A Bitcoin Discussion With Michael Saylor

hey everyone and thanks for jumping back

into the cryptiverse today we have

Michael Saylor on the show we're going

to be discussing Bitcoin primarily we

might touch on some other

cryptocurrencies we're going to be going

over General investment strategies

portfolio Theory Michael is the CEO of

microstrategy he's been really Paving

the way for institutions to come into

Bitcoin for a long time now Michael it's

great to have you on the show I really

appreciate you being here yeah thank you

um so you know I think most people are

are very familiar with your stance on on

bitcoin but could you give us just maybe

like a a brief a brief sort of

discussion or insight into what you view

Bitcoin as and why you're you know why

you're sort of investing in it and why

you see it as you know the future of of

monetary policy or something

you know

I I think that the most important point

is that this is a technology investment

it's a technology uh theme uh if you

look at the most successful Investments

of the past 10 years

Facebook started from nothing and it

de-materialized Human Relationships it

was a social network and that meant that

they channeled social energy onto a

digital Network for a billion plus

people it's worth a trillion dollars a

day

as a mobile network what they did is

they dematerialized mobile devices they

dematerialized your Communications your

cameras your videos you know uh your

documents and it's worth a couple

trillion dollars

and um

you know

Google is a trillion dollar business

because it dematerialized information

information Network search Network

so what's the theme with all these

things it's like

I want to give music to a five billion

people I have to suck the music out of

the CD the record the phonograph the

Steinway piano the orchestra and if I do

that I can give you a catalog of 50

million songs that cost fifteen dollars

a month for the family plan and for

three dollars a month

you can give infinite music to everybody

on Earth and uh if I want to give

everybody infinite free education to

five billion people I have to suck the

information out of the books out of the

libraries out of MIT out of Harvard and

I do that with iBooks and YouTube

and uh and so that that's digital

education the other is digital music

Bitcoin is digital property we are

sucking the monetary energy out of

houses and bars of gold and silver and

bonds and stocks

and collectibles

and um and anything else that we

monetized in the world

and um you know it's if I have a billion

dollars and I want to put it I want to

put it in Gold money I have 30 000

pounds of gold and if I want to move 30

000 pounds of gold from New York to

Tokyo it's five million dollars and it

takes three months

and it's pretty obvious that if you

leave all the money in the gold

you can't program it to be a million

times faster

uh and and smarter and you can't move it

at the speed of light

so we have to dematerialize things to

make progress in the 21st century all of

the trillion dollar networks all

dematerialized something you know Google

Apple Amazon dematerialized every retail

storefront if you basically obliterated

every retail store and you put it into

software and put it in the palm of a

billion people's hands

right I'm not saying they they

obliterated the stuff they ship but they

obliterated the the retail distribution

Channel

so Bitcoin is digital property the

here's the big idea I want to give joy

to 5 billion people I give them digital

music I want to give

education and information to 5 billion

people I give them digital books and I

give them digital video

I want to give wealth to 5 billion

people I give them digital property

the future of the world is 5 billion

people they're already there right

there's five or six billion mobile

phones running Android or iOS

how do this how did the six billion

people with mobile phones carry around

387 dollars worth of property for the

next hundred years

right I can't ship them gold if I

shipped one ounce of gold to everybody

on Earth that's all the gold but you

know if you try to take 387 dollars

worth of gold possession it's a 40

markup it takes you six weeks

if you want to sell it it's a 30

markdown you can't program it you can't

carry it on your iPhone it's illegal to

ship it it's not going to work okay so

what's the hope for 5 billion

working-class people to own property if

I can't hold gold land how you buy 387

dollars worth of land

you know good luck with that right it's

six months to buy and sell land you got

a real estate broker how are you going

to break up 387 dollars worth of land in

Kansas and is that the land you want or

buy 387 worth of land in New York City

good luck with that even if you could

buy property as real estate you've got

property tax

so it if you owned if you own a million

dollars of property in Florida it's two

percent property tax and 30 years you're

losing your property

