Michael Saylor on Economics, Bitcoin and Decision Making

hello everyone

i'm angelo robles host of the angelo

robles podcast

i'm also the founder and ceo at family

office

association i am really looking forward

to today now i know it seems like i say

that all the time

it's because i have great guests on but

today is a little extra special

michael saylor on economics bitcoin

and decision making of course that

features michael saylor founder

chairman and ceo of the public company

microstrategy

unless you're living completely isolated

even if you're not

active in bitcoin you have to have heard

of michael

because he's doing things that really no

one has ever done and really

changing the dynamics of finance

economics

corporate balance sheets and obviously

digital assets on that note michael

welcome to the show thanks for having me

really excited to have you on as my

audience knows with some of the great

economists and macro thinkers that we

have on i'm just fascinated by their

background

how they come to their critical thinking

decision making avoid confirmation bias

so

lots to discuss my first question to you

what's the most important thing that you

learned

as a student at mit

you know i studied aerospace engineering

and i also studied the history of

science so i think the compelling

takeaway from aerospace engineering is

it's systems engineering you're

you're integrating all sorts of

disciplines in order to create a

mechanism

that works and so that gave me an

appreciation of

engineering under constraint and i think

the history of science

is all about paradigm shifts and how how

when you introduce a new material or a

new way of seeing the world or a new

technology

it upends the status quo it's generally

being rejected

for a long period of time until it's

accepted

you know so i think when i left mit i

had a decent appreciation

for the importance of of holistic

engineering but also for the ability to

make the world a better place with new

technology

if you could go back in time a common

question

and talk to your younger self entering

mit

what would you have told yourself so you

could have been more prepared to get

even more out of the experience in the

education

well you know i i think looking back

over the 30 years

um i guess i left in 87 so slightly more

than 30 years

uh what i realized today is

is um statistics

is probably one of the most valuable of

the mathematical disciplines

i don't have occasion uh to exercise

calculus of variations that often so so

certain forms of math get programmed and

we use and we have computers do it for

us

but other sorts of math you have to rely

upon every day

every hour of the day in your head

and probably the most the most common

thing is just

practical application of statistics

stochastic outcomes what's likely to

happen

and using statistics to to decide

what metrics to focus upon

because i feel like you know for example

in the world if i give you a hundred

thousand

assets and i keep track of the

volatility and the return of the asset

every minute of the day

every hour every day every week or every

month

i generate a huge amount of information

all of which is irrelevant

and and uh only a practical

appreciation of statistics will will

remind you

that 99.99 of all the information in

front of you is irrelevant

and uh so i i probably would have spent

more time on statistics

i wouldn't stress out so much about uh

about being able to you know solve the

orbit orbital mechanic exercise

you know for a satellite because that

stuff gets programmed

and i get this question a lot i'll make

it a little bit personal he's going to

get a little embarrassed but i mentioned

it a couple of times already

i have a nephew that is at a good school

he's doing great

he's a junior going to be a senior he's

doing some internships

and he wants to be in the world of

finance whatever that may be who knows

maybe a hedge fund manager a banker a

financial advisor

he sends me his resume and it's

proficient

but i'm like i mean honestly there's

millions of people who want to do that

and it's a little boring

uh so you want to get in the world of

what we're talking about

are you learning in school or on your

own about digital assets about

whatever psychedelics biotech deep

technology the answer was no no and no

uh how would you recommend to a young

person in business and finance

when they're maybe not at a top 15

school how are they going to stand out

among the competition

if they want to be involved broadly in

the world of finance

well i i first of all would say you want

to

if you want to really be involved in the

world of finance the number one thing to

do is figure out bitcoin

and understand the basis of crypto asset

network because

because 7.8 billion people are using

money that's toxic

and uh and the nature of money has been

bifurcated and now the

the the medium of exchange portion of

money is sitting in

fiat currencies and the store of value

element of money is now migrating into

crypto assets and into bitcoin in

specific

