Brent Johnson (01:33):
It is. I can’t tell you how many phone calls or meetings or initial communications with people I’ve had over the last year. So where it started off with, “So I saw you on Twitter or I saw an exchange on a podcast.” It’s very social media related when people first reach out to me and in one form or another. So whether that’s a good thing or a bad thing, I’ll leave that to other people to determine, but it is what it is.

Preston Pysh (02:00):
I love that fast though, when we talked on the phone after the back and forth, I’ll call it that, on Twitter and we talked on the phone and literally in the first minute we hit it off and we’re like, “All right, well, let’s record something. Let’s do this.”

Brent Johnson (02:12):
I don’t know, this might sound sexist, but that’s kind of how little boys, I mean, they’d argue, they’d get in a fight, they’d hit each other and then they’re fine, but it doesn’t get drug out that long.

Preston Pysh (02:22):
And then they’re playing together.

Brent Johnson (02:23):
Right, right.

Preston Pysh (02:25):
So let’s do this. Talk to us about your framework, because I love people to kind of really talk about the big chunks of the things that they feel or that they view as being valid or what’s making the economy function the way that you see it today? And then we’ll just take it from there.

Brent Johnson (02:42):
Perhaps some people have heard this before, but just let me give you a quick overview of what it is actually because I think in many cases, people hear me speak and they think I only do one thing, although they have a very limited view of what I do. And essentially I manage my high net worth individuals. And I have a very concentrated group of very wealthy clients and we customize a wealth management plan for them.

Brent Johnson (03:03):
And when I say a wealth management plan, we work with their trust and estate lawyers and their CPAs and we come up with an investment plan and then we help them implement it. And no two people are the same, so nobody has the exact same portfolio. But that said, because I’m kind of the architect of the overall plan and the quarterback of it so to speak, there’s going to be similar things across all of them.

Brent Johnson (03:26):
And my framework for everybody, even though their individual investment plan may get implemented differently and they may have different allocations based on their certain circumstances, the framework of which that I help and develop that plan is going to carry over across clients. And so the reality is, is I am not trying to make my clients rich. Most of my clients are already very wealthy.

Brent Johnson (03:48):
They got wealthy either through a very concentrated position at a company that they were working at or a business that they started and then it went public or they sold it or whatever it is, right? They had a very concentrated position and then I’ve helped them diversify out of that concentrated position and now we’re kind of creating an overall diversified plan. I mean, the greatest way to get rich is to have a concentrated portfolio and the greatest way to get poor is to have a concentrated portfolio, that’s in my opinion, right?

Preston Pysh (04:14):
I like that, I like that.

Brent Johnson (04:15):
And so it works both ways. And so most of my clients like I said, they’re not trying to become a billionaire. They’ve done very well, they’ve got a very nice lifestyle, they want to pass it on to their heirs or their foundation or whatever it is. And so we’re trying to protect it, right? And so that’s where diversification comes in. So I don’t think anybody should put it all into one thing.

Preston Pysh (04:34):
I want to ask you a question about that real fast because I would think volatility would be something that would be very high on the list. As you’re sitting down with one of these clients and you’re saying, “All right, so talk to me about your risk tolerance. If your portfolio moved by 20% in a year, what would that make you do?” Or are there some of the things that you really kind of focus in on it from the start?

Brent Johnson (04:55):
Absolutely. I mean, and at the end of the day, my job is not to capture 100% of the upside of every move of the S&P 500. I think many people have wrongly started using the S&P 500 as their benchmark. There’s no reason the S&P 500 has to be a benchmark. It might be appropriate, but it very well might not be appropriate. So what we try to do is to come up with an appropriate benchmark for them, what are they trying to accomplish and how do we get that, right?

Brent Johnson (05:18):
And for some people, it means taking a lot higher level of risk, for some people… Like I have one client who is a very successful tech executive, he was a former Air Force pilot, and he’s 65 years old, all he wants to do is live off his earnings and go fly his airplanes. He just wants very conservatively to make 5 or 6% a year.

Brent Johnson (05:36):
So his portfolio looks much differently than somebody else who is younger and wants to take more risk and wants to get 15% a year or whatever it is. The point is, is I think it makes sense to come up with a plan for yourself. And who cares what everybody else is doing? I guess if you’re just managing a mutual fund and your goal is to outperform the other mutual funds, your mandate may be a little different than my mandate.

Preston Pysh (05:58):
So with that said, and I think that is so important for people to understand, is every single person is looking at their circumstances. Their age, I mean, alone is a huge factor of it, right? All of those things are… it’s custom. So a person listening to this, if they take one thing away, it’s going to be completely different than somebody else.

Preston Pysh (06:17):
Talk to us about the big story. If you had to explain, if you had to sit down with a new client and say, “Well, this is how I see the world in the environment that we’re operating in right now,” from a macro landscape, give us that one over the world pitch or description of how you would describe it to them.

Brent Johnson (06:32):
First thing I would tell them that the next four years may be the most difficult years from an investment standpoint in the last hundred years. And I truly believe that. I’m not trying to be dramatic, I’m not trying to scare anybody. I really think we’re kind of at this critical point in history. I think the big theme that I would point out is the debt. It’s all about the debt.

Brent Johnson (06:52):
And debt, whether you think it does or not, debt has consequences. And central banks around the world are doing their best to push those consequences down the road so that they don’t have to deal with it. And regardless of whether they can continue to push it down or not, we’re at a minimum, we’re going to continue to bump up against it. And then maybe they can take it again. But at a minimum, there’s going to be events along the road that are going to be very volatile and very scary because of all the debt in the world.

Brent Johnson (07:19):
And I am of the opinion that they can’t solve it. They can try, but ultimately we will have the kind of come to Jesus moment, right? And we’ve had several of those over the last 15 or 20 years and they’ve been able to successfully kick it. I think we’re getting to the point where it’s going to have to be dealt with. I might be wrong on that, right?

Brent Johnson (07:35):
I might be wrong, but my point is again, because I’m trying to keep people wealthy, I’m always looking for the pitfalls and I’m always looking for what could go wrong. I don’t just have the luxury to say, “Let’s go buy Tesla. Let’s put it all on Bitcoin.”

Preston Pysh (07:49):
Well, when you said you don’t see them being able to solve it, what would be your driving point of view, for why?

Brent Johnson (07:56):
The main reason is because all of the solutions to kick it down the road actually make the overall problem bigger. So let’s take March as an example, just because it’s the most recent and probably the freshest in everybody’s mind. What the central banks did is they came in and they provided, for lack of a better word, liquidity to the market.

Brent Johnson (08:14):
Because what happened was the debts were not getting paid, the dollar was not circulating, asset prices started going down. It created this kind of like vicious cycle to the downside. They needed to do something to stop the downside, provide liquidity to the market and get it back up. Without going into too much detail, based on the design of the monetary system, it has to grow.

