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The Bitcoin Debate: Promise to Limit Coins versus the Promise to Repay

By now even the mailman can explain why everyone should own some Bitcoin. I always said by the time your neighbor is touting the merits of the latest tech stock, that is a sign you should have been out three months ago. I have read articles from the smartest guys on Wall Street, our top economists of the day, and have read more than I need to about Block-Chain technology. I have seen Bitcoin soar from ten cents to over $7,000 for a virtual coin. I have also heard US deficit hawks argue that Bitcoins make more sense than even US debt because, unlike the government, Bitcoin is limited to issue only 21M coins. It would seem that we have arrived at a stalemate in evaluating this new technology wonder, ie, the magic of cryptocurrency. Imagine the look on your child’s face when you provide your little one a digital code where he can access his piggy bank full of 1/1000th of a bitcoin. We have fake news (according to some) so why not have fake money. After all, I never had a problem paying up for “Park Place” on the monopoly board because I was using fake money.

Is Bitcoin fake or is it real? Sometimes to evaluate an asset that has no logical conclusion, it helps to go back and reverse engineer it’s nearest counterpart and just look at the differences. Sometimes a new path provides a new conclusion. Let’s look at the US dollar, a long time friend that has endured years of inflation, over printing, and yet still manages to be the envy of most of the world. The clear downside of the US dollar is our government uses it like there is no end of it in sight and it is no longer backed by an asset like gold. This seems to be the catch all “go to” solution for Bit Coin loyalist. If you can only make 21M of anything, what happens to its value if 22M people are willing to buy one unit. Well the price has to go up. It makes no difference in the Bitcoin world because the virtual currency is backed by a promise not to produce more of it. The central theme of this theory seems to be that because this coin is tracked by a revolutionary block chain technology, we the people, need to apply homage to the fact that regardless of its intrinsic value, the mere fact that we now posses super computers that can add and subtract millions of transactions in a second, we should all breath some relief in the notion that every penny always lives somewhere in the digital world, and because of it’s relative limited supply, it’s value is mathematically bound to multiply by leaps and bounds. I believe 1% a day seems reasonable. After all, pay day loans have run upwards of one half percent per day so by comparison these seem like cheap loans compared the “CD” rates offered by Bitcoin Banks. The problem is there is no such thing as a Bitcoin Bank so who is paying the interest? The answer logically is the stakeholders who own the coins. Let’s say you own a tech stock and it splits from 100M shares into 200M shares. Who gains and who loses? Well the answer is no one on the day of the split. Since the stock drops in half it results in a zero sum game. The same amount of wealth exist before versus after the split. One might argue the next move up by a dollar creates twice the wealth as before but that ignores the reality had the stock not split the price would have moved $2.00. What happens when Bitcoin goes from 10M coins to 20M coins? Who is absorbing the dilution? This is not the same as a stock split because the price is rising faster than either GNP or earnings in both the short term and the long term. What then justifies the increases that have no P/E checks and balances, no liquidation values on high volumes, and one cannot ascertain book value because a virtual coin is only valued by the belief of the people who stand behind it. Here is a question? How could anyone believe in a Bit Coin and not believe in God? Both are based on faith, doing the right thing, and never selling out your family or spouse. The price is the price because that is what the Bit-Coin Gods say it is. In fact merely questioning the value is grounds for being labeled a non-believer. I believe that both Bit Coin and God will have a second coming. I am just not sure which will happen first.

Unfortunately we will not likely see very many days when you can pay off your payday loan with your Bitcoin portfolio and this is where the logic begins to break down. If something is too good to be true or in the Bitcoin world, a marvel that needs to be believed in like Santa Claus, then one just needs to trust in the North Pole and the world will always be a great place to live, and by logical extension, Bitcoins will continue to thrive in an artificial world with fake news, robotic banking, and virtual coins that pay 1% interest per day while we all live in 2.5% inflationary cycles. If this were true we would all be billionaires inside of two years when the compounded rate of return in the Bitcoin world is factored in. If this were true a hot dog would also cost 1 million dollars in 2019 as well. No more free mustard. One squirt will cost $100,000 but the good news is we take Bit-Coin.

