Jeff Ross (01:37):

So I did my kind of pre-med coursework in college, got to med school, did four years in medical school. And then I did six years in residency and fellowship, finished that in 2008. So when I finished that I was a board certified diagnostic radiologist and a fellowship trained interventional radiologist. The latter is basically image-guided minimally invasive surgery.

Jeff Ross (01:57):

So when I got out, the job market was fantastic. I could move anywhere in the US pretty much that we wanted. So my wife and I talked about it and we thought Colorado. We grew up in Minnesota, did our training in Milwaukee, and we always have loved the Rocky Mountains. And so our first chance, we came out here. And so I’ve been out in Colorado Springs since 2008.

Jeff Ross (02:15):

Probably about a year into private practice medicine, I remembered that I loved investing. And so I started a blog at that time teaching people how to invest on their own. Did that for like a year or two and first I got picked up by The Motley Fool and started writing for them, and then I started doing stuff for Seeking Alpha. Had built up enough of an audience at that point of people who were like, “Hey, we really love your style. We think you seem like a good guy. Could you manage our money?” I was like, “Oh, no, I’m just a doctor. I just do this kind of for fun on the side,” but it put a little bug in my brain. I’m like, “Man, if I could do this for a living, that would be kind of fun.”

Jeff Ross (02:46):

And medicine’s pretty intense. I was on call every fourth night as an interventional radiologist doing my stuff there, but I started thinking about it.

Jeff Ross (02:54):

And then fast forward a little bit, 2013, I ended up founding Vailshire Capital Management, and then started this hedge fund in 2014. So it’s called Vailshire Partners. It’s a long-short healthcare and technology centered hedge fund. Literally no clients when I started, $120,000 of my own money. I just turned the shingle around on my window and said, “Open,” and I waited. And for eight months I had no clients. I just was like, “All right, let’s do this.”

Jeff Ross (03:18):

Literally everybody, even my attorneys who [inaudible 00:03:21] super nice, this lawyer who was helping me out, he’s like, “Jeff, I just got to tell you, you have like less than a 2% chance of succeeding. There’s no way you’re going to make it. You’re just some random dude in Colorado and you’re a doctor and you have no connections on Wall Street. You’re never going to survive.” And I’m like, “Thanks. I think I will though. I’ll figure it out.” I have this quirky personality where I kind of like being told by people that I can’t do something. It just makes me want to try harder and kind of prove people wrong.

Jeff Ross (03:43):

Anyways, fast forward, I ended up getting my MBA in there in finance a couple years ago and kept growing Vailshire on the side as a side gig all the way up until actually September, 2021, just finally retired from medicine because Vailshire had finally grown to be big enough. I now have over a hundred clients in separately managed accounts, so the RIA side of my business, and then I also run my hedge fund as well. So having a ton of fun.

Preston Pysh (04:06):

Do you think you had an advantage by getting your MBA so late because you hadn’t been schoolhouse trained in CAPM models and those types of things?

Jeff Ross (04:16):

Yes. In fact, and I hate saying this because I really liked my teacher and I felt like I had a good education, it was great. In the finance courses, all they do is teach you these goofy academic models that literally, I just don’t think they help.

Jeff Ross (04:27):

And I would talk to my teachers about that. I’m like, “I’m just telling you, I do this for a living. These models, they give you a false sense of security that you know what you’re talking about. It just doesn’t work that way.” And ironically, I kind of out as more of a value investor, but as the decade went on and the world of funny money, the Fed money printing, all that stuff, I firmly believe that if your denominator doesn’t work in all of your equations, no matter how good your equations and how well-intentioned they are, you don’t get accurate results.

Jeff Ross (04:56):

And so I just think that growth blew out value investing. And so I had to morph my hedge fund. I was just getting these kind of cruddy results as a value-based healthcare fund. And then I switched over to more of a growth mentality. And then along came Bitcoin and we can talk about that as well. So I’ve really morphed in the last eight years as being a fund manager, for sure.

Preston Pysh (05:17):

So there’s been these rotations into value that have worked, but in very short periods of time over the last decade, and they almost all seem to be correlated to when the Fed is actually trying to tighten and restrict the number of units that are being put into the system. And so you could make the argument that we’re going through one of those times right now, or at least we’re kind of anticipating that they might do that.

Preston Pysh (05:42):

We had a little bit of that in the 2017, going into late 2018 period of time where they were actually tightening. And during this period of time, you actually saw value outperforming growth. But this was, if you’re looking at the total time horizon, this was such a small piece of the last since the 2008, 2009 crisis that those situations of tightening were actually occurring. Do you see that as being the correlation that when value performs is when we’re actually tightening monetary policy versus just accommodative insanity?

Jeff Ross (06:17):

Absolutely. In fact, because I think what the market is sniffing and value stocks are sniffing out is that we’re actually for once, at least for a short time, we’re getting serious about our [inaudible 00:06:28]. We’re trying to actually have a serious currency, but that only lasts, as we know, for months, maybe a few quarters. This time I think it only is going to last a few months before they turn and right back. Like right now they’re talking about tightening. I don’t think they last more than a couple quarters at the very most and then they’re right back to quantitative using again and funny money goes on and risk-on assets are going to blow up again.

Jeff Ross (06:47):

So I don’t know that the Fed ever again can be serious about monetary policy. I just really don’t. They’ve backed themselves in a corner. I really think we’re in the final stages of this Keynesian economic experiment where credit rules, your ability to borrow cheap credit, have access to the credit markets, that rules everything. And then if you can put that into higher revenue growth, those are the companies that crush it. That’s why we see all these tech stocks just crushing it year after year.

Jeff Ross (07:14):

And so I think we’re just going to continue to see that probably right up until money actually dies and we have a true crisis in confidence in our currency, and then what’s going to happen after that is probably going to be a disaster, but thankfully we have Bitcoin.

Preston Pysh (07:27):

You said you had about a hundred clients that you work with. I would imagine that either your personality and what you’re saying right now on a show like this is what’s attracting your clients so it’s an easy conversation to have, but are there some that were with you before a lot of this started really kind of coming off the rails that you’ve had to educate, and what has that process been like? How receptive have some of them been?

Jeff Ross (07:53):

Great question. So, yeah, a lot of my original clients were with me because I was a good stock picker from The Motley Fool days or from Seeking Alpha and I picked out good healthcare stocks. And so I would sort of talk with them about a lot of funny money kind of things going on and just sort of simplistically talking about things that the Fed is doing and sort of the debasing of our currency and the effects that this has on value investments.

Jeff Ross (08:16):

And then along came Bitcoin. And I went down the rabbit hole kind of early 2019, and starting about that same time, I started really teaching my clients about that too. They were very, not all of them, but so the majority, at least initially, were very reserved. It was, “It’s used by criminals. It’s crazy money. It’s anti-government, and this is scary and should we really be investing in this stuff?”

