Intro Vocals 0:01
You’re watching the blockchain interviews hosted by Dan Weiskopf. Each episode features interviews with leading industry experts so that viewers can have a deeper understanding of today’s quickly evolving blockchain marketplace.
Dan Weiskopf 0:21
Greg Foss, thank you so much for joining us today in the CEO blockchain interview series. You know, we all wear a lot of hats, you’ve got a fair number of hats too, I don’t know if you want to consider yourself, CEO, but you’re certainly an adviser to a fair number of CEOs and leaders in different industries. And by way of background, 35 years in the business, right financial services and portfolio management, and you were a couple of different hats. One of them is as a Bitcoin strategist, which I love the title by the way. They call me the ETF professor and I’m proud to say I’m an ETF strategist, some people have dropped that off. I’d love to know exactly what a Bitcoin strategist does, and then also love to hone in on your role at Validus energy, that would be great. So thanks again for joining us.
Greg Foss 1:26
Dan Weiskopf 1:26
Yeah, please expand on that background.
Greg Foss 1:29
Okay, certainly. Well, thanks for having me, Dan, and audience. Dan and I have talked offline before. So here’s my history in a nutshell, started with trading credit with the first LDC crisis, I moved from the Royal Bank to trading at another Canadian financial institution trading high yield bonds. And I went through the next financial crisis, which was long term capital, okay, long term capital, ingenious, ingenious Nobel Prize winners at long term capital that were selling volatility, ie selling insurance based on six years of volatility data and leverage themselves 100 to one and their primary clients were Wall Street, it was ridiculous that it was the stupidest thing I’ve ever seen in my life, yet it happened.
Okay, so that’s financial crisis. Number two, along comes the Fed, they have to bail out the banking system again. All right. I eventually moved from the sell side of the street, to the buy side of the street so that in 2006, seven and eight, I was sitting in a risk chair during the great financial crisis. Now, this was the third financial crisis I’ve lived through and this was the real deal is you’re probably old enough to remember the world was over full stop. Chairman Bernanke, who said famously, the subprime mortgage crisis as well contained two years later was eating crow and bailing out the likes of you know, what, what started the calamity was that bank Nasional Perry BNP, these hedge funds that were mis marking their subprime mortgage loans, the market excetera caused a contagion impact that resulted in the bankruptcy of Lehman Brothers now, I’m sitting in Canada, but all of my trading risk is with us based institutions. Okay, high yield is traded out of New York, full stop. It doesn’t matter where you live in the world. New York is the central trading hub for high yield bonds. And basically, was I lucky? Yeah, I had shorts on that aligned with the, you know, that The Big Short Movie and the genius I don’t actually think he’s a great risk manager, but Michael Burry as a genius analyst. We had those trades on and you know what, I wasn’t happy. We were making tons of money. But I saw the world ending. I still remember taking the train to work early 2009. So I’m talking February, January, February, freezing cold Canadian days, wondering, is this the day that the financial system actually implodes? And it’s no fun when you’re making money. And you actually are wondering whether your kids are going to have a life after this great financial implosion. So we made it through, we actually ended up reversing our positions into one of the greatest asymmetric trades to the upside I’ve ever seen, which was something called restructured, asset backed commercial paper in Canada. That was I don’t want to get too granular here, but again, it was a credit product that had been bought by idiot Canadian pension fund. mines at 100 cents on the dollar and they sold it all the way down to 25 cents on the dollar. The biggest fund that did that incidentally was a case that they pipe last month to Quebec the idiots that funded Celsius. Okay, so look, I see this shit going as to sorry to swear I see this stuff laying around circular circular circular all the time. But here’s the point 2008 2009 It was over. The Fed had to come in and they wrote a check essentially for close to 1 trillion bucks. Okay.
Full stop. After the great financial crisis, you read the books by John Malden called the end game and how the sovereign debt spiral cannot continue because all the risks in the financial system had been kicked up to the sovereign level. But 11 years later, from 2008 call it to 2009 11 years later that nothing had ever been solved, the banks can or the central banks continue to print money because any taper tantrum was met with falling equity prices and the Fed put came into play quantitative easing infinity, they didn’t pay back any of the debt. Now it is too late because you hit the COVID crisis in 2020. And the checks that were printed during the COVID crisis make the great financial crisis look like a rounding error, right? We’re talking multiple trillions of dollars now. And that’s globally and central bank balance sheets that balloon. So I’ve lived through four credit crises. The fiat system is a full blown Ponzi. I can’t say any other way. And I needed to get out. I should just say in 2016 after this great asymmetric trade to the upside I said I’m never going to be able to repeat this success there. So I had resigned I said I’m gonna go and have fun on the golf course and everything like that. Well the reality is guys like you and me type A personalities you can’t stay out of, you know, you can’t stay out of trouble too long. Meaning you always love the markets, you love the feeling of competition. So I left the professional asset management business, but someone introduced me to Bitcoin. And this was 2016. And like everyone, I said, Now bitcoins got to be a Ponzi, because why? Well, I’d read in The Wall Street Journal, it was a Ponzi. And I’d listened to knuckleheads like Peter Schiff, that it was a Ponzi. And at least I did my homework. And I realized, oh my god, this thing is absolutely technologically beautiful. And nobody controls it. Pure decentralization, no risk of having conflicted shenanigans by owners of either the protocol or the system called central bankers. So I said, this is the solution I’ve been literally looking for for 20 years. And I helped fund and you’ll love this, a company that brought the first closed and Bitcoin fund to Canada, we had to take the Ontario Securities Commission to court to get the approval of launching a closed and Bitcoin Fund, which was the precursor to the spot ETFs Bitcoin ETFs that exist in Canada that still don’t exist in the United States. So I helped fund that company. That asset management business that I’m no longer involved with, I did sell my shares and it has attracted a lot of Canadian interest into the spot ETFs nice, proper business that allows investors to diversify their portfolios.
