The Pomp Podcast - #697 Institutions Are Coming To Bitcoin w/ Kevin O’Leary

Episode Date: October 22, 2021

Kevin O’Leary is a Canadian businessman, author, politician, and television personality. He is a Shark on ABC’s hit show Shark Tank and has had numerous previous business successes, including when he sold The Learning Company to Mattel for $4.2 billion in 1999. In this conversation, we discuss bitcoin ETF, monetary policy, inflation, fixed income managers, international money interest, regulation, decentralized finance, and stablecoins.  ======================= Gemini is a leading regulated cryptocurrency exchange, wallet, and custodian that makes it simple and secure to buy, sell, store, and earn bitcoin, ether, and over 40 other cryptocurrencies. Offering industry-leading security, insurance and uptime, Gemini is the go-to trusted platform for beginner and sophisticated investors alike. Open a free account in under 3 minutes at gemini.com/pomp and get $20 of bitcoin after you trade $100 or more within 30 days. ======================= MiamiCoin is the first token to be released by CityCoins, a community-driven project built on Bitcoin. CityCoins aims to give people around the world a new way to support their favourite cities. The protocol has already generated over $7 million dollars in donations to the city of Miami and continues to grow every day. If you want to get involved Follow @minecitycoins on Twitter to stay up to date with the project. Visit chat.CityCoins.co to join the community discord and contribute to the movement.

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 kevin o'leary is a canadian businessman author politician and television personality he is a shark on abc's hit show shark tank and has had numerous previous business successes including when he sold the learning company to mattel for 4.2 billion dollars in 1999 in this conversation we discussed the Bitcoin ETF, monetary policy, inflation, fixed income managers, international money interest, regulation, decentralized finance, and stablecoins. I really enjoyed this conversation with Kevin as always, and I hope you enjoy it as well. Before we get into this episode though, I want to quickly

talk about our sponsors. First up is Gemini. Gemini is a leading regulated cryptocurrency exchange, wallet, and custodian that makes it simple and secure to buy, sell, store, and earn Bitcoin, Ether, and over 40 other cryptocurrencies. They offer industry-leading security, insurance, and uptime. Gemini is the go-to trusted platform for beginner and sophisticated investors alike. You can open a free account in under three minutes at Gemini.com slash Pomp and get $20 of Bitcoin after you trade $100 or more within 30 days. Again, you can open a free account in under three minutes at Gemini.com slash Pomp and you'll get $20 of Bitcoin after you trade $100 or more within 30 days. Gemini, a leading regulated cryptocurrency exchange that is

run by Cameron and Tyler Winklemoss. They have been pioneers in the industry, including they were the first to actually put forward a Bitcoin ETF application back in 2013. Gemini is also a pioneer in the space. So go to Gemini.com slash pump today and let me know what you think. Next up are my friends over at Stacks. As you may have heard, we just had Miami Mayor Francis Suarez on the show to talk all things Miami, including his excitement for a project that's really caught my attention recently, MiamiCoin. MiamiCoin is the first token to be released by CityCoins, a community-driven initiative built on top of Bitcoin. Again, MiamiCoin is the first token released by CityCoins, which is a community-driven initiative built on top of Bitcoin. CityCoins

aims to give people around the world a new way to support their favorite cities. In short, the city of Miami was given $7 million and counting by private citizens to improve the city with no strings attached. A Citi government embracing crypto instead of fighting it was a historic event. Do you want to get involved? You can go follow at MineCityCoins on Twitter to stay up to date with the project and chat. CityCoins.co to join the community discord and contribute to the movement. Again, CityCoins.co to join the community discord and contribute to the movement. All right, let's get in this episode with Kevin. I hope you guys enjoy this one. 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. First, I want to start with the big news of the Bitcoin ETF. What's your read on the launch of the Bitcoin ETF and the impact on the market? I like it as an indicator that the regulator is warming up to finally providing guidance and regulation for the real thing. I don't like it as a product.

