The Joy of Fiat News

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it. But for whatever reason these are articles that are representative of some chord that has been struck in Narrative-world. And whenever we think there’s a story behind the narrative connectivity of an article … we write about it. That’s The Zeitgeist. Our narrative analysis of the day’s financial media in bite-size form.

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There may not be a single news outlet on the planet that doesn’t dabble in Fiat News techniques from time to time. That is the nature of a competition game, after all – the rules are defined so that you either play or you lose.

But nobody – nobody – does Fiat News like the New York Times does Fiat News. Sure, CNN, MSNBC and Fox are a bit bolder, using every tool at their disposal to grey the line between analysis and news, to introduce affect into every term, to assign and present coverage that is at once entirely factual and entirely misleading. If we were being supremely charitable (and we won’t be – this is just a hypothetical), you might even argue that the Foxes and MSNBCs of the world are Not-Even-Fiat-News in some meta sense of the idea, simply because everyone knows that everyone knows that a decision to visit those pages is a decision to read a lot of opinions masquerading as news. They’re Not Even Pretending Anymore (TM), as someone might say, so if you’re reading them with any semblance of earnestness, you’ve basically given up.

But the sheer joy with which the Paper of Record publishes obviously affected content as news is a different thing entirely. And in their case, they really are still pretending. I am confident that this piece was published with a serious belief that it met news standards. I’m confident that view is still held. And yet.


Elizabeth Warren on a Wealth Tax [New York Times]

Look, we haven’t identified a systematic way to track down affect and intent in image selection, but to grossly paraphrase Justice Stewart, I know it when I see it. Let’s just say that the Times’s proprietary archive of GOP candidate images was somewhat less flattering. I won’t hold it against you if you disagree. This is clearly in Rusty’s-opinion-land.


“By now, Senator Elizabeth Warren of Massachusetts is known for being the candidate ready with a plan. But back in January, she was just getting her campaign started. And one of her very first proposals was to impose a wealth tax.”


But this isn’t. This is some sublime A-level Fiat News. The lede of the piece is an unclothed common knowledge missionary statement that communicates zero factual content and an assertion described as something that is ‘known.’ By whom? I dunno. Based on what? No idea. Maybe it’s true. It is certainly the impression that I have, but that raises some uncomfortable questions about how, exactly, ideas about what we all know we all know enter our collective subconscious. Hint: it’s pieces like this.


“When the United States government wants to raise money from individuals, it taxes what people earn — the income they receive from work or investments. But Ms. Warren wants the government to also tax the accumulated wealth — think stocks, real estate and retirement funds — held by the very richest Americans.”


This is not a Fiat News point, but an aside to say how delighted I am that anyone thinks ‘retirement funds’ represent a meaningful portion of this figure.


“It is expected to generate $2.75 trillion in revenue over a 10-year period — money that could help pay for expanded social programs.”


Passive construction probably isn’t halal with the style guide anyway. But when you omit the “who”, you aren’t just communicating vaguely. You are effectively presenting what amounts to an estimate, projection or judgment as a fact. The inclusion of the paired-up issue that follows is pure affect. Whether it’s Facebook Boomer Memes about “every dollar spent on X could have been spent on wounded veterans”, or a New York Times writer saying that we could use these taxes to expand social programs, you know you’re dealing with someone who wants you to draw a relationship between two things which does not exist.

That relationship is not intrinsic. Presenting it is an emotional appeal. Every time.

That’s what it means for someone who has a subtler grasp of the tools of Fiat News to tell you how to think.

There are plenty more to be found, but the last one may be the best.


“Well-funded opponents of the tax would be nearly certain to wage a legal battle against it.”


It’s obviously analysis rather than fact, but what is so marvelously plain about this statement is its intent to prime the pump on the issue. Before you hear any opposition, we want you to know that it is “rich people” who oppose doing all these good things.

Here’s the funny thing: putting aside big constitutional issues for a moment, I think that a wealth tax is generally better and more conducive to freedom than an income tax. It aligns better with what government ought to do, which is to act as an ongoing defender of the assets of its citizens against threats both internal and external. Paying like we would pay for insurance makes sense to me. The hilarious absurdity of any attempt to actually value what rich people own, however, means that I prefer to shift more of our tax structure to capital gains from income rather than try to pretend we know what someone’s private assets are worth year-to-year. It’s a view I think Ben shares, albeit in a more exaggerated way, perhaps.

In other words, this isn’t about us disagreeing with Warren, because in a lot of ways, we don’t. As always, this is about how we’re being told how to think. And it’s all the more seductive when it IS an idea we actually favor.


Children of a Lesser Narrative

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.


Why We Should Fear Easy Money [NY Times]

There’s an ET note for that.


There’s an ET note for that, too.


There’s an ET note for that, too, although we’d probably differ on the focus on bearish sentiment. The author is certainly right that these are possibilities, but we think the transformation of capital markets to utilities is a powerful, largely stable narrative.


You may not know his name if you aren’t in the money management industry, but Ruchir’s is a powerful missionary voice. Pension funds, sovereign wealth funds and others care what he says. They will repeat it to their boards. They’ll put it in their own words and call it their new outlook, or else they’ll put it in the ‘risks’ section of their 2020 strategic planning. That’s how narrative works.

Alas, this still isn’t the dominant narrative. Frankly, against the tide of ‘Financial Asset Appreciation = Economic Strength = National Strength’ memes promoted throughout political and financial media, it barely registers. Still, it’s gratifying to see some emerging coherence around these ideas, even if the piece had to summon the spectre of a crash to fit the Zeitgeist.

We’re All MMT’ers Now

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.


