Insane 11.50% Cash Yields Powered By Bitcoin!🔥$STRC⚡Strategy CEO INTERVIEW🚨Phong Lee

0:00Investors are star for yield, obviously with things that are happening in the markets today, we wanted to break it down with none other than strategy and their CEO. So we'll get into all of that here in a moment. Before we bring on the guest, I want to kind of open up where the industry is heading, because if you look at the growth of what we've seen here recently, sizes rapidly grown to almost 6.4 billion, I'm looking at some charts here, specifically from strategy around some of the assets that they have been putting out into the market. Stretch, of course, is one we're going to be talking about today. So I want to have the president and chief executive officer, officer, Fong Lee coming in from strategy. Fong Lee, how are you? I'm doing great. Thanks, Paul, for having me. Pretty accelerated in terms of growth. Why do you think we're seeing the growth we are right now in your products? You know, it's stretched specifically now is up to $8.5 billion in notional. Last week alone, we issued $2.2 billion, which is the largest issuance any week we've had. And look, I think people are

1:01interested in the product because they want access to the asymmetric risk return that Bitcoin provides. They don't want the volatility. And we're in a yield-starved environment right now, anything where you can get 11.5% paid monthly, 5x4x over collateralized as something people are interested in right now. So I'm showing the stretch-effective yield compared to traditional credit. This comes from a deck you guys have published. Pretty hard to go against this. Sometimes when I see charts like this, I wonder, is this too good to be true? Surely that is a question that is asked to you guys. Explain the product for us. Explain how it works. What makes it so efficient? Yeah, well, I'll start with it's a perpetual preferred. You know, a preferred equity is listed on the NASDAQ or NYC. And this happens to be perpetual, which means that there is no maturity. A normal preferred has a three or five year maturity. So one is it behaves and looks like

2:05an equity, but it pays a dividend. The dividend we pay is 11.5%. We pay that monthly. I will have a proposal now to pay it actually semi-monthly, so twice a month. And it's also paid in cash tax deferred. That's the product. How do we get to 11.5%. When somebody buys stretch, we immediately turn around and we buy Bitcoin. And because we're the largest holder of Bitcoin in the world now, over 820,000 Bitcoin, we have a large Bitcoin balance sheet. We're very adept at buying Bitcoin. We believe that Bitcoin should go up 30% a year. And we're effectively taking that spread in between, I call it 18.5%. We're paying out 11.5% to the end customer. And we take the risk of Bitcoin volatility, call it 40% vol. We stripped that away and we give to the end customer a 2% vol. That's effectively the product. Interesting. Okay. So if you look at the potential risk factors, if there are some, what metrics should a holder pay attention to?

3:09I would say there's two things. What is our total Bitcoin base, which is about $60 billion? As compared to the amount of stretch outstanding, in this particular case is $8.5 billion. That is effectively our amplification. And then what leverage do we have? What additional leverage we have? We have about $6 billion in that leverage. So call that simply $16 billion amplification on $60 billion. So 25, 30%. That's what someone should care about. If we get to the point where we have $60 billion of Bitcoin and $60 billion of stretch outstanding, $6 billion in that leverage, or $66 billion of net debt becomes a problem. So that's piece one that someone should care about. And then piece two, what's Bitcoin price? Because this does rely on the long term that Bitcoin price is going up. And I tell folks, I talk to Bitcoin bulls, but I also talk to Bitcoin

4:09bearers. If somebody thinks Bitcoin is going to go down 90% and sit there for five years, that could be an issue also. So you look at volatility, because that's one of the things that I know some of the people who follow our channel in reference to these kinds of assets look for entry points. So I'm showing your liquidity here right now. Is this essentially the best time to grab it is when it starts to dip into these valleys? It depends on what you are. If you're a buy and hold person, and look, if someone's looking to get the yield right over the long run, I would buy any point in time, because the price basically sits around $100. Now it's $99.50. So you might say, okay, I got 50 percent gain there if I buy a $99.50 go up to 100. But put that aside, if you're looking for 11.5% yield paid monthly, you can enter at any point, right? And actually, you're sent in not to sell the product because it's a return of capital tax treatment, which means that as long as you don't sell the underlying, this is tax deferred for the next 10 years.

