Yet Another Value Podcast - Chris DeMuth's State of the Markets March 2024

Episode Date: April 2, 2024

It's time to welcome back Chris DeMuth for his monthly state of the markets. For this March 2024 edition, Chris shares his thoughts on meme stocks being back in vogue, $DJT, is speculation back in the market right now, small caps due for some revenge, crypto, bitcoin halving and SBF sentencing. For more information about Rangeley Capital, please visit: http://www.rangeleycapital.com/ Chapters: [0:00] Introduction + Episode sponsor: Santangel's Review [2:14] Chris' high level thoughts as we conclude March 2024 [3:35] Meme stocks back in vogue / $DJT [7:31] Deeper dive on $DJT / monetizing celebrity [14:54] Is speculation back? [18:09] Small caps due for some revenge? [23:40] Crypto, bitcoin halving, performance since launch of ETFs [32:06] SBF sentencing Today's episode is sponsored by: Santangel's Review Finding the right hedge fund cap intro event isn't just about the size; it’s about the value it brings to your time. This month's sponsor, Santangel's Review, offers something unique for fund managers and allocators. Founded in 2010, Santangel’s hosts three Cap Intro Roundtables each year - two in New York City and one at Fenway Park in Boston. These events stand out for their focus on quality over quantity, attracting some of the most prestigious endowments, foundations, and family offices worldwide. The secret sauce: Santangel’s spotlights undiscovered talent. Managers you don't necessarily see at other industry conferences. Attendees take part in eight one-on-one meetings, intermixed with ample networking opportunities. In an industry built on relationships, Santangel's fosters some of the most valuable connections. Just go to Santangels.com— S-A-N-T-A-N-G-E-L-S dot com to learn more and request an invitation. If you’re a manager or allocator who is serious about maximizing your time, you'll want to be a part of the Santangel's Roundtable. Click here: https://santangelsreview.com/

This podcast is sponsored by Sant' Goals Review. Finding the right hedge fund cap intro event isn't just about the size. It's about the value it brings to your time. This month's sponsor, Santa Goals Review, offers something unique for fund managers and allocators. Founded in 2010, Santa Goals hosts three cap intro roundtables each year, two in New York City and one at Fenway Park in Boston. These events stand out for their focus on quality over quantity, attracting some of the most prestigious endowments, foundations, and family offices worldwide.

The Secret Sauce? their spotlight on undiscovered talent, managers you don't necessarily see at other conferences. Attendees take part in eight one-on-one meetings, intermixed with ample networking opportunities. In an industry-build-on relationship, Sandingles fosters some of the most valuable connections. Just go to sandigoles.com, that's S-A-N-T-A-N-G-E-L-S dot com, or see the link in the show notes to learn more and request an invitation. If you're a manager or allocator who's serious about maximizing, your time, you'll want to be part of Stanton Goals review. All right, hello, and welcome to the Yet Another Value podcast.

I'm your host, Andrew Walker, also the founder of yet another value blog.com. If you like this podcast, it would mean a lot if you could rate, subscribe, review, wherever you're watching or listening to it. With me today, I'm happy to have on for the, it's probably the 24th time at this point. My friend and the founder of Rangy Capital, Chris, Emuth, on for his monthly state of the markets. Chris, how's it going? It's going well. I flipped on our last one, and I managed to rub my dad.

nose right at the moment that YouTube records the little five second snippet. So it's kind of on this perpetual rewind. So now I have a slightly itchy nose and I'm just trying heroically not to touch my face because I don't want that to be the recording again for the second month in a row. It's also one of those things when you think don't it's your nose. Your nose gets 10 times itchier and you're just so much more likely to hit your nose. Cool. Well, we've got a lot of random topics to talk about today. Before we get there, just want to remind everyone, nothing on this podcast is investing advice. Always true, but I try to remind it particularly true when we're going to talk about a lot of stuff because I've got some random topics over here. I can throw any of

them out, but I don't know what stocks we're going to talk about. So just remember, we might be talking out of our butts. Nobody knows. So please do your own research consults a financial advisor. Chris, I have five random topics that people ask on, but before I get, I'm happy to walk through all of them. But before I do, it is the end of March 24, March 28th as you and I are speaking, I just want to ask, you know, what's on your mind? as we kind of head into the end of the march and round into April? Always M&A. Fewer ARB spreads that I like, but lots that I'm happy to monitor and think about.

