Transcription
Bitcoin is seemingly stuck at $70,000 while the rest of the world is volatile and shaking up and down all around it. Of course, when we say here in the title that uh bank silently closed the exits, we're talking about private credit and a whole lot of rumor that that market is going south very rapidly. And of course, oil spiked back over $100 a gallon.
In the midst of this, once again, Bitcoin not doing very much, which I personally find is a very encouraging sign. And I would imagine my guest today, Mike Alfred, also agrees. We're going to dive in to the market, what's likely coming, and everything else right now.
That's good morning everybody. Happy Thursday and March 12th to all of you. Before we do get started today, told you about him before, I'll tell you about him again. We have an awesome sponsor today, which is Aubra. You've seen Bill Barhide here on the show countless times, counting myself very lucky to be one of their customers and also to be uh working with them.
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All right, moving on. We have Mike Alfred here today. Good morning, sir.
Good morning. How are you?
Yeah, perfect. You got a little delay there, but I think we're good. Uh, man, uh, crazy markets, right? I mean, Bitcoin seemingly just like really just dialed in there at 70, 70,400. I mean, you know, I wake up 68, go to sleep 72, wake up 70, 71, 69. As I sort of said in the intro, though, like with all that's going on, I find it actually quite encouraging.
I think I think it's all very constructive. I think there's a lot of uh energy and effort being expended on the wrong things right now. like whether or not we go to 50 or 48 or something is sort of irrelevant if you understand what Bitcoin is because if we ultimately end up at a million then it will have been pretty dumb to not have bought a 50 or 60% decline uh this this late in time uh where we really haven't had a business cycle. We really haven't had a crypto bull market. we really haven't seen exuberance uh with retail and yet you can still buy uh Bitcoin here in 2026 going into Q2 uh for $70,000. Now you could have bought it at 60 or 62. That would obviously be a better price. And if we do go to 50, you would obviously would have preferred to buy 50.70. The issue is that sometimes these assets don't go to the prices that that the chart squigglers and the kid analysts think they're going to go to. So they draw their squiggly lines and they say, "Look, the moving averages have crossed over and if you if you draw a fractal from last cycle, we've got to go to 48. And if we don't go to 48, that's not the end because it's not a real bare market." And I'm just not sure this cycle is like any other cycle that's come before. Um, so I'm not sure you can use an analogy or fractal perfectly and overlay it. I think there's too many crosscurrents. I think Trump's policies I think it's uh time to say this, right? Even if you voted for him. Like his his policies have confused the out of the business community. Um tariffs have been a net negative. Uh overly aggressive immigration policies been a net negative. The government shutdowns have been a net negative. Some of these geopolitical actions have concerned the market. And so we've we've lagged. We've delayed what would have been, I think, a nice bull cycle uh at this point. And now we're still coming out of I think a prolonged bare market. So that's kind of my view. And so I'm just interested in adding. What I'm not interested in doing is trading around and getting cute and trying to time whether the bottom is 62 or 61 or 48 or or where we've already bottom, right? Because I think that's largely counterproductive if your goal is long-term wealth.
Yeah, I 100% agree with that. This is like the most aggressive dollar cost averaging I've pretty much ever done actually. Uh, obviously I bought Bitcoin much lower through previous cycles, but you know, my situation is currently different than it was then, and I'm really excited to be buying in the 60s and 70s instead of the 120s. And as you said, I'd be really pretty excited to be buying in the 50s.
