Transcription
And what's interesting is that people often default to the position of saying, "Well, I don't like it. I don't want to own it cuz I don't like it." Well, my only response I can offer you is get over it because you already own assets you don't like.
Uh if you are a vegetarian, you already have in your portfolio uh meat processing companies. Uh if you believe in uh a healthy diet, you already have Coke and Pepsi in your portfolio, which are nothing but sugary uh bottles of colored water. Um you probably already own tobacco stocks. You own defense stocks. You own stocks in nuclear energy. You I mean, you already own stuff in your diversified portfolio you don't like. So get over it. That's not part of investing.
In the United States, the total value of stocks and bonds is about 110 trillion dollars. Bitcoin's market cap is about 3 trillion. So, it's roughly 3% of the market. If you believe in passive investing, most advisers these days are passive. They're not trying to beat the market. They're trying to own the market. If you believe in a diversified portfolio that representatively owns the market where you own stocks, bonds, real estate, gold, oil, commodities, foreign assets, etc. proportionately to give your client an effective broad exposure to the markets, you should have a 3% allocation of Bitcoin.
Yeah, it's as simple as that. And if you don't have a 3% allocation of Bitcoin, which is a passive exposure, then you're essentially making the active decision, I'm not going to own it. I think it's going to fall and I don't want to buy it. That is an active decision and it basically means you're shorting Bitcoin.
Welcome to Raise Your Average. I'm your host Pier Daly and co-hosting with me is Mike Philbrick, CEO at Resolve Asset Management. Hey Mike.
Hey Pierre, how are you?
Good Mike. We've got a terrific guest today. If you've been anywhere near the intersection of personal finance and innovation over the past few decades, you've heard the name Rick Edelman. He's not just another market commentator. He's the guy Baron's crowned the nation's number one independent financial adviser three times. He built one of the largest retail investor focused RAS in the US from the ground up, then pivoted to tackle the next frontier, digital assets. Today, Rick leads the Digital Assets Council of Financial Professionals, DAC FP, where he's on a mission to make Bitcoin, Ether, DeFi, and the rest of the crypto universe less like science fiction and more like sound financial planning. This is Raise Your Average, dedicated to making you a better long-term investor. Join us as we sit down with some of the most interesting names in finance to discuss macro markets, investment strategies, and more.
Rick, it's a pleasure to have you here.
Thank you, Pierre. Uh Mike, good to see you as well. Good to be back with the two of you.
Yeah, Rick, thank you so much. And and so just to set the stage, Rick, you've been a trusted voice in personal finance for decades, but in the past few months, you've made what many would consider your boldest call yet. You've recently told investors to consider allocating anywhere from 10 to 40% of their portfolios to crypto assets or digital assets, numbers that would have been unthinkable just a few years ago. What was the turning point for you with this thinking and with this you know with advocating this thesis? Was there was there a single moment or gradual shift in your thinking?
Uh it was u uh an evolution uh for sure. Uh but it all culminated in in my finally I'd say being fed up. the the journey that we've all had in the field of crypto um has been well documented. Most are very familiar with it. My journey began in 2012 uh fairly early but not as early as some. Uh and uh we know how um divisive uh how confrontational, how opinionated uh many people are about the subject of crypto. And frankly, rightfully so, uh, as recently as a few years ago, uh, when I wrote my book, The Truth About Crypto, uh, which debuted at number one on Amazon in 2022 when it was published, um, back then, when I say back then, it was only a few years ago. Uh, we didn't know what the future of Bitcoin was. Uh, we didn't know if the government might ban it. We didn't know if consumers would adopt it. We didn't know if it investors would sustain any interest. We didn't know if it would become technologically obsolete. Might there be something else that comes along that usurps or replaces Bitcoin? It was a very aggressive uh play if you were going to engage in it from an investment perspective. And so I wrote in my book, and this was in 2021, 2022, I said if you're going to allocate to Bitcoin, which I was recommending, you should allocate 1% of your portfolio.
And uh the reason was real simple. Uh we expect that Bitcoin was going to significantly outperform and if so, a 1% allocation would materially improve your portfolio. But if it blew up, if it went the other direction, uh, and Bitcoin became worthless, h so what if you lose 1% of your portfolio? You still got 99% left. It's, you know, there's the loss would not harm your future financial security. So, it was a way for me to help people realize that you put a toe in the water. It's safe to engage and you can begin your journey down that rabbit hole to determine how you feel about this to any bigger extent. That was 2021. Since then, we now have the Trump administration uh in the United States, which has radically changed everything. Total reversal of all of the Biden era policies. uh President Joe Biden and SEC Chair Gary Gensler and by extension Kla Harris and Bernie Sanders and Elizabeth Warren, all key leaders of the Democratic Party in the United States were totally anti-crypto engaging in every effort that they could to crush the industry to eliminate it from existence uh and to dissuade Americans from owning it or engaging with it. uh they instituted a large number of regulations of uh federal policies of executive orders all designed to styy and stifle the growth and development of crypto. Trump came into office and totally reversed all of this. He said he would do so during the campaign. Everybody was widely expecting him to act, which he did. And in fact, many credit the crypto community as having as getting Donald Trump elected uh putting together $200 million in pack money uh to support his campaign and that of uh members of the House and Senate who are strong crypto supporters and using the money against those candidates who are anti-crypto. And now here we are uh we now have uh an environment where all of the Biden era rules have been rescended. We now have legislation for the first time passing the US Congress, the Genius Act, which creates the rules of the road for stable coins. We have two other major pieces of legislation that are working their way through Congress that we expect will be signed into law well within 60 days. uh the Department of Labor, the SEC, the CFTC, the Treasury Department, the Commerce Department, the Justice Department, the Defense Department, all engaging in ways that are supporting all of this. And as a result, we now realize that all of the worries and fears we had just a few years ago have gone away. We now no longer worry if the government might ban crypto. Certainly not the case. Instead, Donald Trump says that he wants the United States to be the crypto capital of the planet. We are no longer worried about technological innovation usurping Bitcoin. There's Bitcoin and then there's everything else. So, you've got Athereum and all of the other commercial applications like Salana, Polygon, Algoran, list goes on and on and on, but Bitcoin stands alone. So, we're not worried about technological innovation rendering Bitcoin obsolete. We also now have as a result of all of this institutional engagement in a manner that has never happened before in the 16-year history of Bitcoin uh and digital assets. Uh and we're seeing massive asset flows. We're talking trillions of dollars of assets flowing into these uh investments at an unprecedented scale and it's growing uh at a un at an accelerated unprecedented pace.
