Ney Torres: Welcome to the show everybody Today, I have the honor to talk to Mike Maloney
Hi Mike It's been a while 10 years Mike Maloney: Yeah, it has been awhile You were such a gracious host when I was down there You brought me down to speak to an audience with Blair Singer that was back when I was with the Rich Dad team and it was great
Thank you so much Ney Torres: Yeah If you ever want to come again, please be my guest and have you gone through the Galapagos yet? Mike Maloney: To what? Ney Torres: Galapagos Islands Mike Maloney: Oh, no, I haven't I can talk about them when I was there last time to do that
Ney Torres: Today, I wanted to talk to you because, well, I've been studying with you silver and gold as an investment and the thesis is very interesting Basically, they store value because our currency is printed into oblivion basically That's how the system works That's how it's designed to be So gold, there's a limited amount of gold
There's a limited about amount of silver Makes sense Right? But today I wanted to talk to you because I'd been hitting my head against the wall for a year or two since you started talking about Bitcoin As volume investers we do not like Bitcoin We kind of hate it
It's called rat poison square but then I started studying it and more and more, and quite frankly, I've changed my mind So I wanted you to please explain us why you're obviously an analytic guy You're not a speculator Why Bitcoin? Mike Maloney: Well, Bitcoin is one of actually thousands of cryptocurrencies or digital assets that you can buy and Bitcoin is the original one that a guy named Satoshi Nakamoto designed In fact, if you want to understand cryptocurrencies, the very best way you can do that is an episode of Hidden Secrets of Money that I made a couple of years ago
It's episode eight of Hidden Secrets of Money, and you'll understand what blockchain technology is and then there's some new technologies we showed Hash Graph in there which is gaining popularity Bitcoin itself is because it's the first, it's not necessarily the most well-designed but these digital assets have the power to either free mankind or enslave mankind And we're getting to an inflection point right now there is the federal reserve, I'm going to look at my computer screen here because there's a story that the federal reserve is exploring right now blockchain technology to be fed direct money transfers are coming Brainard I'm sorry, Brainard is one of the fed governors and says they're collaborating with MIT on a hypothetical digital currency
Now, the problem with that is if we don't start using the free market versions of these currencies and there is this huge like competition of all these different cryptocurrencies, but it's been good because this competition has caused some amazing things to happen in that space with the usefulness of these things Bitcoin is sort of like digital goal You're going to put some value in there when you invest your cash into Bitcoin and hope that it grows others just like Cash, Graph and ELS Those are the two major ones that I'm invested in they can do things like secure emails, make micro payments You visit a website and decide to pay all of the websites that you're visiting
1-100th of a penny, if you want and it's efficient at doing that I've got a phone wallet and if you have a phone wallet for hash graph, for instance, right now I can transfer funds from me in Puerto Rico to you in Ecuador in a quarter of a second I could transfer you a penny or a million bucks Doesn't matter, quarter of a second, it's in your wallet It's highly, highly secure
And if it's in my phone, it takes either a face ID or my thumb print to identify So it's far less likely to get hacked and then there's, you can hold it offline too And the thing is it's there's no entity holding this It's not like a bank where there's a single point of potential failure You have computers running all over the world that are reaching consensus and all agreeing
And you just have a code that gives you title basically to however many of these Bitcoins or EOS or a Hash graph that you have H bars that you've purchased or been paid and nobody can actually hack Bitcoin you've heard people will say, "Oh, Bitcoin has been hacked" No, people put their Bitcoins on an exchange so that you can trade them for other cryptocurrencies or trade them into US dollars and put it back in your bank And the exchanges have been hacked but I don't know of any cryptocurrency itself that has happened Ney Torres: So how do you hold your Bitcoins? You don't hold it in a wallet or an exchange Sorry
Mike Maloney: Well, we're getting an echo Okay, I've got some that are in a there's something called a Trezor and there's something called a Nano Ledger and I have both And so I've got some in each one of those and then you can just write the number down on a piece of paper, your private key it's called So it's like you're with these current digital assets, cryptocurrencies, and so on you've got a public key and a private key, and you can put your public key on a billboard Nobody can take your funds
They can only send funds to you With your private key, you have the ability to withdraw So if you've got your public and private key and you write them on a piece of paper, you don't have to have them in your phone or in the Trezor and nano leisure ledger are sort of like a USB stick that you plug into your computer You can put your ass in that thing, unplug it, stick it in a safe Nobody knows that you've got it
It's interesting You know, when you travel around with your phone in your pocket or one of these nano ledgers you you can fly around with your net worth Basically your, all of your assets in your pocket Ney Torres: Which takes me to my next point What if, and I think I have a conclusion on this, but I would like to know your thoughts
