Transcript+
Let's be clear, Bitcoin is an international asset. We are spending like drunken sailors. Bitcoin is the only economic entity where the supply is unaffected by the demand. If you want to preserve. Your wealth you have. To. Convert. That currency into an asset. That's scarce, desirable, portable, durable, and maintainable. Welcome back to Scarce Assets, a podcast by on Ramp institutional. This week we sat down with your room Blockland, founder and manager of the Blockland Smart Multi Asset Fund. I enjoyed this conversation because your own has 20 plus years of institutional asset management experience and it really comes through in the conversation. We talked about the macro environment that's driving asset prices, the structural change and ultimately why portfolios of the past no longer cut. It talked about his approach to constructing portfolios for his investors, which is a mix of of precious metals, namely physical gold ownership, direct ownership of Bitcoin, no other crypto assets and high quality equities. And then we also talked about the adoption of Bitcoin and the success of the the ETFs and just the interest that he has seen or maybe not seen in the institutional allocator space. Ultimately supporting the thesis and the idea that it's incredibly early for Bitcoin. We unpacked just his framework for allocating capital, how to preserve and grow wealth in the 21st century. Ultimately, this ties into what we do here on ramp, where we focus on 1st principles approach to securing our clients assets. So we work with individuals all the way to the large institutions like pensions, endowments, foundations, family offices. And what do we do exactly? We focus first and foremost on custody because any investor, whether it's an individual or it's an institution, if the custody that you're using to secure your Bitcoin is not robust, what you thought was your allocation of Bitcoin could no longer be there when you need it. And so we focus on multi institution custody, really the foundation of our business. And for the institutional investors, we have the on ramp Bitcoin Trust, which offers security like exposure similar to an ETF, but with in kind delivery, something that is being discussed with the ETFs, but there's still a lot of question about how that's going to work. You also have multi jurisdiction custody built into this as well. And ultimately that is direct ownership of your own Bitcoin. We also offer advisory services for institutions that are looking to navigate this new asset class and how to avoid the pitfalls that historically have plagued this industry and resulted in a lot of losses. So if you're an organization thinking about Bitcoin or already allocating but looking for other solutions, shoot me a note Jackson at on rampbitcoin.com or book a consultation on our website. Hope you enjoyed the episode. OK, welcome back to Scarce Assets. Excited for this one. We have Yorun Blockland, founder and manager of the Blockland Smart Multi Asset Fund back on the show. Yorun, we had you on the last trade, one of our other podcasts about a year ago. I want to say it was August, September. It was right as I started doing podcasting full time, but it's great to have you back. I'm excited for this one because you know Bitcoin very well. And as you know, we're a Bitcoin focus company, but you focus an investment strategy that is aiming to really future proof well for your investors. So you're focused on Bitcoin, but you're also focused on gold quality equities and I would say portfolio construction that is actually mirroring the risks that exist, risk and opportunities that exist in the market today. So really great to have you back here, Yuru and how are you doing? How's your summer been going? Yeah, well, I'm fine. And the summer is as expected in the Netherlands. It's full of rain and I'm now this is my final week before we head off to Malaysia, a big trip with the family. So I'm looking forward to that. But always, as always, the last couple of days are always pretty busy and packed. So I'm I'm I'm glad when everything is done and we can go to the airports and celebrate the holidays. Well, thanks for squeezing us in before the trip. You must think very highly of us if we were able to fit into your busy schedule. I do. I do. I do. I do. Awesome. Well, let's go ahead and get into it. So we had you on, like I said, around late summer, early fall, autumn of last year, yeah, before the US presidential elections, before the trade deals, the tariffs that have happened this year. And I would say it was kind of a mixed bag going into 2025 where you had a lot of analysts that were bearish on the economy, bearish on asset prices. They were favoring risk off type of investments. And then you had people who were bullish. Some people are perma bulls and some people are perma bears. But here we are about almost 8 months into 2025 and it seems like everything is ripping up into the right. So you have US equities hitting all time highs, European equities, gold, Bitcoin. What's the what's going on here? I mean, how would you categorize just the rally across the board? What's driving that? And do you expect that to continue? Well, the latter part I don't know, but I think that indeed a lot of after a great year for basically every asset except for bonds, a lot of people thought that this year would be a little bit more difficult. And if you are a euro denominated or based investor, it is because the euro makes the life of euro based investors a little bit harder. But if you look at asset prices, I think there are a couple of things that have happened. So on the equity side, you see that there has been little chance of a recession, AUS recession. So these rate hikes by the Federal Reserve and then plateauing as where we are now did not hit the economy as hard as a lot of people expected. If you look at that from an historical perspective, that is partly because interest rates given where inflation was is, is still not that high, are not that high. So that's one thing. You see earnings growing not as spectacularly as as in the last couple of years, but still earnings are growing. And I think the last couple of weeks we saw two things. The first is that even though the outcome of the trade war is different for every region, the fact that there are outcomes and deals reduces uncertainty in the market. And the biggest thing that markets do not like, of course, is uncertainty. So better have some clarity on not perhaps the best deal, but to have some deal. And the other thing is that global liquidity, global money supply is rising again, I think now for 6 to 8 weeks and it's rising pretty fast, meaning that liquidity is driving asset prices as it basically always does. So if you Add all of these things together, nothing did really break, even though some economists expected it partly or completely to break like AUS recession. And then you have this liquidity impulse that is now driving markets together with the fact that uncertainty about trade deals is declining, right? Yeah, that makes a lot of sense. And so out of those three factors, they all seem to be more macro oriented than micro or fundamentals based within NASA class. I'm curious to hear your thoughts out of those three factors, do you, would you say anyone of those more so than others are driving markets and do you expect like on the liquidity side, for example, you said over the past 6 to 8 weeks global liquidity has been increasing. Do you expect that that's going to accelerate? I'm, I'm trying to understand between these three factors what's, you know, really driving asset prices and maybe what we could expect to see have more of an influence going through the rest of the year. Yeah. So I, I expect the whole trade related