← Coin Stories with Natalie Brunell
Coin Stories with Natalie Brunell
Dave Collum: The Next Financial Crisis and Debating Whether The State Could Crush Bitcoin
01:25:27
In this episode of Coin Stories, Natalie Brunell is joined by Cornell organic chemistry professor Dave Collum, a self-described Bitcoin agnostic, to debate markets, inflation, and state power. Topics discussed: The “complacency” bubble within the...
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- [00:00]
A
What we don't know and what will be fascinating for me to watch is how bitcoin responds in the next global liquidity crisis. It'll be fascinating to see if bitcoin rallies, if it falls. It'll be fascinating, for example, if at some point the state does try to come down on it and can't. So for me to get into bitcoin, I am going to want to see bitcoin come off the battlefield. Bruised soldiers, sliced and alive.
- [00:33]
B
Hey, everyone. Welcome back to the show. Joining me this week is Dave Collum. He is a professor of organic chemistry at Cornell University. And even though he says he's a bitcoin agnostic, a lot of us in the community feel like it's just around the corner that he's going to become a big hodler. So, Dave, thanks so much for joining me.
- [00:51]
A
Yeah, I get ridden like a donkey by the hodlers online. I don't fight with them because I'm sympathetic. I'm warm to what they in theory stand for. I think that community tends to be a little impractical about the risk.
- [01:07]
B
What do you think we align on? Why do you think that so many bitcoiners say, hey, this guy's truly a bitcoiner. He just maybe doesn't know it yet?
- [01:13]
A
Well, because I think the system's going to go down the tubes. And I like the idea of being independent of the system, and I like the idea of having sort of a fixed quantity monetary system. Lyn Alden, I think, made the best case for me about the merits of being able to move it wherever you're going to end up. Most trivially, I can't. I do not want to be stuffing gold up my rectum to get across a border. Right. That's not appealing to me. And so I get the case. The risk that I see, of course. And when I talk to someone like Cedric or guys like that, and I've talked to so many bitcoin podcasters, to me, the risk is the state, the capital S state, and they say the state can't touch me. And I just don't agree. I just flat out don't agree. I think the state Mao killed 80 million, Stalin killed 40 million. You don't think they can take out bitcoiners. They say, I will move to Guatemala. And I go, I'm not moving to Guatemala. It's not going to happen. Right. So that's the problem.
- [02:20]
B
Yeah. I want to unpack your thoughts on that. But first, just for maybe people in my audience who are less familiar with your work, and I actually didn't find too much of this outside of your academic career. But can you just take me back to the beginning? Like, tell me where you're from, how you, why you wanted to become a professor of organic chemistry. I know you studied at Cornell in Columbia. Right. But can you just kind of give me your backstory first?
- [02:43]
A
Yeah. So as a kid, I was a bit of an underachiever academically. I was an overachiever in terms of excelling at things I wanted to do. But school was not it. You know, parts elementary school, I got A's. And then middle school, I kind of dropped down to Bs. And I can remember my GPAs back to first grade, which is a surreal thing. I can remember my SAT scores. And so in any event, I. I kind of rallied towards the end of high school. So I went 313-13-441 in high school, and I got into Cornell because of backdoor entrance mechanism, there's no chance that that GPA gets you into Cornell. It wouldn't even get my file opened. But my father, my grandfather, turned out to be vice chancellor of the Board of Regents of New York State. I was applying the AG School, which is a state school, and he was also, wait for it, President of National Alumni Association. So, you know, when that phone call got made, you know, what a shock, Dave got in, and then I earned it. I proved that, you know, when you hire, when you accept kids of highly successful Cornell graduates, they tend to ultimately be successful. So I was a bio major. I was going to go to vet school, and then I decided to go to med school, and then at the last minute decided to go into chemistry. So I was a genetics major as an undergrad, but went to get a PhD in organic chemistry at Cornel Columbia instead of going to med school. Sort of a Christmas break decision. Senior year, I was talking to a girlfriend and I said, I don't know what to do. And she says, I think you do. And she was right. So I went to Columbia, got super lucky. Super, super, super duper lucky, where if you put me in grad school 100 times, I wouldn't be able to repeat what we did, but we did something that made us all very famous. So I found myself interviewing for jobs at the end of my second year of grad school. And grad school is normally five years followed by a two or three year postdoc, and then you get a job. And at the end of my second year, I'm getting job interviews. And so my Boss, who was in his second year, was getting senior offers from Stanford, Harvard, Caltech. And so we really became famous. So I got to Cornell, Overrated more than anyone has ever been overrated. And I then sort of switched fields again, within organic chemistry at least, but kind of threw away what I was trained to do for 14 months in grad school and, and, and that was touch and go, was very contrarian. I was told that I would fail, some with sympathy, some with concern, some with schadenfreude. But it worked. And so for the next 45 years, things worked really well, in my opinion, and I headed for open water. That's the one thing I didn't want to be. I didn't want to be in a crowd. And the era I went into was very unconventional. It turned out, unbeknownst to me when I started, that pharma would find it very important some number of years later. So I had all these collaborations with pharma that you would not have seen coming.
- [05:49]
B
That's right. You were an advisor for Pfizer, right?
- [05:51]
A
I consulted for Pfizer. I collaborated with Merck and Pfizer and Genentech and Searle and all these companies. And consequently we contributed. I mean, it was really significant stuff. And so my academic career was fine. I think I was in a very complex field in which it turned out everything I had been told was wrong. And these were scientists trying to get it right, but in part they didn't have the tools at the time. And we kind of figured out how to do it. But it gave me a superpower for other stuff that most people don't have. And that is, I realized that experts can be dead wrong. That was the takeaway. And I've written, I think I wrote 168 papers, but probably 150 of them. We showed someone was full of crap. And, and so, so I, I reached the point when I started studying politics and economics and stuff that I, I could look at 12 famous economists who all agree and say, well, I think you're full of crap and that's a superpower. It's totally understandable that people couldn't do that because that just takes too much. It's like I live outside the box.
- [07:08]
B
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- [08:44]
A
Stage five years early.
- [08:46]
B
Yeah, I mean most, most chemistry teachers are not talking about that and opining on it to their students and you ended up being right. So tell me a little bit about maybe where we're at right now, because I know you talk a lot about how we're in this bubble and you think that it's unsustainable. Look at the current system. That's why maybe you agree with some of the bitcoin ethos or principles, but where do you think we're at right now and where do you see this going?
- [09:11]
A
So we're in a strange one and I was talking to someone this morning about it, but so quickie, this is something I can do. It's my elevator pitch at this point. Every podcast but for the last 40 years we had nothing but tailwinds. So you go back to 1981, the markets were as cheap as they've ever been, valuation being a price over something that the markets ought to Track. So the PE was something like 6 or 7. Right. So they were dirt cheap. Inflation was running rampant, which scared people. So in 1981 the markets were dirt cheap. China was coming out of the dark ages and started selling labor for slave wages, which we benefited from. Russia, Soviet Union was beginning to fail, but not failing yet, but were selling resources for pennies on the dollar. And other third world countries demographically, the boomers were hitting the workplace and the economists all like demographics as a tailwind. If it's a tailwind now, it's a headwind. And interest rates went over that 40 year period from 17 to 0. Now what's interesting about that is that it created a created markets that just relentlessly went forward. And the best metric I have, there's a couple. One is I track 25 metrics. My favorite is Case Shiller because they it can kind of create it back to around 1880. So you get case shield from 1880 to 1990, 110 years, average around 12. The next 30 plus years, it turns out, were so spectacular that it actually drags up the average Case Shiller to around 17 or 18. So that's why I use 1880 to 1990 to set a baseline that I think is historical average valuation. It was around 12 or 13, it's now 38. So by that and other metrics we're 200% over historical average valuation. Which means if you think of equities as a cash flow, they're just like bonds, right? There's just bonds, you know exactly what you're going to get paid. And equities can move around. But if you buy an index that's priced at 40 times earnings, then you're buying an index is priced to pay you 2.5%. And the boomers, there's a saw recent poll, the average investor thinks that they're going to get over 11% inflation adjusted. And I'm going what? How? And then they're not. Let's start with that. So how is that the question? How did you get to that conclusion?
- [11:47]
B
Yeah, exactly.
- [11:48]
A
They asked money managers about the results of that poll and they said oh, now that's wrong, it's more like 8%. I go, what? And so Buffett said, clearly, clearly in a Fortune article he said you can't expect more than four. And Howard Marks same thing. I've got a plot that given to me by Ryan Grice that shows the S and P from 1925 to 2025, 100 years corrected for inflation using M2 money supply, which seems really clean to me. Right. That seems like a much better inflation metric because M2 money supply is a good measure of the monitor the money growth problem. And it goes down, it slopes down and Then if you include total returns by throwing in dividends, but not taxes, not, not, not, not fees, you get 3.79% annualized. And by the way, that's pretty close to Buffett's 4%. Now Buffett doesn't include taxes. Buffett doesn't include fees though. And so the average investor is delusional about what you can expect now from these valuations. They're hyper delusional. Right, because Buffett wasn't even talking about the valuations. He was just talking about over infinity.
