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The following is for informational and entertainment purposes only and should not be construed as financial advice.

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This discussion is a presentation by 1031, the leading institutional investor focused on the Bitcoin ecosystem.

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1031 has over 10 years of experience in Bitcoin and has deployed nearly $150 million into the leading opportunities in the space.

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To learn more, visit 1031.vc.

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And it looks like it's about $3.1 billion.

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It went up a little bit.

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or a lot uh so the 2.7 is now 3.1 i'm not aware of that yeah it just came out

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yeah i haven't heard that from anybody but it just came out

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our notes had about 3.1 as well 3.1 3.2 this came from us yes i don't know who does that

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you're including the martin renovation you just added you just had you just added in the third

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building is what that is that's a third building it's a building that's being built no it's been

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it was built five years ago we finished martin five years ago it's part of the overall work

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so so we're going to take a look we're going to see what's happening uh and it's got a long way

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Do you expect any more additional first-out runs?

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Don't expect them.

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We're ready for them.

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But we have a little bit of a reserve that we may use.

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But no, we don't expect to be finished in 2027.

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I must admit, I saw a bunch of the clips on X and other parts of the Internet.

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Never saw that part of the conversation.

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Didn't realize he was calling out line items of the renovation to him in person.

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Yeah, I, I, uh, I gotta say some of the best, whatever you think of Trump. Um, and there,

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there's a lot that can be said about Trump. The man has delivered some of the most iconic political

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moments of certainly this century. And I think that's, that's a top fiber for me without a doubt.

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It's so entertaining. I mean, I've, I said before, uh, that I would have paid to see

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Big Brother White House or something, like when Joe Biden was in the White House, just to see what

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he was doing on a day-to-day basis. But I would probably pay more to see Big Brother White House

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and just watch Trump all day.

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Probably in Tim Scott as the muscle to be like, no, no, it's 3.1.

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Yeah, right. Who, by the way, doesn't have a hard hat on. The hard hats really make the whole thing,

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that they're standing there in these hard hats and Tim Scott's right next to them with no hard hat.

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What's the what's the wardrobe choices like? I mean, the the theatrics behind it is, you know,

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it's something to behold. What was the setup for that? Like they're like, OK, we're going to we're

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going to put you on TV and just humiliate you in front of TV. So get ready here. Here it comes.

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And we skip the part where he slaps his back at the end and says, this guy's this guy's about to

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go lower interest rates um some some really you know some some middle school uh hallway bully

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power games uh going on here well it reminds me of the one there was one where he was in the was

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it was it the white house lawn where there was a lot of uh i think they were construction workers

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hanging around the background and uh they were going after powell again or was that a different

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Was that someone else?

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Yeah, I got Lambat.

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I think I talked about this.

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I forget if it was here or RHR, but I brought it up.

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We had cold open with it on RHR,

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and I made the uncouth statement of why is Donald Trump asking

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construction workers about interest rate policy?

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It's probably not their core focus.

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And I had a bunch of construction workers on the YouTube comments saying,

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hey, I'm in construction, and I understand interest rates.

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But yeah, that was a scene as well.

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The fact that the fact that we can't even fully remember all the details of all the different times Trump has publicly lambasted or tried to humiliate or otherwise viciously critique the Fed chair, I think, shows is a good indication of where we are right now with monetary policy in the U.S. and its relationship to the rest of the government, the Treasury Department, et cetera.

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Yeah, it's a.

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And just the news cycle.

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Right.

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Because when was this?

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It feels like forever ago.

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Yeah, it was like three weeks ago.

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We put out our artisanal alpha once every few weeks or once every month, or we'll just see.

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But this seems like it was forever ago.

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I know it occurred since the last time we did Bitcoin Alpha.

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It was a few days or a week after the last episode of this.

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And I remember being very frustrated because I knew as soon as I saw it, that's the ultimate cold open.

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and we just missed the chance to do it on the last one.

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So here we are back again.

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And even though it's a few weeks old, I think it's still it stands the test of time.

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It does. And John, I think you used the perfect word earlier theatrics.

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And I think it's an incredible juxtaposition of the world that we operate in and why we operate in this world.

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And many don't realize the global monetary system should not be beholden to the whims of the theatrics between a sitting president and sitting chairman of the Federal Reserve.

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That is essentially what we just witnessed was bullying tactics.

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For those who don't recall, they were there at the construction site because the government was trying to find a roundabout way to fire Powell.

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and I think at one point they were trying to pull the technicality of the Federal Reserve

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wasting money, taxpayer money with that renovation they were doing on the Reserve Building in D.C.

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Theatrics. It's been happening between Powell and Trump since before Trump was even elected

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and we're in the middle or tail end of the summer doldrums. I think this is like really

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the peak summer doldrums, but it ends next week. We've got Jerome Powell and others in Jackson

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Hole, Wyoming for their annual event. There will be no interest rate policy decisions made

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this month outside of some very extreme market volatility, which doesn't look like

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it's going to materialize, but it's a pretty boring week. I think markets are down,

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Bitcoin's down. And I think it's just due to the overall uncertainty of the result of the

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theatrics that we've been seeing play out over the last 16 months.

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Yeah. I mean, it's the theatrics word, you know, to stick with that. Um, I do think is

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relevant to just kind of consider, you know, the, the nature of where we are with the system.

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I think it's in some ways like instructive, um, for, you know, you could say Trump is violating

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norms. And many people have made that, um, that case both in this, in this term and his prior term.

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Um, and he's not, you know, respecting the system and the way it's set up. Um, but I think it's,

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it's interesting and notable that we, this pulls back the curtain a little bit on the fact that

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this is a system where, you know, I think we have a, it's easy to have a view, especially coming from

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say mainstream academia, from your college classroom, um, from working, whether it's on

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Wall Street or corporate America, a bunch of different kind of white collar jobs. It's,

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it's kind of very easy to imagine that the, the men behind the curtain have, uh, have it all

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figured out and, um, you know, they have all the dials properly calibrated and, um, you know,

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they're, they're sitting up there on, uh, you know, Mount, uh, whatever Mount Olympus or Mount

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Mariner Mariner Eccles building as the case may be in this, in this situation. And, you know,

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just passionately evaluating every, all the data flow that they're getting, um, and just making the,

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the right decision at all the time or as right as possible based on the data they have with no

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kind of personal dynamics getting in the way, no politics, nothing like that. And, uh, it's,

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it's helpful in some ways instructive to have like the bull in the China shop of Trump come in and

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just show like, this is a system that's, you know, based on a few people and their interpersonal

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dynamics making kind of flying by the seat of their pants and having to jockey for position

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and negotiate between many, many different dynamics, very few of which actually relate

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to being data dependent and kind of dispassionately evaluating what's going on in the economy.

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So the theatrics are new and different.

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We haven't seen them from a lot of presidents, but I think it probably should help people

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understand some of the, Marty, as you referenced, the potential pitfalls and frailties and downfalls

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of a system that's governed by, you know, a few lawyers and bankers and politicians

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arguing with each other and trying to intimidate each other and, you know, being reactive to

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many dynamics that are not actually directly related to what's happening in the everyday,

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the lives of everyday Americans. I think it's instructive to see it kind of play out this way.

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Yeah. But be careful what you wish for. You may want to replace the interpersonal relationships and decision making that is incumbent in the system right now of Powell and his cronies with Trump and whoever he decides will succeed Powell.

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I think it's meet the new boss, same as the old boss, different context.

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And I mean, that's what you have next on the list.

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There was an abrupt resigning on the Federal Reserve Board of Governors by Adriana Kugler last month.

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And Stephen Mirren has been nominated by Trump to replace her.

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And I saw a bunch of tweets about Stephen Mirren specifically as it pertains to Bitcoin.

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Apparently, he has some tweets out there saying that Bitcoin fixes this.

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and he seemed positive, but I couldn't tell if they were positive

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or if he was trolling Bitcoiners.

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I don't think he was explicitly trolling Bitcoiners.

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I think he may just be aware of the meme.

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If you look up Stephen Myron, Bitcoin fixes this,

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you'll find a couple of these examples where he's responded.

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But I think usually in situations where it's,

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I can't remember the exact details of each one,

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but Bitcoin presumably did not fix the thing that he was responding to,

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so it's a bit of a joke.

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but otherwise I don't think he's had a lot of public opinions about Bitcoin specifically.

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So that he's even aware of that meme and felt it appropriate or humorous to kind of go out on Twitter

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and respond to random tweets with it for very little fanfare, to me, doesn't suggest that he's an outright Bitcoin hater,

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certainly, and maybe is paying attention to some extent to the culture.

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The more interesting thing about him, I think, is people may recognize his name as one of the authors

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or the co-authors of a Hudson Bay capital paper that came out last year about, I think it's called

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A User's Guide to Re-Architecting the Global Trade System or something to that effect. But

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basically, Myron's one of the chief architects of many of the policies that Trump appears to be

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following or trying to put into place with reordering global trade flows and capital flows.

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Myron's been an advocate of certain targeted tariffs, I think maybe not as much of a blunt

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instrument as Trump has kind of used them, not to the same degree, but targeted tariffs,

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targeted capital controls, basically making the rest of the world, in his view, kind of pay their

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fair share for the broader kind of defense umbrella burden that the U.S. has provided,

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pay for the privilege. He's suggested a user fee on treasury holdings to make people pay for the

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privilege of holding treasuries as their reserve assets. And notably, at the end of that paper,

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He did make one reference right at the end to a reordering of that system being positive for neutral reserve assets like gold and, in his words, cryptocurrency.

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So he doesn't say Bitcoin, but Bitcoin, as we all know, increasingly the only cryptocurrency, quote unquote, that really matters from a geopolitical perspective.

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Um, so interesting, notable that that's the guy that Trump, uh, appointed to replace, uh,

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Adrian Kugler, the fed governor who randomly, uh, resigned without any clear explanation a couple

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of weeks ago. Um, so another, yet another interesting piece in the overall Trump fed

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mosaic that continues to evolve. And I think is taking us in, in one particular direction.

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and building on this theme it seems like trump is really trying to clear house and the board of

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governors uh apparently i'm just being made aware of this due to the list that you put together john

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but president donald trump on wednesday called on the top policymaker at the federal reserve to

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resign after one of his allies alleged that she committed mortgage fraud in a letter oh i did see

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this in a letter dated august 15 federal housing finance agency director bill pulte urged the

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Justice Department investigate a pair of mortgages taken out in recent years by Fed Governor Lisa

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Cook. Yeah. So, yeah, this is just to hit shortly before this episode, a truth social tweet. Trump

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demands that Lisa Cook, quote, must resign now, exclamation point, exclamation point,

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exclamation point in classic, uh, emphatic Trump fashion. Um, and it's similar to, you know, the,

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what we referenced up on the top of the top of this episode, um, Trump's attack on Powell for

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the renovation of the Mariner Eccles building, which is apparently over budget, which, you know,

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very likely is over budget, but in both cases, like, you know, maybe that's over budget. Maybe

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Lisa Cook, I have no opinion on this. Obviously this just came out and not, don't know the facts

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of the case, but maybe had some sort of like impropriety related to a mortgage she took

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out a few years ago.

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But in both cases, like clearly looking for any excuse at all to on the margin point to

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wrongdoing or something that, you know, you could use to get Powell or Lisa Cook or anybody

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else to resign, I think just, you know, shows you it's on the same theme of Trump's.

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I think this is going to be curious to hear your thoughts, but it seems to me there are all sorts of, you know, in politics, you'd call them dirty tricks, right?

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And all both sides always pull dirty tricks of different kinds.

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There are all sorts of dirty tricks and levers you can turn to kind of get the leverage that you want.

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And it seems like we're driving to a world where for better or worse, as Marty referenced, Trump's going to get his way on this, you know, one way or another.

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And he's going to get the Fed board that he that he wants and needs to pull off his agenda.

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Yeah, I don't have much to add to that.

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I mean, it seems like the tactics are becoming more out in the open

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than they have been in the past and they escalating more than what we seen Like first it was jabs with you know competing press releases about Trump calling for actions from Powell

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And then, you know, another press release that was sort of a response from Powell.

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And now they're just putting it on video of them in the same in the same place and trying to intimidate him that way.

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And, you know, either way, this is just showing how political the system is.

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I think it's inevitable that when you see these tactics that it has some type of influence one way or another.

