Preston Pysh (00:03:26):

I think it was last week Will Clemente shoots me a text message. And it’s just the picture of the JGB 10 year and it had exploded up to … Exploded. 20 basis points up to 0.46%. Which if you’re trying to peg it at 0.25 and it sells out to 0.45 or 0.46 or whatever it was, that’s a really big deal. And so I pulled up the chart and I mean every duration on the yield curve, the 30 year down to the I think the three year were all blowing out on the chart.

James Lavish (00:04:09):

Yeah. Yeah. So that’s that’s during our market hours, right?

Preston Pysh (00:04:13):

Yeah.

James Lavish (00:04:13):

So that’s when their window’s closed.

Preston Pysh (00:04:15):

Yeah.

James Lavish (00:04:16):

So what you’re seeing is that’s the swap market. So that’s the institutional traders, the hedge funds who are shorting the Japanese bonds because they’re expecting that the Bank of Japan’s going to have to back away. They can’t just keep doing this forever. So they’re shorting the bonds and buying the yen against them in that trade. So that’s kind of where it’s a little bit scary and that’s why I’m watching this every single day to see what happens outside the trading window, outside the Bank of Japan’s … Their open market window. And so it gives you an idea how quickly this thing will move and if they stepped away and let them trade freely, oh, this is going to half a percent without even blinking.

Preston Pysh (00:05:04):

So since then, you’re seeing this happen every day when their market is closing. And so I pulled up the chart and I put it in hourly terms so you can see basically when it’s blowing out when it’s not open and then when they’re opening and they’re buying to try to peg the yields.

James Lavish (00:05:20):

They’re just swallowing them in. Yeah.

Preston Pysh (00:05:21):

It’s crazy. There was a person that wrote in the comments on the chart that I posted something like, “Hey, this looks exactly like when something mechanically is getting ready to have a systematic failure.” And I was like, “That’s exactly what it is.”

James Lavish (00:05:39):

Yeah. Yeah. It looks maybe like the tremors before … What are the tremors called before an earthquake? They’re foreshocks, right?

Preston Pysh (00:05:53):

Yeah. Yeah.

James Lavish (00:05:54):

So they’re kind of like the foreshocks of this currency that’s about to collapse. And it’s not funny actually. It’s terrible.

Preston Pysh (00:06:01):

Yeah. No, but it’s-

James Lavish (00:06:03):

I’m actually a little bit worried. I like Japan. I’ve got Japanese friends. It’s not a good thing.

Preston Pysh (00:06:10):

But James, this is the thing for me. There was a book called The Holy Grail of Economics written by Dr. Koo. And I remember reading this book and it outlines the whole Japanese QE extravaganza. And it goes through like why it happened, how it was a balance sheet recession and all this stuff.

James Lavish (00:06:33):

All the Abenomics and all that. Yeah.

Preston Pysh (00:06:34):

Yes. And it was a really interesting read, but when I was done with it and I got to the end, I was like, nowhere in here does it talk about how any of this gets resolved or solved. Nowhere.

James Lavish (00:06:45):

It doesn’t.

Preston Pysh (00:06:47):

It doesn’t.

James Lavish (00:06:48):

Because it doesn’t. It doesn’t. And that’s a crazy thing. So if you look at it now … Okay. For the people who are listening, the Japanese yen that spread between the US 10 year treasury and the Japanese 10 year treasury, as that widens, the yen follows that spread. So you can see, you can plot it against it and you could see how the yen just follows it. And so the problem is that we’re not loosening anytime soon, we’re tightening. We’re hell bent on tightening into this recession, right? So that’s where we’re going and our rates are going higher. So Japan has now taken in what, $80 billion US worth of yen last week. So they’re on track to buy over $300 billion US worth of Japanese government bonds this month in June. And there’s a metric that nobody’s no sovereign has ever crossed, no central bank has ever crossed. And that’s owning 50% of your own debt. And they’re bumping up against it. So they’re already at over 228%, 230% of debt to GDP. I mean, mathematically, the answer is there’s no solution. I mean, it-

Preston Pysh (00:08:14):

Yeah. That has to blow up.

James Lavish (00:08:16):

Right. Has to blow up

Preston Pysh (00:08:18):

So let’s pull the thread. If this starts to blow up and it becomes unmanageable, now the central bankers collectively, this isn’t just Japan, this is all of them have to step into this with easing. Would you agree with that?

James Lavish (00:08:35):

Well, there’s going to be contagion, you know?

Preston Pysh (00:08:39):

Yeah.

James Lavish (00:08:40):

I think I tried to burn through some of your questions that people posted underneath. Thank you for posting the questions today. And somebody said, “Well, what happens to the yen?” So you just asked, what’s the resolution? Well, the resolution, as you know, is people lose confidence. Sovereigns lose confidence, investors lose confidence. They stop buying the Japanese bonds. The bond market locks up. Japanese government has to just continue buying them or back away, whatever happens. And the confidence in the yen just collapses. The yen hyper inflates. What does that do? It’s what you just said. There’s going to be contagion to other sovereigns and to major, major banks that have exposure to this. It’s the kind of thing that’ll have ripples across the world.

James Lavish (00:09:30):

So one of the things that you and I have talked about, and we’re watching pretty closely, I know you are watching too, is Europe. I mean, now we have this thing where Lagarde comes out and says that, “Well, we have this new tool. It’s called the anti-fragmentation tool.” And so they’re watching the Italian bonds, their Italian 10 years blow up over 4% yielded. And so they have an emergency meeting and they’re like, “Okay, well, so we’ll only do QE in Italy. And then everybody else you’re on your own, but we’re doing QE in Italy. Oh. And maybe Greece. And if Spain and Portugal pop up, maybe we’ll have to do it there too. But Germany will-”

Preston Pysh (00:10:17):

They’re in such a debacle because they’ve got all the different countries that are in different debt loads.

James Lavish (00:10:23):

Yeah. Yeah.

Preston Pysh (00:10:30):

It’s nuts.

James Lavish (00:10:31):

It’s like your kids have-

Preston Pysh (00:10:33):

Yeah. Yeah. That’s a great way to put it.

James Lavish (00:10:35):

They’re living in your basement. They’re 38, 42 years old. They’ve run up this massive debt.

Preston Pysh (00:10:42):

Some of them are a little bit more responsible than the others, but not really. Not by a lot.

James Lavish (00:10:47):

Not really. Not really. But then you’ve got the northern countries, you’ve got the responsible parties who are going to have to take care of them. And that’s a recipe again for disaster. So yeah, it’s going to be interesting. To say the least, it’s going to be interesting. And I’m sitting here laughing, it’s kind of a nervous laugh. It’s super serious. I’ve never seen anything like this. People are asking like, “Well, is this like 1970? Is it like 1940? Is it like the great financial crisis?” Nope. Nope. I don’t think it’s like any of them. I know that it’s a little bit more like 1940 because of the kind of lockdown from the World War and the supply chain issues and inflation. But this is something we’ve never seen. We’ve never had-

Preston Pysh (00:11:37):

It’s a behemoth.

