{ "episodeId": "SLP663", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "reed_wommack": { "name": "Reed Wommack", "role": "guest", "tag": "REED" } }, "segments": [ { "speaker": "stephan", "time": "00:00", "start": 0.28, "text": "I think that in thirty years, every single equity that's large is a Bitcoin treasury company, and so Bitcoin treasury companies will dominate the equity market. And I, I think that before I started going down this rabbit hole, I, I held the mental model that like, man, everything is overpriced, and all the equity value in the world is just gonna get sucked into Bitcoin, and Bitcoin, you know, becomes way more valuable than the stock market. I don't think that is going to happen. I think instead what you will see is that every company is forced over time into becoming a Bitcoin treasury company, and the relative size of the equity market, at least relative to, say, real estate or relative to other things, stays very large. It stays a really, really large and important part. Of global capital structure." }, { "speaker": "reed_wommack", "time": "01:02", "start": 62.08, "text": "Hi everyone, and welcome back to Stephan Livera podcast, brought to you by Bold. For American listeners, you can buy Bitcoin over at getbold.io. Now, joining me on the show today is actually an old colleague of mine, Reed Wommack. Reed was previously, head of customer success, support at Swan Bitcoin, which many of you will know. Now, Reed is, now owner and CEO of Ground Lux. So, Reed, welcome to the show." }, { "speaker": "stephan", "time": "01:27", "start": 87.43, "text": "Thank you. Thank you for having me, Stefan. It's, it's a pleasure to be here. Yeah, maybe, maybe I should start off by just talking a bit through my Bitcoin journey, so folks understand who I am and where I'm coming from. Sure, yeah. so I got into Bitcoin in 2019. Pretty much right off the lows, got obsessed, went deep down the Austrian and sort of economics rabbit holes, hence listening to lots and lots of your podcast rather than sort of the technical rabbit holes. so became obsessed with, with Rothbard and Mises Institute and, and the sort of economic background and history of Bitcoin And was so obsessed with Bitcoin, I needed to work in it, and, was lucky enough to get a job, pretty well employee number six full time, I think at Swan. running customer support and, scaled that team up over the course of three years. So, from twenty twenty, twenty twenty to twenty twenty-three ran customer support for Swan Bitcoin. and then stepped down from that role in twenty twenty-three to spend more time with family, and still obsessed with Bitcoin and, but wanted more time with family, and then, and then in, in sort of this gap year that I had, spending lots of time with family, got very obsessed with something called grounding. which for folks who have never heard of it, essentially the idea of, of touching the earth with your bare feet or with any sort of conductive material is, is quite healing, especially for older folks, especially for people with chronic inflammation and pain, and got really obsessed with that rabbit hole and, and then ended up purchasing a company. That, that sells grounding products. So now we sell grounding products and, on the front end, we aren't a Bitcoin company at all. We transact completely in, in, in fiat, but, on the back end, in, in the financial side, we, we sort of run With Bitcoin as our unit of account and, and make investments and decisions around allocations to, to Bitcoin. So, yeah, I wanted to come on the, on the show just to talk a, a bit through how we're thinking about allocating capital, with the rise of these Bitcoin treasury companies and why we're actually not allocating capital directly to Bitcoin and instead are allocating capital predominantly on our, our balance sheet to the- Treasury companies themselves. So essentially, gotcha. Buying" }, { "speaker": "reed_wommack", "time": "04:01", "start": 241.43, "text": "leverage, unleverage. Leverage," }, { "speaker": "stephan", "time": "04:03", "start": 243.49, "text": "unleverage, yeah. Okay, so look, obviously, let's, let's, I mean, let's," }, { "speaker": "reed_wommack", "time": "04:09", "start": 249.23, "text": "let's kind of the obvious question everybody's gonna have is like, \"Hang on, Reed, this is like antithetical to the, you know, not your keys, not your coins. What's, what's going on? Like, are you, like, you, you know, you previously were working at Swan, like, obviously it was a very strong not your keys, not your Like, why?" }, { "speaker": "stephan", "time": "04:29", "start": 269.42, "text": "For my personal holdings, definitely not." }, { "speaker": "stephan", "time": "04:35", "start": 274.89, "text": "yeah, I haven't done that for my personal holdings. It's, it's, but when I, when I wanted to run a company, I'll, I'll walk you through my thought process of," }, { "speaker": "reed_wommack", "time": "04:43", "start": 283.19, "text": "of" }, { "speaker": "stephan", "time": "04:44", "start": 284.19, "text": "wanting to run a company. Essentially got to the point where I didn't wanna work for anyone else again, very independent, and thought that my time and energy and, and vision I wanted to work for myself, and I, I wanted to run a company. And when I thought through how we would allocate capital, I, I wanted my company to outperform. I didn't-- Got a competitive streak. Didn't want to get outperformed by the Microstrategies, the Metaplants, the, other Bitcoin treasury companies. And I am running a very small company, like we do less than ten million in sales, at least last year, did less than ten million in sales, right? And so, you know, the valuation of my company is small compared to these much larger players, and as a result, my cost of capital is much higher. So if I wanna take out debt, and one of the reasons I actually wanted to run a company is so I can legitimately take out debt to buy Bitcoin, speculatively attack. USD to buy Bitcoin. If you are a, if you, don't own a company, you can only get it, you can only get personal loans at like fifteen percent, right? If you, if you don't go for personal loans, you get credit cards at twenty-five percent. If you run a company, you can start getting down into eight percent. So I'm getting offers for, for loans at eight percent. I can do whatever I want with that. Most people can't do that when they're not running a company. And so, so that's what is attractive about actually running a company. As you get larger and larger and larger, you get cheaper and cheaper cost of capital that you can roll into Bitcoin. Unfortunately, if you're not a public company, you can't get four percent. I can't get four percent interest rates. I can't just easily sell equity either" }, { "speaker": "stephan", "time": "06:21", "start": 380.98, "text": "to" }, { "speaker": "stephan", "time": "06:24", "start": 384.48, "text": "So I don't wanna underperform them, and so, so I am instead choosing to take the risk. Of adding leverage on le- on their leverage, essentially. And, and we can talk through the risks that I'm knowingly taking, but, but one way I'm essentially diluting or, or reducing that risk is just by buying a bunch of these companies, 'cause long term, many of these companies are going to lose their keys. Get hacked and go to zero, like that is for sure going to happen. I don't know which ones, but if, if you're buying a basket of these equities, you know, companies that are consistently buying Bitcoin, so Metaplanet, MicroStrategy, Semler Scientific, some of these over the course of twenty years are going to go to zero for sure, and then others are going to outperform Bitcoin, in my opinion. and so when I was just walking through like risk adjusted reward on how as Bitcoin, in my opinion, as Bitcoin sort of volatility gets reduced and people continue looking for alpha You know, you can, you can trade options and get wrecked, right? You can leverage up BitMEX and get wrecked. But, slowly DCIing into companies that are themselves acquiring Bitcoin, both through positive cash flow, but also through just having access to lower interest rates than the average person can get, to me Is an interesting risk award, reward opportunity, essentially, to, to get alpha on, on Bitcoin itself. And, and the way, again, I'm, I'm managing that risk is, is unlike with Bitcoin, where on the base layer you put everything in one basket," }, { "speaker": "reed_wommack", "time": "08:16", "start": 495.78, "text": "like it's" }, { "speaker": "stephan", "time": "08:17", "start": 496.94, "text": "friggin' useless to buy any other alt-coin, right? As, as you move up away from base layer and, and you start getting into the securitization of Bitcoin, all of those securities are gonna have excess risk over just base Bitcoin. And so in, in, in a lot of ways, you need to reduce that risk by owning Multiple." }, { "speaker": "reed_wommack", "time": "08:40", "start": 519.88, "text": "Yeah, and I guess up until recently, it was kind of strategy previously, MicroStrategy was one of the only games in town there, right? It's only more recently now that, okay, Semliki Scientific, MetaPlanet, and now, you know, there's, there's a whole raft of these new ones. And interestingly, Nakamoto is probably an interesting one to talk about as well, because that kind of represents almost like a similar thing to what you're doing, right? Because they are themselves a treasury company who are buying treasury companies or starting up. Treasury companies, and not just in America, but just around the world, because they see it like, actually maybe there's alpha by going to do, you know, in Japan or in Hong Kong with, seventeen twenty-three, that Moon Inc. one, and, you know, various ones." }, { "speaker": "stephan", "time": "09:20", "start": 560.29, "text": "Yeah, and there, I think there's definitely alpha to be gained jurisdictionally, and you're seeing that right now, at