We're back... with Bitcoin rant! January 19, 2024

28:20Now, again, I use words more likely, or I think very, very deliberately, because I'm not making predictions of the economy will grow at 2.4%, or the stock market will go up 9%, or Harvey Norman shares will go up 13%. I don't know. I'm saying at the current price, I think it's likely that more people shop there. Why? Because I kind of have a reasonable understanding of consumer behavior. And could have been disrupted costs for a million different reasons. Absolutely. Maybe Harvey Norman dies. maybe jerry harvey's a fraud maybe you know whatever else he's not by the way but you know maybe maybe maybe all these other things happen maybe you know uh amazon goes blitzkrieg and sells every white good and brown good for 25 cents okay well that yeah that's possible but over time it's likely that harvey nomin will grow because it has a strong consumer franchise a great brand seriously great presence great net brand recall bargaining power with suppliers it might be your favorite retailer might be my favorite retailer enough people will shop there over time the population is growing despite comments i've made in the past about whether i think that's a good idea or not uh you know it's just likely in my view so it's just it i i'm investing is is honestly we can't talk about investing and speculating or betting as different things but it's not that different at heart it's about just trying to understand the odds of something happening and trying to get a decent return based on those odds so that that's why i think i i don't know what happens i'm not predicting harvey norman's share price or in profitability but i think it's probabilistic that in five years time it's earning more money and if it is then mathematically today's price looks relatively cheap on that basis that's that's literally as as much as i need to do or know to buy shares and having on me yeah i mean i i the way i frame it is it's about being generally right as opposed to specifically wrong you know they're all predictions they can all be wrong but someone who's out there going you know what i think the sun will rise in the east tomorrow is making a prediction, but it's probably going to be a good one versus I think Woolies' second quarter earnings are going to come out with a, you know, per share underlying earnings figure of$2.33.6.

30:19Like they are both predictions, but one's a lot safer bet. And none of this, I think, those that do it well. For me, I always start with two questions. When I look at any stock, any investment, in fact, is will it be around in five and ten years like first that's the first question right like it might be like if that if that is not true i am picking up pennies in front of a steamroller that's right or if there's reasonable risk that it mightn't be it's not just a yes no question you're never gonna know the answer that either as you just to answer you what you're saying it's you know it's got lots and lots and lots of debt and it's making you know uh wagon carts or or polaroid cameras you're like faxes sorry or fax machines or yeah you know it's so like that's That is the first question, right?

31:04And then you go, okay, tick. And then the next one is, is it earning materially more on a per share basis than it is today? Now, again, I can still do well if that's not true, but it's much harder. But if I can get those two broad things right, then it really just comes down to maybe a little bit of general valuation and very, very broad brushstroke valuation kind of stuff. Because if you get those two parts right, uh you know everything else and they're not saying they're easy to answer necessarily you've got a sort of there's a lot underneath the hood there in informing those views but that's really the kind of starting point and they're just easy they're not saying they're easy but they are easier to predict than the q3 earnings result even though they're both predictions that's right i I think that's exactly right.

31:56Mate, Tom, let's move on to, speaking of New Year, I'm curious. I don't think you're this sort of bloke, but let me ask you anyway. Did you make any New Year's resolutions? And if you did, have you managed to keep them on day, we'll record this on the 18th, so day 18 of the year? How was the Andrew Page New Year's resolution scoreboard? I don't do them. I think I made the same comment last year. They have been shown just never to work. And the reason is I think we set ourselves up for that they're too specific and it's it's more about i think what you want to do in your life is i think someone i heard describe it as you want a a theme for the year right and in fact you probably want to narrow that down because year is a bit too long it's not like it's a blink of the eye in many ways but but you know our sort of human time scales day to day it feels too long it's more about having these general themes because when you have hyper specific uh goals it's very hard to be exactly right.

32:57Now let's give the classic example of, you know, I want to quit smoking or something like that. Yeah. And you think, my goal for 2024 is to quit smoking. And then you find yourself at a party at one night and you have a secret. It's like, ah, I failed my New Year's resolution. It's done. Ah, well, it's done. Ah, well, I won't. Must have a second one. Yeah, exactly. You know, it's silly. Whereas if you kind of think, well, no, I really want to stop, but I'm going to make moves in that direction. and it is still a phenomenal success that you've gone from a, I don't know, it's probably a dated example, but, you know, back a day to I had none for like three months and then I had a moment of weakness at a party.

33:33But it's okay. My theme is still on track here. So I think you set yourself up for value with hyper-specific. Yeah. So I don't have any specific New Year's resolutions. so what what's the sort of the themes that i'm that i'm going for i i i really i don't know if it's a stage of life kind of thing but i'm really trying to get to a point of life is short what is this great saying i heard you know a man has two lives and the the second one starts when he realizes he only has one or something like that yeah and i've always loved that in the sense that But it's sort of, I think as a younger man, it was very much about, I've got to be careful here because it makes me sound very material and worried about money.

34:26It's not, but I just realized that, I think we all realize at a certain point that money is kind of important if you want freedom. And freedom is super important to me. But I think it's about trying to strike an appropriate balance. I'm sure I could earn a lot more money and if I worked a lot harder and took different kinds of jobs and the rest of it. But I think I'd also be very miserable. So I'm trying to move more and more to a life where I have more control over what I do. And it's not something that I measure in dollars, but something I get to measure in terms of flexibility and freedom of time.

34:59Now, that obviously, it's very easy to say that, you know, but if you don't have food on the table or a roof over your head, that's, you know, it's very difficult. So you've got to sort of cover the basics. but I'm trying to move more and more in that direction where it's more quality than quantity. And so, yeah, I know that's probably a bit wishy-washy and a bit vague, but that's, I'm trying to move more and more in that direction. If I can get to a stage as I continue to get closer to retirement where I'm working, quote unquote, less, but I'm enjoying my time. I want to be able to sort of get up in the morning and do the things that I find interesting and exciting and engaging while still being able to provide and further my sort of financial goals.