Back to our thesis. The tricky part of this equation is that the US government as currently constitutionally structured has the right to “tax it’s way” out of its own stupidity as long as the US can grow its GNP. One is simply a by-product of the other. If most people like ketchup and mustard on their hot dog, as long as hot dog sales keep going up, the market for ketchup and mustard, should, all things remaining equal, continue to thrive. So, here we have the ultimate standoff. Which is more real? The promise not to produce more Bitcoins or the US promise to always repay its debt? The answer to this question determines the future of Bitcoin when examined by common extension. Is it rationale to assume that Bitcoin, although it will never produce more coins on its initial production run, does by extension produce more supply simply by the rate of interest it pays. This severely reduces the logic of a somewhat limited supply. Limited according to whom and is anyone doing the math here? As I have always said in my company’s, dilution always matters, whether by stock dividend, or issued debt or equity, more shares out means more shares out, end of story. The plain truth about Bitcoin is it is backed by a promise that the market shall stay rational because the supply is limited yet its very own “dividend yield” is mathematically not sustainable unless people see the rational in a $1M Bitcoin. The $1M Bitcoin has no more asset value than a $1 dollar Bitcoin. It does not matter if the process is managed by my daughter counting the coins with a crayon or a super computer that knows how to process every coin in a nano second. The ability to track has nothing to do with the ability to back! The US government at least has the ability to tax, unlike Bitcoin. This is the first wave of crypto technology, and for all its faults, it has been one hell of a good ride. If Bitcoin can find a way to do reverse currency splits and go back to a dime, it might have a future. Otherwise, the mailman is going to get bit and it won’t be with a coin. It might be with his retirement and that is the sad thing about something that is not rational. The Bitcoin surge is based on building a strong pyramid where the bottom stays bigger than the top and their are more buyers in line than sellers looking to liquidate. When over 100M people own Bitcoin the challenge is going to be where to find the next 200M buyers. That is just simple math. The reality is that the whole world is playing this game so unlike the great “Pyramid Meetings” than consumed Los Angeles in the 1980’s, it may take a awhile to get to 500M under the base of Bit-Coin. In the meanwhile, viva la Bit Coin. Unfortunately, like avocados that get overripe, the line of buyers eventually will require smaller and smaller prices to buy that $2.99 avocado. The market will need a way to process the ten cent sale. Bravo the Block Chain. It can add and subtract after all. Who ever knew it could even divide?

Signing Out,

John C Botdorf

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Rebuilding Puerto Rico with Time Share-The new Disaster Recovery Model?

The recent rash of Category Four and Five hurricanes off the US coastline has dealt more destruction to Puerto Rico than the previous 80 years of hurricane damage combined. Mother Nature did with just two hurricanes, Irma and Maria, billions of dollars in long term damage within a few days of each other. Many of the families on those islands may never fully emerge with anything resembling a home again. Many of these families worked on their land or worked at their business for decades to own a small piece of the American Pie.

Many of these families that make up Puerto Rico’s 3.4M population may have to leave the island just to find food and water, increasing the $73B tax burden and $53B pension overhang on those who stay on the island. If nearly 1M people are forced to leave, that will leave Puerto Rico will over $61M per person in debt. The recent cries to wipe our Puerto Rico’s debt are not an option. The current debt burden is not sustainable under any plan.

Although this problem has stemmed from massive borrowing over the past 20 years, Puerto Rico now has $11.3B billion in what was pre hurricane, rated municipal bonds, many of which are owned by Americans retiree’s who looked for a safe after-tax income to help fund their retirement. In essence Puerto Rico’s problem is also American’s problem. While this small island consisting of just over 3,500 square miles has packed an impressive $104B GNP in past years, this revenue stream is now in danger of falling off markedly as tourism and the ability to produce goods and services are now compromised. The recent hurricanes have now taken an island whose future was bleak at best, and now cries out for new thinking. The is a big problem and will need a big solution.

This Common Wealth of the United States is now heading into default with little or no borrowing power to finance their way out of recent disasters. The island has reached the point of no return on paper and needs billions of dollars to replace and repair their electrical and power systems. Governor Ricardo Rossello faces new financial challenges almost beyond comprehension.

Puerto Rico needs a huge out of the box solution and they need it now. The need new revenue, reoccurring revenue, downstream tourism, new jobs, and most of all, they need a reason to believe. They also need it now.

How does any Governor get new capital into an island that is broke? The governments of many localities do not have the financial power to just go ahead and provide disaster funding for every owner that lost their home. What the is the solution for so many who have lost so much? The answer lies in the only remaining asset these governments have any control over:

What the can Puerto Rico offer the world right now:
1) Prime Ocean views.
2) The ability to rezone.
3) The ability to create a New Enterprise Zone.