- [13:04]
B
And, and you've mentioned that legendary investors like Stanley Druckenmiller were pointing out high valuations back in like 2015 and we just turbocharged all the money. Printing and equities went bonanza after the pandemic.
- [13:18]
A
Well, so the other thing though is I'm convinced the average investor now doesn't even understand evaluation. Evaluation is the price divided by something it ought to track. And so it turns out both the numerator and the denominator both inflation sensitive. So it's price to earnings, price to revenue, price to book price, you name it. It's self correcting for inflation. So valuation shouldn't trend. If they're high, you're not getting much on your return, it's guaranteed. If they're low, you're buying cheap. And you're probably going to get a good return if you're patient enough. But you can't inflate away a high valuation. You can inflate the stock up to the moon, but the evaluation cannot be corrected. If you're 200%, you got a 60, 70% correction to get back to the norm. And in the last 40 years we never seem to go below the norm and someday we will and it's going to hurt. So over the 40 years, the valuations compounded annualized 4% growth, the valuations that should never happen. And that's a huge growth in valuations.
- [14:29]
B
Well, so what do you think would trigger this train to actually stop? Because I mean history shows us that they don't allow anything to really crash or at least not, not long term. They are ready to rush in with the money printer.
- [14:45]
A
So I think there's things that have that, that argue against that. One is there's always been inflation, it's always been misrepresented. Right. So if I said to you here's, here's a Godden experiment. If I said to you here's the deal, I'm going to, you get to buy a 30 year treasury, but you can't sell it You're a young chick, you buy it, you put away, you got to hold it for 30 years. And you're also, this is fantasy. You're not allowed to hedge it, so you just buy it and put it in a lockbox. What interest rate would you demand? Not knowing the future, probably safe to assume you'll get paid. Probably. But you don't know about inflation. You don't know anything. What would you demand for that 30 year treasury?
- [15:29]
B
Well, if Bitcoin exists, I wouldn't want.
- [15:32]
A
Yeah, no, don't go near. No, no, don't go near Bitcoin.
- [15:34]
B
Well, I'm asking you, hurdle rate is Bitcoin, right? You have to beat that kind of return. And to your earlier point about M2 money supply, if that's going up at 7 to 10% a year, I'm going to have to get something over that. Otherwise I'm just treading water, which most people are.
- [15:49]
A
So maybe double digit.
- [15:50]
B
Yeah, absolutely right.
- [15:53]
A
And that handles the unknowns the other way. I like to ask, I say to people, I've said, if you were going to contract, if you're a builder and you're contracting to build a house, and they said, but we want you to build it in two years, how much would you add to your estimate to cover the inflation over the next two years? The answer is not 4%.
- [16:10]
B
No.
- [16:12]
A
So the gist is we're mispricing debt terribly, we're mispricing the risk and at some point it'll regress to the mean because markets always regress in some way. They can go insane for very long, but not forever. They never do, they never have. There's never been a market that got expensive, that didn't get cheap again.
- [16:33]
B
Well, so can you share your insights based on the recent corrections that we have seen and the recent bubbles that did temporarily pop and then they came in with liquidity. So we had obviously post pandemic, great financial crisis. They always papered over it. And now we're back at NASDAQ and S and P, everything's at an all time high. But this time now gold page, people like you are taking a look at hard money, right? You've been doing it for decades, but now gold is hitting an all time high of like 3,500 because people are like, wait a second, maybe they can't paper it over forever, but it still, it just feels like they can keep kicking the can down the road for longer.
- [17:10]
A
So you kind of just answered your own question though, right? So for years we had inflation, but they were able to pretend that it wasn't bad. They actually told us it was good, Right? So there's a dozen nitwits at the Fed who we are somehow supposed to think they're these wise ones who sit around and know how to make a call and they're just bureaucrats. They're just bureaucrats and some of them are really stupid sounding when you listen to what they say. And so what did 20, 21 2, 3 zone do is it brought inflation right to the headline. So we got up to 10% after years and years of them saying don't even worry about inflation. Rivlin once said that inflation's not a problem because no one thinks it's coming. And I go, just because they don't think it's coming doesn't mean it's not going to arrive. But inflation expectations now huge, as illustrated by your double digit treasury demand. Now, the reason Treasuries are priced different is because there's all sorts of statutory protections preventing making people buy them. They're trying to create markets for those Treasuries, but they're not pricing correct. So the gist is that now we're boxed in by the fact that, let's say, hypothetically, they start doing something that's inflationary, which everything you just described as the solution is inflationary. And all of a sudden the inflation metrics start glowing bright red right away. Gold takes off, Bitcoin takes off. Things, just things. Groceries start taking off again, which they're still taking off. I had breakfast this morning. The guy said the price of the fish he bought for the fish he cooked this morning, he said doubled two weeks ago, double two weeks.
- [18:55]
B
Crazy now.
- [18:56]
A
So the gist is the tricks that they've done for 40 years are now potentially going to hit a brick wall because they're obviously going to face immediate inflation or inflationary warning signals. And then the Fed will have to make the decision, do we look like a bunch of assholes and just do it anyways or and leave a terrible legacy? Right? We're going to be the Arthur Burns of this generation who let inflation get out of control. Or is whoever's in charge of the Fed going to be the Paul Volcker and try and be the one who wrestles it back and saves the day? I think Powell, to the extent, if he had stuck around, to the extent, had blown up, I think he might have played hardball. I think he might have been.
- [19:41]
B
He's tried to.
- [19:42]
A
Old, old men worry about legacy more than money and stuff like that, right? I think you don't want to be. I wouldn't want to be Fauci right now. Right. He's going to go to his grave in shame. Right. They don't like that.
- [19:54]
B
Well, Powell definitely has been trying to be Volcker. He doesn't want to be the burns. It seems like he's just in this constant battle with Trump now, obviously wanting him to lower rates. But to the administration's point, our debt is so unsustainable at these interest rate levels. They have to roll over the debt. Everything's too high. The long curve has, like, blown out on them multiple times whenever they try to do anything. Right. We had that tariff tantrum. It lasted like a couple of days before they had to sort of back off. Benson's been issuing everything on the. On the short side of the curve, which he criticized Yellen for. But what do you do when you're between a rock and a hard place? I mean, our debt is too high, our entitlements are too large, and no one has the stomach to cut them. And we don't want a systemic, you know, meltdown and a debt spiral that we can't get a hold of. So I just. I don't know how this is going to play out, but it's one of the reasons I have Bitcoin, and that's.
- [20:46]
A
Why I'm sympathetic to the bitcoiners. You just described stage four cancer.
- [20:52]
B
Yeah.
- [20:53]
A
You're saying to your doctors, I had a student die from cancer, and he walked in my office one day and he said, my doctor had the talk with me, and that's where the doctor says, there's nothing left for us to do. We could reach that point. And in the debate last night where I moderated with Peter Schiff and Brent Johnson, Brent was making the case, I think, legitimately, that governments will do really stupid stuff like start wars and things. And Peter was saying, no, they won't. What good would it do? And I finally chimed in, said, what Brent's saying is, they're going to do it. It doesn't matter if it won't do any good. This is what they do. Right. So we are potentially an empire hitting a wall pretty hard. There's a guy named Joseph Tainter. Do I remember that? Complex collapse of complex societies where the society expands and starts using too much energy to sustain itself? That's Rome. That's all sorts of empires. Right. All the empires do that. One could argue we've done it, and I don't think we're done because we've got too many real assets. We've got too many inland rivers. We've got too many resources we don't have. Our population is not. We're not drowning in bodies here. It's not like we're Tokyo, where there's not a square inch unaccounted for. We have resources. We have a fairly educated population, although that's slipping pretty quickly. And so we will have all those assets when we're done. But we could go through a tough period, a very tough period.
- [22:28]
B
No, I very much agree with you. And Brent Johnson always makes the point with his dollar milkshake theory. Even though the dollar is definitely the cleanest sock and maybe the dirty drawer, it's still the dollar. And most debt is denominated in the dollar around the world. And the dollar so entrenched in the system, we still do carry a lot of weight and power, even though it's eroding and we don't have the leverage that we once did, which I think maybe that's one of the errors that Trump is making, thinking that we have some of the leverage that we do, and that's why he's been executing the tariffs in the way that he has, because you can see things shifting. And I don't know if you follow Luke Gromen's work, but I love his analysis where he's talking about what truly backs the dollar and, like, how China has the leverage now with rare earths because we really need the rare earth. So you can only do so much with China. You have to kind of start to play ball and figure out how are we going to rework the system in a way that supposedly lifts up the Main street class that they're talking about so much, because we've hollowed it out so much. And we can't just, like, wave our fingers, snap our hands, and all of a sudden move the industries back here to the United States. So how do you think the administration is doing with their goals of trying to, you know, strengthen the middle class to the point that it once was, while dealing with this dilemma that they have and all this debt and other countries creating alternative systems, including BRICS.
