122. Bear Market Gameplan for Building Generational Wealth - Transcripts

March 13, 2023

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122. Welcome to the Alfalfa podcast πŸŒΎ

(0:00) Intro  

(1:20) J-Pow is back in biz! 

(9:10) What the Fed doesn't want you to know

 (14:00) Eric becomes a trader 

(22:13) Robinhood's wallet 

(33:00) Coinbase is the future of crypto

(38:50) Amazon NFT?! 

(42:30) How to build a portfolio for generational wealth 

(1:13:00) Wrap up

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Disclaimer: This is not Financial Advice. All opinions expressed by the podcast are intended for informational or entertainment purposes only and should not be treated as investment or financial advice of any kind. Alfalfa and its representatives are not liable to the listener/viewer or any other party, for the listener/viewer’s use of, or reliance on, any information received, directly or indirectly, from this media. The listener/viewer should always do their own research. Any views or opinions represented on this show are personal and belong solely to the show.

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Welcome to the Money episode of the Alfalfa Podcast, where we are slowly but surely leveling up. We had a great time, great time in East Denver, as we mentioned in the last episode, popping the Discord. We're on YouTube. We're not doing this episode live. Yes, this is a non-live.

We might be switching that up.

Maybe, Eric wasn't gonna be here, and we felt. That's right, Eric was not gonna be here,

so we said, let's move it forward. I wanna do every episode live. Yeah.

That's where I was. That's where I was. We're gonna get the studio built. My problem is the virtual, the remote. I don't wanna do the at-home episode. I don't like that. It's less ideal, yeah. I wanna do in-person, but live. Yeah. Well, we have some help coming to help us get that set up, which will be very nice.

Money and life episodes live.

The studio built. All right, so we are kicking off. Yeah, I guess, reminder, alfalfapod.com. That's where Discord is. That's where YouTube is. We're pushing more on YouTube. And yeah, I guess, especially in the Money episodes, as you're listening along, watching along, we obviously bring up a lot of stuff that people wanna go deeper on. So feel free to comment on the actual YouTube video or hop in the Discord, but we'll start keeping an eye on YouTube comments as well. All right, let's jump into the market.

Yeah. J-PAL. Daddy J-PAL has re-entered the chat. He's back.

He's back, baby. He re-entered the chat after we had already dumped because we did the Ethan Denver episode and I showed up like a frazzled psychopath and told Ledger I just sold everything. I mean that's what he's saying.

We're all free hungover. We're all free hungover. Is that what you mean, by frazzled

or frazzled by the markets? I mean, both.

It's just generally frazzled state. I'm so proud of us for pulling that episode off. That was fun. I haven't drank like, they would have been quarters over like that a long. We were a mess. We were a mess.

It's there fun.

We were a mess. There's fun, that's a long.

We were a mess. A pair for everyone to see. You know who is more of a mess than us?

was the Denver podcast studio, dude fucking hell! They were terrible!

But they didn't even press the fucking record button. It's not Even! That was a bummer.

For the three of you that you okay.

For the three of you that you're okay. For the three take a lot that are considering doing a log at the Denver podcast, check everything. Don't, don't touch them.

Don't, don't let them touch them. Anyway!

I'd like to record but anyway. I'm not really worth consuming. I did. I can't forget it. I mean what do we do we went to dinner the night before right? Yeah, I forgot it forgot about it Honestly until you posted the photos. It's like oh, that's right. We went to that steakhouse

Wait, that wasn't our alfalfa

Meetup the night before then. No. No, we just got blacked out of dinner. No

We just got blacked out of dinner I mean, I remember being in my hotel room in the morning just like selling things

Like in the middle of the night. How did you smart man? How did you front-run that move?

Good move. I was that was I worked out. Well, is anyone um, is anyone interested in playing this? GBTC Discount narrowing in the last few days the they went the oral arguments between Grayscale versus SEC and it sounds like you know The judges are very open to Grayscale's argument or the fact that the SEC hasn't made a great argument again

Feels a little bullish right feels a little bullish. Has anyone interested in taking that bet? Well, I've been well I've been playing for a while This is a bad spot that I'm in because like, you know on the one hand it's it's narrowing the gaps narrowing But like I do not want to buy


Like I I hold that in my retirement account same some GBTC of our time. Same. So same some GBTC Same, but I guess I am already but like we've been rugged so many times like it's gonna be a big week Etc, etc. Like like I'm so desensitized to like any good news

Well, I think we won't hear won't hear for three or four months of the actual ruling. So you got time I mean what happens first like an approval or just like a full approval just rug possibly What else happened? Well, silver gates going under so yes silver it's done. Yeah, they're self liquidating

Silver gates done. Yes, they're self liquidating and it's gone. It's gone

It's in there and there they're based here in San Diego. So I see boys Right by my house when the loyo drive by them And we're like so the government guarantees this money. What are you gonna do to fix it?

They're right by my house flew into the Laurie drive by them

Yeah, one of the guys I know in town who joined the Discord text to me, he's like, do you know anybody that this bank funds? And I was like, we do actually. Yeah,

literally everybody. We do actually. Yeah, literally everybody. So our buddy carne asada Chris, his dad is from the banking sector and his buddy is the CEO of Silvergate. Yeah, he was telling me today, he's a little busy right now. But yeah, maybe a good retrospective, I think would be good. But all he said was like, yeah, he's not having a great time right now. My buddy's in a bad place. I believe it. And he said that bankers typically have most of their net worth in the shares. So he obviously gets paid a probably a very healthy salary, but poof net worth. My question is, so I actually have quite a bit of cash, like USD cash in Coinbase.

I know Coinbase was using Silvergate. So in sitting in Coinbase. Yeah. Because I have it set up for some sugar, it needs as a limit orders to pull. It's fine. I'm sure it's fine, too.

He was telling me today, little busy right now. So yeah, because I have no sugar. He needs limit orders. Sure. It's fine. But they don't. I'm sure it's fine. Too.

dollar is not to be there to set the limit or because I think they have to be there to set the limit to be there. I can't you? Yeah, they have to be there. That's a beat in there And then you can't use USDC, but anyway, I was gonna pull most of it out and put in some good old treasure

I think I think Coinbase is fine. No, I probably know it But you're like should I have cashing I mean I pulled even more money I basically emptied like my remaining. I'm not sure if I'd I just hold on. What about you?

I'm not sure if I'd I just hold on. What about you? Mr. Bibet over here. I'm sure pause

Well, I have like well, I have like DJ and wallets, but I emptied like my non D gen wallets and just put it in the treasuries because yeah, whatever

Fucking liquidity cascade just continues. This is like the slowest car wreck all time

This is like the slowest car wreck all time I mean I guess like you touched on the the J-PAL things we should probably talk about that a little bit as well I mean he gave a he gave a little chat in front of a he's in front of Congress the other day I actually had kind of a funny exchange with Elizabeth Warren. Yeah, that's what my alfalfa runs about sort of don't honor I won't want to spoil that but he Basically laid down the hammer and the odds of a 50-point hike have gone From like basically zero to like I think they were like 75% or something last time I checked So good chance we get 50 now Obviously, that's not great. I mean, yeah, that's what my alfalfa runs about sort of don't honestly all the stuff We've been talking about in recent weeks has just come to fruition. We were worried about like maxing out the stablecoin supply ratio Basically peaked and market cap right at the bottom of that channel that we drew out on the pod and talked about the discord Talked about the dollar going up Dollar has been crushing. I took profits on like half of my position today because hit like a target there And yeah, the higher for longer thing, you know, it's all those things have sort of come to fruition and here we are

So I have a question about this So, you know, the probability rate hikes has gone up like I think the market has accepted the higher part But the market supposed to the stock market specifically supposed to be this like pretty efficient discounting mechanism and the stock market went down Like a point and a half the other day and it stayed flat today. So why doesn't the market? It's taken this discounting a lot faster. I feel like, you know moving from like a five percent is terminal rate to a five and a half is a big fucking deal when you're

discounting out future cash flows if you actually if you actually have a

DCF model that move makes a big difference more than a percent half and market cap of all those companies So the market doesn't seem to take it all an account like there's obviously some probability

Baked into there, but I thought it would or it was already baked in even though that it didn't reflect in the