If I'm going to be exposed to the price of Bitcoin, why don't I just buy Bitcoin? And so the futures market is very efficient, but sometimes when prices are very volatile, not so much. And so, look, it's great that it's happened. And it's clearly reflected in the overall price of Bitcoin with the optimism globally that the U.S. regulator is finally going to get behind cryptocurrencies, not just Bitcoin. And it's a first baby step. But frankly, you can buy an ETF with the real thing underlying up in Canada right now. And other countries are doing that, even with Ethereum now in Canada. So, you know, hopefully within 24 months, which is sort of my time view, we're going to have the real thing.

bitcoin inside an etf wrapper that allows people with equity portfolios to buy it and get price exposure to the price of bitcoin and cryptocurrencies it's not a bad thing you can't say it's bad but it's not the way i i don't want to invest in it that way and why pay the fees why don't you just buy bitcoin and hold it in a decentralized wallet and i think that's the most efficient way to do it what are the institutions saying to you about the etf is this kind of like an open the kimono now they think that they can start to allocate to the uh asset because there's an etf approved no no this doesn't it still hasn't been the majority of institutions and the wire houses that run the very large brokerage community are not there yet this has not been approved by

compliance just the fact that it's a futures contract in itself just futures contracts are for accredited investors only anyways so it's a small subset to start off with and they can buy it on their own in an online account, but the major houses have not approved this yet. Okay. When we think about monetary policy, the Fed actions and kind of inflation, talk to me about your view right now. We've now had multiple months of over 5% CPI, core inflation's at 4%. And we continue to get this idea of a lot of people saying it's all transitory. How do you think about inflation and then also what the Fed's actions should be moving forward? I spend a lot of time on this, Bob,

because it's reflected in my operating costs in the 34 private companies that i own everything from gym equipment manufacturers to commercial kitchens insecticide companies this is how broad the portfolio is what is happening right now is supply chain issues and it's reflected in what i call transitory inflation let me give you an example i can't get parts off a ship that's moored outside of los angeles for six days i just found that out before i came on the air because it's stuck in a jam trying to get into the port. We're not operating the LA port 24-7, which is insane in itself. But because I can't get those parts, I'm scrambling to buy parts

so I can finish off manufacturing equipment, and I'm paying up as much as 30% to find those parts in the secondary market. That is reflected as an inflationary increase in my cost of goods. It's happening all through the S&P 500. So the fact that we can't get our logistics figured out is the reason we have inflation right now in every aspect of business. The same thing in trying to move operations out of staffing facilities we have in China to Vietnam just to move the molds.

I can't even get a container. It's four times more expensive than it was just 18 months ago to get a container to move the equipment. So inflation is a result of broken down supply side logistics. When we think about those supply chain disruptions, How much of it is initiated by the fact that people were handed money, they started to spend that money in the economy, they drove up demand, and the supply chains weren't ready for the demand, and that ultimately broke the supply chains, which then leads to the increased prices? Or is it just, you know, the supply chains coming out of COVID, they kind of got shut off, then turned back on, and it's the turning back on that's actually breaking them? Well, you're right. The consumer never turned off, even in the height of COVID, you know, February, March, April last year when it was just, you know, a huge pandemic. They still had those stimulus checks and they were still ordering everything online.

And so the amount of traffic that started direct to consumer really put pressure on logistics for transportation, both inbound goods in the U.S. and then distributing those goods within major metropolitan areas. And it never stopped. It just kept growing and growing and growing. I'll give you an example. Nike, a behemoth global company, in five months got to 50% direct-to-consumer. They thought it was going to take them six years, and that's the good news. The bad news is the amount of logistics you need to be able to ship sneakers all over the world, whether it's Phnom Penh, Cambodia, or New York City, put tremendous pressure on the systems in place. And so we have got this remarkable situation now with huge consumer demand, 6%, 7%, 8%, 9% GDP growth, and we don't have the infrastructure to support it. And I'll give you another case or use case where it's a big problem that I'm dealing with now, chip shortages. We only make 25% of the semiconductors in the global demand here in the United States.

The other 75% is in Asia. We can't get the chips. I don't care if it's a truck you're trying to buy from Ford or something from me in consumer electronics. I cannot get the supply. How did that happen to us? How is that possible? It's not about just-in-time inventory. We need just-in-case inventory in case demand is stripping what we thought it was going to be, which is exactly what's happening right now. So one of the repercussions of this is as we get higher levels of inflation, obviously all the people who are holding fixed income, whether it's PIMCO or some

of the other really large fixed income asset managers, but also the pension funds, the endowments, the foundations, the really large asset allocators that depend on this stuff as part of a large portion of their portfolio they now all seem to really be struggling and the reason why they're struggling is just because on a real return basis they're now returning negative on that fixed income and so what are you seeing there as like a repercussion of the higher inflation and how people are thinking about their portfolios it's a huge problem it is a massive problem because the traditional allocation to an institutional portfolio was 60 equity 40 fixed income. Generally, that fixed income came in a form of a ladder of government bonds,

