Mark Yusko: Bitcoin's Rise is Programmed - The Path from Speculation to Global Money — Transcript

Full transcript

1. 0:00Well, Bitcoin and gold may be moving
2. 0:01more closely together, but are investors
3. 0:04actually starting to treat them the same
4. 0:05way? And if Bitcoin is increasingly
5. 0:08behaving like a macro asset, what does
6. 0:10that mean for its place in a portfolio?
7. 0:12Well, there's no better person to ask
8. 0:13than our next guest, Mark Yusco, the
9. 0:15founder and CEO of Morgan Creek Capital.
10. 0:17Mark comes to Bitcoin to Bitcoin with
11. 0:20decades of institutional investing
12. 0:22experience. Mark, thanks so much. So,
13. 0:24Bitcoin no longer just a speculative
14. 0:26trade here. How has that fundamentally
15. 0:28changed the market structure and how
16. 0:30does it make this cycle different from
17. 0:31past ones?
18. 0:34>> Great question actually. So when you
19. 0:36think about um the history of a BTC, you
20. 0:40know, we're a late teenager now uh
21. 0:44having been founded, you know, 17 plus
22. 0:46years ago. And the problem as I see it
23. 0:49is, you know, it began pretty innocently
24. 0:55as this, you know, transactional medium,
25. 0:59right? The pizza and and all that good
26. 1:01stuff. And then we had the aha moment
27. 1:04that no, this was a better form of
28. 1:06money, right? What is money? Money is an
29. 1:08asset that exists in the absence of a
30. 1:10liability. Everything else that we think
31. 1:12of is currency other than gold. And so
32. 1:15it was digital gold. And and why was it
33. 1:18digital gold? Well, gold is this perfect
34. 1:21money, a single ounce of gold for 5,000
35. 1:24years has bought a fine person's suit
36. 1:28from Cleopatra to a suit of armor to a
37. 1:30zoot suit in the 20s to Savile Row
38. 1:32today. You guys are both looking natty
39. 1:34today. So thank you Bitcoin for your for
40. 1:37your threads.
41. 1:38>> And that's interesting because gold
42. 1:41never changed. Well, what changed? the
43. 1:44money, the currency that that is
44. 1:46denominated in. So if you think about
45. 1:48gold though, if I had a bar of gold,
46. 1:51like if I were Kyle Bass, Kyle's a buddy
47. 1:53of mine, under his desk, he keeps a 26
48. 1:57kilogram gold coin from Australia, and I
49. 2:00don't have that under here, but if I
50. 2:02did, and I could bring it up here, I'm
51. 2:04not strong enough to break it, right? So
52. 2:07it's kind of hard to divide. It's not
53. 2:10very divisible. Even if I could break
54. 2:12it, I couldn't stuff it in the computer
55. 2:15and send y'all some. But all the Bitcoin
56. 2:18in the world sits right here. Now, I
57. 2:20don't have any on my phone. Don't SIM
58. 2:22swap me yet. People have tried. I don't
59. 2:24keep it on my phone. It's in cold
60. 2:25storage. But all of it could fit right
61. 2:28here. And with a couple taps of a
62. 2:30button, I can send to you one Satoshi,
63. 2:331/100 millionth of a Bitcoin because
64. 2:36it's incredibly divisible and incredibly
65. 2:38portable. So, it's equally scarce to
66. 2:41gold. It is better than gold. And one
67. 2:43Bitcoin is one Bitcoin. Everybody says,
68. 2:45"No, Bitcoin is now $75,000."
69. 2:48Well, it takes 75,000
70. 2:52paper towel kind of green pieces of
71. 2:55paper, you know, toilet paper to buy
72. 2:57one. But that's not how it started,
73. 3:00right? It started at a fraction of a
74. 3:02penny. And what's happening is the
75. 3:04Bitcoin doesn't change. The money just
76. 3:06gets worse as we print more of it. The
77. 3:09stat that just blows you away, and this
78. 3:11is why people thought it was a
79. 3:12speculative asset, is for 245 years,
80. 3:15we've been a republic for 250 years. In
81. 3:18the first 245,
82. 3:20we've printed $10 trillion.
