whoo episode 38 true north we are back and um in the spirit of decentralization
uh we successfully repelled a ddos vacation attack jeff tried to uh get us to take the
some pto but then like he doesn't pay us so that really didn't make any sense um so dan
was ripping the research and couldn't help himself so we are running the episode tonight
and um just to give a little background if anybody's tuning in for the first time
Jeff put this group together to try to filter out some of the signal in what has been described as what will be the most hated rally in finance.
And we're just trying to filter out some of the noise and provide some signal.
So Dan is anxious to rip the research.
So what do you got for us tonight?
Yeah, I think the topics I want to cover, I think this is going to be a very abbreviated True North.
so probably we're going to cap it at an hour so we'll go 9 p.m eastern to 10 p.m eastern
we'll hit the important topics we'll let you get on through evening so i think first we're going to
talk a little bit about macro stuff which kind of bump ideas off each other i'm not really a macro
guy but i think it's important to understand the entire picture then we'll hit on uh press stocks
just the uh the ex-dividend dates and the payout dates specifically stretch we'll talk about the
mechanisms for which stretch is able to be stabilized. And that's kind of coming up and
traded up to almost $97,000 today. And that's pretty important. It comes to the future of both
strategy and Bitcoin just generally stretches like a pretty important product in the entire
scheme of the Bitcoin market. If we're going to attack the bond market stretches the product to
do it. And then finally, a little bit of the pref stock ATM. I have some kind of charts to show how
the pref stock or when the pref stocks have been issued via atm the volume volumes there and finally
uh is there anything else uh we'll go with that maybe there'll be some bonuses cool
so like i'm going to share my screen this might be a 30 minute episode you guys get lucky
okay so and so like please hop in um just just right on
Yeah. Is there anything you want to say before we get rolling? Anything you're thinking about in terms of price action? I watched your video today. It was great. You're just hustling shares, aren't you?
Yeah. Yeah. It's business as usual and nothing's changed about the thesis. I know people are getting bored, but it doesn't even seem like this is capitulation.
It seems like they might put the screws to the price a little bit more, but hopefully Bitcoin rips and we rip with it.
I agree. Soleil, let me stop sharing my screen for one second. I put on a hat for us tonight.
It says Strife. Okay.
Hell yes.
Thank you.
I really look at the Manufacturing and Services ISM. The Manufacturing ISM is in contractionary territory.
You know, just around 50, anything below 50 means it's a diffusion index.
So across a broad survey of different manufacturing companies, the manufacturing base and supplies
and resources are contracting.
I don't have a great handle on exactly what it is, but the charts look squiggly.
So then the services PMI has been pretty tightly correlated to both global liquidity and Bitcoin price.
You can see these two peaks during which have been kind of boom cycles for Bitcoin.
And we're still in a kind of a contractionary services period of time.
And I think that's quite good for Bitcoin price.
Again, we're sitting along the power lock trend growth.
If you look back, our historic CAGR has been like 50%.
We haven't had any real sort of crazy moves up.
So I think you're sitting here in spot, like there's never been a better time to just sit in spot Bitcoin is the way I look at it right now.
It's like at FTX collapse, you'd probably want to be in some leverage if you're a Bitcoin believer, like twist your arm.
You probably want to be in leverage here.
Who knows?
I think right now, spot Bitcoin is like your friend, you know, or that be MSTR spot, whatever it is.
Spot holdings with very little leverage.
Awesome place to be, in my opinion.
And if you're a covered call seller, I mean, selling upside here, the market's still kind of hot.
Premiums are still kind of high relative to volatility.
I mean, if you're a call seller, your mouth is watering too.
I imagine yours is Soleil.
Yeah.
And even if you are just in spot and you think, okay, the bull market has run its course, you're not leveraged.
So yeah, you can just sit in spot and you can grid it out through the next bear market if that's what happens.
Yeah.
What do we do?
We drop to 80K from here and you're sitting in spot.
Fuck them.
You just level up 30% of your port into three-year-out call options on margin.
That's what I would do.
That's why I think spot's such a good play here.
But if you move up, if we move up significantly, you're not missing any of that upside.
I just think it's really hard to play leverage right now.
That's something I'm managing outside money, and I'm trying to figure it out, trying to really figure out how to position.
And so I think being conservative right now is a good way to do it.
