80. Diversified Portfolio: Investing In Multiple Asset Classes With Eng Taing

PILF 80 | Diversified Portfolio

There are many ways to earn passive income, so why limit yourself to just one asset class when you can diversify your income streams? In this episode, Eng Taing, Founder and CEO of Touzi Capital, shares insights on the different asset classes in the Touzi portfolio and how they are able to effectively and profitably serve their investors. Eng also goes in-depth into the Bitcoin mining process and the role it plays in energy generation and consumption. So tune in and learn how you can diversify your portfolio, earn passive income, and have cash flowing from multiple income streams!

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Diversified Portfolio: Investing In Multiple Asset Classes With Eng Taing

I’m excited to have Eng Taing with us. He’s an experienced private fund manager with over $220 million in assets under management in many years of the private market and real estate investing experience. He’s focused on cashflow investing in creating passive income, so that’s right on with what we’re doing. He’s the Founder and CEO of Touzi Capital, a private equity investment company focusing on multifamily, senior living, Bitcoin mining, defi, and other private equity alternative investments. There’s a ton to talk about.

Eng, welcome to the show.

Thanks for having me. I appreciate it.

The first question we always ask is, we want to understand your journey a little bit. I know you have a fascinating journey, but can you talk about where you started and include how you got into real estate and the syndication? We’d like to know all of it.

If I may, I would love to go all the way back to the beginning. It’s important to understand our personalities are formed. I was born in a refugee camp in Thailand. My parents are Cambodian. We escaped the Khmer Rouge and the genocide was happening there. I have cute pictures of myself chasing chickens in straw hats. I also have stories handed down from my parents of escaping some unbelievable atrocities and some very sketchy times in my life.

We had the fortunate privilege and are always grateful for this to immigrate to America when I was three years old. I came here when I was three years old. My parents did not have any high school or elementary education. You can imagine. They were the type of folks that had to walk seven miles a day with a stick and two buckets of water to get water from a deep well. My mom also has back pains from that experience.

We pretty much have nothing, which formulated my entire mindset of scarcity. When you have nothing, you seek security. I was fortunate to be good at Math and good at Economics. I grew up in LA. I day traded when I was in high school before anyone had any phones or anything like that. It was for Finance and Economics. Ivanka Trump was one of my classmates. I also played poker and paid my tuition through that. I’ve always been pretty good at math, and then I got into investment banking right after that.

This initial story is about me trying to find a way to make money when I didn’t have money. When you don’t have money, you want security until you chase those securities. My Northstar has been getting my family out of poverty, and I succeeded at a fairly young age, but then the faster crisis happened. That changed my entire thinking of being super reliant on equities or one source of income because I saw my 401(k) drop by 50%-60%. I was young back then and I have all the years ahead of me to rebuild that. It didn’t give me a sense of security. When I first started looking at real estate around 22, I bought my first apartment building. It had been my first triplex.

It was cashflowing very well. It was a 10% cap rate. I was like, “This is a great deal. I can make $1,000 a month.” For me, that was a lot of money and security. Chasing after cashflowing investments have been my source of passion and security, and it has allowed me to also take more risks in my career. I think we don’t have to be one note. We don’t have to invest passively. We can actively invest but also actively participate in other ventures.

I have had many opportunities working and going to the Peace Corps, for example. I went to the Republic of Georgia in 2010, right after Russia invaded Abkhazia, which is a part of Northern Georgia. Very familiar times. I remember seeing tons of refugees. My parents were dismayed and flabbergasted that I would go to a third-world country that they had escaped from to a war-torn country with refugees.

I thought it made sense to me, but I did that because I also had the sense of security of some real estate that I had back home in America. I met my wife there. They left Peace Corps, went back to LA, and worked in gaming, media, private equity, and then tech. I had leadership roles. I was leading data science at Siri analyzing trillions of records of data. A lot of people would say a lot of crazy things.

When you have nothing, you seek security. Click To Tweet

I bet they do.

