Krzysztof’s back from Europe, but he brought COVID with him — is his pink Care Bears hat an essential part of the recuperative process?
Luke commends Krzysztof’s bet against corporate real estate and regional banks (puts on $KRE!), and shares some data that supports the doom thesis.
Is thorough research essential in identifying investment opportunities, or is it sufficient to take deep abdominal breaths and visualise winning? (Hint – if you have a fool as a counterparty, you’re on the right side of the trade)
We also make a new bet: $EOSE vs $AXON in two years’ time. Krzysztof backs EOS for its high potential gains, while Luke supports Axon’s steady growth and innovations in making the world a safer place. We need *your help* in deciding the stakes! Please send us your suggestions on X or leave a comment on YouTube!
To close the episode, Krzysztof dives into the state of Bitcoin and crypto, advocating a thoughtful approach to investing in this volatile market and the need to define crypto accurately, avoiding lumping legitimate projects with casino gambling. How should investors without $BTC start their journey today?
Segments:
[00:00:00] Introduction
[00:05:22] Betting Against Corporate Real-Estate
[00:12:24] Why There Is Alpha
[00:16:47] EOS vs AXON Bet
[00:26:08] What’s Happening with Bitcoin?
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WSW E35
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[00:00:00] Introduction
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Woo, woo, woo, woo.
Luke: Hey, and welcome to the latest episode of Wall Street Wildlife. We’ve got a doozy of an episode for you this week, albeit my buddy Christoph has returned from Europe with COVID. We’ll come back to that in a sec, but in today’s episode, we’re going to reflect on what’s happening to regional banks and why Christoph’s short position in KRE.
Might be one of his best investments of the decade. we have placed a bet. we’re both picked a couple of our favorite stocks. We’re going to talk about those stocks and we’ve got a two year bet on whose investment performs the best. And. Christoph, Bitcoin is having a bit of a dooms month, and I’m wondering whether it’s time for me to jump on board and buy some BTC.
So you’re going to get an update on the world of crypto. What’s happening there.
Krzysztof: Wow, oh my god, I leave you alone for a couple days and you’re coming around to finally finding your senses. So, it’s lovely to be back on this side of the pond, not really, cause I feel like absolute death. So, esteemed listeners, forgive me. I just got the COVID bug last night. So, um, underslept, completely feverish, and I feel dumb.
So we’re going to rely on Badger’s charms today to get
Luke: if you’re on the YouTube, so you can see Christoph’s got his, uh, warm pink care bears hat on. So I’m hoping that’s keeping your brain warm and fuzzy and COVID proof. Certainly better for you than injecting ivermectin or whatever your ex president suggested.
Krzysztof: Oh man. Uh, you know, as far as the life goes, it’s, it’s like. We take health for granted. So God, it’s just not till you feel like death that you’re like, Oh, I should have been appreciative of how it felt not to feel like that anyhow. badger, we have a working internet connection again, which is nice.
Thank you for your patience dealing with my small town, Sicily, internet tubes. It’s lovely to see you again while recording. I realized you and your peoples have had a pretty big election with a pretty, uh, what surprising outcome. Can you tell us a bit about that?
Luke: I’m pretty unsurprising, but satisfying to see it across the line. So yes, our sort of center left party, the labor party led by a guy called Keir Starmer took power on the 4th of July, Independence Day. And it’s not like the US where you have like an election and you got, Months of transition and BS, the vote happened on the 4th, the vote result was confirmed on the 5th morning by lunchtime, King Charles has approved the transition of power and Keir takes over that same day.
So he’s now a PM. those of us in the UK who, like myself, voted Labour, are very pleased that we have a change of government.
Krzysztof: I know this ours is in the political podcast and I don’t want to put you on the spot exactly. Um, so, um, the, the only question I have is like, when there’s, it seems like the surprise here was that there was a The extent of the wind was much greater than expected. What, what is it on your soil that’s, that, that’s happened that kind of led to this real pushback?
I
Luke: but mostly Just an absolutely shambolic outgoing government, uh, with multiple changes of leadership. Like we’ve had multiple PMs and the electorate haven’t had a chance to opine on that since Boris Johnson got voted in, and then removed. so, yeah, I think the country’s just tired of mismanagement under the previous government, which is why it was such an overwhelming majority, but it’s good.