Well, it's super asymmetric. I think that's really smart. I mean, I Nobody knows what's going to happen. I think we all should know this by now. There's a there are a lot of kids on X, right, who think that it's possible to to guess correctly or if you guess correctly once that that somehow means you know more uh than than someone else. So like if I knew 3 months from now we'd be at 84,000 let's say that that that I walk on water and I'm the messiah, right? Um look, it's just uh investing is simple. You buy high quality assets uh at the best possible prices that you can get them at. And that usually means that you've got to average in because nobody knows what the best price is going to be. And then your goal is to hold them as long as possible. And I think as much as I love X and you see that I love X, uh, I love it mostly for entertainment purposes. I think it's largely value destructive for most users because they look at that and they think that there's something to be done most days when great investing requires you to do nothing most days. So, if if you're if you're watching too many influencers, who by the way, their their primary source of income is Telegram groups and trading groups and in indicator suites and things like that, they have to sound bearish all the time because acting bearish and sounding bearish is the only way to get people to act. It turns out that if you have a largely bullish message, which is correct by the way, over five, 10 year periods, then no one's going to buy your stuff, which is why I actually have to make my money as an investor. Like I make my money in the real market, investing, uh, doing corporate governance, doing the work in the trenches. A lot of these guys just sit around and draw lines on charts, uh, and they charge their subscribers a fee to give them a red indicator that says things look nasty. Well, guess what? Everything looks nasty when sentiment is negative and geopolitics are scary and the economy looks like it's slowing down and unemployment's going up, but that has nothing to do with whether you're going to make money in an asset over a two, three, four, five year period. Uh, so I just see a lot of that uh on on X. And so as much as I love it, uh, I think most people, like 90 plus% of people need to be careful because they're probably going to be poorer because they follow too many chart squigglers on X.
Yeah. How much do you personally handicap geopolitical events? I mean, you actually obviously alluded to the war without specifically saying it, but I'm I'm pretty openly in agreement that this is a blunder and I'm generally anti-war and I think it could if we're even talking about from a market perspective, it confuses markets, but there are some unprecedented things that are happening in the context of this war, right? I mean, the Straits of Hormuz now have mines on them. They're officially in them. They're officially effectively closed. I mean as Arthur Hayes here says oil up 10-year treasuries up when bailout you know complete shutdown in the straits u.s. announces it will release 172 million barrels of oil that's 400 million I think internationally right I mean it's hard not to and once again your point is well taken I think with X because nobody there including myself is a geopolitical expert but you're getting everybody's unsolicited takes on what it means for markets but the environment is different.
I think different and the same. I mean, look, I was a history major uh at Stanford and basically all of these things rhyme. Y uh markets have been going up for a 100 plus years. Uh and there have been problems and things that could potentially end human civilization every decade uh during that time period. In fact, I'd say there are things that probably looked much scarier at the time uh than what we're seeing now. Uh there will always be some things that are different, right? Like I I think the internet and AI are are distinctly different technologies than like the sea drill and vaccines and pasteurization, right? So, like there are things that are like step function changes in the way that the human operating system works, but going to war uh and bombing and missiles and drones and like none of that stuff is new.
Uh I think Trump surprised people uh because he he campaigned on being the America first and really focusing more at home and repeatedly said, "I will not be at war because I'm such a good negotiator and I'm so tough and people fear me." And I just don't think Iran cares. Uh, I just I think they're willing to literally fight to the death. I think they're they they get accolades when they die in defense of whatever their crazy backwards principles are. So, I look, I I'm not saying that I'm supportive or not supportive of of what specifically is going on Iran. But what I think as a markets person is that you can roll all this up every few years and you can toss it aside and it won't matter because markets will be higher and it will largely price in and discount all of it. Uh, and so I don't want to be overly dismissive, but like markets are programmed, especially good assets, to go higher over longer periods of time. And that is the time frame that matters for generating wealth. Uh, like I had the cycle, for example, like it's been a messy cycle. It's been one of the weirdest cycles, if you can even call it a cycle, the last few years. Uh, I've made a tremendous amount, I mean a generational wealth in those three years by simply ignoring every geopolitical headline, every banking system headline, every time there was going to be a credit crisis, every time the Japanese yen was going to tank the world, right? Every time Donald Trump getting elected or Kamala Harris getting elected was going to do XYZ thing, and none of it mattered. Uh, as long as you buy quality assets at good prices, they largely with a little bit of volatility along the path on a point-to-point basis, if you close your eyes, they go higher. Uh, and so I just I I I hear what you're saying. Um, there may be some truth to there being some differences, but I don't think there's going to be any difference in the end outcome. The end outcome is when there's clarity as to how this ends, whenever it ends, and that that could include boots on the ground even, which will be quite messy and it won't be supported by most people even in the US. Uh, maybe only Israel will be the country left that supporting um, you know, that the overall war effort if we actually put boots on the ground. And of course, it could go on longer than we expect. It could be messier than we expect, but ultimately when that's over, I expect a rush of liquidity and higher asset prices, specifically for assets like Bitcoin and Ethereum that are trading already like they've gone through a long bare market. So, what happens when something good happens? Well, they'll actually probably go up more than expected because they've been compressed by this prolonged period of so-called uncertainty.
