimately, in the cultural zeitgeist of America,
it is known that you make your money and you put it in an IRA 401k and that money is going into
bonds and equities. And I think that structure, um, it was, it was created by the fact that
like, I think, I think intuitively maybe not, uh, maybe, maybe they don't understand this,
you know, like really, but intuitively they know that they can't hold cash because it's melting.
So you, you, you need to, you need to add some risk in order for it to be inflation. And that's
what, you know, if you think the S and P is, is at, what was it done? You know, 9% historically
and inflation is 7% that, that allows you to tread water. Whereas if you're not doing that,
you're getting crushed. Yeah. Well, you just have to think about how inflation trickles down
to the companies, right? So if all the goods start costing more, that means they have to raise their
prices every year to maintain just top line, bottom line. So revenues are perpetually going up,
bottom lines are perpetually going up in raw dollar amounts, right? So that inflation is just
trickling down into the financials of all of these companies. And then as those financials show higher
and higher figures for revenues and bottom line, the equities keep expanding with it, right? So
you're just hoping that the equity expands more than the debasement is during that time.
Yeah. And so it is all a system that's built on around that one fundamental understanding.
I won't say understanding because I don't think most people actually understand it, but
That one fundamental issue, which is the money is going to be debased, where do you put it in?
Well, you have to put it into something where that debasement is going to show up in something that generates value somewhere.
Now, it doesn't mean it's real value, right?
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.
It's done nothing.
there's been no real growth no real value driven out of there it's almost all monetary or m2 money
supply growth so it's just interesting that you get conditioned that way because you just see these
these equities always going up as long as you own a basket right if you're spreading that
counterparty risk you were talking about mason you're going i'm not going to be a stock picker
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.
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.
It's going to help the bottom lines increase.
And over time, those equities are going to keep being more valuable.
And you see that with that steady line that just keeps going up.
Little blips once in a while when you get a black swan, but then it always keeps going up.
And that's just structural because of the problem with the money.
And that's why I think all of us have become so comfortable with Bitcoin is because you realize the value of scarcity.
It doesn't exist almost anywhere out there.
And so when you find something that's truly scarce that is also designed for the world we're moving into.
Gold was great forever.
like it's there's not really a big fight between bitcoiners and gold bugs right i think that's more
sport than anything like we all see the same problem we disagree on the solution for the
future moving forward right gold served well for thousands of years it was great but we're not in
that age anymore now we're in a digital age and all the value is being created and transmitted
digitally and so you want scarcity that's native to digital rails you're not living you know and
just operating in some small community where you've got 200 people around you and you're all
trading and passing currencies back and forth in physical form anymore right the world has got
global it's flattened out you know so there's no no more barriers and so an asset like bitcoin that
has that ultimate scarcity but is also natively aligned to where the world is moving like that's
the bigger bet, right? We think we found the scarcity that's in the form that is functional
for the future. I don't see gold as being functional for the future. Does it mean it's
not going to hold value? No, it might. I'm not against people that want to hold gold. If that's
comfortable to you, have at it. I don't think it's the right answer for where we're going,
right? All you have to do is look at the last decade and go, do you think we're going to revert
back to a more analog system or are we going to go more and more digital now you've got ai agents
people are giving them bitcoin wallets they're allowing them to transact there's no intermediaries
it's the only decentralized asset that's out there that they can utilize right otherwise they gotta
you know play with some crypto token with a central issuer that can change the supply roll back the
chains whatever you want like that doesn't function the same way as something truly decentralized when
when you move into a trustless world.
You don't want to have to trust anybody anymore.
And so transmitting value on those rails
only works with one asset, that's going to be Bitcoin.
And so that's the new bet, right?
So we see that.
It doesn't mean the US dollar
is going to get ripped out of the system.
I don't think that's realistic,
not probably in our lifetimes.
And I think if it did, it would be catastrophic.
