Macro, monetary, and other ghoulish things w/ Preston Pysh

In this episode I'm joined with Preston Pi Preston is one of my favorites. He's the founder of buffetbooks.com the co-founder of the investors podcast that's a podcast network with shows ranging from real estate investing to traditional stock investing and the show that preston. Currently host bitcoin fundamentals now press and I in this conversation we talk through the current fiscal and monetary environment. How in the world we got here? What might be down the line scoobydoo all sorts of fun stuff if you want to learn more about preston you can follow in on Twitter at Pressandish.com again, tune into his show over on the investor's podcast specifically but bitcoin fundamentals all right? Well thanks for being here. Let's get started.

00:01.60

ilm

All right Preston P I appreciate you being here with me today. Yeah like I know it's been about a month since we last hung out and ah, you were my first podcast guest. So ah.

00:02.49

Preston Pysh

Awesome to be here. Awesome to hang out again. Jim yeah.

00:15.16

ilm

Gracious and patient patient with me and I hope this is a great conversation I'm sure it will be with with you here to talk with well hey I I'm excited to have you here I wanted to just have an opportunity to talk with you and I've listened to you since about Twenty Sixteen I've heard I've heard your voice on double speed.

00:16.13

Preston Pysh

Um, yep, can't wait. Can't wait.

00:34.61

ilm

For countless hours while doing dishes. It's hard for me to not be scrubbing some dishes right now while talking with you and or or helping me not road Rage. So I appreciate that this opportunity to actually have a dialogue with you So I'd love to have an opportunity just to talk with you and ah. Just go deeper on where what you've seen as far as the fiscal monetary macroeconomic landscape that's leading up to this strange spot that we're at right now and what you think possible solutions would be and what's the what's the endgame of where we are right now so we can. And that's a lot whole can of worms we can unpack. But let's let's start off with ah yeah, ah, how do we arrive at where we are today.

01:19.37

Preston Pysh

So I would ah I would frame this up in ah and I've talked a lot about this in bitcoin community. But for your audience and maybe people that are coming from this from a much more traditional lens I would first tell them. To ah study Ray Daliio's long-term ah credit cycle. Um, there's a 30 minute video there's tons of writing Ray has published multiple books about this idea of long-term credit cycles and short-term credit cycles. Um, and. If you have show notes or you have links that people can kind of click on I would highly recommend for you to to have links to ah raise video how the economic machine works. This is a 30 minute video and this is the gist of it most people that ah. You know, have money to invest. They're accustomed to credit cycles these boom bus cycles. They typically last or at least what they have in the last couple decades since we've been alive. You see these eight year cycles. Um. 8 to 10 year to 5 years somewhere in that mix where you go through a big credit event. The stock market melts down ah bonds get bid and ah become really valuable and then the system gets reset and we go through another cycle. That's what people are accustomed to but what few people.

02:41.97

Preston Pysh

Understand is that there's also a much larger credit cycle that we have been a part of whether you realize it or not that's been playing out over about eighty years since the bretton woods system was was stood up in the 1940 s and if you could zoom out if you wanted to graphically see this long-term credit cycle. It's it's actually quite simple. You can just go on to ah Google type in long-term debt cycle or credit cycle and then just look at the pictures that come up and what you're going to see is you're going to see pictures of like the 10 year treasury and you're going to see the yield on the 10 year treasury go from the 1940 s where it was really low and you're going to see that yield go really high into the 1980 SA 1970 s 1980 s where the tenure peaked out at about 16% and 1981 and then you're going to see the ten year treasury continue to go down for forty years straight until we get to covid and it pegged it at a half a percent or whatever it got down to I think it was down to like 50 bips around covid on the tenure treasury specifically and this if you. If you weren't just looking at the tenure treasury but you were looking at short duration or long duration bonds. You would see this long term credit cycle that's playing out now. Why is why is that important it's important because ah like the short term credit cycles that we're all used to.

04:05.85

Preston Pysh

Um, where things go boom and then things get built again after it goes Boom Um, and everybody goes about their life and things were bad there for a little bit. It was hard people were losing jobs and then all of a sudden they're they're hiring again and all these types of activities and and everything refflates.

04:24.91

Preston Pysh

That is going to play out but on a much grander scale and um, we are we are in that end game I would argue we're in that end game right now and so for people that are like looking around. Qualitatively and saying what's going wrong with the world. Why is everything feel like it's falling apart like everybody seems to be at each other's throats like what? Why are all these bores happening like it's all happening because of this longterm credit cycle and it transitioning into a new form of money as the settlement layer. So when we look at the second half of this long term credit cycle which you know my argument is is is from like the 1940 s post great depression world war two to I would say covid is probably a really good. Ah, marker of where this is really starting to accelerate for the transition to wherever this is going next. We're obviously of the opinion that it's going towards bitcoin next? Um, and we'll get to that so when we look at this. And we're just trying to wrap our ah heads around like why now why had why did covid why are you saying that it's covered and like because for the last you know since I've been alive. It just seems like the treasury market and the US dollar and

05:42.92

Preston Pysh

Euro and all these other currencies have always been really stable and secure and everybody just seemed to get along quite fine with no issues and what I would describe is when ah your credit markets when bonds continue when the yields continue to get compressed. And go lower and lower like they did from 1981 till covid what that is actually serving as as a bedrock to ah economic calculation of every asset on the planet and the reason why is because the values going up as those yields are going lower. The value of equity is going higher and higher reference to to that. Um, and if if that doesn't make sense I would ah strongly encourage a person to just just understand the mechanics of bonds and understand how they're priced. And also understand how equity's priced because stocks are priced based off of a ah quote unquote risk-free rate of bonds. So the 10 year treasury has really kind of been that benchmark so generically speaking if the 10 year treasury was yielding 5% then stocks should give you a return of let's just say 200 basis points higher than that stocks should be priced at about a 7 % return okay so that would that would equate to some pe ratio for a 7% 10 percent as ah as a p e of 10 right? when you go to a p e of.

07:15.36

Preston Pysh

Ah, fifteen the the the multiples kind of compress and and work in a very similar manner. So I would just I would tell a person that your pe ratio think of it almost like a bond yield and if the pe ratio is a 10 and that's giving you a 10% return because it's one divided by 10 that gives you the percent so you'd take if it was p of 15 you'd take 1 divided by 15 and that gives you the percent. Um and that percent needs to be yielding higher than ah debt. Because you have more risk associated with equity I know I'm getting into kind of the mathematics here a little bit maybe a little too granular for this bigger overarching site picture. But the point I'm trying to make with all of this comes back to bonds particularly Us bonds being the bedrock of economic calculation for the last 40 years that works until you compress the yields to literally nothing that continues to work as long as you can continue to hide the inflation that that everyday participants think.

08:13.75

ilm

Um.

