The Wages of Populism

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I wrote a brief note today about the narratives surrounding emerging market investing, particularly what I call EM Investing™ – the business of EM as an asset class. The skinny of that note is that I believe there are two necessary narratives for EM Investing™ to work: EM Growth! and EM Property Rights!. Unfortunately, the former has been under siege for close to a decade, and the latter has suffered what I think is a mortal blow from the Argentina/IMF debacle. Can investment in idiosyncratic or even country-specific emerging market opportunities work in the absence of a supportive narrative structure? Absolutely. Will institutional flows into the asset class of EM work under these conditions? I don’t see how.

As you’ll see from the text of the EM note (reprinted below), I’m not unsympathetic to Argentina’s populist political movement (now with a healthy lead in the polls) seeking to defeat Macri and undo the IMF accords that provided loans of $57 billion in exchange for the usual IMF “structural reforms” enshrining the primacy of global capital. But regardless of what you or I may think about the merits of all this, I don’t think there’s any disputing that property rights (in this case those of foreign investors) are under assault in Argentina, and that it’s an intrinsic plank of that country’s populist movement.

“Assault” is probably too strong of a word. Let’s call it a subordination of property rights … a political reconfiguration of the meaning and primacy of property rights in relation to other political rights. But if you’re a foreign holder of Argentine sovereign debt, it probably feels like a physical assault.

My larger point is this: the subordination of property rights to other political initiatives and good things isn’t limited to Argentina. It’s everywhere a populist political movement exists, including the United States. I think the way it will present itself in the US is through massive changes in tax policy following the 2020 election, regardless of who wins. I think that no one is talking about this, much less preparing for this. I think that I’m not sure how to prepare for this.

As always, I’d be keen to hear your thoughts.


Yes, Deadwood is the greatest HBO series ever. Don’t @ me. I’m not having it. David Milch is MY President.

And while Al Swearengen is the greatest character of that greatest show, the fact is that it’s another character – George Hearst – who drives the narrative arc for the entire series (and movie). Distant oligarch George wants the gold. He wants the timber. He wants the land. He goes to great lengths and great expense over a period of several years to acquire those assets, and then, by God, he is prepared to go to even greater lengths and greater expense to keep those assets. Because once acquired, by hook or by crook, those assets are HIS.

You see, Deadwood is a show about property rights.

So is the Argentina – IMF show.


IMF not saying when Argentina could get last disbursement  [Associated Press]

The International Monetary Fund refused to say Thursday when it will disburse the last $5.4 billion of a massive loan to Argentina that was originally planned for mid-September.

IMF spokesperson Gerry Rice said at a news conference that he didn’t “have specific information on timing.”

Reporters had asked him whether the organization will wait for the winner of the October presidential elections to take office on December 10 before releasing the funds.


Over the years, I’ve written a lot about Emerging Markets (EM) and the narrative here in the US and other developed markets about EM Investing ™. Here’s the note from six years ago that started this thread, “It Was Barzini All Along“.

Six years later, and I wouldn’t change a word. What is the core narrative for thinking of emerging markets as an asset class? What is the line you hear over and over and over again?

“EM is where the growth is.”

Or in the Epsilon Theory lingo, Yay, EM growth!

Except it’s not working. Or at least it’s not the emerging market-ness of a country that has driven its economic growth (or lack thereof) over the past decade, but rather that country’s sensitivity and vulnerability to DM monetary policy in general and US monetary policy in particular.

Is there a meaningful secular growth reality in emerging markets? Of course there is. But that and $2.75 will get you a subway token. It’s not that the secular growth story in emerging markets is a lie or doesn’t exist. It’s that it hasn’t mattered. In the same way that value and quality and smarts and careful fundamental analysis haven’t mattered. For a decade now. You know … Three-Body Problem and all that.

But the growth narrative for EM as an asset class is just the public core narrative for EM Investing ™. There’s a non-public core narrative, too. A much more foundational narrative.

“Your property rights as a foreign investor will be preserved.”

Or in the Epsilon Theory lingo, Yay, EM property rights!

Christine Lagarde and Mauricio Macri in happier days

This is why the IMF exists. This is what the IMF does. This is what the IMF means.

To protect the property rights of foreign investors in emerging markets.

Now don’t get me wrong. I believe that the property rights of foreign investors SHOULD be protected. I believe that everyone – but most of all the citizens of emerging markets – benefit from the free flow of global capital, and global capital ain’t gonna flow freely to you if there’s a risk it gets stolen.

But I also believe that the local returns on global capital access are almost always hijacked by the local oligarchs, and even if they’re not hijacked completely, it is entirely appropriate for local governments to negotiate and renegotiate those returns on capital. I also believe that there’s nothing sacred about foreign investor property rights, as those rights are not at all the same as the rights of citizens. I also believe that a nation should be free to burn itself on the hot stove of nationalizing assets or defaulting on debt or otherwise choosing an antagonistic stance towards global capital.

And to be sure, it’s not like the IMF rides into town like George Hearst rides into Deadwood, surrounded by Pinkertons and committed to preserving his “rights” through the barrel of a gun.

But it’s not that different, either.

I know, I know … here I go getting all political again.

Look, you don’t have to agree with me about whether the subordination of foreign investor property rights is a good thing or a bad thing to agree with me that this subordination IS … that foreign investor property rights are, in fact, under a withering political assault in Argentina today, and that this isn’t just an idiosyncratic Argentina thing.

Why am I so down on investing in emerging markets AS AN ASSET CLASS?

Because I think you need two functioning narratives for EM Investing ™ to work.

  • Yay, EM growth!
  • Yay, EM property rights!

Today those narratives are broken. And until they’re somehow patched together again, I don’t think it’s possible to have the systemic narrative support required for institutional capital flows into emerging markets as an asset class.

It’s not just the Argentina narrative that’s broken. It’s not just the IMF narrative that’s broken.

It’s the entire EM Zeitgeist that’s broken.

What’s a Zeitgeist? It’s the water in which we swim.

Can idiosyncratic investments in emerging market opportunities work while the EM Zeitgeist is broken? Sure!

But can the business of EM Investing ™ work while the EM Zeitgeist is broken? I don’t think so.


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The Emerging Market Zeitgeist is Broken

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Yes, Deadwood is the greatest HBO series ever. Don’t @ me. I’m not having it. David Milch is MY President.

And while Al Swearengen is the greatest character of that greatest show, the fact is that it’s another character – George Hearst – who drives the narrative arc for the entire series (and movie). Distant oligarch George wants the gold. He wants the timber. He wants the land. He goes to great lengths and great expense over a period of several years to acquire those assets, and then, by God, he is prepared to go to even greater lengths and greater expense to keep those assets. Because once acquired, by hook or by crook, those assets are HIS.

You see, Deadwood is a show about property rights.

So is the Argentina – IMF show.


IMF not saying when Argentina could get last disbursement  [Associated Press]

The International Monetary Fund refused to say Thursday when it will disburse the last $5.4 billion of a massive loan to Argentina that was originally planned for mid-September.

IMF spokesperson Gerry Rice said at a news conference that he didn’t “have specific information on timing.”

Reporters had asked him whether the organization will wait for the winner of the October presidential elections to take office on December 10 before releasing the funds.


Over the years, I’ve written a lot about Emerging Markets (EM) and the narrative here in the US and other developed markets about EM Investing ™. Here’s the note from six years ago that started this thread, “It Was Barzini All Along“.

Six years later, and I wouldn’t change a word. What is the core narrative for thinking of emerging markets as an asset class? What is the line you hear over and over and over again?

“EM is where the growth is.”

Or in the Epsilon Theory lingo, Yay, EM growth!

Except it’s not working. Or at least it’s not the emerging market-ness of a country that has driven its economic growth (or lack thereof) over the past decade, but rather that country’s sensitivity and vulnerability to DM monetary policy in general and US monetary policy in particular.

Is there a meaningful secular growth reality in emerging markets? Of course there is. But that and $2.75 will get you a subway token. It’s not that the secular growth story in emerging markets is a lie or doesn’t exist. It’s that it hasn’t mattered. In the same way that value and quality and smarts and careful fundamental analysis haven’t mattered. For a decade now. You know … Three-Body Problem and all that.

But the growth narrative for EM as an asset class is just the public core narrative for EM Investing ™. There’s a non-public core narrative, too. A much more foundational narrative.

“Your property rights as a foreign investor will be preserved.”

Or in the Epsilon Theory lingo, Yay, EM property rights!

Christine Lagarde and Mauricio Macri in happier days

This is why the IMF exists. This is what the IMF does. This is what the IMF means.

To protect the property rights of foreign investors in emerging markets.

Now don’t get me wrong. I believe that the property rights of foreign investors SHOULD be protected. I believe that everyone – but most of all the citizens of emerging markets – benefit from the free flow of global capital, and global capital ain’t gonna flow freely to you if there’s a risk it gets stolen.

But I also believe that the local returns on global capital access are almost always hijacked by the local oligarchs, and even if they’re not hijacked completely, it is entirely appropriate for local governments to negotiate and renegotiate those returns on capital. I also believe that there’s nothing sacred about foreign investor property rights, as those rights are not at all the same as the rights of citizens. I also believe that a nation should be free to burn itself on the hot stove of nationalizing assets or defaulting on debt or otherwise choosing an antagonistic stance towards global capital.

And to be sure, it’s not like the IMF rides into town like George Hearst rides into Deadwood, surrounded by Pinkertons and committed to preserving his “rights” through the barrel of a gun.

But it’s not that different, either.

I know, I know … here I go getting all political again.

Look, you don’t have to agree with me about whether the subordination of foreign investor property rights is a good thing or a bad thing to agree with me that this subordination IS … that foreign investor property rights are, in fact, under a withering political assault in Argentina today, and that this isn’t just an idiosyncratic Argentina thing.

Why am I so down on investing in emerging markets AS AN ASSET CLASS?

Because I think you need two functioning narratives for EM Investing ™ to work.

  • Yay, EM growth!
  • Yay, EM property rights!

Today those narratives are broken. And until they’re somehow patched together again, I don’t think it’s possible to have the systemic narrative support required for institutional capital flows into emerging markets as an asset class.

It’s not just the Argentina narrative that’s broken. It’s not just the IMF narrative that’s broken.

It’s the entire EM Zeitgeist that’s broken.

What’s a Zeitgeist? It’s the water in which we swim.

Can idiosyncratic investments in emerging market opportunities work while the EM Zeitgeist is broken? Sure!

But can the business of EM Investing ™ work while the EM Zeitgeist is broken? I don’t think so.


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The Right Price of Money

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Everyone knows The Price is Right rules … closest bid, without going over.

It’s the same with overnight repo.


The Fed pumps another $75 billion into financial markets, continuing capital-injection plan   [Business Insider]

The Federal Reserve on Wednesday sold another $75 billion in market repurchase agreements, or repos, in a continued effort to calm money markets and bring interest rates within its intended range.

The round was oversubscribed, as banks requested nearly $92 billion in overnight repos, signaling strong demand for the asset.

The bank began a streak of repo offerings last week, marking the first time such assets were sold since the 2008 financial crisis. The central bank said the offerings would continue through early October.


Well, everyone else has given their take on the recent dislocations in overnight repo markets, so here’s mine.

Overnight repo is where the interest rates that central banks SET meet the interest rates that real economic actors USE.

And when the setting of those interest rates is no longer connected to ANYTHING about the real economy …

When central bankers are cutting interest rates even as growth is robust, unemployment is at 50-year lows, and the stock market is near all-time highs …

When, to coin a phrase, They’re. Not. Even. Pretending. Anymore. …

I think this spike in demand for overnight and short-term financing is a direct result of real economic actors trying to figure out what it MEANS when interest rates are a symbolic communication to markets rather than a clearing price of money in the real world.

I know what it would mean to me.

It would mean that I want the cash, not the securities, and I’d be willing to pay up to get it.

But if the real world price of overnight money is higher than what central bankers SAY is the real world price of overnight money … well, that breaks the world.

So it can’t happen. So no matter how much demand there is for the cash instead of the securities, the Fed will provide as much cash is necessary – truly, as much cash is necessary – to satisfy that demand at the price that the Fed SAYS is the right price of overnight money.

It’s not a crisis per se. There is literally no limit to the liquidity – i.e. cash – that the Fed can and will provide. But it is absolutely indicative of a profound shift in the common knowledge – what everyone knows that everyone knows – regarding the Fed and monetary policy.