least with Metaplanet, I don't, they're like pumping like crazy right now. And I guess just for listeners, the date" }, { "speaker": "reed_wommack", "time": "09:33", "start": 572.98, "text": "today is the 22nd of May, the price of Bitcoin is about a hundred and eleven thousand, and just recently MetaPlanet has just been like going through this crazy run where it's like hitting like limit up across different exchanges and I don't know, it's kind of super crazy volatile, you know? I'm not necessarily endorsing, but you know, that's just, that's just what it is, yeah." }, { "speaker": "stephan", "time": "09:52", "start": 591.82, "text": "Yeah. But, I'm sure in a month or two, you know, things will be back to somewhat more normal on, on that front. But, but what, what you're seeing at least with Metaplanet, I think in particular, is that they have really cheap cost of capital, like they could get loans at zero percent without even doing, yeah, just straight zero percent loans, which you can't get in the US." }, { "speaker": "reed_wommack", "time": "10:15", "start": 614.52, "text": "You know, one, one thing I wanna sort of rewind back just one step because I think it would be useful to hear your journey, because obviously in Bitcoin there are different rabbit holes, right? You got the security and the privacy and, you know, Lightning and all these other things. But arguably now there's this, there's this entire rabbit hole of Bitcoin treasury companies, right? Because at the start, it was sort of seen like a bit controversial or, quote unquote, \"You're not a true Max" }, { "speaker": "reed_wommack", "time": "10:39", "start": 638.89, "text": "in your cold storage, whereas now it's sort of-- There's, there's a lot of interest around this. So I wanna hear how you went down the bit-- the specifically Bitcoin Treasury company rabbit hole yourself, and then we can sort of get into like how you're doing it yourself, or at least what you're doing." }, { "speaker": "stephan", "time": "10:55", "start": 655.1, "text": "So before I, before I started getting interested in Bitcoin Treasuries, like I was of the opinion, sort of the Safedina Moos opinion, which is like, debt is evil. Right. Just don't take debt and just stay humble, stack zats Hey, humble facts, ads, don't use debt, and debt is, is a problem that fiat has produced essentially, and that governments have like enabled this massive expansion of debt. and, and that was like my view, and anyone who got close to the money printer was evil, like it's totally corrupting to try and get closer and closer to the money printer. and you see that, you know, Jamie Diamond is, you know, an evil guy. Whatever for, for running a traditional bank that, you know, gets bailed out by the government. That's, that's like one, one view, and I think it's a legitimate view of many Bitcoiners. and then, and then sort of how I came around to it is just The same way I came around to Bitcoin initially is like, why is this working, at least in the short term? Like, why is Bitcoin going up in the short term? And the volatility, the upward volatility draws you in And so that, that drew me in and then went for on, on Bitcoin, made me go down the Austrian economics rabbit hole. And then, and then watching MicroStrategy essentially take on tons of debt to buy Bitcoin drew me in and it's like, why is this working? Why are they- Outperforming Bitcoin? And do I need to like reconsider my mental models to better reflect reality, which is that someone who is taking on debt right now? Is clearly outperforming Bitcoin on the base, base chain. clearly they're taking on risk, right? Absolutely taking on risk to do so, but, but why? Why is it working? And that question m-made me look more deeply into debt, and how, how debt works and and made me reconsider a little bit the, the narrative around debt being purely evil. that in, instead, if, if you look at it the same way, micros, like Michael Sailors described it as essentially like capital flow and moving capital that is locked or underperforming from people who are low risk Who want consistent payouts at six percent into something that will generate far higher yields, Bitcoin cargars, you know, twenty, twenty-five percent say annually, like that is a massive arbitrage opportunity, and that's actually a natural arbitrage opportunity for, for someone who is willing to take on more risk to get loaned capital to invest it in ways or to, to allocate it in ways that will get high returns and someone else to be senior in An equity stack to then, who wants low risk but they want six percent returns, and, and those people exist. There are lots and lots of people who don't want all the volatility, they just want six percent returns. And, and debt allows them, those two, two parties, higher risk and a lower risk party, to interact and to be-- have a mutually beneficial exchange. and so, so it's not that debt itself is deeply problematic, it's that the debt markets have been like dominated by treasuries." }, { "speaker": "reed_wommack", "time": "14:19", "start": 859.33, "text": "Interesting. And so I guess one other quick question I have on treasury companies, because I-- Okay, there's a few things I wanna get into, but let's just start with this one. On- This idea of doing Bitcoin treasury companies or buying them, what's the difference between, I guess, instead of you taking out debt to buy them, just buying MicroStrategy or just buying MetaPlanet, like just, like without using debt, you know, without doing leverage on leverage, just buying those?" }, { "speaker": "stephan", "time": "14:49", "start": 888.63, "text": "Yeah, well, you're, you're still- So, you know, in the leverage stack, buy Bitcoin least leverage, most safe, right?" }, { "speaker": "reed_wommack", "time": "14:57", "start": 897.46, "text": "Yeah." }, { "speaker": "stephan", "time": "14:58", "start": 898.32, "text": "Next layer up is just buy someone, buy an equity that is essentially wrapped Bitcoin That, that they themselves are play-- doing this playbook." }, { "speaker": "reed_wommack", "time": "15:11", "start": 910.76, "text": "Yeah." }, { "speaker": "stephan", "time": "15:11", "start": 911.44, "text": "That is, that is one layer up, and you have one more set of risks associated with it. And then the, the third layer up, which is the one that I'm sort of playing around with, with my tr- personal company treasury, is essentially taking the same playbook that that middle group is using. The MicroStrategy playbook and applying it to MicroStrategy, so cash flowing into MicroStrategy and then taking out small amounts of debt, maybe at eight percent long-term debt, and buying those companies. And so it's, it's, it's a third layer. That, that is even riskier. And again, I'm going on this podcast, not many people are doing this. Many people are gonna just write me off and be like, \"That, wow, that's way too risky,\" and you're, you're probably right. it's just, it's, it's a fascinating securitization of Bitcoin that's happening, and, and I want to be a part of that in, in some capacity, which is" }, { "speaker": "reed_wommack", "time": "16:11", "start": 971.34, "text": "interesting." }, { "speaker": "stephan", "time": "16:12", "start": 972.16, "text": "And so, let me just summarize a few-- Everyone can do this. I'm just, I'm just suggesting like, as Bitcoin gets institutionalized, there will be increasingly be more and more, companies making decisions, maybe somewhat similar to mine, or offering things like ETFs that are actually Bitcoin treasury. Companies, 'cause the current Bitcoin ETF is like, includes Tesla or something, and it's like, that's not actually--" }, { "speaker": "reed_wommack", "time": "16:35", "start": 994.57, "text": "Right. You mean, as in, an ETF that only does the, the leveraged Bitcoin equities, not just the ones-- Only does the ones that" }, { "speaker": "stephan", "time": "16:43", "start": 1002.6, "text": "actually buys, buys securities or companies that are increasing their Bitcoin stack and are doing this playbook of taking out cheap debt, buying Bitcoin, cash flowing into Bitcoin, and selling, selling equity when you have an MNAV of, you know, above one for Bitcoin. That is, that is sort of the, the three-part playbook that is interesting to me in, in companies that are doing, and if you aren't doing those three, then for me at least, it's not worth looking at those companies." }, { "speaker": "reed_wommack", "time": "17:12", "start": 1031.6, "text": "Back to the show in a moment. This show brought to you by CoinKites dot com, the creators of the best Bitcoin hardware security devices such as the Coldcard Mark IV and the new Coldcard Q. Now, we use Bitcoin hardware security devices to keep our keys offline, our private keys offline. Now, the way these work is you can do that setup, write down your twelve or twenty-four words on the seed word cards and keep that secure. Now, you can use this device to interact with the Bitcoin network work using software such as Sparrow Wallet, Electrum, or Becto Desktop or Nunchuk as a few examples. Now, you have a range of security features that you can use with these devices such as passphrase, you can use seed x or my favorite is multi-signature. Now, if you're starting in a basic way, just start with the device and the USB-C cable, plug it directly to the computer and use it that way, and then later improve your setup. But I believe these devices are great at helping secure your coins. Especially as you start to migrate up into multi-signature security, but don't be disheartened or don't be, scared away. They are accessible, and I think you actually do learn about Bitcoin in the process. So to get yours, go to coinkite dot com, use code levera to get a discount on your cold card. This episode brought to you by Galloy. They are building banking software for the Bitcoin age. So if you are with a bank, a fintech, or a startup looking to offer some kind of