35:41So it's hard, right? Like that's a very hard balance to sort of strike, but that's the balance I'm kind of trying to go for. Hashtag work-life balance. Yeah, totally. I can talk about that in a minute, actually, mate. We're going to talk at the end about some summer reading if we get to that point. Yeah. No, I'm not a resolutions guy either. Not a fan at all. I have some similar thoughts to you and I will probably spend a bit more time with them when I've done the, we do our summer reading i

36:08we put a pool in last year which is is a nice again nice to be able to have that opportunity given what these things cost these days uh if i have a new year's resolution it's probably and we also had our house repaired after flood damage which took about 80 months to get done so i'm actually hoping for a quieter year this year i'm hoping for a quieter year fewer tradies around the house maybe a little bit less and there's money outgoing um so again not a resolution but a kind of an aim to maybe just keep things a little bit simpler. That's probably a reasonable resolution. And again, similar to yours, there is a perpetual trade-off.

36:43I'm not going too far because I want to talk about this in a minute. There's a perpetual trade-off between spending now and spending later. Saving is deferred consumption. And if you can save and then compound that, then you get to defer a lot of consumption. I'm sorry, a little bit of consumption now for a lot of consumption later. But there is still a trade-off between when you want to do the things you want to do. so that's yeah but but for me it's kind of you know i think we'll probably try and save a little bit more this year um not not to the exclusion of enjoying ourselves and enjoying life but just kind of you know moving a bit closer a bit more quickly to to that goal of financial freedom i say every time i talk about this i'm not going anywhere work-wise i love what i do i love this podcast um to your point mate yeah i'm very lucky i get to do what i want to do most mornings there's some parts of my job i don't love but that's life um i'm very very very fortunate so i'm not sure Well, you know, we've talked before about what else we do differently.

37:29But no, nothing. I'm not a news resolution kind of guy, mate. Results I should make, like eating better and getting fit and all that kind of stuff. But I haven't and I didn't. So we'll see how that nets out. But let's move. Let's kind of finish our reflections slash where are we at with inflation. Interest rates are still going to be the big topic with inflation for 2024. And I think I just want to put a stake in the ground a little bit for our first podcast and kind of where are we at. Story in the FIN this morning that the NAB is the last of the big four banks to now predict, speaking of predictions, that the RBA will not raise rates in February.

38:08They had previously believed they would. The big four banks are now saying they won't. The bond market apparently has like a 3 % chance priced in. So there's an almost universal belief, which doesn't mean it's going to happen, by the way. The RBA is its own thing. That rates will not rise in February. and the general consensus now is we've hit the peak for rates and that they will start to fall somewhere between September and November of this year. I've seen predictions of cuts of up to 0.6 % in the back half of this year. NAB is now saying, I think they're saying 1.25%. They expect to cut off the official cash rate between now and the end of next year.

38:51So it's probable that for the first time, again, probable rather than predictions, I think we'll probably finish the year in a better place than we started it for the first time in quite a while. Whatever bottoming out we do, it's almost, it's very likely, I think, wherever we bottom out, recession or not, we'll be on the upswing or at least have started that by the end of 2024. That said, inflation has been coming down, which was lovely. We know it dropped from 4.9 % to 4.2%. 4.2, 4.3, 4.3, which is great. And still a long way from the RBA's target range, though not that far if you think about it.

39:274.3 to 3, which is the top of their band. It's in striking distance. You can see it from here. At the same time. I'm only losing half my purchasing power every decade now. Exactly, exactly. That's a win. Exactly. But the US inflation rate actually bumped back up this month. So we also shouldn't assume it's going to be a smooth sailing path from here. Your thoughts on where we're at? what you were smiling as I was talking. So I imagine - I was, I am so smiling. It's only, when you read things like the financial review or sort of financially based sort of publications, yes, this is the story. It's the pivot, like, you know, rates are going to come down this year and it is framed as good news.

40:08And I just, I mean, people are going to be careful what I said before I get too many death threats here. Because I've been a lot of people with mortgages are going, how is this anything but good news? But you've got to ask yourself. I mean, when you look over, again, take a step back and look at the grand sort of arc of history. We are, we're probably below the long-term average in terms of interest rates. Oh, definitely. And we are all, they're going, oh my God, they're so high and oh, this is terrible and the world's ending. Isn't it going to be great when interest rates come down? It's like, well, you've got to ask yourself why.

40:42Why would the central banks be keen to cut interest rates? And I think the expectation here is not just like there's going to be a bit of a plateau and then maybe we ease back a bit. But no, no, there's going to be cuts. Well, that, to me, would suggest that through the Keynesian sort of lens that things are bad. Right? Like we need to stimulate. That's why we're doing it. In other words, you know, people are losing jobs. There's not enough economic activity. We need to create demand, and we're going to create demand by cutting interest rates. So I think when you sort of frame it up in that way, it's like, well, this isn't good news.

41:22I mean, well, I would rather sort of – I don't want – let me be clear. I'm not advocating that I want to go to a world of 18 % interest rates. Of course not. You know, that's – you know. But I do think that if given the choice, I would rather sort of have an interest rate policy setting that is round about the long-term average and a very robust, healthy economy, as opposed to an environment where interest rates are super low, but, you know, things are on a very shaky kind of footing. So I just, you know, there's a real bizarreness to all of that, to my mind, is the first point I'd make. The other one just sort of being is that, and I know we do this a lot, right?