James Lavish (00:11:38):

Debt to GDP like this. Yeah. You’ve never had an M2 supply and money supply go straight through the roof, right?

Preston Pysh (00:11:43):

Well, I don’t think you’ve ever had nations able to kick the can down the road and avoid economic reality for as long as this long term cycle has gone. And I think a little bit of that has to do just with the knowledge that’s popped out of the last 80 years and the connectivity and the internet and the sharing of information has allowed the globe to twist the dials to such perfection to keep this thing “stable” for as long as they have.

James Lavish (00:12:24):

Yeah. And they’ve been kicking this can down the road and they’re all doing it in concert. Right?

Preston Pysh (00:12:31):

Yeah. It’s all connected. Yeah.

James Lavish (00:12:31):

And that’s the thing is that they’re all doing it together. And I loved your analogy when you were on What Bitcoin Did with Peter and your analogy with the monopoly boards. And the central bankers from each board are like, “All right, so what are you doing??

Preston Pysh (00:12:49):

They have to coordinate.

James Lavish (00:12:52):

Yeah. And it’s-

Preston Pysh (00:12:53):

They have to, because if they don’t, it’s going to be mutiny.

James Lavish (00:12:59):

Mutiny. Exactly. Which it will eventually be anyways because of the separation wealth. When I was in college, we studied this as like a … And I couldn’t relate to it. I’m going to date myself here, but back in 1990, 1993. And we were studying the separation of wealth in Latin American countries. And I couldn’t really relate to it. I was like, “Ah, but they made so many mistakes. They should have retained a middle class or built up a middle class.” And literally at that time we’re destroying our middle class. And so from then to now, now that we have virtually no middle class. We’re just gutting it. That we’re ending up in the same position. I wrote a thread a long time ago about why you should have Bitcoin as a right to Bitcoin, right?

James Lavish (00:14:00):

Why you should have Bitcoin as a hedge against hyperinflation. I had people come on that thread and kind of laugh it off and say, “It’ll never happened in the United States. No way.” And well, I do believe that United States would be the last for it to happen to. That’s my belief. We’re super fortunate that we’re in that position, I believe. I don’t know, but I believe that. But if you think it can’t happen here, you’re kidding yourself. It can absolutely happen here. And it can happen faster than you realize. And do I think it will? No, I don’t think it’ll happen. Not anytime soon. I have this hope and this vision of an orderly operating system getting put in place and being used and working in coordination like Bitcoin as a reserve asset. And then for us to switch over. But if we have things like that are happening in Japan and in Europe and you get complete meltdowns, all bets are off the table. Every single bet is off the table.

Preston Pysh (00:15:12):

People in the digital asset space this past two, three weeks have got a taste of how fast contagion and counterparty risk can blow up. They’ve seen this the Celsius thing, you saw BlockFi needed somebody to give them some liquidity. And you saw people who had deposits that got totally locked. And it happened literally at the snap of a finger that all of this kind of came unraveling. And I think the catalyst was really Luna. It blew up and everybody’s like, you’re seeing who’s swimming naked. And then all of a sudden Celsius locks up their clients and then 3AC. I think if people look back and be like, “Well, it happened so fast,” I think is what the common person-

James Lavish (00:16:00):

Risk happens fast. Greg Foss’ favorite quote.

Preston Pysh (00:16:03):

That’s right.

James Lavish (00:16:05):

And I was watching the Luna thing happen and I thought at the time, naively, I thought, “Well, it’s contained. And looking back on it, like you just said, everything happened so quickly. It’s just like 1998 with long term capital management. And I was sitting there on the desk and I get this call from another trader at a hedge fund. At the time I was trading risk arbitrage, trading merger arbitrage, helping manage this book of tons of positions of merger arbitrage. And for your listeners, merger arbitrage is where you buy the stock of a company that’s going to get bought out, whether it’s for cash or stock or a combination of cash and stock, it can get super complicated, but you buy the stock that’s of the company that’s getting bought out and you short the stock of the company that’s buying them and the right ratio. And you annualize that return and you can capture the spread for. The only risk is that the deal falls apart. That’s the risk. The deal falls apart. You don’t care where the market goes. The market could go up or down. You’re hedged out of beta unless somehow the market movement impacts the likelihood of the deal closing, which is unlikely, unless the deal is subject to financing. And if the deal’s subject to financing and the market falls apart, then you could have issues, but-

Preston Pysh (00:17:34):

Pause. Pause because I got to ask you a burning question I’ve got right now. And we’re coming back to your point here. I’m not going to disrupt your point. Is the Elon Musk deal going to go through? Now that you just said that … The whole time I was like, is that going to happen? What’s your opinion?

James Lavish (00:17:49):

I’ve got to dig into it but the market’s telling me no. Or that at least it’s going to get repriced. That’s what-

Preston Pysh (00:17:56):

Okay. Go back to … Sorry. Keep going.

James Lavish (00:18:01):

Okay. So I’m trading the merger arbitrage. And so we you’re studying the likelihood of the deal closing. That’s all you care about. You don’t care where the market goes. You usually avoid the deals that have financing risk because you don’t want to have market risk. So anyway, so we have this book of deals. In 1998, I want to say Preston, we probably have a half a billion dollar book at that point of merger deals in this hedge fund. Get this call and it’s a trader in another firm and he asks, “Hey, do you guys have any exposure to Goldman Sachs?” I was like, “No. Why?”

Preston Pysh (00:18:43):

Who’s asking and why?

James Lavish (00:18:46):

He’s like, “You’ve heard what’s going on with Long-Term Capital Management.” I said, “Yeah, of course. We’re all watching the spreads kind of creep out.” Anyway. So what had happened is Long-Term Capital Management, this hedge fund that’s run by Nobel Prize winning mathematicians who have created the Black-Scholes calculation for the risk of options trading. And so these guys are really smart. I mean, super smart, right?

Preston Pysh (00:19:15):

Too smart. Yeah.

James Lavish (00:19:17):

Too smart for their own good. So what they did is they took a billion dollars, they levered it up and borrowed doing swaps with every single prime broker and counterpart that they could find. They levered this book up to over $100 billion. So they’re like a hundred to one levered. And what they’re doing is they’re basically short volatility. Because they’re playing interest rate arbitrage, which is one of the big things they were doing.

James Lavish (00:19:42):

And there’s a lot of stuff they were doing. That was one of the biggest things they were doing. And a lot of merger arbitrage. A ton of merger arbitrage. But they weren’t just getting at those deals, they were levering up their position. So they have a book of a billion dollars worth of the merger deals, but they only have like $100 million of cash in that book. So they’re levered so far up and they’ve done it with swaps and it’s just crazy. Anyways, these spreads blow out everywhere. I mean, everywhere. And it happened like that. Because everybody got a sniff that these guys were going under. And so it wasn’t that everybody was selling as much as everybody just backed away and said, “We’re not offering liquidity and we’re going to let there be price discovery.” And it was madness. I don’t know. Do you remember this? Were you-

Preston Pysh (00:20:33):

I was just coming out of high school at this time, but I’ve studied the the book and talked to various people on the show through the years. Yeah.