Bitcoin product, whether that is a Bitcoin collateralized loan Deposit accounts or payments, Galloy can help you. Their latest product is called Lana. It is a loans management platform, and you can use this to come to market quickly and offer a loans or Bitcoin collateralized lending product for your customers. Now, Galloy have a lot of experience in the space. They started with Blink Wallet in twenty twenty, and they've since grown this to become a community favorite over time, and so they have a lot of experience making things work in a secure, reliable, and scalable way. So if you need assistance coming to Market quickly with a Bitcoin banking product such as lending or deposits or payments. Talk to the team at Galloy, you can email them, the email is biz at galloy dot io, or go to the website galloy dot io. And now, back to the show. Interesting. Okay. And so yeah, we'll get into a whole few things, but I guess what one thing we're kind of touching on is, let's say there's this kind of universe, like, let's say you're a Bitcoin Maxi, right? Like you believe Bitcoin is gonna be the money of the world, as Listeners believe, then you've got this universe of risk, right? Like on the safest end is just literally, you know, multisig, self custody, you know, stay humble, stack Sats. Maybe on the crazy, way, way out there is, you know, go to BitMEX and go hundred x long, and then there's gradations between those. All, all between that, right? So as an example, maybe one step up would be like, okay, just use, you know, the likes of like an Unchained or a Lendin or one of these Take a little bit of leverage, maybe like five or ten percent kind of, that would be sort of maybe one level, and then like, you know, or buying, you know, maybe having some of your portfolio, either personally or business portfolio, in some of these tre- treasury companies, and then I guess- So what you're saying is, yeah, go on." }, { "speaker": "stephan", "time": "20:29", "start": 1229.15, "text": "So one of, like, you're presenting this as this like scale that's two dimensional, scale. It's not necessarily two dimensional because I, I actually personally would never recommend people take out like se- take out loans to buy Bitcoin when they post Bitcoin as collateral, 'cause Bitcoin is still incredibly, volatile, and you can and will get Get nuked on that. Like Bitcoin crashes, you get liquidated and all of your Bitcoin is gone." }, { "speaker": "reed_wommack", "time": "20:59", "start": 1258.54, "text": "Gotcha. And that's a fair point around the liquidation. So you see it like the treasury companies don't have that liquidation risk?" }, { "speaker": "stephan", "time": "21:04", "start": 1263.97, "text": "They don't have that liquidation risk, and I, I look at that as a higher risk. So I'm not willing to touch, like- That type of risk profile." }, { "speaker": "reed_wommack", "time": "21:12", "start": 1272.08, "text": "Gotcha. Yeah, and that's, that's an interesting, that's a fair point. but then even if you are taking out, let's say you're taking out business loans, even at eight percent to buy MSTR, Metaplanet, and so on What kind of term is that loan? What are the conditions of that loan? Like, how does that work?" }, { "speaker": "stephan", "time": "21:30", "start": 1290.13, "text": "So, like, as you essentially build this company, you get better and better Terms, and you can take out debt longer and longer at lower and lower interest rates. And so if you take out credit card debt, like, you know, you might be able to max your credit card and get a year at zero percent interest rate, but you're limited on how much you can take out, maybe thirty thousand dollars. I- And, but then as you build a company, you get better and better credit profile. And so, so, I think right now I, I can access eight percent, you know, like a five hundred thousand dollar loan at eight percent, let's say. And, and that's a multi-year loan. And, and that loan is, is not based-- I'm, I'm getting that from based on sales, I'm getting that based on my balance sheet, but I'm-- but I have- Have time to pay that back with cash flow from the company," }, { "speaker": "reed_wommack", "time": "22:22", "start": 1341.91, "text": "if that makes sense. I see. And so it's not, I'm not posting" }, { "speaker": "stephan", "time": "22:25", "start": 1344.6, "text": "collateral, like that's a, a really important thing that I think MicroStrategy's doing well, these Bitcoin going treasuries are doing well, and also like I'm, I'm- I'm trying to replicate is, is like there is no liquidation risk because, I have just time to pay it back with cash flow Not, not posting collateral, and if, if MicroStrategy goes down 50%, I'm gonna be liquidated. Like, I'd never wanna take that risk where if price moves against me I get loans closed out early or I get, I, I'm liquidated. And so setting up loan terms in ways where that isn't a risk is really important. Yeah. Because I know my strategy could absolutely crash fifty percent tomorrow. Bitcoin could easily go down thirty percent within a, a week or two, right? So I don't, I don't wanna be in that position where I'm a forced seller at the lows." }, { "speaker": "reed_wommack", "time": "23:19", "start": 1398.93, "text": "I see. And so how many, I guess, cycles of kind of rinse and repeat have you gone through, or are you just early stages of this? Still" }, { "speaker": "stephan", "time": "23:27", "start": 1407.24, "text": "early stages, but yeah, I think we have four, four or five companies that we own, On the balance sheet and essentially, you know, so far as Bitcoin has gone up, you know, they pump at different times or whatever, doesn't really matter. I don't, I don't really care on the short term because this is, again, not a play. I'm not trading these. I'm not, I'm not, Like, I don't care in the first six months. In the first two years, it, it doesn't matter. It's, this is a four-year play or four-plus year play, And so" }, { "speaker": "reed_wommack", "time": "24:02", "start": 1442.21, "text": "can you share like when you started this strategy and how you've gone so far? Yeah," }, { "speaker": "stephan", "time": "24:06", "start": 1446.07, "text": "I mean, totally, totally. I, I started this, I took over the company in February of 2025. for the first few weeks, I needed to just buy inventory, so we had no cash flow. Essentially, everything was going into inventory, you know, and then we started making money that I didn't have to put into new inventory orders, and, and since then I've just been de-seeing into a variety of different companies, so Meta Planet, SMLR MicroStrategy and twenty-one have been, are holding so far," }, { "speaker": "reed_wommack", "time": "24:37", "start": 1476.95, "text": "and just DCing in. Gotcha, yeah. But admittedly, this is very early days, and you know, you ideally, you need to sort of make it through, yeah. Yeah," }, { "speaker": "stephan", "time": "24:46", "start": 1485.84, "text": "and also like everyone's a genius in a bull market, and like, yes, exactly, yeah. That's, that was, that's exactly" }, { "speaker": "reed_wommack", "time": "24:51", "start": 1490.96, "text": "what I was about to say as well, right? Because you, that's our natural tendency to think, \"Oh, see, I'm a genius,\" you know," }, { "speaker": "stephan", "time": "24:58", "start": 1497.89, "text": "et ceter Yeah, I'm up, great. But really what, what matters and what I care much, much more about is, is my mental model for these treasury companies is like they are able to essentially go higher. They're, they're, they're 2x leverage on the up, and they're like one and a half leverage down. And really what you care about is just whether the base is higher, you know, the Bitcoin per share and the share price is higher on the next bear market than it was, you know, on the past bear market. That's what's more important to me than like, you know, whatever these vertical lines are doing in the short term and what the traders are doing, pushing things around. Like, what matters is whether they're able to accumulate more Bitcoin per share, and that results in, in, Like in outperformance of Bitcoin over long, long time frames. And MicroStrategy has done that at least over the four years, like they've, they've proven the model at least for one cycle. and now there are lots more companies trying to copy it, for this next, you know," }, { "speaker": "reed_wommack", "time": "26:04", "start": 1564.07, "text": "next" }, { "speaker": "stephan", "time": "26:04", "start": 1564.31, "text": "four" }, { "speaker": "reed_wommack", "time": "26:04", "start": 1564.47, "text": "year cycle. Of course. And the important thing with some of these treasury companies as well is when they get debt, they term it out, it's like five years out or six years out or whatever, and they're kind of doing more, let's say, fancy things with, you know, how they manage it. I guess the, I guess I'm curious, so when you're saying leverage on top of leverage, are you at the point where you have More. So currently no. Or not yet." }, { "speaker": "stephan", "time": "26:31", "start": 1590.95, "text": "Like my, the way, the way I, I look at the progression of what, what Bitcoin treasury companies are doing is like first stage is you take all your free cash flow" }, { "speaker": "reed_wommack", "time": "26:43", "start": 1602.9, "text": "Yeah." }, { "speaker": "stephan", "time": "26:43", "start": 1603.36, "text": "And you buy Bitcoin with it. And that is a great stage, and you need, actually, you need that stage in order to sort of move on, I think. and that's the stage I'm in. And then the second stage, which I'm about to enter, you know, in June or something, is you start taking out long-term debt at low interest rates that are going to, that are lower than Bitcoin's carter, like compound annual growth, and you sort of roll that in. And that's stage two and then the third stage that larger companies can easily get into, which I can't, but will one day, I will likely one day enter this stage, is selling equity In order to buy, buy hard assets. And when MNAV is over one, this is accretive to your, your shareholders. And you, my, my opinion on, on that is that that's the most powerful thing you can do. Like you are, you are literally the money printer at that point. You are just like, s-s- Sucking in capital and allocating it to a harder asset, but that only works when you have at least one of the other two also functioning, because if you just tried to immediately issue equity to buy as much Bitcoin as possible and you don't have- Cash flow in or you don't have debt in, then, then you will like crush your share price and, and shareholders will look at you and be like, \"Well, there's no point in investing in this equity because they're not going to generate more Bitcoin in, in two years?