The Pomp Podcast - #770 Q&A - Looking Ahead To What 2022 Will Bring

Starting point is 00:00:00 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. Hey, everyone. Welcome back to 2022. I figured we'd start this year on the podcast with a brand new special episode of a Q&A with you, the audience. I took questions over the weekend on Twitter, and my wife, Polina, is here to ask them and also give credit to those who sent the questions in. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is BlockFi. BlockFi provides financial products for crypto investors. Those products include a high yield interest account, a US dollar loan product against your

Starting point is 00:00:38 crypto collateral, and a no fee cryptocurrency trading product. BlockFi also just released a brand new Bitcoin rewards credit card. It's a normal credit card that when you swipe it, you get Bitcoin back rather than cash back or airline miles. I'm an investor in the business and I'm a very happy user. The BlockFi Bitcoin rewards credit card is absolutely amazing. To start earning today, go visit blockfi.com slash pomp. Again, blockfi.com slash pomp. I've got the credit card. I love it.

Starting point is 00:01:04 I think you will too. Blockfi.com slash pomp. Next up is choice. It's time to stop paying capital gains taxes on your Bitcoin. And choice is here to help. Choice is rebuilding the way Bitcoiners approach retirement by making it possible to invest in Bitcoin and 19 other digital assets inside your IRA. Right now, every time you make a trade, you have to pay capital gains taxes that can be

Starting point is 00:01:25 as high as 37%. Choice enables you to trade real Bitcoin, other cryptos, and stocks without having to pay a dime in capital gains. The best part? They just released an iOS app, so you can open an account in less than 10 minutes and take control of your future from the palm of your hand. Join me and the 20,000 other Bitcoiners who have started their tax-efficient stack and open your Choice account today. Search StackSats in the App Store or visit choiceapp.io slash Pomp. Again, search StackSats in the App Store or visit choiceapp.io slash Pomp. And one more thing, if you want to hold your private keys, Choice lets you do that too. Start stacking tax-efficient Satoshis today and visit choiceapp.io slash Pomp.

Starting point is 00:02:10 Last but not least are my friends over at Circle. If you manage corporate or institutional funds, you're probably looking for ways to access opportunities in crypto. You see the growth the momentum and you want exposure. But a lot of institutions don't know how or aren't comfortable with the risks of Bitcoin or DeFi. Now there's a new investment that's built specifically to help institutions get into digital assets. It's called Circle Yield. It's a blockchain-based investment built with USDC, the leading dollar digital currency. Circle Yield is over-collateralized and fully secured with Bitcoin Collateral to protect your funds. This also makes it a great fit for crypto institutions who want to diversify their treasuries and reduce risks while staying

Starting point is 00:02:49 all on chain. You get your choice of terms from one to 12 months in a fixed rate that's higher than what you'll get at a bank or many fixed income markets. Visit circle.com slash pomp to book a meeting with one of their experts. Again, circle.com slash pomp and book a meeting with one of their experts. Big fan of circle and I think you will be as well. All right, let's get in this episode. I hope you guys enjoyed 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

Starting point is 00:03:31 expression of his personal opinion. This podcast is for informational purposes only. All right. I'm super excited about this episode. So Plano, what's our first question? Beko Bitcoin or 21 asks, which brother do you like more? Ooh, hard question. No, come on. Obviously, for those that don't know, I've got four brothers, two of them, most of you know, Joe and John, who I do the best business show, a lot of content online, et cetera. But I also have two other brothers, Vincent and Michael. All five of us are very, very close. We've been close pretty much our entire lives. And although most people know the two brothers that do the content stuff with me,

Starting point is 00:04:06 The other two are just as involved in a lot of investing activities, et cetera. And frankly, I just feel very fortunate that I get to do this with my brothers, my best friends. And so I wish that everyone could do it, but we're definitely enjoying it. What's next? William at SW2019 asks, what are your 2022 goals? That's a good question. I got a whole bunch of different goals.

Starting point is 00:04:28 Some of the goals are personal. Some of them are specific to each business or each product. Some of them are specific around planning a nice relationship, around our new baby, a whole bunch of different things. I try to actually be pretty thoughtful about goals going into each new year. But I think the two that this audience would be the most interested in are, one, I want to get much better at being able to build systems and delegate. And what I mean by that is a good kind of test for it is every time I get an email, if I have to answer it, then that means that I either haven't hired the right person, I haven't trained someone on our team, or we haven't built a system to be able to handle it or triage it. And so ultimately, if every single time I get an email, I have someone to send it to

