The Wolf Of All Streets - Mark Yusko, CEO of Morgan Creek, on Why Bitcoin is Truly a Hedge, Cronyism Vs. Capitalism, and Why Let Big Companies Fail

Episode Date: April 7, 2020

Mark Yusko, CEO of Morgan Creek and Scott Melker discussed a multitude of topics in this whirlwind podcast. They talked about why Bitcoin is the only legitimately uncorrelated asset in the world and the only true free market, why the government should let "zombie companies fail," why Boeing should be shut down, the difference between Cronyism and Capitalism, the problem with stock buy backs, the culpability of the US government in the present economic situation, why stocks are more manipulated than Bitcoin, why Putin is the richest man in the world, and how retail should invest and why they fail. As Mark said, "Human beings do two things really, really well - we buy what we wish we would have bought and sell what we are about to need." They also howled together at the end... --- ROUNDLYX RoundlyX allows you to dollar-cost-average into crypto with our spare change "Roundup" investing tool, manage multiple crypto exchange accounts in one dashboard and access curated digital asset content and services. Visit RoundlyX to learn more about accumulating your favorite digital assets when making everyday purchases. --- VOYAGER This episode is brought to you by Voyager, your new favorite crypto broker. Trade crypto fast and commission-free the easy way. Earn up to 6% interest on top coins with no lockups and no limits. Download the Voyager app and use code “SCOTT25” to get $25 in free Bitcoin when you create your account --- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe.This podcast is presented by BlockWorks Group. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworksgroup.io

What's up, everybody? This is your host, Scott Melker, and you're listening to the Wolf of All Streets podcast. Every week, I'm talking to your favorite personalities from the worlds of Bitcoin, finance, trading, art, music, sports, politics, and basically anyone else with an interesting story to tell. So sit down, strap in, and get ready, because we're going deep. RoundlyX.com is one of my favorite companies in the entire crypto space. What they do is they take all your small purchases and they round them up to the nearest dollar and invest that money into any of 25 crypto assets of your choice.

They integrate with your favorite exchanges so that you can round up into different assets all at the same time. And they do this all without ever holding any of your Bitcoin. This is by far the best way to dollar cost average into Bitcoin. You'll never even notice that the money has gone from your account and you'll look up one day and hopefully you'll have made thousands and thousands of dollars on crypto. Roundly X, that's R-O-U-N-D-L-Y-X dot com. Go sign up now.

When I need to trade crypto on the go, Voyager is the only app I trust. It's so intuitive and simple. In just a few minutes, you can download the app, create an account, only app I trust. It's so intuitive and simple. In just a few minutes, you can download the app, create an account, and transfer cash from your bank account to start trading. Voyager offers commission-free trading. That's right, free trading of more than 30 top crypto assets, which has saved me tons of money on fees. The best part? They're offering interest on Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and multiple stable coins. No lockups or limits. Visit investvoyager.com or search Voyager on the iTunes or Google Play Store and get $25 in free, that's

right, free Bitcoin to try out my favorite crypto trading app. Use promo code SCOTT25. This podcast is powered by BlockWorks Group, the only events and podcast production company I trust. For access to the premier digital asset conferences and in-depth podcast content, visit them at blockworksgroup.io. I promise you will not be disappointed. Every so often, you randomly connect with someone on Twitter and are magnetically drawn to their opinions, views, humor, and taste. For me, that was definitely the case with today's guest. Every time I listen to him on TV or read something that he writes, it feels like an echo of my own thoughts, but somewhat on steroids, even down to a shared love of the same music, actually. Mark Yusko is best

known as the founder and CEO of Morgan Creek Capital Management, but I think you'll find that there's much more to him than just his brilliant financial mind. Mark, thank you so much for joining me today from isolation. Scott, look, I really appreciate that really nice intro. And I agree. It is rare, but not absolutely uncommon to kind of meet somebody on Twitter and have that instant attraction. I'm just jealous in the sense that you actually can play music. I like music. I like it a lot, but I am always amazed. And I love your tweets where you have you and your kids playing music together. It's just stunning.

Well, thank you very much. I curse my parents all the time for not forcing me to take piano lessons, but I have forgiven them. That's funny because I recently saw a video of you with some serious like samba or some sort of Latin dance moves going on with your son. So I think you're being a little humble. And he put me to shame. I mean, he's, it's really kind of funny story. So we have a unique family of two older kids, 30 and 28, and then the little guy who's nine. And my wife stayed home with the first two and she was working working when he came along as a bonus. And long story short, we had a babysitter for him,

and she was from Argentina, and she spoke Solamente Español to Will since he's five weeks old. So he's bilingual, goes to a bilingual school. And so Stacy and I were up doing this, you know, break the monotony during the quarantine. Let's learn how to samba. And he stands up and says, Dad, I already know how to do this. Watch. And he had some serious moves. Yeah, I saw. I mean, he definitely knew what he was doing. It's funny, actually, we had a nanny for my daughter, actually, who was Venezuelan. And so she was

bilingual. But once she was gone and my daughter started school and unfortunately we didn't have the option of a you know a bilingual school she lost it in weeks it was it was absolutely amazing how fast she lost her ability to speak Spanish and uh it is if you don't use it it's like all skills right I mean if you don't play music you're going to lose your musical skills if you don't practice a language. Heck, if you don't invest all the time, you lose your investment skills. So it is an interesting – humans are interesting that way. We have this instant erasure mechanism in our psyches that use it or lose it. That's interesting that you touched on investing all the time because I think that there's a lot of retail, your average

person, your average investor who's trying to navigate this ridiculous market at the moment, and probably doesn't know how to do it. Can you actually touch on that? Because that clearly you're implying that you should continue doing it to some degree. Oh, look, I could get up on my soapbox on this for hours, but we don't have hours on this particular point. But look, I think it's, and I'll say this word legitimately, and I believe it, I think it's almost criminal what we've done to the average investor in thrusting the responsibility for investing on nurses and policemen and firemen and teachers and any other kind of worker that has a full-time job

has to keep up with their family. And oh, by the way, before 1986, the Tax Act of 86, which had nothing to do with taxes, had everything to do with interesting increase in kleptocracy in that it forced money out of the defined benefit system where there was a professional managing your retirement, your pension, and they had big staff and big plans, and they built it all going forward. But the mutual fund lobby got this bill passed that pushed all the money into 401ks and 403bs under the guise of it being portable and better for a more mobile society. That's just bull crap. It was good for the mutual fund companies who charge fees. And the problem is the average person spends no time on their portfolio. They

literally, they set it up the day they start their company and they do one over N, right? If they have seven choices, they put do one over N. If they have seven choices, they put one seventh in each. If they have 10 choices, they put one tenth in each. They don't know how to rebalance. They don't know how to manage their portfolios. They don't think about it. That's not what they're trained to do. Then when there's a big crisis like this, they freak out and they go to cash. Then they miss the rebound. If you look at the data over 20 years, if you just bought and held stocks, you made 8.5%. If you just bought and held bonds, you made 5.5%. The average individual investor made 1.9%. Whoa, wait a second. How's that

possible? All you had to do is pick one, stocks or bonds, and you made more. Or do 50-50, you made more. But no, what do people do? Scott, human beings do two things really, really well. We buy what we wish we would have bought and we sell what we're about to need. And it's human nature. And when you don't have specialized training in investing, and I don't mean training like you have to go to school for it, but you have to actually have a mentor, someone who teaches you, you have to do it a lot. And you have to actually have time to focus on it. If you don't have those things, you're just going to make mistakes. It's actually, and then you look at the

data for traders, even versus like an individual investor and how much worse they perform because sort of that same binary thing you're talking about, which I guess is more fear and greed in that case. But why do you think that people underperform the market so dramatically? Is it just because they lack the education? Well, there's so many problems. I mean, one, the structural problem, right? If you don't have time to devote to it, you probably shouldn't be doing it. And that's true of most things in life. You wouldn't see me try to get up on stage and play music because I don't know how. I'd like to.