\" For me, then, then I would--" }, { "speaker": "reed_wommack", "time": "28:21", "start": 1701.37, "text": "You mean if you're not a public company?" }, { "speaker": "stephan", "time": "28:23", "start": 1703.23, "text": "No, if, if you're not-- Even if you are. Even if you are. Even if you are, you need to be doing at least one of the other two, either debt or, or cash flow. And if you aren't doing those, then forward-looking investors will say, \"Like, you're not gonna be able to actually increase my Bitcoin per share," }, { "speaker": "reed_wommack", "time": "28:39", "start": 1718.82, "text": "and," }, { "speaker": "stephan", "time": "28:39", "start": 1719.4, "text": "and like, you will crash. You'll kick crater. You'll just like sell equity down to one MNAV, and you won Is, is my mental model at least for why you need, you need to either cash flow or cash flow and debt." }, { "speaker": "reed_wommack", "time": "28:57", "start": 1737.29, "text": "And then you can unlock" }, { "speaker": "stephan", "time": "28:59", "start": 1739.35, "text": "that third, like, great, we're gonna just like sell a bunch of shares and buy Bitcoin with it. Which is the most powerful leverage in that stack. But you, you can't just do" }, { "speaker": "reed_wommack", "time": "29:11", "start": 1750.76, "text": "Right. And it's not just equity, it's-- and generally speaking, all these public companies are looking both on the equity and debt side, right? Like that they are going to issue, have, find investors who are interested in that company's debt and, that's where they, you know, they're doing this terming it out five years or whatever, and ideally with favorable, favorable terms with low, you know, interest rates, this kind of thing. But I guess the, the challenge is first getting to that size and scale, Yeah. And, yeah, okay. But I guess, how much of, you know, 'cause I guess when you take out business loans, let's say as GroundLuck's, the company, not as Reed the individual, how much of that- You know, loan money is needed to actually sustain the business, or is the business already profitable on its own, right? Because is that also distracting from your kind of ongoing operating business?" }, { "speaker": "stephan", "time": "30:03", "start": 1803.46, "text": "Yeah, yeah, the business is already profitable on its own." }, { "speaker": "reed_wommack", "time": "30:06", "start": 1806.47, "text": "gotcha." }, { "speaker": "stephan", "time": "30:07", "start": 1807.25, "text": "As, as a bit of background, e-commerce businesses like the one I'm in, they tend to have really seasonal cash flows. And so even before I took over, the previous owner would take on debt in the summer, you essentially buy a bunch of inventory over the summer, and then Black Friday hits and you sell all of your inventory and then you're sort of cash rich in January. And so that's the, that's the cycle that's common, at least with normal debt. And so I'm, I'm sort of still on that, like s-- I'm gonna have to take on debt just to fund these cash flow cycles, at least at first. But, but we're also gonna be taking on longer, longer term debt." }, { "speaker": "reed_wommack", "time": "30:45", "start": 1845.47, "text": "I see. So" }, { "speaker": "stephan", "time": "30:46", "start": 1846.35, "text": "normally e-commerce companies will take on six months, you know, take out a six month loan in July, buy a bunch of inventory, pay off the loan in December, January. That's, that's a common- Occurrence, at least in this industry." }, { "speaker": "reed_wommack", "time": "31:02", "start": 1861.88, "text": "I see. And so what kind of, I guess, timeframe are you sort of looking at here? Like you mentioned earlier, it's kind of four years plus. Yeah. What's the Timeframe that you think, you, you know, you're gonna operate this on, like, are you planning to then, let's say, rinse and repeat again in one year from now, like in May of next, May of next year or what?" }, { "speaker": "stephan", "time": "31:24", "start": 1884.19, "text": "Yeah, my, my rough mental model is, is there will be a Berkshire Hathaway of Bitcoin treasury companies, right? Where you have these, these large holding companies that are, that don't sell frequently. And they hold for a very long time, and as a result of not selling, they don't have very much capital gains tax to pay, at least in the US. And that, that is what I want Taproot is, is to be that for Bitcoin treasury companies. And, and you know, Warren Buffett did that with insurance companies, right? That was like his, his His start, but now he owns a whole, whole range of them. And if we just stick, if we just focus on Bitcoin treasury companies, only Bitcoin treasury companies, and, you know, I, I talked about having this four-year hold term, but really, like, it would be nice, and I- I'm planning on like a twenty-year hold term, so I buy it, and, and in twenty years, I think three of my five companies that I'm buying are still gonna be around, two will have screwed up, you know? Of those three, one will probably match Bitcoin and two will have- I see. So that's- That's like the roughly the risk profile that I'm taking. It's like it's, it's more like, it's not quite as risky as venture, right? You're not like one in a hundred unicorns. It's more like the risk, it's more like small cap, small cap investing, and the risk profile is around small cap investing. And when it comes to, like, you bake in, like, you're gonna have these companies that just, like, screw up key management and lose their Bitcoin or get sued and, like, go under, and that, that sucks. It's going to happen. but you will also have companies that just outperform so much that they cover for those, those companies that- Yeah, the" }, { "speaker": "reed_wommack", "time": "33:18", "start": 1998.1, "text": "losses, yeah. But also on the question of like loans and the cycle time there, are you going to be- Like paying down that loan, are you going to deleverage that, like, how does that part of this work?" }, { "speaker": "stephan", "time": "33:31", "start": 2010.8, "text": "So, so at least at, at like small scales, right? We are paying down that loan. you know, with cash flow from the business, right? But what you see with larger companies is they essentially just take on more and more and more and more and more debt As their credit profile improves, and they just take on larger debt to pay off the older debt. So long, long term, like we will likely hold lots of debt." }, { "speaker": "reed_wommack", "time": "34:01", "start": 2040.82, "text": "Right? But then, I mean, doesn't that also create the, you know, the higher your leverage ratio goes, like as an example, yeah, yeah, yeah, you correct me if I'm wrong, but with MSTR, I think they've publicly said they wanna keep that ratio something like twenty to thirty percent, something in that range. Totally. Like, and I think that's kind of like MNAV, kind of ca-calculating for like the amount of Bitcoin, oh, sorry, the amount of debt they have over sort of the amount of Bitcoin, taking out the equity dilu- And the debt they have, they-- I think they want that ratio to be in the twenty to thirty percent range. So if you're saying you're just gonna keep, like, are you saying you're just gonna keep the number keep going, number going up? I think" }, { "speaker": "stephan", "time": "34:39", "start": 2079.35, "text": "keep going, it doesn't mean that like the amount of debt relative to our balance sheet goes from twenty percent to five hundred percent. It means that as the balance sheet grows" }, { "speaker": "reed_wommack", "time": "34:51", "start": 2090.86, "text": "The" }, { "speaker": "stephan", "time": "34:52", "start": 2091.6, "text": "amount, so the" }, { "speaker": "reed_wommack", "time": "34:52", "start": 2092.3, "text": "nominal fiat debt terms grows, but the percentage of your balance sheet, yes, do you have a ratio? Do you have a target ratio for that?" }, { "speaker": "stephan", "time": "35:00", "start": 2100.09, "text": "So, I-" }, { "speaker": "stephan", "time": "35:04", "start": 2104.1, "text": "not yet, in total honesty. I, I think one of the things I'm watching is, is how So the second, as, as I talked about those three layers, right? You have Bitcoin, you've got the second layer of these treasury companies, and I'm maybe considering myself the third layer on top of those, is, is what they're doing because we're going to probably match in some capacity what they're doing, and so MicroStrategy is, is I would say middle of the road in how aggressive they're being twenty five percent is actually like they're well capitalized and lower risk, and then other companies are going to be higher or lower than them. and I, I, that's probably the right amount. So you're gonna sit" }, { "speaker": "reed_wommack", "time": "35:50", "start": 2150.2, "text": "at a similar leverage ratio to them?" }, { "speaker": "stephan", "time": "35:53", "start": 2153.08, "text": "Probably, probably, yes. The, just the difference is they essentially like on the pumps They get massive amounts of