1 00:00:00,000 --> 00:00:27,840 Ladies and gentlemen, what you are about to hear may be amazing, but it is not financial advice. 2 00:00:27,840 --> 00:00:30,940 It is for informational and educational purposes only. 3 00:00:31,820 --> 00:00:36,740 Nothing in this discussion should be considered investment advice or the offering of any security 4 00:00:36,740 --> 00:00:38,140 or other investment product. 5 00:00:38,640 --> 00:00:41,200 Please consult your own investment and tax advisors. 6 00:00:41,780 --> 00:00:46,420 And now I'll hand it over to the True North team for your regularly scheduled programming. 7 00:00:48,720 --> 00:00:49,360 Woo! 8 00:00:49,800 --> 00:00:50,580 Welcome back. 9 00:00:50,820 --> 00:00:52,780 True North, episode 60. 10 00:00:53,780 --> 00:00:56,020 Welcome to the Investment Grade Bitcoin podcast. 11 00:00:56,120 --> 00:00:56,400 We're here. 12 00:00:56,400 --> 00:00:57,420 We've got a lot for you. 13 00:00:57,840 --> 00:01:03,160 So much has happened in the last five or six days in the entire world. 14 00:01:03,740 --> 00:01:06,120 It seems like there's chaos kind of going everywhere. 15 00:01:06,420 --> 00:01:10,220 For those of you that are new here, we talk about Bitcoin. 16 00:01:10,480 --> 00:01:12,560 We talk about Bitcoin-backed securities. 17 00:01:12,740 --> 00:01:15,940 We talk about financialization of Bitcoin instruments. 18 00:01:15,940 --> 00:01:18,580 We talk about different ways to think about these things. 19 00:01:18,620 --> 00:01:19,780 We talk about risk profiles. 20 00:01:19,780 --> 00:01:21,040 We talk about options market. 21 00:01:21,460 --> 00:01:26,240 We try to cover everything that's hot this week. 22 00:01:26,240 --> 00:01:34,260 So, I appreciate the time. We've got Adrian today, Soleil, and Dan, and myself. I'm the host, and let's get after it. 23 00:01:34,360 --> 00:01:38,720 And we've already got the Tim intro, and let's jump right into it. 24 00:01:39,040 --> 00:01:46,900 So, the last couple of weeks, I've been passing it around to folks and see what they're interested in or what's hot, what's the hot topic of the week. 25 00:01:47,360 --> 00:01:52,540 But I wrote a few down, and I want to walk through these first to get a lay of the land and kind of kick off the conversation here. 26 00:01:52,540 --> 00:01:56,380 So at the market, what's happening in the market? 27 00:01:56,380 --> 00:02:01,300 So over the last five days, here's a list of the things that have happened. 28 00:02:03,260 --> 00:02:06,300 Over the weekend, Trump gives Iran an ultimatum. 29 00:02:06,360 --> 00:02:13,860 You've got 48 hours to respond and work on a peace deal or else we're going to keep bombing you. 30 00:02:14,120 --> 00:02:15,520 Okay, that happened on Saturday. 31 00:02:16,260 --> 00:02:18,000 You've got Elon Musk comes out with tariff fab. 32 00:02:18,040 --> 00:02:20,320 He's like, we're going to start building our own AI chips. 33 00:02:20,320 --> 00:02:27,560 uh iran comes back to trump says we're actually going to target u.s bases uh private credit 34 00:02:27,560 --> 00:02:33,960 continuing to pull uh pull the door on people trying to exit the trade they're capping withdrawals 35 00:02:33,960 --> 00:02:39,020 on private credit this is happening across several different funds gold and silver on sunday dropped 36 00:02:39,020 --> 00:02:45,540 like 10 on sunday night ended up ripping back three or four five percent higher but significant 37 00:02:45,540 --> 00:02:51,120 declines in the price of gold and silver. These commodities have dropped like $10 trillion in 38 00:02:51,120 --> 00:02:58,760 the last five days. We're now seeing potential digital price tags at Walmart. So if you want to 39 00:02:58,760 --> 00:03:04,360 go get different goods and services like an apple or bananas or something, they might have the ability 40 00:03:04,360 --> 00:03:09,220 to change the price digitally and it might just change on you every day. So this concept of 41 00:03:09,220 --> 00:03:15,400 inflation is starting to become more of a concern. The market is starting to price in tax, not 42 00:03:15,400 --> 00:03:20,580 tax increase rate increases instead of rate decreases, you know, multiple rate decreases 43 00:03:20,580 --> 00:03:26,780 six months ago. Then Trump comes out, says there's a 15, 15 point plan to end the war. 44 00:03:27,680 --> 00:03:32,820 And we're potentially going to get a ceasefire. Then all of a sudden they changed the enlistment 45 00:03:32,820 --> 00:03:41,140 age from 34 to 42. The price of oil continues to rip higher. And then right before Trump talks or 46 00:03:41,140 --> 00:03:46,080 sends a tweet about ceasefire. There's billions of dollars that go in on options trades on the oil 47 00:03:46,080 --> 00:03:53,860 market right before that happened. Crazy deal. Some ships start getting let through the 48 00:03:53,860 --> 00:03:59,800 Strait of Hormuz, but there's a $2 million toll on any ship that comes through. 49 00:04:01,020 --> 00:04:07,200 And then we've got Morgan Stanley files a Bitcoin ETF. Strategy changes or launches another 42-42 50 00:04:07,200 --> 00:04:14,340 plan or I guess a $42 billion plan, 21 billion ATM on MSTR, 21 billion on STRC and a revision 51 00:04:14,340 --> 00:04:15,180 on STRK. 52 00:04:15,460 --> 00:04:16,700 That's kind of what's happened there. 53 00:04:16,820 --> 00:04:19,640 But my gosh, this timeline is insane. 54 00:04:20,260 --> 00:04:21,520 I've never seen anything like it. 55 00:04:22,300 --> 00:04:24,960 And I just want to start with the lay of the land there. 56 00:04:25,020 --> 00:04:25,880 What are you guys thinking about? 57 00:04:25,940 --> 00:04:26,560 What's on your mind? 58 00:04:26,840 --> 00:04:28,020 Adrian, I haven't seen you in a while. 59 00:04:28,080 --> 00:04:28,540 Welcome back. 60 00:04:29,760 --> 00:04:31,640 Well, yeah, I've been crazy busy. 61 00:04:32,780 --> 00:04:36,940 Everything you laid out just kind of shows how nuts things have been this year. 62 00:04:36,940 --> 00:04:42,160 so far. We've got the situation with Iran, the straight oil prices, gold, silver, 63 00:04:43,580 --> 00:04:49,240 the broader market. Every single day, there's one thing after another. So it's really, really 64 00:04:49,240 --> 00:04:56,460 hard to keep up with it. And also, it's really weird knowing that just because you see something 65 00:04:56,460 --> 00:05:00,900 doesn't necessarily mean it's actually accurate. People are just out there tweeting stuff. They're 66 00:05:00,900 --> 00:05:04,920 just putting out information. You don't know what's what. It's really crazy out there how this 67 00:05:04,920 --> 00:05:09,520 year has kind of kicked off and we're only in March. So what, what, what's things going to be 68 00:05:09,520 --> 00:05:14,940 like by the summer when, um, when things really have a chance to settle and, um, 69 00:05:15,460 --> 00:05:21,620 and the market gets to make sense of it. I just, it's been wild, especially with what's going on 70 00:05:21,620 --> 00:05:25,820 with Iran. We're not going to get political here. I'm just saying it's just been kind of crazy to, 71 00:05:25,820 --> 00:05:30,920 um, see what's going on. Well, I think one of the craziest parts about the whole thing is that 72 00:05:30,920 --> 00:05:35,960 the communication is happening on Twitter. It's like you're in the war room. You are seeing the 73 00:05:35,960 --> 00:05:42,140 communication go from country to country. And then you see Trump says he's talking to somebody about 74 00:05:42,140 --> 00:05:47,600 peace deals. And then I guess the Iran military says, no, they're not. And it's like, what's real? 75 00:05:47,860 --> 00:05:54,480 What's fake? What's AI? Who's in control? What is happening right now? And it's just there's chaos 76 00:05:54,480 --> 00:05:57,980 everywhere. It's a bit hard to decipher. 77 00:05:59,120 --> 00:06:02,560 To that point, the fact that the Iranian military's Twitter 78 00:06:02,560 --> 00:06:06,460 page or the actual state pages that are run by the government are 79 00:06:06,460 --> 00:06:10,780 trolling our president, I never 80 00:06:10,780 --> 00:06:14,300 thought in my entire life that I would see two military, 81 00:06:14,860 --> 00:06:18,660 two state forces trolling each other and 82 00:06:18,660 --> 00:06:22,480 tweeting back and forth at each other on Twitter. Yeah, crazy timeline. 83 00:06:22,480 --> 00:06:23,600 Just an insane timeline. 84 00:06:24,280 --> 00:06:27,320 Maybe I'll pass it over to you, Soleil. 85 00:06:27,740 --> 00:06:29,140 I mean, how are you feeling right now? 86 00:06:29,280 --> 00:06:30,160 What's cooking? 87 00:06:30,400 --> 00:06:30,960 What's on your mind? 88 00:06:32,000 --> 00:06:34,780 Well, we're going to get into a ground invasion in Iran. 89 00:06:35,380 --> 00:06:40,560 Kicks off a draft and the second American Civil War, but I got Bitcoin in cold storage. 90 00:06:40,660 --> 00:06:44,100 So I sleep good every night and I haven't missed a sunrise in March. 91 00:06:45,200 --> 00:06:47,420 So there you go. 92 00:06:47,540 --> 00:06:48,640 We can only do what we can do. 93 00:06:49,220 --> 00:06:50,240 We can only do what we can do. 94 00:06:50,440 --> 00:06:50,700 Yeah. 95 00:06:50,760 --> 00:06:51,360 Oh, my gosh. 96 00:06:52,480 --> 00:06:56,920 that would be would be hopefully there's no draft i mean fingers crossed that would be 97 00:06:56,920 --> 00:07:01,620 this is gonna be crazy i mean with drones and everything yeah weird times weird times 98 00:07:01,620 --> 00:07:06,260 over to you dan what's uh what's on your mind tokenization you're cooking what's going on with 99 00:07:06,260 --> 00:07:10,140 buck what are you thinking about you're on mute 100 00:07:10,140 --> 00:07:16,960 okay we'll come back to it 101 00:07:16,960 --> 00:07:20,460 we'll work on it 102 00:07:20,460 --> 00:07:22,680 oh I can hear you now 103 00:07:22,680 --> 00:07:23,220 we're good 104 00:07:46,960 --> 00:08:11,620 Oh, you hear that, Dan? 105 00:08:11,660 --> 00:08:11,980 Oh, really? 106 00:08:13,320 --> 00:08:15,220 Dan, you got to jump off and come back on. 107 00:08:15,220 --> 00:08:17,500 Sorry, troubleshooting the new platform. 108 00:08:18,120 --> 00:08:18,940 Join on Chrome, Dan. 109 00:08:21,160 --> 00:08:21,640 Okay. 110 00:08:23,880 --> 00:08:25,560 We will move along. 111 00:08:28,000 --> 00:08:30,000 So while we wait for Dan to jump back on, 112 00:08:30,140 --> 00:08:32,820 let's jump into the update on MSTR, right? 113 00:08:32,860 --> 00:08:36,700 This week, we've got a new updated $42 billion plan, 114 00:08:36,800 --> 00:08:40,720 $21 billion MSTR ATM, $21 billion SDRC ATM. 115 00:08:40,720 --> 00:08:46,120 And then they downsized the SDRK ATM, I think, from $21 billion down to $2.1 billion. 116 00:08:47,120 --> 00:08:52,900 I think this is really not a huge surprise that they came out with this updated plan. 117 00:08:53,660 --> 00:09:00,780 The biggest signal, in my opinion, was the focus on the SDRK ATM, making that a $21 billion ATM, 118 00:09:01,340 --> 00:09:06,940 and just downsizing the size of the SDRK one. It's really signaling this is the focus here. 119 00:09:06,940 --> 00:09:12,340 we are focused on building STRC. I'm sure there's a lot of confidence in all the other products, 120 00:09:12,500 --> 00:09:21,280 but they're not mature yet and they will mature over time as the interest in STRC as just a 121 00:09:21,280 --> 00:09:26,900 general instrument and these digital credit instruments starts to grow. And now I think 122 00:09:26,900 --> 00:09:31,860 we maybe have Dan back. Is he back? Yeah, I think I'm back, guys. Okay, we're back. 123 00:09:31,860 --> 00:09:38,260 hit it dan what's uh what's on your mind yeah uh sorry about the mishap everybody that's my fault 124 00:09:38,260 --> 00:09:45,120 um adrian's point is very very relevant to think financial markets haven't changed since the 1980s 125 00:09:45,120 --> 00:09:50,860 um considering that we're seeing you know uh militaries interact with each other via twitter 126 00:09:50,860 --> 00:09:55,520 would be a completely wrong assumption right we're seeing information speed up seeing the 127 00:09:55,520 --> 00:10:00,580 diffusion of information in record time not to mention that mark andreason and jordy viscer 128 00:10:00,580 --> 00:10:06,480 are outposting saying the new consumer era is beginning with agents as the consumer economy. 129 00:10:06,640 --> 00:10:12,960 If in fact, robots and agents become a dominant part of the entire consumption economy over the 130 00:10:12,960 --> 00:10:18,580 next 10, 20, 30 years, right? The speed of transactions, the way financial markets trade, 131 00:10:18,700 --> 00:10:22,680 the edge in the short term versus the edge in the long term is all going to be like massively 132 00:10:22,680 --> 00:10:26,500 different. So I think largely in the short term interest rate environment is actually, 133 00:10:27,060 --> 00:10:32,100 It matters for the way Trump is handling the war. I don't think it matters as kind of a nitty-gritty 134 00:10:32,100 --> 00:10:37,220 macro trade point. And more importantly, I think it's very hard to trade markets like you have in 135 00:10:37,220 --> 00:10:42,900 the past, macro equities, et cetera, et cetera. So I'm focusing really everything onto STRC. 136 00:10:42,900 --> 00:10:48,660 There's a guy on Twitter named Flood. Pretty much everyone now knows, all the Bitcoin guys, 137 00:10:48,660 --> 00:10:54,500 that STRC is the most important product in all of the Bitcoin market. And I think people are 138 00:10:54,500 --> 00:10:59,620 are starting to become aware that this is going to be a perpetual Bitcoin buyback bid that's 139 00:10:59,620 --> 00:11:06,340 starting to occur. So watching how SDRC trades, watching how it's brought into products, watching 140 00:11:06,340 --> 00:11:11,740 who's on the bid, where the sales happen, how far does it depeg, how is the interest rate adjusted? 141 00:11:11,820 --> 00:11:15,460 I think it's the only thing really to look at right now in the entire Bitcoin landscape. So 142 00:11:15,460 --> 00:11:21,880 that's where I'm focusing all my energy. We've got one of those too. Love Seda. I know. 143 00:11:21,880 --> 00:11:25,960 So, but this is an important topic. 144 00:11:26,140 --> 00:11:31,480 And this is kind of exactly what we were on when talking about the change in the size of the ATMs, right? 145 00:11:31,520 --> 00:11:33,720 The SDRC ATMs now significantly larger. 146 00:11:34,220 --> 00:11:40,060 And we had an update come out today is that options are now available on SATA. 147 00:11:40,900 --> 00:11:44,840 And I think this is a topic worth exploring. 148 00:11:45,140 --> 00:11:45,960 And Dan, you hit on this. 149 00:11:46,040 --> 00:11:49,560 This is, I think, just incredibly important to kind of like think through here. 150 00:11:50,360 --> 00:11:51,380 Who's on the bid? 151 00:11:51,380 --> 00:11:56,840 who's on the ask as well, right? Who's trading both sides of this instrument. So this is something 152 00:11:56,840 --> 00:12:01,880 I watched like throughout the day. I'm watching how are these instruments trading? How are they 153 00:12:01,880 --> 00:12:05,000 trading relative to each other? I'm looking at different relativities throughout the day, 154 00:12:05,000 --> 00:12:11,640 not just between, you know, SATA and STRC, but SATA and strife, SATA and stride, SATA and strike. 155 00:12:12,040 --> 00:12:16,960 How do those all interact together? How do these look relative to HYG? How do these look relative 156 00:12:16,960 --> 00:12:23,200 to TLT? How do these look relative to, you know, like real estate bonds and watching the interplay 157 00:12:23,200 --> 00:12:29,260 between the two. And I think this is, um, and we talked a little bit about this last week. 158 00:12:29,400 --> 00:12:37,180 I think this is the most, uh, this is the most interesting and compelling ARB surface 159 00:12:37,180 --> 00:12:44,040 I have literally ever seen. And, and I think it's going to explode into the future. 160 00:12:44,040 --> 00:12:49,600 And the reason being is like you think about the equity market, right? Like Citadel, Jane Street, 161 00:12:49,680 --> 00:12:53,100 all the people that are doing high frequency trading, just getting fractions of a penny on 162 00:12:53,100 --> 00:12:59,400 the dollar in the equity market. They take significant risk, like downside tail risk in 163 00:12:59,400 --> 00:13:05,700 the equity market because you're trading for pennies, but you can have that one shock that 164 00:13:05,700 --> 00:13:10,920 could just blow up your trade. So that's interesting. The equity market has been developed 165 00:13:10,920 --> 00:13:12,980 and it's very fast, like it's very liquid. 166 00:13:13,660 --> 00:13:16,720 And historically, the credit market has been very illiquid. 167 00:13:17,160 --> 00:13:21,920 Now that's changed over time with the development of these ETFs like HYG and these other bond 168 00:13:21,920 --> 00:13:27,560 funds that have been able to provide like a liquidity layer over these typically illiquid 169 00:13:27,560 --> 00:13:28,040 instruments. 170 00:13:29,160 --> 00:13:33,720 But I think in my opinion, the most interesting thing here is that it fundamentally changes 171 00:13:33,720 --> 00:13:36,520 the risk profile of an ARB, right? 172 00:13:36,520 --> 00:13:56,540 Like if you're interested in arbing a penny or two, your downside risk of like, okay, if this goes the wrong way on me, I'm holding a credit instrument backed by a significant pool of capital that's paying me 11.5% to 12.75% yield monthly. 173 00:13:57,480 --> 00:13:58,500 That's fascinating. 174 00:13:58,760 --> 00:14:03,600 So I'm really excited about the options market and seeing how this thing evolves here. 175 00:14:03,600 --> 00:14:07,880 it's not incredibly liquid, but it's growing in liquidity. I know, Dan, you've talked a lot about 176 00:14:07,880 --> 00:14:15,460 the put market and that potential there, but the ability, the different optionality that opens up 177 00:14:15,460 --> 00:14:23,240 with having an options market is just, it explodes the number of possibilities of potential trades. 178 00:14:24,180 --> 00:14:30,620 And just how my brain is thinking is like, what are we doing? This is a carry trade, right? 179 00:14:30,620 --> 00:14:33,580 We are, you know, you borrow, you borrow dollars to buy Bitcoin. 180 00:14:33,700 --> 00:14:34,840 It's like perpetual carry trade. 181 00:14:35,240 --> 00:14:38,680 Well, now other people can kind of create a similar type carry trade. 182 00:14:38,760 --> 00:14:40,440 I think there's some really interesting trades out there. 183 00:14:40,520 --> 00:14:46,880 And Dan, I'm curious if you've thought about this, but I'm looking at like a theoretical 184 00:14:46,880 --> 00:14:54,900 short HYG, which is a high yield bond fund, long STRC. 185 00:14:56,820 --> 00:14:59,180 And there's, there's an ARB there. 186 00:14:59,180 --> 00:15:03,100 And the interesting ARB is HYG is a monthly bond fund. 187 00:15:03,840 --> 00:15:05,900 STRC pays dividends monthly. 188 00:15:06,720 --> 00:15:08,720 Now, there's a difference in the record date. 189 00:15:10,080 --> 00:15:16,920 So not only does STRC have a larger interest rate, the borrow costs are relatively cheap 190 00:15:16,920 --> 00:15:18,220 on some of these bond funds. 191 00:15:18,660 --> 00:15:23,140 If you hold a short position on one of the bond funds during the record date, you have 192 00:15:23,140 --> 00:15:23,740 to pay the dividend. 193 00:15:23,740 --> 00:15:32,860 But if you open a short and close a short before the record date, I don't think you have to pay the dividend. 194 00:15:33,600 --> 00:15:48,040 So there's a ton of different risk return trades that are arbable that I think can be very compelling from a risk standpoint when seeing what your other options are out there in the market. 195 00:15:48,760 --> 00:15:51,020 So this is going to explode, in my opinion. 196 00:15:51,020 --> 00:15:55,320 Like the options market is going to get much more, I think much more compressed. 