Yeah, it's the beach ball being held underwater, right? And I mean you have this massive fear of markets in general which is just disproportionate to the actual price of assets everywhere, right? So sentiment is so bad on stocks and we're going to talk about I guess private credit and oil and all these things, but stock market's right by the all-time high. And to your point, Bitcoin's already gotten the the bare market, so it should be the first beneficiary of any meaningful liquidity. And by the way, these wars historically, we've had pacifist presidents before that went to war to stimulate the economy. I mean, that's literally how we got into World War I. Woodrow Wilson ran on the premise of he kept us out of the war and then uh let him sink the Lusitania and took the United States into war to pay JP Morgan, right? So, it's not like this is a and that's not conspiracy theory. This is not an a new playbook. This is the playbook and it's going to mean more liquidity and more money. I mean,
Can I can I comment on that stock market thing, though? Because I think it's a it's a market of stocks, not a stock market. I think a lot of surface level folks who don't really study the market, aren't really in the market every day, will say stuff like, well, the S&P is at an all-time high, so we have a long way to fall. And it's like, well, maybe. Um, the reason why the S&P is so anti-fragile, I mean, some of it is indexing in general as a philosophy, some of it is 401k flows, and then some of it is the constitution of the index. The constitution of a market cap weighted index will largely hide the dispersion and the rotations that are happening under the surface and there has been a massive rotation happening over the last three four five months out of companies like Microsoft which were really dominant uh into pretty much everything else 490 companies that didn't get the AI bid uh, you know, maybe it's more like 470 or 480 because you got all these memory companies now you've got all the the Vistas and the Constellation Energies and the GE Vernovas right, you've got all these equipment providers, anything in the AI thematic um, which is all the largest companies in the S&P, right? Uh, anything that touches that has had a very different path than the rest of the so-called stock market. Uh, so what I think is happening now is a very healthy normalized rotation where we're seeing real dispersion. Like we've seen railroads uh up here today. We've seen consumer staples up here today. We've seen energy, utilities, healthcare, uh sectors that have largely underperformed for three, four, five years doing quite well. um, which I think is a healthy component. Small caps outperforming large caps, international stocks outperforming US stocks. These are all uh, you know, the equal weighted S&P which is a good sort of a way to looking at this outperforming the market cap weighted version. So I I don't um, I'm not I'm not denying that the S&P looks like unusually strong. What I what I'm disagreeing with is that somehow a harbinger of some larger draw down coming because it isn't pricing in uh what's happening. I think AI is so big and so pervasive and growing so fast. And of course, we have OpenAI and Anthropic probably going public in Q3, Q4. A lot of people misunderstand what that means. That means there's not going to be a top, not a big top, nothing that matters in the broader market until those companies go out. We've got to get SpaceX out. So, I think anybody who's bearish here because of the S&P or because they like they largely just are unsophisticated about markets. They don't understand the index constitution and they don't understand sequentially what's likely to happen in an environment where you have some of the biggest private companies in history yet to go out. They're not going to top the market. The market's not going to go into a long-term draw down until they get those companies out. I could pretty much guarantee that.