5:13Now what you see here, there's an interesting movement amongst traders, right? If you're a trader, what do you want to do with one record date a month, right? And that's the 15th of every month. You want to buy the product on the 14th. And then you want to sell it on the 15th, hold it for one day, get paid 11.5%, right? And then for the rest of the days, whatever, put it back into a T bill or something like that. Right. So that's the dynamic you see right here, which is why we're proposing two record days. But look, if somebody wants to do that, that's fine too. But if you're a typical yield star investor and you just want yield over the long term, I would just buy it and hold it. So you look at the potential for the semi annual proposal. How much would this fix the volatility if you go that round? Mathematically, right? And there's the difference between math and actual what people do in sentiment. This is singing monthly, so twice a month. So for once a month, twice a month, it should drop the volatility by about 50%, right? It's already a low volatility

6:17product sitting around two to three right now. You think that that in general is going to be good for the overall performance. It's going to give some more options to long-term investors, as well as the short-term traders, so to speak. Beyond that, because I think there was one more sheet I wanted to show. So this is going to be the only equity right now with semi monthly dividends. Is that right? Yeah, it's pretty cool. You see here in the universe of equities, and before that, in the universe of the universe, the vast majority, 95% are paid quarterly. Right. Right. R is paid monthly. Yep. And when if the shareholders approve this, when we move to semi monthly, it'll be the only preferred paying equity or dividend paying equity in the world that is paid semi monthly. Now, what are we competing with out in the world, right? And the traditional finance markets were competing with other preferred and other equities. You saw those there that paid dividends. Yeah. You could argue, although we are not a money market or a savings

7:21account, we're competing with people trying to get yield on short-term money. Right. Call it six months money, one year, two year money, and so we're competing with that. You can also argue that over time, as stablecoins become more prevalent, and as people are able to make yield-off stablecoins, which is a big topic for discussion and debate right now, that we would potentially compete with yield-bearing stablecoins also. Right. That's sort of one category of short-term money that we compete with. Then the other category is long duration money that earns 10, 11, 12 percent. All right. A good example might be private credit. Right. And in that case, you get your money locked up for four or five years, but you're able to get potentially high dividend and you pay high fees. What we brought is the best of both worlds. High yields, tax deferral, plus short duration. Right. The ability to get in and out quickly and low volatility. And you mentioned innovation, like that's sort of a sweet spot that hasn't been met before, and I think it'd be hard to me

8:25again. We just did a video on banks that were really lacking in the innovation. It seems like more companies like yourself, and I would call it the next generation fintechs that have really pressed the limit on these new products out there. So kudos to you guys for that. If you look at what you guys are doing in the tokenized side, here, of course, is stretch right here. It's one of the top most popular tokenized stocks. So this is interesting to me. Could there ever be a time where dividends at some point in the future would be paid daily or real time? Do you think that's ever a future opportunity? I would love to see that first of all. I think you know, you mentioned innovation. Innovation in the capital markets is going to happen in the tokenized defi world. These are companies building tokenized products on top of strategy. I love to see an issuer fully regulatory approve tokenized world where we can issue tokenized stretch trades 24

9:307 doesn't have some of the requirements or some of the structural inhibitors that typical US exchanges puts on top of it. And yeah, I think why wouldn't you want to have daily accruals? It might still be monthly, like an ETF. And so that would make a lot of sense and that would be friendly to a shareholder. How high or even how low could theoretically yields go in terms of ranges? Do you see, do you guys have a model for this? Yeah. And by the way, one of the things that I think is interesting and you probably notice it, right? Circle Tesla, right? And then SPU I keep Circle on Tesla. This is their common equity. That's sure. Yeah. This is, we're just talking about one of our preferred. It's not even our common. So I think it's sort of awesome to see this. How high can yields go? Look, if we believe that Bitcoin is going up 30% a year. And we're paying a annualized dividend and 11.5%. You would say there's an opportunity in the

