TFTC: A Bitcoin Podcast - Tales from the Crypt #108: Jared Dillian

Episode Date: October 15, 2019

Join Marty as he sits down with Jared Dillian, Founder & Editor of The Daily Dirtnap newsletter, to discuss: - Jared's reformed skepticism of Bitcoin - Bitcoin v. Gold - What happens if we End The Fed? - Millenial investing - much more Follow Jared on Twitter: https://twitter.com/dailydirtnap Check out The Daily Dirtnap: https://www.dailydirtnap.com/ Shoutout to this week's sponsors, Cash App. Cash App. Head over to the App Store or Google Play Store, download cash.app and start #stackingsats today. Use the promo code: "stackingsats" to receive $5 and contribute $5 to OWLS Lacrosse you download the app. Casa. Use promo code “TFTC” to get up to $250 off your Casa membership … or hit their team up [e-mail] for a free demo, or to put them to the test with your hardest OpSec questions! Subscribe to our YouTube channel: https://www.youtube.com/channel/UCtdbWsnfA08KhSUO4amVLaQ?view_as=subscriber Contribute to the show: https://tftc.io/contribute/

What is up, freaks? It's your boy Marty Bent here to introduce this week's episode with Jared Dillian, who is the author of the Daily Dirt Nap, a great newsletter on the markets in a macro perspective. I took a trip I had a wedding in Charleston over the weekend I hopped in the car drove up to dirty Myrtle Beach last Thursday night and sat down with Jared in his office to talk about Bitcoin traditional markets his thoughts on the Fed and libertarianism and a bunch more this was an interesting conversation I very much thoroughly enjoyed it this episode tales from the crypto is brought to you by the cash app you freaks already know all about it if you do know about them uh and you are listening to this podcast and you have not downloaded the app yet

what are you waiting for download the app use the code stacking sets that's s-t-a-c-k-i-n-g-s-a-t-s uh you're going to get five dollars and five dollars going to go to al's lacrosse a charity very near and dear to our hearts and then you're going to get all the functionalities of the cash app uh their boost program which allows you to go to partner merchants uh when the boost is enabled to save money i used it to hold foods yesterday at my coffee shop this morning make sure you're active on the cash app before you're walking into these places it's easy to forget but if you it feels good when you don't forget save myself a dollar this morning i am going to start uh roasting my own my own coffee don't worry freaks um on top of that you can buy and sell bitcoin

you can stack sets you can send sets off the app to a personal wallet from a personal wallet to the app you can send uh two other people on the app and get really creative with it um so check out uh the cash app today use the code stacking sats this episode of tales from the crypt was also was also it is also brought to you by casa casa is working hard uh to create products that secure your bitcoin uh and make your opsec better so if you want to question casa their team about their best OPSEC practices, reach out to them at membershipatteam.casa. Ask them your hardest questions when it comes to OPSEC.

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They will walk through you, hold your hand through the process. If you're someone out there who is a little timid when it comes to approaching the technical side of Bitcoin, KASA is here to help you. So use the code TFTC to get up to $250 off your KASA membership. and again you can check that out or again I haven't told you this yet you can check that out at keys.casa slash keymaster and then on top of that

again you can email them at membership at team.casa for a free demo and have them put you through the hardest OPSEC questions hope you guys enjoy this episode with Jared Dillian I had an incredible time with him always good to get back in Dirty Myrtle Beach

Tales from the Crypt What is up, freaks? Welcome back to Tales from the Crypt. It's your boy Marty Bent here in a very foreign studio in a place I haven't been in a while. We're actually in Myrtle Beach sitting down with a fellow freak,

the author of Street Freak, Money and Madness at Lehman Brothers. I'd like to introduce you freaks to Jared Dillion. and jared thank you for joining hey how you doing doing well um i want to thank you for sitting down i uh we threw this together i don't want to say haphazardly but i was coming down to charleston for a wedding a friend of mine nick carter has been telling me about your newsletter daily newsletter daily dirt nappy shared a couple with me uh your writing is incredible i'm very envious

of your writing style um and you've also been coming out uh more in favor of bitcoin more recently specifically on twitter that's where i've been following you so um yeah i also had uh i don't know if you saw it but i had uh i wrote a piece for bloomberg opinion yes yes that came out just a couple days ago i shared that on a channel that i curate for dig it was a very good piece um and in that piece or was that a piece or a tweet you said you like gold and bitcoin but you prefer bitcoin yeah it was in that piece yeah yeah yeah why why is that well it's hard to get gold out of the country you know uh i look i'm i'm sort of a paranoid person just by nature and uh you know i we're staring down the barrel of an election that is sort of a fourth turning

