The US Is Long-Term Insolvent | Lyn Alden

The US is long-term insolvent, not in the sensationalist sense, but in the sense that the obligations that they owe are basically untenable when you also have bondholders expecting to get paid back their money on a real basis. We don't really have the tools to deal with fiscal-driven inflation, most of our tools are literally inherently designed around lending-driven inflation, it's just not the core of what's happening right now. You know, we don't have tools to deal with an energy crisis, we don't have tools to deal with 7% of GDP deficits, but they can't really say that, and so he comes out, says a lot, and then doesn't raise rates, and the market's like, "Why is he not raising rates when we have above-target inflation?" And then the deeper question is, even if he did, would that actually solve it? Lyn Alden, good to see you. This is very high-definition for you, you must have better webcams in Egypt than they do in the United States. Or just a different setup that makes it look better, better lighting, I guess. Looking good. How is everything going? How are you doing? I'm doing well. How are you? I'm good. I'm confused. There's a lot of crazy stuff going on right now, and a lot of stuff that's really been playing into your "nothing stops this train" narrative. We've got to start on the Treasury buybacks. I think that seems like the most obvious place to kick this off. With them increasing, with Scott Percent increasing the Treasury buybacks, is that the most clear indication that they know, we know, everyone knows that this is fiscal dominance right now? I mean, I think that's the evidence of it. Yeah, I mean, basically when a country gets deep enough into fiscal dominance, you start to get various types of financial repression. This is one of the softer types of it. So on the far end of the financial repression curve, you have yield curve control. That's kind of like the nuclear option. And on the softer side, you have kind of, you know, just kind of moderate amounts of QE or, you know, Treasury buybacks and things like that. And so the fact that they are doing it, you know, we're not in a recession. They're not really trying to stimulate anything. They just don't like where yields are. And so we see that kind of intervention. Now, the interesting thing is that it's not acutely needed. So when we saw, you know, the Fed step in in 2020, that's because the off-the-run Treasury market outright broke. It just became illiquid, basically was going no bid. And so you had all that for selling. So they stepped in. In 2022, the Treasury market got really wobbly. And the UK's Treasury market, you know, the gilt market outright broke. The Bank of England had to intervene in 2022 for the US. It just got really rough for a period of time. So the move index spiked, liquidity got really bad, but it didn't outright break. And what's interesting here is that, you know, the move index is pretty modest. So you don't really have unusually high Treasury volatility. You don't really have unusual signs of liquidity stress in the Treasury market. You just have yields going up fairly orderly. To a level that they're not really comfortable with, while you're hitting certain kind of milestones, you know, $40 trillion in US public debt, over 5% yields on the long end. It's very uncomfortable for the administration. And so we have this kind of intervention, which is not out of the ordinary for countries that are in fiscal dominance. And I would say the only kind of interesting thing about it is that it seems very premature. Like it didn't have to be this month. Even though that these types of things are going to happen. And I think that's a good thing. I think that's a good thing. older treasuries that have kind of just weird numbers of remaining years. And so they're less liquid. And so it's not that unreasonable for them to say, okay, we're going to buy back some eight and a half year treasuries or nine year treasuries and issue some fresh new 10 year treasuries. Now, part of why they end up having to do that is because there's, again, it still ties the fiscal dominance. We have such a large stock of debt out there. And relative to even compared to new issuance, but it's just a very large stock already out there. So they have to kind of intervene in their own market to kind of keep it somewhat liquid. But the actual outcome of that is not really that significant. Now, where it does get significant, where it becomes the one out of 10 where treasury buybacks are actually noteworthy is one of two things. One is you buy back a ton of long end debt by issuing extra T-bills. So you shorten the duration. That is a somewhat pro-liquidity move because you're taking duration out of the market. It's not the same thing as quantitative easing, but it's something like an operation twist by the treasury. So it is a relevant factor in markets. And then to your point, it then depends on size. You know, $4 billion is not much, but if you do $4 billion over and over and over again, it can start to add up even in the macro sense. But it's still not, you know, we're not talking like 2020 COVID level, like stimulus bazookas or anything. We're just talking about a around the margins of pro-liquidity move. And then the other notable thing, would be an unscheduled announcement of these things. They basically, instead of, you know, coming out every three months or so as a treasury generally does and says, okay, this is what the next three months look like for our, you know, operations. When they come out with unscheduled things just weeks after their prior scheduled announcement, kind of like how, you know, when the Fed comes out with a change between meetings, that's an event. And so this one was notable because they're upping buybacks at an unscheduled time. And so, you know, I don't know, I don't know, I don't know if it's a good thing. I don't know if it's a good thing. Upping buybacks at an unscheduled time with either T-bill issuance or potentially draining the treasury general account. So the actual magnitude of the impact, it's not zero, but it's, you know, it's not, it's not the biggest thing out there, I would say. But the signpost that they're doing that is showing, you know, non-traditional methods of operating the treasury, which of course, gets everyone's, you know, the hair on the back of their neck stands up because it's suddenly like, the something's, you know, there's a disturbance in the matrix that the black cat walks and then it resets and walks by again. And people are kind of like looking at that now. Obviously, it was an unscheduled announcement. And in terms of the duration, are they retiring longer-term bonds and issuing T-bills? Is that how they're doing it? So because they did not announce an increase in coupon auction, like, sizes, the presumption, yeah, is that basically that they're still issuing the same number of longer-duration treasuries that they're going to do, but then they're buying some of those back, which means that the difference has been made up with either changes in the TGA or T-bill issuance. And so I know that the sort of shorter term debt is more cash-like in the economy, but what does that actually mean? Like, what can people take away from that? What changes? So in general, yeah, it's more cash-like. It basically means that they're funding more of their deficit with things that are more cash-like. It also means that they're more, you know, subject to short-term interest rates. It generally means that there's just less duration in the banking system, in insurance companies and foreign markets for them to have