People that use fiat currency as a store of value, we call them more.
We call them more.
People that use fiat currency, we call them four.
There's a name for them.
We call them four.
okay the point is if if you have the superior asset it's going up forevermore
right i mean right but i mean we should all
here we go welcome back 2026 true north the investment grade bitcoin podcast episode 50
Let's get everybody up on stage. We are back. We are going to hit it hard. There's so much to talk
about. All right. Is everybody refreshed from a little bit of time off? I can tell you I am.
I'm ready to go. There's a lot to be excited about here and I'm excited to talk about it.
So welcome to... Let me see if I get my screen off. Maybe not. There we go.
Okay. Welcome back, everybody. Here we go. We call them poor.
Okay. True North, the investment grade Bitcoin podcast. This is a podcast about Bitcoin and how
it's infiltrating the financial markets. We talk about all things Bitcoin. We talk about strategy.
We talk about Bitcoin treasury companies. We talk about securitized finance. We talk about digital
credit. We talk about digital capital, how it's all getting integrated into the market. And then
we also talk about just general macro environment and finance. So this collective crew we've brought
together. We've been talking about this for about 65 weeks in a row now and excited to get back to
it for 2026. Thank God we made it through 2025. What a crappy year. We made it through and
congratulations to everybody for making it through. That was a terrible year. However,
every setback is a setup for a comeback. And a lot of this episode is to talk about everything
that's going on in this market environment. We're talking about what is the outlook for 2026? And
what is potentially on the horizon here in the digital credit environment for Bitcoin and the
infrastructure that sits behind it? I think there's a lot going on. We'll talk about macro
environment with Dan. He's got a little bit of a presentation. We're going to do a macro speed run.
We're going to get into the PREF landscape. Effectively, what is the status of the
perpetual preferred equities. How have they performed since they were launched? What is the
environment in which they've had to operate in? We'll talk about maybe some pension funds and get
into insurance companies and strategic finance. What's happening on the back end? How does demand
change over time? And then we'll talk about 2026 and the horizon. Maybe we'll make some
guesstimates on how much Bitcoin MSTR is going to hold at the end of the year for 2026. And maybe
maybe some Bitcoin estimates for what kind of performance we're going to see throughout the year.
And thank you. See everybody in the chat. Thank you for popping in the chat. It's awesome.
And yeah, please let us know where you're from, what you're up to. And yeah, let's get cooking.
Mike is fuzzy. Can you guys hear me now? Better? Yeah. Okay, cool.
All right. Well, let's jump right into it.
STRC had a fantastic day.
So we are...
STRC is at a price of $99.
It closed at $100 even.
We think there was a significant amount of capital that was raised today
as STRC was bouncing right at par.
So exciting day on that front.
And let's just jump into it.
Maybe we'll pass it over to Tim.
Maybe we'll do a round circle.
Just what are you guys thinking about right now in 2026?
What are things that are top of mind?
And yeah, what's going on with you guys?
Let's pass it around.
Well, number one, what you're about to hear may be amazing, but it's not financial advice.
Oh, in real life.
It's for informational and educational purposes only.
It's still not financial advice, even in 2026?
yeah maybe 2027 i don't know but uh i think digital yeah i think digital credits the theme of
of the year uh you know if 2025 was year zero as you've said jeff then 2026
mathematically it's got to be year one that's all i got yeah it's uh it's about a year old and
you're interviewing everybody in the entire market to talk about this stuff so a lot cooking keep on
keep up the good work. Mason, what are you thinking about? What's going on in Brazil?
Just a state of the market. What's going on? You did a stock buy.
Yeah. Yeah. We're, can you guys hear me? We're, we're doing share buybacks at Melius and it's
exciting, you know, increasing Bitcoin per share by any means possible. So we're about 40% through
our goal, which is 10% of the free flow. That's the advantage of having a cash flow in business.
We're able to take our cash flow and buy Bitcoin or our stock at any price. So actually,
it's a little counterintuitive. As Bitcoin goes down, our Bitcoin per share goes up,
or at least our projections.
So we're feeling good.
We're feeling strong and excited for the new year.
Heck yeah.
Great work.
Great work, Mason.
Over to you, Dan.
Let's go, Mason.
Launch a buck token.
We got a treasure of a new preferred equity token,
preferred equity backed token.
That's exciting.
What's on your mind?
Yeah, I'm super, super excited.
We launched yesterday, January 6th,
then we already have a million dollars of total value locked.
The token is our Twitter's buck token.
But our treasury earnings come directly from our stretch holdings, SDRC.
And I think it's going to be just a great sort of product built on top of the prefs
and a really good way to bring these equitized Bitcoin products, stretch in the preferreds,
to the broader market that's crypto native and isn't necessarily in the US.
Bingo. I love it. Off to a hot start. I mean, this is how this stuff scales, right? People find out
because these products have such a high yield, you're able to build within them, right? There's
such a big delta between the risk-free rate, you're able to create an entire business model
that fits in between with the delta of the yield. So super exciting. It's effectively the digital
money concept that Saylor talked about in Abu Dhabi and you're up to market with it.
So cool. Congrats. So excited. Thanks for the support, guys.
Yeah, 100%. So late, what's going on? How many episodes are into the Orange Pill
Investor podcast are you? You're still ripping it. 546.
Just relentless execution just every day. And you're building up a Noster.
We've got more spam wars here in 2026. You're leading the charge there. What's on your mind?
Yep. Every day is an all time high on the number of episodes.
Yeah, I can't stop, I guess, talking about spam wars. I think quantum FUD was probably a distraction to take people's minds off of spam. But there's good news. We got a BIP 110 proposal that may move a solution to the base layer.
there's some extreme suggestions out there it's called the cat which would actually freeze
some of those uh spam transactions um but i think that the uh the benefit of something like that is
more just to put the fear of god into the spammers so hopefully nothing that drastic would need to
take place all right all right keep on keeping on stay on top of it over over to you grain you you
made a book uh ai you're building apps look at you look at you go so proud of you
Thank you. Appreciate it. Okay. So, so, so one of the interesting parts that I'll,
that I'll, that I'll talk about. So where do I see 2026? I see it being positive. I think every
year builds and gets better. We learn more and more. You know, what I did recently, look, I wrote
a book and what I'll tell everybody, the book itself wasn't important. The important part was
I completed a project. I said, I wanted to write a book. I wrote the book. I published it. It's on
Kindle, you could download it, didn't sell a lot of copies. That wasn't the point. What I wanted to
do is I wanted to compress that book. And I did a video in eight minutes, you could run it in 2x
speed. And you can be like, wow, okay, now it's four minutes. And I'm like, that's not good enough.
So I compressed the book down to a post. And that's the post that went viral. And it's a little
bit over 5 million impressions. So from that perspective, you would ask me a week ago,
do you think that I could write a post that can do 5 million impressions?
Absolutely not.
I'd say possible, but 5 million never.
And so what I did was I kind of wrote a tweet that means you don't have to buy my book.
And that's the point I want to get across.
You just have to think about exactly what Mason just said over there,
was that they're buying back shares in order to increase the amount of Bitcoin per share.
That's an important takeaway.
And then I think what Dan is saying is incredibly important.
What he did, congratulations, Dan.
I'm proud of you.
I mean, where we were literally a year and a half ago, I don't think anybody could have predicted this.
And if I had a real Coke, I'd crack it open here.
But, you know, Dan, congratulations.
The concept that digital credit would be invented, it would go live, and then there's companies that are now building a token on top of that to give double the yield of U.S. treasuries.
I never thought that was not on my bingo card.
Yeah, that was my bingo card.
So what am I seeing?
I think that everybody's going to continue building this in here.
Got Mason that's flying down to South America, right?
I mean, yeah.
I mean, look at everything we did in the last year and now we're just getting started, right?
This is year one.
Let's put our foot on the gas.
We can build on this stuff.
Everybody's working hard.
So good, good stuff, Mike.
Over to you, Adrian.
Are we going to get some more lessons on quantum or we'll just dispel the FUD and you can be
the teacher.
everybody can drop out of that class and you know we can have some giggles here in 26 too
yeah um no i think 26 is always to be a good year um the quantum flood that was at the end of the
year was a little bit strange um but you know it pops up every three months and i do what i can to
try to spell any of the nonsense whenever i see it um but you know i've been watching stretch pretty
pretty closely i think that has um potential to be something really really successful i think it's
already has been successful and i think a lot of people have been kind of clamoring for it to fail
but it's been holding steady and it's been holding the peg and it's been attracting a lot of attention
so um especially with the project that dan's working on and there's just a lot of stuff going
on in the space right now that we've been before seen six nine twelve months ago so i'm pretty
interested to see what happens in 2026. i'm not gonna make any predictions other than i don't
think that we're going to see the continuation of the cycle in previous years i don't see like an
80% drawdown in our future or another, what, 40% from here, whatever it is.
Yeah, I don't see that happening. Very curious to see what happens with AI, very curious to see
what happens with Bitcoin. Want to know if we're gonna have any movement on the SBR finally, maybe,
hopefully, potentially. But besides that, yeah, no, really curious to see what the year's gonna bring.
Awesome. And look forward to it. I know you've got some analysis. Maybe we can get into it later
the stream. We were looking at ATM as a percent of total volume over 2025. I was doing some
analysis earlier. It looked like strategy traded about $1.2 trillion worth of volume in 2025.
That's not right. Yeah. I don't know about that. Yeah.
Which is just a staggering statistic, right? Just $1.2 trillion in volume throughout the entire
year. So totally crazy. Let's jump into, let's start as we have almost every single stream,
walking through the statistics of the strategy balance sheet because they are the leaders here.
They've got 673,000 Bitcoin. I'm going to share my screen and then we'll jump into Dan. We'll do
a macro speed run and talk about the landscape of the market before we get into other things.
That works for you guys. Also, apparently we've got some like choppiness in the audio,
some lag on the stream. Yeah, people are saying this only on YouTube. So if you can join on X,
on my own. Join on X if you can. We've just got too much alpha, right? Too much alpha on here where
it's making the audio choppy. You know, it happens. Okay, let's get into it because I think
this is a fantastic story. You know, one thing I've reflected a lot about here in the last,
I don't know, a couple of weeks is just thinking about what's happened over the last year.
and how has the strategy balance sheet changed and in what perspective am I looking at?
Is it, am I looking at a fiat perspective? Am I looking at a Bitcoin perspective?
Is the story better than it was a year ago? How do I feel about the balance sheet? Is it healthy?
What's the market look like? And so I'm going to run through this here. So maybe I'll hide this
for a moment. So compared, so as of today, January 7th, 2026, strategy holds 673,000 Bitcoin on the
balance sheet. Bitcoin price as of when I did this about 91,000. So the assets held on the balance
sheet is about 61.5 billion. The strategy price is $162 per share. The USD reserve on the balance
sheet is 2.25 billion, which is massive. That's increased significantly just over the last couple
of weeks. They've effectively got enough cash dividends to pay two and a half years worth of
dividends, which is just an insane statistic. Then we look at the debt on the balance sheet.
So the debt is about 8.2 billion compared to where it was last year. It's up about,
what is that? One, about $900 million. Preferred stock issued 7.9 billion.
So if you look at the net capital, the assets less just the debt on the balance sheet.
You're looking at, actually, hold on, that number is wrong.
That plus that.
The net capital on the balance sheet is $55.6 billion.
You take $61 billion plus $2.2 billion of USD.
If you just subtract all of the assets, less the debt, you have $55.6 billion.
This is up 63% year over year.
The Bitcoin held is up 51% year over year.