type of election where we have some pretty extreme politics that are running uh and you know you you think number one you think about how to protect your assets and in an extreme case you think about getting out of the country and what you can take with you uh and there's only so much gold you can stuff in your pocket and take through the tsa um and if you just have you know your wallet in your head you can go anywhere in the world you know it's pretty powerful yeah and you were you're saying uh you were saying that uh 2017 2018 particularly was a very bubbly environment and you stayed away what what this time around it makes you yeah so basically i've i've always been enamored of bitcoin and blockchain and but my objection to it before now

i am a reformed crypto doubter okay so now not just a doubter but a bear i was very vocal on twitter i was like getting in fights with people i was trashing people i was very bearish on bitcoin like during the bubble phase in 2017 and 2018 and a lot of people remember me as that person And so when I sort of did an about face and I said, you know, I'm actually bullish on Bitcoin, people were just shocked. Right. But I like I never was against Bitcoin, the technology or blockchain. I what I was against was the sentiment surrounding it. And I, you know, being a creature of Wall Street, I am somebody who pays close attention to sentiment. And when things you know, we had Bitcoin Jesus and Bitcoin rappers and people buying Bitcoin on credit cards.

And it was a bubble. It was like an honest to goodness bubble. And it popped and it had an 80% drawdown. And we flushed out all the week longs. And now it's for real. Now this is, you know, this is the real bull market that's coming up. Why do you think it's real? bitcoin is what i would call in a state of benign neglect okay so nobody's talking about it like mentions of bitcoin on google and twitter are pretty much at all-time lows like nobody is obsessed with it nobody is fascinated with it the only people left are people who have a real stake and that is just how i like it that type of environment and so let's step back and talk about the macro environment you want something that you can get out of the country with what scares you about the macro environment would make you put money in bitcoin right now um i'm not i'm

not one of these people that distrust the financial system okay the financial system is antiquated how we uh you know clear and settle stocks how we clear and settle bonds all these mechanisms are very you know they're out of date and they're clunky and they don't work but i'm not one of these people that says the financial system is um bad or a fraud or whatever uh i mean i have lots of opinions about the federal reserve and yeah i think that's important right to uh to distinguish between uh the financial system and the monetary system yeah yeah so i mean look like you can't print bitcoin you know you can't print gold either you know and i like bitcoin and gold but you can print just about everything on earth. And a lot of people actually, you know,

it's funny on my radio show. And, you know, I mentioned to you, I have a radio show called the Jared Dillian show, which is mostly about personal finance, but I had a caller last night and she was from Connecticut. I don't know who she was. Her name was Karen. I remember this. And she was very skeptical about Bitcoin. Cause what I said on the show was that the average investor should have a 1% exposure to Bitcoin. And she called in, she says, you know, it's uh it's not anything it's not backed by anything and you know i said well neither is the dollar really i mean so we had this kind of interesting discussion on the air that's something i like to focus on this podcast too is like to understand bitcoin you have to understand

the current monetary system right how money works in our current world how dollars work how the system of money today works and i've come to find at least in my experience trying to speak with people and educate them about bitcoin that many people don't know what money is to begin with he shows somebody a 20 bill you say what backs this eight out of ten people at least my experience still think gold backs the dollar well we do i mean the federal reserve does have gold on its balance sheet the gold that is in fort knox but you know the dollar used to be convertible in the gold and gold used to be convertible into the dollar and that was suspended in 1971 and so now we have this floating exchange rate world right um and it's um a flexible

monetary system that was the that was the word i was looking for nixon in 1971 um but you know we there are some countries that have almost no gold backing their currency like which is interesting like canada mines gold like crazy they have all kinds of gold mining on going on but the bank of canada has almost no gold there's nothing backing their currency they're just exporting well that so that's a problem if they the central banks don't have it on their balance sheet and one thing uh that we've come to find too is that gold the gold standard is bastardized by a physical centralization so we saw uh obviously the medora regime is not uh something that anybody wants to support but they did have gold uh in a vault in germany i believe and they tried to repatriate

that and they weren't allowed the system did not allow them that cannot happen with bitcoin yep is that uh and they have bitcoin yeah oh they're using bitcoin yeah i had a venezuelan which raises like all kinds of interesting questions i mean you know venezuela is the bad guys let's just be clear but what they're doing is very innovative and it kind of raises the question like will other central banks have bitcoin reserves at some point in the future yeah and it's as somebody who's like wants bitcoin to happen and and you see that's the crazy thing is like the internet the first adopters or pornographers criminals whatever same with bitcoin bitcoin is a technology that i feel like venezuela's been forced in a corner they can't

repatriate their gold they can't uh interact with the swiss system so they've been forced to use bitcoin you know saying that venezuelan on a couple weeks ago who had a mining operation down there used to uh run a mining operation uh ditch the country for canada a few years ago but uh he's still very close with people on the ground and they're saying that maduro is sending blackmailed individuals to local bitcoins which is a peer-to-peer exchange with an address for them to buy bitcoin with bolivars and send to for the government so they can then buy goods from russia and china yep yep yeah and so this is bitcoin has enabled this use case for them might be unpalatable for a lot of people but do you is it a net benefit in the long run you think that oh

