An Experiment

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There is a chart I’ve been thinking about a lot lately, and I want to tell you about it.

Before I do, I also wanted to show it to you, along with a simple request: Tell me what you think that it is.

Put it in the comments if you’re a subscriber. If you’re not, send your guesses to info@epsilontheory.com.

First one – if anyone can manage it – to guess remotely correctly gets a care package of Epsilon Theory swag. All other guesses will almost certainly make an appearance in an upcoming Epsilon Theory note, so mind your metagame here.

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Ben Hunt
Admin

Is 1968 the first year in the data series of whatever this is, or the first year in your reporting/analysis of whatever this is?

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elddir
Member
elddir

First thought was # of countries with greater than or equal to x% of global GDP.

Got excited when I went here (https://www.investopedia.com/insights/worlds-top-economies/) and it looked like 5 countries had greater than 50% currently.

Downloaded data from the worldbank that goes back to 1960, and quick analysis says that the concentration of wealth has actually gone down from top 5 controlling >50% in the 60s to top 8 controlling >50% now. (8 does not match the 5 from the above linked website, obviously, but I assume this is directional. also, I’m sure there are issues with the data set that could be driving this… either way, I’ve spent too much time on it and this appears to be a dead end, so I’ll go back to work).

My other thought was something like # of companies in the DJIA that are in X sector.

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Riggo44
Member
Riggo44

# of AAA companies?

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Riggo44
Member
Riggo44

or AAA countries

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Brad Dunkley
Member
Brad Dunkley

Data is discrete so not %, or dollars. Number of something but haven’t got a clue as to what. Couldn’t even guess without a clue. May have some relationship to recessions and dot com boom and bust.

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Paul Benjamin
Member
Paul Benjamin

Something to do with the consolidation in the spirits or beer market. Number of firms that make up x% of global sales —- I’m trying to play the player here

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Wraith
Member
Wraith

The shape looks a lot like – but isn’t – US military spending as a % of GDP. It’s also shaped like federal minimum wage in constant dollars. But it isn’t. Being a discrete set, I am going to guess: number of “major” US military contractors. (say, defence revenue of over x, maybe $10B in current dollars). The current 5 being Lockheed, Boeing, Raytheon, GD, and Northrop. And now we have Raytheon-UTI.

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Nathan Abrahamson
Member
Nathan Abrahamson

How many companies make up half of the Sp500 Tech sector?

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michael gjerde
Member
michael gjerde

Seems like a totally artificial chart. Like China’s growth rate or 1980s GE profits that were amazingly consistent. Only China didn’t start growth in the 1960s and GEs profit regularity ended when Neutron Jack left. If this is some hedge fund return we’re talking Madoff time.

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Bob
Member
Bob

Jumpin’ Jack Flash always beat by a penny. #GE best tax law firm in the world?

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Howard Wetsman
Member

I don’t have a guess, but I can share my logic and perhaps that will help someone smarter than me. First, my assumption: you have given us discrete numbers, not rounded thousands, millions or billions.

It is something that was relatively stable from 1968 to 1993, fell off a brief cliff, came back to test the range in 1998, plummet again, come back to test the new range and then progress step-wise down in 5-year, remarkably constant segments. From peak to new low is only a factor of 3, so this is not something that has progressed for good or ill by a great deal. Yes, 66% is a big number but not like an order of magnitude. It’s something that was stable for at least 25 year and then come down at a average rate of 3 every 10 years.

That 2001 was a low after a precipitous fall suggested at first that it is stock market related, but 1987 and 2009 were not lows so it isn’t likely. I have seen the pattern of decades of constance and then a generally constant angle before in research but it was up trending (calories/person, high-fructose corn syrup per person, etc). The things I can think of that have followed the illustrated pattern (straight and then down) are all things that aren’t small discrete numbers like this (real wages, number of ER visits the average worker can afford in a year, etc) . You’ve stumped me. Can’t wait for the answer.

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Andrew Tetlow
Member
Andrew Tetlow

US Banks that are primary dealers with the NY Fed?

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pbobbins
Member

Average estimated pension asset returns for state/local governments.

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Eric Steen
Member
Eric Steen

Number of US Senators that are not millionaires, or that are not in the 1% as far as personal wealth?

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Mike Hanlon
Member
Mike Hanlon

I’d speculate the graph represents an event that was scheduled to occur on a monthly basis, more or less, and that from 1968 to 1998 it more-or-less did. However, for whatever social, political or economical reason, it now occurs at less than half that frequency. If it is an event, it also to be one that’s easily observed after-the-fact, otherwise it would have been too painful to put together the data series going back to 1968.

I’d guess it’s something like the total number of times per year that any cabinet secretary testified in front of a US House committee. If that’s anywhere close to correct, then I’m pouring one out for the poor PhD student who spent months combing through the Congressional record to put together this data series for our intellectual entertainment.

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Bob
Member
Bob

At the reveal, I’m sure Rusty will give credit where credit is due, there’s about $275 trillion floating around anyway

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cartoox
Member
cartoox

I’d wager it’s something to do with wealth /income inequality. The largest share of wealth / income genertion going to the smallest percentage of the population……..

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William
Member

Probably related to US. Probably something related to Long Now/Nudging state/oligarchs. Some dynamics that used to fluctuate normally before mid 90s, then took a crash in the 2000s, leading to a rigidly managed system that maintained stability as the expense of slow consolidation over time.

Number of major media companies?

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Nicholas Allen
Member
Nicholas Allen

Turnover in a major stock index, i.e. number of new companies to enter the DJIA in the year

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Nicholas Allen
Member
Nicholas Allen

Given recent themes it likely has something to do with increased oligopolization and decreased competition. Average number of companies in a major industry that combine to control 80% of market share? Something to do with turnover or decreasing competition in a major sector.

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Andrew Bessette
Member

The number of profitable companies in the S&P 500?

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Milko Campusano
Member

here is my stab in the dark.. the data set is derived from the Dow Jones Industrial Average… the chart depicts either how many companies it takes to reach 50% of total profits (or revenue) or contribution to the price of the index…

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James Hunter
Member

Some combo of the Inequality of Wealth distribution and its correlation to the world’s move to “New and Improved 21st Century-style fascism” (defined as partnership between global oligopolies and global governments/Central Banks).

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Michael Smith
Member
Michael Smith

I really like Riggo44’s guess but I know that in 2014 ADP lost it’s triple-A rating, and in 2016 XOM lost it, leaving MSFT and JNJ. Which means maybe the number of SOVEREIGN triple-A ratings, but the US was downgraded in 2011, and the numbers above drop in 2010 instead.

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Lucas Wear
Member
Lucas Wear

Inline with Mr. Hanlon’s comment related to a discrete number of scheduled events, I’d wager that given how much Ben likes to talk about the Silver Age of the Central Banker, as well as everything around narrative construction on ET in general, this could be reflective of the number of congressional testimonies/policy briefings by the US Fed Chair each year.

Volcker and before would be pretty consistent, Greenspan pivots towards more “Fed communication policy” and “Common Knowledge” begins to be created, thus reducing the number of times the Chair speaks directly to Congress, which reflects Its members “Common Knowledge” of economics and monetary policy. Increasing “Common Knowledge” builds through Bernanke & Yellen’s tenure, further reducing the number of briefings, now carrying over to Powell.

That’s my $0.02.

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Dubya
Member
Dubya

There’s a softball of a joke here involving criminal acts and Harvey Weinstein, but I’ll mind my metagame.

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Kpaz
Member
Kpaz

# of major accounting/auditing firms

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Michael Madonna
Member
Michael Madonna

Ok – my real guess is – number of American official/prime defense contractors/ suppliers for the US military, above some major threshold.

Just came across:

“Roper said that there were 13 defense contractors that could build a fighter jet during the 1950s and 1960s. Today, just two contractors, Boeing (BA) and Lockheed Martin (LMT), build fighter jets for the U.S.”

https://www.investors.com/news/elon-musk-richard-branson-jeff-bezos-bored-billionaire-boeing-lockheed-martin/

https://mattstoller.substack.com/p/bible-lobbyist-we-cant-print-bibles

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Wraith
Member
Wraith

^Clears Throat^ …

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Michael Madonna
Member
Michael Madonna

Whoops. Hat off – I see you beat me to it! I was reading the Stoller piece, and thought of this chart.

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Victor K
Member
Victor K

The number of college students who pay full tuition.

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Bam!Bam!
Member

Number of top performing large US companies (maybe of some popular index) who achieved their results through true business performance; not through buybacks/financialization.

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Eric
Member
Eric

The real question here is: is this experiment designed to collect answers about what we think this chart is to make some point about our answers (i.e. we answer based on what we THINK Mr. Guinn is talking about, and that reveals something about how we formulate opinions without adequate context)?

Also generic guess: number of DOD contractors who earn 50% of annual contracts.

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Rafa Mayer
Member
Rafa Mayer

The experiment has already yielded a fascinating result…the number of comments on this thread is by far the most comments any thread appears to have ever received. Fascinating how a competition activated a significant number of people to get in the game.

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kevin weiler
Member
kevin weiler

Percentage of US equities owned by the bottom 90% of population

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Peter
Member
Peter

I’m going to reject the premise and go with any effing thing Rusty wants it to be. Discrete numbers (zero significant figures) suggest to me a SWAG of some sort ie some bull$hit forward looking estimate/forecast (projected Medicare costs, assuming Baby-Boomers died at their project terminal ages). However, a purveyor of the real chart would insult our intelligence by using a number with 2 or 3 significant figures.

Then again…it just might be Rusty’s, his dad’s, and his uncle’s combined weights divided by some constant, rounded to the nearest whole number. Looks like one of Rusty’s uncles died in 1995 resulting in Rusty and his dad’s gaining weight out of grief and then steadily losing the weight gain…their weight having now stabilized.

Ooops…second look amendment (fat uncle).

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Rob H.
Member
Rob H.

Some sort of equity dispersion chart — # of stocks in the S&P (or DJIA) accounting for 50%+ of the index return? All FAANG for the last 5 years.

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Em Lofgren
Member
Em Lofgren

This was a frustrating exercise, but I am going to make a guess. Should it be completely wrong, I would like my guess to be interpreted as a plea for a note instead, as I think there is a high probability that my guess will be more interesting than this graph… Here goes. I think this is an attempt to showcase the well known neurological phenomenon with many names, probably best described as active interpretation. I am currently reading Donald Hoffman’s book “The case against reality” which tackles vision in particular, so in a sense I am a walking talking example of active interpretation, which is essentially a different way of saying that we see with our brains in addition to our eyes, and that we are evolutionary biased to “fill in the gaps” and use as little brain “processing” power as possible. Meaning that the familiar will usually seem more likely. It is amazing to learn how much of human existence is predicated on essentially just intelligent guess work…or event completion if you like. If you really want to go deep on this, Karl Friston and his Free Energy Principle is for you. There is a lot about the Free Energy Principle I don’t understand, but the relevance to ET would be it’s ability explain why narratives are so appealing to human brain. If Friston is too much, then Andy Clark (based in Edinburgh) has been described as a sort of gateway “drug” to Friston’s ideas. So, similarly to… Read more »

Farmer Don
Member
Farmer Don

This is clearly an accurate representation of how much I have given a sh!t about fundamental analysis over the course of my career so far.

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Patrick Clegg
Member
Patrick Clegg

No idea. Although I see many of the guesses do not fit with the data being a simple integer number each year. Like all of us analytical types I tried to fit it with some industry trend or sector in a slow-bleed decline. But, the data can be viewed as 3 distinct periods to my eye. 1968-1994 was relative stability with some volatility. And the figure is centered around 12 which led me to thinking about something that happens roughly every month. Then, disruption. Something changed in 1995. A new lower level with a temporary blip back to the old trend in 1998, but looking from 2003 something clearly changed from the way the system functioned over its roughly 25 year prior history. 2004-2019 a very stable declining trend and the variation from before is gone. So my narrative is that this is a government statistics release that used to cover 4 weeks or a month of data, hence the 12/13 featuring prominently. The outliers to 14 or 15 were due to some disruption causing extra interest in the data or special reports being issued. Likewise, during becalmed times or administration transitions, a month might be skipped leading to only 11 releases. Due to either irrelevance in the information or a change in technology that made the information from the government available from a better source, the data began to be released less often. Finally, the last 10 years moved first to bimonthly (2010-14) and then quarterly with a separate… Read more »

Mourad
Member
Mourad

Number of shares of publicly traded companies.

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Bob
Member
Bob

Number of legacy airlines? Number of legacy cable companies? Legacy cell phone companies? Number of $ trillion “banks” by “assets” or market cap? RMB/USD? Prime Rate? Number id conservatives in Congress that Wm. F Buckley, Jr. would agree are actually Conservative in the Burkean sense?
Number of legacy national newspapers? Number of guitar players who in your criteria are as good as or equal to say Clapton/Plant/Hendrix? Quarterbacks over x age active in NFL? MLB umpires who can see? Grocery store chains over X% of national market share? Number of companies with stock buybacks with borrowed money that exceed $x? Number of national mall chains over $x capitalization/number of outlets? Percentage of congress people who vote against party line yoy? number of times you misplaced your reading glasses/car keys wallet/forgot why you came into a room to look for something on a weekly basis?

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Bob
Member
Bob

Number of over IPOs that gained more than x% after lockup?

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Sharon McShane
Member
Sharon McShane

The number of media conglomerates in the US.
Second guess: the number of stocks that create most of the return in the S&P.

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Jonathan Matthews
Member
Jonathan Matthews

Well, the Schengen Agreement went into effect in 1995, so I’m guessing number of border checkpoints on the European continent.

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Kevin
Member
Kevin

I’ve been thinking about this for days and I’m stumped.

The title of this is “An Experiment,” which makes me think there may be more going on here than just a trivia question about a chart. But I also believe this is a real chart that could be guessed.

Rusty says he’s been thinking about the chart a lot lately, so I assume it’s not something completely trivial. He also indicated in a comment above that one of the prior guesses was not far off. I’ve scoured those guesses and tried – without success – to come up with variations that would fit the chart. The period in the chart from 1998 to 2002 really throws me off. Whatever this is, it needs to be something that could decline from 12 in 1998 to 5 in 2001, then jump back up to 9 in 2002. So it has to be something that can shift quickly, which rules out stuff like major defence contractors or banks, stocks in the DJIA, senate composition, etc.

I think it’s something in the popular culture category, and I’ll throw out a guess: the number of one hit wonders per year from bands (as opposed to solo artists). Google searching doesn’t back up that answer, but the definition of “one hit wonder” appears to be highly subjective, so depending on how you define that maybe it could fit.

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Juan Luna
Member
Juan Luna

Black unemployment

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Tim Wallin
Member
Tim Wallin

The number of convictions obtained in the US for violating securities laws.

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Brendan Mc Cann
Member
Brendan Mc Cann

Chinese growth rates

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james stewart
Member
james stewart

Apple orchard yields ton/acre?

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Farmer Don
Member
Farmer Don

Rusty, in the words of Judge Smails ” well, we’re waiting…”

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ike
Member
ike

A week or two? Wow it must be really interesting. I’ve already moved on to 50 different topics in the interim. Why don’t you just wait until the next time the Fed raises rates? Or when hell freezes over?

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ike
Member
ike

Btw, that’s my guess. A measure of our shrinking attention span.

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Farmer Don
Member
Farmer Don

Rusty, in the words of Gramm Lou ;
” So long
I’ve been looking too hard
I’ve been waiting too long
Sometimes I don’t know what I will find
I only know it’s a matter of time”

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