The Python and the Pig

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Seattle-area emergency room

NYC declares state of emergency, de Blasio says coronavirus ‘could easily be a 6-month crisis’ (CNBC)

The city now has 95 confirmed COVID-19 cases, with 42 of them reported in the last 24 hours, he said. More than 1,780 people are under voluntary quarantine in the city, with an additional 29 people under mandatory quarantine, he said. By next week, the number of cases in the city is projected to rise to 1,000, he said. 


Here’s what I think de Blasio (and every mayor of every big city in the United States) is looking at. This is data publicly available from NYC Health.

The graph below is a count of the number of NYC emergency room visits PER DAY over the past twelve months where the chief complaint was an influenza-like illness. You see a big spike from November through January. That is seasonal flu. But you also see a new spike over the past two weeks. This is coronavirus.

I really don’t think this is some resurgence of seasonal flu for two reasons. First, for the entire online NYC Health dataset (goes back to 2016), there is no second spike in any year. Second, look at the demographics for ER-reported influenza-like illnesses broken down by pre-Feb and post-Feb. During the seasonal flu spike, the most impacted age group was children age 0-4 years. During this more recent spike, the most impacted age group (by far) was adults age 18-64. This is not the seasonal flu.

CV-19 is not coming to New York City. CV-19 is here. It’s been here for a while. It’s going to get much worse before it gets any better.

By much worse I mean that the NYC healthcare system – one of the finest in the world – is about to be slammed beyond anything they have ever seen. ER visits and patient testing is where it begins. It moves from there through the system, ending in ICU wards. The process is like a python swallowing a pig, except this isn’t a pig. It’s a whale.

From what I read and hear, I think that de Blasio and Cuomo are fully aware of the situation and taking every possible step to prepare the healthcare system for the deluge. It would be nice if we had this sort of leadership on a national scale, but I’m not holding my breath. Frankly, I’ll be thrilled if the White House is just not actively hampering the efforts that need to be made here.

Every local and state leader needs to look at what’s happening in New York and understand that this is your crystal ball. This is your future. You can ignore it or you can prepare. It’s truly your choice.

Every citizen needs to understand that your local and state leaders have the ability to make that choice. They will listen to YOU. So make your voice heard.


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Tick-Tock

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Death inspires me like a dog inspires a rabbit.


If Hitler invaded hell I would make at least a favorable reference to the devil in the House of Commons.


That first quote is from Twenty One Pilots and the second is from Winston Churchill. I thought about both while listening to Donald Trump’s address to the nation last night.

I think Trump’s speech last night was constructive. Weeks late? Yes. Too late? Maybe. But it was his first public statement on CV-19 that reflected seriousness and resolve in the national interest. It was his first public statement that wasn’t overtly corrupt. It’s a start.

Tick-tock.

As for the policy specifics and the bizarro delivery and the walk-backs afterward? I don’t care. As Churchill also said, “war is a series of blunders,” and god knows there is no end to the blunders we have gotten and will continue to get from this guy.

But for the first time our federal government is treating the fight against this virus like the war that it is.

Is it pathetic and sad that it took this long? Of course. But now here we go. And there is no country in the world that mobilizes for war more effectively than the United States.

As for the market reaction to Trump’s speech today? Please.

The fact that the market doesn’t “like” Trump’s speech is exactly what made it a constructive speech in the national interest.

Like it or not (and I hate it) Donald Trump is President of the United States for the next TEN MONTHS. My reaction to his speech is not about giving him “credit”. It’s not about giving him a “grade”. It’s not about gnashing my teeth and rending my garments over a man who I think has betrayed the public trust at every turn and is the most damaging President in the history of the Republic.

Screw all that. I’m way past THAT.

The ONLY thing I care about now is fighting this war. The ONLY thing I care about now is saving lives.

Welcome to the fight, Mr. President. Hope you stick around.

Tick-tock.


How do we save lives?

First, and most importantly, we help our neighbors.


The Non-Linearity of Need

In a potential recession, need isn’t evenly distributed. In a pandemic, that’s even more true. The time to start helping is now.   … Continue reading



Second, we end #DontTestDontTell.

#DontTestDontTell is not just a policy embarrassment. It is not just simple bureaucratic incompetence. #DontTestDontTell is a willfully corrupt betrayal of our country and its citizens, and it is our moral duty to howl our anger and discontent.

You can read about #DontTestDontTell in Epsilon Theory notes here and here.

You can see it here, in Alabama.

Alabama Secretary of State John Merrill: “We don’t need for people to be concerned about something that may not ever happen.”

Alabama has tested 10 people for coronavirus. TEN.

5 million people live in Alabama. Including my 78-year-old mother who’s a substitute teacher and uses a prednisone inhaler for her asthma and her more-than-occasional pneumonia. Shelter in place, Mom, shelter in place.

Alabama, like all states, is getting a chunk of the $8 billion in federal funds recently allocated to fight CV-19. For Alabama that comes to $8.15 million. Know what they’re gonna spend their money on? “Public health communications.” In Alabama-speak, that means posters. Wash-your-hands posters.

Also, a task force has been assembled. Like the Avengers.

Here’s what the task force wants you to know about CV-19. This is from March 6th.

“The Alabama Department of Public Health has issued guidance to hospitals and healthcare centers regarding testing for the virus and encourages Alabamians to take the standard protocol for cold and flu season.”

Yep. Alabamians like my mother and my brother and my sister-in-law and my nephew and my nieces and my childhood friends are “encouraged to take the standard protocol for cold and flu season.”

And you wonder why I am so angry.

Tick-tock, Alabama, tick-tock.


Third, we move to a war-time footing to protect our emergency responders and healthcare professionals, and to bolster our healthcare system.

Specifically that means a national mobilization of manufacturing capacity to make personal protective equipment (PPE), respiratory and anti-viral therapeutics, ventilators, and ECMO equipment to support the surge in CV-19 patients who will require not just hospitalization, but intensive care treatment. It means a broadening of patient under investigation (PUI) criteria and a complete revamping of patient testing and ingestion protocols, including airborne-secure (negative air pressure) facilities inside and outside hospitals and clinics … wherever healthcare professionals come into contact with potential or actual infections.

Specifically that means utilization of domestic military bases as treatment facilities and isolation wards. It means coordination of state and local authorities with the Dept. of Defense to establish regional command, control, communication and intelligence (C3I) capabilities at tertiary medical centers. Yes, direct coordination with the DOD. It’s the most competent, well-resourced C3I organization in the world, and they are present in every domestic battlefront in this war. Yes, tertiary medical centers. They are the most competent, well-resourced medical organizations in the world, and they are also present in every domestic battlefront in this war.

Whether we have a >4% death rate from CV-19 (Wuhan) or a <1% death rate (Singapore) is entirely up to us. It is our choice! If we prevent our healthcare system from being overwhelmed, then we win. If we don’t, we lose. It’s really as simple as that.

Are we almost out of time?

Absolutely. Tick-tock.

But we all see the danger now. All of us rabbits see the virus dog chasing us. Even Donald Trump.

I said it at the start of this note and I’ll say it again, there is no country in the world that mobilizes for war more effectively than the United States. And I know you won’t believe me, but I tell you it is true:

This will be our finest hour.


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The Mozilo Market

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Angelo Mozilo, tanning bed aficionado and former chairman/CEO of Countrywide Financial

I’m willing to bet that fewer than half of Epsilon Theory readers know who Angelo Mozilo is. And that’s a shame, because no one better epitomizes the intense financialization of the American stock market from 2001 – 2007 than Angelo. No one better epitomizes the corrupt lending and securitization practices that led directly to the Great Financial Crisis of 2008 than Angelo.

The fact that Angelo Mozilo was allowed to pay a $67 million fine (leaving him with only … oh, $400 million or so left over) on SEC insider trading charges and walk away scot-free from ALL criminal prosecution is something I will NEVER forgive Eric Holder and Barack Obama for. Google “friends of Angelo” when you get a chance. Only Dick Fuld, who oversaw the Repo 105 fraud at Lehman (and who also skated from any criminal OR civil prosecution), makes my blood boil more than Angelo Mozilo.

But this isn’t a note about Angelo Mozilo.

