51. The Global Bond Market and Bitcoin with Greg Foss

Experienced high-yield credit trader Greg Foss joins Saifedean Ammous for a discussion on why bond investors should own Bitcoin. They talk about why Bitcoin represents insurance against sovereign debt defaults, how Greg’s values Bitcoin using data from the Credit Default Swap markets, and why those same markets suggest that Canada’s official credit rating is too high.

Greg makes reference to:


Saifedean Ammous: Hello, welcome to another Bitcoin standard podcast seminar. In today's seminar, we are hosting Greg Foss. Greg has over 30 years of experience in national markets with a focus on trading high yield credit. He has worked on both the sell side and the buy side and has been managing partner of credit strategies at a successful hedge fund team during the great financial crisis in 2008 and 2009. He is also a founding shareholder of 3iQ, which is one of Canada's largest digital asset manager.

[00:04:08] So Greg has an enormous amount of experience in the bond market. And that is the topic of our conversation today in particular, the evolution of the bond market over the next few years and how Bitcoin affects it and how it affects Bitcoin. And this is a topic that I find very fascinating. We've had a previous seminar where we discussed whether Bitcoin obsoletes bonds.

[00:04:31] And so I was keen to get Greg on to get his perspective as an old time bond veteran on this. Greg is also a Bitcoiner and he's got some very interesting insights to share on this. So Greg, thank you for joining us.

[00:04:45] Greg Foss: It's my pleasure. Thank you so much for having me.

[00:04:47]Saifedean Ammous: So recently I've seen you published some work on linking Bitcoin to the bond markets and thinking of Bitcoin as an insurance against a sovereign default.

[00:04:58] So can you tell us a little bit more about why you think that and what the case for Bitcoin is in that regard?

[00:05:04] Greg Foss: Absolutely. So I'll start off at a let's say 5,000 foot level. And if you guys want to drill down into some of more granular stuff, I'd be happy to go there, but, here's the way I look at it.

[00:05:14] I've traded credit for 30 years and very simply credit runs markets. Okay. Credit is far more important than equity. Now. Everyone watches equities, everyone loves trading equities. Most investors, if not all investors, own equities, but many of them don't understand the impacts that bonds have on equities.

[00:05:39] Very simply since bonds in a corporate structure have prior claim over an equity, unless the bond is worth a hundred cents on the dollar, the equity is worthless. Now you can have different ways of quantifying the risk at each level of the capital structure, but always remember if you go into an equity and don't know where the debt of that same company is trading, you're not doing your due diligence and you perhaps are making a huge error in evaluating where the sweet spot of the capital structure is. And there is a financial, I guess, contributor, from Bloomberg who I'll leave nameless right now.

[00:06:20] But, we could dig into it is... Who, for example, recommended the equity of Hertz, when the bonds were trading at 40 cents on the dollar, there was no way that that equity had any equity value. It may have had option value, but it had zero equity value. Yet here you have an editor of a magazine or a prominent editor pitching Hertz equity.

[00:06:43] The point being, credit is the dog that wags the equity tail. And it's the same thing all through the capital structures of anybody that issues debt at any level. Now you'll say, okay, governments don't have equity. That's true. But governments tend to be the base pricing mechanism of all credit in all various markets.

[00:07:09] So for example, the U S treasury, if you read your financial textbooks tends to be referred to as the risk free borrower. That's not altogether true. I can explain why that's not the case from something called credit default swap, CDS insurance that trades at a price greater than zero. Meaning US treasury does in fact have default risk.

[00:07:34] It's not big, but it's not zero. So it cannot be a risk-free rate. But nonetheless understand that typically it's referred to as the risk-free rate. And when those rates change, there is a knock on effect with all other financial products in the market. So as we've seen over the last 25 or 30 years of my trading and the last 40 years bond base level of interest rates, the U S treasury ten year has gone from 14% to under 1%.

[00:08:06] Well, the knock on effects of that into pricing of equities, for example, means that discount rate on equities can also come down as the base borrowing rate of the world comes down and that's what's happened for 40 years. What happened in the great financial crisis in 2007 and eight was basically once again, socialized losses in the financial system.

[00:08:30] So they bailed just about everybody out except Lehman brothers. They bailed everybody out to rescue the system, socialize the losses and kick the can down the road. So that now all financial risk lives on the balance sheets of governments. And my argument is we need to look to the credit default swap market of sovereign credits to evaluate the true risk in sovereign borrowing.

[00:08:59] And since Bitcoin is the anti fiat, in my opinion, you can take that open market measure of risk across nations. So you can go and watch the CDS rates across all nations. Start with the G 20 nations, Turkey being the worst of the G 20 nations in terms of default potential. You add up the unfunded and funded obligations of that country.

[00:09:28] You multiply it by their credit default swap rate, and you get an intrinsic value of the anti fiat. And it's my belief that Bitcoin is the perfect anti-fiat.  So that's the basis of the evaluation. It's in my opinion, based on 30 years of knowledge, and perhaps I overstepped my bounds, not knowledge, perhaps  experience. Credit markets, once again, run the world. And when the credit market start gurgling equity markets are in for a world of hurt. And you don't rush out to buy your insurance once things are already burning down. You need your insurance, you need it on a timely basis and you need it forever.

[00:10:12] Saifedean Ammous: Yeah. And I think it was James Carville, who said, when he dies, he wants to be re-incarnated as a bond market, because it's the most powerful thing in the world.

[00:10:20] Greg Foss: That's a great quote. I sort of heard it, but, uh, yeah, it is because it's the biggest, right? And it's, it's funny. Everyone thinks that equities are actually liquid. If you've ever traded equities and tried to move big size in equities, meaning a big volume trade versus what you can do in bonds, it's actually laughable. Bonds you can trade hundreds of millions of dollars, right on the screws. You try and move any meaningful size in equities, and you can tell when the market is pricing a big trade and it's just,  bigger players... I'm not going to say more sophisticated, but certainly bigger players, bigger market.

[00:10:57] Saifedean Ammous: Yeah, for sure. It's quite fascinating to see it. And I think, when you look at the implied risk of default from bond markets, it doesn't seem to be an accurate reflection because I think your Twitter handle right now says that the Lehman's credit default swaps were at, what was it?

[00:11:12] Nine and nine basis points.

[00:11:14] Greg Foss: And I was in the markets at that time. You're right. I don't want to jump over you, so go ahead. Complete your thought process. And then I'll...

[00:11:20] Saifedean Ammous: Essentially to a large extent, it's because of Fiat, because fiat just rigs the entire game that... it's like a smoke alarm that only goes off after the house has burned down.

[00:11:30] It's not going to give you any advanced notice. It's not going to call the fire department before the house burns down. Once the house burns down, you'll start,  in the rubble, when everything is gone, you'll start hearing the alarm going  this is where I'm going to, this is where I'm going to take issue.

[00:11:47] Greg Foss: No, no, you see it coming. Okay. You feel it, it starts in the plumbing of the system in 2006, when Lehman was trading at nine basis points. Now let's say, what does nine basis points mean? It means it costs you $9,000 a year to insure $10 million of Lehman debt. Okay. It's an insurance premium based off the riskiness of that name, that reference obligation, you buy that insurance from other people in the market.

[00:12:16] So for example, you could have bought that insurance from Goldman Sachs, or imagine you bought it from Bear Stearns. Hold that thought. What does $9,000 of a premium cost you? Well, if you think Lehman is too big to fail, you might be a leveraged account that says, hey you know what? Nine basis points is almost free money.

[00:12:36] How about I lever that five times, which is a lot of credit funds get, let five times leverage and all of a sudden it's a 45 basis point. They're picking up nickels in front of a steamroller. Well that $9,000 annual premium in 2006 turned into $6 million, three years later. Okay. That's a pretty good insurance policy to have, and it didn't go straight from nine bucks or $9,000 premium a year to 6 million.

[00:13:04] There was a very fluid market, but you could tell it was happening. Now, guess what was happening to Lehman brothers stock at the time? The guys that were selling protection, meaning the insurance underwriters were running into the equity markets and doing put option strategies on Lehman, a common stock or outright shorting Lehman common stock and alarm bells were going off on the desks of the equity guys.

[00:13:28] They're like, what's going on? What's going on? They had no clue. Okay. Again, it starts in the credit market and it's orderly, but then all of a sudden, those leverage guys that were selling protection at nine basis points, they get a tap on the shoulder from their boss. Dude, the margin clerk has told me you've exhausted your limits.

[00:13:47] You now have to become a buyer. Okay? So the guy that was selling now becomes a buyer. And all of a sudden, everyone who was buying protection from him, who also want more protection, they're leapfrogging each other and CDS blows out and it, you know, it'll stabilize and it'll go to 150 basis points.

[00:14:05] And they're like, come on FED, come in. You need to rescue Lehman. Cause if you rescue Lehman, I'm getting out of jail free. And then I'll throw this in. What if you had bought the protection on Lehman from Bear Stearns and Bear Stearns is going down. So you run out to the market because your insurance provider is all of a sudden in big trouble as well.

[00:14:26] So the contract you own on Lehman, that you bought from Bear Stearns is worth nothing if Bear Stearns can't make good on their contract and you see how the contagion  starts? And it becomes rolling and I'll call it a rolling thunder. And I'll never forget the day in 2007, when Jim Cramer, you need to look this up, was on TV and he melted down.

[00:14:49] The FED has no idea how bad it is out there. Do you guys remember this? No idea and the girl there? She was like, Jim, take a pill. It's like he has no idea. And basically the FED came in and cut rates. And equity markets rallied again. And certainly some of the guys that had bought protection on equity, meaning they'd sold put options or they bought put options on Lehman brothers equity said, Oh, maybe things are all good.

[00:15:11] So the equity markets popped to new all-time highs. Okay. So there was a stabilization, but the plumbing of the credit markets was still gurgling. Yet the equity markets were like the FED, the FED, the FED. Guess what? Reality hit 2008, 2009. The most scary time in my 30 years in the markets and it never stopped gurgling in the credit markets.

[00:15:36] The alarm was going off. There was plenty of time to buy the protection. The equity guys had no clue. Hey, go out and buy protection. Then by shorting Lehman brothers, it's common stock in various strategy. So I take issue with that only because yes, you had two years to protect yourself. It all was based on the fact that Lehman's gotta be too big to fail.

[00:15:58] It's gotta be please, it's gotta be. And it wasn't.

[00:16:02] Saifedean Ammous: Yeah. I think there is an enormous amount of distortion of the signals happens because of Fiat money, essentially, always being there as a safety net. So they didn't bail out Bear Stearns and they didn't bail out Lehman.

[00:16:14] And those two...

[00:16:15] Greg Foss: they did bail Stearns. You remember Bear got purchased. The stock was at $126 when Jim Cramer was on TV and he made the comment: as goes Bear Stearns, so goes the market. Okay. Bear Stearns stock went from 126 bucks and it got bought by JP Morgan at two bucks. And it was probably really worth negative 50.

[00:16:39] Okay. It was negative equity value, but the FED engineered a rescue.

[00:16:45] Saifedean Ammous: Oh yeah, that's right. Yeah. But I mean, so there was only the Lehman brother that failed, but I mean, that's correct... the same shenanigans were going on with all the other ones. Oh yeah. But, Lehman brothers, for whatever reason, people got burned, but the same thing was happening at all of these markets.

[00:17:01] And then, people don't really price risk properly because they have the safety net of the central bank expecting the central bank to come in. One point that I mention in the Fiat Standard, which is my forthcoming book, which is available to subscribers on my websites, Saifedean dot com.

[00:17:14]When I try and think about how the Fiat system works, and I use the same kind of analysis that we use with Bitcoin to think about it in terms of miners and nodes. And so on... in Fiat mining Fiat is borrowing. When you borrow new money, you're making new fiat you're bringing new Fiat into existence.

[00:17:32] And so everybody has an incentive to keep borrowing and without a hard monetary asset at the base of this borrowing pyramid, there's just simply no limit to how much more borrowing you can do because every new amount of borrowing creates new money and then it creates new wealth. And then it allows people to engage in even more borrowing.

[00:17:51] Greg Foss: And, um, can I, can I jump in there because there is a limit and this is where credit comes in and this is why it's so important. We live in, in, in a fairly luxurious, so I'm in Canada,  G7 country, the United States, there's hundreds of other fiats. And lots of them get into big trouble and lots of them do fail and there is a limit and it's dictated by their credit market.

[00:18:17] Okay. So this is what Lebanon and Turkey and other... Venezuela, Argentina. These are areas that have experienced it recently. It's dangerous. It happens because there's a crisis in confidence in the credit markets, international lenders step back and they just say no more.

