The Zeitgeist – 3.8.2019

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 sort of chord that has been struck in Narrative-world.

I’m channeling my inner MST3K with the comments here. Premium subscribers should feel free to join me in the Comments section (but only if you know what MST3K is!), and I’ll reprint the best ones in an upcoming Mailbag note.


Norway Gives Wealth Fund Approval to Cut Some Oil [Bloomberg]

The narratives around climate change and socially responsible investing are powerful ones. Why? Because they are presented as existential. They matter for the same reason that attaching the national security! meme to trade negotiations instantly took their importance up a notch. What is interesting about this issue in particular, however, is just how malleable the underlying approach to leveraging the narrative can be so long as you say the magic words. This climate-motivated change in Norway – more than two years in the making! – ended up justifying keeping the huge positions in integrated oil companies because they were more likely to be a part of climate solutions. I’m on record saying I think that actually is true, but do you have any doubts that they could have justified practically any interpretation as long as the forms were observed?

A lot of people believe in investing in big shifts – mega-trends, super-themes, whatever – because they think that issues like climate change create big, unpredictable changes and inflection points. Most of these people underestimate, however, how powerfully entrenched forces can use the language and taxonomy of those change narratives to protect the status quo.


Where does the endowment money go?; $44 billion K-12 endowment sends less to schools than decades ago [Houston Chronicle]

We’ve written a lot about Gell-Mann Amnesia, the phenomenon in which you read about a topic you understand in the newspaper and shake your head in disgust at how poorly the authors understood the details, but then blithely turn the page and nod along to some other specialized topic you know less intimately. Stories about big, public investing institutions are my #1 Gell-Mann Amnesia trigger.

A regional investigative journalist can be forgiven for not completely understanding why comparing returns on a pool of real assets and royalties with a bizarre legislature-imposed mandate to the Yale University Endowment makes zero sense. A professor at Johns Hopkins University, however, has no such excuse. Good grief.


Boat Race Bank BNY Mellon Could Face Landmark Legal Fight After It Bans Staff From Working at Home [Evening Standard (UK)]

Well, that didn’t last long.

Separately, Britons, please advise: What the devil is a Boat Race Bank?


The Gazillion-Dollar Standoff Over Two High-Frequency Trading Towers [Bloomberg]

Ever since I saw the documentary about Disney’s highly secretive landgrabs under a range of oddly named development companies to build Disney World, my brain has started to auto-tune any story of up-and-coming entities staking out surprisingly aggressive positions. I was about two lines into this one when I decided, “Nice. These guys are just Citadel.” It wasn’t until later in the piece that I realized I wasn’t alone.

Part of the kick-in-the-teeth of writing so much about narrative is that you really do see it everywhere. The other part is the response to that: You fight the pattern-recognition impulses that usually do serve you well.


Chinese Shares Suffer Worst Day in Five Months as Exports Slump [Morningstar]

It is de rigeur for us and others to take on the tiresome “Markets [slump/rally/dive/soar] as [event]” takes from financial media, analysts and other commentators, but sometimes someone still manages to say something so vague and hand-wavy that, while we recognize they’re trying their hand at missionary work, we can’t quite figure out what view they’re promoting.


Real Estate Home News: Last Blockbuster Store & Last Blockbuster Mansion [Press Release]

Wait, wait, wait. The Last Blockbuster is real?


The Zeitgeist | 3.1.2019

This is our feature of the 10 (or so) most on-narrative (i.e. interconnected, highly similar) stories in financial media. It’s not a list of best articles, or articles we think are most interesting, or articles we agree with. But if you’re going to read 5-10 stories when you start your day, these are the ones that are most connected to the financial news that got published today.

Why Americans pay $550 monthly for new cars

China tech: Playing BATs versus FAANGs

Big Pharma’s Hunt for New Drugs Is Pushing Up Cost of Deals (Ed Note: Maybe they should just do buybacks instead to avoid controversy.)

Evolving The Advisor-Client Relationship

Trade Against Pension Fund Constraints For Better Returns

Chart of the Week: Institutions pump money into ETFs

J.C. Penney plans to close 24 more stores

Fleet Complete Finalizes Investment Partnership with Ontario Teachers

Ireland Factory Growth Improves In February

‘One Day at a Time’ – Gloria Calderon Kellett on being the boss and the Netflix numbers game

In Praise of Work

Subscribers can access the PDF of this note here.

