Can Bitcoin Hit 100K? | Kitco Interview

There's a lot of misinformation about the mining in Bitcoin. They are not going to buy Bitcoin until this ESG issue is resolved, period. Let me be very blunt about this: I would say right now less than one percent of global institutions and sovereign funds have anything to do with crypto in any way.

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All right, so Kevin, you are raising the need to know the provenance, if you will, of Bitcoins and advocating for clean coins for a while now. Certainly, an issue that's been taken up by Elon Musk. He's recently tweeted that he's having active discussions with Bitcoin miners regarding the sustainability of the digital coin. Why is the idea of a green coin, if you will, so important to Bitcoin's growth as an asset class? Because it matters to institutions.

The way you have to think about this: There's a lot of excitement within the crypto community, particularly around Bitcoin, that it's to the moon. You've heard that expression many times. It won't be long before it's a hundred thousand dollars a coin. None of that is going to happen unless the institutional market starts to buy this as an asset class. For all the hype and excitement and all the discussions that have been going on online and on social media, the truth is institutions haven't touched this yet. Not the real institutions, not the sovereign funds, not the pension plans; very, very few are involved in it. One of the major reasons, if not the reason, is that they all now have to be compliant to sustainability and ethics committees.

The way you have to look at that is, you know, let's say you're managing 50 billion dollars. You're a sovereign fund and you are concerned about long-term investments. That's the nature of what they do. So you concern yourselves about the issues that the people you're serving care about. One of those that has been coming and moving right up the hip parade is sustainability, ESG. You've seen it happen at the corporate level. There's a very famous letter that came out of Larry Fink of BlackRock just six months ago that really defined what it meant to be sustainable, climate change, and all of these things that people kind of ignored for a long time. But now at the institutional level, if you're sitting with a sustainability committee on top of the investment committee, you have to go through their filter first, and their filter has been very clouded by this debate around sustainability and coin mining.

You know, there are many miners, particularly in Asia and other foreign countries, that actually burn coal to make Bitcoin. Well, that's not okay anymore, and that's why this debate has come to the fore. But I say it's important, and it's a good thing because if we can resolve this, we can open up the floodgate, the log jam, if you would, of institutional money that wants to allocate to Bitcoin. So I, as a Bitcoin owner, want the institutional buyer to be my incremental buyer; that way, I can see price appreciation. We're going to be stuck in a rut here until we resolve this issue. I think it's very important to have an open forum about it and have a dialogue.

I took a lot of criticism when I raised this just a couple of months ago. Now, it's at the fore of everybody's discussions. Yeah, it is, and it's partly the reason that we've had so much volatility in Bitcoin lately. As I said, Elon Musk is saying he's not allowing Teslas to be purchased by Bitcoin because of those environmental concerns. Now seemingly addressing that issue—Michael Saylor, he tweeted after Elon Musk's tweet that they've been meeting with Bitcoin miners, and they now have this Bitcoin mining council which will promote sustainability.

So, Kevin, what impact will this mining council have? And in a way, is a mining council antithetical to the decentralized ideology of Bitcoin? Well, that is a very good question. You've really nailed the issue. You've got the original crypto community that is steadfast, holding to decentralization. They don't think they need a voice. They think that the overall aggregate of all the people that want to be in the crypto business or be owners of crypto coins and tokens and everything else, they don't need to form a lobby group.

At the same time while they're having that discussion, New York turns around a few weeks ago and puts a moratorium, or at least threatens one, for three years on any Bitcoin mining. They have one of the most interesting possibilities: lots of hydroelectricity that's not being used around Niagara Falls, etcetera. Because the industry has no voice, it has no lobby; it has no way to fight back when a single regulator, a single state, or a municipality basically bans Bitcoin or tries to keep capital away by threatening something like this. There's nowhere to go. All you have is a barragement of social media occurring, but no centralized voice or committee.

So I applaud anything that tries to aggregate the thought process. There are many different forms being proposed, and in fact, there's a really big Bitcoin conference here in Miami on June 4th and 5th, and this will be one of the topics that's discussed because the world is gathering here in Miami. We didn't know what the core issue would be, but certainly this is going to be one of the big ones: sustainability, ESG, institutional buying is all part of it. I think the pressure that Elon must have felt when he announced that he would take payment in Bitcoin—well, a lot of institutions that are his shareholders in Tesla that have provided him billions of dollars of market capitalization immediately jumped on him and said, I'm speculating when I say this, but I'm sure it happened: "Wait a second, where did that coin come from? How was it mined? How do you know it wasn't mined in a sustainable manner or one that wasn't sustainable at all?" I think that's the pressure that he felt to come out and say, "Wait a second, I have to rethink this, and I want to talk to miners."

Remember, there's only two and a half million coins left to be mined. That's it. So it depends on what happens to the next two and a half million versus all the coins that are out there already, and that's the dialogue the industry is having right now. But this issue is not going away; it is not going away. If we want to see price appreciation, whether it be on a green coin or a sustainable coin or the aggregate of already mined coins, we're going to need to solve for this because the incremental buyer, the institution, is where the next trillion dollars worth of interest is going to come from.

Well, I look forward to seeing how that gets resolved. I too will be at the Bitcoin conference in Miami looking forward to that. But Kevin, assuming the sustainability issue is somehow successfully addressed and we do get more institutional interest, what do you then see as potential existential threats to Bitcoin? Because it's a disrupter combined with DeFi, which we'll get into later, and governments, central banks, traditional institutions, they don't want to be disrupted. So is there anything that you see coming from that end that can derail crypto? Well, let's see Bitcoin specifically. Sure. Let's stick with Bitcoin and let's just look at the last 90 days, or even 60 days' worth of announcements.

The Chinese reiterated their concern about the currency, but didn't really change policy. They just rattled their chain again. Norway removed its tax credits to Bitcoin miners, making it unprofitable to mine there. One of the largest miners basically sold their assets there. That all happened in the last four weeks. Then New York, six weeks ago, dropped their bomb with their moratorium. All of a sudden, because the industry has no voice, and there's no one to cry out and say, "Look, there are some facts that are being ignored here," this is the problem. There’s a lot of misinformation about the mining of Bitcoin, but because there's no centralized voice, when that regulator in Norway or New York or any other jurisdiction comes out and says, "We're going to ban this because we think it's bad for the environment," there's no push back.

That's a huge mistake that Bitcoin miners have done to themselves, and they've got to fix that. So basically, when you think about why Bitcoin mining could be good for the environment, it's basically the profit motive. In order to mine profitably, you want the lowest cost of energy you can get. In many geographies in the world, that's sustainable solar and wind—certainly in West Texas, that's the case. You see a lot of interest in going there to tap into that unused resource because so much of that West Texas wind isn't being used by anybody; it's not even putting back into the grid. So why not monetize it in the form of Bitcoin, which is a good use of that unused power?

The same in Northern Alberta where you can get already flared-off gas that’s being flared off now and turn that into Bitcoin. These are all sustainable in the sense that they're creating value, and that's important; there's nothing wrong with that. Now, of course, there are miners all around the world that are burning coal. Nobody wants that anymore, which is why you have institutions saying, "You've got to show me the difference between a coin mined that way and one that's done sustainably, and I'll buy the sustainable mined coin even if I have to pay a premium."

That's the remarkable discussion that's going on. Because half the community says, "I want fungibility. I don't care where the coin was mined or how it was mined; it has to be the same value as one that was mined sustainably." I think we're going to go through a huge debate on that on the fourth and fifth, but that's all part of the important dialogue. My point is Bitcoin mining can be very good for the environment because it forces new innovation in the creation of energy.

Okay, point made, but let's disregard the whole environmental issue for now. Assuming it's resolved, I'm concerned about governments, central banks, traditional banking institutions not liking this usurper—something that now comes and takes away their monopoly from printing money. We have billionaire hedge fund manager Ray Dalio says he'd rather have Bitcoin than a bond, and if the crypto space does continue to attract investors' attention, government bonds are going to see significant outflows. Governments are going to lose control over their ability to raise money, and I don't think they're going to like that very much, Kevin. So does that lead to government intervention? Is that a concern for you at all?

Government intervention and the regulatory environment is always on the top of mind for me. I have so many investments in financial services companies that I really care that we never, in any situation, go follow the regulator. That is a very bad waste of energy in terms of doing that to yourself. So compliance is my number one cost in all of my financial services investments, and I've learned to live with that. I respect it, and I understand how valuable that is to be compliant versus not being compliant.

So when we think ahead of where crypto's going to go, let's think of two paths. The concern you have is talking about it, and I agree with you, as a currency, that it would somehow usurp the US dollar—the standard currency, the gold standard for the world, if you would—in terms of fiat currency. I don't think that's the long run for Bitcoin unless we're staying specifically in Bitcoin. The reason I own Bitcoin is it's an asset, like a property, like a home, like a piece of land, like a piece of art that is unique, like a watch that's one of a kind. To me, it's not a currency; it is not that efficient to use as a currency for a whole lot of reasons.

