What Bitcoin Did - The Global Financial System Is Structurally Broken | David Dredge

Episode Date: December 26, 2025

David Dredge joins the show for a deep dive into why risk is being dangerously misunderstood across global markets, and why Bitcoin’s recent underperformance may actually be a symptom of structural stress, not failure. David explains why volatility itself isn’t the risk, why leverage is the real accelerant, and how TradFi risk models quietly manufacture systemic blow-ups. We unpack how suppressed volatility, ETFs, options markets, and structured products are changing Bitcoin’s market structure, why leverage is creeping in through Wall Street rather than native crypto venues, and how max pain dynamics emerge when under-capitalised risk builds up. David breaks down why the four-year cycle narrative is breaking down, why Bitcoin’s muted year isn’t about demand weakness, and how positioning ultimately drives outcomes. THANKS TO OUR SPONSORS: IREN ANCHORWATCH BLOCKWARE LEDN BITKEY SWAN FOLLOW: Danny Knowles: https://x.com/\_DannyKnowles or https://primal.net/danny David Dredge: https://x.com/ConvexityDredge

A risk isn't what you think's going to happen. Risk is what hurts if it happens. That lightning strike only catches one tree on fire. It's meaningless. The risk is the buildup of dry brush in the forest that allows that one lightning strike to spread tree to tree to tree and burn the whole forest out. Positioning is the only thing that matters. I'd be very cautious about being too enthusiastic about Tradfai getting their dirty little fingers into Bitcoin. I think it will inevitably bring. leverage and danger to the process. Do everything you can to eliminate the unrecoverable so that you can pursue the unimaginable. David Dredge, great to see you. You've come highly recommended from a good friend of the show, Peter Dunworth. He says you're the man's talk about when it comes to risk. So we're going to get into it today.

First of all, we should start by introducing you because first time on the show, I know you're not a die-hard bitcoiner, so people might not be aware of your work as much. Do you want to start with just giving a bit of background? Hi, Danny, great to be on. Glad that our mutual friends hooked us up. I'm sitting here in Singapore, you know, 6 p.m. on the Friday before Christmas.

I appreciate that. I run a little business here that's focused on long volatility, long convexity that our investors use us as a explicit risk mitigating strategy insurance, if you want to think about it that way, so that they go out and take more risk. and go out and participate more aggressively in growth assets and stuff. I'm a long, long time markets guy out here in Asia. I originally got to Singapore just in time for the October 1987 crash and spent many, many years in banks, most famously, arguably, sort of building what would be the emerging market trading businesses for bankers trust, sort of a leader in the derivative risk innovation world back in the early 90s through the 90s and through the Asian crisis and stuff.

So I have a lot of experience and still apply my skills in the world of financial derivatives in the complexity of derivative markets around the globe and have sat through and seen and participated in sort of a front row seat in every market dislocation that's come along since the October 87 crash. And so run a business that helps people manage risks so that they can grow wealth more efficiently. So with that October 87 crash, what happened?

Was that when the stock market crashed? Was it 50% or am I out of base there? So the S&P, the US stock market index, crashed 23% in one day. They call it Black Monday. Out here, we called it Blacker Tuesday because the next day out here, the Hank Sang Index,

Hong Kong and what is now the AS 51 index in Sydney, which was the ASX back then, crashed 50%. So those two local stock indices crashed 50% in the day. The best performing index in the world on that day was the NICA. It was only down 15% because it had this wild thing that nobody else had ever done, a circuit breaker. So when it went down 15%, it stopped. Now all indices have one of those. So were you working in risk management before that, or was it seeing the stock markets crash?

You thought, I need to do something about this. I need to be prepared for these kind of Black Swan events. I was a very, very young man then, obviously. And I was a trader. So I was then working for Bank of America. And then I was an FX and interest rate trader and saw, you know, the just absolute devastation, you know, two weeks into my new rollout here. in Singapore. And it dawned on me that the simple measures and methodologies around risk management in what was then and is now one of the most sophisticated largest banking, risk-taking

businesses in the world that they didn't have any idea what risk was. And they didn't have any idea how to manage it. And so I've been sort of trying to figure that out for the last 38 years. and learned a lot along the way. And over time, have developed a reasonably good idea. Now, I'll simplify it. You know, risk isn't what you think's going to happen. Risk is what hurts if it happens. Risk is about, as a good friend of mine, Harry Christian wrote in his book, a book he wrote.

He says, risk isn't about predictability. Risk is about vulnerability. And so when you talk about risk, I think one of the things that people may be commonly mistake for risk is volatility. But volatility is what you want. An investment without volatility is absolutely boring. There's no point in doing it. So how do you trade off the volatility and the unpredictability, the risk on the other side of it?

Yeah, exactly. I say all the time in my writing. So if your readers want to go and see I put up a note that we, it's actually our investor letter that goes out to our investors, a part of it. We put up on our website at convex dash strategies.com. And I refer to the traditional maths of the financial and economic world, which we all get taught in school and that which is runs the way banks and pension funds and insurance companies and wealth managers operate. I refer to that as sharp world.

And I'm not referring to it positively in that sense. I'm referring to it as derogatory as I can. and at the sort of heart of that from an investment perspective is what's known as the sharp ratio. And so, as you said, in a sharp ratio, it's return over unit of risk. And they measure unit of risk as volatility of those returns. And that is absolute nonsense. And obviously, upside volatility is good. Downside volatility is bad.

Average volatility is beatingless. And that thus leads to the dynamic that we're talking about. about here that's hard-coded into the financial system, into the regulatory construct of the financial system, that foregoing upside is risk-reducing. And so they want you to enter into things that are low volatility, suppressed volatility, asymmetric volatility, and then apply leverage to it. And they're going to claim that the leverage is not risk. It's the volatility that is the risk. And that, in essence, is what creates what we would call left-tailed or negatively skewed return dynamics, where you have foregone upside explicitly, think something very simple like a

bond, where you don't participate in rising markets, you have a bounded potential return, the coupon. And you have probabilistically, based upon historical look back of defaults, reduced downside. But every time something goes wrong, it turns out you didn't explicitly reduce downside, you've still got it. And that sort of is what gets built into banks, most prominently, that leads to systemic risk because they end up having not enough capital to support the risk they're taking because they're always measuring the risk with these very, very flawed metrics. So how does Bitcoin fit into a volatility profile that you would look at? Because historically, it's obviously been incredibly volatile to both up and downside. Over the last year, it's really

not. I think we're probably down around $10,000 or something since this time last year, roughly. And it's not the year that anyone expected in Bitcoin. I think people were expecting, like, a ripping bull market. I mean, we saw a move to 126K. We're back down to 87 or something as of time of recording. How do you view it in terms of both historically when it was very volatile and what it's maturing into today. Yeah, so I talk all the time that a proper investment portfolio is the opposite of what Sharp World is telling people to do. So Sharp World is telling people volatility is risky, so avoid it.

