Michael Sailor and MSTR are attacking a market called a fixed income market. And if this is a $350 trillion market, they're launching products. They launched STRK. They launched STRF. Now they've launched STRD. What are these products? Should you be using them? And are they viable for a retail investor versus an institutional investor? And what is the potential scale of these products? That is what we need to understand. so you can understand exactly how strategy is going to acquire as much Bitcoin as humanly possible for me and for you if you're a shareholder. This is a conversation that I want to have with punter Jeff who is the leader of the true north. Let's get into it. So, um firstly tell everyone how to get in touch with you because we're going to go through some um information and people are always going to wonder where do they follow you. So tell everyone your Twitter. Yeah, absolutely. So my my Twitter handle is @punter Jeff with a P. P U N T E R. I used to be a punter in college. Everybody thinks it's just because I was a British gambler. No, I actually kicked footballs uh for a team that went three and 33. So I punted a lot and that nickname has just stuck ever since and it's been on my Twitter since 2012. So you can follow me at punterjff. We have a We also have a show called MSR True North or just True North which is dubbed the investment grade Bitcoin podcast. Happens every Wednesday night at 1000 p.m. Eastern, 7:00 p.m. Pacific. Pun to Jeff. Leader of the True North, right? Yeah, that's right. That's right. Leader of the True North. I uh I do have to give you guys a compliment because when I was having like a brain fart moment about MSTR, which kind of lasted for about 3 months, a friend of mine, Samson, was sending me your guys stuff religiously along with a bunch of other stuff. And your your guys, when did you guys start making the content? Like October. Yeah, October. Right. Right as we hit Price Discovery again for the second time. We blasted it through the $200 or $2,000 price and that was like right when we jumped in and started making content. It was going to get crazy and it did. Like I must admit like your your your guys content really was part of helping me reform my opinion on what um strategy micro strategy then could could become. So um I'm very very proud of you guys. I think you guys have withstood a lot of fire um and and really done a good job at breaking down what's going on here. So yeah, it's it's super complicated, right? This that's the whole reason we made this group to talk about this stuff because it's not intuitive, right? Everybody on our team has different backgrounds. I personally have a background in finance and risk management and you know everybody has a different perspective on finance. So, you know, breaking it down the complex nature of it into just like digestible pieces and talking about it is uh I think super necessary. Well, speaking of that, what what are fixed income investors looking for generally speaking? Not like MSTR fixed income investors, but just generally fixed income investors. Yeah. I mean, what what fixed income investors are looking for and with my background in insurance as a as a reinsurance broker, I worked with insurance companies and how they're managing portfolios uh to match future liabilities with assets, right? So, you've got um let's say you have claims that come in the door from an insurance company and you know that they're going to pay out over a certain period of time. You want to make sure with certainty that you have an asset that's going to be there at that future point in time to be able to pay out that future liability and possibly have some um income payments or income stream along the way. So it it generally comes to from an insurance company's perspective, it comes down to like complex actuarial analysis to manage an entire portfolio. So when you think about fixed income, it's very helpful if you have just kind known liabilities or or very close to known liabilities because then you can asset match uh the duration of those specific uh assets to those liabilities. So, for example, um you may know that I've got uh you know 10% of my portfolio is property losses and I'm going to have uh you know certainty that over the 2-year horizon that's going to be X dollars. I may want to match that with a portfolio of preferred stocks or bonds or fixed income products to to meet those specific liabilities. And and that that and so that's just one niche, right? like insurance companies are just a tiny piece of the whole financial world. And then you could think about, you know, pension funds and banks and uh, you know, retirement accounts and all of these different things where uh, different investors have different needs and different desires, right? So fixed income being are you retiring and you need a certain number of dollars to live your life? And if that's the case, maybe you want a certain type of product to live your life and and you use the same products that these insurance companies are using. you just use them in a different format or a different way. And uh so that that fixed income market is enormous, right? 300 300 trillion 318 trillion I think is the updated estimate. And you can even look at worldwide worldwide. Yeah, $318 trillion worldwide. And you can even look at real estate to some regard as like a fixed income instrument. And so I mean that that bucket is another 300 trillion. So you're looking at maybe $600 trillion of fixed income products. Granted, real estate is got a few nuances to it, but you know, it is viewed as a fixed income product to some regard. Yeah. The way I like to describe fixed income is stability. Like the a fixed income investor is looking for stability. It's the stability part of a portfolio. Would you agree? Yeah. Yeah. Absolutely. Stable. Yeah. Known. Yeah. So what what are the usual outside of these new you know MSTR and Bitcoin nuclearpowered products that are out there? What are the usual rates of returns that people are were getting in a fixed income market? Yeah. So the the fixed income market is generally a function of uh like the risk-free interest rate. So the the interest rates will will change as a function of you know what what is deemed the risk-f free interest rate being the US Treasury or the Fed funds rate. So you know as as interest rate the general interest rate changes the interest rate of these other these products will fluctuate with that. So you know right now fixed income products generally are paying like 6 to 7%. I think you know Fed funds rate is like 4 and a quarter or something like that. So, it's uh, you know, 200 basis points, 300 basis points over uh the risk-free rate. And that's that's kind of the the general framework today. I mean, back you know, four years ago when the Fed funds rate was zero, a lot of these fixed income products were paying dividends significantly lower because, you know, the capital was generally free. And so when when the when the interest rates changed, right? So when interest rates came up, the prices of all of these bonds fell because they had to pay a higher interest rate and which caused some issues in how these companies or or people that were managing their portfolios um used these specific assets. Yeah. And what differentiates this capital strategy from other traditional offerings uh in the that have been in the market? H what? Uh yeah, I guess like strategies versus other capital strategies. Yeah, like strategy strategy versus it's so weird. I wish they kept it micro strategy now even though I was kind of like uh on for for them changing the name. Uh now it's just too much strategy everywhere. So uh what is different between this versus what people have used in the past as like like the underlying asset really? Yeah. Well, it's it's actually interesting. been doing a little bit of research on this as well. The the the way that strategy has designed these preferred instruments with different tranches of capital risk is is not new. There are other companies that have done similar things like this like banks I think have you know different tanches of preferred stock instruments and they offer these types of things to