Anyway, you guys still don’t have them? Well, candidate has had them for a couple of years now, thanks to the company that I helped to fund. Then though, I left that and I’m now a Bitcoin strategist. And you say, what is that? And I say, I’m a guy that sat in a risk chair for over 30 years. I understand financial markets. I’m part of an energy company that mines Bitcoin, and hosts Bitcoin miners, including one that we’ve talked about in the past, I won’t bring it up unless you want to, that we host bitcoin mining, and the key thing is, Why am I a Bitcoin strategist?Well, because most of the world doesn’t understand Bitcoin, first and foremost, but it’s my opinion, that Bitcoin eventually becomes the reserve asset of the world. Why? Well, because fi it’s the Ponzi people, and that Ponzi can continue until it doesn’t having spent my life in the tread in the credit trading chairs, you know, that risk happens fast. And slowly, then suddenly, the system breaks. And I am under the opinion that since there is a chance since the global response to COVID was so over the top foolish in terms of the money printing that took place. The next crisis could be the last crisis, okay? Because you just start doing orders of magnitude bigger in the math and you realize It is impossible for the United States to escape the debt spiral that they have inserted themselves in. But it’s not just the United States, it’s every single other country in the world has followed the same game plan, and total debt to GDP numbers are unsustainable now. So there’s some ugly outcomes, and you better protect yourself. And in my opinion, Bitcoin could be the best hedge against Fiat shenanigans I’ve ever seen in my life. Sorry for the long winded answer.
Dan Weiskopf 10:32
Yeah, that’s fine. That’s fine. I totally get your perspective. And that’s why I brought you on the show. So so. But having said all that, let’s talk through a couple of things. I get that I get that you’re, you’re clearly going to be more bearish today about markets, and you were a couple of years ago.
Greg Foss 10:54
Dan Weiskopf 10:55
Um, but but, you know, we get a lot of feedback about bitcoin’s narrative being broken too but you don’t you don’t see it that way. Um,
Greg Foss 11:06
I’ve never been more excited because you have to look at the various first of all, there’s two ways to look at it, you can look at it as a technology and therefore value it on a on adoption basis, much like Fidelity has sent out a report that values Bitcoin, based on adoption of competing technology are not competing technologies, but new technologies, like cell phones, for example, or the internet. And they say that the adoption of Bitcoin is more progressive and faster than those technologies. And incidentally, they have a price target by the year 2030 of Bitcoin of over US dollar, 1 million using that model. That’s okay. That’s one model. Here’s what I do know. Okay, credit, runs the world. And since I spent my life in credit markets, that’s what concerns me the most, the narrative is not actually broken at all. It’s just that the idiot algo traders on Wall Street are trading Bitcoin as a technology stock, when in fact, Bitcoin should be traded as insurance against the Fiat Ponzi. So I value Bitcoin using credit default swaps on sovereign nations. And I use that methodology to come up with an intrinsic value of Bitcoin that satisfies my sense of valuation, and I’m never one to go out and tell Wall Street, whether they’re right or wrong, because a price is a price. It’s honesty, it’s not manipulated, because that’s a good thing. It’s not manipulated, generally, the you know, interest rates are manipulated these days, but the price of Bitcoin is not manipulated. At that point, though, when does Wall Street realize that it’s actually insurance and in my opinion, it takes time, but there are progress points that the credit dies are starting to get it okay. The people that own 30 year treasury bonds right now, should understand that the debasing that’s going to take place in their principal value of their time zero investment in a 30 year treasury bond, they will never make their return on a pure IRR, if they include the debasement of the currency that is 100% Certain, because the Fed has no choice but to continue printing money. And this is where the circularity of the entire argument goes. So in the short run, the narrative of Bitcoin is broken, because most of Wall Street is too stupid to peel a layer of the onion back and realize the institutions that they work for are the ones that are the Ponzi, again, the guys that are trading Bitcoin at these commercial banks on the on the proprietary trading desks of these commercial banks. They’re the fools, but they have more money than all the Bitcoiners do they have more capital to deploy? And they trade it as a risk asset? I believe that’ll change over time but quite honestly, I don’t care. Because right now the world needs Bitcoin and the fact that the price is in multiple, many times higher than it is right now is a gift for the people that need it most, the people and countries that need to adopt Bitcoin at a cheap price. So you just, you know, I frequently say let’s talk in 20 years, I’m not gonna worry about the short run, Bitcoin will never die. Why? I just know that for sure. Why will the price go up and down 100%? It will. So you play it like a an odds maker, does as a risk manager does. And while I frequently say yeah, look $10,000 and lower is certainly in play. But so is 2 million in today’s dollars. Okay, that’s the asymmetry of the trade the most exciting opportunity I have Ever seen in 35 years of managing risk? Could I be wrong?Absolutely. I could be wrong, but the odds are with me. And the reality is the Fiat Ponzi cannot continue. Because why? Because it’s pure mathematics. And mathematics is the base layer of knowledge and the base layer of language. You want to compete against that you’re going to lose. So you can pretend there’s not a problem. But guess what, slowly, then suddenly, eventually, the Ponzi blows up.