For all of these reasons, what I have begun to discover is that when you hear people in the crypto community, going on stage, writing a paper, appearing on a podcast, they all say the same thing. They say you should allocate low single digits. Pretty much the same thing I said back in 2021, allocate 1%. And yet when I talk to these people offstage privately and I ask them, "How much of your personal investments do you have allocated to crypto?" They all tell me that if it's not a 100% of their money, it's north of half of their wealth invested in this. Now, you kind of get it. These are people in the crypto business. They are operating and running platforms and exchanges and asset management firms and custodians and so on. So you would expect them to be heavily heavily heavily involved. But for them to go on stage who are personally engaging their life savings, their personal careers, their business activities in this and then telling the rest of us to do low single digits. To me that's hypocritical. And more to the point, it's actually serving as a disservice to the average investor because when an investor hears who investor who knows nothing about crypto, who is merely cryptocurious, who is aware and familiar of the conversations about Bitcoin, etc., but they're not personally engaged yet. And they hear the biggest and the best in the industry, billionaires, pension funds, and endowment funds and asset managers and platform developers. and they hear these folks saying that you should invest low single digits 1 or 2% of your money. Well, it's easy to stay on the sidelines at zero if the titans in the industry are saying two. But if suddenly I now tell you that you should be allocating at least 10 and upwards of 40% of your assets, you now have a much more difficult time staying at zero. And that's really my hope and goal is to help people realize that there's a there there a lot of the fears that people had that legitimately kept them on the sidelines have all gone away and that we are now have an environment where it is safe to engage where the only risk at this point is investment return. We don't have to worry about government intervention. We don't have to worry about scam and abuse. We don't have to worry about fraud. We don't have to worry about the things that were fun very realistically people had to worry about as little as four years ago. We can now focus intently on the one issue that matters. Is this an investment that is worthy of inclusion in my long-term diversified portfolio? And recognizing that the answer to that is yes, a low singledigit allocation is simply underweighted. that it doesn't effectively represent the kind of allocation that you ought to have relative to the other investment opportunities that you have available to you. And so this is why I think people have been rather shocked by my paper. Uh the white paper is available at dacfp.com dacfp.com. It's available for free. It's all over the internet. My paper's kind of blown up uh the marketplace because I'm the first person who has ever suggested that you should do more than a uh a low singledigit allocation. And in fact, I'm the first person who has said that everybody with a diversified portfolio should allocate, not merely the aggressive or the high risk tolerance people. Even conservative investors, retirees in their 70s should have an allocation to crypto. Uh and uh people are finding it uh shocking as you noted. Uh I it's a bit of a bombthrowing uh paper that I wrote, but nobody to my knowledge has refuted the logic uh or the base case for uh my premise. Uh instead, people are using it as uh a way to say we ought to be paying attention to this asset class in a way that we haven't to date. And so I'm hoping to change the narrative and get people to pay a little more attention to this because I believe that this represents a very significant opportunity for improving the wealth of ordinary investors uh across the continent.
Rick, and I want to add this is all uh with the framework and backdrop from a macroeconomic perspective of geopolitical uncertainty, monetary debasement, and massive amounts of inflation potentially to to handle the debt that currently exists globally. And Bitcoin as an example of a scarce asset actually fits the bill extremely well for diversifying those sort of traditional cash flowing assets that are so predominant in traditional portfolios. And so you're you're absolutely seeing this this move in the Overton window and we're at that point in the adoption curve where I think it's becoming prudent to incorporate these assets. It's not fringe anymore. I think the reputational risk for advisors is no longer in owning these assets because they had this regulatory overhang, but it's in failing to understand these types of assets. And Bitcoin is a scarce asset providing resilience to traditional portfolios and begin to allocate them, allocate to them before your clients start to ask you why you didn't. I think one of the pieces in your paper, one of the points in your paper, you talked about how much of the Senate owns Bitcoin and how much advisors own Bitcoin and then how much they allocate to the in the clients. And I think you touched on that point. How do we get across that regulatory chasm, if you will, and I know that's a big part of what DAX's all about, but I I think that becomes a bit of the hurdle here. How do you get the firms across the the the chasm? getting them to get away from trying to keep their job from a safety perspective in the compliance department versus actually taking that fiduciary role for the clients and getting to these allocations you're talking about.
Well, um it's interesting you raised that point, Mike. You you've got a couple of important points there. Let's tackle this one first. I do not criticize the compliance officers uh for their uh reticence uh and hesitation in uh granting permission to advisers in their firms um who are asking for permission to allocate to Bitcoin and crypto for their clients. Uh it is not because the compliance officers are um failing in their fiduciary obligation. It's not because they are um focused first and foremost on job security, their own job security, uh where they're fearful of saying if I say yes to this and it loses money, I'll get fired. That's not really what they're saying or thinking about or focusing on. What I have found in talking with lots and lots of uh compliance officers and I do a lot of counseling, consulting, coaching at firms, helping them create their crypto strategy, helping them educate their staffs, uh helping them um uh train their clients as well about all of this. What I have found uh which we would all hope that I would have found is that compliance officers are mature, responsible professionals. They care deeply about the safety and protection of the firm's clients and they are equally concerned about the firm's reputation uh because without a good solid reputation the firm won't exist. The clients will leave the assets will fall away and that doesn't serve anybody any well any good at all. What the compliance officers generally express is that the number one reason they are saying no when asked can I allocate to crypto is simply we don't know if we are allowed to say yes under current law and regulation. There has been certainly in the United States a complete lack of clarity from a legislative or regulatory perspective. This was the big complaint that Congress had about Gary Gensler, the chair of the SEC for the past four years because Gensler would routinely go to uh hearings on Capitol Hill, and he would say, "We don't need any new regulations, and I am not going to write any." Um, and Congress was furious about this. And it took the election of Donald Trump to get Gary Gensler to resign and be replaced by somebody who recognizes that the securities laws that were all written nearly 100 years ago never contemplated the context of the concept of digital assets. uh and that is why we now are very very busy at the SEC and CFTC at the Treasury Department in writing these rules and why we need legislation to clarify all of this. And what I'm hearing from compliance officers is as soon as we know what the rules of the road are, we'll be happy to engage. But at the moment in an environment where we don't know what the rules are, how can we proceed when the regulators may come in and issue enforcement actions against us? And that was the modus operandi of Gary Gensler in regulation by enforcement. It's kind of like saying we're going to build a highway. We're not going to tell you what the speed limit is, but we're going to pull you over and find you for speeding. Well, that's ridiculous. How do you operate in an environment like that? So I am confident, not merely hopeful, I am actually confident that as these laws get passed by Congress and sign uh the bills get passed and signed into law by the president and as the agencies develop the regulations creating the rules of the road, the compliance officers will say great proceed. Now it becomes a decision by the firm from an investment management perspective uh and a financial planning perspective. What's in the best interest of the client? Should they allocate? How much should they allocate? And what should they allocate into? Those are not compliance questions. Those are investment management questions. But we can't allow that until we first know, are we allowed to engage in the at all in the first place. So, I'm anticipating that over the next year to year and a half, you're going to see the uh gatekeepers uh step aside. the compliance officers will open the gates that have been currently closed and they're going to say, "Have at it. You now have our permission because we now know the way in which you're allowed to proceed. And as long as you proceed within those swim lanes, you're good to go." And then it'll become a decision for the firm to decide how they want to proceed. And you're going to see massive inflows. We've already gotten a taste. It's a small taste, but it's a powerful taste. And those are the Bitcoin ETFs that came onto the market in January of 24. Gary Gensler was forced into this by the US courts uh because Gensler kept rejecting these uh ETF applications and the courts ruled that Gensler was acting arbitrarily and capricciously and demanded that he uh reverse his decisions. Those ETFs came onto the market about 18 months ago and they have already been the most successful ETFs in history. over a hundred billion dollars are in these ETFs already and that's a just a tip of the iceberg of the amount of assets that will ultimately flow into these investments. So, uh it's very early and because it's very early, we are anticipating that prices will ultimately rise dramatically as the flows uh come over the next few years. And that is why I believe that right now is a wonderful time to invest. You could argue it's probably the best time to invest in Bitcoin's history. Notwithstanding the fact that Bitcoin has been the best performing asset class since its inception. That incredible number of billionaires have been created by having invested in Bitcoin 10 and 15 years ago. The reason that I think it's a better time today to invest in Bitcoin than it was then is because the risks today are so much lower than they were in 2010 or 2015. Today we know so much more. We have so much more confidence in uh the government position in the technological status of this of the adoption rate of institutions on a global basis that most of the uncertainty has gone away and yet the adoption is still very low >> less than 5% of the world are engaged and once the other 95% come in you're going to see astonishing price increases in these assets.