uh different types of investors. I think what makes this really unique is that it's very financially focused, right? Like um many other companies that exist in the market, let's just say like uh I don't know Boeing or uh you know Apple or Microsoft, these are they're they're tech companies and they do offer debt instruments to the market, but they're not offering creative financial products to the market. Yeah. Like they're not focused on that, right? They're not focused on creating, you know, creative financial products. are focused on driving value to equity shareholders and they leverage debt when they need capital. Now, now this this capital structure that strategy is developing here is newish and unique because it's it's it's creating this this whole ecosystem, this like whole yield curve of potential risk backed by Bitcoin. And I think we're going to look back at this period of time as this is evolving. I mean, this is this is one of the biggest evolutions of Bitcoin capital finance ever, right? This is uh this is enormous, right? The the the fact that they're creating these preferred instruments backed by Bitcoin, which is the most liquid product on the most liquid asset on the planet, is going to make these instruments incredibly liquid. These are going to be the most liquid preferred equity instruments the world has ever seen. And that's that's important because if you need to get in and out of products, fixed income products, like liquidity, knowing that there's buyers there is incredibly necessary. Yeah. It's like the f it's the first time that fixed income products are actually built on capital because normally fixed income is like you're buying real estate. That real estate's got to serve a purpose. you're utilizing that that that the fixed income to power into something else which is expected to give you a return which is then going to take care of the people. This is like it's the first time fixed income is actually just built on efficient capital, right? And and to me that's super exciting. So how does the how do these products serve strategies objective for buying as much Bitcoin as PO? That's their stated objective. We got to buy as much Bitcoin as possible for me, right? I'm the shareholder. You're a shareholder. MSTR MSTR's objective is to buy for us as much Bitcoin as humanly possible as quick as possible. How do these products this fixed income market basically serve that objective? Yeah. No, that's that's a that's a great question and I think a lot of MSTR shareholders are asking the same question and really so each one of these individual preferred instruments have different risk return metrics, right? So, so Strife is the least risky. It is the most senior of the preferred instruments, right? There's the convertible debt which is even more senior than that. But you've got Strife, right? It's offering a $10 per share fixed payment and no upside. zero upside. It's just offering $10 per share in perpetuity, right? And then you've got Strike, which is offering you $8 per share, but convertible upside when the stock price goes above $1,000, right? So, you've got reduced downside, but also reduced upside. And then you have STRD, stride, which is offering you $10 a share, but it's more junk status. It's got different characteristics. So, it's junior in the capital stack. So this will be like the junk the junk bond for strategy now and and no convertability, no upside, right? So you got three products there that have capped or or limited upside and limited downside. As an MSTR shareholder, you are effectively taking the excess risk in all of these products, right? You are you are the most as an MSTR shareholder, you are the most junior uh in the entire capital stack. So you are taking all of the excess upside that all of these products don't want to take. Right? So STRF doesn't have any upside. You take all of F STRF's upside and all of STRF's downside that they don't want to take. And most you know pro Bitcoiners are chomping at the bit for that. You're like I okay I don't think Bitcoin Bitcoin going to going to zero is a 0% probability in my mind. So I will take that excess upside and that excess downside all day. Yeah. So what you're saying is that if MSTR is keering at 70% or whatever it is and the cost of that that that um product is 10% then you're taking that 60% profit and putting it in your pocket as an MSTR shareholder. Right? That's that's really how MSTR shareholders are benefiting from from these products. Right. Well, it's it's Bitcoin. It's Bitcoin's upside. Bitcoin's upside. Yes. Bit Bitcoin's up. Yeah, Bitcoin's upside. And it it's it's the excess upside. So, it's it's even kind of a little bit more leveraged, right? So, that's that's why they're using this torque uh the torque, I guess, term. Yeah. the the word they're using they're using torque because the each each one of these instruments is um has a different like dilution schedule and a different dilution uh I guess strength or right right like it's u so strife is the least dilutive right so it could be the most powerful and in how much how much bitcoin per share it can add to the mstr shareholders because if that at a point in time in the future, let's just say Bitcoin goes to a million dollars, you're the risk, the amount of capital that they hold in STRF and the relative risk to the capital held in STRF and the and the dividend that they need to pay and how the market treats the dividend that that number is going to be shrinking relative to the Bitcoin holdings forever. Yep. Right. So, that's that's the kind of how this evolves into into the future. And this is really the only way from what I understand for fixed income investors i.e. all of these investors that need stability in their portfolio to generate these returns from Bitcoin that there is no other way in besides one of these products. Yeah. And and that's the real unlock here is that these products are they're product market fit for the fixed income market. Right. So, so the fixed income market is really interested in in getting like Bitcoin exposure or Bitcoin related debt, but they they're not going to go buy MSTY, right? That like that's a that's a different product for a different type of investor. And there there hasn't really existed another debt like instrument with a quantifiable risk that you can buy to get that Bitcoin exposure. And now you have it like this. This is the like how I'm imagining this is like um you've got like a fisherman in the in the water, right? And like let's just say MSTR is let's say you wanted to go like fish for a halibet. Halibet is like at the very bottom of the ocean. MSTR is like putting a hook at the top of the ocean to fish for a halibet at the bottom of the ocean, right? Like the the fixed income market isn't going to they're not going to come to the top. They're not going to buy uh you know equity. Now then you offer S STRF and that that goes, you know, all the way down to the bottom of the ocean. It just gets a little bit closer to them and it making that jump into buying these products, these preferred equity products that are structured like fixed income debt is much more appealing and much more approachable to to the fixed income market. Now the one thing that's missing right now Yeah. Go ahead. I just want to point out this is extremely important. Like a lot of people don't realize, a fixed income market is taking care of people, right? It's taking care of people's livelihoods. It's taking care of people's retirements. It's taking care of people. And the worst thing you want is extreme volatility in that. And for the first time ever, for the first time ever, you have the ability to use pristine capital to take care of people that are relying on a $350 trillion equity pool. And this is the only way that they have access to this stable asset that's never going to go away. Isn't isn't affected by hurricanes, isn't affected by, you know, CEOs doing something weird with underage people. Like, this is Bitcoin, right? And and this is the first time that they've actually got access to a to an engine that's powered by this nuclear reactor called Bitcoin. That's pretty. Yeah. It's it's structured, right? The taking