It was a fun time to do all those things. I essentially retired in the mid-30s, having built a substantial amount of wealth for myself. The whole time since I even started Peace Corps, I’ve been buying real estate and an investor. I’ve been investing since 2009. I feel like a young person under 40, but I’ve also been passionate about finding these secondary sources of income. I materialize in building a fairly large private portfolio of real estate investments.

I started to talk about all these things I was doing to all my friends and family, who were very smart and engineers working on projects and products that affect billions of people’s lives. The smartest people in the field didn’t know anything about investing. They put the money in their 401(k). They trusted an investment advisor. They didn’t know anything about private deals, real estate, cap rates, or the tax advantages specifically of real estate.

I had this Jerry Maguire moment years ago, where I thought about all these tax advantages and all these great ways that I was doing for many years. I wanted to publish it and take credit deck. I took away the deck to all my friends, family, and colleagues. It helped highlight that a lot of people didn’t know this stuff and wanted to participate in it, but they didn’t know how to. That’s when I started Touzi Capital.

That’s a great story. To come from where you came from and get where you are now is amazing and a credit to you, for sure. One thing I’d like to dig a little deeper into is the streams of income. I love the way you said that it allows you to take chances. How did you figure out that real estate was the way you were going to get these streams of income, and what made you think?

Most people having great jobs as you had would coast. I did for a long time. I got my 401(k) and I’m making a great income. It never once crossed my mind that maybe another stream of income would be helpful. It’s two questions, but how did you figure out that real estate and multiple streams of income will give me more security?

You’re right. I had a very great job at Apple. In fact, when we left in the middle of the pandemic, my wife was four months pregnant. It’s like, “What the heck are you doing leaving a pay nearly seven figures and leaving fairly substantial going in handcuffs?” I was able even to get there because I’ve always thought about real estate and investing as an ability to take those risks to allow me to move to different routes. This is very critical to going up your career ladder. Why did I think of real estate? I think that was such a natural thing for me.

I enjoyed the physical aspect of creating value and home. I could see and materialize it. I love spreadsheets and understanding the market because I am always looking at data. My full-time job was as an investment banker, and seeing that there were all these asymmetric sources of information. You could find good deals in the poll of bad deals. I don’t think you get the same chance to do that in public market equities.

I’m not a public market equities guy. If you ask me what the price of this stock is and whisper that, I don’t know. It’s not my expertise now. I know that when I look at a neighborhood and see a property that potentially has this and that issue, it can be resolved fairly easily, and the market is underpricing. I also know that I won an advantage when I did a deal. Having that asymmetric information allowed me to go in and feel confident. When I did my first one, I was able to do the BRRRR method, which I learned the definition of later in life. I was like, “Let me paint the cabinets, redo the floors, increase the rent a little bit and refinance out.” I bought another property shortly after.

PILF 80 | Diversified Portfolio
Diversified Portfolio: In real estate, there are great ways to defer and leverage depreciation and other tax advantages when you’re an investor, and that’s a great source of tax income or tax-deferred income.

For everybody to know, the BRRRR method is a BiggerPockets term. It means Buy something, Rehab it, Rent it out, Refinance it, and Repeat. The goal is to get all of your equity out. That’s a great model. You talked about your colleagues and family that you spread the word about. Why don’t people, like your colleagues, family, my colleagues, my family, and friends, understand the benefits of passive income and multiple income streams?

Part of the mission of Left Field investors is to share that, “Go out and get some multiple income streams.” It’s a good thing for a lot of the reasons you already talked about, but why do you think most people don’t understand the benefits of that and need either a push or someone like you to show them and say, “Come with me?”

That’s right. I think when people try to push somebody to do something, it’s difficult. The way I always positioned myself and talked very naturally to my fellow colleagues. I was running a 1,500-person real estate investing group at Apple. I’ve always talked about, “Here’s what you could do.” It’s more about leading by example and being an aspiration. Why do most people not do it? A lot of people focus on their lives. The people who do have money make money because they are great at seeing their purpose or did a great job. It’s very hard to think of multiple things at once. When the market is good, you think, “What’s 10% cash-on-cash? Maybe my stock went up 40%.”