investment into Bitcoin, they sell their shares and buy more Bitcoin, and then on the bear markets, they aren't able to do like anything, like capital dries out, they can't issue at the markets, they can't raise at those amount amounts, and so, so that cycle of like Being able to buy on the up and, and like, be, be unable to buy on the down is something that when, like, we need to be well aware of so that we don't match that. Because if I'm like going all in right now, you know, as things are pumping, like, that is too much leverage for, and instead the leverage we add needs to actually be-- I need to be able to sort of like, when things are low, that's the time, you know, where we're gonna be trying to take in Out more debt, to buy more Bitcoin." }, { "speaker": "reed_wommack", "time": "36:55", "start": 2214.53, "text": "Right. So then, I guess that brings up the question, are you trying to time the cycle then as well? Not that I'm totally against it, but is that essentially what you need to do to do this successfully, or do you see it like, it doesn't require you to time the cycle correctly? Like," }, { "speaker": "stephan", "time": "37:08", "start": 2227.56, "text": "we can just DCA, right? We can just absolutely DCA in and be fine with this strategy, right? It's just when you take out debt And you are-- and my debt terms are two years." }, { "speaker": "stephan", "time": "37:20", "start": 2240.1, "text": "It is important if I take out debt on a two-year timeframe that I Don't put it in, it really dumb times. So" }, { "speaker": "reed_wommack", "time": "37:30", "start": 2249.57, "text": "it kinda makes sense to do it like- Once you have a four-year term," }, { "speaker": "stephan", "time": "37:32", "start": 2252.19, "text": "doesn't matter. Once you have an eight-year term, doesn't matter. When you, when you are taking on leverage on shorter time frames, yeah, you, it matters. Like, you buy the, you, you know, you accidentally buy the top on a two-year" }, { "speaker": "reed_wommack", "time": "37:47", "start": 2267.36, "text": "Yeah, then you're in trouble." }, { "speaker": "stephan", "time": "37:49", "start": 2268.52, "text": "You're in, you're in huge trouble, right? And so like, as the business grows, like we can get longer and longer terms, but I, I just can't get, you know, a five-year term right now. If I did, great, DCA in. But if, if the max I can get right now is a two-year term, then yeah, you s- if I want to take on debt, yeah, you sort of have to wait, you know, I'm, I would- Probably wait until Bitcoin is down fifty percent or something, or thirty percent or something, where, where I'm right," }, { "speaker": "reed_wommack", "time": "38:16", "start": 2295.74, "text": "because buying now at all time highs could be, could be a bad" }, { "speaker": "stephan", "time": "38:19", "start": 2299.18, "text": "idea. I mean, on a two year timeframe On a ten-year timeframe, yeah, absolutely. So, so the DC-ing in, like, it doesn't matter for, it doesn't matter when you buy it if your hold year is, you know, hold time is long, but if you're leveraging with a two-year timeframe, it does matter And, and," }, { "speaker": "reed_wommack", "time": "38:45", "start": 2324.87, "text": "yeah. Are you-- like so far, we haven't really spoken as much about the concept of, you know, if you're a Bitcoiner, you believe Bitcoin is the money, are you gonna take profit back into Bitcoin? Like, if Bitcoin is the money, are you gonna take profit back into Bitcoin?" }, { "speaker": "stephan", "time": "38:59", "start": 2338.65, "text": "Yeah, yeah. So that long term, yes. Long, long term. and I am in, in also increasingly thinking that the timeline for Bitcoin being like money, like payments money, is going to be very, very long And that the--" }, { "speaker": "reed_wommack", "time": "39:25", "start": 2364.83, "text": "Are we talking two decades, three decades? What do you think?" }, { "speaker": "stephan", "time": "39:28", "start": 2367.57, "text": "Yes. Yes. Two, three decades before it's really payments. And so the, the-- whereas Bitcoin as collateral, Bitcoin as sort of pristine asset, that will be, in my opinion, the dominant Dominant narrative for the next, for the next one to two" }, { "speaker": "reed_wommack", "time": "39:49", "start": 2388.63, "text": "decades, yeah." }, { "speaker": "stephan", "time": "39:51", "start": 2390.75, "text": "Yeah. Yeah. sure there'll be places where, you know, where you have really poor payments infrastructure where, where it's useful for payments, but the vast majority of- You know, Gresham's Law, good money gets driven out, like the vast majority of people would prefer to, to hold Bitcoin, once they really understand it, rather than to- To spend it. So, yeah." }, { "speaker": "reed_wommack", "time": "40:17", "start": 2416.8, "text": "So I think my main, and then I guess if you are viewing yourself as a, let's say, a mini Berkshire Hathaway, and you are selecting the-" }, { "speaker": "stephan", "time": "40:25", "start": 2425.43, "text": "We are, we are tiny. I'm, I am not, I'm not actually- Okay, but I mean," }, { "speaker": "reed_wommack", "time": "40:30", "start": 2429.5, "text": "the, the principle is that you are, let's say, you are a Bitcoin treasury company who is- You are a Bitcoin treasury, company. Bitcoin treasury, treasury company. Right. Right. Which is, I guess leverage on double leverage. But what is gonna be your selection criteria then of like which ones are good, which ones are bad? Totally. Like, are you intending to just kind of go for all of them or to kind of the best one or two in each country or what's your-- Do you have a strategy on that?" }, { "speaker": "stephan", "time": "40:56", "start": 2455.53, "text": "This is, this is a great question because we are seeing so many pop up now. it was just MicroStrategy for a while, then it You know, similar scientific and then Metaplanet, and now I don't even know how many have claimed that they are. but really what-- it, it, I think for me, the selection criteria is that you have six months of consistent, Purchasing a Bitcoin, and you have marketing or messaging showing that Bitcoin yield is really important, and that is what you're trying to maximize as a company. So, like Bitcoin yield per share" }, { "speaker": "reed_wommack", "time": "41:33", "start": 2493.09, "text": "Gotcha." }, { "speaker": "stephan", "time": "41:34", "start": 2493.75, "text": "And you have so for now," }, { "speaker": "reed_wommack", "time": "41:35", "start": 2495.01, "text": "the main companies I can think of who meet that, so MSTR, Meta Planet, Semler Scientific, Twenty One, Nakamoto, I guess that David Bailey one, the Blockchain Group in France, I think there's one or two in the UK. Yeah. So I guess those are the off the top of my head, and there's probably many more that are kind of, yeah. I spend, I spend" }, { "speaker": "stephan", "time": "41:55", "start": 2514.89, "text": "95% of my time thinking about Like running my business for right now, and over time that's going to change, you know, as we, as the balance sheet becomes more important, to more and more time thinking about thinking about allocation, but, but essentially, I, I can't get sucked into like whatever new Bitcoin treasury company just launched and said we're gonna be the next great thing. Like, like you need to prove out, you know, for six months that, that you are It like actually allocating to Bitcoin before it's interesting to me." }, { "speaker": "reed_wommack", "time": "42:31", "start": 2551.47, "text": "Yeah, that's totally fair. But then the other question and challenge would just be, look, Bitcoin Now, we don't know what the future holds, but at least historically, we've had these four-year cycles, and there's kind of only been this short period where it's been this big number go up, right? Like, kind of twenty thirteen, twenty seventeen, twenty twenty-one. Like, if, if you're waiting for six months, then does that mean you kind of-- they've already done a lot of their buying, and now you're kind of, you've sort of missed the entry on them? Or the-- or you've missed a good entry on them." }, { "speaker": "stephan", "time": "43:04", "start": 2583.82, "text": "Like, you think, do you think there's like one more pump or something? Like, like if your, if your time-- if your time scale is, yes. Like I'm expecting Bitcoin to go to the moon in the next six months, then you take a very different strategy than the one I'm taking. Like you take-- Yeah, yeah." }, { "speaker": "reed_wommack", "time": "43:23", "start": 2603.21, "text": "I know. I mean, I, I see it like it's probably a twenty-year, thirty-year process going here, right? But with that" }, { "speaker": "stephan", "time": "43:29", "start": 2608.73, "text": "twenty-year, thirty-year process, my mental model, at least, and- You know, you people gonna have very different ones, but the reason I'm, I'm choosing this is I'm, I'm thinking that the, the compound annual growth of Bitcoin is going to sort of get reduced as it gets larger. And so you aren't gonna have nearly as much volatility on Bitcoin in ten years as you are having now. Right? Like it will become, you know, the, the compound annual growth will like slowly go down." }, { "speaker": "reed_wommack", "time": "43:57", "start": 2636.62, "text": "Right." }, { "speaker": "stephan", "time": "43:57", "start": 2637.42, "text": "and because of that, you know, you're not gonna have nearly as big of Of ups and nearly as big of downs, and, and over long time per-periods, Bitcoin will keep going up, and companies that accumulate Bitcoin consistently Will keep going up. Like that's roughly. Yeah." }, { "speaker": "reed_wommack", "time": "44:17", "start": 2657.28, "text": "The lead sponsor of this show is Bold, the best place to buy, sell, and save Bitcoin. For listeners in the US, Bold lets you secure your financial future with complete peace of mind by integrating a low fee Bitcoin only