Lyn Alden warns that BIP 110 is unlikely to curb spam and instead mostly rearranges non-monetary data, raising the risk of a minority fork attempt that could split the Bitcoin chain.

Lyn Alden is a leading macro analyst and Bitcoiner who examines how fiscal dominance now overrides traditional monetary policy tools.

She breaks down why high debt-to-GDP ratios prevent rate hikes from taming inflation, how broad money supply still expands 5-8 percent annually, the limits of semiconductor and AI valuations, and the structure of a new Bitcoin-backed permanent capital vehicle for acquiring cash-flowing businesses.

Timestamps:

02:14 — BIP 110 Won’t Stop Spam

04:56 — Bitcoin Faces August Chain Split Risk

12:12 — Bitcoin in Bottom Decile of Cycle

15:37 — Nothing Stops This Fiscal Train

18:04 — Why Volcker Can’t Work Today

22:02 — Higher Rates Won’t Break the System

24:44 — Net Issuance Matters, Not Gross Refi

27:34 — Fed Balance Sheet Stays Flattish

32:56 — Broad Money Grows Despite Flat Fed

36:05 — US Money Supply Growth Hits 5-8%

38:51 — Fiscal Dominance: Who Wins the Money?

41:50 — Why Semiconductors Print Money

45:13 — Software Stocks: Value Trap or Opportunity?

47:31 — AI Is the New Dot-Com Bubble

52:00 — Orange Juice: Bitcoin-Backed Business Buyer

57:57 — Permanent Capital Vehicle, Not a Fund

59:39 — Founders Keep Equity Upside After Sale

Links: 

•  X: https://x.com/LynAldenContact
• Website: https://www.lynalden.com/0
• BIP 110 debate (“motte-and-bailey” critique): https://x.com/LynAldenContact/status/2078599151043162159 

Stephan Livera links:

• Follow me on X: @stephanlivera
• Subscribe to the podcast
• Subscribe to Substack

Full Transcript

[00:00] Stephan Livera: Hi everyone, welcome back to Stephan Livera podcast. Rejoining me on the show today is Lyn Alden, renowned for her macro analysis, as well as being a Bitcoiner and partner over at Egor Death. And, I know, well, first of all, first off, welcome back to the show, Lyn. Thanks for having me, always happy to be on.

[00:18] Stephan Livera: So I know you, recently were engaging a bit on the, the BIP 110 question. For some people, that has been quite a, a contentious kind of online discussion. you’ve been quite direct that Bitcoin, that BIP 110 doesn’t actually stop spam. do you fi- do you think this fight is mostly noise or is there like some kind of real cultural risk here or what do you think?

[00:40] Lyn Alden: I think I put it somewhere in the middle. you know, I’ve been monitoring this for a while, like I monitor all, all, you know, kind of fork proposals or at least anyone that has some degree of traction. and, I, I kinda made a decision just months ago that, I wasn’t really gonna engage on it, just because there’s, there’s, I mean, there’s countless forks out there that are, you know, pretty young or don’t have a lot of consensus, and there’s a lot of things

[01:09] Lyn Alden: And occasionally we’d have like a LP at our fund reach out and ask, or, you know, people would ask my thoughts on something, I would give it to them, but I wouldn’t really make an article about it, but I was asked about it on a podcast and, and gave, you know, it was kind of the tail end of a podcast, gave my, my re-reply, which is, you know, I, I sympathize, a-and I, you know, I, I think that I’m certainly in the camp that Bitcoin

[01:34] Lyn Alden: is money,

[01:37] Lyn Alden: and, Of, of any of that. but when you have a set of things that already exists, already is consensus, and there’s a pretty established, complexity of how to mitigate spam in any system, I mean, that’s, that goes back decades of research, and, you know, ’cause spam can disguise itself and is even hard to define at times,

[01:58] Lyn Alden: and just kind of reviewing everything that, that exists about that soft fork proposal, it mostly just kind of rearranges where non-monetary data can go. some people have very strong opinions Depends on precisely where in the blockchain, you know, like more appropriate types of, of places to put it. even debates about whether or not this is even about spam, you know, ’cause some, some proponents will say we have to cut down spam, and other people will say, “Well, read the Bibb, it’s, it’s actually admitting how limited it is at stopping spam.” so, I, I, you know, my view is that Yeah, kind of the most powerful attribute of Bitcoin is that it’s very hard to change. If it was easy to change, so even if you’re in favor of fork, like there are fork proposals out there that I’m, you know, kind of passively in favor of, I don’t really expect them to pass anytime soon. but the kind of the, kind of the key takeaway is that even if you’re in favor of a given fork, the fact that it’s really hard to get your fork through is also the defense around people that see things differently getting their It’s noble to try to find ways to, to optimize, to, you know, maybe add frictions to add non-monetary data into Bitcoin over time. If, if there’s a way that can do that, that builds consensus, I mean, I’m all ears. but kind of the– for me, it’s, I think the main thing is the marketing around this particular fork, how it seems to differ from what the, the fork actually offers, and kind of the, it, it’s become this kind of cultural moment, I think, more so than a technical

[03:29] Stephan Livera: Yeah, fair enough. on the,

[03:33] Stephan Livera: I, I guess upcoming,

[03:36] Stephan Livera: mandatory signaling period, which I think on the current estimate is around August 8th or maybe early morning August 9th, do you have any expectation or do you think- What do you think the network is going to do basically around that time?

[03:49] Lyn Alden: Well, so I’ve been monitoring that, I mean, there’s always like these confounding variables. Right now, it’s still a minority of, of nodes, which isn’t even a very accurate measure because number of nodes in, in themselves isn’t super useful data. It’s really kind of nodes that process a decent amount of volume on the network. and then it’s also, hash rate signaling, miner signaling is, is, is currently very low. some of the mining pool,

[04:16] Lyn Alden: so, you know, and that, that really goes up to the end, which was, kind of an interesting decision, rather than any sort of like time buffer last I checked. so we’ll see how that kind of thing turns out. I mean, my, my base assumption, unless, you know, things change between now and, and a few weeks from now, is that it’ll be a minority fork attempt. so if it’s not aborted or otherwise, changed, then it, it could potentially result in a chain split.

[04:45] Lyn Alden: That, meets current consensus, but then doesn’t meet the consensus of, of this other chain, that, you know, there’s a high risk of a chain split. So, I, I would, you know, probably would- Yeah. And it might even happen before that, right? Because of the mandatory

[04:59] Stephan Livera: signaling. Yeah. So literally, it may not even be spam that gets into the block, it may be literally the miners choose not to signal in favor of, you know, pro one ten, and that itself will cause a split around August ninth or so.

