The Practical Islamic Finance Podcast
The Practical Islamic Finance Podcast
🌟 The Best Market Recap: 12-03-2024 🌟
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🌟 The Best Market Recap: 12-03-2024 🌟
In this episode, we will cover:
- Intro
- Jobs report impacts rate cut expectations
- Bitcoin miners: Bitdeer leads the pack
- South Korea’s political turbulence explained
- Bitcoin near $96K: Miner efficiency analysis
- Michael Saylor's strategy: Key insights
- XRP price moves: Hype or fundamentals?
- Tesla & AI stocks: Long-term opportunities
- Tips on managing volatility in crypto
- Final Thoughts
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salam@practicalislamicfinance.com
ABOUT OUR PODCAST
Our podcast is about helping people ethically build wealth. We cover a broad range of topics including stock and crypto investing, product reviews, and general financial well-being.
DISCLAIMER
Anything you hear in this video is an opinion. It is not personalized financial advice. Make sure you do your due diligence before making any investment decisions.
Assalamu alaikum everyone. I hope you are doing well. Today is December third and we are on a Tuesday and The indices were continued to chop today. I think we are waiting for the payrolls report on Friday. We did get a jobs report today that was better than expected. So the economy is doing well. And perhaps as a result of this report, the probability for an interest rate cut in December later this month, that is, has fallen a tad from seventy five to seventy two today. That being said, we remain very bullish about equities regardless of the probability for an interest rate cut, so long as the probability is going down because of a strong economy and not because inflation is picking back up. If we get reports that the economy is doing well, then this is a sign that corporate profits are going to come in healthy and our risk assets will be fine, regardless of what monetary policy does. If we get hotter than expected inflation, then that's something that we'll stop at and reassess our thesis for the macro economy, at least. The main characters in the market remained rather stable. So Tesla was down one and a half percent and video was up close to one percent. Bitdeer got a big boost today, up close to seven percent. It was the biggest moving Bitcoin miner in the positive direction, that is. Most Bitcoin miners were down today. Bitdeer and IS Energy were up, Bitdeer being the strongest mover among the gainers in Bitcoin miners. I do think that there's more juice left in the squeeze, so to say. And we are, I think, awaiting as it relates to Bitcoin miners. And I'll actually talk about this. I saw a very interesting chart today regarding the valuation of different miners. But there are a number of different catalysts. Obviously, the biggest catalyst would be Bitcoin's price just breaking out. And so that should be associated with there's obviously a correlation there between Bitcoin miner prices and Bitcoin's price. So that should be associated with a run up in Bitcoin miners, even if there is a lag. But also, especially with regards to our positions with Bitdeer and Iris Energy, we are looking out for a catalyst in the form of high performance computing, AI and power providing contracts with a hyperscaler that really shoots up the price of the stock. And there's, I think, ample opportunity for this to happen in the coming few months. With regards to some other assets, we saw gold. It's still at twenty six hundred. Silver is up one percent. Oil is up two point five percent. Bitcoin is flirting with ninety six thousand. Doge is at forty one cents and Solana is at two hundred and thirty six dollars. As it relates to XRP, I know it's it's in the headlines a lot. I mentioned it yesterday, but honestly, I don't really see any reason for the appreciation that it is experiencing right now other than, you either some form of manipulation or shorts being burned. But from a fundamentals perspective, I don't really think that anything has changed and certainly nothing to justify the type of move that it has experienced. At least that's my assessment of the situation. You're welcome to do your own due diligence and make your own conclusions. Speaking of the markets and our outlook for at least the near term, very interesting stat that I read today. When the market is up ten percent or more with a newly elected president, it has never gone down in the month of December. So that's a pretty encouraging stat. Now, will December be as good as November? No, I don't think so. I think the best month of the year in terms of prices was November. But I do think December will see risk assets appreciating. Now, we did get sort of a curveball out of South Korea today, speaking about macro. So the prime minister or president there declared martial law. And then I guess, you know, the internal politics were not moving in his favor. He decided to