10:37middle of that. So, right. Now, do I really think we're going to be paying a 20% dividend? I don't think so because I think the other thing you'll see is some quantitative easing and the Fed start to reduce the short term interest rate. And as that happens, the need for high yields will reduce a little bit too. So I think we don't need to get there, but we could have if that was what the market desired. Well, that would be interesting because I think we are going, at first of all, I think they're the dynamic of the investors are starting to shift. And what I mean by that is the demographic. You're getting to a point where I won't call them boomers, but there are, you know, they're kind of set in their ways in terms of the risk they're willing to take versus what you're seeing in millennial and Gen Z, which are just now starting to experiment with this. Obviously, risk assets, digital assets are a big target. And this kind of product, I think, would be perfect for that kind of investor base. So you may be going into, I've heard Michael talk about this before, into a huge, you know, perfect storm of where this market is going to

11:42grow. I'll give you this as a thought experiment. If you are running a stable coin, right, why wouldn't you take a portion of that stable coin and put it into a product like stretch, right? Get 11.5% off that portion of the stable coin, mix it with US treasuries as an example, and then pay a higher yield off of it, right? Like I think everybody wants yield off of a stable coin right now. And today, it's difficult to do. I think most stable coins aren't even interested in that at some point in time. But then other than obviously, stable coin has the benefit of the speed of transaction and the low friction. But if you could also provide a real yield off of it through something like this, I think it would make sense, right? And those are conversations that are starting to happen. All right. So I would be remiss if I don't challenge this. And one, of course, your big naysayers is Peter Schiff. He goes on right here. Sometimes a positive scheme is an obvious, the only sign that it may be seems too good to be true. I said

12:46that in the first of the interview. I was like, wow, these are pretty high performances. Not the case with strike or with stretch. How would you respond to that? First of all, when you think about what Peter is saying there, would people trust stretch more, meaning less skeptics, if every part of stretch was a fully unchained? Well, I'll start with you know, Peter is a big gold bug. Yeah, of course, that he I think believes in likes Bitcoin, which is why he talks about it so much. Sure. Because I like gold, right? And so most people who like Bitcoin like gold, I think it works the other way around addressing this question of a Ponzi scheme. First of all, we have as a public company made every effort to be as transparent about everything we do as possible, which is go to strategy.com. You can see everything that you just saw slides real time. We are taking the proceeds of stretch and putting it into Bitcoin, right? It's not like we're taking the proceeds and we're then using those proceeds to pay out. Right. We're actually using the proceeds

13:47and we're putting into Bitcoin. That's one, right? So it's very clear what we're doing with the proceeds. We're reinvesting it into the best digital, the best asset class in the world going up 30, 40% a year. And then we're turning around and very simply issuing additional equity and a premium asset value to pay the dividend, right? And so we're not we're not taking stretch equity, we're taking common equity to pay the dividend. That's pretty much the process. Yeah. Right. And that's it. So so I don't know which part of that sounds like a Ponzi scheme. None of it does. Sure. Yeah. Obviously I'm the one who, you know, help create the products back in the product. But the definition of a Ponzi is something that's non-transparent where you're taking the proceeds from individuals and they're using those proceeds to pay out interest rates. The only part that maybe sounds Ponziish is the rates are very high, right? And we're able to do that because of Bitcoin. But you know, we get the two good to be true quite a bit because it does sound quite

14:50novel. But you know, when you digitally transform something, right? Is is watching any movie you've ever wanted, right? At any point in time, is that too good to be true? Is it getting into a car that drives itself too good to be true at 10, 15 years ago, the answer of a yes to any of those? Yeah. Right. You've been hanging around Michael a lot. Yeah. Digital tell. Mission allows you to do these things. Right. When you take it that way, it does feel as though, okay, this is just the next generation of products that are going to be out there. So maybe you guys are at the right place at the right time. Why don't you just go ahead and issue its own rap Bitcoin for say a DeFi purpose? Why not go that route? We could do that eventually. I think like what works here is we're using the existing traditional financial market system. Right. We're using a publicly listed equity. Yeah. Go buy in the NASDAQ STRC. And for now,

