A Look at Naked Swimmers

MicroStrategy's CEO gets caught in some rough waters as crypto melts down...

(Source: Getty Images)

Bill Bonner, reckoning today from Youghal, Ireland...

When the tide goes out you find out who’s been swimming naked

~ Warren Buffett

Even in a world chock-a-block with messiahs, Michael Saylor deserves special mention. Most pied pipers only take the children once. He’s done it twice.

But it is against the Bonner Private Research code of honor to kick a man when he’s just lost 90% of his fortune. We’ll wait until the last 10% is gone.

And maybe we’re wrong. Yesterday, Saylor assured the world that the kids were all fine. Bloomberg:

MicroStrategy Inc. Chief Executive Michael Saylor told investors not to worry about a potential margin call on a Bitcoin-backed loan, saying the company has ample collateral to pledge if necessary. 

“As long as the Silvergate loan remains collateralized with an LTV less than 50%, there is no margin call,” Saylor wrote in an email to Bloomberg, referring to loan-to-value metrics. “We manage accordingly.”

Staggering Losses

Our first encounter with the man (though never in the flesh) came more than 20 years ago. We had only just begun these daily commentaries. We were relatively new to the trade of making fun of people in print. We needed an easy target.

And there he was. Michael J. Saylor.  

And here he is again: one of the crypto world’s biggest victims. His company is/was the third largest holder of BTC in the world. But it had an average cost per coin of a little over $30,000. Now, with bitcoin trading at $19,000, he’s looking at staggering losses.

In the intervening two decades, however, our sympathies for stray dogs, alcoholics and madmen has greatly increased. After all… ‘there but for the grace of God…’  So, we mention his name with neither contempt nor pity. He did his level best. He brought entertainment to millions. The hope of riches to thousands. And a warm schadenfreude to a few.  

“We’re purging ignorance from the planet,” said he back when his hair was still dark and his future was still bright. He was on a “crusade for intelligence,” he said. He wanted to make information “free… running like water.”

That was back in the glory days of the dot.com bubble, circa 1999. We didn’t have any better intel then than we do now. “But in a contest between ignorance and stupidity on one hand,” we wrote, “and information and intelligence on the other, we know how to bet.”

In the months and years that followed, our bet turned out to be a good one. The Nasdaq, home of the ignorance eradicating dot.coms, fell. Investors lost billions.  And it took many years for prices to recover.  

Gold, on the other hand, that ‘barbarous relic’ from the Age of Ignorance, flourished. The price doubled. And doubled again.  

The “Billionaire Losers Club”

And Saylor? What happened to him? We quote ourselves from 2003:

Purging the planet of ignorance? Only a buffoon or mountebank would say such a dopey thing. Saylor was clearly one or the other – maybe both. We were also suspicious of a man who didn’t waste his time on women. Wasting time and money on women is practically a moral obligation for a straight man. But Saylor saw women as "a time sink" and avoided them. In fact, Saylor didn’t drink, either – at least, not back then.

"I think my software is going to become so ubiquitous, so essential, that if it stops working there will be riots," he told New Yorker magazine. A certain level of madness is often an advantage in the business and entertainment world. But as it turned out, Saylor had less visible corruptions, too… he had hidden massive indiscretions in the company’s financial statements.

On March 15, [2000] the week before Saylor had his rendezvous at the abattoir, we ridiculed Saylor’s Information Age pretensions. The following day, too, we made fun of his idea for an "Ivy League Education on the Net." Ivy League educations were already bad enough, we pointed out, even when you attended in person.

Saylor’s company, MicroStrategy, had developed software that helped businesses figure out who was buying their products.

Shares were offered to the public on June 11, 1998. Nearly two years later, the stock hit $333. Saylor made another $1.3 billion that day after $4.5 billion in the preceding week – bringing his personal net worth to $13.6 billion. MicroStrategy, with sales of only $200 million, and a reported profit for 1999 of $12.6 million, was worth more than Dupont.

Saylor became the richest man in the Washington DC area…wealthier even than Oracle founder, Larry Ellison. At $333, the MicroStrategy stock price was as insane as its CEO. 

[But] while we were mocking MicroStrategy, its share price and its dizzy CEO, the rest of the financial press was praising them. Hardly a single report failed to find something flattering to say. The English language has thousands of negative words, but before the 20th of March, 2000, the ink-stained hacks, analysts, and TV presenters couldn’t seem to find a single one that applied to Michael Saylor.

Then, on March 20, under pressure from the SEC, MicroStrategy admitted that it had cooked its books for the previous two years. Instead of a profit of $12.6 million in 1999, the company would now shoulder a loss of $34 million to $40 million. Revenue, too, was downsized.

That day, Michael Saylor made history. Never before had anyone lost so much money in such a short time. In six hours, his net worth dropped by $6.1 billion.

From that day on, Saylor’s life was different. Instead of being praised by investors and the financial media, he was whacked hard. Investors were out $11 billion. Some of them were angry. Others were suicidal. "I never thought I could lose like this," said one investor on the Yahoo/MicroStrategy message board. He went on to announce that he was going to kill himself.

Before March 20th, Michael Saylor could do no wrong; after, he could do no right. Most prominently, Fortune magazine listed him as #1 in the "Billionaire Losers Club," with total losses of $13 billion.

But a difficult failure does more good for a man than an easy success. On the evidence, Saylor is a better man today than he was a few years ago. "He began to drink," reports the Washington Post. "At least two MicroStrategy officials received calls from people who were concerned that they had seen Saylor drunk in public…"

Freedom and Sovereignty?

That was nearly 20 years ago. Now, we have the Michael Saylor Story, Part II… in which our flawed hero makes a comeback. That is, he has a second chance to make a fool of himself… lose billions more… and babble about cyberspace….

His stock is now selling for only half of what it was worth 22 years ago.  But he insists that it’s a buying opportunity – “like Amazon,” he believes, which crashed five times before it really took off.

As for bitcoin, he hasn’t given up. He’s HODLing (holding on for dear life). He says it’s “a million times more valuable than gold.”

And if things get rough for HODLers, here on planet earth, there’s always “cyberspace,” he adds, where you can find true “freedom and sovereignty…”

On its face, the idea is preposterous. It suggests that a man confined to Guantanamo and regularly tortured by his guards might “move to cyberspace” and find “a decent life.”

Is that all you need – a laptop and wifi access? More free information? More bitcoins? We suspect that for millions of people ‘cyberspace ‘is a hollow lure… like a multi-colored, fake bug dragged across a mountain lake. It leads not to freedom, nor sovereignty… but to flopping around in a fisherman’s basket.   

Poor Mr. Saylor. Gills wheezing. Naked. Cold. God bless him.

Regards,

Bill Bonner

Joel’s Note: Did you catch Dan Denning’s private investment briefing with Jim Rickards yesterday? It was a doozy. Dan told us he had allowed for 3,000 spots on the Zoom call…

“I hope we don’t crash the thing,” he wrote us a few moments before they went live. Apparently, folks are growing tired of hearing their politicians lying and thieving. They want straight answers. Go figure.

Of course, the timing couldn’t have been more pressing. As markets melt down and the economic outlook goes from catastrophic to apocalyptic, honest workers and savers are desperate to make sense of what’s going on.

Enter Mr. Rickards.

If you don’t know Jim, he’s the guy who literally wrote the book called The New Depression: Winners and Losers in a Post-Pandemic World (as well as more than half a dozen others). Through his work, he examines the many disturbing currents (economic, political, financial) shaping the world as we know it.

Currency wars… inflation… gold… China… Russia… the Fed’s “inflate or die” trap… it was all on the table in yesterday’s private discussion.

These special briefings are part of what you get as a Bonner Private Research member… that is, access to Bill Bonner’s personal network of international financial and investment experts. We aim to bring you the very best financial minds working today… because, as Bill, Dan and Tom have warned again and again, the situation facing us today is like nothing we’ve seen before. The stakes are higher than ever.

If you missed yesterday’s event, don’t worry. You can still listen to the full audio recording by becoming a Bonner Private Research member right now. (There will also be a transcript posted on tour Substack page within the next 24-48 hours, same as all our events.)

Don’t miss this exclusive private briefing… or any others. Join BPR today…