test the waters. Hey, maybe I can get away with taking away people's rights. and so people or the people in korea decided to remind him that they were still alive they had a pulse and they were aware of what he was trying to do and so he had to back down from the martial law that he declared and probably this is going to cost him his political career now that he has been revealed to be someone who is willing to actually work against his country in order to advance his personal political interests. If you haven't noticed, I do have a bias, a rather strong one, against dictators and potential dictators and people who will attempt to strip people of their rights. So hopefully this gets wrapped up and it doesn't develop into something more sinister and scary. As it relates to micro here, let's talk about individual positions. So as it relates to Bitdeer, the strongest mover amongst Bitcoin miners today, as I mentioned. Now, this post was about Cypher, but it did. catch my attention in that if you want to look at the market capitalization per megawatt for these different Bitcoin miners, you can see Bitdeer here is the most attractively valued Bitcoin miner amongst all publicly traded Bitcoin miners at two hundred and fifty four thousand per megawatt that it is being valued at per potential megawatt potential capacity based on the plans in twenty twenty five. I should add that caveat. In second place is Cypher. And in third place is Bitfarms. In fourth place is Iris Energy. Now, a lot of these comparisons you have to take with a hefty grain of salt because, for example, Marathon, really not comparing apples to apples there because Marathon, a lot of its valuation, now increasingly so because they are really taking a page out of the MicroStrategy playbook and they're huddling a lot of Bitcoin. So you can't really compare all of Bitcoin miners in this, using this particular metric. But for instance, Bitdeer and IS Energy, I think those are reasonable comparisons considering that they don't huddle any Bitcoin. So now you can see that I do think Bitdeer is probably more attractively valued than something like Iris Energy. Now you may be looking at this and saying, well, why don't you invest in Cypher? Well, because in terms of the efficiency of Bitcoin mining, Bitdeer and Iris Energy have an edge over Cypher in that regard. So in terms of efficiency of Bitcoin mining, and we saw this in Iris Energy's recent report, their efficiency is really top tier. And so that kind of gives you a bit more background about why I positioned myself the way I have with regards to Bitcoin miners. The other, because I know MicroStrategy is on the minds of a lot of you guys, and I don't blame you because you see something going up a lot. And you want to be part of the party, as they say. But let's talk about or let's listen to Michael Saylor as he appeared today on CNBC. So I'll pull up his slides. um his appearance and I think it's rather informative both in terms of understanding the thesis for bitcoin and and understanding what micro strategy is doing and then we'll go into the discussions uh part of this live let me know obviously if um you can't if there's anything with the sound if I don't hear anything I'll assume that the sound is good I love this one. Just saying fifteen thousand four hundred Bitcoin at about ninety five thousand ninety six thousand dollars per Bitcoin for a total cost of one point five billion dollars. The company's executive chairman tweeted, we hodl. HODL, HODL, more than a four hundred thousand Bitcoin. Joining us now, Michael Saylor, MicroStrategy Executive Chairman. Your average, Michael, it's good to have you in studio again. Your average for those four hundred thousand is fifty eight thousand per Bitcoin. So it's been moving higher as you keep buying at higher prices. We bought it about forty two times since August of twenty twenty two today. From August to HODL, the Now, you have to really appreciate Saylor's consistency and his conviction. I mean, you got to give credit where credit is due. We've been through a lot of volatility between and today and his conviction, his steadfastness and his ability to resist panic and prematurely selling his position allowed him to be in the position that he is today. So the idea here, the lesson here is that when you have a thesis, you have strong conviction, Don't let other people talk you out of it. Just do your own due diligence. Make sure you develop a conviction that's based on a solid understanding of the matter at hand and then hold on to patience. And if you can find a community of like-minded people that can support you in your patience, then do that. Strategy is to issue stock or convertible debt of MicroStrategy and use that to buy Bitcoin. We're a Bitcoin treasury company, so we're securitizing Bitcoin. We're providing high performance equity. We're also providing convertible bonds. We've provided other kinds