They don’t think of the downside, but they think about the other side of things. It’s all asymmetric in nature, so when you perceive something, you can’t see the other side of things, and they pay a lot of taxes. The way I led with everything was, “These guys pay a lot of taxes.” In real estate, there are great ways to defer, leverage depreciation, and other tax advantages nature because you’re an investor now. That’s a much better source of taxable income or tax-deferred income.

That is a huge advantage of the tax situation. I want to move in and change the pace a little bit and understand Touzi a little bit more because you don’t often see an operator with such different asset classes, senior living, multifamily, and Bitcoin mining. Those aren’t super related to each other. Are you the operator/asset manager for these deals, or are you raising capital and putting money into another operator’s deals? How does that work?

Every one of our deals, we are very closely tied to. Bitcoin mining specifically. I run the whole company and the big mining operations. I spend probably half my time working on that, and we’re always making deals on that side. I’ve been in Bitcoin since 2013, so any volatility seems funny to me because it seems all high. On the other side of things, I’m not in every area. I have two young kids. I’m in San Diego, California.

I don’t invest in San Diego, California. Probably a lot of people would understand why that would be the case because I like cashflow. I invest in Texas, Missouri, and Florida. I had to rely on operational partners that do what they do greatly. I like to invest in people and businesses, specifically multifamily. We were doing a deal. I closed one in Houston, Texas. I was doing a 219-unit prime building, a great place and our operation partners are the ones who are mostly managing it.

We are asset managers of it, but they’re mostly managing it for our senior living, for which we have a portfolio of 13, and we’re developing 7 of those. We’re very actively involved in the financials, accounting, and financing. I’m not an HR person. When it comes to senior living, a lot of it is about HR. You got to hire the right amount of care and manage staff. You have to make sure that they’re all happy and take care of the residents because you’re essentially fighting a full-fledged service where you can get 4 to 5 times the amount of rent. That typical similar style apartment building would pay but 3 to 4 times to cost, so you have much better NOIs.

I’m naturally a person who likes to generate cashflow and make money. I did a couple of deals in mineral rights and oil and gas. It’s all sent from me personally, a very interested investor. I like to invest. I put my own money into stuff then I figure out, “How can I scale this? Is this scalable? Can capital or other types of things scale it? How does that scale help economics of the deal?”

How does a limited partner like myself and a sponsor like Touzi where you’re so diversified? You’re in so many different things. I like to invest in somebody who’s focused on one thing because then they’re going to be good at that, like you with Bitcoin mining. Now, I understand you probably hire experts and people that understand the other asset classes. What questions should an LP ask? How do they figure out is Touzi or whatever, anybody who is such a diversified operator? How do we figure out whether this is the person I want to invest with or this is the company I want to invest with?

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There’s a very good reason why you want to be invested with someone specialized. For me, I’ve specialized in operators to become a miner. One thing that I would say about diversity in the strength of that is you can see multiple angles and be able to understand things from an investment perspective of an investor and not somebody who knows technology Bitcoin mining, past rates, and all these are specific that relate to the industry. You can now make economic decisions like an investor.

You learn that by investing, not necessarily in Bitcoin mining but in other assets. You’re leveraging costs depreciation and accelerated depreciation for the Bitcoin miners where we can set up 100% of it the first year. I learned that from real estate. Most of them become my friends who run multibillion-dollar companies. They still don’t think like that. They don’t think like an economist or investor, so they need to have a different thought process.

To answer your question, I would make sure that if you’re investing with any sponsor, understand what their stake is because it always highlights their confidence. If they’re putting their own money or they’ve invested before in this specific sponsor or fixer operator, this is not the first time have they had experience with it. What the sponsor is doing if that’s the case, they’re vetting it for you. They’re presenting you with the deal. I get approached by operatives all the time for deals that I think are pretty good, but I need to vet them. A lot of my diligence now is vetting investments, both from a personal perspective as well as one that could fit our audience at Touzi.

I want to talk about Bitcoin mining because it’s super interesting to me. I’m an investor in your fund. Can you explain what Bitcoin mining is? I think most people are familiar with at least what Bitcoin is. The price has dropped a lot. You talked about volatility, so that makes a difference in the returns of Bitcoin mining. Can you give an overview of what Bitcoin mining is and why it’s a real estate-related investment?

I love this topic. Bitcoin mining is similar to real estate. You’re essentially buying a hard asset, miners, and they are not people. They’re super computers. I get this question a lot. People are like, “Do you work 24/7?” We do work 24/7 because what we’re doing is a computer is plugged in, very loud and noisy and they generate hash rate, which generates Bitcoin. Every ten minutes, 6.25 Bitcoin is rewarded to one lucky miner, one lucky machine that helps create the system networks that allow us to define what the blockchain is.

Every time you send a Bitcoin to somebody, a miner validates that transaction. It’s like the visa network. There’s been 19 million Bitcoin that have been mined so far, and there’ll be 21 million Bitcoin total, so 2 million Bitcoin are left to be mined. It’ll take 120 years to mine those remaining Bitcoin. The economic Bitcoin mining is you try to find very energy efficient, productive supercomputers A6 bitcoin miners and plug them into affordable, cheap energy. What you’re doing is you’re transforming electrons into Bitcoin.

It’s a very interesting concept. Every second, every minute, you’re getting Bitcoin because we all aggregate ourselves into a poll. When one lucky miner gets 6.25 Bitcoin, everyone in a poll, meaning that joint collective gets a percentage of that. It’s very typical. Every day, I get four bitcoin. It’s like real estate because, first of all, you want to make sure that you have very low costs and OPEX. Prices where it is now, your profit margin is close to 25% to 30%. When the price is higher, your fixed cost is still very low but your profit margin is more like 75%. You can depreciate the miners, which allows you to take advantage of a lot of great benefits of deferrals.

I bet there’s no recapture on that either because those miners depreciate to nothing, correct?

Exactly. You want to run them to the ground.

PILF 80 | Diversified Portfolio
Diversified Portfolio: The strength of diversity is you can see multiple angles and are able to understand things from the perspective of an investor, not just somebody who knows technology related to an industry.

I want to understand this a little bit better because this is super complicated for people like me. You said one lucky machine gets the 6.25 Bitcoin. There are two-part questions. My first question is, how do you position yourself, so you’re that lucky machine? Are some machines luckier than others because their outfit is better? The other question is, how do you get a poll together where everyone agrees, “Whoever’s a lucky machine, we’re going to share all this out?”

A 6.25 Bitcoin, and these polls exist already. Probably 99% of all Bitcoin miners are plugged into polls. What you’re doing is you’re delegating your computing power to the poll. The poll is a collective. I’m in the Foundry poll, which constitutes around 25% of all miners, so 25% of the time, you will gain that 6.25 Bitcoin, which helps us with spreading out our variability.

Every ten minutes, 6.25 Bitcoin gets released, and that poll automatically disseminates to your computer. It’s based on how much computational power your supercomputer generates. We call that terahash or hash rate. That hash rate is all part of a complicated mathematical problem to solve a Rubik’s cube of an equation that tries to make it every ten minutes.

Meaning that if all of a sudden, 50% of all machines goes away, it will take twenty minutes to solve this mathematical problem on average. The blockchain network knows this. It’s coded into what Bitcoin is, which is what I love about Bitcoin. It’s all code, finite, transparent, and understandable. What I refer to by that is if the price goes down, a lot of miners who are less energy efficient or have higher costs of mining might unplug. That’s what has happened over the past few months.

When miners unplug, the same amount of Bitcoin gets released to fewer people, so we make more Bitcoin. It’s an interesting correlation here where if Bitcoin goes down, we make more Bitcoin. Unfortunately, Bitcoin is worth less but if Bitcoin goes up, more people and computers will be plugged in. More chips and production would be ordered. There’ll be more competition so that every ten minutes, every block reward. It’s always ten minutes or at least very close to ten minutes. It’s a very self-correcting algorithm. I went pretty deep into that. I’m not sure if I explained it very well.

