Imminent harm

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Through gritted teeth

Tudor Investment Corp (because of the track record of Paul Tudor Jones) is a closely followed hedge fund. During the quarter they increased their bitcoin holdings to $159.9 million of iShares Bitcoin (4,428,230 shares). That’s a 400% increase in shares from Tudor’s previous filing as of June 30.

It makes Bitcoin the 3rd largest non-options holding in his entire portfolio of over 2,600 positions. Only NVIDIA and the S&P tracker (SPY) are larger. 

It’s just one person, just one hedge fund but questions are going to be asked at the end of Q4. Why don’t we have any? Why didn’t we have any? Clients will be asking, do we hold any?

The answers will be various and the pain will be great. They will resist, reluctantly buying some but I suspect in most cases it will be done as a sop to clients rather than with any conviction. In Australia the big super funds will re-emphasise the importance of being long 50 storey office blocks that nobody wants anymore. Let’s build another one shall we?

The dominoes will fall here. However long it takes, everyone will own bitcoin at exactly the price that they deserve to. Hal Varian’s rule (former Google Chief Economist) remains true:

"A simple way to forecast the future is to look at what rich people have today; middle-income people will have something equivalent in 10 years, and poor people will have it in an additional decade." - Google's chief economist Hal Varian.

It was true of washing machines, it was true of televisions and it will be true of bitcoin. However, the chances of most people owning an entire bitcoin are falling fast. What rich people have today is “some bitcoins”. In a decade or so everyone will have “some bitcoin”. The “somes” are not the same though. 

A sad story

‘Think without borders’ is the trendy tagline of the British newspaper the New European. Their political reporter, James Ball, has been writing about bitcoin for over 10 years. Trump’s win causing him to wade back into battle. 

During the years that I have written about Bitcoin, it has been priced at as little as one penny per coin.

The general thrust of his new article is that nobody uses bitcoin or cryptocurrencies as ‘actual currency’; so the project is a failure. I’m not sure how this claim can still credibly be made. Bitcoin recently surpassed the pound's market cap. I am not arguing that it currently rivals fiat transactional volume. Simply, that the market judges it as valuable overall as Britain’s monetary base. Gold, which tops the board, is hardly ever used in settlement transactions and yet somehow the market judges it the most valuable, only because it is scarce.

The article went on in the usual vein, energy use, bad; criminals, bad. I was about to give up until this: 

When reporting an early story on Bitcoin, someone offered to send me around 200 Bitcoin so that I’d have “firsthand experience of handling and using them”. I turned it down under ethics rules at the time, as they were worth £30 or so. 

Today they’d give me a net worth of something like £13.4 million, if I’d held on to them. Instead, I still live in a rented basement flat. 

First of all, full marks for the admission. Even higher marks for the incredibly low benchmark for financial ethics. I feel sure Nancy Pelosi could learn a thing or two from James. The ‘I’ll just send you some’ is very common even today. Bitcoiner’s will send bitcoin to newcomers so they get the feel of it. Right from the very beginning when Laszlow spent 10,000 bitcoins on a pizza, people have used bitcoin. Even the journalist's own story, the first time he ever encounters it, the interviewee actually wants to use it. “I’ll send you some”. Nobody uses it?

Knowing the scale of the opportunity cost suffered here, I have difficulty buying into the credibility of the overall assessment. It’s just incredibly sad, wouldn’t you just spend 50 quid of your own money to see what it was all about? You could suspend your reality for just a moment, surely? Maybe it might work.

How can you work for a newspaper that runs around telling everyone else to ‘think without borders’ and then totally dismiss just about the only thing in the world that does exactly that? All the while criticising anyone that thinks it might work as ‘galaxy brained’. 

The fact is, Bitcoin might not work. But it might! That chance, which is getting larger with time, might indicate holding even a bit could work. 

I found an article by the same journalist from 2013. He had a completely different take back then, cheering Bitcoin’s ability to fund activists in autocratic regimes (from the Guardian, obviously). 

“If Bitcoin, or a currency working in a similar way to it, got a stable value and a large user base, it could take cash flows forever out of the hands of government. Whether that's a great thing or a terrible thing depends on what you're trying to do, what you think of government and what country you're talking about.”

It’s such a shame because right at the beginning this guy had understood. I guess when you have scoffed at something that could have made you a multi-millionaire it’s hard to be objective. 

There is another possibility here. James in fact has a stash of bitcoin from 2013. He does live in a basement flat but it has eight bedrooms and is round the corner from Harrods. It’s not impossible and for someone that was telling the story early, it would be nice if it was true.

AGI

What relevance does artificial intelligence have to our investment case? Well, what is the likely answer to this question? 

Will the machines want to use government money or permissionless digital money? 