Always kind of pre-arb kind of takeover opportunities. That is a little more interesting to me right now. Always litigation. That's super interesting to me right now. And then with one eye on things that are almost never interesting to me to own that I, the kind of fun mouth bets, but that would be hard to put a lot of capital to work in is it's kind of been a kind of meamy, a quarter increasingly so, of mixing politics with investing, which I think is almost never a good idea, but it's just observing it's happening.

And kind of a lot of kind of exciting, quirky retail action, kind of thinking about how are there any prudential safe, interesting kind of side bets on the periphery of craziness or do you just stay away from craziness or do you participate in craziness? Let's start with craziness because this was right on my list and it's meme stock seen back in bow. We've got memes squeezing harder. The headliner here is Digital World Acquisition DWAC finally got its merger done with. I guess, truth, social, whatever it's called, they took the DJT ticker out, and that is squeezing higher, right?

It's gone from, I think there was a lot of doubts so they could get the deal over, but a few months ago, that stock was trading barely over trust value for a spec. I think it was at like 15, trust was 10, deals through, as you and I were talking, it's at 60. The thing's just ripping higher. There's lots of people. I mean, we can talk about all sorts of things. That's a headliner, but there are other meme stocks that are squeezing.

I just, we can talk about DJT, we can talk about meme stop squeezing in. Where do you want to go with that? I'm interested in DJT because of the SPAC angle. It's interesting to me that the SEC approved this. It seemed to have, you know, a half dozen things that this SEC was generally particularly skeptical about, but in this case, it seemed to be completely valid concerns. They approved it. It's public and done.

There's quite a bit of litigation ongoing in the background with the various individuals involved, but it's out there. I've been enjoying playing around with arithmetic between the equity, the warrants, the options, and so forth to see if there's anything that makes sense fundamentally and directionally, but the market seems to have almost priced in or overpriced in all of the securities surrounding the equity itself. So the squeezy, mamie part is the just the stock. And then you see like, oh, my only one that notices that this is crazy. And almost certainly in terms of fundamental and their pinnings worth far less than any of this.

And they say, oh, no, the option is taking that account. The warrant takes into that account more. Yeah, it's, you know, I just, when I was referring earlier, there have been people online just saying, oh, you know, there's no bar on this, right? This is clearly short, squeezed mania. There's no bar on this, and you'll see people, people, A, remember, none of this is investing advice, but shorting things incredibly risky. Shorting things that are getting squeezed, incredibly risky times 10. And then you saw people being like, oh, sell naked calls.

Guess what, don't sell naked calls on things. Like, that's even riskier. I just, it was crazy how much discussion there was. And, you know, we've seen this happen to stocks before. This is very reminiscent of GameStop in 2021. And I wish to surprise how much the conversation kind of reminded everyone of it, particularly when we've already seen GameStop 2021. So people know like how this, how crazy it can get in the, in the short term.

And people are still kind of interested in that. I rather suspect it's a lot of the same players, too. I don't know if there's any way to kind of think through. What is the overlap between GameStop then and truth holders now? But I imagine it's a lot of the same people. And it'll be interesting to see the mechanics of how insiders monetize this, right? And if they can do it in a way, because it's a SEC, if SEC approved it, it's SEC registered and SEC, so they'll have to, any kind of exemption or speed up of unlocks will be public.

And then what does that do to the stock? Presumably, insiders are going to want to get out of as much as they can. They did a financing at the last minute that was fairly kind of relational, I'd say. And that was at a very attractive price relative to where the public stock was at the time. So, yeah, very interesting. And then just kind of interesting to get a little peek to where we are in the market psychology overall, that that kind of thing's going crazy. I also, so my favorite things are, look, Trump's stake in this is worth like five.

billion dollars at current market prices right now it is funny it's five billion dollars but that is a very paper five billion dollars i don't think there are many people who think you know it's not like if you've got a fifty dollars sitting in you know jp morgan stock you that's fifty dollars but this there's no way he could get out of it but i do like the permutations around hey you know this is going to trade crazy over the next few months it's going to trade as like a play on trump uh trump winning the white house but i love what people say like if he wins the white else the two things start speculating are, hey, do you see like Saudi Arabia pop up on the DJT with, in their 13 F as like a way to show support for him or kind of curry favor?

