109. Crypto Bear Market Over? And The Real Estate "Mailbox Money" Strategy - Transcripts

January 23, 2023

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Welcome to the Alfalfa podcast 🌾

(0:00) Intro
(1:45) New Format Announcement!
(3:17) ETH/AltCoin Moves
(8:44) Chainlink Coin
(10:51) DYDX Coin
(13:36) Token Unlocks
(15:43) Jam Croissant Knows All
(19:55) FED Talk
(29:51) NFT Markets
(38:38) The Memes by 6529
(41:44) Real Estate Mailbox Money

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Transcript

Welcome ladies and gentlemen, degens and degenets to another episode of the alfalfa podcast. We are four radically moderate entrepreneurs and investors swimming in the messy gray ocean, serving up alpha in money, politics, and life. We are Nick or Bonnie, Eric Johansson, Steven Cesaro, and I am Arman Asadi. All links at alfalfapod.com. Make sure to hit subscribe wherever you are listening or watching on YouTube and follow us on the socials. And most importantly, hop in our discord to join the community for the after party and more alfalfa. We are live. Oh, I had to refresh. Our first one was an absolute disaster. I don't think it could have gone worse. No, actually we had, isn't this like our third one? We had like, yeah, we, so we had the, we had the, we had the merge live stream.

There was an absolute disaster on our own channel. And then Hoffman comes and saves the day and like puts it on their channel, which was great. So we, we, we did a bankless alfalfa live stream on the day of the merge, which ended up recovering to a certain degree. And then we had one where Steven crashed four times, five times, and then had to come in from his phone, which kind of ended up working out. He was missing for half of it. So yeah, we're one minute in and nothing has died yet.

Oh, I had to do that. That's like our third one. Our Christmas special was a, yeah, it was a goddamn disaster.

Yeah, man. All right. So quick reminder. Um, this is a new thing we're experimenting with on Fridays, going all money and doing it live. So if you're here live on YouTube, what's up, what's good? Amazing. Nine 30 Pacific AM, uh, on Fridays is the plan. And if you're listening on the pod, it means that, uh, it's probably Monday, uh, by the time you're getting this. So if you want to be here, getting it right away, injected into the, into the veins, along with your coffee, be here live on, uh, on Friday. And, um, also East Denver is coming and we shall be there. We're organizing an event, a huge thank you to paradox from our community who's helping us organize this. She's an absolute legend and, uh, more details soon.

There will be in the discord. So you have to join our discord, go to alfalfapod.com. And I know there's plenty of you out there that just listen, uh, that will probably be showing up to East Denver. So get in the discord, get the

details. Let's have a beer. It'll be fun. Meet in the flesh. Well announced sir. That was lovely.

Not bad. The voice of an angel voice of a litter, litter, litter, literateka, literateka star.

Yes. Angel. Yes. With a golden penis. All right. So it's been, it's like a star. Yes. Angel. Yes.

So it's been, it's, it's been a fun week. It's been a fun two weeks, right? You guys having a

good time? We're pumping baby. Everybody here long pump and I'm not short, but a transitory

Goldilocks is kind of fun. Transitory transitory Goldilocks. I love it. Okay.

He finally puked up the, uh, you puked up the The darts right? Yeah. When was that? Um, I think when we last talked about it on recorded Wednesday, I went home that night and I was like, I closed a quarter of it and then like an hour later, I was like, I closed with more than half

and then the next morning I was like, I closed all of it. So, uh, when,

When do you re-enter that thing? I'm looking at it now. I don't know. I mean, that's what I'm hoping at some point we can pull up some charts maybe and...

I need some char... I need some charporn, Steven. I need some charporn.

Tell me which direction to take here. Yeah. I mean, it's been a boring few weeks for us, for me anyway, because it's just been, what are you doing? Like, yeah, not a whole lot. I mean, we saw this coming a little bit thanks to our buddy, our buddy, Jim, there.

But yeah, I made a lot of moves this week.

No pressure. What should we talk about first? You want to pull up some charts? Yeah. Or should we do a Chem update first? We'll do a Chem update...

We'll save the Chem update for later. Or should we do a Chem update first?

We'll do a Chem update for today.

All right, I'm definitely curious about that. Yeah.

So let me see if I can figure out how to do this without blowing up the internet. Just a moment.

Just a moment. Here we go.

this is it is there is there a chart on the screen I see a magical lines

everywhere logical are you having a are you having a seizure just so everyone that's listening knows and watching I requested a seven-minute cap but that's

not gonna happen let's see oh no I mean I want to keep it relatively short here I guess I mean I was really looking to get the fuck out of Dodge and this little zone right here but basically over here right so I had a nice long played it all the way up there from the bottom and then and then took profits had a nice little short at the top there as well we talk about that sometime if you want what I wanted to point out to you Nick is we've got our this is like my the reason this looks like such a freakin seizure is because this is like my my long-term zoom out setup I got here I got like all the the magic lines and bands and and but the cool thing is that we've talked in prior episodes about this little net liquidity indicator down here you remember this

right no but you said it's basically like a relative strength index of net liquidity is that a correct like yeah summary of

it summary of it yeah yeah pretty much pretty much so we basically like as soon as this thing reset from like oversold to kind of down here you can see like where this line is boom we sort of took off this thing has has been just on point. I mean, it basically called the bottom here at this green band. You went, you did pretty good there. I told you to get the hell out of Dodge right here, actually, so that was a pretty good call. We're at that trade right there.

Can you tell me, can you tell me, do you know if this is, is this crypto liquidity or is this overall liquidity as we understand it?