83. 3:24And in the last five, we printed $10
84. 3:27trillion. Remember, one trillion is we'd
85. 3:30have to stay here on the air together
86. 3:32for 31,710
87. 3:34years, which would probably be pretty
88. 3:36unpleasant because I'm not that fun.
89. 3:38Okay? Okay. And we got to spend a dollar
90. 3:39every second for 31,710
91. 3:42years to get 1 trillion. So $10 trillion
92. 3:45was printed. And so Bitcoin price went
93. 3:48parabolic multiple times. Oh, it's
94. 3:50speculative.
95. 3:52No, it's not. It's a perfect store of
96. 3:55value. Well, then why doesn't it track
97. 3:57M2 perfectly?
98. 3:59Because humans are going to human.
99. 4:01Humans tend to be attracted to things
100. 4:05that move. So when the price is moving,
101. 4:07people come in and buy it. And it's a
102. 4:10long answer to your question, but the
103. 4:11the biggest challenge is in every cycle.
104. 4:16So we're on this four-year cycle. Why is
105. 4:17it a four-year cycle? Well, it's because
106. 4:19it's hardcoded into Bitcoin's code.
107. 4:23Every four years, the block rewards get
108. 4:25have the having. And if that happened
109. 4:29and nothing changed, half the miners
110. 4:31would go out of business. their costs
111. 4:33are fixed, their revenues go down. So
112. 4:35what happens is naturally the price has
113. 4:38a built-in escalator. It's kind of nice.
114. 4:41And so long story short, as the price
115. 4:45fluctuates around the fair value, then
116. 4:49people get interested. There are
117. 4:50investors like myself, I think of myself
118. 4:52as an investor. I like to buy things
119. 4:55when they're below fair value. So the
120. 4:57fair value of Bitcoin today based on
121. 4:59Mechaf's law. Tim Peterson runs a model
122. 5:01that that tracks this really nicely.
123. 5:03It's about $105,000
124. 5:06but it's 75. Great. So it's on sale. So
125. 5:09you should accumulate things that are on
126. 5:11sale. You should like to buy a dollar
127. 5:12for less than a dollar. Well, as the
128. 5:15price starts to move, then the traders
129. 5:17come in. Traders don't care about value.
130. 5:20They just want movement. Up, down, long,
131. 5:22short. As you hit fair value, what
132. 5:26happens? This hedgers come in. Well,
133. 5:29what's a hedger? A hedger is someone who
134. 5:31owns an asset like an oil producer, a
135. 5:33gold producer, a Bitcoin miner. When the
136. 5:35price exceeds their cost of production,
137. 5:39they sell forward in the futures market.
138. 5:42That's a hedge. And you need a
139. 5:44speculator, someone who doesn't care
140. 5:46about anything other than taking a
141. 5:47position opposite a hedger. They come
142. 5:49in. Well, that starts to push the price
143. 5:52even more. But then what happens
144. 5:54unfortunately is the gamblers come in
145. 5:56and the gamblers use leverage and they
146. 5:58push the price way above fair value and
147. 6:01then we have to have a crash. So we are
148. 6:03at this point we're almost at the end.
149. 6:07October 5th is the 364th day post the
150. 6:11peak. That has historically the last
151. 6:13three times not a huge sample but three
152. 6:16is pretty good number. Precisely 364.
153. 6:18That's the weird part. Every single
154. 6:20time. So by October 5th, it's likely
155. 6:23that we head back toward the
156. 6:25accumulation phase of the cycle. And and
157. 6:30but back to gold, it's not a speculative
158. 6:32asset. It's a store of value. It's a
159. 6:35better form of money. But when the
160. 6:38correlation is high to speculative
161. 6:41assets, people think that matters. Well,
162. 6:45short-term correlations, like when
163. 6:46people quote monthly correlations or or
164. 6:49you know, weekly correlations, they're
165. 6:51just spurious numbers. The long-term
166. 6:53correlation of Bitcoin to stocks is
167. 6:550.15. The bonds is 0.0. That's an
168. 6:59uncorrelated diversifying asset. It's
169. 7:02just a better store of value.