I'd like to. Although, I could take lessons from you and I could learn. But, you know, the interesting thing is, so you've got structural problems. Then you have the human nature problems, right? I said you have the, nature problems, right? I said you have the overconfidence. And we all think if we're good at one thing, we must be good at something else. So particularly as people accumulate wealth, they're like, oh, look, I'm good at making wealth, but I must be good at managing wealth. Well, actually, making wealth and managing wealth

are antithetical skills. If you think about it, all great wealth comes from concentration. Concentrated stock position, concentrated business ownership, concentrated real estate position. All great wealth comes from concentration. And how you stay wealthy is through diversification. It's through understanding a disciplined approach to diversifying your assets, finding uncorrelated assets, selling into strength, buying into weakness. Now, the other problem is this other structural thing where we've all been hoodwinked into believing that the market is this capitalization weighted index strategy, which is just a momentum strategy that works really, really well when liquidity is expanding

from the central banks and works really, really poorly when liquidity is contracting. And so it's a boom bust cycle. And if you did nothing and just held on through all those cycles, you do fine. But what people tend to forget is we go through these cycles over the last 40, 50 years, active investing and passive investing have the same return. Now, passive has outperformed for the last decade up until the last few weeks. Why is that? Well, it's because capitalization weighting means you buy more of things as they become more expensive. Which if you think about it, that's the exact opposite of what you should do, right? You should sell things as they become more expensive. Which if you think about it, that's the exact opposite of what you should do, right? You should sell things as they become expensive,

you should buy things as they become cheap. But that's not what momentum investing does. And momentum investing works perfectly until it doesn't. And then you get the cascade down. Again, which is what happened this time, what happened in 2008, 2009? What happened in 2002? What happened in 1994? What happened in 1983? What happened in 1974? And it happens over and over again. And again, what happens is once people feel that pain of loss, they overreact, they overcorrect. It's like driving on ice.

They'll overcorrect. And, you know, you do the dentist rap. And people say, what's the dentist rap? It's like dentists all buy these brand new Porsches and then they don't know how to drive them and they overcorrect and then wrap them around a tree. That's a new one. I'd never heard that before. Yeah.

But that's a great analogy. So speaking of diversifying into uncorrelated assets, that's a nice segue potentially into Bitcoin. Do you believe that Bitcoin is a uncorrelated asset? It's absolutely an uncorrelated asset. And look, people can't see me, but you can see my picture. I have the white hair to prove that I've been around. I'm experienced. That's a euphemism for old. And so I've been through all of the cycles. I was around before the term alternative investments existed. And I would say whoever invented that term was not a marketing genius.

People don't like alternative stuff, right? Alternative medicine, alternative education, alternative music. They don't like alternative stuff. They like traditional stuff. So they tend to put a little bit in their portfolio and have a little bit of alternatives. When really, I would say alternative to what? There's no such thing as an alternative investment. There are stocks, there are bonds, there are currencies, and there are commodities. That's it. That's all you can own. People say, oh, what about hedge funds? Well, hedge funds own stocks, bonds,

currencies, and commodities, just like mutual funds, just like private partnerships, just like separate accounts. Well, what about real estate? That must be an alternative. Well, no, you own the equity of the deal, the debt of the deal, or the land, the commodity. Well, what about real estate? That must be an alternative. Well, no, you own the equity of the deal, the debt of the deal, or the land, the commodity. Well, what about private equity? You own common stock, preferred stock, or a convertible bond. So there's only four things you can own, but this idea that alternatives are somehow different is crazy. And so what happened is alternative investments came around and they said they were going to promise that people would get these enhanced returns from low correlation back to the Markowitz CAPM, capital asset pricing model, which said that if I start with bonds, right, which have very low risk, and I add stocks, which are riskier, the portfolio risk goes down because those assets are not perfectly correlated.

Right, idiosyncratic risk. Right, idiosyncratic risk. And then when I add small cap stocks or hedged strategies or real assets or other things, every time I add an asset that's uncorrelated. Now, uncorrelated doesn't mean negatively correlated. Uncorrelated just means if interest rates go up or down, you don't know for sure if stocks are going to go up or down, you don't know for sure if stocks are going to go up or down. You don't know for sure if real estate is going to go up or down. They tend to be somewhat correlated. In fact, if you look at part of the problem with alternative strategies, most of them, the correlation is much higher than you think. International stocks, 70% correlated. Bonds, still 30% correlated.

Even hedge funds, 50%, 60% correlated. And the real problem, in crisis, their correlations all go to one. Well, Bitcoin is the first time in my career, and again, I've been through hedge funds, private, venture, real assets, commodity indices, passive versus active. I've been through every diversifying strategy in the history of investing to this point. And now we have, for the first time in my career, an asset that actually lives up to low correlation, the correlation of Bitcoin over 11 years. And I'm even willing to take out the first five years where it wasn't a real asset yet. It was a bunch of people trading on the pink sheets and say the first five years don't count. But even in the last six years, the correlation

to traditional assets, stocks, bonds, cash, commodities, real estate, et cetera, has been 0.15. It varies from 0.2 to 0.1, but it's 0.15. That is awesome lack of correlation. And there's a reason for that. All of the traditional investments, again, stocks, bonds, currencies, commodities, derive their value from the same inputs, interest rates, corporate profits, GDP growth, and multiples, financial engineering. If you look at cryptocurrencies, particularly Bitcoin, it derives its value from none of those other things. It derives its value from the network value, which is, according to Metcalfe's law, one over the sum of the squares of the number of participants. Then you've got millennial adoption. Well, what does that do with anything? Well, think about it.

If you ask anyone over the age of 35, how much Bitcoin do you have? None. Why would I own that piece of crap? If you ask them how much gold they have, they go, oh, I got lots of gold. How about stocks and bonds? Oh, lots of stocks and bonds. Who's your broker? Oh, Merrill Lynch. Easy. Ask anyone under 35, who's your broker? I don't have a broker. What are you talking about? What's a broker? Okay. How much gold do you have? Are you joking? Why would I own gold? That's stupid.