And then B, if he wins, he could have to divest himself. I believe if you're taking any type of government position, you get a divest tax free and his cost basis and this is basically zero. So it is interesting to think, hey, if he wins, he'd have to sell, would he sell the stock and say, I'd love to maintain, you know, a piece of the greatest social media company. in the world truth social, but I have to divest. And because of the presidential acts, divest tax-free, he's got a reason he can get out of all of his bags.

And like that, I just think that's kind of crazy interesting as well. I think there's a lot of opportunities for him here. I mean, the illiquidity and the lockup will make it hard for him to monetize $5 billion. And you could say also, would it crash the stock if he started selling? But he could flip around the narrative and say, hey, if you support me, this is a way you can help me out. I'm selling it to you, bid this thing up. So I'm going to be an actual real live billionaire.

I'm going to get billions of dollars from this. And this is a way, this is like a back end way for retail to buy a presidency and prop up somebody who they support. They might go for that. I mean, you could do so many things with this. A gold foil stock certificate, like they should sell at premium the individual stocks. I bet a lot of people who own this would actually love to own a physical certificate of this thing. And there's a lot of things he could do to actually get out of it because I assume that I assume the overlap between his supporters and shareholders is very high. I'd have to imagine.

I mean, this is the other thing when a lot of people who are saying, oh, sure, like no fundamentals. And you completely agree, right? Like this is a crazy valuation by any mean. But you have to almost think about it like a meme coin, right? Like nobody thinks dog with, dog with hat. Nobody thinks that's worth a billion dollars or whatever. But it's very low flowed and people are just whipping it around and there's no fundamentals. And like, to me, this is basically a meme coin, right?

Except it's way more liquid because you get it on public exchanges. So I think it's a meme point of, hey, if you like Donald Trump and you want to support him, you buy DJT or maybe people think, oh, if he wins the presidency, there's a trade where it goes to 200. So people are just trading it on the odds of the presidency. Like I think it's very mean-quim-esque. And if you're, you know, if you're using fundamentals to look at this business, ultimately, that has to win out. But in the short to medium, to kind of long term, given the low float here, you know, who would have thought GameStop would still be sporting a multi-billion dollar market cap at two, three years after? Like, probably no one. These things can perpetuate for a really long time.

Yeah. Yeah. Yeah, the only other, did I have anything? No, that was kind of it on. I just thought that, oh, one other thing, you know, you do have to be, I guess there's two things here. Number one, this is, I do wonder if this is the start of if you are a celebrity with a cult following, like, there is meme points. And similar to meme coins, there could be SPAC transactions or stuff. Now, Donald Trump is like a league of his own when it comes to it. But, you know, Elon, I think a lot of Tesla's success. Tesla's built into a business, but for the first 10 years, it was just like a bet on Elon and his personality. I do wonder if this is the future where celebrity and status, one of the ways to monetize it is merge with us back, have a publicly traded ticker, have some type of meme coin. And if you are, there's probably only a handful of them, but you could imagine celebrities

like putting their businesses into this and just like their supporters, just blindly doing it. And I think a lot of celebrities could mint into a billionaire status off of them. something like this, you know? Absolutely. I mean, Trump's probably one of the best examples you can think of for just what is he going to say next and kind of monetizing the earned media, because long before he did this, he was spectacular at earned media. You know, just if you look at the mechanics of how much would it cost to pay for an ad in the form of media that he kind goads the world into looking at. And he just absolutely had crushed Hillary Clinton on that

static statistic. I thought it's one of the most interesting statistic about him is how much. I mean, he was an earned media billionaire. And now he has a way to kind of extract from that skill or from that attribute. You know, there's others. You know, you'd think Wilson would be up there. It'd be, you know, Beyonce, Taylor Swift and so forth. Taylor Swift is the one who comes to mind. But, you know, it does strike me. Taylor Swift, she, go back, like, she is probably the biggest artist since Elvis, right? Or Elvis or Michael Jackson would be the two. And both of those were very rich. But Taylor Swift is literally a billionaire. And her cat is richer than her boyfriend, right? And her boyfriend's an NFL player. Like, they're in the social media age, there are ways to monetize that we couldn't dream of these hyper celebrities. And, you know, I do think like a Taylor Swift forming, the Taylor Swift holding company and saying, hey, like, I'm going to sell 20% of it. And then every product that I launch, you're going to get a rights to or you get rights to song. Ryan Reynolds, he's launched multiple, literally billion dollar brands, right? Like you could imagine a Ryan Reynolds holding company that has cuts of them.