so property taxes and property

restrictions and the fact that land is

heavy impairs the value of property gold

is impaired you know I famously did a

gold debate has been seen by a million

people I give you a million reasons why

gold is defective gold miners keep

dumping gold on the market they inflate

the gold Supply by two percent a year 85

percent of the monetary value of gold is

destroyed over the course of 70 to 90

years and in 95 the cases the government

or a hostile seizes your gold and kills

you or they just steal the goal so gold

doesn't work property doesn't work

so what where are you going to store

your monetary energy and property your

next thing is bonds

Mall bonds have a negative real yield if

you're holding sovereign debt that

yields two percent interest then the

monetary inflation rate is seven percent

over the course of a hundred years your

money is zero you know cash cat the US

dollar lost 99 of its value over 100

years you can't hold monetary energy and

cash that's the winner the US dollar is

the winner every other currency lost

more if you had your money in Zimbabwe

or Lebanese or Syria or Iranian or

Argentine or Brazilian or Venezuelan or

Russian or Japanese if you had a German

currency you lost your money three times

in the last hundred years so

cash doesn't work gold doesn't work land

doesn't work now you're down to equity

okay give me a company you can hold for

100 years

right where okay so what's the best

equity in the world big Tech and NASDAQ

has performed the best

I made a lot of money I mean uh holding

Apple Amazon Facebook Google they're up

by a factor of 10 to 20. right

um on the other hand

Apple's a monopoly there's an Anti-Trust

issue Google isn't Monopoly they're

Anti-Trust issues Facebook has

Anti-Trust issues they've all got uh

they've all got uh the risk of income

tax they've all got employees employee

employ employment tax Amazon wants to be

unionized there's unionization risk

they've all got CEOs they've all got

products they've all got execution risks

they've all got competitors so what if I

wanted to take all the big tech

companies and get rid of the CEO the

board of directors the product risk and

and uh the tax risk and the employment

risk what would you have left

Bitcoin Bitcoin is Big Tech without the

company part without the product risk

part it's just a big Tech Network

it's more global

and uh and the product is simple it

couldn't be a simpler product I have a

Bitcoin well what's the pro what's the

plan for next year a Bitcoin what's the

plan for 100 years a Bitcoin well what

if we don't change it I don't want to

change it

you don't want to change it it's what is

it

it's a creature in cyberspace it's like

Plankton I've created the elemental

container to hold monetary energy what's

the goal to not lose your money

that's the goal so the value proposition

of Bitcoin is its digital property on an

open decentralized network given to the

world nobody can control it no one needs

to improve it it doesn't you know all it

needs to be is to exist and

and uh

if you want to metaphor

like how do I see it

it's like um if you could if you could

go back 200 years and you could buy

Manhattan all of it

would you

would it be a good investment when would

you sell it

what's the best time would you short it

would you trade it what's the best time

to sell Manhattan if you happen if your

family owned it in the year 1800 when

would you have wanted to sell Manhattan

right the answer is never never right

okay now what do you own you own a city

block what's great about it it's on

granite Manhattan is granite what's good

about that well if you if you actually

own sand and you build a building on

sand it might collapse right the

Surfside tragedy what is what happens

when you build a hundred story building

or a 50 actually that's 12 stories on a

weak Foundation

Manhattan is special because it's it's a

it's a great piece of real estate it's

it's sitting at the Hudson River mouth

so it's geop you know geographically

well located it was a shipping center

it's the greatest city in North America

maybe it's the greatest city city in the

English-speaking World New Yorkers think

it's the greatest city in the world

it doesn't displace the need for Paris

London Beijing Singapore

or Tokyo so it's just one of 20 great

cities in the world but if you had

actually bought 25 city blocks in

Manhattan 200 years ago your family

could have held it and it would still be

valuable now that's what Bitcoin is it's

buying a block and city map and cyber

Manhattan might it be good for a hundred

years sure might it be good for a

thousand years yeah one day a billion

people might live there there's already

150 million people there now what if 5

billion people live there well why

wouldn't they everybody in Japan can't

move to Manhattan but everybody in Japan

can own Bitcoin why wouldn't you it's

the dominant digital property Network in