It’s very interesting because I’ve never understood how it happens, and I still don’t understand how it happens, but I’m getting closer. I think that’s one of the things with Bitcoin, crypto, and things like this. It’s very complicated and hard to understand. Each conversation I have, I get a little bit closer to understanding, “This is one more thing that I understand.”

With Bitcoin mining and energy, not too long ago, everyone was talking about how Bitcoin is killing the environment because it’s using so much electricity. You hear people on the other side saying, “Bitcoin is helping solve some energy problems and as a storage of energy.” Can you talk about that? It seems like that view has changed a little bit over the last few months of Bitcoin as a huge energy waster. It might not be a true story.

Bitcoin is one of those things where it’s going to probably transform the way we think about energy because you don’t necessarily need to be in San Francisco, Dallas, or a major city to make Bitcoin. You want to be close to the source of production. Usually, the source of production of energy isn’t rare as the source of consumption of energy. We have a long transmission line and grids that move that electron over to the grid, then transform them so that they can go to people’s houses.

Around 30% to 40% of all electricity gets lost due to that delivery. We’re going to get our miners plugged in very close to where the production is. The one that helps us get as low a cost as possible, reduce our transmission costs, and capture the energy that would have been spotted or lost because of the grid. The second part is that I’m working with some power plants now and renewable energy sources.

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What Bitcoin mining does is that it’s a battery for energy companies. What I mean by that is when there’s so much energy being generated. If you think about Texas, there’s a lot of solar industry. There’s a lot of solar and wind. It’s great when it’s always sunny and windy at the same time, and it’s always not windy and sunny at the same time.

At certain times, there’s too much energy. Bitcoin mining becomes a great battery source because it creates sync of that energy. We allow the economics of renewable energy power plants to be much better. There are power plants being made now because they know that Bitcoin mining exists and they have a contract with Bitcoin miners to consume a part of that energy for a certain price because we’re trying to get electronics turned to Bitcoin.

I’ve heard this explained before, but it seems to me that if you’re using more energy, that’s not helping. What happens is that a lot of energy is needed, and the Bitcoin miners maybe don’t use as much. When there’s extra, that’s when they use more. Is that how it works?

Yes, you’re right. Simply when there’s a lot of demand for energy, like when there’s a major storm or heat wave, our miners can be shut off. It’s not great because every ten minutes, we make Bitcoin, but we can sell the energy back to the grid. A lot of industrial-scale mining looks like nowadays is power arbitrage. We’re arbitraging in power.

When power is very low, we consume it and convert it to Bitcoin because we can buy at a very low cost and sell it at very high costs based on the fact that we made Bitcoin out of it. Now, on the opposite side, when energy goes up, we then stop mining then we sell back the energy to the grid. We’re a very natural complement to the energy grid.

Do you stop because you have a contract with the energy company saying, “At peak times, you’re going to stop using energy,” or do you do it for economic reasons?

Economic reasons. We can shut down for 4 hours a day for 3 months of the year for 5 days a week. You can guess what those days and hours are. It’s very hot days in Texas, for example. That costs you less than or around 1% of all the hours of the year, and we can save around 20% to 25% of overall electricity costs.

Why is everyone going to Texas? We’ve heard Texas has problems with their power grid. To the person that doesn’t know very much like me, you think all these miners are going there will make the situation worse. You hear Bitcoin people talking and they say it makes it better because of what we talked about. When they need more electricity, the Bitcoin miners can turn off, and then you have some more energy, but why Texas? Why is it so popular?

One, it’s a deregulated market. It has its own grid that’s self-contained. When power is needed, generating in Kansas, it then gets sent to Oklahoma. In Texas, it’s all generated and consumed in Texas. There’s a lot of renewable energy in Texas. It’s in West Texas and North Texas. It’s all in the Plains of Texas, where there are not that many people. Those energy sources aren’t very economical unless you have more consumption during the off-peak hours and right next to the source.

