TFTC: A Bitcoin Podcast - #171: Andy Edstrom

Episode Date: June 16, 2020

Join Marty as he sits down with Andy Edstrom, author of Why Buy Bitcoin, to discuss: - Why Andy decided to write a book - Pitching bitcoin to institutional investors - How Bitcoin's monetary theory differs from the monetary theory that dominated the 20th century - Inflation - Bitcoin's correlation to other asset classes - Why pay taxes? - much more Follow Andy on Twitter Shoutout to this week's sponsors. Cash App. Start #stackingsats today. Use the promo code: "stackingsats" to receive $10 and contribute $10 to OWLS Lacrosse when you download the app.

What's up, freaks? It's your boy, Marty Bent, here to introduce this episode of Tales from the Crypt. I have the immense pleasure of sitting down with Andy Edstrom, author of Why Buy Bitcoin. Incredible conversation, getting to know Andy a little bit more, talking about his book, a recent presentation he gave at the Value of Bitcoin conference, and Bitcoin from an institutional investor's perspective. I think you guys are really going to like this one. This episode was brought to you by our good friends at The Cash Show. you freak should already know all about them but if you don't know about them let me tell you a

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You've had a dynamic where money's become freer than free. If you talk about a Fed just gone nuts, all the central banks going nuts. So it's all acting like safe haven. I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. In the world of fiat currencies, Bitcoin is the victor. I mean, that's part of the bull case for Bitcoin. If you're not paying attention, you probably should be. You probably should be.

What is up, freaks? Welcome back to Tales from the Crypt. it's your boy marty bent here on a lovely monday afternoon the sun is shining the birds are chirping the weather's heating up uh but we're here to talk about bitcoin very excited for this conversation uh long time coming we've been uh conversing back and forth for a while now uh i'm gonna raise my hand here uh the the uh lagging has been on my end to get this conversation in the books, but I'm happy that we're finally getting done. I'm sitting down with author of Why Buy Bitcoin, Investing Today in the Money of Tomorrow. I'd like to introduce you freaks to Andy Edstrom. Andy, welcome to the podcast. Marty, it's a real pleasure to be on. I'm super psyched to be here

and no worries about chasing you down. We've made this happen and it's going to be great. It's going to be great. Yeah. So we met in person last year at Bitcoin 2019, a little picnic bench with Bitcoin Tina and you had a draft of your book out I'd read about half of it I believe at that point have since finished it at least that draft I have not gotten the hard copy yet but very interested to walk through why you wrote the book what's in the book but first before we get into that I think it's important to understand what you were doing before the book and your sort of career path that led you to Bitcoin and writing this particular book. Yeah, man. Happy to tell my story. And before we start, I'll just say that you're in the

acknowledgments of the book. I appreciated the positive feedback you gave me. It was a pick me up at the time because it's easy to start a book. It's harder to finish it. But it was awesome to have some uh some good feedback uh from you at the time and honestly your your pod and the bent of course you know were significant factors in me making my my hero's journey uh from bitcoin through all the alts and uh you know the desert of the shit coins and back to bitcoin so but yeah so so my story um i did work for goldman basically so i graduated college in 2003 And I worked for Goldman from 2004 to 2006. And I've spent 17 years basically in the regular way finance and investment business. And I did my undergrad in economics. And it didn't prepare me, of course, at all for Bitcoin. I was a Keynesian, taught Keynesian economics, inculcated just like everyone else.

And I had no exposure to the Austrian economics other than I'd probably heard of Hayek once or twice, but never studied anything. And so I managed to basically make my way well into a career in finance without ever truly understanding what is money, which is sort of shocking. but it's helped me to appreciate why so many on my side of the fence in legacy finance have struggled with Bitcoin. And it's one of the key reasons I wrote the book. But my career in a nutshell, so yeah, investment banking, Goldman Sachs, private equity, worked for a fund that spun out of the Carlyle Group, which is a giant private equity complex. Then I worked for a hedge fund here in LA called Tenenbaum Capital, about 5 billion of assets. And I was an associate when I joined and a principal when I left. And I left to join my family business, which is actually my dad and his co-founding partner started a wealth management business, independent registered investment advisor, fiduciary business over 30 years ago now.

so I've been there for eight years and I'm one of those third exposure guys when it comes to Bitcoin okay so I read about it while I was on vacation with my wife and my son I was in Eastern Europe we were traveling and there was an article in The Economist about Bitcoin and I read it and I didn't understand it at all and I completely forgot about it second exposure was an article I can't remember if it was Economist or Wall Street Journal, and it was on the Dow fork, the Ether hard fork. I guess that was probably mid-late 2016, maybe July 2016. And again, totally over my head, missed it. And then first quarter to second quarter in 2017, I started, I don't know, I saw an article somewhere, somebody that I knew pinged me on it.

It might've been actually Arun Rao, real smart tech guy that I had known for a while. And, you know, basically said, hey, you got to look at this. And that's when I started to fall down the rabbit hole, do the research. I, you know, it was nights and weekends, wasn't getting any sleep, you know, the usual, this is too fascinating to put down. And I ended up publishing a research report, you know, in sort of classic investment management slash Wall Street style on crypto. And it was, you know, the title was basically Cryptocurrency is, you know, the world's most under-owned asset class. And so that was mid, I guess it was mid to, it was probably September 2017. And so, of course, you know, went through the bubble, went through the crash. and i was still convinced of the thesis but eventually i continued to do the work and i listened to more marty bent and read more marty bent and i finally figured out that bitcoin was

the thing and we got to beginning of 2019 right we had the we had the the hard fork and the crash at the end of 2018 so bitcoin was like 3k in january 2019 and finally i realized okay this is ridiculous. Like this is probably the buying opportunity of a lifetime. And I got to get my clients exposure. But if I'm going to get them exposure, then I'm gonna have to explain it to them. And it's not a one or two conversation, you know, kind of topic. So I'm gonna have to write it down. So I might as well write it in a full book and put it out there. So I did that I started writing in January, when the price was around 3k. And it was published in September. The draft you read was a little rough i mean most of the meat was there but i but i reworked it basically to

make it much more a little less technical and more readable sort of more accessible to um to to the average reader average intelligent reader let's say and um so that was kind of the the story about uh yeah about how the book came to be well thank you for writing the book i mean it the draft that i read i'm sorry i've not got my hand on a hard copy yet to to read the final version that is on my list of things to do but the book list gets longer in bitcoin every year it's hard to keep up and um not as a i mean a draft i read again like you said you uh not dumbed it down but made it a little bit more clear and less technical I thought it was very, very readable and digestible for an institutional investor type audience.

So what has the reception from your clients been to the book and how has it been sort of educating them about Bitcoin and investing in it from their perspective? Yeah, look, it's been definitely overwhelmingly positive, but not without exception. I mean, I still have a couple of clients who are either wary, they're either wary of it or, you know, I guess they don't want it to succeed because of what the implications might be for the existing system. I think is there, you know, is there is there a driver there? But, yeah, overall, a lot of good feedback. The main thing they've said is it's well written and understandable, which I'm thankful for, that they basically could hopefully wrap their heads around it. um so yeah it's you know the where we were i think before the book at least with my clients was the usual uh tropes in the mainstream media you know sensationalism it's criminal money it's for

money laundering you know whatnot and uh so we've come a long way since there but it is you know it is an uphill uh an uphill battle but i have i have gotten overwhelmingly positive um you know uh, results and feedback. And that was, you know, the goal that I tell people, you know, cause I've been, you know, I've been, I spoke at the value of Bitcoin conference, um, last week or the week before. And, and the message I've been bringing to sort of legacy finance people is look, if you've got someone that you want to help understand this, or if you haven't done the work yourself, legacy finance person to understand this, you know, here's a, here's a tool that's, uh, that's hopefully readable, but also doesn't sacrifice, uh, you know, too much in terms of