And that shift will change everything. Not tomorrow. Not the next day. Not in the form of a market “crash”. But it will change everything.

See, it’s not just Powell and Draghi and the rest of the mandarin crew who are no longer pretending that monetary policy has any impact on the real economy.

It’s us, too.

Everyone now knows that everyone now knows that central banks are powerless to impact the real economy, but are the only thing that matters in the market economy. Everyone now knows that everyone now knows that the setting of the price of money is now a disembodied symbol of governmental will, all-important to the market economy and utterly … utterly! … ignored and immaterial to the real economy.

This is the new common knowledge about central banks and monetary policy … omnipotent in market-world, powerless in real-world.

Dislocations in the overnight repo market are the first place this new common knowledge is shaking the foundations of our political/economic world. It won’t be the last.

With the 2020 election – no matter who sits in the White House – the Fourth Horseman rides into town. And there won’t be a damn thing the Fed or the ECB can do about it.

The Long Now is going to get a LOT worse before it gets ANY better.


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On The Great Jihad And Other Possible Futures

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“He had seen two main branchings along the way ahead—in one he confronted an evil old Baron and said: “Hello, Grandfather.” The thought of that path and what lay along it sickened him.

The other path held long patches of gray obscurity except for peaks of violence. He had seen a warrior religion there, a fire spreading across the universe with the Atreides green and black banner waving at the head of fanatic legions drunk on spice liquor […]

He found that he could no longer hate the Bene Gesserit or the Emperor or even the Harkonnens. They were all caught up in the need of their race to renew its scattered inheritance, to cross and mingle and infuse their bloodlines in a great new pooling of genes. And the race knew only one sure way for this—the ancient way, the tried and certain way that rolled over everything in its path: jihad.”

Frank Herbert, Dune

Dune is easily one of the greatest works of science fiction ever written. I’d go so far as to say it’s one of the greatest works of popular fiction ever written.

That’s not to imply Dune is an easy read. Or even a pleasant one. The first couple hundred pages are incredibly taxing. But it’s all downhill from there. In fact, I’m convinced this is precisely what us Dune fans love about the book. Itsdepth rewards you for your effort. But you have to earn it. Dune is truly a book for “idea people.”

This is precisely why Dune movie adaptations inevitably disappoint. Sure, Dune has a sci-fi plot. It’s got fairly well-drawn characters. It’s got action. But the real draw are the Big Ideas—ideas about how politics, science and religion shape humanity’s evolutionary path. Ideas about how politics, science and religion are used to manipulate humanity’s evolutionary path.

At its core, Dune is all about narrative.

(Funnily enough, it seems like Jodorowsky “got it”, at least in his own loony way. But his Dune adaptation was never made)

One of the recurring images in the book is what we in finance know as a probability tree. In the world of Dune, if you are at least a little bit psychic, and you amplify that psychic ability with a generous helping of hallucinogenic “spice,” you can catch a glimpse of the branching probability tree that is the as-yet-unrealized future.

Here in the investment and financial advice businesses, we, too, seem to have reached an evolutionary crossroads. I don’t claim to know exactly what the industry will look like in ten or twenty years. But like Dune‘s protagonist, Paul Atreides, I think I can peer through the haze of a spice trance to glimpse some of the branching possibilities.

Each of these possible futures has different implications for financial markets and the financial advice business.

The Great Jihad

In many ways The Great Jihad is the most straightforward path. It’s just not a particularly pleasant one. Here, we as a species fail to transition from competitive games to cooperatives games. Inevitably, this leads to big wars and violent revolutions. In this future state of the world, our portfolios and advisory practices are the very least of our concerns. We’ll be much more concerned with the simple things in life. Things like not getting shot, or sent to re-education camps, or starving to death.

If you truly believe we are headed for the Great Jihad, you want to own gold, guns, crypto and seeds.

The Zombification of Everything

We’re pretty familiar with the playbook for this future, because it’s more or less what we’ve been living since the 2008 financial crisis. Here, growth and interest rates remain low for many, many years. Decades. What’s more, the Nudging State and the Nudging Oligarchy somehow succeed in stabilizing the social and political tensions that this state of affairs tends to create.

This is a policy controlled world of zombie companies, zombie investors and zombie civic institutions.

From an investing standpoint, cheap, beta-oriented strategies will continue to dominate the product landscape. There will, of course, be niche opportunities for traders and stock pickers to make money, but never to such a degree that the policy controlled nature of economic and market outcomes can be called into question.

As far as financial advice is concerned, this future will amplify current trends toward focusing on financial planning and even financial therapy. The role of investment selection in an advisory practice will be increasingly marginalized, and advisor compensation will increasingly be divorced from client investment portfolios. There is no need to worry about investment outcomes in a policy controlled world. Why would anyone pay a premium for investment advice in such a world?

What’s more, two “truths” will be self-evident in a zombified world:

  1. Always be buying.
  2. Always be long duration

This is a future without bear markets and without interest rate risk. Financial asset valuations will have “permanently” re-rated higher on the back of common knowledge that the cost of capital will always and forever remain pinned near zero, and that economic cycles have been tamed.

In this world, Ben Graham style value investors are extinct. To the extent people who consider themselves value investors still have money to manage, they will claim to adhere to “evolved” value philosophies that emphasize “quality” or GARP.

However, the Zombification of Everything does not strike me as a stable equilibrium, precisely due to the social and political tensions that must be managed to maintain it. This future isn’t so much a destination as a layover on the way to something else.

The Great Reset

Great Reset is a kind of middle way. It’s not quite the dystopian hellscape of the Great Jihad. But it ain’t exactly a bed of roses, either.

I see two possible paths here. The first (and more unnerving) is that of debt jubilee and MMT. Here it is common knowledge that neither debt nor deficits matter. This is a future of structurally higher inflation. It’s only a question of degree. To me, this is the highest probability future of the three examined here.

Of course, the worst possible outcome is hyperinflation and revolution (shades of The Great Jihad there). But I believe there is a “milder” way forward, too, with “merely” high single digit or low double digit inflation. After all, this kind of inflation is the most politically expedient solution to the debt burdens and unfunded liabilities borne by today’s developed market policymakers.

What does this mean for our portfolios?

Much of what we think we “know” about investing will no longer work. Stocks and bonds will be positively correlated. Conventional wisdom about asset allocation will disappoint. Long duration bets will get crushed. Equity multiples will re-rate lower as the cost of capital rises.

The differences between stocks will matter again. Why? Pricing power is why. Businesses with pricing power will survive and even thrive. Businesses without pricing power will struggle. Many will die.

Naturally, this could open the door to a renaissance in stock picking. Even a renaissance in more traditional forms of value investing.

And what of financial advisors?

We will have to get to grips with the fact that many of our investing heuristics will not be particularly effective in this regime. They may even be counterproductive.

The diversification offered by a 60/40 portfolio will disappoint. Portfolio construction and stock selection will matter again. Financial therapists whose understanding of investing is limited to the heuristic that a low cost, 60/40 portfolio is always and everywhere best portfolio will find themselves at a disadvantage versus competitors who adapt more quickly to this new economic regime.

Both the Great Reset and The Great Jihad represent explicit rejections of the Zombification of Everything. Likewise, they represent explicit rejections of the Cult of the Omnipotent Central Banker. We will probably still have central bankers after the Great Reset. But common knowledge will mark them as sorcerer’s apprentices. Everyone will know that everyone knows that policy controlled markets are a febrile delusion.

I suppose there is also a kind of Golden Path here, where the Cult of the Omnipotent Central Banker is cast down without debt jubilee or MMT. How might such a thing happen? Policymakers themselves might eventually reject the idea of policy controlled outcomes and the tired tropes that come along with it (Fed Days, forward guidance, etc.). But the Golden Path is a narrow one, and it strikes me as a low probability outcome.

I conclude with a final Dune quote worth meditating on, whenever we consider the branching possibilities in life, business or the financial markets:

“And he thought then about the Guild–the force that had specialized for so long that it had become a parasite, unable to exist independently of the life on which it fed. They had never dared grasp the sword… and now they could not grasp it. They might have taken Arrakis when they realized the error of specializing on the melange awareness-spectrum narcotic for their navigators. They could have done this, lived their glorious day and died. Instead, they’d existed from moment to moment, hoping the seas in which they swam might produce a new host when the old one died.

The Guild navigators, gifted with limited prescience, had made the fatal decision: they’d chosen always the clear, safe course that leads ever downward into stagnation.”


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The Old Man and the Sea

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I’m late with this note because I was in Paris for a BAML conference. I wanted to see what European allocators thought about Draghi and the most recent ECB monetary policy “stimulus”. I wanted to see if their narrative was the same as the narrative I’m hearing in the US about the Fed. It is.

The line between the anchor and the ship has been cut. The line between the fisherman and the fish has been cut.

Monetary policy – at its core the setting of the price of money – is no longer connected to the real economy. I mean, of course interest rates are connected to the real economy. But the setting of those rates, by both the Fed and the ECB, is no longer connected. The setting of those rates is now a disembodied symbol of governmental will, all-important to the market economy and utterly … utterly! … ignored and immaterial to the real economy.

My catch phrase these days is They’re. Not. Even. Pretending. Anymore. and that’s still totally in play. Draghi and Powell and the rest of the mandarin crew hardly even give lip service to the idea that cutting rates or expanding the balance sheet do anything helpful in the real economy. It’s really quite remarkable. There’s more talk about “fixing” the yield curve – as if the yield curve were a real thing – than about fixing corporate investment in property, plant and equipment.

But what I didn’t realize until this week is that it’s not just the central bankers who have cut the cord here. It’s everyone else, too. No one on either side of the Atlantic believes that central bank actions have ANY efficacy or connection to real economic outcomes. Worse, everyone knows that everyone knows that central bank actions have no connection to real economic outcomes. THIS is the new common knowledge, and I don’t know how or where or when, but I think it changes everything.  

For example, I think this cutting of the line between interest rate-setting and interest rate-using is the underlying reason for the bizarro-world we are experiencing in overnight repo, where $75 billion is not enough to satisfy the demands of the financial “system” for cold, hard cash, but maybe $100 billion is. Maybe.

Overnight repo is a rope between anchor and ship. It is where the interest rates that central banks SET meet the interest rates that real economic actors USE. What we are seeing with this huge spike in demand for overnight financing is, I believe, a direct result of real economic actors trying to figure out what it MEANS when the interest rates are a symbolic communication to markets rather than a clearing price of money in the real world.

I know what it would mean to me. It would mean that I want the cash, not the securities, and I’d be willing to pay up to have that cash. Because if the price of that real-world cash isn’t connected to monetary policy, then it can trade … anywhere.

I think there are a lot of these dislocations happening today, and I don’t think it’s an accident that they are happening in places where the real world meets the symbolic world. The WeWorks IPO would be another example.

I have no idea where this ends, and I’d be keen to get your thoughts on all this. But where I have a very clear idea is that the common knowledge around central banks has shifted dramatically. Everyone now knows that everyone now knows that central banks are powerless to impact the real economy (but are still the only thing that matters in the market economy). We’re adrift in a way that we haven’t been before.

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Politics Trump Economics Redux

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Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it. But for whatever reason these are articles that are representative of some chord that has been struck in Narrative-world. And whenever we think there’s a story behind the narrative connectivity of an article … we write about it. That’s The Zeitgeist. Our narrative analysis of the day’s financial media in bite-size form.

To receive a free full-text email of The Zeitgeist whenever we publish to the website, please sign up here. You’ll get two or three of these emails every week, and your email will not be shared with anyone. Ever.


We took the title of this Zeitgeist from a tagline we used to lead with on Epsilon Theory. And instead of giving you a single article today, we are going to include each of the top six without exception. I think you will quickly see why – on both counts.

Danish pensions to put $50 billion into green investments [Reuters]

Gender diversity pays off: A new Stanford study finds equitable hiring boosts companies’ stock prices [Business Insider]

Aluminium industry must commit to carbon reductions [Business Insider]

Daughter of Ebony founder resigns from spot on magazine’s board [Chicago Tribune]

At Amazon, workers push climate policy; Bezos sets net-zero carbon emission goals, but employees want more urgent action. [Vox]

General Motors Shares Extend Declines As Nationwide UAW Strike Hits Day Five [The Street]

Recall that the query we use for the daily Zeitgeist is constructed only from news that specifically refers to equity markets and stocks.

