Veteran Fund Manager: Bitcoin and Gold Will Crush Traditional Portfolios

[Music] Let's be clear, Bitcoin is an international asset. >> We are spending like drunken sailors. >> Bitcoin is the only economic entity where the supply is unaffected by the demand. >> If you want to preserve your wealth, you have to convert that currency into an asset that's scarce, desirable, portable, durable, and maintainable. Welcome back to Scarce Assets, a podcast by On-Ramp Institutional. This week we sat down with Yurun Bachland, founder and manager of the Blockland Smart Multi-Asset Fund. I enjoyed this conversation because Yurun has 20 plus years of institutional asset management experience, and it really comes through in the conversation. We talked about the macro environment that's driving asset prices, the structural change, and ultimately why portfolios of the past no longer cut it. talked about his approach to constructing portfolios for his investors, which is a mix of precious metals, namely physical gold ownership, uh direct ownership of Bitcoin, no other crypto assets, and high quality equities. And then we also talked about the adoption of Bitcoin and the success of the the ETFs and just the interest that he has seen or maybe not seen in the institutional allocator space ultimately supporting the thesis and the idea that it's incredibly early for Bitcoin. uh we unpacked just his framework for allocating capital, how to preserve and grow wealth in the 21st century. Ultimately, this ties into what we do here at on-ramp where we focus on first principles approach to securing our clients assets. So, we work with individuals all the way to the large institutions like pensions, endowments, foundations, family offices. And what do we do exactly? We focus first and foremost on custody because any investor, whether it's an individual or it's an institution, if the custody that you're using to secure your Bitcoin is not robust, what you thought was your allocation of Bitcoin could no longer be there when you need it. And so we focus on multi-institution custody, really the foundation of our business. And for the institutional investors, we have the on-ramp Bitcoin trust, which offers security-l like exposure, similar to an ETF, but with inind delivery, something that is being discussed with the ETFs, but there's still a lot of question about how that's going to work. We also have multi-jurisdiction custody built into this as well. And ultimately, that is direct ownership of your own Bitcoin. We also offer advisory services for institutions that are looking to navigate this new asset class and how to avoid the pitfalls that historically have plagued this industry. and resulted in a lot of losses. So, if you're an organization thinking about Bitcoin or already allocating but looking for other solutions, shoot me a note, Jackson onrampbitcoin.com or book a consultation on our website. Hope you enjoyed the episode. Okay, welcome back to Scarce Assets. Excited for this one. Uh we have Yurun Bachland, founder and manager of the Blockland Smart Multi-Asset Fund back on the show. Yurun, we had you on The Last Trade, one of our other podcasts about a year ago. I want to say it was August, September. It was right as I started doing podcasting full-time. Uh, but it's great to have you back. I'm excited for this one because you know Bitcoin very well. Uh, and as you know, we're a Bitcoin focused company, but you focus an investment strategy that is aiming to really futureproof wealth for your investors. So you're focused on Bitcoin, but you're also focused on gold quality equities and I I would say portfolio construction that is actually mirroring the risks that exist risk and opportunities that exist in the market today. So really great to have you back here, Yurun. How are you doing? How's your summer been going? >> Yeah. Uh well, I'm fine. And the summer is, as expected in the Netherlands, it's uh full of rain. Um, and uh I'm now uh this is my final week before we head off to Malaysia. A big trip with the family. So I'm looking forward to that. Uh but uh always as always the last couple of days are always pretty busy and packed. So I'm I'm I'm glad when everything is done and we can uh uh go to the airports and celebrate uh the holidays. >> Well, thanks for squeezing us in before the trip. You must think very highly of us if we were able to fit into your busy schedule. >> I do. I do. I do. I do. Awesome. Well, let's go ahead and get into it. Um, so we had you on, like I said, around late summer, early fall, autumn of last year. >> Yeah. >> Before the US presidential elections, before the trade deals, the tariffs that have happened this year. And I would say it was kind of a mixed bag going into 2025 where you had a lot of analysts that were bearish on the economy, bearish on asset prices. is they were favoring riskoff type of investments and then you had people who uh were bullish. Uh some people are permable bulls and some people are perma bears. Uh but here we are about almost eight months into 2025 and it seems like everything is ripping up and to the right. So you have US equities hitting all-time highs, European equities, gold, Bitcoin. What's the uh you know what what's going on here? I mean how would you categorize just the rally across the board? What's driving that? And do you expect that to continue? Um well the letter part I don't know but I think that uh indeed a lot of after a a great year for basically every asset except for bonds um a lot of people uh thought that this year would be uh a little bit more difficult and if you are a euro denominated or based investor it is because the euro uh makes the life of euro based investors a little bit harder. But if you look at asset prices um I think there are a couple of things that um have have happened there. So on the equity side you see that there has been little chance of a recession a US recession. So so um these um rate hikes by the Federal Reserve and then plateauing at where we are now did not hit the economy as hard as a lot of people expected. uh if you look at that from an historical perspective that is partly because interest rates given where inflation was is is still not that high are not that higher. So that is one thing uh you see earnings growing not as spectacularly as as in the last couple of years but still earnings uh are growing and I think the last couple of weeks we saw two things. The first is that even though the outcome of the trade war is different for every region, the fact that there are outcomes and deals reduces uh uncertainty in the market and and the biggest thing that markets do not like of course is uncertainty. So better have some clarity on not perhaps the best uh deal uh but to have some deal. And the other thing is that global liquidity, global money supply is rising again, I think now for six to eight weeks and it's rising pretty pretty fast. Uh meaning that uh liquidity is driving asset price prices as it basically always does. So if you add all of these things uh together, nothing did really break. Well, even though some econ economists expected uh it partly or or completely to break like a US recession. Um and then you have this liquidity uh uh um um impulse uh that is now driving uh uh markets together with the fact that uncertainty about trade deals u is declining. Right. >> Yeah, that makes a lot of sense. And so out of those three factors, they all seem to be more macro oriented than than micro or fundamentals based within an asset class. I'm curious to hear your thoughts. Um out of those three factors, do you would you say any one of those more so than others are driving markets? And do you expect like on the liquidity side, for example, you said over the past six to eight weeks, global liquidity has been increasing. Do you expect that that's going to accelerate? I'm I'm trying to understand between these three factors what's you know really driving asset prices