What if the government comes and says we don't like this competition People are just all these power is going away from us now with is legal What do you think will happen? Mike Maloney: Well, that's another thing people should watch my Episode Eight of Hidden Secret of Money but there is a possibility that governments would try to clamp down on it However, there's no possible way that they can like destroy the Bitcoin network or the other networks and there are several that are now government compliant So I think what you would see is that if government wanted to ban them, they would try to choke off the points where you can convert these assets into us dollars or into whatever currency that they're trying if China is trying to ban them and so on, but to try and keep people from being able to send like I said, I can send you some hash graph right now in a quarter of a second and the bandwidth is far greater than the fees a MasterCard bandwidth
It can handle more transactions and it would be almost impossible or pretty much impossible for governments to try to stamp out Bitcoin and many of the other units Then there's ones that are trying to become compliant and work within government regulation Ney Torres: So just as a reminder, gold used to be illegal, right? Mike Maloney: Yeah Gold was made illegal in 1933 Roosevelt banned private ownership of gold for Americans and then in 1934, people call it changing the price of gold
We were on an international gold standard then You can't change the price of gold All you can do is unpeg your currency from the gold standard and allow it to float and the exchange rates with the other countries will change And so it was basically the dollar de-valuing from being worth one 20th of an ounce of gold to only being worth one 35th of announced but that was 1934 So from 1933, until the end of 1974 gold was illegal for Americans to own whether you were owning it within the United States or overseas, you could invest in mining stocks and so on, but you couldn't hold gold coins or bullion unless they were a collector coins or jewelry
Ney Torres: So we've seen that in the past too So Bitcoins or some other cryptocurrency becomes illegal Well, we kind of have an idea of what happened before what could happen in the future Obviously, different I got into the conclusion that Bitcoin holds its value because of the whole network of people behind it, right? And because it offers a different way of not a centralized way to hold assets or value, you can exchange your dollars for Bitcoins but this is not a government controlling it
I think that's what it gives its value, right? Mike Maloney: Yeah Yeah The government can't expand the Bitcoin currency supply It's limited to 21 million Bitcoins forever And a whole bunch of the Bitcoins have been lost
Satoshi Nakamoto, the inventor, had a lot of them it's speculated that he may be dead, but none of his Bitcoins have ever entered circulation It looks like they're gone so and then there's another guy in my sector precious metals sector and people were sending him Bitcoins and he had some Bitcoins and then he lost his key So he can never recover them unless he finds his key and he didn't create a recovery seed You can create a seed where you've got a series of words for recovering some of the cryptocurrencies but basically, this is a time right now, the global economy is really in a bad situation and world central banks are answering this problem with currency creation and that's the only thing they know how to do When your only tool is a hammer, everything looks like a nail
And so they're going to be doing massive currency creation to try and beat this thing to try and beat all of the unemployment, the shrinkage of global GDP and it's really not going to work but right now is the time to own things that are real To own real estate, I believe gold and silver is going to be the sure thing That's the one that is going to have massive gains in absolute purchasing power and has very little downside risk I do believe that crypto assets, some of them are going to explode I think that a couple of the most undervalued are EOS and hash graph
EOS currently does the majority of all blockchain processing on the internet, but it's market capitalization compared to Bitcoin is done at like just a one or 2% so the processing power there's many, many, many times that have Bitcoin but what does give it? Its value is the Bitcoin network, the Bitcoin network of the millions of computers that are processing instead of having a bank or one central point where you've got a deposit, you've got these millions of computers, all agreeing and they're all trying to solve a problem every 10 minutes and they're actually taking trillions of guesses per second on what the answer might be to try and solve this problem And then the one that wins some Bitcoins and and gets to update the network and all of the other computers then agree that this is the new blockchain that then it gets permanently recorded But some of these cryptocurrencies like I said, they can make the whole internet if more secure, fairer place They can limit all of these scams that go on, they can stop junk email They can a secure email, secure websites
They can serve website they can run video games, they can run social media platforms Bitcoin can't do all of those things, but things like EOS and hash graph can Ney Torres: Interesting What's your position size in gold, silver and Bitcoin? Mike Maloney: I'm not going to tell you the size, but my position impression perhaps is more than some of my cryptos have caught up So they used to be just 10% of my portfolio and now they're probably 25 or 30%
So eventually I'm going to be converting some of those into precious metals because precious metals they've been around for 5,000 years, they have stored wealth They're the only thing that has proven to be money By the way for all of your listeners, there is no nation on the planet that uses money The stuff in your wallet is not money it's currency It's FIAT national currencies