I think, and I haven’t followed the news too closely, but, a. Center left party has just won the French election yesterday, I believe, and, you know, and both, both France and UK actually have relatively young leaders. So you’ve got the new world, America, with your gerontocracy. And like, Looking like you’re going to be heading further to the right, but the old world has got young leadership and, uh, a bit more left of center.
Actually, I think that feels, I’m happy being this side of the Atlantic.
Krzysztof: yeah, well, meanwhile, here in the U. S. it’s a complete insane asylum. So to be determined, but, um, as far as the markets go, it’s really unclear, not only what’s going to unfold, but how the markets will react. And one thing I do know is they, markets don’t like uncertainty. And the fact that we don’t really know whether Joe Biden will be the Democratic candidate at this point is, is quite, um, it’s, it’s a situation I don’t, I’m not familiar.
I’ve encountered before in my young life. So anyway, there’s the politics corner.
Luke: actually, I will say, I’ve got a bet on my betting app, Biden isn’t the Democrat nominee. I’m backing a number of other candidates for November. but you also in your investment portfolio have a bet against, corporate real estate and what the regional banks, you’ve, you’ve got a short position in KRE,
what is it like an index of regional banks?
[00:05:22] Betting Against Corporate Real-Estate
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Krzysztof: That’s right. Yeah.
Every so often when I feel I have compelling evidence that there is a systemic problem, then it’s possible to find something like an index that correlates to that particular uh, issue. And what I was seeing some time ago was this massive devaluation of commercial real estate in part because of COVID.
And then like, if you go, if you walk around a mall, say in the United States, they’re mostly empty. And so all of those properties are on a bank’s balance sheet. one of the problems is that when Something like that loses value. Banks can manipulate what the balance sheet shows versus what the real value is in the world.
So to me, it felt like a ticking bomb that at some point you could kind of kick the can down the road, but at some point the balance sheet has to be updated and when that happens and you have to write down hundreds of millions of dollars, that’s going to be very bad for. Some smaller banks enough to wipe them out in mind.
And remember, this is like only a year later from Silicon Valley banks explosion. On top of that, there’s all the stuff about bonds. Remember that as yields go up, bond prices drop, and for a good while, many of these smaller banks were buying bonds, so that’s another category in which the bond values on their balance sheets is quite low compared to the actual value.
And so at some point, yeah, again, uh, these two things together, I thought would be, would spell trouble.
Luke: well, I think you’re right. I think I agree with that at the time. when you built that into your king of the jungle portfolio, and it looks like data is on your side. So we’re a couple of quarters into your bet now, and I saw a piece from Professor Rebel Cole a professor of finance at Florida Atlantic University.
So he ran a screener across several thousand U. S. banks and he’s seeing significant levels of unrealized losses. So, um, so what does this mean? essentially unrealized losses, but like when you got your investment portfolio, maybe you buy a stock, the value of the stock goes down, but it’s kind of a paper loss until you actually sell the stock.
And if you’re a bank, you’ve got a bunch of assets on your balance sheet. and you don’t have to recognize those losses day by day. You kind of mark to market at certain events and. Like these, these banks, several thousand banks are now carrying very significant levels of unrealized losses up to like 50 percent of their tier one capital in some cases.
so that’s kind of ugly. And if they did have to mark to market, they might find themselves, like exceeding. their capital requirements, uh, which could either result in like regulatory censure, massive fines, being forced to raise more capital or, you know, back out, sell their assets and back out that book.
or might even result in some of these banks being shut down. one notable on that list was Bank of America, Global Bank. evidently they have unbooked equating to 58 percent of their equity. It’s a pretty big number. Obviously, a Bank of America is not going to go down because of something like this, because they generate significant revenues worldwide, not just in the US, not just from commercial real estate.
but it could still be very painful for even a global bank like that, that has significant exposure. So yeah, I think you’ve got a good bet there. I’m not going to jump on it with you. I feel like I’ve missed the boat a little bit, But let’s see how that one plays out.
Krzysztof: Well, that’s not true. So, you know, king of the jungle portfolio is one thing. But I think to our listeners, I would recommend considering a bet against KRE. So the way you would do it is you would buy puts. And if you have questions about that, ask us on X or YouTube. But you would buy puts on some far dated, uh, so you want to give yourself as much time as possible.
So certainly January at the earliest and then maybe into next year. And that kind of acts, as a hedge, you know, it’s no different than buying insurance for your house. That if the market is pretty lofty priced and you buy this quote, quote insurance, then if these regional banks explode to whatever degree.