Like the bond market probabilities. I'll just do abilities. I'll just market just don't seem to be that efficient I mean the bond market didn't even come close to getting the last couple years, right and You know Bridgewater's been talking about how the stock market and the bond market have been pricing in like events that like can't Coexist so if you just short both of them like you so seem to automatically capture like a return So it's kind of it's kind of weird. Who's the twos and spoos guy? I'll explain what

Oh and the damp spring and Andy constant explain what? Oh, and I think so so if you want to follow a guy who's on a heater in the last like three months and he constant

Let me use at he's at damp damp spring. Yeah, I think that's right. So check him out on tinder

Yeah, I think that's right. So check him out on Twitter and for the last three months he's been short the twos and spoos, which is the news which is the the two-year bond and And the S&P 500 Spoo, S&P 500, I don't know. Someone figured, tell me why that makes sense, but it sounds cool. Short of twos and spoos, so he's been short the two year, and as the yield has gone up, the value that's gone down significantly. So he's doing pretty well, so if anyone wants to follow someone who feels like they've got a hot hand right now, I've been following him a little more closely to see how he's been reacting to everything, see if he's taken profits or whatnot,

but he seems pretty happy where he is right now. He's been short the two year. All right,

Could kick off with your alfalfa next? Okay, so yeah, my alfalfa, we've been talking a lot about, in the past recession or not, recession, soft landing, hard landing, and my alfalfa is essentially that the Fed is forecasting a recession without telling you. They are trying to create a recession. And we may have touched on this in past pods, but maybe not emphatically enough. So right now, and this came up in the Elizabeth Warren back and forth. It also came up with multiple back and forth with Chairman Powell. The current unemployment rate is 3.4%. The Fed itself is forecasting 4.6% by the end of this year, which is 120 basis points higher than it is now. And never in the history of the US, or at least going back to call it like, I don't know, early 1900s, has there been an increase of 120 base points in the unemployment rate without a recession. And anyone can pull up a Bloomberg and figure that out. So the assumption is that the Fed obviously knows that this is the case. Powell confirmed it.

He said, well, the number of times it didn't create a recession is zero. So the point is that the Fed is forecasting recession. And not only are they forecasting a recession or hoping that it happens, because they're predicting it will happen, gives a high probability that they're not gonna ease when a recession happens. They'll be like, oh no, recession. We gotta like, you know, let's do some QT. We're shocked. I can't believe a recession happened. And so the market is currently pricing in this higher part, but I think the market is gonna still have to come to the Fed even more in that fact that it's gonna be for longer, because, well, the Fed's already thinking, that's their base case, that they're gonna send us into recession. You wanna buy the coins here? Ah, not yet, not yet, brother. Patience is feeling okay for now. Treasury bills.

So, so. Treasury bills. They're in a rough spot right now, because like the only thing holding up inflation right now is basically service sector, right? For the most part, then that thing is, that's a huge chunk of the economy. It's not going down. It's basically people's wages. So, you're basically saying you're trying to crush

a lot of people's wages. A lot of people's wages. And 42Macra gave us an update on people's, you know, cash, corporate cash and cash in their checking accounts. And it's still very high percentile. Like they have 5% of household net worth. They still have a lot of cash.

Well, on a related note to that, I think something that's kind of interesting that I sort of see some people talking about now. I think we talked about this a little while ago. Like I was wondering the effect of, okay, so we're doing all right in life, right? So, when the economy gets kind of crappy and the shit's in the fan, but you go, oh, you can earn five and a half. We're probably gonna be earning like six and a half percent in like T-bills pretty soon. Well, we're like, yippee, let's sit in cash. And I can earn all like, like literally like 30 times as much interest income as I could like two years ago, right? How is that disinflation? Like we're sort of injecting a bunch of cash into the pockets of people who have cash and giving them more cash by doing this. This is also a problem with like the US government. Like as they run these like deficits and they're paying out like these huge interest rates on bonds to fund the deficit. Well, the money the government's paying out in interest is generally going back into the population.

Like a lot of bond holders are, you know, US citizens and that money is then available to go back into the economy. So I think this is sort of like a weird setup that-

Wait, hold on, is that right? Hold on. Is that right? Because I feel like a lot of the bond holders

are actually international players. No, like it's a very, yeah. Decreasingly so but- People don't realize like how this is like popular myth that like China holds all the bonds, but like gigantic swap-

I thought it was like Japan. Decreasingly so though. Yeah.

I thought it was like Japan held all of it. But both are decreasing. I think one important note, we're talking about this like Fed forecasting recession is that it seems by no means it's gonna happen anytime soon. Like it seems like Q4, because services high, because people still have cash, because earnings are higher,

this may take a while, so it could get it. I mean, there's not even a, I don't think there's a cut price on the curve this year anymore, right? I think it's all gone soon, yeah.

It's pushed back to 2024 and that might be,

I don't know, the recession may not end until 2024. In a weird way that makes me happy, because that falls right into my long-term thesis.

Might never come, dude, it might have already happened. I don't know, it's an unknowable world out there and everybody's been very wrong on stuff, so we should all just keep being open-minded. I'd just like try to look like a month or two

in front of me and make the best decisions. I'd just like try to make the best decisions. Okay, so my alfalfa this time around is related to Steven, which I'm very excited about, so Steven's the resident trader of all of us and recently I've had an inkling to get more involved in this game and Steven was like the first sort of nudge in this direction and then my business partner was like the other catalyst. He started talking using the same language that Steven does in our Magic Lines channel in our Discord. He was saying things like order blocks and liquidity levels and fair value gaps. This is like very particular Steven language. So I didn't know what any of that stuff meant in the Magic Lines chat. I feel like most people don't actually. Everyone's in the Magic Lines, we're like what do we do Steven? So like I'm just trying to learn it more and when my business partner brought it up to me that he's doing this stuff, he's like all right, so here's what you gotta follow. So I started this sort of like deep dive, learning how to trade and it all stems from this YouTube channel, this YouTube channel is called The Inner Circle Trader. And he's- I found him.

I found him. So The Inner Circle Trader-

You're fuckin'

So The Inner Circle Trader has this name on- I actually haven't directly consumed any of his content but I think he's notorious for being influential for a lot of, there's a whole swath of crypto traders.

Okay, so, okay, so this guy, he has like the it's called the 2022 mentorship program or something on YouTube. It's all free. It's like 40 hours of his lessons. I'm like in chapter three right now. And I think by chapter three, and because I have like the, the benefit of Steven and my business partner kind of like, telling me along the way, like I sort of already get it. And the idea is basically that if you believe that algorithms are trading, like, in all markets, which I believe there to be, then it's like trying to understand what the algorithm are looking for. And, and basically, just like front running those guys are like getting, getting some alpha out of how the market will move based on market makers moves. And and this to me seems like very intriguing. I've always like sort of like shunned high frequency or like, you know, any type of short term trading, it's like antithetical to how my whole sort of style is, but now I'm like, okay, well, maybe let me just fill this void in my knowledge base. So that's where

I'm at. So if you search the inner circle trader 2022 mentorship, it's a playlist that pops up and there's 41

chapters, 41 chapters, 41 chapters, 41 jobs in each one's

like an hour. So I'm three. It's pretty incredible, like how much free trading content is on YouTube. That's like really good actually, there's there's this like divide between stuff there's like Tai Lopez as kind of scammy and they're trying to sell you crap. And then there's guys like, you know, crypto cred when

you said inner circle, I was a little worried, but no, I like I've been worried about my whole life. Like I, any trading ICT was like $67. Like any trading just feels sort of scammy to me. So I've always just shunned it, but I'm coming around the idea

and I just want to learn. Well, you're about to read about my

whole life. Like any trading just feels dope and dope and mean boy, there's some, some good content there. Like, like, yeah, like, I don't know if you guys know crypto cred, but he's like an old school kind of, he's been on crypto Twitter forever. This guy like puts out hours and hours and hours of like really good, just free content. I have no idea why he does it. And it's really good for like super newbies too.

Wait, is that the guy that you plagiarized in our discord?

Plagiarize, plagiarize a lot of people in our discord, you're

gonna have to know more specific. Sorry, that was the one who he was taking the S&P short. This was like two days ago.