Why Trump swallowed a budget deal that bleeds red ink [Politico]

“The president asked Mnuchin to negotiate a deal. And Mnuchin went to Pelosi saying, ‘How much is it going to cost me to get a debt limit increase past the election?’’’ one former senior administration official said sarcastically. “He doesn’t care about the cost. Wall Street is happy. The defense folks are happy. That’s good enough.”

“He didn’t do anything. The pay-fors, offsets are a joke. It’s an accounting trick,” said one GOP senator. “It was sad. And he’s gleeful that the president loves him best for the moment.”

Back in 1971, Richard Nixon famously said “We’re all Keynesians now“, referring to his embrace of stimulative Federal government spending to juice his electoral campaign in 1972.

The only difference between Nixon and Trump in this regard is that at least Nixon made a half-hearted attempt at pretending that he cared about deficits. Ditto Reagan. Ditto Bush 41 and Bush 43. It’s my catchphrase about the oligarchic excess of the Trump regime:

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

That’s why I found this Politico headline so funny … that somehow it was difficult for Trump “to swallow” a budget agreement that runs $1.4 trillion deficits for as far as the eye can see.

LOL.

This is exactly the budget that Trump wanted. Please, please don’t throw me in that briar patch!

You know, we spend a lot of time here at Epsilon Theory with Natural Language Processing (NLP) engines that allow us to visualize the narratives that wash over us like water. I would like to show you a visualization of the US budgetary debate narrative. I would like to show you a picture of the fiscal policy narrative and its connection to the investment narratives that swim in the financial markets ocean. There’s just one problem.

That narrative connection does not exist.

I mean … are there occasional articles printed in the national media about the federal budget and the national debt and all that “stuff”? Sure.

But there is essentially zero narrative or linguistic connection between those articles and anything written about financial markets. Our words about markets and investing do not connect to our words about budgets and spending. At all.

I’ve never seen a less cohesive, less attentive narrative structure.

And I’ve seen a lot of narrative structures.

Why is this important?

Because THIS is what complacency looks like.

What breaks that complacency?

If Trump is reelected in 2020, I think he pushes forward a $2 TRILLION bond issuance that is fully or partially monetized by the Fed. They’ll be called Infrastructure Bonds.

If a Democrat is elected in 2020, I think she or he pushes forward a $2 TRILLION bond issuance that is fully or partially monetized by the Fed. They’ll be called Green Bonds.

It’s the same damn thing. Because … once again, with feeling … They’re. Not. Even. Pretending. Anymore.

Does the market go up or down on this? Yes.

We’re all MMT’ers now.

You ready for that? I bet you’re not.


I’m Not a Raccoon! I’m the Lone Ranger!

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.


U.S. Regulator Probing Crypto Exchange BitMEX Over Client Trades  [Bloomberg]

The U.S. Commodity Futures Trading Commission is investigating crypto exchange BitMEX, according to people familiar with the matter, a platform that’s become wildly popular in Asia for letting people make big bets with little money down.

BitMEX Chief Executive Officer Arthur Hayes said in an interview in January that BitMEX removes anyone who flouted company rules barring U.S. residents and nationals. However, it is possible clients masked their location by using virtual private networks to assign their computer an Internet protocol address from a BitMEX permitted country, tricking filters put in place, Hayes said.

“It’s possible.”

LOL. We can all chuckle and laugh about the obvious hucksters and con men in crypto-world, the obvious raccoons like Arthur Hayes.

Luckily for Arthur, I’m sure that none of these recent legal “entanglements” will keep him from making his appointed rounds on CNBC.

I mean, when you have Sam Waksal on your network to talk about fraud in the biotech world … not as farce but as serious commentary … well, friends, we’re no longer arguing about what CNBC is actually selling, only the price.

But I want to say something about non-obvious raccoons. I want to say something about people who are not the target of an active criminal investigation or who have not gone to prison for fraud, but are hucksters nonetheless.

Anyone who tells you that you should hodl Bitcoin buy-and-hold a non-cash-flowing, non-productive thing because of “network effects” or Metcalfe’s Law or the like … that person is talking like a raccoon. I’m not saying they ARE a raccoon. Maybe they haven’t thought this out and are just parroting an ur-raccoon. That’s at least three mixed metaphors, but you get the drift. I’m trying to be generous here.

And to be clear, there are plenty of non-raccoon arguments for hodling Bitcoin buying-and-holding a non-cash-flowing, non-productive thing. There’s an inflation argument. There’s a security and privacy argument. There’s a fashion argument. I’m sure there are more.

Also to be clear, it’s not raccoonish to say that you should TRADE Bitcoin a non-cash-flowing, non-productive thing based on the transactional popularity of that non-cash-flowing, non-productive thing. Lots of people trade precious metals, for example. They buy and they sell based on anything they believe motivates other buyers and sellers. Good for them!

What I am saying is that there is no inherent VALUE in Bitcoin a non-cash-flowing, non-productive thing from network effects. There is no “tipping point” in the adoption rate or transaction volumes of Bitcoin a non-cash-flowing, non-productive thing beyond which it becomes “too big to shut down”.

In ten-dollar words, network effects are epiphenomenon, not phenomenon, when it comes to non-cash-flowing, non-productive things. They are a shadow of a belief system, not a signal of a belief system.

What did it mean that lots of people in 17th century Amsterdam transacted in guilders and tulips? It meant that lots of people in 17th century Amsterdam transacted in guilders and tulips. That’s it. There was no grand statement beyond that. There was no signal of inherent value contained in the transaction volumes of tulips. There was no more inherent value to a Semper Augustus bulb in 1636 than in 1626, even though lots more people bought and sold tulips in 1636 than in 1626.