42:04It's sort of like this is the current view, according to the bond market, according to the pundits, according to the economists. Oh, they're saying that. Are they saying that now? Yeah, they're saying. Oh, okay, great. It's like, well, they were saying this before. Yeah, now they've changed their mind. Okay. But they're right now? Because they were wrong before. Yeah, that's right. Yeah, yeah, yeah, yeah. They were completely wrong. But now they think this. Okay. If you had a friend who every time you saw them made these predictions and they're just wrong, wrong, wrong, wrong, wrong. I mean, after a while, you just tune them out.

42:34Stop listening. But there is something bizarre when it comes to markets that we will go and we will talk about it endlessly and breathlessly. And there's the amount of column inches written on what, you know, talking head number three thinks from Bank X. You know, it's like what that dude who's been consistently wrong for a 10-year period is now saying this, like, I don't care what they're saying. And it's not because they're idiots other than that they feel as though that they can do this. It's just that it's very, very, very, very hard to predict this kind of stuff. It comes back to what we were talking about before.

43:08Don't predict the things that are unpredictable. And I mean, you know, so look, if you've gone to the head, yeah, I'm with you, man. I think there is a lot of sense in sort of the outlook that's sort of given there. But I think we also need to be super mindful that things can change really radically. I mean, Trump is very likely to be the next president of the US. I was going to ask you about that. and and i don't want to get political or i'm sure people can probably work out what my views are on that but the the the reason the reason why that's well it's a bunch of reasons i don't want to say but from like now i think it's like when you you have kids right and they just get away with murder and then they have another opportunity to get up to mischief they're gonna be office there wasn't any consequences last time you watch what potentially happens under that environment Now, I don't know what that will be, but I guess I use it as an example of here we are early January talking about what might happen.

44:09And then you have the biggest, the easiest of X factors on the horizon towards the end of this year. Like, what's he going to do? I don't know. No one knows. It's going to, it's so bizarre. Like the first term was just a warm up act. Like you've seen that. That was him thinking that there was some constraints. now is like oh turns out i can do whatever right and and still get you know back into power so i i think nothing to lose because there's no third term i mean there's nothing to lose right yeah it's gonna be you know and and like you take u.s politics out of the equation just look at the geopolitical scenario that all the tragedies that are happening in in various wars and now you've You've got other agitations there.

44:54Pirates in the Red Sea. My point is that I can guarantee you at this time next year when we are doing a review on 2024, the thing that we will be occupying our time is not even on our radar right now. We expect it to be X and it'll be Y. And Y wasn't even sort of on the realm of possibilities. We talked about a lot with COVID, right? It's like no one had that on their bingo card. global pandemics like huh that happened and it'll it's not that it needs to be of that magnitude but every year it is that every year it is like we said before with with property and equities going into 2023 oh my gosh it's gonna be it is no turns out it was a really good year huh okay now 2024 oh now we're all saying this well maybe probably not and and not just because just because it's um It's almost unpredictable.

45:47So I don't know. And I do think that people are counting chickens that aren't even close to sort of hatching yet. You can talk about – so just take away forecasts. Let's just look at fact. Inflation is coming down. Now, I've got to be careful. I really hate the language, as you know. I mean, the rate of erosion of your purchasing power is slowing is how I would frame it. prices are not going back down again. Let's just be clear on that kind of thing. But they are, right? So the rate of erosion of your purchasing power is slowing, which is great. But this is a multifactorial dynamic, which is a gazillion different inputs here.

46:32And I think we had sort of these supply chain factors that are easing now, and that sort of helped with things. We've had a little bit of steam taken off with higher interest rates and all the rest of it. But to my view, there's probably some other more significant factors underlying all of that, which is not going away. And I think it's a long time before the US gets anywhere near the 2 % target that it has. You know, the US added more than a trillion dollars in debt in just the last month or so, right they are they are so far away from ever being able to reap it's not this isn't a political state this is just like this is maths right and and they because of because of what's happened with russia etc there's there's a lot of um foreign buyers or traditional buyers of of bonds because you have to make up the difference right you're spending far more than you're taking in they're far less likely to and have been again i don't want to forecast let's just talk about in fact, are far less likely to buy.

47:36So the Fed monetizes it, right? The Fed just prints it up and buys it. That's kind of cool. And you can get away with that short term, but there is nothing happening there. And we are going into a highly populous political environment where I don't think there'll be any sensible adults in the room that are going to have any reservations on doing that. So the end result is, I think we're going to see much more money printing, frankly. And I think that is one of the dynamics that I know people talk about, but I think it's a bigger dynamic than people think. And wherever that wind is in your sails, it's going to be very hard when we're producing more units of currency than we're actually producing actual things in the real world.

48:18And I know that tends to be a controversial take for reasons that are beyond me. I don't know why that's controversial, but I feel as though until that dynamic, we see a structural long-term change in that trajectory. It's always going to be a bit of a sail into the wind kind of issue. I think that's right. I think that's right. And the hard part, as with any other forecasting, is we don't know for how long, you know, what happens in the meantime, what impact or, you know, output there is from that final result. if there is a final result we finally make we find a way to get it solved or whatever yeah understand as always understanding the risks and being able to turn that into this will happen with this impact by this time oh yeah that's why we don't predict that's exactly why you can go does that look ugly but dot dot dot and again we've used the example so many times of the housing market and good old steve keen i should stop i mean i don't mean to embarrass him but you know he sold his it wasn't in the prediction he sold his unit he wasn't he wasn't talking out of his backside for media he literally sold his unit said i'm selling this this is ridiculous house price is going to fall and i want to say you've sold a surrey hills sydney unit for 400 grand i think from memory i think that's right if i don't mean to besmirch you if you if that's not right i'll help you correct the record but um who would sell it who would sell a property once they're on the ladder like you'd have to be a moron who choose you off the property ladder i know i would i would never do that that is crazy just just so people realize i'm tongue-in-cheek because that's exactly what i did yeah sorry mate motley fool money for more subscribe to the free newsletter at fool.com.au forward slash listener.