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It either influences the people who are charged with making these types of decisions to do so more in line with what Trump is wanting or they're digging in their heels for their own political reasons and it's having an impact for that reason.

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And I think it just highlights that it's kind of insane that it comes down to politics in the end anyway.

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That there should be someone or some group that can have influence or some group that can have the power to resist influence.

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You know, it's a double-edged sword.

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Yeah.

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And it actually reminds me of a great conversation on the Tucker Carlson podcast, funnily enough, that I listened to yesterday with Arne McIntyre.

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And I think it really highlights one of the key issues that he was pointing out during that conversation, which is when you have a country, a nation state, whatever it may be, like it only works at a certain scale.

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The American constitutional republic, as it was designed, was supposed to be extremely distributed, limit the federal government.

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And states were were tasked to lead the way, make their own decisions.

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But as time has gone on, 250 years have passed since the Declaration of Independence.

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We've developed this massive empire.

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And when you have empire, history has taught us that the only way to garner control and keep control is to consolidate power.

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and as it pertains to the Trump administration

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and what they're trying to achieve with this economic reordering,

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particularly using the Treasury,

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they have to consolidate power within the Treasury.

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And I think this is a theme we've been talking about

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in the last few episodes.

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It seems very clear.

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It's moved from somewhat implicit to overtly explicit.

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They're trying to merge the Fed and the Treasury

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to make sure that they can achieve their economic goals.

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And I think this is a very important fact to realize,

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just the scale of the U.S. federal government.

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And if it's going to continue operating at this scale,

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it needs to consolidate power more and more,

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not only on the financial side,

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but in the bureaucratic sort of administration side as well.

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I think that's the big question of our time is,

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Like, do we want to keep going down the path of empire or work backwards towards a more distributed system that is probably advantageous for the average American at the end of the day?

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Yeah, I mean, look, like I fully echo all that.

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And I think we're prepared to talk about a few topics today that may be more of a white pill on that front.

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And certainly we're all here for the reason that we think we have found in Bitcoin and other distributed technologies, the ability to maybe help move the U.S. back more in that direction.

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Um, but yeah, I mean, I would, I would just say too, it's like, you know, there was a,

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there was a great chart that was going around, um, this week on Marty Deer point and kind

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of fed treasury relationship of us interest expense this year broke year to date, uh,

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a trillion dollars for, uh, the first time at this point in the fiscal year, we got a

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couple of months left in the fiscal year. But even with the, you know, the surplus that we had

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in June, thanks to some tariff bump, you know, we're still tracking to $2 trillion deficit for

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the year. Interest expense is all time high, you know, year after year after year. We are, I think,

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on a interest as a percentage of total receipts last month was like 130 percent something in that

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range and we've been tracking 100 plus for many months so you know at the end of the day

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if we're in a situation where the fiscal backdrop is getting more and more stretched more and more

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challenging even with you know we're not in a recession we're not in a declared war an explicit

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at war. Unemployment nominally is reasonably low. The economy is from, you know, the basic metrics

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that you would look at on a macro scale, reasonably healthy, like this isn't a, you know, a crisis

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moment. And yet here we are with this massive and parabolically growing interest bill. At the end

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of the day, it's going to get paid. Like the sovereign is going to fund itself like one way

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or the other. And I think the market has not fully digested yet that reality that for the last 50

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plus years, we haven't, or really since World War II, we haven't had, we've been able to have

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the Fed treasury accord that we've had. We've been effectively in economic peacetime, you know,

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most of the time between the Fed and the treasury with a few blips, you know, you could argue maybe

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not so much in the seventies. Um, but in general, like certainly since the Reagan era, we've had

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this happy equilibrium where the Fed could kind of do its own independent monetary policy thing.

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Treasury could do what it was going to do. Debt to GDP was much lower and manageable.

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U.S. Treasuries were the de facto reserve asset of the world. The world couldn't get enough of

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them as we were globalizing, as China, et cetera, were growing. And I don't know that

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most people have yet considered what the world looks like when when that's no longer the case,

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when you don't have that headroom and that flexibility for Treasury and Fed to kind of

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happily coexist and do do whatever they both want. And at the end of the day, I just don't

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think you end up with in this highly political monetary system that we're talking about.

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I don't think you can sustain independent monetary policy in a world where the sovereign

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is coming up on, you know, a funding crunch. Um, one, one of those two things is going to

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ultimately get sacrificed. And I just, you know, no, no government history has decided to lay down

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and let itself, uh, default or radically retrench its obligations, um, and get its fiscal house in

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order until it was absolutely, you know, essentially required to buy, you know, a change of, of the

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form of government or the change of state. Um, and so I don't think this time's gonna be any

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different uh the political system that we have i think suggests um anyone who's still banking on

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independent monetary policy needs to uh ask themselves what time it is

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yeah the only true independent monetary policy in the world right now is bitcoin's monetary policy

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yeah absolutely math physics um it certainly seems yeah

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what a time to be alive.

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So what do we think is going to happen?

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We've got Trump calling for rates,

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thinks they should be 1%,

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Scott percent,

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a bit more hawkish,

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saying he thinks they should come down

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150, 175 bips,

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which would be, what,

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175 to 225 range?

258
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Yeah, I think it'd be,

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what I would like,

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sub three, like two and a half

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off of current FFR.

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So like call it 3%.

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So, you know, comparatively restrictive versus Trump.

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But yeah, I mean, I think that's, you know, there are a lot of people who, you know, on

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Wall Street or in corporate America that just based on how long we've kind of been in this

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this Goldilocks zone. I think most people and myself included, everyone on this call included,

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a lot of our listeners probably like, don't really remember a time when anything that I'm

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describing like prevailed, like you could have had a full career. Like if you came into the

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workforce and like the early eighties, like, you know, like a lot of our parents did, let's say,

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you know, you could have had a full career and be, maybe you're on the point of retirement now.

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And all you've seen really in your working life is the Goldilocks zone that we've been in.

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And I still think there's a lot of resistance to the idea that that's not something that can last forever or is going to last forever.

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But as you said, fortunately, we have immutable monetary policy that can't be pushed around and can't be shoved in a basement and forced to wear a hard hat and play the stooge.

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television yeah i mean and just building on this theme moving from like the fiscal

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side and the fed treasury side to industrial policy like it seems like there is some

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desire to consolidate influence on the industrial side of things too i mean that was the headline

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earlier this week the u.s is considering up to a 10 stake in chip giant intel which has been

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how would I how do I say this as politely as possible it has not been faring as well

279
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as it was when Andy Grove was alive and at the helm yeah it's uh it's it's been a rough one it's

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been a rough what 20 years pull up an INTC chart um yeah it's it's not been super pretty uh there

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was a glimmer of hope maybe 10 years ago but uh especially in the last you know five years with

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the ramping of competitors, AMD, and then Intel's kind of failure to participate in

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the massive kind of AI surge in the last few years. Certainly not a great situation for the

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company to be in. Got rid of the CEO last year. But, you know, whatever your view on the Intel,

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Intel as a stock, Intel as a company, you know, I feel like this headline is kind of like,

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It's been on CNBC. If you've watched, it's been on the Wall Street Journal. There's some headlines about it. But I feel like from my perspective, mainstream news is still kind of underrating what a notable shift this is and shift this would be.

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Like we talked last week about or last episode a month ago about the Pentagon becoming the largest shareholder in MP materials, which is the one of the leaders in kind of rare earth production in the US, given the constraints on the China rare earth side.

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And I think you could maybe brush that one under the rug and say, well, that's still kind of a small company.

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Like that's this one like niche area of the economy.

290
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Yeah, it's like it's this strategically important asset.

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And especially with the choke point of kind of Chinese materials, like, yeah, maybe there is some one off case you could make.

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The Defense Department should have more like a heavier hand in a company like that and securing the supply lines like, OK, you know, one one example of something doesn't make a trend.

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But Intel is like, you know, it's a fallen angel, but it's like one of the great American companies of the last hundred years.

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One of the, you know, exemplars of ostensibly, right, like, you know, free market capitalism, the free market system of, you know, the original effectively like Silicon Valley company.

295
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and, you know, despite its recent status, like a real industrial giant of this nation's history

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in the last hundred years. And the government is talking like fairly casually about taking a 10%

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stake in the company and becoming its biggest shareholder. You know, again, like that's,

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that seems extremely noteworthy. And I think is to our conversation on the prior topic, like,

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you know, a sign that you need to check what time it is. Um, it, this feels increasingly like,

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you know, the wartime economy playbook, um, is, is alive and well. And, um, we can talk all day

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about, you know, whether that's a good thing or a bad thing and how the government's questionable

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track record, not just the U S government, but all governments questionable track record on,

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um, you know, running companies or being kind of, uh, having a hand in the direction of

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industrial capacity and the means of production. But I think it's these two topics tied together

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to me to say like maybe we're not really in Kansas anymore. Yeah, I mean, those are all

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really good points. The one thing I've been thinking about, just like the interesting

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dichotomy between this situation and a topic I know we're going to get to in a second on

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the strategic Bitcoin reserve?

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And is the U.S. government going to continue to pursue that?

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How might they fund acquisitions of Bitcoin?

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But the comparison that I think is really interesting is

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they can make these announcements about potential intentions

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to take a stake like this in Intel.

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And it doesn't necessarily have the same type of consequences as perhaps it does in the case of Bitcoin.

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I think with Bitcoin, they need to be very careful about what they say they're going to do, how they go about executing a purchase of Bitcoin, because it directly influences the price that they get.

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Whereas like with Intel, you know, they could make an announcement like this and sure, like the stock could run.

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Like I tried to look at the stock price and there was a bump at one point.

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And I don't know if it's come down since then.

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But but theoretically, right, there's a there is a central party here and the White House could do whatever deal it wants to.

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They could even force a deal that maybe doesn look economical for Intel shareholders just out of national interest Compare that to Bitcoin where they start making certain announcements

321
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or some of their plans start becoming public.

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They can't bully their way into a Bitcoin position.

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There's no Bitcoin CEO, there's no Bitcoin board to go talk to and say,

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you know what, well, the U.S. government really needs this position

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and this is the price we're willing to pay.

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It's not going to work that way.

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They have to pay the market price that some seller is going to be willing

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to transact with them.

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So I just think that's kind of an interesting dichotomy between those two.

330
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I know what Marty's thinking.

331
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Well, if we're going to be nationalizing the Fed industrial policy,

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there's a company out there with a large chunk of Bitcoin on their balance sheet.

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And if they were going to continue down the trend of nationalizing industries

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and they wanted to acquire a strategic reserve in an advantageous way

335
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that doesn't really lead the rest of global markets to understand

336
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that the U.S. government has to accumulate Bitcoin actively,

337
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they could print a bunch of money and just nationalize micro-strategy,

338
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pay out shareholders, pay out all their pref stock,

339
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and say this 700,000 Bitcoin is the U.S. government's now.

340
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Wild theory.

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But if this trend continues,

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I mean, they're showing the willingness to be bold.

343
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Yeah.

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I mean, I think, so to take the one side of the point,

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I think it's a very good point as it relates to like,

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one of the beautiful things about Bitcoin

347
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is when you think about nationalization attempts

348
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or let's just, you know, for running back the FDR playbook in general with industrial policy

349
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and the wartime playbook, you know, a 6102 type order. Um, it's fundamentally a lot easier to get

350
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that off with the, you know, analog gold, the original gold. And even in that case, in the case

351
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of FDR's 6102 attempt, um, you know, uh, outlawing and confiscating, outlawing private gold ownership,

352
00:32:53,375 --> 00:33:01,295
up confiscating private gold owners holdings. Even that didn't really work like that well,

353
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right? They didn't get all the gold. They didn't really eliminate it from circulation.

354
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Even though, despite the fact that relative to Bitcoin, it's much harder to custody meaningful

355
00:33:12,115 --> 00:33:16,695
amounts of gold by yourself. You certainly can't, you know, distribute it geographically in like a,

356
00:33:16,695 --> 00:33:21,875
you know, multi-sig quorum or using mini script or something to have different conditionality on

357
00:33:21,875 --> 00:33:25,895
its spending, right? So it's analog, it's physical, it's got to be somewhere, it's heavy,

358
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bulky, hard to transport, that tends towards centralization and thus much easier 6102 type

359
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attacks. So I think it's a fair point, like Bitcoin is in a much different position than

360
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gold or any other asset as it relates to individual holders being, you know, attacked in that way.