Price drives the transaction volumes of Bitcoin non-cash-flowing, non-productive things.

Not the other way around.

There are prominent people at the intersection of Wall Street and crypto who know this to be true – who know that the Yay, network effects! narrative is complete BS when it comes to Bitcoin – but who promote the narrative anyway.

Why?

Because it’s narrative that drives the price of Bitcoin non-cash-flowing, non-productive things.

Because they are raccoons.


The Only Winning Move

To date we have written about the Panopticon in a mostly figurative sense. Clear eyes today means seeing it in a literal sense as well. Here’s your top of the Zeitgeist piece, a Financial Times feature on the death of privacy – and more importantly, the arguments being made in favor of its demise.

Is Privacy Dead? [Financial Times]

This is rather obviously an argument for the inevitability (if not explicitly in support) of the literal Panopticon. Indeed, there are few nudges more powerful than those which compel us to believe that we are already engaged in a contest of mutually assured destruction. How does the nudge work?

It tells you that you aren’t protecting your family if you don’t participate in the ritual of collective surveillance.

If tells you that you aren’t a functioning, right-thinking member of society if you don’t do your part to aid the herd immunity of mutually assured surveillance.

We killed our web-based ads this week. We did it for a few reasons. First, in all candor, we did it because the revenues from it were good (you’re an audience advertisers desperately want to reach), but not life-changing. Second, we did it because no matter how hard we worked with our partners, ads we didn’t feel good about kept slipping through the net (and while we’re not judging you, please bear in mind that some of the example ads you sent to me and Ben were, shall we say, uh, the result of your own browsing histories). Third, we did it because the technologies required to serve up the most valuable ads put us in the position of asking you to give up control of some of your data in ways that we found it hard to justify.

I don’t want to make this some kind of big deal, because it isn’t. We still have to collect information about you to accept payments – although even there, we are in the process of exploring the integration of btcpay through a self-hosted node to reduce even that requirement for those who are so inclined. And we are not communists: if we can find ways to serve non-subscribers advertisements that don’t effectively treat your data as if it were our own, we will put up the most obnoxious banner ads you can imagine – and smile doing it.

But no, the Big Deal is when all of us choose to act with reciprocity – acting in ways that are likely to promote cooperative gameplay. And friends, mutually assured surveillance is the ultimate competitive game, a massively sized and massively failed stag hunt that is part of the transformation of all of our social engagements into games with bad equilibrial outcomes for everyone. The nudges that can be summoned to secure our compliance are many:

We will hear that what we can do with others’ data can make us (and our shareholders) wealthier.

We will hear that it will make us safer.

We will hear that it will make our neighbors and communities safer.

Every last one of those things will be 100% true. Clear eyes.

Every last one of those things will also be 100% wrong. Full hearts.

We’re Gonna Need a Bigger Boat

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.


Artprice100(C): The Art Market’s Blue-chip Artists Yield Nearly as Much as the Top Performing Companies in the American Economy  [Morningstar]

Gender Face Swap Filter Is a Windfall for Snapchat  [US News & World Report]

As rivals combine, US Foods can’t make a deal  [Crain’s Chicago Business]

Back in April I wrote “This Is Water” about how financialization – by which I mean profit margin growth without labor productivity growth – has become the water in which we fish swim. We don’t just take it for granted … it has become completely unnoticeable even as it has transformed our capital markets into a wealth inequality machine.

Today, when I was looking through the most-connected financial media articles to write a Daily Zeitgeist note, I found three unrelated articles, each of which touches an element of financialization.


The first two articles touch on the ephemera, the frothy excess of a world where an essentially unlimited quantity of essentially costless money is available to pursue … whatever.

In this world of foam, only an idiot would actually invest in productive real-world assets. Why? Because in a financialized world the risk-reward-time dynamic of playing a new casino game dwarfs the risk-reward-time dynamic possible anywhere else.

Witness, for example, the ArtPrice 100 (c) index – a securitization of a tracking index for fine art auction sales. To be clear, you’re not actually buying or selling art here. You’re not even buying or selling shares in an ETF that is actually buying or selling art. No, you are making a bet on the “score” of the next fine art auction. It’s not just the functional equivalent of betting the over/under of a sports score with a legal bookie, it IS a bet on the over/under of a sports score with a legal bookie.

And worry not … “Artprice is preparing its blockchain for the Art Market.”

Next, we have the revenue “windfall” that a gender-swapping photo app is providing for Snapchat, now up … [checks notes] …. 190% through six months of 2019 and sporting a $22 billion market cap.

SNAP is a company that will never see a penny in GAAP earnings, of course, but that’s not what will make this stock go up or down. No, this stock will go up or down depending on the “score” of the next earnings announcement, where the game is how many Daily Average Users (DAUs) the company reports and projects for next quarter. Think they’ll top 197 million DAUs this quarter (last quarter was 190 million)? Then BUY! Think they’ll just hit their lowball DAU projections? Then SELL!


The third article has nothing to do with the ephemera and foam of financialized markets. It has everything to do with the barriers to further financialization, which are purely political.

US Foods is the third largest food distribution company in the United States, just behind PFG in annual revenues and less than half the size of the clear market leader, Sysco.

How do these companies drive profit margin and earnings growth? Through investment in more efficient supply chains and transportation networks?

LOL.

No, silly boy, they drive earnings growth through consolidation and the resulting ability to squeeze their suppliers more effectively. Consolidation which has ZERO financial barriers when your cost of capital is near zero and debt markets are tripping over themselves for the chance to throw money at companies like these.

The problem for further consolidation is purely political – will the FTC allow the mergers and acquisitions that the strategic planning groups at these three companies come up with?