the world it's the most secure with the

greatest Integrity with the most

durability with the least likely

likelihood of being impaired or broken

of any kind of property so that makes it

the Apex crypto property it also makes

it the Apex property of the human race

there's nothing better

everything's riskier everything is more

likely to be impaired

and what do you do on top of a block in

Manhattan you build a building okay so

your family can build the Rockefeller

Center good building lasted 90 years I

think what 1932 1933 90 years old okay

good will it last for a thousand years

no well the last another hundred years

maybe

what do you put in the building

businesses name a business an 1800 in

New York that's still here name a

business that was in the Rockefeller

Center that's still around

some five percent so what do you have

you can either buy property with a 500

year time frame you can buy a building

a platform for business with a 50-year

time frame or a hundred year time frame

or you can start a business

which goes in the building a restaurant

a discotheque an insurance company a

bank a brokerage

okay so how does that how does that

compare to the crypto world bitcoin's

the Cyber property ethereum is probably

the Cyber platform it's it's the crypto

platform they want to be a platform for

other businesses and then everything

running on it that's the application and

that's the business

the businesses have um a much higher

risk profile right I mean there's a

hundred restaurants that come and go

they have lower Capital you know it's

Capital intention to buy it how much

does it cost you to buy a block of

Manhattan right now pretty expensive how

much would it cost you to build a

building less expensive how much does it

cost you to start a restaurant not that

much I can rent some space for two years

and start a restaurant

if you don't have capital and you're

trying to actually create something new

you're going the application route if

you have a decent amount of capital

you're going to build a building it's a

billion dollars if you have a lot of

capital

you might just buy all the land

underneath and wait

the different business propositions

they're on different frequencies they

have different risk profiles

so that's my that's my ideal on bitcoin

I think that the idea of Bitcoin is

you're literally buying a a city block

in cyber Manhattan

with a

with the opinion that

it's a billion dollars of monetary

energy why do I want it because the 21st

century economy is going to be built on

money who can use it look people in

ethereum and smart chains you know smart

contracts they can use Bitcoin they can

move it around you can you can use

Bitcoin to stake lightning applications

so layer two apps like lightning can use

it you can create your own side chains

they can use it

square and PayPal can create centralized

CFI applications using Bitcoin they can

use it

um coinbase and binance can use it it's

pretty obvious uh Fidelity can offer

funds on bitcoin insurance companies can

build Bitcoin into Insurance

microstrategy built a treasury on top of

Bitcoin

microstrategy issued Equity converts and

secured debt which are derivatives of

Bitcoin okay would it be interesting for

a a company to use Bitcoin as part of

its treasury well my stock went from 120

to 600 a share and we made billions and

billions of dollars for our shareholders

doing what

we didn't we didn't build a you know a

proof-of-stake network

we didn't even build a square cash app

Network we just bought billions of

dollars of Bitcoin and made billions of

dollars okay what's the right

application of of Bitcoin

I don't know I don't care right I think

it's very competitive

so my view on this is Bitcoin is good

because it's Apex property it's Apex

Digital property it's this it's the most

secure crypto asset in the world the

least likely to be impaired but it's

also the Apex property if I have a

billion dollars and my choice is a

billion dollars of gold a billion

dollars of silver a billion dollars of

lumber a billion dollars of Apple stock

a billion dollars of fang index a

billion dollars worth of land in

California a billion dollar building a

billion dollars of s p 500 Index a

billion dollars worth of sovereign debt

a billion dollars of US dollars or a

billion euros or a billion yen or a

billion fill in the blank or a billion

worth of bitcoin or a billion worth any

other crypto

Bitcoin is in my opinion the least risky

most useful thing for the 21st century

economy

if your time Horizon is

five years it's probably a good idea if

it's 10 years it's a better idea if it's

100 years it's a great idea and if

you're if your plan is I'm just going to

buy a billion dollars of it and sit on

it for a decade

yeah do I have to do anything no if you

owned 25 city blocks in Manhattan if

your family bought

if your family bought 25 blocks of

Manhattan in the year 1900

what's your safest business strategy

hold it