Jeff Ross (08:39):

So I spent a lot of time on my monthly letters just like, “Hey, here’s what I think about it. This actually isn’t as scary as it sounds. It’s actually good that it’s decentralized and not controlled by a central bank. It’s actually really secure. It’s actually not only used by criminals. In fact, criminals hardly ever use it, and if they do, it’s really stupid that they use it.” So things like that. And so that helped us to get off zero to kind of a half a percent position, then to a 1%, and then to kind of a 5% position.

Jeff Ross (09:04):

And then at that point I had actual hard data, right? So I had my clients who allowed me to put them in some Bitcoin and the ones who didn’t. And I would just show them. It’s kind of… Do you remember those old commercials like, “Here’s your brain, and here’s your brain on drugs,” and they’d crack an egg and show it frying in the frying fan?

Preston Pysh (09:20):

Yes.

Jeff Ross (09:20):

And it was just like that. I’m like, “Here’s your portfolio. Here’s the same portfolio, but with 5% Bitcoin in it, and look at the difference in returns. And it’s not more volatile, it’s just much better returns. And this is what Bitcoin offers over the long run.”

Jeff Ross (09:33):

So after I did that, but now I’m to the point where my clients love it and I actually have to kind of pull them back a little bit, like, “All right, hold on, we still want to stay a little bit diversified in these portfolios.” For some who want to go all in, I’m like, “Great, let me help you do that. Let me show you how to do that,” and I get them set up. But for the ones that want kind of a diversified portfolio, we’re much higher than the average investment advisor as far as our Bitcoin allocations. And I’m actually kind of proud of that because I think it’s obviously the way to generate alpha for the coming decade or more.

Preston Pysh (10:02):

And risk adjusted alpha.

Jeff Ross (10:03):

Exactly. Exactly. The Sharpe ratio.

Preston Pysh (10:06):

Which I think is really counterintuitive to people that would look at Bitcoin with 60%, 70% annual volatility. And you’re like, “Yeah, risk adjusted, it’s really helping improve my numbers.” People might not believe that-

Jeff Ross (10:20):

Right.

Preston Pysh (10:20):

But until you stick it in there and you actually run the math, that’s pretty insane.

Preston Pysh (10:25):

Hey, I want to backtrack to healthcare. This is something that I can say that Stig and I, for how long we’ve been doing this show, we really have not covered healthcare in any type of depth. So I’m excited to kind of have you on with your background and everything.

Preston Pysh (10:39):

When I’m looking across the board just on a couple of the really big names in healthcare, CVS, 50% in the last year, United Healthcare Group, 37%, Anthem, 43%, Siemens, 51%, HCA Healthcare, 40%, McKesson, 50%. These numbers are huge. What are your thoughts? Why healthcare? What’s really interesting when you look at pharmaceuticals in the last year, they have not performed like that. They’ve been pretty flat. So the delta between healthcare versus pharmaceuticals, how do you think about that just in a broad brush overview?

Jeff Ross (11:16):

Great question. First of all, I used to write about CVS as being a great value company way back in the day. It took a long time. Kind of getting back to what we were talking about, the value companies have been sort of left in the dust bin, but we recently have come into a period where value has generally outperformed.

Jeff Ross (11:32):

So I think the pharmacy companies, well, it depends, you have to tease those out, right? Because there’s the COVID-related pharmacy companies that just crushed it, the Pfizers and those kind of things, and then there’s the other companies that kind of got left for dead.

Jeff Ross (11:43):

I used to be a big fan of the biotech sector, Gilead, Biogen, those kind of companies. They were the hot, hot companies up until about 2015 actually, right when I kind of was getting started with my stuff. And then they entered this really painful bear market and just never really got going again. Biotech was super hot when I first started. It’s still kind of left for dead honestly.

Jeff Ross (12:02):

And so it kind of depends on what sector of healthcare we’re talking about, but healthcare in general is a generally a great defensive play. So when the macro scene is turning bearish, a lot of people turn to healthcare kind of like they would for obviously US treasuries and the US dollar, things like that.

Jeff Ross (12:19):

CVS I think is just a great example of a company that was just kind of languishing and nobody cared about it because it was a great value, but it didn’t have a ton of growth. It’s not going anywhere for a long time. So I think that’s why a lot of people glommed onto that.

Jeff Ross (12:31):

The other companies you mentioned, I mean, insurers, those are the companies as a doctor we love to hate. They give doctors just tons of problems, but they’re great if you own them from an equity perspective. They just do well. And whenever the markets are concerned at all, they kind of grind through. They’re like a Hershey stock or these other just real kind of safe haven, low beta stocks that always perform even in kind of the tough markets.

Jeff Ross (12:54):

So that’s why I think those have outperformed. Pharmaceuticals in general I think are kind of old pharma, traditional pharma. They’re kind of in the doghouse. I think a lot of people have drifted towards alternative medicine kind of things and they sort of look at these guys as the bad guys. They don’t have a lot of new products anymore that are really sort of life-changing. There’s no new Lipitor from like 20 years ago that was the best selling drug of all time.

Jeff Ross (13:19):

Gilead had the hepatitis C drug. They kept changing the names for it. Harvoni I think was one of the most recent ones, but anyways, it cured hep C. They actually cured the disease. And so their whole patient population to treat, to sell their drug to just kind of vanished because they had cured all these people. So that’s a great thing to have if you’re the people, but it’s not so great if you’re the company because now you don’t have anybody to sell this product to anymore.

Jeff Ross (13:42):

So it’s sort of a wishy-washy overview, but I think that healthcare is really changing with technology. We’re moving more into areas like genetic medicine and things like that. And I think that’s where the future is, Teladoc, those kind of companies, telemedicine. Anything that combines healthcare and technology, those are sort of the hot areas and I think those are the areas to kind of be looking for for this decade as well.

Preston Pysh (14:04):

You had mentioned when you were talking about your intro there, were you ever working on the machine? I think it’s called the da Vinci machine by Intuitive Surgical.

Jeff Ross (14:16):

I didn’t use that. That’s for like urologists to do prostate surgeries and then others. So the companies that I would use would be more like Boston Scientific and Edwards Lifesciences and those kind of things. I put catheters in people, so like blood vessels, and if somebody has cancer and they need a port put in for chemotherapy, I was the guy that did that and lots of other things.

Jeff Ross (14:37):

But I know about those companies. Intuitive Surgical is a fantastic company, that robotic surgery, minimally invasive surgery. I’m a big fan of the medical device companies. Anything that can make surgery easier, more tolerable, if you can get in and out in a day versus being hung up in a hospital for a week, those kind of companies, I’m a big fan of. I like supporting those in general.

Preston Pysh (14:56):

On your site for your hedge fund, you talk about this quote, unquote, all-weather portfolio. As having talked with you previously, I understand your fixed income thesis. And I suspect it’s very similar to mine. And when a person hears all-weather, they almost automatically kind of equate that with Dalio and risk parity and things like that. I highly suspect that kind of stuff is not in your portfolio based on what I know you understand about the markets.

