YouSaid · the spoken record

Greg Foss

lines on the record: 122
first: 2021-04-14
most recent: 2021-04-14
sittings or episodes: 1
sources: podcast

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“Or contagion. And hey, I own turkey. I've written default insurance on turkey, so I better hedge somehow. And I'm going to do it a Texas hedge, so I'm going to run out and start buying because I've sold insurance. I need to buy insurance on and then I'll buy it on Russia. And then I'll run around and tell everybody since I own Russian default insurance, as Warren Buffett says. Well, you buy insurance on someone else's house and then you go and try and light his house on fire. There's a little bit truth to that, but really it's nothing more than contagion. It's like the domino effects. It's about hedging your own risk. And the guys that are selling right now, the guys that are selling protection on the United States at 10 basis points, trust me when I tell you, they're not using one-to-one leverage, okay? They're using probably 10 to 1 leverage. They're using that leverage and that is a way of turning it into 100 basis points annualized return. And then you.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“You look at that, so go a little bit to the right more, you'll see the probability of default, okay? That's a pretty neat line. I don't want to get too granular with everybody, but it shows actually the probability of default based on a 40%. Recovery rate, okay, 40% just happens to be a number that credit traders gravitate to as a recovery value of there's nothing scientific about it, but using 40% recovery rate, it gives the different levels or the different probabilities of default. And if you look all the way down even to Turkey, it's still under a 10%, if I'm not mistaken, a 10% probability of default. What if you start getting up around 25%? That's when things really start getting exciting, by the way. When I say exciting, it means, you know,”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Bitcoin is digital energy. It makes tons of sense to me that oil and natural gas should be priced in Bitcoin. I think that Russia would much prefer to have Bitcoin than US dollars. And you're seeing that they're doing some deals with the Chinese and in Yuan and all these things. Note on that chart, Preston, where Russia trades FCS. Russia's a triple B. Did this rated credit credit credit c Very important, very, very important, okay? This is not a drill, you guys. These are real live insurance rates for sovereign default.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“The expression right slowly, then suddenly one of the things I want to do, Canada, Northern Ontario and Canada have some really important gold mines and some towns are built up on the gold industry. I firmly believe that some of these gold miners with excess electricity power should start mining Bitcoin to hedge their gold position. And if you believe in a store of value and yes, for 5,000 years, gold was and was the go-to store of value. Well, it's going to be subsumed by Bitcoin because $10 trillion for Bitcoin is barely a stopping point, okay? Bitcoin is going to many times higher than $10 trillion in market cap. It's just an easy calculation as a function of total global financial assets and what level Bitcoin will hold of those total global financial assets. And it's interesting thing, I know I'm rambling a bit, but I believe that Bitcoin becomes the de facto global reserve asset when energy is priced in Bitcoin, which is totally natural since”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Or 2% annualized. Is it going to happen? I don't know. Technology is pretty darn smart, but there is nothing about gold that is better that makes gold better than Bitcoin. Nothing. You cannot tell me one characteristic of gold apart from filling your teeth and a little bit of electronics. Okay. And even then, it's a bit of a stretch.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Respectfully, I'm going to have to say I'm not sure. I'm not a gold expert by any means. And do you have any ideas? I believe that Bitcoin will absolutely overtake the market cap of gold. I believe in the hard asset value of gold. But I also know that gold is not a fixed supply. I know that it's not divisible. It's not transferable. It's not portable. It's not everything that Bitcoin is. And therefore, I think it's just a matter of time before Bitcoin overtakes the market cap of gold. It's a better form of a store of value. Is gold a horrible store of value? No, I don't think it is. But that being said, and I always point this out and people are like, okay, stop talking. There's 20 million pounds of gold and seawater. I think that technology someday will be able to remove gold efficiently from seawater. If that happens, you know, all of a sudden this 2% growth rate in gold is no 2% annual growth rate in gold.