and maybe what we could expect to see have more of an influence going through the rest of the year. >> Yeah. So um I I expect the whole uh trade related um macro theme to yeah become a bit less uh urgent there because some of these deals Japan, China or China as an extension and and now of course the European Union is is finally done uh on the liquidity side. So we we live in a debtdriven uh system. Uh and that means that every year more debt has to be refinanced, right? Uh and and I think that central banks are extremely aware of this. So even if the Fed decides not to lower interest rates this year, which the jury is still out of course um you see that uh on a on a on an let's say much more implicit way they are driving liquidity. So you see that global money supply is rising, liquidity, other liquidity um factors are rising and my general notion is that this is needed to prevent markets from um um getting scared of refinancing activity because this is basically uh what most of the debt driven world um um is now about. it's more about refinancing than actual uh loans for investments and and and household um consumption and things like that. So, so I think that uh these central banks are very aware of this. So my guess is that on average of course and now it's going pretty fast uh but that liquidity will continue um uh to rise and if that um coincides with the Fed deciding to uh start lowering rates again I think then the the outlook for the rest of 2025 is actually pretty decent. So, so, so I would expect that liquidity could become the main uh driver apart from macro momentum which is of course a little bit uh more difficult to judge how this will go for the rest of the year. Right. A question for you on um I guess one in your mind, what would cause outside of you know pressure from Trump and you know perhaps replacing Jerome Powell like what would cause Pal and the Fed to cut rates you know within the next few months or you know through the remainder of this year and second part of that question is obviously they're looking at CPI as a as their sort of anchor for what inflation is. I'm curious in your analysis, do you consider CPI or are you thinking about sort of a broader metric of monetary debasement issuance? You know, how how do you think about the governmentisssued CPI metric and and how does that factor into your analysis? Are are you sort of adjusting that in terms of what what you're seeing on the ground in terms of um you know prices of all things which I think if you're just like anecdotally you know going to the grocery store um paying for your your trip to Malaysia like it you know inflation's more than two or 3%. >> Yeah. So so I think this is this is but I think what you are mentioning is more u relevant for alternative economists and things like that. So the the difficult part with with the Federal Reserve and POW is that uh you would expect that the Federal Reserve would have focus on one or two key inflation metrics and that used to be uh or still is when you read uh uh their their their output and and and listening to Powell it's the core PCE right but you know again from um the co experience and that we started to look at three month annualized one month annualized X shelter. So, so it's it's it's has become a little bit more complicated. Uh I do think that POW has been very vocal that the uncertainty um of uh terrace on the overall price level let alone which which indicator that is and let's keep headline then uh in in uh the is the first I think data point to look at. Um so if you get more clarity uh on the impact of those tariffs and you see that uh if you look at the deal with Japan and now uh with Europe so the tariffs are there but they are lower than what was suggested and at some point was expected even so 30% to 50%. Um um if that uh coincides with um headline inflation um u dropping to 2 and a half% again so close close enough uh that the Federal Reserve is a little bit more um has a more conviction that inflation is going toward the target. I don't think there's much reason for the Federal Reserve to um uh hold on to rates for much longer. Also if you uh compare that to what the bank of England is doing to what the ECB is doing. So so I think if if the current deal making by Trump mean that the outlook for tariff related inflation becomes uh more clear. I think that then toward the end of the year uh Powell has little has little reason to say okay we are going hold on to uh this 4% level because they they did tell us many many times that 4% is still restrictive right so the question then is is the is the economy growing fast enough to stay above um uh the the the uh equilibrium levels right so so that I think should it will be the shift in in in monetary language in power press conference and things like that. So so I can imagine that we that we will see a couple of rate cuts toward the end of the year. Yes. >> Yeah. And I wonder as well if that coincides with all the refinancing that's needed because you mentioned earlier uh Yurun that the well I think the three of us know that there's always more debt. There's always more money that's added to the system inherent to how it's structured. But I believe there's over10 trillion dollars at least in the US side that needs to be refinanced. A lot of that was um co era or even you know somewhere between the great financial crisis and COVID where zero interest rate policy was under effect. So a lot of the that debt is very low in terms of um interest rate but the >> when you look at the United States budget interest expense is now the second largest item on the budget. And so how do you know based on what you just said, how do you also tie in the fact that so much debt needs to be refinanced, rates are elevated pri uh compared to where they were five or 10 or 15 years ago. That must play a part as well in the strategy here to lower interest rates, does it not? >> Yeah. So I'm a strong believer of fiscal dominance that in the end the the endless uh government deficits and the buildup of additional debt will force central banks to keep interest low rates low on average. Um so yeah the only thing is that if you look at the official central bank target they cannot say this right. So this is the the the the uh continuous um um the the the two distinct forces. They have to say one thing but if you look at what they do at this central bank balance sheet liquidity wise uh in the in in Europe it's it's much more uh outspoken. If you look at what the ECB does, it's so much more depth related that she Lagarda can say whatever she wants, but what what she says and what she does are totally different. So, so in my opinion, um in in let's say from a medium-term perspective, whoever the Fed chair is, um fiscal dominance will play part uh and that mean that interest rates will always be lower than what you would expect compared what you say to 10 year 20 years ago when inflation levels were structurally 4% and things like that. So, so I'm I'm pretty convinced that this will uh be the case. if that means if Powell will cut rates now more than he should uh I don't know because he's very proud of his independence um um and so so in the short term I'm not really sure uh but yeah if it's not now then in May 2026 uh that they will put somebody there that will do this uh as expected right so so it doesn't really matter that's only less than a year away uh so but yeah in the and the the debt system will will um uh force out a clean monetary policy for sure. For sure. >> Maybe one quick followup on um just that notion of Fed independence. How do you think about that generally? I think the assumption now is that, you know, Trump will replace Pal with someone with a pretty clean directive to lower rates, which would sort of, you know, spit in the face of any sort of actual Fed independence if the president of the United States is just directing him to lower interest rates. What What do you think