to absorb and compete with other longer-term savings because, you know, a 10-year bond in some sense competes with an equity because you're thinking, okay, what do I want to own for 10 years? Obviously, it depends on the fund structure itself. That's a different discussion, but that's essentially what the instrument is, whereas a T-bill is more like competing with a bank deposit, with other kind of short-term stuff. So by taking out duration, you're slightly easing the competition for other longer-duration assets. And one of the ironic aspects of it is that, generally speaking, the more T-bills they issue, like as a percentage of their debt, the bigger their TGA kind of has to be. Not in the short term, but part of the reason they have such a big TGA, I mean, partially gives them a buffer against government shutdowns, basically refusals to the debt limit they have then a buffer. But also the bigger their amount of T-bills, the more they have to roll over on a constant basis, which means they have to have more cash at hand to avoid disruptions. And so, you know, one of the, like the Fed talked about potentially reducing their balance sheet. Well, one of the options to reduce their balance sheet is if the Treasury somehow could reduce its T-bill issuance, increase the long end of the curve, the Fed might be able to operate with a, you know, half a trillion TGA. Instead of a trillion TGA, right? But that, of course, has the uncomfortable thing of just putting more duration into the market. So, again, it's not the end of the world that they're around the market. I mean, it's 40 trillion in debt, of which 30-something is publicly traded because you have intra-government debt as well, like Social Security owns debt from the government. But you have 30-some trillion in actual securities out there that trade. And we're talking about billions and billions of intervention. So, again, it's not massive. It's just the fact that it's unscheduled and it's not a crisis and that it's happening anyway. If you hold Bitcoin long enough, there's going to come a time when you need some dollars. It might be a tax bill, a business expense, life getting in the way. But whatever it is, it might come at a time when you don't want to sell your Bitcoin. That's where Ledin comes in. Ledin lets you borrow against your Bitcoin instead with tiered rates that go as low as 9.25%. So you don't have to sell your stack if you don't want to. Ledin have operated through every market cycle since 2018 and have originated over $11 billion in loans. But the important part for me is the way Ledin handles these loans. Your collateral is held in custody and never lent out to generate interest. And Ledin's more than just loans. Tether Gold is now live alongside your Bitcoin with instant trading across 10 pairs. And later this year, you'll be able to borrow against gold in the same way that you do with Bitcoin. Ledin really is an awesome company. I've used them multiple times. The applications have taken me less than 15 minutes and you have the right amount of time to invest in your account within hours. If you want to check out Ledin, go to ledn.io and use the code WBD for 0.25% off your first loan. That's ledin.io and use the code WBD. If you own a Bitcoin ETF, especially if it's GBTC, you need to listen up. Spot Bitcoin ETFs provide price exposure to Bitcoin, not direct ownership. You can't withdraw it, you can't self-custody it, and they charge you a management fee every year to hold it. Well, Swan recently announced Swan Real Bitcoin Exchange and it's ready to use right now. RBX is a structured in-kind exchange that converts your spot Bitcoin ETF shares into real on-chain Bitcoin. It does that without selling on the open market and it's designed to support a tax-efficient outcome. So for example, if you hold GBTC, you're paying one and a half percent a year in management fees for Bitcoin price exposure. But by swapping GBTC for real Bitcoin with RBX, you can drop that figure as low as 0% by just holding it in self-custody. This is designed in a way that maintains your cost basis and in a manner that supports the deferral of capital gains tax. So if you own a Bitcoin ETF, especially if it's GBTC, you need to talk to Swan Private about RBX today. Head over to swan.com/wbd and book in a call with one of their team. That's swan.com/wbd. And how did the bond market react to this? Did it react in a positive way? Well, generally the knee-jerk reaction is to act positively. Maybe it's the algorithms, maybe it's the initial human traders. But generally speaking, the treasury market has just shrugged off the intervention, which generally I think makes sense. Because again, it's not that. Treasures are kind of trading at a level that sort of makes sense relative to the short end of the curve and relative to where inflation is. And so yeah, the treasury market just kind of said, "Okay, we hear you, but we're going to ignore you." So yields just kind of, they bounce right back. They even grind it up a little higher. Japan was hitting 3%. It's not just a US problem. It's most countries with a notable exception of China. And so a lot of these countries, their bond markets are kind of grinding up in tandem. And partially it's because the world's kind of changing its perception of what inflation might look like over the next three, five, 10 years. They're changing their assumptions about whether or not any of these countries are going to get their deficits under control in any sort of investible time horizon. And then things like the AI trade even, when you have massive mega cap companies, like the hyperscale, which is a very good example of that, and the scalers issuing a ton of debt, that actually in some sense competes with the sovereign bond market. These really big credit worthy issuers issuing large liquid amounts of bonds. And they're willing to pay pretty high rates because they think they can get a better ROI on their AI build out. And so there's a spread that makes sense somewhere between, say, what Alphabet's issuing and what the US government's issuing. And if Alphabet's yields are going up, it can drag US government yields up, especially when you take in multiple alphabets, when you have multiple large mega cap companies that collectively are worth many trillions issuing a substantial amount of debt to do what they're doing. So when you say that the world's waking up to what inflation is going to look like, is that obviously higher than 2%, probably lower than 10% for the rest of the decade? Which is something you've been saying, I think, since like the early 2020s, you said this was going to be a decade of higher inflation. Yeah, I think that's what we're seeing. Basically, for a long time, let's say in the US you have 7% average money supply growth, but then you have various deflationary offsets i mean we had the you know 40 years of moore's law for example so computers is getting cheaper cheaper cheaper uh we did automation of manufacturing we did offshoring so you connect western capital with eastern labor you know when china opens up and and the soviet union collapses we have you know labor and resources and capital come together kind of stamp out these inefficiencies that that existed uh obviously there's winners and losers from that trend but that it's a deflationary force uh and the issue going forward is that that's that's kind of done um uh which is that you don't really have like globalization we're still globalized world but we're not like increasingly globalizing uh moore's law is slowing down because of some like kind of structural limits uh we suddenly got a lot more demand for compute