When you look at how big like the credit markets are
that are out there, like imagine unwinding
all of that overnight. Oh my God, no. Everything denominated in the US dollar, you evaporate
quadrillions of dollars of wealth out there and you just move on to a Bitcoin. That's not realistic.
There's got to be a transition. Yeah, that'd be scary. Which is why the other reason I think that
these digital credit products are so transformative is because it's providing the first time that you
have an off-ramp from the credit products that are denominated in US dollars and you're now
moving that into a system that's backed by something, right? It's backed by that scarcity
that the Bitcoin that's being held. And so it's providing an off ramp for the credit markets. And
I think over time, it's going to draw more and more capital out of those as these weaknesses
bubble up and start to show themselves in the market, it's going to become unavoidable.
So I think there's a long transition period here, but I do think it's coming.
So I want to boil it down even more, which sounds crazy, but what's the purpose of equity?
Why does it exist at its foundational form? It exists because the Dutch East India Company
wanted to go raise capital. It exists because a company in the 1600s wanted to go raise capital.
They're like, you know what? I'll give you a piece of my company in exchange for money today.
And I don't have to pay you back, but you can get a piece of my company. If somebody's willing to
trade it, go for it. But the whole entire purpose was to raise capital. Why do companies IPO?
The IPO, because they want to go raise capital and go operate into the world. Go ahead, Mike.
You want to jump in there? Yeah. So I looked at it from the investor's perspective,
but what you're saying is 100% true from the company's perspective.
So exactly right.
What can you do?
You could float a bond, right?
You could take out a loan or invented the equities where you don't pay that back.
And the benefit is that there's a secondary market for it where it could trade.
And you're exactly right.
And so if you look at it from that perspective, yeah, that's why we talk about the difference
between with the capital stack.
And you look at the prefs and you look at the equities,
where they're in that capital stack.
And then you look at bonds or the converts
for strategy being the highest in the capital stack.
And then with the converts,
if they don't hit those converts,
they have to pay either in either a converts
or it's cash in stock or it's all cash.
And so go ahead.
So yeah.
So we're operating in this ecosystem
that's existed forever, right?
It's existed for a really long time because a company in the 1600s wanted to go issue equity.
And that actually created, oh, let's create a capital structure.
Let's have equity at the bottom.
And then if I have debt, I could...
Everything that's operating and happening right now with strategy and our company and everything that we're doing, it's all happened before.
Capital structure has been around for a really long time.
And I was just playing around here with the perplexity.
and I think this information is fun to share. Equity is an ownership claim on the net assets
of a firm. Assets minus liabilities, equity holders are residual claimants. They get what
is left after all the debts and other fixed claims are paid. So thinking about this,
a company issues equity to raise capital, but there's a claim on the residual assets of the
company. Now, one thing that's fascinating, and this is where I'm trying to tie this all back
together to like where we're at today because historically like right now today the entire
equity market is is pretty focused on cash flow and it has been for like the last 40 or 50 years
and there was actually an inflection point and it was the 80s uh before the 80s uh most companies
had far stronger balance sheets most companies were balance sheets companies and surprisingly
enough, right? Like, you know, we go off the gold standard, fiat liabilities, rocket, and then
everybody's really focused on cash flow because it's all about what can you do in the future?
Like, what can your capital do today? Can it do in the future? Because you understand, like,
I think naturally investors saw that, you know, the dollar was fleeting and I needed to, you know,
go out into the future in order to get value as opposed to the value of a company that's existed
today. So it's, go ahead, jump in Mason. Yeah. And this goes back to like why, why investors
invest in equities in the first place. Corporations can short fiat cheaper than an individual can.
Right. Like, like, like, like, like, they've got more money. They've got more money. They
could short fiat because they've got a capital infrastructure. They're making more money than,
than individuals are.
And I think something about the corporate entity,
it's not an individual.
It's a little bit more,
it's less risky in the eyes of a lender.
And so 1971, we come off the gold standard.
You're saying in the 80s,
did companies essentially take on more debt?
Is that what happened?
So an explosion happened in technology as well at the same time.
So you had more of a focus on quarterly results.
