#697 Institutions Are Coming To Bitcoin w/ Kevin O’Leary

Kevin O’Leary is a Canadian businessman, author, politician, and television personality. He is a Shark on ABC’s hit show Shark Tank and has had numerous previous business successes, including when he sold The Learning Company to Mattel for $4.2 billion in 1999. In this conversation, we discuss bitcoin ETF, monetary policy, inflation, fixed income managers, international money interest, regulation, decentralized finance, and stablecoins. ======================= Gemini is a leading regulated cryptocurrency exchange, wallet, and custodian that makes it simple and secure to buy, sell, store, and earn bitcoin, ether, and over 40 other cryptocurrencies. Offering industry-leading security, insurance and uptime, Gemini is the go-to trusted platform for beginner and sophisticated investors alike. Open a free account in under 3 minutes at gemini.com/pomp and get $20 of bitcoin after you trade $100 or more within 30 days. ======================= MiamiCoin is the first token to be released by CityCoins, a community-driven project built on Bitcoin. CityCoins aims to give people around the world a new way to support their favourite cities. The protocol has already generated over $7 million dollars in donations to the city of Miami and continues to grow every day. If you want to get involved Follow @minecitycoins on Twitter to stay up to date with the project. Visit chat. CityCoins.co to join the community discord and contribute to the movement.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Kevin O'Leary is a Canadian businessman, author, politician, and television personality. He is a shark on ABC's hit show Shark Tank and has had numerous previous business successes, including when he sold The Learning Company to Mattel for $4.2 billion in 1999. In this conversation, we discuss the Bitcoin ETF, monetary policy, inflation, fixed income managers, international money interest, regulation, decentralized finance, and stable coins. I really enjoyed this conversation with Kevin as always, and I hope you enjoy it as well. Before we get

• 0:44Anthony Pompliano?

  into this episode, though, I want to quickly talk about our sponsors. First up is Gemini. Gemini is a leading regulated cryptocurrency exchange, wallet, and custodian that makes it simple and secure to buy, sell, store, and earn Bitcoin, Ether, and over 40 other cryptocurrencies. They offer industry-leading security, insurance, and uptime. Gemini is the go-to trusted platform for beginner and sophisticated investors alike. You can open a free account in under three minutes at Gemini.com/pomp and get $20 of Bitcoin after you trade $100 or more within 30 days. Again, you can open a free account in under three minutes at Gemini.com/pomp and you'll get $20 of Bitcoin after you trade $100 or more within 30 days. Gemini, a leading regulated

• 1:26Anthony Pompliano?

  cryptocurrency exchange that is run by Cameron and Tyler Winkleboss. They have been pioneers in the industry, including they were the first to actually put forward a Bitcoin ETF application back in 2013. Gemini is also a pioneer in the space, so go to Gemini.com/pomp today and let me know what you think. Next up are my friends over at Stacks. As you may have heard, we just had Miami Mayor Francis Suarez on the show to talk all things Miami, including his excitement for a project that's really caught my attention recently, MiamiCoin. MiamiCoin is the first token to be released by CityCoins, a community-driven initiative built on top of Bitcoin. Again, MiamiCoin is the first token released by CityCoins, which is a community-driven initiative built on top of Bitcoin. CityCoins aims to get people around the world...

• 2:10Anthony Pompliano?

  A new way to support their favorite cities. In short, the city of Miami was given $7 million and counting by private citizens to improve the city with no strings attached. A city government embracing crypto instead of fighting it was a historic event. Do you want to get involved? You can go follow @mineCitiCoins on Twitter to stay up to date with the project and chat. Citycoins.co to join the community Discord and contribute to the movement. Again, Citycoins.co to join the community Discord and contribute to the movement. All right, let's get into this episode with Kevin. I hope you guys enjoy this one.

• 2:42Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 3:05Anthony Pompliano?

  First, I want to start with the big news of the Bitcoin ETF. What's your read on the launch of the Bitcoin ETF and the impact on the market?

• 3:12Speaker 02

  I like it as an indicator that the regulator is warming up to finally providing guidance and regulation for the real thing. I don't like it as a product. If I'm going to be exposed to the price of Bitcoin, why don't I just buy Bitcoin? And so the futures market is very efficient, but sometimes when prices are very volatile, not so much. And so, look, it's great that it's happened. It's clearly reflected in the overall price of Bitcoin with the optimism globally that the US regulator is finally going to get behind cryptocurrencies, not just Bitcoin. And it's a first baby step. Frankly, you can buy an ETF with the real thing underlying up in Canada right now and other countries are doing that, even with Ethereum now in Canada.

• 3:54Speaker 02

  So, you know, hopefully within 24 months, which is sort of my time view, we're going to have the real thing. Bitcoin inside an ETF wrapper that allows people with equity portfolios to buy it and get price exposure to the price of Bitcoin and cryptocurrencies. It's not a bad thing. You can't say it's bad, but it's not the way I, I don't want to invest in it that way. And why pay the fees? Why don't you just buy Bitcoin and hold it in a decentralized wallet? And I think that's the most efficient way to do it.

• 4:23Anthony Pompliano?