of bonds in the past, but primarily our job is to bridge the traditional capital markets that want bonds or they want fixed income or they want equity or they want options. And we plug that into the crypto economy. And we use Bitcoin as the vehicle to do that. What percentage of the public do you think understands Bitcoin at this point? Because I don't know if it helps to go into your strategy, what you just tweeted about. If people don't even understand Bitcoin, and I still see it everywhere that it's air or that it's You know, it's not like gold because you can't make jewelry out of it. Believe it or not, there's still people saying that because you can't touch it, that it can't be real and it can't represent money. So can we go into how you're arbitraging it to make a return? Yeah, here's what you need to know. The S&P is about fifteen ARR for the past four years and the volatility S&P is fifteen. If you want to own a commodity like silver or soybeans or gold, they have very low performance, less than fifteen percent, five percent, zero percent. You don't really want to hold soybeans for a hundred years. And sometimes they have volatility, but it doesn't last that long. Bitcoin is sixty volatility, sixty ARR, and it is a legal commodity, but it is an economic scarcity. It is the only commodity invented in the history of the human race that's absolutely capped. And so that means you can expect it to keep going up. If I can give you a commodity that outperforms the S&P index, if I can give you a commodity that's more volatile than the S&P index, you can put a hundred percent of your liquid assets in that commodity per SEC rules. I can't do it with a security by the way. So up until Bitcoin, people had to use gold or real estate. So in other words, the price of higher returns is higher volatility. This is what Saylor is saying. But if you know that this is an asset that is going to outperform the S&P over the long run, then are you willing to stomach that volatility in return for higher returns? I think that this is an argument This is also an argument for what we're doing at PIF, which is that we have a portfolio, it has a higher volatility than the S&P. And the question that PIF members have answered in the affirmative is that they are willing to stomach the higher volatility in return for outperforming the S&P. So this is something that is very, but you're only willing to do that if you have confidence that the end result will be outperformance. So this is something that I think investors need to be very aware of with regards to the relationship between returns and volatility. as their commodity, or they have to use the US Treasury bill, those are all underperforming the S&P, and they're less volatile. Bitcoin is the first thing you can use in your Treasury that's more volatile that outperforms the S&P. The result is, if I give you a security, Joe, that outperforms the S&P, how much of it do you want to buy? And if I give you, if you're an ARB or an options trader, and I give you an option. The answer is, I mean, unless you're trying to outperform said security, if you're comparing it to, you know, another option of just following the S&P, then the answer should be, well, as much as I possibly can. And so I do think that when trying to forecast the price of Bitcoin moving forward, I think it's reasonable to look at S&P ETFs and how much money is in there and how much money is going to flow from those S&P tracking funds to Bitcoin, because eventually this has to happen Because Bitcoin continues to outperform the S&P. So eventually what we're going to see is a flowing of money from S&P indexes to Bitcoin. That is for X, the volatility S&P or with MicroStrategy, we're ten X the volatility S&P. How much of it do you want to trade? So Bitcoin is unique in the history of the capital markets. It's the first scarcity commodity. outperforming the s p more volatile the s p that you can put on your balance volatility at some time is not always good thing I mean it's great when something's going higher but do you don't think that there'll be a drop or a significant drop that comes along have we moved past that because of the regulatory changes that have taken place um I think it'll remain well I mean With all due respect, but this is the exact point that was being made, is that he does think there will be another big drop. He does think there will be volatility. But the end result is outperformance over time. Involatile because it's a twenty four seven three sixty five global asset. You can panic sell it on Saturday night. You can enthusiastically buy it on Sunday morning. That's a feature. That's not a bug. You've lived through some of the swings. But do you think we won't see the downturns like we've seen in the past just because of the changes? I think it's going to surge through the roof and then it's going to it's going to surge to one hundred and eighty and crash to