We have commented before that ESG specifically tends to follow the fortunes of the market. It usually becomes a cohesive, high attention narrative when times are good and investors feel confident. When markets decline and perceived risk rises, ESG issues tend to fade from investors’ attention. Independent of ESG investing as a topic in itself, however, the politics of climate, inequality and identity that we have shown to be dominant in electoral coverage are becoming similarly prominent in financial markets coverage.

As long-time readers will know, any time coverage of politics and markets intersect so plainly, we strongly recommend taking a step back to ask, “Why am I reading this now?”

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As Good Once As It Ever Was

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Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it. But for whatever reason these are articles that are representative of some chord that has been struck in Narrative-world. And whenever we think there’s a story behind the narrative connectivity of an article … we write about it. That’s The Zeitgeist. Our narrative analysis of the day’s financial media in bite-size form.

To receive a free full-text email of The Zeitgeist whenever we publish to the website, please sign up here. You’ll get two or three of these emails every week, and your email will not be shared with anyone. Ever.


One of the observations we made in our most recent video was that “Broken IPOs have broken growth and momentum!” has become a part of the narrative surrounding the factor rotation of the last several weeks. I don’t know how true it is. But it has emerged from a common, if slightly out of the mainstream, theory into something that everybody knows that everybody knows.

Now, you won’t hear us say that IPOs are unaffected by narratives, in part because that would be a very stupid thing to say. I mean, it’s literally the most important opportunity most companies have to tell everyone how to think about how to value their company. Still, a private company coming to public markets presents an interesting case study for us. It is an opportunity to analyze common knowledge about both individual companies and risk appetites / preferences at large. It tests whether the narratives which served to produce private valuations are robust to a conversion of some portion of the underlying investor base. In a sense, it is one of those very few opportunities we get to peek behind the curtain of abstractions to see, just maybe, some measure of reality.

So was the We Company’s IPO disaster an isolated bridge too far? Was it, alongside various nightmares lurking within SoftBank pools, part of a series of related bridges-too-far? Will their breaking of profitless-growth-forever narratives become a broader phenomenon that investors need to account for in the rest of their portfolios? Is that what we have seen in the fits and starts of value kinda-sorta working these last several weeks?

I’m not sure. One of the problems (and beauties!) of focusing on observing instead of predicting is that it’s a lot harder to pin down causal relationships. I can see the connections people are making between the momentum/growth-to-value rotation on the one hand and SoftBank and WeWork on the other. I can see the sentiment of language used in reference to top-line growth stories veering more negative. I can see cohesion of narrative structure for consumer tech stories breaking down.

I can’t tell you whether fear of SoftBank and its funders’ ability to continue to backstop aggressive private valuations had a meaningful influence on the (very) recently disappointing relative returns of more expensive stocks and sectors. I can’t tell you whether or how much a sudden willingness of investors to question pursuing greater fool strategies on the WeWorks of the world contributed. I can’t tell you whether all of this worked in the other direction, with a range of trade, central bank, idiosyncratic and other concerns pushing risk postures at the margin in a direction that caught public and private high-flying growth stories in the wash.

What I can tell you is that we can observe the ideas being connected. This is the story we are all watching the crowd tell the crowd about growth, momentum, value and tech stories.

What I can also tell you is what would come next if you were someone with a mind to maintain and extend the Long Now: you’d want a good IPO. A consumer tech unicorn, sure, but a real one. One that would allow us to act like we were not in the heady excesses of the late 90s, but the practiced adolescence of the late teens. A company that would say “growth” but also “hey, I can actually see how this business model might make money!” A reset button.

And we would need it now.

$31 billion Airbnb announces plan to go public in 2020 [Business Insider]

I can’t tell you why they decided to announce this now. Maybe – probably – coincidence.

What I can tell you is why this sits atop the Zeitgeist, as one of the five most linguistically connected articles in all of financial media today. Because financial media, investors (no, not you, seven remaining value investors), execs, asset owners – all the benefactors and beneficiaries of capital markets as a public utility, need this.

Will the IPO market be as good as it once was? Probably not. But I have a sneaking suspicion that a lot of people will be working overtime to make it as good once as it ever was.

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Death in Slow Motion

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PDF Download (Paid Subscription Required): Death in Slow Motion


There is nothing quite like a slow-motion death scene.

And there is no slow-motion death scene quite like the classic from the 1973 Turkish film and popular 2012 meme Kareteci Kiz. The picture you clicked on to get to this piece gives you a small taste of its glory, but you really must watch the video to get the full experience.



Speaking of painfully drawn out deaths, let’s talk about the asset management industry (hey-o!). To that end, I read an interesting thought experiment (read: writing prompt) from our friend Meb Faber yesterday.

Now, Ben has already put his views on the so-called “bubble” in passive management out there, which as per usual were contained in a post that launched a thousand hot takes. His actual observation was pretty uncontroversial. I’ll put it this way: if your clients, boards or bosses are asking you “why didn’t we just buy the S&P 500?” in response not only to stock-picking strategies that didn’t work, but to any investments in foreign stocks, bonds, and other diversifying or objective-oriented investments, then you already understand the narrow point he was making about the always-be-buying impact of the indexing imperative.

As much as we may want it to be (or would like to pretend for argumentation purposes that it is), common knowledge about indexing is NOT confined to an expressed preference for the avoidance of active risk-taking on individual securities (or more accurately, for not paying fees for such activities). It absolutely IS common knowledge that indexing in practice also means a preference for long exposure to US stocks over any other way, place or method of taking investment risk. Honestly, anyone who denies this either hasn’t talked to a client or board in years, is being hopelessly pedantic, or is deliberately or accidentally misleading you to some unknowable end.

Still, Meb’s question isn’t an active vs. passive question, really. It isn’t even a question about active management. Meb’s is a question about our industry, full stop. And it’s a good one. Why do people still pay above-passive fees, when common knowledge about indexing has become so powerful? Is this practice doomed to die? And if so, is it shortable (by which I think we all understand we mean philosophically or conceptually, not whether you need to go find borrow on TROW)?

Like I said, it’s a good question. And I don’t know the answer. Sorry.

What I DO know is that there are a few strong inertial forces keeping the asset management industry alive as it flops around the room with a dozen ragged, bloody exit wounds. If you want to know where this industry is going, I think you’ve got to ask yourself what you think will happen to each:

  1. Human Preference in Advice: Some humans prefer in-person human advice and are price-insensitive to getting it if it comes with relationship. This isn’t a novel opinion, and I’ve already written my piece on this. Confined largely to HNW financial advice – wealth management – both the preference among many consumers for human advice and the fact that the actual value provided by a financial advisor is behavioral and emotional in nature are more powerful bulwarks against erosion than most observers allow. Short the market for advice, and I think you’ll get burned.
  2. Revenue Sharing: This is the uglier side of the otherwise benign influence of wealth management and financial planning. Put simply, actively managed mutual funds and their attendant industry infrastructure are still flopping around primarily because actively managed mutual funds are one of the few things keeping some wirehouse financial advisory platforms afloat. Without 12b-1s, platform participation fees and revenue sharing, many wires couldn’t afford either the business or the staff, and wouldn’t be able to keep FAs from escaping to the warm embrace of advice-driven RIAs. Where does this go? I think it bleeds out gradually, and when these compensation structures are no longer material to any ongoing business, they are killed off suddenly as a false-concession in some regulatory negotiation with the banks.
  3. Fiduciary Fear-Mongering: If you have served on a 401(k) committee, and that committee has hired a consultant, this will not be surprising. If you haven’t, it will probably be a surprise. But ERISA consultants routinely, formally advise plan sponsors that not offering actively managed mutual fund options as complements to passive offerings could subject them to risk of suits or DOL action. No, I am not kidding. This kind of garbage is sticky, and the consultants/lawyers/regulators in this space will keep it that way far longer than any of us would guess.
  4. Risk Transference: An issue for both retail and institutional investors alike, huge categories of the professional money management industry exist simply because advisers or staff of asset owners have a career risk incentive to lay off accountability for missing goals. Separately, and probably more importantly, they must also grapple with a reality in which the theoretical alpha-generative potential of lucky active money management picks is the only thing that fills the gap between projected and actuarial returns. In other words, if asset owners are given the Hobson’s Choice of recommending benefit cuts / spending cuts or telling legislatures / donors / family members that they need to increase contributions on the one hand, or buying actively managed strategies because doing so permits them to include an alpha assumption in their long-term strategic return projections that theoretically could fill the gap, guess which one they pick? Hope springs eternal, y’all.

(And yes, I suppose there are still a few schmucks like us out there who think that occasionally paying someone to identify mispriced assets still makes sense.)

So yeah, I don’t know, but if I were a betting man, I’m betting on this industry being around in something resembling its current form for much longer than most people would extrapolate from current trends. That means people and institutions continuing to pay above-passive fee rates for active management at the portfolio and asset class level. If you’re a full-hearted FA trying to do good, I think you’ll have your shot as long as you want it. If you’re a full-hearted active investor who thinks there are still reasons to own things based on an assessment of their value, so will you.

But all of us would also benefit from eyes clear enough to see that the reasons for the persistence of some parts of our industry as they exist today are not ones to feel particularly good about.


PDF Download (Paid Subscription Required): Death in Slow Motion

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Mailbag

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I don’t write many Mailbag notes these days.

That’s partly because I’ve got so many words burning through my fingers to get out in new notes, but it’s even more so because we’ve created an ongoing Mailbag on the Epsilon Theory website … a place BY Pack members and FOR Pack members, where you’ll find some of the smartest commentary going, and where Rusty and I are in full engagement. At last count, we’ve got something like 2,000 published comments. It’s one of the best things on the internet today.

And yes, our Comment section is for paying subscribers only. It’s the smartest thing we ever did.

But these two conversations with Pack members deserve a wider circulation. They deserve a Mailbag note.

First from T.

Dear Ben,

Six months ago, you extended free premium membership to me because I work in Iraq as an archaeologist. I wanted you to get a sense of what the Epsilon Theory gift means to me.

Everyday we live the widening gyre in ways that Americans don’t appreciate. I work in Ashur, a world heritage site that one day, I hope, will be open again to the world. In order to work there, I rely on human kindness to make the impossible possible. To give you a sense of our gyre.

Archaeologists are targets. We can’t afford private security, so [REDACTED] donates his time and his bodyguard to escort us through ex-ISIS territory to get to Ashur. Once we cross out of the safe zone, the Jaboori tribe (a Sunni tribe) keep us safe with extra patrols and security. We drive through village after village where the war has left a trail of destruction. 

Once you arrive at the once beautiful world heritage site of Ashur, a picturesque complex of ruins on the banks of the Tigris, ISIS’ legacy is in full view. ISIS and its supporters had destroyed the museum, the protective cover for the royal tombs, and the ancient gateway. They systematically stripped the residential house and the local archaeology office. The first night, we slept on the floor, with a drip of water as a “shower”.

However, Ashur is a story of resilience. The local village (Sabka) did not have a single ISIS member. With a small private donation, we turned the taps back on, and we rewired the main house and the guard’s house so that we could get a reliable source of electricity. The local staff started work at 530 AM every day, working 14 hour days, in a country where 9 to 2 is considered sufficient. They donated their time so that our team could finish 3 full days of drone flights in order to take almost 12,000 aerial photographs of the site.

Afterwards, I flew to Baghdad to meet the Ministry and the team from the State Board of Archaeology and Heritage to discuss the future of Ashur. Everyone is helping because of a shared connection to a wondrous place that deserves better.

This is my pack. I hope you and Rusty will come visit it one day.

Best wishes from Iraq,
T.

I asked T. for permission to reprint his email, and he graciously agreed. Here’s a picture T. forwarded of the damaged archaeology office on the left and the damaged archaeology site on the right.

More importantly, T. also forwarded the overview deck for the entire project, which you can download here.

They’re using the drone-based photos to set up drone-based magnetometry and ground-penetrating radar (GPR) studies on the structures below … amazing stuff.

This is our Pack.

AS BELOW, SO ABOVE.


And now from David H. as reprinted from the comments section of The Long Now, Pt. 2 – Make, Protect, Teach.

Long time listener, first time caller.

There are many thing I love about ET, but one of the best things about it is the truths it reveals – truths that are right in front of us but that we don’t see until they are revealed by the truthtellers of ET. I can’t tell you how many ET notes I have read that have made me say “Yes!” and helped me better understand the world.