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Or until we're not, right? Because this is so dangerous. This is so dangerous. Like, I'm so concerned for my kids. I'm so concerned for people that don't understand that real workings of the credit markets. And that's just about every politician in Canada, except for, you know, there's a famous guy Pierre Polyneux. Anyway, him and Pierre Richard need to talk because they speak the same language and they're finally getting it, but people turn him off because he's like, oh, he's anti social programs. And hey, I support social programs as long as we can pay for them. And if we can't, it's going to bring everybody down”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Isn't it crazy And yet we have a higher rating. So the SP gives us a AAA rating and the Prime Minister of Canada can run around and say, guys, we're still AAA. And guess what? The insurance markets are saying, no, no, you're way closer than single A. But he doesn't understand that.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And the market was telling you, hey guys, there's smoke, okay? The markets are truth. Rating agencies are so, so there's conflicts everywhere. The issuer pays for the rating. I mean, it's just guys. It's so antiquated. You got to get off of this. But again, they set the rules.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Would you wrap fish in an SP report? I wouldn't, okay. It's an opinion by a credit rating analyst that wants to work on Wall Street. And the best way he can work on Wall Street is give ratings to Goldman Sachs underwritings to help Goldman Sachs trade their or sell their product. Okay. All this mortgage-backed security structures and all these alchemy that these guys came up with, they were being rated by credit rating analysts that wanted to work for the people that were coming to them for credit ratings. Okay, it's so conflicted. It is just so wrong and yet these are what sets the investment guidelines of some of the biggest pension funds in the world. So you're correctly viewing this. You're calling out that the rating makes no sense relative to what the market is charging them. And guess what? In CDS land in 2006 and 2007, neither did those.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Please mail my prime minister. I know he failed math, okay? Justin Trudeau is not good at math. He said budgets will balance themselves. Hey, what? They don't budget themselves and the market is telling you we are much closer to a single A credit rating. Notice where Portugal, notice where Italy trades. Canada is not backed by this ECB. Canada only has the Bank of Canada. We're in big trouble.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“I don't even want to know where Canada is. I'm going to point Canada out because I'm so concerned about my home country here. Canada actually has a higher credit rating than the United States, according to S&P. We are still AAA and the United States is AA plus. Yet the United States trades at 10 basis points in five-year CDS, and Canada trades at close to 40.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Let's not stop there. I need to stress to you imagine if the United States goes to 50 basis points. Okay, the rest of the world is unraveling everywhere. Okay. Because the US at 50 means Canada.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“That my credit curve is too steep or too flat. At the end of the day, you take that number, you get a number for the United States, you add all the other G20 countries onto it, you divide it by 21 million coins, and that's what each coin is worth. Very simple. And it's based on a fluid functioning market in risk that changes daily. And again, I'll tell you, as those rates widen to reflect increased credit risk, which is a function of inflation expectations as well. The intrinsic value of Bitcoin will increase in lockstep. And where can it go to? I'll just say a lot higher. And are my numbers similar to what Michael Saylor's numbers are? In all due respect, his numbers are very good targets that I believe in as well.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“contagion in the world tends to erupt. I adjusted them from five years to what I believe to be an appropriate duration for the unfunded and funded obligations of the countries. And I came up with a simple mathematical cumulative basket of what Bitcoin, as I describe it as the anti-fiat would be worth. So let's watch, because someone asked us to do this, I'll walk through it really quickly with the United States. United States government owes $30 trillion worth of debt right now and they have $160 trillion in unfunded Medicare and Medicaid obligations. Okay, so that's $190 trillion. Their swap, CDS, five-year, is 10 basis points. You adjust it to a term which I viewed to be between 10 and 15 years as the appropriate duration of those unfunded obligations, you get a number and you can just draw a credit curve and you can argue with”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“These are traded by sophisticated global players. And Turkey's in the lowest rung. And then in the top rungs are all the G7 nations, including the US, which trades at 10 basis points. 