We Study Billionaires - The Investor’s Podcast Network - BTC051: Bitcoin & Why the Bond Market Is Such a Big Deal w/ Greg Foss and Guy Swann (Bitcoin Podcast)

Starting point is 00:00:00 You're listening to TIP. Hey, everyone. Welcome to this Wednesday's release of the podcast where we're talking about Bitcoin. On this week's episode, I have two incredible guests. The first is backed by popular demand, and that's Greg Foss, who has three decades trading fixed income. Next, I've got Guy Swan, who's an OG influencer in the space and has been around since 2011. We cover a lot of topics, but spend a good amount of time talking about the bond market and how things might progress moving forward. So without further delay, here's my chat with Guy and Greg. You're listening to Bitcoin Fundamentals by the Investors Podcast Network. Now for your host, Preston Pish. Hey, everyone, welcome to the show.

Starting point is 00:00:53 Like we said in the introduction, I'm here with Greg Foss and Guy Swan. Jents, man, this is going to be a fun one. In fact, as we were just warming up, you guys made the suggestion that we should all have a bourbon or some type of drink in hand. And so I have to tell you, this is the first interview I have ever done on this show where I was having a drink. And I think that this is the perfect interview for this occasion. Cheers to that. It's amazing. Cheers. Now, I did do a live discussion where I forget what it was one time. We had a drink on that. But it wasn't my show. That doesn't count. We're the first. Oxycapeer. It's exactly. what it was.

Starting point is 00:01:36 This is my first question for you guys. This pop culture thing. No one's talking about this. I think this is a really big deal. You just saw Aaron Rogers today come out and he's given away a million dollars worth of Bitcoin on cash app. Tom Brady, who I was watching the World Series. I see all the umpires wearing FTX jerseys.

Starting point is 00:01:58 It's literally written on the mound, FTX. You got all these professional athletes. It's kind of crazy, right? Like, what are you guys thinking the impact of just that is? So I think this is the follow-up. 2017 was really the time that Bitcoin and even the crypto, like, scam world. But the whole idea of digital money as an independent thing became a household name. And obviously, for so long, people even conflated the idea.

Starting point is 00:02:29 Like, people would be like, yeah, boss some Bitcoin. I got Eith. Bitcoin was it. Like, that's what you called all of the things. And then, of course, we went through another bear market and things have pulled back. But as the recognition in the beginning of learning one thing from the other, as its presence in the human mind has continued throughout these years, everybody even in my life doesn't even know that that's what I do, friends and family members. Like, it's there. It's like eating in everybody's mind that this thing exists.

Starting point is 00:03:02 It keeps not dying, which, like, as I've said for years and years and you've said for a decade, all Bitcoin has to do is not die and it wins. That's the whole goal here. This is it. This is what you see. This is hyper-Bitcoinization, people realizing that Bitcoin is a money to. And this, in fact, maybe it's a more fun money. Maybe it's the money that you give away because you're actually giving it to people.

Starting point is 00:03:27 I don't have to call my bank to figure out how to give it to them, you know? Like, I can just, like, I can give away stuff like on Twitter. I just randomly went down when they started doing the, I mean, I gave you a couple of dollars just because you were the only one, but it turned home for a little while. But like, that's it. It's the, it's that poison. It's that seed. It's that virus that is in everybody.

Starting point is 00:03:48 It's more contagious than COVID. It's sitting there and it's spreading and people are recognizing it more and more. And when, you know, Aaron Rogers or Tom Brady, somebody starts to go down their rabbit hole. start to understand, like, some of the main elements to it. And if they grasp on, like, something that makes it, like, really powerful or really interesting, it fuels. Like, it's a feedback loop. You get even deeper. You latch on even harder. And then you've got a million followers. You get 10 million followers. Why is this guy even talking about it? He's worth, you know, like Tom Brady's case. What's that guy make a year? A hundred mil? Probably something

Starting point is 00:04:25 like that, for sure. One thing that's happening in Canada, well, great. Great points guy. Canada, so we're a much smaller nation, obviously, population-wise, but I was at a Bitcoin meetup in a smaller town in southern Ontario called Waterloo, Ontario on Friday night. And, like, you know, Ali from the Real Tahani's was there and Rodolfo from, oh, Ali was there and Rodolfo and deterministic optimism NVK. The guy is really a star. I've never met him before in person, but we had a great time. And then there was a guy who introduces himself as Chris Johnson. And I know I knew who he was, but it didn't dawn on me.

Starting point is 00:05:06 And he's a sportscaster on TV in Canada with, you know, not millions of followers, but certainly he covers hockey. He knows the NHL Players Association. He's at this Bitcoin meetup. And I told him, I said, hey, listen, one of the biggest times in my life for my kids was when one of my sons saw that you were following me on Twitter. It actually made me look something cool, you know? So he was there.

Starting point is 00:05:30 And that's the sports side of it. But I have a little anecdote that I was talking with Preston a little bit earlier before we started recording. I got two independent, well, one call from a member of parliament in Canada today on Bitcoin and one text. And now in the past, I have noted that I gave a presentation to 45 members of parliament in Canada on Bitcoin. And this is starting to permeate the political spectrum in Canada. But the funniest one, and I won't name who sent me the text, but he did say this was a text. He's so frustrated with his bank because he went to his bank today and he had a bank draft from another credit union that's also in his name.

Starting point is 00:06:13 And at the bank, he'd been a customer of the bank for 25 years. And they still put a hold on the funds that were being transferred from the credit union to his own account and even talk to the bank manager. And then he goes, that's it. I've had it with these banks. I told him the banks are baked. The banks are baked. And I'm getting this from a member of parliament. I like, geez, this is neat stuff. Now, I don't want to dox them and everything. And this could have been any member of parliament or maybe no members of parliament. But at the end of the day, what it means is people are wondering, and I'm going to flip it back on its ear, Preston, How often have you heard the term fiat currency amongst people you never would have thought understood what that meant?

Starting point is 00:06:58 So it's not just what Bitcoin is. It's people understanding what fiat currency is. And I promise you in Canada, 15 years ago, nobody had a clue what fiat currency was. Now it's almost like a word that is common within the media. It's common within politicians. The conservative MP Pierre Poyev, who's had some really great posts on various social platforms on inflation, I mean, he's calling it out. He's calling out the government.

Starting point is 00:07:29 If they can't print money, that's what he said today. If the liberals, which is, you know, it's a ruling party and he's the opposition, he goes, if the liberals can't fund themselves by printing money, what are they going to do? And it's just interesting that he throws that out to the public as if it's a topic of conversation. So sports, politics, young kids who actually use the word Fiat. Now, they may not know exactly what it is, but I promise you they never would even use the word in the past. Yeah, and I think we can never discount the power of memes and the fact that we're having fun. Like the laser eyes, that's a pretty incredible, obnoxiously as it's over.

Starting point is 00:08:13 used and as brazen and just aggressive as some of the people can be on Twitter about it, it's impossible to ignore. It is 100% impossible to ignore and impossible not to notice. And I think Bittstein is right. This is a meme war. And I think the very fact that anybody I know knows what the word Fiat is outside of a conversation directly with me. And that everybody I know outside of a conversation directly with me knows what Bitcoin

Starting point is 00:08:41 is suggests that we're winning. that war. How in the world can the IMF still be making posts when you look in the comments of any posts they've got? How are they not shutting down that account? Because whatever they post, it might have 100 likes on it, but then there's people down in the comments with a meme, just a meme, not even doing anything like, you suck or you're a liar. And it's like it has a thousand. It's 10x the number of likes underneath of it. And I mean, it's not one person. It's like thousands of people. Like, I just can't understand how it's not understood or seen.

Starting point is 00:09:15 And, like, it's so counterintuitive but what they're trying to do. I don't think they realize it. I think they see it as like we're getting the message out and we're spreading the, we're spreading the propaganda, which is what they're used to doing on news and stuff. But the fact that news is a passive, when you're talking about cable TV, it's a passive environment. So everybody's just being fed it. And so they're treating social media the same way. They just think they're going to throw it out to people.

Starting point is 00:09:42 But I don't think they realize they're doing is they're actually going to the town square and they're tying themselves up onto a post and they're asking, can everybody please throw tomatoes at me? And like, that's what they're getting out of it. And I realize, like, you should just stop doing that. It's not working in your favor. But I'm not. They distribute it, but they don't even check the comments.

Starting point is 00:10:02 I think Steve Yankees the same way, personally. Yankee is the same way. somebody in his organization just tweets something mindless and then never checks the comments, right? You're Johns Hopkins, aren't you, Preston? You're Johns Hopkins. What are you trying to do to me right now? Someone who was a John Hopkins graduate. You and Bill Miller should actually go and pull out an advertisement and saying, gosh, what are you trying to do? Turn my diploma into two-ply? What is this? It's right over here on the wall. It is turning into two-ply.

Starting point is 00:10:35 Hopefully Bill and I are undoing or the counterforce to Hanky from Hopkins. It's a little hard. I mean, he's just all over the place. Hey, did you guys see this stable coin thing that came out from this White House collaboration group that Gary Ginsler just tweeted out literally today just came out. I want to say it was this afternoon, maybe late afternoon guy. I'm curious, Greg, did you have a chance to see any of it? I saw the headlines only.

Starting point is 00:11:02 I remember thinking it's an interesting take, but no, I didn't. I didn't dive into it. There wasn't much in it other than like the working group's opinion is that Congress needs to act and really kind of put some type of guidelines in place. And in the meantime, CFTC and the SEC basically have indirect guidance from the White House working group that they can start regulating and moving out in that direction. And hopefully the representatives in Congress can kind of catch up with what they're trying to do to regulate this.

Starting point is 00:11:35 Well, I think Gensler's been pretty clear about his viewpoints on this and consistent. That's all you want, right? It's consistency anyway. And I think this is consistent with his earlier utterances, if you will, about, you know, if it walks like a duck and quacks like a duck, then it is a duck and, you know, will regulate it as such. So I'm a fan of disclosure and regulation when it, as an outsider, and this is what you don't understand from Canada, I'm such a fan of the integrity of the U.S. capital markets, okay?