James Lavish (00:20:41):

Well, the long and short of it is … What’s crazy about this is this remind … I was thinking about it all last week. I was like, this is exactly what happened. These guys took super crazy stupid risk, right?

Preston Pysh (00:20:53):

Yeah.

James Lavish (00:20:53):

They levered way up. They’ve got this collateral that is highly volatile that they’re levered against and it … Okay. We’re not going to get into the mechanics of what happened. Ad nauseum, you can have Mike Alfred on the show and he knows all about it. So just like the spread blew out here and there were major investment banks that were prime brokers that were going to fail. So they go to the New York Fed and they said, “Look, this is so bad that we’ve got to shore up the markets. We’ve got to be rescued or else the financial market’s going to melt down.” So that was the impetus for the real step in of the Fed put. And I think I wrote about this, but the strange thing is though, and the scary thing is there’s no Fed put here in Bitcoin and in crypto. There is only downside to the point where it gets washed out. Whoever is taking too much risk, sorry, you have the consequences.

Preston Pysh (00:21:58):

This is why I’m here. This is why I’m here. I believe in free and open markets. If you make bad decisions, you should lose everything. That’s it.

James Lavish (00:22:07):

Exactly. 100%.

Preston Pysh (00:22:09):

There’s no creative destruction except for in these markets.

James Lavish (00:22:12):

Right. And so if you own Bitcoin and you’re watching all this happen … I mean, my thing is, I’m just holding it. I haven’t sold anything. I’m holding it. Why? Because I think that this is going to swallow up whatever’s left. Now, as these other so-called protocols, these securities, they collapse, well, there’s obviously less market cap to go into Bitcoin. So even though Bitcoin’s dominance is going up, there’s only so far it can go. And you still have a lot of people who have not been wiped out who have some cash on the side who are buying some cryptos. You’ve got them buying Ethereum or Solana’s been all over the place. So they’re buying those thinking that well … And especially hedge funds. Thinking that that has a high beta to Bitcoin.

James Lavish (00:23:12):

And so they know two things. Those coins have high beta to Bitcoin, because that’s a stable asset of the whole group. Of course, it’s different in every way that we can think imaginable. But that’s the first thing they know. The second thing they know is that Bitcoin typically leads risk assets now. It’s been doing it for months and months and months. So as risk comes out of the market, Bitcoin goes down first, as risk comes back into the market, Bitcoin goes up first. So you’re levered both ways. So they’re levering themselves to a recovery as these things have gotten beaten down knowing that if they don’t die … Which I don’t think they’ll die in the cycle. I think they’re just going to keep going and they can make some great money that way.

Preston Pysh (00:23:57):

I love how Michael Saylor … I heard him talk about the frequencies of settlement. And he’s talking about Bitcoin and how high frequency it is relative to everything else in the marketplace, call it equities, bonds or whatever. And so when you think of it in a mechanical term or mechanical way, it makes sense that it should front run the actions of everything else. So if the market has reached max credit expansion and is starting to contract, Bitcoin should lead that. And on the recovery, on the bounce, Bitcoin should lead that.

James Lavish (00:24:34):

I agree. I agree. It does make sense. It does make sense. At some point though, it decouples. It does decouple. It’s got to get to a certain market cap. It’s got to have enough liquidity that it’s a separate asset class.

Preston Pysh (00:24:49):

And we’re nowhere near that right now.

James Lavish (00:24:53):

Not even close.

Preston Pysh (00:24:55):

Yeah. We’re not even close.

James Lavish (00:24:55):

Not even close.

Preston Pysh (00:24:55):

Not even close.

James Lavish (00:24:56):

No, no. I mean it’s … No.

Preston Pysh (00:24:56):

The reason that we started going down this path is we were talking about the spillover for Japan. Like if this really gets out of control and they have to step in, you’re literally talking about one of the top five central banks on the planet and the currency that’s with it and the debt market that’s associated with it potentially … I don’t know how that-

James Lavish (00:25:21):

Collapsing.

Preston Pysh (00:25:22):

Yeah. What is the probabilities we’re at here? Is this really a rare chance or are we really at the end game as far as-

James Lavish (00:25:29):

No, I think it can go for a while. I’m watching it, but I think it can go for a while. I mean, what’s the Bank of Japan’s choices, right? So as this pressure builds, they can either scrap the yield curve control entirely and just walk away. They can move the peg from 25 basis points to maybe 50 basis points.

Preston Pysh (00:25:54):

Is that the next move? Do you think they’re just going to move the peg up and then all these people that are causing these massive gyrations as of the last week, they just disappear for a little bit?

James Lavish (00:26:08):

I’m not sure, but let me say-

Preston Pysh (00:26:09):

I’m sorry. Go ahead.

James Lavish (00:26:10):

Let me walk through all of them.

Preston Pysh (00:26:11):

Yeah.

James Lavish (00:26:11):

So then the other thing they could do is they could target a different maturity on the curve. They go to the five or the seven or the five year or the seven year. Sorry. I try really hard not to talk in financial speak.

Preston Pysh (00:26:28):

It’s hard.

James Lavish (00:26:30):

It’s hard sometimes. Because I know you understand it, but I know there’s a lot of people who don’t know these things that are Bitcoiners that listen to your show that don’t know some of these things. So I apologize if I’m doing that. I try to keep it super simple for people. So they could target a different point on that yield curve, a different bond to control. Okay. Another thing they could do is they could try to save themselves by selling US treasuries, which they’ve been doing.

James Lavish (00:27:04):

I don’t know how much they’ve been actively selling versus how much they’re just letting treasuries roll off their balance sheet but they’re definitely allowing their US treasury balances to decrease, which helps them. They get dollars, buy yen and it helps them support the yen. And then the other thing they can do is they could come to an agreement, which is crazy. This would be like global QE. Where they come to the US or to another nation and they say, “All right, you buy our bonds and we’ll buy yours. And we just push the QE down the road on each other’s balance sheets.” So it’s like in your monopoly game the central banker goes to the other central banker says, if-

Preston Pysh (00:27:54):

We’ll buy some of that equity.

James Lavish (00:27:56):

Yeah. I’ll give your players 100 bucks each, you give my players 100 bucks each. And then it’s not really QE.

Preston Pysh (00:28:07):

And you’re getting so detached from the representative, the political representatives. I mean, they are along for the ride. They are not making any decisions. These central bankers are really calling the shots as to everything that’s happening within these jurisdictions.

James Lavish (00:28:24):

Purporting that they’re experts on all which I don’t think. And nobody knows what’s going to happen.

Preston Pysh (00:28:28):

Clearly their food recommendations are-

James Lavish (00:28:32):

Exactly. They’re spot on. All right.

Preston Pysh (00:28:35):

Eat your fake meat James.