So, I assume you're not too worried about this. Morgan Stanley restricts redemptions at private credit fund after withdrawal surge. JP Morgan forced to markdown their loans. uh private exit credit exodus is accelerating. So we have multiple companies doing this. Private credit defaults are up 4x since 2024. This is the asset class's first stress test. Investors are bracing for a blowup. You get the idea, right? Uh profits return to private equity investors at a 16-year low. That's slightly different. Deutsche Bank flags a 30 billion exposure to private credit. This is the new boogeyman.
Yep. Yep. And and it's real, right? Like there are real issues there. I think a lot of people chase the illiquidity premium like I do private equity and public equity right, and I like early stage all the way up to public uh companies, so I follow the full life cycle of companies and I thought it was odd coming into 2023 how people were piling in still to private equities when public equities were so much better priced because they public equities marked to market right um public assets in general marked to market every week every day uh private assets sometimes don't get a new mark for five or 10 years. And so, uh, you can hide a lot of things in a situation where you don't have to mark to reality because you can just mark to whatever the last mark was and you don't necessarily have to mark it mark it down. So, I I thought it was odd for three years now where like a lot of capital was piling in and you see like the Blackstone President John Gray meeting with executives that run 401k platforms trying to convince them to let retail money into private assets. And I think private assets should continue to be for sophisticated investors who understand the risk. The moment they started opening it up too widely to retail, I started to think, okay, maybe there's something wrong. And I don't think it's just a private credit issue. I think private equity, uh, private assets in general have been mispriced because they never got repriced fully after 2022. Like Netflix and and Meta went down 70%. But a lot of these software, private software companies never got a new mark because they didn't need to raise money. So, you don't really know what they're worth. Um, and if you're smart, if you're a PE executive and you want to uh keep your bonuses going forward, you you you don't take the full mark that you could take, you you you don't reprice it fully. You just uh allow it to continue to to float at the price that it traded at last. Uh, so the incentives are all are all off there. But again, any sophisticated investor like most of us who are professionals, like we've all been watching this for a long time. I don't have any personal exposure to to private credit. All my private equity exposure are assets that I personally underwrote years ago where I paid in a lot of cases significantly lower prices. So, I think there's going to be a lot of noise in the media about this is going to be the end. But remember, in March of 2023, Silicon Valley Bank going down was going to kill the technology industry forever. And then like three days later, they bailed out the whole industry. And then the next couple years, it was the Japanese yen carry trade was going to unwind the entire global economy. And then like like there was two major drawdowns culminating with April of last year where we had a serious a much more serious draw down than what we're seeing now. And then what did that just go away? Because I don't hear anybody talking about it. Turns out the human mind is quite frail and the news cycle is quite short. Uh, and so yeah, they'll be talking about private credit probably for the next year or two, but that doesn't mean that public assets need to go down uh significantly and maybe they will for a period of time when it hits a fever pitch and there's like a lot of news, BlackRock closes their fund and mortgage like there is now, right? Uh, but those will tend to those will tend to coalesce with with actual buying opportunities. Meaning like at the fever pitch of private credit's going to doom the world is actually when you want to continue to buy more public assets because those public assets will re-rate largely price in the worst of it and then if it turns out not to be so bad they go up. It's the same as always like it'll just be the same old story.
Yeah. I guess the narrative there is looking at the fact that JP Morgan is now choosing to write these down and just be done with it and that's probably the end, not the beginning.
It may be the end for their particular fund and then someone else who's lagging because a lot of these other guys it's their whole business. So those are the ones that like the Blue Owls of the world, those are a little bit riskier because they don't have a such a large diversified business. I mean they have a diversified business but but private credit is a big chunk of it. Whereas a lot of these big banks, big asset managers, it's just tiny. Like look at BlackRock's AUM and then look at the amount of it exposed to private credit. So there'll be a lot of crypto people, crypto people do this every few years by the way. They were doing this uh during the COVID drawdown too. They were saying the S&P Ryan Suss was saying the S&P is going to go to zero because the economy shut down. I was just laughing. I was like how where do these kids come from? Like there's the lack of understanding sophistication is incredible. Uh no, like these are just buying opportunities. So, like you wait until there's a lot of news that makes it sound like private credit is the boogeyman like you said it is. Uh, where you want it to accelerate a little bit from here. You want to hear about everybody potentially and it's going to it's going to turn into a massive tsunami of liquidations and blah blah blah blah and then you want to buy more assets. Uh, so that because in three to six months after that nobody will be talking about it. It's the same as always.