I >> I would add to the the the the litany of of positive regulatory um list of things. Paul Atkins his recent speech um talking about bringing America to the forefront of digital assets just an absolute gamecher if if people haven't read that as to what the framework is and I think again coming back to a a a global economic framework of you know the US is going through a period where it's no longer going to be able to be the global hedgeimony and if you can't own the world through the currency because of debt and because of the rise of China. Well, the US has positioned itself to own the platform through stable coins, through Bitcoin. And no other country, no other regulatory entity, sovereign nation has taken this approach, nor would they. China has uh uh controls on their currency can't do it. The euro very old school, Japan not going to do it. So really, there's a number of things that are aligning here. And as you say that regulatory clarity when they pulled the institutions that was the number one thing keeping them from entering because as a fiduciary it's really really hard. You just lose that bet. If it goes wrong you lose and if it goes right you don't win. And so now you have the regulatory clarity to see that avalanche of money. And as you say it does take time. Those first movers like advisers who had the flexibility, family offices that had you know some more single decision makers, they have been the first wave but those endowments and institutions they meet on a much uh longer sort of pace and it takes them time to get the ship turned. And so um I think you're you know you're hitting uh hitting nails with a big hammer all over the place here. It really is exciting. Let me mention um a comment Mike to something else that you had said earlier uh regarding the uh base case for why people should be paying attention to digital assets. You cited the macroeconomic and the geopolitical uh issues, the debasement of fiat currencies, etc. You're right about all of that. Uh those points are the ones that are most frequently touted by the crypto community. uh as reasons to engage uh to expose yourself uh within your portfolio to allocate to crypto. But what's interesting, I have found despite all of the attention that my white paper has received, uh, and all of the commentary and the dozens and dozens of of podcasts and interviews that I've done, uh, and the probably hundreds more that have been done about me rather than with me, uh, in discussing the white paper. Everybody's missing the point. Everybody's really missing the the key premise that I made in that paper. Uh so it's worth elaborating on here um because it sheds a different perspective on why I argue for a 10 to 40% allocation. 10% for conservative investors, 25% for moderate and 40% for aggressive investors. I am a financial planner by training and background. Uh and as you noted, I built the largest financial planning firm in America, uh which is now managing about $300 billion dollars for 1.4 million households. Uh I have uh been uh a financial educator throughout my career, hosting radio and television shows, and my 14th book comes out uh in December uh on college. My last book was on crypto in 2021. My next book is on college and college planning which has nothing to do with with crypto just reflective of the fact that I'm a financial planner first and foremost and crypto is a very small part of the world of financial planning. Crypto is a big deal to us but it's still let's face it a pretty small part of the broader issues of um uh home ownership and and retirement and uh and so on. My 12th book was the truth about your future and and I have uh been known as being a bit of a futurist trying to pay attention to what not where where we are but where are we going what's next what's coming so that we can position our investment strategies and our investment portfolio uh to what grain Wayne Gretzky always said skate to where the puck is going right.
Uh and so I'm always focused on what's next and part of that is that I have been very heavily involved over the past couple of decades in the study of aging. I have been serving on the uh advisory boards at the Stanford Center on longevity uh the Milin Institutees uh center for the study of aging. I've done some work at MIT's age lab. uh and I spend quite a bit of time with technologists, scientists, PhDs uh and MDs in the field of aging and longevity. And this is the premise of my white paper. This is where I began the paper, but everybody kind of ignored it and went straight to the 10 to 40. The issue is longevity. The issue is that humans are living longer than we have ever lived in human history. A hundred years ago in in in 1900 the average American lived to age 47. Today we live to age 85. And the technologists are telling us that with advances in medical innovation and technology, everything from AI to robotics to uh nanotech, biotech, biioinformatics, neuroscience, big data, 3D printing. We are curing the diseases that are currently the leading causes of death. We've been curing the leading causes of death for the past couple of hundred years. couple hundred years ago or syphilis and pymia were two of the leading causes of death. I'll bet you don't even know what they are. Um a hundred years ago, chalera and typhoid were leading causes of death in America. When's the last time you ever heard of anybody dying of typhoid? Uh and yet they were the leading causes of death 100 years ago. More recently, tuberculosis was a leading cause of death. Not anymore. Medical science has eradicated these diseases. What are the leading causes of death today? Heart disease, respiratory illness, diabetes, cancer, Alzheimer's. These are the leading causes of death today. And medical science is going to eradicate them over the next couple of decades. And the result is we're living longer than ever and we're going to continue to do so. Meaning what the scientists tell me is that if you are alive in 2030, you guys expect to be alive in 2030, right? Fingers crossed. Reasonable expectation for most of us, right? If you're alive in 2030, they're telling us that you can reasonably expect to live to age 100 or beyond. Now, if you're going to live to age 100, think about a simple question. Will your money last as long as you do? And for most people, the fear is that it won't because they know that they're not earning a large return. They know that inflation and taxes are eroding the value of the money. Going back to the geopolitical macroeconomic point you made earlier, Mike, we know that at a 2% inflation rate, the value of a dollar drops in half every 25 years. So, we know that we're fearful that we might not have our money last as long as we do. And we don't want to be broke in our elder years. And that is why I'm really arguing that we need to allocate more of our money to equities. The 6040 portfolio model is out of date. It's antiquated. We need to take 6040 and turn it into 8020. And you need to hold that 8020 well into your 70s and 80s and 90s. You need to have far more of your money in equities for far longer than ever before because of longevity. And if you're going to have 80% of your money in equities, I'm arguing that up to half of that should be in crypto.
Yeah.
And that is the fundamental reason from a financial planning perspective. And since you two guys spend most of your time talking to financial advisors and training them into how they can do a better job for their clients, we need to recognize this is not a crypto conversation. This is a longevity conversation that we need to make sure the money maintains its value and grows in real economic terms, net of taxes, net of inflation. And crypto offers the best opportunity to do that. And that is why we need to dramatically increase the crypto allocation in our long-term portfolios.
I >> I think you hit the nail right on the head. And I think people take the discussion of oh, you know, there's these geopolitical risks and inflation and monetary debasement as a market call. And it's not I don't mean to make it a market call. What I mean to say is as Paul Tudtor Jones has said and Ray Dallio has come out and said, you need assets that diversify traditional cash flowing assets in your portfolio. One of those key 5,000y old assets is gold. And yes, it doesn't have any cash flow, but the fact that it's scarce and cannot be printed is what gives it value and it gives it that differentiation into the portfolio. Both increasing the returns and reducing risk. So while you're in those years of taking income from this largely equity position portfolio, what we know in financial planning is the more volatility we're taking on that reduces the uh the the withdrawal rate. And so we need these assets that are scarce like Bitcoin, but that also have this asymmetric upside to provide that sturdiness and those returns in the long term in the financial planning context. And you're absolutely right that gets lost a lot of the time as if it's some sort of market call. It's not a market call. Bitcoin is the new digital gold. It's scarce. 21 will 21 million will be minted and that is all. And that difference to a portfolio adds tremendous value. especially when you're thinking about what's the withdrawal rate that I can sustain through my retirement, especially if my uh my death is is pushed out from 85 to 100. And then I think the other thing I'd love you to talk about and expound on is the other side. So there's the Bitcoin case for use case of store of value, but then there's that other side you talk about in the paper which is technological advancements and are they in fact going to happen in the market cap weighted universe or is there this other universe where we're going to see disruption coming from where we're going to need to source returns and those new innovative types of returns that change the world and how that plays into this as well. So there's two sides of it. one I think we're getting the use case for Bitcoin being that store of value preservation of of of of purchasing power but maybe you can expound on that in in the paper on the the sort of the technological evolution and advancements and how you know market cap stocks may to some degree miss some of that.
Yeah, I I sorry Rick before you before you answer Mike's question I just wanted to add you know it reminds me you know in the early days when I when I began as an adviser Mike you'll recall the same thing is that you know before before in before people before you know everyday people became mass affluent investors in markets it was very popular and it felt very safe in those days to have GIC's in Canada and in the US CDs you just things that were earning safe interest. It was very, you know, people felt very safe in their in their estimation. Oh, I'm getting especially in the 80s when interest rates were higher. There was there was, you know, it was very popular to just collect interest, right? And and you know, gradually that safe portfolio ceased to be safe. But you know, the problem is that is that you're dealing with short-termism versus long-termism. um you're dealing with, you know, I feel safe owning a CD or something that's just or something equivalent to a CD safe in in the 80s. Uh and you had to tackle that question. Today it's, you know, the 60/40 portfolio. I feel safe owning the assets I know and have come to love for the last 15 or 20 years because they've done so well. Interest rates were falling. E equity markets have been rising. They're at all-time highs. you know, this idea that you're talking about doesn't feel safe. But the problem is that is that what's considered safe today is safe today. But how, you know, like you have to put it in the context of how many advisers are actually advocating to their clients multigenerational wealth or multi- decade, you know, multi-deade wealth as you put it. You know, if we live if we're all going to live to 100, those of us who make it to 2030, if we're all going to live potentially to age 100, what how do we ensure that that we've got 40 or 50 years of assets to support that life, to support that longevity?
It's a valid observation, Pierre, and the uh the real issue is that uh the entire financial planning model has to be revised and updated. Meaning that the traditional advice that uh people followed was you get a job in your 20s, you work until your 60s and then you retire and you live off of your savings along with pensions and government support programs like in the US social security.
Uh and you've got your home that's fully paid for. Uh so your cost of living has gone down. The value of your home is high. So you can always tap into that equity to supplement your income if needed. And everything was great. You retire at 65, you're dead at 85. Well, that worked. If in fact you were dead at 85,
but if you're going to be alive to 105, now what you discover is that the meager amount of savings you've accumulated isn't going to be enough to last for 40 years. And it was never intended to. Uh let's remember that when uh FDR created the social security system in 1935 and he said you will get benefits starting at age 65. He knew that most people were dead by 60. So what a great deal. You pay into the system forever and you die before you get any money or even if you do get some money you'll only collect for a few years. You never anticipated that people would live into their 80s, 90s, hundreds with like they're doing today, which is part of the reason the social security system is under threat. Same thing with pension programs. Uh actuaries never expected people to be living for so long. They thought they'd retire at 65 and be dead at 85. They're not supposed to be living at 90 or 95 the way that they are. And that's putting pressure on the systems. So, what's it going to be like in by the time you're 95? you really think your pension program is going to have the money to be able to pay you, especially since we know there are major changes in demographics. We're producing fewer babies today. So, the so-called uh uh population pyramid where you have very few old people at the top and the pyramid goes bigger at the base and you have a huge number of babies at the bottom. That pyramid is becoming a box. We now have as many people old as we have young. Uh in many countries they uh in Japan for example, they're now selling more adult diapers than baby diapers. Many uh cities and towns around the country are closing their elementary and pre uh prek schools and they're increasing the number of nursing homes because of the population shifts. So, we have to recognize first and foremost that the notion that you're going to retire at 65 and live on your investments and pensions for the rest of your life is unrealistic. More likely, you're going to need to keep working into your 70s, even if only on a part-time basis. I'm not saying you keep working 60 hours a week. I'm saying you work 10 or 15 hours a week at some part-time gig. You make 10 or 15 grand a year. that is enough to supplement your lifestyle to allow your savings and investments to survive as long as you survive all to last until you're 100 years old. So we have to change the nature of college and career. We have to change the concept of retirement which I think is going to disappear this century. Retirement was a 20th century innovation. It didn't exist in the 1800s. It was invented in the 1900s after World War II. And I don't think it's going to exist in the 21st century because retirement and contemplated that you would have a 20-year retirement. That's not true anymore. Not only economically you're going to have to keep working into your 70s and 80s, you're going to want to because if you don't, you're going to be bored out of your mind. What are you going to do all day if you're not working? Are you going to just play golf seven days a week? Are you going to garden? I mean, your grandchildren are going to grow up. They're going to get tired of you. They're going to be fun to play with when they're 10, but when they're 20, when they're 15, they're not going to want you around. And when they're 20, they're going to be busy in their own lives. So, you better find something else to do. And making a little bit of money while you do it is probably going to be beneficial to your to your finances. So, it again, it goes back to the financial planning, investment management, and longevity question, which is why crypto fits in so nicely. Uh, and that is a theme that most people are not paying sufficient attention to. And here's why. This is the crux of the issue that Mike raised uh and that Pierre you touched on,