maybe you would rent it out maybe you

would give someone a ground lease on it

maybe you would borrow against it

you know the the richest families in in

London you know if you go to London you

look they've got they've got a lot of

buildings that are sitting on a hundred

year ground lease they don't own the

land

then you know the Duke of Wales owns the

land like I you know last I checked the

royal family owned like a lot of Atlanta

downtown London or the Nobles or or

whatever they don't even sell you the

land they just own the land forever if

you really want to be wealthy

what if you just owned you know the

square mile in the middle of Manhattan

or London and what's your business

strategy

hold it forever

as long as you can generate yield on it

by a rent

you can pay your bills and if you don't

want to do if you don't want to generate

yield on it then you borrow against it

if you have a if you have an asset

that's high quality and it's you know

why does owning uh land in New York work

because my family buys a billion I buy a

hundred million dollars of land

the FED prints seven percent more money

a year the value of the land goes up by

at least seven percent a year

eventually I have a billion dollars of

land

I eventually re-mortgage it I refinance

it every year I'm borrowing money at

three percent interest or four percent

interest or two percent interest

it's going up seven percent a year I'm

paying no capital gains tax I'm paying

no income tax eventually a hundred years

later my family owns two billion dollars

worth of land

I've got a 900 million dollar mortgage

on it I put another 100 million dollars

on it I borrow the money I live off of

it I never sell it I never do anything I

just live off the assets that same idea

works with Bitcoin

if if the fed you know prints twenty

percent more money well Bitcoins up 275

percent this year

as long as we keep in printing more

money if I can Finance the stuff that

I'm holding it'll it will appreciate in

value faster than the rate that the

currency Supply expands

and the Arbitrage is obscene I can

borrow money against it at one two three

four percent interest it's appreciating

a twenty percent thirty percent fifty

percent interest

as long as the appreciation is north of

of the interest rate

you've got an Arbitrage the more assets

you have the better off you have

and so that what you really want is you

want the most durable highest Integrity

property

that's least likely to be impaired

that's easiest to improve and so that

that's my thesis on bitcoin if that

helps yeah I mean it does I do want to

touch on a few different points

um you know I I agree with you if if I

had a billion dollars and I had to pick

one asset to buy I would buy Bitcoin I

agree with that I mean I you know in

terms of everything else you mentioned

you know there's no there's no fixed

Supply I've heard your discussion before

about why it's thermodynamically sound

you know obeying the the laws of

thermodynamics with um

uh with with Bitcoin but I guess my

question for you is

yes if you only could buy one thing with

Bitcoin or if you could only buy one

thing for a billion dollars it would be

Bitcoin but we don't we're not

constrained to only buy that one thing

and I'm sure you have well I guess I

don't know I'm guessing in your

portfolio you have more than just

Bitcoin maybe not your crypto portfolio

but I imagine you have you have exposure

to other other assets as well I mean I

know you've done very well investing in

equities in the past

um how do you manage

that you know some type of portfolio

Theory how do you figure out you know

what sort of allocation you want towards

Bitcoin and or stocks now I would agree

with you a hundred years ago if you had

bought any business yeah I mean there's

a good chance they're not around anymore

but I mean today you don't have to buy a

single business you could just go buy an

index fund or a mutual fund you're still

doing relatively well and I know I know

the general idea is you can take a loan

for two and a half percent and as long

as your annual returns are are easily

beating those there's no reason not to

do it

um but I'm also curious

is there sorry I'm hearing a little bit

of an echo

um is there

um a a level of volatility

that is okay

um so we know with like the S P 500

there's there's going to be some

volatility but we know that annually you

expect to do pretty well over the Long

Haul and that's why you could argue

taking out a loan could make sense as

long as you have the income to make the

loan payments you're applying the same

thing to bitcoin which has better

returns than the S P 500 annualized

but ethereum I mean ethereum has has

great returns too so I I guess my

question is are there are there ways

when you look at what you want in your

portfolio are there are there certainly

are there certain volatility

restrictions that you would imply or

that you would have to have before you

exactly it's worth the risk and

