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Speaker 1: Over the past eleven years. I was a reinsurance broker.

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Speaker 1: I wanted to get a job an investment banking right

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Speaker 1: out of college. I rode game stop to the top.

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Speaker 1: I nailed the trade. Sentiment broke when Robin Hood turned

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Speaker 1: the buy button off and I needed to look for

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Speaker 1: an alternative place to park capital. I was fascinated with

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Speaker 1: micro strategy. This company converted one hundred percent of their

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Speaker 1: cash balance sheet into bitcoin. I quickly realized, this is

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Speaker 1: going to be the biggest company in the world. The

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Speaker 1: traditional financial market is so much bigger, bigger, vastly larger

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Speaker 1: than the bitcoin market at the moment. If you're not

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Speaker 1: adopting a bitcoin treasury into the future, I think you're

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Speaker 1: going to fail.

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Speaker 2: Your insights have been amazing, which is why you generate

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Speaker 2: a lot of noises.

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Speaker 1: But where do you come from?

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Speaker 2: Why is your viewpoint unique in this space?

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Speaker 1: I think the.

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Speaker 2: Jeff Walton. Jeff Walton, let's talk about the most exciting

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Speaker 2: thing going on in the bitcoin space right now, which

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Speaker 2: is sort of the top of the down here at

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Speaker 2: the Bitlin conference, which is bitcoin treasury companies. Before we

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Speaker 2: dive in, I want to set the stage of what

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Speaker 2: bigcoin treasury companies are versus maybe just big one of

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Speaker 2: the balance sheet. I want to talk about the froth

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Speaker 2: in the market, potential risks in the market, where you

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Speaker 2: see this market going. We have a lot of stuff

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Speaker 2: to dig into. But before we do that, Like, you're

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Speaker 2: new in the space, You've generated a lot of noise.

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Speaker 2: Your insights have been amazing, which is why you generate

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Speaker 2: a lot of noise. Where'd you come from? N Why

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Speaker 2: is your viewpoint unique in this space?

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Speaker 1: Yeah? Yeah, great question. So you know, over the past decade,

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Speaker 1: actually eleven years, I was a reinsurance broker, so a

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Speaker 1: little bit of my background. So in college I studied

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Speaker 1: business and economics. I had to focus on finance and

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Speaker 1: a minor in math, so really interested in markets, economics,

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Speaker 1: how the markets work, how things work together. I wanted

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Speaker 1: to get a job an investment banking right out of college,

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Speaker 1: and I ended up getting a job in reinsurance in Seattle.

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Speaker 1: So I took it, and I went that direction, and

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Speaker 1: I ended up falling in love with reinsurance. It was

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Speaker 1: super fascinating. I was able to, you know, be very

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Speaker 1: creative and structuring financial products.

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Speaker 2: I explained reinsurance.

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Speaker 1: Yeah, so reinsurance is insurance for insurance companies. So the

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Speaker 1: point of reinsurance is insurance companies have all of these

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Speaker 1: assets on their balance sheet, right, and they haven't a

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Speaker 1: defined mathematical outcome on how much loss I think they

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Speaker 1: have in any one individual year. Now, when you have

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Speaker 1: a catastrophe like a hurricane or a wildfire, that ruins

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Speaker 1: your whole business model. Basically, you don't want to be

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Speaker 1: in a position where you have to sell your liquid

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Speaker 1: assets to pay out claims from a catastrophe.

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Speaker 2: Never be a four seller.

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Speaker 1: Yeah, never be a four seller. So you can purchase insurance.

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Speaker 1: Companies can purchase reinsurance to reduce the volatility on their

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Speaker 1: balance sheet. So what that looks like is, you know,

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Speaker 1: you may have exposure to an earthquake or a hurricane

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Speaker 1: or a wildfire, and we can, as a reinsurance broker,

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Speaker 1: you slice up and tronch different layers of risk that

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Speaker 1: we sell off into the reinsurance market. In the reinsurance market,

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Speaker 1: there's you know, one hundred plus reinsurance companies, and on

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Speaker 1: each one of these individual reinsurance deals, you may have

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Speaker 1: anywhere from five, ten fifty reinsurers that are participating, just

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Speaker 1: little slices of each, so it's diversifying the risk across

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Speaker 1: the globe. So that background and reinsurance and risk assessment,

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Speaker 1: volatility management, structured finance, and selling volatility has kind of

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Speaker 1: been built into my DNA over the last decade. And

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Speaker 1: that was one of the reasons I was really fascinated

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Speaker 1: in bitcoin. With my background in finance, I was seeing this.

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Speaker 1: I was seeing bitcoin as a necessary addition to my portfolio.

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Speaker 1: From Marko, It's modern portfolio theory. Mark what's modern portfolio

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Speaker 1: theory is the addition of a new asset to your

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Speaker 1: portfolio with different risk return metrics increases the return and

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Speaker 1: reduces the risk of your entire portfolio. So I was

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Speaker 1: really fascinated with that. And you know, around twenty twenty,

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Speaker 1: I was, you know, around COVID times, I was really

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Speaker 1: getting orange pilled in the bitcoin space and going really

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Speaker 1: deep down the rabbit hole into bitcoin. And around the

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Speaker 1: same time twenty twenty one, I participated in the game

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Speaker 1: Stop trade, ended up liquidating my entire portfolio. I bought

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Speaker 1: game Stop shares, I rode game Stop to the top,

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Speaker 1: ended up liquidating at the top. I was like, I was,

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Speaker 1: I nailed it. I nailed the trade. I game. Theoried

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Speaker 1: my way through the entire dynamic of the trade, understanding

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Speaker 1: who are the players in the market, what are the

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Speaker 1: incentives in the market? Sentiment broke when Robin Hood turned

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Speaker 1: the buy button off and I needed to look for

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Speaker 1: an alter at a place to park capital. At that point,

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Speaker 1: I was fascinated with micro Strategy and what Sailor was doing.

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Speaker 1: I had watched tons of Sailor videos and then I

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Speaker 1: looked up just like, oh my god, this company converted

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Speaker 1: one hundred percent of their cash balance sheet into bitcoin.

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Speaker 1: This is this is the biggest story of all you

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Speaker 1: all finance. And I quickly realized, like that day when

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Speaker 1: I when I saw what micro Strategy was doing, this

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Speaker 1: is going to be the biggest company in the world. Right,

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Speaker 1: There's nobody that's going to catch this company there so

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Speaker 1: far ahead, and that story has just got compounded and

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Speaker 1: gotten bigger, bigger and bigger, not with not without some volatility,

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Speaker 1: not without volatility, without a ton of volatility.

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Speaker 2: So yeah, yeah, I love that. Okay, good job, good story.

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Speaker 2: Sometimes we get lucky calling those tops, don't we. Yeah yeah,

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Speaker 2: I've had some of those. So in the in the

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Speaker 2: insurance game, it's all about writing risk properly, right, Because

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Speaker 2: if you don't write the risk properly the news everything,

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Speaker 2: you pay out the claims, you don't have the mindse

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Speaker 2: of that, right. So would you say that your sort

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Speaker 2: of background in finding that risk in those balance sheets,

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Speaker 2: to digging through their assets things like that then sort

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Speaker 2: of lends to looking at these types of companies today

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Speaker 2: and trying to understand the risk models that they're going through.

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Speaker 1: Yeah. Absolutely. And one thing that's really unique and seeing

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Speaker 1: this this new landscape of bitcoin treasury companies is really

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Speaker 1: trying to define risk, right. I mean nobody's nobody's really

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Speaker 1: seen this before, right, this is a new phenomenon with

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Speaker 1: these companies that are adopting bitcoin. And the risks aren't

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Speaker 1: your typical risks of a corporation, right. You don't have

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Speaker 1: you don't have physical risk, you don't have you know,

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Speaker 1: product liability risk. You know, you don't have just traditional

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Speaker 1: risks that you would see in a traditional corporation. So

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Speaker 1: rethinking what is the framework of risk?

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Speaker 2: Right?

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Speaker 1: And That's where I've been spending a lot of time

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Speaker 1: the last couple of weeks is really rethinking, Okay, what

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Speaker 1: is the risk to these bigcoin treasury companies and the

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Speaker 1: ones that are particularly just focused on accumulating bitcoin and

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Speaker 1: how how do they how do you manage it? And

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Speaker 1: so to me, when I'm thinking about developing a risk framework,

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Speaker 1: I'm thinking about, uh, how is the balance sheet desired?

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Speaker 1: Which is very very similar. I think there's a lot

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Speaker 1: of correlation to uh, a lot of similarities to what

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Speaker 1: bitcoin treasury companies are doing and insurance companies, because insurance

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Speaker 1: companies are balance sheet companies. You're you're managing the volatility

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Speaker 1: on your balance sheet, right, that's the whole, that's the full.