so everything you'd study in finance is

going to be rendered largely irrelevant

in the next 10 years unless you really

grasp the underlying

theory of money i think that the best

way to learn that is probably not in

school at all the truth is you probably

should go on

youtube and you should you know if you

go to hope.com

or or the like you'll find an entire

set of videos on this you can learn

anything in youtube

a lot of a lot of university courses are

are

you know 10 20 30 40 years behind the

times and there

there's a lot of inertia in them

but if i told you that somebody invented

something 10 years ago that ob celeste

50 to 90 of the finance industry in the

last decade

you would say what is that thing well

that thing is bitcoin

and uh and so i wouldn't stress that

much about being in a top 10 school or

not being in an ivy league school

i think that that today you can get

cutting edge insight

just going on the internet and and once

you figure out what you want to learn

you can teach yourself in fact you can

teach yourself

you can move you can bend time and space

i can go anywhere on earth anytime on

earth

pull up a streaming video and watch it

at 2x

or 150x skip through it and so i almost

look back on my college education and i

think

sitting in a classroom listening to

things at the time

scale of one minute equals one minute

and going through a semester at the same

rate as everybody else

you know uh subject to the syllabus of a

single professor

is a very crippling way to learn and for

the mind to develop

so so in a way we have opportunities

that are better now

in terms of that would you say so you

said focus you would

to your younger self on statistics in

theory although mit is a great school

you could have learned that and amplify

that at many other universities

was the main aspect of going to mit was

one

either a boost of confidence that you

got there and you were thriving

or the people around you and the

lifelong connections

more so than the actual education you

know i

the number one thing i got from mit was

confidence

and the ability to think for myself

that's the number one thing

uh my my first serious formative memory

of mit as i walk into a material science

class there's 350 people in the lecture

hall

the professor walks out and he is a

consultant for nasa

and he's the top of his profession and

he designed these tiles that went on the

space shuttle

and he takes one of the tiles and is

burnt it's got streaks on he holds up

from the class he says

you know on the space shuttle's last

re-entry this tile burned off the space

shuttle nobody at nasa knows why and

we're not sure how to fix it

what do you think okay and this is this

is the first

class the first week freshman year we're

all 18 year olds and it's a bunch of

people that are like that class

valedictorian from their various schools

and everybody looks at everybody and

there's a pregnant pause for 60 seconds

and you could see what's going on in

people's minds because first they're

like oh my god is there a reading i

missed

is and the second thought is wait a

minute the answer to this question is

not in the back of the book

and the third you know and then at some

point someone raised it

and says you know well maybe we should

reverse the composite lattices or

or change the material to something

and everybody goes oh my god that must

be the most br the bravest

student in the world and it dawns on all

of us that this professor who's the

smartest in the world at what he does

working for the leading space agency in

the world

doesn't have an answer to a fundamental

problem has never been answered in the

history of the human race he's looking

at a bunch of people he expects you to

think for yourself and figure it out

and he thinks maybe you can and

that idea that you can actually uh

solve a problem for the first time in

human history

and you're expected to do it and they're

going to t they're going to give you all

the basic tools

uh the math the engineering disciplines

the scientific method to do it

i think that's enormously confidence

building

at the end of the day because the number

one thing you want to learn from your

education is how to think

how to think right how to solve problems

after that

everything else is useful it's good it

was good to have contacts it was good to

have

to have the social interaction of other

intense

thinkers and yes i think that's probably

the second most valuable thing i got at

mit

but you know i will say that

you know in the 10 years after i left

mit i work 3 500 hours a year 70 hours a

week 50 weeks a year

dealing with problems never before

encountered

and i didn't think it was particularly

difficult

because it was so difficult getting

through those four years at mit where i

was working

80 to 90 hours a week intellectually

butting heads with the smartest

professors the smartest students and

trying to solve

fundamental problems i kind of felt like

it hardened me

intellectually to cope in the real world

and so i

i appreciate the fact that they gave me

