Bitcoin: The Great Absorber of Liquidity

Hi everyone, and welcome back to Stephan Livera podcast, brought to you by Bold, the best place to buy, save, and store your SATs using the two or three multisig. You can find that for American listeners over at getbold.io. Now joining me today is Dr. Jeff Ross. He is at the hedge fund Valsheer Partners, and of course, well known for his commentary on On Bitcoin and macro things. So first of all, welcome back to-- or welcome to the show.

Hey, thanks, Stefan. I'm really happy to be here. Thanks for having me on.

So Jeff, I notice you've, you've made the big shift. You've gone from bull crab to bull. So, let's start there. What's, what's driven this big shift? And I know a lot of people in your comment sections have been annoyed that you've been, up until recently in the bull crab camp, and so what's driven

Sure. So, yeah, so let me first explain how I do things and how I think about things as a fund manager. For me, it's all about liquidity. I think that ever since the great, the global financial crisis back in two thousand and eight, two thousand and nine, that was the time where the central banks, and especially the Federal Reserve, basically wrested control of the markets, f- away from the business cycle a little bit and basically took over, and liquidity became all important. So that's why I focus so much on it. A lot of people get sort of upset with me why, why I talk about the Fed so much, you know, why, w- we, who cares about central banks? We hate central banks, don't we? And I'm like, yes, I'm all on board. I don't want central banks, I don't think we need central banks, and I think Bitcoin negates the need for central banks into the future. But for now, it's the system that we have. and so the flows of liquidity to me are what drive asset prices. They especially drive risk assets like equities The great absorber of liquidity. Okay, so I have five stages of how I think about liquidity flows, and I go, I start my, the lowest is bear, so I go from bear to bear crab to crab to bull crab to bull at the top. Okay? And it, these cycles are basically these sine waves where you have business cycles where you can watch what, economic growth is doing, where you can watch what inflation is doing, and where you can watch what liquidity flows are doing. And then one other point, and then I'll get back into what- By transition from, from bull crab to bull. the other thing that's really important to know is that the flows of liquidity. So when we're talking about that, basically what I'm saying is, are the flows going from the people to the government, or are they going from the government to the people? And if they're going from the people to the government, like they did back in twenty twenty-two, what that does is it sucks out all of the oxygen out of the room for investments, and- And it basically makes it so everything slows down, the economy slows down, that can drive down in, inflation, so you actually can get deflation, those are when recessions tend to happen, and it's basically the government saying, you know what, we're gonna take all that liquidity out of the room and we're gonna slow everything down. And it actually works, it actually happens, that's why twenty twenty-two was such a terrible year for so many investors, and that's why we had, y- another huge drawdown in Bitcoin

from, from the government. Can I When you say, you know, you're focused on liquidity, when you say that, are we talking here about things like M2, like the, as in the money supply numbers, M2? Or what about, as an example, things like when the government engages in a lot of spending, like it did during the, you know, the COVID tyranny years, when the government engages in a lot of spending, that may not necessarily have as much impact in terms of M2, it can, but, you know, the government can just engage in a lot of spending. How does- That come into the liquidity framework you're talking about?

Fantastic question, fantastic question. So, so when we're talking about things like M2, so I like to follow the global M2 monetary supply, and just so your audience understands, what does that mean? That's basically the cash that is circulating, that like physical cash in the system, checking accounts, banking accounts. It's also talking about retail CDs, certificates of deposits, and money market funds for retail investors. So basically, glo-- so M2 is what is the- The money supply, the liquid money supply of regular people. Okay. So when the government spends, fiscal spending, that's a concept we talk a lot about, and we've-- and there's been a lot of fiscal spending, recently in the US over the last couple of years, which is why, by the way, I think we averted a recession in the US. that can go to either, businesses or government kind of, mandated places. It can also go directly to individuals. So to your point, what, what happened in COVID, they Supply chains, supply chains, were ground to a halt, and then they infused Americans, checking accounts and savings accounts with direct deposits from the Treasury into American bank accounts. Right. Like Stimpy,

PPP loans, etcetera. Exactly,

exactly. So that causes a rise in M2, right? Because suddenly now their checking accounts and savings accounts are flush with cash. That's why we had that, by the way, and I was saying back then, this is gonna cause a massive spike in price inflation because suddenly you have less goods and services available. And you have a huge amount of new cash, chasing after those goods and services that are at, at limited supply, and that's where we saw the CPI spike up to about nine percent or so. The government doesn't have to spend money and doesn't have to put it directly to citizens, those are called transfer payments. They can spend it on other projects, right? Like they're building out semiconductor plants. That's good for the economy and good for businesses in general. there's lots of other things and they waste tons and tons of money. Lots of those things aren't actually beneficial, People and for, for global M2. And then one last point, kind of what we're talking about, there's a difference between US net liquidity, which talks about the Fed's balance sheet, and it also includes the overnight reverse repo market As well as the Treasury General Account, which is like the checking, checking account for the, Treasury. that's sort of different and that's really interesting. That tends to, play out, it tends to affect the flow of assets into US-based assets like small-cap, micro-cap stocks and mid-cap stocks. global M2 tends to affect, global assets like Bitcoin, like gold, and actually interesting, like big tech, big technology stocks. In the US, those, those have become basically global safe haven a-assets, and so they follow the path of global M2. So, I don't know, this is kind of confusing to people, but I, hopefully, it makes sense. Basically, you-- if you're seeing the flow of liquidity start to increase away from the government to the people, that tends to portend for good times for risk assets and especially for Bitcoin. And now getting back to your very original question, so did I transition? So, yes. So I was bull-crabish, and basically when I say I Mean is chopping sideways, so choppy sideways movement is called crab-like movement, yeah, kind of from a sort of a technical term. We've been chopping sideways because, US net liquidity has been chopping sideways for about three years or so, and global M2 had been chopping sideways for about that same amount of time. A-again, they're all just trying to recover from what happened back in twenty twenty and twenty twenty-one with these huge stimulus measures that happened from both central banks and, and the Treasury as well. Okay, so, so here we are now. So what happens is just recently, global M2 has started to break out. It's actually not because of what the Fed is doing, it's-- but there are some things, sort of indirectly causing that. The Fed just lowered the federal funds rate. The, in the United States, all of short term debt services are based on what's called the prime rate. The prime rate is based directly off of the Federal Funds Rate. So when the Federal Funds Rate dropped just recently from five and a half to five percent, the US prime rate dropped from eight and a half percent to eight percent. So for Americans who have home equity lines of credit, like HELOCs, we call 'em, credit card debt, or small business loans, also what happened instantly, literally the next day, their, their interest rates should have dropped approximately a half percent. So what that does is it, it, it's an, a positive effect on cash flows, right? So if you're paying whatever two thousand dollars a month for your HELOC or some credit card debt or something that you had or a small business loan, suddenly that probably dropped by a couple hundred dollars. so it's, it Now Americans suddenly have a little more cash that they can put into, riskier assets like Bitcoin or, you know, or, or stocks or whatever. It also affects, you know, a weaker dollar and lower interest rates are good for anyone around the world that has US, dollar-denominated debt because now their currencies are stronger relative to the US dollar, it makes it easier for them to pay, they have more money left in the bank, and, and the interest rates just are lower themselves, so it's a positive exchange rate, and it's a Because of all that, that's why we see global M2 rising, and that's why that's positive, and that's why I'm officially bullish now.