Okay. How much Bitcoin do you have? I don't want to talk about it. A huge percentage of my net worth, and I don't want to talk about it because I'm embarrassed a little bit. Well, you shouldn't be embarrassed. Particularly the younger you are, the more of these alternative strategies you'd have. And we can talk about that later.

So that's a long-winded way of saying Bitcoin is truly uncorrelated. It's uncorrelated because it relies on different things like technology and regulatory changes and millennial adoption to get value. And it really has nothing to do other than in short periods of time, two weeks ago, for the first time, and it won't be the last time, but for the first time, you did see Bitcoin have a high correlation to equities because, again, for the first time, the amount of Bitcoin that traded on the margin was dominated by speculators. And what I mean by speculators is not necessarily crazy bad people, but speculators are just the opposite of hedgers, right? Oil company produces oil. They need to hedge their position. They take one side and the speculator takes the other side.

So speculators are a good part of the market. But if you think about Bitcoin, it's owned by two classes of people. The hodlers, right, which are hold on for dear life or hold on forever or whatever. These are people who believe in the safe money status. Their Bitcoin didn't move. We know that. Yeah, their Bitcoin didn't move. And it's not going to move because they own it as schmuck

insurance. They've opted out of the fiat fiasco with a portion of their assets, and they want to hold that safe haven asset. So they're not going to trade. That's 70-ish percent. The other 30%, and we all wanted this to happen in theory, two years ago, we said, oh, well, wouldn't it be great when the great wall of money of the institutions comes in? Well, great. They got here. Starting at the end of 2018, a bunch of hedge funds and prop desk and wealthy families started buying Bitcoin. And guess what? Some of them bought it on leverage, and some of the people even bought futures, and then they bought futures on leverage. So now you're up to 100x leverage. Well, what happens in leverage liquidations, margin calls, is people don't sell what they want to sell.

They sell what they're forced to sell. And when you have illiquid assets and liquid assets, you're forced to sell the liquid assets. When you have liquid assets, some of which like in the bond market, there were no bids. Literally two weeks ago, there were no bids for certain bonds. So you couldn't sell them. And yet Bitcoin, you could sell instantaneously. So people did. And they were forced. And basically, all the hedge funds got out. I mean, not every single one, but a lot of them, and they just sold. And so, and the last piece of it is, you know, Bitcoin is the last free market and Ethereum and all the other cryptos too, but cryptocurrency is the last truly free market. You know, equity markets are not free. They're totally manipulated. In fact, I know in my heart of hearts that somebody someday,

some enterprising journalist is going to find the secret trump family trading account that has been of course running all these trades absolutely they're gonna they're gonna break that story but you know that's why it's why putin's the richest guy in the world there is no no bill gates no no no putin is the richest richest guy in the world because he also does some funny stuff. But bottom line is you have this market in equities and fixed income that is intervened by the Fed, intervened in by the Congress, right? We just passed this big stimulus bill to stop the market from going down. Oh my God, the market's going down. What's wrong with the market going down? We need the market to go down. We need the bad companies to go bankrupt. That's the way cleansing happens. That's the way capitalism works. But we don't have capitalism anymore. We have cronyism.

And cronyism doesn't impact a free market. Okay, so you need a manipulated market. So we've created these manipulated markets in the traditional world, and Bitcoin is the last free market. Now, the benefit of free market is you have price discovery and you have long-term value creation. The problem with a free market is you have price discovery and short-term value destruction at times. And that's what happened a couple weeks ago.

That's funny, though, because I think that the overwhelming, you know, the meme of Bitcoin is it's the most manipulated asset in the world. It's the most manipulated market. But I agree with you. And you're saying that actually the market itself is far more manipulated than the Bitcoin market. Oh, well, look, it depends on your definition of manipulation. So is it possible for a large owner of Bitcoin to manipulate the price short term? 100%. Of course, right? And that's always been true of every nascent young market. Look at the early days of the options exchange in the United States, right? Where we had the Chicago Ops Exchange and the San Francisco Exchange, the New York Exchange. And what did people do? They would literally sell options on one exchange and they had a time gap. There was different time

zones and they could manipulate the price because one market wasn't open and the other one was. Or they could trade in London and then computer technology erased that arbitrage opportunity. So what'd they do? They figured out other arbitrage opportunities. And so, look, markets will always be manipulated when they're small and nascent. And when they become large and dominated by lots of different players, that ability to manipulate goes away. So, yeah, if you want to say it's manipulated, fine. But that type of manipulation is, you know, peanuts compared to the manipulation that's going on

in the stock market. I mean, look at Boeing. Boeing should be shut down. They bribed officials to get an unsafe product out on the market. And look, I grew up in Seattle. I have lots of friends that worked at Boeing. So I have nothing against them, but I am against, you know, corporate malfeasance, right? They didn't spend money on R&D. And because of that, they didn't have a new engine design ready to the new body style, and it was dangerous. And they knew it was dangerous, and there's evidence that shows they knew it was dangerous, yet they paid off the regulators through lobbying. Okay, that's just a sanitized term for corruption and bribery. But it's like sanctions, right? We use the word sanctions, which is the sanitized word for inflicting human

misery on other countries. And if we said we're inflicting human misery on other countries, we probably wouldn't like it as much. It was, oh, we're sanctioning Iran. Right. Sounds much better. So anyway, my point on Boeing is Boeing should not get one penny of money. And they're going to get the biggest bailout of all. Of course. And it's up, you know, 50% over the last two days, like 30% right now. And that's just ridiculous. And it makes my skin crawl. And it makes me embarrassed that, you know, I live in a regime where, you know, the people at the top can basically commit theft and

fraud. And nobody seems to care. Yeah, it's crazy. I mean, the airlines in general spent 96% of their cash on buybacks over the past few years, artificially raising the price of the stock. And now they're looking for bailouts from the government as well. So I guess- But it's worse than that, Scott. It's worse than that. It's not just that they spent all their free cash flow on buybacks. You know why they did that. Nobody talks about this. Look, the only thing that we had going for the top 1% was that the asset prices were inflating. So, we printed all this worthless fiat and nobody needed to borrow it because everybody had too much debt. And so, the stock market wasn't going up. And what do you do when nothing's working is you do QE, quantitative easing. And so what do you do? You buy assets,

you basically lend money to the banks, and then you buy back the bonds that the banks... So here's the crazy thing. So the banks are your primary dealers. So they buy the new issue bonds from the treasury. Then they borrow money for free from the Fed. And they sell the bonds to the Fed at a profit. Then they take those profits and they buy stocks. Oh, wait, they're not supposed to buy stocks. Well, they were buying stocks. Or they lend money to hedge funds to buy stocks.

Either way, that makes the stock market go up. Well, then the stock market stops going up because the economy slows down, profits go down. Apple's profits are the same today as they were in 2015, actual profits. Oh, no, no, Mark. Their earnings per share went up 20%. Right? Because they bought back 20% of their shares. Well, why did they do that? Because the Fed, up until this past week, was prohibited by law from buying equities. Bank of Japan owns equities. Swiss National Bank owns equities. They've been bailing out their stock markets forever.

