The Pomp Podcast - #1018 Dr. Jeff Ross On Why Holding Cash Is Important Now

Episode Date: June 23, 2022

Dr. Jeff Ross is the Founder& CEO Vailshire Capital Management LLC. In this conversation, we discuss Jeff's career transition from being a doctor in the medical field to working in Bitcoin. We also discuss the macro environment, why Jeff believes we haven't reached a market bottom, why holding the dollar is important right now, and how Bitcoin will become a global reserve currency. ======================= Bullish is a powerful new exchange for digital assets that offers deep liquidity, automated market making, and industry-leading security. Combining the innovations of DeFi with the regulated environment of traditional finance, Bullish empowers users to trade with certainty and earn passively at scale across variable market conditions, in an environment backed by multibillion-dollar liquidity contributions from the Bullish Treasury. Visit bullish.com/pomp today to learn more.   Note: Bullish is licensed by the Gibraltar Financial Services Commission. Virtual assets and related products are high risk. Consult your investment advisor and trade responsibly. Bullish is available in select locations only and not to U.S persons. Visit bullish.com/legal for important information and risk warnings. ======================= Since 2018 Copper has been at the forefront of institutional digital asset development.   From award winning custody solutions, to creating the first truly off-exchange settlement function, Copper pioneers technology, products, and services, in lock-step with a rapidly changing world.    No other infrastructure provider covers as many assets, across as many exchanges, with the speed and security that Copper can offer. To learn how Copper helps the world’s largest institutional investors secure their digital assets, head over to copper.co   Copper - the unfair advantage. ======================= Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Compass was founded with the goal of making it easy for everyone to mine bitcoin.  Visit http://compassmining.io to start mining bitcoin today!  =======================

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Dr. Jeff Ross is the founder and CEO of Valeshire Capital Management. In this conversation, we talk about Bitcoin, the macro environment, what he's seeing in the market, and why he ended up leaving his job as a doctor to start investing full time. I really enjoyed this conversation with Dr. Ross, and I hope that you enjoy it as well. Before we get into this episode, though, I first want to talk about our sponsors. This episode is brought to you by Bullish. Bullish has reinvented the digital asset exchange. They give you access to DeFi features like automated

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Again, compassmining.io. Go check them out and let me know what you think. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. Dr. Jeff Ross. Jeff, how are you? Hey, Pom. I'm doing great. Thanks for having me on the show. Absolutely. I'm very excited about this. First question I have for you, you used to be a doctor.

You're not an active doctor anymore. What the hell are you thinking? Have you lost your mind? What do all your doctor friends think about you leaving the profession to go full-time into investing in Bitcoin? You know, what's funny is most people outside of medicine think I'm crazy. Most of my doctor friends are like right on. I wish I had a plan B. I wish I had something I could go into because healthcare is kind of a rough business right now. And, you know, I've been planning this for a long time. I started Baleshire back in 2013 is when I founded it. So I was doing the two career thing all the way through the fall of 2021 and just retired then. So I've been talking to my doctor friends about it the whole time and

they've been like, man, that is fantastic. Like this is tough. Medicine is a tough field and COVID didn't make it any better. It made kind of an unhappy situation even worse. So I personally have no regrets. It was a really fun first career, but I'm much more excited about my second career at this point, a career in finance, and I'm having a ball. Veilshare is a ton of fun. Bitcoin came along at just the right time, obviously from a financial and monetary perspective. And for my career as well, when I finally learned about it and got orange peeled, went down the rabbit hole, it changed my life and it changed the way I do my investing, the way I think about savings, things like that. So I've been having a great time with it. Talk to me a little bit about

running both careers. Like most people in investing would be like, hey, this is a full-time career. I got to be fully locked in, especially in the Bitcoin world where it's 24-7, 365. Most doctors and medical professionals are like, this is a full-time career. I got to be locked in. I got to be available at all times. How did you balance both of those at the same time for almost a decade? Yeah. Well, like you, I'm a workaholic. I'm super ambitious to the point of where it's kind of painful sometimes on my family, but I just worked all the time. And I still do. So I enjoy what I do. I'm a big believer in finding what you're passionate about and then doing that. So it doesn't feel like work. That's what I do. I look forward to every Monday morning.

I look forward to the day starting. I look forward to the markets opening. I look forward to learning something new. The challenge of investing is kind of like an ongoing chess game it just never gets old the board's always changing it's always interesting so i just i i'm having a fantastic time doing it if i can get paid doing what i love uh then i'll be the happiest guy on the planet and that's where i am right now working two careers was tough though i'm not gonna lie it went back in the early days when i was you know full-time working 60 to 80 or so hours on call every fourth night with my uh hospital work um i had to do veil shower on nights and weekends and any other free time i could squeeze out i never took a vacation

So life is a little bit better now that I've dropped the medical career. I love it. First thing I want to talk to you about is actually recognizing value. There's a lot of folks right now, especially with volatility in markets across assets, but specifically in Bitcoin as well, they think that they are day traders. Hey, you know, it's at one price. Is it going to go up a little bit or down a little bit? Should I buy?