08:22.77

Preston Pysh

Is their debasement rate. Okay in the price of getting food or gas or buying a house or things like that as long as that appears like it's stable and that inflation isn't manifesting itself through to basement people will continue to pile into this. This ah retain their savings I don't want to say piland I would say retain their savings in these debt instruments which were Us treasuries and bonds from europe and the Uk and Japan and and whatnot because those yields continue to compress and they can continue to become more valuable what we found after we compressed. All of that down to nothing. In fact, we we got up to how high did it go Jim. You might know it was like negative Twenty ah billion dollars or I'm sorry trillion dollars worth of um debt around the world negative yielding debt is is how.

09:15.19

ilm

Yeah, just just absurd.

09:20.30

Preston Pysh

How compressed that spring ah because we'm talking about like this really long term credit cycle that spring got compressed down to the point where negative $20000000000000 worth of debt was issued on the market just to kind of quantify How insane that is. Those that's $20000000000000 worth of contracts that guarantee the loss of Capital guarantee. It. Okay and there were people buying it because their opinion was that they were going to make the rates even more negative which would have made them more valuable was the reason you had buyers of to the tune of. $20000000000000 of these instruments. So yeah.

09:59.24

ilm

Press and right quick Could you could you talk through if ah if the risk for your return is negative. It seems at that point that equities would just have to essentially return less negative or zero to be a better investment than equities or than this this debt. How did that.

10:06.71

Preston Pysh

Um, and.

10:15.31

Preston Pysh

Um, yeah, yeah is.

10:18.59

ilm

Why does that relate to it seems that there's so there is a lot of concentration in the market with ah with just a few companies but seems like despite a few years ago when we had these negative interest rates a lot of the markets were still firing off and doing phenomenally.

10:26.70

Preston Pysh

Ah, okay.

10:31.94

Preston Pysh

Um, yeah.

10:35.13

ilm

Especially even in backwards times like Covid when everything was shut down. So why do we have this decoupling of risk freeze Nothing I should be happy with Cash theoretically yet equities are still running off in a place of just absolute nonsense.

10:38.66

Preston Pysh

Yeah, yeah.

10:50.76

Preston Pysh

I love this question. This is actually a pretty advanced question that ah I think the reason you see so many people in the market today saying I have no idea where to go or what to do is because of this question because we have now. Now that you're starting to have inflation manifest itself in everyday. The prices of everyday things desirable things. Okay, you're seeing the debt markets chase after a ah premium to that debasement rate or that inflation rate. Okay. So inflation. Let's just say the inflation today is four or five percent or at least that's what they're telling you. It is right and you.

11:28.59

ilm

Hey did you did you know that? ah last week Paul Krugman tweeted that we we beat inflation. Do you see that as long as you as long as you take out housing and energy and food and and ah transportation we won. So if you if all you need is a bunch of televisions.

11:34.43

Preston Pysh

We've beat it. We've beat.

11:42.48

Preston Pysh

Yeah, it's hilarious. Ah so you have you have the the puppeteers that are trying to convince the populace that everything's a ok right? when it's totally not the house is on fire. Let me tell you.

11:45.56

ilm

You're in luck.

12:00.80

Preston Pysh

So ah, but to your question why this is so tricky to understand so you got these inflation rates that are being published. You have credit markets that are trying to sell off to provide some type of premium or yield above that inflation rate. So I I would tell people you got to think of inflation as. Benchmark of what you have to outbeat or that you have to that your hurdle rate right? So if if inflation's 4%. You've seen the bond market sell off to a point that now it's it's yielding higher than 4% across the entire yield curve short duration long duration is above that 4% rate so you you should be ah able to keep up with inflation and I say should be because there's there's a lot more to this but just in generic and generic terms I would say you were you're outpacing that inflation rate by 1% so you're making your real return is going to be 1% right? If we're really generically speaking here and what you would expect is that that equities would also be selling off based off of a stable currency and stable market equities should also be selling off and providing a pe ratio that exceeds the the return you're getting in fixed income which is. Ah, around 5% I would expect it based off of past performance that it would be around like 7 % yield inequities ah to to capture the risk premium right? which means your pe would have to be way lower than where you're at today which I think the pe on most is.

13:36.97

Preston Pysh

Where's it at Jim like 25 to 30 Maybe even 35 depending on the type of company for pe ratios which for people to understand what that equates to and yield that's a call it a 3% yield okay 3% yield for equities now you might be scratching your head you're saying okay so debts give me 5%

13:42.20

ilm

Um, yep.

13:56.88

Preston Pysh

Fixed income giving me 5% inflation's 4 inequities which should be the riskiest is priced at 3% that doesn't make any sense and this is to the crux of of the question you're asking. So why is that. Why does the why is the world completely upside down like that it doesn't make any sense Jim and preston well here's why when the currency fails throughout history. There are tons of examples. Ah there's a book called this time is different if you want. Ah. Case study after case study throughout history of a currency failing and what happens during those periods of time read that book it. There's 200 examples or whatever in that book about about what is playing out and the reason that you see equities continuing to hold valuation.

14:45.42

ilm

Um.

14:53.50

Preston Pysh

At ah, really high premiums relative to inflation or the debasment and relative to fixed income is because when the currency fails. What happens is is that those debt markets and those credit markets. Ah aggressively reprice themselves. I sometimes refer to it as credit markets blowing up and think about it. The reason why is that credit market is a contract to deliver fiat currency dollars back to that issuer. It's a contract and the contracts. Specifications of repayment is in dollar terms. So if that dollar is getting debased at a breakneck pace which it is since covid ah, what was the debasement rate it was in excess of 25% annual I think if we would go from covid to today I think it's.

15:48.12

ilm

Um, yeah.

15:50.47

Preston Pysh

Debasing at 20 according to the m two if you took the m two and you looked at the growth rate since covid um, it's it's getting the base at about a 25% annual debasement rate how that how that influx of fiat enters the economy it nests itself into areas that. Some is in the meat of the price of meat. Some of it's in the price of equities some of it's in the price of you name it and so it's not just 25% spread across every single asset and commodity on the planet. It nests itself into different areas. So like if you were looking at real estate in downtown Manhattan or you know wherever you name it that inflation rate is going to be different than the inflation on the price of gas or the price of corn or the price of ah, an sandpfivehundred share. Okay like that the basement enters itself into the economy in all different ways. But if you're going to generically look at what's the hurdle rate I think that the best way to think about inflation and there's many of other very smart people out there that would echo this idea. I think the m two growth rate is probably the real inflation that you need to outpace with respect to ah money itself that debasement rate if we were going to say that that's what we're thinking about as inflation like real inflation. Um.

17:11.77

ilm

Um.

17:21.80

Preston Pysh

I would say that. Ah, if you took the past ten years and you did a compound annual growth rate on on that growth of the m two. You would probably be around like 7 or 8% annualized. So if you're not outperforming that with your savings. I would argue you are losing buying power. So if somebody invested in something and it was growing at 5% I would say congratulations you've underperformed just ah, you know the basement rate by 2% like you're losing 2% of your buying power based off of what you did with that savings. So um, when when we answer your question. This is the this is the real answer with all of that and it's important for people to understand all that context so that they can understand what I'm about to say when the when the currency melts down the bonds blow up because they're denominated in. Said currency of the past system. What isn't specified as the the denomination is equity is stocks okay because you have a stock certificate and that that company is performing business and they can elect to be paid in Whatever.