PILF 80 | Diversified Portfolio
Diversified Portfolio: What industrial-scale mining looks like nowadays is essentially just power arbitrage.

Any stories have you heard of issues with the grid, it’s the grid, not the production of energy. Texas produces way more energy than it can ever consume in totality. It’s more about connecting and transmitting those lines of energy as well as the right timing of windows and energy that needs to be consumed.

Why doesn’t somebody like yourself, who’s a Bitcoin miner, move to the Plains of Oklahoma, where the wind blows all the time, put up a couple of windmills and use that power 100% for your Bitcoin mining?

That’s certainly one of the projects we were working on, specifically in Oklahoma. It’s windy 40% of the time, so you’re not online all the time. When you’re not online, you need to consume grid power. It’s going to be a mix of very cheap, renewable energy and maybe more expensive grid energy.

What’s the lifespan of the miners and also the lifespan of the investment? If I invest in your Bitcoin mining fund, how long do those computers last before they become obsolete or stop working? How long does the syndication go?

It’s the same answer. The miners should last around 3 to 5 years if taken care of. I have the circle evidence of miners, especially the one I own now. They’re 6.5 years old. It’s all going to come to profitability. If Bitcoin is at 100,000 or 200,000 in 5 to 6 years, these miners would be profitability still, even though there’ll be newer generations and efficient machines in the future. The fun lasts as long as the miners last.

How do you see the drop in Bitcoin price that was up to $60,000-some and now it’s $24,000 or whatever? How do you deal with that? How does the fund deal with that? How should investors be looking at that? I know you can mine more Bitcoin, but as you said, it’s worth less. The returns presumably are lower. How should we look at that and how do you look at that?

Our fund is a profitable enterprise. What I mean by that is every month, we’re selling Bitcoin, regardless if it’s $60,000 or $20,000. Unfortunately, I don’t like selling Bitcoin at $20,000 but we had to pay our electricity bill, which means our profit margin is less. At these levels, our returns are very high, but when it’s $60,000, we were delivering 10% a month returns. It highlights how Bitcoin miners potentially leveraged into Bitcoin because when the Bitcoin price goes up, even 10%, our returns go up more than 10%.

How we’re navigating the down market now, first of all, it does highlight that there’s a lot of miners and old miners that we’re profitable when it was at $30,000 or $40,000 but they’re not profitable when it’s $20,000, but they’re plugging out. They’re not plugging in. That helps our current operation from at least our production perspective. Ultimately, I’m a long-term investor of Bitcoin. I think that the price will be the same in five years. Years ago, I thought there would be very high. I don’t think anything I’ve seen highlights that it wouldn’t be the same amount in five years.

I’m not a trader. I would say I’ll dip and would dip again. I’ll sell the top, and it’ll keep going up. That’s not me. I’m an investor. I like cashflow. This is dollar cost averaging. Now, the dollar cost is low, and I think there are some great opportunities to buy distressed assets and miners from Celsius or other companies with other exposures. From the perspective of the fund, we’re trying to execute and deliver as much as possible.

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The fund has the same life span as the computers. It seems to make sense that if you wanted some exposure to Bitcoin mining, every time there’s a new fund, you want to be in that one so you get the fresh new computers. You have a mix of the latest technology and maybe some of the less costly technology. As Bitcoin price is volatile, you’ll be collecting either way. Does that make sense?

Yes. When Bitcoin’s at $60,000, everybody wants to invest in Bitcoin. When it’s at $20,000, everybody might not be interested. You’re getting two times to production, low-cost spaces, and everything but you’re right. Every fund we’ve subsequently released. We’ve had lots of repeat investors from the first previous funds. They want a dollar cost average on a low-cost basis or different, newer generation machines. I think it’s a much better way to buy Bitcoin because you’re likely to get more Bitcoin. You get more Bitcoin than if you bought it on the spot market. Plus, you get tax advantages and a monthly income.

