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Lagarde joins the Household Cavalry

No grounding in law, secret sauce, a conspiracy and dying for more olives.

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A loser

“We agree. The denial of the Grayscale proposal was arbitrary and capricious because the Commission failed to explain its different treatment of similar products.”

So said the U.S. District of Columbia Court of Appeals. The SEC now has 45 days to appeal; but the next stop is the United States Supreme Court. Tight spot, if they appeal, they will lose because the current court is not inclined to overreaching regulators.

Matt Levine of Bloomberg probably summarised the situation best. Aside from being funny, he is normally right.

For my part I think Gensler himself is at fault. He gave lectures at MIT about how Bitcoin was not a security. He knew full well that the blocking of the spot ETF was mere technical frustration that had no grounding in law. Aside from losing he has done enormous damage to the SECs reputation.

I’d fire him.


From the annual memo by Howard Marks of OakTree Capital:

The whole memo is very good. It also addresses the one of the challenges we regularly face being a long only fund. The essence of the challenge is that “buying assets and just holding them isn’t active management”. Personally, I believe nothing could be further from the truth. There is tremendous temptation in “trading” and being “busy”. It is perhaps far more valuable to be across what is going on and deciding not to participate.

The question isn’t really about why bitcoin is currently $26,000. It is more will we have sufficient zen to remain calm at $120,000 and $240,000? The stampede for the exit at $69,000 will be quite large; there will be another at $100,000 and when all is said and done lots of people will end up with less bitcoin than they had and regret it.

There is another nice anecdote which summarises the mentality perfectly:

This reminds me of the time I once visited Malibu with a friend and mentioned that the Rindge family is said to have bought the entire area – all 13,330 acres – in 1892 for $300,000, or $22.50 per acre. (It’s clearly worth many billions today.) My friend said, “I’d like to have bought all of Malibu for $300,000.” My response was simple: “you would have sold it when it got to $600,000.”

Secret sauce

Where does the content for this column come from? Obviously not the Australian press, which is a continuous news cycle of the same 50 business people congratulating each other. So in the interests of openness, here are some of the sources.

EuroTrash: Everyone’s favourite and the easiest to write. The ECB twitter account and Lagarde’s. In five years not a week has gone by where neither of those accounts have delivered some utter insanity or falsehood. They are the gift that continues to give and without them my life would be incomplete.

Bitfinex Alpha: Bitfinex is a rather controversial exchange because of their associations with Tether. Personally, I think they are excellent. Their weekly report is free and detailed. The presentation is rather amateurish which I find adds to its appeal. From a macroeconomics perspective it contains quite a lot that is not found elsewhere.

The Lyn Alden newsletter (free): Again, off-piste but high quality content you don’t get elsewhere.

One more useful thing (free): Excellent blog on Artificial Intelligence with a focus on education. He has a deep understanding of where things are going and how they might impact education in particular.

Multiplex (paid) by Brian Rommelle. Brian is a crazy person but brilliant. His blog is wild but he makes genuine attempts to predict the future. He is also very optimistic for humanity and reading his stuff is uplifting. His Twitter account is also excellent, which you should try before paying for his blog.

The Dollar Vigilante (paid): I won’t provide a link to this one but it’s a site of crazy people who think the world is ending. Despite their extreme views I find it useful to consider some of the off-the-reservation ideas they have. I am reluctantly admitting to this one.

Often people send things in too which I find helpful. I would think 20% of the content comes from other people directly sharing things (hence I’m sharing this).

The actual manufacture of the column works like this. Throughout the week when something interesting happens or I see an article I like I message a private Slack channel with the link and the idea. Over the course of a week I might generate 20 things of interest. Then on a Sunday morning I pick the top six and write down the headings. They percolate for 24 hours in my head; then I write the column on a Monday morning, although I sometimes write it on a Saturday night.

That’s pretty much it. The only other thing of interest is that the Saturday night produced columns outperform the Monday written columns because they are often motivated by a good (or emotive) idea that compels me to write immediately.

All told, 4 hours per week.

Shifting Sands

Things happen slowly, but rarely without warning. Here’s a conspiracy theory for you entirely of my own invention.

In June this year the Council on Foreign Relations in the US released a note on the history of the 2% target that we all know and love.

“The 2 percent target was officially adopted in January 2012 under the leadership of then-Chair Ben Bernanke. Despite coming about somewhat accidentally, there are reasons why 2 percent (rather than zero) is a reasonable inflation target.”

It goes on to make an argument about the responsibility of that target but also why there might be room for change. Perhaps a higher target might be appropriate and cost fewer job losses in the pursuit of stability. It was followed up by talking head, Mohamed El-Erian, who said the rate will need to increase to 3%. The Bloomberg article here sets out his reasoning. Mohamed’s Wikipedia page says it all, a very well-connected establishment figure I think we could call him.

Next (this week) we had Krugman in the New York Times last week arguing for 3%. You can find a summary here and several articles in the Wall Street Journal arguing the same.

This is simply how it happens. You tell a story, tell it again and again and again and why it finally happens. Most people are “yeah, obviously”. So I’m declaring it today; the inflation target is already 3% not 2%. It has changed and in about 5 years time it will be an accepted fact and nobody will challenge it. When did it change? Somewhere from June to August 2023.

The question really is why on earth is the target 2% when such a thing is palpably nonsense. The ‘debate’, as far as there is one, is narrowed to should it be 2% or 3% or more.

It’s very clever and I’m impressed that it works, which it has.


Christine was back from holidays this week for the mandatory pow-wow at Jackson Hole, Wyoming. She looked tanned, relaxed and frankly regal in what looked like the uniform of Household Cavalry.

Not much exciting came from the meeting other than “the fight against inflation continues”. Central Bankers expressed their commitment to the cause and Jay told us more interest rate rises are possible. Hooray.

Back in her home country she missed a special case of Euro-insanity. Habits across the world are changing, people are drinking less wine and China has fallen out of love with French grapes. So France has opted to spend 200 million Euros … destroying wine.

The insanity does not stop there though In June, the agriculture ministry also announced €57m to fund the pulling up of about 9,500 hectares of vines in the Bordeaux region. Even more public funds are available to encourage grape-growers to switch to other products, “such as olives”.

We’re all dying for more olives right? It’s not like the Greeks have that sewn up or anything.

The one glint of promise that the destroyed alcohol will in fact be reused. Specifically:

“for use in non-food products such as hand sanitiser, cleaning products and perfume.”

I know of almost nobody that washes their hands in red wine or wears it as perfume but if you were to tell me that Madame Lagarde did, I’d believe you.

Further information

Read our bitcoin news wrap-up on Livewire: Bitcoin industry news for August 2023.

Our July 2023 report to investors can be found here.

If you are considering an investment in the Managed Fund, you can now apply using our online application form: