{ "episodeId": "SLP401", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "greg_foss": { "name": "Greg Foss", "role": "guest", "tag": "GREG" } }, "segments": [ { "speaker": "stephan", "time": "00:09", "start": 8.51, "text": "Hi and welcome to Stephan Livera podcast, a show about Bitcoin and Austrian economics. Today my guest is Greg Foss and we're chatting about Bitcoin as cheap protection. Now this show is brought to you by Swan Bitcoin, which many of you know is the place to learn about Bitcoin and also buy Bitcoin. Now Swan Bitcoin is organizing a conference, it's called Pacific Bitcoin, and it's gonna be on in November this year in LA, California. On the 10th and 11th, it'll be part of a broader week called LA Bitcoin Week, so make sure you come early because there'll be a bunch of events on during the week related to Bitcoin education, as well as fun and just hanging out with Bitcoiners. Now, when it comes to this conference, I'll be one of the hosts, and I'm looking forward to seeing you out there, as well as catching up and hearing from the many speakers we have lined up. We've got people like Alex Epstein, Lynn Alden, Jeff Booth, Dylan Leclerc, Pierre Get a ticket for yourself and see if you've got a friend or a family member who you wanna bring along and they can learn about Bitcoin too. So that's PacificBitcoin dot com. Use the code Livera to get a discount on your ticket. And welcoming a new sponsor of the show, Mempool dot space. Mempool dot space is the Bitcoin explorer built by Bitcoiners for Bitcoiners. It features real-time transaction tracking and mempool visualization so you can quickly get the information you need about your Bitcoin transactions. It is available over Tor and also completely Open source, so you can even run your own mempool explorer at home on a Raspberry Pi with just one click. Over one million people use mempool.space every month, and the project is operated freely for the benefit of the Bitcoin community without ads or third-party trackers of any kind. Go and try it out today at mempool.space. Now, when it comes to Bitcoin hardware, my favorite is the Coldcard by CoinKite dot com. Now, this can act as a hardware signing device to sign our Bitcoin transactions, and you can use this to take your coins off the exchange. Now, this is useful either for yourself or for your family and friends who you are helping coach and guide them through that process. Coldcard is really easy to use, and if they're a beginner, you can just directly plug it to the computer. So, for example, if you get a Coldcard MK4, Mark 4, the latest version, you can get a USB, cable, USB-C cable, to plug it to your computer, and then you can use that directly with wallets like Sparrow Wallet or Specter or Electrum, and then you can use that to spin up a new The Coldcard is really versatile, you can use it in multi-signature, you can put a passphrase on it, you can use a Duress PIN. There's all kinds of features that you will enjoy learning about, so go to coinkite dot com and use the code Livera to order yours. So for those of you who don't know, Greg Foss has joined me on the show before, and we spoke about his experience with over three decades of experience in the bond market, and we chatted a little bit about where Bitcoin is at today, as well as the relation with Bitcoin and bonds and" }, { "speaker": "stephan", "time": "03:00", "start": 180.38, "text": "So now onto the show." }, { "speaker": "greg_foss", "time": "03:02", "start": 181.88, "text": "Greg, welcome back to the show. It's a pleasure to be here. Thanks so much for having me." }, { "speaker": "stephan", "time": "03:06", "start": 185.94, "text": "Yeah, Greg, always great to chat with you about bonds and global debt and all kinds of macroeconomic things. so, you know, we're, we're speaking now at the end of July twenty twenty-two, and it's, interesting to s-s-see the things that are happening around the world. I'm curious just to get your high-level view from a macroeconomic perspective. What are the important factors in your mind that you're looking at" }, { "speaker": "greg_foss", "time": "03:30", "start": 210.08, "text": "Well, I'm gonna steal a tweet from a good young trader, I think, that, the, the synopsis is, \"We are all trading derivatives of the United States Federal Fund Rate.\" And when you think about that, it makes a ton of sense because the USA Fed Funds Rate basically sets the discount rate for the world, okay? Everything trades off of the US discount rate, which sets the US ten-year rate, which sets discount rates for- For global bonds, it sets discount rates for global equities, it'll set a certain level, it'll have some impacts on credit default swap spreads. So it was a quite an astute commentary. And so on that, I think we have to evaluate what I view the Fed latest announcement. So two days ago, Wednesday, Jerome Powell came out and raised rates to two. by seventy five basis points to two and a quarter to, with for a range of two and a quarter to two and a half percent, Fed funds or overnight, the market reacted positively, and it's interesting to see the di-diverging views. I actually thought that this was the first level of his pivot. Now, it's not a pure pivot, but- I believe he has introduced some language called, you know, which is, for example, the Fed is now at neutral. Okay. How can you be at neutral when inflation is nine percent and Fed funds is two and a half percent? I find that absolutely ridiculous, but they introduced this, this word. Then they also introduced, again, the terminology data dependent, which means they've been focusing on backward-looking data. Employment numbers are strong, yeah, that's good, but look at all the layoffs that are coming. Look at all the high-tech companies that have announced that they're gonna, be laying off employees, et cetera. So employment is always backward-looking. The Fed says that, you know, they're now gonna be data dependent. So before, Stephan, they, they had a four and a half percent overnight rate target. I don't even think they get to three percent. That's my personal opinion. But even if they only do get to three percent, it's a form of a pivot, in my opinion, and that's why you saw risk markets rally very hard. Now it could be a combination of short covering and a combination of the, the tech sector getting a bid because if you have a lower US ten-year rate on long duration assets, which tech stocks tend to be, the valuations can go higher as long as the discount rate doesn't go from three percent to four and a half percent and then adding on the equity premium, okay? It's, it's just a knee-jerk reaction. I'm not calling risk markets, you gotta go in, but what I am saying is risk markets interpreted it like I did, I think, that this was more dovish than the markets thought. Now you'll get the other side of the coin, you'll get people that are saying, \"My God, he was so hawkish. I think he's a horrible poker player.\" Okay? He was up on, he was up on the podium, his cards were shaking, he looked to me like he's holding a pair of nines and he's He has a full house, okay? And he just didn't look. He says stuff like, \"We're gonna crush inflation.