But as an asset, like an acre of land in a desirable geography, to me that's what it is. When I buy my coin, I have no intention of selling it. I am going for the long run to see if it appreciates more than other hard assets because it is a unique asset in that respect. So I'm not as worried about Bitcoin specifically actually being competitive with governments. I think they will come to the conclusion that it is an asset, a hard asset, a digital asset, and it's desirable for people that have a long-term view and want to allocate, in my case, three to five percent weighting in that asset just like I do real estate or just like I do gold.

There's no difference. I still have a five percent weighting in gold in bullion and in ETFs, and I look at Bitcoin the same way. So yes, you could be concerned, but it is such an inefficiency. If it's so inefficient as a currency, there's probably going to be something that works better. Now, whether that's tied to the chain or Ethereum ends up being that, or whether there's an actual US token—as we already have stable coins—there are many other solutions to this problem.

But Bitcoin's unique; it is what institutions want as a property, as an asset, and that's why I think it's going to remain that coveted. So if it does remain a coveted asset as a store of value, where do you think the price of Bitcoin can go in the next five years? I'm very bullish. How about I'll tell you why I'm bullish? It goes back to your original question; it's a full circle. You asked about sustainability and the interest of institutions. I talk to institutions every day—they are not going to buy Bitcoin until this ESG issue is resolved, period. There's no flexibility; they have no choice. They've already decided that they're going to stay cut within the covenants of their ESG committees.

I believe the industry hears them. You know, just two months ago when miners were trying to raise capital in public markets, it was very easy to do so. That is not the case today. It has really become much more difficult because every institution that's approached to fund a new mining operation, regardless of the geography, is asking the same questions about sustainability, about compliance, about ethics. We're going to have this period, this pause—the pause that refreshes, perhaps—while we work this out.

Some solutions being discussed, and indeed I'm funding some of these right now, is the idea of putting a wrapper on a coin that identifies it as a sustainably mined green coin. Now, there's a huge debate going on about that because it takes away the fungibility of a coin. The number one Bitcoin that was ever mined was probably not done in a sustainable way. But if this solves the problem for the next two and a half million coins—and think about this: there are many miners that have kept their original coins on their balance sheets since day one that have never sold them and simply lent them out to get fiat to pay their expenses.

Those coins were mined sustainably; they could also win that wrapper. I want to be one of the people investing in the technology that provides wrappings for my coins to prove that they were mined sustainably and that the institutions that I partner with to actually fund my mining operations and my expansion into more mining operations are doing so within the covenants of their ESG committees, and that includes sovereign funds. This dialogue is going on today, and there's at least two groups I know of. I'm involved in one of them that is actually funding the development of these green wrappers.

So look, I'm happy to have the debate with anybody, but it's a solution that really works. So what if you pay a small premium that offsets the carbon that you created making a coin? Particularly if you're doing it on a sustainable basis, you're not going to pay a lot for that, and yet you'll have what is so coveted by institutions: a green coin. So, Kevin, if the stars align and all of these issues are successfully addressed, what do you see as the target price for Bitcoin in, say, five years' time or even two years' time? I'm trying to get you to say your number for me here.

I think it will beat the equity indexes; that's what I think. Now, you know, in a long period of time—seven to eight percent for equity indexes—I think this asset class will outperform over the next 10 to 15 years. I invest for the long term. I have made my decision currently at a three percent weighting in Bitcoin. I've done that because I believe it will outperform the indices over the next 10 years. Now, the only reason you would do that is you're going to make a similar decision. I tell every institution that calls me about this, "Look, it's a binary decision. The first decision is, are you going to hold Bitcoin? Yes or no?"

The second decision, if it's yes, follow that decision tree. It goes to what weighting would you actually put in Bitcoin in today's dollar value? Most institutions have a five to ten percent weighting in gold, and they have for decades. Gold was not mined sustainably; it's one of the most polluted things you can do to the Earth, and yet they ignored those issues when they took the bullion out of the ground.

Now that bullion exists all around the world, and it's a coveted asset, no different than a digital asset in my view. But they've got a five percent weighting on average, so your decision is, "I’ll take a five percent weighting in Bitcoin, but I have a sustainability committee to answer to first, and I will only own coin that's mined in my own facility, or I'm a shareholder; I know it's done sustainably, or I will buy it with a wrapper." That's where I think we're going. If that happens that way and the institutional log jam opens up and that capital starts coming in, which, by the way, is in the trillions of dollars, I see Bitcoin outperforming the stock indices for a very long time. But I'm not betting the farm on it; I'm a three to five percent weighting. That's a rational decision for an investor like me.