With the distributions, when I invest with dollars, and you pay in Bitcoin, I know you can get distributions of dollars if you want to, but typically, it’s a Bitcoin. How does an investor calculate the returns given the volatility of the Bitcoin price and the conversion? If you’re trying to figure out, “Where are my actual returns? I don’t know because I gave you dollars, and you gave me Bitcoin back.” It’s complicated. How do you look at that?

We look at it at the monthly cost basis level. Every month, we will sell that Bitcoin for $24,000. The cost basis that now gets transferred to you. If Bitcoin goes up to $50,000, your cost is still $24,000 and the returns you receive are at that cost basis. We track that every month.

This is totally off the show now. I’m asking for myself. Is it something that we can get out of the portal when that’s up and ready so that we can then put that into our own software when we’re calculating our own personal returns?

For the K-1s, we do provide all those information anyways.

All this Bitcoin conversation, this is what I wanted to get to because, as I said, Bitcoin is complicated and volatile, and there are a lot of different opinions on it. It’s nice to hear from someone who’s in it and a Bitcoin miner. As you said, there are a lot of advantages if you want to get into Bitcoin to get into mining. Rather than buying it on the spot market and those are depreciation. Can you talk a little bit about the comparison if you’re thinking, “I want to get some money in Bitcoin?” Why might mining be a better option than going straight to buying the Bitcoin?

I’ll give you an example. For some investors, if they invested in Bitcoin when there was $45,000, which for our more fund, that was the price. If they bought Bitcoin, they would be down X percent. If Bitcoin stays at around $29,000, for example, it will break even from that investment basis. That highlights that there’s an economic advantage of Bitcoin mining. It’s a long option on Bitcoin.

The K-1s you get represents profit and losses. Losses come from taking a depreciation of 100% of the value of the miners, which usually constitute around 90% of the investment. When we’re delivering K-1s from our earlier funds, if they invested $100,000, some people have received like $95,000, K-1 loss that year.

PILF 80 | Diversified Portfolio
Diversified Portfolio: You can get worse economies of scale on the OPEX and worst kinds of scales in the CapEx from mining at home.

Why would I invest in a Bitcoin fund instead of going and buying a fancy computer and mining it by myself other than the fact that I have no idea how to do it? If someone knew a little bit, is it better to do it yourself, or is it better to have someone else do it? I’m guessing the answer is it’s the same as why I invest in somebody else who’s buying multifamily properties instead of me buying them myself.

That’s basically economies of scale. I can get pricing into hardware at the scale because of the huge amount of orders and the relationships I have or the manufacturers at close to 40% to 50% of the basis that anybody else could do it buying the same machine. If you plug it into your home, first, your partner or family might be very annoyed that it’s sending a lot of heat and creating a loud noise.

It’s running at 90 degrees Celsius sometimes. 70 to 90 degrees Celsius is very hot. It runs at 150 to 270 decibels, so it’s very loud. You wouldn’t want to have that in your home. Although, I do know some people who put 2 or 3 miners in their home so they can create a heat sink to heat a poll. It’s a very clever strategy. Energy is also typically 2-3 times more expensive than industrial energy, where you can get it. Especially the energy we source from.

You can get worse economies of scale on the OPEX and worst scales in the CapEx. I started mining at home. I think if you want to learn technology and you can mind with an application using your computer. It’s not going to make much Bitcoin. Not going to buy a fancy Bitcoin miner, which is the most energy-efficient and productive type of machine for it, but you can use any computer.

This has been a fascinating Bitcoin conversation. I appreciate it. The last question I generally ask is, I don’t know if you’re a podcast listener or not, but if you are, what’s a great show you’d like to listen to that you could share with our audience?

I’ve enjoyed the All-In Podcast. It’s a very good macro-economic thesis of the economy and what’s going on. Especially a fund manager is talking about the funds and the investments. It has been interesting to hear what’s going on.

I’m sure there’s a great time to listen to that now that the markets are so crazy. That’s awesome. Finally, if the audience want to get in touch with you, what’s the best way they can do that?