Oh, well, first of all, it's not plagiarizing. If you tell everybody that you're literally ripping off your work, that was a set up from another guy like crypto chase. Oh, shout out to him. He's a really good ES trader. So you should follow him if you want to trade stonks and kind of do this like short term swing trading. Yeah, candles are candles, bro. I just want to respect. All right, cool. Well, yeah, happy for you. Happy to have somebody to talk to you. I'll see you in magic lines. Yeah, for my thing, I just wanted to run through as some of you know, I published a Twitter thread the other day about why I think Sham Shanghai fork for each is like, and we talked about this on the pod last week, I was like hesitant about it.

Like, I don't know, like, I kind of feel like we've been like middle curving it a little bit, or a lot of people are making these elaborate excuses for like, why it's actually like, this is like the old like, Suzu like bullish selling thing from the last bull market. And I think it's just sort of like, there's gonna be more supply on the market and like more supply generally means number go down. And I actually tried to dig in

and run some numbers on it and I decided your work. That was

candles or candles, bro. I just want to respect. All right, cool. Well, yeah, see you in magic lines. How'd that work out?

You know, I found a bunch of good analysis on Twitter. And then the court Corpy 87. The account like yeah, he publishes some good DeFi content or maybe she I don't know, but had a good write up on East Shanghai and sort of estimated that anything between 500 500,000 to 3 million, each were probably set to be sold over a one to three month timeframe.

And that was a I think that was a fair expectation. Because I read what you're posted and what Corpy posted, he said, he was assuming between eight and 30% of liquid coins gets sold. I think that's fair.

Yeah, it's super fair. I read over and I was like, this makes sense to me. But just to give people like a concept of what that is, like, so everybody on Twitter, every eath lover that you know, has been just like hyping the merge and how bullish that is, because it's taking supply off the market, right. And Shanghai is kind of going to do the opposite, right. So we're six or seven months out from the merge, and we've removed 3 million eath or 2 million eath, actually, 2 million eath from the market. So the worst case scenario for Shanghai is 3 million eath in three months. And we just did 2 million over seven months. So this is basically the potential to be like a double reverse.

And what happened to price? Since the merge? What happened to price since the merge?

Well, the merge is sort of like an unknowable thing, because we're trying to argue against like some unknowable alternative that didn't happen. Like maybe if the merge didn't happen, we'd be at $700 right now.

Yeah, but the coins didn't moon, despite this like cell pressure alleviation.

Well, I would argue that eath has held up really well, actually, like we saw that today too, like things dumped like double digit percentages, and eath is only down like a percent. So I do think at this point, it has been having a positive impact. But if you believe that you also, like if you're going to be intellectually honest, have to believe that the opposite effect is going to happen in Shanghai, and we may have two or three months, you know, maybe assume two months and 1.5 million eath that still basically the merge in reverse and double the time. Are you trademarking reverse merge, reverse merge and I should trademark these things. Right? It's trademarked. I like it. I'm with it. Yeah, yeah. So so we're all on board this.

I think it's trademarked, I like it. I'm with it. Yeah, I think I'm on board for for two reasons. One the math makes sense, I think he's estimation makes sense. and she could check Steven's Twitter thread to see Corpy's post there in his analysis. But also, one thing we had after the merge was this like narrative vacuum, you know, and it definitely was a sell the news event. And so if people are thinking it's gonna be bullish, there is gonna be a narrative vacuum, I think afterwards. And also there's other things that could come up, which we're not talking about

in the isolation of this thesis, but yeah. And I do think I have a narrative to fill that vacuum,

but I think we'll talk about it next week.

Okay, cool. Love the teaser. Yeah, open my loop, baby. So something that I've like brought up to you guys in the past that I, yeah, let me get a little splash of that Chianti as well. That I'm not necessarily like bullish on before singing practice and out in the wild, but bullish on in terms of just like a general thesis of what it could do for the space is Robinhood's wallet. And Robinhood has a platform in general. Oh no, you're out of a sacrament. That's enough.

Oh no, you're out of a sacrament. Chianti Classico is dead.

Oh, great for the gods. And, you know, in general, I think the most important thing in this space is incredible user experience and interface, product design. I've been wanting to see like incredible product design enter the space. Obviously there was like news of like Uniswap's wallet and we'll see how that plays out. It's not available, but Robinhood's is. And I brought up that launch in the past. And it was funny cause we were at East Denver. I think we were in like an Uber and I was like, I wonder when Robinhood's wallet is coming out. And I went to check and Google it and it had just come out three days ago. So at this point that you're hearing this like a week ago. So I immediately downloaded it and I had, and I was like, all right, I'm going to run through the onboarding. And the most important part to me is the onboarding itself.

Cause the onboarding of like something as absolutely garbage as MetaMask. It's so bad. Is the most excruciating, terrible, frightening onboarding. Well, you get rugged three times before you figure out what you're doing. It's just terrible. It's a browser extension. It's got a terrible mobile application that you can't even like originally create the wallet from if I'm not mistaken. So I was very curious to see how Robinhood goes about this.

So first of all, the whole thing is just like beautiful. You get rugged three times before you figure out what you're doing. It's just terrible. Hold on. So you created a Robinhood wallet.

Yeah, yeah, yeah. That's amazing. But here's what's interesting. And I didn't realize that actually Coinbase has had this already as well. So one thing you can do is you don't have to write your seed phrase down. You can hit a button and it'll store it in iCloud for you. Which is what 99% of people are going to do.

First of all, this sounds like a pure rug waiting time.

Well, hold up. Well, hold up. This is like a special way of doing this, right? And I don't think they like take the seed phrase and store it in iCloud. I think they like break it up into like multiple, like I know there's a form of encryption, but the same go that does this, but it's not like equivalence to you like saving it in a Google Doc and. Okay, that's what I was wondering. No, there's some way of splitting it up.

It uses encryption to make it in your iCloud. But iCloud is the mechanism. You never have to write it down. This is already so much better. It's so much better. But ironically, like Coinbase wallet already does that. Cool. I mean, that just makes me happy. But, like, no one uses that. Yeah. And that's what's funny about it. And they didn't really have like a good launch because they've always had this, like, This app called wallet that no one ever really nobody used used.

Yeah, even though I mean people use it

But anyway, you've got this is already cool. I mean that just happy. Yeah, nobody used used. Yeah, there's probably

With Robin Hood According to them a million people that were on the waitlist ready to use this thing and it's available now on iOS to all users onboarding was great and I was doing this like little side-by-side You just compare the two wallets. So like sure the onboarding on both is like decent

But here's the difference once you're talking about coinbase. You're talking about coinbase and Robin Hood or correct

Inside the Robin Hood wallet like I don't know if the YouTube can see that well, you got a lot of money in there Yeah, I got a lot of money infinity money And and like that's it Like the the menu is simple The activity section is simple the UI. It's just there's so good at UI. So Yeah, you you don't you and and it's like web 3 Self-custody multi-chain so you've got you can swap on polygon for with low fees I mean, this is all sounds incredible no fees. No fees. Excuse me, and it's web 3 accessible right from home

So well, you got a lot of money in there. Yeah, a lot of money

So, what about like the web 2 web 3 integration can you I mean maybe you don't know this but like can you take your Sort of like tradify Robin Hood money and take it to your yes 3 Robin Hood money like a seamless way

Cuz that one button. Yes. Yes seamless way cuz that one button one button. That's amazing transfer from Robin Hood

Okay, this is transfer may transfer is what we've been talking about

So like so the people that really like when the big new majority of crypto users were onboarded into Robin Hood We're onboard into crypto It was it was a lot of it was from Robin Hood But the trouble was obviously they didn't have any custody of their tokens or coins now they do on Robin Hood great That was a nice evolution. But then secondly now Robin Hood is enabling this sort of web 3 self-custody wallet I think it's good for the space overall. I have no idea how it'll play out. It's great for this

I don't know. What do you guys well, it makes it's great for this. I don't know what you guys well It makes me it makes me wonder if I should be bullish Robin Hood was this one of SBFs only good investments Maybe I mean the the stocks down the stock is way down But like is this something we should be targeting maybe because like if they become the web 3 wallet

Of choice that would be very valuable. You're the one that said coinbase as the users and You're bullish coinbase for many reasons But yeah

But yeah But one of the reasons is because like the UX is so bad and web 3 and coinbase can solve that But if Robin Hood can also solve that then there can be multiple winners

