Charlie Munger says Bitcoin should be banned and Ray Dalio has a thesis that the world's monetary system is going to collapse. This is going to be like of the great Reset what the heck are these old dudes talking about And do they potentially have a point? Well, let's watch starting in this video. Keep in mind the coupon code has been extended to tomorrow. So if you want to join the programs on building your wealth, do so using that link down below.

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Check those out link down below. No longer thinks that cash is trash Ray Dalio now actually thinks that cash has a substantial a potential opportunity premium over really any other kind of investment. And that's mostly because rate tell you things that U.S treasury yields should remain high and are likely to remain high. This is exactly the opposite of the trend that we've been seeing in treasury yields.

Treasury yields have been falling since about October and mid-november when we sort of had a double Peak on the 10-year treasury. they've been straight down. Since then, we peaked out around four and a quarter now is sitting at under four and a half 10-year treasury yield at the time of this recording setting at about 3.38 after dovish comments from Jerome Powell. So so far, this trend is inappropriate to suggest that, well, a treasure.

yields will actually stabilize I Think this is because Ray Dalio doesn't really believe Jerome Powell and the Federal Reserve are going to cut interest rates and instead believes that you've got to keep interest rates. High Maybe you shouldn't actually extend the debt ceiling because after all, you should operate the government like a business or a household. which on one hand makes sense. That's relatable to us: we shouldn't spend more than we make.

But on the other hand, and the reason politicians spend more than we make is because it promotes growth. And when we promote growth, we are not in a recession. Businesses grow, people flourish. Business businesses are able to expand, people are able to start new businesses, households build their wealth, People are able to buy a home to live in rather than renting for their entire life, which I'm a big fan of.

obviously building your wealth through investing in real estate. And so, governments are clearly incentivized to actually, yes, spend more. uh, than they make. That's why our debts go up.

now. eventually that'll collapse. So again, there's been no currency in history that has survived. In other words, they all collapse.

It all ends up being a House of Cards. Is that a House of Cards that we have to worry about within the next few years? Probably not because the dollar is still one of the strongest. Probably I would, well, I think arguably the strongest currency in the world. and if anything, Decisions by the Bank of England Today where the Bank of England is expecting uh, a, uh, a recession, a mild recession.

but they are expecting a recession out of g seven countries statista shows that the United Kingdom might actually be the only G7 country to fall into a recession. But what did the Bank of England do today? The Bank of England actually hiked rates by 50 basis points. Uh, hiked rates right which were not fully priced in leading to a rally in the pound. Uh, the pound sterling.

And the reason you get this and the reason it matters to the dollar is because the more other countries Everything's Relative You have to remember that when it comes to currencies. Okay, the collapse of the dollar would probably be the last collapse of currency you would expect. You would expect the Turkish Lira with over 60 inflation to collapse way before the US dollar. Obviously right.

we would expect a collapse of many other currencies well before we would expect we would expect a collapse of the Euro before we would expect collapse of the US dollar. But when we look at this relatively and we consider that if the United Kingdom is only one expecting a recession as the Bank of England continues to fight High inflation and they continue to hike more than expected, what ends up happening? Well, you end up driving up the yield of Guilts which are basically treasury Bonds in the United Kingdom And when you drive up the yield for those, you actually lower the demand uh for for uh, you know, treasuries, uh, and and the dollar and other bonds around the world. And on one hand, when you lower demand uh, four bonds over here and you potentially lower prices here, on one hand, maybe Ray Dalio could be right in that. Okay, well, if you have less demand for Bonds in America, yields are going to stay a little elevated because higher yields will help increase.

Uh will help increase demand essentially. and if rates are expected to be even higher in the United Kingdom, you might get less demand in America and more demand in in sort of the United Kingdom or other countries. Now the reason that matters. It's basically to say that in the short term.

Yeah, maybe we'll see some stability around the threes. But here's where in my opinion. Ray Dalio's argument falls apart for treasury Bonds in America. Which is really important because as treasury yields fall, we expect stocks to rise and we expect real estate to rise again.