\" Yeah, that's a good one. Like, you're shaking like a leaf, you're gonna crush inflation and also send the global risk markets into the, into the toilet, so there's no way that GDP can grow. All of these things are problems. I, I view it, Stefan, as the, as a, a degree of a pivot. And, you know, it, it's, markets are forward-looking, so I- I think this is meaningful. What does it mean? It means QE infinity, okay? Very simply, they're gonna have to print forever. It's only mathematics, and that means you need to hold hard assets that will maintain their value against a- Forever decreasing or debasing fiat unit of account." }, { "speaker": "stephan", "time": "07:38", "start": 458.03, "text": "Yeah, I, I think you've got a really interesting and well nuanced analysis, because you're right, it depends who you're listening to. There are people out there with all kinds of different views, but this notion of a Fed pivot has been something the market has been anticipating, and people, if we re-rewind the clock three, six months ago, it was definitely a different perception. It was seen like, \"Oh, the Fed is gonna really tighten,\" because in their Keynesian- They're thinking, oh, they're gonna put the brakes, they're gonna pump the brakes, and we, the economy has to deal with that. But eventually, the narrative was, oh, the Fed is gonna have to pivot. And so now, as you rightly say, it seems like they are at least slowing down, at least putting it in their mindset, right?" }, { "speaker": "greg_foss", "time": "08:19", "start": 499.01, "text": "I think so. Because think of it, okay, so they're at two and a half percent now. They may have one or two more rate increases before December. I-- again, I don't think they do, but we're Basis points isn't a seventy-five or a hundred basis point shocker. I think at the September meeting they pause, okay? Which means really by December, you have two chances to raise rates, and then there are people who are saying in two thousand and twenty-three they're gonna have to start cutting rates. Well, why raise rates to cut them right away? Maybe you just wait for this to, to, to the data to come in for Other markets to stabilize or at least, you know, show what's really happening. Did you see the results out of Germany? I mean, they are horrible, horrible. So the euro, you know, is gonna be under pressure against the American dollar, if rates continue to rise in the USA, same thing with the Japanese yen, all of this stuff, our pressure's building in the system, and something always breaks So again, all I, I, I will tell you is I interpreted this as the first step in a longer term pivot, and even if it's not a pivot, it's a slowing of the acceleration of the rate increases, okay? It's not always the first derivative, it's-- it can be the second derivative as well, which means they just did seventy-five basis points and seventy-five basis points, even if they do twenty-five basis points, it's a market decrease in the acceleration, so it's a deceleration. of your Fed funds policy. Look, markets are on the head of a pin right now. Lots of people are hedged and wedged. There's short covering, there's no question, but that sometimes begets, \"Oh my goodness, I can't miss the chance to buy Nasdaq stocks when they're down, you know, what are they down? Twenty odd percent, or they were at least twenty odd percent off of, all time highs.\" So, you know, this is how markets work, this is how they flush themselves out. The most important thing to remember for the listeners Again, I believe that you need to store your assets in hard assets, so store your capital or store your time and energy in hard assets that will maintain value in the face of a debasing currency. That doesn't include bonds. Bonds are a fiat contract. Yes, they may pop a little in price, but it's still debasing so quickly, there's no way that the coupon on those bonds makes up for the debase of the currency. This is A tough market for the sixty forty balance portfolio, if you will, sixty percent equities, forty percent bonds. You need other assets, introducing, you know, the traditional ones, which gold, silver, but then the most beautiful one, the basis for our love of Bitcoin. It is exactly why Bitcoin was designed, Q infinity, mathematics, always start with math, the base layer of language is like, is how I like to say." }, { "speaker": "stephan", "time": "11:24", "start": 683.86, "text": "Yeah. And you have a great way of- Of really zooming out and explaining where we are in the global situation. And so where are we today if we look at, say, global debt versus GDP? And what do those numbers, just kind of at a high level, what do they look like today?" }, { "speaker": "greg_foss", "time": "11:41", "start": 701.29, "text": "Well, these numbers are based, these are somewhat dated and they haven't gotten better. So I'm, I'm throwing out numbers that are absolutely putrid and they actually have gotten worse, but they haven't been updated. So I always look at things on a macro basis, and I'm a debt guy. So I like to evaluate things on what's called enterprise value. A lot of people always look at market cap, they forget about the prior ranking debt. Well, that's the wrong way to look at stuff. If you have a prior claim in front of you, don't look at market cap, you better look at debt. So total global debt is four times total global GDP. Four times is the equivalent of a company That has an enterprise value that's trading extremely rich to its sales price, if you wanna look at, so GDP is global sales, total debt is one portion of enterprise value, but Four times total debt to GDP means that unless GDP maintains a growth rate that can keep up with the organic growth rate of the coupon, because that's what a debt contract is, it has an-- it has a fiat contract, an organic growth rate Your debt spiral is gonna grow in the absence of irresponsible politicians that keep adding more to the deficit, okay? So like I like to play a game What's an average coupon that should be on the, on the, on, in the numerator? And this is total global debt, so this includes US government debt, you know, all government debts around the world, it includes all banks, structured product, high yield corporate debt, all of it. I think it's fair to say that if the US ten-year rate is three percent The actual coupon on all of this debt, a blended coupon, is far higher than three percent, but let's just use three percent just as a conservative number. If your numerator is four times your denominator, your tax base, and it's four times a coupon of three percent, is it likely that your tax base or your global GDP is gonna grow by twelve percent annually? Just to keep pace with the organic growth of the debt, not even including other, oh, we just found this other thing, this spending on, on inflation. package that the US is-- and it's fully paid for. What a load of hookah, fully paid for. it's fully paid for because you're not gonna pay for any of your other debt that you owe, like what a bunch of buffoons. But point is, your- Debt spiral is being fed by the growth of it organically because of the coupon. We are reaching an accelerating debt spiral where escape velocity is impossible, literally impossible, except for one way that Luke Grohman points out Which is basically financial repression, which basically s- absolutely screws bonds. What they'd-- would allow to happen is the denominator would grow like the rate of inflation, and the numerator would be capped in its growth because they would use yield curve control, like in Japan. So they would try to grow themselves back on side using an inflating economy and, and a capped yield so that your debt spiral is slowing. In that scenario, all paths lead to Bitcoin. It's