Tom Lee: You know when I was a kid I had a really
bad memory and it was kind of funny because I think people thought I was a
little you know I just forgot things really easily but then I got this book
and it’s gonna sound really corny called instant memory and it’s like a blue book
it was like 25 pages and the whole thing was your brain never forgets anything
you know remind yourself you never forget if you’re ever in a test you
don’t know anything just remember it’s in your brain somewhere and I read that
book in eighth grade and believe it or not I after that had a really good
memory really was it like self affirmation yeah I think it’s just proof
that everything’s about self actualization like if you you know if
you’re determined to be a scholar on some subject you can just set your mind
to it and I think I was sincerely interested in having a good memory and
that book was the catalyst one of the core reasons why I really wanted you to
come today is because I feel like tier 1 media is just putting extracts of you
out there and it and unfortunately with the power of media these days it creates
these preconceived beliefs among people and some people call Tom Lee, a bitcoin bull
Bitcoin or maximalist. I find you to not to be that much out there um generally
speaking how would you define yourself in terms of your position towards
Bitcoin and other asset classes on mainstream media everything’s a
soundbite and I don’t determine the agenda but yes I would say we’re known
and you know we are service and our research is really built for our clients
only so that’s who I you know who really mattered to what we do and it’s
primarily thematic so we look at things that we say you can see mile away so
that’s generational issues things that’ll take 10 – 20 years to play out
because those are the really important sort of alpha opportunities and for me
crypto is clearly one of these you know there’s a really usefulness in terms of
how its decentralizing trust and probably re-architecting really the
financial system there’s a whole generational adoption
angle to this and I think it’s probably one of the first real new asset classes
to emerge really since you know volatility or credit default swaps I
think digital assets is gonna be you know an authentic institutional asset
class imagine my aunt Susie or my niece Georgie and they want to start investing
they’ve never invested before you have more than 25 years of analyzing
different markets and different asset classes what would be the your golden
tips for someone who has absolutely no clue and how to invest what to invest in
well you know to start with crypto is a highly hyper volatile asset you know
it’s very volatile we’ve seen it you know four times its fallen ninety
percent every time previously its recovered which means crypto should be
one to two percent of someone’s portfolio especially if they’re treating
it as an asset class the second is I think you should you know the easiest
thing is to stick with winners and you know bitcoin is a 10 year old blockchain
has never had a fraudulent entry on its blockchain and you know it’s dominant so
I think it’s just easiest to invest in Bitcoin so you were you were talking
about generational gaps and that’s something that’s absolutely fascinating
and in your research have you noticed any trends when it comes to baby boomers
Generation X Y Z among your family maybe cousins or differences yeah well there’s
some very obvious ones you know one thing that we can all easily observe is
that each generation is a lot more digital so someone who’s a millennial
today they’ll be surprised if their grandparents are smartphone users are
really active Generation X you know was actually the cell phone generation but I
think you know we’re seeing each generation increasingly exists and
actually live a more native digital life and it changes their social connections
it changes what they consider be valuable you know digital digital unique
things weren’t important to me as a generation Xer but it’s pretty important
to a gamer who’s a millennial or a Gen Y so yes very big changes the blockchain
and crypto really replaces crossed from the traditional financial
system so if you want to say how does cryptocurrencies capture value or how
you gonna make money it’s really any entity that can act as that intermediary
that replaces trust in financial systems and example this for instance is I don’t
know if you guys saw the block article this week about MoneyGram CEO but he
talked about how he thinks digital currencies and digital assets are going
to become the primary pair to do remittances overseas that makes a lot of
sense because today any money transmitter has to have banking on both
sides and and type a lot of working capital and they stand in on trust how
much easier is it – just send Bitcoin overseas hmm the second is productivity
that as you replace these former legacy centers of trust
you’re also replacing a workforce you know 40% of the cost of any banking
system is the compensation paid to employees so there’s a lot of money
saved it also means that companies like JP Morgan could have 90 percent fewer
employees in the future and still make the same money the third is that working
capital will get optimized I don’t think most people realize this but today about