- [23:45]
A
I think 50 years from now, Trump could be transformational. But I also believe the repair work he's trying to do, the timescales of it, will far exceed his presidency. And so he could be the guy who said, like, for example, I made the argument I think I made on Tucker, actually, I made the argument that I don't think it mattered who was president in 1980. So Reagan gets credit for all sorts of stuff. I think there's things he did that were very important. But I think whoever was president during those next eight years was going to inherit the beginning of a boom. I think we're poised for it. So I think Reagan might have been the best guy to be there, but I think we're going to have a boom no matter what. I believe that Trump could be getting it right. But, for example, when Microsoft or Apple says, we're going to build a big plant in Texas, we've renovated floors of our building. This is not exactly on the same par as a big plant in Texas. Texas, right. Takes two years. So. So I believe that they can promise to build a plant in Texas without ever putting a shovel in the ground during Trump's presidency. And so that promise is meaningless. And in fact, by the time, let's say, they did need to follow through, Trump's a lame duck. And they say, no, we're not putting a shovel here. We're taking these plans that we've laid out for you and told the world we're just going to move to India. Same plant, same architecture, same everything, same water supply. Just move it to India. Right. And so all these promises he's getting are just that. They're just promises. And until they become concrete. Now, who do we have in this country who knows how to build a chip plan? Who do we in this country do we have who knows how to run a chip plan? We have people who know how to make lattes. We have people who. We have certain skill sets. We have a lot of college graduates who don't bring with them a lot of skills. Meanwhile, the mistake. And it sounds like I'm talking my book, but I don't think I am. Trump's trying to break down the funding system for university research. And it's the foundation of our scientific efforts in the United States, which have been the best in the world. So you show me a startup, you know, Marc Andreessen, Netscape, it starts at Illinois. It starts at University of Illinois. Yeah. You know, a friend of mine is former second in command at Microsoft. At one point, he was right below Ballmer, and he's fun to talk to. He was a Cornell chem major, and PeopleSoft came out of our computer science department. And so. And all the biotech companies, same thing. They are some med school professors, some. Some biochemists in some. Some department somewhere who figured out some way to do some new process that then gets sold to Pfizer. So Pfizer is a platform company now and Trump looks like he's trying to bring the scientific community to its knees. It looks like more than just a warning to me. I'm not positive. It's very fourth turning, actually sort of destroy the institution that took 80 years to build. So I don't know what's going to happen. But I do believe that these changes and I tried to press Brent and Peter to give me time scales for their two divergent views. When will we start to see the effects of these tariffs and things like that, besides the knee jerk reaction? Right. But when will we start to see if it's going to be inflationary? When will we really see the inflation or if it's going to boost the economy? When we really see the boost in the economy. And I think it's going to be a long time and I think there's going to be a recession or two during that period.
- [27:39]
B
Well, I think that most of us actually would agree that there's some sort of reset underway because there has to be. And the dollar can't really underpin the system in the way that it used to as the treasury reserve asset. And we're seeing countries move increasingly to gold. Like we mentioned, you've been bitcoin and Bitcoin. I think so. So maybe to start to unpack that, you know, we've seen moves with even Besant and a lot of the political leadership embrace the digital assets industry, you know, establish this strategic bitcoin reserve. They haven't announced plans of how they're going to accumulate, but they're really going in that direction. And they prioritized stablecoins because who's going to buy our debt? Stablecoin issuers. Right. They're going to be mandated to hold short term treasuries. And so I think.
- [28:24]
A
Doesn't that spook you?
- [28:26]
B
Well, no. Why? Well, I mean the stable coins just essentially a digital dollar. And I think it will bitcoin adoption.
- [28:33]
A
So let me tell you what I've seen the evolution of the crypto community. I turned down. I made the decision not to buy bitcoin when it was $10. If I bought it, I would have sold it at 50. I know my psyche. I would have said, look, this is a farce. I'm just made fivefold. I'm taking it and running with it. And the profits would have been used to pay for therapy for the next decade. And as I said, the long arm of the state, if they decide they don't want you, I sincerely, to the bottom of my soul believe they can Destroy you. I think that's where some of the Hodlers are out of their minds. So if the state says, look, if you use bitcoin, you're getting thrown in prison for 10 years. Game's over now. But the bitcoin guys, the bitcoin guys are now all, you know, they started as this very libertarian movement and young revolutions are fueled by young, and in particular young men. No offense, but young men are the ones who are skateboarding down railings and breaking their wrist every day and stuff like that. But, but, so it started very libertarian and now they're all excited that Larry Fink is in on the game and that the government's in on the game. I'm going, you guys are signing off on precisely what it is you defied and that is government. So I find there's a paradox in that bit of thinking.
- [30:00]
B
Well, I think that it's less so that people are getting really excited about it than they realize that this was inevitable. And it's exciting to see bitcoin being recognized and maybe legitimized. But I mean, most of us, I would argue, don't believe that it poses any real threat to bitcoin. Bitcoin's decentralization, Bitcoin security as at a technical or economic level. So like the question that I have for you is given that there are such signposts that at the highest levels of government they are embracing bitcoin. And the US is specifically saying crypto. Well, they are, they are actually mentioning bitcoin a lot. Like the recent White House report specifically named bitcoin and talks about the right to self custody. I mean, there haven't been any signs, especially in this administration, that they are anything but for this technology and are trying to figure out strategic ways that it could actually elevate and you know, extend dollar dominance. Because obviously we don't want to lose our position with the dollar being the main currency. But increasingly maybe bitcoin will be sort of a store of value for every government, every company, because it is the one thing that no one can print and manipulate. And you don't have to trust any other country. Right. We're not going to suddenly move to another nation. Sovereign nation's currency. Gold I think would be the best candidate if there wasn't bitcoin. But you mentioned already some of the physical issues that we have with gold and graphically, graphically. So, you know, bitcoin is this great alternative that anyone can tap. It's a neutral reserve asset for the digital age. So I guess I don't understand why you would think that if the Larry Finks are embracing it and we have an administration talking about it, that suddenly the state's going to go, no, I'm going to switch off the light and ibit's going to suddenly go away, and no one's going to be able to interact with Bitcoin. You can't have it. You can't hold it. I mean, what evidence do you see for that?
- [31:52]
A
Well, so if I wanted to bring in, for example, let's say 20 years ago, I knew we were heading for some central bank digital currency, right? The claim that the three NSA guys wrote the first paper on digital currencies. I don't know if that's true, but I keep hearing it. I think it would be brilliant to crowdsource debugging that process. So you release it. You really want to get sinister. You say, okay, Max and Stacy, you guys are going to hype it. I don't go that far. But the idea of getting enthusiasm. So the smartest people in the world are developing the machinery, the on ramps, the, the off ramps and stuff like that. Now, here's something that I read the other day that I think could be spooky, and that is I read a, a summary of a, of a meeting that a friend of mine who's a military analyst, not intelligence, but an analyst, he went to this meeting, they talked about crypto, and, and in his notes, there was no mention of Bitcoin. And the question is, is it possible that they're not really seeing bitcoin as the future? They see totally crypto, totally blockchain, totally. You know, you name it. But, for example, if you had the reserve currency, why would you sign off on a currency that you actually don't own? Right? So I've been told that US has bitcoins and stuff like that, but the fact is, the dollars are of currency is a gargantuan percentage of the global, and whatever the government owns is trivial compared to that. So sort of rhetorically, I ask, are the Rockefellers and the Rothschilds going to give up power to Stacey Max and John Saylor? It doesn't. No, Michael, Sorry. Yeah, you can tell I'm a real hodler.
- [33:37]
B
I heard, I heard you say this on, on Tucker as well. It's just, you know, it's interesting to hear it because there is no aspect of Bitcoin's code that someone can't audit. There is no way for any entity, any government, any organization to somehow 51% attack it. I mean, at this level, the amount of energy that that would take and the cost. And to your earlier point, this idea that they would somehow ban it, I mean, to get two thirds of Congress to suddenly decide, hey, we're against this type of technology that really empowers the individual. I mean, it's essentially like trying to ban the Internet. So I just, there are all these vectors where I just, I can't see how that could be possible. And our government is literally showing us signs that that's not what they're going to do. They're going to do the opposite. They're going to encourage people to hold it. I think stablecoins will usher in more and more bitcoin adoption because they're just like a great entry point and an easy on ramp and this is where everything's going even.
