The Podcast of the Lotus Eaters - PREVIEW： Brokenomics ｜ MSTR

00:00:00.120 Hello, and welcome to Brokernomics. Now, in this episode, I wanted to talk about a very

00:00:05.280 interesting company which is potentially turning everything a bit upside down in the traditional

00:00:10.300 finance world by incorporating a bit of Bitcoin and doing it a bit cleverly. That company is

00:00:15.120 MicroStrategy, MSTR. I did actually record a video on this at the beginning of last week.

00:00:23.060 Normally, I record these on a Tuesday and they go out the following Tuesday. But basically,

00:00:27.420 by Friday, the story had moved on so much that I felt I kind of had to redo it. So this is my

00:00:33.820 second attempt at this video. And for that, you are getting me back in the bunker. I'm recording

00:00:40.780 from home again rather than the nice fancy studio. Now, I have had complaints that when I'm in the

00:00:45.960 bunker, I tend to be a bit low energy. Do apologize. That's probably true, probably more introspective

00:00:52.000 at home. And I will attempt to liven it up a little bit this time. It's obviously not ideal

00:00:59.620 doing it at home. Dog is barking. Children are making silly noises. Wife is probably going to

00:01:04.720 come through the door asking me to put money in the joint account or whatever comes next. But I will

00:01:08.060 attempt to pull off a decent video from home. I'm also going to do this one a little bit differently

00:01:13.980 in that I'm going to try and front load the front bit that goes on YouTube. I'm going to try and put

00:01:20.240 my summary points in there because this is the sort of thing that if it's got MSTL in the title,

00:01:26.220 people click on it who don't necessarily follow Brokernomics. You won't get the whole story when

00:01:31.840 I do that bit. So if you're a regular viewer to Brokernomics, the stuff that I'm going to say near

00:01:37.680 the start won't make an awful lot of sense. But then it will make sense when I explain it properly

00:01:42.320 later on. And normally I don't put any consideration whatsoever into what makes it into the YouTube

00:01:48.120 cut for the simple reason that you guys are great. It's lovely that you're watching. I appreciate

00:01:56.100 you. Fantastic. But you don't pay. And YouTube demonetizes us. And actually we're working for

00:02:01.800 our subscribers. It is only £5 a month on the website. It is worth it for Brokernomics alone,

00:02:08.640 let alone everything else you get on there. Not trying to toot my own horn here, but the lowest

00:02:14.400 performing thing that I've talked about in Brokernomics has gone up 3x. And this is up

00:02:19.960 more like 10x or something. And other stuff that I've talked about has done even better than that.

00:02:25.720 So if you are not a subscriber, well, that is an expensive mistake, isn't it? Not that I'm giving

00:02:30.320 financial advice. In fact, I am not giving any financial advice whatsoever. In fact, you should pay

00:02:36.360 no attention to me whatsoever and don't do anything I say with the exception of the thing that I just

00:02:42.360 said about not doing anything I say. Apart from that, ignore me entirely, not financial advice.

00:02:47.880 These are just my thoughts. But I have been thinking about this one a fair bit. So, you know,

00:02:54.040 make your mind up what you want to do with that. Right. Micro strategy. This is a company which is

00:03:02.760 leveraging the fiat systems debasement and weakness against itself by leveraging from soft money into

00:03:11.560 hard money. So Bitcoin. If you are not a believer in Bitcoin, well, you might as well stop watching

00:03:18.040 now, because if you don't believe in the fundamental layer of Bitcoin, then, well, none of this is going

00:03:25.160 to resonate for you. But if you do, it's worth watching. And effectively, what they're doing is

00:03:30.580 they, I mean, they have potentially found an infinite money glitch. And actually, they kind of

00:03:40.060 might. Now, that sounds a bit ridiculous. It sounds a bit like a perpetual motion machine. But when you

00:03:46.820 take into account that the supply of dollars, for example, or all fiat currencies is infinite,

00:03:52.380 and the supply of Bitcoin is very much not infinite, is very fixed. In fact, if anything,

00:04:01.060 it's declining because people keep losing their coins. A fixed supply of something expressed in

00:04:08.500 something infinitely kind of can be infinite. So, well, at least until it collapses. So, yes,

00:04:16.080 they might have actually found an infinite money glitch. This was fully explained in their Q4.

