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PODCAST: Josh Brown on Why Bitcoin Is Like the 1800s Railroad Boom




    PODCAST: Josh Brown on Why Bitcoin Is Like the 1800s Railroad Boom

    “In the 1800s we had a bubble in railroads, and almost every one of them went bankrupt,” mentioned “Downtown” Josh Brown, CEO of Ritholtz Wealth Management. “But what was left behind in the wake of that financial wreckage were the tracks, and the trains, and the stations, and the expertise to build more.”

    That’s the analogy Brown sees with the bitcoin bubble of 2017, as defined in a latest episode of Bitcoin Macro, a pop-up podcast sequence that includes audio system from CoinDesk’s upcoming Invest: NYC convention on Tuesday, Nov. 12.

    “Eventually the technology [railroads] found a way to be profitable, useful, and became woven into the fabric of our society,” Brown mentioned. “So it’s possible that the crypto investments people made in 2017 were stupid, but that they had the right idea.”

    The final six months have seen a rising dialogue between the bitcoin business and leaders in world finance. No longer written off as some ignorable area of interest, more and more individuals are asking: Is bitcoin a macro asset? Is it a safe-haven asset? How will it carry out within the subsequent recession?

    Brown is an everyday contributor to CNBC. In this episode of Bitcoin Macro, CoinDesk’s head of technique, Nolan Bauerle, talks with Brown about:

    • Why bitcoin looks like a protest asset however doesn’t see large quantities of capital flowing into it from turbulent areas.
    • Why U.S. {dollars} and property like Manhattan actual property are nonetheless the highest choices for transferring wealth out of nations.
    • Why it’s unimaginable to know the way bitcoin will react in a recession given the distinctive set of circumstances surrounding the market’s previous 11 years.
    • Why the bitcoin and crypto areas have veered forwards and backwards between overly optimistic and overly pessimistic.
    • Why true expertise disruptions are likely to occur lengthy after their earliest promoters have left the stage.
    • Why the affect of bitcoin could also be one thing very totally different than the macro, non-sovereign cash narrative in favor at this time.

    Listen to the podcast right here or learn the entire transcript beneath.

    Nolan Bauerle: (00:09)

    Welcome to Bitcoin macro, a Pop-up podcast produced as a part of the CoinDesk Invest New York convention in November. I’m your host, Nolan Bauerly. Both the podcast and the occasion discover the intersection of bitcoin and the worldwide macroeconomy with views from among the main thinkers in finance, crypto and past.

    Nolan Bauerle: (00:34)

    Welcome to the most recent version of our pop-up podcast round bitcoin. This podcast, particularly, is designed to make clear among the content material that you simply’re going to listen to about at Consensus: Invest on November 12th, right here in New York City. Today now we have a veteran speaker of our sequence and a crossover star, Josh Brown, who definitely is understood for his position in mainstream monetary information, an everyday on CNBC, numerous different networks. Josh Brown has been with us at Invest because it launched in 2017. He gave terrific recommendation to the unique attendees of that convention and was our closing keynote fireplace chat with Howard Lindzon, his good good friend.

    Nolan Bauerle: (01:23)

    Last yr he got here again to let the viewers know what asset managers are actually involved about in relation to cryptocurrencies typically. And this yr he’s going to contain himself as our grasp of ceremonies, and we’ll introduce all of our nice panelists, and we’re completely happy to have him. So crossover star, I believe, is an effective option to describe you. Lots of people know you over crypto, however you’re definitely well-known in your mainstream monetary information.

    Josh Brown: (01:48)

    Hi Nolan, it’s nice to be with you.

    Nolan Bauerle: (01:50)

    Great to have you ever aboard. So we’re going to leap proper in. This podcast is absolutely all about bitcoin. And the primary query is about bitcoin behaving as a macro asset. So you’ve seen lots of what’s happening on the planet at this time. You’re fairly plugged in. How do you see bitcoin becoming in right here? Is it an precise asset you can see as a option to hedge macroeconomic modifications? Or is it type of nonetheless within the wings ready to be constructed up and mature a bit of extra earlier than it’s actually within the main leagues of macro property?