361
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And certainly, I think, with the administration that we have right now, I don't think that's

362
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super likely and would undoubtedly alienate a meaningful voting block that arguably kind of

363
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got this administration into, you know, the position they're in. Um, so I think that those

364
00:33:56,575 --> 00:34:02,275
are all great points, but yeah, Marty, the flip side is the much, much easier thing to do as it

365
00:34:02,275 --> 00:34:09,255
relates to not pissing anyone off nearly as much, um, any of your voters not creating a true, like,

366
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you know, constitutional nightmare, um, and not creating a massive, like enforcement nightmare

367
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of having to go knock down doors of every person in the world to see if they have, you know, 24

368
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where it's written down on a piece of paper. The much easier path, if you wanted to do something

369
00:34:24,635 --> 00:34:32,015
like that, is walk down the road not too far outside of DC and knock on the door and see if

370
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the company is interested in selling at a nice premium to the underlying, by the way.

371
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The shareholders, if they got paid out, if you woke up on your Vanguard and Fidelity accounts,

372
00:34:44,015 --> 00:34:50,135
you know, you had a cash settled, um, you know, swap for your, your MSTR shares, you know, you'd

373
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be, you'd be up right now today relative to the underlying Bitcoin that the government would be

374
00:34:54,835 --> 00:35:00,315
getting. Right. So you could even make an argument that, uh, the, the imminent domain would, um,

375
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you know, end up, uh, in a positive result for those who are on the receiving end of it,

376
00:35:04,915 --> 00:35:10,255
which is usually not the case. Um, but these are just wild conspiracy theories that, you know,

377
00:35:10,255 --> 00:35:26,755
I don't think have any merit to consider, but it's a it's it's certainly an interesting scenario if you're looking at a government that's getting a lot more handsy with company property.

378
00:35:27,415 --> 00:35:32,455
Yeah, no, it's just a theory. It's just a theory. Not even it's just a theory. It's not even a conspiracy theory.

379
00:35:32,555 --> 00:35:34,895
I'm not saying that there's any conspiring going on.

380
00:35:34,895 --> 00:35:39,995
I'm just saying if you wanted to do it the painless way, you just print the money, pay out the shareholders, they'd be happy.

381
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the meme, this is mine now. And, uh, and boom, us. I don't know that they would be happy, but,

382
00:35:48,695 --> 00:35:53,875
and I don't know that it would be a good outcome, John, to your point, it depends.

383
00:35:54,355 --> 00:35:58,475
Yeah. It depends in that, in that theoretical scenario.

384
00:35:58,475 --> 00:36:03,395
Yeah. In the theoretical scenario. Yeah. I, uh, in the theoretical scenario,

385
00:36:03,395 --> 00:36:07,595
I'm just making the argument that someone on the other side of, of writing that order to make that

386
00:36:07,595 --> 00:36:11,655
happen might make the argument that if you're getting bought out at a premium to underlying,

387
00:36:11,855 --> 00:36:15,795
you should be quote unquote happy. Well, yeah, but that's, I mean, you're already assuming that

388
00:36:15,795 --> 00:36:20,015
in this theoretical scenario, they would be getting bought out at a premium to underlying.

389
00:36:20,235 --> 00:36:25,955
Maybe they would not, maybe it would be at a discount. Maybe it'd be at a discount to MNAV.

390
00:36:27,575 --> 00:36:31,495
Yes, that's certainly possible. That's another discussion. We can, we can maybe go there too,

391
00:36:31,495 --> 00:36:36,415
or we can stop the, we can stop the inflammatory MSTR discussion here.

392
00:36:36,415 --> 00:36:44,415
yeah this isn't a tftc uh we can get back on track but intel to tie the knot there like it

393
00:36:44,415 --> 00:36:48,695
just doesn't mean like it seems like it would be a bad investment by the government like why go

394
00:36:48,695 --> 00:36:57,035
make buy 10 stake in a beleaguered sort of dying institution like i mean i think this is

395
00:36:57,035 --> 00:37:02,535
an important conversation for us to have too like just the life cycle of businesses generally

396
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generational businesses too at that.

397
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Intel crushed it, 70s, 80s, 90s, early 2000s,

398
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but have not been able to compete with AMD, TSMC, Samsung.

399
00:37:16,475 --> 00:37:20,195
It's pretty obvious that they got complacent, lazy,

400
00:37:20,195 --> 00:37:25,695
and I don't think a 10% equity injection from the government

401
00:37:25,695 --> 00:37:29,915
and some sort of quasi-arm's-length control

402
00:37:29,915 --> 00:37:34,015
over the direction that Intel goes in in the future

403
00:37:34,015 --> 00:37:37,055
by the federal government and is going to make it a better company.

404
00:37:38,795 --> 00:37:41,935
Yeah, I mean, it's an interesting question, right?

405
00:37:41,935 --> 00:37:45,235
And I like your point about the lifecycle of companies,

406
00:37:45,295 --> 00:37:46,355
and we should talk about that more.

407
00:37:47,535 --> 00:37:51,075
And I think with the Intel deal, everything's very vague,

408
00:37:51,415 --> 00:37:53,595
and TBD, how it would actually look.

409
00:37:54,075 --> 00:37:58,055
I think Commerce Secretary Howard Lutnick has suggested

410
00:37:58,055 --> 00:38:03,275
that the way it would work would be the CHIPS Act funding that they've gotten would be basically

411
00:38:03,275 --> 00:38:08,195
like that would convert to equity versus like some incremental cash infusion, though, who knows how

412
00:38:08,195 --> 00:38:13,755
it would ultimately shape up. But it's a fair point that like, if the government's going to get

413
00:38:13,755 --> 00:38:18,315
more heavy handed, they don't really need like, you know, they don't need to be like the top

414
00:38:18,315 --> 00:38:24,615
shareholder on the cap table or on the shareholder register, right? Like, they can kind of, you know,

415
00:38:24,615 --> 00:38:28,975
the, there's a lot of Intel industrial capacity here. The executives live here,

416
00:38:29,415 --> 00:38:34,515
employees live here. A lot of assets live here. Um, I don't know that they need equity in the

417
00:38:34,515 --> 00:38:38,995
business to, you know, dramatically control kind of its, its direction if they wanted to get a lot

418
00:38:38,995 --> 00:38:45,175
more heavy handed. So that's, that's fair. Um, but yeah, I mean, it's, it's, it's definitely an

419
00:38:45,175 --> 00:38:53,555
interesting point on, you know, the, the long-term life cycle of, of companies, um, and you know,

420
00:38:53,555 --> 00:39:03,475
how we as investors think about the innovator's dilemma and the inherent headwinds that exist for incumbents

421
00:39:03,475 --> 00:39:09,975
over after some amount of time, whether it's because of, you know, what Buffett called the institutional imperative

422
00:39:09,975 --> 00:39:19,575
or many other factors, but it does, it tells you a case study and perhaps, you know, the businesses that ultimately

423
00:39:19,575 --> 00:39:26,235
kind of reach their their natural endpoint um and you know that history is littered with with

424
00:39:26,235 --> 00:39:30,655
examples of those and examples of companies then kind of coming in smaller you know more nimble

425
00:39:30,655 --> 00:39:35,735
intrepid companies kind of coming in to um backfill the market opportunity that was left behind

426
00:39:35,735 --> 00:39:40,495
certainly we see a lot of those in our portfolio but um yeah a lot of interesting themes there

427
00:39:40,495 --> 00:39:44,315
broadly um across these different situations

428
00:39:44,315 --> 00:39:48,795
I'm just looking up the data now

429
00:39:48,795 --> 00:39:51,575
Intel has total cash

430
00:39:51,575 --> 00:39:53,095
including short term investments

431
00:39:53,095 --> 00:39:53,875
on their balance sheet

432
00:39:53,875 --> 00:39:56,195
21.21 billion

433
00:39:56,195 --> 00:39:57,115
interesting

434
00:39:57,115 --> 00:39:59,795
you go to Apple

435
00:39:59,795 --> 00:40:02,175
they're sitting on

436
00:40:02,175 --> 00:40:05,375
how much cash

437
00:40:05,375 --> 00:40:06,675
including marketable securities

438
00:40:06,675 --> 00:40:09,535
55.37 billion

439
00:40:09,535 --> 00:40:11,075
so you have these large incumbents

440
00:40:11,075 --> 00:40:12,115
I'm picking on Apple too

441
00:40:12,115 --> 00:40:12,775
because I think

442
00:40:12,775 --> 00:40:14,735
with the AI trend

443
00:40:14,735 --> 00:40:19,475
really taking hold and Apple really not participating

444
00:40:19,475 --> 00:40:22,995
in any meaningful degree up to this point.

445
00:40:23,155 --> 00:40:25,315
Siri is a terrible product compared to

446
00:40:25,315 --> 00:40:27,815
ChatGPT and Claude and others.

447
00:40:28,135 --> 00:40:31,315
You would think that Apple, being the innovative

448
00:40:31,315 --> 00:40:35,415
consumer-focused company that it has been for decades,

449
00:40:35,415 --> 00:40:38,835
would lead. They seem to be on the sidelines

450
00:40:38,835 --> 00:40:43,955
deciding to buy back stock instead of leaning into research and development

451
00:40:43,955 --> 00:40:48,375
that could catapult them to a category leader in the world of AI.

452
00:40:48,375 --> 00:40:51,975
And I think that's another company that many would suspect,

453
00:40:52,395 --> 00:40:56,695
considering that half the world has some of their devices.

454
00:40:56,695 --> 00:40:58,635
I'm using two of them right now.

455
00:41:00,595 --> 00:41:02,475
Are they in an innovator's limit, too?

456
00:41:02,655 --> 00:41:07,815
Are we watching the back end of Apple's lifecycle?

457
00:41:08,835 --> 00:41:31,515
Yeah, I don't know. It's tough. I mean, I'm still not ready to fully write off Apple and Google, the two kind of laggards in the Mag 7 that you'd think would have had some opening to benefit much more from the dramatic wave of new AI products over the last 24 years and kind of be leading that charge.

458
00:41:31,515 --> 00:41:37,555
um so i'm not i'm not ready to call it on either of those either of those yet certainly i don't

459
00:41:37,555 --> 00:41:42,955
think either of them are in anything like intel's position and i'm not even ready to say that they're

460
00:41:42,955 --> 00:41:48,715
you know headed there in the next five ten years um i could see that i can see the bear case uh to

461
00:41:48,715 --> 00:41:56,575
some extent um but definitely uh i'm not ready to put them in the same camp yet but certainly there

462
00:41:56,575 --> 00:42:00,895
are a lot of companies uh you know every a lot of older companies every every year every decade

463
00:42:00,895 --> 00:42:02,915
that are going to fall ultimately into that bucket.

464
00:42:04,355 --> 00:42:07,375
But that's one of the reasons that we're, you know,

465
00:42:07,375 --> 00:42:09,855
so bullish on, you know, what we're focusing on here

466
00:42:09,855 --> 00:42:13,995
and why we do what we do to catch the next generation

467
00:42:13,995 --> 00:42:16,875
of companies that we think can come and backfill

468
00:42:16,875 --> 00:42:17,955
some of those gaps.

469
00:42:22,855 --> 00:42:27,095
Yeah, it's very, very, again, interesting times.

470
00:42:27,335 --> 00:42:28,835
May all your times be interesting.

471
00:42:28,835 --> 00:42:32,255
just as interesting as the times that we find ourselves in now.

472
00:42:32,835 --> 00:42:36,775
But moving on from the nationalization of different industries

473
00:42:36,775 --> 00:42:41,075
and the wartime economy playbook that seems to be taking hold

474
00:42:41,075 --> 00:42:43,075
here in the United States.

475
00:42:45,215 --> 00:42:48,535
SBR, we got some news between the last time we recorded

476
00:42:48,535 --> 00:42:52,575
and our recording today. Scott Pesant,

477
00:42:52,695 --> 00:42:54,215
I believe he was on CNBC last week,

478
00:42:55,755 --> 00:42:58,775
I think gave the first sort of official recognition

479
00:42:58,775 --> 00:43:02,655
of an amount of Bitcoin that the U.S. government has.

480
00:43:03,115 --> 00:43:07,975
I believe he said it was between $125,000 and $150,000,000,

481
00:43:07,975 --> 00:43:17,575
which would put the amount of Bitcoin between $150,000 to $160,000 Bitcoin that they're holding.

