BITCOIN BEYOND THE HALVING! INVESTING SECRETS OF BILLIONAIRES – ANTHONY POMPLIANO INTERVIEW

Welcome to the show, everyone, it’s the crypt Dilek, happy bitcoin having data hope that the ghost of Satoshi Brach’s something good that you remember to leave some cookies under the tree for him. I am very excited. Day to welcome on Anthony Pump Liano. He’s the co-founder and partner over at Morgan Kreek Digital. He’s also the writer of the most popular newsletter in Crypto. His podcast has been absolutely on fire recently and his YouTube channel as well. He’s had some of the most interesting guests talking about macroeconomics, talking about Bitcoin. I know we’ve talked about his YouTube channel already a few times here where he interviewed math. That was an amazing interview. So I’m really excited. Talked to Anthony today. When we break it down, Bitcoin, the having macro economic stuff is gonna be a great chat. So make sure you stick around for it. Anthony, welcome to the show. Absolute. Thanks so much for having me. Thanks for coming on. Thanks for coming. I think the logical place to start this conversation, the bitcoin having, has just happened, you know, by the time everyone sees us, will then an hour or two ago. So very, very recent. And I think the great sentiment to start off with today is that F two pool they wrote into the blog. They’re the ones to mind the block. So they wrote New York Times nine April 2020 with two point three trillion injection. The feds plan far exceeds the 2008 rescue, which, of course, the nice callback to the Genesis block of Bitcoin. So how you feeling right now with the Bitcoin having the way things played out? I did not know they wrote that in. But that is legendary. I fucking love that. That’s amazing. It’s amazing. Those guys are awesome. Yeah. Look, it is. It is what it is, right? Well, Bitcoin is doing exactly what is designed to do and the most transparent, predictable monetary policy in the world. The non predictable monetary policy geniuses are doing exactly what we’ve come to expect, which is just print as much money as they possibly can get away with. So good luck to them. And I like what what we’re doing over here. Yeah, it’s been very, very exciting. I think the lead up to the having obviously a lot of people to get excited and we’ve see more people coming in. But now at the Bitcoin having has happened, what are we going to do for the next four years? Say they have been doing for the last four years. It’s just wait. Right. I actually used to think I’ve become one the more patient people in that. And I literally take multiple hundred year type view on this thing. And the reason why I take that view is I believe that Bitcoin will become the next global reserve currency. And that sounds, you know, crazy today. But I think it’s got a very high chance of doing that. And so, well, that’s not going to happen overnight. So I can have the next five or 10 years. This can take longer than that. And we’ll see what happens. But that’s kind of my time horizon. And so because I have that advantage, I can do things other people can’t do. That’s amazing. That’s I feel like in crypto, sometimes everyone’s thinking what’s going to happen in the next four hours or next week. And like a lot of people are getting in and they buy Bitcoin and like, oh, it went down four percent this week. I’m going to get out. This is all a big scam. It’s like they kind of think long term. And so a lot of the investors that are coming to you at Morgan Creek, what are they? Are they in this for speculation, for short term stuff? Or are you getting approached by institutions or are saying, hey, want exposure this asset class on a 10 year timeframe? Yeah, they mostly institutions, they look at it from two situations. One is they look at the math as to what it does to their portfolio. So it increases. The Sharpe ratio can drastically increase returns with a very small allocation. That’s an uncorrelated asset. All of those things can make it very attractive to put into the portfolio as they think about portfolio construction. And the second thing is there’s actually a lot of bitcoins in the institutional world. They don’t talk about it publicly because of their jobs. But when we get behind closed doors, they close that door and they say, look, I’ve got concerns about the U.S. dollar. I’ve got concerns about the money printing. I’m looking for ways to get out or get exposure to things outside of that system. And Bitcoin was a great way to do that. I personally hold it and I’m interested and think about it from for our fund. I think you saw that with something like a Paul Tudor Jones coming out saying, look, I’m putting, you know, up to two percent of my assets into into this store value. You know, it’s frankly pretty encouraging to see him do that, mainly because it just gives everybody else career risk mitigation. Right. Meaning that now they can go do it. And if somebody says, why are you doing this, as will Paul Tudor Jones, the legend of Wall