The island has the capability to spark huge development if they do it the right way. I will outline below why it needs to be done in the right order, with the right kind of development.

It can take years to approve zoning for beach front development in the United States. The Coastal Commission, local town councils, state and federal regulations, tougher handicapped, fire, and earthquake standards all combined with sky high land cost have almost made continued US development of large beach front properties on the west coast nearly extinct and if these trends continue it won’t be long before the east coast shuts down. The highest and best use of higher density ocean villa’s is hands down a time share development because you can sell the pizza for $1.25 instead of $1.00. Higher margin, same development headache.

The only reason the east coast is still in play is because it has a lot more coastline given the double coined layout of Florida providing the state with two coastlines. Although more restrictions are slowing this down, Florida still has more available ocean front property than the west coast inside the US. Move past the middle of either coastline and the northern half loses the bragging rights on warm weather and the year round sunny beach days that consumers covet and Puerto Rico has in spades. This leaves US developers with just the southern half of the country to find prime real estate development designed for ocean loving retirees and tourist eager for the beach life.

This is the time to create a large 600 plus acre Enterprise Zone inside of Puerto Rico. The state and local governments need to ascertain what area’s can be condemned and rezoned mid-rise development. They can buy out every home wiped out and replace it with a voucher to purchase a condo, home or single family home for each family located in the Enterprise Zone that lost their home. In essence these families will sell their current pile of rubble for a new home voucher that can be used to replace their home in a newly developed residential Enterprise Zone.

This voucher can then be used to buy one of the above home choices on the outer banks of the Enterprise Zones so these families can have their dreams rebuilt. These vouchers need to combine for 10% discounts and be good for 25% down, leaving families with a low interest rate that is affordable. The national banks need incentives to write these mortgages down by 100 to 200 basis points so people with low income can afford to make the payments. This program should also be tied to a job bank that gives priority to those that live or work or both in the Enterprise Zones. A sinking fund should also be set up from a portion of the current donations to help fund these programs which provide permanent relief.

Now the island can approve a bill to fund the needed infrastructure sufficient to reconstruct a new power plant to service the Enterprsie Zones and surrounding neighborhoods. New bonds could be backed by tax revenues from the Enterprise Zones. It is important these zones create a coordinated Master Plan designed to attract the large global time share developers. The land should be sold to them at attractive prices. The large US developers have millions of customers in their current inventory and they need a lot more beach front time share as demand for both west and east coast properties is significantly underserved.

The redevelopment effort needs to accommodate at least 10,000 units over 20 years in order to generate enough tax revenue. Properties need to be beachfront and sold with covenants to break ground on half of the villa’s now and the other half within the next 10-20 years. Land cost should be attractive in order to attract bids that will close quickly. Other key elements of the plan include:


1) The Master Plan needs to include a large restaurant row, bowling alleys, golf courses, movie theaters, sports bars and a mix of international, national, and local retail.
2) The Plan should include a Farmer’s Market and local tourist Mall staffed with local owners.
3) The Infrastructure Plan should include either a monorail or bus or tram system that runs up and down the strand to minimize traffic and promote cross shopping.
4) Overall zoning should be an ideal mix of time share, condo’s, and hotel’s with emphasis on time shares. This will drive millions of new users to the Enterprise Zones every week.
5) The Enterprise Residential Zone should encourage both retirement, employee, and local residences with master planned bike trails and local parks leading into the Enterprise shopping districts.
6) The entire strand should have golf cart transport and parking.
7) A special “Puerto Rico” Tiki Village should be developed with Flamingos, Casino’s and a world class aquarium would bring in visitors worldwide.
8) A special “Cir De Sol” stadium for world class entertainment to accommodate concerts and boxing as well.

The bonds will sell because they will be indirectly backed by the largest developers in the world, the top global time share company’s that have access to public capital because of their public status.They also have direct access to the customers that are seeking more prime beach front product, currently unavailable for the most part in many parts of the United States. The Enterprise Zones must contain legal covenants from the government restricting any future like kind development for future time share construction for 40 years to encourage these types of capital commitments.