Earnings per share became a term.
Return on equity became a term.
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.
It was happening more often, more frequent.
And then there was development of analysts that were starting to go figure out, like, what are these terms?
Like, what are the value?
How do I compare these companies?
And everybody was operating on the same infrastructure.
And then one other thing that I saw, which is really fascinating, because this is also
an explosion in dividends.
Dividend paying stocks started increasing and number of buybacks.
Buybacks started becoming more popular.
And obviously, they've become very popular here in the last decade, 10, 20 years.
Now, the fascinating thing here is executive incentives. So executives, most executives
throughout all of the equity market have very option heavy pay structures.
And they're all focused on earnings per share. So if you're focused on earnings per share,
How do you grow earnings per share? It's like, okay, well, if I have good earnings and I buy
back my stock, my earnings per share is going to go higher. I'm going to get paid more.
So it was like a little bit of an incentive structure just based on how corporations became
founded and became more popular. Executive comp started ballooning and exploding.
It was shifting into option structure, which challenges incentives. The board is generally
aligned with what the executives are doing. They've got similar option type structures.
So this incentive system has infiltrated and is everywhere in the existing equity market.
And now you've got question marks on what future cash flows may look like. You've got
potential volatility in any of these other equities, yet all of that incentive structure
and everything's still there. So it's just fascinating to unpack it and see like, how did
we get here? Right? Like a lot of people say, like you mentioned at the very beginning, Mason,
you get money, you put it in your 401k, you don't even think about it. 99% of people do that.
Why do they do that? Because they do that because their parents told them to do that.
Like if you can't buy a house, go just put it in your 401k or like invest your IRA.
And why do they do it? It's because their parents told them to do it
or didn't tell them to do it.
Jeff, what's really fascinating here
is that I think we've been living through
one of these periods in the past since 2020, right?
Since the Bitcoin standard era
and all these metrics have come up
like Bitcoin per share
and now the rise of digital credit.
But going back to my point about
uh companies being able to short fiat cheaper than an individual that's like that's why bitcoin
treasury companies are important and it's not necessarily because they can do it cheaper but
it's about duration now they can they can you know short fiat at a fixed rate forever yeah yeah more
More efficiently. Without margin calls.
That's the best trade in the world. And then you're buying the best asset in the world. And it's like,
like, how many times can we do that?
Well, it's a tectonic shift in like how a global financial market could be structured.
And I think that's the part that like a lot of people can't comprehend. This idea is huge. This
is one of those ideas when it hits you, you kind of got to like walk around the room a little bit.
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
and you almost can't accept that it shatters your entire reality of everything you've known
like that's hard that's hard for people to do like shatter and ego really hard to do
uh and that's that's kind of what we're living in right now and it seems like
everybody's got like Amazon attention span brains now too. So, you know, like I want,
I want number go up tomorrow, but the reality is we're living through like this enormous
tectonic shift in like global financial markets. It doesn't happen overnight. It happens by,
you know, 10 people working in this ecosystem, then a hundred people working in the ecosystem,
then a thousand people working in the ecosystem, and then 10,000 people working in the ecosystem.
It's all it just takes time to infiltrate infiltrate out.
I mean, look at me like.
18 months ago, I was working in reinsurance.
Now, here I am, like having phone calls with investors and, you know,
rating agencies and stuff about Bitcoin and I'm here
and I'm going to be here for a long time.
And I think there are others that are starting to like, I mean, look at you guys.
You guys, your first jobs are in the Bitcoin ecosystem.
You know, 12 months ago, you weren't working in this marketplace.
And, you know, fast forward a year from now, and you're going to have three or four friends
that were previously working somewhere else that are now working in the Bitcoin ecosystem.
That just kind of keeps, you know, infiltrating its way because there's so much opportunity
here, right?
Like, Dan, your entire business model is a function of the prefs existing.
The prefs didn't exist eight months ago.
It's like, come on, guys.
Like, this is it.
This is the signal.
Like, this is the signal of everything that's happening right now.
Like, right here.
This is the biggest story in all of finance. I say it all the time.
Feels like it's one of those items, right? Where I've always had this theory that everybody gets
about five chances at something that's really big and transformative throughout their life.
And your decision is whether or not you decide to take that journey or not. And that was one of
the buckets I put Bitcoin into. And the longer you're in it and the more time you spend on these
structural issues, you realize how secure you feel in that bet because you quickly understand that
there's no way for them to unwind what has happened. You can't put that any back in the
bottle now. It's reached escape velocity, right? Doge was kind of like the last attempt to see if
there was a way to stem the bleeding long enough to come up with something to stabilize, but you
realize that the entire system's been built around this existing and continuing to exist. It's how
you stimulate the growth in the economy. And so when you realize how structural that is,
taking the other side of that bet, if you're saying, will they print more money? Yes, no.
Taking the yes side of the bet feels pretty secure. The other thing I was thinking about
when you were talking about equities, Jeff, is it was kind of, you know, like we're all, there's a lot
of focus on tokenization right now. You know, equity was kind of the first analog tokenization
project, right? It was taking an asset someone held, which was ownership in a business and
fractionalizing it so that they could unlock value out of that and transact it, right? So it was
really like the first version of tokenization, you know, if you, if you really think about it,
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.
And, you know, so I was just asking him, you know, advice about life and finances and things.
And he goes, there's only one thing you really need to know.
He goes, nobody gets rich on a salary.
He goes, you have to own something.
He goes, it's really that easy.
You have to own something.
He goes, and that can be a business you built. That can be an asset you acquired. That can be
equity ownership and companies. If you're going to really create wealth, you have to own something.
And so the decision is what's the best thing to own. And that's at the individual level.
Yeah. And risk. It's like, it's risk analysis, right? It's like, what is, what is risk? How
much risk am I willing to take? And, and what does that look like? What is the risk return
trade-off look like for well the big wins are concentrated yeah right but that's uncomfortable
for a lot of people right diversification is really what comes from you know either being
unwilling or unable to analyze the risk and the opportunity right if you don't want to put in the
effort you just spread it around right so we go all right one might lose but maybe one will hit
you know and that that'll be enough when you actually have the time and you get passionate
about something and you dig in and you're in a sector and you're focused in and you're finding
out exactly what's going to be the winner within that sector. And then it becomes so obvious
that if there's one or two winners out of this 20 company, if you're looking at any sector in
the market, if I go, these are the two winners, right? Well, then I would concentrate into there.
And the deeper you're able to go, the more convicted you become in those bets and the more
you're going to be willing to pursue those. And so I think that this is one of those interesting
times because this is the first time where I think people have a sector that's understandable
to them, right? You look at the complexity of all these other businesses. I could never explain to
you Tesla's business model. You go look at all the business lines and the manufacturing lines.
I could never explain that to you. I don't know what risk I'm taking on when I do that.
I like the company, but I couldn't possibly explain it to you at any deep level.
And so there comes an understanding when something simple to explain, right?
If I believe printing is going to continue, if I believe they're going to have to continue
to stimulate and ease to keep the economy growing, to keep the GDP growing, then I want
to take the bet on the other side of that.
I want the ultimate scarcity.
I want the asset that's currently denominated in that whatever they're debasing, US dollars or pick your fiat currency around the world.
I want the asset with the fixed supply because I am willing to put a long term bet on continued printing.
So, you know, I agree with what you're saying there, Ben.
I wanted to briefly talk about the same thing with equities.
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.
I was like, how much time can I put into it?
And will it be successful?
And do I have to build everything to make it work?
Do everything.
The sales, get it running and get it going, hire an employee.
And then I thought, hmm, if I could start a business, what would I like to do?
I'd like to be able to make a really cool phone that has all these apps on it, which is impossible.
But just go buy Apple stock.
Or when Google came out and you could buy the Google, assume that it's the best search engine.
Oh, what would I dream up being in Silicon Valley?
