More gold

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Aye You

Free stuff! 

I was particularly drawn to Labor’s contribution to men’s health, $32million or $2.30 each. In fairness to Albanese he actually had some policies while it was not absolutely clear that his principal opponent had any at all. 

What is most striking across all the parties was the complete lack of any vision for Australia. Where is the country going? What is its competitive advantage we might double-down on?  

Here’s a vision that would likely lose an election overwhelmingly but still it is a vision and I could make an argument for it.  

The continent can easily, easily, support 500 million people. We should stop worrying about immigration too much and start worrying about how the land across Australia is best activated. So much of it is available and habitable with appropriate planning. There is room for massive data-centres in places where the solar power (beloved of the recent winners) actually makes sense. There is room for entire new communities with specific skill sets focussed on the next wave of technology. The development of these capabilities will themselves be massively aided by technology, robots and AI. 

Next up, water. Water is an issue but in fact not as a matter of quantity. The main problem is that all the rainfall in Australia falls in the “wrong” places but again, there is more than enough to support a giant population. Any long term thinking government would need to address the water issue at a massive scale. How do we get it from the east of the dividing range to the west? It can be done, although Australia’s last attempt here was the deeply corrupt Victorian desalination plant. 

Finally, the massive deployment of technology. Robots and the self driving cars that have been so gainfully employed on mine sites in Australia. They clearly work. Where is the plan? It will need huge amounts of energy, orders of magnitude more than we have. So we likely need to have a coordinated plan of natural gas (where Australia has thousands of years of supply), nuclear and solar. 

I don’t really see any country in the world with the opportunity Australia has. The ratio of land + natural resources to population is just gigantic here. Yet, we spent two months on whether you should turn up at the office or on how many public servants you are going to sack. 

The mission could be (should be) this: 

“A 2 day week and global domination by 2050”. 

Or, we settle for being an expensive caravan park. 

Incidentally, very little from the new government on policy for digital assets. “Consumer protection at the core” was the basic idea. Protect the incumbent then. It’s the Australian Way. 

OP_RETURN

It’s been a while since there was significant debate about the bitcoin codebase. It reared its head again though in the form of something called OP_RETURN. A technical element of the codebase which allows users to append strings of text when they send a transaction. Currently it is limited to 80 bytes (so very small). 

The proposal to remove the limit is based around the simplification of the codebase.

This is not the same as the block size war of 2017. That intended to increase the size of blocks themselves and therefore increase transaction capacity. This is a minor tweak by comparison. It simply acknowledges that users have already found a way to bypass the data limit via taproot transactions, so there is no real point to the OP_RETURN limit. 

For example, users are able to inscribe images etc. on the bitcoin blockchain. Lots of people think this is essentially graffiti on a financial ledger and shouldn’t be encouraged. I (mostly) agree. 

If you are interested you can check out all the ordinals (images) that have been inscribed in bitcoin here. It’s a reasonably active market. 95 million inscriptions and 4,500 BTC in fees. 

The argument goes that these inscriptions are junk. 25GB of data is just bloating the whole experience of bitcoin and forcing out other transactions. Or at least, forcing up transaction prices.

On the other hand, this is an open source ledger. You can do whatever you want. Clearly the Commonwealth Bank won’t let you store green frog pictures in their database and sell them to other customers. Bitcoin will though and it's stupid and silly and lots of people do it. That’s the point though isn’t it? You can do whatever you want if you pay the transaction fee. 

Here’s another point of view:

A colorful but instructive way of saying that people are already storing more data in the ledger than OP_RETURN allows. So what is the point of the limit? Well removing the limit means they can store in OP_RETURN rather than wherever they currently are via taproot. It’s potentially less damaging. 

On the plus side it does make the codebase a tiny bit simpler, it might allow new possibilities for sidechains and bridges to bitcoin. Overall though, I’m negative on this one because it introduces unknowns. 

The debate has been very aggressive, because people care. In fact, they care very deeply and the time to worry would be when people just shrug. I hope the brutal wars about the bitcoin codebase continue forever. 

In summary then, we don’t want people storing frogs on the blockchain but we do want an open source ledger in which you can do anything. We can’t have both and the tension for blockspace will exist forever. 

More Gold

Hats off to gold which has outperformed us this year (and everything else). Interestingly though in terms of flow, The IBIT bitcoin ETF just went past the largest gold ETF. +$6.9 bn to Gold’s +$5.5bn. IBIT is now 60% the size of the Gold ETF and should on current trends surpass it over the next cycle of four years. 

Demand for gold could will keep growing. Especially if the BRICS countries finally get organised with their own settlement currency. 

Even so, gold has an issue. It reacts to price rises with more production. Australia’s gold miners are having a great time.

Given that is true you can be absolutely certain there will be a lot more gold being produced over the next few years. Good news for Australia. Bad news for gold. 

That’s the point though, there is always more gold. It’s harder to produce than fiat which is why it outperforms but higher prices mean more gold. Mining processes will get better, it will mean more gold. We already use drones to surveil likely mine sites; more gold. Soon robots will do the mining, more gold. 

There will always be more gold. 

New Hampshire

New Hampshire goes first. At least in US elections. The primaries have started there since 1920 and generally set the tone for entire Presidential races that follow. One of those primaries stands out, a forgotten piece of history. In 2020 Bernie Sanders won the Democratic Primary in New Hampshire with 25.6% of the vote. The man who would become President, Joe Biden, came 5th. He got 8.4%. 

Historically, a poor result in New Hampshire is the end. You do not come back from a start like that which is why the ultimate Biden result was so surprising, nobody wanted him. Sanders was the candidate and the machine blocked him because Democratic grandees like Obama and the Clintons wanted Biden, who they could more easily influence. That subversion is one of the reasons the Democrats lost last time. A great deal of trust had been destroyed. 

On the upside, it means we now have a very-pro crypto United States government. The States themselves also clearly feel empowered and New Hampshire was again first this week approving a Strategic Asset Reserve. The new legislation allows the State Treasury to invest up to 5% of funds in digital assets and precious metals with a market cap over $0.5 billion. 

I'm inclined to suggest this is more a marketing stunt than anything else but other states will likely follow. They might all buy a little bit of bitcoin so everybody stops talking about it. In the end that’s what we want, just buy a little bit as a hedge and then leave it and stop talking about it. 

That is how slowly then suddenly comes about.

Euro-Trash

It sounds a bit outrageous really that the ECB has been buying art with other peoples money. In reality though, it was a good move. Compared to the Euro itself, art has performed extraordinarily well. 

Global art has had a bit of a tough trot since 2022 when monetary tightening began but the index is up from 12,000 when the Euro launched in 1999, to 68,000 now. 5.5x sounds huge but it is only 6.9% per annum. An excellent gauge for the real rate of inflation rather than the published one.

The ECBs art exhibition is a beautiful demonstration of what I believe to be the mirage of fiat currency. It simply collapses in value every year, pictures sitting on the wall outperform it. Even if you had borrowed the money at Euro commercial bank rates, you would still have outperformed the Euro after interest costs. That should not really be possible for a non-yield generating asset. We know of few of those though. 

Scarcity drives value.

Further information

Our April 2025 report to investors can be found here.