And are you still maintaining that five percent in gold? Yes, I am. I am doing that because I don't know with certainty what's going to happen there. Now I get into all these debates, even this week, with the crypto community: why are you holding any gold at all? I'm holding gold because it's an asset class that has been called that since the Romans mined it. It has a very long history as an asset. One day after you and I are both dead, you'll say the same thing about Bitcoin. The point is, it's very nascent. It's not even two decades yet, and so we’ve got a long way to go. But I have become a believer after being a major skeptic for a long time. I've changed my mind because the facts have changed, and a lot of that has to do with the regulators in Switzerland, in France, in Germany, in Australia, in Canada, where they have opened up the spigots to allow this asset class to be owned by institutional and retail investors.

I want to quickly touch back on the gold point. Is this physical gold that you're still holding? Gold ETFs? Are there other precious metals that you diversify? Is it five percent just in gold? No, I'll disclose how I own it. I own two and a half percent weighting in bullion, which I pay for storage, and I own the GLD which allows me to balance the five percent every quarter. Now, the GLD also charges me fees, but it's a liquid asset that I can use to rebalance. Now I could, you know, I could change that weighting. So two and a half percent gold, two and a half percent GLD.

It's worked for me for decades, and I simply rebalance every 90 days to a five percent—buy into five or sell down to five, and it's been a pretty good asset for me over the last 20 years. All right, well Kevin, you also like the idea of green coin in another sense, if you will—coins that yield greenbacks. And to that end, I understand you're focusing on DeFi, decentralized finance. You tweeted that this is where the crypto puck is going. So can you break that down for us? Yes, I can. You know, there I am sitting on Bitcoin and asking myself, I don't get any yield from gold, and I certainly don't get anything from Bitcoin. I’ve got a pretty good team that does research and due diligence for me that works within my own operating company. One of the interns that I hired a few years ago is very, very advanced in his thought process on crypto, and he came to me and said, "Listen, I'd like to show you some opportunities. They're complicated, but we are going to take our crypto assets and loan them out into smart contracts, and I think I can get you between four and eight percent yield on them."

I said, "That's fantastic! Let's explore here!" I took different bets: "Here's half a million; let's start with that, show me how you do it." You know, I love to be taught something new. I'm an old dog that can learn new tricks. I said, "Listen, kid, that really works! Let's make it bigger because I've got more money to put to work." That's basically zero return when you think about the cash I hold right now, and that is getting nothing. I'm interested in finding out how I can use it to go into crypto and try and hedge my bets and get yield on it. I'm going to be paid in USD Coin, and I can go back to fiat if I wish or different ways of doing it.

It's complicated. It involved setting up a MetaMask account and using my wallet. Then, I had to get my tax guys to watch these transactions to make sure I'm being reported and being compliant on my gains and my interest yields because I don't want to be offside. So it got really complicated. I had a lot of people working on this, so I said to the head of O'Leary Ventures, Alex Kenji, "Go find me a group. Go find me some developers that can solve this problem for me, and I'll invest in them." Because I want this to be simplified.

If I'm trying to do this with this whole team I've assembled here, there must be an easier way to do this. There has to be, where you could basically get a DApp, you know, a digital app that lets you do all of this with the press of a button. There has to be a better way. It sounds like a line out of one of the Shark Tank episodes, and I found them. I found them in Vancouver, Canada—a great team. I did a lot of due diligence on their private company, so I'm happy to disclose what I did. I basically bought a third of them, and they're my team now. They're called DeFi Ventures. I'm an investor, and I’m going to deploy my capital there because they've solved it for me.

They're making the app so simple that I can basically transfer over my digital assets, be totally compliant, even generate tax returns, send out my contracts, and decide how long I want them out there for, what kind of yield, and what kind of risk I'm willing to take. Because remember, I'm holding crypto with volatility. The reason I can make yield using DeFi is it has volatility, so you have to be willing to stomach that volatility for the periods you're opening these smart contracts up. That is going to be my platform for what I'm going to be doing in my operating company, and I'm happy to be part of the community to invest in them. I put a lot of money to work there, and I think it's going to be a good outcome.

I'm not the only person investing in this; there are others. But I enjoy a very large social media following, and I'm really proud of it. I like to share what I learn with everybody that's interested in it, and I'm going to try and bring this company to the market and say, "Look, here's one solution; that's my idea." I'm really fascinated—it's a fantastic opportunity to deploy cash. I mean, you can't make any interest anymore with fiat; this is a way to do it. And yes, there's volatility, but you said it right at the beginning: this is where the puck is going; this is where the capital is going to invest in DeFi. It’s an immense opportunity, and I certainly want to have a horse in that race.

All right, so the larger trend is in DeFi, but unlike you, if someone doesn't have the capital to launch their own DeFi platform through a private company, how can an investor at this point—until yours list, shall we say—gain exposure to the larger DeFi trend and benefit? How can a retail investor invest in the bigger DeFi movement, capitalize on that trend? Is it by buying Ethereum? Well, you could. I mean, but the thing is there are many other alternatives and other chains to work with. It's not just Ethereum. Ethereum had a massive correction. It's very volatile as well.

I think the biggest opportunity for me as an investor is the fact that it's so complicated to master DeFi; it's so full of complications. It hasn't been simplified yet. There isn't really a retail product that does it. I hope to be one of the ones that answers that call and in doing so build a company around it. But I'm all about simplicity. I mean, I don't want to have to read 15 pages to just figure out how to transfer and set up a smart contract on a chain. I don't want to do that; I want someone else to do that for me so I can just push a button. That's what I'm investing in.

We’ve simplified so many other aspects of financial services over the last five years; why can't we do it in DeFi? The answer is we can, and that's why I'm putting money to work. Well, will my team be the best? I have no idea. Will it bring a great product? Yet to be seen. But I think I'm a great mentor, and I have money to deploy. I have a great number of people that are interested in giving me their sense of the direction it should go into, and I just love being at the cutting edge of this, and I want to invest in it. Why not? Stay tuned is what I like to say; let's see where this goes. I think it's one of my most exciting investments, and I've got many.

You have said though that Ethereum is digital silver to Bitcoin's digital gold; are you still that hot on Ethereum as digital silver? Then I own it. It is digital silver. It will never replace Bitcoin as a coveted asset by institutions. You know my feedback comes from talking to institutions. I have not found—first of all, let me be very blunt about this—I would say right now less than one percent of global institutions and sovereign funds have anything to do with crypto in any way. They have done nothing so far. So that's good and bad; it's bad because it really hasn't been—you know, for all the hype that you hear about every day saying, "Oh, institutions are coming! Oh, here they come!" That's just a bunch of BS; that is not happening at all. Larry Fink said as much just a few weeks ago, and he's the largest asset manager on Earth, and he's right. They're not going to play yet.

We talked about the ESG issue, but there's a lot of interest in decentralized finance as an app, as a methodology, as where the puck is going in terms of payment systems and all kinds of other ideas. So there is interest at the institutional level, and that's the opportunity side of the ledger. I think if I can be one of the proponents that brings the institution into the digital market, specifically what they are interested in is Bitcoin. We talked about it for this last little while—sustainably mined, ethically mined Bitcoin—that's what's on the table right now. I think you're going to hear that when you come to this conference on June 4th and June 5th. That's going to be certainly on my panel, the topic of discussion, because I'm going to be talking with the public miners of the world, and they have the ear of the institutions and vice versa because they want to raise capital, expand their operations all over the geography of the world and do it in a sustainable way.

Hopefully, out of that conference, a voice will emerge that can address some of these institutional issues. It's a very exciting time in crypto, but it is nascent. Anybody that tells you it's an institutional product is full of—you know what. Okay, well, I think, Kevin, it's one of the reasons that we've seen an interest in Bitcoin is stemming from concern about dollar devaluation, which stems from concern about inflation and the fiscal and monetary policies of the Biden administration.

Because we have seen an unprecedented level of fiscal and monetary stimulus, money being printed—and we don't even use printers anymore, so that's even just an expression which is meaningless. Where are you on the global macroeconomic outlook? There's talk now that the Fed is talking about tapering. What do you think about that? Yeah, they are talking about talking about tapering—I get that joke.

And yet today, we see the ten-year at a one-five handle on it. I'm a bond guy; I watch the 10 like a hawk every morning. I look at it; it is the canary in the coal mine for inflation. You know, talking about markets and because I think that's where your question is going, I'm trying to read your inflation question. My allocation starting last January went from 50-50 in fixed income to equities to 70 equities because my feeling is we will see inflation at some point in Q4.

The reason I feel that is we're stimulating the economy in so many different ways at the consumer level. Now, discussions about infrastructure—all of these PPP programs—it's just money flying out of a helicopter into the economy in an unprecedented way. And yet I can measure the effect of that by just looking at the tear sheets of my 30 plus private companies I'm an investor in, and I see their cash flows and their sales each week. We are in an unprecedented growth phase right now.

You know, this is like the 50s, the late 1950s, early into the 60s. We're going to have six, seven, eight, nine percent GDP growth in Q4, and so I think the equity numbers that people put out—the analysts keep upgrading their earnings estimates on companies, and the companies print, and they beat those estimates. It's going to continue to keep happening which is why the markets remain relatively buoyant.

Yeah, there’s some volatility in tech because there’s a concern about interest rates, but the growth rates of the underlying tech companies remain very, very strong quarter after quarter. So I think this is just a classic garden variety correction and what is pause that refreshes. I’m very optimistic and constructive for equities, and the other reason, going to your inflation question, is equities are a good place to be when inflation comes back because it gives corporations pricing power.