that kind of tough love

you know they didn't give us a textbook

with 37 questions with the answers in

the back of the book

and let us memorize the answers take the

test

you know and give us a 95

yeah for sure i mean i take a little bit

of a takeaway you get smart people

uh together uh that are curious maybe

curious being the key word there

they're actually not overloaded on that

first day with too much

too much information and afraid of what

others may think if they speak their

opinion and they're wrong

unfortunately that childlike wonder

sometimes tends to go away from us

as we age how do you it's kind of

interrelated how do you build systems

that embrace volatility i sound like

racine to let now

and are meant to survive and improve

with time

uh you know i i think it starts just

with an appreciation of

of um the statistical nature of things

and and the value of volatility

and stressors uh to the health of a

system

so studying i spent a lot of time

studying uh

natural cycles you know one one part of

mit is the school of system dynamics

and we studied uh predator prey dynamics

and non-linear systems

and yeah that's that's an example where

i remove all the wolves from a system

all the deer

you know explode they destroy the

ecosystem

they reroute the rivers create erosion

and then and then the deer overpopulate

and when you study those kind of systems

you realize that you need to have a

balance between the predator and the

prey and the wolves actually keep the

deer at

bay and that keeps the ecosystem stable

and

and that's good for the vegetation and

that's good for the ecology

and you can model that mathematically

that's what non-linear systems are

it's all about modeling feedback and so

if you

if you develop an appreciation of

non-linear feedback

and equilibrium and you see that applied

in nature then you see it pop up in

immunology and then you see it you see

that it's the basis of all control

systems and control engineering nothing

flies without

servo mechanisms and you have to design

stable systems that will

that will uh return to a stable point

when perturbed

if you get that and and you see all the

thousands of examples in engineering

and and in nature then if you're

designing a product or designing a

company

you can apply those uh those principles

and also it

it makes you comfortable you know the

basic that you take from

a lot of to labs books is don't run from

pain

right pain is information it's a and

it's a stressor just like anything else

and so

uh if you want a robust system you need

to

embrace volatility embrace pain

and react to it and trend toward an

equilibrium

and not run from it and michael how old

were you when you create a founded

microstrategy

24 i was two years out of mit

wow uh i suppose the question would be

what gave you the confidence to think

that at that age you could go and start

a technology company

when i was three years old my first

memory was

standing in a room and it was like a

sunday afternoon after my parents went

to church and

the sunday afternoon ritual was people

come over to the house for a potluck

supper

and they they all bring a dish and so i

was three years old and

and i'm standing there in the foyer and

i know that the kids are supposed to go

in the backyard

the adults with the food are supposed to

drop it on that you know in the

dining room on the left and the adults

without the food are supposed to go the

living room on the right

and so i'm standing there directing

traffic and people come in and i'm

pointing toward the left the right or

telling the kids go in the back

and then there are some adults that are

ignoring me and all i can think is

what's wrong with these people why don't

they know that i'm in charge here i know

what's going on

so i would say it's genetic right it

must be genetic nobody taught me that i

just kind of felt like i should be in

charge

that would be a good approach wow you

did that really soon after school

looking back you're currently and i'm

assuming for a while now a public

company

uh if you could again like i said about

college roll back the clock do you think

there would be some advantages to

remaining private

um you know there are advantages to

remain

private but there are advantages to

going public i

i could reel off all the differences but

i think being

public is introducing uh higher degrees

of compliance and transparency

and more requirements in a healthy

public market where there's access to

capital in the form of equity or debt

then

then a public company is a more

sophisticated corporate creature

i would guess one of their 100 million

private companies in the world there's

like about 5 000

public companies in the world especially

us-based

publicly listed companies are the gold

standard of integrity

because you have you have clear

sarbanes-oxley compliance clear

accounting

standards clear disclosure standards

clear conflict of interest and corporate

governance standards

so any any large entity would prefer to

do business with a publicly traded

