David Dziekanski, CEO, Quantify Funds breaks down the ‘debasement trade’ and explains why Bitcoin and gold could outperform as the dollar weakens.
Transcript:
Caroline Woods: I just want to make sure my wires aren’t showing here. OK here we go. Joining me now, David Dziekanski, CEO and CIO of Quantify Funds. David, great to have you. Thanks so much for joining me.
David Dziekanski: Thank you for having me.
Caroline Woods: So we’re talking about diversifying with Bitcoin and gold. But before we get to both of those things. Let’s talk about the debasement trade because there’s a lot of talk about it right now. Break it down for us. What do we need to know about the debasement trade?
David Dziekanski: Debasement trade is really the rationalization or understanding that our debt and our deficits are at such a high level that we really have no way to get our fiscal house in order. The only hope is really to grow our way out of it. And that’s going to come with some level of baseline inflation, much higher than what we’ve been historically used to. I think everyone was waiting for inflation to finally ticked down to the 2% level. I think we’re going to exist in a world with just a higher steady state of inflation, especially with how much our deficits are rising on a regular basis. And this isn’t booming times. I think what people are most scared about is, well, what is the response and the reaction if things go poorly in the market, right. Our only playbook is to really continue to print more and to give out money to individuals in the economy. We’re talking about UBI with AI taking people’s jobs, and all this does not really settle our finances from a government perspective. And so looking for assets that hold scarcity value, both Bitcoin and gold mine at less than 2% a year. Bitcoin mine’s at about 0.86% gold at about 1.75% And the pace at which we will continue to print debt and money is going to far surpass that for the foreseeable future. And there’s really no turning back. The us is almost acting and looking more like an emerging market economy than a developed leader in the world, at least from our fiscal perspective.
Caroline Woods: OK so the expectation is the dollar will continue to weaken and inflation will be higher for longer. What does that actually mean for stocks? Because we know they’re at record highs or just off record highs right now.
David Dziekanski: Well it really depends if it’s coming with productivity growth. So that’s like the billion dollar question. The AI market is all of this CapEx spending going to really result in bottom line EBITDA for companies. We know it might come at the expense of some jobs, but is it going to create that profit. So hopefully from a fiscal perspective, we can grow our way out of the deficits. But that still doesn’t change the equation of we’re going to be printing and issuing massive amounts of bonds, and currencies. And there’s only so much Bitcoin and gold that can be mined.
Caroline Woods: So would you say to add Bitcoin and gold to your portfolio in place of stocks or in addition to?
David Dziekanski: That’s a good question. So Bitcoin obviously is going to have more of a volatility profile of equity and gold more like bonds. We think that the entire concept of a 60/40 benchmark is being rethought right now. The 40 for most allocators has been their safety assets, and bond really hasn’t provided much safety at all. So we definitely see gold coming out of that allocation. Bitcoin definitely has higher volatility. So you can bucket it either in an alternative slice slice or in an equity slice. The beauty of stacking these assets on top of each other as our product does, offering 200% exposure to the twos. You don’t. It’s really addition without subtraction. You don’t necessarily have to make as much room in your portfolio. So especially gold where gold has gone up a lot. And people, especially younger, more aggressive allocators may have concerns that, well, it might be a good asset, but it might underperform equities. So adding it might actually detract from my returns. This is a way to squeeze an asset like gold in your portfolio without fully retracting your equity allocation to make room for it.
Caroline Woods: OK, so you mentioned your ETF stack. It’s 100% gold, 100% Bitcoin ticker symbol BTG. Dig into that a bit more. Why invest in that versus investing in gold or Bitcoin separately?
David Dziekanski: Yeah you can invest in both individually. And if you aren’t a growth or an aggressive growth allocator, you probably don’t need much leverage on your portfolio. But the best institutions in the world use some form of leverage. They don’t use it to leverage the same thing on top of each other.
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