detail i didn't want it to be sort of short and perfunctory but i also didn't want it to be 300 pages so it's somewhere in the middle yeah somebody is making his way through an 800 page book right now i appreciate you uh keeping it somewhere in the middle is it me yeah i'm finally making my way through human action yeah human action is a is a slog um i did i did it on audio and the audio that i had is not very high quality i think it was must have been recorded you know 12 or 15 years ago or something so it was doubly uh doubly difficult um but yeah man it's uh it's it's worth it's worth as you know it's worth the the effort and worth the work yeah it is it's uh i'm getting through it i'm uh i'm making good strides i'll wake up

take the morning shift with my son uh he takes a nap like an hour and a half after he wakes up at like 8 a.m and or yeah around 8 a.m so i start reading like 7 30 to 9 getting through it getting through it it is a slog like they say like eating a whale right one bite at a time exactly i'm a slow reader too so it's going to take many many bites for me yeah um i got into you know there was a short time in my life when I tried to learn you know speed reading basically as a technique and I did a little bit and the conclusion I walked away with was yeah you can teach yourself to read something very quickly but your retention at least for me you know the retention of the material was was you know left something to be desired so my experience personally was there's not much there's

no free lunch in terms of speed of reading if you read slower it takes you longer time but but hopefully you you know you absorb it better yeah no i think that's definitely the case i i find myself going back and rereading lines i'm one of those people i was like i need to really understand so i can keep the thread going in my mind of what's actually happening within the book so absolutely it'll take me some time about uh and almost a third of the way through the mission of bitcoin education in my view is you know hit hit people from all sides right maybe you read my book maybe read one of the other books on the market maybe listen to uh you know you listen to tftc let's do a couple of the other pods it takes it takes multiple exposures repeat exposures you

know different lenses different angles for this stuff to sink in now i was actually having a conversation over the weekend with somebody who's asking exactly that like how uh writing it for for an investor audience like in a newsletter like how do i get the point across to them that bitcoin can help in a certain very specific situation so you're not going to do it in one newsletter i think it takes yeah many touch points yeah yeah i love that question just just explain bitcoin to me in two sentences uh what do you do with that right yeah number go up bitcoin fixes us that's it the memes are big the memes are big your uh your partner uh your partner in crime uh odell is uh

is on top of that too you guys are you guys are a meme machine so is my uh my newly affiliated firm swamp bitcoin that's that's key to our business uh model yeah getting the uh getting the message condensed into a very small and reproducible um sort of meme format is is important it does work it does does do uh does go a long way too and that's the one thing with matt i think matt has uh produced more meme material uh than i in this duo and that's i think what you'll come to realize is like naturally he doesn't go out there and be like oh, I'm going to make a meme. It's just like he just says something

and it's just like picks up steam in the background. That's when it becomes a meme, right? It's sort of organically, naturally replicated by people who just really connect with it. Yeah, man, the memes and the narratives are so crucial. You know, one of the guys who's woken me up to this is Ben Hunt, who I know you've had on the pod maybe more than once.

I've learned a ton from him. um i've learned a ton from him uh on that topic and um yeah i was i was lucky enough to meet him he had an event out here in la and uh yeah he's got a very interesting perspective on on basically narrative developments and to my mind yeah the meme the meme component is is crucial to that yeah right it just makes all this uh all the stuff easy to to digest and then share it's like alright let me like bitcoin fixes this it's like alright it's just a basis from which people can

can take their research like if bitcoin does fix this how does it do that why does it fix this particularly you sort of dive into the nitty gritty stuff we gotta convince we gotta convince Ben to come over into the light

he still thinks we're all gonna get shot we'll see unfortunately I think ben particularly will be one of uh the late adopters who's sort of forced to by the will of the market um i think he will too i think he's gonna he's gonna i'm gonna i don't know he he was kind enough to you know invite me to talk about bitcoin and i think his planned conference in october he'll probably disinvite me after saying this but but i was reading his latest letter and i almost fell off my chair laughing uh after the first paragraph because you know he describes

himself basically as an upper middle class white guy and um you know if ben hunt is upper middle class then uh that i'm starving on on the street um i think you know i think one of the key reasons that ben is not taking the personal risk on bitcoin right he's got too much to lose i mean if you've made you know tens of millions maybe hundreds of millions in the legacy financial system man it's uh it's a lot tougher to come out pro bitcoin uh when you've got you know two two feet firmly planted in a system that's made you rich right and uh incentives and uh i don't want to say complacency i don't think ben maybe ben is a little complacent uh disclaimer i love ben and i love our conversations i know me too many of the

many of you freaks out there who've listened to them uh disagree charlie and i disagree with him as well and but uh yeah it's uh look i've got conflicts of interest we all do i prefer to you know i try to i try to bubble them up and uh and make them as plain as possible nobody's unconflicted in this uh in this situation but um yeah that's what somebody i sent a provocative tweet out over the weekend like uh like journos are some of the worst people on the planet and i was talking about like corporate press journalist journalist to uh basically speak the party line and just parrot whatever the party line is at any given point in time and somebody reached out to me is like once you consider yourself a journalist aren't you in that that cohort and i was number one no

i don't consider myself a journalist but i can see how people would view me as such um and then number two like i am i wear my bias on my sleeve like it's set like marty's bent the definition that i have at the bottom is this is my inclination this is my bent on everything that's going on and like this is my bias basis what i think is interesting in the last 24 hours like me yeah i think you wear it on your sleeve i think you put it front and center um and uh there's still you know people can learn a lot from you um it is you know man it it is hard to think for yourself i mean we do live in an age where there's more info than ever uh streaming at us and it's i guess harder for the individual or it's more work to try to separate the wheat

from the chaff but you know that's just the nature of the beast that's that's the world we're living in yeah no and i think as long as you're up front with that bias and i don't even say yeah maybe it's a conflict of interest whatever you want to call it um i think that's a lot more admirable than the corporate press who pretends like they're feeding you facts and is not objective on any particular subject when they are heavily influenced by their objectivity and their facts aren't always ironclad. I think that's less admirable.

Yep, agreed, agreed. I try to read as much history. I've actually been reading more history lately, partly because I've got an uh an audible subscription which had basically some of the credits like expire like if you don't use them up they they basically go away so I had like 10 credits are about to expire I was like oh shit I gotta buy a bunch of books so so I got a bunch of uh I bought a bunch of books you know some history some econ some uh some other stuff but um yeah it makes you wonder like I wish I wish I could just have experienced

different periods in the last century, even just in the U.S., to really get a true sense of how unbiased the journalism was at the time. I mean, you read about the yellow journalism, you know, period a century plus ago. And at that time, you know, Hurst, Randolph Hurst, I mean, what I read in history class, what they taught me in history class was that was like totally ridiculous, you know, biased journalism at the time. And then I guess it became less biased over time and now we're going for a period through a period where it's more biased because the business model was changing and it just makes you wonder you know how was there ever a moment when when journalism in general was was unbiased i think the answer is never 100 it's just gradations

yeah no that's what i was typing to pull up a thread of tweets i sent out in january because i was reading some history too particularly about thomas jefferson uh i forget i was like reading thomas jefferson's letters or something like that and good for you he has two letters three years apart 1809 and 1812 and the first he had this line i shall give over reading newspapers they are so false and so intemperate that they deserve tranquility without giving information and then three years later he sort of followed up on that he said i'd given up newspapers in exchange for tacitus thucydides uh for newton and euclid and i find myself much the happier um so sort of reading more about history and philosophy over over the the daily news of the

time seems to seems to be something that's uh has a much higher return on investment and then getting caught up in the in the media cycles at any point in time like you said so this was thomas jefferson it's true 200 years ago it's true i'm guilty of the same i mean you know our our uh our influencer uh our north star nassim taleb you know is constantly banging on about you know read the classics read the ancients you know uh read read the old guys because so much of human nature has been determined for thousands of years and uh we'd all do well to to remember that no i agree i completely agree and it's that's sort of why i've been turning like i finally decided to read human action it's like all right let's just do it this is this is a book that's

been around for for decades now at this point it seems to be something that could stand the test of time centuries into the future and getting away from the day-to-day social media and mainstream media nonsense particularly last month um is something i think is actually good for mental health like my wife has been getting a little distraught like following social media everything that's going on all the pressures to post certain things and and posture certain ways it really starts fucking with people's minds yeah man i mean it's been a tough couple of months i mean you know being you know i'm in the wealth management business right so i'm tasked with looking after people's investments. March was pretty hair-raising. April was a little bit

better. You know, we've had this amazing rally back, not quite to the highs. Well, I guess to the highs, you know, on the NASDAQ, basically the tech giants are back in fine fettle. But yeah, it's been, I agree. I felt the stress. I've been watching the activities with the protests and the riots i saw a video of rioting going on on the third street promenade and in uh well actually it wasn't writing it was looting basically um a few days ago that's you know six blocks from where my old apartment was and um yeah it's uh you gotta you gotta moderate that fire hose of stressful imagery that gets uh you know pumped into your eyeballs if you let it Yeah, I mean, it's completely just used to manipulate emotions and at the end of the day, manipulate action.