care of people, you need structure. Yes, you need you need certainty. You need certainty and structure and like managed and quantifiable risk. And now these products do that. They give you structure. They give you quantifiable risk and they give you give it to you in an instrument that's liquid and digestible that you can add to your portfolio very easily. Yeah. Now, now the the one piece that's missing right now is is this uh the credit rating and sailor is on this crusade to you know make you know get these instruments rated which I think is going to be incredibly valuable. You've got many of the fixed income buyers need they have requirements for any of the assets that they add to their portfolio. So they may not um you know have a mandate to buy any unrated preferred equity or an unrated fixed income. And so I I think the market that's able to buy unrated fixed income products is probably probably less than 10% of the fixed income market. Maybe maybe even 5% of the fixed income market. Now, if they get these products rated, which is a whole process in it in and of itself, right? You've got like 10 different rating agencies. Four probably really matter. And they they want to make sure that these are rated appropriately. Like STRF, if you look at it, is it is the most overcolateralized preferred equity instrument in the entire market. And it it should be rated as investment grade. And I suspect that if they're going to the market and getting these rated and the market's coming and the rating agencies are coming back and saying, "Hey, this is B+ rated, I I would suspect they would go back to them and say, "No, it's not. It's AAA rated. You should rate it as AAA because it's overcolateralized by 6x." And, you know, go through that entire process. Yeah. I think this is important for like people to realize is that fixed income markets again because of who they're serving are very much determined by mandates. They're determined by a plan. They are determined because you can't take risk like this is I feel like a lot of a lot of morons on X kind of feel like that you know fixed income investors and and traders are sort of sitting there fat fingering buys and sells like X is. It's not how this works, right? They've got mandates. They've got requirements. They can only buy a certain certain type of asset, a certain grade of asset. Otherwise, they're open for liability. That that maybe they should be, maybe they shouldn't be. That's a whole different conversation, but that's just how it works. So, we got to wait until these until these products are graded, this debt is graded so that it can access portfolios and start accessing, you know, worldwide diversified bond portfolios and every and fixed income portfolios, etc., etc. So question, why use preferred shares instead of just equity and then convertible debt, which is what MSTR was using until these until these products came along? Oh. Oh, the I guess the question is why why shifting from convertible debt into this preferred equity instrument? Yeah. Right. So So convertible debt is a is a very uh it's kind of a niche product in the fixed income market. it it's a smaller part of the entire broader fixed income market probably represents I don't know maybe 2% of the total total fixed income market and um many of the many of the people that are interested in convertible debt right now are convertible debt ARB traders so trading the ARB between the the price of the bond relative to the shares that it represents in the market. So when convertible debt is issued, uh about 70% of the debt is sold short on the stock on the underlying stock on day one and and that's because they're hedging out their position, right? So So that's why we see a lot of volatility when these convertible debt uh trounces are issued because you know the the convertible debt ARB guys are are hedging out their position. They're shorting the stock 70% of the value on day one. And so you think about that, right? That's dilution. Like that's the dilution of the instrument. The dilution of the instrument is 70% on day one. And then the remaining 30% it gets hedged out over time as the ARB trader goes back and forth and and trades the stock each individual way. Now you think about, okay, well, I've got this one product that I can take 70% dilution on day one and the the remaining dilution over time Or I could create this preferred instrument and I have zero dilution up front. Let me repeat that. Zero dilution up front. And your dilution happens out over time as you as you pay out the dividend on this this debt. So because there's no clarify, there's no need to hedge to delta hedge that position in the markets. Yeah, there's no need. I I'm sure we're going to see a whole new evolution of traders come in and buy these preferred equity instruments and start trading them. I I think they're going to be highly liquid as people start to figure out how to use these things because they're they're novel and they're new and uh but they it has this it has a the dilution schedule that is that plays out over time that's significantly less than the uh convertible debt up front. So I I don't think the strategy team really likes the convertible debt. I think they they may issue them at a future point in time when it really makes sense, right? Like if you look at the last time they issued convertible debt, it was like right at the blowoff top in November. They issued $3 billion with the the $650 strike price. Uh it was out of the money and they were able to get, you know, $3 billion really quickly. It was like an injection of capital in a short period of time and it was very opportunistic. And I think if they're going to use convertible debt in the future, I think it's going to be in the same format. that's going to be very opportunistic at the right time when conditions are perfect and um then capitalize on that leverage knowing that there's a significant dilution component that comes along with it. Um otherwise it would make more sense to focus on the preferred instruments and drum up support and interest in those instruments and and get the fixed income market to understand these products. uh so you can get capital in the door on these products that have more torque on the MSTR the MSTR stock. So it's it's a different buyer, right? It's a different buyer. It's a different um it's a Yeah, it's the convertible debt and the fixed income products via the preferred are just different buyers with different behaviors. Yeah. One is a one is a a kind of a if we have to put it in this framing, one is kind of like a a forex arbit trader and the vault junkie. A vault junkie. Yeah. And and the other one is kind of like, okay, we have a portfolio of retirement accounts and we need to keep these people in retirement and we need to not blow this up. Um so stability junkie. You've got a V junkie and you got a stability junkie and they're like very different buyers, very different behaviors. Yeah. And Okay. So, how are the dividends that they're paying out funded on all of these products cuz clearly you got to sell something to pay those dividends. Yeah. So, I think there's there's going to be multiple ways that they can do it and it's based on the structure of these instruments themselves. So, I I obvious one is they can use the MSDR ATM. They could raise debt via other ATM instruments, right? So like they could theoretically ATM any of these instruments to pay the dividend of any of the instruments, right? If the capital's there to bring more capital in the door, they can that that's effectively like refinancing your debt, right? Like you think about your okay, I got a home, conditions change, I want to refinance my home and I take that capital and I pay off the old capital and I I get a new structure. And it's kind of the same same concept. I mean, they could raise convertible debt. It's it's the ability to raise capital in any of these different formats. They've got a whole toolkit of ways to raise capital to go do this stuff. And I mean, they could go issue a a normal like a a piece of straight debt into the market as well, right? Like uh if if they needed to go raise a billion dollars of capital, they could go is issue