[05:11] Lyn Alden: Yeah, and I’ve seen, there’s even like technical, I, I’ve seen debates b-betweeen developers around, aspects of the, of the fork that some, some people call them bugs, other people, it’s, it’s co- you know, it’s a complex issue that hasn’t maybe been as heavily reviewed as some other forks are. but yeah, my, my expecta- expectation is some degree of chain split, again, unless there’s a change or a backing off of this, and, and I, you know, there are people

[05:41] Lyn Alden: and sometimes things can’t be settled with talk, sometimes they have to be settled with action and just market attempts. e-even as Bitcoiners, as much as we are often against altcoins, sometimes they represent market tests. If people have a very strong opinion that blocks should be bigger, I mean, they got that test in the market. They, they can use, they can use bigger block, block, blockchains if they’d like to. I mean, they’re, they’re out there now. If people think privacy should be on the base layer at the sacrifice of

[06:10] Lyn Alden: We want a more programmable base layer, it’s there for them, and the market can assess that over time. And this is yet another just market test for, for Bitcoin to go through, and if people disagree on, on what open source software they want to run, sometimes it, it just has to go in different directions.

[06:29] Stephan Livera: You wrote, the, the B-Cap, you know, project, and you did that with Steve Lee, and I believe you had maybe one or two other collaborators. I’m curious, given, you know, given this You know, controversy now in the community, how well do you think B-CAP has held up? Like, would you change anything about it?

[06:49] Lyn Alden: No, but the, I, I kind of the whole point of that, document is to change, ironically. so it’s not necessarily anything I would change about our first draft, our V1. we– so for context, we, we went on your show back when we published it, but basically back in 2024, the three of us co-authored this paper, and it’s a combined economic and technical

[07:11] Lyn Alden: Economic side of it, and I, I was fortunate to have, the other two that, that really kind of shored up the, the, the software details in that whole thing and, and really focused on that area. but it basically reviewed the history of how consensus changes are made in Bitcoin, and it’s not all, you know, the process has changed over time as the network, you know, goes from basically Satoshi’s project to this, you know, this global, very large and, and kind of a semi-assetized asset, network.

[07:41] Lyn Alden: That, and at the time, you know, we, we took a neutral opinion on, on any given fork. At the time, there was the kind of Taproot Wizard’s, approach, it was, it was kind of a concerted attempt to make Bitcoin a little bit, the script a little bit more expressive, you could say. and there were some people talking about the potential for an alternative client to, to try to make that fork a reality. and so we kind of went over some analysis of, of what the potential risks are if you get That activates, but then could later become a hard fork.

[08:15] Lyn Alden: and we, we, I think the kind of the key takeaway that’s relevant for this, this kind of current era is that we mapped out the different, powers in Bitcoin. You know, what, what, what powers decide whether a fork is successful and becomes consensus or not? is it, is it just one group has all the power? Is it kind of multiple groups competing with each other? And then more nuanced than that, are there certain phases within the timeline of introducing a fork where some groups have more power? I would say earlier on, and then their power diminishes, and other ones have less power early on, but then their power grows throughout the process. And I, I think a lot of that holds up really well. And I, I, you know, if people are, confused about what’s happening, I think it can be informative. but then what we did is we, we published from the day one, we published the paper on GitHub and invited the community to, you know, improve it over time. It’s a living document rather than just a snapshot of, of what Think about it, and so it, we did, we just put out the V1 and, and said, “This is our best effort so far, “and, and people can help.

[09:20] Stephan Livera: Yeah, and to be honest, I think it holds up pretty well. Like, ultimately, Bitcoin is this kind of anarchic thing, and you kind of have to get enough people on board with your change to get it over the line. And, you know, I think your project did a good job to sort of codify some of the, you know, these elements of it, at least what we People have their own different views, like what we’re seeing now with the bit one ten people is they sort of think there’s kind of a game, they think of it as the game theory is sort of in their favor because they will talk about, let’s say, the wipeout risk, but they will, you know, they may not necessarily give a, a balanced presentation on things like, well, what if you’re a miner who points hash rate to the chain that doesn’t become the dominant majority chain, you would have wasted your hash rate. And remember, there’s a rule that says, and for And so, you know, if you’re, if you’re gonna point to one ten chain and it doesn’t become a real thing, you as a miner, you’re, you’re out money, right? You’ve pointed hash rate. And so, also, there’s not any large exchanges who are willing to sell one ten coin. There’s not really any large futures or predictions markets. I mean, there’s one on like Predicts where it’s, maybe three BTC worth of liquidity. So it’s just, if you look at the signals that are out there, it’s

[10:39] Stephan Livera: You know, 2017.

[10:41] Lyn Alden: Yeah, and I think the best part about this, from the, from the perspective of the B-CAP paper, is, I mean, this will be the best, best, data point we’ve had on how to update the paper. So if, if, if, you know, if we do wanna get new contributors or maybe some of the original authors come back and add a, add a section, this’ll be a new test, a new data point, and regardless of how it, the, the details of how it works out, as Some, some of us,

[11:10] Stephan Livera: yeah.

[11:12] Stephan Livera: So let’s talk to, let’s just kind of switch to Bitcoin just broadly, obviously price and macro and what’s happening there. As we speak, the price is about $66,000. It is the 21st of July.

[11:26] Stephan Livera: Where do you feel we are at, or where are you sensing we are in the cycle right now for Bitcoin?

[11:32] Lyn Alden: so my estimate is that we’re in the bottom decile, of, of the market cycle. So I, I never try to bottom tick anything, that’s more of a trading call. I, I sometimes I work with a base case, like, you know, we hit that low in February and then kind of held that for a while, so I was kind of operating with the base case that that might be the low, and then of course we spilled to a slightly lower low, kind of from the low sixties down into the,

[11:57] Lyn Alden: instead the, the

[12:01] Lyn Alden: You know, it’s not super high conviction, it’s more like I think that most sentiment indicators, momentum indicators, valuation indicators, a bunch of different ways to, to, you know, kind of analyze, is there fast money and enthusiasm, and, and other things in the space, or is it the complete opposite of that? I, I think we’re in the complete opposite of that. and I’ve also kind of just tracked other market aspects. I mean, I think the AI trade, as massive of it as it is, has sucked a lot of the oxygen out of the room

[12:31] Lyn Alden: I would say likely Bitcoin,

[12:34] Lyn Alden: and, you know, we, we’ve done analysis before that showed, eighty-three percent of the time, Bitcoin goes in the direction of various measures of global liquidity, and there’s a couple of different ways to, to define what that means. and this is, this has been one of those seventeen percent of times where it’s not really, gone in the direction of global liquidity, because global liqu-liquidity has been kind of flat to up, whereas obviously Bitcoin’s been in a, in a bear market.