company

and any large investor would prefer to

invest in a publicly traded company

and so i would say on the margin

although it's popular to complain about

the burden of being public

i actually think being public

is good discipline it creates good

mature transparency and i i was never

bothered by the requirement of say

quarterly filings

i think that when you have quarterly

filings there's a quarterly

evaluation it's a good um it's a good

tempo good to have that discipline

if you didn't have it then you would put

stuff off for six months or a year or

two years or four years

right and you would always say to

yourself well

i don't have to do it this quarter so

why not just wait till next quarter

because we're busy on something

and i i think that that lack of tempo

and lack of lack of rigorous discipline

ultimately results in sloppiness you

know so i i'm in favor of ceremony like

like we could cancel christmas this year

but having christmas once a year is like

the right

having a birthday once a year it's the

right tempo

i think there's a benefit to rhythm

and tempo and and ceremony and alignment

and

and those things generally create

institutional virtue

i'm going to leave it a little bit as an

open-ended question take it where you

may

should we a pot apply leverage to what's

working

investing business life

yeah i think i think if you have access

to uh to leverage under favorable terms

yes

for example if uh

if uh you want to buy a house and

someone will loan you money for 30 years

to two and a half percent

you should take the mortgage i mean your

choice would be to work for 20 years and

not buy the house

or you could buy the house and by the

way working for 20 years

but i would say especially there's two

elements here

one is what's the uh what's the cost of

funds or

what's the expansion rate of the money

supply if the money supply is expanding

by seven percent a year in u.s dollars

and someone will loan you money at three

percent interest

you certainly should take the leverage

because if you buy the million dollar

house

then it's going to be worth five million

dollars

you know in 20 years and you will have

generated wealth

and if you don't buy the million dollar

house you will work for 20 years and the

house will keep getting seven percent

more expensive here you'll never get the

house

and in 20 years you'll have nothing so i

think that

i think that in an expansionary monetary

system which is

which describes our money system for our

lifetimes

it definitely makes sense to take

leverage in your personal life

if you can do it uh under fair terms

like i i wouldn't say buy a house with a

credit card with 14

interest right i wouldn't say i wouldn't

tell you to go buy a million dollars of

stock

with 90 or 10x leverage

uh mark the market every minute because

if you get 10

volatility you get wiped out you lose

all your money so i wouldn't say

use uh mark the market leverage to

speculate that's a bad idea i would

use long duration leverage in order to

live better that's a good idea and if

you're in the real estate business it

goes without saying that

you buy the 100 million dollar building

with an 80 million dollar loan

you raise 20 million in capital when the

money supply expands by 10 percent your

building's worth 110 million you

generated 10 million in equity

you can refinance that live off of that

tax-free the rest of your life

you'd be a fool not to use debt in the

real estate business right

so so i think across the bus across the

industry

venture capital is a form of leverage

when i raise equity

public companies are using leverage when

they sell equity to the public markets

public companies sell secured debt

and unsecured debt that could be good

leverage

ex post facto you know there are bad

forms of leverage good forms of leverage

and there are bad use of proceeds and

good use of proceeds

if you have a good use of proceeds and

you have a good leverage you should take

it

but if you have a bad use of proceeds

like i'm going to borrow money on my

credit card and go gamble in vegas

and i just lost the money and i owe the

debt at 14

to a loan shark bad idea don't do that

uh taking the downside approach to that

you mentioned real estate and i'm also

gonna

for a second make you a hedge fund

manager the real estate example you gave

is perfect and probably

over time 99 of the time will play out

but

just sheer luck a year before kovid you

do that

it's office space in new york now your

property is worth less than you

purchased you're over levered

so there are situations where having

liquidity or having optionality and

waiting things out maybe for five or ten

years i mean no one strategy

even in real estate is gonna work all

the time

yeah yeah you can you can make

investments that don't pay off

with leverage um if you have a 10-year

loan

you have 10 years to make it pay off

right so if you did buy that building in

new york city

you you want the 10-year or 15-year loan

you don't want the three-year loan or

the 24 a month loan

generally short duration volatile