Yeah, this is, no, this is, this is like a, yeah, this has nothing to do with crypto, really. This is just as we'd normally talk about net liquidity, like just the liquidity in the system that is kind of driving equities and whatnot, but it works really, really well for, for ETH, like ETH seems to be as far as I can tell, still just like a pure, like super high beta liquidity trade. The good news here is like, this thing is still like, it's still going down as we go higher, right? This is supposed to be the area where it like flips green and you get a, you get really, really long and we're already going up now. So I think we've got a nice potential setup in front of us here over the next couple of months. So I want to maybe get longer if we can kind of get back above, you know, here, I'd feel a little more comfortable.

Can you say as we go higher?

As we go higher. Can you say that number out loud,

just so people listening? Oh yeah, that's right. If we can kind of reclaim and hold above like 16, 16, 16 or so, I would, I would feel better about getting long than, than up here. We're kind of back in resistance again. There's some nice confluence between the 200 day down here at like the 14, 20 level or so. If I pull that chart back up and please check the video if you want to see the chart, you can see at that level here, we've got this little area of consolidation. So I would love to buy a dip like right here or wait for a little bit higher and then kind of add to my existing position. So that's, that's how I'm playing ETH at the moment. Got a lot of alt coin plays too, but I know Armand wants to keep the chart time down. So maybe we, we'll move on and see if you guys have any other, I'll play you want to share here.

Teaser. You guys have any other, I'll play you want to share here. I'm not going to be a, here's the deal though. This is a money episode. So while, while I, I may have a different sort of dispositions, this is, this is it. This is money.

Let's get, I have, I have, I do have two plays. I wanted to run by you guys. Do you remember chain link? Remember that stupid coin we hate?

But it's the worst being bullish. It's the worst being bullish at like so much. God, I'm $40 a coin.

I remember, I think I held it for so much. God, I'm $40 a coin. I remember. I think I held it for three years, four years.

Look at what we, look at what we got going on here, Nick. We've got a, we've got a, how long is that? We've got 259 days of sideways right now. Okay. Did I read that right? Yeah, 253 days of sideways. Look at this like tight little range here. This thing to me looks like at some point it wants to just absolutely send out of here. So I'm going to like build a position actually in this. There's a lot of stuff that looks like this. Like frack share was a good example of this. I'm kicking myself because somebody was talking about this months ago in our chat and I posted a chart of it and I was like, man, this chart looks pretty good.

This looks like a nice little accumulation range here. And it just absolutely sent recently. It's been one of the best performing altcoins. I mean, it's up 150% since I wrote that message.

I remember 100 cents, I wrote that message. You know, it's a good start. Steven, you mentioned about fracks when we were talking about the liquid staking derivative tokens and we had only focused on Lido and Rockapool, but right when we stopped the record button, you were like, oh shit, I forgot to talk about this one. So I think it had one of the higher returns or yields.

So anyway, derivative tokens or yields. So anyway, just a related note. It's been a good one and it looks like it's got a lot more. I mean, look at this gap it has to fill here. Like that's, it's like another 100% from here that you could make a case that it could go if it like really wants to send. So yeah, that's an interesting play. And one more, this is kind of like a later this year thing, I think, and you guys might hate this, but speaking of another coin that we all hate,

this is DYDX.

Oh, this is a coin that I love to hate. Love to hate this coin. And with good reason, because the market cap of DYDX is a little under 200 mil, fully diluted valuation, 1.3 billion. So like, I think like, what is that? Like 85% of all the coins that will exist still are not even in circulation yet.

So. Oh, and remember when you shared that website with us, token.unlock, token.unlock.app. If you pull that up for DYDX, you'll see that on February 5th,

so like in a little less than two weeks, token.unlock. Yeah, I got it right here for you.

And look at that token unlock coming. I think it's going to be like, two times the value of the market cap existing is going to unlock in the next two weeks.

It's going to unlock coming. Yeah, February 2nd, I think, is the date. Yeah, we were going to double the supply of DYDX. And look at this.

I mean, this is kind of basically,

July, July, basically beginning of July this year. We're going to go from, have like 150 million tokens in circulation to like 625. We're like over tripling the supply by July. But after that, we kind of level out again. And I really like this app. I think it's like the best app that exists on Ethereum. I use it all the time. And it's kind of doing its own little accumulation thing right now. I mean, look at this. You thought Link was crazy. This is the same thing, 253 days of just straight sideways. And if we get all the way to July like this, like this is going to be like 450 days potentially of sideways accumulation.

Like you could totally see this just kind of bottoming out, maybe even running these loads here and just trading sideways around like a dollar or something. But like, I think if you can pick up a lot of this under a dollar, like over the summer, I don't know. It seems like it could be like a really good long term play. That would also put the fully diluted valuation like under a billion, which is totally reasonable for me, right? Uniswap's like 5 billion. Coinbase is still like 14 billion, right? Even though it's gotten like absolutely wrecked. So I still have

Do you still have the token unlock page available? Or did you close that out? I do. Okay, so look at the pie chart on the left. Like the unlock is coming primarily from early investors. And I think that's important because like we talked about how ETH staking unlock is not necessarily bearish because like, these are people that have like a long term bias and they won't immediately dump. I think these like, investors that are unlocking are sort of like the lowest hanging fruit to dump this coin. And that's, and that's coming

soon. I did close that out, close that out. I do. Yes, yes, they want to dump because they're, they're probably just up big. I'd be curious what they actually got into, right? But if you run a big fund, right? And you're up like 100x on your investment, even like 20x on your like you take, you take profits there. You don't, you don't be a moron and round trip that and have to go explain to all your LPs why you're dumb, right? So they, there's going to be some selling there. And it could be potentially nasty too. It's probably gonna be a little muted in the beginning, right? Because we are expecting a bull period over the coming months.