James Lavish (00:28:37):

So what I think they’re really doing … And this is the scariest part. I think they’re playing chicken with the US Fed.

Preston Pysh (00:28:44):

Yeah. Yeah.

James Lavish (00:28:45):

I think they’re waiting. They’re watching the US economic numbers closely. We just had a negative GDP print. And then we get another one next week. If that comes in negative, it signals we are definitely in a recession. We’re heading down that road. Energy prices are up. Food prices are up. Stagflation. You’re going to have the unemployment rate start ticking up and then the GDP turns negative. So they’re playing chicken and they’re trying to hold out to the point where the Fed pauses. And when the Fed pauses, that takes so much pressure off them. Why? Well, go back to what we said beginning. The yen follows the spread between the 10 year JGB and the 10 year US treasury. So if that spread stops, then the pressure stops. It’s like, okay. Okay. We’re okay. Everybody okay? We’re okay. Again, it just kicks it down the road. But I think that’s what they’re doing. And they’re hoping that we’ll have to reverse course by early next year, which at the rate we’re going-

Preston Pysh (00:30:02):

Yeah. It seems like that timeline is … It’s going to happen sooner than that.

James Lavish (00:30:04):

I mean, what do you think? Does that sound plausible?

Preston Pysh (00:30:07):

I think it’s going to happen sooner than that. And it’s funny because everyone that you hear on CNBC and whoever, they’re all saying, “Oh yeah, we’re maybe just starting to get into the recession. They’re going to continue to tighten for,” and they drop this one, years with an S on the end of it. And I’m thinking, how in the world are you going to do this for 12 months?

James Lavish (00:30:32):

Well, they have a goal. They need to get the rates up high enough that then they have room to back off and ease again. So they need to get them up. Preston, they’ve got to get them up to three and a half, 4% minimum. I mean, they’ve got to get them up there. And they’ll do it fast. That’s why we had a 75 basis point hike. It’s not because they’re admitting they were wrong. They were like, “Oh, dang, we’ve got to get these up fast because we need these rates to be at a level that we can then back off. Because what we don’t want to do is go negative.” And we saw what happened. And Germany ran negative rates for so long. Just this last fall, there was over $15 trillion of negative yielding. Negative yielding.

Preston Pysh (00:31:15):

Nominal.

James Lavish (00:31:15):

Nominal. Not real yield. Take out inflation. Just nominal.

Preston Pysh (00:31:19):

Real yield it’s everything.

James Lavish (00:31:21):

It’s everything. Everything’s negative. But yeah, we want to avoid that. It’s mind boggling.

Preston Pysh (00:31:29):

Has inflation in the US peaked?

James Lavish (00:31:31):

That’s a tough one.

Preston Pysh (00:31:32):

You’re seeing a lot of people trying to make that call right now. I’m just not going to … People have asked me and I was like I just don’t know. I don’t have anything that signals to me that’s a very clear answer.

James Lavish (00:31:44):

Well, I think what we haven’t seen is the full effect of energy prices in-

Preston Pysh (00:31:52):

Amen to that.

James Lavish (00:31:54):

In all the things that it affects. So oil prices go up, gas prices go up. I mean, every single delivery is more expensive. Every single item that gets moved from one place to another is more expensive. Every single piece of food that’s created is more expensive. That’s created, you said is garbage food. But every single piece of food that’s processed, it’s more expensive. So, I mean, again, you would think that we’ve reached this point that surely prices must come down. I mean, look, with where the rates are on the 30 year mortgage and how much home prices have appreciated over the last two years you need home prices to come down 50%. 50% to get the same monthly mortgage that you got on your house back then. Just two years ago. 50%.

James Lavish (00:32:53):

So surely. Now, here’s the problem. The CPI is a super lagging indicator. So it’s hard to tell where even if we’re starting to see prices come down, you won’t see it in the CPI because that’s past data. So it’s garbage data. And the Fed has admitted numerous times … Powell has stood up there and he said, “We’re reactionary. We’re going with what we’ve got.” Now you and I have heard Target, Walmart, they’ve … Target has decreased their earnings estimate by massive amounts because of the price of shipments, energy. It’s impacting them in everything.

Preston Pysh (00:33:37):

Oh yeah. It’s in everything.

James Lavish (00:33:37):

This is not them shipping goods from the Target store to the people’s houses. This is them getting the goods from distribution facilities or overseas from China or from India or wherever it’s coming from. It’s everything. And so I do think … The funny thing is I saw in the PMI, the manufacturer’s index and the purchaser’s index, in the PMI it indicated that purchasers were worried about supply chains, but their inventory levels went up.

Preston Pysh (00:34:15):

A lot from what I had heard or saw.

James Lavish (00:34:18):

Right. So their front loading Q3, Q4, which is where they have all of their … It’s a huge percentage of sales. Over 50% of sales come in the last quarter. In some of these companies, it’s 70, 80%. Christmas. Thanksgiving and Christmas. So the holidays are a massive, massive driver of retail sales so they front loaded it.

Preston Pysh (00:34:42):

When the trends going up on the prices of everything, you’re incentivized to stockpile inventory.

James Lavish (00:34:49):

And you’re worried that you can’t get inventory heading into that period so you front load it. Eventually we’re going to see a collapse of prices in those places, but here’s the problem. Those are goods that we don’t necessarily need.

Preston Pysh (00:35:05):

Yeah.

James Lavish (00:35:06):

Those are not food. It’s not rent. It’s not energy. It’s not your utilities. All those are going up. The rent might come down but if you have a mortgage rate that it’s not fixed, it’s variable, that’s gone up. So you’re getting hit there. You’re getting hit on your gas costs. You’re getting hit on your food costs. So you’re definitely lowering your discretionary spending.

Preston Pysh (00:35:36):

This goes back to what we were talking about earlier with Saylor referring to Bitcoin as high energy money because of the frequency. When we look at food, this is a high frequency good relative to the junk that they’re selling at Target or Walmart that you don’t need. This is a high frequency, desirable, consumable good that people have to have. So do we not see this thing that I just slapped a whole bunch of adjectives on? Does the price of that not contract and come back down and actually become affordable again? Is that what we’re up against? Because I can only imagine what that supply chain looks like when you’re delivering a high frequency consumable good. I’m just looking at my wife is all about having whole foods in the house and not eating processed crap. And she’s constantly going to the supermarket. She’s constantly getting these items that will literally die in three days if you’re not going back to the supermarket and buying more.

James Lavish (00:36:45):

Super short shelf life. Yeah.

Preston Pysh (00:36:47):

Yeah. Real food.

James Lavish (00:36:49):

Yeah. I think you’re right.

Preston Pysh (00:36:51):

Same goes to fuel. So there’s a very high frequency good that people have to have. They have to have gas in their car to drive to work.

James Lavish (00:37:00):

Right. But there’s no solution there for a long time. The problem is we have suffocated the growth of that industry for so long with certain narratives and with-

Preston Pysh (00:37:16):

Big time.

