The Stereogram

The free world has been dunking on LeBron James for more than a week now and it has not gotten old.

Still, something about it has made me uneasy.

Am I uneasy because King James requires some special grace, because I’m worried that we aren’t being full-hearted enough in our criticisms of him? No. Good God, no. Knock yourselves out, y’all. I’m uneasy because once you see clearly the influence the Chinese Communist Party can wield arbitrarily over you and me as citizens of the free world, you see that same power in a million other places. It is like a stereogram, one of those pictures for which our eyes must conquer their natural tendency to coordinate focus and vergence functions to see anything but a series of repetitive dots.

And once you see it, you cannot unsee it.  


When I was 18, I toured China and Hong Kong with the University of Pennsylvania Symphony Orchestra. We played at the Meet in Beijing Arts Festival in a kind of ‘partnership’ between our university and a couple in mainland China and Hong Kong. We played Peking Opera that had never been orchestrated for western instruments before shockingly large crowds. We played to a black-tie crowd at a Watermelon Festival outside Beijing. I have a nice letter signed by Henry Kissinger sitting in a box in my attic somewhere.

This was almost 20 years ago, and this is the first time in a very long time that I’ve thought about the ID tags we were asked to wear at both of those events. We were artists, and it was important that we not be allowed to converse or interact outside of our station. Heaven forbid we befoul the air in the vicinity of the local and regional party luminaries in attendance. Our ID tags were religiously checked, even when using the nearby restroom – like visiting Bridgewater’s Westport campus. So we huddled, waiting – in many cases, deeply hungover – in a small green room for several hours as other groups performed. The university, hungry for anything that would increase its presence (read: funding), prestige (read: funding) and reputation (read: funding) on a global stage, happily agreed to any and all such restrictions.  

Very small potatoes. And if you want to argue that a “when in Rome” attitude on someone else’s turf is more palatable than watching the Chinese Communist Party squeeze American institutions to influence the free exchange of ideas on our own shores, I won’t argue with you. It was their party, after all. But that isn’t my point. My point is that I am thinking about the power that has been exerted by the CCP on me for the first time in a while. I have seen and cannot unsee how long this has been going on in a million different places. It isn’t new. It always existed underneath the abstracted hand-waving explanations that convinced me to ignore it, like a colorful, repetitive mesh of dots.

And once you see it, you cannot unsee it.  

I’m not alone. Here is what we are observing at macro scale:

  1. That it has been common knowledge – something we all knew that we all knew – since the Nixon years that by simply exporting capitalism and free enterprise, we would unshackle the forces of freedom in China.
  2. That this common knowledge is breaking.

Today, we all know that we all know that the influence of the Chinese Communist Party over what you and I do has been aided, not thwarted, by the nominal Chinese embrace of capitalism. I think that this – not the NBA, or Hearthstone, or Disney, but common knowledge about the distorting effects of concentrated power on the efficiency of market outcomes – is the real main event.

Still, before we consider what that means, it’s worth taking a quick look at just how the bullish narratives on US growth in Chinese markets turned on a dime.

The NBA

Basketball – and by extension, the NBA – has easily been the most successful US sports export, despite playing a very distant second (or third, depending on how you measure it) to the NFL domestically. There are all sorts of reasons for this success, but they all boil down to one simple idea: when there are only five people on the court from each team, each of whom is visible and capable of significantly influencing the outcome of each contest, The Superstars are the Brand. The league’s stars exist, market and develop identities and brands independent of but still in service to the NBA. They have done so in ways that are remarkably in tune with the social and cultural zeitgeist that drives all sorts of consumer purchasing decisions.

In other words, the NBA is the perfect cultural export.

The coverage of and common knowledge about the growth of NBA-related brands in China has accordingly been almost universally positive for years. It will be no secret, but a glance at the narrative map below will tell you that narrative has always been about two things: how good and important it is to sell shoes. Over the twelve months prior to Morey’s tweet, there were 10 articles scored by Quid as being generally positive in sentiment (highlighted as green nodes in the charts below) for every 1 article scored as negative (red nodes).