absolutely for sure yeah yeah why is that um it's i mean look like i think that gold gold is kind of is interesting i mean look like i've been a gold bug since 2005 okay uh i got interested in gold in 2005 at the i'll tell you why because i was the etf trader Lehman Brothers and a guy from the World Gold Council came by the building and he said we're starting up this gold ETF called Spider Gold Shares which is GLD right so that was the first time we like we're securitizing gold and GLD was an incredible innovation. Yeah gold ran pretty pretty quickly after that came out. Well it did it from 2005 to 2011 it went up a lot and in 2011 something amazing happened. The assets under management of GLD actually surpassed the assets

under management of SPY, the S&P 500 ETF. But that actually sort of facilitated the wide scale adoption of people buying gold. Because before that, you had to go to a bullion dealer, either one in your town. There were huge markups dealing with physical as a pain. There's online bullion dealers but then they're shipping this stuff through the mail like it's just a it's a huge hassle and this is way way better way better so yeah and the things that it can enable right like censorship resistance so you can send it wherever to whoever um the fact that you can hold it in your brain these are functionalities and aspects of a is it a commodity like would you i would call it a commodity is it yeah yeah yeah i don't think i look there's a there's a big debate

as to whether uh bitcoin is a currency or not and uh i i think it might be a currency someday but i don't think it is right now it behaves more like an asset um and i think of it as an asset like when i buy it the bitcoin that i hold i don't think of this as a medium of exchange i think of it as an asset that I'm holding for price appreciation. So I think maybe 20 years from now, we might be thinking of it as a currency. But for now, I think most people think of it as an asset. I would concur. And so Bitcoin, the opportunity that exists right now, is it like any opportunity you've seen in your career in the financial markets? Is it similar? Different? I got to rack my brain and think about what I've seen in my career. I mean, look, I think Bitcoin

is uh at a minimum a 10x opportunity um i don't know over what time frame um two years five years 10 years but i think it's a minimum 10x from here and then if you get the wide scale adoption like you know if you if you assume that half a percent of people have adopted bitcoin and that goes to five percent right which is totally reasonable like i think that's eminently reasonable then And I think you're going to see that 10x price appreciation. So do you think governments fight back pretty hard against this? I think they do, but I don't know how long that takes. And I don't know what that looks like.

The thing is, is that Bitcoin is becoming pretty mainstream. Today, I talked to, just coincidentally, I talked to a Bitcoin asset manager who you probably heard of. and um and you know they're sec registered and all this stuff uh we're trying to get bitcoin etfs like this is being mainstreamed and i think it's going to be very difficult for a president you know for a president no matter who to just by decree say okay we're going to criminalize possession of this like i think we're past that point i think that's really hard to do um so i i'm not super worried about that that well it's a pretty big it's a pretty big uh affront especially to the u.s dollar or the u.s reserve system right like it is at the end

of the day will not be the money that we're using as a medium of exchange right now but over a 20 30 year time horizon that's basically the pie it's looking to eat right yeah i understand um i don't know i maybe i'm not thinking big enough uh but there's um i mean that but the technology has obvious benefits that extends just beyond bitcoin the currency right like it's you know and what i talked about before the plumbing of the financial system sort of the back office that keeps wall street running should be on blockchain like absolutely should be so i'm going to trigger a lot of bitcoiners out there that's what uh so that's what a lot of bitcoiners would think is that the first decade is there's been a lot of confusion particularly with all coins and stuff

like that and some would argue that the only application of blockchain technology is a monetary good a digital monetary good like yes you can leverage you can leverage bitcoin and hash data into it which probably could be good for back office stuff but maybe like permission distributed ledger stuff may work for that as well but you're talking about like public blockchains do you think that that will work like back office stuff or uh i think so i think so i'm actually not super aware of this debate this is kind of news to me so yeah yeah there's a there's a contingent of bitcoiners i think bitcoin is uh and i probably just over time uh experience and more sympathetic towards this view as well is that there's very few things that dictate the the assurances that you need to

make the distributed system that is bitcoin i think you need to have nodes that anybody can run from their home you need to have uh developers that can contribute to the code at will without anybody saying yes or no and then on top of that the costs that come with with running these blockchains these public blockchains um it could uh for back office operations not make any sense right because the mining because the yeah you have to expend energy to make these systems um but another topic that i wanted to talk about because you uh refresh my brain on is like yeah so bitwise etf i believe got denied this week i think it was this week but uh the question of an etf it's the other beauty of bitcoin one of its uh uh features is that you