  What are the institutions saying to you about the ETF? Is this kind of like an open the kimono now they think that they can start to allocate to the asset because there's an ETF approved?

• 4:32Speaker 02

  No, no, this doesn't, it still hasn't been, the majority of institutions and the wirehouses that run the very large brokerage community are not there yet. This has not been approved by compliance. Just the fact that it's a futures contract in itself, just futures contracts are for accredited investors only anyways, so it's a small subset to start off with. And they can buy it on their own in an online account, but the major houses have not approved this yet.

• 5:01Anthony Pompliano?

  Okay. When we think about monetary policy, the Fed actions and kind of inflation, talk to me about your view right now. We've now had multiple months of over 5% CPI, core inflation's at 4%, and we continue to get this idea of a lot of people saying it's all transitory. How do you think about inflation and then also what the Fed's actions should be moving forward?

• 5:23Speaker 02

  I spend a lot of time on this month because it's reflected in my operating costs in the 34 private companies that I own. Everything from gym equipment manufacturers to commercial kitchens, insecticide companies, this is how broad the portfolio is. What is happening right now is supply chain issues, and it's reflected in what I call transitory inflation. Let me give you an example. I can't get parts off a ship that's moored outside of Los Angeles for six days. I just found that out before I came on the air because it's stuck in a jam trying to get into the port. We're not operating the LA port 24/7, which is insane in itself, but because I can't get those parts, I'm scrambling to buy parts so I can finish

• 6:07Speaker 02

  off manufacturing equipment, and I'm paying up as much as 30% to find those parts in the secondary market. That is reflected as an inflationary increase in my cost of goods. It's happening all through the S and P 500. So the fact that we can't get our logistics figured out is the reason we have inflation right now in every aspect of business. The same thing in trying to move, you know, operations out of staffing facilities we have in China to Vietnam, just to move the molds. I can't even get a container. It's four times more expensive than it was just 18 months ago to get a container to move the equipment. Inflation is a result of broken down supply-side logistics.

• 6:47Anthony Pompliano?

  When we think about those supply chain disruptions, how much of it is initiated by the fact that people were handed money? They started to spend that money in the economy, they drove up demand, and the supply chains weren't ready for the demand, and that ultimately broke the supply chains, which then leads to the increased prices? Or is it just, no, the supply chains coming out of COVID, they kind of got shut off, then turned back on, and it's the turning back on that's actually breaking them?

• 7:11Speaker 02

  Well, you're right. The consumer never turned off. Even in the height of COVID, you know, February, March, April last year, when it was just, you know, a huge pandemic, they still had those stimulus checks and they were still ordering everything online. And so the amount of traffic that started direct to consumer really put pressure on logistics for transportation, both inbound goods into the US, and then distributing those goods within major metropolitan areas. And it never stopped. It just kept growing and growing and growing. I'll give you an example. Nike, you know, the behemoth global company, in five months, got to 50% direct to consumer. They thought it was going to take them six years. And that's the good news. The bad news is the amount of logistics you need to be able to ship sneakers

• 7:54Speaker 02

  all over the world, whether it's Nong Pen, Cambodia, or New York City, put tremendous pressure on the systems in place. And so we have got this remarkable situation now with huge consumer demand, six, seven, eight, nine percent GDP growth, and we don't have the infrastructure to support it. And I'll give you another case, or use case, where it's a big problem that I'm dealing with now. Chip shortages. We only make 25% of the semiconductors in the global demand here in the United States. The other 75% is in Asia. We can't get the chips. I don't care if it's a truck you're trying to buy from Ford, or something from me in consumer electronics. I cannot get the supply. How did that happen to us? How is that possible? It's not about just-in-time inventory. We need just-in-case inventory,

• 8:36Speaker 02

  in case demand is stripping what we thought it was going to be, which is exactly what's happening right now.

• 8:41Anthony Pompliano?

  So one of the repercussions of this is as we get higher levels of inflation, obviously, all the people who are holding fixed income, whether it's PIMCO or some of the other really large fixed income asset managers, but also the pension funds, the endowments, the foundations, the really large asset allocators that depend on this stuff as part of a large portion of their portfolio, they now all seem to really be struggling. And the reason why they're struggling is just because on a real return basis, they're now returning negative on that fixed income. And so what are you seeing there as like a repercussion of the higher inflation and how people are thinking about their portfolios?

• 9:15Speaker 02

  It's a huge problem, mom. It is a massive problem because the traditional allocation to an institutional portfolio was 60 equity, 40 fixed income. Generally, that fixed income came in a form of a ladder of government bonds, average duration maybe nine years, and corporate credits triple B in above five to seven year duration. And they would always pay you 200 to 300 basis points over inflation. That's not the case today. There's lots of corporate paper being issued right now at under 3% for five to seven year duration. When inflation is 2.1%, the real return is almost zero in terms of buying power. And so that's incredibly risky. And it's one of the reasons you've seen such an incredible

• 9:56Speaker 02

  demand or interest in stable coins that can be staked out at 5, 6, 7% for 30, 60, 90 days. And that's got the regulator really, I wouldn't say upset, but concerned. Stable coins have become the focus of the regulator right now because people are treating them like money markets. And in some cases, they may not be that.