I think the latter. Most likely transfers of value that are represented by software are going to be significantly more popular than “your card is suspended until you provide your digital ID”. Considering that, this week's (grossly under-reported) developments might be rather significant. 

The ARC Prize is a $1million prize which will be awarded to the first person who open sources an Artificial Intelligence that beats the ARC benchmark (which is accuracy of 85%).

Some of the ARC problems, like this one below, are not difficult for a human to solve. The AI’s struggle enormously with this sort of stuff though.  

To date the best score on these tests had been 45% from an AI. The average human scores 65%, the very best human scores 98%. This week's effort (not yet registered on ARC) scored 61.9%. They did it with a very small model and a new technique. 

Rather than load the model with all the data and answers ever known (like the large models do), they train the model during the thinking time (inference), based on the question. Once it is answered, the model resets to its defaults. I suppose it's a bit like swotting for an exam and then forgetting everything the very next day. This seems to be a trend that the more the training mimics the human brain, the better it gets. 

The release has about 25 comments on X and a few hundred likes. Seems about right for the current timeline we are living in. We are sat on the edge of tapping unlimited intellect and nobody seems to know or care.

It’s weird but at least you know because you made it this far.

If you are interested, the best overall links on this topic remain Wait but Why? written in 2015 and brilliantly prophetic. Situational Awareness which sets out a path for the next 10 years. Pretty sure hardly anyone has a clue what's coming down the barrel here. I’m imagining it quite likely that we will be able to have a few thousand PhD equivalents working for us every day for the cost of a few clicks and $20/hour.  

Exciting times. 

Stralia

The Australian Misinformation and Disinformation Bill has made its way to the Senate, which has only four sitting days left this year. In theory, if it makes it that far, they vote on Monday. 

The bill itself stretches to hundreds of pages but the key essence is here, where the “Serious Harms” the bill is designed to address are defined.

Serious harms The types of harm in the Bill are: harm to the operation or integrity of an electoral or referendum process in Australia; harm to public health in Australia including the efficacy of preventative health measures; vilification of a group in Australian society; intentionally inflicted physical injury to an individual in Australia; imminent Communications Legislation Amendment (Combatting Misinformation and Disinformation) Bill 2024 Page 2 of 5 damage to critical infrastructure or disruption of emergency services in Australia; and imminent harm to the Australian economy. 

Specifically for us “ imminent harm to the Australian economy.” When you dig into the bill they call out co-ordinated action against the banking system and financial markets. 

The explanatory documents are even more explicit. The collapse of Credit Suisse is identified as derived from social media speculation. 

The collapse of Silicon Valley Bank though was entirely the result of American politicians and Chokepoint 2.0. To quote Credit Suisse is even more remarkable. Has there ever been a more bankrupt institution than them? The Swiss Government had to break the law to sustain it and lob it into the unwilling arms of UBS. 

I’m putting it to you now that Bitcoin causes harm to public confidence in the banking system because it reveals the lie of fiat currency. So, this bill is a bit of a problem. 

Is the financial sector so lacking in resilience it needs the protection of the Misinformation Act? Do we really need a Misinformation act? 

The people ultimately making the decision about what is Mis or Dis information will be the Australian Communications and Media Authority. The senior team are here. I read their bios and they seem eminently noble, hardworking public servants. So what though? How on earth could they possibly be tasked with knowing what is true and what is not? Quite frankly, if they could do that they wouldn’t be working for ACMA. 

Euro-Trash

First it was Mario Drahgi, then it was Ursula von der Layen, now it's Christine Lagarde. The tough talkers are lining up to be self critical. Christine pulled no punches.

Technology from the last century…..like the windmills that now power Germany and the UK. The solution, of course, is that governments will need to spend 1 trillion per year on climate change, innovation and defence. 

…and we will spend even more on “adult education” once everyone is unemployed due to American designed AI robots. Together we will ‘find solutions’. 

Christine then rallied the troops with a quote from Marcus Aurelius. 

It’s true if you are Marcus Aurelius but the ECB and the EU are not. I suppose difficulties can focus the mind but in fact, what stands in the way “regulation and government”, has indeed become the European way. It is never going to change. 

They have had these issues since the dawn of the European Union. Incredibly, the bloc’s GDP of $18.3bn has barely advanced since 2008 when it was $16.3bn. 12% growth in 15 years.  Indian GDP went up 200% in the same period. Not a fair comparison? I don’t agree, actually we know now that a low base means nothing. There is no limit to the economic growth that would occur if it was actually allowed to occur. 

They are completely cooked. It’s just a conveyor belt of do-nothing story tellers. “we have to do this”, “we must do that”. Nothing happens though. Nothing ever happens. Nothing ever will. 

It’s a shame, but it is true. If you are European and want to succeed. The first thing you need to do is……leave. 

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