Starting point is 00:12:10 Like if you use insider information, the U.S. does not take that lightly. And because it's the part of the capital markets, it's so important that, you know, everybody has access to the same information in order to be able to trade and make decisions. There's a level of regulation that's required in the capital markets. There will be an argument as to what is too much and what is not enough, but I'll just tell you, relative to Canada, the U.S. has it figured out that the fear of breaking SEC laws in the U.S. is real. In Canada, I'll say that those same fears don't exist when you go up against the regulators. And that's not good because it makes our capital markets less robust and less fair. But, you know, I think since I'm just really focused on

Starting point is 00:12:56 Bitcoin, I don't really focus, even on stable coins. It doesn't enter my investing environment. I would say, I would actually partially agree with you on that unless, I think it's really gone downhill from in regards to the American situation and particularly around like insider trading. I think it's really gone downhill in the last like five to 10 years, particularly with the government getting involved in like Federal Reserve with direct equity purchases. At least, you know, in Canada, it's not even close, you know, I just comparing it. I have nothing to compare it to, yeah. I'm disappointed with that, the Fed and the insider trading.

Starting point is 00:13:37 I mean, talk about that. At least though it was a common person, the guy would be in jail. Now it's a federal official. There'll be arguments as to whether there was front running or the like. But let's just say that I wouldn't want to be sitting in that chair, even though there's a very low likelihood of any prosecution. This is a theory I've got on the whole stable coin thing. And I'm kind of curious to hear your thoughts on this.

Starting point is 00:14:00 guys, if you have a different opinion. I think it accelerates the Bitcoinization. I think that once you can start settling immediately in something that has a value that's tied to Fiat, regardless of what fiat it is, whether it's the dollar, the yen, or the euro, or you name it. Part of the problem is just getting off of those old rails that clear, like ones that you were getting from text messages from people in Parliament today, Greg. I mean, if it takes days for that to clear, that's a very inefficient market. But if you can start throwing around these stable coins and do it in a way where big players don't have to be concerned about regulatory risk. So if I want to send somebody a billion dollars in USDA and I want to send it to another large bank or institution and I want to do

Starting point is 00:14:48 it immediately in a final settlement kind of way, I just think that that accelerates this entire system that's being constructed. Because there's nothing that's going to compete with with Bitcoin and the fact that the base units of 21 million can't be manipulated because it's completely essential. There's no way a central bank digital currency is competing with that. I just see it speeding up the onboarding process. The more that they legitimize all of this memo that came out today from Ginsler, for me at least, was completely legitimizing the whole stable coin piece.

Starting point is 00:15:22 It's just a matter of who they're allowing to like really kind of stand up a stable coin. Shmo can't go out there and say, oh, okay, here's my stable coin. It's going to go through a lot of regulatory pieces in order to have that ability to stand up a stable coin. Was their statement, was what Gary said, about regulating and basically legitimizing stable coins? Yes. Was that basically what they were saying? Basically, like, hey, this is not going away. We just need to provide, like, sound guidance. We just need a regulatory environment. That's right. Like, hey, if you're a big bank, like, yeah,

Starting point is 00:15:55 You can play in this ballpark, but if you're like nobody and you're standing up Guy coin and it's tracking the value of the dollar, Guy coin just hit a billion in market cap while we were talking. I totally agree. CBDCs, stablecoins is crazy bullish for Bitcoin. And there's actually a reason, like everybody talks about the integration is that, oh, well, if I've got a stable coin, how much easier is it for me to move from stablecoin to Bitcoin than it is to move from a bank account to Bitcoin.

Starting point is 00:16:27 It's monumentally easy. They're knocking down our own barriers for us. But something that I think is even more critical because it's a higher barrier that people don't think about so much is the literacy barrier. What the hell is an address? What's the public key? What is this USB thing? What is a hardware wallet?

Starting point is 00:16:47 Is this cold or cool? Like, you know, like that is a massive barrier to getting the infrastructure, getting the institutions on board, custodians on board. That's why everybody's using the same, like, two custodians. There's a lot of problem in getting professionalism and getting professional literacy, literacy to the point that you can do it for somebody else as a custodian in the markets. If everybody's using stablecoins, it doesn't look any different than Bitcoin. To the layman, literally the banks and the financial institutions are going to be teaching all of their employees how to manage a private key, how to hold a hardware wallet, how to

Starting point is 00:17:26 identify addresses and look at a transaction details and see what the timestamp and all this stuff how to look at the blockchain. When the institution that's using dollars keeps getting printed and all of their margins are falling and then there's another institution using Bitcoin that's hiring, where are they going to go work when they now have this new skill? They have this new literacy. I think that alone, they're going to build our infrastructure for us and then knock out all the barriers in the meantime. And we're not even going to have to work. Yeah, nothing to add there. Perfect.

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Starting point is 00:21:57 Go to Shopify.com slash WSB. That's Shopify. com slash WSB. All right. Back to the show. Greg, here's the trillion dollar question. If you're a person sitting on a fixed income desk and you got, 10-year treasuries here in the U.S. at 1.5, 1.6%. You just had a CPI print for, I think,

Starting point is 00:22:20 what are we at? Six months in a row of over 5% for the CPI print. And you're looking at supply chains. They're absolutely wrecked beyond compare. And it's going to continue to be wrecked based on what everybody's saying into the foreseeable future, meaning that CPI print's probably not going away. If anything, it might be going higher. What in the world are you thinking sitting on that desk right now. So, you know, let's just look at some real numbers that I'm not sure if you guys know who Larry McDonald is. He puts out a really good record called the Bear Trops report. I would definitely, now it's not free, but it's definitely worth every penny. And he pointed out that intermediate PPI, so the producer price index was just highly correlated to the CPI.

Starting point is 00:23:07 It leads the CPI. The intermediate PPI index is up 27% year over year. He is indicating that there's no way CPI is going down in the next six months. All right. So I'm just looking at his stat there. But even a better stat that came out that was written in his report is if you measured CPI using the original formula that they started with in 1980, year over year, CPI was actually up 14% Preston.

Starting point is 00:23:43 And it's crazy because, you know, you can mix around the basket and try and pretend that inflation isn't what everybody feels it is. You know, you buy some steak at the butcher. You know it's more than 5%. And so here's what I know. I mean, let's make sure everyone understands what a bond is. It's only a contract. There is no subjective returns in a bond.

Starting point is 00:24:06 When you buy a U.S. 10-year bond at a 1.5% yield, it is excluding defaults. Now, I'll just assume in this analysis that there is a very, almost a zero probability of the U.S. defaulting over the next 10 years. It's not zero because of credit default swaps, but let's just say taking that consideration out of the analysis, the return over the next 10 years on a U.S. Treasury 10-year bond, if you buy it today is 100% certain to be 1.5% annualized. And you'll get all these guys to say, oh, Foss, look at me, I'm a huge trader. I can trade the market and I know that I'm going to be able to add a couple of, you know,

Starting point is 00:24:48 25 basis points to that return. And I'll say, well, first of all, if you think you can do that, you're lying to yourself because I've never seen a manager consistently outtrade the performance of the U.S. Treasury market. It's only a contract. And by definition, those guys that make it take away from those guys that lose it. And on average, it'll be 1.5% for the next 10 years. That's a contract, guys.

Starting point is 00:25:14 Everyone's saying, well, I started, I remember getting capital gains on bonds. And I'll say, yeah, because interest trades started when I started trading bonds. The U.S. 10 years at 14%. 14. And it went all the way down. And we talked about Ray Dalio and his risk parity trade. And that was a brilliant strategy as long as interest rates go down. But guess what?

Starting point is 00:25:36 Interest rates don't go below zero for the long term. They may have this idiotic negative yields right now because the European Central Bank is promoting negative yields. But that's not even an asset. That becomes a liability. So look, guys, the absolute maximum return you're going to make on U.S. Treasuries for the next 10 years by buying it today is. is 1.5% annualized. It's only mathematics. And then you bring up what is true inflation? Well,

Starting point is 00:26:06 I know it's more than 1.5%. And if you think CPI is the accurate measure, then you're losing 3.5%. But what if you actually took the 14% original basket? You're not even close. I mean, this is the silly investments I've ever seen in my 30 years of managing fixed income. And then let's not even get started on high yield. High yield makes it even more silly because high yield actually has expected and unexpected default losses. They don't put it even more negative real returns. So not sure what the boys out there are doing, but any fixed income guy that's been around for 35 years like I have is looking at this and going, I own zero bonds. And if I was on the trading desk, I promise you I'd be short them. I'm not short them in my personal portfolio, but by owning

Starting point is 00:26:55 Bitcoin, essentially I am short the credit default swaps or long the credit default swaps to be actually exact. I'm short the credit and I have insurance on the underlying stability of the Fiat issuing sovereign nations. So, Greg, going to this idea of shorting bonds and the way you're shorting it, in my opinion, is the very smart way to short it because if you're actually shorting the bonds itself, who's to say that the central bankers aren't going to try to come in and drop rates. And I suspect they will. And I suspect these people that would be sitting in some of these bonds are probably going to make money as they compress it down to zero or negative percent until it eventually

Starting point is 00:27:36 breaks. That's the point. It's like, when does it break? Well, so that's just it looks, picking up nickels in front of a steamroller. Absolutely. You got to be careful because sometime the bond market is going to call the bluff. Risk happens fast. Everyone's like, okay, I'm it through this auction, but what about the next auction? And all of a sudden, all you really need is low indirect buyers or indirect bidders for the bonds. And people say, wait a minute, there's no foreign participation in this one. I'm not sure I want to participate. And not only do people, then does the government have to worry about rolling over this auction, they might have to deal with all the flood of selling from other people that say, the gig is up. And it happens

Starting point is 00:28:18 quick, Preston, I see it happening in high-yield bonds all the time. It's a contagion or a loss in confidence. So I don't know when it ends. It will end. And the USA will be the last market to fail, both Fiat and their treasury market. But the contagion, the knock-on impacts of countries that, you know, it starts trickle, trickle, in the Latin countries. But imagine if Canada. Imagine if Canada fails. And Canada will be the first G7 nation to fail of all the G7 nations. And you don't say, hey, Foss, you're being so negative. I'll just say, no, it's credit default swap market is telling me that. The CDS market is telling me Canada should be rated as a single A credit, not as the

Starting point is 00:29:06 AAA credit rating, the S&P pretends Canada still aspires to. By the way, guess who pays the credit rating agency? Oh, yeah, that's right, the issuer. So much conflicts, so much problems. And then I just say on one that really matters, China, China's trading like a triple B issuer. Now, triple B is one level away from being a junk bond. If the second largest economy in the world becomes a junk bond rated issuer, there is absolutely contagion impacts to the rest of the world.

