TFTC: A Bitcoin Podcast - #763: The Everything Bubble Is Ending with Nick Nemeth

Episode Date: June 27, 2026

Marty sits down with Nick Nemeth to discuss the rot at the core of private credit and insurance, why layered leverage from sovereign wealth funds to BDCs is pushing the everything bubble toward a systemic unwind, and how Bitcoin’s future depends on rejecting Saylor-style financial engineering in favor of peer-to-peer digital cash. Nick on X: https://x.com/NickNemo17 Mispriced Assets: https://mispricedassets.substack.com/ STACK SATS hat: https://tftcmerch.io/ Our newsletter: https://www.tftc.io/bitcoin-brief/ TFTC Elite (Ad-free & Discord): https://www.tftc.io/#/portal/signup/ Discord: https://discord.gg/yHGkvYxdqT Opportunity Cost Extension: https://www.opportunitycost.app/ Shoutout to our sponsors: Bitkey https://bitkey.world/ Aven https://www.aven.com/bitcoin CrowdHealth https://www.joincrowdhealth.com/tftc Unchained https://unchained.com/tftc/ Lygos https://lygos.finance/ Salt of the Earth: https://drinksote.com/tftc Join the TFTC Movement: Main YT Channel https://www.youtube.com/c/TFTC21/videos Clips YT Channel https://www.youtube.com/channel/UCUQcW3jxfQfEUS8kqR5pJtQ Website https://tftc.io/ Newsletter tftc.io/bitcoin-brief/ Twitter https://twitter.com/tftc21 Instagram https://www.instagram.com/tftc.io/ Nostr https://primal.net/tftc Follow Marty Bent: Twitter https://twitter.com/martybent Nostr https://primal.net/martybent Newsletter https://tftc.io/martys-bent/ Podcast https://www.tftc.io/tag/podcasts/

You've had a dynamic where money's become freer than free. When 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 nickname it it's a pleasure to meet you in person sir yeah it's good to see you it's been two months since our first conversation and what has happened since i was telling you it seems like

the whole systemic credit contagion headlines that were in the news when we first spoke have have left the headlines but it seems like there's still progression on the back end in terms of redemptions redemption gating and actually saw we wrote about in the newsletter yesterday private credit issuance and underwriting is down like 40 month on month yeah it's like in march if you're looking at the ai token numbers they were just going up but ai stocks were falling off the cliff so there's a little bit of uh there's it's it's not making sense right because if you look at the defaults redemptions everything's going up but the narrative you know people get tired of hearing about it until the next shoe drops and during something like this

that's deteriorating it's almost like a shark attack maybe like the shark will nibble you and get your calf and then it'll go swim off and you think you're fine and then it comes back and like takes your leg well what's uh what's new on the default front what what sectors are defaulting So it's actually really interesting. I've done a lot of work into this and I keep on expecting software to be up at the top and it's not, it's like healthcare and consumer. So software is basically at average levels. And again, a lot of it's HIC payment in kind, which is these guys just instead of paying your credit card minimum every single month, they're just like, okay, just keep on rolling it up. And if you don't have any cash commitment, you can't default. I mean, maybe

they'll call it quits but the medallia you remember uh hearing the medallia story your audience probably knows that and i'll get like really specific what is the medallia story so so medallia um had half cash half pick so they had some cash component and they actually were positive by 200 million dollars but they defaulted on their debt because one EBITDA is not cashflow. But two, they wanted to ask Blackstone, like, hey, can we switch this over to PIC? And Blackstone was like, nah, we're not really going to do that for a business that's likely not growing. And for those that are unaware, these payment in kind loans, they come with egregiously higher carrying costs too. Yeah, it's like 14%. So if you look at US equities,

the s&p 500 is much higher quality equities with moats you know there's some junk in there there's some value traps in there but generally speaking these are some of the best companies in the world what's in these private equity and private credit portfolios if you look through tama bravo i'm like what are these companies i'll see a couple cyber companies that i'll know like mcafee or whatever and the rest are like the the narrative that they go out and say these are quality companies there's great companies and i'm looking through and it's like and plural site that's chegg for tech-ish employees to learn how to use a crm like now they're just prompting claude like how do i exactly they're just like claude go do that and there might be um some value and

infrastructure of software but that value is likely in the public markets data bricks is in the private markets might be a great one but there's a definitely a lower quality in software and we haven't even seen that in defaults yet so when that picks up and joins the consumer and the health care we're already seeing 2008 level defaults so i mean people don't seem to care until they do care but defaults from a rate of default perspective or magnitude of defaults i want the rate of default but i wonder on the magnitude it's definitely more because the asset class is bigger um but i wonder just segmenting out are the is the lower lower middle market doing worse than the middle market doing worse than you know the big software

companies that's something i don't have off the top of my head good idea though no and i think that's something we uh not that but another thing we touched on a couple months ago that i'm still trying to wrap my head is like is this systemic like how much contagion risk can can come from this this private credit market specifically and that's what we focused on predominantly in the first conversation is the intermingling of private credit and the insurance goes and um you're from what i recall your your basically thought process is that it's not necessarily private credit that could incite this contagion risk it's the insurance that are insurance companies that are exposed to it i think private credit would incite the insurance

which would infect the system wherever there's a massive wealth effect to the negative side i also think it's systemic so if you're thinking about private equity guys and i just wrote this up yesterday two days ago if they're driving the economy because they're the highest income earners they're relying on their carry and their carry doesn't come and they're also sometimes five times levered into the fund you know subsidized maybe the loan subsidized by their fund or this huge gp financing industry well on this note i i watched your video describing this i don't think many people realize this but when you run a fund you're expected to invest in the fund and it's not not always coming out of pocket. No, they don't have the money for the numbers that they're

contributing. I mean, the thing is with private credit and this idea as well, at first principle, it kind of makes sense. You want to have skin in the game and LPs want to see that you have skin in the game. But the way that it's gone, and I've been meeting in New York City, and when I heard the extent of that i mean we're talking greenwich homes being secured for a margin loan into private equity that some of these funds you may not get back for 15 years what's it called an uh asset portfolio you loan against your asset portfolio they have it's not a typical mortgage no no yeah i i think that might be what it's called but then there's on the underlying portfolios there's that so you have nav loans and this is all basing so you have the private credit and you have the

private equity if you're just it's not mark to market consistently no well i nobody trusts the marks if you ask these guys in private credit you know hey is this company actually worth three billion the answer more likely than not is maybe like maybe when we extend it for four years and recovers the multiple or something like that it's always hope about the future and it's very untested if you talk to private markets guys they're not like public markets guys you may like see a personality difference private market guys talk slower public market guys a little like cuckoo for cocoa puffs sometimes they're constantly because they need to play speed chess and people will tell you you're dumb private markets for 15 years has been told that they're

greatest gift to earth and they believe it and maybe they're the ones that started this story so i think that a lot of the stories that are being told and again you could be five times levered into the fund by the way the saudis are happy to see that they are going to norges bank the bank of norway and giving them a hundred million dollars of treasuries and getting a billion back minus a haircut. Then they'll put out of that a hundred million dollars that turned into a billion dollars, 250 million in this fund and 250 million into this fund and 250 million into this fund. So the LPs, the GPs are levered. Pension funds are less levered. Endowments are less levered, but the sovereign wealth funds and certain players on the LP side are extremely

levered. So inside the fund, you have leverage. Then on the portfolio level, let's just say it's a billion dollar fund. They'll take out $200 million of debt on the whole portfolio, which is the first lien to the portfolio. Then they'll invest, do leverage buyouts of companies at an extremely high leverage rate. So it's leverage into leverage into leverage. so what you just described there i think highlights to me where this could be come systemic and going back to the saudi norway bank yeah levering up people don't think about levering up 10x and then spreading a 250 million dollar trunks around different funds and the norwegian banks looking to make a return on that billion dollars that or that 900 million dollars

that they lent you they are incredibly smart so if they pull the plug on the saudis and say hey we need more money. We need more money. The Saudis are going to go ask the U.S. for U.S. dollar swaps as they have done just to get more money and to stay levered into the system because their cash flows are good, but do not support their massive real estate build-outs and the full, not even remotely close to the full equity of their investments across the world that's mainly in the U S a lot of that's a liquid. So there is a massive amount of globe, uh, sovereign wealth fund risk. I believe the Norwegians are better, you know, Swiss might be better, but I have a particular concern about the Arabs that everyone thinks that have infinite money, their economies

are collapsing right now. And, you know, if you make, I don't know, a trillion dollars per year, i forget their their gdp but i guess maybe 250 billion naturally could go into markets after they spend their real estate and and whatever investments they're doing at home they're deploying a lot more than that there's there's no they don't have the money printer they have to get access to our money printer so i i'm like slightly concerned about the uh arabs in just the system what's going on in their economies well tourism's falling off a cliff because the iran war yeah and a lot of pipelines have been slowed or stopped the qataris uae saudis and they're just shoving they're right now they're just shoving right during uh march they

bought a lot of puts they didn't sell like these guys don't sell and a lot of people have this uh perspective that markets just go up you just gotta buy yourself time and i think that's creating a massive bubble everywhere yeah now you think about it too you look at dixie dixie strengthening and that would validate what you just said because that's what i've been talking about it on my monday show with john arnold um hard it's been strengthening hard well because where else are you going to go especially if you're blowing up the middle east and you have this ai wave hitting here who knows that way it's going to crash or not but uh the like if you're you're looking for a return, you got to come to us capital markets. Yeah. I mean, people ask me

what's a safe place. If this plays out poorly, I'm not a perma bear, right? I try to make money wherever I see the best place to make money. Um, I had to force myself to buy on the gap up in April. Right. And I was like, market should not be going up right now. It just shouldn't, but it is. So I just got to force myself to buy something. And then the week late a week later, you know, I'm like, okay, what's the most irrational thing to buy right now? Like, what should i not be by okay i'm gonna buy that um but yeah ultimately people ask like hey if this goes you know the way that you think will eventually go what do i buy and i'm like cash like you buy cash because even treasuries will come down initially even bitcoin will come down