14% of all global GDP is tied up as cash so companies on average have to keep
about eleven trillion dollars of cash just to be in business that’s it that’s
a huge amount of productivity wasted and of course a store value your crypto
community and blocks anybody’s across the globe welcome back to Cryptonites
the no BS blockchain built with the community and for the community and once
again we have a returning guest here no one else then Tom Lee from fundstrat a
pleasure to have you again my friend yeah thanks how are you doing good I’m
missing the burning log yeah I know it’s not as romantic as the previous but just
to follow up on the previous interview you were telling us about the instant
memory I couldn’t find out Tom I’m so sad where did you know where I can find
a copy of them well you know if I was still in Michigan I could just go to my
room and you know grab the copy off the shelf you know at my parents house but
I’m gonna come knocking on the door yeah awesome awesome so speaking of books you
know like I would love to ask you if you had any other books in your life that
influenced you that you would suggest maybe your children to read to become a
better person and are there any other um well you know I probably wouldn’t
recommend instant memory to my kids they priority have good memories but um you
know I’d say the books that meant a lot to me you know in growing up really were
more about character and personal characters so you know some books that I
think people like I really enjoyed growing up were like things like there’s
this book series called the great brain which is about this kid that you know
solved a lot of things but you know in you know before going to college it’s a
my two favorite authors one was Woody Allen and I think one of my favorite
books written by him is without feathers I thought it was so funny when I read it
but I read it recently and it’s not nearly as funny as it was back then part
of it is you know humors changed and the other author I really liked is Flannery
O’Connor and she’s a fiction writer but you know were there any non-fiction
books I read that really changed my life not really except you know the Bible
that makes a lot of sense thank you for sharing that yeah I wanted to ask you so
with fun strat you guys have so much research so many statistics so much data
and I remember when you showed me one of the samples at the previous Meetup you
said this is just a fraction of what we write to our clients in terms of Bitcoin
itself what would you say recently are some of
your favorite data sets or statistics that support Bitcoin do you have any I
mean there’s a lot I mean I think you know I think that the quality of the
data and the providers and vendors of data are you know they’re really growing
and it’s becoming a lot more sophisticated and I do think it’s gonna
help you know people understand what’s happening on the blockchain and how
coins are moving but to me in when I look at equity markets and all the tools
people developed for stocks at the end of the
day simpler is better and you know with the equity world it all comes down to
cashflow and simple technical measures I think that the same is very true in
crypto that at the end of the day the real driver for value for Bitcoin is
whether or not it’s getting more useful and that really means adoption and from
markets perspective I think this the most important thing to watch it’s
overly simple is it’s just the 200-day moving average if you look at bitcoins
price over the last ten years whenever it’s been above its 200-day moving
average it’s average six-month gain is 200% and it’s up eighty percent of the
time when it’s below its 200-day moving average Bitcoin has one tenth the Ford
return so the biggest thing that happened this year I know it sounds
overly simple is that Bitcoin actually crossed above its 200-day moving average
and of course why is that matter well this dark red line is the Bitcoin 200
week moving average and then you see the 200-day every time you’ve crossed above
its 200-day moving average it’s the start of a new bull market so I do think
that what you have to keep in mind is bitcoins
old high is not going to be the limit of where Bitcoin trades to I remember one
of your slides you have a slide about the Fang stocks and you were saying that
if you missed you know choosing the right stock is always extremely
difficult and you talked about diversification of portfolios if you
don’t mind telling us or to all the people watching out there what is
diversifying a portfolio and why is it important and any things that you can
help increase financial literacy yeah I mean you know I think crypto in general
should be someone sort of bet on a portion of the future you know I think
people should put 2% into crypto currencies including Bitcoin and how
they do that is really their choice you know we think a large piece of that
should be Bitcoin I mean at a minimum market weighted so half of anyone’s
choice should be a Bitcoin but one of the things we point out is you know
if someone decided they wanted to own a hundred cryptocurrencies you know what
we saw happening with consumer stocks in the 80s or with internet stocks in the
