What is “Stretch” (STRC) and does it REALLY pay 11.5% interest?!?

What is stretch strc and does it really pay 11.5% interest? The answer is yes, it does. And let's talk about what it is because it is one of the most fascinating and exotic financial instruments ever created and it is built on Bitcoin. Okay, so first of all, who's behind Stretch? It's called Stretch, but the ticker symbol is STRC, but they call it Stretch because it stretches your interest rate. Okay, so Stretch is a perpetual preferred stock from Strategy, the company known as Michael Strategy, led by Michael Sailor. Michael Sailor is an absolute genius, one of the smartest people literally to ever walk the earth. And he has built Micro Strategy into the largest corporate holder of bit actually the largest holder of Bitcoin period in the universe. It's it's larger than nation states. Micro Strategy owns more Bitcoin than the United States, China. like they are literally the largest owner of of Bitcoin in the world personal or otherwise other than Satoshi Nakamoto. Technically, Satoshi Nakamoto still owns more Bitcoin although everybody thinks he you know burned the keys to his Bitcoin back in the early days. Okay, so Micro Strategy started as a software company uh not unlike the software company I built uh although they had gotten bigger over the multiple decades they have been in business. Um although actually technically I think the software company I built is now bigger than they are but regardless you know anyway. Okay so Micro Strategy pivoted to buying Bitcoin. So they were issuing stock buying Bitcoin issuing stock buying Bitcoin. Issuing stock buying Bitcoin. As they issued stock and bought more Bitcoin the stock price went up which meant they issued more stock bought more Bitcoin. All right. So they were doing this but they there was a limit to how much people would buy of their stock. And so they tried they started experimenting with a bunch of different stocks. ST strf which they called strife. Uh so anyway, Michael Sailor is the founder and CEO of Strategy and Strategy has these different instruments. Well, at as a result of all of their experimentation in the marketplace, they ultimately determined that what a lot of people wanted, even if they did not understand Bitcoin, was basically a bank account that paid a really high interest rate. And so Micro Strategy already had enough Bitcoin on their balance sheet uh that they and enough cash on their balance sheet. They have multiple billions of dollars in US dollar cash as well as a reserve to pay interest rates uh as an effort to uh sort of polish up their their bond rating which I'll explain all of that in a bit. But anyway, so they had this idea which they used uh AI to come up with this idea which is it's absolutely brilliant. Although I am not saying I recommend this. I'm not saying I recommend buying STRC, but it is an absolutely brilliant financial instrument that Michael Sailor and his team invented and it has been buying up bazillions of Bitcoin. Like, I mean, this thing is just hoovering up Bitcoin like you wouldn't believe. Okay, so here's how it works. So, people buy the STRC stock and the STRC stock has a variable interest rate that is currently set at 11.5%. That means Micro Strategy will pay in US dollar cash as a return of capital 11.5% annualized. So obviously that's almost 1% per month. Uh if you own the stock called SDRC, the stock is designed to trade at exactly $100. Now it can dip below that, but if it dips below $100, the interest rate actually goes up. So, by default, if you own one share for $100 and it's still $100 at the end of the year, uh, well, doesn't matter what the price is. If you own a share that you bought for $100, they will give you $11.50 of interest at the end of the year, and it's paid monthly. So, they give you one 12th of that every month. Okay? So, if the price drops to, let's say, $90 a share, you are now getting $11.50 of interest for a $90 share. So if you buy it for less than $100, the interest rate is significantly higher than 11.5%. Because you get the uh you know the the ratio between 11.5 and 90 is significantly higher than the ratio between 11.5 and 100. So whatever that is you you know you get 12 13 14% interest or whatever it is. Okay. So Micro Strategy has said they are committed to keeping that variable interest rate high enough to keep the stock price at $100 a share. Now, if the demand for this instrument, this STRC instrument is higher than the trading volume, basically if there's more buyers than sellers, then they have the ability to sell more shares of STRC into the marketplace and then they immediately turn around and buy Bitcoin with the proceeds. So, the way it works is like this. I'm going to use myself as an analogy even though I would never do this and I'm not recommending you that you do this. So, let's say I go to you and I say you should buy Bitcoin. You're like, "It's too volatile for me." And I say, "Well, what if I were willing to absorb the volatility?" Because I have enough Bitcoin to absorb the volatility, but if I absorb the volatility, then I get a lot of the upside, but I'll give you as much of the upside as I can while allowing myself to keep the upside as a reward for absorbing the the volatility. So, you would say, "Okay, well, how much of the upside do I get?" And I would say, "Well, 11.5%." And you're like, "Okay, so I'm going to give you $100. You're going to invest it in Bitcoin, and then you're going to give me 11.5% interest every year." My answer would be yes. And they're like, "Wait, wait, how do you make money?" And my answer is, "Well, because I'm going to take the $100 you give me, and I'm going to buy Bitcoin with it. And I know Bitcoin is going to go up more than 11.5% on average per year. So the 11.5% interest that I'm paying you is a portion of the upside, but it's not all of the upside. So, I get to keep the rest of the upside. Uh, your response would be, "Yeah, but what if as soon as I buy it, the price of Bitcoin goes down instead of up? How are you going to pay the dividends?" And the answer is, "Well, that's