brokerage with next gen multi sig vaults. With Bold, you can smash buy Bitcoin or set a DCA plan for only zero point nine nine percent fees and seamlessly deposit the Bitcoin direct to your Bold Vault. The Bold Vault is a two or three collaborative multi- A multisig where you hold two keys and bold holds one as a redundant backup protecting against loss or theft. You can use Trezor, Ledger or cold card hardware wallets to spin up a bold vault in just a few minutes, and the bold vault is the only collaborative custody vault available with zero monthly fees. They're also offering zero fees on your first ten thousand dollars of Bitcoin buys and twenty five dollars of free Bitcoin when you buy a hundred dollars of Bitcoin or more. Try bold today and upgrade your stacking experience over at getbold dot io. And now Back to the show. Yeah. I mean, yeah, I, I, I guess what I'm getting at though, because, yeah, I mean, I agree, I think it's gonna taper down over time. I think the power law or power curve stuff kind of gives us a, an interesting kind of benchmark or baseline of where things are going, but it doesn't mean that's exactly how it's gonna go. and, and my, my question is more like, because at least at the start, you've got a two year term on your loan, and so if, you" }, { "speaker": "reed_wommack", "time": "45:42", "start": 2742.32, "text": "In a place where it's recovered yet in that two-year timeframe, because on a two-year loan term. Yeah. Now if you've got a four-year loan term, eight-year loan term, okay, it's not, not as big of a deal, right?" }, { "speaker": "stephan", "time": "45:53", "start": 2752.58, "text": "But if, if you don't have a cash-flowing business and you take out a two-year loan, you will, are forced to sell whatever you bought with this loan to cover the loan. If you have a cash-flowing business Then the cash flow from the business covers the loan, and you end up with less than what you had before than you would have had had you not taken out the loan in the first place, but you aren't being forced to sell from your balance sheet, if that makes sense." }, { "speaker": "reed_wommack", "time": "46:19", "start": 2779.08, "text": "Gotcha. Okay." }, { "speaker": "stephan", "time": "46:20", "start": 2779.98, "text": "And so that, that cash flow of the underlying business is important, at least the scale I'm at with these shorter loans, to be able to make sure that I, I never have to sell whatever it is that I buy onto my balance sheet. I never am a forced seller." }, { "speaker": "reed_wommack", "time": "46:37", "start": 2797.21, "text": "Okay, yeah. And so that's also interesting because, that's kind of the big thing that people are talking about, like, you know, are all these, treasury companies are they gonna cause the next bear cycle? Is it gonna be, you know, some event? I mean, none of us knows, but-" }, { "speaker": "stephan", "time": "46:52", "start": 2811.66, "text": "Yeah." }, { "speaker": "reed_wommack", "time": "46:53", "start": 2813.0, "text": "Is it that there's this sort of temporary craze, for treasury companies and that, let's say, as an example, that their MNAV is goes very artificially high right now or not, like, let's say temporarily high, like there's this te- the, I guess the theory might be, okay, there's a small window in which these MNavs will really shoot up and it's gonna compress down a lot over time." }, { "speaker": "stephan", "time": "47:17", "start": 2837.21, "text": "Yeah, yeah, yeah, that's, that's definitely, That's possible. I think the reason why the MNavs, I think in the long run will remain over one, is that they have access to cheaper capital than the average person, and so it is That is leverage that the average investor doesn't have. And so because of that," }, { "speaker": "stephan", "time": "47:47", "start": 2866.57, "text": "they can accumulate Bitcoin faster than the average investor. And so, so if you, if an investor is forward looking that MNAV, at least theoretically, should, should remain above one. I think when you s-talk about the potential for them to cause the next bear market, it, it is real because What could happen is, you know, MNAV is compressed, some of them go below, below one, and then it's actually, if you are strictly following like Bitcoin yield as a KPI, it is in the company's interest to sell Bitcoin and buy their shares back. So the reverse will happen of what is happening on the ups, which is on the up, they sell shares and buy Bitcoin, and that increases the Bitcoin per share, and then on the down, if their MNAV goes below one, and you actually, I was looking at a small company called- Genius Group and their, you know, educational AI company, and they, they bought a bunch, they said they were a Bitcoin trading company, they bought a bunch, their MNAV went below one, and then they're like, they sold their Bitcoin to buy shares" }, { "speaker": "reed_wommack", "time": "48:47", "start": 2927.49, "text": "back," }, { "speaker": "stephan", "time": "48:49", "start": 2928.77, "text": "right? And so, so yes, like," }, { "speaker": "reed_wommack", "time": "48:51", "start": 2930.99, "text": "so it can send a bad-- So that's bad in two ways, right? On one side, investors may view that as a quote-unquote broken promise, even if theoretically it makes sense, even if theoretically the Bitcoin per share has gone up, it may be seen as like a Never sell Bitcoin. And so some investors will be like, \"Hey, that's a no-no, right?\" And then, and I" }, { "speaker": "stephan", "time": "49:11", "start": 2950.98, "text": "think different companies will probably treat this differently, like, you know? I, I think based on what I've seen of Michael Saylor, it's like, yeah, they're, even if their memcap compressed to below zero, they would just like wait it out or try to, you know, cash flow their business intelligence business to buy more Bitcoin, or, you know, but then other companies are, are, who are purely focused on Bitcoin KPI, Bitcoin yield, like they may sell, and cause that, cause like the bottom of that bear market. And then that may be the kind of, the FTX" }, { "speaker": "reed_wommack", "time": "49:41", "start": 2980.98, "text": "bottom equivalent of next cycle, right?" }, { "speaker": "stephan", "time": "49:43", "start": 2982.68, "text": "Yeah Recognized about these companies, I think, is that they will help boost price and they draw capital in on the way up, and then when, when Bitcoin Turns and goes down, they are going to be unable to put in the bottom, well, because they won't have high MNavs at that point, they won't have good debt terms. All anyone who wants to give up debt will be like, \"Absolutely not, Bitcoin has gone down for a year, I'm not gonna give you more debt, that's a terrible idea, right? \" And so there, and you saw this with MicroStrategy, like, MicroStrategy's accumulated a ton of Bitcoin in the last year During the last bear market, they didn't not at all. And so, yeah, that's something, that's something I think that-" }, { "speaker": "reed_wommack", "time": "50:29", "start": 3029.16, "text": "I mean, they were stacking, but just less, right? A lot less." }, { "speaker": "stephan", "time": "50:31", "start": 3031.38, "text": "So much less, yeah. Because they're not able to use those lever, levers that sort of show up in bull markets, which are, you know, the selling equity to buy Bitcoin or taking out lots of debt to buy Bitcoin. Those are much easier when, you know, there's euphoria, and really it's like it co- comes, comes back" }, { "speaker": "reed_wommack", "time": "50:51", "start": 3051.48, "text": "And what do you make of-- so again, I know you've said you're not spending a lot of your time on this, but what do you make of some of these other instruments? So for example, with MSTR, they have Strike and Strife and some of these other things, like it's not just equity now, they're doing other, yeah." }, { "speaker": "stephan", "time": "51:08", "start": 3067.73, "text": "I, it's maybe a Strange opinion, but I, I don't love the preferred shares because they are a promise of a dividend payment, and that is very dangerous to be in. it's, it's very dangerous to have to promise to give a ten percent dividend. like if you take out debt, you know, if Michael should take out debt, a three percent dividend is much safer In my opinion, a three percent dividend, but really it's a just debt repayment, then a ten percent. and so I'm not, I'm not enthralled with the preferred shares as a component of that equity stack actually, because, Because if Bitcoin does have a, a long bear market, MicroStrategy is going to have to sell equity and Crush their existing shareholders to right, to pay" }, { "speaker": "reed_wommack", "time": "52:07", "start": 3127.25, "text": "the Strife and Strike holders" }, { "speaker": "stephan", "time": "52:09", "start": 3129.07, "text": "who are, who are senior in the capital stack. And, and that, that is slightly unsettling to me, at least. It's much, much more comfortable if it's, if it's debt, because that debt is, is very cheap. whereas a ten percent dividend is very high." }, { "speaker": "reed_wommack", "time": "52:28", "start": 3147.57, "text": "I see. And I guess, yeah, I guess the point would just be if it happens during a bear cycle. I don't, I guess I haven't really thought deeply enough about it or kind of understand all the aspects of how this works, but maybe Yeah, I guess it's kind of relying on the idea that," }, { "speaker": "reed_wommack", "time": "52:48", "start": 3167.72, "text": "yeah, I guess it's, it's kind of relying on the idea that, you know, Bitcoin Kager is gonna be high enough longer term. Gonna be higher" }, { "speaker": "stephan", "time": "52:52", "start": 3172.42, "text": "than ten percent, sort of theory. Yeah. That's kind of" }, { "speaker": "reed_wommack", "time": "52:55", "start": 3175.07, "text": "the broad idea, but in a bear cycle maybe that's kind of, it gets a little more