Here's where in my opinion, his argument falls apart. It falls apart as soon as we start realizing that yes, indeed, the United Kingdom is going into a recession as inflation hopefully gets Stamped Out of the economy. Much like we've seen, that disinflation process start here in America. If we start seeing that also happen in the United Kingdom, we'll probably start seeing International yields for all bonds.

Uh, start falling. And that's because as inflation goes away now, more folks can start buying U.S bonds again. And that's exactly what people are doing. And what does that do? It drives up the price and lowers the yield.

Eventually, that'll happen in the United Kingdom as well. You get a temporary boost in yields because you're seeing higher rates than expected from the bank of England, But that too will go away eventually. So the long story here of where I'm going with with this inflation fight is as inflation. Falls Throughout the rest of the world, we do expect yields to Across the entire world slowly fall and I think that kind of counters.

uh, some of what Ray Dalio is suggesting that. Oh, we're not going to end up seeing yields go down. In my opinion, the only way you don't end up seeing yields go down is if inflation continues to run hot. Which don't get me wrong, it could absolutely pop up again.

But I'm not convinced about Ray Dalio's argument that yields are going to stay high and that maybe it's better to be in cash versus being exposed to some of these yields. Now, for an institution, treasury bonds might be a great way to farm three and a half to four percent yields for an individual. I Think one of the best ways you could Farm yields right now quite frankly is just looking at companies like Wealthfront or Robinhood hashtag not sponsored uh, but uh, you know these here are companies that are offering you four to four and a quarter percent I think so finally, it's at 3.75 or four percent. Why would you bother with treasury bonds if you can get FDIC Insurance up to 500k or more throwing your money into one of those accounts I think Wealthfront or uh, and even Robin Hood potentially lets you get FDIC Insurance up to a a million dollars or more by basically splitting your money up amongst other individual.

Banks So that way you're sort of getting 500k at each. Bank Depending on how many times they do, it is how much FDIC Insurance you can get so uh, you know I'm I'm not convinced that Ray Dalio's argument is uh, is is super. uh, accurate. at least not at this point.

Maybe at some point in the future of when currencies collapse, that that'll be uh, the time his arguments will be right. But I'm not convinced that the debt cycle is ready to end. Uh, just yet. Uh, so yeah, it does mean you're building a House of Cards.

But what did Ray Dalio have to say about Crypto? Well, one of the things I thought was really interesting about his arguments about Crypto? was that one of the best things that we could potentially see for crypto would be some form of inflation linked coins. Something that gives you a secure set of buying power now. Uh, obviously immediately what comes to mind here is Bitcoin because of the limited Supply that Bitcoin has in the theory that in the longer term uh, essentially Bitcoin should be uh, a a large inflation hedge because there's a limited supply of it that should help squeeze the price up Kathy Wood highly believes in her Bowl case that Bitcoin will become a digital gold and if it becomes a digital gold and we even get a 40 adoption of the gold market for uh Bitcoin Essentially so moving from gold to Bitcoin even if you get that 40 adoption plus some other aspects that she thinks are bullish for Bitcoin uh for for its Network effects and otherwise uh, she, she's got a one million dollar price target for Bitcoin So on some you know account here I feel like Ray Dalia was slightly describing Bitcoin via an inflation linked coin without describing Bitcoin but suggesting you should have some kind of inflation protected coin that people being able to preserve their purchasing power would be useful. Now he argues that bitcoin's too volatile and it's only about a third of the market cap of Microsoft.

but I think a lot of Crypto Bulls would argue. That is exactly why. maybe now would be the time to buy Bitcoin It's an interesting idea and it stands in the face of what: Charlie Munger said yes Charlie Munger Obviously Warren Buffett's uh, co-star dare I say and uh Charlie Munger wrote a piece in the Wall Street Journal Today it's an op-ed and it's titled why America should ban crypto Charlie Munger says that in recent years, privately owned companies have issued thousands of new cryptocurrencies, both large and small, and these have later become publicly traded without any government approval or disclosure. In some cases, Big Blocks of cryptocurrency excuse me are sold to a promoter for almost nothing, and then sold to a with a substantially higher value later to the public without the public understanding how dilution works.

now. I Think this is really useful because Charlie Munger is right. Most people have no idea how dilution works and how terrible it is when it comes to investing in companies. and unfortunately, it's a sad reality that most people don't understand it.