Conservative, aggressive, but more conservative.
yield curve here obviously you'll see what interest rates bring over the next six months
i think that's really the big unknown and i have a little bit on the jackson hole speech that powell
gave some interesting tidbits i don't think people really know what's what's going on 50 basis point
rate cut i mean i've heard so there's the market's expecting a 25 basis point rate cut in september
i've heard theories that 50 basis point surprise rate cut would be incredibly bullish and i've also
heard it's been it would be incredibly bearish because of you know the indicates a weak underlying
economy i don't know let's cut rates let's get these rates down let's send strife to the moon
that's kind of what i'm thinking and so you can look here and we'll just benchmark uh the credit
spread so obviously stretch the shortest duration strategy pref should be benchmarked off the you
know shorter t-bill um uh risk-free rate so they're trading at about right now a 500 basis point
credit spread, which quite frankly is just insanity. And then you look at something like
Strife, which is a longer duration instrument, it's a perpetual duration instrument, you should
benchmark it off sort of the longer term rates, which are closer to 5%. And so it's trading closer
to a 400 basis point credit spread. That makes a lot of sense considering it's the highest in the
capital stack. Now, if you look at something like strike, which is underappreciated right now,
granted, it's lower in the capital structure. So that's the key. Why is Strife different than the
other prefs? Well, they can't go out, it says in the prospectus, they can't go out and issue
any equity that's senior in either liquidation preference or dividend payments. So,
Stripe will be the top preferred equity, the highest rated preferred equity, no matter what.
All the rest of the prefs, they can slot new ones in any which way. So, I think that's really
increasing the credit spreads, depressing the kind of principal appreciation for those securities.
And when you look at something like Stripe, if you subtract out the convertibility,
let's uh let's actually go to this here so like see this let me switch the tab i'm sharing
window there you go got it if you look here on the strike this is an update
that they made to strategy's website it's the equity component and this is something i think
jeff and i and solan all of us kind of parsed out along the way we were like okay how do you
price this strike thing and everyone's like, oh, well, there's an embedded call option,
but it's far out of the money. So you can't really price it. And the market's discounting.
You can convert strike now if you'd like. I forget who you call, but you call someone
and you can convert your strike. You can't. Yeah. But so like, no one would ever do that,
right? Because why would you do that and lose $50 or whatever? It's $55. You're a fool or $65.
$60. But the point being is you got about 35.8%. 35.8% of your strike holding is exposure to MSTR.
And that's an important part. So, okay, you subtract out 30. It's 35.8%. It's $34. Subtract
out your $34. You're getting like a 13.3% cash on cash yield when you subtract out the convertible
portion of strike, which is insanity considering it's a cumulative dividend.
Stride, non-cumulative dividend. So if the dividend doesn't get paid, they miss the payment.
It's terrible optically, but there's no really recourse by which the shareholders have.
Strike, on the other hand, if they miss that dividend, it starts compounding against them
immediately and they can't pay the stride dividend until the strike dividend gets paid.
And then furthermore, there's a million reasons why I think strike holders will be able to vote
someone in as a board member to make sure that everybody gets paid. There's a bunch of protections
around these cumulative dividends. So the fact you're getting a 13.3% cash on cash yield on
strike, I think quite frankly is insanity right now, absolute insanity, considering the price
of which Stride is trading at. So either strike is cheap or Stride is expensive, or people are
pricing in a drop in MSTR by a strike, which wouldn't make any sense, that would be expressed
in the options market. So we got all of those things working for us.
Yeah, that's wild. That's got to be like voting machine in the short term and weighing machine
in the long term. And the market's got to figure it out eventually.
Exactly. I think strike is like insanely undervalued. I mean, so like, let's say you're,
you want to hold MSTR and cash and cash, right? Well, you could hold MSTR and then hold cash.
but instead of doing that, you buy the package that is STRK, you get 13.3% yield on the cash
portion of which you're holding. You also get the MSTR exposure, plus you get the liquidation
preference, the moving liquidation preference protection. So if something happens to strategy,
if for some reason something happens to the common or this, that, and the next thing,
you have this protection in the case of bankruptcy against your entire package of the cash and MSTR.
So I think Strikes, relative to the common, I think it's an extremely, extremely undervalued security right now.
Granted, they have this Monster ATM out on it that is kind of nerve-wracking.
But, I mean, they have now a Monster ATM right back on the common.
So I think Strikes is a good buy.
Yeah, I still haven't dipped a toe into any of the preferreds.
And I don't know.
I had a little bit of, I don't want to say regret, but I think some of you guys that jumped on it right away rode that quick repricing.
But even when I did the calculations, and I think at current rates, the theoretical ceiling was over $200 a share.
And if rates come down, that ceiling just keeps getting higher.
And there's no reason it shouldn't be trading at that ceiling now, really.
So still early, I think.
I completely agree.
Yeah, it's just weird because obviously we don't look at interest rates.
I never really looked at interest rates for the past few years.
I was just a diehard Bitcoiner.
But looking at the bond price and all this stuff,
when you put it in a Bitcoin framework, it's pretty interesting
just to figure out what these securities could potentially do,
especially now that the collateral base is continuing to be expanded
via the common equity issuance.
It's only going to bolster the credit worthiness of all of these securities,
potentially tightening the credit spread and upping the principal
over long amounts of time.
So, you know, as liquidity develops in these products, like these products are, they're quite meaningful.
I think people underestimate their impact on, they're like, you know, Bitcoin is supposed to be a peer to peer cash.
Why is anyone talking about the press?