Hasn't worked very well in Japan. And so they did this thing called stealth QE. So all the companies that Warren Buffett owned were basically rounded up in a room. And they said, all right, here's the deal, guys. We're going to give you a massive tax cut. but you can't spend the money on R and D. You can't spend the money on hiring people. You can't build any new buildings. You have to buy back your stock because you're going to pay big dividends to Warren and co. And we, the fed need you to buy stock to keep the stock market going up because the Fed can't buy stocks directly.

So, we had this stealth QE that's been going on for the last two years. And if it weren't for those buybacks, stocks would be down a ton. Why? Because the boomers, which drove the greatest bull market in history because they were in savings mode and spending mode are now every day 10,000 of us turn 71 and a half and they're forced to take distributions out of their retirement accounts. And that's a trillion, a trillion dollars a year. So net sales of a trillion dollars would be very bad for stocks and very bad for our tweeter in chief because he only seems to care about the price of stocks. And look, I don't want to go too deep into this because I get really crazy about this,

but I actually think it's the dictator playbook. I think we are becoming a dictatorship. I think we are going down the same path as Zimbabwe and Venezuela, where the goal is you get all your friends at the top, you give all your friends big positions, and you get them all the assets, and then you devalue the currency. And you basically destroy the wealth of the country, and the people at the top get really, really, really, really rich, and the people at the bottom don't. And it's kind of crazy.

And then the people at the bottom allow you to rule forever. Yes, because you send them checks for $1,000 and they think they're getting something. And look, go to Argentina. You know, Christina Kirchner, who is a bad human being, and I don't say that about very many people, but actually I say about more people than I'd like to care to think about because there are bad people in this world. But she's a bad person. And what does she do to get elected? She basically said, I'll give you free electricity. And what do they do in Venezuela? I'll give you free gasoline. And so you buy votes, which was sad to me is, you know, this whole democratic primary,

we had people trying to buy votes. Well, I'll give you a thousand dollars a month. Well, I'll give you more than that. and now what's the current president in congress doing oh here here's money now someone did the great calculation two trillion dollars no six trillion dollars this is a bad calculation a little bit so funny they keep saying two and uh magically forgetting about the four trillion in the fed that aren't in the stimulus package yeah yeah so but if you just do the math it it's like $58,000 per family of 3.14 people. And instead, you're getting a Barrick and Donald Trump's secret trading account. And, you know, all kinds of people are getting handouts for being friends of POTUS. It's crazy. So do you think we'll have an election this year? Because I think that there's actually a chance that between the coronavirus and what's happening with the markets that could conveniently be canceled or delayed? Look, I, again, you're, you are, you are,

you're secretly pulling me down the deepest, darkest rabbit hole, which is, look, I think this is all part of the plan. You know, my partner tweeted out earlier, you know, you should be mad as hell that they just approve, you know, $6 trillion and you're only getting $1,200. And I said, well, what if that's the plan all along? What if the plan is to make the poor poorer and make the rich richer and increase inequality? What if that's actually the plan?

Well, I actually think it is the plan. And I actually think if you look at the response to this virus, I think I'm in the minority, and I probably shouldn't say it on a recorded line, but I do believe it. I think the response is way disproportionate to the threat. You know, 23,000 people have died from influenza this year, and 820 have died from COVID. Not that 820 is a good thing. I mean, it's a horrible thing, but it's a lot less than 23,000. And I think by using this health situation to then say, oh, well, we can suspend the election and I can stay in power forever. Well, I guess the good news, someone told me today, I don't know if it's true. Someone told me that in that they actually do have something in place. If the president tries to suspend an election, the Speaker of the House becomes president in the interim until the election actually happens. I'm like, I've definitely never heard that one. So I would, I would hope that there was some check

and balance like that. Because look, if a president, wannabe dictator, could actually just suspend the election by calling a national emergency, that would be a horrific environment to live in, right? Talk about the playbook that you were talking about before. But it's interesting talking about that, you know, keeping people inside. The election gets canceled. All those things doesn't exactly jive with, I guess, the new rhetoric of, you know, we got to get back to work by a certain time and letting everyone out. So it's kind of interesting. It's almost like both sides are being represented by the same people. No, it's very complicated. And, and, um, I said, I don't, I don't really think that, that we're in this,

this situation that is so dire and so unsolvable, right? I mean, King Solomon's advisors were right, and this too shall pass, and this too shall pass away, I guess was the full quote. You know, one thing about viruses is they always do burn themselves out, other than HIV. And this, by all measures, is not like HIV. It's a coronavirus, which coronaviruses last usually one season, whether that was MERS in 2003 or SARS, I'm SARS in 2003 or MERS in 2012. Although I do think it's interesting, Scott, why is it always when we're about to invade the Middle East, a novel coronavirus pops up? It's just an odd coincidence. And it is really odd to me that one of the hotspots in the world is Iran, which,

you know, we're- Well, China and Iran being first, I was just waiting for Russia. Yeah, yeah. The fact that Russia doesn't have very many cases does ruin that theory a little bit. But if you think about the two natural enemies of the United States, it's pretty crazy. It's pretty crazy. Yeah. I mean, hopefully the disease will burn out. I don't think it's like HIV.

I think that that's a fair assessment. Just going back really quick to talking about the airlines and companies like this, you mentioned zombie corporations. What happens if companies that big do fail? If we pull the rug and they don't allow the bailout? I have really strong feelings about this, and I feel so strong. I mean, I have this quote on my desk that I look at every morning, which is, failure changes for the better, the last 20-ish years into a participation trophy society. And we don't allow people to fail. I joke all the time. I live in the People's Republic of Chapel Hill. And it's a very, you know, left-leaning kind of place. And they have little bumper stickers, you know, like healthcare is a right. Like, no,

it's, it's actually a business and we should run it like a business and we should actually make it cost the right amount of money and not be at, you know, kleptocracy. But, you know, they don't keep score in soccer. I'm like, what do you mean you don't keep score in soccer? You have to keep score in soccer. Why do you, why else do you play games? And they're like, well, someone might lose. I'm like, yeah, losing is good. Losing is good. It good it teaches you and so we've we've morphed from that to oh we can't have a recession because companies will go to business and people lose jobs yeah that's the way the world works bad companies should not be allowed to exist because they destroy capital and by destroying capital that means we have to replace that capital and And by replacing that capital, we print more money, which devalues our currency.

I'll give you the person. And you're a young guy, and I'm an old guy. But I asked people who are older, I said, well, what's the lowest price you remember for gasoline? Mine's $0.31 from Totem Lake outside of Kirkland, actually, which is still a hotspot for the coronavirus in Washington State. And $0.31 a gallon at the 7-Eleven outside Totem Lake back in the 70s. And I went to see my daughter in California before the lockdown, and I paid $4.30 for a gallon of gas. And I think about it, it's the same gallon of gas, does the exact same thing in my car. It actually does a little less well because it's got,

you know, 15% ethanol in it now. But bottom line, the gas hasn't changed. But the currency that I use to buy the gas has been devalued because of this excess production. So capital destruction is not a good thing. And so we need a cleansing and we need to let bad companies fail. And I actually got an interesting debate actually with my dad who was watching the reasons all the CEOs getting trotted up on Fox News saying why they deserve to bail out. I'm like, oh, wait a second. No. I'm all for helping the company stay in existence to keep the operations running, to keep the people employed, and to keep the business extant. But we have rules for that, right? They're called restructuring. But we should erase or extinguish

the existing equity holders. The bondholders should become the new equity holders. The people who provide the dip financing, the government in this case, should get an ownership interest. And we should profit from that. In fact, if it were up to me, I would create a fund just like the government of Singapore has and I would take money and I would invest in rescue finances of all these businesses. I would take a nice ownership and then I would use the profits from those rescue financings to finance the safety net we need for the most vulnerable in our society. That should be a really good thing.. Actually, government as private equity. Yes, government as private equity. Perfect. And so that's what I would do if it were me.