Bitcoin is down, what was it, 5% year over year. So a massive change there. Annual preferred
dividend payment, $831, net capital years of dividends. So if you're just to take
that $55.6 million figure and divide the $831 million of annual PREF dividend payment,
That's 800. They can pay the dividend for 72 years. Crazy statistic. There's not another balance
sheet on the planet that has enough capital to pay their debt obligations for 72 years. That is
an insane statistic. We're talking about the year 2100-ish. If I'm around, that would be awesome.
You know, it's just so far from now. It's hard to fathom. Then you look at the debt ratio. So
effectively the leverage ratio. And the leverage ratio has gone from 18.2% down to 9.7%. So the
leverage ratio is actually down 47% year over year. So you're telling me they increased the
Bitcoin held by 51% and the leverage is down by 47%? That's a healthy balance sheet. That looks
that looks incredibly healthy. If you denominate your view of this world in Bitcoin, you look at
the coverage multiple. Well, the coverage multiple is down 31%. You've gone from 5.5 down to 3.8.
But what's going on there? Well, they've issued the perpetual preferred equity. The perpetual
preferred equity is so unique because that capital investment comes in the door and they
have a dividend obligation, but they never have to pay that capital back. There's no maturity.
So that's permanent capital held on the balance sheet to pay that interest obligation. So that's
why the amplification figure is different from the leverage figure. The leverage takes into
consideration debt that has a maturity that they have to pay back. So when you look at the balance
sheet, you're like, okay, the Bitcoin held is up 51%. The amplification is actually up 40%
and they've reduced the cliff maturity on the balance sheet, that's a great story.
That's a healthy balance sheet. And the Bitcoin price for the assets to be worth less than the
debt, that's gone from $16.9,000 down to $11,800. It's got to go down, which is a 30% decrease
year over year. So the percent drawdown needed for the assets to be worth less than the debt
on the balance sheet would be an 87% drawdown. I like the story. It looks really good.
So let's take a peek.
to one. And everybody's like, yeah, so strategy, their leverage is 10. No, no, no, no, no, no, no.
They have, it's the flip side of this. I have yet to figure out an easy way. I've tried explaining
this multiple times, but this ratio is the exact opposite of what everybody thinks.
So what they're saying is, is that they have 90% of all their assets. There's only 9.7%
that is the actual debt, which is the exact opposite of way leverage is typically discussed.
And that's why this doesn't make sense to most people because they're like, oh yeah,
it's pretty close to like putting 20% down on a house. Now, this would be the equivalent. If you
went to go buy a million dollar house, your down payment would be $900,000. I mean, if you're buying
a $500,000 house, right? A $500,000 house, you would put down $450,000 as your down payment.
and only 50 grand of that would be your debt.
Nobody does that.
That's the strength of the balance sheet, right?
That's the strength of the balance.
And it kills me that I can't figure out an easy way to get that across
because your metrics are correct.
Yeah.
When you think about yourself, right, like with a house,
If I had a $500,000 house and a $450,000 down payment, your question becomes, what's the probability that I go bankrupt and I'm not able to pay the debt on my balance sheet?
It's like, I'm going to figure out how to pay this interest payment.
I'm going to be able to figure out.
It's not hard.
You can figure it out.
And when it comes to this idea of fractional reserve banking, that Hal Finney quote talking about Bitcoin as being a settlement layer for banks, which issue their own paper currency backed by Bitcoin with different amounts of reserve ratios.
In 1929, during the Great Depression, we were still on a gold standard, but the US dollar was only backed 40% by gold reserves.
So in what we consider a gold standard era, there was still more outstanding US dollar fiat liabilities than there were reserve assets backing those liabilities.
And this is the exact opposite, right? There's 20% outstanding liabilities or perpetual preferred products or some form of outstanding yield bearing instrument relative to the 100% or 20% relative to the entirety of their collateral asset, which is no longer gold like it was in 1929, but Bitcoin in this case.
So like, I think you would be wary if their outstanding liabilities exceeded their total reserves, but that's normal for a bank. So we're just playing in a completely different playing field. And like my thinking is, I think someday, maybe 10 years from now, there could be a world in which strategies preferred equity outstanding actually matches their total Bitcoin assets or some hybrid fractional reserve banking, like some sort of hybrid fractional reserve banking situation going on.
especially if they're lending their Bitcoin or getting some sort of payment on their Bitcoin from JP Morgan or something.
I don't know exactly how that works, but I think we're going to see over time higher and higher amplification ratios as the volatility comes down on Bitcoin.
And as more and more institutions start issuing products that are built on top of this reserve asset Bitcoin.
Completely nailed it. Completely nailed it.
As the volatility reduces and the balance sheet grows, that amplification ratio can increase.
Because what you're effectively doing is underwriting Bitcoin.
You're underwriting your ability to pay the dividends into perpetuity.
And you know what?
I did a little bit of analysis on this.
Maybe it'll make sense at some point to go back through this kind of calculation that I did on what if you just had this model and you just sold the dividends in order to pay the dividend.
payments and you didn't even have access to an ATM, the model still works. The model is still
very interesting if you just did this without access to an ATM to potentially pay dividends or
other capital markets activities or cashflow from your operating business.
So one thing that I wanted to put this into perspective, which is just,
it's just so fascinating, right? Just a little bit ago, I talked about how strategy traded about
$1.2 trillion in 2025, which is just massive amount of volume. And the question that keeps
coming to my mind is like, why is this stock so liquid? It has been a top 20 publicly traded
equity by volume since October of 2024. Okay. It's the 215th largest publicly traded equity
in the market. Yet today it was the 15th largest by volume. What's going on there? Like I've been
trying to wrap my head around it. I think it's primarily because it's backed by Bitcoin, which
is just this hyper liquid asset. And you've got this huge derivatives market that's built behind
it. And you've got people that are hedging the Bitcoin market in the MSTR derivatives market.
You've got all of these different components that are brought in here. And Adrian, I know you've got
some multivariate correlation statistic analysis on this. And maybe we'll hop into that. But
one thing I wanted to point out. So what I've done here is I pulled all of strategy's
perpetual preferred equities. I pulled their notional amounts, the shares outstanding,
and the annual dividend amounts. So the current annual dividend is $796 million for the five
perpetual preferred equities that are outstanding. Today's trading volume was $4.5 billion.
Today, $4.5 billion of strategy stock traded hands today. That's 17% of the volume today.
Okay. So now what's the quarterly dividend? The quarterly dividend is $199 million. That's 4%
of today's volume. What's the monthly dividend? Okay. The monthly dividend is $66 million. That's
about 1.4% of today's volume. If you were to break it down by trading day, so divided by 250,
I think it's right, divided by 250, 250 trading days in the year. That's $3.1 million of capital
that they would need to raise per day if the volume were to stay around the same, about $4.5
billion. So it's 0.07% of the daily trading volume. Okay. So it's hard to wrap your head
around that so i came up with a an analogy imagine you go to a college football game and there are
10 000 people there and you need to convince seven of those 10 000 people to drink a beer
how many people would you have to walk by in order to get seven beers drank you probably do it in a
row you go down one row you'll be able to convince seven people to drink a beer like that's that's
how little this is like seven out of 10,000. You could get it done with one guy.
You probably could. You probably could. It's probably Dan to be honest.
You can put them down. Um, so you know, just the, the, the relativity there is just so,
it's just so small. And you think of the, the yearly, the yearly traded volume, like 1.25
trillion gets 796 million part of 1.25 trillion yeah they're probably gonna figure it out
they're gonna they're gonna be able to find a way to pay this and even even if they had to sell the
bitcoin like that that still works bitcoin trades 60 billion dollars a day it's the most liquid asset
on the planet it's crazy um adrian i'm gonna kick it over to you because i know you feel strongly
about this and you you think about liquidity you've been doing analysis on this like what what
What are you thinking about?
So where should I start?
I don't want to speak about this in a way that's going to lose people.
So let's try to use the simple analogies that you've been using.
One of the things that has been a persistent kind of talking point has been the ATM is driving price, right?
The issue shares is driving the price down.
So what I did is I've been doing this for about a year and a half now, and the analysis has been built out.
What I've been doing is I've been watching the ATM issuance.
I've been trying to model this statistically to figure out, can I see a clear correlation between
share issuance and price activity, right? Very, very simply. And to do that, the first thing I did
was I just took share issuance, kind of like what you did as percentage of volume, and I wasn't
seeing anything. On any given issuance, there's something between like one to 4%
percent of the the overall trading volume and on the high time so like in october and november 2024
they went up to like seven percent at certain times but the thing that people don't understand
is that the atm is a function of volume it is is something that's market driven it is not as if
they're just going to be issuing shares when there's no demand for it right so it's a function
of demand so then i have to think through well what is actually driving price action and to do
that i started modeling bitcoin i started modeling in options activity then i started modeling in
what i like to call sector rotation so all of the different bitcoin miners and then i started
modeling modeling in the etf impact and the impact of another bitcoin treasury companies
and long story short there's a way that you can attribute a percentage of trading volume and
activity if you have the appropriate data set and the appropriate sized data sets and over the
appropriate timeframes. So essentially what I've found is that over the last year, probably more
accurately over the last 14 months, the options market has actually been driving price activity
just as much as Bitcoin, if not more than Bitcoin at certain times. And when I say certain times,
I don't mean like a week or two, I mean for like months. So to feed into what you've been saying,
why is this equity so liquid? Why is there so much trading volume? It's because people
are using strategy as a way to place various bets on Bitcoin. It's become a proxy for Bitcoin,
not just in like a beta play, but it's also a proxy for Bitcoin in the sense of how people are
playing Bitcoin in the market. The reason why we didn't have like an alt cycle this last year
is because a lot of it was sucked up by the Bitcoin treasury companies. And also a lot of
that interest was sucked up by the strategy options market and the overall interest in strategy.
So what we've been seeing is people that are playing strategy and there's a strong, strong
correlation between the options market activity and the price activity we've been seeing in strategy.
So the tune of something like 25% of price variance can be explained just by the options market.
And I modeled that out using delta exposure. I modeled that out using open interest. I modeled
that out using gamma exposure. I modeled that out using put call ratios and I also modeled it out
using the spread between open interest on a weekly and monthly and quarterly basis to see if I can
cleanly identify when the market was moving and the correlations are stark. And it's not a matter
of correlation here. It's a matter of attributing. Pause there. Pause there. Pause there for a second.
I'll pause there for a second.
What Adrian is saying, if I were to summarize this up,
is that the option market open interest had a higher correlation
to the change in strategy price than ATM issuance.
To the tune of option open interest is around 25% correlation
and something like the ATM issuance was 0.15% correlation.
Yes.
Keep going.
Yeah.
And to test that theory, I also modeled out ATM issuance
using all of them. So I went through the 8K filings and I manually tabulated all the different
ATM issuances. So that was in 2025, this in 2024 to 2023, and a little bit of issuance they did in
2022. And I modeled it all the way back to the BSE era. So the Bitcoin standard era was, what was
that, August 20th, 16th, something like that, whatever it was. And I modeled it out using
trading volume as a proxy for ATM. Now, why did I do that? And why did I do that first before I'm
moving into the options is because I need to cleanly say, is the ATM impacting price? And by
impacting, that means not that it's driving price, that it can actually be seen in the data,
and it's having a sizable impact on the way the price is moving. The challenge with it is,
is that I had to do it in a way that the ATM will still show up in the data So first I had to test for that which I was able to find that even if it was a small amount it was still showing despite the fact that i had 50 other variables
so that tells me that i was modeling it correctly it wasn't getting lost in noise i was attributing
everything accurately and then on top of that i had to say okay so now that i've attributed it
accurately how much price action is that actually driving going back to 2020 it almost disappears
it drives down all the way to zero which makes sense so then i went to 2022 then i went to 2023
then i went to 2024 and 2025 and that's when it started showing up in the data and at the highest
peak so that's in no october and november of 2024 it it ticked up to 0.6 percent so then i said to
myself well what else is going to be pushing the price besides options market then i started looking
at m2 then i started looking at the federal funds rate then i started looking at the vix long story
short everything is pushing the price on strategy more than atm by a factor of about seven and that's
just on the federal funds rate when you look at the options market when you look at bitcoin miners
when you look at bitcoin itself the impact of price proportionally to the atm becomes almost
laughable. It completely disappears when I start to put it on a proportional scale.