49:52Let's move on because we are running out of, nominally at least, time. Although maybe can we time print the way the Fed money prints? We just kind of keep going forever, right? We'll just pretend it's only an hour because we just invented more time. Really people can listen to this without giving up any of their current time because we're going to add more time to the day at the end of the day. Yeah, exactly. Speaking of things, speaking of starting off the way we finished, I have to ask you about this, mate, and I'm going to hold you to no more than four and a half hours worth of answer. This, of course, is the Bitcoin ETFs that have finally been approved by the USSEC, Securities and Exchange Commission.

50:25They are the equivalent of our regulator, ASIC, or the Australian Securities and Investments Commission. You know what's impressive about ASIC? They've got to keep the word commission. You know when all those governors who went through that process of having all those words commissions and stuff taken off their names? It should be called Securities and Investments Australia. You know, everything's Housing Australia or it's, you know, Transport New South Wales. It's not the New South Wales Transport Commission or any of that stuff. It's all, you know, the Housing Commission. So, no, it's just about housing now.

50:50So, ASIC should be surely the Securities and Investments Australia is what they should be called. Slight tangent. What's wrong with commission, though? What's wrong with commission? Oh, it's good. All apologies to try to corporatise and rebrand all this crap. Nothing wrong with it at all. I'm just saying everything else has been taken away because they want to seem more something. I don't know what you call it. Anyway, you know, it was state rail. Then it was now it's transport for New South Wales. Is that different? No, it's just a new name. So is it any different? No, no, it just sounds cooler.

51:16Bitcoin ETFs, mate, back to that. The SEC has now said you can now list, if you're a fund manager, and buy if you're an investor, or speculator, some might say, but I won't go too far down that path. Or maybe if you just know what you're doing, as Andrew might say. You can now invest in Bitcoin ETFs on the US market, almost certainly paving the way for ASIC to clear them to be traded in Australia at some point. Mate, I'm not going to make any more comment other than to say your thoughts, reflections, suggestions, ideas. How did you kind of greet the news and the subsequent response? I think it's a big deal.

51:54I think it's a really big deal. I think people overestimated the impact on day one. If you were following crypto Twitter, as I was... You were just into Bitcoin then because Bitcoin isn't crypto, you tell me. Well, that's very true. I've been listening. I've been listening. No, you're a good gold star for you. Thank you. There was all this talk of God candles and, you know, this nonsense, which is basically a big face-melting move upwards because this huge amount of institutional money, we're talking trillions of dollars, which has never had access. Like, yes, technically it's had access to Bitcoin, but holding your own keys, the regulatory approval, the investment mandates against sort of these, whether it be sort of pension funds or just institutional holding or corporate treasuries, it's just very, very difficult.

52:44So what this does, it does two things. It provides an on-ramp for institutional money, and there's a lot of it. And it also legitimizes it. So you've gone from the, I'm always reminded of the Gandhi idea of, first they ignore you, then they laugh at you, then they fight you then you win so let's just step back a little bit here and and also on the price action i just want to make the point here this thing has up 120 since the beginning of 2023 and people are disappointed is exactly what i talked about this start was just sort of like even on face melting kind of you know near-term gains we're all disappointed because it went five it pulled back five percent after the the etf it's like no these these gains have been insane Right.

53:30And anyway, so you had someone like Larry Fink. There's a lot of signal here. He is the head of BlackRock, the biggest asset manager in the world. You know, huge amounts of asset under management, calling it a Ponzi scheme, an index of money laundering and everything that you possibly can. He's now on CNBC telling people that it is sensible to have a modest allocation. You've got Franklin Templeton, one of the oldest, most prestigious investment managers in the world, putting laser eyes on their Twitter profile. I'm not sure if that's accepted as a Bitcoin or you should sell every Franklin Templeton investment you have.

54:13I'm not sure what that says. You've got Gary Gensler at the SEC casting the deciding vote to say, yes, we think that this is legitimate. Now, again, you can have your views on all of this kind of stuff, but there is something of note when the biggest, most powerful people in the industry have anointed, they have given the cross. You know, they have, you know, spectacles, testicles, wallet and watch on this. This is legitimate. Not only is it legitimate, you're seeing Bloomberg put out research saying, actually, your Sharpe ratio on your portfolio will increase with a 1 % to 2 % allocation. That's a whole bunch of gobbledygook for a lot of people.

54:50But the point is, is that you've got people in the traditional space now speaking about this thing seriously. And that is noteworthy. You've now got a thing where your granddad can open up his traditional brokerage account, press a button and have exposure without having to worry about anything else. It's a custodial solution in a lot of ways. So I think it's really noteworthy. I mean, there were 500 ETFs launched in 2023. I'm going to forget the exact stat, but they did something like$500 million in net inflows. There's a lot of esoteric sign of things in there. In the first three days, the Bitcoin ETFs collectively, there was 11 of them.

55:36There'll eventually only be a handful as they fight for dominance and scale. But at this point, there's 11 of them. They saw something. Actually, sorry, my numbers are dated. I need to update this. But in the first couple of days, we saw$800 billion of inflows. Right? A lot, right? That is a lot. Now, here's the other thing, right? The one thing that you can be sure of, and I don't think this should be controversial, is that there is usually – oh, so over the break, I watched Dumb Money. Has anyone seen that? Did you see that at all? Oh, I didn't. No, should I? Yes. Oh, my gosh. Oh, fantastic movie.

56:16Great story. I just, I'm kind of over the soap opera investing stuff. Like I just, you know, for all the stories we follow in the Fin, as I've said this before, we all think we're serious investors and then we click on the Britney Spears stories of the financial world, right? And that kind of grabs our attention. A little dumb money, I thought. Do I, I mean, is it entertaining maybe? Is it? Oh, it's entertaining. Yeah. You know, you're not going to walk away with any investment lesson. Maybe actually, I don't know. If you think about it, you could probably draw some bows there. But it was a phenomenon, right?