00:04:22.260 Their fourth quarter results. And I'd kind of got my head around what they were doing anyway,

00:04:29.680 by that point, because I've been holding this stock for about four years now, four and a bit years.

00:04:36.380 So, and I've been following it closely. It's the largest holding in my portfolio. So, I've been

00:04:40.260 following it quite closely. But it didn't truly click with me until I watched that quarter four. I put that

00:04:45.460 in the reading links as well on the platform. Anyway, I don't know if it makes it into the

00:04:49.320 YouTube. So, if you watch all of this and you think, okay, that's interesting. For heaven's

00:04:55.600 sakes, don't buy it because I talked about it. Because obviously, as we talked about, you should

00:04:59.260 just pay no attention to me whatsoever. But if you are thinking you want to learn more, go to the Q4.

00:05:05.040 That's an interesting place. The response has been kind of epic now that more people are kind of

00:05:12.100 getting their head around what this company is doing. And you might think, well, yes, you're

00:05:17.080 saying it's epic. But, you know, show me epic. Oh, I'll show you epic. And I have to pick a start

00:05:22.520 point for this. And so, the start point I'm going to pick is the day before Trump won the election.

00:05:27.660 I'm picking that because that was the moment that sentiment in crypto had already been improving

00:05:34.740 over the course of the year. And that's linked to liquidity, which I've talked about on Brokernomics

00:05:39.280 so many times before. Regular Brokernomics will know my viewers will know my... Well, my global

00:05:45.500 macro thesis is all built around that, basically, which I won't recap now. If you are a new viewer,

00:05:51.060 because you just found this video, go and watch the first Brokernomics, which I think is on YouTube,

00:05:56.440 but it's also on the platform. And that one is free. And that lays out what my macro thesis of

00:06:01.800 is based on, which basically every other episode of Brokernomics is then building on that thesis

00:06:10.220 until we get to actual stock, not non-recommendations. But yes, so let's say... So we're going to pick

00:06:18.240 the start point of before the Trump election. Let's say you're a reasonably comfortable middle-class

00:06:24.080 individual, and you can lay your hands on 100 grand. We're just doing dollars to avoid the conversion,

00:06:29.980 blah, blah, blah. So let's say you put $100,000 into MicroStrategy the day before Trump won.

00:06:36.840 What would your daily returns have looked like in this company, which lines up with sentiment change

00:06:43.940 plus the unveiling of the Q4 and people understanding this? Well, day after the election,

00:06:50.280 on your 100 grand, you would have made 13 grand. Day after that, you would have made 6 grand. Day

00:06:56.000 after that, you would have lost $170. Not grand, just $170. Day after that, you would have made 30

00:07:03.400 grand. Day after that, you would have made 7 grand. After that, 12. Oh no, sorry, that's a loss,

00:07:11.760 a loss of 12 grand. That was a down day. Oh dear, we've gone down. And the next day,

00:07:16.040 you would have lost $300. Then you're back up again, 6 grand up. Day after that, what's that

00:07:23.140 now? November 18th, you would have been up 20 grand. November 19th, you would have been up another

00:07:30.020 20 grand. And the day after that, you would have been up 26 grand. That brings us to a total of,

00:07:35.560 there are a couple of down days in there, but you would have been up 115 grand on your original 100

00:07:41.020 grand in the space of two weeks. That's quite a big return for a two-week period. And like I said,

00:07:52.680 this is my largest holding, and I quite enjoyed those two weeks, to be honest. They were rather

00:07:59.340 good. Now, before I go any further, let's issue a massive warning here. I'm looking at this closely.