initially even gold will come down initially all the assets are correlated and there's no real place to hide and that's kind of a scary thing well maybe we're already seeing that right a lot of people in bitcoin describe bitcoin as this liquidity alarm bell that that acts uh leading indicator and precious metals do as well because you know again you saw turkey sell a bunch of gold these if if there's like turkey excuse you what turkey yeah okay um yeah when you see big players really need liquidity they sell gold and that's scary you know so people like will buy it when they're worried about something but not when they're panicking and you gotta wait until like there's dust settles in order to be like okay there's

gonna be a bailout or whatever you know that's how people typically justify buying precious metals there's going to be a lot of money printing but the best time to do it is not like it's not before the panic people will be hedging out over two three years on gold and then when the panic actually comes they'll sell it and i'll just be down so so massively in a couple days might wipe out years of gains yeah because we actually wrote about in our newsletter this morning uh 45 percent of central banks have signaled that they're going to increase their gold holdings year on year from 26 to 27. the pace of buying over the last three years is surpassing i believe the decade previous um so they have been stacking a lot of gold and the price the price isn't result uh showing that

yeah no no it's not and that's uh maybe these are lagging indicators from last year when the price was ripping but um again bring this back to like systemic risk contagion where it may break out like give us an update on the interplay between private credit insurance yeah so i think that's the bomb you know i i talk about the big picture because it's it all happens at the same time there's so much leverage built into the system people want to talk about oh the consumer's not as leveraged as it was in 08 and it's like their home values are fake like you know those homes aren't worth that much right especially if you look forward to you know the boomer retirement you know that next 10-15 years they're all going to be retired and a lot of them are going to be

selling their homes for one for one reason or another um so you know the home mortgages that are at all-time highs people are like but home equities are at all-time highs and i'm like yeah a little bit you know something egregiously high yeah on the total residential uh real estate market and you have credit cards at all-time highs you have asset-backed lending which they're doing burritos and you know used car loans carvana so you know everything mortgage-backed securities uh commercial mortgage-backed securities like the commercial real estate market is god awful right now you know so it's all these asset classes and they all move together but the private credit is the worst most untested part of credit it's not all bad but it's a lot of

real bad junk and people usually get off the stop in the exit where they go do the banks have a lot of this and for you and me they do but for their balance sheets no they don't have a lot of it Um, or they'll look at the fact sheets from Aries, Blackstone, BlackRock, all of them. Everyone is in this. Like it was the, it was the freest money on earth because you don't have to follow interest rates. You know, you just mark your little Excel spreadsheet every quarter or every month. So we all just started rushing to it.

It's the greatest story on earth. And at a certain point, you got to find new buyers. Right. it's you know it's not a ponzi scheme but it's ponzi like and you see like a desperation when all of a sudden the money's not coming in because you know bernie madoff said he had 10 15 returns every single year very smooth all of a sudden you know it's all of a sudden the assets are going down and people are like struggling for liquidity and wanting their money back and he can't find them and typically you know just human psychology then they start panicking and

they go into the next one and right now it's 401ks but prior to that all the wealthy people had made money from 2010 to 2017 in private equity and they actually survived 2008 because a lot of funds could just be extended through it and they mostly recovered um they started looking for insurance Because they're looking back to Warren Buffett, and we talked about this last time, and they're like, well, you can take a big balance sheet and just take risk with it, right? It makes sense. And for those who didn't hear our first conversation where the risk is introduced there, where it may differ from Buffett's strategies that these private equity funds were getting large, I think, like majority ownership stakes in these insurers and then replacing the asset manager of the insurance program with themselves and then feeding that investment capital into other products that they control. Yeah. So the alternatives, the private placements, that's where they make the money, right? So they've been maxing out. Immediately, they get all the assets. Warren Buffett was buying value stocks, Coca-Cola. It's better than buying just bonds, right? you know before the mutual insurance era it was a lot of bonds at some point it got into high

yields and then executive life blew up so there has been like historical blow-ups but there weren't a lot of equities especially in the 50s so um so warren buffett was like hey like got a hundred million dollars here why don't we put 10 15 and value stocks and you buy the business for like 5 million 10 million bucks so then all of a sudden it's like you're levered but it kind of spreads out and if you do really good underwriting you can make a lot of money yeah and his whole play is like we're buying value stocks that have a track record that are sustainable that are sort of embedded i mean i mean for berkshire halfway a lot of cultural brands coke the insurance company geico all that um established economies of scale um pretty predictable cash flows but bringing

this back to like private equity buying these insurers like their yeah uh private credit funds are more speculative in nature yeah and also yes so buffett was really good at just being completely ignorant of i mean he would address it but he somehow would just put the blinders on and he would be like can this visit handle everything inside of a portfolio where i may be wrong a few times but is this just going to stay intact through whatever cycle comes and he would he would do intelligently, but he would look for pristine balance sheets with moats that are operating in a cashflow basis. And private equity was like, okay, like we can do that, but let's charge 2% fees, carry, lever up these businesses a lot. The businesses rarely have moats. You know,

if you look through these portfolio companies, you wouldn't recognize the names. It's not like See's Candy or Coca-Cola. So they took it to the limit and then the limit kept on moving almost every year, especially over the past five years, it's accelerated. This private equity push to insurance probably started with Athene's founding. So Apollo co-founded Athene and they ended up buying it. And those are two points in this that marked the beginning and the acceleration in my point of view and the regulators are supposed to stop this right but the regulators have been allowing it and they'll literally have rules that say you can't put this more than this much and you know affiliated paper which is apollo owns athene and these investments are underwritten

by apollo and we are trying to see if athene is safe so you can like related parties exactly so it's supposed to be half of the capital surplus or 10 of assets but the lesser of the two and we are talking about i believe it's 26 times what the limit should be apollo and athene and this regulator in Iowa, he goes, sure, sign it. And then he has the audacity to go out there and say, well, we really, you know, we really shouldn't allow, this shouldn't be happening. And it's like, you're allowing it, buddy. And he's like, oh, I wish we could see what's in Bermuda. And it's like, it means in Bermuda, like you're allowing that to happen. So, you know, There's a lot of perverse incentives. And I guess what I would say to bring it to, okay, this is systemic, is if this blows up, these balance sheets are levered 30, if you're a mutual fund, it might be 15, but mass mutual is horrendous, to 60 to 90 times.

And when you look at Athene, and I've done a lot of work on this because I think that there's going to be money made shorting it. If you look at Athene's capital surplus, they say $20 billion. Oh, Fortress Balance Sheet. It's like, okay, how about we take out the Goodwill and the amortized sales credits? All of a sudden, it drops down $16 billion. So the $20 billion becomes $4 billion. and then you can take out um other capital that's intangible not in that four billion supporting how much in libel 670 billion dollars like it's it's insane and people just think these apollo guys are so smart that they can they're smart in a sly way they are so they're so evil they are smart they're good with the narrative i'll give mark rowan that but the hubris the arrogance and you can see it they what they do a couple things intelligently compared to peers they pull away from certain industries that they just feel

like the crowd's getting in and they'll go to the next one but they run a risk level that is i think it's it's higher at a bigger scale than anything that's ever happened in financial history like i keep on going back to the south sea bubble where there was a government a private private uh partnership with the government where for the time i feel like maybe that would rival this scale and people were like oh the government's behind it and the the poems and the first person accounts that i see kind of feel similar i other than that it's not 2008 so freaks this work was brought to you by good friends at bitkey as things happen things get lost you need to replace your phone life happens and bitkey has been designed with this in mind uh so if you're looking for

the easiest way to secure your bitcoin off the exchange go get a bitkey doesn't come with any seed phrases there's no single point of failure it's a two or three multi-sig you have your device you have the mobile app and block stores a key in the server so you have collaborative multi-sig there on top of that the new bit key has a screen so you can actually see and verify what you're approving you can look at transactions addresses account changes the difference between trusting and knowing has been built into the new bit key with the screen they've changed code delegation and other advanced features like inheritance recovery if you're looking to get your bitcoin off exchange you haven't done so you're looking for the easiest way to do that go get a bit key

you can use our code today tftc to get 10 off the new bitkey so go download the bitkey app use the code tftc to get 10 off the new bitkey and start your self-custody journey today this episode has been sponsored by our good friends at bitkey freaks look at me i'm glowing i've got like an angel's halo going around me you know why that is is i feel good i feel taken care of i feel blessed healthy happy and that is because i'm a crowd health member my family and i have been crowd health members for five years now literally this month five years ago we joined crowd health We've had two babies. We've had multiple health events, and we're never going back to health insurance. CrowdHealth is crowdfunded healthcare. So you sign up for CrowdHealth, you pay a monthly

fee, you help out with other people's bills, and it's significantly cheaper than health insurance. We were on COBRA as a family of three when I left my last job before I went full-time to TFTC. Went on the CrowdHealth. Now as a family of five, we pay, I believe, $700 a month. It's significantly cheaper. They're going to negotiate prices lower for you. They've consistently negotiated healthcare prices as much as 50, 60, 80%. In many cases, they help out with babies. You have a pregnancy, you pay the first $3,000 and the crowd covers the rest. If you have a regular health event, you pay $500 and the crowd pays the rest. Go to joincrowdhealth.com. Sign up today. Use the code TFTC. Opt out of health insurance. I'm an insured