197 00:15:55,520 --> 00:16:04,840 Like if you look at a zero DTE options on like the spy, you can, there's like dollar spreads between the options market. 198 00:16:05,960 --> 00:16:11,700 And so like right now you look at STRC and you look at all the options strikes that are available and they're like $5 increments. 199 00:16:12,140 --> 00:16:20,320 I suspect that's probably going to go to dollar increments and it might even go to 50 cent increments and then 10 cent increments and just get tighter and tighter and tighter. 200 00:16:20,320 --> 00:16:25,180 as the volatility of this thing gets tighter and tighter and there's more demand for these options 201 00:16:25,180 --> 00:16:31,920 products. And why is that compelling? Well, it's compelling because you see the history and the 202 00:16:31,920 --> 00:16:38,340 trading patterns of something like STRC and you know that there's this constant bid near the record 203 00:16:38,340 --> 00:16:46,120 date to push it back to 100. So after the record date, if the price drops off, the ARB opens up. 204 00:16:46,120 --> 00:16:51,960 it's like our window open and there's there's people that are going to be interested in that 205 00:16:51,960 --> 00:16:59,800 trade and that um i think this is like it's going to breed massive liquidity it might take a while 206 00:16:59,800 --> 00:17:06,360 but uh like those those arb windows like right now is very big and i think it will shrink over time 207 00:17:06,360 --> 00:17:11,320 but as people start to recognize like the downside risk associated with the relative arb 208 00:17:12,240 --> 00:17:13,580 So a lot of words there. 209 00:17:13,880 --> 00:17:15,520 I went for a walk with my wife and she's like, 210 00:17:15,540 --> 00:17:16,220 what are you thinking about? 211 00:17:16,240 --> 00:17:17,160 And I tried to explain it. 212 00:17:17,320 --> 00:17:17,620 I was like, 213 00:17:17,880 --> 00:17:20,360 that was the wrong question. 214 00:17:20,360 --> 00:17:21,540 I was like, 215 00:17:21,580 --> 00:17:22,180 we got to stop. 216 00:17:22,540 --> 00:17:23,180 I got to talk about it. 217 00:17:23,520 --> 00:17:24,780 I think that's a super, 218 00:17:24,900 --> 00:17:26,180 super good point because right. 219 00:17:26,260 --> 00:17:29,780 We've seen the release of interweek options on IBIT. 220 00:17:30,080 --> 00:17:34,680 So now there's options every two trading days for the IBIT ETF, 221 00:17:35,020 --> 00:17:39,580 which are going to be used to hedge the credit quality of some of these 222 00:17:39,580 --> 00:17:40,260 preferred equities. 223 00:17:40,260 --> 00:17:45,080 and I know institutions are already starting to think about this. Ultimately, it will likely be 224 00:17:45,080 --> 00:17:49,640 on the common equity issued by these preferred, the common equity of these preferred equity 225 00:17:49,640 --> 00:17:53,540 issuers, right? So a lot of people are hedging their stretch exposure with MSCR puts, et cetera, 226 00:17:53,600 --> 00:17:58,500 et cetera. And I think that will be a theme that will continue. And then on this idea of a massive 227 00:17:58,500 --> 00:18:04,160 trade. So I would, I personally would push back a little bit on being short the US bond fund, 228 00:18:04,220 --> 00:18:08,420 because ultimately by not owning dollars, you're implicitly short dollars. That would be a really 229 00:18:08,420 --> 00:18:12,860 interesting trade if you're betting on that. I think that trade would be extremely interesting 230 00:18:12,860 --> 00:18:20,520 for something like you'd be short the US 10-year and long strife because now you're hedged on 231 00:18:20,520 --> 00:18:28,040 interest rate volatility, right? Similar idea. And then furthermore, like we know, and we're 232 00:18:28,040 --> 00:18:33,700 Bitcoiners because we understand that M2, the way fractional reserve banking works is that when the 233 00:18:33,700 --> 00:18:44,200 When the bank reserves are increased at the Federal Reserve, all of the U.S. bank reserves, those are then essentially levered and levered 10 to 1, right? 234 00:18:44,240 --> 00:18:49,200 Because the actual reserve ratio is sub 10% United States across all banks. 235 00:18:49,720 --> 00:18:50,700 So money is being printed. 236 00:18:50,700 --> 00:19:06,620 Okay, well, where do you, if you have money and the cost of that money is right now 3.8, 3.5% in an overnight repo market, a bank's job is to lend it out at a rate that is higher than that. And that is how the money is created, essentially. 237 00:19:06,720 --> 00:19:20,260 So what Stretch is, is it's like a vacuum. It's like a pit for this money that is seeking a return higher than the risk-free rate, because that's how the institutions which create credit in the United States make money. That's how they're profitable. 238 00:19:20,700 --> 00:19:38,220 So I would say that I don't think this is going to happen in the next four months or five months, but I do think any rational actor, probably hedge funds first, will capitalize on this arbitrage by taking this levered money that really isn't real and dumping it into a higher yield vehicle. 239 00:19:38,220 --> 00:20:01,340 That ultimately is funneling all that capital into the Bitcoin network, which has a hard cap, which then therefore powers up the network, increases the value of the coins, and continues this perpetual, effectively short USD long BDC trade in the form of Bitcoin treasury companies, which are the speculative attack on a fractional reserve capital. 240 00:20:02,040 --> 00:20:02,900 Yeah, it's a Trojan horse. 241 00:20:02,900 --> 00:20:16,860 And that was breaking news with the IBIT having three expirations a week because as an option seller, one of the things that I think about is how often can I compound this investment? 242 00:20:17,420 --> 00:20:21,080 And with weeklies, you can do that 52 times a year. 243 00:20:21,140 --> 00:20:32,500 You can just plug that into your compound interest calculator and figure out if I average my premiums this much and then compound it 52 times, that would be my profit at the end of the year. 244 00:20:32,900 --> 00:20:37,960 And that basically triples it. So now you can compound your returns if you're reinvesting them 245 00:20:37,960 --> 00:20:57,538 all 150 times a year which is pretty insane And then Jeff what you were saying about maybe even getting smaller than strikes it does kind of make sense I mean if you going to be spending 99 of the stock life 246 00:20:57,538 --> 00:20:58,958 between 99 and 101, 247 00:21:00,098 --> 00:21:05,718 then no one's trading the $80 strike on these products. 248 00:21:06,418 --> 00:21:09,458 So we might as well have the 99.10 cents, 249 00:21:09,718 --> 00:21:12,358 or 99.05, 99.10, 99.15. 250 00:21:12,698 --> 00:21:13,778 Those are more interesting. 251 00:21:13,778 --> 00:21:20,018 but even with the way they are now there was a guy in my live and he's like oh yeah I sold 252 00:21:20,018 --> 00:21:27,098 I sold some calls I think on stretch at the hundred strike and I'm like why you know it's 253 00:21:27,098 --> 00:21:32,258 like one percent of the underlying premium for like a month out and I'm like that's like a quarter 254 00:21:32,258 --> 00:21:37,518 percent profit a week like it was very uninteresting to me but he was like easiest money I ever made 255 00:21:37,518 --> 00:21:43,138 it was you know i mean it was just like it was just like easy peasy i'll just take them free 256 00:21:43,138 --> 00:21:49,858 money in his you know in his view so so let i was fascinated with this i did a little analysis on 257 00:21:49,858 --> 00:21:55,398 stretch right before this and i just looked on you know robin hood i looked at the dates and just 258 00:21:55,398 --> 00:22:00,778 the dates the expiration dates alone are fascinating right we got april 17th may 15th 259 00:22:00,778 --> 00:22:11,978 june 18th september 18th uh the record date is the 15th so the open interest on the dates that 260 00:22:11,978 --> 00:22:19,738 were after the 15th was significantly higher right so so there are people that are uh i guess selling 261 00:22:19,738 --> 00:22:28,378 calls on the hundred dollar strike after the record date but you go look at may 15th the open 262 00:22:28,378 --> 00:22:33,418 interest on a hundred dollar call is like a fraction of all the other dates because it's 263 00:22:33,418 --> 00:22:36,858 the record date. Like that's when you expect the most demand. And this is kind of what I'm getting 264 00:22:36,858 --> 00:22:43,398 at. It was like, what we're eight months in and we're like brainstorming these ideas that there 265 00:22:43,398 --> 00:22:47,738 are thousands of people and going to be 10,000 people. And then a hundred thousand people 266 00:22:47,738 --> 00:22:55,038 equipped with AI and interested in these types of products and going to be making like trading 267 00:22:55,038 --> 00:23:01,898 algorithms with it. That's going to happen all over the place. And Dan, you brought up not doing 268 00:23:01,898 --> 00:23:08,258 short the traditional bond long, unless it's long strife. I disagree because you could do it on the 269 00:23:08,258 --> 00:23:15,858 short, you could do it in a day. You could short one instrument for a day, buy in on the record 270 00:23:15,858 --> 00:23:21,638 date, exit, close the trade, not have to pay the dividend. That's interesting. Theoretically, 271 00:23:21,638 --> 00:23:28,838 right i'm not i'm not suggesting i think it's an interesting trade and it's like an arb opportunity 272 00:23:28,838 --> 00:23:34,798 and i think there's like how much risk do you take on for that day of work or two days of work 273 00:23:34,798 --> 00:23:41,338 eight hours of work what does that look like relative to other risk return trades in the 274 00:23:41,338 --> 00:23:47,798 market i think you're gonna have the high frequency guys jumping all over this uh and finding different 275 00:23:47,798 --> 00:23:53,538 opportunities here. Quick, quick word of caution for anybody trying to sell covered calls, even if 276 00:23:53,538 --> 00:23:58,758 you think you're slick and you're going to do it before or after the record date, if the price is 277 00:23:58,758 --> 00:24:05,538 close and it makes more sense for whoever bought your call, just keep in mind that the buyer has 278 00:24:05,538 --> 00:24:11,858 the right to exercise at any time. They don't have to wait for the expiration date. So they can 279 00:24:11,858 --> 00:24:17,578 exercise and snatch your shares on the record date if it's beneficial to them to get that one 280 00:24:17,578 --> 00:24:23,498 percent uh dividend right if it's close enough to the share price to make it worth their while 281 00:24:24,458 --> 00:24:28,698 you can you can get your shares snatched so just just be very very careful with it yeah 282 00:24:30,218 --> 00:24:34,938 dividend paying equities are always different when it comes to options and they become far more 283 00:24:35,658 --> 00:24:41,418 uh risky because of that very complex we're talking very sophisticated i mean this is the 284 00:24:41,418 --> 00:24:46,698 investment grade bitcoin podcast we're talking about sophisticated potential potential um things 285 00:24:46,698 --> 00:24:51,978 that you could do or at least consider right like this is the stuff that people people that do this 286 00:24:51,978 --> 00:24:57,418 for a living are going to be doing this right people that are far more sophisticated than 287 00:24:57,418 --> 00:25:03,578 anything i've ever done and like literally been trading for a decade or two are they're going to 288 00:25:03,578 --> 00:25:07,018 be doing this because that's like that's their job they're going to be making the markets they're the 289 00:25:07,018 --> 00:25:12,618 ones making the options markets they're the ones you know figuring out things uh unique trades here 290 00:25:12,618 --> 00:25:17,678 But I mean, I've seen several people talk about like, oh, this is the ultimate carry trade. 291 00:25:17,918 --> 00:25:20,938 Like this, you can run your own effective carry trade. 292 00:25:22,598 --> 00:25:23,698 Dan, you've talked about it. 293 00:25:23,738 --> 00:25:29,038 You could borrow money, borrow money in a cheap currency, deploy it in an expensive currency. 294 00:25:29,218 --> 00:25:34,798 It's just deployed in a more powerful, more powerful system is exactly what you're talking about. 295 00:25:36,818 --> 00:25:38,798 I mean, Adrian, what's your take? 296 00:25:38,878 --> 00:25:40,418 I mean, you're Mr. AI. 297 00:25:40,418 --> 00:25:44,658 you've got all the computers underneath your desk running cranking all the time what's uh what are 298 00:25:44,658 --> 00:25:49,938 you thinking so i do i do think that the arbitrage opportunity is going to be very interesting for 299 00:25:49,938 --> 00:25:53,298 larger players and hedge funds initially i don't really think this is something that 300 00:25:54,018 --> 00:25:58,418 guys are going to be vibe coding their way through right now to figure out the market isn't mature 301 00:25:58,418 --> 00:26:02,898 enough and there's too many moving factors just like the ones that soleil pointed out around the 302 00:26:02,898 --> 00:26:05,238 the record date. 303 00:26:05,798 --> 00:26:11,538 And however, as stretch becomes more mainstream, 304 00:26:11,918 --> 00:26:15,478 I do think that the biggest, 305 00:26:15,738 --> 00:26:17,218 and I'm going to sound really, really boring here. 306 00:26:17,458 --> 00:26:19,978 The biggest draw for it is just going to be that steady dividend. 307 00:26:19,978 --> 00:26:22,298 And that's what's going to create the opportunities 308 00:26:22,298 --> 00:26:26,958 for different arbitrage plays with the bigger players. 309 00:26:27,198 --> 00:26:30,238 I don't know if smaller players are going to be arbitraging it. 310 00:26:30,238 --> 00:26:42,498 I think that for most people, it's going to be a way that they can get a steady dividend or engage in some kind of a carry trade where they're borrowing money in one currency, deploying it in another, right? 311 00:26:42,498 --> 00:26:43,298 That makes sense. 312 00:26:43,698 --> 00:26:51,538 But the algorithmic plays that we're discussing, these kinds of high-frequency opportunities, I think that's where the big player is going to make their hay. 313 00:26:51,538 --> 00:26:54,298 and I think that it's going to become more and more interesting 314 00:26:54,298 --> 00:26:56,798 as volume becomes steady state 315 00:26:56,798 --> 00:27:01,598 because my view is that stretch is going to hit a normalized level of volume. 316 00:27:01,918 --> 00:27:03,258 That's going to become the new reality, 317 00:27:03,338 --> 00:27:04,458 and then it's going to move up from there. 318 00:27:04,458 --> 00:27:07,058 As it becomes more steady, as it becomes more mature in the market, 319 00:27:07,598 --> 00:27:09,918 different players are going to enter in for different reasons. 320 00:27:10,558 --> 00:27:14,118 But if I'm going to attempt any of this, 321 00:27:14,178 --> 00:27:15,778 as of right now, I'm going to say no. 322 00:27:16,078 --> 00:27:17,338 One, I don't have the time. 323 00:27:17,618 --> 00:27:21,478 And two, I just like the fact that I've got a wad of money 324 00:27:21,478 --> 00:27:25,798 is stretched, I'm going to get the dividend. And for the time being, that's sufficient for me. 325 00:27:26,258 --> 00:27:30,058 Will I think through different ways to arbitrage this as it goes on? Absolutely. 326 00:27:32,518 --> 00:27:38,998 Yeah, 100%. And again, that's the answer for 99% of people. But I mean, look at the chart, 327 00:27:38,998 --> 00:27:49,518 this is so fascinating. It opened the day at what? 99.97, hit 99.99, and it traded $151 million 328 00:27:49,518 --> 00:27:57,158 dollars of volume and it only moved five six cents like what like what do you mean it traded 150 329 00:27:57,158 --> 00:28:02,178 151 million dollars of volume and only traded five cents like what is going on who is trading 330 00:28:02,178 --> 00:28:10,518 these things and that like again it's the the what's happened here is that there's a an arb 331 00:28:10,518 --> 00:28:17,058 surface that like it's got this natural gravity that's pushing it higher why because we all have 332 00:28:17,058 --> 00:28:23,458 the underlying thesis that this is probably the best like risk return yield position in the 333 00:28:23,458 --> 00:28:27,938 marketplace. So it's like, it's almost like a safe haven, right? You could be in here, 334 00:28:28,478 --> 00:28:34,078 you could go find opportunities elsewhere and you can jump back in. Like there's, there's ways to go 335 00:28:34,078 --> 00:28:39,658 in and out of it. And it's, it's creating a liquidity pool and an ARB surface that has 336 00:28:39,658 --> 00:28:46,818 interesting incentives. Again, the downside risk, if this moves against you, is you're holding an 337 00:28:46,818 --> 00:28:56,818 instrument with 11.5% or like our instrument, 12.75% return paid monthly. And then you're taking 338 00:28:56,818 --> 00:29:01,378 the downside risk of the collateral management, right? What's the collateral and the balance 339 00:29:01,378 --> 00:29:07,038 should look like? That's the downside risk associated with it. But relative to other 340 00:29:07,038 --> 00:29:12,538 things in the equity market, it's so fascinating. Digital credit is the most fascinating instrument 341 00:29:12,538 --> 00:29:15,878 in the entire market right now. This is the biggest story in all of finance. This thing is 342 00:29:15,878 --> 00:29:20,998 trading $150 million plus a day of volume and it's growing. 343 00:29:21,038 --> 00:29:22,158 It's just getting bigger and bigger. 344 00:29:22,438 --> 00:29:24,318 And we're right close to par. 345 00:29:24,598 --> 00:29:27,038 SEDA is in 99 territory. 346 00:29:27,038 --> 00:29:28,118 We're approaching par. 347 00:29:28,838 --> 00:29:32,478 These are interesting securities that have never existed before. 348 00:29:32,878 --> 00:29:37,758 And that's just going to create new trading ideologies that, again, have never existed before. 349 00:29:38,598 --> 00:29:40,278 Y'all going to buy some Bitcoin or what? 350 00:29:41,278 --> 00:29:42,078 What's that? 351 00:29:42,078 --> 00:29:43,638 I said, y'all going to buy some Bitcoin or what? 352 00:29:44,318 --> 00:29:45,838 We hope so. 353 00:29:45,878 --> 00:29:46,878 We hope so. 354 00:29:46,878 --> 00:29:51,038 The most common use case I'm seeing with this and the thing that most people are talking 355 00:29:51,038 --> 00:29:53,638 to me about is using leverage on stretch. 356 00:29:53,638 --> 00:29:57,798 They're taking out leverage positions on leverage on stretch and they're arbitraging opportunity 357 00:29:57,798 --> 00:30:02,158 between the interest they're paying and the dividend payment they're getting. 358 00:30:02,158 --> 00:30:04,798 And that's what most people have been talking to me about. 359 00:30:04,798 --> 00:30:08,238 So I think that there's a lot of different people going to be coming to this for a lot 360 00:30:08,238 --> 00:30:11,438 of different reasons and that's going to aid its growth. 361 00:30:11,438 --> 00:30:14,918 The only thing I'm trying to be mindful of, and I haven't really thought it through fully 362 00:30:14,918 --> 00:30:19,778 just yet, is does this additional surface create an attack surface? 363 00:30:19,778 --> 00:30:25,058 But besides that, I think that Stretch, they really have a winner on their hands. 364 00:30:25,058 --> 00:30:29,498 And it's going to be very interesting to see how it performs as this year goes on, because 365 00:30:29,498 --> 00:30:33,878 even though Bitcoin has gone down, Stretch has been relatively stable, right? 