    Josh Brown: (02:24)

    As I mentioned to you simply previous to recording, I see myself as extra of a scholar than a instructor on this realm, however I’m an apt pupil, and I attempt to concentrate to numerous opinions and, in fact, take a look at charts and worth motion. And I attempt my finest to know what’s taking place. To reply that query straight, I’d say I don’t consider that bitcoin behaves in any method like a macro asset. And the one motive I’m saying that’s as a result of now we have no proof that it’s correlated with another macro growth. In different phrases, I want I might say when … Think about gold. When individuals are nervous about inflation, and I’m not saying gold is a good inflation hedge, however when individuals are nervous about it, there are trades the place you’ll be able to see flows go into that asset class. It’s demonstrative.

    Josh Brown: (03:21)

    So you can say whether or not or not you assume gold is an inflation hedge, that different individuals do, and it acts that method. Think about utility shares. All yr lengthy, the story has been the federal reserve about to decrease charges, now they’re reducing charges. Maybe they’re going to decrease charges extra. And as that course of has occurred, you’ve seen cash stream into utility shares, that are prized for his or her excessive yields. So in case you’re not getting yields in bonds, what’s the subsequent smartest thing or the subsequent, subsequent smartest thing? It’s excessive yielding equities, and utilities are thought-about to be among the many most secure excessive yielding shares. So you can say that, that’s a macro asset. What can we are saying about bitcoin that’s even near being comparable? In the month of October, I believe it’s a world file of individuals all over the world concerned in numerous protests, whether or not we’re speaking about Santiago, or we’re speaking about what’s happening in Hong Kong. All over the world, there are thousands and thousands and thousands and thousands of individuals taking to the streets.

    Josh Brown: (04:20)

    Why isn’t bitcoin up 50% if in truth it’s a protest asset? Well, it isn’t, so I don’t know. If we’re nervous about disinflation and we are saying that possibly individuals, in the event that they’re afraid of their very own foreign money, there’ll be this large rush into bitcoin. Well, the place is that taking place? It isn’t. So I’d love to have the ability to reply within the affirmative and say, “Yes, bitcoin has now taken its place among the Pantheon of asset classes that people can use to express a macro view.” But it simply isn’t, there’s no proof for that. So my reply to you isn’t any it isn’t, however possibly that’ll change sooner or later.

    Nolan Bauerle: (04:57)

    Yeah. And that you simply’re specializing in the habits I believe is the essential half right here. Lots of people get caught up with what they need it to be they usually type of will fall into sort of a bubble, the place they see it behaving in ways in which possibly it isn’t really, given the details, and that you simply underlined right here that the habits of it, given all these situations is fairly clear. It seems like a speculative asset that individuals are excited by making some cash on, and definitely there must be a excessive danger tolerance to get publicity even to this present day.

    Josh Brown: (05:29)

    If we’re saying that bitcoin’s most blatant use case is the power to get out of a fiat foreign money and transfer cash out of a rustic, or … it’s received large competitors. US {dollars} are what individuals need everywhere in the world. In Asia, possibly they need the yen once they concern for the protection of the foreign money, or the capital markets, or the financial system during which they reside. This is a reality, after which if we’re saying, “Well, people are going to use bitcoin when they want to get out of the denomination of whatever their country is”, or the jurisdiction. They wish to, I don’t wish to use the phrase cover cash, however they wish to actually transfer cash the place it might probably’t be touched. Well, actual property has been a a lot, far more outstanding method to try this. Look at Vancouver, half the buildings are Chinese cash.

    Josh Brown: (06:21)

    Look on the towers they’re placing up in New York. They simply put the capstone, I believe it’s referred to as, or no matter. They simply put the cap on one thing referred to as Central Park tower. I believe it’s 1400 ft excessive. It’s the tallest residential constructing within the Western hemisphere. It’s solely going to have 70 one thing residences. So who’s shopping for these residences? Well, it’s not like a man who’s a lawyer in New York City. These are $7, $10, $20, $50 million residences. You might take into consideration these as protected deposit packing containers for Russians, Indians, Chinese, individuals which might be attempting to have property outdoors of the nation. Nobody’s even going to reside in half these residences. And that’s only one tower of 5 that I might reference off the highest of my head.