furthermore how do you sort of figure

out what allocation to put towards each

asset because again yeah like if you

could only pick one s up

it might be just a billion dollars for

Bitcoin but you don't have to just pick

one so how do you figure out how you

split that up among various assets

I think if you want to construct a

portfolio you have to start I mean let

me just start with one observation this

whole this whole idea of oh well the

right thing to do is have a diversified

portfolio

is in and of itself just a prejudicial

bias it's like it's it's it's not even

true sometimes it it it would be true

under certain circumstances but just

allowing people to put that in your head

is ridiculous for example

you might it might turn if I knew that

everything was going to zero except for

one thing if I knew that

right then it doesn't make sense to have

a diversified portfolio and you you have

to actually think more deeply about the

macroeconomics here and the

macroeconomics and and the dying the

political and the social economic

Dynamics would determine what is your

state space of potential choices

um like you're on the Titanic the

Titanic is sinking you're gonna die and

there's a one Lifeboat and you've got 10

people in your family okay do you

actually put one person in the Lifeboat

and the other nine stay on the Titanic

or do you all get on a Lifeboat because

you're gonna die if you stand the

Titanic everything is sinking right I

mean uh you're on an airplane and we

blow out the uh the window and auctions

coming out of the cabin you know an

auction Mass drop down from above does

everybody put on the auction mask or

does this one person or two people or

ten percent of the people put in the

auction mask if you're in a life or

death situation

portfolio theory is ridiculous and if

you're an engineering situation if

you're building a building and you have

a portfolio of clay and bricks and

aluminum and brass and copper and steel

and you can choose anything to build a

building with

diversifying and using some clay and

some copper and some steel is not the

right answer

there is a right answer under an

engineering constraint you build a plane

and aluminum you build a building with

steel

when we didn't have steel we had iron

and before iron we had masonry and the

stabilities were six floors high and

when there's a new technology which is

better it completely invalidates the

previous science so

let's look at portfolio Theory well

you know there's a lot of arrogant

presumption in portfolio Theory like um

if I put you

let's let's take this example

if you were in Lebanon

and the pound is 1500 pound to the

dollar

and if I were to tell you

that uh the the currency is going to

crash You're Gonna Lose 85 percent of

your value in every locally denominated

uh currency and currency derivative

and your choice is a Market Basket of

Lebanese stocks Lebanese real estate

Lebanese currency Lebanese bonds you

know or uh or Lebanese uh savings

accounts or uh the US dollar

so what's your portfolio Theory tell you

like tell me what your diversification

strategies should you diversify

because every single thing other than

the dollar is going to go to to minus 80

percent next week you're going no

diversification makes sense they're all

correlated to the currency and so you

think you're Diversified but the real

question is like let me put you in a

different situation

urine uh you're in Germany

right and uh the Nazis are about to take

over or you're in Germany and they're

about to lose the war

okay tell me what your diversification

strategy is across all German real

estate bonds stocks or whatever if the

government fails or if you're Jewish and

you're about to get thrown into a

concentration camp

the overarching issue is

everything you can invest in is

correlated to the political situation in

Russia you know when the Communists take

over they're going to seize all the

private property so having a diversified

portfolio strategy of properties that

are about to be seized by the government

is a waste of your effort so the real

question is is this portfolio of things

correlated because

because most of these things like for

example today

every stock is caught is a currency

derivative every stock is valued based

upon the expected cash flows of mostly

US Dollars and to a smaller extent euros

and every bond is a currency derivative

and every and and all the derivatives

are currency derivatives and all the

commercial real estate is a currency

derivative

and all the ETFs or currency derivatives

so and all this all the currency

obviously is currency derivatives so 90

of what people think they're

diversifying into is all correlated to

the US dollar

and the US dollar

uh the US dollar is devalued by

something on the range of 30 to 40

percent in the last 12 months if you

look at um if we look at uh

performance over the last 12 months s p

is up 39 percent the s p generally is up