right? The advice that advisers are given the 6040 portfolio with the traditional glide path that the older you get, the less inequities you have. By the time somebody is 70, they're not 6040, they're 4060. By the time they're 80, they've only got 20% of their money in equities. Because we know that the older you are, the less risk you can tolerate, the more income you need. You got to shift the money out of stocks and into incomeroucing bonds. And that glide path has been in force for the last 30 years. This is the traditional advice financial adviserss give worldwide. It's out of date. It doesn't work. And here's why. Here's the real crux of the issue. I've been in this business since 1986. I was writing in the financial trade press for several years before that. So, I've been doing this for more than 40 years. And I'm one of the old guys in this industry. Um, there are a lot of others like me who have lack of hair. If they have any of it, it's gray. And most are men. Let's face it. 40 years ago, there weren't very many women in this industry. Thank the Lord. A lot of women are getting engaged in this business. Long overdue. Much needed. Women are far better. I have found I'm going to stereotype here, but women are far better at being financial adviserss than men. Uh, and some of the most successful, talented people I know are women, and God bless them for entering this industry. They're changing in powerful, favorable ways that is long overdue. You go back 40 years, it's hard to find anybody in this business who's been doing this longer than that. Most advisers in this industry, at least in the United States, are over the age of 60. We've been doing this for 30 years plus. And think about this. Most adviserss are basing their strategies on their personal experience. Most advisers are doing the work that is recommended to them by their firms and by the training they've received. And most of that training starts in 1982. Ronald Reagan went into office in 1980, the Reagan revolution in 1982. And we have to remember that from 1982 to the present, the stock market has grown more than it has ever grown in any 40-year period. We don't pay a lot of attention to what happened prior to 1982. A lot of us remember the inflationary 70s when we had gas lines, the oil embargo, we had 14% inflation, we had 18% mortgages. That was the 1970s. What people don't remember is that the stock market, the S&P 500 in 1968 was unchanged as of 1982. It hadn't moved in over 15 years. We tend to ignore that. We tend to ignore the high inflationary period of the 70s and we only look at what happened starting in 1982. And what happened starting in 1982 were two things. Number one, the stock market began to rise. It's been riv rising ever since. But something else happened that's even more important. Interest rates started coming down. Interest rates in 1982 were 14%. Today they are four. And we saw where they were near zero only a few years ago. We know how interest rates and bond prices work. That when interest rates go up, bond prices go down. And we know that when interest rates go down, bond prices go up. For the past 40 years, almost without exception, interest rates have been steadily coming down, which means bond prices have been steadily going up. Which this this explains why everybody says you buy stocks for risk and growth and you buy bonds for safety and income. Because for the past 40 years, the total experience of virtually every adviser, that's all they've ever witnessed. Bonds performing well. Bonds have held their value. They have risen in value and they've generated high levels of income, more than you could get from stock dividends. What's not to love? This is why the 60/40 portfolio was advocated so broadly, because it worked. But here we are in 2025. We aren't at 14% interest rates. We're at four. How much lower are bonds going to go? Not much lower. I don't Nobody I'm seeing is suggesting 2% a 50% drop in interest rates. They're thinking the Fed may cut rates by a quarter of a point or a half a point. We're going to go from 4 and a half to four or from four and a quarter to 375. That's going to be relatively immaterial. What is more likely is that over the next 40 years because of the macroeconomic geopolitic fiat debasement federal debt problem, it's more likely that interest rates are going to go up. And if interest rates go up, bond prices are going to go down. Which means the older investor who is being encouraged to increase their bond allocation is being advised to do it at the very moment those bonds are likely to fall in value and they may fall 50% in value. If interest rates go from 4 to 8, the value of that bond drops in half. But let's make
the average retiree know this.
Yeah, I don't think so.
Let's make this more acute. In the last five years, if we look at the iShares core US aggregate bond ETF, the last five years, the return has been -2.5%. 5 years. CPI has has uh devalued your money by 22 23%. So that 40% that you've held in bonds in real terms has gone down in value by about 22.5%. That is where we've shifted regimes from a falling interest rate environment from 1982 to 2020 to an interest rate environment that is more inflationary. It's addressing the concerns. And as you say, Rick, we could get short-term rates going down, which also means that long-term rates may actually increase, causing those long-term bonds to fall in price as they cut rates in the short end. And I'll add one last observation. The efficient frontier that that Curve where, you know, you got 100% bonds, but you add a little bit of equity and your risk goes down, but your returns go up. And then you have the efficient frontier that you operate on to get more growth. in the 70s. That is a straight line. When stocks and bonds correlate, it only serves to increase or reduce risk. It does not add diversification. What added diversification and benefits in the 70s was assets like commodities and gold. The new gold is Bitcoin. and not arguing for a market call. Diversification is the explicit recognition that if we accept we don't know what's going to happen, we should have things in the portfolio that respond to these structural changes in inflation and growth that contribute returns. And we do have this behavioral bias operating where I would argue that we we've got a a peak in 6040 from the standpoint of 82 to 2020. And this is a real challenge for those long-term assets that are designed to create cash flows for people for them to live on those safe withdrawal rates. And one has to consider also the volatility of the portfolio. So you need to harness these different areas of diversification to both get returns but start to attenuate the volatility in the portfolio so you can take those systematic withdrawals from the portfolio. And this is where I think digital assets provide an incredible opportunity for diversification.
I agree. And this is why I'm arguing for the 6040 to be replaced by 8020.
Yep.
And the 80 to have a significant exposure to crypto. No. How do you break that down? So you have in the paper the technological disruption that I want to come back to and then how are you thinking maybe we can talk about that a little bit but then how are you thinking about the allocation in the digital asset space what what's your experience there what are you seeing raas adapt how are you thinking about that in your practice that difference between sort of store of value assets like bitcoin versus growth assets like you know the the commercial assets the entrepreneurial assets
You talked about Ethereum, Salon, etc. Yeah, a big question is a a natural one is, okay, if I'm going to allocate 10% or more to crypto, what does that mean? Uh, and I don't answer that question in my white paper. I don't think it's my um purview to do that. I think that is what the investment adviser needs to do in consultation with their firm. Uh, and taking into consideration the client's circumstances, attitudes, and of course, what is in the client's best interest.
And what that means is that we have to recognize there are basically three or four different major approaches that I've seen advisers taking. Some are Bitcoin only. Uh, the Bitcoin maximalist. This is championed best by Michael Sailor. Uh, a good friend of mine. I I admire very much what Michael is saying and doing. Uh, he makes a very compelling case for Bitcoin only. Uh, and I would encourage folks, just go to YouTube, Google Michael, look at everything he says and does. It's really compelling information.
Bitcoin stands alone in the digital asset marketplace. Uh, we all understand this fact. And so you can make an argument, uh, of Bitcoin exclusively as an investment strategy for your crypto sleeve. You can also make an argument that Bitcoin stands alone, which means there's a whole other section of crypto that Bitcoin does not deal with. And that is the commercial element of this. And this is where, uh, all of the other coins come into play, dominated by Ethereum, uh, which is the second largest digital asset. There's another probably dozen, uh, that are worthy of consideration, uh, the the other major coins, uh, Solana, uh, Polygon, Algorand, uh, SU, the list goes on and on. And you can choose to allocate to Bitcoin and Ethereum. Uh, and if you do that, you've got to make a decision. Are you going to cap weight it, which means you don't three times as much Bitcoin as Ethereum because that's pretty much the market cap weighting, or are you going to equal weight them? So, that's another decision you need to make. Uh, or are you going to go beyond Ethereum and you're going to create a sleeve of a bunch of these top, uh, digital assets? Uh, so that's another decision you need to make.