Preston Pysh (15:26):

So how do you go about doing something that is all-weather when, and I think I know the answer, where this is going to go, how do you do all-weather when fixed income is a train wreck? And feel free to get into your opinions on fixed income.

Jeff Ross (15:42):

First of all, it’s not a hands-off. Dalio is going for the, “I don’t ever touch this portfolio for 20 years. What are the categories that I can put in where one will even out the other one if there’s a bear here and a bull here?” So I don’t do it like that.

Jeff Ross (15:55):

What I mean by all-weather personally is I look across all asset classes and how they’re going to perform at different stages of the business cycle. So depending on if we’re accelerating economic growth or decelerating, if we’re in an accelerating inflationary period or decelerating, how those things play together, and different asset classes perform differently.

Preston Pysh (16:17):

Are you saying that you quad 4?

Jeff Ross (16:20):

Yeah. Yeah, the Hedgeye quad 4-ish action? Yeah. So I like that data a lot because what I like about Keith and his data is they have realtime economic data. And I actually find that stuff pretty handy.

Preston Pysh (16:35):

And I want to put this on the record. I’m sorry to interrupt you. I love having fun with that, but I agree with you, I think there is some value there, especially when you’re looking at kind of how you want to be positioned for the big macro cycles that are playing out. He was talking about using it with respect to Bitcoin and-

Jeff Ross (16:54):

Yes, he took a ton of crap for his Bitcoin stuff.

Preston Pysh (16:56):

Oh my Lord, yeah.

Jeff Ross (16:58):

And his Saylor interview, that’s still going down in history as one of the best interviews. I think that’s the interview where Saylor said, “Oh, your models are broken,” and then that’s a meme now. Anyways, so it’s awesome. So I love all that stuff.

Jeff Ross (17:09):

So I do use that Hedgeye for data and I like their approach from a macro perspective. For me, that helps kind of ground me in where we are from a macro standpoint. And I keep bringing that up because different asset classes perform in expected fashion when you look back historically in different setups. And so like how we are right now, so speaking of bonds, ironically, so I’m all about you and your beliefs on bonds now. I mean, they’re literally just return free risk, right? If you hold them for the long term. Totally up with Greg Foss and his beliefs on that as well, but in the short-term, they actually can provide alpha for you.

Jeff Ross (17:44):

So in a setting like what we are right now when we have these decelerating inflationary conditions and decelerating economic conditions, I think we peaked in Q4 of 2021. I think we’re on the decline right now. I think that the Fed is tightening at exactly the wrong time, and we can get into that kind of stuff too. When we’re in these kind of settings where the Fed’s trying to put the brakes on even though the economy is starting to look sick, long dated US treasuries actually can perform pretty well. We’re seeing that.

Preston Pysh (18:11):

And you’re seeing the 30 year since the start of the year has actually been bid.

Jeff Ross (18:16):

Yeah. Right on. And we’re seeing the yield curve flatten. That’s kind of expected just based on this kind of thing.

Jeff Ross (18:21):

So I’m totally not a fan of bonds for the long-term, but I will put them in our portfolios, our all-weather portfolios for a quarter maybe, or for two quarters or something like that if I think they’re going to outperform. Especially where I think risk-on assets are not the place to be, we’ll kind of hide in the US dollar. So we’ll hide in cash. We’ll raise a bunch of cash. We’ll sit in long dated US treasuries. I love going long [inaudible 00:18:42]. We talked about that last night as well.

Jeff Ross (18:44):

And so that’s how I have my Vailshire clients positioned right now. We are as defensive right now in our portfolios and it’s January 27th right now. So we’re as defensive right now as we were back in late February of 2020. That was the last time I was this defensive. And it paid off. And it’s not me, it’s just kind of looking, reading the macro tea leaves and seeing where we are. I didn’t know that we were going to have that huge drawdown, but I had so many red flags at the time that I’m not willing to take chance. I’m not willing to sit in equities right now and sit in these huge risk-on assets.

Jeff Ross (19:13):

And so I think we’re at that same kind of setting. And for my long only clients, we’re just kind of sitting in cash. For my hedge fund, I’m actively hedged against that to try to profit from the expected downside.

Preston Pysh (19:25):

So I completely agree with you where we’re at right now. What are some of the variables? So people who are hearing this, they’re saying, “Okay, so we’re starting to contract, we’re not expanding as far as the monetary units in the system.” What are you looking at as far as variables to define that? If a person was going to try to come up with how you’re arriving there, what would you be looking at to define that?

Jeff Ross (19:49):

Everything to me is cyclical, right? So I look at everything as kind of this rollercoaster sign wave, and a lot of these asset classes move based on kind of year over year comparisons. So I look at the comps from usually a year ago, sometimes quarter over quarter, depends what we’re talking about.

Jeff Ross (20:04):

To me, when I look at fourth quarter of 2021, all of these metrics were literally off the charts. The economy just ripped it higher, inflation was 7%, a little under that for the whole quarter, 6.6% or something like that if you average out the quarter. Those are just unsustainable high rates. And so to me, it has to start declining at that point.

Jeff Ross (20:26):

So that’s what I mean when I think that we’ve peaked in the business cycle and we’re kind of on our way down again. I look at the indicators coming in. They’re still reporting indicators and people are still talking about high inflation and they’re still talking about a strong economy because we’re talking about December numbers. That’s still what’s coming in. So the headlines are old news.

Jeff Ross (20:42):

And what’s so interesting is I think the Fed continues to just look at old news and they keep talking about, “Inflation is running hot, hotter than you expected, the economy is hot, job growth is great and all that kind of stuff, therefore we’re going to put on the brakes right now,” and I keep saying they’re doing it at exactly the wrong time. They should have been doing it last year when the economy was actually accelerating and things were looking good and inflation was accelerating.

Jeff Ross (21:07):

But I liken it too they’re basically driving a car and they’re just looking in the rear view mirror the whole time. And so at some point, when they’re driving forward looking in the rear view mirror, they’re going to crash and the market’s going to crash and it’s going to tell them that, “Oh shoot, we made a mistake. We’re tightening at the wrong time.” And I think they’re going to do another pivot similar to what they did back around Christmas of 2018. They’re going to be forced to. The market going to tank. It’s going to really get their attention. They’re going to have to take the attention off of getting inflation under control and put it back on sustaining the markets.

Preston Pysh (21:35):

When we were talking last night, you had made a comment that I’ll tell you, I just wanted to put on a round of applause when you said this because I agree with you so much, but you said something to the effect of you watch technical factors, you watch value factors and you find them important, but in the grand scheme of things, you’re really watching the macro landscape because it’s so much more important in driving the direction of where pretty much everything is going to go. If I misquoted that or you’d maybe say it a little bit differently, please correct me, but then really expand on what you’re getting at with this for people so they understand what you mean by that.