Dan Weiskopf 15:30
So your view on the US dollar is that it has to start coming down?
Greg Foss 15:36
No, not at all. No because look, the DXY. So relative to what I should say, So relative to other fiets, the DXY is doing exactly what it should do right now, on a macro basis.
Dan Weiskopf 15:50
Greg Foss 15:50
I often say this fee it, sorry, well, first of all, the US dollar is like the best crack house on a crack Street, okay, like, look, they’re all melting ice cubes, right? They’re all just melting a different debt, different relative rates of decay. So you know, another Wall Street, I did sheets, the best looking horse at a glue factory like cheese, don’t you guys understand that if they trade relative to one another, but you compare it to something like your house. Now, your house didn’t ever actually go up in value people, I’m afraid to tell you it just went up in price because the unit of account, it’s used to measure the value of your house called the US dollar went down in value. So when you start measuring the US dollar against other non fiets, you’ll see why the US dollar has been debasing, since its inception, in the last 100 years, the US dollar has lost 85% of its purchasing power. Why? Because they keep creating more of them, diluting the supply of US dollars. If you guys can’t figure this out, I don’t have time to help you. You shouldn’t be sitting in a risk chair, you need to go back and learn grade 11 Mathematics of supply and demand. So yes, the DXY is the best horse, the best looking horse at a glue factory. Should it go up in value? Yeah, because every relative to other things are even worse than the US dollar because other countries have US dollar obligations that they need to pay. So they need to sell their own currency to buy US dollars to pay the obligations. It’s all circular. I mean, this is so simple. And yet people try and make it like it’s some sort of, you know, again, we’re trying to go back to that alchemy of the subprime mortgage crisis and all that it’s not even as difficult as the subprime mortgage crisis, for gosh sakes. But people lose context. They think, oh, the US dollar. Yeah, yeah, I get it. It is the strongest of a failing fear of a group of failing fiat currencies Make no mistake, the US Dollars debt, total debt to GDP, including unfunded obligations. So off balance sheet obligations, like Medicare and Medicaid, make it mathematically impossible that the US dollar will ever not debase. Okay, it’s written in mathematics that the value of the US dollar will continue to decline forever. If that is not true, you have to rewrite the rules of mathematics.
Dan Weiskopf 18:36
So is it fair to say what’s happening, the reason why Bitcoin has pulled back is we’ve got a liquidity crisis more than anything else. It’s across all markets, and Bitcoin is being held hostage.
Greg Foss 18:55
it’s correct, because right now it’s being traded as a risk asset. My thesis is that if the world ever understands that it’s insurance, then you should be running to it in times like this because it ensures against the acceleration of the debt spiral, but I’m not a big enough voice to go out there and teach all the wizards on Wall Street who incidentally, it’s programmed by 24 year old Ivy League -, that have no clue how the world actually works, but they know how to program algos and I can say that because I’m an Ivy League -, okay. The reality is when you graduate from school, you know, sweet FA and they put you in a chair to program these algos and you correlate those algos and you know what, as long as the algos keep making money or the correlation stands out, nothing’s going to change until a Blackrock or a fidelity takes on those algos and says, You know what sold to me so to me, so to me, Oh yeah, I’m finally up to my 1%holding of Bitcoin, like I want it to be because you idiot algo traders are shorting Bitcoin to me at a time when I need Bitcoin more than I I’ve never needed it in my life. And these are how things break meaning correlation models break. So, look, I’m not saying when it’s going to happen, and I can’t promise you it will ever happen. I’m just telling you, I believe the odds to be the greatest asymmetric opportunity I’ve ever seen full stop. And I guess I’ll say this. Sorry, I talked a lot, you know, when I got involved in Bitcoin in 2016, at a price of under $1,000 us for Bitcoin. I honestly believe the value of Bitcoin today. It’s a better risk adjusted opportunity today, at 20 times the price than it was four years ago. Why? Because so much or six years ago, rather, so much has happened in the world to ensure that there is no escape from the US debt spiral full stop.
Dan Weiskopf 20:50
I mean, listen, I hear where you’re coming from. I was amazed by the news of Blackrock, with their collaboration with Coinbase and that it didn’t rally Bitcoin.