And once you realize that, it makes it easier to turn to older books and philosophy. Equanimity from the ancients. I need to do more of it myself. Yeah, that's a goal this summer. I mean, I say all this, but I'm addicted to Twitter. like i'm still on it multiple hours a day look let's be real if you're you know if you've got some if you've got a product or you've got a perspective about bitcoin you got to be on twitter right by the way i might the last couple months okay i kind of fell off of twitter i basically

stopped tweeting for about six weeks and the reason i did that honestly was i just had too much going on you know managing my clients portfolios um i had to i had to focus on that you know first and foremost and not get distracted but um but yeah the the it's hard to uh it's hard to get a message out without twitter man so as long as i guess i guess the the thing one could do is tweet which say what you gotta say tweet what you gotta tweet and maybe not read everything in the feed but you know yeah try to try to filter out as much as possible that's been my goal it's hard man those geniuses those geniuses uh working for uh dorsey have figured out how to capture as much of our attention as possible yeah and well that's why i recommend tweet deck tweet deck

is really uh sort of an unbastardized version of twitter so if you know how to use list and group people into lists and about topics that you want to follow. It's sort of an undeprecated version of Twitter that the algos haven't attacked yet. So word to the wise, if you're not using TweetDeck yet, I highly recommend it.

All right, I need to get on it. Yeah. Speaking of getting on it, let's get on why we should invest in Bitcoin. You mentioned the presentation that you gave at the Value Bitcoin Conference last week. and we're talking about transitions we're in the transitionary period and i really like the first slide of your uh presentation which which describes the fact that we're

going to probably witness an economic showdown a showdown of economic thoughts one that has dominated the last century which has been keynesianism and another that will probably research back into the mainstream and into the psyche of the masses, which is Austrian economics or the Mises view of the world. What's going on here? Yeah, man, there's so much. I'll try to distill it. Look, I was raised Keynesian. So I had the Keynesian goggles on from day one. And Keynes was technically brilliant. And he had a lot of great ideas, sort of like Karl Marx and Friedrich Engels. Great idea. Communism, super idea. I love the idea. And the devil, of course, is in the details, which is to say, because of the way the

actual world works, the system doesn't work at all. Now, Keynesian management of an economy is not as bad as you know the allegory with uh with communism but it's still pretty bad i mean it's it depends on the notion of stimulating when the economy is weak so print uh print money and run deficits and then of course you got to do the opposite when the economy is strong and that second part is the hard part that doesn't happen because as we know the politicians are elected on two four and six year cycles so they just you know they deliver the goods they deliver the pork um because if they didn't, they would probably be voted out of office for the most part. And so we get the accumulation of debt. And that's the biggest piece to my mind is the debt story. You look at the last

century and debt to GDP, it went up and down in the first part of the century. Obviously, it went up with World War II, but the levels were still at manageable levels. And we had this productivity explosion basically after uh after that event and then we were on brett woods for 27 years and debt to gdp stayed flat and then of course 1971 comes around and we're off the gold standard and that's where that's where things go sideways so to speak um i think you did you guys have the wtf happened in the 1971 guys on did you have mr cool bp and uh heavily armed clown yeah we had them on yeah Had them on a couple of weeks ago. It was a great episode.

It was a great episode. Those guys are great. The first pod that I did actually was Colin. He read my book and he got me into the pod scene, so I thank him for that. But yeah, a lot of bad stuff has – well, a lot of things have changed for the worse since 1971, but obviously debt has been the big one. So debt to GDP went from about 145% to now call it 350%, right? 2.5x or 2.25x. And that's the problem we have to deal with. We, quote unquote, as a society have

lived beyond our means for, call it 50 years now. And that's the biggest piece. So the Keynesian system has gotten us into this mess. And now we can't have a recession, right? Recessions are illegal. If we, you know, the central bankers and Congress allowed us to have a recession and clear out the dead wood, it would be a depression. So they can't let that happen. But you can only kick the can so far. And we don't know how long the can can be kicked. You look at Japan, Japan has extremely high debt levels. I had this, I had this debate with my partners, my colleagues on a regular basis, they pointed Japan and they say, Look, you can have tons of debt, and still the thing, you know, continues on. And my response to that is, yeah, that's true. But once everybody

is pushing debt levels, you know, government debt levels, say 200 to 250% to 3% plus and total debt levels, including consumer debt and corporate debt in excess of those levels, then at some point, there's going to be a change in perspective or a change in psychology. And this gets to the issue of inflation. Inflation, we have to first admit, is not all that well understood. I mean, there are many, many economists that have very fancy models that would like to tell us exactly how it's going to go. The reality is we don't really know because there is that psychological element. The story of inflation in recent years has been that, yes, the banks have printed a bunch of money, but velocity is still low, right? A lot of those dollars are sitting on bank balance sheets

or they're sitting in people's bank accounts. And until people start pushing those dollars and banks start pushing those dollars out of their accounts, inflation is going to be low. Well, the problem is it's really hard to tell in advance, really hard to predict when human psychology changes. Here again, credit to Ben Hunt. One of his ideas, I'm not sure if it's his original idea, but he definitely popularized it, is this idea of common knowledge, right? It's not what I know and what you know. It's not what everybody knows. It's what everyone knows that everyone knows. It's that moment in time where people are looking around and they're seeing, oh, trillions of dollars are being printed. And oh, the currency's, you know, being

debased. And at some point, there's a, you know, there's sort of a tipping point, right? And then you get the cascade of change in human behavior, the velocity goes up, and then you end up with an inflationary situation. So those are the things that I'm watching and thinking about, and I can go into more depth. But getting to your question of Mises versus Keynes, yeah, it's been a Keynesian world for the last century, but I think Mises will have his revenge. i do as well and uh i'm just looking at the charts that you have on the second slide here page three and just like you're just looking at like the 10-year yield curve like um or the history of the yield of the 10-year treasury note like it's it does not look

like a good chart it is trending in one direction that's toward zero and so when it gets there It's basically saying that the 10-year investment in the United States will yield you no return. That's the trend that this chart particularly is going in, and many other durations, whether it be 10-year, 30-year, 5-year, look the same way. And that's the way every investment asset, well, almost every investment asset gets benchmarked. people say well if the 10-year you know treasury is yielding five percent which it did many years ago you know i'm gonna i'm gonna demand a 10 annualized return to hold stocks i should say stocks um but if the 10 years at zero well maybe i only demand five percent annualized return from from stocks and that helps tell the story of why valuations are at near record levels right

multiples of earnings multiples of cash flow evaluations are really high because people are willing to bid up stocks to make that you know call it five percent annualized return uh because you know it's better than they can do in treasuries and uh most of them still haven't uh figured out the opportunity in bitcoin right um that's it is crazy that bitcoin like sits there it still gets derided you know all this madness is still going on in the world that's So before we get into, like, Bitcoin, I want to stay on this topic, like, the U.S. dollar and whether or not it's truly being debased at a rate that is uncontrollable into the future. Going back to Japan, people love to point at that, like, it's okay, it's okay. But if you look at the underlying state of their society, they have the lowest birth rate in the world.