And then the final decision is whether you want to own any crypto equities. There are a a large number and a rapidly increasing number of publicly traded companies that are in the crypto community. Coinbase, um, Circle, um, uh, Galaxy, uh, there's a couple of dozen Bitcoin mining firms, uh, the list goes on and on that give you that access, custodians, um, exchanges, banks. You could even argue Nvidia, which makes the chips that go into, uh, the gear that the Bitcoin miners use to mine Bitcoin. So, there's a wide array of crypto stocks. This is called the picks and shovels approach to investing. I'm not going to buy gold. I'm going to buy, uh, the stock of gold mining companies and the companies that make the drills and the shovels that allow me to mine, you know, to get gold out of the ground. That's what the picks and shovels approach is for crypto. So, you can do just Bitcoin, you can do Bitcoin plus the commercial applications of digital assets, and then you can do the publicly traded stocks. Uh, and then if you are a high net worth investor and accredited investor, you can do private placements. You can do VC and PE and hedge funds. There's a wide array of investment opportunities available to you. And it's best that that decision be made by the adviser with their client, uh, with the firm's input.
>> Yeah. Now, you you've argued, Rick, that that a 40% crypto allocation today is is actually safer than a 1% allocation was a few years ago.
>> Sure. Um, I mean, what you just explained makes a lot of sense, especially if you round out your, uh, crypto assets like the the coins, Bitcoin, Ethereum, uh, and other coins, uh, along with crypto equities. So, you know, when you combine the picks and shovels, but maybe you can walk us through why you believe that the risk profile has changed that dramatically, that that a 40% allocation or tilt towards the in the direction of crypto is safer than the 1%.
>> Well, there are a couple of reasons. Uh, number one, take a look at the S&P 500. We know the dominance of the Magnificent 7. Those seven tech stocks represent 34% of the S&P 500. So, how is a 40% allocation of Bitcoin radically riskier than investing in seven tech stocks? Uh, and many people would argue Bitcoin is the techiest of all tech. U, so I don't see how you could argue that crypto is a whole lot more risky than in just investing in those tech companies. Uh, that's number one.
Number two, um, today, especially if you invest in Bitcoin through the Bitcoin ETFs. I mean, these things are offered by some of the largest asset managers on the planet. BlackRock, Fidelity, Invesco, uh, Franklin Templeton, just to name a few. Um, you really think that you run fraud risk by buying IBIT, uh, BlackRock's u, Bitcoin ETF, uh, or Fidelity's or Franklin Templeton's or Invesco's? Give me a break. I mean, they have reputational risk themselves. If somehow they got hacked, which I really can't envision happening, that caused the loss of an asset, you really think Larry Fink wouldn't stand behind it? You think Abby Johnson wouldn't stand behind it, or Jenny Johnson, um, uh, wouldn't stand behind >> the investors? I so I think the fraud risk, which is the number one risk investors had to face for the last 15 years. I mean, people talk about, gee, I wish I bought Bitcoin in 2012. Really? Do you really think if you would have bought Bitcoin in 2012, you would own that asset today? Chances are you would have bought that, you would have bought your Bitcoin at Mount Gox and it'd be gone. Um, so odds are pretty high that you would have lost the money to fraud or abuse. U, there's still a huge amount of fraud and abuse out there. But the Bitcoin ETFs, as regulated securities under the purview of the SEC, being sponsored by the world's largest asset managers who have their own reputational concerns in mind, I think it's a far safer way to invest today than it was just a few short years ago. Uh, so the, like I said, in the earlier in our conversation, the only real risk you have now, the only real question to answer is, is this investment risk worth it relative to other investment opportunities that exist? And I think that you can find an awful lot of people, uh, an awful lot of organizations that are making predictions about the future price of Bitcoin, the future price of Ethereum, and you compare those predictions of performance and you compare them to predictions of the S&P. Crypto dwarfs it. I mean, I'm on record of saying that I believe Bitcoin will be $500,000 by the end of the decade, and my prediction is low. A lot of others are predicting a million or more. I don't see anybody anywhere suggesting that the S&P 500 is going to 4x or 5x in the next five years.
>> Yeah, I I think that so >> yeah, keep going. Sorry.
>> No, I I just think that this is, uh, a a unique opportunity that is opportunistic. Literally, it isn't going to last forever. Uh, think back to when the internet was created in the '90s. We all missed it. None of us bought Amazon in 1999. And the few who did, outside of Jeff Bezos, the few who did buy Amazon in '99, uh, probably sold it when the stock got crushed in 2001.
>> Absolutely.
>> The And even if they managed to buy it in '01, they made so much money by '09, uh, during the credit crisis, they probably sold it in that maelstrom as well. And if they happen to have bought it in 2010 after the crisis was over and again made so much money, they probably sold it by 2015 with huge profits. The point is that everybody owns Amazon today, but not a whole lot of people were willing to buy it back then. And if they managed to have bought it, didn't hold on to it.
>> Yeah.
>> That's why today is really rather early in the crypto marketplace. It is now a mainstream asset class, which it never was before. And you have the opportunity to invest alongside institutional investors, pension funds, endowment funds, sovereign wealth funds, family offices in a manner that has never happened before. Uh, and I think that it is in that regard actually a safer investment today. Albeit, it won't be as profitable. Bitcoin is not going to rise 100 million percent again. Those days are over. That party's passed. But I think you can still get a 5x, a 10x, a 20x return, which I don't see as readily available in any other asset class.
>> And and non-correlated. The other thing that that that I get puzzled about too with with the volatility of Bitcoin. I will ask, do you own Nvidia in some way, shape or form? And inevitably, if you own any index fund, you own Nvidia. The implied volatility for Nvidia is about 33% higher than Bitcoin. The historical high for the volatility for Nvidia is 140. For IBID, it's 130. So, it's a bit of this chasm between behavioral acceptability. Everyone already owns Nvidia. It's in our big index. So, we have cover with all these other people on it. Bitcoin is this new and weird thing. So, oh, it's volatile. And I'm like, well, I mean, considering all the other things you might own, the darling of your of your S&P 500 and the um and and the um uh the chip index is Nvidia, and its volatility is higher, yet everyone's sanguine about that. So,
>> well, it's funny you mentioned that, Mike, because I I wrote an earlier white paper, um, that I published in January called "The Six Myths That Are Preventing You From Buying Bitcoin." And you just cited number three on that list, that people are not buying Bitcoin because they fear that Bitcoin is too volatile. And that's a myth. Not only because, as you pointed out, Bitcoin is less volatile than many tech stocks today. As an asset matures, it becomes lower in volatility. This is true of every every tech stock, every investment you ever see. In the beginning, nobody knows really what is this thing? Is it going to last? Will anyone care? Will it become obsolete? Will it get banned? Uh, and volatility is massive. Look at the first 15 years of Amazon's price and compare it to the first 15 years of Bitcoin's price. Those two charts are identical. Uh, and so, uh, I I always laugh when people think that Bitcoin is too volatile.
But here's something that's even more important to recognize. If a client were to approach an advisor and say, "I don't want to invest in stocks because stocks are volatile." That's a that's a pretty common objection, isn't it? A lot of people are fearful of stocks because of volatility.