So is that me saying that at no point in time can ATM ever impact price? No. What I am saying is
that for this particular equity, it is too multivariant and the market is too big for
ATM to be driving price in any appreciable way. And then to make the matters even more interesting,
I said, well, how far can I push ATM in the modeling until it starts actually having an appreciable impact on price?
I got it all the way up to 20%.
Get the ATM up to 20% and still, like, theoretically not making it.
Using the existing history of the volume, I said, let me crank up the ATM to say, what if they were doing 20% in perpetuity?
20% in perpetuity, got it up to 2%.
Yeah.
So what we're seeing right now is unprecedented.
We have an equity that has essentially become a betting ground for Bitcoin.
Yeah, right.
And I think that's one of the most fascinating things here, right?
Strategy's gotten absolutely hammered in 2025.
They've issued more shares, but the balance sheet is stronger.
And then you could think through, you look at the size of the option market,
and the option market for MSDR is bigger than the option market for IBIT.
And that's an interesting perspective.
So you want leverage on leverage and the market is using MSTR to hedge.
Now, what that shows you is when this does turn around, it's probably going to be explosive because it's going to flip and go the other way.
They have to hedge the other direction.
right so it just like we've seen in the past when bitcoin moves very quickly in a period of 10 to 20
days mstr is probably going to move quickly times two well the other aspect of that i'll take the
other side i bet yeah okay well so yeah no i just mean like if like i think mstr is going to outperform
Bitcoin over the long run. I don't, I think the days of 2XM NAV, 3XM NAV, all things being equal
right now are over. Also, I don't think it's intellectually honest to say that the price of
stretch can be capped at a hundred with the ATM and then turn around and say the ATM has no effect
on the MSDR price. Well, you're comparing two completely different things. The, the, the stretch
doesn't have the level of interest in this conversation well stretch doesn't have the
level of interest and stretch doesn't have the level of variables impacting the price
if all things being equal you would be saying that you have the stretch you have the stretch
options market which is like almost non-existent and then you have the issuance of shares on the
flip side with msdr you have the options market you have the issues of shares you have the
correlation to Bitcoin. You have the impact that's coming from all of the Bitcoin miners. You have
the impact that's coming from sector rotation. You have the impact that's coming from all the
other Bitcoin treasury companies. You also have the fact that there's all kinds of leverage plays
on top of MSTR. Then you have the fact that there's options plays on top of it that are
income generating. There are too many factors for one thing to be driving the price. So it's not a
matter of intellectual honesty. It's a matter of scale and impact. And the fact of the matter is,
if they were to issue equity on stretch, could they drive the price down? Yes. But that's
specifically why I said in the case of this equity, because of all the multivariate factors
that come into play, you cannot say that any one thing has been driving price. It's a matter of
attribution. It's a matter of impact. So until someone actually sits down and does what I did,
so go ahead there's a lot missing i like dan's point i mean it does make sense it's like okay
it's it's hard to say that the atm is invisible over here but it's not over here
um but in the in the um on the stretch side i think there's a couple of other
can we pause on that first factor invisible it's not invisible the fact is i i modeled it against
50 different factors and it still showed up well let's pause on liquidity i'm exaggerating when i
stay invisible go ahead let's talk liquidity for a second you're right you're talking about a
company that trades a market right it's got a 60 billion dollar market cap and it's trading 4.5
billion dollars a day for something that's trading 76 million dollars a day right like
if you're going to atm something that's trading 76 million dollars a day yeah you're going to see it
it's a matter of like they i just think i think it's three different things 33 percent of it right
I think it's two different things.
My last point of that is I don't think ATM, like when I say I think ATM has an impact, I don't mean if ATM hadn't been used, it wouldn't have gone.
I think for some reason, something with the press happened such that strategy was bound to go to book value at the end of this four-year cycle.
There was some sort of magnet to book value.
I don't think it was necessarily the ATM.
I'm not saying the recent price movement was a result of the ATM even.
But I am saying that we got to call a spade a spade. If you believe ATM or share issuance is in fact a price suppressor, then you could say on MSTR, while it may not be the only price suppressor or may not even be the driving price suppressor over the past 40 months, you can't say it's not a fundamental price suppressor when it is used in that way on other equities.
absolutely handle that that's what i'm trying to say to you it's a matter of it should you
you cannot simply say that one factor is driving price right i'm saying it can it is a price
suppressing mechanism i didn't say there's more liquidity but the thing is also on the flip side
and the atm was positively correlated with price at the end of the year in october 2020 in october
November 2024. It was actually positively correlated with price. So what I'm trying to
frame here is it's not about is it pushing the price down or is it pushing the price up. It's a
matter of can we see it in the data, which I can, and can we then say what impact is it having on
price? If you're making the assumption that it's price suppressive, I think that comes from your
viewpoint which may or may not be valid all i'm saying is the atm is a function of the market it
is not a driver of the market you're making the atm is a function of the market like i would disagree
with that considering it's a function of the the issuing corporation decides to issue the atm right
yeah but it's a function of the volume it's probably it's probably a function of volume
and the volume is a function of the market so so yeah but let me chime in for a second so so so and
And I'm going to switch to a different topic.
And we have good news about this.
And I think this will bring this to light.
Look, a year ago, sorry, 14 months, I'll say December of 2024, we were all hoping a couple things would happen.
We were hoping triple Q inclusion and we were hoping S&P 500 inclusion.
Okay.
And we all believe that if you get included into an index, there'll be passive buying.
The stock price goes up.
All agree to that, right? Now we apply the symmetry test. You can use a symmetry test early. If you get removed from an index, if you believe it goes up, if you get into it, exclusion on the way out, your stock price goes down.
So then we had FUD about MSCI saying, oh, they're going to get removed from it.
The stock sells off because there's front end loading to say, oh, God, if they're going to remove out, let's sell it before it drops.
That's exactly what we saw.
That's a symmetry test.
Assuming that if something leads to something, it goes up.
If the opposite of that happens, then it would go down.
That's what Dan is saying.
Whatever the data says, we can see that in the real world, that's what happened.
And what did we get yesterday?
msei said we're not or today we're not taking or yesterday we're not taking them out and then what
happens yesterday it's the stock price shoots up and so that confirms the symmetry test so whatever
you want to say about the data the reality is the stock price mirrored exactly what happened there
that's yeah that doesn't make any sense it makes complete sense and adrian i'm going to say this
i said this one time before and we can move on what's different about a stock than with bitcoin
This is a very, very important part about this.
And I've said this before.
With a stock, there's one QCIP.
You cannot tell the age of the share that's being traded for daily volume.
Whereas with Bitcoin, you hear it all the time.
Oh, some OG moved to Bitcoin that never moved from 2011.
Oh my God, he's dumping because for whatever, he knows something and he's selling it.
Even though the Bitcoin just moved, not sold.
So with Bitcoin, you know the age of the coin that actually moves.
And then the specific metric for a long-term holder on Bitcoin is 155 days.
If you hold a Bitcoin for more than 155 days, you're considered a long-term holder.
Now, if you live in America and you pay taxes, you're a long-term holder if it goes over 365 days.
But people are like, well, we don't give a crap about taxes.
but with a QSIP, with a stock, you do not know the age in a given volume.
If it's a net new stock that's being issued through ATM or if it's old stocks that are being traded.
Do you agree that that is true?
Then we'll just agree to disagree and move on.
I think everybody's partly right here.
I mean, if there's more shares trading hands, there's a larger pool of liquidity.
I think there is an impact on the stock price, but it is likely a very, very small impact on the stock price.
There are other things.
The point here, right, it all comes back to volume.
Like, why are people holding this stock?
Like, why is it trading $4.5 billion a day, right?
So, Dan, to your point a little bit, like STRC, why do people hold STRC?
They hold it for the interest rate.
Like, the reason it trades the way it trades is because of the interest rate.
Like if it goes too high and people don't like the risk, they sell it because of the interest rate.
Now, why do people buy MSTR?
It is the accrual of all of the excess volatility of all the preferred equity instruments that they've issued.
So as they are issuing more of these preferred equities, it's accruing like excess volatility.
It's like that's this amplified component, right?
It's like getting more and more amplified.
It's accruing all this excess volatility.
So it would make sense that it is the volatility dampener, because if you need a pool of vol, like where do you go?
You go to the place with all the vol.
It's got all the vol.
And all of the excess vol is shoving over there.
So I think everybody's right to some regard, right?
Like you add 1% more shares, like the pool is bigger.
Do we all get a trophy?
Yeah, I think everybody gets a gold star, right?
We'll make it a true north, true gold star.
The thing with it is that the reason why, I want to be very specific with what I'm saying.
Impacting the price and driving the price are not the same thing.
So I think we need to differentiate that, right?
Then there's also the fact, though, that if I was doing this modeling and I wasn't seeing the ATM and the data at all, that tells me I'm doing something wrong.
So the fact that it's still showing up after all these other factors are accounted for tells me that the model is correct.
And I've spot checked this with so many different people at this point, it's kind of ridiculous.
I'm saying that to say this. It is too simplistic to then say, because you're simply issuing more shares, that's having a suppressive impact on price because of all the other factors that are taking place.
taking place yeah right so yeah when it comes to pushing the price i think people are blaming the
road for the direction of the traffic what's been pushing price down is the fact that the market is
telling us very clearly they do not believe in this model whether we believe in it or not that
i think that's that's a good point go ahead mason i yeah i think this is the more interesting
conversation is is what is strategy embody like like what is mstr embody right and i think it's
very multi-dimensional i was talking to ten and i was like let's say you're you're bearish on um
qqq right you're you're you think ai is in a bubble and you want to express that and and like
maybe you have like a more traditional framework and you think bitcoin is just you know nasdaq
beta, right? It's just, it's, it's gonna, it's gonna be more volatile than than the NASDAQ.
And then, you know, strategy is levered Bitcoin, right? Why would you not short strategy? If you
think, you know, that's, that's the position you have, especially at like, let's say they're at
2M NAV. And you also you also fundamentally disagree with that, right? And I think also,
it being a 2MNAV, that could also be an expression of short animal spirits, right? You think the
market's too riled up, everyone's too bullish, and you think it's going back to one. And I think
that's maybe partially what we saw in Q2 to Q4 or until present. But on the flip side, you could
take the exact opposite expression and think, you know, I strategy can be whatever you want for
whoever. And that's what makes it so amazing. Yeah, I mean, nobody wants what they like to
change. So the people who loved strategy, and they were doing convertible bond deals,
when they switch to something new, it's like your favorite band that changes their sound.