10 basis points for five years, again, is only $10,000 a year to ensure $10 million of U.S. debt against default. But I'll remind you, in 2006, Lehman Brothers was trading for six basis points. Six basis points or $6,000 a year to ensure $10 million of debt. Three years later, that insurance was worth $6 million. Hey, that's a pretty good insurance policy to own. The problem is if you owned that insurance policy from someone like Bear Stearns, you're worried that, oh my God, this insurance company that I bought it from called Bear Stearns may itself default. Okay. So you have to run out and buy insurance on Bear Stearns. And this is called counterparty risk. And this is why the”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Well, as municipal states, these are very well defined insurance products, and they call it insurance, but just think of it as a quasi-bond. It's a derivative. It's a bond-like derivative. This CDS also trades on sovereigns. Now, I mentioned to you that the 2008-2009 financial crisis only transferred risk from the financial system onto the risk of the governments. Therefore, I believe that you need to look at the credit default swap rates of governments and evaluate their relative potential for default. And there's, you know, what's the biggest one right now? Well, Turkey, Turkey is a G20 nation that is trading at about 450 basis points in the five-year term. That means it costs you $450,000 a year to ensure $10 million of Turkish debt against default. There's all very efficient pricing.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“CDS. So, again, credit default swaps are a brilliant invention in the credit markets. They're not that old. I'm going to say they're 10 years old. Hold on, no. They got to be more than that because they caused, you know, they were the crux of a lot of the 2008-2009 unraveling. But let's say they're 15 years old. They were invented at a JPMorgan early 2000s in the US as a way of creating credit curves for companies that didn't have outstanding obligations at each term in front end of the structure. So a typical CDS insurance contract is just like a credit spread is issued in a five-year term and each 90 days there's a new issue. So the five-year term goes to four and three quarters, four and a half, four and a quarter, all the way down. And there's a very efficient credit curve for the top credits in the US in both corporate and sovereigns.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Opinion, it's way more about the asymmetric trait opportunity. You know, I believe that Bitcoin at $50 or $60,000 is still a rounding error based on where it can go. I mentioned to you I calculated the value I think that Bitcoin has intrinsic value based on the credit default swap market. That number is, in my opinion, at least $100,000 a coin right now based on credit default swap spreads. It's between $110,000 and $160,000 per coin right now, depending on CDS spreads. And as those spreads widen, the intrinsic value of Bitcoin will just increase. Okay. Not to mention the fact that it can increase on a whole bunch of other metrics as well, supply and demand and network value, et cetera.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“I agree with that again, Preston, it's all about a risk return calculation, an asset is an asset, is an asset. It doesn't matter whether it's digital or physical. I purely believe that the mass mutual is a very important leader in the space right now. You know, they've made two investments. One, they own Bitcoin, but the more important investment they've made, I think, is within NYDIG, NIDIG, and their funding for round two financing. You know, they were involved with Soros Morgan Stanley, New York Life, Mass Mutual, and I'm missing one of them. But the point is these are really, really important players. So, yeah, all of these players, insurance, pension funds, you know, Calpers, Calpers is the largest, if not the largest pension plan in North America. It's certainly close. We have some massive pension plans in Canada that should be involved in Bitcoin. Why? You know, you can talk about the non-correlated returns, but in my...”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“It increases the universe of potential buyers because it's big enough for them to get a line awaiting in that line that can meaningfully impact their performance of their overall portfolio. It's that simple. It's about allocating people's time as well as being able to get the performance out of that line. Because if you say, hey, I can't own more than 10% of an asset, imagine you're dealing with a company. Imagine if you're dealing with a company that's only got a market cap of $10 billion. Well, if you can only own 10% of that company, that's a $1 billion allocation. And what if you're $100 billion company? Well, that restricts you to owning 1% of that company. Well, there's a lot of companies. They're way smaller than $10 billion. So, you know, there again is how the system just differentiates it doesn't allow big funds to get into.