    Nolan Bauerle: (07:10)

    The one they constructed on Lexington, the skinnier one which went up earlier, I can’t bear in mind the identify proper now, however you’ll be able to see the home windows are empty. The lights are off each single night time.

    Josh Brown: (07:19)

    Of course. You wish to snort? When they constructed 437 Park, which I believe was the most important till this new one, the tallest, they did one thing for New York City referred to as a visitors examine. So if you wish to construct one thing of dimension, it’s a must to spend thousands and thousands of {dollars} and a few years learning what the affect might be on native visitors. And the joke is there ain’t going to be no fucking visitors, as a result of nobody’s going to reside there. So that’s the method you’re seeing overseas nationals transfer cash out of their foreign money, or out of their authorities’s jurisdiction and into what they contemplate to be a safer place. And you’re simply not seeing these greenback flows into bitcoin to the identical extent. So it’s arduous to make the case that functionally that’s what’s actually taking place there.

    Nolan Bauerle: (08:05)

    And you talked about one thing that I hadn’t actually heard earlier than. We name it a safe-haven asset, however you referred to as it a protest asset as effectively. And I believe that’s a extremely fascinating label, and that its habits actually hasn’t mimicked what you’d count on from a protest asset. Now I noticed it traded at a premium when the Hong Kong protests started, it traded a few $100 premium. And that was often because individuals had been nervous about utilizing their Oyster playing cards, their Metro playing cards to get dwelling again to China in the event that they’re going to the mainland, as a result of they had been going to get tracked, and mainly simply actually nervous about native {dollars} being tracked. But we haven’t actually seen that premium stick, and we haven’t actually seen that type of stream in direction of utilizing this so that you simply’re not surveyed and also you’re not spied on in order that they know the place your easy consumption {dollars} had gone.

    Josh Brown: (08:52)

    Somebody was telling me about Venezuela, and I’m conscious of what’s happening within the financial system there, and it’s been happening for years. And hyperinflation, the collapse of establishments, individuals ravenous. It’s a horrible, horrible scenario. Now, in case you had been to inform me 30% of all Venezuelans have moved their cash from the native foreign money into bitcoin, then I’d shut my mouth and I’d say, “Okay, there’s something substantial here.” But I don’t assume that’s the case, do you?

    Nolan Bauerle: (09:24)

    No, I imply, and we’ve seen Turkey, for instance, has seen lots of customers, let’s say purchaser [inaudible 00:09:32].

    Josh Brown: (09:32)

    Yeah. Great instance. Another inflationary scenario the place individuals for political causes need property out of that nation, and the native foreign money and financial system is collapsing.

    Nolan Bauerle: (09:44)

    Yeah. But, such as you’re saying, we simply haven’t seen that sort of use.

    Josh Brown: (09:48)

    Yeah. Where is it, the place is it? When does it begin? So I’m not saying it might probably’t, I’m simply saying I’m not seeing it.

    Nolan Bauerle: (09:54)

    Now transferring onto a recession. A whole lot of rumors of recessions, we’re nonetheless doing fairly effectively right here within the United States, nevertheless it’s definitely crept in, in different jurisdictions. So we’ve seen this type of low-cost cash all over the world for a very long time, and it seems like even from excessive danger tolerance from the VC facet of issues, as a result of cash, it’s simply out there and it seems like each concept out there may be funded and the chance tolerance has grown to a sure extent right here. Now, if that modifications, if a recession does trigger some sort of liquidity crunch, or some lack of ability to get entry to this low-cost cash once more, how do you assume bitcoin behaves?

    Josh Brown: (10:34)

    I suppose now we have no … within the United States, now we have no prior historical past of it, so we’ll say we’ve been in enlargement for 11 years, so it’s the longest enlargement ever. So I don’t know the reply.

    Nolan Bauerle: (10:49)

    Yeah, effectively they’re-

    Josh Brown: (10:50)

    We’ll discover out.

    Nolan Bauerle: (10:53)

    And my closing query for you, and actually that is type of tapping in your publicity to mainstream media, mainstream monetary world. Bitcoin actually popped in everybody’s consciousness in 2017 after I met you at that nice dinner that we had down close to Chinatown. And you wrote a wonderful weblog submit. I believed it was … I actually realized what a implausible author you had been.