These are securitized bullshit.
And I mean, the global bond markets are absolutely the biggest capital markets in the world.
And if you want the money to turn into Bitcoin, this is the conduit by which that can happen.
So, I mean, I think they're a pretty big part of the story and I think they'll continue to be a big part of the story.
Yeah and I kept getting surprised by the new preferreds right So Strike came out I was like okay let digest this let figure it out And before we had even really figured it all the way out they released another one and then another one and then another one And now I just kind of like I kind of anxious I like where the next flavor You know I kind of want to see what they come out with next
Yeah. And don't they have an addressable range? They mentioned it briefly on the latest earnings report. It goes mid duration kind of securities.
Yeah. And there was that big, you know, black space in between, I think it was somewhere between like four and I don't know, 10 ish years on the duration.
Right.
So, I mean, I was kind of thinking because you mentioned rates and maybe the rates will come down and kind of a side note on that. It's like, yeah, if they if they lower rates, then that signals, you know, weakness and the market could tank maybe temporarily. But I think that would kind of just be a repricing event.
But if they don't lower and the market is expecting it, you know, the market might have like a taper tantrum and crash anyway, kind of like demanding that the Fed lower the rates.
So the market's going to get what it wants to get.
But you mentioned the Fed and it kind of made me think about the next product that might come out.
Maybe it'll be a variable interest rate like STRC, but instead of them controlling the rate, it'll just be tied to like the Fed rate or something like maybe Fed rate plus five or, you know, whatever.
Yeah, I think you're totally spot on. And that's a pretty standard kind of product that exists in the market. So I think that's something I need to do a little more research on. Maybe we come up with an outline for what it could be and hopefully we get it right.
Yeah, maybe we'll have a competition so you can guess the next pref.
Yeah, exactly. That'd be pretty cool.
um labor statistics
jobs came in below expectations for july um
okay like uh nothing really new to see here and you know job growth has been slow over the past
few months like this slight weakening this is non-farm payrolls um
uh non-form payrolls no i don't have that here sorry unemployment trends unemployment right here
starting to tick up slight weakness in the economy um you know that coupled with the
jackson hole speech we'll see that i think they're kind of laying the groundwork for justifying rate
rate cuts as powell's on his way out uh especially this kind of weakness in the labor market and the
now that inflation isn't a fixed target it's just to stabilize prices uh we'll see how how that kind
of provides the framework for future rate cuts. Fed funds over time, this is a pretty interesting
chart and I think everyone in their head, I mean, most people who watch this stuff have been through
lots and lots of market cycles. So you have an implicit understanding of where interest rates
have been historically, but for younger guys like myself, it's really important and helpful to go
back and look at where rates have been over time. And you can see the Fed funds rate. I mean, it's
at a historical high relative to the post 2008 period. I think lower rates and we'll see that in
jackson whole speech again um pal specifically mentions that rates will likely come down but
they won't be at sustained lows like they were um during the great financial crisis so uh i mean
this is interesting chart you know pick your poison where's this going and then should you
buy strife and the answer is probably yes what do you think so i you probably know yeah about this
than me you've lived through you've lived a lot more life hey we don't we don't have to talk about
that yeah all the shade all the shaded areas on this charts are kind of interesting too because
every time the the um the yield curve gets inverted we get a shaded area you know aka recession
and it just seems like they have to print their way out of it but you see that little tiny one at
2020 and so i mean the only way we get a soft landing is if they lower rates now and and kind
of make up for that over correction i think that they that they had when they were pumping rates
and basically screwed over the banks,
promising them that rates were going to stay low forever.
And then presto chango, they kind of lied about that one.
And so I need to really learn how to understand Fed speak
because they'll say one thing
and you kind of have to read between the lines
and figure out what they're really going to do
because they might just play the reverse Uno card on you.
um so yeah completely yeah completely yeah so i don't know if that perspective yeah i don't know
if that tiny little recession line at 2020 i don't know if they um if they cooked the books
to to make it look like that was all the recession was or whether we really had just been in a rolling
recession for like two three four years maybe and you can see that the you know maybe we're
recovering from that.
I highlighted a couple points from the Jackson Hole speech.
I'm going to go through them and you can interpret them as you wish.
But I think a few key points kind of start to emerge as you read in detail.
The labor market is a case in point.
The July employment report released earlier this month showed that payroll job growth
slowed to an average pace of only $35,000 per month over the past three months,
down from 168,000 per month during 2024. The unemployment rate, while edging up in July,
stands at a historically low level of 4.2% and has been broadly stable over the past year.
Slowing in both the supply of and demand for workers, this unusual situation suggests that
downside risks to unemployment are rising. This was kind of an allusion to AI. And then downside
risks to unemployment are rising. This is the justification for lowering interest rates. And
And if those risks materialize, they can do so quickly in the form of sharply higher layoffs and higher unemployment.