baby and i love it use the code tftc at joincrowdhealth.com and you'll get 99 a month for the first three months that you're on the crowd health platform in the community bitcoiners you found sovereign money now find sovereign health and sovereign health care there are many people who listen to our first episodes like is this guy does he know what he's talking about but i dm'd you i had a good friend at a big four bank working on basically their private credit desk who texted me immediately after listening to our episode he's like he's dead right like showed me some presentations that they've been going around giving warning about this risk and there are people in the industry particularly in banking commercial banking that understand

this risk exists they're trying to point it out um but from what i understand a lot of people on the inside have been hitting you up independently as well what are they saying Well, it's 50-50. So when it comes to insurance, there is some, the smartest people that I know, I try to, I talk to like, especially people that you've known for years, they will look at it and they'll look at the statutory equity and the gap equity and they'll read the sell-side reports. and they'll just be like there's you got to reconcile that you know and then i spend four months going through 10 000 page filings over multiple years for 680 insurers and i'll come back to them and i'll be like i reconciled this this gap equity what fitch and moody's are saying is the capital surplus in bermuda it's it's not real and then they go okay these things are going to take longer than you think right so there is that side that just you know it's been a bull

market for 15 years and um even long short guys are mostly just trying to stay afloat on uh on their shorts then on the other side um i have to say that there is an extreme understanding that there's a massive problem that could infect absolutely everything. The question is the timing, but there is, and I don't want to lead myself too much there. There is a content. There is a segment of the hedge fund community. It's not the tiger cubs, right? Tiger cubs are, you know, beat and raise, beat and raise. Oh, no beat and raise. That's it. They're not looking to really make money on the short side, generally speaking, but there is a segment of, um, the hedge fund community that's trying to do work and get their hands around this. And I think the banking guys,

like more, more 25% of them actually kind of understand. And it's just sort of, because I've been on this for so long and doing so much work and talking to so many people and getting it inflows i can tell that it's picking up intensity what's the uh the spectrum of timelines that people on the inside that understand this that's the trillion dollar question yeah well what are their their inclinations in terms of people are scarred and they look back to 2007 2006 and they don't want to be too early and blown out i'm you know with a few partners i'm like you can make this carry neutral, right? You can get paid to wait. And then when it blows up, you'll lose on something and you'll make a whole lot more on something else. Um, but I think we're talking

in quarters. I don't think we're talking in years and I get, I understand the wisdom of like, Hey, it's not going to happen as soon as you, you, you think. But I also think at the same time, to happen sooner than you think. And it happens quicker than you think. So the work that I've done and continue to do, I mean, it was like two days when Mythos came out, just auditing my work in one night, I spent 1500 bucks. I'm like, yeah, you got it in before they pulled it out. Yeah. And then they took it away from me. I felt like I'd been broken up with. It was the worst thing ever. I had all these ideas. I saw our future together, but it was worth that fifteen hundred dollars it was worth that fifteen hundred dollars

mythos is really good at um you know whatever the next gen models i'm sure they're all going to do this really good at segmenting out and tackling large data sets sort of almost agentically inside of a prompt so it would put out 120 sub-agents and just do one task and then 70 more and do another task and i was kind of shocked because i'm used to opus like i gotta type this out ask me questions let's go through it let's make a game plan um which gave great output but um metheus was just ripping it i was like oh yeah you go get them go get them well thinking of um again and it's probably annoying to hear this time and time again particularly for me but it's like what is the match that lights the fuse?

And thinking back to 08 as an analog and the big short. It was just defaults in 08. Well, yeah, because we remember the part of the big short where things are defaulting, but the rating agencies refused to downgrade a lot of those mortgage-backed security investments and the CDOs. So it's just purely defaults.

i think it could be i think it could be four or so things well because also when that was going on like defaults were rising rating agencies weren't moving but the banks were offloading their books and i think that's starting to happen yeah and that's that's the point i'm getting is that happening right now yeah so they'll do it uniquely right maybe they'll sell a swap against it do a bonds. I'm not inside an investment bank, but I do kind of hear things and I have friends and I talk to them. They're definitely cutting back the risk. And when it comes to the funding mechanisms, like these guys got basically commercial paper sometimes for these BDCs and the funds that Jamie Dimon is sitting there with his hands on the rug, right? And you know, he's going to rug pull

And he's going to be right because it's your financial best interest to not take the loss. And you may know that by pulling this rug, it's going to blow up, but it's not your responsibility, right? It's not your responsibility to help Cliffwater have liquidity, right? so i i do think that the institutions qualified institutional buyers or the whatever funders they're really starting to get their hands around this and ultimately it's only a matter of time you know maybe it's not this quarter maybe it's not next quarter but it could be three or four quarters from now and you know as defaults continue to go up again software hasn't even defaulted yet right you know the idea i see a lot of people that say well

ai's you know ai is a bubble so software has to be fine like there's a potential and i think ai is more fine than probably the consensus these days there's a potential that the there's no roi on hyperscalers and software explodes and they've just rushed into hyperscalers in order to diversify away from software well that's what i was going to bring up maybe that's the the matches right you have all these hyperscalers that have funded their capex build out via cash flows for the last three years and you had google come out well last month and do an equity raise that that guy participated in but next they're going to have to go to to debt markets to really and they're starting to they've done so much they've done more than people

understands the debt markets well that's a big question like do they go to really tap the debt markets and then all these private credit funds are like we don't have the cash or we need to get liquidity um or do the private credit funds view this as like a hail mary like yes let's pile into this and hopefully the roi makes our nut back on the back end they don't they don't know how to have um reservation when allocating capital their businesses allocate capital they get paid to allocate capital there's no and maybe it's not the best time they're just thinking kind of like a rat in a maze you know oh we're getting burned on software like we got to go here and now they're going to energy like they just go and that's a huge problem if you think about what private

markets are supposed to be it's like stuff that's not going to do well in public markets because not popular and it's quirky and you know you can make a good return just by maybe prettying it up but mostly just operating it well and you know it's cheap now they're like blackstone is like ooh years 2021 what's hot enterprise sas and infrastructure okay let's do a bunch of green and a bunch of you know rapper like the 10 times arr software application that was built by 25 guys and you know built upon since but it you know has some revenue and seems to be on a good trajectory you know every year since it's like they just go into the hot stuff okay now it's data centers now it's, you know, going to be energy because they can see oil prices as well. We think it's going

to stay above $70. So let's go into that. And also we are underexposed there. It's like, yeah, but you guys are writing seven year loans. Like if you go into the hottest thing every single year and expect to exit in seven years, it's not like a public markets person where, you know, you can buy them a momentum and if you know how to get out you'll make money these guys have no liquidity so they're going in at not at already elevated multiples in some cases extremely elevated multiples expecting in seven to ten years that while clipping a management fee every single year that there's going to be a multiple expansion and ebitda is going to grow so well i mean and i think to solve this problem

within the last few years you've seen these secondary funds get raised where somebody will raise a fund basically to buy secondaries from private equity bc funds that have that have underwritten and deployed capital and their fund life cycle is coming up and they need to to get liquidity back to their lps and so they'll basically go to a secondary fund sell their share and the secondary fund will take on that risk my favorite one of my favorite shorts i have a few favorite shorts is stepstone stepstone is a secondary platform used to be institutional went towards retail pays a massive sales credit three and a half percent for one share class to sucker people in day one markups does it you know on average i think that's three

percent of their returns throughout their portfolio but then they'll mark up day two and day three they will tout the spacex made a bunch of money on spacex um the small lines and andrel and anthropic the rest is hidden in these spvs nobody has any idea what they are and you know that it's enterprise sass and it's infrastructure and it's stuff that like one of them is called peggy aggregator LLC. Another one's I have a tweet where I just go through and I'm like reading through and I'm just highlighting the craziest names for these SPVs that make absolutely no sense. And then I actually like tried to try to figure out what they were. I was like, no, okay. Or a couple of them, I did figure it out and I excluded those. So StepStone, that's an example of what's

happening in the private market hamilton lanes another one they're just trying to get liquidity we're in the end of the cycle okay i don't care what anyone says it's been a long cycle it's been a great cycle you might not think it's going to end as poorly as i do okay that's fine we are closer to the end than the beginning and these guys are like oh spacex this year like this is going to CAGR it 10, 15%. Like their gains right now, they think next year they're going to have 10% more. And the next year they're going to have 10% more. And StepStone particularly is paying mostly for executives, basically 60% of their market cap because they built this retail business. What? Yes. On a multiple of 2026 and 2027, it's like 50%, 26. They're going to exercise the put.

that's an assumption 50 of 2026 is unrealized gains 40 of 2025 unrealized gains and this is like the best this is the best ipo market ever especially for a secondary platform typically getting good shares in the secondary markets hard but like spacex was a very unique situation that had a lot of liquidity because it was private for a long time and now it's below where and they're going to dilute the crap out of common uh out of shareholders and the stories that they tell i'm like man you guys are dumb you guys face x or the investors uh stepstone the analysts i came out with a short report and all of a sudden it was it was right before the earnings call and all of a sudden all of the analysts were like reading like a line to ask from from

my short report i swear to god they had never asked any of those questions before and all of a sudden they're all asking about the the put and the spacex valuation and how much it was marked up and the answers were horrendous besides the first call typically they give a softball like it's a fake hardball who was answering these questions the underwriters or spacex no the stepstone executives okay that made this deal with their sub agents oh so you're you were telling the lp analyst in stepson to ask these questions no it's the it's the um stepson the sell side analyst oh so after the earnings steps on public steps on public yeah there we go past sense steps on public and all of a sudden it's like all right guys like thanks you know there's a lot a lot more

to come in my view sup freaks this rep was brought to you by good friends at ligos finance celsius blockfi ftx they took your bitcoin and gambled it away ligos can't because they never hold it non-custodial lending on bitcoin's base layer your keys your collateral it's verifiable on-chain. Go to ligos.finance. Tell them that TFTC sent you. and it always takes two keys to move bitcoin meaning their single key can't access your bitcoin on its own just resilient shared custody that gives you institutional grade security while keeping you sovereign unchained also lets you trade straight from your vault access bitcoin back commercial loans open a bitcoin ira where you hold your own keys and set up personal business