Starting point is 00:29:41 It's only the way fixed income works, a guy that is getting crushed on. China runs out in shorts another basket of countries and says, well, you know, because China's going down so these other countries are going to go down with it. And it just becomes a game of whackamol. Is this time different because they can't hide the CPI? They can't hide this supply chain. Before it was all kind of like masked and they were, they kept dropping rates and they had just the federal funds rate and it'd come down. And like you didn't have this, this situation. You still had room. Yeah, you still had room. When we last hit the crisis in the great financial crisis, you still had a lot of room to lower

Starting point is 00:30:22 rates. That was the run to bonds. You know, so it is different this time for two respects. Preston, great question. The first one is people are now focused on inflation because there is no room to go lower. I mean, the base level of interest rates is zero and it got to less than 1%. And now, oh my gosh, it's increased all the way back to 1.5 percent. Quoting a great money manager, Druck and Miller, he says the great.

Starting point is 00:30:46 The tenure rate should be four and a half percent at a minimum if the Fed wasn't in there suppressing rates. And you've talked about this. The flip side of that and even, you know, almost where you're at a point where people are going to start to question the credit quality. This is the key. Interest rates are made up of an inflation expectation and a credit component. And people are going to start saying, these guys aren't the credit quality that I thought

Starting point is 00:31:15 they were and I have to add my credit spread on top of this quintessential risk-free rate. And this is when stuff gets exciting. When countries become credit, the credit quality of countries becomes questionable. I'm not saying it's going to happen to the USA. Again, the USA will be the last country to fail, but it's happening right now in Canada. And it's happening because we have a prime minister who says stuff like budgets will balance themselves. And forgive me if I don't care about monetary policy. If he was the CEO of a company, he'd be fired on the spot. Like, fire that fool. But no, we reelected him for another four years.

Starting point is 00:31:54 Good on you, Canada. Like, you reelected a really solid financial risk manager, but that's where we are. Guy, you were going to say something. I can't get over when I kind of take a step back and look at this whole situation. How unique and not unique the situation is. In one context, like on one hand, it's the oldest story in the book, is, We ran up debts, printed money, cheated our currency for the government to get what they wanted. And that story's been told over and over and over again.

Starting point is 00:32:24 It is the story of history. And if anybody thought, the hilarity is that anybody today thought it was going to end differently than it ended every other time since forever. But the crazy thing about our situation is how deeply we are all tied together is the fact that China is on the verge of bankruptcy. Germany, all of Europe, Canada, US, Russia, like the whole thing. All of

Starting point is 00:32:55 it is so incredibly like it has never happened even close to this scale before. And it's just like Bear Stearns and Lehman Brothers or whatever. When one of them goes, everybody else is so financially tied to the other ones

Starting point is 00:33:10 that suddenly they have to adjust their balance sheets. You know, if China goes down, Do you know how much of Europe and the U.S., like how much supposed assets that all of the modern world hold that are suddenly like not assets anymore that change the budgeting of everything that we supposedly own and all the wealth that we supposedly have? I don't, this is such a crazy thing because like there's no real way to be outside of this. It's all so deeply intertwined and it's not like my grocery store isn't susceptible to this. you know, like we're all tied together here. And it's great to kind of feel like I'm a little bit on the outside because of Bitcoin. But like I just can't even, I just have no concept of how this will really play out.

Starting point is 00:33:53 The counterparty risk on a fractional reserve system that's global is just like you just can't even wrap your head around it. But for people who aren't intimately familiar with how markets work and how that counterparty risk becomes another person's liability, it comes to be becomes another person's liability like instantaneously. You know, as a kid, I always heard people say, oh, yeah, the star. markets go down because everyone gets fearful and they all just decide to sell at once. That's the easy chirp narrative that you can just kind of say and it has a real qualitative

Starting point is 00:34:23 field to it. But for anybody who really knows how it works and has been in the trenches like a guy's like Greg, they know this is mathematical. This is mathematical that the impairment of one person's balance sheet quickly turns into a zero on another's and it just cascades through all these balance sheets because they have all these counterparty risks because of the fractional reserve system. Your description of how everything is that's a lot of the factional things intertwined is so well described there. It's contagion. Preston. And it's well said, guy, it's, yeah, you're describing contagion. But here's the interesting thing. Don't forget, prices are set on the margin. And it may seem like everybody's selling. But what really happens?

Starting point is 00:35:01 And everybody is selling. But why? You lose confidence in the system. And the people that have money invested in the system, particularly on a levered basis, they unwind their leverage. And that's what causes every contagion is a leverage on wine. So sitting in a risk chair, managing money for unit holders, and this story is true because it happened to me, we were actually doing quite well during the great financial crisis. We had the proper insurance on. We were making money on a lot of shorts. And we were getting redeemed because unit holders were looking at us and saying, you guys are doing so good, I got to get out because everyone else is getting crushed. And so I got to at least balance my losers with my winners and I want to

Starting point is 00:35:48 take cash out of the system and put it in my mattress. That's called a leverage unwind. It's very frustrating. You're doing exactly what you told the unit holders you would do. You're actually making money for them and they're still redeeming you because they just want cash. They do not want any risk exposure to the markets and you're doing well. And sometimes what happens is the guys that are doing really not well, they gate their fund. They stop redemptions. So imagine those, you have what's called fund of funds. They have clients who tell them, hey, give me my money back. And then the fund to funds is trying to raise money from its clients. And one of those funds is gated, meaning they can't get their money back. Well, they go to the other funds and say,

Starting point is 00:36:36 give me, you know, I was only going to take three dollars from you, but now I need to take four dollars because the other guy is not giving me the extra dollar that he owes me. And it's really weird, guys, and it's horrible. And selling begets selling. That's what happens. And it seems like people are foolish. Guy, you said you, they're idiots. Hey, it isn't. It's just because prices are set on the margin and one guy decides to de-lever or take cash or capital out of the markets and it's a cascading effect. Countries, hedge funds, corporates, all the same impacts. My comment was actually on the, it was supposed to be an allusion to the animal spirits. There's no explanation. Everybody's just dumb. It's like, no, that's not how it works.

Starting point is 00:37:21 It's not how it works. I'm sure that's comfortable for you. You can make, there's lots of things that don't work as they're supposed to in a textbook when you're sitting on a trading desk and someone says, I want my money back. And you have this perfect trade set up, but it's not working because markets are illiquid. And they just say, I want my money back. And you're like, well, this is the worst time to sell, except they want their money back. They're not listening to you. And you have to unwind your trade when it's at the most disadvantage to you because that's

Starting point is 00:37:54 the way markets always work, right? Markets move in the direction that cause the most pain to the most people. And he needs the money back because he owes it to somebody else that he has an engagement. Same pressure you're getting is what he's kidding. That's exactly right. I can't counterparty. We're just, we're all tied together. Through this discussion and hearing this, how should people manage their personal mortgages in debt moving forward right now for your typical retail person?

Starting point is 00:38:23 Okay, I'll tell you what my strategy is right now. Unfortunately, I hope, I hope is right. This is what I'm planning on being how I'm trying to position myself is I'm putting all my liabilities in the financial system and all of my assets into Bitcoin. And I am maximizing my liabilities right now. You know, Bitcoin has gone up and there are things that like I'm, okay, it's time for me to get the basement done. I need to start in a family. Like, I got to finish some stuff in the house. So I'm going to take it alone. I'm going to take it alone. I'm going to buy Bitcoin with it. And then I'm going to slowly take out what is needed to do the remodeling.

Starting point is 00:39:01 And any interest on the loan, I'm going to service with the Bitcoin that would have gone towards the purchase, but all I'm going to do is service the debt. And I'm not going to sell any Bitcoin. I just bought a car. Didn't sell a dollar of Bitcoin. I bought Bitcoin this month. And I'm going to keep doing that as much as I can get low interest. And I'm going to look at my window of, I mean, that sounds.

Starting point is 00:39:25 It sounds insane. Like my everything about like my want to be responsible, want to be out of debt, want all of it. I refinanced my house last year. I bought a Bitcoin. I mean, I don't want to do this. I hate debt. I vehemently hate the concept of going into debt for the sake of going into debt. I want to be out of debt. I kept telling myself for years that by this price, I would be out of debt. But it just doesn't make financial sense right now. But guy, it's cheaper than it's ever been. So if you're going to be in debt, You got to take it when it's cheap, right? So let's look at one of the most amazing capital market arbitrages that's ever existed,

Starting point is 00:40:03 and he doesn't even know he is, and that's Michael Saylor. That guy is doing the same plan that everybody should be doing, whether they're either another corporation or even at the personal level. So your question, Preston, was what should people do, let's say, if they have a mortgage? Well, why don't we look at what Michael Saylor did? Assuming someone who has a mortgage has the free cash flow to make the mortgage, mortgage payments, which is always key. And if you can increase that leverage in a point where the rates are cheap and you still have the free cash flow, you're supposed to do that when

Starting point is 00:40:35 rates are low and it's cheap. And you can use those proceeds to buy hard assets like Bitcoin. Okay, so you'll say, well, I have a house. Yes, it's a hard asset. You are using fiat destruction to create capital because when you borrow something for 10 years and you pay it back, You've borrowed a hundred bucks and you'll pay the $100 back in 10 years, but the value of that $100 in 10 years is like 65 cents, right? Because that same $100 can only purchase 65% of what it could purchase at times zero. Absolutely follow the Michael Saylor model. Now he arbed the convert bond market.

Starting point is 00:41:15 Then he arbed the high yield market. Now he's arbing the at the market equity market. The guy is like just unbelievable. And, you know, I know for sure he issued his high yield debt deal at 6 and 1 eighth coupon. And the high yield guys thought they were bending them over and just giving him a horrible rate, a high rate. And he probably would have done the issue at 8%. And he's like, gosh, they even took 200 basis points off.