You will, of course, that’s going to have systemic repercussions. Stocks are going to go down. However many percent it’s going to be pretty red and bloody, but you would profit from that position. So I think of it as a actually risk management. conservative approach, with the mindset, I’d add that you sort of, with something like this, you sort of expect to not make money because like you, when you buy insurance, right, you, you kind of hope your house doesn’t lose its roof and you’re happy to lose that money, but you get a house.
so I would not say it’s too late to, for, you know, normal portfolio balance, risk management to add some KRE puts. at this point.
Luke: Yep, fair enough. But do take using derivatives with caution, not something to jump in too lightly. you can essentially reduce volatility by buying puts in certain situations. You can also blow your portfolio up if you kind of cock up the way you structure some of those positions. So, um, step, cautiously fair investors if you’re moving into that world.
Krzysztof: Yeah. Though, in this case, uh, derivatives have different levels of danger because there are, there are many different vehicles. The one I’m talking about here is actually relatively simple and not dangerous in the following sense, like insurance policy. Let’s say you have a portfolio of just for easy numbers, uh, 10, 000.
And you say to yourself, I want 1 percent of that to be insurance. You do the math. You say, what, what is 1 percent of 10, 000? I think it’s a hundred dollars. Is that right? Right. And then you would take that hundred dollars and you would buy a hundred dollars worth of puts, and you can’t lose more than that amount.
So if regional banks don’t explode, your puts will go to zero, but you’ve only lost a hundred. That’s very different than some other situations where you could really like badger was saying, lose your pants. So this particular version is, can be quite controlled.
Luke: But you still need to do your homework. You need to know which put to buy, at what strike price, at what maturity date. Um, it’s not as simple as, oh just, I’ll throw 100 at that and see what happens.
Krzysztof: Yeah. So if anyone has questions about my particular KRE puts, feel free to ask,
Luke: Yeah, and it’s probably a good opportunity to plug our Twitters. You can ask Christophe that question on X.
He is at seven flying platypus, and I’m at seven Luke Hallard.
[00:12:24] Why There Is Alpha
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Luke: And if you tweet me or X me this week, uh, I’ll be mostly laughing about a tweet I saw, relating to why there is alpha. I don’t know if you saw this, I, uh, I gave it a like.
I saw a, uh, a quite amusing tweet from a guy called Bouncy chill ups saying grown men will literally try to do this instead of reading the filings. This is why there is alpha. So what’s he referring to? He’s referring to, uh, a thought piece from Capital Flows. Actually, no, not quite from Capital Flows.
Capital Flows quoted someone called PTJ. I’ve got no idea who that person is, but clearly an imbecile. Um, and, uh, what did PTJ have to say? I’ve just, I’ll quote an extract from this. Five times a day on each and every trading day, I will break from the momentum of the moment and take control of all trading situations by reestablishing my vision, my game plan, and my invincible psychology.
I will enter my power room, drink fresh water, take three deep abdominal breaths. And take the following five steps,
I’m going to abridge his five steps, but two of the most amusing were separate the forest from the trees. your sentiment. If it looks bad, buy it. If it looks good, sell it. Uh, and here’s another, uh, visualize the numbers, visualize achieving 12 plus consecutive winning months.
the growth and the excitement of your net asset value growing. There you go. Abdominal breaths, fresh water and visualization. And I don’t know what, sell the good stuff and buy the bad stuff.
Krzysztof: yeah,
Luke: That’s it. That’s the, that’s the route to success.
Krzysztof: it, it seems like that’s what the method I’ve been following for our king of the junk portfolio challenge, and it might explain the results I’ve been getting so far.
Luke: not visualizing hard enough for stuff,
but the, uh, the source tweet there, I think is a good reminder. Like we, on this podcast, we do talk a lot about The importance of managing your emotions and not doing it, like how letting FOMO fear dictate the way you manage your portfolio. And that’s really, really important, but that assumes you actually do the work as well.
You can’t just manage your emotions and be a successful investor. It’s a crucial component, but you have to. Like listen to the earnings calls, read the 10 Ks, look at other researchers analysis, maybe subscribed to a number of stock recommendation services. Like you’ve got to pull in your data from everywhere so you can make an informed decision.
And after all that, like manage your emotions and for heaven’s sake, don’t sell your great stocks and buy the. Dross. That’s just a route to madness.