And you're just mad and like, oh, they're doing something different now.
but you know the preferreds as far as i'm concerned they're more creative than the
convertible bond deals bingo and they are in their infancy stages and you know just like ai is never
going to be this bad it's only getting better the preferreds are only going to get more liquid
and they're going to be more mature and they're going to be more efficient into it well i'm going
call it infinity but for my lifetime so um you know your favorite band got better they're better
musicians and that's you know they're gonna have a new set of fans really the old fans are gonna
stop showing up and the new fans are gonna arrive have you absolutely nailed exactly where i was
going with this right um dan you you brought up uh this gravity back to one m nav in my opinion
as like viewing risk here as the m nav drifts higher if it does i i personally think it will
and i think when bitcoin moves it's going to drift higher the risk of shorting it back down
to one m nav in my opinion gets higher and the reason i say that right is a lot of people
disagreed with the pref only model right like what happened in this last year there was a lot
of disagreement with the pref model i mean mike you hated it dan you hated it you're like mstr
commons broke and now you're like kind of long here uh with the pref model right there was a lot
of confusion how do you pay the dividends didn't have dollars they issued five like six of these
things the price of bitcoin went down there was a lot of a lot of things going against it now as we
progress into year one and year two and year three and you start to build a track record of these
things and they start to grow the perception of this model is going to change and those tools get
get more valuable and valuable in the, in the toolkit. So as, as the liquidity in those things
build, you're going to start to be able to issue a little bit more of that to give you more
amplification on the common stock when you need it. So, and I think this is a perfect time to,
to talk through this. I, I, um, sharing my screen here. Let's see if we can add it in there.
So, okay, what's happened in the last year?
Okay, this is from January 1st, 2025 to January 1st, 2026.
So behind this, you see the price of Bitcoin.
So you see the purple line is the price of Bitcoin over the last year, right?
It closed down, what, 5.17% year over year.
Every single white vertical line here is an issuance of digital credit in the last year.
So you got strike happened in the end of January, strife in March, stride in June, stretch in July, SATA and stream in November.
What you'll notice here is four out of the five preferred equities were issued when the Bitcoin price was higher than what the year closed at.
Okay, that's interesting.
I think that's really helpful to understand.
And like a lot of, there's been so much FUD in the last, like, I don't know, two months from just horrible, horrible takes saying that there's no demand for these instruments.
Like, okay, well, they raised $8 billion last year doing this and equates to about $18 million a day if you break it down on a per day basis.
But yeah, tell me there's no demand.
So what, why do I bring this up?
So here's every instrument, digital credit instrument that was launched in the last year.
here's the Bitcoin price at which those instruments were launched at, right?
So strike was launched at 104,000.
Stride was 101,000.
Stretch is 117,000.
You look at the notional outstanding.
Then I take the percentage of total of each of these instruments relative to the notional outstanding.
84% of the prefs that were issued in 2025 were issued with a Bitcoin price greater than $100,000.
And we're sitting at Bitcoin at $91,000.
The only one that the underlying balance sheet has grown from a Bitcoin perspective since issuance is STRF.
The Bitcoin price is up 8% from when STRF was launched.
So not a surprise that, honestly, that Strife is trading slightly above par.
Kind of makes sense.
The underlying collateral value went up.
Now, when people are saying that there's no demand on this stuff, I've got to say, you've got to be crazy.
They've raised hundreds of millions of dollars of additional PREF while the...
What happened, right?
Like the underlying value of the collateral held on the balance sheet or the capital held on the balance sheet is going to be improving drastically, which de-risks all of these instruments and makes the relative risk profile look better and better and better.
which should boost liquidity, makes the common stock look significantly better.
As they get more of this instrument in,
they're adding more Bitcoin capital to the underlying balance sheet.
Amplification rises.
Like that's how this, that's why, you know, when you're thinking about like,
okay, we're in year one of digital credit.
Last year was year zero.
It was born last year.
We're at the beginning.
We're at the beginning here from when all of these things were issued.
And all technically from the Bitcoin price perspective,
all of them are technically underwater from when they were ipo so i'm not surprised billion
when bitcoin was uncooperative yes they raised eight billion dollars of this stuff when bitcoin
was uncooperative i think that's a great way to say it absolutely um so you know when you look at
this the fact that stretch is trading what at a hundred dollars they increased interest rate from
10 what is it 9 to 11 but stretch is trading at uh 100 100 and today it traded i don't know 76
million dollars if they if they took 33 of the volume which is what they took back in november
when stretch hit par you're talking about them raising 25 million dollars in a day
that's interesting that's an interesting story uh so i don't know what what do you guys think
about this i like to me if bitcoin runs from here like this is this is a good position to be in like
dan you like the common right now right you're getting in near near nav yeah it's just like
volatility here exactly it's like a like i mean who it's hard to tell if the m nav is going to
expand or not if you get in a book value expands your gravy if this thing trades a book you're also
gravy if you think bitcoin's going out yeah so if you're a bitcoin bull
i get questions about stretch daily the level of interest in it is kind of crazy
of all the preferreds that's that's attracting the most attention from what i for what i can see
yeah i think so too like this idea of it's really scary with like bonds right like so you're telling
me interest rates change and i could lose 20 percent like you're levered on interest rates
The idea of a long-dated bond, and obviously these are perpetual preferred products, but you can use the Macaulay duration formula to figure out kind of how these things will behave based on changes in the interest rate environment.
And right now, they're just trading based on credit spreads and the seasoning of strategies and issuers, so it doesn't really matter the long-term interest rate because the credit spread so high.
Point being is no one wants to take principal risk.
They want to have their money.
They want to get yield.
And they don't care if the yield is a little bit lower here.
They don't care if the stretch yields lower than stride.
They just want to make sure they have $100 when they want to pull it out.
And I think principal risk is the main thing,
and that's why Saylor has said stretch is the killer product, the killer app.
For those reasons, they've been able to stabilize it.
What do you guys think?
I have a question in terms of – so obviously we think the ATM was hit today
as stretch was bumping up against 100.
I've heard that the strategy teams,
they've been very aggressive with their atm issuance at 100 but then on top of that do you
think they will continue to raise the dividend rate so the ex-dividend date you have to have
stretch in your account as i understand it so you have to be holding it on the morning of the 15th
but you have you actually have to have bought it before the 14th because there's an ex-dividend
date and there's ex-dividend date and then a record date the ex-dividend date's the 14th so
if you buy in the 14th you don't get the dividend you have to buy before the 14th to qualify for
your dividend you have to be holding before the ex-dividend date and then you have to market has
to open and you have to be holding it on the record date that's the ex-dividend date is a broker rule
that um the the uh record date is a strategy rule so i think the key is the 13th falls on i think
monday correct right so yeah i think it's tuesday tuesday so i think a lot of this we're seeing this
on a monthly basis as that dividend date as a dividend date approaches the market starts to
pile in and be like let me let me clip this coupon then we see the price retrace on the
ex-dividend date as people sell because they've qualified for the dividend and so i think over
time this will become a more mature market and we're going to see the ex-dividend date fall by
the same percentage as the payout and it's starting to trade like a real kind of fixed
income market. I think it's going to be pretty interesting moving forward. See how that trades.
You hit the nail on the head because if you only had to hold it for three days and you get the,
and you get the dividend and you feel like you have the opportunity to go earn,
you know, more money elsewhere, you're holding it up until that point in time.
And I think one thing that's interesting, if you think about this as a short duration instrument,
If you're, I think up until the 13th, maybe the 14th, Dan, we probably see, unless something drastically changes with Bitcoin, we probably see Stretch continue to trade right at 100.
A thousand percent.
Totally agree.
And after the ex-dividend date, we probably see it drop a little bit.
And I think that the amount that it drops will probably start to decrease a little bit more and more over time as that pool of liquidity becomes deeper and deeper and there's more confidence in this instrument.
And one thing I wanted to bring up and share with some people, just because this is like understanding how this was issued, I think is an important understanding.
Like you care about this and you think there's no demand.
Understanding how this was issued is really important.
Okay. So they raised $2.5 billion of this stuff in July.
They went out to market. They went to a bunch of banks and they told the banks like, hey, we want to issue this cool variable instrument.
All the banks were like heads exploding because they've never seen anything like it before.
And you get all these people that were interested in taking a speculative bet on this new instrument being created.
They're like, okay, this is a similar flavor to STRK and STRF that you've launched.
And yeah, sure. I'll buy it.
And so you've got actually a significant amount of interest, right?
So how this works is all of the bankers and you get retail people and they give you an indication of interest.
And they'll tell you exactly how much they're interested in buying and at what price.
And some people will tell you like, hey, at this price, I'll give you $100 million.
Let's just say at 90% and 9%, I'll give you $100 million.
But if you gave me a discount at 80 and 9%, I will, I'll give you 250 million.
So you build like what's an order book.
And so what they ended up landing on was, I think it was $9 per share on par priced at a discount of $90.
So everybody that $2.5 billion of interest, when they first bought this, they bought in at $90.
So as it began to trade up to 100, not only do they get paid the yield, they also get the option of principal appreciation.
So it's got the potential to go up 11% and it's paying you 9%.
So you get a double whammy, you win twice.
Now, the reason I bring that up is because in the IPO, just like any other IPO, there are people that don't give a shit about the yield or anything else.
They just know that they're getting an opportunity to buy something at a discount and the company is going to make this thing go to 100.
They're going to do everything in their power to go to 100.
So you've got all of these institutions that are like, yeah, look, I'll give you all this capital.
I'm going to buy it at 90 and I'm going to sell it when it goes to 100.
I don't care.
Maybe I'll take, you know, maybe I'll clip a couple months of coupons as the liquidity builds in this thing and I can kind of drip shares out into the market.
So what that effectively is, is an overhang.
Like I think people don't really understand that.
Like that is an overhang on the stock for the people that don't want the yield,
don't care about the yield.
They're waiting until the principal appreciates and they're just dripping shares out because they're like, great.
I got another 10%.
And they've held this instrument, what for six months.
And they got 10% because they bought it at 90 and they've been selling at a hundred.
So there's an overhang on this stuff.
an overhang on this stuff. And once that overhang is gone and these shares are in the hands of
people that want the yield, the amount of volume and their ability to pull capital in the door on
this thing is going to be insane. This is like a pipe deal. Everybody's had the boogeyman of the
pipe. This is effectively, you can think of it like a pipe deal or any other IPO arbitrage
opportunity. And that is fundamental in understanding how this works. I think we're
probably getting close to a lot of those shares being turned over and in different hands for the
people that you know didn't want to be in this instrument long term so so jeff let me reconstruct
what you're saying uh sailor decides to do a digital credit product so what he does is he calls
up a book runner calls up his his um investment bank and says look i came up with digital credit
it's called strike stretch whatever these instruments are and shows them the prospectus
and says look i'm gonna sell i want to know what your appetite is for this and it pays this yield
and they read it they agree to it and they say fine so what they do is because it's not available
and and the brokerage houses can come and say hey do you want to buy this and so you sign up on your
brokerage house yes i want to buy this on the first day and they gauge that amount of interest
So let's say they want to raise a billion dollars, but they find out that there's only going to be $200 million worth of retail coming in and buying it.
So what the institutions do is they buy the full $2 billion, right?
Saylor will say sometimes there's a green shoe and it's oversubscribed.
We've been talking about this for years.
The green shoes are not new.
Same thing with an MSTR ATM.
He'll do that.
So the brokerage, what happens is the investment bank and the book runner give Saylor a billion dollars.
So Saylor goes and buys a billion dollars worth of Bitcoin and he announces the orange dot, right?
And you're like, okay.
Now they gave him a billion dollars.
And what do they do?
They're sitting on a billion dollars worth of these shares.
Now they have $200 million for people that want IPOs.
They give it to the $200 million.
Now there's $800 million left over.
The casual observer on X, you know where I'm going is, oh, then they just dump the other $800 million.
in a market order when the market opens and crash the price and short it.
That is exactly what has not happened.
What Jeff is saying here, Jeff, if I understand what you're saying and reconstructing it,
they then drip those shares out to the market over the course of days weeks and months to keep the price relatively stable because they don want to lose the money that they gave the sailor to go buy the magical
Bitcoins. Are we all in agreement that that's the way an ATM and this works? Absolutely. And what an
awesome deal for the bankers, right? Or the people that purchased in the IPO, right?