macro team to yeah, become a bit less urgent there because some of these deals Japan, China or China has an extension. And now of course the European Union is finally done on the liquidity side. So we live in a debt driven system and that means that every year more debt has to be refinanced, right? And I think that central banks are extremely aware of this. So even if the Fed decides not to lower interest rates this year, which the jury is still out, of course, you see that on the, on the, on the, let's say much more implicit way they are driving liquidity. So you see that global money supply is rising liquidity, other liquidity factors are rising. And my general notion is that this is needed to prevent markets from getting scared of refinancing activity because this is basically what most of the debt driven world is now about. It's more about refinancing than actual loans for investments and household consumption and things like that. So I think that the central banks are very aware of this. So my guess is that on average of course, and now it's going pretty fast, but that liquidity will continue to rise. And if that coincides with the Fed deciding to start lowering rates again, I think then the the outlook for the rest of 2025 is actually pretty decent. So, so, so I would expect that liquidity could become the main driver apart from macro momentum, which is of course a little bit more difficult to judge how this will go for the rest of the year, right? Question for you on, I guess one in your mind, what would cause outside of, you know, pressure from Trump and, you know, perhaps replacing Jerome Powell, like what would cause Powell and the Fed to cut rates, you know, within the next few months or you know, through the remainder of this year? And second part of that question is obviously there looking at CPI as a as their sort of anchor for what inflation is. I'm curious in your analysis, do you consider CPI or are you thinking about sort of a broader metric of monetary debasement issuance? You know, how, how do you think about the government issued CPI metric and, and how does that factor into your analysis? Are you, are you sort of adjusting that in terms of what, what you're seeing on the ground in, in terms of, you know, prices of all things, which I think if you're just like anecdotally, you know, going to the grocery store, paying for your, your trip to Malaysia, like, you know, inflation is more than two or three percent. Yeah. So, so I think this is this is simple, but I think what you are mentioning is more relevant for alternative economists and things like that. So the difficult part with with the Federal Reserve and Powell is that you would expect that the Federal Reserve would have focused on one or two key inflation metrics. And that used to be or still is where you read their, their, their outputs and, and, and listening to Powell, it's the core PCE, right? But you know, again, from the COVID experience said that we started to look at three months annualized, one month annualized ex shelter. And and so, so it's it's, it's, it's become a little bit more complicated. I do think that Powell has been very vocal that the uncertainty of tariffs on the overall price level, let alone which which indicated that is and let's keep headline then in the the, the is the first I think data point to look at. So if you get more clarity on the impact of those tariffs and you see that if you look at the deal with Japan and now with Europe. So the tariffs are there, but they are lower than what was suggested and at some point was expected even there. So 30% to 50%, if that coincides with headline inflation dropping to 2 1/2% again, there So close, close enough that the Federal Reserve is a little bit more. It has a more conviction that inflation is going toward the target. I don't think there's much reason for the Federal Reserve to hold on to rates for much longer. Also, if you compare that to what the Bank of England is doing to what the ECB is doing. So I think if the current deal making by Trump mean that the outlook for tariff related inflation becomes more clear, I think that then toward the end of the year, Powell has lit has little reason to say, OK, we are going hold on to this 4% level because they, they did tell us many, many times that 4% is still restrictive, right. So the question then is, is the, is the economy growing fast enough to stay above the, the, the equilibrium levels, right. So, so that I think should it will be the shift in in, in monetary language in power press conference and things like that there. So, so I can imagine that we that we will see a couple of rate cuts toward the end of the year, yes. Yeah. And I wonder as well if that coincides with all the refinancing that's needed because you mentioned earlier your room that the, well, I think the three of us know that there's always more debt, there's always more money that's added to the system inherent to how it's structured. But I believe there's over $10 trillion at least in the US side that needs to be refinanced. A lot of that was COVID era or even, you know, somewhere between the great financial crisis and COVID where zero interest rate policy was under effect. So a lot of that debt is very low in terms of interest rate. But the when you look at the United States budget, interest expense is now the second largest item on the budget. And so how do you know, based on what you just said, how do you also tie in the fact that so much debt needs to be refinanced, rates are elevated compared to where they were 5 or 10 or 15 years ago? That must play a part as well in in the strategy here to lower interest rates, does it not? Yeah. So I'm a strong belief, belief of fiscal dominance that in the end the the endless government deficits and the build up of additional debt will force central banks to keep interest rates low on average. So yeah, the only thing is that if you look at the official central bank target, they cannot say this, right. So this is the continuous, the two distinct forces. They have to say one thing. But if you look at what they do at the central bank balance sheet liquidity wise in Europe, it's much more outspoken. If you look at what the ECB does, it's so much more debt related that Lagarde can say whatever she wants, but what she says and what she does are totally different. So in my opinion, let's say from a medium term perspective, whoever the Fed chair is, fiscal dominance will play part. And that means that interest rates will always be lower than what you would expect compared what you say to 10 years, 20 years ago when inflation levels were strictly 4% and things like that. So I'm pretty convinced that this will be the case. If that means if Powell will cut rates now more than he should, I don't know, because he is very proud of his independence. And so. So in the short term, I'm not really sure. But yeah, if it's not now, then in May 2026, they will put somebody there that will do this as expected, right. So, so it doesn't really matter. That's only less than a year away. So, but yeah, in the end the the debt system will will force out a clean monetary policy for sure, for sure. Maybe one quick follow up on just that notion of Fed independence. How do you think about that generally? I think the assumption now is that, you know, Trump will replace Powell with someone with a pretty clean directive to lower rates, which would sort of, you know, spit in the face of any sort of actual Fed independence. If the president of the United States is just directing him to lower interest rates, What it what do you think that that has a potential impact on markets moral hazard? Like how do you think about, you know, I think for a while now it's, it's been clear that, you know, Fed