So literally if you're in a bank, you're regulated to avoid it. And then it's telling you that low volatility is safe, so apply leverage to it. Well, the correct investment portfolio is the exact opposite. own things that are thin-tailed that have natural volatility, where you're getting rewarded with upside volatility for the downside volatility risk you're taking, and hedge with things that are fat-tailed, and particularly fat-left-tail that have artificial suppressed volatility and attract leverage, which then limits the capital available when something goes wrong. and Bitcoin over the last five, six, seven years has been a fantastic, thin-tailed investment.

And so paired in a portfolio of other participating assets, it's been a very good compliment because it's rewarded you with upside for the downside risk you're taking. You'll know way better than me. I say all the time, and I don't really know specifically that Bitcoin's had six, 25% drawdowns in the last three or four years and is up 250%. That's a good reward for the risk you're taking. And then conveniently, in terms of the people that we work with, you know, in a diversified portfolio of risk-seeking,

participating assets, risk-managed with efficient, risk-mitigating asymmetry negatively correlating. Well, that worked really well in a year like 2022, because Bitcoin's worst year was a bad year for everything else. And so the things that we would provide as hedges. And when we're providing hedges, we're really hedging that correlation, the correlation of risk across assets that makes your diversified portfolio, your diversification lets you down.

And so it's been a fantastic compliment to people's diversified portfolios of risk-seeking assets. this year in what's been a really good year for global equity markets for gold for various things has been a mediocre year for Bitcoin, which had, you know, which had outperformed sort of all of them, X gold, up to a certain point. And then in the recent months, it has a pretty good pullback. And it's been a pullback that obviously you'll see it clearly than I do has been somewhat idiosyncratic. It hasn't been part of a correlated market dislocation. You know, maybe you can say there's been some noise around some of the high-flying tech stock single names, but at the index level, indices have been certainly not troubled particularly in

recent months, sort of, I don't know, when would just date the sort of origination of this sort of pullback in Bitcoin sort of September. It was probably early October. Nair or October. Roughly. Yeah. And so you had some noise around some of the other things, but that noise is kind of dissipated. And meanwhile, Bitcoin still, you know, give or take, you know, not at its lows, but maybe six or seven thousand dollars off its lows.

And, you know, I don't know exactly what drove that, but I would, you know, again, when I talked to our friend, Checkmate, and we had discussed over time about my thoughts about leverage in systems and how little leverage there actually was in Bitcoin, in particular because the native exchanges that apply, you know, finance or Bitmex or even the one that went out of business. FTX. FTCS. They cut the guy's position when he runs out of margin. It's not like the Tradfai system where they, you know, they give you a call the next day and

say, you know, when it's convenient, send us more margin. particularly if you're one of the big banks who is blessed by the, you know, monopolistic gift of the governments that underwrite them, they can keep, you know, running up under margin positions forever until the system collapses. But Bitcoin, the exchanges were the riskiest trading took place. I mean, imagine if the, you know, one of the top two largest exchanges in Tradfai went out of business like FTX did. I mean, the system, you know, talk about a systemic risk. But in that one, it's just the people involved. in FTX lose money. That's the way it should be. So, but what's kind of happened, and this is what you know, Checkmate wanted to talk to me about at the time was this sort of proliferation of growth in the Tradfai world, obviously the ETFs, and then more significantly in terms of what I'm rumored to be a specialist in or something I might understand that the options on the ETFs and the evolution of that getting, adding sort of that Tradfai style of leverage into the system. and the evolution, inevitable evolution of the availability of these I-bit options, which dominate the volumes in that space, into the world that I really do focus on, which is the structured product, the complex, embedded, short, volatility, yield-enhancing investment products, auto-cullables and stuff like that, that really drive the leverage in much of the equity, interest rate, FX markets that are dominated by the trad-fied world.

And that's kind of, I think probably why some sensitivity build up there. I mean, of course, everybody's familiar with the leverage from micro strategy and dats, I think you guys call them. You know, but you just got enough leverage build up in kind of a short time that you needed to clean out of it. This episode is brought to you by Anchor Watch. The thing that keeps me up at night is the idea of a critical error with my Bitcoin cold storage. And this is where Anchorage comes in.

With Anchorage, your Bitcoin is insured with your own A plus rated Lloyds of Loids of London insurance policy and all Bitcoin is held in their time-locked multi-sig volts. So you have the peace of mind knowing your Bitcoin is insured while not giving up custody. So whether you're worried about inheritance planning, wrench attacks, natural disasters or just your own silly mistakes, you're protected by Anchor Watch. Rates for fully insured custody start as low as 0.55% and are available for individual and commercial customers located in the US. Speak to Anchorage for a quote and for more details about your security options and coverage.

Visit anchor watch.com today. That is anchorwatch.com. With Fiat money constantly debasing, wealth preservation isn't optional. That's why I recommend Swan Bitcoin, a team of dedicated Bitcoiners who work with families and businesses to build and secure generational wealth with Bitcoin. Strong relationships with clients are at the center of everything Swan does. A dedicated Swan private wealth representative, which is a real person that you can text and call, will help you build a Bitcoin wealth strategy using Swan's comprehensive platform of Bitcoin services, including tax advantage retirement accounts, advanced Bitcoin cold storage using

collaborative self-custody, inheritance planning with both trust and entity accounts, tax loss harvesting, asset back loans and more. Swan have helped over 100,000 clients since 2020, and if you're serious about acquiring and securing Bitcoin, I recommend Swam. Meet the team at swan.com forward slash wbd, which is swan.com forward slash wbd. Do you wish you could access cash without selling your Bitcoin? Well, Leiden makes that possible. They're the global leader in Bitcoin-backed lending, and since 2018, they've issued over $9 billion in loans

with a perfect record of protecting client assets. With Leiden, you get full-costly loans with no credit checks or monthly repayments, just easy access to dollars without selling a single SAT. As of July 1st, Leiden is Bitcoin-only, meaning they exclusively offer Bitcoin-back loans with all collateral held by Leiden directly or their funding partners. Your Bitcoin is never lent out to generate interest.