This is very explicit, saying they're very concerned about rising unemployment in the face of, you know, not materially higher unemployment yet.
Yeah, this case is, there's a way to hop in.
Yeah, I was going to say with that, I mean, the jobs, I that's kind of I don't know if that's just an excuse to lower rates.
But with AI particularly, I mean, I see you put that in the margin.
I mean, it's it's coming for all of our jobs. Right.
Which is why I think when Tad said that, I think it was when he was his first maybe his first interview with Tim.
he said that if ai is going to do all of our jobs better than us you might as well just do what you
love because you don't want to do something that you hate and a robot still does it better than you
yeah like that's that's not a good look for your future um and i think really that's just a good
point to go back to the beginning and realize that we're all bitcoiners and
And what AI is going to do for deflation is going to benefit everyone in the world.
It's going to make everything cheaper.
But if the fiat system is going to put up a fight, then it has to inflate to counteract that.
Otherwise, fiat kind of can't keep up.
So it's just a good reminder that Bitcoin is really the only solution and way out.
And it's the way that we can capture the actual deflationary pricing basically forever.
If you're not into Bitcoin, then you're getting left behind.
And so, Leigh, that reminds me of this clip I posted the other day on the Peter Diamandis Moonshots podcast.
Let's listen to it real quick.
I can't hear.
oh you can't hear um did you share with audio you might have to reshare the whole entire screen and
check the audio box okay let's see share window share tab instead chrome tab twitter share done
so i can hear this now because people are yep it's low
get the general trend and get the general formative trend and then I would pick certain verticals
where you had to make a massive difference and then invest in the companies. What's in your bucket?
Hell no. So I'm trying to put everything into Bitcoin so it's hard to think.
Yeah, you might have to try it again with the volume cranked up.
Okay, that's all. Essentially, they're just saying...
That's the title to go?
Yeah.
okay just recap it then yeah what salim says is or what what peter's asking uh excuse me i apologize
for that failed transmission um what what peter's asking is okay what you know how are you how are
you positioning for the you know riding the ai wave and uh you know he says i get it salim says
i get a basket of of different industry disruptors and kind of be diversified because i don't know
exactly what the winners are, but I want to ride the trend. And then Peter says, okay,
but what exactly are you buying? He says, well, I'm just buying Bitcoin. So that's kind of,
watch what they do, not what they say. So I think that's a important part of the whole story.
So now let's look at the inflation picture. Obviously, inflation was a little bit higher
than expected. And the effects of tariffs on consumer prices are now clearly visible. We
expect those effects to accumulate over coming months with high uncertainty about timing and
amounts. The question that matters for monetary policy is whether these prices increases are
likely to materially raise the risk of an ongoing inflation problem. A reasonable base case is that
the effects will be relatively short-lived, a one-time shift in the price level. Rates are
coming down. Boom. They said it. In the absence of inflationary pressures, it might not be necessary
to tighten policy based solely on uncertainty and real-time estimates in the natural rate of
unemployment. That's kind of protecting themselves. They don't have to prevent.
I don't know exactly what that means, actually. I'm going to leave my commentary out on that.
We cannot say for certain where rates will settle and over the longer run, but their natural level may now be higher than during the 2010s.
They were effectively at zero.
Reflecting changes in productivity, demographics, fiscal policy, other factors that affect the balance between saving and environment.
However, they're kind of, you know, when you're trying to sell a product or something and you put out a price to kind of locate people's,
you may say a crazy price to bring people's expectations to that price and you negotiate down very subtly,
but you've already fixated them on a price that was way above kind of where they initially had
thought you'd settle. This is what that is, in my opinion. They're referencing this kind of
very zero interest rate environment, very low interest rate environment, and then saying,
we'll probably settle above that. But it kind of seems like the undertone is we'll settle lower
from here, but maybe I'm overthinking it. And just the last couple of quotes, the revised statement
reiterates that the committee is prepared to use its full range of tools to achieve its maximum
employment and price stability goals, particularly if the federal funds rate is constrained by the
ELB. Second, we returned to a framework of flexible inflation targeting and eliminated
the makeup strategy. Flexible inflation, this is the thing that's been going on that you've seen
on all the Bloomberg terminals with regards to inflation rate not being pinned to 2% and the
target inflation not being pinned to 2%, but it being kind of a variable flexible target,
grow your way out. This is all kind of seems to be cut from the same cloth.
