← The Wolf Of All Streets
The Wolf Of All Streets
Bitcoin At Crossroads As Banks Silently Close The Exits!(What You MUST Know) | Mike Alfred
00:38:46
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- [00:01]
A
Bitcoin is seemingly stuck at $70,000 while the rest of the world is volatile and shaking up and down all around it. Of course, when we say here in the title that banks silently close the exits, we're talking about private credit and a whole lot of rumor that that market is going south very rapidly. And of course oil spiked back over $100 a gallon in the midst of this. Once again, bitcoin not doing very much, which I personally find is a very encouraging sign. And I would imagine my guest today, Mike Alfred, also agrees. We're going to dive in to the market, what's likely coming and everything else right now. Let's do, Let's dope. Good morning everybody. Happy Thursday and March 12th to all of you before we do get started today. Told you about them before. I'll tell you about them again. We have an awesome sponsor today which is Abra. You've seen Bill Barheid here on the show countless times. Counting myself very lucky to be one of their customers and also to be working with them now. If you guys haven't check them out at all, it's a great place to do a bitcoin backed and other crypto backed loan. I, as I said, I'm personally a customer give loans out roughly 50% LTV. You give them your bitcoin, they give you money, you don't get margin called and your life goes on. But what the best part is and always has been for me, I literally called my rep there yesterday and was like, can you guys help me through these tax forms that just came which are insane. For all of you who are getting these from exchanges, they'll really sit down with you personally and work through everything, your priorities, make sure that what you're doing there with them is exactly what you intend. You can see the link right down in the description there will grow crypto wealth with Abra and can't wait to have Bill back on the show very soon. All right, moving on. We have Mike Alfred here today. Good morning, sir.
- [02:02]
B
Good morning. How are you?
- [02:05]
A
Yeah, perfect. You got a little delay there, but I think we're good. Man. Crazy markets, right? I mean bitcoin seemingly just like really just dialed in there at 70, 70,400. I mean, you know, I wake up so 68, go to sleep. 72, wake up. 70, 71, 69. As I sort of said in the intro though, like with all that's going on, I find it actually quite encouraging.
- [02:30]
B
I think, I think it's all very constructive. I think there's a lot of energy and effort being expended on the wrong things right now, like whether or not we go to 50 or 48 or something is sort of irrelevant if you understand what Bitcoin is. Because if we ultimately end up at a million, then it will have been pretty dumb to not have bought a 50 or 60% decline this, this late in time where we really haven't had a business cycle. We really haven't had a crypto bull market. We really haven't seen exuberance with retail. And yet you can still buy bitcoin here in 2026, going into Q2 for $70,000. Now you could have bought it at 60 or 62. That would obviously be a better price. And if we do go to 50, you would obviously would have preferred to buy 50.70. The issue is that sometimes these assets don't go to the prices that, that the chart squigglers and the kid analysts think they're going to go to. So they draw their squiggly lines and they say, look, the moving averages have crossed over and if you, if you draw a fractal from last cycle, we've got to go to 48. If we don't go to 48, that's not the end because it's not a real bare market. And I'm just not sure this cycle is like any other cycle that's come before. So I'm not sure you can use an analogy or a fractal perfectly and overlay it. I think there's too many cross currents. I think Trump's policies, I think it's time to say this right? Even if you voted for him like his, his policies have confused the out of the business community. Tariffs have been a net negative. Overly aggressive immigration policy has been a net negative. The government shutdowns have been a net negative. Some of these geopolitical actions have concerned the market. And so we've, we've lagged, we've delayed what would have been, I think, a nice bull cycle at this point. And now we're still coming out of, I think, a prolonged bear market. So that's kind of my view of. And so I'm just interested in adding, what I'm not interested in doing is trading around and getting cute and trying to time whether the bottom is 62 or 61 or 48 or, or where we've already bought them. Right. Because I think that's largely counterproductive if your goal is long term wealth.
- [04:39]
A
Yeah, I 100% agree with that. This is like the most aggressive Dollar cost averaging I've pretty much ever done actually. Obviously I bought bitcoin much lower through previous cycles. But you know, my situation is currently different than it was then and I'm really excited to be buying in the 60s and 70s instead of the 120 20s. And as you said, I'd be really pretty excited to be buying in the 50s.
