The Village Watchman

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Statistics

I would probably doubt Josiah (1880 - 1941; former Bank of England Director) were it not for my own experience with statistics. On taking a new job in finance some years ago in the UK, I was presented with a form for signature. It was from the ONS, Britain's Office of National Statistics.

“What’s this?”

“The ONS form, you just need to sign it”

“OK, where do the numbers come from?”

“This spreadsheet”

“Great, I’ll take a look”

I did. Of course the numbers did reflect some underlying aspect of the accounting but they happened to omit about 60% of the business that we were reporting on. This had been the case for eight years. Consistent submissions of totally meaningless numbers to the civil service, who provide them to the ONS who crunch out some economic growth figure that is then reported as though it were the word of God.

As a matter of fact, everywhere I saw these forms they were generally allocated to the least skilled member of staff to complete because (a.) they are a pain and (b.) Nobody is getting a bonus for filling in a form either correctly or incorrectly. Simply, there is zero incentive to make any effort at all with it.

So it is that national statistics are formed. Growth, inflation, job numbers etc. They are absolutely numbers from ‘the village watchman who doesn’t care in the least’.

With great delight then I present Nobel Laureate, Paul Krugman. The war on inflation is won! At very little cost.

His chart, aside from using the village watchman's numbers, excludes food, energy, shelter and used cars.

For the vast majority of Americans, that is 70% of their household budget that he has chosen to ignore (because it’s going up). So we have major exclusions coupled with largely made up numbers and a chart that does exactly what Krugman wants it to do.

That’s statistics. They either work for you and if they don’t, you make them up.

ARK

Our confidence in the likelihood of US Bitcoin ETFs continues to grow. Last week ARK made their second resubmission to the SEC.

The amendments were quite specific around the calculation of NAV and how they might generate a difference between NAV and the financial statements. For the deeply interested, the NAV will be calculated at market value but the financial statements will follow GAAP. At present, Bitcoin is not revalued in the financial statements, so there will be a difference. How will that be handled and explained to the client?

It’s a technical non-issue but it tells us the SEC is engaging now at the detailed level and providing feedback on submissions, not simply rejecting them.

Further evidence was provided when the SEC declined to appeal the Grayscale ruling that their ETF application had been unfairly denied. This hasn’t been confirmed formally by the SEC but it would seem very unlikely they will want to risk an embarrassing defeat in the Supreme Court.

It looks like a go. 13 January 2024 or earlier.

The contenders

There are plenty of others in the frame for launch in January. Not least BlackRock whose largest single ETF is the IW S&P 500, which has approximately $350 billion in AUM.

I realise comparisons to bitcoin are totally unfair, so there is absolutely no need for you to email us.

This ETF alone is 65% the size of Bitcoin’s market capitalisation. I am therefore encouraged about the amount of money that might, slowly, be allocated across to the higher performing albeit a far more volatile sector.

It’s not just supposition either. The BlackRock CEO Larry Fink was again on the airwaves this week telling investors he believes buying bitcoin is a “flight to safety”. The price had just spiked to nearly $30k on a ‘false rumour’ that an ETF had been approved. It hadn’t.

I must say, I don’t agree with him. Bitcoin is not ‘safe’ in the way that word is generally understood. For most investors ‘safe’, means it won’t go down much. Cash is safe, it goes down every year but not by much. The consistent decline in value is the price of safety.

Anyway, that’s BlackRock. Another monster manager in the queue is Fidelity. They, with curious timing, just released a report to investors titled “Bitcoin First”. It's rather good and highlights this excellent point about which assets stay the course.

It does validate the view of many commentators that the sector is full of get-rich-quick schemes and frauds that are never going to make it. The skepticism about digital assets is in my view fully justified by the fact that seven of the top ten assets in 2017 no longer feature, and will go to zero.

Do the research, buy the winner(s) and in most cases that will mean a small allocation to bitcoin and that’s it. In not many months from now doing so is going to be much easier.

Qantas

This has no relevance really to anything other than being quite funny.

PwC’s recent difficulties, which were covered in their own internal report, found that the culture was one where “we only really care about money”. For a major accounting firm, is that a bad thing? Who wants an accountant that neither cares about money, nor knows how to make it.

Indeed, if I were to launch an accounting firm, I could imagine a tagline “we only care about money” as being a rather good advertising campaign.

Whether you work in, own, or run a business, everybody knows that the people element is the hardest. John is sick, Mary is pregnant, Peter is a predator who hovers around the vending machine. The drama in people's businesses never ends. PwC is no different, Qantas is no different. So I am intensely put off investing in anything that has “people at its centre” because it’s highly predictive of disaster.

If you can find something that has no staff, no CEO, no management, no people at its centre ripping out your financial heart with their LTIP and bonuses, something innovative and useful that represents new knowledge creation, then you should buy it. Naturally, I have some ideas and the perfect fund for you.

Euro-Trash

“Always”, unless you’re an American taxpayer. Then it's a nightmare.

Janet recently had her 77th birthday. Apparently one should not be ageist, but Trump, Biden, Yellen, and Warren are too old. I think we should be open about saying so. It’s not as though being US Treasury Secretary is an easy job. It is intellectually and physically demanding and I am certain a person of 77 years is not best suited to doing it.

Right across American politics, age seems to dominate. In particular in the Senate where the 70-79s almost outnumber the 60-69s.

Anyway, we digress. This is about pouring scorn on the ECB not America … so; where did Janet and Christine meet this week?

It happened to be a rather interesting meeting in Marrakech about funding for the IMF. It did not go well. Largely because China wants more shares and more influence to reflect the fact that its economy has doubled in size since the last discussion.

America just wants China's money and not their influence and the Europeans of course can’t really decide what day it is because when it comes to IMF contributions, that is a country-specific and not a European matter. Maybe Christine just wanted the airmiles.

There was no agreement, which is bad because quite soon the IMF will run out of other people’s money and new ways of destroying people’s lives will have to be created.

Further information

Read our bitcoin news wrap-up on Livewire: When money doesn't work, people stop working

Our September 2023 report to investors can be found here.

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