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You get a shiver in the dark, it's raining in the park, but meantime

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Sound of the river, you're stopping, you hold everything

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A band that's blowing, Dixie, double fall time

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You feel alright when you hear the music ring

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Now you step inside but you don't see too many faces

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Coming in out of the rain to hear the jazz go down

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Competition in other places

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We are back. Episode 41, the investment grade Bitcoin podcast, True North. Here we go. Let's

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bring everybody on. We're going to have some fun tonight. We're going to do a crash course

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in corporate finance. We're going to talk about credit. We're going to talk about risk.

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We're going to dive through a ton of topics. We have got special guests here tonight. We've got

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the Bitcoin wizard, Adam Livingston. We've got Tim Kotzman in the flesh going to come say hi.

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Grain of salt just hopped on. We got Ben Workman as usual. And Soleil is going to hit us with

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a little bit of history tonight. So we're going to have a really good conversation.

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We're going to talk about quite a few things on the agenda. We'll just go through it.

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it. Actually, we'll start with an intro. The intro being this is True North, the investment

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grade Bitcoin podcast. If this is your first time listening to this, we talk about everything

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under the sun, Bitcoin related, Bitcoin finance related, securities. We talk about investments.

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We talk about capital, collateral, insurance, different marketplaces, and just the everything

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finance that sits behind the scenes of Bitcoin here and the combination of the two.

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So it has been evolving quite a bit and we just take it as it goes every day. We talk about what's

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happened in the last week and thanks for being here. Appreciate the time. So the agenda for today,

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typically we are going to walk through the STR micro strategy and the strategy preferred equities

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and an update on all of the statistics. We're going to get into what is money, what is credit,

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What is risk? Bitcoin treasury companies can multiple exist.

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This is a common thread. This is a really hot topic at the moment.

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And just thinking about who's going to succeed here in this marketplace.

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Dominant empires. What does the dominant empire look like?

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The debasement trade and the dollar abroad.

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Grain of salt was just in South America.

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So we're going to get some unique perspectives on that.

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We have a new segment that we're starting every week called the bad bond of the week.

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I think this will be extended. It'll be good.

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we'll talk about risk and think about different frameworks of who's holding some of these things

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and how that might change over time. And then AI and Cisco getting an update on the Silicon

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Valley business model. I think we'll also hit on energy. I think energy is a really huge topic at

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the moment and we'll kind of weaves through this entire thing. So yeah, there's so much going on

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here. We are frequently talking about a marketplace that is really operating in dog years, about seven

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years of typical life is happening in one year and everything is moving so quickly and uh yeah we're

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excited to talk about it and get through it so without further ado i will pop over to actually

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we've got tim kotzman hey hey i'm still alive you're still alive you're not you're not digital

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i mean we could play you if you want uh and just you know get into it or we could get it in in the

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flesh in real life ladies and gentlemen still got it we don't know so we're gonna test him out again

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today i don't even know i don't even know ladies and gentlemen what you're about to hear may be

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amazing but it is not financial advice it's for entertainment and informational and entertainment

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purposes only back to jeff adam livingston soleil ben and grain of salt thank you i gotta ask him

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And when you're out in the streets of New York City harassing people about Bitcoin on your show, do you have to give them the disclaimer before you get rolling there or are you just diving right in?

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I'm diving right in, but, you know, it usually comes up at some point or maybe they should be telling me that.

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I mean, I don't know if you saw episode two, but, you know, there's there's guys in Times Square that are taking options trading courses.

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I mean, New York is, you know, a bunch of hustlers out here.

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you gotta do taxis too just hop in a bunch of different taxis and talk to them see what they're

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you'll get a lot of xrp most of the taxis i'm in the guys are talking about xrp it just kind of

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goes to show you okay yeah i think adrian and i are going to do a few uh uh try to shoot some

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stuff while we're in santa monica uh later next week so that could be interesting the options

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traders are uh they're uh shadier than the chess players you gotta watch out

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Also, a warm welcome to Adam Livingston, the Bitcoin wizard. You have officially surpassed

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everybody and follower count on this entire stream. And congratulations. The flipping has occurred

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and it is well-deserved because the amount of content you're putting out is absolutely absurd.

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Your AI conversations are incredibly refined. And yeah, great, great, great work. So excited

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to have you here today. Really appreciate that. This is a full circle moment for me

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because you guys radicalized me. So thank you so much. I couldn't have done it without you.

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Thank you. Absolutely. Absolutely. Okay. Let's get into it. Let's, let's jump into statistics,

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which we talk about every week. And we just take a look at the health of MSTR, which is the,

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whatever you want to call them, a thousand pound gorilla in the scene. We are going to share my

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screen here. The 1080 pound gorilla. 1080 pound gorilla. Exactly. Long 1080s. Okay. MSDR financial

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leverage. So we show this every week. We've got a few columns here. This is different timelines in

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each different column. So focus your attention on what is now column BN, which is Bitcoin held

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strategy holds 640,000 Bitcoin and 31 Bitcoin. Bitcoin price as of today, 122,000 ish. MSDR

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price is about $331. Bitcoin assets, they've got $78.3 billion of assets on balance sheet,

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$8.2 billion of debt, $6.5 billion of preferred stock. So your net capital sitting on balance

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sheet, if you just take assets minus the debt is $70 billion, which is an absolute ton of money.

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And you've also got another figure here, which is the net capital, which is the $70 billion number

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minus four years of the preferred dividend outstanding. So you've got $67 billion in net

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capital when you factor in at least four years of dividends on the balance sheet.

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Then we've got this liability to asset ratio, which is just showing the liabilities, assuming

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a pure notional value of the debt plus the preferred. You've got an 18.9% leverage ratio

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and a debt coverage multiple or a BTC rating of 5.3. I think this will be pretty close to what

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is on strategy's website. So when you think about, you know, what would, what kind of event would take

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a company like this down that has leverage of this size and scale, it sounds like a lot on

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a nominal basis, but on a percentage basis, it's really not that much. The price of Bitcoin would

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need to be below $23,166 for the assets held on balance sheet to be worth less than the debt,

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the notional debt outstanding. That is, I think, incredibly unlikely at this point.

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and many people on the screen would be selling everything in their entire world to buy Bitcoin

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at those prices or something else drastic maybe breaks Bitcoin. I think that's a very low tail

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probability. So the price of Bitcoin, we need to go down about 81% and stay there for an extended

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period of time for this to even start to become an issue. The next thing, I mean, obviously,

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Yeah, hop in there, right?

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Yeah, I just want to chime in real fast.

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So I've talked about this before, but you said it's 18.9% is the current debt?

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Leverage.

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Yeah, right there.

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That's the leverage.

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That means they have the reverse.

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That means they have approximately 81% left in assets.

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And what I said previously before, about a month ago, is that when anybody goes to buy

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a house, if you put down 20%, it doesn't matter whether the house is 100 grand or a million

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dollars, you put down $200,000 and you're five to one leveraged. It's the exact opposite of what

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people are comfortable doing. This is a volatile asset. We all know that, but this is very low

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leverage. So when you hear in mainstream media, hey, Saylor's leveraged up to the gills or he's

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got huge amounts of leverage, it's not. The notional amount is billions of dollars, like Jeff

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just said, but the actual leverage ratio is the exact opposite of what you do when you buy your

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house. And that's the interesting part. Bingo. Exactly. The other column I've got here is just

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if you were to take out the $3 billion of convertible debt that's outstanding, that's

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currently trading really deep in the money effectively as equity. So that actually drops

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the leverage ratio even more. So on an as-if pro forma leverage basis, the liability ratio is around

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15%, so even less. So the price of Bitcoin would need to go down even further. And obviously,

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the price of mstr has been down in the last couple of weeks you know we've gotten a lot of crap

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saying that we don't talk about it so obviously uh the price is down i can't control the stock you

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know the stock does whatever whatever it does and uh you know that's just the way it goes

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so um but like the reason we do this every week is to talk about the fundamentals like what this

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it just because the stock goes down doesn't mean that they're not making money like the company

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makes money. Like if the price of the equity goes down, it almost doesn't matter if the price of

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Bitcoin is going higher, the company is getting stronger, like regardless of what the equity does.

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So there's a lot of, you know, craziness, obviously short reports and a lot of energy being

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like thrown around saying these things are dead. But the company is like getting like

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incrementally stronger as the price of Bitcoin goes up, which makes the short thesis even

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just more insane as you start to play this out and think about the game theory down the road,

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like the long term. Sure. Are there shiny things in the market that people are chasing right now?

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Absolutely. We just saw an energy stock with iron go from $5 to $60 in like three weeks or four

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weeks or something like that. Yeah. There's a lot of shiny, shiny things in the market that people

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are chasing. And if people make money on those, awesome. We talk about this because like, this is,

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this is the big story. This is the huge story. This company has an order of magnitude greater

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than the next closest company of the best capital on the planet. What does that look like down the

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road? We're here to unpack that. That's what we're here to talk about today. So the fundamentals,

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when you look at the fundamentals, the Bitcoin per share or the Bitcoin exposure per share is

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increasing drastically year over year. Why do you buy this over IBIT? Your Bitcoin per share,

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your Bitcoin exposure per share is increasing drastically over time, right? Just from 2023,

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you've got increase of 74% and then increase of 26%. That is more Bitcoin. That's as simple as

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that. You're yielding Bitcoin by operating and financing different operations. Anybody else have

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anything to add there? Well, maybe I'm jumping ahead because I'm sure you've got this graphic

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somewhere but aren't they closing in on really jumping up the treasury list oh yeah aren't they

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in striking distance of being the number two the second largest treasury in yeah i thought you did

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somebody somebody did a post on that yeah i did what was the number 100 140 000 uh 150 152 000

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and they have the second largest corporate treasury in the world behind Berkshire Hathaway.

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Now, I did a post about a month ago, which Saylor liked.

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It was a big day for me.

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So I'll congratulate myself.

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And what I said is, is that if you adjust the balance sheet based upon the market cap

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of the company, they have the largest treasury, the largest balance sheet in relationship to

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the market cap, even including Berkshire Hathaway.

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So that's the number one on the list.

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So if you reframe it that way as a percentage of the market cap, they're way ahead of Berkshire Hathaway already.

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And so with this, getting into second place is just is unprecedented.

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Yeah, this is massive.

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I think one thing to point out that kind of stood out to me a little bit when thinking through this is if you go look at these companies, their assets held, the number is very different.

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So if you go on macro trends or anywhere where you scrape any of the public data, the assets held is actually maybe significantly larger for some of these companies.

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but they show cash and short-term investments. Why? Because Bitcoin is effectively a cash

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slash short-term investment. It's liquid. 24-7, 365, you can sell Bitcoin at any point in time.

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It's the most liquid market in the world. Whereas these other companies that are carrying these

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assets on their balance sheet might be a billion-dollar campus in Silicon Valley

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that is illiquid. Who's going to buy that on the other side of the trade? It's an asset sitting

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there, but it's very illiquid. So I think that's helpful when you think about the context of these

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corporate treasuries. Like what's the value of this? Well, the value of having liquid assets is

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you can protect your company against risk, any risk that happens at any point in time because

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you have a liquid asset. So good point, Ben. Well, it's just such a massive jump, right?

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What started as this darling of the dot-com bubble, and now all of a sudden they're shooting

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up the list with companies that are perceived for the value that they're holding, these

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large value organizations.

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And now one's within striking distance of being in the top two, only behind Berkshire,

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who is the poster child for holding capital.

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And this is all made possible by Bitcoin and the power of corporate balance sheets.

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Now, you know, people are going to argue this, you know, and it's going to happen forever.

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There's never going to be a consensus on this where sentiment changes when the price goes down like this, particularly when it grinds down like this.

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When you get into the bull market everyone completely hyper focused on getting as much Bitcoin exposure behind those shares as they possibly can increasing that exposure that they have to the asset that they believe is perpetually going up and to the right right The ultimate carry trade it the debasement

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trade here. But then when it grinds to the side, you know, then the focus is only on the price

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of the equity, the common stock. Now, reality is there's both there. And everybody who is investing

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in these, ultimately, the focus is on the price of the common equity, right? I think everyone here

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would agree with that. But what you're trying to focus on, and I think this is something that a lot

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of people miss, is when you're putting a management team in place and making them responsible for

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executing a long-term strategy, the KPIs that you put in place, the reason for the KPIs is those are

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what are going to guide all of the action along the way. So if their strategy has been, we're going

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to focus on implementing methods where we can increase the Bitcoin exposure to each of our

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shares, they're going to hyper focus on that metric and execute whether the markets are good

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or the markets are bad because it's about years and decades. It's not about weeks and months.

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And what they're looking at is that they're building up this asset backing in the one asset

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that's meant to combat one of the only certainties you can almost look at out there in the world,

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which is the debasement of fiat currencies. That isn't stopping. If you look at the state of the

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world and go, man, these currencies are about to get stable. I'd love to see the charts you're

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seeing because that is just not a reality. You saw the notes that came out from the Fed. You got

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more rate cuts that seem to be on the way, but they're worried about the injection of inflation

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that's going to come along with that. The macro picture is pointing towards additional liquidity

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coming in and they're going to try to grow their way out of this and they're going to have to fuel

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that somehow. And so if you don't see them being able to put the lid on that in the next one year,

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two year, three year, five year time frame, this is a long game and you want as much exposure to

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the one asset with a truly fixed supply that you can get. And that means you've got years of this

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company taking the opportunity to build that value under your shares for you. And when you take the

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long-term approach to this, you can feel pretty comfortable, but it doesn't mean, and I want to be

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clear about this, it doesn't mean that there are no bad entry points into these investments, right?

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That's a reality of all investments that you make. You can be directionally correct and you can time

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it incredibly wrong. That's real, right? And I know we're all mega bulls and we're looking at this

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strategy for what it means for five years and 10 years, and we're nothing but bullish on that.

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But you do have to find the right entry points, and you're looking for the best risk reward that

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you can possibly get. Now, most people right now are fleeing out of the treasury space.

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You're seeing sentiment getting absolutely clobbered. It's coming down. And this is happening

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right at the moment where most of these plays are so de-risked that it's hard to see that much more

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downside to them. So even companies, when they're trading below their net asset value,

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everyone else thinks that that's a death blow. I don't think that it is because the incentive

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structures shift over time. And what I think a lot of people are going to figure out is that

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if you've got the ability to enter one of these plays where you've got a corporation and a

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corporate balance sheet that can do these things that are going to help to accrete that Bitcoin

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exposure, and now you're able to pick it up for 80 cents on the dollar from the Bitcoin they all

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already hold. Imagine what you were going to do is go buy IBIT.

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Right. You were going to go get just Bitcoin exposure.

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You just want Bitcoin beta exposure, which people that don't know what beta

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exposure means, it just means it should move like Bitcoin.

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Right. It should track Bitcoin if that was all you were looking for.

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But now you can go into an investment where you've got a discount of, you know,

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20 or even 25 percent on some of these to Bitcoin.

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If your only thesis in that is that if the bull market takes off in Q4,

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right say we rip for the next three months which historically has been the case if the only outcome

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you think could be achieved on that is that maybe it'll trade for just the base value of its assets

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at some point during that time you'll have greatly outperformed bitcoin during that time period

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so there's going to be a point where people start to see these opportunities and start

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changing their allocations because now you've got the ability to outperform and you're completely

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de-risked and if you don't believe that the business is going to be completely insolvent

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and die off or they're not completely burning cash constantly and you're worried about that drain

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you're in an incredibly strong position to now benefit into the future of all accretion that

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comes into those shares yep there's a because you do have to be able to pick those equities and you

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have to find them and that's not easy that's the diligence part of investing right there's no edge

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without diligence. If you're not out doing due diligence, if you're not out reading SEC filings

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and getting the details most people aren't willing to get, you're going to miss the opportunities.

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And that's why, you know, for us, it's such a fun journey because you get so deep down that rabbit

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hole that you start to spot what opportunity looks like in this space. Because it's hard for a lot of

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people because it's so new. This doesn't have a decade-long track record yet. We've got six months

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of a lot of companies in the space. Ben, you've fast forwarded into part three of the agenda here.

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I'm going to have to put you on pause here for a minute. Go ahead. I'll jump in there.

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Go ahead. I got to disagree with you, Jeff, with what you said about MSTR's price being down.

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And people can say that this is copium or whatever, but when should you enter into a position,

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right? If you think Bitcoin's going up on a four-year cycle, then you're going to want to

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jump into that position, what, beginning of January before the halving. And so I think a

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fair measurement starts there, January 1st of 2024. And if you take a look at Bitcoin,

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it's up like 3x from that point. And strategy is up currently 5x from that point. And, you know,

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people are measuring it from the blow off top in November, but that was like a 9x return compared

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to Bitcoin. That was completely unreasonable. That is, you can't expect strategy to trade

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9x to Bitcoin in perpetuity. So you can't be mad that a stock that has a meteoric rise

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has a correction like every other stock that ever has a meteoric rise. It happens every time.

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So if your starting point is an unrealistic blow off top, you're going to be real disappointed.

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Yeah, yeah, 100%.

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And on top of that, they raised like $42 billion in like, I don't know, 60 days, 90 days, something like that.

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It's just an incredible amount of capital raise.

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And they raised the floor.

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They raised the floor.

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They helped bring the price of Bitcoin up.

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They raised the floor of the 1XMNav price, which I posted about this previously.

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And Adam, please jump in there at any point.

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Yeah, absolutely.

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But I posted about this just comparing very similarly.

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So late, right?

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123023, the Bitcoin price, 42,000.

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The 10725 price is 121,000.

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So Bitcoin price got up 190%.

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The 1XMNAV.

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So if you were to compare the 1XMNAV price, let's call this the floor.

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If you believe 1XMNAV was the floor.

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The 1XMNAV price went from $52 to $271.

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So it's up 422%.

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And that's like really simple math, right?

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The actual price has gone from $69 to $329.

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But really, this is the whole thesis.

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Like this line right here is the entire thesis.

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This is why we're here.

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They're raising the floor forever

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because Bitcoin is the best capital ever.

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That's it.

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Go ahead, Adam.

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Come in.

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Hop in.

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Yeah, I agree that the floor is being raised.

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That is why we're all here.

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And, you know, I was just going to make a quick comment on what Ben was saying is that right now you're seeing some of these companies, they're trading at a 0.7, 0.8, 0.9 MNAB.

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And the reality is, is that some of those have a lot of debt on the balance sheet where they're capitalized with a lot of debt.

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So they're incredibly well positioned to really perform well in the next three months when we could see a significant Bitcoin bull rally.

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And, you know, it's the sentiment is so bad right now when you simply point out the mathematical reality of how well some of these companies are positioned to benefit from a Bitcoin rally.

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You know, you get accused of getting paid.

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You get accused of getting paid by David Bailey.

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And the sentiment is just really awful out there.

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So, yeah, I don't know.

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I don't I think it's totally unfounded.

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I think Soleil makes a great point.

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You know, the floor is getting raised, guys.

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And I think that a lot of the sentiment just really is irrational.

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And we get to take advantage of that.

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Yeah. And I think when you're looking at these companies, one thing people really do need to look at is the leverage. If you think we're going into a Bitcoin bull run here for Q4, you want a company that's got leverage. You want them to be levered long Bitcoin during that time period. If you're about to go into the most explosive time in the Bitcoin cycle, you want the companies that have leverage.

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And I think that there's been this shift where most of the capital that's been raised in the space probably over the last month or two has really been equity capital.

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And that's going to need to change here.

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And I think that for a lot of these companies, they're going to have to start positioning themselves and putting some leverage on to make sure that when you get this run, that you're getting that benefit from it.

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What if we do go up into a super cycle?

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right and this just grinds up into the right that might actually be max pain for a lot of people

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and uh if that were to happen you know that could be really painful if you didn't get leverage on

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before the most explosive part of that bull run happened so i would just you know when people are

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looking at these companies that is one of the differentiating factors and i think it's one of

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the things that strategy is really focusing on at the moment they've gotten so big that putting on

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enough leverage is very difficult. And that's what they're trying to work on. They're trying

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to scale these prefs. And now that stretch has been bumping up against par again, and it's getting

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into the range where they can actually go and use the ATM on that. We'll see if they raised any

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capital when they launched it on Robinhood and it actually hit the $100 peg briefly there and stayed

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above 99 for a while. But their key focus right now is got to be getting leverage on because they

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want to be that levered long Bitcoin proxy in the market. And with the speed at which they've been

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able to grow with equity capital, it's kind of left them a little imbalanced, particularly with

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a lot of the converts in the money. So I'm expecting them to have a real focus on hitting

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those prefs as hard as they can. So if that demand and that liquidity is starting to show up in those

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products, I'm expecting to see them accelerate the pace at which they're collecting that capital now

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and probably laying off the delevering tools.

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I mean, the common ATM is a delevering tool, right?

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It builds that balance sheet capacity

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to allow you to put more leverage on.

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But at this point in time, I think for strategy,

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that pivot towards becoming more levered

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than they are today.

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I mean, was it 15% or something around there, Jeff,

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that you said if you accounted for the converts

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that are deep in the money already?

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Yep, 15%.

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I think that they probably want that up around 30%.

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So, you know, I think that's good.

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And that kind of gets into this whole conversation of credit.

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Also, real quick, if you were racist in the comments, you were getting kicked out.

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You're gone.

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Like immediately.

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Like there's zero tolerance for that.

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So just FYI.

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Back to leverage.

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100% agree.

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Like these companies, they can just wait.

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And a lot of these companies that have come out through these pipe deals have already taken on leverage before they even went public.

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So they literally, this is like strategy in 2020, if they were a private company and did a deal,

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and then they put on the leverage as a private company and then came to the market. And it just,

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it takes a while, like that's got to go through. And then eventually, these companies that have

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taken on leverage have more capacity to take on additional leverage. What does that look like?

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It's tough to say if it's convertible debt, then all of that capital is cleared.

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and now you could have 100% capacity to go take on new forms of leverage. So it's really just a

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like, it's a time thing. It's these companies have time.

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And I saw a few questions about why is Sailor waiting to put leverage on,

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you know, let me assure you, he's not right there. They're trying to put leverage on right now. But

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what you got to realize with these products is these products are still so new. You know,

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we've all been digesting them now for months and figuring out what they are and the value proposition.

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and what it means for Bitcoin to have this high compound annual growth rate and gives the company

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the ability to pay a high coupon. But you have to go and source that demand. And these are pretty

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large products relative to the exposure that they're getting, right? So when you've got billions

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of dollars, if you're sourcing that through retail channels, that's going to be pretty difficult

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to ramp up. And a lot of the institutional capital will really truly be unlocked when they've got the

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capability to get ratings. So part of it is just an education game in the market.

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We should talk credit. We should talk credit. We should talk credit. This is what we're here for.

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We're here to talk credit. Okay. So actually real quick, we hit the update. We hit a little bit on

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Bitcoin treasury companies and maybe we come back to it. But I wanted to start with this.

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What is money? What is credit? What is risk? And I think thinking about all of these three things

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in concert are very important, right? There's been this huge push to figure out like, what is money,

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right? Safety and wrote a book about it, the Bitcoin Standard, Sailor Series, What is Money

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podcast with Robert Breedlove. It's been a lot of focus on this and people had to learn about what

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is money, right? Step one, once you have the money, what do you do with the money? Step two, credit.

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And then part of that is credit and risk.

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So that's where we're at in this evolution.

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And that's where this thing needs to go.

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That's where that's the natural evolution of this entire space.

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So I asked the guys on the screen today to think about, uh, the, the word credit, like

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what does credit mean to you?

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Like, what is, what, how does it impact your day-to-day life today?

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And what, what does it look like?

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because this entire landscape is likely going to get changed and shift up a little bit.

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So Adam, I know you've talked a lot about this.

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You've done a lot of digging into the space.

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I'm going to start with you and maybe we'll pass it over to Mike and start to think about it.

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Yeah, it's an interesting question.

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The philosophical aspect of money and valuation itself, right?

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And right now, I just think that we're watching the credit market slowly realize that trust

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itself is a counterparty risk but the thermodynamics of Bitcoin is not And I think that the fact of the matter is is that Bitcoin is the apex collateral because everything else is literally just a claim on

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entropy. So if you really think of the implications of this, any industry that relies on trust-based

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collateral will be consumed by truth-based collateral. And you just think of all the

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industries that really run on collateral, whether it's bonds, credit, banking, insurance, energy,

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sovereign finance, real estate, whatever it is, you realize that Bitcoin is just going to start

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to slowly touch everything and then just take over because it is the least risky asset. And

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the classic debate is that Bitcoin is competing against gold, against the dollar. But I think

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really on a bigger picture, what Bitcoin treasury companies and maybe more specifically strategy

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have really illuminated is that Bitcoin is competing against kind of what the default

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architecture of trust is within our civilization. And this is why everyone's brains are being so

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broken. And understanding Bitcoin's relationship to markets is tough because there's so much of

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that unraveling to do. It's just a lot of deprogramming on a very fundamental level.

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So if money equals like crystallized time and energy, your effort, your labor,

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then credit is something like belief in future productivity. And risk is entropy that just

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leaks through that trust. So I think on a broad scale, I think everyone should think of credit as

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being civilization's shared hallucination that tomorrow will exist. And I don't know, I just

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think that this is proven because we all know that that fiat credit literally created the illusion of

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growth through debt expansion. That's the position that we're in. So it's literally proven.

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Every single debt-based empire that has been built on borrowed time, you know, and Bitcoin is where

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time finally collects and whoever has the most Bitcoin collects the most.

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So I think it's a very interesting philosophical discussion.

387
00:32:29,500 --> 00:32:29,780
Totally.

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In a nutshell, that's kind of what I think about Bitcoin.

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Credit, money, in a nutshell.

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Massolution is an Instaclip.

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Make it happen.

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Instaclip.

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The clipping team is watching this.

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Please clip that one.

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There you go.

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Please.

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The, it really all comes down to trust, right?

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And so when I think of credit, I think of just seeing credit throughout my life.

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I go to the restaurant and I use a credit card.

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I have a mortgage.

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You get somebody gets an auto loan or you've got these other different types of credit

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systems that are just really pervasive and in everyday life.

403
00:33:15,260 --> 00:33:16,720
Why does that structure exist?

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00:33:16,720 --> 00:33:24,320
that structure exists as a trust system to provide, you know, the ability to interact

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within society based on like how time, energy, like in money is flowing throughout a society.

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So really this concept of credit and money is like so incredibly intertwined with like

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the entire ledger system.

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You can see how there's a natural transition here into the credit landscape and Bitcoin

409
00:33:46,440 --> 00:33:52,520
going to work its way in there. Go ahead. Anybody else, other thoughts? I've got some

410
00:33:52,520 --> 00:33:57,880
data information. Green, hop in there. Sure. So I think all of us know there's basically

411
00:33:57,880 --> 00:34:02,680
three forms of credit that most people are used to. One form of credit is, I mean, you could use

412
00:34:02,680 --> 00:34:06,680
a debit card for things or you can use a credit card. And so you go make a bunch of purchases,

413
00:34:06,680 --> 00:34:11,720
you get paid twice a month or once a month or weekly, whatever it is, you make your purchases.

414
00:34:11,720 --> 00:34:15,480
If you're responsible, then you pay off the bill in total at the end of a month. That's one month

415
00:34:15,480 --> 00:34:21,080
credit. You need a way to get to work. Well, what can you do? You could walk to work for five years,

416
00:34:21,620 --> 00:34:29,520
save $500 a month, and then go buy a car for cash. Or you could buy a reasonable car,

417
00:34:29,820 --> 00:34:35,500
put down a reasonable down payment, only walk to work for two years, and then buy the car on credit,

418
00:34:35,500 --> 00:34:40,900
and then you pay it off while you're driving it for the next three or five years. That's a midterm

419
00:34:40,900 --> 00:34:46,320
credit. And then the longer term credit that Jeff just talked about is a house. You can go live in a

420
00:34:46,320 --> 00:34:50,760
tent and you could do that, save up your money or live at home until you have enough money to go buy

421
00:34:50,760 --> 00:34:56,220
a house for cash. Or you could buy the house on credit and the collateral is the house itself.

422
00:34:56,840 --> 00:35:03,180
And I was thinking about what I said about Saylor. If he only has 15% debt and the rest is equity,

423
00:35:03,540 --> 00:35:10,260
he bought a house with 85% down. So he has very little leverage. Most people do the reverse. You

424
00:35:10,260 --> 00:35:17,020
put down 20% or less than 20% to go buy the house. So we're all used to this, but sometimes his

425
00:35:17,020 --> 00:35:21,740
numbers are just bigger. So I think we all use this every day. I posted a video from Ray Dalio.

426
00:35:22,280 --> 00:35:30,520
Yeah. How the economic machine works. That if you were to go to any Ivy, I pick an Ivy League

427
00:35:30,520 --> 00:35:36,840
all the time, econ professor professors, none of the econ professors could explain how the economy

428
00:35:36,840 --> 00:35:43,460
works in 30 minutes, like Ray Dalio's video does. It's got almost 500 million views. It's whatever,

429
00:35:43,920 --> 00:35:50,940
11 years old. Watch the video. It explains credit. And the benefit for this is that it makes the

430
00:35:50,940 --> 00:35:55,780
economy, because you're buying more cars, because you could buy them on credit, that allows more

431
00:35:55,780 --> 00:36:01,260
people to work in the factories and your economy grows. And so in America, we have the FICO,

432
00:36:01,740 --> 00:36:05,820
you know, credit reports. Literally, they're called credit reports. And if you have good credit,

433
00:36:05,820 --> 00:36:10,800
they let you borrow more money and then you can get a better car. Now, if you take this the wrong

434
00:36:10,800 --> 00:36:17,160
way and you buy things that you cannot afford, then you have problems. And so that becomes a

435
00:36:17,160 --> 00:36:22,480
personal responsibility piece. So credit is the bedrock. And in the US, we have these, like I said,

436
00:36:22,560 --> 00:36:28,100
credit reports, which allow you to borrow money. And the people that hate credit reports are the

437
00:36:28,100 --> 00:36:35,260
people with bad credit. Yeah. And the amount of credit that you can go get is actually pretty

438
00:36:35,260 --> 00:36:40,100
insane. I don't know. I think I've got like, I used to game the credit card system, right? So you get

439
00:36:40,100 --> 00:36:44,180
one, you sign up, you get the points, you do all the things. And like, that was just a thing in

440
00:36:44,180 --> 00:36:49,320
traditional finance. It's like what you did. And at one point, I think I had like $500,000 of credit

441
00:36:49,320 --> 00:36:54,640
credit limit. I'm like, this is insane. And I can't believe I was able to like rack all of this up.

442
00:36:54,900 --> 00:37:01,440
And it's just a mathematical number of trust based on, you know, the way I've interacted in society.

443
00:37:01,440 --> 00:37:03,880
So it's like this construct that exists everywhere.

444
00:37:04,960 --> 00:37:10,380
And Mike, to your point, you've got revolving credit, installment credit, open credit, different

445
00:37:10,380 --> 00:37:12,400
designs of different credit systems.

446
00:37:12,680 --> 00:37:16,680
And there are people that are taking the risk on the other side of that trade, right?

447
00:37:16,700 --> 00:37:21,440
So anytime you like open a bank account or a credit card, like you're the JP Morgan,

448
00:37:21,640 --> 00:37:25,360
you know, when I go put in my application, they're taking the credit risk behind the

449
00:37:25,360 --> 00:37:28,140
scenes, but they've got all these assets that sit behind it.

450
00:37:28,140 --> 00:37:33,820
So if I default, they're like, all right, they're taking that risk that's built into their entire calculation.

451
00:37:34,440 --> 00:37:37,240
And that's why the interest rates change are associated with it.

452
00:37:37,760 --> 00:37:43,180
But by the way, anybody that goes to buy a house gets to play econ professor.

453
00:37:43,460 --> 00:37:44,140
What do I mean?

454
00:37:44,420 --> 00:37:49,260
You could buy a house with a 30-year fixed mortgage or what they'll make you an offer and say, you know what?

455
00:37:49,580 --> 00:37:54,760
We'll give you an arm, an adjustable rate with a five-year lot, a five and two.

456
00:37:54,760 --> 00:37:58,940
The first five years, you have a lower rate, but after five years, it resets.

457
00:37:59,320 --> 00:38:03,380
So you're making a bet and thinking, I'm going to take it with a lower interest rate,

458
00:38:03,660 --> 00:38:06,520
betting that interest rates will be lower in five years.

459
00:38:06,840 --> 00:38:11,600
Otherwise, if it's a five and two or five and one, it will reset every year or every

460
00:38:11,600 --> 00:38:12,680
two years after that.

461
00:38:13,100 --> 00:38:16,580
And so you have to think about where that can you refinance?

462
00:38:16,700 --> 00:38:19,060
Did you pay down more debt on that house?

463
00:38:19,740 --> 00:38:21,120
And so, excuse me.

464
00:38:21,320 --> 00:38:24,000
So you have these choices that you can make.

465
00:38:24,000 --> 00:38:25,920
And this is all common.

466
00:38:26,060 --> 00:38:28,300
This has all been available for 30 years.

467
00:38:28,880 --> 00:38:31,020
And so you have to be responsible with it.

468
00:38:31,560 --> 00:38:31,680
Yeah.

469
00:38:32,540 --> 00:38:34,620
And there's a couple other things here.

470
00:38:34,720 --> 00:38:38,660
And when we get into the bad bond section, we'll talk through why this is important.

471
00:38:38,780 --> 00:38:39,860
But secured credit, right?

472
00:38:39,860 --> 00:38:44,320
So secured credit is a loan that's backed by the collateral that's put up against it.

473
00:38:44,380 --> 00:38:49,540
So when you go get a house, like if you don't pay, if you default on your house, on your mortgage, they take your house.

474
00:38:49,540 --> 00:38:58,840
Then you have unsecured credit, which is no collateral, which is more typical, like a credit card or something, which is more risk for the lender.

475
00:38:59,420 --> 00:39:02,020
If you default, like they can't really do anything.

476
00:39:02,660 --> 00:39:04,140
So different forms of risk.

477
00:39:04,160 --> 00:39:07,200
And that's all like a mathematical construct in a mathematical calculation.

478
00:39:10,020 --> 00:39:14,580
And I wanted to bring this up because this is a website.

479
00:39:14,940 --> 00:39:16,880
This is called, what is this called?

480
00:39:16,880 --> 00:39:22,760
Uh, this is household debt center for microeconomic data.

481
00:39:22,760 --> 00:39:27,980
You've got non-housing debt balance, total debt balance, and then the percent of, uh,

482
00:39:27,980 --> 00:39:29,780
balance that's 90 days delinquent.

483
00:39:30,860 --> 00:39:36,940
And this is a really interesting website just to see like how, how corporate or how personal

484
00:39:36,940 --> 00:39:39,080
credit household credit is changing over time.

485
00:39:39,080 --> 00:39:45,200
So you could kind of get a glimpse into like the, the health of the system, uh, based on

486
00:39:45,200 --> 00:39:49,720
how like the credit profile of the world is kind of shifting and changing. So I thought this one

487
00:39:49,720 --> 00:39:54,120
was pretty fascinating percent of balance, 90 days delinquent. And, you know, the reason I'm

488
00:39:54,120 --> 00:39:57,300
showing this is like, we're all trying to put this together in real time of like all these other

489
00:39:57,300 --> 00:40:04,820
things that are happening in the marketplace, trying to see through the mud, really. But

490
00:40:04,820 --> 00:40:12,360
one thing I found that was interesting here is that household mortgage balances, percent of

491
00:40:12,360 --> 00:40:17,420
balance that's 90 days more delinquent is actually really near an all-time low

492
00:40:17,420 --> 00:40:26,660
compared to like going back to 2004. But the other forms of credit, like credit card credit is kind

493
00:40:26,660 --> 00:40:36,220
of nearing 2008-ish all-time highs. You've got other credit is nearing 2009 all-time highs,

494
00:40:36,220 --> 00:40:42,160
2010, all time highs, auto loans taking up student rates or student loans, obviously,

495
00:40:42,400 --> 00:40:50,240
you know, rocketing here as well after the Biden era, after the Biden era there. So it's just an

496
00:40:50,240 --> 00:40:56,600
interesting perspective how these forms of credit are kind of shifting and changing

497
00:40:56,600 --> 00:41:03,080
and the health of these different systems. Just seems like the incentive structures are

498
00:41:03,080 --> 00:41:07,260
really warped in society when you see those graphs going up into the right in the last few years.

499
00:41:07,820 --> 00:41:10,900
It's almost like we're living with broken money and people can't plan for tomorrow.

500
00:41:11,600 --> 00:41:13,980
Really sad image, but yeah, you make a great point, Jeff.

501
00:41:14,440 --> 00:41:20,100
Yeah. So, you know, the first thing I thought about too, it was a sad image. I even wrote that

502
00:41:20,100 --> 00:41:26,180
here in my Excel. My gut reaction was I felt bad about society and like looking at every single one

503
00:41:26,180 --> 00:41:32,340
of these, like the total debt balance of non-housing debt is rising. The spread between

504
00:41:32,340 --> 00:41:35,840
the two between housing debt and non-housing debt is actually rising pretty drastically,

505
00:41:35,840 --> 00:41:40,700
which is an interesting perspective. Non-housing debt balance, again,

506
00:41:41,080 --> 00:41:47,300
as the money supply increases, these debt balances are ballooning and inflating these

507
00:41:47,300 --> 00:41:53,580
credit balances, which is again, another interesting perspective. But my secondary reaction I had is

508
00:41:53,580 --> 00:42:02,180
that, holy shit, somebody else is on the other side of this trade. And what does that look like?

509
00:42:02,180 --> 00:42:13,080
what does that look like? And what is the, um, what's the downside? And, uh, if, if you're

510
00:42:13,080 --> 00:42:16,400
really interested in credit, actually, I'm going to do a little plug for this. There's this, uh,

511
00:42:16,400 --> 00:42:20,560
like one, an hour and a half video here, debt, the first 5,000 years by David Graeber talks

512
00:42:20,560 --> 00:42:25,800
about the history of debt. Uh, it's like a quick hour and a half on this, like 400 page book he put

513
00:42:25,800 --> 00:42:32,540
together. Totally worth the time. But the interesting thing I was thinking about here

514
00:42:32,540 --> 00:42:40,960
is this loss of access to credit. So what happens if people aren't able to access this credit

515
00:42:40,960 --> 00:42:47,660
anymore? If this problem exacerbates and there's no break in the system, what is the break in the

516
00:42:47,660 --> 00:42:54,420
system? Is it that people can't get mortgages? Is it that people can't get credit cards? Is it that

517
00:42:54,420 --> 00:42:58,180
these finance companies that used to be able to provide all this credit, like have no capacity

518
00:42:58,180 --> 00:43:04,340
to provide credit anymore. What is, what does that look like? And how does this whole system begin to

519
00:43:04,340 --> 00:43:11,380
like reshape itself and change? And one thing I looked at was these mortgage rates and I wanted

520
00:43:11,380 --> 00:43:19,300
to see how they moved in concert with interest rates. And one thing I noticed here is going over

521
00:43:19,300 --> 00:43:23,800
the right-hand side. So on the left-hand side, this is the 30-year mortgages in the green, the

522
00:43:23,800 --> 00:43:28,720
15-year mortgages in the blue. And on the right-hand side, I did a little transparent image

523
00:43:28,720 --> 00:43:33,380
here and I overlaid the Fed funds rate. And you can see some correlation to the Fed funds rate.

524
00:43:33,500 --> 00:43:37,060
But one thing that was most interesting is when the Fed funds rate came down in September,

525
00:43:37,240 --> 00:43:45,020
there was this blip down in mortgage rates, but then it ripped higher after rates went down.

526
00:43:45,020 --> 00:43:51,640
It ripped right back higher to, I don't know, where was that? Something around 6%.

527
00:43:51,640 --> 00:43:56,840
percent and rates have come down again and the price the mortgage rates have come down but the

528
00:43:56,840 --> 00:44:03,400
real question is like is what what happens is there a disconnect there between like interest

529
00:44:03,400 --> 00:44:06,920
rates dropping and like the risk of these things actually staying high like the credit risk of

530
00:44:06,920 --> 00:44:12,680
these things staying high uh and the market changing that's what i'm trying to think through

531
00:44:12,680 --> 00:44:20,200
and kind of react on a bit so so i'll make a comment about this so so look i think what people

532
00:44:20,200 --> 00:44:25,560
that are listening to this that are smart enough to understand what's going on is that you assume

533
00:44:25,560 --> 00:44:30,840
that you're you you own a house and it's not paid off you have a choice let's assume your house is

534
00:44:30,840 --> 00:44:36,840
going up in value pick and pick an amount let's say it's four or five percent a year but if bitcoin

535
00:44:36,840 --> 00:44:44,040
has a kegger of 30 or let's say the cake is only 20 on bitcoin but your house is only going up by

536
00:44:44,040 --> 00:44:52,620
5%, it would make sense for you to buy more of the faster appreciating asset than to build up

537
00:44:52,620 --> 00:44:58,200
more credit by paying off your house, building equity faster than that, because this other asset

538
00:44:58,200 --> 00:45:02,980
is going up faster than by paying it down over here. And that's your choice. And if you have a

539
00:45:02,980 --> 00:45:07,660
low interest rate, and I'm well aware that mortgages are declining balances and most of

540
00:45:07,660 --> 00:45:12,420
the money goes to interest in the beginning, but you have to think about where do you see yourself

541
00:45:12,420 --> 00:45:17,540
in five years? Or if a Bitcoin halving is every four years, where do you see yourself in eight

542
00:45:17,540 --> 00:45:22,740
years? And from that perspective, do you want to buy things that go up faster? It's not an all or

543
00:45:22,740 --> 00:45:30,740
nothing. Split it up and do that. If you have a great job and this is not financial advice,

544
00:45:30,740 --> 00:45:35,780
but you could think of it like it's risk-free, just pay off your house. If your house payment's

545
00:45:35,780 --> 00:45:42,340
$3,000 a month and you pay off your house, you don't have that expense anymore. But your house

546
00:45:42,340 --> 00:45:44,640
is only going to go up at whatever percent, 5%.

547
00:45:44,640 --> 00:45:46,480
And if that's what makes you happy, do that.

548
00:45:46,820 --> 00:45:46,980
Yeah.

549
00:45:47,420 --> 00:45:49,200
What we're doing here, I'll wrap up one second.

550
00:45:49,400 --> 00:45:53,860
What we're doing here with Bitcoin treasury companies, specifically with strategy, is

551
00:45:53,860 --> 00:45:58,780
we're saying, look, it could take on leverage in order to buy Bitcoin to get a better return

552
00:45:58,780 --> 00:46:08,040
over a set number of years And so either you buy Bitcoin you buy some of strategy and then it makes more money over time

553
00:46:09,520 --> 00:46:11,700
I think the true distinction

554
00:46:11,700 --> 00:46:13,140
that I'm really trying to point out here

555
00:46:13,140 --> 00:46:17,240
is that there's a bunch of really bad credit

556
00:46:17,240 --> 00:46:18,400
out in the market.

557
00:46:19,320 --> 00:46:22,000
And if you hold the best form of collateral,

558
00:46:22,000 --> 00:46:24,280
you will have the best credit in the market.

559
00:46:25,560 --> 00:46:26,980
That's it.

560
00:46:26,980 --> 00:46:28,740
And so that's the,

561
00:46:29,080 --> 00:46:31,840
That's the way I'm thinking about this.

562
00:46:32,200 --> 00:46:33,760
So if you're like, all right, well, there's...

563
00:46:34,840 --> 00:46:37,320
I wanted to lay out the personal debt landscape

564
00:46:37,320 --> 00:46:40,200
so people can see this is the personal credit landscape.

565
00:46:40,560 --> 00:46:44,940
But that same construct exists in the corporate bond landscape,

566
00:46:45,060 --> 00:46:46,080
in the corporate credit landscape.

567
00:46:46,880 --> 00:46:51,960
And now you've got a company that's got some of the best collateral on the planet

568
00:46:51,960 --> 00:46:54,280
and they've got an order of magnitude more than everybody else.

569
00:46:54,280 --> 00:46:56,540
And all these other companies that are holding this really, really,

570
00:46:56,540 --> 00:47:03,540
really good collateral, you have a really good credit quality. The market just hasn't

571
00:47:03,540 --> 00:47:08,360
recognized it yet. Everybody here agrees, your credit quality is insanely good,

572
00:47:08,800 --> 00:47:16,220
but the market just doesn't believe it yet. And so my campaign that I've kind of been on recently

573
00:47:16,220 --> 00:47:25,060
is this risk is completely mispriced globally, everywhere. And it's so mispriced, it doesn't

574
00:47:25,060 --> 00:47:32,960
feel mispriced because it's so mispriced. And that's this kind of recognized risk landscape

575
00:47:32,960 --> 00:47:36,620
that I'm trying to unpack and dive into different places here.

576
00:47:37,420 --> 00:47:42,040
Yeah. If you hold Bitcoin, your FICO score should be a perfect 850, period.

577
00:47:42,440 --> 00:47:44,180
It should be because a Bitcoin is a Bitcoin.

578
00:47:45,380 --> 00:47:49,980
Imagine you go to buy a house and you put up some Bitcoin as collateral,

579
00:47:49,980 --> 00:47:56,260
and the collateral is going up in value faster than what you're borrowing to buy.

580
00:47:57,100 --> 00:48:04,160
Like you should be able to put like zero down and they just like, sure, no problem.

581
00:48:04,700 --> 00:48:04,880
Yeah.

582
00:48:05,380 --> 00:48:05,900
Here's the money.

583
00:48:06,200 --> 00:48:06,440
Exactly.

584
00:48:06,700 --> 00:48:07,880
And it's just crazy.

585
00:48:07,880 --> 00:48:12,740
Like all these, all these loans that have come out where you can post your Bitcoin as collateral.

586
00:48:12,960 --> 00:48:14,800
Like the terms are so horrible.

587
00:48:15,320 --> 00:48:15,920
Yeah, they're terrible.

588
00:48:16,100 --> 00:48:18,060
They're just so insanely horrible.

589
00:48:18,060 --> 00:48:21,380
I can't even believe they exist because you could just pull the collateral.

590
00:48:21,380 --> 00:48:24,420
Like they've got 25% liquidation.

591
00:48:25,200 --> 00:48:28,920
Like the risk on the other side of those transactions is pretty much zero.

592
00:48:29,740 --> 00:48:34,640
If you see one Bitcoin is one Bitcoin, which is just crazy that those are the terms.

593
00:48:34,740 --> 00:48:35,700
Like that's where the market's at.

594
00:48:36,260 --> 00:48:40,680
But I want to get Adam in here because the people want to rant.

595
00:48:40,800 --> 00:48:44,900
You've got some, like some excited fans in the audience.

596
00:48:45,120 --> 00:48:46,980
Yeah, I can go on a quick rant.

597
00:48:46,980 --> 00:48:50,320
I totally agree with the thesis that risk is mispriced.

598
00:48:50,320 --> 00:48:53,580
When you just look at the universe of comparable assets,

599
00:48:53,820 --> 00:48:58,600
like you look at investment grade bonds that are 2X collateralized

600
00:48:58,600 --> 00:49:01,580
and you have strife at an 8X, it just begs the question,

601
00:49:02,000 --> 00:49:04,660
how over collateralized does this thing have to be

602
00:49:04,660 --> 00:49:06,700
before the market starts to really notice these things?

603
00:49:07,100 --> 00:49:09,380
And they are obviously when you're raising billions of dollars,

604
00:49:09,460 --> 00:49:10,640
you're raising billions of dollars.

605
00:49:10,800 --> 00:49:14,540
But it just feels that like the market is still totally not understanding

606
00:49:14,540 --> 00:49:16,580
how incredible these products are.

607
00:49:16,580 --> 00:49:20,240
and you just look at the analog

608
00:49:20,240 --> 00:49:22,380
between like a stride and a stretch too

609
00:49:22,380 --> 00:49:25,280
versus like the normal collateralization of those buckets.

610
00:49:25,500 --> 00:49:27,300
It's just, it's night and day difference

611
00:49:27,300 --> 00:49:29,140
and you just wonder how long

612
00:49:29,140 --> 00:49:30,740
is that risk gotta be mispriced?

613
00:49:31,180 --> 00:49:33,160
It starts to get frustrating a little bit,

614
00:49:33,240 --> 00:49:36,080
but like you guys said, these are so new, we're so early.

615
00:49:36,320 --> 00:49:39,120
It's really tough to just, to even predict

616
00:49:39,120 --> 00:49:40,680
when they're really gonna start to catch on

617
00:49:40,680 --> 00:49:41,980
even though they already are.

618
00:49:42,680 --> 00:49:44,380
It's an interesting question.

619
00:49:44,380 --> 00:50:09,260
Yeah. By the time they catch on, the price is going to be much, much higher. I mean, what a lot of people overlook with, and so banking was the first industry that I worked in. One of the things people overlook when it comes to Bitcoin is from the underwriter perspective, you're no longer underwriting the individual at all. You're only underwriting the asset, right? It's asset-backed lending is effectively what Bitcoin is.

620
00:50:09,260 --> 00:50:14,420
So even when you get a house, you would think that's effectively asset-backed lending as

621
00:50:14,420 --> 00:50:14,860
well, right?

622
00:50:14,880 --> 00:50:19,500
You've got one asset and you've got one liability against it and they're securing it based on

623
00:50:19,500 --> 00:50:20,920
the value of the house, but they're not.

624
00:50:21,400 --> 00:50:26,020
Because in that instance, they're also underwriting your own personal cash flows and they want

625
00:50:26,020 --> 00:50:29,360
to know what else they can come and take in the event that you default and you've got

626
00:50:29,360 --> 00:50:30,360
a shortfall on it.

627
00:50:30,500 --> 00:50:34,660
So they're underwriting the individual and there's also a lot of cost and time that goes

628
00:50:34,660 --> 00:50:35,940
into underwriting the individual.

629
00:50:36,120 --> 00:50:37,340
That's the complex part.

630
00:50:37,340 --> 00:50:51,960
So for people right now, and I think that this is a part of the value for people holding spot Bitcoin themselves and actually having access to this is your cost capital for you personally in the future is going to be very low.

631
00:50:52,520 --> 00:50:57,700
And while they're still high, you know, they're not quite, you know, I used to always say they were in the loan shark range.

632
00:50:57,780 --> 00:51:02,500
Basically, if you wanted to borrow against your Bitcoin, it was 16 to 18 percent, not that long ago.

633
00:51:03,360 --> 00:51:06,300
You're starting to see that come down pretty quickly.

634
00:51:06,300 --> 00:51:23,260
And I think a part of that was you needed to build up the bid underneath the asset. They needed to know that there truly was deep liquidity out there for this asset in the event they had to liquidate so that there was no liquidation cascade risk out there that they couldn't figure out how to price.

635
00:51:23,260 --> 00:51:31,220
And now you're seeing it come down where even on, I think, Coinbase as their borrowing platform, and it's weird because it goes into a stable coin and all this.

636
00:51:31,300 --> 00:51:35,080
But I think that lending right now is like seven and a half at the moment.

637
00:51:35,640 --> 00:51:40,540
And so obviously in that arrangement, you're giving up your custody and doing a lot of those things.

638
00:51:40,540 --> 00:51:53,100
But when you're stockpiling one asset, I can't think of an asset that in the future is going to be more valuable to borrow against because this is the cleanest transaction you can possibly hope for.

639
00:51:53,260 --> 00:52:00,420
as an underwriter 100 you know to be fair to the the bitcoin loan sharks um i mean if they

640
00:52:00,420 --> 00:52:07,040
understand bitcoin and they can just get a 30 return every year they kind of have to charge

641
00:52:07,040 --> 00:52:11,960
a boatload to even make it worth their while because like they should just buy bitcoin with it

642
00:52:11,960 --> 00:52:18,000
so you know eventually maybe those those those numbers will come down as bitcoin's

643
00:52:18,000 --> 00:52:21,000
Kagger comes down and it'll all get easier to do.

644
00:52:21,480 --> 00:52:24,720
So what you're saying is we need lenders that don't believe in Bitcoin as much.

645
00:52:24,720 --> 00:52:25,680
Yeah. Yeah.

646
00:52:25,680 --> 00:52:25,980
If you can.

647
00:52:25,980 --> 00:52:26,580
Problem.

648
00:52:26,580 --> 00:52:28,440
That's the problem with this entire industry.

649
00:52:28,440 --> 00:52:28,920
When I.

650
00:52:28,920 --> 00:52:29,680
Find a sucker.

651
00:52:30,300 --> 00:52:31,140
When I left.

652
00:52:31,140 --> 00:52:32,160
Weep in belief.

653
00:52:33,060 --> 00:52:36,240
When I left reinsurance and I started working in this area full time, like the first thing

654
00:52:36,240 --> 00:52:40,180
I noticed is like, oh my God, there's nobody dumb enough here to lend fiat dollars and

655
00:52:40,180 --> 00:52:43,620
doesn't believe in Bitcoin is willing to give me like a good rate for the risk.

656
00:52:43,620 --> 00:52:54,160
So it's almost like almost a lost cause because it's so much better to take the other side of the trade all the time, 100% of the time.

657
00:52:54,960 --> 00:53:00,040
And so I understand why that market is not incredibly deep.

658
00:53:00,560 --> 00:53:07,260
So it's like you got to think about, okay, let's think about the other side of it, which is what Saylor has done in terms of equitizing it.

659
00:53:07,260 --> 00:53:10,360
Like this is equity credit, not debt credit.

660
00:53:10,980 --> 00:53:12,980
It's like flip the script upside down.

661
00:53:12,980 --> 00:53:17,840
and gone the other way. Like, I'll give you credit instead of I'll take credit. I'll give

662
00:53:17,840 --> 00:53:23,980
you credit. And that's like really blown people's brains here. Like the, you know,

663
00:53:24,300 --> 00:53:27,340
they've got to work on business plans and revenue and all this stuff. It's like, well,

664
00:53:27,340 --> 00:53:31,700
this is a business plan. Like strategy is a credit company. They're, they issue credit,

665
00:53:31,700 --> 00:53:39,620
very similar to how an insurance company issues insurance, very similar. And, you know, I want to

666
00:53:39,620 --> 00:53:44,840
walk through this because a lot of people don't understand like how insurance works. And I didn't

667
00:53:44,840 --> 00:53:50,300
until I like worked in it for a long time, but there's this concept of a gross written premium

668
00:53:50,300 --> 00:53:57,520
and gross earned premium for insurance companies. It's an accounting mechanism. So when they write

669
00:53:57,520 --> 00:54:02,540
a policy, like when you issue a policy and you get paid the premium in the door on day one,

670
00:54:02,940 --> 00:54:09,320
you actually earn out that premium over time, over the life of the policy. So you can't account for

671
00:54:09,320 --> 00:54:14,280
actually having to gain on that entire premium that you bring in the door until the policy is

672
00:54:14,280 --> 00:54:20,900
over. So you earn out over a period of time and it's accounting mechanism. And I think

673
00:54:20,900 --> 00:54:27,400
the world could start looking at strategy very similar from an opposite perspective,

674
00:54:27,400 --> 00:54:33,380
because you are taking an investment in the door and you have a liability over time,

675
00:54:33,380 --> 00:54:38,560
but it's declining over time. So that like, there is a life of, of the policy and like an

676
00:54:38,560 --> 00:54:45,900
effective duration such that, you know, you can take that into consideration, like a gross written

677
00:54:45,900 --> 00:54:52,640
investment and a gross earned investment, which can be thought of as revenue. And I think this

678
00:54:52,640 --> 00:55:00,760
is kind of where this industry is like going in a different direction. What do you guys think?

679
00:55:00,760 --> 00:55:08,040
It's a little, it's a little weird. It's a strategy is a credit company, not an insurance

680
00:55:08,040 --> 00:55:11,720
company, they're a credit company. I'm going to take a little bit different of a view of it. I

681
00:55:11,720 --> 00:55:16,520
think that sometimes people conflate with what Saylor did. What Saylor did was made a bunch of

682
00:55:16,520 --> 00:55:23,160
preps that pay either 10% or 8% a coupon that comes out either on a yearly and stretch on a

683
00:55:23,160 --> 00:55:29,560
monthly. That was not designed for Bitcoiners. It was designed for the bond market. It was designed

684
00:55:29,560 --> 00:55:34,280
for people that are risk averse, don't want the volatility, just want to get this. So he created

685
00:55:34,280 --> 00:55:40,200
that. Now where it becomes interesting to someone like me, a Bitcoiner, is that when you can buy

686
00:55:40,200 --> 00:55:46,760
enough of it to get paid in perpetuity, an amount that you never have to sell, for me that becomes

687
00:55:46,760 --> 00:55:54,040
compelling for me to sell MSTR shares, pay taxes on that, then buy enough of the prefs in order to

688
00:55:54,040 --> 00:56:00,440
give me an income that I can live on in perpetuity. So that for Bitcoiner becomes exciting, but I

689
00:56:00,440 --> 00:56:02,280
I wouldn't sell all, I would sell some.

690
00:56:03,320 --> 00:56:04,040
Excuse me.

691
00:56:04,580 --> 00:56:07,580
Because the credit quality is so good.

692
00:56:08,320 --> 00:56:10,720
Right, because like we've been saying nonstop,

693
00:56:10,720 --> 00:56:14,900
he's only 15% levered or he bought a house with 85% down.

694
00:56:15,000 --> 00:56:16,880
So for that perspective, he can always pay that.

695
00:56:17,100 --> 00:56:18,680
I'm not going to live in perpetuity.

696
00:56:19,140 --> 00:56:21,480
So it's an easy math to do.

697
00:56:22,020 --> 00:56:23,500
So with that, Adam, jump in.

698
00:56:23,740 --> 00:56:25,440
Give us your rant.

699
00:56:27,080 --> 00:56:29,720
I have the rants later on in the show during the solo section.

700
00:56:29,720 --> 00:56:33,200
Adam, we just need you on call at all times.

701
00:56:33,200 --> 00:56:34,960
Just like rant on call, please.

702
00:56:36,740 --> 00:56:39,580
We need to record a rant.

703
00:56:39,680 --> 00:56:41,680
We can just play it every time we're on an episode.

704
00:56:42,640 --> 00:56:44,260
I have no shortage of those, man.

705
00:56:44,680 --> 00:56:45,240
Record a rant.

706
00:56:48,440 --> 00:56:50,960
If we think Bitcoin is going to gold parity, right?

707
00:56:51,160 --> 00:56:55,120
20 plus trillion, which I think it's like 27 and a half trillion as of today.

708
00:56:56,100 --> 00:56:56,640
You're right.

709
00:56:56,720 --> 00:56:58,540
Bitcoin goes to $1.2 million.

710
00:56:58,540 --> 00:57:03,560
dollars strategies balance sheet goes from 80 billion dollars to 800 900 billion dollars

711
00:57:03,560 --> 00:57:07,920
incredibly quickly there's literally not another company on the planet that has that much cash or

712
00:57:07,920 --> 00:57:13,000
capital so there again credit quality is going like literally through the roof we're talking

713
00:57:13,000 --> 00:57:17,900
about 850 credit scores sole it's like 1080 credit scores we're going we're going like the credit

714
00:57:17,900 --> 00:57:25,260
scores are going higher uh everything's going higher and that uh that concept is just vastly

715
00:57:25,260 --> 00:57:32,220
misunderstood. There's no frame of reference for it. It's just total uncharted territory.

716
00:57:32,220 --> 00:57:36,480
You can't expect anybody to have a proper understanding of it. That's just the difficult

717
00:57:36,480 --> 00:57:41,040
part. That's why you're called True North. Right. Yeah. It's like we keep coming back to it. It's

718
00:57:41,040 --> 00:57:47,440
like this is hard to conceive because it has never existed before that a company has this much money

719
00:57:47,440 --> 00:57:54,500
and is issuing an investment instrument, a credit investment instrument. It's never existed before.

720
00:57:54,500 --> 00:57:59,760
What if Bitcoin goes to a million dollars and you see the value of that Bitcoin nav on strategies

721
00:57:59,760 --> 00:58:03,520
balance sheet and you get so ridiculously over collateralized and you hit a ceiling

722
00:58:03,520 --> 00:58:10,420
where you can't issue everything. It starts to boggle the mind a little bit like how over

723
00:58:10,420 --> 00:58:15,120
collateralized, how good of yields do we have to pay before people catch on? And we're just going

724
00:58:15,120 --> 00:58:18,680
to have these questions answered in due time, but it's a fascinating thought experiment.

725
00:58:19,220 --> 00:58:24,460
And this is where it all connects to risk too, because you have to look at the entire

726
00:58:24,460 --> 00:58:29,440
risk landscape because like this, everything is risk. Every investment on the planet is risk.

727
00:58:29,580 --> 00:58:33,820
Equity is risk. Bond is risk. Credit cards are risk. Mortgage is a risk. Real estate's a risk.

728
00:58:33,920 --> 00:58:39,860
It's all like, that's why, uh, Saylor says Bitcoin is money. Everything else is credit. JP Morgan said

729
00:58:39,860 --> 00:58:44,380
gold is money. Everything else is credit. That's like literally because everything is credit and

730
00:58:44,380 --> 00:58:51,620
risk. They're like completely intertwined. So you've got to look at the entire risk landscape

731
00:58:51,620 --> 00:58:57,140
and compare the risk everywhere. And like, that's, that's one of the reasons I left the

732
00:58:57,140 --> 00:59:01,240
reinsurance world. I was like, the risk here, the amount of money people are getting paid to

733
00:59:01,240 --> 00:59:07,260
take on this risk is just so stupidly small. It's not like, I'm never going to make a ton of money

734
00:59:07,260 --> 00:59:13,680
here ever. So like I needed to go somewhere else and it was very clear. Bitcoin made the most sense.

735
00:59:14,080 --> 00:59:20,340
Little did I know it was going to be so frigging correlated to like insurance and like risk and

736
00:59:20,340 --> 00:59:22,220
credit landscape. I had literally no idea.

737
00:59:22,220 --> 00:59:24,060
I was like, I just want to work in Bitcoin.

738
00:59:24,060 --> 00:59:27,840
But now I'm making these realizations that like this is why, because this is why I was

739
00:59:27,840 --> 00:59:34,980
gravitated to it naturally, because this entire risk landscape is just completely off.

740
00:59:34,980 --> 00:59:39,720
When you when you look at things through a Bitcoin lens, it's off.

741
00:59:39,720 --> 00:59:42,700
So I think we need to go into the bad bond segment.

742
00:59:42,700 --> 00:59:48,300
We could just keep chatting as we're chatting, but I've got a new intro jingle into bad bonds

743
00:59:48,300 --> 00:59:49,300
here.

744
00:59:50,340 --> 01:00:00,780
Oh, come on. Maybe I don't. Maybe the jingle comes on at some point, but it's not right now.

745
01:00:01,860 --> 01:00:09,060
Okay. Bad bonds. We'll get into it. So while I share my screen here,

746
01:00:09,960 --> 01:00:14,360
no, I'm pretty bummed about that. We'll get the jingle. The jingle will come up. We'll get it.

747
01:00:14,360 --> 01:00:23,380
okay us corporate bond market evolution so this is this is how bonds have shifted over time just

748
01:00:23,380 --> 01:00:27,200
from a ratings perspective so this is going like worst on the top and this is kind of hard to see

749
01:00:27,200 --> 01:00:32,520
this is in perplexity and i wish the lines could be a little bit better but what you're what this

750
01:00:32,520 --> 01:00:38,000
is showing is that triple a bonds are going down so the amount of like very high investment grade

751
01:00:38,000 --> 01:00:43,280
bonds are going down over time down into the right number of unrated and high yield bonds

752
01:00:43,280 --> 01:00:49,720
is increasing. So basically this is indicating that since 2015, more risk has been shifted into

753
01:00:49,720 --> 01:01:01,740
the U S corporate bond market. And that entire landscape is, is changing. Um, Oh man, go ahead.

754
01:01:01,860 --> 01:01:04,880
You guys have anything else to say here? And I'm going to try to pull this.

755
01:01:04,880 --> 01:01:09,020
I think that when we talk about bad bonds, I think the, the, you know, the interesting part

756
01:01:09,020 --> 01:01:13,260
is there's something called junk bonds. I mean, literally, they're called junk bonds.

757
01:01:14,060 --> 01:01:16,360
And the quick one-minute history lesson is-

758
01:01:16,360 --> 01:01:21,640
Ladies and gentlemen, what you're about to hear may be amazing, but it is not-

759
01:01:21,640 --> 01:01:21,680
Sorry.

760
01:01:22,240 --> 01:01:23,460
It's amazing every time.

761
01:01:23,480 --> 01:01:24,660
It's amazing every time.

762
01:01:24,660 --> 01:01:25,400
Ladies and gentlemen,

763
01:01:25,440 --> 01:01:27,440
No, that doesn't work either.

764
01:01:27,440 --> 01:01:29,440
Let's see if this works.

765
01:01:29,440 --> 01:01:30,440
That doesn't work either.

766
01:01:30,440 --> 01:01:31,440
Okay.

767
01:01:31,440 --> 01:01:32,440
Sorry.

768
01:01:32,440 --> 01:01:33,440
Yeah.

769
01:01:33,440 --> 01:01:38,440
So Jeff, just a quick 30-second history lesson.

770
01:01:38,440 --> 01:01:46,440
So the reason why the mafia found was building out Las Vegas because you had to use cash because the banks wouldn't loan money.

771
01:01:46,440 --> 01:01:53,440
And so then if you watch the movie Casino at the very end, you then realize what happened is, how's this related to bonds?

772
01:01:53,440 --> 01:01:54,900
I'm going on some stupid rant.

773
01:01:55,520 --> 01:01:58,100
Well, when Michael Milliken came out with junk bonds,

774
01:01:58,180 --> 01:02:02,940
I'm going to build a casino that's going to have a volcano in the front of it that explodes.

775
01:02:03,540 --> 01:02:06,220
And people are going to come here and gamble and lose money.

776
01:02:06,540 --> 01:02:09,880
And it's going to take whatever amount, hundreds of millions of dollars to build it.

777
01:02:10,200 --> 01:02:11,740
It'll take three years to build it.

778
01:02:11,780 --> 01:02:13,700
Then we have to convince people to fly to Las Vegas.

779
01:02:14,200 --> 01:02:17,460
That was the start of the junk bond business with Steve Wynn.

780
01:02:17,760 --> 01:02:20,760
Maybe you heard of him, to quote Ryan McGinnis, right?

781
01:02:20,940 --> 01:02:22,300
Maybe you heard of Steve Wynn.

782
01:02:22,300 --> 01:02:26,440
And so what happened was they used junk bonds to build out Las Vegas.

783
01:02:27,200 --> 01:02:33,620
And so how are you going to borrow money in order to build something that's going to take

784
01:02:33,620 --> 01:02:37,640
three years before somebody ever comes in there to lose money at the casino?

785
01:02:38,020 --> 01:02:41,480
And think about how do you figure out how much you're going to make?

786
01:02:41,960 --> 01:02:44,520
And so they're called junk bonds.

787
01:02:44,640 --> 01:02:48,080
And then we have credit rate bonds, which are decaying all the time.

788
01:02:48,480 --> 01:02:49,400
Why are they decaying?

789
01:02:49,440 --> 01:02:51,020
I think you're talking about Ford Motor Company.

790
01:02:51,020 --> 01:02:54,600
You build a factory, it's 50, 60 years later.

791
01:02:54,800 --> 01:02:56,640
It's on the Superfund site.

792
01:02:56,900 --> 01:02:58,860
They can't clean it up because it's so expensive.

793
01:02:59,200 --> 01:03:00,120
So what do you do?

794
01:03:00,340 --> 01:03:05,340
You put GM into bankruptcy, wipe out the shareholders, and you start over again.

795
01:03:07,120 --> 01:03:07,600
Bingo.

796
01:03:08,100 --> 01:03:08,580
Bingo.

797
01:03:09,060 --> 01:03:11,420
And so then you have GM number two.

798
01:03:11,940 --> 01:03:12,280
Yep.

799
01:03:12,340 --> 01:03:15,700
Because they could not pay to figure out that they polluted all the plants.

800
01:03:15,880 --> 01:03:16,420
Look it up.

801
01:03:16,800 --> 01:03:16,980
Yep.

802
01:03:16,980 --> 01:03:22,620
So you don't want to hold a bond on something, on a factory, even if it was good for 80 years,

803
01:03:22,760 --> 01:03:24,340
if they're polluting the ground.

804
01:03:24,860 --> 01:03:27,620
So Bitcoin, what does it cost to store it?

805
01:03:27,680 --> 01:03:30,140
You put in the cold storage, the storage is pretty much zero.

806
01:03:30,280 --> 01:03:35,940
It never needs a new roof, never needs capital upgrades, never needs OSHA of checks.

807
01:03:36,180 --> 01:03:38,460
You don't have to worry about people getting run over by a robot.

808
01:03:39,100 --> 01:03:40,320
It's so much easier.

809
01:03:40,800 --> 01:03:42,420
Why don't I like Amazon stock?

810
01:03:42,420 --> 01:03:44,080
Because they have a million employees.

811
01:03:45,580 --> 01:03:46,160
That's right.

812
01:03:46,160 --> 01:03:50,180
I have a company that has a lot less employees because they're less likely to get hurt.

813
01:03:51,260 --> 01:03:51,940
My rant's over.

814
01:03:52,060 --> 01:03:53,280
I'm not as good as Adam Livingston.

815
01:03:53,340 --> 01:03:54,340
It's all good.

816
01:03:54,820 --> 01:03:57,340
I'm going to try to do my jingle one more time.

817
01:03:57,460 --> 01:03:59,140
And if it's Tim, then it's Tim.

818
01:03:59,380 --> 01:04:01,080
And if not, hopefully it works.

819
01:04:01,320 --> 01:04:02,760
But anyway, we're going to give it a run.

820
01:04:02,760 --> 01:04:06,820
Bad bonds, bad bonds, what you're going to do?

821
01:04:06,940 --> 01:04:08,940
What you're going to do when Bitcoin comes to you?

822
01:04:09,100 --> 01:04:12,680
Bad bonds, bad bonds, yields falling through.

823
01:04:12,860 --> 01:04:14,580
Stretch, strike, strike and strike coming.

824
01:04:14,580 --> 01:04:20,180
digital credit don't miss raise coupons legit

825
01:04:20,180 --> 01:04:31,520
who did that all right as well as my edit that's what i want to know the production is just taking

826
01:04:31,520 --> 01:04:38,840
a step up guys yes it's we're uh the team the crew is working hard real quick shout out to the team

827
01:04:38,840 --> 01:04:42,500
the team is working incredibly hard behind the scenes uh we got somebody that made a jingle

828
01:04:42,500 --> 01:04:46,420
somebody that made the video and we're just going to keep playing it through uh every time we do the

829
01:04:46,420 --> 01:04:52,660
new segment so so i i have a question how long did it take you to do that from time of conception to

830
01:04:52,660 --> 01:04:58,180
getting it done justin sent it over this morning in like i don't know how long it took him uh

831
01:04:58,180 --> 01:05:02,580
somebody tweeted about it and he had it done within an hour and then our team made a video

832
01:05:02,580 --> 01:05:08,980
and they had it done within an hour okay so any right so anybody working in a corporate job you'd

833
01:05:08,980 --> 01:05:13,540
have to go get a budget then you'd have to do a wireframe and then you'd have to do storyboards

834
01:05:13,540 --> 01:05:18,660
and then you'd have to have a committee to see if it makes sense and then basically about three

835
01:05:18,660 --> 01:05:23,940
months later after you go through 50 permutations and every you missed the whole opportunity you'd

836
01:05:23,940 --> 01:05:29,860
spend a hundred grand to make a 30 second clip so this is the new world guys congratulations i loved

837
01:05:29,860 --> 01:05:37,060
it we've got a justin somebody made the jingle then we got a team that made the video and i was

838
01:05:37,060 --> 01:05:42,340
incredibly impressed i was showing my wife like look at this they made this today we just do

839
01:05:42,340 --> 01:05:48,260
things up in here we just do things and ai is incredible uh yeah maybe we'll talk about that

840
01:05:48,260 --> 01:05:55,940
a little bit more with energy later but uh okay thank you for uh the rant uh the detour rant

841
01:05:55,940 --> 01:06:00,180
grain to to get me to the segment and that got the technical difficulties fixed but yes

842
01:06:00,180 --> 01:06:05,780
i wanted to talk about ford motor uh because i i think this is an interesting uh this is an

843
01:06:05,780 --> 01:06:10,580
interesting story um maybe i'll try to put everybody down below i'm hidden but that is okay

844
01:06:11,620 --> 01:06:16,500
and please anybody jump in at any point so i've just got a bunch of research that i pulled together

845
01:06:16,500 --> 01:06:22,100
here um on one excel sheet but i'm going to start with um one thing that i found pretty interesting

846
01:06:22,100 --> 01:06:29,700
which is why the strategy credit instruments are so appealing is if you look at corporate bond

847
01:06:29,700 --> 01:06:36,420
liquidity versus their credit spreads. Let me just throw you guys on the side so people can see this

848
01:06:36,420 --> 01:06:40,660
here. So if you look at corporate bond liquidity versus their credit spreads, this is mapped into

849
01:06:40,660 --> 01:06:47,720
different buckets. So you've got a high credit quality over here in the green, over on the left

850
01:06:47,720 --> 01:06:52,600
hand side, you can see they're significantly more liquid. You've got this line here that's showing

851
01:06:52,600 --> 01:06:57,460
you the average. The medium credit quality instruments are significantly less liquid,

852
01:06:57,460 --> 01:07:04,160
and the lowest credit quality instruments are the least liquid. So in the event of, you know,

853
01:07:04,200 --> 01:07:08,240
anything remotely bad happening, if you needed to offload any of these things, there's just not

854
01:07:08,240 --> 01:07:13,800
a ton of buyers on the other side of it that want to take on that specific risk. So if you get locked

855
01:07:13,800 --> 01:07:19,000
into like a 30-year bond somewhere or 20-year bond or somewhere, you may have a really hard time.

856
01:07:19,760 --> 01:07:25,840
You might lose your principal, one, but you might have a really hard time of just unloading it. It

857
01:07:25,840 --> 01:07:30,480
might just literally go to zero. And I think that relative risk that you're taking for

858
01:07:30,480 --> 01:07:36,620
that duration is really curious. And I think it's worth looking into everywhere. So that's the,

859
01:07:36,740 --> 01:07:40,320
that's the point of starting to look into some of these, some of these instruments.

860
01:07:40,980 --> 01:07:46,060
Liquidity is huge, Jeff. Liquidity is massive. Like, I'm sorry, but I was just looking into

861
01:07:46,060 --> 01:07:51,980
Hertz, the car rental company's bonds. And I was thinking like, if you see COVID on the cusp,

862
01:07:51,980 --> 01:07:56,060
If you see a virus coming, that's going to just wreck havoc on the economy.

863
01:07:56,180 --> 01:07:57,420
How do you get out of your position?

864
01:07:58,020 --> 01:07:58,980
Liquidity is massive.

865
01:08:00,760 --> 01:08:01,220
Yeah.

866
01:08:01,360 --> 01:08:04,560
And Adam, I think you mentioned this previously in a message to me.

867
01:08:04,820 --> 01:08:10,200
The Hertz had bonds that went bust before COVID or like right after COVID, right?

868
01:08:10,820 --> 01:08:11,640
Two months after.

869
01:08:11,840 --> 01:08:12,380
That's correct.

870
01:08:12,760 --> 01:08:17,760
So they issued bonds right before COVID and then all of a sudden zero people rented cars.

871
01:08:17,760 --> 01:08:22,800
So you're sitting there holding this like instrument that you think is just going to pay you steady stream of income.

872
01:08:22,920 --> 01:08:24,980
And you're like, cool, I get my 6%.

873
01:08:24,980 --> 01:08:26,580
Like my pension's fine.

874
01:08:26,940 --> 01:08:32,720
And all of a sudden, nope, that isn't worth anything anymore, actually.

875
01:08:32,880 --> 01:08:37,180
Like the company's bankrupt because they literally aren't bringing any revenue in the door because nobody's renting cars.

876
01:08:38,000 --> 01:08:39,460
That's called a black swan event.

877
01:08:39,740 --> 01:08:41,500
But it's physical risk.

878
01:08:41,500 --> 01:08:42,820
That is risk.

879
01:08:43,000 --> 01:08:47,000
Like that's so that's that's risk that.

880
01:08:47,760 --> 01:08:54,500
is difficult, difficult to quantify. Um, and there's significantly more types of that risk

881
01:08:54,500 --> 01:08:57,660
all over the place. But I think the other crazier part is that somebody doubled down,

882
01:08:57,660 --> 01:09:03,460
like they issued more, they issued more, right? This is a, this is the 2029 bond that we talked

883
01:09:03,460 --> 01:09:10,940
about last week. And I think this was issued in like 2024 or 2023. So somebody signed onto it and

884
01:09:10,940 --> 01:09:15,500
it's still paying, you know, 10%. So you're thinking like, okay, well, what if robo taxis

885
01:09:15,500 --> 01:09:22,400
take off here? Well, the age of disruption is going to change these products forever, right?

886
01:09:22,460 --> 01:09:29,200
The pace at which these company business models get attacked now, you have to imagine that at some

887
01:09:29,200 --> 01:09:34,260
point that's going to have to get priced into this. You can no longer take a 30-year outlook

888
01:09:34,260 --> 01:09:40,020
on nearly any industry out there. They're all turning over, right? Technology's speeding up

889
01:09:40,020 --> 01:09:45,480
so quickly. There's so many more tools at people's disposal. Companies are entering that are leaner,

890
01:09:45,500 --> 01:09:48,740
that don't have decades of overhead built up in them.

891
01:09:48,860 --> 01:09:51,320
I mean, you know, Mike has talked a few times

892
01:09:51,320 --> 01:09:53,940
about being in the corporate world and all the employees

893
01:09:53,940 --> 01:09:55,440
and why he wouldn't invest in Amazon.

894
01:09:55,900 --> 01:09:57,140
If you've ever gone and worked

895
01:09:57,140 --> 01:09:58,400
in one of these corporate environments,

896
01:09:58,400 --> 01:10:01,220
you understand the bloat that builds up

897
01:10:01,220 --> 01:10:03,840
over decades of operating a business.

898
01:10:03,980 --> 01:10:05,260
There's so many roles in there.

899
01:10:05,300 --> 01:10:06,060
You're walking around going,

900
01:10:06,200 --> 01:10:07,580
what do you even do all day?

901
01:10:08,360 --> 01:10:10,960
And now that these other companies are coming in,

902
01:10:10,960 --> 01:10:14,760
you can be disrupted in a moment's notice.

903
01:10:14,760 --> 01:10:21,700
It happens so fast. And one of the best examples of that was even when you had open AI kind of

904
01:10:21,700 --> 01:10:26,700
emerging. And then what was it, DeepSeek that popped up all of a sudden? And all of a sudden,

905
01:10:26,700 --> 01:10:31,280
it seemed like even the leading AI tool was about to be disrupted. Now, it wasn't, right? And there

906
01:10:31,280 --> 01:10:36,880
was all kinds of shenanigans going on. But it shows you that even the companies that are doing

907
01:10:36,880 --> 01:10:42,440
the disruption are not immune from this, because that is the pace at which technology is evolving.

908
01:10:42,440 --> 01:10:49,400
so to go and take on the risk of 30 40 50 years with no liquidity to exit out of that position

909
01:10:49,400 --> 01:10:54,540
and you're just tying yourself to this company i don't know that you can consider many of those

910
01:10:54,540 --> 01:11:00,920
money good over the long period i really i'm pretty firm you can't yeah based on what we've

911
01:11:00,920 --> 01:11:06,180
seen you know nokio was killing it they had the indestructible phone everyone loved playing snake

912
01:11:06,180 --> 01:11:10,220
on that phone they didn't need to change anything they were just going to keep pumping those phones

913
01:11:10,220 --> 01:11:14,380
out and then one day you started to be able to watch videos on your phone they were gone

914
01:11:15,100 --> 01:11:20,780
right that's what it takes not much jen i don't want to hijack your section but i really want to

915
01:11:20,780 --> 01:11:25,980
touch on something because you go ahead about this you posted recently about a target corporation

916
01:11:27,180 --> 01:11:31,820
and i previously worked at target i was a director at target corporation don't come from a glamorous

917
01:11:31,820 --> 01:11:37,100
industry where i spent a lot of time just operationalizing like crazy trying to squeeze

918
01:11:37,100 --> 01:11:43,100
the last pennies out of every single dollar very low margin business and i was seeing tremendous

919
01:11:43,100 --> 01:11:48,300
risk every single day you know the company we erased 100 billion dollars of market cap in two

920
01:11:48,300 --> 01:11:52,620
years we were literally worth one third of what we were after two years of getting killed by walmart

921
01:11:52,620 --> 01:11:57,900
and amazon and you know this is a company on the pr on the precipice of the ai revolution that we

922
01:11:57,900 --> 01:12:03,260
just cannot pivot to find a way to survive and then you posted about their bonds i'm like exactly

923
01:12:03,260 --> 01:12:06,780
this is why i was screaming from the inside of why we should just take our billions of dollars

924
01:12:06,780 --> 01:12:12,360
and buy Bitcoin. And, you know, I'm just looked at like I have two heads, but sorry for the rant,

925
01:12:12,460 --> 01:12:18,140
guys, but it's very relatable right now. There's tremendous risk in physical operating companies.

926
01:12:18,400 --> 01:12:23,880
There are so many of them are zombies that have trouble surviving. And, you know, it's a new term

927
01:12:23,880 --> 01:12:29,760
of a junk bond. It's a new kind of junk bond, I guess. Yeah, it would. Go ahead, Zoe. Yeah,

928
01:12:29,760 --> 01:12:34,420
I was going to say, and where do you put disruption risk on your spreadsheet? Because,

929
01:12:34,420 --> 01:12:40,860
going back to Ford, I mean, Tesla is dominating the EV space. They're the only ones that make

930
01:12:40,860 --> 01:12:47,300
money. And even with the EV tax credit going away, the only risk for Tesla is that it eats

931
01:12:47,300 --> 01:12:53,420
into their profit margins. But every single other EV maker loses money every time they sell an EV.

932
01:12:54,420 --> 01:12:59,740
So now they're just losing more money. So it hurts Tesla's competition more than it hurts Tesla.

933
01:12:59,740 --> 01:13:08,440
and you know ford is you know could be bankrupt in 10 years because of of disruption and what what

934
01:13:08,440 --> 01:13:15,740
are their bonds worth at that point 100 100 you know i want to 100 i want to chime in here for a

935
01:13:15,740 --> 01:13:21,380
second so so i'm so old that i've been through multiple black swan events right the internet

936
01:13:21,380 --> 01:13:29,180
bubble crash y2k um you know we won't go back to the 90s then you have the 2008 2009 financial

937
01:13:29,180 --> 01:13:35,020
crisis, then you have 2020 COVID. Everybody's like, oh, black swan events, they happen all the time.

938
01:13:35,020 --> 01:13:41,060
Then a super tanker gets caught sideways in the Suez Canal or freaking, and then another one hits

939
01:13:41,060 --> 01:13:49,080
a bridge two weeks later. And so when it comes to black swan events, what I could tell you this is

940
01:13:49,080 --> 01:13:54,500
they're miserable when they happen. And the people that get hurt with that is absolutely horrible.

941
01:13:54,500 --> 01:13:59,720
But with that, every time they're over, what do they do?

942
01:13:59,720 --> 01:14:04,700
They do the same thing, lower interest rates, print money, and then the asset holders make

943
01:14:04,700 --> 01:14:06,440
more money and it goes on.

944
01:14:06,440 --> 01:14:11,940
So every time there's a black swan event and then Ben's chiming in, oh, what was it?

945
01:14:11,940 --> 01:14:17,940
Deep Seek, the Chinese, all of a sudden make a software version that eliminates the need

946
01:14:17,940 --> 01:14:18,940
for NVIDIA.

947
01:14:18,940 --> 01:14:21,980
Well, that just happened in April.

948
01:14:21,980 --> 01:14:26,700
But Nvidia now is a 4.13 or whatever the number is, trillion-dollar company.

949
01:14:26,700 --> 01:14:29,320
And it adds a trillion dollars in value.

950
01:14:29,320 --> 01:14:35,020
But I don't know, that was a black swan event that lasted, what, six weeks?

951
01:14:35,020 --> 01:14:37,540
And people are like, oh, it's all over with Nvidia.

952
01:14:37,540 --> 01:14:41,060
Maybe they should have bought Nvidia on the dip, buy low, sell high.

953
01:14:41,060 --> 01:14:43,320
I mean, so I've been through this so many times.

954
01:14:43,320 --> 01:14:47,000
The other thing I noticed that you saw on Ford was that they had a bond that goes out

955
01:14:47,000 --> 01:14:48,000
to 2097.

956
01:14:48,000 --> 01:14:49,000
Yeah.

957
01:14:49,000 --> 01:14:50,000
Right.

958
01:14:50,000 --> 01:14:55,040
Right. I want to tell you something. And I got to go back for something because this is how old I am.

959
01:14:55,600 --> 01:15:00,640
So, before there was an iPhone, when you would rent a car, you'd have a paper map and you'd

960
01:15:00,640 --> 01:15:05,920
fly to some city you've never been before, right? You get a rental car and then you drive around to

961
01:15:05,920 --> 01:15:10,640
figure out where you're going. You print out your stupid maps on MapQuest, Alpha Yahoo,

962
01:15:10,640 --> 01:15:13,680
and you can't figure out where you are. And then you got to get back to the airport,

963
01:15:13,680 --> 01:15:18,160
fill the car up with gas so they don't charge you $7 a gallon because you're not getting

964
01:15:18,160 --> 01:15:20,920
and reimbursed for that by the cheap person in accounting.

965
01:15:21,540 --> 01:15:22,780
God forbid you miss your flight.

966
01:15:23,020 --> 01:15:24,940
So then you drive all the way back to the airport.

967
01:15:25,520 --> 01:15:27,340
Then a few years later, they come out with Garmin,

968
01:15:27,440 --> 01:15:29,540
comes out with these GPSs.

969
01:15:29,780 --> 01:15:32,500
And they charge you $12 a day to rent that.

970
01:15:32,600 --> 01:15:34,760
Of course, you take that because you can't get lost, right?

971
01:15:35,180 --> 01:15:36,200
So you're doing that.

972
01:15:36,260 --> 01:15:38,300
Then they invent the iPhone and puts out Garmin.

973
01:15:38,300 --> 01:15:41,700
But now when I go on a business trip, right?

974
01:15:41,980 --> 01:15:45,420
I use Uber probably 30, 40% of the time.

975
01:15:45,580 --> 01:15:47,740
I'm going to fly to Santa Monica for the event.

976
01:15:47,740 --> 01:15:53,640
I have to get from LAX to Santa Monica for Fred's event, doing a plug for him, right? Bitcoin alpha.

977
01:15:53,880 --> 01:15:59,100
I'm taking Uber. It's probably going to be some guy that's going to pick me up in a Tesla Model

978
01:15:59,100 --> 01:16:04,400
3 or Model S, which is better than some crappy taxi I would have gotten, you know, whatever,

979
01:16:04,560 --> 01:16:10,680
five years ago. So I'm driving in a better car and I'm using this app. And then I have an American

980
01:16:10,680 --> 01:16:16,660
Express Platinum card. So I get 15 bucks free every month, right? And it's like, my life is

981
01:16:16,660 --> 01:16:20,900
better because I have a built-in GPS on it. Everything has gotten better. Technology has

982
01:16:20,900 --> 01:16:26,020
gotten better. And that's the way the world is. And so how does this relate? I don't want to be

983
01:16:26,020 --> 01:16:32,000
in a company that's getting destroyed by... Soleil said it. Where do you put in technological risk

984
01:16:32,000 --> 01:16:36,200
into the calculation on something that goes out 30 years?

985
01:16:38,220 --> 01:16:54,194
When technology is accelerating at a pace literally never seen before It is And by the way on Uber I got five different choices right yeah yeah i it i i see the i see the videos of those tesla factories too and it like the the robots that are picking

986
01:16:54,194 --> 01:16:59,794
up these like huge chunks of metal and like putting them together and it's like pretty insane uh how

987
01:16:59,794 --> 01:17:05,154
far the head on how far ahead they are on robotics too but i'm just going to pull this up this ford

988
01:17:05,154 --> 01:17:09,314
just to put it in perspective because a lot of people don't know this but um it's actually

989
01:17:09,314 --> 01:17:18,654
incredibly difficult to identify the capital stack of companies. Like I've got a Bloomberg terminal

990
01:17:18,654 --> 01:17:23,594
here. And even going through the Bloomberg terminal, I was like working on chat GPT for

991
01:17:23,594 --> 01:17:30,314
hours, like trying to like wrap my head around who, who gets what in the event of liquidation and

992
01:17:30,314 --> 01:17:36,754
the, like the capital stack, I think it's opaque on purpose. So when you actually look at all of

993
01:17:36,754 --> 01:17:39,894
these companies that have these really opaque capital stacks and you look at strategy that

994
01:17:39,894 --> 01:17:43,574
has got a website that shows like here's our exact capital stack and we're not hiding anything

995
01:17:43,574 --> 01:17:51,094
from you like it's 100 right here it's so easy to appreciate now this is senior unsecured bonds

996
01:17:51,094 --> 01:17:59,994
for ford there's 77.5 billion of outstanding bonds and i just started scrolling like you could

997
01:17:59,994 --> 01:18:04,314
scroll here for a while you could see all these issuances right you got 4 million 1.8 million

998
01:18:04,314 --> 01:18:12,014
well this is or that's uh yeah that's 4 million 1.8 million 1.5 billion 1.3 billion 16 million 16

999
01:18:12,014 --> 01:18:18,374
million and you look at the maturity of some of these you think like 2046 like that makes me

1000
01:18:18,374 --> 01:18:25,314
scratch my head you look over at the yield 2046 paying 6.65 67 percent and you're like oh my god

1001
01:18:25,314 --> 01:18:34,074
that's 21 years out and it's only paying me 6.6 percent like what what can happen in 21 years

1002
01:18:34,074 --> 01:18:40,234
based on like with these cars like is ford going to be around and i

1003
01:18:40,234 --> 01:18:46,594
sold it one person that bought it and they both had the same reaction which was this isn't going

1004
01:18:46,594 --> 01:18:50,914
to be my problem yeah it's just like i want the ford probably sold it and they're like i can't

1005
01:18:50,914 --> 01:18:54,394
believe i'm selling this right now and the person that probably bought this was like i can't believe

1006
01:18:54,394 --> 01:19:00,514
i could get this but uh it's totally totally insane that somebody's holding that piece of paper

1007
01:19:00,514 --> 01:19:07,514
and then i started looking hey go ahead go ahead okay by the way everybody knows about the 20 20

1008
01:19:07,514 --> 01:19:15,214
38 unix time problem everybody knows this right what is this well well they had the problem with

1009
01:19:15,214 --> 01:19:20,934
the the size of the uh the dates that went into the older systems for the y2k problem

1010
01:19:20,934 --> 01:19:28,274
but the unix systems have the same problem in 2038 so there's existential risk that occurs in

1011
01:19:28,274 --> 01:19:34,434
systems in the future. And so when you look at something that's 10 years after this, what happens

1012
01:19:34,434 --> 01:19:41,154
to those systems if they can't be updated, whether it's cars or... It's not only these bonds or

1013
01:19:41,154 --> 01:19:46,754
producing the cars, it's the amount of employees, it's the capital purchases, it's the factories,

1014
01:19:46,754 --> 01:19:51,714
it's the pollution that goes into producing this versus something like Bitcoin, which is virtually

1015
01:19:51,714 --> 01:19:57,794
zero in order to store. That's the fundamental difference here. And can you go to the other one

1016
01:19:57,794 --> 01:20:03,154
that's 2097 you scroll it was in the screen oh yeah was it in the screenshot here yeah it was

1017
01:20:03,154 --> 01:20:07,234
yeah it was like in the lower left hand corner i just saw it it just said it was i think it's right

1018
01:20:07,234 --> 01:20:14,514
there yeah yeah this one yeah the 5 15 20 97 500 million it's 500 million with a 20. i mean when

1019
01:20:14,514 --> 01:20:19,474
something goes out basically a hundred years it's almost in perpetuity right i mean that's like

1020
01:20:20,274 --> 01:20:26,514
that's like a pretty long duration bond in my view yeah yeah and there's only 142 million of

1021
01:20:26,514 --> 01:20:33,434
of an outstanding. But that being said, what's the liquidity of this thing? How does that work?

1022
01:20:33,434 --> 01:20:39,894
Do they just buy it back in the open market or when they want to retire it? I don't know.

1023
01:20:41,534 --> 01:20:46,414
The whole thing was a bit strange. And it was a bit strange in just scrolling the capital stack.

1024
01:20:46,494 --> 01:20:49,954
And I was like, oh my God, look at all the debt. Look at all the paper here. There's just paper

1025
01:20:49,954 --> 01:20:54,714
everywhere. There's so much paper. And then people are like, nobody's going to buy the strategy

1026
01:20:54,714 --> 01:21:01,294
products and like Ford has $70 billion of paper outstanding with like a six like 5.6% interest

1027
01:21:01,294 --> 01:21:08,794
rate like are you kidding me like there's so much like appetite for this paper this credit it's this

1028
01:21:08,794 --> 01:21:17,054
is one company that we think has massive disruption on the horizon in the auto market and like a

1029
01:21:17,054 --> 01:21:24,074
challenging business model to be honest like you look at the so Ford has $37 billion of cash

1030
01:21:24,074 --> 01:21:30,354
$88 billion of debt. So their net assets, their assets minus their liabilities, about $45 billion.

1031
01:21:31,054 --> 01:21:37,074
So debt to equity is roughly 196%. Debt to liquid assets, about 238%.

1032
01:21:37,814 --> 01:21:43,114
Relative to MSTR, you look at their debt to equities, 23%. And debt to liquid assets, 19%.

1033
01:21:43,594 --> 01:21:51,754
So that's tricky. That's a bit strange. Now, one thing that, shout out FMT, he keeps me honest

1034
01:21:51,754 --> 01:21:59,114
here he i posted about this yesterday um sneak preview of this week's bad bond ford motor company

1035
01:21:59,114 --> 01:22:03,034
and fmt brought up a lot of that debt is non-recourse to the parents same for gm

1036
01:22:04,634 --> 01:22:10,954
so i'm like okay non-recourse what does that mean uh and like we reviewed earlier non-recourse

1037
01:22:10,954 --> 01:22:14,954
meaning it doesn't have a claim on any of the assets of the collateral of the parent company

1038
01:22:15,994 --> 01:22:18,634
and my first response was like okay cool so ford

1039
01:22:18,634 --> 01:22:22,594
Ford issued this paper and they're actually not taking on a ton of risk.

1040
01:22:23,134 --> 01:22:30,834
And I looked up about 60 or 70% of the debt is non-recourse, meaning they can't go chase

1041
01:22:30,834 --> 01:22:37,514
the assets, which at first makes me feel a little bit more comfortable that Ford might

1042
01:22:37,514 --> 01:22:38,614
exist for a little bit longer.

1043
01:22:38,994 --> 01:22:45,474
But the second order effect in thinking through that is that, oh my God, somebody's holding

1044
01:22:45,474 --> 01:22:47,854
60% of these $80 billion of debt

1045
01:22:47,854 --> 01:22:49,074
that has no recourse.

1046
01:22:49,694 --> 01:22:50,974
It has no recourse.

1047
01:22:51,174 --> 01:22:53,934
You can't even go chase the assets.

1048
01:22:54,194 --> 01:22:54,454
Like what?

1049
01:22:55,514 --> 01:22:56,894
So it's backed by air?

1050
01:22:57,054 --> 01:22:58,634
It's backed by air, dude.

1051
01:22:59,454 --> 01:23:00,654
It's backed by air.

1052
01:23:00,934 --> 01:23:02,074
Mike, you're out of here using hugs.

1053
01:23:03,274 --> 01:23:04,554
And so, yeah, I mean,

1054
01:23:04,874 --> 01:23:06,554
if Bitcoin is the disruptor,

1055
01:23:07,074 --> 01:23:08,714
then strategies preferreds

1056
01:23:08,714 --> 01:23:10,934
are backed by the assets

1057
01:23:10,934 --> 01:23:12,794
that is doing the disrupting,

1058
01:23:13,154 --> 01:23:14,694
not the one that can be disrupted.

1059
01:23:15,474 --> 01:23:17,514
And that's everything.

1060
01:23:18,714 --> 01:23:18,954
Yes.

1061
01:23:19,494 --> 01:23:25,074
I start to look at all these companies through the friction lens to the end consumer.

1062
01:23:25,074 --> 01:23:40,234
Because when you're seeing all this disruption happening out there in the market, and I found this with myself, there was a point in time where I actually started noticing this where smaller and smaller inconveniences would stop me from doing something.

1063
01:23:40,234 --> 01:23:45,074
right so for instance having to get my car drive to the store to go pick something up that i don't

1064
01:23:45,074 --> 01:23:49,614
really need right now well i can just order it it'll show up at my doorstep right same thing

1065
01:23:49,614 --> 01:23:54,154
with a company like ford you know they've got this whole dealer model out there where you've got to

1066
01:23:54,154 --> 01:23:58,994
go do one of the least favorite things on earth except for people like mike maybe because he's

1067
01:23:58,994 --> 01:24:04,374
made it an extreme sport which is going and buying a car and having to go through the headaches of

1068
01:24:04,374 --> 01:24:08,354
you know dealing with that whole dealership model and go out and test drive whereas tesla

1069
01:24:08,354 --> 01:24:12,654
you go online, you put $500 down, they tell you when you can come get your car.

1070
01:24:13,294 --> 01:24:17,714
You don't have to deal with any of the headaches feeling like you're getting screwed. None of that.

1071
01:24:17,814 --> 01:24:22,714
And so you can look at all of these products that same way. I think that's ultimately going to be

1072
01:24:22,714 --> 01:24:31,274
an issue for banks. When people start looking at Bitcoin as being the money, and now you look at

1073
01:24:31,274 --> 01:24:37,294
a different model where you're holding Bitcoin as effectively your savings. But if you want

1074
01:24:37,294 --> 01:24:42,934
something with a return that's still got the security and the liquidity behind it, you go to

1075
01:24:42,934 --> 01:24:49,154
the products like Stretch and Strife, where you've got the liquidity to get your capital back

1076
01:24:49,154 --> 01:24:52,694
immediately, but you're getting a higher rate than you're getting at the bank. Traditionally,

1077
01:24:52,694 --> 01:24:57,074
to go get a higher interest rate at a bank, you got to go tie up your capital in something like a

1078
01:24:57,074 --> 01:25:01,854
CD or something that's got a maturity where you can't actually access the principle of it,

1079
01:25:01,954 --> 01:25:06,914
but you're taking the friction out of that process now and still getting the yields that you want to

1080
01:25:06,914 --> 01:25:12,414
get. And I think that's a really powerful transformation that's happening because now

1081
01:25:12,414 --> 01:25:16,394
you have no friction with accessing your own capital. It's sitting in Bitcoin. You've got

1082
01:25:16,394 --> 01:25:21,774
total control over being able to access your own capital. If you need the cash reserves to be able

1083
01:25:21,774 --> 01:25:26,494
to live your life and generate some returns and generate some income out of it, you've now got

1084
01:25:26,494 --> 01:25:31,494
the securities and the equities that are out there that you can tap into at much higher rates,

1085
01:25:31,554 --> 01:25:35,694
more than double the rates that you're going to get at a bank. And there's just no friction in

1086
01:25:35,694 --> 01:25:40,794
that process anymore hardly. So it's come completely back to your control. I don't have

1087
01:25:40,794 --> 01:25:45,834
to go to the bank and ask them to give me my money, right? I want $20,000. Will you please

1088
01:25:45,834 --> 01:25:51,174
give it to me? Like, no, I'm just going to go take it. It's my money. I've already got a handle on it.

1089
01:25:51,534 --> 01:25:57,614
So when you view it through friction, you know, this is really going to start applying pressure

1090
01:25:57,614 --> 01:26:05,194
to the banking model over time. I don't want to hold anything long-term in US dollars. So my

1091
01:26:05,194 --> 01:26:10,094
savings account has completely converted to Bitcoin. I'm going to store it in the asset

1092
01:26:10,094 --> 01:26:15,734
that's not being devalued beyond the rate that I'm getting. And if I need an account that's like

1093
01:26:15,734 --> 01:26:20,014
a checking where I need the liquidity and I still want to be earning a higher yield than the rate

1094
01:26:20,014 --> 01:26:25,034
of inflation, and quite frankly, getting average returns of the S&P 500 along the way, pretty good,

1095
01:26:25,714 --> 01:26:32,574
I'm going to go to these preferred equities. And there's an education ramp here that is going to

1096
01:26:32,574 --> 01:26:37,894
need to take place, but it becomes a powerful combination once you finally reach that. Now,

1097
01:26:37,954 --> 01:26:44,094
it's not going to be reality for everybody, right? We all live in a world where you are saving and

1098
01:26:44,094 --> 01:26:48,614
you're not doing the paycheck to paycheck thing. And that's the reality a lot of people are seeing.

1099
01:26:48,694 --> 01:26:52,174
And I think that was illustrated in some of those earlier charts you showed, Jeff, with

1100
01:26:52,174 --> 01:26:57,754
that non-mortgage debt really ramping up, which is going to include things like credit cards and

1101
01:26:57,754 --> 01:27:02,694
personal loans and all that kind of stuff. So it is pretty dire out there, but what you need to

1102
01:27:02,694 --> 01:27:08,234
realize is for people that are early to this process or that are young or that are just starting

1103
01:27:08,234 --> 01:27:15,174
out their careers, if you start going up the education curve on how money actually works

1104
01:27:15,174 --> 01:27:20,834
and finding the right solutions to protect yourselves, the compounding of making that

1105
01:27:20,834 --> 01:27:26,254
change early and the impact it has later in your life is absolutely massive. Huge.

1106
01:27:26,254 --> 01:27:33,254
so i want to make a quick comment and you know again about ford so ford versus mstr can you go

1107
01:27:33,254 --> 01:27:39,914
back to the uh your yeah so one of the things that i said before um one of the metrics that

1108
01:27:39,914 --> 01:27:45,934
they do is like revenue per employee or we could do it as a balance sheet for net you know for

1109
01:27:45,934 --> 01:27:55,614
employee. Ford has 171,000 employees. Strategy has 1,300. There's an order of 100x for employees.

1110
01:27:55,614 --> 01:27:56,894
Two orders of magnitude.

1111
01:27:56,894 --> 01:27:58,654
Yeah. Oh my God.

1112
01:27:58,654 --> 01:28:03,614
Yeah. It's 100x difference. So if you do that, if you do the calculation right now

1113
01:28:03,614 --> 01:28:10,014
of the balance sheet per employee, and this was known back in the old days of the internet bubble,

1114
01:28:10,014 --> 01:28:17,614
Cisco, I remember, had revenue of $3 million per employee. That was a sales metric. And so

1115
01:28:17,614 --> 01:28:22,494
this metric is used in order to figure out which companies have more drag on them.

1116
01:28:23,374 --> 01:28:30,894
And now, it's manufacturing, but Soleil was talking about this, or Jeff was, if you have

1117
01:28:30,894 --> 01:28:36,254
automated the production of these facilities, you become much more efficient for a variety of reasons.

1118
01:28:36,254 --> 01:28:43,454
OSHA reasons, you don't have insurance. And so there's a back-end expense on the employees.

1119
01:28:43,454 --> 01:28:49,454
So you capitalize the production. So the numbers are kind of small. What's the difference?

1120
01:28:49,454 --> 01:28:58,574
Yeah. So strategy has $40.8 million of net assets per employee and Ford has 343,000

1121
01:28:59,214 --> 01:29:04,494
of net assets per employee. My work is done. I should get off the call right now.

1122
01:29:05,454 --> 01:29:10,334
Every strategy employee could lose a briefcase full of cash on their lunch break and still provide

1123
01:29:10,334 --> 01:29:18,254
more profit than Ford can. Absolutely. Looking at the Ford, I looked at the Ford net income too,

1124
01:29:18,254 --> 01:29:25,694
because I went full analyst mode on this because why not? Last year, so this is the last three

1125
01:29:26,654 --> 01:29:32,334
quarters in a row of net income. They went 4.1 billion, 3.8 billion. This is the last three

1126
01:29:32,334 --> 01:29:39,614
years in a row 4.1 billion 3.8 billion 3.1 billion of net income so like that's not a great story

1127
01:29:40,574 --> 01:29:46,734
uh i think it's pretty clear that these other like car companies are winning

1128
01:29:48,174 --> 01:29:49,934
i personally am never going to buy a ford

1129
01:29:53,214 --> 01:29:56,654
and uh you start to look at

1130
01:29:56,654 --> 01:30:03,714
the debt and their ability to repay the debt, their net income. So I took the net income average

1131
01:30:03,714 --> 01:30:08,354
is about 5.2 billion compared to strategy's net income average over the last five years,

1132
01:30:08,414 --> 01:30:13,274
I think is technically around 5 billion. If you factor in FASB fair value accounting,

1133
01:30:13,274 --> 01:30:20,274
which is pretty crazy, they're pretty similar. But the years of coverage over and above the

1134
01:30:20,274 --> 01:30:22,854
net

1135
01:30:22,854 --> 01:30:25,274
the debt

1136
01:30:25,274 --> 01:30:27,674
lasts the cash.

1137
01:30:27,834 --> 01:30:29,614
How much debt do you have less cash?

1138
01:30:30,514 --> 01:30:31,514
The years of coverage

1139
01:30:31,514 --> 01:30:32,814
is 9.7.

1140
01:30:32,814 --> 01:30:34,874
Basically, if they had their average

1141
01:30:34,874 --> 01:30:35,774
net income,

1142
01:30:36,654 --> 01:30:38,254
they would be able to cover

1143
01:30:38,254 --> 01:30:40,594
their debt after their cash for

1144
01:30:40,594 --> 01:30:41,794
nine years, basically.

1145
01:30:42,454 --> 01:30:44,614
Strategy is the inverse

1146
01:30:44,614 --> 01:30:46,294
because they have

1147
01:30:46,294 --> 01:30:48,954
more money than they do

1148
01:30:48,954 --> 01:30:52,454
debt. Like they have more net money on their balance sheet than they do debt.

1149
01:30:54,674 --> 01:30:59,914
So this is funny. Today, there was literally a news story that there was an aluminum plants

1150
01:30:59,914 --> 01:31:06,014
fire. So Ford's F-150 trucks are going to take a huge $1 billion production hit. That happened

1151
01:31:06,014 --> 01:31:12,654
today. No way. So yeah. So think of this, the bond buyer's thesis, the bond buyer of this,

1152
01:31:12,654 --> 01:31:19,494
Their thesis is, please let an indebted legacy automaker surviving on government incentives

1153
01:31:19,494 --> 01:31:22,694
magically out earn inflation for 10 straight years.

1154
01:31:22,894 --> 01:31:28,154
But like the stretch buyer's thesis is Bitcoin goes up, yield goes up,

1155
01:31:28,254 --> 01:31:29,074
sailor keeps stacking.

1156
01:31:29,734 --> 01:31:31,034
Bitcoin doesn't catch fire.

1157
01:31:32,574 --> 01:31:35,554
Yeah, Bitcoin, it's as simple as that.

1158
01:31:35,614 --> 01:31:36,514
Bitcoin doesn't catch fire.

1159
01:31:38,034 --> 01:31:42,014
There's just way less risk associated with the whole thing.

1160
01:31:42,014 --> 01:31:58,814
And then you think about, I sent this to Jeff Park, the companies that are offering this good credit are going to start being a lot more attractive to anybody buying bonds.

1161
01:31:58,814 --> 01:32:17,508
So people are going to sell the bad junk and buy the good stuff because it so much better on a risk adjusted basis everywhere And at that point it kind of cleanses the market Like these Bitcoin credit companies

1162
01:32:17,508 --> 01:32:21,348
like strategy and these other Bitcoin treasury companies that are offering good credit instruments

1163
01:32:21,348 --> 01:32:30,568
to the market are cleansing. They will cleanse the market by removing bad businesses ability to

1164
01:32:30,568 --> 01:32:36,548
access debt capital markets. And I think that's a really interesting concept to think about. It's

1165
01:32:36,548 --> 01:32:40,808
like Bitcoin fixed the money. Okay. How does Bitcoin fix the credit market? So it was like,

1166
01:32:40,808 --> 01:32:47,128
you need counterparties that are so incredibly trustworthy with so much collateral that they

1167
01:32:47,128 --> 01:32:55,128
create instruments that are so much better than the rest of the market that you can't not hold

1168
01:32:55,128 --> 01:33:00,628
them. But you've still got the liquidity problem. They got to be able to sell the bad stuff to get

1169
01:33:00,628 --> 01:33:04,168
to the kids. You got to be able to sell the bad stuff. Yeah. And some of these people might be

1170
01:33:04,168 --> 01:33:09,928
riding those bonds until 2097 when someone's going to have to collect on that. Damn, bag holding for

1171
01:33:09,928 --> 01:33:15,828
70 years. That's such a good point, Ben. And that's why this is going to take a decade. That's why

1172
01:33:15,828 --> 01:33:20,968
it's going to take 20 years because all this stuff, all the bad stuff has to turn over. And anybody

1173
01:33:20,968 --> 01:33:22,568
that's sitting on that 2097 bond,

1174
01:33:22,648 --> 01:33:24,528
like you're going to have to take Ford to court

1175
01:33:24,528 --> 01:33:25,528
to go get your assets.

1176
01:33:25,528 --> 01:33:27,208
Or like if it's secured,

1177
01:33:27,648 --> 01:33:29,048
if it's unsecured and backed by air,

1178
01:33:29,148 --> 01:33:30,008
as Soleil mentioned earlier,

1179
01:33:30,068 --> 01:33:30,708
you're kind of screwed.

1180
01:33:30,968 --> 01:33:33,688
But like there's going to be illegal proceedings.

1181
01:33:34,008 --> 01:33:35,728
Do you go through that whole process?

1182
01:33:35,848 --> 01:33:36,788
Do you just mark it at zero?

1183
01:33:37,908 --> 01:33:40,408
There's the next five to 10 years

1184
01:33:40,408 --> 01:33:41,968
and watching this disruption take place

1185
01:33:41,968 --> 01:33:43,468
in the market is going to be totally fascinating.

1186
01:33:43,628 --> 01:33:45,408
And this is just one place, right?

1187
01:33:45,448 --> 01:33:46,048
This is one company

1188
01:33:46,048 --> 01:33:48,188
and why I think we'll have a segment on this every week

1189
01:33:48,188 --> 01:33:57,868
because it's totally fascinating to think about the entire debt structure of the market

1190
01:33:57,868 --> 01:34:00,168
that was historically incredibly opaque.

1191
01:34:00,508 --> 01:34:02,828
I came for the Bitcoin and I stayed for the bonds.

1192
01:34:03,548 --> 01:34:04,608
And that's where I'm at.

1193
01:34:05,388 --> 01:34:05,988
That's where I'm at.

1194
01:34:07,088 --> 01:34:11,388
It would be really interesting to find the holders of those 2097 bonds

1195
01:34:11,388 --> 01:34:13,488
and see what types of holders they are.

1196
01:34:13,968 --> 01:34:15,628
So add that to the list for the future.

1197
01:34:15,628 --> 01:34:16,928
Yeah, the type of holders.

1198
01:34:17,168 --> 01:34:17,408
We've got the fancy terminals.

1199
01:34:18,188 --> 01:34:28,028
maybe we'll get you one i think you need one too um yeah it's this stuff is totally crazy

1200
01:34:30,508 --> 01:34:37,228
um shall we shall we shift gears what do we have we hit the dead have we killed the dead horse

1201
01:34:39,228 --> 01:34:45,068
yes poor ford well you gotta remember you've got to remember too that they were the only one of the

1202
01:34:45,068 --> 01:34:49,568
the big three automakers that skipped the tarp bailout in 2008. I don't know if you remember that.

1203
01:34:49,568 --> 01:34:54,368
And then the next year, they got $6 billion from the Department of Energy. So really,

1204
01:34:54,528 --> 01:34:57,808
those Ford bonds are betting that your government's going to be solvent in the first place.

1205
01:34:57,988 --> 01:35:03,368
It's just a total mess. It's ridiculous. And that's just a money printing solution.

1206
01:35:04,528 --> 01:35:08,028
Yeah. Wow. Yeah, I think the best thing I can say about Ford is that they're going to go bankrupt

1207
01:35:08,028 --> 01:35:18,188
blast. It's just so critical to the American world, the American economy. Yeah. The, uh,

1208
01:35:18,188 --> 01:35:24,188
the other thing we were talking about was, uh, these bailouts, which I think is Mike,

1209
01:35:24,188 --> 01:35:28,828
you hit on this a little bit earlier. Um, all of these bailouts, like these, uh,

1210
01:35:30,028 --> 01:35:34,348
what's, uh, Jeff Park called them and he calls them Scrabble tiles, right? The tarp and all

1211
01:35:34,348 --> 01:35:37,388
these different bailouts are just different forms of money printing in a different way.

1212
01:35:38,028 --> 01:35:41,468
You think of like Silicon Valley bank

1213
01:35:41,468 --> 01:35:46,468
and like Silicon Valley bank was a money printing moment.

1214
01:35:46,708 --> 01:35:50,008
There was a bank run on the bank in Silicon Valley.

1215
01:35:50,008 --> 01:35:52,248
All of the tech companies banked there.

1216
01:35:52,248 --> 01:35:54,768
That specific bank, Silicon Valley bank,

1217
01:35:54,768 --> 01:35:57,988
they may, if you wanted to get a line of credit

1218
01:35:57,988 --> 01:36:00,408
from Silicon Valley bank, they had the best rates.

1219
01:36:00,408 --> 01:36:03,068
You had to keep all of your money there.

1220
01:36:03,068 --> 01:36:05,648
You couldn't like split up your exposure

1221
01:36:05,648 --> 01:36:06,988
between other banks.

1222
01:36:06,988 --> 01:36:11,068
So they made all of these tech companies, put all of their money there.

1223
01:36:11,448 --> 01:36:14,468
And then when the tech companies went to actually go get the money, there was no money left.

1224
01:36:14,568 --> 01:36:15,528
It was like a huge issue.

1225
01:36:15,668 --> 01:36:17,528
What's the U.S. government going to do?

1226
01:36:17,528 --> 01:36:31,348
Are you going to let your best sector in the entire world just fall to pieces because of one bad bank in Silicon Valley that took on too much risk?

1227
01:36:31,768 --> 01:36:32,068
No.

1228
01:36:32,948 --> 01:36:36,268
They said all of your deposits will be insured.

1229
01:36:36,988 --> 01:36:45,148
which is just a super, super, super, super slippery slope of just we're going to money print no matter what.

1230
01:36:45,148 --> 01:36:52,288
Like it just it's the incentives are really not great for banks to not take on risk.

1231
01:36:52,288 --> 01:36:56,728
Like all of these banks are taking on risk because they know there's if there's just too systemically important,

1232
01:36:56,728 --> 01:36:58,768
they're going to print their way out of it.

1233
01:36:58,768 --> 01:37:01,588
Then that's why we buy Bitcoin.

1234
01:37:01,708 --> 01:37:05,628
That's why we hold Bitcoin, because these incentives are just totally skewed.

1235
01:37:05,628 --> 01:37:10,108
and the the way out of poor risk management is money printing

1236
01:37:10,108 --> 01:37:18,128
so it's crazy crazy world out there and maybe we'll uh maybe we'll hit on target too a little

1237
01:37:18,128 --> 01:37:23,868
bit because you brought that up adam um i kind of got i got a little bit roasted in the community

1238
01:37:23,868 --> 01:37:27,488
some people are like oh yeah it's a screw target it's the worst place ever some people are like

1239
01:37:27,488 --> 01:37:31,128
have you ever been to a target you should go walk on a target and then it became a moment of

1240
01:37:31,128 --> 01:37:34,828
contention with my wife she's like all right we're going to target we're going to go check this out

1241
01:37:34,828 --> 01:37:39,248
And it's it's difficult, right?

1242
01:37:39,248 --> 01:37:41,588
And in nice places, Target looks like it's doing fine.

1243
01:37:41,588 --> 01:37:46,848
But in bad places, like everything in the in the area is like locked up.

1244
01:37:46,848 --> 01:37:52,228
You can't go get shampoo or toothbrushes or like medicine.

1245
01:37:52,228 --> 01:37:54,688
It's like, why would I like why would I even go to Target?

1246
01:37:54,688 --> 01:37:56,928
The Target in Seattle was horrible.

1247
01:37:56,928 --> 01:37:58,568
We used to go to Target because it was kind of cool.

1248
01:37:58,568 --> 01:38:03,148
Like you get some stuff for your house and get all the toiletries

1249
01:38:03,148 --> 01:38:08,588
stuff that you need is like just a trip that you did every once in a while and then it's just like

1250
01:38:08,588 --> 01:38:14,108
why i why would i ever do this like i can't i have to ring a bell every time i wanted to go

1251
01:38:14,748 --> 01:38:19,788
like get anything from the shelves and then you've got a minimum wage employee that comes running

1252
01:38:20,428 --> 01:38:25,628
and or or or walking or doesn't come at all and you're like this shopping experience is

1253
01:38:25,628 --> 01:38:28,988
completely horrible but then you're like well what's the point of target existing

1254
01:38:28,988 --> 01:38:34,328
if like i could just go get all this stuff on amazon which is what i do now i subscribe and

1255
01:38:34,328 --> 01:38:40,248
save that's friction right yeah you go to those stores and it shuts you off immediately you go

1256
01:38:40,248 --> 01:38:44,808
why am i going to come here jump through all these hoops there's too much friction out there but also

1257
01:38:44,808 --> 01:38:50,848
if you're if you are target you have to look at a lot of those stores now and in those areas and

1258
01:38:50,848 --> 01:38:56,128
go do i even want to be open here that's exactly when you had all of the people that could just

1259
01:38:56,128 --> 01:39:00,368
come in and just walk out with as long as it was what less than a thousand dollars of goods or

1260
01:39:00,368 --> 01:39:04,328
whatever and they're clearing the shelves if you're a corporation that's trying to make money

1261
01:39:04,328 --> 01:39:10,808
in a world where that's getting harder and harder for some of these you've got a serious risk return

1262
01:39:10,808 --> 01:39:16,188
that you've got to look at on that and most of them start to vacate those areas so now those

1263
01:39:16,188 --> 01:39:20,868
areas have far less options to them and you basically get down to a well i guess amazon

1264
01:39:20,868 --> 01:39:25,988
will bring it hopefully unless people start raiding the trucks and stuff that's exactly what

1265
01:39:25,988 --> 01:39:29,988
it is like there's something called shortage percentage which is just a percentage of your

1266
01:39:29,988 --> 01:39:34,868
annual sales that you'd expect to lose due to theft in retail theft is horrible across the industry

1267
01:39:34,868 --> 01:39:39,588
and it was like very regular to see like a two percent three percent shortage rate where

1268
01:39:39,588 --> 01:39:44,788
like two to three million dollars of your product is missing every year which is crazy to think

1269
01:39:44,788 --> 01:39:50,948
about and then you know on top of it multiple years ago back in like 2019 before the pandemic

1270
01:39:50,948 --> 01:39:54,948
target kind of pivoted their strategy where they want to compete with amazon they fulfill

1271
01:39:54,948 --> 01:39:59,828
online orders through their stores and then obviously as e-commerce takes off the infrastructure

1272
01:39:59,828 --> 01:40:05,188
just isn't there the logistics aren't there to compete with amazon with walmart on that basis so

1273
01:40:05,188 --> 01:40:09,988
they're just in an identity crisis so much so much risk everywhere man i wish i could i could talk

1274
01:40:09,988 --> 01:40:17,828
about this for hours but yeah it's a tough spot to be in identity crisis yeah they don't want to know

1275
01:40:18,388 --> 01:40:23,748
they're trying to understand who they can be like do we compete with amazon or do we just downsize

1276
01:40:23,748 --> 01:40:27,828
like ben said we have all these stores that we probably need to close due to these operational

1277
01:40:27,828 --> 01:40:32,628
issues uh it's just a it's a tough spot you need to decide to win on one thing and then

1278
01:40:33,428 --> 01:40:38,148
it's really hard to compete it's a super tough industry yeah it's like identity risk i haven't

1279
01:40:38,148 --> 01:40:42,548
really thought about that before it's like you can't find your little niche anymore because it's

1280
01:40:42,548 --> 01:40:48,548
been taken by these large companies that can move faster quicker with less friction and

1281
01:40:49,988 --> 01:40:53,188
it kind of makes you wonder like what's the what's the future of the world look like if

1282
01:40:53,188 --> 01:40:58,548
if a company like target disappears and a few of these other like i i get they've got all the real

1283
01:40:58,548 --> 01:41:02,148
estate so you've got some assets there but then the question is like who wants the real estate

1284
01:41:02,148 --> 01:41:08,608
when's the last time any of you were at a mall right i've walked through an empty one you remember

1285
01:41:08,608 --> 01:41:12,488
when you were a kid and like that was the spot you were always there right you'd go there and

1286
01:41:12,488 --> 01:41:16,628
shop for everything all the stuff now they're empty right we have a massive one that they

1287
01:41:16,628 --> 01:41:23,628
put in here a couple of years ago and you walk in there now and i think there's probably six or

1288
01:41:23,628 --> 01:41:29,748
seven active stores in there and the rest of it's just completely vacant like like that model just

1289
01:41:29,748 --> 01:41:35,188
got decimated as soon as Amazon came and people could take the friction of going to the mall

1290
01:41:35,188 --> 01:41:39,808
out of their lives. They didn't need to anymore. You can ship it to your house. You don't like it.

1291
01:41:39,868 --> 01:41:45,288
You can ship it back. It's an easy transaction now. The world's getting lazy. We don't want to

1292
01:41:45,288 --> 01:41:50,428
leave and have to go chase things down. That's just a reality now. I don't know if it's a world

1293
01:41:50,428 --> 01:41:55,248
got lazy. I'll say it differently. We'll move on to the next topic. It's not lazy, but we've gotten

1294
01:41:55,248 --> 01:42:00,368
more efficient in our lives and we're exactly because of things yeah so when we talked about

1295
01:42:00,368 --> 01:42:05,088
the black swan events you could talk about things that happened due to there's a mistake in the

1296
01:42:05,088 --> 01:42:11,568
system but in silicon valley i've been here for 25 years what happens is there's a term that's been

1297
01:42:11,568 --> 01:42:17,008
here ever since i've been here called creative destruction so the company netflix put blockbuster

1298
01:42:17,008 --> 01:42:23,728
out of business the easiest one amazon put sears out of business right and so so with that um and

1299
01:42:23,728 --> 01:42:26,188
And then you have Google puts Yahoo out of business.

1300
01:42:26,508 --> 01:42:30,728
So it's really great for the creative company, not for the company that gets destroyed.

1301
01:42:31,128 --> 01:42:36,428
But now with Target, you know, with Amazon making it so easy to get this, the other black

1302
01:42:36,428 --> 01:42:42,108
swan event is a technological event that we talked about Ford and Tesla versus Ford.

1303
01:42:42,228 --> 01:42:46,868
So I think we see that also as black swan events, just technology putting you out of

1304
01:42:46,868 --> 01:42:51,508
at you have an inefficient business to compete against, you know, Amazon.

1305
01:42:51,508 --> 01:42:56,468
I mean, Adam, if you're a target, nobody there wants to talk about competing against Amazon.

1306
01:42:56,688 --> 01:42:59,268
That's probably the worst story to talk about, right?

1307
01:42:59,328 --> 01:43:00,168
Yeah, 100%.

1308
01:43:00,168 --> 01:43:00,708
Absolutely.

1309
01:43:00,928 --> 01:43:01,148
Yeah.

1310
01:43:01,288 --> 01:43:06,148
And think about if you're a target executive, every day you got to go to work, figure out,

1311
01:43:06,208 --> 01:43:07,428
oh, how do I compete with Amazon?

1312
01:43:08,068 --> 01:43:10,008
You know, they have prime delivery, a subscription.

1313
01:43:10,008 --> 01:43:16,688
I get free movies and they don't have a shrinkage problem and it delivers to my house and it

1314
01:43:16,688 --> 01:43:20,168
remembers what I, you know, as Jeff said, he has a subscription for toothpaste.

1315
01:43:20,168 --> 01:43:27,168
And like, what are you going to do? Like what's the incentive to work there to like the equity upside and target?

1316
01:43:27,168 --> 01:43:28,168
Exactly.

1317
01:43:28,168 --> 01:43:37,168
You know, like, like, is that, that's not cool. That's not sexy. Like good luck trying to hire people. Like, does anybody like grow up, man, I want to be.

1318
01:43:37,168 --> 01:43:44,168
Your RSUs and target stock are down, you know, 70% over the last three years. So think of all the people that have spent their career there.

1319
01:43:44,168 --> 01:43:50,408
their career there just banking on a million dollars of rsus that will go down to a quarter

1320
01:43:50,408 --> 01:43:57,368
million and you know a short time it's a really sad thing yeah and then um you know what's what's

1321
01:43:57,368 --> 01:44:04,368
wild is so before you had telephones in your house with a wire you know analog and then i was in

1322
01:44:04,368 --> 01:44:11,088
silicon valley so what happened was we were displacing with voice over ip cisco was displacing

1323
01:44:11,088 --> 01:44:16,728
all that with phones that did voice over IP. The problem that happened was that once the iPhone

1324
01:44:16,728 --> 01:44:22,108
came out and the cell phones went to unlimited pricing per minute, people were like, I don't

1325
01:44:22,108 --> 01:44:27,388
really ever use my desk phone because then they started with WebEx, which led to Zoom and Skype

1326
01:44:27,388 --> 01:44:33,408
and so forth. So from that perspective, the whole VoIP play became a non-starter, even though it was

1327
01:44:33,408 --> 01:44:38,088
better technology, because once your cell phone went to unlimited minutes, you didn't give a crap

1328
01:44:38,088 --> 01:44:41,088
with the technology was because the economics were better.

1329
01:44:41,988 --> 01:44:43,708
And so you're trying to pitch, you know,

1330
01:44:44,028 --> 01:44:45,528
and that's where you get back to,

1331
01:44:45,728 --> 01:44:48,668
I don't want to spend millions of dollars on a phone system

1332
01:44:48,668 --> 01:44:49,848
if nobody's going to use it.

1333
01:44:50,288 --> 01:44:51,548
I'll just use my laptop.

1334
01:44:52,388 --> 01:44:56,228
And so I've seen analog lines, you know,

1335
01:44:56,548 --> 01:44:58,448
and then I saw VoIP to get pitched,

1336
01:44:58,508 --> 01:45:00,188
and then it got displaced by the iPhone,

1337
01:45:00,448 --> 01:45:01,628
and that all happened.

1338
01:45:02,268 --> 01:45:04,528
And that's in a very short period of time.

1339
01:45:05,868 --> 01:45:06,648
Very short.

1340
01:45:07,448 --> 01:45:07,908
Very short.

1341
01:45:08,088 --> 01:45:13,828
um maybe maybe we switch gears because we got i don't know 15 minutes left and i mean maybe we'll

1342
01:45:13,828 --> 01:45:16,988
go a little bit over because we're we're cruising here if we could talk about this stuff forever

1343
01:45:16,988 --> 01:45:22,448
and i'm sure we will talk about this more um but grain you were just in argentina and i think we

1344
01:45:22,448 --> 01:45:27,888
should give this i think we should give this some air because this is a really interesting story um

1345
01:45:27,888 --> 01:45:33,868
argentina obviously big monetary issue a new president came in javier melee it was a big

1346
01:45:33,868 --> 01:45:39,928
ordeal. He's getting rid of all these government enterprises afuera, afuera, afuera. And then

1347
01:45:39,928 --> 01:45:45,248
it's involved in some scams and now the country hates him and it's a bit crazy down there.

1348
01:45:45,848 --> 01:45:50,288
And everybody thought he was going to be the Bitcoin hero and put the country on a Bitcoin

1349
01:45:50,288 --> 01:45:55,168
standard like El Salvador. Ended up not really happening. Launched a meme coin, did the whole

1350
01:45:55,168 --> 01:46:01,388
thing. But anyway, Graeme, you were down there and you traveled and you experienced the money

1351
01:46:01,388 --> 01:46:04,868
and you went to like car dealerships and stuff. Tell us a story.

1352
01:46:06,148 --> 01:46:12,488
Sure. So, so, so first off in, in, um, in my first job in New York city in, in 2000,

1353
01:46:12,488 --> 01:46:17,328
I went to Venezuela. And so it was the Boulevard at that point, it's still the Boulevard.

1354
01:46:17,668 --> 01:46:21,208
And, and what I found out by asking people from Venezuela to this day,

1355
01:46:21,328 --> 01:46:27,008
they've run out of zeros three times. So the Boulevard there's been, maybe there's been more,

1356
01:46:27,008 --> 01:46:33,808
But since I was there, there's been three generations of the boulevard because they keep on printing zeros onto it.

1357
01:46:33,828 --> 01:46:34,768
The paper's not big enough.

1358
01:46:35,388 --> 01:46:36,068
That's Venezuela.

1359
01:46:36,388 --> 01:46:37,728
I was in Caracas and Maracaibo.

1360
01:46:38,368 --> 01:46:40,288
So that was the old days.

1361
01:46:40,488 --> 01:46:45,588
That was 19, let me think, 1992, 93.

1362
01:46:46,648 --> 01:46:49,208
So then on this trip, I went to go to Patagonia.

1363
01:46:49,468 --> 01:46:50,428
And so I was like, cool.

1364
01:46:50,528 --> 01:46:54,268
So I take a plane, SFO to Houston, Houston to Buenos Aires.

1365
01:46:54,268 --> 01:46:56,628
When I travel, I take 500 bucks in cash.

1366
01:46:57,008 --> 01:46:59,668
I have credit cards because you got to pay tips and stuff.

1367
01:47:00,228 --> 01:47:04,028
So I'm in the airport in Buenos Aires and you have to give them your passport.

1368
01:47:04,308 --> 01:47:09,008
It's Bank of Argentina in the airport.

1369
01:47:09,248 --> 01:47:10,128
And I figure I'll go there.

1370
01:47:10,128 --> 01:47:15,368
First, I tried taking out of the ATM machine and they only let you take out 60,000 pesos,

1371
01:47:15,728 --> 01:47:17,748
which is equal to about 48 bucks.

1372
01:47:18,308 --> 01:47:21,748
And I'm like, I think I need more money because there's a limit on it.

1373
01:47:22,108 --> 01:47:24,008
So I go to the desk and I give the guy $200.

1374
01:47:24,348 --> 01:47:34,842
He going to give me like 250 pesos And I like cool And I got a flight I going to go to Tierra del Fuego Excuse me Ushuaia

1375
01:47:35,322 --> 01:47:36,322
And then I'm going to go to Chile.

1376
01:47:36,522 --> 01:47:38,422
So I, because the guy knows I'm an American.

1377
01:47:38,822 --> 01:47:41,022
I said, can I have some Chilean money?

1378
01:47:41,502 --> 01:47:42,422
Whatever it's called.

1379
01:47:42,742 --> 01:47:43,942
And he's like, no.

1380
01:47:44,522 --> 01:47:45,642
I'm like, why not?

1381
01:47:45,682 --> 01:47:46,802
He goes, because we don't have any.

1382
01:47:47,122 --> 01:47:51,542
I'm like, you know, you got euros, you got francs, you got yen.

1383
01:47:51,682 --> 01:47:53,142
You don't have Chile money.

1384
01:47:53,262 --> 01:47:54,362
It's the next door neighbor.

1385
01:47:54,502 --> 01:47:55,562
He's like, no.

1386
01:47:55,922 --> 01:47:58,702
So I take my Argentine pesos, go to Yishwaya.

1387
01:47:59,102 --> 01:48:03,542
So then I drive over into Chile and I get there and I get to the hotel.

1388
01:48:03,802 --> 01:48:05,242
This is a very, very nice hotel.

1389
01:48:05,442 --> 01:48:08,882
It's about $200 American to stay at this hotel.

1390
01:48:10,442 --> 01:48:14,702
So I go to the front desk and I said, look, I don't have any Chilean money.

1391
01:48:15,102 --> 01:48:16,822
And the guy's like, okay.

1392
01:48:17,202 --> 01:48:20,042
I'm like, because sometimes they'll change it for you at the hotel.

1393
01:48:20,042 --> 01:48:23,042
And he's like, you got to go to the black market to go get it.

1394
01:48:23,122 --> 01:48:24,062
I'm like, what?

1395
01:48:24,502 --> 01:48:27,222
And so I said, what am I going to do?

1396
01:48:27,262 --> 01:48:28,522
And he's like, well, what do you need?

1397
01:48:28,562 --> 01:48:29,702
I go, look, I got like 100.

1398
01:48:29,842 --> 01:48:30,642
I got five.

1399
01:48:30,722 --> 01:48:31,782
I didn't tell my 500 bucks.

1400
01:48:31,822 --> 01:48:32,782
I have a hundred dollar bill.

1401
01:48:33,182 --> 01:48:34,322
He's like, that's no problem.

1402
01:48:34,622 --> 01:48:35,122
What do you want?

1403
01:48:35,162 --> 01:48:36,662
I go, I want singles and fives.

1404
01:48:36,842 --> 01:48:38,962
So he gives me back a hundred dollars in cash.

1405
01:48:39,042 --> 01:48:40,362
He had a wad of US dollars.

1406
01:48:40,922 --> 01:48:43,542
And he goes, everybody here prefers the blue dollars.

1407
01:48:43,702 --> 01:48:45,062
I'm like, what the fuck is a blue dollar?

1408
01:48:45,322 --> 01:48:47,882
And that's American money because they call it blue.

1409
01:48:48,002 --> 01:48:48,762
I don't know.

1410
01:48:49,242 --> 01:48:50,302
So I'm paying everybody.

1411
01:48:50,302 --> 01:48:54,462
The Chilean people don't even want the Chilean peso.

1412
01:48:54,922 --> 01:48:55,962
That's how bad it is.

1413
01:48:56,442 --> 01:48:58,362
Anyway, I get back to Buenos Aires.

1414
01:48:59,542 --> 01:49:00,722
People are beautiful.

1415
01:49:00,982 --> 01:49:01,922
They're dressed great.

1416
01:49:02,182 --> 01:49:04,682
All of the restaurants and cafes are packed.

1417
01:49:04,782 --> 01:49:06,522
They start at four o'clock at the cafes.

1418
01:49:07,062 --> 01:49:10,302
They have their cappuccino, their coffee, espresso, whatever it is.

1419
01:49:10,822 --> 01:49:11,302
Fabulous.

1420
01:49:11,442 --> 01:49:13,782
The restaurants, everybody goes to dinner at nine o'clock at night.

1421
01:49:14,122 --> 01:49:15,382
The restaurants are full.

1422
01:49:15,382 --> 01:49:20,682
The weirdest thing is all of the malls that I went to in Buenos Aires, right?

1423
01:49:20,982 --> 01:49:26,222
And I guess all the nice areas, whatever, I walked around, all the malls were completely full.

1424
01:49:26,482 --> 01:49:28,162
There was not a single empty storefront.

1425
01:49:28,682 --> 01:49:32,382
And all of the inventory was stacked up in every single store.

1426
01:49:33,102 --> 01:49:39,122
And I'm like, if they got bad currency and they're doing all kinds of renovations on the real estate, I don't get it.

1427
01:49:40,182 --> 01:49:43,342
So I went into the car dealership because I like cars.

1428
01:49:43,342 --> 01:49:48,622
if you want to buy a car, you got to buy it in American dollars. Can't buy an Argentine pesos.

1429
01:49:49,322 --> 01:49:54,842
So I learned that that was interesting. And then what happened was what it said was

1430
01:49:54,842 --> 01:49:59,822
that if you want to, I'm breaking out a little Coke here, real deal.

1431
01:50:01,002 --> 01:50:02,102
Glass bottles are the best.

1432
01:50:02,102 --> 01:50:08,842
Glass bottles. So with that said, to wrap up, the real estate was all being renovated. And I'm like,

1433
01:50:08,842 --> 01:50:11,842
why is it real estate being renovated if the money is so bad?

1434
01:50:12,062 --> 01:50:13,442
That's their store of value.

1435
01:50:14,082 --> 01:50:18,722
And once you own an apartment, you can live in it for whatever, 50 years.

1436
01:50:19,242 --> 01:50:23,162
So they have this really good renovation of real estate.

1437
01:50:23,502 --> 01:50:24,962
That's the store of value that goes up.

1438
01:50:25,182 --> 01:50:27,322
And then you don't have to worry about the debasement of the money

1439
01:50:27,322 --> 01:50:29,302
because you bought it for cash.

1440
01:50:30,562 --> 01:50:33,842
So, and the reason why the stores are all stocked with inventory

1441
01:50:33,842 --> 01:50:35,682
is because it's a hard asset.

1442
01:50:35,682 --> 01:50:36,502
It's inventory.

1443
01:50:38,102 --> 01:50:38,782
Excuse me.

1444
01:50:38,842 --> 01:50:47,802
yeah it's uh it's crazy that these other countries that have really bad currency

1445
01:50:47,802 --> 01:50:55,542
rely on us dollars as their stable currency when we're over here in the us and we don't

1446
01:50:55,542 --> 01:51:02,022
even want the currency and it's like that's just it's crazy final boss of currency

1447
01:51:02,022 --> 01:51:08,882
collapse. It's the final boss. Once all these other countries realized that our currency isn't

1448
01:51:08,882 --> 01:51:13,622
stable, then what... But it's better than theirs. So it's a game... It's better than theirs.

1449
01:51:13,882 --> 01:51:17,882
What's better than theirs? And what I could tell you is that I thought it was going to be...

1450
01:51:17,882 --> 01:51:24,222
I thought the... Caracas in 92 was... I mean, again, it's like the old days. I have not been

1451
01:51:24,222 --> 01:51:30,002
there since then. That city was pretty worn out at the time I was there. But Buenos Aires was

1452
01:51:30,002 --> 01:51:35,682
beautiful and modern and beautiful glass buildings and old architecture. It truly is the Paris of

1453
01:51:35,682 --> 01:51:41,522
South America. And it was awesome. They had a very efficient, the train station was gorgeous. That's

1454
01:51:41,522 --> 01:51:46,802
where I stayed right by it. And so I did not get the sense that anybody, and I asked ChatGPT,

1455
01:51:47,222 --> 01:51:51,382
I'm like, why aren't the people concerned about this? They're not because they've been living like

1456
01:51:51,382 --> 01:51:57,382
this for 40 years. Buy your house for cash. You don't have to worry about your biggest expense,

1457
01:51:57,382 --> 01:52:05,222
your rent. And then the reason why you can only take out 60,000 pesos at a time is to keep the

1458
01:52:05,222 --> 01:52:11,542
the velocity of money fast. But it doesn't matter. Most stores, I'd say 90% of people paid by credit

1459
01:52:11,542 --> 01:52:18,662
card anyway. So I just like to have cash because I tip bellhops or whatever people. So anyway, so

1460
01:52:19,542 --> 01:52:24,662
to me, it was a big eye opener going there because it was for a third world country.

1461
01:52:24,662 --> 01:52:29,782
It was awesome. The other thing I'm going to say is that WhatsApp for a telephone call

1462
01:52:30,582 --> 01:52:40,822
works better in Argentina on a free Wi-Fi at a coffee store than my phone works with AT&T in

1463
01:52:40,822 --> 01:52:49,062
Silicon Valley. And that just bugs the crap out. Or making a phone call through X or a phone call

1464
01:52:49,062 --> 01:52:55,222
through whatever app I had on free Wi-Fi worked better than a cell phone call in America. So that

1465
01:52:55,222 --> 01:53:01,782
just irks me to hell. And that's a great answer right there from Elliot. They save in the dollar

1466
01:53:01,782 --> 01:53:06,822
because the dollar is like Bitcoin to us. And so I only saw one place that advertised Bitcoin,

1467
01:53:07,322 --> 01:53:12,862
but it was an eye opener. And I thought it was going to be a lot worse. And I was really,

1468
01:53:12,862 --> 01:53:18,122
really surprised. I read this article on the Federal Reserve's website today.

1469
01:53:18,122 --> 01:53:23,882
It came out in July and it's called the International Role of the US Dollar 2025 Edition.

1470
01:53:24,542 --> 01:53:28,142
And I highly recommend it because it's from the Federal Reserve, the people with the biggest

1471
01:53:28,142 --> 01:53:30,202
incentive to make sure that the dollar looks good.

1472
01:53:30,482 --> 01:53:34,582
And it is filled with very easy to read graphs that not only show the death of our dollar,

1473
01:53:34,722 --> 01:53:36,642
but the world's eroding trust in it.

1474
01:53:37,002 --> 01:53:42,022
And it is just mind boggling that this is coming from the Federal Reserve trying to

1475
01:53:42,022 --> 01:53:43,462
dress it up the best that they can.

1476
01:53:43,462 --> 01:53:48,502
And you're just seeing like foreign exchange reserves of the dollar are down 20%, foreign

1477
01:53:48,502 --> 01:53:52,222
holdings of treasuries down 30%, and they're trying to put on a face.

1478
01:53:52,382 --> 01:53:54,402
So I think the rest of the world is going to catch on.

1479
01:53:55,322 --> 01:53:56,782
They're trying to pump their stock.

1480
01:53:57,862 --> 01:53:58,262
Yeah.

1481
01:53:58,982 --> 01:54:00,262
I'm going to pivot real fast.

1482
01:54:00,262 --> 01:54:08,382
J.P. Morgan put out this article or investment thesis called the debasement trade.

1483
01:54:08,822 --> 01:54:11,062
The fact that it has the correct name is awesome.

1484
01:54:11,062 --> 01:54:17,282
And basically, the core thesis is that gold and Bitcoin are complements to swelling government deficits.

1485
01:54:17,442 --> 01:54:18,202
We've all known this.

1486
01:54:18,542 --> 01:54:22,362
If you've been in Bitcoin, you've known this based upon the years you've been in it.

1487
01:54:22,802 --> 01:54:25,642
So that has been true, this debasement trade.

1488
01:54:26,402 --> 01:54:31,042
Now, one of the reasons why I like the term debasement is because there's two things going on with Bitcoin.

1489
01:54:31,562 --> 01:54:37,702
CPI, Consumer Price Index, which the price of something could go up because there's a supply chain problem.

1490
01:54:38,002 --> 01:54:38,922
That's not money printing.

1491
01:54:39,342 --> 01:54:41,262
Money printing is you have a fiscal deficit.

1492
01:54:41,902 --> 01:54:45,962
In the US, it's a trillion dollars a year, and it's about 6.5%.

1493
01:54:45,962 --> 01:54:54,262
So you add the debasement of the currency, that's M2, plus the CPI, and you get whatever,

1494
01:54:54,562 --> 01:54:58,582
6.5 plus 3, you got 9.5, round it to 10%.

1495
01:54:58,582 --> 01:55:02,322
That means every 7.2 years, your buying power gets cut in half.

1496
01:55:03,122 --> 01:55:05,602
You know, China's M2 is 10% a year.

1497
01:55:05,602 --> 01:55:09,702
I don't know if the CPI is there, but it's probably more than 2%.

1498
01:55:09,702 --> 01:55:15,942
So the takeaway for this is the debasement trade is JP Morgan said in order for Bitcoin,

1499
01:55:16,142 --> 01:55:18,562
they said gold leads Bitcoin.

1500
01:55:19,082 --> 01:55:24,082
And in order for it to catch up, it'd have to be 40% higher or 165,000.

1501
01:55:25,602 --> 01:55:28,882
So congratulations to JP Morgan.

1502
01:55:28,882 --> 01:55:35,082
You now know something that we've all known for anywhere from 1 to 10 to 15 years.

1503
01:55:35,602 --> 01:55:40,602
Here is the debasement trade visualized.

1504
01:55:42,602 --> 01:55:46,422
The blue line is the CPI consumer price index.

1505
01:55:46,422 --> 01:55:48,602
So the increasing cost of goods.

1506
01:55:48,602 --> 01:55:52,162
And then the red line is the M2 money supply index.

1507
01:55:52,162 --> 01:55:54,122
So it's how much the money supply is increased.

1508
01:55:54,122 --> 01:55:57,022
So the spread between the two is the debasement.

1509
01:55:58,062 --> 01:55:59,402
That's the debasement trade.

1510
01:55:59,402 --> 01:56:02,422
And it doesn't look like it's stopping.

1511
01:56:02,422 --> 01:56:04,742
This is from 2005 to 2025.

1512
01:56:04,742 --> 01:56:09,502
the compound annual growth rate of the M2 is like 6.5%,

1513
01:56:09,502 --> 01:56:11,542
and the compound annual growth rate of the CPI

1514
01:56:11,542 --> 01:56:12,762
is like 3.5%.

1515
01:56:12,762 --> 01:56:15,642
And within that, the CPI has also had changes

1516
01:56:15,642 --> 01:56:18,102
to the construction of the index itself,

1517
01:56:18,102 --> 01:56:21,642
whereas breakfast foods used to include eggs and bacon

1518
01:56:21,642 --> 01:56:25,042
and those types of normal breakfast foods.

1519
01:56:25,042 --> 01:56:28,242
And now I think breakfast food is just cereal.

1520
01:56:28,242 --> 01:56:30,122
Obviously, those are very different.

1521
01:56:30,122 --> 01:56:32,062
The price of those changing over time

1522
01:56:32,062 --> 01:56:34,202
is incredibly different.

1523
01:56:34,202 --> 01:56:39,002
So yeah, it's wild to see that the, like the Fed is posting this information.

1524
01:56:39,602 --> 01:56:44,402
And then so is JP Morgan, you know, like understanding what's going on.

1525
01:56:44,662 --> 01:56:47,702
One of the big things kind of bring this times back to like credit quality.

1526
01:56:48,922 --> 01:56:50,602
So what's the credit quality of the US government?

1527
01:56:51,422 --> 01:56:53,102
Just got downgraded by Moody's.

1528
01:56:53,302 --> 01:56:54,882
It did, but like, what's that mean?

1529
01:56:55,402 --> 01:56:55,882
Oh, damn.

1530
01:56:57,682 --> 01:56:59,962
You know, like who's like, who they pay the debt to?

1531
01:57:02,062 --> 01:57:03,182
Who they owe the debt to?

1532
01:57:03,182 --> 01:57:08,582
what is the debt like what happens if they don't pay the debt

1533
01:57:08,582 --> 01:57:16,382
it's the best of the worst right i mean you look across the world i guess your credit quality is

1534
01:57:16,382 --> 01:57:22,362
relative to everything else that's out there and if the rest of the world is spinning out of control

1535
01:57:22,362 --> 01:57:30,282
faster than the u.s you know the u.s is still still almost the best you got it's but man it's

1536
01:57:30,282 --> 01:57:33,682
getting dark out there when you start watching this because we're hitting this weird point in

1537
01:57:33,682 --> 01:57:40,262
time where everything's just accelerating and it's accelerating so fast and you start looking

1538
01:57:40,262 --> 01:57:44,702
you know i used to always be mesmerized watching that debt clock just climb and climb and climb and

1539
01:57:44,702 --> 01:57:50,202
you know it doesn't feel real and still until you start tracking the impacts with like those

1540
01:57:50,202 --> 01:57:54,922
charts that you just showed as well like that's a terrifying chart watching how fast that debasements

1541
01:57:54,922 --> 01:58:02,282
accelerating away from even CPI. Because I think what it tells you when you look at our economy is

1542
01:58:02,282 --> 01:58:07,382
that the economy is slowing down and they're trying to find a way to re-inject it. And now

1543
01:58:07,382 --> 01:58:10,962
all of a sudden you've got all this productivity that's coming out of the market when all these

1544
01:58:10,962 --> 01:58:14,442
people are aging out of the workforce and they got to find ways to replace that because you've

1545
01:58:14,442 --> 01:58:19,902
got all these systems and entitlements built up that you got to be able to fund. And so I think

1546
01:58:19,902 --> 01:58:26,862
what you're seeing right now is the last ditch effort to try to make an impact on that because

1547
01:58:26,862 --> 01:58:35,022
they don't have that long to turn it around. Yeah, absolutely. So this is, I took this picture

1548
01:58:35,022 --> 01:58:43,862
December 12th, 2023. So this is two years ago, 32.9 billion. I was in New York for work and I was

1549
01:58:43,862 --> 01:58:50,262
like really bullish on bitcoin at that point in time and then jim kramer posted this uh i don't

1550
01:58:50,262 --> 01:58:56,982
know like 10 days ago our national debt 37.6 trillion i'm like oh my god this is like i went

1551
01:58:56,982 --> 01:59:02,982
back we posted that i was like oh my god this is that's so much money right that's so much money

1552
01:59:02,982 --> 01:59:11,862
in such a short time period like it's it's greater than an nvidia it's one 1.2 nvidia

1553
01:59:11,862 --> 01:59:18,782
just out of thin air like well the worst the worst part about this is that the third line item in the

1554
01:59:18,782 --> 01:59:26,522
federal budget is the interest on the debt so that that makes things worse and so let's try and wrap

1555
01:59:26,522 --> 01:59:34,142
this up on on a positive note look for the for the 33 000 people watching this you're aware of now of

1556
01:59:34,142 --> 01:59:43,142
what's going on? And Tim, Justin, people that we both know, we were in New York City and he said,

1557
01:59:43,222 --> 01:59:49,902
can you orange pill my friend? And I said, sure. And this is at PubKey. And I went to go talk to

1558
01:59:49,902 --> 01:59:56,022
him. Very smart guy, works at a bank. And I said, what's inflation? He's like, 3%. I'm like, okay,

1559
01:59:56,342 --> 02:00:02,562
what's the M2 number? I said, 6.5. I just tell it to him over the past 25 years. I go, well,

1560
02:00:02,562 --> 02:00:09,602
add those two together. So 6.5 plus 3 is 9.5, just round it to 10% because the rule is 72.

1561
02:00:09,602 --> 02:00:14,562
That means every 7.2 years, your buying power gets cut in half. And he goes like this. He looks at

1562
02:00:14,562 --> 02:00:21,042
me, he goes, you add them together? I'm like, well, yeah, it's a yearly rate for both of them.

1563
02:00:21,042 --> 02:00:26,162
He goes, I never thought of adding them together, but he really didn't know what the M2 number was.