tricky because who's, who's gonna pay for that?" }, { "speaker": "stephan", "time": "53:02", "start": 3181.71, "text": "Yeah, yeah, and it will, it will, will be the equity holders if they're unable to raise like additional debt, which is would happen during a bear market. Like it will be very difficult to raise debt to pay off your preferred shares in that s-situation. So, so I'm, I'm not like enthralled with that as a part of the capital stack, but, But I'm also, you know, like we're diversifying into a bunch of different equity companies, and they're gonna take-- they're gonna have different, different," }, { "speaker": "reed_wommack", "time": "53:33", "start": 3213.02, "text": "capital structures and" }, { "speaker": "stephan", "time": "53:36", "start": 3216.03, "text": "And I hope, I hope some structures" }, { "speaker": "reed_wommack", "time": "53:38", "start": 3217.53, "text": "will win, some structures will lose, so be it. Yeah," }, { "speaker": "stephan", "time": "53:40", "start": 3219.64, "text": "some structures will win, some structures will lose, exactly. I, I hope that many companies don't take that, but I could be totally wrong, and it could be, it could be a really useful part for my strategy. I know, I definitely know Michael Saylor is a lot more intelligent than I am, so." }, { "speaker": "reed_wommack", "time": "53:53", "start": 3233.3, "text": "Yeah, I mean, as I understand, part of the way he's sort of, at least, from watching one of the earnings calls, I think the way he was- Promoting the idea or at least talking about it was showing, like this BTC talk kind of, idea. And I guess it's this idea that they can accumulate some bit-- more Bitcoin now because the more Bitcoins that they get now is gonna be worth so much more in, like, you know, ten years time that a lot of the gain is coming, you know, when those Bitcoin-- those extra Bitcoins that you acquired, you know, now, in ten years time, they will have, you know, compounded up to so much more, and I think that was kind of how- I understood it at least that it was being seen as a less dilutive," }, { "speaker": "reed_wommack", "time": "54:38", "start": 3277.72, "text": "thing for accumulation." }, { "speaker": "stephan", "time": "54:42", "start": 3281.62, "text": "Yeah, I mean that. Yeah. It's gonna be three, but I guess it just" }, { "speaker": "reed_wommack", "time": "54:46", "start": 3285.53, "text": "comes back to the bear market thing, right? Like, how bad does it get in the bear market? Like, would, would they actually be unable to raise in the next bear market, or maybe there's like a broader shift in credit and debt market thinking, and maybe more people actually do go for Bitcoin Treasury Company debt even in a bear market because it's understood that government debt is so bad as an example. Yeah." }, { "speaker": "reed_wommack", "time": "55:10", "start": 3309.89, "text": "Yeah. So yeah, I mean, I, I, I'm, it's an open-- I don't, I don't really know. and I guess from your perspective, how big do you see this market becoming? Like, do you, like, do you have a rough- Yeah. Estimate or a thought there?" }, { "speaker": "stephan", "time": "55:24", "start": 3323.56, "text": "I mean, I, I think that in 30 years every single equity that's large is a Bitcoin treasury company, and so Bitcoin treasury companies will dominate the equity market, and I, I think that Before I s- before I started going down this rabbit hole, I, I held the mental model that like, man, everything is overpriced and all the equity value in the world is just gonna get sucked into Bitcoin, and Bitcoin, you know, becomes Way more valuable than the stock market, and that isn't not, I don't think that is going to happen. I think instead what you will see is that, that Every company is forced over time into becoming a Bitcoin treasury company, and the relative size of the equity market, at least relative to, say, to real estate or relative to other things, stays very large. It stays a really, really large and important part of global- Capital structure." }, { "speaker": "reed_wommack", "time": "56:31", "start": 3391.46, "text": "Yeah." }, { "speaker": "stephan", "time": "56:32", "start": 3391.89, "text": "It's just that, it's just that rather than, than everyone pricing their earnings in dollars, they price them in Bitcoin. And so when you say how large can this get? This can get as large as the stock market. This is, this is the way the stock market is going to go. In thirty years." }, { "speaker": "reed_wommack", "time": "56:51", "start": 3411.31, "text": "Yeah, but I mean, it's also that, depends how you see it, but is Bitcoin gonna suck a little bit out of each different, like, a bit out of equity, a bit out of, you know, bonds and debt, and a bit out of physical property?" }, { "speaker": "stephan", "time": "57:02", "start": 3422.22, "text": "What I'm, what I'm sort of thinking is like, yeah, I, I still think real estate gets wrecked by Bitcoin comparatively. and that overall, companies that don't adopt Bitcoin will get wrecked by Bitcoin," }, { "speaker": "reed_wommack", "time": "57:16", "start": 3435.56, "text": "and" }, { "speaker": "stephan", "time": "57:16", "start": 3436.24, "text": "eventually the Bitcoin will sort of eat into all the companies that aren't adopting Bitcoin, and for-- and then the companies that do will sort of keep level with Bitcoin or, or slightly outperform. So, Yeah, so it's, it's not going to, it's not going to like," }, { "speaker": "stephan", "time": "57:38", "start": 3458.5, "text": "reduce or, or the, the, the size, the relative size between the stock market and Bitcoin. Bitcoin is gonna grow alongside it, but the importance of the stock market globally As being a predominant place of people to store value and to invest isn't going to go away. It's not that Bitcoin's gonna fully replace that. Of course, yeah. People will still wanna take on different types of risk with different types of securities, it's just that, that risk will be priced in Bitcoin rather than be priced in dollars. Yeah," }, { "speaker": "reed_wommack", "time": "58:07", "start": 3486.58, "text": "and I mean, the way I'm seeing it, I think I agree with you. I think it's sort of like, there's gonna be this just, you know, the fiat expansion is gonna continue for the next twenty or thirty years, and a dollar nominal terms, but go down in Bitcoin terms, and that's really what, you know, what really matters at the-- in twenty years time or whatever." }, { "speaker": "stephan", "time": "58:26", "start": 3506.27, "text": "And my, I guess my thesis around the stock market is it's going to con-- as a whole, probably in the next ten years, next five years, will go down in Bitcoin terms, but there will be these companies that will outperform Bitcoin." }, { "speaker": "reed_wommack", "time": "58:40", "start": 3519.66, "text": "Right, and that's, that's again why you're buying them, right? That's why you're doing this whole thing, yeah? Yeah," }, { "speaker": "stephan", "time": "58:44", "start": 3523.87, "text": "that's the thesis I have. I could be totally wrong, like I, you know, I, I said of the five I bought, I expect two to totally go under, one to keep pace, and two to outperform, like those numbers could be off. I don't know, but that's the, that's the risk I'm taking and, and, and I think the risk reward at least is, is worth it for where I am at least in my life" }, { "speaker": "reed_wommack", "time": "59:08", "start": 3548.47, "text": "Yeah, right, okay. So, yeah, I'm just trying to sort of think through like what are the real ways that this kind of strategy could fall down?" }, { "speaker": "stephan", "time": "59:16", "start": 3555.85, "text": "it goes down a lot of ways. Like, we are, we are two layers up on risk." }, { "speaker": "reed_wommack", "time": "59:19", "start": 3559.47, "text": "Yeah. Exactly. And I think, I think that at the end of the day, like, it just comes back to the same thing we, we mentioned this earlier, that, you know, everyone feels like a genius in a bull market, you know? Like in 2017, there were people buying random, whatever shit coins. Yeah. You know, I didn't, I didn't get into shit coins, but there were, there were people just buying random shit coins, and, and people were joking about like, \"Oh, you, you made forty percent? I made like forty x, right" }, { "speaker": "reed_wommack", "time": "59:50", "start": 3590.39, "text": "You know, a bear market for a year, and, you know, I, I just wonder what's that gonna be this cycle, right? Like, what is the equivalent of that, and how do you make sure you survive a bear market and make it through to the next, you know, make it through?" }, { "speaker": "stephan", "time": "01:00:06", "start": 3606.06, "text": "Yeah. Yeah, and I think, I think- Like, that's something I'm thinking a fair amount about, about right now. And, and like your questions around, like, man, if you have a two-year loan and you're buying the top, it's like, yeah, I, the, the safe approach here is just DCA. The safe Bitcoin treasury company approach is just DCI into those and like don't take out any, any debt that's near term, right? And, and that's, that is probably gonna be our, our heaviest or our, our largest pillar of this strategy at first is just like DCA, DCA, DCA until we sort of prove it out, until our, our credit improves, and we can get longer, longer cheap loans, and then, and then we can start sort of doing that full playbook. But you're right, like if I take out five hundred thousand dollars and buy Metaplanet right now, like" }, { "speaker": "reed_wommack", "time": "01:01:01", "start": 3661.95, "text": "Yeah, I mean, it could go half the next day or it could go up 2x the next day. I mean, who knows? At this point." }, { "speaker": "stephan", "time": "01:01:07", "start": 3667.48, "text": "I'm not, I'm not. I think that would be a really silly idea. Personally, but, but yeah, that, that, that capital management on Bitcoin