170. 7:05>> So, we've seen
171. 7:06>> Oh, go ahead.
172. 7:08>> No, I was gonna say sorry for the long
173. 7:09answer.
174. 7:09>> Oh, no. That was fantastic. I was taking
175. 7:11notes over here. Um, we've seen spot
176. 7:14ETFs, corporate treasuries, and other
177. 7:16institutional vehicles bringing Bitcoin
178. 7:18into traditional portfolio. So, if
179. 7:20that's the first wave of institutional
180. 7:22adoption, and it's been underway, where
181. 7:24do you think the next major wave of
182. 7:25demand comes from?
183. 7:27>> Man, you you're another amazing
184. 7:30question. This is awesome. Um, you know,
185. 7:32it's interesting. I was on a a podcast
186. 7:34with a buddy of mine, um, Scott Melker,
187. 7:36and he said, "You know, the uh the key
188. 7:39to a good podcast is you ask a question
189. 7:42and then you shut up." I said, "No, no,
190. 7:45no. The key to a great podcast or a
191. 7:48great interview is not just ask a
192. 7:50question and let the speaker speak." A
193. 7:52great interview is when you have a
194. 7:55question, you listen actually to the
195. 7:58response, and then you ask a better
196. 7:59follow-up question, which you just did.
197. 8:00So that that that's amazing.
198. 8:02>> I appreciate that.
199. 8:03>> And so I I think the um the issue is
200. 8:08where do we go from here or or quadis,
201. 8:11right? Um to use a little Latin that no
202. 8:13one does. And if you think about
203. 8:17adoption of any technology, it always
204. 8:20starts on the fringe, right? Who was the
205. 8:24first user of pagers? Drug dealers.
206. 8:27We're the first users of the internet.
207. 8:29Porn. How about Bitcoin, drug dealers?
208. 8:33And it it makes sense. Why? Because the
209. 8:35fringe is excluded from using the good
210. 8:38stuff, right? If you sell cannabis, you
211. 8:40can't get a normal banking account. So,
212. 8:42you have to find a better way to to uh
213. 8:45do business. And so, it starts all
214. 8:48technology innovation starts at the
215. 8:50fringe and then it slowly becomes
216. 8:52adopted by the early adopters and then
217. 8:56ultimately the masses. And so we're at
218. 8:59this inflection point where we've had
219. 9:02the, you know, the fringe and the early
220. 9:04adopters and now we're getting into the
221. 9:07early majority. And so people like Black
222. 9:11Rockck, right? This is funny. So June,
223. 9:14two years ago, you know, everybody's
224. 9:16talking about doing an ETF and and Black
225. 9:19Rockck's like, "No, absolutely not." And
226. 9:22then Larry Fank says, "Well, hell yeah,
227. 9:24that that's a big business. I can make
228. 9:26lots of money." So they created the
229. 9:28biggest one and so and if Black Rockck
230. 9:31does it then other people are like huh
231. 9:34okay now it's legitimate so I can do it.
232. 9:37Now the one little problem with this and
233. 9:40this is this is the danger of of where
234. 9:42we are in this institutionalization
235. 9:45cycle.
236. 9:46Like yesterday clarity didn't pass and
237. 9:48everybody's freaking out and the price
238. 9:50is down a little bit and people are like
239. 9:51oh it's such a big deal for for crypto
240. 9:53and for Bitcoin. I'm like, "No." The
241. 9:56whole point of Bitcoin is that it
242. 9:59doesn't need permission from legislation
243. 10:03or regulation. It is a permissionless
244. 10:06asset.