But if we get like that sort of inflection point in mid February, or even in May, then the second half of this unlock could be kind of like a bloodbath, right? If like the market is going down and people are unlocking,

then they're, they're selling as fast as they can. Well, what did Jim have to say in his updated video? Because he had formerly said that mid February was going to be like a reversal back

to bearishness, right? Before you respond to that, Stephen, select your microphone. No, thank you. Did it, did it switch back? Yeah. No, it says it's, uh, no, it says it's good on my end.

Really? In zoom, select the sure. It is selected. All right. Well,

it's not. It's literally the only microphone I have Armand. All right. I'm on a PC now. There's no microphone. No other microphone exists. I'm sorry. This is what you're getting. Um, I will, I mean, I don't care. It's, I'm going to stop. I'm going to stop the share. Now.

I think Armand ceded enough charts. You want to, you want to talk about, do you want to talk about chem now? Or do you guys want to, you guys want to share any alpha first or no other microphone exists? I don't care. It's, I'm going to, um, I want to hear gems. Okay. So Jim, Jim, Jim, I'm still not exactly sure how to say this guy's name. Um, for those of you who don't know, we, we on this program love, uh, Jim croissant of Kai volatility advisors. He is a, uh, options volatility savant. He basically called this rally almost to the day. We've been talking about it since, um, since mid or early December, I think in accumulating for it. Uh, he gave another interview today and he sort of did not change too much.

Um, he seems like very, very open to the idea that we are going to continue this kind of Goldilocks period, this temporary, um, nice period where inflation's down. Uh, growth is remaining like pretty solid. The fed is sort of worried about putting the foot on the gas too much. They're seeing inflation come down. They're like, all right, well, maybe it's a good time to just, you know, to pull it off a little bit, right? So we could have this window. Um, and that could either stop in mid February, potentially as late as like May or June, where we could just see massive rallies, um, in risk assets. Um, he was asked if he thinks like the fed is going to come out and play hardball now. Um, because like we've been kind of trained to think that, Oh, and markets are going up. Feds are going to come out and just slap us down in the press conference. Right. And there's a case to be made that, well, they're not going to do 50 next meeting.

They're going to do 25. So with that dovish, quote unquote 25, um, maybe, um, Powell wants to come in the meeting and like lay the smackdown again on the reporters like he did in the fall. Um, but Jim doesn't think that's going to happen. He, he cited, uh, Brainerd's recent remarks, um, said they were, uh, super, super dovish. Um, he said, like some of the commentary from the fed indicates that they themselves might once again, think that inflation is transitory. They've acknowledged like the lagging effects of policy. They have like really ramped up interest rates a lot. So it's completely plausible that they will kind of, um, not, not let the markets run for a little bit. Um, he ultimately thinks, um, and we, we talked about this last week, actually, what is ultimately going to kind of break this market again? It's probably not going to be like a recession or a credit event. It's probably going to be like inflation rapidly ticking up again. And that's, that's, that's what he thinks.

He thinks with the China opening and all the structural issues that are sort of still in place with, with inflation that come, you know, summertime ish, or maybe, you know, mid mid Q2, we start seeing a tick up back again and CPI, and that prompts the fed to come back out again and say, Nope, we're not going to have this. We're going, we're going higher than your pricing in. We're going a little longer than your pricing in. And then we sort of like markets have to readjust and that kind of starts the next leg down. So that's my basic framework for how I am thinking about this. That seems to be how, uh, Jim is thinking about it as well. He, he said to start selling next month, as soon as you start hearing the word Goldilocks everywhere. I don't know if that includes transitory Goldilocks. I feel like our disclaimer in front of it is not worthy of a sell. But once people are out in February saying, this is it new bull, maybe pull some, maybe pull some off the table. I think Feb 15 was his magic day. That's like a day or two after the CPI print, you know, so that could be a catalyst if that comes in a little, a little hot

for some reason, you know, so that, yeah. And I guess if you think the, the fed kind of believes

in a potential soft landing and they start, you know, believing in themselves, you know, soft landing and they start, you know, believing in themselves to execute that, that's probably like a also a sign. I'll say that the, the scenario that he outlined later in the year where inflation ticks back up is really scary to me because of what could happen with the bond market. So the bond market, if inflation ticks up again and starts to show that it's rising again, I feel like the bond market, people lending money to the U S government or lending money to corporations are going to ask for a really high interest rate because they're the first time it showed up, it was kind of like, uh, inflation's here. It could be transitory. We're not going to demand a, you know, a real yield, but the second time it comes up, they will demand a real yield because it could stay for a long time. And the second time it shows up, it's going to be serious. And when you see like Treasuries tick up to rates that we're not comfortable with, that means that our precious risk assets are the most vulnerable. If you have five, six percent, 10-year treasuries, I don't know if it'll get to that extent, but when you're talking about that as a possibility, whatever probability it is, it gets scary to me and that's the one I get nervous

about the most. It's a good point. I'm still a believer that a deep recession is inevitable. So I think this sort of Goldilocks period is temporary and it will provide a good entry for shorts is the way I'm viewing it. But having these conversations is helpful because timing that short

entry is going to be really important. The thing I keep asking myself is the core assumption that needs to constantly be tested in my mind is, is the Fed literal about two percent inflation, 2.0 percent inflation and staying there? Because if that's the case, then it seems like it will require more the cost of money going up and the amount of money going down in order to achieve that. Because even now, right now, there is a gap between what the Fed is saying in their press conferences and in their written documents where interest rates will be just even nine months from now and what the market is pricing in. It even requires greater restrictions than what the Fed is even saying now. I guess as we go throughout the year, this window is going to close because reality will set in, projections will revise, and that's where maybe the transitory Goldilocks starts to end. And yeah, maybe they don't do it now, smack people down in press conferences. But I think we've seen some people say that when the dot plots come out, that's where all the Fed presidents say, this is where I think, where my votes will essentially go for interest rates. As those come out in March and June, we could see that gap tighten between what the Fed says they're going to do and what the market expects. And that's when, Eric, maybe that's when the shorts really start to play out if everything's in hand. But if the Fed is not literal about 2.0% inflation and they might be cool with three, three and a half, then I don't know. Then it's the whole thesis is a little off the table.