18:26.37

ilm

Um.

18:35.42

Preston Pysh

And retain their their savings in anything that they want most companies actually retain their savings not in dollars a lot of them were using treasuries for a very long time when they kept appreciating in value but those companies can they can save in marketable securities. They can buy s and p 500 stock. They can buy. Individual companies and put them. You know their non-operational so subsidiaries that are just sitting on their balance sheet. Um, but that's how they can save and so let's say the currency. Let's say the world would start using Schrobucks which is basically which is basically the dollar. Um. But let's say the schrobuck was like really it didn't debase at all and it was actually a wonderful currency that company can choose to denominate their savings and their unit of account inside that company in in Schrobucks if they wanted to and obviously what I'm what I'm getting at is. Um, companies in my opinion are going to decide to save in the hardest money as we continue to go through this transition of this of this legacy long-term credit cycle into this new financial system and I think that they're going to choose to do it in a currency that's backed by energy.

19:48.42

ilm

Are.

19:50.51

Preston Pysh

That is immediately saleable that has near 0 frictional cost to transact that no entity or government can come in and screw with the amount of units that exist and has a terminal fixed number of units in it which is bitcoin. And I think that's what everybody's going to move to. So If you're looking at this market and you're owning Equity. It's all going to be repriced. There's going to be different Pe ratios on the other side of this event horizon. But um, that's why I think you're seeing it already that equities are. Ah, have a premium to debt and um, that's why you're seeing the yields that that they're at and they're kind of holding their value is because once the eventual transition occurs and this is why you go, You know you go read the book. Ah, this time is different.

20:42.99

ilm

Um.

20:47.65

Preston Pysh

Um, you'll find that stock markets in their local firm in their local fiat currency term denomination. Go parabolic through these events they go way up in. That's right.

21:00.79

ilm

If you have I mean if you have a ah money that's infinitely debased the assets that's being priced against go infinitely up.

21:06.61

Preston Pysh

Right? That's right, it's it's the same I use. This example sometimes to help people understand if we're playing monopoly and there's a fixed amount of equity on the board right? and those are businesses and let's say the banker comes in and they flood the game with all the money that there's that they're squatting on. And everybody's currency is going straight up. Okay, and there's 5 times as much currency in the game. What's going to happen to the scarce equity on the board. It's going to be that's right.

21:35.27

ilm

Yeah, everyone's gonna be. You're gonna be buying as many houses and hotels as you can because the money's no longer. Yeah, it's you want something? that's that's that's finite rather than this infinite flood.

21:43.61

Preston Pysh

Only thing that's right, that's right, anything that's scarce in that game is going to get bid. The value is going to go higher and here's another thing to think about is if you borrowed money from one of the other players to buy the scarce thing the equity. Stock right? You ah the person who gets screwed in that deal is the lender because they're getting paid back at a remember they they issued the debt when there was one fifth of the amount of currency in the game.

22:19.61

Preston Pysh

The the repayment was in in currency terms like the deal that you struck with the other player was I'm going to pay you back in the Monopoly money and I'm going to pay you back This fixed amount. Okay, then the Banker steps in and they debase the the fiat in the game by 5 x. But that contract didn't between you and the person that lent you to money didn't change. But what you did with that money is you went and bought scarce equity off the board that now has appreciated in value tremendously and so that's the game that's being played right now on a global level and this is why. Ah, you know if I was going to add a little bit more realism to the the Monopoly example that I just provided with ah people basically using debt to buy scarce things look at look at who the us is ah at War with. Everywhere in the world. It's people that are providing scarce commodity physical things and what they're trying to shove into their throat as payment are treasuries right? They're saying.

23:26.61

ilm

Um.

23:28.97

Preston Pysh

Ah, you have to use the dollar you have to use our treasury market as basically the backbone of payment for these physical things that you're delivering every every every enemy that the us has or Europe or Uk like they're all trying to jam these these paper nothings down their throat for physical things and they're just not having it and I would argue that that's one of the main reasons you're seeing so much social unrest in the world from a nation sovereign state level.

23:55.88

ilm

Um's there's so many places I want to take this but we'll we'll camp on that right quick where we're at it's so obviously with this where we are with oil right now is it's interesting.

24:05.10

Preston Pysh

The.

24:10.67

ilm

Ah, we we haven't set ourself up for an advantageous spot over the last several years we've essentially drained our strategic petroleum reserve meanwhile last week who was it that tweeted that they're going to mandate that we get the price of oil down to what like sixty bucks a barrel I don't I don't know how they think they're going to achieve this. You're trying to get something that has.

24:15.97

Preston Pysh

Um.

24:21.98

Preston Pysh

Gal.

24:28.79

ilm

Again, there's there's a limited supply and we don't right now we don't have access to that much of that limited supply yet. We're mandating or supposedly going to mandate that we get it for a a price when I I would I would argue that a lot of other countries are trying to lose trust in the Us dollar so

24:41.44

Preston Pysh

Um.

24:47.98

ilm

Let's just go there right quick. How what? what are your thoughts on oil like will we be able to get $60 a barrel like how is that going to happen or like I don't know how you even process that.

24:55.40

Preston Pysh

Well, the way that well the way the government would try to do it and just just for people to if you think we're operating in free and open markets. We totally aren't like not even close. Um and I could go into like the backstop facility and how basically yield curve control has been happening for banks since.

25:04.57

ilm

Um.

25:12.75

Preston Pysh

You know they stood up that facility with the Silicon Valley bank and all this other stuff to kind of prove my point of like why we are not actually operating in free and open markets which manipulates the cost of capital blah blah blah right but to your 2 year question about oil if the government really wanted to try to keep the. Keep the price down they could just print a bunch of theirrobucks they could go and um, if and this is this is becoming more of an if as the days go by if they can find somebody to sell them oil. They don't care about the price because they're just printing therobucks.

25:36.41

ilm

Um.

25:49.69

Preston Pysh

If They get the oil for $140 a barrel. They can just print Therobox shove it into the hands of the person willing to accept Therobox and then they get the oil and then they drop it into the market through the spr program to to flood the market to try to push the price down to $60 Is the play so they're trying to lever the schrootbox to to create a false sense of price action in a physical market and ah that is a total fool's Erran Now what they think they can do they like if if you're going to. Jump into the mind of of a person in government. That's that's trying to play this game. What they're trying to do is they're trying to create a recession through so much pain interest rate pain that um that they suck the demand for oil out of the market which would also drop the price. And if they can if they can do all of this through interest rates before um, they they run out of oil to put into the market then they get away with it or at least they they think they get away with there's all other types of maturation that kind of pops out of all these. Sinister Market manipulation type activities that we're not even talking about but in that short term window if we were analyzing it in that short term window if they can do all of that before they run out of physical oil or a person willing to give it to them.

