August 3, 2024 • 53 mins
Can Bitcoin truly be a better form of money than gold? Join us as we sit down with Mark Yusko, founder of Morgan Creek Capital Management, to unravel his transformative journey from traditional asset management to becoming a leading venture capitalist in the digital asset space. Mark opens up about his initial skepticism of Bitcoin, what led to his change of heart, and why he now sees it as a superior store of value. He also breaks down the distinctions between cryptocurrencies, utility tokens, and digital collectibles, offering a rich insight into the future of blockchain technology, which he intriguingly calls the "truth net."
Is the stock market rational or driven by unpredictable forces? In our next segment, we explore the pivotal role of data in today's tech landscape and the evolution of AI. Mark shares his thoughts on the explosion of data creation over the last decade, the critical challenges around data security, and the innovative investments in encrypted data chips. We also dissect the erratic valuations of tech giants like Intel and Nvidia, comparing them to past phenomena such as MicroStrategy's dramatic rise and fall. Mark cautions against shorting momentum stocks, reminding us that the market often behaves irrationally.
What does the future hold for global currencies? We delve into the complex world of cryptocurrency regulation and market dynamics, analyzing the SEC's approach to classifying cryptocurrencies like Cardano, Ethereum, and Solana. Mark discusses the SEC's enforcement tactics, their funding mechanisms, and the potential ramifications for investors. Wrapping up the episode, we turn our attention to Japan’s weakening yen and the broader economic implications. From the yen carry trade to demographic trends, Mark offers a compelling analysis of how Japan’s current economic situation could signal future challenges for the US and Europe. This episode is packed with thought-provoking insights and expert perspectives you won't want to miss!
The content in this program is for informational purposes only. You should not construe any information or other material as investment, financial, tax, or other advice. The views expressed by the participants are solely their own. A participant may have taken or recommended any investment position discussed, but may close such position or alter its recommendation at any time without notice. Nothing contained in this program constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in any jurisdiction. Please consult your own investment or financial advisor for advice related to all investment decisions.
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Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:08):
my name is michael dyad, publisher of the lead lag
report, and joining me for therough hour is mr mark yusko, who
never quite has his face on hisx profile.
It's always something else onhis profile.
But uh, mark, I know a lot ofpeople have seen you over the
years but for those who don'tknow your background, just do a
overview of who you are, whatyou've done throughout your
career, what you're doingcurrently.
Speaker 2 (00:28):
Yeah, so the quick version although, mike, as you
know, I don't do short very well.
But the quickest version ischapter one.
I worked for not-for-profits.
I worked up at my IslandModerate, notre Dame back there
and now I sit in Chapel Hill,north Carolina.
So I worked at University ofNorth Carolina and then, 20
years ago which is hard tobelieve I launched Morgan Creek
(00:51):
Capital Management and spent 15plus years building a
traditional asset managementfirm outsource CIO business fund
to funds across all traditionalassets.
But the last five years chapterthree I have spent most of my
time in the digital asset space,becoming a late in life venture
(01:13):
capitalist, and now I scouredthe globe looking for startup
funds or startup firms in thedigital asset ecosystem across
what we call the ABCDs AI,blockchain, chips and data.
We've made about 80 investmentsacross four funds, raising our
(01:33):
fourth fund right now, andthat's what I do for my day job.
Speaker 1 (01:40):
What was the aha moment that made you pivot
towards the digital space?
Speaker 2 (01:46):
Yeah, so 11 years ago which is hard to say out loud,
but I joke I was introduced toBitcoin the same month as the
Winklevoss twins.
They're multi-billionaires andI'm not why.
Well, they were in Ibiza withCharlie and they immediately had
(02:06):
the aha moment.
I had traditional clients, andwhen I wrote in a letter that I
thought this Bitcoin thing waskind of interesting, I mean I
got hate.
There are people like I willfire you.
You're an idiot, don't talkabout this stuff.
And the price fell from about500 bucks to about 186 bucks
(02:28):
from March to September of 14.
And I'm like, yeah, oh, they'reright.
And then eight weeks later, itwas a thousand bucks.
I'm like no, there's somethinghere.
And so I did a relatively deepdive, but I didn't have the aha
moment really for another twoyears.
I kind of got blockchaintechnology as an operating
(02:53):
system for computing.
It's the next computingplatform.
We had mainframes in 54, themicrochip in 68, personal
computer in 86, the internet in90, I'm sorry, the internet in
96, the mobile net in 2010, andnow the truth net or blockchains
, in 2024.
(03:14):
So I kind of got that, but Ididn't get Bitcoin really until
2017.
And I was actually in an RV inEureka, california.
I couldn't make that part upand I had the aha moment that
Bitcoin was a application ofblockchain technology, it was a
(03:36):
better form of money, and sosince then I've kind of gone all
in, so to speak.
Since then I've kind of gone allin, so to speak, in what I do,
but it really was that ahamoment that and I wrote a paper
about this called Digital GoldRush that money, an asset that
exists in the absence of aliability, gold has been that
(03:58):
for 5,000 years.
But gold suffers from twoproblems.
One, it's not very divisible.
If I had a bar of gold here, Icouldn't break it in half.
I'm not strong enough to breakit in half and even if I could,
I couldn't stuff it in the phoneand send it to you.
I can send you Bitcoin with acouple of taps of the finger and
I can send you down to one 100millionth of a unit, one Satoshi
(04:21):
.
So more divisible, moreportable, equally scarce and
just a better form of money.
Speaker 1 (04:29):
But obviously it went beyond Bitcoin for you, right?
Because you started looking atother cryptocurrencies.
I want you to talk about thatexperience, because the I don't
know how many cryptocurrenciesthere are now.
What 10,000, 20,000?
I can't keep count.
Speaker 2 (04:41):
Well no, there's only a dozen cryptocurrencies, right
?
A cryptocurrency is a unit as amedium of exchange or a store
of value.
There are lots and lots,thousands and thousands of
utility tokens A utility token.
Most of them are not veryuseful at all.
They don't have much utility.
(05:01):
They don't give you a share ofequity, they don't give you a
share of cash flows.
They're not a form of debt.
They're essentially a digitalcollectible and that's fine.
But they're definitely notcryptocurrencies.
They're definitely not even,for the most part, utility
tokens.
But they are tokens, meaningthey are an entry on a ledger,
(05:25):
on a blockchain, but other thantrading back and forth and
trying to use them as currencyfor certain areas I just didn't
say currency as like a script,right, something you can trade
back and forth.
That's what they are.
But Bitcoin, know, bitcoin,ethereum, maybe Ethereum.
(05:46):
I really don't like Ethereummuch as money.
I like it as a global computer.
But things like Dash or Moneroor things like that do have some
cryptocurrency aspects to them.
Speaker 1 (05:57):
So I guess that's the question how do you
differentiate between the tokensand the nonsense side of it
from the more real things, thetokens and the nonsense side of
it from the more real things?
Speaker 2 (06:05):
Well, look, an NFT, a non-fungible token.
Now, it's not a monkey JPEG,right, which is what everyone
associates.
But I don't even like the termNFT or non-fungible token,
because it is accurate, right.
Non-fungible means unique,token means an entry on a ledger
(06:28):
.
It's not like a little coin orsomething, it's an entry on a
ledger, which is all ablockchain really is a series of
entries on a ledger.
But the difference isblockchains are permanent and
immutable.
They're not centralized like aCOBOL database that we all use
every day with our Visa orMasterCard.
If they want to turn it off,they can.
(06:49):
Or if we want to store all ourdata on the cloud, they could
keep it if they want.
Or we put our money in the bankit's on a ledger, but it's the
bank's money, right?
So it's not our money anymore,and what blockchains do is they
fix that.
They let us own things.
So web one was read.
Web two was read-write puttingstuff on the internet.
(07:11):
Web three is read-write-own.
Blockchains allow us to ownthings, and so non-fungible
token really I think should becalled a digital property, right
.
All an entry on a ledger is is arecord of someone's ownership
of some property.
It could be a JPEG, it could bea title, it could be a stock
(07:32):
certificate, it could be a bond,it could be any asset, it could
be the Mona Lisa not thephysical Mona Lisa, but the
right to own the Mona Lisa.
But that's ultimately whatblockchains are good for, and
Eric Schmidt from Google said itbest.
So Satoshi Nakamoto did whatgave us Bitcoin but, more
(07:55):
importantly, gave us thetechnology to create unique
assets in the digital sphere.
And what does that even mean?
Well, think about it.
Think about stocks.
Right In the olden days, youand I would meet in New York at
the Buttonwood Tree literallyBig Tree, where the stock
exchange is today and we wouldbring our analog stuff stock
(08:18):
certificates and pieces of paperbanknotes and we would meet and
we would exchange, and we hadto be physically proximate.
And the real problem was, ifyou've seen gangs in New York on
the way to the Buttonwood tree,those guys with the top hats
would steal our stuff.
So the Stock Exchange built abuilding and said come inside
and you'll be safe, but youstill had to get there.
So they came up with an idea,with the advent of computing,
(08:42):
the electronic age, to say youknow what, put the bank notes in
the bank and let them be onesand zeros.
Electronic database.
Put your stock certificates inDallas, texas, in DTCC, and have
these Q-CIPs, thesealphanumeric codes, and you guys
can change.
In the old days, physical peoplewould go and do the bartering
(09:04):
on the floor of the stockexchange.
Now it's just computers.
There's no people there Not nopeople, but almost no people.
Well, that's fine, but thosestock certificates still have to
exist in Dallas, texas.
Well, why?
Why not create unique digitalassets entries on a blockchain
ledger?
And that's the digital age.
So we went from the analog ageto electronic age, to the
(09:28):
digital age, and everything inthe world every stock, every
bond, every currency, everycommodity, every piece of art,
every collectible car, everycase of wine, every private
business, all $700 trillion ofassets will eventually be
entries on a blockchain.
Blockchains will be thecomputing platform in which all
of us work and will buy and sellassets in the digital realm
(09:52):
instead of the electronic realm.
Speaker 1 (09:55):
I'm going to show a question from YouTube, from
Kevin.
His question is why doesn'tBitcoin Cash get more attention
and credibility than Bitcoin?
It's faster and more scalablethan Bitcoin.
You know this far better than Ido.
I've seen some things aroundBitcoin Cash and some of the
clashes that happen among it.