The point of this article is that if PFG’s proposed acquisition of Reinhart Foods is given the green light, then a) US Foods drops to third place in the mega-size sweepstakes, and b) there really aren’t any more regional acquisition targets of any size (like Reinhart) for US Foods to go after.

The obvious solution? Cue a potential merger with Sysco to create the behemoth of all behemoths in the food distribution space. The only problem there is that this merger was proposed back in 2013, and it was nixed by the FTC.

Can US Foods get a merger with Sysco through the FTC six years later? I don’t know. But I’d bet a lot of money that they’re going to try.

And in a They’re. Not. Even. Pretending. Anymore. world, especially now that you’ve got Republicans as three out of the five commissioners, reversing the 2013 Obama ratio … I think they’ll get it.

Financialization is not a mean-reverting phenomenon. It’s too good of a gravy train for Wall Street, corporate management and the White House to stop now. So they won’t. Like any self-respecting Great White shark, the Nudging State and the Nudging Oligarchy never stop swimming. They never stop eating.

Want to survive these financialized waters if you’re potential shark food? You’re gonna need a bigger boat.


When Did You Stop Beating Your Wife?

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.


De Blasio’s ‘pay parity’ hypocrisy  [NY Post]

Back on planet Earth, there’s a gender pay gap at the top of his own administration. As Julia Marsh reported in Sunday’s Post, four of the five highest-paid members of his administration are men.

Overall in de Blasio’s top ranks, women earn 81 cents for every dollar earned by the men. And both Schools Chancellor Richard Carranza and new NYCHA chief Gregory Russ have salaries over $400,000, much more than their female predecessors.

Bill de Blasio is an apparatchik.

Give him a bowler hat and an umbrella, and he’s a dead ringer for John Cleese’s classic character, the Minister of Silly Walks.

My personal opinion of Bill de Blasio’s political career and ideology is a sense of relief that he’s too inept to be truly dangerous.

But is Bill de Blasio a hypocrite? No.

Bill de Blasio is an authentic good leftie soldier, and it’s that authenticity that makes him a successful politician today.

Even if it also makes me throw up in my mouth a little bit.

Sure, Bill de Blasio is pandering in a particularly cringe-worthy way when he says that he’ll force equal pay for women’s national sports teams “if elected president”. But at least it’s authentic pandering. There is no bone in Bill de Blasio’s body that does not believe this is the right public policy position, no matter what ridiculous lengths he might take it.

And that’s what makes this series of “articles” and editorials from the NY Post – claiming that there is some massive inequity and hypocrisy in de Blasio’s treatment of women in his own administration – so popular and central to this morning’s media Zeitgeist.

But as it turns out, everything about this “reporting” on the pay-parity hypocrisy of the de Blasio administration is complete horseshit.

For example, when the NY Post says that “four out of the five top-paying jobs in the de Blasio administration belong to men”, they neglect to tell you that one of those four men is de Blasio himself. How dare de Blasio – who does not set his own salary, of course – include himself in his own administration! So out of the five top-paying jobs of people Bill de Blasio hired, three are men and two are women. The sexist pig! If de Blasio had hired a woman for any one of those three jobs now filled by a man – something I’m sure he now wishes he had done – the entire pay-parity “scandal”, where “women earn 81 cents for every dollar earned by the men”, disappears.

This article is not a lie. There is no “fact” here that is not checkable and true. This article is not Fake News.

It’s worse.

This article is Fiat News, the presentation of opinion as fact, in pure and despicable form.

This article was specifically designed to manipulate someone like me … someone who is VERY predisposed to believe the worst about Bill de Blasio because I dislike his politics SO MUCH.

It’s a particularly virulent and destructive form of Fiat News we call a rage engagement.

Once you start looking for rage engagements – and their twin, the mirror engagement – you’ll see them everywhere in today’s media. Why? Because they WORK. Because we are hardwired to respond to manipulative “evidence” like this. Because this is how others win The Game of You.


The Upside Down

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.


Facebook’s (FB) Libra Faces Intense Scrutiny From Regulators  [Zacks Equity Research]

Facebook’s upcoming cryptocurrency, Libra, has drawn attention of banking and financial market regulators and policy makers globally. While the announcement has been applauded by cryptocurrency issuers, users and enthusiasts, it met a fast and worried response from central banks and regulators.

This is because regulators believe that entry of tech giants like Facebook into the banking and financial systems through cryptocurrencies like Libra, without any regulation, is too dangerous for consumers.

A recent statement by European Central Bank (ECB) executive board member Benoit Coeure, quoted by Bloomberg, also suggested this. Per Coeure, “It’s out of the question to allow them to develop in a regulatory void for their financial service activities, because it’s just too dangerous.”

Of course I’m a big fan of Stranger Things. Any show that can celebrate Dungeons & Dragons before it was called Advanced Dungeons & Dragons is a show for an OG gamer like me.

If you haven’t seen the show, the core plot device is a struggle between our dimension and an alternative dimension called the Upside Down. As the name implies, everything is topsy-turvy in the Upside Down, from the most fundamental laws of physics on down. That’s the Big Baddie in the picture above, known as the Mind Flayer (all of the monsters in the show have good D&D names … love it).

Narrative-world is a lot like the Upside Down.

I’m reminded of that when I read articles like the one here from Zacks, where we are told that the crypto community is overjoyed about Facebook’s Libra, but that government regulators are beside themselves with worry.

LOL.

This Zacks article is a classic construction of Fiat News – the expression of opinion as fact – chock-full of affect-laden words like “applauded”, “worried”, “because”, “believe”, and “suggested”. This article is figuratively shaking its finger at you, telling you how to think about Libra, not what to know about Libra.