10 a year for 100 years so 39 means a 29

collapse plus it was the dollar was

already being devalued at seven percent

a year so you could say that backing out

the risk premium of holding the stocks

which is traditionally three percent a

year you order 36 percent devaluation of

the US dollar

in the past 12 months which meant that

was a 36 devaluation of all value stocks

all cash all bonds if you're holding a

bond that's yielding four percent you've

got a minus a negative real yield of

minus 34 in one year

so to be extreme

what's your diversification strategy if

you're holding Argentine equity and debt

and real estate because the inflation

right there is 85 percent informally

right now

so it's so when you say should we

diversify the answer is

what's coming back to Lebanon the only

answer is you had to convert the dollars

but that didn't work either because they

seized all the dollars in the banks

like they they froze all the accounts so

it only works if you diversify to a hard

asset and then you get it out of the

political jurisdiction where it might be

impaired so we come back to your

question like how do I view the world

today I think that the first issue is

the currency is being devalued

everywhere in the world it's being

devalued at the rate of 20 percent or

more at least in the US every other

currency is is pegged to the US currency

if the if the U.S currency actually just

collapsed 37 percent which is what the s

p index is pointing to that means the

Euro collapse 37 against scarce assets

that means the Chinese won collapse the

CNY collapsed 37 because it's pegged

that means that uh the Saudi currency

the emirati currency the Swiss currency

the Singaporean currency every first

world Peg currency collapsed 37 against

scarce assets

second second and developing World

collapsed 20 percent more and the third

tranche

the the weak currencies

you know Zimbabwe Venezuela even

Argentina Syria Iran Lebanon they're

collapsing 80 percent against scarce

assets so

now you gotta ask the question

what what if I if I don't want to own

100 Bitcoin

it's like people think it's risky to own

Bitcoin because it's volatile that

that's that's basically myopic thinking

because what you're doing is you're

putting blinders on and you're fixating

upon the volatility of Bitcoin instead

of looking looking out you know how much

did the volatility of Bitcoin hurt you

if you own Bitcoin in Lebanon

because they divide the currency 90 and

They seized and froze all the foreign

assets so you lost 90 to 100 of

everything in 12 months okay so the

volatility of Bitcoin which is up two

hundred and eighty percent in U.S

dollars and going back and forth is a

friend of mine says you know

when there's blood on Your Collar your

dry cleaning is the least of your

concerns

you know um that volatility is second or

third order if

if the airplane is depressurizing you're

worried about this the hygienic

standards of the oxygen mask

who gives a crap you're going to be dead

in 60 Seconds

right when the ship is sinking and

you're worried about whether you got the

best seat on the Lifeboat or try to

figure out whether you wanted the this

one or that one you're going to be dead

in two hours so if you have an extra if

you're Jewish in Germany in 1932 the

only answer is you needed to leave

that's the only answer there was no

other answer it was just going to get

progressively worse and you're screwing

around debating whether you should take

a 25 haircut to sell you everybody if

you read the history first they sold

their property for a 40 discount then a

50 then a 60 then an 80 then a 90 then

in 95 then they lost everything then

they had to pay a ransom to get out and

if you were lucky and you paid you know

a huge amount of money you might from

that came from somewhere else you might

have got out that's uh that's what

happens when you have

uh a collapse in a socioeconomic system

so

the the summary is there's no

diversification strategy that works in

Venezuela Benjamin none there's nothing

that works other than you got to go

orthogonal to uh the monetary system so

let's say let's say in the U.S we buy

the notion that um that um the dollar is

collapsing 20 to 35 percent against

scarce assets and we can debate what it

is but it's at least the M2 money supply

is 21 or something the s p is telling

you

that the money supplies that the

currency is collapsing 37 that's what

it's telling you based on history so

if you don't want to own all Bitcoin

then my advice would be

buy a bunch of residential real estate

you're going to live in the rest of your

life

buy a beach house like so I buy a house

I want to own the rest of my life

because the the Federal Reserve can't

print that away they're not going to

take 37 of my house away each year okay

that's good then I buy scarce assets but

you could buy collectibles

yeah yeah you could say I mean what is a

good investment something that a wealthy