[00:18:36] I want my money back and guess what? I'm not rolling my money and I, I sorry to jump in front of you, but it's absolutely that crisis in confidence that exists in secondary and tertiary tight borrowers the 180 fiats that aren't G 20 fiats. Let's put it that way.

[00:18:55] Saifedean Ammous: Yeah, no, there definitely is a limit, which is when the whole thing comes crumbling down.

[00:18:59] But, with the hard monetary assets, when making new borrowing is just an obligation from somebody else, when it doesn't actually lead to the creation of new money, then you've massively undercut the incentive to keep piling up debt on top of debt.

[00:19:14] And you also get rid of the systematic risk aspect of things with a hard form of money, you make a loan to somebody, it's your problem. The two of you have a problem, and if they can't pay you back, you know, you're in trouble. But without all these many, many layers of credit and all the enormous incentive for everybody to constantly be borrowing and constantly be lending, in the financial system, then contagion is...

[00:19:38] Greg Foss: It's there too, because of leverage.

[00:19:39] I mentioned about hedge funds, they get five times leverage. Do you know, for example, that most global banks are at least 20 times leveraged to their equity position, which means they have $5 of equity thereabouts to their risk adjusted assets on their balance sheet. Another way of saying that you guys is that if you make a loan at a hundred cents on the dollar and it falls to 95 cents on the dollar in value, because either the credit quality of the counterparty has deteriorated or there's a systematic shock to the system, you've exhausted your equity.

[00:20:16] You are on that loan. You have exhausted your 5 cents of equity and imagine they don't fall just to 95 cents on the dollar. That's pretty, yeah, that's, that's not a big price change. You know, I traded debt my whole life, that trades in the forties and fifties, right. That's where I got my specialty.

[00:20:34]This is where I first fell into, I need to find a solution for fiat. When I came back to Canada to start working in the financial system, I worked for the largest financial institution in Canada called Royal bank of Canada. And it was insolvent. Because of the loans that it had made to Latin American and other lesser developed countries, it's book value of equity would have been exhausted if we had written down the value of the Latin American debt to market. Now, treasury secretary Nicholas Brady in 1988, solved this problem. And it wasn't because he was trying to solve the problem for Royal bank of Canada. Royal bank of Canada was in exactly the same shape as Chase Manhattan and manufacturers Hanover, all the other money center banks, right in New York, it's called leverage.

[00:21:20] He has to turn a five-year loan to Mexico that was trading at 25 cents on the dollar because banks had lent at a hundred cents on the dollar. They were now trading at 25 cents on the dollar. He turned a five-year loan into a 30 year obligation priced or backed by US treasury zero coupon bonds. Rescued the global financial system.

[00:21:43] The first time that I've been involved because they didn't have to mark their loans to market because they were secured by the U S treasury. A brilliant structure. But my God, I said to myself, I just graduated from business school. I came back to Canada. I'm like what? This is how our financial system works?

[00:22:01] Is it possible? Why? Because governments can print money. Very simple. And I said in 1988, Saif, I said, this is the Ponzi. The fiat is the Ponzi. I need a solution. And then in 2016, thanks to, 3iQ. I was introduced to Bitcoin and I said, look, I cannot believe how beautiful this is. It solves leverage in the system.

[00:22:26] That's the key. It's not about loans. It's about the leverage on that loan. If you're a hundred percent secured against the loan, you're not gonna take depositors' money and lose money for depositors. Right. So I found, I was looking for it from 1988. I found it in 2016 and every single day I realize what a beautiful thing Bitcoin is compared to the legacy financial system.

[00:22:50] I'm an engineer. And you just look at the Bitcoin, you look, you go to trade block.com and you look at the blockchain in action. And it's visual and I'm a visual guy and I'm like, come on this, this is it. This  actually exists. Oh my God. And then the first thing I did is I read your book. And I'm like, yeah, I mean, and then I saw you go on against Peter Schiff.

[00:23:12] And now I realized that, you know, there's no use talking to people like Peter Schiff who were so conflicted that, and then Michael Saylor last night talking to another very famous gold bug in Canada by the name of Frank Giustra, I'm not sure if you guys saw that, but listen, you know, it's the future versus the past.

[00:23:29] It's like, you guys got to understand it's leverage in the system that's the danger. The leverage. Banks are 25 times levered. Okay. Long-term capital management in 1988, 1998, rather the first time or the second time the system got into trouble was using multiples of leverage that Nobel prize winners were in charge of. God.

[00:23:52] Darn. These guys are not Nobel prize winners. They're academics that have never traded risk in their life.

[00:23:58] Saifedean Ammous: That's what a Nobel prize  winner is.

[00:24:01] Greg Foss: Maybe, maybe so you know, it's leverage guys. I need to stress that. And the greatest quote ever. You mentioned the one that got me laughing. How about this quote from Henry Ford and I'm gonna paraphrase.

[00:24:13] I don't exactly, but he basically said if the American people understood how the banking system actually worked, there'd be a revolution overnight. And he said this almost a hundred years ago, and it hasn't changed. You take $4 of bank equity capital, and you can collect another $96 from depositors and turn that into a loan.

[00:24:36] That's the problem. That is the problem.

[00:24:40]Saifedean Ammous: Ultimately, I like to keep emphasizing the fact that it's not because bankers are evil and it's not because bankers are greedy. We've always had evil and greedy people throughout human history. What's different now is that we have this mechanism that is financing this and subsidizing it.

[00:24:55] And that is Fiat money. It's the endless printer at the bottom that tells people that go ahead, be reckless. And whatever happens at the end of the day, there's always the safety net of the federal reserve that is going to come and get you, unless you're Lehman brothers, there'll be the occasional exception, but overall it's a completely rational strategy for you to take reckless risks.

[00:25:16] It's in fact reckless not to do it. And the more that I think about it after writing the Fiat standard, as I'm writing the Fiat standard, it seems to me basically the most reckless thing you could have done in the last 30, 40, 50 years in the American global monetary system, the most reckless thing to do would be to hold savings in cash  only spend money that you have and not get into debt.

[00:25:40] Like this is the most responsible thing that all of our grandmothers had taught us. And this was correct for the vast majority of human history, but in the 20th century, this became massively irresponsible. And what was responsible was to get into irresponsible debt, get into debt beyond what you think you could get into because yeah, it might blow up in your face, but most likely or at least the expected value of taking on irresponsible debt has largely been positive.

[00:26:10] So you look at businesses that have taken on high-risk debt. It has allowed them to essentially, kick their competitors out of the business and the take over the market and become a okay.

[00:26:21] Greg Foss: Or buy back equity. Okay. And that's key, right. Or,  use it to buy back their stocks so that the equity float is lower so that they can report higher earnings per share because it's the same earnings divided by a lower equity base or shares outstanding.

[00:26:34] So, yeah, there's a lot of shenanigans that go on at every level, but I want to add a credit perspective that I think hits a lot of people. They don't think of it this way. And this is from a credit guy again, how I would have looked at a corporate balance sheet, but I apply it to governments.

[00:26:51] And by the way, the worst balance sheets I've ever looked at, or the worst income statements I've ever looked at are not junk bonds, which was my specialty. It's actually governments. Okay. But just stick with my logic to begin with the total debt, total global debt in the numerator divided by total global GDP is basically a credit metric that measures your debt, and your debt service obligations divided by your tax base.

[00:27:17] So total global GDP. Well, total global debt, I'm not talking just about governance. This is global debt everywhere in the world. Is four times total global GDP. So, what do you think an average coupon on that debt is? And I'm going to throw out a number it's a low interest rate environment. I think this is even lower than it actually is, but I'm going to throw 3% as your average coupon in your numerator.

[00:27:41] Now, if your numerator is four times larger than your denominator, that means your numerator just organically because of the debt service obligations is growing at 12%. Okay? That means your numerator has to grow at 12%. Your tax base has to grow at 12%. Your denominator has to grow at 12% just to keep base at pace with your numerator.

[00:28:04] It ain't going to happen guys. It's a mathematical certainty that the error term, the thing that has to solve this debt spiral is called a fiat currency. They have to print more of it to solve the debt service, and this doesn't even include these crazy deficits that have just been announced. It's only math.

[00:28:25] It's very simple and it's very scary. Even if we got fiscally responsive government in. Meaning they wanted to try and balance the budget, not even pay back old debt, you still couldn't do it. You could not anticipate global GDP would grow at 12% or higher in order for you to start even eating into the increased debt   cruise because of the interest obligation.

[00:28:52] Saifedean Ammous: And you think that applies not just to a basket case, third world countries...

[00:28:55] Greg Foss: No, this is global debt. So here's another stat. Everyone only talks about the United States 30 trillion ish, 40 trillion of government debt.

[00:29:04] Hey guys. Guess what? The big number is 160 trillion, which is their unfunded Medicare and Medicaid obligations. People are counting on this and it's not even an on-balance sheet number, but it's $160 trillion. Oh my God. The numbers are so crazy and the math is so simple yet people have not done the math that they just assume that  we'll just continue to do this.

[00:29:33] And then they bring out, they wheel out new theories, like modern monetary theory. Thank goodness there's guys in Canada, like Pierre Poillievre, who he's calling them out. He basically called out the government. He said, this is modern monetary theory. That's been around for thousands of years, it's called printing money and it does not work.

[00:29:55] Look, who knows. We need to have a dual system because there were certainly,  they'd kick the can down the road too far. Little story. One of the reasons they let Lehman brothers fail, this is conspiracy theory is because in 1998, when long-term capital management needed to be bailed out, Dick Fold, the CEO of Lehman brothers was one of the only people that voted against it.

[00:30:20] And he took the ire of all of the rest of Wall Street. And people have long memories. I'm not saying this is the case, but one of the reasons in conspiracy theorists, it's a small world .I've traded on Wall Street and Bay street in Canada, my whole life a little bit with London. I was mentioning that with Peter, but it's a very small street and people have very long memories.

[00:30:44] So why was it Bear Stearns that was rescued and Lehman got kicked out? Was it the poster boy for letting something fail? Well, maybe something happened in 1988 behind or 1998 behind those closed doors of long-term capital management. Who knows? I will just say it's a system that's based on faith in the financial services.

[00:31:06] And when that faith is knocked and people are running for the exit all at the same time, the backstop is. The FED or federal government balance sheets. And eventually that could stop too. And that's basically what I'm saying, and I don't want it to happen. Let me be very clear. I do not want this to happen.

[00:31:25] I have three kids. Yeah.

[00:31:28] Saifedean Ammous: I mean, nobody wants this, but Murray Rothbard used to say that any kind of a system that requires your confidence in order for it to work does not deserve it and cannot work. If you engineer something that requires you to be confident in it, to work that's bad engineering.

[00:31:44] Imagine you buy a car and they tell you, this car will only work if you believe it works. You have to really step on the gas really hard, but also have faith and conviction, or step on the brakes. You have to have conviction. And if the brakes don't work, then it's because you didn't have conviction and confidence in it.

[00:32:02] I mean, things that require a confidence to work at called the confidence scheme, a con scheme, that's where the con is that right? Yeah. Yeah. That's when it comes from there you go, because the way  that you make a con is that you have to get the confidence of the person. And then when you get their confidence and they usually,con artists, what they'll do is they'll bait you with the promise of you making money. So, but like the Nigerian email, you know, they'll send you an email. There's $15 million. If you just send me the $3,000, then I can send you $1 million next year... So once they got your confidence that, oh wow, well, this guy is trusting me with his $15 million from his deceased King father, then you have some confidence in him and that's when you can send them the $3,000 and then you realize that was it.

[00:32:47] That was the whole thing. And it's kind of like this with the current monetary system and that people have the confidence that yeah, the government is going to stand behind the system and bail it out and that's going to always make sure that it works. You're just dealing with another Nigerian Prince because you are the one who's actually going through.

[00:33:05] Greg Foss: Okay. So, so the important thing is to remember the difference between those lower rated countries and those countries that don't have the backing of the European central bank, they're in a great spot, great earth spot than they would be if they were on a standalone basis like Greece or whatever. This confidence that you rightly point out is taken for granted in again, G 7 for sure and most G 20 countries right now with the exception of Turkey, because it's worked. But this is the most dangerous thing. When you are in the credit markets and you have a debt D E B T spiral, your debt never actually matures. You just have to keep rolling it, right. Because there's more of it. They have to keep funding it.

[00:33:51] Well, what happens at an auction when no one shows up. When people have said, you know what, I'm not going to roll my debt. I just want to take the money from the other guy. Who's going to fund this auction. And my 30 year bond, I've held it for 29 and three quarters years. And it's now a one quarter year obligation.