Should I sell? How many transactions should I do? You seem to take a very different approach, which is much more about recognizing longer term trends, finding true value, kind of buy, hold and adhere to these timeless investing principles versus maybe some of the day trading that happens. Why pick that investment strategy? And how do you make sure that you stay with the idea of recognizing value over a long period of time versus get enticed into into the day trading mania that has taken place in many financial markets? Yeah, well, first of all, it's really well documented that day trading just generally

doesn't work as a strategy over time. I think I might be misquoting this, but I remember Fidelity putting out a study a few years ago that said that the day trading accounts that were opened on their system in their brokerage firm, within a year, I think 90% of those went to zero or near zero. So they basically lost all their value. Trick with day trading is you have to be right more than half the time. And then you have to be right. Your winners have to make more than your losers lose. And then on top of that, you have to factor in trading fees. So that's a lot of things working against you. And most people can't do that successfully. A few can, by the way. But what I tell people is to quit, especially in regards to Bitcoin and other great assets. I view Bitcoin as the king of assets. It's the greatest asset that has ever been created. Instead of trying to time tops and bottoms, which is basically a fool's errand, and even the best professionals can't do that over and over again. They may get lucky a time or two, but in general, you can't do that.

learn to recognize value, learn to recognize when something is expensive and when something is cheap right now, based on all of the metrics that I use based on on-chain analytics, based on kind of Metcalfe's law, adoption cycles, those sorts of things. Bitcoin is super cheap right now. Could it get cheaper? Sure. Could we go lower? Sure. If the recession worsens, which I fully expect, could Bitcoin drop in price down to 15,000, down to 10,000, below 10,000? Sure. I don't care. But what I do know right now is that Bitcoin is really cheap. And so learn to recognize value like the most famous investors in the world, like the Warren Buffetts, those kinds of people, when they see value, they jump on it. And so I would recommend to people to quit trying to time the

bottom and just start buying at these prices. This is literally what dollar cost averaging was made for, for this kind of volatility, for this kind of like bottom dwelling price action. If you can just set it and forget it at a certain dollar amount every day or every week or every month, I can almost guarantee you that within two or three or five years, you will be so very happy that you did that today that you were buying when everybody else was selling. That's the way to grow wealthy over the long run. So I hope people are taking advantage of these prices right now in Bitcoin. When you start to look at various asset classes, are you all Bitcoin and that's what you spend all of your time thinking about? Or do you look at other asset classes as well?

And how do you select kind of markets to analyze and participate in versus the difference of like the security selection itself. So, hey, I should go and look at stocks versus an individual stock and spending your time. Where do you spend most of your time on the analysis front? Yeah. So, great question. So, when I started my career, I actually started writing for Motley Fool and Seeking Alpha way back in the early 2010s. I was a stock picking analyst. I focused mostly in the healthcare and technology sectors. Then Bitcoin came along. And then on top of that, what I realized, it took me a while, but by the end of the 2010, so 2017, 2018, 2019, I just finally figured out that, you know what, value investing is not working right now. Growth is the only game in town right now. So basically, if you had growing revenues, you didn't even need to have positive earnings. You barely had to have any kind of cash flows. You just needed revenue growth in order to be a favored stock in the market.

That was kind of the way the world was working at that point. So I sort of morphed my strategy. I'm a top down macro guy. So I tend to see the world in terms of what is inflation doing? What are economic cycles doing? What is the Fed doing? What are other central banks doing? different asset classes respond in kind to these kind of factors based on what inflation things are doing. So that causes currencies to fluctuate, that causes interest rates to move higher or move lower. When interest rates move higher or lower, that has a significant effect on other things like financials, like energy, like commodities. And so I tend to look across everything now. I tried to be kind of a jack of all trades. And then I've sort of focused in on Bitcoin itself. So yes, I'm hardcore on Bitcoin. I focus a lot of my education on Bitcoin. I love to spend time on Twitter spaces, teaching people about it. But I do focus both in my hedge fund and in my separately

managed accounts for my clients. We're into equities. We're into bonds. If bonds are a good thing to be into, they aren't right now. Currencies, commodities, you name it. If I think we can generate alpha in that sector, we'll be in it. So when you start to evaluate these various markets, how long is your time horizon? Is this like, hey, I look at one week, one month, one year, a decade? How do you actually analyze what constitutes good value over your time period? In my mind, I'm still a long-term investor. I want to hold things forever. So personally, I plan on holding Bitcoin forever and hopefully never selling it. My mantra is until I can live off of 5% of my Bitcoin savings, I'll never touch it. So that's my goal. Whatever that happens,