Krzysztof: this whole notion of alpha, it’s so fascinating to me. It goes to, you know, efficient market, inefficient market. We’ve been doing this for so long. And, you know, it’s a complex thing, but I think in the end, there is so much data that could sometimes be overwhelming and more is sometimes not more, but I continue to find over and over and over again, there’s always some investment opportunity out there that if you, through your, you know, being open minded and exploring the world and reading If you sniff your way towards some corner, there’s some opportunity that others have not yet discovered.
And then as, if you do what Luke was saying, if you then kind of hunker down and learn more about that particular company or sector, it’s astonishing. You’ll still find, that you’re early to the party, that in, you know, the world hasn’t caught on and there’s alpha to be made. Meaning like there’s still that gap between perceived value and actual value.
so. I’m a firm believer that, it’s been this way, is this way, and will be this way.
Luke: there are two sides to every trade when you’re buying, someone is selling, and when you’re selling, someone is buying and that creates the market. and so if you can consistently make. Well, you know, even consistently, if more than say 60 percent of the time you can make better decisions than your counterparty, well, you’re going to make money in the long run and making better decisions for me is founded on just doing the hard work
[00:16:47] EOS vs AXON
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Krzysztof: Alright, speaking of hard work, we have a new bet. this was, when we were pitching our best buys. for seven investing. I nominated my Phoenix back from the dead company EOS. And it was, it was, uh, voted last place by every advisor, Except for me. And, and by the way, I’m not biased.
I’m capable of not voting for my own company. I’ve done that plenty of times, but in this case, I know what I’m talking about. So I voted that it’ll, it should be the selection. Meanwhile, badger over here, Nominated axon. And I cheekily said, let’s make a bet in two years time, two years, not. So this is the same.
Two years is, is not just like. We’re not exactly flipping the coin. I said that from whatever prices were back then. Some weeks ago now that two years from then EOS will be the better investment to which badger. If you’re watching this on YouTube did make all kinds of, very strange noises in facial expressions. And So two things. I think I’d like to talk about why we’re doing another bet and why each of us are confident in our own horse in this race. And then what the stakes ought to be. So why, why do you think that Axon will provide more gains in two years time than EOS?
Luke: the rising need for public safety. and the incredible efficiencies that Axon brings to police departments all around the world, but predominantly in North America today. like the police ain’t going away, right? I know there was that defund of the police, uh, movement like a year ago, um, which is just nonsense.
the police are required and unfortunately, if you’re a police officer, it’s just an incredibly inefficient job. That’s like, Loaded down with paperwork and administration with complexity. and, uh, it’s a hard job to do. Axon has an incredible software platform and incredible set of hardware that not only makes your job materially easier and with some of the latest capabilities, something called draft one, taking 30 to 40 percent of the admin out of every day of the average police officer in a limited trial where they’re starting to roll this new capability out.
Um, it also makes everything more transparent with lots of, body camera, fleet camera, drone camera footage integrated into evidence. com to allow the police to very quickly assess what’s happening, manage incidents more effectively and more safely, and then also deliver prosecutions more cleanly because it’s easier to get evidence into the hands of the court system. I just think this is win, win, win, plus the company’s branching out into, body cameras to frontline retail workers and restaurant workers, plus like 20 other very small acquisitions that I think are additive and expanding the TAM.
It’s an expensive stock, for the purposes of the bet, we’ve baselined Axon’s market cap at 22. 08 billion. But yeah, I see this as being a reliable, slow, steady growth stock as it expands internationally for the next two years and probably for the next 20 years.
Krzysztof: So what I, what I think of when making a bet like this is, um, is the difference between a great company and a great stock. And this is why I think I have the edge for this particular bet because I buy everything that you said. And where the bet, well, I can’t even say that because I really, uh, I’m really optimistic about yields.
But like in general, I would say if the bet would say something like 10 years, then maybe you might have the edge because this is a world class company that. I think will continue to dominate. and I would obviously sleep at night better owning it, but like you said, it’s already, as of today, it’s a 23 billion company and it’s quite expensive. So if I’m looking at, let’s say in two years time, Like even a great return, let’s say 40% in two years or 50%, that’s another, whatever the math is, $10 billion on the market cap. Of course possible though I don’t know, the, the, I don’t know the market dynamics for, for this stuff as well as you do. Whereas when I look at eos, uh, when we made the bet, EOS was a dollar 27. So. Now it’s gone up quite a bit too. It’s close to, so I don’t know what the market cap was at a dollar 27. It’s 2, 3 cents now at about 430 million. So that’s still size wise, approximately 40 times smaller.
then the axon and for me the big twist turn in the story is the greatest risk face it that the company was facing is now off the table and there’s been a lot of back and forth between Financial experts people who are you know, reading the legal fine print of this deal basically the financing deal and there’s been, um, ambivalent takes on it.