- [05:02]
B
Well, it's super asymmetric. I think that's really smart. I mean I. Nobody knows what's going to happen. I think we all should know this by now. There's a, there are a lot of kids on X, right, who think that it's possible to, to guess correctly or if you guess correctly once, that that somehow means you know more than, than someone else. So like if I knew three months from now we'd be at 84 000. Let's say that, that, that I walk on water and I'm the messiah, right? Look, it's just, investing is simple. You buy high quality assets at the best possible prices that you can get them at. And that usually means that you've got to average in because nobody knows what the best price is going to be. And then your goal is to hold them as long as possible. And I think as much as I love X and you see that I love X, I love it mostly for entertainment purposes, I think it's largely value destructive for most users because they look at that and they think that there's something to be be done most days when great investing requires you to do nothing most days. So if, if you're, if you're watching too many influencers who by the way, their primary source of income is telegram groups and trading groups and in indicator suites and things like that, they have to sound bearish all the time because acting bearish and sounding bearish is the only way to get people to act. It turns out that if you have a largely bullish message, which is correct by the way, over five, ten year periods, then no one's going to buy your stuff. Which is why I actually have to make my money as an investor. Like I make my money in the real market investing, doing corporate governance, doing the work in the trenches. A lot of these guys just sit around and draw lines on charts and they charge their subscribers a fee to give them a red indicator that says things look nasty. Well, guess what? Everything looks nasty when sentiment is negative and geopolitics are scary and the economy looks like it's slowing down and unemployment's going up. But that has nothing to do with whether you're going to make money in an asset over a 2, 3, 4, 5 year period. So I just see a lot of that on, on X. And so as much as I love it, I think Most people, like 90 plus percent of people need to be careful because they're probably going to be poorer because they follow too many chart squigglers on X. Yeah.
- [07:07]
A
How much do you personally handicap geopolitical events? I mean you actually obviously alluded to the war without specifically saying it. But I'm pretty openly in agreement that this is a blunder and generally anti war. And I think it could, if we're even talking about from a market perspective, it confuses markets. But there are some unprecedented things that are happening in the context of this war, Right? I mean the Straits of Hormuz now have mines on them. They're officially in them, they're officially effectively closed. I mean as Arthur Hayes here says, oil up, 10 year treasuries up when bailout, you know, complete shutdown in the straits. US announces it will release 172 million barrels of oil. That's 400 million I think internationally. Right. I mean it's hard not to. And once again your point is well taken I think with X because nobody there, including myself, is a geopolitical expert. But you're getting everybody's unsolicited takes on what it means for markets. But the environment is different,
- [08:09]
B
I think different and the same. I mean, look, I was a history major at Stanford and basically all of these things rhymes Y markets have been going up for 100 plus years and there have been problems and things that could potentially end human civilization every decade during that time period. In fact, I'd say there are things that probably looked much scarier at the time than what we're seeing now. There will always be some things that are different, right? Like I think the Internet and AI are, are distinctly different technologies than like the seed drill and vaccines and pasteurization, right? So like there are things that are like step function changes in the way that the human operating system works. But going to war and bombing and missiles and drones and like none of that stuff is new. I think Trump surprised people because he campaigned on being the America first and really focusing more at home and repeatedly said I will not be at war because I'm such a good negotiator and I'm so tough and people fear me and I just don't think Iran cares. I just, I think they're willing to literally fight to the death. I think they're, they, they get accolades when they die in defense of whatever their crazy backwards principles are. So I, look, I, I'm not saying that I'm supportive or not supportive of, of what specifically is going on Iran, but what I think as a markets person is that you can roll all this up every few years and you can toss it aside and it won't matter because markets will be higher and it will largely price in and discount all of it. And so I don't want to be overly dismissive, but like markets are programmed, especially good assets to go higher over longer periods of time and that is the time frame that matters for generating wealth. Like I had this cycle for example. Like it's been a messy cycle, it's been one of the weirdest cycles, if you can even call it a cycle. The last few years I've made a tremendous amount, I mean a generational wealth in those three years by simply ignoring every geopolitical headline, every banking system headline. Every time there was going to be a credit crisis, every time the Japanese yen was going to tank the world, right. Every time Donald Trump getting elected or Kamala Harris getting elected was going to do XYZ thing and none of it mattered. As long as you buy quality assets at good prices, they largely with a little bit of volatility along the path on a point to point basis. If you close your eyes, they go higher. And so I just, I, I hear what you're saying. There may be some truth to there being some differences, but I don't think there's gonna be any difference in the end outcome. The end outcome is when there's clarity as to how this ends whenever it ends. And that could include boots on the ground even, which will be quite messy and it won't be supported by most people, even in the US Maybe only Israel will be the country left that supporting, you know, that the overall war effort. If we actually put boots on the ground. And of course it could go on longer than we expect, it could be messier than we expect. But ultimately when that's over, I expect a rush of liquidity and higher asset prices. Specifically for assets like Bitcoin and Ethereum that are trading already like they've gone through a long bear market. So what happens when something good happens? Well, they'll actually probably go up more than expected because they've been compressed by this prolonged period of so called uncertainty.