that that has a uh potential impact on markets, moral hazard? Like, how do you think about, you know, I think for a while now it's it's been clear that, you know, Fed independence is always sort of in question, but I think if if that were to happen and Trump replaces him with someone who's literally just going to do his bidding. What do you think the the longer term implications of that are um in terms of there, you know, not actually being any even semblance of of that independence? >> Yeah. So I think already this is quite different from what we are used uh to see, right? So I think there in in history And in this case, US history, there have been a lot of US politicians that really did not like what the Federal Reserve was doing, right? The early 80s, for example. Um um but now you have a president who actually says, "I want my policy to dominate your policy. I'm going I'm going to ask you from the oval every time that a journalist puts a camera on me. I'm going to ask you uh uh to order you to lower rates or I I am going to fire you. Of course, this is Trump, but uh still this means it's so he actually confirms that his policy is more important than what the Federal Reserve is trying to do. And the interesting um part about this is while Trump is having this trade war raising prices for his citizens, he also at the same time still asks um his central bank, his independent central bank to cut rates. So if if this so for him fiscal uh dominance is is very normal. Um and and then and this is also a good question. I looked up um how all these um central banks are positioned uh in their uh um u legislation wise and things like that. So in the end it's always politics that gets to decide uh what the uh central bank um and um can do. Sometimes it's more complicated. It needs a lot of legislation to be adjusted and things like that. But in the end um politicians do have impact uh on the function of the central bank even though they are independent uh uh independently positioned. So so that is so that is one thing. Uh the second is of course it doesn't really matter if they put basent there or not. I don't think he will go but uh that would be the first time. So it's just so that um so Yelen went from the Fed to uh the ministry of treasurer and now the other way. So there was this um there's one one example in the somewhere in the 50s or so after the second world war but that was not the uh min it was the second guy or something but this would be a first right. So if you have the now uh um um minister of finance moving to the Federal Reserve, I don't think it's going to happen. But that that also would be a precedent for what is going to happen. Right? So uh all in all if you look at data central bank balance sheets that even though um inflation went to near 10% in the United States but interest rates were 5%. In the 80s uh in inflation also went to 10%. And interest rates went to 20%. So if you look at the the the differences there. Um so so if you believe in fiscal dominance then politicians will force central banks to do what politicians want. The other of course is financial repression and then the um central bank is happy to play along with the politicians to pull off the same result. Right. So for in the end I don't um um um really care which one it is. I so you can have a whole debate on that. The the obvious question is what will this do with interest rates on average and why do bond investors not think about that ever? That's what I don't get. So if if you believe that interest rates will go down if POW if is replaced by somebody who will cut rates immediately and and to 2% or whatever. So what is the outlook for your long-term bond uh position? So shortterm it's fine because there are lowering rates of course that's fine. Uh but if you have higher than 2% inflation which is very likely uh and and on average 2% and in Europe 1% in in Japan 0% interest rates. My question is why why do investors not think about what that does to their 6040 portfolios, right? Uh so my idea would be that even more people are forced to think is my current portfolio still uh uh aligned with central bank policy long term. That's a great point, too, and it segus well into a lot of the topics we wanted to make sure we cover because Yurun, one thing I really appreciated about the first time we had you on the podcast is that you have an approach to portfolio construction and investment strategy that I think actually addresses how different the investable landscape is today than it was two decades ago. Right. You mentioned the 6040 portfolio. Well, that portfolio has kind of the bed over the past five years. Really, it hasn't really held up with the changes at the fiscal levels, the macro levels, higher inflation, financial repression like you mentioned. So, that's the idea of inflation being higher than interest rates. So, a negative real return on bonds. Um, I'm curious. So, you said if rates do come down, right, what are the implications for bond investors? And so, I'm going to get to the question in a second. I'm kind of surprised that we have lived through the past five years of higher in uh higher excuse me inflation and negative real returns on bonds. And actually I think you mentioned one of your newsletters the the worst 10-year period for US treasuries in modern history. And so we've lived through this over the past five now even 10 years in terms of the US Treasury return. Yet most investors have really not questioned their assumptions or how their portfolios are constructed. Why, you know, why is that? >> Why is that uh why are more investors not taking approaches that that you are? >> Yeah. So I have a very clear answer but it doesn't reside well with traditional investors. Um so the the first thing and you say uh five years and of course the last five years is what made bond returns stand out in real terms. But I if if I um do a presentation, I now have a chart, but it's it's it's basically the same in many countries. Uh but when I have a presentation for Dutch uh listeners, I show a chart with uh um uh the performance of Dutch bonds in real terms, uh you have to go back to 2005, 20 years, the last time that you would have made a positive return. The chart that you mentioned in my newsletter is nominal returns. the worst in 10 years, rolling 10 years, it's nominal zero. Add to that inflation and you are way way below zero. So, so this has gone on for a longer term and you also see before uh co that real returns on bonds declined every decade. So, if you have a rolling decade every time it and in the end it was already near zero before this whole uh uh inflation boom of the of co postcoid era happened. Right? So my idea is um first is ignorance. People just don't know understand how uh investment and asset pricing works. And I must admit that for a long time it look it took me a long time to acknowledge all the different uh uh impacts on on portfolio return and also to start thinking in real return. Why would you invest in something that does not increase your purchasing power? Because you are taking risk. You are are giving your money to somebody else to to make that money more. What in in real terms? So what if you make uh in nominal terms from 100 to 120 and then your your life spending of your your everything you have to pay for is 150. So, so that that is I think uh when do you see real returns on the homepages or of asset managers and things like that? They always show you nominal returns. And this is the same with saving. Uh uh when you save, you see actually your number in your bank account increases but the purchasing power of your bank account decreases at the same time. So I think this is what I call ignorance. And the second is of course um suppose you are a a well-known established asset manager and you have you you um your company is exactly split like the 60/40 portfolio. So 40% of your income of your people uh of your employees uh of your fund