Speaker 2 (10:13):
It's Paul Romer, famous prof from Stanford and
then NYU and hence retired, wonthe Nobel Prize, I think, six
years ago something like that,for something called the law of
increasing returns, and what hesaid is it's not the best
technology that wins, it's thetechnology that gets critical
(10:34):
mass first.
And so if you think about themost valuable assets in the
world today, they're notcompanies the way we think about
companies In the old days, youwere a big, strong company if
you had property, plant andequipment, you had people and
stuff, and that was the biggestcompanies in the world oil
(10:55):
companies and manufacturingcompanies.
Today, what does Amazon make?
They don't make anything.
They're just a search enginethat matches buyers and sellers
and they take a fee, a big fee45% of revenues.
But networks are reallyimportant.
So the question Bitcoin versusBitcoin Cash is Bitcoin was
(11:18):
created and it's a blockchain,and the thing about blockchains
is you can fork them, you cancreate a copy and go down a
different path with a differentcommunity.
The problem with Bitcoin Cashis the community is small and,
in essence, in blockchains, thelongest chain, the most
(11:38):
continuous chain, hashistorically been the most
valuable chain.
It has the largest number ofusers, has historically been the
most valuable chain.
It has the largest number ofusers, and so it's not to say
that Bitcoin Cash doesn't havepositives.
This idea that it's faster andcheaper.
Well, that assumes that fastand cheap are a feature, not a
(12:02):
bug.
And what do I mean by that?
Are a feature, not a bug.
And what do I mean by that?
Well, in computing, you can besecure or you can be fast.
Pick one.
It's like when you're buildinga house good, fast and cheap,
pick two.
You can have good and fast.
It won't be cheap.
You can have good and cheap andit won't be fast.
And you can have fast and cheapand it won't be good.
So Bitcoin has chosen to besecure.
(12:25):
It's the most secure blockchainin the world.
So I've been down for like 21minutes and 15 years.
Never had a hack, never had aproblem, not one fraudulent
transaction.
How many fraudulenttransactions are there at Visa
or MasterCard?
Thousands and thousands,probably millions, probably
(12:48):
millions.
And ultimately, it's not aboutspeed for Bitcoin, it's about
permanence and safety andsecurity.
Now, that's at the base layer.
We can have other layers thatdo other things, like Solana
super fast and super cheap.
It's not up all the time.
It has some problem withvaporizing transactions.
So there are trade-offs in theworld of blockchains that are
important, but ultimatelyBitcoin Cash.
(13:10):
There's nothing wrong with it,it's just it has all the
benefits of the original Bitcoinblockchain, but a smaller
community and fewer users, soit's not as valuable.
Speaker 1 (13:28):
I'm smiling at another comment here from Randy
Hunt on YouTube.
Can I use Bitcoin Cash to buyNVIDIA on sale today as a joke?
I want to tease a little bitmore on the secure versus fast
dynamic you just mentioned,because I think it's an
interesting way to frame thingsthat makes me think that AI is
not going to be secure at all.
Speaker 2 (13:48):
Oh yes, look, such a great point.
Look, we have a problem.
And actually it's interesting.
Segue into the thing I'm mostexcited about in the ABCDs, in
which we invest AI is a tool,right, it's an 80-year overnight
success story and we're like oh, ai.
(14:10):
So I'm old enough, michael, toremember 1980 was the year of AI
by Time Magazine 1980.
Okay, 2000,.
Intel stock went up up 20 foldin 12 months because their chip
was going to revolutionize AI.
Today, intel's down 60, 6-0%from 24 years ago and Nvidia's
(14:37):
up a lot.
For now We'll see how that ends,but at the end of the day, what
matters in the ABCDs?
Data.
Everything's about data, right,eric Schmidt.
Back to Eric Schmidt In 2010,.
He had this great quote he saidfrom the beginning of time,
which is a little bit ofhyperbole.
So really, since the 50s, 2010,there were five exabytes of
(15:02):
data created.
2010, there were five exabytesof data created every two days.
Today, as you and I werecreating part of it, we'll
create 329 exabytes of data.
So data is king.
The problem with data is youhave to store it and capture it.
(15:24):
That's what blockchains do.
You have to analyze it that'swhat chips do, computing
platforms and then you have tomake decisions with it.
That's what AIs do.
But the problem with AI is thedata isn't secure.
So all the data I have on myphone is secure it's encrypted.
(15:45):
If I send you a WhatsApp or atelegram, it's encrypted.
If I send you an iMessage, notso much.
All the data at Morgan Creekthat we put into the cloud okay,
at Microsoft Azure is encrypted.
It's secure as long as I'm notworking on it.
The moment I work on it, it hasto be decrypted and that's
(16:09):
where all the hacks happen.
That's where all the data leakshappen and that's why, if you
look at your phone, you've hadyou've had multiple data leaks
across all your passwords, asbecause data at rest is secure,
but data that's active is not.
So we've actually invested intwo companies that are have
invented a chip and it bogglesmy mind.
I don't really understand howit works that will allow you to
(16:31):
work on encrypted data, and soAI models that actually use data
sets could not be open to theworld to be polluted or hacked
while they're doing theoperation.
Now, those chips don't existyet, but, fingers crossed, in
about three weeks we'll get thefirst prototype back.
(16:53):
But AI, it's a tool and it'snot a computing platform.
It's not some thing that'sgoing to change the world.
And NVIDIA 36 times sales, isoverpriced.
But now I would have said thatat 23 times sales and it went up
more.
But we'll see what happens.
Speaker 1 (17:15):
My favorite stock in the world, nvidia, which I
always joke about.
Of all the stocks I had to pickon right.
With the Persona which I'velargely killed off on X, I had
to pick on that one.
With the persona which I'velargely killed off on X, I had
to pick on that one.
But now it does seem like it'sstarting to break.
I was obviously very wrong andvery early.
Speaker 2 (17:31):
But, michael, we're always wrong, and early and
early is the euphemism for wrongright.
So here's the problem.
Go back to 2000,.
Microstrategy, michael Saylorthe darling.
His stock was three bucks andit went to a hundred and
everybody was short and they gotcarried out and they came back
(17:54):
and it went to 200 and theycarried out the shorts.
And this shorts came backbecause they're like this is
stupid, there's no there there,there's no company there.
This guy's a fraud.
It was just three hundred andthirty something dollars.
They carried out all the shortsand then it went to three and
he did get fined by the SEC andall kinds of good stuff.
(18:15):
But the bottom line is therewas no there there.
But the market can beirrational longer than the
rational investor can remainsolvent.
Because back then, in 2000, mostof the money was actively
managed.
It wasn't dumb.
And I don't mean dumb onintelligent, I mean dumb,
(18:37):
meaning rule-based.
Now more than 50% of assets arerule-based.
They're indexed, capitalizationweighted, and a capitalization
weighted index has no choice butto buy more NVIDIA as it goes
up.
It doesn't get to say this isstupid, I won't pay 36 times
(18:58):
sales.
It has to do it.
And because people neverchanged their 401k.
They put the money in the 401kevery two weeks and it goes into
the index and it's aself-perpetuating momentum
strategy until it breaks.
Now, when it breaks and goesthe other way, glory hallelujah.
We will go down 70, 80, 90.
(19:19):
I don't know what that numberis, but there is no number,
there's no math, there's nothingon the planet that can
rationalize any multiple over 10times sales.
Even at 10 times sales, right?
The head of Scott McNally, thehead of Sun Microsystems in 2000
(19:39):
, said it best To make a 10%return.
If you pay me 10 times salesfor my company, I would have to
give you all of my revenue forthe next 10 years, which is a
problem because I would go tojail because I have to pay taxes
, I have to pay my suppliers, Ihave to pay my people.
So you're not going to get a10% return.
(20:00):
Stock went down 98%.
Company still exists, still aperfectly fine company, and I'm
not saying is going down 98%.
I'm saying it's going to godown a lot at some point, but
you don't know when.
So the problem with trying toshort these momentum stories is
(20:21):
the 315 train problem.
You're standing on the traintrack at 310 and you look up and
the train's about to run youover.
You're like no, no, no, no,you're not supposed to be here
till 315.
The problem is, you're rightbut you're dead.
So step off the track, let thetrain come in.
Stop, then get on the train.
Speaker 1 (20:42):
I don't know if people really understand just
how pervasive NVIDIA is inalmost every single portfolio
and ETF.
I mean, I do tons of writingson Steeping Alpha, covering
different ETFs and analyzingthem and even the funds that in
the name have low volatility,high quality dividends.
Nvidia is like the number threeposition and this is what Wall
(21:03):
Street does.
It comes out with products thatsound good, like they're
supposed to do somethingspecific, and then they put
momentum names.
So I say that because peoplewill criticize me for that
negativity on NVIDIA right thatI've had, because I've just been
skeptical of the narrative andthey say oh, you know, you
missed out on one of thegreatest moves in history.
It's like, oh, wait a minute,Everyone owns NVIDIA.
(21:25):
If you have any kind ofexposure to a supposedly broad,
diversified benchmark, andprobably more than you realize,
Right.
Speaker 2 (21:33):
Oh, that's exactly right.
So I've criticized I mean I, Icriticized Tesla when it was
going parabolic and the Teslalemmings came at me and they
don't come at me anymore becauseTesla's broken that momentum.
And look, every bubble chart inthe world looks the same, right
(21:53):
, it has a false breakout andthen a correction and then it
goes parabolic.
There are no charts, michael,none, zero.
I mean literally zero.
That go up parabolic and thengo flatline.
There are zero, right, they alllook like the Eiffel Tower,
every single one.
(22:13):
And after the original breakthere's a one last hookup, the
return to normal, whereeverybody's like see, I told you
.
And then you go to the bottomand Tesla's past that point and
they're headed down to gravityand ultimately NVIDIA will too.
Because it's just math One ofmy favorite hashtags, hashtag
(22:34):
just math.
Stocks are not like organicgrowing things.
They are simply a record ofpeople's expectations of the
future cash flow of a business.
And ultimately, the problem isthe price is a liar, right.
(22:55):
John Burbank's great line theprice doesn't mean the value.
The price is just what twopeople agree to exchange a small
amount.
And here's the big problem.
If you want to trade 100 sharesthat price on Nasdaq, that is
the price.