- [11:23]
A
Yeah, it's the beach ball being held underwater. Right. And I mean you have this massive fear of markets in general which is just disproportionate to the actual Price of assets everywhere, right? So sentiment is so bad on stocks and we're going to talk about, I guess, private credit and oil and all these things, but stock market's right by the all time high. And to your point, Bitcoin's already gotten the bear market, so it should be the first beneficiary of any meaningful liquidity. And by the way, these wars, historically we've had pacifist presidents before that went to war to stimulate the economy. I mean that's literally how we got into World War I. Woodrow Wilson ran on the premise of he kept us out of the war and then let him sink to Lusitania and took the United States into war to pay JP Morgan, right? So it's not like this is a, and that's not conspiracy theory. This is not an, a new playbook. This is the playbook and it's going to mean more liquidity and more money.
- [12:17]
B
Can I comment on that stock market thing though? Because I think it's a market of stocks, not a stock market. I think a lot of surface level folks who don't really study the market aren't really in the market every day will say stuff like, well the S and P is at an all time high, so we have a long way to fall. And it's like, well maybe the reason why the S and P is so antifragile. I mean some of it is indexing in general as a philosophy, some of it is 400, 100 flows and then some of it is the constitution of the index. The constitution of market cap weighted index will largely hide the dispersion and the rotations that are happening under the surface. And there has been a massive rotation happening over the last three, four, five months out of companies like Microsoft which were really dominant into pretty much everything else. 490 companies that didn't get the AI bid, you know, maybe it's more like 470 or 480 because you got all these memory companies now you've got all the, the Vistas and the Constellation Energies and the GE Vernovas, right? You've got all these equipment providers, anything in the AI thematic, which is all the largest companies in the S and P, right? Anything that touches that has had a very different path than the rest of the so called stock market. So what I think's happening now is a very healthy normalized rotation where we're seeing real dispersion. Like we've seen railroads up here today, we've seen consumer staples up here today, we've seen energy, utilities, healthcare sectors that have largely underperformed for three, four, five years doing quite well which I think is a healthy component. Small caps outperforming large caps. International stocks outperforming US stocks. These are all, you know, the equal weighted S and P which is a good sort of a way to looking at this outperforming the market cap weighted version. So I don't, I'm not, I'm not denying that the S and P looks like unusually strong. What I, what I'm doing disagreeing with is that somehow a harbinger of some larger drawdown coming because it isn't pricing in what's happening. I think AI is so big and so pervasive and growing so fast. And of course we have OpenAI and anthropic probably going public in Q3, Q4. A lot of people misunderstand what that means. That means there's not going to be a top, not a big top, nothing that matters in the broader market until those companies go out. We've got to get SpaceX out. So I think anybody who's bearish here because of the S and P or because they largely just are unsophisticated about markets, they don't understand the index constitution and they don't understand sequentially what's likely to happen in an environment where you have some of the biggest private companies in history yet to go out. They're not going to top the market. The market's not going to go into a long term drawdown until they get those companies out. I could pretty much guarantee that.