27:22.79

Preston Pysh

Then they kind of get away with it in the short term at least from like the psychology of the the global or the the citizens of that nation state. But boy what? a what a game to play and what dice to role because if they do run out of The. Of the oil which look at the sp or the strategic petroleum reserve right now and I'm seeing it's tapped right? It's tapped So if we don't get the the demand suffocation that naturally comes through a recession. Ah boy it's going to get fascinating and you would see the price of oil just totally rip. And ah and and now think about the ramifications of that into the treasury market because the treasury market is is moving based off of the expectation of of inflation itself. So Yeah man we're we're in the end game. We are. We are definitely um.

28:09.95

ilm

With that.

28:16.13

Preston Pysh

Where we're at in the end game and how long that end game lasts I don't know but I think we're definitely in it and ah, we're probably in the start of it. Ah, but I just I don't know how long it takes to play out and I think that for somebody listening to this if if that idea like really makes you. Raise an eyebrow like what the heck is this guy talking about I would strongly encourage you do your own research and dig into this a whole lot more because for me this is just matter of fact, like this isn't even like a question of whether this is actually we're in this end game in this transition to a new system. We are very much in that. But if that's if that's a shocking idea to you go find somebody else and dig into this a whole lot more and and I would again go back to the Ray Dalio video because he gives such a great overview of of um, the beautiful del leveraging part there near the end. Maybe he's a little delusional to like how these systems. Ah, transition. But um, in general the premise and the thesis is very strong and important for people to understand.

29:22.39

ilm

Um, you're you're seeing so many pieces lining up that would be indicative of this this endgame situation even like again the the spr you have the bricks nations. We talked if we could find if we could.

29:34.89

Preston Pysh

Um.

29:36.16

ilm

Find someone to give our our shootbucks to you know, most people only need to take a Stanley nickel for ah for it. So ah yeah, and for a long time. We've been able to shove our debt as a country onto other nations because hey we were. We were the big person on the block. But now again, you're having other countries starting to rise up and recognize the the.

29:51.92

Preston Pysh

Um, ah.

29:55.80

ilm

The abuse that we've leveraged over decades and are going to put their foot down which is ah it's frightening I think it's healthy I think a really easy way to think through where we where we're at now is thinking through like a forest fire. So like California like Southern California

29:57.40

Preston Pysh

Yeah, yeah. So Well in.

30:15.54

ilm

If you live out there I know a lot of people in Southern California want to think it's like Hawaii it's just tropical paradise it's not it's it's really quite a desert and you can plant some palm trees and everything but it's still. It's pretty deserty out there. Anyways, we've we've created this facade for what we think this atmosphere is like and then.

30:22.76

Preston Pysh

And.

30:31.80

Preston Pysh

M.

30:34.65

ilm

We've built homes on places They shouldn't be built so we've we've that's building up of assets in places that aren't very stable. Um then with with with force fires. You know there's there's natural cycles with the burning of brush and what we've done is we've we've put homes in places that.

30:40.17

Preston Pysh

Yeah.

30:48.98

Preston Pysh

Um, me.

30:52.40

ilm

Probably shouldn't be that It's not natural for them and the moment a spark hits we put it out. We put it out when the the healthy thing to do over the long term will allow some some of that underbrush to be burnt up but we've allowed for any time we see the smallest Spark we we.

31:06.19

Preston Pysh

Um, I'm from.

31:10.31

ilm

We stomp it out with our big foot and then over time we just had this building up of pine needles Now we have the society that's built around feet and feet of pine needles and leaves and undergrowth and it's eventually a spark will hit that we can't with our giant foot come in and put out and.

31:15.89

Preston Pysh

Um.

31:27.72

Preston Pysh

And.

31:30.58

ilm

Unfortunately, we've built so many homes around this So many people's lives are intertwined with this undergrowth and it just become natural. It's just part of its its it seems normal to us and eventually when it goes up. It's gonna be really most likely I Really hope it's not the case but it will probably really be really painful. But.

31:40.70

Preston Pysh

Even.

31:50.20

ilm

Eventually it will lead to healthier place. That's few years ago kindra my wife she and I went on a hike we were in ah grand tetons and there's a beautiful hike. It's right along. It's ah it's called Ginny Lake and on your left. You've got this big lake we're going up to the grand tetons and this ah ah.

31:52.43

Preston Pysh

Yeah, yeah.

32:08.80

ilm

Big waterfall out there but on the right, there's a whole bunch of beautiful trees that are you can tell they're they're not infants anymore, but they're they're young trees. They're just real vibrant. They look like the healthiest trees in the whole park. Well, the reason it's like that is because several years ago they had a big fire right there and that allowed things get burned out new nutrients to come in and the dead and old to be.

32:24.25

Preston Pysh

Um.

32:28.45

ilm

Taken away and that is a natural state. Um, that that we've we've suffocated out in a literal sense Again, we don't We don't like force fires. Um, it's it can be damaging to society in the short in the short term but we've also done that with our with our situation financially monetarily and it's.

32:29.57

Preston Pysh

Yep, yes.

32:48.10

ilm

Yeah, there's there's a place of unnatural habitation like people now going back to like where do you put your money if if if inflation is this high and bonds are negative and what do where do you put your dollars Well, that's led that's led to this monetization or financialization of everything.

32:49.99

Preston Pysh

Yes, yes.

33:06.83

ilm

Suddenly a few years ago gosh it was absurd during covid remember how like use cars were just skyrocketing in price. Everything went up massively and that's because people are looking for anything to hold their value in and it just led to these bizarro world of.

33:06.95

Preston Pysh

Um, that's right.

33:14.87

Preston Pysh

Who.

33:23.97

ilm

Trying to retain value and worth in something that is relatively scarce at least scarce compared to this 1 thing that can just be printed out and ah yeah, it's I don't know what the the match will be or the the lightning strike will be um.

33:32.63

Preston Pysh

Ah.

33:40.64

ilm

But there will It's it's inevitable that something will take place that will lead to all this underbrush that we've been accumulating for decades and decades to take to take a spark and then lead to ah.

33:51.30

Preston Pysh

Well Jim I would argue that the that the spark has already happened. Ah I would argue that the fire is already raging. Ah no seriously like the the bond if you if you sat at a billion dollar bond desk you have experienced.

33:58.44

ilm

Um, yeah.

34:08.35

Preston Pysh

The deepest selloff in the history of the the United States since covid in fixed income. So like if you put a dollar amount on how much ah buying power has been destroyed since covid in fixed income. It's unfathomable like you. Totally unfound trillions upon tens of trillions in buying power has has been evaporated and eviscerated from the market already now for most people they don't own that most people don't have savings if you lined up 100 people on the street. Most don't even have any savings so to them. They're not necessarily seeing that but I would tell you the the the mat or the the spark has already happened the the fire is already raging when you look at the reaction that we're having from policy makers. From the countries that are in debt up to their eyeballs and are flooding the market with more fiat. They're not They're not dropping water on the fire they're they're actually dropping gasoline on the fire. Okay, um, so the process is already underway.