[00:34:10] And I'm out, I'm never rolling this into the U S treasury again. Well, it's okay at the U S treasury because there's a lot of confidence in the US treasury still, but it's not the same. And this is why you always have to look at things on a relative basis. And then you ask contagion questions.

[00:34:26] Like, why is it the Canada? Even though we have a higher credit rating than the United States, which is true, we are AAA rated in the United States is AA+ rated yet Canada in the default swap market trades at 40 basis points where the U S trades at 10. Okay. That would indicate that the market is much more comfortable with the U S than it is with Canada.

[00:34:50] So the credit rating is wrong. And then you line up where Canada is trading, and it's more like a A credit. Canadians, wake up Canada. We are not a AAA credit. The market is pricing us like a A. And then what happens? The rating agency says, Oh, first thing they do is they put the country on credit watch and then are going to downgrade it from AAA to AA+ inline with the United States.

[00:35:14] And then people are like, what? Oh my God. And they have no idea what's going on in the credit default swap market to begin with. They just read the newspaper that says Canada was downgraded. And that's where some of the contagion can start as well.

[00:35:29] Saifedean Ammous: Yeah. I think this is an important distinction, which is the rating agency is a bunch of people sitting in an office making a decision, which, they get paid to get this decision right.

[00:35:37] But it's, did they get paid by Saif? Exactly.  they get paid by the issuer.

[00:35:43] Greg Foss: They get paid by the issuer. I am aware of a conversation that happened with a Japanese bank that came to Canada to get a credit rating. And the CEO very succinctly asked if we pay a higher fee, do we get a higher rating?

[00:35:58] And I'm not going to say what happened. And I don't believe anything was nefarious that was going on. It's just interesting that that sort of conversation could even happen. And I will also tell you having lived through the great financial crisis and we made, actually quite well.

[00:36:14] We were short when we had to be, and we, then we went quite long on a product called asset backed commercial paper that was a restructured senior secured lending product in Canada that was rated as AAA. And guess what? That AAA rating traded down to 20 cents on the dollar. AAA credit is not traded at 20 cents on the dollar if it's truly AAA, ladies and gentlemen. You got to understand as Saif correctly pointed out: a rating agency is an opinion. And it has no bearing on what the true price risk is.

[00:36:48] Saifedean Ammous: Yes. And you get a much more accurate assessment of that from the markets where people have had it. I always look to the markets.

[00:36:55] Greg Foss: Markets are truth. I could say how about I'm starting a rating agency it's called the Foss rating agency. And maybe no one will listen to me, but I'm going to go out and I'm going to say, yeah, these are my ratings. And over time, that's basically how Moody's and S and P got their start. And now there's a lots of investment committees that make their decision based on the ratings of S and P and Moody's. Note, I didn't even bring up the notion of price.

[00:37:18] Can you imagine investing in something just because they have a certain rating and it doesn't involve a price. That's the stupidest thing I've ever heard, but it happens all the time.

[00:37:27] Saifedean Ammous: Yeah. And it betrays a very central planning perspective on what markets are as if there is a truth.  This thing has this much of a default probability.

[00:37:39] And as if it is an objective fact about life, when it's not an objective fact, it's a thing that emerges on the market from the action of others. I think it's going to default. So I short it. You think it's not going to default, so your long it. And then their balance sheet and their revenues and their expenditures over time will either vindicate me or you price today on the credit default swap is the best guess that all of the people who have put their money in the market are able to the key actually risking capital.

[00:38:08] Greg Foss: They are risking capital on a daily basis and they're managing risk.

[00:38:12] Saifedean Ammous: And yet, I'd say credit default swaps are much better than rating agencies. And yet still that itself is of course also probably highly influenced by the fact that Fiat money comes in. And so I would say perhaps the 40 bips on Canadian debt it would be much different if the Canadian government didn't have a money printer.

[00:38:34] Greg Foss: Oh yeah. A hundred percent. But listen,  it's still a market. And look at Turkey. They have a money printer as well, but Turkey trades at 450. All right. And you know, Russia, the same thing and Russia trades wider, in China the same thing, and China trades where it trades. Never forget, you have the printing press.

[00:38:50] The question is if you're delivered fiat  on maturity of a bond, and that fiat gets shoveled to the curb like in Venezuela, because it's got no value. Is that a real default or de facto default? And then the second question becomes you can own insurance that you make money on that doesn't actually lead to an outright default.

[00:39:07] It's just that you bought the insurance policy when it was cheap, and then other people are paying you more for it. And maybe they pay you more for it. And they pay the top of the market spread, meaning the spread is wide and the country gets their act in gear and, and turns it around. Now that's generally doesn't happen, but in corporate credit, it certainly does.

[00:39:26] And I have an interesting story for you very quickly. The largest high yield borrower in the world at one point in time was a Canadian company called Rogers communications, not the largest high yield borrower in Canada. It was the largest high yield borrower in the world. Okay. And Canadians would not buy the debt of Rogers communications because it was a junk bond and they get all their junk bond financing in the United States market.

[00:39:50] But Canadians owned all the equity of Rogers communications cause it was in the Toronto stock exchange, 60, the 60 largest companies of the Toronto stock exchange. So I worked at an investment bank that we were trying to bring a deal for Rogers communications to fund Rogers communications in Canadian dollars.

[00:40:09] Rogers had no US dollar revenues, therefore had no natural hedge against their US debt obligations. So they would love to have their debt, their term debt, high yield debt funded in Canadian dollars. So I picked up the phone and I called the Canadian asset manager that owned. And this is no word of a light $900 million worth of Roger's  communications, common stock.

[00:40:31] And I said, Hey XYZ. We're bringing a Roger's communication debt deal at a 10% coupon. You own 900% of the 900 million of the equity you, that equity is paying zero dividend. You obviously have confidence in the company. Why don't you pick up some of the debt at a 10% coupon? Nope, can't do it. It's a junk bond or non-investment grade.

[00:40:51] I beg your pardon. It's non-investment grade junk bond. I said, okay, no disrespect. And you own super junk equity.  So let's start with that. You own $900 million of super junk equity. Why don't you sell some of the super junk equity, buy the prior claim high yield bond at a 10% coupon. Treat the income on the bond, like the dividend you're not getting on the stock, trade up in the capital structure, reduce risk. How much can I put you in for? Long story short, they said zero. It's a junk bond. I'd have to report to my investment committee that I own a non-investment grade bond. I said, what price would you buy it? They said, there's no price.

[00:41:28] And then I hung up while the salesman actually pushed me off the key and said, Foss don't ever talk to my account again. But I basically said, that's the stupidest money manager I've ever talked to in my whole life. Okay. You own $900 million of a subordinate claim and there's no price that you would buy the bond of the same company, a prior claim.

[00:41:47] I said, what if I gave you that bond for free? They said, no, I wouldn't take it because I'd have to report to my investment committee I owned a junk bond. And I just shook my head. And I said, Oh my God, these are people that are managing our pensions and managing our money. And that is the truth.

[00:42:03] Saifedean Ammous: Yeah, because  the equity is subordinate to the key point.

[00:42:08] So  if the bond is junk, then the equity is junk.

[00:42:11] Greg Foss: We call it super junk, no pejorative society, but I'll give you a price that, that investment, sorry, that junk bond. What if it's a 50% yield, five 0% yield? I don't know. That sort of sounds like investment grade. To me, it may not mature, but at 50%, boy, you're getting paid some serious risks.

[00:42:29] Now, no one issues, a new issue, high yield bond with a 50% coupon on it. But sometimes bonds do trade in markets at yields that no longer make sense because they're trading on a base of recovery value of the bond, not even on a ongoing collection of interest basis. So it's an fascinating part of the market leads to all sorts of collective capital structure, arbitrage opportunities, but remember manage risk accordingly.

[00:42:55] That's what this conversation's about. Manage risk accordingly.  

[00:43:00]Saifedean Ammous: So I guess the question this leads us to is how do you see the current credit situation unfolding in the  G7 particular, do you see this as a heading toward default or inflation or both maybe.

[00:43:13] Greg Foss: Great question. Really great question. So what I see happening is that everyone who's owned bonds over the last 40 years has been a inflation jockey. Okay. They've always been trying to predict inflation and making sure they have a real return on their bonds that exceed the rate of inflation.

[00:43:32] Okay. The, I should say a nominal return on their bonds that exceed the rate of inflation. So they get a real return. What I see happening going forward is people turn from being concerned about inflation expectations, to being very concerned about credit. Up until now you've never really heard in the commentary of certainly G7 or G20 nations, commentary about credit risk.

[00:43:56] It's always been inflation risk. But again, since we've pushed everything down the road from financial institutions in 2007 and eight onto the government balance sheets that we never actually paid for, we pulled forward lending or borrowing rather, we never paid it down. And then we got hit by COVID. I think that credit risk is going to become the overriding factor in consideration for also not just corporations, which I've traded my whole life, but also for governments.

[00:44:24] And that's key. And eventually if you lose the confidence, as we've talked about in the credit markets, you lose control. And so you better understand what's going on on the balance sheets and in the markets of credit insurance on countries. And that's key because no one has ever really been with the exception of worrying about Argentina on a regular basis as a serial defaulter.

[00:44:49]G 20 countries don't necessarily default. Well, what if Canada, who is in the worst fiscal shape of all the G seven nations and actually trades at the highest CDS spread of all G seven nations. I don't want this to happen, but imagine if Canada gets into the same spot that Turkey's in right now? That's scary as a Canadian, that's scary.

[00:45:10] They're not rolling our deck. We cannot fund our own government without foreign investors. And then we'll say, okay, well let's just start printing our own money and buying it with the, uh, the Bank of Canada, which they bought 84% of our latest fiscal deficit. Eventually that gig is up as well. And as a Canadian with three kids, you better own insurance in the form of, well, you could buy default protection on Canada, but I'm not big enough.

[00:45:40] I don't have this thing called an ISDA, I don't have an international swap dealers association agreement with Wall Street that I can buy protection on Canada, but what can I buy? I can buy the anti-fiat called Bitcoin.

[00:45:53] Saifedean Ammous: Yeah. So why is Bitcoin the anti-fiat and why does it protect us from all of this horrific nightmare?

[00:46:01] Greg Foss: You know, I, you know, the, and I love you. It's fixed it's, you know, skit, it's got 21 million it's it's beautiful. It's decentralized. It's. It's ruled, but there's no rulers, you know, it's the most beautiful financial innovation I've seen in 30 years in the markets. It's everything you want it to be.

[00:46:23] You guys already know transferable, portable, verifiable. You guys don't need to hear it from me. You can read really good books written by a Saif, I will just tell you, I found it as a solution to what I'd been living for 30 years, which is the continuous monetization of your debt, because firstly, it is mathematically certain that it has to happen.

[00:46:44] But secondly, and most importantly, it's a safety valve that four year politicians sorta like to draw on so they can try and become eight year politicians.

[00:46:55] Saifedean Ammous: Yeah, before we get back into Bitcoin, I wanted to ask you more about Canada because I think Canada is quite an interesting, case or basket case.

[00:47:03] If one may add, all the G seven countries went crazy over the last year fiscally and monetarily. But I think Canada is kind of in a league of its own. And I think past years, it's you correct? Yes. Yeah. And I mean, the amount of money that's been given out is enormous.

[00:47:19] The amount of money that they're paying to people to not work is absolutely enormous. I know a lot of people who make more money sitting at home being heroes by watching TV and eating the ice cream and saving lives. They make more money getting paid from the government from that than they used to make in their actual jobs.

[00:47:39] You know, so people would get into work all day and slave away all day, and now they make more money just by sitting at home and being Trudeau's heroes in saving lives. And  it's amazing in my mind how much the confidence in Fiat money has led to just the complete destruction of the concept of opportunity cost.

[00:48:02] People just don't think that there is any cost to that. If it's the government that's giving away money, then it's free. You know, we don't need to worry about working. We don't need to worry about how much money we earn, because if the government is going to hand out money for us, then it's going to be okay and that's not going to have any consequences.

[00:48:22] Greg Foss: They failed math, right Saif? The hardest courses in school tend to be mathematics. Now math is the base layer of language. Okay. Meaning I don't need to explain it to you, but you know, base layer of language, because regardless if you speak Chinese or if you speak Japanese or any other dialect, Canadian, obviously I say Canadian, but English, it doesn't matter if you don't understand the second layer of language, you understand mathematics, mathematics works everywhere in the world on the same principles.

[00:48:50] Okay. And most people in school given the choice, unless you're an engineer and you love math sorta like me and I wasn't a great engineer as engineers go, but, I love mathematics. And the reason I loved it is because I believe every equation as a solution.  That is the problem that most people take for granted that our politicians, I guarantee you.