Starting point is 00:05:12 or a system to put it through, that means that I've done my job right. We are nowhere near that situation now. So we've got a lot of work to do. But I think that's one big goal for 2022 is basically build out the team, train the folks who are already on the team to be able to handle some of that, and then also build out systems as well. A second goal that I think is probably pretty interesting is I've been doing a lot of investing, but over the years, as I've kind of built a larger online presence and frankly, just done more investing, I get access all the time to deals that are kind of very high quality deals, but they're access driven. Everyone knows it's a good deal and it's simply, can you get in the deal or can you not? And obviously the reason

Starting point is 00:05:51 why everyone wants to get in is because the probability of making money is much higher. So I'll still do those deals, obviously, because I'm a capitalist and I want to make money, both for any investors I have or for myself and my family. But on top of that, what I really want to focus on in 2022 is investments that I think fall more in the intellectually interesting category. These are things that may seem not as obvious, things that you have to think much more deeply about, things that you have to be more intentional when investing. It's not necessarily just a hot round with a bunch of kind of tier one investors co-investing alongside you. And so I think those types of deals, maybe they end up being a great economic investment or maybe

Starting point is 00:06:28 not, but they just make you think much more critically about where the world is going, where we are currently, who the founding team is, and kind of what the obstacles for that business or the risks are as they continue. And so I'll still do a whole bunch of different deals, but those ideas that fall into the intellectually interesting or intellectually challenging bucket is definitely a big focus for 2022. So what's the next question? Robin Wood asks, what happens to real estate as an asset class investment opportunity in a Bitcoin standard world? Yeah, I don't think that there's any difference really. There's one argument is that as we move

Starting point is 00:07:05 more towards kind of like a Bitcoin standard, if you will, there's a huge kind of tailwind of people taking their capital out of other store of value assets. So whether that is real estate or fine art or anything else, and they put it into Bitcoin. So similar to how Bitcoin is essentially demonetizing gold, you see gold's market cap collapsing and Bitcoin's expanding, and it's very much kind of a net winner, net loser. There's an argument that, hey, that's going to happen to real estate as well. Now, I don't actually think that that's what is going to occur. I think that the opposite is going to occur, is that Bitcoin is going to serve as a tailwind for real estate. What I mean by that is real estate is already hundreds of trillions

Starting point is 00:07:46 of dollars in market size. But I think that there's still a very small percentage of the population that understands why real estate is a good investment. And so what I think we're going to end up seeing here is that as more and more people get red-pilled on the depreciating dollar, the devaluation of the dollar, and the need and the necessity for assets, whether they're hard assets in the traditional world or things like Bitcoin, what you're going to see is people are to say, hey, you know what? I didn't realize that I needed to invest in certain types of assets because of that devaluation or that high inflation. So now what I'm going to do is I'm going to take a portion of my wealth and I'm going to put it in Bitcoin, take a portion of my wealth and put it in

Starting point is 00:08:24 real estate, take a portion of my wealth and put it in something else. And so ultimately, I think that rather than it eat into real estate, I think that real estate will likely expand just like Bitcoin will expand. They share many similar types of properties and people may not just invest in and also for pure the highest upside, right? If you're a very conservative person and you realize that there's high inflation and there's cheap capital available because interest rates are down, then you may actually be investing in real estate as a way to protect your wealth and purchasing power, but you want to do it in the most conservative way possible. Now, there's a strong argument that Bitcoin's the most conservative. There's a strong argument that real

Starting point is 00:08:59 estate's the most conservative. I think that's where the market's going to end up deciding where those capital gets allocated. What's next? At Meta Brahman asks, my question, what does the average investor fear the most in the next one, three, five-year timeframes and how should they go about addressing them today? So this is a really good question. I don't know what the average investor fears the most. I think that one of the things that doesn't get enough kind of coverage or conversation around is probably the biggest fear that the average investor has is they don't have enough money to invest. There's this feeling like, hey, I can never catch up. I can never get ahead. Some of that's because they don't get paid enough.

Starting point is 00:09:33 Some of that's because they consume too much, or some of that is because they're so far in debt already that majority of the capital they don't spend on consumption ends up going to servicing debt that they've already taken on. But I think that's probably at the most basic level is if you're an investor or you think of yourself as an investor, an average person just thinks, I don't have enough money to invest or I need more money to invest. So I think that's kind of one key thing. The second thing is the more sophisticated the investor becomes, I think the more that they wonder about interest rates and the activities of the central bank. In my opinion, the interest rate decisions, along with quantitative easing, but interest rates for sure, is one of the most important data points in the financial system right now. It may be the most important data point. And so if interest rates rise, the belief is that risk assets will sell off and other types of