And you could just imagine lots of celebrities doing something like this to get a cut and monetize their celebrity. And, you know, I haven't quite perfectly worked it out. But I think it's going to be the returns to social, to like being famous go exponential on the internet. and we're just starting to tap, like tap just how much you can monetize it. And I think DJT is actually the first and what we could see a trend of. I don't know.

Who knows? Oh, the other one I wanted to run, Elon Musk buying Twitter, everybody knows he's underwater on that, but you start putting the comps on, oh, true social trading for 30, 40, 50 billion, start putting the comps on an actual social network and Twitter. Maybe Elon's got a bailout here.

He's got to take that thing public and point to the true social, the truth social comp as much as he can. Because he's also one of these people who, you say, what is he going to say next? So he would be on that, he'd be a top 10 on that list as well of if you just look at what Trump's doing, you know, that his followers want, believe in him, are curious about him, but also just want the connection somehow, just want to be in league to some extent. Just going back, so the other thing we were talking about was, you know, it feels like meme squeeze season is back. There's a lot of euphoria. Maybe this is just me putting up my vibes, but it does feel like there's a lot of euphoria coming back to the market. And to point to that, I point to, you know, Reddit, IPOed last week.

They had a huge pop. Doesn't trade at the truth social, the truth social valuation, but that trades for a big market cap. Reddit, there's DJT. There's a lot of other meme-y stuff. Obviously, crypto has gone really, really hard over the past, this year since the ETS. It just feels like there's a lot of speculation back in the market right now. Yeah, speculation. And I would say also kind of first order thinking that I would have maybe expected some mean reversion on has had no mean reversion.

If anything, the kind of growth over value, large, especially mega cap over small cap, kind of end. retail followable, you know, the kind of thing, if you look at the, like, most tradable on retail brokerage apps, that kind of thing. A lot of those have done extremely well. Yeah. It's been very frustrating, too, because I know both you and I follow, like, there are, there's the meme trade, right? So I'll just, like, truth social, right? That is DJT, that is the meme trade. I don't think anyone would say it's got better fundamentals than any of the peers, but that's the mean trades and squeeze. But then they'll be like, other industries, there'll be one meme player. And then there'll be a player who, you know,

their fundamentals are all the same as the meme player. Maybe they're bigger. They're probably smaller, or something like that. But they'll trade for a tenth of the valuation of the mean player. And you'll look between the two of them and they'll be like, why does this one catch a meme bid and this one doesn't? And for me, it's just, it's perplexing. It's frustrating. I have nothing to say about it. It's just, it's frustrating and interesting. And usually if you, the deeper you go beneath the superficial analysis, the more trouble you're going to get being off course from whatever is going to mean, which is normally just first order, kind of just a gutteral reaction to an obvious

virtue of something has done really, really well. I mean, I think one of the funniest in all this is how our friend Lionel Hutz has done with his meme coin trade, which has to be, I mean, he could in his whole career never outdo the percentage return he made on one of these things that was practically somewhere between a joke and a research project and made a fortune on it. I don't think he will mind us. I mean, he put it into the public domain, so I'm sure it wouldn't. So for those who aren't familiar, our mutual friend, Lionel, he was like, I need to figure

out what all these meme coins are trading about. And he took $100 and put it into, as he said, the three most offensive meme points he could find. And he put $100 into it. And five days later, it had turned into about $20,000. So, you know, that's a 200x. That's the type of thing people dream of. And he did it in five days by basically saying, how can I, what is the stupidest things I can best in?

And that really work. But yeah, it feels like that's back and, you know, crypto's racing. It's, well, I do, we can talk about crypto racing a second. I do want to, earlier today, there was an article in the Financial Times that said small caps, worst run since the late 1990s. Our CEO over is sent it to us. This is nothing new, right? people have been decrying the valuation gap between large cap versus small caps for several

years. You've certainly felt it if you've invested in anything other than the magnificent seven or big tech or something. I just want to take a moment to sit back. Like, you read this and your first instinct is, oh, you know, we've seen this trend before, right? It reverses, just like in the late 90s. It was the best time you could imagine to invest in small caps because once it reverse, a lot of the heroes of the value investing age today, their background is they started value investing in the late 90s. They were buying small cap stocks. And once that kind of trend reversed, they were heroes, right?