Currencies are designed to leak value They have to go down in purchasing power over long periods of time, and that's known as inflation and it's part of their very design Currencies have to be a unit of account, a medium of exchange They've gotta be portable, durable, fungible, which means they're interchangeable If I loan you a $20 bill, you can pay me back a 10, a five and five ones and I don't care
That's fungibility They should be convenient to use, but they should also money has to be all of those things plus a store of value Currencies don't have to be a store of value And the proof is that right now, Venezuela is in a hyperinflation Zimbabwe is beginning another hyperinflation
Libya is in a hyperinflation Governments can print them currency to zero Ney Torres: Yeah, is true I lived through it in Equador We destroy our currency in the two thousands
It's very interesting And what whole value is people that actually made it out, and it felt just like right now by the way Another world is leaving what we felt when the currency was being destroyed It's the hard stuff, hard stuff that's what makes it and I know you're planning and is before over a decade is not to call it gold and silver forever It's at some point it's changed it for real estate
Mike Maloney: Yeah You know when I developed something called Wealth Cycles years ago, and I saw a chart of the Dow-Gold ratio, the Dow Jones industrial average being a proxy for the value of the stock market And it went back more than a hundred years And what you saw was that the price of the stock market measured in how many ounces of gold that it costs If you divide one into the other, you're eliminating the currency
You're now measuring the Dow's price in ounces of gold And you can do the same thing with bushels of wheat or tons of iron or barrels of oil or what fraction of a single family median price home that it takes to buy the Dow And what you see is that it goes along in this range and the bubbles got bigger and bigger But basically it really wasn't going anywhere if the bubbles are bigger than when it reverts back to the mean it overshoots to the opposite side Bigger
And when I saw that, I sort of imagined in my head and nobody else had really done this If you take that same graph and you flip it upside down, now you're measuring gold in the percentage of shares of the Dow that is required to buy one ounce of gold And you put these two things together and you see that nothing goes up Everything goes in this valuation channel from overvalued or undervalued overvalued to under and the trick is to pick the thing that's undervalued and sell it So I'm sorry, you ride the thing that's getting overvalued, sell it and buy the thing that's undervalued
And it's just like taking that next wave and pasting it onto the end of the last wave And you're escaping this valuation channel which is to me, the only road to true wealth is to escape that valuation channel and not ride it forever So if you're invested in just one asset class forever to me, it's not a road to true wealth now things that produce income though like real estate, they're a little bit of a different story because you have to add that income to it But it's still not good to ride the value of real estate down If your real estate investments are going to fall by half or three quarters
Like for instance, if you had sold a single family median price home in the US in 1971, when gold became free trading, and then you bought silver Eight and a half years later, you would have been able to buy 19 homes Just like the one that you sold 19 This is true gains in wealth Then if you rent out those homes, you've got some serious cashflow
Ney Torres: Very good Thank you very much, sir I think it's very clear I think that will be all for today And where can people find you? Where can people learn more about this? Mike Maloney: Okay
If you go to goldsilvercom, that's my website And download my book Guide to Investing Gold and Silver, it's free The book has a about 20 years per cent of it is a very entertaining history of money and currencie There's a 20% that's some very simple economics
Now, this was written just before the global financial crisis of 2008, and then I updated it in 2015 But even today, it's still the best selling book on the subject but it covers things with the history of money, simple economics, current state of the global economy and then some potential outcomes And the last 20% is a guide to investing in gold and silver So you're getting a very well rounded education on economics basically So go to my website, download a free copy it's free or you can buy it on Amazon if you want to pay for it
That's fine and otherwise I've got a series of YouTube videos and I've got a very popular channel So you can just do an internet search for Mike Maloney or Hidden Secrets of Money I would suggest my hidden secrets of money videos, one of them has eight and a half million views roughly All of them are over a million views at this point and it's a great place to an education on economics, monetary history, and precious metals and episode eight, if you're interested in the cryptocurrencies Ney Torres: To all the people that want to understand economy, I send them to your channel, Hidden Secrets of Money
Because it's explained so well, it's such a complex system, but you made such a marvelous job making it easy and everybody, please listen and go there now, write it down You have to see it Mike Maloney: Yeah That's due to my Producer-director Dan Roebuck And he has a two full time animators working for him
So we do this to a level of production That's more like public broadcasting or the history channel I mean, it's not your average YouTube video These are done to a very high level and fact episodes' nine and 10, I can connect and it's actually putting those on the big screen and getting a bowl of popcorn Ney Torres: Yup
Exactly Hope to see it in Netflix sometime Mike Maloney: Well, we're trying Ney Torres: I'll see you in the next occasion Thanks
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