00:08:07.140 I, for now, I think this checks out. I haven't sold any of my position. In fact, I've been adding

00:08:14.780 to it. But just on the face of it, you should think this is a bit too good to be true, right? And

00:08:25.960 maybe that's the case. Maybe I've got it wrong. And maybe a whole bunch of other people, because

00:08:30.020 there are some serious financial players who are backing this now. Germany's largest insurance

00:08:36.500 company, Allianz, I think it is. They dropped a billion on this, on the convertible bonds,

00:08:42.720 which I'll come to. A company like Allianz, and I've seen the inside of these companies,

00:08:50.620 they've just got desks full of quant people. What are quants? Quants are, they're basically like

00:08:58.880 normal financial people, but with extra IQ and less personality. I might be a little bit unfair,

00:09:04.220 but the problem is they're good with the calculators. The insurance companies are full

00:09:09.840 of these type of people, and they put a billion into it. I mean, lots of people are putting,

00:09:16.180 people who know this stuff, who know this game, are putting hundreds of millions into this company

00:09:22.940 through the convertible bonds and other things. So look, it might be too good to be true. This might be

00:09:29.260 the thing that blows up this cycle. Those of us who have been in Bitcoin for more than one cycle are

00:09:34.820 always, I mean, we always got PTSD because something blows up every cycle. The first time around, it was

00:09:40.060 Mt. Gox. You know, last cycle, oh, there's a load of them. There's FTX blew up, Three Arrows Capital blew

00:09:46.720 up, Celsius. I mean, there was a whole bunch of them that blew up. Maybe this is the thing that blows

00:09:53.600 up this time because it looks too good to be true. I don't think that is the case. I didn't do anything

00:10:01.960 with those companies. Well, I did a little bit with FTX. I had a bit of something on FTX, which,

00:10:07.600 you know, just went off into the wind, which is a bit unfortunate because, well, that's never nice.

00:10:14.120 But so I mean, I have been caught out before and maybe all of these, you know, big insurance

00:10:19.520 companies are getting into this. Maybe they've missed something as well. So big warning flags,

00:10:25.660 anything that moves like this should be treated with suspicion. But my reaction is, OK, let's be

00:10:33.820 suspicious, but do the work to understand what's going on behind it and stay frosty on it and,

00:10:39.800 you know, maybe take profits along the way, you know, to protect yourself. But I mean, if you would,

00:10:44.820 if you had had 100 grand in this before the Trump election, you would have doubled your money and

00:10:49.760 then you could have taken your original stake off the table. Again, not a recommendation to buy,

00:10:56.420 must stress that because you might do that and the following day it might drop 16%. And that's

00:11:01.920 actually what happened after that series that I gave you. There was one day, I think it was the

00:11:06.980 Thursday maybe where it dropped 16%. Didn't bother me in the slightest because I was still up on the two

00:11:12.880 weeks and I was massively up on where I'd been in this for the past few years. But, you know, it is

00:11:19.180 a different situation if you went in the day before and you don't, you know, and you don't have the same

00:11:25.560 risk tolerance or, you know, position that I do. So, yeah, it's not financial advice. This is my largest

00:11:31.880 portfolio holding. So I'm kind of talking my own book. It is easy for me to wear this volatility

00:11:38.280 because my cost basis is below $20 a share. And if you were to buy in today, your cost basis would

00:11:44.080 obviously be considerably higher. And if you then had a, you know, a period of a correction where this,

00:11:51.300 you know, maybe this has got a bit frothy. And you've got to remember when you're trading shares,

00:11:54.980 most of those shares aren't moving. It's only a relatively small percentage that are moving.

00:12:01.940 And it is, it is easy for things to get bubbly in momentum where a small number of those last

00:12:09.840 traded shares are done at a much higher value. And then, you know, for whatever reason, that sort

00:12:16.420 of froth comes off and it's quite easy for there to be a correction down where the, where the stock

00:12:21.580 kind of takes a breather. And I would say that it's then going to continue to perform well because

00:12:27.760 the fundamentals are good, but that bit of froth that comes off. But if you buy at that frothy bit,

00:12:32.920 you could then be sat there for a period of time, which could be, um, you know, days, weeks, months,

00:12:40.480 years, who bloody knows where you're underwater. And so you need to position carefully anyway. So I

00:12:47.120 think I've gone over that enough. Do not listen to anything I say, do your own ratios or all that

00:12:50.940 kind of stuff. The underlying thesis, it's talked about, you go and look at brokonomics.