why in the case of Micro Strategy, well, I don't have a cash reserve, but let's assume I did like uh Micro Strategy does. That's what the cash reserve is for." They're like, "Look, if Bitcoin dips, then we use our cash reserve to pay the uh the interest rate. If it doesn't dip, then we use the cash proceeds uh we have on our balance sheet to uh as a result of selling shares of MSTR stock, my Micro Strategy stock. We'll use those to pay the dividends. So, they're selling stock to pay the dividends and they're they have a cash reserve in case there's a bare market, which we're in right now. And they guarantee they don't guarantee, but they have uh stated that they will pay 11.5% interest on this STRC stock. So in in a beautiful sort of way, as long as this works, and it's so new and it's so exotic that, you know, people are not guaranteed it will, but as long as it works, it's a really beautiful thing, which is people who want maximum upside of Bitcoin, uh, that's even more volatile than Bitcoin could buy shares of MSTR, the actual company, the stock stock. Uh, so the shares of MSTR, the company will go up and down even more radically than Bitcoin because essentially it's leveraged Bitcoin. You're buying more Bitcoin per share than you would otherwise be able to because of this STRC vehicle. So the people who want the absolute craziest wild ride can buy shares of MSTR, which I do not recommend, but uh because there's no guarantee that they will go up in the long term the way in my opinion Bitcoin will. Um but anyway, the people who want a corporate stock with maximum Bitcoin exposed volatility can buy MSTR. But the people who want the complete other end of the spectrum, which is as little volatility as possible with a very high interest rate, can buy STRC stretch. And to the degree that the performance of Bitcoin outperforms the 11.5% interest, the value of that outperformance acrru to the common shareholders which is MSTR. So essentially you have two ends of the spectrum where the people who want the safest, you know, the safest solidest return that's super high are buying STRC stretch and the people on the other side willing to take the risk and put their, you know, balance sheet of US dollar cash and a massive pile of 740,000 bitcoin uh worth, you know, six whatever that is 50ome 60some billion dollars. the people who are willing to take that risk and put their balance sheet up as effectively collateral are getting the acred upside to it. So to recap, the way that would work is you come to me and you'd say, "Hey, I want basically a bank account that pays 11.5% interest." I say, "Great, give me your money. I'll put it in Bitcoin and then I'll give you 11.5% interest. How am I going to pay for that?" By the appreciation of Bitcoin. What's going to happen if I'm in a bare market? Well, that's when I'm going to tap, in the case of strategy, a US dollar reserve they have for that purpose. And if we're not in a bare market, I'm going to sell common stock to raise more money to pay your dividend. And I have the ability to do that because my stock price keeps rising because I keep buying more Bitcoin with the effectively the upside that I'm not having to give away. So, you know, Bitcoin in the next 12 months could go up 30 or 40% or 50% or more. and I only have to give away 11.5% of that to the people who want the stable return. So, it's a brilliant, brilliant, brilliant financial instrument. I do not recommend it because it is brand new. Everything comes with risks and it is a stock market security. But if I were Michael Sailor, I'd be pretty proud of myself because that is a just a brilliant genius financial instrument. And it has been buying thousands of Bitcoin every week because there are so many people who are willing to make that trade. They are willing to trade Bitcoin's volatility for a very high interest rate. So they're giving up they're willing to give up all of the upside of Bitcoin other than 11.5% in exchange for not having the downside volatility of bare markets and huge draw downs. So in some ways again everybody wins. So I do not recommend Micro Strategy MSTR. I do not recommend uh Stretch, STRC, but both of them in their own ways are brilliant financial instruments that are meeting very unique needs in the marketplace that are allowing for people to to participate in the Bitcoin ecosystem even when they don't have the appetite for in the case of Stretch Bitcoin's volatility. So, Micro Strategy takes away that volatility in exchange for capping your upside at 11.5% per year. or on the other end of the spectrum, people who want an even more volatile experience with an even wilder roller coaster ride than Bitcoin itself, which I do not recommend, can get a taste of that with MSTR, which is Micro Strategy, uh which is strategy. They changed their name from Micro Strategy to just strategy, which is uh on the other end of the spectrum of the most speculative, wildest roller coaster ride. But if all works out, which there's no guarantee it will in their case, but if it does, it's a wilder roller coaster ride with even more upside. But again, I do not recommend it. But I still think Stretch STRC is a brilliant financial innovation. I mean, the sort of financial innovation that makes you think you wish you had come up with it yourself. Not nearly. So STRC is an absolutely brilliant financial innovation. I'm not saying I recommend it. I don't own any. But there is a niche in the marketplace that wants that. And Michael Sailor is an absolute genius for inventing it. And that vehicle is soaking up huge amounts of Bitcoin because there's so much demand for people who are willing to trade a lot of the upside of Bitcoin to have a solid, you know, 11.5% return if it all works out. And hopefully it will, probably will, but we don't know. Which is why I don't recommend things. Just buy Bitcoin and hold on to it for as long as conceivably possible. that is the the path forward. But Michael Sailor is still a genius and STRC is a brilliant financial innovation. Uh if it works out and it might not which is why I don't recommend it. So FYI,