Submitted by QTR’s Fringe Finance

Today, with his permission, I’m happy to offer up the latest thoughts from my friend Anton Wahlman, whose takes I don’t always agree with — but are always worth considering.

Anton is a brilliant analyst and has, many times in the past, help me see “blind spots” in analysis I’ve performed, whether it be of politics, macro or individual companies.

His Substack, Heresy And Liberty, is a must-subscribe. While his opinions sometimes seem far off the beaten path, his accuracy often surprises me — and his “fringe” analysis is exactly why I love supporting him — to think and consider angles we normally wouldn’t.

Anton is a former sell side analyst with UBS, Needham and ThinkEquity and now spends his days writing mostly about automobiles and other technology products.

Last night, he sent me his thoughts on my recent 2 hour interview with Michael Saylor over the weekend, which I will now pass on to you for your thought consideration.

My Counter-Argument to Michael Saylor Regarding Bitcoin

Chris Irons of Quoth The Raven hosted a supremely intelligent and pleasant interview with Microstrategy CEO Michael Saylor.  The central subject was, of course, why Bitcoin is the solution to all sorts of financial problems in society.

Here is the original QTR podcast interview with Saylor: Michael Saylor Exclusive: Bitcoin’s Biggest Risk, GameStop, ETFs, Inflation

Michael Saylor himself was late to the Bitcoin party, as he says.  He had been looking at it since at least 2017 but changed his mind in 2020 to become hugely bullish, and started levering up the Microstrategy entity to essentially become a levered bet on Bitcoin.

You got to hear Saylor’s descriptions of hurricanes and organic living

Saylor has an outstanding perspective on the ills of society.  In the QTR interview, you should pay particular attention to his description of the absolute madness that takes place in today’s media-driven society when there is a hurricane approaching a place such as Miami, and people evacuate unnecessarily to some other place in Florida — where the hurricane, having changed direction, ends up hitting in reality.  I will be re-listening to this description for years to come. 

You will also want to listen to Saylor describing other modern societal pathologies such as sitting still and avoiding risk, such as germs.  He didn’t use the words of George Carlin from 20 or so years ago, but he might as well have: 

Seeing as I view myself as the most extreme anti-vaxer who has ever existed on this planet, Saylor’s views on these kinds or problems and social phenomena are music to my ears.  He’s clearly a Libertarian anti-communist anti-vaxer.  It doesn’t get better than that, in my opinion. 

The solution: Here is where I don’t get it

Saylor has levered the company he runs to the hilt, with a singular bet on Bitcoin.  As a result, this is what he is selling: Bitcoin is going to the moon, and you are well-advised to get on this Bitcoin train pronto.  

The problem is that even after listening to this interview — only the most recent in a long list — I remain unpersuaded about the argument for a high Bitcoin valuation in the current format.  I am simply going to tell you why.

From my vantage point, someone created a long series of numbers in a computer, and because this computing power has been distributed to many computers globally, it is possible to keep track of each of these numbers so that nobody can “steal” your specific number-series.  This sounds lovely an intellectual exercise, and it could have a nominal value if each number-series had some real asset value to it.

However, the situation as it is looks like this: The market is currently assigning a $60,000+ value to each number WITHOUT any asset attached to it.  One of the better analogies I can think of, is that the market is assigning a gazillion-dollar value to your checkbook — without any attachment to the bank account that’s behind the checkbook.  

I mean, this is simply absurd.  

Bitcoin is not scarce either.  You can create as many cryptos as you want, and anybody is free to copy Bitcoin itself.  Let’s just call it (them) Bitcoin 2 and Bitcoin 3 etc.

Even each Bitcoin is divisible into a far smaller entity on the decimal point scale, called Satoshi.  As a practical matter, each Satoshi can perform the accounting function of the larger $60,000+ Bitcoin.  This just goes to show that a Bitcoin is completely unnecessary, when you can do with something that’s many decimal points smaller.

After all, Bitcoin isn’t a real thing.  It’s just a number in cyberspace.  It’s like buying fresh air in a bottle — but without the bottle, and no air.  It’s nothing in real life.

It is an unlimited supply of nothing. 

Pro-cyclicality

The Fed has injected so much liquidity into the economy after the 2008 financial crisis that Bitcoin (and crypto in general) was able to soak up billions and trillions of dollars of speculative dry powder coming out the Fed’s printing presses.  If people had been counting pennies over the last decade, such as in the years following the 1929 stock market crash, they would not have had any money left for this kind of speculative game.  

The richer people have become since the Spring 2009 stock market trough, the more extra money people have had to pour into their speculative bucket.  That’s why the Bitcoin price has increased. 

It follows from this, that Bitcoin could get ongoing fuel from a continued general society-wide “everything” asset bubble.  I mean, why not?  Those are the odds anyway, as long as the Fed keeps pumping up the economy with more debt. 

Wahlman

Bitcoin will likely crash with the general market

One of these days, the debt and asset bubbles will eventually pop — it’s a matter of when, not if.  When the financial markets reset onto firmer ground, with less money-printing and less debt, I think Bitcoin and other cryptos would follow similarly — but with a leveraged effect on the downside.  If the stock market falls 80%, Bitcoin could fall 99%.  

In times of crisis, people look at what assets they own and ask: What is this really, and how badly do I need it?  First comes food, shelter, guns and ammo.  Then comes real assets: An income-generating business providing real valuable services, plus gold.  

Some numbers in cyberspace?  Farmville?  How much are X numbers of digits in someone’s computer worth? One millionth of one cent?  Less?  Certainly not thousands of dollars.  This is what you sell first, in a time of crisis. 

As you can see, I don’t think Bitcoin is a hedge against anything.  I think it is a liquidity sponge, sucking up the gambling instinct of investors to throw money at hopes and prayers of making money on a nonsensical momentum play.  This all reverses when the general market reverses. 

Saylor is a good sport

I disagree completely with Saylor on Bitcoin.  I think it is as useless as a Dutch Tulip in 1637, except without the tulip, and Saylor thinks this is a great asset in which you should invest for the long haul.  Time will tell who turns out to the right.  I think it will go to zero, suddenly, one day. 

Regardless, I find Saylor to be a great sport and an interesting guy who has great stories to tell.  There is agreement on almost everything except Bitcoin.  You have to hear what he said about the irrational panic surrounding hurricanes approaching Florida, and about the folly of being risk averse by sitting still in your chair all day long.

Listen to the full Saylor interview from this weekend here.

Subscribe to Anton’s Substack here.

QTR’s Disclaimer: Please read my full legal disclaimer on my About page here. In addition, please understand I am an idiot and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning. Contributor posts and aggregated posts have been hand selected by me, have not been fact checked and are the opinions of their authors. They are either submitted to QTR by their author, reprinted under a Creative Commons license with my best effort to uphold what the license asks, or with the permission of the author. This is not a recommendation to buy or sell any stocks or securities, just my opinions. I often lose money on positions I trade/invest in. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. None of this is a solicitation to buy or sell securities. These positions can change immediately as soon as I publish this, with or without notice. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. Also, I just straight up get shit wrong a lot. I mention it twice because it’s that important.