I recently took out a loan with Leiden. The whole process was super easy. The application took me less than 15 minutes, and in a few hours I had the dollars in my account. It was really smooth. So if you need cash but you don't want to sell Bitcoin, head over to ledden.com. forward slash WBD,

and you'll get 0.25% off your first loan. That's ledden.com. So I'm just a simple Bitcoiner, David. I'm probably everything you hate about Bitcoin is in the sense where I don't do any hedging. I'm almost 100% into Bitcoin and I just leave it there and I wait. That's all I do. And so when it comes to like the I-Bit options, I know they're a huge deal,

but I don't exactly know how it changes market structure and the impact it will have on the Bitcoin market going forward. Like you say, this is the thing you're an expert in. So how do you think large option markets coming to Bitcoin will impact it? Well, you could think of options as leverage, right? So you obviously are well aware that if you lever up your position in Bitcoin, that in exchange or you're taking a lot more risk for the amount of capital that you have. And you think you're going to get something for that.

But of course, when things go wrong, you get stopped out, which has been literally the beauty or the thing that makes Bitcoin not risky is that the guy's position gets cut. The exchange grabs his margin his position gets cut. So you could kind of, in a sense, only make as much money as the guy on the other side can lose because the position gets extinguished. So, but in the Tradfai world, that margining isn't based upon a bunch of guys who are risking their own capital. It's based upon regulated financial institutions that are using really, really bad mathematical risk and accounting rules. And this margining thing masks and the way they, they, they obviously. operate, masks the risk in the tails. And so when you start getting a world where option sellers,

volatility sellers, can come in, usually with somebody else's money because they're a fiduciary, and they're selling this optionality to harvest this image of enhanced returns, well, almost without fail, they're not accounting for the tail risk on it. And so you start to get undercapitalized risk in the system, which will start to make that underlying component negatively skewed. So you'll get the movement where it pulls it the direction where the weakness, the fragility is in the system. And so that vol selling, you know, I'm in the business of vol buying. So that's me in a sense taking on non-recourse leverage, right?

So I'm going to buy a put option. You know, let's say I'm going to buy a put option on Ibit. So somebody in exchange for the premium I'm paying them has underwritten the downside and I get all the upside. So if I buy a put and I go and buy I bit, if it goes up, I get that benefit. If it goes down, the disbenefit goes to the guy who provided me the non-recourse leverage. And for that I pay him a fee. Now, in the long run of something that is driven by its ups and downs, which is, you know, interestingly, particularly fat-tailed things, things that have low volatility, tight distributions

will have fat tails, that the long-term compounding paths will be driven by the extremes, the power law, right? So the moments of the distribution, the average in a power law, you won't know until, you know, let's say we're at dinner. Danny and you know, there's me and you, there's checkmatey and there's Pete and et cetera. And we're doing a survey of average wealth. And we're going to try to guess the average wealth. But we won't know what the average wealth is until the last guy who happens to be Jeff Bezos.

And he will be the average, right? He'll be 100% of the average because it's a power law distribution, not a normal distribution like we were trying to guess the average height, right? nobody's height is going to be enough to, you know, fundamentally change the mean. But wealth is not normally distributed. It's power law distributed. And so when you create these fat tails through the suppression of volatility and the addition of leverage, the magnitude of the tel events will dwarf the mean and variance

inside what you thought was a much more narrow distribution. And so the value of optionality grows in that. because I want to get the infrequent low percentile, but high magnitude outcomes. Now, in a naturally volatile thing, it doesn't work. You have much thinner tails, and so you're fine to just kind of be in there doing it. And so the guy who's selling that option who thinks, oh, good, I've collected this premium. And, you know, my worst case is, you know, one standard deviation downside, only to find out that the one standard deviation downside. was a lie in a world that is accumulated leverage and has significant uncapitalized risk that will

generate this fat left tail when it occurs. So we obviously were talking a little bit before about how Bitcoin's volatility is dampened. One thing I've not fully got my head around with the options is assuming Bitcoin volatility comes back, which I think it will, probably both to the up and the downside, and it obviously trades 24-7 globally. Do you think there's going to be a lot of people who aren't managing risk using these ibit options who are going to get blown up because bitcoin can't bitcoin can be so volatile and it does trade 24-7 yeah and even more so and you know what you know what did the tradfai world eventually really drives this accumulation of of leverage and and short volatility is these much more highly juiced structure product things so the auto callables

the example and i mentioned it on the conversation or the checkmate the first major institutional long-dated auto-callables started coming out. And so one was issued on October 31st. And the embedded in that is a what they call a knock-in put where the guy who's bought the note is getting a yield, but embedded in that without him really under generally understanding it, he's short and at the money put that knocks in when the market's 25% down. Now, I don't, don't know exactly, I haven't dug through all the details of it, but just a quick calculation that I did. The Ibit adjusted Bitcoin rate for that 25% down knock-in was 82,000. So where did the market go to, just coincidentally, on that Friday night, November, what was that 21st,

it went to 82,000. And then recover. Is that the market searching for it? for Max Payne. Correct. That's exactly what it is. It's exactly what it is. And so that's, you know, again, triggering that sensitivity, whether it's the, you know, the bank who's managing that risk hedging it. And, you know, he's trying to manage negative gamma or somebody.

And you know, you drive it there and then once it knocks in, the pressure's off and it recovers again, at least in that short-term series of outcomes. So as someone who like follows markets loosely, but obviously no way near as the the level of view. Is Max Payne just a meme? Because I see people say, like, the market always wants to find a pain. What does that actually mean?

And does it happen? It definitely happens. And to some extent, I've made a career out of it. Yeah, because, you know, again, this leverage means that you've got uncapitalized risk. So if people are levering risk based upon bad mathematical metrics, And again, in the financial industry, in the fiduciary industry, that's what everyone's doing.

They're using things like value at risk and regulatory reporting and accounting nonsense and going out and taking risk, you know, massively asymmetric risk, risk with other people's money. And so you get these accumulated undercapitalized tails in the system. And then it's like a magnet, right? once it starts going there, you know, it's an unstoppable train. Now, the analogy that I use all the time when I talk about endogenous risk, and so the way I would think of the world, Danny, is that all the risks that matter, a dredges of that I say all the time, positioning is the only thing that matters, because the risk that matters is all endogenous.