Idleness is inimical to the soul.

The Rule of Saint Benedict

And let them not be distressed if poverty or the needs of the place should require that they busy themselves about gathering in the crops with their own hands; for then are they truly monks, when they live by the work of their own hands, as did our fathers and the apostles.

The Rule of Saint Benedict

Peter: Let me ask you something. When you come in on Monday, and you’re not feelin’ real well, does anyone ever say to you, ‘Sounds like someone has a case of the Mondays’?

Lawrence: No. No, man. Shit, no, man. I believe you’d get your ass kicked sayin’ something like that, man.

Office Space (1999)

Chef: It’s very simple, children. The right time to start having sex is seventeen.

Kyle Broflovski: Seventeen?

Chef: Seventeen.

Sheila Broflovski: So you mean seventeen as long as you’re in love?

Chef: Nope, just seventeen.

Gerald Broflovski: But what if you’re not ready at seventeen?

Chef: Seventeen. You’re ready.

South Park, Season 5, Episode 7 (“Proper Condom Use”)

It is all very well and good for someone like me to write about work.

I have never really wanted for anything. My father had a good job. He spent his entire career as an engineer with the Dow Chemical Company. My mother was a homemaker. We were square in the squarest middle of the American middle class. Me personally? I was even more fortunate. I was a kid with good test scores from a poor, rural high school that no one had heard of, so I got to hop in the short line to get the Team Elite stamp on my passport. I’m a terrible person to lecture you about how you should think about your relationship to your work.

Hear me anyway: Your work is holy.

Work is on my mind right now in part because of two essays I read this week. One was written by Ben Carlson at Ritholtz Wealth Management. The other – which was heavily referenced in Carlson’s piece – was written by Derek Thompson and published in the Atlantic. They are both really good and worthy of your time, but it’s Thompson’s piece I want to talk about (in part because I don’t disagree with anything in Ben’s excellent piece). I think Thompson gets nearly everything right, too, but for all that somehow ends up in the wrong place.

In short, Thompson’s contention is that we have imbued work with almost religious significance. No, not almost. True religious significance, to which end Thompson coins the expression workism to describe our search for meaning, identity and community in the work we do. For most of us, he notes, this obsession with work isn’t working. By any measure, we are more emotionally invested and connected to our jobs and our coworkers. We aren’t any happier.

Thompson is right. Of course he is right.

American corporate culture has embraced the appearance of exhaustion. To be harried, frantic and busy is the mark of being in-demand, of being important. Our unread emails are a source of pride, our hard stops on a meeting a badge of honor. We are on mute but listening because we’ve got too much else to do. The savviest among us, of course, have learned how to humblebrag our way through all of this, to wrap it in a metagame of subtlety and hand-waving that says ‘Oh yes, I suppose I’ve got a lot going on, but I’m learning to be a bit more Zen about it.’

But why now? The Protestant Work Ethic has been a dominant narrative in northern and western Europe for a few centuries now. Even the term Max Weber used to describe it is more than 100 years old.  Hell, even Office Space, America’s seminal cultural criticism of workism, is 20 years old now. Are we just now acting out the inevitable ennui of a decadent culture largely finally unthreatened by famine, disease and war? Is workism the soul-crushing manifestation of the force multiplier social media applies to our own tendencies to compare our lots in life to those of others?

Yes! Well, yes and no.

And as much as I agree with Thompson, it is the ‘no’ part which interests me. We are clearly missing something in our explanation here. I think it can be found by asking two further questions. To wit, if all of that about workism is true, why isn’t this happening in the trades and what is left of blue collar labor? And why was this the dominant culture of consulting and banking for >50 years before it found its way to the rest of white collar work?   

My answer is this:

The problem isn’t that we derive too much of our worth and value from work.

The problem is that our jobs are becoming increasingly abstracted from work.