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Speaker 1: They're both capturing money, they have the float. Yeah, and

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Speaker 1: then how do we leverage that balance sheet the float

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Speaker 1: into more assets, right exactly exactly, which I'm surprised there's

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Speaker 1: not more insurance people here yet. But yeah, uh so

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Speaker 1: when you when you think about it from a bitcoin

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Speaker 1: treasury perspective, it all comes down to like structure, design

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Speaker 1: of the balance sheet, volatility, how much leverage you're taking on,

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Speaker 1: how many other people in the market can do what

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Speaker 1: you do, Uh, liquidity in the marketplace, timing and duration,

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Speaker 1: duration of your liabilities, and that it's evolving really fast

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Speaker 1: and people people are trying to figure it out, and

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Speaker 1: we've seen tons of new metrics come into the space. Right,

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Speaker 1: We've got you know, how quickly is your bitcoin yield increasing?

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Speaker 1: It kind of started with bitcoin yield, you know, Sailor

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Speaker 1: and MSDR team put out a bunch of really good

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Speaker 1: metrics bitcoin yield, bitcoin gain or bitcoin dollar gain, bitcoin

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Speaker 1: dollar income. And now we're seeing, you know, m the

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Speaker 1: evolution of m NEV for multiple and net asset value

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Speaker 1: months to cover m NEV. And I think one element

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Speaker 1: that the market is really missing is the risk element,

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Speaker 1: you know, risk adjusted metrics. We need, we need risk

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Speaker 1: adjusted metrics to compare some of these companies. What is

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Speaker 1: what what a lot of people are trying to do

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Speaker 1: is uh compare, right, Like how do I how do

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Speaker 1: I compare one investment relative to another investment? And you

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Speaker 1: look at one data point and one investment may look

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Speaker 1: incredibly lucrative, but you may look at another data point

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Speaker 1: or another framework, and it may look significantly less lucrative

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Speaker 1: because of that different framework. So I think there's there's

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Speaker 1: a lot that needs to develop into the marketplace. And

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Speaker 1: I think this this vision of risk needs to be

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Speaker 1: overlaid on the entire market. And that's kind of that's

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Speaker 1: one of the things I'm kind of focused on.

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Speaker 2: Well with your background, and I couldn't agree with you more.

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Speaker 2: That's something that I'm actually focused on as well, So

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Speaker 2: I want to dig more into that. But let's just

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Speaker 2: frame let's go back a little bit and frame this up.

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Speaker 2: So we have between treasury companies which I sort of

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Speaker 2: call bitcoeen treasury strategy companies versus companies that are pretty

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Speaker 2: in big one of the balance sheet. When you see

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Speaker 2: those as different, and if so, why.

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Speaker 1: Uh yes, a little bit. See, you've got you've got

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Speaker 1: two companies. You've got like kind of a pure play

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Speaker 1: bitcoin accumulation company, which to me really seems like it

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Speaker 1: seems like a moment in time opportunity for a very

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Speaker 1: select small group of zombie companies that have the ability

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Speaker 1: to do something like this. This is a you know,

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Speaker 1: you've got a little bit of operational income or operational

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Speaker 1: design on a balance sheet and you're able to leverage

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Speaker 1: the capital markets, just given the euphoria that's happening in

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Speaker 1: the capital market space right now.

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Speaker 2: When you're talking about a zombie company, you're talking about

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Speaker 2: sort of like strategy micro Strategy was in where they

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Speaker 2: have the software business, but it's sort of dead and

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Speaker 2: it's not really worth reinvesting into. Or you have game

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Speaker 2: Stop is a company that their business model is sort

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Speaker 2: of dead at least a dead man walking, but they're

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Speaker 2: still revenues, there's still balance sheet stuff there. So that

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Speaker 2: was right about the zombie company.

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Speaker 1: Yeah, that's what I mean by a zombie company. Yeah, exactly.

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Speaker 1: It's just you know, revenue and growth is stagnating or

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Speaker 1: likely down. You're basically forced to make a decision and

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Speaker 1: do something art because if you don't, you die, right, right,

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Speaker 1: That's what what I view as a zombie company. And

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Speaker 1: a lot of these zombie companies that are adopting a

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Speaker 1: bitcoin treasury shredure, it's going to save them, right, It's

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Speaker 1: going to save their company and their ability to access

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Speaker 1: capital markets increase more like put volatility in your balance

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Speaker 1: sheet generates some liquidity. And you've seen companies like Simwihear

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Speaker 1: come out and you know, somewhere the similar scientific the

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Speaker 1: stock have been. You know, it was one of the

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Speaker 1: most highest performing stocks from twenty sixteen to twenty twenty,

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Speaker 1: and then they'd gone down pretty significantly. It is a

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Speaker 1: healthcare stock, it's a healthcare stock, and they were really

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Speaker 1: struggling to generate interest in stock. And you know, then

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Speaker 1: they announced that they were the second company to add

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Speaker 1: bitcoin to their treasury and the stock yeah, you know, booms.

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Speaker 1: It's like the biggest marketing tool in the market right now.

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Speaker 1: It's just add bitcoin of your treasury and you're going

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Speaker 1: to get liquidity.

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Speaker 2: Right, But do you think the market anticipates in the

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Speaker 2: way that I'm sort of looking at it is like

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Speaker 2: putting bitcoin in your balance sheet? Man? Like, of course

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Speaker 2: companies have money, and of course they have a treasury,

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Speaker 2: and what is that parked in treasury bonds and equities?

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Speaker 2: Like what do I care?

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Speaker 1: Right?

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Speaker 2: And if some of that goes into bitcoin? Like, man,

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Speaker 2: so what right? Versus a treasury strategy company, which is like, okay, no,

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Speaker 2: we're going to try to this is our treasury, and

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Speaker 2: we're going to try to grow the bitcoin p share.

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Speaker 2: We're going to by tapping into capital markets. And that's

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Speaker 2: sort of like a new business model because its strategy

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Speaker 2: used to be a software company, right, They're not a

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Speaker 2: software company more. The product now is mstr or STRKSTRF,

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Speaker 2: so now they provide financial products. So the business model

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Speaker 2: changed and with game stop, the reason why these zombie

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Speaker 2: companies are dead men walking is because their business models

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Speaker 2: are dying the game stop adopted a bigwin treasury strategy,

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Speaker 2: they would become the next financial product, maybe like an ETF.

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Speaker 2: It's like hard to kind of compare these things versus

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Speaker 2: a company like Apple put in ano their balance sheet.

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Speaker 2: That's kind of what the distinction I see and so similar,

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Speaker 2: Like are they going to sort of shift their model

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Speaker 2: and they'll become the next financial asset?

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Speaker 1: Yeah, it's it's a mindset shift, right, I think I

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Speaker 1: think you nailed it right. A company that's just adding

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Speaker 1: bitcoin as on their balance sheet as a hedge, it's

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Speaker 1: very different than a company that's actively seeking to add

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Speaker 1: more bitcoin to their balance sheet based on their operations,

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Speaker 1: the capital market activities, you know, et cetera, et cetera.

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Speaker 1: And it's it's become apparent that it's become very apparent

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Speaker 1: with the companies that the amount of capital that the

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Speaker 1: companies have raised in the last two I don't know,

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Speaker 1: six months billions of dollars, right, strategy makes up a

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Speaker 1: majority of it. But it's very apparent that this is

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Speaker 1: a very lucrative strategy to focus on accumulating more bitcoin

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Speaker 1: into the future. Now, and you think about like a

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Speaker 1: company like Similar or these other bitcoin treasury companies. I

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Speaker 1: mean that is the natural evolution is securitizing different tranches

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Speaker 1: of of risk on your corporate balance sheet. I think

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Speaker 1: that's the really big unlock here. The really big unlock

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Speaker 1: is that you've got bitcoin that you hold on your

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Speaker 1: balance sheet and you're monetizing the position in your capital

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Speaker 1: stack as collateral. That's what's happening. So you've got different

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Speaker 1: positions in your capital stack, so you've got the most

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Speaker 1: senior position. You can offer a security that's the most

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Speaker 1: senior position on your capital stack with reduced return but

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Speaker 1: also reduced risk. And every company should be offering these

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Speaker 1: types of products to the market. Right there's like a

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Speaker 1: jashes of preferred stock or convertible debt, and it's a

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Speaker 1: no brainer if you are focused on managing the risk

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Speaker 1: of your portfolio, managing the risk of your balance sheet.

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Speaker 1: And I think that's where all of these things start

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Speaker 1: to go.

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Speaker 2: The risk, the risk, the risk. We're going to come

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Speaker 2: back to that. But we also have these zombie companies

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Speaker 2: as you call them. I would agree, where either either

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Speaker 2: shift or die kind of a thing. But now we're

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Speaker 2: also seeing a rapid increase, dozens a day of companies

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Speaker 2: that are shelf companies that are converting over to build

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Speaker 2: this out. Specifically, a lot of people were a tiny

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Speaker 2: little echo chamber here, but a lot of people think, oh, man,

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Speaker 2: this is the bubble. This is euphoria. I see it.

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Speaker 2: I've been here before in the Dachham era or in

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Speaker 2: the crypto craze or whatever. And so we're seeing now companies,

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Speaker 2: shelf companies just converting over and popping up left and right.

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Speaker 2: And then a lot of people think, are we in

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Speaker 2: a bubble? Is this something that's like going way too

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Speaker 2: fast and is going to explode? Or can the market

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Speaker 2: bear all.