Okay, great. So yeah, so look, there's, there's all these different factors out there. As you mentioned, we were talking a bit about the Fed funds rate, there's a little bit about what is the US government doing? Are they putting, are they doing a lot of, you know, stimulus checks or buying a lot of things? Now, we can sort of step back and understand, now, ideologically, you Sector resources and take more, you know, control or commandeer more things. But there's understanding of, of obviously what I ideologically want to happen and what I see as what is actually happening right now, and what does that portend for, you know, number go up or what does that make number go up, right, ultimately? So I guess that's kind of, you know, as I'm understanding your framework here, it's, it's sort of zooming out, looking at M2 at the global level, not just in the US, but globally, and understanding, well, That money is ultimately gonna find its way into quote-unquote risk assets, so people are per se going further out on the risk curve. They're looking for more, they're looking for yield, they're looking for return, and obviously Bitcoin is a big Key bucket to receive some of that liquidity, let's say. and so I guess when we're talking about what, what kind of regime we're in, we also have to think about, are we, you know- Okay, this is my next question. So are we in-- going to be in a, do you-- I guess your, in your view, do you believe we're gonna be in like a sustained increased liquidity environment or can this just be a blip? And with that as an example, if it's just a blip, does that mean you're gonna flip from bull back to bull crab, or, you know, or, or do you think there's gonna be a, a, you know, a sustained, you know, a few years period of time?

So I think it's to stay now, and usually the way these work, so we're already in this new cycle where global M2 is starting to accelerate again. We're starting to see central banks lower rates in general. I think from an economic perspective that the economic business cycle, especially here in the US, has already bottomed and is starting to increase again. That's generally positive. It lasts though, it-- how long it can last is up in the air, it's hard to predict that, but in the past, since the global financial crisis, these cycles last about four years or so, and So since we're already into it, what I anticipate is that we'll see continued, acceleration of global M2 all the way into basically the fourth quarter of twenty twenty-five, where at that point, I think it'll probably start peaking and rolling over again. I actually think our biggest risk right now, because we're starting to see economic growth, here in the US, that's gonna surprise people, right? There's a lot of doom and gloom recessionistas out there who are still calling for the big recession. I know one guy who's saying within the next couple of weeks to crash greater than nineteen twenty nine, because things are so overvalued. And he's not wrong, things are overvalued. But I think the bigger risk is to the upside that we're gonna have kind of a late nineteen nineties style melt up, because now the central banks are actually getting dovish, now liquidity is starting to get injected into the system, both from a global M2 perspective and central banks sort of backing up, the markets and allowing, the economy to start to grow again. And then we just got an announcement yesterday that China Kind of getting on board bigger time. So they've already been doing a little bit of like stealth, liquidity injections, but they're, they're starting to get into it bigger time now. all of that really portends to a great cycle that I think will last basically starting now into the fourth quarter of, of twenty twenty-four and then last all the way through twenty twenty-five. And, and, my guess, if I had to guess, I think it's gonna peak somewhere in the fourth quarter of twenty twenty-five before it rolls over again.

And when you say peak, are Bitcoin and let's say the S&P or even the, the fantastic seven or whatever they're calling it.

Sure. So I, when I'm talking about peaking, I'm always talking about liquidity. So, so in, in this global M2 stuff, so I think that peaks, but like I said, Bitcoin is the great absorber of liquidity, is, is the most acutely aware of what's happening. So you, so you follow-- so people always ask me like, "How do I follow your liquidity? How do I follow what M2 is doing?" I said, "Just watch Peaks, that's when you wanna start being nervous, and that's where I'll start switching over into bearish tones, and then that'll officially roll over. And once it's rolled over, everybody knows we'll be talking about recession again, and, and the stock markets will be crashing. stocks tend to, be a little more delayed relative to Bitcoin, but they will catch on eventually that the liquidity is coming out of the market, and basically it's just people shifting back from the further end of the risk curve, and then they go into safety measures, they go into cash selling their risk assets to buy the dollar. and it's very predictable, these cycles tend to be predictable once they start, you just have to know where you are in the cycle.

I see. And so the other comment a lot of people will make is that, look, things are overvalued as you, as you pointed out, and, you know, people look at numbers like the Schiller case, cape ratio as an example, the cyclically adjusted price earnings ratio, and they might say, look, stocks are already at this very high level, look at how crazy Nvidia is or Can it really pump more? And I guess your answer, as I'm reading you, is that just like, you know, the dot com bubble or the J-Japan bubble in the late '80s, yeah, it can, and we can pump harder for now because of this liquidity factor, but eventually that hits a, you know, that hits a limit, and then, then we take a, the drop from there.

Yes, and I, I, so I come from a value investing background. That's how I started out my hedge fund. It was just like a, a value based healthcare

If it talks about it the way securities analysis talks about, it just doesn't work anymore. And it's not because that's not a good system, but it's because the central banks have taken control of the markets. And so what matters isn't what the multiple is, so like it's not about finding a cheap stock with a, you know, a low PE or a low price to sales or price to cash flow, whatever, whatever metrics you wanna use to, to assess value. What matters is, is are the multiples expanding or are they contracting? And if you have expanding PEs, that's because And it's causing people to go further out on the risk curve. So to your point, like things where stocks were very expensive in nineteen ninety eight, and then they just exploded higher for the next two years, and went to just, obscene levels of valuation. And I think that same thing can happen again. We're already at these valuations by some metrics, by the cape, as you're talking about, price to sales metrics are very high for a lot of the US stocks. I think they can go much higher, and I think they'll, they're going to, be What we're gonna see for the next year.

Now, Jeff, you made another comment around how the recessionistas are wrong, so I think that would be great to maybe dig into that a little bit further. Now Perhaps the maybe a counter argument there might be, and I think you might be correct, but just for the sake of argument, let's see if, you know, somebody came back to you, Jeff, and said, "Look, actually, there's a lot of people struggling right now, or, you know, people can't afford a house, this kind of thing." what would you say to that, like the, this idea that, you know, the middle class is disappearing and it's kind of becoming a, a story of the haves and the have-nots, and if Do you think that that's maybe something more at a social level and not as much of an economic level?

