MicroStrategy的终局……——Rekt Mando

Good to see you, dude. Times are a bit gloomy right now, huh?

Yeah, it’s definitely been a tough month for a cryptocurrency enthusiast.

Well, it’s not the most enjoyable year, to be honest, but it’s probably been a pleasant one in a long time.

Yes, although the markets are absolutely crazy.

Everything has become like cryptocurrency, hasn’t it? If you changed course, which I think you did, then there’s definitely something to talk about. But cryptocurrency was unpleasant.

Yeah, it’s funny. I felt like we changed course really late, and then it still grew. I have a chart marked when the AI arms race went live, and that’s when Micron stock was $600. I thought I was late. It went from $600 to $1,200. This is madness.

Yes, I mean, it’s 2x. I don’t think it’s that crazy to find a deal with a 2x multiple in this market, but Micron is the one that did get the deal, right? It was the craziest deal. $700 billion is a bit much. A 2x on $700 billion is definitely impressive.

About a month. And, for example, the SanDisk deal started around the end of last year and then early this year. The people who caught this deal—I feel like they caught it because I remember hearing about SanDisk around the third or fourth quarter of last year—and this deal just went parabolic.

This one was disgusting. Unfortunately, I would only like to talk about stocks, but we should talk about some cryptocurrencies. You’ve become a perma Bitcoin bear, dude.

I saw a couple of bullish posts today. Call me crazy.

I see Ansem’s tweet below. I see some bullish posts, but, my friend, the situation is bleak. It seems STRC closed at, what, $76?

$75.69 on STRC.

Strategy is at $85.33 at the close, and Bitcoin is currently at $59,588. Can you explain that I actually covered 85% of my MicroStrategy short just at the close?

Yes. Where did you enter?

$124.

Oh, God. Did you trade it well?

Yes, we traded it well. As soon as STRC started moving down, I thought, “This is the move.” That was pretty much what I was telling you about. I had a feeling it was planned. If I were smarter, I would have started sharply reducing STRC, and then it would have started falling. I thought, “They will destroy MicroStrategy if this happens.”

So, can you give us a setup for the crypto guys, but also for the stock guys who are watching this right now? We’re cross-asset. Can you tell us where we are now and what’s happening with Saylor in his current state?

Yeah. I think about a month or two ago there were some terrible market predictions, and I think the market’s reassessment of Strategy meant that if you just typed “Strategy” into the X search box now, you’d probably get some pretty good predictions.

I don’t think everyone was looking at it the wrong way two months ago, and they’ve started looking at it the right way recently. Two months ago, everyone was just valuing their Bitcoin against their liabilities or against their equity value, right? They thought enterprise value was enterprise value. When people talk about it, it’s assets, or assets plus liabilities. Sorry—net debt plus equity value.

It was about 1.3 to 1.4 times the value of the assets that comprised his Bitcoin. People said, “Well, that’s okay. Even during the last cycle, the value of liabilities plus equity seemed to fall below the value of assets, and that was normal.”

But what he’s done in the last 2 or 3 months is suddenly add this cash-flow problem. It suddenly went from being a liability problem to a cash-flow problem because he had to make $1.7 billion a year. In fact, for some unknown reason, he suddenly spent all his money.

Why did he do that? Why did we even include STRC? Why did he turn on STRC?

I have no idea. I think, for some reason, he was talked about as if he was trying to get a return on his Bitcoin. He thought it was an interesting way to change the capitalization structure, but it was so successful, especially from a marketing perspective, that it became such a huge part of his capitalization stack that suddenly he needed $1.7 billion a year to sustain it.

That started happening around February or March, and I think a lot of people thought, “This is going to get bad if this is his permanent commitment.” Then, for some unknown reason, he bought out a few new converts. They were trading, I think, in the 80s, and he bought them out and depleted his cash balance. Suddenly, everyone thought, “Well, actually, he only has 5 or 6 months of cash balance now.”

So what happened to the remaining cash? He collected it for dividends and then spent it?

Yes, he just bribed a few converts with it. Suddenly, his cash balance isn’t as large as it used to be.

Is that legal? Save it for one thing and spend it on another?

I don’t know. I have a feeling that Saylor has been doing a lot of things recently that he said he wouldn’t do, and I think some of them might come back to haunt him.

Can I share this on my screen?

You are sharing your screen.

Oh, no, I can’t share. It says the host has disabled it. But you get a good feeling from this. I actually made a very small model that I can share.

Basically, all of a sudden the price of Bitcoin started to drop, and suddenly the value of the preferred stock that he issued, which is about $15 billion, plus the bonds that he issued, which are about $22 billion, started to look a little risky.

As the equity started to fall, the value of the company began to approach the value of the debt plus the preferred stock. By the way, if Bitcoin drops to $40,000 or $35,000, then the stack of Bitcoin he owns will suddenly be worth about the same as the preferred stock he issued plus the debt.