because of ai so rather than just kind of like saving money on on moore's law it's like well okay now we can actually just but we need kind of 10 times more of it and more electricity to run it all um and so for and then so when you have that kind of ongoing money supply growth uh you don't really have the deflationary offsets anymore so if you had say seven percent money supply growth uh but three percent a year in in various productivity growth or things like that then actual price inflation in aggregate might be four percent uh but if you only have one percent uh you know savings then you get more like six percent inflation uh and obviously you know during periods like a war or a pandemic lockdown you can get negative productivity so it can actually it can add to inflation so there's there's multiple kind of factors here that are just headwinds for getting inflation down to a sub two percent target even the way they measure it which already has its own flaws but let's just let's even just take their measurement at face value uh getting getting below two percent when you have six seven percent money supply growth is a lot harder when the deflationary offsets are vanishing and then basically you know in theory certain types of fiscal deficits could you know potentially not be that inflationary if they were like extremely efficient like if you if the government said okay we're gonna run a big deficit but we're somehow very efficiently build out highways power plants uh and you know manufacturing facilities something like you know kind of the like eisenhower in like the 50s for example they did like the interstate highway system it's if you're going to spend money it's one of the most efficient things you can spend money on for example uh whereas what we're working on right now is we're primarily doing throughout the west and japan uh you know and elsewhere is that we have a demographics issue so we built these entitlement systems based on every generation being bigger than the prior one that's not happening anymore uh and so we have all this this just obligations going to pure consumption basically just financing uh the the older end of the of the age spectrum um and rather than building things per se uh and so that's it's just more inflationary because you don't have a lot of inflation without an increase in in production per se i'm really interested to know what say let's say walsh does at this point because he at thing at jackson hole he came out and said the two percent inflation target was still very important to him that's what he's aiming for and he's kind of flirted with hiking rates again but i know that or i think that you think that uh hiking rates might not even fix inflation yeah that's the issue so i'll answer that question by starting with why that's the case uh which is when people think that they're going to have to take the bitter medicine because the problem is that if people think of inflation they immediately think of if you've raised rates you can fix it because they think of of paul vorker he you know it's like okay we'd have to take the bitter medicine and we can do this the problem is that the the causes of inflation in in the 70s and early 80s are different than the causes of inflation now uh so in in the 70s and 80s you had actually low government debt to gdp they because they already went through you know kind of the the debasement cycle from the 40s into the 70s away uh so debt to gdp is pretty low i mean it bottomed at something like 35 in the us um and inflation instead was coming from a couple major factors one was that baby boomer generation the biggest generation was entering their home buying gears which means peak credit formation so so peak fractures or bank lending rates uh and two you had an energy shortage so you have a tangible resource uh you know geopolitical constraint and then you have faster than average money supply growth then you have uh you know you have uh you know a problem uh but the the core of it was was the energy and then the uh the bank lending and so when they when he raised rates super high it did a couple simultaneous things one is uh by raising rates super high and strengthen the dollar which killed emerging markets that were dollar indebted which at the time is primarily latin america so it kind of put them into depressions and they reduced their oil consumption so that was like we take we take demand out of the market by by you know killing the economies of of that they got over indebted uh in our currency uh so it keeps more for us that's kind of the the strongest wins uh so that's the brutal one but then domestically it so it slows down borrowing and lending because people can't afford uh as much borrowing as they could with lower rates so you slow it down the money supply growth and then the other factor is that it does increase the deficit because you do blow out interest expense but it's less of a factor when you have 35 debt to gdp so you slow down bank lending that's a bigger effect than blowing out the interest expense now if you fast forward to today uh bank lending rates are pretty normal meaning that the the the growth of the money supply from bank lending is kind of standard at the current time and instead we have larger than average structural deficits that are going to social security medicare uh defense uh and then from there it trickles into the economy because the the medicare worker like the you know the workers in the in the healthcare system the workers in the defense system the soldiers that that paycheck i mean that eventually kind of floods into the rest of the economy as well circulates around uh interest expense is very high that again also partially that circulates back in i mean some of that's expendable and the problem is when you say okay okay we have high inflation we got to increase interest rates well when you have over 100 percent debt to gdp uh you know we we do put some downward pressure on borrowing so for example because mortgage rates are so high it's it's it's pretty hard to afford a home there's not a lot of home turnover at the current time you do put some downward pressure which which in a vacuum can be deflationary but you blow out the deficit interest expense by an even bigger absolute number uh so every time they increase interest rates people that are cash rich in their money market accounts get a raise and then go out and spend more which actually defeats your purpose of trying to quell and inflation so when you when you go above a certain point it's like alice going through the looking glass everything all the rules just flip uh and it's not necessarily one-time thing but it's kind of there's like a transition phase where they start first they first they just kind of nullify so it's kind of like you know you go from industry rates being disinflationary to higher interest rates being kind of neutral and if you get fur enough far enough in they actually can potentially get inflationary um uh and so i don't think we're there yet but we're more in that neutral zone where you're just not you're not actually tackling the core issue which is the seven percent of gdp deficits the two trillion dollar deficits that and interest rates only increases that um you know they already they already have restrictive housing uh in terms of because interest rates are so high so that's the first issue and then the second issue is so if you're worse there like when people say what do they do i mean that's where i'm sympathetic because i wouldn't know what to do uh where the part the part that i'm unsympathetic is then why did you take that job because at least i would