482
00:43:18,215 --> 00:43:20,675
I think that's right. I don't have the headline in front of me.

483
00:43:20,715 --> 00:43:22,555
I'm going to take your word for it in that case.

484
00:43:23,255 --> 00:43:26,455
It was a really broad interview with a lot of topics covered.

485
00:43:26,595 --> 00:43:28,035
I'd have to go back and find the exact headline.

486
00:43:28,035 --> 00:43:30,075
but it's something to that effect.

487
00:43:31,755 --> 00:43:33,455
I pulled up this decrypt article.

488
00:43:36,255 --> 00:43:38,955
Current Bitcoin holding, oh, between 15 billion to 20 billion,

489
00:43:39,375 --> 00:43:43,275
which is between 130 and 1,175.

490
00:43:43,335 --> 00:43:44,135
I mixed it up there.

491
00:43:47,135 --> 00:43:52,355
Somewhere between 130 and 175,000 Bitcoin that it's holding,

492
00:43:52,595 --> 00:43:55,595
which is less than what people were expecting

493
00:43:55,595 --> 00:43:57,595
if we're going with those rough numbers that percent said.

494
00:43:57,595 --> 00:44:05,875
But during that same interview, he mostly iterated that they don't plan on buying more Bitcoin.

495
00:44:06,135 --> 00:44:08,795
And then a day later, sort of walked it back.

496
00:44:08,955 --> 00:44:21,335
So it seems like the typical Trump admin strategy of sort of strategy via confusion and sort of testing the waters by saying something.

497
00:44:21,775 --> 00:44:26,255
In this case, not bombastic, but just saying one thing and then walking it back, seeing how the market reacts.

498
00:44:26,255 --> 00:44:28,135
I think this is what we were seeing here.

499
00:44:31,335 --> 00:44:34,835
Yeah, there are a lot of trial balloons in this administration.

500
00:44:35,575 --> 00:44:39,695
There are a lot of like, just kidding, but maybe not really kind of moments.

501
00:44:41,295 --> 00:44:46,535
And yeah, I don't know, it's anyone's guess whether, so in the interview he said, you know,

502
00:44:46,675 --> 00:44:52,295
it was kind of like a series of comments about the Bitcoin strategic reserve as well as like the,

503
00:44:52,735 --> 00:44:55,235
whatever they're calling it, the crypto stockpile.

504
00:44:55,235 --> 00:45:00,035
and he said, you know, we have the Bitcoin that we have now. We won't be buying that.

505
00:45:00,855 --> 00:45:04,015
Unclear if he just meant like, well, that that doesn't need to be bought because it already

506
00:45:04,015 --> 00:45:09,635
exists or something else. But in any case, it definitely came off as, you know, the there's no

507
00:45:09,635 --> 00:45:15,495
incremental addition coming to the to the SBR. And then later that day, tweeted that tweet that

508
00:45:15,495 --> 00:45:22,595
Logan put up. And so you wonder if he got some frantic phone calls from big donors or, you know,

509
00:45:22,595 --> 00:45:28,215
relevant, um, policy people that want to keep the Bitcoiners happy. But in any case, it seems like

510
00:45:28,215 --> 00:45:34,295
maybe, uh, budget neutral accumulation is, is still, is still back on the table. Um,

511
00:45:34,655 --> 00:45:40,875
so what, you know, we'll see. We also got, you know, the announcement that, um, Bo Hines, the

512
00:45:40,875 --> 00:45:45,735
special advisor for digital assets or something to that effect, his title in the white house is

513
00:45:45,735 --> 00:46:05,192
leaving and going to work at tether Um but on his way out said that the uh the SBR plans will quote continue and accelerate in his absence So ultimately talk talk is cheap and Bitcoin is not So we we we see what actually happens with that Um unclear if there

514
00:46:05,273 --> 00:46:08,992
you know, I think Grant, you referred to this earlier, but if I'm the government, I don't really

515
00:46:08,992 --> 00:46:12,913
know that I have any incentive at all to make it clear, like what I'm doing until I'm fully sized

516
00:46:12,913 --> 00:46:19,173
in my position. Um, I don't really know how it helps me to tell anyone like, yes, over the next

517
00:46:19,173 --> 00:46:23,052
year, I will be accumulating a hundred thousand Bitcoin. Um, cause you're almost definitely gonna

518
00:46:23,052 --> 00:46:28,352
end up with materially worse prices and doing that. So my sense is if, if, and when it happens,

519
00:46:28,352 --> 00:46:32,692
I, I do think like there's all the incentive in the world for the U S to want to do it,

520
00:46:32,692 --> 00:46:37,972
especially as it, you know, moves to this wartime economy. Um, if there's any strategic value at all

521
00:46:37,972 --> 00:46:42,332
in Bitcoin, like they're going to want to be involved, but there's also no incentive to,

522
00:46:42,472 --> 00:46:46,573
to telegraph to Bitcoin Twitter, you know, what their, what their plans are really.

523
00:46:46,573 --> 00:46:53,633
yeah i don't read too much into it i mean i think he often is just sort of flying by the seat of his

524
00:46:53,633 --> 00:47:01,972
pants and he's he's it doesn't look like he's rehearsed certain answers on tv so i think he

525
00:47:01,972 --> 00:47:08,552
he said some things uh he then later was told that he screwed it up and he quickly

526
00:47:08,552 --> 00:47:14,012
fixes that and i don't even take much in the like the comments around the amount of bitcoin because

527
00:47:14,012 --> 00:47:21,052
It sort of depends on are they counting the Bitcoin that ultimately is due back to Tether?

528
00:47:21,252 --> 00:47:27,173
Because if Tether is going to get that Bitcoin back, which is over 100,000 Bitcoin,

529
00:47:28,113 --> 00:47:32,273
I think those two things can't both be true.

530
00:47:32,273 --> 00:47:38,593
Because what he said implies that they have a pretty significant amount of Bitcoin,

531
00:47:38,593 --> 00:47:43,633
but it wouldn't be possible based on what we know about

532
00:47:43,633 --> 00:47:46,512
or what we've been told about the strategic Bitcoin reserve

533
00:47:46,512 --> 00:47:52,012
and what they have under their possession from prior seizures.

534
00:47:53,633 --> 00:47:56,192
So I don't take it as any type of audit.

535
00:47:56,393 --> 00:48:05,972
I mean, once they reveal addresses and post a mempool.space website address

536
00:48:05,972 --> 00:48:12,413
where we can see it. I mean, I don't even, I don't really believe what he said about the Bitcoin

537
00:48:12,413 --> 00:48:21,992
position. No, no. Yeah. It seems like it's all pandering to a base that helped them get elected

538
00:48:21,992 --> 00:48:28,232
and no string along. And as a Bitcoin, honestly, I've said this, I think we all believe this,

539
00:48:28,332 --> 00:48:33,073
like a Bitcoin strategic reserve at the federal level is a nice to have. It's not a must have for

540
00:48:33,073 --> 00:48:39,732
me as an individual, for us as investors. I think if you're looking at the fiscal crisis and the

541
00:48:39,732 --> 00:48:45,153
out-of-control interest expense on the debt and you're trying to think strategically and creatively

542
00:48:45,153 --> 00:48:51,433
and boldly about solving that problem in the long term, strategic Bitcoin reserve, I honestly

543
00:48:51,433 --> 00:49:00,793
and earnestly believe that it is a creative, bold, and worthwhile endeavor to try to solve that.

544
00:49:00,793 --> 00:49:05,032
if you actually want to solve it, I think that's the bigger question is do they actually want to solve the debt problem

545
00:49:05,032 --> 00:49:08,113
or they just want to keep printing and

546
00:49:08,113 --> 00:49:12,073
just send this thing on turbo until the currency is completely debased, maybe.

547
00:49:12,972 --> 00:49:16,613
But at the end of the day, it really doesn't affect me as an individual Bitcoiner. Us as

548
00:49:16,613 --> 00:49:20,692
investors looking at companies building out infrastructure

549
00:49:20,692 --> 00:49:24,873
for individual Bitcoiners like ourselves. That is a government

550
00:49:24,873 --> 00:49:27,472
decision and I think

551
00:49:27,472 --> 00:49:31,692
as long as the free market's able to operate.

552
00:49:32,113 --> 00:49:35,552
Businesses are able to set up and build what they need to build

553
00:49:35,552 --> 00:49:38,192
to facilitate Bitcoin adoption at the individual level.

554
00:49:38,373 --> 00:49:39,113
That's all that matters.

555
00:49:40,032 --> 00:49:43,712
And it's certainly been more positive than it was in the Biden administration,

556
00:49:43,712 --> 00:49:47,752
but yeah, we shall see.

557
00:49:49,012 --> 00:49:54,972
But there have been some interesting conversations around gold revaluation.

558
00:49:54,972 --> 00:49:59,492
There was two events that happened almost simultaneously.

559
00:50:00,032 --> 00:50:06,793
One was Trump tariffing an unexpected tariff on Swiss gold bars.

560
00:50:09,433 --> 00:50:20,093
Again, another one of these, what do you call trial balloon instances where we sort of threw out, we're going to tariff the one-ounce Swiss gold bars and then stepped it back.

561
00:50:20,093 --> 00:50:23,672
and it's still unclear what's going to happen there exactly.

562
00:50:23,953 --> 00:50:26,732
But around the same time, the Fed quietly released a memo

563
00:50:26,732 --> 00:50:33,712
about the historical gold revaluations throughout the last century,

564
00:50:34,273 --> 00:50:37,252
which is signaling like, hey, maybe we'll do this again

565
00:50:37,252 --> 00:50:38,273
at some point in the near future.

566
00:50:41,172 --> 00:50:44,133
Yeah, and I mean like, you know, it's one of those like just,

567
00:50:45,752 --> 00:50:47,093
you know, we mentioned conspiracy theories

568
00:50:47,093 --> 00:51:01,453
And we mentioned kind of it's very easy to to dive down certain rabbit holes and artificially connect, you know, different disparate events that are happening in the world and think that it you know, you have the confirmation bias that it suits the thesis that you have about how things are going to play out.

569
00:51:01,692 --> 00:51:06,933
But, you know, it was certainly funny to see both of these things happen in quick succession like that.

570
00:51:06,933 --> 00:51:16,433
To be fair, like this memo doesn't say like the Fed is considering doing this or the Fed and Treasury, whatever the U.S. government, you know, there's no implication.

571
00:51:16,433 --> 00:51:23,873
that this is coming. But it is the first ever, you know, official memo that they've put out kind

572
00:51:23,873 --> 00:51:28,933
of on this topic. There's a footnote at the bottom, which I didn't realize at first. But if

573
00:51:28,933 --> 00:51:33,933
you scroll down, there's a footnote at the bottom that says like something like this is one way that

574
00:51:33,933 --> 00:51:40,472
has been floated by certain parties to help the U.S. accumulate Bitcoin in a budget.

575
00:51:40,712 --> 00:51:45,633
The ideas come up in the context of helping to establish a strategic Bitcoin reserve or sovereign

576
00:51:45,633 --> 00:51:50,873
Wealth Fund, and the use of revaluation proceeds was proposed in a recent legislation by Senator

577
00:51:50,873 --> 00:51:56,773
Lummis in Belgium. The press reported the governing coalition was considering financing

578
00:51:56,773 --> 00:52:00,413
additional spending partly through monetization of some of the National Bank of Belgium's gold

579
00:52:00,413 --> 00:52:04,832
reserves, with the National Bank of Belgium commenting on the idea in a recent press release.

580
00:52:06,433 --> 00:52:11,593
Yeah, exactly. So it's the kind of thing where like, does that mean it's happened? Any of this

581
00:52:11,593 --> 00:52:17,433
is like, you know, being planned, um, explicitly. No, does it mean that this is happening like

582
00:52:17,433 --> 00:52:23,752
tomorrow or next month? No, but it's, it's interesting because like, this is exactly what

583
00:52:23,752 --> 00:52:29,172
you would expect to see this kind of like slow, subtle, like dribs and drabs of like pieces of

584
00:52:29,172 --> 00:52:35,052
information or memos or think pieces, right. To kind of like directionally normalize an idea and

585
00:52:35,052 --> 00:52:40,313
like vaguely shift the Overton window and add some veneer of like academic prestige around it.