assets things like that uh is in uh bonds. Which CEO, which top manager is going to say, "Let's skip this whole bond stuff um um make our u decrease our income by 40%." And then let's let's start thinking about other alternative assets that we have no uh experience with or as at least we are not known for that uh as well. So I also think this is a clear business uh model and this has happened over and over again. So um we all know about these um the video rentals and if you don't if your business model does not adjust in every industry some of these business models will uh start to decline or or end altogether. Uh but I I know few um asset managers especially when they have um um um when they are listed when they have shareholders. Yes. who is going to bring the message we are going to dissolve our bond uh uh uh portfolio or bond part of the company. Yeah. So I also think it has a lot of to do with uh um uh just business models and and not wanting to change that or not are able to change that because shareholders are in between those decisions. >> Yeah, those are great points. It's almost remarkable how you know once you see this you can't unsee it right the idea the first point you made is incredible just about how the entire asset management industry and really the entire you know traditional finance industry everything to even your savings account or your checking account everything is based on nominal value right there's no accounting for purchasing power or an actual real return or if the savings the number in your Chase savings account is that actually increased ing the amount of things you can purchase or is it decreasing the amount of things you can purchase? >> Yeah. >> And it's remarkable to me, you know, I I I struggle with this because you have traditional finance at least, you know, in in the United States, in New York in particular, it attracts some of the highest caliber people, very sharp people that come into this industry. And I guess ultimately it comes down to incentives, right? a lot of people aren't incentivized to question the insum assumptions or to question the models of which they make a lot of money in their industry because it's really not that hard to understand. I think we're starting to get to a point now where more investors are questioning just because inflation has been so high the past five years in in the Western world, more people are starting to question CPI. You know, as Brian mentioned earlier in this podcast, and they're starting to question, well, great, my portfolio is going up 10% per year on average the past 10, 20 years, but I'm actually not able to actually purchase anything more. You know, it purchases me the same house. It gets me the same groceries at the store. >> Yeah. And it's it's remarkable I think just how still there's this lack of understanding if I speak to someone you know friends or family or or just people in my life most people do not have any perception or understanding of debasement right the real rate of inflation the monetary expansion >> and I'm wondering like you know what what needs to happen there's the business case you mentioned as well but >> do you think that like inflation just needs to explode higher what needs to happen for more people to start thinking about in a real return basis. >> Uh yeah, good question also. I think uh you did a better explanation than me in in in this whole dis debasement uh uh thing, right? So this is this is actually what you are telling about your friends and family. I have clients that I have explained their debasement in terms of uh things they can buy. the actually to visualize it as as much as possible and then for some of these uh people then actually they get it and exactly once you see it. So um one thing is that sure if if we have another inflation uh boom uh or wave then I think a lot of people have waken up because I I do think that a lot of people do understand um I don't know if they understand how to to ex escape this. So you are you are so a lot of people do not invest in at all. Uh but even the the ones that do, do they really understand that? So uh let me so sometimes my clients or people around me ask me uh when are you going to sell your gold or your Bitcoin? And my question my answer is probably never ever. So and not that I'm the biggest bull on Bitcoin or or that gold is the I still also believe in equities. Uh yeah, but why would I? So I have wealth and I try to diversify wealth as best as possible. And one of the things that you should take into account is that my euros is worth nothing and my central bank has an official target to devalue my value. So yeah, why why would I not diversify? Why would I not keep something some part of that wealth in other assets that have proven to uh um protect me against inflation, debasement, whatever you want to call it. So um uh and I think this lesson um the I I so a lot of people when you talk about gold for example, they think that you are going to tell them a story that the world will end. No, no, I'm just telling a story. You can preserve your wealth by buying old cars. You can consume it. You can hold it in your bank account in euros. You can buy Bitcoin. Um or you can buy companies that generate a profit and then you get a dividend if everything goes well, right? Um but why only this um eurobased thinking? Uh and and and I think that is a lot uh I think that is a good angle to explain to them the impact of inflation if you do nothing. So, so, so that I think starting to talk to pe people about um um how much money supply is growing each year and how much more euros which are useless and how how how less gold there is in the faults of central banks like countries in China. I think it's a very interesting discussion. I like it but it's too complicated for people that just have to understand every day. So, so in in the Netherlands um the interest rate uh is now back to 1%. So, the ECB rate is two and we give you one. So, and the inflation is 3 to 4% every month. Every month. So, you can actually make a quick calculation every day, every day that you keep your money in the bank, inflation eats a little bit away from your purchasing power. And once people start to understand and this has to do with something with you said by buying groceries. Once once they see that I think then you can have a discussion should you do something else with your money but they have to be aware first that the euro or dollar thinking is not the only angle you can take in what is actually wealth how do I preserve uh wealth. So, this is maybe a bit a long answer, but this is yeah, a lot of people really don't understand yet what inflation does, what central banks do, uh what the actual value of a dollar of of a euro is and things like that. >> How how would you respond to someone? Because I think, you know, uh I think part of the the rub or the the misconception around hard assets like gold and bitcoin is people are so um ingrained or even addicted to like yield or the concept of income gen generating assets. >> Yeah. >> So, you know, how do you respond to the person that's like, you know, I don't care if I'm getting killed in real terms, like I need that income on a yearly, monthly basis, whatever it is. um when you know there is an alternative way of just thinking about it and saying well no I'm just going to own hard assets maybe I rebalance it I trim from that I borrow against it there are other ways to produce income off of hard assets so you know how do you how do you speak to the person that is is addicted to the yield or the income generating fixed income >> doesn't yeah doesn't generate cash flows I don't think uh I will be able uh to get people off that idea ever uh the same thing again is that uh so if they have a coupon of €100 a month or a year uh I the only thing I can explain it is that uh I take away 10 €10 of that $100 and that is what you actually get. Now go to the shop and buy me something