The Pomp Podcast - #937 Fidelity Brings Bitcoin To Retirement Accounts

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. Today's episode is a breakdown of a brand new initiative by Fidelity Investments to allow investors and clients to put Bitcoin in their 401ks and retirement plans. I really enjoy recording these solo episodes, and I hope that you enjoy them as well. Before we get in today's episode, though, I first want to talk about our sponsors. This episode is brought to you by FTX US. FTX.US is the safe, regulated way to buy and sell Bitcoin and other digital assets. You can trade crypto with up to 85% lower fees than top competitors. There are no fixed

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Starting point is 00:03:01 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 expression of his personal opinion. This podcast is for informational purposes only. Good morning, everyone. Bang, bang. The retirement situation in America is dismal. According to a recent bank rate survey, more than 50% of US workers say that they are behind on their retirement savings. At least one in every three people report that they don't even

Starting point is 00:03:40 have a retirement account. To make the situation worse, 51% of Americans said that they have previously taken an early withdrawal from their retirement savings, and the economic chaos caused by COVID-19 hasn't helped either. One strategy to help lessen the blow of financial duress later in life led to the creation of pension plans. The idea was that employees and employers would put money in, the investment teams would go grow the money over time, and the employees would get paid out a portion of the proceeds in retirement. This is a great idea on the surface, but the main problem is that most pension plans have been drastically underperforming their target investment returns, which means that they won't have enough money to pay retirees when the bill comes due.

Starting point is 00:04:21 According to Richard Ennis, a prominent institutional investment consultant who was previously CEO of the respected consulting firm Ennis Cut and edited the prestigious Financial Analyst Journal, said in an interview with MarketWatch, quote, the bottom line on public fund performance is that underperformance of 152 basis points per year on 4.5 trillions in assets translates to an outright waste of stakeholder value of $68 billion annually, a figure I find astonishing, end quote. If the public pension funds have a tough time underperforming standard benchmarks while simultaneously missing their actuary rate of returns, there's a risk that the 25 plus million Americans counting on their pension fund for retirement will get an unwelcome

Starting point is 00:05:04 surprise. So what exactly is the solution to the retirement problem in America? I wrote a letter to each of you in December of 2018, titled every pension fund should buy Bitcoin. In that letter, I argued the following, quote, the retirement of hundreds of millions of corporate and government employees around the world depends on these pension funds ability to pay the individual a set amount of money post retirement. Unfortunately, many pension funds are facing a significant in crisis. It does not look like they will be able to pay their future obligations. The difference between the obligations and the resources allocated to pay them is actually widening. This is driven by a decreasing worker-to-retiree ratio.

Starting point is 00:05:45 Workers pay into the pension fund, think of this as revenue for the pension fund, under the promise that the fund managers will grow the capital and be able to pay the employee's pension post-retirement. Once an employee retires, they begin to draw their pension, Think of this as the expense for the pension fund, and will continue to do so until they die. The gap between revenue and expenses is getting worse because of lower birth rates, fewer people entering the workforce, and longer life expectancy, the retirement age staying fixed so people are entitled to their pension for longer. Each of these trends is expected to continue and possibly even accelerate,

Starting point is 00:06:18 which would put additional pressure on pension funds to come up with the capital needed to fulfill their obligations. End quote. I then went on to discuss a potential solution being the purchase of Bitcoin for these pension funds. If the thesis plays out how I anticipate though, an investment of 100 basis points or less would materially change the performance of each pension fund, which ultimately changes the future viability of retiring for hundreds of millions of people. These institutions have permanent long-term capital, which allows them to stomach more volatility than most investors. For example, an investment of 1% of assets at $4,000 Bitcoin price would yield a 25% increase in the pension's

Starting point is 00:06:56 total assets if Bitcoin reached $100,000. If a fund decided to invest 0.1% of assets, the same price appreciation would increase total assets by 2.5%, end quote. Obviously, Bitcoin's price has not yet reached 100 grand, but the rise to $40,000 means that a 1% allocation would have increased a pension fund's assets by 10% so far. This would close the underfunding gap for a large portion of pensions in the United States. While we wait on more pensions to purchase Bitcoin, there's a light at the end of the tunnel for individuals.

Starting point is 00:07:30 Fidelity announced this morning that they will be the first major retirement plan to allow investors to put Bitcoin in their 401k plans. According to the Wall Street Journal coverage, quote, employees won't be able to start adding cryptocurrencies to their nest eggs right away. But later this year, the 23,000 companies that use Fidelity to administer their retirement plans will have the option to put Bitcoin on the menu. The endorsement of the nation's largest retirement plan provider suggests crypto investing is moving further into the mainstream, but it remains to be seen whether employers will embrace it for their workers, end quote.

Starting point is 00:08:03 A quote in the article stuck out to me as well. It came from Dave Gray, the head of workplace retirement offerings and platforms at Fidelity, saying, quote, there is a need for a diverse set of products and investment solutions for our investors. We fully expect that cryptocurrency is going to shape the way future generations think about investing for the near term and long term, end quote. Whether you think Bitcoin is a great investment or not, it is interesting to see that Fidelity wants to increase the optionality for clients. They realize that there is a significant problem around retirement preparation, and Bitcoin could provide a solution. My guess is that we will see every retirement platform follow suit and start offering Bitcoin to their clients. The older clients may refrain, but this will likely be adopted en masse by the younger generations. For better or worse, this younger generation doesn't want to hold gold, bonds, or cash.

Starting point is 00:08:52 They treat Bitcoin like a reserve asset and ultimately see a big reason, inflation, to be invested fully in the market. There are few better ways to gain investment exposure than through a tax-advantaged account. Now, Fidelity may be the first large retirement plan to offer this solution, but they weren't the first. There are options like Choice by Kingdom Trust, Bitcoin IRA, and many others who pioneered this idea. This combination of incumbents and startups bringing this opportunity to market signals that the trend is only beginning. Bitcoin is not the solution to everything, and it may not be the complete solution to the retirement crisis in America, but it can definitely have a positive impact. It is encouraging to see Fidelity creating solutions to help investors pursue this path if they desire.

Starting point is 00:09:35 Hope each of you has a great start to your day, and I'll talk to everyone tomorrow. three-week intensive training program with over 50 events packed into that three-week time period go to pompscryptocourse.com to learn more and i'll meet you guys for the next episode

The Pomp Podcast - #937 Fidelity Brings Bitcoin To Retirement Accounts

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