This is a note about Countrywide’s quarterly earnings call in 2008, when Angelo, in response to an analyst’s question, said that sharply increasing mortgage delinquencies and failures were NOT limited to sub-prime, but were now in Alt-A mortgages, too.

I’ll never forget that call. With one comment, Angelo gave the lie to everything Ben Bernanke and Hank Paulson had been saying about the “well-contained” nature of the sub-prime mortgage crisis. You could almost feel the thermonuclear energy coming off that call and spreading throughout the professional investment community.

Markets were never the same after that.

From that call forward, no professional investor responsible for Other People’s Money trusted a single word they heard from Bernanke or the Bush White House on the “containment” of sub-prime delinquencies. No professional investor worth his or her salt trusted a single word they heard in the following months from Merrill and Bear and Goldman and Citi about the marks they had on their RMBS assets. This wasn’t just a US thing. The Europeans were much more flagrant liars. Even as all hell started to break loose for US banks in the summer of 2008, European banks valued their massive portfolios of Alt-A securities at 97 cents on the dollar, all rated AAA, natch. They were ALL liars. All of them. Without exception.

After that Countrywide earnings call in 2008, I trusted NO ONE in government or Wall Street to tell the truth about the mortgage crisis.

And that’s the way I feel about COVID-19 today.

In 2008, you could not trust a single word that anyone in government or the financial services sector told you about their exposure to bad mortgage securities. And because you had zero trust … because you had zero visibility into the actual exposures that banks actually had … you SOLD.

In 2020, it’s exactly the same thing. I do not trust a single word that anyone in the U.S. government (or the Japanese government or the Chinese government) tells us about our exposure to this virus. I believe that most professional investors feel the same way.

And when you have no trust … you SELL.


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Kitchen Sink It

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Sometimes it’s best to go straight for the trident.

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I have been under withering (if modestly deserved) friendly fire recently for posing a riddle and sitting on the answer. It is with some hesitation that I pose another.

Relax. I won’t make you wait for the answer this time.

What is every marginally competent CEO AND every financial journalist on the Coronavirus beat planning right now?

Kitchen sinking it.

Let me show you what I mean. Here are three of the top five most linguistically connected financial and market news articles published a couple days ago. If watching Michael Bloomberg self-immolate on stage isn’t crowding out all of your short term memory, maybe you’ll remember these articles:

Apple Shares Drop After Virus Warning Rattles Tech Investors [Houston Chronicle]

Apple’s coronavirus warning wasn’t a total surprise, but magnitude rattles Wall Street [DJ Marketwatch]

Apple Investors Get Nervous After Tech Giant Cautions on Coronavirus Impact [The Street]

Yeah, me neither. Why? Because in two trading days the stock bounced right back to where it was before Apple gave markets its guidance on Coronavirus impact. As I’m writing, it’s about 10 basis points away.

A similar story hit the Zeitgeist yesterday for Puma – who reported half their stores in China being closed – and Adidas, who reported an 85% drop in sales compared with the same period last year. And that’s just sales impact.

Adidas and Puma warn of coronavirus sales drag [Financial Times]

Those stocks, on the other hand, barely attempted a headfake downward before bouncing well into positive territory. Let’s make the obligatory (and important!) observation that stock prices are driven by a billion things. Let’s make the second observation that investors are not stupid, and that active investors who owned these stocks probably knew before formal guidance that they had stores in China. They have probably read something about the Coronavirus. Presenting that day’s price behavior as a simple, straightline function of the announcement event alone is obviously silly.

And yet: if you were CEO of a company that’s been sitting on some bad assets, postponed cash outlays or ugly one-time expenses that you needed an excuse to vomit out, and you saw the collective yawn with which markets have viewed other negative Coronavirus-related guidance, what would you do?

You’d kitchen sink it. Let it all out, fellas. You’ll feel better afterward.


We’re seeing an entirely different type of kitchen sink on the side of institutional missionaries in central banks and financial media, and it’s a familiar story. Here’s one of the most connected stories in today’s Zeitgeist run:

Fed Flagged Coronavirus Risk at January Meeting [NY Times]

The Fed wants us to know they’re on it. Financial media wants to make sure that everybody knows everybody knows that the Fed is on it. It’s our old friend “The Narrative of Central Bank Omnipotence.” Is that why stocks guiding on Coronavirus fears have been greeted with a yawn? Why a serious regional health issue with non-zero global pandemic risk hasn’t really manifested in risky asset prices? I think you’d be kidding yourself to say that it’s not at least playing a role.

But what’s more interesting to me is how media calls for us to connect our expectations for central bank action with the Coronavirus problem have been positively related to the level of focus on the pandemic itself. In other words, when the share of equity market news that is focused on the Coronavirus increases, the share of THAT news which is focused on central bank response increases too. When the day’s updates feel a little bit more dire, we immediately start talking about throwing the kitchen sink at it. When you hear us talk about the drum beats of narrative, this is what we mean.

What does it all mean? Well, we won’t tell you that good or bad news on Coronavirus won’t matter to markets or stocks, especially in the short run. Clearly there are people who are going to try to trade on news and their predictions of it. But if I had genuine concerns about Coronavirus-related risk for a portfolio position, at least for now I’d be a little less focused on predicting, and a little more focused on observing missionary statements about Fed/ECB policy.

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Love in the Time of COVID-19

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A professional baseball game during the Spanish Flu epidemic of 1918

The problem in public life is learning to overcome terror.

Gabriel Garcia Marquez, “Love in the Time of Cholera”

Within a few months, the reality of COVID-19 will overtake the propaganda of the CCP and their toadies at the World Health Organization, as real-world companies begin making real-world economic decisions to maintain their enterprises in the face of a real-world threat.

Those decisions will be led by sports franchises.

I realize this sounds pretty out-there to most people. As my father used to tell me, “Ben, being two steps ahead is like being one step behind.”

And I get it. We’re still playing the “Confirmed Cases!” game, where countries like Indonesia claim that COVID-19 doesn’t exist within their borders because they’ve tested … checks notes … 64 people. Where more people apparently caught COVID-19 on a cruise ship yesterday than in Africa and the Southeast Asian sub-continent combined. Where the World Health Organization parrots the (literally) party line from China even though WHO-sponsored doctors have published study after study showing that the China data is a crock.

Barf.

But it hit me like a ton of bricks this morning that the “Confirmed Cases!” game is now giving way to the reality of living with a global pandemic when I saw this announcement from the organizers of the Tokyo marathon.


Tokyo marathon to cancel entries from general public (Reuters)

Tokyo marathon organizers have decided to cancel entries from the general public for the event scheduled on March 1 due to the coronavirus outbreak, Tokyo Shimbun newspaper reported on Monday.

About 38,000 people from the general public were scheduled to run in the event, Japan’s biggest marathon, the paper said.



So I’ll just say this as simply as I can. Three things:

First, this is absolutely the right decision.

Second, the 2020 Tokyo Olympics are finished as a spectator event. Not happening.

Third, if you’re a professional sports league and you’re not making contingency plans to shut down your stadiums and run next season in front of TV cameras only, you’re just not paying attention.


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Options

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Source: Chris Arnade, via Medium

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In full disclosure, we didn’t identify today’s article in our NLP-driven screen of political and financial markets news. Medium posts don’t make our database. But it felt like part of our Zeitgeist to me. I think it will to you, too.

We have mentioned Dignity and its author Chris Arnade in our livestream feature on a few occasions. Why? First, because it’s a lovely book and worthy of your time. Second, Chris is a former markets professional, which makes a lot of what he has to say relevant for a big part of our audience. He understands our language. But we also think his framework for thinking about class in America – and his willingness to uncondescendingly apply it to better understand the frustrations of a huge, demographically diverse swath of Americans – is useful. And powerful.

He shared a piece yesterday that he had written last year called “D in the McDonald’s.” It is an interview with a former computer worker with a passion for math who also happened to be living in a truck in the parking lot of a McDonald’s. I don’t want to reprint it in full, because I think you should read it there. But I want to share a piece that did jump out at me. As you’ll find, Arnade doesn’t offer many simple answers.

It’s a good thing, too, because there aren’t any.