Greg Foss 21:02
I think it did in the short run, but again, now then you get back to so let’s talk about other things that are holding the price of Bitcoin down. Besides the other macro, I’ll say, digital asset macro system, things that have happened to Bitcoin, this Luna Terra thing was an absolute calamity. Anybody that owns Luna and promoted Luna was part of the Fiat Ponzi. I’m calling you out. You guys know who you are Novo and rug, Paul, okay. At the end of the day, you guys promoted a Ponzi. It’s okay. But that $60 billion of token value or digital asset value that was destroyed because of Luna and Terra. That’s the same size as the Lehman Brothers crisis. Now, that’s only the equity side of Lehman Brothers that didn’t include the $900 billion of Lehman Brothers counterparty risk that was out there. The point is very simple, though. Bitcoin price fell because of that bitcoin price fell because of the Celsius shenanigans fraud, all the other bullshit that happens in the digital token community that Bitcoin has weathered, and now we’re weathering the merge the Ethereum merge, which is a dumpster fire, because again, it’s just recreated the Fiat Ponzi, but there’s correlation traders on Wall Street, they will trade Bitcoin in correlation with Aetherium. And as Aetherium, price goes down, and they’re long Aetherium, they don’t want to crystallize the loss on their theory. And so they short Bitcoin, as this hedge. And this is the funny thing, having sat in the pits with all of these so called really smart traders, there’s not that many smart traders on Wall Street, I can assure you of that. Or I will say, of if there’s smart ones, there’s far more very average and very poor traders on Wall Street. So this is the world we live in. I’m not sweating it. Yeah, again, Bitcoin could go under 10 grand, it could also go over 2 million grant a $2 million US per Bitcoin very quickly, when the world realizes the Fed no longer exists because the Fed is powerless. So I like to think of Bitcoin as a put on the Fed put, and all of these things can happen very quickly, then, and I’m not going out there to tell your clients, you need to own 100% Bitcoin, I’m just saying, look, a gift horse in the eyes and be thankful you can buy the best form of insurance I’ve ever seen in my life. No counterparty risk gamma, put on the Fed put, etc, etc. And you’re getting it at a very small portion of its intrinsic value. If you own zero Bitcoin, you are mathematically challenged. That’s fine. Because there’s lots of mathematically challenged people on Wall Street. I could call them out by name, but I won’t. The reality is Wall Street is what Wall Street is.
Dan Weiskopf 23:59
Can I challenge you a little bit on the whole analogy of insurance? Because yeah, you buy insurance, because it’s been proven mathematically, and it’s been proven as a hedge.
Greg Foss 24:14
Dan Weiskopf 24:16
But with Bitcoin, you don’t have enough history to make that claim.
Greg Foss 24:21
So this is the coolest thing. You’re right. And that’s why I am calling it insurance. But the world hasn’t embraced that as yet. But here’s the key thing. I’ll just throw it back at you. What is the alternative? Gold doesn’t work because you cannot audit the supply of gold. And any other centralized mechanism is at risk of the same shenanigans that any centralized company or organization is at risk of one person making the wrong decision at the expense of all their capital contributors or all their followers. The beautiful thing about Bitcoin And I think this is what a lot of people don’t understand is the decentralized nature of it. There is no CEO, there is no owner, there is no marketing department, there is only a network. And there is only the ability to mathematically recreate a distributed ledger to ensure the programmatic supply of Bitcoin at 21 million Bitcoin for ever and ever for all of the world to fight over, if you will. Now, people will say, well look at gold. And I’ll just say, Yeah, that’s fine. What is the true supply of gold? What is the growth rate of gold and nobody knows. It’s not algorithmic, or excuse me, it’s not pro. It’s not written in the probe protocol. And I play this little game that like I sort of like gold, I own a little bit. But gold, if the price of gold were to double overnight, let’s just say to $5,000 US per ounce, do you think the supply of gold would stay at about 2% annually? Not in your life? But the beautiful thing about Bitcoin? Is this agnostic to the price? Sorry, go ahead.
Dan Weiskopf 26:12
No, so that’s perfect, perfect transition there. So two things, you know about the mining space?Yes. Feel free to speak about Hut 8, there’s no problem about that is from my vantage point, Jamie has been on this series, by the way. And if bitcoin goes down to 10,000, hypothetically, yeah. What does that do? To a lot of miners?
Greg Foss 26:37
Boom, gone. See yah, it’s over. Bitcoin mining as a standalone business is a horrible business. I’m sorry, I can’t say it any other way. Because you don’t control your input costs, which is energy. And you don’t control your output price, which is Bitcoin. That’s a horrible business.
Dan Weiskopf 26:57
So what happens, to the system then without the miners?
Greg Foss 27:01
You get distressed buyers who are energy companies that are lapping up distressed Bitcoin miners, ASICs, and all the supply and they’re mining Bitcoin with their own energy that costs them 00. Okay, and this is the key to Bitcoin mining is controlling your energy costs. If you do not control your energy costs, you have a horrible business model. Okay, full stop. I cannot think of designing a worse business model than somebody who doesn’t control their output revenue and doesn’t control their input costs. You’re a sucker? Well, there’s lots of suckers that got brought public to the market, because they didn’t want people to buy Bitcoin at $10,000 a Bitcoin, but buying a $2 equity was so attractive because of price bias. Right. So I’ll just tell you that. Look, I have never been bullish on the miners. Okay, I don’t think I’ve ever made a bullish comment on Bitcoin mining ever from a valuation basis, what I do know is the business will come to be dominated by energy companies, energy companies whose marginal cost of energy is essentially zero. And in fact, if you’re in flare gas, where you are venting methane, and you can collect carbon credits, or you can collect ESG points, if you will, then it becomes even more beneficial to mine Bitcoin. So just understand that this is a world in transition, there was a time when mining Bitcoin at your home was so profitable, because the difficulty adjustment allowed you to do it on a graphics processing card right now, it’s not like that anymore. These are specialized ASICs, miners, there’s going to be a fire sale, there will be more bankruptcies in the Bitcoin mining space. I’m pretty excited about that, because that’s where I’ve spent my entire life is in distressed and high yield credit. And you just wait for this to come along. And guess what, that’s the way capitalism works creative destruction, it does not take away from the opportunity in Bitcoin the coin, I’m just, I just want to make sure people understand the risks they have taken in Bitcoin mining stocks, there’s a price for everything, I hope that Bitcoin doesn’t go to 10,000 bucks, but if it does, with Bitcoin at 10,000 bucks and the difficulty adjustment at all time highs, something’s gonna break and you better have some spare cash around to buy ASICs at cents on the dollar and to buy, you know, Bitcoin mining stocks that the you know, some of them might survive, and I hope all of them survive, but
Dan Weiskopf 29:44
Greg, I mean, I’m gonna have to cut you off on that, and that’s good dialogue, but, you know, but Capital Access helps these companies they can if they’re mining Bitcoin in unprofitable way, they can pull back. The difficulty level will come down. Right? Yeah, that’s my vision of that.