It was five years of almost, if you were investing in anything small cap, it was just alpha. Like, you almost couldn't help yourself. So that's the first thought. Like, now's the time for small caps. The second thought is, hey, you know, private equity is taking most of the good small caps over. And the large caps today are not the large cap of the 90s. Today it's Microsoft. It's Apple, it's Amazon.

Like these are moats and cash flows and growth and scale that we've never seen before. or maybe you need to, like, adjust your priors and adjust for the current valuation environment. So I threw a lot out there. I'll just pause there. Like, what do you think about that when I say small caps were run since the late 90s? Do you think this is, hey, sign of the top, small caps are due for some revenge? Or do you say, oh, it is different this time? So what I want to say and what is kind of true to form for me to respond to this, but it's just so shaken.

So my shaken view is in the press, in the price, especially above the fold, especially outliers. So, you know, I don't think when something is 45 to 55 percent, but when something is at extremes, then truly that's where kind of medium to long term mean reversion can be really interesting. And if you otherwise have a bottoms up reason to do something, if there's a sound fundamental underpinnings to something, then you should feel really good about doing it in an environment where it is against what is being kind of blared in the press. So that's what I want to say. However, I'm shaken by that. You know, so much day to day. And even if you look quarter to quarter, we get a lot of what we deserve in terms of wins and losses and profits and losses on positions.

for the things that we think we are exposing ourselves to. So a lot of this is quite expected. Any one position obviously could have a bad outcome, but it is frequently the outcome that we think we're exposing ourselves to. But day to day, I mean, there are just freakish days where dozens of things that have absolutely no fundamental connection whatsoever and really even no connection to the equity market that are just, you know, litigation stops are all up or all down and just clearly driven more and more by fund flows.

You know, if you look at passive ETFs, almost all of which are cap-weighted and that there's this reflexivity of underperforming cap-weighted indexes will drive things lower. And then also just kind of being very skeptical as much as I prefer the topic of small caps to large caps because it seems more likely that you're looking at something where nobody's looking or not that many other people looking at, you know, being really skeptical. I'm like, why is something still small? If it's, if it's not new and there's not some kind of cap structure transformation of some sort or another, you know, why did somebody or something allow for the continued smallness, especially where I found in many cases smallness is a corporate defense.

It's hard to effectively push somebody out where if you combine the advisor costs with the regulatory limitations, once something is even sub a billion dollars, it's more of a struggle to make enough money when you win and to affect things enough so the delta of your involvement can be worth an expense that you just can't scale. down. I mean, everybody wants hundreds of thousands of dollars or millions of dollars just to help. And so that has to be a small enough percentage of your time, just on the Delta, because it might work anyways, that it's really hard to change things about a small cap. So I'm increasingly skeptical of why is something still small? Why is it still underperforming? What can I do

cheaply to change that? And so I'm feeling, I don't know, maybe this is one more side. Maybe you can just add me to the press side of, if it's in the press, it's in the price of feeling a little despondent about it. But I'm not feeling as robust as I normally would saying, ha ha, now's the time, mean reversion. As a reminder, today's sponsor is Santa Gull's review, the host of one of the best cap intro conferences in the industry. Go to sandsengals.com, that's S-A-N-T-A-N-G-E-L-S-com, or see the link in the show notes to find out why their events are among the most sought-after by top-tier allocators and emerging managers. You know, so just you said in the press and the price,

and this is completely unrelated to that. But one thing I've been, you know, this, I've been super interested in this month is crypto and Bitcoin into the halving. And like one of the things that just drives me crazy about it is so for those who aren't, you know, up on Bitcoin, Bitcoin, the way it works is you have miners, right? And miners literally mine Bitcoin every day. They take energy, they put it through, they put it through CPUs, and they solve a bunch of math formulas. And every day, like if Chris and I were mining, we'd get one Bitcoin in return for our trouble.