Starting point is 00:10:19 assets, maybe like value investing, et cetera, would actually gain value. The also kind of belief that goes hand in hand with that is if interest rates don't rise, then risk assets will continue to do what they've been doing for the last decade or so. And so ultimately, I don't know if anyone knows what the future holds, but not having enough money to invest is one concern, interest rates is a second. And then I think the third thing, and probably one of the most interesting things is if you're a value investor, I think you got to be asking yourself, is value investing dead. If you're a tech investor, I think you got to be asking yourself, is tech's day going to be over at some point? And we had a good run. And I think that just that's natural, right? Like

Starting point is 00:10:59 anyone who has an investment strategy, you got to be questioning, is my strategy still valid? Is this the best strategy to have moving forward for what I'm trying to optimize for or kind of gain? And also, what would I have to see in the market? Or what would I have to recognize to have it violate my belief that this is the best strategy. And so I think that probably enough people don't do that, but those are things that come to mind for that question. Jessica Turner asks, what investments are most important for an early investor against inflation? For example, someone who has about a thousand dollars a month to allocate. Yeah, this is probably where the average investor actually is, the average American. So if you think about kind of the core rules of

Starting point is 00:11:38 personal finance, in my opinion, the first is you got to spend less than you make. That's kind of across the board, spend less than you make. So you have some leftover income. The second is you got to get out of debt. If you're in debt, you got to do everything you possibly can to get out of debt. It's like kind of getting back to the starting line. You're already starting up behind the starting line, get back to the starting line by getting out of that debt. The third thing I would say is you have to learn to invest in general. So not even the importance of where you put the money, but you have to learn to invest because in this market with high inflation, you cannot save your way to financial security. You're going to have to be an investor.

Starting point is 00:12:10 And then once you get through those three steps, a fourth one that I always tell folks is while you're learning about investing, you should also be creating a rainy day fund. If you create the rainy day fund, you should be able to survive 1, 3, 6, 9, 12 months, whatever makes you most comfortable. Where if you lost your job or you lost your source of income, you could basically survive for that period off of that savings. And then after that, you should go and you should invest as heavily as you possibly can. I think that most people right now are basically looking at three asset classes as inflation heads. I think that in some way, the stock market, whether you look at something like the S&P 500, which is up almost 30% in 2021, QQQ is another

Starting point is 00:12:48 one, kind of low cost indexing that's served as somewhat of an inflation hedge just because it benefits from inflation, right? There's asset inflation. The second is real estate that's always served as an inflation hedge and kind of a hard asset. A lot of people have been allocating there. And third is Bitcoin, right? I think that there's a lot of young people who say, hey, I don't have enough money to actually participate in real estate in the way that I would want to. Stocks aren't very interesting to me. And so I'm going to go ahead and I'm going to buy into the inflation hedge narrative of Bitcoin and allocate there. But those are probably the three most popular ones that I know of that people are allocating to. Nick can tell me,

Starting point is 00:13:20 what are you most excited for in 2022? Yeah, this is a really interesting question because I think when most people are asked, what are you most excited about? They think of a certain milestone or they think of a specific kind of point in time. For me, I don't think that it's really about a single milestone. To me, the most important thing is actually around just time continuing to expire, if you will. And what I mean by that is, let's take Bitcoin specifically. My belief is that the biggest hurdle to more Bitcoin adoption is simply time. There's a ton of people who are saying, hey, it's been around for 12 years, but that's still a really short period of time. Fiat's been around for 50 years, or gold's been around for 5,000 years. And so the more that

Starting point is 00:14:03 gold is, or I'm sorry, the more that Bitcoin is around, the more that people get comfortable with it. So one is just like the more that time of Bitcoin being around, the kind of the Lindy effect, the more likely that people trust it, the more that people kind of buy into it and believe that it'll stick around. The second thing that I think is something I'm looking forward to is it feels like we're at a tipping point in society right now where the average American understands prices are rising significantly. And if they don't do something, they'll be in a really bad financial position. That basically means that they're getting kind of red-pilled, if you will, on the need to learn about investing. Now, as we know, high schools and colleges,

Starting point is 00:14:41 they don't really teach personal finance. They don't teach investing, kind of those skills that you need to participate in the financial market. Now, historically, that hasn't been that bad because inflation has been relatively low. But as soon as we get into a high inflation environment, now everyone needs to have those skills. And so the first and most important thing that needs to occur in order for people to get those skills is they got to have a need for the skills. They got to know that they need the skill. I think that's what's happening right now. So going into 2022, it's just time, patience, long-term thinking, all that kind of goes to play. And then two is as more and more people realize they need the investing skill, I do believe that we'll get