person will want to buy from you in 10

years

buy a franchise trophy asset if you have

have an asset like maybe the Jets maybe

a sports team

if you have an asset which you think is

going to hold its value and appeal for

the affluent for a decade regardless of

what a politician might do then you

might want to hold that do you want to

hold a building in New York well you

know your property rights can be

impaired the Supreme Court this week

just ruled against eviction for

non-paying tenants so if you are holding

an apartment building thinking that was

an asset that was impaired during a

lockdown and you can't move it

so I don't know maybe I wouldn't own

cash I wouldn't own a bond bonds have a

negative 20 real yield

now what about gold I wouldn't own gold

gold is gold is um if we look at the

results what is the market telling you

this year about store of value

Bitcoin is up 276 percent gold is down

two percent s p is up 39

NASDAQ is up 43 44 and if you bought

long-dated bonds 10 to 30 year

treasuries you're down 12 percent

which is which totally makes sense

because it'd be stupid to buy a 30-year

sovereign debt uh that was yielding 1.2

percent interest which is where you were

12 months ago

would you should you buy picassos

baseball cards comic books

I'm not maybe buy a portfolio of rare

art because wealthy people will probably

want to buy the rare art off of you what

worked well single family housings up 25

according to the headlines in the Wall

Street Journal last week

25 percent Hampton's houses are up 50

luxury real estate

things that are highly desirable that

people with money want right you want to

buy you would say ethereum is up even

more yeah I mean there's uh there's

there's certainly small you probably

Tesla meme stocks you can find

other things out the risk curve that

have also performed well so I mean you

could look at those

my issue here is you have to there's two

existential macroeconomic questions you

got to ask yourself

one

will a political will a political

activity impair the value of your

capital for example will Amazon get

unionized will will Apple or Google get

broken up will there be an Anti-Trust

action will it be positive and negative

will China ban Apple from manufacturing

iPhones

will there be a tariff what what will

your property gonna get in impaired by a

tariff attacks

um or a regulation

because

been the most valuable companies on

Earth in theory

should be

um the water utilities and the power

companies electricity and water

but they're not

because they're regulated as monopolies

but at the end of the day right

everybody in New York would be dead

within 48 hours if I turned off

electricity in New York city so if I

really and and I could kill you with the

water supply faster so if it was really

as simple as providing a utilitarian

value then the utilities would be much

more valuable but what happens is

eventually the politicians regulate the

utilities and then the profit uh leaves

those businesses so so the question is

if I'm holding an equity will it be

impaired by a political Act

and the second question is if I'm

holding uh if I'm holding real estate

probably real estate's the same way you

own a building in New York

you know is it going to be impounded

seized regulated you know taxed I can

tax away your property right you can't

move a billion dollar building in New

York isn't moving

whereas a billion dollars of Bitcoin can

move

if if the state of California passes a

property wealth tax that seizes 10

percent of all your property in

California and it's a building

good luck with that can you sell that to

a billionaire in Beijing or a

billionaire in in Tokyo not likely

can you move it to Tokyo not likely

now here's the thing about Bitcoin if I

own a billion dollars of Bitcoin and

California taxes 10 percent of it

I can move to Wyoming

if the United States Government taxes it

and I can't you know let's say the worst

case the United States Government taxes

it I'm a U.S citizen I could move out of

the country but they still want to tax

U.S citizens I can sell it to someone

who's a Monaco resident and they can

take possession of it in Monaco subject

to Monaco tax laws and so the value of

the property is less impaired because I

can transfer it

to someone in a different political

jurisdiction and I don't have to worry

about the mayor of New York passing an

anti-eviction law on me that says I'm is

the mayor of New York gonna say you

can't generate yield on your Bitcoin

because he said that to people that

owned apartment buildings said you can't

generate yield on your apartment

building

so

there's risk in real estate there's risk

and Equity that's that's political risk

you have to you have to assess it then

the question is what about the currency

risk

if the value of the Venezuelan currency

goes to zero

then every piece of real estate every

every company every Bond and every

currency derivative in Venezuela or