I mean, I think putting accounts on a sidechain not ideal, but I can see why they do it They want to stay with their no fees kind of value proposition But obviously not as secure as either or or an a proper l2 But I also don't think this is like the the real deal one that like exposes to millions of people I think once wallet builders start using the account abstraction that Account contraption token that went live in the last week where maybe there is No seed phrase if they can get creative ways where just seed phrase doesn't

Come to the users by knowledge my knowledge This just reminded me like this does do the wallet wars that are are on the horizon like right now It's meta mask and then the rest, but there will be a wallet war Yeah Coming to like does that provide you use that phrase does that remind you of the browser wars like it back into like Netscape I feel like that is

omyosby, becoming like does that remind you of that phrase

remark is I feel like that is gonna be that larger but way bigger because I feel

like the ability to monetize crypto wallet is just gonna it's gonna be that

later it's immediate it's absolutely a clip like it's absolutely a clip yeah all the browsers you use are just what are they I don't know what are they even do to monetize like it's I feel like it's mostly to just kind of like Google Chrome. Yeah, they just want to plug you into their ecosystem a little bit, but like Robinhood, they monetize right now via like payment for order flow, right? There's a neat fit into crypto with that. That's basically what MEV is, right? Like if they have a hundred million users swapping on their wallets and they can just sort of like capture that via MEV in some way and I think there's gonna be some, you know, SEC issues with doing that probably, but there are so many ways to monetize users in crypto beyond I think what's available in like a simple browser and I think we're gonna see like a huge arms race for that. It's one of these things I think that's gonna start happening, it already is happening, but

nobody's paying attention because it's a bear. I think the wallet wars are real, the arm rate, arms race is real. I think wallet abstraction sounds fantastic but I don't think any of these things increase the number of users meaning in a meaningful way. Wait, why? Because all it is is really preparing for token go up. Like until that happens then users arrive to chase and they go what's the fastest, easiest, most immediate, seamless path for me to enter this new world with language that makes sense to me and is simple on software that I've already plugged into. When that day comes and a person is like why already own stocks or crypto on Robinhood or Coinbase or Fidelity or you know whatever it might be, whoever makes that process as seamless as possible and at that time what will happen is they'll get promotional marketing emails, they'll get incentives, they'll get bonuses to swap, whoever can pay the most to acquire that user and to create loyalty that will be very temporary. Something similar to like when the Uber versus Lyft race was happening what were they all doing they were all slashing prices and discounting subsidizing they were all paying referral fees there all paying bonuses whatever it took and we were all whores for whatever app was cheapest and pull up both the same time. One would launch a new feature the other one would launch the same feature one would change the UI you know component the other one would. So what I really think we're doing is we're commoditizing the whole thing and competing to make it as strong and seamless of a process as possible to prepare for that day when the bull market comes but I don't think like this tech itself is what's going to create

more adoption in this market. I think it will and that there's already a pile of users that can't access it who already exist and then what you're

saying is correct. It'll be a meaningful amount. It'll be this million people and maybe 10% of them learn. That's a lot. Maybe 5% of these people learn to go swap a token.

It'll be this million people and maybe 5% of Coinbase's 100 million users go. That's 5 million users. ETH has like 400,000 daily active users. That's like 10x ETH already. I still think we're overestimating but yeah. Yeah we're coming off of a low base. But even if we divide that by 10, it's still double. Those users are probably 90% inactive. Yeah there's so many people who are like crypto adjacent but don't actually use crypto. We have this like one-time thing where we can

actually tap into some. So let me ask you guys. Let me ask you guys this. If this seems akin to the browser wars of early internet, AltaVista, Geocities, Netscape. If that's where we are in the wallets like I don't know. Where do you think this Robinhood is? Are we launching Chrome now? Is this

the one or is this like too early? Chrome was launched from a behemoth who

already had users. So I think the Chrome is when Chase says. What was the big difference still?

What was the big disruption in the browser? Was that Internet Explorer was

like the one that like really took off? Netscape. I think we're looking at this wrong because we're looking at it from like a how do we get more people into crypto type perspective. If I'm Coinbase, what I'm trying to do is like launch a bank that's just better than Wells Fargo because we're moving into an era where we're going to probably have persistently high interest rates for a long time and we have all these stratified banks. Everybody's used to getting zero percent on your money, right? One sophisticated player just has to come in and be like I will pay you three percent on your cash and then everybody's like okay and we're gonna give you this nice interface that's very web to like versus like I use Wells Fargo right because I love pain and it's terrible and I just hate everything about my experience as a Wells Fargo customer. Like if Coinbase came to me and was like we're gonna offer you this like really slick banking app where you can do all your real-world stuff and we're gonna pay you interest. Free wires. And on this tab here you're gonna be able to just click this tab and be in crypto world. That to me is I think how

you really get everybody in. This is it and I just want to go on the record. I think we all agree with it. DeFi goes trad-fy to bring people to DeFi. Well web 2 graduates to web 3. So many bridges. Yeah, we bridge those. I

think like we're like to web 3 or maybe somebody bridges. Yeah we bridge those. I think like we're it's a DeFi player that doesn't. As sort of like we're crypto.

Coinbase isn't DeFi right? So hold on we're crypto natives. right? And we're looking at the crypto space all the time for good investment opportunities. We're looking for like, what's the next narrative or whatever? Like, is it game five? Is it social? Or is it science? All this shit? Like, I actually think that wallets are the answer wins wallets that we've always fucking you and I have always said agree. And like, I think this is not talked about. This is not on crypto Twitter.

No, this will be the fucking norm. We've always fucking you and I have always said agree. And like, this will be this is looking. No one's gonna set up a goddamn browser extension and a seed phrase and a ledger and all that stuff. They're gonna log into a mobile wallet. And that's going to be their sort of entry point into this web three words.

It's so stupid. Surprise. Surprise. Like, and maybe Coinbase has this, but it's not easy. But like, it should be easy for coin, like a business to set up a wallet or account on Coinbase with the quote unquote, free wires, you're not actually wiring money, but you can send money freely. Like as a business, it's annoying to like do transactions. And you could say, hey, instead of having your Wells Fargo account, if you set up a wallet on Coinbase, I could send it to you free instantly. And that is like a use case, which seems viable to me. I don't know if you guys noticed this, but Coinbase kind of launched their new marketing campaign, they kind of launched like a pseudo commercial on their Twitter account, which is like, aren't you pissed off the system doesn't work, and it shows someone like paying fees at the ATM in order to get their own money out, like takes five business days to receive your payment. So they're already like seeding that I think to the masses is gonna fall a little flat when they're like, yeah,

but that one doesn't literally pull my money out of my account money out of my account. Most people aren't like sending

international transactions. Yeah, where Yeah, where they hear of like, this guy Sam Bigman free just stole everyone's money. They're like, Yeah, so anyway, it'll happen. I still think that the big one will, if and when Chase says it's like the

worst thing that happened is like the worst thing that has happened in the traditional banking world was like Wells Fargo, like half rugging people. And it was like it just a big deal. Big rug. It was a big rug, but it was nothing compared to

FTX. There's nothing. Here's the other thing I think will probably happen too, is that we're going through probably NFT everything in the

future, and I think we're gonna have like utility NFTs and you met your Heart dude. Yeah, but it could spark like some really interesting stuff for retail

Yeah, well my point is like you're gonna have all these things suddenly you're gonna want a place for them to live and it's natural That they live in a crypto wallet and the idea that you're gonna have like an NFT wallet and a crypto wallet And then like your banking app is it's not gonna make any sense Like you just have like if coinbase wins this race You're gonna have coinbase wallet have all your NFTs not just your monkey pictures But like deeds or memberships and stuff or whatever it is. You're gonna have like your tradfi Banking stuff like fiat and then like some merging of like the crypto stuff. It'll all be in there Maybe you even have like identity in there Maybe your like identity is like some sort of NFT your ability to log into websites. You know, we're gonna do like I don't know why we don't sign in with the theory of right like all this stuff I think it's gonna happen and it's all gonna want to be in a crypto wallet and in Wells Fargo is not going to be best positioned to capture that

Fucking open see and figure out how to actually Connect in the first place and then go look at my NFTs and then and then and then remove the ones that have been like spam

Airdrop to me and now we'll be done back in back. Now. We'll be done back in back in my day

I Be like explaining like somebody to a kid who uses like I message like how you used to like login to AOL with a good dial-up modem and then like navigate some weird chat room interface and then just like ASL somebody

like this kind of crypto conversation is my favorite crypto conversation because it's a it's a macro and Futurism sort of philosophy as well. It's philosophically and it's correct as well Like a lot of what we're already discussing is correct and important because I think that The more you talk about this stuff the builders actually get behind the right things and they start to put their energy toward the right things And we have a lot of great builders in our community that go to hackathons and eat Denver and actually build So I'm most bullish on products like like that accomplish this type of stuff personally. Oh, yeah, but you want to mention the Amazon thing

Yeah, sort of philosophy as well

It's philosophically, yeah, I mean real quick. It sounds like they're going to launch a marketplace in sometime in April Those are rumors and an FME Marketplace yeah and and it sounds like part of those rumors which hadn't been part of the rumors before is that They may link them to stuff you well world goods Yeah And who knows what that means?