The Government of Puerto Rico should organize an Enterprise Council comprised of infrastructure experts, global time share developers, local and state government, and local citizens for constructive input into this process.This plan should create ten to twenty year Master Plans where each section of the Plan could be sold off with a pre approved development guide. The one thing Puerto Rico can offer is to get rid of the years of approvals. Once the Master Plan is in place, the government could begin selling off the parcels and recouping hundreds of millions while also guaranteeing their island something more valuable than a loan, reoccurring tax revenue.

The largest time share developers need to buy into this project which is necessary to create the critical mass needed to pull off a project of this size. They also have the in house teams needed to build Cat Four and Five properties that will better stand up to the next destructive hurricane. The Master Plan should include wind tunnels and enough steel and concrete to allow for this project. Since Puerto Rico is not in position to build $1M condo’s and if they were, they would not sell because the island is decades away from having financial stability without plan in place. The market is not there for full time residents. It will be there for thousands wanting a month of perfect sunsets.

By using a time share development solution you can spread the cost of rebuilding Puerto Rico across the United States and provide a much better product that is already needed. Americans can help rebuild this island with their vacation dollars and can always choose to visit other sites if they decide they do not wish to return. They are not taking island risks the way a purchaser of owning 365 days a year takes. Developers will flock to the island if a solid and defendable Master Plan protects their commitment long into the future and if the plan includes the proper infrastructure in place. Puerto Ricans can then hold their head high knowing they are part of a world class solution instead of incurring billions more in debt they are not positioned to pay back. This project provides a solid solution and would allow the surrounding island economies to heal as downstream GNP from the Enterprise Zones pours over into the island economy. For more information about time share demand, please visit our web site at

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Economic Cycles and their impact on Time Share Values-What the Future Holds.

September 22nd, 2017

John C Botdorf-Blog Post

RE: Economic Cycles and their Impact on Time Share Values-What the Future Holds.

Dear MYTS Fans,

To Time Share or Not to Time Share? The question of the day. Certainly with today’s internet buffet on travel options it is possible to travel almost anywhere, stay in some comfortable digs, and if your attitude is right, you can have a good time and make most trips worthwhile. That said, the old saying can still apply, “There is no such thing as free”. Well we would have to define free. Time Share is the only real estate business in the world where it is very possible to cover 100% of your cost. We discuss this in detail in Mastering Your Time Share. But the old internet bargain does come with the “you get what you pay for ” more often than not. Generally huge discounts come with getting booked into less desirable units, back of the plane, and marginal food. Does not mean it may not be a bargain however. Cheap is Cheap.

Would if you want to travel cheap but stay in nice digs, a la time share and you want to know how to get started. It is important to understand economics because time shares have some valuable conditions that will by definition, perform very differently depending on where the country is headed in its next economic cycle. We are going to discuss in this blog a few concepts that we believe will apply to times shares in the next 15 years. We all know any of us can predict the stock market is going to crash or suffer a 25% pullback. I read everyday and have for the past 15 years that the market is tired, overbought, interest rates must rise, and we all need to sell everything and live in a cave. Eventually these predictors of dome will be 100% right. At some point the market will take a downturn and the doomsday pundits will flood their blogs with I told you so. Well, you and I can make the same prediction every year for 15 years, and we would be right as well at some point. My point is what good is their advice. It is like saying I predict the earth will have darkness in the next ten hours.

For those that have read our book,, you know we believe that certain time shares are undervalued relative to their housing counterpart. What do we mean by that? Well, in the Newport Beach, California area a two bedroom house with two baths with about 1,500 square feet on the water or with a 180 degree view of the water will cost about $4M today, if you could find it. One could purchase one year of time share, stay every year in an ocean villa, on the water in Newport Beach for about $975,000. My friend commented, “well you really don’t own it”. My answer was: What do you mean by own? Is not the right to occupy 365 day a year the same as ownership? Besides, less than 33% of the homes in the US are actually owned outright. The balance of the population has to pay the bank every month or they will not own their own home. So why does 1,500 square feet in one real estate environment need to cost four times as much for the exact same thing?