[13:01] Lyn Alden: Kind of twenty twenty and twenty twenty one stimulus, e- ever since we, we got past that era, and kind of the macro cycles have been different now, rather than the kind of the cycles we saw throughout the twenty tens decade, a lot of I think has to do with fiscal dominance, which is like a macro topic I keep, kind of pounding the table on,

[13:22] Lyn Alden: and so we’re in this kind of longer, grindier type of macro environment, that also is, it’s another way to describe it is kind of a two which is you have the combination of, i- and the US kind of influences the rest of the world. I mean, I’m in Egypt and, you know, both of us in the Middle East right now having this conversation, but obviously the US, dominates a lot of, global macro, which is to say, when you have loose fiscal, meaning pretty large fiscal deficits, that are pretty structural, in, in the biggest economy in the world, and then you have, semi-tight monetary policy trying to fight back against,

[14:01] Lyn Alden: Home prices, like the actual ability to purchase them when you include both the house price and the associated leverage and interest on top of that, that the most, say, middle class Americans would engage in,

[14:12] Lyn Alden: you, you have pretty restrictive policy up against that loose fiscal policy. So, i-i-in automobile terms, it’s kind of like, you know, holding the e-brake while, putting your foot on the gas at the same time is basically what the US economy is doing, and that affects a lot of assets. A lot of things are kind of grinding flat to up

[14:31] Lyn Alden: Trades, have been kind of liquidity sucked out of them, and at least until recently, a lot of the money has kind of poured into that AI space, and, you know, I, I think that as that kind of subsides, not to say it’s the ultimate top, but as like the, the sheer speed of that move cools down, I think it allows other assets, to get their kind of day in the sun, potentially and hopefully, including Bitcoin.

[14:57] Stephan Livera: And I guess let’s touch a bit on the fiscal dominance thing. I know this has been a big, hobby horse issue for you, obviously the “Nothing Stops This Train” meme, which you are obviously famous for, and I guess As I, if I had to kind of quickly summarize my understanding of that, it’s that basically given the welfare state, given the entitlements, given the demographics, especially of America and many other countries too, to be honest, it’s like it’s just gonna be very difficult to- Not keep spending a lot of money, and the point is maybe in the twenty tens era, we were in a more of a dom-monetary dominance era, let’s say, where interest rates of the Fed and the, the actions of the Fed were very, you know, important. And now I think, as you say, post twenty nineteen or so, that’s when we went into fiscal dominance, which is more like, it’s more about what the federal government is doing in terms of budget and spending. Is that– Would you say that’s kind of a fair summary of that?

[15:55] Lyn Alden: Yeah, I, I think it is. you know, there’s a couple of the nuances that the US is more financialized than any other major economy, meaning that, our economy kinda like, it’s, it’s a situation where the tail wags the dog, so our economy kinda i-is influenced by the stock market, whereas historically it’s, it’s more often the other way around. but the, the main forces are the ones you said, which is, for a variety of demographic reasons, in addition to political polarization, we have this really

[16:24] Lyn Alden: The, the ability to materially reduce it, is extremely curtailed, like near zero in any sort of investable time horizon. and, you, what, you know, it’s, it’s not like a temporary thing, like, let’s just stimulate to get out of this, you know, malaise. It’s structural. and it’s also accumulated debt and, and, you know, kind of accumulated over a hundred percent debt to GDP, which means that, the, the, the Fed has limited tools here. When they–

[16:54] Lyn Alden: Volcker, and they said, “Well, what’s the solution to high inflation? Well, it’s raising interest rates.” and the reason it worked back then, or actually, it was a, it was a combination of things that worked back then. It was also geopolitical solutions to get oil flowing again and, and release supply. But the reason that kind of hawkish monetary policy worked is because the, back then, the baby boomer generation was entering their home buying years, that was kind of peak demographics in a way, and that means a lot of credit formation,

[17:24] Lyn Alden: The world, there was kind of the highest modern rate of fractional reserve bank lending, basically new money creation through, through fractional reserve bank loans, and so you have ra-more rapid than average money supply growth, and then you had a real constraint, which was the whole Middle East oil, oil geopolitical conflicts and all that, so increased money supply growth, real scarcity, inflation. So Paul Volcker comes along and he jacks interest rates up, it, it put a lot of dollar indebted emerging markets into a basically depression. I mean, it- Killed Latin America’s oil demand, and then it also slowed down lending growth, in the US and other countries were doing something similar. So the combination of slowing down the money supply and eventually geopolitical solutions that got oil back into the market, helped relieve the inflation burden. The issue is that federal debt to GDP was like thirty-five percent, in the US at that time, which means when he, when he jacked up interest rates to double digits, it, it, it, you know, it, it slowed down bank lending to the private sector,

[18:24] Lyn Alden: To some extent, blow out the deficit, especially when we had the whole Reagan ’80s, that was a very deficit-driven decade. but it slowed down the bank lending that was like a bigger factor than the deficit increase. The problem is when we fast forward forty years, and, most of the, you know, more money creation really comes from like fiscal deficits, a-and, you know, banks even just buying treasuries and things like that on fractional reserve, then it comes from banks making loans to consumers and businesses. And when you have over a hundred percent So there’s high inflation, we gotta raise interest rates to some extent, that does still slow down, you know, bank lending to some extent, but then it actually, the, the, by sheer numbers, it blows out the fiscal deficit by literally a, a bigger dollar value than it slows down that private sector bank lending. Basically, there are consequences for having over a hundred percent sovereign debt to GDP. it doesn’t mean everything breaks tomorrow, but it just means that the, the monetary tool That central bankers have relied on for, for the better part of a century here, kind of modern financial history, is, is not really the one way sword or the one way tool that it used to be, and now it kind of ricochets as much or more than the initial direction it pushes in. So you get this messy situation of structurally high fiscal deficits, trade-offs anytime the central bank tries to raise rates, and, growing populism as well, because you have, you know, if, if you’re long- Assets that benefit from the deficits, or just own assets in general,

[19:55] Lyn Alden: and you’re just, you’ve, you’ve locked in a thirty-year mortgage or you’re, you locked in thirty-year bonds and you’re basically structurally short the currency, you’re, you’re generally doing pretty well, whereas if you’re not, if, you know, if you’re younger, you don’t have a lot of assets, you’re looking to buy your first home, you’re, you’re, you know, most of your income is from wages, not from assets,

[20:15] Lyn Alden: you’re not really, and, so it, it results in class issues, it results in, and, and, you know, it’s– I mean, this is already complex enough podcast, and this is simplified. It’s very hard for even financial professionals to wrap their head around these details, let alone if you just, you work in any other field and it’s hard to point to what the issue is, so people point in a lot of different directions, and so you get a very polarized, and angry political environment.

[20:49] Stephan Livera: And the other, I guess, point you were touching on there is that if the Fed would otherwise have wanted to raise rates, they’re now they’re boxed out. They kind of can’t do that because, as you said, if they re- if they let rates go too high, then the government’s deficit blows out a lot, and its interest cost obviously blows out a lot because you’re paying a higher interest rate. And so I guess you’re, I guess you’re saying they’re kind of boxed into keeping interest rates low and basically doing what it takes to keep interest rates low. Interest rates low, because that’s, that’s all the system can handle.