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Speaker 1: These Yeah, it's a good question. I'm trying to figure

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Speaker 1: it out. At the same time, I think personally, I

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Speaker 1: think the music's playing right now, and the music playing

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Speaker 1: you dance, right, That's right, the music's playing, you dance,

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Speaker 1: and there's just so much opportunity, and you can see

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Speaker 1: it with all the announcements we've got game Stop, Knock

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Speaker 1: a Moto, Meta Planet's going crazy sst right, egbah and

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Speaker 1: in all jurisdictions, which is just fascinating to see, and

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Speaker 1: that it gives me chills down my spine right, because

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Speaker 1: we're seeing bitcoin now work its way out into all

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Speaker 1: international jurisdictions. So everybody in each one of those jurisdictions

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Speaker 1: has the ability to access bitcoin like exposure within their

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Speaker 1: traditional rapper that they had access to within their market.

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Speaker 1: So it's a I think the market can bear a

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Speaker 1: lot of what's going on. That being said, there will

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Speaker 1: be a time when the music stops, and there will

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Speaker 1: be companies that will be exposed for being over leveraged

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Speaker 1: and and and they may have to weather a significant

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Speaker 1: storm that may be difficult to weather. And so so yes,

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Speaker 1: the music is playing.

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Speaker 2: Yes, as Warren Buffet would say, when the tide goes out,

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Speaker 2: we see you swimming the game. Micaro strategy ad to

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Speaker 2: weather that in twenty twenty two, right, and a lot

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Speaker 2: of people kept saying that he's going to get liquidated

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Speaker 2: and all these things, and he built a position where

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Speaker 2: he wasn't obviously, but we could see what it took

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Speaker 2: to whether that, and so we can start to see, well,

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Speaker 2: these are potential risks. So for example, if your board

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Speaker 2: is not aligned, like that's gonna be a big problem.

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Speaker 2: It's not a founder led company with an aligning board

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Speaker 2: in a timel like in twenty twenty two, Like that's

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Speaker 2: going to fall apart. Also, I think if the base

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Speaker 2: of people buying it aren't right, if you bring in

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Speaker 2: a lot of short term traders, that could be a problem. Right,

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Speaker 2: So we can start to spring that up, But I

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Speaker 2: want to go back to how many can the market bear? This?

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Speaker 2: Here's kind of how I'm thinking about it, Like again

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Speaker 2: back to micro strategy strategy. Right, the software is no

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Speaker 2: longer their product the product. The product now is the

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Speaker 2: stock and then the three tickers that they have yep.

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Speaker 2: And when I look at it, like each one of

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Speaker 2: these companies is approaching a little bit differently, but their

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Speaker 2: stock is also going to be the financial product or

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Speaker 2: the product. And so then I ask myself, well, how

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Speaker 2: many financial products can the market bear? We have thousands?

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Speaker 1: Right, tens of thousands.

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Speaker 2: And if we wanted to look at it almost like

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Speaker 2: sort of like an ETF, because an ATF, basically eh

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Speaker 2: ETF sort of creates its own strategy, right, its own basket.

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Speaker 2: So each one of these is sort of maybe like

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Speaker 2: an ETF, and we we try to compare them to

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Speaker 2: things that we know. But we're going somewhere we've never

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Speaker 2: been before, right, But to try to compare it, it's

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Speaker 2: like sort of like a mancial park, sort of like

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Speaker 2: an ETF and like how many ethf's going up?

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Speaker 1: Well, we could have unlimited unlimited it. Yeah.

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Speaker 2: The problem I see is that in the in the euphoria,

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Speaker 2: we have this first mover advantage. The music's playing and

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Speaker 2: so like right now, every announcements they're about three hundred

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Speaker 2: percent five hundred percent percent like Kindly or you know, Knakamoto.

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Speaker 2: But then if you want to launch an ETF today,

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Speaker 2: how do you get attention to that?

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Speaker 1: Right?

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Speaker 2: So I think that's one big danger, like this the

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Speaker 2: diminishing return sort of thing. H But I guess would

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Speaker 2: you agree with that premise? So maybe the market could

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Speaker 2: bear hundreds or thousands of these types of companies.

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Speaker 1: Yeah, I think they I think they can. I think

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Speaker 1: the market can be like long term sustainably yes, yeah,

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Speaker 1: And I think that's where the world is going. I

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Speaker 1: think it's if you're not adopting it a coin treasury

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Speaker 1: into the future, I think you're going to fail.

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Speaker 2: You're never gonna make it.

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Speaker 1: I think you're going to fail. And I think we

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Speaker 1: can see a lot of I mean, the traditional financial

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Speaker 1: equity marketers just enormous, the fixed income market enormous, real

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Speaker 1: estate market enormous, And there's a ton of a ton

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Speaker 1: of monetary premium that is inappropriate, inappropriately allocated from a

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Speaker 1: risk return perspective in those markets. So I think we're

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Speaker 1: going to see capital shift and move and and force

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Speaker 1: other companies to enter the fray. Here. It's you know,

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Speaker 1: adapt or die sort of situation. So I agree with

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Speaker 1: the premise that you know, it's each one of these

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Speaker 1: companies has their own it's like their own risk return profile,

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Speaker 1: and you might want a piece of all of them, right, Like,

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Speaker 1: if you think about building out an efficient frontier of

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Speaker 1: assets in a portfolio, you kind of want all of them, right,

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Speaker 1: you kind of want all of the pieces of them.

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Speaker 1: And now you can do it within bitcoin, right right

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Speaker 1: now you could. Now you can have a bitcoin efficient

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Speaker 1: frontier in your portfolio. Right You don't have to have

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Speaker 1: a you know, USD denominated one. You can have a

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Speaker 1: pure bitcoin one and and take pieces of all of

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Speaker 1: these things. Obviously, waiting an allocation is really scale and

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Speaker 1: allocation is really important.

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Speaker 2: But yeah, with our fund, with the Big One Opportunity Fund,

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Speaker 2: I mean we're taking stabs at all these deals coming

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Speaker 2: across right now. But I see a lot across the

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Speaker 2: market that are like micro microcaps. So now you've can

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Speaker 2: start to hunt for these like smaller players that have

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Speaker 2: big one on the balance sheet. Do do you sort

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Speaker 2: of dumpster dive through those and look at these smaller

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Speaker 2: companies or are you sort of only just focused on

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Speaker 2: the big players.

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Speaker 1: Yeah, it's it's a it's a good question. It's almost

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Speaker 1: like the penny stock like penny stock opportunities, right, And

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Speaker 1: to me, I've been I've been incredibly focused on like

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Speaker 1: the architecture of the equitting market, like how does this

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Speaker 1: whole thing work? And to me, when I zoom out

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Speaker 1: and I look at the architecture of the entire market,

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Speaker 1: a lot of the a lot of the inflows that

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Speaker 1: are coming into any equity are a function of the

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Speaker 1: design of the market, the passive flows. Right, I got

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Speaker 1: sixty percent of the market is pass I guess. So

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Speaker 1: you're talking pension funds for one k's banks, you know,

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Speaker 1: companies that are managing this iras et cetera. And there's

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Speaker 1: it's helpful to have scale to be into those passive

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Speaker 1: uh you know, index funds. But primarily, like the Russell

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Speaker 1: two thousand. So there's this idea of like, okay, just

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Speaker 1: get get to a billion so you can get included

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Speaker 1: in the Rustle two thousand, and that's like a huge

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Speaker 1: milestone and a huge achievement because you're going to have

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Speaker 1: passive money coming in the door to buy these equities

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Speaker 1: moving forward into propetuity. Then it's like, Okay, the next

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Speaker 1: goal is, you know, get a little bit higher, get

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Speaker 1: an MSCI index, then get into the S and P

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Speaker 1: five hundred, and then into the Nasdaq one hundred, and

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Speaker 1: you can kind of like work these milestones up. And

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Speaker 1: I think when every time you get included in each

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Speaker 1: one of these passive flow index ETFs, you're de risking,

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Speaker 1: and I think there's there's potential, you know, crazy returns

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Speaker 1: to being made on some of these small ones. But

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Speaker 1: my brain cook back to, like the risk return profile,

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Speaker 1: that's one of them.

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Speaker 2: Yeah, well, I mean, and hopefully smarter people they always

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Speaker 2: start with the risk. Unfortunately, most people most retail think

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Speaker 2: about how much I can make?

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Speaker 1: Yeah, right about the risk.

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Speaker 2: On the downside, of course, the term hedge fund comes

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Speaker 2: because they hedge right their position. But you know what

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Speaker 2: we're seeing right now is there's a lot of people

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Speaker 2: jumping ship on MSTR. Yeah, for any number of reasons,

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Speaker 2: one of which Michael Saylor. People are mad that he's

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Speaker 2: hitting the ATM too hard and diluting the stock. But

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Speaker 2: a lot of it is also I think it's just

433
00:22:43,040 --> 00:22:45,600
Speaker 2: gotten so big that it doesn't grow at the same

434
00:22:45,640 --> 00:22:47,960
Speaker 2: rate as some of the smaller players. And to your point,

435
00:22:48,040 --> 00:22:50,840
Speaker 2: like it's maybe almost to the S and P five hundred, right,

436
00:22:50,840 --> 00:22:52,480
Speaker 2: like the risk is getting less, but then at the

437
00:22:52,480 --> 00:22:55,320
Speaker 2: same time volatility goes down. And then so there's a

438
00:22:55,320 --> 00:22:58,080
Speaker 2: lot of traders in there. I guess what's your Are

439
00:22:58,119 --> 00:22:58,800
Speaker 2: you a bitcoinner?