Consider the jobs of the construction worker and the banking analyst for a moment. The construction worker builds and then he comes home. His job and his work are more or less the same. His job is to make and he makes. He probably has some complaints about his hard-ass foreman and about that rotator cuff that keeps giving him issues. He might not be totally satisfied with his pay or the fact that the new guy is getting paid the same even though he takes twice as long to frame a wall. But office facetime demands and exhaustion porn play little role in his conversations over a beer on Friday afternoon.

The banking analyst, on the other hand, will have a little more difficulty telling you what his work is – what he produces. If he’s got more years of college telling him how to answer this question than he has experience actually doing it, he’ll give you the something something matching capital with those who can deploy it answer. Even then, he will have some difficulty explaining how the things in which he invests his mind and body during the average day contribute to that result. Over time, he comes to understand that his job function is explicitly this: to permit his immediate boss to signal competence to her immediate boss, a chain of signaling which ultimately ends with a client who wants to do something (e.g. buy another company) while offloading some of the various types of risk and accountability associated with that thing to the most credible third-party sources (i.e. you).  Sure, in rare cases the matching function may be the kind of thing that wouldn’t have happened without their help, but generally speaking, banking and consulting make nothing – not even ideas, not even connections. Their service is to shift and allay the career risk of institutional decision-makers.

So it is that workism was alive and well in these fields long before social media provided avenues to compare, long before millennials, long before it became fashionable to treat our jobs as our calling. The reason for the emergence of workism was that the jobs of banking and consulting were fundamentally about signaling intelligence, competence, credentials, hard work and availability. They were not about what sliver of work was being done, or how much meaning anyone invested in it. The job was – and is – almost wholly abstracted from that work. That is the soul of workism: that the job is, in every meaningful respect, to look like you are doing the job.

I think it is a mistake to be too narrow and prescriptive about why workism spread to other professional fields in the last quarter century. Social media has exerted powerful influence. Even outside of social media, more rapid information flow and stronger common knowledge effects about what other companies are doing has exerted influence. The search for our place in the world that is the natural result of a rapidly expanding and crowded populace of talented people we cannot hide from – yeah, this has exerted influence, too. Yet I maintain that the strongest influence has been the coming-to-maturity of software-dependent professional fields, which is to say…just about everything. Industries and careers formed around innovation and creative destruction have transformed into those in which conventions reign, IP is a thing to be protected and harvested, risk is a thing to be transferred, and the job is to look like you are doing the job.

I know this because we talk to all of these people daily. They are among our 100,000+ subscribers, and in our prior lives, they were our clients. It has happened in software. In video game development. In mobile app development. In FP&A, corporate development and strategy functions across industrial, chemical, materials, consumer goods and consumer devices companies. It has happened in investments, from public active management to venture capital. It has happened in media and entertainment, in digital media, in publishing, and even in the arts. We are a nation full of people doing jobs where the real job is to look like you are doing the job.

As all this happened, American corporate culture proposed two solutions. As we became disillusioned with the increasing gap between our jobs and any work product which might influence the world in a meaningful way, the first solution was, as Thompson points out, to introduce myths of meaning, belonging and calling into our offices. Workplaces became places to feel comfortable and at home. Colleagues became family – you wouldn’t ignore a call from family at 10PM, would you? This kind of meaning was a nutritionless husk, a crude analog to real human engagement. It goes without saying that it made the problem worse, adding guilt and moral judgment to the weight of pointlessness in the jobs we all performed.

Perversely, the second solution we promoted was nearly the opposite of the first. We promulgated the mythology of work-life balance. This remains, in fact, the ultimate recommendation of Thompson’s piece, in which he observes:

It is the belief—the faith, even—that work is not life’s product, but its currency. What we choose to buy with it is the ultimate project of living.

The basic idea is this: suffer the mind-numbing frustration of unproductive labor, but you know, turn off your phone sometimes and actually take your vacation days. Treat work as a means and not an end. A way to buy free time and leisure. This is not the same nutrition-less husk that the poisonous mantras of ‘we’re your second family’ were. At the very least, it suggests that we spend more of our hours engaging in true human interaction. That’s all for the good. But it is like treating a sinus infection with an expectorant – it may alleviate a symptom, but gives us no answer for the disease. And it forgets another point.