There’s a lot of folks saying, yeah, there’s a lot of dilution milestone payments. And if EOS doesn’t execute as well, the company’s going to get diluted and that won’t be great. And there’s a lot of financial experts saying this is a great deal for EOS, for all kinds of reasons, even with the dilution.
Because as long as. The batteries are made when you add on top, um, the DOE tax credits, the capital efficiency with which EOS will be making money, the dilution is just really will be a drop in the bucket. So to be determined, but all the, for me, all the pieces of the puzzle are fitting together, and this includes data, the need for data storage and increased AI energy, and it’s just like, to me, this, singular moment where you could invest in the company with seemingly, I don’t want to say infinite TAM, but like, they can’t make these batteries fast enough.
And now they start to make them. So I don’t love the company in the sense of, I don’t think it’s as secure for all these complicated financial reasons as Axon, but from 430 market cap, I could see hundreds of percent gains in two years. I can’t see that for Axon. No matter how well they perform,
Luke: Yeah, I agree. And you were kind enough to say nice things about Axon. I, I can’t bring myself to do the same thing. I’m actually going to go the other way. And, uh, I’m whatever we determine is the stake. I’m going to make an additional side bet with you. they’ll have been, acquired forcibly by Cerberus who put the, uh, the financing deal in place. But this company’s, I hope this doesn’t happen for you, the good of your portfolio, because I know you have a lot of personal exposure to EOS, but, uh, yeah, like I hope you don’t have to sell that whiskey collection behind you.
That fine whiskey collection to pay the mortgage.
Krzysztof: I think you need to if you’re interested, Luke, because you know, one of the reasons we do this is well, one of the benefits of this podcast is we exchange ideas, and I’m fully sold on the Exxon. I’m waiting to add it to my portfolio, but I would highly encourage you to maybe go, go on X and read some of the commentary about the, the cerebus deal and you’ll see people both doing what you’re doing disparaging it and also saying it’s quite a good deal and make up your own mind.
Um, I think it’s from where I’m standing. Um, I couldn’t be more enthused.
Luke: I’ve heard this story before, it didn’t play out well, Christoph. I got my fingers crossed for you, buddy.
Krzysztof: It did not. So this is a legitimate potential of a phoenix coming back from the dead. but the better question, maybe the most interesting question is we don’t know what the stakes of this bet should be. We already have, uh, a dinner planned in, I believe, November based on the first lap of the king of the jungle portfolio in which I’m still trailing by about 400, uh, with, with some months to go, but for this one, What should the, the winner should get what, or the loser should have to do what?
If you’re listening to this, send us a message on the YouTubes or on X. and tell us what you think the consequences of badger being wrong about this ought to be.
Luke: look forward to hearing what you will have to do come two years time, or maybe sooner if EOS throw in the towel.
Krzysztof: Are you, are you at all, uh, terrified that I’m already winning by whatever, 80 percent or something?
Luke: No, not remotely.
Krzysztof: Oh my god. can’t believe you’re trying to kill me when I’m on death’s door. Okay, uh,
Luke: Okay. That’s a, that’s so, tell us, what the wages should be. We look forward to your feedbacks. , but before we get there, we’ve got one more headline topic for today, which is, uh, Bitcoin.
[00:26:08] What’s Happening with Bitcoin?
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Luke: It seems to be in a bit of a price slump as I guess our most cryptocurrencies once again. Christoph, as our resident crypto and crypto mining bull, could you battle through the COVIDs and tell us why you think that might be the case? And this is a loaded question because I’ve had on my investment to do list buy BTC for a little while, so I’m hoping you will help me make that decision.
Night.
Krzysztof: there’s so much, there’s always so much to say around crypto in the first place. I want to start is. The name itself, crypto, I think is one of the big problems because it’s a huge, gigantic general name in under that is are so many different kinds of call it securities slash tokens slash digital coins that unless you’re specific about what you’re talking about, you’re probably going to make a mistake by talking about crypto in general.