yeah and just just a reminder for everybody that everything that they say is keynesian bullshit
so they think they can just control the uh the jobs and the inflation and unemployment and we'll
just crank this knob up and crank this knob down and i mean they they literally only have a few
things that they can do they can adjust the interest rate and they can print uh so they're
going to screw it up one way or another. Or even if they do it right, they, um, what's the guy that
always talks about the, uh, the, the way that the world works. Anyway, he always calls it like a,
a beautiful deleveraging or some other kind of ridiculous thing. But, uh, you know, they, they,
they have to print it It just inevitable They think that they think they think they can these things and really they just kind of handcuffed to their to their two or three levels levers that
they can pull exactly we look at the dollar i've never been able to trade the dollar uh with that
much accuracy so i know a lot of people are calling for breaking down with the dollar to help
grow our way out of this uh so any comments on the dollar before i move on
no i don't know i don't know jack about the dollar all right fuck the dollar
weekly Bitcoin gold. Yeah, this is a pretty big chart. I think more people are starting to look
at this. I feel like two months ago, the hot chart was global liquidity of BTC, which is kind of a
manufactured chart because you fit the global liquidity to the BTC price and then trying to
assume where the Bitcoin price is going. And you can really fit a lot of charts together based on
kind of data manipulation. So I don't think that's a be all end all chart. BTC gold, we're sitting
around the 2021 all-time high um 2022 and i mean i don't think you want to fade this chart i mean
we could be topping and it's all i mean big and gold's been on a tear so if gold falls i mean we
could see this expand while we chop steadily higher wait which one is is bitcoin in the
numerator or gold is this is this is btc gold by gold so this is big one yeah yeah i mean it seems
like gold has to go to zero eventually but i don't know maybe a bunch of countries decide to peg to
gold again to try to save themselves yes i think it's a both and i think bitcoin and gold but but
you'd want to see the point bitcoin will continue to outpace gold over a long period of time and if
you look at the btc gold power law we're still sitting along the floor so i think i think gold
is being treated i mean we've seen all the central banks starting to buy up gold buy up gold so the
So I think there's a gold power law too, so no dollars.
Yeah, you can price because it's essentially just a different unit of account, right?
Interesting.
You can price BDC, USD, and we're sitting right along the trend there.
So we have an expected 40% annual CAGR now, decreasing to 30% over the next five years.
But pricing gold, we're sitting right along the floor, the very bottom of that arc.
But I don't think gold recently has been...
you could argue that gold is this represents stable prices but it seems like gold is still
being speculated on so i don't think gold is necessarily or hasn't been increasing at the
inflation rate over the past year is the point i'm trying to make yeah the most annoying um
commercials that i have to listen to on my favorite like libertarian podcasts is like
monetary metals like come on guys buy freaking bitcoin but it's good right like this will trend
up and to the right. And so a lot of people are worried about topping, a lot of people
working on cycles. As long as we're sitting here, I'm super comfortable. I'm very, very comfortable
sitting at an all-time high priced in gold, right? Especially if gold remains strong moving forward,
I think the outlook continues to look positive. Maybe we don't get a blow off. Maybe we get a grind
higher, especially with the interest rate environment we just talked about. They're going
to be cutting for the next year. Think about what happened in 2020. Interest rates were taken to zero,
risk assets mooned and then they did the fastest rate hike cycle in the last two decades
and so obviously btc slammed down there's a ton of leverage in the system and and things melted
down as brutal the macro i think people want to just look at four-year cycles and be like oh this
is going to happen this is going to happen or look at the price or whatever like i think you have to
look at the macro outlook and then you kind of step work your way back to the cycles it's like
okay, well, we're a year post-having, we're over a year, however many days we are post-having.
And the macro outlook, things are getting frothy. Global liquidity is looking to peak over the next
six months. Interest rates are still very high. We've grinded higher. We're still sitting at a
peak in BTC Gold. There's a lot of comfort signals. MNAPs have collapsed across the Bitcoin treasury
landscape. So that bubble has deflated. Credit spreads are incredibly high in Bitcoin-backed
credit it's difficult for new companies to get uh funding for a bitcoin treasury strategy even
though some people have been able to like i mean i just think the top signals aren't there in the
bitcoin market in the same way they are for the equities market right now um but we'll see yeah
and there's you know there's some there's always everybody's got their little theory but um if
you're political at all and you believe that uh you know president trump thinks highly of himself
he might want the stock market to like completely just blow the roof off throughout his presidency
so he can cement his legacy so um don't uh don't don't be short the um the egos of people that want
to put themselves in the history books.
Exactly.
And I think, you know, yeah.
So Bitcoin gold, I think one of the most meaningful charts out there.
CMC fear greed, coin market cap.
This is a couple of days old.
We're now like sitting at 40.
And this uses options data across different exchanges and some other inputs.
I figured exactly what all the inputs are, but this is a great way to, great chart to
look at.
I mean, you can't trade it.
You can't directly trade it, but it gives you a sense if you're overheated.
I think extreme greed is a place you really want to avoid taking leverage out.
As long as you're in that neutral zone, even in the lower greed zone,
really anything could happen.
It's anyone's game.
The market's not pushing you in one direction necessarily.
So that's a good one.
Strike, strike, both taking a beating.
That's a bummer.
