The Pomp Podcast - #1428 Sam Callahan | Bitcoin Will EXPLODE With Global Liquidity

Episode Date: October 29, 2024

Sam Callahan writes simple, insightful updates on bitcoin called “The News Block Weekly Newsletter.” In this conversation, we talk about global liquidity, why bitcoin is so sensitive to it, Paul Tudor Jones comments on bitcoin, companies putting bitcoin on balance sheets, interest rates, and where you can get smarter on a daily basis. ======================= Buy book: https://www.amazon.com/Live-Extraordinary-Life-Anthony-Pompliano/dp/0857199927/ ======================= Xapo Bank, the world’s first fully licensed Bitcoin-enabled bank, offers military-grade security with an unmatched blend of physical and digital security, as well as pioneering regulatory oversight, so your funds are always protected. Beyond secure storage, they enable you to grow and use your Bitcoin. Earn daily interest in Bitcoin, spend with zero FX fees using a global card, and make instant payments via the Lightning Network for unrivalled access and convenience. Visit ⁠https://www.xapobank.com/pomp⁠ to join. ======================= The Pomp Podcast is powered by BetOnline.ag, the premier crypto-friendly place to gamble on politics and sports, casino, poker and horse racing. BetOnline.ag gives you the ability to use Bitcoin and more than a dozen altcoins to make deposits and withdraw your winnings. There are no crypto transaction fees, and processing is instantaneous and secure. Visit ⁠⁠⁠⁠https://promotions.betonline.ag/pomp⁠⁠⁠⁠ and use PROMO CODE: POMP100 to receive a 100% matching bonus on any crypto deposit. BetOnline.ag is available in nearly every country around the world, making it the top global gaming destination for crypto users. ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

What's up, everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. What's up, guys? Today, we've got Sam Callahan here, and we got a great episode for you. We talk about global liquidity. We talk about why Bitcoin is so sensitive to it, what Paul Tudor Jones is talking about, how corporate CFOs are

putting so much Bitcoin on their balance sheet, and why they're going to start realizing that dollars are liabilities and not assets. Then we get into what's going on with interest rates, what the Federal Reserve is thinking, and how you can get smarter on a daily basis where Sam gets his information and where you can too. I really enjoyed this conversation and I think you guys will learn a lot from it. So here's my latest episode with Sam Callahan. informational purposes only. a unique blend of physical and digital security for over a decade. From military-grade Swiss bunkers to cutting-edge digital protocols, they've got you covered. And now they're bringing you the

kind of competitive Bitcoin trading fees typically reserved for institutional giants, right in the palm of your hand. With Zappo Bank's ultra-competitive spreads, more of your Bitcoin stays where it belongs, in your pocket. Whether you're trading big or small, every move you make is designed to boost your gains and fuel your financial future. Head to zappobank.com forward slash pomp to join. That's X-A-P-O-B-A-N-K.com slash pomp. I thought a great place to start is you did this report with Lynn Alden about Bitcoin and its relationship to global liquidity. It's a good time to talk about this because global liquidity seems to be increasing. M2 money supply is expanding. They're making capital cheaper. Why do you think Bitcoin is so sensitive

to global liquidity compared to other assets? Yeah, I teamed up with Lynn Alden on that report. And the reason why we thought it was like our hypothesis that Bitcoin would be the most sensitive and that's what we found. But our theory was that other asset classes, there's different factors that drive the prices. So, for instance, like equities, equities have like dividends and earnings that it's not just liquidity driving their the price action, as well as they have a structural bid from like retirement accounts. 401ks. So even if liquidity gets drained out of the system, that passive bid can kind of buffer those prices up. So it kind of distorts its relationship with global liquidity. And that's just equities. Gold, similar, has like a mixed relationships with liquidity. It's scarce. It benefits from pro-liquidity environments, but it's also seen as like a safe haven asset. So when

liquidity gets drained, prices fall, people kind of flock to it as a safe haven. So it's not just a pure, you know, correlated asset to liquidity either. Now, Bitcoin, you know, risk assets tend to do better in pro-liquidity environments. Investors kind of move further out on the risk curve. Bitcoin in today, I think other people disagree, but it's broadly seen as a risk asset still. And so it's going to benefit from pro-liquidity environments. It doesn't have earnings or dividends driving its stock or price like stocks. And so it's very purely correlated to liquidity or so we thought and so all those things it's global as well like if you look at like emerging market stocks for instance um they could kind of break with liquidity as well because

they can kind of like very specific events happen in their economies that kind of are specific to them so some kind of currency crisis economic crisis um natural disaster or something like that could kind of help break that liquidity condition whereas bitcoin is just this like global asset right it's also very scarce fixed supply so it's very small too still so it's gonna get thrown around more than other things with uh like the waves of liquidity coming in and out so for all those reasons we thought that bitcoin would be the most pure barometer of liquidity conditions and that's actually what we found with the data as well so if we go back to 2021 obviously in uh interest rates are at zero percent we just printed trillions of dollars um

asset prices were at or near all-time highs. And the Fed comes out and says, we're going to raise interest rates. They ended up doing it at the fastest pace in history. I think every person that is in the investing world would say, obviously asset prices fall and stay down until we start to cut interest rates. Instead, what we saw was Bitcoin stocks and many other assets, they did fall initially, but even though rates were still above 5%, percent, they all came back at or near all-time highs. And so you have the S&P hitting new all-time highs. You have Bitcoin hitting new all-time highs in a high-rate environment. Why is that happening? Or why did that happen? I think there's a couple of different