586
00:52:40,313 --> 00:52:45,933
you know, that you would do that kind of a year in advance, right? You'd slowly like let this stuff

587
00:52:45,933 --> 00:52:53,332
leak out to kind of test the waters and get people maybe a little more comfortable circulated

588
00:52:53,332 --> 00:53:00,933
in certain circles. So not that any of this means that it's definitely coming. But I think if it were

589
00:53:00,933 --> 00:53:05,573
to be coming in like a year or something, two years, whatever, this is exactly the kind of stuff

590
00:53:05,573 --> 00:53:07,732
that you would expect to kind of see under the hood

591
00:53:07,732 --> 00:53:11,852
being slowly leaked out to normalize it.

592
00:53:13,153 --> 00:53:15,633
It's kind of predictive programming in some sense.

593
00:53:16,232 --> 00:53:19,492
Yeah, or it's a classic case of nothing ever happens.

594
00:53:19,893 --> 00:53:20,732
Could be that too.

595
00:53:21,472 --> 00:53:24,192
It's just an info drip to get people running down

596
00:53:24,192 --> 00:53:27,832
these speculative theory paths,

597
00:53:28,373 --> 00:53:29,692
and then nothing will ever happen.

598
00:53:30,873 --> 00:53:31,073
Yep.

599
00:53:33,532 --> 00:53:35,212
That's the base case until proven otherwise.

600
00:53:35,212 --> 00:53:39,032
Something is happening though

601
00:53:39,032 --> 00:53:40,212
There are things happening

602
00:53:40,212 --> 00:53:41,512
Not at the government level

603
00:53:41,512 --> 00:53:43,172
Nothing ever happens in the government

604
00:53:43,172 --> 00:53:44,732
Meet the new boss, same as the old boss

605
00:53:44,732 --> 00:53:45,593
You're going to print

606
00:53:45,593 --> 00:53:49,393
But we in the private market

607
00:53:49,393 --> 00:53:51,732
As actors can do things

608
00:53:51,732 --> 00:53:52,232
Harvard

609
00:53:52,232 --> 00:53:54,172
An institution

610
00:53:54,172 --> 00:53:55,972
Been under a lot of fire in recent years

611
00:53:55,972 --> 00:53:57,252
Caught up in the woke

612
00:53:57,252 --> 00:53:59,192
Debacle

613
00:53:59,192 --> 00:54:01,352
People coming out their president

614
00:54:01,352 --> 00:54:03,773
There's some questions about

615
00:54:03,773 --> 00:54:06,552
whether or not they're

616
00:54:06,552 --> 00:54:08,293
they're

617
00:54:08,293 --> 00:54:10,413
what do you call it?

618
00:54:12,273 --> 00:54:12,953
They're

619
00:54:12,953 --> 00:54:15,492
They're tax-exempt status.

620
00:54:15,893 --> 00:54:18,593
Tax-exempt status, but when kids enroll, their enrollment

621
00:54:18,593 --> 00:54:20,613
sort of procedures and

622
00:54:20,613 --> 00:54:24,012
the preferences they may show, the

623
00:54:24,012 --> 00:54:28,712
illegal preferences they may show for certain demographics over others.

624
00:54:29,113 --> 00:54:30,873
But nonetheless, they have a large endowment.

625
00:54:30,873 --> 00:54:41,212
And it disclosed this first Bitcoin ETF position, a pretty material position of over $100 million, which you're describing.

626
00:54:41,313 --> 00:54:42,913
I'm looking at the show notes, John.

627
00:54:42,992 --> 00:54:47,913
You're describing it as a fairly seismic signaling shift for institutional asset managers and endowments.

628
00:54:48,273 --> 00:54:48,692
Seismic.

629
00:54:50,732 --> 00:54:52,832
It seems seismic to me.

630
00:54:52,832 --> 00:55:03,073
You know, certainly there are other endowments that have either publicly or, you know, non-publicly taken Bitcoin positions.

631
00:55:04,293 --> 00:55:07,793
And so, you know, it's not the first endowment.

632
00:55:07,933 --> 00:55:13,773
We've seen Brown and a few others kind of publicly file their IBET positions.

633
00:55:13,773 --> 00:55:22,073
So not the first, but, you know, Harvard is say what you want about Harvard and different things that have happened in higher education in the last 20 years.

634
00:55:22,832 --> 00:55:26,532
You know, probably the most respected kind of educational brand in the world.

635
00:55:26,532 --> 00:55:30,472
So right now it's, you know, Harvard, MIT, Yale, you know, Stanford, maybe.

636
00:55:32,113 --> 00:55:39,172
And even more than that, Harvard and Yale have been, you know, pioneers in the endowment investing space.

637
00:55:39,172 --> 00:55:46,613
And there are a few other big endowments that have been kind of significant in moving like the quote unquote endowment model forward as well.

638
00:55:46,613 --> 00:55:52,593
Um, but, you know, this is undoubtedly, you know, one of the top like few, uh, that have,

639
00:55:52,593 --> 00:55:58,172
that pioneered like all of the strategies that go into, you know, what we now think of as the

640
00:55:58,172 --> 00:56:02,433
endowment model, which I think frankly has gotten, you know, is now very diverse and can mean a lot

641
00:56:02,433 --> 00:56:08,633
of different things. But all that is to say, um, you know, this is something like, uh, I think

642
00:56:08,633 --> 00:56:13,352
within the endowment world, and I don't want to speak for them too much, given that I'm not, uh,

643
00:56:13,352 --> 00:56:20,492
fully in that world. But having an actor like that take a position like this, and granted,

644
00:56:20,653 --> 00:56:25,113
it's a tiny piece of the total endowment, but it's also a massive slug and makes them one of

645
00:56:25,113 --> 00:56:30,453
the bigger holders of iBit to have them move in that direction is, I think, comparable to

646
00:56:30,453 --> 00:56:38,813
BlackRock giving the imprimatur to Bitcoin that we're the leading ETF administrator in the world

647
00:56:38,813 --> 00:56:44,712
with the leading ETF provider. And yes, we're going to say that a spot Bitcoin ETF is worth

648
00:56:44,712 --> 00:56:48,633
fighting for and pushing through and getting through the regulators and then marketing

649
00:56:48,633 --> 00:56:51,633
aggressively and saying, this is something that you should have in your portfolios, adding it to

650
00:56:51,633 --> 00:56:57,573
our model portfolios, all that. The kind of brand cachet that BlackRock brings kind of on the

651
00:56:57,573 --> 00:57:04,573
general asset management ETF side, I think is analogous to what Harvard brings to kind of the

652
00:57:04,573 --> 00:57:11,852
endowment investing world, right? So for them to take this position, I think is quite significant,

653
00:57:12,352 --> 00:57:20,352
particularly given there are still, I think, are a lot of, in academia, even probably more so than

654
00:57:20,352 --> 00:57:26,332
Wall Street, a lot of legacy biases against Bitcoin for various reasons, many of which relate

655
00:57:26,332 --> 00:57:33,153
to energy expenditure. And famously, Harvard economist Ken Rogoff said that Bitcoin was

656
00:57:33,153 --> 00:57:39,133
more likely to go to 100 than 100,000 and has now had to kind of walk that back and talk about all

657
00:57:39,133 --> 00:57:47,413
the reasons why that didn't play out. But I think he's emblematic of the type of viewpoint that you

658
00:57:47,413 --> 00:57:54,293
still see a lot in higher education. And so against all that tide for Harvard to put its reputation to

659
00:57:54,293 --> 00:57:59,972
some degree in endowment investing behind Bitcoin, yeah, I'd call that fairly seismic. I think that's

660
00:57:59,972 --> 00:58:03,813
a pretty significant perimeter to have for Bitcoin.

661
00:58:05,613 --> 00:58:07,613
Ken Rogoff, very butthurt.

662
00:58:07,953 --> 00:58:12,773
I don't know if this tweet was a response to the endowment of the school

663
00:58:12,773 --> 00:58:16,692
that he's the professor at taking material position in Bitcoin.

664
00:58:16,692 --> 00:58:24,352
But I had the pleasure of watching Seyfidina Moose debate Ken Rogoff

665
00:58:24,352 --> 00:58:26,992
at the Soho Forum, I believe in 2018 or 2019.

666
00:58:26,992 --> 00:58:31,172
and it was on the legitimacy of negative interest rate policy,

667
00:58:31,393 --> 00:58:35,613
which Ken Rogoff is a very big advocate of.

668
00:58:35,672 --> 00:58:37,873
He actually wrote, I think, the official paper

669
00:58:37,873 --> 00:58:40,252
on negative interest rate policy and how to implement it.

670
00:58:41,273 --> 00:58:45,352
And it's just an incredibly stark juxtaposition

671
00:58:45,352 --> 00:58:48,172
of academic economists, how they think money works

672
00:58:48,172 --> 00:58:52,252
and the economy works and their concananny ideas.

673
00:58:53,332 --> 00:58:55,532
Basically, we should have negative interest rate policy

674
00:58:55,532 --> 00:59:00,573
bailing governments and institutions in versus just letting the free market

675
00:59:00,573 --> 00:59:03,913
create the hurdle rate and solve things by adopting a Bitcoin standard.

676
00:59:06,913 --> 00:59:11,413
The other interesting thing I thought about this announcement was,

677
00:59:11,532 --> 00:59:16,293
I mean, as John said, it's a tiny piece of the overall endowment, right?

678
00:59:16,712 --> 00:59:20,212
And we don't really know the rationale behind why they did it.

679
00:59:20,212 --> 00:59:26,192
we can make some assumptions on why they might be dipping their toes in,

680
00:59:26,492 --> 00:59:31,313
particularly given that they also did so with the gold ETF.

681
00:59:32,133 --> 00:59:34,972
But I thought it was interesting that they actually took a bigger position

682
00:59:34,972 --> 00:59:40,512
in the Bitcoin ETF or in one of the Bitcoin ETFs than the gold ETF.

683
00:59:41,273 --> 00:59:49,512
Some people, you would think in a legacy, traditional-minded category,

684
00:59:50,212 --> 00:59:55,852
capital allocators, particularly based on just market cap, like market cap of gold versus market

685
00:59:55,852 --> 01:00:03,433
cap of Bitcoin, you might see an allocation suggested that's less than 50%, but less than

686
01:00:03,433 --> 01:00:09,512
50% to Bitcoin relative to gold. But this is a greater allocation to Bitcoin than gold, which I

687
01:00:09,512 --> 01:00:17,873
just think is an interesting directional perspective given where Bitcoin is relative to gold overall

688
01:00:17,873 --> 01:00:24,852
today. Yeah, and it actually ties into the newsletter I wrote on Monday. This report from

689
01:00:24,852 --> 01:00:31,492
Bank of America came out last week. Zero Hedge wrote an article on it on Sunday, sat down and

690
01:00:31,492 --> 01:00:39,913
read it. But I think to your point, Grant, Bank of America sent out a survey to fund managers

691
01:00:39,913 --> 01:00:49,573
and 75% of the respondents responded that they have zero allocation to cryptocurrency.

692
01:00:49,573 --> 01:00:52,752
We'll just use that as a proxy for Bitcoin.

693
01:00:53,852 --> 01:00:54,633
And here's the stats.

694
01:00:54,913 --> 01:01:02,273
The survey revealed that just 9% of fund managers have exposure to crypto

695
01:01:02,273 --> 01:01:05,692
with a weighted average allocation of 0.3% of AUM.

696
01:01:05,692 --> 01:01:10,153
48% of those same respondents have exposure to gold,

697
01:01:10,153 --> 01:01:13,532
and there is a 2.2% weighted average allocation

698
01:01:13,532 --> 01:01:15,732
to gold across the managers that responded

699
01:01:15,768 --> 01:01:17,568
Bank of America survey

700
01:01:17,568 --> 01:01:19,968
and to your point too, I wrote this in the newsletter

701
01:01:19,968 --> 01:01:20,628
like I think

702
01:01:20,628 --> 01:01:23,368
if you're an institution

703
01:01:23,368 --> 01:01:25,028
weighing

704
01:01:25,028 --> 01:01:28,008
the opportunity cost of

705
01:01:28,008 --> 01:01:29,508
allocating one hard asset

706
01:01:29,508 --> 01:01:31,868
or another, particularly between

707
01:01:31,868 --> 01:01:33,808
Bitcoin and gold, depending on your

708
01:01:33,808 --> 01:01:35,068
risk appetite, I think

709
01:01:35,068 --> 01:01:38,028
an over weighting towards Bitcoin makes sense

710
01:01:38,028 --> 01:01:38,948
if you're like risk on

711
01:01:38,948 --> 01:01:41,908
it just makes sense. Gold's

712
01:01:41,908 --> 01:01:43,988
been monetized over the course

713
01:01:43,988 --> 01:01:48,528
millennia, Bitcoin is still in the very early stages of its monetization phase. And if you want

714
01:01:48,528 --> 01:01:55,228
to ride some relatively high upside, you got to ride the Bitcoin horse, not gold.