average duration maybe nine years, and corporate credits should be in above five to seven year duration. And they would always pay you 200 to 300 basis points over inflation. That's not the case today. There's lots of corporate paper being issued right now at under 3% for five to seven year duration. When inflation is 2.1%, the real return is almost zero in terms of buying power. And so that's incredibly risky. And it's one of the reasons you've seen such an incredible demand or interest in stable coins that can be staked out at five, six, seven percent for 30, 60, 90 days. And that's got the regulator really, I wouldn't say upset, but concerned. Stable coins have become the focus of the regulator right now because people are treating them like money markets. And in some cases, they may not be that.

What do you think happens there with those stable coins? so you're well aware of the tether situation you know that circle has started with you know just two years ago practically nothing in west dc and now it's over 30 billion dollars that's a lot of money and most of that is in the hands of high net worth individuals family offices hedge funds it is not yet approved institutionally for reasons we already know the regulator is is scrutinizing them i think the genie's out of the bottle or the ship has sailed or whatever analogy you want to use we're not it's not going to be made illegal it's going to be regulated now how much balance sheet assets you need to support your stable coin is going to be the debate and

frankly i think the smart move is being done by the ceo jeremy at circle by simply saying the regulator turn me into a bank regulate me like a bank because that's what i am i'm being treated like a bank by my investors and once that happens and if it does i think that's a really good first step because you know i think it's easier to regulate stable coins backed by usd or whatever you know short-term duration duration government credit and and get that through the meat grinder of the regulator than it is bitcoin which is so controversial for all the reasons you've been talking about for years so if i saw that happen first that would be great it would be a good step forward and then then the debate about decentralized finance and financing and payment systems that'll

coming to Focus Next. There's just so much going on. It's incredible right now. So Circle is, let's just refer to them as kind of a private market participant that's doing this. Other private market participants would be the large banks. We know JP Morgan tried to launch JPM coin. There's a couple of others that have tried stuff. How do you think about the private market doing this versus, let's say, the United States with like a central bank digital currency or some sort of state backed effort? I don't think they're entrepreneurial enough to pull it off. I really don't. What happened at Circle, if you meet that management team as I have, these are very, very savvy entrepreneurs that are working within the

crypto community with their version of what a stable coin is. They move very, very quickly. They had virtually nothing under management just 24 months ago, and now we're past 23, 24, 25 billion and it's going up every week you don't see that in the traditional banking system because they're trying to protect their own systems that they have already in place they don't want to cannibalize themselves and frankly if they were successful in launching a stable coin they would have to do it under their own compliance systems which are and the and those compliance officers in a giant wire house know that the regulator is scrutinizing all of the players in crypto in stable coins and they're going to wait until there's a judgment they're

not going to go and start fighting with the regulator and the jp morgan that's not going to happen and so this is a really interesting story of the hair and the turtle you know starting very slowly sometimes you can win but maybe not in crypto once you get scale once you become a standard once everybody's using your platform and writing and taking you know staking and loaning and doing it as i'm doing that right now at circle i'm putting out contracts at 30 60 90 days on usdc i go to fiat usdc i get paid back in usdc and i can convert back to fiat any currency but to get that through my own auditor took me six months let alone that's getting them to agree to sign the statement so i can file with the regulator i mean this is going to take a while

how much are you earning when you do some of this stuff like what are their general rates and what i'm trying to compare it to is like the fixed income guys who were earning you know five six uh seven percent on their like highest risk stuff lower risk stuff was kind of you know one two percent what is it in the stable coin world right now well each platform is different right now you see some very attractive rates on ftx if you if you're able to set up an account and you have compliance that will let you do that including their own compliance which is very heavy scrutiny they make sure who comes on that platform uh whatever job they're in remain compliant with their own law you know code in whether it's switzerland or france or canada

whatever uh you can do more than seven percent on ftx right now and staking uh a circle contracts right now yesterday i did some at 6.2 percent for 90 days that's very attractive on usdc so you're you're beating inflation you do have regulatory risk pump i mean if tomorrow morning i wake up and usdc is no longer allowed by the regulator that ain't good news and so that's why there's some hesitancy but you know we have as a waiting probably less than one percent in the particular mandate in usbc right now but i would take it up way bigger if the regulator would let me and and i would probably have i put our cash in there you know it could be 20 and because i don't want to make 22 basis points that's what my cash desk is giving me right now 22 basis points