can self custody really easily if you know how to do public private key cryptography so do you think we even need an etf people can just custody this uh this asset a lot easier than bullion they don't have to go to a bullion uh dealer down the road they can simply use the cash app um need is kind of a funny word i i think that um people don't have the comfort level with the technology to do that themselves and etf is etfs are for dummies right you can securitize anything in an etf listed on an exchange and people can buy it and there's a lot of people out there that will buy an etf that will not buy bitcoin um so even you know that's why gbtc trades at this massive premium because like there's it's the only product out there that replicates the performance of bitcoin so

yeah is that still trading at like a 25 yeah but the premium used to be higher like the average premium over time is actually like 43 so it's actually kind of cheap right now relative to history i think people are waiting for this etf to drop right and if it does the the theory is that premium will collapse pretty quickly correct probably probably but you know i i've been sort of watching off and on um this saga of trying to get it because i'm actually uh i'm pretty familiar with vanak and what what they've tried to do with a bitcoin etf and shout out to gabor yeah this has been um taking a lot you know i'm taking a long time so yes yeah and many different options so the etf uh i know vanak is frustrated in particular uh on the option side ledger x has been waiting

for some some options uh approval from cftc uh and then as generally because now is that options on futures or just options futures options on futures yes um and uh and then you just have the uh the retail investors waiting for the irs and sec to get clarity apparently the irs gave clarity this week but i think a lot more people are more confused than ever after the irs announcement this week what did they say uh they basically i mean that's what people are trying to discern what did they say and a lot of people are uh so a lot of people are saying that the report that they dropped this week dictates that anybody who holds bitcoin uh actually had taxable events uh for any fork of bitcoins like bitcoin cash bitcoin gold bitcoin platinum all those

forks the irs is trying to say that if you're holding bitcoin uh those forks just may be a taxable event but there's a debate uh is it only a taxable event if you claim the fork if you claim the utx is on the other chain you technically have to download a new software and access your coins with your private key so you would have to actively go look for it on top of that it's very uh up in the air of like the price of some of these forks like some of them didn't even reach an exchange or only traded OTC for a little bit of time when it comes to

taxing people are very confused right now are they going to be forced to pay for all those forks I mean are the exchanges going to have to give people 1099s at some point they do I know Cash App gives 1099

I know Coinbase gives 1099 exchanges that I've used but when it comes to 4 coins that's a good example like Coinbase uh ethereum i don't know if you know this ethereum forked like three or four years ago and they forked 2015 2016 whatever they forked and ethereum was on coinbase and coinbase waited a year and a half to give their users access to to the fort coin um which is pretty pretty egregious the users could have sold the coin at a much higher price if they give them access

uh earlier so that's a that's another question it's another uh like weird externality of this technology right like it's open source technology anybody can fork it and just basically create a taxable event for somebody create a taxable event for somebody or just create uh engineering overhead for an exchange or somebody trying to yeah interact with this technology um this is crazy um so what are your what are your thoughts on this week in particular on china versus us um the the corporations getting into the fray now yeah disney nba supporting vans right now it's a little bit above my pay grade um i mean look like you have to you have to sort of think about what is the purpose of a corporation the purpose of a corporation is to make money and

That includes the NBA. Right. So the NBA is a bit hypocritical, obviously, because so you say, should the NBA get involved in these philosophical debates about Hong Kong and China? No, they should be focused on making money, which is why they should maintain a relationship with mainland China. The problem is, is that the NBA gets in these philosophical discussions about other things, other political things, causes that it champions. and the reason that it champions those causes is because of virtue signaling well capital baby because they get paid to do that so it's you know i mean lots of people have pointed out the hypocrisy uh i don't think it really changes anything but yeah no it's just crazy to see as an observer you had the nba then you had like blizzard the gaming company kicking people off their platform yeah i think you know here's the good news this is actually good news here because

A lot of people are freaking out about, you know, U.S. corporations supporting China. The good news is that it's very hard for the U.S. to get in a war with China because we are so intertwined. Now, look, it could happen. Right. But I mean, just think about Apple and Foxconn, just for starters. And probably every company in the S&P 500 does business with China. We are so inextricably linked with China. And there's the old Bastiat quote, right? If goods don't cross borders, then armies will. Right. If you remember that quote. So I think that, you know, the tariffs from the beginning back in 2017 were very troubling to me because, you know, you want to trade with everybody. You want to trade with Cuba. You want to trade with North Korea. You don't get into a war with somebody that you're doing business with. So what do you what would you say to Trump's argument that we're not getting a good deal from a trade standpoint? You know, my my my point to that is two wrongs don't make a right. OK, so like has I mean, sure.