James Lavish (00:37:18):

Yeah. There’s been no incentive to build there. So infrastructure is at capacity.

Preston Pysh (00:37:24):

And there’s been the Fed put. There’s been the Fed put, right? So anytime they were going to pack in margin … Like right now is a perfect chance, James, for them to pack in margin so that they can make capital investments into their infrastructure and their cap ex.

James Lavish (00:37:38):

Yeah. Exactly.

Preston Pysh (00:37:39):

But there’s-

James Lavish (00:37:42):

They’re not being incentivized to. Yeah. Who in the right mind would build into an environment that the politicians are saying, “Oh, we’re going to have a windfall tax on you guys. We’re going to make sure that your margins aren’t too high. We’re going to make sure that we regulate how much you’re pumping and how much you’re refining when and where and how.”? Who in their right mind wants to go into that industry right now?

Preston Pysh (00:38:08):

Especially after the last, call it seven years, they’ve been shellacked.

James Lavish (00:38:15):

Shellacked.

Preston Pysh (00:38:17):

Pull up their 10K’s, look at them.

James Lavish (00:38:18):

Yeah. Exactly.

Preston Pysh (00:38:19):

They’ve been shellacked.

James Lavish (00:38:21):

Not free cash flow and positive. They’ve been shellacked. Exactly. So it’s their time to actually solidify their balance sheets and make sure that they’re whole going forward. Yet you’ve got people that are just career politicians that all they’re doing is trying to have the next soundbite to get that margin of vote so they can stay in office so they don’t have to go to work.

Preston Pysh (00:38:49):

Here’s the Fed Chair Powell’s quote from today during his conference with … Or his discussions with congress. “Raising interest rates will not bring down the major drivers of inflation, namely gas prices and food prices.”

James Lavish (00:39:10):

So they admitted it. I mean they know that … So what do they do? What do they do? They do the best they can to throw up smoke and mirrors and to adjust that CPI in ways that obfuscate the realities of the prices of the goods that people need. And they’re hurting them the most.

Preston Pysh (00:39:37):

How can people not realize that if you provide a gas credit by dropping the price … Because this is what they’re talking about now. If you give a credit of a dollar off on the gas, people will consume more gas than if it was a dollar more, which drives the price higher because there’s less supply in the market. How in the world-

James Lavish (00:40:02):

Higher demand. Correct.

Preston Pysh (00:40:05):

Do people know this? I think they know this.

James Lavish (00:40:09):

And the best part is that they have to print money to do it.

Preston Pysh (00:40:12):

That’s right.

James Lavish (00:40:13):

It’s just another form of QE. I mean, this is like … Well yeah. Or-

Preston Pysh (00:40:17):

UBI.

James Lavish (00:40:19):

UBI. Yeah. Exactly. It’s a form of UBI. So yeah.

Preston Pysh (00:40:25):

It’s crazy.

James Lavish (00:40:28):

Look, when this all started happening back in the beginning of the pandemic, I have a lot of friends who were not in finance and who when I started talking about how the money printing is really actually hurting the little guy, how it’s not … The cantillon effect. And I try to explain that. They’re like, “But they need that money. They need that 1200 bucks.” Yeah, but it’s going to hurt on the back end. They’re going to get hit with inflation. It’s going to hurt. And arguments about this. Now, it’s not that they’re not smart. They’re smart people. But they’re not thinking about it the way we are. They’re not looking at the … We’re looking at this stuff every day. What do you do the first thing you wake up in the morning besides like-

Preston Pysh (00:41:12):

I absolutely look at charts.

James Lavish (00:41:14):

First thing I do is … And I don’t look at Bitcoin to see, oh, how’s my portfolio doing? I look at it to see if there was a systematic shock last night. Did something come out? Because that’s the leading risk indicator right now. What happened last night?

Preston Pysh (00:41:33):

That’s why we get along. No, you’re right. I just go through it. I have 10 or 15 charts always up in my browser and I’m just plowing through each one of them to see what the deltas were while I was sleeping.

Preston Pysh (00:41:47):

Here’s an interesting one. BRICS currency basket. And we’re talking about BRICS. This stands for Brazil, Russia, India, China, and South Africa. There’s talks of them trying to basically stand up their own, I guess you’d call that a mini SDR of their currencies and their currency basket. And I recently did this interview with Pablo Fernandez and he made this comment because he’s from Argentina. And he said what happens when you really start to get real inflation. Not 8%, but double digits. Large double digits.

James Lavish (00:42:29):

Yeah. Yeah.

Preston Pysh (00:42:30):

He said people run to a stable currency that they can trust. For us, it was the dollar. And he says what happens is because the government’s trying to implement all these controls and trying to prevent people from going to the dollar and to use their currency and preventing the collapse of the currency, he says what happens is that local currency gets shoved into the hands of the consumers. But the producers are desiring the stable and the one that actually stores their buying power. And so it appears like this is the play for these BRICS currencies, the Brazil, Russia, India, China, and South Africa against the US, the Euro and the yen.

James Lavish (00:43:17):

It doesn’t surprise me at all. Now whether or not they’re successful, I don’t know. I mean, I would expect long term … I mean, I’ve said this before, I expect long term, not in the next two or three years, but long term that you have a couple of currencies that are the base currencies of the world. Like US loses its sole status and you have the US, Euro collapse into each other and some other. The yen. And then you’ve got the Russian China. And this is it. This is the BRICS currency. But it shouldn’t surprise us after what we saw with Russian sanctions and with the United States seizing US treasury assets owned by foreigners. What? I mean, if you’re one of these countries, do you want to be holding us treasuries? Of course not. That’s why they’re all selling. That’s why Russia owns none. That’s why China’s been selling them with abandon. And they all own what we have suddenly realized is actually important. Not just our good word that we’re going to … Full faith backed by the US government. Great. But having oil and gold and food and fertilizer and wheat actually matters. That’s no surprise. They actually have something to stabilize the currency with.

Preston Pysh (00:44:51):

When I look at them trying to do this and I’m trying to look at it very objectively, it makes sense to me that they would want to do that and force the network effect over to their currencies that they know they’re controlling and they understand whether they’re debasing it or not. But does this drive a wedge between … I mean the split in the world between these energy producers, these fertilizer producers, these things that the world has to have. I’ve said this, I think multiple times on the show, but I think it’s a very apt example of your body has a bunch of mitochondria that produces the ATP. This applies the energy to your body. If you suddenly lost 30% of them in your body, how in the world do you possibly expect to go perform any type of energy consuming demand on your body?

Preston Pysh (00:45:43):

Michael Saylor likes to use the blood letting example before a fight. If you went and forced the person to bleed out 30% of their blood, how in the world are they going to be able to do what they’re doing? And so when I look at our global cooperation that’s required and you separate the world into, let’s just call it NATO currencies and these BRICS currencies, does this battle … Because both have something to offer each other. Maybe some a little bit more than others. But collectively both of these parties need each other to get along. I don’t see a world where these two entities break off and don’t coordinate with each other anymore. I think they have to coordinate together.