- [34:39]
A
They already exist. Didn't they already exist though? Didn't stable coins already ex.
- [34:43]
B
Oh yeah. Tether's the biggest. And I think that Heather will increasingly move to the US because right now they're, they're offshore. But you see the, you know, Paolo always at the White House. So they're clearly coordinating. Right. And I think the stable coins will eventually end up some of them on Bitcoin. We're actually seeing some more announcements of them moving the technology off of these other chains, which I don't think are as secure at all, and moving them onto bitcoin. But again, like, I just, I feel like you're very negative about it without seeing that there is this potential.
- [35:14]
A
It's not negative about bitcoin. It is negative about the power of the state.
- [35:18]
B
The power of the state. Okay.
- [35:20]
A
It is really. I just do not believe the state wants to give this kind of power to the people.
- [35:27]
B
Well, why do you think that they are okay with gold then?
- [35:31]
A
Well, they're not, but it's also not pressuring them right now. It's just a speculative asset. Don't forget the Constitution of the United States protected gold, period. QED King's English. Only gold, only silver.
- [35:47]
B
But it also protects.
- [35:49]
A
And then they outlawed it.
- [35:50]
B
Freedom and speech.
- [35:52]
A
No, no. But then they outlawed it. So bitcoin does not have a constitution level protection. Gold had a constitutional level protection and then they outlawed it.
- [36:04]
B
I guess I would argue against that because it's code, it's open source software. So it is.
- [36:10]
A
But again, you can outlaw it. If you can outlaw something that's explicitly protected by the Constitution, you have an awesome power. Right.
- [36:20]
B
This episode is brought to you by BitKey, a Bitcoin hardware wallet with multi sig security inheritance and a recovery system designed for real life. No complex setup, no seed phrase, just true self custody without the stress. Named one of Time's best inventions in 2024. Use code STORIES for 20% off at BitKey World. Up next, the Bitcoin way. There's only one way to protect your Bitcoin from government, politicians and third party risk and that is 100% self custody. My friends at the Bitcoin Way will train you how to do this the right way the first time. No compromises. Go to the Bitcoin way.com Natalie to speak with the experts about making sure your bitcoin is secure and private. Want to win one million sats just by answering Bitcoin trivia? The top 50 players win free sats weekly. One lucky winner gets a million sats each month. With Speed Wallet, you can send bitcoin swap to stablecoins, shop gift cards, play games, explore mini apps. So don't miss speed trivia. Head to speed app coinstories and use code COINSTORIES10 for 5,000 free SATs. So you believe that there's going to be sort of an Executive Order 6102 again, but in digital form, and it's going to target bitcoin. Is that sort of what you, what you anticipate?
- [37:30]
A
I don't know how it's going to play out. That's way too specific for my taste and I don't know if it's going to play out. All I know is that my spidey sense, that's all I've got to work with. My spidey sense says when Larry Fink is embracing something, you should be nervous. I don't think he's your friend.
- [37:50]
B
I mean, but that's kind of like, I mean, he embraces real estate, so we shouldn't own real estate. Right. It's an. If he embraced gold, if he embraced.
- [37:57]
A
Gold, you should know you shouldn't own Real Estate no. 7 when it was being embraced by all of Wall Street. Right.
- [38:05]
B
And. And yet if you kept that real estate from 07, you'd be doing really well right now. Based on case.
- [38:11]
A
Yeah, but two years, two years from now, will you be doing, doing really well? Because commercial real estate's about to bust, I think. Right? Commercial real estate, private equity, that world is that world. Right. And private equity is not marking the market. It's a big, big mess. And so, so, so your real estate story could fall apart again.
- [38:33]
B
Yeah, I mean, I. The private equity things that you mentioned on Tucker show, I Wrote a little bit about that in my upcoming book. And I really, it's, it's really sad because I know a lot of people go into that industry and they want to do, they want to, they want to do great things, but it's actually harmed a lot of businesses, a lot of people along the way. But. Okay, back to bitcoin. Okay, I get your thesis that the state has the ultimate power. So what do you think are ideas, technologies, things, movements that we can embrace that fight state power? Because to me, bitcoin is the obvious one and the one that has the best chance.
- [39:13]
A
That might be true. That might be true. Again, I'm not against bitcoin. It's this little voice in my head that says one of the things, I have a lifetime filter that I've sent every major decision through, whether it's getting married or going to grad school instead of med school, whatever. And that is, I say, if this goes very badly, will I forgive myself? And if I committed a bunch of money to bitcoin, everyone always says, oh, just a little, I go, what's that going to do me? Right? That's not going to do me any good. I mean, you really have to put in a commitment to it, right? So if you're a hodler and you really believe you got to be pushing in the chips, and then the question is if bitcoin turned into a scam, right? If it turned into a mess of the state, crushed it, would I say, oh, well, you know, I used my best instincts and got it wrong. The answer is no. That's the problem.
- [40:07]
B
So there's, there's no chance that in the next couple of years you would allocate any percentage.
- [40:11]
A
Oh, no, no, no, no, no. Here's what bitcoin's never suffered through. Bitcoin has itself been drawn down many times and rallies back. And so it's making it more and more sort of confidence that it always comes back. Bitcoin is yet to go through a real life serious global liquidity crisis. And what we don't know, and what will be fascinating for me to watch is how bitcoin responds in the next global liquidity crisis, the next really deflationary credit seizing up and stuff. Bitcoin was a twinkle in someone's eye. Maybe Max owned it, but. But very few other people owned it. And so it'll be fascinating to see a bitcoin rallies if it falls. It'll be fascinating, for example, if at some point the state does try to come down on it and can't so for me to get into bitcoin, I am going to want to see bitcoin come off the battlefield bruised, sliced and alive.
- [41:16]
B
Okay, so you do bring up a very good point and valid point about the fact that bitcoin was sort of birthed into the great financial crisis and came out and was the beneficiary of all the qe. Right. It has largely existed. Era of qe.
- [41:34]
A
Right.
- [41:34]
B
However, it was to. I mean, we did have a global liquidity crisis in 2020 and they papered over it. Right. So I think where we maybe diverge is you believe that there's a liquidity crisis, a debt issue, an inflation, a deflationary spiral that's coming, that a lot of things won't be able to survive. They won't be able to print their way out of the bond. Yields are going to go crazy. Bitcoin's going to tank like 90%. Right. I just don't. I. I don't. I guess I don't see that. And I don't see that.
- [42:06]
A
Let's look at what happened in 2020. So I don't feel a correction. To me, a correction has two components. One is you adjust the price considerably. Right. That, that's minimum. Second is you have to adjust and flesh investors attitudes. So, so when, when Bitcoin, if it goes to a real live correction, which it has by itself. Yeah, no question. Repeatedly, yes. You really have to have investors say, I'm never buying that crap again. You really got to get to that point. And in 2020, for example, I actually wrote it this way. I said, imagine the opening paragraph, my annual review. I said at the end of 2020, I said, you wake up having been in a coma for most of 2020 due to a Covid problem. And through this Covid fog, you find out that the entire global economy was shut down by a global pandemic and every business shut down and every school shut down. And then you look in your hotel room and you look at the TV screen and they're along the bottom of CNBC's station, it says S&P is up 13%. That's wrong. That's wrong. That should have forced a correction that shows you the insanity of the markets. And so it wasn't a liquidity crisis. It was a liquidity risk. At some point they'll have a crisis again. They had a risk with Silicon Valley bank, you know, the three big regionals that went down, which is insanity, by the way. Let's think of the insanity of that three serious regional banks I think the three largest regional banks went insolvent because, wait for it, they bought too many treasuries, right?
- [43:51]
B
Their bonds were under.
- [43:52]
A
How insane. And people say, well, they should have hedged. They go, yeah, what kind of stupid world are we in that you have to hedge treasuries as a bank to not go insolvent? But so we are on the cusp of something ugly. This has got to get corrected.
- [44:06]
B
But exactly what I mean, you know that scene in Vegas Vacation where they're in the dam and, like, the water's starting to, like, come through and he starts to put the gum over all the spots every single time we've had one of these tremors and, oh, the regional banks are going to fall. Oh, something's happening in Japan. The trade's unwinding this, that they always manage to come in with a program with stealth QE with whatever. You know, they're ready for anything because they can't let the systemically crumble. Right? So like, so do you believe they.
- [44:38]
A
Have that autonomous power? Do you believe they have that?
- [44:42]
B
No, I believe it's actually, it's actually the market's fault. Right. It's this expectation that the Fed will come in and always save the day, which is, again, why I've opted out of the FIAT world and I, I put everything into.