35:18.69

ilm

Um, me.

35:23.50

Preston Pysh

It's already. It's already left the station. It's it's nature going to your point about like the force fire. What I think it makes us so hard for people to wrap their head around is it's never happened in their lifetime, especially if and if you're in a developed Western Country. It's never happened in your lifetime. So. When you're hearing this, you're saying. There's no way because we have a cog as humans we have a cognitive bias that if if you've never seen the the the black swan. Well the black swan doesn't exist. It's just a myth right? but. This is this is like extremely obvious. It's all it's just mathematics. Um, and it's it's well underway, it's well Underway and and it's not something to fear. It's something that naturally happens there is a way to prepare yourself and to protect yourself. You don't have to do anything.

36:08.76

ilm

4

36:16.78

Preston Pysh

Ah, like based on let's say we're right about bitcoin and that it becomes this new global settlement layer for for the world to settle the exchange value based on where the price is today is. if if you have a million dollar net worth I would argue you really just need about a 1 % ah position size in bitcoin from that million. So a $10000 position on a million dollar portfolio to preserve the buying power of that portfolio based on the math right. And I think I'm being and I'm not being ah I think that's a pretty conservative estimate is like just a 1 % position so like people that are fearing this or are saying oh my god like sure there's going to be social unrest with that. There always is just like in the forest fire like hey there's things that are that are burning like you got to get away. You got to. You got to be lean, you got to be agile. Um, but you also have to have ah some type I would argue you really need to have some type of position size to preserve your buying power. The other thing that we've already talked about that's really counterintuitive is you is if you don't like bitcoin or you don't. Think that it's going to be that as we migrate to a new system. Well the only thing other that you're going to be able to really kind of preserve your buying power is is inequities and you're going to have to own high quality equity that you think is going to continue to be competitive on the other side of this event horizon.

37:49.00

Preston Pysh

Um, because you definitely can't preserve it in debt because it's blowing up because.

37:54.39

ilm

It's gonna so you mean a moment ago. You're talking about just this the black swan How we haven't experienced it and there's ah, there's a money manager that I run into but it all often and he in town and ah.

38:10.67

ilm

Her talking with him about probably like 2 2 or so years ago 2 two and a half years ago and I overheard him in a conversation with client. He was a coffee shop talking about their allocation their their bond and stock allocation I pulled him aside afterwards and I was curious and and he said all of his clients are sitting in about 80% bonds 20% ah, stock portfolio and I asked him isn't this frightening for you one. How are you achieving yield right now in this environment with such low rates and to what happens when the fed pivots and starts raising rates. You said said, hey look your son I've been doing this since 1982 we've only made money and it's it's this.

38:48.50

Preston Pysh

What an egotistical response? Yeah, what an egotistical response and um and ironic that he said 82 right because going back to yeah me going back to talking about like how this long term credit cycle has played out since 81

38:48.76

ilm

Entrenched.

38:57.39

ilm

He is perfect. Ah.

39:05.76

Preston Pysh

You could have been a ham sandwich and you would have crushed your performance if you just had ah a significant allocation to long term bonds ah through that entire 40 year period of time because it was. It's a massive. It was a massive forty year bull cycle for long long duration bonds. So yeah and he was. His comment like literally marked the peak. Um, you know the low point and yields but the peak and price and ah boy if if something goes up for forty years straight which bonds long duration bonds did. What do you think the correction on that's going to look like. Ah.

39:47.30

ilm

Actually I am curious So I saw him recently and he mentioned I asked him all his portfolios doing he mentioned they've mostly shifted to ah ah, investment grade debt and ah trying to get some higher yield and to me that seems quite risky. Um, seems like you're trying to pick up pennies in front of a steamroller but I am curious I meant to actually this until your ride. Um I'm I'm curious your thoughts I'm under the inclination that the fed man I Want to go so many places the fed's obviously trying to bring pain I think that's that's writinging is on the wall there. I Don't think the market and the economy is reacted as much as they would like to see so I think they're going to keep put their thumb down to to bring more pain but we have to keep in mind. Ah you know next fall it's ah it's a voting year an election year and ah yeah I think they'll be.

40:21.62

Preston Pysh

Ah, hub and.

40:25.42

Preston Pysh

Ok.

40:36.67

ilm

Keep their phone on thumb on the pane for a bit but I would expect for them to pivot probably around I don't know March april is my guess I'm probably way off here. But that's my guess.

40:45.29

Preston Pysh

I think they're already trying to pivot I think they're trying to pivot right now I mean you had what? ah multiple fed officials every single day for the last like two weeks come out and try to talk this thing down like that we're we're done raising. yeah yeah I think they are. They're already in pivot mode.

40:57.36

ilm

Um, it's all my games.

41:03.13

Preston Pysh

And what's what's interesting is as because anytime they've done that in the past you would have saw bonds just bidding like crazy and the yields coming down off of that that news of of you know a dozen and a half. Fed officials coming out and and pumping this narrative that we're pausing we're pausing. We're pausing. Um, you didn't see that you didn't see that at all. In fact, you saw the the Bond Market rage into a further sell off as they're saying we're done. We're done. Why.

41:39.15

Preston Pysh

Why was because because people can actually do the math and they can see that. Ah, they've got to flood the system with more printing at this point in time and those Yields ah continue to go higher and higher and the prices continue to go lower and lower. So they're already trying to pivot jim.

41:59.61

ilm

That was my my my next question was going to be actually related to that when the if if we follow normal Bond values in in interest rates. Ah, we would think we would say that all right The fed Pivots interest rates begin dropping. Therefore existing bond values theoretically would go up. Um, do you think that's the case or is there just lack of trust in the system and a realization of the the value of the underlying return of payment is just people are trying to wake up to this so we won't see that.

42:20.58

Preston Pysh

Huh.

42:33.97

ilm

That seesaw go the other way as as interest rates start to drop again or should we see just a normal. Oh yeah, interest rates. Go go back down therefore Bond values like should you be looking to buy the long. The long duration stuff as as they start to pivot. What are your thoughts there.

42:49.63

Preston Pysh

So here's here's ah so if you think that we are at peak yield in that the the bond market is going to go into a bull cycle for the rest of the year obviously you want to own duration right? because you make more money on on the move. But. Today right now. The three month is offering you 5.46 okay, the 30 year is offering you 5% so you're getting ah approximately another 40 bips by owning three month money. With and this is really important the optionality to to plug it into anything that you think is is going to provide more value into the future versus. Ah, gamble that you're perfectly timing the the bottom of of the bond market and you're going effectively levered long because you're using the duration to get an outsized performance that you know right now that that it is the the bottom of this bond sell off right. And that the 30 year even though it's giving you less yield and you can change your mind three months from now. Okay, you can change your minds three months from now Jim like and collect 5.46 annualized as you wait three months so like

44:19.21

Preston Pysh

I Guess the question I throw back to anybody that's buying long duration right now. Yeah I would say Wow You really are that good. Ah you your time your ability to pluck out the timing is so perfect.