that used to be $100. So so um my son wanted to buy something and I tried to explain him this whole concept. It's not a goal on itself. It just happened this conversation. Uh but I said if you wait a year you cannot buy this and it took him like 10 minute what do you mean and in the end when they understand the concept of some it's more expensive that's the only thing you uh you have to know right but I think that you know I get to go to the events of let's say traditional asset managers as I can still still go there and the many of those people say the first thing is it doesn't has have cash flows but if those cash flows are negative uh or if the value underlying value of that cash flow has nothing behind it I it's I try to but it's hard to explain uh uh uh to them and uh uh and and and also for some people for some investors having a euro dollar yen denominated cash flow is what they need because because of their situation there so so it's not But the whole idea that um uh you have an asset that is supposed to preserve value no matter what. Let's let's that's let's let's keep and you have an an an an asset that is supposed to decline in value because of inflation but yeah you can pay all your bills in euros and dollars inited um uh that is a mismatch. I'm I I so I try to be a bridge but it's extremely difficult. And that is the same when I go go to an event and someone tells me I don't like Bitcoin but I do like blockchain. Yeah. Okay. What what what do you want me to do? Yeah. Okay. Then that's fine. That's fine. Yeah. Yeah. Yeah. It happens. Yeah. So, uh you know I keep trying but it's it's difficult. Especially the cash flow thing. It's it's the holy grail for many investors. >> Yeah. That's I think that'll be an uphill battle for quite a quite a while, I would say. >> Yes. Yes, definitely. >> Hope you're enjoying the episode. If you are, please leave a like, please leave a comment, please subscribe if you haven't already on YouTube or leave a fivestar review on Apple, Spotify, etc. That really goes a long way. Uh we spend time to book guests, prepare for conversations, get everything in order in terms of editing and distributing the podcast. It's a lot of work to be honest. uh but it is worth it just in terms of providing high-quality content that is appreciated education that the industry needs. So if you appreciate it, please leave a token of appreciation. I really I appreciate it. Uh quite frankly, I try to respond to every comment. So if you could leave a like, comment goes a long way. And if for some reason you're not enjoying the show, leave a comment as well and let me know what I could do better. I'm always trying to improve and I do take constructive criticism and feedback. So, please either way, if you could leave a comment, leave a like, subscribe, I really appreciate it and hope you enjoy the rest of the episode. Thank you. >> Yeah, I want to talk about gold and Bitcoin. Um, it might have been you, Yurun, that uh shared something about Gunlock, the Jeff Gunlock, CEO of Double Line, and he did an interview recently. It might have been a month or two ago, but he did an interview recently and he was talking about the concept of US treasuries no longer being really the the flight to safety investment. >> Okay. Yeah. >> And then he also mentioned something about >> uh it was about gold. He said something to the extent that gold is no longer for lunatics like you said. Yeah. He said earlier >> I know there Yes. Yes. >> Okay. Yeah. >> Yeah. So I'm curious like >> I think we might have spoken about this about a year ago. I want I would love to hear how maybe any of your clients or people in the in your world are starting to view gold differently because we spoke a year ago about how the idea that in most traditional portfolios gold is largely ignored. I remember five years ago it's like oh well if you want to express a bullish view on something or you want to express a bearish view on another thing you may want to have a 1% allocation to gold in your portfolio. Yeah. And for all the reasons we've been discussing for the past half hour, I I do think that gold is going to be playing a more critical role in portfolio construction over the foreseeable future. And I'm curious maybe two-part question if you could just talk to how you think about gold as part of your portfolio, your investment strategy. And then would love to hear if you think institutional investors are going to start participating say institutional and you know wealth management family offices are they going to start participating in the gold market soon in your opinion? >> Yeah. So on on on the first part there so my fund invest uh 25% of its assets in physical gold in a vault in Switzerland. So no paper gold. Um that's the strategic weight. Um, and the interesting thing, so I have a traditional finance background and there are a lot of elements in there that are totally applicable to alternative assets or alternative portfolios. There is no boundary that what works in one world does not work in in the other. And what I find interesting, even though even if you let all of the things like money um money supply growth, independence of central banks, inflation, all the things that we touched upon already, if you leave them aside because uh when creating or or deriving uh strategic asset allocations, a lot of traditional investors look at history and they don't take into account any forward-looking aspects, which is strange as it is, but that's and I do that as Well, so I use my Bloomberg and I go back to the 1970s and because for gold you always have the gold standard. So it's always after that that things start to move literally. Um it doesn't matter if you take 50 years, 30 years, 20 years. If you do a mean variance optimization, if you look at the characteristics of gold relative to both bonds and equities, uh you you have to come up with some very harsh um restrictions to keep uh gold out. So um that's one thing. And I I have one chart that that is a little bit more low profile that uh that shows uh the combination of a 60/40 portfolio the traditional way 60/40 uh equities bonds and 6040 with 40% gold and then uh I do this since the start of 2020 uh of I can take it much longer but then it's already not very visible anymore but for every starting month since January 2020 so we have all these different horizons I calculate uh when the 6040 traditional outperforms or the 60/40 with gold outperforms. So this and then the cells in the Excel sheet are green when with gold is outperforming and it's red uh when with bonds is outperforming. So this whole chart which is huge because of all the cells is green it's green and this is the whole concept that I try to explain. So, and if you do that on a more statistical um acknowledged manner, you so so um um the sharp ratio of a 6040 portfolio of equities and bonds um um is equal since the 70s. It's slightly better for with gold from the 80s and then it starts to turn dramatically. Now, if you then add inflation, you get negative sharp ratios. So, the the the the real returns on bonds are negative. So sharp ratios do not matter anymore because a negative sharp ratio tells you nothing apart from the fact that there was a lousy investment right. Um so what I find interesting I know how these companies derive their strategic asset allocation and there is no way that the result is zero% in gold. So this is this is what I all these statistical guys and girls that I don't know what they are tweaking uh but that's that's what I find um uh um more astonishing that they that their their view on the world is that real assets or hard assets whatever you want to call it are are a good uh hedge to some of the things that we are now experiencing but the hard data also puts you um towards at least some allocation uh uh uh to gold. So, um, and this is because for Bitcoin, you can say it's new and a lot of old-fashioned, uh, thoughts are still out