Starting point is 00:41:41 I would have done it at an 8%. They gave it to me at 6 and 1 8th. So 1 in 7.8's percent better. I know the way Sailor thinks, he's absolutely brilliant from a capital. arbitrage perspective, and yet he doesn't even know he's doing that to the market. So everybody should do the same thing at their personal level. I'm not arguing going out and taking a mortgage when you can't afford the interest payments. No, that's silly. But if you can afford it, you should lever yourself up because leverage is very cheap right now. They can't take it away from

Starting point is 00:42:14 you, right? The banks can't call the loan to you as long as you're making those payments. So, if you're talking about a long-term loan, is that particularly if you're looking to buy Bitcoin, like let's say like the equity on a house, if you're paying 4% on a mortgage, refinance it. I was paying 4.5% because I put like almost nothing down because we know we were going to renovate the house. So we paid 4.5% and then after getting, I think I had like $40,000-ish dollars in equity in the house, refinanced, took it all out to buy Bitcoin and got my 4.5% of the money. percent interest down to like a 2.1 or something. I can't even remember exactly what it is now. My monthly, I owe $40,000 more on the loan and my monthly bill is less. It costs me paperwork

Starting point is 00:43:03 and I got like I got like a whole Bitcoin out of it. And the funny thing is if you're taking out a long term loan, if you're looking at long term debt at low interest, you can buy Bitcoin with it and then just actually manage the loan, do maintenance on the loan with the Bitcoin you bought. So you can just sell that monthly and all you're doing is betting that the value of Bitcoin will go up more than the interest on the loan. So if you've got like a 5% loan, you're betting that for five years, you're betting that in five years Bitcoin will be better than 5%. And if you just take it out and then just sell the Bitcoin to pay the loan, you don't, it doesn't have to be income. All you're doing is betting that Bitcoin will be

Starting point is 00:43:42 5% in five years. This isn't a hard bet for me. I mean, I know that's risky for some people because you're taking on a loan that you specifically cannot afford. Maybe that's a little bit crazy in a lot of different situations, but right now the environment is crazy. I think this is an important point for what Guy is saying, for people that are listening to this, a lot of people that are listening to this do not have a debt to equity of point one. And I would imagine knowing Guy and knowing how long guy's been in Bitcoin that that's probably the case for Guy is that his debt to equity is extremely low relative to the value

Starting point is 00:44:17 of his house when you look at Michael Saylor. The only reason Michael Saylor was able to do the things that he was doing is because he had a pristine balance sheet going into his first deal, that convertible debt deal that he did. And then as you get into like some of the deals that Greg was talking about where there was higher interest rates, there wasn't convertibility clauses associated with those higher interest rates. This was Michael's way of saying, I'm tired of giving up the optionality of my common stock into the future. And so I'm willing to pay a higher interest rate for this. And I can afford to pay a higher interest rate for this based on the free cash flows that my company generates. And so the reason I'm saying this is

Starting point is 00:44:56 because if a person, a bug goes out and buys a $500,000 house, but they have $4 million a Bitcoin in their balance sheet. Like, I'm sorry, I just don't see that as a risky thing to lever the full value of that $500,000 house when you have all that equity in Bitcoin. Then I think that's a really important thing for people to understand it. And one other thing that I think is important in this particular scenario, what's your competitive advantage in the marketplace as far as the skills and the labor that you're performing to earn a salary? Because if it's not a very competitive, let's go through a scenario where a person has a very high debt to equity and they're doing these swoopty things with debt. And let's say they don't really have a real high marketable skill in the labor force.

Starting point is 00:45:38 I would tell you, that is the wrong decision to be making because you're too levered at that point. And like we talked about before, like, who knows exactly what's going to happen here? We all have a pretty good understanding of what we think is going to happen. But at the same time, I think people need to be a little bit careful with how levered they become. That's a really good pin. Like, for the degree of leverage, like for equity, like Bitcoin could take a 50% drawdown and I would still not be levered. Like, I would still be there to cover it all.

Starting point is 00:46:11 So it's very, very low risk. reasonably so, enough so that I know I don't want to pay twice the Bitcoin to get rid of it all, but I could if it really came down to it. So I'm much more comfortable with taking on stuff like that. And so those are things I think it's important because I don't know what the demographic would be for people listening to this, but I'm sure there's a lot of noobs, a lot of people that are in debt up to their eyeballs, listening to this just by the sheer nature of like how the system is structured, where they're at in their life, Maybe they're very young and they're in that situation.

Starting point is 00:46:44 You have to be really smart about this. I'm sorry, but you aren't Michael Saylor today. Maybe it will be when you're 50. I just want to proceed with a little bit of caution because sometimes people hear stuff like that and they get very overzealous. You wouldn't use credit card debt. I wouldn't use credit card debt. I mean, everyone knows the coupon that you pay on the credit card debt.

Starting point is 00:47:04 That's much harder to make it work. But when you get mortgage rates at historical lows like a guy, And you have a term that's 30 years in the U.S. in Canada, we don't have mortgages that are quite that long, but the point still stands. You don't use a credit card balance to do this. You use a long-term loan that has a low contractual coupon. You can meet those interests and principal obligations fairly easy as measured by your debt to equity ratio, Preston, that you talked about. And it's, look, it's tough for people to, they've been taught, especially my father, you know, his generation, have been taught their whole lives. You don't want to be in debt. Well, that's for sure when

Starting point is 00:47:47 interest rates are 14 percent. But when interest rates are one and a half percent, it's like you're getting it cheap. And the house securitizes that loan. So when you're talking about a credit card, like it's securitized by nothing. Correct. And nobody's coming for your TV. Like the TV's worthless. But the house, the house securitizes that loan, which removes a lot of the risk. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up and customers now expect proof of security just to do business. That's why VANTA is a game changer. VANTA automates your compliance process and brings compliance, risk, and customer trust together on one AI-powered platform. So whether you're prepping for a

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Starting point is 00:51:16 Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the income fund fund's prospectus at fundrise.com slash income. This is a paid advertisement. All right. Back to the show. actually take this argument up a level then any CFO. Let's talk about the CFO of a company, like Michael Saylor's company, any CFO that has leverage available on their balance sheet, i.e., they have multiple turns of coverage in their interest coverage ratio, etc., etc. You should be issuing a fixed term debt contract to the market where investors are just

Starting point is 00:51:59 lapping it up and you should take a portion of those proceeds and put it in. into Bitcoin. Again, capital creation using Fiat destruction. Pure math. Guy, this question's for you. So you recently did a show that was titled Lightning and the Internet, Choose the Right Path. And this was in reference to what? Yeah. Talk to us about this. I'm just curious because I hadn't had a chance to listen to this. What was this in reference to? He's talking about the debate, so to speak, which there isn't really much of one yet, but I think we're at the place where we need to start debating it. The difference between the Lightning expansionists and the Lightning purists, I don't know,

Starting point is 00:52:39 I don't know what you call it, but essentially Lightning is a powerful, decentralized network that can, it not only sends payments, but it sends packets of information with those payments, payment details, right? So lots of different services have started to utilize that. The impervious has used it to establish VPN connections. Sphinx is using it to send encrypted messaging. And there is this whole span of people and lightning developers and people who are building on this who are like,

Starting point is 00:53:12 we got Web 3. We've got infrastructure to, we can send every single packet over Lightning. We can pack it full of streaming and like all this stuff. And we can just start routing all this stuff. And it's decentralized and it's got no center and nobody knows where the connections are going, et cetera, et cetera. it's Tor with payments attached, right?

Starting point is 00:53:30 And Roy's argument, and I tend to agree with him, this is kind of, it's something that's kind of been in the back of my mind for a while, but Roy did a really good job of kind of just articulating it at about 11 minutes worth of a read. And it's the same philosophy of let's shove everything into the blockchain and make payments, make all the payments on layer one and all the contracts and all that everything is that we kind of destroy the incentive structure of lightning, and we're going to ruin the ease and simplicity of running a lightning node if we're trying to cram the internet on it. Use the protocols that work already. And streaming sacks is actually a perfect example.

Starting point is 00:54:09 You don't host on a lightning node. You run an RSS feed and you buy your hosting somewhere else. And even more beautifully is that you can tag in your RSS feed. You can tag your host so that they're getting paid by the minute at the same time. What actually, like what I went to in the guys take is that one of the main problems of the internet, because Roy actually brings up OnlyFans as one of the problems of, you know, the centralization of the internet is only fans just gutted themselves. They just cut their intrals out and let them fall out on the floor and says 80% of our business is no longer allowed. But it wasn't because they had a hosting problem. So they had a payments problem. Lightning should be about payments.

Starting point is 00:54:49 We have a big enough problem to tackle in creating a decentralized, secure, robust. payment network. There's like $200 million or something like that on the Lightning Network right now. We're talking about like $20 trillion is what we need to be at. We're not talking about like a million users or 2 million users or 10 million users. We're talking about $8 billion. We have a challenge ahead of us. I think we can meet it. I think there's something beautiful being built with the Lightning Network. But it needs to be payments. It needs to be payments. So is this concern that he sees it going in the direction where it won't be used for payments? Because at the end of the day- It'll get bloated.

Starting point is 00:55:32 Yeah. So if it's going to get bloated, the more interesting conversation for me comes, what's the incentive structure to prevent it from becoming bloated and only being used for payments? Because at the end of the day, we might have the best intention in the world, but the technology and people really just don't care. And they're only going to be as good as their incentive. So, like, what incentive structure is he suggesting that we need to put in place in order to keep it all about payments? Well, it's funny is he mentions, and he mentions kind of in a line or two talking about, like, you know, people just want the internet to work. When we try to cram everything on the internet, it's just not going to be the user experience that they're looking for. And, you know, if you want to contradict this, go ahead and send an email and pay by the bite.