[21:22] Lyn Alden: Yeah, pretty much. And I would say, you know, there’s no like, like so the kind of, if I say that, there, there are people that will push back and say, “Well, what’s the exact interest rate level that breaks it then?” And my view isn’t necessarily that anything– that, that there’s no interest rate level that breaks it, it’s that it just stops being effective. so it, it basically, if you raise interest rates, you know, higher and

[21:46] Lyn Alden: higher, let The day they do it. But then, well, then o-over weeks and months, the federal deficit will increase because their interest expense will get, refinanced at that higher rate over time, so they’ll be pouring more money out to people that own money markets, the people that own bonds. a lot of this is spend-spendable money. they’ll be paying the banks more ’cause banks own a lot of those, government liabilities, and, you know, they can pour it into what they’re doing.

[22:16] Lyn Alden: and, and, you know, ba- fractional reserve banking isn’t at an elevated level compared to history, if anything, it’s slightly below average. so you get the, you, you know, you keep kind of holding the real estate market somewhat underwater, which, which does put a somewhat of a lid on it, but then it just, all those other things are blowing out. So it’s like you’re, again, that you’re, you’re holding a speed break while still having your foot on the gas or trying to get water out of a, out of a boat that has

[22:48] Lyn Alden: and, you know, there’s, like, Argentina went through something similar, which was, I mean, you know, they can jack up interest rates to a hundred percent, but they’re not, they’re not addressing the core issue. you know, it’s, it’s kind of the whole point of higher interest rates, when used properly, is to try to slow down money supply growth, but if you’re in a state of fiscal dominance, it doesn’t necessarily c- achieve that effect, is kind of the, the punchline at the end. I

[23:11] Stephan Livera: see. And then when it comes to interest rates, p- you know, the big talking point is how big of a line item it is on the Federal Reserve, sorry, on the federal government’s, budget. can you talk to us a little bit about that, that side of it in terms of like when they do, when they’re rolling things over, like how long does it take before it really starts to spiral further away from them?

[23:34] Lyn Alden: Yeah, good question. I mean, I mean, interest expense is well over a trillion dollars annually right now. I don’t have the exact number in front of me, but it’s over a trillion now. one of the, the headlines I see on Twitter or X a lot, which is one of the ones I fade actually, is you’ll see a figure like, you know, nine trillion dollars has to be refinanced in the next twelve months or something like that, you know, whatever the, the figure pretty much only grows over time, and as though that’s like a catastrophe.

[24:04] Lyn Alden: Bought by the entity that already owns that, that the insurance companies, banks, pools of capital, money markets, that, that people have their, their savings in, that it just, a T bill or a T note matures and it just, it just gets bought into the same equi-equivalent T note or, or T bond. It’s really the, the net issuance that matters, and, How quickly interest rates transfer to larger interest expense depends, of course, on the average duration, of the federal government’s debt. and historically speaking, the T-bill portion, so, you know, the, the portion that is like very short duration, that’s been historically under twenty percent of government debt, and the other eighty percent is, is somewhat longer, duration, meaning that that wouldn’t be affected by, you know, for, for, for a year or two, or in some cases up to thirty years. so twenty percent of it gets In the, in the, in the months that follow, and the other parts, over time, but currently, you know, generally speaking, when governments enter fiscal dominance, they tend on average to shorten their duration, so we actually have a higher than average amount of T-bill issuance, which, began under Secretary Yellen, the current Treasury Secretary criticized her for that and then kept doing it when, he took over because this is, it’s, it’s structural at this point. the other way, of course, it Expenses that, if they raise short-term interest rates, it could at times affect long-term interest rates. that they, you know, unless they do yield curve control, they don’t have a firm

[25:34] Lyn Alden: control over what happens to the longer end of the curve. And in fact, for example, some of the, some of the Federal Reserve cuts that they did in recent years hasn’t really translated to lower mortgages because it hasn’t really affected the long end of the curve, because there still is this kind of inflation, component in the market and this kind of high,

[25:54] Lyn Alden: Of what the Fed’s doing is what the long end of the curve is doing, because at any given time, for example, there’s a ten-year Treasury maturing, and the government is issuing another ten-year Treasury to replace it at whatever prevailing market rates are, which is partially influenced by the Fed, but then partially influenced by, by the market. So in, in general, higher interest rates over time take, you know, months to work through and then, ultimately take years to work through to higher interest expense.

[26:21] Stephan Livera: While we’re on the topic of the Fed and all this stuff, obviously everyone knows President Trump, he loves low interest rates, he wants them as low as he can get them, but obviously what he’s actually gonna get, we don’t know. and obviously the other big talking point is that, I think, the Federal Reserve Chair, Kevin Warsh, has mentioned that he would like to lower the Federal Reserve balance sheet. But is that realistic? Or maybe that’s like a longer term, medium longer term thing. So I guess my question to you, Lyn, is, where do you see the Federal Reserve, balance sheet going in the, you know, medium term?

[26:54] Lyn Alden: flattish for a while is my, is my best estimate. so, so pre-Worsh, pre, pre-the current Fed, my view was the gradual print. you know, kind of, are people calling for a big pr-big print or, you know, other, other factors? My view was that, we’re kinda entering a, a pretty long period of a gradual print, which is to say, the Fed’s not going out there and just rapidly increasing the monetary base, but they are around the margins, creating new base money, to, to buy a small amount of Treasuries over time, and, you know, just gradually keep the base money growing and by extension, making the broad money not have to contract due to like, you know, bank capital restrictions and things like that. a-and that’s been the case really Last year, and otherwise we’ll probably continue for the foreseeable future, any sort of investable time horizon, going forward, unless there’s some massive crisis that just, you know, kind of rapidly blows things out. There are around the margins things that, that the Fed can do to reduce that, and it mostly revolves around giving banks more ability to, to basically buy things on fractional reserve. especially ever since the global financial crisis, there’s a number of kind of constraints that banks have, that they- Kind of certain tests they have to meet, certain, you know, certain things they, they have a certain amount of capital, risk weighted capital, and certain things count as, you know, kind of different risk weightings in that. And the Fed has the ability to kind of make it easier for them to hold treasuries,

[28:25] Lyn Alden: on their fractional reserve. And so basically, if you, if you see, if, if, so Warsh has been hawkish on the balance sheet since like twenty eleven or so, since really since the balance sheet blew out,

[28:40] Lyn Alden: Remarks in that have been somewhat dovish, which is that he’d made, he’d made very clear to the market, this isn’t, it’s not his unilateral decision, it involves a lot of people agreeing, it’ll be well tele-telegraphed to the market, they will check with banks and other market participants. It’s kind of a way of saying, “Hey, I’m not like, ideological hawk, I just, wanna find ways to tweak this.” and one of the things they could do is, is, you know, re-slightly tweak, and they Print on the bank side instead of the central bank side, which is, it’s kind of a net wash, like, you know, i-i-it’s not really a massive change either way. so the short answer, is flattish. I mean, it could be slightly down for a while if, if he gets kind of his most hawkish dreams and most, kind of liberalization of bank balance sheets, or we just continue flat to up if the status quo stays in effect, which is also a reasonable possibility, and that the I think the, the repo issues, we’ve seen, late last year will be under, will be well controlled. the treasury market will be liquid. the Fed will step in around the margins if needed to keep that liquid. the deficits will continue, money supply will keep growing, broad money supply.