factors. I mean, for one, we do live in this environment where the fiscal policy just kept spending, right? I mean, this is like the fiscal dominance. Politicians didn't get the memo. No, they didn't get the memo. And so in this period of fiscal dominance is what you call it, as interest rates rise, it actually widens the deficit more. And so this is when typical monetary policy tools that are used to fight inflation to combat it actually do the opposite. It's like this backwards where the fiscal deficits get so big that it's actually the main driver of inflation. And so if the interest expense is increased as the Fed keeps raising

interest rates, well, that's going to be a problem, right? That's going to keep things elevated. Another thing that was happening was you had kind of, as the Fed was engaging in, say quantitative tightening, there was like offsets happening, right? There was the reverse repo kind of getting drained down. There was also the treasury general account that Yellen was kind of manipulating to kind of add liquidity to the system as well. So that was kind of buffering asset prices. And so there's kind of these offsets that were happening at the same time that I think was kind of purposeful because they didn't want everything to get drained right at the system and everything to fall right away. They wanted to kind of try to have that soft

landing that they always speak about. And so those are the different reasons, I think, why, even though the Fed jacked interest rates at the fastest pace, you still saw asset prices kind of perform well in that environment. As they cut interest rates, is it as simple as interest rates go down, asset prices are going to continue going up, or are there other things to consider, whether it's Bitcoin or stocks? Well, I think, you know, yes, I think when they cut interest rates, now borrowing is going to get cheaper. I think that's just generally good liquidity and it's not just the fed doing it right it's it's uh central banks around the world it's the ecb it's the bank of england bank of canada they've all started cutting rates you have this

like coordinated action once again and so i do think like as they cut rates uh that's gonna make borrowing cheaper it's gonna flood the market with more dollars because that's how dollars are created in this system and asset prices are going to perform well i think it kind of is that simple And the U.S. is cutting rates, but also we're seeing a number of these other central banks start to do that. How much emphasis do you put on global liquidity from the United States contributing to other places and also those interest rates? Is it a U.S. story or do you have to, as an investor, look at global liquidity is global for a reason, right? And also those interest rates kind of around the world obviously are at different levels depending on the country

in the individual economy? Well, I think it is a U.S. story. I mean, it is the largest global economy. We are the Federal Reserve, you know, dictates the price of money. The dollar is the global reserve currency. And so I think that's where most of the focus is on. I mean, everyone's kind of focused on China

and kind of the stimulative activities they're doing there. But I mean, that's very different than if the Fed came out and did something similar. I mean, that would cause the market to really react to it. So I think that's the main story. I think you should focus on what the U.S. is doing. And the Fed is kind of signaling that, okay, this is a pivot. I think everyone was focused on, is this a 25 basis cut or a 50?

But really the trend is clear. And we're in this regime change where the Fed's now easing monetary policy where they weren't tightening before. And that's good for liquidity conditions. And when we look at, let's say, companies, they have these balance sheets you've previously talked about. There's kind of two different playbooks that they need to be aware of. One of them is holding cash and one of them is holding Bitcoin. Obviously, the dollar-based strategy seems to be the same as an individual holding the cash. They just get devalued over time. What is it going to take for more and more people to realize that this Bitcoin strategy is actually something that can be used inside of corporations and done where it can actually be good for shareholders?

Well, I've been asking myself that because you look at MicroStrategy. I mean, it's insane that another corporation hasn't followed suit right now because you just look at their stock performance since they've adopted a Bitcoin corporate treasury reserve strategy. I mean, it's crazy. They've outperformed every single stock in the S&P 500 at this point. And so I think when it's in such a, it's kind of a change in thinking for these CFOs and these treasurers to really think about, you know, a dollar is no longer an asset, it's a liability, and they really need to think about that. And when you see Michael Saylor, not just think about it, but then say, Oh, my gosh, we're going to put $500 million into Bitcoin right away. I mean,

that just takes a very innovative thinker to identify that, but then to actually execute a strategy. I think you're starting to see kind of a change in thinking, you see some like companies on the margins like the meta planets of the world one med nets uh similar scientifics start to do it and i think they need to be like founder-led teams bill miller talks about this you know founder-led teams you have to think about the corporate governance if they have the power to even implement a strategy like this or if they're going to get a lot of pushback from the board or from their investor base you know they have to be really good about investor relations of why they're doing it and and looking at you know their balance sheet saying okay this is actually how we can get

a competitive advantage over our competitors and you know having a case study like micro strategy now where you can point to and say look at what it's done for this company not just from a you know performance standpoint but like culturally the entire um narrative around micro strategy has completely shifted right um and so i think now that we've seen that it's going to be uh this is kind of the cycle where i expect to see a lot more corporations started to get in here yeah so if more and more companies are going to do this uh is it something where you just buy bitcoin leave it on the balance sheet or is it going to be something where uh it seems like michael saylor has said hey i'm going to buy this put on the balance sheet but now i'm going to

almost go on offense i'm sort of borrowing capital i'm really going to go try to acquire as much bitcoin as possible like how do you think about offense versus defense with bitcoin on the balance sheet for you know the average corporation where they may say hey you know we believe the bitcoin story but we're not necessarily going to go and become the you know bitcoin uh company as i think maybe michael saylor has done well i think that's like this you know when you get into bitcoin as a corporation i think that's a decision you have to make but i think most are going to just be on the defensive side they're going to say hey we have a opportunity to kind of diversify our balance sheet a little bit to protect ourselves against inflation as well as maybe rising geopolitical