Yeah, so I think this is a long term secular problem because of our monetary-- right? Because of fiat currency, that's a credit based system, and you, you alluded to this. If you are an owner of assets, you will get richer, and the rich get richer because you own your house and you have equity in your house and you own stocks and you own Bitcoin versus the rental, the renter class, right? You, you rent a house Rents are, have been going up, prices of everything have been going up. You don't own stock, so your net worth hasn't been going up. You probably don't own a lot of Bitcoin, so that, your net worth in general isn't going up. That's a problem with the money. And, and I know you know this, this is a broken money issue. a-and it, it basically destroys and guts the middle class, and it creates these two tiers, I talk about all the time, the K-shaped economy. we continue to have that, it continues to

previous regime change, like a war, could be a civil war, could be a major world war or something, something needs to happen to reset the monetary system, because for the lower income renter class, it's almost insufferable right now. Like they're barely making it right now with multiple jobs, they can barely afford groceries and transportation, whatever else. something has to change, and I think at some point a revolt will happen and it will change. And again, a-and we could talk about that if we wanted to, but this is, Bitcoin fixes this, right? If you have a Allow for this, these massive income shifts, we're gonna see, the, the, the K shape is gonna close and, and we'll, we'll build up a new strong worldwide middle class based on Bitcoin and based on proof of work. I can't wait for that day, but we're not there yet, and I think we need to see a collapse of this system first, and the collapse is gonna be ugly. so what I'm talking about, that's a very long term trend. It's been happening since started around the end of World War II, and it's

With Nixon removing the dollar from the gold standard, 'cause now there was, now there's nothing holding fiat back from just being, nonsensical, and, and, and there's no accurate measuring stick anymore. So, so that's different. So that's a long-term trend, and that's not gonna get better anytime soon until we actually fix the money.

Right, yeah, and I, I think you're right on that analysis, that, while there can be social issues that, you know, we all acknowledge, at the same time, you know, there's haves and have-nots, and in this kind of liquidity going up environment, numbers are gonna go up, and that means people who have assets, they're gonna do really well, and then on paper, it's gonna look like, "Oh, wow, GDP number go up, you know, everything's great," and then that's kind of where, let's say,

'Cause if you have assets, you're watching the numbers go up, and you're like, "Oh, wow, I'm, I'm getting richer, it's great, look how good life is for me." And of course, if you are in the regime at that time, you wanna play that story up, right? Like, if you're in the regime, you're gonna say, "Look, the numbers are going up, we're doing a good job for you, you, you little plebs." You know, that's what they're gonna try to, you know, that's what Or all these things is getting worse.

Yeah, and it's a problem, and, and the problem is, and this is another thing by the way, I, I hear a lot of people blaming the central banks for these problems, but really what the problem is, is unbridled spending by the governments, because that's how it all starts, right? So the governments basically, like the US government, we really don't have a debt ceiling right now, they can spend as much money as they want. When they say, "Hey, we're gonna spend this billion here and these hundreds of billion and

The Treasury just has to say, okay, we're gonna create a bunch of new treasuries because of this, and then the Fed, Fed, despite what they talk about, they're dual mandate, what I really believe the Fed is, is they are the buyer of treasuries of last resort. And so the market will continue to absorb these treasuries as long as it can until it just says, you know what, we can't do it anymore, we don't want these treasuries anymore, and that's where, that's, you have a little bit of calam

problem and the whole reason why we have income inequality, despite what the politicians say, and they just lie through their teeth, or they're stupid. They're either stupid or they're lying. you know, they blame greedy corporations, and they blame, Republicans, and Republicans blame Democrats. All of it is just a spending problem. They're spending more than they take in. most people understand that, that if you do that, you even-- you can't do that for long. You can't keep borrowing on credit cards if you're not making enough income to pay off your credit card

They can't go bankrupt and all we see is this continued divide, this continued wealth inequality, and it gets worse and worse and it's very frustrating to watch when you know what's happening underneath the hood. and it's also frustrating because most, young people or, people who just, you know, haven't taken the time to learn, they believe what the politicians say, they believe it's the greedy corporations that are making their lives miserable or they believe it's the grocery stores that are price gouging. It's just pure nonsense, but that's what the newspapers say,

Yeah, and as you said, on the same topic of US government debt, everyone's seeing those numbers going around now, I think it's thirty-five trillion, the last I saw, and the, you know, the other factoid that goes around is, oh, look, the interest payment is more than the amount that the government is spending on the military, right? And, you know, these huge, massive, massive numbers in terms of the amount of spending on social security and healthcare and, you know, these huge, huge i-items, But where does that go? What does that mean for, you know, the global economy if the US isn't able to deal with this debt situation in an honest pathway?

Yeah, well, they won't deal with it in an honest pathway. So what they're gonna keep doing is just keep printing. I will say I deviate from a lot of my colleagues in the space who talk about this, runaway debt, you know, this debt crisis and the death spiral. I think the US can continue doing this for decades, and I don't think we're at risk of the dollar collapsing anytime soon. I do think lots of other countries are going to collapse. We've talked about that a lot, where I believe hyperinflation is real, it's happening in And tons of countries around the world, and as that happens, that, that means the collapse of your fiat currency, and then that purchasing power has to go somewhere else. Most of it will migrate into the dollar, some of it will head into the BRICS contingency as well, but, but the dark horse obviously is Bitcoin, and more and more people are starting to store their purchasing power in Bitcoin, and I think that just obviously is gonna continue to grow at a, a, a very fast pace and start to catch up. But so where does it end? It ends in hyperinflation and the death of a currency, but the US dollar is and will remain, until further notice, the strongest, currency in the world, the best currency in the world. so I don't see the US dollar collapsing like any time soon. you maybe if there was a massive world-- if we have World War III, and, and basically our, our printing got to be just out of control at that point to pay for, financing this war, that people don't want, Lead to US dollar hyperinflation, but short of that, I don't see that happening anytime soon.

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Yeah, exactly. And I, I definitely think if you look at the times and you take the thirty thousand foot view, we're definitely in the final stages of this fiat currency experiment. It's been a wild experiment, it's been greatly beneficial to the US in many ways, but now we're starting to see that Triffin dilemma start to take place, right? We, we-- The US no longer has a middle class. We don't have a manufacturing base anymore. We've exported all of our manufacturing around the world, China predominantly, Asia predominantly, some in Mexico, but not so much anymore To see the downsides of this, like it's great that we can export treasuries and the whole world funds the US military, that's basically what the system is right now, is, it's all, and it's all based on the dollar, the petrodollar sort of, where everybody has to hold treasuries. But to your point, people are less and less, inclined to do this, and the u-- even US officials are starting to say, "You know what? The benefits are starting to, shrink relative to the, the downsides of this,

It's actually even a discussion that we should have, like a Bitcoin strategic reserve. I know that a lot of, of people on the left think that's just insane, that Trump said that or RFK Junior said that, but that's the way to think about this. They're starting to think about a transition away from this dollar-based system where the US dollar is the world's reserve currency, a-a-and unit of account, and start to think, well, if it's not the dollar, what else could it be? What, what could we do so that we don't just collapse as a can still maintain, you know, our clout around the world basically in our position without just completely collapsing. And to me, it's super obvious that Bitcoin is the answer, a-and it's encouraging to see the political leaders talking about it, but I still think we're kind of years and maybe a decade or so away from that becoming reality. Right. Yeah,

and I, I agree. I think we've got a few more cycles to go, of this kind of, you know, craziness with Bitcoin, and I, to your point around- The hollowing out of the middle class, and, you know, I think it's fair to say the US government and the US people have arguably, in some ways, benefited because a lot of people around the world We're effectively paying for the US government and for US people to enjoy, let's say, an artificially advanced, living standard, because there are all these people around the world without knowing it, their government was taxing them to buy, guess what, US government debt. And so it's sort of that net effect results in US, you know, people living in the US and US citizens kind of living a bit larger than they would have otherwise, if everybody was kind of living within their means and, you know, on a sound money standard. Hypothetically. so I'm curious as well, like if we're talking about, okay, it's kind of, you know, your framework for looking at things is liquidity, are we, you know, increasing liquidity or a decreasing liquidity? Now, I'd love to talk a little bit about behaviors. So in a high liquidity regime, what kinds of behaviors are we gonna see? Are we gonna see more leverage? Are we gonna see more crazy business ideas, engaged in? Are we gonna see more, you know, VC? I'm curious if you have any thoughts on that. Typical behaviors that signify or that we see in high liquidity environments.