>> What does the adviser say in response to that?
>> They say, "This is why we diversify. This is why we're not putting all your money in stocks. This is why we maintain a long-term perspective because it's volatile in short periods, but over decades, the volatility smooths itself out. It also is why we rebalance periodically to take advantage of a volatility. So when the price goes down, we can buy more at lower prices and when the price goes up, we sell at a profit. So, we take advantage of the volatility through dollar through, uh, rebalancing. It's also why we dollar cost average. We're not going to put you into stocks all at once today. We'll slowly have you invest over a long period of time, which smooths out the price you pay for the stocks. And finally, we're going to engage in tax loss harvesting. We'll capture any momentary losses to lower your taxes to reduce the tax you got to pay on the gains you have in other investments." In other words, volatility is our friend when you use it in an established successful money management strategy. That is what advisers say to clients about stocks. And we know that the more volatile it is, the better we are with our rebalancing. Well, if we like volatility, how it how it helps our in stock investing, then we ought to love it with crypto because crypto is even more volatile. So, how can you tell me that you tolerate volatility in the stock market, but you're unwilling to tolerate volatility in the crypto market? It's hypocritical. It's shortsighted. And that's simply what people need to recognize. Volatility is not a problem. Volatility is a feature, not a bug.
>> Yeah.
>> The cognitive dissonance is real.
>> You know, there there's just that that habit forming. Everybody else is doing it. But that is changing. That Overton window is shifting. There's a a related myth, uh, that I talk about in in my paper from January, that it's too late. Just the opposite. That Bitcoin's price is so high, it's $120,000, that it's too late. I missed it. I should have invested years ago. We can always say that about every investment.
>> The best time to buy real estate was 30 years ago. You know, my father, all of our fathers used to tease us at how cheap they bought their first house compared to the prices we got to pay today. We can say this about every asset. If if we would say that, nobody would own Amazon today. Nobody would own Apple. Nobody would own Google, Alphabet. Why? Because the prices are so high. It's not too late. Sure, it price is high relative to where it's been in the past, but where will it be in the future? That's the only thing that matters. So it's not too late at all. It remains as viable an investment opportunity as it was a year ago, 5 years ago, 15 years ago.
>> Probably more viable given the regulatory clarity we now have.
>> Yeah. Right. This >> which goes to the risk question.
>> This thing, my experience, one minute here, because my experience is, do the 1%. Yeah. So took Rick's advice, that's now 10%. So I sinned a little. I didn't rebalance. Right. So now, from an advisor's perspective, if we think about implementation, certainly get off zero, start to build a position, start to build the intuition for your client, start to build the habit of rebalancing, build a position where you are have the mental clarity to rebalance. If it goes against you, then if it goes in your favor, your client likes it, you like it, you've built some intuition for that client, you built some new thinking for that client, fighting the cognitive dissonance of of accepting the old all the time, then you could allocate a little bit more and build from a position of strength for the advisor from the standpoint of how do you start to get on this train in order to start to allocate? Start with a piece that's small enough that you can preserve your mental capital and you can rebalance if it goes down because we've all seen it too many times. You start with too big, too late in a particular asset class. It goes through a normal course drawdown, and you redeem and you end up capturing the losses and foregoing the forward returns. Right? So think through that as an advisor, as a looking after people's money and thinking about their long-term, uh, withdrawal rates and what they want to do, and start from a position of strength. Start small enough you can rebalance and build from this.
>> So you're raising, you're dancing around a really important point, Mike, um, which is actually the number one myth that I have in my paper from January. By the way, that that white paper on the six myths that are preventing you from buying Bitcoin is available to you at dacfp.com, uh, alongside my new white paper on the, uh, 60/40 allocation. Uh, they're both available to you for free. It's the number one myth that I find that are preventing people from buying or recommending Bitcoin today. I'd have to admit I was wrong.
>> Right? For me to buy Bitcoin today at $120,000, I'd have to admit that I should have bought it when it was 100 or 60 or $25,000 or $5,000 or just 10 bucks. And I don't want to have to admit I was wrong. Nobody wants to do that in front of our spouse, for sure. Uh, and definitely not in front of our clients. Here's the point. The fact that you did not buy Bitcoin when Bitcoin was $40,000 a year ago or $15,000 a few years ago, you weren't wrong. You were prudent. You were a responsible, careful advisor who focuses first and foremost on your clients' safety and protection. Remember where Bitcoin was back then? Even as recently as a year ago, we didn't know if Donald Trump was going to win the election. We didn't know if he was going to overturn the Biden era policies because if Kamala Harris was going to win the election, she made it clear she would perpetuate the Biden era policies and Gensler would remain as chair of the SEC. So, you weren't wrong. You were prudent and careful. You waited until we knew what the landscape was going to be. That's why you're a good advisor. So all you need to recognize is that today things are different. We now have clarity we didn't have before. We have new information and the new information allows us to reach a new conclusion. You were right not to gamble on Bitcoin in 2015. You are equally right to allocate today to it.
>> Ricky, you've also said that not owning crypto is effectively shorting the asset class.
>> Right. Yeah. I mean, think about it. In in the United States, the total value of stocks and bonds is about $110 trillion. Bitcoin's market cap is about $3 trillion. So, it's roughly 3% of the market. If you believe in passive investing, most advisors these days are passive. They're not trying to beat the market. They're trying to own the market. If you believe in a diversified portfolio that representatively owns the market, where you own stocks, bonds, real estate, gold, oil, commodities, foreign assets, etc., proportionately to give your client an effective broad exposure to the markets, you should have a 3% allocation of Bitcoin.
>> Yeah.
>> It's as simple as that. And if you don't have a 3% allocation of Bitcoin, which is a passive exposure, then you're essentially making the active decision, I'm not going to own it. I think it's going to fall and I don't want to buy it. That is an active decision and it basically means you're shorting Bitcoin.
>> 100% true.
>> Right?
>> And I'm not sure most people who aren't investing realize that that's what they're saying and doing.
>> Yeah. And I think that's a great place to I mean, think about it from an efficient market hypothesis. The global market portfolio of assets that you have opportunity, 3% is what the market cap is telling you is the appropriate allocation to Bitcoin and maybe it's sort of 1-ish% to the other sort of technology-based coins. That's the point of equilibrium today. And if you're under that equilibrium, you are making a bet.
>> Yeah.
>> And and what's interesting is that people often default to the position of saying, "Well, I don't like it. I don't want to own it because I don't like it." Well, my only response I can offer you is get over it because you already own assets you don't like.
>> Uh, if you are a vegetarian, you already have in your portfolio, uh, meat processing companies. Uh, if you believe in, uh, a healthy diet, you already have Coke and Pepsi in your portfolio, which are nothing but sugary, uh, bottles of colored water. Um, you probably already own tobacco stocks. You own defense stocks. You own stocks in nuclear energy. You, I mean, you already own stuff in your diversified portfolio you don't like. So get over it. That's not part of investing.