US companies maximizing their footprint and growth in China was a Good Thing.

Source: Quid, Epsilon Theory

What does this world look like after Morey’s tweet and the subsequent response from China, the NBA and superstars like LeBron James? For one, the sentiment of articles about the NBA’s branding and marketing efforts in China went from 10-to-1 positive to 2-to-1 negative. But sentiment comes and goes. What is fascinating is how the language in the stories links them to language used in all manner of longer-cycle news stories, like the Hong Kong protests themselves (for obvious reasons), the Trump/China trade war, and importantly, other examples of CCP pressure being applied to US companies and individuals. The language devoted to discussion of economic growth, corporate opportunities and the freedom-enhancing power of Chinese embrace of capitalism?

Gone. Not diminished. Gone.

You’ll also note that the network map is much less tightly packed – that’s how the visualization demonstrates starker differences and distances between major topics and clusters. We used to all sing from the same hymnal about the NBA’s brilliant efforts in China. Now it is a battleground of language and competing missionary behaviors.

In short, the NBA-in-China isn’t just a cool growth story any more. Today we all know that we all know that it is tied up with big, global political, social, cultural, economic and human rights issues that the power concentrated in the CCP has prevented markets from reflecting clearly.

Source: Quid, Epsilon Theory

Blizzard

Blizzard Entertainment came under similar fire for withdrawing a prize won by a participant in a competition for Hearthstone, its World of Warcraft-themed deck-building game. The reason? He spoke up for Hong Kong protesters in a livestream, and Blizzard management came under pressure from the CCP to take action. Now, in case you didn’t know, Hearthstone’s publisher isn’t a Chinese SOE. It’s a subsidiary of Activision Blizzard, a US-domiciled, US-listed public company.

Despite (still) getting practically no coverage in mainstream publications, eSports is a huge and rapidly growing industry, especially in East and Southeast Asia. Over the same pre-Morey period, the narrative about eSports in China was uniform, cohesive and almost universally positive. It is exactly the narrative map you would expect from a rapidly growing, entertainment-focused industry with a supportive trade media that benefits from its growth and entertainment features (not unlike the financial press).

Source: Quid, Epsilon Theory

After Blizzard’s kowtowing to Beijing, as with the NBA brand narrative, the narrative around eSports in China became immediately less cohesive, dramatically more negative, and instantly linked by language and terminology to global political, social and economic conflicts.


Look, I’m not here to tell you that everything has changed for the NBA or Blizzard or any other company that has built its narrative around Growth in China. People will forget that they were mad at LeBron James and the NBA. And I’m talking weeks, not months, people. Sentiment will drift back. Sorry, but it’s true. People really like video games and basketball. On CNBC, by Q4 2019 earnings season, we will be back to “China Growth Initiatives” occupying bullet #1 on US corporations’ MD&A slides. People really like growing earnings. Imagine that.

But the awareness – in general – of what China can do? That can’t be unseen. What’s more, it is a nearly perfect fit with what we have described as the overarching common knowledge (as represented in political media) about the 2020 Election, namely, that it is about identity and unseating incumbent concentrations of financial and political power. Unlike those narratives, however, or those promoted by the drain-the-swamp chants from the Trump 2016 campaign, the China concern has universal appeal. This issue, and the inevitable conclusion that we “must do something about it” isn’t going to go away.

I, for one, am conflicted.

On the one hand, I can’t unsee what I’ve seen. It isn’t just unsavory or undesirable that China be in a position to so directly influence (and punish!) the free exercise of rights in the United States. It is untenable.

I also believe in freedom of action, thought and association. I believe in those freedoms as ends to themselves, untroubled by the need to justify them by evaluating their second-order effects. I don’t stop believing in those ideals when they concern the private commercial interactions between individuals and/or corporations. Not because I have some fanciful belief that unregulated, unrestricted trade across borders will always lead to universally optimal outcomes. Of course it won’t. But because I earnestly believe in rising tides, and in the generally superior function of the informal, unplanned, spontaneous features of markets to organize our collective activities.