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Agree with that. It's like you're let's make the math easy. And let's say you have a hundred billion dollars, you're managing $100 billion of assets all across the spectrum, equities and bonds. And that $100 billion asset manager probably has it most, let's make the math real easy, 25 analysts, right? So each analyst needs to cover essentially 4% of the portfolio, all right, which means each analyst can effectively cover really well they can effectively cover 10 companies, okay? But let's say that 20 companies. The point is in order for 100 billion asset manager to get a weighting in their portfolio that justifies the time that the analyst will spend on it, as well as meaningfully impact the performance on their portfolio, assets have to be a certain size to invest in them. Markets have to be a certain size. And as the market for Bitcoin grows,”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Guys are one trillion dollar guys, so their whole fund is about the size of the entire Bitcoin market cap. Say to Canadians they're having trouble getting involved in Bitcoin at a trillion dollar market cap, that Bitcoin is worth more than the entire Canadian banking system, the market cap of the entire Canadian banking system combined. And the flip side of that is it's almost worth as much as the US market cap of US banks. Are you telling me that market's not big enough for you to get involved in? I think you're mistaken. And I think the number of people that think they've missed the train right now, I argue that it's still in the early innings and it's actually less risky to get involved now than it was when people were getting involved three and four years ago on a risk return basis Bitcoin is less risky now than it was three or four years ago.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Are absolutely cornered. They have these prescribed defined benefit pension plans that will never meet their obligations. They say it's a funded rate of 8%. Well, they're trying to come down to 7% or 6%. As soon as they do that, you know they become, oh, we're fully funded at an 8% prescribed rate of return, but at 6%, we're way underfunded. And that's what happens. So you're saying, okay, so who bears the brunt of this? It's even going to be worse if people who are used to earning capital gains in bonds now get capital losses because interest rates start rising and they need alternative asset classes. So all of this blends very nicely with the conclusion that we all know we're going to come up with is they need to hedge with Bitcoin. Okay. Only math. Let's not get overthink it. And Mr. Dalio, once again, you understand it. And I know you're, let's just say he's one trillion. Okay, because Fidelity and the...”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Be generous and say it's a three percent. Okay, because U.S. 10 years 170, a high yield for come up with a number of 3%. So on 40% of their portfolio, they're earning 3% without defaults. That's not even including any defaults. That's assuming that that 3% is certainty. They have a prescribed rate of return of 8%, right? That's for their defined benefit pension plans. Well, if you're only earning 3% on 40% of your portfolio, That's 1.2% coming from there. That means that your 60%, which is equities, needs to make, help me with the math 6.8%. So 6.8% on 60% means you need equity markets to grow at something like 12% a year for the rest of time, just for you to make your prescribed bogey of 8%. That's why these pension plans.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“You're so bright, you're just overthinking it by a half. You're too smart by a half, Mr. Dalio. That's a bond term. Okay. He knows it's worth 85. The market right now is 40 to 42, and he's bidding 41.5, and he misses the trade at 42, even though he knows it's worth 85. Okay, it's called being too smart by a half. So don't be too smart by a half, Mr. Dalio. Bitcoin is friggin' cheap right now. Friggin cheap. So what is he saying? Well, he's absolutely correct. There are going to be a lot of pain. And who's going to bear the brunt of this pain? In your traditional 60, 40 portfolio, if you're calpers, you have 40% of your portfolio, at least 40%, but we use the 60, 40, 60% equity is 40% bonds. 40% bonds yielding right now, let's say their average yield if you include high yield in all the fixed income instruments they have let's”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“So I have enormous respect for Mr. Dalio. It's funny, he's 99% of the way there. I just think he thinks that he's missed the Bitcoin train in that. So that's an aside, okay? Ray, you haven't missed it, okay?”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“You guys, you need to understand that that's called a debt spiral. And we are in one and you cannot get out of it. You are 100% certain to be debased because they need to continue to print money to solve this debt spiral.