I think a lot of people made nice exits, hopefully, around these higher prices
as they started to see this kind of turn around and the etm started to be put online on those two
securities so i hope everyone made a lot of money there and i think we're going to get to run this
back here i'm about to lever up pretty big for the strf uh dividend coming up like big big uh just to
collect the dividend and then um if let's say people sell right after the ex-dividend date i
don't mind holding those securities on on margin i think by those securities i mean specifically
strife you could do this with stride problem is i don't want to hold strive for a long long period
of time if i have to strife right is the only one i will because of the different covenants in the
prospectus um strike atm so i did a little chart here showing the weekly atm issuance on strk
they're marked by these dotted lines those correspond there's little numbers there you
you can't see them with the actual issuance here of SGRK weekly issuance. So it's been pretty
consistent. There have been periods of time during which it hasn't been issued. I'm missing the most
recent one as well, but we're pretty consistent ramping up. It's a high percentage of volume.
If you look on a weekly basis, it's anywhere between 15 and 30% of the weekly traded volumes
issued by ATM. So these are resilient securities. And once the volume continues, if the volume
continues to build which we've seen and the volume is not bad here the volume is still higher than it
was in the winter winter months i think these are going to be you know pretty popular securities and
they continue to be yeah and if we do get the rate cuts it'll be bullish for for these preferreds
which should be bullish for the atms completely yeah i mean can you imagine you have 50 basis
point rate cut well i mean these are professional yeah i mean i know luke grumman's got a lot going
on he's like and viscer's talking about this as well it's like what if we see you know fed funds
rate cut but then the long end of the curve goes up right with like anticipatory inflation
expectations like what if the 10 year doesn't come down or the 20 year doesn't come down
i mean that possible that's a real possibility this is extremely bullish for stretch which is
the short duration so that's the crazy scenario so late and we should talk about that right now
and i'll put the stretch price up just so we can ponder on it 50 basis point rate cut in september
august 31st the dividends increased on by 25 basis points on stretch because they they're
trying to push it up to par as quick as possible so i mean your short term you're probably like a
four so you're at close to a four percent you know month t-bill rate and stretch is paying 10
10%, right? 600 basis spread. I mean, come on. And it's trading up and it's at par.
If those two, that could be the perfect storm to stretch down and thinking about it.
I think we got to lever up.
Yeah. And I was talking on my stream that I was excited for the next prep to come out
and somebody had to check me in the comments. They're like, can we get STRC up to par first
before we release another preferred? And I was like, okay, yeah, you got a point there.
and maybe that's what they're doing like maybe they're just ready to to release it and as soon
as they get it to 100 maybe that's the uh the starter's pistol for the next preferred yeah i
don't think i think stretch is their winning horse here so and they just gotta they gotta get that
thing up to par because people don't want to fuck around with it below par right now because they
know it it's going to be difficult for them to stabilize it it needs to get to par the liquidity
needs to build and we need to see how they respond to the current pricing via a change in
coupon rate. When the coupon rate is announced, it must be the business day closest to the end of
the month, but the change in the next month's coupon interest rate will be announced at the
end of this month for the next month. And the ex-dividend rate, the date at which you have
to be holding the security is recorded on the 15th of each month. Those are very important.
So for example, if the dividend rate is increased by 25 basis points for next month,
September and you're holding it by September 15th, you get that dividend payment even if you sell it
after that point in time. Stripe ATM, much less aggressive than strike. That will be a continued
theme. We can talk about Bitcoin ratings later. Stretch price, very limited amount of trading
days. Lots of green recently, which is very cool. We can see volume is much higher than the other
press. I think volume will continue to be very high. Stretch mechanism. So I got this wrong.
there's an optional redemption so strategy is able to redeem the stretch token at 101 per share
which should put kind of a gravitational force um around that price able to stabilize it up around
100 and um you know bonds a lot different than kind of atm mechanisms so like that redemption
tends to put a ceiling on the price of the bond so 101 kind of you know this is the the targeted
ceiling and that's upon the um what do you call it uh the decision of strategy strategies able to
redeem at 101 strc whenever they they deem it fit now you can also look at the atm atm issuance
there's no regulated price at which they can atm they can atm at any price um they don't have a
hard floor uh but they're able to excuse me they're able to to issue atm above the 100 floor and um
yeah i forget exactly this the specs here so
so there's no hard floor but they have a mandate to keep it between the 99 and 101
um and so you know atm likely won't occur below 99 because it optically would be
Yeah, that makes sense.
But we can expect ATM to happen between 99 and 101.
We'll be tracking that on a weekly basis.
But there's no hard kind of cap on the ATM price at which they can sell.
This allows them to algorithmically manipulate the price on an interweek basis.
Right now, there's two levers at which they can pull, right?
They can pull the monthly dividend rate change.
That's how they can manipulate the price of the security.