That’s what suddenly started to worry people about MicroStrategy. It also needs to make $1.7 billion a year, and if Bitcoin crashes, it has this new liability that it has to pay.

I don’t really think he’ll fail. Let’s look at 1 and 2. What do you think you would do if you were Saylor? What’s the best thing available to him here? How many outs does he have?

He only has a few different outs.

And the only way Saylor can come up with this cash is to sell Bitcoin or sell MicroStrategy?

Yes. It seems that the Bitcoin sale he attempted to make was received very poorly. I think he was trying to show the credit-rating agencies that he could sell this thing, and it just had an unpleasant effect.

He sold 30 Bitcoin, right?

Yes. So now he can only sell MicroStrategy shares. The problem is that MicroStrategy stock has gone from a market cap of $50 billion or $60 billion to the current $30 billion.

To be honest, I think he needs to get rid of all his preferreds—the whole structure. The STRC preferred stock he just released: he needs to get rid of the vast majority of it if this company wants to survive in the long term.

How does it work?

Traditionally, you could make a tender offer. You could have about $15 billion of preferreds, and he could come out and say, “Listen, I’ll pay you 80 cents on every dollar.” I think they’re trading at about 75 right now, so he gives you a premium to buy them back at 80 cents on the dollar. He could actually withdraw those $15 billion of preferreds for about $12 billion.

The problem is that the way he sold those preferreds was pretty terrible from a marketing perspective. To turn around and essentially say, “Hey, I’m buying them back at 80 cents on the dollar,” is pretty wild.

If he really wanted to rip people off, he would also cancel the dividend, because then he could probably buy them back at about 60 cents on the dollar. But he can do whatever he wants. If you look at the documentation for both of those things, he can cancel the preferred-stock dividend even if he has cash on his balance sheet. He doesn’t even have to issue new Strategy shares to pay the dividend.

The only thing is that it accrues. If he stops paying one year, he has to pay again the next year. But he doesn’t have to pay even if he has the money.

What’s that for?

It’s perpetual. It’ll go on forever.

So theoretically, he could accumulate it for 10 years, and it’s just $17 billion?

Yes. Decades.

That’s why I like that he’s a little bit of a heel. He also has a lot of control.

Saylor runs this company. It’s not like any other company. He has all the voting rights. You don’t get rid of Saylor unless the feds come and say he did something really bad.

What can he do if he acts like a really bad guy and, let’s say, just says, “Take me, take me to jail”?

I would actually suspend the preferred dividend. In that case, I think the STRC price would probably go down to the 60s or 50s. Then I would make a tender offer to buy it back at 65 cents on the dollar.

I would then probably sell the Bitcoin and buy it back. Let’s say you buy at about 65 cents on the dollar. You can buy back $15 billion or $16 billion of preferred stock for $10 billion. So you have to sell $10 billion, buy back all the preferreds, and get rid of this constant cash-flow problem.

He needs to get rid of the preferred stock. He also needs to get rid of the bonds.

The other thing about these bonds is that they’re convertible, but they have a put option.

How does that work?

In the high-yield market, bonds are usually callable, but with convertibles, they have a put option. Basically, anyone who owns them can say, “Saylor, you have to give me back the cash.”

If they’re trading below the actual par or the conditional strike, they can say, “You have to give it back.” They’re all trading below that price.

Over the next 2 years, assuming prices stay the same, he also has to give back about 6 bonds worth a little over $6 billion. Who buys these bonds? Why do you buy convertible bonds? Frankly, convertible bonds are actually likely to be redeemed. They're in a waterfall scenario, so they're much higher in the capital structure.

What are you buying if you buy a convertible Strategy bond? If it goes above a certain price, it converts into stock. They were very attractive in the beginning, when Bitcoin was low, because if the value of MicroStrategy's stock goes up, then conversion is a good scenario: you get the stock and make a profit. In a bad scenario, when the company doesn't really grow, you essentially convert it into a bond, where you get back its face value. And that's what MicroStrategy is now.

So it's not only a vehicle where you don't have as much downside exposure. They're usually lower in the capitalization stack, but in this case they actually are probably the safest. Of course, he has to figure that out.

There's actually a trigger here for Saylor, and I think he's going to act pretty quickly, to be honest. If Bitcoin goes down to $50,000, $40,000, or even $35,000, I think it's going to be a lot worse for him. I've been saying this since Bitcoin was much higher. The lower Bitcoin goes, the more significantly reduced I think the chance is that it's actually going to blow up, either in 2027 or 2028, when it can't pay off the bonds or essentially has to do some sort of secured financing where MicroStrategy's stock gets wiped out.

The chance of that is very high. Obviously, it's reflexivity. Right now, there's a lot of gamma in the price of Bitcoin.

That's what's scared everyone right now.