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Is four times as big if your numerator is four times as big as your denominator. And the average coupon on that debt, you pick a number. I'm going to say let's say it's 3%. I think that number is low, but debt has a coupon. It needs to be paid. That means that your numerator, right, Preston is growing at 12% just organically. That doesn't even include any of the deficit funding that is going on right now. If your numerator is growing at 12%, your denominator, which is global GDP, needs to grow at 12% over time forever to keep up with your numerator, not including any of this deficit funding. It's impossible. Global GDP will not grow at 12%. Therefore, the currency needs the solve the, and I term it, the error term. It needs to solve that equation where you can continue to grow your debt by printing more money. Simple math.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And people will say the US, it's the quintessential risk free borrower. And I'll say it was until they lost control of their borrowing habits. And if I may, there's some really good questions that came up, okay, that you said, hey, I'm interviewing FOSS. You guys have any questions. And at this point, I want to, there was a really good question by somebody who asked me to explain why is it a certainty that affiats are going to debase? And it's this simple, okay, guys. Ladies and gentlemen. The total debt in the world to total global GDP is over four times, but let's just use four as the total debt in the numerator, okay? Four multiple of the GDP, which is essentially your tax base, okay? Now it's total debt. It includes corporate debt and everything, but interest expense is tax deductible. So you need to include total debt in your numerator against your tax base in the denominator.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“It can go up for two reasons, and we mentioned them one, it could be inflation expectations, and the other one is just like a high yield market. Hey, you're more risky. I need to be paid more to lend you money.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“So true, yeah, which is well, it's and it's but it's the way it works, right? And confidence and when you lose that confidence contagion is such a it happens so quickly. So I often say, look, you need to buy your insurance before the calamity hits, right? You don't try and buy insurance when your houses are fire insurance when your house is already burning. You need to buy that fire insurance before it's burning. And this leads to my belief that Bitcoin is that perfect. I call it an anti-fiat, okay? And I can give tremendous comfort in the fact that Bitcoin is equivalent to a basket. It's equivalent to default insurance on a basket of fiat credit. Okay. And it's that simple and you need to own Bitcoin as a hedge to the regular calamities of the fiat system.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“You could argue it's 90 ish trillion. I think that's a bit of a stretch, but it's, yeah, it's at least three to four times. Yeah, three to four times. But most importantly, most importantly, don't forget. Leverage in the system. The system is leveraged 25 times. 25 times. That's your common bank is leveraged 25 times to its loans. You have $4 of equity capital for every hundred dollars of loans. Well, it's the way banking has worked. And Ford pointed this out. Henry Ford pointed this out in the early 1900s. I believe he said something like, if American citizens understood the way the banking systems were, they wouldn't put any money in the banks.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And they sometimes have no idea. There's poor guys, they're out there buying common stock when the CDS, the credit default swap guys are buying puts on the common stock because they need to buy insurance. And the equity market is going, why is this getting beaten up? I have no idea. And guess what? It's being driven by the credit markets, you know, and you have no idea. And you're just being used as a whipping boy.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“That's the scary part because there is a real disconnect between equity risk taking and credit market understanding. Okay, equity risk guys, they are just like so bullled up. They're emotional. Their trees grow to the moon. You know, you got to own equities, growth this, and sometimes they're not wrong, but sometimes they're so wrong. And it always generally starts with their lack of understanding of the credit markets. I say this often. I say credit markets are a dog. and the equity markets are its tail and that tail gets whipped around”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“In the other currencies that are supported by the IMF, right? It's so dangerous you see it coming, Preston. The equity markets, they frequently don't see it. They just say, oh, well, the Fed cut rates, so everything must be good.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And something dollars at that time. And they cut rates, they encouraged the Fed to cut rates, and equity markets went to a new all-time high. And credit markets did not budge. They're like, this doesn't solve anything. And it still started gurgling. And even though equity markets went to an all-time high, three months later in October, it really started to unravel again. And Bear Stern's stock went from 120 bucks to in 2008, I think it was 2008, maybe early 2009 when JP Morgan bought it for two bucks a share. And that's the danger. It's always the plumbing of the financial system. Now, I would extend that to Argentina and I would say, yes, of course, it happens in Argentina, but if it happens in the biggest, most developed U.S.