trust or retirement vaults they even offer inheritance solutions built for long-term hodlers or opt for the highest level private client service with unchained signature and get a dedicated account manager discounted trading fees exclusive access to events and features and much much more if you want a partner that helps you secure and grow your bitcoin without giving up control go to unchained.com and use the code tftc10 at checkout to get 10 off your new bitcoin multisig volt that's tftc10 at unchained.com well another interesting twist here too is with coming in i mean last week's fomc meeting i think he made it pretty explicit that he doesn't really want to do bailouts this time around like he wants yeah there's so many articulate the definition of

recession is when you have over levered over indebted companies that that got over their skis actually just dying off because that's that's what should happen and so it'll be interesting to see if that does manifest and he does let him go everything he says like 95 i agree with if you just look at the history of warsh at morgan stanley they were like he doesn't do work he just walks around and pats people on the back and says like what's up brah what are you working on brah and then he marries a billionaire heiress and all of a sudden is in the bush administration if you look at reports of what he did in the bush administration he was just like setting up meetings and shaking hands and

being the networker guy then he becomes fed governor because apparently he did a good job at that the worst track record on record of identifying crises and responding to them out of probably any of the fed governors and then he's like a stanford professor after that i don't know works for dreck and miller probably setting up meetings and giving him chit chats and now he's controlling the economy he has good ideas like i do think that he is intelligent on a intellectual theory basis but when shit hits the fan those types of people have no idea you know you see may see it for making money the smartest people you know the isaac newtons of the world have no idea what to do and it's the fan it's not the speed chess that he famously

aped into uh the east india company at the top right i was just yeah yeah 17 20. yeah um yeah so it's like rick reader is actually a genius i get that he works at blackrock but i've grown up listening to him. Every time Rick Reader's on CNBC, I'm like turning up the volume and I'm just listening on mine. And he's like, he uses his hands. I feel like intelligent people, when they're trying to explain something simply, they use their hands a lot. And I just feel like he's just conjuring a mental model that is sufficient to handle most scenarios. Versus when I look at Wursh, I'm like, I don't know if he really understands these things like it's different to build a mental model versus to follow you know like a wave of

you know intelligent discussion well that's another question too doesn't really matter because it seems pretty clear that the whole thrust of the trump administration going back two years now in the lead up to the 2024 election was we're going to basically go back to a fed treasury accord where they're going to work in simpatico and since the administration has come office at the beginning of last year they've really sort of leaned into for lack of a better term nationalization of core sectors of the economy putting direct investments in companies like intel and other infrastructure companies and it seems like we are as a country and as at the treasury and at the executive level like on wartime footing in terms of

of a nationalization of parts of the economy so like is there like a treasury bailout that manifest through all this maybe it's not maybe it's not a bailout of private equity it's just like a hey private equity uh got over their skis over indebted maybe that's why wars is out there saying we're not doing bailouts this time but ai being a systemic national security risk as identified by the administration like hey we're gonna let that fail but we're gonna ensure that this infrastructure build out sustains yeah no i'm there for that it doesn't help these portfolios because you're screwed at 90 90 it doesn't matter if the government backstops 10 right it just doesn't um i do think that if shit hits the fan there's gonna be like a you know new deal that's

gonna be ubi and pushing ai like that's the fiscal response that i would imagine um it's just you can't print enough money for um true systemic distrust to be jaw-boned you can't there's only 22 trillion dollars of u.s dollars in circulation we're talking about asset classes that are extreme multiples of that right so if you double the money supply okay but what if people still don't want to own that stuff right you could double the money supply and you could buy private equity companies right based on how much they're levered maybe you have a little bit to spare but i don't want that to happen like i mean it's gonna suck the dollars can be worth nothing yeah and and by the way the more importantly like you should have a feedback loop of failures

there's so much moral hazard in all of this you know it would take three hours to explain the incentives at each level and you have to follow one to a trail and you're like oh but this is a different moral hazard we have to come back to that and they are like tied and it's this you know tree of how this incentive system has done exactly what it's done we gotta let it fail and like last time i'm talking and i sound like a sourpuss like we need the market to crash and I'm like, would it be that bad? Right. I get that young people take more risk and we're going to get smoked and it's, it is what it is, but imagine just clearing the decks and all of a sudden, maybe you can buy a home in the Hamptons for 2 million bucks again. So you might go back to,

you know, not much, but you have skills, right? You have the opportunity, you have the youth and you have the vigor and by the way those vacate those florida homes might be 150 grand right there's 750 grand now someone's gonna get liquidated you can buy a foreclosed house and you can have a winter home as well if we just let this stuff deliver it would be so much healthier and the only way i can describe it is like it's like somebody that has like a real like cerebral palsy or something and you're just putting steroids into them and you're like okay are you like better like you're not you're just juiced to the gills like and and eventually it's going to be worse and it's going to be worse the longer that it happens

and the more cycles because every time that the repo market blows up a hedge fund is like oh my god we're gonna lose all our money and then you know everyone hears about it in like certain circles and the fed comes in and just like completely seals it that guy's fine three more hedge funds are going to step up their risk right and it happens every single place like every time we bail out people the there's people with a thousand residential uh homes you know in the sunbelt state because they heard that was a great idea and they're all renting rent rental properties they think that housing price is never going to go down again because last time it was too hard so you know this time they're just it's just not going to happen so they can

take a billion dollars of debt or 250 million dollars of debt to do that just like can we just clean out a little bit of the greed in the system yeah you would hope that's the question again going back to warsh's comments last week like is he actually gonna stick by them um yeah i mean i hope so so that's a good comment good comment don't want to criticize the comment um i just don't trust it necessarily i will imagine the thick of the madness or like fucking we got to fill this hole let's just print the money yeah so when people when people i i do worry about warsh not being independent but do you really they've never really been independent they've never been no they've never been an illusion of independence but i think that warsh is actually

fine i actually find the the uh the explicit uh cooperation a bit refreshing where it's like all right you're not pissing on my face and telling me it's raining i yeah i i think that there's an opportunity to call you know a cat a cat but i am worried about his dependency on not trump trump thinks he's his guy warsh is not trump's guy warsh is the guys of the people that are currently backing trump right and if they switch sides warsh is immediately anti-trump trump's saying warsh is the worst pick ever i can't believe i did this well that's i mean we've had a shout out to matt dines who's on the show a few weeks ago and he he said explicitly that same thing where it's like you have this sort of american heritage rich that are backing trump to preserve

i mean this gets into a whole meta layer negative one discussion of like what is america and like what are we trying to do here and his argument was that like warsh's old heritage americans besent old heritage americans trump backed by old heritage americans to preserve american autonomy in this transition to the digital age where the davos class would like us to sort of be subsumed by their view of the world and yeah i think it's a different group than davos oh it is yeah that's yeah yeah but it but i but it is it is an elite group it's an elite group that's like davos that's not direction we're going like we're we're going in this direction yeah so all of those guys operate in circles that have feedback loops that rarely tell them they're wrong. I'm going to say

that they don't get it. They don't get it. Like, I don't think they're evil. You know, I, I, it takes a lot for me to think people are evil. BB Netanyahu might be evil, but these, you know, rich East Hampton guys, they have nice wives and they have nice dinner parties and they talk nice ideas and it's kind of like fencing and they're intellectualizing everything. They do not understand the way that this will be perceived if it doesn't go to plan. If Warsh ends up being a bad pick and he's tied to a billionaire heiress and that billionaire heiress is a member of these four clubs and Warsh is a member of these three clubs and they're in such a bubble that they think Like, well, like there's always people that are going to hate us for being successful.

Like what if you actually drastically lose the country and everyone knows exactly what, you know, circles you're running in, who your friends are, which is like publicly friends with, you know, a lot of people that do not want to be public and on photos. And it's like, guys, the elitist domination of this country is only going to hurt the elitist and it's only going to lead us into fascism or communism. Like, just put, your guys are successful. Go enjoy the beach. Like, stop trying to control everything. Well, I mean, and this goes back to something we were discussing earlier, which is sort of the dynamics of the guys running PE funds and how they can afford their lifestyle using portfolios to get loans out to do all that. but i was at a presentation by uh brown brothers uh the other week i got invited and it was a great presentation their lead economist basically pulled up the chart of the k-shaped economy and showed

that there's i mean you've seen the headlines like the american consumer is alive and well spending's up consumer spending's up and he pulled up a chart and said like the top 10 is driving 50 of consumer spending within the last year when historically that that sort of ratio of the top 10 percent driving consumer spending should be somewhere near like 30 maybe 20 to 30 percent so you're wholly dependent on that top 10 percent and then within that top 10 percent the top one to point one percent which is the individuals that are involved with private equity and other types of hedge funds and i i think from a self-preservation perspective what you're getting at here too it's like hey you need to realize like this is not going to work unless more people are

participating in the wealth effect and able to actually go and go about their lives and and put a roof over their heads buy food and uh enjoy some some uh paltry luxuries i guess i would say like just like a steak dinner on a friday exactly and uh that's like i think what you're getting at is like the social incohesion that can arise from uh mishandling this and i think you just look at consumer spending and the the portion of it that's being driven by the top 10 and i think that's proof in the pudding like hey like if you guys this up on the private equity side like not only are you gonna mess up your own life we're gonna ruin the economy and so we need to figure out a way to like land that plane and get everybody back on a level playing field there's

a little bit of a ramble but it's something i stoked in my mind while you're saying that no yeah well exactly right um the problem is convincing those people that maybe they got a little bit lucky and they're not god's gift to earth it's hard you know i just want to delineate when i'm talking about the people in private equity that make a lot of money and are potentially going to lose their homes and to take their kids out of private school i'm not talking about the people that have the 50 million home dollar home in southampton or montauk or whatever nantucket and are pulling political strings behind the scenes that do not benefit them and they're seeing one step ahead and not realizing maybe you should allow some competitive dynamic and