James Lavish (00:46:37):

I think they do have to. Honestly, if you look at the … And I was looking at this because I saw that somebody asked that question in that thread that you posted today. And if you look at the weighted average of the five year sovereign CDSs, the credit default swaps. So for your listeners, a credit default swap just is a … It’s an insurance instrument that institutional traders use that when they own a bond, they can buy insurance against that bond failing. Defaulting. So credit default swap. But the five year default swaps on the BRICS is at least 20 times wider than the CDS for the SDR currencies. Okay. I mean, Russia’s rated at 100% to default. They’re absolutely defaulting. It’s just a question of when. Of course, we have a hand in that, but that’s what’s happening.

James Lavish (00:47:39):

The credit risk will make it hard for people to deal in that currency so they will absolutely have to back it by hard currency. They’ll have to back it by gold. And I think that they would back it by Bitcoin. Now China’s a funny one. Because they’ve banned Bitcoin mining. Of course there’s still mining going on there which is odd. Although maybe not surprising. There’s a question about how much Bitcoin the Chinese government may own. Nobody knows. But if you had something that’s backed by-

Preston Pysh (00:48:13):

Energy.

James Lavish (00:48:13):

Gold and Bitcoin. Yeah.

Preston Pysh (00:48:13):

Won’t work.

James Lavish (00:48:17):

Yeah. Energy. Energy, work, oil. Yeah. I mean those are … So they could stand it up. They could. But just to your point is that China needs the United States.

Preston Pysh (00:48:28):

Yeah. Yeah.

James Lavish (00:48:30):

I mean, they certainly don’t want us to default. That would be terrible.

Preston Pysh (00:48:38):

And I think you can also say that the US can’t go cold turkey on any of those countries.

James Lavish (00:48:44):

Of course not.

Preston Pysh (00:48:44):

Of course not.

James Lavish (00:48:44):

Of course not. They’re talking a big game as politicians. But look at what’s happening in Europe. I mean, they’re allowing countries to buy energy from Russia and gas because they don’t want a problem this coming fall and winter of citizens freezing to death because they don’t have heat. Of course, they dug their own trench there by shutting down the nuclear plants. But we’ve put ourselves in this spot where just like you said, we’re so interconnected that we’re going to have to come to an agreement.

Preston Pysh (00:49:28):

And it almost seems like because there’s going to be this battle for whose basket of currencies are going to win versus the other and it’s the political piece, the maneuvering and all of that. Meanwhile, you got Bitcoin who’s just chugging out another block that’s completely apolitical. And it almost seems like because of that, it’s going to be the only thing that all those parties can ever agree on.

James Lavish (00:49:53):

It’s almost maddening to sit here and watch the system just try as hard as it can to repel it. It’s maddening. Because you and I know how it can fix so many problems. We won’t get into that. People have heard that ad nauseam. But it’s unnerving to watch. And like you’re seeing it act like this leading risk on asset for so long it can be frustrating. I know it’s frustrating for people who are saying, “Well, that narrative’s dead.” There was a remark on one of my Twitter threads about, well, it can no longer … And this is by somebody who’s very smart that I respect. You can no longer claim that it’s CDS on sovereigns. Well, but the answer is, it’s not going to act like a CDS that trades in the open market. It’s going to act like a CDS the moment you need it. The moment you need it, if you’re Venezuelan, if you’re in Lebanon, if you’re in the Ukraine and you need it to get across the border with your net wealth, then you need it. And if you don’t have it, your currency is deflating against Bitcoin so rapidly that you won’t get a chance to get it. So the point is that it saves you in spots. But we’re seeing this. We’ve seen it play out in real time a number of times. Yet the system is still battling against it.

Preston Pysh (00:51:28):

Clearly the market hasn’t viewed it through the optic of this insurance policy like you’re describing it yet. Why do so many people in traditional finance not understand this?

James Lavish (00:51:39):

That’s a good question. I can tell you from my experience, Preston, back in 2018 I had some discretionary capital I wanted to put to work in something a little bit further out in the risk curve. Something I hadn’t really dug into yet. Because I had private equity. Obviously own real estate, house, public equity, and venture capital. I wanted to go a little bit out on the risk curve and do something different. So I had heard about this Bitcoin thing and run up to 20 something thousand and come all the way back down to four or five. And so I did what you do as an institutional investor. I went and asked my traditional technology analyst at the investment banks, “Hey, what about this Bitcoin thing?” And I mean to the T every single one of them that said it’s super speculative or it’s a scam or it’s a Ponzi. There’s no fundamental value to it. Just avoid it at all costs.

James Lavish (00:52:43):

And of course made the worst trade of my career, which was avoiding it and not buying it and walked away. Okay. So you have some of that that’s been going on all these years. Now it’s front and center. Okay. It gets a lot of negative press. We see it all the time. You guys are out there trying to battle against it constantly. But the problem is institutional investors, they’re super close minded because number one, the system’s worked for them perfectly. I mean, it’s been fantastic for most of these guys. They’ve crushed it.

Preston Pysh (00:53:19):

Especially fixed income.

James Lavish (00:53:22):

Yeah. Crushed. Yeah. Not this last year. But yeah, the last 10, 15 years have been-

Preston Pysh (00:53:28):

40 years.

James Lavish (00:53:30):

Yeah. Yeah. And then beyond. Yeah. But they don’t need it. Okay. So that’s number one. They just don’t need it. And so their instinct is they know that it’s disruptive. And so when you hear of disruptive technology and you’re in the technology that’s going to be disrupted, of course you’re going to battle against it. It’s your first instinct. You’re going to battle against it. Whether or not you know anything about it. But let’s just pretend. Okay. Because I do know that there are institutional investors that … The ones who know it, who are playing it right now, Preston, are hedge fund guys. The true institutions, the ones who control the massive amounts of capital, the ones that control the hundreds of trillions of dollars in investment assets, these guys are your pension funds, your endowments, your nonprofits. These are sovereigns. These are players that are so big that they … These are the ones who really move the market.

James Lavish (00:54:39):

Okay. But why have they not done it yet? Well, the problem is it’s structurally very difficult to do. Number one, when you’re at a pension fund, an endowment or something, you’ve got mandates of what you can do. Okay. Let’s talk about a pension fund. You’ve got a mandate of in your fund of what you can buy. It’s tight. You can’t just buy … If you’re in a growth stock fund, part of that pension fund and you’re the portfolio manager of that portfolio, you’ve got a really tight, narrow, narrow mandate.

James Lavish (00:55:15):

But let’s pretend that a portfolio manager digs in, reads the Bitcoin standard. Okay. Reads The Price Of Tomorrow. Jeff Booth’s awesome book. Understands the deflationary versus inflationary pressures that are about to collide. That are actually colliding. And they see it, they get it, they understand it and they see it as a separate asset class and something that is insurance and is more like a bond than they’ve admitted. That it should be something they own in their portfolio. Even just 1%. Just 1% in their portfolio. Okay. So let’s say they get there. They get to the understanding. Well, the first thing they’ve got to do is get their chief investment officer to buy into it. So they’ve got to orange pill that guy. Okay. Then they’ve got to get … If they’re successful there, then they’ve got to get the investment committee to agree to it in order to adjust their mandate. Okay. So they’ve got to say … You want to say something?