Jeff Ross (22:17):

I’ll do a little backstory to this. I’ve been bearish on Twitter very publicly since early January, since I realized I had made a mistake by being too bullish on Bitcoin all of the way through kind of the third week of December in my fund, I’m like, “Oh shoot, Bitcoin has sniffed out that there’s trouble under the hood.” I didn’t believe it. I was waiting for this parabolic ramp up to kind of end the year. Didn’t get it. My fund suffered in December. It was a bummer. And so I flipped neutral. And then early January, I’m like, “No, this is real. We’re literally sliding into really bad conditions,” so I flipped bearish at that point.

Jeff Ross (22:48):

So I liken it too I love on-chain analytics, I love technical analysis and all that kind of stuff, I use it a lot, I look at valuation metrics, but when the macro setup is clearly in one direction, that supersedes all of those things. So I don’t ever look for bullish TA, bullish technical analysis in a bearish macro setup. I don’t care about bullish on-chain analytics if the macro backdrop is bearish, and vice versa. If it’s bullish, if the macro is bullish, it’s like a tsunami. It’s moving in this direction. You can have the coolest sand castles, the biggest, most powerful sand castles, if you see a tsunami coming, it just absolutely overwhelms all that other stuff. It truly doesn’t matter. So I say you either got to surf it or you got to get out of the way because it’s just doing what it’s doing.

Jeff Ross (23:35):

And then one other analogy because people keep getting mad at me again on Twitter, I feel like I’m a meteorologist, right? I grew up in Minnesota, and say we’re in January in Minnesota, okay? It’s a very cold place. I feel like the weather guy saying is, “Well, it’s winter, so this whole next week you should expect snow and really cold weather and there’s going to be icy roads.” And I feel like people are throwing stuff at me and they’re mad. They’re like, “But I want warm weather. I want sunshine.” I’m like, “Well, it’s winter, and so I would probably plan on it being cold and snowy. I would go long cold. I would go long snow and I would go long ice. And I’d probably short hot weather and short getting a suntan.”

Jeff Ross (24:13):

And I feel like I’m just a messenger telling people this kind of stuff, like, “Look, this is the macro backdrop. You can hate me for it, but this is what the weather is. And so you can fight it if you want to and you can go out in your swimsuit in the negative 10 degree weather or you can kind of go along with it and go build a snowman.”

Jeff Ross (24:29):

So anyways, that’s how I feel about all this kind of stuff, that the macro to me is so clear right now. And I’m not hating on anybody and I don’t want Bitcoin to go down. I know that over the long run, it goes up and to the right. It’s truly number go up technology and I really believe that it will, but in that huge secular bull market that we’re going to see I think throughout most of our lifetimes, we get these bearish cycles. We can have business cycles where it’s going up and down and up and down, and we’re just in a down point and that’s a great time to be accumulating more Bitcoin and risk assets in general. You want to be accumulating them when they’re down big and I think that’s just the kind of period we’re in right now.

Preston Pysh (25:03):

You know what I notice? Is everybody’s got a different time horizon. And on Twitter, the data throughput, right, is just so minuscule that you put a comment out there, and long-term, like you just said, this thing’s going up, at least that’s both of our points of view, but maybe your opinion on the next month, next six months, whatever it is might be bearish, but the person who’s reading it is saying, “Oh, this guy’s saying Bitcoin’s going down forever,” or whatever timeframe they’re assigning to it without even knowing the deeper context because you can’t transmit that much data through the tweet, right? So yeah, it’s fun.

Jeff Ross (25:45):

It’s fun. It’s good to have fun with it instead of let some people ruin your day.

Preston Pysh (25:49):

Oh yeah.

Jeff Ross (25:50):

So anyways, this is what it is.

Preston Pysh (25:51):

Oh yeah, you see all different types. How are you thinking about the dollar? I had a conversation with Luke Roman just a little bit ago and he was kind of thinking that we might see a shift in the dollar, but I’ll tell you, since we’ve had that conversation, this thing has continued to rip higher just the last 48 hours. It does not seem to be letting up. And if that’s the case, I think it only magnifies everything that you’re saying from a bearish sentiment going into this supposed hike that we’re going to see in March. What drives that? For somebody who’s hearing that, they know that as the dollar’s getting stronger, it’s putting a lot of pressure from a macro standpoint, what drives that to happen in the FX market?

Jeff Ross (26:32):

This took me a long time to figure out and I think it’s really actually pretty simple if you think about it. When people start getting nervous and the panic starts to set in, what do they do? Think about what you do. When you panic and you’re like, Oh shoot, I have these assets. I’m watching my net worth go down. I’m looking at my 401(k) or I’m looking at my IRA, it’s going down, down, down,” panic starts to set in and you get that fight or flight response. And so what do you do? You hit the sell button. What does it mean when you hit the sell button? You’re selling your stock and you’re buying the US dollar.

Jeff Ross (27:00):

And so people all around the world, I mean in the US especially, that’s where we’re thinking about it mostly, but people sell their stocks, they sell their bonds, they sell their commodities, they’re selling real estate related things and they’re buying dollars. Most people don’t think of it, “I’m buying dollars,” they just think, “I’m selling this other asset,” but you’re buying that. That puts a lot of pressure on that. And so that causes that upward pressure in the dollar and that’s what causes the performance to go.

Jeff Ross (27:23):

It also can cause liquidity issues with the dollar as well obviously if there’s not enough dollars kind of floating around the system. So that’s why when we’re in these sort of risk-off environments like we are now, it’s really smart I think just to raise some cash because your cash alone, which normally is just this dying, melting ice cube as everybody knows over the long run, in the short run, it can provide a great safe haven. It can actually provide alpha relative to all of these other declining asset classes. So that’s kind of how I look at it.

Jeff Ross (27:50):

At some point, by the way, people keep asking, people who understand Bitcoin I think kind of fundamentally get that someday down the road, Bitcoin will also be a risk-off asset, that that will be the go-to safe haven asset like the dollar is, like long dated US treasuries are, like gold historically has been.

Jeff Ross (28:08):

I think we’re way too early in that. There’s not enough people who truly understand Bitcoin yet. It hasn’t reached a high enough level of adoption, but probably before this decade’s over and hopefully buy around 2025, 2026, somewhere in there, people will start to think about it like, “Well, if I hit the sell button, do I really want US dollars or would I rather hold the soundest money? Would I rather hold Bitcoin?”

Jeff Ross (28:30):

At some point, that will happen on a major scale and I can’t wait for that day. Honestly, I’m such a geek about this kind of stuff, but I just can’t wait until the day where Bitcoin outperforms the dollar when we’re in a risk-off setting.

Preston Pysh (28:42):

What market cap, if you had to guess?

Jeff Ross (28:44):

I think it’s somewhere between 20 and 100 trillion. I don’t know where that is. So maybe let’s call it 60 trillion give or take. I think by the time it gets that big, people are really going to be taking it seriously. They’re going to see it as the world’s major decentralized non-government currency. And so that’s when they’re really going to start thinking about it.