Yep, yep, hundred percent. So, so leverage is the first thing that I look at. Leverage gets, leverage increases as the, as the bull market rages on. Everybody feels like, they're brilliant during a bull market because all of your assets are increasing, your nominal net worth is increasing, markedly, so you have that wealth effect where everybody is feeling good. Home prices are rising, equities are rising Bitcoin, I think, is gonna, you know, go, go to the moon again, those kind of things. But what happens is people start adding to leverage and they think, "Man, I, I just made a hundred percent quickly because I used leverage. What if I triple down on my leverage, you know, for the next six months?" and, and that works until it doesn't, and then, and then it collapses and it gets terrible. So, so basically, easy money begets stupid behavior and more risky behavior. And the longer it goes on, people can

The hockey sticks higher that you see in Bitcoin, you can see that in tech stocks as well, you know, Tesla, these kind of stocks taking hockey stick as well still. that always though means that we're getting close to the end, and so that's where you have to start getting cautious. That's when I'll probably start counseling people to be, you know, to be careful, to consider, you know, you know, buying puts instead of buying calls, those sorts of things. that's the downside of all this stuff. So you also mentioned VC, what Basically, any dumb business idea could get funded by cheap debt because you ha-- if you have the cost of capital near zero, at very, these very low interest rates, you can do whatever you want because there's basically no risk to you not being able to pay back your, your zero interest rate payments. This time around, though, I don't think interest rates are gonna go that low, and so I think we're gonna see a shift from sort of debt funding to more equity funding. I think venture capitalists are gonna focus more on, obtaining equity in companies, and they're gonna have to have Of, viability this time around because interest rates are a little bit higher, so venture capitalists will be taking a little bit more risk in these early stage companies than they have in the past. So All of that behavior is very similar, I think the only big difference relative to a decade ago is the interest rates. So because debt is more expensive now, and I don't think it's gonna get nearly as cheap that just means that you're, you're gonna see that slight shift away from debt into equity and people having a bit more discerning, approach to how they value these early stage companies.

I see. And that could also play out in the sense that venture capitalists, because most venture capitalists, unless they're like a rich angel or someone, they're often not investing their own money, they're going out and sourcing investor funds. And where did those investors get their money often from? You know, historically, that in the last ten years, that's been because of the- low interest rate environment because we're sort of, we're swimming in this environment and people don't really realize that, and so they think, you know, as you said, we all think we're geniuses when really it's kind of liquidity has been going up and any, almost anything, does well, within reason, and so- What we might see then is those venture capitalists, as an example, will have less LPs, less people signing up to give them money because there's not, you know, the money isn't as free flowing as it was, but I guess to, to your point about the interest rates, so are you seeing it then like the Federal Reserve is going to Keep lowering, but just not as much as historically. So you think it's gonna go to like two or three percent, but not zero? Yeah,

I think it will be limited. So I think the Fed, the Fed funds rate, you know, maybe by the end of this year, it actually gets down to four and a half percent, so a full basis point lower, or, excuse me, a hundred basis points lower, full percentage point lower. and then I don't think it's going to continue into twenty twenty-five. The markets are predicting that it's gonna go much lower. And I, that's where I, diverge from them. I think they're wrong. I think what we're going to see is inflation is gonna actually start picking up a little bit, like it's probably gonna bottom September, October, right around now. I, the, I think the next CPI, release is kind of mid-October that we'll talk about what, what happened in September. To me, that's probably gonna be a low point, and then we're gonna start seeing inflation start creeping up again. And I think this range of interest rates,

sort And I think we will see that, for at least probably a year or maybe two, until we have a big deflationary bust, which is, I don't think would, would happen until, you know, probably twenty twenty-six or so. but until then, I don't think-- again, I just really don't think we're going back to zero. And then one other point is, I, I see a lot of people, or when I was on Twitter, I, I, I nuked my Twitter account, but so I'm, I'm just on Nostr Before I left, I saw tons of people, overlaying the nineteen seventies double inflation cycle with what we currently have, and they say we're right at the precipice of this happening again, and I think they're going to continue to think that they're right because I think inflation will bottom and maybe start to creep a little bit higher, but I definitely don't think that we're going to go to another massive inflation spike like, like what we saw in twenty twenty-two. I don't think we're gonna go back up to eight, nine, ten percent or, or higher as some people are Say three percent or so, but, but be kind of uninteresting, after this. I think we're through that inflationary impulse.

I'm curious there because Coming back to the US government's debt position, don't they effectively have to create a lot of printing to sort of print their way out of the debt? Are you saying it more like they're gonna do that, but the CPI is still gonna stay in that three percent range? How do you sort of square those two?

Yeah, so, it, so again, the, the, the credit creation isn't necessarily inflationary. So if you have underlying economic growth that is rising and accelerating, that actually kind of eats that inflation in causes you can have kind of that sustainable level of, of inflation, but you don't have runaway inflation. And by inflation, we

mean CPI inflation, right? CPI,

yeah, yeah, it's really important, yeah. So we'll have price inflation of things like, of asset, I should say, we sh-- we'll have asset inflation, but not necessarily inflation in the cost of goods and services. to me, those kind of things happen where, like what we talked about, what happened during COVID, is where you have that huge influx of cash into people's bank accounts and

For massive price inflation. but I think what we're more at risk for in the next, you know, at risk for the next twelve to fifteen months is asset inflation, so asset increasing in prices, stocks, Bitcoin, other things like that.

Interesting. And so then, yeah, and that will to also tie into people being unable to afford houses and things like that because the houses are pumping like crazy, but their income isn't really going up that much. So, that's gonna be, challenging at the social level, but, yeah, that'll be that. also, I'm curious, so with this liquidity framework, would you distinguish that from other ways of looking at things? So as an example, some people just look at it like, okay, just four year cycles or even the presidential cycle or, you know, other aspects. Do you see them as aligned or, you know, just different?