And right now, Bitcoin miners are given 900 bitcoins per day in return for their troubles. And the halving is, after the halving, which will occur about April 19th, they'll go from 900 to 450. And people are going wild into this, right? And they're saying, hey, this is, it reduces supply. You know, there's 450 less bitcoins that come on per day, reduces supply. Bitcoin's going to go up into this having. And it drives me crazy because when I hear people say that, I mean, my instinct is, well, if it's in if it's so known, like look up Bitcoin having and you can find 500,000 articles from every website on Earth that the having is coming. If it's so known, it has to already be in the price, right?

Like, why should Bitcoin 450 less coming out per day? Why should that change the price? You can go buy it now and adjust like it should be adjusted. But then I say that and I say, oh, well, you know, Bitcoin was at 25,000 start the year. and people said, oh, Bitcoin ETFs are going to drive Bitcoin higher. And if you had just listened to that, they were right, right? All this demand went into the Bitcoin ETFs, and Bitcoin's gone from 25 or 35,000 to start the year to 70,000.

So I'm just like, is it in the press? Like, is crypto completely unique where if it's in the press, it's completely not in the price? Like, I don't know. I threw a lot at you, but I know you follow this as well. So I'd love to hear your thoughts. I think part of it, I mean, part of it is just going through this quarter where first level thinking has really paid off. But I would also add, in the case of Bitcoin,

there was a very intense, I'd almost say ideological, either kind of libertarians like me or kind of techno-optimist fanatical support early on. But that was just only so many people and only so many dollars that were very, very interested in crypto. And I think that with the ETFs, it's not just the mechanics and the ease of support amongst retail investor and kind of normy, moderate people who are moderately interested in crypto, which you never see it kind of an early on conference or a follower. It was mostly kind of weird fanatics. And I think one of the things that's really driven this,

especially as you say from like, you know, kind of after it should have been in the press and the price, is the kind of whole RIA kind of mass market retail infrastructure going from no interest and kind of a point of disdain or a total lack of curiosity to kind of a moderate amount of curiosity and maybe almost defensive, am I out on a limb? for not having my clients sent to this, where that wouldn't have been no factor five years ago, maybe even a year or two ago, where, you know, 10 years ago it would have been embarrassing and weird to have for kind of, you know, Oklahoma's third most popular RIA for oil and gas families would affect, like it would have been weird to be involved and then it'd been kind of maybe

neutral. And now you might not want to say, oh, no, I have no, I have no. I have no. knowledge or interest in crypto, you know, you might be safer. I don't know, one or two percent of all of your clients stuck in this might be the kind of reputationally safest move. And that's just a spectacular amount of new capital. So this is the reflexivity argument that I thought has been really interesting for crypto, right? Like in January, if you were an advisor and you wouldn't say, hey, we need to have one percent of our ETS are here. We need to have one percent of our assets in crypto, or name it, one, two, whatever you think like a reasonable small pieces, you might have got some skeptical looks. But now, because Bitcoin's gone

up 50% since then, if you said 2%, right, 50% of 2%, 1%, your portfolio is outperformed every other portfolio by 1% on that crypto thing. And now every other advisor has to go to their clients who are saying, hey, like he put a little bit in crypto and he outperformed, like, why don't we have a little bit in crypto? Now, every other advisor has to either actively defend that in some way, which is taking mind space. And like, at that point, it's kind of like, why not put 1% of your client's assets into crypto? Because they're asking, they're begging for it.

A reasonable person can, like, you could defend it in court and say, hey, like, we thought we need 1% as a protection against inflation. Like, it's almost better for you to have 1% than 0%. And that creates a lot of kind of sticky flows. I'm completely with you. But again, just like, it feels like that could have, there is some reflexivity to that. But it feels like that's the type of thing, again, that like, could have been in the price before the ETS even came online, but, man, it's just, it's been aggressive.

Especially because when something has quantifiable, fundamental underpinnings, if you have an idea and I miss it, I have an idea and you miss it, 10, 20, 30% more expensive, a great idea might no longer be a expected value that should be worth anywhere near the same size position. But if you're talking about GameStop, Nvidia, DJT, paying twice or three times as much for it doesn't really affect the math all that much, right? It could be, if it's exciting and interesting, it might be just as exciting and interesting, you know, once you're talking about, you know, some incomprehensively high or infinite or no relationship to fundamentals, then there's really no missing it in the same sense. It's, you know, I think it was Charlie Munger who said two times insanity is still insanity, right?