[29:59] Lyn Alden: and so it’s, yeah, I, I– Multiple ways to get there, but I think they all lead toward gradual print.

[30:05] Stephan Livera: So can you expand a little bit on that for us, this idea that the Federal Reserve balance sheet may stay flat-ish, but money supply, as in, you know, broad money, M2, M3, et cetera, those metrics are still going to grow? Can you explain a bit of that?

[30:19] Lyn Alden: Sure. So basically there’s, there’s two layers of money in the system. there’s multiple ways to break it down, but there’s really two layers. The base layer, is kind of defined by that country’s central bank, and they say this is, this is base money. and then what most people have is commercial bank deposits. you know, they, they can have direct liabilities from the central bank if they have physical banknotes, but for the most part, they have fractional reserve bank deposits. And what a commercial bank Will do is, you know, they’ll hold, let’s say, ten percent of their deposits in base cash, you know, more or less, and then the rest is backed up by other assets. so it’s fractional reserve banking. You have a, a, duration mismatch, where, people have, you know, they can pull their money out on demand in theory, and then the bank is back, backing that by generally longer duration assets. and that, that creates a fractional reserve bank lending environment, and so you get a than the base money supply. So you have basically these IOUs for base money equivalents, and there are various regulatory levers or even just decisions by the private market to, to determine how much those banks are, are either allowed or comfortable in leveraging, you know, to make sure they’re not caught out on their duration mismatch, or that there’s tools available to them. and so prior to the global financial crisis, the ratio was actually much higher, because banks, the, the, the base layer- It was very thin, frac–

[31:49] Lyn Alden: the fraction reserve ratio was extremely high. when that all blew up, basically, you, you know, when you only have like three percent of, you know, IOUs backed by actual base cash, and it’s kinda like the, it’s kinda like a game of musical chairs where there’s, there’s a hundred kids and there’s three chairs and the music stops and it’s just, it’s pure chaos, so you have to throw a lot of chairs in there and, you know, fix, fix the problem that way.

[32:16] Lyn Alden: you Multiple times the base money, and so even as the base layer gets, at some times it’s not growing. I mean, there was a couple years there where the Fed was reducing its balance sheet, it wasn’t growing, it was actually shrinking, and you still had, at least for, for most of that period, you had broad money supply still gradually growing because you still have that fraction reserve, layer built on top of it, and that’s the part that is really more impactful at the end of the day for what happens with consumer prices, because that’s the money that’s

[32:49] Lyn Alden: in corporate bank accounts, that is, generally what we think of as, as spendable.

[32:55] Stephan Livera: Right. And then that ties into, you were touching earlier on like liquidity and how that has been historically reasonably highly correlated to Bitcoin price moves, and of course, the stock market in general. So I guess As I’m trying to understand your view, then the Federal Reserve is likely to be staying flat in terms of balance sheet, but we will still get monetary expansion, and then that’s where possible– and some of that can come from changes in the rules, you know, whether how much, capital, you know, banks and financial institutions are required to hold, in, in, in, in reserve. and so then your view then is that, you know, that, that, the liquidity cycles can still play out on top of- A flat balance sheet at the Federal Reserve, let’s say.

[33:42] Lyn Alden: Exactly, and I think that– so the current status quo is slightly increasing, Fed balance sheet, like a, a slow rate of increase. And then there’s a variance, like I said, of, of what happens, you know, if Warce is successful, you could have that either stop increasing and flatten out for a bit, or even slightly go down, and yet you have that broad money supply, I would say, at this point is probably very unlikely to go down. you know, it briefly

[34:09] Lyn Alden: When the Fed was kind of all out going hawkish against the, the twenty twenty, twenty twenty-one, rapid increase in the money supply and then the associated price increases that followed. so you know, you get a temporary contraction here and there. I think we’re past that phase, and yeah, I think the broad aggregates, continue to grind higher, regardless of the exact rate of change of the, the Fed’s balance sheet for a while.

[34:32] Stephan Livera: So if you just had to sort of finger in the air, have a guess where you think,

[34:39] Stephan Livera: the not base money expansion, but you know, broader money expansion rates are going to be, like historically has it been sort of seven or eight percent, depending on where you look, different countries, but let’s say for a US Investor, what, where would you sort of handicap that? And the reason I’m asking is, let’s say you think you’re gonna go buy the S&P or you’re gonna buy Nasdaq, you also wanna understand like if I’m gonna earn twelve percent in the S&P or whatever, but I’m getting inflated away at seven percent, so my real return is more like five. So just as an example, like, I guess what I’m asking is, where do you, how do you handicap that, like in terms of how much you would anticipate,

[35:21] Stephan Livera: the inflation to be versus S&P growth.

[35:25] Lyn Alden: So historically, it’s around seven percent, over a multi-decade long term, kind of in modern financial history in the US. Obviously, it’ll vary by country. Japan’s historically been the lowest in, in, in modern history, which actually surprises a lot of people. They think of Japan as a big printer, but in terms of broad money supply, they’ve actually been on the slower end of the curve even as their base money has exploded.

[35:48] Lyn Alden: most developed countries are kind of in that five to, to eight percent range. Double digit range more often than not. I, I expect that the US is probably gonna continue somewhere around its average, which is mid to high single digits, you know, for, for quite a while. Probably the main difference is the composition of where that money supply growth is coming from, because again, b- since we’re in fiscal dominance, it’s less that fraction of bank lending and it’s more that fiscal deficit component, w-which, a-and a lot of that is, is, is generally gonna go more toward consumption than production, w-which can around Inflationary than if a similar amount of money supply growth was happening because, for example, you were building a lot of new factories to make a lot of new supply of things, at least that the, you know, the price increase of the things you’re making, supply of. so different composition, I think, for what is otherwise back to kind of average money supply growth

[36:43] Lyn Alden: now when you look out further and further, that could increase. another aspect of this kind of, change in structure is that that number is a little bit less cyclical than it used to be, because deficits, you know, fis-fiscal deficits don’t really go down in a recession, for example, in the way that, that bank lending tends to, and if anything, is more often likely to increase in a recession. So you get this kind of more structural background increase, which is then partially offset by The kind of older demographics generally means less private sector borrowing demand, as well as the Fed’s kind of current attempt to, to, you know, push back on inflation and, and keep kind of the housing market kind of restrictive is also somewhat pushing down on that money supply growth compared to if they just, you know, did yield curve control and said, okay, go out and buy a home and party while also the fiscal deficit, you know, that, that would be a, that would probably result in net higher, money supply growth.