56:45And where was my point with that? My point, I guess, my point being is that when you see huge run-ups in demand, like we saw with GameStop, now this was – the Australian equivalent would be electronics boutique, EB Games. They sold DVDs, games, these kind of gaming paraphernalia, and they were in all kinds of trouble. Sales were falling. They were kind of going to go bankrupt, et cetera. It's a fascinating story. Anyway, what happens when the price spiked? They issued more shares. What happened with lithium last year? Lithium was an awful year for lithium. Yes, it was. Yeah. Now, wait a sec. I thought we needed more of it.

57:23Yeah, we did. I thought demand increased. Yeah, it did. There was a supply side response. There always is. Now, the only point I'm leading up to here is that you can't do that with Bitcoin. It's programmatic. It just can't be mathematically. It can't be done. So at the moment, there is 900 new coins issued per day as part of the supply issuance. Again, I get too technical here. That gets cut in half in about 90 days or so. It happens every four years. It's part of the supply issuance and the monetary policy, the blah, blah, blah, blah, blah. My point is, is that at current prices, $40 million a day will soak up all of that supply.

57:59In 90 days, it's going to be$20 million. Now, it sounds like a lot. That is, I can't emphasize how tiny that is when you're talking about the deepest, most liquid capital market in the world, i.e. being the US. Now, we've had$800 billion of net inflows in the first couple of days. Let's say that once things settle down, it's a tenth of that. What happens when an immovable object meets a - Resistible force. Thank you. So, I think that's why it is a big deal. You never underestimate the greed and moral bankruptcy of Wall Street would be the point I would make here. For the first time in the longest time, there's something new.

58:49And this new thing is now being considered by some of the most important thought leaders in the space as legitimate. So your financial planner would never recommend to mom and dad that they should have a Bitcoin allocation. and you've already started to see the investment notes come out. Again, fidelity. It's a who's who of massive money managers. And they're all saying, actually, a 1 % to 2 % allocation is good because it's non-correlated. All these technical reasons. I actually think there's a lot of merit to the reason. But it's all sort of hyper-technical. The point is just like, just tell me what I need to do.

59:25You need to have some gold exposure. You need to have some of this. We think 1 % to 2 % allocation on crypto is a decent idea. Now, I've used that word again. And that's the word that they're using, but this is the only avenue that they have. And again, when you look at the trillions of dollars that these people are managing, and as advisors start to direct these fund flows in that direction, very tiny amounts relative to the amounts of money that they're offering, it's going to be very potent. And just on a demand supply dynamic, that is a very, very, very big deal. So, I don't know. I could go on and on and on and on and on.

1:00:07And it is a – here's the other thing. It's 15 years old. Do you know when the internet first came to be? 95? No, well before that. Are you talking about the old Arpanet stuff? Yeah, right? Yeah. Right? But even in 95 when it started to sort of get into households and the rest of it. Yes. You know? And even in 2000, right? There's this wonderful article from Forbes, I think, in 2000, just basically saying the internet thing is never going to take off. And we all laughed at it. We all did until we didn't. And I think Bitcoin is getting to that point now where it's gone. It has been legitimized. We are actually seeing real world use cases come out for us.

1:00:52Actually, circular economies are being developed. It is here. it has arrived and is now being, the kids were playing with it in the sand pit and now the adults have come over. And I find that a fascinating, fascinating dynamic. So I'm as bullish as I've ever been. And I think people have just been way too narrow and short-term in their focus. And I would say a very significant portion of investors in this space are just after the get rich quick. They don't really get it. They just think it'll go up. That's why I'm buying it. They don't really understand the fundamentals. And yes, I will die on this hill.

1:01:24There are fundamentals. But just as it wasn't immediately apparent in 1998 what the internet was going to be, there were some early sort of thought leaders there and some early adopters. It's the same kind of thing. It's 1996 in the Bitcoin space. That's where we're at. And I think things are going to unfold in a very, very interesting way, particularly when you fold that against the macro background, as we were talking about before. Or when inflation and global trust, geopolitical, all these kinds of things start to increase the use case and utility dimension to this. So I know. I know everyone thinks I'm crazy.

1:02:07I know. I know. I cringe when I talk about it. They said the people who invested in chilips were crazy too. And look what happened. Hang on. Hang on. You know what's funny about that, right? No, when you have things like the South Sea bubble and the Bernie Madoffs and the tulips and that, when Ponzi's collapse, they collapse. They don't come back. I mean, this thing is now 45 ,000-ish USD. So it hasn't actually spent much time above this. When scams and Ponzi's collapse, they don't come back. This has come back, right? So it's sort of like it was a really good argument in 2016. thing and it's becoming like harder to make that sort of argument and then the other one i saw in the fin the other day is an idiot journo call i won't name them but they're calling it um calling it the pet rock you know and it's sort of like i i don't think they realize how good an analogy that is like it's not the dunk you think it is right so what are what are beanie babies worth what is a babe ruth baseball trading card worth there's no intrinsic value there there's no cash flow there but but people value it and it doesn't i think you know artwork's the same like you people think someone needs to sort of say that oh no this is a no it is a thing if enough people think it is a thing so so so so anyone can get up there and go this is nonsense i think it's a pet rock and it's stupid it's like yeah but enough people don't right they all want a pet rock and there's certain more pet rocks to go around as long as people want the pet rock then and they're going to pay something for it.

1:03:46And you might say, well, yeah, but that's dumb. And it's like, yeah, well, that's what it is, right? And the - Yeah, investing is the value judgment, right? You're on the make money, you don't. There's no value judgment applied to the demand and supply. And we're looking at, we're trying to put the round peg through the square hole because everyone makes the discounted cash flow basis. It's a non-productive asset. It's like, yeah. Stop comparing it to equity. It's not equity. It's currency. And all this thing, oh, it's not backed by anything. Well, what's the Australian dollar backed by? What's the US dollar backed by?