As I drive away I think I must be missing something, some simple explanation for why D is homeless, some reason why a man who worked with computers for 30 years is living in a truck. I spend lots of time with homeless people and I usually can say within a few seconds a glib reason for them being on the streets. It is usually mental illness, or drugs, or a physical handicap, or aggression, or a lifetime of jails and prison. Or all of that. With D there is no obvious simple explanation.

D in the McDonald’s (Chris Arnade on Medium, June 2019)

I’m not even an armchair sociologist, but if you’ve lived in different parts of what Arnade calls back-row America, even as a lucky-as-hell front-row (if McDonald’s-loving) son of an engineer, you can’t help but see the shared trait among the poor: a belief that they have few or no options. Sure, the reasons are different, but those reasons coalesce into the same feeling in a small oil-bust town in southeast Texas that they do on inside-Broadway Washington Heights and outside-University City West Philadelphia.

A lot of policy and a lot of charity is directed to fixing the sources of that belief that are external and tangible. In other words, we focus a lot of our energy on fixing the ways in which some people in America really don’t have many options. We invest in education and job-training, we regulate prejudicial hiring, we create social safety nets to prevent some forms of bad luck from eliminating optionality in life for our fellow Americans. A hundred other angles to address the many ways in which life choices might be limited. We disagree as a country about the scale and scope of these policies and who ought to be executing them. Still, I think that if you asked most full-hearted Americans if they wanted a political and social system that permitted unbounded mobility, you’d get resounding agreement.

The other side to the belief in the lack of options – and the one that is very hard to come up with answers for – exists in the stories we tell. Our narratives about the poor. We have a lot of them. But here, Chris puts his finger on one of the most powerful: in America, everybody knows that everybody knows that poverty is inextricably related to immorality. Conservative politicians circle the wagons around and campaign on welfare abuse and unhealthy / fraudulent use of food stamps as if they were a widespread budgetary disaster. Hundreds of charismatic and pentecostal churches (and yes, both principally white and black churches among them) embrace a prosperity gospel attaching God’s favor or anger as the sole cause of financial circumstance. Liberal leaders gloat about educational attainment in the Deep South as a predictor of Bad Political Views. The people who “cling to their guns and religion” will remember that characterization for a generation.

This idea is deeply, broadly shared cultural common knowledge.

But here’s the thing: forget about whether you think any of the above cases have some basis in fact. Yes, sometimes people are poor in part because they did bad things. Dumb things. And sometimes they get rich for the same reasons. I’ll leave it to someone else to parse through root causes, because I’m not here to lionize or condescend to anyone. Even if I were, I don’t know how to weigh goods and bads.

What I do know is that the narrative of immorality-based poverty has power far beyond whatever truth lies underneath it. It changes how WE behave. It changes our perceptions of the dignity of other Americans and of their agency. It colors our perceptions of their motivations and it permits us cover for ingratitude and unkindness. And yes, I think it also affects the willingness of many who would benefit from getting back on their life’s path – or just being shown the trailhead, for God’s sake – to ask for or accept that assistance. How much help would you or I accept from someone we suspected offered it as a good deed to an undeserving wretch like us?

I don’t know if one of us being in a position to tell D in McDonald’s something practical about graduate school, or to offer love and help in a moment where a belief in a lack of options was crystallizing in his mind, or to connect him with someone we knew who needed someone with his skills might have opened up a new path for him to change his life for the better, or at least to make him happier. I do know that there are a thousand thousand others where we can and do have that power. Full hearts.

Clear eyes, too. We published a short piece this week about many of the memes that influence our behavior. We argued that there would be a time to sing new songs – once we’ve stopped singing the songs our powerful institutions required of us.

I think this might be a good one to start with.

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The Promised Land!

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Every once in a while, narrative-world gives you a gift that just keeps on giving.

So it is with outgoing CEO Ginni Rometty’s regime of despair at IBM.

I mean, I haven’t even gotten to the billions of dollars frittered away on stock buybacks. We still haven’t seen the 8-k IBM will file after the close on a Friday afternoon detailing the tens of millions of dollars that the board will lavish on Rometty as she walks out the door.

I’ve already compiled all 167 of Rometty’s SEC Form 4s to figure out just how much money in stock comp alone she’s sucked out of IBM. The answer to our puzzle is over $100 million.


Once You Buy a Prize, It’s Yours to Keep

I’m not even going to count Rometty’s salary and annual cash bonuses. I’m not going to count the corporate jet. I’m not going to count the Augusta National membership and all that. Nope, you’ve gotta work hard to fritter away a national treasure like IBM into irrelevance, so let’s not begrudge the woman whatever tens of millions of dollars she’s been paid in cash comp  … Continue reading



But today my focus is on the IBM-sponsored hagiography that is springing up like slime molds on the underside of rotting swamp cabbages.

It starts with this:

Which is drawn from this:


Rometty’s Legacy: Leading to IBM’s Promised Land [Chief Executive]

Moses may have been able to see the Promised Land, but that doesn’t mean he could complete his mission to lead the people there. A different skill set was needed, and Joshua was selected. No one faults Moses for his time in the desert.

History will be equally kind to Ginni Rometty, the CEO of IBM. The company’s share price may have lagged rivals over the last few years, but inside the company—deep inside, where it counts—Rometty has transformed IBM in every possible way, setting the stage for a promising next chapter. IBM’s stock is up 25% just this past year.

Some cynical business media never quite got the story right, and it was eye opening that the same respected business voices who preach against short-termism were focused solely on the 4 percent jump IBM’s stock took on the news of Rometty’s retirement, rather than the foundation she’d laid for the years to come. So much for long-term investment, technological transformation, community impact and “ESG,” right?

— Yale professor Jeff Sonnenfeld, winner of the Epsilon Theory lifetime achievement award for narrative construction in service to the oligarchy, popularly known as The Renfield.

The author of this quite serious analysis where Ginni Rometty is favorably compared to … checks notes … MOSES, is none other than Yale professor Jeff Sonnenfeld, who is also the founder and leading light of the Chief Executive Leadership Institute, a non-profit “school for CEOs featuring applied research and peer-driven learning” that generates a multi-million dollar revenue stream for the Yale School of Management.

Would it surprise you to learn that Jeff Sonnenfeld works hand-in-hand with Chief Executive Group, a decidedly for-profit company that, among other things, runs the Chief Executive website that published Jeff’s little paean to Ginni Rometty?

Would it surprise you to learn that IBM is a major sponsor of Sonnenfeld’s Chief Executive Leadership Institute?

Would it surprise you to learn that Jeff Sonnenfeld presented Ginni Rometty with the … checks notes … Yale Lifetime of Leadership Award and the … checks notes, does a double-take, and checks notes again … Yale Legend of Leadership Award?

Yes, apparently the Yale Legend of Leadership Award is a real thing. And “prestigious”, too, according to Jeff’s hand-written Wikipedia entry.

Would it surprise you to learn that Jeff Sonnenfeld has been doing this stuff for literally decades, to the point where even the New York Post catches on to his act?


Being friends with Yale prof Sonnenfeld has its benefits [NY Post]

Three times in the past 16 months, Sonnenfeld has written opinion pieces or been quoted in the media supporting a company or CEO who was honored by his Chief Executive Leadership Institute or was a financial backer of his biannual CEO Summit, The Post’s research reveals.

None of the op-eds disclosed either the financial backing the companies supplied to the Sonnenfeld-led nonprofit or that CELI had honored their CEOs.

— by Josh Kosman and Michelle Celarier (April 15, 2015)

Actually, I would bet a lot of money that Nelson Peltz tipped off the NY Post to dig into the Sonnenfeld puff pieces around his DuPont activism, but still, good for them to publish this article five years ago.

Not gonna lie, I can’t wait to dig into the Form 990 for the Chief Executive Leadership Institute.

Like I say, it’s the gift that keeps on giving.

One more thought on all this for today.

There is no structural difference between the “conspiracy theories” of Zero Hedge and the “serious opinions” of Chief Executive. The only difference is whether the constructed narrative supports the status quo or challenges the status quo.

And yet Zero Hedge is banned from Twitter for making up narratives from the flimsiest of “facts”, while Sonnenfeld and his fellow Renfields are celebrated for doing exactly the same thing.

Clear eyes, friends. Clear eyes.


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Once You Buy a Prize, It’s Yours to Keep!