Hear me again: your work is holy.

No I don’t mean your job. I also don’t mean your passions. Your life’s greatest work may never be a passion. And no, this isn’t another paean to artisanry, crafts and trades, although these are perfectly legitimate paths to meaning, too. I mean your work: what you make. When you set your mind and hands to work, what do they produce? Does your labor result in knowledge, happiness and health, beauty and wealth, for yourself or for others? Even if you manage to reserve a good amount of time for leisure with friends and family, make no mistake: Your work will still matter to your happiness.

The form work takes for you will differ based on the talents you have. Whatever it is, there is no substitute for it. If you reduce your work-less job from 70 hours to 55, you will still be unhappy. If you are able to find relationships and connections and even follow your passions at your job, if it is not work, you will still be unhappy. If you are retired early, sedentary and wealthy enough to do nothing for as long as you want, you will still be unhappy. Good people are wired to be productive, to contribute and to give more than they got. Unless you are a sociopath, you cannot trick your brain around this.

Yes, yes, there is an obvious, ever-so-tiny problem with committing to the dignity of work and rejecting the abstraction of the modern job: We are not communists. You want to make money and live a fruitful life. So do I. You are not always going to be in a position to determine how much of your job can be defined by something other than looking like you are doing the job. I get it. But you’re not nearly as powerless as you think you are. Clear eyes, full hearts, y’all. Neither you nor I have the option of doing all these things, but we both can do some:

Clear Eyes:

  • Get Your Passport Stamped, Then GTFO: If you can, and if you want the flexibility to determine how closely related your work and your job will be, there is no substitute for spending time in what others consider to be an elite employer in your chosen profession, at an elite educational institution, and probably with time spent in a big city. Like Ben wrote in the above piece, of course there are workarounds! But we don’t have to like or agree with credentialing and signaling to recognize that they are a thing. They are. But whereas others might tell you that you’ll have to figure out yourself how long to spend working at one of these places, or to stay as long as it takes to learn what you need to learn, I’ll give you a straighter answer: three years. Spend three years at one of these inherently work-abstracted, soul-sucking institutions, get your passport stamped, and GTFO. You’ll find plenty of reasons to convince yourself to stay longer. Don’t.
  • Don’t Be a Hero: Unless you’re the boss (and even then it’s hard as hell), you won’t fix your company’s workism culture. Don’t try. Do this for you, but as much as you possibly can, be intentional and honest about connecting your time and tasks to non-zero-sum, actual work products. Get in the practice of documenting and journaling how you’re spending your time at your job and how it connects to your work. Even in soul-sucking hell-holes, I guarantee that you can find at least two more hours a day to spend on something that matters.
  • Tell A Partner or Friend What You Did. Every Day: This is a piece of advice I got from Jerry Albright, now the CIO at Texas Teachers, and it has saved my sanity. Every day when you get home, tell your spouse or partner what you did that day. Everything. Do it for two reasons. Do it to check yourself on your how much time you are wasting on looking like you’re doing your job instead of doing work. And do it so that you won’t forget to properly value how much work you really are doing.

Full Hearts:

  • Spend At Least Three Hours Making. Every Day: Hopefully you can do this by contributing to real, non-risk-shifting, paper-shuffling, zero-sum work you do in your job. If not, then maybe it’s a lesson for the kids. Maybe it’s a hobby or a craft. Maybe it’s time invested in exhorting a friend. Maybe it’s preparing a meal. Maybe it’s volunteering. All of these things may be your work. But unlike the counsel provided in the Atlantic, I think that part of the answer to our jobs supplanting the fulfillment that can only be provided by work is doing more actual work. Anything that contributes to knowledge, happiness and health, beauty or wealth. Do this for a month, and I think you will find that this kind of intentional, true work fills the gaps more than hours of idleness and pure leisure ever could.
  • Train Your Voice and Use It (Stolen shamelessly from Ben’s note here): It’s one of the most disappointing outcomes in life – to know that you’re a creative person, to have something Important that’s going to burn you up inside if you don’t share it with the world … but to lack the words or the music or the art to do so. In my experience, the unhappiest people in the world are mute creatives. To paraphrase Langston Hughes, sometimes they shrivel. Sometimes they fester. And sometimes they explode. Every creative person should start a blog to express and develop their art. Do not distribute it. Do not publicize it. Do not play the ego-driven Game of You. Erase it all every six months if that’s what you need to do, because odds are you have nothing interesting to say! But start training your voice NOW, because one day you will.