Brent Johnson (08:35):
The monetary system is designed to get bigger. It cannot survive contraction. If it contracts, it actually collapses, or if it continues to contract, it will collapse. It’s an exponential system. And an exponential system would either go straight up or they’d crash. And so that’s what we have. When we hit those and when the debt gets too big and the debts don’t get serviced, you get a contraction. And the central banks by design have to come in and provide new capital to the system in order to get it growing again.

Brent Johnson (09:07):
And this has numerous effects across all kinds of markets, whether it’s talking about growth rates or inflation rates or alternative currencies. It literally affects so many different things. To me, it all goes back to the design of the monetary system, the fact that it’s a debt based monetary system means for it to grow the debts have to grow, but eventually the debts create… they get so big they create a deflationary force.

Brent Johnson (09:30):
So you have this situation where the system has to grow, which is inflationary, but the system has grown so big, it has to deflate at the same time. It eventually gets big enough to where it becomes in conflict with itself. And I think that will eventually have implications for all kinds of markets.

Preston Pysh (09:44):
And do you think that we’re at a parabolic point where this isn’t linear? It was probably never linear, but it’s becoming very evident now that it’s not linear and we’re actually starting to go parabolic in the growth of M2 and all the promises that are built on top of that. Do you agree with that?

Brent Johnson (10:01):
Well, there’s no… I do agree with that. And I think there is some misconception when you see these graphs of M2 and M1 go down, and I’m not minimizing them, this is a problem, and this will have severe consequences, but it doesn’t necessarily indicate what a lot of people think about. Even though M2 has spiked, the world is not just a wash in tons of liquidity. People still need dollars and aren’t getting them, right?

Brent Johnson (10:24):
It doesn’t mean they can’t get them, I’m just saying that just because that M2 has taken off, a lot of it’s still trapped into the banking system. And I mean, we could spend five hours just on that topic alone. So we probably don’t have time to go into too much detail, but a lot of the money that the central banks have pumped in based again on the way they’ve done it, it gets trapped in the banking system.

Brent Johnson (10:43):
It doesn’t get into the real economy or at least the full extent of it does not get into the real economy the way many people think it does. I think the common perception is that the banks are printing money, they give to the banks, the banks go out and buy stocks and the stock market goes up. That’s sort of true, but in a really detailed sense that’s not true.

Brent Johnson (11:00):
And the fact that it’s not getting to the moms and the pops of the world, meaning Wall Street’s benefiting but main street is not. And so then that creates all kinds of problems, right? That creates problems for small businesses and it eventually leads to problems of inequality. And it’s a system that benefits the wealthy at the expense of the masses and it benefits the few at the expense of the many. That can go on for a long time but it eventually has consequences.

Preston Pysh (11:26):
We’ve seen central bankers come out and say that they don’t buy into what you’re just saying. I definitely agree with you. But we’ve seen central bankers that came out and are saying, that’s not the case, that it’s not adding to inequality and destruction of the middle class. Are they just straight up lying or do they believe it?

Brent Johnson (11:46):
It’s funny that you asked that because I always ask people kind of in the know, I said there’s that famous saying are our leaders smart people who are putting us on are idiots and really mean it? And I’ve kind of come to the conclusion that central bankers as a whole, at the staff level, for the most part, I think they really mean it.

Brent Johnson (12:05):
But I think at the really high levels, I think they know, or at least they know that they’re there to perpetuate the policies. I think that they do know that it does lead to inequality. And I’m very critical of central bankers and I’m very critical of the fed. I think central banks in general are probably the smallest group that have done the most damage to the biggest number of people, if that’s the right way to say it.

Brent Johnson (12:28):
And not just the fed, but around the world. Now, there’s a lot of people who disagree with me and they say they’re actually good people and they’re trying to do their best. And that may be true as well. But my point is, is that I believe that it leads to these inequalities and these inefficiencies and unfairness. And so I’m very critical of central banks.

Brent Johnson (12:44):
But the flip side of it is I’m not one of these people who just kind of howl at the moon about the central banks. I mean, it is what it is. And if you lose money because the central banks did something that you didn’t think that they should do, or because you don’t agree with QE, in other words, if you’ve been trying to short the stock market for 10 years and every time it goes up you say it’s only because the central bankers… well, at some point you have to start factoring these evil central bankers into your formula, right?

Brent Johnson (13:09):
And so to think that the central bank, that they’re ever going to do anything other than bail out the system is silly because that’s literally their job. They’re the lender of last resort. So to think that they’re not going to step in when a crisis hits and just let everything fall, it’s not going to happen. They are going to step in. That’s why they were created.

Preston Pysh (13:29):
Do you think that in 2021 we’re going to see printing that exceeds the printing we saw in 2020?

Brent Johnson (13:36):
Oh yeah. Highly, highly likely. Nothing is impossible, but it would very much surprise me if it did not exceed it and perhaps drastically so. I say that not just the fed, the whole world is doing that. That’s the other thing I always like to point out, is it’s fine to take shots at the fed, and I think that they deserve it. But it’s not like we have the idiots at the fed and then there’s these geniuses at the ECB, right? Or these masterful financial guys over at the BOJ, because they’re all the same.

Preston Pysh (14:05):
So let me ask you this then. March, huge liquidity event, that as you were describing, massive amounts of impairment on trusts between two parties all over the globe and then they had to step in with real printing to put all those units back into the system. If you think that we’re going to have printing and debasement like we saw in 2021 but maybe even bigger, does that mean that we’re going to have another liquidity shock like we had in March that would generate the need for something like that? Because I agree with you a hundred percent, I do think that it’s going to be higher in 21. I’m just looking at it like, well, you need some type of event for that to happen. Do you see that?

Brent Johnson (14:47):
I do. And I don’t know what’s going to trigger it. I mean, everything is just so ambulant. Is that the right word? I mean, sentiment is high on everything, markets are euphoric. And listen, sentiment and narratives are extremely powerful. And right now the narrative is that the world is going to print its way out of it. We have global reflation, the central banks have reduced the amount of risk, they have your back, and so get into risk assets and here we go.

Brent Johnson (15:11):
And that can last awhile. And I’m not denying that that is a incredibly powerful force and that it can’t go on, I just don’t think it can go on forever. And I don’t have perfect timing. Did pretty good at the beginning of this year and I’ve done not so well in the second half of this year trying to time that, but I do believe that we’re going to have more of these liquidity events.

Brent Johnson (15:35):
And I think these liquidity events are going to lead to solvency events because fed and central banks around the world, they can provide liquidity, but they can’t make a business profitable. They can’t make a good business a good business, right? And what I find kind of interesting, this actually it’s kind of affected my overall thesis this year, is that the central banks, to this point, they can provide liquidity, but they can’t make businesses better.

Brent Johnson (15:59):
And I expected to have a year like this, even without COVID. We were set up for this long before I knew anything about a virus. And even when I did know about the virus, I didn’t know initially the impact it was going to have, right? But what I knew is that all the pieces were in place for a crisis. I didn’t know what would be the catalyst to kick it off, I just knew all the pieces were there and whether it would be some kind of a company missing earnings or whether one country would default on its debt or whether another currency peg would break.