366 00:30:33,878 --> 00:30:39,498 So that has implications for what they can do in a prolonged bear market or just in a 367 00:30:39,498 --> 00:30:44,458 prolonged side-based shop. They'll be able to buy Bitcoin, even if it's a relatively small amount, 368 00:30:44,598 --> 00:30:50,258 every single month, week, whatever. And as you were mentioning early on, there's going to be 369 00:30:50,258 --> 00:30:53,878 a consistent bid on Bitcoin. And I really think it's going to be interesting how the market reacts 370 00:30:53,878 --> 00:31:03,418 to that. Exactly. Exactly. Okay. Well, I mean, that's topic number one. Let's see here. Let's 371 00:31:03,418 --> 00:31:12,618 get back to topic number two and which is I guess really just the credit market. We've been watching 372 00:31:12,618 --> 00:31:18,238 cracks in the credit market. We've got the gates that are coming up on many of these private credit 373 00:31:18,238 --> 00:31:26,878 funds. And this is the opportunity that's presenting itself. You've got several, it's hard to go a day 374 00:31:26,878 --> 00:31:30,938 on Twitter without seeing something about private credit, something about the private credit market. 375 00:31:30,938 --> 00:31:34,578 Somebody is trying to or stops withdrawals from the private credit market. 376 00:31:35,518 --> 00:31:38,938 And that is opportunity that's opening up for digital credit. 377 00:31:39,058 --> 00:31:42,718 You've got these opaque funds that you're unsure of what's in there. 378 00:31:43,258 --> 00:31:44,258 There's zero liquidity. 379 00:31:44,538 --> 00:31:48,138 Maybe it was sold with a liquidity wrapper, but it turns out when people actually want 380 00:31:48,138 --> 00:31:51,158 the liquidity, everybody's running to the door at the same time. 381 00:31:51,718 --> 00:31:56,218 And I think what's happening with these private credit funds, just for clarity, I think they 382 00:31:56,218 --> 00:32:05,558 have limits on how much can be withdrawn every quarter. So it's like, okay, we can only accept 383 00:32:05,558 --> 00:32:10,218 10% withdrawals this quarter and then 10% withdrawals next quarter. What will be fascinating 384 00:32:10,218 --> 00:32:16,158 is to see the compound effect here, right? Like the same risk that is associated with these private 385 00:32:16,158 --> 00:32:25,438 credit funds is not going away. So in fact, it's probably accelerating. So the compound effect and 386 00:32:25,438 --> 00:32:31,458 the compound nature of this impact on private credit will be interesting to see like how that 387 00:32:31,458 --> 00:32:35,658 how that takes shape and again like right as of right now it's just a liquidity problem for the 388 00:32:35,658 --> 00:32:43,398 most part not a default problem necessarily but we did just see I think a couple days ago there 389 00:32:43,398 --> 00:32:49,938 was a triple b a triple b minus investment grade private credit fund that did get downgraded from 390 00:32:49,938 --> 00:32:54,418 investment grade to junk status like we were talking last week I think that's where the big 391 00:32:54,418 --> 00:33:02,278 potential concern is in the credit market. And I guess I would pose this question to you guys, 392 00:33:02,958 --> 00:33:09,398 and I think it's probably pretty apparent. Do you think the rating agencies have priced in 393 00:33:09,398 --> 00:33:13,058 AI risk appropriately, and are they moving fast enough? 394 00:33:18,538 --> 00:33:20,358 That's kind of a leading question, Jeff. 395 00:33:20,358 --> 00:33:50,118 I mean, but I agree. I think it's, you know, obviously you can't price future cash flows in an age of uncertainty, especially with AI. There's, you know, that's the absolute truth. And capital will become scarce in a world of AI, especially when capital as we know it, most of the collateral in the traditional financial system are backed by these Mag7 equities that have essentially been funding the sustained price and growing PDEs via share buybacks. 396 00:33:50,358 --> 00:34:07,178 So if cash flows decline on any big business, especially with them outlaying instead of their annual cash flow, instead of into share buybacks, into CapEx spend, if there isn't a return on that CapEx, the collateral environment across all of the financial markets is going to change significantly. 397 00:34:07,178 --> 00:34:17,978 And that affects both the common equity of these big companies that are affected by AI, but also the credit markets, that being the bond markets or the private credit markets. 398 00:34:17,978 --> 00:34:26,818 And so I think there will be a starvation and a desire for capital. And what is capital, 399 00:34:27,058 --> 00:34:33,538 digital capital, when MAG7 and digital monopolies aren't as profitable as maybe they once were? 400 00:34:33,738 --> 00:34:35,958 And I think that's what we're trying to figure out here. 401 00:34:36,438 --> 00:34:42,438 Yeah, it's kind of that transition in capital. Historically, all of the large, big tech stocks 402 00:34:42,438 --> 00:34:47,378 throughout the 2010s were the best store of value. That was the best capital. It was better 403 00:34:47,378 --> 00:34:52,738 than real estate, better than anything else. Go ahead, Soli. Yeah, I was going to say, I mean, 404 00:34:52,838 --> 00:34:59,138 they're not even priced correctly now without the advent of AI and the threat of AI. Like they're 405 00:34:59,138 --> 00:35:06,898 just priced on vibes at this point. They're just built on air. I think it would be challenging to 406 00:35:06,898 --> 00:35:15,458 even figure out what they're basing their valuations on. I saw this interview, Dave 407 00:35:15,458 --> 00:35:23,158 column on BTC sessions. And they basically said that what you were talking about before where they 408 00:35:23,158 --> 00:35:31,098 put limits, it's called gating. And some some have it and some don't. And the only reason why there 409 00:35:31,098 --> 00:35:35,778 hasn't been a stampede is because so many of them are gated. And you can only take out a certain 410 00:35:35,778 --> 00:35:42,198 amount at a time. But that's just going to start like a domino effect. And if you're looking for 411 00:35:42,198 --> 00:35:49,858 something that's performing. I mean, the only two preferreds that are backed by pristine capital, 412 00:35:50,598 --> 00:35:55,358 Stretch and Seda, seem like they would be the inevitable recipient of that money. 413 00:35:56,498 --> 00:36:06,058 But here's two memorable quotes from that interview. He said that the private equity 414 00:36:06,058 --> 00:36:13,858 market is a cottage industry of morons. So he had no confidence in their ability whatsoever. 415 00:36:14,978 --> 00:36:20,838 And I think what you were saying about AI is perfectly aligned to expose them as such. 416 00:36:21,598 --> 00:36:26,838 And the other notable thing that I wrote down immediately was he said that there were more 417 00:36:26,838 --> 00:36:35,458 private equity offices than McDonald's franchises. And so there's just this enormous 418 00:36:35,458 --> 00:36:44,778 uh like just pile of just nothingness just go up in smoke at the first spark 419 00:36:44,778 --> 00:36:53,538 yeah because all this all this capital was plowed into illiquid things and there was like a scarcity 420 00:36:53,538 --> 00:37:00,018 of things to invest in in the private market and deals were getting done because there was 421 00:37:00,018 --> 00:37:03,858 like kind of some liquidity people are taking 10-year horizons and now like 422 00:37:03,858 --> 00:37:10,258 what is a 10-year horizon now? That might evaporate 50% of the market. I mean, 423 00:37:10,438 --> 00:37:14,218 who knows? And who's there to buy whatever you have on the other side of it? 424 00:37:14,778 --> 00:37:22,978 When the younger people coming up today don't have any money, who has the money? It's like, 425 00:37:22,978 --> 00:37:31,478 all this money is stockpiled and everybody, boomer age. What is that transition of wealth? 426 00:37:31,478 --> 00:37:34,518 Like what is it? What is a transition of wealth to this younger age look like? 427 00:37:34,518 --> 00:37:40,038 I mean, right now, like a like a Gen Z, a typical Gen Z, they're not even looking. 428 00:37:40,038 --> 00:37:43,038 They're not even close to looking at buying a house. 429 00:37:43,478 --> 00:37:48,838 Right. They're like they're just getting DoorDash Taco Bell to their minimum wage job. 430 00:37:49,478 --> 00:37:52,838 And they're like, I don't even care anymore because I'm never going to afford a house ever. 431 00:37:53,958 --> 00:37:57,118 That's that's their point of view that they've got. 432 00:37:57,118 --> 00:38:24,698 Yeah, it's this demographic shift idea. And there are going to be Gen Zers that inherit massive amounts of Boomer wealth. And will that be reinvested into private equity? I mean, that's the bet you're making. Because the private equity funds have a return period. At some point, the fund pays out. And so you can roll it into the next deal, or you're going to reinvest it, allocate it elsewhere, and the landscape will look a lot different. 433 00:38:24,698 --> 00:38:31,658 yeah completely completely well those pensions take a haircut though before 434 00:38:31,658 --> 00:38:37,518 the next generation inherits them and you know will their houses be worth what they what we 435 00:38:37,518 --> 00:38:41,858 think they will too like there could be a lot of young people thinking they're going to inherit 436 00:38:41,858 --> 00:38:51,218 a big chunk and it's just shrinking yes but i'm super i'm i've turned the corner i'm very 437 00:38:51,218 --> 00:38:58,158 bullish on real estate. I think land is going to be super valuable in the future. Like, and my 438 00:38:58,158 --> 00:39:02,798 friend brought the idea to me. He was like, okay, look, like, yeah, you know, obviously when you own 439 00:39:02,798 --> 00:39:07,298 real estate, you're largely owning the land. And if we have all these autonomous robots that are 440 00:39:07,298 --> 00:39:10,818 bringing the cost of labor down significantly, you know, you're going to be able to build for 441 00:39:10,818 --> 00:39:16,358 really cheap. You're going to be able to refinish your house for very cheap. So the land again is 442 00:39:16,358 --> 00:39:20,078 the scarce asset. And especially in the United States where you have, you know, pretty good 443 00:39:20,078 --> 00:39:24,438 property rights and in states where property rights are enforced, this is going to be a scarce, 444 00:39:25,238 --> 00:39:30,358 desirable asset, especially one that's so easily financed. And that leads me to believe it's like, 445 00:39:30,458 --> 00:39:35,998 okay, so financing homes are essentially what has inflated the prices and keep prices sustained. 446 00:39:36,338 --> 00:39:40,738 I think mortgages are going to be taken out to 50 years, especially with a longer lifespan. 447 00:39:42,238 --> 00:39:47,758 And then that breeds the question, okay, so if financing real estate is so important for 448 00:39:47,758 --> 00:39:53,578 elevated real estate prices, I think we're going to see the financialization of Bitcoin do the same 449 00:39:53,578 --> 00:39:56,978 thing to Bitcoin prices over a long period of time. I did a tweet. It was like, oh, well, 450 00:39:56,978 --> 00:40:02,178 can you put 10% down on Bitcoin? There's people working on that. But even just the extension of 451 00:40:02,178 --> 00:40:06,558 margin on IBIT, big development, the Bitcoin-backed lending is the first step in that direction. 452 00:40:07,038 --> 00:40:13,278 Stretch is another way in which you're financing Bitcoin. It's a mortgage-backed security. 453 00:40:13,278 --> 00:40:18,898 It's a Bitcoin-backed security offered by the most credit-worthy issuer on the planet. 454 00:40:18,898 --> 00:40:23,818 So this is all the financialization of Bitcoin that will lead to inflated prices over long periods of time. 455 00:40:25,878 --> 00:40:27,138 Yeah, what is a mortgage? 456 00:40:27,338 --> 00:40:30,238 A mortgage is credit on physical capital. 457 00:40:32,338 --> 00:40:36,238 What is a government bond? 458 00:40:36,298 --> 00:40:41,858 A government bond is credit on sovereign society or your society. 459 00:40:41,858 --> 00:40:50,498 And then what is digital capital? Digital capital is credit on digital capital. 460 00:40:50,498 --> 00:41:02,538 Right? I agree with you on real estate, Dan. The caveat is commercial real estate in cities. 461 00:41:02,538 --> 00:41:11,358 and that's a we i agree with that we talked about this yeah we talked about this on the 462 00:41:11,358 --> 00:41:14,978 hurdle right earlier this week and it's like there's this one we just looked up one example 463 00:41:14,978 --> 00:41:21,018 uh in 2019 it was this place in houston it got appraised at like 1.3 billion and then just 464 00:41:21,018 --> 00:41:26,838 recently in the last year got appraised at like 400 million and it's like an office park or 465 00:41:26,838 --> 00:41:30,838 And the, the challenge is that like a lot of these commercial, 466 00:41:30,838 --> 00:41:33,838 a lot of these commercial real estate, 467 00:41:36,838 --> 00:41:45,436 a lot of this commercial real estate was in private credit instruments And a lot of these leases are turning over like pre leases are turning over 468 00:41:45,696 --> 00:41:50,396 So these companies that used to be in the offices are no longer having to go to the office. 469 00:41:50,936 --> 00:41:54,576 So the leases, they're just walking, people are walking away from leases that they've had, 470 00:41:54,656 --> 00:41:55,636 you know, 10 year leases. 471 00:41:56,216 --> 00:41:59,696 And there's nobody there to pick up, pick up the bill on the other side. 472 00:41:59,696 --> 00:42:02,376 So what is the function? 473 00:42:02,576 --> 00:42:03,976 What is the value function of the commercial real estate? 474 00:42:03,976 --> 00:42:11,656 It's a function of whatever the cash flow is of the people that are renting that specific location and like the relative cap rate in different locations, etc. 475 00:42:12,416 --> 00:42:14,316 So, I mean, that's fundamentally changing. 476 00:42:14,456 --> 00:42:17,276 And that's tied, like a lot of that is tied into the private credit market. 477 00:42:17,276 --> 00:42:30,256 So people are seeing not only this AI pressure on cash flows, you've got just a change in societal, like how society operates in cities and like different businesses. 478 00:42:30,256 --> 00:42:37,016 Well, to the original question that you asked, is the private credit market pricing in AI 479 00:42:37,016 --> 00:42:43,616 appropriately? I'll say no. Financial markets and finance as a whole seems to be very risk-averse, 480 00:42:43,876 --> 00:42:48,516 and I think it's more likely that they'll wait for the AI flood to come in, and then everyone's 481 00:42:48,516 --> 00:42:52,456 going to start piling into the same ideas. So I don't think that they're likely pricing it 482 00:42:52,456 --> 00:42:57,336 inappropriately. To the point about real estate, yes. I do think real estate is going to become 483 00:42:57,336 --> 00:43:00,956 more valuable as time goes on, as it always has. 484 00:43:01,096 --> 00:43:04,356 But the caveat I would give with Dan's point 485 00:43:04,356 --> 00:43:07,916 regarding the ability to build more cheaply, more efficiently, 486 00:43:08,256 --> 00:43:09,496 I think that's going to happen, 487 00:43:09,616 --> 00:43:12,016 but I don't think it's necessarily going to be because of robotics. 488 00:43:12,376 --> 00:43:15,176 Robotics is actually, we don't have the manufacturing, 489 00:43:15,356 --> 00:43:16,076 we don't have the compute, 490 00:43:16,176 --> 00:43:17,596 we don't have the data centers to support 491 00:43:17,596 --> 00:43:20,696 a massive build-out for robotics yet. 492 00:43:20,696 --> 00:43:22,756 But I do think the cost of production 493 00:43:22,756 --> 00:43:27,316 for the things that we build houses with will come down. 494 00:43:27,336 --> 00:43:31,656 due to broader markets opening up globally outside of China, for instance. 495 00:43:31,656 --> 00:43:37,816 And I think that the ability to rapidly turn around homes, 496 00:43:38,116 --> 00:43:41,116 like flipping homes and building new homes 497 00:43:41,116 --> 00:43:44,676 and building in areas that are perhaps less than ideal right now, 498 00:43:44,736 --> 00:43:48,336 but as technology and different methodologies advance, 499 00:43:48,456 --> 00:43:51,676 we'll be able to build out into these areas. 500 00:43:51,776 --> 00:43:53,176 For instance, like in Arizona right now, 501 00:43:53,376 --> 00:43:55,996 they're building out in areas where 20 years ago they never would have 502 00:43:55,996 --> 00:43:58,096 because they can effectively run water there. 503 00:43:58,156 --> 00:43:59,316 They can effectively run internet there. 504 00:43:59,376 --> 00:44:00,596 They can effectively run power there. 505 00:44:00,856 --> 00:44:01,896 But that's all changed, right? 506 00:44:02,076 --> 00:44:05,236 So I think that real estate is going to become a very, very hot money, 507 00:44:05,356 --> 00:44:06,716 but for a different set of reasons. 508 00:44:06,956 --> 00:44:10,276 When robotics happens and when you can have a whole bunch of robots building a house, 509 00:44:10,316 --> 00:44:11,396 I think all hell breaks loose. 510 00:44:11,936 --> 00:44:14,576 But I think that we are still quite a ways away from that. 511 00:44:15,276 --> 00:44:19,336 Well, housing should already be a depreciating asset. 512 00:44:19,796 --> 00:44:22,716 It should go down in value as soon as you take the keys. 513 00:44:23,256 --> 00:44:24,656 It should depreciate like your car. 514 00:44:25,996 --> 00:44:30,716 the cost of materials has been going down, but artificially inflated by money printing. 