Like, no, no one knows really no, those are rumors and and ad

That's what that means. That's what that means. Hold on. Does there, like I heard maybe like four months ago they had like a partnership with Avax.

Is that part of it? I don't know. Like there, I don't think there's any.

Well, yeah, they, well, yeah, they AWS where you could like run like a, I think Avax validator on AWS. Okay.

But that's very, that's like, okay, but that's very, that's like mostly a part of our telling block works that Amazon is looking to equip its 167 million us based prime members with a web three wallet ahead of its NFT ecosystem launch. The rumor is users won't need to set anything up or buy any crypto or collect any NFTs on Amazon. The wallet will simply be added to their account and integrate with the credit card they already have on file.

So I get a little scared like at this stage of the cycle, like looking at charts and trying to scalp another like 20% or something like we're one yeah, Amazon type event away from

just like the event away from just, they don't need to use ETH in order to do this.

They're just going to be buying this stuff with me buying this stuff with Amazon wants to give customers the ability to buy NFTs tied to real world assets. Then they are delivered to their doorstep. So if they do this, what's stopping like Walmart or whoever else?

I mean, they'll all just like Amazon Walmart or whoever else.

I mean, they'll all just like Amazon just keeping it simple. Like we sell stuff that people want to buy online and they're like, well, it looks like people like to buy digital collectibles online.

So here you go. Stevens points well taken that could be we fiddle a lot. We fiddle a lot down here in these in these trough ranges. We fiddle so much trying to like maximize our our units, right? We tried it, we tried to squeak out more units, but it's like if you just buy. If something if there's a catalyst like that, you're going to be all right. It's all fine. Yeah.


Like poker, we used to have a term called fancy play syndrome where there's just like a kind of obvious basic way to play the hand and you would like, well, actually he knows I'm going to do that. So instead of just betting the flop and the turn in the river, I'm going to check all the flop, check all the river. Then I'm going to lead the river and then I'm going to like re raise them and you post it online and everybody's like, what are you doing? It's like you had a great hand. Just extract the hand. We have a good hand right now.

We made it through the bulk of the bear to play the hand.

We have, I hope, you know, financial black swan aside, which I think is still out there. But like realistically speaking, we are at the point where we have to start worrying about the oh, wait a minute. Like we talked about how few users are still in crypto, this like absolute ocean of users here and like web to world and like just one kind of the white swan moment away. I don't know. Yeah. Like, yeah. From just like having everybody go, oh my God, this is like the next gold rush. And then we just do like the AI thing that we've done over the last few months, but it's in crypto. And then you're like, oh crap, I got too cute trying to accumulate, you know, like 20% more

coins. It's just a good transition because, oh, you felt it out.


It's perfect. Oh, you feel now? Yeah. Yeah. All your posture change and you were speaking of please go ahead and go.

I just enjoyed that we were on the same wave like all your posture change and you were yeah. Yeah.

Oh speaking of is go ahead, you know, go, go. I just enjoyed that we were on the same wavelength there. Yeah, I mean, I think it's a good transition to talk about, well, how should your accumulation strategy be? You know, I'm currently like, cause I want to apply my personal situation to your framework, Eric. You know, I'm currently like 20, 25% allocated into crypto where I eventually want to be, but you posted a really good, you called the bear market game plan to kind of like a framework to how to accumulate. And it's flexible where it seems like you could insert your own asset class or your own favorite coin or stock, but do you want to give us a rundown of what it was?

Can you give me some financial advice? Okay, so first of all, this is my first Twitter thread of all time. I was- Welcome to the bird. Yeah, this feels cool. Like I asked you guys on Discord, I asked all of our Discord members, like, what do I do now? I want to do a thread. And you just do it in the app itself? Yeah, I did in the app and they were like, hit this plus button. I was like, oh, okay. I hit the plus button. All right, so I posted this thread and like this thread was a culmination for me. Like I don't want to post on Twitter, but I just felt like this was a culmination of what we've been talking about for a long time, starting with like our early episodes.

Steven mentioned, I look back, episode seven talked about this idea of a three asset portfolio. It was cash, ETH, and real estate. And I think this, like what I suggest here in this tweet, was like a modified version of that, or maybe like a chronology of how to build that out. And what I suggested was like, you have four buckets of your money and you sort of work your way from bucket one to number two and then number two to number three and so on until you get to this like generational wealth bucket that is like the end-all, be-all where you like just hold forever. So I laid it out as like, bucket number one is income. So that's the money you make, and I loosely say income because it's like, I think Stephen in his magic lines is like trading, he might be trading ETH, but like I consider that income. Like I don't think of that as, yeah, so that's income. So you take the income that you earn and obviously you need to spend out of that bucket and you wanna have some savings, you wanna have a cushion. So once you exceed that cushion, then you go into bucket number two. Bucket number two is very simple, T-bills. We talked about it earlier, T-bills are rising in yield and like everything in risk assets is falling. So just stay in T-bills, earn your 5% right now, stay there, be patient, wait for shit to come back to you.

If the coins are gonna fall, that's good if you're in T-bills, you just get to relax and wait. And I said this quote that I think our buddy Mike Lenny, he reached out, he said he liked it, he goes, I said, this T-bill bucket is like, I called it the pounce bucket. I said, like a lion waiting in the reeds, waiting to attack its prey. This is like, this is your money that's waiting to buy the generational lows. And I totally feel like this is the right play. Like I know people wanna DCA into the coins now, but you know, ETH was at 16.50, like four days ago, like I don't think now is the time. I think you wanna be waiting in the reeds, collect your 5% and buy the generational lows or like buy dips. So then once you move from bucket number two, which is T-bills, then you get into risk assets, growth assets, that's bucket number three. I think ETH is the best growth asset that I've ever seen in my life. Like I've been analyzing assets since I was a 14 year old. ETH is the best asset I've ever seen. But that doesn't mean that ETH is the best asset that exists in the world.

I wanna find other assets as well. I want to diversify bucket number three, to the extent that I can, but that doesn't mean what traditional advisors say, which is like, just spread your money out wherever you can, which is like S&P 500, VTI Vanguard total stock index, 40% bonds, like, you know, long duration bonds, like, no, fuck all that. Like I'm being very specific, like I want ETH and I want to benchmark this growth portfolio against ETH and anything else I add in there,

I want to beat ETH. Welcome to the bird.

And then once you ride that through the cycle, like the next bull cycle, which could be, who knows how long, three six years, something like that. You just hold it like you're accumulating the units, you hold it through the next bull cycle but then you don't do the same mistake that a lot of people have done in this cycle, which is hold it all the way from the fucking top all the way down. Again, we know that these like growth assets are volatile, so don't ride them all the way down again, move them to bucket number four, which is like forever wealth, which is like the Nicker Bonnie game. Like this is what he's talking about in all of our episodes on like real estate investing, like take them to a place that's stable, that won't draw down 85% in a bear market. So I'm supportive of this like chronology,

bucket one to two to three to four. In a bull market situation, how would you treat bucket number two? And or at any other time in general,

when T-bills are not the game and talent. Yeah, yeah, so I think what I want to make clear is that this, I call it the bear market strategy, meaning like this applies to right now. Right now. Like I'm not trying to say that this is the new 60-40 portfolio that applies to all time. Like this is not your golden butterfly. Yeah, like in 40 years, this won't be in finance textbooks, but I do believe that for right now, this is the optimized way to play. And I'm talking about for right now

through the next decade, let's say. Right, yeah. This is not your golden butterfly.