And this is is how people make a lot of money in the stock market. It's through uh, companies going public or a coins going public with substantial dilution. I Think an easy way to explain to you what a dilution is is giving you an example. Let's say I create the MKC We're going to create it together.

Okay, let's say we create the meet Kevin coin and what I'm going to do is I'm going to create Uh 1 million coins and what I'm going to tell you is that on the market I'm only going to allow 1 000 of those coins to sell and I'm going to sell those coins for one dollar. But keep in mind my costs to create the Meet Kevin coin were ten dollars. So in other words, if I created a Meet Kevin coin for the cost of ten dollars, I only put ten dollars into creating a million coins, right? And if I now limit the float float is a very important word. In fact, it has a lot to do with the adani disaster that's going on.

When you limit the float, you could really increase the value of each share or each coin. So if I say listen, we are only going to have 1 000 coins available for sale. and if you want to meet Kevin Coyne you have to pay a dollar for each of those coins. Well, in this example, I get about a thousand dollars in cash, but you have been substantially diluted by the fact that there are another 999 000 coins available.

Which means on one hand, you've actually just created a million dollars in value. You turned my ten dollars into one million dollars in value. And the reason you could be diluted is because while there are now a thousand coins outstanding, I could take another thousand and start selling them again for another dollar. or maybe even 87.

Sense, Whatever it is, but because of those prior sales people believe. Ah, okay, this is about where the market value is, and if you slowly trickle them out, you essentially dilute the base and you can make lots of money. This is essentially what Charlie Munger is saying and it's the same thing that companies do, right? I mean think about it from a company. example here: If you go to somebody, uh, and you say hey, look, I own a hundred percent of a company and I'm into it for I don't know 50 million dollars, right? I'll sell you 10 of this company for uh, let's say 25 million dollars.

Well, what I've just done is if I sell you 10 of the company for 25 million dollars What I've just done is valued the entire company at 250 million dollars. In other words, I just 5xed the value of the company by selling a small slice to somebody else for a substantially higher valuation, right? This is the same thing that happens in crypto. It's the same thing that happens in the stock market, so it's really no different from that. I think Charlie Munger Here is just making the argument that most people don't understand that kind of dilution that favors the original creator of the coin because there's a lack of disclosure.

Although I could tell you this, there is a massive lack of disclosure in uh, in most of the spacks that we've seen. in fact, most of the Spacs have had these insane and glorious projections, only to end up proving to us that none of those were even remotely accurate. Uh, and it's unfortunate that even spax are able to get through the Sac and the regulatory process and end up creating the same dilution that Charlie Munger is talking about through technically the official processes. Although Here Charlie Munger goes as far as saying that because of this lack of disclosure and lack of dilution awareness from individuals, cryptocurrency should basically be banned.

He goes on to say that crypto is not a currency, it's not a commodity. It's not a security. Instead, it's a gambling contract with nearly a 100 percent Edge for the house. Now, I would argue that with the case of let's say, like a Bitcoin there really isn't much of a house given given how just decentralized it really has become.

But uh, sure. I I would argue he's not wrong when it comes to smaller coins that are created. Yeah, there's probably more than 100 Edge for the house. The house wins through via that dilution that I explained.

Uh, and so Charlie Munger actually goes as far as praising China for Banning cryptocurrencies, concluding that cryptocurrencies provide more harm than benefit. and he says that, look, the English Parliament did this in the 1700s when companies were basically uh, uh, exhibiting this. This cryptocurrency-like Behavior Uh in early stock listings in the 1700s and when England banned new stocks uh, from publicly trading for about a hundred years, uh, Charlie Munger suggests that the world was actually able to progress substantially from the enlightenment to the Industrial Revolution to the creation of the United States. So in other words, dare I make this slippery slope analogy.

Although I didn't make it Charlie Monker actually did I'm just gonna say it in a different way: Charlie Munger is basically saying if you ban crypto, you'll be able to create a new United States Uh, that's that's how extreme of an argument he's making. He's basically saying it's so speculative and such a robbing of value from people that you potentially eliminate the opportunity to create something as great as the Industrial Revolution or another. United States Now that's a pretty big argument there by Charlie Munger Uh, and uh, I Don't know how I feel about it, but I'm curious to know what you think about it. Keep in mind Kathy Wood's got that one million dollar price Target on her bull case for Bitcoin Uh, and uh, Ultimately, you have going back to Ray Dalio Ray Dalio suggesting that stable coins are not great because they're kind of like Fiat which is interesting because the good stable coins are actually backed by one dollar of Fiat.