Street, doing it. So like, unless, you know, you want to bet against Paul Tudor Jones, then good luck. Right. And 2% of his out of his portfolio. That’s incredibly substantial amount of money. I think it’s around 500 million dollars or so. So we’re talking about a lot of money that Paul is putting online for his Bitcoin play here. Yeah. And look, by the way, like two percent of anyone’s portfolio is small, yet meaningful, right? It’s 200 basis points. If you’re only managing a hundred dollars. Right, then yes, two bucks. But at the same time, you’re managing twenty two billion like he is. So much bigger number. Right. And so I think that part of this really is just the size of assets that he manages. But also, too is there’s a documentary in nineteen eighty six, I think it’s from where he talks about, he says, look, at some point it stops being money. Right. Sources being numbers on a screen and it’s two percent or two percent as matter if that’s one hundred dollars or a hundred million dollars. And I think that, you know, obviously as he’s grown his assets there, he obviously keeps that same mentality, which I think makes him one of the best investors in the world. So it’s encouraging to see him come in and sort of gain exposure in a substantial way, and particularly the time that he announced it to. I mean, just before the having he’s making this play. And I think that’s going to pay off incredible dividends for his fund in the coming years. So we’ll have to watch and see how that plays out for him. But I like what you said on Twitter the other day. Bitcoin will go from a contrarian investment on Wall Street to a consensus one in the next 18 months. I guess to an extent, what we see with Paul Tudor Jones here being maybe a sole catalyst for that key. Expand on that idea a little bit. Yeah, I mean, look, right now, if you go on Wall Street, most people will say bitcoin stupid to laugh at it. They’ll ignore it, you know, literally even say, hey, I think that that’s all criminals and scammers. Right. That’s fine. They said the same thing about beepers and cell phones and computers and the Internet. Right. So, like, pretty good track record with that. And frankly, the the thing that becomes funny is the things they don’t think are the scams or don’t think are nefarious. Those tend to be the thing that ends up being bad. Right. So you could you Bernie Madoff’s great example. No one thought that he was running a scam. And bam, there you go. And so I think that part of this is it’s critical contrarian today on Wall Street, meaning that a very small percentage of people believe in this or are actually allocating capital there. But over time, that would go from a small percentage to a very large majority. And so it becomes a consensus type that the whole key to investing is to understand what people are going to do in the future and beat them to the punch. Right. And so if you invested some of this contrarian today but becomes consensus later. That’s where the opportunity to the upside exists. And I think that’s what we’re gonna see. Big Bitcoin. I think that’s one most exciting things about Bitcoin that we are in this early price discovery phase. Still, it’s going to be bumpy and there’s going to be all kinds of craziness happening on that ride. But it’s a very exciting ride to be on getting in now. Right. I’d like the the old saying, when’s the best time to buy Bitcoin yesterday? Second best times today, right? Absolutely. Now, what percentage of bitcoin should someone consider for their overall portfolio? I mean, what are you telling people when they come to you? Yeah, I mean, so it’s important, like a definite don’t give kind of financial advice. And the first thing I tell people is like, go read the Bitcoin white paper, make sure you do your own research to really understand what this is. I think that’s part of the learning process, is educating yourself on the various aspects. And then you should actually start with a very small allocation. McLeary go by a hundred dollars a Bitcoin trust, send it to somebody. Right. Or put it into some sort of product and use it. So you actually understand the functionality, how it works and why it’s important. Then what I say is as you start to get gain more confidence, understand it, have a higher degree of education. You want to allocate surplices your portfolio. You have to look at your risk profile. And so most people are relatively conservative. And if you’re relatively conservative, somewhere between a one to five percent allocation tends to be where I see most people go. And if you go back over the last five years, the data is a little stale now, about six months old. But over the last five years, you get a 60 40 global portfolio. You’d taken half a percent from stocks, half a percent from bonds and put it in Bitcoin. During that same time period, you would have gone from a seven point two percent return on your portfolio to nine point two. So 200 basis point upside, if that one person had gone to zero, you