have the i wouldn't take the job if i didn't know what i could do um now so you have to either think you know what you're going to do or pretend that you know what you're going to do so he has to of course as the fed share he has to part of it is is perception management you say our target's two percent we're gonna get there we have the tools to get there uh but partially the the market's losing confidence in him because you know his initial speech was fine but then in subsequent every time he talks again he kind of doesn't say a lot because there's not a lot to say uh and you know he can't come out and say hey actually we don't really have the tools to deal with fiscal driven inflation most of our tools are literally inherently designed around lending driven inflation it's just not the core of what's happening right now you know we don't have tools to deal with an energy crisis we don't have tools to deal with seven percent of gdp deficits but they can't really say that uh and so he comes out says a lot and then doesn't raise rates the markets are why is it not raising rates above target inflation and then the deeper question is even if he did would that actually solve it and i would say probably probably not yeah it seems really hard because it's like there's sort of the question what should he do what can he actually do and then what will he do under pressure and and it sounds like you know what can he do there might not really be an answer pretty much yeah i mean so he can like i i've been on the record thinking that he'll probably raise zero to one times this year um uh it's still not clear i don't know you know uh if he does one is probably symbolic um you know if he does two it wouldn't be utterly shocked if he does zero i'd be like yeah i mean that's this you know and the the bigger issue is that you know there's a lot of attention paid on how many 25 basis point changes if any he'll do whereas i i think that the the band that matters is like like anywhere and like 50 base points is higher 50 base points lower barely matters uh when you're running seven percent of gdp deficits and you have crack spreads uh at a hundred dollars a barrel so uh you know the the the energy crisis you know when you have refineries taken off the market You know, we have high diesel prices, not necessarily because oil itself is super expensive. I mean, that's being intervened in in various ways. But you do have really big spreads between oil and refined products. And so that, fiscal deficits, and a handful of other matters are, I think, much bigger macro variables than what the Fed does 25 basis points at a time when they're in that neutral zone where rate hikes, they do slow down some things. But then they actually ironically accelerate other things that are roughly of magnitude or bigger than the things they slow down. Yeah. And when you say, like just earlier, you said they're not really tackling the core issue, which is the deficit. I mean, they know that that's the issue, I'm sure. Like, is it just that they can't tackle that? There's nothing to be done there? Well, pretty much. I mean, that's more Congress and the president. So, you know, you'd have to have Democrats and Republicans agree on some combination of tax increases or spending cuts. You know, sign it, get through, you know, the House of Representatives and the Senate and then have the president sign that. I mean, that's a huge thing. And then because the U.S. is so financialized, so many economies, if they somehow got through that part, they could actually potentially reduce their deficit. The problem is that the U.S., even if we somehow do that miracle, you know, they come out and say, we have this big package. We're actually, it's a grand bargain, like Obama was trying to get with his speaker at the time, and they never, you know, they couldn't. They couldn't agree on anything to make happen. Let's say there's a grand bargain today and they say, OK, we've agreed, you know, put aside our differences. We're going to we're going to reduce the deficit. The problem is that because, you know, stock market is something like 200 percent of U.S. GDP and we have such significant wealth concentration that a very significant percentage of tax receipts come from executives making a lot of money, executives getting a lot of stock compensation and things like that. And then they, you know, they pay into the Treasury. If you slow down the deficits, you'd likely see negatively impact financial markets, which on a lag starts to impact capital gains taxes, executive compensation taxes, and then therefore about a year later negatively affects your tax receipts. So it actually it's like a Gordian knot to try to untangle this in a way that that actually does it, which is why I think that the chance of that happening is virtually zero. So it's like a Gordian knot to try to untangle this in a way that that actually does it, which is why I think that the chance of that happening is virtually zero. know what people are meant to do to prepare themselves for that. Oh, I mean, it's really good question. I think certainly in a macro sense, I've described this as a macro heavy decade and longer. So I mean, I mean, back in the 2010s, you know, my first website was running like a dividend investing blog, right? I mean, my initial interest in investing was equities. And I grew up, you know, reading about value investing, and Warren Buffett saying, like, you know, if you spend two minutes on macro, you spent two minutes too much, right? Because just buy good companies and you ignore what's happening around you. And that was really good advice when you had 40 years of declining interest rates, 40 years of rising valuations, occasional recession, but if you just, you know, the point was just hold through it. And in the US markets, you did fine. Now, when you kind of get to the end of that 40 year period of declining interest rates, and you get to the next kind of sovereign debt bubble, then we're back in a macro heavy decade. And it feeds on itself. So when you have a sovereign debt crisis, even a slow motion one, you get more interventions by the sovereign. That's when you're more likely to get trade wars, you're more likely to get capital controls, you're more likely to get interventions in markets, you know, company owning pieces of companies, state capitalism, things like that. Industrial policy terms that the term sounds okay, industrial is good and policy is okay. But it basically means more intervention by the government in the direction of industry, especially physical industry. And so it is a very kind of macro heavy period. And, you know, it's, I mean, the last period of the last long term debt cycle the world was in was like the 1940s. And so we're back macro speaking in that kind of environment. Hopefully nothing as extreme as that. But yeah, we have, you know, we have multiple wars that are active. We've got very eccentric decisions. decisions, you know, among leadership. You know, we're not in a world of Kennedys and Eisenhowers at the moment. You know, we're in the world of, yeah, we're in the world of presidents that can't kind of get either get out a full sentence properly, or they're just grifting in public, and or both. And, you know, it's just like, that's the, you know, that's the oscillation we're between, you know, the Biden Trump versus the, you know, the Eisenhower Kennedys, different world. And so people, I think, rightly have lost trust in institutions, whether it's government institutions, whether it's media, whether it's big corporations. You know, and so it is, you know, I think it's, people, of course, have