investments are more likely to blow up

on your face than long duration

investments

and i'm going to make you an investor

which you probably are but you don't

need to disclose that

uh imagine i'm in greenwich connecticut

the land of hedge funds and imagine

you're investing in hedge funds

aren't you going to want a manager who

has very strong beliefs in a

limited number of selections they're

being concentrated

but you probably know there may be some

additional risk with that

if you talk to a hedge fund manager and

they have 300 positions

net of taxes and fees you may be saying

to yourself

why do i need you you're basically a

beta you're passively marketing

matching the index what would you look

for in a talented manager

um well you know i guess what i would

say

if i if i start from portfolio theory is

looking out over the last decade the

return on the s p is 11.6

for 10 years running as of today the

return on nasdaq 17

the return on bitcoin is 200 percent

annual

the return on gold is less than 2

percent and the return on long bonds

like tlt

4.2 so my first principle is the cost

capital surrogate the closest one is

really the return of the s

p which is 11.6 percent it turns out

that

another version of the cost of capital

is the rate at which the m2 money supply

expands which is pretty close to that

maybe 11

over that time um before

march of 2020 that was like eight

percent

and then we had about 24 expansion last

12 months and so

all of these cost to capital numbers get

out of whack in the last 12 months

but if i'm going to invest my first

issue is

can you beat the cost of capital 11.6

okay because i could basically get 11.6

percent by buying spy

in the next 30 seconds and and do it

with a low

uh a low fee fund so

i you know i don't really think someone

i agree with you

managing 300 different names not likely

you're just creating another index

doesn't make sense so

um what do i really think here's what i

really think

i think that if you're if you look at

the past 12 months

the s p is up 39 bitcoins up 582 percent

nasdaq's up 57 gold is up 2

and long bonds are down 16 so what do i

think

i think that if your returns are less

than the s

p 500 index you're destroying wealth

you're diluting your wealth everything

you invest in that can't return the s p

500 is a wealth delusion and i think if

your returns are less than bitcoin

you're diluting your opportunity

you could have got 200 per year before

tax

i mean tax tax deferred for a decade

in bitcoin so if you're taking risk or

doing

something that's really different are

you going to get 200 percent

because bitcoin is an index against the

cyber economy

s p 500 is an index against the entire

economy you know i i would just tend to

be spec

i would be uh skeptical of any

hedge manager like i probably wouldn't

give most of them any of my money

because to tell you the truth

the the single best screaming home run

right now

is to buy as much bitcoin as you have

risk tolerance if you want to get an

outsize return

and then take the rest and just dump it

in the s p 500

and wait bonds are going to be a

disaster

because the cost capital is now 36

39 and the m2 money supply is 24

25 so somewhere between 25 and

and 39 percent i think the 39 is because

the jerking around the s

p about a year ago but let's even say 25

so you got to get better than 25

if you're going to avoid being debased

by the currency

expansion and you can't do that with a

bond that yields

two percent interest or four percent

interest so bonds don't work

commercial real estate doesn't work

because no commercial real estate has a

has a rent yield of 25 percent they're

all capped at cpi

and they've got like a cap you know

they've got like a three percent four

percent yield they trade like long bonds

so now you're into equity and uh my

answer is i wouldn't bother with equity

because

for the most part show me if the money

supply is expanding at 25 percent

show me companies are going to grow

their cash flows 25 a year for the next

eight years

not many not many right i mean so

you know i guess if you'd asked me that

question a year ago

when the cost of capital was eight

percent right the money supply is

expanding at six and a half or six

percent and the s

p is doing eight and a half percent for

a decade

if you'd asked me that question i would

have said okay well find some money

manager that's got a specialty that can

beat eight percent

and if you believe that then yeah put

your money with them otherwise put it in

the s

p and you know big tech that's an

example big tech was beating the s

p and apple amazon facebook google that

all made sense

but i think if you ask me that question

now today

thinking from first principles i have to

say

the federal reserve and the eu central

bank have tripled the cost of capital

and what and that's made your investment

decision much easier

what they've done is they put 95 of

every company underwater

most companies can't grow their cash

flows 25

a year it's a it's literally impossible