standard, if you're trying to get alpha, is not nearly as, as simple as just DCA completely into, into Bitcoin, which is, I think, the safest approach, but, but not the one that, that will ultimately Provide the biggest upside, I think, if that makes sense. Yeah." }, { "speaker": "reed_wommack", "time": "01:01:44", "start": 3704.32, "text": "It is, I think, in some ways, yeah. And I, I've heard, Checkmate, right? You might have, you might know him. He's a, he's an Australian, one of the guys doing like on-chain analytics and stuff. he made an interesting point, I thought it was an interesting way to put it. He said, you know, buying some of these Bitcoin treasury companies, it's like getting the Bitcoin in twenty thirteen experience, right? And, I think there's some, there's something to that." }, { "speaker": "stephan", "time": "01:02:08", "start": 3728.67, "text": "There is more volatility there, that's, that's part of what drew me in. I think that's what part of what draws a lot of people in. That volatility can, can like, yeah, it's very attractive to some types. It can also like make you sell high time preference and just wreck you. Right? You know, all the, everyone who was like, and I, I sort of got sucked in by the microstrategy run up in November of twenty twenty-four of like, \"Oh my God, they can just keep selling equity and keep buying Bitcoin and literally like do this on repeat forever,\" you know? Like, yeah. Or at least twenty or thirty" }, { "speaker": "reed_wommack", "time": "01:02:42", "start": 3762.46, "text": "years until we hyperbitcoinize, yeah. Yeah," }, { "speaker": "stephan", "time": "01:02:45", "start": 3765.04, "text": "yeah, and then, and then it, it evens out that, and they stopped buying as much Bitcoin for like a few weeks, yeah. Or just, yeah, it won't feasible, you know," }, { "speaker": "reed_wommack", "time": "01:02:53", "start": 3773.84, "text": "because maybe by then, maybe by then these treasury companies will become banks or insurance companies or some kind of financial service company, and they're, they're making yield by lending out Bitcoin or something like they just become a bank but under a Bitcoin standard, you know? That is. That is. That may be the likely outcome." }, { "speaker": "stephan", "time": "01:03:08", "start": 3788.98, "text": "That is the likely outcome, I think, is that they, they become the banks of the world. And banks don't go away, banks do serve. A very useful purpose, I think." }, { "speaker": "reed_wommack", "time": "01:03:18", "start": 3798.09, "text": "Yeah. But then at that point, you would become a holding company of banks." }, { "speaker": "stephan", "time": "01:03:22", "start": 3802.01, "text": "Yeah. In the same way that Berkshire Hathaway is a holding company of insurance companies. Yeah." }, { "speaker": "reed_wommack", "time": "01:03:27", "start": 3807.54, "text": "Yeah. Yeah, so it's an interesting, yeah, I guess it's kind of, so who would you, would you like, would you say this kind of strategy that you're applying Who is it applicable for and who should be like, \"Hell no,\" you know? Is it like, if you're a-- Obviously, the more cons-- Obviously, this is kind of like a very out there strategy, a very, you know, aggressive strategy." }, { "speaker": "stephan", "time": "01:03:52", "start": 3832.31, "text": "It is a new and aggressive, in some ways, strategy. I mean, I, I wouldn't recommend anyone take out Deep amounts of leverage to buy Bitcoin, the safest strategy is to, to buy base layer Bitcoin." }, { "speaker": "stephan", "time": "01:04:06", "start": 3846.56, "text": "I own, like, I own base chain Bitcoin. Not gonna sell it. And so, so in terms of who this strategy appeals to, I think is-- Is it a young man's game? Well, it is, it is like a maybe a young man's, like slightly more risk yeah, slightly more risk, but risk that isn't time dependent. At least if you don't take out debt, if you're just DC'ing into these treasury companies, you, you- Aren't going to get liquidated. you are going to slowly over time increase your ownership of these, these companies that I think are very valuable, and, and I think will outperform Bitcoin. So I, yeah. I, I don't think that anyone should do this strategy ex-like so-only by MicroStrategy or only by- Meta-planet, or even just only own this basket, like you need-- This is, this is one part of, you know, my own personal--" }, { "speaker": "reed_wommack", "time": "01:05:09", "start": 3909.09, "text": "Of a cohesive, let's say, over-achieved." }, { "speaker": "stephan", "time": "01:05:11", "start": 3911.57, "text": "Includes, like, own Bitcoin. Just, just own Bitcoin, obviously, to be the safest." }, { "speaker": "reed_wommack", "time": "01:05:17", "start": 3917.67, "text": "I think for me, probably the difference, at least for me personally, is more like- I, I could, I could kinda understand this strategy if I was like a young man, you know, single, no kids kind of thing, maybe it would, and, you know, I was new to, like, you know, but I think for me, probably the difference, at least now, I'm a thirty-seven year old man, I have a wife and two kids, I, I'm maybe a bit more a little, yeah, a bit more conservative for good reason. not that I'm like, you know, I'm not like at the craziest level conservative, but I don't know, I, I would sort of see it more like, I'd wanna, quote unquote, take profit back into Bitcoin more. You know, like that's probably how I, I think about this, maybe that's probably our main difference of kind of view on this. And maybe that's driven partly by my age. I'm, I'm a bit older than" }, { "speaker": "reed_wommack", "time": "01:06:07", "start": 3967.26, "text": "you And just, you know, have that safety." }, { "speaker": "stephan", "time": "01:06:13", "start": 3973.12, "text": "You don't have income taxes, you don't have property taxes. Like, if I take, you know, if I'm, if I'm every year selling these equities and rolling it into Bitcoin, the capital gains is massive. Whereas in the US, when you, when you become a holding company and you don't touch these equities at all for long periods of time, and then you, then you like die And pass them, right? You're doing" }, { "speaker": "reed_wommack", "time": "01:06:35", "start": 3995.73, "text": "the, the buy, borrow, die thing," }, { "speaker": "stephan", "time": "01:06:37", "start": 3997.29, "text": "yeah? Right. And so from like a tax perspective in the US This strategy makes more sense than if you didn't have capital gains tax, then every, like, you sell whatever you want and roll it into Bitcoin. But like selling gains and paying twenty percent to the tax man to roll that back into base chain is really painful when on long time frames. If you just die and the t-tax base steps up, you, you, you can pass that wealth generationally. That makes sense. Yeah." }, { "speaker": "reed_wommack", "time": "01:07:14", "start": 4034.05, "text": "And I see, there's certainly the-- This is like the typical old person. The question is, like, I'm" }, { "speaker": "stephan", "time": "01:07:18", "start": 4038.49, "text": "32, yeah, you're 37, you're the, you're the old Man, I'm 32, I'm, I'm a kid, like I, I'm, I just have a higher risk profile, but, but the, that, that question of like when you sell, and if you ever sell, like you would do it, you know, on shorter time frames and take profits, but, but, The risk at of this strategy ex-like increases the longer you hold the thing, right? There's more likely that Mike's strategy screws up key management and goes to zero in eighty years time than in ten years time. And so, so those risks increase, but the- the real thing that American investors need to think about is capital gains, and it is, it sucks." }, { "speaker": "reed_wommack", "time": "01:08:03", "start": 4083.83, "text": "So yeah, as you were saying, and rightly so, capital gains tax is a factor, and there's this continual compounding effect that you sort of lose out on if you are, let's say, selling assets, and, quote unquote, taking profit back into Bitcoin. so yeah, so in the end, I think, yeah, I think it- Yeah, it's a fair point you make there that, being able to just compound, but, I think, yeah, I think at the end of the day, it is, it is a more aggressive strategy, and I guess the main thing The main caveat would just be, can you prove it out? Can you prove out that this works even through a bear cycle? Because, you know, it's easy to say it now, in the bull market, but that'll be the real test. Like if we, you know, do another, let's say, we're, at the bottom of the next, bear market and we, we talk about this again and we'd be like, \"Hey, Reed, how you going on your Bitcoin treasury company, treasury company strategy?\" And at that point, we'll" }, { "speaker": "stephan", "time": "01:09:02", "start": 4142.08, "text": "Exactly, I'm, I'm curious to see that answer as well myself." }, { "speaker": "reed_wommack", "time": "01:09:06", "start": 4146.92, "text": "Well, I'll see you in, two years or three years time then, huh? No, okay, but, look, thanks for joining and, sharing what are, for some people, controversial opinions, but, Interesting for people to kind of hear some different opinions. and of course, lastly, before we let you go, any final thoughts and where can people find you online?" }, { "speaker": "stephan", "time": "01:09:28", "start": 4168.64, "text": "Yeah, people can, find me on Twitter at reed wommack or my business email. I, I- Run a company called Ground Lux, we sell grounding sheets. you can contact me at reed at groundlux dot com. And if you have ideas or, or think I'm a moron, please send me a DM, DM." }, { "speaker": "stephan", "time": "01:09:52", "start": 4192.06, "text": "'cause I'm, I, yeah, the strategy is, is new and fresh and, and helpful for people to poke holes in." }, { "speaker": "reed_wommack", "time": "01:10:00", "start": 4200.11, "text": "Fantastic. Well, thanks, Reed, and, I'll see you around. Yeah." } ] }