- [14:52]
A
So I assume you're not too worried about this. Morgan Stanley restricts redemptions at private credit fund after withdrawal surge. JP Morgan forced to mark down their loans. Private exit credit exodus is accelerating so we have multiple companies doing this. Private credit defaults are up 4x since 2024 is the asset classes for a stress test. Investors are bracing for a blow up. You get the idea, right? Profits return to private equity investors at a 16 year low. That's slightly different. Deutsche bank flags a 30 billion exposure to private credit. This is the new boogeyman.
- [15:28]
B
Yep, yep. And, and it's real. Right. Like there are real issues there. I think a lot of people chase the E liquidity premium. I do private equity and public equity. Right. And I like early stage all the way up to public companies. So I follow the full life cycle of companies and I thought it was odd coming into 2023 how people were piling in still to private equities when public equities were so much better priced. Because they public equities mark to market, right? Public assets in general mark to market every week, every day. Private assets sometimes don't get a new mark for five or 10 years. And so you can hide a lot of things in a situation where you don't have to mark to reality because you can just mark to whatever the last mark was and you don't necessarily have to market down. So I thought it was odd for three years now where like a lot of capital was piling in and you see like the Blackstone president John Gray meeting with executives that run 401k platforms, trying to convince them to let retail money into private assets. And I think private assets should continue to be for sophisticated investors who understand the risk. The moment they started opening it up too widely to retail, I started to think, okay, maybe there's something wrong. And I don't think it's just a private credit issue. I think private equity, private assets in general have been mispriced because they never got repriced fully after 2022, like Netflix and Meta went down 70%. But a lot of these software, private software companies never got a new mark because they didn't need to raise money. So you don't really know what they're worth. And if you're smart, if you're a PE executive and you want to keep your bonuses going forward, you, you don't take the full mark that you could take. You, you, you don't re rate it fully, you just allow it to continue to, to float at the price that it traded at last. So the incentives are all, are all off there. But again, any sophisticated investor, like most of us who are professionals, like we, we've all been watching this for a long time. I don't have any personal exposure to, to private credit. All my private equity exposure or assets that I personally underwrote years ago where I paid in a lot of cases, significantly lower prices. So I think there's going to be a lot of noise in the media about this is going to be the end. But remember In March of 2023, Silicon Valley bank going down was going to kill the technology industry forever. And then like three days later they bailed out the whole industry. And then the next couple of years it was the Japanese yen carry trade was going to unwind the entire global economy. And then like, like the, there was two major drawdowns culminating with April of last year where we had a serious, a much more serious drawdown than what we're seeing now. And then what did that just go away? Because I don't hear anybody talking about it turns out the human mind is quite frail and the news cycle is quite short. And so yeah, they'll be talking about private credit probably for the next year or two. But that doesn't mean that public assets need to go down significantly. And maybe they will for a period of time when it hits a fever pitch and there's like a lot of news. BlackRock closes their fund and Morgan's like, there is now. Right. But those will tend to. Those will tend to coalesce with. With actual buying opportunities. Meaning like at the fever pitch of private credit is going to doom the world is actually when you want to continue to buy more public assets because those public assets will re. Reate largely price in the worst of it. And then if it turns out not to be so bad, they go up. It's the same as always. Like it'll just be the same old story.
- [18:46]
A
Yeah, I guess the narrative there is looking at the fact that JP Morgan is now choosing to write these down and just be done with it. And that's probably the end, not the beginning.
- [18:56]
B
It may be the end for their particular fund and then someone else who's lagging because a lot of these other guys, it's their whole business. So those are the ones that like the blue owls of the world, those are a little bit riskier because they don't have a such a large diversified business. I mean, they have a diversified business, but private credit is a big chunk of it. Whereas a lot of these big banks, big asset managers, it's just tiny. Like, look at blackrock's Aum and then look at the amount of it's exposed to private credit. So there'll be a lot of crypto people. Crypto people do this every few years. By the way, they were doing this during the COVID drawdown too. They were saying the S P. Ryan Selkis was saying the S P is going to go to zero because the economy shut down. I was just laughing. I was like, where do these kids come from? Like there's the lack of understanding. Sophistication is incredible. No, like these are just buying opportunities. So like you wait until there's a lot of news that makes it sound like private credit is the boogeyman. Like you said, it is where you want it to accelerate a little bit from here. You want to hear about everybody potentially and it's going to. It's going to turn into a massive tsunami of liquidations and blah, blah, blah, and then you want to buy more assets. So because in three to six months after that, nobody will be talking about it. It's the same as always.