So maybe he's not necessarily wrong with that. except it's harder to print new stable coins unless you get an inflow of new dollars. So potentially there is a difference there. Since we're not printing new stable coins unless of course you're tether, then we don't really know what's going on.

Anyway, this is an interesting point of view from Charlie longer. and it's an interesting point of view from Ray Dalio. Honestly, I kind of wrapped this one up by saying I Don't know if we're just listening to two old people fuss about things that they just don't like. Ray Dalio doesn't like the government printing money and again, a lot of people don't and think the government should run a balanced budget.

Is it going to happen anytime soon? Probably not. Charlie Munger is complaining about cryptocurrency. Not a surprise he always has. Is he correct though when suggesting that dilution is a big problem for initial investors and things Abso freaking lutely.

This is why with the company that I my startup House Hack, we're actually selling shares at one dollar per share for every one dollar of cash that we have. So basically the company is worth one to one. They're oops. There is no pre-dilution Uh, you know we.

We could go in and say hey, we're raising 50 million dollars at 150 million dollar valuation. That would make your shares essentially get diluted down to 33 cents right? forever every dollar you put in. But that's not actually what I'm doing with my company at House. Sac I'm purposefully preventing that pre-dilution at House Hack? Uh, read the solicitation at Househack.com by making sure that if we raise 50 mil, the company's worth 50 mil.

If we raise 75, the company's worth 75. Uh, and and I'm doing that. In my opinion, it's sort of like a well, it's twofold at one. I Think it's a gift to my subscribers? uh, and and the people who believe in me.

But number two. It also gives me the opportunity to prove myself for that that I can build this company uh, and turn it into something really incredible. So that way, when the company actually gets a market valuation which is generally a multiple of your book value uh than uh, than those people who initially invested in me win, uh, and uh, everybody wins Who's involved. So I'm a big fan of that.

But anyway, it's interesting to consider that that pre-dilution argument I I Don't know if it rises to the level of banning all crypto, but don't get me wrong, there are a ton of lame, smaller scammy coins that you want to be careful of. Now, another thing that Ray Dalio told us was a warning that companies with low-free cash flow in any minor shock that comes up, are going to have to raise a lot of money, and you could potentially see very quick collapses of what he calls bubbles occurring in certain markets now. I Think this is very accurate, especially in the private Market where you actually haven't seen a lot of those valuation adjustments yet. But one of the issues that you have in a recession is you have a lack of cash, You have a lack of liquidity and this is one of the reasons I think Ray Dali was suggesting hey, cash is a good thing, But what I think is remarkable is Ray Dalio is really providing a warning to the people speculating on companies like Carvana and Bed Bath companies that are really heading towards bankruptcy.

Yet here in the pre-market Carvana for example is up 27 and Bed Bath and Beyond is heading up 25. These are generally unsustainable momentum rallies where the reason we get increases or Spike in these stocks solely because more people are buying them as maybe somebody's manipulating you know, a sentiment on stock twits or whatever. And what's great? Uh, in terms of a warning is when Ray Dalio says, look, companies that have low free cash flow are going to have to go to the capital markets to raise money, He's basically providing a massive warning that companies that are trending towards bankruptcy because they don't have free cash flow in a recession, or companies that are going to suffer bigly in any kind of future little hiccups that pop up and I think he couldn't be more right? Obviously, right now, markets are a little bit euphoric after Jerome Powell is suggesting that the process of disinflation has started. but there's a reason why my goal in investing Really, for the last six plus months has been to focus.

Actually probably more like a year six to six to 12 months. My goal has been focusing on High Free cash flow companies that uh, that have low liquidity risk or needs to go to the market to raise a lot of money So high Free cash flow companies those with margin or those with pricing power in my opinion are companies that I really want to focus on. And so I think Ray Dalio's warning really reiterates.