Oh, wait, let me give the good news. Why would a banker do this?
The banker gets paid a fee.
And you're looking every time they do this, it lists the line item.
This is the fee.
The banker gets a fee.
What the banker also has, and this is not nefarious, is nobody knows how much of the shares the banker has.
The banker knows, but we don't know.
And we don't know how many people bought the IPO.
Now, let's assume that the IPO was oversubscribed.
So there's $1.2 billion worth of retail, and the bank gave Saylor $1 billion.
You're like, oh, what happens in that case, Green?
Oh, well, that's really easy.
What does the bank do?
Not only do they keep their fee, they slowly issue out those shares in the market to capture the spread.
Like, oh, that's manipulated.
No, that's the way you would do it.
I just said, if you had all of this, would you dump the shares on day one at the open with a market order?
No.
Never.
You distribute it out slowly.
I don't know why people miss this.
We've been talking about this for a year and a half.
The coolest part for the people that were holding it or like that invested in the IPO is like, even if you didn't care about it, right?
You look at a company like Strategy, you're like, they're at least going to pay the dividend for a year.
So you're like, I've got a year to drip this out.
If I think the company is going to actively manage it to 100, I'm like, cool, I can make 11% watching you go from 90 to 100. And I get paid while I'm holding it. I get paid every month while I'm holding it. It's just a fantastic deal.
So anyway, I think we're close.
We're probably pretty close to getting rid of the overhang that's on top of that.
And then you're starting, you'll probably start to see people that are holding these instruments a little bit more long term, whether it be pension funds, insurance companies.
Yeah.
So I'm going to add an extra word in here.
One of the words that you'll see come up sometimes is equilibrium.
What happens is, oh, or stabilize over time.
So as the shares get into the market, as the market becomes more comfortable with it, they're like, oh, it's stabilized or now it's in equilibrium.
And that's what you're seeing in stretch.
The range for that is going to be somewhere between $98 and $100.
But the goal is to keep it between $99 and $100.
Maybe they could peg the vol less.
I think Saylor said on the last call, it's at 5%, he can get to 3%.
And the goal is to get to 1%.
Well, Dan's going to take it even lower.
Dan's going to take it lower because what's going to happen is they're going to build on top of it.
And it's going to be there'll be a perpetual bid on it for multiple areas.
Right.
So this is where the market's going.
And but guys, by the way, people think the preps are going after the bond market.
Right.
Oh, the preps are going to bond market.
Stretch is going after the money market funds.
Right.
And Saylor has talked about this in Miami specifically and multiple places, most recently in Miami.
But the money market funds is $7 trillion.
And think about that.
Well, if it's liquid, right, then think about this.
If your money market fund pays, I don't know, what does a money market fund pay?
1%, right?
And if you're a brokerage house, you're like, eh, we'll give people 6%.
We'll keep 5% for ourselves.
the bank or the brokerage house would make a five percent spread and i know this because i posted
this back in miami and i tagged sailor in it i'm like did i get it right and he's like
yep so that's exactly what we're trying to do here they're going to keep that spread so
the first three the most of the preps are the bond market but stretch is going after the money
market fund and that's seven trillion dollars the craziest part is it's both right like
like imagine your bond portfolio with liquid bonds that are beating everything else like that
that's the craziest part it's both yeah it beats everything it beats every bond out there from
every facet like you know you know it's less risky it's less volatile it's more liquid like
every single facet out there and maybe we'll get into the bad bond of the week but i want to i want
to wrap this up with two things i go first i think probably one of the biggest problems with trad fi
or investment banks looking at it is the first thing is that they don't understand it.
And the second thing is it's too good to be true.
They're just like, no, it's too good to be true.
It's going to implode.
It's too good to be true.
That's the reason why Saylor invented the green dots and acquired cash.
Because somebody is like, can you ensure that this is going to get paid?
And we're like, yeah, what's the current metrics on that?
We can pull it up.
It's two and a half years.
They've got two and a half years.
It's like 30, 34 months or something on, on what do you call it?
On the cash balance.
And what is it?
70 something years on the Bitcoin.
It's insane.
It's, it's like crazy over, over capitalized.
Right.
And I want to call it one last thing.
We can, we can move on.
All right.
You've had like five last things.
Great.
Come on.
But no, I'm known for that.
I'm really known for that.
Look, Matt Cole said something and you said this about goodwill.
if software is made free by AI, Matt Cole said this, then the goodwill for software
pretty much goes to zero. He said that. And I wrote that is awesome and horrifying at the same
time. So I mean, think about this. So you're going to talk about the bad bonds that are doing,
the transparency on strategy, the dashboard showing you in real time what it is. But if
other companies had to show real time value of their software and specifically relative to AI,
coming in oh my god if i was a ceo i'd be like of a software company right now i i would have a i
would have a crisis meeting right now and say how are we going to make sure that some other company
using ai doesn't offer the same functionality for one one hundredth of the price yeah i would be
scared about that yeah go ahead go ahead mason you're going to jump in yeah yeah no i mean i
I think what we want to see over the next few years
or maybe next decade is massive disruption.
And I think what Bitcoin and digital credit are,
it's kind of safe harbor for both parts
of a traditional portfolio, right?
If you're looking 60-40.
Yeah, like digital credit is obviously better
than any single bond out there,
any single money market.
And realistically, it's not that
hard to figure out like you have to accept bitcoin as kind of a you know a a thing that is going to be
here and then you just show them the financials like jeff you can pull that up it's like if if
anybody with any kind of financial literacy uh who know who's managing capital can can
and really internalize what that means then it's it's not it's not hard to figure out right
So I think digital credit will be safe harbor for the bonds, which are going to increasingly be disrupted. And then it's the same thing for the equity side, right? Like, if I think a pretty popular trade right now is going to ensure software service, long hardware, I think ultimately everything gets disrupted. And that's why you have Bitcoin.
So I think the really interesting conversation here is what does adoption look like? What is the timeframe for a catalyst? Because we know what we've got, right? But how does that play out? And I think we'll keep watching in the meantime.
yeah 100 so i'm going to summarize what mason said what he said is short basically short software
long hardware what that means is that one of the reasons why nvidia trades so well and people are
like oh well some other company will come out with better hardware than video nvidia has a software
stack on top of it called cuda cuda and so it's not only do you have to come with better hardware
but everybody that's wrote the ai apps that run on top of nvidia needs to have the software that
that that uses it in the case of nvidia it's embedded right you have to use their software
with their hardware now what you're also saying mason the meta message here is you know microsoft
is a software play and use any hardware the hardware had no value the bigger play here is
apple what do you do apple you buy the computer can only run apple software and so meaning the
operating system so i think this is where the market's going how is this related to strategy
strategy is the biggest issuer of prefs full stop right jeff is there any company that's issued more
prefs than strategy no no way they're like set records with all the ipos they've set records with
the uh the trading volume they've set records with they're the first company to put a atm on
top of a preferred equity which is super novel i think everybody really overlooks like how how
crazy novel that is like they can issue debt like capital as equity any day of the week like
that is a that is such a valuable tool that is commonly overlooked right and stretch it's the
only way the only way stretch is able to be created was because of the atm on top of the preferreds
right and the other part would stretch stretch was the largest ipo of the whole year correct yeah
Yeah. I think one came out at the end, but I think you're right.
Okay. Yeah. I think you're right. It's close.
Okay. Well, okay. It's close.
It's either the largest API, largest IP over the years.
Right. So I think we're looking at, you know,
if we want to be mad at something, be mad at Bitcoin, be mad at forever.
Whatever reason the price went down,
we didn't get any fricking help from Bitcoin. That's.
And that's what strategy buying 250,000.
Right. I like when I hear something, oh, we don't like Saylor, what are you doing?
Because he's going to make the market worse.
I'll be like, you know what, dude?
If strategy didn't buy 250,000 Bitcoins, I don't even want to talk about what the price of Bitcoin would be.
Because I'll tell you right now, it'd be lower.
It'd be way lower.
If the ETFs weren't there, if the derivatives market wasn't so huge.
If the spot Bitcoin ETFs were and they weren't doing this, it would be lower.
on this point i think we should talk about msci briefly because msci came out and they had reversed
their stance and now they're allowing companies with digital assets greater than 50 of their
treasury to stay within the index funds and so a couple things that are really interesting here
they came out with this note on it was october 10th the day of the flash crash companies with
greater than 50 of their digital assets they're considering removing them from all of the next
funds. And it created this huge period up until January 15th, they were going to make their
decision. And so they had almost an entire quarter to figure out what they wanted to do with this.
Well, that creates uncertainty for the entire market everywhere. It creates uncertainty on
all of the digital asset treasury companies, creates uncertainty on Bitcoin on top of having
like four-year cycle bros YOLOing out of this thing. And then you've got uncertainty on PREF
models and you've got all this stuff happening. And then fast forward to a couple of days ago,
Morgan Stanley comes out with a Bitcoin ETF. That's interesting. MSCI used to be owned by
Morgan Stanley, but they were divested in 2007. That's interesting. Just a lot of things that are,
when you plug them together and you look at this timeline, like if you wanted to
increase and scare the market and get some increased Bitcoin exposure,
that's a pretty good way to do it to create some uncertainty within the market of the largest
continuous public publicly continuous buyer of the stuff and then you've got potentially
coordinated FUD with JP Morgan and that like Walter Bloomberg account it was just like
heinous ridiculous takes in all of Q4 but really it was uncertainty from from quite a quite a few
things can i speak on that 100 walter bloomberg thing i was at the naples family office that
sailor spoke at and he was on stage straight face bitcoin's going to 10k in the next three months
i'm like
you know you know that meme are you sure about that exactly and so but what's so interesting
is i saw a post today from him it seems like and so on call sheet on call sheet bitcoin reclaiming
100k just hit 40 percent this month which is very high like if you price that as an auction
that you know that's pretty high options markets getting really expensive both for mstr and bitcoin
some things change long-term holders obviously have stopped selling like some sort of momentum
has shifted but my point being is walter bloomberg came out of the post it wasn't walter bloomberg
it's the other guy mike mcglone excuse me mike mcglone did the speech at naples he came out of
post today and said there may be a reason a scenario in which bitcoin doesn't go down to 10k
during uh 2026 i'm like oh uh really uh and that's and he says because of reduced volatility in the
the equities market and for some other nonsense reason so he's pretty much saying the equities
market may have a good year and there's so many reasons why the equities market could
will probably have a good year credit spreads are extremely tight on all the junk bonds bitcoin is
performing really well, not hitting all the resistance levels or whatever shelf falling
off TA lines that people were saying was going to hit.
And I think it's because the institutions are stepping in and buying, much like they
front ran the end of the four-year cycle, they're front running the end of the bear
market, right?
Essentially, our four-year cycle, we hit $126K four months early.
And I think institutions will do the same thing, and they'll start buying on the way
down as they get their entry prices months in advance of when the historic bear market would
end, which is in the second half of 2026. So like if you're going to buy something, if you want,
if you like it at 50,000, you're a buyer at 65,000. Any smart investors probably kind of
thinking that way, especially if you believe it's going to a million plus over a long period of time.
Yep. Hold on, Mason. I got to pause. I've got to plug this. We've got a short commercial break
kind of uh we have true north vegas this is happening in partnership with strategy world
here in february at strategy world i believe it is february 23rd through february 26th the
strategy world our event is going to be on the 23rd it's going to be a great time there's 150
tickets in total that will be sold so far we've already sold 67 44 of the tickets have been sold
and once they're all gone, they're all gone.