Jeff Ross (29:03):

I think it happens also first in these developing nations that are really struggling with these currency crises on kind of a regular basis, the Turkeys, the South America, Central American countries that have just gone through just horrific, horrific losses of purchasing power that destroys families, destroys business. They already understand the value proposition of Bitcoin. They understand preservation of purchasing power. They understand that when a inept government is controlling your money supply, that they’re literally sucking your purchasing power, your proof of work away from you so that the government can survive at the expense of its people. I think it’s practically criminal. It’s definitely immoral, and Bitcoin fixes all of that, those kind of problems. So I’m very excited for that day.

Preston Pysh (29:45):

There’s regulatory forward guidance and rumors that are getting published right now with the White House evidently going to be coming out with something. It looks like it’s going to be heavy towards defi and stablecoin regulation. What have heard? What do you think is going to pop out of this? And what does that mean for Altcoins? What does it mean for Bitcoin?

Jeff Ross (30:09):

People are really clucking about it right now on Twitter, right? And it’s making all the headlines. None of this is a surprise. It shouldn’t be a surprise to anybody. You’ve been watching Gary Gensler. I’ve been watching him closely and listening to his speeches. He I think has been exceedingly clear, bitcoin is not a security. A couple other things like Bitcoin are also probably not securities, and I think of probably like the forks, the Bitcoin cash and the BSV and maybe the Litecoin and these other things that tried to compete with Bitcoin as a currency, but lost thoroughly, and then there’s everything else. So 98% of everything else, our securities, he’s very clear. He’s like, “And if you are one of these, we know that you are, I would recommend that you come talk to us.” He said that many times, like, “We don’t like it that you’re unregistered securities. We’re the SEC. We have jurisdiction over you, even if you don’t think we do, we’re coming. So come talk to us or we’re going to come after you.”

Jeff Ross (31:02):

And I think that’s what’s happening now. So we’re starting to see kind of the framework get laid out. I’m nervous for Altcoin people. A lot of my friends, they’re into that kind of stuff. I generally focus on Bitcoin, so I don’t care much about it. To me, it’s more of a distraction, but there’s, what, a trillion dollars worth of people’s money and that kind of stuff and lots of people really believe in it. And I think they sort of this herd mentality, like there’s a safety in numbers. “Oh, they’re not really going to come after us. Oh, but we are decentralized. They can’t really shut this project down and we’re just like Bitcoin,” and all that kind of stuff.

Jeff Ross (31:33):

I don’t think so. I think they’re in trouble. And I also think that the exchanges are in trouble because they’ve been sort of skirting the issue as well. But I think as far as Gensler is concerned, they’re saying, “Hey, look, as long as you have a platform where these unregistered securities can trade, buy, sell, whatever, earn interest, do all that kind of stuff, you’re complicit in this as well, and so we’re going to come after you.” And I just feel like people are so surprised by it, but he’s been clear as day on it I think.

Jeff Ross (32:00):

And so that’s those things. And then there’s the stablecoins, which are a totally different issue. I think it’s so interesting that Janet Yellen has been kind of focusing in on those and a lot of the other leadership. Elizabeth Warren has had things to say as well.

Jeff Ross (32:12):

I don’t want them meddling with this kind of stuff honestly. I’m more libertarian, kind of biased. I would rather have less government for sure, but I think that those things are going to have their moment under this scrutiny spotlight as well. And I don’t know what’s going to happen. I wouldn’t be surprised. Some of the headlines are talking about are they going to get sort of swallowed up by big banks? Is J.P Morgan going to buy Circle or something like that and own USDC Coin, those kind of things. I think it’s very possible.

Jeff Ross (32:38):

My take on all of this, and they call it a security issue, this is a matter of national security, I really think it comes down to the US government has had this absolute domination on the world’s financial system for decades and decades and decades. Their greatest tool, their greatest policy weapon is basically economic sanctions, right? They can cut off monetary flows from this country, blah, blah. They know where the dollar is. They know where it’s going. They know everything about it, so they can control that and that’s a huge source of power for us.

Jeff Ross (33:06):

Crypto, and even these stablecoins, they don’t have that same control over that. And they hate that and they want that control. So they want to have their fingers in everything so that they can keep a control, they can keep terrorism and financing and all that kind of stuff under surveillance. That’s where all of this comes in.

Jeff Ross (33:26):

Coming over to Bitcoin, I think they realize, “We can’t do anything about Bitcoin. It’s completely decentralized. It’s totally secure. It has this proof of work thing that basically makes it an impregnable fortress. There’s nothing to do about it. So let’s just let that lie and we’re going to start going after all these other things.”

Jeff Ross (33:41):

That’s my take on it from the high level. None of it surprises me. I do think stuff is coming. The only thing I don’t know is what that means. Are they going to shut down Cardano or Solana or Ethereum? I can’t imagine that they would do that. So I don’t know what they’re going to do. I don’t know what the penalty is. Are they going to find the founders? I just don’t know.

Preston Pysh (34:02):

I’m equally as confused and I think this is why I just continue to focus on this show just about Bitcoin is because everything that I’ve seen from a regulatory standpoint and the way Stig and I and the other hosts of our network think about it is we just don’t want to be talking about something that could pose just enormous risk into somebody’s portfolio. We’re just looking at it from, hey, everything that we’ve seen from a regulatory guidance, from Gensler and those that have preceded him is that this thing’s going to be viewed as a digital asset. Everything else is going to be viewed as a digital asset security.

Preston Pysh (34:36):

And it appears like I think their first play is going to be really kind of just going through the exchanges in order to limit what’s happening. And then maybe the next step is to go after some of the protocols themselves. I mean, they’ve already started engaging with Ripple and I wonder if they’re trying to use them as a base case, case law type situation where they’re trying to get a ruling from that and then using that as a copy and paste for a lot of the other protocols that they see being similar to them.

Jeff Ross (35:08):

Yeah. That’s my take on it too. I think they’re doing that. And so I’m really curious to see, I obviously don’t own any Ripple, so I’m very curious though to see what the verdict is in that. And then not just the verdict, but what’s the penalty? Is it a slap on the wrist? Is it a sizable fine? Do they try to shut it down? I don’t know the answer to that. I don’t know if they know the answer to that too. They’re probably kind of sitting in their meetings like, “Well, what are we actually going to do about it?”

Preston Pysh (35:33):

What’s interesting is a lot of these, should we call them founders?

Jeff Ross (35:37):

I think so. Yeah.

Preston Pysh (35:38):

The founders of these protocols, they’re extremely wealthy individuals. And so the litigation and the team of lawyers that they can afford versus the government lawyers I think is going to be an interesting thing to kind of watch out. I don’t know that it’s a slam dunk for the government just based on the caliber and the funding of litigation that they kind of have in their corner. So it’s going to be very interesting to see kind of how it plays out. And I think the exchanges now are getting so large. What was it, last week we saw this German bank was purchased by… Oh, I forget which exchange purchased them.

Jeff Ross (36:15):

Oh yeah. You talked about that with Mark Moss. I saw that. Yeah, whatever it was.