Look, if your wall of worry is comprised of a mean letter from Maxine Waters and stern words from Benoit Coeure … well, god bless.

That’s not even a hurdle. It’s like two mini-hurdles that a child could step over.

Please. Libra was designed for government regulators. It is exactly what government regulators want to see in a stablecoin.

And of course all of the crypto raccoons are praising Libra. All attention is positive attention to the hucksters.

Who’s the real Mind Flayer? Modern financial media, that’s who.


Raking it in

Nike rakes in $3 billion after Colin Kaepernick calls foul on shoe [Denver Post]

We have written about the Colin Kaepernick / Nike saga before. It was the headliner for our inaugural piece that discussed how winning in a widening gyre requires politicians, companies and people to control their own cartoon – before someone else does it for them. Nike did it, and they won.

Some few months later, they’re back in the Zeitgeist, with coverage language powerfully connected to all other social and financial news. I think you can make a meta-game argument that their tactic this go around was a bit transparent. Maybe even long-term counterproductive, given some internal inconsistencies in the cartoon they’re created. What you can’t do, I think, is argue that it wasn’t effective in promoting and controlling that same, highly effective, polarizing cartoon today.

One of the easiest ways to spot a well-controlled cartoon is how it auto-tunes others’ perceptions to that narrative. The Denver Post gives us exactly that:

Remember, this is at the top of our Zeitgeist query. This language is making its way across financial media. Whatever we think about the reality or fairness of Nike’s decision or Kaepernick’s belief here, the narrative about Nike is that its wokeapitalism strategy is working. Outlets are attributing market price changes over a couple days to a specific event. Outlets are calling day-to-day volatility in total market cap ‘raking it in’, which says about as much as it does for financial literacy as it does the strength of the cartoon. Articles are even intimating that Nike is winning from the popularity of protest actions (and they may not be wrong):

The simplest takeaway from our first brief on this topic was that controlling your cartoon is an indispensable corporate tool in the widening gyre. The takeaway from this one is probably more important: there is now a strong narrative that controlling your cartoon works. A cartoon about cartoons now sits at the top of the Zeitgeist.

Don’t be surprised, friends. The world we live in is now the kind of world in which Jar Jar Binks is trending on social media because…well, because everyone wanted to know why Jar Jar Binks was trending on social media.

Alas, I fear it’s Jar Jars all the way down. Brace yourself for more of this.

Here We Go Again

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.


Trump says he’s optimistic about trade deal with Chinese President Xi, in interview with Tucker Carlson  [Fox News]

“You just recently hours ago met with the Chinese president, Xi Jinping,” Carlson said. “Are you closer, do you think after that meeting, to a trade deal?”

“I think so,” Trump replied. “We had a very good meeting. He wants to make a deal. I want to make a deal. Very big deal, probably, I guess you’d say the largest deal ever made of any kind, not only trade.”

One of the weirdest things about Donald Trump is how he forcefully pulls you close to his body when he shakes your hand. Watch for it whenever he has one of these formal handshaking events. He doesn’t extend his hand – or rather, he does for a nanosecond to lure you in – and then he yanks you really hard into his belly. It’s hilariously weird. Like the extra-long ties that he wears and the inverted-pyramid hands when he sits, I’m sure he read this in a “body language secrets” book long ago and has now seared these behaviors into his “deal-making” soul.

And yes, there’s an Epsilon Theory note on this.

In the same way that I can’t help myself but eat that last piece of fried chicken, no matter how long it’s been sitting out on the kitchen counter (and I’m talking DAYS here, people), Donald Trump can’t help himself but say things like this:

“The largest deal ever made of any kind”.

It’s hilariously weird.

And so here we go again … it’s the game of Chicken, where everyone thinks they can assign odds to a multiple-equilibrium game where odds are not just difficult to assign, but IMPOSSIBLE to assign. And whenever Trump says or tweets anything, no matter if it’s said or tweeted as mindlessly as any other behavioral compulsion, we will ascribe information to it. Or better yet, we will all believe that this is what we all believe. It’s Common Knowledge creation in action. By a natural, if compulsive, Missionary.

But there is a big difference today in the backdrop for Trump’s game of trade (and national security Chicken with China. When I originally wrote this note, it was December 18 and Jay Powell was still sailing the monetary policy barge up the tightening river. Now Powell is driving the Trump Train, or at least some version of it.

And there’s no way on god’s green earth Powell can reverse course AGAIN.

We’re on a one-way street with monetary policy now, at least through the 2020 election. So if we DO end up with a bona fide deal with China … if that’s the outcome of this game of Chicken … if the market rips and commodity prices soar and all is good with the world … even if all that happens, the Fed STILL isn’t going to tighten.

And that’s when the melt-up happens.


The Solution To The Fintech IPO Shortage

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.


Scott: Hey, how’s your girl, man? 
Luis: Ah, she left me. 
Scott: Oh. 
Luis: Yeah, my … mom died, too. 
[Beat; Scott gapes in awkward silence]
Luis: And my dad got deported. 
[More silence]
Luis: But I got the van! 
Scott:[quickly] … It’s nice!
Luis: Yeah, right?!

Ant-Man (2015)

The Solution To The Fintech IPO Shortage [Forbes]

The headline is bullish. The tone is positive. But the article is dour as hell. Why haven’t we seen Fintech IPOs, it asks, then provides the answer: because they don’t have sustainable business models, the companies don’t have clear value propositions, they can’t get to scale, IPOs did terribly last year and they haven’t done anything to change the actual economic proposition of financial services products to end users.

Other than that, Mrs. Lincoln...