- [20:06]
A
And interestingly, at this same moment, hedge funds are shorting stocks at the highest level since 2022. You gotta love that if you have a slightly bullish tilt.
- [20:15]
B
In my humble opinion, the positioning and the sentiment is beautiful, especially in crypto because crypto didn't get any sort of follow through at all since 2023. So you had this huge down year in 2022, a little bounce in 23, a new all time high and a couple things like BNB. And then largely if you look at it now, they're, they're well below all time highs and they've never really had a cycle. So yeah, you want people shorting, you want people buying puts, you want people saying the market's going to fall further, you want people saying Iran's going to be the end of the world, private credit is going to be the end of the world. Those are perfect conditions for long term investors. And so either you have capital to deploy here or you're already invested and you stay invested or you are gonna your dollar cost averaging and you want to keep investing, you want to root for people to continue saying this is a crisis. Like I saw this guy Visser, Jordy Visser, who's saying, oh, all my indicators are saying crisis. I said please, please keep convincing people that it's a huge crisis for as long as possible because that's what creates the deeper buying opportunities. Like April of last year. April of last year was a slingshot, right? It was a boomerang. It was unbelievable. I had stocks in my portfolio that 10x or more off of the lows because you actually need the liquidity swept at those lower levels where like everybody's scared, everybody thinks it's going lower in order to get that more explosive up move. And those explosive up moves can go five, six, seven, eight months off the low. So, so like if this is it, and it may not be, but let's say this is it and the sentiment just gets a little bit worse over the next week or two and then we bottom and we're higher in late March or early April, like I'm not sure we're going to get the same level of slingshot as last year because the fear just isn't where it needs to be. You need people to get their panties a little bit more into a bunch than they are right now. People are largely okay, even the chart squigglers who freak out every time any of these Things I've watched them freak out two, three times a year for three years, even as markets have largely continued higher. They're not concerned enough yet. Right. So I want them to get a little bit more concerned if possible. Like, what's happening in the straight of Hormuz right now is really helpful because you got a bunch of people saying this is the end and oil prices are going to go to infinity. And that's really helpful. I'm not sure it's going to tank Bitcoin much further because bitcoin largely, it sniffed out a lot of the issues we're having now three, four, five months ago, earlier than the rest of the market. And then it will probably sniff out the liquidity and the recovery and the bailouts and whatever happens after that that causes asset prices to go up. And so that's probably why it's largely seeming uninterested now, even as some people are becoming more bearish at exactly the wrong time.
- [22:58]
A
I mean, it went down for like five hours on the war news, and it's basically just pressed up and held since then.
- [23:04]
B
So is it still at 70 right now? 70?
- [23:07]
A
Haven't even looked, but I'm assuming it's in that ball. Yeah. $70,123.
- [23:13]
B
Yeah. So it was at 74, 74 hundred when we started. It'll probably dip back down into the 69 or 68 region and then maybe later today or tomorrow it'll be 70 again. I mean, it's just oscillating between 66 and whatever, 74. So that's kind of the new band for now. And when it breaks 74, it'll run into the 80s. And, you know, if it breaks 60 on the downside, it'll probably run to 50, but. But that's it. Like, unless you have options and you have a time constraint, which I can't imagine anyone would be overly at this, at this stage. Right. Like if you, if you have options now like I do, it's probably a small percentage. Like I have IBIT calls for May and September.
- [23:55]
A
Right.