When I say that I think your work is holy, I mean exactly what I say. Your work supersedes your job. Your work will often supersede your passions, because it isn’t a thing you feel. Your work is what you do with the gifts of life, talent, intelligence, fortune and strength you have been given. Be shrewd, but where you have the power to do so, reject any who would tell you to squander them.

(Ed Note: Some clarifying edits made to Clear Eyes section at 9:55 ET on 3/1)

The Zeitgeist | 2.28.2019

This is our feature of the 10 (or so) most on-narrative (i.e. interconnected, highly similar) stories in financial media. It’s not a list of best articles, or articles we think are most interesting, or articles we agree with. But if you’re going to read 5-10 stories when you start your day, these are the ones that are most connected to the financial news that got published today.

Report: Blockchain Home Equity Loan Platform Raises $65 Million

UK house price growth ‘subdued’ as Brexit looms

Why Nintendo keeps returning to classics like Pokemon

MYSTERY SHOPPER BRISTOL; The shopper is considering investing her graduation gift – £50,000 – in safe haven assets such as gold

Doubts Over Trade Talks Weigh on Stocks (Ed Note: We haven’t seen “weigh on” in a while.)

The Perils Of Investing Idol Worship: The Kraft Heinz Lessons!

Deutsche Bank Shares Slip Lower After ECB Capital Increase Notice

Chinese Stocks Are Suddenly the World’s Best Trade in February

Trump-Kim summit fizzles; AB InBev surges; US GDP

The Zeitgeist | 2.27.2019

This is our feature of the 10 (or so) most on-narrative (i.e. interconnected, highly similar) stories in financial media. It’s not a list of best articles, or articles we think are most interesting, or articles we agree with. But if you’re going to read 5-10 stories when you start your day, these are the ones that are most connected to the financial news that got published today.

How To Build A World Full Of Elons (Ed Note: I’ll take ‘Questions nobody is asking for $400, Alex’)

Alaska Permanent allocates $1.6 billion in commitments, investments

Tech stocks: is the foldable, 5G and AI era really revolutionary

GE just spun off its locomotive unit. Workers immediately went on strike

AutoZone Rises Sharply After Beating Earnings Estimates

Asian Shares Rise On Dovish Fed Comments

Elon Musk’s SEC fight: Here’s what could happen next

Dow futures point to lower open ahead of Trump-Kim summit

Low Participation Levels Keep The Bull Alive

The Zeitgeist | 2.26.2019

This is our feature of the 10 (or so) most on-narrative (i.e. interconnected, highly similar) stories in financial media. It’s not a list of best articles, or articles we think are most interesting, or articles we agree with. But if you’re going to read 5-10 stories when you start your day, these are the ones that are most connected to the financial news that got published today.

Intel and Apple Among Stocks Set to Gain on Improving U.S.-China Relations

Stealing The Permian – Which Operators Are Next In Line For U.S. Onshore Mergers And Acquisitions Activity?

Barrick Gold’s Shocking Hostile Bid For Newmont Is A Lowball Offer

Hearings on ‘sky-high’ drug prices show how little has changed in 60 years

The Current Cost of Climate Change: $650 Billion and Rising

Rally in Cyclical Stocks Could Be a False Positive

SE Asia Stocks-Most fall on trade deal uncertainty

Aussie, NZ shares end lower as markets seek clarity on Sino-U.S. talks (Ed Note: Markets ‘seek clarity’! What a cool thing to be able to determine.)

Kraft Tests Buffett and 3G Ties — WSJ

A Stock That Rides Every China Bubble Returns Stronger Than Ever

The Seed Delusion

We may call Connecticut home now, but (as I’ve alluded to in prior notes) my family wasn’t willing to leave Texas completely behind. To that end, we bought a bag containing around 50,000 seeds of lupinus perennis, and we’ve begun to spread them around the property, including along the street-facing edge of our old stone wall.