-centric financial markets, then, yeah, it happens so much more quickly in the tertiary markets like the low G20.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Aren't raising concerns. There's flags raised. It's like, oh, all of a sudden, I don't trust the counterparty ABC as much as I did. So we're not going to be doing business with them anymore. And the funding rates start increasing. So do you remember in 2007? This was before the credit crisis actually happened. It was the summer of 2007. Bear Stearns was in trouble. Jim Kramer on a very slow afternoon in the middle of August saw it on TV at his rant. You remember? And he says, they don't understand. The Fed is asleep at the wheel and they have no idea how bad it is. Do you remember in the poor girl, she's no longer on CMB? She's looking, Jim. And he lost his mind. Well, he did. He was part of the community that convinced the Fed to respond to the gurgling that was in the financial system that the credit markets because of Bear Stearns, because of subprime pre-warnings, because of Lehman Brothers. Bear Stearns stock was still at a”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“They're not a G7. Let's talk about G7 experiences. And it starts in the plumbing of the G7 nations and it will extend to the emerging markets. So like Argentina. So they really, they're so far down the scale of risk true developed risk markets that they catch a cold every time the United States sneezes, right? And emerging markets change direction because of either the currency, the strength of the currency or outlooks for commodities, et cetera, et cetera. But what happens always is the plumbing of the financial markets, which include things like bank swap spreads, TED, the TED spread. That's the euro dollar versus T-bill spread. It's the overnight funding. It's repos. It's all these things that occur in a financial system that's levered 25 times to its equity cushion. And when these things stop.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Great question. So it always starts with the plumbing of the financial system. And I won't go quite to Argentina because I don't know Argentina. You know, I know they've defaulted a number of times. Their capital markets are nowhere near as developed as any G7 or they are a G20 nation, but they're.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And this is really sad, but it's a fact. Now, the United States, is there a chance it'll default? Yes, there is because there's a credit default swap market on the United States that is not zero, but it's extremely low. The chance of it is extremely low. It's not zero, but it's extremely low. When people start doing the math as to the true obligations that the United States has in terms of its funded and unfunded Medicare and Medicaid, it's off the charts, guys. It's just the math is just undebatable. You cannot tell me that the fiat currency will not debase at an accelerating pace for the next. And now I hope it's a long time, but it may not be where people call out the fraud or the Ponzi. Hey, this has got to stop. And does the US very quickly go to like what Venezuela? I hope it doesn't, but is the chance zero? No, it's not because they're both based on the same principles of fiat and printing money.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Need to understand how blessed you guys are in the United States because there's over 150 fiat currencies in the world, right? And a lot of these countries have been serial defaulters. I wouldn't say serial, but they've defaulted more than once. They experienced this. I mean, when's the Cesares in Patagonia? The reason he loves Bitcoin so much is because his family went through three episodes where they lost everything. And so I experienced one of them in 1988. Argentina was bankrupt and it looks like Argentina may go bankrupt again.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Unless though, and this is what's a head scratcher for a lot of people right now, why are house prices going crazy in most countries, for sure, North America? You know, I just saw a Wall Street Journal article about what's happening with house prices in the United States. And Canada, let me tell you, is going off the charts as well. And if that's not an indication of inflation concerns, I don't know what is. And why is that? Well, people say, is your is your house price really going up? Or I ask the question, is it just that your unit of account is going down that quickly, right? Over time for that value, but certainly not anything like the growth in the house prices right now. And it's just that the unit of account, the fiat currency, is going down so quickly.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“But I see now what you were saying about how the gauge, the CPI, I agree, is not a realistic chapwood index. The money supply growth, as Michael Saylor would say, are all much better. Of issue inflation, of shoe inflation.