MicroStrategy was trading at about 1 mNAV a month and a half ago, when they decided to call the bonds. Now it's trading at 0.6, so it's down about 40% relative to the value of the Bitcoin it held.

It's still trading above 1 if you go to Strategy's website. They have very good documentation. Their mNAV is down to 1 now, and their ETH mNAV is a little bit above 1.

Wow. That's why I cut it down to about 1 today, because I thought the whole ETH mNAV was right around 1 now.

You're really just in a situation where, if Bitcoin goes down, not just the equity but MicroStrategy can really lag Bitcoin. In my opinion, at best, MicroStrategy stock will get destroyed. In the worst case, we actually get a forced liquidation of Bitcoin through Chapter 11. In that case, I think Bitcoin is trading at $30,000.

Actually, that's not the best-case scenario. The best case is just that Bitcoin rallies and this situation suddenly disappears. How could Bitcoin catch up with the market? Bitcoin hit $59,000 and went all the way up to $80,000. Then it hit $59,000 and went up to $67,000. Then it hit $59,000 and went up to $62,000 or $63,000. Now it hit $59,000 and went up to $60,000, and everybody is waiting for when that turns around.

Bitcoin is going down at that $59,000 level. If it goes down to $50,000 and $40,000, the chance that the Saylor situation goes from bad to really, really bad is high. It could be Chapter 11.

What is the trigger for Saylor, because it's not FTX. Unlike FTX, CZ tweeted on Friday, and they had an actual level.

They had an actual level, right?

Yeah. FTX is gone. Saylor has full control. He can actually just run with the ball for a year, most likely. The main trigger I see is probably 2027 or 2028, because he's going to have to pay off those bonds. There's a world out there where that's impossible.

Another trigger is that he gets arrested for mis-selling, which I think could happen. I really think that could happen in the next month or two. Especially if the gap keeps going down, people are going to look at Saylor.

I also think that's me putting on a tinfoil hat, but the government wants this Bitcoin. Anyway, I think there's a good chance that some government-related entity would get this Bitcoin if it went through Chapter 11. For example, someone buys it, like in the case of the FTX asset sale.

Most Chapter 11 claims are not paid in kind, like you saw in the FTX case. You couldn't just get paid in the Anthropic and Solana balances, and everybody got really pissed off because they basically sold everything at the lowest price and got back, nominally, essentially 100. Some of them even got about 120, but they would get a lot more if they just got a percentage of all of FTX's assets.

There's a chance that if this went through Chapter 11, someone would have to buy all of these Bitcoins and then pay back the debts to all the creditors. In my opinion, if I go through all the different steps, it would probably be some kind of US-related entity. Maybe not a purely government entity. Maybe it's something like US Bitcoin Corp., where someone close to the US government could come in and buy this.

I don't really think there's a lot of incentive for someone on the US side to bail this out. I actually think the opposite. I also think it could get worse before it gets better. He's an easy scapegoat. Why would Trump want to bail out Saylor? Once Trump comes in, the Bitcoin president, anyone who buys Bitcoin is going to be wiped out. It's not my fault.

I think it's probably going to be here for a while. Like I said, there's no immediate trigger. The real triggers for me are if he doesn’t get huge lawsuits. It's probably next year or the year after that, but I think that's the end of debt trading.

Part of what I was telling you is that I moved some of my short position here in ETH, because I actually think BitMine looks interesting to me here.

If you recall, I don't know if you can, but BitMine's mNAV—

Okay, just type that into Google. Blockworks has a good website about it, but I can actually do that. Let's go.

BitMine's mNAV has typically traded around 1 since it came into existence, or maybe even above 1. It's low right now. What you've seen over the last month is that it's started to come down. It's 0.86 right now.

Is that true?

That's true. BitMine has been coming down quite a bit in the last few days.

BitMine is a very different type of instrument from MicroStrategy, in that it doesn't have debt. It has no debt portion; it's just stock. So it's a much cleaner instrument.

Oh, it's 1,500 right now. Wow.

Yeah. It has a much smaller one, but BitMine has a much smaller preferred component. I think it has a very small one.

Oh.

But Tom Lee doesn't own that instrument. He's just the CEO. He was paid a nice salary back in January.

They're going to talk about this 5% allocation, right? They want to get 5% ownership of ETH, and they need 4.6 or 4.7. So they're done. They have a few hundred million left to buy, maybe $300 million, and they're issuing stock to buy it right now.

In my opinion, if Saylor—let's say Bitcoin falls here and hits $50,000—I think the mNAV of the stock would be about 0.7 or 0.75. The reason it's falling is that people are saying this is the end. If the mNAV of the stock is 0.7 or 0.75, I think you have the largest ETH holder, who owns 5% of all ETH, essentially asking themselves if they should sell ETH to buy their own shares. As a shareholder, that would be an obvious question for them to ask.

And Tom Lee wasn't asked about that because the price has been flat the whole time.