Greg Foss 30:10
I want to see here, here’s what you say we have to play probabilities. Okay. And I’m just saying if it goes to 10,000, I’m not saying it’s certain to go there. Let’s play the other side of the equation. What if it goes to 2 million? What if overnight, something happens in the system and Bitcoin gaps up to all time highs? Is Bitcoin mining a great business again? Yes. Well, I mean, it doesn’t mean you control that down. I’m not telling people that anyone who owns a bitcoin miner isn’t exposed to the same Asym asymmetry to the upside. I’m just telling you, though, that the asymmetry to the downside is worse for the miners due to this crazy thing. Look, if bitcoin price were only set because of the difficulty adjustment, and you’d see Bitcoin prices far higher right now, but it’s been impacted by other things in the market, which I mentioned the Celsius bankruptcy, the unraveling of Luna Tara, the fact that algos on Wall Street are trading Bitcoin as a risk asset. And then perhaps most importantly, lately, I don’t think anybody has calculated what the impact of the eth merge could be on Bitcoin if eath you know, starts trading at at 500 bucks US per coin versus the current price. Certainly a risk people need to understand it. I know you and I have talked about Bitcoin miners and there are a lot of cool opportunities amongst Bitcoin miners, including some of the subjects we talked about in the past Bitcoin miners being smart enough to go out and buy their own power assets. So they’re not held hostage by any utility, they can turn them off and on they can set tax them at will all of this stuff goes away when you control your own power assets. And that’s you know, again it’s it’s it’s a push pull relationship, something that changes over 14 years. Why because that’s all it Bitcoin spin around.
Dan Weiskopf 32:08
So tell us about your role at Validus by the way. Just put in context,
Greg Foss 32:13
Can you imagine if I’m the guy at Validus, that understands enough about energy because I have an engineering degree obviously, and I studying turbo machinery and that’s what we are we’re natural gas turbine generating peaker plants, but our peaker plants are on standby to allow for any excess demand on the grid in Ontario but we are able to sell our supply when in that we have to off takers like hot eight and that’s a good business for us. And when hot eight can lock in their cost of energy at a price it’s attractive for them then they go along and they make money on mining Bitcoin but the problem is if they lock in that power cost and the price of Bitcoin declines, it’s not as attractive as before that’s all I’m trying to say okay, and the most attractive cost for energy as you would imagine is zero. Okay? If for example we owned and we do own equipment that allows us to mine Bitcoin using flare gas and if we went into a Permian Basin field and the cost of methane was essentially zero when in fact, if we took that methane and captured it and burned it and ran it to, you know, cleansed it and ran it through turbines that allowed us to mined Bitcoin, the company that was flaring, it might say, Wow, I got an extra revenue stream and even better, I’m helping to clean the environment. So you can see how all of this works. And all this comes. But I need to stress with you again, I’m not knocking anybody that invested in Bitcoin mining, I am just saying there is a better business model that will evolve in my opinion over time, why more people get educated they see the risks of the business, if it was purely based on mining of Bitcoin in the absence of other let’s call it the digital ecosystem assets or Wall Street algos, trading it as a tech stock, it’d be a much simpler business. So I think it’s exciting that there will be opportunities to consolidate certainly the industry. So what is Validus power? We have about 1000 megawatts of natural gas peaker capacity, and it’s across four different plants in northern Ontario. And we have the you know, we have expansion plans using mobile turbines, steam generators, all the stuff that that make Bitcoin mining exciting, or you know, power exciting because the province of Ontario is in a difficult situation, because they are in the process of closing down one of their nuclear reactors and the province will be at a deficit of power to the tune of a couple of a couple of gigawatts. Okay, like easily a couple of gigawatts, this is bad for the economy, it’s bad for keeping industry in Ontario. So these are things that you always have to consider within the context of energy as a whole, the Bitcoin mining space as a, an off taker, and it’s exciting, because, you know, Bitcoin, in my opinion helps to balance the grid, it helps helps to stabilize the grid, and it actually creates revenue streams for energy companies that otherwise would not have access to those revenue streams.
Dan Weiskopf 35:40
See, we’re on the low end of of our historical allocation, the minors so okay, I get the challenges and I’ll be honest with you, I probably underestimated the complexity of the business, whether it’s regulation energy and price bitcoin price actually executing on building out a facility getting all hot, alright, easy. It is really difficult. So is Bitcoin mining cyclical? Or a growth business?