    Josh Brown: (11:16)

    Ah, thanks.

    Nolan Bauerle: (11:17)

    I believe it was one thing into [inaudible 00:11:18], and it was nice.

    Josh Brown: (11:19)

    Yeah. Yeah.

    Nolan Bauerle: (11:21)

    So right here it’s. It popped into world consciousness in 2017. Everyone began speaking about it, and it’s already mutated a number of occasions in individuals’s minds since then. In the final six months although, what have you ever seen that’s modified, or if something, is it simply the identical previous story?

    Josh Brown: (11:35)

    So after I was a keynote speaker within the closing panel of Consensus: Invest 2017 the primary yr, the viewers was crammed with younger individuals, primarily, largely dudes, they usually had made some huge cash. I believe the value of bitcoin at the moment was $15,00Zero or $16,000, and my message to that viewers at the moment was, “calm down.” It’s okay to really feel such as you’re lacking out. You don’t need to do one thing simply because everybody else is doing it they usually appear to be getting wealthy. And in fact, it will solely take a few weeks for that to appear like actually good recommendation. But that’s all the time good recommendation. Maybe now we’re within the polar reverse scenario, the place as a substitute of concern of lacking out, there’s this simply unbelievable quantity of pessimism that all the things that folks thought could be true about digital currencies, and cryptography, and blockchain is now like a joke within the mainstream monetary media, or no less than it’s being derided every day.

    Josh Brown: (12:47)

    And so possibly now issues have gotten too pessimistic. And the one different instance of this type of factor that I might consider for my very own profession and expertise, I bear in mind my adolescence within the business we had been doing the dot com bubble, and all the things got here aside comparatively shortly. It solely took from March of 2000 to, let’s say, the top of 2001 for individuals to only be utterly worn out, not simply in monetary phrases, though they had been, however emotionally, and mentally. And simply no person wished to listen to something about expertise ever once more. And within the ashes of that have, Google was born. In the ashes of that have very quietly with little or no fanfare Steve jobs rejoined Apple because the CEO. The seeds for the expertise growth that we’ve now been dwelling by means of over the past, let’s name it 12 years or 15 years, had been born within the ashes of that prior mania.

    Josh Brown: (13:52)

    So I believe statistically, spiritually, any method you wish to take a look at it, there was completely a bubble in something associated to crypto going into the top of the yr of 2017. I don’t assume anybody would deny that it was insane simply because the web mania, however the factor is the entire predictions that had been made in regards to the transformative energy of the web really ended up coming true. It simply took longer than what individuals anticipated, and the businesses concerned had been very totally different. If you consider the unique dot com bubble, we had been worshiping on the altar of fiber optic performs like JDS Uniphase and Nortel. And we had been shopping for up shares like AOL, and Excite, and Lycos and Yahoo. None of that are significantly related anymore. But all of the predictions, we’re going to purchase groceries on the web. It occurs. We’re going to purchase pet meals on the web, it occurred.

    Josh Brown: (14:51)

    Toys, books. We’re going to speak all day lengthy. All of these predictions got here true. It’s simply the investments weren’t proper. So if there’s a crypto future and there’s a blockchain future, it’s extremely potential that the early entrants, who got here alongside in 2015, ’16, ’17, ’18, aren’t going to be part of it. And lots of the investments which were made will transform zeros. But it doesn’t imply that the long run is written. So if I might possibly flip the script and this yr provide that, I do know it’s not that hopeful, nevertheless it’s considerably hopeful to the viewers. Then I’ll really feel as if I’ve mentioned one thing that’s considerably significant.

    Nolan Bauerle: (15:33)

    What you’re mainly saying is the world at this time is recognizable to the entrepreneurs and visionaries of 25 years in the past. They would acknowledge what we’re doing at this time because the factor they predicted, however as you mentioned, possibly coming at it from a unique angle, with totally different names, on a unique platform. The specifics are maybe totally different, however the total define of it’s just about consistent with what these people had envisioned.