But instead, what we're saying is, no, we're going to socialize risk. Equity is a risky asset, is a contingent claim on cash flows of a business. Bonds are a contractual claim. Bonds must be paid back first. But by allowing the bad equity to exist, we're basically giving hedge fund managers and banksters profits that they don't deserve. And we're breaking down the entire methodology of capital asset pricing, which is we have a risk-free asset, treasuries. Then we have bonds that have a little more risk, but are a contractual claim. And then we have equities. And equities, long-term, have a high return because they have risk, because they have volatility. If we remove the volatility, remove the risk, we're going to remove the return,

and everything's going to socialize to zero. Now, if your plan is to do just that, which is to socialize everyone's assets to zero, except for real assets like collectible cars and fine wines and luxury properties and things all the top 0.1% have, again, in the dictator playbook, well, then you're doing a really good job. If you actually want democracy to work and normal pricing of markets to work, then you have to let the bad companies go away and be replaced by the good ones. Again, that's capitalism versus cronyism. Cronyism is, I give my favorite example. So ExxonMobil back in 2014 made $40 billion in profit back when oil prices were really high. And that year, by tax law, the tax rate was still 40%. They should have paid $16 billion of tax.

Instead, they had paid $320 million in lobbying that year. They're the number one lobbying firm in the world. And instead of paying $16.16 billion in tax, they got a refund of $1.7 billion. Now, that's an amazing- Who pays that refund? Where does that money come from? Us. You and me, baby. And what's crazy about that, that's a great investment. I would spend $320 million to get $'s crazy about that, that's a great investment. I would spend 320 million to get 17.7 billion. That's a great investment. It is, but that was the top for oil, right? 2014 was the highest that Exxon stock has ever traded. RoundlyX.com is one of my favorite

companies in the entire crypto space. What they do is they take all your small purchases and they round them up to the nearest dollar and invest that money into any of 25 crypto assets of your choice. They integrate with your favorite exchanges so that you can round up into different assets all at the same time. And they do this all without ever holding any of your Bitcoin. This is by far the best way to dollar cost average into Bitcoin. You'll never even notice that the money has gone from your account and you'll look up one day and hopefully you'll have made thousands and thousands of dollars on crypto. RoundlyX, that's R-O-U-N-D-L-Y-X.com. Go sign up now. Are you sick of paying ridiculous fees to trade crypto? It's time you try Voyager. It's hands down my favorite place to buy

and trade crypto and it's 100% commission free. Voyager gives you easy access to more than 30 top crypto assets, and you can instantly transfer cash from your bank account so you never miss a trading opportunity. Even better, you can now automatically earn interest on your crypto holdings. Currently, they're offering 5% interest on Bitcoin and 6% on USDC. Yes, you heard that correctly, 6%. And there are no limits or lockups, which means your funds always stay liquid. Find out why so many people are making the switch to Voyager. Visit investvoyager.com or search for Voyager on the iTunes or Google Play Store and get $25 in free Bitcoin when you use the promo code SCOTT25. So putting on my tinfoil hat a bit, just based on what we're discussing,

do you think that all of these companies continued the buybacks and doing all these things because they knew that no matter what happened in advance, they knew that the bailout would be there? Absolutely. 100%. Look, it's all part of the cabal. Look, they just announced that BlackRock was going to get a big assignment to run the mortgage-backed securities program. Shocking, given that BlackRock sits on the committee to restructure financial services legislation. Same thing with Vanguard. it's not shocking that a couple of years ago they tried to pass a law which basically said that you were not fiduciarily correct unless you put people in the lowest fee product. So basically, you couldn't use mutual funds. You had to use ETFs because they have lower fees.

Now, the idea that a lower fee means you're a better fiduciary is completely ridiculous, right? Fiduciary has nothing to do with cost. Investing is a profit center, not a cost center. You shouldn't try to minimize cost. You should try to maximize profits. But the cronyism that goes on between all these guys worked with each other, their ex-Goldman Sachs, their ex-Blackstone, their ex- They had the people on CNBC yesterday that were invited to talk about the bailout. And it was literally Blackstone and BlackRock and Vanguard and all the same actors that all have ties back to Goldman Sachs and all have ties back to one another. And look, if you don't have any diversity of thought

and opinion and representation, guess who's going to win? It's going to be the same people that win every time. Yeah, it makes sense. Do you believe that in the current environment that we should have a market holiday, that they should shut down and basically solve everything that's happening? Should have shut down a week ago, maybe even 10 days ago. Look, the idea that you have markets that go up 9% one day and down 8% the next day and up 10%, that means price discovery is gone. When price discovery is gone, having

markets open is not good, right? It creates a lack of trust. It creates, again, the people who have been furloughed, right? They're out of their office. They're not at their desk. They don't have all their stuff. The trading floors are skeleton crew. All the people have been kicked off the New York Stock Exchange floor. Who wins in that environment? The algos, the people who have the big, scary computers that are right next to the exchanges. And so, the people who you would expect to be winning in this environment are winning. And the people who can't get through to the broker because their broker's in isolation and not at their office, you know, they can't, they can't participate. So

Or you're frozen out of Robin Hood. Or you're frozen out of Robin Hood. That's a great point. Yeah. Well, you touched on a lack of trust there in the market, of course, but I think that that that can be expanded, obviously, to a lack of trust in the government, a lack of trust in the system. How do you think we've gotten to a point? And this goes also to COVID, all the things that are happening. Nobody believes what the media is reporting. Nobody believes what the government's telling them, or on the flip side, they believe very strongly what a certain side of the media and the government is telling them and can't see anything else, including the science. So, how do you think we got to this point where there's just an inherent lack of trust across American society? Social media, right? And, you know, and it's really

amazing, and I don't say that flippantly, I say it intentionally in that if you think media has always been challenging, right? In the good old days of media, you know, when there are three television stations, ABC, NBC, CBS. And, you know, if you get UHF, maybe you get one or two others. But bottom line is that media was controlled by the producers. And they had their own slants. But it was relatively free because there were journalistic principles that said you had to present both sides of a story. You had to be fair and balanced. By and large, I think people like Walter Cronkite, God rest his soul, I think were really good, honest journalists. And over the years, that changed through disruption. And today we have splinter factions that have no journalistic integrity to commit to the whole story. They present one side of a story and they present it with clickbait headlines and things that incite the type of negative reaction that everybody has

now. And social media creates an echo chamber because the algorithms not only screen for what you like, but they screen against things that they know you won't like. And so they'll actually serve you up negative views of the things that they think are the antithesis of what you've liked. And so it just creates this echo chamber effect. And then the last thing that's happening is what I call nowism. And in the olden days, again, where people actually would, you know, read the paper once a day, and then they would actually take some time and think about things, and they'd have conversations with their friends who, you know, were seeking truth.