uncertainty you know a small allocation goes a long way river put out a great report that said you know if you have two to three percent of bitcoin and the rest cash you will out perform the rate of inflation and so a little bit goes a long way when it comes to bitcoin i think a lot of corporations will probably take that more conservative route now the ones that really get it that really can put on some of these more aggressive strategies and say okay no we want to acquire as much bitcoin as possible um you know i think again you have to be kind of like a innovative you know led by an innovative thinker with the power to do something like that and then you have to have access to the capital markets i mean um you have to be able to raise debt both

through the debt markets and the equity markets and then to implement that bitcoin strategy uh that's just ultimately a choice i think um you have to have a lot of conviction to put on something like that but i do think more and more people will do that because i mean you see this with a mara too i mean they put on their huddle strategy and now they're doing the same thing they're entering the convertible debt markets and if you think about mining it's one of the the most competitive industries out there. And what's one competitive advantage that I'd say Mara has over other miners, it's the liquidity of their stock. It's how big they are. So they can actually go access the capital markets and put on a strategy like this, whereas smaller

miners can't. And so they have that competitive advantage and they're leaning into it. And they're going to start, hey, we're actually going to put on this huddle strategy. We're going to put on the micro strategy playbook here. And if we're right, especially with the timing, then down the role, we're going to have a much bigger competitive advantage over somebody who did not do that. So I think it's just a matter of where you are, who you're led by, what you're able to do, whether you want to be more on the defensive side of things or the offensive. But I think it always starts with that first step. And then maybe more and more when people do the MicroStrategy playbook. How about private, small businesses?

One of the things that people have reached out to me over the years, they're like, I see what MicroStrategy is doing. That's awesome. They're a publicly traded company. worth billions of dollars. I run X local business. I have half a Bitcoin or a full Bitcoin on my balance sheet. What should I be doing? Is it the same thing? It's just like, hey, keep stacking Bitcoin and kind of use it as that defensive thing? Or do you think that kind of size matters and maybe public companies versus private companies or big companies versus kind of small or medium-sized businesses, there's something different that they should be thinking about when it comes to Bitcoin? Well, I think for somebody like a small

business i mean every single one of these businesses have the same problem which is like if they're gonna you know have cash on their balance sheets then again it's a liability and so they want to hold some bitcoin that actually will appreciate in value and protect themselves against currency debasement then yeah i think i think they should do that and i think you know they don't have to do the whole micro strategy thing where you have to keep raising money and leverage your your business to do something like that again that's like your own personal risk tolerance and whether your business can handle something like that because obviously leverage has to be intelligent leverage is how michael saylor describes it but a lot of these small

business owners i think it just makes sense to put them on their balance sheet and you know instead of their cash but make sure that they have like a working capital threshold to you know keep their business running operationally uh and then anything left over they can kind of put it into bitcoin to save more long term and then they can use that bitcoin down the road it's just a way to save so they can use it to you know reinvest into the business down the road but until they make a decision of how to allocate that capital makes sense to hold into Bitcoin instead of something that's going to lose value, right? So that's how I think of it as like a small business owner. And going back to that same River report, they say they're seeing a ton of uptick in their customer

base of small businesses. So people are doing this. They just don't get the headlines of the microstrategies or the maras of the world. Well, it's not as interesting if the local restaurant does it compared to microstrategy doing it with billions of dollars. Yeah, no, but that reminds me of, I was just actually talking to a small business owner and they own a restaurant up in California and they've been doing this since I think 2018. So really good time to get in back in 2018. They said that their Bitcoin holdings are now worth more than the entire business. Yeah, it doesn't surprise me.

Yeah. Which is crazy, right? So that just shows how impactful a Bitcoin strategy can be to any business that adopts it. Yeah. Paul Tudor Jones recently came out and he said that all roads lead to inflation. He's long gold, he's long Bitcoin, he's long some commodities. And then he thinks that the NASDAQ is also serving as some sort of inflation hedge for young people. Do you think corporations will buy into the inflation story? Like, let me get some Bitcoin, but I'm also going to maybe get some gold or some of these other inflation assets? Or do you think that this is really a Bitcoin only story? And obviously, Michael Saylor and MicroStrategy just bought Bitcoin. We've seen MetaPlanet. They're just

buying Bitcoin. There's a couple of other companies that have started to do this. I haven't really heard of anyone being like, I'm going to buy some gold and Bitcoin. but do you think that CFOs and corporations may actually take more of a Paul Tudor Jones approach and say, let's build an investment portfolio of kind of inflation hedge assets? Yeah. I mean, I could see that happening. I mean, especially again, if they see Bitcoin as just like one part of a more diversified portfolio, that would make sense to me. Now, gold has its problems, right? I mean, it's physical, it's harder. And so these companies, they can only buy a certain amount of securities before they had to reclassify themselves as an investment company. I think it's