[37:41] Stephan Livera: And contrasting, let’s say, monetary dominance and fiscal dominance, I’m curious how you see it. So let’s say, you know, the typical Cantillon effect really applies, especially in a monetary dominance era, right? Like in the monetary dominance era, to benefit, you, you try to go near the printer, right? Like the closer you are to the printer, the better you are as an individual, let’s say, or a business. In a fiscal dominance era, is it more like you need to try to be supplying the government because the government is the one spending a lot of the new money

[38:11] Lyn Alden: I think that’s a lot of it, yes. I think so, so basically in a monetary dominance environment, like you said, the closer, the closer you are to the, the, the money printer, the better, which in practice generally means, the, the lower and longer you can borrow money, like lower interest rates for longer and with less restrictive terms, you know, your advantage compared to entities that can’t borrow as much. And that’s true even in a hard money environment, but that, in that kind of softer money environment, that borrowing difference, that Especially an advantage, right? Yeah, it’s especially, it goes from like a, a tertiary concern to like almost the primary concern. in a fiscally dominant environment, that’s, I mean, that’s still a relevant factor. I mean, Berkshire Hathaway with their insurance flow and, and super low, you know, bond yields, still a- But close, you know, much a, and a better borrowing position than me or you, and, and we’re better in a, a better borrowing position than, than someone who is, is less financially well off. That’s, that’s still all, all true. But you don’t have that kind of forty-year period of declining interest rates anymore, and so it, it, that’s a little bit, you know, diminished compared to what it was at its peak. But then, like you said, it’s replaced by, you know, is a company or, or an individual

[39:26] Lyn Alden: Attention, if, if do you own companies that are, even if you’re not, do you, you know, do you own the assets that are on the right side of that, or even indirectly on the right side of that? So for example, if money pours out to, say,

[39:40] Lyn Alden: you know, Social Security, for example, what do those people spend their money on? You know, what, if you have an aging demographic that is, you know, supported in that way, what do they, what do they spend money on? So for example,

[39:56] Lyn Alden: It depends on real estate turnover, you know, you’re on the, you’re not really on the right side of fiscal deficits, you’re on the wrong side of the semi-tight monetary policy, right? So it really comes down to being on the right side of where the, where that, that’s flowing.

[40:11] Stephan Livera: Yeah, fascinating. I guess there are some interesting insights there for investors there. And then, let’s talk a little on the AI side of things. Obviously, that’s a super hot topic, it’s obviously the big thing of the day.

[40:22] Stephan Livera: there are different sectors in AI, and I know in your recent newsletter, you were commenting a little bit on how you’re playing this in terms of, you know, there’s like the semiconductors side of this, there’s like what’s happening with software, there’s obviously the models and the, the companies that making those, the frontier

[40:40] Stephan Livera: So can you give us a bit of a your overview on, you know, how you’re, how you’re playing the AI trade, let’s say?

[40:47] Lyn Alden: Yeah, good question. I mean, so, for a while there, the, the hyperscalers and the semiconductors were doing great together, and, and in the private market, the AI models were also doing great. So kind of those three big buckets of AI were doing great. but really in, in recent months, it shifted toward semiconductors. up until weeks ago, we’re still doing amazing

[41:10] Lyn Alden: Differentiation that is, you know, pretty, pretty wide economic moat and hard to reproduce, so they’ve been kind of printing money. The hyperscalers are in pretty fierce competition with each other, so in the 2010s, these internet companies benefited from network effects, they benefited from mostly software stuff, mobile stuff, pretty low CapEx spending relative to their revenue, and so they, they just- Basically printed free cash flow, which they could plow into boosting their balance sheet, they could buy back shares, they could, around the margin to pay some dividends. and now they’re deploying a lot of that free cash flow and even their, their, their prior stockpile of cash toward hardware spending, data centers and all these chips. and there’s, so far not in, you know, there’s a lot of, there’s, there’s like lower switching costs, you know, it’s, it’s, it’s, it’s hard to get off Twitter and go start

[42:03] Lyn Alden: Facebook can go start a Facebook competitor, it’s hard to get off Instagram, it’s hard to make a competing search engine, for example, or, you know, these, these network effects things to kind of really entrench themselves, YouTube, as well. but it, it’s easier to switch to a different model, or it’s easier if you have a, a solution to change where you’re, you’re, you know, what environment you’re hosting, that solution in. and so I, I, I’m not really bullish on the AI

[42:33] Lyn Alden: From open source, I think there’s a just, just, you know, kind of low switching cost toward whatever the best model is,

[42:40] Lyn Alden: and the hyperscalers, you know, they have some degree of economic moat, but compared– when competing with each other, they have to spend a lot of money. so I, I mean, I like semiconductors whenever they sell off a ton. I mean, they, they, they get overenthusiastic and then they sell off, and, I, I tend to be kind of a cautious Compute for the foreseeable future, but sometimes the prices get ahead of themselves, and when they do sell off and, and, you know, they become cheap again, I, I tend to go long. If anything, my mistake is, been getting out too early. I tend to, my, my kind of at heart, I’m a value investor, so when things have doubled or tripled, I, I tend to wanna, put profit off there, yeah, yeah, whereas, I’ve been a little, I think a little too quick on the trigger finger

[43:28] Lyn Alden: there. So

[43:32] Lyn Alden: I

[43:33] Lyn Alden: But I tend to get, you know, I, I think structurally speaking, I’m bullish on pullbacks. the other way I’m kind of looking at it is the opposite side of the trade, which is that as all, as the semiconductors and AI has, has kind of taken off, there are areas of the market that are viewed, I think rightly, as disrupted. So software companies, who, you know, people can vibe code competitors now, or, you know, if you’re, if you’re, if you’re a worker Eight AI tools and each one does the work of four designers. How do the design software companies try to recoup, that potential hit? and interestingly, so far we’re seeing that their, their, their revenue and their earnings of, of most software companies, or at least the big ones, like the leading ones in their field, have actually so far not really been impacted. They’re still growing compared to last year, the year before, the year before that. Sometimes around the margins you have a slightly slower growth rate, which I think is, is common for a mature company

[44:33] Lyn Alden: Priced in the idea that maybe two, three years out, they’re gonna run into some pretty severe impairments, their growth’s gonna dry up, maybe even go negative, as their pricing power will reduce, as their maybe their, the volume of demand will reduce. and so these have kinda shifted from growth stocks to value stocks, and the market’s trying to figure out are these value traps, meaning they, they look cheap, but it’s only gonna get worse, or is it overhyped and maybe, you know, i-it’s easy to kinda vibe code But it’s harder to maintain, you know, A tier software, and I mean, even the, even the software companies themselves can save expenses with AI, so, you know, maybe their, their top line does get thinned out, but maybe also their expense line gets thinned out, and these, these just transition to value stocks in the market, so I think for value investors digging around in things that are just completely sold off while their fundamentals Haven’t yet, and many of them have strong balance sheets, so I, I, I think there’s a reasonable trade here for cautiously bullish on AI, but not expecting everything legacy to just go to zero next year, that there is kind of a balanced trade there. And by extension, I mean, for a while, Bitcoin’s been correlated with some of these software stocks,

[45:48] Lyn Alden: and some of them are kind of showing signs of a potential bottom, as the, the kind of the memory and, and other semiconductor that, that rally we had and kind of- The first half of this year has kind of faded to some extent. some of these other names are finding at least local bottoms, and Bitcoin’s also been showing some strength here from a, from a pretty oversold position.