senior debt on the balance sheet with a you know some sort of interest rate to to pay off the dividend at a future point in time. It really comes down to capital strength, like financial strength in my opinion. And right now, right, they've got like $62 billion of capital and they've got $10 billion of debt. So, they are to me they're underlevered right now. They're underleveraged. They're the strongest Bitcoin company in the market by 20x by 650,000 Bitcoin probably. Yeah, basically. Um, and so they're incredibly strong. So, let's just say that the price of Bitcoin fell 50% today, right? MSTR still has $30 billion of debt and 10 billion or $30 billion of assets and $10 billion of debt. Would you underwrite that loan? No, I would. Well, I I would write it all day. I'm like, "Oh my god, they're still they're still incredibly strong." Like, you just look at the numbers, they're still incredibly strong. So, I I think that's what it comes down to is the ability to raise capital based on their their financial strength. So managing the leverage ratio is the is the key here is the risk management is managing the leverage ratio such that they always have a little bit of capacity and the the buffer to go raise cap additional capital as needed. What do you think is a is a is approaching a dangerous leverage ratio where they would be not able to do that? Like strategy specifically or any or any Bitcoin strategy? Strategy strategy specifically? I I mean even even at a 90 or 100% leverage ratio, they'd probably still be able to raise capital. Uh realistically a little bit more it would be more expensive. The terms would probably be crappy. um you know it's that I think they'd still be able to raise capital because they've got all the Bitcoin. Now if if something fundamentally changes with Bitcoin that that can change things, but it really comes down to like okay, how much of the network do you own? What is the power of the network? Like is is there still capital there? I I think they could they could crank up those numbers pretty pretty drastically and still be totally fine. I mean looking back, right? Like they've already weathered a storm in 22 where their leverage ratio was 110%. Right? They had their they had more debt than they had assets. Everybody was, you know, screaming at MSTR like liquidation liquidation. It's like, well, our debt actually has a horizon here and we're we're totally fine. So they they weathered that storm. They could weather another storm. Would it be more noisy because they have more capital? Absolutely. But it's still possible. Yeah. I always tell people that tell me, you know, they've built so much leverage. I'm like, if someone came to you with a million dollar home and said, "You know what? I've got $200,000 of mortgage left on this and uh I want to buy Bitcoin." The first thing you would tell them is to refy the house cuz they've got $800,000 of equity that they can tap into, right? Like um so yeah, I think it's completely underlevered. But of course, you know, the team there kind of knows what their what their capacity is and obviously going through 2022 probably taught them a little bit about how close to the fire they can they they can fly. So, um, by the way, how does the the volatility upside and down on Bitcoin affect the attractiveness of these fixed income products? That's an interesting question. Well, I I I think it really Let's see here. Well, I I think that it really comes into play on the stability, right? Like all of these all of these three fixed income instruments are are they should be far more stable than MSTR and far more stable than Bitcoin. But they do they are a function of the volatility of Bitcoin and its its future compound annual growth rate into the future, right? like it's a it's all a function of how how this can continue to grow, but it it's not like MSTI where you're not really harvesting the volatility, right? You're you're harvesting just the power of the network growing. Y and any capital that's coming in the door, it's buying Bitcoin immediately. So any capital that they use on any capital they bring in the door via ATM on any of these preferred instruments, they're just buying Bitcoin immediately and harnessing the power of having like a fixed asset that you're just shoving energy into um continuously over time. And it works because there's never been a an asset quite like this where you have a truly fixed supply and you know at a future point in time there's not going to be any left, right? like you you couldn't do this with gold because they can go mine more of it. You know, at some point there's incentive to try to figure out how to make remake it like structurally, scientifically or you go find it on other asteroids um that are floating around space or different planets or things, right? Like this can this can work because there's a truly fixed supply. Yeah. I think that the implied volatility on Bitcoin would have to drop to like 10 and stay there for 5 years for this to even start becoming a non or becoming an issue. I think you would have to see such low volatility on Bitcoin that this would I mean even then even at 10 you would be like yeah I mean I'm a fixed income investor just buy the out of it still it still probably makes sense. Yeah. I the the the the fixed income market. I think there's going to be a landslide of capital when they when when the market figures this out. There's going to be a landslide of capital that comes in the door and it's it's going to happen just fast and the scale is going to be big. I basically I I think there's u the entire fixed income market is probably mispriced relative to this strategy product. either the strategy product is mispriced too high or the rest of the fix fixed income market is priced too low. Right? So you think about like what are the risks of the fix fixed income market like so you think about real estate right if you think about real estate as fixed income you got physical risk you've got vacancy risk you got maintenance risk you got you know all these all these physical risks you you look at some of the other other things like Boeing uh Boeing fixed income it's like okay well what's that risk like airplanes falling out of the air uh political risk like people stop flying or you know rockets start becoming a thing and the the reason those fixed income products work is because their their promise of like future cash flows and future value and same with like you know PG&E or you look at any of these utility companies or um even Apple right Apple offering debt to the market what is the risk of Apple well the risk of Apple is people don't use iPhones anymore and you just have a phone plugged in your brain and like is that fixed income product worthless like that that's the risk and uh you compare that to strategy it's like okay What's the risk of strategy? It's collateralization risk. Uh right is like does the capital that they have on the balance sheet fall below the amount of debt that they have on their balance sheet for an extended period of time such that they're unable to raise more capital or um pay off the the dividends on the perpetual preferred stocks into into perpetuity. So the the the the list of risks in the physical world is just so vast and the list of risks in the digital world is much smaller and and I I think that this market is going to this fixed income market is going to figure that out at some point and you got you're going to have this like landslide of capital coming in the door for these products probably dropping the price down which would which would make strategies ability to raise capital at more attractive terms even even better. Yep. It's it's quite it's quite shocking when you think about the fact that like how many analysts you need to watch a fixed income portfolio that's based on traditional equity or traditional assets versus with this these products you need a team of analysts that are watching MSTR's leverage and Bitcoin's direction like that's it like that's your team right um and so that that I I think it continues to get more attractive So, look, let's look at let's talk about what these products are now, cuz I think everyone kind of understands like