another form of debasing of the currency, and you don't wanna be a bondholder there. Now, I've covered my bond shorts, okay? I am not advocating s-- shorting bonds here, but I'm certainly not advocating being a long bond holder. Over the, you know, a bondholder over the long term. You wanna trade bonds? You think you're an absolute star? You might be picking up nickels in front of a steamroller, as far as I'm concerned, but go ahead, knock yourself out. It's just a horrible investment. Long term. So the sixty forty portfolio is dead. This year, the sixty forty portfolio has been down double digits, both equities and bonds, in the first time in history. Both have recorded double digit declines for the first six months of the year. It's never happened, so there's been no buffering or no bal-- you know, offsetting of the risk. So pension funds all around the world have been destroyed this last, semi-annual period. And they need assets that are non-correlated with this over time. You know, the hard asset story is alive and well, in my opinion. Some of the-- you know, Bitcoin certainly wasn't a star at this time, but Bitcoin is still a little bit in its- early days, people don't truly understand its, risk mitigating properties. I think that'll happen, and I'm really proud to say, I'm not sure if you saw that, that Zero Hedge published an article last night that I've been banging the drum on for a while that--" }, { "speaker": "stephan", "time": "16:51", "start": 1010.65, "text": "Yes." }, { "speaker": "greg_foss", "time": "16:51", "start": 1011.27, "text": "Bitcoin is basically the equivalent of credit default swap insurance, they said on the US Fed. I'm like, don't stop with the Fed. It's credit default swap insurance on all central banks around the planet. So I think that'll happen over time, Stephan, where Bitcoin will be a non-correlated asset that will actually shine when other assets are getting, you know, debased or risk off, however you wanna call it. So it's an interesting time, let me tell you. you know, I, I think there's a lot of opportunities in the market right now, but you don't wanna get too far over your skis. You never know where there's another, you know, leverage unwind coming, whether it's in the trad fi Space or in the, the, the crypto ecosystem, gotta be careful. That being said, you know, smart money is making adjustments as the information changes." }, { "speaker": "stephan", "time": "17:47", "start": 1067.4, "text": "Excellent. And to your credit, you have been banging the drum about the CDS, component or aspect of Bitcoin, it being protection, and maybe one way to frame it is a very cheap protection. I think that's something I've seen you, one way you've framed this, and you, you make a really interesting point because- As you said, back to those numbers with the, three percent and, four x, you know, global debt to GDP. And the thing is, even there, you're actually bending over backwards to be conservative and helpful to that case, because the reality is it might not even be three percent interest, it might be four or five percent, in which case, then, then the global growth rate shouldn't be twelve percent, it should be sixteen percent or twenty percent. And we know, you know, historically, even countries that are growing very quickly, they might be doing, you know, He's lucky to get two or three percent GDP growth per year, so we are well, well below the level that would be required to, so called, grow out of this debt problem. And so it just brings all of these problems around, well, what is the way this, this resolves? Obviously, I'm with you, I think the inflationary pathway is the most likely. Now, of course, not endorsing, we're just saying this is the most likely pathway, it's the least bad from the, from the politicians and the government and the systems point of view. That's arguably The least bad way out of this. But I want to touch on this point you mentioned as well, because you mentioned earlier that sixty forty is having one of the worst years of its entire, you know, in history, sixty forty, so sixty percent stocks and forty percent bonds. It's a typical thing that people get put into as an allocation. Now, I'm curious, Greg, y-your point of view here. Do you see that there will be some investors who are angry at their financial managers who put them into a sixty forty? Are they going to be angry and calling them out and saying, \"Hey, get me out of this?\" Or do you see it like potentially some of these investors are in bonds because they have to be because of various reasons, mandate, government regulation, et cetera?" }, { "speaker": "greg_foss", "time": "19:46", "start": 1186.14, "text": "There will always be unhappy unit holders having managed money. It's a horrible job, okay? Why? Well, if somebody puts money with you And you do really well, they were really smart to put money with you, okay? Had nothing to do with you, it's how smart they were to put money with you, right? And then, if they put money with you and you crap the bed, even if markets you've outperformed your, your benchmark, you're down, but hey, I'm presenting you with a return of minus fifteen percent, but the benchmark was minus twenty-two, so look at me, I'm such a star. They look at you like, \"How are you a star? You, you lost twenty-two?\" Asked me fifteen percent. You're the idiot, not me for putting money with you. You're the idiot. So, you know, it's a bit of a asymmetric, reward, position to sit in that chair. Some of the clients are good, some of them understand What it really means in the longer term, though, and you mentioned this, okay, advocating for something different than the sixty forty portfolio doesn't mean a hundred percent equities and zero percent bonds, and it doesn't mean you do it right away. What it does mean is, in my opinion As I've said before, I like, would like all asset managers in the world to attain at least a five percent weighting in Bitcoin. All I'm saying is, where should that five percent, allocation come from? Absolutely, it comes from bonds before it comes from equities. Absolutely, it comes from bonds before it comes from commodities. So let's say commodities was a portion. Point is to not confuse the math. 60/40 should become 60/35/5. Over time, sell some bonds, buy some Bitcoin. Bonds are a An asset that's a fiat contract that are programmed to debase, whereas Bitcoin is an asset that is programmed to increase in value relative to this unit of account, the bond unit of account, or the fiat u-unit of account. So, it-- you know, people always overthink this, and I did say this on stage at Bitcoin Miami, and I think it went over a lot of people's heads, but the funny thing is, if I ever do succeed in getting a big- Plan to put five percent of their assets in Bitcoin. It's like they forget what the other ninety-five percent of their assets are. Then they're only focused on this Bitcoin thing. Oh my God, it's gone down, it's gone down. Dude, if you own Shopify stock, it's gone down way more than Bitcoin has. Oh, well, yeah, well, we own Shopify 'cause it's in the index, so everybody has to own Shopify. Well, stop your belly aching then. Focus on the fact that over time, I've- I believe Bitcoin will be embraced as a, in the words of a, of an asset manager, a non-correlated asset that will provide diversification benefits, which is to say, you can reduce the risk of your overall portfolio and maintain the same level of expected