440
00:22:59,080 --> 00:22:59,560
Speaker 1: Yeah?

441
00:22:59,640 --> 00:23:03,119
Speaker 2: So, and then you buy these companies because of the

442
00:23:03,160 --> 00:23:04,280
Speaker 2: long term bitcoin vision?

443
00:23:05,640 --> 00:23:07,240
Speaker 1: Yeah, how do ei them? Because of the long big

444
00:23:07,840 --> 00:23:08,640
Speaker 1: the long term vision.

445
00:23:08,720 --> 00:23:09,639
Speaker 2: You also hold bitcoin?

446
00:23:09,760 --> 00:23:12,040
Speaker 1: Yeah absolutely, okay, Yeah, it's like your base layer one

447
00:23:12,119 --> 00:23:16,440
Speaker 1: hundred percent. Yeah, that's my you know, it's never touching it. Okay, yeah, yeah, absolutely.

448
00:23:16,440 --> 00:23:19,480
Speaker 1: That was That was That was a monumental time for me.

449
00:23:19,560 --> 00:23:23,240
Speaker 1: When I moved bitcoin to cold storage off in an exchange,

450
00:23:23,720 --> 00:23:26,640
Speaker 1: I was like, oh my god, this is way bigger

451
00:23:26,640 --> 00:23:28,960
Speaker 1: than I than I thought this was, you know, like

452
00:23:29,160 --> 00:23:31,359
Speaker 1: I walked around the block, you know, with my hardware wallet,

453
00:23:31,359 --> 00:23:34,560
Speaker 1: and I was like, oh, you know this, it was

454
00:23:34,560 --> 00:23:37,359
Speaker 1: a yeah, it was a very like a visceral feeling.

455
00:23:37,359 --> 00:23:39,600
Speaker 1: You're like, oh my god, the money has changed. Money

456
00:23:39,600 --> 00:23:43,320
Speaker 1: has totally changed. But you know, thinking back to this

457
00:23:43,320 --> 00:23:48,960
Speaker 1: this concept of when I when I look at strategy

458
00:23:49,040 --> 00:23:52,520
Speaker 1: that there's relative to some of these other ones I

459
00:23:52,520 --> 00:23:55,480
Speaker 1: think they're in it's just a whole nother ballmark, right,

460
00:23:55,600 --> 00:23:59,840
Speaker 1: I mean they've got fifty times more. Uh, they've got

461
00:23:59,800 --> 00:24:06,760
Speaker 1: fifty times more bitcoin than the mag seven. Yeah combined, Right,

462
00:24:07,080 --> 00:24:08,760
Speaker 1: you've got Tesla's the only one in the mag seven

463
00:24:08,800 --> 00:24:11,560
Speaker 1: that the old bitcoint right, and they've got forty nine

464
00:24:11,600 --> 00:24:13,800
Speaker 1: times more. They'll do the amount of bitcoin then the

465
00:24:13,960 --> 00:24:17,000
Speaker 1: entire SMB five hundred, the top five hundred US companies

466
00:24:17,000 --> 00:24:17,520
Speaker 1: in the world.

467
00:24:17,680 --> 00:24:17,800
Speaker 2: Right.

468
00:24:18,280 --> 00:24:20,200
Speaker 1: And so if you think if any of these companies

469
00:24:20,320 --> 00:24:24,760
Speaker 1: start adopting anything remotely close to a bitcoin treasury strategy,

470
00:24:24,760 --> 00:24:27,000
Speaker 1: even if they just add bitcoin to the balance sheet,

471
00:24:27,880 --> 00:24:32,560
Speaker 1: that pushes strategy further up into the stratosphere. And they've

472
00:24:32,600 --> 00:24:36,000
Speaker 1: got the only ones in the market right now that

473
00:24:36,040 --> 00:24:40,600
Speaker 1: are offering these preferred you know, fixed income alternative debt instruments,

474
00:24:40,960 --> 00:24:44,040
Speaker 1: and they're going to have the highest credit quality forever.

475
00:24:45,160 --> 00:24:48,480
Speaker 1: And if you're talking about onboarding trillions of dollars of

476
00:24:48,520 --> 00:24:52,639
Speaker 1: capital into the bitcoin ecosystem, it's coming from fixed income. Right,

477
00:24:52,880 --> 00:24:54,919
Speaker 1: It's not coming from the equity market. It's going to

478
00:24:54,920 --> 00:24:56,720
Speaker 1: come from the fixed income market. It's going to come

479
00:24:56,720 --> 00:25:00,800
Speaker 1: from the real estate market. In these rappers that are

480
00:25:01,080 --> 00:25:04,560
Speaker 1: more appealing to those types of investors. And because the

481
00:25:04,880 --> 00:25:09,160
Speaker 1: risk return trade off is so much higher, so much better.

482
00:25:09,240 --> 00:25:12,159
Speaker 1: These products that Strategy is offering, the risk adjust returns

483
00:25:12,160 --> 00:25:15,960
Speaker 1: on them are monumentally higher than anything else in the

484
00:25:15,960 --> 00:25:16,840
Speaker 1: fixed income market.

485
00:25:17,000 --> 00:25:17,160
Speaker 2: Right.

486
00:25:17,240 --> 00:25:19,120
Speaker 1: You can look at like the preferred stock of PG

487
00:25:19,200 --> 00:25:22,560
Speaker 1: and E, Like the utility provider in California provides utilities

488
00:25:22,560 --> 00:25:25,399
Speaker 1: for two thirds of the state. Their preferred product is

489
00:25:25,400 --> 00:25:29,240
Speaker 1: paying like six point twenty five percent interest compared to

490
00:25:29,560 --> 00:25:33,680
Speaker 1: the strife product that Strategy provides. It's paying like ten

491
00:25:33,800 --> 00:25:37,320
Speaker 1: or eleven as of today. Right, And you think about

492
00:25:37,359 --> 00:25:39,920
Speaker 1: what are the what are the relative risks each of these? Right?

493
00:25:40,560 --> 00:25:42,640
Speaker 1: PG and E just paid out a four billion dollar

494
00:25:42,800 --> 00:25:47,359
Speaker 1: loss in twenty twenty from the twenty twenty eighteen wildfires,

495
00:25:47,359 --> 00:25:51,480
Speaker 1: the Paradise wildfires. Wow, it's rate this huge, Like physical

496
00:25:51,600 --> 00:25:55,840
Speaker 1: risk liability you know population risk that there are so

497
00:25:55,920 --> 00:25:58,840
Speaker 1: many risks in the and that's just one example. Right,

498
00:25:58,920 --> 00:26:00,560
Speaker 1: I just shine a light on you need.

499
00:26:00,640 --> 00:26:02,560
Speaker 2: And that's a pretty healthy yield. A lot of the

500
00:26:02,560 --> 00:26:05,240
Speaker 2: market's much less than that, right BOMs or the AT

501
00:26:05,320 --> 00:26:06,359
Speaker 2: and t S or Yeah.

502
00:26:06,480 --> 00:26:08,240
Speaker 1: Yeah, you can look at the Boeing and some of

503
00:26:08,280 --> 00:26:10,119
Speaker 1: these other ones and you start to compare them and

504
00:26:10,119 --> 00:26:12,320
Speaker 1: you see amount. You Okay, it's like, why would I

505
00:26:12,359 --> 00:26:15,960
Speaker 1: hold that with all of these risks when I can

506
00:26:16,000 --> 00:26:21,680
Speaker 1: hold this with digital risk involved other risk. And I

507
00:26:22,080 --> 00:26:25,200
Speaker 1: truly believe there's going to be like a landslide movement

508
00:26:25,240 --> 00:26:27,639
Speaker 1: at some point, it might be five years from now,

509
00:26:28,040 --> 00:26:32,879
Speaker 1: where all of this capital is getting reevaluated, like the

510
00:26:33,240 --> 00:26:34,800
Speaker 1: risk return gets re evaluated.

511
00:26:35,600 --> 00:26:38,720
Speaker 2: Let's talk more about the risk. Yeah, so this is

512
00:26:38,720 --> 00:26:40,840
Speaker 2: a good segue because a lot of people think that

513
00:26:41,400 --> 00:26:44,440
Speaker 2: it is too risky because sure they don't have wildfire

514
00:26:44,520 --> 00:26:47,960
Speaker 2: risk or liability risk. To your point, but how can

515
00:26:48,000 --> 00:26:52,240
Speaker 2: he afford to pay that yield in perpetuity in perpetuity

516
00:26:52,320 --> 00:26:53,960
Speaker 2: and how can he continue to do that when micro

517
00:26:54,000 --> 00:26:56,960
Speaker 2: Strategy doesn't even have a business and no underlying cash row.