[46:09] Stephan Livera: On the use of AI, I’m curious, if you’re looking at this, and some of this could be even on the personal side in terms of what we use or in terms of like analyzing what’s it gonna, what’s the impact gonna be on the economy, I’ll give you an interesting stat that I’ve seen, and you might have seen it, which is only about two or three percent of American households are paying for AI. So many of them might have used it for like a search thing, but isn’t that interesting? Like, are we maybe in an echo chamber where, let’s And agentic engineering and this, that, and the other, but the masses aren’t. So I’m curious, how do you see that? Is it just a, a similar, a typical thing of like technical, technical change preceding the social change?

[46:50] Lyn Alden: I, I do think so. I think, I mean, kind of like how the, a lot of the people that were in the dot com bubble, a lot of the kind of the people saying what the world’s gonna look like, were right. I mean, a lot of the, the, the expectations came true. They just came true at a

[47:06] Lyn Alden: And therefore, the prices they were willing to pay for certain things were premature, and some of the investments that were maybe seen as valuable actually had to be discounted over a longer period of time, and therefore, kind of broke their model. But then, over a given amount of time, the world caught up to what those kind of early adopters thought it would become. I think probably AI is similar, which is that, you know, people that are really in the space can kind of see where the puck is going, but, you know- House, you know, the way you do things doesn’t change overnight. you know, people– there’s like that stat, like people listen to the same music they liked in their teens and twenties, it kind of gets locked in for the rest of their life. And there’s a million other things people do that are just like that. the same is true for businesses. it, it takes a lot of time for, for processes to change, even as the options and the tools that, that are available do change more rapidly. and so right now, I mean, if

[48:00] Lyn Alden: they really, you know, AI is obviously pretty important to them, especially if it’s any sort of, just ag-again, you know, if they’re, if they’re competitive in any way and, and they’re, you know, they’re trying to be the kind of leading edge there. but I do think it’ll take time to work itself through businesses and through households in a more economically active way,

[48:21] Lyn Alden: and that there– and there’s still a ceiling for what AI can do. I mean, these, you know, the– these are, As, as kind of high as those limitations might be.

[48:34] Lyn Alden: And,

[48:35] Stephan Livera: what do you think about the whole, you know, the memes of, you know, the permanent underclass? Are we, are we, are, are, are people gonna be doomed to the permanent underclass if they don’t, you know, make it very soon?

[48:49] Lyn Alden: I think the short answer is no. I think while this can bifurcate society to some degree, it’s less about class and it’s more about ability, which is to say, in some ways, it’s never been easier to, to, to change your, your status because it would get increasingly cheap to, to deploy bots and, and do things like that that really extend your reach. a lot of the gatekeeping that, that previously existed is down now. and, and I think the, the biggest hurdle That it’s just so crowded. I mean, these tools are widely available. Obviously, if you, if you’re the owner of a semiconductor foundry, you’re, I mean, you’re, you’re, you know, that’s if there’s a new countdown effect, it’s, can you print semiconductors? and, and do you have the power to run them and all that and, and all that. But, in terms of just, I, I think it’s the powerful thing here is that in the 2010s, when we saw kind of Obviously people were empowered. I mean, I, I certainly enjoyed having access to social media. It’s been, it’s, it’s done a lot for my business, but it also came with a lot of negative effects for society. people glued to their phones and all that and, and,

[50:01] Lyn Alden: you know, I don’t have to reiterate all, all the issues there. the thing about AI is that it, because there’s lower switching costs, I think a lot of the benefits of the long term actually accrue to those using it.

[50:16] Lyn Alden: you know For the foreseeable future, it’s hard to maintain a moat there,

[50:22] Lyn Alden: and I, I, any sort of small business can just substantially reduce its, its kind of back end expenses, and focus hopefully more on the things they actually wanna focus on, and so I, I, I think that there’s, there’s obviously any sort of, anytime there’s rapid change, there’s a lot to adapt to,

[50:38] Lyn Alden: and maybe we see a shift, slightly away from white collar work toward more real world work and building things. because robots are just inherently harder than software bots, because you have all the software components plus the real world materials, the real world functionality, the real world edge cases, everything material is harder. so I think there’s a lot of room to, you know, either whether you work in information work or physical work, it’s more about are you using the tools or, or not, and are you capable of using the tools?

[51:07] Stephan Livera: And lastly, let’s talk about orange juice. So this is a new, venture that you, you have been talking about recently, so give, listeners an overview there. What are you, what are you trying to achieve there?

[51:20] Lyn Alden: A good question. We are, we started a company called Orange Juice, which will seek to buy small and medium, cash-flowing businesses. and then unlike private equity, which, you know, goes out, buys businesses generally speaking, makes rapid cuts, usually leverages them up and then flips them, gets out, often with a statistically high rate of failure going forward because you have a hollowed out company. instead, we intend to hold indefinitely, the companies that we buy, and we’ll have this foundation, hopefully of a, of a, you know, diversified set of cash flows, and then, because we believe Bitcoin is sound money and is likely to appreciate over time, we intend to, to have a Bitcoin treasury attached to that, kind of, you know, more private equity type of company. and so you, one of the big criticisms of, of kind of Bitcoin treasury companies is that at least a lot of the pure plays, and I think there’s a role for them, but the kind of the criticism of, of their detractors is that, they’re very reliant on the appreciation of Bitcoin price. They often don’t have cash flows that can meet their interest expense.

[52:26] Lyn Alden: whereas the way we intend to structure this is that any interest expense we Cash flows of companies that have nothing to do with Bitcoin, and that, we accumulate more Bitcoin into our treasury. And if anything, over the past, I mean, since, since the first company came out and put ba- Bitcoin on its balance sheet, I’ve been hoping to see, companies that just have profits that has nothing to do with Bitcoin, decide to stick it into, you know, at least some of their assets into Bitcoin for as, as, you know, kind of a long-term appreciating, appreciating asset. Haven’t seen a ton of that,

[53:03] Lyn Alden: Even for, for business sellers, we talked about demographics earlier, there are, there are trillions of estimated value of small to medium private businesses, owners looking for liquidity that for a variety of reasons might not want to see their company chopped up, you know, might even want to continue working on it as they manage to unlock liquidity from it, and, you know, we think there’s an opportunity in permanent capital vehicles to, to, you know, kind of meet them where they are. Interesting.