who they're helping, why they're there, how they, you know, all that stuff. Like, talk to me. Let's talk about STRK first. Like, how does it work? What value does it bring to the buyers? Uh, and how does the convertability work? Yeah, STRK is is one of my favorites just personally with my time horizon, how old I am, and like how I see things. But uh STRK offers $8 per share dividend annually. It's split up and it's paid out it's paid out quarterly. It's $8 per share annually. And the I think the price of STRK as of yesterday was like $106. So it's roughly like 7.5% um USD annually that you're getting paid to hold this instrument. And and that yield percentage will fluctuate as the price of the preferred stock goes up. the yield the technical yield from a percentage basis will go down vice versa right if the price of the preferred stock goes down the effective yield would technically go up now the element that makes this product really unique is that it's convertible into MSTR shares at a future point in time and 10 shares of strike can be converted into one share of MSTR uh and so at at above the price of a thousand this starts to makes s like converting starts to make sense or the the preferred equity will start to move like the underlying MSTR equity. It will start being more volatile. So of the of the three instruments, STRK is going to be the most volatile instrument at a future point in time because at one point in time it'll start to move like the underlying equity because it will be in the conversion zone. And so so STRK is is really interesting because you effectively have downside protection uh because you have the $8 per share dividend. So that that means at you know it's very hard to understand a situation where the price of STRK would fall below like $80 or $60. So because you have this dividend that's holding it up, right? there would be an arbitrage situation. If the price of STRK fell such that the yield was super high, there would be a lot of people running in to buy that product to to you know prop it up because the yield is just too attractive. So you've got downside protection and upside potential because it h it can convert into MSTR stock. So that that's the most unique one. I mean strategy created this product with AI, right? This is the first financial instrument that was created with artificial intelligence and it's very I think you could tell right it's a very unique product and very valuable to the marketplace. So who is the target customer for STRK? I I think there's a lot of target customers for SDRK. I mean I I talked to my father a lot about it and he's approaching retirement and he was you know pretty interested in this in this product because of its upside potential but also still getting income right so kind of in my mind I think people close to retirement uh that want to take some exposure to this but also want to protect their downside right like I I don't want to um take on the risk that this goes to zero and it's like okay well this actually protects your downside as well so it's it's a unique product from that perspective, but I'm also interested in I've got some in my uh in my HSA where I want the upside, but I also want the protected downside because of, you know, the the tax advantage account like design. So, that that's kind of how I think about it. I I think retail is a big um is pretty interested in this, but also, you know, large capital should be interested in this product as well because it's more senior to in the capital stack to MSDR. You get that downside protection. I think Capital Group owns 25% of STRK shares outstanding. They're an investment manager. I'm sure they're plugging it into all of their individual American funds that have outperformed all these other instruments over time. So, I honestly anybody I think Strike is is interesting to anybody, even if you're an insurance company managing an insurance portfolio, like it's a it's a really interesting product with upside and downside protection. So, do you think in terms of returns compared to the underlying MSTR equity, how do you think STRK performs versus MSTR if you're looking at just growth? Yeah, I I think STRK is designed to be like Bitcoin upside and 20% downside. Got it. Okay. So if if MSTR is 2x or two, you know, one and a half to 2x or 3x Bitcoin, I think STRK will be like 1x Bitcoin with downside protection. Got it. Yeah. Okay. So, so it you are you are chopping off some upside, right, in in exchange for the down because the convertability happens over the price of $1,000 per share. So like anything between now, I don't know where it's trading at today, 380. Um, so anything between 380 and a,000, you're effectively giving up in exchange for protecting your downside. Yeah. Okay. Um, and obviously I uh have been talking about MSTY. We've had discussions about MSTY. I prefer MSTY because I can control what percentage of my portfolio I can put into income harvesting and then if it's too much I can just liquidate that and put it into the underlying equity. What would you say is the difference in the client that's using MSTY for income versus using STRK for income? Well, they're very different, right? They're very they're very different products. MSTY is a you know a VH harvesting covered call strategy that is I mean last year delivered 100% return right so you're comparing you're comparing a 100% return to something like an 8% dividend or 100% yield to like an 8% dividend yield very different very different risk profiles as well right MSTY harvesting the volatility you may miss you may you're you're capping your upside in perpetuity right like by design your MSTY is short MSTR stock consistently and and they're net they're net short MSTR stock consistently and that's call option because of the call options and selling options and there's going to be morons that watch this and go MSTY is now actively shorting MSTR stock that's not what they're doing it's just a function of of how call options work yeah ex exactly they're they're net short right they're long shares right they're long shares but they're net short because they've got more call options sold against the net long shares than they do long long position as a result of the synthetic positions that they use, right? Yep. Yep. 100%. And and that's that's kind of where the yield is is harvested from. And so so if you think just about just about the design, your your upside may be capped. Um, I know that the MSTY has bought call options to kind of protect some upside in in scenarios where it blows out the top, but you're you're not going to you're not going to have that MSTR uh like full full upside potential. It's it's just going to decay over time just based on the design. And so if you want to if you want to maintain your full upside potential, like if you're if you're a decade long or 25 years long, you might want to hold strike. um as opposed to MSTY. Like if you don't need the income, you might want to hold strike instead because if if you want that long exposure and the 8,00 wouldn't you just hold the wouldn't you just hold the MSTR equity in that in that scenario and what you've just mentioned because strike you're giving up the upside from you know 350 to a,000. Yeah, you could. I I think it it kind of depends on your your risk tolerance and your portfolio management, right? All right. So, by the way, now we're talking about like retail. I'm not talking about fixed income investors that have portfolios to manage with mandates. I'm just talking about you or I sitting here going, "Which one do I which one do I get into?" If I'm 40, right, I may be more interested. If I'm 40 and I've got a job and I feel like I'm happy about my job, I'm making money and it would be nice if I had a little extra income, but I still wanted full upside of my port my portfolio because I I don't feel like I've made it yet. I might I might buy strike. And that's that I think that's the the difference is uh 100% what you're talking about like you would just buy 100% of your portfolio in strike. Maybe not maybe not 100% of my portfolio. No, but I would have I would have exposure to it, right? It it reduces the volatility. If you go look at the last couple