it'll happen. And even then I may not sell it. I may just borrow against it, but that's a different story. In my mind, I'm a long-term investor, but I also make my trading decisions and I have a whole kind of trading system that I have built for Velshire where I use momentum and volatility to factor in when I'm in and out of positions. And so like right now, for example, I've been bearish from a macro point of view since early January and been telling people like, look out, it's going to get ugly. Back in January, February, March, I'm like, we haven't even hit the rough patch yet from a macro standpoint. Now we're in the rough patch. Now we're seeing what happens to markets when things get really ugly. I think a recession is inevitable. In fact, I think we're

probably already in a recession right now, and I think it's going to get much worse before it gets better. So when I invest in different assets, I use momentum. Clearly we're in a bearish formation right now. Momentum is very, very strongly bearish. Now nothing goes straight down just like nothing goes straight up. What it does when it goes down is it zigzags down. So I use that form of trading, I'll be I'll have a very macro bearish view that things are going to go in this downward channel. But within the channel, we may get up to kind of higher points in the volatility range. At that point, I'll increase my shorts, I'll take profits when we get to the lower end of our volatility range. And I just kind of do that over and over again. So I'm, I'm like a long term investor, but with with trading strategies mixed in there. So it's kind of hard to pin me down. You mentioned that you believe we're already in a recession. We obviously saw GDP contract in Q1. We have the White House press secretary saying that there is no recession imminent. They don't see any signs of recession. You see Janet Yellen also saying that she doesn't believe a recession is imminent and no one needs to worry at the moment. What is the difference between your view of the world and their view of the world? Why do you think we're already in a recession? i think the difference is i'm being honest right i'm being intellectually honest i'm not managing the expectations of the country like those guys are i think that's the primary job of the federal

reserve by the way is to manage expectations of the markets um and because expectations are everything and if you lose your perspective on something and if you go crazy then then that's when things plummet and get out of control so i think they want to sort of maintain the um concept that they actually do exert significant control over the markets. And in a way they do, but in a more powerful way, they don't. The markets themselves are so much more powerful and so much larger than the Fed itself. But so what are they doing? I think they're being not totally honest. They're twisting the truth. They're focusing on things like, well, unemployment is still very low. That's true. But that's going to change probably pretty rapidly. Everything else

you look at, whether it's consumer sentiment, whether it's housing rolling over, whether it's the stock market crashing. You can go on thing after thing. Manufacturing is way down. I mean, we're talking not just recessionary levels. Some things are at all time historic lows right now. That is not good. The CEOs that were interviewed, this just study came out. I'm sure you talked about this too. 75% of CEOs think that we're either in a recession or we're going to be in a recession within the next 12 months. That's for real. That's no joke, right? And as Stan Drunken Miller has pointed out in the past, when you have a high dollar valuation, high oil prices and high interest rates, that always leads to an earning recession for companies. This stuff is

still coming. We haven't even hit this part yet. So we haven't hit the ugliest part of everything right now. The one thing that I'm watching, by the way, really closely is the price of oil. Oil has been kind of on a downtrend recently, and I think that it probably has peaked and it's rolling over. Similar to 2008, the stock market had started to decline, but the price of oil had continued to ramp up higher. Once you see that price of oil peak and then descend, it can descend extremely quickly. And what that does is the floor drops out of risk on assets. Stocks, I think, risk on assets in general are going to crash and probably crash hard and further than they have already. And then at that point, that's when we'll get the disinflation, right? The disinflation that

Powell wants. He's hoping for, he's gunning for demand destruction. He's succeeding. He's destroying demand. He's bringing down the wealth effect. He's making people poor. He's shutting down businesses. He's getting what he wants. And I think we should be careful about what we're wishing for because we're going to get it and it's going to be ugly in the short term. Obviously, he has doubled and tripled down on his promise to increase interest rates. We saw 75 basis point hike with the last hike. And it feels like many people in the market are like, hey, man, no mas. Like, we've already seen demand destruction. We've already seen the economic contraction. But they remain committed to raising interest rates even further. They're

going to continue with the quantitative tightening. What is your read on their ability to actually follow through with what they're saying, given the contracting economy, given asset prices down already so much. Is this just inevitable that they will push us into a full on recession and people should brace for that? Or will we see the Federal Reserve wave the white flag, give up and kind of reverse course out of necessity because their demand destruction is almost too good and people start getting really, really hurt by it? I think kind of all of the above. I think that they will wave the white flag at some point and they will pivot and go dovish again. And that that's definitely coming. But first, we need lots of pain and I think they're going to succeed. I

believe, Paul, when he says that they are not going to stop their tightening, their hawkish stance until they see significant sustained disinflation, I think he's going to get what he asks for and it's going to be really ugly. And again, I think that the markets have a lot further to fall. They started at extremely high, historically high valuations from a price to sales, price to earning perspective, basically any metric you use was kind of similar to, you know, 1929, the dot calm bubble, 2008, those kinds of levels. That's where we were. And we've come down a lot from there, but there still is much further to fall. I would not be surprised to see the NASDAQ fall another 30, 40% from here, maybe even 50% from here. That would be not surprising. And I think