It's under one, I believe, at this point. studies have come out and asking people like why aren't you having children or more than one child and 89 of some of the surveys that i've seen respond that it's economic so even though the nike uh maybe uh at a at a like maybe performing well and uh inflation quote-unquote inflation reported inflation isn't extremely high according to the indices that the central banks will put in front of you it seems like if you look at the underlying society it would it would paint a different picture and that's coming here to the united states like we had our lowest birth rate recorded birth rate on record just announced a few weeks ago and over 110 years since that's been

recorded um i haven't seen any surveys asking why that birth rate has fallen here in america particularly but i would assume uh money has has a big is a big factor in in people's delaying of family formation or just ditching a family formation at all probably coupled with cultural things uh like people being uh more selfish these days and having more wanderlust wanting to travel over start a family probably combination of things but then like i wrote about in the bend there's this huge and this is the keynesian mindset huge delusion of the collective we that public debt doesn't matter because it's only money we owe ourselves dead is money we owe ourselves i love that one well it doesn't make well and that's like i got

in a fight with joe wisenthal about it over the weekend and then this morning i still like thinking about decided to write about it i was still thinking about the tweet exchange we had on saturday i was like this doesn't make any sense because they'll say qe is a net zero effect because it's just fed buying treasuries and it net zero on both balance sheets on the bank's balance sheets and the fed's balance sheet but that's that's here really misrepresenting what's going on i'm gonna say something which is gonna piss some people off and i'm not gonna name names because i don't want to throw anyone under the bus but i had this debate with one of my family members. I actually sent an email out a couple of months ago and the discussion or basically the

question I was asking was, you know, is it worth it? Is, you know, the lockdowns, is the deficit spending, is the money printing worth it? And the way I framed it was, you know, what was like the bad case scenario, you know, for lives lost due to COVID in the U.S.? Probably a couple million, let's say, right? I mean, it's been, I don't know, what has it been? A hundred thousand or whatever. But let's say if we'd done, you know, nothing, you know, 2 million people would die. Okay. Or even 3 million. Let's say it was going to be really bad.

Well, what did we spend to avoid, you know, that loss of life? Well, we spent 3 trillion or more. Okay. What does that amount to? Well, rough math comes to a million dollars a life. And so the question, is that worth it? And the answer is, well, depends on to whom, right? Did you bring your checkbook, Marty?

Are you ready? You're ready to write a check for a million dollars. And this particular family member, his retort was, oh, no, you've got this all wrong. In the bailout package, you know, in the in the deficit spending package, the CARES Act, excuse me, you know, they're only spending whatever he said. They're only spending one hundred fifty billion or something on health care. So that was his that was his lens. He was viewing it, by the way. he happens to be a boomer. His lens was that, oh, they're only spending a few hundred billion on healthcare. Of course, the answer is no, no, you're incurring all this debt that the older generations won't have to pay for because they'll be gone when the bill comes due and you've saddled

it all onto the younger generation. This concept is one that I have to tread carefully around because I have lots of clients that are boomers and they don't want to hear this. Well, boomers and older right silent generation two they got the best deal um but uh yeah it's a it's a it's a misunderstood problem this concept that you know there's nobody that's going to have to pay for this debt we're incurring today number one or number two that it's this you know net zero transfer um is is extremely misguided extremely misguided yeah the net zero stuff is the thing that pisses me off because you either have to be ignorant incompetent or malicious to to trot that line out particularly because it's not net zero the fed gets the treasuries and then they

become unproductive productive assets on its balance sheet and it gives the banks dollars that's that's that transaction's net zero yes they're getting equal amount of the banks are getting equal amount of dollars the treasuries that they hand over to the fed the dollars are them being levered in the system which creates crazy inequality and they're being levered in financial assets which affords the owners of those assets and like undue benefits it doesn't make any sense like to say that's net zero is being completely uh disingenuous like it's it's insane it is it's i i many of my clients do not understand that they have lived out their lives during this period of just ongoing debt incurrence and they have yes they think that it was all their

you know hard work and brilliance that made them wealthy and it was partly that but it was also partly just living through this period of borrowing you know yeah basically juicing the economy with the expectation that some future generation will pay it back and it's really hard for people i don't know hard for people understand you know or they just don't want don't want to understand it i'll say i'll say one thing which has dual meaning so first there will be blood you know this movie i think you've talked have you talked about it on the pod we've we've brought it up i'll drink your milkshake has come up yeah exactly i'll drink your milk so there will be blood remember that because i think if we don't get the debt problem

solved there actually will be blood but the movie okay is based on a novel called oil which was written by upton sinclair and upton sinclair you know wrote several famous books and he was a very quotable guy but what but my favorite quote of his is it's difficult to get a man to understand something when his salary depends on not understanding it right and in in one way the older generations, quote unquote, salary, you know, social security, entitlements, all this unfunded liabilities depends on not understanding this debt problem. And likewise, when you look at the legacy, you know, financial system, this is part of my mission these days, right? Educating basically wealth managers, bankers, et cetera, about Bitcoin. Their salary also depends on

not understanding it this i think helps partly explain why it has taken so long for these people to uh to figure it out they just have they have the opposite incentive and man you get the blinders on it's really hard to see the truth when you've got uh your livelihood depending on on something different yeah especially if you're sitting sitting comfy with that 2 and 20 it's hard to justify 2 and 20 for Bitcoin when it's a bearer asset you should probably hold and there's not really too much active management needed to

invest wisely in Bitcoin specifically. Yeah. And this was part of my personal journey was, like I said, I wrote that research report in 2017 and my view at the time was, I don't know who's going to win so I'm going to hold a basket

basically, hold the portfolio and Bitcoin will always be I shouldn't say will always but Bitcoin should be the largest part of the portfolio but I want to own all this other stuff because you know I don't know what's going to succeed and now when I look at the investment thesis today and likewise over the last you know three months six months year year and a half it's pretty clear to me that Bitcoin is the thing right hard money assets are the thing and you know will there be I hate to say it like will there be another you know altcoin bull market

Sadly, there probably will be. I tend to be in the same boat as Corey Clipston. He's like, look, even if it's a fraction in percentage of the last one, well, if the magnitude of Bitcoin gets where we think it will, then that'll still be huge, absolute dollars. I could say the same for gold, by the way. Here, I'm going to get some more flack from the freaks out there. I think gold makes more money, accumulates or accrues more value in the next few years than Bitcoin, just because it's so much bigger, right? If gold is a $10 trillion asset, or let's say the monetary premium embedded in gold is $6 or $7 trillion, and it accumulates $5 trillion of value, right? So gold goes to whatever, 2500 an ounce. It's at 1700 now. Do I think that Bitcoin is going to accumulate five trillion of value in the next four years? I might. I think it's going to take longer than that. But yeah, hard money assets are probably an important thing to own. this for our clients you know for my clients is basically it it didn't used to be it's now a new sort of discrete category on its own it's bitcoin and it's gold and uh with the with the money

printer going you're gonna want to own those hard money assets right i mean yeah i think that's why we're both here and so i guess this is a good question while we're on this topic as as somebody is advising clients on allocating a portion of their investable funds into bitcoin how do you how much into bitcoin like how do you there's obviously going to be a transitionary period stocks stocks can go up for quite some time if fed manipulation uh persists the way it has for the last uh 10 years or yeah 10 years specifically um how do you i know i just said you shouldn't like actively manage bitcoin positions but how do you sort of uh transition into this uh and and how are you advising your clients on doing that yeah a couple things there so i tweeted i think

last week uh something along the lines of uh you know in march when i was buying stonks uh you know, Bitcoiners thought I was crazy. And when I was buying Bitcoin in March, you know, my stock investors and stock clients thought I was crazy, right? Both sides thought buying the other asset was nuts. I can definitely create a scenario or imagine a scenario where, as you suggest, you know, there's just so much money printing that basically every asset goes up. So then the question is, well, what goes up more? Or, you know, do you get debasement of purchasing power such that actually you're only, you know, treading water or even losing net value in certain assets versus others. I do think that the hard money portion of an investment portfolio is really

important. And we can talk more about inflation, we probably should, but I don't know when it's going to hit, although I don't think it's going to take, you know, it's not going to take 10 years. When I published the book, you know, I told people, basically, I think we're going to see inflation within a decade. That was before COVID. Now, I don't think it's going to take a decade, right um so we'll see um how that goes but but as far as portfolio sizing is concerned you know it's hard not to be long stocks and we're still long stocks and you know this this face-ripping rally has uh has so far uh paid off in that regard not as much as bitcoin though at least year to date or as gold and bitcoin is the outperformer so far in 2020 and i'm very bullish

on Bitcoin. So I want that allocation to grow as a component of the portfolio. Now we've started small. We're greater than zero, but it's still a very small percentage. And I won't sort of give specific numbers because it varies a little bit client to client. But I would like to see us add to the position with time. I expect to see the portfolio allocation to increase just as a result of Bitcoin beating the market, beating stocks, beating basically everything else in terms of price appreciation. But I also would like to be accumulating over time for the rest of this year into next year, because I used to be very skeptical of the four-year cycle, stock-to-flow model, periodic repeat around the halving. And yet, it seems to be playing out again.