518
00:26:57,359 --> 00:27:01,760
Speaker 2: So there's certainly some risk there. Yeah, you look at

519
00:27:01,760 --> 00:27:05,120
Speaker 2: the My first step is I look at the balance sheet.

520
00:27:05,280 --> 00:27:07,560
Speaker 2: Right as of today, they're holding sixty four billion.

521
00:27:07,359 --> 00:27:09,080
Speaker 1: Dollars a big point under balance sheet, and they have

522
00:27:09,119 --> 00:27:11,520
Speaker 1: ten billion dollars worth of debt. Of that ten billion

523
00:27:11,520 --> 00:27:13,639
Speaker 1: dollars worth of debt, five billion of it is already

524
00:27:13,680 --> 00:27:16,119
Speaker 1: trading in the money. It's a convertible bond. So really

525
00:27:16,160 --> 00:27:19,560
Speaker 1: their their pro forma debt is like five billion dollars.

526
00:27:19,640 --> 00:27:23,520
Speaker 1: In terms of interest income payable, I think as of

527
00:27:23,600 --> 00:27:26,200
Speaker 1: right now it's about maybe two hundred million dollars a

528
00:27:26,280 --> 00:27:29,280
Speaker 1: year something like that. To put that in perspective, Strategy

529
00:27:29,359 --> 00:27:33,560
Speaker 1: raised seven hundred million dollars last week on the ATM

530
00:27:33,720 --> 00:27:37,800
Speaker 1: of Strike and MSTR. So they have the ability to

531
00:27:37,880 --> 00:27:41,240
Speaker 1: raise capital incredibly quickly and fast. I mean they raised

532
00:27:41,680 --> 00:27:45,120
Speaker 1: last year in one month. I think they raised seventeen

533
00:27:45,160 --> 00:27:50,159
Speaker 1: billion dollars in one month. And it's to me, I

534
00:27:50,200 --> 00:27:52,480
Speaker 1: see this as this is just this is a pure

535
00:27:52,600 --> 00:27:53,320
Speaker 1: risk management.

536
00:27:53,920 --> 00:27:56,880
Speaker 2: Put in a down market they have they potentially could

537
00:27:56,880 --> 00:27:58,920
Speaker 2: lose the ability to raise money so quickly or or

538
00:27:59,000 --> 00:28:02,159
Speaker 2: raise money at all. They could and so then what happens.

539
00:28:01,960 --> 00:28:05,119
Speaker 1: Yeah, they could they could delay the they could delay

540
00:28:05,160 --> 00:28:09,520
Speaker 1: the dividends payable. That is a function in strike and strife.

541
00:28:09,520 --> 00:28:14,120
Speaker 1: They have the ability to do that, they think most dividends. Yeah,

542
00:28:14,200 --> 00:28:17,040
Speaker 1: but it just it's very similar to like you can

543
00:28:17,080 --> 00:28:20,600
Speaker 1: refinance the debt as well, right, you can as long

544
00:28:20,680 --> 00:28:23,119
Speaker 1: as you have a strong balance sheet, you can go

545
00:28:23,240 --> 00:28:26,200
Speaker 1: get capital, Like you can go refinance your debt even

546
00:28:26,760 --> 00:28:29,440
Speaker 1: even in a bad market yet, right, I mean, let's

547
00:28:29,440 --> 00:28:31,879
Speaker 1: just say the price of bitcoin fell fifty percent of that.

548
00:28:32,560 --> 00:28:38,040
Speaker 1: Right now, Strategy has thirty two billion dollars of bitcoin

549
00:28:38,160 --> 00:28:41,120
Speaker 1: and ten billion dollars of debt. Would you underwrite alone

550
00:28:41,120 --> 00:28:41,320
Speaker 1: for them?

551
00:28:41,440 --> 00:28:42,480
Speaker 2: Still seems pretty good to me.

552
00:28:42,720 --> 00:28:46,520
Speaker 1: I would Still it looks like they're still incredibly strong. Yeah,

553
00:28:46,560 --> 00:28:49,320
Speaker 1: And and I don't think people quite conceptualize that, right.

554
00:28:49,520 --> 00:28:52,720
Speaker 1: This is this is a financial strength play, and Strategy

555
00:28:52,800 --> 00:28:56,240
Speaker 1: is very focused on managing their financial strength. And you

556
00:28:56,240 --> 00:29:00,280
Speaker 1: think about, like, okay, back to this risk. What is

557
00:29:00,320 --> 00:29:02,920
Speaker 1: the risk? Right? The price of bitcoin we need to

558
00:29:02,960 --> 00:29:06,280
Speaker 1: go down to sixteen thousand dollars and stay there for

559
00:29:06,320 --> 00:29:10,720
Speaker 1: five years in order for Strategy even remotely without even

560
00:29:10,720 --> 00:29:14,160
Speaker 1: thinking about refinancing it to remotely be at a position

561
00:29:14,360 --> 00:29:16,560
Speaker 1: of risk to those holders.

562
00:29:16,800 --> 00:29:18,560
Speaker 2: I don't want to spend all our time talking about strategy,

563
00:29:18,560 --> 00:29:21,160
Speaker 2: although it's the big dog in the space and Michael

564
00:29:21,200 --> 00:29:23,479
Speaker 2: Saylor is sharing that playbook with everybody yet so it's

565
00:29:23,520 --> 00:29:27,080
Speaker 2: important to understand that because everyone's running the derivative off

566
00:29:27,120 --> 00:29:28,640
Speaker 2: of that if you rail. I don't want to spend

567
00:29:28,680 --> 00:29:29,760
Speaker 2: all our time talking about it, but I do want

568
00:29:29,760 --> 00:29:31,320
Speaker 2: to ask one more question about it before we move on.

569
00:29:32,440 --> 00:29:35,160
Speaker 2: So one big thing that's been happening in the market

570
00:29:35,240 --> 00:29:39,080
Speaker 2: is proof of reserves, and proof of reserves is in bitcoin.

571
00:29:39,160 --> 00:29:41,760
Speaker 2: We say, you know, don't trust verify, and so there's

572
00:29:41,760 --> 00:29:44,320
Speaker 2: been a big call for years of exchanges to show

573
00:29:44,360 --> 00:29:46,680
Speaker 2: the reserves because like with the FTX, we found out

574
00:29:46,720 --> 00:29:48,120
Speaker 2: they didn't have a bitcoin that they said they did,

575
00:29:48,200 --> 00:29:51,640
Speaker 2: so people help paper claims and so there's a lot

576
00:29:51,640 --> 00:29:53,920
Speaker 2: of uproar after the last couple of days when Sailor

577
00:29:53,920 --> 00:29:57,400
Speaker 2: took the stage talking about proof of reserves. What's your

578
00:29:57,400 --> 00:29:57,840
Speaker 2: take on that.

579
00:29:59,000 --> 00:30:01,360
Speaker 1: I think the the market sentiment is a little bit

580
00:30:01,360 --> 00:30:03,920
Speaker 1: overblown on the proof of reserves. I mean me personally,

581
00:30:04,000 --> 00:30:06,560
Speaker 1: would it be ideal that Strategies showed the brief proof

582
00:30:06,600 --> 00:30:11,000
Speaker 1: of reserves? Absolutely? Absolutely, I mean there are other companies

583
00:30:11,040 --> 00:30:13,840
Speaker 1: that are doing it. Do I think there is some

584
00:30:14,080 --> 00:30:18,240
Speaker 1: risk of doing it. Absolutely do. I think it's a

585
00:30:18,360 --> 00:30:21,120
Speaker 1: risk with bitcoin and the protocol of bitcoin not at all.

586
00:30:21,640 --> 00:30:26,520
Speaker 1: It's human risk, it's target risk. Right. You have if

587
00:30:26,560 --> 00:30:31,080
Speaker 1: those wallets are out that is showing information, it's just

588
00:30:31,200 --> 00:30:35,480
Speaker 1: more information that the market has to potentially target some

589
00:30:35,560 --> 00:30:40,160
Speaker 1: kind of social engineering attack. You also have elements of

590
00:30:40,760 --> 00:30:42,760
Speaker 1: I was talking about this with somebody yesterday of like

591
00:30:43,000 --> 00:30:46,040
Speaker 1: dusting dusting attacks is becoming a thing of dusting is

592
00:30:46,600 --> 00:30:52,080
Speaker 1: where you have like corrupt like old silk road bitcoin

593
00:30:52,080 --> 00:30:54,719
Speaker 1: that's just being sent to these wallet addresses because they

594
00:30:54,760 --> 00:30:56,280
Speaker 1: know what they are. And now you just create this

595
00:30:56,440 --> 00:30:57,160
Speaker 1: nightmare for.

596
00:30:59,640 --> 00:30:59,960
Speaker 2: A couple.

597
00:31:00,160 --> 00:31:02,040
Speaker 1: It's like who's managing it? Where did it come from?

598
00:31:02,360 --> 00:31:05,040
Speaker 1: What is this? And you've got to figure it out. Additionally,

599
00:31:05,080 --> 00:31:10,920
Speaker 1: there's there's elements that the market doesn't quite understand too. Right.