I also believe that allowing companies formed by Americans to do business wherever they want will generally lead to better aggregate outcomes than some Very Smart Person with every incentive to parlay their $175,000 public servant salary into a multi-million dollar net worth who believes they have the prescience to dictate which domestic industries ought to be subsidized and retained and which oughtn’t to be. I will always be concerned that the cure for concentrations of power will be worse than the disease.

And y’all, I have good reason to be concerned. Remember, if you would, that any time someone celebrates leaning on the state and policy to solve the distortions caused in markets by concentrated power that the people making those decisions think things like this:

Still, no matter how conflicted or uneasy we may be, these discussions are coming. You and I won’t be able to avoid them. Anti-trust. Restrictions on trade and activities with foreign powers like China. Abolishing billionaires. Maybe even trimming the power of the state (LOL, sorry, just seeing if you were paying attention). This isn’t a temporary topic. Like it or not, this IS the zeitgeist.

So what’s the answer?

Clear Eyes. We see and reject the meme of Yay, Capitalism! , which tolerates no dissent from the idea that mostly-free enterprise is the panacea that will seep in to overturn dictators and tyrants. We do so knowing that the meme form bears little resemblance to the simple belief that unstructured, democratic social organization which funnels rewards to risk-takers is a magnificent, proven mechanism to make men and women wealthier and more free.

Let me say this more clearly for my fellow small-l market liberals: we must be willing to see and identify concentrations of power and their effects without fear that doing so necessarily implies our consent to a state policy-based solution that might be worse.

Full Hearts. We recognize that neither we nor anyone else can be objective about which concentrations of power we deem distorting. Our determinations will reflect our posture and beliefs about a great many things. We will be tempted to see our own conclusions as self-evident and justice-affirming. We will be tempted to see others’ conclusions as attempts to engineer society in their own image. That’s the effect of the widening gyre. But even when everything in our head is telling us that the person we’re arguing with is using the power exerted by China or Facebook or the Banks or Big Government as an excuse to re-engineer society to suit their personal preferences, we listen and treat those arguments in good faith until they have proven otherwise.

Long after we’ve forgotten about the forced rewriting of Disney movie scripts, or the maps of China that ESPN uses on their Sportscenter background, or access bans by gaming and social media companies, this debate will be with us. For those of us who really, truly, earnestly believe in the power of capitalism, we can either lean on the meme of Yay, Capitalism! to thwart all comers, or we can engage in good faith.

We’re in the latter camp.

ET Election Index (Candidates) – October 15, 2019


This is the fifth installment of Epsilon Theory’s Election Index. Our aim with the feature is to lay as bare as possible the popular narratives governing the US elections in 2020. That includes narratives concerning policy proposals and candidates found in the news, opinion and feature content produced by national, local and smaller outlets.

Our goal is to make you a better, more informed consumer of political news by showing you indicators that the news you are reading may be affected by (1) adherence to narratives and other abstractions, (2) the association/conflation of topics and (3) the presence of opinions. Our goal is to help you – as much as it is possible to do – to cut through the intentional or unintentional ways in which media outlets guide you how to think about various issues, an activity we call Fiat News.

Our goal is to help you make up your own damn mind.

Our first edition covered April 2019, and included detailed explanations of each of the metrics we highlight below. If this is your first exposure to our narrative maps, analysis or metrics, we recommend that you start with that primer.


Notes to October 15 Analysis

  • We have further pared our list of candidates to those consistently polling at >1% based on the October 10/11 Quinnipiac and Economist polls.
  • This drops O’Rourke, Klobuchar, Booker and Gabbard from our metrics below.
  • The analysis covers political media published during the period from September 1, 2019 through October 15, 2019.