And interestingly at this same moment hedge funds are shorting stocks at the highest level since 2022. Y
You got to love that if you have a slightly bullish tilt in my humble opinion.
The positioning and the sentiment is is beautiful, especially in crypto because crypto didn't get like any sort of follow-through at all since 2023, right? So, you had this huge down year in 2022, a little bounce in '23, a new all-time high in a couple things like BNB, and then largely, if you look at it now, they're they're well below all-time highs, and they've never really had a cycle. Uh, so yeah, you you want people shorting, you want people buying puts, you want people saying the market's going to fall further, you want people saying Iran's going to be the end of the world, private credit's going to be the end of the world. Those are perfect conditions for long-term investors. Uh, and so like like either you have capital to deploy here or you're already invested and you stay invested uh or you are going to you're dollar cost averaging and you want to keep investing. You want to root for people to continue saying this is a crisis. Like I saw this guy Visser, Jordi Visser, who's he who's saying, "Oh, all my indicators are saying crisis." I said, "Please, please keep convincing people that it's a huge crisis for as long as possible because that's what creates the deeper buying opportunities." Like April of last year, that April of last year was a slingshot, right? It was a boomerang. It was unbelievable. I had stocks in my portfolio that 10xed or more off of the lows because you actually need the liquidity swept at those lower levels where like everybody's scared and everybody thinks it's going lower in order to get that more explosive up move. And those explosive up moves can go five, six, seven, eight months off the low. So, so like if this is it, and it may not be, but let's say this is it, uh, and the sentiment just gets a little bit worse over the next week or two and then we bottom and we're higher in late March or early April, like I'm not sure we're going to get the same level of slingshot as last year because the fear just isn't where it needs to be. You need people to get their panties a little bit more into a bunch than they are right now. People are largely okay. Even the chart squigglers who freak out every time any of these things, I've watched them freak out two, three times a year for three years, even as markets have largely continued higher. They're not concerned enough yet, right? So, I want them to get a little bit more concerned if possible. Like, what's happening in the Strait of Hormuz right now is really helpful because you got a a bunch of people saying this is the end and oil prices are going to go to infinity and that's really helpful. I'm not sure it's going to tank Bitcoin much further because Bitcoin largely it sniffed out a lot of the issues we're having now three, four, five months ago earlier than the rest of the market. Uh, and then it will probably sniff out the liquidity and the recovery and the bailouts and the whatever happens after that. That causes asset prices to go up. And so that's probably why it's largely seeming uninterested now even as some people are becoming more bearish at exactly the wrong time. I mean, it went down for like five hours on the war news and it's basically just pressed up and held since then. So,
Is it still at 70 right now? 70.
Haven't even looked, but I'm assuming it's in that B. Yeah. 70,123.
Yeah. So, it was at 74 70,400 when we started. It'll probably dip back down into the 69 or 68 uh region and then maybe later today or tomorrow it'll be 70 again. I mean, it's just oscillating between 66 and whatever 74. So, that's kind of the new band for now. And when it breaks 74, it'll run into the 80s. And, you know, if it breaks 60 on the downside, it will probably run to 50. But,
But that's it. Like, unless you have options and you have a time constraint, which I can't imagine anyone would be overly at this at this stage, right? Like, if if you have options now like I do, it's probably a small percentage. Like I have IBIT calls for May uh and September, right? I have Ethereum calls for June, right? Like I'm always layering in to out of the money calls that are two, three, four, five, six months out because over long periods of time, you capture the the convexity of of any of those bigger moves. And so I have no idea whether it'll move into my price range during those time frames. But as long as those positions are sized correctly and I continue to kind of roll them forward eventually you catch that next move essentially the beginning of that next cycle move. Uh, so but outside of that kind of trading like I can't imagine people are too worried about time frames and if they're not worried about time frames then if your downside is 40 50k and your upside is a million uh over the next six seven eight nine 10 years uh and again it could million could come a lot faster it could be a lot slower I don't know uh but your asymmetry is all to the upside so I just again as I said at the outset I'm struggling to understand why there's so much brain damage uh and so much energy being expended on whether or we have to go lower and whether someone's right or wrong because they called this or that thing. To me, that's largely irrelevant to the path that we're likely going to take in the coming years. And the path we take in the coming years is where all the money is going to be made.