Starting point is 00:15:14 more and more financial education in the United States and abroad. And that ends up being a really net positive. These two questions are related. So I'll give credit to both people. Willie Barbs asks, what year did you get into Bitcoin? And DJ Diggs asks, how did you get into Bitcoin? When did you first hear about it? How long before it clicked? And then how long before deciding to go all in? Yeah. So most people have heard me talk about this before, but I'll answer quickly. 2014, I was working at Facebook. I first heard about Bitcoin. I didn't do anything with it. Basically somebody that I worked with, it was like, it's stupid. And so I kind of wrote it off. I never even Googled it. So error that I made. The second thing was, of course, the end

Starting point is 00:15:53 of 2016, a young kid by the name of John Paul Baric pitched me on cryptocurrency mining. It was actually not Bitcoin. It was Ethereum with GPU miners. I went ahead and I sold my Facebook stock. I put half of it in the bank. I took the other half and basically went and bought some of these miners and started mining. From there, my partner at the time, Jason Williams, the two of us were thinking about a business that Jason had invested quite a bit of money in and was running as the CEO, they did kind of off-grid power generation. So we ultimately came to the idea of why don't we just build a mining facility here? So we went ahead and we did that at a place called PRTI. And then we just went down the rabbit hole from there. Once we started doing all

Starting point is 00:16:38 of the mining activity, it became very clear that people were going to have to build exchanges. They're going to have to build wallets. They're going to build a bunch of this stuff. So myself, Jason, really started to kind of spend a bunch of time investing. Ultimately, my conviction in Bitcoin rose significantly. And by December of 2018, I had enough conviction that when the market looked like it was bottoming around $3,000, I put about 50% of my net worth into Bitcoin. And then all the way until March of 2020, I pretty much held that position. And then in April and May of 2020, when I realized that the Fed was going to put a bunch of money, there was going to be manipulation of interest rates and all the chaos was going to happen,

Starting point is 00:17:17 I then decided, hey, look, I don't know another place to put my wealth. So I went ahead and I put a big portion of the rest in Bitcoin at that time. And the final question is from Abraham Nubani. If you were to start all over again, what would you do? Yeah, this is a fantastic question. It's a good one to end on. I think that there's a couple of things that I would do. The first is that I would spend as much time as possible learning. I really think that people under-optimize their learning, especially when they're young. The second thing that I would do is I would basically build in public. And that kind of sounds cliche now because everyone says it, but I do think that the best way to build a network, the best way to build a

Starting point is 00:17:55 reputation is just to show your work, right? Like literally on Twitter or whatever platform, just build in public. From an investing standpoint, obviously hindsight being 2020, I would have bought a lot of Bitcoin a lot earlier and just held onto it. I would have invested in a number of other things as well in terms of having that hindsight 2020. But I think that moving forward, if I was starting all over again, the two things that I would focus on is one, definitely I would want to operate on the frontier for majority of my investing activities. I think the frontier is in Bitcoin and cryptocurrencies. There's a whole bunch of different sectors of that industry that are growing very quickly. So I would definitely focus there. And then the second

Starting point is 00:18:36 thing I would do is I would really spend a lot of time trying to acquire cash flowing assets. One of the things is a lot of the businesses that we've built, they still require human work to operate. We don't actually own as many software businesses as I probably would like. And so from that standpoint, what ends up happening is we own these businesses that are more service-based, whether it's a content business or the employment business or others. And so ultimately, I would spend a lot of time thinking about what are cash flowing assets that I could buy now. And with minimal oversight or work, I would go ahead and end up actually being able to operate so that it could generate monthly cash flow, etc. But the majority of my time, frankly, I'd be doing exactly what I do now, which is simply just going to the frontier. Where's the biggest risk? Where's the most asymmetric payoff? And it goes back to this idea that in technology, you don't have to be right every time. You just got to be right one time or you got to be right on the right thing. And when that occurs, then it kind of takes care of itself. So that's kind of how I would think about it. But I appreciate everyone listening today.

Starting point is 00:19:42 Hopefully this is helpful. A little bit of interaction, a little bit of behind the scenes action. Thank you so much to Polina for spending the time to do this. Maybe we'll start bringing Polina on the podcast a little bit more. She can actually provide

Starting point is 00:19:55 some intelligent commentary and maybe actually make this a little bit more entertaining than just me talking to a bunch of technologists all the time. But thank you, Polina. Thank you, guys. I'll see you soon.

Starting point is 00:20:05 All right, everyone. Thanks so much. And I'll see you guys tomorrow.

The Pomp Podcast - #770 Q&A - Looking Ahead To What 2022 Will Bring

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.