A Masterclass in Money

The CEO of one large company thinks we should change the way we think about investing. After listening to his rationale it's easy to agree with him.

A Masterclass in Money

Over the Christmas break I listened to a podcast that gave me an entirely different perspective about building wealth in the decade ahead .

The guest was Michael Saylor, CEO of Microstrategy.

You may recall that Microstrategy is the company that converted its entire treasury reserves ($465 million) into Bitcoin. It soon doubled in value and he raised another $650 million from investors to purchase more Bitcoin.  

All told, his company now has $1.6 billion invested in the cryptocurrency.

Not surprisingly he is very optimistic about the future prospects of Bitcoin and he has clearly put his money where his mouth is. It's not unusual for people to talk up their investment positions.

However, even when one accounts for the self-interest, Saylor made me think about the current state of the world differently.

His thesis is rather simple.

Central banks around the world are printing money at an unprecedented rate.

In effect this reduces the value of cash by the same ratio in which it is being printed. The figure he used was 15 per cent which is based on US Treasury stimulus.

That means, your dollars will buy around half as much in just three years time!

Saylor posits that cash is a guaranteed losing investment and that real estate and stocks are all fully valued. This is the result of record low interest rates and the 'smart money' fleeing cash and placing it into assets that offer a perceived hedge against the currency debasement.

To offset the decline in purchasing power and provide an effective rate of return, Saylor suggests that one needs to see a return of around 20 per cent per annum. That's a pretty juiced up return in a world where most things are at already high valuations.

That's why he has turned to Bitcoin.

Saylor sees Bitcoin as a store of value because the supply is fixed and it has now become an institutionally acceptable investment class. He eventually sees it as becoming the global reserve currency - meaning it will be the relative value against which fiat currencies are measured.

It also means that Saylow expects exponential growth in the value of Bitcoin relative to those currencies.

Now there will be many who say that inflation (and the reduction in purchasing power) is nowhere near what Saylor suggests. You are correct if basing inflation on the official government figures.

However it is hard to argue that inflation is as benign as those figures indicate. It depends entirely on your financial circumstances and what you want to purchase.

Real wages have been going backwards while essentials have been rising in price. Interest rates have declined but asset values (stocks, art, collectibles etc) are rising. Both are forms of inflation because your purchasing power is reduced.

Saylor also points out that interest rates can't really go much lower which has been the major foundation of rising values in real estate and stocks.

All this has led him to Bitcoin and he says that the same strategy he has implemented on a massive scale can be replicated by individuals too.

I have posted the podcast below.

It is long but well worth a listen and it might just cause you to rethink your wealth building approach in the years to come.

Great! You’ve successfully signed up.

Welcome back! You've successfully signed in.

You've successfully subscribed to Confidential Daily.

Success! Check your email for magic link to sign-in.

Success! Your billing info has been updated.

Your billing was not updated.