245. 10:08If I want to send y'all money, I have to
246. 10:10have a bank account. You have to have a
247. 10:12bank account. I have to ask permission
248. 10:15of the bank to use my money. In fact,
249. 10:17here's a crazy this true. So, when I
250. 10:20first tried to send money to Coinbase,
251. 10:22we were early investors in Coinbase. I
252. 10:23wanted to fund my account. Bank of
253. 10:25America said, "Nope, not going to do
254. 10:27it." Like, "What? What do you mean? It's
255. 10:29my money." No. Well, technically, it's
256. 10:32not your money. It's it's our money. And
257. 10:33and if you read the fine print, you
258. 10:35know, I didn't read the fine print. We
259. 10:37have 10 days before we have to send that
260. 10:40transaction, and we're going to take all
261. 10:42of it.
262. 10:44And I really So, I debanked myself from
263. 10:46Bank of America and I went to Truist
264. 10:49Bank. Well, truest requires me
265. 10:52physically to go to a branch. I had been
266. 10:56in a branch in 20 years. I have to go to
267. 10:58the branch and talk to a human to get
268. 11:01them to transfer money, which is
269. 11:03ridiculous, but it is what it is, but
270. 11:06you know, I left Bank of America. So,
271. 11:09that permission system is silly. If I
272. 11:13have a Bitcoin, which I do, and I want
273. 11:14to send it to you, I can send it with no
274. 11:17permission. You don't have a bank
275. 11:18account. I don't have to have a bank
276. 11:19account and we don't have to spend the
277. 11:22seven trillion. There's that T word
278. 11:24again. Every year banks, brokers,
279. 11:27insurance companies, auditors, etc. skim
280. 11:317 trillion dollars from us on a global
281. 11:34basis for the permission of using our
282. 11:38our money, our money, which becomes
283. 11:40their money when we deposit. So, Bitcoin
284. 11:43fixes that. And so, but the problem is
285. 11:46remember then when Bitcoin got
286. 11:49classified a commodity, everybody went,
287. 11:52"Yay, we're not a security." Oh, be
288. 11:54careful what you ask for. Okay, you
289. 11:57might get it. We didn't want that. Why
290. 12:00did we not want that? Well, if you watch
291. 12:01this interview from Leo Melamed back in
292. 12:042017, he was the chairman of of Chicago
293. 12:07Merkante Exchange. He said, "Don't y'all
294. 12:10worry about Bitcoin. We'll tame Bitcoin.
295. 12:15Tame? That That's a funny word. What?
296. 12:17What do you mean tame? Well, what he
297. 12:19meant was
298. 12:21if something's a commodity, then you can
299. 12:25issue futures contracts against the
300. 12:27commodity. Remember, let let's say oil.
301. 12:30Let's say I want to sell you oil. Well,
302. 12:33in the old days, I used to actually have
303. 12:35to have oil. Fancy that. I had to have
304. 12:38the oil to sell to you. Well, when
305. 12:40futures came along, I can now write a
306. 12:43contract saying,"Well, I promise to sell
307. 12:45you some oil on a certain date if it's
308. 12:48convenient for me. And if it's not,
309. 12:49we'll just cancel the contract, and I
310. 12:50don't have to sell deliver any oil."
311. 12:53Well, what does that allow someone to do
312. 12:56also? Well, it allows them to short
313. 12:59something literally out of thin air. So,
314. 13:02we've seen this in the gold market. The
315. 13:04gold market kind of sits like this for
316. 13:06years. It's just getting spoofed every
317. 13:08day by JP Morgan. They're clamping down
318. 13:10the price and then like a beachball, it
319. 13:13has one of these parabolic moves like it
320. 13:14did last year because the shorts have to
321. 13:17have to cover. Same thing happened with
322. 13:19Bitcoin since the Bitcoin futures were
323. 13:22created and they happen to be created.
324. 13:24It's on interesting days. So remember
325. 13:26back in 2018
326. 13:282017 we hit went from 10,000 to 20,000.