But not this note.

The “Make, Protect, Teach” principle Ben espouses misses the mark for me. There is a kernel of truth to it, but only a kernel, and it would set us down the wrong path. The error in the “Make, Protect, Teach” principle is in equating a person’s occupation – what they do to make money and survive in this world – with that person’s value to society. Now, I’m not saying a person’s occupation has no correlation to their value to society, but it is not a direct correlation. Take teachers for instance. Just being a teacher doesn’t make you a positive member of society. There are lots of small-minded, petty, vindictive, and generally crappy teachers out there. And by the same token, being a corporate lawyer, banker, or member of business management doesn’t mean that you aren’t a positive member of society. These occupations (and, full disclosure, I am one of those nasty corporate lawyers everyone loves to hate) are all vital and necessary to modern society and have every bit as much intrinsic value to society as those extolled in the note as being “Make, Protect, Teach”-worthy.

For me, it is not what you do but how you do it. Let me explain. I believe that life is the Great Mystery; an unsolvable puzzle. We understand only a small fraction of what goes on around us, and can only hope to gain a slightly better understanding during our lives. My belief that we live in a fundamental state of mystery underlies my small “l” liberal beliefs. Given the unknowable nature of life, all people need the freedom to believe and act differently, to make mistakes (or what I believe to be mistakes), to be wrong (or what I believe to be wrong), to be different. There are three things that give value to my “mysterious” life:

1. Enjoyment. Have fun, Life is a gift!
2. Increasing my personal understanding of life’s mysteries. Think Big Thoughts!
3. Helping others (family, friends, acquaintances) do 1 and 2.

For me, the pursuit of the “good life” is the pursuit of these three things, for myself and others. Jim Valvano said there are three things we should do every day: 1) Laugh; 2) Think; and 3) Have your emotions moved to tears. I don’t do these every day, but I aspire to. I believe that there are three things that give any person “value” to society: 1) Do they enjoy life and help others enjoy their lives?; 2) Are they both truthful and truth-seeking and do they help other seek truth in their lives?; and 3) Do they love and support their family, friends, acquaintances as they seek to maneuver through life’s great mystery? So, an artist that creates a work of art that helps millions better understand life has great value to society. On the other hand, an artist that creates small-minded drivel that speaks to no one has very little value to society. It is not what you do, it is how you do it. “Make, Protect, Teach” is close, but for me it is “Spread Joy, Seek/Tell Truth, Love/Support Others”.

And by the way Ben, despite my disagreement with this note, you are the best Truthteller I have ever known. As always, thanks for making me Think.

– David H.

Heard.

When I wrote this note, I really struggled with the idea of giving too much citizenship “weight” to one’s JOB. As David points out, there are plenty of sociopathic, bad citizens who are also teachers or police or engineers. And there are plenty of full-hearted good citizens who are lawyers or management or bureaucrats. But I really do think (and there’s a long-winded Bayesian argument here that I won’t bore you with), that choosing a profession that inherently emphasizes some notion of service over money (in my lingo, Make/Protect/Teach) over a profession that inherently emphasizes the reverse is a MEANINGFUL SIGNAL that you are a citizen. It’s not the only meaningful signal! Coaching a kids’ soccer team … setting up a Maker space at the local library … spending your time (NOT just your money!) in service to your Pack … these are ALL meaningful (and sufficient) signals that you’re in the Make/Protect/Teach framework.

EITHER of these signals is enough for me to give you the presumption of citizenship in the M/P/T framework.

The reason I’m focused on signals is that I’m trying to find a recipe for a mass society – a nation of hundreds of millions of people – to organize their shared concept of citizenship on something that can’t be BOUGHT and something that requires SERVICE, without creating a caste system of “approved” jobs or a requirement for “national service”. Using signals (EITHER a job that inherently favors service over money OR an inherently service-oriented use of your time) will have lots of false positives (“bad” citizens who generate a “good” signal). But that’s far more just than a system that generates lots of false negatives (“good” citizens who do not generate a “good” signal).

I do disagree with David on two points. First, just thinking well-meaning and society-supporting thoughts is not enough. It’s necessary but not sufficient. There must also be ACTION taken in support of those thoughts. Second, the outcome of that action isn’t the important thing, it’s the EFFORT. It doesn’t matter to me if an artist does crappy art that no one likes. It doesn’t matter to me if a writer publishes a crappy blog that no one reads. What matters to me (and I know that I sound like a contestant on The Bachelorette when I say this) is that Makers/Protectors/Teachers are Making/Protecting/Teaching FOR THE RIGHT REASONS. That’s a really tough thing to evaluate in a mass society (much less a small society like the cast of a reality TV show) – which is why I focus on signals and erring on the side of false positives – but I think it’s the right place to make an evaluation.

One last observation … this is the first in-depth conversation I think I’ve ever had with my brother on the meaning of life (and all that). I’m 55 years old and he’s 53. If Epsilon Theory stopped tomorrow, experiencing THIS ALONE would have made it ALL worthwhile. Full-hearted engagement, bringing us closer together … THIS is our purpose. Thank you, David. I love you.

AS BELOW, SO ABOVE.


As Bill Simmons used to say, “yep, these are my readers.” He meant it as a joke after a silly email, and that’s how I’ve used it in the past, too. But no silly or funny emails today. Just clear eyes and full hearts. Because … you know … can’t lose.

Yes, these are OUR readers, and this is OUR Pack, and this is OUR platform for thought and action in service to that Pack.

Watch from a distance if you like. But when you’re ready … join us.


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Hello Darkness My Old Friend

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There are a couple of tectonic plates moving in narrative-world of late, just like there have been a couple of tectonic plates moving in market-world. The market-world tectonic plates are factors like momentum and value, and lots of people are talking about them. The narrative-world tectonic plates are inflation and central banks, and that’s what I’m going to talk about.

Our most impactful structural attribute of narrative is Attention – the level of “drum-beating” for a certain narrative relative to all of the OTHER narratives taking place. It’s not just an increase or decrease in the number of articles that drives an increase or decrease in narrative Attention … it’s much more an increase or decrease in the centrality and the connectivity of the articles.

These measures of centrality and connectivity within a giant multi-dimensional data matrix don’t lend themselves to two-dimensional visualizations very well, at least not nearly as well as other attributes like Cohesion and Sentiment, so I won’t be showing those visualizations here (although you can see them in the attached data packet). But just to reiterate … I believe Attention is the most important measurement we take in the Narrative Machine.

So I think it matters that the Inflation narrative is close to all-time lows in its Attention score coming into September, while both the Central Bank narrative AND the Trade & Tariff narrative are at all-time highs in their Attention scores coming into September.

Our rule of thumb regarding Attention (and this is true whether you’re talking about single stocks or sectors or macro issues) is pretty simple: fade high Attention and accumulate low Attention.

More specifically, I’ve got the following takes from these narrative Attention scores:

  • There is enormous market complacency around inflation. Just enormous.
  • Markets are far more likely to be disappointed by Central Banks today than encouraged.
  • The all-China-all-the-time news cycle is at a peak.

How does this play out? I dunno. If there were any signs of the US Recession narrative actually taking root in domestic US issues, then I’d say that it’s time to study up on the stagflation playbook. But as I described in last week’s letter, there’s nothing about the US in the US Recession narrative … it’s all non-US issues. Still, even if it’s not an all-out stagflationary world, we’re going to have some whiffs of that stagflationary odor. Gold? I don’t think you get hurt with all this complacency on inflation, but it’s hard for gold to work so long as Central Banks are front and center. Keep in mind that I think markets are likely to be disappointed in Central Bank action, not that they’ve lost faith in the ability of Central Banks to control market outcomes.

My best take at putting all this together? The back-up we’ve seen in rates over the past two weeks has the narrative legs to back up more. Maybe a lot more. And that’s not going to make anyone happy. Especially the guy in the White House.


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Narrative is not a Disease. Narrative is Us.

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Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it. But for whatever reason these are articles that are representative of some chord that has been struck in Narrative-world. And whenever we think there’s a story behind the narrative connectivity of an article … we write about it. That’s The Zeitgeist. Our narrative analysis of the day’s financial media in bite-size form.

To receive a free full-text email of The Zeitgeist whenever we publish to the website, please sign up here. You’ll get two or three of these emails every week, and your email will not be shared with anyone. Ever.



Wall Street Used to Crunch Numbers. They’ve Moved On to Stories.   [Bloomberg]

U.S. business may have been talking itself into a slowdown.

That’s one way of reading a study by the Carlyle Group, using techniques from narrative economics –- an emerging field set to gain momentum with the publication of Nobel prize-winner Robert Shiller’s much-anticipated book on the topic.


So this article is part of the publicity effort behind Robert Shiller’s forthcoming book, Narrative Economics. I’m sure I’ll have more to say about the book after it’s formally released, and I’m glad that narratives are getting more mainstream attention, and imitation is the sincerest form of flattery, and Robert Shiller is a really smart guy. Yep, I think I’ll leave it there for now.

Ah, who am I kidding?

The central metaphor for Shiller’s book is that narrative = disease, that (some) narratives are “contagious”, and that the spread of an “infectious” narrative “virus” can best be understood through the toolkit of epidemiology.

I think this is … wrong … not just in its conception, but even more so in how Shiller’s book will be USED.

Narrative is NOT a virus. Narrative is not something that exists outside of us. Narrative is not something that infects us or just happens to us if we are unlucky enough to catch it.

NO.

Narrative is intentional. Narrative is motivated. Narrative is done TO us. Narrative is – quite rationally – embraced BY us.

Narrative is entirely human, entirely part and parcel of what it MEANS to be the human animal … a social animal.

I can’t express strongly enough how dangerous I think it is to conceptualize narrative as a contagious disease, rather than as the medium of a social game – the Common Knowledge Game.

Why?

Because a contagious disease is something to be CURED.

And that’s exactly how Shiller’s book is going to be used.

Here are some more quotes from the Bloomberg article above:

Central bankers can’t just watch. They need to promote their own narratives, too –- and it’s getting harder.

“I’m a shaman,” said Stefan Ingves, governor of Sweden’s Riksbank. “I’m a weatherman, I’m a showman, and I’m an economist.’’ But above all: “I’m expected to be, and I am, a storyteller. I tell stories about the future.”

“And if I’m successful in my storytelling,” he added, “people say: ‘Hmm, that’s reasonable.’’’

That’s Stefan Ingves, storyteller and central banker, shaking his finger at us and telling us HOW TO THINK about economic news and economic facts. Thank goodness!

Because in the Shiller universe of narrative = disease, it is the “reasonable” narratives of experts and academics that serve as the medicine for narrative epidemics like Bitcoin or market panics or gold buggishness or real estate booms or “talking ourselves into a recession”.

Just like these guys. They’re all doing EXACTLY the same thing that Ingves is doing.

Although I’d wager a lot of money that only 70% of these guys would be seen by Shiller or Ingves as promoting a “reasonable” narrative.

I think it’s a cop-out to think of narrative as disease, as something that just happens to us from time to time, as if it were some act of god.

Because if that’s how you think of it, then obviously that’s something that an “advanced” society should want to FIX. And how does an advanced society “fix” this?

Through the Nudge.

There is another way.

The other way is the anti-nudge. The other way is the encouragement of an individual autonomy of mind.

Clear Eyes, Full Hearts, Can’t Lose.

Not from the top-down, but from the bottom-up. Not from a political party, but from a social movement.

This is Make/Protect/Teach.


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Sparks, Arcs and Trademarks

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Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it. But for whatever reason these are articles that are representative of some chord that has been struck in Narrative-world. And whenever we think there’s a story behind the narrative connectivity of an article … we write about it. That’s The Zeitgeist. Our narrative analysis of the day’s financial media in bite-size form.

To receive a free full-text email of The Zeitgeist whenever we publish to the website, please sign up here. You’ll get two or three of these emails every week, and your email will not be shared with anyone. Ever.


We are on record saying that the thing we’d watch out for to spot a change in the nature of the the ongoing US/China trade and tariffs saga is the escalation of rhetoric into ‘national security’ language. There have been flashes of such language at critical points in the negotiation – points in time where, say, a lack of progress on agricultural product purchases leads to someone bringing up Taiwanese sovereignty or the national security implications of IP theft or, uh, hypersonic missiles. But in general, these escalations, which we think have the potential to change the character of the game into a political game in which scorched earth on trade is the optimal strategy, have stayed outside of the core of the trade and tariffs narrative structure.