Every day that goes by and I see what the chart looks like, it seems to be more likely that history will repeat in that regard. And if it does, then we could have a huge bull market through the end of this year and into next year. And man, as an investor, you want exposure to that. Yeah. right because i'm thinking like when we when i worked when we when i worked at the managed futures fund we were fighting for like five percent of people's portfolios just like a as like a yeah insurance hedge uh within a portfolio go out get your stocks bonds five percent allocation of managed futures just in case shit hits the fan

um that's one thing i i toil about toil over a lot it's like when do these asset managers start moving that that insurance part of the portfolio um allocation from below 10 percent maybe between 10 and 20 percent um because of the potential outperformance against the market because it does seem like something's gotta hit ed here but we've been saying this for years too it's like the goddamn i feel like what's the crazy house when's the herd coming i think obviously Paul Tudor Jones, you know, Paul Tudor Jones runs a $40 billion hedge fund, his going on record being long Bitcoin, that matters. That's one. Two is actually, I think, the hard money thesis. In other words, to my mind, and other people have other opinions, I mean, but as the investment

case today, digital gold is like the strongest narrative, right? Okay. So then the question is, well, how much gold do you want to own? It may surprise some people to learn that a lot and i would even probably say the majority of wealth managers still have zero allocation to gold um so so if you're if the thesis or if the investment thesis let's say and there's many reasons to own bitcoin right not just you know not just investment but if the investment thesis is the hardest money ever um well if i can't even get an allocation of gold into my portfolio as a wealth manager, you know, then how am I going to get Bitcoin basically? Well, and you could argue, well, Bitcoin is better than gold. And I think that's true, but it is, you know, sort of a

farther bridge. It's a farther leap. So yeah, I think that, I think that the hard money thesis becoming more mainstream as the money keeps getting printed, the fiat keeps getting printed is going to be a significant driver for the Bitcoin investment thesis as far as institutional money is concerned no i agree and like we were talking before we hit record about dave portnoy and shrew bucks and um you have that him like being a huge personality sort of calling that out was it was a huge cultural event for me personally i noted it in the bent and on top of that you have a bunch of people in these protests like why do we pay taxes if the fed can just print money it seems like culturally at least uh from what i'm observing it seems that a tide seems to be turning

and people are beginning to question the efficacy of of the u.s dollar and fed policy more uh more aggressively now like people you wouldn't expect to in the past i wouldn't if when i was working at barcelona if you would have told me that that day portland would be calling out fed policy in early 2020 i would be like what the fuck is going on it's true it's true man there's there's signs and signals and i have to believe that the average person out there and as you know there i mean there isn't it's sort of silly in some ways to think about the quote-unquote average person it's really more about you know how many get get red pilled you know in sequence you know some percentage of population starts to question as you say wait why do i pay taxes if they can just print the money

but you know what what does this all mean and then you've got as you say mainstream you know guys big audience basic audiences basically talking about this stuff um as well as just the growth of your audience and you know other people's audiences right that's also an indicator the more people listen to marty bent and uh various other podcasters out there is is more exposure so their uh time time is our friend and um yeah another way to look at it too i was talking to someone recently about sort of inverting it, which is if we get to this time next year, or basically 12 months from now or 18 months from now, and Bitcoin price hasn't moved significantly higher, I may start to question the hard money thesis. Let's just put

it that way i'll start to wonder if if uh not if i was wrong well i will i will start to let's see my conviction will be a little bit uh will be a little bit shaken yeah well it's a good transition to further into your presentation is what would make a hard money thesis appealing and obviously that is real inflation inflation in the real world and you have a slide titled the gathering inflation storm you break it down into three um three uh sections of time 2001 to 2016 2016 to 2019 and then 2020 to 2030 first why these particular time periods um and then we'll go through the the factors of deflation and inflation on on this chart yeah no that sounds great i'm happy to do it. And this, I think, folds into sort of the Jeff Booth technological deflation

thesis. I know you had him on the pod. I think his book's great too. I really like the thought process he brings to it. And this is, it's basically one of the major inputs here. So big picture, I like, since we were talking about Mises before, I like Mises' framework of three major categories of goods in the economy. Okay. There is consumption goods, right that's stuff we we consume every day food clothing etc there's capital goods that is the means of production by which we make either the consumption goods you know or more capital goods to make consumption goods and then there's the monetary good that's money and this is admittedly a simple or simplistic framework but i think it basically works so you print more of the money

right and then it flows into the other two you print create more of the money monetary good okay it flows into the capital goods and it flows into the consumption goods. Now, to my mind, the effect on the capital goods is clear, right? You print money, as you were saying, you know, basically markets go up, stocks go up, real estate goes up, and that's like an unambiguous outcome. And you get the Cantillian effect, basically of the money flowing into these assets as well. Okay. But on the consumption good side, it's a little trickier. There's multiple factors at work. And this is, this is what we're talking about. This is what most economists are talking about when they're talking about quote unquote inflation. It's really

inflation of consumer prices or goods and services for the most part. And so the framework that I've laid out is, is yeah, this short of multiple, several driving factors for consumer price inflation and why it may be different now than it has been recently. So item one is technology And technology, you know, as Jeff Booth says, is always deflationary. He would probably even make the case that it is accelerating, right? That technology is moving so quickly that that deflationary effect of technology is increasing. And I am open to that idea, although I'm not sort of 100% convinced. But let's just say that technology is a deflationary force always. Okay, then you've got globalization and trade. And you laid out those time periods, 2001 to 2016. Okay, China joined the World Trade Organization, WTO, in 2001. This was hugely deflationary, right?

Because basically, you know, hundreds of millions of Chinese workers came onto the world market, and that held down the cost of production of many goods. So that was a deflationary force. That inverted, though, with the election of Donald Trump, we got protectionism and tariffs. And so the outsourcing of jobs basically from the U.S. to China went into reverse and what had been a deflationary force became inflationary at the margin because the cost of production of something and the cost of the good when you slap a tariff on it is increased. But now with the pandemic, looking forward into the next decade, that's into overdrive, right? If there was some doubt about whether it was a good idea to have all our supply chains running through China, that doubt has now gone away, right? It's clear that when you can't even supply yourself with critical, you know, protective equipment and basically medical supplies, pharmaceutical or physical supplies or otherwise, you got something wrong. So now it looks like there's consensus, rare consensus in politics, right? What's one thing that Democrats and Republicans can agree on?

Well, there isn't much, but it seems like one is, you know, everything going through China is a problem. So that is now, I would argue, even more inflationary than it had been, you know, since Trump got elected. OK, next factor is government stimulus. Now, government stimulus, I'm talking about printing money and deficit spending, has been basically going on for the last 20 years. I mean, through every bubble and downturn, right, you had the dot-com bubble, the internet, that popped, and you had stimulus. Then you had the global financial crisis, you had stimulus. And so that's sort of been a constant going on in waves. But now that's, of course, in hyperdrive.

I mean, it used to be that we talked about a billion dollars here, a billion dollars there. Pretty soon it's real money. Now we're talking trillion dollars here, trillion dollars there. So that's got to be at the margin inflationary. huge stimulus going on right now as a result of the pandemic. And then the last piece, which I think doesn't get enough airtime, is demographics. And there's two things going on. Most people think of the baby boomers as the biggest generation or cohort, basically, in modern American history. But actually, bigger than the boomers is the millennial generation, right? They're kids.