327. 13:31Everybody's like yay. December 18th, we
328. 13:35started to fall like a stone. Why
329. 13:37December 18th? The day Chicago market
330. 13:40exchange introduced futures. So then we
331. 13:43recovered through the next cycle and
332. 13:45things are going great. Black Rockck
333. 13:47creates the ETF and then bang, November
334. 13:5121, we go down again on the exact day
335. 13:55Chicago merchant exchange expands the
336. 13:57number of futures. interesting because
337. 14:00if there are futures contracts and
338. 14:02they're large, you can naked short
339. 14:05against you're not supposed to do that,
340. 14:07but you can naked short against assets
341. 14:09and cause price pressure. So, we're in
342. 14:12this funky zone where we thought we
343. 14:15wanted to not be a security, should have
344. 14:17just been a security. Now we're a
345. 14:19commodity, but now we're stuck in this
346. 14:21world where the big institutions
347. 14:24can control through the paperation,
348. 14:28the word I just made up, paper of assets
349. 14:31in the futures market. So my hope is
350. 14:35that the next wave, to answer your
351. 14:36question, which again is a really
352. 14:37important question, the next wave of
353. 14:40adoption will be people who say, you
354. 14:42know what,
355. 14:44I have three buckets. I have my
356. 14:45liquidity bucket to fund my lifestyle,
357. 14:48right? If I need to pay my bills or pay
358. 14:51the mortgage or pay a tuition payment, I
359. 14:54have to have a certain amount of money
360. 14:55that needs to be fixed income or actual
361. 14:57income. I immunize those liabilities.
362. 15:00That's good. Then I've got my second
363. 15:03window, which is kind of 5, 10, 15, 20
364. 15:07years. That's my saving zone. I'm I'm
365. 15:09I'm looking at my goals and and there I
366. 15:12need equity. equity, common stocks,
367. 15:14preferred stocks, private equity, real
368. 15:17estate equity, commodity equity. I need
369. 15:18equity because I need it to grow and and
370. 15:20and achieve my goals. But the problem is
371. 15:24over a 30-year period, equity, 85% of
372. 15:28companies disappear over 30 years. It's
373. 15:31amazing stat. So, you don't you're not
374. 15:35guaranteed to make a return by investing
375. 15:37in equity. There's risk and volatility.
376. 15:40So, what you really need is something to
377. 15:41protect your value. And historically,
378. 15:44for 5,000 years, there was one asset,
379. 15:46gold. Actually, there were two or three.
380. 15:48Gold, silver, platinum, maybe. Diamonds
381. 15:51worked until the lab grown and now
382. 15:53they've been disastrous. But there were
383. 15:55a handful of stores of value. Gold was
384. 15:57the best. Now, we've got gold and
385. 15:59Bitcoin. And so the next wave of
386. 16:01adoption people who say you know what
387. 16:03when I need to secure my family's future
388. 16:07and to preserve my purchasing power like
389. 16:10my wealth like if I earn a dollar and I
390. 16:12put it in the bank 10 years from now
391. 16:15I'll take it out it'll be worth less
392. 16:17because there'll be too many dollars. If
393. 16:19I put it in gold or Bitcoin, it'll be
394. 16:21worth the same or more because those
395. 16:24assets stay the same while the currency
396. 16:27devalues.
397. 16:29Anyway, long answer. You know, Mark, one
398. 16:32of your previous answers and part of
399. 16:34that one that you tied in, you talk
400. 16:36about adoption cycles and you talk about
401. 16:37what's driving these cycles and
402. 16:39speculators and and it kind of gets
403. 16:41magnified as as we get into the early
404. 16:43adoption phase and go through these
405. 16:44different phases of adoption.
406. 16:46One of the thing, one of the prevailing
407. 16:48narratives of, you know, for example, it
408. 16:50was massive in the 2021 cycle was rates
409. 16:53go to basically zero and money's free
410. 16:55and these speculators come in and just
411. 16:57drive the thing skyhigh. Now, Bitcoin is
412. 17:01in a whole new environment, right? We're
413. 17:03seeing Treasury yields remaining
414. 17:04elevated.