00:12:57.760 But basically very quickly for anybody who's joining this for the first time, um, very short

00:13:04.620 version is that the Western world's Western governments are in this massive structural

00:13:09.160 deficit. And that's driven largely by, by demographics. So a, a functional first world

00:13:17.340 Western economy should not be operating at a deficit unless it's like in a major world war,

00:13:25.220 something like that. Something extreme is going on. Um, the rest of the time it should be running a

00:13:29.480 balanced budget. Why is it not? It's not because, uh, the greatest generation went out, they won a war.

00:13:39.080 They had a lot of children, the baby boomers, baby boomers move through the system and they wanted to,

00:13:47.040 uh, be good kids. So they started putting in place very generous pensions and other, um, social

00:13:53.660 redistributions. They were doing it primarily for their parents who they obviously looked up to

00:14:00.320 because, you know, the, the gallant chaps had just won a war. Good for them. And they kind of also did

00:14:06.520 it with an eye on the future. It's like, Oh yeah, I'm going to get old one day. And they had kids,

00:14:11.780 millennials, millennials are a large generation. They are a slightly larger generation than the

00:14:17.380 baby boomers themselves. But in terms of a percentage increase, um, they're actually a

00:14:22.700 very, very small generation. There was the, the percentage increase from greatest to boomers was

00:14:27.040 huge. The percentage increase in, in available workforce from, from boomers to millennials was,

00:14:32.440 uh, minuscule. So basically the maths on the pensions don't add up. Um, then you fast forward to 2016,

00:14:41.200 the boomers start retiring in size. And that is obviously a process that's playing out at the

00:14:46.980 moment. Um, but once government spending has become baked in and redistributions and pensions

00:14:53.120 have been baked in, nobody wants to do anything about it. Well, you can't win an election if you do

00:14:58.800 anything about it. As a result, um, you know, the U S is now running a 2 trillion deficit a year.

00:15:07.020 Um, when governments run a deficit, uh, they borrow the money, uh, blah, blah, blah. We talked about it

00:15:17.260 in Brokonomics before, but ultimately it just gets printed. Um, that's ultimately what happens. Um,

00:15:22.300 you, you, you, you, you borrow it, you then refinance that debt every four years. It sets up

00:15:26.780 this lovely liquidity cycle. Again, talked about it on Brokonomics many times, not going to rehash it

00:15:30.940 here. If you, if, if this is interesting to you, just pay the five pounds a month, go back,

00:15:34.860 watch the back catalog. You'll be caught up. So basically deficits running, debt being churned,

00:15:45.100 money being printed is about the size of it. Meaning the value of fiat currencies is being

00:15:51.060 pushed down with debasement, creating that opportunity for anything with a fixed supply

00:15:56.180 to go up land, property, fine art, wine, blah, blah, blah. Anything with a fixed supply goes up in value

00:16:03.580 because the unit of denomination of money is being compressed and going down. Uh, then you

00:16:09.660 might reasonably ask yourself, okay, well, what is going up the fastest? Is it land or wine or

00:16:15.420 whatever? Well, no, it's, it's, it's Bitcoin. Um, and, and that's provable. You can backtrack it. You

00:16:20.620 can, you can have a look at this and basically Bitcoin kind of sniffs out the change in the liquidity

00:16:26.540 very, very quickly and responds better. So if you are in a debasement scenario, uh, the best asset in

00:16:33.800 the world is, is Bitcoin. Um, tech's also pretty good, good tech. So the top of the NASDAQ, um,

00:16:40.060 they're pretty good, but it, but I mean, you, you can just back test it. It is, it is Bitcoin.