Oh, the best search engine.
What's easier to do?
Don't go build a better search engine.
Just take whatever, $5,000.
Just go buy the stock in Google.
I'm not going to build a better search engine than Google.
And so I looked at my side hustle being investing,
that I'm not going to build a better phone than Apple.
I'm not going to build a better search engine.
I'm not going to be able to do any of those things
or a social media site like Facebook.
And so then I just invested that money
because to me that was a lot less risky.
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
because I had a really good job in tech, that's what I did. That's how I just looked at it.
And so I agree with what you guys are saying there. And volatility is not risk. And when you
say that, Mason, and when I say that to people, I go, when they say, oh, that's risky, I go,
no, you mean it's volatile.
And the look on their face is like, what?
I go, no, it goes like this, like this,
but it's volatile,
but that's not the same as risk.
You know, I'll give you a good example
of the difference between volatility and risk.
TSMC makes the best chips in the world
and they're in Taiwan, right?
Maybe the stock is volatile, maybe it's not.
What's risk?
If China decides to take Taiwan, that's risk.
And you're like, well, what's the chance of that?
Oh, see the Straits of Hormuz with Iran, right?
A month ago, we weren't thinking about that.
So as soon as I say to a traditional investor, TSMC makes whatever, the best chips in the world,
they're like, oh, yeah, it's not really risky.
Yeah, until China changed their minds and rolls out an aircraft carrier.
I'm not saying that that's going to happen.
But that's the difference between volatility and risk.
And that's the easy way to say this.
Like oil, was oil risky?
oil wasn't risky a month ago. It seemed to be trading in a range. And now all of us, then it's
the biggest rise of oil in the shortest period of time. That's due to risk. But the carbons
haven't changed. Right. Nothing's changed. And we don't even get our oil from 20% of the world's
oil goes straight to Hormuz and we're a net exporter. But our oil prices rocketed up and
We broke $4 a gallon in the U.S. for something that we don't even buy.
It's like, but that's the way the world works.
So that's the difference between risk and volatility.
Jeff, I have a question for you as the chief risk officer.
Do you see, like, when I think of risk, I guess my question here is, how would you define risk?
And do you think there's something inherent about risk, which means, like, when I think about risk,
I think about like existential, like going to zero, like, like in, in grain's analogy,
uh, Bitcoin's volatile, but you know, it's gone down 80%, but it's never gone to zero.
Not once has Bitcoin gone to zero. And, and that would be the, that would be, you know, how I would,
but I guess that's not exactly right because there's a probability.
I've used another Bitcoin underperforms.
forms. Yeah. I view risk as a, as a spectrum of probabilities and volatility is just data.
And so I see data as informing like a risk profile. So like, I don't know the thinking about
my past life, the insurance, the insurance world, like my job was to offload future volatility of a,
of an insurance company's balance sheet, like offload catastrophe risk. And you don't know
what that risk is, but you can create a probabilistic framework to understand what,
like how it would impact your portfolio if it did happen. So it's the probability distribution
associated with volatility. And I think that's my perspective on risk. It's like the probability
distribution associated with the volatility and the outcome. It's like weighing the volatility
and the outcome of the relative probability distribution and the tail. So it's the distribution,
the skew, and the tail throughout all of the data and information that you have. So that's like
my view of the world. And it's all a function of underlying data, like what you know.
So in underwriting, it's there's qualitative factors and there's
quantitative factors and qualitative factors, as you mentioned, right?
Like you could take all of this past data and that gives you one perspective.
But then there's also this uncertainty element of the qualitative factors, right?
Regulatory environment, infrastructure,
you know, future threats, quantum computing, regulatory threats,
infrastructure threats, etc. It's like,
the holistic view of the qualitative world and the quantitative world combined together into a view of risk.
It's how I see the world.
Do you think humans are good at judging risk?
No.
Very bad at judging risk.
And it's like you could see it everywhere.
I mean, that's why people buy insurance, right?
I mean, like most of the time, I don't even want to say this.