recency bias is the joke of like, you know, you can go back in history, in like old news articles and writings. And like every generation, you have the older generation will play with the younger generation, like the younger generation is not okay. Right? So of course, it always seems like that's the case. But if you go back in history, it's funny how reoccurring that is. So some things are forever. And everything seems like an emergency. And yet, it that's, that's just how things go. But from macro perspective, this decade is just quantifiably very different than anything we've seen in in any adult investing time horizon. So we have to go back to basically what your great your great grandparents were investing through to find anything that kind of remotely resembles this, with the exception that if you look at emerging markets, you can find more situations. So at least the developed world is going through a situation we haven't seen in call it 80 years. Whereas they're actually taking on some emerging market characteristics. I mean, where I'm doing this interview from we are official inflation rate is 15%. And it's just it's a normal Thursday is that it's 15%. What was it last year? Something like 15%. What was it? You know, a few years ago, something like 15%. I mean, it peaked at 38%. Officially, I think it was. And you know, like, we were we were at dinner last night, and people are taking their kids to childcare and going to work. And it's it's a mess. But it's just that that's the world that that's where that's where this place has adjusted to, unfortunately. And it's just it's a it's a different world. Is that coming to a place near us? Do you think then? I don't think 15% inflation anytime soon. But I still hold that, you know, we're gonna have above target inflation for any sort of investable time horizon. And that holding kind of paper assets that don't pay your yield that that's above that are going to get debased. And so you want to own scarcer things that are not in the bubble. Bitcoin, and Bitcoin, obviously rallied after the Treasury announcement. Do you think bear markets done? We're back in a bull market? How what's your sort of big picture take on Bitcoin right now? Yeah, good question. So I you know, before then, I was thinking, Okay, I think that the bottom is looking closer. I don't try to time exact bottoms. I mean, like, you know, I think it's like, you can ask, is it you fork? Or is it cheap? Is most fast money elsewhere? Or is fast money here? Those are the big questions I ask. And so for multiple metrics, it was like, no fast monies elsewhere sentiments in the gutter. Various on chain indicators are kind of, you know, in their in their bottom, you know, 10, 15% of what they typically get to in a bear market. And so I was kind of looking for a bottoming formation. And, I mean, this is kind of showed like, this was like one of the biggest liquidations of shorts. And in Bitcoin terms, it wasn't that big of a move. And it wasn't that big of a reason. And it's just how bearishly things were positioned. And, you know, I don't think we just go straight up from here or anything like that. But I think there's a good case to make that the bottoms in. If it's not, and we retest a little bit lower, I mean, I think it's, I think my kind of framing here is that, you know, three years from now, this will look like a great time to have bought, regardless of whether the 58k gang really has the bottom here, or if you manage to go a little lower. But I think Bitcoin is in a good position for the years ahead. Yeah, the interesting thing is the fast money being elsewhere, because it has been in the AI trade for the last couple of years, like we've really didn't see a euphoria last time, last bull market in Bitcoin, like we have done previously. And one of the narratives that's going around Bitcoin circles at the moment is like, when this AI trade eventually slows or rolls over or whatever happens there, that money has to look for a new home. And Bitcoin is maybe one of those potential places. Do you think that's right? Do you think that's where money will flow? Well, I think it's partially right. You know, I would caution against narratives in general. But, you know, I do think that right now, so for a long time, Bitcoin was the fastest horse. And then with AI, that became the fastest horse. So any money that just says, I just want to own the fastest horse in nominal terms goes there. Bitcoin is still unique in the sense that you can self-custody it. It's an asset that you can actually own, you can pay with it permissionally, it's not a stock. And so it's got that gold-like aspect to it. And obviously differences than gold, you know, several pros and some cons compared to gold. And I do think that, you know, once the AI trade gets exhausted, meaning that it's, you know, it's not to say that it's a bubble per se, or that it's just going to roll over and, you know, get cut by two thirds or something. But if it stops going up at the rate that it does, because it's already kind of priced in the next several years, it's already a big percentage of global GDP, then there will be money saying, okay, what's the next trade? And, you know, one way of looking at things is like, so I keep using this example, like during 2025, one of the best performing things out there was like Latin American bank stocks, like Brazil's biggest bank, Colombia's biggest bank. And like the US was like putting like 50% tariffs on Brazil. Like who would have added on their bingo card the year of the trade war that like Latin American bank stocks are where you want to be. And yet that they did in general, they did great. And the reason, largely was just things stopped going badly for them. That basically they were already, like the money was already gone. That any money that was already going to leave was already gone. You know, Brazil, let's say Brazil, for example, they had a really high real rates, meaning that their, their, their industry that they set was much higher than their inflation, which eventually attracted capital. And then all it takes is certain market participants to say, hey, there's like banks trading for like six times earnings over there. They're just, they're just not going down anymore. It's like, I don't have a good reason why they should go up, but they're not going down and they're cheap. And why shouldn't I put 2% of my portfolio in it? And then when that happens, then you have, then you have someone that looks at charts and they say, hey, that chart has like a technical, like a, a bottom looking, you know, squiggly on it. So then they hop in and then you, then you're up, you know, 50%. And then you have momentum traders and their algorithms come in and say, hey, that, that thing's going up and our strategy is to buy things that are going up. So then that money goes in. And I think that's, that's essentially what you get with Bitcoin. And it can be any number of reasons. It could be that the AI trade gets exhausted. It could be because, you know, the, the market is sudden surprised by a dovish treasury pivot in the case that happened here. Uh, that just money's washed out, you know, it's only held by, by diamond hands. Um, and just the first thing, it just is not going down anymore. Uh, and people say, hey, here's this like on-chain chart. And every time it gets to this thing, it ends up being a good buy. So maybe I'll just, I had 0%, I'll put 2% into it. Then the charges come in and say, hey, it looks that, that chart doesn't look awful anymore. So then they come in and if you get, you know, if you break 100K and start going up from there, then you have