independence is always sort of in question. But I think if if that were to happen and Trump replaces him with someone who's literally just going to do his bidding, what do you think the, the longer term implications of that are in terms of their, you know, not actually being any even semblance of, of Fed independence? Yeah. So I think already this is quite different from what we are used to see, right. So I think there in history, in this case U.S. history, there have been a lot of U.S. politicians that really did not like what the Federal Reserve was doing, right, the early 80s, for example. But now you have a president who actually says, I want my policy to dominate your policy. I'm going I'm going to ask you from the Oval, every time that a journalist puts a camera on me, I'm going to ask you to order you to lower rates or I I am going to fire you. Of course, this is Trump, but still, this means it's so he actually confirms that his policy is more important than what the Federal Reserve is trying to do. And the interesting part about this is while Trump is having this trade war raising prices for his citizens, he also at the same time still asks his central bank, his independent central bank to cut rates. So if if this so for him, fiscal dominance is, is very normal. And, and then, and this is also a good question. I looked up how all these central banks are positioned in their legislation wise and things like that. So in the end, it's always politics that gets to decide what the central bank can do. Sometimes it's more complicated, it needs a lot of legislation to be adjusted and things like that. But in the end, politicians do have impact on the function of the central bank, even though they are independent, independently positioned. So that is so that is one thing. The second is, of course, it doesn't really matter if they put percent there or not. I don't think he will go, but that would be the first time. So it's just so that. So Yellen went from the Fed to the ministry of Treasurer and now the other way. So there was this. There's one one example in the somewhere in the 50s or so after the Second World War, but that was not the minister. It was it was the second guy or something. But this would be a first, right? So if you have the now Minister of Finance moving to the Federal Reserve, I don't think it's going to happen, but that that also would be a precedent for what is going to happen, right. So All in all, if you look at data, central bank balance sheets that even though inflation went to near 10% in the United States, but interest rates were 5% in the 80s, inflation also went to 10% and interest rate went to 20%. So if you look at the differences there. So if you believe in fiscal dominance, then politicians will force central banks to do what politicians want. The other, of course, is financial repression. And then the central bank is happy to play along with the politicians to pull off the same result, right. So for in the end, I don't really care which one it is. So you can have a whole debate on that. The, The, the obvious question is what will this do with interest rates on efforts and why do bond investors not think about that ever? That's what I don't get. So if, if you believe that interest rates will go down if power if is replaced by somebody who will cut rates immediately and and to 2% or whatever. So what is the outlook for your long term bond position? And so short term it's fine. And because there are lowering rates, of course that's fine. But if you have higher than 2% inflation, which which is very likely and, and on average 2% and in Europe 1% and in Japan 0% interest rates. My question is why do investors not think about what that does to their 6040 portfolios, right. So my idea would be that even more people are forced to think, is my current portfolio still aligned with central bank policy long term? That's a great point too, and it segues well into a lot of the topics we wanted to make sure we cover because, Yurun, one thing I really appreciated about the first time we had you on the podcast is that you have an approach to portfolio construction and investment strategy that I think actually addresses how different the investable landscape is today than it was 2 decades ago, right? You mentioned the 6040 portfolio. Well, that portfolio has kind of shit the bed over the past five years really. It hasn't really held up with the changes at the fiscal levels, the macro levels, higher inflation, financial repression like you mentioned. So that's the idea of inflation being higher than interest rates or a negative real return on bonds. I'm curious, so you said if rates do come down, right, what are the implications for bond investors? And so I'm going to get to the question in a second. I'm kind of surprised that we have lived through the past five years of higher inter higher, excuse me, inflation and negative real returns on bonds. And actually I think you mentioned one of your newsletters, the the worst 10 year period for U.S. Treasuries in modern history. And so we've lived through this over the past five, now even 10 years in terms of the US Treasury return. Yet most investors have really not questioned their assumptions or how their portfolios are constructed. Why, you know, why is that? Why is that? Why are more investors not taking approaches that that you are? Yeah, So I have a very clear answer, but it doesn't reside well with traditional investors. So the the first thing you say 5 years and of course the last five years is what made bond returns stand out in real terms. But I if, if I do a presentation, I now have a chart, but it's, it's, it's basically the same in many countries. But when I have a presentation for Dutch listeners, I show a chart with the performance of Dutch bonds in real terms. You have to go back to 2520 years, the last time that you would have made a positive return. The chart that you mentioned in my newsletter is nominal returns, the worst in 10 years. Rolling 10 years it's nominal 0. Add to that inflation and you are way way below 0. So this has gone on for a longer term. And you also see before COVID that real returns on bonds declined every decade. So if you have a rolling decade every time and in the end it was already near 0 before this whole inflation boom of the year of post COVID era happened. Right? So my idea is first is ignorance. People just don't know understand how investment and asset pricing works. And I must admit that for a long time it looked, it took me a long time to acknowledge all the different impacts on portfolio return and also to start thinking in real returns. And why would you invest in something that does not increase your purchasing power? Because you are taking risk. You are are, are giving your money to somebody else to, to make that money more what in in real terms? So what if you make a nominal terms from 100 to 120 and then your, your life spending of your, your everything you have to pay for is 150. So, so that is I think when, when do you see real returns on the home pages or of asset managers and things like that, They always show you nominal returns. And this is the same with saving. When you save, you see actually your number in your bank account increases, but the purchasing power of your bank account decreases at the same time. So I think this is what I call ignorance. And the second is of course, suppose you are a a well known established asset manager and you have your company is exactly split like the 6040 portfolio. So 40% of your income of your people, of your employees, of your fund assets, things like that is in balls, which CEO, which top manager is going to say, let's skip this whole bond stuff, make our decrease our income by 40%. And then let's let's start thinking