- [23:55]
B
I have Ethereum calls for June. Right. Like, I'm always layering in to out of the money calls that are two, three, four, five, six months out, because over long periods of time, you capture the, the convexity of, of any of those bigger moves. And so I have no idea whether it'll move into my price range during those time frames. But as long as those positions are sized correctly and I continue to kind of roll them forward, eventually you catch that next move. Essentially the beginning of that next cycle move. So. But outside of that kind of trading, like I can't imagine people are too worried about time frames. And if they're not worried about time frames, then if Your downside is 40, 50k and your upside is a million over the next 6, 7, 8, 9, 10 years and again it could. Million could come a lot faster, it could be a lot slower, I don't know. But your asymmetry is all to the upside. So I just again, as I said at the outset, I'm struggling to understand why there's so much brain damage and so much energy being expended on whether we have to go lower and whether someone's right or wrong because they called this or that thing. To me it's largely irrelevant to the path that we're likely going to take in the coming years. And the path we take in the coming years is where all the money is going to be made.
- [25:04]
A
Yeah. My friend Tillman said on the show one day something that was brilliant. He said it at Pomp's conference as well on stage. The idea was basically that sentiment right now is driven by whether you actually have cash on the sidelines or not. People who actually have played this well and have dry powder are very excited about the opportunity. People who are fully deployed are terrified.
- [25:27]
B
Yeah. And look, I think that's part of it. I understand that way of thinking. It's a trader mindset.
- [25:33]
A
Yeah.
- [25:33]
B
Long term investors always have some cash and always are largely fully invested. Right. So like you always have some liquidity or some cash flow. I got a private company that distributes. It used to distribute every six weeks but we're accelerating it to every three or four weeks because there's just so much cash. It's a bakery. Right. And like completely immune to geopolitics, global stuff, tariffs, like it doesn't care. Just a domestic beautiful domestic business that generates 6 or 7 million of EBITDA and we distribute almost all of it every single year. And so that that money just keeps coming in and I just keep redeploying it into to things that I think are cheap. And so I like to. Right here I want to be largely fully invested. I don't see the benefit of having a lot of cash on the sidelines because again, over a three to five year period, which is my time frame, almost all periods where you hold above average amounts of cash are a drag on your overall returns. So. So yeah, it feels good when markets are going down. Right. It feels good to have more cash. But the problem is a lot of times markets go up even when it feels bad. And a lot of people are holding cash because they want to feel good, but actually the returns over longer periods of time, three, five, seven years, they're actually hurt through that process. So I prefer to have businesses that generate cash and income streams that are non correlated, like public board seats combined with private businesses. Right. Combined with hedge fund management fees, et cetera, which are all like almost entirely uncorrelated in the way they operate. It's such that I don't really care. Market go down, I'll buy more. If market goes up, I'll just sit tight. But I just want to be long, right? I want to be long here. And I want to largely ignore the noise, this loud amount of banging and screaming and yelling from people on the Internet about how bad things are going to get.
- [27:21]
A
What I find interesting is that a lot of the short term headlines that we see on a day to day basis are seemingly headwinds. But if you zoom out on this industry in general, it's nothing but tailwinds. Right? I mean CFTC and years of rivalry with Deal, that means combined crypto oversight. Okay. I don't think it moves the market today by any stretch or Wells Fargo filing a trademark for wfusd. I mean, all plumbing and all small news stories that directionally show you the level of adoption of this industry. So once again there's an asymmetry, right? You might have Straits of Hormuz and private credit today, but you have Wells Fargo, Morgan Stanley and all of these coming into crypto forever.