But if it's 0.7, or even 0.8 for a long period of time, or around that level, I think you have a time bomb.

Wow.

So I think there's no other buyer for ETH.

No, there isn't.

It's not like Bitcoin. Tom Lee took ETH from $1,500 to $4,000, and then it went down again. He has nothing left to buy. The mNAV of the stock has suddenly dropped 15% in the last 2 or 3 weeks, and he has nothing left to buy.

I sit here and think, if the price goes down to 0.8, the Ethereum Foundation has actually said, "We're going bankrupt and we're cutting 40% of our staff." Who would have thought they had that many people?

Yeah, they don't have any money.

You take some of the staking revenue, and then you have all the ETH in one fell swoop, like DeFi. That's not what people are talking about in terms of price. ETH is a $200 billion asset. If I just look at it, I actually think that might be a more interesting short right now.

So how do you sell your ETH deal?

I've shifted it a little bit. I've backed off my strategy a little bit, like I said, and I've moved quite a bit into ETH because I don't think ETH is working. There's no day that I think ETH is going to go up 10%. Maybe there's a day where, like MicroStrategy, if they say they're going to cut their dilution, the stock just goes up or something.

If you look at the open interest in MicroStrategy, it's actually picked up a little bit over the last few days. People are shorting it.

Okay, I'll short it. It's become a popular short, right? It's like everyone's putting money on it.

After the close, it usually tends to go up the last few days. But honestly, if Bitcoin goes down to $35,000, I think MicroStrategy will be trading at about $10. It's probably going to be trading at about $15. It's still very vulnerable.

Just now, when we were closing the market, I thought, "I'm just going to move some of this into ETH," because I actually think this deal could go down. BitMine's stock price fell another 6% today. You look at this and think, if they're going to catch up with BitMine, I think the ETH deal is suddenly going to be tough.

Wow, $7.5 billion. Wow, this thing was trading at $160. Damn, that can't be happening, bro. The daily went from $58 to $160 in one day. BMNR—what the hell was going on? July 25th.

At the beginning of this, everyone was stupid, right? As far as I remember, we had people come to us and confess to financial crimes. This is going to be a case. I don't want to testify.

It's going to be you. We're talking about the same video, right?

Same. Yeah, yeah. You definitely have a subpoena. A million dollars a day, he says.

That was bad. I mean, he sold—he sold, didn't he?

I don't know. Maybe. I think he's still going. He convinced Trump to speak at a conference, so he's still going. He pays for his own magazine, so it's going well.

That was pretty bad. I mean, are you shorting this ETH or not? Are you going hard?

It's a $200 billion asset, but if I look at it and make a chess move based on what I think might happen next, my strategy is that I could just—because of the buildup of positions, it could bounce back a little bit. I think Bitcoin is at this $59,000 level right now, and it's going to break through. But if the mNAV goes down to 0.75 or 0.8, it's worse in some ways.

I really like that there's no bailout. Also, is there a guy who comes in to buy? Pumping ETH was so funny at $4,000 because everyone knew it was Tom Lee, and everyone was running out of the way. Everyone was selling it. If you had ETH, I really like Tom Lee as a guy. He's just the Cathie Wood of crypto, right? He's just incredibly bullish.

But when equity and net worth go down to 0.8, do you keep him as CEO?

This guy basically knocked out everything he could. He said he wanted to be slow and steady in building the ETH position. He was buying, he ripped through it, and then he was done. He was basically 5% done. He's the 5% allocation that he keeps talking about.

It was a terrible execution, all of it, really. At least Saylor was dripping it in for a couple of years.

Yeah. Well, I think it was more expensive, a lot more expensive. He probably got caught up in the moment. He was at the $4,000 mark and the $5,000 mark, and it was like, “Oh my God.”

I was on that train, but then it started off a little badly, and he said something like, “$4,000 is my limit. $3,000 is my limit.” It was over when he started posting technical analysis. I've never seen him post support levels before.

Right. I've never seen that. Incredible. He posted it. I'll find it for you. He said something like, “This was an email from my quants, who said it was going to bounce here at $3,950.” At $3,950, he's buying about a billion dollars, and it bounces.

Is that like a brother who bought 5% of asset classes hoping for a technical-analysis breakout?

He's got Bluntz playing “ABC 123.” Elliott Waves?

Yeah. You know what my favorite thing about Tom Lee is? We watch him on CNBC every day, and every time he goes on—he was on last week—he said $1,600. The guy who introduced me to Tom Lee said, “Tom, when are you going to be wrong? It's going to come for you someday, but I just don't know when it's going to happen. When are you going to be wrong?”

I'm like, “Dude, when are you going to be wrong?”

Yeah. They just don't care about cryptocurrency. They don't even pay attention.

CNBC loves him. He was obviously right about Bitcoin very early on, but was he? Is that how he became popular?