• 10:17Anthony Pompliano?

  What do you think happens there with those stable coins?

• 10:21Speaker 02

  So you're well aware of the tether situation. You know that Circle has started with, you know, just two years ago, practically nothing in USDC, and now is over $30 billion. That's a lot of money. And most of that is in the hands of high net worth individuals, family offices, hedge funds. It is not yet approved institutionally for reasons we already know. The regulator is scrutinizing it.

• 10:45Speaker 02

  I think the genie's out of the bottle, or the ship has sailed, or whatever analogy you want to use, we're not, it's not going to be made illegal, it's going to be regulated. Now, how much balance sheet assets you need to support your stablecoin is going to be the debate. And frankly, I think the smart move is being done by the CEO Jeremy at Circle by simply saying to the regulator, "Turn me into a bank. Regulate me like a bank, because that's what I am. I'm being treated like a bank by my investors." And once that happens, and if it does, I think that's a really good first step. Because, you know, I think it's easier to regulate stablecoins backed by USD, or whatever

• 11:25Speaker 02

  short-term duration government credit, and get that through the meat grinder of the regulator than it is Bitcoin, which is so controversial for all the reasons you've been talking about for years. So if I saw that happen first, that would be great, it would be a good step forward. And then the debate about decentralized finance and financing and payment systems, that'll come into focus next. There's just so much going on, it's incredible right now.

• 11:51Anthony Pompliano?

  So Circle is, let's just refer to them as kind of a private market participant that's doing this. Other private market participants would be the large banks. We know JP Morgan tried to launch JPM Coin, there's a couple of others that have tried stuff. How do you think about the private market doing this versus, let's say, the United States with like a central bank digital currency, or some sort of state-backed effort?

• 12:12Speaker 02

  I don't think they're entrepreneurial enough to pull it off, I really don't. What happened at Circle, and if you meet that management team as I have, these are very, very savvy entrepreneurs that are working within the crypto community with their version of what a stablecoin is. They moved very, very quickly, they had virtually nothing under management just 24 months ago, and now we're past 23, 24, 25 billion, and it's going up every week. You don't see that in the traditional banking system, because they're trying to protect their own systems that they have already in place. They don't want to cannibalize themselves. And frankly, if they were successful...

• 12:55Speaker 02

  in launching a stablecoin they would have to do it under their own compliance systems which are and and the and those compliance officers in a giant wirehouse know that the regulator is scrutinizing all of the players in crypto in stablecoins and they're gonna wait till there's a judgment they're not gonna go and start fighting with the regulator at a JP Morgan that's not gonna happen and so this is a really interesting story of the hare and the turtle you know that starting very slowly sometimes you can win but maybe not in crypto once you get scale once you become a standard once everybody's using your platform and writing and taking you know staking and and loaning and and doing it as I I'm doing that right now at

• 13:36Speaker 02

  circle I'm putting up contracts at thirty sixty ninety days on usdc I go to fiat usdc I get paid back in usdc and I can convert back to fiat any currency but to get that through my own auditor took me six months let alone that's getting them to agree to sign the statement so I can file with the regulator I mean this is gonna take a while

• 13:56Anthony Pompliano?

  how much are you earning when you do some of this stuff like what are their general rates and what I'm trying to compare it to is like the fixed income guys who were earning you know five six seven percent on their like highest risk stuff lower risk stuff was kind of you know one two percent what what is it in the stablecoin world right now

• 14:14Speaker 02

  well each platform is different right now you see see some very attractive rates on ftx if you if you're able to set up an account and you have compliance that will let you do that including their own compliance which is very heavy scrutiny they make sure it comes on that platform whatever job they're in remain compliant with their own law you know code in whether Switzerland or France or Canada whatever you can do more than seven percent on ftx right now in staking a circle contracts right now yesterday I did some at six point two percent for ninety days that's very attractive on usdc so you're you're you're beating inflation you do have regulatory risk

• 14:54Speaker 02

  off I mean if tomorrow morning I wake up and usdc is no longer allowed by the regulator that ain't good news and so that's why there's some hesitancy but you know We have as a weighting probably less than 1% in the particular mandate in USDC right now, but I would take it up way bigger if the regulator would let me. And I would probably have, I put our cash in there. You know, it could be 20%. And because I don't want to make 22 basis points, that's what my cash desk is giving me right now. 22 basis points when inflation is 2.1%.

• 15:27Anthony Pompliano?

  Yeah, it's crazy. You now are Mr. Wonderful. You're world famous ABC Shark Tank. I see you smile when I say it. If there's humans on Mars, they know who you are. So this isn't just like a Western Hemisphere conversation, right? It's not just about the United States and Canada. I know that you've got a number of different friends, colleagues and peers all throughout the Middle East, Europe. What are they all saying about this? Are they jumping in the game? Are they still a little bit hesitant? What's the international money doing?