    Josh Brown: (16:00)

    You know, this predates what I simply talked about. In the 1800s we had a bubble in railroads, and nearly each one in all them went bankrupt. But what was left behind within the wake of that monetary wreckage had been the tracks, and the trains, and the stations, and the experience to construct extra. And I imply now we have trains to this present day, and we had bullet trains. And what they’re constructing to attach … I used to be simply down in Orlando, and I noticed all of the amenities that they’ve constructed for the bullet prepare that’s going to take individuals from Miami to Orlando in 15 minutes.

    Nolan Bauerle: (16:37)


    Josh Brown: (16:37)

    But that system that they’re constructing is a descendant of cash that was misplaced to overambitious funding all the way in which again within the 1840s. So I do know individuals don’t have that a lot endurance to attend 160 years to see their goals come true, however I’m simply mentioning, after the railroad bubble, there have been most likely lots of people operating round saying, “You see, it’s all stupid.” No, it wasn’t all silly. And we had useful railroads from the civil battle on. So finally the expertise discovered a option to be worthwhile, helpful, and have become woven into the material of our society. So it’s potential that the crypto investments individuals made in 2017 had been silly, however that they’d the correct concept. And that within the wreckage of the bubble having burst, new corporations, new concepts, new entrepreneurs, new makes use of come about, and the entire thing rebuilds itself.

    Josh Brown: (17:34)

    And abruptly there are individuals with worthwhile investments. And simply as a Coda to that, I took the lengthy Island railroad into Manhattan at this time from lengthy Island. And in each automobile, there are commercial posters. And in a automobile I occurred to have been using in at this time had been posters for the Genesis crypto change. And I do know that’s Tyler and Cameron [Winklevoss] and I’d think about they spent a ton of cash on this, however everybody using that prepare automobile was surrounded by posters for this new financial change or brokerage or no matter you wish to name it. And most people this poster had been like, “What the hell does that mean?” But some individuals know. And I simply discover it fascinating that there have been nonetheless individuals keen to take a position, and promote, and market new merchandise. And so long as that continues, possibly there’s a future that’s extra within the close to time period than what I believe now for most of these applied sciences.

    Nolan Bauerle: (18:32)

    So such as you’re saying, the tracks had been laid to convey you from Miami to the happiest place on the planet in such a brief period of time. And maybe the tracks are nonetheless there to convey bitcoin to the moon and understand everybody’s-

    Josh Brown: (18:48)

    When moon.

    Nolan Bauerle: (18:48)

    When moon, when moon.

    Josh Brown: (18:49)

    Well, look, I believe we might separate what we expect the value of the factor does versus what we expect the utility might be. That’s the place I’ve been since December of 2018. We wrote a weblog submit mainly saying, I’m completed speculating on the value of bitcoin. I believe it’s a mania. However, I’m open-minded to the chance that blockchain will turn into a transformative expertise. The caveat is that it may be very unsexy. It would possibly present up within the earnings assertion of an organization that managed to save lots of a number of million {dollars}, by going from database to a blockchain. I don’t know that that suggests that the value of a digital coin will go up, however I’m attempting to remain open-minded.

    Nolan Bauerle: (19:34)

    It’s not the romance of pamphleteering across the French Revolution or the American Revolution that everybody was type of-

    Josh Brown: (19:42)

    No, proper, it might simply be company price financial savings. And once more, that may be a type of revolution. It simply received’t contain individuals waving flags and storming the boundaries.

    Nolan Bauerle: (19:54)

    Well, Josh, thanks in your time at this time.

    Josh Brown: (19:56)

    Did I convey all people down? I don’t wish to try this.

    Nolan Bauerle: (19:59)

    No, no. It was implausible and we’re trying ahead to listening to extra in simply over every week now. So thanks in your time and see you quickly.

    Josh Brown: (20:07)

    All proper, Nolan. Thank you.

    Nolan Bauerle: (20:08)

    Bye, Josh.

    Nolan Bauerle: (20:14)

    Enjoyed this episode? I’d prefer to personally invite you to return to Invest: New York in November. The occasion options not solely the speaker you simply heard, however an array of different wonderful thinkers. Visit and click on occasions, or just observe the hyperlink within the description. Thanks for listening, and see you in New York City.

    Josh Brown picture by way of CoinDesk archives

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