Now, Lupinus perennis isn’t exactly the same thing as a Texas Bluebonnet, but the latter is a surprisingly poorly defined thing anyway. From 1901 to 1970, the State of Texas recognized only Lupinus subcarnosus as a true Texas Bluebonnet. From 1971 on, at the urging of a mass of increasingly opinionated citizens, it switched its allegiance to Lupinus texensis. Since then, one of the most outstanding and underrecognized institutions we have in these United States – the Ladybird Johnson Wildflower Center – has taken the more liberal stance of informally recognizing several blue-flowered lupinus species as Texas Bluebonnets. Whatever the official status, the seeds we’re spreading are native to Connecticut and unlike the Texas variants, don’t germinate in the fall in expectation of a mild southwestern winter. Their pale blue flowers will make an appearance later this year.

It’s a far cry from the kind of planting we did with our children last weekend. Being about 8 weeks from planting here, we carefully pulled pepper, tomato and onion seeds from packets, pressed 2 or 3 into an 1/8” divot in starter soil, and moistened the soil. With each pod set onto heat mats and resting under properly tuned and time-controlled LED lights, just about every one should produce at least one proper plant.

Not so with the wildflowers. With that many seeds, there’s little hope of getting them planted at the right depth and under perfect conditions. You can scarify them by freezing and removing the seeds to warm water – and we did – but beyond that you’re at the mercy of nature. So you cast them far and wide. A very modest yield would suit us just fine. There’s nothing wrong with either of these methods, but that’s only because (1) seeds are shockingly inexpensive and (2) I’m a homeowner and hobbyist farmer, not a professional trying to maximize my output per acre.

There is a point in every market cycle, too, where your average investor stops thinking like a professional and starts thinking like a hobbyist. I think we’re there.

Why do I think so, and how do you know when we’ve reached that point?

You know it when otherwise professional institutional investors start seriously talking about opportunistic positions in speculative investments like diversified 1-2% crypto footholds.

You know it when PE shops start pitching – and asset owners start subscribing to – massively oversized tweener funds with ‘the upside potential and opportunity’ of VC and the ‘confidence of an established growth equity franchise’ to capture the next leg of growth from the most adversely selected graduates from early-stage funding.   

You know it when family offices start pursuing more idiosyncratic one-off direct PE deals, not because they believe in the franchise, its business case or its cash flow potential, but because they know that there’s money out there to snap it up.

It isn’t that there is something inherently wrong with any of these investment ideas. It is surely possible that they might have arisen as part of an investor’s regular process for evaluating investment ideas and opportunities. More power to those investors. Yet the far more common justification for casting seeds into a field isn’t a real process, but the belief that establishing small positions with asymmetric or speculative return profiles is an inherently advantageous road to outperformance.

This is a delusion. It is the Seed Delusion.

The Seed Delusion is a natural response to three ideas and effects: (1) the Madame Bovary Effect, which biases us against anything that feels like boredom, (2) the undeniable fact that a true edge in estimating odds or payoffs will make these activities profitable, and (3) the delusion that we are likely to possess that true edge. The third idea is where the framework breaks down. It breaks down because of a feature of our behavioral response to observing returns, a response that inevitably creeps into our thinking regardless of our investment DNA. Stolen shamelessly from Ben, that response tends to follow this pattern:

Contrarian investors confuse outsized payoffs from long odds bets with edge.

Consensus investors confuse frequent payoffs from short odds bets with edge.

It’s worth being pretty direct about this one: If you are a professional subscriber to The Seed Delusion, over sufficient time your expectation should be that you will lose every seed you cast, because you are likely to consistently overestimate the payoffs and edge of your long odds bets. If you are routinely casting 25 and 50bp seeds – and my conversations with institutions, consultants, FAs and advisers indicate that many of you are doing exactly that – you run the risk of systematically eliminating just about every benefit you have gained from reducing fees over the last decade. Maybe worse.

The things that look to us like asymmetric payoffs are not magic beans, y’all.

(FYI – Commenters submitting a “but my deal flow” comment should do so with confidence that it will be referenced in a future Deal Flow Delusion piece.)