Election Narrative Structure as of October 15, 2019

Source: Quid, Epsilon Theory

Commentary on Election Narrative Structure

  • Our view on the Narrative of the 2020 Election has not changed since July: The common knowledge is that the 2020 election is a referendum on race, gender and class identity.
    • This doesn’t mean we agree or disagree with this characterization.
    • This means that this is what everyone thinks everyone thinks the election is about, at least as promulgated by US political media.
  • Every highly connected cluster in the narrative structure from the months of July, August, September and October to-date was charged with and defined by this language.
  • Outside of this consistent structure, we have also seen four major shifts in the election narrative:
    • The most on-narrative candidate – the one whose personal narrative structure has best matched that of the election at large – has consistently been Bernie Sanders. We think this has changed as a direct result of missionary activity and actions taken by the new incumbent of that title. We now think the most on-narrative candidate is Elizabeth Warren.
    • Impeachment, which was a peripheral issue, is now a central one to the election. We anticipate potential wedges between those in offices that can influence and speak publicly about their role in the proceedings (e.g. Warren, Sanders, Harris) and those whose commentary will come from the outside (e.g. Buttigieg, Biden).
    • As we have written for nearly all of 2019, the forces arrayed against a successful Biden candidacy seem to us insurmountable; however, we analyze narratives, not polls. There are insights into Biden’s core electorate that we cannot offer. What we can offer is counsel to recognize in your own news consumption how concerted the decidedly negative coverage of Biden appears to be. Already the most negative by far, in September and October Biden coverage became almost unrecognizably negative in comparison to that of other candidates.
    • In the wake of summer recession fears (see our ET Pro monitors for more on this), the Economy as an electoral issue has finally raised its head above water. This is worth close monitoring to see which early narratives take shape.

Candidate Cohesion Summary

Commentary on Candidate Cohesion

  • The candidate with the most significant jump in narrative cohesiveness over the late summer should come as no surprise: it’s Elizabeth Warren.
  • As is always the case with observing instead of predicting, it isn’t clear the extent to which media narratives have influenced or simply reflected the more cohesive story about who Warren is as a candidate. Either way, everyone knows that everyone knows what Warren means now in ways that were far less clear some months ago.
  • Despite his fall in the polls, Sanders continues to have the clearest, most stable, most coherent narrative. Yet despite its continued favor among most media outlets (see Sentiment below), it seems to be the case that it’s a coherent narrative with limited electoral appeal.
  • Yang has consistently produced the least cohesive coverage in media. When outlets cover him, they do so in context of non-overlapping niche issues, other candidates or human interest stories surrounding his monthly UBI-preview giveaways. The result continues to be no consistent common knowledge about what Yang means as a candidate.
  • Surprisingly – and concerningly for his candidacy – this has increasingly been the case with Mayor Buttigieg as well. As an unknown early in the primary process, his limited coverage tended to be more cohesive because outlets told simple, consistent stories at different points. In spring debates, he was “erudite and intelligent.” Later coverage focused on his unique identity among candidates as an openly gay man. As debates have shifted into policies, that clear identity has faded – there is no Buttigieg policy narrative.
  • As for Harris, the continued strong cohesion of her narrative structure shouldn’t be seen as positive. As we will note in the sentiment section below, she is increasingly getting the Biden treatment in media: “We know who you are, and we don’t like it.”

Candidate Sentiment Summary

Commentary on Candidate Sentiment

  • In advance of her rise in polls, we noted in June and July that Sen. Warren was attracting much more positive sentiment across political media coverage, rivaling even that received by Sen. Sanders.
  • This has continued over August and September, in which sentiment attached to Warren and Sanders coverage far exceeded that of any other major candidate.
  • Those looking for a downtick in candidate narratives for lingering Native American / DNA test concerns or questioned claims of dismissal from an earlier career will come up empty.
  • The reverse is true for Biden, whose already abysmally negative narrative took a nose dive. How bad? By our measure, coverage of Biden during this period was, on average, roughly 230% more negative than that of the average democratic candidate. By comparison, coverage of Sen. Sanders was about 90% more positive than that of the average democratic candidate.
  • There is practically no issue relating to Biden’s candidacy which does not seem a ripe territory for profoundly negative language and coverage.
  • The Sen. Harris narrative is slightly better, but our analysis (read: our opinion) is that she is rarely attached to policy questions (much more commonly to pure identity coverage), and that negative ‘hypocrisy’ language, especially with respect to rights, policing and justice, is prominent throughout her narrative structure.