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Outgoing IBM CEO Ginni Rometty has filed 167 SEC Form 4s detailing her stock transactions in the company.

So I downloaded and compiled all of them to see how much money she has sucked out of IBM, just like I did for outgoing Boeing CEO Dennis Muilenburg.


Shot, Chaser.

So I downloaded and compiled every SEC Form 4 filing that former Boeing CEO Dennis Muilenburg has ever made, to answer one simple question: how much money did Dennis Muilenburg suck out of Boeing over the last ten years? … Continue reading



As with Muilenburg, I’m not even going to count Rometty’s salary and annual cash bonuses. I’m not going to count the corporate jet. I’m not going to count the Augusta National membership and all that. Nope, you’ve gotta work hard to fritter away a national treasure like IBM into irrelevance, so let’s not begrudge the woman whatever tens of millions of dollars she’s been paid in cash comp, and let’s not begrudge her the well-deserved downtime on the links or sipping mint juleps in her green jacket. Besides, cash comp is for suckers. Just ask Jamie Dimon.

So here we go. Ready?

Over the past fifteen years, Ginni Rometty has acquired or been granted about 850,000 shares of IBM stock (all of this information is publicly available in the SEC Form 4s). Most of this stock was given to her gratis, but she had to pay to exercise some of this as options. The total price paid for all of these shares by Rometty was $25.7 million, which works out to an average price of $30.31 per share.

Rometty has sold more than 550,000 of these shares over the years in more than 50 separate transactions for a total of $84 million, at an average price of $152 per share. For those of you keeping score at home, the current IBM share price is $143, so as you can imagine, Ginni has been pretty good at timing these sales over the years, with more than 100,000 shares sold around the top-tick of $200 for the stock back in 2012.

That leaves about 295,000 shares still in Rometty’s hands as of her last Form 4 filing, which have a current market value of $42 million.

So over the past fifteen years, Ginni Rometty has $84 million in realized stock gains and $42.4 million in unrealized gains, at a cost basis to her of $25.7 million.

That’s $100.7 million.

To be clear, THIS IS JUST THE OPENING BID. We still haven’t seen the 8-k filing from IBM where they will detail her going-away prize money. Just as with Muilenburg, there will be tens of millions in deferred this and long-term incentive that.

But don’t call it severance.

Barf.

One day we will recognize the defining Zeitgeist of the Obama/Trump years for what it is: an unparalleled transfer of wealth to the managerial class.

It’s the triumph of the manager over the steward. The triumph of the manager over the entrepreneur. The triumph of the manager over the founder. The triumph of the manager over ALL.

But until that day … Yay, Capitalism!


PS. Here’s a fun fact. Did you know that Ginni Rometty was on the board of AIG from 2006 – 2009?

You really can’t make this stuff up. No one would believe you.


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You Had One Job

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I haven’t been this angry since the United States government allowed Jeffrey Epstein to die …

I’m a Superstitious Man

Whether Epstein killed himself or not is the least important part of the story. I’m blaming the people in the room. They’re ALL guilty of the SYSTEM of Jeffrey Epsteins.  … Continue reading



I haven’t been this angry since the last time the United States government dealt with a global plague …

Calvin the Super Genius

Am I personally worried about an Ebola outbreak in the US? On balance … no, not at all. But don’t tell me that I’m an idiot if I have questions about the sufficiency of the social policies being implemented to prevent that outbreak. And make no mistake, that’s EXACTLY what I have been told by CDC Directors and Dr. Gupta and the White House and all the rest of the super genius, supercilious, remain-calm crew.  … Continue reading



What made me so angry? This.


U.S. Sets Evacuation Plan From Coronavirus-Infected Wuhan  [Wall Street Journal]

The U.S. State Department said Sunday that it is organizing a single flight out of the central Chinese city of Wuhan, confirming efforts to extricate diplomats and a limited number of private U.S. citizens from the virus-hit city.

Private citizens are expected to later repay the travel costs, the notice said.

U.S. authorities believe that roughly 1,000 American citizens live in and around Wuhan, a sprawl of 11 million people with a manufacturing-based economy that includes a number of major American companies. 

The U.S. evacuation flight from Wuhan’s Tianhe International Airport was initially planned for Sunday, but issues related to chartering the plane from the U.S. caused a delay. 

The jetliner is expected to be a Boeing 767 with about 230 seats.

The flight is expected to carry mostly Americans and possibly a small number of other foreign nationals but no Chinese citizens.

Japanese Prime Minister Shinzo Abe said Sunday that Japan would evacuate from Wuhan any of its citizens who want to leave, using charter flights and other means to get them back to Japan as quickly as possible. Public broadcaster NHK said about 700 Japanese citizens were thought to be in Wuhan as of Friday.

According to an evacuee manifest and promissory note posted to its website, the State Department asks any participants in a government-arranged evacuation to provide basic identification information and to sign an agreement promising to repay the State Department for all expenses included in the evacuation within 30 days.

That includes the cost of an air ticket, whose price shouldn’t exceed the cost of a full-fare economy ticket.


Japan is getting ALL of its people out of Wuhan. Why aren’t we?

Why the hell are we evacuating “a small number of other foreign nationals” and leaving Americans behind?

Why does this article feel compelled to tell us TWICE about the payback terms on the price of evacuation?

We spend TRILLIONS of dollars fighting god-forsaken wars in god-forsaken countries, and we have “issues” chartering ONE Boeing plane?

JFC.

Rhode Island residents Patrick Randy Stockstill, his wife and two children had traveled to Yichang, a city of about four million near the Three Gorges Dam in Hubei province and 200 miles west of Wuhan, to celebrate Lunar New Year with the extended family of Mr. Stockstill’s wife.

Mr. Stockstill, who had arrived in Yichang on Jan. 20 and was set to leave this coming Friday, said his family was very worried about his youngest son, who is 3 months old. Public transportation in Yichang has been shut down since Friday.

“We’re not looking for special treatment,” said the 38-year-old loan officer, who hasn’t stepped outside for four days for fear of getting infected by the virus. “We are just looking for a way to get my boy home.”

Forget about impeachment and its partisan Kabuki theater. It’s a joke.

If there’s some rich dude who bought his way onto that Wuhan evacuation flight, and you know there is … if there’s a pecking order that leaves people like the Stockstills behind, and you know there is … if this Administration is forsaking its ONE JOB to protect American citizens, and you know they are

THAT’S what brings down this government.


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Pleased to Meet You, Hope You Guess My Name

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It’s the one thing that Donald Trump and Rachel Maddow can agree on …


As deficits soar, Trump asks, ‘Who the hell cares about the budget?’  [MSNBC]

Donald Trump delivered remarks at a private dinner with wealthy donors Friday night at Mar-a-Lago, and as the Washington Post reported, the president shared some thoughts about the nation’s finances.

To those who criticized his spending and the growing national debt, Trump said: “Who the hell cares about the budget? We’re going to have a country.”

And though I’m generally loath to agree with Trump, his blunt rhetorical question — “Who the hell cares about the budget?” — may have some merit.

About a year ago at this time, White House Chief of Staff Mick Mulvaney — the far-right budget chief who got involved in politics because he was determined to help balance the federal budget — told a group of Republicans that “nobody cares” about the issue anymore. His boss echoed the sentiment on Friday night.

And perhaps that’s a good thing.

— Rachel Maddow, announcing the freezing over of hell

If you don’t see that every government in the developed world is about to embark on a massive deficit spending spree, with modern-day ziggurats constructed in every burg and hamlet … you’re just not paying attention.

You will be told that these are “investments” that will “pay for themselves” many times over.

This is a lie.

You will be told that the size of the federal deficit “doesn’t matter”, that it’s just “money that we owe to each other”.

This is a lie.

Pleased to meet you. Hope you guess my name.

This image has an empty alt attribute; its file name is Yakov_Guminer_-_Arithmetic_of_a_counter-plan_poster_1931.jpg

In the end the Party would announce that two and two made five, and you would have to believe it. It was inevitable that they should make that claim sooner or later: the logic of their position demanded it. Not merely the validity of experience, but the very existence of external reality, was tacitly denied by their philosophy. The heresy of heresies was common sense.

And what was terrifying was not that they would kill you for thinking otherwise, but that they might be right.