there, but for gold, um, I think it's, yeah, it's it's it's a a respected asset class. And I think the, um, interview you mentioned, I did see it and also what Ray Dalio is saying that these people are trying to explain this is not some asset if you expect the end of the world. This is an asset that actually adds value to the risk return profile of your portfolio. So yeah, I've I've said nothing about future and dollars and things like that. You can make it much worse and then you have a bigger allocation towards gold. But I think uh um I also have this chart um um showing the 20 worst months for equities since the great financial crisis uh and the uh performance of gold. So in 16 16 out of the 20 months the performance on gold is positive. On average you would have realized nearly 3% uh positive return uh on gold and equities were minus 7 or so on average. I also did that with bonds negative over those 20 months. It's it's marginally negative but it's negative. So, you know, if I was some kind of asset allocator, basically I'm but with one of these asset managers, I would say, is it not an idea to at least have 5% uh uh of gold in there? Uh and I also think that it would resonate well with our clients uh because a lot of clients are asking, should we not invest in some of these alternative assets? Of course. So, I'm I'm amazed that this has not happened. um uh um more >> do you think um do you think that hesitation or reluctance to embrace gold even when the numbers and the data support it being part of a a portfolio? Do you think part of that stems from sort of uh you know just an air of sophistication from from allocators thinking that they need to conduct some amount of diligence on company XYZ or some issuance of a bond and gold just feels too easy. It feels like a copout of like there's not really any diligence to be done. It's just like do you believe in the thesis of gold or not because I I see that on the Bitcoin side. I think there's a lot of reluctance and hesitancy around Bitcoin from the traditional world just because it feels well on one hand it feels too good to be true. Like how could this digital money that just you know some guy named Satoshi created how could that um be akin to digital gold? Um, and so that that I think partly drives some of the ignorance around this because it just feels like, you know, how how am I as a sophisticated all allocator adding value by just allocating to to gold or Bitcoin? Do do you think that's part of the equation? >> Uh, it could well be because I get sometimes these questions and if sometimes people think that I'm trading all day, I don't. I I want to trade as less as possible. But yes, they it could well be that in order to uh charge that fee that they think they have to do something. But even if you have a uh 6040 traditional portfolio and you allocate 5% to gold and you keep everything else the same still for the for the 55% in equities if there's still a lot of work to do. Right. Right. >> So I I don't get it. And and the second and and this is I think more interesting the way you talk. Where where are the needs, the requirements, the wishes of your clients? Where are they? Isn't Isn't it your job? How how how simplistic portfolio that may yield uh to search for the best um uh best uh possible strategic asset allocation or portfolio mix for your clients. Um and if the data says you have to add some of that then the data because that is the the the whole uh um um cover your ass principle of course that it's the historical data um that then right so so that's that's what I find fascinating there are so many people that just start a new fund with small assets for some portion of your clients that then have some exposure to these asset losses right what what harm is there and and maybe there's also So you say it's an something of sophistication, but maybe also reputational risk. Yeah. Because uh so what if gold falls uh $1,000 from here, right? Um yeah, with equities, everybody is dropping like a stone when the S&P 500 goes down 20%. If you are the the first one with 20% uh uh gold in your portfolio or 10%, yeah, you have to explain everything. Uh so maybe that's also um a reason. I don't feel that pressure fortunately, but uh I can imagine that it could be. Uh yeah. So yeah, I think something somewhere along those lines. >> Yeah. Yeah. I don't I don't know. I I think I agree I agree with you there. Um and it's interesting as well on the gold side. It it still seems to be largely ignored by just about everyone in traditional finance, but that it's kind of a barbell approach in terms of who is buying it. You have self-directed retail investors that are buying physical gold. And then you have nations, right? You have central banks accumulating gold. >> I I want to say in that same interview, the the Jeff Gunlock one, he was talking about how >> a decade ago, central banks were selling gold or maybe it was two decades ago, but they were selling gold at $300, $400 an ounce. >> Yeah. Yeah. Mr. Brown, Gordon Brown. Yes. >> Yeah. And then buying back, right, at the $3,3,300 an ounce. And so it is quite interesting to see this uh discrepancy between where you have like the sophisticated traditional finance investors continue to dismiss it, but then you have nations accumulating perhaps recognizing that there are a lot of uncertainties around the fiscal picture not only in the United States but globally, right? You just have record debt to GDP levels everywhere just about. you have higher inflation, you have trade wars, you have geopolitical conflicts, hot wars. And so it makes a lot of sense in this new investment regime to allocate to gold. Yet most people in the professional investment community just they they can't figure it out or or they're just too much of cowards. They don't want to step out of line, honestly. Like >> you said it, not me. You said it. >> Yeah, that's fine. You know, maybe it's just about that, you know, they don't want to go against the grain. Um c can I say something one thing about that? Well, this is this is part of the amazement that I have. So, you have this you have this big country. It's called China. China wants to move away from the dollar. Everybody knows that in the end the United States and China are not the biggest of France. Um, China is actively uh not only with its oil but also in Asia it's is is very much um pushing countries to uh do all the trading in yuan. Uh but it has one big issue. I don't want to have the yuan because yeah this is so so it's it's not adult enough. It's not big enough. It's not stable enough. It's not the system I want. Whatever you want to call it. So what um and so you had Alexander Hamilton, he helped create the dollar and he understood that I must um lock the value of the new dollar to the the silver dollar of the Spanish because then everybody will recognize this is this is this is um there's there's value underneath it. So I think that is the case why China will continue to buy gold until they have 50 or 60 or 70% of all their reserves uh in uh gold and then I would say oh but you have 70% of gold there lying in your vaults underneath those yuan okay let's try it right so so this is something every every quarter I think when the world gold council or month comes up with the new data you see this happening all of these emerging markets that are not a big fan of the US dollar, they are buying gold. It's it's extremely logical why that why they are doing that and so that would also be for those traditional asset investors. Why not copy paste a little bit of that what is happening around you? So so if you believe in benchmarking that would be benchmarking, right? Um so this is this is this is why the these countries are buying gold and and after the whole thing with Russia uh when their uh uh fiat FX reserves were confiscated um this has has accelerated right because gold is if you have it in your own faults um so yeah again this is