So once I think of it is, the other thing that strikes me is, so as you and I talk, there's just under 20 million Bitcoins outstanding, 70,000 per Bitcoin, you know, the market cap is about $1.4 trillion. And the other thing is I listen to a lot of these Bitcoin bowls when they talk. talk, say, oh, Bitcoin's going to 500,000, 100,000, trillion per coin, whatever. And look at it and say, there is a difference between Bitcoin at 10,000 when there's 15 million bitcoins at versus 70, like, $1.4 trillion, that's a lot for a kind of nonproductive asset.

And I understand their gold has a market cap, and that's kind of a nonproductive asset. Yeah, you use it for jewelry, but it's generally nonproductive. But at 1.4 trillion, it's just a big number. And I wonder, like, how much higher that number can go. It's just, it's weird. As a lot of Bitcoin people will talk and they would be like, there is no fundamental value. And that's part of the point. I'll be like, man, that's just a lot of money invested in something that's unproductive.

But I know other people will be like, hey, there's 100 trillion of U.S. money supply outstanding. Why couldn't this rival that? It's just wild. It really stretches the mind to think about. digital gold has always been the best defense and kind of the gold analogy and market cap I think is the most defensible way of thinking about it and as is my view that it's kind of the inverse of your trust and confidence in central bankers and politicians where it's hard to stand still in the store of value there is no if I listed my concern on our fiscal and monetary policy there's

no inversely sensible central bank where you can put your money in. So a lack of good currency is, a lack of store of value, and an efficient virtual way to store the prevalence of gold is the best I can get. Let me, last thing. So today, you and I are speaking again, March 28th, is SBF got sentenced to, I think it was 25 years sentencing. Do you have any further on the SBF sentencing? I do. I have no sympathy for what he thought he was doing, but I need to be a little careful in how this is taken, but morally, and I certainly believe in not just breaking rules

for the sake of breaking rules, but I always think of victimless crime is not crime, right? Like to have a moral, and again, follow the rules of whatever society you're in because it's a good risk reward to follow the rules. But in terms of what matters to me, it is not hurting people, not taking their stuff, don't lie, cheat, or steal.

And for somebody to have a punishment, there should be intent, and there should be damages. And in the course of what he did, the scale of the damages have been massively attenuated. Oh, see, I disagree because what I think you have here is you have complete fraud, right? I think it's fair to say fraud because he was convicted, so you don't have to even have to say alleged. You can just say.

And then because you had an AI and crypto bull market on the back end, and they had that stake in anthropic or whatever, and because you had crypto just skyrocketing after, there was no losses. But, you know, prevention also has to be part of it. And if you had, if you went to a different world and you said, all right, FTCS fails, and then because of that, there's, you know, crypto went down when FDX failed. What if it had like broken the whole crypto ecosystem or we had stayed in a crypto bear market and they didn't have this anthrophic investment? It was in literally any other AI company that hadn't worked out for some reason. Then all of a sudden you're talking about massive losses. And I just think you need to remember like you can't allow people to yolo their way out of frauds, right? Like, there is another person who I will not mention, but they ran something.

It was a fraud. They had one successful investment. And in between kind of it stopping and the money going back, the investment went up 50X. So his point was, hey, you know, my investors not only were made whole, they got money back. He's like, yeah, that's cool. You got really lucky, but you can't be encouraging people because then you've got people who are just going to run around committing fraud. And on the back end, you just yolo it.

You keep yoloing it all away. Keep going it all away. And if you can make it ruin whole, then it gets out. So I kind of disagree. I understand if everyone's made whole, it's tough to point to a victim. But I also think the system needs to function where the fact that there was fraud, you just can't let people yellow it away. That's convincing.

I think that's well said. Yeah, I don't. It's just, it's tough. Also, the other thing, maybe the reason I'm such a sickler, I'm sure you read it that the Bernie Madoff book. I can't remember what the Bernie Madoff book was, but the one that broke it down, you know, I always thought, oh, it's no big deal. And just like he ran such a Ponzi scheme and the horror stories of people who had withdrew from the Ponzi scheme 10 years ago, had all their life savings in it, and then it went

away. I'm just so sensitive to how awful of those stories it were. And yes, this one had a nice outcome because they had some investments that really went to the moon. But you could imagine a lot of other ways where people are broken. And I mean, there were funds who, you know, they had part of their trade in FDX and it falls apart. Like, it is, it's bad. Wizard of Lies, I think, is that book. Yes, yes, which is such a good book. I never watched the TV show. Maybe I need to watch the TV show.

Yeah, and there was a substantive fraud here. I guess my victimless crime isn't or shouldn't be a crime thought is maybe a little more geared to when somebody has a substantive accusation as well as lots of procedural ones. it is very much the norm in our society for the law enforcers to continue going after the procedural crimes, even if there was no substantive under. And that's where I start to think. I mean, what I, and then again, follow the rules of the game you're in because it's a good risk reward. But in terms of, you know, we're both parents and thinking about kids and thinking about

what you actually care about and what you want humanity to be like, I want people to me not cruel. I want people to not hurt each other. And if somebody could prove, I didn't hurt anybody, then say, well, actually, you know, you fail to comply with procedural things for me that has less import. I would say no import. Be like, oh, you didn't hurt anyone, but hey, you know, we gave you a 20 box form and you forgot to check off box seven. So that's actually going to be $100 million to be like, oh, well, that was a pretty innocuous mistake. You know, there were 20 about, I certainly hear that as well. And they were only looking because they were curious about the substantive thing, but they got a lot of momentum and sunk costs and reputation. And they rarely

let people go from the procedural accusations when the substantive one is disproved. Cool. Cool. Well, look, the only other thing I had, maybe we'll save for next month, I had the, there's always interested in the Capri merger. Everybody's always talking about that. I don't know if you have thoughts there or if you want to just punt that to next time? I would largely put that to next time. We have a suit by that. I think that I just, as a portfolio manager, I have a problem when I'm this skeptical of our agencies that I'm not that excited. Maybe I'm just being a little lazy about having one or two big guesses with a government that could just bring a suit anyways because it's very hard for me to come up with a

any level of diversification where any one of these could get blown up. I'm much more interested in circling back and possibly putting capital to work once there's a suit, once there's a complaint, once something's in front of a judge that you can really kind of see what they're talking about because they're bringing so many inane cases that if I said in a clean room, I'm looking at this, this doesn't pass muster with me. I think historically that's kind of 60 or 70% of the battle. right now that may be like 10% of the battle? No, I'm completely with you.

It is also interesting there was a, I think it was a Wall Street Journal article talking about how far right and far left politicians are like kind of aligning on just blocking every merger. And it's just crazy. Like you would never think that. But big tech is so that enemy. Big companies are so that enemy. And from my more, I'd like to think more neutral, moderate viewpoint, it's like, hey, we should

look at these and like, yeah, maybe Amazon shouldn't be able. allowed to buy Google Cloud. But, you know, Amazon should probably be allowed to buy a robot, a vacuum manufacturer if they want to. And they shouldn't be precluded just because they're big. Like, we actually have to have rules and follow them other than, hey, you're the strongest company, so we can't let you get any stronger. But yeah, it's just, it's wild time and regulatory land. And you know what? It doesn't seem like it's going to get any less wild, no matter what, like whether it's Biden term two or Trump term two, it seems like the regulations are going to keep getting weirder and, in my opinion, a little worse.

We're in a populist era where, I mean, I think it's in large part driven by the way we structure primaries that it's cultivating people who are kind of emphasized kind of catharsis and aren't that serious about the normal public policy issues that would drive how we look at M&A, how we look at antitrust, how we look at national security. And so these companies are kind of getting ripped apart. It's like getting drawn and quartered by people, not only of the right and left, but of the same kind of populist enthusiasms. Look, it's one of the things I worry about. Our system was clearly not designed for this level of partisanship, but it also clearly wasn't designed for this level of,

hey, your incentives are to get in the press and make money, like just going back to what we said with the social media, like if you can get a name for yourself and get famous, you can make money, you can generate influence for yourself, and all you have to care about is your primary voters or your national footprint. It doesn't really matter if you're popular inside your outside of your party, your very local base. You can make tons of money.

I don't know if our system was really designed for that. It's creating some real perverse outcomes. Absolutely. Cool. Anyway, this was great. March 28th, we'll wrap it up there. Chris, looking forward to talking to you soon. Looking forward to having our next podcast at the end of April and we'll go from there.

Absolutely. Thank you, Andrew. Nice speaking with you. A quick disclaimer. Nothing on this podcast should be considered an investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.