— George Orwell, 1984

You will be told over and over again that 2 + 2 = 5.

And what is terrifying is that you will begin to believe that they might be right.

You think you won’t. But you will.

And it is in that moment … that moment of doubt and pain … when this battle will be won or lost. It’s not a public battle. It’s not an electoral battle. It’s not a battle of ideas. It’s not a battle of wits.

It’s a personal battle of will … the will to maintain your autonomy of mind against the Adversary who would nudge and cajole and shake their finger at you until you welcome the saddle and desire the bit.

It’s the oldest battle. And it’s the only battle that matters.

It’s a battle that is infinitely easier to win when you know that you are not alone.

We call ourselves the Epsilon Theory Pack, because the Long Now is going to get a lot worse before it gets any better, and there is strength in numbers. You can watch from a distance if you like, but you are also welcome to join us.


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The Church of the Long Now

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That’s Minneapolis Fed President Neel Kashkari on the left and JR “Bob” Dobbs, High Epopt of the Church of the SubGenius, on the right.

I know, I know … it’s me being mean to Neel again.

But I just couldn’t help myself when I saw this Twitter thread yesterday from my favorite stalking horse of Team Elite.

A little background here. The article that Neel is responding to is a spot-on Bloomberg Opinion piece by Elena Popina.

The Debate Over Whether to Call It QE Is Over, and the Fed Lost  [Bloomberg]

In the court of investor opinion, the verdict is in. The Federal Reserve is guilty of quantitative easing.

Never mind that Chairman Jerome Powell tells everyone his efforts to shore up funding markets are “in no sense” QE. Try as policy makers may, they’ve lost the ability to convince people that Treasury purchases aren’t at least partially why the Dow Jones Industrial Average is up almost 4,000 points since late August.

Sure, it’s all labels. If you want to call it QE, you can. Or not. If you want to ascribe the rally to Powell, that’s up to you. Certainly the Fed thinks it’s on solid ground. Rather than trying to drive down long-term interest rates to stimulate the economy, a la QE, it’s simply buying T-bills to keep the financial system’s plumbing in order.

And then here’s the money quote:

The problem for policy makers is that perceptions matter in shaping sentiment. If everyone believes central bank largess is pushing up prices, what happens in the market when it’s turned off?

So right.

Anyhoo … Neel’s inability or unwillingness to engage with the actual points and questions raised by this Bloomberg article is nothing new. I’ve had my own run-ins in this regard.

My Dinner With Neel

So I had a Twitter “debate” with Neel Kashkari. But it wasn’t a real conversation. It was me talking to a wall. Maybe one day I’ll get to have a genuine conversation with Neel or Jim or Jay or Lael or Richard or one of the gang. But I doubt it. We can’t have a real conversation with central bankers because they are both guards and prisoners of the island of policy and thought that they’ve created. … Continue reading



No, I’m just going to take Neel on his own merits today. I’m just going to take his actual words as an accurate representation of his actual beliefs and intentions.

Here’s what Neel tweeted yesterday …

By inverting the yield curve, the Fed created a cartoon of recession risk in the real economy. Not an actual cause of recession risk in the real economy, because that’s not how a yield curve works. I mean, the yield curve isn’t a thing. It’s a derivative of market data observations that market participants assign meaning to as a predictive signal of recession risk. The shape of a yield curve has zero actual impact on the real economy. To use ten dollar words, it is epiphenomenon not phenomenon. To use Epsilon Theory words, it’s a cartoon. It’s a market cartoon of real world recession risk named “Inverted Yield Curve!”.

That cartoon had absolutely no impact in the real world, of course. It can’t. It had a huge impact though, in the market world.

The Fed created FEAR in market world that a recession might be coming.

Then the Fed took that fear away.

In the immortal words of Neel Kashkari … Should we be surprised that the market is up?

At no point did the Fed’s actions, either in creating market fear or in taking away market fear, have any impact on the real economy.

It was entirely an exercise by the Fed to maintain control over market world.

It was entirely part and parcel of the effort to transform capital markets into a political utility.

What is The Long Now?

Exactly this.

The Long Now is the construction of artificial fear and the removal of artificial fear in order to maintain the social POWER of the constructors and removers of those fears.

They’re. Not. Even. Pretending. Anymore.


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Shot, Chaser

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Shot …

Internal Boeing Documents Show Cavalier Attitude to Safety  [Wall Street Journal]

“Would you put your family on a MAX simulator trained aircraft? I wouldn’t.”

“I still haven’t been forgiven by god for the covering up I did last year. Can’t do it one more time. Pearly gates will be closed.”

“This airplane is designed by clowns, who in turn are supervised by monkeys.”

“I don’t know how to fix these things … it’s systemic.”

“This is a joke. This airplane is ridiculous.”

“I’ll be shocked if the FAA passes this turd.”


Chaser.

Ousted Boeing CEO exits with $80 million – but no severance  [CNN Business]

“Ousted Boeing CEO Dennis Muilenburg left the company with stock options and other assets worth about $80 million, but did not receive severance as part of his departure from the embattled company, Boeing disclosed late Friday.”


Both of these articles appeared last Friday, and of course it got me thinking about my most disliked ET note ever:

When Was I Radicalized? (Boeing edition)

I wonder how much money Muilenburg and his management team and his board of directors have pocketed since he took over as CEO in 2015 and Chairman in 2016? I wonder if executive compensation practices have changed over that span since … you know … Boeing started buying back nine billion dollars of stock every year? … Continue reading



Yep, I got more angry emails on this ET note than anything I’ve ever written, telling me what a fine plane the 737 MAX was and how the government (or at least the Obama/Deep State holdover part of the government) was just out to get Boeing and how incredibly flawed my compensation analysis was on Muilenburg and Boeing executives.

OK, Boomer.

But even this article about the Muilenburg severance seemed off to me. I mean … it’s from a Boeing press release, also from late last Friday after everyone has gone home for the weekend. And since basic forensic accounting is a skill they don’t teach in journalism school anymore, not as it conflicts with a masters degree in advocacy studies, at least, I decided to dig in a little bit myself.

So I downloaded and compiled every SEC Form 4 filing that Dennis Muilenburg has ever made.

He’s EDGAR CIK# 0001471763 if you want to check my work, btw, and I’m just trying to answer a simple question …

How much money did Dennis Muilenburg suck out of Boeing over the last ten years?

Tell you what … I’m not even going to count his salary and annual cash bonuses. Nope, you’ve gotta work hard to destroy a corporate culture as big as Boeing’s, so let’s not begrudge the man whatever tens of millions of dollars he’s been paid in cash comp. Besides, cash comp is for suckers. Just ask Jamie Dimon.

So here we go. Ready?

Over the past ten years, and prior to this past Friday’s Boeing announcement, Dennis Muilenburg has acquired or been granted more than 430,000 shares of Boeing stock (all of this information is publicly available in the SEC Form 4s). Most of this stock was given to him gratis, but he had to pay to exercise some of this as options. The total price paid for these shares by Muilenburg was $12.4 million, at an average price of $28.65 per share.

Muilenburg has sold about 70% of these shares over the years. Here’s the Bloomberg insider transaction chart showing the activity, with the green flags showing net share acquisition (albeit at cheap or no cost to Muilenburg), yellow flags for no net share change, and red flags for net share disposal (with shares sold at full market price, natch.)

Over his tenure at Boeing, Dennis Muilenburg sold about 290,000 shares of stock for a total of $54.5 million, at an average price of $189 per share. His last major sales were in late February 2019, when he pocketed about $10 million in a top-tick of the all-time high Boeing stock price of $422. For those of you keeping score at home, the first 737 MAX crash was in October 2018.

That leaves about 143,000 shares still in Muilenburg’s hands as of his last Form 4 filing, which have a current market value of $47.3 million.

So over the past ten years, Dennis Muilenburg has $54.5 million in realized stock gains and $47.3 million in unrealized gains, at a cost basis to him of $12.4 million. That’s $89.5 million.

Once you buy a prize, it’s yours to keep!

And now we come to the Boeing announcement last Friday, which you can also read in all its gory detail on the SEC site.

First there’s $29.4 million in “long-term incentive awards”. LOL. Amazing how there’s never a “long-term clawback”.