Indeed, when you go back in history and look at what happens when inflation rears its ugly head, equities tend to do quite well, as long as it's not hyperinflation. And we're certainly not Venezuela here in the US yet, but if there is a raising of rates, if there is a pulling back of buying assets, do you think that the markets are going to react with the taper tantrum? You know the answer would be yes if it was going to be a gap up.

There were times in the past where the Fed moved rapidly, quickly, decisively, and in huge 50-50 increments, which really hurts equities. I just don't see that happening while we have nine million people unemployed. I just don't see it. And also, we have a global economy now; it's not so isolated. Even though there's been a lot of inward-looking about repatriating a lot of manufacturing to the US, etcetera, it still remains a global economy, and I think at the end of the day that tempers rapid inflation returns. You’ve got a lot of stagnation in even Japan still.

So no, that is not my number one concern. I have diversified recently and put a 20 percent weighting in my equity into Europe. Everybody hates the European zip code, but I own equities in Swiss francs, British pounds, euros—there are 50 companies there that are well-known in the domestic markets: Nestlé, Roche, American Tobacco—fantastic balance sheets, strong power to increase prices during inflationary times, stellar distributions in terms of profits, almost a three percent dividend in some cases. I mean, you know, why not own those at a time when even the European regulators remain very, very accommodative? And so my view is, yes, you can't—

The trouble is when people say, "I'm going to take assets out of the market," they're trying to time the market. If you had tried to do that over the last 18 months, there were days in our own domestic market where we had between seven and 11 swings intraday, and if you weren't in the market for those hours you missed 50 percent of the return of the year. So I don't—I can't time the market. I’ve tried to time the market; everybody tries. It doesn't work.

You've got to stay the course. Decide if you're going to asset allocate, for example, three percent to Bitcoin, or you want to go to cash because you're concerned. But you'll make no return on cash; in fact, you'll have a negative return. So what is your number one concern then? It really remains around the virus, to be honest with you. I want to know what happens in the back end of the year.

We're clearly going to get to a place where 65, 66 percent of the population is vaccinated in the next 90 days, and then where do we go? Because if we can't get eighty percent compliance, including ten percent that have already been inoculated by having COVID, I think it resurges each fall just like the flu or influenza pneumonia does, and that's a bad thing. Particularly if it's a variant that's very viral in terms of spreading or causes more respiratory illness that ends up in death, and so that could be a problem.

There are countries like Canada which have been a disaster in managing. If you're in Canada right now, you can't get a second shot. The economy is completely shut down. If you want to go and do business there, you have to go to an internment camp, where you're in prison for some period of time. I don't know what they're doing up there, but it's a mess. There are other countries in the same boat, but to see a G7 country like Canada in that situation tells you there's still risk in the virus.

Biden did one thing well; he promised logistics to deliver vaccines, and he did. Most people here that want two shots have had them, but it's probably one of the only countries in the world that that's the case. Even in Switzerland and France and Germany, there are various versions. I was speaking to a fund manager today in Switzerland; they're not opening restaurants until next Monday, and even so, it's going to be socially distanced. They really haven't—they're about six months behind the US. Canada is probably a year behind the US, and so those are still big problems that could affect what equity markets do.

So are there any significant changes to your portfolio that you make to adjust for this COVID-recovering world? Are there any sectors that you see will now be changed in the long run here? Yeah, I mean that's a great question. I did make some big moves besides the move from 50-50 fixed income to equities to 70 equities. I have a rule that I do not let a stock become more than a five percent weighting of the portfolio, and I never let a sector become more than 20. I've used that for decades for diversification; it's a discipline. It works for me because it really helps protect you against drawdowns and volatility.

But the weighted sectors that I am fully weighted in right now are two: healthcare and technology. You know, all these discussions about all the technological platforms that allowed us to survive and go digital, I've watched these technologies turn America into America 2.0—a digital economy where there's a tremendous improvement in productivity. Take Nike, for example, a great global example. In five months, they achieved something they said was going to take six years. They went 50 direct to consumer all around the world.

When you sell a product or service direct to consumer, you only have two costs: customer acquisition cost and manufacturing and delivery logistics. Your margins can be as high as 93 on some products versus going through the old traditional retail, which has fallen out of favor. So you've got all of these digitization platforms that have allowed direct to consumer, and those are not work-from-home stocks; they're work-from-anywhere stocks—the Zooms, the DocuSigns, the CrowdStrikes, the Shopify, Adobe—all of these platforms that continue to show 20 to 40 growth year over year.