1:04:14Nothing. Good faith is what it's backed by. This is backed by good faith as well. So the more that people try and dunk on this thing as no intrinsic value, is not backed by anything, is not producing cash flows, all you're doing is describing every single currency that has ever existed. So I take your point, but how is that different? And so now we have a global currency that I think in terms of volume traded and in market cap sort of size in terms of the size of the network, is probably the 13th biggest currency in the world. Right? Pay attention to that. And it's like, well, what's the utility?

1:04:51It's a global trustless ledger that no one can F with, that more and more people are using. And as anyone who studies network theory would know, the network effects are insane. It's like three people using it, it's worthless. You know, 20 million people using it? Okay, it's got a bit of use. This ETF full circle here is driving adoption. and adoption if you want to look at number of wallets number of transactions the block size fees hash rate whatever fundamental metric you want to is only going up and that becomes and that means that it becomes more and more value like the internet in the sense that you and me are connected to the internet no one else is it's like i guess we can play doom against each other and send an email but that's it's pointless everyone in the world now has internet access and it's the most powerful thing ever right so we someone came up with a tcp ip transfer protocol for information.

1:05:40It changed the world. We crystallized around a standard. Now someone's come across a protocol standard for transferring value. And 15 years later, there's Bitcoin and then there's everything else, right? And it's like, it's been invented. We were in a world before electricity and a world before fire, a world before the internet, you know, and a world before radio. And we had a world before a pure decentralized online commodity. And now we've got one after and the global significance of this is just insane and yes it's for money laundering and drug use as is money in general right um but but every day that goes by and as i've said to you before the only thing i'm watching is adoption because with adoption grows utility with utility grows adoption in a virtual feedback loop and it's just going in one direction it's going in one clear direction and and i would agree with fidelity and morningstar and bloomberg just to do the the social proof kind of angle there, that if you don't have 1 % at this stage, you really need to have your head read.

1:06:39And it is now, just to answer you, I'm sorry, mate, you did limit me to four hours and I will shut up in a second. You've now got the point where before I had, and we've done the episode on it, right? So what you need to do is get yourself a hardware wallet, set that up, write down your private keys, etch that into a steel plate, bury that into your backyard, get onto this protocol here, do that. And it's just like, it was like setting up email, you know, back in the day. Grandma's never doing that. You know what grandma's doing now? She's calling up a stockbroker and say, can I have 1 %? Yeah, done.

1:07:11You're completely within the normal walls of TradFi, as it's called, traditional finance, and you don't have to do anything. It's like buying BHP shares. It's a big deal, man. It's a big deal. and and and and i i would say that at this point again with everything growing as it is if you've got a one percent exposure and nothing happens it goes to zero then you're not going to lose any sleep uh if it doesn't then you you'll likely do it extraordinarily well i know the argument is there is like well why wouldn't i take one percent in every like moonshot and it's like that's a really good argument but where we are we are the biotechnology company that's gone from hey we're working on cancer to we've passed all of the human trials and we're now commercializing that's that's the distinction and so at that point the one to two percent allocation isn't reckless well at that point it's not the one in a million moonshot that might or might not work and i'll make a fortune if i if i do so so you know it's going to be wild it's going to be unpredictable it's going to be humbling but it is it is a it is a technological um uh phenomenon that that we don't i don't think we fully grasp yet like you know everything that sounds crazy about bitcoin ask yourself how the current plumbing and the financial system works and tell me that's not crazy like it's all crazy like we're just monkeys exchanging tokens amongst much like it's money is what allows humanity and civilization to scale someone's just put created a so significantly better form of money that isn't controlled by anyone in a world that is fast running out of of of trust um you know i don't know i'll shut up i could go on that was a very passionate impassioned uh defense or or maybe what's the other word uh i'll say i'll say this as well the thing is, is when I go on these little rants here and stuff, I never, and I'm, I'm my, I've built an entire business on, on trying to get people to prove me wrong because I feel as though by challenging an idea, it makes me better as an investor and it makes my investments better.

1:09:22Hit me up. If you've, get me on Twitter and like point out something that I'm missing here, right? Because I started out as the biggest skeptic in the world and all I did was just started digging into it. And the more I dug into it, the more I convinced myself. And I really go out of my way to find the negative views on this. And what you do is when you actually spend a bit of time researching in this space, you realize that all of the negatives that come up were actually discussed on the original Cypherpunk mailing list back in 2008 when Satoshi first invented it, right? It's all been discussed before.

1:09:55The classic meme in Bitcoin is like, hey, I'm new to Bitcoin and I'm here to fix it. It's like, dude, we've got this, right? It's not that your value, your input isn't, it's not the hot take you think it is. It's 2024. All of these things that you're throwing up have been discussed, debated for over a decade now and demonstrably in the free market proven to not be a thing, right? It's like, it just hasn't happened. And so anyway, I don't want to have all my money invested in news corp when the uh uh the internet is this bit or news corp might be a bad example but i want to be invested in traditional media i'm not investing in kodak now that everyone's doing digital cameras and i gotta be careful here as well because this will play out over it's been 15 years which blink of an eye by the way it will be the the full realization and potential will unfold over a very long period of time.

1:10:58And that's the time if you are going to invest in this space, that's what you've got to be mindful of, right? And so buy Bitcoin. Yes, I'll add my thoughts in the interest of balance and whatever. I actually don't – I'm not a no Bitcoin, as you know. Yeah, a no-coiner. You're not a no-coiner. Yeah, but I think for what it's worth, my investing approach, it's not even about Bitcoin because you mentioned it's a currency or maybe it's a store of value or maybe it's something else. I own no investment currency or investment stores of value. Yeah, you don't buy the yen or the US stock. For reasons that it does require, you say there are fundamentals.