to do without taking on insane risk

and so you're you know why is tesla

working because people are looking for a

hyper growth

that they think is not going to be

that's going to grow more than 25

it's going to change the world and if i

don't like that i go by gamestop

you know and and and otherwise

what are you going to buy big tech you

can buy big tech

but they're all tech monopolies will

will facebook apple amazon and google

going to be able to

can they raise their prices 25 a year

for every year for the next eight years

without regulators doing something about

that

maybe that's your bet otherwise

you know angela i guess the real issue

is i would say

the fundamental most important question

every investor has today

is you take a spreadsheet and you and

you write the years

20 21 22 23 24 25 26 27

28 29 on it and then you put in the

percentage increase in the money supply

that you expect

the fed or the eu central bank to print

and really just the fed

and if you put in a number zero zero

zero zero zero you're an optimist

right and then then you've got a

thousand complicated

choices but if you put in a number

15 15 15 15 15

you know you can't buy bonds you can't

buy real estate you can't buy 95

stocks and if you put in the number 20

20 20 if you think that the currency is

going to weaken by 20

all you can do is buy scarce assets

trophy assets

scarce art bitcoin something which is

not

correlated to fiat cash flows because

everything else

has been debased to the point that that

a million pages of information and

strategy are all irrelevant the models

are all irrelevant

everything you've learned in 30 years is

all irrelevant

but best example you know what are you

going to buy in venezuela or

zimbabwe if the currency collapses it's

going to work

and the answer is nothing nothing if

you're in argentina and the peso slides

from three pesos to the dollar

to 150 pesos to the dollar which is what

happened in the last 10 years

there is no investment strategy no money

manager in argentina

no portfolio of stocks bonds equity

derivatives real estate nothing

which is going to work other than this

one thing you convert your pesos into

dollars

you conver you forward finance all your

cash flows

you finance all your fixed assets you

issue as much equity as you can in pesos

you issue as much debt unsecured in

pesos converted all the dollars put it

into a bank outside to control the

argentine government so that they can't

convert it back into pesos and debase it

and that's the only strategy and what

i've just described in a nutshell

is the strategy of buying bitcoin right

bitcoin's a bank in cyberspace it's a

hard asset

i i take my money i convert it to

bitcoin i put in a bank and cyberspace

and then i'm indifferent to how much

currency gets printed

by the federal reserve and i've isolated

my

risk in that way that was an amazing

uh which i wanted from you you beat me

to the punch on some questions kind of a

economic lesson condensed in 10 or 15

minutes

i'm gonna want you to add a little bit

to that i believe it was on breedlove's

podcast

and i stole some of your lines so i do

use them i'll

i'll give you acknowledgement now about

how for the super rich which is

definitely part of my

audience and family office association

if they believe that their inflation is

increasing by the government controlled

cpi they're fooling themselves and some

examples that you give were

living in manhattan buying homes in

malibu london paris tokyo

the hamptons buying are buying assets

that are now going up

scarce assets that that are in demand

way

way more than probably even 10 or 15

percent

i know you just touched on a part of

that but if you wanted to further

elaborate

and you also gave an example about how a

dentist making a couple hundred thousand

a year

which probably puts that person in the

top one or two percent of income

has no chance in a traditional system of

ever

moving up the ladder buying those kind

of assets per se

yeah this is where like the mit

education helps

most most problems solved in the real

world like fluid dynamics or

thermodynamics or orbital mechanics

problems

they're not solved with scalars with a

single number they're not solved with

arithmetic

they're solved with vectors n

dimensional numbers

that if you're going to describe

inflation you can't describe inflation

with a single number

like cpi is 1.8 percent

inflation is a vector which means that i

can track the inflation rate

of houses it's 11 percent this year

i can track the inflation rate of luxury

houses in palm beach

and and beachfront property that's

somewhere between it's 25 percent in

palm beach it's 50 percent in the

hamptons

i can track the inflation rate of assets

like shares of stock or bonds

the inflation rate of the s p is

39 so people you know people tell

themselves oh that's not inflation

that's return this year you had

hyperinflation in assets

you had no inflation in consumer goods

but rich people tell themselves i'm a

genius i bought assets that went up 39

and and those consumer goods didn't okay