Still, the piece manages to end with the kind of relentless optimism that you have to admire on some level. If they can figure those fourteen things out, expect more IPOs! Still, it’s an interesting question, given how powerfully non-financial tech and VC has managed to cultivate a supportive narrative. The problem is pretty simple, and it’s a narrative problem:

Everyone knows that everyone knows that financial services switching costs are extremely high.

It’s the source of the fundamental economic malaise affecting these companies – their stratospheric customer acquisition costs. It’s the source of the scale problem. It’s the reason the business models aren’t sustainable. Having a product that disrupts something customers hate isn’t enough if they still can’t fathom the pain in the ass that is figuring out, learning and actually pulling the trigger to do something different.

The successful Fintech plays have (as the article points out) either served other financial services businesses directly or have figured out how to make the complicated process of switching or simply starting to use a financial product people haven’t used before, well, easy. Any such company that isn’t actively owning its cartoon on this dimension – continuing to obsess over addressable markets and consumer frustration with incumbents – will continue to miss the boat.

Riding the Cyclone

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.


A $1,800 Drop in Minutes: Bitcoin Volatility on Full Display    [Yahoo Finance]

Bitcoin soared as much as 39% this week to $13,852, the highest since January 2018. But it hit a brick wall around 4:30 p.m. New York time Wednesday, plunging more than $1,800 within about 10 minutes. Moments later, prominent cryptocurrency exchange Coinbase Inc. reported an outage on its consumer site, which was resolved in under an hour.

Swings continued Thursday, with the coin anywhere from down 15% to up 4.8%. It was down 15% to $11,111 as of 12:23 p.m. in New York. Volatility in Bitcoin is near the highest levels since early 2018, when the bubble was bursting.

Analysts said this was likely a sign of things to come.

Sorry, just couldn’t help myself when I grabbed this photo of the Cyclone rollercoaster. Had to isolate these two gents, not to diss but out of respect. This is authentic joy, in a world where that can be mighty hard to come by.

Hey, I’m Big Lou … I’m just like you. Except rollercoasters make me too dizzy to ride these days.

The rollercoaster nature of Bitcoin is a feature, not a bug.

It is not to be wished away or adulterated. It is to be celebrated. It is an integral and authentically joyful part of the experiential or performance art that IS Bitcoin.

People always think I’m trolling or dissing when I call bitcoin a work of art, but they couldn’t be more wrong. It is my highest praise. The creation of good art is – in my opinion – what we are put on this earth to do. It is our highest calling.

I’m totally serious about that, btw.

There is lasting value in good art, because it is a very scarce thing and it never gets used up. The notion that Bitcoin would ever “go to zero” is ludicrous. Good art is always worth something.

But how do we measure that something … how do we put a price on the value of good art at this particular moment in time? It’s a REALLY tough question.

Why? Because we don’t have a toolkit for it.

We have plenty of toolkits for measuring cash flows, both current and prospective. We have plenty of toolkits for measuring the “fundamentals” of this thing or that thing that we want to buy or sell. We can argue about whether the price we ask for this collection of fundamental metrics is too high, or whether the price we bid for this collection of fundamental metrics is too low, but there IS a shared conception – a common knowledge – for the process of pricing the value of “fundamentals”.

But there are no cash flows to art. There are no fundamentals to art. There is no common knowledge – what everyone knows that everyone knows – on valuation metrics for art.

There is only story. There is only narrative. There is only how story and narrative make us FEEL.

Again, I don’t say this as a put-down. I say this in awe.

The price of Bitcoin, like the price of any great work of experiential or performance art, is entirely based on narratives.

The price of Bitcoin is entirely based on how these narratives make us FEEL.

Gold, too.

Over the past few months, we’ve developed a new toolkit for measuring stories and narratives, for moving beyond conditioning attributes like sentiment and identifying structural attributes like attention and cohesion.

It’s a major advance in what we call the Narrative Machine.

We first wrote about this new toolkit here, with an application to stock market sectors:

And most recently here, with the results of our test of that application:

We’re now ready to turn this toolkit on Bitcoin and gold, to see what the Narrative Machine can tell us about the price of both.


Pirate Bay

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.


What Happens After Amazon’s Domination Is Complete? Its Bookstore Offers Clues   [NY Times]

“The Sanford Guide to Antimicrobial Therapy” is a medical handbook that recommends the right amount of the right drug for treating ailments from bacterial pneumonia to infected wounds. Lives depend on it.

It is not the sort of book a doctor should puzzle over, wondering, “Is that a ‘1’ or a ‘7’ in the recommended dosage?” But that is exactly the possibility that has haunted the guide’s publisher, Antimicrobial Therapy, for the past two years as it confronted a flood of counterfeits — many of which were poorly printed and hard to read — in Amazon’s vast bookstore.

Mr. Kelly’s problems arise directly from Amazon’s domination of the book business. 

This is a flat-out damning article, relating example after example of Amazon screwing over legitimate authors on their industry-dominating online bookstore.

If you are (super) charitably inclined towards Bezos and team, you might characterize Amazon’s attitude as one of benign neglect to all the counterfeit books running rampant on the website. A fairer reading, though, would conclude that Amazon bears some civil if not criminal responsibility here, that the thievery they allow “is not really negligence on Amazon’s part. It is the company’s business model.”

Basically, The NY Times is accusing Amazon of being a slightly updated and more upscale version of Pirate Bay, the rogue Swedish website that would allow any cracked videogame or stolen content or counterfeit software app to be put up for download on its site. Worse, of course, Amazon is making hundreds of millions of dollars selling the counterfeit merchandise, as opposed to being engaged in free “performance art” as claimed by Pirate Bay.

So just to be clear … this article rings totally true to me.

I think that Amazon is a monopolist that routinely abuses its market position in exactly the way this article suggests – not as an accident, but as part and parcel of a rapacious business strategy.