But if you have 1,000 shares,that ain't the price.
If you have a million shares,it's definitely not the price,
(23:15):
and if you have 10 millionshares it's not the price.
It's going to be different.
So how long can markets remainirrational?
A long time?
How long can people like youand me sound stupid Because we
are value guys at our core andwe like to buy things below fair
value and sell them above fairvalue a novel concept?
(23:36):
You can be wrong a long time.
But to your point, I own NVIDIAin my 401k and all my others,
but I would never own it in anactively managed portfolio
because that doesn't make senseRight now.
Right now, right now.
Speaker 1 (23:55):
Right, there's a price for everything, I think is
the point.
It's just not necessarily theprice right now.
I want to bring in anotherSwitching Gears, youtube
questionnaire or comments fromER Berg.
We'd love to hear both youropinions, really.
Mark's opinion on the SECrescinding its security
designation for Solana Cardano,et cetera regarding the finance
case, maybe provide a littlecontext on this first.
Speaker 2 (24:18):
Yeah, look, I mean the SEC under Mr Gensler's
leadership.
And, by the way, it's not in mybest interest to criticize the
organization that oversees myfirm.
So full disclosure we are aregulated entity, we're a
registered SEC, registeredadvisor, so I'm probably not
(24:38):
going to lambaste thatorganization.
I think they do a good job.
With limited resources.
They try to do the best.
However, I do believe that thecurrent administration chose a
tact that I probably would nothave taken enforcement by
(24:59):
punishment as opposed toenforcement by rule setting.
And so one of the challengesit's like raising a child If you
don't have rules, the childflounders.
They don't know what to do orwhat not to do, so you need
rules and they may push upagainst them, they may even
(25:20):
cross the line, but at leastthey know there are consequences
for their actions and they knowwhere the boundaries are.
The problem with the currentform of legislation was they
kind of said well, we're notgoing to rule per se on
different cryptocurrencies, uh,or different utility tokens.
(25:40):
We're not going to tell youwhether we think they're a
security or not a security, andsometimes, even if we say
they're one thing, we're goingto change.
That, arguably, is partlybecause one of the unknown
little wrinkles.
The SEC is not funded by thegovernment.
(26:01):
They're self-funding.
They fund themselves throughtheir fines, regulatory actions
from time to time to pay thebills.
So when people do bad stuff,they fine them and if they do
really bad stuff, like spoofingthe price of gold, they fine
them a lot.
The problem is those spoofersmake so much more.
(26:24):
If you pay a billion dollarfine, but you made 20 billion,
it's just the cost of doingbusiness.
So that's a long way of saying.
There are tokens that many feelnear and dear to people's heart,
like Cardano.
I don't really understand it.
I don't see any technicalactivity being built on Cardano.
(26:45):
A lot of people own it andtrade it, but I don't really
understand the use case.
Understand the use case.
There are other things likeEthereum that I think have lots
of use cases and lots ofapplications and lots of
development activity.
There are things like Solanathat we own a lot of and
actually sold a lot of and madeprobably more money than I've
(27:06):
ever made in my career on thatproject.
But today I kind of strugglethat struggle that yes, it's
cheap and fast, but it's notvery many people building stuff
on it and other than meme coinsand and nfts.
I I really can't find many usecases for it.
So, uh, you know what's goingto happen with xrp?
Yeah, don't know.
(27:29):
And and ultimately, the sec'sstance lately has been shoot
first, ask questions later, sothey fine people for violations
of rules that didn't even exist,which is kind of a weird
paradigm.
That happened at the Winklevosstwins and it happened to DCG and
it happened to a bunch ofpeople who were victimized by
(27:52):
the real bad actor, ftx, whichseemed to be very buddy-buddy
with the SEC for some reason.
So lots of things to unpackthere.
But ultimately I think they putthemselves in a place where
they decreed certain thingssecurities, certain things not
securities.
My view on that is there was alogic to why Bitcoin and
(28:17):
Ethereum were ruled commoditiesas opposed to securities, and
that's because when you deemsomething a commodity, you can
then have futures contractsagainst it, which then allow you
, as Leo Melamed from the CMEsaid, to tame the price.
Because what's happening rightnow is the reason that Bitcoin
(28:40):
hasn't reacted the way peoplethought post-halving is you have
massive arbitrage going onbetween the big dogs who are
shorting the futures and buyingthe underlying ETF, so most of
the inflows to those ETFs arenot really retail flows and
actual purchases.
They're just arbitrage tocapture the spread between the
(29:03):
future and the spot.
Speaker 1 (29:07):
Another good, interesting question to kind of
expand on here from Zane onLinkedIn Is Solana decentralized
enough to be considered acryptocurrency or is it a
centralized D2B?
Interesting question to kind ofexpand on here from Zane on
LinkedIn Is Solana decentralizedenough to be considered a
cryptocurrency or is it acentralized database?
Speaker 2 (29:20):
disguised as a decentralized ledger?
Wow, that's such a greatquestion, and I would look at
the risk of pissing off more ofthe Solana bros.
Speaker 1 (29:30):
You're on Leadlag Live.
A lot of people get pissedwatching.
Speaker 2 (29:33):
I know no, no, but yes, it is exactly the latter.
It's not decentralized enough.
But most of the problem withmany utility tokens is they are
not truly decentralized at all.
Right, are not trulydecentralized at all.
(29:55):
Right.
They are pointers to AWS orAzure servers.
To me, on-chain means on-chain.
If I want to own an asseton-chain, I want it physically
on the chain and to me, proof ofwork is the best way to do that
.
So ultimately, I think Bitcoinhas a huge advantage, kind of
(30:16):
the Lord of the Rings one chainto rule all chains.
Now, does that mean thatvirtual machines are useless?
No, does it mean that?
I think there are weaknesses inproof of stake and proof of
history?
Yes, does it mean that they aremore centralized than they
should be?
Absolutely.
(30:37):
What will fix that?
More development activity, morenodes, more decentralization.
But in the short run, yeah,they are overly centralized
comparatively.
Speaker 1 (30:56):
By the way, I love your pinned post on X.
The greatest wealth is createdby being an early investor in
innovation.
Making an investment requiresbelieving in something before
the majority of peopleunderstand it.
You will be mocked, ridiculedand criticized for your
non-consensus action.
It's absolutely worth it.
You will be mocked, ridiculedand criticized for your
non-consensus action.
It's absolutely worth it.
(31:16):
On that point, obviously easiersaid than done to identify that
stuff.
Speaker 2 (31:21):
Well, yes and no.
So here's the thing I've beenreally lucky.
I've spent my career having thegreatest job in the world.
I got paid to talk to thesmartest people in the world
about investing.
Like literally people put me ina seat, whether it was at the
(31:42):
universities or as an outsourcedCIO or as a fund to funds
manager.
They said go find the smartestpeople in the world.
And so I've literally spoken toall the great investors.
Over the years I've had capitalwith hundreds of the very best
managers everyone from.
You know George Soros and JulieRobertson and Michael
(32:02):
Steinhardt and Paul Tudor Jones,and you know anyone that you
can add.
You know I've met with MyronScholes and Nobel laureates and
I don't really like him verymuch Too tan and very
condescending.
But ultimately you have tochoose where you invest and
(32:23):
that's the neat thing is byhanging out with the smartest
people in the world.
You don't have to be very smartto see when there's real
innovation and to get excitedabout it.
And the caveat to my post issometimes I don't even
understand, like to this day.
I don't understand how you andI are speaking into metal and
(32:46):
glass boxes and instantaneously,through the airwaves and
landlines, we can see each otherin high definition.
I don't really understand howpacket switching and voice over
IP works, but I don't reallycare, because I made a ton of
money in the 90s investing inGoogle and eBay and Yahoo and
(33:07):
all these crazy names who wereintegrating Internet protocol
and ultimately creating thestack that we call web one,
which is TCP, ip, ftp, smtp,https and wwwweb.
One was all about ownership andChris Dixon wrote the book about
this read, write, own.
I mean, it's all, I'm sorry,it's all about read.
(33:29):
So you post information on theinternet.
We could read it like aninformation page.
It's like it'll bebritannicacom.
And then it was read, write.
So now we could edit wiki pageand Wikipedia and we could put
videos on YouTube and createcontent and people would
(33:49):
monetize it because you didn'town it.
Well, now web three, we can ownour content right.
Think about cookies.
Your cookies are a record ofall the activity you do online
and companies will pay for that.
Well, how about we turn thatinto an NFT, a non-fungible
token, just a record, and we ownit and we decide who gets to
(34:12):
see it and who pays us for ourinformation?
Or how about our health records?
How about not Epic owning ourhealth record.
How about you and I owning ourhealth record?
So when we talk to a doctor wecan decide should they see our
medical record or not?
So all of this movement to thedigital age unlocks huge
(34:36):
opportunity and ultimately, Ilook at it as the innovations
are easy to spot because theydon't happen very often.
In computing it's every 14 years.
There's a major innovation incomputing about every 14 years.
Why 14 years?
It's about half a generationand young people create all the
new stuff.
So there was a big innovationin 1954 with the mainframe 68,
(34:58):
the microchip 82, the personalcomputer 96, the internet 2010,
the mobile net.
I actually remember being inSeattle at Craig McCaw's family
office, a big investor incellular, and I asked this
family office guy do you thinkthat the mobile net will be as
big as the internet?
He's like Mark, are you joking?
Ask people if they want acomputer, like whatever.
(35:20):
Ask them if they want a phone,like I already have two, I don't
need another one.
It's true, I got two phones.
So the mobile net was reallybig.
Web one right Created about $2trillion of value.
Web 2, about $5 trillion ofvalue and now Web 3, we think
will create closer to $15 to $20trillion, because it's an
(35:40):
exponential growth curve.
And those innovations get builton better technology.
Right when petscom was created,it was a great idea.
It failed because we neededbroadband technology and GPS
tracking.
And 20 years later, chewycom isa multi-billion dollar company,
(36:03):
same as Petscom.
It just needed more innovation.
So, as Newton said, right, I'mnot that smart, I stand on the
shoulders of giants.
He was pretty smart, but we nowstand on the shoulders of these
previous innovations, and so Idon't really think I'm that
smart.
I think I hang out with reallysmart people.