- [44:54]
A
I agree with you.
- [44:56]
B
But they're going like, the thing, the thing I do believe is they're going to destroy the dollar. They're not going to allow for the crash and the austerity and the depression. What they're going to do is absolutely demolish the currency and it's going to go like this, along with all the other assets, just like we saw when money died in Germany and other hyperinflating currencies. Currencies, right?
- [45:14]
A
So, like, here's the interesting thing about Germany. They demolished the currency, but they didn't get rid of the debt. So people think they're going to inflate away the debt. I say, show me an example where a country inflated away their debt. It's hard to find one. Turns out the best one was pointed out to me first by Luke Grumman, as you mentioned, Israel did it where they had this super like 200% inflation for about 5 years and then it went back down to normal. And I go, what was that? It just went up and then over and then back down. I go, what just happened? Now, here's what we don't know. We don't know who backstopped them. And I'll just Leave it at that. Israel's a small country. They could have been backstopped and somehow they got through it. There was something that tied to the Yom Kippur war or something. Who knows who backstopped Israel? But I think you reach a point where you can't backstop it. And I think the bubble we're in, they're selling it as an AI bubble. I believe there's actually a reason why they like that narrative, because they'll say, oh, it's just an AI bubble. And, and, and, and, and, and it's about euphoria. So this is not a euphoric bubble. I don't think it's ever going to get euphoric. I believe we're in a complacency bubble. So you've got people like you who are protecting yourself against it, but even you're buying the narrative that says they'll just not let it happen. And I believe that's the bubble.
- [46:43]
B
Well, regardless of whether they do or not, I mean, you want to own hard, scarce assets, period.
- [46:48]
A
That's right. That's right.
- [46:49]
B
That bitcoin will probably tank in that scenario. But I do think.
- [46:52]
A
No, I'm just. No, no, no. I don't know. I don't know.
- [46:57]
B
Well, I think that this is. What's interesting is like, how is this all going to play out? And I think the reason why I'm so passionate about bitcoin is because we clearly need a life raft. We need some sort of parallel system that we can opt into peacefully without some sort of a violent revolution. Because we're already ready to, like, kill ourselves, right? In this country. We haven't been this divided since the Civil War. Everyone has divided themselves into teams. Sometimes I think people forget what they're even fighting for. They can't see the nuance, the gray in the middle. They can't, like, see past whatever fog they're in. And it's really sad.
- [47:28]
A
Let me ask you a question. There's, There's a block. I'm just thinking this just now. There's a block of countries that have. They embraced bitcoin. Now, I know you've got, you know, a couple South American countries that, again, the bitcoiners just adore Bukele and these guys, what if, and this is a question almost to myself, what if at the end of one of these 25 country BRICS meetings, which, by the way, someone at Kitco asked me on a podcast, what do you think about brics? I said, well, they just met recently, didn't they. And she said, yeah. And I said, where was the meeting? And she said, it was in Moscow. And I go, we have tried to demonize Moscow. Yet 25 countries met in Moscow to talk about a non US centric world. Right? That's a big thing. Now if all of a sudden the BRICs start talking more seriously bitcoin, now tell me, are they or are you still waiting for them?
- [48:36]
B
Well, I believe that they will, they will be talking about. They've already mentioned it. I mean, like the finance minister in Russia has mentioned it. And if you look at what the leaders of these countries that are in brics have been saying even prior to the last few years, I mean, over the past two decades, they've given signposts that the US dollar system is a parasitic one that is unsustainable and they have to figure out ways out of it. We accelerated that by weaponizing the dollar as much as we have. Right. In the last few years. But it's natural that they would create alternative systems if the one that they're in is currently not, you know, not giving them any advantages, which it's not. And I think that increasingly they will, they will look at Bitcoin. Right now they're focused on gold. But what I think we need to zoom out and recognize, which is the leverage issue that we brought up earlier, they are the net producers of the world. We no longer are. We are, we are the debtor of the world. And that's the issue. And that's why they're moving out of the system, because we're exchanging our printed dollars that we're just consistently like inflating for their goods and services, that they're actually providing for their commodities, for their, you know, products that we purchase at a discount because we're just able to print the money. And I think that that's the system we need to recognize was never built to last. I mean, after the 1971.
- [49:50]
A
Griffin's dilemma. Right, Griffin's dilemma.
- [49:53]
B
After 1971, it's like this was never going to survive. So what replaces it? We have to go back to a neutral reserve asset. The dollar can still be the main currency. I mean, I don't think a lot of countries would care if that's like the main thing that things are priced in. And, you know, you use it more of a medium of exchange, but it's certainly treasuries are no longer going to be the primary asset, I think.
- [50:12]
A
Well, I still don't know why you can't just have a basket of forex Currencies. I don't know why it has to be the Dow at all. It seems to me that computers ought to be able to handle that. But, but, but. So if. If the BRICs, send me an email. If this, if you start picking up on this, if the BRICs starts talking, not just individuals mumbling about Bitcoin under their breath. If you, If. If we start to see tangible moves by the 25 countries and counting BRICS, the producers of the world, as you said, start seriously talking about bitcoin. That's a different world.
- [50:47]
B
Yeah.
- [50:48]
A
So that would catch my attention. The ideal world would be Bitcoin gets the crap kicked out of ideal world for me, not for you.
- [50:57]
B
Oh, because you want to buy it cheaper.
- [51:02]
A
Bitcoin gets the crap kicked out of it, survives, and bricks moves to it and they go bang. You know, the best investment I ever made was Philip Morris, R.J. reynolds.
- [51:14]
B
Oh, really?
- [51:15]
A
And the reason it was the best, it wasn't the most profitable. I was a tech bull. I made a ton of money off tech. I was an idiot. It was the. It was evidence of the bubble that I was enthusiastic about tech. The best analysis I ever did was Philip Morris. It was at a PE of Philip Morris. RG Reynolds had a PE of 6 or 7, had dividend yields 9 to 12%. It was hated. It was despised by people. It was banned from funds. It was facing $142 billion lawsuit. And I knew they wouldn't. They. I knew they wouldn't go bankrupt because then you don't get paid. They just declare bankruptcy and then, boom, the lawsuit's gone. And I'm thinking, what am I missing? What am I missing? This is an amazing buying opportunity. This is a low. And then one day I read an article that said, by the way, if they lose the lawsuit, they have to raise cigarettes $0.50 a pack to pay it off. And I go, oh, my God, that was the missing puzzle piece. And I bought a bunch of Philip Morris and R.J. reynolds.
- [52:17]
B
Really?
- [52:20]
A
I could easily imagine a time in my future where Bitcoin where there's that moment where the missing puzzle piece shows up. Now, there's no way right now my current thinking, would I size Bitcoin enough to make it meaningful? And I have no interest in having an irrelevant quantity of it. Except the one argument for it is if we're truly in a life or death situation and I got a scramble out of the United States, just survive. And I can do it as the sewing diamonds in the hem of my. In the. In the seam of my pants equivalent. Right. I don't want to fight that fight. I'm going down to the ship if we get to that. I'm too old for the shit.
- [53:04]
B
You're exposing the Achilles of heel of some of these other stores of value. Well, I do think that bitcoin, it's interesting what you say, because it was hated, right? That was an opportunity actually because it was undervalued and I see bitcoin that way. I mean it doesn't have earnings, so you can't kind of compare it to the valuations we were talking about earlier. But its market cap, $2 trillion in market caps of, you know, equities, real estate bonds that are in the hundreds of trillions. If it just captures a small, a small portion of that. If it just, if, if you believe that it'll go to half of gold, that's 5x from here, right? If it's 10, you know what, you.
- [53:43]
A
Know what the above ground value? You know what the above ground value, above ground value of platinum is? The above ground supply of platinum, it's like three, $3 billion.
- [53:54]
B
Really? And they're going to need it for hy. For hybrids, cars, right?
- [53:57]
A
Yeah, hybrids and, and all sorts of things. And so, and supposedly the underproduction of platinum means we're going to run out of that above ground supply at current production rates in something like two, three years. I could have my numbers wrong, but it's not 20. Wow. So one day I'm sitting an odd dinner. I'm sitting with the CEO of Chemitel, which is a European based metals company.
- [54:23]
B
Okay.
- [54:24]
A
The mayor of Gossen, Germany. What am I doing there? Sometimes I wonder. And I asked the CEO of Chemitel about, about rare earths and, and he said, oh, there's tons of rare earths. It's just the Chinese are undercutting our price and so that's the only place that can produce them. Now again, let's say China cuts us off from rare earths. How long would it take to get a rarest mind going? And the answer is a long, long time. And so I, Brent made an argument last night in the debate that was, there was no, it was Peter. I think one of them made the argument that on shoring was a national security issue. And I asked if Trump was thinking along those lines. I think I questioned him on that. But, but that is the real problem because if China said, look, we're not sending anything to the United States now because you did something in Taiwan or whatever, everything would shut down. Everything, right? There would be nothing. You couldn't fix your car, you couldn't fix your plumbing, you couldn't fix anything. That was, by the way, the great risk of COVID the lockdown. So the good news is the whole Covid story was baloney. And so as soon as China got us to lock down, they opened up. If they had stayed locked down, too, everything would have fallen apart.