Yeah, it's just hard for me to see how we even go to three with wages as high and sticky as they are and China reopening. The big fear is that you get this kind of three-pronged attack of you get an escalation in the Russia-Ukrainian conflict. You get China coming online and basically spiking oil energy demand, perhaps around summer again, like we had last year. And then you have just the general stickiness of inflation on top of that because people are just earning so much money. And in real terms, they are actually richer by the stats in spite of what everybody is kind of proclaiming. So that could be like a nasty cocktail for us. And I think the main thing for people to take away here is that Goldilocks, oddly enough, is not bullish. It's like midterm bullish. But in the longer term, a soft landing just sort of makes it so that inflation inevitably picks back up again. And we have to do this kind of terrible yo-yo up and down until I don't know what the ultimate catalyst is that kind of finally ends it. But there's never been a decrease in the core CPI that the Fed is looking for without having a really bad recession. So until we get to that event, it's hard for me to think of any of my crypto positions as anything more than trades.

And I bought a little bit of spot in December for this because I thought the price was good even long term. But recently, I've just been trading pervs. I've just been trading derivatives because in my mind, it's just like I want to get into this position and I want to get out of it. I want to just click the close button and be gone and not be like buying and selling coins because I just feel like I'm not merry to them. I feel I feel like I can't really buy until maybe later this year. This is kind of where I'm seeing it right now, but who knows? I don't know.

Are you guys accumulating any spot right now?

Then... I YOLO'd some ETH calls back when we were at a lower volatility. And I think I'm just gonna hang on to those for now and sit tight. Those are up then, right? Quite a bit, I'd imagine.

Oh yeah, crushing. Quite a bit, I'd imagine. Oh yeah, crushing, crushing. Hell yeah.

Nice work. These are cool if you know how to use them, right? Because you can sort of strategically add some long convexity to your portfolio if you think we're about to just, and vol's low, and you can take risk off too. If you just have spot bags, but you're like, ah, this is, I don't, I have a midterm bearish view. It's really cool what you can do with them. You can generate income on them.

I know you, are you still writing calls underneath? I'm kind of waiting. I put that on pause because I want to wait for this little pump to continue and then sell calls.

Yeah. I like that.

Okay, yeah.

I like that. Yeah, I sold some at 16 because I was like, ah, like it's pretty pumped right now. We're at resistance. I think I sold the 2200s February. I have to double check. It seems very plausible to me that we're going to kind of run up to the top of that range for ETH. There is this range we have between 1,000 and 2,000, right? So it seems very plausible that we run that and maybe even run all the way up to 25 depending on how crazy stuff gets this spring. I think that's totally in the cards. But I really do think ultimately at the end of the year that ETH is going to probably look like those other charts we looked at. It's probably going to look like the link chart maybe. It may go up to 2K and it may go back down to 1,000.

We may actually just do this kind of terrible range thing for a year where people get chopped up, up and down. You could trade like a 2X move or half your money on the way down, losing it. But that could happen for a while and we don't know. So much of it is dependent on what happens with the inflation picture. If we soft land and then we have to keep tightening and loosening and tightening and loosening, who knows how long that happens. I think the best case for us is to be sitting in cash and then we just have a massive credit event or something, massive recession. Everything just totally nukes. The Fed goes, okay, we got to redo QE. We got to turn back on the liquidity. And we just eat a few months of short-term pain. But then we could just go back up again. This to me is like, ugh, God, I don't know.

That'd be ideal.

I hope it doesn't happen to be down. That'd be ideal.

I hope it doesn't happen. Can I bring up something about our Fed talk a little bit? I'm just curious if you guys think this is a big deal or not. So Darius Dale, 42 macro, he makes a good point. I think he had a slide in one of his presentations that Chair Powell gets what he wants. There is a bunch of voting members, but he's the one who decides and everyone just goes with it. And he mentions that he's 70 years old and that he is concerned as a man of his age about his legacy. He does not want his legacy to be, he didn't control inflation and it spiraled out of control for five, seven years. And so he means business. He's gonna squash it down. He doesn't care that it will result in a recession. He even needs a recession.

He needs you to lose your job to tame inflation and to save his legacy. So do you guys think the fact that Jerome Powell is seven years old is a significant thing or not

in this whole equation? I basically agree. I agree with Darius Dale's take on that. And that's why I think the recession is inevitable. And why I want to consider being short,

just a matter of when. I mean, that brings in the human element into the discussion, right? And so it's like you can sit and look for patterns as much as possible or recreate them and say, this is unprecedented territory. But at the end of the day, there's humans involved and I think that's a good take. People do both rational and irrational things when they get to that sort of stage of their life. You see that with Putin, not to make this political discussion but I think there are some commonalities there for sure.

Cool.

Yeah. I saw it in the deck and I figured, I don't know, it seemed like a small point

but it felt like it had a lot more significance. Yeah, I think it's the type of point that is background and gets discounted a little too much

but it's probably more significant than we realize.

How do you guys feel about the NFT market right now? I think it's ready to just get absolutely smacked if this real recession actually comes.

It is absolutely smacked. It has been absolutely smacked. You were just talking about a double smack?

Oh, I think if you think you've seen the smack, you're not ready for the smack.

I don't care about the smack.

I think we've bottomed. I don't care about the smack personally. I'm just saying, I think we definitely, like yeah, the whole thing just went down by 95% as expected. Will there be another 90, 95% drawdown? Sure, yeah, if all these macro things we're talking about happen, of course, but where it is today to me is actually kind of confusing because what has developed now are these, I think a lot of the hypothesis ended up being true around the idea of community. I think what we actually ended up finding is that community is more powerful than we realized, and we thought that the entire NFT market would just completely disappear, but what I find most interesting is that it did not, and a lot of these communities are actually thriving, and the NFT just represents something to that community. It could represent a game, it could represent access to the community, it could represent the ability to build 10k TF, and it could represent whatever the fuck the meta-versus in the future, and that community's position in that, I don't think anyone knows, but what they do know is that the economics of these communities is real, and it allows for, like Wolfgame, like there is a real community there, and there is a high transaction volume there, and a game being played, and it didn't all go to shit.

So it's really interesting. But to play this stupid game, you need to buy a character that costs $1,000, so how realistic is that to ever go mainstream at that price point? I just think prices have to come down.

Isn't that just like every other technology, though? When new stuff comes out, isn't it very frequently just uber-expensive and inaccessible at all, but the high-end and then it kind of moves downstream?

Don't you think the same thing will happen?

If by price is coming down, yeah, I agree with that. I think one of the tricky things in crypto as a crypto investor is you get very euphoric about stuff, but you also then get overly bearish about stuff on the downside, and you kind of get into the habit of just this thing sucks, LOL at you forever buying this, and then you never make 1,000X, though, when somebody likes something a lot. Once everybody likes it, it's already gone up too much, and then it's coming back down. So you're always typically buying stuff that is beaten up a little bit. DeFi is a good example of that. I think we talked about Aave a couple weeks ago on the show with the suckening, and Aave's been absolutely on a tear. I think people are starting to price that now, and I think some of those other protocols may come back and have their day again. But I wonder if we're doing the same thing with NFTs right now, and we're not seeing it. I got one more chart for you on the screen here. Can you guys see this? Yeah, so we had a pretty bad capitulation in terms of both number of sales and the dollar volume, or the average, or excuse me, the total dollar volume. But that delta has significantly leveled off now.

We went from going straight down to, we've been now trending sort of sideways in NFT sales since November 22nd. So we've got, we're two months into a sideways move, and then sales volume is up from, it's doubled over that timeframe. Part of that is due to the change in the ETH price, so you gotta be careful at how you're measuring NFT stuff, right? But ETH hasn't doubled since then. In fact, ETH is probably only up. I forget exactly when that day is, but it might be up like 20, 25%. But it's interesting to me that there does seem to be a flat lining and now an incremental increasing in activity. And we have had a couple of these mini NFT bubbles over the last year or two, where the market didn't even seem that great, but then NFTs sort of ripped. So I don't know, I'm wondering if this is an interesting time to make some plays, but I also feel like I'm so disconnected from the market because I was just so burned out on it and hated watching it go down. So much that I'm not even sure where to dive in again.

Dude, what the hell is that spike in May of 22? Is that like one project launch?

That was Bored APYOC Club, right? Bored APYOP hitting like 80 ETH or whatever it was. Yeah, floor price at like a $4,000 ETH.

No, I may have, that was Bored APYOC. No, May of 22.

May of 22. May of, no, no. That was the other side, right? Oh, the spraying sale? Yeah, I'm pretty sure that was the other side drop and that was the top of APES, right?

Around then.

Oh, the spraying sale? Around then. The whole thing just, yeah, rose, like the floor of APES, the floor, yeah, the open,

yeah, I mean, it's wild how much of an impact

that just kind of trickles down into the rest of the ecosystem Oh yeah, May was the others, I was in Greece. Yeah, and that whole thing was ridiculous. It was a terrible mint, but yeah, it was high volume. I'm curious, do you guys even see NFTs being a terrible mint? What we think they are anymore. I just see this like, it's just gonna continue to consolidate down into these great communities. And I think a lot of people expected it to just be like a handful. I think it'll be more than a handful, but I imagine there will be 100 great projects. And these 100 great projects will last, not indefinitely, but into the next era of what NFTs will become. And part of me thinks that we won't even refer to them as NFTs anymore. And the technology itself, which that's the way I look at it, I ultimately just look at it as a technology, will find a new medium. And it will completely exit out of this realm of everything we see today on an open sea, which is games, fucking just JPEGs, access to communities, all that bucket of things will just sort of evolve out into this whole other realm.

So I don't know, do you guys agree with that? And do you think it's worth owning some of these 50 to 100 great projects that will be like a relic of the early, that's the way I look at it. I look at it as a relic of the early crypto days, and you wanna hold some of these, especially when you have Ethereum sitting at $1,000 and you're getting ready to go into the next bull run. I mean, a great play is to go from dollars to NFTs and go into the next bull market, having selected the right ones. I mean, you're talking about a five X gain on the amount of ETH you'll kind of end up with. Most likely, that's how a lot of people became crypto rich was in this last NFT bull run. They just bought the right ones.

So I think I completely agree with you, dude. I think there's like the two different paths, right? There's the tech path, and then there's this artifact path. I don't see much of a reason for NFTs like on the tech side to exist on layer one. Like that's only for the artifact side of NFTs. So I think like your crypto punks and stuff can exist on layer one of ETH, and like that'll be very cool, but there's no like need for that to exist. So I think as you're describing, like how this technology evolves and maybe it like turns into this other use case, that would probably be on a layer two or a layer three and where it's like, it doesn't have the same use case as we think of NFTs now,

and there's no need for it. Yeah. You know what really surprised me was the Trump NFT. You actually crushed it. It's still pumping, I think it's-

You actually crushed it. It's still pumping, I think it's like a Avengers Three We Five floor last time I checked. Wow.