Starting point is 00:56:16 No, nobody wants to do that. They want it to just go. And I mentioned this towards the end of the show, which he doesn't directly see. say, but that's basically what he was getting at. And I think it's largely that a lot of those models probably aren't going to work anyway. Inzabo has a great piece called minimizing consumer worry. There's something else, like identifying and minimizing consumer worry. I can't remember exactly what's called. It was like 400 feet ago. But there's a great piece on his blog. Talking about how like just the general idea of micropayments is actually a greater cost in

Starting point is 00:56:47 worry to the consumer as to whether or not they're going to pay it than it is in like what you're getting out of it, like a two-cent payment might cost five-cent worth of time just in like, should I, is this worth two-cent? You know, like, you just want that to go away. You just want to hide it behind something. And the idea of paying by the bite for internet traffic, I think it's largely just going to disincentivize itself. And I use the example as like, this is hard to do. I don't know how you would actually implement it because the traffic or the data packets themselves are encrypted. But if there was a way to limit, If somebody's sending like a bunch of data through my note or payments that were failing.

Starting point is 00:57:24 Oh, yeah, I'm going to jack the fees. I'm just going to, I'm going to either jack the fees or I'm just going to say, already, just limit it one per minute or something like that through this channel or close the channel. Like, I'm just going to not do it. Like my little raspberry pie note, I just wanted to do payments, right? So it will probably take care of itself. But I would like to skip the step of everybody building all of this stuff and it like getting bloated and becoming a pain in the ass. and then us having to figure out a solution

Starting point is 00:57:52 if it just builds out as a payment network. And I really think all of our centralizing social media like cancel culture problems of a centralized internet infrastructure is really a monetization problem. And if you have decentralized payments and decentralized money, those problems go away.

Starting point is 00:58:10 It's not the protocols themselves that really have the problem. It's the fact that the second you monetize anything, it's deeply and inherently centralized and you can't get around it. We have the ability to monetize it without the centralization now. And I think that means that we have the ability to rebirth and or revamp a lot of

Starting point is 00:58:28 the alternative infrastructure and protocols that we already use and make monetization work. Even in an automated way, computers can talk lightning, you know. So that's kind of a cool thing in a nutshell. You know, and that's pretty cool. It's a way outside of my pay grade, I maybe didn't quite understand everything you're talking about, but I get the gist and it's really cool about payments. I talked to Preston about this just a bit early before we started recording. I've been in contact with the guys at Ibex Mercado down in Central America, the guys from

Starting point is 00:58:59 Guatemala that are working in El Salvador on the Cheval wallet and the merchant solution. And I wasn't aware, so I'm a partner in some restaurants in Montreal, some Irish pubs, actually, and we're pretty good operators. We have an EBITDA margin, a profitability or a cash flow margin on our business of about 14% of sales, which means in every dollar we sell, we make 14 cents after everything's set and done, whether it's on liquor or food and everything. But the point is, if someone pays their bill with a credit card, we have to pay the credit card company 2.5% of the sale.

Starting point is 00:59:37 We have to pay the credit card company, what's called merchant fees. So our profitability of 14 cents on the dollar sold goes down by 2.5 cents, which is meaningful, right? We go down to 11.5 cents on a dollar versus 14. Imagine the same restaurant in Central America where I was informed that merchant fees in Central America are 8%. So you can imagine if you're a restaurant that's really good in Central America. And I'm assuming, you know, they make their 14% like we do in Canada because it's industry average of good restaurants. They make their 14%, but someone decides to pay with a credit card. That 14 cents on the dollar goes down to 6 cents of their profitability because

Starting point is 01:00:23 8 cents of the profitability goes back to the credit card company. Tell me that's not a market that Lightning needs to absolutely shred. And I think that's the exciting part from that. So if that meshes with your argument on keep it as payments, I hope it does because That's real money. 100%. And I got to say this again. I said this on Why Are We Bullish the other day?

Starting point is 01:00:48 Because this continues to fly under the radar. And I still, I haven't even seen it like a lot of people talking about it on Twitter. Is it Nydig, the bottle pay for $300 million? Nidig, the company, the financial institution that's working with strike and they've been plugging in a lot of banks just bought a lightning wallet for $300 million. It was like a week old news or whatever. And like, I don't know. Nobody has been really talking about it.

Starting point is 01:01:11 Interesting. really blow up. It's just kind of like, oh, a little article. I didn't even know it. I have coverage. I'm covered by Nidig out of Los Angeles, Southern California, and they have great research. And geez, I read a lot of their stuff. And I never saw any mention of that at all. That's incredible. I just think, like, who, like, you don't make that purchase unless you have a reason. So I'm just like. Especially at that price tag. I've been just kind of buzzing in my head as like, what does the release of that look like? Like, you know, where are they going with that?

Starting point is 01:01:41 And I can't get it out of my head. And nobody's talking about it. Well, this is the thing, too, Greg. Let's say the business down there that has these 8% fees wants to receive whatever the local Fiat currency is in a stable coin. They can set that up. 100%. Yeah.

Starting point is 01:01:57 And it can be coming to them over Bitcoin rails and they can receive. Absolutely. I mean, it's done. Yeah. It's done. Yeah. Our guys down there really, really genuine. And they feel that, you know, and I shouldn't say they feel, you know, people in the industry feel

Starting point is 01:02:11 there's some of the top talent in the, in the lightning space. And, and, you know, I work in an office in Toronto where we share a space with a company called Sat Street, which is a Canadian, a Canadian exchange. But one of the principals in Sat Street was just down in, in Southern California. And they met with Jose Lamas. He's the CEO of IBEX and Mercado. And really, really impressive. guy. But can you imagine, you know, you're going to get the ability to clear some of those payments through a node in Canada. And just then if there's an exchange that needs Bitcoin, it's just the economies of scale and the ability to share those profits on an efficient basis that will make, you know, make money for both countries. It would be amazing, you know.

Starting point is 01:02:56 And anyway, it says, okay, so Foss, you're so smart in the hedge fund business. What would be people you'd be worried about, meaning who would you be shorting right now? And, you know, my pocket short is Western Union, but then not far behind that are the credit card companies, all right? And then the banks. And then we understand why Jamie Diamond still thinks that, you know, Bitcoin has got no value because it's pretty obvious, Jim, Jim Diamond, why you think it has no value because it's going to eat your lunch, man. It's going to disintermediate you out of business and conflicted advice from someone who's going to be disintermediated out of business. Hey, Greg, Michael Fink has a question for you. He posted this one. He said, can y'all tackle the restoration of interest rates in a more Bitcoinized world? So right now, let me just expound on this. So you go to FDX. You go to some of these other exchanges. They're offering 5%. 8%. Yeah. On deposits. What does this transition look like? What does this dichotomy of legacy interest rates?

Starting point is 01:04:03 versus this digital asset world of interest rates. When does that culture clash just come head to head? Amazing question. But I guess you've got to be really careful if you understand how you're actually making your interest rate. It's just on the slope of our favorite word, the contangle, right? Yeah. And, you know, the funding rates and rather the slope of the upward sloping futures curve,

Starting point is 01:04:30 it's not written in stone. and that curve can collapse and it can, you know, so some of these rates, and don't forget, it's only math, if you make it for one month, but multiply it by 12 to annualize it, something that's yielding 1% over a month, but you multiply it by 12 because it exists for one month, it rolls down the curve and you're 1%, but you say, oh, well, that's 12% annualized. Yeah, it is if you can do it for one month, but who says you can do it continuously for the next 12 months? And what if that curve flips from contango into normal backwardation and all this sort of stuff. Okay, so I like it, but Preston, I don't think enough people understand that the futures curve is fluid and it changes on a daily basis.

Starting point is 01:05:16 And in fact, the CME where all this action is going on now is markedly different from Deribut and all the other ones where, you know, you used to have the offshore futures. So I'll just say that let's focus on what's really broken. which is the Fiat interest curve because you have an elephant in the room that's suppressing that and what solves that? Well, Bitcoin. And are you going to make a, are you going to lend your Bitcoin and make an interest rate? I don't do that. I'm not telling you not to do it, but understand what I own Bitcoin for.

Starting point is 01:05:54 I own it for insurance, okay, against the big system, which is still the Fiat system, collapsing. And I'm not going to worry about playing the contango curve. There's a better trade, and that is selling BITO short and buying GBTC, which is the gray scale trust at a 14 or 15% discount and playing the contango versus the 14% discount. Now, that gets interesting. And you can put that on about 10 billion aside. Right now, 10 billion. Giddy up, man.

Starting point is 01:06:28 And that is excitement because there's $6 billion to capture on a mark to market discount that for some reason the big hedge funds out there are not doing it. And if I was the big fund, if I was a big fund like CPPIB, which is the Canadian pension fund investment board, one of the largest pension plans in North America, they know they need Bitcoin. Hey, I wouldn't be averse to telling them to go out by $10 billion of GBTC. If that discount doesn't narrow too much, buy the whole fund. Wouldn't that be exciting?

Starting point is 01:07:04 And then Canada makes $6 billion at the expense of unit holders of GBTC. There's big money out there like that, Preston. Guys that need to invest $40 billion, why wouldn't you go and invest it at something that's trading at a 15% discount to net asset value and then unwind the fund? Thank you very much. I got my Bitcoin. Thank you very much. the fund is done.

Starting point is 01:07:29 You wouldn't even have to continue to hold it. Obviously, that's not our opinion. You can just take the Bitcoin liquidated. Thank you very much. I just bought Bitcoin at a 15% discount and I did it in big size because that's what big funds have to do. They kind of move in big size.

Starting point is 01:07:45 Hey, guys, I want to capture your take and I know this is going to sound funny to you guys that I'm asking you this, but I'm going to ask it because people listen to the show and they come from all different walks of life, and you guys have been around. I know Guy, you've been around since what year? Have you been in Bitcoin?

Starting point is 01:08:03 Early 2011. Mid-2011, somewhere around. You've been in the space for a bit. You've seen a bit. So you don't own any alt coins. And so the question is, is why do you guys ignore Ethereum? Dot, cylindra or salondra or whatever the name of it is, Cardano, you name it.

Starting point is 01:08:28 Why do you guys ignore these things? I own Bitcoin for one reason only because I'm so concerned with the Fiat system. The Fiat system is going to implode. Okay, that's pure mathematics. I just don't know when. And no other coin out there solves the Fiat Ponzi for me because no other coin has math and code that Bitcoin has. Do I think that some of these other applications have value?