• 15:57Speaker 02

  It's very, very interesting. The topic that's going to be in Riyadh next week is about crypto and there's a tremendous amount of excitement about it, but they have not pulled the trigger yet. They're trying to get themselves set up for the moment where the regulator allows it, both in their own geography and in the US. You've got to remember that those funds, those sovereign funds, whether it be Saudi Arabia or United Arab Emirates, a huge amount of that capital is invested in the S and P 500 and derivatives thereof. Huge amounts, huge, huge amounts. So they cannot be offside with the US regulator. They just can't. And so, and I look at this as a huge opportunity. I speak to those guys almost every day.

• 16:38Speaker 02

  They would immediately go to 1 to 3% on Bitcoin alone, just Bitcoin, let alone Ethereum or any level 1, level 2s on the chain. They haven't even thought about that. They're just thinking about Bitcoin and only that as an asset. The amount of capital that will come into this market when the regulator approves Bitcoin as an asset or a currency or a security, whatever they're going to, you know, regulate it as, is going to be unbelievable, which is why I own it. I mean, my premise, you know, stomaching the volatility, which we all do every 12-month cycle, is the upside. is behemoth is huge and so you know whether it be for me it's an asset it's a long term hold

• 17:21Speaker 02

  the coin I own the coins the coin I own I don't trade it I lend it I stake it and you know I get some income from that but I'm never going to give up the coin and you know I heard you guys talking about the the ESG issue I'm sorry that hasn't gone away but there have been some new initiatives in raising capital to solve for it.

• 17:40Anthony Pompliano?

  So before we get to the ESG stuff with this international money right you you talk about them wanting to go one to three percent just to Bitcoin maybe they would do some other stuff as well are we talking about just large family offices in the Middle East and Europe are we talking about foundations sovereign wealth funds like and I'm trying to use that as a proxy for like how serious the most conservative investors in the world are about this versus oh this is a large family office where there's kind of one decision maker and they're going to end up making that decision based on how comfortable they are in a regulation standpoint and also return standpoint.

• 18:13Speaker 02

  Yeah, the real opportunity is not with the family offices or hedge funds that operate out of the Middle East the real money is in the actual sovereign funds in both Saudi Arabia and the United Arab Emirates it's billions and billions and billions of dollars they have not allocated to crypto yet when that happens you'll see it reflected in the price of Bitcoin there's no question about it and they have such long-term views in those funds that and the funds are so large remember these countries don't operate the same way as the US domestic countries do although

• 18:55Speaker 02

  they're managed many of the people managing those Middle Eastern funds the sovereign funds are actually Western educated managers and so they generally abide by discipline and principles of of you know risk diversification so they may have a mandate for example that no stock can represent more than 5% of the fund or no sector more than 20% those are diversification mandates that are used all around the world and they do that there too but when you're dealing with a multi-billion dollar mandate and some of these are

• 19:29Speaker 02

  They're the largest pools of capital in the world. A 1% allocation is a tremendous amount of money. And so, there's a whole bunch of people, me included, heading over in November, and everybody is talking about not just Bitcoin anymore. It's what would a portfolio look like? If, you know, the managers are asking this of participants that are already building these portfolios. Give me an allocation of positions if I want to be exposed to Bitcoin itself, of course, but also be involved in decentralized finance and also own Level 1 and Level 2 chains. What does that look like? And I'm heading over, I think probably you and I at some point in the

• 20:11Speaker 02

  next few weeks, I'm going to give you my portfolio. I'm not finished yet, but it's over 21 positions right now. And I'll do it on your show. I'll disclose what I own. I think you're going to be knocked out by what you see what I've got here. Because I've gone right down the rabbit hole. I've hired multiple people to do the due diligence on some of these really eclectic projects, but we are investing in them.

• 20:33Anthony Pompliano?

  My last question on, let's say, the sovereign wealth funds is, could you see them getting into mining at some point?

• 20:39Speaker 02

  Yeah, great question. And yes, that is my plan. And here's, that goes to the ESG issue. Okay, here's the solution, all right? Let's say you can't get around, your compliance department can't get around the issue of ESG, because it's still out there and they're still have compliance and ethics committees and these big funds. And so, here's a solution. Let's say you go from scratch. Let's say you go to West Texas and you want to build a gig facility and build it out in 250 increments. And you, and you basically guarantee the investors that you're only going to use wind and solar, and you agree to the Texas grid that you'll pay back some of your production. And you

• 21:21Speaker 02

  go to the capital markets and say, every time we're awarded a coin, it stays on the balance sheet of this investment. So you know with certainty that your coin was mined in this facility that you own. That's what I'm doing. And that's a big solution for me because I get to check the box now on ESG for anybody that's even saying to me, where does your coin come from? I can't do that if I buy an ETF. I can't do that if I just go and buy a coin in the open market. But I can do that if I was awarded the coin in an ESG compliant facility. And there's enough coin to be mined left that you're going to see a lot of capital put to work. And not just the geography of West Texas. There's other jurisdictions in Northern Europe that are looking at this proposal as well. So you're basically going

• 22:06Speaker 02

  into the government office saying, we are going to mine sustainably. We're going to do it. Give us the permits. Give us access to the grids. Give us all the things we need to be able to service this facility and let us get to work.

• 22:18Anthony Pompliano?