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“So every base rate is a combination of an inflation expectations, as you point out, and historically that's been the overriding factor and a credit component. And my argument is that the 10-year US Treasury has an inflation expectation in it, but it also has a credit component. It is not, even though it's termed the risk-free asset in the world, and there's no one that's better, it's still not risk-free because if it was risk-free, the credit default swap market wouldn't be charging you a premium to insure against the default of the U.S. Treasury. So my argument is, yes, inflation expectations are there. They're a concern for all fixed income investors, but that's a backward-looking concern. The forward-looking concern is credit. Now, will credit be impacted by increased interest rates due to inflation? 100%. It's, you know, cause and effect.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“What a great explanation. So now I understand what you're saying. You know what's neat? So I never traded bonds for inflation expectations. I was a credit guy and perhaps this will help explain it. And I believe this sincerely. I believe that credit concerns will overwhelm inflation concerns, whether those inflation concerns are actually being properly measured or not. I believe that it's credit that's going to be the defining characteristic of setting the base rate.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“have the rates that could be going in the other direction. And you may say, I don't like bonds of any duration, let alone the fact that you have that spread of 300 basis points over. So it's harder for me to make that, to say that it was pushing people out now, does it? It makes things like the discount rates on all assets lower, which means the price appreciation of all assets definitely goes up. But was it really pushing people out? I think that always existed, Preston. I think there were always the people that would take that incremental 300 basis points. And there's still people right now that won't take that incremental 300 basis points at 170. And I think they're actually being very smart right now, not taking that incremental 300 basis points. But then you talk about equities and the price mechanism for pricing growth equities and everything. And yeah, there is a cascade, no question.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Assets, but all of a sudden they're off 26%. That's tough to take to your unit holders. So, yes, you're 100% correct on that price. The difference, though, is I'm not certain that it meant they had to reach out the yield curve or you reach out the risk spectrum. That risk spectrum is always there. It's always relative generally to the US Treasury curve. The incentive, perhaps you could say, were high yield bonds at a 300 basis point spread over treasuries starting with a 14% yield, which meant U.S. treasuries were at 14%. You add 300 basis points on top of that. You get 17%. Is that 17% more attractive in 1988 versus this year when the 10 year is one in 170? You add those same 300 basis points on top of it. It may look more attractive, but then you think about it.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“On it in the US, it's a one and a quarter of 2050, and it has lost 26% of its value in one year. That's a tough mark to market, right? That's 26 points. That's 18 years or more. It's 20 something years of coupons of the one and a quarter coupon to make your price loss back. This is tough to report to your bond unit holders, isn't it? Hey, thanks for coming out. You just lost 26% in one year. Now, that's only a 100 basis points change in rates. What if rates went up 400 basis points? Convexity starts to come in and the price won't go down. It can't go down 80%, right? Because just doesn't. The convexity is the shape of the bond pricing curve. But I'll tell you, these are big, big, big price movements for insurance companies and pension plans that have matched their liabilities against the”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“In interest rates, the bond pricing formula basically says the duration of a bond times a change in interest rate. When interest rates are as low as they are right now, it is very meaningful for duration. So very simply, the duration of a 30-year bond right now is about 22. It's just a mathematical formula, 22. And if you said, what does that mean? Well, it means for every 100 basis points change in the 30-year yield, the bond price will drop by 22%. Now bond guys aren't used to losing 22% in bond pricing terms, especially since rates, as you said, over the last 40 years have come down. They've been used to these things called capital gains. It was a one-way railway for capital gains. Well, now, and we talked about Ray Dalio's risk parity. Now it's capital losses. It's the same math, except that rates are going up, not coming down. So the long bond that was issued one year ago has a 1.5% coupon.”
2021-04-14 · We Study Billionaires · BTC021: Bitcoin and Bonds w/ Greg Foss (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT