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Haircut
I had not fully appreciated the impact of synthetic diamonds on the wholesale diamond price. My barber, an expert on many topics, told me about it. Down almost 50% from their covid peak and falling all the time. I did a bit of digging and found this McKinsey Report on the state of the diamond market.
In short, things look bleak. De Beers owner, Anglo American, has taken consecutive write-downs on its holding. $3.5 billion so far, valuing De Beers at $4.9 billion. It’s for sale too if you would like to buy it. You can bid against the government of Angola, who submitted their proposal this week.
Synthetic diamonds themselves are old. General Electric were making them in 1954 but the breakthrough to jewellery quality did not arrive until the late 2010’s. Even then, the process was quite expensive and consumers still had a preference for the “real thing”.
Unfortunately for the diamond market, lab grown diamonds are the real thing. The chemical composition of a lab-grown diamond, its atoms, its physical properties (hardness amongst others) is identical. They are diamonds. They meet the Federal definition of a diamond in the US (the largest market).
“A diamond is a mineral consisting essentially of pure carbon crystallized in the isometric system. It is found in many colours. Its hardness is 10; its specific gravity is approximately 3.52; and it has a refractive index of 2.42.”
A synthetic diamond meets this definition as much as a “natural” one. The only requirement for selling them is that they do not masquerade as natural diamonds. Aside from that, synthetic diamonds have many advantages. They have almost no imperfections, so arguably are better, they also don’t require small children to drown in mud collecting them.
The cost of making synthetic diamonds has fallen 98% over a decade and keeps falling which does not bode well for the wholesale price. Obviously very famous diamonds, with very famous former owners, will likely keep their value. As for the rest of them, they are heading to zero, which is why Anglo American is doing its absolute best to dump the thing.
Seeking an explanation for this phenomenon, I was told “they were scarce and now they aren’t, and that’s that”.
Incidentally, in my ignorance, I looked up whether the same could be done with gold. GPT: “No. Gold is an element, diamonds are a crystal”.
En France
France has proposed global taxation for its citizens in its 2026 budget. Any French citizen whose income exceeds five times the annual social security ceiling (approximately €235,500 in 2025) and lives in a country with an income tax rate 40% lower than that of France will be required to pay French tax.
In fact, this is not as penal as it could be. In the US this has pretty much been the rule since the beginning. There are no exemptions either other than a small threshold for overseas income. The French, despite the headlines, have stepped quite gently into this but as time goes by no doubt its reach will be extended.
In the US, the capability of a government to tax global income was challenged in the early part of the last century. The Supreme Court ruled as follows in 1924:
“The government, by its very nature, benefits the citizen and his property wherever found, and therefore has the right to tax him.”
As arguments go, it isn’t a bad one.
Tax is the price of citizenship. Most likely if you don’t believe in tax you don’t really believe in citizenship either. The distinction here is between, where you live ‘residency’ and which passport you hold, ‘citizenship’. Almost all countries tax people on residency, very few (other than the US) tax on citizenship.
There is a wider dynamic here. Countries like the UAE with their very low rates of taxation have attracted hundreds of thousands of overseas citizens in the last decade. For example, 240,000 British nationals now live there. It doesn’t sound like a lot, but of the UK’s population, the workforce is 34 million, about half the population. Of that population, only 7-8 million are aged 18-35. That is almost exclusively the age group that has emigrated to the UAE, nearly 3% of the prime-aged working population.
Governments might then consider it is reasonable to take action to prevent this from happening
There are two ways international taxation can go. The UAE has taken the approach of attracting people with low tax. Other countries could also lower their taxes and make their country more attractive to capital in response, but almost nowhere has that happened. It appears the equalisation of global tax rates will happen upward, not downward, and via citizenship taxes.
People and capital are now far more mobile than they ever were. As a consequence tax law is likely to change too. It is quite an easy one for politicians because the overseas citizens are much less likely to vote because of the admin pain of doing so. There is also very limited sympathy for expats amongst those left behind. If it doesn’t lose votes and it does raise money, there’s a good chance it happens.