He was very— I think he worked at JPMorgan, maybe, and then he went independent. Fidelity also got into Bitcoin very early on, and he was the driving force behind it. So he definitely called Bitcoin early on, and he was very popular in the early stages of Bitcoin because he made crazy price-target calls. Then I think he just kept going with them.

Yeah, that's not him. So if your target for Saylor—

He said he was at JPMorgan.

Oh, okay.

If you think about 2027 or 2028, when he has to deal with these bonds, are we just stuck in a no-man's-land for the next year in Bitcoin? That's what's bothering me here. I can't imagine the market letting it go much higher without addressing this issue.

If Bitcoin goes down to $35,000 or $40,000, then really the trigger would be when these bonds become available for sale in 2027 or 2028. You're talking about—I don't know why the market would issue it. You know what I'm talking about? That's his strength. Who's going to be the person to step in here and issue it?

Yeah, the banks are screaming right now.

What about ETH if that happens too?

This deal is going to fall through. It's really awkward. This deal is going to be terrible, but it's not an FTX-style explosion. It's kind of like a nail-peeling thing—slow and—

Yeah, it's like a blurring of the deal. They're always there, you know?

Because if this deal is trading at 0.8, they're just going to keep selling, or there's an incentive to do that. If it takes Saylor 2 years to completely liquidate here, that could be bad.

You know what's crazy? He's not saying anything. He's not commenting. Is that right?

He's not saying anything. I think he doesn't like solving any of the problems. He's just putting out videos about AI.

That's not right. He's a voracious, smart guy. That's what I really don't get about this whole thing. He went to MIT. He just did the math on it. Of course, you know you're just selling this to get $1.7 billion a year.

We talked about it yesterday. I thought not many companies could do that. There are 100 companies in the world doing $1.7 billion in revenue a year.

Yeah, especially in the U.S. I don't know. Globally, it's probably a little higher, but it's hard to think of a company that's doing that. So you can't sell your Bitcoin because that would cause the market to crash. You just have to sell the stock.

So your company is effectively selling stock worth of one of the most profitable companies in the world. That was just a really, really bad move, in my opinion.

Can you give me a rundown on how to do that? When you build this short ETH, how do you think about the pyramid? How do you add to it? Do you have levels? Where do you exit? Leverage? What do you think about your time horizon?

I don't buy short positions often. I very rarely buy short positions. You usually have to be right when you do that. But with MicroStrategy, I felt like it was a deal I knew. I'm from that high-yield and distressed environment. As soon as I saw the top of the capital stack start to fall, I thought, “Yeah, this is going to get destroyed.”

On ETH, I really see it as beta compared to some of the other things in my book, but I get it. I think this thing looks good here.

I think I'd be out right now if it went up to $1,800, which is a 10% move from here.

My gut tells me that if Saylor goes, there are going to be a lot of questions about all the DATs. That's going to be the next one. One house of money left, I think.

Yeah, I don't know if Solana DATs trade at mNAV, but you have to assume that if Saylor goes—because Saylor actually had the highest mNAV of them all—

If Saylor goes, they all go. Essentially, all the purchases that have been happening through the DATs over the last 2 years suddenly become an overhang. They're not liquidation. They're just hanging there like these—

Yeah, Kyle's at 237 on Solana.

Yeah, man. 237 is crazy. How do you get to 237? The highest. He's at 237. That was a year ago. A year ago, it was a crazy time.

He's at 237.

We know Tom Lee and Saylor, and then there's Hyperliquid. There's Hyperliquid and Zcash. The Winklevosses owned about 3% of Zcash, and then Hyperliquid—maybe they picked the right coin.

Yeah. Hyperliquid, at least the company, has staked the L1 itself. So if they needed to buy it out at any point, they would probably just buy it from them.

I'm less worried about Hyperliquid, but the ones where there's just no buyer for the L1—that's bad. That's also kind of why I think FTX—

All the FTX sales had a major—well, a big chunk of it early on happened around that price on Solana. That happened around $63, I think. We can go back and look at that.

There was a bearish pullback at about $90, and then the last one happened around $110, but they were all between $60 and $110. So this idea that Solana is just going to double, to me, is ridiculous because you just have to look at all of that. You have to look at all of it.

That's still the thing to get right, by the way.

What do you think about the market? Are we going to be stuck in a bear market in the foreseeable future here?

I'm pretty pessimistic about this resolving itself. I don't really know how this is going to resolve itself right now. The depressing part is what we just described. The most likely scenario is that it's just a slow bleed.

That's the worst part, actually.

The DATs, Saylor in particular, seem to be holding back on this, but they're offering into an offer. In a market that's already been pretty bad for altcoins, this could get pretty bleak.

So I'm not bullish on cryptocurrency right now. I was bullish on NEAR, and I was bullish on Hyperliquid during the trading, but you know how they are. I think they're probably two of the only coins that have gone up this year.