Candidate Attention Summary

Commentary on Candidate Attention

  • In our July update, we wrote the following:
    • For better or worse, if Warren were to refocus efforts on participating more actively in the identity-related narratives that we believe represent the common knowledge about what the 2020 Election “is about”, we think she would emerge further as a leading candidate.
  • We think that Senator Warren has done exactly this. We think the firming of a more coherent identity as “an electable and frankly less weird version of Sanders”, more positive sentiment and coverage more consistent with what the 2020 election “is about” at a macro level have been the results.
  • We also wrote our opinion that Warren appeared to have trouble differentiating her narrative from Sanders, which meant that the more cohesive Sanders narrative tended to be more in-line with election narratives. Warren’s efforts have literally flipped this dynamic on its head. Now it is Sanders being asked what he offers as a candidate that Warren does not.
  • Biden remains at high attention, but for almost universally bad reasons – in effect, there are two focal points in the election narrative structure.
    • On the one hand, there is a high attention center of gravity focused on Biden and the common knowledge missionaries who want to promote a more-of-the-same, not-really-a-progressive, part-of-the-neoliberal-system narrative with very negative sentiment and language.
    • On the other, there is a high attention center of gravity focused on identity and social/economic inequality issues. These were previously largely associated with the Sanders candidacy. We think that has since transitioned to Senator Warren.
  • Importantly, we think that consumers of political news – especially if they agree with either of those characterizations – should be mindful and cautious of news appearing to hew closely to either of those narratives.

US Recession Monitor – 9.30.2019

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.


  • US recession commentary – which is invariably influenced by discussion of global recession, remained at a high level of attention throughout most of September.
  • As with other topics, recession coverage is intensely intertwined with Trade/Tariffs (the common knowledge proximate cause) and broad common knowledge of the need for, inevitability of and market efficacy of stimulus.
  • Our views expressed in September remain the same this month:
    • 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, and it is becoming less so. 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

After Breakneck Expansion, WeWork Stumbles as It Nears I.P.O. [NY Times]

Stocks are poised to hit a new record this week, yet investor mood has darkened [CNBC]

Souring Bets on Apocalypse Were at Center of Quant Stock Storm [Bloomberg]

Concerns for Recession Fuel a Search for Economic Villains [NY Times]

Upbeat data suggest U.S. economy still on moderate growth path [Reuters]

US Fiscal Policy Monitor – 9.30.2019

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, at least as it concerns markets.
  • What we are seeing is a deepening of negative sentiment in these discussions.
  • Why? Because outside of markets, there HAS been an emerging language about US debt levels, deficits and spending. It exists purely in political and wonkish debates, and has been almost completely untethered from financial markets discussion.
  • We have said that the monetary narrative in 2019 is that it means nothing in the real world and everything in the world of asset prices. Is common knowledge about deficits the opposite? Irrelevant to markets, but meaningful to the real economy?
  • Not yet. But it does imply a complacency about the issue in markets.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

Don’t-pay-till-you-die reverse mortgages are booming in Canada [SF Gate]

Trump Says He’s Exploring “Various Tax Reductions” and the Economic Data He Loves Shows Why [NY Times]

The Finance 202: Mnuchin again demonstrates why he is Trump’s most loyal surrogate [Washington Post]

Companies Aren’t Putting Trump’s America First [Bloomberg]

Woke capitalism is a winner in the 2020 campaign [Reuters]

Trade and Tariffs Monitor – 9.30.2019

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.