Brent Johnson (16:31):
Something would happen and then it would cause this chain reaction. Well, it turns out it was a virus. And when it initially hit I thought, “Oh my God, this is the catalyst. This is not only going to be really bad, but it’s going to accelerate my whole thesis. It’s going to make it happen even faster than I thought.”

Brent Johnson (16:46):
And that initially was correct. And I knew that the fed and central banks around the world and monetary authorities would put policies in place to provide emergency liquidity and send checks to people and these CARES Act, that didn’t surprise us at all. What we didn’t factor in and what we missed, and in hindsight this was something that we should have done a better job of picking up on, was their ability to defer dollar demand, right?

Brent Johnson (17:09):
And what I mean by that is they put policies in places that you don’t have to pay your rent for the next six months and in the meantime, the landlords can’t kick you out. Think of all that money that’s been deferred. Those payments still exist. They haven’t been forgiven, they’ve just been deferred. But that was a dollar demand that was kicked down the road, at the same time that they’re providing supply.

Brent Johnson (17:27):
We initially thought that the demand was so high that it would overwhelm the new supply that they’re kicking in. And had they not been able to defer the demand, we think that would have been the case, but they also did the same thing with mortgages, right? You don’t have to pay your mortgage this month, we’ll just tack the next three or four months onto the end of the mortgage or whatever it is, or once COVID’s behind us then you owe those payments.

Brent Johnson (17:47):
Same thing with kind of trade finance. If you ordered bunch of inventory from China, but the planes weren’t flying and the ships weren’t floating and so you weren’t receiving that inventory, well, then you didn’t have to pay for that inventory right away. You could pay for it three months later, or six months later once the economy opens up.

Brent Johnson (18:01):
And so they’ve been able to provide a bunch of supply while kicking demand down the road. And I guess the point I would make is they can’t kick the demand forever. And when the demand comes back, perhaps that’s what causes the solvency and the liquidity that then leads to these solvency issues.

Brent Johnson (18:18):
I mean, I’ll tell you, I saw this chart and I think that [Goodluck 00:18:22] sent it out, somebody told me that’s their name. And I didn’t see it initially posted, but somebody sent it to me and it showed the households around the country that are either in arrears on rent or behind on their mortgages. And it’s like every state it’s like 20, 30% of the population are either behind on their rent or their mortgage.

Brent Johnson (18:38):
But San Francisco is a big restaurant town and we actually have several friends who own restaurants and bars and they’re all just getting decimated. So there’s all these businesses that they’ve been able to survive on either savings or the emergency loans or the programs that the government gave, but I don’t know that those businesses are ever going to be solvent.

Brent Johnson (18:57):
Again, maybe they will, but they might not. And so I think that there’s all these issues that are still out there. And I don’t know exactly what the catalyst will be, I just know that the table is still set for another crisis. That’s kind of a long rambling answer to your question, but that’s kind of how I see it.

Preston Pysh (19:13):
No, and I think those are all really interesting points. And I think when we look forward, the PPP was such a huge event in how they issued it, because I mean, it was literally willy nilly like, “Hey, here’s a giant pot of money, everyone stick their hands in and grab as much as you can and go. And you might not have to pay it back, so just get as much as you can,” kind of event.

Preston Pysh (19:33):
And I kind of suspect that the next one, and I fully expected it to be the next one, is going to be an equal sized pot of money, maybe even bigger. And I just can’t imagine the zombification that that’s going to have on just businesses all across the whole country and really kind of globally.

Brent Johnson (19:53):
And not only that, but think of even if let’s say they get the vaccine to everybody in the next 60 days, to everybody and everybody takes it and there’s no more COVID. Even that’s the case, I just don’t think that the world is going to go back to work the same way we did a year ago. Businesses have… the ones that have been able to…

Brent Johnson (20:11):
In restaurants, you kind of have to go to the restaurant in order for the restaurant to be successful, but someone like me or a lawyer or banking, or some of those shops like that, you don’t really have to go to the office every day, right? Or in a sales job, you don’t really have to get on the plane and fly to Houston to meet that pharmaceutical company to set… you can just do Zoom and then you can ship them the stuff, right?

Brent Johnson (20:31):
I don’t think that companies are going to need the same amount of office space that they have, but think about how big the office and the real estate markets are, and those are all financed by debt. I just don’t see how commercial backed securities don’t have real trouble. And the problem is once you start based on the design of the monetary system, when you start to get a credit event, it has this effect where it kind of ruffles through the whole world and the whole economy. And so I just think there’s too many events out there to think that this is all going to go smoothly.

Preston Pysh (21:00):
I was listening to a clip of Sam Zell, probably in the August timeframe. He was looking at the commercial real estate and just like, “This is a disaster and no, I don’t think it’s time to step into this and start buying it. I think people need to stay the heck away.”

Brent Johnson (21:13):
Sure.

Preston Pysh (21:14):
I’m surprised we haven’t seen more bankruptcies in that space. Are you aware of the government basically providing some type of relief for that middle tier…

Brent Johnson (21:24):
I don’t think they have. But I think on some of that, the banks have just extended the loans, have said to the people that owe the loan, “Well, next quarter or next six months we’ll defer them out another year.” But like I said, I mean, and that can go on for a little while, but eventually the banks have to get paid too, or else the bank stop lending because they owe money to people, right?

Brent Johnson (21:41):
And so, again, this all works for a while, but it’s interesting that in a way that if the economy opens back up and all the demand for the currency increases again, in a way that causes problems too, right? Because then you actually have to pay your bills. And so I just kind of feel like we’re in this corner, it’s kind of like with interest rates.

Brent Johnson (21:59):
Interest rates are so low there’s no way that we can let them rise again, right? But the flip side is if interest rates don’t rise then banks don’t do well and pension funds don’t do well and then they’ll go bankrupt, right? So you’re kind of damned if you do and damned if you don’t. And that’s why I say, well, they’ve done a masterful job of kicking this kind of down the road but I just don’t think they could kick it for much longer without the consequences coming up.

Brent Johnson (22:20):
And you go back 20 years, but if you just go back 10 or 12 years in the great financial crisis, a lot of the problems around the world got bailed out by the central banks. So it’s the central banks that have the assets on their books now, and to solve those, then you start messing with currencies and the currencies become their outlets, right? And so I think we’re going to have a currency crisis. And again, whether it kicks off in new 2021 or 2022, I don’t know, but I just know that we’re set up for a massive currency crisis.

Preston Pysh (22:46):
So based on all that, I suspect you have a lot of the same narratives that I hold as dear as anybody else that talks on all these podcasts, which is the narrative is scarcity wins. If you can own something that’s truly scarce, it’s going to do really well in this environment just because of the expectation for how many more units central bankers are going to be adding into the system. So is there anything beyond that that you can see from an investment standpoint, or just talk to us a little bit about your opinions on that and maybe even beyond that?

Brent Johnson (23:18):
Well, the first thing I would say, and I’ve been saying this for about over a decade now, almost 15 years now, is that everybody should own gold, right? I mean, I think that should… I mean, to me it’s a no brainer that you have to own some gold. And it doesn’t mean you need to rush out now and sell everything you own go put 30 or 40 to 50% of your portfolio in gold, but you need to have some, right?