of weeks, like MSTR has been all over the place. Strike has been a straight line up. Y because there there's more there's more capital coming in here. Understanding the value of this product, right? It's now you got a 7 and a half% dividend. A couple weeks ago, it was like a 9% dividend with full upside. You basically get a free call option uh on MSTR while while getting paid money to hold it. It's like a savings account with a call option attached to it. That's the savings account with a that's that's a that's a really good way to look at it. It's a it's a fiat savings account with a call like a free call option attached to it. Yeah. Yeah. So, so it can reduce the volume of your entire portfolio. It will trade differently than MSTR as an underlying. If you need the mental stability of having mental stability in your portfolio, that might be more attractive. Okay. For me, I like I've seen the V go everywhere, so I feel comfortable with it. And and what about STRF? uh who's that product aimed at and um you know what is the value of having commulative dividends and its seniority to his buyers like who's who's buying that? Yeah, I I I think this is some retail at the moment. Um but but honestly, this is the this is the most senior preferred equity. So this is like the investment grade product. I will I would suspect we're going to see insurance companies buying this in the future. are going to be pin pension fund managers buying this in the future because of the attractiveness of the yield and the relative risk. I think of this as like a true fiat savings account, right? Like you could go open a savings account at JP Morgan and it's going to pay you 0.2% interest annually. Or you can hold this and you think that okay, it's going to pay me $10 per share. Oh, how it works, it's $10 per share annually. And so as of right now, I think the stock is trading at $106. So, it's around like 9.6% interest yield. So, you look at your alternatives. Well, I can hold cash in a savings account um at JP Morgan and earn zero dollars on it or I can hold cash in this savings account. Let's say I wanted to, you know, buy a house and I needed a mortgage at a future point in time and I wanted stability. I wanted to know like six months from now I'm going to have this amount of dollars and plus it's going to earn a yield while I while I get there. I would be using personally this again none of this is financial advice. I would be using this as a as a technical savings account because of the relative risk and where it sits in the capital position and you're not going to have as much volatility on the product because it's more of a function of the interest rate environment and the relative risk because there is no convertability function. It will not trade as volatile as MSTR. It won't have that volatility component. But if interest rates if if interest rates in the entire market come down or expectations of interest rates come down the price of this stock is going to rise. Y it's it's going to rise and so because the the relative yield the credit spread between the risk-free rate and the rate that this is paying um will probably remain constant or or shrink over time as the market understands the risk profile. So, as the risk-free rate drops, that credit spread will either maintain the same or or shrink and the price of the stock will increase to reflect the credit spread of the yield between the risk-free rate and the current rate. Yeah. Okay. And what about the the new quote unquote junk product STRD that they announced like yesterday? Yeah, STRD. So, uh STRD very similar to STRF. It's providing a $10 per share dividend, but it's junior in the capital stack and it doesn't have cumulative dividends. Basically, it means if there's a point in time where strategy doesn't want to pay the dividend because, you know, crappy market conditions, right? If similar to 2022, if there's an FTX like blow up and you know they don't have the ability to raise capital, they can just pause and not pay the dividend for a future point in time. But the price of the stock will reflect that and that yield the relative yield of that instrument will will reflect that that ability to raise capital at a future point in time. So right now I think the credit spread between the three or or between the two between STRF and STRD is like 200 basis points. And to me that seems like one of them is mispriced. And I think it's probably STRF. I think the credit spread between the two should probably be wider. Right. Right now, they're very similar in in the design of the capital stack because they've got $60 billion of debt and 10 billion of $60 billion of assets and $10 billion of debt. So, like their relative risk is is very similar, but as they raise more capital in these other instruments, like as they raise more capital in STRK, right? So the the seniority goes STRF, STRK, STRD. As they raise more capital in STRK, right, they've got a $21 billion ATM capital plan. As they raise more capital there, that junior product gets pushed further closer and closer and closer to risk. And so as that as that product gets pushed closer to risk, the the relative yields between STRF and STRD will will reflect that. Y and so it it may be like a high yield savings account with with more risk and that that's kind of how you can view it is it it will be the high yield product in the market and the market pricing will reflect the relative risk. Yeah. Okay. And and who's really the buyer of this? Just people that are just V junkies again like you mentioned or like Yeah. I I don't even think this is V junkies because it it's it's a st it's a stable product and I I think the the market appetite for this product will grow exponentially. uh like right now I think it's going to take time for the market to digest this what what these products are and the appetite for this product will increase drastically as the other instruments become more popular right as the STRK um capital uh deployed to that specific product increases and this product gets closer to risk that the yield may reflect um it being closer to risk. So the price may come down, the relativities of it may come down and uh it may be more attractive at certain points in time. So so that's that's why these products are just so attractive because there's going to be like arbitrage opportunities between all three of these instruments and the entire fixed income market relative to these products as well. And and I think there's going to be capital starting to move and flow uh between all of these different instruments recognizing the price of Bitcoin, the collateralization risk of MSTR, uh the alternative opportunity cost of capital and the rest of the market and the liquidity of those other instruments relative to these and you know I think we're going to see capital kind of move all over the place. So again, who who's buying it right now? I I think obviously they they've announced this is primarily in this is for institutional investors and maybe it'll be available to retail at some future point in time. Um but it's it's somebody that wants a higher yield than you know STRF it wants to be a bit closer to risk. Fixed income dgens fixed fixed income dgens. Yeah, exactly. Maybe you have like I don't know let's say just say of your Bitcoin fixed income exposure maybe you've got uh you know 10% of your portfolio is in bitco bitcoin fixed income maybe 7% of it is in strf one 2% is in strk and 1% is in strd right like maybe maybe that's the kind of design and structure and the it's these products are going to get huge these products are going to get absolutely freaking massive like I SDRF could easily be a $150 billion product. Like easily they suck that up easily. 150 billion. Yeah. I I think they're going they're going to aim to get $3 trillion of the fixed income market. Like 1% of the fixed income market, maybe three or four trillion. And I think they could do it. And like you think of the total addressable market here and like what is the potential of this company? Well, the total addressable market is $600 trillion. Yeah. Right. What is the total addressable market of Apple? I I don't I don't know. Like eight eight billion people. Like if 8 billion people on the planet had an iPhone, it's 8 billion times $1,000, right? Was that 8 trillion? Yeah. I don't know. 80 trillion. 