about other alternative assets that we have no experience with or as at least we are not known for that as well. And so I also think this is a clear business model and this has happened over and over again. So we all know about these the video rentals. And if you don't, if your business model does not adjust in every industry, some of these business models will start to decline or or end altogether. But I I know few asset managers especially when they have and when they are listed and when they have shareholders, yes, who is going to bring the message we are going to dissolve our bond portfolio or bond part of the company. Yeah. So I also think it has a lot to do with just business models and not wanting to change that or not are able to change that because shareholders are in between those decisions. Yeah, those are great points. It's almost remarkable how you know, once you see this, you can't Unsee it, right? The idea, the first point you made is incredible just about how the entire asset management industry and really the entire, you know, traditional finance industry, everything to even your savings account or your checking account, everything is based on nominal value, right? There's no accounting for purchasing power or an actual real return. Or if the savings, the number in your Chase savings account, is that actually increasing the amount of things you can purchase or is it decreasing the amount of things you can purchase? And it's remarkable to me, you know, I, I, I struggle with this because you have traditional finance, at least, you know, in, in the United States and New York in particular, it attracts some of the highest caliber people, very sharp people that come into this industry. And I guess ultimately it comes down to incentives, right? A lot of people aren't incentivized to question the, in some assumptions or to question the models of which they make a lot of money in their industry because it's really not that hard to understand. I think we're starting to get to a point now where more investors are questioning just because inflation has been so high the past five years in, in the Western world where people are starting to question CPI, you know, as Brian mentioned earlier in this podcast, and they're starting to question, well, great. My Portfolio is going up 10% per year on average the past 1020 years, but I'm actually not able to actually purchase anything more. You know, it purchased me the same house. It gets me the same groceries at the store. And it's, it's remarkable, I think just how still there's this lack of understanding if I speak to someone, you know, friends or family or, or just people in my life, most people do not have any perception or understanding of debasement, right? The real rate of inflation, the monetary expansion. And I'm wondering like, you know what, what needs to happen? There's the business case you mentioned as well. But do you think that like inflation just needs to explode higher? What needs to happen for more people to start thinking about in the real return basis? Yeah, good question. Also, I think you did a better explanation than me in in, in this whole debasement thing, right. So this is this is actually what you are telling about your friends and family. I have clients that I have explained their debasement in terms of things they can buy actually to visualize it as as much as possible. And then for some of these people, then actually they get it. And exactly once you see it. So one thing is that sure, if we have another inflation boom or wave, then I think a lot of people have waken up because I do think that a lot of people do understand, I don't know if they understand how to escape this. So you are so a lot of people do not invest in at all, but even the ones that do, do they really understand that. So let me so sometimes my clients or people around me ask me when are you going to sell your gold or your Bitcoin? And my question and my answer is probably never ever so. And not that I'm the biggest bull on Bitcoin or that gold is the I still also believe in equities, but why would I? So I have wealth and I try to diversify wealth as best as possible. And one of the things that used to take into account is that my Euros is worth nothing and my central bank has an official target to devalue my value. So yeah, why, why would I not diversify? Why would I not keep something, some part of that wealth in other assets that have proven to protect me against inflation, debasement, whatever you want to call it. So, and I think this lesson, I, I, so a lot of people when you talk about gold, for example, they think that you are going to tell them a story that the, when that the world will end. No, no, I'm just telling a story. You can preserve your wealth by buying old cars. You can consume it, you can hold it in your bank account in euros, you can buy Bitcoin or you can buy companies that generate a profit and then you get a dividend if everything goes well, right. But why only this euro based thinking and, and, and I think that is a lot. I think that is a good angle to explain to them the impact of inflation if you do nothing. So, so, so that I think starting to talk to people about how much money supply is growing each year and how much more EUR, which are useless and how, how, how, how less Golders in the falls of central banks like countries in China. I think it's a very interesting discussion. I like it, but it's too complicated for people that just have to understand every day. So, so in, in the Netherlands, the interest rate is now back to 1%. So the ECB rate is 2 and we give you 1. So and the inflation is 3 to 4% every month, every month. So you can actually make a quick calculation every day, every day that you keep your money in the bank, inflation eats a little bit away from your purchasing power. And once people start to understand, and this has to do with something and what you say about buying groceries once, once they see that, I think then you can have a discussion should you do something else with your money. But they have to be aware 1st that the euro or dollar thinking is not the only angle you can take in what is actually wealth? How do I preserve wealth? So this is maybe a bit a long answer, but this is, yeah, a lot of people really don't understand yet what inflation does, what central banks do, what the actual value of a dollar of of a euro is and things like that. How, how would you respond to someone? Because I think, you know, I think part of the the rub or the the misconception around hard assets like gold and Bitcoin is people are so ingrained or even addicted to like yields or the concept of income generating assets. So you know. How do you respond to the person that's like, you know, I don't care if I'm getting killed in real terms. Like I need that income on a yearly, monthly basis, whatever it is. When you know, there is an alternative way of just thinking about it and saying, well, no, I'm just going to own hard assets. Maybe I rebalance it. I trim from that, I borrow against it. There are other ways to produce income off of hard assets. So, you know, how do you how do you speak to the person that is is addicted to the yield or the income? Generating, yeah, yeah. Fixed income. Yeah, Yeah, It doesn't generate cash flows. I don't think I will be able to get people of that ID ever the same thing again. Is that so? If they have a coupon of €100 a month or a year, the only thing I can explain it is that I take away €1010.00 of that $100 and that is what you actually get. Now go to the shop and buy me something that used to be $100.00. So my son wanted to buy something and I tried to explain him this whole concept. It's not a goal on itself. It just happened, this conversation. But I said if