Then there’s $28.5 million in pension and deferred compensation benefits. Then there are options that Dennis can exercise on 73,000 shares at an average strike price of $76 … that’s worth another $18.5 million at the current stock price. And finally, there’s $4.3 million in still more stock that Boeing has decided to give him.

All told, that comes to $80.7 million as Dennis Muilenburg is shown the door.

But don’t call it severance.

All told, that’s more than $170 million that Dennis Muilenburg has pocketed from Boeing in stock-based comp and “incentive awards” and don’t-call-it-severance payments, not even counting his salary and bonuses.

Oh, did I mention that Dennis is on the board at Caterpillar, too? They’ve only given him $2 million in stock, plus a couple hundred grand a year in cash comp.

One day we will recognize the defining Zeitgeist of the Obama/Trump years as an unparalleled transfer of wealth to the managerial class.

#BITFD.


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Alpha/Beta Amnesiacs

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From time to time the Zeitgeist pulls us in a clear direction.

We are emerging from the year end, so the language shared across financial media articles is performance language. How did stocks, markets, benchmarks, funds and strategies perform in 2019?

It is an opportunity for the financial media to pull its usual amnesiac act – you know, the one where they conveniently forget to pay any attention to the underlying exposures of the strategies and indices they will end up comparing. It is also an opportunity for us to pull our Gell-Mann Amnesiac act, in which we read something we understand well, shake our heads in disbelief at how it misses the point completely…and then happily and gullibly consume another article about a topic we don’t understand nearly as well, assuming they must have it right.

Frequent readers will recognize Gell-Mann Amnesia as a favorite topic here at Epsilon Theory.

Gell-Mann Amnesia

That’s Michael Crichton, the physician turned novelist turned director, talking about his physicist friend Murray Gell-Mann, who discovered (and named) the quark. Crichton pretty much invented the techno-thriller genre of books and film, starting with The Andromeda Strain, which is one of the most influential books in my life, for sure. Crichton is probably best … Continue reading



What is it, really?

The #1 question investors ought to ask of a financial services company trying to sell them something is: “What is it, really?” If you don’t know what you’re investing in, you’re liable to end up eating a lot of crunchy frogs. … Continue reading



So what are the articles which rose to the top of the Zeitgeist and prompted these two highly correlated and problematic kinds of memory loss?

The first was from a few days ago, and didn’t quite make our cut (until we saw its counterpart today). The second popped up in this morning’s daily query of the most linguistically similar financial news.


In Disappointing Year, Bridgewater’s Flagship Fund Returns 0.5% [Institutional Investor]

Ackman avoids limelight even as Pershing Square posts record 2019 [Reuters]


I don’t really take issue with the Bridgewater headline’s characterization of Pure Alpha’s 2019. Even evaluated as an absolute return strategy, it wasn’t a banner year. As a term, ‘disappointed’ carries enough emotional weight that it probably counts as Fiat News, but not enough to get too bent out of shape about.

Alas, it doesn’t take long after the lede for the amnesia to set in.

Bridgewater Associates, the world’s largest hedge fund firm, had a tough 2019.

The firm’s flagship Pure Alpha strategy was essentially flat in 2019, with Pure Alpha 18 Percent, the more leveraged version, falling 0.5 percent for the year, according to an investor in the funds. The less leveraged version, Pure Alpha 12 percent, gained 0.5 percent for the year. Pure Alpha 18 percent had been in losing territory all year.

The performance stands in sharp contrast to that of many other hedge fund firms whose performance is more closely tied to the Standard & Poor’s 500 stock index. The S&P 500 gained 31.5 percent last year, including dividends reinvested. 

On the other hand, Bridgewater’s All Weather fund gained 16 percent for the year, according to the investor. Bridgewater declined to comment.

Institutional Investor, “In Disappointing Year, Bridgewater’s Flagship Fund Returns 0.5%”

Sigh. The S&P 500 comparison is absolutely, completely, wince-inducingly irrelevant. I DO appreciate the kinda-sorta attempt to wave in the general direction of this fact. Yes, “…to that of many other hedge fund firms whose performance is more closely tied to the Standard & Poor’s 500 stock index” is about as heroic an attempt to be honest about inappropriate performance comparisons as you’re likely to see in any financial publication. These half-hearted protestations aside, the narrative being promoted by our financial media missionaries here is absolutely that Bridgewater’s performance is disappointing BECAUSE OF the performance of the S&P 500 and all those long/short funds who charge all sorts of incentive fees for the beta to said index.

If the focus of the article was really on whether and why investors might be ‘disappointed’ with Pure Alpha’s performance, it wouldn’t have used the third paragraph to discuss how the returns “[stood] in stark contrast” to a benchmark they’re bloody designed to stand in stark contrast to. It would have focused on why the Westport crew – like many non-trend systematic/econometric macro shops – struggled to figure out rates and currencies in a year that (for once) was dominated by a narrative (trade) other than one that simply allowed them to get in front of central bank actions.

It’s a topic we felt strongly about going into 2019.

The Many Moods of Macro

Part 2 of the multi-part Three-Body Alpha series, introduced in Rusty’s recent Investing with Icarus note. The Series seeks to explore how the increasing transformation of fundamental and economic data into abstractions may influence strategies for investing — and how it should influence investors accessing them. … Continue reading



The Reuters article just makes the same mistake in reverse. By any standard, the Silver Fox put up a terrific 2019. But even in presenting it, the article can’t help making comparisons to peer strategies (e.g. Third Point, Elliott) which are consistently run with dramatically different net exposure than most of the Pershing Square strategies. Like the II piece, it makes some attempt to explain them away as maybe not-so-good comparisons, but the sheer act of including them strikes me as a pretty transparent attempt to frame the narrative, juice SEO and pump the controversy-clicks, insomuch as activist fund return articles on Reuters have the rabid sort of audience that would respond to those things.

Clear Eyes: don’t let Gell-Mann Amnesia get you. If you read a performance article about anything – a fund, a strategy, a firm, a pension plan, an endowment – read it skeptically. ASSUME that you aren’t being given all of the information to properly compare it, and that the comparison information that IS being given to you is a story-telling technique and almost certainly incomplete.


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Normalize This

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I feel like the Billy Crystal character in Analyze This all the time. There’s always some mob boss politician or central banker or CEO or asset manager pinching my cheek and telling me that it’s all gonna be okay, that I’ve just gotta understand how things are.

My god, I am so tired of having my cheek pinched.

I am so tired of being nudged in such an artless, heavy-handed way.

I am so tired of being told that 2 + 2 = 5.

Yesterday it was one of the asset managers pinching my cheek, a senior partner at Baillie Gifford, a firm that manages over $200 billion. Here’s his FT Opinion piece.


Japan’s GPIF is right — short selling is downright irresponsible  [Financial Times]

“Stock and bond markets, together with their investors, have a higher purpose than mere profit: their ultimate function is to provide capital to companies creating wealth for the benefit of wider society. This is best achieved through taking a long-term perspective and considered decisions.”

“What is the value created through stock lending? Those who defend the practice cite setting fair prices as an important outcome. But how valuable or helpful is this to the broader mission? Is such price discovery really helpful or necessary?”

“Baillie Gifford does not lend out stocks for our investment trusts or mutual funds, though many of our segregated clients do so, by their own choice. GPIF should be applauded for taking the long term and principled view of its responsibilities and hopefully more of our clients will follow its example.”


I mean, this is a sentence actually published by the FT in a non-ironic sense:

Is such price discovery really helpful or necessary?

As the kids would say on Twitter, let that sink in.

What is a Nudge?

It’s an article like this, pinching your cheek and telling you that of course it’s okay if market regulators decide to institutionalize GPIF’s “responsible” decision to stop lending out stock for short-sellers. After all,

Stock and bond markets, together with their investors, have a higher purpose than mere profit.

What do I mean when I say that capital markets have been transformed into a political utility?

This.

This is the water in which we now swim.

Or to use another vocabulary in vogue these days, it’s a method of normalizing an exceptionally non-normal world, where price discovery is something to apologize for, something distasteful and uncouth, like farting loudly in public.

from Hypernormalization, by Adam Curtis (2016)

This is a cover shot for a BBC documentary by Adam Curtis, called Hypernormalization. It is, in the words of The New Yorker, “painting a picture of a world increasingly dominated by the false reality put forth by corporations and politicians.” In Curtis’s own words, channeling Alexei Yurchak:

“No one could imagine any alternative. You were so much a part of the system that it was impossible to see beyond it. The fakeness was hypernormal.”