1:11:43I would disagree, but probably only because we would define the word fundamentals differently. um i i i invest in things for which i believe there's a fundamental basis for future cash flows and that's just that's just my investing framework so because that makes sense for equities right that's that's the only rational way of looking at it exactly yeah but but equally i'm not investing in gold at any price or yeah i mean maybe two dollars i invest in gold but you know there's a price for everything i suppose but even then though that's made up or i'm sorry to interrupt but like why why why is two dollars cheap totally you know yeah yeah i think my point is just that i guess i'm i'm not i wanted to say two dollars because i'm not ruling out ever doing it at any price like there's probably a time i don't want to i i desperately as much as easy people in our industry to just be absolutist about everything um you know i'm not gonna be absolute about anything is there a time yeah i didn't think i'd buy any miners i bought fortescue um right eight months ago right so i don't want to say never i never will or there's no circumstances until i would including bitcoin um i would just say my why i have avoided bitcoin as an investment the same as i don't invest in gold or currencies which is just i prefer to have investments and you're right it's it's a different way to think about an asset that's not an equity i just choose to invest in equities because i believe there's a better better way of uh understanding the likely future value of that that doesn't require some i don't invest in art for the same reason it's again all of those things right unless there's a yes a cash flow or a likely future cash flow i'm just simply not going to do it and that's maybe that but that's that's not wrong no it doesn't know i'll jump in but that that is that is the that is perfect because all you're saying is is it's not for me and you know i don't invest in art i don't invest in gold i don't even you know and like but but but that is there is a difference between me saying it's not for me for various reasons versus saying it's all a ponzi and it's not correct correct that's the that's the that is the point that i take issue with with too many of these people out there sort of just jamie diamond you know they're deriding the whole thing.

1:13:36And it's like, well, you don't, it doesn't need you, dude. Just like gold doesn't need me, right? Like it exists, you know, and it is a thing. Yeah, that's true, yes. And that's why I'm not an anti or a no corner, whatever you call them. I'm just, this investment isn't for me. I haven't suggested it. I don't suggest it to our members. I could be entirely wrong about that. But again, for the same reason, I don't recommend gold or other things. I just have an investment framework and it doesn't fall within that investment framework for me. And that's more. I or no one can argue against that. Right.

1:14:07I say that only just to make the point that that's, you know, conceptually where you and I differ. And again, as you say, completely fine. Hey, we're going to talk about summer reading, mate, but at one hour and 15 minutes, I reckon we're probably done. Surprisingly. Sorry. No, I was going to say, I was going to say, surprisingly, I remained optimistic that after bringing up Bitcoin, we could talk about something else, which was clearly my mistake. I learned nothing on this podcast. You have learned nothing. I have learned absolutely. Can I say that was the short version? I've got notes, right?

1:14:33I could go on a lot. There is so much I didn't touch on. The point where you said, actually, I'll probably stop. I thought, well, there's at least another half an hour here. No, mate, keep talking. Sorry, sorry. No, it's great. It's really, really good, mate. It's super useful stuff. I know a lot of our listeners really appreciate it, enjoy it. If nothing else, what I like about these sorts of conversations, mate, is it's the, if I was going to, what would I think? Or how do other people think about investing? Or what are the frameworks or lenses? Or what are other smart people thinking that I'm thinking differently?

1:15:02and i think you know i've spent a bit of time on social media over the last month probably again mostly to my detriment um and you get some really really great people with whom i disagree and there's some idiots who i agree with and and yes i'd rather the format every day of the week right i would rather thinking politically right i would rather an engage a politically engaged person with whom i disagree than someone who didn't care you know i think those those things are real and they're true and they make you better because they open your mind to different ways of thinking and you know what sometimes by the way you should be absolutely open to changing your mind i don't imagine a scenario in which bitcoin will come into my investing framework unless i change the framework and i might i don't think it's likely to get that might cost me money but uh but but i again like that to your point you know those those objections of for the structure itself i think if you start with this is a fad or this is a this is a it's it's the this is right not could it be yes you know you you're you're fully aware that you could be completely wrong about bitcoin i'm fully aware you could be completely right about bitcoin that's a healthy place to be when you start to dismiss something as stupid or accept something as unquestioned in both cases you are really really really doing yourself a massive disservice can i can i just sneak in one more signal points i forgot to mention it so when when the etf was released on day one kathy wood had a twitter spaces right kathy would arc they've got their own fund they're they're they're very deep into it yeah um elon jumped onto the call uh had a few comments one of them being that he would consider it for twitter i feel as though that's potentially so now that we've got the etf out of the way uh we'll have the halving done sooner or later i think the next bit of signal to look for would be a major u.s company not just like a block or a tesla which has it on the balance sheet which they do in fact there's dozens of fortune 500 companies that do another bit of signal just for user out there.

1:16:53But once it starts being integrated into the app, so imagine if I can tweet when I like, I send you a 0.1 of a cent or whatever I want to do, equivalent, that is going to onboard a lot of people. And he's basically saying, I'm thinking about it. Now, maybe he won't, maybe he doesn't, but it's just, or Apple starts adding it to their wallet or Google Pay puts it as a component within their wallet. Or if the guy who ran PayPal for a long time, who is actually now working on LightSpark, a really interesting company, just using it as the payment rail infrastructure for back-end fiat payment transfer.

1:17:28The technology is mind-blowing and you've got some of the smartest people in Silicon Valley saying, yeah, we're looking at it. Anyway, I just wanted to sneak that one in as one other little bit of signal that might be worth taking notice of. I also, well, not about Bitcoin particularly, but I really want to invent a different term for proper ETFs rather than this stuff. And I don't mean Bitcoin's not proper because it's Bitcoin. I mean, the static ETFs are just invented so that fund managers can make money by trying to convince you to buy their crap. I'll say crap. It's a product. Bitcoin is crap, right.