  So I've got Bill from ABRA here. What's your take on the ESG stuff?

• 22:22Speaker 03

  Well, Kevin, really great to meet you. Very impressed with how deep you've gone on this topic. It's not easy. So much respect there. I guess, you know, two questions, right? First, I understand that the ESG issue hasn't quote unquote gone away. But one, do the numbers really support the narrative when you go deep that the issue should exist? And do you actually think that you could produce enough energy in wind and solar at large scale to make a dent in the hash power war, assuming that we get back to the current hash power numbers by this time next year? Actually, I'm assuming we would be ahead

• 23:02Speaker 03

  of the pre-China crackdown numbers by this time next year. And would wind and solar actually make enough of a dent to even warrant the investment?

• 23:12Speaker 02

  It's a great question. You can't do it with solar alone. It's a combination of wind and solar, which makes it expensive, but it's definitely ESG compliant. And let me tell you, I agree with you around the debate. I mean, if you want to own Bitcoin, own Bitcoin. But it's not that simple. If you have a compliance department and you have the Larry Fink letter hanging over you, everybody knows about the Larry Fink letter. In fact, everybody also knows that BlackRock has hired a chief ESG officer. And so if you are being serviced by an sovereign fund in the world works with BlackRock pretty well. You really can't go against that mandate. It's not going to work for you. You've got to solve it.

• 23:53Speaker 02

  And so the question is, you got to check the box on ESG or you can't play in the coin space if you're tied into those metrics. So it's not like they don't want to. It's they can't. It's the same issue about, you know, buying certain goods and services from banned countries. That's what the Ethics Committee stopped you there too. I really, I really work in this, in this, in this institutional world. And it's not like you can call up the Chief Compliance Officer and have a dialogue regarding the merits of mining Bitcoin with existing energy sources. They just don't give a shit. They're not going to take the call. They're just saying no.

• 24:32Speaker 03

  So when they see how much money is being made in the space, don't you think they're just going to change the narrative to fit what they need it to be to make the investment, which is what, I mean, come on, they do that anyway. I mean, and also they're not eliminating all the companies from the Fortune 500 that probably wouldn't pass muster on the same usage around ESG if they weren't already in the portfolio today.

• 24:53Speaker 02

  Well, that's not true, actually. If you look at the allocations, even Calpers alone said this after the fake letter. They're going to downsize their energy holdings. But probably over 20%, they may be down as low as eight now. And you can see reflected in large energy, energy names like, you know, Schlumberger A and Exxon and Moll. They're, they're, they're getting their PEs compressed because incremental buyer is not there anymore. On the hydrocarbon mandate coming out of the White House. So there's some pretty big forces at play. And when you talk about, you know, if you'd only own Bitcoin at 8,000, now it's over 60,000 to a, to a sovereign fund that's running, you know, 30, 40, 50, 60 billion dollars, it's a rounding error.

• 25:38Speaker 02

  They don't care. And, and at the same time, it's the greatest opportunity for those of us that have invested in cryptocurrencies is to solve this problem for them. I mean, it, it, it's not going to get solved debating it with the compliance officer. It's going to get solved when they can simply check the box saying this facility in Norway, this facility in Northern Quebec, this facility in Northern Alberta, and this facility in West Texas, where the places I'm looking at, mine sustainably as agreed to with the government. The government has certified this as an ESG compliant facility. Then the debate's over. In fact, those are the very people that I'm going to to raise

• 26:19Speaker 02

  capital from to build out these facilities because it solves their problem. The same compliance office that won't let the fund buy Bitcoin will put money in the ground to build a facility to to to mine coin if it's ESG compliant. Go figure.

• 26:33Anthony Pompliano?

  Yep. Joe, John, what questions you guys got? Hey, Kevin. Thanks for doing this. Nice to see you again. So I remember seeing something that you said, I think it was a month or two ago, that you were going to double your crypto exposure in your portfolio. Is this something that you're actively looking to do? Is this something that you're waiting on regulation for? Or have you already done it, etc.? Just a little more kind of insight into that.

• 26:55Speaker 02

  No, I'm on my way. By the end of December, I should be at 7% of the operating company's portfolio. And the way I'm doing it is with FTX. I became an investor this week in FTX. It's a private company, but I was able to buy some of it because I've become their paid spokesperson. Most people know that. Right beside Tom Brady. I love that. I can't

• 27:20Speaker 02

  wait to play some football with him. But the bottom line is, they're smart about it. They're helping me build that portfolio with some very eclectic products that normally it's not easy to get access to. I'm really fascinated now by the different approaches on decentralized ledgers. And so I've got a lot of people on my team working on it. I think the NFT market is going to be absolutely huge, and I'm going to be a participant in it. And I'm thinking NFTs, not just on digital art. I'm thinking NFTs used to authenticate physical assets. The one I'm working on, because I'm a huge watch collector, and I know all the world's largest collectors and the CEOs of all the watch companies, is authenticating

• 28:05Speaker 02

  secondary market watch trading. I don't know if you saw that article last week. I think it was put out by CNBC. $20 billion a year of trading in the watch asset class. And the biggest problem, let's say I want to buy a tech Philippe that went off the market 17 years ago, which I'm doing right now, a piece celebrating their 75th anniversary. I have to send it to a guy named John Reardon in New York to get it authenticated. To know that it's real. The hassle in doing that, the cost of doing that, moving it from the seller in Hong Kong to New York City in Bonn. Having John look at it, open it up, make sure it's real, close it, send it back to the seller so it's in his physical hands. Then do the trade. I can avoid all that with a watch NFT.

• 28:49Speaker 02

  Once that watch was put on the market, it was. Reardon would do an NFT to it. Approve it, certify it, and for the rest of that watch's life, and every time it trades. You know it's real. And if we have to pay back a royalty to the tech affiliate, or whoever the maker is, or the designer of the dial, that's fine. You can all do that on a smart contract. So should that be on Solana, should that be on Ethereum, should it be on a derivative of Ethereum? I don't know yet. That's the research I'm working on.

• 29:15Anthony Pompliano?

  John, what questions you got?

• 29:16Speaker 04

  Yeah, what's up Kevin? Nice to see you again. Can you talk more about your stablecoin holdings and like? Any restrictions that you have? What coins you like versus other ones?

• 29:25Speaker 02

  Yeah.

• 29:28Speaker 02

  I've done a lot of work on stablecoin because this was out of need. About 18 months ago, we took down our commercial real estate holdings, including here in Boston where I am. Down from 31% of the operating company's portfolio. Remember, these are income producing properties, so it's a form of our way we made income. And the cap rates got so low here in Boston, New York, Detroit, Miami. We just sold them, including, you know, climate controlled storage facilities that we bought at 11 cap that were trading at 3.5 cap. So it was time to exit. So we sold it down to 8% holdings. The only buildings we didn't sell are liquid. Or have, you know, issues around them that they house movie theaters and things like that. And we had all this cash, so we go to the cash desk and we say, okay, we have to park this cash while we redeploy it.

• 30:13Speaker 02

  And they offered us 23 basis points. And I'm talking about some of the biggest cash desks in New York. And I said, this is insane. You're gonna give me 23 biffs? And I'm, you know, I'm facing 2.1% inflation. That's when we started digging into stablecoin because that was the first time. We started that dialogue with Circle and other entities. And then I called up our auditors and said, look, we're going to deploy some of this cash into stable coins. And we chose USDC because we really like the compliance team over at Circle. If you really, those guys understand our problems regarding compliance. And the auditor said, no way, no way. You are not doing that. We're not signing the statements. I said, that's

• 30:54Speaker 02

  crazy. Like you, I want to deploy this capital. You won't sign my statements? No, we won't. It's not, it's not approved by the regulator. I mean, guys, you know, we talked about crypto collectively all day long, but it is so early in the institutional world. It is so nascent. It's so not there yet. And that in itself is the giant opportunity. I mean, just stable coins alone would be a huge market if you could actually lend them out, even anything over 4%. Now, I assume when they, when they regulate it, the demand is going to be so high, it's going to push down the yields. But right now, you're talking 6.2% on a 90-day, you know, state, which is phenomenal. Unless

• 31:39Speaker 02

  you wake up and the regulator changed their minds on, on stable coins and USDC, which is kind of scary, which is why we can't load up. We can do, you know, maybe a hundred basis points worth of it, but we can't put 20% of a portfolio into it. I would if it was regulated. So, and I'm just one guy. Can you imagine what would happen if it, tomorrow morning, regulator says, okay, here are the rules for stable points. Here's what a stable coin money market fund looks like. Yeah, you have to be a bank and then Circle turns into a bank. Whatever's going to happen, I'm speculating when I say that. But the demand would be unbelievable.

• 32:09Anthony Pompliano?

  Kevin, I got two questions for you and then we'll let you go. First is, when you think about those regulators coming in and giving the thumbs up, kind of saying, all right, everyone go. Would you go to 20% or would you do more in your portfolio in terms of full exposure to the industry? Could you see yourself going to 50-plus percent, given that you're 50-plus percent in US dollar kind of assets and cash?

• 32:34Speaker 02

  Well, you know, it's a good question, Paul, and we just had that discussion on Monday with our OT. Here's what I think we're gonna do. We're gonna go to 7% on crypto itself by December. But I've also started to take some pretty big positions in public miners right now that are checking the box on the S G. And so I guess you could argue that if you included that in what we'll call the crypto weighting, if you want to call that an asset class. And the reason I'm doing it that way is I really can't go past a 20% in any one sector. If you call, I really believe that that crypto is the 12th sector of the S and P. We don't know it yet. It hasn't been designated

• 33:18Speaker 02

  that, but it's coming in the years ahead. We have 11 sectors now, including real estate. Crypto is going to be number 12, primarily driven by decentralized finance. It's so disruptive, so powerful, so productive, it'll get there. So I want to have more exposure during that transition. And I guess the way to do that and keep my own compliance department on board, my own auditor on board is to simply buy the securities of those compliant miners that are trading with the volatility of Bitcoin's pricing. And I think that will get, you know, I'm going to be discussing this in Abu Dhabi in November, and I'll present the portfolio there. Same thing

• 34:01Speaker 02

  in same RS is a huge conference there in Switzerland in January about this exact topic that you're raising, this exact topic, very high net worth individuals and family offices in Europe are, I guess it's not a secret anymore, but it's happening. And a lot of the crypto players are going to be there presenting their way of indexing crypto. I'll show mine. I'll listen to everybody else's. I bet you I'm spending 40% of my day now on this topic, maybe even 50% because it's performing so well. I mean, I don't have any performing this well. So

• 34:39Anthony Pompliano?

  My prediction, back in 2018, the first time you and I ever went on television, I say, yeah, I'm gonna remind you, you forbid me for being over 50%.

• 34:51Speaker 02

  Why are you such a dick about this?

• 34:55Anthony Pompliano?

  But here's my prediction is that in the next five years, more than 50% of your portfolio will be in, but not from a sense of, I know you have these 20% kind of limitations, but I think what will end up happening is your, let's say, real estate portfolio, people will start paying you in stable coins. So it'll be kind of tangentially or indirectly related to it. And so you'll have exposure in more than 50% of the portfolio to these technologies. It's just not going to be 50 plus percent of you going and buying Bitcoin or, you know, one of the individual assets themselves.

• 35:26Speaker 02

  Yeah, I think you might be right on that. I'll tell you where I think it's going to manifest itself first. In the FX market, for example, I use this example all the time. I have a portfolio of over 50 names in Europe, large cap stocks trading in Zurich, in Europe and in London. So you've got British pounds, you've got euros, you've got Swiss francs. Every time I put on the position, I have to go USD, I have to go through an FX desk, pay BIPs, convert to Swiss francs, buy the local market. When I sell the position, it goes in reverse. So I'm getting clipped lots of basis points, a lot of friction there. I think when the regulators approve a payment system on the chain between a market like the Swiss market

• 36:07Speaker 02

  and the US market, that solves the problem forever. I mean, you're right, because when I, when I buy that security, I'll buy it on a chain in a, in a, in a, in a way that I don't have to go through multiple fiat. And I think that's going to happen within five years. And so you're right, people are going to be exposed to crypto and payment systems that will represent 40, 50, 60, 70% of their net worth. They just won't think of it that way. It's a good, it's a good analogy.

• 36:33Anthony Pompliano?

  Correct. My last question for you is, when you guys were doing the filming for Shark Tank, I think you recently did that over the last few months, what's the conversation behind closed doors? You, Mark, Lori, Barbara, Robert, the whole crew, what are most people saying about this? Are they all as bullish as you are? Or there's still some skepticism among that crowd? And I use them as a proxy for most of kind of the average American. That is one of their biggest sources of kind of business content is watching Shark Tank. So what's the thought process of, of your co-host?

• 37:08Speaker 02

  Well, you know, we don't do crypto deals on Shark Tank or marijuana. I mean, we don't, we can't do those for, for, because of regulatory reasons. And we, we're also very, very sensitive to the regulator for obvious reasons for, you know, it's a network owned by Disney, et cetera. But behind closed doors, Mark and I are very, very active in crypto. You know, the Cuban is, we, we share notes on NFTs. You know, I'm, I'm intrigued by, by that whole business and I'm very active in that. I, I've invested in WonderFi, you know, which is decentralized finance. They're bringing their app in the next few weeks. The company just raised another 20 million yesterday.

• 37:53Speaker 02

  Also in Jordan Freed's business, the platform called Immutable Holdings. He owns nft.com. He's setting up profiles for most of the S and P 500 brands. I'm working with him on the watch industry, for example. I own a piece of that company too. And, and, you know, I, I look at all these, I look at this stuff, probably of the Sharks, two, two out of us are, are allocating portfolios to it. The others, not so much yet, but they're very interested. They're more traditional in how they deploy capital. But I don't know how you, how you can ignore it anymore. Given the pressures that you started this conversation with around inflation and, you

• 38:38Speaker 02

  know, decentralized finance, the productivity it can provide to the economy. You just can't ignore it. And I understand the regulatory cloud. I get it. But I don't think even the regulators want to abandon the promise that crypto has for the American economy. So it just has to be rules based and they'll get there eventually, even if it takes time. That's where we're at.

• 39:03Anthony Pompliano?

  So the Sharks that are not yet allocating, is this basically a question around regulatory? Or is it they're not yet convinced? Or what is kind of the biggest critique or the biggest obstacle that you see turning them from not being allocated to actually getting allocated?

• 39:19Speaker 02

  Primarily regulatory. I mean, you know, with Without naming any specific shark, they all have big brands. They all support all kinds of companies. Some of them have their own products, goods and services around their name. And it's the same reason that they don't get involved in the cannabis market. It's a Schedule I regulated narcotic in multiple states and yet it's legal in others, but they have to be compliant. And so, they all have advisors. And it's like I said earlier, I have to fight my orders. I have to say, "No, no, no, no, you don't get it." And they say, "We get it," and the answer is "No." And so, it takes a fair amount of

• 40:01Speaker 02

  energy to pursue this when all the advisors around you are saying "No" and won't even support you. I mean, that's really the truth about what crypto is now. It's a growing... It was a baby five years ago, now it's a teenager and it's nasty. Because it's not stopping, it's gonna keep going. And it's gonna be an adult soon. And those teenage years are a bitch. That's the problem.