It's not about predicting the unpredictable lightning strike that's going to catch the forest on fire, that lightning strike only catches one tree on fire. It's meaningless. The risk is the buildup of dry brush in the forest that allows that one lightning strike to spread tree to tree to tree to tree and burn the whole forest out. And in the financial industry, that risk, that interconnectivity of dry brush is leverage. And once that starts triggering a risk reduction, it causes this reflexivity where it just goes and finds where the most vulnerable part of the forest floor is. And that's where the fire is going to go and do the damage. And it's going to go and clean out those weak hands that over levered or undercapitalized risk and cause the biggest

pain. And that's the way, if you ask me, that's really how markets work. So the other thing that I've kind of been trying to figure out on the Ibit options is if it's going to have a negative impact on Bitcoin price, because it seems to me at least that in Bitcoin's history, it's largely been driven by people, like just retail, obviously ETS with the start of Wall Street really coming into this and with options, which can be much larger on top of that,

is this like Wall Street taking over the Bitcoin price chart instead of being retail? And what does that mean for it? I think that's a great question. I think in a sense, I think that is the question. I've been known to say, and this goes back before there ever was a Bitcoin and what, you know, I guess I wouldn't have used the term tradfai, but now that we're all used to it, I'll say Tradfai, but I would have said Sharp World. Tradfai destroys everything, right, because it brings this leveraging dynamic driven by the regulated institutions who have no skin in the game. So they're always happy to take on destructive risk that is allowed, in fact, incentivized by their regulatory risk and accounting construct that creates the systemic risk that necessitates, that brings financial crises and necessitates global bank bailouts every, you know, decade or so.

And sort of, you know, if you think about it, the great example, the easiest example, Danny. I mean, think about, I mean, you're maybe too young, but even today, what could be safer than U.S. houses? You've got the world's strongest, most advanced economy, most wealthy economy, most dynamic economy. You know, what's safer than the guy owning his own house? And yet the TragFi system managed to blow that up in 2008, right? It found a way to tranche up and take advantage of regular. that was all our view and trust me, you know, explicitly constructed to try to subsidize homeownership. I mean, think about all the rules in banking and in tax treatment and in

government mortgage guarantee organizations, Fannie and Freddie and the risk-weighted asset capital preferential treatment on mortgages and then the rules around tronching and and collateral and in building out mortgage portfolios and super senior tranches of subprime CDOs that get treated like a risk-weighted asset because, you know, you've played this accounting game of buying insurance from a monoline insurer who's a AAA rated guy because he only insures triple-a-rated mortgages. And because he's AAA, he doesn't have to collateralize any of the insurance. And the thing gets a zero-risk rating asset and you can leverage it infinitely and say it's no risk and pay yourself bonuses every year on the crude income. Well, that whole thing destroyed the

US housing market, destroyed the global banking system, right? So I'd be very cautious about being too enthusiastic about tradfai getting their dirty little fingers into Bitcoin. I think it's, well, it inevitably bring leverage and danger to the process. Yeah, I think it's going to be really interesting because like as Bitcoin is often described as Bitcoin being the Trojan horse into the traditional financial system and that, um, you know, it's this like uncorruptible thing, which I believe it is, but only time will tell if that's actually true. So you've obviously been in markets a long time. Were you around like working in the markets in 2008? Yes. I was. And, and did you spot this coming then?

Well, at that time, I was still in the banking industry. And so it was very easy to spot what was coming because I worked in a bank. One of the things I say all the time. So another analogy that I use all the time, Danny, in terms of investment strategies and how you should manage your investments, is the race car analogy. In a multi, a 40-lap Formula One race, who wins the race? Well, the guy with the best breaks, right? because the guy at the best breaks doesn't crash,

and he could drive faster. And so when I'm talking to people about risk, most people when they're thinking about risk want to predict the future unknown course of the racetrack. But the actual risk, the only thing you can control is your car. So what you want in terms of risk management is a resilient, robust, dynamic car. You want good brakes so that you can go out and test your car

on how to drive it faster, better aerodynamics, better tires, different steering, transmission, stronger engine, right, skills. So in a bank perspective, if I'm around a bunch of bankers or regulated financial fiduciaries. Everybody always says, Dave, what do you think the risk is? Do you think it's geopolitics in North Asia? Or do you think it's recession in Europe? Or do you think, you know,

all these random, exogenous things out there? And I say, no, the risk is your balance sheet. Why are you looking out there? All the risk is right in front of you. And if you're sitting in a room full of bankers and you say, well, your risks are almost certainly driven by the lack of capital to the things, that you've been told you can account for as riskless.

So you've applied a ton of leverage to them. And the interesting thing is, so is he, and so is the guy sit next to you. And so is the guy sit next to him and so is the guy sit next to him. Because you're all following the same rules and paying on the same incentive structure. And so, you know, if you're inside a bank and you understand what a bank does, it's pretty easy to see where the risk is built up because you're doing the same thing that everybody else is doing. And you know where there's no capital.

And again, you know, U.S. mortgage structures that had been gamed to add infinitum. But, you know, not just that. All of the lack of capital around complex structure derivative type activities was massively undercapitalized. And you could see that kind of stuff coming. And I'm sure you've seen the movie The Big Short. There was all kinds of guys inside big saying, hey, this is a problem. or, you know, margin call or all of those saying, hey, this is a problem and getting told, you know, what was the famous Chuck Prynch code, you know, that we know it's a problem, but, you know, as long as the music's playing, we'll keep dancing because that's how they get paid, right? They're not getting paid to grow the wealth of the bank over the multi-lap race. They're getting paid based upon each lap. So they're just trying to sort of match the average lap speed because they believe they start over each lap. They're getting paid based upon each lap. They're just trying to sort of match the average lap speed. They're just trying to sort of match the average lap speed. They're not trying to compound growth and compound wealth. They're just trying to get through the year and

collect money. And so they're happy to, you know, in the old analogy, you know, pick panties up in front of the steamroller. What Bitcoin did is brought to you by the massive legends, Iron, the largest NASDAQ listed Bitcoin miner using 100% renewable energy. Iron are not just powering the Bitcoin network. They're also providing cutting edge computing resources for AI, all backed by renewable energy. We've been working with their founders Dan and Will for quite some time now and have been really impressed with their values, especially their commitment to local communities and sustainable computing power. So whether you're interested in mining Bitcoin or harnessing AI compute power, Iron is setting the standard. Visit iron.com to learn more, which is iri-r-en.com. What if you could lower

your tax bill and stack Bitcoin at the same time? Well, by mining Bitcoin with blockware, you can. New tax guidelines from the Big Beautiful bill allow American miners to write off 100% of the cost of their mining hardware in a single tax year. That's right, a hundred percent. A hundred percent. 100% right off. So if you have $100,000 in capital gains or income, you can purchase $100,000 of miners and offset it entirely. Blockware's mining as a service enables you to start mining Bitcoin right now without lifting a finger. Blockware handles everything from securing the miners to sourcing low-cost power to configuring the pool, they do it all. You get to stack Bitcoin at a discount every single day while also saving big come-tax season. Get started today by going to mining.blogwear solutions.com

Of course, none of this is tax advice. Speak to your accountant or tax advisor to understand how these rules apply to you, and then head over to mining.blockware solutions.com forward slash WBD, and you'll get one week of free hosting and electricity with each hosted miner purchased. If you already self-custody of Bitcoin, you know the deal with hardware wallets, complex setups, clumsy interfaces, and a seed phrase that can be lost, stolen or forgotten. Well, Bitkey fixes that. Bitkey's a multi-sig hardware wallet built by the team behind Square and Cash app. It packs a cryptographic recovery system and built-in inheritance feature into an intuitive, easy-to-use wallet with no seed phrase to sweat over. It's simple, secure self-custody without the stress, and time named Bitkey one of the best inventions of 2024. Get 20% off at Bitkey.world when you use the code WBD. That's B-I-T-K-E-Y.World and use the code WBD.