515 00:44:31,116 --> 00:44:39,476 And the other problem is that cities wanting to protect the value of those houses are probably 516 00:44:39,476 --> 00:44:47,216 not going to ease up on the zoning laws. So you can want to build 500 more places for people to 517 00:44:47,216 --> 00:44:52,136 live in your city, but nobody wants the value of their house to go down. So the zoning laws can 518 00:44:52,136 --> 00:44:59,816 artificially prop up housing. Whereas maybe somewhere in the middle of nowhere, those problems 519 00:44:59,816 --> 00:45:03,816 don't exist. And it's going to be a lot more affordable for people to live in those type of 520 00:45:03,816 --> 00:45:09,896 places versus the big cities. It's a dance point about the land itself, maybe not the home, 521 00:45:09,896 --> 00:45:19,496 but the land. I think that that is a different angle to it. So right now, there's there across 522 00:45:19,496 --> 00:45:23,256 the country right now there are a lot of people that are fighting with these um mag 7 companies 523 00:45:23,256 --> 00:45:27,976 and these big data center companies i want to build out um these data centers because they 524 00:45:27,976 --> 00:45:33,816 don't want to sell their land right so where we could have a situation in the future let's say ai 525 00:45:33,816 --> 00:45:39,656 does what everyone thinks is going to do and we're going to have this this massive need for data 526 00:45:39,656 --> 00:45:43,336 centers this massive need for manufacturing this massive need for all these other things 527 00:45:43,976 --> 00:45:47,416 are they going to do what they're doing in arizona right now with tsmc and build somewhere 528 00:45:47,416 --> 00:45:52,676 further out and take on a very, very complex task? Or are they going to go into cities, 529 00:45:53,056 --> 00:45:57,656 perhaps into urban areas that are somewhat dilapidated, into areas that have been a victim 530 00:45:57,656 --> 00:46:02,096 of urban sprawl and start repurposing them for data center build-outs? What is that going to do 531 00:46:02,096 --> 00:46:08,356 to real estate prices when you now have cities that are becoming massively overtaken by technology 532 00:46:08,356 --> 00:46:13,436 and by data centers and by means of manufacturing just because it's easier to build there than it 533 00:46:13,436 --> 00:46:19,016 is to build 100 miles out. I think that there's all kinds of different things that can happen 534 00:46:19,016 --> 00:46:26,356 when it comes to the value of land versus the value of homes. I actually think the homes 535 00:46:26,356 --> 00:46:34,596 are going to become less of a long-term store of value, but people that own the land that the home 536 00:46:34,596 --> 00:46:39,816 is on are going to be the, that's what people are going to focus on. Owning the land, the home that 537 00:46:39,816 --> 00:46:44,856 going to build on it i think that home is going to be coming down like like up and down like crazy 538 00:46:44,856 --> 00:46:49,976 now homes that they build right now are not built to last 100 years they're built to last 25 to 30 539 00:46:49,976 --> 00:46:53,816 if you're lucky before the roof falls out from under you right all these new construction homes 540 00:46:53,816 --> 00:46:59,256 so i can see that people are going to be buying a house buying the house just to have the land 541 00:46:59,256 --> 00:47:03,576 and i'm tearing it down building a new house on it and i think that can have very very interesting 542 00:47:03,576 --> 00:47:07,656 impacts on the prices of the homes themselves but the land i think is where things are going to be 543 00:47:07,656 --> 00:47:11,816 really interesting because we're going to need it if ai is going to do what we think it's going to 544 00:47:11,816 --> 00:47:18,056 do we're going to need land and companies are going to be less and less inclined to build further and 545 00:47:18,056 --> 00:47:22,376 further out for the reasons you listed so late and also because of what dan was talking about 546 00:47:22,376 --> 00:47:27,096 with the land itself why would you build when you could already just knock down some ghetto somewhere 547 00:47:27,096 --> 00:47:30,456 or some area somewhere that's low-income housing that they're already doing right now 548 00:47:31,096 --> 00:47:34,536 and building apartments on it instead of building apartments they'll be building data centers 549 00:47:34,536 --> 00:47:38,856 i'm just laughing thinking about a 30-year house with a 50-year mortgage 550 00:47:38,856 --> 00:47:43,156 that just sounds about right it's true though that's what's going on right now it's true 551 00:47:43,156 --> 00:47:48,636 i mean damn thing falls down you still got to pay for it for another 20 years 552 00:47:48,636 --> 00:47:51,696 yeah i mean if they launched it i would take that leverage though 553 00:47:51,696 --> 00:47:57,456 you know jeff you'll insure it right yeah you'll go put gap insurance for that 554 00:47:57,456 --> 00:48:02,936 from 30 to 50 yeah exactly price that there's a deal there's a deal to be had there for sure 555 00:48:02,936 --> 00:48:04,876 100%. Well, the appeal of a 50-year mortgage 556 00:48:04,876 --> 00:48:06,856 is because you know your money is going to be inflated 557 00:48:06,856 --> 00:48:08,136 away, right? So over time, 558 00:48:08,656 --> 00:48:11,076 that's the whole benefit of it. 559 00:48:11,976 --> 00:48:13,656 I take it all day. 560 00:48:14,856 --> 00:48:15,976 And also, 561 00:48:16,396 --> 00:48:18,556 I mean, yeah, well, the thing is, 562 00:48:18,676 --> 00:48:20,476 what Dan mentioned isn't that far-fetched. 563 00:48:20,476 --> 00:48:22,656 Didn't someone already float 40-year mortgages 564 00:48:22,656 --> 00:48:23,576 just like six months ago? 565 00:48:24,876 --> 00:48:26,356 Trump was talking 50, right? 566 00:48:27,716 --> 00:48:29,256 Whatever it is, right? 567 00:48:29,336 --> 00:48:30,736 So 40, 50, boom. 568 00:48:31,216 --> 00:48:31,696 For all we know, 569 00:48:31,716 --> 00:48:32,316 Do I hear 100? 570 00:48:32,936 --> 00:48:34,576 that's what I was just going to go with. 571 00:48:34,656 --> 00:48:36,856 People are going to start living to 120 before you know it. 572 00:48:37,356 --> 00:48:39,516 Don't be surprised if we're all in our eighties and they're going to start 573 00:48:39,516 --> 00:48:40,956 seeing 70 year mortgages out there. 574 00:48:43,196 --> 00:48:44,616 Right. And so, so what, 575 00:48:44,676 --> 00:48:47,116 what does that mean for the value of a home? 576 00:48:47,316 --> 00:48:49,256 And what does that mean for the land that the home sits on? 577 00:48:49,336 --> 00:48:50,296 I just think that. 578 00:48:50,416 --> 00:48:52,776 I guess there's so many, there's so many unknowns. 579 00:48:52,776 --> 00:48:55,816 There's like known unknowns. Like what does population do? I mean, 580 00:48:55,836 --> 00:48:58,276 nobody's having kids. So like this population expand, 581 00:48:58,376 --> 00:48:59,396 the robots just take over. 582 00:48:59,536 --> 00:49:02,876 Do people just live longer and like keep their brains alive and, 583 00:49:02,936 --> 00:49:06,736 shifted over to like a robot body. I mean, the stuff I've been seeing just the last couple of 584 00:49:06,736 --> 00:49:10,496 weeks on like Neuralink, there's people with ALS that are communicating telepathically with 585 00:49:10,496 --> 00:49:14,936 computers and it's like coming out with their voice and AI. I'm just like completely blown away. 586 00:49:15,016 --> 00:49:21,156 This stuff is changing how everybody interacts. I mean, even just having internet, like the, 587 00:49:21,156 --> 00:49:28,616 the fact that Starlink, you can live in the middle of nowhere and have Starlink access or like, 588 00:49:28,616 --> 00:49:33,856 okay, well now, now rural properties just got way more expensive because the people that want to get 589 00:49:33,856 --> 00:49:38,736 away from people can now still be connected and get away from people. They can still do their jobs. 590 00:49:39,356 --> 00:49:44,676 That's, that's fascinating. Um, you know, what becomes important, the fresh water, access to food, 591 00:49:44,936 --> 00:49:50,136 um, you know, some, some of those things, but yeah, I think the world's going to look a bit 592 00:49:50,136 --> 00:49:54,056 different. And I mean, all this stuff is moving so fast, but the whole point of this conversation 593 00:49:54,056 --> 00:49:56,256 was like getting back to rating agencies, right? 594 00:49:57,256 --> 00:50:00,896 Like these industries that are purposefully built 595 00:50:00,896 --> 00:50:05,596 to move slowly and not like jump react to anything 596 00:50:05,596 --> 00:50:09,236 are doing what they have historically done 597 00:50:09,236 --> 00:50:10,216 and move slowly. 598 00:50:10,216 --> 00:50:11,856 And they're likely way behind 599 00:50:11,856 --> 00:50:13,136 on the relative risk profile 600 00:50:13,136 --> 00:50:19,716 on a systemically broad category of risk securities 601 00:50:19,716 --> 00:50:22,856 that the broader financial ecosystem relies on. 602 00:50:22,856 --> 00:50:31,256 like that's a concern for sure and but that's also like when we're thinking about digital credit and 603 00:50:31,256 --> 00:50:36,756 the opportunities here bullish digital credit right like bearish that system that design bullish 604 00:50:36,756 --> 00:50:45,616 digital credit i posted about this maybe i'll show my screen is uh the i mean one of the reasons i'm 605 00:50:45,616 --> 00:50:50,156 bullish here on digital credit bullish case for digital credit the dominant u.s rating framework 606 00:50:50,156 --> 00:50:55,416 values Bitcoin as worth zero on the balance sheet. I know we've said this plenty of times before, 607 00:50:55,516 --> 00:51:01,736 but it's worth zero. Literally the rating agencies say, hey, yeah, strategy, all of that $50 billion 608 00:51:01,736 --> 00:51:05,436 of Bitcoin that you hold on your balance sheet. Yeah, actually we're going to market to zero, 609 00:51:05,916 --> 00:51:10,736 but we're going to give you a B minus credit rating. Strategy still have a B minus credit 610 00:51:10,736 --> 00:51:16,336 rating. And what does a B minus issuer credit rating means? It means that you're more vulnerable, 611 00:51:16,336 --> 00:51:20,196 but you're currently able to meet all your commitments, but highly sensitive to adverse 612 00:51:20,196 --> 00:51:26,736 conditions. And like when you, when we think about this, right, we're thinking about, all right, 613 00:51:26,736 --> 00:51:32,216 well, a lot of these adverse conditions that may happen, um, you know, we're putting, putting our 614 00:51:32,216 --> 00:51:36,136 head around the corner and trying to wrap our heads around them. They all seem very, you know, 615 00:51:36,316 --> 00:51:43,856 positive for moving in this, you know, future direction. And so right now the rating agencies 616 00:51:43,856 --> 00:51:49,576 believe that strategy was able to meet all their commitments. This is before they raised 617 00:51:49,576 --> 00:51:53,356 two and a quarter billion dollars of USD cash, by the way. But they're highly sensitive to 618 00:51:53,356 --> 00:52:00,796 adverse conditions. So basically it's saying they could pay their dividend payments even if the 619 00:52:00,796 --> 00:52:05,476 capital didn't exist. Basically their access to capital markets is the only thing that is being 620 00:52:05,476 --> 00:52:11,656 rated as the risk rating for their company. It had nothing to do with the capital. 621 00:52:11,656 --> 00:52:18,436 Now, if that capital is worth just greater than zero, right? If it's worth greater than zero, 622 00:52:18,716 --> 00:52:23,656 they have to go up the rankings. It's got to go to double B. If they get into triple B, 623 00:52:23,716 --> 00:52:29,056 it's technically investment grade, right? So what is investment grade? Triple B means adequate 624 00:52:29,056 --> 00:52:34,616 capacity, adverse conditions, more likely to weaken ability to meet commitments. So we think about, 625 00:52:34,736 --> 00:52:40,496 okay, how many years of dividend coverage does strategy have? Well, they've got 50 plus years 626 00:52:40,496 --> 00:52:44,436 of dividend coverage. They've got two years of dividend coverage held in cash. Yes, they have 627 00:52:44,436 --> 00:52:51,136 $8 billion of bonds, convertible bonds on the horizon in the next three years, but they've got 628 00:52:51,136 --> 00:52:57,596 sufficient capital to cover multiples of that. So they've got, in my opinion, adequate capacity. 629 00:52:58,556 --> 00:53:03,776 Can adverse conditions more likely to weaken ability to meet commitments? Sure, adverse 630 00:53:03,776 --> 00:53:09,216 conditions would hurt anybody. But I think you could also conceptualize calling them strong 631 00:53:09,216 --> 00:53:15,816 capacity or even very strong capacity, just based on our understanding of liquidity profile of 632 00:53:15,816 --> 00:53:20,556 Bitcoin, how it works, the size of the balance sheet, the relative size of the commitments, 633 00:53:20,876 --> 00:53:24,616 the perpetual nature of the instruments, the construction of the balance sheet being relatively 634 00:53:24,616 --> 00:53:31,756 healthy, 11% leverage ratio, et cetera. So, I mean, that's the bullish case right there. 635 00:53:31,756 --> 00:53:39,896 like they're at the bottom rung if they get any any increase in that valuation they move up 636 00:53:39,896 --> 00:53:48,436 and just to put this into comparison uh the ratio of u.s investment great bonds to high yield bonds 637 00:53:48,436 --> 00:53:53,636 is roughly five to one so like the amount of capital could could that that could come that 638 00:53:53,636 --> 00:54:01,036 could possibly come into these instruments is not just like doubles like it may 5x it gets you know 639 00:54:01,036 --> 00:54:06,476 materially larger. And for reference, here are some recent deals that were done in 2026. So 640 00:54:06,476 --> 00:54:13,996 Google $32 billion bond deal, Amazon $37 billion, Oracle 25, Honeywell 16. And these are just, 641 00:54:13,996 --> 00:54:19,996 these are just typical bonds. I think these have like 10 year terms and like, I don't know, 4% 642 00:54:19,996 --> 00:54:27,276 interest rates. You've got strategy offering and strive offering significantly higher with assets 643 00:54:27,276 --> 00:54:28,036 on the balance sheet. 644 00:54:29,496 --> 00:54:31,456 I mean, just reading the letter of this, 645 00:54:32,456 --> 00:54:33,956 and it says, you know, 646 00:54:34,036 --> 00:54:35,776 adverse conditions more likely 647 00:54:35,776 --> 00:54:37,436 to weaken ability to meet commitments. 648 00:54:37,836 --> 00:54:39,676 But with however many years 649 00:54:39,676 --> 00:54:42,816 of the cash reserve to pay dividends, 650 00:54:43,676 --> 00:54:45,736 wouldn't that be like adverse conditions 651 00:54:45,736 --> 00:54:49,056 most like least likely to weaken their ability? 652 00:54:50,036 --> 00:54:52,776 Like the opposite of this. 653 00:54:53,836 --> 00:54:55,516 There's no way that they should be anything 654 00:54:55,516 --> 00:54:57,896 under frickin double A. 655 00:54:59,396 --> 00:55:02,656 Yeah, I think the assumption is 656 00:55:02,656 --> 00:55:06,576 that there's cash flows 657 00:55:06,576 --> 00:55:08,476 to support the payment 658 00:55:08,476 --> 00:55:10,636 versus holdings to support the payment. 659 00:55:11,276 --> 00:55:12,896 I think that can be the big disconnect. 660 00:55:13,936 --> 00:55:14,296 Well, it is. 661 00:55:15,296 --> 00:55:17,036 That's exactly the point, Adrian. 662 00:55:17,176 --> 00:55:19,896 It's like they're giving the holding zero credit. 663 00:55:20,436 --> 00:55:20,696 Yeah. 664 00:55:21,556 --> 00:55:22,836 Which is just insane. 665 00:55:22,836 --> 00:55:24,836 Like the... 666 00:55:25,516 --> 00:55:31,156 there there's a historical reliance we're talking about a credit system that's been built and has 667 00:55:31,156 --> 00:55:36,596 evolved over time but it's like historically archaic with some of the least tech savvy people 668 00:55:36,596 --> 00:55:43,156 uh you know working through some of these things and like the implications i think the other crazy 669 00:55:43,156 --> 00:55:50,356 part is just like the incentive structure right the the implications of making a change are so big 670 00:55:50,356 --> 00:55:57,856 in both directions, either moving strategy up or notching down anything that's investment grade 671 00:55:57,856 --> 00:56:07,216 to below because of AI risk. Think about that. Think about there's, I don't know, 50, 100 trillion 672 00:56:07,216 --> 00:56:12,096 dollars of this credit floating in the market somewhere. Somebody's holding it. 673 00:56:13,096 --> 00:56:18,896 So if anything happens on the AAA investment grade stuff or the BBB investment grade stuff, 674 00:56:18,896 --> 00:56:25,716 and it gets notched down. There's some portion of it that just has to liquidate it because they 675 00:56:25,716 --> 00:56:31,796 can't proceed with their market structure or they've got mandates that says they have to hold 676 00:56:31,796 --> 00:56:38,436 investment grade or insurance companies. It changes my cost of capital requirements. Now I 677 00:56:38,436 --> 00:56:42,536 need to buy more reinsurance and I can't afford it. So I have to drop these and go grab other things. 678 00:56:42,536 --> 00:56:49,156 so it's a the second order effect of making a change like that like holistically to a broad 679 00:56:49,156 --> 00:56:55,456 category is very very very large alternatively the second and third order effects of going the 680 00:56:55,456 --> 00:57:02,296 opposite direction so strategy going from b minus to triple b oh like okay well what does that signal 681 00:57:02,296 --> 00:57:09,996 if you signal that hey there's a company that's now investment grade but they're paying 11 and a 682 00:57:09,996 --> 00:57:18,816 half percent what's the right cost of capital right like everything else investment grades like 683 00:57:18,816 --> 00:57:27,496 five or six maybe and so like now you've got an investment grade instrument at 11 and a half 684 00:57:27,496 --> 00:57:36,276 like wait wait hold on right like what's the there's there's implications of that right like 685 00:57:36,276 --> 00:57:42,956 Are you just now saying that, okay, the cost of capital is now 11.5% and you have to, do interest rates float up to that? 686 00:57:43,016 --> 00:57:44,316 Or is there a change in interest rate? 687 00:57:44,476 --> 00:57:45,636 Do interest rates come down? 688 00:57:46,116 --> 00:57:47,356 What is the evolution there? 689 00:57:48,056 --> 00:57:51,036 And I think it's a really big decision. 690 00:57:52,476 --> 00:57:53,476 I want to know if the signals. 691 00:57:54,036 --> 00:57:54,596 Yeah, go ahead, Adrian. 692 00:57:55,256 --> 00:57:56,116 Yeah, no, I agree. 693 00:57:56,116 --> 00:58:07,056 I think that the reality of it is rating the strategy preferreds as we think they should be rated, right? 694 00:58:07,316 --> 00:58:16,836 As AAA, what have you, fundamentally says to the market something very, very different about Bitcoin, right? 695 00:58:16,876 --> 00:58:20,316 It puts Bitcoin on footing with the US dollar. 696 00:58:20,416 --> 00:58:22,736 It puts Bitcoin on footing with other currencies. 697 00:58:22,736 --> 00:58:26,696 What does that say for the broader market, to Jeff's point? 698 00:58:26,816 --> 00:58:45,456 I think the signal it puts out there is, and I don't want to sound, I'm not trying to sound dramatic here, but if you signal to the market that Bitcoin now has equal footing with other forms of currency in the most fundamental way, you can't just re-rate the offerings. 699 00:58:45,516 --> 00:58:47,196 You have to re-rate strategy as a company as a whole. 700 00:58:47,196 --> 00:58:53,916 and the the overall message that sends i think it's kind of like a tectonic shift in what the 701 00:58:53,916 --> 00:58:59,196 in what the market understands about finance and they're not i don't think the market is ready for 702 00:58:59,196 --> 00:59:02,536 that that's why i've been saying for the longest while that i don't think the s&p 500 inclusion is 703 00:59:02,536 --> 00:59:07,316 going to happen anytime soon it's not because i don't think strategy is necessarily worthy of it 704 00:59:07,316 --> 00:59:14,776 we can make different arguments for that i think s&p 500 inclusion literally drops 700 000 plus 705 00:59:14,776 --> 00:59:16,436 Bitcoin in the center of traditional finance. 706 00:59:17,136 --> 00:59:17,236 Yeah. 707 00:59:17,356 --> 00:59:20,816 Rerating it, giving it a fundamentally different understanding, giving the market a fundamentally 708 00:59:20,816 --> 00:59:26,556 different understanding of it, which the market is going to have no choice but to perceive 709 00:59:26,556 --> 00:59:31,536 strategy as a company entirely different, which will have trickle-down effects to all 710 00:59:31,536 --> 00:59:35,876 the offerings, which is just going to have this massive reflexive effect once that starts 711 00:59:35,876 --> 00:59:36,796 to coalesce in the market. 712 00:59:37,236 --> 00:59:40,796 And I don't think these agencies, I don't think these committees are ready for that 713 00:59:40,796 --> 00:59:41,216 just yet. 714 00:59:41,216 --> 00:59:46,416 and I think Bitcoin is just going to have to get to such a size 715 00:59:46,416 --> 00:59:49,556 that it makes it almost cartoonish for them not to do it. 716 00:59:50,016 --> 00:59:52,996 But until then, they're going to find all kinds of different rationales 717 00:59:52,996 --> 00:59:53,856 for why it shouldn't happen. 718 00:59:54,996 --> 00:59:58,196 Well, you read my mind, Adrian, because I was going to ask, 719 00:59:58,396 --> 01:00:03,636 what's the minimum rating that they need that signals S&P 500 inclusion? 720 01:00:04,136 --> 01:00:06,736 Like, how far do they got to get rated up? 721 01:00:06,996 --> 01:00:09,596 It's just positive earnings is the last thing. 722 01:00:09,596 --> 01:00:16,296 No, but I think there's a stat that says that like no company under triple B minus has ever gotten in. 723 01:00:17,276 --> 01:00:27,576 So there is potentially some kind of like, it's not a written rule, but they can, you know, you can have any kind of number of unwritten rules you want in baseball or anywhere, anywhere else. 724 01:00:27,576 --> 01:00:31,216 Because the committee gets to meet and, you know, thumbs up or thumbs down, right? 725 01:00:31,656 --> 01:00:31,796 Yeah. 726 01:00:31,796 --> 01:00:42,196 So, you know, like, like at what point is it rated high enough that just poly market explodes from like 10% chance they get into 80% chance? 