something um um interesting to see that they I don't think they pay any attention to that. >> Yeah, I don't think so. I had to go figure this out on my own back in 2020. I had to go listen to people like you and go listen to macro voices to hear anyone talk about the these things, right? It wasn't talked about within my office. I worked at a traditional finance um I worked at a wealth management shop and no one was talking about it. Like I said, it was, oh, if you're bearish on this thing, you know, maybe you have 1% allocation to gold. There was obviously no talk about Bitcoin. So, I had to figure this out myself like I think many of us had. >> Yeah. Yeah, I did too. So uh 10 years ago I was not where I I am now. So this is also a process but it's never too late to to switch and I think that's also I think it's a strength if you can say after a couple of years I got it wrong. Oh sorry I I messed up but that's that's fine. People miss make mistakes. Maybe Bitcoin is a mistake. We don't know. Uh but yeah it's it's it's it's I think doing nothing is perhaps the worst thing when every everything around you is changing. So uh also for the benefit of your clients and yeah so yeah >> well for the benefit of your clients we have to talk about Bitcoin uh at least briefly because of course a lot has happened you there's an entire episode could be done just about Bitcoin of course but um Yurun maybe you could just give a refresher about how you use Bitcoin within your portfolio in terms of you know allocation size etc and then catch us up on just your thoughts in the in 2025. 5. Are you more bullish, less bullish on Bitcoin than you were a year ago? What are your thoughts on, you know, the Trump administration uh becoming much more favorable among other things that you just, you know, talk about your portfolio as it relates to Bitcoin if you could? And then from there would like to understand what you're paying attention to as it relates to the Bitcoin investment thesis. >> Yeah. Okay. Okay. Fine. Yeah. So my fund invests uh 10% uh strategically uh into Bitcoin and the reason that it's 10% uh has everything to do with portfolio construction. So uh I want to promise my clients a uh average risk profile a balanced neutral risk profile uh and uh with the uncorrelated characteristics and the volatility of Bitcoin 10% uh is is about right. We can increase that in the future if the volatility uh would decline. Uh but that's then I have to u um go through my clients to do that. But um you don't want to have a 1% allocation as you said for gold and then a half% bitcoin. Uh so we we have we have um 10% to make a statement that we believe that this can be digital gold or be an interesting uh asset uh to own. Uh so that's on the uh how we do it part. Uh then on um the outlook um so um on the on the Trump administration, two things. First, who would have thought two years ago that the most powerful nation on earth uh would do something uh uh with uh Bitcoin, stable coins, crypto uh allow uh technically technically allow its states uh to build up a reserve even though you cannot use tax uh taxpayer money and things like that. But uh this is of course pretty new. We had Bhutan, we had El Salvador and then bang we had the United States. So well I think that's a big step. Um the other aspect I would like to add here is that Trump is Trump loves Trump the US dollar and the United States. So uh I don't think this is my uh biggest uh bull uh sign. Uh also if you look at stable coins so it's very clear he's very open about it. Stable coins are here to create artificial treasury demand. That's fine, but that's not I don't like treasuries. I don't like treasury demand. Whatever you want, but I don't still don't like them. So, so, so that's so that's one thing. Trump is for Trump and the United States, and I think he does a good job for the United States. Um um and and also he will use anything uh uh um that is available to him to to make America great again, right? um on a uh um u a much more macro global level uh I think even though the price action is even though it's up is much less spectacular than uh the the the Bitcoin ETF uh um year 2024. uh I I still don't think that a lot of people understand how big of a success and also with another a new SEC boss that is a little bit more relaxed on how to actually implement such a Bitcoin ETF strategy. Um um um my notion is that this year without any explosive news yet that a lot of people say yeah but it's just there Ray Dalio. So, a lot of mega investors say it's an asset. I'm not I'm not sure if I I will invest in it, but it's there. It's not going away. It's not just for criminals. Even though people on LinkedIn keep keep repeating themselves over and over again. Come on. Uh but um but I think there's the whole the let's say I don't know how to call it because I'm not a native English speaker. Shadow adoption or something. uh I think it's becoming much more normal that you allocate some part of your portfolio if you believe in this whole hard asset thesis um scarce asset thesis things like that. So so my idea is that um uh it's it's it's just yeah some people do it some people don't but not always with the question why why why are you investing in Bitcoin? Uh uh so and I also think this will um result and this is what I'm hoping that even though I understand it but the people that that go to LinkedIn or social media and and try to educate uh other people uh for not seeing it that that also becomes a little bit less because I think that for me that's that's not necessarily a weakness but we don't I don't need to explain people that you should invest in Bitcoin. If you don't want to do it, you don't want to do it. Um uh so so it's it's becoming more mainstream now. Of course there are also some risk in there and who owns it and u strategy and things like that. But uh what what I'm seeing is just it's becoming a somewhat established assets asset which you can own if you have a philosophy that fits to that. But it's not that you have to be a radical investor or things like that to say okay I invest in Bitcoin. I also see that finally that Bitcoin is not crypto. So so crypto can also have its benefits. I don't know anything about it. U but the distinction between the two is becoming a little bit uh um better unless you come in the whole traditional area. Crypto is crypto and everything is the same. But these things are are not spectacular like what we saw yes last year. But for me it gives people a lot more comfort if I tell them we invest for 10% in Bitcoin and let me explain why they don't hang up uh the phone. They just they want to do they want to hear the story. So for me I think that is what is happening this year. Um it's it's it's yeah normal. I don't know normal but is becoming a an an an an um um established part of the investment universe. Let me put it like that. >> Yeah. Which is remarkable because 15 years ago was an experiment. It was a white paper 16 years ago and today it's over $2 trillion asset class. And to your point to your point um you know the ETFs have been remarkable. We don't I know we uh need to wrap up soon, but I think investors don't fully appreciate just how successful those products have been and how it reorients incentives in favor of Bitcoin because now the largest Wall Street firms are making a lot of money from Bitcoin products and regardless if they understand Bitcoin or they're aligned on bit Bitcoin philosophically, they don't care. They want to make money. they're in the the business of making money either for themselves as private owners of the business or for their shareholders and Bitcoin products are wildly successful. And then I agree with you too on the aspect of Trump um in his ad administration. I think people are almost underplaying the significance of that because his media company is now the sixth largest public company holding Bitcoin on the balance sheet. Now, you'd think that there