415. 17:05>> Uh, as Bitcoin is trying to recover, can
416. 17:08Bitcoin, in your opinion, continue to
417. 17:10see normative appreciation throughout
418. 17:12its bull cycles? uh where the 10-year
419. 17:15Treasury yields stay above 5%. Or do you
420. 17:18think that rallies look a little bit
421. 17:19different until that situation gets
422. 17:21figured out?
423. 17:23>> Again, fantastic question. And the and
424. 17:25the the key point here is that anomalous
425. 17:29period, right? From 2009, March 2009
426. 17:34till basically, you know, a year and a
427. 17:36half ago, we had an anomalous period
428. 17:39just like we did in the 1930s. Like
429. 17:42people think QE and zero interest rates
430. 17:45were invented in 2009.
431. 17:48Oh, go back and read a little history.
432. 17:50In 2029, in 1929, we had the crash. And
433. 17:54then in 1931, we cut interest rates to
434. 17:56zero. Because remember 1931,
435. 17:59America was an emerging market run by a
436. 18:02gang, right? If you've seen the movie
437. 18:04Gangs in New York, right? They got the
438. 18:06tall hats. I mean, it was not a really
439. 18:08safe place. It wasn't the dominant
440. 18:10superpower. The UK was the dominant
441. 18:13superpower. The pound sterling was the
442. 18:15world reserve currency and we were a
443. 18:17little emerging market that was on our
444. 18:19way to ascendancy. And it wasn't until
445. 18:211944 when we became the superpower. So
446. 18:25what happened is in that period we had a
447. 18:28bunch of debt, okay, following the crash
448. 18:32and no one would buy our bonds because
449. 18:34we were an emerging market and we were
450. 18:35probably going to default. So we had to
451. 18:37buy our own bonds. That's what QE is,
452. 18:40right? No one will buy your debt, so you
453. 18:41buy your own. So, we did it. We learned
454. 18:44Japan's been doing it for the last 20
455. 18:46years. They and they they are
456. 18:49unbelievable at it. Like the Bank of
457. 18:50Japan now owns about 70ish% of their
458. 18:53outstanding government debt. And when
459. 18:55they get to 90ish, they'll just cancel
460. 18:57it all. It'll be amazing.
461. 18:59So, America's starting that, right?
462. 19:01Scott Besson said, "We are the house.
463. 19:03Wave it in. If China won't buy it, if
464. 19:06Japan won't buy it, then we'll just buy
465. 19:08it. A Ponzi scheme actually. But but
466. 19:11okay. So the issue here is that period
467. 19:15of excess when interest rates were zero,
468. 19:18money was free, people would borrow
469. 19:20money and they would buy appreciating
470. 19:24assets. The problem is if you borrow
471. 19:28money at zero and you buy a a stock that
472. 19:31yields 4%
473. 19:33and it's very safe and it's never cut
474. 19:35its dividend, pretty good arbitrage.
475. 19:37People do that all day long. If you buy
476. 19:40something that has a 12% yield, that
477. 19:44might be a little risky. It might be a
478. 19:45high yield bond, you know, closed end
479. 19:47fund or something. If you buy something
480. 19:51on margin, let's say you have Amazon
481. 19:53stock and you margin it, if you margin
482. 19:5750%.
483. 19:59Reg, no problem. Why? Well, because
484. 20:02Amazon, interestingly, Amazon and
485. 20:04Bitcoin have the same volatility. Amazon
486. 20:07has been a public company for 30 years.
487. 20:10Every single year, they have a
488. 20:12double-digit draw down, including this
489. 20:13year. The average, this is crazy, the
490. 20:16average is 31%.
491. 20:18Average on average every year for 30
492. 20:20years you've lost a third of your mind.
493. 20:22When was the right time to sell? Never.
494. 20:25Who actually bought at the IPO and held
495. 20:27to today? So there's five people in the
496. 20:29world. Jeff, mom, dad, ex-wife, Bill
497. 20:32Miller. That's it. Because everybody
498. 20:33else gets shaken up by the volatility.