Feel free to connect with me on LinkedIn or on Twitter. Also, go to our website TouziCapital.com and sign up. I’m happy to have a conversation with anybody. I’m here to provide opportunities. The opportunities I provide are ones where I’m super passionate about. I love to connect and talk about investing.

Thank you. Again, this has been fascinating. I appreciate your time. Thanks for being on the show.

Thanks for having me.

That was a great conversation with Eng. He’s such an interesting guy. To be born in a refugee camp, come over to the United States, and have the success he’s had is amazing. It’s great to hear that’s one of the American-dream-type stories. I think it’s fantastic. Some of the stuff he was sharing with us multiple income streams. We’ve talked about that a lot where you want multiple income streams, but his take on it was it allows you to take chances. That’s a great way to look at it. You can be more risky with other investments or your employment or whatever you’re doing because you know you have these other income streams that are not dependent on you doing this every day.

It’s passive income. It’s coming in regardless, so you can take some chances. You can start a new business. You can open a franchise. There are all kinds of things you can do because you know you have other income coming in. It seems obvious, but when people say it, it’s like a light bulb moment, like, “That makes total sense.”

I also liked how he said, “Here’s what I’m doing. Follow me if you want to,” to his colleagues, family, and friends when he was getting into this. I’ve figured that out a little bit, too, with passive investing where I’m saying the same thing to people. I’m not trying to push or pull them into anything, but I’m saying, “Here’s what I’m doing. You can do it too. If you want, I’ll help you.”

I’m not in sales anymore, but that’s such a great sales tactic. You don’t want to push or pull people. You want to show them what you’re doing and say, “If you think this is going to be successful, come along. I’ll help you along the way.” It’s brilliant. Bitcoin is a battery. I go back and forth on this because it’s so odd to me to think Bitcoin stores anything when it’s in the cloud and you can’t touch it.

The way it uses electricity and what I’ve been hearing is sometimes when the grid is too much in need. People are using it. The Bitcoin miners can all shut off, and all of a sudden, there’s this excess energy, but then when there are low times, the Bitcoin miners use that energy. Bitcoin miners could make everything a little bit more efficient. It sounds counter-intuitive, but when you talk to people like Eng, you can start to comprehend this complicated stuff.

The last thing he said, which resonated with me, is he’s not a trader. He’s an investor, and that’s the way I feel. I’m not a trader or speculator except for a small part of my portfolio. That’s for fun. Hopefully, for some big-size returns someday, but I’m an investor. That’s what Eng is, and that’s the kind of people that I want to be partnered up with. I enjoyed hearing him talk. I enjoy following him and seeing where he goes. I enjoyed that episode. We’ll see you next time in Left Field.


Important Links

About Eng Taing

PILF 80 | Diversified PortfolioEng Taing is an experienced private fund manager with $220M assets under management. He has 12 years of private market and real estate investing experience and has focused on cash flow investing to create significant passive income. Eng is an economist by training, from the Wharton School of Business. He also has experience leading data science and analytics at Apple, Capital One and AT&T. He applies that experience when identifying and underwriting investment opportunities and markets.

Eng is the classic immigrant story that can only happen in America. He was born in refugee camp in Thailand, where his family escaped the Khmer Rogue from Cambodia. Having grown up in Los Angeles, he pursued economics by day trading and playing Poker to pay for his tuition while attending the University of Pennsylvania. There he trained as an economist and afterwards went into Investment banking. Later he would leave the financial world to join the Peace Corps, volunteering in the Republic of Georgia–a year after the Russian invasion. There he met his wife–Jennie, who was also volunteering abroad. They now have one son, with another on the way.

Eng has presented at companies like Apple, Facebook, & Amazon where he teaches employees how to minimize their tax burden and keep and investing more of their earnings so that they can achieve financial freedom.

Our sponsor, Tribevest provides the easiest way to form, fund, and manage your Investor Tribe with people you know, like, and trust. Tribevest is the Investor Tribe management platform of choice for Jim Pfeifer and the Left Field Investors’ Community.

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