that's the point where the Fed would pivot. And we would definitely be seeing disinflation, if not outright, just deflation at that point. That's going to be ugly. I don't wish that on anybody. I really recommend that people consider hedging or at least holding larger cash positions at this point, because I still think there's more ugliness to work through before the Fed pivots back to dovish again. Real quick, if I can put on my conspiracy theory hat, one thing that I think the Fed is trying to do is move as fast as possible. That's why they're raising rates at kind of an unprecedented rate. And I think they're very vocal about what they're doing, about wanting to destroy demand, about realizing that it's going to be sacrificing

the stock market as well as the housing market, things like that. I think they want all of this to happen so that we can bottom and then they can pivot and turn back on to QE or at least to pause before the midterm elections. I think they can't go into midterm elections with inflation still high and with stocks still falling. They need to try to have this happen very quickly, probably this summer, crash and burn so that then they can bottom and then turn everything back on again and get assets kind of going back up again before the midterm elections. That's my conspiracy theory. I'm not political at all. I don't care at all. But as it stands right now, the Democrats are toast, right? Because if you go into a midterm election with the economy down and inflation high,

it's just going to be an absolute landslide for the Republicans as far as I view it. When you mentioned cash, having a larger cash position, many people over the last two years were like, hey, inflation's coming. Now inflation's here. It's very high. It's the 40-year kind of historic levels, but also asset prices are falling. And so how do you balance the risk of getting out of cash into assets that may just be going down versus the known factor of inflation is high and you're losing purchasing power in the cash? How do you kind of think through that problem? And maybe there isn't anywhere to hide. Yeah, it's all about time frames, right? So in the short term, when things are ugly in the near term, you want to go to cash.

Why? Because cash, the US dollar specifically, is the world's safe haven asset. That's where people go. Why do they go there? It's because when you have your stocks or your bonds or your commodities or even your cryptos or your Bitcoin or whatever you have, what happens? People panic. They see things getting ugly. They see lots of red candles. They hit sell, sell, sell, sell, sell. And what happens when you sell those things? You go into cash. You're buying US dollars. It becomes a safe haven asset. So what we see in these times of intense market fear during times of, you know, recessions like we're entering into, the value of the U.S. dollar relative to all other currencies goes up. That's why we've been seeing the Dixie rise and go as high as it has. I think it's going to go higher still before this is over for sure. The second point of this, though, is that the dollar is a terrible asset to hold for the long term. So short term, it's a great asset to hold when we're going through a correction. Long term, it's terrible, right? it's guaranteed to devalue over time. You're guaranteed to lose your purchasing power over

time. That's literally the monetary policy of the dollar is to inflate and to print more of it and to cause your purchasing power to decrease over time for the benefit of the government for the loss of U.S. citizens. So get out of the U.S. dollar over the long run, but consider it in the short term. When you think about asset prices continue to go down and kind of this very bearish view in the short term, kind of this crash and burn of stocks. How would you anticipate Bitcoin to participate alongside? And we've obviously seen a high correlation. Bitcoin just hit its all-time high correlation with the S&P 500. NASDAQ's very high as well. Is it just wherever stocks go, Bitcoin's going? Or do you expect to have some decoupling and maybe Bitcoin could serve

as a safe haven compared to a short-term outlook for stocks or other assets? So yes, the correlation with the stock market has been uncontrovertible. It just has been what it has been. Why is that? I think for now, it really comes down to education. Even though you and I and most people listening to this understand that Bitcoin is actually the world's greatest safe haven asset and savings technology that has ever been created and I think ever will be, most people don't view it that way. Most people, you think of it either like it's just a crypto or they think of it like a small tech stock. They don't understand the difference between Bitcoin and a tech stock or Bitcoin and crypto. And so they don't, they don't recognize what it is that they're holding. So until the

majority of market participants start to understand what Bitcoin is, that it truly is just simply better money for a better world, that it is the world's ultimate safe haven asset, things like that. At that point, it will continue. So over the long run, more and more people will recognize that it will become the world's ultimate safe haven risk off asset. For now, it's still trades like that. Although I will tell you that I think that most of the decline is already priced in, Could it go lower? Sure. But I think we've seen most of the worst of it. I also think that Bitcoin is the canary in the coal mine. It's it's the world's freest market. So it tends to respond the most quickly to changing economic and inflationary conditions. Bitcoin peaked, I think, back on November 8th of 2021. And then since then has been declining. It was the first to sense or smell trouble underneath the hood of the economic engine throughout the world. And I think it's going to be the first to sniff that things have maybe bottomed and we're going to enter a period of more risk on environment going forward. So I'm watching Bitcoin very closely. I think that it will decouple at some point.