They can also redeem at 101, and they can issue ATM at any price.
but um you know they're going to use that to their best ability uh strike redemption there's also
redemption clauses if you know the number of outstanding strike falls below 25 of the initial
issuance but that's all like classic press stuff anything there so i i rambled through that but
no no keep going all right right on s&p inclusion dates uh this is important so the
The committee decision will be announced on Friday September 5th 2025 and the actual inclusion will be effective September 22nd So that the third Friday So what is that The first Friday in September is the announcement
and the third Friday is the change has become effective. The open on Monday after the third
Friday of September. If anyone's curious, if anyone's looking to gamble, I don't think that's
going to happen. I think that info gets leaked and the market doesn't seem to be front running it.
So I'm not a betting man, and I'm not betting on that.
Yeah.
Is there a betting website?
Is it actually on there?
I wonder if anybody's on there.
Yeah.
Is it really?
I haven't looked.
That would be actually an interesting data point.
We should look that up.
Don't they always, aren't they pretty reliable?
Like, didn't they predict the election results and all that good stuff?
Like it was actually more accurate than the polls?
Yeah.
Leading into it.
I bet you feel the same way about the polls I do.
But I mean, they're also saying 62% chance Bitcoin goes below 100 between now and the end of the year, which I mean, I guess that's probably the right percentage.
I mean, I would put it at a coin flip.
So yeah, I guess that's fine.
And also I think people forget like when it comes to financial securities prices, there's all kinds of hedging that goes on.
Like there may be an arbitrage between taking that bet, going long that bet, or going short that bet in some options position over the next six months.
So I really don't think those are as reliable as people would like them to be.
Like if the options market has a different probability, then theoretically you could close the spread between those two kind of different wagers and there'd be the kind of mispricings.
But maybe those get arbed out and it is accurate probability representation. I don't know.
Yeah, and I guess we still got some Bitcoin whales that are big enough to, what, a weekend or two ago that somebody sold a bunch and crashed the price.
So I guess there can be some shenanigans going on.
Yeah, I'd probably be buying, like, if we go down to 90, I mean, I'd be buying two-year-out calls.
I would totally change the strategy.
Yeah, I would be buying, like, really, really long-dated stuff.
Because then we could, you know, we could see, like, six months of, like, I mean, right now we could see six months of brutal disaster.
but if something goes like anything below 100 i mean you just want to be levered long over a really
long period of time but if you're like at 130 140 150 160 170 you got to be kind of more Nash
equilibrium like this thing could blow off but like i don't want to be holding i don't want to
be sitting in two-year calls at 180 bitcoin like that's just yeah i got excited for for power law
when i first saw it and then i kind of had a little bit of um second thoughts about it um
but one of the more interesting ones that i heard recently it was like i can't remember if it was
exactly called like fair value or something and it was based on the the price that bitcoin should be
at for miners to actually make a profit since they're the ones that should be setting the market
like they can't operate if they're not at a profit and this guy was saying you know bitcoin should be
at 320 right now so that's bullish but you know who knows like all the models are how does it go
all your models are uh destroyed not exactly well not destroyed but um i mean i say that too but
it's like they're uh useful but they're not all 100 accurate completely completely yeah no this is
a human this is a human phenomenon at the end of the pricing and security pricing commodities
is based on the market participants.
So, and they're on.
Yeah.
And the market's irrational as fuck.
So that's not going to change anytime soon.
Look at dividend, looking at dividend liabilities here right now, there's, this is a bit off,
but there's just over 600 million annually in preferred equity dividend liabilities.
I did a little rough math.
If you were to clear out all the converts and issue the same blend, the same blended
percentages of each of the common to replace the converts and get you back up to that about
20% leverage ratio, you'd be looking at about 1.4 billion of annual dividend liabilities.
Kind of seemed like a lot to me, but I get that that's a small percentage of the daily or
weekly traded volume. But I was like, ah, the market's not going to like that one.
1.4 billion in annual dividend liabilities covered by the common ATM. So we'll have to get some good
good messaging going out there. But I mean, that's why I do love the idea. It's like, what if you
just raised common, you just slammed the common ATM one week or two weeks, you know, you get that
1.4 billion and be like, yeah, we have our dividend and cash reserve for the next year.
Like, please don't bother me. When we, when we weren't having a, uh, an episode tonight,
I was actually going to share the Preston Pysh interview that he did most recently just came out
today, I think. And he was saying, you know, one of the things that you have to remember
is that unlike the convertible bonds, these preferreds don't have, they don't have to pay
the principal back, right? So the, you know, one or $2 billion worth of Bitcoin that they bought
at the initial offering, it's just on the balance sheet forever. And they don't ever have to just,
you know, they have to pay the dividend, but they don't have to pay the principal back.
Yeah, exactly. It's a perpetual short USD long BTC position.
It's pretty incredible.
If you're a real Bitcoin believer, then I mean, this is exactly,
it's an infinite duration bond,
which they're able to meet with kind of just the volume and the common.
It's pretty crazy when you think about it.
They're going to be a massive, massive company.