Today, however, we spotted this near the top of the Zeitgeist.

Federal funding for Chinese buses risks our national security [The Hill]

It’s a guest opinion piece from a few (seemingly esteemed, as far as I can tell) former military and intelligence officers.

The switch from a petroleum past to an electrified future is handing the United States an opportunity to own its transportation future. However, we will only have one attempt to realize this chance. If we do not counter China’s EV ambitions now, we risk losing this golden opportunity to bolster our energy security — and place our transportation needs for the foreseeable future into the hands of our greatest strategic rivals.

Now, I’m not sure if one year’s federal funding for Chinese-made EV buses and the resultant battery infrastructure reliance rises to the level of a national security risk. I don’t say that snarkily or doubtfully – I honestly don’t know. My instinct is to say that of all the threats to the independence of US energy sources (and energy-adjacent tech like this), this struck me as being a not especially terrifying one. There are some serious “why am I reading this now?” qualities to this piece that I hope should jump out to any regular Epsilon Theory reader.

But let’s take it at face value anyway.

Because even if we do, the fact that this rose to the top of the Zeitgeist is probably related, in part, to its linguistic connectedness to popular pop culture debates about Tesla’s new competition in the EV space, to heightened financial markets attention to energy narratives in September, and to broader political discussion of climate change in connection with recent town halls and primary debates. And so I am not convinced that this is the “National Security Escalation” we are looking for.

But that’s my story, not a fact.

Clear eyes on this one, and open.

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Rust and Blight

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PDF Download (Paid Subscription Required): Rust and Blight


Suddenly, over the slope, as if tethered to a cord of air drawing quickly upward, came a Northern Harrier, motionless but for its rising. So still was the bird – wings, tail, head – it might have been a museum specimen. Then, as if atop the wind, it slid down the ridge, tilted a few times, veered, tacked up the hill, its wings hardly shifting. I thought, if I could be that hawk for one hour I’d never again be just a man.

PrairyErth: A Deep Map, by William Least Heat-Moon

This is cedar rust.

It is the effect of the fungus gymnosporangium juniperi-virginianae on an apple tree leaf in my orchard. This fungus has infected a particularly lovely Yarlington Mill tree that would otherwise make a rich English-style single-varietal cider.

I can slow cedar rust down.

I can spray the tree with copper or sulfur, and it’ll kill some spores. I can spray the tree with something ‘organic’, and it’ll make the spores smell like whatever ‘organic’ goop I sprayed them with. Neither strategy will stop them. They’re in the air, on the bark and on the ground. Any leaf on this tree that has been infected with cedar rust this season will eventually curl, yellow and die. Any new leaf on the same branch will still almost certainly become infected. Even on new growth on a different branch, the prognosis isn’t very good. I’ll lose every leaf on this tree this season before its time.

The tree will live. But as long as the eponymous hosts for the fungus exist in the vicinity, it will be my orchard’s constant companion.

I have a few choices.

I can find, uproot and burn every cedar, juniper, cypress, sugi, sequoia and redwood tree within a half-mile radius. Having seen what juniper did to turn the Central Texas plains into a desert over the last 100 years or so, I am inclined toward this idea. Regretfully, my neighbors disagree, even though the destruction of all cedar and juniper trees is both a righteous and holy crusade – and the only permanent solution to my little problem with cedar rust.

Alternatively, I can religiously apply sulfur to each and every apple tree before and following bud-break, and then follow up with copper in the late season.

But tearing up the tree and replanting a new one? Wouldn’t do a thing. Cedar rust isn’t a problem with the tree. It’s a problem with the tree’s environment.


This is fire blight.

Fire blight is, well, a blight. It isn’t caused by a fungus, but by a little bacterium called Erwinia amylovora. Thankfully, this picture isn’t from my orchard.

Fire blight is different from cedar rust. It can be controlled and prevented at some stages with many of the same chemical applications, but once you’ve got a canker in your wood, that wood must be removed and burned. If it emerges during the Goldilocks temperature and humidity environment of a North American summer, you’ll have to cut it a foot or more inside the canker to be sure.

And if the canker is in the main leader?

Pull the trees up, root and stem. Burn them in the hottest fire you can find and use the ashes to curse your enemies. Nuke ’em from orbit. And with whatever you plant the next time, be sure to pay your weregild to Cornell University, which curiously owns the patents on nearly every fire blight-resistant rootstock and makes a few bucks on just about every apple tree you’re likely to find at a modern orchard.

When it comes to blight, the problem is with the tree and with its roots.

How does the orchard hobbyist discern between rust and blight?

It is never easy. Sometimes a canker or growth gives you a strong hint, but the effects can otherwise be pretty similar. Browning, curling, drying of leaves. Yellow spots. These same symptoms may describe a dozen different maladies, some of which warrant patience and pruning shears, and some of which demand nothing short of fire and blood.

How does the investor and citizen discern between rust and blight?

It is never easy.


I remember the exact moment I decided to make orcharding part of my life’s work.

When my wife and I were first planning to be the only poor saps moving to Connecticut from Texas, we found a few houses we liked. We liked this one a little more than most. We thought the yard and woodlands were nice – a great place to free range our kids. But when we took a look inside the old red barn, we found two things: a gnarled old apple tree stump, four 19th century cider barrels and this old apple mill.

That was it. That was when we fell in love.

That was also when we decided we would plant apple trees.

It isn’t that I have some long-standing thing for apples. I mean, Jesus, I know I’m odd, but I’m not “apples are my passion” odd. My favorite fruit is the blackberry. I think most American cider is insipid. But I don’t understand how you can see and touch the value that generations saw in a piece of earth and come away unmoved. Unchanged.

If I could be that hawk for one hour I’d never again be just a man.

There is a contradiction here; surely you see it. It is the wellspring of American exceptionalism – an idea manufactured into a meme by the right and an ironic joke by the left. We are an exception, but not because we are uniquely free or uniquely smart or uniquely strong. We are an exception because for most of our history we have been a frontier. We are ever torn between a cultural and personal predisposition for adventure and a yearning for deeper connection. I moved my family half-way across the country, away from every root we’d ever sunk into that deep red clay, only to find a 150-year old barrel with a painted-on family name I felt obliged to honor. And for Americans, that story is decidedly unexceptional. It is the kind of story a hundred million families could tell.

What is the thread which ties those stories together? The escape to and civilization of a frontier.

If you, like my 7th or 8th (or whatever) great-grandfather, arrived in the early-to-mid 18th Century from an Irish port, you probably landed in Philadelphia or Wilmington. You were probably poor and probably indentured for some period to pay for the voyage. Once you were able, you found the lands around Philadelphia full and far too expensive. And so you took to the road west toward what is now Harrisburg or Lancaster, where Swiss Anabaptists fleeing an unfriendly religious environment and Palatines fleeing nearly constant French incursions into the Rheinland had already settled. And so, by wagon or horse, you followed the curve of the Shenandoah Valley into the James River Valley and all down the spine of the Appalachians.

No matter when you came, you kept going until you found the frontier.

It was always moving. Before 1750, the frontier was the backwoods of Virginia. In the 1760s or 1770s it was probably in North Carolina (my dear wife thinks I should make an Outlander reference here, but I have informed her that would be very off-brand). In the 1780s and 1790s, that frontier shifted to what is now Northeast Tennessee, where the Tennessee River and the lands lying before the Cumberland Gap opened entirely new worlds to most European settlers. Alabama, Mississippi. Kentucky. Indiana. Missouri. In the coming decades, the breach of the Appalachians meant that the frontier’s race westward would accelerate.

The most popular and enduring myth about these early pioneers – especially among my fellow Tocqueville-loving conservatives – is that they were an especially pious people, bringing civilization, godliness and order to the untamed country. What a laugh. As Lyman Stone correctly points out, they were drunks and heathens all, by which I hope you understand that I mean no criticism. These were my kind of people. The settling of the frontier was a demonstrable rejection of established cultural norms, established social structures and entrenched power. Of course it was. Y’all, that was sort of the point of the whole affair.

Image
Source: Lyman Stone

And yet.

Despite the fundamental small-l liberalism of frontier expansion, in each of these new communities, duty to fellow-laborers quickly became sacred and indispensable. Naturally, this took different forms in different places and with different people. But the pattern is recognizable in nearly every frontier town. Citizens realize that they needed someone who could marry them. Someone to share the burden of teaching children. Someone to shoe a horse. Someone to judge a dispute between two neighbors. Someone who could be trusted to lock up citizens who’d been hitting the cider too hard. They also needed to know that the people around them could be roused to selfless, communal action if their community was under threat.

Civilization emerges. Conservatism follows when people conclude that they’d like to keep the things they’ve found.

Of course, not every American had the luxury of simply working off an indenture to make whatever they could of the world. Nearly 4 million Americans whose mothers and fathers lived for centuries under the vile institution of chattel slavery were forced to wait until its abolition. And yet theirs is perhaps the most powerful frontier story of all – navigating at once a new, unfriendly and unfamiliar country, and in conquering it discovering and creating one of the most culturally cohesive – and yes, in its own way, conservative – communities in the world.

And that’s a good thing. No, that’s an exceptional thing – and essentially human.

Every great achievement, every great leap, every great advance we have made as a species is the result of small-l forces of liberalism and heterodoxy braving new ideas and new shores. AND it is the result of small-c conservatism and the successful institutionalization of orthodoxy around those new ideas alongside those that came before that worked.

The Long Now, well, it usurps and perverts them both. In the Long Now, we are helicopter parents and helicopter policymakers. In the Long Now, we create memes of liberalism! out of whole cloth in place of real frontiers, and memes of values! and conservatism! to defend not Lindy-proven ideas, but sources of existing power and influence. Want to know why we have a world that looks fair but feels foul? A world where present valuations of the future look great, but true expectations of the future feel lousy?

Tell me, where today is small-l liberalism and heterodoxy permitted from within? Do you think that you will find it in financial markets, where the very act of positing that maybe – just maybe – the job of a professional investor might involve judging the value of an asset being purchased in comparison to another has become a kind of heresy? Do you think you will find small-l liberalism among American progressives, where wholesale embrace of deplatforming and cancel culture will damn you and your ideas for all time because you were an ignorant dumbass when you were 16? Do you think you’ll find small-l liberalism among American conservatives, where opposition to Dear Leader will lead to your banishment and excommunication, regardless of the consistency of your political views?

Tell me, where today is good-faith orthodoxy not under assault from without? Is there a view about the public sphere it is possible to hold which has not made the transition in some group’s common knowledge from disagreement to dangerous? As utterly unacceptable, worthy of our derision, our strongest rhetoric and treatment as an existential threat to everything we love? Within these tribes of little meaning we have allowed to consume us, we handle every disease like rust, something to be pruned and treated, but gently. Kindly. Outside these tribes of little meaning we treat every disease like blight, burning and ripping indiscriminately.

There is but one end-game: a sparse field of dying trees, lovingly tended and violently defended.


Thankfully, in our own lives, careers and communities, we get to choose what we labor to heal and prune, and what we throw on the bonfire so that we may plant anew.

I’m with Ben. Even though we disagree on health care and health insurance. On abortion. On tax policy and the justifiable role and interest of the state in managing wealth inequality. On a great many things. We are not ‘political allies’ in any recognizable American sense. But national politics and national parties are a blight, and they will be a blight so long as they perpetuate their control through manipulation of existential narratives. I’ve ripped them from my orchard. Will I vote? Probably. Do I care who wins? Probably. I like Gorsuch. I’d like more Gorsuches. But my energy, my time, my wealth – such as they are – cannot belong to this painstakingly designed foreverwar of Flight 93 Elections.

News media is a blight, too. That doesn’t mean that there aren’t earnest, good people working to inform us. There are thousands – tens of thousands! A free press is, properly arranged, among the single most important institutions to the defense of liberty! However, the decision of the major outlets and their owners to fuse and gray the lines between news, analysis, feature and opinion journalism has made them vessels for fiat news and agents of the widening gyre. So yes, I think we should demand that legitimate news organizations, both left and right, exit the opinion and analysis business. Full stop. They won’t. Fostering the widening gyre via social media was the discovery that finally made this terrible business model modestly profitable for some outlets. And so it falls to us to determine the role they will play in how we inform ourselves, in our orchard. My vote, again, is for the bonfire.