727 01:00:42,476 --> 01:00:44,196 You know, like when is it when is the market out? 728 01:00:44,556 --> 01:00:46,636 I think inclusion has to happen before a rating. 729 01:00:48,656 --> 01:00:50,396 Oh, I was in the other direction. 730 01:00:50,676 --> 01:00:52,816 I assume the rating was signaling the inclusion. 731 01:00:52,816 --> 01:01:05,636 No, I think the rating, I think if I were to guess, if I had to flip a coin on which way I think it was going to go, I think the SP500 inclusion and credit rating will happen in rapid succession. 732 01:01:06,716 --> 01:01:07,656 That would be my guess. 733 01:01:08,836 --> 01:01:12,296 Just because I think, and I could be wrong here, I'm open to feedback. 734 01:01:12,896 --> 01:01:21,416 I think giving the preferreds a credit rating before they are included in the SP500 seems counterintuitive to me. 735 01:01:21,416 --> 01:01:25,956 you'd be saying to the market you have these credit ratings on these instruments they're all 736 01:01:25,956 --> 01:01:30,356 they're all double a triple a whatever but at the same time you're not including the sp500 when you 737 01:01:30,356 --> 01:01:38,296 meet all the other criteria yeah and i don't go ahead you know how crazy this is strategy holds 738 01:01:38,296 --> 01:01:45,096 700 and what 65 000 bitcoin when they when the price of bitcoin goes back to all-time high 739 01:01:45,096 --> 01:01:49,896 they're going to have a hundred billion dollars of capital on the balance sheet 740 01:01:49,896 --> 01:01:54,856 they will have the second largest liquid treasury on the planet. 741 01:01:56,796 --> 01:02:00,516 Like just back at all time high. 742 01:02:00,596 --> 01:02:03,756 Like we're not even talking about blasting into new all time highs or the 743 01:02:03,756 --> 01:02:06,076 amount of Bitcoin that they're going to accumulate on the way back to all 744 01:02:06,076 --> 01:02:06,476 time highs. 745 01:02:06,956 --> 01:02:07,356 Right. 746 01:02:07,476 --> 01:02:08,136 Like that's just, 747 01:02:08,256 --> 01:02:09,536 that's as of today, 748 01:02:09,536 --> 01:02:12,676 like if they had their holdings and we're back at all time highs, 749 01:02:12,776 --> 01:02:14,776 we're talking a hundred billion dollar balance sheet. 750 01:02:15,036 --> 01:02:15,716 Like the next, 751 01:02:15,936 --> 01:02:17,076 the next one is Berkshire. 752 01:02:17,696 --> 01:02:19,616 Berkshire is a trillion dollar company. 753 01:02:19,896 --> 01:02:38,994 I agree but the thing is this is where I not trying to sound bearish I think they need to find a way to bring in revenue i think that cracks everything open i don think so yeah it just like they gonna they don need it i mean they don need 754 01:02:38,994 --> 01:02:42,274 it they can just keep doing what they're doing right that they brought in a billion dollars 755 01:02:42,274 --> 01:02:47,794 like think about every instrument that they sell right the product is their credit the product is 756 01:02:47,794 --> 01:02:53,234 a credit every share that they sell of sdrc is like you could think of that as like revenue 757 01:02:53,234 --> 01:02:57,974 there's a loss ratio on every instrument that they sell right so if you if you sell a share at a 758 01:02:57,974 --> 01:03:02,314 hundred dollars like there's a loss ratio that you have on that share that you've sold like what's 759 01:03:02,314 --> 01:03:08,874 your terminal loss ratio like revenue yes i agree will the market agree with us though that's what 760 01:03:08,874 --> 01:03:14,454 i'm saying i guess that like no yeah that's a good point and i think it's a case for sustained 761 01:03:14,454 --> 01:03:16,434 relatively tame MNAVs. 762 01:03:18,454 --> 01:03:18,674 Yeah. 763 01:03:19,094 --> 01:03:19,994 So I agree with you. 764 01:03:20,554 --> 01:03:22,234 Do they agree on capital raising? 765 01:03:22,674 --> 01:03:24,534 Do they agree on selling a product? 766 01:03:26,134 --> 01:03:26,274 Yeah. 767 01:03:26,474 --> 01:03:27,414 If you want to find a MNAV, 768 01:03:27,494 --> 01:03:29,314 sure, you need sustainable. 769 01:03:29,954 --> 01:03:30,954 For them, they'd be like, 770 01:03:30,974 --> 01:03:32,214 you need $10 billion cash flow. 771 01:03:32,214 --> 01:03:33,674 But where are they going to go 772 01:03:33,674 --> 01:03:34,594 spin up a business? 773 01:03:34,734 --> 01:03:35,534 It's just like $10 billion 774 01:03:35,534 --> 01:03:36,734 a cash flow a year. 775 01:03:39,034 --> 01:03:39,674 A billion. 776 01:03:40,054 --> 01:03:40,734 I mean, to be fair, 777 01:03:40,814 --> 01:03:41,394 they need a billion. 778 01:03:41,614 --> 01:03:43,494 I don't think they need 779 01:03:43,494 --> 01:03:44,314 to spin up a business. 780 01:03:44,454 --> 01:03:46,554 I think this is, and this is just my view. 781 01:03:46,634 --> 01:03:48,414 I think if they're not going to do anything with the BI business, 782 01:03:48,514 --> 01:03:52,694 they need to kill it and just go full bore on what they're doing with 783 01:03:52,694 --> 01:03:57,614 digital credit and deal with the reclassification and deal with anything 784 01:03:57,614 --> 01:03:58,394 that comes with it. 785 01:03:58,694 --> 01:04:01,894 If the goal is at any point, and this is just my view, 786 01:04:02,114 --> 01:04:03,994 that the goal is SP 500 inclusion. 787 01:04:04,254 --> 01:04:08,994 I do not think that's going to happen anytime soon without them bringing in 788 01:04:08,994 --> 01:04:09,894 revenue of some kind. 789 01:04:10,774 --> 01:04:11,254 I just don't. 790 01:04:11,494 --> 01:04:12,554 That's a fair take. 791 01:04:12,994 --> 01:04:13,414 I just don't. 792 01:04:14,454 --> 01:04:17,754 Yeah, because that's different than saying they need revenue, right? 793 01:04:17,754 --> 01:04:28,554 Like I would agree with you in saying that like there's probably some, you know, the committee is going to discount their liquid treasury if they don't have revenue in terms of an inclusion potential. 794 01:04:29,034 --> 01:04:31,054 But I don't think they need the S&P 500. 795 01:04:31,294 --> 01:04:32,094 They demonstrated. 796 01:04:32,394 --> 01:04:33,354 No, that's the thing. 797 01:04:33,454 --> 01:04:34,214 That's not what I'm saying. 798 01:04:34,454 --> 01:04:36,374 I'm not saying they need the S&P 500. 799 01:04:36,374 --> 01:04:47,494 What I'm saying is if we are thinking in terms of getting credit ratings for the offerings, we're thinking in terms of SB500 inclusion, what does that mean? 800 01:04:47,994 --> 01:04:51,194 How do they get, and let's take them separately, how do they get the credit rating? 801 01:04:51,674 --> 01:05:00,454 The market and the communities and all these different external agents are going to have to fundamentally reclassify how they think about Bitcoin and what they think about digital credit. 802 01:05:01,194 --> 01:05:04,974 Now, that is not me saying I don't think that should happen. 803 01:05:04,974 --> 01:05:09,994 what I'm saying is there's the reality of what we think and then there's what the market thinks and 804 01:05:09,994 --> 01:05:14,294 the market's going to dictate this how long is it going to take for the market to cross that chasm 805 01:05:14,294 --> 01:05:19,174 that's that's the first piece the second piece if if they're thinking about sp500 inclusion 806 01:05:19,174 --> 01:05:23,914 at some point that I don't think that happens without them having some kind of a revenue 807 01:05:23,914 --> 01:05:30,114 some kind of a positive consistent revenue that is separate from bitcoin now with that said this is 808 01:05:30,114 --> 01:05:33,974 where I think their future could be more like a bank or something like that they should forget 809 01:05:33,974 --> 01:05:38,514 about inclusion, they should forget about the indexes, they should go all in on digital 810 01:05:38,514 --> 01:05:43,694 credit, they should go all in on the financialization of Bitcoin, kill the BI business, just focus 811 01:05:43,694 --> 01:05:48,394 on this, and they can become a massive company without any of these considerations. 812 01:05:49,494 --> 01:05:52,534 I think they just need to pick which lane they're going in. 813 01:05:53,074 --> 01:05:54,774 What do they think of the BI business? 814 01:05:55,474 --> 01:05:55,754 What was that? 815 01:05:55,954 --> 01:05:56,894 It's break-even. 816 01:05:57,094 --> 01:05:58,354 It's like, why do you have to kill it? 817 01:05:58,354 --> 01:06:04,794 Because it is still being seen as part of the overall enterprise. 818 01:06:05,794 --> 01:06:09,454 You can't say that the BI business does not matter 819 01:06:09,454 --> 01:06:13,294 and then functionally say at the same time 820 01:06:13,294 --> 01:06:17,534 that it doesn't matter and it shouldn't be considered 821 01:06:17,534 --> 01:06:21,214 even though it's functionally part of the overall enterprise. 822 01:06:21,934 --> 01:06:24,414 Sure, but it's an app positive if it earns free cash flow. 823 01:06:25,254 --> 01:06:25,594 If. 824 01:06:26,534 --> 01:06:27,474 And what I'm saying is... 825 01:06:27,474 --> 01:06:27,794 It does. 826 01:06:27,794 --> 01:06:29,034 it has free cash flow 827 01:06:29,034 --> 01:06:30,934 yeah but that is 828 01:06:30,934 --> 01:06:33,394 what are they is what I'm getting at 829 01:06:33,394 --> 01:06:35,674 are they a BI business or are they a digital 830 01:06:35,674 --> 01:06:37,574 credit business I don't think they can be both 831 01:06:37,574 --> 01:06:38,794 I mean like what is a 832 01:06:38,794 --> 01:06:41,114 university with an endowment 833 01:06:41,114 --> 01:06:43,534 it's a hedge fund that offers classes 834 01:06:43,534 --> 01:06:45,154 that's not the same thing 835 01:06:45,154 --> 01:06:47,294 that's so true 836 01:06:47,294 --> 01:06:49,054 that's not I understand 837 01:06:49,054 --> 01:06:51,754 the corollary but that's not the same thing 838 01:06:51,754 --> 01:06:53,594 I think that 839 01:06:53,594 --> 01:06:54,654 it's Berkshire Hathaway 840 01:06:54,654 --> 01:06:57,474 well I mean 841 01:06:57,474 --> 01:07:02,774 if you want we berkshire hathaway's in the s&p 500 that was actually a big deal um 842 01:07:02,774 --> 01:07:07,494 getting out of the way into the s&p 500 was a big deal because they're effectively an etf like 843 01:07:07,494 --> 01:07:11,974 berkshire hathaway is an etf they own so much shit um you know it's it's real estate it's 844 01:07:11,974 --> 01:07:16,914 insurance companies it's reinsurance companies it sees candies it's like all sorts of like weird 845 01:07:16,914 --> 01:07:22,074 conglomerate stuff they buy companies when they're cheap and then 300 billion dollars of cash it's 846 01:07:22,074 --> 01:07:25,634 like it is an ETF, but they got included in the S&P 500, I guess. 847 01:07:25,634 --> 01:07:28,314 Like, and why, Adrian? 848 01:07:28,514 --> 01:07:32,714 Because they got so damn big that they couldn't not. 849 01:07:33,714 --> 01:07:35,614 And that's probably what's going to happen with strategy. 850 01:07:35,614 --> 01:07:39,434 They're going to be in a situation where like, holy shit, this company is so big. 851 01:07:39,434 --> 01:07:42,074 Like, what how did this happen? 852 01:07:42,334 --> 01:07:43,594 It's real. Oh, my God. 853 01:07:43,594 --> 01:07:46,174 Bitcoin's not a scam. 854 01:07:46,174 --> 01:07:48,134 And we got to do something about it. 855 01:07:48,134 --> 01:07:51,934 Right. Like all of society that invest in the S&P 500 856 01:07:51,934 --> 01:07:55,414 just missed out on this like generational move to a, you know, a hundred, a hundred, 857 01:07:55,534 --> 01:08:01,114 $200 billion company. And I guarantee you, Taylor doesn't care, right? Like he's, 858 01:08:01,334 --> 01:08:07,094 if it happens, great. Like they're just going to go be category killers in every single thing, 859 01:08:07,154 --> 01:08:10,514 right? They went and killed the category, like best performing equity. Okay. Check 860 01:08:10,514 --> 01:08:15,154 best performing a convertible bond. Okay. Check. They're going to go be best performing 861 01:08:15,154 --> 01:08:21,754 preferred equity. Check a best sharp ratio instrument on the planet. Okay. Check. 862 01:08:21,934 --> 01:08:25,894 best bond check, right? 863 01:08:25,894 --> 01:08:27,694 They're just going to be category sellers. 864 01:08:27,694 --> 01:08:28,194 I agree. 865 01:08:28,194 --> 01:08:30,614 But what I'm trying to tell you is that I agree with all of that. 866 01:08:30,734 --> 01:08:34,074 But I think we are grossly underestimating the power of perception 867 01:08:34,074 --> 01:08:36,614 and how the market perceives Bitcoin and as a result, 868 01:08:36,614 --> 01:08:38,874 perceives strategy and how that will impact any decisions 869 01:08:38,874 --> 01:08:40,454 that are to come in the future. 870 01:08:40,454 --> 01:08:41,954 Yeah, that's fair. 871 01:08:41,954 --> 01:08:42,914 That's what I'm saying. 872 01:08:42,914 --> 01:08:43,294 Yeah. 873 01:08:43,294 --> 01:08:45,334 And I completely agree with you. 874 01:08:45,334 --> 01:08:47,454 I mean, I've chatted with some of these rating agency people 875 01:08:47,454 --> 01:08:49,634 and they're just like, it's going to take so long. 876 01:08:49,634 --> 01:08:51,874 And I've got to reverse the change. 877 01:08:51,934 --> 01:08:56,574 Well, I've gone to a few of them and just, it's so odd. Like the, uh, 878 01:08:57,054 --> 01:09:06,914 it's so crazy to see like a technology and see it exist and not be intellectually curious about it. 879 01:09:07,234 --> 01:09:12,234 Like, I think that's the part that's pissed me off the most. It's like, what do you mean? Like, 880 01:09:12,354 --> 01:09:15,794 what do you like there, there, they couldn't even believe we're having the conversation we were 881 01:09:15,794 --> 01:09:24,854 having and like not even intellectually curious and like it's just it's blown me away but uh fun 882 01:09:24,854 --> 01:09:33,294 news i'm going to risk world 2026 uh it's happening in may and it's in philadelphia and it's like uh 883 01:09:33,294 --> 01:09:38,334 all insurance and reinsurance risk world risk world talk about the nerdiest thing of all time 884 01:09:38,334 --> 01:09:41,594 Yeah, I'm going to come hang out. 885 01:09:41,594 --> 01:09:43,334 It's dangerous. 886 01:09:43,334 --> 01:09:44,254 Risk world. 887 01:09:44,254 --> 01:09:47,174 And I'm going to talk about digital risk. 888 01:09:47,174 --> 01:09:49,174 I'm going to talk about Bitcoin risk and I'm talking about like, 889 01:09:49,174 --> 01:09:52,174 you know, reducing the volatility of an asset like that. 890 01:09:52,894 --> 01:09:56,634 Insurance company balance sheets are an asset like reinsurance 891 01:09:56,634 --> 01:09:59,254 reduces the volatility of an insurance company balance sheet. 892 01:09:59,794 --> 01:10:02,214 Like we're doing the same thing, right? 893 01:10:02,214 --> 01:10:06,454 We're just like carving off risk and creating like we're separating it out 894 01:10:06,454 --> 01:10:08,314 into two two different instruments. 895 01:10:08,334 --> 01:10:11,834 And like that's intellectually stimulating. 896 01:10:11,834 --> 01:10:15,934 And that's kind of the approach I'm going to take is I'm going to do a case study. 897 01:10:15,934 --> 01:10:17,434 Like that's the stage amount. 898 01:10:17,434 --> 01:10:22,234 I'm on a case study stage, but we're going to talk about like being intellectually curious 899 01:10:22,234 --> 01:10:26,234 about this opportunity in this space and seeing the similarities. 900 01:10:26,234 --> 01:10:28,934 But I'm probably going to get laughed at. 901 01:10:28,934 --> 01:10:30,734 Maybe there'll be five or six people there. 902 01:10:30,734 --> 01:10:32,234 So if you want to come, maybe seven. 903 01:10:33,834 --> 01:10:35,434 Yeah. How much are the tickets? 904 01:10:35,434 --> 01:10:36,734 I have no idea. 905 01:10:36,734 --> 01:10:37,474 You can give me a comp. 906 01:10:38,294 --> 01:10:38,434 Yeah. 907 01:10:39,094 --> 01:10:39,694 We'll be in the front row. 908 01:10:39,694 --> 01:10:40,714 We might be able to see one. 909 01:10:41,754 --> 01:10:43,854 So Adrian, to your point, I agree with you in principle. 910 01:10:44,074 --> 01:10:46,354 I just think the time frame is probably, 911 01:10:46,534 --> 01:10:48,994 we're probably not on the same time frame. 912 01:10:48,994 --> 01:10:53,614 I don't think that they need to worry about any other products 913 01:10:53,614 --> 01:10:56,634 until Bitcoin's CAGR is below 20. 914 01:10:58,134 --> 01:11:02,754 Once we get there, then maybe what they're paying for stretch 915 01:11:02,754 --> 01:11:09,394 starts to like tangentially approach Bitcoin's CAGR 916 01:11:09,394 --> 01:11:10,894 and then maybe they have to pivot. 917 01:11:11,454 --> 01:11:14,234 But for now, if it's bringing in cash flow, 918 01:11:14,234 --> 01:11:16,274 it just seems like it's enough to overcome 919 01:11:16,274 --> 01:11:18,754 a little bit of the friction that's in the business itself. 920 01:11:18,994 --> 01:11:20,614 I think it's beneficial for now. 921 01:11:21,554 --> 01:11:23,174 Well, so I know, so the BI business, 922 01:11:23,234 --> 01:11:25,394 I know it has benefits for the return of capital for stretch, 923 01:11:25,434 --> 01:11:26,414 for instance, and all that, right? 924 01:11:26,494 --> 01:11:27,914 I understand that. 925 01:11:28,234 --> 01:11:29,394 What I'm trying to say is, 926 01:11:29,394 --> 01:11:35,274 how is it going to be received at some future date, 927 01:11:35,494 --> 01:11:39,674 indeterminate future date, where Bitcoin is at whatever it is, 928 01:11:40,174 --> 01:11:43,914 strategy is at X number of hundreds of billions, 929 01:11:44,454 --> 01:11:47,454 and we're still having the same conversation 930 01:11:47,454 --> 01:11:49,534 whether they should be included or not. 931 01:11:50,054 --> 01:11:51,294 That's the first thing. 932 01:11:51,294 --> 01:11:55,154 The second thing is, I think, 933 01:11:55,694 --> 01:11:59,294 and this is what I mentioned in the conversation with Fong 934 01:11:59,294 --> 01:12:02,974 that I had with him in the interview I did with him, I think that as a function of growth, 935 01:12:03,074 --> 01:12:08,134 the BI business is going to scale and it's going to get bigger. I think that that's likely going 936 01:12:08,134 --> 01:12:14,514 to happen. What I'm trying to say is at that point, we can draw the correlates between Berkshire 937 01:12:14,514 --> 01:12:20,094 Hathaway and whatnot, but there's a fundamental difference. There wasn't an entirely new commodity 938 01:12:20,094 --> 01:12:24,614 that is still under 20 years of age, 939 01:12:24,874 --> 01:12:27,994 that is still being adjusted to globally 940 01:12:27,994 --> 01:12:31,494 as the underpinning factor in this whole thing. 941 01:12:31,814 --> 01:12:34,994 That fundamentally changes the way that this can go. 942 01:12:36,074 --> 01:12:37,954 And inclusion means, 943 01:12:38,174 --> 01:12:41,354 inclusion and credit ratings means you have, 944 01:12:41,774 --> 01:12:43,974 people think that Bitcoin is legitimized as of right now. 945 01:12:44,094 --> 01:12:44,934 I don't think it is. 946 01:12:45,374 --> 01:12:48,214 I think when you start having it behind digital credit 947 01:12:48,214 --> 01:12:51,074 and it being recognized as we all think it should, 948 01:12:51,474 --> 01:12:53,254 that fundamentally says not to the market, 949 01:12:53,354 --> 01:12:54,294 but also to the world, 950 01:12:54,734 --> 01:12:58,954 you now have a truly 100% vetted, accepted, 951 01:12:59,994 --> 01:13:03,254 appropriately rated, appropriately leverageable asset 952 01:13:03,254 --> 01:13:04,454 that now exists. 953 01:13:05,374 --> 01:13:06,534 What does that mean? 954 01:13:06,674 --> 01:13:07,574 What does that say? 955 01:13:07,654 --> 01:13:09,434 And how long does it take for the world 956 01:13:09,434 --> 01:13:10,414 to want to accept that? 957 01:13:11,114 --> 01:13:13,414 It's not just about Bitcoin getting big enough. 958 01:13:14,014 --> 01:13:15,794 I think Bitcoin is going to be successful regardless. 