40%. So if you want to play gold and have an ETF, well, okay, but that's a security. And so if you want to have the NASDAQ, that's security as well. And so that's one of the things that Bitcoin offers these corporations is that we'll never have to reclassify. They're going to hold as much Bitcoin as a percentage of the balance sheet as they want because it's a commodity. Now, if they want to buy real gold, I mean, they could do that as well. That's a commodity, but again, it's physical. I mean, they have to deal with all the logistics of getting the physical gold and and storing it and securing it. Bitcoin being digital makes it a lot easier. But yes, I do think that corporations will probably start to diversify because up to this point, from my

understanding, most CFOs and treasurers, it's pretty simple. I mean, they're just like, we're in treasuries, right? We're in cash and cash-like equivalents. That's our balance sheet. It's just now that they're starting to think about these risks, really since 2020, when inflation started to ramp back up really quickly in terms of the CPI, because that's really what they track, right? I think Bitcoiners and gold bugs, we kind of look at the empty money supply and other measures of inflation. But now that CPI is ramped up, the cost of living is increasing, their costs are increasing. And so now these CFOs and treasurers are starting to think about, how do we protect ourselves? Now, there is something called reverse

teal's law uh which is basically like bad money flows to good money right or capital flows from bad money to uh good money um and so there's this idea that like bitcoin was going to take away economic value from dollars it's kind of like fiat currencies are bad money they get devalued everyone's gonna go to bitcoin one of the things i've been thinking a lot through is like well stable coins are pretty popular and it's kind of this like new wrapper for the the fiat money and So it almost feels like Bitcoin and dollars are winning together, you know, in maybe it's a short-term thing, maybe it's a long-term thing. Like, how do you balance, you know, maybe the Bitcoin critics are like, oh, Bitcoin

is bad because it's a threat to the dollar. But actually the data points seem to be like, well, the dollar seems to be doing just fine, you know, these new digital rails and Bitcoin obviously is doing well as well. Yeah. I mean, the stablecoin growth over the last three years or so has been crazy. I think it's over like $450 billion now. I mean, there's clear demand there. That's like, if you point to like crypto, that's the one thing that's found product market fit is these stable coins.

I just saw the bridge acquisition by Stripe. I mean, that's a big, big point right there. That's something like a signal to look at. And the way I see it is that, yes, I think that you talk about network effects in Bitcoin a lot. Dollar has a pretty strong network effect. And now these stable coins just improve accessibility. I mean, you had people like Paul Ryan talk about also, you know, this is a way for us to kind of increase dollar accessibility and improve the dollar stance and the global stage with stable coins. And so it makes a lot of sense to me that that's going to keep growing.

But the problem is that it still lacks, it's not a store value, right? That's what Bitcoin has that all these stable coins don't have, because it really is just like a wrapper for fiat. And they're going to keep debasing their currencies. And the other thing that stable coins have that people need to think about is you're still trusting a centralized issuer. I mean, we saw the Silicon Valley Bank collapse. What can happen when Circle holds all of its reserves in one bank and then its peg broke and suddenly it was like, oh, this is actually really centralized. You're trusting this private issuer of these dollars, so to speak, these crypto dollars is what Nick Carter would describe them. But it kind of depends on the reliability of the issuer itself.

And this is where you get into the conversation of CBDCs because they're like, well, we shouldn't be a private issuer for these digital dollars. They should be a central bank backed, you know, dollar because we are the most stable issuer. You know, you can trust us. We have a money printer. There's no liquidity risk with us. You know, we can hold the reserves at the central bank. And so this is kind of this conversation that's been developing over many, many years. But to me, you still can't replace Bitcoin because Bitcoin is that store of value, right?

It can't get manipulated. It doesn't have a single issuer. It's decentralized. And so I see them growing over the same time. You've got these stable coins. You've got the Bitcoin. But the problem is that over long periods of time, the people who adopt Bitcoin, their purchasing power is going to go up over time. And it's like that thing you always hear where

if your neighbor is getting richer, everyone notices, right? So the people that hold Bitcoin over time, if you're holding stable coins and your neighbor is holding Bitcoin, you're going to look over your neighbor who's living a good life, going on multiple vacations, and then you're going to continually get poorer over time. And eventually you're going to be like, well, why am I holding these stable coins? Even if they're faster than the shiny wrapper, I should probably holds in Bitcoin as well. And so like, that's kind of like that law that you spoke of where the good money gradually will take out the bad money, but that can happen over a long, long time. And that's kind of how I see it happening. I see the dollar kind of being

fine for a long time, then Bitcoin kind of in parallel with it. And then I see like weaker currencies really fading off. And then at the end, it's like, I think just more and more people will recognize Bitcoin as superior because it actually holds its value. What's interesting to me is Bitcoin's promise, obviously, is electronic cash. It feels like right now Bitcoin has won as a store of value. It is the dominant store of value coming out of this digital crypto world. um does it need to become a transaction and medium of exchange and kind of a payments type technology in order to fully reach its promise or if it just becomes kind of digital gold is that still a win and we can kind of claim victory and you know we should be happy with that well i think even if bitcoin allows people to save in something that's free of debasement

And that can't be manipulated. I think that is a win. But I think if you look around the world, even today, I mean, yes, in the Western world, primarily a store of value. I mean, that's how we see it. But there's other people around the world that use it as medium of exchange. I mean, in people in authoritarian regimes who are censored, you know, they use it to transact. There's people in Africa who use it to transact quite frequently. There's people who have really high remittance payments that use it to transact. It's not the dominant way that people use Bitcoin today, but, you know, they are using it as a medium of exchange. It works as a medium of exchange. And then there's different scaling solutions that are happening, lightning. And I think that's going to keep accelerating over the years.