So I think the only thing that's not aligned actually, interestingly, is the Bitcoin halving cycle, which I think is sort of a red herring, right? That's a little less than four years, it's like three years, eleven months in general, for the halving. So that's getting-- we're seeing the halving happen earlier and earlier in the year, and that's starting to detach itself from this other, which I think is actually the more important four-year cycle, the US presidential cycle. It's, it's, it's not that it's like magical or something

Happens as we head into an election, right? Like we, what we, what they want is we wanna see a, an improved economy, so there's usually a ton of fiscal stimulus, and then these presidents come in and like day one, they're like, okay, here's all the things we're gonna do, and we're gonna spend money here and spend money here and do all this stuff. So you get this huge fiscal and monetary impulse once they get elected, and as that becomes into fruition as, whoever wins, Trump or Harris, they're both gonna spend just ghastly And that's gonna cause this big inflationary impulse, and again, inflationary, not prices, it's gonna be inflationary for assets, increasing. and so, so they're just gonna be supporting the markets, and that's why we see that big, huge impulse right after the presidential election that lasts for about a year or two, before it, it turns over and people-- and suddenly the reality of everything, like, "Oh my gosh, we've spent so much money, markets are way overpriced, you know, the cape ratio is off the charts In about year two to year three and says, "You know what? Let's raise interest rates, let's slow the economy down, " and they basically force a recession, and so you have these cycles that kind of ebb and flow every four years or so.

That's fascinating. Yeah, that's actually a really good explanation. I hadn't ever heard it put that way because I've heard people talk about this idea of, "Oh, is it just-- is it the presidential cycle? Is that more important than the halving cycle in terms of, you know, economy and NGU and what is the government doing in terms of spending? How liquidity, how much liquidity are they creating or injecting into the system? so I guess, One other area I'm curious if you, if you have any thoughts on, is the shift in the narrative with Bitcoin. So as an example, it recently came out that Bhutan, the nation of Bhutan, has been, you know, now it's been known that they were doing Bitcoin mining, but what recently came out is that, is apparently they've been stacking Sats really hard, and now on a per capita basis, it's some-- it's, you know, it's a lot in terms of the probably the biggest nation in terms of per capita Sats per

It's just a reflection of, you know, Bitcoin advancing into public consciousness.

Yeah, yeah. So I think this is all inevitable, right? This is what we've all been waiting for to happen, and we're starting to see the dominoes fall. And at first, there are these little coun-- these little countries, El Salvador, Bhutan, and we're just going to see that more and more. And I, I really believe this, and I've said this for several years now, that Bitcoin will change the geopolitical world order. Having a Bitcoin reserve is like it is right now oil reserves. So the Middle East, Norway has their famous reserves, the state of Alaska has reserves that the citizens benefit from. There is nothing better for a country to do than to have a reserve of Bitcoin on by, off by the government on behalf of their citizens. It will create a, a huge net wealth effect for the nation as a whole. It will help make, you know, paying bills much easier. If you have runaway debt, it's, this is the way to rein that in and to actually start, you know, making that manageable again. And so- I think it's inevitable. I think it's awesome. I think that at some point, probably ten to fifteen years from now, I think basically all nations in the world will be doing this, that they will have a strategic Bitcoin reserve. It, to me, that's inevitable. And I think the main reason is, is because as we go along, say, the next five to ten years, and people are looking-- everybody knows about the US, government runaway debt that they can't possibly pay back with, you know, sound money. but that's the same in all of the major And print their own money, they do, and they abuse it until they run their currency into the ground. And what happens is it's, it's the Gresham's Law, right? Is that people don't want their cash anymore, and so everybody's gonna be storing away sound money, possibly gold, you know, oil, you can argue as kind of a form of sound money, it has been for the last fifty years, just like a commodity money, and then Bitcoin obviously is the best form of money. And so what I think is going to happen in the next five to I don't want your dollars, you can pay me in Bitcoin if you wanna, you know, pay me what you owe me, and, and if not, you know, maybe a threat of war, who knows what's gonna happen. But to me, that's what's gonna be driving all of this, is as we look at the success of Bhutan and the success of El Salvador and these other nations that are gonna start, creating a Bitcoin strategic reserve, countries are gonna start demanding Bitcoin as payments from each other, and it, and that will change the world order. Whoever

This show brought to you by mempool dot space, the world's leading Bitcoin visualizer, and now they've got an accelerator program. So if you have a transaction that you sent at a fee that was too low to get confirmed, now you can fix this at, with the mempool accelerator. The way it works, you can go and search a transaction, scroll down, click accelerator, and you don't need an account, you can pay with Lightning, and then it'll show you it's now in the process of being accelerated, and then after a few minutes, it's confirmed. And so this is You are stuck, and this can happen where maybe your wallet doesn't have RBF or CPFP, or it might help you in situations where it's impractical to go and re-sign. So for example, multisig with keys in different locations. And thirdly, even in some Lightning scenarios, perhaps a forced close, you might not be able to use RBF, and so in this case, the mempool accelerator can help you out. So keep it in mind, and you can find out more over at mempool. space/slash-accelerator. And now back to the show. So looking forward, then, again, looking in this liquidity paradigm, are you seeing it like, as you're saying, all these assets will go up? So it's kind of like maybe gold will go up, but Bitcoin will go up more than gold. Is that how you're seeing it? So as an example, as we stand today, Bitcoin is what, one point two, one point three trillion, and gold, I think last I checked, is maybe sixteen trillion, seventeen trillion, something like that, as a total market. So where do you sort of see them going on a, you know,

'Cause one is, I, I say a lot that anything that's good for gold is ten to a hundred x good for Bitcoin. And so I, I actually got into Bitcoin from being a sound money guy. I used to be a gold bug, and in fact, in my funds, I used to invest in gold and gold miners and things like that. a-and so I love to always give credit to gold, is it did a fantastic job of being the world's best store of value for thousands of years in the analog age. But then we switched over to the digital age and everything changed, age where Bitcoin could have been created, per se. And so, so Bitcoin is now, you know, and, and we all know this, all of the properties of money, Bitcoin does everything basically better than gold. It just doesn't have the track record yet, but that's, that's getting a little better every year. and so yes, I think gold will continue to benefit somewhat, although I do think gold will be demonetized by the next generation. I think as the baby boomer generation dies and Gen X is getting too old to matter and the millennials come on, the That monetary premium is gonna just slowly get sapped out of gold, and it will be just basically a commodity. It will be, it will have its utility value, maybe ten, twenty, thirty, forty years from now, and Bitcoin will absorb basically all of that monetary premium going forward. Yeah. So, and so,

yeah, go on.

I was just gonna say, so if I were, if I were gonna invest with a thirty-year outlook, I would not invest in gold, but I do think for probably the rest of this decade, gold will probably do well, for

Definitely a lot of the gold guys are, you know, fist pumping right now at, you know, twenty-six hundred an ounce or whatever it is, so they're all cheering, but I think, I was chatting recently with, Andrew Edstrom and he was sort of making the point that often, you know, gold might pump a little bit, but then Bitcoin will pump, you know, much multiples of that. I don't think, I, I- I can't, actually might be, I might be con-getting that confused. It might be, macro scope. But anyway, similar, I think a lot of people have a similar sentiment on that. so we might be seeing that kind of dynamic play out where, yes, there are central banks around the world buying gold, and maybe certain countries, maybe India and China, where they still like gold, but in practice, longer term, it's gonna be Bitcoin, but it's just kind of-- It's gonna take some time to get there. And so Bitcoin hodlers and say, "Oh, look at you silly hodlers, we're doing well on gold," and then Bitcoin will sort of go to the races and outpace the Bitcoin, sorry, outpace the gold return, and then there'll be, you know, that sort of natural back and forth.