Preston Pysh (00:56:14):

No, I was just going to say, so this is like 0.1 raised to the ninth power.

James Lavish (00:56:19):

Yeah. Exactly.

Preston Pysh (00:56:21):

The math. The math.

James Lavish (00:56:22):

The math is exactly. So then they get all those guys. So now we’re talking about weeks or months of meetings just to get those people, the investment people, the risk takers on board. Now you’ve got to get the risk mitigators on board, who are the general counsel and the compliance officer, the chief compliance officer and the compliance committee. So you get the general counsel, the chief compliance officer, you’ve got the compliance committee. Now you want to talk about meetings. Holy mother. You cannot believe what this is like. So then they go through all those meetings. Okay. They finally get everybody understanding it, on board. They’re all gone home and done their homework and they’re on board. They at least get to majority where they can start pushing this through. Well then they’ve got to get everything in place. Who’s going to trade it.

James Lavish (00:57:10):

Is the exchange worthy enough to handle the capital of this pension fund and is it going to breach any fiduciary duty of this pension fund by using them? That’s number one. Then how are they going to settle it? Who’s going to be their prime broker? Pension funds don’t hold stock certificates in their back office. They have a broker who holds everything for them. Custodian bank holds everything for them. So who’s going to custodian? And who’s got the keys? Are they going to do multi-sig? Who’s going to be in control of those signing devices? How is that going to work? And then get all that done and you’ve still got to figure out when you going to market. Do you market at midnight London? Do you market at the close of the New York Stock Exchange? Because it’s open 24/7. So there’s just a litany of steps you have to go through.

James Lavish (00:58:05):

So this is the great thing though, Preston. And it’s unfortunate that the prices collapsed here, but I think it’s given people a lot of opportunity here.

Preston Pysh (00:58:14):

Big opportunities. Yeah.

James Lavish (00:58:16):

So you were around in high school. Maybe you were in investment club and you played the dotcom bubble a little bit. And you saw how some of these prices, they got released, IPOed, and just went tenfold the first day. Okay. So I was sitting on a hedge fund desk at the time and you would go in … So what happens in IPO allocation, you know this, but for the benefit of your listeners, what happens in an IPO allocation as an investment banker or as a hedge fund or an investment firm, you ask to be allocated a certain amount of that IPO.

James Lavish (00:58:56):

You say, “We want a 100,000 shares. We love this Google thing. We want to own some of it.” And so the investment bank works with their syndicate desk and they decide who gets what? And back then it was like, well, who knew who? What kind of favors did you need? How many commissions did they give us as an investment bank? Have they done a lot of business with us? It was ridiculous. But you’d go in for a 100,000 shares and you’re this huge hedge fund and you get one, two, three, four, 5,000 shares. That’s it. So a thousand shares of this IPO. But Preston, this thing will go up a 100, 200, $300. You’d make a quarter million dollars without even blinking. And so there’s a point to this. So for the first time you’re sitting in the same seat as those hedge funds if you’re an individual investor, because you don’t have to go through all the garbage that the institutions have to go through to buy Bitcoin. You can buy it right now. You don’t have to go through all of that.

Preston Pysh (01:00:04):

Isn’t that crazy? It’s just crazy to me that retail actually has the advantage here. They have the advantage and they have the edge and it just … It’s like watching-

James Lavish (01:00:14):

And when they come in, when they do come in, they’ve got-

Preston Pysh (01:00:18):

Oh, it’s going to be crazy.

James Lavish (01:00:19):

But because they’re going to say, “I need 1%.” They’re not going to say, “Oh, well, it’s trading at $47,000. Wait until it comes back to 42.” No, they’re going to say, “I need 1%. Go buy 1% of my portfolio.” Sorry. “I need 1% of my portfolio. I’m managing $100 million. I need a million dollars or a billion dollars and need 10 million dollars worth. Just go buy it.”

Preston Pysh (01:00:42):

And if you’re Apple, their balance sheet is … What is their balance sheet now?

James Lavish (01:00:45):

It’s gigantic.

Preston Pysh (01:00:47):

Gigantic.

James Lavish (01:00:48):

Gigantic. Yeah.

Preston Pysh (01:00:51):

Making people’s head’s spin.

James Lavish (01:00:53):

They make people head spin. And that’s just one company, one pension fund. And when these guys come in … So I actually wrote this down somewhere here, Preston. There’s five asset managers who control $30 trillion of assets. BlackRock, Vanguard, Fidelity, State Street, and Morgan Stanley. $30 trillion. When all those guys come in and they get 1% or 2%, they’re not going to get 1% and tell the world. They’re going to get 3%, 5% and tell the world. And then everybody’s going to be going. I mean, that’s just the way I see it happening.

Preston Pysh (01:01:34):

And people got to realize that if they buy a trillion … If a trillion comes into this market, it doesn’t move the market cap by a trillion. It moves it-

James Lavish (01:01:45):

There’s a friction.

Preston Pysh (01:01:45):

By a lot more than that.

James Lavish (01:01:47):

There’s friction. It’s called trading friction. They’ve got to find the price that people are willing to sell. Exactly.

Preston Pysh (01:01:52):

Okay. There was another topic I wanted to hit with you here and I know we’ve covered a lot of space here and I’m looking at the time. I want to talk about the real estate market with you because my Lord, this just looks like a total disaster brewing.

James Lavish (01:02:08):

Yeah. It’s incoming. Disaster incoming. Now, I don’t think it’s going to be-

Preston Pysh (01:02:13):

Do you think it’s worse than ’08?

James Lavish (01:02:15):

No. I don’t. Because people aren’t levered the way they were in 08. I mean, you remember back in ’08, there wasn’t Uber, but you were taking a cab in San Francisco. The cab driver’s like, “Oh yeah, I own six houses.” Wow.

Preston Pysh (01:02:30):

Well, and the values have appreciated so much in nominal terms just in the past year alone that that puts people way further in the green.

James Lavish (01:02:38):

So here’s the problem. Yeah, exactly. Well, you just hit on it. That’s going to be the problem. Housing prices have to fall 50%. I think we talked about this earlier on the show. They have to fall 50% to have the same mortgage payment as you did two years ago. Because house prices went up so much and so did interest rates. Interest rates have doubled and so have housing prices. So they have to come down 50% just to have the same … But the problem is they’re coming down, the demand’s coming off. It’s just fallen out of bed. There’s no demand right now in so many cities. So the problem is, as those prices come down, people’s equity that they are expecting to be sitting on as part of their personal balance sheet is evaporating.

