The Epsilon Theory Archive

“History doesn’t repeat itself, but it often rhymes.” Mark Twain said that, or Abraham Lincoln depending on what corner of the internet you find yourself on any given day. Likewise, there are common themes, topics and subjects that run throughout the Epsilon Theory archive. All of our writing is categorized, tagged and organized to be easily accessible, but beware: your search for truth on one matter may very well lead you down any number of rabbit holes (and we hope that it does).

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Mental Toughness!

Investing requires mental toughness, but it doesn’t require us to pretend we — or our colleagues — are invincible. Read more »

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Many of the memes that drive our political behaviors inherently push us toward Competitive Games and tribalism. Resisting these memes means losing both arguments and credibility. Rusty argues that a willingness to lose is exactly what it will take to fix our broken political dialogue. Read more »

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The Narrative Machine can help us see the invisible memes that drive our political behaviors. Because you're smart enough to make up your own damn mind. Read more »

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This is Part 1 of the multi-part Three-Body Alpha series, introduced in Rusty's recent Investing with Icarus note. The Series seeks to explore how the increasing transformation of fundamental and economic data into abstractions may influence strategies for investing — and how it should influence investors accessing them. Read more »

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Two negative narratives have derailed the ebullient markets of January — Inflation and Trade War. While I think both are here to stay, I’ve trained the Narrative Machine on inflation first because it’s more critical for investors. Here are the results, and to quote Game of Thrones — Inflation is Coming. Read more »

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Investing with Icarus

The allure of a fundamental truth is powerful. Investors are hungry for that kind of clarity about markets, but it doesn’t exist. In the first in a series, Rusty discusses a framework for investing in a time of Icarus. Read more »

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The Icarus Moment

We live in a Cartoon Age, an era not of alienation per Karl Marx, but of alienation per Groucho Marx. What’s the cause, what’s the future, and what do we do about all this? It’s a TL;DR cri de coeur from Epsilon Theory. Read more »

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What is it, really?

The number one question investors ought to ask more often of a financial services company trying to sell them something is: “What is it, really?” If you don’t know what you’re investing in you’re liable to end up eating a lot of crunchy frogs. Read more »

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Good Job!

I don’t need to calculate a Sortino ratio to know if my dogs are doing a Good Job. Same with active investment management. Same with active citizenship. It’s all about embracing Convexity, not as a mathematical cartoon, but as a philosophy. Read more »

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Most investors think that fundamentals are sound. Most investors think that other investors think that last week's correction was about vol-selling, vol-targeting and algos run amok. But neither of those is the real story. The real story is that everybody knows that everybody knows that inflation will change the way portfolios are built and managed. Read more »

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