momentum traders coming in. So it just, it just kind of, it becomes self-feeding in a while. And the biggest North star I have is just, is the, is Bitcoin still the best in class of what it does and is what it does have a big enough total adjustable market compared to its current market cap and usage. And if those two things, they still have yeses, then it's an asset that I want to own when it's showing signs of being, you know, underappreciated. And I would say that all that is currently the case with, you know, there's always caveats for risk, but that's how I view things. So it doesn't sound like you're bearish at all, but maybe not incredibly bullish expecting a bull market right away. Is there something you'd have to see for you to sort of flip very bullish on Bitcoin for the shorter term? Is it like, is it breaking that 100K level again? What is it that you're looking for? So part of it is this, I just don't do a lot of short-term trading unless I get a really, really high signal. Like it's pretty rare that I'll have a pretty high conviction short-term call. I mean, breaking well over 80 and staying there would be nice. I mean, right now 80 is kind of serving as resistance. You know, the chart is, I can point out kind of why it's kind of visible in a chart, why that's the case. So, you know, if you break over 80, you get somewhat of a higher high from kind of this bear market period that it's in. So that would look good. But other than that, I mean, it's just in general, I just don't really want to try to make six month or three month views. And instead, I want to constantly ask the question, does this look good on a multi-term basis? Which currently my answer is yes. And so this is kind of how I view things. Is there anything that could ever change that answer for you from being yes? Yeah, I mean, so I, you know, when I saw treasury markets, I mean, treasury companies trading it, you know, three times MNAT for the big ones or almost infinity for the small ones, that was concerning. When I saw altcoin treasury companies coming to market, it was concerning. So at least in the intermediate term, it's like, okay, this is, you know, it's the fast monies here. Longer term, again, it goes back to the two questions. Is Bitcoin the best at what it does? Meaning that as far as, you know, cryptocurrency or as far as decentralized open source money, is it the best one? And because of network effects and because of decentralization and security and intentional simplicity and all that, my answer continues to be that it is and that it has a very, very high probability of continuing to be because those network effects, and things like that feed on each other. So as long as that continues to be the case, as long as there's not some crazy security issue or other, you know, just major, just kill shot on the network. So as long as that continues to be the case, and then two, what do I think the total adjustment market is of decentralized portable money and capital? You know, money that you can bring around the world with you. I mean, we just talked, we had a whole, almost hour long discussion of how kind of crazy the world is. And it's like, you know, in a world of capital controls and fiscal dominance and financial repression, there's a handful of tools that people have where they can actually self-custody their own money and be able to hand that money to another person without centralized intermediaries, like stocks or other things like that. Of course, one of them is precious metals, gold and silver, which that can work great if you don't really want to go across borders and, you know, subject to search and all that. So if you want to stay put and have some gold and silver, and it can, it can do great. I'm bullish on, especially on gold, precious metals in general. Now for people, you know, in America, because our country is so big, it's a continent in and of itself. We often don't think about things like that. But in many other countries, I mean, smaller countries, more borders, more changing, more disruption on average, people do want to move around. And, you know, you can, you know, write down 12 words or even memorize 12 words and bring your wealth across the border. Or, you know, you can pay someone on the Internet for a service and things like that. And so it's like, what is what is the value of that? And of course, it's undebasable as long as the technical details continue to hold up. And so what is that worth? I mean, it is currently something like 0.2% of liquid assets in the world. And it's like, you know, if it's if that is 2%, that's 10 X from here, you know, if it's 20%, that'd be 100 X from here, which I think it's premature to call something like that. But I think it's not out of the question to go from 0.2% to 2% of global liquid assets for something like that. So as long as the kind of total market is still significantly bigger than the current market, I'm kind of long term, structurally bullish. And you talked about the Treasury companies there, and they've had a rough year. And maybe let's forget about the smaller ones that, like you were saying, we're trading at essentially, like I think some of them got to like 30 times MNav. Like forget about those, just the big ones. What do you think the next few years will look like for them? Because let's let's take strategy as the as the biggest. I'm sure they'll do very well in a Bitcoin bull market. And their stretch product is back to par or almost par. Like things are looking fine there. And do you think we'll see them trade at 2X, two and a half times MNav again? Or is that era over? Well, I hate to say never. But I do think that the total euphoria we saw in the Treasury market will probably not be repeated. Meaning that you won't see like strategies at 3X MNav. I mean, Metaplanet, I think 8X MNav. I mean, even earlier back in the really early period. But when they were pretty sizable, they were at 8X MNav for a period of time, six times. You know, I think that era is done. Now, if you get, you know, if you get a crazy enough sovereign situation, you know, you could get, you know, another huge run. But I think in general, the way that like, for example, altcoin markets work is that, you know, you'll have like a new thing that cycle. And that's like, that's where all the money goes. And then that thing has a resurgence in the next cycle. But it's not really as big as like its first cycle. And I think that this was like the Treasury market cycle. And people now know how that ends. And so I think that just capital is more going to be flighty with those things. It's going to care more about quality metrics. It's going to say, OK, we're fine with Bitcoin, Treasuries and, you know, preferred attached to it or convertible debt attached to it. But there's a certain limit of how much you want to pay for that. And so I do think that the big ones that are that are well capitalized will do well in the next cycle. But as a base case, I wouldn't expect them to be as euphorically priced as they were in this cycle ever again. The thing that I can't quite figure out with them is, like, strategy being a sort of more volatile version of Bitcoin. Essentially, it goes up more when Bitcoin is going up, goes down more when it goes down. Makes total sense to me. What I can't figure out is if it can ever be a longer term play where it might go up more in the bull market, go down slightly more in the bear market, but overall net out of being a positive. Do you think that's possible or will it always just be a higher volatility Bitcoin? I mean, I think the end game there would be. Basically, establishing a core business. I