So if you want to come have a very unique,
interactive experience, come talk with us, hang out.
The tickets will get you access to,
we'll have a happy hour at a cool location afterwards.
There's about four hours of content.
This content will be interactive
and we'll do a little bit of presentations,
a little bit of conversations
and probably some rotation of topics.
You'll get a chance to meet and hang out with everybody
and it will be a great time.
It'll be slightly elevated from what we did last year.
And I'm sure we'll have a couple of guests
from some of the Bitcoin companies swing by.
So please take a peek at it, come hang out with us.
We'd love to meet anybody that's interested in this.
And if you're interested in hearing
what's going on in the strategy world,
there's an entire Bitcoin for Corporations track
at Strategy World for three days in a row.
So you can hear this from the horse's mouth, from different banking institutions, different treasury companies.
And you can really interact and network with all of these people in a very small group of people.
So it's a fantastic event.
It's going to be bigger and badder than last year and really looking forward to it.
Anybody else have anything to add?
Yeah, you know, I'll chime in one thing.
Look, meeting us is great.
um what i'll tell you is that michael saylor is is accessible if you go to event where he is
especially if you go to this event there's a really good chance that if you look for him
you could find him meet him and talk to him and so if you want to meet the guy yourself
i would suggest you go to the event and you go and talk to him that i mean we we met and talked
spoke to him many times in orlando last year and and i met him previously the year before that two
years ago was the first time I met him in person. And I talked to him multiple times over multiple
days that I was there. So I suggest that everybody come not just to meet us so you can meet him also
and the rest of the executive team. It's Andrew Kang, it's Sharice, it's CJ, it's Charlie, it's
everybody on the strategy team will be there. And if you want to talk the Bitcoin treasury strategy
and you want to hear it from the people that are working, there's likely going to be bankers there.
There's likely going to be lawyers there.
If you want to talk to these people that are actually operating behind the scenes, it's not the Bitcoin, you know, the big Bitcoin conference in April.
It's this event.
It's the strategy world event.
I think last year there were like 400 people there, 400, 500 people at the strategy world event.
Everybody was incredibly accessible.
Yeah, right.
I'm not saying anything is wrong with the Bitcoin event.
The problem with the Bitcoin event trying to meet Saylor is there's 25,000 people there.
So the security was tight because there's 25,000 people.
With these events, because they're much, much smaller, you can get there, meet him, and it's great.
Yep.
Okay.
Back to you, Mason.
Sorry, I had to interrupt.
Yeah, I want to get into Dan's macro slides, but maybe one way to lead up to this is I think the market may soon start to appreciate the fact that Bitcoin has less regulatory risk than a lot of individual companies or sectors.
And I think we're seeing this even today, right? You had two pretty substantial kind of keeping announcements from Trump, which may or may not come into effect. One was corporations won't be able to buy single family homes.
And the other was that defense companies can't buy back stock or pay their CEOs or executives more than $5 million, right?
I don't know if there's any precedent for this, but defense stocks went down. Blackstone went down.
And the fact that there was this response to me just indicates that the executive branch or government in general can cause substantial volatility.
Whereas with Bitcoin, sure, it can have negative price action from regulatory actions, right?
But what I think we've seen is adoption.
Mason, your audio is horrible.
Can you try jumping off and jumping back on?
Yeah.
All right.
Yeah. While Mason does that, I think what he's getting at is basically the president can move markets with a single tweet, move the real estate market a day, move the defense stock market, and then kind of reversed course and said, oh, military spending is going to go from a trillion to 1.5 trillion.
And then all of a sudden, it was at Lockheed Martin closed, closed up on the day after this crazy volatility.
Let's try to get Mason.
You guys hear me?
That's better.
Loud and clear.
All right.
I don't know how much you got, but essentially we're seeing increased volatility from regulatory risk.
And I think in the world that we're going into, Bitcoin is a safe harbor.
And hopefully the market will begin to appreciate that.
And it will be events such as what we saw today, which will be a catalyst for viewing Bitcoin as more of a risk off asset than it is right now, which is a risk on Brazilian Wi-Fi.
That's a great comment.
he's got the brazilian no and uh mace and i were talking about this the other night and i think
it's super spot on because part of sailor's whole talk track and why it's also the underpinning for
why strategies applying leverage to the bitcoin is if you believe bitcoin is going up 30 arr and
it's risk-free then you want to apply leverage and you can get higher returns you're upping your risk
on an asset that has no risk right if you believe bitcoin has no risk but it has volatility
then by applying leverage you're introducing risk onto the asset which is an interesting way to look
at it and so i think the the difference in the market the way the market's not understanding
bitcoin is i think it's overestimating the risk in bitcoin and if it truly does become this sort
of risk-free pristine capital asset then um you know equities won't look as enticing but that's
that's old news we've talked about that before yeah it's the this kind of risk is mispriced right
equity risk is mispriced all of these all of these other things are trading at you know 30 50 xpe
multiples 100 xpe multiples and now you've got bitcoin which universally trades at one xpe every
day now you've got companies that are trading and applying leverage on top of it that are now
trading at like net asset value like what what is it what is a digital credit company vehicle worth
Like what is the vehicle that strategy has created?
Like what is that worth?
Probably more than that.
Probably a lot more than that.
Like what would somebody be willing to pay for this vehicle?
What do you think strategy would be willing to pay to sell the vehicle?
I don't think there's a number.
There has to be a buyer.
right now there's no buyers a number i just i just don't i just don't think that there's a
there's a number right that's an interesting concept yeah so look i'll give something
interesting you know why would somebody buy the mstr common stock so so strategy is the operating
company and they offer all these different products we've already talked about on the
preps mstr common so what happens is if the the preps are mostly designed to have
it clips some form of the volatility in order to pay you a yield.
That's exactly what sellers all the time in the slide that talks about,
hey, we have oil and then we break it down into different fuels
and different purposes as we distill it down.
So in this case, what happens is-
They don't clip the volatility though.
Clipping the volatility would be like selling calls to pay the dividends.
They're not doing that.
Great mid-transferring.
I think, Grain, you're transferring.
Yeah, I get what you're saying.
I just want to be like, that's a distinction that I think is important to mention.
Like, they're not clipping the volatility.
They're not taking the volatility off their balance sheet.
They're actually throwing more volatility into the balance sheet, and they're underwriting the risk of the instrument.
So, Jeff, I agree with what you're saying.
Because they add more Bitcoin to the balance sheet, overall, the company can have higher volatility because they have more Bitcoin.
Is that what you're trying to point out?
No, I'm trying to point out that strategy doesn't clip the volatility to pay the dividends.
Okay.
Well, from what I heard from Saylor, and I believe to quote him exactly, is that we strip the volatility out of it to pay a yield.
He uses the word strip all the time.
Strip the volatility out of the prefs.
Yeah, strip the volatility out of the prefs to pay the yield.
I use the word clip instead of strip, but he's reducing the volatility with the prefs in order to pay the yield.
We got clippers and strippers here.
Clippers and strippers.
I'm not going to touch that one.
Okay.
Clippers and strippers.
So what I'm trying to say here.
That makes sense.
They're stripping the volatility from the preps.
That excess volatility is going to the common stock.
That makes the common stock more attractive.
They're able to use that as an ATM.
Right.
And the common stock is the most volatile wine.
It's the most volatile wine.
Okay.
So my point about this is if strategy is right, which I think they are,
I want to own as much as that company as possible.
So if I need either quarterly or monthly payments, I would buy the prefs.
It's not all or nothing.
I could buy stretch.
There's almost very little or no upside in the underlying price of it.
If I want strike, strike gives you more upside and it gives you less yield or yield depending
upon how it trades.
My point here is this, is that if you think that strategy is right in issuing digital credit
will become the next form of attacking the bond market and the money market funds, I would want
to own a part of that company. That's the simple equation. If you agree with that.
What's it worth?
And what's it worth? I think it's worth a lot more than what it is right now.
Yeah. It's funny. The chief marketing officer at Strive asked me the other day, he's like,
how long do you think you're going to work at this company? And I just, I giggled. I totally giggled
because my response was,
I think this might be the last company I ever worked for.
I think there might be one.
It's like, what is this company worth?
A lot more than what anybody is willing to sell it for.
You know what one of the weirdest things in Silicon Valley is?
Somebody says they're a serial entrepreneur
and they always sell off a company.
I'm like, okay.
If the company is so good, why are you selling it off, right?
The reason why they're selling it off is because they got paid so much money that they don't think it's going to continue to go up, right?
Because if they sell it and it continues to go up, that means they sold it too early.
But that logic is lost on these guys.
Totally.
Well, you kind of like reach this economies of scale and you're like, all right, I got to pull the parachute now because I think the risk of going any further here doesn't make a ton of sense.
An example of this, I saw a chart the other day.
It was showing Zoom, the company that does the web software.
It was showing their earnings over time, and then it was tracked with the stock price next to it.
And so as earnings were growing really quick, like right during COVID, the stock was booming.
And then earnings flatlined.
Stock crashed.
And it's like, well, where does Zoom go from here?
Somebody can create a Zoom app.
Mike, you could probably go create a Zoom app on AI today.
yeah and you know one of the craziest parts about this everybody's talking about zoom in 2020
right because that's when covid hit and zoom take oh we're going to do a zoom call we're going to do
a zoom call i'm sitting there like this i didn't buy the stock right and i'm like really i'm going
to date myself during the internet bubble when i was at global crossing i provisioned the the the
circuits on the back end for webex i had been using video conferencing literally for 20 years
and i was the guy that that provisioned and sold those deals to webex which got acquired by by cisco
so my point here about this like oh my god you just heard about zoom we had to convince people
back in the old days like oh you're gonna have video on a call and so many people were dead set
against this i don't it's like yeah but you had to go to the office anyway why are you dead set
against the dead set against this so the question is is like oh zoom came out you're right where's
it going to go from there that's when you said that's when you see when the founders sell off
because there's no longer any upside left in it right but but when you when you have a huge bitcoin
balance sheet and the the preferred equity vehicle it's just like why like why why would ever like i
I don't think there's anything better than this.
I think there's like just a few companies on the planet that have this vehicle structure.
It's just, it's really appealing.
It's really appealing.
And I think the company could last for a thousand years.
You know, it's just, it's a very interesting dynamic, right?
Like these companies, like if Zoom were to have Bitcoin on the balance sheet, maybe the
stock performance would be significant.
different right i don't know yeah i'm gonna go back to what you said about risk from all these
companies um i had posted that i was using i use claude i'll i'll explain this very very quickly
what happens and why why risk is not priced correctly so i saw all these video all these
posts about claude so i'm not a computer programmer my degrees in economics i don't write code i can
do configurations though for routers and switches and set that up in computer networking anyway so
what do i do i'm like i want to do i always want to do an iphone app so what do i do i go into
chat gpt tell it to write the mvp and i tell all the parameters that i want to be in the app and i
say make sure you're right so it works for claude i never logged into claude log into claude with my
google account by the way it's free paste it into it claude goes cool we'll write up the app for you
It writes up the app. It does it in seven different modules. I don't know why it did seven modules. Now I want to emulate that iPhone app. So then I download Xcode, right? Because I'm a Mac guy. Guess how much Xcode is? It's free. Download Xcode, paste the code from Claude into Xcode, and then I emulate it on my Mac and I wrote an app.
So now, if you've got me, let's be very clear about this.
I'm a reasonably intelligent guy, but when it comes to writing iPhone apps, I'm an idiot.
I'll be very clear about it.
I never wrote one before.
Guess what?
I didn't write the code.
I used Claude.
I did that all in an hour, right?
The scary part was the functionality that I wanted in the app.