Yep. And I think we're at that transition point right about now. Gold has had a spectacular-- for gold, it's had a very great year, and the last several months have been fantastic. If I were, say, a portfolio manager that just had Bitcoin and

gold, Most or all of that into Bitcoin, if, you know, if I were doing that, but I'm, I'm not.

Yeah, of course. And then from an asset allocation and portfolio, perspective, I'm curious if you have any thoughts, you know, for, let's say, institutional investors or people who are more serious about how they think about their asset allocation. H-how, how should you think about Bitcoin?

Well, what I rec- well, what I've noticed as a fund manager and, and a, a former investment advisor is that the more you understand Bitcoin, the more you know Bitcoin, the more you own Bitcoin. And so, you know, we all know people who think it's just crazy the idea of putting one percent of their net worth into Bitcoin. They're, they're at this end of the spectrum, and then w-we know people who are literally a hundred percent allocated to Bitcoin, and that's all they have. And some of them are a Bitcoin, because they actually borrow money, they're doing speculative arbitrage or a carry trade to own more Bitcoin, on, on debt. And I'm not recommending that, I'm just saying I know a lot of people who do that. So anywhere you are along the spectrum, obviously if you look at Bitcoin's historical returns and you look at its, Sharpe ratio, its risk-adjusted returns, it's vastly outperformed all other assets since it's existed. If you think that that is going to continue, and I do, I personally think that Bitcoin is gonna have, you know At least twenty five percent for probably the next fifteen to twenty years or so, you know, in the twenty to twenty five percent, and that's later on. So as it gets bigger, I think we're gonna have these diminishing, annualized returns. It's gonna taper

down over time, right? Yeah.

Exactly. But it's still going to be-- and this is the point. So lots of people get disappointed when they, when they hear that, but I'm like, if you understand traditional investing, do you think stocks are gonna do that? Do you think bonds or currencies or gold are Class. And that's what I tell people, like, look, you, you can have a sm- if, if you are, put out by the volatility of Bitcoin, then just have a small position size in your portfolio. It's, it's ridiculous to have no Bitcoin exposure at this point because it's not a career risk anymore. and so, you can have like a one or two percent, and that will be volatile, yes, but it's more volatile to the upside. And, and I just think volatility is the price you pay, for making

Pay that, then you're not gonna have life changing amounts of wealth for the most part. And so,

yeah,

I encourage people to put as much as you can tolerate into your portfolio. I will tell you that the reason, like, my hedge fund has been one of the top performing hedge funds in the world from a, a multi-strategy perspective this year is because I have a very large allocation to Bitcoin and Bitcoin proxies, and that's not a fluke. And I think that, it's not, not only is it not a fluke, I think it's going to accelerate in the That are in their stock bond portfolios, they're gonna get decimated in the next twelve to fifteen months, and all of them are going to wish they had Bitcoin at a much higher amount, as this year progresses.

So perhaps a little more on the controversial side around timing the market. Now, the typical thing people say is don't time the market, time in the market, etcetera. But if you're operating in a liquidity framework and let's say, as you say, you believe towards the end of 2025 or maybe early 2026, you start to think, okay, liquidity is gonna start going the other way. Does that mean you actually lighten on your Bitcoin position or how do you think about that aspect of it?

So this confuses people, and I always like to make this really clear too. So I'm, I'm two different people, right? I'm a fund manager and I'm just a regular guy. My regular guy recommendation, and this is for 99% of people, Just buy and hold Bitcoin and don't touch it, and quit-- don't try to time it. And to your point, timing the market beats timing the market. You're probably gonna be wrong if you take, if you sell Bitcoin because you think you're get-- you're hitting the top or something. There are tax implications depending on where you live, especially in the US, it can be pretty rough. there are lots of ways that that can go wrong, and so I recommend to everybody who's just a regular person, just buy and hold. Dollar cost averaging's the best strategy for

Now, as a fund manager, yes, I, I actually do try to time these cycles, right? And so, like in my fund, in after twenty twenty-one, when I saw that the liquidity cycle was turning, I didn't want our, fund to go down seventy-five percent or so, like Bitcoin did. I thought, you know what? There are ways to, hedge against that. I literally, it's, it's called a hedge fund, that's what I run. and so there are ways to do that. So yes, I think Bitcoin's gonna peak into probably the fourth quarter, I'm targeting Halloween of twenty twenty-five as sort of the, the top date, d-d-d-did you know, based on past cycles and things. But who knows? I'll, I'll change it. I, I, I'm not, I'm not holding that. I'll change it as the data comes in. But if it looks like liquidity is starting to roll over, global M2 had been increasing, but now it's starting to flatten out and probably gonna head lower because of the economic cycles changing, and the Fed is I will start to get, conservative, and the way I plan on getting conservative is to do things like buy puts at that point. So, so say Bitcoin is four hundred K, my target is four hundred seventy five K for this cycle, say it's at four hundred seventy five K and I'm celebrating 'cause I got the price right or close to it. At that point, though, I won't be looking at Bitcoin to go to a million. What's good, the most of the market participants are going to be just losing their minds at that point. They will be tripling down on leverage

hoping that Bitcoin goes up to a million or two million or whatever they think it's gonna do, and, and I will be trying to caution people, I'm gonna turn back into Dr. Bear at that point and saying, "This is the time to hedge." and so in my fund, I will be timing it, to, to your point, I'll be buying puts. I might, you know, take a little bit of, trim my positions a little bit down and, and put them into treasuries or just hold cash at that

point

I, I, I had a couple days where I just spent tons of time, looking at past charts and past cycles and things like that, and, w-when I, kept coming to, to around that price target, so four fifty to kind of five hundred thousand, I wouldn't be surprised if it, if it, if I'm too low, I, I could see it actually spiking up, you know, to seven, eight hundred, even a million, I could see it tagging a million. if it did, I think at that

For people that I feel like I wish I could, put that from past experience, I wish I could give this knowledge to new and younger investors. When you see the price of anything hockey-sticking and going exponential, it, that's unsustainable. You're close to the end. Yeah. Yeah, it's the end. It's, that's the, that's the final huge dose of leverage, before it crashes. And so I, I would just beg people to be cautious at that point and don't go all in if Bitcoin is hits a million dollars or hits five hundred K, Two or three years after that, if

you do that. Yeah, and I, I will remind people, I've said this a few times, if you think back to, for people who are around in the twenty seventeen cycle, people think of twenty seventeen as just twenty K. No, it started the year at like one K or so. It spent seventy five percent of the year under five thousand. It spent ninety percent of the year under ten thousand. It was only that last month or so that it really went from like, you know, ten to twenty thousand, and, you know, it just People kind of misremember that and they just kind of think of it as, it was twenty K the whole time, but no, it just kind of, it did that real hockey stick at the end. Now, I, I wonder if you think twenty twenty-one was maybe slightly different behavior, maybe it was kind of lopped off a bit or we kind of, you know, China mining ban or something else happened that maybe stopped it.