Brent Johnson (23:35):
And I think having some kind of assets kind of outside the banking system, so to speak, or that aren’t subject to the whims of the monetary authorities is a good thing. But part of the issue is that a lot of the way that people earn gold is either through an ETF or a mutual fund or they’d trade futures and that’s kind of exposure to the gold price, but it’s not really gold itself, right?

Brent Johnson (23:59):
But gold is a thing, it’s scarce and it’s always been in demand for 5,000 years. And so I think over the years ahead as governments around the world increase the supply of their fiat currencies that gold will rise. We kind of talked about Bitcoin a little bit on the phone the other day, I think everybody should own Bitcoin. I think for some people maybe a higher allocation is appropriate and I think for other people higher allocation isn’t appropriate.

Brent Johnson (24:24):
But I think if you can afford to own some, you should have some. Bitcoin is the potentially biggest asymmetric trade in history, and it already has been. And it could be even from here, right? And even as much as I like gold, I don’t think gold has the same asymmetry as Bitcoin does. Now, what you won’t like to hear me say is I think Bitcoin could fall a lot too, right?

Brent Johnson (24:43):
I’m not convinced that it’s going to be the greatest asset in history, but I know that it has the potential to be. And so I think you got to own it. But I think that there’s some things that could go wrong with it. So I wouldn’t tell somebody to sell everything you own and go out and put all your money into Bitcoin either. I think it has a place in a diversified portfolio, but not an all or nothing thing for me. The whole Bitcoin versus gold debate, I think it’s kind of silly. I think you can own both. There’s no reason you have to choose between the two. If you do, I understand it, but you don’t have to.

Preston Pysh (25:11):
Talk to us about some of the risks that you see with it.

Brent Johnson (25:14):
I think the biggest one is that it’s unproven. Now I know you’ll say, well, it’s been around for 12 years, we’ve had two or three crises. It’s gone from pennies to $23,000. It’s proven itself. Well, fair enough. It’s proven itself over the last couple of decades, but it’s been very volatile along the way. It’s been open to massive swings. If you bought three years ago at 18,000, but when was it? Two years ago, it was… Anyway, whatever.

Preston Pysh (25:39):
Yeah, 2017.

Brent Johnson (25:41):
If you did all your analysis in 2017 and you thought this is the greatest asset in history, it is going to a million dollars and you put 50% of your portfolio in there, well, today you look pretty smart, but six months ago, you didn’t, right? Because you were down 75% from where you started six months ago, right? If at 18,000 to 6,000 or whatever that number is, right? But it wasn’t 6,000 in March.

Preston Pysh (26:03):
It was 4,000 in March.

Brent Johnson (26:05):
And so if you have liquidity from other places and you knew you were holding for the long-term, it didn’t matter. But if you needed that liquidity for something, that’s 60, 70%, that’s a big draw down, right? So my point is, is it’s not without risk. The second thing I would say is, and you know these figures much better than I do, I kind of go like this with Bitcoin, I get really into it and then I kind of leave it for two or three months, and then I get really into it.

Brent Johnson (26:27):
And Bitcoin is kind of one of those things part of the crypto world, it’s kind of one of those things I feel like if you’re not on top of it every day or every week, so much happens that you miss it. And so some of my stuff might be dated and you know the figures better than I do. But a couple of other risks that I would say is that isn’t it something like 2% of the holders own 80% of the coins or something like that? The whales dominate the market, right?

Brent Johnson (26:52):
So typically the whales are pretty smart people, right? And I’m not saying this has happened, I’m just saying this could happen. If the whales pump it up, this is the greatest asset in the world and then all the small retail guys come in and buy it at the margins and push it to 30 or 40,000 and then one night a whale says, “You know what? I’m out. I’m 80 years old, I’m rich. I don’t need anymore,” and he sells, he could sell a lot of coins really quickly.

Brent Johnson (27:15):
Now, again, I’m not saying that will necessarily happen, but it can. And maybe you argue that it’s not a thinly traded market, but if you have a big whale selling in a thinly traded market, prices can move really quickly. And you’ve seen that several times in Bitcoin. But the flip side is a whale comes in and you go from 4,000 to 23,000 in six months, right? So it cuts both ways.

Brent Johnson (27:35):
The other thing I would say is that again, I don’t know the numbers, but I know over 50% of the miners are located in China. And so I’m not going to say that that’s necessarily a bad thing, but if the CCP just rolls up to all the mining operations and says, “These belong to us now,” those people don’t really have to say no and they don’t have to gut to say no, they don’t, right?

Brent Johnson (27:57):
I mean, China, if they want them, they’re going to take them. And then you’ll say, well, then they’ll just migrate to the miners that are outside China or it’ll fork or something. And that’s possible. But I’m just saying that is a risk, that could cause some disruption in the short term. The other thing, and you’ll know this better than I will, the whole Tether thing.

Brent Johnson (28:14):
As I understand it, Tether is a big part of the growth of Bitcoin. And it’s my understanding, you can correct me if I’m wrong on this, but it’s my understanding that Tether is really more of a way to send dollars around the world than it is to send Bitcoin around the world. In other words, it’s dollars backed by Bitcoin instead of Bitcoin backed by dollars.

Brent Johnson (28:34):
I might have it wrong, but that’s my perception. And I know it was like two or three years ago, they kept saying it’s a hundred percent backed, but they would never… an audit was never done, it was never approved. And then it finally said, well, it’s more like 70 or 80% backed. Okay, well that’s actually still pretty good. No problem. But well, what’s it backed by? Well, it’s backed by assets. Well, are those assets dollars or what kind of assets are they backed by? Okay, well, they’ve never actually said that.

Brent Johnson (28:58):
And then this year, I think they said the value of Tether has increased a lot. But then when you look at the banks that Tether uses, there’s been no dollar flows into those banks. So if all that Tether’s backed by the dollars, well, where are those dollars at? Because they’re not in the banks that they say that they use. So again, it doesn’t necessarily mean there’s a problem, it’s just a red flag for me.

Brent Johnson (29:19):
And then the big one, the really big one, and I already know where this is going to go and that’s why I laugh, but the idea that the governments around the world are just going to sit by and let a private currency be the currency of the realm and they’re just going to be slaves to this Bitcoin and that’s going to become the national currencies for a number of governments, I think is absolutely ludicrous.

Brent Johnson (29:44):
Now, that doesn’t mean that Bitcoin’s not going to go to a million dollars, but I don’t see governments adopting Bitcoin. I think they’ll have their own digital coins. And if Bitcoin ever seriously threatens the livelihood or the ability of the government to fund themselves with their own fiat currencies, I think governments will take steps to limit the use of Bitcoin.

Brent Johnson (30:04):
And then I know people will say, “Well, they can’t shut it down because they’d have to shut down the whole internet,” I get it. Totally get it. That’s why I still think you should own Bitcoin. But you throw a few people in jail and activities, behaviors will change. What I think is interesting is one of the reasons that people are so, I guess into Bitcoin, if that’s the right way to say it, is they see it as a way to take on the evil system, right?