I tested it first in ChatGPT.
ChatGPT got 70% of the functionality by itself natively.
So now my point is crazy That why that why what happens with this what going to happen in the future This is what going to happen with AI You going to be rewarded on your creativity your motivation to go do something And the fact can you complete it Now once you complete it if it makes no money you don do anything with it again
That's what happens.
And so now what's going to happen with all these companies, and I would be really scared about this,
wow, we built a company with 1,000, 5,000, 10,000.
What happens if another company can replicate all of our functionality
and do it with one-tenth or one-one-hundredth other people?
That is frightening.
Totally.
So one last thing. I wrote a book on AI. It's going to go live and probably tomorrow, the next day.
It's a pretty good book. So you guys will check it out. I'll post it. You had to stay on here to
hear it first for me, by the way, the book will not generate enough money for me for any part of
it. But I now have this clarity of thought about how AI works by writing this. So anyway, with that
said. All right. Well, we'll jump into a quick session on bad bond of the week. And I'm just
going to jump into it here.
Now that everybody's got that stuck in their head
for the next little while.
We are going to look at the Saks bond.
I'm sharing my screen.
Everything is super laggy today.
Sorry about that.
Sorry about the audio.
I follow this guy, Junk Bond Analyst.
It's been just a ton of fun
watching all of these junk bonds
that he posts about.
He posts about all of these junk bonds
and what's happening with them,
all of the bankruptcies.
So if you want to learn about junk bonds
and follow along what's happening,
It's just, it's so crazy what's happening in this market for yields that are very similar to the perpetual preferred equities.
And they just have significantly more risk.
And I'll explain why here.
So you look at Saks.
So the luxury fashion retailer, have you heard of Saks Fifth Avenue?
This is that same Saks.
So Grain has.
Grain has heard of Saks Fifth Avenue.
He's had to buy some presents in his day.
You know, when you buy a Ferrari, you got to go get the ladies something from Saks too.
So Saks skipped a debt coupon payment while negotiating with creditors amidst a potential
chapter 11 bankruptcy file.
In 2020, December of 2024, okay, not that long ago, Saks raised $2.2 billion to finance
its acquisition of Neiman Marcus via Jeffries.
Jeffries is a private credit, like banking institution.
They sold the deal to investors.
Just six months later, those bonds were trading at 25 cents.
So basically the,
what was worth $2.2 billion in December of 2024 is now worth,
you know, 550,000 or 550 million just six months later.
And the creditors conducted an aggressive liability management deal that
rearranged repayment priorities. And again,
injected $700 million fresh capital to fund the business.
So what happens in this is they go back to investors and say,
hey, the deal's not going super well.
This is falling apart.
We need 700 million more dollars,
but we're gonna strip some debt payments on top of this
and we'll put your senior in the capital stack
just so we can figure out how to do this bankruptcy.
And so those new notes,
those $700 million of additional fresh capital
that came in the door today trade at 37 cents.
So you got $700 million that came in the door
and now it's trading at,
what like 250 million dollars something like that and when while the pre pre the reprioritized notes
from a year ago traded just seven cents so those original 2.2 billion dollars of bonds now trade
at seven cents so they're worth i don't know 100 million 70 million dollars something like that
maybe less and that additional 700 million dollars of capital that came in the door is worth 37 cents
of what that original value is so this is the type of stuff that's happening in the market
Like, how do you underwrite this?
I just, I just can't believe that people are signing up to just get punched in the face
again.
Like, it's just like, I want you to spend more time.
I can't understand how any, any bond salesman or underwriter or whatever book runner or
investment bank, whatever the, whoever that was for this, I don't know how they could
sell this.
Right.
Cause you know, I heard there's a company called, look, I get that Saks Fifth Avenue and even
markets or luxury goods, but I just don't know how they're able to pitch this to institutional
investors, why this makes any sense. Can anybody explain this to me?
I don't get it.
And by the way, after it crashes, they go back to different people and you think they
would do some form of due diligence and be like, well, the previous ones are down 70 or 80%. So we
want to come in now because all of a sudden we think Saks is going to rocket back up because
they bought Neiman Marcus. I can't figure it out. I think the crazy part about it, well, it's like,
okay, so there's a couple of things going on here. One, it's just showcasing that these are
illiquid, right? Like the new notes are trading at 37 cents. The old notes are trading at seven
sense. Basically, nobody wants to buy them. Okay. That means you have to go through the bankruptcy
proceeding to go get your money back. How much money is going to be left at the end of the
bankruptcy proceeding? I don't know. I don't want to do the analysis and I don't want to be a part
of it to find out. That's what makes the price of these things. Because like, why would you?
Who cares? Like, this is the last thing that I want to spend my time doing is underwriting,
like the balance sheet of this, all of the, all of the stores, all of the, um, the inventory and
all these stores, how do you liquidate it? Like, what is liquid? Is there anything liquid?
Like, it's just a horrible deal. And I just can't believe people signed up to get punched in the
face multiple times. Um, even after recognizing this stuff is already done poorly, which is crazy.
You know, and the other part, you know, we, we, we've talked about this before,
when I talked about the Blockbuster, when they went bankruptcy, they had a $1 billion bond
and they had leaseholds. Somebody's like, oh, well, somebody, they bought these bonds because
they'll give them a claim on real estate. Now, I'm sure if we do two seconds worth of analysis here,
they don't own the building of the real estate. And so I was like, how can a leasehold be valuable?
A leasehold is valuable in the case of Blockbuster because they needed that in order to generate
revenue or cash flow. And then that would pay the bond. They'd be like, okay, we get it.
Well, when you declare bankruptcy, then there's virtually no cash flow, right? Or it's
completely impaired. So at that point, then the leasehold becomes a liability because you just
want to close down stores, but you have to continue paying for a lease that you no longer use.
So this is like a disaster that unfolds that any of us would look at and be like,
this makes no sense, right? So I will guess right now, and this is clear because in San
Francisco while Union Square has come back and Neiman Marcus is absolutely gorgeous that is a
gorgeous store you could eat on in the corner with glass on multiple levels it's absurd it is a
and you go in there and you see professional football players it's completely awesome Neiman
Marcus but in the exact opposite corner is the empty Saks Fifth Avenue and they took off all the
names and logos but you could see because you know the sun hit it and so while that has recovered
you're like there's no nobody really wants sax is not going to reopen that location it's not no way
so i i just see this and i'm just like i want to meet that salesman one day because that's the
best salesman in the world he sold crap twice twice he sold he sold a pile of crap twice
i mean that's what makes these digital credit things so exciting it's like
they look really good from a risk perspective.
You don't have to underwrite inventory across stores,
across the globe,
and speculate on people liking those luxury goods.
Are they going to like those luxury goods a year from now?
I have no idea.
And let me give you guys another thing that will come in with this.
I am going to – this is not a guess.
There's two things that are happening here.
First of all, in June of 2025, they went back to resell this.
Everybody knows that Trump instituted the tariffs, which means if they're luxury goods, they're imported from outside the United States.
So now all of a sudden, the price of your goods go up just because of the tariffs.
Oh, my God.
It's due to additional taxes.
What do rich people hate doing?
They hate paying more money for the same thing.
It's not that they can't afford to do it, but that becomes another headwind.
But they still were able to sell these bonds, even though everybody knows about the freaking tariffs.
Again, I would like to meet, I want to meet the salesperson.
I will pay for dinner if somebody finds the guy.
Pay $10,000 for the dinner with this guy because I just want to hear how smart this guy is.
Well, you brought up strippers and clippers earlier.
I mean, I'm sure there's some of that going on.
Soleil, you had some perspective.
You were thinking about these things?
oh no i was just gonna say with um with their financial situation maybe they should just start
a gofundme only fans sax fifth avenue only fans i mean just toe picks from all the employees that
like that might do it uh i mean who knows these days uh and then you you'll load that into some
call she bets and maybe the bonds are worth something um okay there's one more thing i
wanted to talk about and before we wrap this up and this is kind of in the theme with bad bonds
here i was doing a bit of analysis on uh pension funds and this is this was this kind of spooked me
a little bit honestly um and i kind of want to leave people with this thought because if you've
got a pension fund it might be worth looking into what is in your pension fund um whether that's your
state or your local company and so what what you're seeing here on the graph this is pension funded
pension fund funded ratios by category as of 2025 and i use perplexity to come up with this analysis
So, yep, you know, don't take this as fact, but like, I think it's probably directionally correct.
And I looked at corporate pension funds, public pension funds, and just wanted to see like how funded are they?
How underfunded are they?
We talked about this on the hurdle rate.
So if you're interested in this topic, go listen to this week's hurdle rate podcast, the At the Hurdle Rate.
Matt Cole, CEO of Strive, myself, Ben Workman, and Tim Kotzman.
We unpack things every week and we did a deep dive into this.
But one thing that was really interesting here is this blue bar.
So this is public pensions.
So think of all state pensions across the entire United States.
This is a United States analysis.
What this analysis was showing is that public pensions across the United States are 17% underfunded.
That's crazy.
That's a crazy statistic.
17% underfunded.
So if everybody retired today, that means there would be a 17% gap.
Like all the money you said you were going to pay out everybody isn't there.
17% is missing.
Everybody has 17% less than you said you were going to pay out.
Yikes.
Big yikes.
Okay.
The 50th percentile, the mid-funded pension funds are 22% underfunded.
Okay.
Bottom quartile are actually 40% underfunded.
Okay, so how do you come up with the Delta?
You have to take more risk.
You have to go further out on the risk curve to come up with the Delta.
Or you've got to rely on more employees coming in the door that are going to contribute to the pension fund to help make up for that Delta in the underfunded rate.
That's interesting.
And the reason I brought this up is because I had a conversation with a guy this weekend that kind of spooked me a little bit.
He was telling me about his pension from a prior employer.
And the employer is pretty, they've got a pretty large pension.
They're like a healthcare company.
And 60% of the pension was invested in private equity.
And 17% of the pension was invested in high yield credit.
okay so you got 77 percent of the company is probably in very illiquid things what happens
when 20 percent of the private equity businesses that you're invested in go tits up because of ai
like what happens to your pension fund that that was spooky he was spooked um and then you know
when I was talking to Matt Cole on Monday on the hurdle rate pod,
CalPERS, I did analysis looking at CalPERS.
CalPERS had about 20%, 19% or 20% of their portfolio in private equity.
Okay. They're a significantly bigger company or significantly bigger operation.
They've got more risk, more liability.
They kind of conceptualize that.