That's what I love to do, and Ihang out with young people
(36:27):
because that's where theinnovation occurs, because they,
when you get older, you're likewell, I've always done it this
way and I don't really want totry something new, but young
people don't know what theydon't know and I'll use
something that's not politicallycorrect.
So back when I was growing up,bill Cosby was not a bad guy.
He was a funny comedian right,and he had these record albums
(36:48):
that I would play and I wouldlisten to his comedy routines.
And he had this one about thiskid at the playground.
He said this kid could ride hisbike anywhere.
He'd ride up over the swing set.
He'd ride around the top of thefence.
He'd do 360s six inches off theground.
He never fell.
You know, the first time hefell when someone told him about
(37:08):
gravity right, when he didn'tknow about gravity.
He never fell.
So if you think about MarcAndreessen, 19 years old,
invents the browser of Sergeiand Larry they were in their
twenties, sergei and Larry, Imean.
So if you think about that tweet, it's simply follow the talent
(37:29):
In 2000,.
All the talent.
The easy thing was all you hadto do is follow all these young
people who are not going toconsulting or iBanking.
They were going to SiliconValley and to Seattle and to
tech companies.
It made sense Invest in those.
We put 500K in Google when Iwas at Notre Dame in 96.
It turned in 200 million.
(37:50):
Not because we're geniuses, noteven Sequoia geniuses.
It was Larry and Sergey, but wewere smart enough to put the
money.
There is the biggest migrationof talent the world has ever
seen.
All the smartest people aregoing into this space.
(38:10):
Why?
Because it's where the futureis and we're building on top of
networks that are so powerfuland so global and decentralized
that they are truly worldchangers.
So that's the fun part ofinvesting in innovation truly
world changers.
Speaker 1 (38:29):
So that's the fun part of investing in innovation.
See me a few comments fromthose watching the live stream.
This one's on X MetaPlanetearly investor innovation.
Speaker 2 (38:40):
Right here.
Let's talk about MetaPlanet alittle bit here.
Yeah, look, metaplanet is.
You know, we are a smallversion of MicroStrategy and
this says we want to be theMicroStrategy of Asia.
Right, good artists borrowgreat artists' steel, so said
Picasso.
So you know, we're blatantlycopying Michael's approach, now
(39:03):
on a much smaller scale.
But the short version is youknow, people can see my, my PFP.
It's a, an on-chain monkey, andand through the on-chain monkey
community, I met some guys andthey said, hey, we got this idea
to create this, this Asiancompany, and uh, turned out that
uh, one guy had a publiccompany uh called Metaplanet.
(39:26):
He, he had a couple of us makesome investments and become
board members.
We did that and we adoptedofficially the strategy of
MicroStrategy, which is to takethe treasury and buy Bitcoin and
then ultimately tap the creditmarkets and buy Bitcoin.
And it makes even more sense inJapan than the US because you're
(39:49):
denominated in yen and the yenis even more cooked than the
dollar in terms of a race to thebottom because of their debt
issues.
And so in 2011, the yen was 78to the dollar and today it's
like 158 or something and theyen is going to be lower the
rest of our natural lives, andso it's going to continue to
(40:11):
deteriorate because they have noway out.
When you get massively in debt,you got four options.
You can pay the debt back InJapan, us, europe.
You could tax all the wealth.
Forget the income.
You could tax all people'swealth.
You can't pay the debt back, soyou're not going to pay it back
.
You can restructure it.
The problem is someone has totake the other side of the
(40:32):
restructuring and everybody's soscrewed they can't do that, so
you're not going to restructureit.
You can default on it, but thenthe politicians get kicked out
of office.
They don't like that, so noone's going to default on it,
except in third world countries.
So then your choice is todevalue it, which is to
basically devalue your currency,and that is the history of
mankind.
There have been 775 papercurrencies in the history of the
(40:52):
world.
Three quarters no longer exist.
The rest are on their way down.
So if you think about where weare in that process, the US and
Europe trail Japan in their needto devalue their currency.
So for us, it was a natural todo MetaPlanet in the Japanese
markets.
Speaker 1 (41:15):
Can we talk about the yen a little bit, because I've
been on this kick since August.
This scenario that I've beenplaying out, which is that the
yen keeps weakening, japan hasto import all its oil.
They can't control the price ofoil.
They can control the price ofyen, which means oil price in
yen.
They can manipulate.
Yen keeps getting weaker.
(41:36):
Everyone thinks that that's agood thing because it's
inflationary Too bad.
The exports don't actuallyreflect that.
When you look at Japan'seconomic data and now you're
starting to see the reversal.
Now I have you know, going backto the whole point about NVIDIA
.
The irony of all this is thatagain, all the stocks I had to
pick on it was NVIDIA.
It seems like a large part ofthat momentum was driven by the
carry trade, as money wasborrowing from Japan and going
(41:59):
to AI names.
Now, not all of it, right, andclearly there's some real
momentum there that's US homedollar driven right.
But I want to hear yourthoughts on, just given your
experience in the industry, onhow currency crises play out.
I mean any kind of examples oranything that we can point to
that would suggest that you knowwhat this could be a bigger
deal than people realize.
And here's how, historically,you should be thinking about it.
Speaker 2 (42:22):
Yeah.
So look, the problem withtrying to time the yen implosion
.
Kyle Bass has been trying to doit for 15 years, 15 years.
And there are people thatpredated him that said, hey,
when you get to 100% debt to GDP, you got to collapse.
(42:42):
Well, maybe it's 150.
Maybe it's 180.
Well, maybe it's 150.
Maybe it's 180.
Well, maybe it's 220.
Well, the reality is because ofthe yen carry trade.
And what is the yen carry trade?
So if you have interest ratesat zero and people from around
the world can go borrow money atzero and buy anything with a
(43:03):
yield, that's a carry trade.
So for years, the yen was theax in that global carry trade,
which was really interestingbecause other countries could
have lowered their rates to zero, which eventually they did, and
(43:23):
so there was this period threeyears ago where the yen actually
strengthened.
You know, like that can't beright.
Everything about this country isimploding, except the quality
of life.
The quality of life is reallyreally high, especially if you
happen to live already in Tokyo.
You know, food's great,apartments are great, it's great
(43:47):
quality of life.
But short version of the longtail is once the Fed went back
to punishing well, punishing themasses by raising rates, or I
should say unpunishing savers.
I should say unpunishing saversBecause by going to zero,
you're punishing the savers andyou're stealing money from the
(44:08):
savers to give it to the richbecause they lever up everything
.
So once they reversed that, theyen carry trade was back and it
has been backed as thepreferred trade.
And so the dichotomy is you'reright In theory, a country with
226% debt to GDP should implode,the yen should skyrocket out of
(44:34):
control and it should be areally bad experience.
But the demand for yen to fundthis global carry trade which is
encouraged, by the way isalmost infinite because the fiat
countries keep printing moremoney.
So think about the race of themoney.
(44:56):
Everyone quotes DXY, right?
Oh, look how strong the dollaris.
No, it's not.
It's just less weak than theyen or the euro.
If you look at it relative tothe renminbi, it's actually not
strong.
So this global race to thebottom is inevitable because of
(45:19):
demographics.
Demographics are destiny 65 to85-year-old people.
They don't spend a lot, theytend to save and they like fixed
income.
And so what we've seen as Japanfirst, then Europe, then the US
.
Every single day, 10,000 peoplein the United States and Europe
turn 65 for the next seven plusyears and that is going to
(45:43):
continue to play out.
So if you want to know what'sgoing to happen in US and Europe
, that is going to continue toplay out.
So if you want to know what'sgoing to happen in US and Europe
, just look at Japan 11 yearsago.
And so they peaked in 89, wepeaked in 2000,.
Their debt got downgraded.
11 years later, us debt getsdowngraded, same kind of things
happen and ultimately, I thinkthe yen is a controlled
(46:04):
demolition, not anout-of-control demolition, and I
think the yen carry trade isback to being the most preferred
because they're the place thatstill has zero rates.
Speaker 1 (46:17):
Until they don't, until they don't.
As you know, mark, for thosewho want to track more of your
thoughts, more of your work,which way to go?
Speaker 2 (46:25):
So I mean I'm on Twitter.
So at Mark Yusko, your thoughtsmore your work, which way to?
So I mean I'm on twitter.
So at mark usco uh, we have awebsite, morgan creek, cap,
capcom that has some links tostuff.
I mean, I, I do a lot of thingson the internet.
Uh, we have a youtube channel.
Uh, around the world with usco.
We also have one for digitalcurrents.
We do a weekly show on theABCDs, so that's probably the
(46:52):
easiest place to find me.
You are keeping busy, any majortravel coming up, any places
you're going to, you know, yes,so we are in the midst of what I
call the Willie Sutton tour.
So you know, willie Sutton tour.
So you know Willie Sutton, thefamous bank robber.
They asked him, willie, why doyou rob banks?
That's where they keep themoney.
(47:14):
Um, so we are raising our, ourfourth fund for the digital
asset business and, uh, we areheaded uh over to the middle
East here, uh, in the fall.
So two of the guys just gotback and I'm headed over in
September.
So that's one area, and what'sgoing on in the Middle East is
(47:35):
truly extraordinary in terms ofjust the embracing of the
digital asset ecosystem, thedigital age focus on all things
digital and innovation.
So that's a very exciting placeto be.
Southeast asia, another placewhere we're focused on uh
heading to singapore and hongkong.
Um, but you know I I don'ttravel as much as I used to
(47:59):
because of of zoom and and othertools.
Um, but I do like being out onthe road.
I, I was just, I just backed.
Last week, 20 years ago, I leftNorth Carolina, university of
North Carolina and I startedMorgan Creek and I took my first
full two-week vacation in mycareer up to that point, and so,
(48:20):
for our 20th anniversary, Idecided I was going to do that
again.
So my family and I disappearedfor two weeks.
And when I say disappeared, Imean I disappeared.
I didn't tweet, I didn't doanything.
And so I said how can you dothat?
And I said because I had agreat first boss.
My first boss had a great line.
He said if you can't disappearoff the face of the planet for
(48:42):
two weeks and not be in contact,just completely gone, you're
not paid enough.
I'm not that important.
So it was easy to disappear fortwo weeks and it was glorious.
We did Italy and I love going toplaces with history and it
makes you realize a couple ofthings.
One, there's nothing new inthis world.