Brent Johnson (30:30):
There’s this evil system that has lasted for centuries and it’s the few take advantage of the many, the money’s always in the hands of the powerful and it’s never in hands of the people. These guys will do anything in their power to maintain their power. But then on the other hand, they’re not going to do anything when this private currency comes along and threatens their existence.

Brent Johnson (30:50):
I don’t quite get that. I don’t quite get how someone can think the evil empire has lasted for all these years because they’re the most ruthless people in the world, but then those most ruthless people in the world are also just going to sit by while this private currency comes along and threatens its existence. To me, at least there would be a battle along the way. Anyway, those are just some of my thoughts.

Preston Pysh (31:12):
I love this. So on the last one with the government ban, what are your thoughts on entrenchment? Because I think if you talk to any hardcore Bitcoiners, they’re going to look at that argument and they’re going to say, “You’re getting insane entrenchment right now. Billionaire after billionaire is buying into this, who then have the ability to lobby and influence policy makers, elected officials. And you’re not just seeing it in the US, you’re seeing it globally.” How would you respond to that?

Brent Johnson (31:39):
I’d say that’s absolutely correct. It’s a very good point and it’s one of the reasons you should own Bitcoin, right?

Preston Pysh (31:45):
Yeah.

Brent Johnson (31:45):
That is very, very true. And the more powerful people that own it, the less likely it is to get banned because it’s those powerful people that fund the politicians that would try to ban it in the first place, right? So I completely get it. I’m just saying that Bitcoin could become worth a million dollars, but it doesn’t necessarily mean it’s going to replace the US dollar.

Brent Johnson (32:05):
It’s not necessarily going to replace the euro, it’s not necessarily going to replace the yen. So I think the people who say you have to own Bitcoin because it’s going to become the world currency and governments around the world are going to fall, instead of people being slaves to the governments, the governments are going to be the slaves to Bitcoin, I think it’s the personification of silly.

Preston Pysh (32:25):
But if let’s just say the US stands up their own US token and they have their own protocol, right? They’re still managing that centrally. It’s not like it’s going to be a decentralized token. So if we still buy the narrative, which I’m sure you agree with, which is they have to continue to base the currency based on the policies that this massive deflationary price.

Preston Pysh (32:49):
So it doesn’t really matter if they call it a US dollar token, or they keep doing what they’re already doing. They’re going to have to debase whatever that thing is and it’s going to be debased against gold, it’s going to be debased against Bitcoin because I buy into Bitcoin being fully decentralized at this point. I think you have an interesting talking point. I think a lot of people in the community share your fear with the Chinese mining.

Preston Pysh (33:13):
And you brought up the point that full node operators can fork. If there’s a bad actor or there’s somebody who’s trying to go back and reverse one of those blocks, right? That have a 51% attack, the full node operators can go and fork the protocol. But I agree with you. I think in the short-term, it’s going to have an impact on price and it’s going to create volatility, which I think is your biggest concern for a person owning this. Your opinion is they might not be able to handle the volatility associated with it.

Brent Johnson (33:40):
And the other thing I’d say is I don’t have a problem with Bitcoin. Actually, I’m a fan of it. I would love to see Bitcoin continue to rise and become more popular and not get attacked by the government. I think one thing people get a little bit messed and I think this is a mistake a lot of people make, and I’ve made it many times in my life and I think I’ve gotten better at it, is the difference between what you’d like to see happen and what’s actually going to happen, right?

Brent Johnson (34:05):
I would love it if we had private currencies competing with fiat and government currencies and we were allowed to choose. But there’s legal tender laws for a reason, right? You don’t have the time to go through them all, but look around the world and look how many times a country kind of this rogue nation started talking about using something other than the dollar and think about how it ended up for those people and those leaders. They’re gone.

Preston Pysh (34:27):
Do you think there is a certain market cap? I don’t know what the Bitcoin market cap is right now, but let’s just make-

Brent Johnson (34:31):
Yeah, maybe.

Preston Pysh (34:32):
Like if we get to a trillion or we get to 5 trillion, does that argument really kind of go away and it’s like, all right, now governments are going to have to adapt because there’s no way they can really kind of stop this force at this point.

Brent Johnson (34:43):
Well, I would say the governments already have to adapt. But they’re all talking about digital currencies, right? I think this thing kind of sprang up and it was kind of this cute little anomaly and then it kept growing and growing. And then I think it’s gotten to the point where, I mean, my mom knows about Bitcoin at this point, right? It’s not like a secret thing anymore.

Brent Johnson (35:00):
And it’s kind of entered the zeitgeist a little bit. And I think the governments of the world realized they had to wake up. And I think they’re kind of scrambling to try to catch up. And government currencies are not going to be decentralized. They’re going to be centralized, right? And so I think that they will be fine with Bitcoin existing and they’ll try to regulate it to a certain extent, as long as it doesn’t threaten their coins themselves, right?

Brent Johnson (35:27):
But I guess my point is the idea that they will just sit back and allow Bitcoin to become the currency of the world and not push back, I think is wrong. Now, that doesn’t mean that Bitcoin won’t win, it just means that they’re not just going to sit back and allow it to happen.

Preston Pysh (35:44):
So one of the arguments that, well, I make this argument a lot, the reason that we’ve gotten to the entrenchment level that we’re at right now, which I think is extremely high, way higher than anyone would have suspected. If we warped ourselves back 15 years ago and we said, hey, there’s going to be this decentralized protocol that becomes money and all the central banks and all the governments of the world are going to allow it to happen, right?

Preston Pysh (36:08):
You, me, everybody else pretty much on the planet would have looked at you and said, “That’s impossible. They’re never going to allow something like that.” People who study the protocol and how the protocol functions believe that the four year halving event was by design and by design in order to create deep entrenchment. And so what it does is through its scarcity, it basically ratchets up into these various scarcity levels, but they stay put for four years.

Preston Pysh (36:35):
So you get these exuberant bits that happen because there’s this suffocation of supply on the open market. It goes up, there’s a total overreaction, it has this big, giant correction, regulators are getting ready to really start taking action like, hey, we’ve got to start regulating this, then the whole thing falls apart and they forget about it for three more years.

Preston Pysh (36:55):
And then the protocol does another four year halving cycle and it basically does quantitative tightening and it ratchets it up. So in May we had another one of these events. And a lot of analysts, a lot of people that are looking at, well, what does the scarcity level now take us to with this new halving event? Well, it takes us over a hundred thousand. And we’re seeing the price run post halving event. And it almost seems like this whole thing was designed to perform in this way that allowed entrenchment at the deepest level into our existing financial world. Do you buy into that?

Brent Johnson (37:32):
I do buy it. Bitcoin is one of the most ingenious inventions in the history of the world. I mean, I think it’s incredible. I find it endlessly fascinating. And again, I think everybody should own it. I think Bitcoin has this first mover advantage, I’m kind of one of these Bitcoin maximalists, even though the Bitcoin maximalists would drive me absolutely crazy.