Yeah. My friend Tilman said on the show one day something that was brilliant. He said at Pomp's conference as well on stage. The idea was basically that uh sentiment right now is driven by whether you actually have cash on the sidelines or not. People who actually have played this well and have dry powder are very excited about the opportunity. People who are fully deployed are terrified.
Yeah. And I think I look I think that's part of it. I understand that way of thinking. It's a trader mindset.
Yeah.
Long-term investors are always have some cash and always are largely fully invested, right? So like you always have some liquidity or some cash flow. I got a private company that distributes. It used to distribute every six weeks, but we're accelerating it to every three or four weeks because there's just so much cash. It's a it's a bakery, right? And like completely immune to geopolitics, global stuff, uh tariffs, like it doesn't care. Uh, just a domestic beautiful domestic business that generates six or seven million of EBITDA and we distribute almost all of it uh every single year. Um, and so that that money just keeps coming in and I just keep redeploying it into to things that I think are cheap. Uh, and so I like to right here I want to be largely fully invested. I don't see the benefit of having a lot of cash on the sidelines because again over a 3 to 5 year period which is my time frame. Almost all periods where you hold above average amounts of cash are a drag on your overall returns. So yeah, it feels good when markets are going down, right? It feels good to to have more cash, but the problem is a lot of times markets go up even when it feels bad. Uh, and and a lot of people are holding cash because they want to feel good, but actually the returns over longer periods of time, three, five, seven years, they're they're actually hurt. uh through that that process. So I prefer to have businesses that generate cash uh in an income streams that are non-correlated like public board seats combined with private businesses right combined with hedge fund management fees etc. which are all like almost entirely uncorrelated uh in the way they operate. It's such that like I don't really care. Market go down, I'll buy more. If market goes up, I'll just sit tight. Uh, but I just want to be long, right? I I want to be long here and I want to largely ignore the noise the the the the loud amount of banging and screaming and yelling from from people on the internet about how bad things are going to get. And what I find interesting is that a lot of the short-term headlines that we see on a day-to-day basis are seemingly headwinds. But if you zoom out on this industry in general, it's nothing but tailwinds, right? I mean, CFTC and years of rivalry with deal that means combined crypto oversight. Okay, I don't think it moves the market today uh by by any stretch or you know, Wells Fargo uh filing a trademark for WFUSD. I mean all plumbing and all small news stories that directionally show you the level of adoption of this industry. So once again there's an asymmetry right you might have Straits of Hormuz and private credit today but you have Wells Fargo Morgan Stanley and all these coming into crypto forever.