you wait a year, you cannot buy this. And it took him like 10 minutes. What do you mean? And in the end, when they understand the concept of it's more expensive, that's the only thing you you have to know, right? But I think that, you know, I get to go to the events of let's say traditional asset managers. I can still go there. And many of those people say the first thing is it doesn't have cash flows. But if those cash flows are negative or if the value, underlying value of that cash flow has nothing behind it, I try to, it's hard to explain to them. And also for some people, for some investors, having a euro, dollar, yen denominated cash flow is what they need because of their situation. So it's not, but the whole idea that you have an asset that is supposed to preserve value no matter what. That's, that's and you have an, an, an asset that is supposed to decline in value because of inflation. But yeah, you can pay all your bills and EUR and dollars and you emit it. That is a mismatch. I, I, so I try to be a bridge, but it's extremely difficult. And then it's the same when I go go to an event and someone tells me I don't like Bitcoin, but I do like blockchain. Yeah. OK. What do you want me to do? Yeah. OK, then that's fine. That's fine. Yeah. Yeah, yeah. It happens. Yeah. So I keep trying, but it's difficult, especially the cash flow thing. It's the Holy Grail for many investors. Yeah, that's, I think that'll be an uphill battle for quite a quite a. While I would say yes, yes, definitely. Hope you're enjoying the episode. If you are, please leave a like, please leave a comment. Please subscribe if you haven't already on YouTube or leave a five star review on Apple, Spotify, etcetera. That really goes a long way. We spend time to book guests, prepare for conversations, get everything in order in terms of editing and distributing the podcast. It's a lot of work to be honest, but it is worth it and just in terms of providing high quality content that is appreciated education that the industry needs. So if you appreciate it, please leave a token of appreciation. I really, I appreciate it. Quite frankly, I try to respond to every comment. So if you could leave a like comment goes a long way. And if for some reason you're not enjoying the show, leave a comment as well and let me know what I could do better. I'm always trying to improve and I do take constructive criticism and feedback. So please, either way, if you could leave a comment, leave a like subscribe. I really appreciate it and hope you enjoy the rest of the episode. Thank you. Yeah, I want to talk about gold and Bitcoin. It might have been you, Yarun, that shared something about Gunlock, the Jeff Gunlock, CEO of Double Line, and he did an interview recently. It might have been a month or two ago, but he did an interview recently and he was talking about the concept of U.S. Treasuries no longer being really the the flight to safety investment. Yeah. Yeah. And then he also mentioned something about it was about gold. He said something to the extent that gold is no longer for lunatics, like. Yeah. Because he said, he said earlier. I know. Yeah. I mean. Yes, yes, OK. Yeah, yeah. So I'm curious like I think we might have spoken about this about a year ago. I want to, I would love to hear how, how maybe any of your clients or people in the in your world are starting to view gold differently because we spoke a year ago about how the idea that in most traditional portfolios gold is largely ignored. I remember five years ago because they go, well, if you want to express a bullish view on something or you want to express a bearish view on another thing, you may want to have a 1% allocation to gold in your portfolio and. For all the reasons we've been discussing for the past half hour, I, I do think that gold is going to be playing a more critical role in portfolio construction over the foreseeable future. And I'm curious maybe two-part question, if you could just talk to how you think about gold as part of your portfolio, your investment strategy. And then would love to hear if you think institutional investors are going to start participating, say institutional and you know, wealth management family offices, are they going to start participating in the gold market soon in your opinion? Yeah. So on, on the, on the first part there. So my fund invests 25% of its assets in physical gold in a vault in Switzerland. So no paper gold. That's the strategic weight and the interesting thing. So I have a traditional finance background and there are a lot of elements in there that are totally applicable to alternative assets or alternative portfolios. There is no boundary that what works in one world does not work in the other. But I find interesting, even though even if you let all of the things like money supply growth, independence of central banks, inflation, all the things that we touched upon already, if you leave them aside. Because when creating or, or or deriving strategic ESTA allocations, a lot of traditional investors look at history and they don't take into account any forward-looking aspects, which is strange as it is, but it's, and I do that as well. So I use my Bloomberg and I go back to the 1970s because for gold, you always have the gold standard. So it's always after that that things start to move. Literally, it doesn't matter if you take 50 years, 30 years, 20 years. If you do a mean variance optimization, if you look at the characteristics of gold relative to both bonds and equities, you, you have to come up with some very harsh restrictions to keep gold out. So that's one thing. And I, I have one chart that that is a little bit more low profile that that shows the combination of a 6040 portfolio, the traditional way, 6040 equities, bonds and 6040 with 40% of gold. And then I do this since the start of 2020. I can take it much longer, but then it's already not very visible anymore. But for every starting month since January 2020, so we have all these different horizons, I calculate when the 6040 traditional outperforms or the 6040 with gold outperforms. So this and then the cells in the Excel sheet are green with gold is outperforming and it's red when with bonds is outperforming. So this whole chart, which is huge because of all the cells is green. It's green. And this is the whole concept that I tried to explain. So if you do that on a more statistical acknowledged manner, so the sharp ratio of a 6040 portfolio of equities and bonds is equal since the 70s, it's slightly better with gold from the 80s and then it starts to turn dramatically. Now if you then add inflation, you get negative sharp ratios. So the real returns on bulls are negative. So sharp ratios do not matter anymore because a negative sharp ratio tells you nothing apart from the fact that there was a lousy investment, right? So what I find interesting, I know how these companies derive their strategic asset allocation and there is no way that the result is 0% in gold. So this is what all these statistical guys and girls that I don't know what they are tweaking, but that's that's what I find more astonishing that they that their, their view on the world is that real assets or hard assets, whatever you want to call it, are a good hatch to some of the things that we are now experiencing. But the hard data also puts you towards at least some allocation to gold. So, and this is because for Bitcoin, you can say it's new and a lot of old fashioned thoughts are still out there. But for gold, I think it's yeah, it's a respected asset class. And I think the interview you mentioned, I did see it. And also what Ray Dalio was saying that these people are trying to explain, this is not some asset if you expect the end of the world, this is an asset that actually