600
00:31:11,800 --> 00:31:16,600
Speaker 1: Let's just say strategies got this all of their capital

601
00:31:16,640 --> 00:31:20,360
Speaker 1: in two thousand different wallets, a ton of wallets, and

602
00:31:20,760 --> 00:31:23,360
Speaker 1: the value of the bitcoin rises. They may want to

603
00:31:23,400 --> 00:31:26,720
Speaker 1: rebalance all of their portfolios such that they don't have.

604
00:31:26,960 --> 00:31:30,120
Speaker 3: You know, too much in what they might want to

605
00:31:30,160 --> 00:31:32,200
Speaker 3: make four thousand, right, but the price bitcoin doubles, you

606
00:31:32,240 --> 00:31:34,080
Speaker 3: might want to be like making more wallets so you

607
00:31:34,120 --> 00:31:36,240
Speaker 3: don't have too much in anyone And that might be

608
00:31:36,280 --> 00:31:39,840
Speaker 3: a function of insurance policies that because custodians provide and

609
00:31:40,080 --> 00:31:41,840
Speaker 3: all of a sudden you may see fud in the

610
00:31:41,840 --> 00:31:44,880
Speaker 3: market of strategy selling your bitcoin because they moved it.

611
00:31:44,920 --> 00:31:47,239
Speaker 1: And it's like we saw this with the US government, right,

612
00:31:47,360 --> 00:31:49,080
Speaker 1: Like people were like, oh, the US governments sold their

613
00:31:49,080 --> 00:31:50,600
Speaker 1: bitcoinke It's like, no, they just moved it.

614
00:31:50,840 --> 00:31:51,560
Speaker 2: But we don't know that.

615
00:31:51,840 --> 00:31:53,479
Speaker 1: We don't know that. But I know what just in

616
00:31:53,640 --> 00:31:54,200
Speaker 1: you know what I mean?

617
00:31:54,520 --> 00:31:57,520
Speaker 2: So like the way I look at it also is

618
00:31:57,560 --> 00:32:00,240
Speaker 2: that certainly don't trust verify, but I think I think

619
00:32:00,560 --> 00:32:03,920
Speaker 2: it could potentially give a lot of false hope because

620
00:32:04,440 --> 00:32:05,160
Speaker 2: number one.

621
00:32:05,520 --> 00:32:06,240
Speaker 1: It's in equity.

622
00:32:06,720 --> 00:32:11,080
Speaker 2: They're not immutable, right, like right, it's there's counterparty risk yep,

623
00:32:11,080 --> 00:32:13,600
Speaker 2: it could be revoked, right whatever number one. Number two,

624
00:32:14,080 --> 00:32:16,680
Speaker 2: to your point about the capital stack, just because I

625
00:32:16,760 --> 00:32:18,720
Speaker 2: see that there's bitcoin there doesn't mean I have a

626
00:32:18,760 --> 00:32:21,000
Speaker 2: claim to it. Right Where am I in the stack?

627
00:32:21,400 --> 00:32:21,840
Speaker 1: Right? Right?

628
00:32:22,080 --> 00:32:26,040
Speaker 2: So I don't know how encumbered it could be. Right,

629
00:32:26,080 --> 00:32:28,240
Speaker 2: We have no idea even with an exchange. If an

630
00:32:28,240 --> 00:32:30,160
Speaker 2: exchange shows me a proof reserve, I don't know what

631
00:32:30,280 --> 00:32:32,959
Speaker 2: encumbrance that might have, so for it sort of then

632
00:32:33,040 --> 00:32:36,640
Speaker 2: leads to a false sense of security. And then I

633
00:32:36,680 --> 00:32:39,080
Speaker 2: almost think, like, if people are really depending on that,

634
00:32:39,320 --> 00:32:42,120
Speaker 2: there's the ethos and the ideology, and like do I

635
00:32:42,160 --> 00:32:44,719
Speaker 2: want to be aligned with that? I guess. But then

636
00:32:44,720 --> 00:32:45,960
Speaker 2: at the same time, like I said, it's like a

637
00:32:45,960 --> 00:32:48,880
Speaker 2: false belief and if people are really hanging it on that,

638
00:32:49,840 --> 00:32:52,160
Speaker 2: maybe they're not understanding the way equities work in the

639
00:32:52,200 --> 00:32:52,800
Speaker 2: market works.

640
00:32:52,880 --> 00:32:55,120
Speaker 1: Right, Yeah, you don't know the liabilities. You don't know

641
00:32:55,160 --> 00:32:57,240
Speaker 1: the liability side of it, right, just because somebody shows

642
00:32:57,240 --> 00:33:00,400
Speaker 1: proof reserves, I mean they could be leveraged center of

643
00:33:00,400 --> 00:33:02,840
Speaker 1: the perform and you have no idea. It's like it's

644
00:33:02,880 --> 00:33:06,160
Speaker 1: a much bigger focus on the liability side of things. Also, right,

645
00:33:06,200 --> 00:33:10,200
Speaker 1: all of these companies have audits, annual audits. Yeah, by right,

646
00:33:10,240 --> 00:33:13,440
Speaker 1: do you want do you really think that all of

647
00:33:13,480 --> 00:33:17,120
Speaker 1: the executive staff and the auditor want to go to jail?

648
00:33:18,400 --> 00:33:20,800
Speaker 2: And everyone would say, but en run yeah, but.

649
00:33:20,840 --> 00:33:22,840
Speaker 1: In run right? Yeah, but end round? I mean the

650
00:33:22,840 --> 00:33:24,080
Speaker 1: world's changed since then round a.

651
00:33:24,160 --> 00:33:25,640
Speaker 2: Nuclear mom dropped once before too.

652
00:33:25,760 --> 00:33:28,520
Speaker 1: Yeah. Great, It's it's like it's it's black swan right

653
00:33:28,560 --> 00:33:31,440
Speaker 1: to me. It's binary, right, they have the bitcoin.

654
00:33:31,160 --> 00:33:31,680
Speaker 2: Or they dealt.

655
00:33:32,520 --> 00:33:37,760
Speaker 1: If they don't, the entire market is scripped. Yeah, at

656
00:33:37,840 --> 00:33:39,920
Speaker 1: least for at least for an extended period of time.

657
00:33:40,040 --> 00:33:42,920
Speaker 2: Yeah, all right, let's move on past micro strategy. So

658
00:33:44,200 --> 00:33:49,440
Speaker 2: bushing companies popping up left and right, Like I said Thier, overnight,

659
00:33:49,960 --> 00:33:53,960
Speaker 2: amazing amazing returns. The music's dancing, we're dancing, right. But

660
00:33:54,920 --> 00:33:57,280
Speaker 2: what I guess what would you say when you're looking

661
00:33:57,320 --> 00:33:59,920
Speaker 2: at these new companies? Well, I guess number one? Are

662
00:33:59,960 --> 00:34:00,840
Speaker 2: you look at the new companies?

663
00:34:01,080 --> 00:34:01,440
Speaker 1: Absolutely?

664
00:34:01,440 --> 00:34:04,840
Speaker 2: And then number two, Well, let's start with let's start

665
00:34:04,840 --> 00:34:08,520
Speaker 2: with if you were to let's start with the risk.

666
00:34:09,000 --> 00:34:11,800
Speaker 2: What do you think the biggest risks are that you're

667
00:34:11,840 --> 00:34:14,760
Speaker 2: what are the red flags that you would see glaring?

668
00:34:15,000 --> 00:34:16,520
Speaker 2: There's a lot of unknowns we don't know yet because

669
00:34:16,520 --> 00:34:19,080
Speaker 2: it's evolving so quickly. But from what you do see

670
00:34:19,080 --> 00:34:20,960
Speaker 2: and what you do know, if you saw a company

671
00:34:21,320 --> 00:34:23,640
Speaker 2: doing these couple of things, what would be red flags

672
00:34:23,680 --> 00:34:25,520
Speaker 2: for you? Uh?