It wasn't, I have my opinion, and I want to convince you of my opinion. It was, hey, I have some facts, you have some facts, let's compare facts, and let's seek truth. And that's the way it should work. And I had to referee, I shouldn't say referee, I kind of came in late and tried to referee a debate between two very good friends on Twitter, who were getting into this whole, well, if you open the economy, you're killing grandma versus, no, if you don't open the economy, you're going to kill way more people. And it became this, you know, grandma or the economy. I'm like, whoa, whoa, whoa, whoa, whoa. That's not where we should be, right? We shouldn't be

at you're wrong because you disagree with me and you're wrong because you disagree with me. We should be at, hey, open debate and dialogue is critical for seeking truth. And we can't just focus on the number today, because what if some of that data is bad? What if Italy really is miscoding a lot of their deaths? You know, what if that's true? And we don't know what's happening in China. And what if, you know, China has a, you know, Auschwitz-type cover-up going on? I don't believe that to be true, but I'd say it's a non-zero possibility.

Or what if it's really better than we think and they've actually found a way to defeat the virus? chloroquinone thing, you know, rather than drinking the stuff to clean out your fish tank, how about we only give the drug to people who go into ARDS? Because what happens in ARDS, from what I understand, again, I'm not a virologist or a doctor, but from what I understand, is the virus triggers a massive autoimmune response, and people are actually dying from the autoimmune response, not the virus. Well, if chloroquine can delay that autoimmune or suppress that autoimmune response along with azithromycin, hey, let's try that. Let's do more of what's working, right? Korea totally bent the curve. Singapore totally bent the curve. Taiwan totally bent the curve. Singapore, totally bent the curve. Taiwan, totally bent the curve. Heck, even Iran looks to have bent the curve a become so tribal and we become so fixed on our beliefs. The way a belief should be formed is you should be open to all ideas. You should sample as much data as possible. You should analyze the data, synthesize the data, and then you should form a belief.

Instead, we do the exact opposite. We're given our beliefs by our parents, by our tribes, by media, and we form that belief. And then we reject all information against our belief. And we accept all information that supports our belief. Like, but that's the wrong way to do it, right? Yeah, it's antithetical. It's interesting. It's funny, because that was always the defense of atheism by atheists is that, you know, anyone who's an atheist wasn't born that way. Uh, they came to it by, you know, basically dismissing what they learned from their parents or society. And I think it's that way with a lot of information, as you're saying, I mean,

I think it's even to some degree, it's that way with sports. It's that way with nationalism. It's that way with religion. It's that way with, Hey, I'm from Florida. You're from Georgia. We hate each other. You know, everything boils down to that level of of tribalism but what's interesting to me is we've always had that sort of we've always had previously an ability to at least have some sort of dialogue now i don't think there's a single issue that isn't polarized in this manner right i mean right you you're, and not only that, all of the issues are assigned to a side, right?

So you, like when it comes to elections, it basically boils everyone down to a single issue voter, the thing they care about. If you are passionately pro-life, you have to be a Republican, even if everything else you think is Democrat. And I don't know how, especially with the direction things are going,

how we reconcile that in society. I know this is going totally off topic. Look, I think it's really hard and I think it's a really important topic. And it does come back eventually to investing and it does come back to cryptocurrencies and it does come back. You know, everything's integrated, right?

Everything in life, whether it's social or physical or emotional, I mean, all the things eventually weave their way into everything we do in all aspects of our life, whether it's family, whether it's business, whether it's relationships. And, you know, it's like the term social distancing. That's a really interesting choice of word. That's exactly the wrong thing that we want to be doing. We want to be creating closer social relationships. We want to create less tribalism, less absolutism. What we want is physical distancing right now to try to slow the spread of the virus, but we don't want social distancing. In fact, I said this in a tweet, I said, look,

pick up the damn phone and call people. I mean, it's scary to be alone by yourself. And if you're an introvert, it's even more scary. If you're an extrovert, you're going crazy because you've got to talk to somebody. But pick up the phone and talk to people and create those relationships and those bonds and be a support. I call it hashtag be the hotline. One of the things that drove me crazy, and again, not politically correct, but I think it's some number of thousands of people commit suicide every week. And I don't remember what the numbers are.

But every time a famous person commits suicide, then everyone tweets out the headline. I mean, the hotline number. Right. Forget the number. Be the hotline. Pick up the phone. I mean, the hotline number. Right. Forget the number. Be the hotline. Pick up the phone because we all know someone. We all know someone in our life who's vulnerable, who you think, oh, geez, maybe they're close. Maybe they really are.

And especially now, think about the restaurant owners. Think about the hot dog vendors at the basketball games that have all been canceled. They bought the inventory. They don't know that have all been canceled. They bought the inventory. They don't know how to pay for it. They don't know how they're going to make rent. They're not going to see their check anytime soon. They're not going to get the corporate bailout. There's a lot of people who are struggling. And I'm not saying they're all suicidal. I'm not saying they're all at wit's end, but there are a lot of scared people out there. There are a lot of people that need help. And there are a lot of people that just need to hear someone else's voice saying, Hey, I care. Hey, I'm here.

Yeah, I agree. I mean, I can say that I've talked to my family and friends more in the last two weeks than any time before. I mean, I had to cut off two people who called me on FaceTime to jump on this podcast with you. Two people that, you know, I obviously I text with and stuff, but I certainly don't look them face to face. I think that what you said about physical distancing versus social distancing is, I mean, it's just so important and not something that I thought about. And it really does make the term social distancing so misleading. Yeah. And again, I'm stealing that from, I'm stealing it. It's actually kind of cool.

So, you know, again, we all have different faith systems and I'm Catholic and I went to Catholic school. Everyone knows I went to Notre Dame and, but I wouldn't call myself the very best practicing Catholic. I always love the fact that it's called practicing. It's like practicing medicine or practicing law. Maybe you get good at it someday. But, you know, we decided that, you decided that we've got the little guy, we're going to keep the faith tradition. So you can't go to mass because it has been shut down. So we pulled up one of the online broadcasts from the Basilica up at South Bend. And the homilist, the priest gave this homily, and he quoted a rabbi.