15:50to me, that is the, you know, we have quarterly earnings reports, right? Like we have full transparency on the product, on our leverage ratios, on our assets, on our balance sheet. So to the extent we can take something that is in the form that everybody is very useful. Yeah. Provide a novel product. I think that is better than taking a brand new format and then putting a novel product on top of that too. Right. Like you go back to boomers. Right. What is a boom? This product you would think is ideal for a boomer who has a million dollars in assets and wants to live off of a fixed income. Sure. Right now, they're making three and a half, four percent a year. They can make 11 and a half. I'm not suggesting they put all their assets in there. But if you want to live off of fixed income, tax deferred. And then when you pass away, give this to your children and the tax basis steps back up, right? Or the cost basis steps back up. This is a, and now if I was to wrap that in a DeFi product and then give it to the boomer,

16:50like they're very unlikely to purchase that. But if I tell them you can go buy this through Charles Schwab or through, you know, fidelity on the NASDAQ, they're like, okay, I can work with that. They explained to me, when you say this, you said that this product is of course tax deferred for 10 years. How does that work within the tax code? Is this similar to other, you know, other yield products that are out there that are going? What makes it qualify for that? Yeah. So there's sort of three types of taxation typically on dividends and on yields. One is ordinary income. So you make interest on a money market, right? And that would be taxed at the highest tax rate, federal tax rate in the US, 37%, you live in New York, it's 55%, right? And so you put your money into money market, you're an interest off of it. That's an ordinary income. That's sort of the worst, right? The second are dividends on securities, right? QDI, quality dividend income. And that is taxed at a 15% rate, right? And that is if it's a return on

17:54capital, if it's a return of capital, which means that the company is producing negative earnings in profits. And because we have a operating software business where we purposefully return negative earnings in profits, there is no capital to return. So it is a return of capital, which essentially means that we're giving you back the capital you gave us. That's how the tax code looks at it. So if you buy a hundred dollars worth, when we give you 11 and a half dollars, now your tax base is your cost basis goes down to $89.50 or $80.50. And that can continue to when it steps down to zero, which is taxed as a dividend, right? So that's about 10 years of tax deferral as long as you don't sell the underlying. Interesting and intriguing, because I think a lot of people are trying to do more strategy now, no pun, in how they're investing. You just hit on some

18:54of the key things that I often argue around money market is just the tax exposure that you have on money markets, even though it is paying somewhat of a reasonable yield. But when you look and apply the tax position, starts to create a different story. We thought when we did this that the product market fit and the demand was going to go through the roof, you never know until you put the product out in the market. And it did, right? It's grown to here eight and a half billion dollars. It started off as $2.8 billion. It's one of the fastest growing financial products or any product in the history of the markets. And it was that change going from a fixed principle to a variable dividend. And look, when you talk about short term money, right, that's sort of what you don't want, you don't want to risk losing your money. Exactly. Having 20% come off of your money. And if you want to hold something, it's your kids' college tuition. You know, you're going to have to pay it in six months, and you want to park it somewhere without losing the principle. Right, right. What about, I'm looking

19:58at all these products and I think, all right, why not lay in or create a vault strategy that alternates between all of the different products? Yeah, you know, there has been a lot of, I'll call it layer two innovation on top of our products. In fact, if you look at stretch right now, a few companies, 21 shares, APEX, hope, have created fairly good size products on top of stretch that offer, for example, daily accruals. There are ETFs that are available in Europe. I love the idea of a vault strategy on top of these products. And we don't want to necessarily create that because it'll cause us to defocus a little bit, but we're happy to partner with others who want to do something like that. So I think it's a fantastic idea, Paul. And if anyone's listening, wants to do something like that, there you go guys. There you go, conversation. Reach out to Fong Lane. He'll work it up. Well, listen, this is one of the things that we try to do for our audiences is give you guys insights a little bit more into stuff that are, is it a little bit more,

21:03it sounds easy to understand, but until you really hear it broken down like what Fong Lane has done, you have to understand how it makes sense for your investing. So obviously not investing advice, but it is something that we dive into around discovery and education. Hopefully this worked out for all of you guys. Thanks for coming in today. We appreciate it. Yeah, I think you too, Paul. Appreciate the time. If you like this video, hit like and subscribe. Drop a comment down below and also join our free private member group, the link is in the description.