Yes, that's my thesis, and I've, I've written that a couple times. Like, I think that the price in, in twenty twenty-one should have tagged about a hundred and twenty-five K, and I think it would have done that if it weren't for the China ban, which I think was really effective. I mean, it literally dropped the hash rate by fifty percent in about a month. That was incredible. and that was a real exogenous black swan hit to Bitcoin. and so by the time it recovered and started to ramp up again and liquidity started to build up Then the liquidity cycle turned and it peaked and started to roll over, and we could see that a recession was coming, unfortunately. And so I think a lot of people, including me, were disappointed. I was, I was all, prepared for the price to, to head up above a hundred with, with my call options and things like that. And so that was a painful couple of months until I realized that the transition had occurred. I think it was a fluke, and I also think that if you, if you have that mindset that it should have hit a hundred twenty-five K, should have Normal. What usually happens the year or two following is that you see this, crab-like choppy movement about forty to sixty percent of the former all-time high. and if, if that were the case, this whole price of like, kind of, forty-five to seventy K is really normal, and that's basically where it should be before it takes off again. So a lot of people are saying this is a really abnormal cycle, we hit a new all-time high early, what's happening? And I say it's only because twenty twenty-one was a fluke that this I think we're right on schedule, and I think like as we head into Q4, like November, December especially, and then into, the twenty twenty-five, that's when all the fireworks will start and we'll see that, as you're describing, that kind of hockey stick ramp up. It'll be kind of low for a while, maybe disappointing, but then as we head into kind of third quarter of twenty twenty-five, I think that's when the fireworks start and that's when we start seeing that exponential move higher.

Yeah. And I, I, I think you had some really great

Everything plays out as, you know, as we, as we are seeing it, people are gonna be losing their minds, right? They're gonna be thinking, "Oh, we're in a new paradigm." There's gonna-- there might be new countries, new companies, big public companies, smaller companies who are all buying Bitcoin, and people will feel super bullish, they'll think, you know, they're geniuses, and they can't do anything wrong, just, you know, lever on Bitcoin and you can't go wrong, and that precisely, sadly, is when most people will set themselves up

Predictions or things that you think people will be doing at that point in the cycle and that they should try to avoid?

Let's see. Any additional stuff? Well, I think, I think you hit on the main points, and I think kind of the point is at some point you just run out of buyers. There's so much optimism. Everybody is, you know, not only fully max allocated, they're max allocated with leverage, so they're over-leveraged in there, and, and they're, they're taking on risk that they can't afford to go wrong. when you hit Simply no more buyers, that's the day you peak. and it's gonna feel like the worst time ever to think about, being conservative, but that's exactly when you should feel conservative. So everything-- so I would just tell people like Watch the-- there, there are ways to, to figure this stuff out. You can look at, you know, technicals that say something is, is overbought or oversold. I think these technicals will be screaming over, overbought at that point. you can look at a lot of on-chain indicators that, that show these, right? There's tons of things, there's the, things

like this, yeah.

Exactly, exactly. There's just tons of different things you can look at. And, but it's gonna feel bad because what happens to people, and

If it hits like two hundred fifty K and you'll say, "Well, the indicators are starting to look like it's overbought and maybe I should..." And you're gonna feel like a genius 'cause you're like, "Dude, I bought at twenty five K, I sold at two hundred fifty K, that's a ten X." But then what will happen is literally the next week it's gonna go up to like four hundred K and you'll be like, "Oh, shoot, I sold too early." And so then you're gonna not be able to take it anymore and at about like Basically gone to the moon. just, just be careful, right? I mean, hopefully maybe I can come back on your show at that point and we'll talk about, you know, ways to,

and then people will be hating on you being like, "Oh, why you so bearish? Why, why can't you be bullish like everybody else?"

They will, they will. I get a lot of hate for being like that, but I just, I want, I, I literally just want what's best for people, right? I'm not looking for clients. I'm People to not make stupid mistakes. That's literally all I'm here for. And so if people hate me for that, like, that's alright. But I'm gonna tell you what I think is the truth. And if I think it's overbought at that point and it could drop eighty percent, and I think-- and I do, by the way. So my, my, you know, bull market price target is four seventy-five K, I think it could go back below a hundred K by the end of twenty twenty-six. I think we could be back down to like seventy K around where we That kind of stuff, and that's just, that's just

life, I guess. Yeah, it's funny because at certain points in the cycle, you'll see on social media people hate each other for not being bullish enough. They'll be like, "Oh, you're a bear, right? You're a bear. Oh, yeah, why don't you believe in two hundred K by conference day or whatever?" so one other topic I wanna get to with you, is the- 8% withdrawal rate aspect, right? So people talk about, you know, financial independence, and look, people shouldn't necessarily, you know, doesn't necessarily mean you have to retire early, maybe it just means you work on something else that you want to work on. But I know you've spoken about this idea of withdrawing 8% of your stack per year as an example. could you explain a little bit about that 8% number, how to think about it?

Sure. So, so Okay, so first of all, this comes from, you know, as an investment advisor, we talk about retirement ideas and like, you know, w-w-the goal of retirement is you want to build up your account according to some of the best research that says that you can live off of basically a four percent withdrawal rate for the rest of your life, and that way you won't outlive your money. That's the biggest fear that people-- people fear outliving their money in retirement more than they do dying. so they're just terrified they're gonna run out of money before they die. Based on the stock bond portfolio allocation, traditional stock bond portfolio allocations, whether you're 100% stocks or 80% stocks, 20% bonds or like 50/50, something like that, they, they show research that shows historically speaking, basically a 4% rate is the acceptable rate that there's a very, very, very low risk that you'll actually run out of money before you die, whenever that is. So, but now enter Bitcoin, right? So, so Bitcoin has these annualized returns that to date have been just ludicrously high. They've been, they've been super high, but they're, they're clearly slowing down. So the way I look at it, and we talked about this before, is I think for the next fifteen years or so, they're still going to be extremely high, but they're not gonna be like they, like the, the twenty tens decade, I think I, when I did the research on that, the, the, the annualized return rate Crazy. That's not-- we're never gonna see that again. We might see it briefly during the bull market, but, but not over the longer term. I think this, this decade, we're looking at kind of like a fifty percent, forty-five to fifty percent annualized return rate to the end of the decade, and then as we go into the twenty-thirties to twenty-forty, I'm looking at about twenty to twenty-five percent somewhere in that range. So again, it's disappointing that it's slowing down, yes, you know, you're not gonna become a billionaire because Or real estate, whatever else you wanna invest in. So, why do I say eight percent? Eight percent happens to be double the four percent rate for stocks and bonds, and I think, by the way, that that's very reasonable. I, I, I was called out, as we know, by someone for that being too aggressive and irresponsible, and I say, "Show me the math where that's too aggressive and irresponsible." You have to have, a very, very low expectation of Bitcoin returns for the next twenty years if you think eight percent is too high. I think Well above that. And I think that if you can current, so say, say you've been fortunate enough to save up enough Bitcoin today and you wanna start living off of that, whether it's like an annuity, or you wanna just supplement your income, or you're actually at retirement age and you wanna retire and you have this large stack of Bitcoin that eight percent is livable, I predict, and I think I can say this with a, a high degree of certainty, that you won't be able to spend that money fast enough, that the growth rate of Bitcoin will grow faster than your own Personal consumption rate will grow. So even if you, you know, start to do things a little more fancy and you stay at nice hotels and you take two, you know, an extra vacation every year, it will appreciate your purchasing power faster than you can spend it. And that's, that's-- and I think that's just very reasonable and that's very, based on history, and, and projecting that out into the future. Could I be wrong? Of course. Could the, could the growth rate of Bitcoin slow to ten percent or five percent going forward? For sure. But I And I think it would be very surprising to a lot of people, so I don't expect that at all. That's where I get that eight percent, I think that's actually extremely conservative in Bitcoin terms, but, you know, I could be wrong. And it also depends on how much you have, right? If you-- I'm not saying for people, if you have, you know, sixty percent in stocks, thirty-nine percent in bonds, and one percent in Bitcoin, then no, an eight percent rate isn't appropriate, you should still stick to kind of the four Eight percent actually isn't appropriate withdrawal