one forty and people will be freaking out about it again. But let me make this one analogy. Volatility is like fire. And some people run away from the fire. But Henry Ford put the fire into a carriage via an engine, created an entire industry, and he gave humanity wings. Can we talk about... It's a pretty powerful analogy. Michael Saylor has a lot of those. He's almost as good as me in that regard. So I've been leading up to me and for everybody to understand your tweet just from, I think, in the last hour. So what did you do last week with the treasury operations? You were able to generate a Bitcoin yield of two point five five percent or over almost ten thousand Bitcoin to shareholders using an arbitrage. Can you explain? Will I be able to understand this if you explain this? We sold one and a half billion dollars worth of stock by five hundred million worth of Bitcoin. We bought back one point five billion of Bitcoin. We captured nearly a billion dollar gain in the arbitrage that we can do with equity day by day when we do it with debt. We issue three billion dollars of debt that's backed by six hundred million of Bitcoin that comes due in five years. We pay zero percent interest. We buy three billion dollars of Bitcoin. We capture the two point four billion dollar in the arbitrage gain up front. But then over the course of the five years, we double or we quadruple the investment because we're buying an asset which is appreciating faster than the asset. What you told me was that it's fifty five percent premium over. Yeah. So basically he's using the assets he has to borrow more money or raise more money and buy an asset. that is going to appreciate in value. And so now he has more assets to get more funding, to back more funding. Same as what people do with real estate. So they purchase a house, put a certain amount down, and the rest is basically a mortgage, assuming the the house price goes up, they're able to refinance, take out even more debt, buy additional property and so on. This is kind of what Michael Saylor is doing. Now the zero percent interest is because of the nature of the debt, which is a convertible note. So they're able to convert it for, then this is actually appealing considering the the extreme volatility that microstrategy stock actually has. So people are willing to lend them at zero percent interest, but for the opportunity to actually benefit from the equity appreciation. conversion, but a zero coupon? Is that the same? Yeah, that was a zero coupon, and you can do that because Bitcoin is high vol, and the companies that have Bitcoin on their balance sheet have even higher volatility. So Mera is a great example. Two weeks ago, they did a billion dollar convert, zero coupon to buy Bitcoin. This week, they're back in the market doing another billion dollar convert, zero coupon to buy Bitcoin. You can rinse and repeat that frequently. So, yeah, so that's basically how MicroStrategy is doing it. I know that a lot of people have asked, hey, well, it's actually zero interest. Is that OK? The fact of the matter is it is debt that is being issued with an expectation of benefit by the lender or else it wouldn't have been issued. So that expectation of benefit. is something that is, I think the majority opinion is that any expectation of benefit from a loan is riba. And that's why I've stayed away from this company. And as I always say, when I do something for the sake of Allah, I don't really worry about the results. Eventually, Allah will bring me something, an opportunity that's way better than what I left. This is his promise. This is the promise of the proper peace be upon him. And by the way, Alhamdulillah, I have to say this. It's not like Alhamdulillah, I need it. And so why would I, why would I sacrifice? Alhamdulillah, I have everything I need. And so why would I sacrifice, you know, my, you know, relationship with Allah Subh'anaHu Wa Ta-A'la or even put it, you know, under question. Especially, you know, considering how generous Allah Subh'anaHu Wa Ta-A'la has been with me. So that's how I think about things. That's how I approach things. I encourage people to think about these things in the same way. All right. So let's take some questions. Wa alaikum salam to everyone. Thank you all for coming. uh so is iris dumping in the aftermarket I just saw a comment that iris I was dumping so let's see here come on dude it's down one and a half percent I would in the aftermarket I would hardly call that uh dumping all right um Nice to see you, Rashad. Assalamu alaikum. In your opinion, will large institutions and companies set up on a crypto network, Ethereum or Solana? Well, I haven't seen that yet, and I don't really see why they would. I haven't seen a good argument for why they would yet. Taskeen, nice to see you. Would you consider having a separate thread room in the Discord for crypto-related discussions? I did think about that, but I