499. 20:36Same thing with Bitcoin. You should have
500. 20:38just bought it. Or I I was on TV back in
501. 20:41in 2017 and while I was on the show, it
502. 20:43was only like six minutes. the price
503. 20:45went from like 10,000 to 8,000. And
504. 20:47Melissa Lee looks at me and says, "Well,
505. 20:49what should we do?" They're like, "Buy
506. 20:51it." And her face like literally she
507. 20:53just she just like, "What? What? Yeah,
508. 20:56you'd always say that. Yes, I would. Buy
509. 20:59it today. Buy it tomorrow. Buy it next
510. 21:01week. Buy it next month. Don't don't buy
511. 21:02it all at once. Accumulate ownership of
512. 21:06the most powerful computer in the world.
513. 21:08The Bitcoin blockchain is the most
514. 21:09powerful computing network in the world
515. 21:11by a factor of 1,500
516. 21:14times more powerful than the CERN
517. 21:16supercomputer. It is the most powerful
518. 21:19asset that you want to own a piece of.
519. 21:22So all that said, um when you can borrow
520. 21:26money cheaply and you buy a speculative
521. 21:29asset, there's risk because there's
522. 21:31volatility and you get a margin call and
523. 21:34they take your Bitcoin. I have a friend
524. 21:36called me up said they stole my Bitcoin.
525. 21:39What are you talking? Says, "Well, I
526. 21:41borrowed a bunch at at Bitfinex." I'm
527. 21:44like, "Stop." No, you're an idiot. You
528. 21:48put, you know, 50 times leverage on an
529. 21:5080 vol asset, didn't make the margin
530. 21:52call, and they seize the collateral.
531. 21:54That's not stealing. Now, maybe if if
532. 21:56their intent was to steal, maybe that's
533. 21:57a little different, but but no, that's
534. 21:59just dumb. So when people use too much
535. 22:02leverage as they were in zero interest
536. 22:04rate environment, you'd get bad
537. 22:06outcomes. Today with a 5% treasury, I
538. 22:10think you don't have as much leverage,
539. 22:11which is I think why instead of going
540. 22:13down 84% this time, we only went down
541. 22:1651. And why I think the next rally won't
542. 22:19be as big. We won't have a 10x or a 20x,
543. 22:23but we're still going to accrete value.
544. 22:26And again, go go to Tim's chart. It's a
545. 22:28parabolic parabolic chart, okay? Based
546. 22:31on metap's law. And if you think about
547. 22:35it, it's one of my pet peeves of
548. 22:37long-term charts. You know, everybody
549. 22:38looks at these charts that go like this
550. 22:40and they make this big parabolic move,
551. 22:42right? But that's a long-term chart,
552. 22:44right? It has to be logarithmic, right?
553. 22:46Going from 0 to 100 is the same as going
554. 22:49from 100 to 200,
555. 22:52right? But 100 to 200 is only 50% move.
556. 22:550 to 100 is a is you know a lot of
557. 22:57percentages. So you have to use
558. 22:59logarithmic charts to get the smoothing
559. 23:01of that effect and the same thing of
560. 23:03logarithmic relationship to network
561. 23:06value in metaf's law you get a parabolic
562. 23:09move. So our first move and our first
563. 23:11window was big 20x. The next one's going
564. 23:15to be 10x. Then it's going to be 5x.
565. 23:17Then it's going to be 2 1/2x. And it's
566. 23:19just but it's just going to keep
567. 23:20accreing value. The total value gets
568. 23:23larger, but the incremental move is
569. 23:25going to be small.
570. 23:27>> Markus, founder and CEO of Morgan Creek
571. 23:29Capital. Thanks so much. That was
572. 23:31awesome insights. I hope we can have you
573. 23:32back soon.
574. 23:33>> Oh, anytime. I appreciate it, guys. And
575. 23:35appreciate uh the great question.
576. 23:37>> Yeah, appreciate you. Have a great rest
577. 23:38of your day.