What about other institutions, like our universities, our churches, temples, mosques and synagogues? Our system of laws, our intangible institutions and collective social values like home ownership, families, volunteerism, charity, patriotism and social mobility? There’s some pruning that needs to be done. Some branches in need of culling. But as marvelous as the really thoughtful Derek Thompson’s piece in The Atlantic was, I’m among those not yet willing to consign any of these things to flames of woe in hopes of some new stabilizing cultural institution taking their place.

Yet in all these things, what matters most is what we lose if we embrace the Long Now and the widening gyre.

What we lose is the ability and appetite to take risk.

Adrianus (Hadrian) was passing on his way to Tiberias when he saw a very old man digging holes preparatory to planting trees. Addressing the old man, he said: ‘I can understand you having worked in your younger days to provide food for yourself, but you seem to labour in vain at this work. You can surely not expect to eat of the fruits which the trees, that you intend planting, will bring forth?’

‘I’ said the old man, ‘must nevertheless do my duty as long as I am able to do it.’

‘How old are you?’ asked Adrianus.

‘I am a hundred years old,’ replied the planter, ‘and the God who granted me these long years may even vouchsafe me to eat of the fruit of these trees. But in any case I do not grudge the labour on them, and as it pleases the Lord so He may do with me.’

Leviticus Rabbah (5th to 7th Century)

Common knowledge will tell you that the real question is which national party and candidate you will support with your whole heart to stave off the coming existential threat, whatever that might be. I tell you that the real question is this: Who are you willing to take risk for, and who are you willing to protect – emotionally, morally and financially – when they take risk?

Maybe it’s just your immediate family.

Maybe it’s three or four neighbors. Or a couple very close friends.

Maybe it’s fellow laborers in local union.

Maybe it’s a small group from your place of worship.

Maybe it’s a small group of business partners, people with whom you’ve shared both wins and losses, successes and failures.

Maybe it’s a community separated by distance and united by technology, a collection of like-minded people willing to call themselves something.

Whatever that thing is for you, that’s your pack. Or at least it can be. We can Make. Every ounce of effort we would otherwise devote to defending blight can be devoted to taking new risks on new ideas, new investments and new creations. We can Protect. Every ounce of energy and time we muster to defend memes of our beliefs against all comers can be devoted to supporting our fellow-laborers when they fail. We can Teach. Every ounce of exhaustion that is poured into trying to signal our adherence to the Right Ideas can instead be poured into growing together intellectually, physically, emotionally, technologically, socially and culturally with our pack.

We may not succeed. But we will not grudge the labor.


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The Long Now, Pt. 2 – Make, Protect, Teach

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Peter Paul Rubens, Saturn Devouring His Son (1636)

Every three or four generations, humanity consumes itself with the fang and claw of fascism and collectivism. Every three or four generations, we eat our own.

This is that time. This is the Long Now.

In politics it takes the form of a widening gyre, where the center cannot hold against the onslaught of polarizing political entrepreneurs who eliminate the political promise of the future, replacing it with the Long Now of constant political fear. In economics it takes the form of a market utility, where those same illiberal political entrepreneurs eliminate the economic risk of the future, replacing it with the Long Now of constant economic stimulus.

The first note in this series was about my personal response to the Long Now. Tick-tock.

Today’s note is about my political response to the Long Now. Make – Protect – Teach.

My question is not how we prevent or avoid the Long Now. Sorry, but that ship has sailed.

No, my question is how we keep the flame of small-l liberal thought and small-c conservative thought alive through the Long Now, so that it can light the world again when this, too, shall pass.

My question is … must we ALL become rhinoceroses?

Eugène Ionesco’s masterpiece, Rhinoceros, is about a central European town where the citizens turn, one by one, into rhinoceroses. Once changed, they do what rhinoceroses do, which is rampage through the town, destroying everything in their path. People are a little puzzled at first, what with their fellow citizens just turning into rampaging rhinos out of the blue, but even that slight puzzlement fades quickly enough. Soon it’s just the New Normal. Soon it’s just the way things are … a good thing, even. Only one man resists the siren call of rhinocerosness, and that choice brings nothing but pain and existential doubt, as he is utterly … profoundly … alone.

Yay, rhinoceroses!

Ionesco was born in Romania in 1909, spent most of childhood in France, and returned to Romania when he was 16. He got married and had a kid, pursued a career as a poet and playwright, but ended up fleeing Romania in 1942 for Marseilles. He wrote Rhinoceros in 1959 to describe the rise of the fascists in his homeland, a particularly nasty crew of Eastern Orthodox ultranationalists who went by names like the Iron Guard, the Legion of the Archangel Michael, the Greenshirts, and the National Legionary State.

The Iron Guard didn’t seize power in some bloody putsch, and they didn’t rise to ascendancy overnight. No, it took 13 years for them to come to power, contesting parliamentary elections all the way along. They got 0.4% of the vote in 1927, 1.1% of the vote in 1931, 2.4% of the vote in 1932, got themselves banned in 1933, returned with a new name in 1936, and won 15.8% of the vote in 1937. They were banned again in 1939 following the dissolution of parliament, but struck a deal with strongman-general-turned-politician Ion Antonescu and became the only legal political party in 1940.

And then the pogroms began.

Like the Bucharest pogrom of 1941, where – per the US attaché report to Washington after visiting one of the many massacre sites – “sixty Jewish corpses were discovered [in the meat-packing plant] on the hooks used for carcasses. They were all skinned … and the quantity of blood about was evidence that they had been skinned alive.” Their guts were hung around their necks and they were labeled “kosher meat”. Yes, some were children. A five-year-old girl is mentioned, flayed alive.

You know, I almost didn’t keep that last paragraph. Too harsh, I thought. Takes away from the flow of the larger argument I’m trying to make here, I thought. Some readers will get distracted, I thought, and some will get angry. Some will not recover or read beyond that paragraph, I thought.

I mean … there are no massacres in Ionesco’s play. There’s a lot of property damage. A few people trampled to death by the rampaging rhinoceroses. But there are no ritualistic mass murders. No butchery of five-year-old girls. Ionesco’s play is kinda cool, by which I mean it is not hot. Not emotional. It’s one long allegory. And yet he lived within 50 miles of Bucharest. He saw the 1941 pogroms with his own eyes!

Ionesco wrote about the PROCESS of the widening gyre and the Long Now, not the OUTCOME.

Why? Because he didn’t have to write about the outcome. Hell, his audience had LIVED the outcome.

I don’t have that luxury. All we know of mass murder is what we see on Criminal Minds.

So I’m keeping that paragraph. Because Central Europe. Because Biafra. Because Cambodia. Because Rwanda. Because (I suspect) Xinjiang. This is what it looks like when Things Fall Apart. I need you to be aware of the stakes.

I need you to be aware of what can happen – of what ALWAYS happens – when we become rhinoceroses.

But now I need to pull you back from the emotion and horror of the OUTCOME of the widening gyre that was Romania in the 1930s, just like I need to pull you back from the OUTCOME of the widening gyre that was Nigeria in the 1960s or Cambodia in the 1970s or Rwanda in the 1990s. Because otherwise I can’t bring home the Big Point that Ionesco was making about the PROCESS of the widening gyre and the Long Now. Which is this:

It wasn’t just the bad guys who became rhinoceroses.

Sure, the local brutes and rightwing martinets are some of the first to become rhinoceroses. But soon enough it’s the scientists and the academics and the logicians who turn. They are the worst of the lot. Not because they’re the biggest and baddest rhinos. But because they know better. Because they make a conscious and deliberate choice IN THEIR HEADS to lie to themselves and embrace a real and palpable evil IN THEIR HEARTS.

“All cats die. Socrates is dead. Therefore, Socrates is a cat.”

THIS is the syllogism of the logician turned rhinoceros. It’s nonsense. It’s logically wrong. But THIS is the lie that a rhinoceros scientist can convince himself is truth. THIS is how an intelligent, educated academic who loves his family and his dog can witness a pogrom. And look away. Ehh … gotta break a few eggs.

Romanian politics in the 1930s was a classic widening gyre, spread out over a decade, and policy followed the classic Long Now formula – more and more economic stimulus, more and more political fear-mongering. This was true of the fascists, for sure. IT WAS ALSO TRUE OF THE LIBERALS.

By February 1938, when King Carol II dissolved the parliament, nothing mattered anymore in Romanian politics. There was no “truth”. There was only narrative. There was only spectacle. There was only the naked exercise of power and the celebration of that naked exercise of power. You didn’t just seize control. You seized control, and then you threw yourself a big parade for doing it. This was true of the fascists, for sure. IT WAS ALSO TRUE OF THE LIBERALS.

That’s the kicker of Rhinoceros. It wasn’t just the bad guys who turned. It was everyone.

Just like it’s not just the bad guys who are becoming rhinoceroses in America today. It’s everyone.

How does THAT happen?

Through the embrace by ALL political actors of the idea that NOTHING MATTERS beyond that which accretes power, that power is to be sought for power’s sake and that once attained, power must be USED. Used for draining the swamp. Used for unmasking the corruption of the Trumps or the Clintons or (and here’s where I make a clever connection with 1930s Romania) the Hohenzollerns or the Bratianus. Used for undoing the obscene legislative influence of the Democrats under Nancy Pelosi or the Republicans under Mitch McConnell or (and here I go again) the National Peasant Party under Armand Calinescu or the Everything for the Country Party under Corneliu Codreanu.

It has all happened before. Many times. It is all happening again.  

You will hear that the danger at hand is so great, so existential, that NOTHING MATTERS other than combating that danger, that you must sacrifice your most precious possession – your autonomy of mind – to believe in the necessity of these political actions. You must not only think that it is possible for 2 + 2 = 5 if the political exigency is urgent enough, you must believe that it is necessary for 2 + 2 = 5. Orwell called this “collective solipsism”. I call it political nihilism. Either way, THIS is the politics of the Long Now.  

And once you believe that NOTHING MATTERS … poof! you have chosen to become a rhinoceros.

So you vote for Bob Menendez. You vote for Roy Moore. You excuse your party’s lies and your politician’s thuggery and moral corruption as necessary to prevent some greater evil.

Here’s the kicker.

There’s not a damn thing that you or I can do to stop this.

There’s only one thing that you or I can do. Luckily, it’s the most important thing.

We can refuse to become rhinoceroses ourselves.

Am I saying that we don’t fight against iniquity and evil? Am I saying that we just cede the field to the rhinos who are already running amuck?

So here’s where I’m going to lose a lot of you …

Yes, there will be a time to step boldly into the public political arena and help write a new set of rules, help re-establish political institutions that allow for cooperative gameplay and shared notions of the good life, and help instantiate small-l liberal and small-c conservative principles in a top-down manner.

But that time is not now.

Now is the time when the political institutions that allow for cooperative gameplay and shared notions of the good life are being shattered, and now is the time when they will continue to be shattered. Now is the time of the widening gyre, and you can no more command it to stop from the top-down than King Canute could command the tides. No, it’s precisely the opposite, where everything from the top-down will be devoted to rewriting the history and the narrative of the tides, intentionally moving us farther and farther into the Sea of Nudge.

Once you start looking for sharpies, you will see them everywhere.

That’s true for Trump today, and it will be true for whoever is in the White House in 2020. That’s political nihilism. That’s the way this ALWAYS plays out.

The Long Now is going to get worse before it gets better. A lot worse. Yes, that means more and more economic “stimulus”, more and more financialization and propping up of financial asset prices. You think there is a snowball’s chance in hell of a recession before the November 2020 election? LOL.

It also means more and more political fear-mongering and gyre-widening and nihilism-embracing. You think there’s a snowball’s chance in hell that either the Democrat or Republican party will ever again represent anything other than the accretion of power for power’s sake? Also, LOL. The Republican party is already all MAGA all the time. It is already 100% rhinoceros. By the time the primary season is over, the Democrats will be the same. Look at our Election Index analysis … the narrative center of this election is almost entirely race and gender identity memes. It’s like a pure SJW rhinoceros-inducing potion.

Should you vote in 2020? Sure. But as a statement of your personal identity, not out of some misplaced notion of efficacy or consequentialism.

Should you engage in national politics with more than your vote at this stage in the widening gyre? I mean … if you must. But when you give your heart to the rhinos, you become one yourself. Or you get trampled.