when inflation is 2.1%. Yeah, it's crazy. You now are Mr. Wonderful. You're world famous ABC Shark Tank. I see you smile when I say it. If there's humans on Mars, they know who you are. So this isn't just like a Western Hemisphere conversation, right? It's not just about the United States and Canada. I know that you've got a number of different friends, colleagues and peers all throughout the Middle East, Europe. What are they all saying about this? Are they jumping in game are they still a little bit uh hesitant what's the international money doing it's very very interesting the topic that's going to be in riad next week is about crypto and there's a tremendous amount of excitement about it but they have not pulled the trigger yet they're

trying to get themselves set up for the moment when the regulator allows it both in their own geography and in the u.s you got to remember that those those funds those those sovereign funds whether it be in saudi arabia or united arab emirates a huge amount of that capital was invested in the s p 500 and derivatives thereof huge amounts huge huge amounts so they cannot be offside with the us regulator they just can't and so and i look at this as a huge opportunity i speak to those guys almost every day they would immediately go to one to three percent on bitcoin alone just bitcoin let alone ethereum or any level one level twos on the chain they haven't even thought about that they're just thinking about bitcoin and and owning that as an asset the amount

of capital that will come into this market when the regulator approves bitcoin as an asset or a currency or a security whatever they're going to you know regulate it as is going to be unbelievable which is why i own it i mean my my premise you know stomaching the volatility which we all do every 12-month cycle is the upside is behemoth it's huge and so you know whether it be for me it's an asset it's a long-term hold the coin i own the coin is the coin i own i don't trade it i lend it i stake it and you know i get some income from that but i'm never going to give up the coin and you know i heard you guys talking about the the esg issue i'm sorry that hasn't gone away but But there have been some new initiatives in raising capital to solve for it.

So before we get to the ESG stuff with this international money, right, you talk about them wanting to go one to three percent just to Bitcoin. Maybe they would do some other stuff as well. Are we talking about just large family offices in the Middle East and Europe? Are we talking about foundations, sovereign wealth funds? And I'm trying to use that as a proxy for like how serious the most conservative investors in the world are about this versus, oh, no, this is a large family office where there's kind of one decision maker and they're going to end up making that decision based on how comfortable they are in a regulation standpoint and also a return standpoint. Yeah. The real opportunity is not with the family offices or hedge funds that operate out of the Middle East. The real money is in the actual sovereign funds.

in both saudi arabia and the united arab emirates it's billions and billions and billions of dollars they have not allocated to crypto yet when that happens you'll see it reflected in the price of bitcoin there's no question about it and they have such long-term views in those funds that and the funds are so large remember these countries don't operate the same way as the u.s domestic countries do although they're managed many of the people managing those middle eastern funds the sovereign funds are actually western educated managers and so they generally abide by discipline and principles of you know risk diversification so they may have a mandate for example that no stock can represent more than five percent of the fund or no sector more than twenty percent

those are diversification mandates that are used all around the world and they do that there too but when you're dealing with a multi-billion dollar mandate and some of these are they're the largest pools of capital in the world a one percent allocation is a tremendous amount of money and so there's a whole bunch of people and me included heading over in november and everybody is talking about not just bitcoin anymore it's what would a portfolio look like if you know the managers are asking this of participants that are already building these portfolios give me an allocation of positions if i want to be exposed to bitcoin itself of course but also be involved in decentralized finance and also own level one and level two chains

what does that look like and i'm heading over i think probably you and i at some point in the next few weeks i'm going to give you my portfolio i'm not finished yet but it's over 21 positions right now and i'll i'll do it on your show i'll disclose what i own i think you're going to be knocked out but you see what i've got here because i've gone right down the rabbit hole i've hired multiple people to do the due diligence on some of these really eclectic projects but we are investing in them my last question on let's say the sovereign wealth funds is could you see them getting into mining at some point yeah great question and yes that is my plan and here's that goes to the esg issue okay here's the solution all right let's say you can't get

around your compliance department can't get around the issue of esg because it's still out there and they're still have compliance uh and and ethics committees and these big funds and so here's a solution let's say you go from scratch let's say you go to west texas and you want to build a gig facility and build it out in 250 increments and you and you basically guarantee investors that you're only going to use wind and solar and you agree to the texas grid that you'll pay back some of your production and you go to the capital markets and say every time we're awarded a coin it stays on the balance sheet of this investment so you know with certainty that your coin was mined in this facility that you own that's what i'm doing and that's a big solution