But yeah, it just,
there's so much risk out there in all of these things,
all over the place and they're underfunded, they're banking on more employees coming in the
door to help fund them so all of these older folks can retire and pull out on their pensions
into the future. There's a lot of risk out there. Which, Jeff, if we're looking in the future,
do you think there's going to be more or less employees? I think the trend is less employees.
probably less employees right so if there are less employees who's going to make up for the
delta in this so the other question is right so if you're if you're 17 underfunded and somebody
draws on this or if you have a big portion of your you know past employee population that starts to
draw on this that it doesn't it doesn't come out um proportionally right so they're going to
continue to like if you've got all these boomers that are retiring and going out and they're
drawing on the pensions they're going to get paid 100 so you have a disproportionate impact that's
that's having an impact on all of the younger people that are putting into these pension funds
they're millennials or gen z that are getting pension funds if they're still around i'm most
everybody's shifted to 401k these days but i mean this is a this is a big issue and it's an issue on
state level you've got state level employees like what happens when a state level pension fund
doesn't like they start not paying the boomers that think that they're going to get the money
from the pension fund you have you have civil unrest you have people that are very pissed off
what is like what does that look like and i i don't know the answer to that like how do you
you fix that can you fix it guys look i could i could tell you a horror show from personal
understanding so by a strange confluence of events um the first company worked at in silicon valley
i left that company and due to due to a weird scenario i ended up at a startup that went that
basically fizzled out and i was there for like three months and it was weird so i got a job at
Nortel. So I joined Nortel. You'll see how it's really in a second. And so they onboard me and
they have a pension and the pension paid 3% of your gross base pay. I'm like, okay. So then what
I do is I sign up for the 401k and I do just a regular contribution. So I don't know, a month
later or something, I'm like, guys, this is kind of weird, but I checked on it. It seems to be
legal. I'm signed up for the, I'm paying for the 401k and the pension. And a whole bunch of people
said to me, this is 2005. This is not like the old days. They're like, why would you, why would
you do your own 401k if you get a free pension? And I'm like, what? It's like, what? I'm like,
I'll do the double dip, right? This makes total sense. Anyway, this is where the horror show
happens. So I was there for about a year. They did reverse, the company was, it was a hundred
years old and it basically imploded at the peak of the internet bubble. It was 50% of the Canadian
stock market, Nortel. Anyway, so I leave the company and I had told people, I said, I was,
I just told them, I said, I can't believe you people didn't ever did the 401k. They'd been
there for 20, 25 years. So I leave the company six months later, Nortel liquidates. I get phone
calls from a bunch of people. They're like, what happens to my pension? I'm like, I don't know.
Why are you calling me? And they're like, they never did. These people worked there for 20,
25 years and never did the 401k because that was less money out of their paycheck.
Now there's a pension guarantee corp that went in. This is why the 401ks and IRAs came out
because of the exact problem you're talking about. These people have no idea what I'm talking about.
None whatsoever. And that hit a whole bunch of people that put 25 years in at Nortel.
I get that this is old, right? Everybody's saying, oh, why are you talking about something
that happened 20 years ago? The people just could not price in any form of risk. And they thought
this company would live forever because it was free. And that's why they didn't have to do it.
So after I left the company, a month later, I applied and I was able to get this. I filled out
the paperwork in triplicate and mailed it back in, got a form, printed it all out, mailed it back in.
And I rolled the pension into my IRA account. Yeah. And it was non-taxable. Now they took,
it never grew again, but I didn't have to worry about this. And I, again, so, you know, Jeff,
when you talk about these things in theory, this is all real stuff. I don't know how people,
I don't think that anybody just says to them, can you explain to me why you bought this?
yeah and what an interesting thing that matt was explaining is like the people that are running
calpers or like the investment that are making the investment decisions are appointed politicians
they're not finance people so if you want to go talk to them and tell them hey like why don't you
consider this digital credit. If they started today, the earliest that they could potentially
start adding this instrument to the pension fund is probably like three years from now,
if they started today. And so you've got this like concept of you've got to have track record.
Nobody's going to take this risk for something that's new, newly issued. And there's probably
going to be a sort of hockey stick pattern of adoption on these digital credit instruments.
And there's this short period of time, probably the next three years, where this outsized alpha is available for the rest of the market before these things are rated, the people that understand them, and the adoption grabs hold in the rest of the traditional financial market.
Because even if they started today, it's going to take time in order for these things to come in the door at these places.
and one other one other graph i'm going to share here which is um oh man maybe dark mode is not
the way to do this but asset allocation of the top 10 u.s the top 10 u.s state pension funds from
24 to 25 and so i've got calpers calsters so california new york florida texas and new york
teachers wisconsin washington uh and what this shows is the breakdown of assets in each of these
pension funds. And a couple of things stood out to me is just the large portion in public equity
and the large portion in private equity and watching and just seeing how that is over 50%.
Those two components are over 50%. And we've spent a lot of this show talking about potential equity
risk. And so if there is this potential equity risk in the market, how do these things change?
These are large, large pools of capital with large assets under management with large liabilities.
And I think it's just good to be, I don't want to like scare everybody, but I think it's just good to be aware that, you know, pensions do have risk associated with them.
And not all pensions are the same.
Like you just say you have a pension fund.
like a company that provides you a pension fund is different from a state that's providing you a
pension fund they're they're investing in different things they have different liabilities they're
probably worth looking into in general yeah they're not all risk-free anyway okay so we're
at two hours bored everybody to death on uh risk let's do a go around we'll pass it to everybody
do final thoughts and we will see you at some point next week thank you tim for being around
for the entire episode of The Hardest Working Man in Bitcoin.
I'm going to go to you.
Final thoughts after watching everything here.
I'm just excited to have Mike on the Bitcoin Treasuries podcast tomorrow.
I'm going to go to sleep.
I'm going to sleep fast and get up, do some meetings tomorrow,
and then hang out with Mike.
So I'm super excited.
Before we started, I think maybe it was just you and Mason, Jeff,
but I said, I'm excited.
If you're not excited, your exciter is broken.
So I just think 2026 is going to be astronomically unbelievable.
Just look at every single thing that could be possibly in our favor from interest rate
trajectory to digital credit instruments.
And then you overlay that with sentiment and it's just kind of hilarious.
So those are my final thoughts.
yeah most of all the financial people in large institutions like they're not even on x they don't
even know this stuff is happening but they may be working in the space like there are a lot of people
that are working in the bitcoin space they can't even access x
which is funny like uh i've spoken with many of them actually and that they just have no idea
about like the hurdle rate pod or true north podcast what we're talking about or anything
like this yeah also kind of kind of doesn't make sense but uh or doesn't matter but i like that
now that dan's beside me it looks like we're actually it looks like we share a wall kind of
oh yeah like we're right beside each other all right over to you dan
i think 2026 uh there's a drucken miller quote out there about 2026 anyone saying that they know
what's going to happen in 2026 is lying it's one of the most unpredictable market environments that
he's ever seen so i don't feel like i have any place making any predictions but i do think um
the outlook is strong for bitcoin adoption over the long term and the thing the best thing to do
is expect the unexpected all right so dan says god candles bitcoin at a million at the end of the
year and he knows all of the things. I think you're right, Dan. There's a, I mean, everything,
people are working in the space. We have no idea where this is going to go. A lot of people are
working hard and things look bullish. Over, over to you, Mike. Yeah, look, Tim, I can't wait to do
this tomorrow. I I'm really looking forward to it. We've never done a podcast together, so
that'll be awesome to do it. Dan, congratulations. What you're doing with, with Buck being
involved with us and everything you're doing, putting together is awesome. I agree with you,
with what Druckenmiller said. I totally get it. It is incredibly hard to figure out what's going
to happen this year. And I will just quote, Finding Nemo. Keep on swimming. No matter what
happens, just keep on swimming. And if you get into that current and you go faster, awesome. If
you don't, that's the only thing you can do. Just keep on building, doing it, and new things will
come up. Did I think I was going to end up writing books? No, I didn't think anybody said to me,
you write a book. I'm like, no, why would I do that? So just keep on swimming. Who knows what
happens? So yeah, this is the most exciting story in all of finance. And keep talking to people.
If you're not talking to people, you have, you know, like that lady that's in New York,
head of housing now talking about owning property is racist so like yeah keep talking about this
stuff and and try to talk to other people it's just it's really powerful and keep on swimming
just keep showing up like soleil who's shown up for what 546 episodes in a row 546 episodes in a
row that's a lot of fun and they're always it's always an all-time high on number of episodes
that's right that's great tomorrow's a new all-time high
final thoughts so what do you got all right so from an option seller's perspective
uh there's this guy that i um that i really like uh his channel's called real pnl and he's one of
the only guys that sells courses that's like legitimately shares his pnl um so he's he's not
a scammer he's one of the guys that actually inspired me to cover my trades the way that i do
and um but one of the cautionary tales that he has for someone who just holds stock or
sells options is that you know the the stock can just go to zero right if if they get disrupted
they can just go to zero and then you're just left holding nothing right you're just
pulling thin air at that point but if you are holding a bitcoin treasury company
even if the 1x MNEV bears are correct, the bear case isn't zero. The bear case is 1x MNEV.
And if they're trading at leverage, it's plus whatever their leverage amplification is.
So it's never ripe for disruption like other stocks are. So I think it's kind of like the cure
for anyone who is like, you know,
just worried that, okay,
my computer chips are going to get disrupted
or whatever product and service you have
is going to be disrupted.
You can't disrupt the Bitcoin balance sheet.
Bingo.
Yeah, completely agree.
Yeah, you have ultimate flexibility
and you know that there's value.
Like having the commodity asset on their balance sheet,
yeah, you know that there's always value there.
So like if you under, if you take out the tail risk of Bitcoin going to zero,
which you're like, okay, is the internet going to break?
Is there going to be a global EMP?
Okay.
Well, I've got guns and whiskey for that, for that situation.
And if that doesn't happen, then like, I'm going to keep operating this in this lane.
You got it.
You're nailing it.
Cool.
Over to you, Mason.
Yeah, I have a quote as well.
Oh, your audio is awful again.
Oh, man.
Okay.
Goddamn, it's a good quote.
Here, I'm going to – do you think it's my connection or my mic?
Oh, man, I have no idea.
I think it's your connection.
Open up the door and maybe the Wi-Fi will flow through the door.
Doorway.
Oh, man, it's a good quote.
Whatever.
It's your connection.
We can't hear you.
Drop it in the chat.
Drop your quote in the chat.
And get better, get mesh wifi.
Okay.
My final thoughts is, oh, actually before that, if you like this, please like,
and subscribe, apparently we were supposed to say that now this is the investment
grade Bitcoin podcast.
We've talked about stuff like this for the last 60 weeks in a row.
We're out here analyzing this stuff.
We are working behind the scenes.
Many people are working in the industry now, and we've got a really unique
perspective of what's actually happening here. So the YouTube channel is called BTC True North.
Go check it out. All of our live videos are there. The X page is MSTR True North. Go check us out
there. We all have X handles. Those will be available within the YouTube channel. You can
look in the description. You can see all that stuff out there. So please like, subscribe,
follow along. That helps us out. Appreciate the support. My final thoughts are, in my opinion,
the four-year cycle is broken the four-year cycle is now broken forever i think the og sellers that
were focused on selling here and with the potential of buying back lower at 60k later down the road i
think that probability is incredibly low and uh i think the the architecture of the market is
completely changed and i think what we will see with bitcoin price action moving forward will be
significantly different than times past and it could just be a grind higher in perpetuity
with volatility along the way. I think the years of 80% drawdowns are gone.
And now that these instruments are tapping all different capital markets at different periods of
time, there is significantly different ways to buy Bitcoin at different periods of time. And
you're seeing it now, right? Like companies like Strategy, MetaPlanet, our company, we have been
buying Bitcoin, even though the price of Bitcoin has been down. So that can extend into the future
because these products exist.
And I think it's a fascinating development in the market
and that's only going to be bigger
as the years move forward.
Mason, we'll try one more time with a new connection.
And he's on mute.
Can you guys hear me?
What do you got?
I can hear you loud and clear.
You can? You can?
Okay.
I heard a quote today from...
Okay, okay.
I heard a quote from Mel Madison today.
He said, when the market gives you opportunities to buy,
there's no narrative in the zeitgeist to reinforce buying.
And that's why conviction matters.
So I'll leave it there.
Thank you, guys.
I think this will be a good year.
Bullish 2026.
I've got the bull right behind me.
We're going higher.
Appreciate it.
We'll see.
Yeah.
One last plug.
We'll see everybody in Vegas.
Come hang out in Vegas.
Yeah.
We'll,
we'll post that in the chat.
Come hang out in Vegas.
We'll,
we'll meet everybody in person and we'll have a great time.
Yeah.
Good night.
Awesome.
See ya.
Good night.