Greg Foss 36:14
That’s a great question. For now. It’s cyclical. I believe long term, it’s a huge growth business. Very simply, why? Okay, the miners, the CEOs of many of the miners, let’s be honest, they started in their parents basement, and they became an expert, because, you know, they did it in their parents basement. That doesn’t make for the CEO of a really good company, because they just don’t have the experience of how to manage financial risk operating risk. Now, it’s not to say everyone’s in that basket. But there were certainly, you know, that type of less experienced CEOs. And then secondly, any CEO that is really, really good would look at the Bitcoin business and say, Why would I risk my career going into that on uncertain environment, right, like, I mean, I’ve made my career and other big industry, I’m not going to transfer it as as up and coming industry and potentially, you know, tarnish my career. So there is the management experience side, there’s the financial risk side. So this is how I fit into the whole thing. Like I understand energy. But look, we’re an energy company first. And Bitcoin strategy is one of our strengths to help mitigate risks at the opportune times. And this is going to become a huge business, though a huge growth business as for example, Duke Energy, somehow weaves Bitcoin into their infrastructure, why to stabilize the grid, you know, to use Bitcoin to consume power when they have no off takers or not or no demand and then turn off the Bitcoin miners as people come home from work, and they power up their air conditioners or their stoves and ovens and stuff like that, you know, how the grid works. It’s all about baseload management. So Bitcoin will pay play an extremely important role in baseload management for utilities globally. Another thing I’m going to throw out and this just was incidentally, valid as power is owned by an, you know, majority owned by the indigenous in Canada, okay. The indigenous separation of state and money resonates with them a little bit. More than it does with other, let’s say, components or counterparties in the market. So it was just announced that there’s an indigenous tribe in Quebec, it’s exploring mining, Bitcoin, all of these things are so exciting. So Bitcoin mining growth business where though not in your parents basement, not in a, you know, I call it a funnel or an hourglass where you don’t control your energy, and you don’t control your distribution, I would love it to be a vertical slice where from the molecule in the ground, you mined Bitcoin? And then you distribute it to the black rocks of the world that are going to need Bitcoin for their ETF platforms, because all of their clients are demanding exposure to Bitcoin.
Dan Weiskopf 39:04
But, I mean, I’m coming from the US perspective, which may be different than Canadian perspective. I don’t see energy companies coming out, including Duke. Yeah, and buying up the minors as a business because from a regulatory standpoint, it would be a nightmare for that.
Greg Foss 39:24
It’s interesting. So you know, non regulated areas, certainly, I throw out Duke because I know they’ve studied it. Well, that I better not, you know, you can retract that a little bit companies like Duke, we’re in touch with these people all of the time. Okay. Some of the biggest excitement, in my opinion is within nuclear companies. Okay? Because when you construct a nuclear reactor, you need about a 20 year timeframe. In order to get paid back over there capital investment at times zero because of the expense of the Corps and all that, well, if you can put nuclear, excuse me a Bitcoin mining as part of a revenue stream, it vastly reduces the payoff time of your ROI. And here’s a little story for you. Yeah, you live in the US? Well, Canada’s one of Canada’s nuclear reactors that lives in the Bruce Peninsula in Ontario, there are times of day that we actually pay Americans to take our electricity, I swear to god, okay. Not only is the price zero, we actually pay you guys to take our electricity. Well, you don’t have to be a rocket scientist to figure out, it would be smarter to bind Bitcoin with that excess energy than it would be to pay our friends south of the border to take our electricity. Okay. This is where Bitcoin comes in. This is the excitement. Yeah, it doesn’t require a strategist, well, maybe it requires someone who’s sat in a risk chair for 30 years to understand that markets are cyclical that sometimes you have a Fed President or chairman, Jerome Powell, who actually has never sat in his chair and this could be a topic of an incomplete other subject. He has no clue what he’s doing. Okay. And that’s the biggest risk to the world right now. All risks, our assets are balancing on the head of a pin. Because Jerome Powell is a lawyer who has actually never sat in a risk chair and manage risk. We are in big trouble because of the shenanigans of a fed. That was too loose a policy. Now they’re tightening into a recession risking a global depression. I don’t know how else to say it.
Dan Weiskopf 41:40
Just to put everything into context would one consider you a maximalist?
Greg Foss 41:44
I am a freedom maximalist. So I look at Bitcoin as being the only truly decentralized digital asset out there. So by that definition, I think I probably have a little bit of a Bitcoin maximalist hint to me, but it’s fine. But here’s the worst, the better way for me to say it. Okay. I’m a fit minimalist. Okay. Is the biggest Ponzi I’ve ever seen in my life. I tried to lay that out. And so do I also own gold? Yeah, I do. Do I own silver? Yeah, I do. Do I own real estate? Yeah, I do. Do I own bonds?Now? I’m not that bullish on bonds. And I’ve been a 30 year bond trader, because for the first time in the last 40 years, the bond market and the equity markets are moving down in lockstep. Why very simply because interest rates have finally turned from being a 14% level when I first started trading risks. They went down to under 1%. I’m talking the US 10 year and now they’re at three and a half percent. And if the market is supposed to believe Jerome Powell, you know, there’s another two and a half at least percent. This is what Ray Dalio is calling for four and a half percent on the US tenure will look even if rates stabilize at three and a half percent in the US tenure. The funny thing is, firstly, inflation is still twice that high. And the more important thing is you’re going to lose money on a debasement of a currency basis. us why? Because the only way to solve the US debt spiral is to print more money. Full stop, the USA is not even covering its interest expense one time. And if he was a corporate rated bond, the USA would be rated Triple C. The only reason the USA maintains a high credit rating is the ability to print money. And yes, they will print money, which means the money that’s already out there loses its purchasing power like it has for the last 100 years. So owning bonds without considering the debasement of your principal over time is a mug’s game. But every single pension plan that’s 6040 out there owns bonds. Very interesting that sorry, I was just gonna say very interesting that Mr. Dalio who made his career on the risk parity on the risk parity spectrum has gone negative on bonds. I think he’s right, by the way, I’m not going to argue with him. But on the other side is Jeffrey gunlock. Who thinks that bonds are a buyer right now? I’m not going to opine one way or the other. I just like a commodity called Bitcoin that I think can go to $2 million a Bitcoin and the markets only telling me I have a 1% chance of being right. And that’s why I love Bitcoin.
Dan Weiskopf 44:39
Commodity insurance, technology. So here’s the question, right? What is the one thing that you, so I’m going back to my like wildcard questions here. What is the one thing people are missing today about Bitcoin? That they’ll look back and say it was so obvious?
Greg Foss 45:01
Well, if I could run through the math with you real quickly, okay, as a new asset that I think has a chance of becoming the global reserve asset of the world, not currency, global reserve assets supplanting US Treasuries, is that the global total global financial assets are US dollar $900 trillion, and that includes 400 trillion of debt, okay. 300 trillion of real estate, about 100 trillion of equities, and another 100 trillion of commodities currencies, included in there as gold, which is about 10 trillion, fine art, all of that stuff adds up to 900 trillion US dollars. Okay. I think Bitcoin, ultimately, when it becomes global reserve asset, we’ll get 5% of that market, at least, but we’ll start with 5% 5% of 900 trillion, is 45,000,000,000,040 5 trillion divided by 21 million bitcoin is over $2 million per Bitcoin in today’s dollars. Okay. So I have a target, not a limit a target of 2 million bucks. And it’s currently trading at $20,000. And people are worried it’s going to $10,000. So they’re not buying it here. But even at $20,000, if you take 20,000 and you divide it by 2 million, that’s 1%. I’m an odds guy, I play probabilities, the market is telling me I have a 1%chance of being right for my target. Because we’re measuring an insane today’s dollars. And I’m like, Look, I’m not 100% certain I am 100%, certain fiat money will be based, that’s only math, I’m not 100% certain that Bitcoin attains a 5% share of global financial assets. But that being said, I’m way more certain than 1%. Okay, so I feel like I’ve gone and watched the horse train, and I know the lay the odds that the horse track is laying laying against my pony. And I’m like, Dude, you haven’t watched this horse train? I think I know better. And I think the odds should be better than 99 to one. And I’m just saying, that’s why I own Bitcoin as an asymmetric trade opportunity, but I don’t own 100% in Bitcoin, that would be irresponsible. I am telling every risk manager out there though, if you own zero Bitcoin, you are taking excessive risk relative to whether you have relative to having a proper portfolio allocation, that portfolio allocation is up to you. But let’s say it’s 5% Never forget that if you only have 5% of in Bitcoin, you still have 95% in other assets that you need to worry about way more than Bitcoin. And it’s like people lose their mind right? Then they’re like, oh my god, I can’t sleep at night because I have 5% in Bitcoin, stop it. You knuckleheads, you have 95% in other stuff that is balancing on the head of a pin as well. And it’s hard to train people to understand this. You and I have done this professionally. Managing money is a horrible profession. Horrible, horrible, horrible profession. Congrats on doing it, because I did it for 30 years and I couldn’t get out. You know, I without losing my sanity. I guess I had to get out. So here’s what people look back on. What are they missing? The center realization the first time in history, you have an auditable ledger that is not controlled by anybody. So beautiful. That is the key.
Dan Weiskopf 48:34
Greg, you know, I’m gonna push back on something. I’m with you on the decentralization.
Greg Foss 48:39
Dan Weiskopf 48:40
But the reason why, at some point, you know, we might pivot more towards the miners is that the business that’s managed by the larger miners, they’re survivors is moat like.
Greg Foss 48:53
Okay, no, I I’m sorry, if I came across as as crapping on the Bitcoin mining business, versus more importantly, I’m trying to crap on the meth heads, okay, this whole thing where they recreated a fiat system under the guise of a metallic Vitalik Buterin as some boy genius, who in in history will look back on and saying he was no smarter than Jerome Powell, which is not saying much, okay, because at the end of the day, none of them are really qualified to sit in that chair. I will just say this though, the thing you have to focus on is the decentralization. So everybody gets into digital assets, and then they expand and they diversify beyond Bitcoin, which what I’m trying to say is, in hindsight, focus on Bitcoin. It’s the only thing that solves the Fiat Ponzi, in my opinion, the only digital asset that solves the Fiat Ponzi and all of the other things, recreate the Fiat Ponzi. So Luna, Terra was exactly the Fiat Ponzi recreated debt, and then you buy back debt and all this thing worth it. Pro, an algorithmic stable coin, what a bunch of malarkey yet it was pitched by guys like Novogratz, and people follow him into this trade. And it’s just a real shame that they don’t do their math, they don’t understand that. The Fear Fear is the Ponzi and you need to hedge yourself against that reality. And decentralization is key. As soon as you have centralization, you have the chance that someone could change the protocol and change essentially the rules of the game.
Dan Weiskopf 50:30
So Greg, the second wildcard question that I always ask of course, is what industries are going to be most affected by the blockchain?
Greg Foss 50:39
And we covered it, we covered it right now. Excuse me energy, okay, energy because I thought guys I am the only I’m, I am a fiat minimalist, and I am a Bitcoin Maxy and I’ve lost money, and I’ve made some money on the altcoins. But I’m not focused on those things anymore, because you cannot control that garbage Okay. Rightly so, you cannot control Bitcoin, but nobody can control Bitcoin, whereas other people can always control the garbage called hacks the garbage called XRP, the garbage called, in my unfortunate experience, perhaps sent the hate mail to Dan not to me, the Ethereum merge, okay, that thing is a dumpster fire, because you just recreated the fiat system, I can’t say in and out of the way. So what’s going to be the most important thing that is impacted? Energy. Why? Because energy is proof of work. And bitcoin is proof of work. And Ethereum is now proof of stake. And there is the difference.
Dan Weiskopf 51:45
This has been so much fun, Greg. And we’ve gone back and forth, which I frankly don’t usually get a chance to do. But I enjoyed that part of our discussion. I hope you did as well.
Greg Foss 51:56
100%, sir, and I look, I know you and I could sit down for eight hours and we could recreate scenarios. And incidentally, there’s going to be huge opportunities under the guise of what I call a Bitcoin Opportunities Fund. Okay, whether that’s shorting Western Union, because Western Union is the blockbuster of the payment rail system right now, or whether it’s taking strategic shorts and Visa and MasterCard because Bitcoin and the Lightning Network will disintermediate those things, or whether it’s about buying El Salvador debt, because El Salvador debt is so stupid cheap right now. Under the guise of a Bitcoin Opportunities Fund, there should be lots of money there to buy distressed ASICs, miners, there should be lots of money there to fund Bitcoin mining companies at the right time and at the right price. I look forward to Wall Street developing these pools of capital, because Bitcoin is the most exciting technology I have ever seen. And most importantly, the best asymmetric trade opportunity I have seen in over 35 years of managing risk. It’s that simple. Do expected values probability analysis, don’t overthink things. If something is trading at 20,000 bucks and it should be trading far higher. Don’t try and get fancy and buy it down at 15,000 bucks. Just dollar cost average in both directions we’ll talk in 20 years.
Dan Weiskopf 53:25
Greg, thank you so much before I let you go, how can people find out more about you and what you do and looking glass education
Greg Foss 53:35
Thanks for bringing that up. Yeah Looking Glass education, a free education platform that I’m involved with to try and teach financial literacy to people that otherwise don’t learn it in school because I never learned it at Cornell and Ivy League such a school not Ivy League institution, I learned all about the Latin American debt crisis. I just didn’t learn that the banks were 25 times levered to their equity risk. And my finance professor Maureen O’Hara at Cornell could not possibly have looked me in the eyes and said, A fosse I wouldn’t go to work for manufacturers Hanover, they’re bankrupt. Like, you can’t say that as a professor, right? So we try and do this. So yeah, looking glass education.com Or at Looking Glass edu on Twitter, a great resource, but my Twitter handle quite simply, you can send hate mail, I’m good with it. I try and respond to, you know, legitimate legitimate concerns. Excuse me, at Foss, Greg Foss. So F-O-S-S-G-R-E,-G-F-O–S-S, but my biggest thing is looking glass education. I got five partners, we’re doing it for free. And the cool thing is, it’s been translated into over 10 languages right now, including into El Salvador, where as you know, El Salvador has adopted Bitcoin as legal tender. So lots of really cool things happening. I have three kids, Dan, I’m not sure how many you have. I’m not doing this for myself, you and I have probably done pretty well on Wall Street, by you know, working in the Fiat Ponzi. I’m trying to actually give back now and make the world a better place for my kids than it was when I came into the world. And we’re on the wrong path with the Jerome powers of the world. You know, Janet Yellen, who probably know the math, but they’re gaslighting us that, you know, this Ponzi can continue. I’m not sure how long it will continue for it. But yes, it can continue. It’s just going to get worse though. That’s the problem. So protect yourself. Educate your kids, I guess hug your kids. That’s the most important thing. And you know, I look forward to Yeah, let’s have them because that’s what we’re doing this for. But look, I look forward to talking to you. You’re a very smart risk manager. You have other people in your firms, they have opposing views. I’m good with it. I listened to opposing views. If the thesis changes, I, Excuse me, if the information changes, I promise you, I’ll change my thesis. But until then, I go with the fastest horse at the track. And as Paul Tudor Jones says, Bitcoin is the fastest horse at the track. You got to look at it over the long term, though, and look at all the things it’s weathered and be pretty happy that it has weathered all of these storms, and tick tock next block, every 10 minutes, a decentralized, beautiful proof of proof of work. Ledger is confirmed. I’ve never been more excited, even though I’ve never been probably more worried about the financial risk markets since the great financial crisis. We are up against it right now. It is ugly. Can’t say it any other way.
Dan Weiskopf 56:41
Greg, thanks very much. We’ll keep the dialogue going.
Greg Foss 56:46
I really appreciate you having me. And sorry, it took me so long to get on here. You’re a very gracious host, because I certainly wasn’t responding to your invites as expeditiously as I should have. I’ve been on some trips. I’m going to Europe though. Talking at the Bitcoin conferences over there. I look forward to talking to some big asset managers, which I do regularly. But more importantly, I’m talking to governments, and that is the exciting thing. If you ever get a government to embrace this, it’s their only solution to their own Fiat Ponzi. That’s the exciting thing. God bless America. Thank you so much.
Dan Weiskopf 57:24
Thanks Greg, bye.
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