for me because i i get to check the box now on esg for anybody that's you know even saying to where does your coin come from i can't do that if i buy an etf i can't do that if i just go and buy a coin in the open market but i can do that if i was awarded the coin in an esg compliant facility and there's enough point to be mined left that you're going to see a lot of capital put to work and not just the geography in west texas there's other jurisdictions in northern europe that are looking at this proposal as well so you're basically going into the government office saying we are going to mine sustainable we're going to do it give us the permits give us access to the grids give us all the things we need to be able to service this facility and let us get to

work so i've got bill from abra here what's your take on the esg stuff well uh kevin really great to meet you uh very impressed with how deep you've gone on this topic uh it's not easy so much respect there. I guess, you know, two questions, right? First, I understand that the ESG issue hasn't quote unquote gone away. But one, do the numbers really support the narrative when you go deep that the issue should exist? And do you actually think that you could produce enough energy in wind and solar at large scale to make a dent in the hash power war, assuming that we get back to the current hash power numbers by this time next year? Actually, I'm assuming we would be ahead of the pre-China crackdown numbers by this time next year. And would wind and solar

actually make enough of a dent to even warrant the investment? It's a great question. You can't do it with solar alone. It's a combination of wind and solar, which makes it expensive, but it's definitely a GST compliant. And let me tell you, I agree with you around the debate. I mean, if you want to own Bitcoin, own Bitcoin. But it's not that simple. If you have a compliance department and you have the Larry Fink letter hanging open, everybody knows about the Larry Fink letter. In fact, everybody also knows that BlackRock has hired a chief ESG officer. And so if you are being serviced by every sovereign fund in the world works with BlackRock, pretty well, you really can't go against that mandate. It's not going

work for you you've got to solve it and so the question is you got to check the box on esg or you can't play in the coin space if you're tied into those metrics so it's not like they don't want to it's they can't it's the same issue about you know buying certain goods and services from banned countries um that's what the ethics committee stopped you there too i i really i really work in this in this in this institutional world and it's not like you can call up the chief compliance officer and have a dialogue regarding the merits of mining bitcoin with existing energy sources they just don't give a shit they're not going to take the call they're just saying no so when they see how much money is being made in the space don't you think they're just going to

change the narrative to fit what they need it to be to make the investment which is what i mean come on they do that anyway i mean and also they're not eliminating all the companies from the fortune 500 that probably wouldn't pass muster on the same usage around esg uh if they weren't already in the portfolio today well that's not true actually if you look at the allocations even calipers alone said this after the fake letter they're going to downsize their energy holdings um but probably we're up at 20 they may be down as low as eight now and you can see reflected in large energy energy names like uh you know schlumberger and exxon and mobile um They're getting their PEs compressed because the incremental buyer is not there anymore on the hydrocarbon mandate coming out of the White House.

So there's some pretty big forces at play. And when you talk about, you know, if you'd only own Bitcoin at $8,000, now it's over $60,000 to a sovereign fund that's running, you know, $30, $40, $50, $60 billion. It's a rounding error. They don't care. and and at the same time it's the greatest opportunity for those of us that have invested in cryptocurrencies is to solve this problem for them i mean it's not going to get solved debating it with the compliance officer it's going to get solved when they can simply check the box saying this facility in norway this facility in northern quebec this facility

in northern alberta and this facility in west texas where the places i'm looking at mine sustainably as agreed to with the government the government has as is certified as an est compliant facility then then the debate's over in fact those are the very people that i'm going to to raise capital from to build out these facilities because it solves their problem the same compliance office that won't let the fund buy bitcoin will put money in the ground to build a facility to mine coin if it's CSG compliant. Go figure. Joe, John, what questions do you guys got?

Hey, Kevin, thanks for doing this. Nice to see you again. So I remember seeing something that you said, I think it was a month or two ago, that you were going to double your crypto exposure in your portfolio. Is this something that you're actively looking to do? Is this something that you're waiting on regulation for?

Or have you already done it, et cetera? Just a little more kind of insight into that. No, I'm on my way. By the end of December, I should be at 7% of the operating company's portfolio. And the way I'm doing it is with FTX. I became an investor this week in FTX. It's a private company, but I was able to buy some of it because I've become their paid spokesperson. Most people know that.