[00:49:13] Justin Trudeau is probably absolutely awful in mathematics. In fact, I'm certain of it because he became a school teacher no disrespect to school teachers, but a bartender or excuse me, a snowboard instructor and a bouncer. Okay. Like you as, as a mathematician, he, you know, I'm not saying that there aren't smart snowboarders and smart school teachers or smart, bouncers, but I'll just tell you, they typically don't embrace math like an engineer does or other people.

[00:49:43]And as the base layer of language and math being the base layer of money, which is Bitcoin, it's very simple for people like us to understand it. Cause he just got to break it down to first principles. Everything is solved with an equation. It starts with a fixed supply of 21 million.

[00:50:02] Saifedean Ammous: Absolutely. And of course, people miss the cost of all of these measures because they don't see the impact immediately. The Canada has not defaulted yet and Canada has not witnessed hyperinflation yet.

[00:50:14] Historically,

[00:50:15] Greg Foss: there's been some defaults now, and then you have to ask the same thing.

[00:50:18] Saifedean Ammous: No, I mean, I mean recently,

[00:50:20] Greg Foss: Oh yeah, no, no, but in 1971, people are too old for this, but would you term a 1971 and Nixon's gold window thing. That was a technical default by all, by all definitions for a guy in the credit markets. Like let's not mix, let's not fool around here. That was a technical default.

[00:50:36] And you gotta be careful with that. So.

[00:50:39] Saifedean Ammous: Yeah, I've made quite a splash and triggered quite a bunch of people on Twitter by constantly saying 1934 gold confiscation was a default and 1971. gold repudiation was a default. People say that the US has never defaulted. Nonsense. They defaulted twice in the 20th century.

[00:50:57]There's no other way of understanding it. The US had made a promise that they'll pay you back. They'll take your $35 and give you gold. And they decided they can't do it. Sure. They had all kinds of interesting and irrelevant stories about why they're doing it then fighting, you know, other than the evil international bankers who are out to get the, you know, the innocent central bankers who are just out there looking out for the little guy.

[00:51:20] Sure. You can tell yourself all of those stories. It doesn't change the fact that it is a default. I think arguably we're due for another one in a lot of the world's markets.

[00:51:30] Greg Foss: No, you're correct. And that's why you need insurance. You don't buy insurance when your house is already burning.

[00:51:35] You buy insurance in case your house is exposed to fire. And so that's one of the arguments that you should always maintain a core position in Bitcoin. I'm not telling you don't trade it and have some opportunity, but never go to zero. Always own some Bitcoin. I like to say always own a certain amount over X, and it's up to you to defining your risk policies, what X is, but it cannot be zero.

[00:51:59] And it should be meaningful. A position Michael Saylor last night said a beautiful thing. He said, even goldbugs only go out and tell people to own 10% of gold. And then he says, well, what are you going to own with the other 90% like, are you sure you understand what your what your other risk exposure is?

[00:52:14] Because anyone who buys Bitcoin for the first time, let's say it becomes 3% of their portfolio. Do you know how often they'll check the price of that 3% of their portfolio? And it'll keep them up because they're into a new asset class versus the other 97%, which could be getting destroyed. But the only thing they're focusing on is the 3% that they've just waited into, you know, it's just the way human nature works.

[00:52:37] Saifedean Ammous: Yeah. Which brings me to another question that I wanted to ask you. You said Bitcoin fixes this and you came to the realization that Bitcoin was the answer. So I'm wondering why you hadn't for the previous 30 years considered that gold could fix this.

[00:52:51] Greg Foss: I did actually. And I was, I wouldn't say I was a gold bug. I have to be very careful because if I'm a high yield debt guy, I have to, and by the way, I believe strongly in the values of high yield debt, relative to equities on a risk adjusted basis. I had gold in my portfolio forever because it was the best insurance, but remember it, it started slow.

[00:53:12] Okay. In 1998, people didn't really understand the implications of long-term capital. Then in 2000 and 2008, I became a big gold bug. All right. And I said, we need gold. I own gold. I owned real estate. I owned other hard assets. And then I found Bitcoin and did I do my Bitcoin research early enough? No, I didn't.

[00:53:31] It took me until 2016 to find it. And I did like everybody does, Oh, it's gotta be a scam. It's gotta be a Ponzi. There's no intrinsic value to, and then I looked into it. And if you hear the first opinions of this from somebody who is intellectually lazy, meaning, or conflicted, by the way, someone who's a gold bug, that's conflicted that tells you a Bitcoin has no value because they could be running a gold fund, for example, or their head of a gold mining company, peel away the layer of the onion, understand what Bitcoin brings to the table. And Bitcoin is digitizing what I was looking for in gold. Okay. I actually think Bitcoin is digital energy rather than digital gold, but start with digital gold, then go down to digital energy.

[00:54:16] And as an engineer, that's what I love about it. Bitcoin is digital energy and it takes natural resource energy, converts it into digital store of value and ask yourself if you're Russia that is selling very valuable natural resources on a daily basis. And you're being paid in US dollar fiat. Wouldn't  you rather be paid in a hard asset like Bitcoin, and since Bitcoin is digital energy, you're selling natural resource energy for digital energy and storing it for value in the future.

[00:54:51] On the most secure network, programmed by math and code, and guess what? It will replace the US dollar as a reserve asset for oil producing nations first and then for the rest of the world. Cause it's only math based on the first principles of thermodynamics called conservation of energy.

[00:55:13] Saifedean Ammous: Yeah it's the most incredible way we have for conserving energy.  We can that energy into this.

[00:55:21] This was a metaphor that I was going to put into the Bitcoin standard, but then I took it out. It was half joking, but it kind of gets the point across. Bitcoin is like canned digital energy. You take the energy, you put it into cans and then that's it. You've locked it in. And then you have that coin and it's stored all of that energy.

[00:55:36] And then the more people buy into the network, the more that the energy is amplified inside that tool. It's call it a battery.

[00:55:41] Greg Foss: It's a battery. Okay. It's the same, it's a battery. It's a way of storing energy for you.

[00:55:46] Saifedean Ammous: I'm not keen on the term battery, because you can't really get energy out of Bitcoin, I guess you can, in the sense that you can spend,

[00:55:54] Greg Foss: Hey, I promise you, I promise you, you can, because you can get someone to work for you for Bitcoin and his is his energy.

[00:55:59] And if you pay him in Bitcoin to fix the roof of your house, guess what? You're getting energy out of a man.  I'll just tell you on the one hand it, when I worked so hard doing roofing, when I was 20 years old in the hot sun and I earned 20 bucks for a full day's work, I earned $20. Do you think that my energy in 1984 on the roof, in the hot sun, that I go and take that $20 today, that it's worth the same amount of energy that I put into that roof.

[00:56:26] Don't even start with me. Okay. It's not even worth $5. Let alone all the energy that I expended. That's why you need to take a store of value that stores the value of your time and your work and your energy today for consumption in the future. That's called Bitcoin.

[00:56:42] Saifedean Ammous: Yeah, absolutely. It is. It's really amazing when you think about the implications for this. Now one, hobby horse of mine that I've always,  recently I've begun to discuss this. And we had a recent episode where we went into this in a seminar in depth, I think, beyond just buying insurance against your national currency collapsing today, bitcoin, I think in the long run, basically obsoletes the case for holding gold. What do you think of that? Oh, sorry. Not, Oh, well gold. Yes, but also bonds. Well, I think now it's becoming clear that, Bitcoin is around the 10th of the market value of a gold, it took gold 5,000 years to get to where it is.

[00:57:25] It's taken Bitcoin 12 years to get to a 10th of that. And I think it's a safe bet to say that in another 10 years, we'll probably overtake gold. But I think now that we're at this point... I think a couple of years ago, if you said we're going to overtake gold, you needed a 100 X appreciation in Bitcoin.

[00:57:41] Now we've done 10 X. And so another 10 X doesn't look too outlandish, but now what does look outlandish,  to no coiners, but might seem quite reasonable for us is, well, we could do another 100 X beyond that and beyond where we are right now. And then Bitcoin becomes bigger than the bond market. And this isn't just extrapolation based on the fact that the number go up forever.

[00:58:07] I think there's a clear, fundamental case for why this might be the case because, what role do bonds play in your portfolio and why do people hold bonds? Supposedly equities are where you get your appreciation, where you get most returns that people hold the bonds primarily for safety, for protection. Bonds are the part of your portfolio that is there to beat inflation. Bonds are what is considered the risk free rate.  

[00:58:32] Greg Foss: Governor, no government bonds. Yeah. Government bonds were. They no longer are, but they were considered the recent risk-free rate. Correct?

[00:58:38] Saifedean Ammous: Yeah. So now, you know, they're becoming riskier and riskier.

[00:58:43] For me, obviously, and for you, I think it's clear that the case for holding Bitcoin over bonds is convincing, but I think, why can't we say that this was going to just keep going and more and more people are going to dump their bonds for Bitcoin?

[00:58:55] Greg Foss: So I just wrote a paper on that very basis. It summarizes my 30 years in the market. It's titled why every fixed income investor needs to own Bitcoin as portfolio insurance. And it brings the credit angle into the conversation, but let's take a step back. First of all, the traditional portfolio has always been 60, 40, right? That's just what you hear.

[00:59:15] 60% equities, 40% bonds. That is not a bad, measure of CalPERS. Let's say the California state pension fund largest pension plan one of the largest in the world, certainly. 60, 40, what did they own equities for? Yes. Capital appreciation. What did they own get for capital preservation?

[00:59:34] Okay. That's typically the way it is. You own bonds for capital preservation. You make your money on your equities, but equities are more volatile. If you believe in volatility is a measure of risk, which I do. It's not the perfect measure, but it is a measure. Equities are more volatile than bonds.  But what have bonds done?

[00:59:50] Well, bonds have ridden a 40 year decline in interest rates from 14% down to under 1% in the U S ten year. People were getting so-called capital gains on bonds, or they felt good because the price of the bonds that they had bought with a 14% coupon were trading above a hundred cents on the dollar, because the way bond math works is if the interest rates go down, the bond price goes up.

[01:00:13] Well, now we've hit 60 basis point low in the U S ten-year and now it's trading about a hundred basis points higher than that. Well, simple bond math would tell you that that 60 basis points yield to maturity that you invested in for 10 years one year ago has just lost about eight bucks or 8% because yields have gone from 60 basis points to a dollar six, excuse me, to 160 basis points.

[01:00:41] That's only bond math, it's called duration and convexity. It's like accelerate velocity and acceleration  in your physics classes. Okay. So pricing of a bond is the price of a bond changes as a function of its duration times the interest rate and the convexity one half the convexity times the change in interest rate squared.

[01:01:00] Think of that as being like your velocity and acceleration in your distance calculation in grade 11 physics. Okay. Same concept for bond pricing. Well, guys that we're used to pulling forward the returns on their bonds are now, like, what are you talking about?

[01:01:13] I just lost eight bucks. Well, do it on a 30 year bond. The 30 year bond that was issued a year ago at a 1,25% coupon that now has a yield of 2.5% because that's the going rate in the U S 30 year. That bond has lost $25. Oh my God, this isn't capital preservation. I've just lost 25% of my money.

[01:01:38] This is bond math guys. It's very simple. Don't panic. But as long as the U S treasury is there in 30 years, you'll get your principal back, but you certainly didn't make a great investment at one and a quarter percent when it's now trading at two and a half percent. And just imagine if it goes back to 14%, the pain on the street, it's not because of that I'm telling you to buy Bitcoin, though. Those are mostly inflation expectations. I'm telling you to buy Bitcoin because credit considerations will impact the rate as well. And if the credit spread starts widening on sovereign debt, the same pricing mechanism works. So yes. Is it a candidate and how big a candidate is it for Bitcoin?

[01:02:20] Well, let's just take  Institute of international finance. Global debt markets are at least $300 trillion US. So we'll do some simple math. Okay. Saif. Let's say Bitcoin someday becomes 5% of that market. 5% of 300 trillion is 15 trillion, right? That math should be right. 15 trillion, 15 trillion by 21 mil divided by 21 million.

[01:02:46] Okay. We're giving up there. It's. Now it's now over the market cap of gold. Now I'm going to even make it more exciting for you. What if you take all global financial assets, not just bonds. Total global financial assets is $900 trillion. You take 5% of total global financial assets. You get 45 trillion and how could it get the 5% again, it could get there.