  • 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.
  • We furthermore believe that the “Tweetstorm-sensitive” mechanism whereby shorter-horizon investors are updating estimates of these outcomes has itself become common knowledge.
    • Everyone knows that everyone knows that Trump’s trade tweets move markets.
  • Other than perfunctory, peripheral coverage of Chinese missile parades, we still do not see (1) national security issues or (2) a transition to a pure domestic political game in this narrative structure.
  • That means we still think this is an unpredictable Game of Chicken that warrants very little use of investors’ respective risk budgets.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Attention


Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

Emerging Markets in Grip of China’s Yuan More Than Ever [Bloomberg]

Its leash lengthened, China’s yuan flirts with trade war role [Reuters]

How the U.S.-China trade war makes clear the folly of arms races [Washington Post]

US-China trade war not hurting diaper maker Kimberly-Clark, CEO says [CNBC]

Chip stocks brush off trade war and rally to near record highs as investors bet on 5G [CNBC]

Central Bank Omnipotence Monitors – 9.30.2019

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 noted last month, a rise in cohesion after a period of waning is in our view evidence of strong (and growing) common knowledge that the Fed and fiscal policymakers “must and will” continue to take action.
  • We also think the common knowledge of excessively slow rate cuts by the Fed – again, not the personal intellectual belief in the mistake, but a belief that the market believes that the market believes it – grew rapidly once again in September.
    • We think the sharp drop in sentiment attached to this coverage is partially reflective of the language expressing this view.
    • We also think from the language of some articles that it reflects a growing common knowledge of the limited real-world impact of this stimulus.
  • You may also note that language of US markets coverage is actually more similar to discussions of ECB rates policy, negative rates and more aggressive policy. A narrative of central bank omnipotence with respect to market outcomes is alive and thriving in US markets.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Attention


Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

Market Fragility On Show as Trade War, China Data Curb Optimism [Bloomberg]

Trump Can Battle China or Expand the Economy. He Can’t Do Both. [NY Times]

Easy Credit’s Latest Twist: Loans to Companies With No Income [American Banker]

ECB cuts rates, revives QE to lift growth as Draghi era ends [Bloomberg]

The Road to Replacing Libor Led This Finance Legend to the Best Barbecue [Bloomberg] [Ed Note: This really was in the top 10, I swear]

Inflation Monitor – 9.30.2019

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 noted in the last two monthly updates, our measure of attention on inflation narratives faded after what we believe was a short-term “boost” from central bank and rates policy commentary in general.
  • Interestingly, we have noted the increasing centrality and influence of language relating to the usual areas of increasing costs – Health Care, Education and Housing.
  • Fiat News surrounding inflation remains high, largely in connection to these clusters where opinion and de facto opinion journalism being called news seeks to influence readers.
  • A low attention narrative structure with very high fiat news and historically negative sentiment strikes us as one with higher than average asymmetry – especially in context of the strong common knowledge around central bank omnipotence.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Attention


Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

Australia central bank seen easing policy in October, rates seen at 0.5% by early 2020: Reuters poll [Reuters]

Don’t expect oil shocks to move the Fed [Reuters]

No, No, No. Elizabeth Warren Is Not a Socialist [Bloomberg]

Mexico central bank has more reason to cut rates after low Aug inflation [Reuters]

Your Pension Might Be About to Get Riskier [Washington Post]

Politics Trump Economics Redux

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?”

As Good Once As It Ever Was


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.

Death in Slow Motion

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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.


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Sparks, Arcs and Trademarks

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.

Rust and Blight


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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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When Meta-Analysis Goes Meta

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.

US Recession Monitor – 8.31.2019

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]

US Fiscal Policy Monitor – 8.31.2019

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]

Trade and Tariffs Monitor – 8.31.2019

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]

Central Bank Omnipotence Monitor – 8.31.2019

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.