All the stuff we think weinvented in modernity were all
(49:05):
existing in antiquity and someof the things were truly, truly
extraordinary.
Like you know, the Temple ofHercules in downtown Rome,
across from the Mouth of Truth2,000 years this building's been
standing.
Not one piece of mortar,hand-cut stones, no power tools,
(49:27):
earthquakes.
I mean how, how is thatpossible?
We can't build homes that last20 years and this thing has been
standing for 2,000 years.
That's pretty cool.
Speaker 1 (49:41):
As the expression goes, they don't make them like
they used to.
Speaker 2 (49:44):
Amen Amen.
Speaker 1 (49:45):
Everybody.
Please make sure you followMark.
I appreciate those that areengaging during the live stream.
Again, this will be an editedpodcast under Lead Like Live.
Hopefully I'll see you all inthe next episode and make sure
you follow Mark on X and everyother place that he's at.
Thank you, Mark, I appreciateyou.
Speaker 2 (49:59):
Thanks for having me and look forward to doing it
again sometime soon.
Thank you.
my name is michael dyad, publisher of the lead lag
report, and joining me for therough hour is mr mark yusko, who
never quite has his face on hisx profile.
It's always something else onhis profile.
But uh, mark, I know a lot ofpeople have seen you over the
years but for those who don'tknow your background, just do a
overview of who you are, whatyou've done throughout your
career, what you're doingcurrently.
Speaker 2 (00:28):
Yeah, so the quick version although, mike, as you
know, I don't do short very well.
But the quickest version ischapter one.
I worked for not-for-profits.
I worked up at my IslandModerate, notre Dame back there
and now I sit in Chapel Hill,north Carolina.
So I worked at University ofNorth Carolina and then, 20
years ago which is hard tobelieve I launched Morgan Creek
(00:51):
Capital Management and spent 15plus years building a
traditional asset managementfirm outsource CIO business fund
to funds across all traditionalassets.
But the last five years chapterthree I have spent most of my
time in the digital asset space,becoming a late in life venture
(01:13):
capitalist, and now I scouredthe globe looking for startup
funds or startup firms in thedigital asset ecosystem across
what we call the ABCDs AI,blockchain, chips and data.
We've made about 80 investmentsacross four funds, raising our
(01:33):
fourth fund right now, andthat's what I do for my day job.
Speaker 1 (01:40):
What was the aha moment that made you pivot
towards the digital space?
Speaker 2 (01:46):
Yeah, so 11 years ago which is hard to say out loud,
but I joke I was introduced toBitcoin the same month as the
Winklevoss twins.
They're multi-billionaires andI'm not why.
Well, they were in Ibiza withCharlie and they immediately had
(02:06):
the aha moment.
I had traditional clients, andwhen I wrote in a letter that I
thought this Bitcoin thing waskind of interesting, I mean I
got hate.
There are people like I willfire you.
You're an idiot, don't talkabout this stuff.
And the price fell from about500 bucks to about 186 bucks
(02:28):
from March to September of 14.
And I'm like, yeah, oh, they'reright.
And then eight weeks later, itwas a thousand bucks.
I'm like no, there's somethinghere.
And so I did a relatively deepdive, but I didn't have the aha
moment really for another twoyears.
I kind of got blockchaintechnology as an operating
(02:53):
system for computing.
It's the next computingplatform.
We had mainframes in 54, themicrochip in 68, personal
computer in 86, the internet in90, I'm sorry, the internet in
96, the mobile net in 2010, andnow the truth net or blockchains
, in 2024.
(03:14):
So I kind of got that, but Ididn't get Bitcoin really until
2017.
And I was actually in an RV inEureka, california.
I couldn't make that part upand I had the aha moment that
Bitcoin was a application ofblockchain technology, it was a
(03:36):
better form of money, and sosince then I've kind of gone all
in, so to speak.
Since then I've kind of gone allin, so to speak, in what I do,
but it really was that ahamoment that and I wrote a paper
about this called Digital GoldRush that money, an asset that
exists in the absence of aliability, gold has been that
(03:58):
for 5,000 years.
But gold suffers from twoproblems.
One, it's not very divisible.
If I had a bar of gold here, Icouldn't break it in half.
I'm not strong enough to breakit in half and even if I could,
I couldn't stuff it in the phoneand send it to you.
I can send you Bitcoin with acouple of taps of the finger and
I can send you down to one 100millionth of a unit, one Satoshi
(04:21):
.
So more divisible, moreportable, equally scarce and
just a better form of money.
Speaker 1 (04:29):
But obviously it went beyond Bitcoin for you, right?
Because you started looking atother cryptocurrencies.
I want you to talk about thatexperience, because the I don't
know how many cryptocurrenciesthere are now.
What 10,000, 20,000?
I can't keep count.
Speaker 2 (04:41):
Well no, there's only a dozen cryptocurrencies, right
?
A cryptocurrency is a unit as amedium of exchange or a store
of value.
There are lots and lots,thousands and thousands of
utility tokens A utility token.
Most of them are not veryuseful at all.
They don't have much utility.
(05:01):
They don't give you a share ofequity, they don't give you a
share of cash flows.
They're not a form of debt.
They're essentially a digitalcollectible and that's fine.
But they're definitely notcryptocurrencies.
They're definitely not even,for the most part, utility
tokens.
But they are tokens, meaningthey are an entry on a ledger,
(05:25):
on a blockchain, but other thantrading back and forth and
trying to use them as currencyfor certain areas I just didn't
say currency as like a script,right, something you can trade
back and forth.
That's what they are.
But Bitcoin, know, bitcoin,ethereum, maybe Ethereum.
(05:46):
I really don't like Ethereummuch as money.
I like it as a global computer.
But things like Dash or Moneroor things like that do have some
cryptocurrency aspects to them.
Speaker 1 (05:57):
So I guess that's the question how do you
differentiate between the tokensand the nonsense side of it
from the more real things, thetokens and the nonsense side of
it from the more real things?
Speaker 2 (06:05):
Well, look, an NFT, a non-fungible token.
Now, it's not a monkey JPEG,right, which is what everyone
associates.
But I don't even like the termNFT or non-fungible token,
because it is accurate, right.
Non-fungible means unique,token means an entry on a ledger
(06:28):
.
It's not like a little coin orsomething, it's an entry on a
ledger, which is all ablockchain really is a series of
entries on a ledger.
But the difference isblockchains are permanent and
immutable.
They're not centralized like aCOBOL database that we all use
every day with our Visa orMasterCard.
If they want to turn it off,they can.
(06:49):
Or if we want to store all ourdata on the cloud, they could
keep it if they want.
Or we put our money in the bankit's on a ledger, but it's the
bank's money, right?
So it's not our money anymore,and what blockchains do is they
fix that.
They let us own things.
So web one was read.
Web two was read-write puttingstuff on the internet.
(07:11):
Web three is read-write-own.
Blockchains allow us to ownthings, and so non-fungible
token really I think should becalled a digital property, right
.
All an entry on a ledger is is arecord of someone's ownership
of some property.
It could be a JPEG, it could bea title, it could be a stock
(07:32):
certificate, it could be a bond,it could be any asset, it could
be the Mona Lisa not thephysical Mona Lisa, but the
right to own the Mona Lisa.
But that's ultimately whatblockchains are good for, and
Eric Schmidt from Google said itbest.
So Satoshi Nakamoto did whatgave us Bitcoin but, more
(07:55):
importantly, gave us thetechnology to create unique
assets in the digital sphere.
And what does that even mean?
Well, think about it.
Think about stocks.
Right In the olden days, youand I would meet in New York at
the Buttonwood Tree literallyBig Tree, where the stock
exchange is today and we wouldbring our analog stuff stock
(08:18):
certificates and pieces of paperbanknotes and we would meet and
we would exchange, and we hadto be physically proximate.
And the real problem was, ifyou've seen gangs in New York on
the way to the Buttonwood tree,those guys with the top hats
would steal our stuff.
So the Stock Exchange built abuilding and said come inside
and you'll be safe, but youstill had to get there.
So they came up with an idea,with the advent of computing,
(08:42):
the electronic age, to say youknow what, put the bank notes in
the bank and let them be onesand zeros.
Electronic database.
Put your stock certificates inDallas, texas, in DTCC, and have
these Q-CIPs, thesealphanumeric codes, and you guys
can change.
In the old days, physical peoplewould go and do the bartering
(09:04):
on the floor of the stockexchange.
Now it's just computers.
There's no people there Not nopeople, but almost no people.
Well, that's fine, but thosestock certificates still have to
exist in Dallas, texas.
Well, why?
Why not create unique digitalassets entries on a blockchain
ledger?
And that's the digital age.
So we went from the analog ageto electronic age, to the
(09:28):
digital age, and everything inthe world every stock, every
bond, every currency, everycommodity, every piece of art,
every collectible car, everycase of wine, every private
business, all $700 trillion ofassets will eventually be
entries on a blockchain.
Blockchains will be thecomputing platform in which all
of us work and will buy and sellassets in the digital realm
(09:52):
instead of the electronic realm.
Speaker 1 (09:55):
I'm going to show a question from YouTube, from
Kevin.
His question is why doesn'tBitcoin Cash get more attention
and credibility than Bitcoin?
It's faster and more scalablethan Bitcoin.
You know this far better than Ido.
I've seen some things aroundBitcoin Cash and some of the
clashes that happen among it.
Speaker 2 (10:13):
It's Paul Romer, famous prof from Stanford and
then NYU and hence retired, wonthe Nobel Prize, I think, six
years ago something like that,for something called the law of
increasing returns, and what hesaid is it's not the best
technology that wins, it's thetechnology that gets critical
(10:34):
mass first.
And so if you think about themost valuable assets in the
world today, they're notcompanies the way we think about
companies In the old days, youwere a big, strong company if
you had property, plant andequipment, you had people and
stuff, and that was the biggestcompanies in the world oil
(10:55):
companies and manufacturingcompanies.
Today, what does Amazon make?
They don't make anything.
They're just a search enginethat matches buyers and sellers
and they take a fee, a big fee45% of revenues.
But networks are reallyimportant.
So the question Bitcoin versusBitcoin Cash is Bitcoin was
(11:18):
created and it's a blockchain,and the thing about blockchains
is you can fork them, you cancreate a copy and go down a
different path with a differentcommunity.