Yeah, I mean look you got Clarity Act coming you've got a new Fed chair coming. You have no sign of letup in the long-term adoption. You've got the other big story, Scott, beyond uh just the ETFs, which have obviously been a huge uh sort of fundamental underpinning to particularly the Bitcoin space over the last few years is uh the rise of these these preferred securities that have been issued by companies like MicroStrategy and Strive. Those products are really starting to work. Um now the StratFi guys are arguing they're Ponzi schemes and they won't be able to pay out. And there is some truth to the fact that like there's no guarantee that they're going to pay out 11, 12, 12%. But they are filling an important gap there. There are not a lot of high-quality assets you can buy with yields at that level. And if these companies can build a longer-term track record of doing that as Strive is starting to do and Strive is holding that $100 level, that is a long-term another long-term fundamental component of how Bitcoin embeds itself in the traditional system because there are a lot of retirees who don't have enough capital to retire if their yield is 3%. So if they buy Micro Proctor and Gamble and Merck and even Altria, right, and and British Tobacco, like they're maybe getting a blended 5 percent yield with Strive, they're getting 10% yield. So So with they can retire now with 500K and actually continue to live in the US versus having to retire with a million. And so it closes a gap. So if you if you undersave during your working career, now you can catch up via Strive. And the only thing you're betting on there is does Bitcoin outperform those yields. So if you think it's a simple bet, if you think Bitcoin returns 20 or 30% over the next 10 years on a compound basis, those companies will be able to meet those obligations. If you don't, then maybe those companies will have to cut the yields or cancel the yields at some point along that journey. But if you get in at the right price, like if you bought Strive below 100 or you bought SATA under 90 or something, you're getting a yield on cost that's even above the stated yield. And that will actually accelerate retirement andor allow some people to have a more comfortable retirement. Uh, and that is a fundamental driver of Bitcoin now because uh as of right now as long as STRC stays above 100, Michael Sailor is able to buy Bitcoin every single day. And people will say the bears will say, "Well, A, that's not sustainable." And then they'll B say, "Well, if that's true, why isn't Bitcoin going up?" Well, all it takes is for the market to flip to a more bullish sort of positive regime. and you'll see that the benefit of having that natural buyer in there every day selling STRC actually benefit the market. But right now in a negative regime, all it's doing is causing uh Bitcoin to be more kind of technically stable than it would be otherwise. But I think it's a bigger story than people think. I see people in Bitcoin talking about it, but I don't see anyone outside of Bitcoin talking about it.
And STRC is exploding. People are getting it now, right? I mean, I think it's paying over 11% now. and SATA Stripes just raised to 12 and a half and they're now targeting the par value between 99 and 101. So they're going to try to model they're basically like a slightly riskier or significantly riskier version of of STRC where like if you want to go a little further out on the risk curve to get a slightly higher yield uh, you can but again they have a debt-free balance sheet. So is it risky in over five years? Yes. If Bitcoin does not perform above 12 a.5% then yes there they won't be able to pay at some point but I actually think it will right I think especially from these levels the CAGR of bitcoin's gone up the ke the forward CAGR of bitcoin from 60 is better than 125 that's just math because as long as it eventually goes to 150 or 200 the return of bitcoin from these levels will be better than it will be if you bought it at 125 and if you're buying stretch or SATA right now that's what you've got to model because that's where the return comes from it comes from the return from here, not what happened in the past. Uh, so I think I I think they're both fine bets. I own a little bit of SATA largely to to start to understand the products better because I think if the flywheel of those preferred securities really works, then the finally the treasury company business that we've been talking about for years now will actually have a reason to exist.
And this is what we one one of the things I said you were correctly bearish at the correct time. But what I said at that time even when and I was bearish on MSTR in November of 24 at the correct time which was hard to do because everybody was bullish and I actually had made money on the way up 15x right um off the bottom in 22. But but the issue was there was no business model yet like selling uh common equity via the ATM to buy Bitcoin was not going to be sustainable. This potentially uh actually works over 10 years and I think the fact that at Strive for example you have like insurance actuaries working on it to try to model it over 20 30 40 50 years is exactly the kind of mindset you need. It's like the reverse insurance model where all these insurance companies got too heavy into private credit because they were all looking for a yield that looked sustainable and maybe the real yield is actually driven off of Bitcoin. Maybe that's a better way of modeling uh the long-term obligations of some of these large pensions, some of these large insurance companies. So, I'm I'm becoming increasingly constructive. I'm holding my 575,000 shares of ASST. I think it's a lesser understood story than MSTR, but also clean balance sheet, so it's not going anywhere. And really, all you need there is for Bitcoin to go up. If Bitcoin goes up in a sustainable way, that stock will rip. Um, and then I'm holding like six or over six million of SATA, a little less than six million of SATA, largely because I want to experiment with that uh asset and understand how it works. But one of the other interesting things that someone pointed out on Twitter the other day is that STRC pays on the first of the month and SATA pays on the 15th. So if you wanted to like have a blended income where you get paid twice a month like a normal paycheck, you buy 50% in both and you get a paycheck on the 1st and a paycheck on the 15th. That's right. I had no idea of that. That's interesting.