Right beside Tom Brady. I love that. I can't wait to play some football with him. But the bottom line is they're smart about it. they're helping me build that portfolio with some very eclectic products that normally it's not easy to get access to i'm really fascinated now by the different approaches on decentralized ledgers and so i've got a lot of people on my team working on it i think the nft market is going to be absolutely huge and i'm going to be a participant in it and i'm thinking nfts not just on digital

art. I'm thinking NFTs used to authenticate physical assets. The one I'm working on because I'm a huge watch collector and I know all the world's largest collectors and the CEOs of all the watch companies is authenticating secondary market watch trading. I don't know if you saw that article last week, I think it was put out by CNBC, $20Bn a year of trading in the watch asset class. And the biggest problem, let's say I want to buy a Patek Philippe that went off the market 17 years ago which i'm doing right now a piece celebrating their 75th anniversary i have to send it to a guy named john reardon in new york to get it authenticated to know that it's real the hassle of doing that the cost of doing that moving it from the seller in hong kong to new

york city in bond having john look at it open up make sure it's real close and send it back to the seller so it's in his physical hands then do the trade i can avoid all that with a watch nft once that watch was put on the market it was Rardon would do an NFT to it approve it, certify it and for the rest of that watch's life and every time it trades you know it's real and if we have to

pay back a royalty to Patek Philippe or whoever the maker is or the designer of the dial that's fine you can all do that on a smart contract so should that be on Solana should that be on Ethereum, should it be on a derivative of Ethereum, I don't know yet that's the research I'm working on John what questions you got?

Yeah. What's up, Kevin? Nice to see you again. Can you talk more about your stablecoin holdings and like any restrictions that you have? What coins you like versus other ones? Yeah. I've done a lot of work on stablecoin because this was out of need. About 18 months ago, we took down our commercial real estate holdings, including here in Boston, where I am, down from 31% of the operating company's portfolio. remember these are income producing properties so it's a form of our way we made income and the cap rates got so low here in boston new york detroit miami we just sold them including you know climate control storage facilities that we bought an 11 cap that we're trading three and a half cap so it was time to exit so we sold it down to eight percent holdings the only buildings we didn't sell are liquid or have you know issues around them they have movie theaters and things like that and we had all this cash so we go to the cash desk and we say okay we have to park this cash

while we deploy it and they offered us 23 basis points i'm talking about some of the biggest cash tests in new york and i said this is insane you're going to give me 23 biffs and i'm you know i'm facing 2.1 inflation that's when we started digging into stablecoin because that was the first time we started that dialogue with circle and other entities and then i called up our auditors and said look we're going to deploy some of this cash into stable coins and we chose usdc because we really like the compliance team over at circle if you really those guys understand our problems regarding compliance and the audience said i said no way no way you are not doing that we're not signing uh the statements i said that's crazy like you i want to deploy this capital you

won't sign my status no we won't it's not it's not approved by the regulator i mean guys you know we talk about crypto collectively all day long but it is so early in the institutional world it is so nascent it's so not there yet and that in itself is the giant opportunity i mean just stable coins alone would be a huge market if you could actually lend them out even anything over four percent i assume when they when they regulate it the demand is going to be so high it's going to push down the yields but right now you're talking 6.2 percent on a 90-day uh you know state which is phenomenal unless you wake up and the regulator changed their minds on stable coins in usdc which is kind of scary which is why we can't load up we can do you know maybe 100 basis points worth of it

but we can't put 20 of a portfolio to it i would if it was regulated so and i'm just one guy can you imagine what would happen if tomorrow morning regulator says okay here are the rules for stable coins here's what a stable coin money market fund looks like yeah you have to be a bank and then circle turns into a bank whatever is going to happen speculating when i say that but the demand would be unbelievable kevin i got two questions for you and then we'll let you go first is when you think about uh those regulators coming in and giving the thumbs up kind of uh saying all right everyone go would you go to 20 or would you do more in your portfolio in terms of full exposure to the industry could you see yourself going to 50 plus percent given that

your 50 plus percent in us dollar uh kind of assets and cash well you know it's a good question paul um and we just had that discussion uh on monday with our ot just here's what i think we're going to do we're going to go to seven percent on crypto itself by december but i've also started to take some pretty big positions in public miners right now that are checking the box on the SG. And so I guess you could argue that if you included that in what we'll call the crypto weighting, if you want to call that an asset class. And the reason I'm doing it that way is I really can't go past a 20% in any one sector. I really believe that crypto is the 12th sector of the S&P. We don't know it yet. It hasn't been designated that, but it's coming in the years