return, or the flip side is, you can keep the same level of risk in your portfolio and enhance your expected level of return because of an asset like Bitcoin. It's so- Exciting where this is going, not just price wise, but just what you see out in the markets to find, right? You're, you're there, you're seeing the, the, the apps that are being built on top of the Bitcoin blockchain. I mean, these user adoption numbers are absolutely astound- astounding, and it's a combination of a technology and a store of value That over time will disintermediate the visas of the world, it'll disintermediate a lot of the traditional finance management, traditional finance payment rails. This is something that you cannot afford to have a zero exposure to Bitcoin. The risk of having a zero exposure far outweighs the risk of having a five percent exposure that can ha-have asymmetric returns that are non-correlated to other risk assets." }, { "speaker": "stephan", "time": "24:04", "start": 1444.18, "text": "Yeah, absolutely. Absolutely. And so, I think part of this is that journey of people changing their default in their mind away from the default sixty forty or whatever their typical allocation is. And look, the other reality is there's a lot of individuals out there, just everyday people, they've got their government superannuation fund or pension or, and the money is just going into these things without them knowing. So they already are exposed to bonds, they just don't even know it. So I think that's an important thing that, you know, I think that people have unfortunately been pushed into a system where They don't really have that much control over their own retirement accounts and what's going into them and, you know, how to do that stuff. I wanted to also ask, w- as well about, in terms of where this goes, right? So as we said, we've got this very high debt to GDP ratio just globally, and in terms of the ways things could potentially shake out in the future. Now, I'm, obviously, I'm with you, I think the likely scenario and arguably the less bad scenario is inflation, but what about some other scenarios? If they try to find another way to make somebody else take a loss. So as an example, what about just explicitly defaulting? Or, you know, I'm sure you might have heard of cases where in China, in some of the banks there and some of the mortgages, there are people who are literally just not paying the mortgage. And so in those cases, who, who's gonna bear the loss in those kinds of scenarios?" }, { "speaker": "greg_foss", "time": "25:25", "start": 1524.62, "text": "So let's, let's def-define some different type of scenarios that could be very painful. one is called a bail-in. That was actually used in, in Cyprus in, in, 2013. Correct. Okay. What happens is, depositors' money in, in banks over a certain level become, hey, it's not your money anymore. what does that do? Well, that basically allows the government to take those funds and take them away from you and Bail out the bank a little bit because those funds are like debt relief, okay? What, in any of these scenarios, debt relief is, you know, what is a default? Well, it's debt relief because basically then you have to restructure the debt, and the chances are you cut your debt in half or more. The reality is though, that would be absolutely, in my opinion, so cataclysmic and, and so, disruptive to the, the functioning of the fiat system Everything would stop, okay? It would make the great financial crisis look like a walk in the park. Like, you talking about the potential default of even a, a G7 country, let alone the most important country of the world, the USA, I, I can't even fathom the, the Grinding to a halt of the financial system, measured, measured by things like OIS over LIBOR, the LIBOR OIS spread, which in the great financial crisis blew out to, you call it four, four percent, it's a, it's a measure of the stresses in the, in the banking system. Well, four percent would probably go to ten percent, which means any bank loan would be priced at ten percent plus whatever they're charging you for your credit risk at the end. At the end of the day, do things work at a ten percent interest rate when right now we can't even make the government or the global debt markets work at a three percent? Stefan, it's, it's like, again, it's only the math. Like, there is no way to escape this unless they do financial repression, which is a long-term, slower bleed punishment of bonds or a fixed income contract. that's what essentially Japan is doing right now. Everyone says, \"Well, look at the Japan, the Japanese experience. It hasn't been that bad.\" Yeah. Don't forget, Japan was a net exporter. It's not the USA, which is a net importer. That little difference between being a net ex-exporter and then net importer changes your whole GDP equation and makes the math again not work. So all paths lead to Bitcoin, in my opinion. It's either Financial calamity, which I think a lot of Bitcoiners actually want, I don't want financial calamity. I, I can promise you my children don't want financial calamity because the pain and the social unrest would be far outweigh the potential benefits to, oh yeah, well Bitcoin is the, is now the global reserve asset. Look, we can get to global reserve asset status without having to go through you know, some sort of Armageddon scenario, and that's what I'm-- I believe is gonna happen. That's what I believe the governments, not that they're gonna embrace Bitcoin globally, some governments will, those first movers will be advantaged. But the reality is, you know, in order to survive social, a civil war potentially, you have to just keep the, the, the people happy. They're not happy with inflation, but the alternative is, again, will you be happy when there's, you know, you're, you-- there's w-war in the streets? I don't think so. So let's hope that we can solve this, with a slow bleed in the traditional finance system and people learn that Bitcoin is there. Escape, you know, is their lifeboat. Very simply, use fiat money as your checking account, use Bitcoin as your store of value savings account Countries should do the same. Fiat money is good for avoiding barter. It allows a price to be set so you don't have to trade goods for other goods. You can have an intermediary currency. But fiat money isn't good for saving, and that's where Bitcoin comes in. So Jeff Booth and I love to say, \"You wanna develop this parallel system over time that is able to absorb the reality of the fiat- Death spiral. You don't want that death spiral to happen tomorrow. It could, but you don't actually want it to. You build this parallel system that will a-allow for an orderly transfer, is would be the, the best outcome in my mind." }, { "speaker": "stephan", "time": "30:28", "start": 1827.93, "text": "Back to the show in a moment. If you're interested in Bitcoin mining, brains dot com are the website to check out. They've got a range of Bitcoin mining education content on their blog, they've got a Bitcoin mining book coming out soon, and they also have Brains OS Plus. This is firmware that you can install on a range of Bitcoin mining machines to give yourself additional efficiency by as much as twenty percent. You can increase the hash rate using their auto-tuning. Now, they are also the operators of Sloshpool, which will soon become Brainspool, and if you use Brains OS And point your hash rate towards BrainSpool, you'll get zero percent pool