you know a capitalist democracy if you will of ideas well i think that's another important part like i am involved with the private equity fund on the vc side like i i am in this world as well and i think the point that's important to make is that these things aren't inherently bad in and of themselves it's just like the risk that's been allowed to take on in some pockets of the market is so extreme it's creating a systemic risk and it's not to say that we should never have private equity you need sort of capital allocators out there to invest in um people with moonshot ideas i mean valor atomics i think is a great example of this in the last week able to spin up a nuclear reactor in nine months wouldn't have happened without private equity venture capital dollars

coming in the room like these things are necessary functions for society and the economy to progress but it's just like as long as losses are allowed exactly like i love risk i get it listen i want to see somebody you know hit a hundred x but there's gotta be at least 50 zeros right you can't have this and what's happened in silicon valley like yes we've over the past 25 years had a lot of of technological innovation and a lot of people have made a lot of money helping um businesses become world-changing right but it's been too much of a game and a grift and you know it's kind of just leading it up and everyone knows it's going to tank but we ipo it right and it's too much of club and the good stuff you keep private, that whole, like everything just needs to be stress

tested. And I think 50% of venture capital, 50% of private equity, 50% of potentially insurance, it's all, let's just focus on the private equity. I think 50% of private equity funds are going to be gone in the next 10 years, right? It's gotten too crowded. It's gotten too crowded. We need losses. We need to test this, the assumptions. And honestly, everyone needs to go to his private equity networking events and just listen, Hey, we create value by having buying a, an accounting firm and a janitor service. And then the janitor service cleans the floor of the accounting firm. And the accounting firm does the taxes for the janitor firm value creation, you know, we synergies synergies right it's like it's insane if you listen to these guys it's insane yeah and there

are really smart people in every industry but private equity particularly um on the top you know if you go to the top five percent of intelligence and these are probably firms that nobody has heard of right the same thing with hedge funds but i think that you know it's the top 15%. There are obviously smart people in every industry. Mark Rowan, I think he's evil, but he's a smart guy. John Gregg, not so smart. Mark Rowan, pretty smart. Arigetti, Aronati, Michael Aronati. Who's the lawyer? Aronati, I think. Yeah, yeah. So Michael Aronati of Aries. He's smart, but those guys are just allocating way

too much tech capital and they're so deep into it that they're just Texas hedging by going everywhere at this point in time. But there are plenty of $30 billion private equity funds. I was talking to a private equity fund a week ago and I was like, there's good ideas, bouncing ideas back and forth. It lays over to the public markets, which is where I play. But they're generally intelligent people in the industry, but there's 80% nonsense and the consensus on how to create value and what value PE is or real estate, private equity, lower middle markets is the best opportunity. Like the justifications, if you really test them and again, public market guys get tested all the time, right? If you go out and say, I like service now, you know, someone's going to

say you're an idiot and you say i'm not an idiot here's why i'm not an idiot and he says you are an idiot here's why you're you're you're an idiot right it's a dialectic and and and it's quite frequently discussed on social media or otherwise well the information is free you can't short private equity it's open so you have like information there's not perfect information yes there's more information available the public filings do a lot because then you you really have evidence, the amount of work that I've had to do on these private credit portfolio porcos using alternative data sets, like just going crazy on web traffic and sales surveys, everything in order to try to figure out, is this company doing well? All of that stuff.

If you're in the public market, the way this is going to end, I think, and the way that should end and everyone should say that it should end, you have to file at least a consolidated statement that, you know, is audited that says how the business is doing. And we don't even know the covenants of these loans, but just more transparency would do wonders because then it would be pretty hard to argue that Pluralsight should be marked at 100 cents, right? Or 97 cents in some portfolios. That's the Chegg company. Chegg. Chegg. Because we see in the public market. Oh, Chegg company. Yeah. Companies go down 95% and then the same companies in private equity portfolio in a different flavor. And it's at par, right? Or what they bought it for four years ago. It doesn't make any sense, but you also can't short it, right? You can't go into, now there's some CDS on private credit, BDCs, but you can't go into, you know, Tom Abravo's Fund 7 and be like, you guys are terrible.

I'm just going to short all of this. The public marks are here. These public software companies are way better. These businesses are not growing. They're not cash flow positive. You underwrote them like idiots. and now sure maybe three of them will survive but the value is certainly going to be lower the fact that you cannot short this stuff i think you know people talk about shorts and

they say that they're an evil upon the face of the earth they're throwing short sellers in jail yeah a couple weeks ago i think left was a little sketchy but um yeah i mean bears are going to jail the bears are dead the bears are legitimately dead and it's like but like you need some bears otherwise the deers are gonna run rampant and that's what if you press the typical private equity or private credit person on assumptions they look like a doe they look like a doe with an oncoming 18 wheeler and they just like default to the same five things that they say justifies their existence yeah well i mean this is why i do what i do and what i've been doing this show for nine years nine years now which is hard to believe because i think a lot of the i mean

the bears are dying their their extinction is almost predetermined by the monetary system like going back to that saudi norwegian bank like the fact that you can lever up 10x on 100 million dollars get a billion dollars from money printed out of nothing is the whole problem so it's floating all these values across the board where it's private equity portfolios they're able to take loans out or raise a secondary fund to get cats like keep it afloat real estate prices same thing it's because there's no feedback mechanism not only will the government and the central banks not allow these things to fail they'll back it up with printed money that'll paper over it and like that's why i'm so passionate about bitcoin because i think bitcoin brings back a true opportunity

costs to the market where you're forced to weigh capital allocation decisions and there is a true cost to up that allocation which is we can't print more bitcoin so you got to figure out what is actually providing value in cash flow and i think that's a core part of the like again going to layer negative one it's like the money literally how the monetary system operates does that allow for this i think the feedback mechanism is you identify a risk the risk doesn't you know people cry wolf so many times right it doesn't materialize into a crisis and then you're back at the next risk that you identify and that loop has happened so many times where it hasn't blown up recently and you know the memory of people that are investing today that they think it's

it's just always going to happen. But the thing is, do you look through financial history? Things work for a long time before that, you know, eventually they stop working. Japan is a great example and it's recent, you know, they created a bubble and they did, you know, a lot of quantitative easing. And then all of a sudden they didn't have an economy that grew for 20 years. Right. But you can look back to the UK, look back to the Netherlands, you can look back to the Roman empire. Right. And, you know, Ray Dalio, I think he says some things that, you know, again, like these guys cry wolf too much. That's kind of the problem. Right. And then all of a sudden people are like, well, everything he said was wrong. And it's like, no, some of that's

actually true. You're just living on a timeframe that is, well, when he first heard that I was in high school and now, you know, I've got a wife and my baby's crying and I don't even want to hear that shit anymore i mean we get it a lot in the bitcoin space yeah we're crying wolf all the time yes now the the bitcoin people i think are directionally correct but they have been kind of scarred kind of like the gold people where you know they're like yeah it's all it's all bullshit it's all bullshit we're just gonna buy bitcoin you know some may be too much some as a hedge um and you know you can't print more print more bitcoin and we'll just leave it at that it takes like cte or a certain amount of brain damage to like consistently be like okay well i see the

risk okay it's i really want to identify six concussions here so yeah i really want to do a tremendous amount of work for you know six months on end in order to encapsulate this risk And, you know, maybe there's a new exit that's invented, but I don't think the old exit is going to work. And, you know, you can come off as schizophrenic. Like it's, it's a, it's a tough thing. And it's easier to just say, yeah, it's bullshit. And I'll just buy a little bit of this and I'll be intelligent. But the vast majority of people are like, you know, you're a perma bear if you like talk about anything bearish. Oh, a vast majority of people aren't even aware of it. They're not even aware yet. There's a bigger dichotomy. I live in circles where we debate this. Same.

The average American has no freaking idea what's going on. And shit, I just see a turn where everyone realizes it's bullshit. And it's going to go completely different than what our leaders think. and you know our leaders are so you like the you know the east hampton private equity finance crowd they think that they're just going to be able to say like socialism is segue pipeline dude yeah i'm interjecting with some uh instagram uh meme if it's like become a meme now yeah segue pipeline play lacrosse in an ivy so go to private equity live in the hamptons yes definitely a super i think humor does an amazing job of like telling truth right um there's do you

know the guy on tiktok that is like private according here do you know what that guy's name is the uh yeah the private equity like yeah it's private mr private equity whatever it's it's it's so true and i think it tells where this is gonna go because i think that the majority of financial elite, think that they have to worry about socialism and socialism is all they have to worry about. But a populist that can intelligently talk about free markets and how the markets aren't free and it's been entitled to a certain segment and it's been sort of like a regulated monopolies times 100 in every single industry and, you know, capital capture being political capital and isn't a socialist, like they're so unprepared to deal with that narrative.