  • After a brief jog downward as Fed policy faded into a broader backwash of Trade War narratives, Trump’s designation of Powell as an ‘enemy’ and somewhat confused communications policy out of Jackson Hole brought central bank omnipotence narratives back to the fore of investors’ attention.
  • The rise was significant enough to make our measure of attention to central bank narratives as high as it has been since we began tracking it.
  • Along with the rise in attention, cohesion began to rise again (after a period of competing narratives) as well. We think that the change was reflective of a strong (and growing) common knowledge that the Fed “must and will” take more significant action.
  • We also think the common knowledge of excessively slow rate cuts by the Fed – again, not the personal intellectual belief in the mistake, but a belief that the market believes that the market believes it – grew rapidly in August.
    • We think the sharp drop in sentiment attached to this coverage is partially reflective of the language expressing this view.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Attention


Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

Germany’s Scholz: Don’t expect higher interest rates for years [Reuters]

Trade War Back With a Vengeance After Jackson Hole: Economy Week [Bloomberg]

European Bonds Are Best Placed to Enjoy Spoils of a Currency War [Bloomberg]

Bond yields are on a path lower as recessions risks rise: Strategist [CNBC]

The Fed’s Stimulus Might Be Undermining Growth [Bloomberg]

Inflation Monitor – 8.31.2019

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.


  • We observed a curious combination for inflation narratives in August – a sharp drop in attention coupled with a sharp rise in cohesion
  • We believe that the drop in attention reflects an even further erosion in focus by investors on inflation.
  • We attribute this drop in large part to the rapid acceleration of attention to central bank policy narratives and continued peak levels of attention to trade and tariffs.
  • The increase in narrative cohesion reflects the increasingly universal discussion of inflation as being ‘non-existent’ or ‘a challenge’ to create.
  • Coupled with a rise in our fiat news measure, we believe that the equity market correction in August led to an increase in advocacy journalism – masquerading as news – arguing for stronger central bank action with ‘weak inflation’ as a justification.
  • This remains an active narrative.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Attention


Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

The Danger of Plunging Interest Rates and Delayed Buying [Bloomberg]

If Trump Causes a Recession, How Severe Will It Be? [Bloomberg]

MMT may be Democrats’ economic cure, but only Trump got the memo [Reuters]

Negative Mortgages Set Another Milestone in a No-Rate World [Bloomberg]

Argentinas Macri says inflation rising, central bank props up peso [Reuters]

Gell-Mann Gravity

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.



There are three topics which, despite being wonkish or technical subjects pertinent to specific industries or social fields, seem to always manage a connection to all the narratives floating around in global financial news:

  • New Hampshire and Iowa electoral caucuses
  • Companies buying back their own stock (don’t worry, I’m not going there)
  • Rare earth metals

Welcome back, old friend.

I had honestly forgotten about this story, but extra kudos to the writer here for the very appropriate scare-quotes around “liquidity.” The world just wasn’t ready for crowd-sourced terbium oxide markets, y’all. All the same, the story is worth reading just to remember how wacky the world of finance, real assets and commodities can be.

Yet I’m far more interested in why rare earth metals stories tend to be so front-of-mind for so many news outlets. Yes, I think it has something to do with discussions of commodities, trade and China to which some language here is connected. Yes, rare earth metals actually are specifically important to some industries and not as broadly distributed in current production as we might like.

AND another thing. I think there is a special class of topics which are simultaneously (1) widely believed to be a powerful catalyst for future events and (2) really complicated. They are ripe with potential to make us victims of Gell-Mann Amnesia. They are also ripe with potential to exert disproportionate influence on the attention paid to these topics. People and outlets want to cover topics which everyone knows that everyone knows will be a catalyst for future events. In media, as in politics, as in financial markets, people make their name on these kinds of predictions. For better or worse.

That is Gell-Mann Gravity.

I am not saying that I have insight into whether control of rare earth metal deposits is or isn’t (or won’t be) a catalyst for some Big Thing. For all I know, I will have grandsons fighting for the New England Confederation in both the Greenland and Chinese theaters in the Great Neodymium War. I’m also not saying this particular article has anything wrong with it. But I think I do have some insight into how common knowledge about catalysts shapes the way that we talk about them – and read about them.

My humble suggestion: consider adding “Does this topic exert Gell-Mann Gravity?” to your tool kit of Fiat News tells and “Why I am reading this now” heuristics.