See, the thing that I find frustrating about this kind of thing is that it, and this is, and this is talked about in Bitcoin a lot in the sense that when money is broken, everyone has to be an investor plus a risk manager. And if you're just like, I don't know, a doctor or a lawyer or a teacher or something, you shouldn't have to think about all this. Does the sort of fiat currency world frustrate you? Oh, it's so much. It's my enemy. And again, sharp world is my, it's funny. You know, and people joke about this because I, you know, your, your followers and listeners can go and track me down and hear me talk at things at podcast and interviews and conferences and stuff. And I am a very vocal and have been for 30 years outsmoken critic of short-world of the regulatory

construct of banks and a very outspoken critic of the practices of central banks and how they manage monetary policy and the sort of inflation, the commitment to generating inflation, particularly asset inflation and the wealth segregation that goes along with it. Now, on the other hand, the practice of Sharp World is what provides the opportunity that my business lives off of. So the cheap convexity, that very highly efficient asymmetry, that allows our investors who tend maybe not to be just individuals, but there are some wealthy individuals but are institutional, to allow them to sort of delegate that breaking, that.

risk management to us and then go out and just figure out how to drive faster and do what I would you know, crudely call the easy part and, and just go and own stuff that goes up when things are good, goes up when fiat's being debased, that goes up when asset inflation, which I'll argue, you know, sort of been the sort of singular growth policy since the, since that 87 crash, since the first time Alan Greenspan cut interest rates because stock markets were falling, which started the first time in the October 87 crash, and then basically evolved into the Greenspan put that it was implemented all over the world and became inflation targeting central banks, beginning with the New Zealand Central Bank and then standardized around the world,

where they, every time asset prices fell, they cut interest rates and keep propping the asset prices up. and they drove growth through the wealth effect of asset inflation, concentrating the wealth in more and more hands and concentrating, I don't know if you can go and see the numbers, the consumption that drives the growth in places like the U.S. in particular, in more and more, you know, fewer and fewer hands, and the bigger and bigger and wealthy people. It's funny, the same people who make fun of trickle-down economics from the Reagan era

of that he was going to cut taxes, and then the wealth would trickle down to every because they get more jobs, they seem very happy to implement trickle down asset wealth because that's literally been the policy. And that, of course, then leads to, again, back to the endogenous problems and the sort of fragility of systems, you know, it leads to this sort of geopolitical fragility and leads to economies that are really, you know, downstream from the markets. So I say all the time, economics is downstream for markets. But you don't have, markets don't fall because there's a recession. There's a recession because markets fall.

So, I mean, you sound like a bitcoins, David. That's for sure. I'm not a disbeliever. That's for sure. Do you think there's a future, like a near future, you know, give it 10, 20, 30 years, whatever you want to, whatever number you want to pick, where this kind of Fiat, Sharp world doesn't exist anymore and we move to like a hard money standard again? I'm not good at time.

In fact, in a sense, my job is solving the problem of time. I don't know when the lightning strike's going to come. I just know how much risk there is in the forest. And so I would say inevitably, yes, that this is unsustainable. So solutions are going to have to be found, exactly what those, you know, whether the fire is going to start because of lightning or because kids are playing with matches or which direct and the wind's going to blow, I don't know. But there is a lot of fragility in the system.

I'll go back to this sort of basic core, the thing that I believe is at the very core of the challenges, and that's the population demographic problem. And that problem, as I would define, it isn't declining population, although that has obvious complications itself, but by far the greater problem is declining working-age population. And so this gets really to the heart of Bitcoin because the declining working age population, let's reclassify them, declining taxpayer and saver population. And so I say this all the time that I find it as the single biggest weakness in those who purport to make policy, economic policy, is how can they not factor in,

into everything they do, this simple sentence that I say, so tell your listeners, every time somebody says something to you, every time Rachel Reeves in the UK, you're in the UK, right, Danny? Now, I am in the moment. I actually live in Australia, but I'm here right now. Yeah. Every time Rachel Reeves talks or Governor Bailey talks or Governor Bullock talks or, you know, Scott Besson talks or Awaita-San talks in Japan.

at this sentence at the end of whatever they said, and for every year going forward, there will be fewer taxpayers. And that will, in a significant way, clarify the nonsense that's coming out of their mouths. Because how can you continue to borrow from the future to try to facilitate, maintain, sustain growth today, knowing that in the future there will be both fewer taxpayers and fewer savers. So there's fewer bond buyers in the future. There are fewer sources of revenue for the governments in the future. And now, I'll argue, and noted this as my notes, I would argue that we've been under financial repression that a big part of the

subsequent implementation of BIS regulatory capital guidelines, which is known as Basel 1, Basil 2, and now Basel 3, is in essence financial repression, right? It's using the banking system to own a shit ton of government bonds. And the government keeps issuing those bonds and then regulating banks and pension funds and insurance companies to own them. And so this financial repression has had the intent of keeping interest rates below growth. And when they did that back in post-World War II era, that allowed the debt that had accumulated during World War II. to subside. Difference back then was the governments were shrinking after the war, and the private

sector had wiped out all of their debt in the depression and the austerity years during the war. And you had the, what I call the pig in the python, the largest population cohort, the baby boomers, were just barely in the jaws of the python. And now, 80 years later, 70 years later, you have all-time peak government debt, all-time peak private sector debt, and the pig is coming out the other end of the Python. And they're no longer the largest tax-paying, largest saving bond-buying cohort.

And the cohorts behind them, and every subsequent cohort is going to be smaller. And this is what drives this problem and creates this sort of inflation feedback loop, because as you debase the savings of the now retirement cohort who saved in your bonds because they were quasi-forced to through the regulatory construction around the fiduciary system, they go into retirement with not enough wealth to offset the rising cost of living that you've imposed on them. And so that requires ever more subsidy from the government to cover their longevity, their unemployment, their social security, their retirement benefits, their medical benefits, etc., which requires more taxes from a smaller taxpaying cohort who are also burdened by the higher cost of living. And so once you tax them more and they consume in a higher cost of living, guess what? they have less money left over to save.