715
01:01:58,888 --> 01:02:06,128
Yep. Yeah, for sure. I think it's a great point, Grant. Just the relative weightings there. And

716
01:02:06,128 --> 01:02:11,108
the caveat that I'll throw in here is you never really know what different investment managers

717
01:02:11,108 --> 01:02:15,968
are thinking or doing and what plans they have for their allocations. So, you know, would it

718
01:02:15,968 --> 01:02:20,728
surprise me? Like we've seen in the past, like I think Wisconsin's biggest state pension fund,

719
01:02:20,788 --> 01:02:24,268
you know, took a big I bet position. And then a couple of quarters later, I think they sold out

720
01:02:24,268 --> 01:02:29,208
of all of it. I can't remember if they, you know, likely sold out at a loss or a gain, but in any

721
01:02:29,208 --> 01:02:34,088
case you would have, I think it would have been fair to say like, oh, a pension fund's taking,

722
01:02:34,088 --> 01:02:37,428
you know, making this bet, making this allocation, that's very likely, you know,

723
01:02:37,428 --> 01:02:42,608
chunky capital that they'll, uh, add to over time. And, you know, they have a kind of a long-term

724
01:02:42,608 --> 01:02:47,968
view on it, but, you know, they were out within, you know, a couple of quarters. So, um, not trying

725
01:02:47,968 --> 01:02:53,128
to, not trying to suggest that, uh, Harvard is about to become, you know, the, the biggest Bitcoin

726
01:02:53,128 --> 01:02:57,508
bull in the world on a sustained basis. You never really know what anyone's thinking, but yeah,

727
01:02:57,628 --> 01:03:02,348
collectively, I think all those, those points are irrelevant. And it's, it's even more notable

728
01:03:02,348 --> 01:03:07,568
against the backdrop that like, if you, if you Google this, like if you Google like Harvard

729
01:03:07,568 --> 01:03:12,448
endowment, Bitcoin, um, you're not going to find like a lot of mainstream coverage of this.

730
01:03:12,548 --> 01:03:17,588
Like, um, you know, there's an article in pensions and investments. There's like, you know,

731
01:03:17,588 --> 01:03:21,988
the article that we had linked in the Harvard Crimson, um, and maybe one or two others, but,

732
01:03:21,988 --> 01:03:28,308
um, it, it, it seems much more meaningful, even if it's not, even if there's low duration to it,

733
01:03:28,328 --> 01:03:31,968
even if it's only a few quarters that they hold it much more meaningful than I think the coverage

734
01:03:31,968 --> 01:03:34,028
that it's gotten in mainstream press.

735
01:03:34,548 --> 01:03:36,588
So definitely one worth watching.

736
01:03:38,288 --> 01:03:38,408
Yeah.

737
01:03:39,468 --> 01:03:43,468
And I know we've got a call at the top of the hour,

738
01:03:43,688 --> 01:03:46,088
so we're going to jump around the list

739
01:03:46,088 --> 01:03:49,968
to what I think is probably the most interesting thing,

740
01:03:50,188 --> 01:03:52,348
especially as it pertains to what we're doing here,

741
01:03:53,088 --> 01:03:55,188
to the crypto IPOs that we've seen.

742
01:03:55,268 --> 01:03:58,268
There's been some S1s that have been released

743
01:03:58,268 --> 01:04:00,768
in the last couple of weeks,

744
01:04:00,768 --> 01:04:03,628
bullish, which is a large institutional

745
01:04:03,628 --> 01:04:07,348
exchange, announced that they were going public

746
01:04:07,348 --> 01:04:10,728
and I believe they did IPO last week

747
01:04:10,728 --> 01:04:13,788
on the NYSE and then Gemini

748
01:04:13,788 --> 01:04:16,048
filed an S1. Looks like they're prepping

749
01:04:16,048 --> 01:04:19,508
the sales to go public, which is much expected.

750
01:04:19,628 --> 01:04:22,208
They've been around for 12 years now at this point.

751
01:04:22,208 --> 01:04:25,288
So it makes sense that they would be getting ready to go public

752
01:04:25,288 --> 01:04:28,088
but Grant, you are our resident

753
01:04:28,088 --> 01:04:29,148
S1 sleuth.

754
01:04:30,768 --> 01:04:32,908
What did you find that stuck out to you?

755
01:04:33,628 --> 01:04:34,748
A couple things.

756
01:04:34,748 --> 01:04:42,948
Well, first of all, the BLSH as a ticker, I think, is great for memes

757
01:04:42,948 --> 01:04:48,548
because they're a crypto shitcoin business and their ticker is bullshit.

758
01:04:50,348 --> 01:04:54,748
But I wasn't very familiar with their business.

759
01:04:55,008 --> 01:04:59,828
I'd seen them at conferences, big sponsor of the conferences,

760
01:04:59,828 --> 01:05:03,788
like large square footage on the floor.

761
01:05:03,968 --> 01:05:06,168
So clearly we're throwing a lot of money around

762
01:05:06,168 --> 01:05:07,688
trying to build their brand.

763
01:05:07,688 --> 01:05:11,228
But it turns out they do quite a bit of institutional volume.

764
01:05:11,648 --> 01:05:15,428
I think it was rivaling close to a trillion dollars

765
01:05:15,428 --> 01:05:16,748
worth of institutional trading.

766
01:05:16,848 --> 01:05:21,028
And they were claiming that they do around 30%

767
01:05:21,028 --> 01:05:23,268
of spot Bitcoin, spot ETH.

768
01:05:23,408 --> 01:05:26,268
They trade all the shitcoin pairs.

769
01:05:26,268 --> 01:05:34,368
But they do have quite a sizable Bitcoin position, I think 24,000 Bitcoin on their treasury.

770
01:05:36,188 --> 01:05:44,108
And some of that I think probably was associated with some of their founders and who ceded the capital initially.

771
01:05:45,268 --> 01:05:53,108
But they have built a business that generates about 50 million of adjusted EBITDA.

772
01:05:53,108 --> 01:05:57,808
So it throws off real profits and cash flow.

773
01:05:58,708 --> 01:06:02,728
But interestingly, the stock just went wild right after it listed.

774
01:06:02,908 --> 01:06:04,388
I mean, I think this was last week.

775
01:06:04,948 --> 01:06:08,048
It traded up a couple hundred percent, I think.

776
01:06:08,488 --> 01:06:13,228
Now it's trading around a $9 or $10 billion market cap,

777
01:06:13,288 --> 01:06:17,648
which even if you give them some premium to the Bitcoin treasury,

778
01:06:17,948 --> 01:06:21,428
it's about $3 billion worth of Bitcoin on their balance sheet.

779
01:06:21,428 --> 01:06:29,528
So even if you assume there's a premium to that, it's still implying quite a significant value to this operating business.

780
01:06:29,528 --> 01:06:59,508
And I just think, given what we've seen over the last couple of months with the Circle IPO, that it's not just a reflection that the IPO window is open and that the public markets are perhaps more open for business than they've been historically, but also that there's an interest in just, let's call it the broader crypto story, given how Circle is traded and given how, you know,

781
01:06:59,528 --> 01:07:03,408
where bullish or bullshit is positioned itself.

782
01:07:04,208 --> 01:07:07,968
So I think that's an interesting dynamic at play.

783
01:07:09,868 --> 01:07:13,948
And then on the Gemini side, what I found most interesting about that,

784
01:07:14,008 --> 01:07:18,748
I mean, we know they've had their issues in the past with the hypothecation of Bitcoin

785
01:07:18,748 --> 01:07:23,328
and going underwater on lots of these loans to the degen market makers.

786
01:07:24,048 --> 01:07:29,148
And I think they still have quite a bit of outstanding debt that they're trying to deal with

787
01:07:29,148 --> 01:07:37,088
in this IPO. I think the IPO, they're targeting around 400 million raise. And some of that may

788
01:07:37,088 --> 01:07:44,928
be to pay off debt. I don't know when the listing is expected. I would assume sometime next month.

789
01:07:45,028 --> 01:07:52,108
So there hasn't been any chatter about where this business will price and what the valuation will be.

790
01:07:52,108 --> 01:07:59,608
I guess it looks like they have a lot less Bitcoin on their balance sheet than bullshit.

791
01:07:59,608 --> 01:08:09,728
But what I found was most interesting is that they generate, I think it was around $130 million

792
01:08:09,728 --> 01:08:22,388
or million of annualized revenue but are operating at quite a significant loss I think just based on headcount costs they were spending million

793
01:08:22,388 --> 01:08:26,308
just on compensating employees

794
01:08:26,308 --> 01:08:29,448
and were operating at something like $100 or $200 million loss.

795
01:08:29,588 --> 01:08:31,388
So I found that very fascinating

796
01:08:31,388 --> 01:08:34,588
since it goes really against the philosophy

797
01:08:34,588 --> 01:08:36,728
that we have at 1031

798
01:08:36,728 --> 01:09:00,728
One is backing teams that can build sustainable business models on top of Bitcoin, can actually generate profits, can operate lean and don't have to have bloated cost structures, whether it's through headcount or otherwise, and build Bitcoin on their balance sheet in a sustainable way.

799
01:09:00,728 --> 01:09:12,528
And so despite the fact that Jim and I is operating what seems like very significant loss, I think it's going to be really interesting to see how like what is the interest in this business?

800
01:09:12,528 --> 01:09:39,768
Because to me, the bullish trading or the positive trading dynamics of Circle, how we've seen bullish trade, certainly to me would imply that there's quite a lot of value that investors will put on businesses that can actually operate profitably or are operating in the Bitcoin space.

801
01:09:39,768 --> 01:09:44,748
and benefit from some of the same tailwinds

802
01:09:44,748 --> 01:09:47,748
that the market seems to associate with these businesses.

803
01:09:48,648 --> 01:09:53,188
Yeah, it's really astonishing that a lot of the incumbents,

804
01:09:53,348 --> 01:09:57,908
I mean, that was when you brought the SG&A cost

805
01:09:57,908 --> 01:10:01,328
or just like the overall administrative costs

806
01:10:01,328 --> 01:10:05,188
in terms of salaries up in our group chat.

807
01:10:05,268 --> 01:10:07,508
It was astonishing to me

808
01:10:07,508 --> 01:10:08,948
because we see it in the mining industry too.

809
01:10:08,948 --> 01:10:21,048
A lot of the mining companies have insane SG&A costs, and you'd think that people would recognize that this is something that is going to be a problem if you're looking to grow a profitable business.

810
01:10:21,048 --> 01:10:31,868
There's way too many publicly traded companies, particularly miners out there with bloated SG&A lines on their financial statements.

811
01:10:32,188 --> 01:10:40,388
And it's crazy to see that Gemini is spending this much on salaries and not yet profitable, having been 12 years old.

812
01:10:40,588 --> 01:10:47,848
And we were saying this, they're one of, I believe, three operators with a BitLicense in New York, which is one of the largest markets in the world, not only the U.S.

813
01:10:47,848 --> 01:10:54,068
And so they have a somewhat of a competitive advantage and somewhat of a regulatory boat in one of the biggest markets.

814
01:10:54,308 --> 01:10:58,808
And they're about to go public and aren't profitable yet.

815
01:10:58,868 --> 01:11:01,008
And you juxtapose that to a company like Strike.

816
01:11:01,648 --> 01:11:09,348
In our portfolio, where Jack is very public, even though they're still private, he's been sharing some of their financials.

817
01:11:09,348 --> 01:11:11,668
And it's a point to him.

818
01:11:11,668 --> 01:11:24,408
They've built the business that they have with around 75 employees and their core focus as a business is how can we make as much money as quickly as possible, as efficiently as possible.

819
01:11:24,928 --> 01:11:34,388
It seems like that management mentality is not not being yet widely adopted, not only across the space, but broadly speaking, I think.