For me, that's a 20 percent weighting. Even though they're volatile, you're not going to find growth like that anywhere else in the economy. And then finally, my theory on healthcare is look at the technology—the advancements that Moderna and Pfizer did and others that, you know, in 11 months, brought out a vaccine with new technology. But there's also a momentum within governments, particularly the US government, to repatriate all aspects of healthcare.

That means bringing back generic drugs to Puerto Rico, to Canada, to stateside, to Mexico, so that they're very close to the population and we don't get stuck where we don't have medical devices or PPP materials in the next pandemic. Because I don't know when COVID-20 is coming or where it's coming from, but I know it's going to come eventually, and we have to be set up for that. So the billions of dollars that will be invested in healthcare is a very good theme.

So my overweighted or fully weighted is technology and it's healthcare, and I've pulled back my horns from energy. Hydrocarbons are falling out of favor with institutional investors; you've seen that happen, and I think they will trade off and underperform the indices for the next few years. All right, well, Kevin, to pay for all of this stimulus, the Biden administration wants to raise taxes, including corporate taxes, and this is now pushing the idea forward of a minimum global corporate tax rate.

U.S. Treasury Deputy Secretary says he expects that the G7 is going to go along and back the proposed 15-plus global minimum corporate tax. I know you said you're a fan of investing in Europe—well, France, Germany, and Italy; they seem to be fans of this minimum global corporate tax rate. Japan also making some positive comments. What do you think about it? Do you think it'll get through? No, I think the chance that happens is zero.

Here's why: If the G7 do that to themselves, the G20 will take advantage of it and make sure all of that capital flows to their jurisdictions where they have lower or no tax at all. If you think Singapore or those Asian countries are going to raise a minimum 15 percent tax on corporations, the chance of that happening is zero. They have such an advantage now.

So, you know, the point is people say, "Oh, there was a time when America had a 30-plus percent corporate tax rate." It did just fine; that time has gone forever. The reason is now we have fungibility; you can work from anywhere; you can put a headquarter anywhere. You have technology that allows people to work from anywhere they wish. Why would you ever take, take the domestic example? I will never start a business in New York, Massachusetts, or California ever until those guys get their act together.

Why would you ever put capital to work in a place that's so mismanaged that their corporate tax rates are already, before the hike, uncompetitive? I move them to Texas and to here in Florida. This is where business is done. You don't do it in New York anymore. That's one of the reasons that there's been such a huge increase in valuations here in real estate because everybody's moving out of those high-taxed uncompetitive jurisdictions and moving here or to Texas. California is losing a lot of businesses too.

The same thing will happen on a global basis, so if you're running an Asian economy where you want to attract more corporate dollars, you're going to keep your tax rates very low like Zug in Switzerland at three and four percent. The Swiss aren't stupid; they know exactly what they're doing. The whole idea of taxing corporations is stupid; you should have zero corporate tax rates and tax people. People don’t move; corporations do.

So, you know, you have to think about it that way. I think the corporate tax rate in the U.S. should be 15; that would be competitive. It's sitting now at a rate that's in the middle of the G20. If Biden's proposals actually were put through, the U.S. would be the highest tax jurisdiction in the world for corporations, and the people that lived in New York, Manhattan, Boston, Massachusetts, and San Francisco, California would be paying the highest tax rates of any human being on earth.

What is the likelihood that's happening? I don't think so because I think a lot of people even in the Democratic Party realize that's unsustainable. The other thing to realize, because I'm a policy wonk on this and I think about this in context of investing, whoever is in the White House, regardless of party, they tend to lose seats in the midterms. So Biden has to move very, very quickly to try and jam this stuff through because he's going to lose a lot of seats in the midterm. That just happens naturally, and there's nothing you can do about that.

Any incumbent—Trump lost seats in the midterm; Biden will lose seats, and then he'll be stymied for the rest of his 24 months. He'll be a lame duck in that sense, and I think that's the likely outcome. Unless you can get every single member of the Democratic Party to vote for that insane tax idea, I don't think it happens. I think there's going to be a lot of negotiations because I say insane—I should be respectful of policymakers—but to take the United States of America and make it the least competitive economy on earth, I think that has this chance of happening.

Well, China is hoping that it does happen, and that I guess the Biden administration maintains its seats in the midterm. I'm speculating here, but I think it's a safe bet to say obviously you have actually been quite outspoken in terms of being more aggressive to level the economic playing field between the U.S. and China. That was a big priority for the Trump administration. What do you think the Biden administration is doing to further that along or perhaps to unravel that?