959 01:13:16,034 --> 01:13:18,114 I think strategy is going to be successful regardless. 960 01:13:18,214 --> 01:13:23,894 what I'm trying to say is what does that success look like and what will that entail it probably 961 01:13:23,894 --> 01:13:30,434 it probably takes it probably takes three years um it probably takes five at minimum three years 962 01:13:30,434 --> 01:13:34,554 track record right like you're building a track record as soon as these instruments are around for 963 01:13:34,554 --> 01:13:39,154 several years like the amount of institutional capital this thing is that these things will get 964 01:13:39,154 --> 01:13:44,854 integrated uh into different systems I mean it just depends on how fast the world changes right 965 01:13:44,854 --> 01:13:48,394 Like we're seeing like how fast is the risk market change? 966 01:13:48,434 --> 01:13:50,114 How fast is the private credit market change? 967 01:13:50,154 --> 01:13:54,974 Is there a, is there a large, um, global systemic, uh, credit crisis? 968 01:13:55,194 --> 01:13:58,334 If there's a large systemic credit crisis, is there a significant money printing? 969 01:13:58,414 --> 01:13:59,454 What does inflation look like? 970 01:13:59,494 --> 01:14:01,674 What is the result of this war look like? 971 01:14:01,714 --> 01:14:05,334 What is, you know, how does AI change how we live in the world? 972 01:14:05,334 --> 01:14:05,554 Right? 973 01:14:05,554 --> 01:14:10,754 Like there's so many things that can happen so fast or slowly. 974 01:14:10,754 --> 01:14:17,674 It just kind of depends on like the pace of society and like its ability to keep up. 975 01:14:18,794 --> 01:14:22,494 Well, three years, those for traditional offerings like this, this is not traditional. 976 01:14:23,074 --> 01:14:25,734 So I don't know if we can make the same, if we can make the same assumptions. 977 01:14:25,834 --> 01:14:26,474 That's all I'm saying. 978 01:14:27,114 --> 01:14:27,734 Yeah, that's fair. 979 01:14:27,914 --> 01:14:28,414 That's fair. 980 01:14:28,534 --> 01:14:31,134 I think, I mean, I agree. 981 01:14:31,214 --> 01:14:33,614 And I think the timeline's uncertain, you know, the future's uncertain. 982 01:14:33,854 --> 01:14:36,734 All we can do is spread awareness. 983 01:14:36,854 --> 01:14:37,334 I think it's cool. 984 01:14:37,374 --> 01:14:38,474 You're going to risk summit, Jeff. 985 01:14:38,574 --> 01:14:39,534 I'm super psyched. 986 01:14:39,534 --> 01:14:40,074 I'd love to. 987 01:14:40,074 --> 01:14:40,934 Come hang out. 988 01:14:41,014 --> 01:14:41,394 Risk world. 989 01:14:41,534 --> 01:14:42,394 I even thought I was like, thanks. 990 01:14:42,494 --> 01:14:43,794 So yeah, that is cool that you're going there. 991 01:14:44,154 --> 01:14:44,714 Risk world. 992 01:14:45,194 --> 01:14:47,274 Okay, this is actually a perfect time. 993 01:14:47,574 --> 01:14:50,454 And I should have brought this up earlier. 994 01:14:50,994 --> 01:14:51,914 We created a website. 995 01:14:53,054 --> 01:14:54,254 We have a new domain. 996 01:14:54,254 --> 01:14:56,194 It is super cool. 997 01:14:56,494 --> 01:14:57,714 And I'm going to share it right now. 998 01:14:58,214 --> 01:15:01,374 And we are going live. 999 01:15:01,654 --> 01:15:01,954 Boom. 1000 01:15:02,354 --> 01:15:03,054 New website. 1001 01:15:04,174 --> 01:15:05,794 True North, investment grade Bitcoin podcast. 1002 01:15:06,114 --> 01:15:09,874 So the domain is tnorth.com. 1003 01:15:10,074 --> 01:15:15,114 Check it out. We've got, I'm sure many of you have probably gotten questions. Hey, like, 1004 01:15:15,194 --> 01:15:19,274 what is this digital credit thing? Maybe, can you give me something that I could read about it? 1005 01:15:19,814 --> 01:15:24,074 Boom. You click on digital credit, the definitive guide to digital credit. And here we got, 1006 01:15:24,074 --> 01:15:30,934 you know, thousands, I think nearly 50, 60,000 of words that you can, you know, share with 1007 01:15:30,934 --> 01:15:35,074 somebody. We spent a lot of time putting information out there, putting a guide on 1008 01:15:35,074 --> 01:15:39,754 digital credit. I've even created a digital credit investment thesis. Boom. You could see it there. 1009 01:15:39,754 --> 01:15:44,374 It's about 8,000 words, maybe the base of a book that I write here in the near future. 1010 01:15:45,414 --> 01:15:47,194 And we've got a research page. 1011 01:15:47,354 --> 01:15:48,434 You can see all the research. 1012 01:15:48,574 --> 01:15:50,894 We've got Adrian Morris has popped in a thesis in here. 1013 01:15:51,374 --> 01:15:53,134 This is significantly long. 1014 01:15:53,374 --> 01:15:55,974 This is a lot of work and energy has been put into this. 1015 01:15:56,454 --> 01:16:01,694 And ultimately, what we wanted is a place where we can house all of our information. 1016 01:16:01,954 --> 01:16:05,634 We know that the X search function is absolutely horrendous. 1017 01:16:05,634 --> 01:16:15,074 A lot of people are putting out fantastic content and we wanted a place where our entire group can house content in an easily digestible manner. 1018 01:16:15,694 --> 01:16:21,814 So, for example, if you're curious about what Dan Hillary has been writing, boom, you can click on Dan and it filters his articles. 1019 01:16:21,994 --> 01:16:25,294 You want digital credit articles, you can go check it out. Boom, you've got that there. 1020 01:16:25,814 --> 01:16:28,074 Capital structure, hit on that or Soleil. 1021 01:16:29,194 --> 01:16:31,034 Any articles about him, boom. 1022 01:16:31,654 --> 01:16:33,994 Different analysis and commentary, fantastic. 1023 01:16:34,734 --> 01:16:36,074 So please go check it out. 1024 01:16:36,254 --> 01:16:40,614 The last piece, which I think is awesome, just as everybody else is building out tools, 1025 01:16:40,874 --> 01:16:42,574 we are also building out tools. 1026 01:16:43,494 --> 01:16:46,354 And we are going to have some more tools and calculators here. 1027 01:16:46,454 --> 01:16:51,634 But I think the one that I'm most excited for at the moment, and Michael, if you're watching, 1028 01:16:51,734 --> 01:16:52,534 we built this for you. 1029 01:16:52,954 --> 01:16:54,754 This is the Bitcoin 24 calculator. 1030 01:16:54,754 --> 01:17:00,114 So this is the open source 21 year Bitcoin price model that you posted to GitHub a couple 1031 01:17:00,114 --> 01:17:00,754 of years ago. 1032 01:17:00,974 --> 01:17:03,814 It was Michael, Sharish, and CJ that put it together. 1033 01:17:03,994 --> 01:17:09,414 And we have turned it into a calculator online. So if you have any updates to this, let us know. 1034 01:17:09,494 --> 01:17:14,034 We can change the base assumptions, but you could pop in here. And these are Michael Saylor's 1035 01:17:14,034 --> 01:17:19,074 assumptions. You can pop in and plug in your bear case, your base case, bull case. Look at what the 1036 01:17:19,074 --> 01:17:25,274 starting Bitcoin price is. This is live information. You can pull live Bitcoin prices here. Look at 1037 01:17:25,274 --> 01:17:29,474 different growth rate assumptions, growth rate decline assumptions, and terminal growth rates. 1038 01:17:29,474 --> 01:17:44,254 So based on Saylor's bull assumption, this model based in 2024, by the year 2032, we're looking at a bull scenario of 2.6 million, a base case of 1.1 million, and a bear case of 377,000. 1039 01:17:45,174 --> 01:17:48,494 Obviously, it's a function of where the Bitcoin price is today and how fast that puppy moves. 1040 01:17:48,694 --> 01:17:51,654 But this is what we're looking at. 1041 01:17:51,774 --> 01:17:56,674 And this is in line with how we view the world of Bitcoin as well as underwriting the long term view. 1042 01:17:56,674 --> 01:17:57,994 What do we know about Bitcoin? 1043 01:17:57,994 --> 01:18:26,994 What do we know about the infrastructure? What do we know about the plumbing? We've got changing AI world. The world's getting faster, moving to computers. Infrastructure on capital is completely changing. There's a move to tokenization that you can't deny, that you can't ignore those things. The regulatory environment's wide open. You've got banks that are accepting Bitcoin. You've got these digital credit instruments that will eventually probably get ratings on top of them and infiltrate their way into traditional finance. 1044 01:18:27,994 --> 01:18:29,914 And this stuff becomes systemically important. 1045 01:18:30,374 --> 01:18:34,734 So we're well on the way of creating a track record and this type of stuff helps. 1046 01:18:35,474 --> 01:18:47,174 So ultimately, the goal here is to teach everybody, just like we've been doing for the last 60 episodes, spread education, spread information, spread knowledge, and continue to build this out. 1047 01:18:47,594 --> 01:18:53,674 We will be putting any new research on here and as well as the X page. 1048 01:18:53,994 --> 01:18:55,294 There's a bit about the crew. 1049 01:18:55,534 --> 01:18:56,674 There's a bit about us. 1050 01:18:56,674 --> 01:19:01,574 future events. You'll see future events that are coming out here. It'll show where we're at and 1051 01:19:01,574 --> 01:19:07,634 what's going on. So if you want to come hang out and chat with us, that'd be great. And yeah, we 1052 01:19:07,634 --> 01:19:14,974 are also hosting a Bitcoin for business event here in Oregon later in May. So more information 1053 01:19:14,974 --> 01:19:21,334 to come on that, that will pop up here. So yeah, check it out. TNorth.com. We'll put it in the show 1054 01:19:21,334 --> 01:19:27,094 notes team, if you can put it in the show notes, that'd be great. And we'll, we'll blast it out 1055 01:19:27,094 --> 01:19:33,794 here over the next week. The team has put tremendous amount of effort into this. As you can see, 1056 01:19:33,914 --> 01:19:39,314 we've, we've now built a website. Our stream is updated and cleaner. We've got a team that's 1057 01:19:39,314 --> 01:19:43,034 helping production on the, on the website. We've got clips that are being blasted out a little bit 1058 01:19:43,034 --> 01:19:48,754 more here and there. The support of our sponsors definitely helps that we've got a horizon now and 1059 01:19:48,754 --> 01:19:51,014 BitGo. So big shout out to our sponsors 1060 01:19:51,014 --> 01:19:52,854 and that helps 1061 01:19:52,854 --> 01:19:54,874 us continue to get this information out 1062 01:19:54,874 --> 01:19:56,894 into the market and our goal 1063 01:19:56,894 --> 01:19:59,014 is to just spread education and information 1064 01:19:59,014 --> 01:19:59,994 on digital credit. 1065 01:20:01,514 --> 01:20:02,654 Yeah, it's pretty slick. 1066 01:20:03,014 --> 01:20:05,114 Real clean. Super clean. 1067 01:20:06,334 --> 01:20:07,134 Shout out 1068 01:20:07,134 --> 01:20:07,734 Dan O. 1069 01:20:09,034 --> 01:20:10,654 Fantastic work, Charles Dean. 1070 01:20:10,774 --> 01:20:13,034 Fantastic work. Charles Dean. Yeah, Charles Dean 1071 01:20:13,034 --> 01:20:14,774 killed it. Totally killed it. 1072 01:20:16,134 --> 01:20:16,434 Okay. 1073 01:20:17,874 --> 01:20:18,354 Okay. 1074 01:20:18,754 --> 01:20:22,814 I think the last thing I really had is this. 1075 01:20:23,034 --> 01:20:29,614 I mean, again, we've got to talk about AI, but open AI offering 17 and a half percent 1076 01:20:29,614 --> 01:20:30,254 guaranteed. 1077 01:20:31,834 --> 01:20:33,854 I guess it's a perpetual preferred equity. 1078 01:20:33,934 --> 01:20:34,394 I think it is. 1079 01:20:34,494 --> 01:20:36,094 I think it is a prep equity instrument. 1080 01:20:36,194 --> 01:20:37,874 I have no idea how much capital they're looking to raise. 1081 01:20:38,934 --> 01:20:42,354 But I mean, have you guys looked into these business models? 1082 01:20:42,414 --> 01:20:44,054 I'm super confused by the stuff. 1083 01:20:44,054 --> 01:20:46,854 And I think, Dan, this is kind of what you're referencing in the beginning. 1084 01:20:46,854 --> 01:20:54,274 i'm using the shit out of these models i'm abusing them i'm running it through like as much as i can 1085 01:20:54,274 --> 01:21:00,514 and i will have like several tabs open running complex analysis and i'll do it in multiple 1086 01:21:00,514 --> 01:21:05,294 engines right like i'll like while one's going over here i've got another on another screen 1087 01:21:05,294 --> 01:21:14,014 doing something else over here and like there's no way there's no way that this is like profitable 1088 01:21:14,014 --> 01:21:19,654 like i don't know how much i'm spending on these i don't know maybe a couple hundred bucks a month 1089 01:21:19,654 --> 01:21:26,754 i'm spending on these tools but like i'm using i'm abusing them and i'm curious like how much 1090 01:21:26,754 --> 01:21:32,914 output is used on the other side like you guys have any idea on this 1091 01:21:32,914 --> 01:21:40,554 i think um how does this pencil like i just don't think these these deals pencil right like and 1092 01:21:40,554 --> 01:21:45,034 they're all super competitive like are they just are they they're going to jack are they going to 1093 01:21:45,034 --> 01:21:51,574 make this so ingrained on what you do that as soon as you're hooked they jack up the prices but but 1094 01:21:51,574 --> 01:21:55,274 they can't do that because there's competitors it's like a super competitive environment it's 1095 01:21:55,274 --> 01:22:04,454 moving super fast so yeah i think i think a lot of it is um a lot of them are taking a what if 1096 01:22:04,454 --> 01:22:09,974 you build a deal come approach that they're just going to keep doing these deals and they're going 1097 01:22:09,974 --> 01:22:14,574 to keep pumping money into getting money into these deals and they're going to build up the 1098 01:22:14,574 --> 01:22:19,334 data centers and i think that the hope for a lot of them especially open like specifically open ai 1099 01:22:19,334 --> 01:22:25,274 is that things that escape velocity and they're able to catch up to um their valuation in a way 1100 01:22:25,274 --> 01:22:30,734 i think a lot if i had to really really simplify it i think a lot of it is that to your point about 1101 01:22:30,734 --> 01:22:35,714 profitability i mean they can monetize a variety of different ways i think that opening i was looking 1102 01:22:35,714 --> 01:22:44,274 to do ads i think right for some of it is what they were doing um the thing is if you take a look at 1103 01:22:47,074 --> 01:22:51,394 this just this is sheer size of some of the companies involved i don't know if they're at 1104 01:22:51,394 --> 01:23:00,514 any terminal risk of of it's breaking them i do think there's a risk of at least one of these 1105 01:23:00,514 --> 01:23:05,614 models becoming defunct and that's going to be a bit of a size of event in the market. 1106 01:23:05,614 --> 01:23:10,594 But in terms of how they're financing it, people have called it, you know, they call 1107 01:23:10,594 --> 01:23:14,874 it a bubble, they call it all the different names. 1108 01:23:14,874 --> 01:23:19,954 I don't know if I'll go as far as to call it a bubble, but I will say that there is a 1109 01:23:19,992 --> 01:23:25,112 ballistic financing going on that is getting to the point where it could be somewhat problematic 1110 01:23:25,112 --> 01:23:26,712 in the way some of these deals are structured. 1111 01:23:27,172 --> 01:23:29,772 And with regards to OpenAI, I don't know what they're doing, quite frankly, 1112 01:23:30,052 --> 01:23:33,492 with this new offering that they're trying to kick out. 1113 01:23:33,812 --> 01:23:36,012 So it is what it is. 1114 01:23:36,052 --> 01:23:39,072 I think we're going to see what's going to happen with a lot of this in the next 18 months. 1115 01:23:39,312 --> 01:23:40,692 A lot of this is going to get shaken out. 1116 01:23:41,692 --> 01:23:44,472 I don't see any way that they can make money on these things. 1117 01:23:45,412 --> 01:23:47,612 Kind of what you were talking about, Jeff, with the competition. 1118 01:23:47,612 --> 01:23:49,252 it's almost like 1119 01:23:49,252 --> 01:23:51,352 imagine before 1120 01:23:51,352 --> 01:23:53,892 calculators were dematerialized 1121 01:23:53,892 --> 01:23:55,012 and put on everybody's phone 1122 01:23:55,012 --> 01:23:57,352 and you put out a capital raise 1123 01:23:57,352 --> 01:23:59,992 like the calculator company was like 1124 01:23:59,992 --> 01:24:02,612 oh we're going to do a perpetual preferred 1125 01:24:02,612 --> 01:24:04,452 to raise money for this calculator 1126 01:24:04,452 --> 01:24:06,872 that's going to be free on everyone's phone in 10 years 1127 01:24:06,872 --> 01:24:08,992 where's the profits going to come from 1128 01:24:08,992 --> 01:24:10,492 the only thing that I can think of 1129 01:24:10,492 --> 01:24:13,252 is governments will 1130 01:24:13,252 --> 01:24:15,332 you know maybe start 1131 01:24:15,332 --> 01:24:16,112 issuing 1132 01:24:16,112 --> 01:24:23,432 regulations and just kind of like enforcing monopolies for a couple of companies that are 1133 01:24:23,432 --> 01:24:28,612 deemed too big to fail or something that that's the only way is i can see government is just kind 1134 01:24:28,612 --> 01:24:34,112 of stepping in and you know protectionism basically is the only thing i can think of 1135 01:24:34,112 --> 01:24:40,852 because if you have if you have this like crazy intelligence tool and you want your society using 1136 01:24:40,852 --> 01:24:47,412 it like it probably is systemically important at that point or maybe maybe maybe you don't want 1137 01:24:47,412 --> 01:24:52,612 them to your point so lay on calculators real quick texas instruments is 179 billion dollar 1138 01:24:52,612 --> 01:24:58,612 company it's actually uh four times like three times the size of strategy and they make calculators 1139 01:24:59,172 --> 01:25:02,692 so like they figured out another way though i gotta make something else 1140 01:25:04,772 --> 01:25:09,412 yeah also the thing is i um i get what you're saying the calculator analogy but i don't i don't 1141 01:25:09,412 --> 01:25:15,492 know if it fits so an l so if we're using llms as the example an llm is not going to be a static 1142 01:25:15,492 --> 01:25:20,612 instrument even if you come up with the most perfect llm tomorrow knowledge is still going to 1143 01:25:20,612 --> 01:25:25,332 be expanding the llm is going to have to be updated i think that's the future an llm is going to be 1144 01:25:25,332 --> 01:25:29,892 like an os that you're going to be paying a fee to update in perpetuity i think that's one 1145 01:25:29,892 --> 01:25:35,972 monetization route that they can they can go down it's just a matter of which llms become the 1146 01:25:35,972 --> 01:25:42,332 industry standard. And then I think we're also not taking into account that current language models 1147 01:25:42,332 --> 01:25:47,392 are being applied to everything. They're definitely going to be highly specialized models for 1148 01:25:47,392 --> 01:25:52,132 mathematics, for science, for medicine, and so on and so forth. That's the next frontier I think 1149 01:25:52,132 --> 01:25:57,872 they're going to try to milk. And then there's also the fact that there's the world models that 1150 01:25:57,872 --> 01:26:01,992 are going to be coming online. There's all kinds of other applications that come in with robotics, 1151 01:26:01,992 --> 01:26:04,972 with driverless cars, aviation. 1152 01:26:05,712 --> 01:26:07,152 You also have military applications. 1153 01:26:07,392 --> 01:26:09,752 I think there are a lot of different industries 1154 01:26:09,752 --> 01:26:12,532 and different verticals that this can spiderweb into. 1155 01:26:13,052 --> 01:26:14,712 I just think that before we get to that point, 1156 01:26:14,932 --> 01:26:18,692 one of these, I hate to use the term circular, 1157 01:26:18,832 --> 01:26:19,892 but a lot of them kind of are. 1158 01:26:20,072 --> 01:26:22,172 One of these circular deals is going to blow up. 1159 01:26:22,632 --> 01:26:24,852 And I think the market is, once that happens, 1160 01:26:24,892 --> 01:26:26,372 it's going to be kind of a reset for the market. 