[53:30] Stephan Livera: So in a way, you’re sort of trying to, trying to- I guess lead by example and show people that you, you know, you can, more and more companies can adopt Bitcoin as their, let’s say, their savings asset. Now, as I understand, you mentioned leverage, but I presume what you mean there is like, you may lever, you may take fiat loans to buy other small businesses, small to medium businesses, and just stack Bitcoin with your profits is kind of the idea, as opposed to the take out fiat loans to buy more Bitcoin strategy or style.

[54:01] Lyn Alden: Exactly, yes. Yeah, I mean, we’ll have, we’ll have obviously, physical assets, you know, that are associated with the companies themselves. we’ll have, you know, financial assets, cash and Bitcoin. and then, you know, we intend to have leverage, but it’s, it’s, it’s, you know, it’s, it’s backed up by the operational cash flows of those businesses rather than just tied to the, to the Bitcoin treasury. and so when most companies spin out of private equity, they enter the market in a

[54:31] Lyn Alden: Business does, they don’t have a lot of financial assets, you know, their, their, their balance sheet’s been stripped. They often have leverage, they have a lot of debt, and so they’re often in a situation where if the slightest thing goes wrong, they fail. That’s why post PE businesses have higher average failure rates than, than average. and instead we’ll have a bunch of companies, hopefully, that, you know, earn, earn operating cash flows, and at the parent company level, we also have a Bitcoin treasury, so we have more financial assets than

[55:01] Lyn Alden: To, to back up the companies and to accumulate, you know, so we’re, we’re, you know, we’re structurally short fiat currency in a, in a conservative way and structurally long Bitcoin over time and backed, you know, with any sort of interest expense, backed up by operating cash flows.

[55:17] Stephan Livera: Yeah. And then in terms of who’s going to be primarily involved, I know, Nico from, Nico Letuga, it sounds like he’s gonna be really involved. Are you gonna be like actively involved or are you sort of more at a passive level for this

[55:31] Stephan Livera: What specific role going to be here with Orange Juice?

[55:34] Lyn Alden: Yeah, so I’m a partner, and a co-founder. so the way we’ve structured it, so, so the four partners that work at Eagle North Capital, including myself, are part of this. We also brought in, Adrian, Steckel and Ruben. so there’s six, kind of founding partners of the, of Orange Juice. our– the, the most kind of full-time operating partner is Ruben. You know, he’s running the day-to-day

[56:01] Lyn Alden: you know, after that, you know, he got a, he got a degree in Oxford, he’s been working in finance for a number of years, mo-most recently was a CIO of a, of a very large multi-family office, doing some deals that are much like what we’re seeking to do. and so, you know, he’ll, he’ll be running the day-to-day operations. The rest of us as, you know, founding partners, will not be taking any, salaries,

[56:26] Lyn Alden: but we

[56:29] Lyn Alden: are part We’re running all the legal backends, we’re, we’re, you know, running the kind of the operations of the business, and then most importantly, when it comes to making acquisitions, all of us will be on the investment committee for that, as well as governing high-level decisions, you know, with the board and in the advisor groups and in this investment committee, for how the companies run, how much, you know, how much leverage we have, what companies we’re buying, you know, how, how do we respond to

[57:02] Lyn Alden: it’s, you know, it’s, it’s a, it’s a structure that we think is, i-it’s a somewhat new way of doing things, but we think, this is an attractive way to kind of bring this opportunity to the market. Yeah. And just to be

[57:10] Stephan Livera: clear, this is a private company, but you are accepting outside investors, like accredited investors?

[57:17] Lyn Alden: Yes, it’s a private, company. it’s not a fund, that’s what makes it different than private equity. So private equity, you know, you have a ten year fund life, realistically speaking, within a, a three to seven year period, they’re looking to buy a company, kind of gut it, leverage it, flip it for a higher multiple, give the money back to, to investors. this is a permanent capital vehicle, so, aka a company, you know, like a mini, mini, tiny little version of say Berkshire We, owned at the current time, available for credit investors. We have a publicly stated intention to eventually go public. obviously you have to, you know, meet certain requirements and get to a certain size where that, that becomes relevant, but that is our longer term, aspiration.

[58:02] Stephan Livera: Gotcha. And then I guess the other one would just be, when you’re going out to acquire some of these smaller, medium to, medium-sized businesses, you re- you will really need people who have experience in that sector, right? Because if you sort of end up buying things in

[58:17] Stephan Livera: You know, not knowing what you’re doing or getting ripped off or not knowing the kind of where the traps are in that industry. So what’s the plan around that? Is it just to kind of have advisors for that or to kind of hire an operator from that industry or what’s the plan there?

[58:29] Lyn Alden: Great question. I mean, so one of the best case scenarios is that the existing operators keep running their business, because not everyone who’s seeking to sell a business wants to stop doing what they’re doing. so a lot of people, have a lot of capital tied up in a, in a liquid business, you know, they maybe they wanna pass on money to their kids, maybe they wanna diversify, maybe they, you wanna de-risk, maybe they wanna buy more Bitcoin ’cause we’re initially targeting business owners that just happen to see the value in Bitcoin. And so

[58:59] Lyn Alden: We, we think, business owners will like is that, you know, w-while we can buy a business in cash, we can also buy a business in a combination of cash and/or intrust equity, and so the founder can partially con-continue with the upside, of their business and this diversified set and we can structure things to, to keep a, a founder there, for a number of years, where, and this is, you know, that they can keep working at it and keep, you know, kind of contributing to what they built, just in a de-risked and more liquid way. And then, yeah, over time, we, you know, we would, we would line up a deep, a bench to make sure that even when the founders leave, you know, either from within that s-i-in that subsidiary or outside, Operators, we can hire people. And if you have this kind of larger parent structure, it’s, it’s easier to go out and get talent. you know, it’s, it’s hard for a, a single small business to, to maybe hire someone at times, whereas if you have this kind of larger structure And, you know, kind of a, you know, large social media reach and, and kind of just bigger aspirations, you can bring people on, a-and kind of put out, you know, put out calls for resumes and say, “Here’s something we, we, we need run, over time.”

[1:00:09] Stephan Livera: Fantastic, well, a lot of interesting insights. Thank you for joining me today, Lyn. Listeners, go and check out Lyn’s, research over at lynalden dot com. I recommend subscribing, it’s great research, both the free stuff and the premium stuff, and of course, follow Lyn online at lynalden on X. Lyn, thanks for joining me today.

[1:00:26] Lyn Alden: Thanks for having me, happy to be here.