820
01:11:34,388 --> 01:11:41,788
when you compound the hurdle rate that is Bitcoin with the productivity gains that are entering the

821
01:11:41,788 --> 01:11:48,448
market via AI, if you are not running a business profitably and cutting costs as much as possible

822
01:11:48,448 --> 01:11:53,848
and being as efficient as possible on the expense side, I think you're going to start to get dinged

823
01:11:53,848 --> 01:12:01,868
materially in public markets. Yeah, I mean, I'd love to say that I agree that the public markets

824
01:12:01,868 --> 01:12:07,328
will be rational, rational enough to eventually that will be enforced. You know, the market is a

825
01:12:07,328 --> 01:12:11,128
weighing machine in the long-term voting machine in the short term. Right. So, but eventually that

826
01:12:11,128 --> 01:12:15,128
will be enforced. But yeah, I think it's, you know, it speaks to, in my view, like Grant,

827
01:12:15,148 --> 01:12:19,588
you said it all really, you guys both said it all really well. Um, I think strike is a great

828
01:12:19,588 --> 01:12:23,488
example of kind of a counterpoint that, you know, we like to draw and that we like to lean into,

829
01:12:23,488 --> 01:12:30,548
um, uh, 1031 and, you know, Jack's been, um, more public recently about some of the results.

830
01:12:30,548 --> 01:12:35,908
Um, and so people can go kind of look that up, but yeah, I think it's, it's very notable that

831
01:12:35,908 --> 01:12:42,128
when Bitcoin is your North star and your goal is to accumulate as much Bitcoin for yourself

832
01:12:42,128 --> 01:12:47,908
and your shareholders as possible, and there's a fixed supply and there's demand is only going

833
01:12:47,908 --> 01:12:52,928
in one direction. And every day that you're not accumulating Bitcoin, every day it gets harder to

834
01:12:52,928 --> 01:12:57,328
accumulate more Bitcoin on the margin. Right. And so if you have that as your North star, as a,

835
01:12:57,328 --> 01:13:01,108
as an entrepreneur, as an individual, an entrepreneur, and then ultimately as a business,

836
01:13:01,108 --> 01:13:07,948
it really just radically shifts your mentality about the way that you want to operate and how

837
01:13:07,948 --> 01:13:13,688
you want to allocate capital, how you want to expend resources and, you know, your interest in

838
01:13:13,688 --> 01:13:20,248
and emphasis on squeezing, you know, the max possible productivity out of any given employee,

839
01:13:20,248 --> 01:13:24,448
any given, you know, deployment of capital. And I think if you, you know, look at the way,

840
01:13:24,448 --> 01:13:30,668
If, for example, Strike has operated the way that other companies in our portfolio have operated, you get a very different picture, right?

841
01:13:30,688 --> 01:13:35,868
And you get a good sense of what it looks like when Bitcoin is, you know, truly your North Star.

842
01:13:36,788 --> 01:13:45,408
I think it's clear that, you know, whatever you might say about Gemini, whatever you might say about bullish, you know, no strong opinion on either of them.

843
01:13:46,148 --> 01:13:49,108
But certainly they are broader crypto companies, right?

844
01:13:49,148 --> 01:13:53,208
They've catered to the broader crypto ecosystem.

845
01:13:53,208 --> 01:14:07,328
They're not exclusively all in on Bitcoin, focused on Bitcoin. And it's interesting that you kind of you see the divergence, right? And not just the marketing, not just the product launches, but even the operating results.

846
01:14:07,328 --> 01:14:10,248
it bleeds through every part of the organization.

847
01:14:11,028 --> 01:14:15,048
We'll continue to focus on the businesses that make Bitcoin their North Star.

848
01:14:16,148 --> 01:14:20,288
Not just for ideological reasons, but because we want to accumulate more Bitcoin.

849
01:14:21,088 --> 01:14:24,348
The leading businesses that feel the same way

850
01:14:24,348 --> 01:14:25,808
are going to be the best way to do that.

851
01:14:27,808 --> 01:14:30,488
This is a good segue to the final topic,

852
01:14:30,628 --> 01:14:34,208
which is on the list, and this is probably one of the

853
01:14:34,208 --> 01:14:36,788
I mean, they're in the S&P 500 now.

854
01:14:36,868 --> 01:14:46,168
Block, I think, is one of the few in public markets outside of treasury companies, even though Block does have a Bitcoin treasury.

855
01:14:46,168 --> 01:14:52,848
I think they're an incredible example of a company that is focused on Bitcoin and Bitcoin alone.

856
01:14:53,228 --> 01:14:56,608
And that is expressed across their different business lines.

857
01:14:56,608 --> 01:15:01,588
Obviously, Square, they announced in Vegas earlier this year that they're going to be

858
01:15:01,588 --> 01:15:07,368
rolling out the ability for their merchants to accept Bitcoin payments and to funnel some

859
01:15:07,368 --> 01:15:13,228
of their revenues into Bitcoin directly on the back end using the Square stack, the banking

860
01:15:13,228 --> 01:15:29,748
stack there Cash app obviously consumer app focused on getting Bitcoin into the hands of everyday retail consumers spiral open source initiative to support open source projects in the space most notably LDK

861
01:15:29,748 --> 01:15:36,568
And now, BitKey, the hardware wallet to help foster self-custody.

862
01:15:36,788 --> 01:15:42,028
And now this has been talked about and sort of teased for the better part of a couple of years now.

863
01:15:42,028 --> 01:15:47,108
And they had their big sort of unveiling last week, which I was there for, Proto, which is their mining division.

864
01:15:48,488 --> 01:15:54,948
And so they announced the rig, which I think is a pretty massive moment for the Bitcoin mining industry.

865
01:15:54,948 --> 01:16:12,388
You had a bunch of ex-Apple Square designers, hardware designers specifically, really dig into the problems that exist on the hardware side in the mining space and try to come up with a product to solve a lot of the pain points that miners have run into.

866
01:16:12,388 --> 01:16:15,588
just due to the fact that there's really been a duopoly

867
01:16:15,588 --> 01:16:19,548
trending more towards monopoly in the Bitcoin mining hardware space

868
01:16:19,548 --> 01:16:24,648
with Bitmain and MicroBT being the big gorillas in the room in that industry.

869
01:16:24,908 --> 01:16:30,128
And notoriously, both companies have had a mindset of,

870
01:16:30,128 --> 01:16:32,208
hey, we're going to build these things, you take what you get,

871
01:16:32,328 --> 01:16:34,068
and we don't really care about your feedback.

872
01:16:34,728 --> 01:16:39,728
This has been expressed with the inability to really tap into the firmware

873
01:16:39,728 --> 01:16:43,288
and sort of customize your setup.

874
01:16:43,448 --> 01:16:44,888
They've made it extremely hard to do that.

875
01:16:45,568 --> 01:16:50,568
They don't really take feedback in terms of what the hardware should look like

876
01:16:50,568 --> 01:16:55,748
and how it should be manifested in a physical end product.

877
01:16:56,108 --> 01:16:58,488
They sort of say, hey, take our shoebox and plug it in,

878
01:16:58,868 --> 01:17:02,508
and you'll have to figure stuff out on the back end.

879
01:17:02,508 --> 01:17:07,348
So it looks like the Proto team has noticed that there's an opportunity

880
01:17:07,348 --> 01:17:11,108
to step into the space and improve in these different areas.

881
01:17:11,128 --> 01:17:14,408
And they came up with the rig, which is extremely impressive.

882
01:17:14,408 --> 01:17:22,648
So it's a modular sort of Bitcoin mining device that is designed incredibly well.

883
01:17:23,068 --> 01:17:25,228
You can take out the hashboards very easily.

884
01:17:25,448 --> 01:17:29,188
You can replace fans and PSUs very easily.

885
01:17:29,448 --> 01:17:35,568
And so the launch of the rig is really a statement by Proto, like, hey, we're taking feedback

886
01:17:35,568 --> 01:17:36,388
from the mining industry.

887
01:17:36,508 --> 01:17:37,768
We want to provide you with a product

888
01:17:37,768 --> 01:17:40,448
that will be durable, modular,

889
01:17:40,728 --> 01:17:43,968
and sort of enable you to easily run

890
01:17:43,968 --> 01:17:46,088
your mining infrastructure

891
01:17:46,088 --> 01:17:49,148
in a way that you want to and need to,

892
01:17:49,288 --> 01:17:51,328
depending on your particular setup.

893
01:17:51,448 --> 01:17:52,348
So it was incredibly good to see.

894
01:17:52,548 --> 01:17:55,248
So they have the rig, which is a chassis.

895
01:17:55,828 --> 01:17:56,608
Again, it's modular.

896
01:17:57,108 --> 01:17:59,488
You can sort of put up to nine hashboards

897
01:17:59,488 --> 01:18:02,748
in this free chassis cube that they're selling,

898
01:18:02,748 --> 01:18:07,808
take the fans off replace them very easily on top of that they have a software stack called fleet

899
01:18:07,808 --> 01:18:13,348
which allows you to easily manage um your your mining machines as they're running uh in your

900
01:18:13,348 --> 01:18:21,708
facilities uh and from a competitive perspective on performance it's not top of the line uh bit

901
01:18:21,708 --> 01:18:26,308
mains hydro units are around like nine joules per tera hash they're air cooled units around 12 and a

902
01:18:26,308 --> 01:18:33,888
half out of the gate, the rig will be coming with up to 14.1 joules per terahash in efficiency,

903
01:18:33,888 --> 01:18:38,468
which is good enough for certain parts of the market. So I think it was a massive

904
01:18:38,468 --> 01:18:44,768
day for the Bitcoin mining industry. I've talked very publicly on this show and many others that I

905
01:18:44,768 --> 01:18:50,248
think one of the most centralized aspects of the Bitcoin network is the mining layer,

906
01:18:50,248 --> 01:18:57,548
both at the chip level and the pool level and so i think with square stepping in putting their

907
01:18:57,548 --> 01:19:03,268
design expertise to hardware expertise to work and launching the rig it was a great day for

908
01:19:03,268 --> 01:19:07,088
competition in the mining hardware space which is desperately needed

909
01:19:07,088 --> 01:19:17,428
yeah i mean it seemed it seemed massive um you know just from afar um and you know massive as

910
01:19:17,428 --> 01:19:23,388
well to have just to bust up potentially like a, you know, decade plus, you know, duopoly,

911
01:19:23,688 --> 01:19:30,208
or there was even a monopoly going farther back, especially with, you know, with increasing

912
01:19:30,208 --> 01:19:37,168
geopolitical tensions with the, the country that is the source of the existing supply line for

913
01:19:37,168 --> 01:19:43,348
miners to then have, you know, an option that's, you know, American based with American service

914
01:19:43,348 --> 01:19:50,208
seems notable and meaningful just from a competition perspective and from a geopolitical

915
01:19:50,208 --> 01:19:59,268
stability perspective. I'm curious how you and people you talk to there would weigh the,

916
01:19:59,268 --> 01:20:04,928
you mentioned the relative kind of efficiency trade-off against, so you have some smaller

917
01:20:04,928 --> 01:20:09,268
efficiency trade-off, maybe it's like good enough for certain parts of the market. How much of a

918
01:20:09,268 --> 01:20:16,888
a, um, uh, needle mover relative to that is the modularity and, you know, the ability to have,

919
01:20:17,008 --> 01:20:22,648
say, like, let's say higher touch, like, you know, American service that where like, if you're

920
01:20:22,648 --> 01:20:26,968
operating in America, at least at Texas somewhere, like you can get on the phone with, you know,

921
01:20:27,448 --> 01:20:32,008
potentially like, let's see how it actually works out in practice. But someone who is in your,

922
01:20:32,008 --> 01:20:37,248
in your time zone, like generally is, you know, operates with like American business standards

923
01:20:37,248 --> 01:20:39,928
relative to someone on the other side of the world who may or may not,

924
01:20:41,028 --> 01:20:44,048
those kind of factors and the ability to potentially avoid

925
01:20:44,048 --> 01:20:45,968
or at least minimize downtime.

926
01:20:46,928 --> 01:20:50,068
How do you think miners will weigh those factors?

927
01:20:51,468 --> 01:20:52,148
I think it would be massive.

928
01:20:52,508 --> 01:20:56,488
And again, let's just run with the assumption that it works as advertised.