My advice? Abandon the party as your vehicle for political participation.

My alternative? The Epsilon Theory Pack.

My platform? Make – Protect – Teach.

We had our first “Pack Meet-up” last Saturday at Rusty’s house … about 30 Premium and Professional subscribers from all over the East Coast.

The barbeque was Rusty’s labor of love. Four beef briskets, three pork collars, three slabs of pork ribs. There was no vegan option. Sorry, not sorry. Enough food to feed an army, but somehow it was inhaled. Everyone brought a bottle of something to share with the group. That – and a commitment to an evening of full-hearted conversation – was the only admittance fee. Age range was 23 years-old to 75 years-young. Was there a lot of money around that table? I guess. You’d never know it from the utter lack of conversational alpha-dog-sniffing … unique for any Fairfield County dinner I’ve ever been to.

Know what we talked about? The political.

Know what we didn’t talk about? NOT AT ALL? Politics.

What is the political if not politics? It’s how we lead our lives as social animals. It’s how we understand small-l liberal and small-c conservative virtues as they play out in our lives. It’s what we want to SAY to the world through our efforts to Make, Protect and Teach.

THIS is where we stand our ground. Not on some national political scale where we are either turned into rhinos ourselves or trampled into the mud. But on the personal scale. On the scale of our families and our communities. A scale where we can recognize ourselves once again, not as a means to some grand Statist end, but as members of a clear-eyed and full-hearted Pack.

The way through the Long Now is a social movement, not a political party.

A social movement based on resistance and refusal. A refusal to vote for ridiculous candidates. A refusal to buy ridiculous securities. A refusal to take on ridiculous debts. A refusal to abdicate our identity and autonomy of mind.

And it’s more than refusal. It’s more than just saying “Homey don’t play that”, more than just turning the other cheek. There is also action. But it is action in service to our Pack, not action in self-aggrandizement and the celebration of power itself.

I believe that a decentralized and service-oriented social movement at scale can thrive in the age of social media technology. I believe that a decentralized and service-oriented social movement can both inoculate our hearts from the top-down Nudges that push us into rhinocerosness, as well as fill us with a positive energy that reverses the pervasive alienation that creates the Neb Tnuhs of the world.

It’s a social movement for a revitalized foundation of citizenship. It’s Make – Protect – Teach.

There’s no primacy to these three rightful objects of political power and the citizenship which drives them. Put Teach at the top of the triangle. Spin everything 90 degrees. Marry two of them. Take them independently. Change the colors and the font size. I’m not trying to be symbolic here.

I’m trying to be Real.

I’m trying to provide an alternative to the abstracted world of narrative and cartoon that rules our mindfulness from the top down, in favor of a concreted world of actual human beings making things and protecting each other and teaching each other, where we act as Stewards of our children’s future rather than as Managers of our personal now.

What does it mean to Make?

It means you are an inventor. A manufacturer. An artist. A craftsman. A kid at a Maker Fair. A farmer. An engineer. A home builder. A coder. It’s the creation of some THING through the application of some creative IDEA.

What does it mean to Protect?

It means you are a soldier. A policeman. A fireman. An EMT. A nurse. A doctor. It’s a Neighborhood Watch. It’s a mechanic fixing a car. It’s also a unionization drive. It’s also a fiduciary managing a portfolio.

What does it mean to Teach?

It means you are a teacher, of course. Or a writer. Or a researcher. Or a priest. Or a home-schooling mom. It means you’ve got something to say to your Pack, and you’ve got the guts to say it.

What is NOT some form of Make – Protect – Teach?

Basically, if you are in the business of money (and that includes you, Crypto Bro) or in the business of business, then you are neither a Maker nor a Protector nor a Teacher. The sole exception to this – and it’s why this job is my universal suggestion to people who say they want to work in finance but in an authentic, socially-supportive way – is the fiduciary financial advisor. A fiduciary is a Steward. A fiduciary is a Protector. It is unlike any other role in financial services, and it’s the only role I’d want to have.

Management, both in the private and public sphere, is out. Banking is out, both investment and commercial. Corporate lawyering. Consulting. Trading. Sales and Marketing. Out. Out. Out. Out.

If you are using your time and brains to make more money for a profit-seeking organization, or if you are using your time and brains to manage the time and money of a non-making, non-protecting, non-teaching government organization … then you’re outside the Make – Protect – Teach framework. There are no hard and fast rules here, and I mean to be more inclusive than not. But I think you understand the distinction.

Let’s just say that zero of the Forbes 100 Innovative Leaders list (LOL!) would make my list of Make – Protect – Teach. Neither would our professional political “leaders”, including 99% of current Senators and Representatives. As for current and recent residents of the White House … don’t make me laugh.

And yes, I realize that the vast majority of people reading this note would not be practitioners of Make – Protect – Teach, at least not in their day job.

But it doesn’t have to be your day job. It just has to be your Identity.

This is a social movement for people who are IN the world-as-it-is but not OF the world-as-it-is. I’m not saying that your success IN the world, financial or otherwise, is either laudable or damning. I’m just recognizing that it is. I’m saying that your success IN the world, financial or otherwise, does not DEFINE you. Unless you let it.

Everyone can Make – Protect – Teach.

Even Jeff Bezos. I guess.

Today our system of social rewards and political power is based entirely on MONEY, not just in our laws and in our practices – which is bad enough – but even more so IN OUR HEARTS.

Yes, there’s a town full of rhinoceroses there, too.

It was not always so. It is not ordained that it must always be.

What’s at stake with the Make – Protect – Teach movement? Well, in some distant day, when we do in fact remake the rules and institutions of society, you’ll need to be a Maker, Protector or Teacher to be a full citizen. You’ll need to be a Maker, Protector or Teacher to vote. It will never be the route to making the most money, but that’s a feature, not a bug. I think the answer to teachers’ pay scales isn’t to pay them like a corporate lawyer or an investment banker, but to reward their superior social participation through superior political representation.

The American revolution was founded on the slogan “No taxation without representation”. That direct link between taxation and representation was severed long ago, and NOT to the advantage of the people who deserve it the most – the middle class and the working poor. I mean, if you think the middle class and the working poor are represented AT ALL in Washington … once again, LOL. It’s time for a new American revolution, and my slogan is “No representation without making, protecting or teaching.” Okay, maybe that doesn’t sing. How’s this: “No representation without real participation.” Yeah, I like that.

It used to be commonplace to think of military service as a prerequisite for citizenship, and by commonplace I mean universal in the societies where the small-l liberal virtues of democracy and the small-c conservative virtues of citizenship were actually invented. Today we get an occasional watered-down version of this floated in a half-hearted way by Grumpy Grandpas who want those darn kids to spend two years in some national service program. Well, it’s not two years, it’s a lifetime. And it’s not those darn kids, it’s all of us. And it’s not public service to the national government, for god’s sake, but private service of Making and Protecting and Teaching to whatever level of community sustains us … and we them. That’s how a pack works.

It will start small. It will start with your family. And over time it will grow to include your community, especially your physical community. Over time it will spread fractal-like everywhere.

As Below, So Above.

One day.

In the meantime, we evaluate our current crop of gyre-widening political candidates and policies on the basis of how little damage they do to a society based on Make – Protect – Teach. I’m not expecting any of them to get this. And I’m keeping my emotional distance from all of them. But I’ll talk with anyone.

Also in the meantime, this is how we change the structure of OUR social conversation, from “politics” to the political. Here’s my offer:

Put together a group of 20+ people who want to have a full-hearted conversation about Make – Protect – Teach, who want to think and act differently in their political lives. Let me know when you’re getting together with some advance notice, and I’ll be there.

I can help publicize and organize. We are 100,000 strong, all over the world. If you can find a sponsor to pay direct expenses of the meet-up, great. If you can’t, we’ll make it work anyway.

Dinner by dinner. Handshake by handshake. Conversation by conversation. That’s how we do it.

To paraphrase Margaret Mead, never doubt that a small group of thoughtful, committed Makers, Protectors and Teachers can change the world. Indeed, it is the only thing that ever has!


PDF Download of single chapter (paid subscription required): The Long Now, Pt. 2 – Make, Protect, Teach


PDF Download of entire series (paid subscription required): The Long Now


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The US Recession That Wasn’t

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Before I get into the planned subject for this week’s note, I thought I would take a minute to describe what we’re seeing from a narrative perspective in the under-the-market-surface dislocations that have occurred over the past few days. As you’re probably aware, Value stocks (financials and energy listings, for the most part) have outperformed Growth stocks (tech listings, for the most part) to a degree that we haven’t seen in years.

None of this shows up in the specific financial sector, energy sector, and tech sector narrative data. On the contrary, the specific sector narratives are wrong-footed for these sharp shifts. This isn’t a financials story per se, or an energy story per se, or a tech story per se.

I think it’s a Value narrative in general that is playing out here (for how long is anyone’s guess), and a yield curve / negative interest rates story in particular. The “negative interest rates are inexorably coming to the US” story got a lot of play last month, as did “the ECB is going to go crazy with new policy” … both of which were terrible narratives for financials and the yield curve and value stocks in general. We’ll see what the ECB actually does on Thursday, but the narrative of the last week or two has been “well maybe we were being overly optimistic about ECB boldness” and you’ve seen the yield curve on both Bunds and USTs steepen a lot, with a commensurate move in financials and value stocks in general. The last few days have been a magnified version of that, playing out across everything that touches the “value complex”.

On a personal note – and I certainly don’t have any narrative analysis to back this up – the past few days (and the past six weeks, really) have felt like long periods of 2008 and 2009, where the only thing that mattered for markets was risk-on/risk-off, and that “factor” swamped whatever else you were doing in your investment process. This isn’t as all-pervasive as risk-on/risk-off, but whatever it is (rates-on/rates-off?), it’s as impactful in the value/growth context.

And now our regularly scheduled note.

We’re pleased to announce a sixth standing narrative Monitor – US Recession – to join our roster of Central Bank Omnipotence, Inflation, Trade & Tariffs, Credit Cycle, and US Fiscal Policy. We’ve produced historical values for the Recession Monitor through January of this year, and we can speak to the 2018 narrative patterns here.

You can see the full write-up for all six narrative Monitors here, but thought I’d speak directly to the Recession findings today.

Here’s a copy of the Recession narrative map for August.

The first thing you’ll notice is how many narrative sub-clusters there are for non-US issues … in a US Recession narrative map! Yes, most of these non-US clusters are outside of the narrative center of this map, but not all … German stimulus and ECB stimulus are at the heart of this map, and Chinese economic data is not far out from the center.

I’ve never seen a US-oriented macro query that yielded more non-US narrative clusters!

Moreover, the largest (and most central) narrative cluster has nothing to do with the real economy in the US, but is focused on the inverted yield curve and its “signal” of recession. Again, nothing to do with an actual recession in the US real economy.

Finally, as Rusty notes in the attached commentary, the cohesion of this August Recession narrative map is quite low, meaning that the sub-clusters tend to be spread apart and relatively unconnected with a common narrative theme.

Put it all together and here’s my conclusion: there is quite a lot of narrative attention being paid to the concept of a US recession … everyone is falling over themselves looking for a US recession. But it doesn’t exist. At least it doesn’t exist in the US real economy.

These recession fears should be faded.

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When Meta-Analysis Goes Meta

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Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it. But for whatever reason these are articles that are representative of some chord that has been struck in Narrative-world. And whenever we think there’s a story behind the narrative connectivity of an article … we write about it. That’s The Zeitgeist. Our narrative analysis of the day’s financial media in bite-size form.

To receive a free full-text email of The Zeitgeist whenever we publish to the website, please sign up here. You’ll get two or three of these emails every week, and your email will not be shared with anyone. Ever.


A JPMorgan bot analyzed 14,000 Trump tweets and found they’re having an increasingly sharp impact on markets [Business Insider]

I don’t think it is really a secret to anyone who spends much of their day monitoring financial markets that President Trump’s social media habits have a, well, habit of creating bouts of volatility. So when JPMorgan created their Volfefe Index (cute, guys), I don’t think anyone was really surprised at what they discovered.

As a result, JPMorgan said: “A broad swath of assets from single-name stocks to macro products have found their price dynamics increasingly beholden to a handful of tweets from the commander in chief.

It also shouldn’t be surprising to anyone – especially anyone who has been reading our ET Pro monitors that have been making this point since December 2018 – that no narrative has captured the market’s attention quite like the ping-ponging of China and trade war narratives.