Like most of the time, you're probably better off.
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.
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.
So there's like some mental and physiological, uh, elements of risk analysis that break rationality.
like a lot of people are you guys opened up and rained down golf ball sized hail on my house
insurance came in kind of handy yeah yeah i mean it's once in a while it pays off oh man yeah it's
but people buy insurance on on weird things right like you buy a thing on amazon
and it's like do you want the six dollar insurance on this computer screen that you just bought
it's like no i don't want the fucking six dollar insurance on the computer screen i just bought
like somebody's clicking it but oh yeah so many people are clicking it dude it's more financing
guacamole at chipotle i mean someone's clicking everything yeah yeah i think there's an inherent
uh and i think that boils down to so many things um and i like the secretary of the church like
besant was just talking about increasing financial literacy like we made a website so we can increase
financial literacy it was like well you don't teach any humans about like money in any education
system ever so like cool you made a website like how about you just teach people about we also made
a website so we didn't make a website but you know what like the government i mean come on uh
but like just just that concept right like people don't like people are becoming less literate in
math uh like money and finances is never taught like instead i learn about um i'm told i have to
memorize 400 vocabulary words for ap literature it's like okay you know maybe that was helpful
for how i communicate now but like i probably it would have been nice if i knew how a stock worked
in you know 2008 2009 like if i were like that would be cool to buy the dip in high school you
know like uh but you don't like i wasn't so many people don't even graduate high school
yet you're thrown out into the world and you have no idea how a credit card works you have no idea
how debt works you have no idea how to buy a house you know like unless taxes taxes right like yeah
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
and justify inflation.
Yeah.
So they're going to tell you you should have money
and then you're going to ask,
well, how much is there?
And they're going to say,
don't worry about it.
My treasury.
Yeah.
How much money is there?
Yeah.
It's like the universe.
It's constantly expanding.
Where does it come from?
Don't worry about that either.
Yeah.
How do I get more of it?
Yeah.
Get closer.
Just get closer to the supply.
Right.
buy assets. Yeah. Okay. Well, we're getting close to the end here. I built a retirement optimizer.
I'm going to save that for another time just to avoid any challenges. But you know what? I'll
flash it. These AI things are getting so good. I built this in an hour where you can plug in
different assets and try to optimize an allocation to those different assets based on your time
horizon, frontier, your portfolio, your growth projections over time, your age, your retirement
age, what your initial investment is, monthly additional deposit, desired income. Do you
reinvest the dividends? What's your debasement rate? So you can see how that plays out over time
and you could simulate this, run Monte Carlo simulations. These AI tools are insane. Use them.
they are totally incredible and they will change the way that you feel the world so
check them out jeff can i can i put something out there um maybe once once a week we can look at like
a use like a a viewer right who's made a model and sent it to us i think that'd be pretty awesome
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
on the horizon that I'm working through
to involve the entire community.
So hopefully we can get that going in Q2,
maybe later towards the end of Q2.
I'm excited to tell people about it,
but that's on the horizon.
But it's kind of on that same vein.
It's a great idea and more to come.
I think there's going to be a lot of energy
pouring into this space here in the near future.
But maybe we'll pass around final thoughts.
I might start with you, Dan.
It's been a little quiet over there.
You're out here grinding, working on the press.
There were a couple of people that were asking about STRF, STRK.
There were some drops in the STRK price recently this last week.
I did get a note from one of my friends that margin was increased for STRK this last week.
I think it was doubled on some brokerage accounts.
I think interactive brokers.
So it may have led to a little deleveraging on the STRK instruments.
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.
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.
So, you know, liquidity is as important as volatility in these markets.
Yeah, liquidity is an element of like that entire quantitative qualitative equation, right?
Big element.
Cool.
Pass it over to you, Grain. What's your final thoughts? What do you think about?
Look, I'm really excited that we have two instruments, Seda and Stretch. I think the
volumes are going to continue to go up. And I think those products, I think they're huge.
