To learn more about Epsilon Theory and be notified when we release new content sign up here. You’ll receive an email every week and your information will never be shared with anyone else.
The Latest From Epsilon Theory
This commentary is being provided to you as general information only and should not be taken as investment advice. The opinions expressed in these materials represent the personal views of the author(s). It is not investment research or a research recommendation, as it does not constitute substantive research or analysis. Any action that you take as a result of information contained in this document is ultimately your responsibility. Epsilon Theory will not accept liability for any loss or damage, including without limitation to any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Consult your investment advisor before making any investment decisions. It must be noted, that no one can accurately predict the future of the market with certainty or guarantee future investment performance. Past performance is not a guarantee of future results.Statements in this communication are forward-looking statements. The forward-looking statements and other views expressed herein are as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements, and there is no guarantee that any predictions will come to pass. The views expressed herein are subject to change at any time, due to numerous market and other factors. Epsilon Theory disclaims any obligation to update publicly or revise any forward-looking statements or views expressed herein. This information is neither an offer to sell nor a solicitation of any offer to buy any securities. This commentary has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Epsilon Theory recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
Leave your guesses here, cowards!
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?
Not the first year in the data series, just the first one I care about for completely arbitrary reasons that seemed good to me.
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.
of AAA companies?
Hmm… according to Rusty, what peaked in the late 60s / 70s and has gone downhill ever since? Have to go with “Songs that are Actually Good”
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.
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
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.
How many companies make up half of the Sp500 Tech sector?
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.
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.
US Banks that are primary dealers with the NY Fed?
Average estimated pension asset returns for state/local governments.
Number of US Senators that are not millionaires, or that are not in the 1% as far as personal wealth?
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.
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………
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?
Some really good guesses so far. One isn’t far off. Note next week will reveal and discuss, so feel free to guess away until then.
Turnover in a major stock index, i.e. number of new companies to enter the DJIA in the year
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.
The number of profitable companies in the S&P 500?
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…
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).
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.
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 $0.02.
There’s a softball of a joke here involving criminal acts and Harvey Weinstein, but I’ll mind my metagame.
of major accounting/auditing firms
Ok - my real guess is - number of American official/prime defense contractors/ suppliers for the US military, above some major threshold.
Just came across:
“Roper said that there were 13 defense contractors that could build a fighter jet during the 1950s and 1960s. Today, just two contractors, Boeing (BA) and Lockheed Martin (LMT), build fighter jets for the U.S.”
^Clears Throat^ …
Whoops. Hat off - I see you beat me to it! I was reading the Stoller piece, and thought of this chart.
The number of college students who pay full tuition.
Number of top performing large US companies (maybe of some popular index) who achieved their results through true business performance; not through buybacks/financialization.
The real question here is: is this experiment designed to collect answers about what we think this chart is to make some point about our answers (i.e. we answer based on what we THINK Mr. Guinn is talking about, and that reveals something about how we formulate opinions without adequate context)?
Also generic guess: number of DOD contractors who earn 50% of annual contracts.
Percentage of US equities owned by the bottom 90% of population
I’m going to reject the premise and go with any effing thing Rusty wants it to be. Discrete numbers (zero significant figures) suggest to me a SWAG of some sort ie some bull$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).
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.
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 Eric below, my guess is that this information-poor graph is really an attempt to discover where our brains will travel, when faced with an open question and a set of incomplete data points.
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.
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.
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 year end summary (2015-19).
As to what is being disseminated it probably is something very important that has faded in the public consciousness. Once Rusty tells us what it is we will be shocked, maybe outraged that it’s star has fallen so dramatically. But, since we are subscribers, we won’t be that surprised and it will give us an interesting nugget to share with the non-ET world bringing more heft to the pack.
or AAA countries
Number of shares of publicly traded companies.
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?
Jumpin’ Jack Flash always beat by a penny. #GE best tax law firm in the world?
Number of over IPOs that gained more than x% after lockup?
At the reveal, I’m sure Rusty will give credit where credit is due, there’s about $275 trillion floating around anyway
The number of media conglomerates in the US.
Second guess: the number of stocks that create most of the return in the S&P.
Well, the Schengen Agreement went into effect in 1995, so I’m guessing number of border checkpoints on the European continent.
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.
The number of convictions obtained in the US for violating securities laws.
Chinese growth rates
Apple orchard yields ton/acre?
Rusty, in the words of Judge Smails " well, we’re waiting…"
c’mon Rusty , spill the beans
A thrilling collection of terrible guesses. Thank you! Look for a note in the next week or two referencing this chart.
See, that wasn’t my original intention, but…
Would (lamentably) be going in the other direction, although the units are surprisingly close. Orchards are moving in the direction of dwarf trees at intense concentrations, which has brought yields up dramatically in the last 20 years. But yes, depending on how you do the thing, ranges of 6-16 are kind of what you’d be thinking about for tons/acre on apples.
You’re on, you’re on!
OK I really like this guess. Still, I suspect it’s far more - but focused on irrelevancies, institutions of little note.
God that’s a good guess. I mean, completely wrong, but it’s an angle I never would have considered that has relevance for the pivotal years here.
Hahaha Jesus, Peter. I’m not THAT mischievous. It’s a real thing, I promise.
Shrewd - and again, amazing how many different ideas align with this timeline. Also completely wrong.
Be a lot cooler if you didn’t.
A popular theme, I think aided by the discrete nature of the units on the Y-Axis. Not correct, but I appreciate the axis unit awareness.
This is a Rusty piece, not a Ben piece. No permabears allowed.
Still writing. Patience.
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?
Btw, that’s my guess. A measure of our shrinking attention span.
Or in the words of Turk Malloy: " Waiting sweetheart, just waiting "
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"
Rusty, in the words of Lemony Snicket "…if we wait until we’re ready, we’ll be waiting for the rest of our lives, Let’s go "
Or in the words of E.V. Lucas " I have noticed that the people who are late are often so much jollier than the people who have to wait for them"
Rusty, in the words of the Rabbit Queen “…but what they were all waiting for, none could say; nor could one say whether they were all waiting for the same thing, or whether each was waiting for something entirely different.”
Rusty, in the wise words of Neeraj Agnihotri: ’ whatever happens, do not let waiting become procrastination."
Rusty? It’s been over 6 weeks now. I’m getting scared I’ll succumb to COVID-19 before I learn the meaning of this chart!
" waiting shortens life"
Mehmet Murat Ildan
In the immortal words of Ted Knight “Well…we’re waiting”
Holistically, it is about the Fed, because everything is about the Fed.
Answer is coming soon, folks. Thanks for your patience. Someone DID win.
Rusty, in the immortal words of farmer Don: " waiting for you is like waiting for my wife to decide which colour of shoes she likes best, an excruciating marriage maintenance test"
Continue the discussion at the Epsilon Theory Forum