Preston Pysh (36:20):

But I mean, that’s huge. That’s not something that in my mind I would’ve ever thought would’ve been taking place is the exchanges are getting so big and they’re so powerful that they’re actually stepping in and buying banks that are touching the Fed rails and they’re onboarding in that direction. And it’s moving fast.

Jeff Ross (36:40):

I was just going to say that the technology is moving so fast, I will be astonished if government can actually keep up with that and the SEC. So I don’t know. I don’t know how this ends, but it will definitely be interesting.

Preston Pysh (36:52):

Yeah. And on the stablecoin piece, I think they can come up with all these rules and regulations here in the short term and it might have some type of impact, but these discrete log contracts, which hasn’t been really talked about too much, but it appears like there’s a technological way to synthetically create stablecoins all via the blockchain. And if that’s the case, there’s no way to regulate that. There’s no way to regulate. So you’d have this tokenization of stablecoins that would be happening in a synthetic way all on Bitcoin and there’s just no way they could regulate it.

Preston Pysh (37:28):

That’s why I think it would really kind of come off the rails if that technology that appears to be there could start taking root. It don’t matter what their policies are around the world because so much of this stuff would just really kind of start moving at a pace that I don’t think anybody could possibly control.

Preston Pysh (37:44):

So we talked earlier about kind of your bearish sentiment due to the economic contraction that’s taking place. This is a really hard question. How would you define that inverting itself where things would then become bullish? So think back, we both know what happened in March of 2020. We had this big giant liquidity event, but then the Fed steps in, they recapitalize everything. They drop all these units into the system, these monetary units into the system, and it comes screaming back.

Preston Pysh (38:15):

So as you look at that scenario and you’re thinking about, all right, let’s say you’re right, let we go through this big bearish contraction, what is that going to look like in order to reflate and go through the next bullish cycle? What would be the key variables that you’d be looking at to identify that for people? Let’s say that’s six months from now or nine months from now, whatever it might be, what are you looking at?

Jeff Ross (38:39):

To me it doesn’t look as dramatic as it did back in March of 2020. So I don’t think we’d get that dramatic V-shaped recovery that we had with COVID. That was unprecedented. I don’t know that we’ll ever see something like that again. We might, we probably will, but it’s unlikely to happen again.

Jeff Ross (38:54):

I think what’s more likely is that we trend down and we do this like stair step down where we drop, go sideways, drop, go sideways, and it just sort of crushes the souls of everybody. We may have some sort of big news trigger event like a COVID or maybe Russia does invade the Ukraine, or maybe something happens that triggers fear and panic in the markets and we go from this kind of just debilitating decrease in all risk-on assets and then it just plunks down.

Jeff Ross (39:23):

At some point right around that point, I think that’s where we bottom, that’s where we get the Fed’s attention for sure and they start considering pivoting. At some point business cycles just have to bottom. That’s the beauty of all this stuff. So that’s what I keep telling people too, like we’re in the winter right now, but at some point, spring comes. So at some point we go from bad to less bad.

Jeff Ross (39:40):

I think that that probably happens in about the third quarter based on kind of historical numbers. And so when I say third quarter, I think that the markets look ahead, especially risk-on assets tend to look like one to two months in advance and they tend to do their stuff kind of in anticipation of improving economic conditions and accelerating inflationary conditions as well. We can talk about that a little bit.

Jeff Ross (40:02):

So real quick side tangent, I think inflation decelerates all this year. And by the end of the year, we’re looking at kind of like 3% to 5% levels of inflation, which are still high. They’re still over the 2%, but I think economic conditions should start to improve before that third quarter, probably fourth quarter as well of 2020.

Jeff Ross (40:20):

So that’s the way I look at this. I think we’re going to dump in the first half of 2022 and then accelerate out of it. I don’t think that we have that V-shape. I think what we see is really kind of bad to less bad economic conditions. Bitcoin was the first major asset class alongside of small cap US stocks to peak on November 10th, and then they’ve been grinding down. I think they’ve been doing that because they sniffed out trouble under the hood, under the economic hood, and then it made the larger asset classes, the larger stocks and things like that, the S&P 500, Dow, and all that stuff, it took them to basically the New Year to start coming down.

Jeff Ross (40:55):

So they’re behind Bitcoin and Bitcoin is more of the leading indicator. Bitcoin’s probably going to be the first to bottom, or one of the first. So I call it the canary in the coal mine. And then I think it starts kind of grinding higher. And then maybe a week later, two weeks later, a month later, I don’t know, equities bottom and they start to grind higher from there as well.

Jeff Ross (41:13):

So nobody will believe it too. That will be the point where Schiff is going to come out declaring victory, “Bitcoin’s going to zero, it’s dead, it’s stupid, you guys are crazy, buy gold,” and that’s going to be the time to buy Bitcoin and that’s going to be the time to buy back into risk-on assets and the NASDAQ, little tech companies that have gotten crushed. So that’s kind of how I’m looking at playing this.

Preston Pysh (41:34):

So I’m with you on the inflation? I think the 7% print that we recently saw, I mean, I could see it kind of going flat and kind of staying there for a little bit, but if they are in fact tightening and they’re allowing these yields to continue to sell off, it’s going to have to start pulling those inflationary prints down. But the only thing that based on previous cycles, that’s what seems to be how these things play out, in the back of my mind, I’m looking at supply chains and I’m looking at the total dysfunction of employment all over the country and I’m thinking maybe these 7% numbers just hang around, right? Maybe they don’t go down to these 3% or 4%, which I agree, if I was going to say my base case, I would say exactly the way you’re seeing it and I think that’s my base case, but my God, the employment situation is just so dysfunctional right now that I don’t know that we’re going to get back to a functioning society that’s fully gainfully employed to get those numbers to be like that.

Jeff Ross (42:35):

I agree with you on the employment. That’s a huge issue and I think that’s going to take actually years to play out. I think there’s this whole generation of people that are like, “I’m not going to go work that crappy service job for minimum wage,” or whatever.

Jeff Ross (42:47):

The difference is I think from what I’m hearing from CEOs of companies is obviously the supply chain issues are massive right now. They still are, but they’re all talking about they are kind of improving, at least that’s what I’m reading. They’re slowly improving. They’re working through the log jams, they’re working through these kind of issues.

Jeff Ross (43:04):

So I do think that improves. I think that with commodity prices also coming down, that that helps with that kind of stuff too. They’re able to get what they want for prices that are more reasonable.

Jeff Ross (43:14):

So I think employment issues are going to be just as you say. They’re going to be sticky and rough. We’re going to have labor issues for quite a while. I think supply chain kind of issues are going to recede, so get better, and that will help kind of slowly pull down inflation a little bit.

Jeff Ross (43:30):

The one, this wouldn’t be a black swan, but let’s call it a gray swan that could happen, we could get another COVID variant that’s worse than Delta, right? So right now Omicron is not a big deal. I actually tell people if you have to get a variant, this is the variant to get for your natural immunity, those kind of things. Delta was rough. I mean, I was a doctor. I was watching these people come through. I was reading their chest CTs. And when it hit people hard, it hit them really hard and it killed a ton of people. And so that’s what it is. But if we have another bad variant of this virus, that could ramp things back up again and cause a lot of issues as well.