Brent Johnson (37:54):
That said, there’s such an incredible advantage to being the first mover. But that said, there’s also the first mover disadvantage in that if, and I’m not saying that they will, but if private digital currencies ever start to threaten government issued securities, the government’s not going to go after the little tiny one, they’re going to go after the big boy to try to cut him off at the knees to scare the whole world to, don’t threaten our existence. And again, I just think the people that think that this isn’t going to happen, that Bitcoin will just be allowed to take over, now Bitcoin may take over, but it won’t happen with the government just saying, “Okay.”

Preston Pysh (38:29):
Without a fight.

Brent Johnson (38:30):
They will fight it, they will fight it to the bitter end and they will score some points along the way. That’s my point.

Preston Pysh (38:38):
What do you think about the game theory of other countries? So if this was an individual country that was dealing with this threat, I buy into what you’re saying all day long, but when we look at, and you and I are looking at this from a US lens, right? And we’re looking at it from a lens where there’s been US dollar dominance for decades, and it’s benefited us tremendously from a military standpoint, from all sorts of standpoints where dollar dominance has given the United States a massive advantage.

Preston Pysh (39:07):
When you look at all the other countries in the world, they see that through the exact opposite lens. It’s been a detriment to them, that dollar dominance. So when you have this new token that’s decentralized and it affords them a huge opportunity to take back some of that advantage that they’ve been a victim of for literally decades, even if… and I’m using the US as an example, but you could really kind of use any country as the example.

Preston Pysh (39:31):
If they want to step in and perform heavy regulation, I think you’re going to have others that are going to look at it from a game theory standpoint and say, “Well, we’re going to do the exact opposite. We’re going to actually promote the use of this heavily.” You look at Switzerland, I know they have a entire valley out there that they call Crypto Valley in Switzerland, and it’s heavily-

Brent Johnson (39:50):[crosstalk 00:39:50].

Preston Pysh (39:51):
Yeah, and it’s [crosstalk 00:39:51].

Brent Johnson (39:51):
I’ve seen that, beautiful. It’s one of those beautiful places in the world.

Preston Pysh (39:55):
Tell us about it.

Brent Johnson (39:57):
It’s basically from Zurich down to the border with Switzerland, it goes along Lake Lucerne and the Zug. And there’s these half dozen vaults up in the Alps that are former army bunkers that do this cold storage and they’ve passed laws and encouraged businesses to do that. So I agree with everything they’re saying. I guess my point is, is because I think they see the advantage of it, right? They want productive economies, they want growth of the economy. But I don’t think that they want their currencies replaced, right? I mean, that’s a big thing. I mean, you’ve got to remember that the currency of a government is one of its biggest tools.

Preston Pysh (40:36):
Yeah, flexibility.

Brent Johnson (40:38):
I mean, think about this. So let’s pretend for a second that we’ll just use Switzerland because that’s what we were talking about. Let’s pretend that Switzerland was more of a rogue nation rather than just a neutral nation and they decided, “Okay, as the rest of the world kind of tries to clamp down on Bitcoin, we’re going to embrace it. And we’re going to make Bitcoin the national currency of Switzerland.”

Brent Johnson (40:57):
Okay, so now you’re operating a business in Zurich, Switzerland and the currency’s Bitcoin, and it’s priced at $25,000. And now you need to go build a new plant, right? So you go down to Union Bank of Switzerland and you borrow $2 million of Bitcoin because you want to go buy some trucks and materials to buy that plant. And then a year later Bitcoin’s priced at $75,000.

Brent Johnson (41:21):
Well, now you’re in debt, you took out three times as much debt as you thought you did, right? I mean, remember that cross of gold speech that was given by the politician back in the early 1900s because they didn’t have the flexibility of the currency. Well, how do you grow your country and your economy if your currency is going up two or three times a year and nobody wants to borrow? I mean, there’s that side of it too, right? In order to have a productive economy, you do need to have at least somewhat of a steady currency.

Preston Pysh (41:52):
My concern is this Brent, when I look at… so I buy into the whole Ray Dalio big credit cycle that basically started with Bretton Woods and the interest rates peaked in the early ’80s and now we’re here at 0% interest rates, right? That big giant cycle. And I look at how much that inflationary monetary policy has incentivized capital investment.

Preston Pysh (42:15):
And you look at how much technology growth we’ve had through that period of time relative to any other period throughout history, because it was this global collective incentive structure that was supplied through that monetary policy. And when I look at… and I just look at how nature works, if you have 12 hours of daylight, now you got to have 12 hours of darkness and you look at pretty much everything throughout nature has this cyclic piece to it.

Preston Pysh (42:41):
And so when I look at the fact that we’ve been going through that since 1944 up until now, and we’re 80 years into that big, giant credit cycle that created all this innovation and all this growth, I then have to wonder to myself, is this Bitcoin thing supplying such a hard peg that it’s bringing the nighttime to this massive credit cycle that’s going to slow everything down?

Preston Pysh (43:05):
Just because you and I like the fact that we’ve been able to have so much progress and growth through our entire lifetimes doesn’t necessarily mean that that growth rate or that incentive to continue to produce and grow is going to continue to be there for the second half of our lives because maybe something like this steps in. Do you think that that’s a little hard core or…

Brent Johnson (43:25):
Listen, I mean, these are extremely big concepts that we’re thinking about, right? And it’s like the cycles of history. And I don’t think you’re off base. I don’t know whether that’s going to play out or not. I certainly think barring some new technological discovery, I think to maybe the growth rates over the next 50 years maybe are not quite as high as they were over the last 50 years.

Brent Johnson (43:44):
Maybe if we got rid of all this debt, whether it’s by default or inflation or whatever, but if we can get past all this debt that’s taking all our productive capacity away, then maybe we could get to these higher growth rates again. Again, I’m just not sure there’s a difference between having a great store of value, which I think Bitcoin has the potential to be a great store value, I’m not sure it’s as good a currency as it is a good store of value, and I guess it’s right now.

Brent Johnson (44:09):
It doesn’t mean it couldn’t become a good currency, but again, I don’t want to borrow a currency that’s going to go up three times in a year, right? And I have to pay back three times as much as I borrowed, unless I took that money that I borrowed and invested in something that went up more than three times a year, right?

Preston Pysh (44:24):
The way some of the lending works now is if you go and you want to borrow a hundred thousand dollars, well, you got to have $200,000 in Bitcoin in order to take out the hundred thousand. And so then if the value of Bitcoin’s going up, if you have other money in Bitcoin, it’s going up in value and it’s getting easier for you to pay back that loan.

Brent Johnson (44:42):
That’s true.

Preston Pysh (44:43):
It’s an interesting dynamic.

Brent Johnson (44:44):
I want to say something before I forget, again, if I had to be something in the crypto world, it would probably be a Bitcoin maximalist because I just think the advantage of it are so much higher than any of the other coins. It’s the Bitcoin maximalists who also just think that Bitcoin’s magic and it’s going to take over the world and it’s going to solve all the world’s problems. I think that that’s wrong, but I will say this.