lost all your money, you’d gone from seven point two to seven percent return on your money. So there what you show is a two hour basis point upside, 20 basis point downside, literally 10 to one upside. The downside. It’s a no brainer to get exposure. We’ve got around the entire country and really the world telling people get off zero. Hopefully people will listen at some point. But I think they’ve really I look at their own portfolio, their own risk appetite to determine what they want to get exposure to. But at the end of the day, don’t put more money in. You’re willing to risk losing. And it’s either gonna be worth a lot more in the future or something worth a lot less, but it’s hyper volatile. So what kind of buckle up and get ready? Well, I think those numbers you just gave really, really speak for themselves. I mean, look at the risk to reward ratio there. It’s it’s off the charts. And of course, Paulita at our Jones, he just did two percent. Right. That’s that’s an incredible amount of money for him. But it’s still, you know, for if you are a smaller investor, you don’t have 22 billion dollars. Just casually sit around and throw money and stuff. You can still do a smaller percentage and have it really, really pay off well for your portfolio. So something for to keep in mind out there. Now, I want to talk about Bitcoin and I guess the current economy. We’ve seen just all kinds of insanity happening. We’ve got bailouts for every corporation. Everyone’s too big to fail these days. Junk bonds are being bought up by the central banks. We have QE to infinity. There’s talk now of negative rates coming to the US. I mean, the market’s already starting to price that in. So is this the perfect storm situation for Bitcoin? Yeah, I think that there’s two key pieces to this. The last June. I think I started writing about my belief being, hey, there’s a lot of economic alarms that are just starting to ring. I don’t know exactly where the top’s going to be, but like it’s in the short term rather than longer term. And then throughout Q3 and Q4 last year, I kept writing more and more and more about, hey, there are a lot of alarms going off now, inverted yield curves and things like that. But back in June, what I wrote was in some weird world, are we about to see interest rates get cut? It go to zero. But I think it go pretty low. And then we see quantitative easing. I don’t think they’re going to print two trillion dollars in one shot, but definitely we’re gonna print money. And all of that was going to happen sometime around the having occurred. Right. And I didn’t think it would be like directly all the same time, but definitely kind of sometime within a six month window before after the harvest. Now, what ended up happening is when we went to zero rates much faster than I. And two, we got way more printing than I thought. And three, it happened to a line almost directly with the having this fucking rocket fuel for Bitcoin. Right? 18 months from now, I think that Bitcoin will go from eighty five hundred dollars today to hit one hundred thousand or more in price by the end of December. Twenty twenty one. Again, I could be wrong. But there’s so much asymmetry on the upside for one ex downside where you can lose the money you put in. That to me it’s an incredibly attractive risk reward. And a lot of that’s being driven by the fundamentals and structure of bitcoin. But a lot of it’s also being driven by the macro environment and things that we’re seeing there. They’re going to push more, more people to seek out an inflation hedge asset. Right now, we’ve seen a lot of, I guess, kind of record even correlation with Bitcoin to the S&P 500 over the last few weeks. I mean, I know we’ve been breaking away a little bit more recently, the big rise in Bitcoin before the having. But what do you think happened? Why was there so much correlation? I mean, historically, we’ve had very low levels of correlation. So what happened here? Yeah, I mean, look, it’s a liquidity crisis, right? So historically, Bitcoin has been incredibly non correlated point one five on average, sometimes even gone negative, correlated like May of last year. And she doesn’t 19 went negative, correlated went up. Fifty five percent had a point nine negative point nine correlation to stocks, negative point eight to gold. And there’s much of macro chaos and geopolitical chaos going on. But during a liquidity crisis, just like we saw in 2008, all assets correlations go towards one. Right. And so 2008, gold went down twenty nine percent and then rallied 200 percent to an all time high as all the money printing happened in 09 through 2010. It’s the same thing here, right, is if you look every single store value asset went down. Real estate went down. Gold went down. Bitcoin went down. Treasuries went down. Stocks went down. Everything went down. The dollar strengthens the deflationary environment or the kind of liquidity trap. Now, all of a sudden, you look at year to date, Bitcoin is up like 60 percent