1161 01:26:26,752 --> 01:26:29,192 But the genie is out of the bottle for these LLMs. 1162 01:26:29,192 --> 01:26:30,812 Even if opening eye goes down tomorrow, 1163 01:26:30,812 --> 01:26:33,292 It's not as if they're going to delete all their source code. 1164 01:26:35,372 --> 01:26:37,232 Like the genie is out of the bottle. 1165 01:26:37,652 --> 01:26:45,232 And I think optimization and application and then commoditization of the LLMs and the AIs is going to be the next step. 1166 01:26:45,492 --> 01:26:46,892 They're going to be able to monetize them. 1167 01:26:47,312 --> 01:26:56,492 We just don't see the pathway forward because we're kind of taken into account of like, well, to Jeff's point, I'm using the hell out of these things. 1168 01:26:56,612 --> 01:26:58,232 I'm getting so much productivity out of it. 1169 01:26:58,232 --> 01:27:01,692 There's no way they're charging me enough for what I'm getting out of it. 1170 01:27:02,192 --> 01:27:08,452 But that I think the monetization route is going to become highly specialized in the next two years. 1171 01:27:08,592 --> 01:27:11,412 And then things are going to scale appropriately from there. 1172 01:27:11,492 --> 01:27:14,052 But this is all contingent upon data center build out. 1173 01:27:14,472 --> 01:27:18,112 I think that without the compute, this whole thing falls apart. 1174 01:27:18,412 --> 01:27:23,352 So if the build out doesn't really kick off and if these deals don't materialize, 1175 01:27:23,412 --> 01:27:27,852 then maybe so late is where it comes in that maybe the government steps in and takes a stake in some of these. 1176 01:27:27,852 --> 01:27:30,392 and they start doing that kind of a thing, 1177 01:27:30,772 --> 01:27:34,492 I think that is the real terminal risk. 1178 01:27:35,012 --> 01:27:36,932 If we have the data centers, if we have the compute, 1179 01:27:37,052 --> 01:27:38,912 I think everything else kind of washes out 1180 01:27:38,912 --> 01:27:40,092 and it sorts itself out. 1181 01:27:41,192 --> 01:27:42,792 Now, which one is Sam Altman? 1182 01:27:42,932 --> 01:27:44,192 Is he the OpenAI guy? 1183 01:27:44,212 --> 01:27:44,572 OpenAI. 1184 01:27:44,992 --> 01:27:46,912 Yeah, so that dirty bird, 1185 01:27:47,332 --> 01:27:49,792 he said something along the lines the other day 1186 01:27:49,792 --> 01:27:51,532 where he was like, 1187 01:27:51,652 --> 01:27:55,792 AI is going to be sold as a utility in the future. 1188 01:27:56,452 --> 01:27:59,832 You're just going to be metered out how much intelligence you want to buy. 1189 01:28:00,792 --> 01:28:03,992 And it just reminded me of Flowers for Algernon, 1190 01:28:04,112 --> 01:28:08,472 where he concocted that stuff to make the mouse smart, 1191 01:28:08,632 --> 01:28:10,252 and then they gave it to the guy with a low IQ. 1192 01:28:11,112 --> 01:28:15,012 And then he kind of got addicted to being smart. 1193 01:28:15,652 --> 01:28:17,452 Who wants to go back to being dumb? 1194 01:28:18,492 --> 01:28:24,752 So it just seems like this kind of dirty trick they're going to play on us 1195 01:28:24,752 --> 01:28:27,532 to get us addicted to being smarter than we are. 1196 01:28:27,752 --> 01:28:29,752 And nobody's going to want to go back to reality. 1197 01:28:30,512 --> 01:28:32,832 And it's almost going to be like an intelligence drug. 1198 01:28:33,332 --> 01:28:36,852 And they're just going to be like dishing it out to us for fees. 1199 01:28:38,432 --> 01:28:39,992 It kind of ticks me off. 1200 01:28:40,632 --> 01:28:43,952 Well, the thing with that is, and I understand where you're going with it, 1201 01:28:43,972 --> 01:28:46,072 but let's think about what that means. 1202 01:28:46,372 --> 01:28:48,872 We have metered usage for all kinds of things right now. 1203 01:28:48,992 --> 01:28:50,792 Our internet, for instance, on our phones. 1204 01:28:50,792 --> 01:28:59,532 if you have um for instance i have a two gig um connection in my house that um i have it's metered 1205 01:28:59,532 --> 01:29:03,072 because they don't have the full build out so they're they're limiting how much bandwidth you 1206 01:29:03,072 --> 01:29:08,632 can use at two gigs versus one that's metering right so is it is it really that they're going 1207 01:29:08,632 --> 01:29:12,712 to get us hooked on it on on intelligence or is it just going to be another utility 1208 01:29:12,712 --> 01:29:20,412 that we use and that we pay we pay to play so if you are someone that has an lm on your phone and 1209 01:29:20,412 --> 01:29:26,832 you're hitting your compute threshold, you pay for more compute and you use it. Sam Altman is a 1210 01:29:26,832 --> 01:29:33,452 sketchy motherfucker, but he's not exactly far off with what he's saying. I think that a pay-to-play 1211 01:29:33,452 --> 01:29:40,772 usage model is how they monetize this thing. And think of it, just think of us, right? Think of us 1212 01:29:40,772 --> 01:29:45,972 as a group. Do you really think in three years hence, we're going to say to ourselves, I don't 1213 01:29:45,972 --> 01:29:52,852 to pay an extra 25 30 40 bucks a month on top of what i'm paying already for compute when i can 1214 01:29:53,652 --> 01:29:57,972 do all kinds of modeling statistical modeling i can do all kinds of research i can do all kinds 1215 01:29:57,972 --> 01:30:02,772 of things like that just for that extra compute i think that it's not going to get people addicted 1216 01:30:02,772 --> 01:30:08,532 to being smart because the internet was a pretty big deal it put information at our fingertips 1217 01:30:08,532 --> 01:30:15,012 and most people are using it to look up stupid post on reddit and be trolls online i think that 1218 01:30:15,012 --> 01:30:19,892 reality doesn't change you're going to have the super users that are paying for that are going to 1219 01:30:19,892 --> 01:30:23,892 be willing to pay for the compute you're going to have the everyday users that are going to pay for 1220 01:30:23,892 --> 01:30:27,892 the compute and they're going to have everybody else that's using it to to make cat videos and 1221 01:30:27,892 --> 01:30:32,212 shit right the reality is not going to change it's just going to become a different level of 1222 01:30:32,212 --> 01:30:37,092 stratification first it was that first it was access to information then it was access to the 1223 01:30:37,092 --> 01:30:42,852 internet then it was access to ubiquitous connectivity through our smartphones and our 1224 01:30:42,852 --> 01:30:46,852 smart devices and so on and so forth and the next layer is going to be compute they're going to 1225 01:30:46,852 --> 01:30:53,412 commoditize it i i just i i don't know if it's going to create um a dystopia that's agi that's 1226 01:30:53,412 --> 01:30:58,852 a different story but to your point i don't know if i think people will get addicted but just like 1227 01:30:58,852 --> 01:31:13,834 people get addicted to the internet now you have weirdos that play world of warcraft for 15 hours a day still right or or warhammer 40k or yeah well i i was too so that what but what i saying is i grew out of it at some point 1228 01:31:13,834 --> 01:31:17,734 right but you have people that aren't going to grow out of it you're going to have those people 1229 01:31:17,734 --> 01:31:22,654 that that gets stuck in the web as usual but you're also going to have everyone else that 1230 01:31:22,654 --> 01:31:27,394 kind of adopts and adapts and they're just fine i mean but if my robot's doing my job what 1231 01:31:27,394 --> 01:31:32,594 difference does it make i can raid 24 7 if i want to yeah you can but you still i think you got about 1232 01:31:32,594 --> 01:31:37,054 30 years to worry about that until then let's enjoy the compute right let's enjoy the compute 1233 01:31:37,054 --> 01:31:41,354 and what this brings okay all right this is investment grade right i got one more analogy 1234 01:31:41,354 --> 01:31:50,414 star-bellied sneetches anybody else parents read dr seuss to them okay it's the one it's the one 1235 01:31:50,414 --> 01:31:56,354 where yeah some of the sneetches got stars and some don't and the ones without the stars feel 1236 01:31:56,354 --> 01:32:00,754 bad because they're not as good as the ones with the stars and so then the guy comes around and he 1237 01:32:00,754 --> 01:32:06,214 starts selling stars that you can put on your freaking bellies and then it was like a star race 1238 01:32:06,214 --> 01:32:10,574 to see who had get the most stars and then he just milked everybody for all their cash and then dipped 1239 01:32:10,574 --> 01:32:15,514 and that's like i can just see them doing that with intelligence you're gonna have like competing 1240 01:32:15,514 --> 01:32:21,914 ai oh i can get you to 140 iq i get you to 150 i get you to 160 and then everybody just gets fleeced 1241 01:32:21,914 --> 01:32:27,234 for their cash and you know the AI companies just run off with all the money okay so here's here's 1242 01:32:27,234 --> 01:32:33,814 an here's another one um this Neuralink thing is kind of got me uh it's got my brain and we'll 1243 01:32:33,814 --> 01:32:38,094 finish on this like if you had the opportunity to plug an AI into your brain like would you 1244 01:32:38,094 --> 01:32:43,294 like would you do it if it if it was starting to become a commonplace and it was like reasonably 1245 01:32:43,294 --> 01:32:50,274 affordable like right now one of the biggest constraints on compute is that you have to be 1246 01:32:50,274 --> 01:32:55,434 focused on it and you have to be like plugged in and so you're it's like sucking information out of 1247 01:32:55,434 --> 01:33:00,634 a straw like it used to be like a coffee straw like a coffee stir stick and now it's like a 1248 01:33:00,634 --> 01:33:07,274 i don't know like a bubble tea straw but like what if it was a river and like anytime you 1249 01:33:07,274 --> 01:33:13,274 thought about something you're attached to it it's like boom you got it would you do it and like 1250 01:33:13,274 --> 01:33:18,894 we're probably gonna have to make that decision in our in our lifetimes super weird uh thought 1251 01:33:18,894 --> 01:33:25,494 concept but like it's happening like you you can be connected and like think about things 1252 01:33:25,494 --> 01:33:29,654 would you do it you guys are the ones that are all on macbooks you'll be getting it off the app store 1253 01:33:29,654 --> 01:33:35,594 and i'm over here on windows and i'll just be on android doing it analog style 1254 01:33:35,594 --> 01:33:40,934 no but it's funny that you mentioned that so i think i think the reason why apple's kind of been 1255 01:33:40,934 --> 01:33:44,994 biding their time with the whole llm thing and they haven't really been trying to build their 1256 01:33:44,994 --> 01:33:51,954 own i think i think they're waiting for the best one or at least the initial best one and they're 1257 01:33:51,954 --> 01:33:57,954 going to embed that on a laptop as a secondary it's a secondary os i i think that i think that's 1258 01:33:57,954 --> 01:34:06,514 the next big step i think we're going to have local llms on our machines that we are you on 1259 01:34:08,114 --> 01:34:13,314 yeah exactly so like so for instance under my desk as everyone likes to talk about right i've 1260 01:34:13,314 --> 01:34:15,174 I've got my towers. 1261 01:34:15,434 --> 01:34:16,534 I'm running my local models. 1262 01:34:17,014 --> 01:34:19,794 I think we're going to have local frontier LLMs. 1263 01:34:19,954 --> 01:34:24,314 Once the compression technology and once the algorithms catch up, we're going to have local 1264 01:34:24,314 --> 01:34:26,714 LLMs on our machines and we're going to pay for them. 1265 01:34:27,074 --> 01:34:28,714 And then we're going to pay to update them. 1266 01:34:28,994 --> 01:34:31,314 And the price for them will just be high. 1267 01:34:31,614 --> 01:34:37,754 So they're not putting out models like mini and so on and so forth because they're saying, 1268 01:34:37,874 --> 01:34:40,674 oh, it is good for this series of questions versus this series of questions. 1269 01:34:40,894 --> 01:34:42,674 I think they're building up the pricing tier. 1270 01:34:42,674 --> 01:34:43,694 We just don't realize it yet. 1271 01:34:44,374 --> 01:34:47,694 So you're going to pay for Grok Mini, right? 1272 01:34:47,734 --> 01:34:51,134 You're going to have your yearly subscription for that, that you're then going to pay for 1273 01:34:51,134 --> 01:34:51,834 every single year. 1274 01:34:52,374 --> 01:34:56,354 Then you're going to have your Super Grok that you can pay for every single year and 1275 01:34:56,354 --> 01:34:57,194 so on and so forth. 1276 01:34:57,234 --> 01:34:59,254 But the thing is, it'll run on your machine. 1277 01:34:59,534 --> 01:35:00,214 It'll be local. 1278 01:35:00,654 --> 01:35:01,954 I think that's the step. 1279 01:35:02,114 --> 01:35:07,234 And I would pay a thousand bucks, two thousand bucks, three thousand bucks. 1280 01:35:07,234 --> 01:35:26,374 Think of it as like a secondary brain that I'm paying for to have it run on my machine. If I know that the LLMs have become significantly more advanced, they don't hallucinate as much, they are far more applicable to other areas of my life, they are more integrated to other areas of my life because they're on a machine. 1281 01:35:26,374 --> 01:35:32,794 that use case, I think that's the big step that they're working towards. Everything that we're 1282 01:35:32,794 --> 01:35:37,874 doing is working towards that. And I think the two big cases are going to be that and tokenization 1283 01:35:37,874 --> 01:35:43,314 because I use my usage on tokens when I'm doing algorithm design and so on and so forth is 1284 01:35:43,314 --> 01:35:48,714 significantly higher than the monthly premium I'm paying for Gemini and all these other LLMs 1285 01:35:48,714 --> 01:35:54,394 that I'm using on a monthly basis. So I definitely think there's a path that we're working towards 1286 01:35:54,394 --> 01:36:00,554 right now um whether open ai survives that or not i don't know if it matters well on that point on 1287 01:36:00,554 --> 01:36:05,354 compression algorithms there i just saw google just dropped a compression algorithm exactly 1288 01:36:05,994 --> 01:36:13,674 eight times faster while using six times less memory zero accuracy loss what's compression 1289 01:36:14,474 --> 01:36:19,594 this is what i think about it the the best analogy is like losses compression for an mp3 file 1290 01:36:19,594 --> 01:36:30,834 So you copy it from whatever source and you do it in a way that the data doesn't degrade and it doesn't lose quality while also becoming smaller and more efficient. 1291 01:36:31,154 --> 01:36:32,354 That's the simplest way I can put it. 1292 01:36:32,494 --> 01:36:32,794 Oh, nice. 1293 01:36:33,614 --> 01:36:44,714 So, Sully, you brought up a few episodes back where we're talking about bits, like how much content is on a Bitcoin transaction. 1294 01:36:46,074 --> 01:36:46,354 Mm-hmm. 1295 01:36:46,354 --> 01:36:51,914 right so um the ai models here turbo quant compresses that memory down to just three bits 1296 01:36:51,914 --> 01:36:59,574 per value from 32 bits without losing any quality it's like uh it's like effect effective caching 1297 01:36:59,574 --> 01:37:05,134 of your like thread so like i don't know if you've noticed but like if you go if you go into a longer 1298 01:37:05,134 --> 01:37:10,314 thread with one of these ai machines it just it starts to get like super slow and just like kind 1299 01:37:10,314 --> 01:37:16,214 of your context window blows out yeah yeah so but that that should compress so like you can just 1300 01:37:16,214 --> 01:37:22,934 have a full length thread going and going and going and it's not going to slow down on you 1301 01:37:22,934 --> 01:37:27,634 because it its ability to like understand the context of everything gets better and better 1302 01:37:27,634 --> 01:37:34,234 and it uses less memory and less compute interesting so take that right so take that and 1303 01:37:34,234 --> 01:37:40,414 just kind of play this off for the next one minute here when i was a kid the first computer we had 1304 01:37:40,414 --> 01:37:41,314 was an IBM Activa. 1305 01:37:41,754 --> 01:37:43,834 It had a five gigabyte hard drive. 1306 01:37:44,894 --> 01:37:45,574 Five gig. 1307 01:37:46,034 --> 01:37:47,974 And it was used, right? 1308 01:37:48,054 --> 01:37:48,754 It was used. 1309 01:37:49,214 --> 01:37:50,574 The second computer we had 1310 01:37:50,574 --> 01:37:51,914 was a 40 gig hard drive. 1311 01:37:52,714 --> 01:37:54,094 Many, many years later 1312 01:37:54,094 --> 01:37:55,934 that I thought that was crazy. 1313 01:37:56,194 --> 01:37:56,234 You're like, 1314 01:37:56,314 --> 01:37:57,734 they're never going to get bigger than this. 1315 01:37:57,994 --> 01:37:58,414 Exactly. 1316 01:37:58,934 --> 01:38:00,514 Now I've got, 1317 01:38:00,694 --> 01:38:01,354 where is it? 1318 01:38:01,894 --> 01:38:03,234 This on my desk, 1319 01:38:03,494 --> 01:38:06,254 I think that's 60 gigs. 1320 01:38:07,574 --> 01:38:08,014 Right? 1321 01:38:08,014 --> 01:38:09,674 I think my phone's like two terabytes 1322 01:38:09,674 --> 01:38:15,914 or a terrible writer and this and this this is a shitty drive that i that i use when i when i travel 1323 01:38:15,914 --> 01:38:22,834 just to transfer word documents sheets right it's it's not even a good one i i have other ones that 1324 01:38:22,834 --> 01:38:29,274 are much better i bring that up to say this so imagine two three years from now you've got the 1325 01:38:29,274 --> 01:38:33,154 ability to have a frontier model on your phone 1326 01:38:33,154 --> 01:38:38,354 top of the line localized model on your phone. 1327 01:38:39,434 --> 01:38:41,394 You've got to be able to, you have it on your iPad. 1328 01:38:41,994 --> 01:38:44,334 Jeff would have it on one of us four iPads, right? 1329 01:38:45,674 --> 01:38:56,856 Got it on your laptop got it on your computer Now just picture this Someone like me I got five computers well now six computers in my office in different areas I got a 1330 01:38:56,856 --> 01:39:05,256 different LLM, a different frontier model on each one. That costs me a lot of money, right? 1331 01:39:05,256 --> 01:39:12,236 I network them together and create a cluster. I've now got five frontier models working for me 1332 01:39:12,236 --> 01:39:15,716 in my office doing all kinds of things. 1333 01:39:16,056 --> 01:39:16,536 Locally. 1334 01:39:17,276 --> 01:39:19,076 At like crazy speed. 1335 01:39:19,436 --> 01:39:20,276 At crazy speed. 1336 01:39:20,956 --> 01:39:22,556 Because computers are getting faster. 1337 01:39:22,636 --> 01:39:23,756 And the reason why I brought up Macs 1338 01:39:23,756 --> 01:39:25,576 is there's a reason why they're integrating 1339 01:39:25,576 --> 01:39:28,196 neural chips and GPUs 1340 01:39:28,196 --> 01:39:29,996 and they're going with a system on a chip model. 1341 01:39:30,356 --> 01:39:31,796 It's because it's more efficient. 1342 01:39:32,656 --> 01:39:34,696 So just imagine a future 1343 01:39:34,696 --> 01:39:37,596 where you have five local frontier models 1344 01:39:37,596 --> 01:39:39,236 running in your house 1345 01:39:39,236 --> 01:39:40,616 or one frontier model, 1346 01:39:40,716 --> 01:39:41,896 whatever the hell you choose to do. 1347 01:39:42,236 --> 01:39:46,616 it's going to cost you three grand a month. 1348 01:39:46,776 --> 01:39:48,076 But if you're someone that can afford it, 1349 01:39:48,656 --> 01:39:50,516 imagine how productive you'd be. 1350 01:39:51,016 --> 01:39:53,196 Imagine how productive businesses would be. 1351 01:39:53,776 --> 01:39:55,416 And this is not me talking about like, you know, 1352 01:39:55,416 --> 01:39:57,256 people becoming unemployed or anything like that. 1353 01:39:57,336 --> 01:39:59,496 What I'm saying is that is the model. 1354 01:39:59,916 --> 01:40:02,076 Imagine how many hard models you could run on digital credit. 1355 01:40:03,036 --> 01:40:03,876 That's what I'm saying. 