linked to Venezuela is going to zero

right the Argentine peso was one one

peso to the dollar 20 years ago it's 155

pesos to the dollar today if you're a

business person in Argentina there is no

diversification strategy there is no

investment strategy that works if it's

related to anything that's a peso

derivative so you have to and and you

can't keep your money in dollars I

converted all my pesos to dollars I had

a million dollars of dollars it was in a

bank in Argentina on one day the

politicians passed a law actually by

edict they simply converted all the

dollars forcibly back into Pesos the

next day they devalued the peso ten to

one and in 48 hours They seized 90

percent of all the currency values and

all the banks in the country from 45

million people without due process

that's what happened in Lebanon too

that's what happened in Cyprus that's

what happened in most of these countries

that's what's happening all the time

right now so

you're like well that's not a problem in

the U.S well it is the current the

currency the US has been getting

devalued seven percent a year for 50

years until March and in March it

started getting devaluated at a number

which I thought in March I thought it

was Triple I thought it went from seven

percent devaluation to 21 devaluation

if you devalue the currency by print by

expanding the money supply by 21 and

you're getting a three percent yield on

a bond you're getting a negative 18 real

yield you're losing all of your money

over the course well you're losing half

of your shareholder value in three years

half

but if the currency collapsed at 37

you're losing half of your money in two

years

okay

great

so most people in America have I believe

they have a frame of reference bias been

here the frame of reference bias is

you're such an egotistical person that

you're standing on Mount Everest and you

jump off a cliff

and you think the world revolves around

you

and so you look at the other mountains

and you think wow that's a bubble

they're really going up quite fast

there's going to be a regression to the

mean eventually they're going to come

down there's a lot of volatility in that

other Mountain well the volatility is

not in the mountain you're falling

right it's not because the other amount

is not a bubble the problem is you're

falling to your death because you fell

off the mountain your frame of reference

is just egotistical so the same is true

if you hold a portfolio of s p stocks if

you had a billion dollars of s p stocks

in March

you made 400 million dollars in the last

12 months okay so is the system screwed

up if your frame of reference is is fiat

currency you think you're a genius

because you have 40 return this year

it's the best year of your life

you know I hear stories about people

sitting on their floaties in the

Hamptons they're hanging out by their

pool it was the easiest year they spent

it with their family they made a Fortune

they're getting paid a percentage

they're getting paid 20 percent of a 40

percent gain on assets everybody in Wall

Street got rich this year

so in that environment you don't think

there's an existential risk you think

you're getting rich but if you take the

other frame of reference you say every

company in the s p do you really believe

that the US economy is healthier by 40

this year than it was last year

no Main Street is impaired

badly by 10 to 15 percent the companies

are actually 10 to 15 percent weaker

because of the lockdowns the equities

are 40 percent higher there's a

delamination of Main Street of reality

from Wall Street the reason that the

stock is 40 percent higher is the

currency is 37 percent weaker the reason

the s p went up 10 a year was because

they kept making the currency seven

percent weaker a year the real growth

was the three percent

you know that that's what's going on in

the real world with risk and and if if

you adjust for the risk it's like well

it's not clear where I'm getting with

this

so

here's the summary

if you're actually holding a diversified

portfolio of real of commercial real

estate bonds and stocks and cash you're

not Diversified at all

you're about as Diversified as as having

your kids sitting on 10 different deck

chairs on the Titanic they're all

sinking

it's not Diversified so you've you had

this intellectual laziness where you've

told yourself you've Diversified

but if you're but if you actually reason

from first principles from broader frame

of reference

it's like you know like I had all my

money in dollars in an Argentine bank I

I didn't want to be invested in the peso

was I Diversified

no why because the government sees the

dollars converted them to pesos if

you're in Lebanon and you had all your

money in dollars or dollar derivatives

or anything at a centralized custodian

are you Diversified no the government

took everything

so the question here with regard to

portfolio theory is

what do you think you're diversifying

right