Yeah, like in 40 years. Okay, I think you can adapt this to a bull market pretty well.

Yeah, how would you do bucket number two? Like I see Eric's thing as like three buckets. So I see a kind of like earn bucket where you put money into the system and then there's a grow bucket where you figure out how to optimally grow that money as quickly and safely as possible. And then there's this like sort of sustain bucket at the end where the goal is to sort of maintain wealth and sort of just generate slow income. You're minimizing the downside while not just like having your cash eat away forever. Yeah, so let's ignore the income thing because whatever, we got it. Figure out a way to make income. We could talk about that in another pod. But the grow one I think is interesting because you sort of set up like a barbell strategy

because you're talking about ETH and like C-bills. I think this is where like my whole plan differs from traditional finance, which I'm a part of by the way. Like I'm actually having to like fight my own background to write this thing. Cause like I want to do what I've been taught but like this thing, I want to run it by you guys cause I need sort of validation to be like, is this right? Cause like as I'm like doing the math here, this feels right, but then everything I've been taught is like, this is not right.

I mean, I love this like bucket way of thinking of how to manage your money because I think I've like maybe backed into this like maybe unknowingly into essentially your strategy which is, okay, whatever my cushion is, in the earn bucket or the income bucket, sometimes it's six months, sometimes it's 12 months of living expenses. That's where that money stays. And I have this like personal balance sheet calculation. It shows me, okay, here's your 12 month lot. Here's how much cash you have. Cash minus the 12 month amount is your investable cash. And that's your, what you call it, your liquid bucket and bucket number two. And in a growth market, like Steven saying, I didn't have a bucket number two. Like as soon as there was cash, it went to work immediately because it felt like a good risk return.

And also would it eliminate? You didn't quite have the option either, did you? What do you mean?

Where would it have been parked? Well, because T-bills were only zero. Exactly, exactly. And like, I think, you know, I think I fell into a mistake of where a lot of people did, which is, well, inflation is rising. So we have to be in assets because how are you going to beat the inflation? I think, you know, inflation hasn't been around in most of our, all of our lifetime. So I think I learned a lesson about, you know, in inflationary environments, cash is obviously the highest performing asset if you're not going to go short. But yeah, in any case, I found myself, myself using it and what I realized is that I actually have like 75% of my, well, I actually exclude the cash. Yeah, anyway, let's call it like 75, 70% of my net worth in that generational bucket,

which is stocks, real estate. Well, because T-bills were, you know, zero. Exactly. Yeah, that's because how are you going to beat, just like stocks, real estate. You're in a good spot. So like, I thought about that too. Like what about for people who already have assets in one, two, three, four already? I thought this thing still applies because you're still making new money. Like you're still generating new income. It's a waterfall. And I think that that new income should work its way through the waterfall.

You didn't talk about percentages everyone's different. Yeah, yeah. I think that's important though. Like new money comes in,

decide to determine the percentages for each bucket.

And I don't want to be a maxi on eath cause like I know that some people don't like it but like, I like it. So that'd be mine.

Well, it depends on conviction But it also depends on age. It depends on risk tolerance. It depends on your life situation, number of kids you got, baby mamas. I mean all kinds of things.

I mean later, baby mamas- So like here's- I mean all kinds of things. Let me tell you something that I'm struggling with about this whole thing. It's like on the one hand- World baby daddy's. So I have my own wealth that like I'm very comfortable with my own risk tolerance or whatever. But I also am running a business that's sort of like, based on these things, but also like I don't want to spit in the face of tradition because some people like, let me just be real. Like some people hire me with all of their wealth and some people hire me and they say like, here's a portion of my wealth and I want you to just fucking hit some home runs and go for it. Like those, I feel like can go through this bucket thing, no problem. But the holistic side, I'm like, oh God, but like we have stonks like in, in bucket number three, but I like, that's the growth bucket. And like traditional advisors are using S and P 500 as bucket number three, but this doesn't feel optimized to me at all. Like I don't want to be like bucket number two and bucket number three are basically like a 60, 40 portfolio, but I'm like Steven said, barbelling even further. Like I'm going safer on the bond side and riskier on the growth side. And I feel like that's better because if you go riskier on growth, like it's going to have more volatility, but we just absorb the volatility.

Like we're down 85%.

Like the volatility is largely in the rear view. So let's say what, you know, if, if you're parking S and P 500 in that potential generational, the bucket for wealth, does that mean you got to pick individual stocks

or like a sector style ETF? No, this is actually, I'm glad you asked that because I actually wanted to ask you, what else do you think belongs in bucket four? And you've already alluded to the fact that you think S and P 500 is bucket for generational wealth. And I'm thinking like, that's possible. But like, you know, even Facebook stock is down, what 65% from all time highs. Like this apart, you know, that's a big component of S and P.

Like you don't want to just like, maybe generation. I think that that's where the traditional, your traditional background could come into play because like, if I'm five years away from having to use my generational wealth, maybe not the best play. But if I'm 30 years away from hopefully having to use that, then, that's where like you have the tweak method, you know, deciding for you which app, which, you know, vehicles for bucket,

4-ish the vehicles market for is the easy bucket. What are you working for is like the I've made it bucket and I'm mostly trying to not lose everything. And then like you could even just do the standard diversified portfolio or dragon portfolio, or I dunno whatever the hell you want. And like bucket, for it as a matter. The hard one is like the two, three bucket or you know, bucket two, as I consider it, which is like the growth strategy between like your, like you're assuming you want to do a barbell and I do think like barbell is like the best way to like jumpstart wealth. Like if you don't have like a lot of cash, you want to, you'd be like really

heavy risk on or in and have some cash for optionality, but the question is like,

when do you shuffle those two things back and forth? Like this doesn't fit into the traditional investing paradigm because like you have to make like decisions about allocating between cash and assets and like, most traditional, you know, capital allocators, the CFAs of the world. Like from, you know, I'm not a CFA, but my experience is they take the money and they invest it and then it absolves them of having to make these like very difficult decisions or timing. It's my, it's just my mandate to go to put the money to work and you can't time in the market. So, but like, I think that's silly and it's really silly in a market like crypto or like, if you time the market wrong, you get wrecked. and if you time the market really well, you can make generational wealth.

It's a go.

It's a go.

It's a go. Right? I haven't brought this up in the pod yet, but I think I was lamenting to you guys that JP Morgan's private banks, supposedly one of the best managers of wealth on the planet, we had this very awkward conversation where I was like, so I have money in the growth portfolio. Like, yes, it's in the growth portfolio. And I'm like, okay, what's the bank's S&P 500 target for the end of the year? It's down. I'm like, okay. So why is the money in the growth portfolio? Right. And also why is the growth portfolio 100% invested? Like, well, that's the mandate of the growth portfolio. Oh my God.

And I was like, who the fuck's job is it to manage risk? Is it mine? Cause you never told me that.

So right.

And also why, oh my God.

And I was like, so this is exactly what I'm struggling with. Cause like, as a practitioner, like you work for clients and you want to not get fired. Like really, that's like a big goal. Like you're not going to get fired by doing sort of status quo, but like this thing that I'm suggesting is a dramatic shift from what everybody else is doing. Like if I feel like this is sort of optimized, but it like, I risk something big, you know, like.

Yeah. And can I bring a point where maybe I think there might be a hole we can talk about if there is. Cause I've argued that. So I like your buckets. I'll use the same buckets. Income, liquid, growth, generational safety, let's call it. Yeah. So I've argued that once you have lick you earn income, you have money in the liquid bucket. The next bucket you should do is actually the safety bucket, not the growth bucket, because let's say you're of our age, late thirties, you want to invest in that safety bucket. Cause the worst possible outcome would be that your growth bucket does take a dump and your growth bets don't play out. And you're 65, you're 70 years old and you're like, fuck. This is interesting.