fees. They've also got an insights dashboard over on their website. You can find all of this over at b r a i i n s dot com. Do you need an easy way to set up your Bitcoin or Lightning node in the cloud? Voltage can help you. This might be useful for you if you are looking to become a merchant and take Bitcoin Lightning payments using your own Lightning node that you can control, or you might be a Bitcoin or Lightning builder needing to scale nodes by the thousands. Voltage can help Help you out in either case. They've got a range of tools to make it really quick and easy, whether you want to spin up a Bitcoin node, a Lightning node, or a BTC Pay server node, and they've got a range of other products that can help you and smooth over that process of running a Bitcoin node. They've got Surge, which is this Lightning analysis, insights platform, and they can give you all kinds of information. So they've got a waitlist on the website for that. So for those of you who are interested to set up your Bitcoin or Lightning node, go to" }, { "speaker": "stephan", "time": "31:58", "start": 1917.65, "text": "People leaving your coins on an exchange, or perhaps you're looking to upgrade from a single signature hardware solution into a multi-signature solution. Unchained can help you do this process with a two-of-three multi-signature vault. Now with Unchained, they've got a concierge onboarding process where they will ship you the hardware, they'll do a call with you and help you withdraw your coins into keys, into an address to which the keys you control, and they will also have some ongoing support. So Unchained Capital can make this really easy for you. So don't leave Leave this to the side, take the time now and get it done, so that way you are feeling confident and secure in your Bitcoin security setup. So go to Unchained dot com slash Concierge and use the code Livera for a discount. And now back to the show. Right, and of course, I, I'm with you there. I think that would be less bad than the other scenarios. Unfortunately, that's where we are right now. But I think here's the other point. Bitcoin today is very small. It's only about four hundred and fifty billion as a total market, as we Wanted to be bigger, but that can pose, oppose challenges for large companies or governments who wanna take a large position without, let's say, moving, moving the, the market, and it may be challenging for some of these large ent-investment entities, pension funds and the like, to take a meaningful position in Bitcoin because, you know, as you said, five percent, but if they all went five percent into Bitcoin today, I mean, the price of Bitcoin would absolutely skyrocket at that point." }, { "speaker": "greg_foss", "time": "33:28", "start": 2007.67, "text": "It would essentially go to two million dollars, okay? That's where Bitcoin would go, 'cause let's run through that math. I don't think I've done it on your show, but I have done it in the past. That, that incidentally is my price target, okay? It's not my limit, it's my price target in US dollars for Bitcoin, and it's based on today's dollars. And how do I get there? I start with what are total global financial assets, and that number is nine hundred trillion US dollars around the globe. It includes all the debt that I talked about, four hundred trillion dollars worth of debt. It includes three hundred trillion US dollars worth of real estate, okay? It includes a hundred trillion dollars worth of equities and a hundred trillion dollars worth of commodities and other, hard assets. You know, gold is ten trillion of that. So you have four hundred plus three hundred plus one hundred plus one hundred, that's nine hundred trillion US dollars. What's five percent of that?" }, { "speaker": "stephan", "time": "34:28", "start": 2067.85, "text": "Forty-five. Yeah." }, { "speaker": "greg_foss", "time": "34:29", "start": 2069.39, "text": "Forty-five trillion. Forty-five trillion. What is forty-five? 5 trillion divided by 21 million. There's your $2 million price target, okay? In today's dollars. Now, don't get mad with me, all you Bitcoin Maxies, why am I so bearish? Okay? It's a target, it's not a limit, and it has to go through my price target before it goes through your price target, which is some guys are like, you know, ten times my price target. It's all possible. But here's the crazy thing, right now, based on its potential, Bitcoin is such a rounding error that you have to have exposure to it. So if Bitcoin price target, my price target is two million, and I'm looking at your block clock right behind you, and I'm assuming it's right, let's just to make the math easy though, say it's twenty thousand. Twenty thousand is one one hundredth of two million, okay? The market is basically telling me that there's a one percent chance I'm right. All right, twenty thousand divided by two million. 1%, and I'm not 100% certain I'm right, Stefan, but I'm way higher than 1%. Like you've fired in ice holes, you've gotta do the math. This is the best asymmetric return I have ever seen in my life. And you don't care if you get in and you move the price from twenty to forty, at least you're in, because then at forty, it still has fifty times Fifty multiples upside, which means it's a two percent chance now. You moved it from a one percent to a two percent chance the market is telling you you're right. My, I think I'm like 70% chance that it's going there. So if I'm a big fund and I've done the math, I'm like, \"Yeah, I'm gonna move the market, but guess what? It's a rounding error. I gotta get in. It's the price of admission.\" You know, Bitcoin is actually a better- Risk adjusted opportunity today at twenty thousand, than it was when I first got involved in it in two thousand and sixteen at under a thousand dollars US per Bitcoin. And everyone will say, \"How is that possible?\" And I'll just say, \"Three things.\" Adoption, the federal, the, the response to COVID, the government response to COVID, which was unprecedented, nine trillion dollars of global money printing. Okay? Unprecedented. In the g-- in the great financial crisis, I mean, you know, there was maybe two million, two trillion dollars. Now we're at nine trillion dollars. And then the most important part of it, it's five years down the road. It's, it's worked for five more years. It's, it's security, the network security is higher than it's ever been, or close to as high as it's ever been. All of these indicate that the likelihood of me attaining my price target is actually higher. So even though it went from a thousand to twenty thousand, twenty times higher, it's better today, more likely to att- attain my, my final price target than it was five years ago. I, I, I, you know, I lose my voice sometimes, I run into a wall, I smash my head against the wall, I cannot, for the life of me, understand why people don't see how simple this is, but they look at the donut And they focus on the hole. They don't focus on the donut, they focus on the hole. They're like, \"Well, it was at seventy and it went down to thirty, and oh my goodness.\" And, \"Well, you grow up, people, learn how to manage risk, okay?