90s the late 90s is that that portfolio of 100 stocks if if crypto does as well
as Internet did in the consumer they don’t have to pick the right currencies
and their total return will outperform the overall crypto market or equities so
you’re talking about 2% of portfolio perhaps in Bitcoin and then within that
2% maybe half would be Bitcoin itself rather than crypto currencies in terms
of diversification if someone is just starting to build their own portfolio
let’s say a youngster a millennial how would you recommend they build their
portfolio yeah you know when people look at savings it’s primarily going to be
traditional financial instruments stocks bonds some commodities and as people get
older they have a different you know they add different pieces to their mix I
don’t think real estate in general is really an asset you know if you own a
house you it it’s a liability because you’re living in it you know and very
few things are truly collectible so I think stocks bonds commodities and then
you know cryptocurrency should be 2% Tom Lee: It turns out that consumer stocks were
monsters so even though there was an equity boom there was an even bigger
boom in consumer stocks they the top 7 best performing consumer stocks turned a
thousand dollars into 1.2 million ok what does that mean let’s just say you
were a terrible stock picker and you bought a hundred consumer stocks in 1982
you could have been so bad that 93 percent of your picks would go to zero
and on average only 50% – and you’d still have a 12x return you would have
crushed the ESPY just by buying consumer stocks and being a bad stock picker
similarly internet was the same trade so Gen X
was 26 and a half in 1997 boomers were 26 and a half in 1980 and if you bought
a hundred internet stocks in 1997 96 percent would have gone to zero but you
still had a 16x returned and you would have beat the S&P 500 so again the point
is if you get the demographic trade right you can be a terrible stock picker
and again in crypto I think bitcoins the way to go but if you were to buy a
basket of crypto this is the same trade that we think is being set up there’s
one thing that we’re talking about last time and I know there’s no data to back
this up but will Bitcoin thrive after another recession or financial crisis I
know there’s no perfect answer there’s no magic ball but do you see this
because the first financial crisis came from the private sector the second one
potentially by both private public sectors do you think this is good for
Bitcoin itself or it doesn’t it’s hard to say yeah I think a question um well
one we don’t know if there is gonna be another financial crisis right I mean no
one knows what a recession will look like until it starts happening but you
know in general I think Bitcoin remains an uncorrelated exposure to financial
markets you know even now Bitcoin has negative correlation to stocks meaning
as stocks fall generally Bitcoin Rises now Bitcoin doesn’t have to fall when
stocks go up but when it when stocks are falling bitcoins negatively correlated
and I think in the future if a progressive agenda develops globally
progressive meaning governments want to run deficits and borrow money and print
money that’s not going to be strong money in the future that’s weak money in
that that’s really bullish for Bitcoin that’s really really good points and
speaking of Bitcoin there’s another question that I had which for I think
for the beginners or Millennials who want to start investing they’re always
confused on whether I should invest or trade and obviously their pros and cons
to both world’s but for example Warren Buffett
as you know he made that bet against the hedge funds with S&P 500 that
outperformed all hedge funds after the crisis and there was also a report
saying that 80% of professional traders in the US actually tend to lose money
because it’s not a obviously an easy game what is your advice would you
recommend investing or trading do you have preferences or yeah I mean I think
some people are probably skilled traders I’m not one of them so you know we
recommend people have an allocation to crypto and essentially hodl it you
know we’ve published many times our analysis is showing that Bitcoin makes
all of its gains within ten days in any single year and if you exclude the ten
best days bitcoins down 25 percent of year on average so you know if someone
had a crystal ball and only owned it for the ten good days they’d be a gajillion
error many times over better than owning
Bitcoin but I think it’s just simple own Bitcoin Tom Lee: I’m not a big believer in trying
to be a timer of markets because of this chart this is the top ten days okay so
if you look at every year since 2013 the light blue line represents the return of
Bitcoin on the on their 10 best days and the dark blue line is the return of
Bitcoin the other 355 days if you didn’t own Bitcoin for their 10 best days in
any year you lost 25% a year so think about that Bitcoin makes all of its
returns in just 10 days I wanted to ask you as well in terms of
utility tokens and security tokens these days the security token Oh obviously
since last year is a big big hype you know the traditional world so well
institutional players do you really see them moving towards a token or just