James Lavish (01:03:27):

They may have borrowed off of it because they’ve got lines of credit. They’ve got home equity lines of credit that they’re borrowing off of that are now upside down because they took on extra a hundred grand at the wrong time or whatever it is. And so that’s going to start squeezing people’s credits. So now you’re watching the people’s credit card debt tick up back up to the 2008 levels. And so here we are again. I don’t think it’s going to be as bad in the housing market as it was back then, because I mean, look who’s buying up all these houses. BlackRock and Berkshire Hathaway. All they’re going to do is rent them out and they can sit on them forever. So I think it’s just a different structural problem, but it is a big enough problem that, again, it’s going to cause more stagflation where you’ve got inflation of goods that people need, but a deflation of their assets at a time when the Fed is raising rates. It’s a recipe for more pain. Period. What are your thoughts on it? That’d be interesting to know.

Preston Pysh (01:04:41):

Yeah, no, I think the thing that is at least a little bit of the saving grace is I think you’ve got a lot of people that if they had 20% down or 30% down already paid into the house and the house doubled in value because housing prices are going bananas everywhere, that’s going to help ease the burden a little bit. Now my concern is for people that are new home buyers or have to move because of work or whatever and they’re just not going to be able to buy as much house for the price that they can afford coming out of it. It’s a noose that once you drive those rates, especially you do it systematically over a 40 year period of time is you continue to tighten those yields down to nothing. And you get everybody locked in with not much down on the house. They’re going to have to stay there because as rates rise and based on the inflationary environment that I expect in the coming decade, I just don’t know that-

James Lavish (01:05:45):

Yeah. All the people are moving from … Okay. From San Francisco to Austin. Austin’s not cheap. That is not a cheap city. So now you have … Of course, you can get a whole lot more house in Austin than you can in San Francisco. But like you just said, it precludes them from going and taking a mortgage that’s 6%, 7% now on a house that is now going to be comparable to the one they’re leaving. So what’s the point?

Preston Pysh (01:06:18):

Yeah.

James Lavish (01:06:18):

So it does. It restriction movement. Yeah. It’s interesting. It’s something that hasn’t been talked about much, but you’re starting to hear people chirp about it. And I think you can sense it’s just another thing. We need a few more data points there. I want to see a few more data points to see where this thing’s going and how it’s really affecting people’s bottom line and where the consumer credit is going. How much it may be affecting that.

Preston Pysh (01:06:46):

People that have locked in very low interest rates and they don’t plan on moving, they’re going to be huge beneficiaries of it if they can continue to hold down a job and make their payments because as you will-

James Lavish (01:06:59):

You’re deflating away your debt.

Preston Pysh (01:07:00):

Yeah.

James Lavish (01:07:01):

Exactly. Yeah. I was at the bank the other day, because I had to send a wire. So I had to sit down with a banker and fill out 17 pages of paperwork. I’ve literally sent 250 wires with this bank, but I got to do it every time. So I go in, fill out all the paperwork. And this young banker, he’s a kid, but he’s like, “Well, what do you suggest I invest in?” Because he asked me what I do. And I was talking to him about it and he’s like, “Well, at first I want to pay down my mortgage.” I go, “What?”

Preston Pysh (01:07:33):

Back up the train.

James Lavish (01:07:37):

Why? He’s like, “Gosh, I just feel like I should own it. I shouldn’t have that debt.” I was like, “You understand as the dollar inflates that you’re paying off your house with cheaper dollars?” He’s like, “I never really thought about it.” This is a banker. He never thought about it that way.

Preston Pysh (01:07:54):

The Dave Ramsey pay it back as fast as possible and all that stuff. I don’t want to bash Dave for trying to get people to get their finances under control but in this particular-

James Lavish (01:08:05):

Super important. Yeah.

Preston Pysh (01:08:06):

Yeah. In this particular scenario this is-

James Lavish (01:08:10):

I wouldn’t agree with that. That’s all. Yeah. I wouldn’t agree with it. Yeah. Get your credit card debt off.

Preston Pysh (01:08:15):

Yeah, exactly.

James Lavish (01:08:16):

Pay that down. Make sure you have no credit card debt, especially now because that is ballooning.

Preston Pysh (01:08:20):

Did you see that chart? Over 20% I guess is the national average on it. It’s insane.

James Lavish (01:08:24):

APR. Ouch.

Preston Pysh (01:08:25):

It’s insane.

James Lavish (01:08:29):

I didn’t see that chart. Yeah. Makes sense.

Preston Pysh (01:08:31):

James, we got to do this more often. I thoroughly enjoyed the chat with you.

James Lavish (01:08:35):

Likewise man. And I’m sure there’s going to be … I can only imagine what the coming quarter’s going to bring. Holy moly.

James Lavish (01:08:41):

God only knows. Hang on tight. I don’t profess to know.

Preston Pysh (01:08:44):

No, I know.

James Lavish (01:08:47):

I’m just looking around for where you may see the risk. Where’s the systematic risk? And you do the same thing so I like talking to you too, man.

Preston Pysh (01:08:55):

Yeah. We’ll see where it goes, but we’ll definitely do something here in the future. And boy, thank you so much for coming on the show. Is there anything you want to highlight? I know you work with different organizations or you want to maybe [inaudible 01:09:07].

James Lavish (01:09:06):

Yeah. Well, you just had us on with our Looking Glass Education platform. You can find it on my Twitter profile in my bio. And that’s the thing that Greg Foss pulled me into. Seb Bunney, Daz Bea, you’ve got Pleb Music on there, Dalia Platt. Jason Sansone’s a surgeon in Wisconsin. These guys are super smart guys and gals. They’re so smart. I basically … I’m the old guy with Greg. We just help with a little bit of advisory. But Greg, he helped them really kickstart it so he’s been a very important part. I don’t want to belittle that. But the guys that are running it, they’re awesome. And so this is just a simple platform, an educational platform for your listeners.

James Lavish (01:09:56):

If you want to know more about money, how money works, the system and how it all leads to Bitcoin. It’s not Bitcoin heavy, it’s really money heavy and the history and how … And it’s super simple and it’s in easy modules to go through just like a coursework online. I highly recommend it. That’s the one thing.

James Lavish (01:10:16):

And then part of that is my Informationist newsletter. So I write a newsletter every Sunday comes out that I take one complicated financial topic and simplify it. Super, super simple for anybody to understand. And I love doing that. I hate the fact that my industry is so opaque. I hate the fact that people are scared of it. They don’t know what to do and they don’t how … They hear all this jargon and they don’t know what it means and it just goes right past them and it shouldn’t. So it’s a great thing for people and it’s free. I just really like doing it. It’s one page, boom, knock out. Like what’s a yield curve control? Or what’s a Fed put? So I do that and that’s it. James Lavish on Twitter. You know where I am.

Preston Pysh (01:11:01):

James, thanks so much for making time and I really enjoyed the chat.

James Lavish (01:11:05):

Thank you. Honored to be on here and I look forward to the next time, Preston. See you.

Preston Pysh (01:11:08):

Absolutely. See you.

Preston Pysh (01:11:10):

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. 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 (01:11:43):

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