80 trillion. This is 80 trillion. There is a massive pool of capital that needs the stability and the volatility that MSTR is providing. They've been starved for that. So one of the mon most monumental shifts that just happened to me and I don't know about your perspective on it is the shift and the proving of the fact that we can harvest ATM from these fixed income products and we do not need to sell the common stock which we which means we can allow the common stock to ride and what I think's actually going to happen here is the common stock is going to be allowed to ride they're going to scale the ATM on the fixed income product and then when it's right? I.e. the MNAV jumps too high. You're going to come in with a massive convertible bond offering on the on the common stock to back that ATM down with the hedging that happens. And that's how they're going to that's how they're going to navigate this. How important do you think it is in the shift from this ATM from the common to the fixed income products and and how how much can that scale? I I think it could scale very like a ton. This this could scale so much, right? I mean, these products have been out for what, three months, four months, and they're now raising $75 million of capital a week. That's a lot of money, right? Like just like if you were to try to go raise $75 million in in a week, it might be kind of hard to go do that. Um, and and these guys are doing it consistently. The the importance here is the ATM on the MSTR stock has allowed them to potentially offer these products, right? because it the the common stock ATM has deleveraged the entire balance sheet and it's given them the capacity, right? So now they've got $60 billion of assets and $10 billion of debt. It's given them the capacity to potentially issue these things and issue them in scale because as they as they issue ATM on any of these instruments, they're now going to be able to add more Bitcoin, which makes the balance sheet even stronger, but it also maintains that capacity, that additional capacity. So I I think you're right. I think you're absolutely right. the MSTR ATM as a as a proportion of the total ATM will probably scale down because as of right now they don't really need it as much. Uh they don't really need the MSTR ATM as much because they have these other instruments to provide capital in the door. And I think it I think the MSDR ATM will be used very strategically. And you've heard Sailor come out and say, you know, the MSDR ATM isn't designed to to move the market, right? Like if you see the stock drop really quickly, like that's not Sailor hammering the ATM. They're doing like a T-W or a VWOP and, you know, dripping dripping shares into the market when there's a ton of demand and like that's what they pay these investment bankers for is like they see that the demand is shifting and they're like, "Oh yeah, let's let's throw ATM at it because the demand is shifted." And that's probably passive flows that are coming into the market. That's people that don't even know that they're buying the stock and they want to capitalize on those passive flows that are coming into the market. I mean, that's what they did at QQQ. Um, they saw all of this new energy coming into the market and they were like, "Cool, let's harvest let's harvest all of this, turn it into Bitcoin. Now it's permanent capital. Now we have a stronger balance sheet." And I think something similar will happen with uh potential S&P 500 inclusion. and you want the ability to capitalize on that new demand that's coming in the door to add permanent Bitcoin to your balance sheet. So, I mean, what they've got like $18 billion of the common stock ATM left, and I wouldn't be surprised to see that used up before the end of the year. Yeah. And uh but if they use that up before the end of the year, that means their balance sheet just gets even stronger. That means the attractiveness of these preferred instruments gets even better. and their ability to get those rated as investment grade products becomes even greater. And then once those instruments do get rated, then you're going to have a flood of capital coming in the door that are chasing this stuff because it is the best performing preferred instrument in history and the most liquid preferred instrument in history and that that is that will just naturally scale itself into the future. Can they use the existing ATM on the fixed income products or do they need to go back and and get it approved for more on that like that billion that 18 billion that's remaining can that can that come from STRK STRF strD or is that just for MSTR? That's just for MSTR and they've got a separate $21 billion ATM on STRK and I think of that $21 billion ATM, you know, I don't know, 300 million has been used. So, they've got 20.7 billion left. So, as the demand comes in the door for those products, they will see it and and they'll be able to they'll be able to capitalize on that demand. And and I think the ATM that they've got on the on strike or STRF is 2.1 billion. So, you you can start to see the capital plan design here, right? like you got 2.1 billion. So it's a it's a small tunch for STRF and they want it to be a small tranch because they want it to be relatively less risky than the other products, right? It's it's the most senior preferred instrument in the capital stack. So they want it to be less risky. Now you've got STRK. Well, this one's more risky and it's also got convertability. And so they've got a big, you know, $21 billion ATM plan. And now you have STRD. It'll be interesting to see what they come out with on a ATM on that side, but I wouldn't be surprised if it's another, I don't know, 10 15 billion, something like that. Yep. And and by the way, the fixed income investors will love it because what's the problem with the the share price staying at par on a fixed income? Nobody gives a right? So, okay, this is this is great. I've got one one final question which I think is going to wind people up, which is why I want to ask it to you. I'm I'm team sailor and I respect everyone else in this, you know, Bitcoin Treasury hype cycle that's going on right now. I I I'm getting very annoyed by the fact that I'm seeing newbies come in, buy Bitcoin, get bored with Bitcoin, dump it out for a 1.7x MNAV on MSTR, get bored with MSTR, and dump it out for a 4.6x MNAV on on on Metaplanet. and then we'll get bored with the Meta Planet and sell it down at a 3xm nav at a lower share price and get back into MSTR and just leak their wealth. In terms of I don't want to put you in a bad spot, but in terms of the offerings, Bitcoin Treasury offerings, how monumentally different is strategy to everything else? Yeah, it is monumentally different than everything else, right? It is it is the investment grade Bitcoin treasury company and they have just an absolutely massively enormous lead, right? They've got uh nearly 600,000 Bitcoin held on balance sheet and the next closest has got 45,000 50,000, you know, whatever that may be. So, you're talking like a 10x different uh size and scale and they've already weathered a storm of 2022 and they've got all of the capital instruments prepared to to go to market and be able to offer any of these fixed income instruments. So, to me, their their lead is going to get even even further because they have the they have the conduit to interface with the fixed income market. like they they have the products that they can use. Whereas you look at some of these other Bitcoin treasury companies. I mean looking at MetaPlanet, I I love MetaPlanet. I love everything those guys are doing. But like they're just using they're using a common stock ATM basically with these moving strike warrants. And you know I I think they they will release a preferred instrument here in the near future. I I assume so they can start to interface with the market a little bit differently. that, you know, they haven't leaned in or leveraged into uh the convertible bonds because they are a little bit more of a predatory type product for the