Brent Johnson (45:07):
I mean, Bitcoin is a revolution, right? I mean, it’s the money for the people trying to take on the most powerful groups in the world and it’s trying to overthrow them. And that big group is going to do everything it can to keep it from getting overthrown. But you know what? Sometimes, not very often but sometimes the revolutionaries win, right?

Brent Johnson (45:25):
And if you go back and you look at revolutionaries throughout history, they’re typically not the most rational people in the world, right? They’re the people who think that well, their cause is worth dying for. And to be a revolutionary, you kind of have to be out there and you kind of have to be a little bit crazy.

Brent Johnson (45:42):
So even though the Bitcoin maximalists are driving me nuts, I kind of understand it. Because if you’re going to start a revolution and you’re going to win, you need the true believers who are willing to die on the floor for the cause. And there’s people out there that are selling everything they own and taking out loans in order to go buy more Bitcoin at $23,000 because they’re the true believers. Who knows? We’ll have to see how it works out.

Preston Pysh (46:05):
One of the things that gets lost in where this could potentially go and unravel is really around the fixed income market. So today we’ve got, let’s just ballpark it and say we’ve got a hundred trillion dollars of fixed income in the world, most of it yielding literally nothing. We’ll call it 18 trillion is negative yielding. And so I’m just going to play out a scenario.

Preston Pysh (46:29):
My opinion and the opinion of a lot of other people due to this scarcity shock that just happened in the protocol back here in May of 2020, is that the price of Bitcoin should be around a hundred thousand by the fall of 2021. That’s the numbers in the math people are suggesting. If true, I’m curious how people in the fixed income community could possibly keep holding onto those positions as they watch something that is “becoming the new store of value”.

Preston Pysh (47:00):
I mean, we’re already seeing narratives. I saw one on CNBC probably two weeks ago and the headline was, I think it was like the dollar’s death or something like that and there was a picture of a Bitcoin with a crown on top of it. This is on CNBC, right? And they’re having these conversations and I’m thinking, how are people possibly not going to say, “You know what? Let me just pull a sliver of 1% out of this hundred trillion dollar market of fixed income and start sliding it into Bitcoin.”

Preston Pysh (47:30):
And I think that the potential for it to totally unravel due to what has been caused by the central bankers that you were describing perfectly at the beginning of the show starts to play into some of this. And I’m just curious if you would agree with it.

Brent Johnson (47:45):
I don’t disagree with it, but I don’t agree with it for a few reasons as well. So what do I mean by that? So I think this hundred trillion that you’re talking about, those markets, the people that make the decisions overseeing those markets, they can’t go buy Bitcoin. It’s just not in their mandate, right?

Brent Johnson (48:03):
Now, the individuals who perhaps believe in Bitcoin may be currently lobbying their investment committee or their board of directors or whoever it is to allow them to take the 1% and put it into something like Bitcoin. But a lot of the big holders of these the hundred trillion dollars of fixed income, these are big pension funds and big endowments and big mutual funds.

Brent Johnson (48:27):
And a mutual fund that is tasked with bond renewal, managing AAA rated bonds, their mandate is to go buy AAA rated bonds. And that guy may have his own money invested in Bitcoin, but he can’t take his mutual funds money and go buy Bitcoin. And if and when that mutual fund company ever does let somebody go buy Bitcoin, they’re probably going to set up their own Bitcoin mutual fund or something to go do it.

Brent Johnson (48:55):
I guess my point is your argument, you could also make that same argument, that gold’s been going up over the last couple of years, not at the same rate as Bitcoin, I get it. But that same fixed income managers that are, why do I have to buy a negative yielding bonds when I could go buy gold? That would perform better than these negative yielding bonds.

Brent Johnson (49:13):
But they go to their investment committee and the investment committee says we have in most a 1% allocation to gold but we wouldn’t just go buy gold in mutual fund. In our AAA rated bond portfolio, we’re not going to go buy gold, right? And my point is, I’m not saying that those endowments and those pension funds, they may, at a group level, decide that we want to have a small allocation to Bitcoin.

Brent Johnson (49:37):
But these investments, it takes a year sometimes to get a change in the investment policy statement or their mandates to allow them to go into a new asset class. And it’s becoming easier, right? And when you have people like Druckenmiller and Paul Tudor Jones and these kind of legendary investors stepping up and buying Bitcoin, that obviously helps. You’ve got a guy like Michael Saylor who’s a little bit more of a… I mean, that, guy’s kind of crazy, right? But he’s gotten his board to sign off on coding, what did they put? 10% of their money?

Preston Pysh (50:10):
I want to talk about that because this relates to fixed income, what he’s doing right now. So he just went out and he issued a press release that he was going to try to raise $400 million with a note, a five-year note that had a convertibility clause to it. And what was so fascinating, so I talked to him on Monday and it was oversubscribed.

Preston Pysh (50:33):
It was oversubscribed to $650 million, $150 million higher than what he was going after. And you know what? What I think is going on is you have people on fixed income that have the mandate that you’re talking about and their Bitcoiners or they believe in Bitcoin and they’re saying, “Holy crap, this is my chance to basically participate in this upside and do it in a way that I’m still meeting my mandate.”

Brent Johnson (51:00):
I think that’s absolutely right. I mean, listen, whether or not you agree that Bitcoin is going higher and whether or not you agree with Michael Saylor of the attributes of Bitcoin. It’s a fairly genius move on his part, right?

Preston Pysh (51:13):
Oh yeah, genius. If he’s right about Bitcoin, which I obviously think he is, but yeah.

Brent Johnson (51:18):
Sure. Well, I guess my point is it was a way for him to go raise capital. And I have a confession to make, I’m not sure that I know the answer to this, was it that he would put a hundred percent of the proceeds into Bitcoin or just a portion of it?

Preston Pysh (51:33):
Yes.

Brent Johnson (51:35):
All right.

Preston Pysh (51:35):
Which is crazy.

Brent Johnson (51:36):
And what was the interest rate on it again?

Preston Pysh (51:38):
75 basis points.

Brent Johnson (51:41):
And that’s essentially what it was, right? Basically he sold a call option on Bitcoin to people who couldn’t buy Bitcoin.

Preston Pysh (51:49):
Exactly. That’s the best summary explanation of what he did. So I was really curious, well, let’s see how the market handles this, right? Is he even going to get the-

Brent Johnson (51:57):
Is the 75 basis points payable in dollars or in Bitcoin?

Preston Pysh (52:00):
Oh, no, it’s dollars? Oh yeah, it’s definitely dollars.

Brent Johnson (52:04):
Perfect, perfect, perfect. It’s a genius move. Whether it works out, I don’t know, but it’s very clever.

Preston Pysh (52:08):
I love how you just described that because that’s what this is. So when I’m seeing this movement, I’m looking at it and I’m saying, are we just seeing a preview of what Apple and other large cap companies that have a really pretty balanced sheet, is he providing a template that’s going to be copied in 12 months from now?