So someone of the Jewish faith in a Catholic sermon, he quoted this rabbi. And he's the one that made this point about social distancing being a heinous term. And so I went online and I found this guy's original piece and I read it. And I was like, wow, he's right. I mean, this is, and again, if you, again, put on the tinfoil hat, if you believe that this is all part of a greater plot to actually increase tribalism, nationalism, populism, to destroy the economy, to create the difference between the haves and have-nots, to do what we did in the 1930s, where we turned a garden variety recession into the Great Depression,

and we concentrated the wealth in the hands of a very, very small number of people. What happened in Venezuela, what happened in Zimbabwe, if you actually believe that, which I'm not saying I necessarily do, then using terms like social distancing, like using terms like America first, like all these things make sense if your goal is to foment fear and foment dependency and create strife where if, again, if it's up to me, I want us to become socially closer. I want us to get off of our devices and look each other in the eye. I want people not to text. I want them to call or use FaceTime. And it sounds corny, but I think it's really, really important, particularly right now.

That's been the silver lining for me, certainly, is like more time face-to-face with my kids and more interaction with a bunch of other people who are sitting at home with nothing to do. So, um, I don't want to do it forever, certainly, but that has been a nice benefit to what's going on. You just touched on, uh, the great depression being a result of what could have just been a normal recession. And I've noticed that you use an amazing hashtag quite often, which is welcome to Hooverville. Yes. Could you talk about why you use that hashtag? Yeah, look, I used to, and I hate to say it in past tense, because I actually, I enjoyed writing these letters, but they became so long and so big that my wife finally put the

kibosh on them and said, you know, your family wants to see you occasionally. But I used to write these long quarterly letters. And when I say long, I mean, 40, 50, I think my longest was like 81 pages. And, and everyone said, you know, why do you write that so much? Nobody reads that. So that's, it's not for them. It's for me. Right? It's, it's my way of thinking and blogging and getting it out there. And if people want to read it, great. But so I wrote these pieces and I came across Roger Babson three and a half, four years ago. And he's the guy that called the top in 1929. Now, curiously, you know, he was a devout, not devout, but a devoted fan of Sir Isaac Newton. And in fact, he spent the rest of his life after he became wealthy, basically trying to create a device that would defeat gravity. So, I mean, he was totally obsessed and he created Babson College and all this cool stuff. But

Roger Babson was the guy. Now, the funny thing about the story is he called it literally to the day in September of 1929, but he also called it in 1928 and in 1927. And his actual quote was, as I said last year and the year before, a crash is coming and it could be terrific. And no one listened to him because he had said it in 27 and 28 when things were just as stupid, but they got stupider or more stupid. And so, you know, I came across Babson, I dug into him. And one of the things that it talked about was when Babson was talking about this, Hoover was coming up and Hoover was elected, right know the crash was was happening and right before the crash was happening and he got elected on a platform called the white fright platform he invented it right and it was basically the south was basically african-american at that point

and a republican could not win and so he went in and he created this, you know, white fright, basically said, swept the South and got elected. And then he comes into office and foments this nationalism and populism. And we did something called the Mexican Repatriation Act. We literally forcibly marched 500,000 Mexicans back to Mexico, even though some of them were American citizens. Crazy. We literally physically marched them hundreds of miles. And then in 1930, as the Great Recession was happening, and the first leg of the crash of the market was happening, Hoover came on and said, everything's solved, everything's great. And Congress said, we're going to focus on America first. And we're going to

create the Holly Smoot tariff bill. And I actually wrote another letter around that whole thing about there's that that scene in Ferris Bueller, you know, anyone, anyone, you know, did tariffs go higher, lower, higher? Did it work? Yes, no, yet, no. And what I saw was the Trump campaign looked exactly like the Hoover campaign. It looked exactly like all the things that Ferris Bueller talked about in Ferris Bueller's Day Off. And so it all culminated in this thing called Hoovervilles, which were the shantytowns that popped up after the Depression because the Smoot-Hawley tariff bill – it was called Hawley-Smoot tariff bill – actually created a decline in global trade, a devaluation of the dollar, a massive rise in the price of gold, and to the point where they confiscated gold in 33. And it created this horrible environment for everybody except the people at the very tippy top. And Hooverville sprung up all over the place. And so I kind of went, wait a second, Trump was the third president elected with no experience. Hoover was the second. Had many of the same ideas

about nationalism and populism. And now he becomes tariff man. I'm like, oh my gosh, it's happening again. History is repeating. And so I went back and I read the letter from two and a half years ago. And it's kind of scary. Some of the things that we talked about are actually happening. And I really believe we're at a very precarious position, you know, the last two days notwithstanding, where everybody's, oh, the bear market's over and everything's going to go back to positive. This is exactly what happened in 1930. And we had another two and a half years of really nastiness to come because we thought we could do it ourselves. We thought we could get out of it ourselves. We didn't need global partners and we didn't need global markets.

And I think the same things are being said now. And I think it's as wrong now as it was then. Does that mean that a depression is likely? I won't say likely yet, Scott. But I will say it's more probable than it was. I mean, two and a half years ago, I would have said it was a slight possibility. And investing is really all about possibilities and probabilities.

You want to invest based on high probability outcomes. And on occasion, you want to invest in low probability or high possibility or low possibility outcomes that have big payouts. And, you know, the early, early investors in Bitcoin, it was a low probability, only a slight possibility, but the upside, the asymmetric upside was monstrous. Now we say the miracle, right? The miracle was it went from 0.003 cents to a dollar. That was the miracle. A dollar to $100, not miraculous. $100 to $1,000, not a big deal. As it goes from $1,000 to $100,000, not miraculous. The miracle was that it survived it all. is there a possibility that we have a v-shaped recovery and everything's fine i think it's very low probability very low probability i think people don't understand how bad the economic damage of this cure uh is and that's why i actually you know i've not been in favor of shutting

everything down i think there are vulnerable communities that should have been isolated. I think there are lots of, you know, one of the things that came up is it's possible we made it worse by closing schools and colleges. Because we sent young, healthy people that, yes, the virus would have circulated in that community. But we sent those people, some of them carriers back into homes with you know adults like me in their late 50s right and grandparents in their 70s and 80s and 90s and i actually you know to make it really totally personal a good friend of mine's wife just lost both parents to covid in two days because somebody in the family was a carrier, right? And awful, awful, I mean, horrible. And, you know, there are lots of crazy things out there

and crazy stories like this. And I think the challenge is, we're making decisions in real time and we're reacting to stimuli, but because we don't have any experience, we don't have any knowledge, we may be making decisions that make the situation worse. Kind of like what happened in the 30s and kind of like what I think could happen today. So is it possible that we could have a depression? Absolutely. Is it highly probable? No. If we continue to make mistakes, like I believe bailing out bad companies is a mistake. I think it's a misallocation of resources and I think it will lead to bad outcomes. I think printing money infinitely is a mistake and will lead to really big problems down the line. But look, I'm definitely in the minority on this because the last 10 years, everybody said, oh, look, it's worked great. Well, it's worked great if you own stocks. Right, which nobody does.