or 50 percent. Whatever the hell it is, it’s the best performing assets outperform gold stocks, treasuries, real estate, et cetera. So I think what ends up happening is in that liquidity crisis, you get correlations going to one. But again, you can have short term periods, two, four, six, eight weeks where correlations look higher, but over long periods of time. Bitcoin continues to be non correlated. If anything, there’s actually a possibility that it could become negatively correlated in some cases to some assets. And so I tend to just kind of brush away the argument that bitcoins now correlated because the last two to four weeks have been correlated. And you got to look at things like twelve months, three months or twelve months, three years, five years, etc.. Bitcoin is incredibly attractive from that perspective. Well, it’s like you said, everyone’s, you know, take that longer term view, guys. You know, what’s what’s happening over the year, what’s happening over the multi-year period or so early still for Bitcoin people who get in. I have a five percent. I’m getting out there, never coming back. You’re missing out on a big part of the picture here. Now, with all this central bank money printing and the big businesses are all too big to fail and it seems like the game is really, really rigged sometimes. So how can an investor thrive in such a rate game? Yeah, I mean, look, it’s it’s pretty simple, actually. The problem is you got to be educated, right? So the entire financial system is based on 50 percent of the population, not understanding how money works and how the economy works. Right. And it literally steals the wealth from the poor to give to the rich. And the system is designed that way. And so the keys to financial freedom are financial success are really simple. Spend less than you make, have multiple streams of income, get out of inflationary assets into inflation, hedge assets. And then four is be super patient, have a long time horizon. If you can do those four things, you’ll be rich. Like, I don’t care how much money you make. You’ll be rich. And the problem is either one. People don’t understand that they’re not educated. And so therefore they don’t know what to do or to they actually become undisciplined because they get bored. Right. That they know what to do. They just think that they’re smarter than the market. They wanna get rich fast, whatever it is, they become undisciplined and they break that model. And so if you can do those four things and part of that being patients, you’ll be rich because literally the system is structured to make you rich if you do the right things, the system structure to keep you in debt and poor if you the wrong things. There you go, guys. The secret sauce. The secret sauce. Right there. Right there. No, that’s that is very, very true. I can definitely see sometimes investors who get bored. Right. And then they go off and do risky things and then they come back while also money. What you didn’t hold. It’s the simplest thing. And the hardest thing is to buy and then be patient. Right. Have that long timeframe. Of course. And look, part of this is, you know, I forget who said this, but somebody said, I want to get rich quick. I want to get rich for sure. Right. And I think that that’s part of it is a lot of people wanna get rich for sure. They won’t get rich quick. And it goes back to that consumer mindset. And so if you have a really long time horizon, you know, and just do the right things. You know, you read the stories all the time about the you know, the janitor who makes thirty thousand dollars a year and became a millionaire. Well, how do they do that? They spend less than they made. Right. They got out of inflationary ask, has gotten deflationary assets. A lot of times they have a second source or third source of income. And they were patient. It’s not that hard, just discipline and discipline and discipline over years and years and years. And if you do it, you’ve got a shot. Unfortunately, our society rewards not having that discipline in and people get caught. The truth. This is true. Where to next for the economy? We’ve got just an incredible amount of money printing going. All the stuff we mentioned, the U.S. just passed the twenty five trillion dollars in debt and that’s an act. That’s an extra trillion added on just in about the last month or so in from twenty four to twenty five trillion within a month. So where where where’s this all going? Yeah, I mean, look, these people are absolutely drunk on stimulus, right? I mean, literally, they’re addicted to stimulus. And we saw that when they tried to raise interest rates and the economy started to gyrate and they had to go ahead and start kind of plateauing and going back down. We are an economy just like a crack addict is addicted to crack. You try a little bit, you’ll like it. You want a little bit more. You do more Nessy. You know, you got tons and tons in order to get high. You eventually overdose and die. Right. That is what our economy is doing. We are addicted to stimulus. We cannot operate without manipulation of our interest rates and quantitative easing. We are now fully addicted to that. Well, that will turn into is you have to do more and more and you have to become riskier. Riskier. And so we’ll actually stop just printing money to inject it into the economy via a traditional means. We’re going to start handing it to people you called modern monetary theory. You can call it UBI. You can call it magic. I don’t care what you call it, helicopter money. That’s what they’re gonna do. At some point, the future. And so, you know, I recently tweeted and said, while the Federal Reserve is going through enormous quantitative easing, Bitcoin just went through the third quantitative hardening of it in history. Proceed accordingly. And so, again, we’ll go back to the four rules, spend less than you make, have multiple sources of income, get out of inflationary assets into deflationary assets and be patient. Rule number three. Get out of the inflationary assets. And I think that as people start to understand how money works, they educate themselves. They start looking out for themselves. It becomes very obvious what they need to do, and that’s what we’re hoping happens. There you go. It’s a fantastic analogy. The Federal Reserve. They’re crack addicts. And in this situation, they’re not just going to take themselves maybe a couple of their people down with them. These guys have the power to take down everything, the entire economy that it’s we start talking about money losing all of its meaning. I mean, what what is the purpose of writing any kind of fiat money if it’s just theologist the joke? Right. They just print, print, print, print, print. And it’s there’s no meaning behind this money, which is just it’s crazy. It’s a group insanity where we’ve decided these pieces of paper all have value and they’re backed by nothing. Look, money is a belief system, right? That’s been true for thousands and thousands of years. And when you lose that belief, currencies fail. Right. So we’ve seen that many, many currencies. Usually it’s because the government loses discipline. People lose trust or confidence in the currency. They go elsewhere. Right. And so that’s nothing new that’s been going on for thousands of years. What I do think is super interesting here, though, is at the end of the day, what people are being asked to is to literally trust humans to make these decisions. They’re biased, they’re emotional, and frankly, they’re corrupt in many cases. Right. And so I think that what happens when you get a separation of state and money, you get a programmatic, transparent monetary policy. Now, all of a sudden, you’re not asking somebody to trust a human. You’re asking somebody to trust an algorithm. Yes, the algorithm is written by a human, but it is transparent. It can be audited at any time by anyone. And I think that ultimately people will decide to trust an algorithm over a human. They will choose a transparent, programmatic, kind of dependable, predictable monetary policy and bitcoin over other things. It will take a while, but that’s where we’re going. Nice. Now, you have interviewed on your YouTube channel and on your podcast some of the just top investors in the world, people like Chamitoff, people like Mark Cuban. Robert Kiyosaki, what has surprised you most in the approaches of some of these, you know, biggest the most successful and most famous investors in their attitude towards Bitcoin? So I went time, asked my partner, Mark Yasko, Mark spent 20 years interviewing every single greatest investor in the world as an LP to give them money. Right. He was a fund to funds and he would go and give them money. Or when he was at the U.N. see endowment, he’d go and give them money. And so I asked him, I said, look, you’ve been, you know, all these people. What’s the one thing that separates the top five of them from the top one percent? So that you know the point. Oh, one percent from the one percent. And he said to me, it’s super easy. They cut their losers faster than anyone and they press the winners harder than anyone cutting their losers. I think most people have heard that before. Pressing the winners is the key. And what that means is at times where the opportunity opens up, they are better than anyone in the world at doubling, tripling, quadrupling and 10x taxing their their money. Right. And the way that they do that is they remain convicted in a thesis, regardless of what happens in the short to medium term, as long as nothing has changed in that thesis. And so the best example of this is the big short. Right. Remember the guy who Sydnor is Drumlin? He’s got no shoes on. He’s walking up to the board and saying, you know, I’m down plus 20. I’m up plus 20 now, plus 10 now. I’m flat. Now I’m negative, too. Now I’m negative 10 now negative 20 percent. And everyone’s e-mailing. I’m saying give me my money back. What are you doing? You’re fucking crazy. Like you’ve lost