mean, ironically, they had that, you know, they still have it with with the software, but basically a core business with the Bitcoin. And I think basically what they have is optionality. I mean, they have a giant treasury. They have more assets than liabilities. Their assets are non debasable, where their liabilities are debasable. And so I think they're like and even the way that Celia has kind of described it is he'll use the reference of like, Manhattan like property, which is that over time, with a long arc of time, the property just keeps increasing relative to the fiat currency. So why wouldn't you go long and short the other with a caveat that you just have to make sure you don't blow up somewhere in the middle? Which, which, of course, is a very big caveat. And so I think that that can get that can get them pretty far as long as they keep doing the no blow up part, which now they've navigated for two cycles. Now, if you do get Bitcoin closer to its total. Just one market, I mean, that's where you start to say, well, why? Why should this trade at a premium? You know, or like if you expect less explosive growth in the future, it's just bull markets are less explosive. And basically what happens is you have trouble kind of justifying the cost of capital at that point. And then it's like, what are you going to do with all that Bitcoin? Could you make acquisitions? Could you become the JPMorgan of the new Bitcoin economy, whatever the case may be? That's kind of I think what. Market participants would expect to see happen at that point. I think that's still premature. And so, yeah, I think it's it's right now, it's mostly just a gap between, you know, what Bitcoin is going to do, what fiat is currently going to do on the when I went on the prior earnings call. My question is really about counter cyclicality, which is that historically, you know, the market wants to issue them a bunch of capital when Bitcoin is high. It doesn't want to issue them a bunch of capital when Bitcoin is low. And so they actually they buy more Bitcoin when it's. When it's high and they buy less or even sell some when it's low. And it's like in the future, could they use their tools to ideally do that in reverse? Yeah. And because if you if you say, why should this company have a premium? One of the answers, I think the most compelling answer would be, well, they have a bigger tool set than anyone else. You know, they have public market access even compared to other ones. They're bigger, more liquid. It's not easy to do. I mean, you need a certain scale to do preferreds. They, you know, they're one of the couple of companies that have hit that scale in that space. And so they have tools to do various counter cyclical things which can accrue shareholder value and increase Bitcoin per share. And so I wouldn't pay three times MNAV, but you can justify above a one times MNAV if you determine that one, Bitcoin is going to keep going up relative to dollars and above their cost of capital. And two, that they're going to pull the levers in such a way that are accretive and that, you know, they have committed to try to be more counter cyclical in the future. I mean, they've learned from two cycles now. So we'll see. We should talk about your treasury company. Do we even call it a treasury company? Tell everyone what Orange Juice is and how you sort of define it. Yeah, I would say it's a company that will have a Bitcoin treasury rather than a Bitcoin treasury company, meaning that it's not a pure play or nearly a pure play. So, yeah, we founded Orange Juice. Those of us at Ego Death Capital, along with Ruben and Adrian as well, additional partners. And it's basically, primarily it's tackling the private equity market. It's basically a permanent capital vehicle, which is a jargon way of saying a company rather than a fund that will seek to buy middle market and lower middle market private businesses that are cash flow positive that generally have nothing to do with Bitcoin, buy them, hold them forever. And accumulate some percentage of its of its income in a Bitcoin treasury. So the combination of cash flows with a Bitcoin treasury, and we intend to accumulate a lot of companies. And the kind of the reason for that is that we talked about the 40 year period of declining interest rates and a really big unlock that did was financialize, you know, small to medium businesses that basically people in New York had really good access to cheap debt, cheaper than the mom. And then they can go out and buy HVAC companies and buy them on really cheap debt. And then they can fire half the staff and optimize things and, and they'll have a fund with an estimated life of, say, 10 years. And so they'll buy a company and then a few years later, they basically want to flip it. They either it depends on the company, they might want to go public with it, they might want to sell it to some other kind of larger strategic buyer, but they're in that more flipping mentality. And it's largely an interest rate arbitrage game. And now that you have a couple major things have changed, we no longer have structures declining interest rates. So you can't just kind of keep playing that same game over and over again. And then two, because of demographics, you have a really big number of businesses owned by baby boomers that are looking for eventual exits. And you know, some of them would like to pass the business down to their kids. But maybe their kid wants to be a doctor or an engineer, doesn't want to run, you know, their, their HVAC business or, you know, that's the kind of the meme. And so they, there's, there's a handful of options. One of the hardest things you can sell is a business. And so to private equities kind of credit, there is a market for it. They create liquidity in businesses, buying and selling businesses. But ideally, you know, if a company does not want to have it get chopped up. And leveraged, you know, companies that emerged from the private equity process generally have a higher than average bankruptcy rate, because they've been hollowed out and leveraged for kind of the short term optimization. You know, we instead say, Okay, well, if you care about legacy, and if you want to even keep participating in the company, and you know, have kind of equity upside, that's what we want to do, we want to come in and buy a business, help where we can, I mean, we can bring in, we can bring in a lot of people, we can bring in a lot of people, but we can't do it. We can't bring in world class AI experts to help, you know, with your administrative back end. But we don't want to just carve up and shitify the business itself. And nor are we going to optimize for a three to five year flip. We intend to hold it indefinitely. And, you know, there have been a handful of companies that have kind of made that model work really well. I mean, the most famous example, which is like, it's almost a meme to compare yourself with it, which would be Berkshire Hathaway, which is that in addition to their public stock portfolio, they go out and buy whole businesses. Dozens of them, and then they just hold them indefinitely. And ideally, they keep existing management in until, you know, they eventually want to retire, and then they can bring in other people to run it. And other examples would be, you know, Illinois Tool Works, for example, is they basically make various engineering tools and equipment, and they go out and buy other engineering and equipment companies. They roll that into their own product line, and they just keep repeating that process over and over again. And so Orange Juice. To kind of go after the fact that there's