- [28:07]
B
Yeah, I mean look at, you got Clarity act coming, you've got a new Fed Chair coming, you have no sign of let up in the long term adoption. You've got the other big story, Scott, beyond just the ETFs, which have obviously been a huge sort of fundamental underpinning to particularly the bitcoin space over the last few years is the rise of these preferred securities that have been issued by companies like MicroStrategy and Strive. Those products are really starting to work now. The Tradfi guys are arguing their Ponzi schemes and they won't be able to pay out. And there is some truth to the fact that there's no guarantee that they're going to pay out 11, 12, 12 and a half percent forever, but they are filling an important gap there. There are not a lot of high quality assets you can buy with yields at that level. And if these companies can build a longer term track record of doing that, as Stretch is starting to do, and Stretch is holding that $100 level. That is a long term, another long term fundamental component of how bitcoin embeds itself in the traditional system. Because there are a lot of retirees who don't have enough capital to retire if their yield is 3%. So if they buy Procter and Gamble and Merck and even Altria, right, and British Tobacco, like they're maybe getting a blended 5% yield with stretch, they're getting a 10% yield. So they can retire now with 500k and actually continue to live in the US versus having to retire with a million. And so it closes a gap. So if you, if you under save during your working career now, you can catch up via Stretch. And the only thing you're betting on there is does bitcoin outperform those yields? So if you think it's a simple bet, if you think Bitcoin returns 20 or 30 over the next 10 years on a compound basis, those companies will be able to meet those obligations. If you don't, then maybe those companies will have to cut the yields or cancel the yields at some point along that journey. But if you get in at the right price, like if you bought stretch below 100 or you bought SATA under 90 or something, you're getting a yield on cost that's even above the stated yield and that will actually accelerate retirement and, or allow some people to have a more comfortable retirement. And that is a fundamental driver of Bitcoin. Now because as of right now, as long as STRC stays above 100, Michael Saylor is able to buy bitcoin every single day. And people will say, the bears will say, well a, that's not sustainable. And then they'll be say, well, if that's true, why isn't bitcoin going up? Well, all it takes is for the market to flip to a more bullish sort of positive regime. And you'll see that the benefit of having that natural buyer in there every day selling STRC actually benefit the market. But right now in a negative regime, all it's doing is causing bitcoin to be more kind of technically stable than it would be otherwise. But I think it's a bigger story than people think. I see people in bitcoin talking about it, but I don't see anyone outside of bitcoin talking about it.
- [31:02]
A
And STRC is exploding. People are getting it now, right? I mean, I think it's paying over 11 now.
- [31:08]
B
SATA strives just raised to 12 and a half and they're now targeting the par value between 99 and 101. So they're going to try to model. They're basically like a slightly riskier or significantly riskier version of, of STRC where like if you want to go a little further out on the risk curve to get a slightly higher yield, you can. But again they have a debt free balance sheet, so is it risky at over five years? Yes. If Bitcoin does not perform above 12 and a half percent, then yes, they won't be able to pay at some point, but I actually think it will. Right. I think especially from these levels, the KEGR of bitcoin's gone up. The forward kegr of Bitcoin from 60 is better than 125. That's just math because as long as it eventually goes to 150 or 200, the return of bitcoin from these levels will be better than it will be if you bought at 125. And if you're buying Stretch or SATA right now, that's what you've got to model because that's where the return comes from. It comes from the return from here, not what happened in the past. So I think, I think they're both fine bets. I own a little bit of SATA largely to, to start to understand the products better because I think if the flywheel of those preferred securities really works and the finally the treasury company business that we've been talking about for years now will actually have a reason to exist. And this is what we want. The things I said, you were correctly bearish at the correct time. But what I said at that time, even when I was bearish on MSTR in November of 24 at the correct time, which was hard to do because everybody was bullish and I actually had made money on the way up 15x right off the bottom in 22. But the issue was there was no business model yet. Selling common equity via the ATM to buy Bitcoin was not going to be sustainable. This potentially actually works over 10 years. And I think the fact that at Strive, for example, you have insurance actuaries working on it to try to model it over 20, 30, 40, 50 years is exactly the kind of mindset you need. It's like the reverse insurance model where all these insurance companies got too heavy into private credit because they were all looking for a yield that looked sustainable. And maybe the real yield is actually driven off of bitcoin. Maybe that's a better way of modeling the long term obligations of some of these large pensions, some of these large insurance companies. So I'm becoming increasingly constructive. I'm holding my 575,000 shares of ASST. I think it's a lesser understood story than MSTR, but also clean balance sheets so it's not going anywhere. And really all you need there is for bitcoin to go up. If bitcoin goes up in a sustainable way, that stock will rip. And then I'm holding like 6 or over 6 million of SATA, a little less than 6 million of SATA, largely because I want to experiment with that asset and understand how it works. But one of the other interesting things that someone pointed out on Twitter the other day is that SDRC pays on the 1st of the month and SATA pays on the 15th. So if you wanted to like have a blended income where you get paid twice a month like a normal PayCheck, you buy 50% in both and you get a paycheck on the 1st and a paycheck on the 15th.