>> Well, "I don't like it" is not taking that financial and fiduciary planning, um, side of the equation seriously. Right. So then we come into this cognitive dissonance where you're holding these two opposing ideas that I'm doing right by my client, but I don't like this. And we've got to bridge that mental gap for folks that.
>> And that's and and I I I really really like what you said about, you know, it's that John Maynard Keynes quote, "When the facts change, I change my mind. What do you do, sir?" And we're at a critical watershed moment where, as you said, you didn't know Trump was going to be elected. You didn't know the extent with which they would clarify the regulatory framework and provide clear rules and regulations for engagement in this asset. You did not know that before. Today you know that and that should be a motivating factor and should be the reason that you say, "Well, hey, listen, I was nervous about this. There was a lot of regulatory, the lack of regulatory clarity, and other institutions and endowments were nervous too. I'm a fiduciary. I can't take that risk with your money." As we know, the advisors own a lot more crypto than is in their client portfolios, but they can make that decision for themselves. It's like those family offices. There's a there's a single person who can take the bet and they live and die with the slings and arrows of that bet. But when it's a board and that board has a fiduciary responsibility, it is much harder and much riskier for them to do so until now. And now is a moment where we had a watershed change where RIAs can start thinking about this and the compliance departments can too, and they're going to be starting to move in the direction. The executive order from Trump clearing the way for 401ks. These are all going to be this is the way it happens. These things have to fall for broader adoption and now you have the opportunity to use those, uh, changes in order to start to adopt in portfolios. That that's well said, Mike. And in fact, that leads really to the number six on my list of myths. Um, a lot of advisors say, "I think Bitcoin's, uh, an extreme speculative bet, and I don't believe in taking big risks. I don't believe in making big bets." Well, my response to that is, are you saying that you're smarter than everybody else? That you know more than the billionaires who are investing in this? That you know more than the CIOs of endowment funds and pension funds? I mean, Harvard just invested $116 million into Bitcoin last week, >> after saying a few years ago they thought Bitcoin would fall to zero. Now they've just made their first ever major investment. Are you saying you're smarter than them?
>> Um, so the speculation here is that you're speculating that you're smarter than everybody else.
>> Correct.
>> If you believe in passive portfolio management rooted in modern portfolio theory, building risk-adjusted diversified portfolios, you don't have to treat Bitcoin as a speculation or an animosity. It's simply yet another asset that due to its market cap and current level of engagement in the marketplace belongs a role in the portfolio.
>> And it's not a big deal.
>> And it's agreed and it's a diversifier. It's different. It responds to different macroeconomic factors. You know, the the Bitcoin side of it, it's a scarce asset. That scarcity provides the the genuine unique features that are more akin to gold, and those growth features that are going to be akin to growth assets like the Ethereum, Solana complex on that side.
>> And you can think about it that from a standpoint of complementing your portfolio,
>> with scarce assets that provide resiliency when your bond complex over the last 5 years has lost 20 plus% in real terms. Only Bitcoin and gold and those types of assets have served to fill that void. And again, they're often not included for reasons of simple habit or preference or, you know, I'm taking a bet. I'm smarter than the market. I like to, you know, I like to always start from what is, what is the, what does the, the mass market cap say? What should the weights be? And am I that much smarter than all the crowds? And let's get there at least. You know, this is this is as much about psychology as it is about allocation.
>> I mean, Rick, for for advisors and investors who are still anchored to legacy models, what mental shift needs to happen before they can seriously consider what you're proposing?
>> You need to evaluate what's going on in the world today, uh, and recognize that we are experiencing, uh, a rate of change that is unprecedented. Uh, the notion of technological advancement due to computer technology, nanotech, um, Moore's Law, where computers get twice as fast every two years and they drop in cost by half every two years, is, uh, the cause for all of this. Um, and we need to recognize that what got you here isn't going to get you there. It's as simple as that. That many people are happy with where they are. They're happy with how they've gotten to where they are and they're happy to let things stay the way they are. And I agree with that. I share that point of view. The problem is the external forces aren't allowing that to remain true. That we are experiencing technological shifts with AI and robotics that are upending everything. That demographics are changing radically around the world in terms of the number of births that we're producing on an annual basis versus the, uh, number of deaths, meaning that old people tend to get older rather than die. Uh, and this is putting new pressures on social systems, on government policies, and on investment, uh, management strategies, and we need to recognize these facts. So my advice at the end would be that you study and consider these issues and evaluate the impact that they have on your goals and your investment management decisions. Uh, and I believe you'll discover, uh, as I have, having studied this for the past couple of decades, that it requires a shift in strategy in order to remain, uh, opportunistic for the prosperity that is available. Uh, what got us here won't get us there is what it comes down to.
>> And I would I would give, um, DACFP a huge plug here. Oftentimes, what helps you cross the chasm is education, right? Is actually taking the time to understand the asset. And this is where we started with. I think we're at the point in time where the risk for the advisor is no longer in owning these fringe assets. These assets are going to become foundational. And so as they move from fringe to foundational, the client, the client that the advisor is serving, is going to start asking, "Why didn't you include it once the regulation was clear? Why didn't you understand how these assets would impact my financial legacy and my financial planning?" That's where the conversation is going. So, educating yourself is probably, uh, goal number one. And then number two, from a risk perspective, a lot of boomers are going to go the other way. And that mahogany desk money is a lot less invested in digital assets than the Robin Hooders. And as those assets move from the baby boomers to their children, those will encounter, they'll look at those advisors and say, "What does your portfolio look like versus what does my portfolio look like?" And so there's also a clear risk there as things pass through the estate process. If you're not an advisor that's thinking through these things and and allocating to them appropriately, the new owners of those assets are going to look at you kind of skeptically. So, there's a lot of things going on, but often it really is just educating yourself, getting your head around what Bitcoin is, all the things that Michael Sailor talks about, how >> well, that's why incorporate it. Go ahead, Rick.
>> That that's why I created DACFP. Uh, and we offer lots of education. Most significantly, we invite you to get your CBDA professional designation, become certified in blockchain and digital assets. It's a FINRA registered, uh, professional designation. You get 18 CE credits. Uh, and, uh, you can now brag to your clients that you have obtained this certification and become proficient, knowledgeable, fluent in the subject of blockchain and digital assets. Uh, and we help you build your business. We have a directory on our website that, uh, features those who hold the CBDA designation so that investors who are looking for a crypto knowledgeable advisor, uh, can find you. Um, so, uh, I encourage you to go through the, uh, CBDA course. It's an online self-study program. It's been, uh, obtained by thousands of financial professionals from 37 countries. Uh, and everybody raves about the course. We're constantly updating it. We just released a new module last week, uh, because everything keeps evolving and growing in the field. Uh, and so we're we're happy to provide you the education that you need, uh, to help you learn about this, become proficient so that you can give your clients the advice they need that's in their best interest.
>> Agreed.
>> Rick. That was, uh, an incredible conversation. I mean, so many so many nuances and and and flipping of scripts. Uh, it's, uh, it's been very exciting to get the lowdown from you today on digital assets.
>> Well, it's been a pleasure to be with you, Pierre. Thanks for hosting us, Mike. Good to see you as always and, uh, happy to be helpful. Thanks so much.
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