china steals ip uh they put tariffs on our goods right we should continue to trade freely with them we should not you know up the ante and retaliate so that's my view yeah is that's another thing may you live in the craziest times is it a is it a curse like is this the craziest macro scene you've ever seen in your career craziest macro scene like just geopolitical tensions the uh we have currencies falling no i'm gonna say i'm gonna say no i've seen a lot uh you know 2003 with the iraq war was pretty crazy um you know uh i mean even just a couple years ago with north with north korea like there's been there's a whole there's been a bunch of stuff i would say the thing that makes 2019 different is that um you know first of all

trump is just different okay um and second of all the news cycle has gotten very short like there is so much stuff going on that it's just exhausting like over the course of a 24 hour period you will see if you're on twitter you will see the world focus on like five or six different things and it is absolutely exhausting like i really i kind of wish we were back in like you know 1996 clinton versus dole like the most the most boring election of all time like i really wish things were boring again because they're not boring right now let's wait till hillary gets back in the mix yeah i talked about that today did you yeah i did what'd you say it's not it's it's it's that has to be one scenario that you consider out of a range of scenarios that she runs again and honestly one of

the things i've been saying for years polarization has been increasing for like the last 15 years the right has gone further right the left has gone really further left and what i've been saying is that one of these days somebody's just going to drive a truck right down the middle and i think we reached peak polarization two weeks ago god i hope so when two weeks ago yeah i think so when when bernie sanders was announcing eight percent wealth taxes and he said we were going to put rich people on a secret government registry okay so when that happened uh i mean that was that was shocking and i but in hindsight i think that was peak polarization and i think that there's going to be a pretty there's going to be a lot of people clamoring for a centrist democratic

candidate maybe hillary i think pete buddha judge is is going to become more attractive here in the future there from indiana or yeah from south bend south bend yeah yeah now it's i hate it i hate the whole election cycle i can't i i'm one of those people who doesn't vote i think the the political system is uh defunct i also don't vote but i do donate interesting why is that it's more effective interesting i just noticed your honey badger don't care jared has a honey badger don't care he's for the cause he's got a sign on the wall you don't vote but you donate it's more powerful that's interesting yeah um to pax to to do you donate to pax or actually it's just too maybe it's too no well no it's okay i don't mind um in 2016 i donated to gary johnson and bill well

was very happy to do that yeah the libertarians can never get their stuff together though Well that was their chance That was their one chance I thought Ron Paul had a good chance in 08 No he never had a chance So I'm 28 I was a senior in high school in 2008 And I just so happen to be

You freaks who are listening right now I've heard this story 10 times But I was taking economics elective class As the world was going to shit And as a 17 year old Sitting in a senior in high school Watching this, watching TARP We went through TARP and read all the bullshit that got put into that bill.

See, you're one of the millennials that I talk about on the radio. What's that? Because you distrust the financial system because you watched it implode when you were in high school. I don't distrust. See, that's the thing. And I've worked in finance. I don't distrust finance. I do distrust the financial system a little bit.

What about stocks and bonds? No, I never invested in those. See, that's my point. Yeah. well certain certain stocks certain stocks and maybe like maybe if i had sorry get a little i assume we can edit that you still hear it bang bang all right 26 no uh will i ever well that's the thing i'm 28 bitcoin exists why would

i invest in stocks and bonds if bitcoin exists the the potential upside for that is seems way uh way more lucrative than well i mean so so i'm so i'm an old wall street guy so i don't think just in terms of returns i think of things in terms of risk adjusted returns okay so i don't just care about the returns i care about the volatility and actually you know i didn't mention this but one of the things keeping me away from bitcoin in 2017 wasn't just the bubble stuff but it was the volatility and i still don't like the volatility i don't like that i got flushed for 20 percent last week like that's not fun you'll get used to it you know it's i you know i actually said in my bloomberg piece i said maybe the volatility is a feature not a bug um so you know

i just have i just have to adjust my risk parameters well would you agree that the world's trying to price a new monetary good for the first time in potentially millennia and volatility should be expected right like you have a bunch of monkeys looking at this new slab like from 2001 a space odyssey and they're looking at like what the hell is this trying to determine what it is let alone price it accurately yeah yeah i'm getting i'm getting i'm getting used to it i mean basically you know you just have to set a stop loss at zero and eliminate a hundred thousand and just ride it out you know so how are you trying to trade this market are you are you actively trading it are you looking for like a buy hold buy and hold yeah yeah you're not trading this

way no no um what uh is there any other markets you're looking at or as excited about as bitcoin i mean look first of all you're having a discussion with somebody who is very early in his crypto career right so like i don't know a lot about all the other coins um not worth it well that was kind of my that was kind of my opinion uh and the reason i say that is because you know i was around for the dot-com bubble in 20 years ago and there were hundreds and thousands of dot-com stocks okay and 99 of them went down 99 or went bankrupt and only four ended up doing anything facebook amazon netflix and google that was what survived the dot com and they went to be trillion dollar market caps right but basically 99 of the other stocks disappeared and honestly