1:18:01Yeah, it's just a product. One of the codes that was both clever and really not was B-R-R, right? Which is the money which is that idea. So good. It kind of is, but like it's funny and I think, but actually this is a financial product and some muppet is buying this because they think the ticker is funny so they might as well buy the ETF. The other ticker was HODL, which I thought was great. I mean, it is, and I agree with you, mostly. I just really can't kind of come at the, just the ETF marketing rubbish around all, and it's not this, it's lithium and it's gold and it's cybersecurity and it's whatever.

1:18:35It's kind of, you know, that whole idea of like, it's not miles away from being predatory. And it's not about the ticket code itself and it's, I'm not bagging that. If I'm a manager, I don't know which one it was and I'm not suggesting a bad ETF necessarily. Just that idea of these ETFs that are, you know they get to effectively dodge a loophole of financial advice where they get to say if you think bitcoin's going up we have an etf for you yeah oh that's all that i said at the start man never underestimate the greed and moral bereftness like that that is a core part of my investment that you can't okay we we can't ignore it we can't fight it i guess we're going to make money off it that that that is exactly it and and and that they they kind of control the world really these are the these are the these are the masters of the universe right who tell most people where to put their money and they're now saying here why does it make sense is it rational it kind of it's sort of beside the point they are they are doing it that that is the point i i guess i i would make and you were right here's one thing i should say on that is the vanguard is not allowing their clients access to yeah wow to other people's etfs or to their own etf to they don't have an ETF on Bitcoin.

1:19:44They've said we never will. And we're not letting you buy any of these other ETFs through our platform. This is Vanguard, right? I've got a huge amount of respect for it. It's like, okay. Although I do find it a little bit odd that I can buy a triple leverage NASDAQ short ETF, but I can't buy a Bitcoin ETF. I mean, everyone's entitled to their own view, but it's sort of like how how van carb with the straight face can say no no we know best pat pat pat you on the head you poor little darling this isn't for you oh but hey look over here triple leverage short nasdaq etf uh okay okay because because that's not risky like come on are we sure they do allow that i should i should just at least try and make sure we're clear about that uh i i was i listening to a podcast the other day from someone i really trust i'm going to take them at their word i want to make sure we weren't assuming they were doing that um yeah and you know what that's oh Man, we're way too deep in the podcast.

1:20:41I mean, that is kind of modern life in general, right? The idea of like, you do this, you're not that thing. If you start from first principles, I've got zero issue with Vanguard. I like them a lot, as you know, as do you. If they said, we are only going to allow plain vanilla ETFs on our platform, because we think broadly that's what we prefer to do. You can go somewhere else if you want to. So they're not saying you can't. They're saying you can't use our platform to do it. I would have respect for that view if they chose to do it. I probably frankly like that idea because there are a whole lot of no, not enough investors.

1:21:09I would say no, I think investors, but you know, ETFs are people who aren't picking stocks, right? At some level, there's an argument to say that if you cared about retail investors, you got a lot of them, you want to make sure they keep themselves reasonably away from harm. You could put some rules in place, but those rules have to be first principle, not just Bitcoin's terrible, but triple leverage, bear ETFs on NASDAQ are wonderful things that everyone should invest in. You're right. There is zero justification for not offering one, but letting the other go through unfettered. Well, this is why Gary's hand was forced at the SEC, because prior to the spot, so the distinction here is that the spot BTC, they have to hold the underlying one for one.

1:21:44But prior to this, there was a futures ETF on Bitcoin. So a company called Grayscale that runs a trust called GBTC, which was another way to hold Bitcoin, basically took them to court and won. And the high court basically sort of said, well, you're not going to let a spot ETF run, but you're going to let one based on futures contracts. Like it just, there is, look, the truth is putting its pants on while a lie runs around the world, right? And it's a very, another interesting point of signal that you, some of these regulators, some of these institutions are sort of saying tut, tut, tut, at the same time offering these other products.

1:22:26It's sort of, I feel as though you can have a view on it. And I agree with you. If Vanguard was to say, no, you can give broad-based, low-cost index EDF trackers, we do that. That's all we do. I respect that. I respect that. I don't necessarily agree with it, but I can respect that. But to sort of say, oh, it's like me sort of saying, I'm snorting a kilo of coke up my nose while telling you that you need to stay away from marijuana or something. Is it like, how is that? It's a bad example. It's late in the pod. I'm sorry. But you know what I mean? It's kind of, that's the analogy that's in place here.

1:22:59And it's sort of like, I think there is, I get a great deal of solace in just sort of saying, look, get subjectivity and opinion out of this. When you start looking at some of the facts and evidence sort of below this, like a lot of these, in fact, I've yet to find any argument that really stands up against, not necessarily that you should, but that it is something that could be invested in. Correct, correct. No, I think that's absolutely fair. Hey, mate. Let's do it. Let's put a pin in it before I go. I'm not going to reference the time because I just can't bring myself to do it. Thank you for sharing your love of Bitcoin, mate.

1:23:33I am surprised. I am shocked that you would talk about Bitcoin or certainly spend this long talking about Bitcoin. But I really appreciate you coming out of your comfort zone just for the privilege so the listeners could understand a little bit more about a thing you've just discovered and don't really have a firm view on. So it's lovely to hear from you, mate. More importantly, it's much, much, much better to be with you again and recording these podcasts, the first of many in 2024. For those three people who've made it to the end of the podcast, thank you for listening. I'm sure you've enjoyed actually the conversation.

1:24:00I certainly have, despite my different view from Andrew on Bitcoin. It's the intellectual exercise that is most fascinating. I really, really enjoyed it. Mate, will you come back on Sunday? Yeah, man. Well, are we going to talk about Bitcoin? Hell no. Okay, I'll come back anyway. Until then, have a Bitcoin-free weekend. Cheers.