This was like a-

I have a chart for you guys. You got one chart? I have a chart for you. Wow. Yeah I do. hold on How do I pull up the right chart? Shit. He doesn't have a chart for us. Oh, he does desktop. All right, so This intrigues me and I don't know why I miss this I Fucking really want some of these. So these are the memes by six five two nine super creative. Check them out It's just like a bunch of relics, you know It reminds me actually of the very first project of the very first project I bought I remember when Nick told me about it and actually we were all playing golf Nick and Steven and I and we like ran home to buy What are they called?

He doesn't have a chair for us. Oh he does actually of the very first product. Oh, Curio cards. Curio cards Yeah, Curio cards and it reminds me of that. How do those do that? Oh, they're fucking dumpster. Hey, they're back I'm believe I believe in those though

That's like one of those relics that I would want to own but check this out like Oh, Curio cards. Curio cards

Those do that

Like this is this is the main this is this is the main six five two nine, right?

When did this come out by the way, dude, dude, I don't know because this is a bad chart I should probably go to a legit. I didn't I didn't do this in advance. I should go to like a legit NFT analytics

This is a great chart. Dude. Look at this. This is a great chart. Dude. Look at this great chart

I want to long the fuck out of that dude. Look at this. These things were point one In July when this shit was just led when yeah, like after that whole, you know Bake board a bugle abs like pump and everything went to shit. He came out with these and Look at look at them now Look at the floor price you could have got one for point. Oh six and five exit right now

Yeah, you gotta buy one. No dead when yeah like you gonna buy one nobody's paying attention and everybody thinks you're stupid actually, dude, I like them though I still think their I like the aesthetics of this honestly Like when you when you just pull up all the items and I look over it, it looks Exactly, dude. I like them though. I like the aesthetics and I look great to me

I agree. I agree. Oh, I like her mornings. I think, uh, my, uh, I think, uh, my, uh, my, my priority is to, you know, just buy, uh, cheap eat first. Right. And if I kind of overshoot my targets of the amount of eat that I, that I want, I think for me, it falls into like three categories. It's the art specifically, generative art, I think is important long-term because that art is, um, native to the technology it's sitting on, uh, the identity part, like crypto punks, I think is, is certainly a part. And then, you know, you could talk about the, I don't know, what do you call them? You can call them games, but you'd also call it casino and risk. Like that, that's interesting to me. I don't know if the real games are anywhere close. I don't think there's really anything to invest in anyway right now for those.

But those are three categories that would be fun to dabble in. If you, if I kind of am able to overshoot the amount of eth that I,

that's the movement. I don't want to target my term. I don't want to target. That's the move by

cheap either essentially by, by cheap NFTs, uh, from on a dollar basis. Can I, uh, can I switch

to my non-crypto boring, uh, stats that I have? I love, I love it. No, you want it. Yeah. Let's,

let's wrap it up. Let's wrap it up with a little, uh, little shift here. Land. We don't just talk

about the crypto land. We don't just talk about the crypto. Yeah. So, uh, this is a money episode. I've talked, uh, several times how I think that, uh, limited partner real estate is one of the best ways to accumulate wealth over a lifetime. Certainly not going to get rich quick, not going to double, triple up, you know, in, in months, but, um, on an absolute basis. I also think on a risk adjusted basis is the best way to kind of ensure your financial freedom over your entire life. So every quarter I get, uh, these distributions from these general partners have about six general

partners that invest with, and I wanted to share some distribution. This is a money episode. I've,

I know you weren't pitching me just now, but I, I, I'm sold. Like the way you have that pitch down

is just so good. I mean, I, I, I am really high conviction about it and I can go on even more. But I figure like, since this is like, uh, basically an extended alfalfa round, why not just show what's going on? So obviously I, I blank some stuff out. Um, I blanked out the name of the general partner. I didn't really have time to ask them, uh, for permission. I blinked out some of the total dollar amounts, but I kept what is most important, which is in the right column here. So just so you know, this is looking at Q4 October through December. Um, these got paid out on January 15th and on the right hand column, you see the annualized cash on cash return for Q4s, uh, distributions. And so let's just call out a few things. So it looks like the min minimum is 6.5% and it looks like the maximum is 13.2% and the weighted average is 9.1%. It's important to know that the way I look at this is this is the, uh, post tax, uh, number, but in, in reality, uh, the depreciation from these properties cancels out any income.

It's often a greater than the amount of income you get paid from these properties. So on your K one and your taxes, you have a negative number. So what that means is that this is essentially a tax free number that, you know, as a limited partner, I feel comfortable spending this money. I'm not going to take a chunk and set aside to pay taxes. This is, uh, spendable money. So, you know, you're, you're looking at like a 13, 14%, uh, pre-tax equivalent return, uh, in, in cash. In, in addition to these cash flows, there's obviously appreciation. Um, and we can talk about, but for this convo, I want to highlight two things. Um, and I think these two things are really where, uh, this type of asset starts to snowball that it is really tough to find in other assets. So you see, I have a two groups of property names highlighted. The first one is a green one, and then there's an orange one. So let's talk about the green one

first. So the green one was, uh, I can pronounce that if you want some of us on this podcast. Um,

but I think, and so I can pronounce that if you want some of us on this podcast or color blind, by the way, that's on Dante. I didn't, I didn't realize there were two colors here. Oh my God. Can you, can you do, can you do red and blue next time for me? Sure. Yes. I'll do the R that's on Dante. Can you, can you do, yes, I'll do the R I'll stick to RBG for you.