Starting point is 01:08:55 There's no question. All I would say, though, is over time, applications that are built on other centralized blockchains will probably find their way to layer three Bitcoin, because layer three Bitcoin will be the solution and the most secure blockchain out there. Am I wishing for the demise of some of these other coins? No, not at all. And by the way, I'm totally fine with people owning that stuff. Just understand why you own Bitcoin or why I own Bitcoin layer one and then you get the

Starting point is 01:09:29 optionality of layer two and layer three. That's what excites me. I'll start this by first I went down that rabbit hole. I went fully into shit coins, all coins, the whole thing from 2015 really to 2017. Mostly just exited with a lot less Bitcoin. And so I saw all. all the hopefuls and all the grand ideas and all the ones that sounded like they had a decent purpose and really convincingly said we were going to be here for this particular reason.

Starting point is 01:10:07 They didn't make it. And so I've seen this hype cycle four times, really, when you really look at it. It's just kind of come in different flavors every time. Different flavors, different colors. But in probably the best breakdown for the long. Long form. I read Only the Strong Survive by Alan Farrington and Big Al on the show. And the guys take, first, the piece is amazing.

Starting point is 01:10:32 And I probably covered the topic a bunch of other times, but I think that's probably the most recent and largest breakdown of the whole concept of why. But the fundamental reason is monetary economics. The very purpose of money is to bridge the coincidence of wants. It's the purpose of language. We're not speaking three different languages in this podcast. We're speaking the same language because we're trying to bridge our communication from my head to your head and vice versa around. It only works if we use a common one.

Starting point is 01:11:05 And any sort of digital token that has value is almost universally, almost by the nature of the fact that it's just an abstract token only going to be able to hold monetary value. It can't really do anything else. And we're not going to end up with a whole bunch of monies. I don't think so. It defeats the purpose. You don't have a money for chickens and you don't have a money for cars. When you go buy a car, you don't ask how many chickens it is. You ask how many dollars it is, how much it's worth in money.

Starting point is 01:11:32 And the monetary, the economic pressures to consolidate on the same money is unbelievably vast. Like, it's incredibly powerful and it is a very long-term trend. It could take 20 years for us to get there. I wouldn't surprise me in the least, but I think that's where we go. And I'm planning 20 years out. The monetary economics is that we have one dominant global money because I think the jurisdictional barriers, the geographical barriers, all of that stuff is falling away. And we have one single global digital money that is decentralized. I think Bitcoin is by far the only thing that really fulfills that ticket.

Starting point is 01:12:13 And everything else is just downstream. I think the people that would be making the argument that we're going to have all these different tokens. I would argue that that's akin to saying that we would have all these different types of internet protocols that Turkey would have its own protocol. And in Europe, they'd use this protocol for just data packet transfer. And that's not what happened at all. We have one internet. We have one internet that everybody's using, that transmission control protocol is the same as transmission control protocol. in the U.S. versus Australia versus whatever country you're in, everybody's using that because

Starting point is 01:12:50 it's a common language. And I think that you're going to see the exact same thing when you're dealing with the protocol of money. It's the unit that people trust because it works and because the monetary units aren't being debased or changed or the monetary policy isn't being changed by a guy who's sticking boogers on the wall and all that kind of stuff. I'm with you 100% on that one guy. I like that. I also when you do look at like because the internet does have a plethora of protocols, right? But they all work on top of TCIP. Yeah. They don't work in spite of. And I think those monetary pressures are far more like monetary pressure is a is a value consolidation and a communication consolidation. So the pressures to consolidate are even stronger than what you see

Starting point is 01:13:38 in like social media and Amazon and like all of these incredible like and pressures to consolidate on internet protocols. And it's probably not linear either. That's probably more of an exponential. Not at all. But when it comes to like let's say my goal and I like to caveat this because I have shitcoin insider, if we end up in a world with like thousands of different monies or even five different monies for different purposes.

Starting point is 01:14:07 Like, call me a toxic Bitcoin maximalist because I'll pick on them or like I just say, I think they're going to die if you give them a long enough timeline. But I really don't care. Like, that's great. I don't think Bitcoin's going anywhere. And if we end up with 10 of them, wonderful. The goal is to end the state monopoly on money. The goal is to end the corruption and manipulation of monetary systems.

Starting point is 01:14:33 It's a free market picks 10. them. Right. I just don't think so. I've been around long enough that I just think it's just not going to happen. I just want the free and open cost of capital because then I can go back to doing my value investing. Greg, what are the chances of a March 2020 type event or worse like we saw in COVID where everything, you just had impairment everywhere happening and possibly driven by Fed actions? Maybe they're too late to start raising federal funding. funds rate and things start getting away from themselves. Do you see another event like that happening in the coming year to three years? So there's an expression, right? I'll give an answer but not a

Starting point is 01:15:17 time frame or I'll give a time frame but not an answer or a target rather. So yes, 100% there's one coming. I mean, I've lived through four of them in my career. Now, four years started in 1988. it was the Latin American debt crisis. And then 1998 was the long-term capital management. And then 2008, but noticed the 10-year timeframes, was the great financial crisis. And then 2019, 20 was COVID. Each successive crisis was actually more painful, happened quicker. And that's just a symptom of leverage being increased in this system each time. Right. So each success of crisis, crisis transferred leverage from the financial system to the balance sheets of the governments. And then when things unraveled, notice how quickly things unraveled in the COVID crisis.

Starting point is 01:16:09 Like it wasn't even close. Like this didn't go down over time. This didn't take the staircase down. It took the elevator down. And I've never seen anything like that. It didn't take the elevator. Jumped out of the building. Well, that's it.

Starting point is 01:16:21 You look at me on flying, right? You think you're flying for three minutes and then you hit the ground. But at the end of the day, like it. So with the next one, what I will say is I don't know when it's going to happen. I'm very concerned that the next one is the last one. And I don't want that to be the case. I've said this many times. Jeff Booth and I are very, we want a parallel system to develop so that there is a

Starting point is 01:16:44 lifesaver, a life raft. Think of your borrowing from, you mentioned Nick Zabble before guy. You know, borrowing a great line from him that I love is use your checking account. Fiat is your checking account. Bitcoin is your savings account. There can be a parallel system in which both can succeed. Just don't save your money in Fiat. Don't save your money in your checking account.

Starting point is 01:17:06 But get this system, this network transfer that's going to take place. Because when you do a network transfer, you don't just turn one off, right? You run two networks in parallel to make sure you have the system working properly. So I'm skirting the issue. Is there going to be another one? Yes, 100%. The next one could be the big one. I hope it's not as soon as in the next year because we're not ready yet.

Starting point is 01:17:31 But as time proceeds and more people understand, the Fed is never going to taper. Let's be honest about that. All of this stuff is a goofball argument. I'm considering stopping printing 120 million a month. Okay, congrats. Are you ever going to get down to zero? No, it's mathematically impossible. So stop pretending that you're going to actually ever taper to zero.

Starting point is 01:17:55 That's math. You are not. So the next one will be, we're still QEing, and we just hit another crisis. Open the floodgates. This is QE infinity times three, if that even makes any sense, because it will have to be. So their response compared to the COVID-19 response is going to be Forex? Well, it just has to be because there's four times as much. You know, we're now at total global debt to GDP is four times.

Starting point is 01:18:23 When we had the first one in 1988, it was like, you know, total global debt was averaging probably just over one times. And this is global debt, not just government debt, but total global debt. Well, successive increases in leverage mean the leverage unwind, which we talked about, is more painful because there's more leverage in the system. It doesn't take a rocket scientist to figure that out. So every time you increase the leverage, the pain increases. So the next one, we jumped out the window last time, Guy.

Starting point is 01:18:54 I'm not sure what we can jump out of this one. It'll be a, we'll be jumping into a black hole. Maybe that's what happens. We jump into a black hole next time, right? And I don't want that to be the case. I want these systems to be in place so that our kids can actually enjoy some of the good parts of life that I've enjoyed and hopefully the future generations can enjoy. I mean, I totally agree with, I hope they can drag it out as long as possible because we

Starting point is 01:19:21 can basically have two networks in parallel. And I think that's the best outcome because people can protect themselves and simply limit their exposure to the one that's sucking value out of their life to the things that are specifically expenditures. I mean, I already, I'm not fully on a Bitcoin standard. I mean, my life is a Bitcoin standard. But obviously, I use Fiat all the time, right? but that is kind of that halfway road.

Starting point is 01:19:50 I keep my assets in Bitcoin. I keep my liabilities in the Fiat system. But I'll actually step back a little bit and talk about, I listened to recently when money dies. And one of the things that kind of stuck out to me was the number of times they would have a crash, a significant crash, and then a rally, and then moments of peace,

Starting point is 01:20:15 and then a significant crash. and a rally in moments of peace. Like the number of times that this little, this cycle kept happening. And there were points where people like, oh, we're finally on the other end of this. We're finally on the other side. We got it. We got it sorted out now. And I'm talking about both a crash up and a crash down in the context of purchasing power versus debt.

Starting point is 01:20:37 And I think, you know, when we have a huge liquidity crisis, Bitcoin absolutely take another 50% even an 80% nose dive. liquidity is still thin enough, even though it's massive, that the over-leveraging, and again, everybody's over-leveraged into Bitcoin. I'm technically leveraged into Bitcoin. It's not bad, but I still am. And I think a lot of people are doing that. It mathematically makes a lot of sense right now. So that specifically can put a lot of downward pressure on the price of Bitcoin one, those sorts of. I'm going to take the other side of that bet over time. I think people are going to understand that Bitcoin's your insurance guy. And they're going to understand that Bitcoin is actually a what's what I term and I don't want to get too granular, but I term it a long

Starting point is 01:21:21 volatility trade. And essentially what long volatility means is you are short credit, you're short other financial assets. Because inherently, if you own bonds, you are short vol. If you own equities, you're short vol. I saw somebody ask that question. Yeah. So it's hard to explain, but you take it from a from an options trader perspective, Bitcoin is the perfect option that I've ever seen in my life. It's got no theta, meaning it has no expiry time. It actually increases in value as volatility increases. It's got gamma, which is your second derivative, which means more people will run to own it. And as more people run to own it, it actually builds on itself.