44:30.19

ilm

That.

44:34.31

Preston Pysh

You can't even squat for three months and collect a 5.46% return because you're that good like it's ego like it's somebody's stepping into this right now and buying longage and you know what they could be dead right? But boy like. I'm sorry like everything that I'm looking at from a from a geopolitical backdrop right now in this market and I'm I'm not even going to say like the wars and this I mean it was just like Biden like ah you know what we're just going to pop out another one hundred billion to these other countries in the world with. Nobody in congress voting for anything. We're just going to throw this hundred Billy their way. Um, if you're in credit markets and you're buying the 30 year like long at this point like I don't I can't understand it for the life of me.

45:29.17

Preston Pysh

For the life of me. That's why I think it's gonna I think you're totally nuts my personal opinion.

45:38.12

ilm

It's but where where we're at though I mean going back so you and I both I think would would agree that the the endgame for this would be bitcoin I think it's the most likely result. But there's so much argument against that and it's mostly by the entrenched players here and as as we're talking I have a bunch of young kids. So I think in their terms a lot of times. So what I'm what I'm picturing with this is like um I feel like we're living in an episode of Scooby-doo and in Scooby-doo everyone's the same.

45:55.78

Preston Pysh

Yeah, yeah.

46:09.74

Preston Pysh

And.

46:11.48

ilm

It's every episode's the same what happens they're driving along and they you know they break down in a small town and there's this person you meet you always as an adult you know who the bad person is it's the person who is trying to not have some sort of change or inconvenience in their life. It's old man Jenkins the whole time because old man Jenkins has lived in this place.

46:19.60

Preston Pysh

Oh.

46:30.66

ilm

He likes that it's quiet. He likes that he's easily making money and has his life sustained for him or whatever you know he's got his old in that he takes care of but then suddenly there's this new thing on the block. That's that's making a ruckus and it's it's ah it's bringing change. Yeah.

46:45.54

Preston Pysh

Those darn kids. No, it's those darn kids.

46:50.90

ilm

You see there's There's so much going on and suddenly like oh well, it's this.. It's this ghost. It's this this villain they villainize something and that's the evil thing and they paint this picture of this this terrible thing the whole time. That's hey this should This is really the problem we need get rid of this problem and everything will be fine again. But in the end of the episode they they finally catch the ghost and the whole time.. The bad problem was the one that was the ah the one who's been intrenched all time their their whole stake here is keeping status quo and they want to make sure that status quo was quote was kept but you had these these darn kids who came in.

47:16.22

Preston Pysh

Seeking order. Yeah, yeah.

47:27.60

ilm

And ah revealed like oh wait. It's it was old man jekins the whole time and I really feel in my ah terrible terrible analogy I like that's where we're at us government is sitting here like oh that it's this and it's that it's these other things and these are bad. This is going to boil the like bitcoin's going to boil the oceans and you know drug dealers use this thing and it's. Quick look at that that ghost over there and meanwhile you have bunch of gubers on Twitter ah talking about bitcoin and oh wait I think it's this thing and we're we're the ah we're the darn kids. But I think the people trying to see the mass is getting pulled off and who's it with blackrock a couple days ago I mean

48:00.13

Preston Pysh

Yeah, yeah.

48:06.20

ilm

Stated that that he thinks that this this current price movement in bitcoin is yes, related to the false etf but he even indicated He think it's also just the fact that people shouldn to wake up and realize that bitcoin might be a relatively safe asset and ah.

48:20.53

Preston Pysh

Um, they're seeking quality I think was the quote. Yeah.

48:22.36

ilm

Equality That's it I think the mask is trying to get pulled off and people should realize the villain this whole time was not this foreign thing. It was the the familiar thing we've been entrenched with the whole time That's been built up that it has the most to lose um with with a changing of tides.

48:37.87

Preston Pysh

The ultimate fool's errand is seeking order in a universe of disorder and change right? and what you just described is geriatric incumbents. That are living an extremely um, amazing life and they have all of the equity and they hold all the buying power and we can see this in in the manifestation of like just the the amount that proportionally wise like percentage wise. How much of that buying power is stuffed into the top 1% or ah tenth of a percent. Um and what they seek is is order in a world that is always changing and.

49:32.79

Preston Pysh

When we look at bitcoin and we look at what it's Changing. You are changing this idea that that I can send you gold bars over a over a wire now and to custody these gold Bars. I Don't need a vault I don't need all this men with guns surrounding the vault. Um, there's no middle man that's taking their cut to transport this which happens instantaneously and there's no.. There's the miners aren't able to drop more supply onto the market when the price rages and if a person doesn't want to wrap their head around that technology they're they're seeking the the fool's Errand. Which is they're seeking order in a world which is constantly changing and improving itself and it's just that simple and and I and I actually like the analogy a lot I think it's hilarious because you're right that like if you really do dissect those those ah those shows it is often.

50:40.90

ilm

Ah.

50:47.65

Preston Pysh

Some old fart that's like seeking order and doesn't want the pesky kids or the noises or whatever and they're trying to scare them away and use use illusions and use ah fear tactics to prevent. Ah. Chaos or disorder or change. It's really change prevent change from happening that's hilarious. Yeah.

51:11.78

ilm

My My last thought for you here um would be why Why do you see bitcoin as a solution. Versus just fling to equities or gosh were We're only talking about the Us right? So Why? not? Why don't We just go to an international market or an ah international currency. Um, why or housing like why there's only a there's not but there's there's There's so much Land. There's a finite number of houses sort of.

51:25.52

Preston Pysh

Yeah I Love this quote at.

51:38.76

Preston Pysh

Yeah.

51:40.44

ilm

So why not real estate or equities or international markets currencies or equities or debt or something else. Why why? this.

51:45.78

Preston Pysh

Yeah I Love this Question. So I Think what? what is a really hard concept for people to think about is what would a Pe ratio look like in an economy with a money that's not being debased like fiat. Okay, and. When you when you think very deeply about that question you will come to the you'll you'll arrive at why I'm um like all in on bitcoin versus ah stocks. Um, that's my.

52:15.11

ilm

Which is so bizarre because that's your I mean so much of your career and your life like that's how I found you was talking about the most traditional of investing you know Warren Buffet you you buffet books dot com like you're the traditional investment guy. But here you are.

52:22.15

Preston Pysh

Yeah, yeah, yeah.

52:32.26

ilm

Pivoting so much not out of hype or just general speculation. There's something there. Yeah.

52:36.99

Preston Pysh

It's out of math. It's based on math. So here's the math so like um when when I look at an equity and today it's priced and obviously I'm talking public you know large cap equity if it's priced it at. Ah, 30 or somewhere in that ballpark and we're saying that that's a yield that's equivalent to 3 what happens when you move to a world and it was compressed to that 3% yield because it was because credit was being compressed to a half a percent. Okay, so that's how it got there. And then as credits unwinding equity is staying at these really high premiums because there's nowhere else to go with with your buying power. So it's continuing to be there. In fact, the multiples might even become higher which is probably crazy to even think about. But. But I think that's where it goes next is I think the multiples don't go down to 25 I think they actually in in dollar terms I think they actually start going to like thirty five and forty as as debt continues to explode because there's nowhere else to go to preserve your buying power. And most people aren't going to understand bitcoin until you're like at a price in excess of $1000000 per bitcoin and then they're going to. They're going to have to they're going to have to understand it or have to learn it and then that's when it really starts to get interesting because.

54:00.89

Preston Pysh

Then you're going to be looking at what's the value of the equity in bitcoin terms so you have to you have to come to well what? what in this new world is going to be the risk-f free rate I think the risk free rate is going to be ah, ah, lightning channel capacity and ah, how much a person to. Person has bitcoin they they can take those bitcoin they still hold the keys they can open channels I think all this is going to be turnkey ah for a person that's squatting on bitcoin they're going be open channels on layer 2 for immediate payment settlement and you're going to collect fees for that routing I think that is going to be the new risk free rate. Because because what's so interesting about that is you're still holding the keys what? what in the history of humanity have you been able to hold the keys while the underlying asset or physical asset is being routed back and forth. Um, I would equate this if people are trying to wrap their head around it think about like if I had gold bars and I wanted to open up an I O U Network with with you Jim I can do that but the gold bars are still sitting in my vault and. I still hold the key to the vault but I we can still settle them back and forth amongst each other and if there's ah another person a third person I can open a channel with them and they can they can basically use these gold bars that continue to be in my vault. It's almost ah ah akin to.

55:36.92

Preston Pysh

Um, Quantum Mechanics is what I would describe this. It's almost like I have a gold bar that's like ah that can be in multiple places at once is is how a person can maybe wrap their head around this and and with that you've de risked.

55:52.45

ilm

Um.

55:55.88

Preston Pysh

Ah, me or me lending it out right? because I'm not lending it out I still hold the keys and and nobody else does so. That's what makes this really fascinating. That's why I think it'll be the new risk free rate now what? what percent fee am I going to be able to collect. On an annualized basis for let's say 10 bitcoin that would be in a vault because whatever that percent is in fee routing I think is your new risk free rate then you have to think the next thing that I would say that is going to be a different. Ah, concept than what most are accustomed to is how much of a premium above that risk-free rate is equity worth. Ah.

56:43.65

Preston Pysh

For the for the price. So like let's let's use some generic numbers here. Let's say that the routing fees for this lightning network is 3 historically in this fiat world. We we would slap 200 basis points above that and say that that's an appropriate risk premium for equity. Which would mean 5 which would mean a pe of 20 for equity. Um I don't think that that's going to be enough personally. Um I think it's going to have to be higher than that and I think it might it might even be aggressively higher than that and so ah.

57:11.40

ilm

And.

57:20.80

Preston Pysh

You know I'm just ballparing it here because when I look at my own personal bitcoin I I know what I would be willing to part with it for what what yield I would have to be collecting on it for the risk that's associated with owning equity and their ability to produce future Free Cash flows I think that numbers like.

57:27.22

ilm

Um, yeah.

57:40.76

Preston Pysh

Maybe ten a p e of 10 which is a which is a return of 10% ah and it it might and and obviously it's it's business dependent in the prospects of that business and it's competitive moat and blah blah blah. But I think that you're going to. And another thing that I think makes this really hard to to wrap our head around is like what does Ai introduce because I think that that's kind of a landmark technology that's way different than anything we've experienced in our lifetimes. Um and and where that's going and the pace that it's going is is going to really change things a lot as well. But um. Going back to the initial question and and why I'm saying all this there is a point is if if the pe today is 30 and I think the pe is going to 40 and it's just ridiculously out of control versus the the free cash flows that it's kicking off in the risk that it that's associated with that. When I reprice it in bitcoin terms. The prices have to be drastically different than where they're at right now and for how much I think bitcoin's going to appreciate in value between now and whatever that moment is in the future. There's no way equity can compete with that after it's repriced in bitcoin terms like not even remotely. Like 80% lower than where it's at right now would would pique my interest.

59:02.24

ilm

Well, it's amazing. It should again going back to the ah the wildfire analogy like this should bring Health and Equilibrium back it again. It might bring some pain to get there but it should bring health back to an investing standpoint right now.

59:11.83

Preston Pysh

And her.

59:17.69

ilm

Most people were not investing. We're buying the market. Why Why are we buying the market is it because you think that these companies are actually valuable and they have opportunity for risk you know risk adjusted return that makes sense. It's it's primarily speculation again I world I live in this weird dichotomous world of like Bitcoin maxy crazy people and.

59:36.84

Preston Pysh

Yeah, yeah, well.

59:36.93

ilm

Financial Planner cfp and almost all them most most financial planers bury their heads in the sand to anything macro economic and the moment you mention anything about macroeconomics or fiscal or monetary policy. They say that you're trying to time the market or whatever versus living in reality and there's this place of like look just buy the index. That's the safest thing to do.

59:48.64

Preston Pysh

Yeah.

59:56.56

ilm

But again I would argue is that is that safe or is that just what the masses are doing and why why is that perceived as being safe and there's there's so many weird things there when it comes to investing and ideally again like this comes to this financial or monetization of everything. And these indexes are no longer used as investing Oh does this make sense as an investment. It's a it's basically a savings Tool. You just got to do something out of desperation. Try to at least reach if not try to moderate outform inflation and the implications of having a.

01:00:30.13

Preston Pysh

Ah.

01:00:31.50

ilm

Ah, money. That's not debased is astounding like 1 of the hardest things I think is especially when interest rates for nothing is hey Jim we want to buy like a few years ago I hated this question hey Jim we're want to buy a house in one or two years what should we do with our money between now and then it's like well jolly like what do you do. Do keep it in cash like where I live in New Bromles Texas little town in in Austin San Antonio area a few years ago I mean houses went up by 20% and then my house appreciated by 33% in 1 year and then about 20% and 10 percent like so if you keep it in cash I just lost 33 % purchasing power on my home in 2022 do you put it in bonds. Do you put in at that point money markets were yielding nothing. Do you put in equities and risk a pullback in the markets where do you park this? That's a terrible thing that we have to speculate on again. This is not because our house is becoming that more valuable are that more people moving to do bronles that it's 33% more valuable.

01:01:11.31

Preston Pysh

Um, ah.

01:01:29.10

ilm

Or is it the dollar that we're denominating these things in is becoming worth less when we introduce a money that cannot be manipulated suddenly the communication methods again money is just simply a means of communicating storing and transferring ah value across space and time.

01:01:33.65

Preston Pysh

Bingo.

01:01:42.58

Preston Pysh

Energy. Yeah yeah.

01:01:45.64

ilm

So the moment we remove this hijacking of of communication. We're able to actually sit here and have a better dialogue. Okay well I can look Jim I want to buy a house in a year it's like okay well, how much do you think New bronhel is going to go by and like yeah, there's some underlying things like. What's wood going to do like. Is there going be a big force fire that causes all the wood to be depleted and suddenly wood's going to cost a lot like we could. We could probably get a better idea like all right like we think that housing because the amount of people moving to this area. Houses will go up by x amount most likely but we're not sitting here trying to speculate on what's going to happen with our monetary policy over the next two years it'll make it just put it in keep it in money money itself versus again, that's gosh There's so much to be. You know so many questions being begged out like what is money.

01:02:23.58

Preston Pysh

I.

01:02:34.20

ilm

What are good stores of value. Why is our money suddenly not a good store value that seems bizarre that money itself is a terrible store of value and I think most people even the people who don't think about this at all are starting to recognize that Wow The the dollar is a bad store value right now. Um, which doesn't make any sense. So yeah, it's it's it's it's it's.

01:02:48.76

Preston Pysh

Over.

01:02:53.46

ilm

It is really fun to think through the implications of having money that can't be hijacked by a centralized party or debased um on a especially at someone's whim and ah the yeah, the impacts all have on investing and the the need to speculate is is.

01:03:03.59

Preston Pysh

Um.

01:03:10.30

Preston Pysh

So yeah, people just need to think that there's going to be things as as we go through this big event horizon that we've been talking about there's going to be things that perform best and there's going to be things that perform horrible.

01:03:10.77

ilm

Fantastic I think it would be great for civilization.

01:03:27.41

Preston Pysh

And then there's going to be a whole multitude of things in between. It's a vector of many different arrays and um for me I Just want to own the the best performing thing and ah.

01:03:41.88

Preston Pysh

And when I think ah if I was going to just generically quantify things for folks, it would be you know Bitcoin is going to outperform everything then equities are are in there next and then ah you know commodities could actually Perform. Outperform some equities and it could then underperform and it's going to be very volatile in between and it's really hard to do that because you're using it through futures and then there's a huge ah so I think for most people and and a lot of it's timing and and the frequency of that performance outperformance and underperformance is. A very tight frequency and so that's really challenging for people to to navigate. But those are going to be in there with equities and sometimes it'll be better and sometimes it'll be worse and then you have real estates in there which I kind of treat like ah equity as well and that's so dependent on location. Ah. The the growth in that location the politics in that location and so speaking to that is is a little difficult as well because it's very nuanced but think of it like anything else if it's scarce and desirable. It should probably perform quite well and if it's. Not scarce and not desirable and there's not some type of local ecosystem. That's fueling growth making that land and that property more valuable. Ah well then it's going to suck and go back to Them. You know use Monopoly if you want to understand which properties do well and which one's down. Um, and then at the very bottom.

01:05:14.29

ilm

Um.

01:05:17.91

Preston Pysh

The very very bottom is going to be long duration debt. So um, short duration debt might be actually not a bad place to sit here and there as you're trying to navigate this violent volatile storm. Um, but I would say very short duration like under a year type duration. Um, so like that's how people need to think about this and it's all about the preservation of your buying power and and if you select and you have the right composition of this to navigate it based off of your appetite of volatility. Um, because I know that that's a huge for me. It's not a big deal like the volatility doesn't scare me when I feel like I actually understand something I actually prefer the volatility. Um, but I know a lot of people aren't like that and and a lot of it comes down to just their understanding and their conviction of what they own is why they can't tolerate a lot of volatility. Um. And so they have to come up with whatever composition of all these different types of asset classes as as they can to to allow them to navigate it and still sleep. Well at night based off of what they feel like they they know and and don't know so I would kind of leave it at there for them. And going back to the comment that I said earlier where we're at right now in this event horizon like you don't really have to have a whole lot on this to protect yourself from what's about to happen and this is this is going to be very difficult for people to comprehend.

01:06:46.10

Preston Pysh

But the further we go across this event horizon and into this new world that we're moving towards as the price of bitcoin runs higher and higher when the price is at five hundred Thousand I think people this is going to have to compose about 10% of their of their overall portfolio value in dollar terms. Okay. When it goes to a million. It's it's going to have to be twice as much as that it said 20% of their portfolio will have to be in bitcoin at that point to preserve just to preserve the the portfolio value. Okay, so it.

01:07:19.46

ilm

Well you think through let's see like the german marks at first it's like all right if you think I mean obviously that happens at a parabolic rate but upfront like all right, you just have a fraction of your your money kept in us dollars at the time talking about ah early.

01:07:28.26

Preston Pysh

Um.

01:07:32.31

Preston Pysh

No no.

01:07:36.20

ilm

Ah, twentieth century just a little bit in the Us dollar and mostly in german Mars but then as it went off like suddenly if you have 99% of your your money in german marks and 1% of the Us dollar you just lost 99% of your purchasing power. So suddenly as that as this ah ah switch.

01:07:40.59

Preston Pysh

Ah, safe.

01:07:56.10

ilm

Takes place. Yeah, there's there. There is more risk associated with owning the legacy asset itself and so how do you? How do you navigate these this waitings of portfolio.

01:08:02.30

Preston Pysh

Jim this is what's gonna be really really really difficult for people because they're gonna be looking at a chart and and remember you got to remove your brain and put their brain in there. They're gonna be looking at a chart that looks like. A tula ponzi and they're going to be told by this imaginary mario coin that we have no idea who invented it because this is how they're recent. This is how they're looking at it right? you and I don't look at it that we know it's backed by energy and all the hashing and like we know all that but they're not going to know the the.

01:08:39.80

Preston Pysh

Everyday person off the street isn't going to understand that all they're going to know is that there's this imaginary coin that somehow floats around on the internet that we have no idea who invented it and ah it's gone from. Five hundred thousand to a million in the the past four months or six months or whatever and everybody's telling me I need to buy it right now and it's going to feel like a total trap to to a lot of people and they're going to continue to sit on their hands and the the crazy part is is that person. At a million is going to have to have 20% of their life savings or buying power in that thing at that moment in time and today where people sit. They only need to have 1% to have the same protection. So.

01:09:26.34

ilm

Can.

01:09:31.81

Preston Pysh

Why I say that is don't go buy it because I'm telling you to buy it or that somebody because I'm not I'm telling you do your homework. Do your research now. The only way you're going to be able to actually handle what's about to come is through knowledge and nobody can perform that work for you other than yourself. So go out and do the work.

01:09:51.72

ilm

Yeah, knowledge builds conviction and conviction builds strong hands. So we've got to be based in knowledge. Otherwise you're going to get shook out so well. Ah Preston thanks for thanks for taking time and talking with me I appreciate it that was ah that was a lot of fun.

01:09:58.93

Preston Pysh

Yep.

01:10:04.70

Preston Pysh

It was a blast and thanks for having me.