And they're going to continue to put buying pressure on Bitcoin. And it's going to suck up
the mine supply. And I think that's the biggest thing that we see. We have a large institution.
We have a super large institutional buyer and we have a smaller one, Strive, buying Bitcoin.
And it's public.
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.
And that'll be great.
I look forward to reading that when it comes out publicly.
And for strategy, we'll see on Monday how many, or wait, Monday's, is Monday a holiday?
No.
Is it a holiday?
No, maybe not.
Is there a holiday in April?
No.
You sure?
Yeah, Easter's on Sunday.
So it's a Monday's not a holiday.
So anyway, with that said, we'll find out on Monday.
Well, we know that strategy typically does their announcement on Monday,
how many Bitcoin they bought.
And so in a bear market, we have a large institutional buyer
that appears to be buying every week.
And then you guys, I hope that your product continues to be successful.
That's what I'm looking forward to.
A lot of things moving.
Yeah, I think it's great.
A lot of things moving.
Congrats.
Absolutely.
Friday is a holiday.
for the market.
It's Friday.
Wait,
the stock market's closed on Friday.
Yep.
Oh,
I got it wrong.
Okay.
That's good to know.
Oh,
it's only one more trading day.
Okay.
Mason.
One thing that we didn't touch on this episode was the,
the sailor ad.
That,
that,
that blew up.
And man, I think I got like four or five million views and people were unhappy.
And, you know, it's a broad range of people.
It's Jason from All In.
It's Crypto Bros.
It's Martin Scarelli.
it's it's all these like uh traditional finance people or or even crypto bros who haven't done
like a lick of research into this have done zero math who are just kind of you know sitting in their
their armchairs and just preying on preying on the downfall of strategy was the ad a little odd
maybe like maybe and and is that like it was crazy is it is it good publicity is all publicity good
publicity probably you know at this state but uh something that that got me excited was
like we have such asymmetric information right now the whole market thinks he's going to blow up
They're calling it the next Luna, Terra Luna.
And what I'm really excited for is in three years,
Stretch is still going to be at $100.
It's still going to be paying its dividend.
Bitcoin's going to be higher.
And all these people who are laughing at it,
at some point are going to have to deal with the fact,
look themselves in the mirror and say,
hey, yeah, the ad was weird, but this is real.
And this is like a fundamental shift in the market.
And I actually need to do some research
because this thing isn't going away.
Will it take three years?
Will it take six years?
Will it take 10 years?
I don't know.
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
Yeah, the incentive structure, right?
You think about that ad and the weirdest, most controversial ads are always the most
viewed and popular because it just stirs people up.
Like, why did it get 4 million views?
is because people like didn't like it. People thought it was funny. Right. Like, yeah. So I,
I think it worked right. If your whole energy, if the whole goal is to get eyeballs on it,
definitely worked, definitely worked. And you know what, like that, that also increases the energy
in the common stock too. Right. Because what, what happens, and I've seen this, people are like,
oh, let's dive into this. And they, they do their very first intro analysis of the capital stack.
and they're like, how does this work?
And then they're like, I'm shorting this.
And okay, well, now you got people shorting the common stock,
which is increasing the volatility of the common stock,
which just makes it trade even more,
which makes the whole thing work
because there's more trading volume in the common
and they have more ability to raise capital.
Yeah, this week made me think,
Saylor has to quote,
the only thing worse than being hated is being irrelevant.
and and we're certain like strategy is certainly not irrelevant right 100 percent
over to you ben final thoughts yeah i'll just chime in on the ad it worked um all these guys
you know it's hilarious because the people that hate it the most are advertising it to their
audience they don't know it but they're advertising that product to their audience so you know all
these you know shkrellys and all these other guys that are out there that you know dislike everything
sailors doing are out there advertising his product and what happened it went right to 100
well in advance of the ex-div date well in advance of the record date so it like it's a lesson in
being willing to put things out there that you're willing to just live with the ridicule. You also
learn quickly, and I think we've all learned this, the outrage cycle of Twitter is four days.