The problem with Bitcoin Cashis the community is small and,
in essence, in blockchains, thelongest chain, the most
(11:38):
continuous chain, hashistorically been the most
valuable chain.
It has the largest number ofusers, has historically been the
most valuable chain.
It has the largest number ofusers, and so it's not to say
that Bitcoin Cash doesn't havepositives.
This idea that it's faster andcheaper.
Well, that assumes that fastand cheap are a feature, not a
(12:02):
bug.
And what do I mean by that?
Are a feature, not a bug.
And what do I mean by that?
Well, in computing, you can besecure or you can be fast.
Pick one.
It's like when you're buildinga house good, fast and cheap,
pick two.
You can have good and fast.
It won't be cheap.
You can have good and cheap andit won't be fast.
And you can have fast and cheapand it won't be good.
So Bitcoin has chosen to besecure.
(12:25):
It's the most secure blockchainin the world.
So I've been down for like 21minutes and 15 years.
Never had a hack, never had aproblem, not one fraudulent
transaction.
How many fraudulenttransactions are there at Visa
or MasterCard?
Thousands and thousands,probably millions, probably
(12:48):
millions.
And ultimately, it's not aboutspeed for Bitcoin, it's about
permanence and safety andsecurity.
Now, that's at the base layer.
We can have other layers thatdo other things, like Solana
super fast and super cheap.
It's not up all the time.
It has some problem withvaporizing transactions.
So there are trade-offs in theworld of blockchains that are
important, but ultimatelyBitcoin Cash.
(13:10):
There's nothing wrong with it,it's just it has all the
benefits of the original Bitcoinblockchain, but a smaller
community and fewer users, soit's not as valuable.
Speaker 1 (13:28):
I'm smiling at another comment here from Randy
Hunt on YouTube.
Can I use Bitcoin Cash to buyNVIDIA on sale today as a joke?
I want to tease a little bitmore on the secure versus fast
dynamic you just mentioned,because I think it's an
interesting way to frame thingsthat makes me think that AI is
not going to be secure at all.
Speaker 2 (13:48):
Oh yes, look, such a great point.
Look, we have a problem.
And actually it's interesting.
Segue into the thing I'm mostexcited about in the ABCDs, in
which we invest AI is a tool,right, it's an 80-year overnight
success story and we're like oh, ai.
(14:10):
So I'm old enough, michael, toremember 1980 was the year of AI
by Time Magazine 1980.
Okay, 2000,.
Intel stock went up up 20 foldin 12 months because their chip
was going to revolutionize AI.
Today, intel's down 60, 6-0%from 24 years ago and Nvidia's
(14:37):
up a lot.
For now We'll see how that ends,but at the end of the day, what
matters in the ABCDs?
Data.
Everything's about data, right,eric Schmidt.
Back to Eric Schmidt In 2010,.
He had this great quote he saidfrom the beginning of time,
which is a little bit ofhyperbole.
So really, since the 50s, 2010,there were five exabytes of
(15:02):
data created.
2010, there were five exabytesof data created every two days.
Today, as you and I werecreating part of it, we'll
create 329 exabytes of data.
So data is king.
The problem with data is youhave to store it and capture it.
(15:24):
That's what blockchains do.
You have to analyze it that'swhat chips do, computing
platforms and then you have tomake decisions with it.
That's what AIs do.
But the problem with AI is thedata isn't secure.
So all the data I have on myphone is secure it's encrypted.
(15:45):
If I send you a WhatsApp or atelegram, it's encrypted.
If I send you an iMessage, notso much.
All the data at Morgan Creekthat we put into the cloud okay,
at Microsoft Azure is encrypted.
It's secure as long as I'm notworking on it.
The moment I work on it, it hasto be decrypted and that's
(16:09):
where all the hacks happen.
That's where all the data leakshappen and that's why, if you
look at your phone, you've hadyou've had multiple data leaks
across all your passwords, asbecause data at rest is secure,
but data that's active is not.
So we've actually invested intwo companies that are have
invented a chip and it bogglesmy mind.
I don't really understand howit works that will allow you to
(16:31):
work on encrypted data, and soAI models that actually use data
sets could not be open to theworld to be polluted or hacked
while they're doing theoperation.
Now, those chips don't existyet, but, fingers crossed, in
about three weeks we'll get thefirst prototype back.
(16:53):
But AI, it's a tool and it'snot a computing platform.
It's not some thing that'sgoing to change the world.
And NVIDIA 36 times sales, isoverpriced.
But now I would have said thatat 23 times sales and it went up
more.
But we'll see what happens.
Speaker 1 (17:15):
My favorite stock in the world, nvidia, which I
always joke about.
Of all the stocks I had to pickon right.
With the Persona which I'velargely killed off on X, I had
to pick on that one.
With the persona which I'velargely killed off on X, I had
to pick on that one.
But now it does seem like it'sstarting to break.
I was obviously very wrong andvery early.
Speaker 2 (17:31):
But, michael, we're always wrong, and early and
early is the euphemism for wrongright.
So here's the problem.
Go back to 2000,.
Microstrategy, michael Saylorthe darling.
His stock was three bucks andit went to a hundred and
everybody was short and they gotcarried out and they came back
(17:54):
and it went to 200 and theycarried out the shorts.
And this shorts came backbecause they're like this is
stupid, there's no there there,there's no company there.
This guy's a fraud.
It was just three hundred andthirty something dollars.
They carried out all the shortsand then it went to three and
he did get fined by the SEC andall kinds of good stuff.
(18:15):
But the bottom line is therewas no there there.
But the market can beirrational longer than the
rational investor can remainsolvent.
Because back then, in 2000, mostof the money was actively
managed.
It wasn't dumb.
And I don't mean dumb onintelligent, I mean dumb,
(18:37):
meaning rule-based.
Now more than 50% of assets arerule-based.
They're indexed, capitalizationweighted, and a capitalization
weighted index has no choice butto buy more NVIDIA as it goes
up.
It doesn't get to say this isstupid, I won't pay 36 times
(18:58):
sales.
It has to do it.
And because people neverchanged their 401k.
They put the money in the 401kevery two weeks and it goes into
the index and it's aself-perpetuating momentum
strategy until it breaks.
Now, when it breaks and goesthe other way, glory hallelujah.
We will go down 70, 80, 90.
(19:19):
I don't know what that numberis, but there is no number,
there's no math, there's nothingon the planet that can
rationalize any multiple over 10times sales.
Even at 10 times sales, right?
The head of Scott McNally, thehead of Sun Microsystems in 2000
(19:39):
, said it best To make a 10%return.
If you pay me 10 times salesfor my company, I would have to
give you all of my revenue forthe next 10 years, which is a
problem because I would go tojail because I have to pay taxes
, I have to pay my suppliers, Ihave to pay my people.
So you're not going to get a10% return.
(20:00):
Stock went down 98%.
Company still exists, still aperfectly fine company, and I'm
not saying is going down 98%.
I'm saying it's going to godown a lot at some point, but
you don't know when.
So the problem with trying toshort these momentum stories is
(20:21):
the 315 train problem.
You're standing on the traintrack at 310 and you look up and
the train's about to run youover.
You're like no, no, no, no,you're not supposed to be here
till 315.
The problem is, you're rightbut you're dead.
So step off the track, let thetrain come in.
Stop, then get on the train.
Speaker 1 (20:42):
I don't know if people really understand just
how pervasive NVIDIA is inalmost every single portfolio
and ETF.
I mean, I do tons of writingson Steeping Alpha, covering
different ETFs and analyzingthem and even the funds that in
the name have low volatility,high quality dividends.
Nvidia is like the number threeposition and this is what Wall
(21:03):
Street does.
It comes out with products thatsound good, like they're
supposed to do somethingspecific, and then they put
momentum names.
So I say that because peoplewill criticize me for that
negativity on NVIDIA right thatI've had, because I've just been
skeptical of the narrative andthey say oh, you know, you
missed out on one of thegreatest moves in history.
It's like, oh, wait a minute,Everyone owns NVIDIA.
(21:25):
If you have any kind ofexposure to a supposedly broad,
diversified benchmark, andprobably more than you realize,
Right.
Speaker 2 (21:33):
Oh, that's exactly right.
So I've criticized I mean I, Icriticized Tesla when it was
going parabolic and the Teslalemmings came at me and they
don't come at me anymore becauseTesla's broken that momentum.
And look, every bubble chart inthe world looks the same, right
(21:53):
, it has a false breakout andthen a correction and then it
goes parabolic.
There are no charts, michael,none, zero.
I mean literally zero.
That go up parabolic and thengo flatline.
There are zero, right, they alllook like the Eiffel Tower,
every single one.
(22:13):
And after the original breakthere's a one last hookup, the
return to normal, whereeverybody's like see, I told you
.
And then you go to the bottomand Tesla's past that point and
they're headed down to gravityand ultimately NVIDIA will too.
Because it's just math One ofmy favorite hashtags, hashtag
(22:34):
just math.
Stocks are not like organicgrowing things.
They are simply a record ofpeople's expectations of the
future cash flow of a business.
And ultimately, the problem isthe price is a liar, right.
(22:55):
John Burbank's great line theprice doesn't mean the value.
The price is just what twopeople agree to exchange a small
amount.
And here's the big problem.
If you want to trade 100 sharesthat price on Nasdaq, that is
the price.
But if you have 1,000 shares,that ain't the price.
If you have a million shares,it's definitely not the price,
(23:15):
and if you have 10 millionshares it's not the price.
It's going to be different.
So how long can markets remainirrational?
A long time?
How long can people like youand me sound stupid Because we
are value guys at our core andwe like to buy things below fair
value and sell them above fairvalue a novel concept?
(23:36):
You can be wrong a long time.
But to your point, I own NVIDIAin my 401k and all my others,
but I would never own it in anactively managed portfolio
because that doesn't make senseRight now.
Right now, right now.
Speaker 1 (23:55):
Right, there's a price for everything, I think is
the point.
It's just not necessarily theprice right now.
I want to bring in anotherSwitching Gears, youtube
questionnaire or comments fromER Berg.
We'd love to hear both youropinions, really.
Mark's opinion on the SECrescinding its security
designation for Solana Cardano,et cetera regarding the finance
case, maybe provide a littlecontext on this first.
Speaker 2 (24:18):
Yeah, look, I mean the SEC under Mr Gensler's
leadership.