- [55:47]
B
Right, Right.
- [55:48]
A
And so that's risk. That's a monster risk.
- [55:52]
B
It's huge. It's for national security. It's huge. But for a lot of the different things that we rely on. I mean, they dominate in production and they dominate even more in refining. So even if there are, and we're.
- [56:02]
A
20 years from getting back in that game.
- [56:05]
B
Well, I agree. This is, this is why I think that the administration, whoever's in power, whoever's in office, needs to be very careful because we don't carry that leverage anymore. We need to be wise about these types of, you know, negotiations and trade deals because they have, they have the power when it comes to that. We need the stuff. We, we can just print all the paper we want, but we, we need the actual physical.
- [56:26]
A
If they don't want, if they don't want our paper. And so again, you're making the bitcoin argument there. If they say, we like bitcoin, bitcoin, we don't like dollars. You just won this whole discussion. You, you, you own it. You, you're going to be rich, Natalie. And you're gonna, you're gonna, you can dump whoever you're dating with or married to now and get a better model. And, and you can, you get, you could move up. You can move up. You'd be an upgrade.
- [56:50]
B
Well, I won't, I won't need to do that. I just want the, I really want the world to embrace bitcoin because too many people have been left out and left behind. And that's what really frustrates me. And it makes me sad because, you know, the reason I think that we're at such like an inflection point with our country and a fourth turning feeling is because so many people, the majority, feel so frustrated. They don't trust the institutions, they don't trust the politicians because they've been given many reasons not to anymore. They cry out and hope for accountability, and they never get it right. They never get it, no matter who's in office. It's very frustrating. They both, both teams rack up the debt, and for the average person, education, retirement, everything is so much more expensive than it was once was. And it's frustrating. And so what tools exist that the average person can start to opt into and to use and to save in that can save them from this giant mess that's caused by the money Printer? And I believe the best tool is Bitcoin, because it is kind of hard to get, like, you know, a tiny fraction of an ounce of gold. But you can buy a couple of satoshis with whatever currency that you have, and it's much more accessible to the globe than any really other store of asset. You can't buy a fraction of a beachfront property in Miami or, you know, I mean, I just. I think that there are so many things that the average person doesn't have access to. And we work harder and harder for money that's worth less. And that's the problem. That's the problem. Everyone's feeling so screwed over because we have been so.
- [58:14]
A
This is a strange thing about what I think is a huge bubble, and that is there's no euphoria. Well, you're describing a very depressing world.
- [58:23]
B
There's. Well, I think. Well, I mean, like one of the most concerning statistics that people have been raising is that young people don't have hope, hope for the future. I mean, look back on your childhood. Didn't you think to the future with hope? Even if things weren't perfect or you had a difficult time or struggling like there. A lot of people had hope for the future. And now you pull Gen Z and it's like, I have no hope that I'm going to be able to afford anything. AI is going to take my job. I'm never going to afford kids. Like, it is sad and it is depressing. I think people call it the silent depression. Right. So many feeling like, well, this isn't fair. And so I think.
- [58:57]
A
So here's the problem. Let's say I'm right about the markets being 200% over historical valuation. Let's say we do find our way into a recession. And, you know, the jobs numbers yesterday or this morning were horrible.
- [59:09]
B
All the revisions have been horrible. Yeah.
- [59:10]
A
And in fact, if you look underneath the hood, you follow someone like Stephanie Pomboy, who talks about what the real numbers are, and she says, it's been a disaster. You look at Melody Wright talking about the real estate market, it's a disaster.
- [59:21]
B
I've had them both. Yeah, I've had them both on the show. And Danielle DiMartino Booth, too. Yeah.
- [59:25]
A
And Danielle. I have the experience of having sat on stage with Danielle and having her Put her fist into my ribs. You know why? Because I made a joke about wearing one of those pink hats. But here's the problem. We are therefore in this, I'm going to call it the complacency bubble. Let's trademark that one because I haven't heard some. It's a complacency bubble. It really is this. The Fed won't let the system hurt us. There is no evidence from the historical record that that's true. There's no evidence.
- [59:56]
B
Well, it won't.
- [59:56]
A
There's evidence from the last five years. That's not historical record.
- [59:59]
B
It won't hurt the system. It's been hurting average people a lot actually.
- [60:04]
A
Right. But just because the boomers and everyone need returns doesn't mean they get them. They're not entitled to returns and I think the returns are going to be awful. Now here's the problem I have. If the complacency bubble, which I think is the biggest of them all, if we're feeling this bad at the top, what's the bottom going to look like? Yeah, the bottom is going to look like the fourth turning well again.
- [60:31]
B
I mean this, I find this debate really interesting because there are so many folks out there who are the doomers, if you will.
- [60:40]
A
That's me. That would be me.
- [60:41]
B
They're predicting the ultimate, like basically the equivalent of 1929, modern day, arguably worst. But I just. This is where I think. I don't believe it. They're going to destroy the dollar instead, which.
- [60:56]
A
That'll be worse then. That'll be worse then. That is the model.
- [61:00]
B
But that's what they've been doing. Right. So that's why. What's the solution? What is the solution for the average person? Because that's exactly what they've been doing. They have inflated and destroyed the dollar over the last hundred years. Not to mention the 40% they printed in the last few. But it's like they've destroyed the dollar. The average person can no longer buy a home. Young people feel no hope. Groceries are up. I don't know how many double digit percent over the last few years. You know, everything's gotten more expensive but they hide it in their CPI metrics. So they are doing it. So they're going to continue to do it again. They're always going to paper over it. So the dollar is worthless. You can't save in the dollar. So what are you going to. What's the solution?
- [61:37]
A
They can't paper. The idea they can paper over it is the thing I'm questioning I'm challenging, but I, I believe the inflation now being headline, inflation being now inflation expectations means that the minute they start to do what used to work, it won't work. That's my opinion. And so I believe that the, that Joe Six pack, first and foremost, don't quit your job. Let's start there. Second of all, you know, quit buying lattes. Quit, quit, quit spending money you don't have. Quit using doordash and paying in four installments, right? Stay off of the, stay off of the private debt market for good, period. You know, get rid of your credit card, you know, freeze it in a block of ice so you can't get to it. And don't buy story assets, don't buy things like Nvidia because it's a story asset. Nvidia. Here again, bearish stuff. Here's a story I like to tell in. In about 2005, Buffett lamented holding out a Coca Cola. Now we know he loved Coca Cola. I mean, the guy walks around in a bathrobe with a cherry Coke pretending to be a harmless guy, right? What he was saying was that in 1998 Coke had a PE of 50. And he realized that Coke therefore was returning 2% cash flow when Treasuries were returning 6. And the great Warren Buffett was too blinded to realize he should have swapped his Koch for 10 year treasuries. Fifteen years later, Coke was still underwater, inflation adjusted. I don't know when they caught up, but it took a very, very long time. Coke is a royalty Trust, was returning 2%. It's not like all of a sudden Coke is going to double its market share. That wasn't going to happen. And he realized that he had totally blown it. And so now let's look at the modern stocks in 2015. I don't remember the equity market seemed like a great depression. In fact, when I wrote about it. I write about the economics and markets and stuff every year. And I had to read my 2015 year in review recently. And I make the case, and I think it's compelling because I know how to do this, that we had gotten back into bubble territory. And I do it by showing metrics of valuation getting up. I do it by quoting the most famous investors in the world saying, jesus, we're looking into the abyss already. Again, how did we get here? We're about to have a disastrous set of markets. Stan Druckenmiller, you name it, Howard Marks, the whole enchilada, the guys who, if they don't know, no one does Right. Ten years later it is just straight up. What's straight up? Apple. Apple grew its revenues 50% over a 10 year period in which its share price went up tenfold.
- [64:37]
B
Yeah.
- [64:38]
A
Now it's Microsoft grew, its revenue is 150%. Good job. Tenfold gain in share price. Nvidia 25 fold gain in revenues. Wow, that's good. 250 fold gain in share price.
- [64:53]
B
Yeah.
- [64:55]
A
These companies were not trading like Philip Morris in 2015, yet somehow they've put these massive growths in their valuation. And by the way, Huang at Nvidia, he's got a sketchy past. Are you going to be shocked if it turns out that Nvidia has been vendor financing using 35 shell companies to buy chips? Because that's what's claimed.