The Zeitgeist | 2.25.2019

This is our feature of the 10 (or so) most on-narrative (i.e. interconnected, highly similar) stories in financial media. It’s not a list of best articles, or articles we think are most interesting, or articles we agree with. But if you’re going to read 5-10 stories when you start your day, these are the ones that are most connected to the financial news that got published today.

As AI Software Replaces Thousands of Workers, One Company Will Benefit the Most

Are you paying higher fees to subsidise tiny ‘orphan’ funds?

How America Learned to Stop Worrying and Love Deficits and Debt

The Green New Deal: A Fresh Opportunity For Investors?

Stocks Gain, China Surges, as Trump Delays Tariffs Amid Trade Talk Progress (Ed Note: It’s a rare threefer – Gain! Surge! Progress!)

Trump predicts ‘very big news’ in China trade talks after breakthrough

Trump Extends China Tariff Deadline

Buffett’s Berkshire, hurt by Kraft Heinz, posts massive quarterly loss


The Zeitgeist | 2.22.2019

This is our feature of the 10 (or so) most on-narrative (i.e. interconnected, highly similar) stories in financial media. It’s not a list of best articles, or articles we think are most interesting, or articles we agree with. But if you’re going to read 5-10 stories when you start your day, these are the ones that are most connected to the financial news that got published today.

Volatility Seems Here To Stay

House sales UP year on year in January as property market continues at ‘steady’ pace (UK)

UTIMCO to search for a custodian, strategic partners

Walgreens’ New Digital Refrigerator Doors Are Watching You. Here’s What They Know.

Restaurant Brands Yearns For Overseas Growth

European markets seen mixed amid US-China trade talks

Warren Buffett and the Insurance Business: A 52-Year Love Story

China and Russia have deep financial ties to Venezuela. Here’s what’s at stake.

Copper hits 7-1/2 month high on trade hopes, sliding stocks

The Final Frontier For SaaS Is CRM For Main Street

Gravity Sucks

Image result for gravity

Our two greatest problems are gravity and paper work. We can lick gravity, but sometimes the paperwork is overwhelming.

Wernher von Braun, in the Chicago Sun-Times

Alongside the unexpected reemergence of an old friend – the narrative of central bank omnipotence – trade and tariffs have been front-of-mind for investors since early December. It’s something we track in a recurring monthly series for our ET Professional subscribers.

In cases like the former, we think the narrative exerts a directional influence. When everybody knows that everybody knows that the Fed has a strong asset price protection mandate, then BTFD isn’t just a bit. It’s a rational response to that common knowledge. In cases like the latter, however, it is a bit more complicated. Market participants may be paying tremendous attention to tariffs and trade – and they are – but there isn’t yet a consistently directional story being told about them.

It’s an interesting mix of circumstances. No edge in trying to engage in fundamental prediction. Very little to make sense of in narrative space either. But the trade and tariffs issue still exerts significant gravity on all stories being told about markets. What’s the result?

Chaos and bullshit.

To each of those noble ends, let’s explore on a week-by-week basis just how financial media have told the story of US/China trade dispute. To do this, we explored all English language articles in the LexisNexis database about trade and tariffs from December 2 through the present. We further culled this list to include only stories that referenced ‘trade’ in the headline itself. There were 5,328 articles fitting these criteria.

What are the stories we have been telling about tariffs and trade since the negotiation window opened? How have we discussed their impact on financial markets? Well, within single weeks, financial headlines both explained how markets ‘rose on’ trade and tariffs news and how they ‘fell on’ trade and tariffs news.

Source: Epsilon Theory, Quid, Moreover

Within those same weeks, markets were ‘up on’ trade news on one day, and ‘down on’ trade news the next.

Source: Epsilon Theory, Quid, Moreover

If hyperbole is more your speed, you didn’t have to wait long. Markets ‘soared’ and ‘surged’ on trade news with some frequency, and ‘crashed’ and ‘plunged’ with almost equal frequency.

Source: Epsilon Theory, Quid, Moreover

It should be no surprise that financial media characterized these market movements as being the result of trade news. After all, market participants apparently moved from worries to optimism on a nearly daily basis.