And what had happened in recent years was the demographics effect was sort of neutral, you know, in the first part of this century, you know, 2001 to 2016. But then what happened was you had a period where the millennials were joining the workforce. This was incremental labor coming into the workforce, which at the margin is more supply of labor, which keeps wages down, right? More people competing for the same wages. So that was a deflationary factor, which is now reversed because that cohort, right, which you are a member basically has joined the workforce. Now we've got what's going on with the boomers, and that is ongoing at the moment. I have clients who are now retiring en masse. That means they're taking their labor

out of the labor pool. So that's reducing the supply of labor, which again, should be at the margin inflationary for wages, there should be wage pressure there. So basically, suffice to say that there's several factors here that have sort of flipped in terms of they were either neutral or deflationary in the last 15 years, call it. And now those, you know, those those factors are pushing upward, likely pushing upward in terms of what they mean for inflation. Now, is it going to be inflationary soon? I don't think so. I think we've got this huge negative demand shock from the pandemic. People aren't spending. But I think once that passes, then we'll have to reckon with the possibility that these newly inflationary factors are likely to push up consumer prices

and goods prices. And I'll add one more thing to the mix, which is not in the presentation, which is what's going on in the banking system and specifically interest on excess reserves. When you look at all the money that's gotten pumped into the system by the Fed, a lot of it just ended up on the bank balance sheets. And specifically, it ended up in accounts that the banks just held with the Fed. Right. This is the excess reserves beyond what their banks are required to hold at the Fed, basically as safe collateral, you know, the safe base of the monetary system. Well, the Fed had been paying like two percent annualized interest on excess reserves for a period of a couple of years recently. Well, you know, in a low interest rate

environment, if you're a bank, and you can earn 2% a year, you know, for zero risk to have your money at the Fed, that is truly a quote, you know, risk free asset, right, the deposit at the Fed, you're going to do that. Well, what's happened recently is they is they remove the reserve requirements, as you know, and they took the interest on excess reserves, right, the Fed was paying the banks to hold there, and they cut it almost to zero. So now there is a stronger incentive for the banks to push money elsewhere away from their excess reserve account at the fed and into the economy and that should create credit which effectively you know creates money supply with the money multiplier and so that's another factor that today is at the margin you know more

likely to increase the money supply and increase uh in or be inflationary let's say that wasn't there you know very recently say last year yeah and so these last two particular uh factors are what scare me the most the combination of government stimulus in the form of helicopter money and uh the fed also sort of cutting rates and sort of incentivizing credit expansion beyond that and especially when you lock down like i and we're sort of already seeing aspects of inflation especially meat prices when you when you lock everybody down you airdrop money into their bank accounts and you shut down supply chains therefore creating uh scarcer consumable goods it seems like a perfect storm for inflation in my mind yeah dude my so i have been mostly you know locked

down i haven't left the house much my wife god bless her makes the weekly uh grocery store trip right and yeah we've got you know there's some stuff that's not available the uh the leafy greens are in short supply the meat is is rationed basically but you know you're limited at least in my neighborhood here in la you can only buy you know one serving of chicken basically you know two servings of beef you know one serving of pork and yeah she she picked up some steaks because you know we always make sure we get at least a steak a week and the price I can't remember the per pound price but you know the couple of small fillets was like 30 bucks and that's certainly way higher than it has been in the past so there's definitely inflation showing up in certain goods

uh, and services for sure. And then of course, as you know, well, the other story of inflation is, um, you know, the CPI, 42% of the CPI is housing costs and housing costs as computed in the CPI is based on a base, basically a fictional notion of, uh, of it's, I'm trying to remember the term. It's like owner's equivalent rent. Um, I've got it in the book, but, um, but yeah, it's basically the theoretical cost that a homeowner would charge themselves for rent. And as a matter of fact, when you look at the real estate market, so interest rate, real estate, as you know, is the most levered asset in the economy, right? There is more debt supporting the real estate market than in any other asset. So of course, when you keep interest rates down and you lower them and you

lower and you lower them, then your mortgage payment is decreased. And if you are a landlord Lord, and you own a property that you rent to people, well, then yes, you can afford to charge less rent if your mortgage cost is low. But of course, the effect of all this is that, you know, a house that used to cost, you know, 200 grand now costs four or 500 grand. And although you may be making the same mortgage payment to support that now more expensive house, right, because the interest rate is lower so the same mortgage payment supports more house the problem is you have some somehow you got to stump up the increase in the down payment right i mean 40 years ago in my neighborhood yeah you could buy a house with a down payment of you know i don't

know 20 30 grand probably and um now millennials have to find a way to scrape together 100 grand 200 grand you know for a down payment for a house in a major city and uh it's not so easy to accumulate that amount of capital uh you know when you're starting your career especially if you have student loans and you want to have a good health care that's i mean we've talked about it ad nauseum on on this podcast but the bastardization of the cpi and the fact that it doesn't include many goods like health care education housing well it has that housing heuristic but again that's a heuristic and it doesn't take into consideration the principle that needed like you just mentioned it's like again like is it criminal is it sheer incompetence

is it is it malice like are these like is the keep this system afloat at all cost mentality leading people to do truly evil things to represent uh inflation in this way like it's completely uh illegitimate and it's a complete lie like to say that my wife people don't have those costs yeah my wife will tell you that they're i'm like a pretty even-keeled guy you know sometimes too much so um but there's so there's not that many things that get me excited or pissed off but this is like the one thing that gets me pissed off is is the yes is basically the giant intergenerational theft and and it's more than that of course it's also the you know like we talk about the cantillion effects and you know the the explicit pushing of money and

value to financial assets that are owned you know only by a few by the way this all accrues to the benefit of of me and my clients right great news for my uh you know for for the investment accounts uh i manage thank you federal reserve for uh for bailing us out uh one more time um but yeah it's uh it's corrosive to society ultimately and i do worry i mean i do lose sleep about the resolution of it and this gets into sort of my you know my ethos on bitcoin like don't get me wrong if bitcoin does well i'll make money so i got a number go up there's a greed factor you know that's that's real um but i also take the view that the sooner we bring forward you know the monetary transition hopefully the less painful will be the unwind because as you know the longer

you kick the can the longer you uh keep that heroin addict on the junk you know the the the worse is the ultimate outcome when uh when he has to get off the stuff yeah i mean i mean we're saying saying it play out right now like with with the riots and the protests obviously they're um people are hitting the streets not because of monetary reasons but i think there's some tangential um effects at play here where it is everybody's riding um for the death of george floyd but i think there's an underlying um theme of people feeling completely disenfranchised and sort of lashing out at the system they may not all know what is the largest contributor to their um to their strife to their economic strife which is central banking um but it seems like

people are extremely frustrated and lashing out yes i agree with that and i you know i worry yeah i worry about all these factors and i worry about um yes i worry about the underlying causes and i think it's it's like anything else there's you know there's multi there's multiple causes it's multivariate uh but there's no doubt that if you create an environment where many people lose their jobs because you've you know because i say you because the government you know or the local government state whatever jurisdiction makes a decision to shut down the economy and basically force people, uh, out of their livelihoods, then you're inviting, um, you're inviting civil unrest, regardless of, you know, the underlying issues of, you know, racism and

mistreatment, um, you know, of citizens, especially black citizens by, you know, by the police. Um, that's very important also, but, uh, yeah, you just, you just add fuel to the fire when, uh, you know when you when you implement some of these policies yeah and i let's just repeat the one policy said the government shut down the economy like that statement should never be able to be uttered if we actually live in a truly capitalistic and free society like governments shouldn't be able to shut down whole economies yes i too was freaking out in the beginning it was for a two weeks shutdown but after two weeks after 90 days after we're approaching probably 120 days at this point uh the the control that the governments have over people being able to weigh the risk

of whether or not they should go conduct economic activity is becoming very scary so i agree 100 and my latest thinking marty has been i'm of two minds right one thing that i just keep thinking more about and reading more about and learning more about is i don't want to say chaos but you know just basically the behavior of complex systems and the ability to predict which is to say we have no ability to predict you know what's going to happen in a complex system and human societies are complex systems and economies are complex systems so so one you know angle is okay anytime you you poke that animal right anytime you try to push it in a certain direction you're likely to be surprised by what you know ultimately happens right you're