I think the good news on the Biden administration is they didn't really unroll all of the Trump initiatives on what he did with China. They really worked hard to make sure that they would keep their feet to the fire. There are two things we need in China, and I live this every day. I've got so many investments in China and other jurisdictions as well. We need a level playing field on IP. We haven't talked about that much, but you know we need to be able to use their court system the way they use ours to litigate our disputes—which is a healthy thing to do—and we don't have access to that.

We also need access to their markets, their middle-class markets, as they have to ours, so that and then I'd let the competition begin. You know, an American technology, a product—one of my companies—if I could protect its IP in China and sell it through distribution there, I’d like to do that. But I'm stymied because I can't litigate there; they can here. I think we have to level that playing field, and I think Biden understands that. The Chinese are at war with us on trying to find a digital currency; we need to lead that charge here.

We talked about that earlier, but obviously, China has rattled the chain against Bitcoin but may come with their own digital one. We don't know yet. We need to prepare ourselves for a digital currency for the U.S. dollar. But the competition on technology and advancing technology, you know, China used to only graduate sub-par standard engineers. Today, they graduate over 250,000 engineers a year that are world-class competitive. They are doing some amazing work in all kinds of technologies, like human DNA. They're working on wireless technology that's extremely advanced. We need to compete.

We don't graduate 250,000 engineers; we graduate great leaders, but not that many. I think we all have to understand it's a competition, and we need to hold their standards equal to ours. However that gets played out—and I hope Biden will, and I think he does understand it—we need to force their feet to the fire. The Chinese understand the stick; they understand the stick, and I think if we do that, we'll work this out.

I mean, so far they haven't been held accountable to the same standards. If you look at the World Trade Organization and the way it still regards China as a growing economy, a developing economy, if you look for example at the Paris Climate Accord, and China gets all the breaks in that. So when does the rest of the world catch up with this mentality, Kevin? Pretty soon. I think Europe is getting starting to understand the problem.

You know, the idea that you can herd cats to solve the Chinese problem actually doesn't work, and I'll tell you why. Too much of the European economy relies on trade with China; they really don't have much leverage. The U.S. is still the world's largest economy, and it has leverage. This idea that we're going to do it in unison with Euro policy, I think, is flawed. It doesn't work; it never has. I think it's going to have to be Biden policy delegations that keep the American push on it. It's always helpful to have Europe behind you, but they'll never lead the charge. They can't afford to anymore; China is too big a part of their economy.

All right, well Kevin, you clearly have very strong political opinions. As you mentioned, you've been spending a lot of time in Miami, which is the opposite to Canada in terms of lockdowns, as we covered. You've been quite critical of Canada's COVID response, which is leading many to wonder if you're perhaps going to do more than just talk about it again and perhaps enter the political fray again. Is that something on the cards for Mr. Wonderful in his future?

I never say never to anything, but I'm so busy as an investor today, and I've got so many projects like the crypto one we talked about that I'm spending a lot of time on. I'm an open critic; I believe you should be critical of government—they serve you. I pay my taxes; I pay a lot of tax in Canada; I pay tax in the United States. I have a vote, and I have a right, and I have a right to speak openly about what I see as a very poorly managed country. Canada is poorly managed; it can do better.

But I'm very optimistic for it because no matter how poor the management is at the provincial and federal level, the country is so wealthy; it has so many resources that are still in the ground that the world needs. All it needs to do is to solve for the poor management it has—hire better managers, however you have to do that. I have ideas; others do too. I think Canadian politicians are way underpaid, and we can't seem to get leaders that have been successful in many sectors to come and work as politicians. They solve for that in Switzerland by paying them well and inviting them and making the campaign laws easy to work with.

Canada has a lot of problems there. I have brought a case forward to try and break those laws down because I've seen how they don't work, and they keep mediocrity in government, which is terrible. As a proud investor there, as a proud citizen and taxpayer, I would like to give back to my country by changing those laws and funding a federal case, which I'm doing. The campaign laws are broken; the country is poorly managed. The COVID pandemic showed the weakness of Canadian management. The country is a disaster—an unmitigated disaster. The fact that you have to go to prison to visit the country in a place where there's no HEPA filters, where people are locked in rooms with no air filtration, where you could get a—a new—you could die there. I mean, the whole—I—that is so insane that that's why it's time to get the spatula out and make the changes.

That is the craziest idea I've ever seen. I feel sorry for people that are trying to do business there. But for my Canadian friends that asked me specifically to ask you if you will attempt a comeback to Canadian politics and rescue the country, the answer is I never say never to anything. But I will use my social media platform in the next election to be an open critic of the current management and point out their faults, their weaknesses, their failures, and hope that we as a country can get better managers. We simply need better managers. We are the richest country on earth with the smallest population managed by very, very weak talent.

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