Is Bitcoin still kind of young in that second layer scaling solutions for, you know, improving the transaction speeds and things like that? And then there's like developments like e-cash that people can have thought about, like, you know, developing with a Fediment protocols that have different tradeoffs in terms of privacy, as well as this transaction speeds that allow Bitcoin to be used as a medium exchange. So I think that we're just going to see like developments happen over the next decades or so of how Bitcoin can improve as a medium exchange. But again, like the biggest problem Bitcoin solves right now is being able to save something that's free of debasement. And that's a huge problem that everyone, every corporation, every individual faces right now. And Bitcoin is serving that very well as a store of value. You recently talked about macro models that fail to incorporate future policy interventions are basically breaking. I always laugh that the Fed has this impossible job. I'm going to look

at backwards data, make decisions today to predict the future. But what you're talking about here is these models that are trying to understand asset prices and GDP growth, et cetera, they can't incorporate things they don't know, these future interventions. So, um, explain a little bit as like what that challenge is and then like, what do you think they should be doing maybe instead? Well, that was like, uh, there's a really good report from Alliance Bernstein that was called debt, uh, debtor alive. I think, I think everyone should check it out. It was a, it was a really good report, but they were just looking at kind of what we talk about a lot with the spending problem. And they were looking at the CBO projections.

CBO projections are quite ridiculous in my opinion, because they're out to 2054 looking at the debt to GDP, they say, hey, it's going to be like 175%. But they assume the inflation rate is going to be 2% the entire time and that there's never going to be a recession, right? And so- Sounds awesome. Sounds great. Sounds great. And we know like when you look at the global financial crisis, as well as the pandemic, how these crises can result in huge responses from the fiscal and monetary sides that just jack up the debt to GDP, like substantially, right? And so to not

incorporate any of those things and look at those projections, it's just nonsensical. So what the Alliance Bernstein, there's a little like a paragraph that they were like, there is a secret amongst the modeling community in DC and in academia, whereas if you do any of these projections or try to make it make sense in terms of how we're going to pay for it with the CBO projections, the models break if you don't include some kind of intervention, some kind of policy intervention. And by policy intervention, they mean some kind of recession, and then there's a huge response that comes in. And so it just doesn't make sense. The arithmetic doesn't make sense. And so that's the secret that I think Paul Tudor Jones is talking about, Stanley

Druckenmiller is talking about. You're looking at the discretionary versus mandatory spending over the next 30, 40 years, and then it just doesn't make sense. How are we going to pay for it. And that's when it comes back to, oh, they're probably going to try to debase the currency. That's probably, they're going to try to inflate their way out of it. And that's the other playbook that I mentioned. It's the IMF playbook, published a paper in 2015 called the liquidation of government debt. They laid it all out and that's exactly what they're doing now. And so in that environment, they're like, okay, we want to hold the hard assets. So that's what all these really smart investors are talking about now. The models don't make sense. They break. They're going to try

to inflate their way out of it, you know, and so protect yourself. One of the investors that's doing this is Anthony Deaton. Most people watching or listening to this are not going to know who that is, but he's a very well-respected, very good investor. I believe he lives in Switzerland. I'm aware of maybe one or two interviews he's ever done. But he has a quote that he put out where he basically said, the compelling thing about gold is the risks we don't take by holding it. And so talk a little bit about that being very similar to, I think a lot of Bitcoiners saying the reason why I hold Bitcoin is because I don't want to take the risk of holding dollars or anything else. Yeah. So Anthony Deaton, I think he resonated with me. You brought up that

interview. I mean, I thought he was brilliant. He's a sound money guy and he was talking about gold and yeah so like it's about the risk you don't take when you own gold that's what makes it a compelling investment for him he said the risk you don't take owning gold could fill volumes and that's why i own bitcoin and people don't understand that they see it as such like a risk on asset but i see it as a risk off asset it doesn't have counterparty risk right um duration risk it doesn't have uh you don't have to worry about like the cash flows of the business or the management team, if you're looking at a stock, all of these things, it's just Bitcoin is this asset that's unchanging. And people don't understand this when they hear about it.

They're like, oh, this thing's very volatile. But really, it's very simple the way it functions. I mean, there's only ever going to be 21 million Bitcoin. It's an asset that will never change. And when you look out into the world that is continuously changing with all these different risk bitcoin is very unique in that in that in that way and gold is probably its closest comparison and so when somebody who's a little bit older and like anthony didn't they might be attracted to gold and look at bitcoin and be like oh this cryptocurrency it's such a risky thing but i own bitcoin for the exact same reasons that anthony didn't own gold and i wonder what you thought uh when you saw that quote too i mean you said earlier something that i think people don't

quite understand, which is if you're a corporate CFO, the dollar is a liability and Bitcoin is an asset. And that's not how they think about it. They think the dollar is this offensive thing. When you start to understand that the dollar is going to be devalued, when you start to understand that bonds, like Paul Tudor Jones recently said he owns no fixed income. I think people are very surprised by that. But it's like, look, if you look at TLT is something I look at quite often Because over the last five years, it's down like 25, 30%. Yeah. And so you're like, okay, I get, you know, hold of maturity, all this nonsense, whatever.