a lot of business out there, a lot of private equity funds are already kind of stuffed to the gills, it's hard to find kind of the next buyer. And that kind of fiat arbitrage game is the engines, it's not dead, but it's kind of disrupted. And so we want to go out there, buy good businesses at low multiples, and then hold some of that in Bitcoin. So that's interesting, because like the stereotype with private equity is they'll come in and they'll buy you. They'll buy you a local dentist, dental practice or whatever. Everything gets worse, and then they'll obviously flip it five, seven years later, whatever it is. Can you flip that on the head? Because you don't need the liquidity from selling it because you're doing cash flows in Bitcoin. Is that the idea? Yes. Basically, that we so incentives matter a lot, because it's not like these private equity guys, I twirl their mustaches and say, how can we make dentist worse? They, it's always basically someone's like, okay, I get paid if I give return to shareholders. And the way I get, I mean, fund fund investors, and the way that I do that, because I have a limit, a time limit on my fund, is they go out, buy dentists, fire some employees, cross sell bad products, whatever, raise the prices, and then get out, and I have to, I have to pay the fund investors back, it's not a permanent vehicle, so I have to get out somehow, I need a liquidity event. And so you make short term decisions that optimize for three to five years, but then that dentist practice is going to have a higher than average failure rate after that, because you kind of lost customer trust. So you're going to have to make short term decisions that optimize for three to five years, but then that dentist practice is going to have a higher than average failure rate after that, because you kind of lost customer trust. So you make short term decisions that optimize for three to five years, but then that dentist practice is going to have a higher than average failure rate after that, because you kind of lost customer trust. and we literally only get potential upside from this if it works out for investors. So yeah, my primary role at the moment is making sure that our initial acquisitions are well selected and then well integrated uh you know we we just hired a cto uh we haven't we haven't quite announced him yet because he has to you know leave his current position um but we're really excited because you know we can go into these smaller businesses and say hey we have a leading ai expert for example that can help understand the business help figure out where to trim costs without doing the whole like you know gutting the company thing or just kind of acting like you know how to run the company better than them it's saying basically how can we help you um uh and so it's kind of making sure all those tools to come together make sure that the values keep kind of operating as you said that the incentives keep working for everyone uh but the main thing is is acquisitions and then making sure the integration goes smoothly we've talked about so much there i do have one complete tangent topic i want to talk to you about quickly but is there anything else before we move on to that that you want to cover that we've not i think those are the big things we've talked about the big things i want to talk to you about your book because last time you were on the show it's been a little while it's been nearly six months i just started reading the book and i've obviously finished it since then i thought it was absolutely brilliant i really really enjoyed it um how's it gone uh it's going well so for people that don't know it's called the stole guard incident it's a sci-fi novel uh and it's uh it's action it's uh it's thinking you know it's it's a common combination of both i think uh and it's going well i mean uh you know i never expected to be like broken money you know where like i literally have a macro tech audience and i write a book about you know macro and tech um uh but as far as kind of hitting them with this curveball uh it's been well received the ratings are good the reviews are good uh we have an audio book uh by walker and carla uh and that's actually currently the highest rated version of it so is the audio because um we did something somewhat unusual so most audio books are either read by one person or they're published by one person or they're published by a different person or they're or if you do have like more than one usually have someone read like a whole chapter and then the next person read the whole next chapter like let's say you have a male point of view or a female point of view and they'll read all that chapter including all dialogue from all characters in that chapter for our audiobook we did full duet narration meaning that for example walker reads all the male narration but also reads every male dialogue line even in the female narration chapters and vice versa for carlos so all the dialogue just comes out feeling a lot more realistic um uh and of course they're both they especially carla but they're both amazing kind of actors uh and they both have like the radio voice and the acting uh abilities um and so uh yeah it's been it's it's been kind of like um in a world of spreadsheets and mostly bad news and uh you know it's like i never can i never really come on a macro podcast and say yeah things have been great for the next 10 years uh kind of the the more creative outlet uh the more fun outlet is saying well if we're going to write about dystopias let's uh let's have some fun with it see i did the old-fashioned thing and read the book um but i think i'm going to listen to the audiobook as well carla and walker awesome so i should do that um is there going to be a second one because it was kind of left open like the potentially could be uh good question so i wrote it uh as a standalone meaning that as a book uh it is just a complete book uh there's there's no kind of intentional hooks left open anything like that the way that i approach is that life is messy you know life is not just like one story it's the stories leading other stories so the way that i did it was i outlined a prequel and a sequel meaning that i know kind of what happens in the world that led up to this i know what happens after this and not for sure that i'd ever write those or write this book as though those have to exist but it makes the world feel more lived in and more realistic so the first and foremost is just a standalone novel that i'm really happy with how it is um uh but i am over time chipping away at prequel and sequel uh concepts uh the prequel is actually further ahead than the sequel so you'd actually find out kind of what before potentially um but yeah instead of i don't like those series where it's like you have a character and it's like let's save the world and say the world seven more times you know and it's just like how many times how many times is ethan hunt gonna save the world uh yeah in mission impossible right it's not kind of the sequel situation i want to write it's more like uh do i have a story to tell uh quality over quantity uh and so yeah i have an idea of up to three novels with the world uh but each one kind of stands on its own well i will look forward to it if it comes out i thought it was brilliant it's my favorite kind of genre like relatively near future sci-fi is my thing so i thought it was absolutely awesome um everyone should go and read that book or actually listen to the audiobook listen to walker and carla do it um thanks lynn this has been awesome we should definitely speak again soon but appreciate you thanks for having me