Right. 50% of the people in America own zero stocks. They don't have 401k. They don't have a retirement plan. They don't have any money. They don't even have $400 for an emergency. So, they don't care about stocks. But if you think about the average person, they care about GDP growth. We just had the worst 10 years of GDP growth in the history of the United States. It's about to get worse. We may have, second quarter, we may have the worst contraction in GDP in the history of America. Worse than the Great Depression. It took four years in the Great Depression to lose 30% of GDP. We may lose that in one quarter. So it's very, very scary where we are today. And that's why I don't think the lows are in i don't think the damage

is here i think it's you know sell the effing rip instead of buy the freaking dip you know i agree yeah it's amazing watching you know um these huge green days first of all maybe today and you know not to get too time sensitive but we might have two green days in a row for the first time in this entire thing but i mean every single time it's bounced has been an epic shorting opportunity yeah yeah period period period and and i think that's going to be the case for a while and if you go back to 2008 you know people forget uh from october of 2007 to march of 2008 the market just fell and fell and fell. And people were nervous and subprime was starting to blow. And then from March of 2008 to May of 2008, we had this wicked rally. I think

it was like 18, 19%. And it was, oh, everything's fixed. Awesome. It wasn't even getting started. The global financial crisis hadn't even started yet. And from May of 2018 until March of 2019, 2008 to 2009, not 18, 19, 8, 9, that's when things were really ugly. And we went peak to trough down 58%. And it wasn't until they pulled the QE gun out of, remember, QE is not new. QE was invented in the 30s. Because in the 30s, we were an emerging market run by a gang. Think about that, remember? It's amazing to me, if you watch old movies, and you seeica from a different lens than today i mean today it's awesome right modern society everything's great i just watched rocky the other night and i hadn't watched rocky in forever and i forgot that rocky was from 1975 yeah you look at the

pictures of philadelphia in 1975 it's like a third world country it looks like a third world country. It looks like a third world country. And that was 1975, not 1935. So you go back into the 30s, we were an emerging market run by a gang, no one would buy our debt because we were over indebted. And so what do we do? We bought our own debt, we invented QE, we cut interest rates to zero. And then again, when we tried to get out of zero interest rates, we turned a garden variety recession into the Great Depression. And then again, when we tried to get out of zero interest rates, we turned a garden variety recession into the Great Depression, and all kinds of bad things happened. But at the end of the day, policy errors will determine our outcome at this point. And that's probably what makes me the most scared, is I think we have a total lack of leadership across every position

in DC pretty much. And not only do we have inexperienced leaders, we have people who I don't think are good people as leaders. We have people who are self-interested as leaders. We have people who are only there for the tax breaks. And there are some good government service. Don't get me wrong. There are some good people in government unfortunately they usually don't have a lot of power because they actually are lifelong public servants not elected officials right and unfortunately in a social media now ism world the people who get to the top are reality tv stars The guy with the best soundbite, of course. Well, so we've covered a lot here, obviously, and I'm going to wrap it up. Seeing how this government operates, what's happening in the market? Are there, I mean,

I think we both view that Bitcoin is a hedge to some degree to all of that, but what, just as a last thing, what can your average person do to protect themselves financially in an environment like this? Yeah, there are a lot of great things. Sometimes I get feedback. They say, Mark, you're so negative. I'm like, no, I'm not negative. I'm negative about the things that I think are overvalued. I'm negative about the things that are impacted by policy decisions because I think we have bad policymakers. But I'm really, really positive about a lot of things. I'm positive about Bitcoin and the infrastructure around Bitcoin. So, you know, blockchain infrastructure, some huge opportunities in the venture capital. You know, the average investor can't invest in that yet. So, you got to invest in the public companies around,

you know, blockchain infrastructure and crypto. And you can do that buying GBTC, or you can buy Bitcoin directly, or you can buy the digital asset index fund, which, you know, is our, you know, capitalization weighted index. You can buy the proxies like AMD and NVIDIA, they were the video boards are being used to mine crypto. So a lot of things you can do in that regard. Gold is another place to hide. Gold miners are super cheap. I mean, and they get huge operating efficiency with oil prices this low. They're going to make a ton of money in the next year. So huge opportunities there. The real asset environment has been absolutely decimated. We've basically been in the rock, paper, scissors world for the last decade where paper beats rock. But I think going

forward, rock beats paper because we got the flip-flop going on. I think the next decade will be one where real assets do better. You got opportunities in emerging markets where there's massive great growth. I mean, Chinese assets are really cheap here, super cheap, and they seem to have gotten through the worst of the COVID scare. Other markets in Southeast Asia are quite interesting. You know, look, I like to say buy what's on sale. So, Russia just went down 50%. You can buy the best bank in the world, Spare Bank, at $0.50 off. I mean, 50% off. I mean, it's the best bank in the world by far. I mean, they have 68% market share, highest margins in the world. Huge, great business. And they're going to be around forever. You can buy that at 50% off. Way below the prices for U.S. banks or

European banks, which may not survive because they're over leveraged. Great assets there, or all kinds of opportunities in emerging market if you really, really want to own equities. Now, I'm still concerned that there will be some fallout there, so I'd be cautious and I would ease in and dollar cost average in. Long treasuries, right? Everyone says, oh, interest rates are going to go up. Nope. Interest rates are going to zero. In fact, they're probably going negative. And it's not because the president wants them negative. It's because of demographics. It's because of debt. It's because of deflation. I call them

the killer Ds. So demographics, every day, 10,000 people turn 65 in the United States, 10,000 people turn 65 in Europe. 65 to 85-year-olds don't buy stuff, okay? They buy bonds. And there are going to be a lot of 65 to 85-year-olds. In fact, there are going to be a lot of 85 to 105-year-olds because we're going to live longer, which is another thing to buy biotechnology. But those people are going to buy bonds, and that's going to put pressure, downward pressure on interest rates. And so, you know, buying long duration treasuries where people say, oh, but I can't make money at one and a half percent. Well,

if it goes to zero, you actually make a lot of money in a long duration treasury. And if you want to, you can actually buy Chinese long duration bonds at three and a half percent, because those are going to zero too. So lots of places to hide, lots of places to deploy capital. But one important thing is cash is king in this environment because cash has massive option value. And everyone says, well, what's the buy signal? And I hate to say it because I think he's a cronyist and I think he abuses the system. But when Buffett buys, that's when you can buy. Because he's not going to buy stock. He's going to buy convertible bonds in beaten down companies, just like he did in 2009, when he bought into Goldman Sachs and Bank of America. He gets paid 10% to wait, and then he gets to convert the stock

after it stops falling and starts going up. Okay? That's the buy signal. Until that happens, until he comes out and spends his 130 billion in cash cash is looking pretty good yeah well he bought delta but that's about all i've seen yep well man thank you so much for this uh where can everybody find you yeah so you know our website's morgan creek cap cap.com i'm on twitter a lot my wife would say too much at mark usko m-a-r-k-y-u-s-k-o um and otherwise you know the best way to find me actually is through dm i suck technical term at email um but i do respond to dms uh that's how you and i got together and i you know given that this is called um the wolf podcast you know i think we should make it a thing that we howl at the end.

That would be my first howl. Well, I'm definitely down. Do we do it separately? No, we got to do it together. We got to do it on three. One, two, three. Hey, everyone. Hey everyone. Thanks for listening.

New episodes go live every Tuesday at 7am Eastern standard time. Links to our Apple and Spotify channels are in the show notes. You can also follow me on Twitter at Scott Melker to continue the conversation. See you next week.