that's kind of my opinion of what's going to happen in crypto is that i mean maybe not 99 but a lot of these coins are going to disappear over time i think 99 is accurate yeah and it's already happening and that was the crazy thing so i don't know if you know about barstool sports yeah of course that's where i was working when uh the 2017 2018 bubble was going on and i was in that office i was bitcoin marty i was the bitcoin expert in the company and it was crazy standing there i'd been at bitcoin for four or five years at that point and watching everybody go crazy we after after the podcast i'm not going to be a pig we can have a discussion about barstool i want to have that conversation we can do it here we can talk about it on this absolutely i'm 45 years old

we're not doing this but just as somebody was it was insane when everybody like everybody in that office was just going for anything with a coin on the end of it anything with crypto in the beginning of it not knowing at all what it is and the ico bubble of 2017 in particular where the ethereum blockchain promised uh everybody a world of tokenomics you're gonna have utility tokens for everybody that uh that has come to earth over the last two years in particular and i think that was maybe the biggest hype that we'll see for like all coins at least in the first couple decades yeah yeah and it's um yeah what would your advice be so you i'm still like i don't want to say triggered but in the back of my mind i'm going back to the comment of you're the uh you're the

high schooler uh who watched the world burn down it doesn't believe no i mean i mean you're you're I want to say generation. I sound like Dan Rather. But people in your age group are way more susceptible to invest in Bitcoin than people in my age group. Is that a good thing or a bad thing, you think? That's not good or bad. It's just that my comfort level is very high in traditional financial instruments, stocks, bonds, commodities, stuff like that. And it took me a long time to get some degree of comfort with crypto you know and you like i said because you live through that period in history you have distrust maybe i'm putting words in your mouth but you know that's

accurate yeah you have a distrust of the tradition of traditional financial instruments and um and so i'm getting up to your level of trust in crypto and what i encourage you to do is you get up to my level of trust in stocks and bonds. How, how would you advise a go about that? Like what path should I take? What should I focus on? Um, I, you know, the thing with, look, there's, I, I think of things in terms of optimal portfolios. Okay. And since I'm also a personal finance guy and I give advice to regular people about what kind of portfolio they should construct, I advise that they have a portfolio that's very heavy on bonds. And the reason I do that is because it smooths out the volatility in a portfolio that has mostly equities. So if you ask

the average person on the street that had a Fidelity account or an E-Trade account or Vanguard or something like that, they would have 80% stocks or higher. And I constantly encourage people to take that number down and add a lot of bonds because it's it smooths out the volatility in that portfolio having said that you need some assets that have a lot of potential upside you know nassim talib right yes okay so talib uh is fooled by randomness 20 years ago right my favorite of his yeah so at the end of fooled by randomness he he talks about how you should manage your money and he says 90 of your money you should have in safe things and 10 you should have in moonshots venture capital bitcoin things like that and that's basically how i live my life

yeah well that's the thing for people in my age group it's so hard to number one invest and then number two create a diversified portfolio especially if you're living in new york city like me um where it's impossible uh not impossible i mean i'm able to save and invest some money but It's not your average millennial is not in a spot to go build up a big stock portfolio right now. What are you? I don't know. I mean, what are you saying? You're poor?

No, no. But I'm saying a lot of a lot of kids my age are still the kids. I mean, like you work you work at a company. You have a 401k like I assume you contribute to the 401k, right? No, I don't. Do you have a 401k at your company? No. Okay.

Yeah, it's another thing. Those are dying. A lot of them aren't matching. They're not really dying. And you don't need them to match. Even if they don't match, it's a huge tax benefit. You contribute $19,000 a year, which means it's like a $5,000 tax benefit. Yeah.

This is becoming interesting. I feel like I'm getting a life lesson here sitting with you. But it's interesting. so for me and i'm focused on bitcoin so i'm probably i'm talking about like the average millennial i'm not your average millennial i'm hyper focused on bitcoin um but again investing outside of this realm i'm not as comfortable with it and especially how can how can you advise investing in stock market while it's at all-time highs and you have the fed back into a quarter a corner uh with very few tools from which it can back itself out of this i mean it's

fed or no fed i don't i don't like the stock market here and i don't like the bond market here i think that all financial assets stocks and bonds i think all financial assets are overvalued yeah so we shouldn't be investing in them right now uh but you still kind of have to because we don't have perfect knowledge of what's going to happen in the future stocks could go higher interest rates could go lower do you think what do you think happens do you think we go to qe4 without calling it qe4 yeah that's kind of happening already um i mean i you know i'm actually even even with tenure notes at 1.6 percent i continue to be bullish on bonds i think interest rates are going to go lower probably negative here in the states yes what but what

happens if that happens like isn't the fed basically admitting defeat at that point who's going to put up with negative rates in the united states um it's i don't i don't really think of it in terms of putting up i mean first of all you know when interest rates go down somebody wins and somebody loses right so if you're a borrower you win and the u.s government obviously wins i mean trump has been you know harping on this for a long time he explicitly has said on twitter that he wants the fed to lower interest rates so he can lower u.s borrowing costs it's pretty insane that's absolutely insane the fact that you have the president tweeting at pal yeah and the fed's supposed to be apolitical by the way let me just let me talk about since this is a crypto

podcast and people care about this kind of stuff let me throw out a nightmare scenario let's go let's jump because we're talking about ron paul you mentioned ron paul in 2008 what does ron paul say about the fed all the time and the fed and the fed okay so now it's 2016 trump is president let's say we ended the fed what what do we have in its place i don't know you'd have to have a controlled demolition of the fed right transition what we have in its place is a president with arbitrary and unlimited power to set interest rates unilaterally but so the function of monetary policy would be handed to the government yes you're saying yes okay so what i'm saying is is that the libertarians and i am a libertarian the

libertarians like ran paul audit the fed and the fed very foolish in this environment because if you get rid of the fed at least makes a pretense of maintaining the purchasing power of the currency they at least make make a pretense at it what trump wants is what erdogan has is basically unlimited power to set interest rates yeah and it's crazy that you have them trump trying to devalue the dollar and that's the other weird thing too because the dollar's strong but it's strong relatively right no let me let me i'm gonna in trump's words yeah it's so if you go back to the 90s okay we were living in a time of strong currencies and high interest rates so if you remember Robert Rubin under Clinton was Treasury

Secretary and he always said we are pursuing a strong dollar policy strong dollar every other country in the world was pursuing a strong currency policy everybody wanted their currencies to be strong the Fed had interest rates high and how we can measure that is our real interest rates were positive. Okay. So don't look at nominal rates, but our real interest rates were 2% or higher. So we had positive real interest rates and we had strong currencies. Fast forward 20 plus years and everybody is trying to weaken their currency. It's like a race to the bottom. Everybody is trying to weaken their currency and we have negative real interest rates. So basically what happens is in the 1990s in an environment

where you have hard money, is that corporations become very disciplined. If the dollar is strong, it becomes very difficult to export, which means that US corporations have to be very tight on expenses. Now we live in a world where corporations don't have to be disciplined. They can run at a loss. They can be very flabby. And this is the world that we live in. And it is demonstrably worse than it was 25 years ago. Yeah. I mean, if you just look at the number of quote unquote unicorns that exist now compared to 10 years ago it's insane like i think there was one or two unicorns in 2008 i saw a cb insights slide i think a couple weeks ago there's like one or two unicorns in 2008 and 10 years later there's hundreds yeah is this a

product of monetary policy in your opinion it's a product of a lot of things a lot of politics uh trade policy monetary policy yeah and what if it all just goes to shit well i mean is that like they're are they all racing to the bottom is their bottom do we ever hit a bottom basically here's here's the here's the case for bitcoin and gold both uh if all currencies are being devalued simultaneously then something that is an objective store of value like gold or bitcoin will increase in value that's that's the investment case period what about the the social case what happens socially if if this all if central banks can't figure it out and people lose trust in them i don't know yeah are you worried about that yes how worried uh i try not

to worry i i i try not to lose sleep over it it's because just you know being older like one thing i've realized over time is that things take a really long time to play out way longer than you think for example 2008 the fed starts quantitative easing okay what did everybody do in 2008 they're like we're going to get inflation we're going to have massive amounts of inflation it's going to happen now and everybody bought gold well it worked for a couple years but it was based on the fear of inflation but we never we never got inflation now like 12 years later inflation expectations are just starting to turn but literally like this is like years later you know so stuff just takes a really long time to happen you know bitcoin i wouldn't be surprised

if this takes 20 years to play out way longer than everybody thinks you'd be surprised bitcoiners myself included think it's going to take a generation or two yeah at least because you have to build out the technology you have to educate people about it and you have to give them their hands it is going to be a process but i think it's worthwhile i think it could bring a better future more equitable not equitable where everybody's equal or has an equal amount of money but it's a fairer system in my opinion do you believe in the cantillan effect the white effect the cantillan effect i've never heard of this so the cantillan effect uh basically dictates that the way monetary policy is run especially easy monetary policy at the fed creates undue advantages

for those closest to the creation monetary speaker those closest to the fed window right So they're able to take that money at low interest rates, put it to use in assets before the pricing has basically reached all the way through the market. And by the time prices have adjusted, everybody close to the Fed window has already invested all those assets. And as prices rise, the people who don't have access to that window just get the inflation at the end of the day. I'll have to look that up. I've never heard of that. yeah yeah so basically the argument there is that just the the mechanism of monetary creation the way it currently is created is inherently unfair um and then bitcoin the fact that anybody

can plug a miner into a wall and contribute to consensus and have an ability to um fight for for bitcoin uh on a level playing field is is something that creates again equity not equity but it makes a fairer system at the end of the day yeah yeah jared we're about 40 minutes in here um i know you uh you're very busy man you got to write your letter do you have to write your letter when do you write no i i write it the day before it's already written for tomorrow um do you think i should do that i usually wake up and write it yeah i write in the morning yeah yeah yeah let's talk about the letter for a second yeah let's talk about you don't mind yeah let's talk about the daily dirt nap the daily dirt nap so i've been writing it since 2008

I left Basically I left the day of the bankruptcy When Lehman went bankrupt Started the Daily Dirt Nap And it's a three page letter It's a macro-ish sort of letter I focus on sentiment mostly Sentiment, psychology

That's what I'm best at You know I talk a little bit about crypto But not a lot But it's really about macro And sentiment and psychology And behavioral economics And again your writing style is Something I'm envious of

You're a very good writer It's very Very concise That's the thing I love about your letter It's very concise And you say a lot In very few pages I am gonna

Give you a gift I'm gonna Actually I already gave you a gift I'm gonna give you another gift Thank you This is my second book Right here I might have to get this one signed too

So that's That's actually That's an advanced copy That's a galley So it's got a couple of typos in it and stuff but it's you know it's basically you won't even notice all the evil of this world yeah that's my second book a novel is it out yet yeah it's been out for three years okay i didn't know because this uh hell yeah i want to check this out thank you thank you for two gifts to come here

taking your time and leave with a couple gifts but uh you said you started the day lehman went bankrupt what was that like being around for that yeah did you see it coming or Yeah. As of about June or July in 2008, it started to become apparent that, I mean, the stock traded like ass. Like Lehman stock was just, it couldn't get a bid. And we were hearing from our clients, like our hedge fund clients, they were shorting our stock and they were just like, you guys are screwed. You guys are done. So that summer I started looking for a job and I'm like, you know what? That's not really what I want. I want to start the newsletter. When I walked into work on September 15th, as I was walking, it's in

Times Square on 49th Street. And I was walking up the street and TV trucks all around the building. And I'm walking up the sidewalk into the entrance and I got reporters like sticking microphones in my face. And, you know, I get up there and basically like compliance just told us we couldn't trade anything. We just had to sit there. And what happened was people came to work for an entire week because they didn't have any other place to go. Even though the firm was bankrupt they kept coming to work what were they could they not believe what had happened or that partially that partially they were kind of hoping that somebody would buy well what was left to the bank and that is what happened on friday of that week barclays bought just the broker dealer

operation of lehman uh they bought it out of bankruptcy for two billion dollars and so everybody that was a lehman employee just stayed on as a barclays employee but i quit so are you happy to be away from oh yeah oh yeah how much has your life changed over the last decade um things are pretty great things are pretty great like the that was a stressful job you know that etf trader job that i was doing the guys that were doing that were not lasting very long they were lasting two years three years four years i did it for seven years and um that is the most stress i have been under in my entire life and uh is it just the fact they have to be up for all market times or just know every market

just hand just handling massive amounts of risk in periods of very high volatility trading 300 400 million dollars like on a touch uh market ripping around like it was it was intense it was intense how do you calm your nerves at that job i i mean i was a mess i literally i was just a mess so i mean you you got the street freak book you'll read about it so yeah yeah yeah check out street street freak um check out all the evil of this world check out the daily dirt nap if you can work at dailydirtnap.com yep dailydirtnap.com um last question i have uh given your experience at lehman are you worried that db's in a similar situation that they were or uh i don't think first of all i don't think um i i think systemic risk is a lot lower than it was before uh because

of regulation i mean look like we're not going to have another financial crisis we might have another crisis someday but it's not going to play out the same way and i mean honestly like the german government's going to backstop deutsch bank if they run into trouble so um you know Now, Deutsche Bank didn't really have a liquidity issue or a solvency issue. They had a profitability issue, which is why they got rid of their equities division, because it was just consistently losing money. But it's not a liquidity or a solvency issue. And they have crazy derivative exposure, too, right? You know, I think that people misunderstand the derivatives exposure.

Okay. Like, a lot of people, because they say, oh, it's 400 quadrillion derivatives exposure. you know the notional amount like the gross amount of the derivatives exposure it sounds like a big scary number but the net exposure is very very small and there's people are just misinformed they look at the gross exposure and they just think it's like a systemic risk and it's really not all right this is good to know jared it was great to meet you yeah ma'am i had a lot of fun thank you for inviting me into your office for giving me gifts uh for talking about bitcoin and answering my stupid questions i appreciate yeah it was great thanks um that's

That's all we got this week, freaks. Peace and love. Take care.