I don't know if NEAR has gone up, or if it's just gone up in the last few months, but I can't even bring myself to buy these things. HYPE has probably doubled this year. Meme coins did. HYPE doubled in a month, in a month and a half. You're buying the best assets of a bad class right now, and it's really hard. I can't bring myself to buy all the coins.

Gold had a pretty good day.

Yeah. What do you think? I bought more gold.

You have a lot of gold, don't you?

Well, no. I put it up at about $4,200, and then I cut it down a decent chunk, from about $4,200 to $4,150, and then I bought it back, about $4,000 yesterday. I really like that deal, but it seems like there are still some gold sellers. I'm a buyer. I'm a big buyer of all this inflation protection.

The whole reason why my bitcoin should be there is because we want to own it. We're going to have fiat currencies massively depreciate, I think. It's a long-term hold for you. As I told you when I did this, it's a trade against the dollar for me, against a stable currency. That's how I think about gold. It's more like a currency, and dollars have obviously been going up over that period as well.

To me, I think gold is in a multiyear uptrend, and you always try to catch traps in this trend. There was one a few years ago, and there was one now, I think. So I think the bottom is in around here right now.

If these are the things, they sound like really big numbers because they went from $4,200 to $4,000, but that's a 4% move. It's actually quite small.

Yes, it is. It is. Compared to SpaceX.

So I think it could probably go down to $3,900, even $3,800. But I think this is a deal that I like. I think it will hit an all-time high by the end of the year, maybe even in the third quarter, because I also think we're going to see that inflation expectations are not as bad as people thought. Oil is just going down, right?

Yeah, I think the Fed scared people the other day. I actually thought people were factoring in that they were going to look at other inflation data and rates could go up, but I think that's changed a little bit recently, with some of the assumptions about inflation expectations and also just the way rates are moving.

So, yeah, I think gold is a good deal to appreciate through the end of the year, and I would just hold it relative to the dollar.

But, yeah, I think it's going to go to $5,000 and above. The other thing that I'm looking at—I liked the Tulip King Eli Lilly thesis that you put out the other day, the Eli Lilly thesis. I'm pretty heavily invested in that, just because I think the AI deal is getting a little bit more complicated now.

You have the hyperscalers. Everyone's getting more pessimistic about them because they're basically spending all their free cash flow, and the margin has suddenly gone to all the supply-chain chip companies and this, that, and the other. But then people got to the point where they questioned whether hyperscalers should be giving all their margins to these guys.

It's interesting. I know Apple had a bad day, but they were one of the top performers in the Magnificent 7, and they didn't actually commit to spending on AI. I think there's this question now: guys like Meta or Google—or anyone who actually commits to multiyear capital expenditures on AI—their stock price is going down.

Yeah, right now. People are noticing that. They're not just going to say, “Oh, yeah, let's keep saying that.” People are driven by their stock price. If any of them were to say, “Hey, we're not going to commit to this,” that would change things.

I think Microsoft would probably be the first to say, “We're not going to play the AI game.” I think they had such a bad experience with OpenAI, and they're basically using something like DeepSeek in Copilot right now. They have no idea what they really like about their AI strategy, and I think they've been pretty vocal about not committing to this capital expenditure.

And I think if you start hearing a little bit more about it—maybe it's not a 10-year deal, but even just the rumor mill about it—it could matter. While Micron has had incredible earnings, I think SK Hynix is an incredible deal for a long career. I think it's crowded. It's cheap, but it's crowded. That's why you get 20% moves, because everyone is in it.

So, just a breather. We might be overestimating our 2027 AI capital-expenditure forecast, which means the memory names will be destroyed.

No, I don't think they will be destroyed. These are good deals. I just think it's not a deal anymore in the way I understand what you mean.

So the hyperscalers that have these multiyear, huge capex commitments are suffering because they're obligated. If they see that and back out of their four-, five-, or six-year capex commitments, the beneficiaries of that could also be a little shaken.

Teetering, I think they'll probably still be doing well for the next 3 to 4 years. But remember, one of the reasons why everyone loves these names is because they've increased margins significantly. It's not just demand; they've increased margins here.

But doesn't that mean that the hyperscalers—for example, if Micron's margins are so disgusting—are being caught? Are the hyperscalers just being destroyed?

Right, but look at the margin versus the long-term margin for memory, and you realize that's not going to happen. You can't price it at about 20 times profit because that's something that's not going to happen for 20 years. Supply will go up. So it's not just the demand side; it's the margin side that's really driven this growth.

I think they really should be trading at single-digit multiples of forward profit because that's probably how long they're holding the margin.

So I think that's a really good deal. I think that was a really good deal. I think that's what they were. I think that's what you're like: you buy it like a hype. You buy them on the day that the liquidation candle brings them down about 5% to 10%.

Yeah. They're probably going to continue to outperform, but I also don't think that's an obvious deal. I like these deals. I like the movement into robotics that we've seen a little bit.