And I think it's going to swing extremely hard. And sure, there's going to be socialists and there's going to be some whack jobs, but I think that there's a very intelligent argument that these guys are not God's gift to earth. No. And one could argue, I think you make a strong argument i have made it before that we do live in a socialist society it's just socialism for the rich feed these bailouts yes it's like yeah and that's what really that's where the real dangerous trap is is again going back to i mean it's objectively true the vast majority of americans have no idea what's going on they'll just know that something happens in the markets it blows up and they'll blame capitalism for it we don't have capitalism yeah and the socialists use

that as an inroad to see say capitalism got us into this situation your home value went down you lost your job because the capitalist system failed but we do not live in a capitalist society it is socialism for the the upper class and again i want to be very clear i'm not trying to denigrate denigrate excuse me uh wealth creation or wealth inequality wealth inequality is just a foregone conclusion of human society there are inequalities between each individual i think thomas soul said it perfectly no one man is equal to himself on a day-to-day basis like inequality is going to exist but i think the inequality is exacerbated by socialism for the rich via these bailouts we need class mobility and what that takes is the ability to go from the lower class to the upper

class or the middle class the upper middle class whatever you want to say but also from the upper class to the middle class also potentially from the upper class to the lower class and i think that there's the people are kind of like oh the company country could swing to like actual aoc socialism or now and those those are the identified opposition but i think you could thread the needle intelligently and explain it to the average american that hey socialism doesn't really work. There's ample evidence of that. But also what we have is not capitalism. And what we need is free markets, like legitimately free markets where there are losses. And if that happens, all of the moral hazard that we've been dancing around, what if there's not a bailout for

those guys? And I think that could be a huge, huge recession. A huge recession. If all of a sudden then the political power switches and a new crop gets elected. And the majority of our politicians are going. They're so old. So what if politics gets taken over by people that just don't service the same power, right? In that case, everyone's looking at AOC and Mamdani

and it's actually, that's not the opposition that you have to be in order to get the bailout that you're counting on for whenever this cycle is going to end. And listen, what I would say is maybe I'm an optimist. I think that route is going to have a lot of acute pain, but it's going to lead to the 30 years of a golden age with technology, with all of this stuff we talked about, but we kind of need a reset. And there's historical precedent for it. Was it the mini depression of 1920 or 1919 um there was yeah well with the the acute pain that you described it was it was big but we recovered very quickly there's like under hardened or something like that yeah

you know economies typically have cycles the last six to eight years eight years is long right we have had one cycle since 2008 i don't care what anyone says they want to say oh but covid Oh, but 2022, the leveraging didn't happen. And that's going to make it worse. But at the end of the day, we could have class mobility. And you got to take some of the leverage off. And some of these private equity guys that make a million dollars per year and have levered up in every aspect of their life and crept their lifestyle up to $90,000 for each kid, private school for K through 12 and then go to Duke and whatever. And college is extremely expensive and home prices are extremely expensive. The solution to all of this, I think, is just letting assets go down to

reasonable and normal levels and probably overshoot. And then at which point, people that have income should be gracious. Sure, maybe your 401k went down 50% and it sucks, but But home prices are now down 25%, 30%. And you've got to get into blue-chip, amazing companies for 14 priced earnings. That is the reset that could get us there. But it has to be with deregulation and sort of an antibiotic for the moral hazard that's currently in the system. It cannot be unnatural. Oh, things crash, we print.

Everyone that knows better is going to buy stocks when the Fed says we'll do anything it takes. So maybe Warsh is that guy. What I'm concerned with is that when things do inevitably crash, we're going to try to V recovery it again with the Federal Reserve, and it's not going to go well, and it's going to lead to more wealth inequality. And all of a sudden, Warsh is going to be the guy that it's like, well, why did you bail out your rich friends again?

And then the political variance from there could be communism, could be fascism, right? So I'm optimistic that we can thread the needle. And I think that's the only way that we can lead to a cohesive society for the long term in the United States, Europe, and pretty much the entire Western world is dealing with this problem. Yeah. And I mean, despite what, I think we have this other backdrop right now, which is a natural forcing function for all this to get set in motion, which is you look at the treasury yield curve and along into the yield curve, it's elevated to levels that people would have told you were impossible five years ago. And so you have this natural increase in the cost of capital via the bond market that's like forcing, like the Fed doesn't have to force it, but the bond market's forcing financial discipline on the market. And it will, I mean, I think ultimately that will be the catalyst for unearthing where the bodies are. Liquidity is drying up. Liquidity is absolutely drying up.

And, you know, a $6.5 trillion Fed balance sheet sounds huge. It was nine, but pre-global financial crisis might have been one or two. We're talking about hundreds of trillions of dollars in the debt markets, hundreds of trillions in just government debt, corporate debt, any sort of real estate related debt, whether residential or commercial, the asset stuff, leverage on the companies. When you put all of that together, if that is all coming down at the same time, the federal balance sheet may have to expand at such a level. It's this idea of a jawbone. People in financial markets understand the jawbone. The average American doesn't understand the jawbone, where the Fed will backstop and be like, you guys are good. We got your back.

It works while people think it's going to work. But if it doesn't work, we are completely unprepared for that because the true amount of dollars needed for the backstop on the level of the everything bubble that I see, we would have to triple, quadruple the federal balance sheet, and then you have the dollar in struggle. But then if you have the dollar in struggle, remember, this is a European issue, too. This is an Arab issue. All fiat currency at the same time. It's kind of like COVID. COVID backstop worked. But you're going to see massive, you know, government response.

And then all of a sudden, all that paper that has a number printed on it, that number is worth less, right? that would be a really painful thing because then you would have everyone trying to rush into real assets sure bitcoin would do amazing gold would do amazing but the economies would do horrendous on a real basis because you would just see the nominal gdps go up and all of a sudden inflation would kick off globally and in a way that you know it would be hard to create true value you know if you just hoard commodities like gold and bitcoin you're not creating value you might be hiding your wealth but you know and the volatility involved in that you know it would it would be gross yeah because you think of the return on capital necessary in the scenario

you just laid out where you're debasing the currency potentially approaching hyper deflation i mean we've seen this throughout history i mean i think the early episodes of the show had people from venezuela argentina brazil that told the story is hyperinflation you literally can't allocate capital because you don't have time to think about it your your time preference is such that you get your paycheck and you run to the grocery store to get as many goods as you can because the average person yeah i mean listen if i were to think about the best way that i can climb the the relative wealth channel it would be hyperinflation like i think i have the skills to navigate that environment very adeptly,

it's a zero-sum game at that point in time, right? And I don't want to live in, like, I'll do well in a deflationary environment, you know? Just go and buy bonds. You'll be able to read balance sheets and cashflow statements and be like, okay, well, I'll buy that debt, right? The hyperinflation is where you really need skill, right?

And the typical person doesn't have that skill. so um the idea that you know two percent inflation three percent inflation inflation can always stay within you know a relative band and it just takes some monetary finagling and will always stay there i think right now it's kind of like when the bank of england broke and they were trying to keep a band of um the the deutschmark and you know currencies throughout time i've tried to keep like a, you know, a relative, yeah, a peg or a window or something like that. I think that's kind of what we're doing with inflation. If there's massive deleveraging, you're going to see pretty significant, potentially great depression level deflation. If we respond to that and stop

that, I think we're going to go into probably the more painful category. And the idea that we can just stay here, it's, it's hogwash. And if you look, it's not even objectively true. I mean, the like they say we're staying here but if you look at real the money supply we're way out of it yeah we're way out of that i like when bitcoin guys point to the money supply instead of the cpi because cpi is bullshit right you can grow the money supply consistently 10 every single year but what you will see over the course of doing that initially cpi will be low because where that money supply grows goes into lending and goes into credit that potentially provides more supply So it's not inflationary on a demand side, right?

But over time, there's only so much, and you create massive bubbles, and there's only so much that you can lever up before all of a sudden people start demanding that either equities go up, and equities can only go up with profits going up consistently. So profits can only go up really by raising prices. And, you know, you can cut costs and AI may help do that. You know, that's kind of just, it's not changing the scale of this in the long run. If that happens, then you're going to get inflation. And these things happen, you know, they don't happen on a quarter to quarter basis. They don't happen on a year to year basis. And people think that modern monetary theory can just maintain, you know, this perfect level of, you know, Xanax and morphine and Adderall and like, we got so many drugs in our financial system, it's insane. And then, you know, it's just fine. That's how you operate and nobody ever gets health effects.

I think we're starting to experience the health effects. And, um, I don't think that just because certain things I've worked for 15 years that they will always work. And I would say the best scenario that I see is like a good, healthy correction. And based on the levels where we are, that healthy correction might be 40%, you know, across asset prices. That's what, back to where we were in 2020. Like if that. On home prices. Yeah. Yeah. Well, and that's the other, I mean, you mentioned Bitcoin is focusing on money supply versus CPI. And we actually do a monetary, we do a quarterly global monetary base update. There's this guy out of Latvia. He's American, but he lives in Latvia. His name is Matthew Mazanches, and he's one of my favorite monetary autists in the space. he's basically gone back and collected all the central bank data across the world going back like 50 years now at this point i think starting in 1970 and even before that he's got some data too but he's run the number the global monetary supply over the last 30 years has a i believe like a 12.5

category um so that's 12.5 percent on a global basis so adding all currencies together and sort of measuring the growth of the global monetary base over time as a 12.5% CAGR over 30 years. So maybe 10% on that, 11, 12% on equities isn't so good? Yeah, that's the argument you make. That's, yeah. I like the idea of investing in businesses and having smart people work for you.