Preston Pysh (44:05):

Do you find that the way that the variants kind of play out with these viruses, that once they start trending in a direction where this is much more contagious, the Omicron is more contagious, but it’s less lethal, do they keep trending in that direction or can they kind of oscillate back to the lethality of the Delta and maybe not as contagious?

Jeff Ross (44:25):

There’s no set rule that the viruses have to get less lethal, but the good news is more and more and more people in the world have gotten it, so they have natural immunity, which I’m a big fan of, by the way, it never gets talked about, a big fan of natural immunity, but also tons of people have gotten vaccines, regardless of people’s opinions on them. More and more people’s bodies have seen this virus and so it’s less and less likely to hospitalize them, to kill them as well.

Jeff Ross (44:49):

So even if we have variants that are worse than Omicron coming, I think we’ll tolerate it better as a species. So I’m less concerned about that. But you just never know, we could get just some killer one. So hard to say.

Jeff Ross (45:01):

But that would change my thesis. People ask me when would I change my thesis and be even more bearish into the second half, it would be if something like that happened. So if inflation suddenly ramped up again and started accelerating for whatever reason, supply chain issues got worse, nobody wants to go back to work kind of thing and the economy really stalled out, I would be concerned at that point and I would stay bearish.

Preston Pysh (45:23):

One of the things that when you look back to the March, 2020 and the bounce, the 60 day bounce where you were clear back to all-time highs again, I think it was like 60 or 90 days, one of the key factors I think that was associated with that bounce, not only did they, I think it was like $5 trillion that they dropped into it globally, how much stimulus was dropped in there, but you were also in this environment where everyone’s opinion, and has been for decades, is that there was no inflation whatsoever, right? We were at nothing percent inflation according to the CPI gauges that everybody was using in order to conduct a financial valuation.

Preston Pysh (45:57):

And so I think in that situation, that was one of the reasons you got such an enormous bounce, but with this, if let’s say we go through an economic downturn and the markets start getting really ugly and these CPI numbers are still getting printed above 5% and they’re taking yields lower, I think you’re in a completely different dynamic than you were back in 2020, where based on that stimulus response that we saw and then what followed it with all these inflationary prints, it’s fresh in everybody’s mind that if they would come with all that stimulus again, and let’s say you’re already at 5% and you’re not seeing lower numbers, I think it’s going to scare the hell out of people.

Preston Pysh (46:40):

I think they’re going to be looking at that and so I don’t know that you’re going to get the backstop and maybe the response that… Because think about it, all the economic calculation that’s going to take place, people are going to be like, “Oh, we’re at 5% already, they’re adding all these units into the system. Maybe this takes us to 10% and maybe these valuations are still too rich.”

Jeff Ross (47:00):

I think that’s great you bring that up. I’ve actually been thinking about that exact same thing and what would happen in that scenario. What if people are just like, “I don’t believe this anymore,” and that’s where we start talking about the crisis in confidence in your currency, like this is not sound money anymore. And what if the stock market doesn’t believe it anymore and we don’t get that pump higher and inflation starts ripping higher again and people start really panicking and these stagflationary conditions?

Jeff Ross (47:24):

I think what is inevitable are two things. I think one is UBI is definitely coming and that would help kind of bring it along because people are going to be so miserable, living conditions in a stagflationary environment, and they already are miserable for the lower economic echelons right now. I feel terrible for what’s going on.

Jeff Ross (47:40):

Two is that I think that’s when the Fed starts purchasing equities outright. I think it’s the Japanification of the equities market and it’s just completely no longer a free market anymore. They’re just like, |Look, we’re trying to pump it up. It’s not pumping up. We’re going to be pro-America and we’re going to start buying ETFs,” and that’s the end of it. We’re talking end stage game at that point. And that would be the time to just basically just go all in on Bitcoin because equities, they don’t have any more alpha in them at that point. Bonds already don’t have any more alpha in them. Real estate, that’s the same kind of story. The purchases of mortgage-backed securities, they could continue doing that. They’re pumping valuation so that regular people can’t buy houses anymore. They’re just these investment vehicles. It’s such a ridiculous system.

Jeff Ross (48:22):

And so that’s just this runaway centralized, socialized system. It’s not even worth investing in anymore at that point and then I think the world just completely pivots 180 and goes into Bitcoin at that point.

Preston Pysh (48:35):

So let’s talk about correlations in portfolio construction because there’s a lot of people out there. Obviously we got a lot of Bitcoiners that listen to our Wednesday Bitcoin show, but they have other positions and they don’t want all that volatility in their portfolio. They want to own other things. And so when you think of the portfolio construction, correlation is such a huge part of doing it in a way that kind of manages and de-risks the volatility of your portfolio, especially as a fund manager.

Preston Pysh (49:04):

As an individual, I’m comfortable with a whole lot of volatility, the next person’s personal preferences are different, but when you’re a fund manager like yourself and you’re managing other people’s money, this is really important stuff to manage that volatility in your portfolio.

Preston Pysh (49:18):

So how do you think about correlation? Is it something that’s very high on the list that you control or is it something that you manage more through your letters and in the way that you educate the people that are with your fund?

Jeff Ross (49:30):

Yes. A great question. So, first of all, I would say about correlation is that when you enter periods of risk-off periods where people are scared, where the macro environment is bearish like we are right now I think, correlation trends to one on all risk-on assets. So I think that’s the period we’re coming to. We’re seeing that across outright. Bitcoin and the NASDAQ and S&P 500 are all starting to trend towards one. They’re not going to get to one, but they’ll trend that direction and get pretty high, 0.9 possibly.

Jeff Ross (50:00):

I’m not into the portfolio theory of having a portfolio of uncorrelated assets. That’s kind of getting back to the Dalio all-weather portfolio where you just set it and forget it. That’s not how I roll, right? So I’m a top down kind of guy. When I see the tsunami tidal wave coming in, I go all in on all of those kind of assets. Sometimes I’m wrong, but usually if you get the macro right, you get the movements of asset classes right as well.

Jeff Ross (50:23):

So I actually like periods of high correlation. Again, so everything’s correlating. So the dollar always tends to go up in these kind of scary environments, stocks go down. Most equities go down. The higher the beta, the better for going down. I don’t short Bitcoin, but I do short crypto exchanges and even some Bitcoin miners to hedge against Bitcoin in my portfolio. Those all basically go to one and they all go down at the same kind of dramatic rates.

Jeff Ross (50:50):

So I like when correlation goes to one. I don’t look for uncorrelated assets. I don’t have that all-weather portfolio in that fashion. So that’s kind of a misnomer if you think of it like the Ray Dalio kind of thing. If people want to do a set it and forget it type portfolio, they should do that. They should look for uncorrelated assets and put them all in a portfolio together. If they never want to look at it, that’s a fine strategy.