So for me, I kind of think about three different categories. One is Bitcoin, which is its own thing. Uh, and what pertains to Bitcoin does not pertain necessarily to the other two categories to there’s what I consider right now, the majority of crypto projects. Which are, I’m sorry to be so dismissive, mostly casino, grifting, meme, momentum, garbage.
And that’s the majority of it, and that’s what gets pumped and dumped and, I mean, it’s still kind of the wild west. Um, and people, you know, take to it because, like at the casino, you could go on a good run, get lucky and make big money, but, you know, And then there’s category three in which I’m invested in, which is looking at crypto as a technology, which is, helping to bring finance into the modern world by bringing it on top of blockchains.
And so quick segue, Badger, to what we were talking about with the bank crisis. I’ve said this before, but the project I’m most excited about is Chainlink and they’re trying to create a protocol basically, which is they’re working with all of the world’s biggest financial institutions saying. We will help you bring all your assets to the table.
onto blockchain. Why does that matter? Because essentially, for simplicity sake, blockchain is without allows full transparency for everybody. And with full transparency comes speed of transactions. And I mean, all of it’s like a series of dominoes. When you know what somebody is holding because it’s mathematically verified, then all of these games that happen with financial crises, including the ones we were talking about, right?
Banks being black boxes and playing financial games with their balance sheets and whatnot, that all kind of goes away with blockchain. I want to read, uh, a quote from somebody that I greatly admire. On the, on the X. His name is Zach Rines. He goes by the name Chainlink God, and he is, by the way, One of the most thorough and well researched guy in the whole crypto space and I don’t say this lightly, you know, like, this is a little bit of the rhetorical thing, you know, when someone’s shilling stuff, and when someone actually knows what they’re talking about, and the way they write is call it for lack of better words, serious and consistent and doesn’t, you know, fall off into the gibberish.
Zach Rines is one of these guys. I mean, he just provides. Tremendous alpha to, to the space. So here’s what he wrote around crypto as a topic, on the eve of many elections, uh, he wrote
tokens are effectively protocol equity, their values tied to being a claim on future positive cash flows. So pause.
I mean, all that means is that, you know, in the stock market, when you buy a share, you’re buying a piece of the company in crypto. If I, when I own a piece of chain link, I have. like a share of their future equity based on the projects they bring in. So it’s kind of like pretty one to one analogy. He goes on to say, unfortunately, regulatory uncertainty attacks against crypto have pushed the industry off course into financial nihilism.
Why launch a real protocol attempting to solve a real problem when the risk of regulators destroying everything you built is so high. Just launch a meme coin and cash out. Why buy tokens of real protocols who are solving real problems when adoption is curbed, as regulators don’t let institutions touch crypto, just gamble on meme coin lottery tickets and cash out.
This is the financial nihilism that’s plagued crypto. The crypto industry today is a shell of what it can and will be, and the void has been filled by grifts and scams and sentiment reflects this. What’s ultimately needed is a regime change at the highest level And when the shift happens, it’ll happen quick.
Let’s see what the election brings. And that’s at chainlinkgod if you want to follow him.
So here’s why I’m optimistic, Luke, about the space. I know from following the Bitcoin story, the latest Bitcoin ETFs and Ethereum ETFs, when you have a guy, like, uh, sorry, I don’t know if it’s CovidBrain or I just can’t remember, the CEO of BlackRock, uh, Fink, Whatever his name is, Publicly, guys like him have already been on the record saying we want to tokenize all of our assets and bring them on blockchain. You don’t have guys like that coming out and saying that. So to me, you know, without being serious. So what I see is right now we have this moment where eventually, if you, if you watch the wire, you realize just follow the money and you’ll get to the end result.
And in this case. The guys controlling all of the money in the world, all of these assets, want their assets to go into blockchain. It’s not a matter of if it’s a matter of when and when you have money, you’re going to somehow find a way to finagle the regulations so that they’re on your side.
And when that happens, there’s going to be this, you know, I think shift in perception. Um, but right now, yes, the regulated, the regulations are the big problem, but it’s a matter of time. So maybe having with that as a prelude, uh, can you ask me your question again? And, or maybe reflect on what I just said and see if that, anything I said helped answer what you’re asking about.
Luke: Yeah, I, uh, I don’t know if there is a question specifically or if there is, it’s like a really simple one, like, duh, should I buy Bitcoin? well, so crypto seems to be in a bit of a temporary slump and obviously it’s incredibly volatile space. Stuff goes up, stuff goes down sometimes for no reasons beyond just kind of sentiment.