And then, oh yeah, the, let me stop sharing and open up my last.
i wanted to give people a sense of where kind of a overall pref market cap could be
because it's hard to quantify like we're talking like oh press could be successful and people like
okay cool like what does that even mean and but you got to put it in numbers i think and look out
far so i've got a you know 40 decreasing to a 30 kegger in bdc assumption and an assumed constant
mnav of one six these are just assumptions like don't don't you know nail me to a cross because
of because i said one six i'm never whatever um assume bitcoin prices i have like a little bear
market scenario i just did for myself in here but i say okay so based on your assumption of mnav and
bitcoin price and you have this constant consistent running 300 million scaling up to
a $6 billion monthly ATM usage, which isn't totally fine, but it's a monthly ATM percent
of the market cap. I use conservative numbers historically, and that's how I set the common
ATM usage. So common ATMs consisted throughout here. You've got Bitcoin price, Bitcoin amount
of Bitcoins. The real thing is the target debt ratio. So right now, the target debt ratio
is give or take at a 30% debt to equity ratio around $17 billion. Right now, these are all
old numbers, we're sitting, you know, 14 billion, roughly, we're sitting in low teens of actual
debt, that's both converts and prefs. But if you run this scenario out, and just keep the MNav
constant, keep the ATM running, and you try to and you keep the Bitcoin price increasing, you try
to meet this 30% debt threshold, how big does the preferred market cap get? That's the real question.
How many of these preferreds are out there, if they can just continuously meet this 30% debt
leverage ratio. And if you get out to 2031 and the price of Bitcoin is 500,000, 600,000, call it,
let's just use here, 500,000 at the end of 2030. And that 30% leverage ratio is about 200,
I think that's million. So you're looking at a potential market cap of all the outstanding
perhaps if they maintain this leverage ratio of 175. Sorry, that's billion. So 175 billion, right?
Like that's nuts. If the preferred market cap is 180 billion in 2030, these things were a smashing
success. So it's just a matter of how quickly that could have developed across those products. But
I mean, I don't think there's a reason why this couldn't happen. And this would
drastically change the landscape for Bitcoin, for bonds, for US denominated, you know,
for government-issued securities across the board.
This is really a pretty crazy thought experiment,
but also a reality.
Yeah, and that's another thing that Pish mentioned
was this market was, is it 100 trillion, 300 trillion?
It's a bunch of trillions.
And it's usually, what is it going to be like,
win or take most.
And there's going to be a bunch of people
that follow strategy into this market.
but um you know strategy is the first mover and they're going to have the highest percentage
of of whatever those however many trillions that is and by 2030 however many hundreds of
trillions of dollars it is that'll probably double by then so it'll just be a the dominant
slice of an even of an even bigger pie you're you're muted you're muted yeah completely i totally
agree um totally agree yeah i think we i had it's strife it was in the uh it was in our thumbnail
i want to let everyone know yeah i um i mean i'm i've got a bunch of chips on the table hoping for
one more pump so um if it doesn't happen it'll be kind of brutal for my portfolio but i have the um
at least I can console myself that all of the longs,
all of the leverage that I purchased was funded by the short calls that I sold
in the first place. So even if those all expire worthless,
it was basically just all the money that I, uh,
that I made for myself on the, on the covered calls to begin with.
So it'll just be a breakeven moment for me.
Completely. Yeah. No, I mean, it's, it's really hard to know right now.
It's not 2022, 2023, 2024 anymore.
so it's the end of 2025 yeah and the and bitcoin loves to like okie doke you like as soon as you
think you see a pattern and it's like oh yeah i see the i see the code in the matrix it's like okay
for your cycles and then everybody thinks there's they're real you could say that it's a self-fulfilling
prophecy but then maybe everybody gets surprised and maybe we get the super cycle that everybody
wants or maybe we get an early bear market and who knows maybe the fed screws up the whole situation
but i don't see that happening it seems like rates got to come down and that's just bullish
yeah yeah i agree but uh you know who knows could be priced in here so i think you gotta
tread lightly but carry a big stick yeah we um we covered everything on your agenda
anything else you want to get off your chest that you just couldn't wait three more weeks for?
No, I'm glad we did that. There's important stuff going on. I know it's end of August, but
it's important to keep momentum through the fall, whatever happens.
Oh, yeah. And I mentioned that, you know, the whole point of this is to try to get some signal
for investors because, you know, Jeff saw what happened with the GameStop trade and how
much just bad information was out there.
And so there's that.
But then I think we're also kind of like
a little bit of a litmus test
for Bitcoin treasury companies themselves.
And we're going to be highlighting things
that we think are good
and things that we think
are maybe Bitcoin treasury companies
shouldn't be doing.
So hopefully we'll be informative
for the BTCTCs themselves.
you got any final thoughts or should we uh should we wrap it up i mean let's wrap it up
hell yeah thanks everybody for jumping in on our impromptu session and thanks to dan for
just being in the lab and pumping out a bunch of research for us and making us not wait another
three weeks thanks for listening guys that was good thank you guys y'all