And so eventually you have to financially repress more. And central banks have to become the buyers of the bonds and things that sometimes they call quantitative easing, although last week they called it not quantitative easing when they announced they were going to do it. And you create this loop where it just keeps going. So until you stop debasing the savings of your populace as they move from savers, and taxpayers to retirees and, you know, where necessary, subsidized in their retirement because their savings won't cover the higher cost because you've debased the value of their savings by

forcing them to own bonds. And, you know, they weren't smart enough to get on board Bitcoin to finance their retirement. It's a very difficult loop to get out of. And so to your point, and, you know, the long answer to the question, it's a complicated world. You know, you're going to have to figure out how to solve this problem and you need to end that loop or you blow it up. It's scary. I was actually talking to someone on the show just recently who was talking about Social Security potentially going bankrupt by, I think 2032 was the year that they gave. And so if we do have like an aging demographic, more reliant on social security retirement schemes around the world and becoming more heavily reliant on Medicare and like the NHS here

in the UK, it gets messy really quick. And is the only way out of that essentially to print more money? And so when I ask, does the Fiat system die, is that because of this, they end up having to do a huge print, which then ends up in some kind of like hyperinflation event? They don't have to, but that is what they have chosen to do, right? So again, I'll argue this really goes back to 2000, but, you know, accelerated post-GFC, accelerated again post-COVID has, you know, really gone global. You could argue it started with my good friends in Japan, who, you know, added more fuel

to that fire today with their own policy nonsense. And they've chosen this. And so if you're, if you stay in this loop, we build a model with, I had some interns here for this summer and we built a model, what they call an agent-based model on population demographic issues. And, you know, it shows once you're in that loop, and your fertility rates declining, and you start to get the imbalance between retired turtles, we call them in the model, retired turtles and working turtles.

And if the government is subsidizing the decline in overall productive resources relative to unproductive resources, and they end up having to do that to print money because the smaller productive resources can't cover the tax burden of doing that, and then they themselves have less savings when they go into retirement. It becomes an impossible loop to solve and the only solution for it, I'm getting a little bit economic geeky with your crowd, but the only solution for it, the true solution for it is productivity gains, right? You have to make the fewer workers more productive so that there's more productivity. They have to have higher real wages, not persistently lower real wages. You can't constantly debase their earnings.

Janet Yellen, you know, joking about it in 1996 when the Fed was talking about going to inflation targeting. And Alan Greenspan thought the inflation target should be zero. And Janet Yellen thought it should be 2% because workers wouldn't know they were having their real earnings debased. And the benefit to the corporate, to the employer would encourage him to hire more workers because, you know, he's kind of getting the 2% that they're losing. And that's literally, you know, that's in transcripts from the Fed. I wrote about it one month. Jenny Ellen was my econ professor in grad school.

It's so insidious, though, because before I got into Bitcoin, I didn't even necessarily think inflation was a bad thing. I thought if we were at 2% inflation, that was a sign of like a healthy economy. And like, these are the lessons you're taught. And then as soon as you kind of see behind the curtain, you realize everything was a bit of a lie. So the productivity is an interesting one, though,

because the obvious place where that could come from is through like AI and robotics, which is seemingly going to be a really big part of the economy in the future. Do you think that could actually save the central banks around the world in the short term? I guess maybe, you know, I don't know. I don't have a lot of, you know, I like AI as it functions as a simple tool, but I don't have a lot of respect for it. AI or LLMs, this sort of current version of AI that's actually available for use is an LLM.

And an LLM is exactly like Sharp World, right? It, I coined it. So if you're, again, if your readers want to go, I wrote one of my notes that I titled the Polonni paradox. Have you ever heard of Michael Polonyi? No. He was a philosopher scientist in the mid-1900s. And he coined actually another guy, David Olinie.

alter current economist coined referring to him, the Polanyi paradox. So what Polonio is known for is what's known as tacit knowledge. And he, in the Polonji paradox is known as we, humans, can know more than we can tell because we have tacit knowledge. So we, we can know how to write a bike, but we can't necessarily write down the mathematical formulas of physics to explain it to somebody, right? But we know. We know, we know, we know, that jumping off, using a Nassim-Taleb fragility analogy, that jumping off a one-meter-high fence 10 times won't hurt us. But jumping off a 10-meter high fence one time probably will.

That's tacit knowledge. It's skin in the game, right? Well, I coined the reverse Polanyi paradox in this note about LLMs. And the reverse-Polanyi paradox about LLMs goes, AI can tell more than it can know. Right. AI will answer every, will answer every question.

It actually knows nothing. Right. And all it's doing is taking its entire corpus of it, the data set and saying, on average, what's the next word? It's just another normal probability distribution saying that in the course of, you know,

human data that I have access to, what's the middle of the distribution, and I'll put that word next. And it's really remarkable how it does that, now quickly it does it, now fast, can read stuff and order it that way. But again, taking science again, going to Claude Shannon. Claude Shannon's the father of the modern day digital age. And he wrote when he was a PhD student back in 1950 something, the mathematical theory of communication, and what's known as Shannon's entropy, which is the math behind how information moves. It's bits and bytes. He coined the word bits. And what Shannon would tell you is there's no information in the expected. All learning and growth comes outside the expected outcome. And it's what we don't know that matters. It's not what

we do know that matters. So I have very little hope in the current formation of AI. And I have a lot of doubt that the promises of generative AI will produce what they claim it will produce, because I struggle to understand how AI learns. Because the current AI doesn't learn at all. It just expands its data set and gets a better problem. of what the next word is, but it still hasn't actually learned anything, and it only knows the average of what everybody already knows. And one of the things I criticize central bankers with all the time, because they also seem to be incapable of learning, and that, you know, it's a Nassim telebism. Without accountability, there can be no learning. If you're never punished

for your mistakes, you know, there's a big difference between reading that sticking your hand in the fire will burn and sticking your head in the fire. So it sounds like you're kind of fading the eye part of AI. You don't think it's actually intelligent. So there's probably, is there anything else out there that could increase the productivity to a degree that could save the current financial system if it's not going to be AI? Or is that it's like single shot? No, I think there's a whole bunch of things out there.

And almost all of those things are things that we haven't thought of. and that's kind of the whole point. And so finding thing, you know, Elon Musk. Right. There's an energy or. Yeah. You know, you know, Elon Musk building, you know, energy and mining capability on Mars, nobody had on their bingo car 10 years ago. And now this crazy guy said, what if we did this?