But it's like, no, no, no, you're like, you are losing value holding this thing. And so in a weird way, you kind of have to like have this contrarian view of the traditional assets to even understand what Deedon's saying, right? Like so many people are like, what do you mean you're holding gold? Like gold is, you know, risky to me or Bitcoin is risky or whatever. But then you're like, what do you hold in your portfolio? And they're like, oh, I have cash. Like, I'm super safe. And you're like, wait, wait, wait, the whole time, how?

Yeah, treasury, risk-free asset. Yeah, yeah, yeah, risk-free. I mean, literally, right? Like, it is non-controversial to talk about a risk-free asset being treasuries. And you're like, well, actually, let me explain how this works. And so, I just think that Bitcoiners maybe are early to understanding some of this stuff, more so. But I always come back to this idea of like, what is it going to take for the public narrative to change

where then cash or in treasuries and stuff like is seen as risky? I think that's very hard, right? You know, like there's still people who, if you go and you ask them like for personal finance advice, like, well, just save your way to financial security. Like, hey man, that's like way harder now than it was 50 years ago. And so maybe it's time. Maybe it's just like, we all get older

and then we're the old people, right? Then we like tell our kids or whatever. And, you know, you have to change it like through time. Um, but I do think that Deedon is unique in that he's older, but he sees something that a lot of older people don't see because he's had to change his mind about like fiat currencies. Um, where it's much easier, I think for young people to be like, you know, what's this new thing? Uh, I'm kind of more open-minded, you're more mentally flexible.

And so you go and you do the work. Yeah. Maybe it's some more pain for, for bondholders, right? I think like thinking about things in real terms is something that people don't think about either. Like taking into account. yeah, okay, I have a bond. I protected the principal and earned interest. Great. But did you actually outperform inflation during that time? Like, no, you lost out in real terms. I

think especially people that might not be as more sophisticated don't really think in real terms. And that's so important in this world that's more inflationary. And that's, I think, the big underlying theme is we are probably entering this more inflationary world. And when you think about portfolio allocation. AQR Capital put out a really good report on this a couple of years ago, just looking at how the correlation changes between bonds and stocks in inflationary environments. When in the past, inflationary environments, they go positive, right? And so all of modern portfolio theory is built around this inverse relationship between

stocks and bonds. Bonds are able to be that buffer when stocks fall, Fed cuts rates, bonds rise, kind of eases off some of that loss for the portfolio in inflationary environments. That's not the case. They actually move together. And so that's what we saw in, in, you know, 2022 we saw them both crash. And that had everyone scared because they're like, okay, what do we do now? Where do I hide? We haven't seen this in like 20 years. Right. But AQR capital was even, he was like,

the weird thing has been this the last 20, 30 years where interest rates have just gone straight down and they have been moving inversely all the time. But really, when you zoom all the way out, they actually, for a lot of the times, they move together. And so, there's just this regime change where people have to look for alternative investments to diversify now if they think we are entering this more inflationary environment. And so, that's my base case. When I just look out into the world, I see more conflict, deglobalization. I see the demographic situations. I see the spending. all those things are all inflationary. And so if we are entering this inflationary environment,

you have to change the way that you diversify your portfolios and how you, you know, reduce risk by enhancing returns. And I think nothing is better than Bitcoin. And Bitcoin has shown that over the last, you know, whatever, 10 years, you could say. When you do the calculation, I call it, you know, kind of like a napkin math on, okay, I'm going to calculate the real return of stocks, or I'm calculate the real return on bonds what is the number that you use for the inflation rate and uh what you're really trying to get at is like you know right now they claim that it's 2.4 percent um there's base effects there's you know the measurement of cpi there's all these things that kind of feed into it do you have a number that you just say hey this is the number i'm

going to use both in terms of uh maybe it accounts for the current situation but also i think it'll be a fair number to use to evaluate you know kind of forward 10-year returns or anything like that I look at the growth rate of the money supply, which has been historically 7% to 8%. And then that's increased in different parts. But if you really stretch it out, it's usually around 8%. So I think that's actually the right rate that you should use for the inflation. I mean, we know that CPI has its problems with its methodology. I don't think it accurately reflects the rate of inflation. I think the best way to think about it is that inflation is a and monetary phenomenon, and that you should look at the rate of the M2 money supply growth.

And so that's about 7% to 8%. So I think that's actually your hurdle rate. And then if you think about even further, it's kind of like for businesses, it's like you're an investment manager, it's like the S&P 500 almost, that's kind of your hurdle rate too. Because that's like another option. But if I'm just thinking about inflation, that's what you should be beating. You got to beat 8% every year. And so there's not many assets that have actually been able to do that um and bitcoin is one of them now when you use that number obviously during the pandemic when the official number spikes to you know over nine percent let's say are you thinking okay the official number is nine so add another seven

or eight on top of that and that's your real number like how do you think about these like spikes and the reason why it becomes interesting is if you think that the world is going to become more inflationary because of the debt problem then actually seven or eight is what it's been doing you know looking backwards but looking forwards maybe it's actually 10 or 12 yeah you know some higher number yeah i mean if there's a huge jump in it like you have to take that into account i mean you gotta understand like people even talk about the m2 money supply growth uh year over year going negative recently but again if you look at it since 2020 it's still up 40 like yeah it's dropped a little bit of the year but you have to take into account that huge increase over the last