may would be more discussions of this happening outside of these small uh communities or, you know, investment forums online on on LinkedIn or on Twitter. Yet, most people are totally ignoring it. And I think that is incredible because, you know, what has historically been a big headwind for Bitcoin, you mentioned two years ago, imagine, you couldn't imagine the United States having the strategy they do today. It's become a remarkable tailwind. So, I certainly agree with all of that. Um, and I think just to tie that into what you described earlier in this podcast. There's really no reason to think or believe that the the debt story, the global liquidity expanding is is going to stop, right? There's all the structural reasons to believe why it will continue. And really, at the end of the day, Bitcoin is just a way to protect yourself against that. Uh it doesn't mean that you think the world is ending. It doesn't, you know, you don't need to have these crazy uh thoughts about what the future will look like. You just need to recognize that the bonds are are are not working for me, right? They're paying me income, but they're they're making me poor. Uh so you need things like gold. You need things like Bitcoin and quality equities in the portfolio to actually protect purchasing power. So I think we're starting to finally get to that point of institutional recognition. Uh but it's still quite early, right? Like most people haven't most people don't have an allocation or if they do it's like a half a percent or 1%. >> Yeah. Now I I don't and that's what I like. I I don't want it to go too fast because I'm running a fund. Uh and second uh I don't want to because let's say Bitcoin is a million dollars tomorrow. Then you have a discussion where does it end? Right? So now I have this whole rebalancing chart showing the amount of debt uh and money in the world relative to the amount of uh gold and bitcoin in the world which is very unbalanced. I like that and it has to balance out. Um yeah, I I think uh uh on what you said um also doing the podcast um what I want I want people to understand or or find out for themselves is um everybody at some point want to manage is risk if it's what it's job or whatever so it's also with money so I think once people broadly understand that having some gold having some bitcoin having some stocks and perhaps a little bit of bones I won't but uh is is a um way of diversifying your wealth and trying to using whatever you are seeing out there to preserve that to make sure that something like inflation does not eat up all of your wealth if inflation pops up again. So you know from gold most likely will protect you Bitcoin most likely as well. So the so the the sensitivity of uh um Bitcoin to uh inflation is it's it's it's a short data set. But I think that is the main message that people have to figure out for themselves. Why would you put all your eggs in one basket? The same holds. This is like the most first cliche ever in investing. So think about um diversifying across different kinds of value. I think that that would be my suggestion and I think this is going to be uh the the big trend uh for the next 10 years also because of this um the millennials uh uh uh um earning a lot of money and uh and the the great wealth transfer and all these things. So so all these things come together um and then we have a different discussion about dollars or euros or whatever. Well, Yurun, before we wrap this podcast today, I do want to give you a couple minutes to discuss what you said was your favorite topic before we hit record here. >> Yes. The the actual >> Yeah, the trade deal. >> So, I'll pull this up real quick. We have uh the United States and European Union reach massive trade deal. Do you can you can you catch us up on what the trade deal what happened with the trade deal and then we can also shift over to your thoughts as well but if you could first just recap. >> Yeah. So of course you know that uh the time was ticking. I think for the EU and a lot of other countries it was August 1st. Then Japan made a deal. Um and what happened now is that uh our not non-chosen leader um has negotiated a deal meaning that uh we will buy $750 billion in natural gas um because uh we closed down our nuclear plants and um the Netherlands has one of the biggest gas fields uh in the world and in Europe definitely we closed that. uh so we now have to buy it first from Russia then from Qatar and now from the United States obviously as at at the premium uh and we also have to invest 600 billion uh directly in the US and then still we get 15% tariffs so um yeah you know that's a good deal uh that uh you guys uh on that side of the Atlantic made um I'm not um so fond of and two uh there's going to be but this is just One and a half week after the lion Ursula asked for a budget rise uh from 1200 billion euros to 2,000 so centralized and then we have all these different countries have their own budget. Um now we we talked about that a lot. So now we have this 40% increase and then she hands over 1,500 billion or whatever uh to the United States. So I did not vote for that. Um I'm not really happy about that. And my question is and was who gets to decide where billions are going? How does this work in Europe? Can we So um um and um I put that what what you showed on uh X and LinkedIn and LinkedIn is respectfully and it's it's it's not that crazy as on X, but still a lot of people on both platforms uh went pretty crazy on on that uh uh uh post. Um and most of the comments were not that positive. So I I I touched some some some some nerve there. Uh but uh yeah this is of course um very difficult to understand and my question as mentioned is how do how do these things work? Um uh why should we pay all of this uh uh money and buy stuff uh from uh uh why why did we not um uh uh go together with China, can Canada uh Japan and then uh try to figure out something else? But apparently that was not possible. So uh yeah, great great deal. Great deal. >> Well, I guess yeah, United States got the the better end of that deal. I will say though I I share your frustration in general with unaccountability of governments and using our money to really do you know who knows what with that's a big issue here in the United States as well. So I certainly share that frustration and >> you know that's why uh personally I'm I'm all in on Bitcoin because uh I just think they're going to continue to throw away money. they're just, you know, they're going to dump it wherever they'd like to. And um unfortunately, there's really not too much we can do short of uh buying Bitcoin. And um you know, there are other things that could be done, but I will not say uh publicly on this podcast. >> Yeah, I think the the the the point of accountability that was also my main message. Okay. Can someone explain to me I asked the prime minister of the Netherlands, he also put out a tweet what a great deal this was. Can you please answer my question? How does this work? I'm just asking. Uh, so I'm not against Europe or something, but I have questions. How money is spent and who will pay it? Decent question, right? No answer. >> Seems fair. Seems fair. Seems like a fair question. >> Yeah. Yeah. Yeah. I think so. Yeah. Yeah. >> Well, Yurun, thank you for the generosity with your time. I hope you have a great family trip. Thanks for getting on the show with us before you leave for vacation. If anyone wants to get in touch, where's the best place for them to find you? Uh the the fund website is uh Blockland. So my last name f.com blocklandf fun.com and if you go to X uh JS JS uh Blockland uh you cannot miss it. Uh and I think from there you can get in in touch download the presentation on the phone ask questions wherever you want. >> Well thank you Yurun really pleasure to have you back on and thanks again for your time. >> Thank you sir. >> Okay you too. 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