But when the money supply is growing so much, and completely corrupt any investment decision well it inherently does because you're forced to think like you patient capital completely leaves the market because it doesn't have the luxury of being patient right and you you get this high velocity trash economy where you're yes getting money and pushing it into every piece of dog shit that exists because you need to get it in and get that return out as quickly as possible you know the function and the viability of the actual business be damned like just get it and get it out hot potato buffett is patient capital like epitome of patient capital a lot of the people that think they're patient capital are

now fomoing into quantum computing or something like they're like wait a minute like we've missed doubt on the past four years. And that's really where you get the pain because you did so good. You avoided it for so long and now you're into, I don't know, maybe it's mega caps and hyperscalers or whatever. And ultimately, it's unfortunate. It's unfortunate that so many people have gotten rich being you know not investors like we're not we're not compounding a basis on cash flows anymore right we're speculating it's a massive speculation economy and the number one way to see the effect of that is like look at kaoshi look at the younger generations right they feel like they missed on bitcoin they feel like they missed on all this stuff and go read when money

dies this is like a repeat of weimar yeah have you ever ever read i haven't i need to really stop there's one section where it's like every paper boy and uh milk girl was trading stocks like or speculating did you see this morning so this is apparently black thursday i haven't checked the markets it was ugly in the morning let's see let's see where we're at now can we did worse uh bring out the plunge for that yeah Nasdaq down 1.7 hmm it's better people think two and a half percent in one day it's like the worst I can get it's like Hank Paulson's on his knees right now yeah the money yeah so I mean I think think your point earlier about getting threading the needle again bringing this back to the

juxtaposition of socialism fascism and true capitalism free markets it's like that's the message that needs to get out there we live in a quasi at best i would describe what we have crony quasi quasi capitalism yeah there are capitalistic uh sort of features of the economy but at the end of the day that money printing and that backstop is pure socialism for a particular subset of the population which just so happens to be the rich and it makes sense you're going to backstop that because it's holding up everything else but um to your point i think we have to eat the pain in the short term clear the board and get back to wise capital allocation decisions backing legitimate businesses providing goods and services that people value at a profit

to the economy, to the market. And I mean, there are certainly companies that are doing that and people that are allocating those businesses, but the amount of businesses that are not doing any of that, but are still able to assist and raise and sit in these portfolios is way too much. Yeah. I mean, I don't want to completely demonize the, you know, elitists. I just think that they're dumb sometimes they're really dumb and you want to get back like elite like they don't see it they don't see social hierarchy is like just natural and we just need to get it back to like a hierarchy that's actually yeah you guys you guys can still be read based on merit we're not we're not trying to take your money we're just trying to take your you know profit centers your backdrop the moral

hazard centers yeah yeah yeah you can make money the real way like fine you just you can't make money the way that you're making money because what that results in is shackleless slavery for the middle class and that is something that you know really is going to lead to a worse outcome just let it go you know let go take you know the boomer billionaires you know and the centi millionaires right just like over the reins yeah well and that's um and say there are boomer billionaires and sent to millionaires that i know that actually like have legitimate family businesses most of them are private right for sure and like they're great businesses if you guys are fine it's like but they're operators they're operating businesses in most cases

the financialization that's been sort of embedded on top of that where you have like somewhat parasitic class of financiers that are just trying to sort of squeeze everything that can from that that's where and the fact that they have a money printer sort of safety net um for them alone obviously maybe we get stimmy checks ubi which would help or quote unquote help the common man but like historically at least in our lifetimes it's been for that class and yeah i i mean i do think that we probably need ubi but it should not be abandoned like it cannot be the solution well if we how do we how do you have unemployment go to 14

like i think demand stimulation is better than supply stimulation like i think if you just evenly distribute 30 grand per person for maybe a two-year period through a recession and assets are getting crushed. Maybe some of that money is going back into assets. I think that's probably like you, the laissez faire side, I just don't think is actually truly going to work. I think there has to be something I, if we want to do an intelligent, you know, okay, we rebuild the infrastructure. You know, I think a lot of this stuff in the new deal is kind of bad, really bad, long lasting consequences, but I'm understanding of the Keynes. I think Keynes is one of the most underrated economists of all time. What? Yeah. People don't understand what Keene's actually

said. Keene's never said you could do this stuff indefinitely and that there aren't consequences. Debt is only money we owe ourselves. You'll be dead by the time you have to pay it back. Yeah. In the long run, we're all dead. Yeah. But a slight, you know, if we have to do something, do it to the demand side, evenly distributed, but let's not use that to obscure what has actually happened. And if people just tread water through bad times, sure, maybe you don't have as much disposable income to go to Florida or the Bermudas or whatever. You're not less wealthy. If everyone's wealth is down 40%, your wealth is down 40%, you're just as wealthy. It may not feel like it. On a comparative basis. On a comparative basis, right? Just try to take

more intelligent risk and find more security live within your means and save some money yeah jesus well the the part of the equation that's really going to fuck this up is the fiscal side like the government needs to cut their spending by arguably 90 on the on the boomers i mean yeah well hey boomers want to raise more taxes on the young people you sent me a video today pomp talking about this pomp pomp has some bangers sometimes that was a banger i'm like god they would literally vote to tax a child they would be like you are two years old now you need to start running on a treadmill to power a data center well the other way they're doing that is trump accounts it's like you are two years old we're going to print money and you're going to throw it in

equities markets yeah no that's that is that is true it's funny how that didn't happen in 2008 And now when they need the liquidity and the permabid to all of their assets, they're like, yeah, now we're going to give, we're going to print money and give it to babies. They can't touch it. They can't sell it. They can't sell it until after we sell it. To me, technically, it seems like there's like Michael Dell and others are contributing. So it's not direct money printing, but. Listen, the sovereign wealth fund, all this stuff's great ideas, but it is very funny.

The timing of all of it, you know? Yeah. Yeah. We need to get back to it. This has been great. what uh what haven't we talked i feel like we talked about everything what haven't we talked about that we should wrap up with the the bitcoin you know i think we're clearly in a bear market oh you think yeah what would make you think that i just feel bearish no what are you talking about

i think that uh bitcoiners i would hope would look a little bit internally at like the leadership And I am of the opinion that Bitcoin will fail if Michael Saylor is the face of it. Because there's so much hogwash that guy says, that an intelligent person in a corporate or sovereign wealth fund is like, we're not pumping this guy's delusion. And if the consensus doesn't get adopted, we lose the beautiful picture of Bitcoin, right? Yeah, you're parroting something that's been said on this podcast quite a few times the last couple months really yeah no there i mean i'm not sure if you've observed it but there is a um a large narrative battle going on around this particular topic with it's really divisive in the bitcoin space people think that anyone that buys

bitcoin and kind of like buys at all-time highs and is good and finds it's so one thing i would say is you know really savvy people understand who is with them on the side of the trade that they're on and that they're just because someone is buying a stock that you're in they could be weak hands they could be perverse have perverse incentives and it doesn't that just because they take a stock from 17 to 18 by buying it doesn't mean that it's good that they did that right um But also Bitcoin is inherently consensus based, right? And it's very, very strange. I talked about this and it resembles a currency in the way that the more that people buy it, the better the consensus is around it as a store of value. but michael saylor can be pouring in 70 billion dollars and stopping 150 or a trillion dollars from going in just because he goes on cnbc and says things like we're making more money than

microsoft and you need to apply a 20x multiple on our bitcoin gains and you know oh by the way this is a new invention i used ai and now we have preferreds and structured credit and this is the best credit that's ever existed and going to eat the entire like that's the the semantics asshole on me is uh it looks like because it's not credit it's preferred equity right yes with dividends yes uh like this whole digital credit meme doesn't make any sense and by the way he doesn't have to pay you he can just stop paying the preferreds yeah but you know if there's that constant overhang and bitcoin's not cool like i talk to bitcoin people that think you don't need Gen Z to buy in. They have no money. They'll say, yeah, no, literally they're like, Oh no,

we just need the boomers to buy in. It's like, brother, if everyone of all, if all boomers go into, you know, I'm going with Gen Z and I'm going tank that. Right. Like that's, that's what I'm talking about. Like the crowd and looking behind and being like, okay, like how do we have better ideas? Because Michael Saylor has raised all of this money on financial engineering that has nothing to do with the Lightning Network, has nothing to do with development, has nothing to do with crypto, broadly, blockchain improvements. We've lost the plot a little bit. And this is coming from a Bitcoin bull, but that's a little bit critical because, shit, what if we just break up MicroStrategy? Break it up into four. Don't you think that would be a little bit better than

one guy that's delusional in many ways having five percent of supply more than satoshi at some point in time like we can do a little bit better in the bitcoin space and i completely agree i mean you're um and listen i i have a lot of respect for michael saylor in certain ways he's been on this podcast once we fought the whole time really yeah he's years ago he's really intelligent in some ways but he's also says the dumbest shit i've ever heard he tries to talk in analogies just don't make sense yeah he also lives in he lives in a feedback loop that is very tight and a lot of yes a lot of sick offense yes and i completely agree with you and that's actually been a point of uh focus on the show over the last six months is really getting back to basics like what

are we here for peer-to-peer digital cash with no trusted third parties like use it as money saving it spend it um i think the emergence and proliferation of the agentic economy provides an incredible opportunity to highlight highlight the unique value prop of bitcoin and unique capabilities of bitcoin for the agentic economy specifically like we have stripe and all these stable coins building these products to equip agents with um wallets and money that they can spend between each other and with um other and uh with other companies and bitcoin holy convinces is way more uh form fit for that particular use case and not only that but it's like going back to what we were saying earlier about like the compound annual gross rate of the global money

monetary supply your comments on turkey and what they're doing like that that is an economy that has experienced something close to hyperinflation recently like people need bitcoin uh monetary system and a monetary good outside of the purview of central banks and governments and arguably they've never needed it more than they do now and so it's like instead of pushing people to buy preferred equity with a dividend or a common yeah that only works if bitcoin works and by the way we're going to take the excess well that's the question i don't think sailor's going to stop and so i think that's what a lot of people on i wouldn't even say that the opposite side of sailor i would say people say hey michael like cool you're doing your thing but we really

need to get back to these base principles of bitcoin uh as money outside the system and work on improving the lightning network other second layers and embedding native bitcoin into everyday use cases that people will will interact with more um i think that's the question is how do you have that energy surpass sailor's energy with the idea in mind that sailor's not going to stop he's going to try to get a million bitcoin probably try to get two million bitcoin and it's like how do you you're not going to stop him i mean he's sort of committed to this strategy but if we tell the story that that's and you're the sucker and by the way just buy bitcoin if microstrategy equity is permanently trading at a discount if the sdrc never gets back to par

and he can never issue at par again he's probably going to issue at 95 cents people you know he said he wouldn't sell bitcoin he said he would only issue above par just watch you know that that guy is very very greedy on you know being the most powerful person in the future that he envisions for you know electrified currency right and um just you know it's easy to point outside and say the financial system's fucked. It's really hard to be like, okay, well, you know, I've been living in this community that I love and adore, but like some of it's gone awry.