I didn't play it safe enough. And now I have to keep working. And to me, that might be the ultimate sin of money management that your 65-year-old self is not putting their head on their pillow, very comfy at night because you took a little too much risk early on. But that goes against what you're saying, Steven, I wanna play this out a little bit. You're saying, well, if you're younger, convexity is,

well, let's like, circle this. Because I think Arma wants to go,

and then I wanna be on the list. Yeah, and just saying, or what happens to a lot of people, which has definitely happened to me, where you have this idea in your mind that I can allocate as much as possible to the growth bucket, and I can take that risk because I'm younger, and I have time, and it's okay if crypto goes down 90% because I have conviction in this long term. But when it actually happens, in a practical sense, it's quite different. Because you then further miss opportunities to have allocated out, because you mistimed, like Eric said, you make the mistake of not cycling out at the top of the bear market, or as close as you can possibly get. And moving into the wealth bucket, the long term generational wealth bucket. So I think you're on to something, for sure, because the hardest part of what you said, Eric, is the timing of getting out of bucket three into bucket four. And the hardest part of what you said, Nick, is you have to continue producing enough income to, and you have to set an allocation limit to know when do I actually start investing into.

Well, hold on, I also think that the generational bucket is expensive as fuck. Very. Like this is a big hurdle for most people. Like I talked to people who are like, no, I want to buy real estate, I wanna do this, but I don't have enough money yet, so the growth bucket is the vehicle to get you. To get me there.

To get you there. To get me there. To get you there. But then you get lost in a cycle. Right, right. Of a wave of hold-up.

But you can't just go buy a house with income.

That's right. You guys are saying this, and in my head, owning a house

no better than just owning stocks. This is where we'll disagree. Holding a house is a consumable, it's not an investment. Also, I don't think Eric's referring to owning a

house. No, I'm saying like owning real estate as an investment to me isn't like some higher shining thing on the hill than simply just buying stocks.

Well, you know, they're first of all lower beta. So like we know that real

estate has not drawn down 85%, like the coins have. I'm not comparing real estate to coins. I'm saying like, coins wouldn't be in My Growth, I'm not in my I'm sorry. Oh, wait, we're talking about. Oh, I thought you're talking about the

fourth bucket. No, I am. But like, you have to get to the fourth bucket. Well,

point are not on your growth. Oh, no, I am, but like, you have to get to the fourth bucket, like you don't just like start with like a paycheck and be

like, no, no, no, but I thought we were talking about like, no, no. But I thought So we're talking about like real estate as like the shining city on a hill to get to in your fourth bucket. I think it is. But yeah, I don't, I just don't agree with that. I think you can have a lovely-

So what's in your long-term wealth, preservation, generational wealth bucket? Like if I-

If you agreed with the foundations in the bucket, so what's in the generational wealth bucket? Like if I snap my finger tomorrow and have like a billion dollars, I'm going to have like a combination of real estate, of like dividend stocks, of right now I would certainly have bonds in that portfolio.

I don't think we would all disagree with that, but real estate is part of it. It's part of it.

Yeah, exactly. It's part of it. Yeah, exactly.

But to me, it's like maybe 20. Maybe 20. Okay. I really think of the fourth bucket as like passive income bucket of which real estate is very good at producing without big drawdowns in terms of like capital loss.

So I, that's why I'm a real estate buyer, it's a wealth preservation bucket. You do what you like.

Yeah. I don't, I don't, this may be a spicy take, but I think passive income is like wildly overrated and kind of, it's like, it's like, I think you should be, you should be optimizing for like-

I'm not surprised. I'm not surprised. No, I just, I want to put the meme on him of like a guy who's like, who's passive income.

Yeah, who's like, who's passive income.

Well, it's like, I think you should be optimizing for like wealth, like you should overall wealth. Like to me, like people who like overly optimized for passive income or the people who like, like in the DeFi summer, they got like really googly eyed over the 300% APY and they're like, look at all this passive income. I'm warning.

I'm won while their principle is full.

It's like, I think you should be. I know you're not making yourself for this conversation because as Stephen and I've talked about this before, so I'm going to come to his defense. He's not just being a contrarian right now.

Um, so no, it's an interesting. But it, no, it's an interesting, but in that case they were using it as a growth.

They were using the income as like a growth, or even as a, or even as like a bucket one, like that's income bucket to me like, okay.

to me like, okay, passive income to me is like the end game is like wildly overrated, right? Like let's, let's assume we have 10 million dollars, right? And then you optimize for getting $500,000 a year on that in like, sounds weak, passive income, right? And then I take a strategy where I get zero passive income, but I grow my equity by a million

dollars a year passive income, right? Okay, now what risk are you taking in order to grow

that everything to grow that 85% drawdowns? But that's like a different story? Like the

idea that like you should be focusing on passive income. It doesn't make any sense to me. well No, no, no, well, no. I don't think we're saying you should focus on passive income. It's more about the risk management, about preservation. Like I remember the first time I started interviewing our is like investment advisors. They're like, okay, goal. Number one, wealth preservation. I was like, what? Like, I thought you were supposed to grow my wealth. Like, no, the number one thing is to protect it. So like, like you take a ton of risk in your own businesses.

The way you make money is super risky, so

we're not gonna take risks. I don't think it's like, it's about preservation.

But what I'm saying is sort of the same thing, in a way, because like I am still thinking about that. I'm thinking about, I'm ignoring passive income, and I just want to see the overall trajectory of my wealth, and then like the volatility of the drawdowns

within that. But I don't care about the passive income in between. All right. That's fine. I think the way that because I think I said leaning towards passive income is why you went on this rant. The way that I view investments is that you can have income today or capital appreciation in the future. And by being more preservation oriented, you're skewing that more towards income today. I agree with you that it shouldn't be the focus of just getting income today, but like preservation should be the focus. So you shouldn't just be like

going for moonshots in bucket for I would like to go a little deeper into one comment though. Like there was this comment of like, you can't just go straight into real estate for most people. Yeah. And most people are not entrepreneurs. Most people can't pull, you know, can't go buy a house in a major city right now or can't go put $100,000 into, you know, a multi multifamily real estate. So what do you think about that, Nick? Like do you agree with Eric that the waterfall exists in that way and in that order because it simply must, because the growth bucket was, is what creates the opportunity to participate in real estate or whatever it might be according to Steven's plan. But the minimums in real

estate are so much. Yeah. Thank you for asking that question. Um, and I'm also saying that it's starting today, like with asset prices, the way they are with everything, the way housing prices, the way they are with our expectations housing prices, the way they are, like all of this stuff is starting from right now. So I'm not saying this is like a, the, the path forever.

Yeah. Yeah. So I think, yeah, yeah. But I think your framework is pretty extendable. Like you can adapt it, but uh, in terms of like, can I not a forward a real estate investment? Some people might say, well, you can go buy a REIT, which I think is pretty terrible way of investing in real estate, and I think you should most likely avoid it, because you're not getting the main advantages of real estate, mainly the tax advantages. You probably are getting some leverage, but you're also not getting the depreciation. And there's just a ton of fees, and they have a bunch of money, and they don't always deploy at the same time, so there's a ton of inefficiency there. And also, as we found out, ETFs, or REITs like Blackstone, can not have liquidity, which I never thought I'd see in a long time, but that's certainly happening. So yeah, I mean, I think you can find general partners that will take $50,000 checks. I found one would take a $25,000 check, so there are options. But that being said, then maybe your path is, shouldn't be, even though it is in the generational bucket, maybe it shouldn't be in an illiquid bucket.

It should be in a safe but liquid bucket, because it could also be that just in case, where you pull the just in case money out of where you have a big health thing, or you all of a sudden have a kid, or whatever it is. So maybe you're just not ready for, because I do think there's another filter to apply, which is liquidity and illiquid and liquid funds. And I look at, kind of like analyze my money in terms of which bucket they're in, what's the risk tolerance I'm taking each, do they have liquidity, which produce income or not, look at the percentages and all of those, and have to be comfortable with all of those at any given time. So yeah, I guess you just have to stage it. But I do have another question. I still want to go back to my original question.

My original question. Oh, I want to go back on what you just said. All right, well then finish that. So like for your thing, like in bucket four, like you have deployed capital into these real estate investments, and you've never pulled a dollar out. No, no, I live off the income. Okay, but you haven't pulled principal out because you continuously roll them over. So like, you're not coming in there with the thought of like, I need to be liquid for this. Like the, that's my idea. It's like, this is the generational doll, okay, forever thing. Like you're saying, no, no, plan for liquidity. No, it's like that's for the other buckets.

All right, well then there are liquidity events, so if I didn't need to use it, you're saying don't worry about liquidity.