Starting point is 01:22:07 It's called a gamma squeeze. And think of a gamma squeeze on the Fed put. Everybody trusts the Fed to be there to bail out markets. But imagine finally, or not finally, the one time the Fed can't bail out the market. Well, basically, what has the Fed done? With a Fed put, the Fed has sold volatility to the markets. The market is long the Fed put. A gamma squeeze is when you have to run out and the Fed has to run out and cover the stuff

Starting point is 01:22:37 they shorted. Imagine if they run out and buy Bitcoin. Imagine the smartest trade they could ever make. And by the way, people are learning this day by day. This doesn't come quickly, but I believe I've seen inklings of when markets and VIX starts picking up, the price of Bitcoin doesn't go down. It actually picks up as well. It'll take time.

Starting point is 01:22:59 It's an education process. But it starts with a credit perspective because I've lived credit. And when you are long credit, you're short ball. And when you're short credit, your long volatility. And what is Bitcoin? It's a short credit trade against sovereign debt. I love it. I've never seen a better option in my entire life, and that's why you have to own it.

Starting point is 01:23:24 It's funny. I've been thinking of any potential, I mean, just because historically what's happened to Bitcoin, but Bitcoin's always just kind of been this edge case thing, or just outside of the realm of the financial system thing until pretty recently, really. but that whenever there was a crisis in the stock market, Bitcoin sold off. And like in March 2020, I was losing my mind. If you could ask my wife, I was losing my mind trying to figure out how to get, I was dry in Fiat at the time.

Starting point is 01:23:55 It's just absolutely dumb. I tell the story of my wife came home from work that day. Now she actually works for the podcast, which is great. But she came home from work that day. And we have like a big bookshelf thing, which was a filing cabinet. On the bottom, we had these little file folder things. And it was like all our finances and mortgage and everything that we had done. I had pulled all of it out.

Starting point is 01:24:17 The price, you know, it dipped 50%, 60% in something like 24 hours. And I had literally pulled every one of them out. The difference then was that you didn't have the institutions that are studying it now. And I honestly believe that. And people may say we don't need the institutions. I beg to differ, the big money still runs the world. And if you get a big fund that understands that it's insurance, that it's long volatility, they're going to be like, hey, ship it in.

Starting point is 01:24:47 And by the way, I've been waiting for this day because I need to get my allocation up. And once one fund is doing it, guy, everybody is looking at it. Everybody has to do it. I'm trying to hold off this next financial crisis as long as we can. And in doing so, the market will be educated as to what the beauty of Bitcoin is. And I think that there's a chance, not 100% certain that Bitcoin actually is understood by the world as being the perfect insurance policy. And you never know what could happen then. Otherwise, if it goes down in price, well, you're lucky.

Starting point is 01:25:24 You're stacking. As that being said, how do we come out the other side? We don't know how we come out the other side. The Fiat system could be gone. Because as I said, this next crisis could be the big one. It's like, you know, that earthquake that everyone's waiting for. Like, you just don't know. You know it's going to happen.

Starting point is 01:25:39 Statistically, it's going to happen. You just don't know when. And I don't want this for my kids, man. I got three kids. I don't know how you guys line up on the kids front, but I got three kids that I want to have a good future. Talking about kids, talking about various generations. This is a question that I know you liked, Greg. Differences between risk tolerance between generations.

Starting point is 01:26:04 I'd like you answer this because you answered it perfectly and you gave the guy the article to read. I'll just tell you my little story, and this will go really quickly, my dad never had a bit of debt in his whole life. He never had an iPhone. He never had even a cell phone, okay? And I finally convinced him when I graduated from school in 1988, Dad, you got to get a credit card. You got to get one of these gold cards even, because this is going to show prestige. You're going to be a guy that can put a credit card, a gold card down. Two months later, he calls me up, he goes, Craig, I don't understand. how these credit card things work. And I go, dad, what are you talking about? He goes, I got a bill. I still

Starting point is 01:26:41 don't even have my card. And I got a bill. And the bills for $4,950. I'm like, what? He goes, yes, someone has taken my card and spent and bought a stereo with it. And I'm like, oh, geez, dad, your card got stolen out of the mail. And the point is he never trusted technology after that point. And this is part of the generation that preceded my generation by, you know, a couple years. Even my generation, there's people that don't understand the digital phone, right? And the ability to store digital assets on your phone, whereas the kids these days, well, it's natural. So I think it's a generational thing. I love the article you pointed out to him, Preston. And I think a lot of your arguments make sense. I think it's a risk education process,

Starting point is 01:27:29 isn't it? A risk education. And I think it's whether it applies to institutions or to individuals. Most of the institutions that are the guys that are managing the money at the institutions are old farts like me anyway, right? You know, the same guys that never had a credit card in their lives, but they're still managing money at an institution because, you know, they've been doing it for 45 years. I'll tell you, just in my life and in my circles, the younger generation, like millennial group, without a doubt, we have higher risk tolerance and just the idea that, I mean, you know, my grandparents saved paper cups to reuse. You know, like, you see this generationally all the time. Like, it's the kind of whole argument of the fourth turning, right? Is that they grew up

Starting point is 01:28:17 in a crisis and they learned how to save. They understood what the difference between the real value was and the fake. And now we have whole generations that have grown up thinking that all of this should be taken for granted. It's all just going to be here. And that's how it is. And then at the exact same time, we've grown up through these crises that kind of just say it's like, oh, well, you could just lose it all anytime. Like, there's no, there's no assurances for anything. So, A, just being younger, like just the younger generations, there's a higher risk tolerance, obviously, naturally. But also, I think just the lack of trust in the system and being at the height of a debt bubble where capital just costs almost nothing in so many weird contexts, it's just like throw it at everything. You know, like, it's really kind of bizarre where we find ourselves.

Starting point is 01:29:12 And I don't think it's going to be long lasting. I actually think crypto is largely a phenomenon of that, of the loss in the, what's the word, the discrimination of where to put capital. Is that capital costs something, so where do we put it? And we've entered an area where capital costs almost nothing. And so it's just kind of like throw it at anything, the nominal price goes up and the nominal price goes up on everything. Don't forget, people can't own bonds anymore. And that was usually be 40% of their bonds.

Starting point is 01:29:43 portfolio and the guys that understand it need to find. That's crazy to me. So my dad, hey, my dad, like he had bonds in his portfolio. I made a lot of sense when bonds yielded 14%. It's not hard to get a 10% contractual return when 14% of it is from bonds. You know, hey, I can make some mistakes in the equity market and still be okay that I'm going to get my 10% boge. How easy was retirement then? Well, then the inflation was a big part of it. A guy in this is why there's, you know, the ebbs and flows. But the point is here, and this is interesting and Preston, you understand this. The 60-40 bond, 60% equities, 40% bond, traditional portfolio was gone, okay, at any pension fund that has an 8% prescribed return, actuarial return for

Starting point is 01:30:35 their, whether the fund is funded or not. Those investment guidelines, incidentally, everyone and says, well, who owns bonds? Well, these pension funds that own bonds and have 40% of their allocation and bonds, these guidelines were written 20, 30, 40 years ago when the 40% of your portfolio was earning 18% in 1980 and then 14% in 1985. If you have an 8% prescribed return, it's pretty good to start with bonds that are yielding 14%, as I said, but now they're yielding 1.5%, which means equities have to earn over 12% annualized for the rest of time for your 60-40 portfolio to reach the 8% boge. That's almost impossible. But these guidelines still dictate that you need to own bonds and you need to make your 8% return to be qualified

Starting point is 01:31:32 as fully funded. CalPERS is going to have to jump through some actuarial return hoops. And it ain't going to be pretty. And all of a sudden, all these funded, these pension funds that are fully funded, the actuarial guys might say, hey, wait a minute, Mr. Calpers, you're not actually fully funded. And that 60, 40 portfolios got a switch. And why don't you put 20% of it in? Guess what? We know the answer. This is a Bitcoin show. Rock and roll. There will be actuarial returns that are going to gravitate towards the best performing asset over the last 10 years. That's how investment guidelines are set. You know, it's funny because, like, it almost blows my mind that the bond market is still

Starting point is 01:32:15 as big as it is. And it's one of those things where, like, the solution exists, but it still hasn't properly crept into people's minds in the right way or in the right context. And I think people are still nervous because it's there and it shouldn't. It just feels like this distant thing or this app or this thing. It's like, what is this thing? Whereas, you know, when you're talking about money on the scale of, like, you know, holding significant billions of dollars in bonds, there's just not many alternatives to stick

Starting point is 01:32:49 a billion dollars. Like, there's not many places that you can put that sheer amount of capital. Bitcoin is actually to the point where it can hold that. Absolutely, sir. And when they realize that not only can it hold that, not only is it an alternative, but it's a vastly better alternative in so many different, like go down the line in what you're actually getting as far as assurances and ownership. It's so much better in so many different ways.

Starting point is 01:33:18 But there's like, there's always that one thing that has to click. And it's different for everybody. Like, it's some perspective about Bitcoin or some realization about money or something that finally it clicks. But when those light switches start to go, they will go quickly and then, People will jump on it for the sake of like I saw someone else who did. You know that most people don't understand how bonds are priced, how they move with interest rates,

Starting point is 01:33:46 with convexity and duration at all. And they just assume it's a safe part of their portfolio when in fact, right now it is the riskiest part of anybody's portfolio is their bond holdings right now. And people need to get that through their head, but no one's telling the truth. You are, Preston, but some financial advisors are still clinging to the, old, outdated 60, 40. And it's very dangerous and people need to know. Bon math is not easy.

Starting point is 01:34:12 It's just worked for decades. They started at 14%. The prices have just continued to go up. It's just inertia. For four decades straight. And same with equities because if the, if the interest rates are going down to nothing, the equity prices are just bidding to the moon as well. And so I think you just have, and think about it, if you're 60, 70 years old today, like, all you know is that you're pretty much spectacular at anything you do in financial markets with respect to fixed income or equities. Like, you're just awesome in nominal terms. You could do no wrong. And so how old was that person when they first started entering the market where they had any type of disposable income when they first started? They were 20 or 30 years old.