\" This is the opportunity now. Even at seventy thousand, I thought it was cheap based on a credit default swap analysis. By a credit default swap analysis, I think Bitcoin should be trading at four hundred thousand dollars today. Just on the CDS analysis, but it's not, and it's not my price target either, but the point is using another mathematical way of looking at it. Four hundred thousand, it's one twentieth of its price. So, all, all I will say is, it-- this is a tough, a tough sale to a lot of people. what we need to do is get, the education out there. You're doing a great job, I love what you're doing. I mean, sometimes I'm not the world's best educator because I get upset and I use my old trading floor language, and I apologize people to people, right? I swear because I care. Like, I really cannot, for the life of me, understand how people who are paid to do smart risk analysis Still have their head in the sand when it comes to this asset class." }, { "speaker": "stephan", "time": "39:13", "start": 2353.05, "text": "And I'm curious as well, then, you're pointing out that there are some of these people who should have better risk management, better analysis capabilities. Is it also then that there's certain individuals that if you got to them, if you could orange pill those individuals, that that would really move the needle because they, in command or have some way to influence the allocation of larger pools of capital, as opposed to, let's say, a lot of retail individuals? Of course, not anti-the retail individuals, but in this sense, I guess the point we're making, you're making here is that certain individuals can really move the needle." }, { "speaker": "greg_foss", "time": "39:48", "start": 2387.53, "text": "The most important institution on that front, in my opinion today, is Fidelity, which has, you know, it's a top five global asset manager. It's done incredibly good research. It has, Urien Timmer, who's, you know, he has price targets of over a million dollars on Bitcoin using, things like cell phone adoption, Com- comparison and internet adoption comparison. the Abigail Johnson, the CEO of Fidelity, has been testing Bitcoin mining for ten years. I, I, and they've come out with this research, and they, as you know, in the USA are accepting Bitcoin in four o one K accounts, et cetera, et cetera. they're getting pushback from some of the US senators who are brain dead, financial risk managers. That's okay. What, the more important part is the black- Black Rocks of the world, which compete against Fidelity, and they're both gonna have the same client, and if the client comes to Black Rock and says, \"I'm gonna move my money from you to Fidelity, unless you provide a Bitcoin- Silo. BlackRock will really quickly provide a Bitcoin silo, okay? So I see that happening. I see Fidelity doing great research. I like that institution, I always have. I've viewed them as a, a, trailblazer. They, did great things in Canada. Here's, here's what I do know. The other guy that I think is becoming a Bitcoiner, and I'm not gonna put these words in his mouth, but I saw him on CNBC the other day, Mohammed Alaryan. now that guy is smart, okay? I'm not knocking all risk managers as not being sharp. Alarian is smart, I know he knows the benefits of a diversified portfolio with asymmetric return possibilities. Asymmetric- Investments define careers. If your one percent allocation to Bitcoin goes up a hundredfold, that one percent, and you had ninety-nine percent in other assets, let's assume those other ninety-nine dollars on a hundred dollars, they keep its value, and your one dollar goes up to a hundred dollars because it went up a hundred times, your entire portfolio now is fifty percent in Bitcoin, right? Assuming you didn't sell any, and the ninety-nine dollars is still ninety-nine, but The Bitcoin went from one dollar to a hundred dollars. That is the possibility here, and this is why you can't afford to have zero. Because if you have a hundred dollars in non-Bitcoin and your competitors have one dollar in Bitcoin and ninety-nine in the same stuff that you have, you've just lost out To the best asymmetric return ever, and your unit holders are gonna be bitching to you like we just talked about, how could you have missed this opportunity? Well, li-- having lived it, and, and, you know, it, the craziest thing is, you know, people are very, The money is so precious to them that they make irrational decisions all the time, okay? The ir-rationality of it is due to emotions. When you let emotions impact your investing, you tend to make horrible investment decisions. Some people hate Bitcoin, they don't, they can't get over it. Peter Schiff is that type of individual. I, I'm afraid that Shifty Pete has got to learn to change his portfolio allocation when the information changes. So the, the, the point is, please, guys, remove emotions from your trades. Remove emotions. And that's why sometimes computers are better traders than humans. Computers trade based on price with no emotion. When something hits a price, it buys because it's programmed to buy or sell. The, the emotion of the person, the, the emotion of the person, of the person, who is, making this decision or programming the computer is different But, you know, you can't, you can't allow yourself to fall into these problems." }, { "speaker": "stephan", "time": "43:59", "start": 2638.59, "text": "Yeah, of course. And I think that's also perhaps part of the reasoning why there's the message around auto DCA, right? Like that companies like Swan and others have, is this idea that you can automate your savings. I think part of that though is for some people, depending on where they're at in their life, it's about whether they are able to save in Bitcoin, because part of that is you do have to be able to take some volatility. And I think you have to-- That, that for some people is, depending on where you're at, if you're able to save and you're able to stomach that volatility, others will sort of run for- Who said" }, { "speaker": "greg_foss", "time": "44:33", "start": 2673.22, "text": "Bill Miller? Okay? Greatest, greatest phrase. Volatility is the price of return, okay? If, if I show you an asset that has very low volatility, chances are its return profile will bump around just above zero, okay? Here's the craziest thing. You know what Vol measures, right? It measures-- Okay, so I'm trying to draw a gra-graph on your screen. Top right, top left to bottom right, a straight line down. No volatility, straight line down. Is that thing non-risky? No. You've lost money from there to there, but there's been no volatility, it's gone straight down. People who measure risk by using volatility forget that you can be in a straight line down with no volatility And still lose your shirt. And the same thing applies to a straight line up with Sawtooth, okay? Even though you gotta look at the, you know, the, the regression to the mean. This is what's happening. Don't focus on this thing. And all of these guys who, you know, use things like, vol- what's the term? at risk. Your," }, { "speaker": "stephan", "time": "45:49", "start": 2749.04, "text": "value at risk." }, { "speaker": "greg_foss", "time": "45:50", "start": 2750.0, "text": "Value at risk, thank you. Your VAR, your value at risk is all based on volatility. Sometimes it's asinine, because they'll say, \"Hey, you can have all of this,\" oh, and guess what? Over time, it goes straight down with no vol, straight line down. All of these systems were built at times when, you know, oh, computers, they're gonna make my life so much easier. Sometimes they don't. Sometimes computers mess things up just because you're able to measure so many different variables at one time." }, { "speaker": "stephan", "time": "46:19", "start": 2779.3, "text": "Yeah, and I think for some individuals who like to trade a lot, like day traders, they often end up losing money because, there are some statistics that have been done and studies showing that some of the regular traders were the ones who lost a lot of money, as in, people who are just trying to play these, either in equity equities or in futures and other things. And I've done this" }, { "speaker": "greg_foss", "time": "46:39", "start": 2798.55, "text": "for thirty-five years. Yeah. I've done this for thirty-five years. All I bring to the table is thirty-five years of mistakes, okay? And I learn from every single mistake I make. And the key is not to keep making the same mistake. And the very most important key is remove emotion and cut your losses, ride your winners and cut your losers, whereas most people do the absolute opposite. They like to crystallize their gains. They like- I'd like to be able to go to a, a cocktail party and say, \"Haha, I bought Bitcoin at a hundred and I sold it at five hundred.