don't want to have too many rooms in our Discord. Maybe I'll put that up to a poll and see what our Discord community would like. I think XRP boom is related to their case against SEC. Certainly that's what set off the chain of reactions that we're seeing in the market and I think what's actually happening from a technical perspective is that it was shorted to no end. XRP was. And so it got a little fused. And so it jumped. And then now a lot of different dynamics are going on. You have shorts battling. you know, FOMO investors, but it's something that I don't want to be a part of because, you know, from a fundamentals perspective, I don't really think much has changed in my analysis of XRP. It could be wrong, but that's my assessment. Ali says, Assalamu alaikum, I can with alt season gaining momentum is PIF looking to add new altcoins? Yes, absolutely. Doge has already run up substantially. I do think that Doge is going to run up substantially. again like there's another leg up here and it may come after bitcoin reaches a hundred thousand because I think a lot of people are gonna say you know do I is there really enough meat left on the bone here with bitcoin if I buy it above a hundred thousand uh maybe I should look at these smaller caps and you know dogecoin is it's a mature It's been around for a while. It's proof of work. Not many tokens are still proof of work. It has basically a fair launch. It is... know it's it's fun it's been around for a long time so it has a history I don't think anyone is really concerned about it going anywhere there are potential catalysts and perhaps an etf for dogecoin perhaps integration with x platform I'm seeing little anecdotes where you know different websites are saying they're going to be adding a dogecoin as a payment option So I think a lot of people are going to be saying, Hey, Bitcoin's above a hundred thousand. Maybe I should buy this much smaller coin. That's currently less than fifty cents. And maybe there's more upside there. And I have to agree with them on that. There's probably more upside there. Iron, three hundred million convertible notes offering. How should we react to it? That's kind of par for the course, I think. So with three hundred million, they'll basically be I mean, based on their recent comments. And their most recent earnings, I think that should set them up for at least Q one twenty twenty five. maybe even Q to twenty twenty five, considering the cash flow generation that the company is having. So, you know, we knew it was coming. It was just a matter of when. And that's why we took some profits out of IRS, if you'll remember last week, because we know that there's going to be, you know, events, dilution events that may bring the stock down. I'll probably buy more if it goes down more than this. But right now, you know, down two percent or one and a half percent. It's not something to write home about. Roy says, as a Syrian, I would say we have a strong bull run in Syria and it just started. Yeah, absolutely. I'm very optimistic about, you know, what's going on in Syria. And You know, I can't help myself, but I often get into discussions with people online, like some people asking, hey, why aren't you talking about Palestine? Well, I am talking about Palestine. I have spoken about Palestine many times. And I actually believe that you can't be pro-Palestinian people and authentically so, and not be pro the Syrian people because they're the same people and you can't be, you know, vice versa. You can't be pro one of them. If you're pro one of them and you're not pro the other, then you're probably not pro either. The truth of the matter is you're probably just using that for whatever, you know. whatever bias you have in your mind. So that's what I'll say about that. Muhammad says, nearing my one month mark with PIF. That's great, Muhammad. And already seeing great value in many aspects. That's awesome, Muhammad. Thank you for saying that. I missed getting into Tesla as a new member. Do you think it's still worth buying now at three fifty? Yeah, I do think it's worth buying now if you have a longer term horizon, if you're just waiting for next quarter earnings I don't, I don't know if there's much more here. I mean, maybe it goes to four hundred in January, but perhaps there's a dip before earnings as well. But if you have a longer term horizon, if you're talking about, you know, twelve, at least twelve to twenty four months, then yeah, I think you'll do well buying here. Salam aleikum brothers, PIF website portfolio updated. If not, can you please repost on Discord entire position share breakdown? Sure, I'll post the entire position share breakdown the individual portfolios are updated but the the all four portfolios together um I haven't sent out an update on that since I believe was it the week before last so I'll send one this week inshallah barry sanders big fan of yours uh Could you please share