00:16:44.560 That's what's the best of it. So, uh, like I say, you have to be a believer in this, um,

00:16:51.320 in the Bitcoin layer, at least before we get onto the micro strategy. Right now, I want to very

00:16:56.100 quickly skim through apologies to the Brokernomics subscribers, because you may be wondering what

00:17:02.680 the hell am I talking about? And I'll, I'll explain the whole micro strategy thing in detail in the

00:17:08.440 rest of the video, but very quickly, while we've still got the YouTube guys with us, um, let's,

00:17:15.080 let's me just give the quick footnotes. Um, trad fi guys are hating this. Um, good because that

00:17:25.720 means you get to front run them again because they haven't understood this model. Government

00:17:30.020 support is there. I'll talk about that more in the next video, but strategic reserve, a whole bunch

00:17:34.380 of other things, you know, stuff is, I'll come to it in a full video. Um, Bitcoin is taking over

00:17:40.140 government, something like 300 pro Bitcoin senators and congressmen. Um, JD Vance is a Bitcoiner,

00:17:49.180 Elon's a Bitcoiner, Vivek is, uh, I mean, a whole bunch of them. Uh, Trump spoke at the, uh, Bitcoin

00:17:55.460 conference. So that, so that, that layer of the government support is there. A strategic reserve

00:18:00.460 might be on its way. There's currently a bill going through Congress to turn, uh, to, to treat

00:18:06.220 Bitcoin like a commodity. So all of that is there, um, on micro strategy specifically. Um,

00:18:13.860 I'm going to let, let's jump into the premium debate. Is it worth more than an ETF? Cause

00:18:18.140 this is what a lot of the trad fi guys are saying. Is it worth more than an ETF? Because

00:18:22.640 you know, it's got that premium. Yes, it is. Let me very quickly explain that to you. Why?

00:18:26.940 Because with an ETF, you are only getting one X Bitcoin minus fees mean that the amount

00:18:35.300 of Bitcoin you have decreases per dollar with a, with micro strategy, you get the amount

00:18:43.460 of Bitcoin plus the growth in Bitcoin plus the underlying legacy business I'll talk about

00:18:49.260 in a minute. So the amount of Bitcoin that you own increases per share over time. Yes,

00:18:55.120 you are paying a premium for that, but what you've got to do is work out what that premium

00:18:58.700 is worth to you. And then the growth of the Bitcoin over a long time period. Therefore,

00:19:03.980 micro strategy is obviously better than an ETF for that reason. Again, I'll get more into

00:19:08.860 the debate on that as we go through. Um, this year they added 80,000 Bitcoin year to date,

00:19:16.080 I think. Well, you're watching this on Tuesday and I'm filming this on Sunday. So they might

00:19:20.780 have bought more over the weekend. So it might be even more than that. So that's an

00:19:24.600 increase of about 250 Bitcoin a day going into the company, meaning that it goes up. Um,

00:19:30.460 they've just issued a convertible bonds at 0% coupon at a 55% premium. You know, show me

00:19:38.880 another company that can do anything remotely close to that. Again, I'll explain it properly

00:19:42.960 in the video. Um, this strategy has taken micro strategy from, um, a 2 billion market cap

00:19:49.280 to a hundred billion market cap. And I think it's going to go whole, uh, higher. They've

00:19:52.800 currently got a balance of 331,000 Bitcoin. Again, by the time you watch this, I wouldn't

00:19:59.060 be surprised if that's gone up by 50,000 Bitcoin because the purchases over the weekend or some

00:20:03.020 other number. Um, that's my brief takeaway for the YouTube crowd. Right. And now I should

00:20:10.900 probably explain it to the confused regular Brokernomics, uh, subscribers. So anyway, cheerio,

00:20:15.520 uh, YouTube chaps. If you would like to see the full version of this premium video,

00:20:19.520 please head over to lotus eaters.com and subscribe to gain full access to all of our premium content.

The Podcast of the Lotus Eaters - November 26, 2024

PREVIEW： Brokenomics ｜ MSTR - Infinite Money Glitch

Episode Stats

Length

Words per Minute

Word Count

Sentence Count

Hate Speech Sentences

Summary

Transcript