1356 01:40:04,176 --> 01:40:06,616 Just imagine the different ways that you can take it. 1357 01:40:06,616 --> 01:40:08,596 Imagine all the different options, models, 1358 01:40:08,676 --> 01:40:09,656 you can come up with Solet. 1359 01:40:09,656 --> 01:40:13,476 just with a Frontier model that is local 1360 01:40:13,476 --> 01:40:16,596 that you know Big Brother isn't necessarily watching on, right? 1361 01:40:16,656 --> 01:40:18,276 You can even have it air-gapped if you want 1362 01:40:18,276 --> 01:40:20,556 because once the model is downloaded, you can air-gap it. 1363 01:40:20,576 --> 01:40:21,596 You don't even have to hook it up online. 1364 01:40:21,696 --> 01:40:23,236 You can just work on it fully locally. 1365 01:40:23,816 --> 01:40:25,716 So not just local on your hard drive. 1366 01:40:26,176 --> 01:40:28,516 You don't have to hook up to the internet whatsoever, right? 1367 01:40:28,516 --> 01:40:28,836 Wow. 1368 01:40:30,156 --> 01:40:32,116 Yeah, I wanted to ask you about local inference 1369 01:40:32,116 --> 01:40:34,296 because I'm still too paranoid. 1370 01:40:35,156 --> 01:40:38,416 I don't want the cloud to have root access to my machine. 1371 01:40:38,416 --> 01:40:41,456 is local inference 1372 01:40:41,456 --> 01:40:43,396 something that we're all just going to be able to do cheap? 1373 01:40:43,776 --> 01:40:45,436 I think that's where 1374 01:40:45,436 --> 01:40:46,376 it's going. 1375 01:40:47,496 --> 01:40:48,616 Right now, 1376 01:40:49,036 --> 01:40:50,276 the local model, 1377 01:40:50,416 --> 01:40:52,776 I haven't upgraded my model yet. 1378 01:40:52,796 --> 01:40:54,476 I'm still running Llama 70B. 1379 01:40:54,476 --> 01:40:56,616 That is 1380 01:40:56,616 --> 01:40:59,016 okay 1381 01:40:59,016 --> 01:41:00,776 now when you compare 1382 01:41:00,776 --> 01:41:02,196 it to what Claude has 1383 01:41:02,196 --> 01:41:03,976 with regards to Opus 1384 01:41:03,976 --> 01:41:06,536 and Gemini and 3.1 1385 01:41:06,536 --> 01:41:06,836 and whatnot. 1386 01:41:06,836 --> 01:41:12,376 right but that when you have an ability to have a frontier model so let's say it's a 1387 01:41:12,376 --> 01:41:17,716 let's say it's a giant file let's be ridiculous let's say it's a 40 terabyte file 1388 01:41:17,716 --> 01:41:24,016 that you have to download right but it's a frontier model you paid a thousand bucks for it 1389 01:41:24,016 --> 01:41:31,156 you paid the two thousand bucks for it it is your gpt6 or whatever right you run that locally 1390 01:41:32,156 --> 01:41:36,696 The LLM, if it's properly compressed, 1391 01:41:36,836 --> 01:41:40,396 and if they make it so that it can run locally more efficiently, 1392 01:41:41,036 --> 01:41:43,456 and the model can run on your machine 1393 01:41:43,456 --> 01:41:45,056 because the computers have gotten faster, right? 1394 01:41:45,096 --> 01:41:46,556 Computers are getting faster and faster every year, 1395 01:41:46,616 --> 01:41:47,996 so we're talking two, three years hence. 1396 01:41:48,716 --> 01:41:50,856 And we actually reach a point of equilibrium 1397 01:41:50,856 --> 01:41:54,456 where we have the local GPU, the local CPU, 1398 01:41:54,456 --> 01:41:58,816 and the local LLM at a point where they can run as a frontier model. 1399 01:41:59,236 --> 01:42:01,136 People will pay out the ass for that. 1400 01:42:01,156 --> 01:42:13,396 there's going to be competition on it it's like it yeah exactly oh my god uh just a race to the 1401 01:42:13,396 --> 01:42:17,576 bottom though at the same time so it's like a race to be the fastest but a race to the bottom 1402 01:42:17,576 --> 01:42:22,556 yeah so like as you pay for your os right now like we already have a if you have if you have 1403 01:42:22,556 --> 01:42:28,416 windows or even if you have a mac os you have you have microsoft office right i i still remember 1404 01:42:28,416 --> 01:42:30,196 whether that was a disk or a download. 1405 01:42:30,636 --> 01:42:30,776 Yeah. 1406 01:42:31,476 --> 01:42:33,816 And then if you wanted to upgrade, you chose to. 1407 01:42:33,876 --> 01:42:35,256 Now it's a subscription model. 1408 01:42:35,596 --> 01:42:35,916 All right. 1409 01:42:36,276 --> 01:42:37,996 So now your LLM is a subscription model. 1410 01:42:41,116 --> 01:42:42,976 That's how they, I think that's how they monetize it. 1411 01:42:42,996 --> 01:42:44,676 That's probably how they do it, right? 1412 01:42:44,776 --> 01:42:44,996 Yeah. 1413 01:42:45,616 --> 01:42:46,516 Yeah, that's how they do it. 1414 01:42:46,536 --> 01:42:48,856 But it's a function, like all of the systems 1415 01:42:48,856 --> 01:42:51,176 are going to be a function of like how much compute they can, 1416 01:42:51,356 --> 01:42:53,996 well, I mean, the compute would be run locally. 1417 01:42:53,996 --> 01:42:57,176 Like if you had your, oh, interesting. 1418 01:42:57,176 --> 01:43:02,136 So what I'm running Lama is running on my tower right now. 1419 01:43:02,336 --> 01:43:07,996 I don't have any other external compute power besides what's on my tower. 1420 01:43:08,156 --> 01:43:11,156 But that's why I'm saying a frontier model versus a local model. 1421 01:43:11,816 --> 01:43:16,676 There's a wide difference between frontier models and local models right now. 1422 01:43:16,816 --> 01:43:17,716 It's massive. 1423 01:43:18,296 --> 01:43:24,616 What I can do with Claude, what I can do with Gemini, nowhere near Lama is nowhere near that. 1424 01:43:24,616 --> 01:43:41,456 So what I'm talking about is the frontier model. So imagine the lowest tier of a frontier model that we can run locally in the future is the best we can run right now. So imagine Claude right now locally. I think that's what's coming. I think that's what they're working towards. 1425 01:43:41,456 --> 01:44:01,296 And the reason why they need all the compute and the compute build out is to be able to compress, refine, restructure, get the LLMs to that point where we have the ability to have the individual local compute match the frontier model specs and run it locally. 1426 01:44:02,036 --> 01:44:03,536 That's what the build out is for. 1427 01:44:03,616 --> 01:44:04,716 That's what they need to compute for. 1428 01:44:04,796 --> 01:44:05,516 That is my view. 1429 01:44:05,516 --> 01:44:18,656 So, you know, I think that the ability to have your own local model that you can do all kinds of proprietary work on becomes a very, very attractive proposal. 1430 01:44:18,656 --> 01:44:27,056 And I think that is when the acceleration takes off because then businesses no longer have to worry about what I spend 60% of my time. 1431 01:44:27,256 --> 01:44:35,156 When I'm talking about these businesses doing AI implementations, all of my conversations for 60% to 70% of the engagement. 1432 01:44:35,516 --> 01:44:41,916 is internal compliance and information security they don't want these systems having access to 1433 01:44:41,916 --> 01:44:47,036 files they don't want these systems having access to proprietary information if you have segmented 1434 01:44:48,076 --> 01:44:52,396 local models that are frontier quality that no longer becomes as much of a concern 1435 01:44:53,676 --> 01:44:58,476 so i think the boom that everyone's talking about is still three to five years out 1436 01:44:58,476 --> 01:45:03,996 but when it hits it's going to be very disruptive yeah that's what everybody's working towards so 1437 01:45:03,996 --> 01:45:06,716 So like the AI models that we know of today are just going to, 1438 01:45:06,716 --> 01:45:07,636 they're going to look different. 1439 01:45:08,816 --> 01:45:09,476 Fundamentally different. 1440 01:45:09,756 --> 01:45:11,516 They're just going to be on a different platform. 1441 01:45:11,936 --> 01:45:12,076 Yeah. 1442 01:45:12,796 --> 01:45:13,016 Yeah. 1443 01:45:13,036 --> 01:45:14,576 So to answer your original question, 1444 01:45:14,756 --> 01:45:15,076 Jeff, 1445 01:45:15,596 --> 01:45:16,876 if I was paralyzed, 1446 01:45:16,876 --> 01:45:22,636 I would stick a whole bunch of shit in my brain and move shit with my mind 1447 01:45:22,636 --> 01:45:24,436 and play video games or whatever. 1448 01:45:25,096 --> 01:45:30,816 But as long as I can carry my ass down to the sunrise and on my own two 1449 01:45:30,816 --> 01:45:31,136 feet, 1450 01:45:32,256 --> 01:45:33,716 you ain't plugging nothing into my brain. 1451 01:45:33,996 --> 01:45:41,956 i've seen that movie yeah the neural link is i don't know man but like i'm not there yet i'm not 1452 01:45:41,956 --> 01:45:50,636 about your like local computer ai machine in your brain like plugged in like do you do you fall 1453 01:45:50,636 --> 01:45:56,576 behind like there's a prisoner's dilemma problem right like if you the people that do it are going 1454 01:45:56,576 --> 01:46:02,076 to get are going to be more intelligent and faster and better than you well has anyone here seen ghost 1455 01:46:02,076 --> 01:46:03,956 in the Shell. I don't mean the bullshit movie they made. 1456 01:46:04,016 --> 01:46:06,196 I mean the original anime. Has anyone ever watched Ghost in the Shell? 1457 01:46:06,556 --> 01:46:07,796 I gotta go back and watch it. 1458 01:46:08,316 --> 01:46:09,976 You should. If you want to see what 1459 01:46:09,976 --> 01:46:11,596 a world where people plug into their 1460 01:46:11,596 --> 01:46:13,896 brains into computers 1461 01:46:13,896 --> 01:46:15,876 and what it could look like, that's Ghost in the Shell. 1462 01:46:16,236 --> 01:46:17,136 I'm not ready for that, dude. 1463 01:46:18,056 --> 01:46:19,896 That's a bridge too far for me. I'm all 1464 01:46:19,896 --> 01:46:22,036 about tech, but once you start messing with me, 1465 01:46:22,536 --> 01:46:23,296 my brain... 1466 01:46:23,296 --> 01:46:24,776 Let's kick that one out. 1467 01:46:24,776 --> 01:46:25,216 Yeah. 1468 01:46:27,156 --> 01:46:42,838 Let wrap it up here Final thoughts Dan let kick it over to you You been observing the landscape here What final thoughts Yeah I mean I think there big developments in the credit markets here Like the fact that we 1469 01:46:42,838 --> 01:46:49,278 seeing a Bitcoin local bottom coupled with an SDRC max bid for two weeks every single month, 1470 01:46:49,878 --> 01:46:57,078 plus a fracture in private credit and uncertainty with regards to future cash flows, which finance 1471 01:46:57,078 --> 01:47:02,278 the entire credit market across the globe, I think is an interesting intersection, 1472 01:47:02,278 --> 01:47:11,558 what it means to have capital that outpaces the interest on bank reserves, short-term Fed funds 1473 01:47:11,558 --> 01:47:16,678 rate. So I think all these things are really, really important. And I think Bitcoin is becoming 1474 01:47:16,678 --> 01:47:21,398 the base layer settlement mechanism that is funding the higher interest rate environment 1475 01:47:21,398 --> 01:47:26,918 we're going into. So I think that's part of the reason why stretch is such an important instrument. 1476 01:47:26,918 --> 01:47:32,198 is because it doesn't take on principal risk and it can absorb interest rate volatility moving 1477 01:47:32,198 --> 01:47:35,798 forward. Because ultimately, I think interest rate volatility for the next 10 years is going 1478 01:47:35,798 --> 01:47:41,238 to be massive. There's going to be massive 10 year, 30 year interest rate volatility, 1479 01:47:41,238 --> 01:47:45,718 the move index, right? The move index, which is an index of bonds in the US, 1480 01:47:46,758 --> 01:47:52,038 this measures sensitivity and uncertainty across capital markets. And that's what we're going to 1481 01:47:52,038 --> 01:47:55,958 be seeing more and more of as AI becomes a more disruptive force. For all those reasons, 1482 01:47:55,958 --> 01:48:00,238 You want an instrument that has principal protection in different interest rate environments. 1483 01:48:00,438 --> 01:48:04,858 And I think that's why SDRC has such significant and important product market fit. 1484 01:48:05,078 --> 01:48:06,678 And I'm looking forward to seeing that play out. 1485 01:48:08,398 --> 01:48:09,698 I mean, so many things. 1486 01:48:11,178 --> 01:48:12,958 Great review there. 1487 01:48:14,578 --> 01:48:20,418 Corporate bonds, corporate credit are a function of the productivity of human capital. 1488 01:48:20,418 --> 01:48:27,958 like the last 45 minutes we've been talking about how digital intelligence is is going to make human 1489 01:48:27,958 --> 01:48:31,738 capital maybe it makes human capital more productive but it's almost it makes it a little 1490 01:48:31,738 --> 01:48:37,838 bit more irrelevant so if you've got all this corporate credit as a function of how productive 1491 01:48:37,838 --> 01:48:44,018 your human capital is your human capital is not keeping up like digital capital is going to be a 1492 01:48:44,018 --> 01:48:49,898 better form of credit because of the productivity of ai and computers that intersection there that's 1493 01:48:49,898 --> 01:48:58,838 interesting. And then you bring up interest rate volatility, going back to sovereign credit. 1494 01:49:00,098 --> 01:49:06,158 Sovereign credit is a function of your society. How well are you able to tax your society? 1495 01:49:07,158 --> 01:49:15,418 And what is a function of inflation and monetary supply and your ability to control how your 1496 01:49:15,418 --> 01:49:22,878 society is moving and changing. If your society is leaving and moving and taking their capital 1497 01:49:22,878 --> 01:49:27,278 into different forms, there's going to be disruption and volatility. I totally agree 1498 01:49:27,278 --> 01:49:31,358 with that. Great summary. I'm going to pass it over to you, Soleil. 1499 01:49:32,698 --> 01:49:37,918 Yeah. So Dan, I think you mentioned this guy in your recent video as well, 1500 01:49:37,918 --> 01:49:47,718 uh sminston with and um he had a very interesting graph he's a power law guy and he graphed the 1501 01:49:47,718 --> 01:49:56,338 ratio of the bitcoin's price to the cost of production um power law model and if you if 1502 01:49:56,338 --> 01:50:01,798 you look at those trends it actually looked like there's a possibility we were we've been in a bear 1503 01:50:01,798 --> 01:50:09,598 market since 2022. And if that's the case, it was almost kind of like a crab accumulation phase. 1504 01:50:09,918 --> 01:50:18,118 And if that's the case, then we actually had in USD terms, we had a Bitcoin all time high 1505 01:50:18,118 --> 01:50:24,018 in the middle of a bear market. And I can't think of anything more bullish that I could possibly say 1506 01:50:24,018 --> 01:50:29,738 than that, because when the bear is over and we've already had an all time high in the bear, 1507 01:50:29,738 --> 01:50:32,818 what happens in the bull market. 1508 01:50:33,018 --> 01:50:34,918 So I couldn't be more excited. 1509 01:50:35,638 --> 01:50:37,338 I hope it's all true. 1510 01:50:39,758 --> 01:50:41,358 Completely agree. 1511 01:50:41,918 --> 01:50:42,478 Completely agree. 1512 01:50:42,958 --> 01:50:45,798 Yeah, the interest rate environment is completely different than 22. 1513 01:50:47,318 --> 01:50:49,118 Capital is still relatively tight. 1514 01:50:49,218 --> 01:50:50,758 Not a ton of credit expansion. 1515 01:50:51,658 --> 01:50:53,198 Still some concerns on inflation. 1516 01:50:54,038 --> 01:50:55,698 All systems go, right? 1517 01:50:55,698 --> 01:50:58,258 As Dan mentioned, you've got stretches. 1518 01:50:59,738 --> 01:51:04,618 permanent bid becoming a permanent bid on bitcoin on the bottom end and it's created this surface 1519 01:51:04,618 --> 01:51:08,938 for people to be trading in in and out of this instrument just like the common equity 1520 01:51:11,018 --> 01:51:17,178 oh yeah over to you adrian oh yeah so i think that stretch has been very very fun to watch 1521 01:51:17,178 --> 01:51:24,538 these last few weeks i i'm very pleased to see that it is getting to a steady state sooner than 1522 01:51:24,538 --> 01:51:29,818 I thought. I think that strategy has a real winner there that they can leverage in a variety of 1523 01:51:29,818 --> 01:51:35,578 different ways. There's going to be a consistent bid on Bitcoin. I'm very curious to see what 1524 01:51:35,578 --> 01:51:39,898 happens geopolitically. This is not me getting political, this is me seeing, I'm very curious to 1525 01:51:39,898 --> 01:51:45,178 see what's going to happen and how it affects the markets. Also, and I'm watching the developments in 1526 01:51:45,178 --> 01:51:50,378 AI. I think there's going to be a lot of crossover between the impacts that AI expresses on the 1527 01:51:50,378 --> 01:51:55,258 market and how people view money kind of to the points that you know you and dan were just 1528 01:51:55,258 --> 01:52:01,418 discussing i think that having instruments that are backed by pristine collateral are going to 1529 01:52:01,418 --> 01:52:07,658 become more and more necessary in a world where you have no idea of what inflationary pressures 1530 01:52:07,658 --> 01:52:11,658 are going to take place what the inflationary pressures are going to take place and what kind 1531 01:52:11,658 --> 01:52:18,858 of destructive events can happen in markets at any given moment if we if we've seen anything in the 1532 01:52:18,858 --> 01:52:27,898 last 18 months is that volatility is now becoming something that spikes and troughs within 24 hours 1533 01:52:29,098 --> 01:52:36,218 very very unexpectedly from a tweet so it is going to be um very interesting to see how people 1534 01:52:36,218 --> 01:52:39,658 navigate that in the future and what kind of instruments they gravitate towards and i think 1535 01:52:39,658 --> 01:52:47,418 that in a future like that something like stretch has a home bitcoin obviously has a home and um 1536 01:52:47,418 --> 01:53:02,358 It's very exciting to be part of this, I guess you can say, build out of a new digital capital infrastructure in the world is the best way I'll describe it most succinctly. 1537 01:53:02,978 --> 01:53:05,518 And it's going to be fun to watch it grow and be part of it. 1538 01:53:07,318 --> 01:53:08,298 Capital is changing. 1539 01:53:08,658 --> 01:53:09,078 Absolutely. 1540 01:53:09,598 --> 01:53:09,898 Absolutely. 1541 01:53:10,658 --> 01:53:12,078 My final, thanks, Adrian. 1542 01:53:12,438 --> 01:53:13,998 And glad to have you back. 1543 01:53:14,098 --> 01:53:14,798 Appreciate it. 1544 01:53:14,798 --> 01:53:24,318 And my final thoughts are the world is in total chaos and there's a lot changing and Bitcoin feeds off of that chaos. 1545 01:53:24,538 --> 01:53:26,658 And digital credit is a category killer. 1546 01:53:26,658 --> 01:53:38,258 I mean, these instruments appear to be performing incredibly well and provide a really good opportunity cost against the existing credit system. 1547 01:53:38,558 --> 01:53:43,578 It's, you know, taking this old credit world and moving it into the new credit future. 1548 01:53:43,578 --> 01:53:49,678 So I couldn't be more bullish about just the structure, the plumbing of this entire marketplace, 1549 01:53:49,858 --> 01:53:53,438 the relative health of the industry, et cetera, and how that's shaping up. 1550 01:53:53,638 --> 01:53:55,318 So I appreciate the time. 1551 01:53:55,498 --> 01:53:57,118 Thank you, everybody, for joining. 1552 01:53:57,418 --> 01:53:58,718 Like and subscribe, please. 1553 01:53:58,918 --> 01:54:01,438 That helps push out more information and content. 1554 01:54:01,958 --> 01:54:07,058 Go check out our new website, tnorth.com, and look at the digital credit topics. 1555 01:54:07,418 --> 01:54:08,078 Check out the thesis. 1556 01:54:08,298 --> 01:54:09,038 It's really long. 1557 01:54:09,118 --> 01:54:11,898 If you want to bore yourself to sleep, go check it out. 1558 01:54:11,898 --> 01:54:13,378 and yeah, 1559 01:54:13,438 --> 01:54:13,998 appreciate the time, 1560 01:54:14,058 --> 01:54:14,238 everybody. 1561 01:54:14,318 --> 01:54:14,958 We'll catch you next week. 1562 01:54:16,898 --> 01:54:17,598 Signing off. 1563 01:54:18,098 --> 01:54:18,498 See you, Ron.