likely to you poke the bear you might be surprised uh what happens to you so that's one and then on the other side and that basically tells you that you just don't know what the future is and it's impossible to model and um and so you should have great humility about trying to manipulate or direct that complex system and then the other side is i look at the debt problem you know and i read Ray Dalio, and I say, how can this not resolve itself, basically with, you know, with inflation? I mean, yes, there's other ways to deal with excess debt. You can have austerity, but that's very difficult. You can have, you know, mass defaults and a depression, but governments won't let that happen. You know, you can have taxation redistribution, I think we'll probably get,

you know, some of that. You can have a jubilee, right? You can have debt forgiveness, which is a good, which is appealing in principle, but if you do too much of it, then people start to say, well, what is contract you know what is contract law basically and the foundation of the economy disappears um so yeah kind of all most roads well financial repression is another option which we're already seeing right we're already seeing interest rates get extremely low we may even see more capital controls that'll that's something i'm watching out for um but yeah all the roads lead to inflation so i'm really of two you know two minds part of me says it's got to go in this direction eventually but then part of me says i don't know you know i don't know what i know

i don't know how to how to predict civil unrest or what's going to happen with the election or you know just where where this country's going or where the world's going it's it's a humbling time it really is and well time of opportunity too right like thank god bitcoin's here hopefully um success continues and more and more people begin to wake up to the thesis that of bitcoin and why it may be a good idea to get a hold of some if you can because it's it's to me at least it's drastically important that we that we start building systems like bitcoin and assets like bitcoin hard money assets become more mainstream and popular because again this is it's getting insane yeah and and it's and it's uh it seems more and more like the only way out right the

only likely way out i actually so this is interesting right you know getting back to sort of the investment thesis because i had this debate with one of my partners and he's and he is he does not believe we're his position is basically i'm not willing to hedge against inflation i'm not willing to position a portfolio you know to hedge against inflation basically until i see the inflation show up right not until i see the whites of their eyes am i going to shoot at them right and and my perspective is well by that time you're going to be paying a lot more for the insurance right you're going to be paying 2500 an ounce for gold and you're going to be paying you know 50k for bitcoin and so it's it's unwise to uh it's unwise to uh not position

yourself um in advance of that and so yeah yeah the slippage i would imagine if if an inflationary god forbid hyperinflationary event were to start occurring would would not be would not be advantageous yeah exactly i mean my view is you gotta you gotta position yourself soon you gotta to position yourself now, and the thesis is so clear and so asymmetric. Again, in addition, like the inflation is one thing, and then the trust in government is another thing. This is another debate I have with my partners, which is, let's say, you know, this pandemic was sort of a nothing burger. I mean, look, a lot of people have already died. So it isn't nothing. I it's definitely taken many lives but let's say that it was significantly overblown and we're

back in a growing economy and we're back in a bull market soon i mean we're already it looks like in the bull market but and we talk about that but let's say it's all you know rainbows and unicorns and everything's coming up daisies that still doesn't make me feel good about it what i just went through right because to your point it's like wait a minute we just shut down the entire economy for months at a time you know and put you know tens of millions of people out of work and uh and meanwhile the the government grows right leviathan grows goliath grows and so this is this is another debate i have with my wife is you know she's more you know sort of progressive you know larger government than i am and the point i i raise with her frequently

is, you know, the bigger government gets as a percent of GDP, the more you have at stake when they screw up, right? A small government that screws up badly, you know, relatively speaking, doesn't do as much damage. When the government is huge, then minor policy screw ups really have significant effect. And so yeah, I come out on the other side of the saying, well, if it was a big problem, you know, if it's still a big ongoing problem, then you know, we're in for dark times, right it's going to be a long recession and if it turns out that it wasn't so bad well then still we just witnessed our government you know probably go off the rails and kind of blow it and neither scenario gives me more confidence in the system and so every time i lose a little bit of confidence

in the system i transfer a little bit more value into into bitcoin right i stack a few more sets i found myself stacking sats every day at this point yep me too me too as you know uh as you know i use swan bitcoin for that purpose so there's the shill yeah gotta get the shill in but beyond the shill like you mentioned earlier you think we're in a in a bull market i definitely want to dive into that and also this slide on bitcoin's correlation in the context of other risk assets or correlation with or with correlation to or non-correlation to other risk assets because that's been a huge meme this year is that everybody's saying that bitcoin's moving a lockstep with equities and it's sort of driven by fed policy as well

but uh bitcoin does seem to be non-correlated when you actually dive into the numbers and expand your your time horizon a bit yeah yep so i agree and and there's a couple ways to look at correlation so the the numbers i lay out in the book are monthly return data right and i use i go back as far as the uh reasonable or dependable data go back which is about 2011 you know prior to that bitcoin's price was below a dollar and you probably can't trust the price data and i correlate it to u.s stocks that's the s&p and foreign developed market stocks that's msci eva and emerging market stocks, and gold and bonds in the form of the Barclays Aggregate Index. So those five major asset classes. And yeah, on monthly data, Bitcoin has less than 20%

correlation. So it seems to be uncorrelated. The second thing I looked at was, you know, monthly data is nice, but I got to tell you, as an investor, I don't care that much about monthly correlation. What I really care about is when the shit hits the fan, right? When stocks and other risk assets are falling dramatically, then what does the asset do? And so when I published the book, I think there had been five periods. Well, we hadn't had, by the way, a significant bear market in stocks up to that point. I mean, I think we technically maybe had a bear market on the S&P in late 2018, like just barely, but it didn't last very long. So anyway, in those five periods, it was two of the periods Bitcoin outperformed, two of the periods it underperformed, and one of the periods it did about the same.

And those were the various crises of the last decade, which were, you know, it wasn't the global financial crisis because we didn't have data then, but it was the euro crisis, you know, and it was the China crisis when they de-pegged the currency, etc. So, yeah, it did better in some cases, did worse in other cases. Now, obviously, in the most recent downturn, you know, Bitcoin had that tough day when it tanked, you know, went down more than 50% in March, but it sprang back very quickly. So what does it all mean? Well, what it means is, you know, the correlation, you talk about correlation in aggregate, or you can talk about correlation conditional on circumstances. So we talked about what happened in March, right? Well, in a scenario where it's just a liquidation, where market participants are panicking, and they are selling literally every asset, they're selling stocks, they're selling gold, you know, they're selling Bitcoin, they're selling, you know, liquid real estate, basically anything, then it's going to go down. everything else. So then the question is, well, what does the future hold? And people talk about Bitcoin being negatively correlated or a hedge. I think we're two orders of magnitude away from that, right? I think we'll be talking about that when Bitcoin is deep into the six figures

in terms of dollar price. So will it eventually happen? Yes, if Bitcoin reaches its potential, but I don't think we're anywhere near that. And I think in the meantime, it's okay that it's sort of broadly uncorrelated on average, except for in liquidation circumstances where it is correlated. And it is what it is, and that's fine. And we're going to find out, you know, if and when we get inflation, then we're going to really find out if it behaves as a hard money asset i think it likely will but yeah only time will tell only time will tell i'm optimistic i think i was thumbing through the sovereign individual again over the weekend i uh i lent my original copy out to a friend haven't seen it in a couple years so i decided to to buy a new copy

and it came and nice just going back to like page 24 when they predicted that this stuff would come uh and it has been predicted like the or at least the writing has been on the wall for quite some time that these governments and the sovereign individual they were focused on emerging market uh like like russia and in asia in the 90s and it seems that this uh that's what i'm looking for this um give me a second i'm gonna get it i'm gonna get it regime change no it's uh undisciplined undisciplined monetary policy has spread from emerging markets to the big dogs in bank of japan euro and and now the fed as well and undisciplined