Do you have a sense as to why, Bitcoin, let’s say, has declined over the last two or three months?
Krzysztof: too complicated for me to answer with any certainty. You had this massive regulatory shift allowing huge funds to now buy Bitcoin, then it had a big run, and anytime you have big institutions profiting, there’s something called window dressing, and it’s completely within the realm of plausibility that some of these big shifts are just big money selling. Locking in their numbers, waiting for a dip and buying back in, who the hell knows what I would, I would reframe the question in a different way. That timeframe that you’re talking about is just two to three months, right? That’s a short window. If you zoom out basically, you know, from its history. So let’s call it in 2016. So like eight years. The line is, is I think it’s the best returning asset class of the last decade. So ignore the volatility, I would say, and approach the question a little more philosophically.
What does Bitcoin represent and do you want to own what it represents? And to me, it’s, the answer is it’s a better form of gold. And when we have this really, you know, severe political upheaval We have huge debt loads, uh, across the world, you know, all kinds of instabilities. Having some portion of your portfolio be allocated to, forget the price, something that represents gold, the future of gold.
I think that’s a reasonable way to balance your portfolio’s risk.
Luke: Yep, okay, I agree. I’m not a crypto bull, I own some Ethereum, I’m probably gonna double my crypto stake and buy some Bitcoin to match.
Krzysztof: Yeah, I mean, uh, for anyone not, not named Luke, I would suggest doing things piecemeal. And so if you’re at all, let’s say you’re in Luke’s position and you’re, you know, you’re finally saying maybe, maybe, right. Why not just buy like 100 of it? So, you know, like take that tiny little first step and just say, okay, now I’m an owner of Bitcoin and then follow the story, read the headlines for a couple of months and just watch the, you know, new cycle and learn about it.
And then you’ll see, oh, right. This does make sense. So then you add another, you know, 500 bucks doesn’t have to be all at once.
Luke: Yeah, that makes sense. And that same, sort of buying incrementally as you do your work, that same logic applies to the stock market as well. Like, it can often be a inhibitor to feel like you have to do a ton of research to take a starting position in the company can be good to, can be good to just get a foot in the door with a starter position doing absolute bare minimal work on the assumption that you are then going to do the work.
And that work is then motivated by the fact that you have an existing position to be better quality than if you were just looking at something cold. I’ll often approach some stocks in that way.
Krzysztof: And, you know, I’ll say this too about something like to me, Bitcoin is a, is one of the most fascinating, call it philosophical slash there’s a lot more, a lot, lot more going on with this than, than, I mean, it takes you back to basic foundational monetary policy and what is money and how it all works. I’ve learned more.
I think about the way the world works by learning about Bitcoin than any other asset. And so for, if nothing else, to go back to what we were talking about earlier, you don’t get big returns, I think, without doing the work. And maybe the, most prominent reason I would recommend you take a small initial position is because it would encourage you to learn about this whole world that you might not know about.
And that’ll be a fascinating journey. I mean, it’s. Just stay away from the nut jobs. That’s there’s a, there’s a, there’s a lot of radicals, you know, cause it ties into politics too, so, you know, it gets pretty wonky.
Luke: Pretty good. Well, big episode today, Christophe. Despite your COVID, we had one of our most action packed 45 minute conversations. We covered everything from, like, banks to crypto to idiots to actually doing proper due diligence. And we got an extra bet in, which is always good. I love a gamble.
Krzysztof: That’s right. So one more time, please don’t ignore our plea and send us your suggestion for what the stakes of EOS versus Axon in 2026 should be and make it good because, uh, make it good, make it good. I feel I’m excited about it.
Luke: Uh, yeah, make him hurt, make him hurt come two years time. Once again, you can tweet us, on X. I’m at 7LukeHallard.
Krzysztof: I am at seven flying platypus. We’re also on wallstreetwildlife. com where we have a shiny PDF for you called all about the 10 laws of the investing jungle.
Luke: do leave us a comment on YouTube. That’s good. A nice place to, uh, tell us what you thought about this episode or if you’ve got any questions. also, we’d love a review on Twitter. Apple podcasts or a star rating on Spotify. They’re very helpful as we try and build our listenership. good stuff. Are you ready to become a beast of an investor?
Your journey starts here.
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