673
00:34:25,800 --> 00:34:31,560
Speaker 1: Secured debt okay, debt secured by the bigcoin and my

674
00:34:31,719 --> 00:34:37,200
Speaker 1: only the instead of the stock it well yeah right,

675
00:34:37,200 --> 00:34:41,200
Speaker 1: instead of being unsecured right, effectively, the any any debt

676
00:34:41,320 --> 00:34:44,560
Speaker 1: structure of being collateralized by the bitcoin. And my concern

677
00:34:45,560 --> 00:34:51,640
Speaker 1: with that is the traditional financial market is so much bigger, bigger,

678
00:34:52,480 --> 00:34:55,719
Speaker 1: so much bigger, vastly larger than the bitcoin market at

679
00:34:55,719 --> 00:35:00,200
Speaker 1: the moment, the incentives are not aligned, right. So if

680
00:35:00,200 --> 00:35:04,160
Speaker 1: somebody is offering these debt instruments that maybe they're decent terms,

681
00:35:04,160 --> 00:35:06,359
Speaker 1: maybe will get you know, generate two hundred and fifty

682
00:35:06,400 --> 00:35:10,520
Speaker 1: million dollars more of capital, which is great. My concern

683
00:35:10,719 --> 00:35:14,960
Speaker 1: is the provider of that debt calls up his trad

684
00:35:14,960 --> 00:35:19,879
Speaker 1: five buddies at any point of weakness and says, hey,

685
00:35:19,960 --> 00:35:23,480
Speaker 1: let's bury these guys. And that's what happens. Let's bury

686
00:35:23,480 --> 00:35:27,279
Speaker 1: these guys. And and then at that point if if

687
00:35:27,280 --> 00:35:32,880
Speaker 1: they start getting buried, you may lose sentiment in like

688
00:35:32,960 --> 00:35:36,000
Speaker 1: retail traders, and have no liquidity going back up. You

689
00:35:36,040 --> 00:35:41,000
Speaker 1: have no liquidity there to backstop it. And the traditional

690
00:35:41,000 --> 00:35:43,160
Speaker 1: financial market, again is so much bigger. They could do

691
00:35:43,200 --> 00:35:45,160
Speaker 1: that for an extended period of time. I mean, we've

692
00:35:45,200 --> 00:35:47,640
Speaker 1: seen it with these like targeted short interests on a

693
00:35:47,640 --> 00:35:50,560
Speaker 1: lot of these stocks like Walgreens to game stole, game stop,

694
00:35:50,680 --> 00:35:52,920
Speaker 1: the same thing. They can they started, they could, they

695
00:35:52,920 --> 00:35:56,600
Speaker 1: could be there longer than you, and they're bigger than you,

696
00:35:56,920 --> 00:35:57,759
Speaker 1: and they.

697
00:35:57,440 --> 00:35:58,800
Speaker 2: Will get more billions from their buddies.

698
00:35:58,920 --> 00:36:03,000
Speaker 1: They're stronger than you, they're bigger than you. And that's

699
00:36:03,080 --> 00:36:04,600
Speaker 1: kind of my concern in the market is that the

700
00:36:04,640 --> 00:36:08,600
Speaker 1: incentives aren't aligned for the security debt instruments at the moment,

701
00:36:08,800 --> 00:36:13,640
Speaker 1: and there could be a situation where the convertible bond

702
00:36:14,480 --> 00:36:19,319
Speaker 1: the seller may look at like that is an opportunity, like, oh,

703
00:36:19,320 --> 00:36:21,319
Speaker 1: I could go get bitcoin at a discount, right, I

704
00:36:21,360 --> 00:36:23,480
Speaker 1: go bury this company and I go get bitcoin at

705
00:36:23,520 --> 00:36:27,479
Speaker 1: a discount. And so that's that's one of the most

706
00:36:27,480 --> 00:36:29,480
Speaker 1: glaring risks I'm kind of looking at right now. It's

707
00:36:29,520 --> 00:36:32,160
Speaker 1: just like the structure of the leverage, like how are

708
00:36:32,160 --> 00:36:35,400
Speaker 1: you getting leverage? Where does it come from? And I

709
00:36:35,400 --> 00:36:39,560
Speaker 1: think there are ways to do it that may be

710
00:36:41,360 --> 00:36:44,840
Speaker 1: less existential risky than others.

711
00:36:45,080 --> 00:36:48,040
Speaker 2: Okay, that's good. Yeah, So then let's talk about the

712
00:36:48,040 --> 00:36:50,880
Speaker 2: converse of that. So if you were going to imagine

713
00:36:50,920 --> 00:36:54,719
Speaker 2: the best company starting today, well, how would they do it?

714
00:36:55,520 --> 00:36:57,919
Speaker 1: Yeah? I've been trying to think about this as well,

715
00:36:58,280 --> 00:37:01,160
Speaker 1: and really I think having an operating company that has

716
00:37:01,520 --> 00:37:05,719
Speaker 1: income coming in from a diversified stream is really important.

717
00:37:06,080 --> 00:37:09,879
Speaker 1: Uh that because that hasn't been important for Metaplanet. Hasn't

718
00:37:09,920 --> 00:37:12,680
Speaker 1: been important for Metaplanet. I mean, they're they're generating an

719
00:37:12,719 --> 00:37:15,000
Speaker 1: income stream right now. They're doing it right now by

720
00:37:15,000 --> 00:37:18,560
Speaker 1: selling cash secured puts, you know, so that is that

721
00:37:18,680 --> 00:37:23,520
Speaker 1: is a revenue stream for them. But Metaplanet also hasn't

722
00:37:23,560 --> 00:37:26,960
Speaker 1: weather to storm yet, right right, So I think that

723
00:37:27,360 --> 00:37:30,319
Speaker 1: having that operating cash flow will be incredibly important for

724
00:37:30,480 --> 00:37:33,799
Speaker 1: cover the debt service. Yeah, cover debt service, but also

725
00:37:33,880 --> 00:37:38,319
Speaker 1: have you know a sentiment boost, right It's like a

726
00:37:38,360 --> 00:37:42,799
Speaker 1: sentiment booster. If bitcoin goes down fifty percent and you're like, oh,

727
00:37:42,840 --> 00:37:45,840
Speaker 1: this little tiny company is still buying you know, tons

728
00:37:45,880 --> 00:37:49,440
Speaker 1: of bitcoin and everybody else is paused, Yeah, that that

729
00:37:49,520 --> 00:37:52,040
Speaker 1: might be incredibly attractive. You're like, wow, this is a

730
00:37:53,239 --> 00:37:56,359
Speaker 1: They're they're accumulating faster than anybody else right now because

731
00:37:56,360 --> 00:37:59,319
Speaker 1: they have this other diverse cash flow. So, uh, the

732
00:37:59,360 --> 00:38:03,959
Speaker 1: rest spot cash managed, managed leverage, being prepared to weather

733
00:38:04,000 --> 00:38:05,839
Speaker 1: a storm, but I think a storm was coming at

734
00:38:05,840 --> 00:38:10,400
Speaker 1: some point in the future. So that that's kind of

735
00:38:10,400 --> 00:38:13,320
Speaker 1: what I'm focused on. And then the ability to what

736
00:38:13,640 --> 00:38:16,360
Speaker 1: I think is really cool here and unique is this

737
00:38:17,280 --> 00:38:20,200
Speaker 1: because of strategy has grown so fast and so big

738
00:38:20,320 --> 00:38:24,279
Speaker 1: they and and they're so consistent and transparent about what

739
00:38:24,320 --> 00:38:27,600
Speaker 1: they're doing. They don't want to go chase any weird

740
00:38:27,680 --> 00:38:30,920
Speaker 1: capital pols. They are folks. They are laser focused on

741
00:38:31,120 --> 00:38:36,680
Speaker 1: the fixed income market, right and credibly transparent about it. Now,

742
00:38:37,160 --> 00:38:40,880
Speaker 1: that provides opportunity for these other players in the field

743
00:38:40,880 --> 00:38:44,360
Speaker 1: to go tap different alternative capital cools that may be

744
00:38:45,200 --> 00:38:48,719
Speaker 1: just unique and weird and different, right. I mean, like

745
00:38:48,760 --> 00:38:53,040
Speaker 1: what Strive is doing and uh looking at buying company

746
00:38:53,239 --> 00:38:57,520
Speaker 1: distressed biotech companies for less than that cash and basically

747
00:38:57,560 --> 00:39:00,120
Speaker 1: getting bitcoin at a discounty by doing that and and

748
00:39:00,200 --> 00:39:02,760
Speaker 1: holding the IP that comes along with it to bunch

749
00:39:02,800 --> 00:39:05,200
Speaker 1: it up and sell it to no big biotechs when

750
00:39:05,239 --> 00:39:08,480
Speaker 1: the market shifts and moved around, and there are thousands

751
00:39:08,480 --> 00:39:12,080
Speaker 1: of opportunities like that. And for me, I'm thinking about

752
00:39:12,080 --> 00:39:14,319
Speaker 1: that in the insurance space, Like the insurance space is

753
00:39:14,320 --> 00:39:18,080
Speaker 1: so archaic and old, Like that's a huge untapped market

754
00:39:18,160 --> 00:39:22,960
Speaker 1: that I've got my eyes pretty focused on two to

755
00:39:23,080 --> 00:39:29,400
Speaker 1: go identify opportunity over there. So that's I think going

756
00:39:29,440 --> 00:39:32,120
Speaker 1: to lead to the most success with these bitcoin treasury

757
00:39:32,160 --> 00:39:37,319
Speaker 1: companies is like identifying unique pools of capital that need

758
00:39:37,480 --> 00:39:39,279
Speaker 1: that need yah, need it.

759
00:39:40,440 --> 00:39:43,600
Speaker 2: I sat down with grand cardon yesterday and he has

760
00:39:43,640 --> 00:39:45,680
Speaker 2: maybe one of the best ones that I've seen right now.

761
00:39:45,680 --> 00:39:48,120
Speaker 2: And I mean, obviously he's a real estate developer and

762
00:39:48,200 --> 00:39:52,480
Speaker 2: now he's building real estate projects that will be paired

763
00:39:52,520 --> 00:39:53,040
Speaker 2: with bitcoin.

764
00:39:53,360 --> 00:39:56,440
Speaker 1: Yeah, he's amazing. So you have in the United States

765
00:39:57,239 --> 00:39:58,040
Speaker 1: thirty year debt.