uh coordination across the world will not bode well um for in the long term it just can't like am i crazy to say it just can't like i have all this debt like or are we wrong are we just wrong as mmt the future i agree i don't think i don't think uh money can be printed in infinite amounts without ultimately resulting in inflation it just doesn't stand to reason and it goes back to the comment you made before, which is also the popular meme now, which is, if we can print infinite money, why have taxes? And the answer is, well, then we shouldn't have taxes. We should just print infinite money. And of course, we know that that's not true. It doesn't work out. So yeah, I am very bullish. I am quite optimistic on Bitcoin. I wrote it in the book and I continue

to say today that it is not only the most attractive and asymmetric investment opportunity I've seen in my 17-year career, but I think it's likely the best one I'll ever see in my career, depending on how long I live, I guess. But yeah, it's very attractive. And again, we've been talking through the investment lens, but all the other geopolitical and authoritarian and freedom uh limiting things that are going on throughout the world all you know all those roads point to bitcoin adoption i completely agree um before we wrap up here one question i had in my head earlier i forgot to ask how are you moving into bitcoin for your clients what products are using specifically so i don't like to you know get specific and you know show particular products

um i think people know that there are i'll speak generally so there is one product today that you can buy in your brokerage account that's ticker gbtc that's the bitcoin trust um the downside of buying that is you're paying a premium to net asset value right so you got to you got to pay $1.20 for a dollar's worth of Bitcoin. That's one downside. The other downside, obviously, is it's, you know, it's custody. It's a third party. So that's one product. There are also limited partnership structures. There's a few of them out there, which are basically hedge fund structures where you don't have to pay a premium and you buy basically at net asset value. Oh, by the way, the downside with all these investment products, of course, also is there's,

you know, management fees. I mean, you're paying someone basically to hold your Bitcoin. So another thing that I'm working on is actually for Swan, which is an institutional option, you know, for dollar cost averaging, basically auto stacking Bitcoin over time on a weekly basis or even a daily basis. and you know that's that's a product we're working on it doesn't exist yet but i think there are well i know there are also others in the marketplace that are working with other exchanges and custodians basically to try to uh to launch products um for investment purposes this is obviously you know separate and discreet from holding your own keys i tell my clients i tell everyone you know try to learn about holding your own keys get comfortable experiment with small amounts of money you know basically raise your game continuously right and uh and try to

custody yourself um and so that's the long-term goal but uh but yeah in the meantime anyone who's trusting a third party with their investment strategy and their portfolio management these are some of the options you know that are either available today or likely to uh to be available in the future i think eventually we'll get an etf but man who knows when that happens could be a while not holding my breath for the etf yeah i'm not either nor am i particularly excited by it like i i would i'd be interested to see if like a product emerges where like something like unchained spreading further where you can engage like a multi-sig quorum with your money manager and sort of have at least some custody of of the bitcoin and i'm actually aware

of i'm aware of one provider that's already doing this who i just met recently some and and they're doing it you know multi-asset so i'm not gonna i'm not gonna show them directly but but what you're describing is starting to happen. And it's an interesting, you know, when you think about the future of Bitcoin, where can this go? It's an issue, right? I mean, the more third party, I mean, I know you talk about this. I know Matt O'Dell talks about this. The more third party custody, especially concentrated third party custody, and I'm not going to name names here, there is, of those Bitcoins, you know, the worse it is, right? And so in the ultimate maturation of bitcoin i am hopeful that more people are running nodes more people are managing their own wallets

that more people have what you say you know multi-sig or or sharded you know deep deep cold storage bitcoins um i think there may be a transition period before we reach there sort of like there's been a transition period you know with mining right you know it got actually more concentrated for a while um you're doing i think your part to uh to develop the the onshore uh you know mining industry which i think is actually really important for the long term of bitcoin is distributing that hash power more broadly throughout the world so yeah in the short term this stuff could concentrate it could concentrate it could go counter to decentralization and it's gonna you know it's gonna take effort basically by people to uh educate people or

educate holders to then take it into their own hands take possession of the keys and uh and that's that's the goal that's the long term it may take a while no i agree and that's harp on this every once in a while too santiago siri when he was on here the first or second or second episode second or third episode made a really good point of like when cities got industrial plumbing for the first time people learn how to wash your hands and wipe their asses and take showers that's sort of what we have to do here now that uh public key cryptography in the form of bitcoin is is going to go mainstream people need to learn how to control their keys and secure their keys it's just going to take time and i'm i'm confident the ux has improved drastically since i've been

paying attention and and using bitcoin uh just in the seven years alone so i think moving forward that that trend will continue i'm not i'm not too worried about that i agree completely i mean as long as cryptography well let me frame it differently we need cryptography you know to preserve basic human freedoms and the way things have gone with the internet That if private key management does not become a core life skill in the next decade, then we'll have a problem. Whether it's related to holding Bitcoins or basically controlling private information that we selectively choose to release to other people and the Internet and the wider world. We have to figure this out. this is this is a this is a civilizational requirement you know for continuing on

basically as a species uh and not slipping into uh into a darker type of scenario i completely agree and again i'm more optimistic than the most and i think i think we will rise the occasion and the need to figure this stuff out we're the most adaptive animal to ever live on this planet i don't see why we wouldn't adapt to this as well yeah i agree and thank thankfully satoshi gave us an instrument that wraps human greed and number go up and provides this incentive to learn how to uh how to manage a private key and hopefully that doesn't get uh co-opted by third parties and i like you am optimistic that in the long run it won't be and that people will become more self-sovereign and uh so yeah we just have to we just have to do

our little part uh to help people learn how to do it yeah well thank you for doing your part on the front lines writing books educating investors um building products to help people invest via ira that's what you're working on at swan correct yep yeah exactly i mean whether it's ira format you know or taxable format or both um is uh exactly could be could be uh both directions bang bang we'll have to talk more about that product specifically at some point um in the future do you have any parting notes for the freaks out there before we wrap up yeah no i this has been a blast marty i really appreciate it um i'll do the usual uh usual shills uh you know the book is why buy bitcoin investing today in the money of tomorrow it's uh

It's meant to be the thing that you can hand to someone you know that is maybe curious and maybe knows a little but not much. And obviously, it's how Bitcoin works and the investment thesis and the risks. But it's also peppered with some fun anecdotes from my times at Goldman and working in finance. And it's available on Amazon and Apple and Barnes & Noble. Amazon's the primary channel, but you can find it a bunch of places. Follow me on Twitter. It's Edstrom Andrew. That's my handle.

uh swan bitcoin check it out swan bitcoin.com forward slash andy you get 10 bucks free bitcoin for signing up and signing up is super easy it takes less than five minutes and then uh my firm which does wealth management uh we both you know invest for people and we provide them financial advice and do financial planning and that website is westcapgroup.com and i'll give the disclaimer that i should have given at the beginning which is uh you know none of this is investment advice so that these opinions are my own, not those of my employer or anyone else. And do your own research and, you know, all that good stuff. Do your own research.

Don't trust us freaks. Verify what we're talking about. Don't trust. Do verify. But do, you know, do subscribe to The Bent and, you know, keep learning. I'm learning every day, man. I've learned from you. I've learned from others in the space.

i'm hoping to to give back a little bit and um but we're all we're all learning every day yes we are never stop learning that's the beauty of bitcoin it forces you to learn yeah man some a lot of uh someday i'll be a i hope to be a black belt and uh and understand it down to the to the protocol level and the code something to aspire to i'm nowhere close i'm just a finance guy trying to wrap my head around uh around it but yeah and i mean the protocol stuff's getting especially with lightning thrown in now too it's it's hard for me to even keep i mean not that i'm an expert on the protocol at any means but i i like to think i have a good grasp on it but i'm finding it with everything that's going on like still hard to catch up which may be a good thing

means a lot of things are going on a lot of people working on things yeah man even working full time in the space which i don't uh but even working full-time in the space it's hard to it's hard to catch up which is or stay abreast which is a cause for uh for hope i mean that's a good sign there's so many you know thousands of people way smarter than me who are working to build this thing and uh that's that's gonna what that's gonna be one of the things that carries its success i completely agree well keep crushing it keep doing what you're doing thank you again for coming on uh i really thoroughly enjoyed this conversation i think the freaks are gonna love it too uh thank you marty i really appreciate it and uh it's been a blast all right that's all

we got today freaks peace and love