Source: Epsilon Theory, Quid, Moreover

Or perhaps our motivations were more primal than simple worries or optimism. Perhaps markets soared and plunged on trade news because of our rising hopes and rising fears about trade and tariff resolution, which also apparently shifted on a daily basis.

Source: Epsilon Theory, Quid, Moreover

We are typically of the opinion that we can rarely afford to disregard media, research and other publishers that act as missionaries, or at a minimum, repeat and propagate missionary statements. Even if we think there is little substance to the ideas being presented, the statements and narratives which surround us still exert gravity. They still matter. Likewise, we are also nearly always of the opinion that “Stocks were up on X” articles are bad, widely understood to be bad, and unlikely to exert much influence.

But the gravity of a high attention narrative like trade and tariffs presents a sore temptation. Because we know that it is important, and because we know that everyone knows that everyone knows that it is important, the temptation to pay attention to updates, leaks and explanations of markets responding to this issue is strong. The temptation to incorporate our own interpretation of what others are discounting is strong. It is a recipe designed to appeal to confirm whatever bias we have about the issue, and to convince us that we have an edge in thinking about it.

So I will be less equivocal than usual. Until an announcement is made, continue to ignore it all. Ignore the news. Ignore the probability-based scenario research pieces. Ignore the daily ‘up on’, ‘down on’, ‘hopes and fears’ grind. The gravity of the trade and tariffs narrative means that every event, every market outcome, every surge and every fall, will be drawn into the stories being told about it. 

Gravity sucks. Resist it.

The Zeitgeist | 2.21.2019

This is our feature of the 10 (or so) most on-narrative (i.e. interconnected, highly similar) stories in financial media. It’s not a list of best articles, or articles we think are most interesting, or articles we agree with. But if you’re going to read 5-10 stories when you start your day, these are the ones that are most connected to the financial news that got published today.

Most European Bank Stocks Recover. Societe Generale Misses the Boat

People moves: New leadership for 406bn asset manager

UPDATE 2-GAM expects another challenging year, sacks suspended director

The S&P 500 Lost 11% of Value From Trump’s Trade War, Research Says

Cheesecake Factory Issues FY19 Outlook – Quick Facts (Ed Note: It may say Quick Facts, but it’s really 85 laminated pages)

Treasury yields move higher on US-China trade deal hopes (Ed Note: C’mon CNBC. ‘Move’? Are we really out of words already?)

Okta CEO: ‘We’re on the Right Side of History’ as Cloud Services Market Grows

DAX Inches Higher On Trade Deal Optimism (Ed Note: ‘Inches’ isn’t bad. Good job, good effort.)

Overnight Markets: Wall Street advances on US-China trade optimism (Ed Note: I’m really not making this up, people)

BAE’s Saudi Arms Deals Hit by German Export Ban Over Khashoggi


The Zeitgeist | 2.20.2019

This is our feature of the 10 (or so) most on-narrative (i.e. interconnected, highly similar) stories in financial media. It’s not a list of best articles, or articles we think are most interesting, or articles we agree with. But if you’re going to read 5-10 stories when you start your day, these are the ones that are most connected to the financial news that got published today.

Barclays fraud trial: ex-chairman ‘not aware’ of GBP280m Qatar deal

Devon Energy Makes A Huge Decision

C-SUITE INSIDER; For Calpine, going private means no more pesky stock analysts

Equinor presses on with drilling plans in Great Australian Bight

Warren Buffett’s annual letter shareholder is dropping on Saturday. Here’s what to expect.

LendingClub Corp (LC) Q4 2018 Earnings Conference Call Transcript

Stocks close higher with boost by trade talks (Ed Note: Alright, ‘Boost’ is off the board. This Trade War Descriptive Term Suicide Pool is getting exciting!)

EMERGING MARKETS-Emerging stocks jump on trade talks progress, S.Africa awaits budget (Ed Note: Sorry, ‘Jump’ has been off the board for weeks.)

Stocks Mixed as Trump Hints at China Talks Extension; Fed Minutes Loom For Doves (Ed Note: Oh no!)

JGBs follow global peers higher ahead of Fed minutes

Skyworks Collaborates with MediaTek on Innovative 5G Platform