Brent Johnson (52:31):
Well, I would say it’s unlikely he’s the only one to do it, right? If somebody does something that’s successful on Wall Street, everybody starts to copy it, right? I mean, that’s just kind of how it’s historically been. Somebody figured out credit default swaps and the next thing you know, we’ve got so many credit default swaps we cause a global financial crisis, right?

Brent Johnson (52:50):
So whether or not this will turn out to be that same type of a thing, I don’t know, but I would not be shocked at all to see more people do this. Again, I think there’s demand for Bitcoin. And I think that there’s individuals at these institutions who would love to put 1% of their institutional capital into it. And my guess is that as Bitcoin stays high in price, some of these mandates will get through.

Brent Johnson (53:12):
And then when we have a pull back in Bitcoin, and listen, maybe Bitcoin goes to 50,000 and then pulls back to 30,000, I don’t know. But whenever we have the next pullback, these things will kind of get shelved a little better. They won’t be quite as popular as they were. And then again, I think that Bitcoin’s ultimately going to go a lot higher, but I don’t think it’s without risks.

Brent Johnson (53:31):
I think that the risks are much bigger than the Bitcoin community thanks to our… But that doesn’t mean it’s not going to be successful. There’s risks in every industry. This is the absolute truth in investing. You can always come up with a reason not to do the trade. There’s always a hundred reasons not to do the trade. But if you can find a couple of reasons to do it, sometimes you just got to do it, right?

Brent Johnson (53:51):
And I kind of feel like Bitcoin’s one of those things. I own some Bitcoin, I don’t know as much as you would probably want me to, or other people think that I should, but I want a little bit just because I see… I’ll tell you, if you want to call me bitter about Bitcoin, I will absolutely admit that I’m bitter on Bitcoin because I’ve been following it since 2010.

Brent Johnson (54:11):
Somebody sent me the white paper in January of 2010 and they sent it to me because I was a big fan of gold and they said, “Hey, this is pretty similar to gold. We think you might be interested in this.” And I remember reading the white paper and I remember sitting back in my chair. I live in Silicon Valley, near Silicon Valley, and I have a lot of people that work in tech. But tech kind of goes over my head.

Brent Johnson (54:31):
I’ll talk with them about the things that they’re doing and my eyes just glaze over because I just don’t really get it. But I remember reading this white paper and I remember sitting back in my chair and thinking if the technology works the way this paper says the technology works, in a million years, it’ll never be legal because it is the most powerful thing possible, right?

Brent Johnson (54:51):
And Bitcoin was 25 cents at the time. And I remember thinking I should just put $5,000 in it and forget about it. Well, yeah, it’s the one time in my life where I was somewhat practical, but just had a son a couple of years before, I was starting to pay for him to go to private school and I had changed jobs and there’s all these reasons. And again, I should have just done the trade, right? And I didn’t because I thought about it and I was like, “Well, no, I won’t.”

Brent Johnson (55:16):
Well, I ended up buying it later when it was a thousand dollars or $800 or whatever it was. But yeah, I mean, you can imagine what $5,000 at 25 or 30 cents would be worth. Even if you sold it off long ago because you would never would’ve held it all, right? So it’s not like I’d have 3 billion in Bitcoin, but 20 or 30 million wouldn’t be bad, right?

Preston Pysh (55:38):
It’s pretty amazing. There are a few people in the community that have held from very insane prices of a dollar or a quarter. And yeah, I mean, it’s-

Brent Johnson (55:49):
That’s [crosstalk 00:55:49].

Preston Pysh (55:49):
You can imagine if it keeps going where many suspect it could go, I mean, they’re going to be trillionaires as far as buying power goes.

Brent Johnson (55:59):
Again, I find the whole space fascinating. It’s kind of the intersection of economics, politics, finance and the wild, wild West, right? I mean, what’s not to like about it? This is fascinating to me. But again, in the wild, wild West, I mean, you can get shot in the street in the wild, wild West, right? It might’ve been a very cool environment and a very kind of wide open and opportunities were amazing, but I mean, somebody might ride up on a horse and shoot you. And so that doesn’t mean that it wasn’t some pitfalls along the way.

Preston Pysh (56:31):
Last question, because believe it or not, Brent, we’ve already gone an hour. I can see why everyone wanted us to talk.

Brent Johnson (56:38):
We haven’t even gotten in a fight yet. [inaudible 00:56:41].

Preston Pysh (56:42):
Last question. Tell us something about yourself that you’ve never shared or that people might be surprised to hear or just something really unique.

Brent Johnson (56:51):
That’s a good question. I don’t know if anybody’s ever asked me that before. I don’t know if people have heard this before or not, but one thing that people might not know is the reason my company is called Santiago Capital is I hiked the Camino de Santiago, which is an old ancient pilgrimage route across Spain. And I was between jobs in 1999. And I was looking for something to… I wanted something kind of adventurous and kind of a spiritual and kind of off the beaten path. And so I decided I was going to walk across Spain. And that’s where the name comes from.

Preston Pysh (57:23):
Oh, that’s awesome. And you know what? Before we had this conversation, I actually thought that to myself, I said, why is it called Santiago Capital? Because I don’t see that anywhere kind of in his… the bio and I’m reading everything, I don’t see it anywhere in there. So that’s cool. Awesome. All right. I lied, there’s one more question.

Brent Johnson (57:41):
Sure.

Preston Pysh (57:41):
Book recommendation or person that really influenced you that people can research and study up on that really had a big impact on your investing style.

Brent Johnson (57:49):
I think that the one book that’s probably influenced my overall view the most is The Fourth Turning. And people have heard me say that before. I think The Fourth Turning is just a genius work of history and analysis and it applies to the past and it applies to the future. So if I had to give one book recommendation, that would be it.

Brent Johnson (58:08):
My two favorite books of all time are The Alchemist and The Old Man and the Sea. And those are books about… one of them is about going on a big adventure and the other one’s about kind of the ultimate struggle. I kind of think that’s what life’s about. You can live kind of a boring life or you can take some big swings and go on a big adventure. And you may go through this struggle to do it, but ultimately it makes life pretty interesting.

Preston Pysh (58:29):
Brent, I really appreciate you agreeing to come on, especially after us wrestling each other in front of the playground.

Brent Johnson (58:39):
And people take Twitter so seriously, they’re like…

Preston Pysh (58:42):
I really appreciated you being willing to just talk to me on the phone. I knew right away, I was like, “All right, this is going to be a great conversation.” And just coming in here and sharing some of your concerns. And I think that this is super important for people that are entering the Bitcoin space, or even if you’re taking a 1% position in Bitcoin to hear counter-arguments, to hear people say what their concerns are, whether they’re valid, they’re super valid, unvalid, whatever, it doesn’t necessarily matter. It’s in the eye of the beholder or the person listening to this to decide and to do future research. And you brought a whole bunch of that today, and I really appreciate it and I appreciate your time and coming on the show.

Brent Johnson (59:19):
Cool, man. And I appreciate you having me and happy to come back anytime and hope you and your family have a great Christmas.

Preston Pysh (59:24):
Hey, you too. And yes, we do need to do it again.

Outro (59:29):
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