Yep, that’s the Zeitgeist. That’s Fiat World. That’s the Long Now.

But I see people waking up to this. I get hundreds of emails every week from people opening their eyes.

Change is coming. Not from above, but from below. Yes to tear down, but also to rebuild.

Tick-tock.


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A Perfect Meme

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Every day we run the Narrative Machine on the past 24 hours of financial media to generate a list of the most linguistically-connected and narrative-central individual stories. We call this The Zeitgeist and we use it for inspiration or insight into short-form notes that we publish a couple of times a week to the website. 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.


As you might have noticed, we’ve taken a brief hiatus on Zeitgeist notes here at the end of 2019 – a short period both Ben and I have spent with our families and planning for an exciting 2020 here at Epsilon Theory.

But sometimes an article that rises to the top of our queries is just too good to pass up, even when we’re on vacation.

First there was ‘diversity.’ Then ‘inclusion.’ Now H.R. wants everyone to feel like they ‘belong.’ [Washington Post]

We don’t spend all that much time talking about ‘political correctness’ or the more conservative variants we occasionally refer to as ‘patriotic correctness’. Some readers find that surprising – or irritating, wishing we would lay into some of this nonsense a bit more often. It is true, these moving target norm enforcement rackets sit at the target rich center of the overlapping Venn diagram of paternalistic nudging, highly abstracted language, and missionary behaviors meant to establish new common knowledge – what everyone thinks everyone thinks our cultural norms are.

It’s not that we don’t see it. It’s just that it’s…been done. Honestly, if the headline alone – much less reading each ever more excruciating word of this Washington Post ‘Analysis’ – wasn’t exhausting to you, there isn’t anything I can write that will change that.

Still, it is interesting that an article like this was among the most connected by language to financial markets news over the last couple days. More detailed examination shows that connection to be the result of a general increase in ESG language showing up throughout financial news. The behavior of executives, the demographic composition of C-suite and boards and the hiring behaviors in the tech industry in particular are all becoming more common in standalone articles and as frames for articles nominally about other topics. It’s part of the Zeitgeist – for now.

And, no, Yay, diversity! – a vastly different thing from the actual pursuit of or belief in the benefits or rightness of diversity – is not new. For years, it has been a banner-waving meme embraced by every Fortune 500 HR department and MBA program across the country so that they wouldn’t have to, y’know, actually undertake the hard work necessary to rid themselves of the self-defeating monocultures of skills, temperament and demographics they’ve so painstakingly created over the decades. If you think the Patagonia Parade is the natural output of a properly functioning meritocratic system or exercise in maximizing aggregate company productivity, I’ve got some energy PE investments those bevested young men are hard at work right now fitting into a 1.2x Q4 mark that I think you’re just going to LOVE. But merging diversity and inclusion language on the one hand, and the workism dogma of belonging, family and community on the other?

Yay, belonging! is a powerful meme. A perfect meme.

It is also deeply cynical.

We have already said our piece on workism, the meme-laden exploitation by employers of our desire to imbue our work with meaning, which forms half of this new idea.

So what is the rest of this new idea?

I mean, it’s all good-sounding stuff, of course. This kind of thing always is, and one does get the impression that people like this are well-meaning. But what does it mean in practice?

It means that if you resist all that nonsense about seeing your employer as your family, you are now guilty of an infraction against inclusion, too. It means that employers will change the dimensions they measure from things they can control (e.g. whether they hire people whose intellect, skills, race, ethnicity, temperament, value system, religion, socioeconomic background, regional background, nationality, gender, sex, etc. may make their company’s ideas and execution more robust) to things they can’t. And THAT means that executives and boards will now have more firepower to arbitrarily claim that they did all they could but couldn’t achieve results due to factors outside of their control – or better yet, to change the subjective standards by which success on this dimension is defined.

That way we don’t have to do anything that matters, and everyone still gets to wave the yay, belonging! flag.

When clear, simple ideas don’t work perfectly – like, say, the embrace of a simple idea like diversity – we have three choices: we can accept their imperfections, we can add more complexity to the ideas to accommodate their flaws, or we can create abstractions which cloud the areas that worked and didn’t work in a fog of linguistic uncertainty.

As a rule, favor the first, selectively apply the second, and avoid the third like the damned plague.

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An End to War!

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Every day we run the Narrative Machine on the past 24 hours of financial media to generate a list of the most linguistically-connected and narrative-central individual stories. We call this The Zeitgeist and we use it for inspiration or insight into short-form notes that we publish a couple of times a week to the website. 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.


Last Friday, the Washington Post printed an article that scored near the top of our Weekend Zeitgeist, when we explore articles outside of our typical focus on financial markets. We didn’t write anything about it, in part because we think it’s worth being a bit more skeptical about feature and opinion pieces whenever you do agree with them.

And while I can’t help rolling my eyes a bit at the repeated appeals to international law (sorry, still an unabashed chauvinist about that sort of thing), there is a lot in this piece I do agree with. Hence the skepticism. America’s nearly constant state of war over the last few decades is a classic dog that didn’t bark, an event that is newsworthy because we have been told it is un-newsworthy, like a strike aircraft we can only see because it was painted blacker than the night sky itself.

American weapons are fired in anger daily. They kill real people, deserving and otherwise, daily. Except for a predictably politically motivated annual tally article published in tandem with some scheduled Pentagon disclosure or FOIA request, we simply do not hear about it. If we do hear about it, especially in our industry, it is abstracted into figures and good-sounding features of people just doing their job. Hellfires and Block III Griffins are the new “razor blade” model for business models with high levels of recurring free cash flow, don’t you know. Hey, we fire the occasional Viper Strike, too, if you’re willing to deal with a lack of transparency on how that’s hitting your bottom line in the BAE/EADS JV that builds them, there’s something for you in Europe, too.

The Infinity War [Washington Post]

So why now? Why would this piece be among the most connected by language to other articles published over the weekend?

Because nearly every politician from nearly every party is calling for an end to our Infinity War. This language being begged for and described in this opinion piece exists in dozens of recent pieces covering the upcoming primaries.

And why did we decide to post it today?

We posted the article because these arguments – for the most part – aren’t earnest expressions of a desire to end war. They are memes of An End to War!, good-sounding narrative constructs structured to pretend that stand-off weapons, cruise missile strikes, targeted assassinations and UAVs are not part of what needs to end, but things we will define as not being acts of war at all. An End to War! is at the top of the Zeitgeist because our politicians, parties, think tanks and other Important Institutions have decided that so long as no American troops are put into harm’s way, what we are doing isn’t actually war.

War is over if you want it. Just change what you call it.

When we refer to the Long Now, what we mean is the way we borrow from the resources, stability and happiness of our collective future to smooth the edges of the present. Anything to reduce what feels like volatility. Anything to reduce the perception of geopolitical risk. Anything to avoid someone saying that there was something else we might have done. The Long Now is the prioritization of the subjective perception of the present with no concern given to the cost that will come due in the future.

The Infinity War is a part of the Long Now.

Don’t mistake me. Being lawful good doesn’t mean being lawful stupid. Legitimate states have enemies. They will and in some circumstances ought to conduct open war to defeat those enemies. And when they do, I hope it is our boys and girls who make the other poor dumb bastards die for their country. But remember this: Obama and Trump both ran on An End to War! The 2020 candidates will run – in part – on An End to War! Clear Eyes means seeing that they don’t mean what you and I mean.

It is well that war is so terrible, otherwise we should grow too fond of it.

Robert E. Lee, in a comment to Lt. General James Longstreet about the Battle of Fredericksburg

Full hearts, too. We have become far too fond of war, and far too unwilling to ask questions about why it is conducted in our name. You and I may agree or disagree with the answers we get, and that’s OK. We may disagree about whether we ought to participate in this kind of action or that. That’s OK, too. I disagree with 2003 version of me who was a full-throated supporter of the Iraq War. But no matter our posture on the role of violence on our behalf in executing US foreign policy, memes of An End to War! which abstract away targeted, smaller-scale violence-at-a-distance into topics unworthy of our notice serve no American.