You know, and so it's always the, you know, and again, this is another investment thing. And this goes sort of in line with, I was having dinner with. my dear old friend, Pippa Mombgren, ever heard of Pippa Momgren? I have, yes. Geopolitical Economist strategy person, also an ex-bankers trust alum. And we were, we think, we were all brainwashed the same way, Nassim Taleb and me and people all brainwashed the same way in our bankers trust days when we were actually in the risk business.

And something I say, you know, the key to risk management or the key to life is to try to, you know, to do everything you can to eliminate the unrecoverable so that you can pursue the unimaginable. And that's how I advocate people manage their risk portfolios. That's the brakes on the car so you can go out and explore, you know, the capacity to go faster. And so cut off those wings. Stop focusing on the average. Stop doing the simple. Cut off the risk of the negative tail that you'll never recover from, bankruptcy and insolven

insolvency in wealth management or death in life and go and find the thing that nobody else has ever thought of. And the human race has an unbelievable track record in solving problems. It wasn't that long ago that people would, you know, would have told you that we're going to run out of food because population is growing too much. Now we've got to solve the problem that, you know, something that history books don't really have a record of is how to deal with population shrinking. And that shrinking, sort of being hard-coded over the next two or three generations because the birth rate decline, the fertility rate decline, is already hard-coated in those that were born behind the next few generations. And so we need to figure out how to cope with that and coping with it by, and, you know, again, I wrote about this summer.

I think the note was called preservation and linked to a paper that was done commissioned by the G20 and done under the oversight of the BIS in 1998 that said all this stuff, said we, you know, we should not borrow from the future. We should focus on investment in productivity. We should, you know, instead of going with what BIS, think about what the initial Basel 1 did, it provided the, you know, sort of maximum subsidies, banking, subsidies, the minimum capital required to own these assets and, you know, pay yourself bonuses on the annual accounting revenue to government debt and mortgages. Well, how much productivity comes out of government debt and mortgages? Shouldn't banks like they once used to do lend to businesses, to startups, to small businesses, to community businesses, to, you know, guys that are out creating the actual productivity that allows growth? But we went the opposite way. And then now we're going to suffer through trying to solve that.

So I think there are all kinds of solutions that nobody's thought of. And maybe AI is that solution or certainly is part of that solution because it is a fantastic tool. And what it can do, nobody really knows. What it currently does do isn't anywhere close to what people are telling you it will do. But maybe they get it there. Yeah, I don't know if this is recently biased, David, but it feels like we're living in most interesting times for good or for bad. Like everything you've talked about then,

and then in the macro world, it's, I mean, things are a mess. But I'm very conscious of your time, but before we close out, I wouldn't mind just getting a little bit into the macro side of things. Because QT and the US has now come to an end and they're doing their not QE, QE, QE. Rates are getting cut while inflation is still pretty high. Fiscal dominance is a story that, like,

I'd never even heard the term fiscal dominance until a few years ago. and now it's kind of the thing that everyone's talking about. How much for a mess are we in? You're always looking for risks in the market. What are the big risks that you're looking at right now? Well, again, I see risk as leverage as imbalances. So I don't think about future events. I can see where there's a lot of fragility, buildup brush,

fingers of fragility to use pairbox, sandpile, self-organized criticality language. You know, you don't have to, you don't have to be too much of a rocket scientist to understand that still, you know, going back where you got a real sniff of it in 2022, there's a lot of uncapitalized risk leverage in government bonds. So government bonds, you know, were piled on to regulated balance sheets. You know, nobody with their own retirement money was buying 30-year bonds that yielded zero. And yet, you know, all of the major governments in the world hit their peak all-time bond issuance when they yielded zero. So somebody was buying them. In fact, somebody was buying more of them than ever in history.

Well, who was that? Regulated financial institutions. And so you get this dynamic like Silicon Valley Bank, a bank that regulated, a heavily regulated bank goes out of business, goes insolvent following the rules because it owned U.S. Treasury bonds. So again, my famous quote, which I quoted way before Silicon Valley Bank went out of business, banks don't go out of business taking risk, banks go out of business, levering that which they can account for as riskless, right?

And so banks were told these bonds, U.S. treasuries, French government bonds, Giltz, Boons, JGBs, Australia, were riskless. And inside even non-developed countries, their domestic bonds are riskless. Greek government bonds are riskless to everybody in the world because they're inside the Eurozone. Indonesian government bonds are riskless to Indonesian banks. And banks aren't that, you know, banks are pretty creative. They'll figure out a way to use derivatives to leverage that up even more and still get it treated as a zero-risk weighted asset.

even though it's another round of leverage on top of their 30x leverage already. So, so, you know, it's not hard to see. And then you, you know, you get the stupidity like the liability-driven investment strategies in the UK where pension funds are levering guilt, long-dated duration guilt, 5x, and accounting that is risk-reducing for their otherwise, you know, equity portfolio, only to find out that they need to get bailed out because all of their risk is the leverage, and the guilt. And so that still remains arguably one of the biggest risks in the system. And you can see how the back end of everybody's bond curve has behaved this year as all of the central

banks have cut rates. None of the long end rates have come down. In fact, today, thanks to our friends at the Bank of Japan, they're all going up aggressively. And so that's still a major problem, maybe the major problem in the big global system because that's where the systemic risk is the systemic risk without fail will be in the banking system because that's where the bulk of the protected leverage is and that's where the sensitivity

when things go wrong are. Having said that, one of the things that has been proliferic in its growth in the last couple of years has been the leverage going into the high flying stocks. The Mag 7, the crypto strategy, a great example of a high-flying stock that inherent in its own construct is leveraged. And then all around it in the financial engineering of the Tradfai attracts

more leverage. So, you know, let's take a levered micro strategy and embed it in a three-time levered ETF, as though that makes sense to somebody. Or do. auto-callable, these highly levered vol-selling strategies on micro-strategy. And so the proliferation of that over the last several years has been a big part, in my opinion, of the noise that we saw in iBit and fed through into Bitcoin in October, November, and that we've seen in some of these names like Micro Strategy, who's getting it from both sides and and eventually we might see in other high-flying meme stocks. So those are things I think, you know, we saw quite a bit of volatility around them.

Some have recovered. Some have not recovered, micro strategy being a great example. AI related things, you know, that sort of cycle of internal trading. I'll lend you money to buy my product. and we'll both say they were done this big deal and our stock prices will go up. And then those will get embedded in three times levered auto callable structure. And so that stuff seems to me to have gotten pretty juiced and attracted quite a lot of leverage. Japan itself, it just structurally is a very interesting place.

And I've long said, obviously, I don't, as I hope I've made it clear, I don't know when or where lightning's going to strike. I don't even know if lightning's going to be the thing that starts. the fire. It's usually the thing that you weren't anticipating that surprises you. But I've long said, you know, if people, and I don't necessarily agree with them, but people are more familiar with the, what they call the Lehman crisis, the thinking of Lehman as the trigger of the GFC. When we get more time, I'll tell you what was the actual trigger. We can't do that today. You know, I've long said that the next trigger is going to be Japan, that Japan is the likely spark because of the fragility,

the Japanese market system economy after, you know, the longest period, 35 years of manipulating interest rates, manipulating the price that should balance between borrowers and lenders, savers, investors, speculators, hedgers, importers, exporters, they've decided, instead of you know, hundreds of millions of participants coming and finding, an equilibrium balance where you're happy to participate, we're going to set it here. And we're going to set it there and keep it there for 30 years. And now the market's decided they've had enough of that and the transition away from that is proving challenging.

And I think still has a reasonable possibility of being the kind of thing that triggers some of these problems because if Japanese investors who are the largest net international creditors in the world, so Japan. Inc. is the biggest foreign bond owner in every government bond market in the world. And if they decide they need to bring money back to buy their own bonds that are circa 250% of GDP, and the Bank of Japan is in theory running down their bond holdings, they're running down their bond holdings at a pace that will get them to some target in a hundred years. So they're not exactly selling off the bonds they bought. They're just not buying them as fast.

You know, that kind of thing. You know, and we had it today. I guess, I don't know if you saw the European announcement about the $90 billion commitment to Ukraine. So the EU, they're going to issue bonds for, you know, out of nowhere. So there's been, you know, to my knowledge, nobody voted for this. It's not been in any approved budget. but they're going to issue bonds, get 90 billion euro, give it to Ukraine over the next two years, collateralize it with the money they've frozen from Russia, and then force Russia to pay Ukraine that money in reparations,

and then Ukraine will pay off the loan with the money that they get from reparations. So they haven't strictly confiscated Russia's assets, but they've used them as collateral for this loan to the Ukraine that they're going to fund. issuing bonds. And so this gets to get back to the government bond issue, something that I've written a lot about that I refer to as the Hunger Games. So this Hunger Games competition of who will be the last guy that can issue bonds to the last taxpayer and saver. And so this competition that now Germany has waived their constitutional debt ceiling and started what they call the made in Germany to bring capital back to buy German bonds so they could build a military which I saw the guy announcing he's going to start drafting people involuntarily into the military if they don't start signing up voluntarily.

And now the EU, who hasn't had an approved budget in history, has just announced that they're going to spend another $90 billion that nobody's voted for by issuing bonds. And the Japanese, you know, every JGB on the curve has made a new, you know, 40-year high in yields today or whatever. as that bond market gets nuked because Bank of Japan refuses to raise rates fast enough to stop the inflation. And so if the Japanese ever decide they're going to bring money back to buy JGBs, and the Germans decide they're going to bring money back, Germans are the second largest foreign bondholder in most markets, and the EU is now competing, where does that leave France? So France, who relies heavily on Germany and Japan to fund their markets,

markets not to compete with them on bond selling. And so these sorts of things are always percolating out there. But meanwhile, you know, the core strategy of the guys who own the printing presses is to inflate assets. And so what you can't do is sit out. You can't say, oh, this thing is so messed up, I'm just going to sit on cash because the inflation will eat you alive. And now Bitcoin has been an unbelievable good protector to date of that inflation, of the asset inflation, of the printing of money problem. Hopefully it can continue to be. Now, what we would advocate to all of our investors is you got to own things that participate if it keeps going the way it has been going. And owning that stuff has been very

rewarding for the last 50 years since QE started. Since March of 2009, owning participating assets has been good. And then you also need to own something that provides, highly asymmetric negatively correlating risk, so that when you get GFCs or European credit crises or COVID or 2022 rate hikes to try to restore some stability, you have something that's mitigating that drawdown and allowing you to stay in the market, not getting forced out of your Bitcoin or out of your gold or out of your NASDAQ or out of your NIC or whatever that may be. And that combination of something that is, back to the race car analogy, that is accelerating on the good parts and aggressively decelerating on the bad parts, that's responding, reactive,

is the way to deal with the uncertainty, the unknowability of the future path, is to have a car that's very resilient. I love the race car analogy. That's great. I mean, the whole macro world seems a complete mess at the moment, but I guess the good news for you is that you're going to be in a job for a while. Yeah. Yeah, we always say, I say it every day, we know, we and our investors hope we never make

money, right? You never want your insurance to make money, right? But then your job is, once you've got the insurance, is to go out and take advantage of it, to go out and drive the car fast, you know, find the opportunity that knowing you've got, you know, good safety net allows you to go take. What you need to avoid is the opposite of that, which is, you know, what Sharpworld is trying to force you into of saying, well, you know, let's do these covered calls. Let's do a covered call strategy where you have all of the downside volatility risk and a capped upside.

Well, if you're going to take the downside volatility risk, the reward should be the uncapped upside. Why don't we turn that around and cut off the downside and go get the upside? So let's cut off the unrecoverable and pursue the unimaginable. It's a very good motto, I think. Yeah, I love that. David, I'm very conscious that it's late there on the Friday before Christmas. I massively appreciate the time. I've really enjoyed this.

And I'd love to do it again at some point. Maybe we should do a history lesson on Lehman and get into why Japan could be the start of this next fire. But thank you so much. Tell everyone where they can go to find your work and everything that you do. Yeah, so I'm not active, but I at least note on LinkedIn and on X. On X, I'm at Convexity Dredge, and on LinkedIn, I'm just David Dredge. We note up there whenever our monthly updates go up on the website, and the website is convex-staffstratageys.com, and there's, I don't know, at least 100 monthly

updates talking about all this stuff, talking about the science, the math, the flaws, the way things work and the way I think they should work, the mistakes that Central banks make month after month after month, and then a whole bunch of podcasts and interviews or presentations that somebody got to record over the last decade or so up there as well. So there's a lot of information there. And I always say this. And when somebody thinks to check the info mailbox at the website and share with me things that somebody's asked a question, they'll be surprised how often I respond. I like talking about this stuff.

I love that. Thank you so much for time, David. I hope you have a good Christmas. and I will, we've got to do it again. I really enjoyed this. We'll do it again soon. Awesome. Thanks, Danny.

Really appreciate it.