And when it starts to peak, when it looks like a bottom has been formed, that will be a fantastic time. And I think it's going to lead to, you know, two or three or more years of really fantastic price performance, definitely outperforming equities, definitely outperforming other asset classes. When you start to think about the Fed, do they care about asset prices? Will they actually wave the white flag because of the asset prices or is it true that they are only looking at inflation? That's a tough one. Well, first of all, I think, you know, even though they're supposed to be apolitical, they were clearly influenced by Trump, right? Powell was. Trump was like, get the stock market up, get the stock market up, get the stock market up, do whatever it takes. And I think Biden is the exact opposite, like get inflation down,

get inflation down, get inflation down. And so they sort of shift direction based on the current administration. I think their primary focus, I think it's legitimate that their primary focus is inflation, but I think they definitely care about falling asset prices. They realize that their popularity is definitely based on this as well as their job security. They're in a tough bind right now, right? Because they're not completely responsible for this inflation that we're experiencing. A lot of this is supply side that they can't control. So because the supply demand equation is out of balance, the only solution they have is to destroy demand, which is a terrible solution, right? That's like a socialist response to how do you make the world,

like if the things are out of balance, what do you do? You make everybody miserable. That's literally what they're doing right now. I think a smart plan would be let's raise supply, let's free up supply chain issues, all this other kind of stuff. Let's increase oil production. Let's help resolve the Russia-Ukraine war, blah, blah, blah, and raise the standard of living for everybody. Instead, we're doing the opposite. We're bringing everybody down and making everybody miserable to solve this imbalance. They definitely are concerned about asset prices, but they're pretending to look the other way for now. At some point, it will just become too serious of a problem and they're going to have to switch. And that's when they'll pivot. And I think that's

when the next asset bubble will start. I do think, by the way, QE4 is going to absolutely dwarf QE1, QE2, and QE3 combined. So I say get ready for that. Buckle up for what's next for the lower prices, but then buckle up for the asset inflation after that. It definitely feels like there's just this trend of the easy free money leads to these bubbles. There's kind of a popping of them. We get a crash back or kind of a reversion to the mean, and then it's like, oh shit, everything's crashing. Let's inject more liquidity. And when we go and do that, we just get a bigger and bigger bubble over time. What's the end state? Is it unsustainable and eventually they can't keep doing it? Or does it literally just get bigger and bigger and one day

the United States takes zeros off of the dollar and says, no big deal, everyone, just keep normal operations going? I think the end state is the collapse of the dollar, but I think that's a long ways away. So I see this decade as basically a decade of stagflation with occasional deflationary busts that are just going to be terrible. So, so as, as you were just saying, so we're going to see these massive QEs, these massive bubbles being formed and then, okay, we're overheating pop. They got to pop the bubble. Everything crashes down, you know, similar to kind of how the seventies were, where it was just massive choppy action, but basically from 1966 to 1982 stock places were flat. So if you had just like not invested in, you know, or, or put your money in stocks and

then fallen asleep for 16 years, you would have had the same stock value at the end of 16 years. Now, mind you, that would be minus the inflation that you lost, the loss of purchasing power. So you actually got kind of destroyed during those 16 years. I think we're kind of due for a same setup, and it's just going to continue until people start losing confidence in the currency. I like to steal a quote from Greg Foss, by the way. I'm sure you know him, who talks about the U.S. dollar being the best crack house on the crack street. The U.S. dollar will definitely be the last to fall. I think in the meantime, lots and lots of other currencies, smaller currencies are actually going to go away this decade.

We're already starting to see that. And I think that purchasing power is going to go into one of three currencies over the next 10 years. I think the dollar is still going to achieve some of a gain, some of that purchasing power. I think the Chinese yuan, whether people love or hate China, it is definitely on the ascent. And I think that currency will gain strength. And I think the third is Bitcoin. And I think that's going to gain massively in market cap over the next 10 years. So I would be watching for that. And I think by 10 years from now, we're basically only going to have these main three currencies and people won't really be discussing other currencies, including the Japanese yen, including even the euro, other strong currencies. I think they're basically going to be irrelevant. I hate to say that to pro-European people and pro-Japanese people, but I think the currencies are weak and getting weaker and that's going to happen faster than most people realize. Is there a world where the individuals who share the same view as you not only, quote unquote, go long on the dollar, Bitcoin and China, but also they would short the weaker currencies that likely would fail?

So kind of go long, the strength, go short, the weak ones? Or is it more of a strategy of like, hey, it's really hard to kind of time and understand the severity of the weakening of these currencies. And so people are better off kind of just looking at the long articulation and not play around so much with the shorts. I think the easiest way to play that for shorting fiat currency is just going long Bitcoin, right? I mean, just as the monetary policy of Bitcoin, because it's perfectly scarce, because of, you know, the inherent designs and properties of Bitcoin, it's designed to go up in value over time. It's designed to appreciate in value over time. Government fiat currency literally is going to all government fiat currencies go to zero.