like four years and so that definitely changes specifically i mean that's what michael saylor had a really good presentation where he talked about this because he kind of pins it like since they did the micro strategy uh bitcoin playbook which is like august 2020 that's when he saw all this huge m2 money supply growth and it's like what has outperformed that over that time period and it's really just like bitcoin i mean i mean there's certain uh individual stocks that you can pick but again that that's tricky for people to do i mean they have to understand like what they're investing in they have to do the research to pick those like individual stocks and then there's all those risks that i talked about like business risk

um but yeah bitcoin's one of the only ones that have performed since since august 2020 when you look at the m2 money supply growth and so if you haven't been beating that with some of the other investments you're losing in real terms uh you know so it's it's one of the things that makes bitcoin such an attractive uh asset just how much it compounds every year that it can actually outperform the rate of currency debasement that's happening if we are entering a period where they're going to keep doing that it's probably going to happen at a faster and faster rate and so you want to own something that actually will protect you um you've previously said that the risk reward for bitcoin is second to none right now um we talked a lot about the reward

side what do you think the big risks to bitcoin are and one of the things that always becomes interesting to me is like i think bitcoins are pretty critical of bitcoin and and try to think about hey what are the things that we could do to improve it like what do you think are the two or three biggest risks right now i think the risks really with bitcoin are like self-inducing you know people have said it before it's more like a critical critical bug or something like that um anything that kind of threatens the that 21 million number i think if that ever comes into a doubt, then this experiment is going to get put into doubt. It all comes down to like 21 million. So if something happens, some kind of critical bug, it is software. So something like that

happens now. I think we're kind of past that. That risk is getting lower and lower over time. And so I'm not as worried about it. But again, software, something could happen. So that's always a risk that's there. Other risks are more like can just delay things. It's more like the on on and off ramps kind of make it harder to access it there can be like you know heavily being taxed you know you kind of see that uh some countries are taking different uh approaches to taxing it heavily um which could kind of hinder its adoption uh but it doesn't stop bitcoin that's the thing um i mean you saw italy kind of increase its capital gains tax uh from 20 to 40 something the other week. And so these things can kind of help hinder Bitcoin's adoption. And so that could

be a risk if you're an investment manager and you have a more short-term thinking, hey, I want this to do well over the next couple of years. If they start to do things that hurt the adoption of Bitcoin by regulation, by enforcement, shutting down on-ramps and off-ramps, that could kind of delay things a little bit if you don't have a really long investment horizon uh but that's that's not really a risk for somebody who's just like a young person who just wants to save in something that's not diluted uh by currency debasement who has 30 40 years because you know that just kind of stops it from happening in one jurisdiction but bitcoin's a global phenomenon and i think it's it's just an idea whose time has come given the amount of currency debasement

happening what's fascinating to me also is um it's really forcing an entire generation to think long term yeah when i see certain people come out they're like oh what's going to do next week next month whatever i'm like oh you must be new here yeah right most of the people i know have been around for a long time they're now literally thinking decade plus timelines and the people who i probably respect the most are thinking 20 30 40 50 years out um and then of course you know bitcoin's got like weird uh cultural things around it people eat certain food i always joke that like there's a certain subset of Bitcoiners who want to like go outside naked and like send their balls or whatever. Like, you know, there's all these like different like cohorts, whatever. But

I do see a lot of people who they start to think long-term in their portfolio and then they start to think long-term in their life. And it's this very like fascinating thing of maybe actually one of the greatest gifts that Bitcoin gave to the world is just like think long-term. Yeah. And for young people who tend to be more, you know, excited about Bitcoin than older people, like they still have time on their side. Yeah. And I've noticed it in my own life. And I think about fiat currency, it makes sense when you look at it at the other side of things. So like if you have, if you live in a jurisdiction

where the currency is inflating like 100%, I mean, how can you think long-term, right? You're just kind of worried about like the grocery store price is increasing the next week. You have to keep thinking really short-term, short-term, short-term. And all the greatest things that we built as a civilization has been like long-term investments projects you know building businesses like solving things uh solving problems that take like these innovations like i never thought this was going to work but i'm going to invest some capital and just like see if it could work over the next five to ten years you know that's how we get like some of these like really big technological breakthroughs and so like thinking long term is i think really really good for

society as a whole. And I think that sound money does that to people. And so, it's one of the reasons I'm so bullish on Bitcoin, because I think it's like sound money for the digital age. And it's going to get people thinking more long-term about how we can solve these really big problems in our society. And I've seen it myself. I know you've probably seen it yourself. And I'm excited to see that kind of trickle out into the corporate world, nation-state level, over the next i mean i'm just kind of front row seat right here just kind of watching bitcoin spread and it's uh that's one of the reasons i'm so excited about it i do love this idea that like um the critics eventually join our team right yeah it's like you know like the larry finks of

the world like he's the cmo of bitcoin now right like he's doing a great job like we love him right and uh there's this weird thing like the messenger really matters and so he's maybe saying the exact same thing that bitcoin has been saying forever but like it actually matters that larry fink's saying it, you know? And so like the team expands over time and very few people I know were into Bitcoin and now aren't, but there's a hell of a lot of people who weren't into it that now, you know, kind of joined team Bitcoin. And that seems to obviously be a great tailwind. Before I let you go, one thing I'm always interested is what information do you consume on a daily basis? Like you wake up in the morning, what are you looking at Bitcoin or investing wise,