- [65:21]
B
I don't know anything about that, but I mean it is interesting to see these tech monopolies and the Mag 7 just dominate entirely. And they've been the largest like 35% of the market. Right, exactly.
- [65:32]
A
And, but what if they, what if they lose 90% of their value just to regress back to 2015? This is not antiquity.
- [65:43]
B
I mean this is again, it's like they're the analysts that are predicting this. I, I, it's interesting to talk to you guys and I've had several of them on my show. But it's just, I don't, I don't see how it's possible when they still have the money printer and they're going to choose the currency to be the fall, you know, the fall item that.
- [66:05]
A
But what, what have we ever have we in Recent years? So in 2021ish, they turned on the printer. 2020 they turned on the printer. But then we got double digit inflation real fast.
- [66:20]
B
Right.
- [66:21]
A
And I think what that means is the inflation demon woke up. It's like a Godzilla movie where all of a sudden this creature came out of the ocean to rampage around Tokyo. Right. And I think that inflation monster will wake up immediately.
- [66:37]
B
Absolutely.
- [66:40]
A
Well then what's the Fed going to do when people are looking them right in the eye and say, you guys did this, it's your fault. Everyone knows the Fed held rates too low too long and what they leave off is too many times.
- [66:59]
B
Right, right.
- [67:01]
A
So now they're calling for the Fed to do it again. I go, are you listening to what you're saying?
- [67:06]
B
Yeah.
- [67:07]
A
You're calling for the Fed to make the same mistake again.
- [67:12]
B
I know, but the alternative is, one of it literally is a total global collapse because we have nothing built up on the Other side, other than maybe arguably bitcoin. Right. I mean, no. Like, that would be total pandemonium. Everything in the stock market crashes. Real estate goes down. The dollar shoots up. Like, I, I mean, and, and still they would try to print. You're going. We're basically going into Weimar, Germany at that point. But still, you want to own hard, scarce assets. Because in the end, that's the only thing that they can't print. Right.
- [67:46]
A
So we agree. Well, we agree 100%. We don't know whether it's gold or bitcoin. You know, if, If, If I could replay the tape. Do I wish I bought bitcoin? Yes. Right. And by the way, you and I both know, I don't know when you got into bitcoin, but if I had a cost basis of $10, Bitcoin can go up and down like a yo yo, and I would sleep like a baby, because that's what happens. I was buying gold at a cost basis when gold was 270, I was buying it inside a close end fund that was 28% below NAV. So I was buying it like round number 220.
- [68:21]
B
Wow.
- [68:22]
A
So when gold. When you're buying gold at 220 and it is fluttering around 3500, you don't care if it goes up that day.
- [68:29]
B
Right, Right. And I do think that it's a good, like, signal and signpost for the money printing that's happened. Because if you price things like the S&P 500 in gold, you see just the devaluation that's happened and that the S P is just essentially like, it's been the vehicle for where money printing, inflation goes. Right.
- [68:46]
A
So I. I bit into Peter and Brent simultaneously on that argument in the sense that there's the. The gold bugs who have their cult. Right. They have their cult too. The gold bugs say gold's the money is the dollar that's changing. I go. When I go to the grocery store, if, If I were pricing groceries in gold, they'd be moving up and down like a yo yo, so that everything I buy is denominated in dollars. And so you can't say dollars are varying. Gold's not. Gold is a moving target. It's a metric that's moving around. And so I love the fact that gold's gone way up compared to. To things that I could have owned. Yeah, but it's still a moving target.
- [69:30]
B
Yeah, but I think that when people compare it to, you know, an ounce of gold could. Could have bought a nice suit in the 1930s.
- [69:37]
A
I got a better one for you. I got a better one for you. A better one.
- [69:41]
B
What is it?
- [69:42]
A
We don't know what a nice suit was, right? It's, it's, it's a. They say you can buy a nice suit in ancient Rome for ounce of gold, but you know what's a toga cost, right? I know. I don't know how to price a toga. What gold could buy an ounce of gold could buy in ancient Rome was a month worth of manual labor.
- [70:00]
B
Oh, okay.
- [70:02]
A
And that turns out to be something that hasn't changed at all. You hire some burly bastard who's unskilled laborer. What are you going to pay him? Well, 3,500amonth.
- [70:13]
B
Well, see, so there's some stability there. The hard money is stable and the fiat currency is the volatile one.
- [70:18]
A
The Lindy effect. It's the Lindy effect. The Lindy effect says the longer it's been around, the more likely it's going to be to stick around. And gold bugs own bitcoin huddlers on the Lindy effect. Now, again, I'm so sympathetic to you guys that your podcast is going to get people saying, why are you talking? This guy, he's just a boomer, doesn't get it. And they always say, you haven't taken the time to understand bitcoin. I go, well, you haven't taken the time to understand markets and politics and authoritarianism. I've read so many books on authoritarianism to understand what could happen. Because what could happen is not about economics, it's about politics. It's about authoritarianism. I actually am seriously fearful that the invention of the Internet guaranteed authoritarianism, because I believe it's too powerful. And I believe that whoever controls it will have that power.
- [71:15]
B
Well, I mean, I, I think that the Internet has done some incredibly concerning things with regards to social media. I have a love hate relationship with. But I do think that we all given. It's given so many people access to information to work. I mean, my career wouldn't be possible without Internet and the digital landscape that we're in. So, you know, everything, Everything. Like, like any tool, like any technology, there are good sides, there are bad sides. There are people who will use it for good, there are people who will abuse it and use it for bad. But I do love that Bitcoin at its core is. It's not corruptible. It is pure and it is economically and technically sound.
- [71:58]
A
I did a podcast, a guy named Aaron Day. Do you know Aaron Day? Kind of. He's Kind of a love hate relationship with your community in the sense that he's a crypto guy, okay. But he's not, he doesn't seem to be a bitcoin guy. So there's this. He's not a Monero guy, right? John McAfee, you know, but he, he said a couple of things. I read his book because I was going to do a podcast. I'll read a book, right? And, and he talked about different kinds of bitcoin and he talked about this. Bitcoin does this, and this does this. He's talking about the. Are you familiar with this? And, and I, I think I had a chat with, well, I had a chat with Marty Ben, and he seemed to confirm that there were sort of subsets out there that have different functions. You should go, you should go watch. You should watch Aaron. You should watch Mike Ferris. Aaron Day.
- [72:52]
B
Okay.
- [72:53]
A
And, and, and, and what spooked me was, is he was claiming that there's these variations. Now here's the problem. Bitcoin has a limit of 21 million. My understanding is that there's a thin seam there that could change that. But the bitcoin community has kind of agreed to not change it.
- [73:12]
B
It's all consensus, right?
- [73:15]
A
Well, consensus could change, right? But that doesn't scare me. But what does scare me is remember when Nvidia got whacked? When all of a sudden, was it Deep Seek? I think the software. And all of a sudden they say, wait a minute, we don't need Nvidia chips as much. Now if Deep Seek works so well, right? What would prevent, besides just the network effect of a new crypto coming along saying, oh, this is really much better. Now let me give an example of sort of the black swan effect. Google was told to be a complete moat, right? No one's going to get Google. They own search, they're going to dominate it. And along comes AI. And next thing Google knows is spending hundreds of billions to not lose. And they didn't see it coming. And Kodak didn't see digital cameras coming and Smith Corona didn't see computers coming. And they could have. And so what would happen if, and this is totally hypothetical, what would happen? Could there be a digital currency that has some new technological advantage? Also the cool kids say, oh, you're a boomer, you like bitcoin, but we think this is cool.
- [74:38]
B
Yeah, but that just gets to the notion of the fact that bitcoin had such a head start in order to secure energy behind it.
- [74:49]
A
Did Google. So did Google.
- [74:50]
B
But, but the Fact that you have the energy component backing it, it's something you cannot replicate easily. Especially now. Especially now.
- [74:58]
A
Just like when you say energy, you mean literally energy. You mean literally electricity.
- [75:03]
B
Literally the amount that bitcoin has been diffused around the world and the fact that each block is secured, it was protected by real world expended energy that you would have to. In order to try to crack even one block and submit a, you know, an illegitimate block, a nefarious block to the ledger, you would have to gather literally the word, like two, three navies worth of energy to try to, you know, try to invalidate bitcoin for just maybe 10 minutes, and they could kick you right off.
- [75:37]
A
And is there no other crypto that has this capability? It just doesn't have the network?
- [75:42]
B
Absolutely not. Exactly. It's like comparing Kilimanjaro to a grain of sand. It's all the network's energy. That's.
- [75:50]
A
But it. So it is the network. It's the size of the network. It's the first entrant advantage. It's the.