market, right? A lot of dilution on your stock really quickly. Um, a lot of trading is happening uh because they're they're arbiting the the product in the market and uh so they've just got this monumental lead that's going to be in my mind impossible to catch, right? the the only company that I thought would potentially be able to catch them was Meta and they just declined the ability to look into Bitcoin uh from the shareholder vote. So, you've got Bergkshire Hathway has enough cash on hand, but there's no way in hell uh Greg Ael is going to just yolo the $300 billion of cash they have on hand to buy Bitcoin. And if they did, um, I mean, the price that just makes MSDR more valuable and there would still be different instruments because Burkshire owns all this other sees candies, insurance companies, you know, it's just not a pure Bitcoin play would just be completely different for for Yeah. So, they've just got such a monumental lead that this is sovereign power. Like, there's never been a company like this before. And I I think they're just going to I mean they've got what like 50 times the amount of Bitcoin than the S&P 500. Yep. Than than the 500 top companies in the United States, they have 50 times more Bitcoin than the top 500 companies in the United States. And if we think we're moving to a Bitcoin denominated world, all of those 500 companies are going to buy Bitcoin at some point. Yep. And if they start to buy Bitcoin, even in small chunks, that makes MSTR just that much more powerful. just shifts them, pushes them further and further and further into the lead. Yeah. Absolute finality of scarcity means something with Bitcoin. Un unfortunately for everyone else. And I look at that and I go, look, there's probably what seven or 10 entities that could replicate this at a fixed $103,000 price point. Like what happens if they start trying to come in with $60 billion and it pushes the price to $150,000? That extends the lead for for strategy. And at 150,000, you probably got four entities that could match it, right? Like, so the game has already been won as far as I'm concerned. The only thing that matters here is strategies execution versus everyone else's. And respect to everyone else, I trust ruthless operators, financial operators much more than than than missionaries in hoodies. Like I I just that's just for me as an investor. uh I know where I'm keeping my money if those are the two choices. So look to summarize, we've got a 300 Sorry, go ahead. Yeah. Yeah. I I just want to add one piece there, right? So you've got MSTR is really like plowing, right? They're plowing into this fixed income market and they're they are making the market and and Sailor's been incredibly transparent. He's like, "This is what I'm doing. I want to be transparent with the market. I don't want to be opaque. I'm not going to do any private placements. I'm not going to do anything weird that the market can't understand or digest. But if I'm going to be trading and if I want to bring in $3 trillion of income or three trillion dollars of capital, I need to be the most trustworthy partner in the entire market. And they're not going to do anything weird. But what that does is that lifts the floor, right? That lifts the floor for all of these other Bitcoin treasury companies to go tap alternative pools of capital, right? Like the fixed income market isn't like isn't everything that there are other pools of capital that you can go attack, right? Like you could go attack the insurance market. you go attack like different different arbitrage opportunities to bring capital in the door um by by getting deals done. And that that's where I think the a ton of the value is for these Bitcoin treasury companies is identifying unique pools of capital or unique opportunities to go absorb it and buy Bitcoin with it without people knowing what's going on. Yeah. Innovating innovating. Yeah. And we'll see how that innovation goes when the Strategy Road Show comes and lists in Japan, in Brazil, in Europe and everywhere else with all of these products. Right. So, I'm looking forward to that competition. So, in summary, we have a $350 trillion capital pool that is starved of security, stability, and volatility. M Michael Sailor and the strategy team has come along and they've offered preferred stock seniority the ability to invest through these particular innovative vehicles and they've offered across the whole spectrum whether you are uh you know a fixed income DJ a retirement portfolio self-portfolio manager or an investment grade uh manager to to invest some of that $350 trillion The coming steps are S&P 500 inclusion. We've got investment, you know, the in the the debt needs to be graded to allow some of this three more of this $350 trillion to get into it. All in the meanwhile, they're pivoting how they use ATMs and everything else to keep acquiring more and more Bitcoin for the common stockholder while providing all these other benefits. Is there anything else left to say? Yeah, just there's no there's very little competition. And if like I look at MSTR's I post every single day about where MSTR sits in the ranked companies in the United States, right? So as of yesterday, they're the 92nd largest company and and I look at the MAG 7 a lot, right? I look at the top seven publicly traded equities in the market and they're all jockeying for the same space. I want to be the number one AI tech powerhouse, right? And to me, digital capital is the final frontier for valuation of stocks, right? All of those companies in the mag 7, they're all going to hold Bitcoin at a future point in time. So, if they all have to store their energy and their value and their earnings in Bitcoin, that's going to make MSTR just that much more powerful into the future. So, I think there's this going there's going to be this point in time where MSTR floats to the top of the publicly traded leaderboard and then it separates from the from the top publicly traded leaderboard, right? So MAG7's all trading around$2 to3 trillion and if digital capital is the final frontier MSTR has more digital capital than any of these other companies ever in history and it will separate from the market and and have a rational valuation based on true scarce digital capital. Finally remind people where they go uh find you uh the leader of the true north where where do we where do we find leader of the true north? Uh it's uh punter Jeff on Twitter X and MSTR North is the handle of our uh weekly podcast. Happens on Wednesdays uh 10:00 p.m. Eastern, 7:00 p.m. Pacific and then it's available on YouTube in in the live section of our YouTube channel as well. Very proud of you. Everyone should go follow follow you, follow everything that you guys are up to. Very proud of you. Thanks for having this conversation and looking forward to more in the future. Thanks for having me, British. Appreciate I hope that gives you a clearer perspective on what these products are, who they're for, who they're targeting, and whether you should be invested in them or not. Personally, I prefer for my income portfolio something like MSTY, which I can personally titrate up and down based on how much of my portfolio I want in income and maximize the gains that I want in the underlying equity, which I own a lot of of MSTR. So, this is really depends on how you want to play this. And all of these products are designed to attack the entire fixed income market and they will continue to scale up. And Michael Sailor is onto a winner here. Ultimately, all of these products are designed for one thing and that is to get as much Bitcoin on the balance sheet as quick as possible and to never ever let go of it for shareholders. That is what they're doing. And I want to congratulate and thank the entire team at Strategy for continuing down this mission. Probably the only team that I can trust to never ever sell a single Bitcoin considering they've already been through a deep bare market from $69,000 to $15,000 per Bitcoin. And they didn't flinch a single bit because ultimately there's always only three rules to Bitcoin. Step number one, you buy Bitcoin. Step number two, shut the up. And step number three, you get fabulously wealthy.