[01:03:09] If energy is priced in Bitcoin, which I think is going to be a very logical evolution. And once energy markets are priced in Bitcoin and Bitcoin becomes the reserve asset, not reserve currency. The reserve asset of the world, 5% of 900 trillion is a, not a crazy expectation. 5% times 900 trillion, 45 trillion, 45 trillion divided by 21 million.

[01:03:32] You're over 2 million a Bitcoin. Put a probability on that. It's not a hundred percent, but it's also not zero.

[01:03:38] Saifedean Ammous: It's actually 4 million. It's over 4 million. That's, that'll be 45 multiples of where we are right now. Well, no, actually you're right. Sorry. 3 million is 44, 45 by 21.

[01:03:47] Greg Foss: I've done this math a lot and I can easily get to higher numbers.

[01:03:50] So I don't, I'm not telling people to get the higher numbers. I'm just telling you to run it and the expected value analysis, which is how I've traded my whole life. You do probabilities. You're never a hundred percent certain, unless you're Peter Schiff, you're a hundred percent certain, and he's been a hundred someone who is wrong.

[01:04:04] A hundred percent of the time is just as valuable as someone who's right a hundred percent of the time so keep listening to Peter Schiff. Okay. He's been wrong a hundred percent of the time. So the point being though, do your profitability analysis, understand it's a continuous distribution. You need to set your own probability outcomes.

[01:04:20] I'm not going to do it for you. I'm just going to tell you that it's 60,000 or 50,000 US dollars. Ladies and gentlemen, this is a rounding error. Do not overthink this. Okay. Where this could go, where it could go. I'm not guaranteeing you it goes there, but it is the best asymmetric trade I have ever seen in 32 years of trading risk.

[01:04:42] I'm highly confident the price will go higher. Am I certain? No. Am I going to bet all my savings on it? No, but am I going to make sure it's a portion of my portfolio that's meaningful so that I and my family are rewarded for doing some math, for doing some expected value and also for going against people that have no mathematical background called our politicians who are just printing us into oblivion.

[01:05:08] Yes. I'm going to do that trade.

[01:05:09] Saifedean Ammous: Yeah. Yeah. I think, it's becoming clear that Bitcoin works great as a store of value, for preservation of capital Bitcoin does incredibly well, much better than bonds. And I think what's becoming clear, I don't know what you think of this is that bonds work much better for bond traders now than they do for bond holders.

[01:05:27] Greg Foss: Do you think bond traders are bad people? Cause I don't, they're actually all they do is they take and they set a price and they try and provide liquidity to pension funds that realize, you know what, Oh, I made a mistake and now I have to reverse course. The best mark of a risk manager is someone who realizes he's made a mistake.

[01:05:44] Right. And reserve reverses course.  

[01:05:46] Saifedean Ammous: I wasn't being disparaging of bond traders. I don't think there's anything wrong with it. I just think, with the drop in the interest and with the variation that is caused by all these geopolitical problems that are happening and all the changes in interest rates, it ends up being far more lucrative to be the one trading the bonds and making money from buying and selling them

[01:06:04] Greg Foss: I've lost a lot of money trading bonds, Saif. I promise you, it sounds fun. It's not fun. Okay. You're managing risk like everybody else. And you think you have an edge until you don't or until you get buried by some big account that comes in, it just dumps on you and then doesn't just dump on you. He dumps on everyone else on the street as well.

[01:06:22] So everyone else on the streets, in the same position as you, it ain't that fun. I promise you, okay, you just have to manage your risk. And the best thing you do is you're like, hey, if this guy did treat you this way, this time you miss the trade the next time, and you can front run him. And I'm not saying you front run him cause you're breaking any laws.

[01:06:39] No, you're just managing risk for your own portfolio. So people like to beat up on the street. It's not an easy chair to be in. Okay. You get a call from Ontario teachers.  They expect to be able to transact on the phone and anyway, it bond traders are only market makers. They set markets according to supply and demand.

[01:06:58] Saifedean Ammous: Well, I mean the point of my comment was not to disparage bond traders as it is to disparage bonds as a method of saving.

[01:07:05]Greg Foss: It's over for that. You're totally right. It's over the 60, 40 let's run a quick calculation again. If the CalPERS has based an expected return of 8%. Okay. That's their implied return in their portfolio so that they can claim they are fully funded. Well, if they have a 60, 40 portfolio and 60% equities and 40% bonds, and they haven't adjusted down their return because interest rates have come down, it means if they have 40% of equities or excuse me, 40% of bonds that yield, let's say 3% because they have high yield, they have government debt, they have all this other mixture that yields a blended average of 3%, 40% times 3% is what 1.2%, right?

[01:07:47] That means they need on the other 60% of their portfolio to make 6.8% on the other 60% of their portfolio. So 66.8 divided by 600%. 12%. Yeah. Okay. Our equity, market's going to produce that over time. Like either they better change their prescribed rate or their prescribed mix, and this is key or they're prescribed mix, put something in there that has asymmetric return to the upside.

[01:08:19] And that's why Goldman Sachs has started to include Bitcoin in their portfolio attribution analysis. And there was a great tweet the other day that basically said the average life of a portfolio manager just decreased by 10 years because Goldman put bitcoin in their portfolio  attribution analysis.

[01:08:37] It's the way Wall Street works, guys, you know, as soon as one guy does it, the theory of agents, another guy will do it. As soon as CalPERS announces that they're investing in Bitcoin, then you'll see a cascade of all the other followers that say, okay, well, CalPERS is doing it. So it's okay for me to do it.

[01:08:52] Now. It was the same in high yield bonds in Canada, 20 years ago, when I got my start, no one was doing it. So everything was okay, but then one person started doing it and their returns started beating everyone else on the street. And they're like, Hey, and I better do it.

[01:09:09] Saifedean Ammous: Absolutely. Chris, in the comments is saying you used to get fired for owning Bitcoin soon, you'll get fired for not owning Bitcoin.

[01:09:16] Greg Foss: That's just, it's a theory of agents. Great, great statement, Chris. I think that the portfolio metrics are set by people way higher up than the typical portfolio manager anyway. So it comes from the top down. It has to be embraced by the CEO of the institution. It's that a decision like that? Doesn't start from the bottom up.

[01:09:37] It's not like the portfolio manager can own some and then report to his committee that, Hey, I just bought some Bitcoin. What do you guys think of that? You'll get fired for telling them that you bought Bitcoin, even if it's the best thing ever. It has to come from the top down. And the problem is the guys that are at the top are stupid old people like me.

[01:09:55] Okay. That have never grown up with it. I didn't grow up with an iPhone. I didn't grow up with more computing power in my hand than was required to put two people on the  moon when I was four years old. Okay. The truth is I graduated engineering without ever having used a personal computer. I only used mainframes and punch cards.

[01:10:17] Why? They didn't exist, guys, they didn't. And those are the same people that are managing these supersize pensions. Now they don't understand store of value digitally. They still live sorta like, you know, and it only, again, it's like you live in your own bubble and you gotta  learn Bitcoin.

[01:10:38] You've got to get it on your wallet before you even think about investing in your pension fund. Because if you don't understand about how it works on your wallet, you don't understand that the beauty of the blockchain. How many of these guys actually know how to operate an iPhone? No, no.

[01:10:52] They give it to their kids. Hey, Hey kid, I don't even know how to this thing works. The kid knows how Bitcoin works, but the old man has no clue and is intellectually lazy and doesn't do the math or the peel of the onion himself, because his friend says it's a scam.

[01:11:09] Saifedean Ammous: Yeah, and this is one of my arguments when, we've discussed this over many times in the seminar about whether this is going to be the supercycle, this is going to be, this time is different.

[01:11:19] We're just going to keep going up forever and we're not going to witness a crash. And we had this discussion with Saylor and I tend to bring up this argument that you just gave for why I think it's a little early. Saylor is an astonishing intellect and an astonishing mind, but on top of that, he also has an enormous amount of sovereignty over his company.

[01:11:39] He's the founder and he's the CEO and he's the chairman. He's got a lot of leverage on his company. And so when he got Bitcoin, it was very simple for the company to move into Bitcoin. Within a few months, they had already figured out all of the details of how to move forward and they did it and they started stacking sats and they haven't looked back.

[01:11:58] But I think for the majority of money managers and the majority of corporations, you don't have a Michael Saylor in terms of the intellectual capacity. And also you don't have a Michael Saylor in terms of the just  the executive power that Michael Saylor can yield and his company, you've got dozens of committees that need to meet and the issue reports and talk to one another.

[01:12:16] And I think in my mind, it's going to probably take a little bit more time until some of that top brass in the boardrooms is won over, or they grow old and they're replaced by newer people that are more open to it. So it might still be a while, but I definitely agree with you that I think that the potential is limitless.

[01:12:34] And I think, I don't see any reason why bonds would survive because they're going to survive.

[01:12:39] Greg Foss: Bonds are always going to survive because the world needs debt. Okay. Debt is the way capitalism works. There will always be bonds. The point is I would take my allocation to Bitcoin out of my bond allocation.

[01:12:49] I would turn my 60, 40 portfolio into something like 60, 25, 15. Okay. To just to keep it on those simple terms. I'm not including things like private equity or anything like that. Okay. So 60, the 15 points that you take out of your, bond portfolio, or sorry that you want to eventually get to in Bitcoin, it should come out of your fixed income portfolio in my opinion right now.

[01:13:11] But I want to take one step back.

[01:13:13] Saifedean Ammous: Now, I'm just going to say, you know, I have fun staying 25% poor.

[01:13:17] Greg Foss: Uh, if you can keep 25% in bonds diversification is key. And it brings me into a very valuable second point. I want to make, okay. Let's say that the world has embraced Bitcoin and everything else starts crapping the bed.

[01:13:28] Okay. Equities volatility increases. Equity starts screwing up because credit the gurgling and the credit system portfolio managers that are sitting on a big gain in Bitcoin, their instinct is going to be to sell Bitcoin. Okay. I'm sorry. That's just the way it works. Of course, they sell the best stuff in their portfolio, not the crap.

[01:13:46] It's just human nature. They sell their winners. They don't sell their losers. They have to raise cash. If there's a margin call, they sell what they can, not what they have to or what they want to. They sell what they can. So there will definitely be a correlation over time. I'm not going to argue, but again, listen, I'm telling you that.

[01:14:04] I believe that we're currently at a rounding error in price for Bitcoin. So I'm not going to get too bent out of shape. If it goes back to 30,000, like I don't care. It's a rounding error. It's insurance.  If the insurance on your house just got cut by half, are you going to just say, that's it?

[01:14:20] I don't need fire insurance anymore. No, you always want fire insurance on your house. Just cause the price of it went down. You could either double up or you could just say no, but I'm still going to own it. The smart person manages risk like that. The portfolio manager that gets a margin call. He doesn't always manage risk like that.

[01:14:38] Why? Well it's human nature. That's why computers tend to do a better job managing money than humans do, but it doesn't matter. There will always be human. So I saw something come across, someone who made a chat, they're surprised with how much senior executives actually understand Bitcoin.

[01:14:54] I'm going to take, I do believe there's honestly some very smart senior executives out there. Michael Saylor is an anomaly in both his intelligence quotient, as well as his, ability to manage his company. There's no question, but I'm going to throw this back. It takes a long time for people in the money management business to embrace an asset class and then get to fully invested in that asset class.

[01:15:19] It's just a process and it takes time and there'll be blips and there'll be FOMO. And there'll be, God, God Dinesh that 75,000. Now the big thing is going to be when the central bank comes out and says, I own Bitcoin, okay. There will be a gap up in price on Bitcoin, and you don't want to be fancy, not owning it.

[01:15:41] When a central bank comes out, mentioning they own Bitcoin. And that central bank may say I own it because I was selling my oil and I decided I didn't want gold, or I didn't want US treasuries. I wanted Bitcoin. And all sorts of permutations and combinations can lead to the fact.

[01:16:00] It brings me back to my home country. Okay. Canada is in a big state of, I call it confusion. If we have an energy patch in Canada, it's world respected world renowned and doing things environmentally friendly basis with carbon capture. And everything. We sold all our gold in 2006, 17, I believe 2016 or 17 Bank of Canada has no reserves gold zero.

[01:16:26] If Bank of Canada could get on their horse and talk to the energy industry in Alberta and get those excess energy reserves like flare gas and mine, Bitcoin using flare gas, clean the environment and put Bitcoin on your balance sheet. Oh my God. We've actually changed the tables and I'm involved in a company that does exactly that. We take flare gas, waste energy from oil fields, clean the gas, run it through a jet turbine, basically a 35 megawatt generator, mine Bitcoin capture the carbon and create a revenue stream from a waste product.