- [75:56]
B
It's specifically the secured. This. The fact that it's secured by this energy wall. That's why Sailor always says, the wall of encrypted energy, you cannot undo it. Right. It's like, think of that mosquito in the amber, right? And like the Jurassic Park. Right. And you can't undo all of that. Like, it's layers and layers and layers and layers and layers and layers and layers that have been put on top of bitcoin. And that's what happens every time a block is mined. So if you just put out a new coin and expect it to become naturally decentralized, you can hack it too quickly because there's not enough energy backing it that sustains the whole entire network.
- [76:34]
A
So it's like having the Great Wall of China around you. Yes. You know, here's a. Here's a fun story.
- [76:40]
B
You know, there are tens of thousands of crypto that have tried, you know.
- [76:45]
A
You know why they build walls? They don't build walls to keep people out. They build walls to keep people in. And I don't mean authoritarian wise. When. When someone breaks through the Great Wall of China in the old days and they get through it, and if they started marauding in China. China, the Chinese government would send troops to the wall to make sure the whole hole is covered, and then they'd mop them up. Yeah, it's a wall. So breaking through a wall puts you in enemy territory and you can't get out. And so what you're sort of describing is that at some level, Right, that you can't break through the wall?
- [77:19]
B
Yeah, it's. I mean, it's very resilient on a technological standpoint. But. Okay. As we wrap up, I do want to just ask you, I mean, because we're, we're touching on a lot of things that I think reflect that you are a little bit more pessimistic about the world. You think that the state will ultimately maintain its power, do anything. We might usher our.
- [77:38]
A
You know, I don't know if they'll maintain it, but they'll do anything to try.
- [77:41]
B
Right. I. I see, I see it as like, what tools exist for us to maintain our freedom, our decentralization? So why, I mean, first of all, why do you feel that way? And what are the things that do make you hopeful for, for, like, the people, the people's empowerment?
- [77:59]
A
Well, one thing that makes me hopeful, something Crichton said where he said, go back and read. Read headlines from 30 years ago and look how stupid they look. Right. And so you look at you, oh, you know, the world's going to go into an ice age. You know, things like that, you know, they're just so.
- [78:14]
B
This is always proved wrong.
- [78:18]
A
The doomers have so far. And by the way, someone said, maybe Rudy or someone said it. Who's. Who's the only guy on Twitter I know who can go by a single name? Predicting the end of the world is a bad bet because it only happens once. And so you're really betting on an inside straight predicting the end of the world. Now, the Great depression only lasted 10 years, but here's the deal. If there was an anthill behind your house and you didn't like it, you went out there and you stomped on that end. He'll open over and over and over all day long. You would come out the next day and there would still be an anthill. But you don't want to be one of the dead ants. You don't want to have been the person who had to go through 10 years of the Great Depression. So, so you and I are both trying to not become the victims.
- [79:09]
B
Right.
- [79:09]
A
Of a world that is likely to cycle. But by the way, you know, I mean, you can say bad things do pass, but I go, there's 1.7 million dead Ukrainians who wouldn't agree with you. And there's. There's 5 million dead, dead Middle Easterners who, who, who are dead because of 9, 11, and again, 80 million killed by Mao, 40 million killed by Stalin. So Bad things really do happen occasionally. And so, so risk is not about what, what happens, it's about what could happen. And, and those who don't mitigate risk, and I'm not, I'm preaching to the choir. You are a risk mitigator by any definition. But those who don't mitigate risk eventually get caught by it. And so if you were a Jew in 1935 in Germany and you sat around the kitchen table, there's going to be guys sitting across the table saying, you know, we got to get out of here. And you're saying, now this too shall pass. And a lot of people died because they said this too shall pass. Now also you couldn't get out. There's, it's very complicated story and that's what got Israel pissed at me a week ago. But bad things do happen. And, and you're mitigating risk. I'm mitigating risk. What I do believe is that the indexers who think that the Fed will save them, and I hear you say that, but I hear you say it first. Frustrated. Yeah, right.
- [80:36]
B
It's a ridiculous system.
- [80:38]
A
It's a ridiculous system, but I also think it's not real. I think, I think the Fed won't save them. In fact, if you look at the last two major rate cutting cycles, the top of the market would correlate it almost to the minute that the Fed started dropping the rates. And in those two cases, the market dropped 50%.
- [80:58]
B
Yeah.
- [80:59]
A
So people say, oh, the Fed starts cutting rates, you know, we're going to party, go, no, you're about to head down a lose run.
- [81:06]
B
Well, you do, you bring up a good point. I mean, immediately the market reaction actually is a sell off and then it tends to.
- [81:13]
A
Well, yeah, but maybe it won't. Maybe we'll finally go back to historical valuations and stay there. Because if a correction doesn't stick, it's not a correction.
- [81:22]
B
Right. Well, I guess we'll have to wait and see. I mean, you do bring up really great points and we have to be aware and realistic of the fact that human nature isn't. There are bad people out there. Right. That's how I'll put it. And power corrupts and an absolute power corrupts absolutely. Right. And it's so sad to think that all the millions of lives that you mentioned that have been lost. I think that it would be much more difficult to go to war and to stay at war as long as we do if we didn't have the money printer mechanism and the fact that we can Control and corrupt the actual money itself. That's why I have hope in things like bitcoin.
- [81:59]
A
And.
- [82:00]
B
And in those situations where the worst case scenario is around you, you need something you can flee with immediately, that no one can control, no one can confiscate, no one can take from you, that it gives you true property rights in a digital form that you can go anywhere around the world with. So I've loved talking to you. This is fascinating. I do think that you will eventually own bitcoin. Maybe it won't be tomorrow.
- [82:22]
A
I actually hope to. I actually hope to.
- [82:24]
B
I hope so, too. I will. I can help you buy it anytime you want.
- [82:28]
A
So, you know, I've had Marty Mar tried to set me up with a bitcoin right there on the podcast. I said, no, I will ask for your help when I'm ready. Now it would be great if the opportunity knocked. When the missing puzzle piece gets put in, I go, okay, now you got me. I've talked to Lynn Alden extensively. I've talked to people who say that, you know, this boomer's an idiot because he doesn't take the time to understand bitcoin. I think I don't understand the computer we're talking into, but I still buy the idea of having to have one. So it's not that I don't understand bitcoin. And I certainly have gaps. I call them, you know, John Sailor. Right. There's a gap. But I know enough about bitcoin to know that now what's dominating my thinking is politics.
- [83:10]
B
Right, right.
- [83:12]
A
And I'm happy with the idea of bitcoin. I'm not unhappy with the politics.
- [83:16]
B
Yeah, well, we need to get the politics out of money, personally.
- [83:20]
A
That's what I think.
- [83:20]
B
But good luck.
- [83:21]
A
Good luck.
- [83:23]
B
That's where we'll leave this. Dave, it's so great to talk to you. I'm going to have your information as well as your year in review in the links in my show notes. Thank you so, so much. I hope to get to chat.
- [83:33]
A
Why don't you do me a favor and link to the Tucker interview too, because it was quite an experience.
- [83:38]
B
It was great. It was a great interview. I really enjoyed watching it. I'm also working on trying to get Tucker to understand that bitcoin, it's not an NSA tool that's going to, like, you know, have a. Have a fate of just going away in a couple of years. I think that he's wrong about that. So we'll see.
- [83:55]
A
Well, I talked to Techcraft extensively off camera And I'll tell you, he sees the word world darker than I do.
- [84:00]
B
Yeah, that's sad. That's sad. We got it. We got to look at the world in an optimistic way, because that's the only way that we're going to get out of this mess and prevent authoritarianism. At least that's what I believe.
- [84:09]
A
Well, I look at it pessimistically, but I look at it with joy. It's like it. It's like, you know, going down a lose run, right? You're going, this is great. You know, my pulse is up to full speed. You know, this is. I used to skydive, and my last jump was in a. In a. In a. In a. In a show to raise money for my dead instructor.
- [84:33]
B
Oh, my gosh.
- [84:36]
A
I said, okay, I'm done. I'm done.
- [84:38]
B
I. You have been a pleasure. This is so funny. I hope that you someday embrace bitcoin and the fact that it's the best bet on. It's a bet on the best of humanity, I think, and I do believe in that. So thank you so much, Dave. It's been great.
- [84:52]
A
It's been a pleasure.
- [84:53]
B
Thank you so much for checking out this episode of Coin Stories. Make sure you're subscribed to the show so you don't miss any new episodes, and if you can, turn on those notifications and leave us a positive review, they really help the show grow organically with new listeners. We have a free weekly newsletter. You can sign up@thenewsblock.substack.com this show is for educational and entertainment purposes only. Nothing should constitute as official investment advice, and you should always do your own research. I'm always open to feedback and guest suggestions, so please feel free to reach out@infooalkingbitcoin.com I'll see you next time.