staying in their ways of you know trading securities on in traditional
markets I don’t know question yeah I don’t know
we don’t know the future right I think traditional financial
institutions like low costs so to the extent that any future method of
acquiring assets is lower-cost it’s going to attract capital but
institutions really prefer to buy things that grow and have upside to price so I
think crypto currencies are attractive to the extent that it’s going to emerge
as an asset class hmm that makes a lot of sense that makes a lot of sense and
one last question with regards to Facebook as you know like this is on
every headline the global coin and how it may be a challenger to Bitcoin
obviously their pros and cons to everything but how do you see this
phenomenon playing is it good for currency that Facebook yeah I mean I
think you know I think it’s only good comes from Facebook launching it a you
know a cryptocurrency I think it it validates a lot of the efforts and the
concept of you know decentralized finance and and blockchain and digital
assets and you know we’ll have to see what the actual operating you know
Facebook coin looks like and but it’s it’s early I want to tell you why I
think the Bitcoin ETF is a positive okay unequivocally positive but I just don’t
think it’s going to happen in the next few years number one as you guys all
know there’s a huge regulatory hurdle that the SEC is institutionally somewhat
hostile to crypto part of it has to do with the lack of transparency in pricing
and the previous speaker really did a good job of explaining you know the the
issues with volume and reporting and the gaming of pricing but I think there’s a
secondary issue mmm the Bitcoin ETF might be too much of a good thing
okay if you look at the top ten ETF launches even the top 20 ETF launches
the average is a billion dollars a demand in the first year okay that’s
twenty million dollars a week with the havening taking place next year
bitcoins daily supply is going to be five million dollars that means that if
if the ETF were to launch for Bitcoin you’re talking about twenty million
dollars a week atom and almost five million dollars a day which would buy
every single block reward that a miner receives think about that for a moment
if Bitcoin has equilibrium today and then you get a new entity that’s buying
every single block that’s coming from a miner what do you guys think will happen
to the price of Bitcoin look it’s game theory every miner is never gonna
withdraw supply everybody who holds Bitcoin isn’t going to sell it and you
got you know five six million dollars a day of ETF demand I think there’s a
chance that bitcoins price has a massive parabolic move because of an ETF so I
think that the that bitcoins price and the market needs to get a lot larger
before we have an ETF otherwise you know bitcoins price would would potentially
go ballistic on an ETF I was blown away by all the generational stats that you
provide in your reports I find it fascinating that you were able to find
correlation with generations and market booms and in crisis and crashes when was
it again you said that the Millennials will peak in ten twenty thirty eight
twenty thirty eight so by then hopefully we’ll hopefully see mass adoption or
yeah B should be a good 20 years right should be a good 20 years all right
thank you so much Tom for all your time was awesome having you yeah and
definitely guys don’t forget to watch Tom’s talk here at the crypto camp
reginal acid summit there’s some really valuable information I couldn’t stress
it more there’s so much data that you want to watch it over and over and over
again and hopefully have you again soon and next time we’re in London Tom right
thank you so much yeah thanks Tom Lee: Demographics explains markets better
than almost anything else in the world in fact I can tell you that if you
justly use demographics solely you could predict stock market tops
since 1870 with a 40-year lead time and you’d be right within one year every
time so what I mean by that well these are the six living generations in the
United States greatest generation Silent Generation baby boomers Gen X
Millennials and Gen Z most people in this room and most people who do crypto
are Millennials on the right side I list the year that the total population of
each generation P it’s not the same as births because there’s immigration and
it’s not exactly twenty years apart because there’s Wars and everything but
take note of the dates 1930 $74.99 2018 well see take a look at this chart this
is the stock market since 1870 and I marked with columns the peak of every
generation it’s called every major market top so think about that you could
have predicted every major top every major crash with a 40-year lead time
just using births and interestingly we published this last summer 2018 it was
the peak of Generation X well what happened in 2018 97 percent of global
stock markets around the world had a negative return the worst since 1900 so
last year even though the US only fell 20% it was essentially a global crash
last year now here’s what’s good the good news if you guys own equities if
our analysis is correct the next major bear markets not till
twenty thirty eight so you know we’re in a bull market for stocks for twenty more
years you