And, by the way, it's not in mybest interest to criticize the
organization that oversees myfirm.
So full disclosure we are aregulated entity, we're a
registered SEC, registeredadvisor, so I'm probably not
(24:38):
going to lambaste thatorganization.
I think they do a good job.
With limited resources.
They try to do the best.
However, I do believe that thecurrent administration chose a
tact that I probably would nothave taken enforcement by
(24:59):
punishment as opposed toenforcement by rule setting.
And so one of the challengesit's like raising a child If you
don't have rules, the childflounders.
They don't know what to do orwhat not to do, so you need
rules and they may push upagainst them, they may even
(25:20):
cross the line, but at leastthey know there are consequences
for their actions and they knowwhere the boundaries are.
The problem with the currentform of legislation was they
kind of said well, we're notgoing to rule per se on
different cryptocurrencies, uh,or different utility tokens.
(25:40):
We're not going to tell youwhether we think they're a
security or not a security, andsometimes, even if we say
they're one thing, we're goingto change.
That, arguably, is partlybecause one of the unknown
little wrinkles.
The SEC is not funded by thegovernment.
(26:01):
They're self-funding.
They fund themselves throughtheir fines, regulatory actions
from time to time to pay thebills.
So when people do bad stuff,they fine them and if they do
really bad stuff, like spoofingthe price of gold, they fine
them a lot.
The problem is those spoofersmake so much more.
(26:24):
If you pay a billion dollarfine, but you made 20 billion,
it's just the cost of doingbusiness.
So that's a long way of saying.
There are tokens that many feelnear and dear to people's heart,
like Cardano.
I don't really understand it.
I don't see any technicalactivity being built on Cardano.
(26:45):
A lot of people own it andtrade it, but I don't really
understand the use case.
Understand the use case.
There are other things likeEthereum that I think have lots
of use cases and lots ofapplications and lots of
development activity.
There are things like Solanathat we own a lot of and
actually sold a lot of and madeprobably more money than I've
(27:06):
ever made in my career on thatproject.
But today I kind of strugglethat struggle that yes, it's
cheap and fast, but it's notvery many people building stuff
on it and other than meme coinsand and nfts.
I I really can't find many usecases for it.
So, uh, you know what's goingto happen with xrp?
Yeah, don't know.
(27:29):
And and ultimately, the sec'sstance lately has been shoot
first, ask questions later, sothey fine people for violations
of rules that didn't even exist,which is kind of a weird
paradigm.
That happened at the Winklevosstwins and it happened to DCG and
it happened to a bunch ofpeople who were victimized by
(27:52):
the real bad actor, ftx, whichseemed to be very buddy-buddy
with the SEC for some reason.
So lots of things to unpackthere.
But ultimately I think they putthemselves in a place where
they decreed certain thingssecurities, certain things not
securities.
My view on that is there was alogic to why Bitcoin and
(28:17):
Ethereum were ruled commoditiesas opposed to securities, and
that's because when you deemsomething a commodity, you can
then have futures contractsagainst it, which then allow you
, as Leo Melamed from the CMEsaid, to tame the price.
Because what's happening rightnow is the reason that Bitcoin
(28:40):
hasn't reacted the way peoplethought post-halving is you have
massive arbitrage going onbetween the big dogs who are
shorting the futures and buyingthe underlying ETF, so most of
the inflows to those ETFs arenot really retail flows and
actual purchases.
They're just arbitrage tocapture the spread between the
(29:03):
future and the spot.
Speaker 1 (29:07):
Another good, interesting question to kind of
expand on here from Zane onLinkedIn Is Solana decentralized
enough to be considered acryptocurrency or is it a
centralized D2B?
Interesting question to kind ofexpand on here from Zane on
LinkedIn Is Solana decentralizedenough to be considered a
cryptocurrency or is it acentralized database?
Speaker 2 (29:20):
disguised as a decentralized ledger?
Wow, that's such a greatquestion, and I would look at
the risk of pissing off more ofthe Solana bros.
Speaker 1 (29:30):
You're on Leadlag Live.
A lot of people get pissedwatching.
Speaker 2 (29:33):
I know no, no, but yes, it is exactly the latter.
It's not decentralized enough.
But most of the problem withmany utility tokens is they are
not truly decentralized at all.
Right, are not trulydecentralized at all.
(29:55):
Right.
They are pointers to AWS orAzure servers.
To me, on-chain means on-chain.
If I want to own an asseton-chain, I want it physically
on the chain and to me, proof ofwork is the best way to do that
.
So ultimately, I think Bitcoinhas a huge advantage, kind of
(30:16):
the Lord of the Rings one chainto rule all chains.
Now, does that mean thatvirtual machines are useless?
No, does it mean that?
I think there are weaknesses inproof of stake and proof of
history?
Yes, does it mean that they aremore centralized than they
should be?
Absolutely.
(30:37):
What will fix that?
More development activity, morenodes, more decentralization.
But in the short run, yeah,they are overly centralized
comparatively.
Speaker 1 (30:56):
By the way, I love your pinned post on X.
The greatest wealth is createdby being an early investor in
innovation.
Making an investment requiresbelieving in something before
the majority of peopleunderstand it.
You will be mocked, ridiculedand criticized for your
non-consensus action.
It's absolutely worth it.
You will be mocked, ridiculedand criticized for your
non-consensus action.
It's absolutely worth it.
(31:16):
On that point, obviously easiersaid than done to identify that
stuff.
Speaker 2 (31:21):
Well, yes and no.
So here's the thing I've beenreally lucky.
I've spent my career having thegreatest job in the world.
I got paid to talk to thesmartest people in the world
about investing.
Like literally people put me ina seat, whether it was at the
(31:42):
universities or as an outsourcedCIO or as a fund to funds
manager.
They said go find the smartestpeople in the world.
And so I've literally spoken toall the great investors.
Over the years I've had capitalwith hundreds of the very best
managers everyone from.
You know George Soros and JulieRobertson and Michael
(32:02):
Steinhardt and Paul Tudor Jones,and you know anyone that you
can add.
You know I've met with MyronScholes and Nobel laureates and
I don't really like him verymuch Too tan and very
condescending.
But ultimately you have tochoose where you invest and
(32:23):
that's the neat thing is byhanging out with the smartest
people in the world.
You don't have to be very smartto see when there's real
innovation and to get excitedabout it.
And the caveat to my post issometimes I don't even
understand, like to this day.
I don't understand how you andI are speaking into metal and
(32:46):
glass boxes and instantaneously,through the airwaves and
landlines, we can see each otherin high definition.
I don't really understand howpacket switching and voice over
IP works, but I don't reallycare, because I made a ton of
money in the 90s investing inGoogle and eBay and Yahoo and
(33:07):
all these crazy names who wereintegrating Internet protocol
and ultimately creating thestack that we call web one,
which is TCP, ip, ftp, smtp,https and wwwweb.
One was all about ownership andChris Dixon wrote the book about
this read, write, own.
I mean, it's all, I'm sorry,it's all about read.
(33:29):
So you post information on theinternet.
We could read it like aninformation page.
It's like it'll bebritannicacom.
And then it was read, write.
So now we could edit wiki pageand Wikipedia and we could put
videos on YouTube and createcontent and people would
(33:49):
monetize it because you didn'town it.
Well, now web three, we can ownour content right.
Think about cookies.
Your cookies are a record ofall the activity you do online
and companies will pay for that.
Well, how about we turn thatinto an NFT, a non-fungible
token, just a record, and we ownit and we decide who gets to
(34:12):
see it and who pays us for ourinformation?
Or how about our health records?
How about not Epic owning ourhealth record.
How about you and I owning ourhealth record?
So when we talk to a doctor wecan decide should they see our
medical record or not?
So all of this movement to thedigital age unlocks huge
(34:36):
opportunity and ultimately, Ilook at it as the innovations
are easy to spot because theydon't happen very often.
In computing it's every 14 years.
There's a major innovation incomputing about every 14 years.
Why 14 years?
It's about half a generationand young people create all the
new stuff.
So there was a big innovationin 1954 with the mainframe 68,
(34:58):
the microchip 82, the personalcomputer 96, the internet 2010,
the mobile net.
I actually remember being inSeattle at Craig McCaw's family
office, a big investor incellular, and I asked this
family office guy do you thinkthat the mobile net will be as
big as the internet?
He's like Mark, are you joking?
Ask people if they want acomputer, like whatever.
(35:20):
Ask them if they want a phone,like I already have two, I don't
need another one.
It's true, I got two phones.
So the mobile net was reallybig.
Web one right Created about $2trillion of value.
Web 2, about $5 trillion ofvalue and now Web 3, we think
will create closer to $15 to $20trillion, because it's an
(35:40):
exponential growth curve.
And those innovations get builton better technology.
Right when petscom was created,it was a great idea.
It failed because we neededbroadband technology and GPS
tracking.
And 20 years later, chewycom isa multi-billion dollar company,
(36:03):
same as Petscom.
It just needed more innovation.
So, as Newton said, right, I'mnot that smart, I stand on the
shoulders of giants.
He was pretty smart, but we nowstand on the shoulders of these
previous innovations, and so Idon't really think I'm that
smart.
I think I hang out with reallysmart people.
That's what I love to do, and Ihang out with young people
(36:27):
because that's where theinnovation occurs, because they,
when you get older, you're likewell, I've always done it this
way and I don't really want totry something new, but young
people don't know what theydon't know and I'll use
something that's not politicallycorrect.
So back when I was growing up,bill Cosby was not a bad guy.
He was a funny comedian right,and he had these record albums
(36:48):
that I would play and I wouldlisten to his comedy routines.
And he had this one about thiskid at the playground.
He said this kid could ride hisbike anywhere.
He'd ride up over the swing set.
He'd ride around the top of thefence.
He'd do 360s six inches off theground.
He never fell.
You know, the first time hefell when someone told him about
(37:08):
gravity right, when he didn'tknow about gravity.
He never fell.
So if you think about MarcAndreessen, 19 years old,
invents the browser of Sergeiand Larry they were in their
twenties, sergei and Larry, Imean.
So if you think about that tweet, it's simply follow the talent
(37:29):
In 2000,.
All the talent.
The easy thing was all you hadto do is follow all these young
people who are not going toconsulting or iBanking.