- [34:07]
A
That's right. I had no idea of that. That's interesting.
- [34:11]
B
Yeah, it's cool. Yeah, he's the first and SATA is on the 15th. And SATA, as I said, is slightly riskier and higher yield. And of course you're paying below par now, so your effective yields even higher than stretch. It's a 200, 300 basis points more at the current price. It'll close, right? Like if, if people start to have the same confidence in strive that they have an MSCR, it'll eventually trade at 102 and so then it'll equalize those yields a little bit. And then what happened over time as those products get bigger, as the yields will come down because the cost of capital will come down. And eventually like if bitcoin's going up in a bull market, you'll see them, you'll see them trade probably well above par. Right? Because a 12% yield sort of assumes a lot of risks to the balance sheet of the corporate issuer. It assumes a lot of risk to bitcoin. Right. I said this the other day on a space. I don't think institutions are buying those because they really believe in bitcoin. I think they're buying them because they've modeled the short term that the balance sheets of MSTR allows them to pay that yield for two years. And so if you can get 12% sort of for two years, you can always sell the, the asset within those 24 months and take your money back. You can put a sell stop on the preferred. So like you can say, look, we're just not going to own it, if it goes below 99. So that we're limiting, we're capping our downside at 1%, but we're getting almost 1% a month. So as long as we hold it for two or three months, we've outrun our, our stop loss. And if it goes below 99, we're out. If it stays at 100, we're in. It's really that simple. People are overthinking it. A lot of the bitcoin people are like, look, this is a clear endorsement of bitcoin. I'm like, no, these are private equity vulture type people. These are traditional investors. They're just looking at MSDR's balance sheet and they're saying forget about the bitcoin, put that aside. This company has two years of cash on the balance sheet and they have enough bitcoin to pay this yield for 20, 30 years or more. So we expect them that they'll do that because their whole business model is toast if they stop paying the yield. So they're not, they're not even at the point of underwriting bitcoin. What happens when bitcoin starts to work again and they actually re underwrite the Bitcoin? 2 now you've got a thing that actually maybe works. And again, I think those yields will come down. I think the buyers of SATA and Stretch will largely be rewarded if that happens over the next two years. And since I'm betting on that, I want to take different distinct bets on that thematic and I think it's going to be a winner.
- [36:24]
A
Tldr Buy stuff and stay long and wait.
- [36:29]
B
Buy stuff, generate cash flow, private businesses, preferred equities, bonds, dividend paying stocks. Right? Like I've been a huge proponent for 3, 4 years, 5 years now of energy MLPs like EPD and tobacco stocks like MO and PM. And all the bitcoin people are like, Mike, what the hell are you talking about? This is a scam. You're trying to get people into other things other than bitcoin. I'm like, no, the correct portfolio for a bitcoin holder is something that allows you to hold bitcoin forever. Yeah, right. So this idea that you should put 95% of your Bitcoin have no income means you're going to have to sell bitcoin at some point, whereas I don't have to because I have all these tobacco stocks and all these energy MLPs and a private bakery. And so guess what? If you have cash coming in, you can just hold bitcoin. Forever. So I don't care if bitcoin goes down, right? Like, I see it. I see it on my screen. It looks juicy. And of course, if I had zero exposure, I'd be buying the crap out of it right now. But the most important thing is, Unlike, people are 100% Bitcoin, and they're worried about it going lower. I'm not. Like, I just don't care.
- [37:30]
A
Brilliant. All right, Mike. Well, I'm gonna let you go. I appreciate you taking the time. That was a master class. So get to stop it there, guys. Give Mike a follow on X and hope to have you back very soon, man.
- [37:41]
B
All right. Thanks, buddy. See you soon.
- [37:42]
A
See you guys soon. See you tomorrow.
- [37:44]
B
Bye.
- [37:45]
A
That's dope. Let's go.