That's just what they do. That's what they're designed to do, whether people admit it or not. And so I don't like trading individual government fiat currencies against each other because they're all racing towards zero. And it's just kind of a matter of, well, you know, what policy is shifting what and you can make money on the short term. But to me, that's a very difficult trade and hard to be profitable consistently on those. It's very easy, I think. In fact, I think it's the trade of the decade. All you got to do is trade fiat currency for Bitcoin, which is designed to appreciate over time. And it's almost like you can't go wrong. That's how I view it. I think it's definitely going to be the world's reserve currency at some point. It will absorb the

purchasing power of other government fiat currencies. So don't even worry about the trading. And especially, by the way, one quick piece, because they're both designed, the dollar is designed to depreciate in value over time, but in the short term, it's very strong. On the contrary, Bitcoin is designed to appreciate in value over time, but in the short term, it's very weak. It's down like 70%. Trade your strong dollars for your weak Bitcoin for a long term investment strategy. And it's hard not to do well if you do that. I've heard you previously say that Bitcoin is kind of perfect money and that this was unattainable in the analog age, but it is attainable in the digital age. What do you mean by that?

I like to give credit to gold for being a fantastic stable store of value for the analog age. So basically, the last 3,000, 4,000 years, gold did a great job of being a stable store of value. In fact, you can look at some studies that show you could buy the same amount of food and wine back during the Roman Empire, you know, so the time of Christ 2,000 years ago or so, about exactly the same amount of gold would buy you the same amount of food back then as it does today.

That's pretty remarkable. That's a fantastic stable store of value. It wasn't until the digital age came around and we're clearly entering into the digital age. Some old timers, you know, a lot of boomers have a difficult time understanding that, getting their kind of arms wrapped around that, their mind wrapped around that. But we clearly are, right? We're entering into the digital age. So it wasn't until the digital age came to fruition and became a reality that we could actually design a more perfect money. So gold was a fantastic stable store of value. Bitcoin is everything that gold was plus some. So everything that gold does well, Bitcoin does at least that well and actually does many of those things 10x or 100x better. That's why I think it is a near perfect money. I say near perfect because it's still not a great medium of exchange. That is changing quickly as layer two, layer three gets built out as the lightning network expands and becomes ubiquitous throughout the world. then I think it will be essentially a perfect money. It's the perfect base layer of money with some kind of ugliness on top right now. That will get built out. It will become much easier to use. It's a perfect store of value. It's basically guaranteed by design to appreciate in value over time because of its perfect scarcity and decentralized nature and all these kinds of

things. To me, it's just obvious and inevitable that it will become the world's money at some point, but it's going to take some time to get there. When you start to think about Bitcoin being adopted globally. We've obviously seen individuals first, then we've started to see organizations over the last three or four years, both financial institutions, public companies, private companies. Now we're starting to see nation states be interested. We've got El Salvador, who's openly buying Bitcoin. They've built out a bunch of infrastructure. We've seen some other countries start talking about it. Is your expectation that some of these countries will drop their fiat currencies for Bitcoin? Or do you believe that they will just add Bitcoin somewhere

to El Salvador as legal currency alongside either their own native currency or another legal currency that they already are using? I think at least in the next couple of years, they're going to pull the El Salvador model. I think we're going to see this hybrid model, which is clunky and kind of ugly. But El Salvador is still kind of holding on to the old system. They still have to cling to the US dollar system. There are a lot of kinks to work out in the meantime until the Bitcoin infrastructure gets built out so it's super easy to use, until it's as easy to use it as it is to break out your Visa card and buy a Starbucks with it, those kind of things. And that's coming. Until all of these kind of issues are ironed out, I think we're going to see this hybrid model. Maybe three,

four or five years from now, we'll start seeing the first nation state go to just simply Bitcoin on a Bitcoin standard. There's going to be kinks. It's going to be a little bit ugly this decade in general, but it's growing exponentially. And the adoption and the usability of Bitcoin is also growing exponentially. And so I think it's going to happen sooner than most people think. When you start to think about Bitcoin today, one of the things that I always go back to is like the longest term investors, the pensions, the endowments, the foundations, they have permanent capital to some degree, but many of them have fixed income and they're at a real negative rate of return. Is your expectation that we're going to see all these long-term investors eventually get up the education curve and they will start to allocate very large portions of their portfolios to Bitcoin because of that long-term kind of compounding nature of the asset? Yes. Well, first of all,

bonds are the most obvious stupid investment of this decade, right? I mean, there's no way they're going to keep up with inflation. They may make good short-term trades. So I'm not like 100% anti-ownership of bonds. There are times where bonds are good. In fact, we may see one if oil drops and we head into a recession, at some point people are going to flock into U.S. treasuries and they'll probably do well on a short-term perspective. So these companies, these huge pension funds, endowments, things that have 60, 40 or more or a higher percentage of bond allocation than 40%, they're definitely already talking about Bitcoin. They're already talking about their terrible returns. It's really hard to change these systems. These guys have been doing