rate. I see. And so the way you calculate that would just be, let's say, as an example, at the start of the year, you take eight percent of your stack and you say, "This is what I'm allowed to spend for my living expenses, hypothetically." And then next year rolls around again, you take eight percent of whatever you've got, that's what you're allowed to spend. That's the way you're calculating that, right?

Exactly. Yeah. Yeah. Some people get confused by that. And so, yeah, so after--

Point eight Bitcoin for the first year, yeah. Point eight Bitcoin, so then you'd, at, then you'd have nine point two Bitcoin left, and then at year two, you take eight percent of nine point two, whatever that is, and whatever dollar amount that is, by the way. So it is going to fluctuate a lot. Bitcoin is very volatile, but thankfully it's generally more volatile to the upside. And if you continue to do that, you will draw down your stack, but that smaller and smaller Bitcoin stack will be worth more and more in purchasing power

terms

over time. Yeah, purchasing Of course you'll have less, like after thirty years you'll be down to, I think it's like eight percent of your stack. You'll have, if you do an eight percent withdrawal rate after thirty years, I think you'll have eight percent of your stack left. But if you have eight percent of ten Bitcoin thirty years from now, that will probably be worth tens of millions of dollars, if not more, and so again, it's growing faster than your consumption rate, and so I don't think we don't have to keep talking about it, but- Yeah,

I see. Yeah. Yeah, I see. Yeah. And as you're saying that, the- as long as you're not crazy and buying like ridiculous yachts and private jets or whatever, like in practice for a lot of people, as long as it's reasonable, you're probably not gonna outgrow that spending rate, based on how much, you know, people are anticipating Bitcoin to go up, compared to, you know, if you just think about the amount of fiat debase-ment going on around the world, right? Like that there's just, there just will be this much fiat debase-ment going on, and so, yeah, I guess that And, and for people to, you know, think about these numbers and just understand, I think it's important for people to run their own numbers, of course, and kind of be, you know, do your own numbers, do your own budgeting, and really come up with what you think is realistic and reasonable, but of course, be prudent. so yeah, I guess closing, closing it up then. Any, final thoughts? Anything you think we didn't hit today?

I guess if I could leave people with anything, well, first of all, I, I'm fallible and I make mistakes, so please don't take anything I say as individual investment advice. These are just my best guesses, right? but I think that this isn't a time to be bearish. I don't think this is a good time to be conservative. I do think that, the recessionistas are wrong, I'll just flat out say this, and I listen to them every-- There are many smart economists who I listen to on purpose every day to get their bearish takes into the worst recession the world's seen since two thousand eight or nineteen twenty nine. I just don't see that in the data I look at, and I think that data going forward is gonna show as we head into twenty five, that inflation will bottom sometime around out and then slowly start to rise again, but not be out of control, and I think economic growth is going to start surprising to the upside, and then on top of that, we have central banks supporting the markets, and all of that means more global M two, more cash for people, more people starting to- Venture further out onto the risk curve, and I think that Bitcoin will be a, a big beneficiary. So I would just like encourage people, please don't just sit one hundred percent in cash on the sidelines, or please don't-- And actually, one more point, please don't short Bitcoin right now, like for real. Like, I, I-- And this not because I think I want Bitcoin to go up, I'm saying you will get wrecked if you short Bitcoin during a Bitcoin bull market, and a lot of people are new to this space. g-g-damn, use Just be smart, dollar cost average into Bitcoin and Bitcoin and chill, and, and you'll do fine.

Yeah. And actually, one other question just came to my mind, I forgot to ask it earlier, on the whole eight percent You know, retirement question. Do you, how would that play into it if you thought it was kind of towards the end of the bull cycle and you're kind of like, "We're a bit overpriced," is it really right to use eight percent at this point, or should you sort of maybe calculate that off of, let's say, a lower number than what it really is?

There are definitely better times, and this happens with anything. Like, if you're doing a four percent rule with the stocks and bonds and those kind of things, and you're at a local peak, then you're

you know, I have fifty percent less this time or whatever. So yes, if that's important to you, then I think it's important to think about timing the market a little bit as to when you start. But I will say that when you have enough Bitcoin accumulated or you have enough retirement savings accumulated, the timing shouldn't matter much, even if you have kind of a, A, you know, a flat rate of return or like with Bitcoin, you have a large drawdown, even if we have a large drawdown in 2026 and the price of Bitcoin comes back down to about 70k or 75k? It's probably gonna start going back up again though. So you might have an unfortunate year, but you've only taken out eight percent of your stack, and then you might have, you know, you might have a, a, a lower dollar term, rate that year. But then I think it's gonna start heading up again in twenty twenty-seven, and I think by twenty twenty-eight, twenty twenty-nine, we're gonna be talking about Bitcoin at a million dollars or one, you know, one, one and a half million dollars somewhere in that range at the next bull market,

You're just having a conservative rate of withdrawal, whether you see it as retirement or as an annuity or just as supplemental income like rental real estate, income that a lot of people do in the States, it fluctuates, but in general it's going to move higher over time and it will eventually, reach a point where it's a lot more ten years from now than it, than it is today for that same eight percent.

Fantastic. Well, a really interesting discussion, and, I will encourage listeners to follow Dr. Jeff, on Nostra, your, so your Nostra account or handle, I guess, or pub, pub key, I'll put that in the, in the show notes, but it's drjeff at nostraplebs dot com. And, yeah, Jeff, thank you for joining me. I, and I enjoyed the chat today.

Thanks for having me, Stephane. It was a fun, fun conversation. Okay.