\" They forget to tell you that now it's trading at fifteen thousand, okay? And, and, you know, but they, they wanted to crystallize that gain, so they sold it at five hundred and now it's many times more higher. And then they never tell you about That penny stock that they bought at ten bucks, that's now trading at two bucks, but they're praying that it comes back to ten dollars, right? 'Cause they kept their losers and they sold their winners. So again, Stephan, I bet you in my life I might have a sixty percent batting average on winning to losing trades, okay? And that's way above average, I promise you. And that being said, the only thing I do well is on the forty percent of my losing trades, they're gone. I'm not emotionally attached to them. They're, they're off the table, they're out of my conscience. Okay, I might have had the long term plan right, but my exit or entry was, was horrible. You know, the worst expression in managing money is, \"We were early.\" Early. Yeah, yeah. You were early. Correct. You were wrong for the timeframe that you said you were early, right? So be careful about all that stuff. I'm not advocating-- Firstly, there's a couple of things I need people to understand. They say Foss, you trade. Bitcoin. I say, I've spent my life as a trader, okay? I have a core holding in Bitcoin. I won't never be short Bitcoin. But are there times that I trade it? Come on, guys, I'd be lying to you. Of course I trade it, I've done this for thirty five years, okay? Then they'd say, \"All right, what are-- what's your ideal or what's your core holding? \" Well, I'll share with you that my core holding is above twenty five percent and less than fifty percent. Like, why aren't you a hundred percent? And I go, 'Cause you don't have to be a hundred percent allocated to this most beautiful asymmetric return in order to, to reap the benefits, okay? And when you're not a hundred percent allocated, what it means is you can take some profits, you can wait for the, the, the price to potentially come back down. If it doesn't, you're still above your core holding number, and I'll talk to you in twenty years. I think that there's a lot of people out there that should- Actually, just DCA and huddle until they get to their portfolio weight. But then there's other people, and I talked to, you know, a friend who is a little boisterous out there, Bitcoin Tina, who Bitcoin Tina has admitted that, you know, he's now realized that perhaps his weighting was a little too high in Bitcoin, and he wasn't, he didn't sell enough when it was above fifty K, because now he can't buy anymore when it's below twenty K, and now he wants to act Actually reevaluate his path forward. Tina, please don't, you know, I'm, I, I'm, I'm not, you know, whatever the doxing you or whatever, you've admitted that on a podcast with me, and I'm good with it, because look, I do the same thing, my entire life has always been Manage risk as the information comes in, and if the information changes and your position is wrong, guess what? Change your position. That's why I find the best traders, you know who the best traders are on Wall Street? They're women. Women are actually better traders than men, I've noticed on Wall Street. They can rem-- they can remove the emotion better than men can." }, { "speaker": "stephan", "time": "50:38", "start": 3037.97, "text": "I see, yeah. So I, yeah, I wonder if it's, is it a like a survivor bias thing? Is it just a, yeah, the ones who survive are the ones who manage their emotions better?" }, { "speaker": "greg_foss", "time": "50:46", "start": 3046.3, "text": "The males, the males, like, yeah, the male, the, I'm, I'm too proud to admit this loss. I'm gonna show the market who's right. I'm gonna bully the market to, to, to, to see When you become bigger than the market, you probably become something like the JP Morgan whale that almost brought down the whole bank on a credit default swap position that was mismanaged out of Europe, so far from home, you know, greater the, greater the playpen, farther from home. JP Morgan had this London-based whale that almost brought down the bank on some crazy-ass, Structured product credit default swap thing, where the guy was too proud that he wouldn't absorb his losses, he tried to force the market into his position and almost brought down the bank. Like, again, I, I- You know, credit where credit is due. One of the best traders at JPMorgan that I ever transacted, transacted with was, a, a young lady, one of the founders of the credit default swap market, to be, to be honest. She was absolutely unemotional about her trades, and well, it appeared so anyway, and I thought she was absolutely fantastic. And many other female traders that I've traded with, I found the same thing. And I sometimes I have to check my own, own emotion, right? Stephan, if I ever- Never think I'm bigger than a market? Okay, time for you to check out Foss, like you have lost your mind, okay? The only market that you're bigger than is the, is the, the sell that you should be in a padded little room thinking that you're, you know, the master of your own domain. That please, people, manage risk properly, understand that there, there's nobody who has a hundred percent batting average, nobody. And, and think of baseball, where, you know, a three hundred Batting average is like outrageously good. Maybe it, it, it takes time to learn that the best way you learn it is by losing money, unfortunately, but that's generally the only way you learn So, I mean, I, I'm not trying to give people trading one-on-one tips here. Get your allocation. In my opinion, it should be a minimum of five percent, then we'll talk. Hopefully that five percent will happen with people that deserve to get it before the price goes parabolic. You know, I want countries like El Salvador to get as much as they need before the price goes parabolic because you know what? I love the USA, but they already have all the money. It's not like they need more money. It's countries like El Salvador that need to have, to experience the upside." }, { "speaker": "stephan", "time": "53:24", "start": 3203.7, "text": "Yeah, fantastic. so, let's also chat about your website. You've got lookingglasseducation dot com. So do you wanna tell us a little bit about that? And I was checking out some of your articles there as well. So, tell us a little bit about this." }, { "speaker": "greg_foss", "time": "53:36", "start": 