your view on owning Tesla shares, even though Elon Musk made some negative comments on his lap? So a common question I get, I make a separation between Elon Musk, the person and Tesla, the company. They are two different entities. I'm invested in one and not the other. Karim says, by the way, recently became a premium member and it paid off soon after. Alhamdulillah. Thank you for sharing that, Karim. I'm very happy it has. flux is one that we talked about a while ago flux crypto yeah you talked about a few months ago I think it's actually a good it's not a bad project but if my memory serves me it's built on ethereum and I just don't out of principle I don't invest on anything invest in anything on ethereum because I think it's eventually going to be dead And all of those projects have to move to Solana. So perhaps there isn't a catalyst in the future with if some of these Ethereum projects move to Solana, that will be a catalyst for their price. But I'm not going to bank on it. Should I use my company match on Bitcoin ETF instead of traditional for one case? So I do think that what Michael Saylor was saying is accurate in that Bitcoin will probably outperform the S and P over, you know, the next few years, at least, but Yeah, not financial advice. And it's going to be more volatile, as he was saying. So it's going to be more volatile. There's more risk in Bitcoin. It could go to zero. There's no S&P going to zero. It's not a probability. And Bitcoin going to zero, I think it's a very remote probability. I don't know what would cause it. But... If you can sleep at night okay with a Bitcoin ETF, then it'll probably outperform an S&P ETF. Again, not financial advice. That's just how I think about it. I see Muhammad Amar. Nice to have you, Syed. I'm glad you joined our community. I'm very much looking forward to Exit strategy for Doge, we're taking profits on the way up and we'll continue to do so, inshallah. What would your advice be for someone like me who loves hodling and struggles to sell no matter what the profit is? Is this okay if my investment horizon is long-term? well my this I would say my strategy my approach what I found works the best is to take profits on the way up it's not a you know all or nothing thing typically when you do an all or nothing move there's some regret associated with it so I would suggest staggering my way out of positions and staggering my way into positions And so when you're taking profit, I would take just enough so that I'm okay with my move. If the price continues to go up and I'm okay. And I'm actually happy. I took profits if it goes down, because then I can buy back at a lower price. Assuming my thesis hasn't changed. Did you see Mark Andreessen on Joe Rogan saying blockchain technology will be solving social media content verification? I think that guy generally is overrated, I have to say. But I was not impressed with his blockchain commentary at all. To be completely honest, you know, a lot of these VCs have made a lot of money off of cryptos that have done jack. So something to keep in mind. Where can I go and see your thesis for your existing investments? The best place would be the messages from PIF to see the tab that is on the left-hand side. When you logged into your account, you'll be able to see my most recent messages on whatever asset you have in mind. No, I think there's still some juice left in the Solano run. It depends on what you're staking, eh? Yeah, Hems is really taking off. I still think that the... the business for HIMSS will not have the same margins that it has had. So unless they're able to very effectively implement the personalization aspect of their business. So maybe it ends up doing well, maybe it doesn't. I just wanted to kind of de-risk my exposure. And we exited with a profit. So from a risk management perspective, I'm completely content with the move that I made. Alhamdulillah. As new PIF membership, and there are a lot of new members, can we have a session on how to benefit from it and get familiar with the app? Absolutely, Ryan. Inshallah, you'll hear more about that soon. Thank you, Brother Khan. I hope to not let anyone down. Inshallah, I'll do my best. You know, one sort of corner of crypto investing that I want to take a much closer look at and I'm kind of familiarizing myself with is the bots that are created and investing in some of those. So I will have more on that and my thoughts on them, but I want to kind of actually try them out myself and I really have a solid conviction before I make a move but I inshallah I will be making a move soon so inshallah I thank you all for coming we have a hundred and fifteen people here that's amazing thank you all for coming do leave a like if you enjoyed the live I'd really appreciate it uh subscribe hit the notification bell All that good stuff. Until next time, make sure to take care of yourself. Assalamualaikum and peace be upon you all.