your mind. You’re wrong. You know, sell our positions. All this stuff, human emotion and greed and fear and all those things are playing in. And he just sits there. Right. He still has conviction in the investment. And then he turns around and he multiplies the money hundreds of percent. They sent it back and he says, you’re welcome. And I think that’s what separates the absolute best from everybody else. Is that conviction to ride out the short term because you have the thesis and the conviction in the long term, super hard to do? You know, there’s been times, honestly, we’re talking about it earlier today where when Bitcoin dropped 50 percent a couple of weeks ago, I mean, my heart’s in my stomach, right? I’m literally like, what the hell is going on? I’m staring off in space. But even though it hurt, I bought more bitcoin rather than sold. Right. And it’s because my long term thesis hasn’t changed. And therefore, I need to do what I what I know is the right thing, even though it doesn’t feel good. And so if you can do that with large amounts of money over a long period of time and continue to be consistent, disciplined, I think you’ve got a shot to it to be a great investor. And all the people that I’ve interviewed on the podcast, not only are they good at that, they are the best in the world. And it is very obvious when you talk to them, they just have great control, their emotions and psychology. Very, very interesting. You can learn so much from the people who have already gone before you and have done these things that you want to do in your life. That’s they’ve set the blueprint out. You just need to read it and follow. It’s a very, very interesting insights there, Anthony. Now, I’ve got one thing that you might be interested in. So I’ve got a friend who I interviewed, a Jambos little. And one of things he said on the podcast was he said, listen, he’s worked with some of the best investors in the world. Side by side with them in the trading pits and things like that. And he said, look, they’re usually only right. 55 to 60 percent of the time. So a lot of people think like, wait a minute. That’s like a really low number. That’s an incredibly high number for an investor to be right. 55 to 60 percent of the time. That means that you’re wrong 40 to 45 percent of the time. Now, the difference is that when they’re wrong, they lose only a little bit. Right. The asymmetry of the upside, first downside, they know their downside and it’s capped risk. But when they’re right that 50, 50, 60 percent of time, they’re doubling and tripling their money. And so you even though you’re only right. 55, 60 percent of the time, you’re making multiples of your money on there on the times. You’re right. I think that that’s another key piece of this is really understand the risk reward of the trades that you make or the investments you make. And having the discipline to only enter investments where you’ve got high upside and low downside. There you go. There you go. Classic stuff, classic stuff, I love it. Now, final final question for you for today. What’s what’s the exit plan for you with your bitcoin? You know, is there a price prediction? Where are you going? Hey, here, I’m going to take some big profits or this is where I’m targeting. Or is it just this is this is the exit plan. Yeah, I’m going to give my Bitcoin to my grandkids, grandkids, and the way I look at it, is it basically Bitcoin either becomes the next global reserve currency or it becomes worth way, way less than it is today. And basically, I lose all the money that I’ve put into it. And I’m uncomfortable with that risk. Right. I’m 31 years old and I’ve got an incredibly high risk tolerance. And so I’m willing to to make that investment today works out for me. Great. If it doesn’t, that’s OK as well. But but there’s definitely no kind of exit plan, if you will, because ultimately what you find is by investing in highly innovative things like this, they take decades to play out. And there was gonna be a lot of volatility. So you’re going to go up, you know, 20 percent year and drop back down 80 percent. You’re gonna do it over and over and over again. But over a long period of time, if you hold somewhere that if you held Amazon for last 20 years, it ends up having great performance. You just got to have the stomach and discipline to hold to all that volatility. And so having the mindset of I’m never selling this little I’m going to hold it until the day I die, I’m going to pass it on to somebody else, you know, really kind of gives you that discipline that’s needed in order to kind of have that confidence. There you go. There you go, Anthy. Thank you so much for come on the channel and sharing some insights. Super fascinating conversation. If you want more of this, go and check out Anti’s YouTube channel again, link down below where you can check that out. Anthony, thank you so much. Yeah. I appreciate you having me. Thanks for everything you’ve been doing. And now we’ll do it again. Thank you.