JPMorgan also noted that his “market-moving” tweets were less popular in terms of likes or retweets, but also they tended to contain the same keywords: China, billions, dollar, tariffs and trade. The bank also said that tweets containing Mueller were categorized as market moving.  

What is surprising to me – or at least interesting – is the fact that this analysis is at the top of the Zeitgeist. It isn’t that China, or trade, or even Trump tweeting about these things is connected to everything else being written about in financial media. It is that the analysis of the influence of missionary behaviors is itself part of the Zeitgeist.

Welcome to the party, folks.

There’ll be a lot of introductions to make now that you’re all here, but first, I want to warn you about those guys in the corner. They’re the “it’s just short-term volatility – no one really takes any of this seriously” crew. After they tell you their names, they’ll let you know that these silly things don’t matter to their process because they’re very long term, and have absolutely done enough education with their clients to keep them from hitting the eject button after a historically minuscule drawdown, you see. You could tell them et in Arcadia ego, but I’m not sure it would do any good.

This group is also prone to seeing the emergence of this kind of analysis into the foreground as a destructive force to its influence, like pulling the curtain on the Wizard of Oz, or shining a bright light into a dark room. Once everyone knows that everyone else, along with a bogeyman we call ‘The Algos’, are establishing their positions based on how they think everyone else will respond to Trump tweets, that should break the illusion and make people realize that it’s time to focus on things that matter again, like their five-year drop-down model and commodity price scenario analysis for that sweet MLP GP. Right?

Unfortunately, the effect is usually the opposite. If you’re playing the Keynesian Beauty Contest or Dick Thaler’s Dinner Party Game, common knowledge about the game itself affects the winning strategy. Our collective awareness of second- and third-degree gameplay by other participants accelerates our perception of the need to shift to deeper levels ourselves. As I wrote back in 2008:

Playing a third-degree game is too daunting a task to consider for most, and so curiously, even in the mathematically deterministic version of the game that has a Nash equilibrial ‘correct’ answer, the takeaway is the same as in the beauty contest: you usually win by guessing that others are playing a mix of one to two degrees of the Common Knowledge Game. Some people buy and sell on fundamentals, and some on how they think people will react to them.

But as Ben discussed in The Three-Body Problem, we think that this is changing. We think it has changed. We think that the violent expansion of communications policy by global central banks and the accompanying expansion of always-on media has meant more participants shifting to third-degree thinking. The reason we talk about Narrative so much is that we find it a useful meta-expression of and proxy for exactly the kind of mental model a third-degree participant must construct. When we refer to Narrative, we mean it as an expression of what everyone knows that everyone knows.

The Fundamentals are Sound (February 8, 2018)

Why does this matter? What should it mean to us that investing based on common knowledge is…common knowledge? I think it means that awareness of and sensitivity to narratives will necessarily be part of the professional investor’s playbook for the foreseeable future.

After all, that’s what we mean by the Zeitgeist.

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I’ve Got a Secret

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Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it. But for whatever reason these are articles that are representative of some chord that has been struck in Narrative-world. And whenever we think there’s a story behind the narrative connectivity of an article … we write about it. That’s The Zeitgeist. Our narrative analysis of the day’s financial media in bite-size form.

To receive a free full-text email of The Zeitgeist whenever we publish to the website, please sign up here. You’ll get two or three of these emails every week, and your email will not be shared with anyone. Ever.


I’ve Got a Secret was a TV game show that aired from 1952 to 1967, where debonair white people would smoke cigarettes, sport bow ties and ermine stoles, and crack wise as they quizzed “contestants” about their secret pastime or accomplishment. My god, how I miss Kitty Carlisle.

Anyway, I thought a lot about I’ve Got a Secret when I saw the recent financial media brouhaha over Michael Burry and passive investing. But probably not for the reasons you think.


The Big Short’s Michael Burry Sees a Bubble in Passive Investing  [Bloomberg]

“The bubble in passive investing through ETFs and index funds as well as the trend to very large size among asset managers has orphaned smaller value-type securities globally,”

The Big Short’s Michael Burry Explains Why Index Funds Are Like Subprime CDOs  [Bloomberg]

“Central banks and Basel III have more or less removed price discovery from the credit markets, meaning risk does not have an accurate pricing mechanism in interest rates anymore. And now passive investing has removed price discovery from the equity markets. The simple theses and the models that get people into sectors, factors, indexes, or ETFs and mutual funds mimicking those strategies — these do not require the security-level analysis that is required for true price discovery.”


Okay. Whatever. The whole index-funds-are-like-subprime-CDOs thing is silly, but that’s the headline writer setting this article up for clicks. Burry – like every small cap value investor since the dawn of time – is saying that the market doesn’t appreciate the information he’s uncovered about his small cap value stocks, and that there are structural reasons why the market doesn’t appreciate that information. Not exactly fighting words.

But judging from the reaction on Fintwit and elsewhere in the financial blogosphere, you would have thought that Michael Burry had run over someone’s dog.

It’s the reaction to the Michael-Burry-says-passive-investing-is-a-bubble stories that made me think of I’ve Got a Secret.

I mean, you had celebrated former-alpha-guy-turned-asset-gatherer Cliff Asness leap to Twitter to call Burry a “monkey who typed Hamlet” (but don’t worry, it’s okay to say this because it was done in a self-deprecating way), “histrionic”, and full of “inarticulate nonsense.” I lost count of all of the urgent “debunking” blog posts to the Michael-Burry-says-passive-investing-is-a-bubble story.

It’s just weird.

To be fair, it’s also weird how passive investing becomes the scaffolding for any number of Grumpy Grandpa strawman positions, most notably the “this will blow up ANY DAY NOW” argument, the “those darn computers!” argument, and the “in praise of index-hugging active managers and their … [checks notes] … price discovery” argument. I claim zero association with those positions in what I’m about to say, so don’t @ me.

There IS a bubble here. It’s a behavioral bubble I’ll call ABB.

Always. Be. Buying.

And the Common Knowledge surrounding passive investing – what everyone knows that everyone knows about passive investing – is what blows this bubble.

Everyone knows that everyone knows that passive investing beats active investing.

Everyone knows that everyone knows that stocks as an asset class ALWAYS go up over time.

And if that’s the case, then why in the world would you pay more for someone to use their discretion in picking this stock or that stock? No, no … just harvest the inevitable returns that stocks in a general sense ALWAYS provide by putting your money in an inexpensive, systematic buying program. If you think yourself particularly clever, then by all means express this systematic buying program in terms of “factors” or “betas” instead of this index or that index, but the important thing is to ABB.

Always. Be. Buying.

Index funds and any other passive investment vehicles are really important, excellent things for investors. I get that. I am not railing against their existence.

But you cannot separate the Always. Be. Buying. impulse from index vehicles and pretend that they are just the intellectually simple, straightforward expression of market exposure that they are in theory.  They are loaded with “be long” MEANING for everyone.

THAT’S THE BUBBLE.

Now I know this will come to a shock for many, but there was a time when this was not the accepted faith of markets.

Gerald Loeb, co-founder of E.F. Hutton, happily immersed in the tape.

This is a picture of Gerald Loeb, who co-founded E.F. Hutton and was Warren Buffett-level famous back in the 1950s and 1960s … back when I’ve Got a Secret was in its heyday. And this was The Secret about markets that Gerald Loeb thought he knew:

Buy and hold is for chumps.

In the 1950s and 1960s, everyone knew that everyone knew that Gerald Loeb was right. This was the investment Common Knowledge of the day. This was the gospel and the MEANING of the business of Wall Street.

No one remembers Gerald Loeb today.

Which is a shame. But not surprising.

Did Gerald Loeb know The Secret to markets? Of course not. But did Gerald Loeb know A Secret to markets? Yes, he did. And did his secret WORK for the markets of his day? Absolutely. Would his secret work TODAY in a different Common Knowledge environment? Not a chance.

Do YOU know The Secret to markets, that stocks as an asset class ALWAYS go up over time?

Or do you know A Secret to markets, one that works because it is the Common Knowledge of the day?

I think it’s the latter. Which means it will work until it doesn’t. Which means it will work until the Common Knowledge changes.

That’s my Secret about markets. It’s far from Common Knowledge. But pass it along and let’s see what happens.


PS – We’ve written a lot about passive investing and indexing. And by we, I mostly mean Rusty, who has some great notes on the subject. Like these:


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US Recession Monitor – 8.31.2019

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Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.


  • Given the amount of related commentary we have observed anecdotally in financial news coverage, this month we began explicitly tracking narratives about US recessions. We have produced historical values through January of this year.
  • As you might imagine, recession narratives are caught up amid other narratives, such as central bank policy and trade and tariff narratives.
  • Understanding their relative attention, however, can help a great deal toward understanding the nature of each respective narrative structure.
  • From our initial analysis we have come to believe a few things:
    • If there is a recession narrative in the US, it is that the China trade war is would be the proximate cause, and that central bank action would be the remedy.
    • Whatever narrative exists, however, is not cohesive. There is no agreement or common knowledge about a US recession.
    • Furthermore, the narrative structure is only moderately high attention, and certainly takes a back seat to direct trade and Fed coverage.
  • Whether they prove to be correct or not, everyone knows that everyone knows that the Fed and tariff tweets will determine asset prices for now, not economic fundamentals.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Attention


Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

EOG Resources profit misses on weaker commodities prices [Reuters]

Kudlow Pushes Back on Recession, Says U.S.-China Calls Positive [Bloomberg]

New recession warning: The rich aren’t spending [CNBC]

Trade woes are slowing U.S. economy, U.S. budget experts say [Reuters]

Trump’s tax cut isn’t giving the US economy the boost it needs [CNBC]

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US Fiscal Policy Monitor – 8.31.2019

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Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.


  • As we have noted in prior months, there is no Fiscal Policy, Deficit or Austerity narrative, except perhaps the narrative that these things “no longer matter’
  • As the primary season approaches, public discussions and coverage of financial markets-related policy proposals have become somewhat more acrimonious, driving a steady drop in sentiment and increase in negativity.
    • The attachment of political media to ‘Wall Street’ narratives, especially those suggested by on-narrative Bernie Sanders and Elizabeth Warren has been noteworthy.
    • News outlets are getting into related advocacy journalism as well – fiat news measures have risen to levels comparable to mid-terms.
  • Investors in regulation-sensitive asset classes and sectors should be mindful of a continued increase in volatility relating to this trend, which we expect to continue.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

Michigan is more important than ever in 2020 — here’s how Democrats think they can win the state back from Trump [CNBC]

Powell Admits Fed Has No Playbook for a Trump Trade War [Bloomberg]

Trump’s Rust-Belt Rally Risks Return of ‘Send Her Back’ Chants [Bloomberg]

Nobody Likes These Curves as Global Economy Bends Out of Shape [Bloomberg]

A $1 trillion US budget deficit is one big reason the Fed may have to cut rates [CNBC]

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Trade and Tariffs Monitor – 8.31.2019

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Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.


  • As we mentioned in our last research note, while not complacent, markets entered August with what we think was a more-confident-than-warranted view of the general direction of the US/China Trade War, which remains a Game of Chicken.
  • President Trump’s stridence on tariffs led to a few things, in our view:
    • The evaporation of any hint of complacency about trade and tariffs resolution. If there was a short-term asymmetric bet on downside vs. upside outcomes, we think that opportunity has passed – and perhaps flipped into “alarmism.”
    • The sharp increase in negativity of coverage, to its lowest points since we began tracking it. Coverage has been deeply pessimistic and concerned.
    • An increase in cohesion from trough levels, as varying probabilistic “prediction” markets on the trade war gave way more universally to coverage asserting or implying that (1) Trump might not be a friend to markets, even for political reasons, and that (2) rates needed to be cut by more than expected to prevent the negative impact.
  • We think there is common knowledge in US risky asset markets that the China Trade War is the most important risk/event to other investors. We think interest rate / central bank narratives are derivatives.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Attention


Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

Wall Street analysts worry these stocks are caught in the deepening US-China trade war [CNBC]

COLUMN-Trump must choose between economy and trade war: Kemp [Reuters]

Consumers are America’s not so secret weapon to keep economy afloat, but they can’t save the world [CNBC]

Feds Powell, under pressure, likely to stick to mid-cycle message [Reuters]

Fears of China Capital Flight Hang Over a Newly Sliding Yuan [Reuters]

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