That is the outrage cycle. I've watched this more times. Every time something comes out that
everybody hates, I like to track. You can do the trends to see how long these terms are out there.
It's four days, and then everyone's off to something else. We're so distracted these days,
we can't keep a grudge on anything anymore.
So, you know, it is a masterclass in marketing
because what he did was he gained reach into audiences
that are not his typical followers
because everyone was passing it around
and throwing in their comments on it
and forcing everyone to go watch it.
Go look at it.
Watch the ad, you see the rain, you come up
and you know there were at least a few people that went,
11 and a half sounds pretty nice.
It pays me every month.
That sounds like a good product.
I might stretch into that.
Sometimes you have to use the outrage of the internet and all your critics as your greatest marketing distribution tool.
They work for you and they don't even know it.
I think the craziest part of it, because the ad was all AI generated.
What did it cost him to do the ad?
Whatever the subscription is for that AI.
It was like nothing.
five times
whatever it was
if you wanted to go
film that ad
with a real person
it would have been
a quarter million bucks
and now it's
whatever
25
well then you know
that they doubled down
on it
because then today
they had the
you know
the CEO told me
you know
follow up version
to it
right
so they're
leaning into it
they know exactly
what they're doing
they're rage
the reality
that all these
critics have to live with
which is
they are the new
distribution channel
and they're the ones
marketing this product
you know so here's what it is but anyways that's game theory that's just masterful
masterful game theory it's max ad is like stretch stretch helps me looks max like
they they need to lean in outrage right yeah yeah turn it productive broad distribution with it i
mean it's it's a master class in marketing but uh you know i thought dan brought up a really good
point right like what's been highlighted here over the last several weeks is liquidity risk and most
people didn't understand how much of it they were taking in their investments and you're starting to
highlight just how valuable that is in any of the investment vehicles that you're holding because
when times get strained and all of a sudden you figure out liquidity doesn't exist that's a risk
you probably were unaware that you were taking so you know there's there's a shift out there
and these weaknesses and a lot of investments are starting to get highlighted and it's going
to change the way people think and when people are looking for new solutions
i think that's what brings them to what i think is going to be the initial on-ramp for bitcoin which
is the prefs because they just provide an attractive return profile and cash flow and i
think ultimately from there it's going to bring people into bitcoin itself you figure out that
you know you can take ownership of that asset directly you start to see the value in it you
understand what thesis it's working on and that starts to build that foundational part of your
portfolio where you're decoupling yourself from all the games that are happening out there you
know at the fed and the treasury and all across the world so we're in a transformative period
and it's going to be really awesome to watch this unfold and i think this time next year
we're going to be in a very different place than we are today i think we're going to be far more
mainstream. Absolutely. This time next year. Oh my gosh. April, April of 27, man. We're going to
look back for sure and see where we're at. Hopefully much higher across the board everywhere.
Okay. Yeah. Thanks, Ben. Appreciate it. And my final thoughts is there's so many things happening
in, in the entire world right now. There's a lot of chaos everywhere and we've been continuing it
on this. The Fed is in a difficult position. There's somebody newly, likely going to be newly
appointed here in May. They've got a bunch of challenging decisions to make on the horizon.
They've been handed a balance sheet that's chock full of reserves and got to figure out how do I
manage the entire world economy effectively with all of these second and third order effects that
I can't control. So some interesting impacts there and the world is changing and these instruments
are starting to enter into the world into different ways.
And it's starting to permeate the different capital environments.
People are starting to figure out how can I create portfolios
and different things with these instruments.
And that's only going to get more advanced
and expand even further into the world.
So I encourage everybody to use the AI tools,
figure out what you can build,
talk to as many people as possible.
Don't be shy.
I mean, people are going to hate your ideas 100% of the time.
and then eventually one will crack
and you find some people that you can work with
and start building on new things.
So encourage everybody to get out there.
Thank you everybody for your time.
Go check out our website.
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And we will see you next week with episode 62.
Cheers.
Thank you.