• 40:30Anthony Pompliano?

  I know you well enough that all you need to do is, when you talk to the other sharks, say, "Listen, I believe in it so much, I got my own dough in it." And when you say that, they'll obviously understand that if you're comfortable, they should be.

• 40:41Speaker 02

  They know. They know. And everybody's interested to see what my holdings are. I get that every day. You know what I'm really worried about, Paul? I don't want to be one of these guys that gets some obscure token or coin and promotes it and all that stuff. I don't want to be seen that way. I'm being very careful to make these long-term investments because I believe in... The best way to look at this, and I tell people this that really grill me on crypto, and particularly when you keep floating that video of us together on CNBC on Twitter, and I get abused over and over again. I'm never gonna forgive you that. I'm gonna figure a way to get you back. I don't know how, I'm gonna figure it out. But, what I tell them is, "Look, do you invest in Google? Do you invest in Microsoft?" Those

• 41:25Speaker 02

  are big holdings for me. They are software companies. When you invest in crypto and the blockchain and the level one and level two ideas out there, and a lot of these tokens and a lot of these shared ledgers, you're investing in software. Why would you invest in Microsoft and not in the chain? Why? Why wouldn't you? And they said, "Well, I never thought of it that way." Well, think about it that way, because that's what it is. You're just adding to your software productivity portfolio. Now, I get it, it's controversial and all the rest of it. But the innovation that's occurring by these developers, the hottest hands on the keyboard are now in crypto. The smartest guys are doing this work. And you're getting, engineers are leaving traditional productivity software like crazy

• 42:10Speaker 02

  to go into crypto, whether it's a startup or work with a behemoth or whatever it is, because the productivity opportunities there are greater than anything else we have in software. And so, you know, I just gave you the use case for watches. It's for every asset class. It's all coming, but it's all software.

• 42:27Anthony Pompliano?

  So the politicians that say shadowy super coders, Kevin says the hottest hands are on the keyboard. I like that. That's a much better way to put it, I think.

• 42:36Speaker 02

  Yeah, well, I mean, look, politicians have to make press. They're constantly raising capital for their own campaigns. I understand the pressure they're under. Nothing gets you more press. The two ways to get press these days is beat up Facebook, which always works, it gets you on the hill, which is ludicrous, because they're the backbone of small business in America. And talk about crypto as being used for crime. That's going to get you a lot of headlines, that's going to help you raise a lot of money. It's never going to stop. But that's not what crypto's about anymore. Decentralized finance is going to be very disruptive, very powerful, very productive. It's going to eliminate a lot of fees and it's going to make life a lot easier for everybody. Like me, when I talked about trying to buy and sell European stocks in multiple currencies. I mean, why wouldn't I invest in that?

• 43:21Anthony Pompliano?

  Of course. All right, where do you want us to send people? You can go follow you on Twitter, where else?

• 43:25Speaker 02

  Um, come and look at my, uh, doing a lot of this stuff on YouTube. So, you know, Mr. Wonderful on YouTube, good place to go. I discuss this every week practically. And LinkedIn also, doing a lot of white papers on there. Um, there's a lot of interest on LinkedIn, which is, you know, primarily managers, in what's going on in crypto. Um, so I, I think that, I think the genie is out of the bottle now, and this is going to be forever a debate.

• 43:53Speaker 02

  For you for bringing it out early on and becoming a, you know, marching to that tune when everybody thought it was crazy, including me. But, you know, when things change, I change, and things have changed.

• 44:04Anthony Pompliano?

  I always tell people, I say, listen, I've got one clip, I'm gonna play it forever, but after that, you eventually change your mind. And, uh, and the thing that I will give you a lot of credit for, which I don't think people really, uh, understand is it's one thing to change your mind, right? You can go from, hey, I don't like this. Okay, now I'm okay with it. But it's another thing to say, it's not just gonna be half a percent or 1%. Right? You're talking about going to 7%, eventually maybe 20%. Like, it's, it's, uh, going from being a critic or, uh, having critiques to now saying, no, hold on a second. Not only do I like this, but I'm gonna press the winners, right? I'm gonna go in because that's where I, I'm actually spending 40, 50% of my time. That's where a big portion of my portfolio goes. And I think a lot of people, they, they get caught up in, uh, not having the, uh, intellectual

• 44:46Anthony Pompliano?

  flexibility. They already were against it. And now when they say, okay, fine, I like it a little bit, they don't want to be seen as going all in on it, right? Becoming a big proponent, which you've obviously done. So I, uh, I will forever always respect you for changing your mind, which I think, uh, most people, they can give you shit on Twitter. I'm gonna keep citing that. But other than that, you're good in my book.

• 45:06Speaker 02

  Well, look, I really appreciate it. Great talking to you guys. Take care. I'm sure we'll get together again soon.

• 45:11Anthony Pompliano?

  All right. Sounds good. Talk soon.

• 45:13Speaker 02

  Bye bye.