They were going to SiliconValley and to Seattle and to
tech companies.
It made sense Invest in those.
We put 500K in Google when Iwas at Notre Dame in 96.
It turned in 200 million.
(37:50):
Not because we're geniuses, noteven Sequoia geniuses.
It was Larry and Sergey, but wewere smart enough to put the
money.
There is the biggest migrationof talent the world has ever
seen.
All the smartest people aregoing into this space.
(38:10):
Why?
Because it's where the futureis and we're building on top of
networks that are so powerfuland so global and decentralized
that they are truly worldchangers.
So that's the fun part ofinvesting in innovation truly
world changers.
Speaker 1 (38:29):
So that's the fun part of investing in innovation.
See me a few comments fromthose watching the live stream.
This one's on X MetaPlanetearly investor innovation.
Speaker 2 (38:40):
Right here.
Let's talk about MetaPlanet alittle bit here.
Yeah, look, metaplanet is.
You know, we are a smallversion of MicroStrategy and
this says we want to be theMicroStrategy of Asia.
Right, good artists borrowgreat artists' steel, so said
Picasso.
So you know, we're blatantlycopying Michael's approach, now
(39:03):
on a much smaller scale.
But the short version is youknow, people can see my, my PFP.
It's a, an on-chain monkey, andand through the on-chain monkey
community, I met some guys andthey said, hey, we got this idea
to create this, this Asiancompany, and uh, turned out that
uh, one guy had a publiccompany uh called Metaplanet.
(39:26):
He, he had a couple of us makesome investments and become
board members.
We did that and we adoptedofficially the strategy of
MicroStrategy, which is to takethe treasury and buy Bitcoin and
then ultimately tap the creditmarkets and buy Bitcoin.
And it makes even more sense inJapan than the US because you're
(39:49):
denominated in yen and the yenis even more cooked than the
dollar in terms of a race to thebottom because of their debt
issues.
And so in 2011, the yen was 78to the dollar and today it's
like 158 or something and theyen is going to be lower the
rest of our natural lives, andso it's going to continue to
(40:11):
deteriorate because they have noway out.
When you get massively in debt,you got four options.
You can pay the debt back InJapan, us, europe.
You could tax all the wealth.
Forget the income.
You could tax all people'swealth.
You can't pay the debt back, soyou're not going to pay it back
.
You can restructure it.
The problem is someone has totake the other side of the
(40:32):
restructuring and everybody's soscrewed they can't do that, so
you're not going to restructureit.
You can default on it, but thenthe politicians get kicked out
of office.
They don't like that, so noone's going to default on it,
except in third world countries.
So then your choice is todevalue it, which is to
basically devalue your currency,and that is the history of
mankind.
There have been 775 papercurrencies in the history of the
(40:52):
world.
Three quarters no longer exist.
The rest are on their way down.
So if you think about where weare in that process, the US and
Europe trail Japan in their needto devalue their currency.
So for us, it was a natural todo MetaPlanet in the Japanese
markets.
Speaker 1 (41:15):
Can we talk about the yen a little bit, because I've
been on this kick since August.
This scenario that I've beenplaying out, which is that the
yen keeps weakening, japan hasto import all its oil.
They can't control the price ofoil.
They can control the price ofyen, which means oil price in
yen.
They can manipulate.
Yen keeps getting weaker.
(41:36):
Everyone thinks that that's agood thing because it's
inflationary Too bad.
The exports don't actuallyreflect that.
When you look at Japan'seconomic data and now you're
starting to see the reversal.
Now I have you know, going backto the whole point about NVIDIA
.
The irony of all this is thatagain, all the stocks I had to
pick on it was NVIDIA.
It seems like a large part ofthat momentum was driven by the
carry trade, as money wasborrowing from Japan and going
(41:59):
to AI names.
Now, not all of it, right, andclearly there's some real
momentum there that's US homedollar driven right.
But I want to hear yourthoughts on, just given your
experience in the industry, onhow currency crises play out.
I mean any kind of examples oranything that we can point to
that would suggest that you knowwhat this could be a bigger
deal than people realize.
And here's how, historically,you should be thinking about it.
Speaker 2 (42:22):
Yeah.
So look, the problem withtrying to time the yen implosion
.
Kyle Bass has been trying to doit for 15 years, 15 years.
And there are people thatpredated him that said, hey,
when you get to 100% debt to GDP, you got to collapse.
(42:42):
Well, maybe it's 150.
Maybe it's 180.
Well, maybe it's 150.
Maybe it's 180.
Well, maybe it's 220.
Well, the reality is because ofthe yen carry trade.
And what is the yen carry trade?
So if you have interest ratesat zero and people from around
the world can go borrow money atzero and buy anything with a
(43:03):
yield, that's a carry trade.
So for years, the yen was theax in that global carry trade,
which was really interestingbecause other countries could
have lowered their rates to zero, which eventually they did, and
(43:23):
so there was this period threeyears ago where the yen actually
strengthened.
You know, like that can't beright.
Everything about this country isimploding, except the quality
of life.
The quality of life is reallyreally high, especially if you
happen to live already in Tokyo.
You know, food's great,apartments are great, it's great
(43:47):
quality of life.
But short version of the longtail is once the Fed went back
to punishing well, punishing themasses by raising rates, or I
should say unpunishing savers.
I should say unpunishing saversBecause by going to zero,
you're punishing the savers andyou're stealing money from the
(44:08):
savers to give it to the richbecause they lever up everything
.
So once they reversed that, theyen carry trade was back and it
has been backed as thepreferred trade.
And so the dichotomy is you'reright In theory, a country with
226% debt to GDP should implode,the yen should skyrocket out of
(44:34):
control and it should be areally bad experience.
But the demand for yen to fundthis global carry trade which is
encouraged, by the way isalmost infinite because the fiat
countries keep printing moremoney.
So think about the race of themoney.
(44:56):
Everyone quotes DXY, right?
Oh, look how strong the dollaris.
No, it's not.
It's just less weak than theyen or the euro.
If you look at it relative tothe renminbi, it's actually not
strong.
So this global race to thebottom is inevitable because of
(45:19):
demographics.
Demographics are destiny 65 to85-year-old people.
They don't spend a lot, theytend to save and they like fixed
income.
And so what we've seen as Japanfirst, then Europe, then the US
.
Every single day, 10,000 peoplein the United States and Europe
turn 65 for the next seven plusyears and that is going to
(45:43):
continue to play out.
So if you want to know what'sgoing to happen in US and Europe
, that is going to continue toplay out.
So if you want to know what'sgoing to happen in US and Europe
, just look at Japan 11 yearsago.
And so they peaked in 89, wepeaked in 2000,.
Their debt got downgraded.
11 years later, us debt getsdowngraded, same kind of things
happen and ultimately, I thinkthe yen is a controlled
(46:04):
demolition, not anout-of-control demolition, and I
think the yen carry trade isback to being the most preferred
because they're the place thatstill has zero rates.
Speaker 1 (46:17):
Until they don't, until they don't.
As you know, mark, for thosewho want to track more of your
thoughts, more of your work,which way to go?
Speaker 2 (46:25):
So I mean I'm on Twitter.
So at Mark Yusko, your thoughtsmore your work, which way to?
So I mean I'm on twitter.
So at mark usco uh, we have awebsite, morgan creek, cap,
capcom that has some links tostuff.
I mean, I, I do a lot of thingson the internet.
Uh, we have a youtube channel.
Uh, around the world with usco.
We also have one for digitalcurrents.
We do a weekly show on theABCDs, so that's probably the
(46:52):
easiest place to find me.
You are keeping busy, any majortravel coming up, any places
you're going to, you know, yes,so we are in the midst of what I
call the Willie Sutton tour.
So you know, willie Sutton tour.
So you know Willie Sutton, thefamous bank robber.
They asked him, willie, why doyou rob banks?
That's where they keep themoney.
(47:14):
Um, so we are raising our, ourfourth fund for the digital
asset business and, uh, we areheaded uh over to the middle
East here, uh, in the fall.
So two of the guys just gotback and I'm headed over in
September.
So that's one area, and what'sgoing on in the Middle East is
(47:35):
truly extraordinary in terms ofjust the embracing of the
digital asset ecosystem, thedigital age focus on all things
digital and innovation.
So that's a very exciting placeto be.
Southeast asia, another placewhere we're focused on uh
heading to singapore and hongkong.
Um, but you know I I don'ttravel as much as I used to
(47:59):
because of of zoom and and othertools.
Um, but I do like being out onthe road.
I, I was just, I just backed.
Last week, 20 years ago, I leftNorth Carolina, university of
North Carolina and I startedMorgan Creek and I took my first
full two-week vacation in mycareer up to that point, and so,
(48:20):
for our 20th anniversary, Idecided I was going to do that
again.
So my family and I disappearedfor two weeks.
And when I say disappeared, Imean I disappeared.
I didn't tweet, I didn't doanything.
And so I said how can you dothat?
And I said because I had agreat first boss.
My first boss had a great line.
He said if you can't disappearoff the face of the planet for
(48:42):
two weeks and not be in contact,just completely gone, you're
not paid enough.
I'm not that important.
So it was easy to disappear fortwo weeks and it was glorious.
We did Italy and I love going toplaces with history and it
makes you realize a couple ofthings.
One, there's nothing new inthis world.
All the stuff we think weinvented in modernity were all
(49:05):
existing in antiquity and someof the things were truly, truly
extraordinary.
Like you know, the Temple ofHercules in downtown Rome,
across from the Mouth of Truth2,000 years this building's been
standing.
Not one piece of mortar,hand-cut stones, no power tools,
(49:27):
earthquakes.
I mean how, how is thatpossible?
We can't build homes that last20 years and this thing has been
standing for 2,000 years.
That's pretty cool.
Speaker 1 (49:41):
As the expression goes, they don't make them like
they used to.
Speaker 2 (49:44):
Amen Amen.
Speaker 1 (49:45):
Everybody.
Please make sure you followMark.
I appreciate those that areengaging during the live stream.
Again, this will be an editedpodcast under Lead Like Live.
Hopefully I'll see you all inthe next episode and make sure
you follow Mark on X and everyother place that he's at.
Thank you, Mark, I appreciateyou.
Speaker 2 (49:59):
Thanks for having me and look forward to doing it
again sometime soon.
Thank you.
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