929
01:20:56,488 --> 01:20:59,668
We really literally won't know until we know,

930
01:20:59,848 --> 01:21:03,628
and we won't know until these things have been plugged in and running

931
01:21:03,628 --> 01:21:04,688
for a certain period of time.

932
01:21:04,688 --> 01:21:25,888
But if the chassis are really durable for up to 10 years and you really only have to replace fans and hash boards and the fact that you can replace individual hash boards and you don't have to unplug a whole machine and ship it either somewhere in the United States or there's still people shipping machines back to Malaysia or China to get repaired with a two month sort of round trip.

933
01:21:25,888 --> 01:21:28,748
That's that's a lot of time that you're not plugged into mining.

934
01:21:28,848 --> 01:21:31,988
So the time cost of capital has to be factored in there.

935
01:21:31,988 --> 01:21:34,608
I think it really is going to be dependent.

936
01:21:34,748 --> 01:21:39,408
The overall sort of cost benefit analysis is highly contingent on what the pricing turns out to be.

937
01:21:39,488 --> 01:21:44,748
And I've heard anywhere from 16, 18 dollars a terahash to the low 20s.

938
01:21:44,748 --> 01:21:59,908
If they're able to really anchor to that lower dollar per terahash number, I think they can be really competitive, particularly in hotter climates, because I think that's one thing that's pretty clear for bit main air cooled units and hotter climates.

939
01:21:59,908 --> 01:22:07,588
they're not optimal and their hash boards crap out and people with air-cooled operations in

940
01:22:07,588 --> 01:22:13,788
hotter climates tend to use micro bts because they're juggernauts in that regard they're

941
01:22:13,788 --> 01:22:25,488
just beast that what i run in northern tennessee so they can compete in hot climates so they can compete on pricing I think the efficiency is good enough And if you can if they do truly the chassis

942
01:22:25,488 --> 01:22:31,708
do truly last for 10 years, I think that they were marketing, like it's going to save you 20%

943
01:22:31,708 --> 01:22:38,588
on having to refresh your fleet every five to six years, which is material amount. And so if that

944
01:22:38,588 --> 01:22:47,388
comes true i think it is a a legitimate contender to compete with micro bt and bitmain and i think

945
01:22:47,388 --> 01:22:51,768
it should be noted this this is only the first tape out of their asics there's no reason why

946
01:22:51,768 --> 01:22:58,328
um with the design team that they have that i would not be shocked if they come out with more

947
01:22:58,328 --> 01:23:04,028
efficient asics next year the year after they're really able to compete on efficiency at scale

948
01:23:04,028 --> 01:23:10,248
I think there's going to be a 12- to 18-month period here

949
01:23:10,248 --> 01:23:12,968
where they get their first orders in, get them shipped out,

950
01:23:13,028 --> 01:23:14,908
get them plugged in, and people are validating.

951
01:23:15,168 --> 01:23:19,808
If they can get past that hump and reinvest in more efficient ASICs,

952
01:23:19,848 --> 01:23:23,308
it could really set the stage for them to eat

953
01:23:23,308 --> 01:23:25,728
into a significant market share of Bitmain and MicroBT.

954
01:23:25,728 --> 01:23:39,508
to me what i love about this is just like this meme that i i feel like has really gotten some

955
01:23:39,508 --> 01:23:47,288
traction this year which is like you can just do things um like i i uh i posted this on nostr

956
01:23:47,288 --> 01:23:53,648
but like you can just build a new bitcoin miner and the fact that there's a group out there you

957
01:23:53,648 --> 01:24:00,448
spearheaded by Dorsey. But the stuff that Block is doing overall for the space, I don't think you

958
01:24:00,448 --> 01:24:11,448
can understate it. They're truly breathing new things into existence for the benefit of Bitcoin,

959
01:24:11,748 --> 01:24:17,828
things that a lot of people could just sit and complain about and talk about how

960
01:24:17,828 --> 01:24:20,288
there's problems with Bitcoin

961
01:24:20,288 --> 01:24:22,048
there's things that we need to fix

962
01:24:22,048 --> 01:24:24,528
and that group out there

963
01:24:24,528 --> 01:24:26,268
is doing it

964
01:24:26,268 --> 01:24:27,988
all the things that you mentioned Marty

965
01:24:27,988 --> 01:24:29,908
not just mining but

966
01:24:29,908 --> 01:24:32,648
the BitKey, the open source work

967
01:24:32,648 --> 01:24:34,928
they do, I mean the list goes on and on

968
01:24:34,928 --> 01:24:36,428
Cash App

969
01:24:36,428 --> 01:24:38,088
and integrating Bitcoin recently

970
01:24:38,088 --> 01:24:40,188
on the payment side

971
01:24:40,188 --> 01:24:42,788
so I just find

972
01:24:42,788 --> 01:24:44,408
I find it very inspiring

973
01:24:44,408 --> 01:24:45,808
to see groups like that

974
01:24:45,808 --> 01:24:51,228
that don't just look at what others are doing

975
01:24:51,228 --> 01:24:53,968
and try to replicate something else

976
01:24:53,968 --> 01:24:55,788
that someone already is going after,

977
01:24:55,928 --> 01:25:00,368
but they are trying to push the ecosystem forward.

978
01:25:00,908 --> 01:25:04,008
That to me is one of the greatest things

979
01:25:04,008 --> 01:25:06,368
to see about this release.

980
01:25:07,428 --> 01:25:09,708
Especially with a group, an organization

981
01:25:09,708 --> 01:25:13,648
that's very well capitalized with real budget,

982
01:25:13,648 --> 01:25:18,488
you know, strategic vision, that's a real organization, um, member of the S&P 500 or

983
01:25:18,488 --> 01:25:23,528
constituent of the S&P 500, um, you know, a large publicly traded U S company, like,

984
01:25:23,928 --> 01:25:28,048
you know, we're invested in some fantastic, you know, smaller up and coming companies,

985
01:25:28,168 --> 01:25:31,208
some of which are actually getting pretty big, but you know, they're, they're private. They're

986
01:25:31,208 --> 01:25:35,908
still in, you know, first, second, third inning of, of really becoming, you know, breakout successes.

987
01:25:36,508 --> 01:25:40,168
Um, and I think we've invested in a lot of companies that are similarly, you know,

988
01:25:40,168 --> 01:25:45,268
doing a lot to push Bitcoin forward, um, both on the open source side and the product side and

989
01:25:45,268 --> 01:25:50,768
different verticals of, you know, the market and the economy. Um, but yeah, to see all of that

990
01:25:50,768 --> 01:25:56,248
happening at the scale that, you know, block can kind of bring to bear as a very large publicly

991
01:25:56,248 --> 01:26:01,788
traded company with, you know, real revenues, real cashflow, a huge cash balance, um, and just

992
01:26:01,788 --> 01:26:05,848
the resources of, of a public, the resources and the credibility of a public company. I mean, I

993
01:26:05,848 --> 01:26:11,968
think that's that's massive as well so yeah very uh very bullish to see um for a variety of

994
01:26:11,968 --> 01:26:19,968
dimensions yeah very ambitious and it seems like they're executing um at a high level it was really

995
01:26:19,968 --> 01:26:25,568
i got to spend a lot of time with the proto team um and it's it's cool too because they have a lot

996
01:26:25,568 --> 01:26:29,508
of um sort of cross-pollinating on the different teams so a lot of the people that worked on the

997
01:26:29,508 --> 01:26:36,008
BitKey also worked on Proto in the rig and they are top notch hardware engineers and designers.

998
01:26:36,008 --> 01:26:42,508
And it's really cool to see that level of design expertise coming to Bitcoin at the hardware level

999
01:26:42,508 --> 01:26:49,208
specifically. It's desperately needed in mining. Every miner that I talked to there again,

1000
01:26:49,328 --> 01:26:54,488
we'll see what happens with where the cost comes out for these machines and how efficient they are

1001
01:26:54,488 --> 01:26:58,928
and how they actually run, but every miner was, I think at the very least,

1002
01:26:59,028 --> 01:27:04,648
extremely relieved that it seems like there's a hardware manufacturer

1003
01:27:04,648 --> 01:27:07,448
that is actually listening to them and taking design feedback

1004
01:27:07,448 --> 01:27:09,388
and implementing it into what they're doing.

1005
01:27:12,928 --> 01:27:15,968
It's like an incredible edge that they could have if they can execute

1006
01:27:15,968 --> 01:27:18,848
because Bitmain and MicroPT simply don't listen.

1007
01:27:19,048 --> 01:27:22,908
I don't know if it's a West-East communication issue

1008
01:27:22,908 --> 01:27:24,928
where they just simply don't care.

1009
01:27:25,288 --> 01:27:26,368
They're the only game in town.

1010
01:27:26,448 --> 01:27:28,388
It's just like, all right, you need our machines.

1011
01:27:28,488 --> 01:27:28,908
We don't care.

1012
01:27:29,388 --> 01:27:31,068
We're going to make them the way we make them,

1013
01:27:31,108 --> 01:27:32,288
and you're just going to have to buy them,

1014
01:27:33,068 --> 01:27:34,188
which seems to be the case.

1015
01:27:36,048 --> 01:27:40,388
I like that we started off with the government's going to nationalize

1016
01:27:40,388 --> 01:27:40,988
every industry.

1017
01:27:41,848 --> 01:27:43,988
Trump's going to appoint himself as Fed chair.

1018
01:27:44,688 --> 01:27:47,108
Your dollar's going to hyperinflate in two years,

1019
01:27:47,668 --> 01:27:49,748
and they're going to take over Intel.

1020
01:27:49,748 --> 01:27:52,248
They're going to take over all the strategically relevant companies.

1021
01:27:52,908 --> 01:27:59,828
And, you know, all the the potential, you know, Doomer blackpilling piece pieces of the episode we got out of the way early.

1022
01:27:59,828 --> 01:28:09,868
And we can we can wrap up here on something like this about that shows that that you indeed can just do things even against that kind of backdrop.

1023
01:28:09,868 --> 01:28:19,728
And that Bitcoin is increasingly intrepid, intelligent, well-capitalized, motivated Bitcoiners are finding ways to make meaningful improvements to the ecosystem on the margins,

1024
01:28:19,728 --> 01:28:24,808
kind of regardless of what the politicians and the Fed chairs decide to do.

1025
01:28:25,668 --> 01:28:30,308
Yeah, I've noticed that you've been observing how Matt likes to design a list.

1026
01:28:30,388 --> 01:28:33,248
You start with the doomer stuff and then you end on,

1027
01:28:33,468 --> 01:28:35,408
here's the actionable advice, the good stuff that's happening.

1028
01:28:36,228 --> 01:28:36,688
Never do it.

1029
01:28:37,048 --> 01:28:38,088
You got to learn from the best.

1030
01:28:40,828 --> 01:28:43,988
All right, we are officially 17 minutes late to this call,

1031
01:28:44,028 --> 01:28:46,408
even though I saw we were pushing it in side messages here.

1032
01:28:46,408 --> 01:28:50,868
So I think we should be respectful of the people we were about to meet.

1033
01:28:51,048 --> 01:28:53,048
And that was the alpha of the week.

1034
01:28:53,108 --> 01:28:54,328
I think we did a good job here, gentlemen.

1035
01:28:56,248 --> 01:28:56,608
Yeah.

1036
01:28:56,768 --> 01:28:59,588
Another, another batch of artisanal alpha successfully delivered.

1037
01:28:59,928 --> 01:29:00,288
Yeah.

1038
01:29:01,088 --> 01:29:01,728
We'll be back.

1039
01:29:01,848 --> 01:29:02,108
See you next time.

1040
01:29:02,448 --> 01:29:03,008
See you next time.

1041
01:29:03,068 --> 01:29:06,668
I bet we'll be around September fed policy decision.

1042
01:29:06,808 --> 01:29:09,728
It's probably a good time to bring some artisanal alpha to the table.

1043
01:29:10,268 --> 01:29:13,008
New, new, new fed chair appointed by the time we have the next episode.

1044
01:29:13,288 --> 01:29:13,928
Yes or no?

1045
01:29:14,048 --> 01:29:15,588
No, no, no.

1046
01:29:15,588 --> 01:29:16,368
All right.

1047
01:29:16,408 --> 01:29:17,788
I'll say no to them

1048
01:29:17,788 --> 01:29:18,308
alright

1049
01:29:18,308 --> 01:29:19,688
we'll see you guys then

1050
01:29:19,688 --> 01:29:20,168
see ya