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It’s Not So Much …

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For some reason, it’s not so much the fact that Harvey Weinstein is using a walker to make his appearances in court that makes me want to burn the world down.

It’s the popped collars.

It’s the bevy of 400-pound “assistants”.

What a freakin’ charade.


Harvey Weinstein, Ex-Associates, Accusers Reach Tentative $47 Million Settlement    [Wall Street Journal]

“Harvey Weinstein, his former associates, insurers and accusers have reached a nearly $47 million tentative settlement of almost all the civil cases pending against him, about $25 million of which will compensate women who have accused the Hollywood producer of sexual misconduct, according to people familiar with the matter.”


For some reason, it’s not so much the fact that only $25 million of the $47 million settlement is going to the actual victims of this serial rapist that makes me want to burn the world down.

It’s that the settlement will be paid for by insurance policies.

It’s that more money is going to creditors of the film studio ($7 million) than is going to the women who actually brought the civil suit ($6 million).

It’s that $12 million is going to pay the lawyers who defended Weinstein’s partners.

It’s that $1 million is going to Weinstein himself to defend him against accusers who didn’t join the settlement.

I think Harvey Weinstein will be acquitted in his criminal trial … or at worst he’ll plead out to a much lesser set of charges. And when that happens, he’s golden. He’ll still have all his money. He’ll still have his freedom. He’ll still have an audience willing to pay attention to what he says. Maybe he’ll move to France and hang out with his hero, Roman Polanski.

If you don’t see that there is one set of rules for the very rich and another set of rules for everyone else … if you don’t see that there is an unaccountable political power that accrues to the very rich in both big social ways and in small personal ways … well, you’re just not paying attention.

When I was boy, I would stand up every morning in school and pledge allegiance to a flag that promised liberty and justice for all. I bet you did, too.

More and more, I think we were played for fools.



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One Narrative Keeps on Trucking

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Every day we run the Narrative Machine on the past 24 hours of financial media to generate a list of the most linguistically-connected and narrative-central individual stories. We call this The Zeitgeist and we use it for inspiration or insight into short-form notes that we publish a couple of times a week to the website. 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 has been a constant narrative undercurrent in the 2019 Zeitgeist we haven’t covered yet. The articles attached to the narrative have ranked highly nearly every day of the year, but never quite high enough to make our list of the top 5 most linguistically connected articles published by financial media on a given day. Today the topic broke through.

What is it?

The death of trucking.

An American trucking giant is slated to declare bankruptcy, and it may leave more than 3,200 truck drivers stranded and jobless [Business Insider]

Why did it finally break through to the top of our model’s attention? For a few reasons. First, a declared bankruptcy is a news event that will get mirrored coverage from multiple outlets. Second, the article links to prior pieces that covered an Amazon-specific angle, which it doesn’t take much prodding to discover is how, exactly, Amazon is the one killing it. But third, and most importantly, this article begins to shift the focus from a problem with the industry to a problem for workers. This transition alone, along with its attendant fiat news and affect-laden language, connected this article to all sorts of political articles, opinion pieces expressing concern about the rise of left-populism among Democratic primary participants and the projected impact on markets, etc.

I suspect our readers will have wildly different views on whether the rapidly increasing propensity to frame business problems in context of their impact on labor is a good or bad thing. What matters, however, is that you know that it IS a thing, and that it is absolutely not going anywhere any time soon. It is a feature of the widening gyre, we think, that left populist and right populist language will dominate the narrative structure of nearly every conceivable social, political, economic or cultural topic for the foreseeable future. That is exactly what we are observing, even from Business Insider, and even on a subject as outside the mainstream of most Americans’ discussions as the prospects of a largely unknown trucking company.

In full disclosure, yes, I did pick the #2 most connected article over the #1 article so that I could post this with a picture of Large Marge. Plus I didn’t have anything to say about the Peleton Ad response (the #1 article in the Zeitgeist) that Aviation Gin didn’t already say.

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Presented Without Comment

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Former Purdue CEO Mark Timney (L) and former Uber CEO Travis Kalanick (R)

Every day we run the Narrative Machine on the past 24 hours of financial media to generate a list of the most linguistically-connected and narrative-central individual stories. We call this The Zeitgeist and we use it for inspiration or insight into short-form notes that we publish a couple of times a week to the website. 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.

Below are two of the most narrative-central articles in financial media today. I’m going to leave this here, as the kids would say, without comment, because I’ve been railing on this topic for quite a bit lately (Yeah, It’s Still Water, When Was I Radicalized?, The Rake, OK Boomer).

But I’ll just say this:

Regardless of your personal views pro or con, if you don’t see that a powerful narrative backlash is forming against corporate management enrichment, you’re just not paying attention.


CEO Named in Opioid Lawsuits to Reap $68 Million for Year’s Work  [Bloomberg]

“Mark Timney faces the kind of allegations that can end careers. The former Purdue Pharma LP chief executive officer is accused of playing a key role in fueling the opioid crisis, according to scores of lawsuits by state attorneys general and others. They allege that he directed staff to mislead doctors about the addictiveness of painkillers, which devastated communities across the U.S.”

“Last December, about 18 months after leaving Purdue, Timney became CEO of Medicines Co., a Parsippany, New Jersey-based biotech firm with an experimental cholesterol-lowering treatment for cardiovascular disease. Last week, Swiss pharmaceutical giant Novartis AG agreed to buy it in a $9.7 billion deal that’s expected to be completed early next year. Timney’s stock options and small stake in Medicines are valued at $87.6 million at the offer price of $85 a share. After excluding the cost of exercising the options and the money he paid to acquire the shares, his take will total $68 million.“


Uber’s former CEO Travis Kalanick cashes in another $93 million in stock as he separates himself further from the rideshare giant [Business Insider]

“Former Uber CEO Travis Kalanick continued his ongoing share sell-off into December, cashing in more than $93 million after selling the company’s stock over a three-day period.”

“Kalanick’s combined sales now ring in at more than $1.8 billion since Uber’s post-IPO lockup period expired on November 6.”


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Our Dumb World

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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.


When Ben and I have conversations about analyzing the structure of narratives, one of the things we talk about most is the distinction between narratives defined by topical similarity and those defined by similarity in affect or non-topical turns of phrase.

For example, sometimes it is useful to know that the language in coverage of another Lee Cooperman rant about “The Algos” is more or less similar to other clusters of financial markets commentary. But when we see the Cooperman Algos stories all clustered together by themselves, we can be pretty certain that it is a topical cluster, defined by words which describe a thing. In this case, that thing is Cooperman’s willingness to blame every 50bp drop in the S&P 500 on poor liquidity, dumb computers, volatility targeting, risk parity and other such bogeymen. It is simply our collective lot to puzzle out why big up days with practically no major earnings or macro news don’t yield similar frustration.

We may instead see clusters which aren’t so much defined by a topical similarity, but by the affect, quality, sentiment and distinctive traits of language being used, independent of whether they are being used to describe the same thing. Terms and phrases used to describe wealth inequality or social injustice, for example, find their way into very different topics and create dimensions of similarity that begin to shape all sorts of narratives.

We generally find the latter more interesting and informative, but even when clusters are topically driven, we can still measure their proximity to affect/non-topical language-driven clusters. If Facebook earnings coverage (topical) is more similar to affect-driven clusters of articles about billionaires, anti-trust legislation, politics and social justice, that may have meaning. To us, anyway.

Sometimes an article comes across the Zeitgeist which gives you a little bit of both: a clear linguistic relationship to a substantively significant and intuitive topic of the day, elevated in interconnectedness within the overall narrative structure by the affect and quality of its language.

That, dear reader, is how we end up with this at the top of the Zeitgeist:

Amazon Removes Auschwitz Christmas Ornaments, Bottle Openers After Outrage [Huffington Post]

Valentine's Day key chains featuring a photo of a train car that deported Jews for extermination remained for sale on Su

Horrifying.

Horrifying for obvious reasons. But also horrifying that being topically related to Black Friday / Cyber Monday topics and non-topically related by merits of the affect of language used in discussion of the horrors of Auschwitz makes something the most similar to all other financial news published over the weekend and today.

December can only get better from here, right?

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