[01:17:09] Okay, this is beautiful. It's conservation of energy. And is it green? I'm telling you it's better to do it our way than just allow methane CH4 burned into the atmosphere or you let it go like cow farts and it takes apart the ozone, right? You better capture this energy.

[01:17:27] Use it, convert it into a beautiful store of value called Bitcoin and move yourself up on the global scale. The stage you guys, okay. We can share them an entire company, our school, excuse me, and entire country and all these people that are thinking.

[01:17:43] Saifedean Ammous: I know, but I mean, if you listen to the Bank of Canada and what they say about Bitcoin, it seems that it's very, very far off.

[01:17:50] Greg Foss: There are people at other levels of provincial government that are listening.

[01:17:56] Saifedean Ammous: Oh, that's good to know that they have to be listening.

[01:17:58] Greg Foss: It's about energy. It's about store of value. It's about reversing. You know, if you live in Alberta, you used to be the richest province in Canada. You no longer are all right.

[01:18:11] The U S pipelines because of this and that. Imagine if you could say, Hey, look, I'm actually. I'm collecting carbon, I'm cleaning the environment. I'm not going to wrap myself in this green energy thing because every there's sources of energy that are called green and aren't meant close wind power green energy.

[01:18:27] Oh, by the way, did you realize how many tons of steel go into that turbine? And did you realize how much energy and coking coal and polluting the environment go into creating that wind turbine? That wind turbine will have to turn for about seven years creating green energy, just to make back the power that was used using dirty energy as people would define.

[01:18:49] So it's about cleaning the environment. It's about using wasted energy sources. And I could even say wasted or stranded energy, the power grid, the power grid is built for some stupid resilience that never gets hit, unless it's a couple of hot days in August, right? Otherwise those turbines, are turning, but no one's using the power.

[01:19:08] You don't up and down a nuclear reactor. You're generating that power all the time. The turbines in a hydroelectric dam, they're turning all the time regardless of whether there's toasters and air conditioners and all sorts of things that, so you take stranded energy. I'll define it in a very liberal term stranded because the turbines are turning, but no one's drawing on the power and they're not being stored in batteries.

[01:19:32] Well, mine Bitcoin,   because why? It'll stabilize the grid. Conservation of energy. Think outside the box, don't listen to these carbon capture or carbon captures. Good environment is good. Don't listen to these boiling, the oceans, critics that, Oh, Bitcoin's boiling the ocean. Did you guys know that the gold industry uses at least 20 times the power that the Bitcoin network uses. Come on now, enough of this stuff, do your math, do your energy, understand the way conservation of energy works and store it in the most secure, hard asset ever created in mankind.

[01:20:12] Saifedean Ammous: Yeah, we've definitely very much on board with this. And, we've had on this podcast Steven Barbour, I'm sure you know of him.

[01:20:19] Greg Foss: Yeah. Quite quite aware. He's doing stuff. I'll just say this, I really admire what he's doing. He's doing it on a much smaller scale. Our 35 megawatt jet engines. Okay.

[01:20:30] We can scale. We can bring four of those in, we have a hundred megawatts. All of a sudden you can power. That's a conscious a bit. Well, a hundred megawatts. No, that's, that's like a data center. It's like a factory, but at the end of the day, imagine this, you have a hundred megawatts that's being generated with flare gas.

[01:20:48] And you can flip the switch from Bitcoin to powering the grid, to stabilize the grid, like what happened in Texas or even more important. And this is really five nines. These guys at data centers need five nines reliability. That means 99.999%. You're going to get the power you need. You can't shut down an Amazon Web Services.

[01:21:10] You got to give them nines five nights. So if you have five generators that are there for five nines, reliability, but they only really need so five times 2035, what's that that's a a hundred seventy-five megawatts, but they only need 125 megawatts. Hey, use the extra 50 mine, Bitcoin on the side, and when they need, let's say one of the generators fails one of the four that they're using, or the three that they're using rather fails.

[01:21:37] Hey, you just turn off your Bitcoin miner. You give it to the data center. They maintain their five nines reliability. And guess what? It's a thing of beauty. You're stabilizing the grid.

[01:21:48] Saifedean Ammous: Yeah, absolutely. I think this is quite useful, you could have backup power that is generating Bitcoin to cover its cost all the time when you don't need it.

[01:21:59] And then when you need it, you're not generating Bitcoin with it. That's fine because this way, right. So simple.

[01:22:07] Greg Foss: It's a thing of beauty guys as an engineer, it's a thing of beauty.

[01:22:10] Saifedean Ammous: Absolutely. I studied engineering as well. And so I also have this admiration for gigantic equipment that does the job reliably.

[01:22:21] Greg Foss: Yeah. And Steve Barbour. So getting back to Steve barber, I love what he's doing. We are, yeah, we are. We're joined at the hip, Marty Bent a great American data or a great American mining rather. And Marty Bent. Absolutely a brilliant guy like yourself. I get so much inspiration from you guys. You young engineers, you people that understand mathematics, I'm 57 years old.

[01:22:41] Okay. I sorta retired, and found Bitcoin and realized I can't retire. Okay. I just need to help bring this to the masses because I've actually managed risk for 30 years. And I knew zero coming out of school about how to manage risk. They do not teach you that in school. Okay. They do not teach you that banks are regularly insolvent..

[01:23:03] For those of you who missed it, go back to the start of the podcast. Global banks are regularly insolvent because they are 25 times levered to their equity base. It's only math. It's only mark to market. If you've managed risk don't trust that your bank is the low risk position in your portfolio.

[01:23:22] Saifedean Ammous: Absolutely. All right. Just one quick follow up on something. When I was saying that Bitcoin could obsolete bonds, you said they'll still be around. Let me ask you this. If the interest rates on bonds is negative or it's very low in a world where you have the store of value of Bitcoin, where  let's assume we're in a fully hyperbitcoinized world.

[01:23:40] So you're not expecting 100 to 200% returns on your Bitcoins every year. You're getting, let's say 5% to 10% reliably every year, just by holding Bitcoin in real terms, not as a return, but just in terms of the appreciation of Bitcoin. In that kind of world, why would you want to hold a bond? So if you want to preserve capital, you preserve capital by just putting it in Bitcoin, and you actually get a little bit of an increase in its value.

[01:24:08] But if you do want to take on risk, if you want to increase your capital by then you go into equities because with equity  the upside is unlimited. So both bonds and equities have a downside. Uh, you could lose all of your money in an equity or in bonds, but with bonds, the upside is limited.

[01:24:28] Whereas equity is the metric.

[01:24:30] Greg Foss: Bonds are asymmetric. To the downside, Bitcoin and equities are asymmetric to the upside, but in the case of equities, bonds have prior claim over equity. So I'll make a case at times when you own the bond, you don't own the equity. In fact, you're short the equity of the same company, because we talked about hedging that risk, but let me talk.

[01:24:49] You brought something up incredibly interesting. Any bond, that's a negative return bond. That's not a bond. You guys think about what a negative return charity. No, it's not even charity. It's it's, you've a bond on the, on the, uh, balance sheet of an asset manager. A bond is an asset that returns a positive contractual obligation.

[01:25:10] If you have just invested in a contract that returns a negative return obligation, you've turned your asset into a liability. So all that is is central bank shenanigans. That is accounting gimmickry central bank. That's not called the bond. So let's be clear. Any negative yielding bond is not a bond.

[01:25:29] It's not an asset. It's a liability. It's a benefit to the issuer. If you're a corporation and they give you negative interest rates, dude, if you're too stupid to take those negative interest rates. You shouldn't be the CFO of that corporation. Right? So negative interest rates are not a bond. There's 18 trillion of them in the world or thereabouts.

[01:25:48]Yeah, just take that 18 trillion and turn that into Bitcoin. And all of a sudden Bitcoin's worth a million bucks a coin. Yeah. That is not a bond. Then you'd mentioned something like, okay, you get a return, you can trade this thing called contango. Contango is an upward sloping futures curve. You can take spot Bitcoin and you can sell forward the one month or three month future on Bitcoin.

[01:26:13] And you can capture a 10% or 5% return every, uh, if it's monthly, you know, you'll, you'll gain a one and a half percent monthly and you multiply it by 12 and that's your annual return. Yeah. You play the contango curve. Risk-free except for counterparty risk, that's a strategy for gaining income based on the contango curve, the futures curve of Bitcoin.

[01:26:37] Does that turn Bitcoin into an income producing product? Yeah. You could take that to your investment advisory board and argue that that is the case. They would say, well, what about the counterparty risk? You want me to be exposed to this thing called Deribit or Bitfinex or what are they helped me Binance or that's traded on the Chicago mercantile exchange.

[01:26:56] Oh, that's great. It's traded on the Merck. Okay. So I understand that counterparty risk, but on Sunday of last. The world melted down in Bitcoin and the contango went negative and anyone who left half of them, the leg, you know, it wasn't exposed on the same exchange was all of a sudden turned a income producing instrument into a one legged liability, right?

[01:27:19] You've taken off one part of your hedge. And so there's so many different ways of skinning this. Bonds will always exist very simply because borrowers will always need money. Full stop. Okay. There will always be capital structures of companies that say, hey, I'd rather borrow the money than issue equity and dilute my equity base.

[01:27:42] And then it all becomes a question of what is the right interest rate to pay on those bonds and that's where the market decides.

[01:27:50] Saifedean Ammous: Yeah, I'll push back on this a little bit. In that I think with the presence of a hard money that like Bitcoin and not just gold because we know with gold, the problem with gold was that it is inherently inflationary because it's always going to be stuck in banks.

[01:28:06] And the banks will always be able to issue more liabilities because the cost of you launching a bank run on your bank in order to see if they have all of the gold is always expensive and banks had a monopoly. And so you had to go through the bank in order to get your money from one place to the other.

[01:28:22]Basically gold has very low spatial saleability. And so the monetary system around gold is not just gold, it's gold and the banks, which are indispensable for its operation, which effectively gives them the ability to print more money, which effectively makes the gold's number go up technology, not as good.

[01:28:42] You know, you put your money in a bank. The appreciation that we would expect to come from your gold is being eaten up by the bank that's issuing more credit backed by that gold. And so that in my mind is, and then you have the power of the government's monopoly that in my mind is what drives the demand for something like bonds.

[01:29:01] But I think I'm making the case, and I'm interested in your perspective that if you had the choice of putting your money in a Bitcoin, which appreciates in real terms, and also is very easy to take out of your bank at any point in time where you suspect any kind of shenanigans going on.

[01:29:19] Yes, sir. And it's very easy to spend on anywhere in the world with that perspective. I think it'll be hard for companies to be able to borrow without giving up equity. The way that I see it in that world is that we might end up with something closer to Islamic finance, where if you want my money for your company, I want to share with the profits.

[01:29:38] I have no reason to give up my money just because you're telling me you have a senior claim on the company's credits and so I take all the downside. But I get a little bit protection on the downside better than the equity side, but then that caps me on the upside.

[01:29:53]Greg Foss:

[01:29:53] You're designing an instrument that is effectively designed by the market on a daily basis. We can't really silo investments called bonds. I like to think of our equities. What is a bond? It's senior equity, what is equity? It's a junior bond. You know, again, we silo things and they tend to trade on different desks, but anyone who understands that the counter, the risk of the company, ABC just, you know, there's different points in the structure that deserve different return.

[01:30:24]I think is what you're saying. There's different return expectations at different stages of your ranking in the capital structure. Let's take one step backwards. We'll talk about gold really quickly. Michael Saylor nailed it last night in his conversation with Frank Giustra, he basically was making fun of the mining companies, the Bitcoin miners that, uh, excuse me, not the Bitcoin miners, the gold miners that don't even keep gold on their balance sheet.

[01:30:48] They turn around and sell it as quickly as they can to create it back into fiat. So there's another pressure on this beautiful store of value that was for 5,000 years, the best option. But your mining community is incented to actually sell it. Whereas in Bitcoin, it's the reverse. The miners are incentived to actually keep it if they can.

[01:31:06] It's just a different philosophy. It takes a lot of time Saif. So, but that's a minor consideration. I want to go back to the bigger consideration. There will never be a pension fund anywhere in the world that is a hundred percent invested in any one asset class. It's impossible. Okay. Despite the fact that we can manage our investment money in one investment class, if we decide all in on Bitcoin, there will never be a pension fund that approaches that level of conviction.

[01:31:35] Why? Well, there's too many people that would get fired because they were in other asset classes to begin with. So, Oh, you're telling me as a bond manager, I no longer have a job. Well, I'm going to fight that. Right? So that's the way it works internally, but then there's always diversification studies. Yale came out, they did a good study on Bitcoin, but they said the optimal exposure to Bitcoin for pension funds is like six to 8%.