Yeah, it's cool. Yeah, STRC is the first and SATA is on the 15th. And SATA, as I said, is slightly riskier and higher yield. And of course, you're paying below par now. So, your effective yield's even higher than Stretch. Um, it's a 200 300 basis points more at the current price, it'll close, right? Like, if if people start to have the same confidence in Strive that they have an MSTR, it'll eventually trade at 100, too. And so, then it'll equalize those yields a little bit. And then what'll happen over time as those products get bigger is the yields will come down because the cost of capital will come down. And eventually like if Bitcoin's going up in a bull market, you'll see them you'll see them trade probably well above par, right? Because because a 12% yield sort of assumes a lot of uh risk to the balance sheet of the corporate uh issuer. It assumes a lot of risk to Bitcoin, right? And I said this the other day on a space. I don't think institutions are buying those because they really believe in Bitcoin. I think they're buying them because they've modeled the short term that the balance sheets of MSTR allows them to pay that yield for two years. And so if you can get 12% sort of for two years, you can always sell the asset within those 24 months and take your money back. You can put a sell stop on the preferred. So like you can say, look, we're just not going to own it if it goes below 99. So that we're limiting we're capping our downside at 1%. But we're getting almost 1% a month. So as long as we hold it for two or three months, we've outrun our our stop loss. And if it goes below 99, we're out. If it stays at 100, we're in. It's really that simple. People are overthinking it. A lot of the Bitcoin people are like, "Look, this is a clear endorsement of Bitcoin." I'm like, "No, these are private equity vulture type people. These are traditional investors. They're just looking at MSDR's balance sheet and they're saying, forget about the Bitcoin. Put that aside. This company has two years of cash on the balance sheet, and they have enough Bitcoin to pay this yield for 20, 30 years or more. So we expect them that they'll do that because their whole business model is toast if they stop paying the yield. So they're not they're not even at the point of underwriting Bitcoin. What happens when Bitcoin starts to work again and they actually reunderwrite the Bitcoin too? Now you've got a thing that actually maybe works and again I think those yields will come down. I think the buyers of SATA and Stretch uh will largely be rewarded if that happens over the next two years. And and since I'm betting on that, I want to take different distinct bets on on that. And I think it's going to be a winner.
TLDR, buy stuff, and stay long and wait.
Buy stuff, generate cash flow. Private businesses, preferred equities, bonds, right? Uh uh dividend paying stocks, right? Like I've been a huge proponent for three, four years, five years now of energy MLPs like EPD and uh tobacco stocks like MO and and PM. And all the Bitcoin people are like, "Mike, what the hell are you talking about? This is a scam. like you're talk you're trying to get people into other things other than Bitcoin. I'm like no the correct portfolio for a Bitcoin holder is something that allows you to hold Bitcoin forever.
Right. So this idea that you should put 95% of your Bitcoin have no income means you're going to have to sell Bitcoin at some point. Whereas I don't have to because I have all these tobacco stocks and all these energy MLPs and a private bakery. And so guess what? If you have cash coming in, you can just hold Bitcoin forever. So I don't care if Bitcoin goes down, right? Like I see it. I see it on my screen. It looks juicy. And of course, if I had zero exposure, I'd be buying the crap out of it right now. Uh, but the most important thing is unlike people are 100% Bitcoin and they're worried about it going lower. I'm not like I just don't care.
Agree.
Brilliant. All right, Mike. Well, I'm going to let you go. I appreciate you taking the time. That was a master class. So, we're going to stop it there, guys. Give Mike a follow uh on X and hope to have you back very soon, man.
All right, thanks, buddy. See you soon.
Thanks, man. See you guys soon. See you tomorrow. Bye. That's dope.