what they've been doing very successfully since the early 80s. It's been a great strategy to be long bonds. So it takes a lot and a lot of committee meetings and a lot of wringing of hands and conferences and things to get people to switch their policies. But it absolutely will come. I think it starts really small. That's one thing that I'm looking for, by the way. I'm waiting to see these sorts of entrants into the Bitcoin space. I think what we've seen so far from an institutional perspective are trading hedge funds and similar funds that love to go long and short Bitcoin. They love to trade Bitcoin because of its volatility. These are not who we really want in the system to grow the network. What we really want are the long-term hodlers, the people who buy

a company and they hold it for 10, 20, 50 years or more. Those are the kind of committees that we want talking about Bitcoin. We want these endowments and these kinds of funds that are long only essentially to buy Bitcoin. I think they're going to start out small. They might start out with a 1% allocation, but that will rise over time, especially as the losses on their bond purchases start to mount, start to build up over time and inflation continues to be generally high this decade. They're going to realize we are just literally throwing purchasing power away. We're losing so much money with these bonds. We need to go heavier into Bitcoin. So I think that's coming. I think it's going to take though many, many years until that's a common thing and not too scary for

a lot of these traditional pension funds and endowments. Talk to me about some of the public market investment vehicles. We obviously have seen the Bitcoin futures ETF get approved in the United States. We now have a Bitcoin short futures ETF. We still don't have the Bitcoin spot ETF. How important are these vehicles for institutions or other investors to get exposure versus they're nice to have, but really, if people want exposure, they're going to go and buy the actual asset themselves? I think for a retail investor, they're sort of a non-issue, right? They're a nothing burger for the most part. I think most retail investors should avoid the futures-based ETFs. They're inefficient. They're terrible in general. So I would say stay away. I think what

that means, though, is that this is the inevitable adoption of Bitcoin. It's Wall Street building out its infrastructure and accepting Bitcoin as a new asset class. So in that way, it's a good thing. I think it's going to bring in large amounts of money, like billions of dollars into Bitcoin because of these sorts of products. It's inevitable, too. So a lot of the traditional, you know, the original cypherpunks and the, you know, not your keys, not your coins, Bitcoiners, they don't like this kind of stuff. They don't like seeing Wall Street getting its tentacles into Bitcoin. But it's again, I think it's inevitable and it's what will bring Bitcoin from being kind of a one trillion or sub one trillion asset class asset up to, you know, 10 trillion, 50 trillion, 100 trillion in the coming years. It needs to be adopted by Wall Street. We're going to see all of these types of products. It's frustrating for many that the spot Bitcoin ETF hasn't yet been approved.

It's sort of a head scratcher when you see and I understand the reasons, right? The CME is responsible for futures based things. And it's just it's a different kind of structure. I know Gary Gensler is being very slow and reluctant as far as this adoption. It is coming at some point. It is inevitable. So so once that happens, I think there is a wall of money that is going to enter the space because it's such an easy way to invest in Bitcoin, even though it's sort of a sort of a derivative of Bitcoin. it's still a very easy way for people to get their 401ks and their IRAs into Bitcoin. It's a great product that will be approved at some point. I hope it's sooner than later, but I'm not holding my breath anymore. I'm just kind of waiting and see what the SEC decides. Yeah, that makes sense. Let's talk about taxation. The United States is treating Bitcoin as property today. And so if I

go and I spend it, I get hit with capital gains taxes. Is that a barrier to Bitcoin adoption? or do you expect over time there to be some sort of like de minimis exemption or some way to encourage more people to actually spend Bitcoin and have it transition from just a pure store of value to much more of a medium of exchange and maybe even a unit of account as more and more people adopt it? Yeah, I think it's inevitable that I think it's a mistake right now. It's fine in its early days to consider it a property. You know, the IRS and the US government in general had no idea how to characterize Bitcoin. So they called it a property and that's fine for the most part. But yes, it's a huge hindrance for people. People don't want to spend their Bitcoin if

they're going to incur a capital gains tax every time they buy a Starbucks or whatever. That is, again, inevitable to me that I think at some point within, I hope it's as early as five years, but probably more like 10 years down the road, I think that the government changes its stance and they officially basically admit that Bitcoin is a currency, that it is money, and they start treating it and taxing it as such. So I'm looking forward to that day when people can just sort of freely spend it like they would US dollars. And purchases will get easy. At that point, the lightning network, I expect to basically be ubiquitous. I expect transactions on Bitcoin to be extremely easy. Also at that point, I think it will be a wonderful unit of account too. It'll be

much more stable. I don't think we're going to see these 10X, 100X, 1000X gains that we're seeing sort of in the early days of Bitcoin. But then by that point, it will be a fantastic money. It will be kind of widely regarded as the world's best decentralized apolitical money. And people will be one by one, kind of as we were talking about earlier, they're going to be putting away their current government fiat currencies and putting their purchasing power into Bitcoin. And then it will be just used for commerce around the world without people even thinking about it. What's the one milestone that you look forward to in the future that maybe people aren't putting as much importance on that you're like, this is going to be really important when it happens?

I just don't know when it will occur. That's actually one of them, kind of how the government characterized it. You know, the most important thing for me, what I had been watching for, was for it to become a primary central issue for the government, that we would be hearing headlines. We'd hear politicians debating it, talking about it on a regular basis. We've already reached that point. So that's pretty fantastic. I think the next is to see countries bigger than El Salvador start to adopt it, right? Russia is talking about accepting Bitcoin and crypto as payments for their goods.

That's also a great start. What I want to see, you know, I'll tell you what would floor me and what I think would be awesome. So everybody's been paying attention to the Japanese yen and the collapse of it and their yield curve control that they're doing, all this kind of stuff. I think Japan could be a dark horse. And if they were smart, if there was just one person who understands Bitcoin, you know, in their government high up enough that they could whisper into the ears of people like,

look, this could be our way out of this. Can you imagine if a government, a G7 nation started printing money, you know, printing money and using the proceeds to buy Bitcoin and to use that as a store of value, use it as a treasury reserve asset like we have with gold in the past? Gold was a fantastic reserve asset for the analog age. Bitcoin is clearly the best asset for the digital age. That could be a dark horse that would literally just rock the world. And so I would love to see that headline come out that a G7 nation is actually holding Bitcoin as a treasury reserve asset. that would be a game changer. When you start to think about kind of Bitcoin, what is the conversation right now with investors? It's drawn down 70%. There's plenty of people who are doing

their victory laps who have been critics. They're saying it's over. Many of them were the same people in 2018 that were saying it's over. But what's the conversation like with clients around Bitcoin now? And how many of them actually think that it could be over? How many of them are simply saying, oh, wow, this is a much lower price than it was just a few months ago. And therefore, they're excited. My clients are surprisingly relaxed about it. You know, there's a couple that went like kind of all in on their own. And I always tell them, if you want to do that kind of stuff on your own, once you feel like you have a good handle, a good grasp of Bitcoin, you know, here's how you do it. Here's how you buy it. Here's how you put it in cold storage,

those kind of things. They're freaking out a little bit. They don't like watching their net worth decline that substantially. I would say the vast majority of my clients are just kind of taken this in stride. Like, yeah, this is what happened. What I remind people too, by the way, Bitcoin's been in the limelight and like, you know, Peter Schiff comes out and talks about, oh, Bitcoin has failed. See, it's going to zero, blah, blah, blah. Look, Shopify is down more than Bitcoin is down. And Shopify is a fantastic company. I don't hear anybody talking about Shopify being tulips, being tulip mania, being a failed experiment that Shopify is going to zero. That's just ludicrous to talk like that. And so it's ludicrous to talk about Bitcoin that it's

a failed experiment because it's down so much. Yes, it's extremely volatile. Everybody knows that. But look, we're literally in or entering into one of the worst recessionary periods of our country's history. It's going to be painful for all asset classes, even ones that have held up pretty well. They're still going to get tanked. We're still going to see oil, I think, tank. It may drop 70% or 80% from its highs before this is over. So nobody's going to talk about oil being a failure, right? Nobody's going to talk about oil being tulip mania. So to me, that's all ridiculous. The only people who say stuff like that are people who don't understand Bitcoin at all. They just don't get what it's for. They don't understand that it's simply better money. So I don't put

much stock into it. My clients, I've been teaching them about it since I got orange-pilled back in 2019. And what did it for me was Saifedean's book, The Bitcoin Standard, just kind of understanding the history of money and why Bitcoin is basically the best money. Once I started to understand that, I started to teach my clients that. So long story short, they take it all in stride. We're doing fine. When I tell people that they should go follow you on the internet, where can I send them

or where can they find out more about Valshire? Sure, if you wanna learn more about how I manage money, I obviously do my RIA, my separately managed accounts, different than most people. I'm not like a traditional investment advisor or financial planner. I run my client, my separately managed accounts more like my hedge fund.

So if you wanna learn more about that, you can check out Valshire.com or actually just shoot me an email, info at Valshire. dot com. And then I spend most of my days actually on Twitter. My handle is at Valshire Cap. I'm on there probably too much. So feel free to follow me on there. I'm on Twitter spaces a lot. I love to talk about Bitcoin and markets and investing and all that. So feel free to look me up. Awesome, man. Jeff, thank you so much for taking the time to do this. It is pretty incredible

that you built this all while also being a doctor. And I wish that more people could see that there's a path to work hard, do it for a long period of time and you can get yourself in a position that you're in. And just talking to you today, it's very obvious that you care about this stuff and got some unique views. So we'll definitely bring you back. And I appreciate your time. Thanks, Pomp. I had a great time. Thanks for having me on. All right, buddy. Talk soon. See ya. Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you're subscribed on Apple, Spotify, or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got

you covered. Head over to palmscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week time period. Go to palmscryptocourse.com to learn more and I'll meet you guys for the next episode.