[01:31:56] You have these consultants in the industry that will never, never, ever tell you to go and get a a hundred percent exposure to any one asset class. Even if it makes all the sense in the world, it just won't happen. It's ruled by consultants in the investment towers, parent, all these other guys that consult to the pension industry and all other asset managers, how they should manage their risks.

[01:32:21] So even if it made all the sense in the world mathematically, it won't happen at least quickly, not in my lifetime. Okay. It will not happen in my lifetime that any one pension asset manager would go a hundred percent into one asset class. I love Bitcoin, but even I'm not a hundred percent in Bitcoin.

[01:32:38] Okay. I have to manage risk. I have to manage it. Pate bomb that comes out. I have to manage the chance that some government who's very strong has some central banker that goes out and says, that's it. We're shutting the internet. Without even thinking we're shutting the internet within our country.

[01:32:54] Well, it's not likely to happen, but it's not a zero chance either. You got to manage risk.

[01:33:00] Saifedean Ammous: Okay. Well, yeah that's a lot of useful info for me to think about on this. I'm not gonna say that I was a hundred percent persuaded. I still think that I want, I'm still stuck.

[01:33:10] Greg Foss: I want you to do, because you're so right. I'm not saying you're wrong. I'm just telling you, it's not going to go that way. That quick little C okay, good. Look. Uh, again, if that happens, then my 5% waiting in $900 trillion of global financial assets goes way higher than 5%. Okay. But then let's do the quick math then.

[01:33:34] Okay. So, so 30% on 900 trillion, 27 trillion, sorry, 270 trillion. 30% of 270, sorry, 270 trillion. You helped me with the math. Now two 70 trillion divided by 21 million. How much is that? Is that 10 million coins or 13? 13, correct. Okay. 13 million bucks of Bitcoin. Gosh, you know what? I don't say it's impossible, but my probability distribution, it's the fact it's the tail risk and that's what I love.

[01:34:02] That's asymmetric return to the upside.

[01:34:05] Saifedean Ammous: Yeah, and I think it's also like behind the mountains are more mountains. And so where we are right now, the biggest mountain that we can see is gold. And then the ones with a little bit more foresight can look beyond the golden state.

[01:34:16] Greg Foss: Gold is a rounding error.  10 trillion bucks. That's nothing in $900 trillion, $10 trillion. You find that in your couch cushions, you'll find it in your couch cushions. Don't I want to see your couches, Greg. Okay. Not mine, but the big guys. Okay. The big guys.

[01:34:32] Saifedean Ammous: Yeah. Okay. Well, Peter has a question he wanted to ask you about a quantitative easing.

[01:34:40]Thanks. Thanks, Greg. Great contribution there to the discussion. It was really fascinating to hear all that stuff. My question goes back a little bit to something you said at the beginning, which was that the monetary system has to keep on inflating in order to exist fiat monetary system and you're an expert in bonds and a lot of the reason, well, the reason that fiat money system has to keep inflating is because central banks create money by buying bonds in exchange for a central bank deposits. And my question is given that in order to exist, the Fiat's system has to keep buying government bonds. Should we kind of typically amongst Bitcoiners, amongst people that are like Austrian or libertarian minded, people are really against quantitative easing. I say that this is like printing money. This shouldn't be allowed, but unless you're saying that you want the entire system to collapse, surely people should actually not be particularly against quantitative easing because you can view it as just a necessary part of the process to avoid the Fiat monetary system collapsing.

[01:35:53] So when the bank of England come out in the UK and say, we're going to take a few rounds of quantitative easing, surely we should just not be particularly against that sort of move. What do you say to people that think in those terms?

[01:36:05] Greg Foss: So, great question.

[01:36:06] Thank you, Peter. So yes, I believe there will be... so, first of all, you said they're against quantitative easing. So right now we don't have a choice anymore, right? At four times total global debt to total global GDP. At four times, you have to quantitative ease. It's over mathematically. You have to print money.

[01:36:23] Okay. Understand that guys that's pure math. I'm not making something up. That's what the world needs to solve the error term, which is called this debt spiral. Okay. Very simple mathematics. So yes, printing of money is required to solve the debt spiral that we have irresponsibly built up over the history of my life.

[01:36:43] And that's just the case. So then is there going to be two systems? Do I want firstly, the fiat system to fail? Absolutely 100% no. Okay. I don't want craziness in the streets. I don't want people that can't feed themselves. I want a dual system to exist. One is fiat. That's a currency that helps the barter system.

[01:37:06] You don't want to have to trade. I have a funny story. You've heard about the, uh, I use this the other day. Have you heard about the guy that was walking through town and he had a cow and on the side of the cow, it said this cows for sale for $600,000 and he's walking through and everyone's laughing at him.

[01:37:21] There's no, you're never going to get $600,000 for that cow. And three days later, he's walking through the County and he's got three chickens. Okay. And the town's folks at, see, I told you, you never get $600,000 for your cow. And he said, are you kidding me? I got three of these $200,000 chickens. Okay.

[01:37:37] That's all fiat is, it's a way of measuring what? Taking place barter. Yes, it has to exist. Okay. It's a process for facilitating global trade it's called fiat. It is paper, money with no intrinsic value. I want a parallel system to exist where money, which is not currency, it's true store of value values, your energy work or time today for consumption in the future.

[01:38:07] That is not fiat. That is Bitcoin. Store value of which we will build a second layer on potentially for currency applications, like already the apps that are being built by Square. And you know, all the guys that are building the second layer and then we'll do the real second layer called lightning.

[01:38:23] But the store of value, the base layer of Bitcoin is store of value. That's not what fiat is. Will the two systems exist hand in hand? Yes, they have to. Do I want them to? Yes, I beg they do. I have three kids. Fiat is for three chickens for one cow. Okay. That's whatfiat is for it doesn't matter that, you know, is your house going up in value?

[01:38:48] I don't know. It's really that the unit of account is going down. Don't get all bent out of shape about this. Yes. Fiat will exist. I hope it does. I think that the U S dollar... US dollar could actually be a beneficiary of Bitcoin. If you think it through and Michael Saylor I'm borrowing from him. I don't want to get into it.

[01:39:07] There will be hundreds of fiats that fail before, hopefully before Canada, but certainly before the United States, Bitcoin is for all of the other guys. And it's for Canada and it's for the United States, but the US dollar is always going to exist in my opinion, because it is a currency to facilitate global trade or barter.

[01:39:31] Okay. Now the fact that global foreign exchange is 30 times the value of global trade would lead you to believe there's a lot of speculation that takes place in fiat and I would agree there's a ton of speculation, but for the base fiat is used for yes. I hope it exists. So I hope that answers your question.

[01:39:53] It's a basically a parallel systems that exist for different purposes. Store of value versus currency.

[01:40:02] Peter Young: Okay. So when we, when there is central bank announcements, that we should have money, money, more money should be created. More money should be printed. Your view is that's. That's good. I guess it's it's,

[01:40:16] Greg Foss: it's it's mathematical, but then your chicken's just, so then all of a sudden you're  $800,000 cow each chicken was just worth, what is that? Eight divided by three, three eight, right? So each cow, each chicken, witchers just worth three. How did that work? Guys helped me out three eights of account was 66, whatever, you know what I mean? There you go. Look, that's all currency is that's all fiat  is it, you know, you got cows and you got chickens, you got silver and you got gold in the olden days.

[01:40:44] They traded them and they decided one guy was given me two chickens for a cow. And this guy down the street was giving me three chickens for the cow. And let's assume that all chickens were equal and all cows were equal. You're going to take your plate. You're going to take your cows and chickens to the place where you get the highest price currency helps that it doesn't solve it because you got a lot of speculation that takes place.

[01:41:03] But, that's what currency is. Nice. Okay. Thank you.

[01:41:09] Saifedean Ammous: I'm beginning to kind of see the point behind the idea that Bitcoin could just be a reserve asset than not a reserve currency. Saylor argues that, and I'm not entirely sold, but I can see a world in which Bitcoin keeps eating up the market share of gold, bonds, some equity, real estate that's used as a store of value. And as it continues to rise, national currency has just continued to operate. Some national currencies will have hyperinflation, but that will probably be a result of their own hyperinflationary policies.

[01:41:42] So, you know, it wasn't Bitcoin that made the Lebanese Lira or the Venezuelan shitcoin collapse. It was the Lebanese central bank and the Venezuelan central bank. So I think perhaps there is a case where would you agree that, you know, uh, decent potential banks will still managed to maintain their currency. They'll have a decline in its value, obviously, because it's always declining in value in that it's designed to go down in value, but you know, maybe we could get a world in which we have a $10 million Bitcoin, and the dollar is still operating and you still have to pay your taxes and dollars.

[01:42:11] Greg Foss: And, um, that's the world. I think that it comes. And I'll also say this, I'll let the market decide, right? I'm not smart enough to tell you. At first two things, I'm not smart enough to give you a timeframe, and I'm not smart enough. If I give you a timeframe, I'm not smart enough to give you an outcome. Okay.

[01:42:28] Just understand you manage risk accordingly, the U S dollar is in its place of prominence for many reasons. Some of them were regulatory or mandated, Bretton Woods, certainly, the gold window, we're in a relatively small part of history is, you know, I'm not going to, I loved when you brought up Islamic finance.

[01:42:45] I mean, that's just a whole different aspect of finance. The capitalist system is built on debt. You guys, that's the way it works. And if you are telling me that, fiat and capitalism    don't exist. I'm going to be a little upset because I'm a open market, free market. I have three kids and I want Canada to actually still be a great country to live in.

[01:43:07] And I want the U S to be a great country to live in. And actually I want every country to be a great country to live in. And most countries that print their way into oblivion it's self-imposed, but we're on our way to making the same mistakes right now. And that's what I'm trying to help people understand.

[01:43:25] There are consequences to believing that you can print your way to prosperity. That is not the way it works in risk management. A lot of these professors have never managed true risk in their life. I would put them on a bond desk and they get destroyed. They wouldn't even last a month and a half. First of all, they blow all their risk limits.

[01:43:45] And secondly accounts would come in and use them as a punching bag as they're too dumb. They think everything happens in our textbook. It doesn't, it happens on desks that manage it minute to minute, their risk exposure, not in a textbook.

[01:44:02] Saifedean Ammous: Yeah.  Nathan, you had a couple of questions.

[01:44:05]Nathan Reed: I'm wrestling continuously with how these two can live together.  The government is using simple inflation as a tax. I mean, that's where most of the tax is coming from. It isn't Bitcoin going to become a gauge on that inflation. That's obvious. I'm trying to envision government's reaction to this.

[01:44:30] I'm just not getting a clear picture in my mind.

[01:44:34] Greg Foss: Okay. Should I answer that question? Or did you have another question I'll go with that's the, so, so, so there's two things here. Um, let me, let me come back to my home country, first of all, uh, in Canada and or a state. So don't forget in the United States, I'm assuming you're in the United States.

[01:44:53] Texas is going to be markedly different in their embracing of Bitcoin. If energy really becomes a Bitcoin standard in energy, right? So then you'll get Texas approaching things differently, budgeting differently than a state that has no natural resources or has no vested interest, perhaps like, I was going to say New York, but they have some natural gas fracking.

[01:45:14] The point is this, it's an open market, Nathan,  governments that are smart are going to embrace this. And this is where I come back to Canada. I really honestly have a belief that the Canadians or certain levels of government in Canada are going to get this pretty quickly. You take this to a room full of petroleum engineers, and you talk about digital energy to petroleum engineers.

[01:45:35] They sort of get it. They understand. How could it co-exist then we'll again, I need to stress that I want there to be a dual functioning system. I don't want the governments to lose control because I've seen markets that don't function and it isn't pretty, it's like, it's actually scary. There's no capitalism in terms of being able to raise risk capital everybody's withdrawing risk capital from the system, a global financial crisis in 2008, 2009.

[01:46:06] How much equity do you think was raised for startups in 2008, 2009? Like it was diminimis okay. Because everybody was recalling at leverage was coming out of the system. You sold what you could, not what you wanted to, and you weren't advancing more money because everyone was withdrawing funds. They were redeeming your fund.

[01:46:28] So the guys that are making the decision, Hey, I want to invest in this startup company. You're like, what are you talking about? We're being redeemed to the tune of a hundred million dollars a day. I don't want you putting any money in a startup. I need that cash to redeliver to my unit holders.

[01:46:44] You understand that dynamic is set on a daily basis. So how does a government then come in and weight in? What would they always do? They're a bull in the China shop. What if a government actually embrace this? I'm going to take the positive side of it. And then if Canada embraces it, what does Texas do? God darn it.