This brings us to the point of our blog. Some of us may remember the early 1980’s. Prime interest rates hit 19%. Inflation was running into double digits and it continued for years. What happened to the value of hard assets? They soared as inflation took off. Let’s examine the current state of the US economy. We now owe $19 trillion dollars to bondholders who own our debt. The current Trump administration is looking to mandate a US tax cut to help stimulate the economy and produce more jobs. The handwriting is now on the wall if you look outward for a period over the next 15 years. What is the single best feature or reason to own a time share? You got it. It is the rate or “points” they can charge you to summer in Newport or ski in Vail in the winter. The right time share cannot ever change the price you pay to occupy your villa. Why does this matter? It matters because many of us have not seen, are dead or can’t remember the last real inflationary cycle because it happened over 35 years ago. Most people in their forties in the United States don’t know what inflation is. These are the same people now entering their peak earning years. Why does this matter and what does it have to do with the future price of time shares? I would argue it has everything to do with downstream prices, for everyone.

There are two reasons that interest rates must rise in the future. When they do, the RRC spreads on time shares are going to explode. What does this mean? It means that while operating expenses will rise in line with inflation, rental rates will rise as much or more causing the economic value of real estate to go up. This is true whether you own a home or a time share. Beachfront property is beachfront property. The property itself does not care whether it is owned by 52 one week owners or just one 365 day owner. When taxes get cut nine times out of ten, production goes up, more people get hired, so more homes need to get built. Now the price of lumber and steel go up because all of a sudden there is more demand for copper, lumber, drywall, etc, because everyone needs it. Now the railroad company needs to charge more because it has more customer demand than open rail time. Solution. Just raise your price until demand equals your open supply of rail cars. This cycle then goes on and on. Now, this is reason number one on why interest rates rise. The demand for money goes up. Money is just like hot dogs. If you have ten hot dogs to sell for the day and 15 buyers, how do you solve the problem? You raise the price and go surfing!

Now let’s look at reason number two on why interest rates need to go up. When you owe $19 trillion in debt you have to keep selling bonds. Lots of them over and over. When the world has wars, hurricanes, earthquakes that wipe out whole islands, what happens to the need for capital? It goes up. What happens if Russia needs $15B for a new pipeline, the US wants to improve our freeways (infrastructure) and we need $1 trillion just to upgrade our own highway and travel systems. We go shopping for money, just like Russia. Where do investors decide to invest their money? They take the highest combination of return with the lowest risk profile. So, if we need to borrow more and more money and compete with our own US citizens who need capital to grow, eventually the world economic demand for capital gets short on money. The answer: It is just like the hot dogs. The federal reserve raises the price it will pay for capital and it comes back to the US. But it comes at a cost, we are pay more for everything because the price on money is part of the cost of doing business.

Now back to time shares. Let’s pretend we forgot the 1980’s.It is not a matter of whether prices will go up in the future it is just a matter of how much, and how fast. In fact it is likely we will see relatively speaking, tame inflation into the next election through 2020. Inflationary cycles take years to take off and years to cool down. Imagined you owned a prime summer beach house and I came along and offered to rent it for $10,000 a month forever. You live on the east coast and decide that $10,000 a month for life is a deal since the market is only $8500 a month right now. You are smart enough to make sure that I have to pay the operating expenses. Now, let’s run the math over 15 years with 3% inflation and 10% inflation and see what that $8500 a month rent should be in the year (2017 + 15) 2032. In the year 2032 with 3% inflation the rent is now $13,242 per month and with 10% inflation it is now $35,506, per month, every month. Now for those of us that feel we will be alive in 15 years (your kids most likely will be), how would like to insure you will pay $8500 a month to summer at the beach every year for life, your kids life and your grand kids life and so on. You see, time share is an insurance policy against inflation. Yes, operating expenses will go up, but the rental rates will also go up, meaning the spread between the Daily Rental Rate and the Daily Expense rate (the RRC Ratio) will rise with inflation meaning you just make more money if you rent it out.

Now you can see how inflationary cycles can greatly impact the future value of time shares. You win pretty well if we have low or moderate inflation like we have had in the past several decades. However, when the economy shifts into higher inflationary cycles and your upside occupancy cost is frozen for life, the value of that time share has to soar. I used $8500 a month for an example. Right now prime two bedrooms with two baths on the water in Newport or Maui are renting for $900 plus a day. That is $6300 a week right now or $25,200 a month in 2017 dollars. Let’s run that out 15 years at ten percent inflation at 4.17 times the current weekly rate. $6300 times 4.17 is $26,271 to rent a summer condo for a week in 2032 if inflation hit 10%. There were years in the 1980’s that inflation was much higher that that. This is why time shares are the poor man’s way to own real estate. Whether you use it for pleasure, to live in, or rent it out, most of us would prefer an alternative to the current $6300 for a summer week.