RNG is no good. Just get out of it. Don't mix RNG. I'll do variations of gray. How's that?

Do you just run red light, Steven? You just, just, just everywhere you go, you just run them.

Well, if it's dark and I can't tell which light is the top and the bottom light sometimes, then

yes. All right. Good Lord. I don't know how to give you a license. Anyway. All right. Good Lord. Anyway. Okay. So first example, I want to show the power of this. There's two things I want to go over. I want to go over 1031s and refinances.

And it just so happens in this specific general partner for this quarter. There's like a really good example of it. So the top ones on Dante and view 22, those are examples of 1031s. So, uh, I actually, uh, invested in a previous property about four or five years ago. And that one had grown at about a 41% annual return for about four to five years. And then, oh, it was amazing. And it's funny cause it was only cash flowing, like, uh, 7% on average. It wasn't like a, one of the ones that stood out to you in the sheet, but when they went to go sell it, there was a lot of appreciation that was realized. And it was probably because, um, just valuations of these, uh, you know, multifamily, uh, got elevated. But in any case, uh, it was a, you know, a multiple and multiples of return and we got a chance to 1031 it. So all of that capital went into these two properties and you see one is producing a 10% annual cash on cash return and one is a 6.5%. But what I'm really interested in measuring is what is my cash on cash on the original investment, the money I put in originally and the, the weighted average return of that money is a 18.3%.

So I'm getting 18.3% cash flow, uh, basically tax free, um, on my original money, money in. And so again, this goes back to why this is a good way to accumulate. Wait, wait, wait. Tax free. Let's go. Wait, wait. Yeah. Because again, the depreciation on the property cancels out your, your profit. Um, and depreciate depreciation is obviously a non-cash expense. Um, maybe in another episode we can talk about why, why that happens and, and why that's so important. It's not like some, uh, scheme or hack it's, it's there for a specific reason and, uh, smart general partners can, can use it to their advantage and to their limited partners advantage. You know, it probably lasts on any given property 10 to 15 years.

So it's not, you know, forever, you're just not going to pay taxes, but the whole times on these can be, you know, around seven years. So you typically have plenty of time to cashflow off these without having to pay, uh, taxes on your profits. So that's one that's, that's a big unlock, you know, where you can kind of heavily compound your money. The other is the, the orange ones, Bella Vista and Westview in this scenario. Um, that was a similar scenario where, uh, I had invested in another property, um, in 2016, I believe, and two years into it, they refinanced a hundred percent of the money out. Um, and the reason was they actually increased the net operating income of the apartment complex. They went back to the bank and say, Hey, instead of that 65% leverage, we're now at 30% leverage because we've increased the value, the profit of the company and the value in the valuation. So we want to re-lever up again. And they took that cash out and just gave it back to their investors. And that is also tax-free because well, you can consider it a return of capital or you can consider it alone. You're, you're taking a loan out. You don't get taxed on, on loan proceeds.

So you're borrowing money in that scenario. And that's an example of how this is one of the very few asset classes where you can go 60% leverage and it's not only acceptable, it's encouraged. Um, and so you, uh, you see on these two properties, 8.5% and 6%. And this is an exam. I think the weighted average of that is 18% flat cash on cash. So two scenarios, um, where, um, over time again, this took seven, eight years to play out for these things, but, um, overtime, the snowball and then you have these huge legs up, um, sometimes. So I got a question

for you. I just want to showcase those appreciation. I just want to showcase those yeah. I got a question for you, dude. Cause like, um, so the cash on cash return, 9%, you're saying you have a tax advantage too, so that return is actually higher when compared to other investments. I like that. I think your 18% weighted off your original cost is not something you can always expect because you got in basically at a low price and then they exited at a higher price. Somebody who's going in now would probably go in at a higher price and it might not stay higher. How are you in your mind categorizing this style of return versus what you'd find in another asset you like, like ETH, where you see a potential upside of maybe higher than 9% annualized? How do you make that decision in your mind? How much to allocate to either style?

Yeah, that's a good point. When you look at these deals, they are highly illiquid. These have increased in value drastically, but I can't be like, hey, can I get a million dollars cash? I want to go buy a house. This is not going to happen. I can't pull the money out. In comparing this to say, I don't know, maybe the stock market, I need a much higher return for that liquidity risk. Now, when I look at ETH compared to this asset class, ETH has extreme volatility. It's one of the most volatile things we probably play with in our portfolios. I don't know that there's a term for this, but I need a premium. I need a return in exchange for that volatility. Most of these deals are underwritten at 14%, 15% IRR.

Sometimes they get adventurous and underwrite them at 17%. My experience has been that they compound at a 20% to 25% annual return if you find the right partners to work with. In my mind, ETH has to beat a 50% annual return over the same timeframe, which is five to seven years, and it can. The whole goal of that ETH is to peel off cash in times of abundance and then put them into this wealth machine. I've found that it's hard to make money in real estate. If you don't have cash, it's hard to make more cash with this, but if you have a little cash to play with, it is one of the best ways to amplify your wealth over a long period of time. So I guess the short of the answer is I just need to double that term and that I'm seeing in real estate for it to be worth it, and I think it will. I don't know. How would you talk to me as someone who has experience advising in these kind of scenarios?