[01:47:02] Those guys up in Canada, I I'm better than them. I got the Permian basin. I don't need oil sands. I'm going to use the Permian. And then all of a sudden there's a free market that develops in energy. That's based on Bitcoin and Bitcoin mining. That's exciting. That opens doors that opens governments. Did you see the guy that's just in Tennessee?

[01:47:21] There's a mayor in Tennessee that tweeted something about Bitcoin. You see Kentucky Bitcoin mining. There's an open market. People in their local ecosystems understands how beneficial it can be. I think where you're taking it is to the upper echelons of governments don't like this because they can't control their own destiny.

[01:47:39] I totally disagree. The tax base of Bitcoin itself could be what rescues the stupid fiat system. If people are honest and the capital gains they make on Bitcoin are declared which any pension fund who's managing for their employees. They don't have to pay taxes, but there are  a ton of taxable investors out there, man.

[01:48:01] Oh man, that Bitcoin capital gains could really meaningfully change the tax base that's currently.

[01:48:10] Nathan Reed: So, in five years from now, when Joe Biden 2 decides to print $4 trillion, what does that look like? If Bitcoin has a dominant position. We're not arguing that, I guess it just means, look, it just makes your dollar.

[01:48:30] Greg Foss: Let's just focus on what it does. You're printing more dollars. It just means what then the value of your dollar is depreciated more debased, more right, faster. You, we know the dollars debasing on a natural basis, just because of the organic growth of the debt due to the coupon. But if you keep adding more deficits, annual deficits, annual government spending the debasing of your currency picks up it's again, only mathematics.

[01:48:54] Nathan Reed: Sorry. Are you saying it's just going to be a fluctuation in Bitcoin's measurement against the dollar. I guess what I'm driving at is Milton Friedman cooked up a way to hide income taxes, impact on your wage, but inflation trumps, they're not inflation, but just the printing of money trumps that and what I'm trying to suggest.

[01:49:18] Oh, not suggest, but ask is doesn't Bitcoin just put at tachometer on that so that it's obvious to people, it takes away their ability to hide that tax. Therefore, I expect a reaction.

[01:49:37] Greg Foss: There's a lot there. I will tell you that you sound like you're pretty a pretty smart individual that I. I have my opinions.

[01:49:45] I haven't quite thought out the answer that you're looking for. I'm not certain I understand it. I'll just tell you as a risk manager, I'll just go back to my basis of education in the markets. As a risk manager, I need to protect against those scenarios that you are telling me, and I need to protect it with something that can't be printed into oblivion.

[01:50:06] I need to own Bitcoin because of what's happening in this other rail, this other payment rail called fiat currency that facilitates other things that perhaps has safety and said could or could not come from Bitcoin in the future, which is, facilitating trade and all that. I think where you're going with this is a nation state challenging the store of value of Bitcoin versus their own store of value, which they like to think as a store of value.

[01:50:32] But it's not, anyone who knows mathematics knows that fiat is not a store of value. And so history has proven that as well. I'm a huge fan of the United States guys. I lived there. I'll tell you a story that my roommate, from Cornell university was killed in nine 11.  I sort of live with the U S  I'm symbiotic. Canada loves the U S. We need to bring this to Canada, to North America so that we can actually regain control of our destiny. Financial destiny. Okay. I'm sorry. I don't have, I just play risk. I just play probability distributions. I can not tell you anything with a hundred percent certainty, but my gut is, I think we need these two systems and they will exist.

[01:51:17] They will exist. Math and code is freedom of speech. Okay. Math and code is Bitcoin. Bitcoin is protected by the first amendment of the United States. My granddad fought in two world Wars to protect freedom of speech. There are enough people out there that understand freedom of speech equals freedom of money and freedom of investments.

[01:51:38] So that's what my hope is.

[01:51:40]Saifedean Ammous: All right. Kane, you have a question.

[01:51:43] Kane McGukin: Yeah. So, in this space, you see a lot of battling of what is, or what might be, it seems like with the advancements of technology, wallets, different coins, different segments of just crypto in general, whether it be Bitcoin or Ethereum or whatever. And now with seeing that, to me, my opinion may be wrong.

[01:52:03] CBDC's are going to come in like regardless. And that's how they'll continue to carry out a more targeted MMT. But do we not just as a solution move to just a one wallet. So if you want to hold dollars, you hold dollars want to hold Bitcoin or Ethereum or whatever you hold it and dollars through stable coin.

[01:52:24] And then you also could bake in your stocks, bonds, whatever. As more of those things go digital, I mean, ice comes online like this is that not just the solution. And if you believe in Fiat, cool, hold it. And then if you want to go to the store and pay you, just do it with whichever of those, tokens or coins or money you choose to believe that.

[01:52:49]Greg Foss: I'll take that.

[01:52:49] And I'm sure Saif wants to answer that or add to that too. But how about this? Hi Kane. It's nice to meet you. I know. And I also know Daniel Prince is on the phone or on the thing, is it the same one? Because brother, you guys are the greatest community I've ever met. Okay. So Bitcoiners are optimists, a bond trader?

[01:53:06] What am I? I'm a pessimist guys. Don't forget. I grew up downside risk. Okay. That's all I grew up with. I had to protect the downside. It's so beautiful to meet a community of people that actually  love life to the upside. So your question was so loaded. I'll tell you one thing that I take out of it.

[01:53:22] Central bank digital currencies are nothing but digital fiat. Digital fiats always fail because physical fiats always fail. Okay. Don't overthink it. It's just digital fiat. With tracking. Now that's a little dangerous, but I'm not going there. Okay. Digital fiat with tracking. Maybe that's why the PBOC wants central bank digital currency.

[01:53:46]Don't want to get into a political fight. I want to say that Bitcoiners offer hope and yes, it will be one wallet where you can choose freely how you want to transfer value from one person to another. For what? Well, it could be just because you're a feel-good guy. It could be because you're testing the system.

[01:54:03] You know, one of the coolest things I do is I go into a restaurant and I asked the waitress or waiter. This is when things were open in Ontario. I said, guys, you know what Bitcoin is? And some of them say yes, but some of them say no. And I go, if by the end of my meal, you've downloaded a Bitcoin wallet.

[01:54:18] I'm going to tip you three times the amount of Bitcoin than I would give you in regular fiat. Almost a hundred percent of the time, come back with a Bitcoin wallet. And I pay them in Bitcoin. Okay. And I've just brought someone else into the Bitcoin world. And then they say, how did this settle?

[01:54:35] And I go decentralized, no intermediary. It didn't go through your bank. It went through the most beautiful network ever conceived by man. And I just gave you 20 bucks. That's sounds pretty cheap, right? Let's say I gave you 60 bucks. Cause I was either going to pay them 20 or 60 and I still get messages.

[01:54:54] I swear to you, my God, I can't believe how much your tip is worth to me now. Word of honor. Okay. And that's what the choice is. Could I have paid them in fiat? Yeah. Am I philanthropic? No. Is a wider Bitcoin network advantageous to me where more people who understand it eventually turn into a positive community like Bitcoiners?

[01:55:16] 100%. All of my kids have a Bitcoin wallet. All of my kids don't understand what the blockchain is. They do understand what a store of value is. That's who's going to run the future. I just got to get from where we are now with a bunch of these monkeys running government now to the future where people understand.

[01:55:38] And I think we can get there. It's not going to be easy. And it's mathematically certain that your fiat is going to debase. And I almost use the word default in certain countries. It's mathematically certain. They will default. It's the price of stupidity, but just remember I am born pessimist because I'm a bond trader things I never ask.

[01:56:03] How much can I make? I always asked how much can I lose? Right. That's what a bond trader starts with. How much am I going to lose on this transaction? Because bonds are asymmetric to the downside. Bitcoin is asymmetric to the upside and it's a beautiful community to be involved with. So, I love you guys for the questions.

[01:56:21] I wish I had more answers. I'll just tell you that bonds are an extremely important asset class that have lived the beauty of mathematics of going from an interest rate of 14% down to an interest rate of under 1% in the US ten-year. And now it's going somewhere else. And guess what? They don't go to negative 15%.

[01:56:42] So you're not going to get another 14% capital gains in bonds because bonds aren't going from 1% positive down to minus 14% negative. Even if you are David Rosenberg, who thinks they are. Okay, they're not okay, guys, please, David Rosenberg happens to be a very well-respected Canadian economist that I just wish I could convince him, but he's made the decision that Bitcoin's bad and he's never even used a Bitcoin wallet.

[01:57:05] Again, intellectual laziness that is punishing my children and punishing the children of the world.

[01:57:12] Kane McGukin: At the Citadel 21. The yuppie article is very good for people that take, right?

[01:57:18] Greg Foss: Yeah, I've read it. I like I'll tell you what the library includes Saifedean's book. It includes a number of other books, including a book by Jeff Booth a fellow Canadian called The Price of Tomorrow.

[01:57:30] You got to read people, you got to read, you got to understand math. The base layer of language. Again is math. So if you failed math, please don't run for politics. But unfortunately that's where most people end up. Okay. They failed math. So they go into political science and they go into politics, not dissing our politician.

[01:57:48] I'm just saying, guys, it's really unfortunate what you're doing, because it is totally irresponsible. And some of them don't understand, but some of them do like Pierre Poilievre of the Ottawa Carlton district, progressive conservative called out today on Twitter. What modern monetary theory really is.

[01:58:09] And I'm not saying it's a bad thing. He just called it out. There's nothing modern about printing money. It's existed for thousands of years. Okay. That's all.

[01:58:19] Saifedean Ammous: Absolutely. Well, thank you so much, Greg, for this. It was absolutely fascinating and very educational. I learned a lot that I hope everybody else enjoyed it.

[01:58:29] And I look forward to bringing you back here to chat, hopefully there'll be a lot more fireworks. Well, hopefully there won't, but realistically there will be a lot of fireworks in the bond market and the. Okay, I'm going to tell you how your guidance.

[01:58:43] Greg Foss: I'm going to tell you one final story.

[01:58:44] Please stick with me. Anyone sign off my grandfather, world war one. He was flying over Italy. He had a German fighter plane in his sights, the German pilot put his hands up, pointed at his machine gun and said, I can't my guns jammed. My granddad says point to the ground. They landed in a field in Italy.

[01:59:02] Okay. They, he disarmed them, ripped the machine gun off the front of the German fighter. Threw it in the backseat of his Sopwith camel shook hands with the enemy and said, next time I'll kill you legitimately. Or you kill me up in the air in a fair fight. All I'm asking for is a fair fight. Okay. My granddad defended freedom.

[01:59:24] This is important. This is about the future of our kids. Okay. I beg you guys to understand that mathematics is reality. Mathematics and code is freedom of speech and that's what freedom is. So please, anyone have problems with me DM me anytime I am just trying to do this because I believe I owe it to my kids.

[01:59:50] And your kids. So thank you so much Saifedean and it's a pleasure meeting you again. I have physically met Saifedean and when he was nice enough to come to Canada and give a speech and, uh, look, he's doing the same thing. He's trying to call out the people that aren't responsible. The book is amazing. I was going to try and underline or, you know, I have underlined so many parts of your book.

[02:00:12] I could have gone for a refresher, but I certainly understand... you don't understand Bitcoin, unless you've read Saifedean's work. You don't understand, economics until you realize that there's Austrian economics and there's other practices, and you don't understand risk until you've actually managed it on a professional level.

[02:00:31] And a lot of academics have not. And please not everything in a textbook is true. There are times I can put risk-free absolutely 100% risk-free trades on my trading blotter because markets are dislocated and that's all that Bitcoin is, is an ability to manage risk smartly. So thank you again. And, uh, boy, did we ever run long?

[02:00:55] I'm sorry about that. But, it was a pleasure. So anyone who has issues, please look, I have, I have, I've written a paper it's available online. It's 40 pages long. There's no stories about cows and chickens in it, but there's some other funny war stories that, uh, when I say war, I mean, sitting in the trenches of a bond desk, it's about pricing risk.

[02:01:16] All I know is I'm sometimes wrong. Come at me, show me where I'm wrong in my thinking. Okay. So far I get more committed every time I meet people who give me an argument that are that's so hollow, I go, Oh buddy. Again, you shouldn't be managing risk, but you are. So let's get at it and, make the world a better place, guys, like you, uh, give the future.

[02:01:38] And, uh, again, if I can help in any way, I'd be happy to come back on your show. It's a, it's an honor to be here.

[02:01:44] Saifedean Ammous: Thank you, sir. Thank you so much. All right, guys. Thank you. Bye guys. Take care.