But I also have to ask myself … why am I reading this article now? why does it seem like I am being told how to FEEL about Amazon in this article?

It raises the narrative hackles on my neck when I see a writer say “Lives depend on it.” in the opening paragraph about an online bookstore and their third-party distributors. I mean … if lives truly could be saved or lost in your use of an anti-microbial handbook, are you buying a discount copy from UsedText4u? Are we really saying that Amazon is, to use DoublePlusGood DemSocTalk, “putting lives at risk” by letting third-party distributors sell books without checking in advance – not in arrears or after complaints, but in advance – the provenance and quality of those books?

In fact, yes, that is exactly what this article is saying.

Setting up a quick process for authors and publishers to take down counterfeit books (Amazon’s Project Zero) is “an insult”. Yes, an insult. “Why should we be responsible for policing Amazon for fakes?” he said. “That’s their job.”

Again, I am NOT saying that nothing is wrong here. There is CLEARLY a problem here, and I TRULY feel bad for the authors/publishers of this book and every other book that’s being counterfeited or “summarized”. I am ANTI-Amazon, not pro-Amazon.

But this is Fiat News. This is an author who does not trust the reader to come up with the right conclusion, but believes it necessary to “shape” the reader’s “journey” through this story arc.

Barf.

The Fiat Newsiest part of this article? The title.

What Happens After Amazon’s Domination is Complete? Its Bookstore Offers Clues

There is nothing in this article other than a damning critique of the online bookstore. Nothing. The author, David Streitfeld, has written (and written well) an investigation of the bookstore’s business practices. Not to be outdone, however, the headline editor decides that this is not enough, that to fully communicate the horror that is Amazon we must extrapolate from the bookstore today to ALL of e-commerce tomorrow. Again, there’s absolutely none of this in the text of the article. But who reads the text of an article these days, anyway?

I dunno. At this point maybe I’m seeing fiat newsy ghosts and ulterior narrative intent even where they don’t exist. Maybe I’m so sensitized to the whole journalist-as-principal thing that I can’t read straight anymore. And I really am anti-Amazon.

But this is a hatchet job.

And I see this sort of writing EVERYWHERE.


We Didn’t Say it WASN’T a Press Release

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.


Discretionary Consumption Becomes Law In The Land Of Lincoln [Benzinga via Morningstar]

There are a couple reasons I’m intrigued by this story ranking so high on the Zeitgeist today. The first one is that weed stocks have been remarkably resilient as a part of the financial media Zeitgeist. My suspicion is that this is simply being driven by clicks, and if you write about weed and weed stocks, you’re going to get those clicks in ways that writing about, say, Clorox wouldn’t get you. Doesn’t hurt that Motley Fool’s business model, whatever it was originally, is now basically pitching investments cannabis ideas to your boomer relatives on Facebook, either.

But I’m also fascinated by how often these Benzinga articles keep ranking as highly as they do. Every one we see is syndicated through Morningstar, reads like a news article, transitions to an obvious pitch, and never really discloses that it was really just a press release disguised as news. Is there any chance that the average person researching mutual funds on Morningstar.com, would know that? It’s really misleading, and really disappointing.

You rarely see a They Live meme-worthy transformation of newsy-looking content to pure pay-to-distribute opinion journalism in the course of a single piece, but well, here we are:

I suppose it goes without saying, but “Why am I reading this NOW?” should be your go-to on just about any site that syndicates content like this as news, sight-unseen. Add Morningstar to that list.

The ANDs of Asylum

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. On the weekend, we leave finance to cover the last week or so in other shifting parts of the Zeitgeist – namely, politics and culture. It’s not a list of best articles or articles we think are most interesting … often far from it.

But these are articles that have struck a chord in narrative world. 


Bringing the Border to the Front Range [Boulder Weekly]

Increasingly rare, but powerful even so, are pieces which demonstrate high connectivity in narrative structure not because of their adherence to a particular common narrative, but because they connect otherwise disparate language with their own familiar language. It is the power of AND, a thing that most on-narrative journalism and writing misses, so caught up in hewing to some particular interpretation of facts.

This is one. It does not shy away from discussing conditions of detention facilities at the border.

AND it does not shy away from discussing an influx of asylum-seekers that is not a fantasy.

AND it tells both the stories of those who fear the current administration’s policy’s effects, and those who admit that, under some definitions, it is working.

The piece is feature journalism. There are opinions, affected language and structural decisions that convey a view in this piece. But broadly? This is gyre-closing, not gyre-widening work. No, it’s not about always naively presenting ‘both sides’. It’s about remembering that most of our complicated issues warrant far more ANDs.

Zeitgeist Narrative Map – Week of June 16 in Review

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.

This is the map that links them all together for the week gone by.


Source: Quid, Epsilon Theory
  • The week’s macro focused news (NE quadrant) emphasized the Fed above all – for obvious reasons
    • We note, however, that China and trade were never far from the language used to discuss Fed policy
  • Language relating to Iran and oil prices was more connected than we would have expected. A little drilling down demonstrates that there is some active linking of ‘geopolitical risk’ and ‘wag the dog’ narratives around China, Iran and easy Fed policy
  • Beyond Meat’s adopted taxonomy is not even part of the go-go growth language cluster (NW quadrant). It’s in pure pitch-to-retail land (SW quadrant), through and through, a la Tesla. Proceed with caution.
  • As with almost every other network we observe, education and health care / health care cost-related language remains central to almost every graph
  • We were surprised to see Slack as disconnected from the rest of the language we would otherwise have expected to be related – whether growth or in retail-friendly momentum language – but that’s exactly where it was. Alone and on its own with only limited connection to any market narrative.
    • We are not sure what this says about the IPO frenzy or Slack as a business, but it isn’t being connected to bigger ‘thematic’ market commentary in the way other IPOs in the last year have

That Time I Bought Blockbuster Debt

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.