I like the movement into pharma and biopharmaceuticals a little bit more, and I think Lilly is just in a really good place. If you think about a company that would be allowed to make consumer pharmaceuticals, “allowed” is a pretty big term. I think that's the problem that Hims had recently.

On the combination of AI and health, I still think it's going to be a regulatory grab, and I think Eli Lilly has an incredible amount of private data, basically, that nobody else has. So they're very well involved in AI research in their business. I really think Eli Lilly could be a big stock this year.

There was a comment from Jordi Visser who said that he thought it would be the most valuable company in the world. Jordi Visser recently had some thoughts. He has a really good podcast with Pomp. I don't know if you should listen to Jordi Visser.

Let me say this: he actually has some good thoughts. He said something like, “Yeah, I think Eli Lilly is going to be the most valuable company in the world.”

Then I read the Tulip King article and thought, “You know what? All the companies we think are interesting alternatives for AI to create a supply chain—or this kind of transition to products that people with private datasets can create and nobody else can—are interesting.”

So I'm pretty active on that right now.

And a couple of other things: I think Hims is in a weird position. Hims is a little different in that their profits have been terrible. So you're essentially betting on the idea that they're going to be able to create and give people peptides and testosterone. They could, maybe, but so can everyone else. If Hims can do it, so can everyone else, right?

Well, they say, “We have a great subscription model, and our branding means we can have a better margin.” A few months ago, Hims stock was trading at $75, right? But that's when they were allowed to say, “Look, we're going to make our own peptides,” and then Lilly said, “No, not really. We're going to sue you.”

Then they said, “Okay, now we're going to distribute, and we're going to get better margins because we're going to make branded products, and we have this great subscription model.” Hims has a great brand, so they can win on distribution.

But my gut tells me that if I want to own something, it's Eli Lilly.

So, yeah, I'm big on that. OpenAI just said they're probably not going to do an IPO this year.

Interesting. If you looked at Polymarket or Kalshi—I forget which one—they were on track for December as the most likely date. It was like 6 to 5. It's like 1 to 3.

Yeah, I mean, it was always going to be next, right? All of a sudden, we heard that Anthropic had positive free cash flow yesterday. They're getting ready for their IPO.

Yeah, and I think it's going to do well. I do. I think it's a good company. But, yeah, SpaceX wasn't at the top.

Well, maybe it was at the top. Are you worried about that? Are you worried that hyperscalers, after SpaceX and all the megacaps, are going to be super weak?

And then we're going to risk your life[?]. That's worrying. I think it's really worrying. I think if you look at what you're doing right now—

Well, I'm short, damn it, so it's always a deal to be short.

For a big—

Well, I sold my Strategy and moved a decent chunk of it into ETH.

So I feel good. I’m sleeping like a damn baby, man. But I think there was a period two or three months ago when the Nasdaq looked like it had a double top. And then there was just a rally in stocks that melted faces.

But if you look at it, the Mag 7 didn’t really participate—not at all. It was interesting because the whole supply chain and the chips led this entire Nasdaq move. I was talking to one of the other co-founders of Canary yesterday morning, and we were looking at this. The Nasdaq seems to be creating another double top.

It makes you think: What kind of rotation is this? Rotation in causes daily changes. I forget what day it was, but maybe the rotation in February was like this: “Oh, wow, we’re going to see everyone else move away from the Mag 7, and we’re going to move a lot or not move at all. The Mag 7 is not going to be the leader in this. It’s going to be led by all the chips and down the AI supply chain.”

I don’t know what it’s doing this time because, like I just said, Micron is the devil.

Yes, Micron is a great company, but now everyone owns Micron. Something like a memory trade was made, right? SanDisk.

So, are you moving further down the supply chain? Do you buy things like Nvidia and Marvell and growth-type companies? They seem even more focused on the same trade.

Yes, but they seem much more exposed to the same deal that I was talking about. If any of the Mag 7 say, “Hey, we’re not actually going to do this. We’re taking a step back,” that’s not great because I think they care about their stock price.

Actually, that’s a pretty good prospect, by the way. If they cut capital spending, what happens? It might not even be that they cut it, but if any of them say, “Hey, we’re not going to spend that much,” they’re not committing to it.

I know Apple had a bad day, but I think they’ve generally outperformed the competition because of that. The others have basically said, “Hey, we’re not going to do that.” Amazon and Apple all care about their stock price. They all know about Meta, even Google, which is a giant.

These guys get paid like every CEO, under some crazy stock plan. They know very well what affects their stock price, and anyone with any sense will tell you that people notice what you’re spending all your money on.

Some companies’ revenue isn’t really growing that much, so maybe just don’t spend that much money and wait and see a little bit. Or don’t waste 3 years of damn memory on Micron, you know? I think that’s what might be a little bit of a concern.