It remains a radical policy though. Wherever you go, whatever you do, whenever you do it; you have to pay us. Forever.
Before 2025 is done Bloomberg reports that JP Morgan will begin accepting Bitcoin and Ethereum as loan collateral. At this stage ‘institutional clients only’, but as time rolls on this should extend to everyone.
The historic Dimon quotes are there for this reason. You have to win the argument. It's no good saying “bitcoin this, bitcoin that” and it's just a story that means nothing. The point of the story, the point really of this column is to win the argument and when you win the argument the pendulum moves.
we got Bitcoin ETFs
we got stablecoin regulation
we will get bitcoin backed loans
In fairness to Jamie Dimon, as the pendulum has shifted he has launched products to fit the market.
The collateral designation will make a huge difference because it simply removes sell pressure. One by one the dominoes keep falling but the argument will continue.
I have wondered when the argument will be finally won. It will be when the government insists I pay for their services in bitcoin.
The end of QT
Since June 2022, the Federal Reserve has been running off its bond holdings each month. In essence it has simply done nothing and collected the cash on maturing bonds. $2 trillion, or thereabouts. In banker-speak it was “tightening”. In reality it was just good old doing nothing.
The chart below is from the Fed website. Oddly, the y axis is in millions implying to the reader that the current balance sheet stands just above $6m. In fact (see footnote under x axis) it's millions of millions, so $6 trillion but nobody should quibble about a few orders of magnitude. Why not label the axis 6T instead of 6M?
The new Fed policy from 1 December will be to reinvest the proceeds of maturing bonds in … bonds. Which they describe as a ‘neutral’ policy. Arguably, the sit-back-and-do-nothing was neutral and this new policy is anything but.
Years back (2012), the Federal Reserve Chairman at the time (Ben Bernanke) explained why the policy of Quantitative Easing is not in fact the monetisation of debt. It relies on the fact that it is temporary and eventually the Fed just lets the bonds mature or sells them.
It's been 14 years since he said that. In that time the balance sheet doubled in size. In one month's time, the Fed will be buying at $5 billion/month again.
Euro-Trash
AI Factories! Correct, the European Union has hit back at American dominance and launched its AI factories. As a European citizen you can log in and benefit from Europe’s pool of GPUs to help with your research project or start up.
Unfortunately, the internet did a deeper dive and all is not what it seems with Euro-AI. The largest data centre is in the Czech Republic. It houses mostly CPUs (which are basically useless for AI). It does have a few NVIDIA chips but it turns out that Elon Musk’s xAI alone has 800x more GPU capacity than the largest Euro option (he also managed to build that in 90 days). Assuming the other data centres are the same size (which they aren’t) this would imply about 1,500 GPUs in the EU “factory cluster” compared to America’s currently active 750,000 GPUs. 500 times smaller.
For those that do bother to try and use the Factory you need to be ‘pre-registered’ but registration closed in 2020! Not a joke, that’s when the Horizon program closed off applications.
New applications can be made via the AI Playground.
Specifically you need to be careful which category you apply in because the allocations of compute differ for each and your specific project will be assessed based on its merits. No real guidance on how this works you just have to guess I think.
It’s insane. Having spent a few minutes navigating this soup of websites (the German one, the Greek one), there are 20 of them, it does make you wonder. None grant access to AI, they all just end in a form submission.
The soonest you can get access is in “4 days”. If you do get access you won’t necessarily get any GPU allocation though. Firstly, because there isn’t any, and secondly because access has to be specifically approved based on the worthiness of your project.
The money for all this is derived from the EU’s Horizon program, which has a budget of €95.5 billion. The internet was not terribly kind about the use of those funds. How many people are working on this I wonder? It’s a web of nothing.
If you are European (or anyone actually), just go here and use Google AI Studio for free.
Further Information
Our September 2025 report to investors can be found here.