766
00:39:58,320 --> 00:40:01,120
Speaker 2: No one else in the world has that, and most

767
00:40:01,160 --> 00:40:03,040
Speaker 2: of the real estate debt is somewhat you could say,

768
00:40:03,040 --> 00:40:06,080
Speaker 2: subsidized by the government that super low rates. So I

769
00:40:06,120 --> 00:40:10,399
Speaker 2: get super cheap debt turned out super super super far.

770
00:40:11,320 --> 00:40:14,479
Speaker 2: But then in the US we have tax write offs

771
00:40:14,480 --> 00:40:16,839
Speaker 2: from the you know, depreciation from the from the real estate.

772
00:40:16,880 --> 00:40:19,160
Speaker 2: So then I get the tax depreciation from that. Then

773
00:40:19,200 --> 00:40:21,640
Speaker 2: I have tenants that pay that for me, and that

774
00:40:21,800 --> 00:40:25,520
Speaker 2: goes up with inflation, and then he takes that. So

775
00:40:25,560 --> 00:40:29,960
Speaker 2: you have basically no volatility asset yep. And then all

776
00:40:30,000 --> 00:40:31,800
Speaker 2: the cash flows from that go into bitcoin.

777
00:40:32,000 --> 00:40:32,400
Speaker 1: Yeah.

778
00:40:32,440 --> 00:40:35,560
Speaker 2: So you have a nova, super cheap, subsidized long term

779
00:40:35,560 --> 00:40:38,600
Speaker 2: money with no volatility paired with a high volatility asset

780
00:40:38,640 --> 00:40:42,839
Speaker 2: like bitcoin. And his goal is to I think he said,

781
00:40:42,840 --> 00:40:45,759
Speaker 2: build up nine or twelve of these, bundle them together,

782
00:40:45,800 --> 00:40:48,200
Speaker 2: and then watch that as a public traded Bickuin treasury

783
00:40:48,200 --> 00:40:48,920
Speaker 2: strategy company.

784
00:40:49,080 --> 00:40:50,600
Speaker 1: Yeah, it's a no brainer. Yeah.

785
00:40:50,600 --> 00:40:52,640
Speaker 2: And so it's like that's like one idea of like

786
00:40:52,960 --> 00:40:56,000
Speaker 2: a whole whole subset of pools of cabbo.

787
00:40:56,160 --> 00:40:59,680
Speaker 1: Yeah, I mean private equity. There's very similar opportunities in

788
00:41:00,040 --> 00:41:04,160
Speaker 1: equity market. Just like, throw a bitcoin kicker on anything, yeah,

789
00:41:04,440 --> 00:41:07,359
Speaker 1: any of it, for all, any transaction, any transaction that's

790
00:41:07,360 --> 00:41:09,200
Speaker 1: made you throw a bitcoin kicker on it, you know,

791
00:41:09,360 --> 00:41:11,239
Speaker 1: five to ten percent, and it's like, okay, well that

792
00:41:11,280 --> 00:41:15,880
Speaker 1: whole transaction changes. But it could be a duration asset.

793
00:41:16,760 --> 00:41:20,440
Speaker 1: Real Estate's very very clear that's an opport just because.

794
00:41:20,200 --> 00:41:22,440
Speaker 2: Of the long term cheat money. And I'll tell you

795
00:41:22,680 --> 00:41:23,560
Speaker 2: it's a good edition.

796
00:41:24,239 --> 00:41:24,520
Speaker 1: All right.

797
00:41:24,560 --> 00:41:26,759
Speaker 2: So where do you think the what do you think

798
00:41:26,760 --> 00:41:30,440
Speaker 2: bitcoin and bitcoin treasury strategy companies aren't five years?

799
00:41:31,360 --> 00:41:34,440
Speaker 1: Yeah, okay, so five years from now, so we're talking

800
00:41:34,640 --> 00:41:39,960
Speaker 1: twenty thirty, twenty thirty. I think bitcoin is a six

801
00:41:40,400 --> 00:41:44,880
Speaker 1: to seven trillion dollar asset, and I think these bitcoin

802
00:41:44,880 --> 00:41:48,719
Speaker 1: treasury companies are. I think there's going to be a thousand,

803
00:41:49,719 --> 00:41:56,719
Speaker 1: at least a thousand of them, and yeah, I think

804
00:41:56,760 --> 00:41:59,000
Speaker 1: they're all going to be continuing to shift this way.

805
00:41:59,200 --> 00:42:01,200
Speaker 1: I think the USC is going to hold a significant

806
00:42:01,200 --> 00:42:03,000
Speaker 1: amount of bitcoin. I think Nation States are going to

807
00:42:03,040 --> 00:42:07,080
Speaker 1: hold a significant amount of bitcoin. And we'll see some

808
00:42:07,120 --> 00:42:10,200
Speaker 1: of the larger companies have a cost basis of over

809
00:42:10,239 --> 00:42:13,040
Speaker 1: a million dollars per bitcoin, and I don't think they'll

810
00:42:13,040 --> 00:42:14,040
Speaker 1: take it seriously until that.

811
00:42:14,800 --> 00:42:17,759
Speaker 2: So you think bitcoin could be I guess that's three

812
00:42:17,760 --> 00:42:20,480
Speaker 2: to four times And do you think some of these

813
00:42:20,480 --> 00:42:24,280
Speaker 2: treasury shaddy companies will be two three four times bitcoins

814
00:42:24,880 --> 00:42:27,000
Speaker 2: most price? Uh?

815
00:42:27,920 --> 00:42:31,439
Speaker 1: Yeah, yeah, I mean I think they're going to move faster, right,

816
00:42:31,960 --> 00:42:34,560
Speaker 1: because what is an equity and equity is a forward looking,

817
00:42:35,640 --> 00:42:38,000
Speaker 1: forward looking view. So how far into the future do

818
00:42:38,040 --> 00:42:40,000
Speaker 1: we look? And if we think bitcoin is the strongest

819
00:42:40,000 --> 00:42:42,520
Speaker 1: asset on the planet, and then these companies have x

820
00:42:42,560 --> 00:42:45,799
Speaker 1: amount of bitcoin x percent of the network, you know

821
00:42:45,840 --> 00:42:47,759
Speaker 1: they should be priced as such. Yet and so how

822
00:42:47,760 --> 00:42:49,920
Speaker 1: far on the forward do you look? And how far

823
00:42:49,960 --> 00:42:52,520
Speaker 1: forward do you look? And like in videos ten years

824
00:42:52,560 --> 00:42:55,280
Speaker 1: forward looking? If you start looking ten years forward looking,

825
00:42:55,880 --> 00:42:59,280
Speaker 1: like is strategy a five to ten trillion dollar company?

826
00:42:59,360 --> 00:43:00,120
Speaker 2: Maybe?

827
00:43:00,320 --> 00:43:02,919
Speaker 1: Right? Are these other companies, you know, hundreds of billion

828
00:43:02,960 --> 00:43:05,840
Speaker 1: dollar companies? Absolutely, and they're going to have the ability

829
00:43:05,920 --> 00:43:09,160
Speaker 1: to eat and consume other companies that are distressed because

830
00:43:09,160 --> 00:43:11,000
Speaker 1: they don't have bitcoin on a balance yet. They've got

831
00:43:11,000 --> 00:43:14,120
Speaker 1: no strength, no liquidity, and they're going to be able

832
00:43:14,160 --> 00:43:17,160
Speaker 1: to absorb a lot of these companies, they think.

833
00:43:17,360 --> 00:43:20,919
Speaker 2: Now cool, all right, anything you want to shout out

834
00:43:21,160 --> 00:43:24,160
Speaker 2: bring attention to, We'll link to your Twitter profiles down below.

835
00:43:24,320 --> 00:43:26,919
Speaker 1: Yeah. No, I've got a crew. We've got a show

836
00:43:26,960 --> 00:43:30,040
Speaker 1: called mstr True North or just True North, and we

837
00:43:30,120 --> 00:43:32,759
Speaker 1: talk every Wednesday about what's going on with strategy, what's

838
00:43:32,760 --> 00:43:35,000
Speaker 1: going on with bitcoin, treasury companies, the evolution of these

839
00:43:35,000 --> 00:43:38,880
Speaker 1: financial products, securitization of bitcoin, how the market's changing and evolving.

840
00:43:39,520 --> 00:43:44,120
Speaker 1: And my Twitter is at hunter Jets on my Twitter

841
00:43:44,160 --> 00:43:48,520
Speaker 1: ex handles at h I do. I post a lot

842
00:43:48,560 --> 00:43:52,360
Speaker 1: of research and analytics on the space and what I'm thinking.

843
00:43:52,440 --> 00:43:54,240
Speaker 1: Every now and then I'll do, you know, thirty minutes

844
00:43:54,239 --> 00:43:57,120
Speaker 1: to an hour long just Live show and I'll just

845
00:43:57,160 --> 00:43:59,680
Speaker 1: talk about everything that I'm going through in my thought process,

846
00:44:00,040 --> 00:44:02,080
Speaker 1: what's going on in the market. Yeah cool, all right,

847
00:44:02,200 --> 00:44:03,399
Speaker 1: thanks so much, appreciate it.