ahead we have 11 sectors now including real estate crypto is going to be number 12 primarily driven by decentralized finance it's so disruptive so powerful so productive it'll get there so i want to have more exposure during that transition um and i guess the way to do that and and keep my own compliance department on board my own auditor on board is to simply buy the securities of those compliant miners that are trading with the volatility of bitcoin's pricing and i think that will get you know i'm going to be discussing this in in uh in abu dhabi in november and i'll present the portfolio there same thing in st maurice there's a huge conference there in switzerland in january about this exact topic that you're raising this exact topic very high net

worth individuals and family offices in europe are i guess it's not a secret anymore but it's it's happening and and a lot of the crypto players are going to be there presenting their their way of indexing crypto i'll show mine i'll listen to everybody else's um i bet you i'm spending 40 of my day now on this on this topic maybe even 50 because it's performing so well i mean i don't have any performing this well so my prediction here back in 2018 the first time you and i ever went on television i see hey i'm gonna remind you you forbid me for being over 50 why are you such a date about this but here's my prediction is that in the next five years more than 50 of your portfolio will be in

but not from a sense of, I know you have these 20% kind of limitations, but I think what will end up happening is your, let's say real estate portfolio, people will start paying you in stable coins. So it'll be kind of tangentially or indirectly related to it. And so you'll have exposure in more than 50% of the portfolio to these technologies. It's just not going to be 50 plus percent of you going and buying Bitcoin or, you know, one of the individual assets themselves. Yeah, I think you might be right on that. tell you where i think it's going to manifest itself first in the fx market for example i use this example all the time i i have a portfolio of over 50 uh names in europe uh large cap stocks

trading in zurich in europe and in london so you've got british pounds you've got euros you've got swiss francs every time i put on the position i have to go usd i have to go through an fx desk pay bips convert to swiss francs buy the local market when i sell the position it goes in reverse so i'm getting clipped lots of basis points a lot of friction there i think when the regulators approve a a payment system on the chain between a market like the swiss market and the us market uh that solves the problem forever i mean you're right because when i when i buy that security i'll buy it on a chain in a in a way that i don't have to go through multiple fields and i think that's going to happen within five years and so you're right people are going to be exposed to crypto

and payment systems that will represent 40 50 60 70 percent of their net worth they just won't think of it that way it's a good it's a good analogy correct my last question for you is uh when you guys were doing the filming for shark tank i think you recently did that over the last few months what's the conversation behind closed doors uh you mark lori barbara robert the whole crew what are most people uh saying about this are they all as bullish as you are or are there still some skepticism uh among that uh crowd and i use them as a proxy for most of kind of uh uh the average american that is one of their biggest sources of kind of business content is watching shark tank so what's the thought process of uh of your co-host well you know we don't do crypto

deals on shark tank or marijuana i mean we don't we can't do those for because of regulatory reasons and we we're also very very sensitive to the regulator for obvious reasons for you know it's a network owned by disney etc but behind closed doors um mark and i are very very active in crypto you know the cuban is uh we we share notes on nfts um you know i'm i'm intrigued by by that whole uh business and i'm very active in that i've invested in wonderfi you know which is decentralized finance um they're bringing their app in the next few weeks the company just raised another 20 million yesterday also in jordan freed's business the platform called immutable holdings he owns nft.com he's setting up profiles for most of the s p 500 brands i'm working with him on the

watch industry for example i own a piece of that company too uh and and you know i look at all these i look at this stuff probably of the sharks two uh two out of us are are allocating portfolios to it the other is not so much yet but they're very interested they're more traditional in how they um deploy capital but i don't know how you can how you can ignore it anymore um given the pressures that you started this conversation with around inflation and you know decentralized finance the productivity you can provide to the economy you just can't ignore it and i understand the regulatory cloud i get it but i don't think even the regulators want to abandon the promise that crypto has for the american economy so it just has to be rules based and they'll get there

eventually even if it takes time that's where we're at so the sharks that are not yet allocating is this basically a question around regulatory or is it they're not yet convinced or what is kind of the biggest um critique or the biggest obstacle that you see turning them from uh not being allocated to actually getting allocated primarily regulatory i mean you know when without naming any specific shark they all have big brands they all support all kinds of companies some of them have their own products goods and services around their name and it's it's the same reason that they don't they don't get involved in the cannabis market it's a schedule one regulated narcotic in multiple states and yet it's legal in others but they they they have to be compliant