you're captured in your own frame of

reference

i can define any market basket of

aspirational goods

products and assets then i can calculate

the rate at which they change over time

it's a vector it'll change and you know

it's changing with time it's changing in

space right the rate at which real

estate in palm beach changes is

different than the rate at which real

estate in the hamptons changes

for good reasons so once you embrace

that idea then the question is

do you want to live in your parents

basement watch netflix and order

domino's pizza the rest of your life

if so the cpi is relevant to you

or would you like to be wealthy or stay

wealthy if you wish to

you know if you wish to be wealthy or

stay wealthy then the relevant

inflation rate is the asset inflation

rate and the best surrogate for the

asset inflation rate is either the broad

money supply

m2 which expanded 25 percent this year

or it's um the s p index

which is the most liquid thing i mean

people said oh well we printed money and

there's no inflation

well there is there was instant

inflation within minutes

in the assets when you print a trillion

dollars

the inflation flow the money flows into

the assets and the price of bonds goes

up

interest rates go down that's hyper

inflation

in fact you know if if it costs a

million dollars to buy a bond that

yields fifty thousand dollars in

interest a year

because the inflation or because the

interest rate's 500 basis points

when the fed prints more money they

drive up the price of that bond to 10

million from 1 million

the interest rate is 50 basis points

you've got hyperinflation in the bond

you're just telling yourself a jedi mind

trick i don't want to buy the bond

this is not the thing i'd want to buy

and therefore i don't care about the

inflation

but you know to to the point you made

about the dentist

well if what do people want do they want

a job or they want to never have to work

again

if what you want is social security and

you want to you want to be able to

retire early at age 40 and paint and

live with your family and enjoy your

life

you don't want cheap pizza and you don't

want free streaming youtube and netflix

that's patronizing i don't want to work

till i'm 80

and have cheap youtube what i want

is to work till i'm 40 buy a bond

and stop working and if i'm gonna i have

to buy an

asset and so the pernicious

issue is that the inflation rate of

assets

is it was eight percent a year

from 2010 to 2020

it was 35 from from march of 2020 to

march of 2021

and if you're working if you're 21 years

old and you've got a job earning cash

you just saw your assets inflate by 25

or 30 percent

that's the that's the the risk of

inflation

so once you understand that then you

realize if you wish to preserve your

wealth or to create wealth

the number that matters is the cost of

capital i.e

the asset inflation rate which is equal

to

the s p 500 index return or the or the

m2 money supply

roughly speaking and if you're not

actually able to keep up

uh stay ahead of that you're getting

poorer so

if you're a laborer if you have a job

and your salary didn't go up by

25 in the last 12 months you got weaker

you got poorer right you know the

government doesn't want to use 25

of the inflation rate because they don't

want to give every federal employee a 25

raise and so they'll say well it's only

one percent there's no inflation yet

but then again if every house in america

on average according to case-shiller

index went up by 11 this year how is

that one percent

well you you just don't want to buy a

house that's not for you

right these are not the droids you're

looking for it's patronizing

you know and and it just reminds me of

this one this one

famous phrase all of our research shows

us we can't tell people what to think

but we can tell them what to think about

and so if i just repeat cpi cpi there's

no inflation there's no cpi

cpi's inflation there's no inflation cpi

there's no inflation we're waiting for

cpi

if i keep repeating that you'll agree

with me but meanwhile

you know the fed prints a trillion

dollars the stock market spikes and

and people don't say oh oh my god assets

have inflated there's hyper inflation in

assets

what they say is oh we're brilliant the

stock market's going up isn't that great

well it's not great for people with cash

by the way here's the problem

it's not great for any company that's

valued based on fiat cash flows

i.e every value stock if you have a

stock value based on future cash flows

and if the discount rate is equal to the

m2 money supply and if it goes to 15

a year you have to d you have to

discount the cash flows 15

a year and so what you realize is if

you're printing money all of those value

stocks can't

possibly have they can't hold value

and so you're destroying the wealth

in the equity market over the long term

while you're goosing it in the near term

and ultimately

you're going to create this massive

stampede to a store of value that is not

real estate

that is not bonds that is not cash