It's like being in a fraternity and all of a sudden you have, you know, a few bad actors. Like it's hard to be like, shit, those guys are fucking up. I need to address it. But, you know, if there is an attention to detail and also, by the way, it's not just Saylor. There's a lot of 50 year old Bitcoin, 60-year-old Bitcoin guys that are super arrogant and pick them up. Why didn't you just buy a

thousand Bitcoin when it was at a hundred bucks? Oh, you didn't have any money? Oh, well, you should work harder so that you can buy a thousand Bitcoin today. And it's like, it's a little bit of a different work hard than it was. And you guys just really got lucky. You saw the vision, you were correct. Great. Now, do you understand that this has to be a collaborative ecosystem that actually grows or do you want to fuck off because you know if it is just dominated by those guys bitcoin i think will fail and the reason why it will fail is because every four years mining costs double right uh functionally no well well the price goes up yeah supposedly but but from four years ago the price hasn't gone up and there is the death spiral

potential no death spirals complete bullshit but what if the security drops down because the hash rate goes down then the difficulty just lower which makes it more profitable to mine so people turn right but then the system can be hacked easier uh no yeah the death spiral that the hash rate is an important thing to maintain yeah but like yes i agree so i've been in the mining industry for 10 years the um the or nine years now the um like that's the beautiful part of bitcoin like right is the difficulty adjustment is one of the secret sauces it is that like so like if hash rate falls off price is down it's happening now hash rate had its we had the 11th largest difficulty adjustment in bitcoin's history two weeks ago on the 13th and anybody who's plugged

in there is more profitable um but it's also less secure so if then you can hack blocks well and now we're getting into like the real um game theory war gaming here yes technically it is uh maybe not even it's not technically less secure it is um because for it to be attacked right like there's an amount of asics that exist in the world at any given point in time the ones that are turning off because the price is going down their electricity costs are too lot too high and it's not profitable like they're going off the market for when that happens to attack the network if so if a nefarious actor were to attack the network they would have to go scoop up all those asics scoop up a ppa build infrastructure plug those machines in and intentionally 51 attack the network

after that logistics problem solved which takes time and a ton of capital um and that's not to say that there could be a nefarious actor who's been planning to 51 uh the network over a long time horizon they've been opportunistically acquiring a6 waiting for um china it's china china is theoretically the player that you would probably have to worry about on the computing power and they already banned bitcoin you know it didn't work they kicked out all the miners sent them here yeah i mean listen i think that's a really interesting conversation it's not a risk but i'm going to say like the logistics of effectuating that attack or waging that attack are it's hard much harder than people make it out it's hard but as the total amount of compute

goes down going towards the bitcoin mining network china is ramping up their compute right they could just switch it over from ai to bitcoin well they're running gpus right they don't you could run gpus you could but you'd be like one gpus the asics this is a conversation for another time it's an interesting war game yeah um but you're saying that the asics are much more efficient than you know blackwell the asics do one thing right that's all asics you build them to do one thing and bitcoin asics produce hash cash shop 256 hashes that's all they do yeah and so like they're hyper efficient at that like a g like we went from cpu to gpu to fpga to asics so like gpus are two sort of compute levels back from where the cutting edge not even the cutting

edge like there's a6 ever produced in 2016 that are still running today profitably if you have free energy um interesting um and then if you're trying to weigh the opportunity costs of transitioning your gpu compute towards bitcoin mining versus training large language models like do you believe you're in a systemic existential race to agi versus the us like what is the cost of turning off some of your gpus to train models and to mine bitcoin so yeah this gets like deep like layers of like game theory of how viable is a 51 attack um based off of a falling difficulty and hash rate actually and you get logistics and then you get opportunity cost equations they have to run in your mind and i think as it stands right now transitioning gpus

to mine bitcoin just doesn't make sense for china if if they believe and i do believe that they believe that they're an existential race for agi against the us yeah yeah i think i think it's not a concern now per se you know but it might be the next bear market you know imagine if the next bull market doesn't even get all-time highs right that would be kind of gross right um you know i i think that the volatility of bitcoin should smooth out a lot and sailor has increased it a lot but we should have had a higher high this cycle right i agree with that and i think that's you know there was a it just it was a bull market that had a lot of you know trump coin fucking you know it's like what what it was supposed to be the crypto presidency and i felt

like it was the worst thing on earth honestly um so i'm just you know throwing out the the bear case because maybe that incentivizes a little bit of self-healing inside the space no no not that i'm rooting for it i think it's necessary to like trump the whole world liberty fi the trump coin melania coin just complete it was brutal just like so disappointing and salon is completely insider owned yeah you know a lot of the cryptos it just there's so much to like and i think that a rational assessment of like what's going wrong can only make the space stronger yeah and i think we need to do a better job of um holding up what's going right like i think dorsey what he's doing at block disclaimer block is a sponsor of the show but i think what they're doing to actually make

put a concerted effort forward to make bitcoin everyday money and to make it more accessible to their millions of users is the type of building that we should be lauding in the space more more so than like i'm not going to say that any public company can't go out and tap capital markets to accumulate bitcoin if you want to do that strategy go for it but i think at end of the day bitcoin peer-to-peer digital cash who's building tools and applications and products that make it easier to operate um your life using bitcoin in that way like we need to focus more on that that's why proud of block as a sponsor and really excited to see how aggressive the block family of companies has been implementing bitcoin and what they're doing

wap is doing some interesting things with crypto just fintech in general you know the paypal venmo it's like how are you guys fucking up so bad yeah like i think that fintech can get there um but you know these are these are positives it doesn't you know would still address the negatives while you're pushing the positives you know and going back to like the we're getting we're getting long now i need to give you back your time but i want to like the whole concept digital credit in the way it's been explained it's particularly of a strategy it's and i wouldn't even define this as digital credit but there is a place for bitcoin in credit structures it's just as collateral on long duration debt that like so they're you look at commercial real estate

like we backed a company called battery finance uh traditional credit fund they spun uh traditional credit fund new market capital his apparent company founder andrew really into bitcoin said oh i think bitcoin is a collateral asset in these credit structures actually solves one of our problems which is like we need to get a return and we don't want to go further out in the risk curve what we can do is go and refi um high grade credit commercial real estate um in top tier cities the first one they did was philadelphia but you imbue you put bitcoin in the collateral package and instead of sort of trying to demand a higher return on the cash flow of the commercial real estate property you're willing to offer lower cost of capital because bitcoin sits in the collateral

stack and the credit fund appreciates or um participates in the appreciation of bitcoin appreciation of bitcoin i mean it's like a convertible yeah at the essence but like i think duration like that's a 10-year loan and so like you need to be able to have bitcoin sit there and do its thing for a longer period of time yeah and to your to our discussion earlier about like how do you de-lever and how do you like i do think there is a place for bitcoin as for lack of a better term digital credit but it's not in the way that sailor's doing it it's like no you make it part of collateral packages for long duration loans and then you start sort of de-risking the the capital that is focused on the underlying assets that have idiosyncratic risk and you sort

of pair that with with bitcoin which if we get out of this bear market and people come to their senses and focus on what bitcoin actually is um uh you you have bitcoin which is sort of a risk profile that's completely separate from the individual assets that you're underwriting i will say when capital stacks get more complex there's a sucker at the table you can have debt and you can have equity and both can win and both can be you know taking different risk profiles as soon as preferreds come into the equation anytime i see it either the preferreds or the super sharp money and fucking the common equity and you know it's like goddamn but is this in public markets Just anywhere I see it. Yeah. Yeah. In private equity and public markets and, you know, digital equity credit like stuff. You're either the sucker for buying it or someone else is the sucker. As soon as preferreds come in. It's a generalization, but I will say 90% of the time.

Yeah. So you don't like this digital Bitcoin as collateral? I don't even like preferreds. I think preferreds, just get out of there. Do convertible debt, do senior debt. Don't tell me your senior debt is senior if there's something super senior or if it's the, you know, only, the private credit loves to do this. They say senior secured. It's like, there's no subordinated debt. That's unit tranche. Okay. Like cut the shit, you know, or senior secured debt, but they have agreement among lenders. And all of a sudden there's like senior, first senior and second senior and the first senior or, or the subordinated debt actually owns the IP, which is the only liquidation value of the business. And you're sitting in senior, but the subordinated debt is below you, but has access to the valuable stuff, to the valuable stuff. It's the first lien on the Bible stuff. Yeah. So let's clean up the cap tables. Is it possible?

We'll see. Yeah, the lawyers are going to be so rich. God damn. We need to unemploy some of them. There's too many lawyers, too. I mean, that's another problem. We have money inflation, diploma inflation, more lawyers, more laws, more regulations, more friction, more compliance. Problems we're not going to solve, but Nick, this has been a pleasure.

It was great to meet you in person. Great to meet you in person. We'll have to do it again. Yeah. Round three. At some point in the future. Peace and love, freaks. Thank you.

Thank you for listening to this episode of TFTC. If you've made it this far, I imagine you got some value out of the episode. If so, please share it far and wide with your friends and family. We're looking to get the word out there. Also, wherever you're listening, whether that's YouTube, Apple, Spotify, make sure you like and subscribe to the show. And if you can leave a rating on the podcasting platforms, that goes a long way. Last but not least, if you want to get these episodes a day early and ad free, make sure you download the Fountain podcasting app and go to fountain.fm to find that. $5 a month gets you every episode a day early, ad free, helps the show, gives you incredible value. So please consider subscribing via Fountain as well. Thank you for your time, and until next time. Okay.