You just said it pretty much. If you have wealth, this is a great way to protect and slowly grow wealth. If you're starting from low and you're trying to make it, you can't really play this game or it's not the right game to play. You want to buy ETH and you want to stack as much ETH as possible until you get to a point where you have real estate money and then you can start playing

that game to protect or it's not the right game to play. Yeah, I think that's- So you both agree that this is much more of a wealth preservation strategy than a commute? Because I know that you started this early. I mean, you started this, as you said, seven, eight years ago. So you weren't necessarily looking at it that way, and this is the majority

of your portfolio, but it now looks that way. I think preservation is in quotes. Preservation means maintaining purchasing power. So you have to beat inflation. So Nick's up in dollar terms, but he's also in a real return sense. He's more wealthy now. So I think of it as preserving your

purchasing power, because Nick's obviously making money here in dollar terms. Nick, there was a

question. Yeah, I think I found it and feel free to call it out if I missed it. But we had one question in the chat that says, what does year one and year two look like? Because you probably astutely noticed that a lot of these were invested in 2015, 2016, 18, 19, and they've had time to grow. So I think what you should expect as of right now, what the market is pricing in is boring 5%, 5.5% cash on cash in the first year. And I'm currently in a pause mode for 2023. I've seen great deals come up, and I've purposely passed them because I've looked at historical returns pre, during, and after recessions. I think it's just much wiser to wait for, say, 12 to 18 months from here. But you should expect a 5%, 5.5%, and it's really boring. And then you look at the 10-year Treasury yield, and you're like, what did I just lock up this money for for seven years to only get paid a few shekels initially? But you get a year, you get a two, and you do a few of these over time, and then your 60-year-old self starts to pat your 35, 40, 45-year-old self on

the back. So Nick, one more question that I just thought of. I know that in one or maybe several of your deals, they've refinanced the debt side of it, and that was an effective payout to you. Can you envision a situation where the Fed really tightens, you get much higher interest rates when you initially go into a deal, and then interest rates fall back down when they start easing again, that would probably provide an opportunity to refinance, and maybe that could be your windfall, so you're like maybe timing it like that?

Totally. So that would be ideal, and I would like to kind of time that scenario if possible. But there are two ways that you can get a refinance out. One is just that rates drop dropped drastically, and you have an opportunity to redo the debt. But the second is that they're actually a value-add scenario. They're actually improving, making renovations, leasing it up higher, making the property better, making it a better business, and that's really what you want to focus on. Will this be a better business in two to three years, regardless of rates, so they have a chance to refi? Just 30 days ago, I got a refinance out of nowhere. I didn't see it coming. Interest rates have been going up, but they just did a really good job on that property, and so there's more income, a higher valuation, and they decided that before rates go higher, let's just pull some cash out and give it to the investors. Another thing to look out for in these deals is what type of debt structure the general partner is using, because sometimes they will take these interest-only loans for 10 years, and there's a prepayment penalty, which means there is no chance of a refi. Or if it is, it's going to be very expensive and be a non-starter.

In future episodes, when we dive deeper into stuff, we can talk about what to look for. I think that setup of higher interest rates, the thing is, though, is that your cash on cash in these deals is going to be low. They may say it starts off at 4.5%, and it's just going to be really hard to make that decision. But if you think that the property itself will be a good business in the future, then it'll still do well.

A quick thing on this. Go ahead, finish that point.

I just want to answer a question I saw in the chat. It says, were all of these ground-up development deals? No, these weren't. In these type of deals, you have three types of business models. You have core, value add, and development, typically. Core is a brand new property. It's fully leased. It's got in-place cash flow. You're not going to make any changes. It's going to collect whatever rents come in currently. Development is obviously picking up a shovel, digging in the ground, and building it up. But these were all value ads, existing maybe a 1990s apartment complex, going in, doing it up, and leasing it up.

All of them were? Oh, wow. All of them, yeah. I don't do the development ones. They have a lot more risk, and the time to cash flow is usually two years out.

We're all of these ground-up development deals.

Wow. All of them, yeah. You don't do the development because of needing to fill them up, and yeah. Yeah, exactly. What about geographic? Obviously, these are all West Coast deals. That was another question. What was the exact... Good point. So this is why it's good to diversify with West Coast.

Yeah, yeah. Yeah, exactly. Point. So this is why it's good to... Is it restricted since you're all... Yeah, it's good to diversify amongst general partners because they typically focus on an area. So these ones are, well, you could see Arizona, California, Nevada, Oregon, Washington. But I have some in Texas, in Kansas City, in Ohio, Georgia, other areas. And my goal is to always find general partners that are just as good as, say, these guys, but that specialize in other geographies because there's certainly maybe more risk-adjusted opportunities, say, maybe in the South than California. So yeah, these are all kind of West Coast-ish, but there's other general partners that specialize in other geos. And there's other sectors, too. This is multifamily.

There's

industrial and storage and all kinds of other ways to diversify California.

I love it. I love it. Good little crypto-real estate combo today. I thoroughly enjoyed this. Thanks for everyone who's here live in the chat with the great questions. If you're listening on the pod and you want to come hang with us and ask the questions, just come to go to the YouTube, youtube.com forward slash alpha podcast and hop in the chat. One thing I realized because we're new at this is we actually, we can definitely improve on when we're showing charts to say out loud for you podcast listeners. Exactly. Sorry about that. Yeah, no, it's okay. I'm also apologizing because I realized I did it with the chart that I pulled up. We have to say the numbers out loud and we need to tell you what we're looking at.

So my bad. And yeah, I would love any feedback on this model. If you guys like it, hop in the discord, let us know. And I think that's it. Right guys. Yeah. Congrats to us.

We made it. We made it. Exactly. Sorry about that. Yeah. Yeah. No, it's okay. I'm also

apologize to us. We made it. We made it. No screen shares, no disconnects, no crashes.

I feel this is huge. This is huge. I feel this is huge. This is huge. I love it.

I love it. Good stuff guys. Good stuff guys.

All right. Thanks for joining everybody. That's a wrap. Later. Later.

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