GameStop Wants to Be the ‘Local Church’ of Gaming   [Fortune]

“We had a massive diversification strategy [previously], but the new management team, under George Sherman, our new CEO, is myopically and maniacally focused on gaming,” he says. “We need to…focus on becoming a cultural center for gaming….If [E3] is the Vatican [of gaming], why aren’t we the local church?”

“Something Wall Street doesn’t understand is lower income gamers are a massive, massive audience and GameStop does a yeoman’s service in serving that customer,” he says. “That customer typically pays in cash. That customer doesn’t have massive bandwidth in their home. That customer is a value shopper.”

– Frank Hamlin, Gamestop EVP

That customer also plays Fortnite for free.

The worst investment I ever made in my hedge fund – and by worst investment I mean by an order of magnitude – was buying Blockbuster junior debt. Sure, we bought it at a really steep discount, so that it was yielding something like 25%. Sure, we “did our homework”, as our analysts constructed beautifully detailed cashflow models and projections. Sure, I talked myself into believing that Blockbuster could construct a new narrative about its future, as I “sat down with management” for the umpteenth time and they demonstrated their Netflix-beating streaming app.

I think they made three quarterly payments on the debt before it all came unglued and Blockbuster filed for bankruptcy. Carl Icahn, who owned a lot of equity and was a big reason why we thought this could work, ended up controlling the senior debt, too, and pushed his liquidation plan through. The junior debt was totally wiped out.

What’s the biggest lesson I learned, other than it’s not enough to be in the same general vicinity as Carl Icahn, but that you better be in exactly the same security with exactly the same seniority or you will get fucked?

Secularly declining companies ALWAYS run out of time.

Management is not lying to you. It’s probably a really good plan. It could probably work out fine … IF they are given enough time. But they won’t be. Particularly when it’s the second turn-around plan.

There are just too many Carl Icahns out there.

See, Carl Icahn doesn’t care about The Company. He doesn’t care about The Plan. He cares about His Money, and he knows that it’s a Big World with lots of opportunities for His Money. So what is Carl Icahn’s attitude and message to every management team he’s ever been involved with?

Tick-tock.

I say this with admiration, not as a slight, as there are so many valuable permutations to both understanding this investment perspective in others (play the player, not the cards!) and adopting this investment perspective in myself (opportunity cost is everything!).

It was one of the most expensive lessons of my investing career. And worth every penny.


Democracy Dies with Dancing


Qatar, a country without a free press, hosts a D.C. party celebrating…the free press [Washington Post Magazine]

When a sitting president repeatedly calls your industry the ‘enemy of the people’, I think you can be forgiven some dramatics about the importance of and threats to mass media outlets. Newspapers and cable TV news are not ‘the press’. although they constitute a meaningful portion of it, so there’s some abstraction being done here, but again, not inappropriately so. At least in my judgment.

AND I think that a lot of the reason for the newfound religious belief in the importance of the first amendment among some press types has more to do with opposition to a deeply disliked and antagonistic president than it does with any sort of widespread passionate, principled belief in the fundamental value of freedom of expression. To wit, this article sends a journalist into a Washington D.C. party sponsored by notorious journalist-squelcher Qatar. Hilarity ensues.

Utter horseshit, of course. I’m not a media member in any accepted sense of the word, but even I know that Qatar routinely shuts down critical media. You’d have to be living under a rock in the industry not to. But in a world of narrative, it’s important to drape our preferences in the most politically acceptable and emotionally charged memetic impulses available to us. We’re banking the unbanked! We’re protecting the poor students punitive damages would adversely impact! We are crusaders for free speech!

Y’know, unless there’s a good DJ.

The Not-So-Much War

Hedge funds and private-equity funds face tug-of-war over talent [Business Insider]

This blurb is from a BI daily round-up piece – if you’re a BI subscriber (LOL) you can access the full bit from the link.

The long and short of it is this: calling the fight between PE/VC and Hedge Funds over talent in 2019 a ‘tug-of-war’ is like calling the USWNT group stage match against Thailand last week riveting sports entertainment. I’ve been asked for advice from a lot of soon-to-be-alumni from my own alma mater over the last few years. I’ve done quite a few interviews of prospective students, too. It has been years – legitimately years – since I’ve heard the words “banking” or “hedge fund” in any of those conversations.

Public markets active management professionals are fighting a valiant rearguard action in narrative space (as they are in AUM space), but it’s a sure loser; that is, until the next liquidity crunch coincides with actual marks-to-market that remind us all what some of those ’06 vintage buyout or early 2000s VC funds looked and felt like.

I wouldn’t hold my breath. We’ll get our adversely selected candidate pools and like it.

Zeitgeist Narrative Map – 6.14.2019

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 this is the map that links them all together.


Source: Quid, Epsilon Theory
  • Usual mix of core topics in financial media today, although extracted ngrams from the commentary cluster have tended toward terms like ‘defensive’, ‘bearish’ and ‘downside.’
  • Commentary is more closely related to the Fed Cut discussion language, indicating what we think is greater attention to these public market concerns than the more positive tech/health care/private equity chatter on the right hemisphere of today’s narrative map.
  • IPOs have faded from the radar a bit from summer in terms of quantity, but discussion of them is still intensely connected to the narrative of markets from a linguistic perspective.
  • Privacy and Big Tech break-up language, especially from the campaign trail, is starting to filter a bit more into financial media. It’s a narrative we’ll have our eye on.