Jeff Ross (51:11):

I want to beat the market though. I’m a manager, a active manager. And so if I’m not providing alpha for my clients, what am I doing this for? I mean, you could just go buy index funds and just be fine with that. And most people would be better off just doing that, but I just believe that there are still some active manager out there who have that special sauce and who can actually figure out a way to beat the market over time and generate alpha for their clients.

Preston Pysh (51:35):

Okay, so I’m sure you promote people holding their own keys and their own Bitcoin, but for a lot of people out there, they have money in GBTC, which is a ticker trust. This used the trade at a premium and now it’s at a severe discount to the underlying assets inside of the trust. What is causing this? Is this going to go away? Is this going to convert into an ETF? What are some of your thoughts on GBTC?

Jeff Ross (52:03):

Great thoughts. So, yeah, I think the last time I checked a couple hours ago, the discount was about 30% to NAV, which is crazy. So I have a lot of thoughts on this.

Jeff Ross (52:12):

First of all, I’ve been holding GBTC individually in my own brokerage accounts and in our fund accounts and for our clients for a long time. So we have felt the wrath of that dropping. We started buying it when it was a little bit of a premium and then we’ve ridden that all the way down to this discount, now this significant discount.

Preston Pysh (52:31):

Due to regulatory reasons that you have GBTC opposed to underlying coins in the fund?

Jeff Ross (52:37):

Yes. So it has been. It has been, although that that kind of stuff is changing though. But I actually think as disappointing as that’s been for people who have been holding it, at some point, I truly believe that that is a fantastic arbitrage opportunity. And I think that at some point, that will go to zero. And I think just as you surmised, it’s they’re waiting for a spot Bitcoin ETF.

Jeff Ross (53:01):

So let’s take a quick tangent on this. I think that Gary Gensler is holding the Bitcoin spot ETF hostage to all of his demands for these Altcoins and crypto exchanges to get their butts and gear and to do all the stuff he wants to. I think that’s the only valid reason because he’s smart and he understands Bitcoin and he knows it’s not a security and he knows it is not the Altcoin world. It’s totally different. And so-

Preston Pysh (53:25):

He taught the class.

Jeff Ross (53:26):

Exactly. He taught the class. He knows what he’s doing here. And so to me, it’s extremely frustrating, especially as a hardcore Bitcoiner. I think he should for sure just let the spot Bitcoin come to fruition, spot Bitcoin ETF, and that would be a really easy way for lots of people, a very safe way for people to get into Bitcoin. A lot of boomers and people who don’t like technology and don’t want to hold their own keys and they think that’s crazy and they don’t understand any of that stuff, they just want to press a button and they want to own some sort of Bitcoin proxy and as close to owning real Bitcoin as they can within their portfolios.

Jeff Ross (53:57):

So I think that’s coming at some point, but like I said, I think he’s holding it hostage. I think that’s tragic.

Jeff Ross (54:03):

Back to GBTC. GBTC is at this huge discount to NAV right now, to net asset value. I think at some point that is going to go to zero. Probably by the end of this year I think we actually see a resolution. Maybe I’m too optimistic. I don’t have any inside information. People just have to reason that out. If it does go to zero from a 30% discount to NAV, they’re getting that premium on top of price appreciation of Bitcoin. It is a fantastic time arbitrage opportunity.

Jeff Ross (54:31):

So I would be a buyer of that still and even more so. If we’re value investors at heart, you obviously are too, when a great asset goes on sale, you buy more. If it goes even more on sale, you buy more if you can. So that’s how I look at it. So in my client portfolios, I actually like the strategy. If you can’t own Bitcoin outright, my favorite kind of Bitcoin proxies in that situation would be maybe own half GBTC, actually half micro strategy, which I think is a great leveraged way to play Bitcoin. It’s basically a leveraged ETF to Bitcoin at this point.

Preston Pysh (55:02):

How do you think about all the interest that’s being paid on people that have their own keys and they can put it on an exchange and have it lend out? What are some of your thoughts on that, all the shadow banking that’s happening in the space?

Jeff Ross (55:14):

I like the development of that in general. I’m very curious again to see what the SEC does with all that and to see if that’s allowed. I think there are going to be some changes, but I don’t know what those changes are. I don’t know if the interest rates stay that high. I think Bitcoin being what it is, those rates will come down over time. For Altcoins, they might stay high because those are so risky and crazy and junky in a lot of ways.

Jeff Ross (55:37):

Bitcoin as being the world’s safest and soundest money, that interest rate just has to come down, down, down, down. So I think it will eventually be very low and that will be the world’s true real interest rate to go off of, much better than 10 year treasuries I think and much more accurate because it’s truly a free market.

Jeff Ross (55:54):

I think that again, I’m kind of watching and waiting with those. People love to earn interest, right? I come from finance. I want to earn interest on my stuff too. I actually have some Satoshis in those kind of places earning interest just as kind of a diversification strategy and an interest earning strategy, but I think it’s far wiser for most people to actually hold your own keys, keep them out of that because you’re taking a ton of risk anytime you do that, right? We’re trusting these companies that they’re not going to run away with your money, that they’re not going to rug pull you, that the SEC isn’t going to come in and shut them down and trap your money there so you can’t get your Bitcoin.

Jeff Ross (56:28):

So you’re taking on a bunch of extra risk for those interest rates. Probably not necessary. Some people like it. I don’t hold it against people if they do that kind of thing, but I’d caution people that you are taking much more risk if you’re earning interest.

Preston Pysh (56:42):

Jeff, I don’t have anything else. I just want to thank you for coming on the show. I thoroughly enjoyed this conversation. We need to have more of these conversations. Give people a handoff if they want to learn more about you. I know you’re active on Twitter, and then give people a handoff to your fund.

Jeff Ross (56:57):

Thanks so much. So yeah, Twitter, I’m way too active on there. I should probably chill out on there a little bit. So my handle is @VailshireCap. My website is vailshire.com. You can check it out. And if you want to get ahold of me, I’m always checking my email too, just because I’m always sitting in front of a computer, so info@vailshire.com. I love talking with people about anything. I just really like helping people live well and invest wisely. It’s part of why I was a physician, part of why I’m a investment guy now. If I can help people with, with anything investment related or even health related, I’m happy to help.

Preston Pysh (57:28):

And we’ll have links to all that in the show notes. So Jeff, thanks for coming on the show.

Jeff Ross (57:32):

Thanks for having me, Preston. It was a lot of fun.

Preston Pysh (57:35):

If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use. Just search for We Study Billionaires. The Bitcoin specific shows come out every Wednesday and I’d love to have you as a regular listener.

Preston Pysh (57:48):

If you enjoyed the show or you learned something new or you found it valuable, if you can leave a review, we would really appreciate that. And it’s something that helps others find the interview in the search algorithm. So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening, and I’ll catch you again next week.

Outro (58:07):

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