and so any they all have advisors and they you know it's like i said earlier i have to fight my auditors i have to say no no no no you don't get it and they say we get it and the answer is no and so it takes a fair amount of of energy to pursue this when all the advisors around you are saying no and won't even support you i mean that's that's really the the truth about what what crypto is now is it's a growing it was a baby five years ago now it's a teenager and it's nasty because it's not stopping it's going to keep going and it's going to be an adult soon and those teenage years are a bitch that's the problem i know you well enough that all you need to do is when you talk to the other sharks say listen i believe in it so much i got my own dough in it and when you

say that they'll obviously understand that uh if you're comfortable they should be they know they know and everybody's interested to see what my holdings are i get that every day you know what i'm really worried about i don't want to be one of these guys that you know get some obscure token coin and promotes it and you know all that stuff i don't want to be seen that way i'm being very careful to make these long-term investments because i believe in you know the best way to look at this and i tell people this that really grill me on crypto and particularly when that you keep floating that video of us together on cnbc you know on twitter and i get abused over and over again i'm never going to forgive you that i'm going to figure a way to get you back i don't

how i'm gonna figure it out but what i tell them is look do you invest in google do you invest in microsoft those are big holdings for me they are software companies when you invest in crypto and the blockchain and the level one and level two ideas out there and a lot of these tokens and a lot of these shared ledgers you're investing in software why would you invest in microsoft and not in the chain why why wouldn't you they said well i never thought of it that way well think about it it that way because that's what it is you're just adding to your software productivity portfolio now i get it it's controversial and all the rest of it but the innovation that's occurring by these developers the hottest hands on the keyboard are now in crypto the smartest guys

are doing this work and you're getting engineers are leaving traditional productivity software like crazy to go into crypto whether it's a startup or work with a behemoth or whatever it is Because the productivity opportunities there are greater than anything else we have in software. And so, you know, I just gave you the use case for watches. It's for every asset class. It's all coming, but it's all software. So the politicians that say shadowy super coders, Kevin says the hottest hands are on the keyboard. I like that.

That's a much better way to put it, I think. Yeah. Well, I mean, look, politicians have to make press. They're constantly raising capital for their own campaigns. I understand the pressure they're under. Nothing gets you more press. The two ways to get press these days is beat up Facebook, which always works to get you on the hill, which is ludicrous because they're the backbone of small business in America

and talk about crypto as being used for crime. That's going to get you a lot of headlines. That's going to help you raise a lot of money. It's never going to stop. But that's not what crypto is about anymore. Decentralized finance is going to be very disruptive, very powerful, very productive. it's going to eliminate a lot of fees and it's going to make life a lot easier for everybody. Like me,

when I talked about trying to buy and sell European stocks in multiple currencies, I mean, why wouldn't I invest in that? Of course. All right. Where do you want us to send people? You can go follow you on Twitter. Where else? Come and look at my, I'm doing a lot of this stuff on YouTube. So, you know, Mr. Wonderful on YouTube, good place to go. I discuss this every week practically and LinkedIn also doing a lot of white papers on there um there's a lot of interest on linkedin which is you know primarily managers

in what's going on in crypto um so i i think that i think the genie is out of the bottle now and this is going to be forever a debate um and you know kudos for you for bringing it out early on and becoming a you know marching to that tune when everybody thought it was crazy including me but you know when things change i change and things have changed i always tell people i said listen, I've got one clip. I'm going to play it forever. But after that, you eventually change your mind. And, and the thing that I will give you a lot of credit for, which I don't think people really understand is it's one thing to change your mind, right? You can go from, Hey, I don't like this. Okay. Now I'm okay with it. But it's another thing to say, it's not just going to be half a

percent or 1%, right? You're talking about going to 7%, eventually maybe 20%. Like it's, it's going from being a critic or having critiques to now saying, no, hold on a second. Not only do I like this, but I'm going to press the winners, right? I'm going to go in because that's where I'm actually spending 40, 50% of my time. That's where a big portion of my portfolio goes. And I think a lot of people, they get caught up in not having the intellectual flexibility. They already were against it. And now when they say, okay, fine, I like it a little bit. They don't want to be seen as going all in on it, right? Becoming a big proponent, which you've obviously done. So I will forever always respect you for changing your mind, which I think most people,

they can give you shit on Twitter. I'm going to keep inciting that. But other than that, Uh, you're good at my book. Oh, look, I really appreciate it. Great talking to you guys. Take care. I'm sure we'll get together again soon. All right. Sounds good. Talk soon. Bye-bye.