like data or information what sites are you going to to kind of consume uh content what are those things that you've kind of filtered through you say look i think these are high signal and and things that um you know uh really kind of i learn from yeah i wake up and i i kind of i i go to the mainstream media sites too like i go to like financial times bloomberg wall street journal and i just kind of see what everyone's talking about and then if there's like a bitcoin article or anything about digital assets i'll like read it and see what's going on there um then i go on x i think like x is so powerful because it's just like a hive mind of of really brilliant people and i think like if you look at people's following list i think that's

one of the biggest alpha you can do if you think somebody's really smart just like look at who they're following and then follow them too i think i learned so much from just like the community there and so i usually like bookmark things like reports that come through like whatever on x um and then you know there's all these different firms throughout the industry that have put out great reports and content and research and i try to read like as much as i can if there's a really good report well done took a lot of time to make i'll read it i'll read everything um no matter if it's just like bitcoin specific or digital assets or about stable coins um i'll read anything that people put out and so like i'm really interested right now and like so

like blackrock for instance like they put together those slides and they're going around like you said i mean it's it's crazy they're going around like a worldwide tour teaching institutional investors about bitcoin with bitcoin memes right like the things that they've been saying for a decade i mean i just i try to read everything and i'm like going through their you know slides that some of them leaked on uh you know x and i'm just like this is crazy like and and i'm learning some things like how are they sending the messages but it really is just what bitcoin has been talking about another one is like uh bernstein uh from alliance bernstein they just put out like 160 page uh what they call black book this is one of the most respected research firms on wall street uh

all about bitcoin and the institutional adoption era and that why bitcoin's going at 200k by the end of next year this is bernstein i mean so like i i get really i i try to read all different types of perspectives on it from different people from wall street mainstream media sources industry specific firms as well as x and just like regular you know individuals like blog posts because that's how bitcoin content really grew back in like 2017 2018 it was like a collection of medium posts newsletters podcasts and not to those people were brilliant too so i tried to read everything it was like one of the first things i did at uh swan was uh grab all the bitcoin content that was out there from youtube blog posts articles uh reports and i archived

them all and then i and i just like made a different curated content an entire educational platform of like the decentralized content of bitcoin and so you can learn so much from all those different uh mediums and it's just like really how do you want to learn about it and so for me i i i'm trying to like i i i try to read everything i try to like digest everything it's almost impossible now um but i learn from everything so i guess i wake up it's just constant reading that's that's a great way to learn right yeah that's how i like to learn and then uh i find that after i read a lot then i go talk to people and they kind of help me filter like oh that was dumb okay i'm not gonna forget that thing right yeah i know like bernstein come

Come on, man. You know, the 165 pages or whatever, like 159 were great. Like those six pages, I gotta forget that part. Totally. I like reading. I like going directly to sources too. There's a lot of articles that talk about, you know, lawsuits or something like that. I like to read like, like I'm the guy who's like reading like the 180, you know, page

lawsuit from the SEC. Like I like going digging into those and then even like looking into the footnotes because that's where you see some of the real like gems is where you read the footnotes of where they got the information and then you dig into that and you get into these rabbit holes so i think like going to find the original source material and then giving your own opinion or like developing your own opinion before going on twitter and just like finding a thread i think that's like a generally a good idea to do and so i recommend people go to the original source material that's always good bitcoiners are very smart every once in a while they get too excited

yeah and there is like something that goes super viral and we're talking about one earlier like Is that true? Is that not true? Let's go try to figure it out. Yeah, I've been guilty too. This is more like after seven, eight years, like I've learned, like, I'm not going to trust that guy. I got to go to the original source material. And then, yeah, maybe he's right.

Maybe he's wrong. Amazing. Where can we send people to find you on the internet? Yeah, I'm on X. So, at Sam Kella, S-A-M-C-A-L-L-A-H. Share my thoughts there. I also do a newsletter called The News Block, where we just try to break everything down every week

in under 10 minutes, like a block. usually we curate a lot of things on there so we talked about like where I get my content I usually just make it easy for everybody so it's all right there

for them so I do all the work for you you can just read all the links to all the reports and stuff so check it out it's the news block

at sub stack dot com news block dot sub stack dot com yeah the news block okay and the news block yeah make sure you tell them

exactly if I mess it up they're never gonna get mad at me the news block dot sub stack dot com and I see what you did there with 10 minutes

and the block that's clever yeah Yeah. Yeah, there you go. All right. Well, thank you so much for doing this. We'll do it again in the future. Yeah. Thanks, man. What's up, guys? I hope you're enjoying this episode, but I got a quick message for you. I just released my very first book. It's called How to Live an Extraordinary Life. In this book, there are 65 life lessons that I've picked up over the years. These lessons will teach you about money, investing, relationships, work, health, happiness, and much

more. In this book, I wrote letters to each one of my children, and I tried to share those life lessons with them. If you pick up this book, there's three things that I can promise you. The first is that it is very concise. The audio book is only three hours. You can listen to it on a long drive or on a rainy afternoon. The second thing is that you're going to learn something. It's worth the price of admission just for the lessons themselves. And then the third thing is it will make you think more deeply about your life and how you try to live it. So go pick up How to Live an Extraordinary Life today. It's a quick read. It's very impactful. it's very concise and it would mean the world to me for the support go check it out today on amazon

barnes and noble or wherever you buy your books hardcover audiobook it all works thank you so much for the support and i'd love to hear what you think about the new book