Starting point is 01:34:57 So for their whole life, they've been right. Correct. And they've not had to ever come to a realization that any type of like real risk management or work has had to be done at any kind of level, in my personal opinion, right, especially if you have a long bias. Now, if you have a short bias, then maybe that's not necessarily. But if you're buying something and holding it on a five, 10, 15, 40 year horizon, you've been, you've been very right to date. And so that's just kind of like leading somebody into a cage

Starting point is 01:35:30 and they're walking in and then the door that, you know, is closing and then they're getting ready to lock themselves in that cage because they think that their habits of how they've been capturing these gains have been based on their merit as opposed to just some giant macro 80 year cycle that's coming to a close. And if I was going to go even a step further, I think a lot of people look at the Bitcoin price and they're seeing a linear chart. And when you look at the Bitcoin price in a linear chart and you know it's just based purely on more people adopting it, it's very easy to just say, well, that's crazy. These people are nuts. That is a tulip. Because the only chart I've ever seen that goes up that much in linear terms is a tulip chart.

Starting point is 01:36:15 And so I think they're looking at that and they're not thinking that there's any type of mathematics that's actually driving that adoption. rate. I think they're just thinking that it's emotions that it's all qualitative, nothing quantitative about it. They're very wrong. But that's what I think that they're, that they're viewing. And I think the distraction of crypto is reinforcement of that. Because people are buying Shiba and Squidcoin, you know, like so, and so many people can flight the two. They think that's just, like I said, you know, I bought a Bitcoin. It's an ether. You know, like they think it's the same thing and they completely missed so much of the nuance in the real story. And here's why I don't get mad about that.

Starting point is 01:36:59 Like, what you're bringing up is 100% right guy, but here's why it doesn't really get me all that charge. Like some people you see on social media are losing their minds about like some of that stuff. It doesn't bother me in the least bit because I think it's such a distraction that it has allowed the Trojan horse to be wheeled into the straight into the courtyard because there's just mass confusion. as to what this is because no one's doing the hard work.

Starting point is 01:37:24 Everyone's just looking at the price chart. Oh, that's crazy. They're all going to blow up and they're going to lose all their money. And that's the end of it. And I don't have to even worry about it. But they're not actually digging deep. And they're not looking at it on a log chart because when you look at it on a log chart, you're like, my God, what is this thing?

Starting point is 01:37:40 And how is it that systematic? It almost looks like a processor is driving that price systematically up in a way. It's a little eerie. It's a little eerie when you look at it in a log chart. And people need to understand, sorry, Preston, I just want to add, though, you know, I said bonds are more risky than they ever been. I will go out and flip it on its ear and say Bitcoin is actually less risky today and a better risk-adjusted return opportunity than when I first got involved in it five years ago. Every single day that it survives and the network gets stronger, the probability of it achieving my price target, which incidentally is over $2 million, U.S. of Bitcoin in today's dollars, increases. I'm still not 100% certain, but I'm more certain than I was five years ago, and that means that it's a better risk-adjusted bet. And that's that simple.

Starting point is 01:38:33 Which is counterintuitive to how- If you've never sat in a risk share, you don't understand how to make these calculations. It's not against every single human emotion you have. Because what do humans do? They sell their winners and they hold their losers. Whereas Bitcoin, What do you do? You hold your winner and you keep holding your winner and you buy more of your winner and you dust everything else, which includes bonds. When I look at the world today, it is just dying for critical thinking. It needs critical thinkers.

Starting point is 01:39:08 It's desperate. That's the better word. It's crazy. It is desperate for critical thinkers. And when I look at what Bitcoin is doing is it is the ultimate filter of critical thinkers. If you've got bad critical thinking skills, this thing is just filtering you all day long with ease. It's not even trying. And it's just filtering you just completely out of the mix. And so I think that's probably one of the things I'm most excited about with all this is I think

Starting point is 01:39:33 when you get to the other side, you're going to have some of the people with the deepest critical thinking skills really kind of reorganizing and rethinking and reprioritizing capital allocation in a way where you actually have free and open cost of capital and they're going to be allocating that capital to things that actually are adding value to society, either product or service kind of way. And the zombies, they're just going to be decapitated, like unemotionally, like without any type of reservation. It's an exciting time.

Starting point is 01:40:04 I've never been so excited to be part of a community of like-minded people with like-minded values, okay? You know, one of my great friends that I've met within the last year, and I will say a great friend is Jeff Booth. So Preston, you know, Jeff, better than I do. But that guy is absolutely a rock star. And I just love what he's trying to do. You know, he's not in it for the money. He's in it for the solution. And then Mark Moss said this, I'm boring his, you know, a group of like-minded thinkers that share the same values. And guy, you know, everybody, whether we disagree on certain things, we're rowing in the same direction because we want a sound money solution. And that takes me to one final thing I want to bring up is, you know,

Starting point is 01:40:49 we shouldn't be fighting the gold bugs. The gold bugs still have it figured out. They want sound money as well. We just have the better sound money. But the bigger elephant in the room is the bond market. The bond market is 40 times the size of the gold market. and the bond market is where the risks are right now. Please people, understand bond math. The only reason you made money in bonds is because interest rates went from 14% down to 1%. When interest rates go down, bond prices go up. That's the first and most important component of bond math.

Starting point is 01:41:28 And you didn't actually make your money on the price basis. You just pulled forward a 14% coupon and you turned it into a 10% coupon. And then you turned it into an 8% coupon. And by pulling forward those higher coupons and cashing them in at a present value, you think you made money, but you didn't. Because if you would kept your money for 30 years in the same 14% contract, you would be in exactly the same spot. Okay.

Starting point is 01:41:54 That's what a contract is. And now it's one and a half percent. And you're like, you can't make it out. That's what you're going to get. And it doesn't look good, especially when inflation is as we talk about. talked about before, either 5% or on the low end. 14%. Exactly.

Starting point is 01:42:12 And, you know, I think there's something too. Like, when you dig into history, you realize that this bond market is a little bit of an anomaly. Like, it's prior to, or it occurred after really the growth of fiat. Correct. Like, the really, the institutionalization of fiat and sovereign debt as the asset for everybody to hold. You know, they had to beg people to buy bonds in World War I and World War II. The traditional bond market was literally fractions of what we think of as portions of the economy of the bond market today. And I think that's where we're going back to. I think that's where

Starting point is 01:42:51 hard money takes us back. The bond market replaced hard money as savings. And we're going to go back to hard money as savings. And we're talking about the movement of deca trillions of dollars. Oh, yeah. Doesn't have to be slow. So gentlemen, that's all I had for this conversation. I want you guys to give people a handoff to definitely your Twitter feeds, but anything else you guys want to highlight. I'll let Greg finish this out. I do Bitcoin Audible and Shickgoing Insider. Bitcoin Audible is kind of my first love here and really explore, dive into Bitcoin all the time, every day, all the time. Like, that's all I do. And I tons of audiobooks too. I'm finishing up

Starting point is 01:43:33 the seventh property by Eric Yakes right now, and the Fiat Standard, me and Safe, are doing that together. And I got like 11 other ones or something on Audible, just nothing but audio all the time in Bitcoin. And on Twitter, I am the guy Swan. Follow me. Check it out. Good stuff. Guys, I just want to say, I've been absolutely honored to join people like yourselves on podcasts. I can't believe that I have made it into a point where my kids actually know how many Twitter followers I have. Now, not that that's important. That makes no difference. But what I will say, again, is I've met so many great people in this community that I'm truly honored. Bitcoin is the hope that I've been looking for for 30 years. I realize in hindsight, I talk about

Starting point is 01:44:24 things as if everybody understands what I'm saying. And a lot of people come back to me and say, Foss, I have no idea what you're saying, but you're saying it was such a passion, but it must be true. So, so here's the funny thing, Preston. This is because in 30 years, you pick up something that you realize not a lot of other people have been been in that chair, right? Like sitting in a chair, seeing things unravel is a very sickening feeling in your stomach and you just don't want it to happen again. What did I bring? I'll borrow a line. All I've to this is 30 years of mistakes, okay? But I'm still here. I'm still here and I've survived because when you make a mistake, you reverse position and you make sure you don't make that same mistake again.

Starting point is 01:45:06 We have a team of bitcoins that are world-class thinkers. It's unbelievable. Jeff Booth, Preston, you know, Lynn Alden, these people, you people are just so empowering and you just bring a level of knowledge that is not available in the traditional school system. So I'm just proud to be part of that. I'm on Twitter. My name is Foss, Greg Foss on Twitter. I'm not really anywhere else except photo bombing all sorts of other platforms. So Preston, this is our third or fourth time.

Starting point is 01:45:38 I really thank you for being inviting to me. I'll tell you that I think there's big things happening in Canada. The power company that I'm involved with in Canada is going to do unbelievable things for the Canadian economy. for also for other specific sex within our country. There's MPs in Canada that are concerned. This is how you start and it becomes unstoppable. And I'm proud to be part of that movement with you guys on both sides of the border. So from Canada, the Great White North, there's, I just met Rodolfo this weekend at this Bitcoin meetup.

Starting point is 01:46:13 He's NVK. The guy is brilliant. All right. He's brilliant. He's brilliant. He's brilliant, literally brilliant, all right? And he's salt of the earth and this community, I'm just like, are you kidding me? I'm 58 years old and I've never been more energized to try and help a solution that I've seen crumbling for the last 30 years.

Starting point is 01:46:32 And I'm not happy about it, but at least we have a solution. Thank you so much for making time coming on the show. We've got to do it again. All the links and the things that these guys were talking about, we're having it in the show notes. And looking forward to the next chat. See you guys soon. Okay. Thank you so much.

Starting point is 01:46:48 Later, guys. If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use. Just search for We Study Billionaires. The Bitcoin-specific shows come out every Wednesday, and I'd love to have you as a regular listener. If you enjoyed the show or you learned something new or you found it valuable, if you can leave a review, we would really appreciate that.

Starting point is 01:47:10 And it's something that helps others find the interview in the search algorithm. So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening, and I'll catch you again next week. Thank you for listening to TIP. To access our show notes, courses or forums, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by the Investors Podcast Network.

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We Study Billionaires - The Investor’s Podcast Network - BTC051: Bitcoin & Why the Bond Market Is Such a Big Deal w/ Greg Foss and Guy Swann (Bitcoin Podcast)

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