Like I'm saying that that's like I'm saying that that fourth bucket is specifically for

the never see again, for ever bucket, for ever, but which works perfectly with what

That's you and that's how you want to have shithead kids. Well, that's heard a bunch of is He's actually doing that fourth bucket that way and he's saying well, no think about the liquidity is like no if no think about the liquidity It's like well if if you let's say like, you know The bucket is $50,000 like or $100,000 like maybe it's not enough to have that fully fully illiquid like that that may be where you're gonna grow that daddy. Yes, actually Okay, so this is back to my original question. So I think this bucket is really helpful for people who are Starting out like maybe they they got the income bucket down. They've got six months worth of cash the Excuse me the income bucket the liquid buckets filling up. Yeah, so do they go? Do they go to the growth the risky bucket or do they go and take care of their 65 year old selves first?

Make sure that older guys taking care of this is a great question. Yes This is a great question. No, it's a great question And I'm surprised we haven't talked about sort of the accumulation in bucket three at all because this I think that's the hardest part Of the whole thing

I said and I just want to say I'll pop this in before we get NFTs they beat all the time

Buy some monkeys monkeys Buy some monkeys. So Eric is not giving legal advice. He legally can't but Armon is sure

Yeah, alfalfa NFT doesn't exist yet But so your question was why not go straight to bug at four instead of bucket three?

Specifically for someone literally just starting up that ramp

Well, I think it depends on what you consider bucket four because I think you included sort of like dividend paying stocks or

Like Stevens like, you know menu of items real estate. Yeah, you know S&P 500 and

Or dividend stock let's say and then Treasuries when they so yeah, I'd like I've thought about this and I've struggled with it like how to sort of like really label these things because We might talk about Warren Buffett later Warren Buffett's made a whole Career and an amazing career off of like putting Stocks and businesses into bucket four only right and he doesn't worry about real estate I know he has he has a house in Ranch Santa Fe. He's got a house like in Del Mar Country Club I know he's got a real estate

But like that's obviously not his his number four his four bucket is stonks. Clearly. It's in his three, right?

He doesn't even care about three and four he just cares about going into stonks So I I don't like I haven't really formulated exactly how I view these two things but like I know that stonks draw down considerably and like I would want to sort of like peel that into

Your okay taking higher beta though Because like if the reason to not put in four is that they have so much downside risk why put them in three water

There's even more we're talking about right now. Okay, alright. No, no, no We're talking about right now. Okay, right now. Stonks have already drawn down like crypto is already drawn down Like don't you don't you feel like and and they they will probably continue draw down further, right? that's what we just talked about on our market update like I'm I'm viewing this as an opportunity to stack cash into T-bills, pounce on growth assets that will hit these low prices that we view as like really good opportunities.

I guess my answer is that we don't know actually which way price will go, but I think one thing we're fairly confident of is that if everything takes a dump, ETH is going to go down more than

say the S&P 500. And I think that I was viewing it the inverse way, which is like if you're going to put stonks into your number four or even number three, why not put that into something that will rise higher? Because if we know that this stuff does come back, it always does, risk assets do go through cycles. We're in a down cycle. It will go through an up cycle eventually. Why would you put to something that won't rise as high as the high beta? I think now is the time to be stacking cash, put into high beta shit on a dip, let it ride all the way up,

and then put that into stable. I think, I mean, Steven's made a good point for this, the convexity, especially maybe in times like this. I've heard Rizzi and our Discord make a case for this. I think for your framework, I would want to know how fast the waterfall is going for that person. If it took them seven years to get the money into that liquid bucket versus took them six months because they're making a ton of cash, I'd be like, okay, if this took you seven years or 15 years to build, then we need to be a little more safe because we may not have another go at this. If we have to wait another 15 years to reload the chamber, maybe this isn't the best

place to go. So I think it also depends on at the pay flow. I think that's fair. But don't you think that if S&P goes down to 3,200, where do you think E's going to be at? It's going to be fucking down. If S&P goes to 5,500, where do you think E's going to be at? It's going to be fucking moon. So I guess what I'm saying is why do anything akin to what traditional finance says, which is stay near the middle of this beta skew. No, go fucking barbell. Go safe and go risky. And then when when risky gets cheap, take from safe, go risky, and then fucking send it. And then once that moons, then take it over to the bucket for generation.

I love it. I'd be curious when people out there have in their generational bucket and how they look at that, and also what they think can be eath. Like, I think that's really the conversation. I completely agree. And also, I think this is where we need to crowdsource a little bit.

I'm curious what people think too. That's the hard part. I completely agree. And also like on our, on our like feature money episodes, I like, I intend my other rounds to conversation focus. Other things that I will include in bucket three that I think could possibly beat ETH or have an expected return that beats ETH. And like, these are things that I look to fill bucket three

with conversation focus. Other things that- Have you heard of crypto butt dicks? Dick butts? I don't know. Dick butts. Butt dicks? Yeah. What? Coming out next week. Are you launching? Yeah. You in?

Wow. Dick butts.

Butt dicks? Wait, what? Are you making, are you launching? You in? Wow. I hope on flip.xyz. Oh man. Oh yeah.

Oh man. Oh yeah. Flip. I like that. I like that. All right. Let's work toward wrapping up here.

We want to close with anything here on the buffet. Yeah. I think we just probably- Mr. Buffet. Punt that.

Yeah. Punt the- Mr. Buffet. Punt that. Punt the buffet. I like this. This was very, very good discussion. Yeah. Very curious people's takes on all this stuff. Any specific question that we want to crowdsource in particular? Man, I- Is it the, what would you put to be- No, that's not-

In the buffet.

I like good discussion. Man, no, that's not it. I actually just want more sort of like poking holes in this idea because I like, honestly, for me, the person, like I'm a human being, right? And I have my own emotional and cognitive biases. And like my own history with finance. So like I'm struggling to even make this leap, even though that I view this to be optimized. Like I'm having a hard time being like, okay, now fucking do it with your dollars. Like it's actually hard.

Let's understand. Yeah, let's understand.

Because you've created a system that requires execution. Yeah, it's hard. And bucket two and three. And that's very hard for people to do. So I think you need to come up with some strategy that's like simple enough to follow

on a sort of like systemize, like systematize automated way.

Yeah, it's hard. The hardest part is getting it down. Like for me, I remember doing it at the beginning of 2022, just writing down, like reviewing my investment thesis. And I have the same thing. I have the same buckets. I mean, I landed in the same place. So like, I love it. But that's the hardest part. Once you have it down, like execution,

I think, I think. I mean, I would simplify the strategy. Like if I were like a 22 year old, right? Who is just like, I really want to get rich, like I would just simplify your strategy to a three bucket strategy. And I would just have like income, convexity, and whatever the last one, what was the last one? Preservation. Preservation. And I would just be just making money and just pouring it into the exponential growth, like super high bay, whatever, in the middle there and trying to do that strategically

and not worry about preservation. Preservation. Yeah, trying to do that strategically and not worry about But we didn't talk about that at all. Like the accumulation phase, like matters. You want to maximize units. All right.

Let me put one last point there and then put one last point there. And then it assumes that you're good at actively investing.

I'll put another argument in the case for filling bucket for the preservation before you start with the convexity is that bucket number four specifically benefits from compounding like that because you're not touching it.

And so the earlier you start, it can actually move your, move your. Say that. And I forgot I was going to ask you. Yeah.

You can move your, yeah, you can move your retirement, you know, retirement or stop working moments sooner. Like I found that like the real estate has compounded, even though I didn't forecast it, I was like, Oh, that's, that's nice.

It moved, you know, you're just like, you're just like guaranteed to never get ridiculously rich doing that though.

Unless you're, unless you're also guaranteed to not be poor.

Yes. So you have to make a decision. Like, do you want to be like Mr. Money Mustache and just take like the hundred percent probability route of basically achieving like a minimum viable retirement and do so by just checking all the boxes. Or are you trying to like swing for the fences? Like you have to ask yourself, like, do I want to jet? Like if I w if you want to jet, then yeah, you don't take all your income and buy the SFP 500 with it.

It's just not going to work with it. It's just not going to work. Do you guys feel like buying ETH or like Coinbase stock is like jet money? I don't think so.

No, like even just yellowing, better be better be better be all right. To be continued in the YouTube comments and the discord. Let us know. We love you guys. Bye. See you later. Bye. Thanks.