The Mag 7 had basically dominated all of Nasdaq trading for the last 5 years, then went into this double top, and we moved down the supply chain into chips. Now you have to think about what takes the Nasdaq from 29,000 to 35,000. What’s the next step? I don’t know what that is.

I thought it was going to be something like a robotics trade, but there’s not enough of it. Tesla probably has the largest market cap there, and Tesla doesn’t look that good because of SpaceX. It doesn’t look good at all.

And then it’s like, what? You know what was funny? We started talking about SaaS. We were like, “Is SaaS going to have a big bounce? Is Salesforce a buy here for a multiple of revenue?”

But I don’t think we’re ready for that. It’s not a big enough part of the Nasdaq.

Yeah, it’s just not a big enough index.

That’s what I’m talking about. What brings the index up to 35,000? It’s just not big enough.

What essentially happened is that a bunch of $100 billion to $200 billion companies became $1 trillion companies. And I don’t know what it is on the Nasdaq now.

I actually think this double top looks a lot more tenuous than the one in February, even if it never goes that high. Maybe we’ll just go higher and Micron goes to the goddamn $3,000. That’s a reasonable thought, though.

But I’m a little more concerned that this one is more tenuous. Obviously, the dollar is going up, so let’s just see what happens.

If I had to buy one thing, it’s Eli Lilly. I like the move into making more functional AI products, and I think they have a really good chance. I like Eli Lilly.

Okay, give me the last one. Google. I know you’ve talked about hyperscalers, but Google specifically was one of your favorites.

They actually issued $80 billion worth of stock at $350 and secured the price on this, in my opinion. I think Google has an incredible business if you look at the business.

They have this whole cloud infrastructure that’s going crazy right now. They have search, advertising, products, and Android. Google isn’t just AI, but they basically said, “We’re going to spend all of our, or a significant portion of our, free cash flow on capital expenditures for AI.”

Google is less dependent on others now. A lot of people are dependent on Google. You have to remember this: Google makes its own chips, makes TPUs, and owns a lot of AI labs. For example, it owns 15% of Anthropic. It’s a beast.

Google is just going to own it forever. But, yeah, I probably will, at some point in time, think Google won’t be the best performer because it’s being challenged by other companies that will spend capital on AI.

And also, Gemini as a model is a little bit down.

No. They’re losing some of the AI talent. You have to remember that everyone from the AI labs basically came from Google. Dario came from Google. The whole original OpenAI team came from Google.

Elon Musk and Sam Altman basically went to all the Google engineers and said, “We should start OpenAI. All of you super-smart people at Google are basically just making ads. You’re stuck here with AI. Let’s do OpenAI. Let’s make it open.”

Then Anthropic’s original team also came from Google. Google is basically the father of all AI, with DeepMind.

I’m still a big fan of this AI team. I think they have some extremely talented people, but it’s clear that they’re losing some of the brain drain here and there. With the Anthropic IPO and the OpenAI IPO, if someone offered you $100 million worth of Anthropic stock right now to join them before the IPO, you’d probably say, “Yeah, maybe.”

Yeah, I think they’re losing some people. But Demis Hassabis, who’s supposedly leading Google’s AI team, is an absolute genius. As long as he’s still there, Google will be fine.

He’s also a very famous biologist, isn’t he? He’s a Nobel Peace Prize winner and a protein-folding prize winner or something?

Yeah, obviously they have DeepMind, which was my original lab. There’s a really good podcast on Google.

Oh, seriously? Where can you hear it?

It’s a 4-part story, and the fourth part is their whole journey to artificial intelligence. It’s worth listening to because a lot of it is relevant right now.

He started DeepMind, and then DeepMind was bought by Google. DeepMind is basically a research lab, and they did protein folding. He won the grand prize, and then they did a bunch of other things.

I love that. Dude, I wish you had a more optimistic view of cryptocurrency for us, but that’s where we are.

Yeah, that’s where we are.

You’re a good guy. You’re underrated, dude. You’re being used, damn it. I don’t know how you do it. You’re really being used.

I think I’m being used. You’re really being used.

That was a real session we just had. We went over a bunch of different things. That’s good for the show.

Okay, last one. Last one, I’ll let you go. Korean stocks—they want to know. What do you think?

I’m a multigenerational Korean stock buyer here, man. I think everything in this is going up. Buy every dip in Korean stocks, I think.

Memory stocks are great to trade, but they go up and down. You have to remember that you’re buying this index with such a low P/E ratio—not just for the memory stocks, but for every name.

They basically came out and said, “We’re going to change the way we distribute the profits.” I think this is a huge buying opportunity.

Korean stocks were trading at a lower enterprise value than Chinese stocks, which is saying something because you don’t buy Chinese stocks for dividends or buybacks. So I think that’s it. Buy it for your 401(k).

Multigenerational is not. Yeah, that’s a good way to end this. Man, you’re a goat, man. See you in our little Telegram chat.

Yeah, see you, man. All the best. Have a nice day. Peace.