3216.3, "text": "What a great question. Thanks for bringing it up. Very proud to be a" }, { "speaker": "greg_foss", "time": "53:42", "start": 3222.5, "text": "Run by a, two young kids, one of whom lives in, Western Australia, I think, but his name's Daz B. Oh, yeah. Last name spelled B E A." }, { "speaker": "stephan", "time": "53:54", "start": 3233.94, "text": "I've seen him on Twitter, yeah. Great" }, { "speaker": "greg_foss", "time": "53:55", "start": 3234.98, "text": "kid, okay. A little bit older than, I'm not sure how old you are, but definitely younger than me, so I call him a kid, alright? and then, and then, so he-- There's Daz, and then there's Sebastian Bunny, a trans-- Well, an expat New Zealand kid who I ski with in Whi-- in Whistler in the winters. Just a great guy, huge brain, twenty-nine years old, trying to change the world, putting together this free education for people. So Daz and, and Seb. Our co-uh CEOs, if you will, that are putting together this free education for, for people to understand the fallacy of the fiat system. Stuff you won't learn in school because if you did learn it in school, you wouldn't ever deposit your money in a commercial bank. honestly, you wouldn't, 'cause you'd realize the risk that you have by depositing your money in the commercial bank. Point is, free education, young motivated kids that are changing the world, and here's some examples. It's been translated into- to 18 different languages, they're using it as part of the curriculum in El Salvador already. Okay? We've had talks with Madeira, we've had talks with, Brazil translating into Portuguese. So all of these things are so positive, it's only been out for-- we announced it at the, at the Bitcoin Miami conference this year, and already there's been something like I might have the number slightly wrong. over three thousand people have completed the course, the online course, which gives, you know, it's a bit of a, it's an accreditation that says, \"Yeah, congratulations, you went through this learning process where you actually see some of the risks in the fiat Ponzi that I like to describe it as.\" But they can't have, a full-on Foss, indoctrination. They'll, they'll, you know, they'll, they'll think I'm some sort of madman, okay? They need the Doing it, you know, basically it's, how would you say, it's more like a, a drip, you know, indoctrination by drip test rather than the Foss who comes at you and, and, and throws it all at you, right?" }, { "speaker": "stephan", "time": "56:02", "start": 3362.05, "text": "Yep." }, { "speaker": "greg_foss", "time": "56:02", "start": 3362.33, "text": "And, and, and so I'm proud to be part of that, but I'm purposely stepping away. I, I, I want the kids to, run it the way they, they, they think is, is, You know, most advantageous for the world. And yeah, thanks for bringing it up. we have, received really nice accolades, on the content and Most importantly, I think we're helping to change and educate the lives of people that need to know this. the, the, the population of El Salvador, for example, like I said, look, Americans generally are The most privileged population in the world, they're not the ones that are gonna benefit the most by learning about this opportunity. It's the lesser privileged countries, and so yeah, these guys, these kids are doing amazing. we've had people reaching out who wanna help more. all I can say is it's a great community to be part of. w-w-we'll come back to that. You remember when Larry Lapard had that, that party in, i-i-and you and I were at? This is what Bitcoin's all about. I, I never met A, a community that is so, such a giving community, okay? Willing to give their time and their effort. When you work on Wall Street, where I did, I mean, there's not a lot of givers on Wall Street, like it's a zero sum game. In fact, if the world is eighty-five percent taker and fifteen percent giver, I think Wall Street is ninety-nine taker and one percent giver, and the Bitcoin community is actually the flip side. It's like eighty-five percent giver And fifteen percent taker. It's a beautiful community to be part of, and, and that's why, look, I never would have met guys like you, Jeff Booth, Larry Lapard, you know, all of these influencers that aren't doing it 'cause they-- they're doing it because they feel it's a, it's a greater good. Are they gonna, you know, make financial gain if our outcome, plays out? Yeah, but that's not exactly why we're, we're doing it. Even at the Bitcoin Miami conference, how often did you hear price being mentioned? Which was very little relative to opportunities that are being generated with this technology, right?" }, { "speaker": "stephan", "time": "58:16", "start": 3496.46, "text": "Yeah. The bond and--" }, { "speaker": "greg_foss", "time": "58:17", "start": 3497.42, "text": "And this is what the, you know, traditional media guys, they always, they always paint us as being a bunch of wackos who are have fun. Staying poor and all this shit. The majority of us are more like, \"Hey, we're trying to change the world. We wanna build a world that our children would be proud and, and happy to live in for the kids, right? We're doing this for the kids.\" So, summing up a long thing, that lookingglasseducation dot com is my efforts to be involved in something that will make the world a better place for the kids, full stop." }, { "speaker": "stephan", "time": "58:51", "start": 3531.36, "text": "Absolutely. And so there's so much, there's so much different education out there and- Sometimes different angles can appeal to different people, right? So obviously there's podcast stuff. You're a regular on podcasts out there, Foss. obviously there's my show, there's, you know, Sailor Academy, there's Looking Glass Education, there's the material we're doing at Swan. There's just all this stuff out there, and whoever gets to it, well, you, you know, that, that what, whatever material you find, or if you find some article on Bitcoin Magazine, and then that sends you down the rabbit hole, you know, these are all different pathways that people" }, { "speaker": "stephan", "time": "59:25", "start": 3565.1, "text": "Buy some Bitcoin, trying to learn about Bitcoin, and, yeah, so listeners go and check out, lookingglasseducation dot com and follow Greg over at, fossgregfoss on Twitter. and, yeah, Greg, thank you again for joining me." }, { "speaker": "greg_foss", "time": "59:39", "start": 3578.79, "text": "Can I just thank you and Swan as well? I'm a huge, fan of, what Corey has done for the space, a fan of other people that are, part of the, the Swan Bitcoin family, you know, friends, Natalie Brunel and, and the like that are doing new shows, under the Swan Bitcoin banner. This is so valuable, so thanks for having me. Forever friends that I've made in this community, I know we're gonna win, we have to win for the kids, and it makes it easier when you have a group of people that, are cut from the same, ethical desires as we are. So really, really appreciate you having me. Das Bay in, Oz. Is going to some Bitcoin bash somewhere up in the, i-in, in Queensland or something this weekend. So shout out to him and all, all, all the guys that are up there from Canada, thanks for the support, and, we'll talk to you soon, alright?" }, { "speaker": "stephan", "time": "01:00:37", "start": 3637.65, "text": "Thank you. Get the show notes at stephanlivera dot com slash four o one, and I will see you in the citadels." } ] }