1564
02:00:26,802 --> 02:00:32,162
And so that's why, you know, when the younger generation, look, I'm the old guy here. I already

1565
02:00:32,162 --> 02:00:37,762
know that. So what does that mean for the young people? The reason why it's harder is because

1566
02:00:37,762 --> 02:00:44,242
you're getting paid, but the money buys half as much every seven years. So you're 21 years old

1567
02:00:44,242 --> 02:00:50,722
before you're 30, your buying power is cut in half. And then Jerome Powell said in front of

1568
02:00:50,722 --> 02:00:55,842
Congress, anybody can fact check me. He said, well, we don't look at M2 because it's obsolete.

1569
02:00:55,842 --> 02:01:00,962
We learned it in college. There's no reason to talk about it. And I'm like, what are you talking

1570
02:01:00,962 --> 02:01:06,962
about it's obsolete it's it's so crazy because that all of that extra money printing is going

1571
02:01:06,962 --> 02:01:11,362
in new assets that never existed before too so not only is it like all assets are printing you've got

1572
02:01:11,362 --> 02:01:15,522
actually new assets with crypto they're just absorbing all of a sudden and it's exacerbating

1573
02:01:15,522 --> 02:01:20,642
the issue you know but you know what made it worse one of the craziest things that happened during

1574
02:01:20,642 --> 02:01:25,842
covid was that was the biggest jump for robin hood so all of a sudden you're at home you can't

1575
02:01:25,842 --> 02:01:30,562
spend money you're wearing a mask right life sucks and you're sitting at home you're like well

1576
02:01:30,962 --> 02:01:35,262
I could bet on sports or I could buy freaking crypto stocks.

1577
02:01:35,482 --> 02:01:36,362
It was 2020.

1578
02:01:36,542 --> 02:01:37,402
The halving happened.

1579
02:01:37,522 --> 02:01:38,702
The price dropped down.

1580
02:01:39,142 --> 02:01:39,882
Every, right?

1581
02:01:40,042 --> 02:01:42,622
March of 2020 was the bottom.

1582
02:01:43,142 --> 02:01:44,402
So then you hit the halving.

1583
02:01:44,522 --> 02:01:45,902
You're like, well, Bitcoin got killed.

1584
02:01:46,262 --> 02:01:48,842
Let's just start buying stocks for free on Robinhood.

1585
02:01:49,242 --> 02:01:51,682
Robinhood runs all the way up, right?

1586
02:01:52,062 --> 02:01:55,642
Wasn't there a company called GameStop that had a gamma squeeze of January 21?

1587
02:01:56,362 --> 02:01:56,842
Yeah.

1588
02:01:57,102 --> 02:01:58,342
So then this happens.

1589
02:01:58,342 --> 02:02:03,382
everybody's sitting at home and Robin Hood goes bananas because everybody can't. So the government

1590
02:02:03,382 --> 02:02:07,762
prints money, but the problem was you couldn't spend it because your store was closed. So now

1591
02:02:07,762 --> 02:02:11,802
you're sitting at home waiting for the Amazon guy to show up. Hopefully he doesn't give you COVID.

1592
02:02:12,522 --> 02:02:20,322
Yeah. Yoloing assets. Yoloing assets because it's what makes sense. All right. We're two hours in.

1593
02:02:20,562 --> 02:02:25,902
I know we could probably take this five hours if we wanted to. I'm going to pass it around. We'll

1594
02:02:25,902 --> 02:02:29,322
We'll do final thoughts just to wrap it up.

1595
02:02:29,322 --> 02:02:31,762
And we'll go from there.

1596
02:02:31,762 --> 02:02:33,742
Adam, super appreciative of you joining.

1597
02:02:33,742 --> 02:02:35,062
Thanks for chiming in.

1598
02:02:35,062 --> 02:02:37,122
I really appreciate your perspective.

1599
02:02:37,122 --> 02:02:41,182
And yeah, hopefully we'll have you back and get on,

1600
02:02:41,182 --> 02:02:44,022
start doing a couple more offshoots of True North.

1601
02:02:44,022 --> 02:02:44,862
Of course.

1602
02:02:44,862 --> 02:02:45,702
Yeah, anytime.

1603
02:02:45,702 --> 02:02:46,542
I love talking about this stuff.

1604
02:02:46,542 --> 02:02:48,342
Like you said, I could go another five hours, man.

1605
02:02:48,342 --> 02:02:50,822
This is what I, you're the only

1606
02:02:50,856 --> 02:02:54,536
that i can talk to about this stuff my fiance is asleep in the other room she has no idea what's

1607
02:02:54,536 --> 02:03:01,016
going on to the magnitude that it is so by all means anytime yeah absolutely so maybe we'll uh

1608
02:03:01,016 --> 02:03:05,016
we'll pass it over to mike well mike will give you final thoughts and we'll go around

1609
02:03:08,456 --> 02:03:13,256
mike that's you grain of salt oh i called you i called you mike i guess yeah yeah i called you

1610
02:03:13,256 --> 02:03:19,016
by your name no sorry i have i have my name in there i like how you're like to my name over here

1611
02:03:19,656 --> 02:03:25,656
Like, anyway, hey, look, look, everybody, I think that, you know what, you have to think about where

1612
02:03:25,656 --> 02:03:29,656
you want to be in one year down the road, two year down the road, three year down, whatever it is,

1613
02:03:29,656 --> 02:03:35,816
and then you make your decisions and do that. And, you know, when I realized that Bitcoin in 2017,

1614
02:03:35,816 --> 02:03:40,136
it was like, oh, I think this is going to be the best thing ever. You know, I just, I jumped into

1615
02:03:40,136 --> 02:03:46,216
it full force. And now I, because I always thought in the future, why wouldn't I want to buy as much

1616
02:03:46,216 --> 02:03:51,496
of it as i could so that's where it happened and i know tim for a long time and you know what guys

1617
02:03:51,496 --> 02:03:56,536
this has been great and i could talk about this all the time but go out there and go talk to people

1618
02:03:56,536 --> 02:04:01,416
see how people are running their businesses see what's affecting them and you learn more by going

1619
02:04:01,416 --> 02:04:07,496
out there in the real world i think that's great yeah see see risk everywhere and then talk like go

1620
02:04:07,496 --> 02:04:12,376
experience in different places like your your experience in argentina and chile like

1621
02:04:12,376 --> 02:04:14,956
Like that story deserves air.

1622
02:04:15,316 --> 02:04:18,556
You know, you need to like, that's interesting to tell people everywhere.

1623
02:04:18,556 --> 02:04:22,276
Like this is real life things that are happening in the rest of the world.

1624
02:04:22,456 --> 02:04:22,816
A hundred percent.

1625
02:04:22,916 --> 02:04:23,436
Keep doing it.

1626
02:04:23,516 --> 02:04:25,396
I love the travels of grain of salt.

1627
02:04:25,616 --> 02:04:25,836
Great.

1628
02:04:26,256 --> 02:04:27,096
Over Soleil.

1629
02:04:28,296 --> 02:04:28,696
Yeah.

1630
02:04:28,856 --> 02:04:32,376
So my, uh, my final thoughts is actually a question for Adam.

1631
02:04:32,476 --> 02:04:33,656
So we'll call it final rants.

1632
02:04:34,396 --> 02:04:38,216
Um, you know, so with your following, which is well-deserved by the way, with the content

1633
02:04:38,216 --> 02:04:43,236
that you pump out. You could have just covered the knots versus core debate in a neutral way.

1634
02:04:43,236 --> 02:04:47,996
So it was not to, you know, anger followers or whatnot. But they say that Bitcoin is a courage

1635
02:04:47,996 --> 02:04:54,036
test, not an IQ test. And there's definitely some high IQ, you know, proponents out there for core.

1636
02:04:54,416 --> 02:04:58,956
But, you know, I just wanted to know what gave you the courage and conviction to take a side and

1637
02:04:58,956 --> 02:05:04,716
endorse knots? Yeah, well, I tried to give a neutral overview of it for Swan, actually,

1638
02:05:04,716 --> 02:05:09,396
And I got raked over the coals because I learned that you can't do a neutral overview of the debate.

1639
02:05:09,656 --> 02:05:10,956
Like you need to pick a side.

1640
02:05:11,496 --> 02:05:13,196
So I learned that the hard way.

1641
02:05:14,076 --> 02:05:15,456
But nothing too crazy, man.

1642
02:05:15,516 --> 02:05:17,456
I love Bitcoin and what it can do for humanity.

1643
02:05:17,796 --> 02:05:26,656
And I haven't successfully seen the case as to why we should change the 80 byte opportune limit, you know, that enables more flexible data embedding.

1644
02:05:26,656 --> 02:05:46,936
You know, I've seen the case that filters don't work in the sense that you can't ever completely prevent unwanted data from being included in the blockchain. But, you know, the entire thing is a game of incentives. I view it as just, you know, opening up some attack vector that totally is unnecessary. I like how you actually framed it as Pascal's wager on X. I thought that was brilliant.

1645
02:05:46,936 --> 02:05:51,936
And yeah, I love Bitcoin and I want to keep Bitcoin

1646
02:05:52,296 --> 02:05:54,956
the, how it has been since 2014.

1647
02:05:54,956 --> 02:06:07,732
You know I want to have Bitcoin the way I have grown up to like it Yeah man I love it I appreciate you you know trying to keep Bitcoin money And I guess my final final thoughts would be a message to the core developers

1648
02:06:09,072 --> 02:06:13,652
Game theory of cooperation says that the optimal strategy is to cooperate

1649
02:06:13,652 --> 02:06:16,072
until someone defects against you.

1650
02:06:16,372 --> 02:06:20,592
And then you defect, you know, back against them until they stop defecting

1651
02:06:20,592 --> 02:06:22,612
and they start cooperating again.

1652
02:06:22,612 --> 02:06:28,872
so I would say that the rise in the knots road node runners shows that the network recognizes

1653
02:06:28,872 --> 02:06:33,992
that you have defected against Bitcoin and if you want us to stop defecting against you all you got

1654
02:06:33,992 --> 02:06:41,592
to do is stop defecting against us and that's it that is that is deep game theory so so let you

1655
02:06:41,592 --> 02:06:49,812
just have game theory episodes just go through that that's awesome there we go 100% defect

1656
02:06:49,812 --> 02:06:53,292
All right. Over to you, Ben.

1657
02:06:54,572 --> 02:07:00,572
Yeah, no, I've really enjoyed this conversation. I think that these are going to be interesting ones to continue to have.

1658
02:07:00,912 --> 02:07:16,232
And I would just continue to challenge people to think through the concepts of money and credit and think about what this means in a future world where Bitcoin becomes viewed as money, effectively the final settlement.

1659
02:07:16,232 --> 02:07:21,032
right? If you just think about credit as the promise of money in the future,

1660
02:07:21,312 --> 02:07:27,892
think about what that means as Bitcoin grows and scales. And if there's a world in the future where

1661
02:07:27,892 --> 02:07:35,532
Bitcoin shifts from the store of value into being recognized globally as the money, what does that

1662
02:07:35,532 --> 02:07:40,852
mean for a currency like the US dollar? So just think on that for a little bit. It's an interesting

1663
02:07:40,852 --> 02:07:43,812
thought experiment. I've been going down that rabbit hole here for a little bit.

1664
02:07:43,812 --> 02:07:53,012
everything's being rewritten that's all new so it's okay if it's uncomfortable and it's okay to

1665
02:07:53,012 --> 02:07:58,872
be wrong and it's okay to be like think about what the future can be like all this is completely new

1666
02:07:58,872 --> 02:08:03,252
everything's novel so if you think you've got a weird thought or a stupid thought it's like

1667
02:08:03,252 --> 02:08:12,432
not a stupid thought because we're pioneering a new land and the last thing i would say is

1668
02:08:12,432 --> 02:08:16,552
when everyone's screaming, start looking for the risk returns.

1669
02:08:17,132 --> 02:08:20,832
The opportunities. Risk reward payoffs, right? Tune out

1670
02:08:20,832 --> 02:08:24,832
noise. Go out there and find the opportunities. If people are

1671
02:08:24,832 --> 02:08:28,912
screaming, it means those opportunities are available. So be

1672
02:08:28,912 --> 02:08:32,932
willing to do the due diligence. That's your edge, right? Don't

1673
02:08:32,932 --> 02:08:37,072
sit on your hands. Don't take the word of anybody else. Go do your due diligence.

1674
02:08:37,352 --> 02:08:40,892
Understand what you're buying into and search for those

1675
02:08:40,892 --> 02:08:43,752
opportunities that everyone else is going to overlook while they're scared.

1676
02:08:45,912 --> 02:08:50,472
Absolutely. Don't rent your conviction. Tim, over to you.

1677
02:08:52,192 --> 02:08:58,352
I mean, you guys are just nailing point after point after point tonight. I guess on the

1678
02:08:58,352 --> 02:09:03,872
everything is being rewritten part, I've had the opportunity recently to just kind of,

1679
02:09:04,592 --> 02:09:18,648
between Ed myself and some other guys just like really have a lot of conversations like meeting after meeting after meeting and the the guys on wall street that are actually willing to

1680
02:09:18,648 --> 02:09:25,088
have a genuine conversation with you they'll ask you like well how do we get our m nav back up for

1681
02:09:25,088 --> 02:09:30,588
this company like what's the strategy and it's like that's how early we are like it sounds

1682
02:09:30,588 --> 02:09:36,668
hyperbolic in the language when you're like we're birthing this new industry but like that's exactly

1683
02:09:36,668 --> 02:09:43,148
what's what's happening i mean i have the pleasure of talking to almost everybody and it's just like

1684
02:09:43,148 --> 02:09:51,228
holy crap we're really early and like just thinking about pristine collateral the best money

1685
02:09:52,028 --> 02:09:58,748
credit like all of these concepts are just going to evolve and whoever can kind of figure out

1686
02:09:58,748 --> 02:10:06,748
which is everybody in this community right now together like whoever can figure out like the next

1687
02:10:06,748 --> 02:10:13,708
best thing to do whether it's m a or whether it's structuring something a little bit differently

1688
02:10:13,708 --> 02:10:19,868
um i think we're just going to look back and be like oh wow you were in the bitcoin treasury

1689
02:10:19,868 --> 02:10:25,808
industry before the year 2030 like you were there at the beginning and it's like we're still like

1690
02:10:25,808 --> 02:10:35,728
internet yeah yeah in hindsight it's gonna be so obvious so obvious so super super cool times

1691
02:10:35,728 --> 02:10:42,768
mike it sounded like you wanted to say something i i just agree with you i i i agree wholeheartedly

1692
02:10:42,768 --> 02:10:48,768
you know you're you're gonna look back in four or five years and say why didn't i do more to learn

1693
02:10:48,768 --> 02:10:53,408
more about bitcoin treasuries if bitcoin's good for a person it's good for a company if it's good

1694
02:10:53,408 --> 02:10:58,188
good for a company. It's good for a sovereign nation. And so that, you know, I think you will

1695
02:10:58,188 --> 02:11:03,848
look back years later and see where it is. And, and you'll be like, wow, the whole industry turned

1696
02:11:03,848 --> 02:11:09,388
around. I'm dedicated to the space. I'm going to be in, this is my second career and I'll be in it

1697
02:11:09,388 --> 02:11:14,348
for the next, you know, I don't know, for as long as I work. As long as you're having fun. Yeah.

1698
02:11:16,108 --> 02:11:21,428
Yeah. Over to you, Adam. Yeah. It's tough to pick on something to end on. We've had such great

1699
02:11:21,428 --> 02:11:26,548
discussion tonight. So thanks guys. But I guess I'll say in the age of great uncertainty that we

1700
02:11:26,548 --> 02:11:33,728
live in with AI disrupting entire industries, our entire economy, and the money printer continuing to

1701
02:11:33,728 --> 02:11:41,188
go debasing our currency, just know that because the debt needs to be devalued, the asset owners

1702
02:11:41,188 --> 02:11:45,448
are going to be disproportionately affected to the upside. Therefore, you need to own assets in this

1703
02:11:45,448 --> 02:11:50,388
day and age. And thank God for Bitcoin, because it's going to shield you a lot from the destabilizing

1704
02:11:50,388 --> 02:11:55,188
effects of both the money printer and any ai disruption so don't want to end on a downer but

1705
02:11:55,188 --> 02:12:01,908
thank god for bitcoin because that is the positive note yeah absolutely thanks thanks for being here

1706
02:12:01,908 --> 02:12:08,708
adam appreciate the perspective as always keep doing you uh and you're you found a lane and it's

1707
02:12:08,708 --> 02:12:24,584
so awesome to see so thanks man yeah keep keep doing it um because it this uh lifts the education level for everybody Like we all communicate to different people We all have different audiences and cross collaborating and talking to different audiences is good for everybody

1708
02:12:24,704 --> 02:12:29,224
Like this is clearly a huge education gap.

1709
02:12:29,224 --> 02:12:32,704
And we've got to lift up the finance knowledge of like the rest of the world

1710
02:12:32,704 --> 02:12:36,984
in order to get to a relatively decent baseline.

1711
02:12:36,984 --> 02:12:40,604
And that's a complicated task and it takes different perspectives and

1712
02:12:40,604 --> 02:12:41,844
different communication styles.

1713
02:12:41,844 --> 02:12:48,544
And yeah, not everybody wants to listen to a two hour and 15 minute podcast of six dudes

1714
02:12:48,544 --> 02:12:51,464
talking on a Wednesday night at midnight Eastern, right?

1715
02:12:51,544 --> 02:12:54,124
Like you've figured out that.

1716
02:12:54,764 --> 02:12:57,384
They'll listen to a Cokehead rant at 6am though.

1717
02:12:59,364 --> 02:13:00,824
Yeah, exactly.

1718
02:13:01,124 --> 02:13:01,564
Exactly.

1719
02:13:03,044 --> 02:13:05,164
Yeah, it's just such an exciting time.

1720
02:13:05,384 --> 02:13:07,384
I encourage everybody to just talk about this stuff.

1721
02:13:07,464 --> 02:13:08,484
Again, communication is huge.

1722
02:13:08,584 --> 02:13:09,404
Education is huge.

1723
02:13:09,404 --> 02:13:17,524
We're going to try to continue to push this education kind of lens into the market just because there's like there's so much.

1724
02:13:17,664 --> 02:13:22,464
I'm learning continuously every day and I've worked in finance for 11 years.

1725
02:13:22,464 --> 02:13:28,924
And if I could fast track that learning to everybody else and like what I'm seeing, that's that's the ultimate goal.

1726
02:13:29,564 --> 02:13:34,724
This is really a benevolent journey and I want the world to be a better place.

1727
02:13:34,724 --> 02:13:36,324
So I'm really hopeful.

1728
02:13:36,324 --> 02:13:38,224
Tell the people you care about about Bitcoin.

1729
02:13:38,224 --> 02:13:42,004
You might be the conversation that saves their financial future.

1730
02:13:42,404 --> 02:13:43,264
Make it happen.

1731
02:13:44,684 --> 02:13:45,164
Okay.

1732
02:13:45,384 --> 02:13:46,364
One last second.

1733
02:13:46,744 --> 02:13:50,644
Maybe you buy more Bitcoin for your friends and family that don't.

1734
02:13:51,504 --> 02:13:54,044
Maybe be a little bit altruistic in the future.

1735
02:13:54,204 --> 02:13:57,084
If you can't convince them, buy enough for you.

1736
02:13:57,244 --> 02:13:58,244
Buy as much as you can.

1737
02:13:58,604 --> 02:14:00,584
And then in the future, you help somebody out.

1738
02:14:00,644 --> 02:14:01,684
You're like, look, I can help you.

1739
02:14:01,904 --> 02:14:02,864
How can you do that?

1740
02:14:02,864 --> 02:14:05,904
Well, I bought Bitcoin in the past.

1741
02:14:05,904 --> 02:14:07,204
How much?

1742
02:14:07,204 --> 02:14:08,404
I bought enough.

1743
02:14:08,404 --> 02:14:09,504
And then that's what you do.

1744
02:14:09,504 --> 02:14:11,364
Eight years in the future, you go help somebody.

1745
02:14:11,364 --> 02:14:15,444
So I loan it to them at a very attractive interest rate.

1746
02:14:16,544 --> 02:14:17,584
Bingo.

1747
02:14:17,584 --> 02:14:19,584
Be the be the one company that does that.

1748
02:14:19,584 --> 02:14:23,624
The every Christmas I'm in the age that all my friends are having kids

1749
02:14:23,624 --> 02:14:28,624
and every Christmas I buy each one of my friends kids $250 in Bitcoin

1750
02:14:29,384 --> 02:14:32,384
and I put it in a wallet for my custody for them, the whole thing.

1751
02:14:32,384 --> 02:14:36,544
and so now like you're some of them that are four years old and it's like looking pretty good i'm

1752
02:14:36,544 --> 02:14:42,064
like this is a this is a college fund here for uh for your kids and the same thing it's like they

1753
02:14:42,064 --> 02:14:47,104
weren't going to do it they have some like mstr exposure because they know i like talk about it

1754
02:14:47,104 --> 02:14:53,344
and they want to support me but that's like that's really it and uh it's just it is a nice feeling

1755
02:14:53,344 --> 02:14:59,264
to do that to do that for people so absolutely encourage that encourage that it's a it's cool to

1756
02:14:59,264 --> 02:15:06,764
to see. And my last thought is that I came for the Bitcoin and I stayed to disrupt the bond market

1757
02:15:06,764 --> 02:15:11,364
and I'm going to be working in this space for a long time. So you can yell at me all you want.

1758
02:15:11,704 --> 02:15:19,164
I don't really care. I'm going to be working here for a while. Cheers. Thanks everybody for joining

1759
02:15:19,164 --> 02:15:24,624
two hours and 15 in. I think we've got like 35,000 people. We will catch you next time,

1760
02:15:24,764 --> 02:15:27,444
maybe next week, maybe after that. We'll see you later. Peace.