adds value to the risk return profile of your portfolio. So yeah, I've, I've said nothing about future and dollars and things like that. You can make it much worse and then you have a bigger allocation towards gold. But I think I also have this chart showing the 20 worst months for equity since the great financial crisis and the performance of gold. So in 1616, out of the 20 months, the performance on gold is positive on average. You would have realized nearly 3% positive return on gold and equities were -7 or so on average, I also did that with bolds negative over those twenty months. It's marginally negative, but it's negative. So you know, if I was some kind of asset allocator basically I am. But with one of these asset managers, I would say is it not an idea to at least have 5% of gold in there? And I also think that it would resonate well with our clients because a lot of clients are asking should we not invest in some of these alternative assets, of course. So I'm I'm amazed that this has not happened more do. You think, do you think that hesitation or reluctance to embrace gold, even when the numbers and the data support it being part of a, a portfolio? Do you think part of that stems from sort of, you know, just an air of sophistication from, from allocators thinking that they need to conduct some amount of diligence on company XYZ or some issuance of a bond And gold just feels too easy. It feels like a cop out of like there's not really any diligence to be done. It's just like, do you believe in the thesis of gold or not? Because I, I see that on the Bitcoin side, I think there's a lot of reluctance and hesitancy around Bitcoin from the traditional world just because it feels, well, on one hand, it feels too good to be true. Like how could this digital money that just, you know, some guy named Satoshi created, how could that be akin to digital gold? And so that, that I think partly drives some of the ignorance around this because it just feels like, you know, how, how am I as a sophisticated allocator, adding value by just allocating to, to gold or Bitcoin? Do you do you think that's part of the equation? It could well be because I get sometimes these questions and if sometimes people think that I'm trading all day, I don't, I, I want to trade as less as possible. But yes, they, it could well be that in order to charge that fee that they think they have to do something. But even if you have a 6040 traditional portfolio and you allocate 5% to gold and you keep everything else the same still for the, for the 55% in equities, if there's still a lot of work to do, right? So I, I don't get it. And, and the second and, and this is I think more interesting, the way you talk where, where are the needs, the requirements, the wishes of your clients, Where are they isn't isn't it your job? How, how, how simplistic portfolio that may yield to search for the best, best possible strategic asset allocation or portfolio mix for your clients. And if the data says you have to add some of that, then the data, because that is the the whole car for your ass principle, of course, that it's the historical data then. So, so that's that's what I find fascinating. There are so many people that just start a new friend with small assets for some portion of your clients that then have some exposure to these asset process, right? What harm is there? And maybe there's also, you say it's something of sophistication, but maybe also reputational risk because So what if gold falls $1000 from here, right? Yeah. With equities, everybody is dropping like a stone when S&P 500 goes down 20%, If you had the first one with 20% gold in your portfolio or 10%, Yeah, you have to explain everything. So maybe that's also a reason. I don't feel that pressure, fortunately, but I can imagine that it could be. Yeah. So I think somewhere along those lines. Yeah, yeah. I don't know. I think I agree with you there and it's interesting as well on the gold side. It it still seems to be largely ignored by just about everyone in traditional finance, but that it's kind of a barbell approach in terms of who is buying it. You have self-directed retail investors that are buying physical gold the past couple of years and then you have nations, right? You have central banks accumulating gold. Yeah, I, I want to say in that same interview, the the Jeff Dunlock 1, he was talking about how a decade ago central banks were selling gold, or maybe it was 2 decades ago, but they were selling gold at 300 four, $100.00 an ounce. Yeah, yeah. Mr. Brown? Gordon Brown, Yes, Yeah. And then buying back right at the 3030 three, $100.00 an ounce. And so it is quite interesting to see this discrepancy between where you have like the sophisticated traditional finance investors continue to dismiss it, but then you have nations accumulating, perhaps recognizing that there are a lot of uncertainties around the fiscal picture, not only in the United States but globally, right? You just have record debt to GDP levels everywhere just about. You have higher inflation, you have trade wars, you have geopolitical conflicts, hot wars. And so it makes a lot of sense in this new investment regime to allocate to gold. Yet most people in the professional investment community, just they, they can't figure it out or, or they're just too much of cowards. They don't want to step out of line honestly, like. You said it, not me. You said it, Yeah. That's fine. You know, I maybe it's just about that, you know, they don't want to go against the grain. Can I say something about one thing about that? Well, this is, this is part of the amazement that I have. So you have this, you have this big country, it's called China. China wants to move away from the dollar. Everybody knows that in the end, the United States and China are not the biggest of friends. China has actively not only with its oil but also in Asia, it's very much pushing countries to do all the trading in yuan. But it has one big issue. I don't want to have the yuan because this is so. It's not adult enough, it's not big enough, it's not stable enough. It's not the system I want. Whatever you want to call it, So what? And so you had Alexander Hamilton, he helped create the dollar and he understood that I must look the value of the new dollar to the, the silver dollar of the Spanish, because then everybody will recognize this is, this is, this is, there's, there's value underneath it. So I think that is the case why China will continue to buy gold until they have 50 or 60 or 70% of all their reserves in gold. And then I would say, oh, but you have 70% of gold there lying in your folds underneath those yuan. OK, let's try it, right. So, so this is something every every quarter, I think when the World Gold Council or a month comes up with the new data, you see this happening, all of these emerging markets that are not a big fan of the US dollar, they are buying gold. It's it's extremely be logical why they are doing that. And so that would also be for those traditional asset investors. Why not copy paste a little bit of that what is happening around us. So if you believe in benchmarking, that would be benchmarking, right. So This is why these countries are buying gold. And after the whole thing with Russia when their Fiat FX reserves were confiscated, this has accelerated, right, Because gold is, if you have it in your own faults. So yeah, again, this is something interesting to see that I don't think they pay any attention to that. Yeah, I don't think so. I had to go figure this out on my own back in 2020. I had to go listen to people like you and go listen to macro voices to hear anyone talk about these things, right? It wasn't talked about within my office. I worked at a traditional finance. I worked at a wealth management shop, and no one was talking about it. Like I said, it was, oh, if you're bearish on this thing, you know, maybe you have 1% allocation of gold. There was obviously no talk about Bitcoin. So I had to figure this out myself, like I think many of us had. Yeah, yeah, yeah, I did too. So 10 years ago, I was not where I I am now. So this is also a process. But it's never too late to to switch. And I think that's also, I think it's a strength, if you can say after a couple of years, I got it wrong. I'm sorry, I I messed up, but that's that's fine. People make mistakes. Maybe Bitcoin is a mistake. We don't know. But yeah, it's, it's, it's, it's, I think doing nothing is perhaps the worst thing when everything around you is changing. And so also for the benefit of your clients. And so, yeah. Before the benefit of your clients, we have to talk about Bitcoin at least briefly because of course a lot has happened. You know, there's an entire episode could be done just about Bitcoin, of course, but Arun, maybe you could just give a refresher about how you use Bitcoin within your portfolio in terms of your allocation size, etcetera. And then catch us up on just your thoughts in the in 2025. Are you more bullish, less bullish on Bitcoin than you were a year ago? What are your thoughts on, you know, the Trump administration becoming much more favorable among other things that you guess what, you know, talk about your portfolio as it relates to Bitcoin, if you could. And then from there, we would like to understand what you're paying attention to as relates to the Bitcoin investment thesis. Yeah. OK, OK, fine. So my fund invests 10% strategically into Bitcoin. And the reason that it's 10% has everything to do with portfolio construction. And so I want to promise my clients a average risk profile, balanced neutral risk profile and with the uncorrelated characteristics and the volatility of Bitcoin, 10% is, is about right. We can increase that in the future if the volatility would decline. But that's then I have to go through my clients to do that. But you don't want to have a 1% allocation as you said for gold and then a half percent Bitcoin. So we we have, we have 10% to make a statement that we believe that this can be digital gold or be an interesting asset to own. So that's on the how we do it part. Then on the outlook, so on the Trump administration, two things. First, who would have thought two years ago that the most powerful nation on earth do something with Bitcoin, stablecoins, crypto allow technically allow its states to build up a reserve even though you cannot use taxpayer money and things like that. But this is of course pretty new. We had Bhutan, we had El Salvador and then ban we had the United States. So I think that's a big step. The other aspect I would like to add here is that Trump is Trump, loves Trump, the US dollar and the United States. So I don't think this is my biggest Boo sign. Also, if you look at stablecoins, so it's very clear, he's very open about it. Stablecoins are here to create artificial treasury demand. That's fine, but that's not, I don't like Treasuries, I don't like Treasury demands, whatever he wants, but I don't still don't like them. So that's one thing Trump is for Trump and the United States, and I think he does a good job for the United States. And also he will use anything that is available to him to make America great again. Right, on a, a much more macro global level, I think even though the price action is, even though it's up is much less spectacular than the, the, the Bitcoin ETF year 2024. I I still don't think that a lot of people understand how big of a success and also with another a new SEC boss that is a little bit more relaxed on how to actually implement such a Bitcoin ETF strategy. My notion is that this year without any explosive news yet that a lot of people say, yeah, but it's just there. Ray Dalio. So a lot of mega investors say it's an asset. I'm not I'm not sure if I will invest in it, but it's there. It's not going away. It's not just for criminals. Even though people on LinkedIn keep keep repeating themselves over and over again. Come on. But but I think there's the whole the, let's say, I don't know how to call it because I'm not a native English speaker, shadow adoption or something. I think it's becoming much more normal that you allocate some parts of your portfolio if you believe in this whole heart aesthesis, scars, aesthesis, things like that. So, so my idea is that it's, it's just, yeah, some people do it, some people don't, but not always with the question why, why? Why are you investing in Bitcoin? So, and I also think this will result. And this is what I'm hoping that even though I understand that, but the people that that go to LinkedIn or social media and, and try to educate other people for not seeing it, that that also becomes a little bit less. Because I think that for me, that's, that's, it's not necessarily a weakness, but we don't, I don't need to explain people that you should invest in bits if you don't want to do it, you don't want to do it. So, so it's, it's becoming more mainstream. Now, of course, there are also some risk in there and who owns it and strategy and things like that. But what what I'm seeing is just it's becoming a somewhat established assets, assets which you can. Own if you have a philosophy that fits to that but it's not that you have to be a radical investor or things like that to say OK, I invest in Bitcoin. I also see that finally that Bitcoin is not crypto so crypto can also have its benefits. I don't know anything about it, but the distinction between the two is becoming a little bit better unless you come in the whole traditional area of cryptos, crypto and everything is the same. But but these things are are not spectacular like what we saw yes, last year. But for me, it gives people a lot more comfort if I tell them we invest for 10% in Bitcoin and let me explain why they don't hang up the phone. They just they want to do they want to hear the story. So for me, I think that is what is happening this year. It's it's normal. I don't know normal, but it's becoming a an established parts of the investment Junior first, let me put it like that. Yeah, which is remarkable because 15 years ago was an experiment, it was a white paper 16 years ago and today it's over $2 trillion asset class. And to your point, to your point, you know, the ETFs have been remarkable. We don't. I know we need to wrap up soon, but I think investors don't fully appreciate just how successful those products have been and how it reorients incentives in favor of Bitcoin because now the largest Wall Street firms are making a lot of money from Bitcoin products. And regardless if they understand Bitcoin or they're aligned on Bitcoin philosophically, they don't care. They want to make money. They're in the the business of making money either for themselves as private owners of the business or for their shareholders. And Bitcoin products are wildly successful. And then I agree with you too on the aspect of Trump. It is an administration. I think people are almost underplaying the significance of that because his media company is now the 6th largest public company holding Bitcoin on the balance sheet. Now, you'd think that there may would be more discussions of this happening outside of these small communities or, you know, investment forums online on on LinkedIn or on Twitter. Yet most people are totally ignoring it. And I think that is incredible because you know what has historically been a big headwind for Bitcoin? You mentioned two years ago, imagine you couldn't imagine the United States having the strategy they do today. It's become a remarkable tailwind. So I certainly agree with all of that. And I think just to tie that into what you described earlier in this podcast, there's really no reason to think or believe that the, the debt story, the global liquidity expanding is, is going to stop, right? There's all the structure reasons to believe why it will continue. And really at the end of the day, Bitcoin is just a way to protect yourself against that. Ah, it doesn't mean that you think the world is ending. It doesn't. You know, you don't need to have these crazy ah thoughts about what the future look like. You just need to recognize that the bonds are are are not working for me, right? They're paying me income, but they're they're making me poorer. So you need things like gold, you need things like Bitcoin and quality equities in the portfolio to actually protect purchasing power. So I think we're starting to finally get to that point of institutional recognition. But it's still quite early, right? Like most people haven't, most people don't have an allocation or if they do, it's like a half a percent or 1%. Yeah. Now. I, I, and that's what I like. I, I don't want it to go too fast because I'm running a fund. And 2nd, I don't want to because let's say a Bitcoin is $1,000,000 tomorrow, then you have a discussion. Where does it end? Right. So now I have this whole rebalancing charge showing the amount of debt and money in the world relative to the amount of gold and Bitcoin in the world, which is very unbalanced. I like that and it has to balance out. Yeah, I think on what you said, also doing the podcast, what I want people to understand or find out for themselves is everybody at some point want to manage his risk if it's with his job or whatever. So it's also with money. So I think once people broadly understand that having some gold, having some Bitcoin, having some stocks and perhaps a little bit of boats, I won't, but is a way of diversifying your wealth and trying to using whatever you are seeing out there to preserve that to make sure that something like inflation does not eat up all of your wealth. If inflation pops up again. So you know from gold, most likely it will protect you, Bitcoin most likely as well. So the sensitivity of Bitcoin to inflation is it's a short data set, but I think that is the main message that people have to figure out for themselves. Why would you put all your eggs in one basket? The same holds. This is like the most first cliche ever in investing. So think about diversifying across different kinds of value. I think that would be my suggestion and I think this is going to be the big trend for the next 10 years. Also because of this, the millennials earning a lot of money and the great wealth transfer and all these things. So all these things come together and then we have a different discussion about dollars or EUR or whatever. Paul Yuru, before we wrap this podcast today, I do want to give you a couple minutes to discuss what you said was your favorite topic before we hit record here. Yes, the actual yeah, the trade deal. So I'll pull this up real quick. We have the United States and European Union reach massive trade deal. Yeah, you did. Can you? Can you catch us up on what the trade deal, what happened with the trade deal? And then we can also shift over to your thoughts as well. But if you could first just recap. Yeah. So of course you know that the time was ticking. I think for the EU and a lot of other countries, it was August 1st, then Japan made a deal. And what happened now is that our not non chosen leader has negotiated a deal meaning that we will buy $750 billion in natural gas because we closed our nuclear plants and the Netherlands has one of the biggest gas fields in the world. And in Europe definitely we closed that. So we now have to buy it first from Russia, then from Qatar and now from the United States, obviously at the premium. And we also have to invest 600 billion directly in the US and then still we get 15% tariffs. So yeah, you know that's a good deal that you guys on that side of the Atlantic made. I'm not so fundamental and to this going to be, but this is just 1 1/2 week after from the Lion. Ursula asked for a budget rise from twelve €100 billion to 2000, so centralized and then we have all these different countries have their own budget. Now we talked about debt a lot. So now we have this 40% increase and then she hands over 1500 billion or whatever to the United States. So I did not vote for that. I'm not really happy about that. And my question is and was, who gets to decide where billions are going? How does this work in Europe? Can we so, and I put that what, what you showed on X and LinkedIn and LinkedIn is made respectfully. And it's, it's not that crazy as on X, but still a lot of people on both platforms went pretty crazy on, on that post. And most of the comments were not that positive. So I, I, I touched some, some, some, some nerve there. But yeah, this is of course very difficult to understand. And my, my question as mentioned is how do, how do these things work? Why should we pay all of this money and buy stuff from why? Why did we not go together with China, Canada, Canada, Japan and then try to figure out something else? But apparently that was not possible. So, yeah, great, great deal, great deal. Well, I guess yeah, the United States got the the better end of that deal. I will say though, I I share your frustration in general with unaccountability of governments and using our money to really do, you know, who knows what with that's a big issue here in the United States as well. So yeah, I certainly share that frustration. And, you know, that's why personally I'm, I'm all in on Bitcoin because I just think they're going to continue to throw away money. They're just, you know, they're going to dump it wherever they'd like to. And unfortunately, there's really not too much we can do short of buying Bitcoin. And there are other things that could be done, but I will not say publicly on this podcast. I think the the the point of accountability. That was also my main message. OK, can someone explain to me? I asked the Prime Minister of the Netherlands. He also put out the tweet. What a great deal this was. Can you please answer my question? How does this work? I'm just asking so I'm not against Europe or something, but I have questions how money is spent and who will pay it. Decent question right? No answer. Seems fair, seems fair. Seems like. A fair question. Yeah, yeah, Yeah, I think so. Yeah, yeah. Well, Yarun, thank you for the generosity with your time. I hope you have a great family trip. Thanks for getting on the show with us. Before you leave for vacation, if anyone wants to get in touch, where's the best place for them to find you? The the fint website is Blockland, so my last name fint.com blocklandfint.com and if you go to XJSJS blockland you cannot miss it. And I think from there you can get in in touch, download the presentation on the phone to ask questions, whatever you want. Well, thank you, Irwin. Really pleasure to have you back on and thanks again for your time. Thank you, Sir. OK, you too. Thanks. Thanks for listening to this week's episode of the show. If you found the information valuable, please share the episode with a friend or leave a rating on your favorite podcast app. All the links we discussed in today's show will be in the show notes inside your podcast app. Before we finish, a quick reminder that On Ramp Media is for informational and entertainment purposes only, and nothing should be construed as investment or legal advice. Regardless of where you are on your Bitcoin journey, we'd love to hear from you. Visit on rampbitcoin.com/contact to schedule a consultation with one of our private Client advisors.
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