Riding the Cyclone

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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.


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Pirate Bay

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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.


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

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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.

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The ANDs of Asylum

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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.

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Zeitgeist Narrative Map – Week of June 16 in Review

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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
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That Time I Bought Blockbuster Debt

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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.


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Democracy Dies with Dancing

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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.

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The Not-So-Much War

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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.

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Zeitgeist Narrative Map – 6.14.2019

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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.
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Victims of Success

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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.


Beyond Meat’s stock falls after former investor Tyson Foods announces plant-based nuggets [CNBC]

Of all the last couple years’ IPO run-ups, Beyond Meat’s is the one that feels most to me like vintage ’90s. The narrative power of Unknown Growth Potential! is so strong in a largely growth-constrained world that we’re almost all willing to take a small gamble on it, or else bet that others will do so, which works out to the same thing.

So I don’t begrudge those that are trading the thing with those ideas in mind, although I have neither the skill nor attention span to attempt it myself. But one starts to get the impression that there really are true believers here, not just in the long-term potential of meat alternatives (which does seem somewhat inevitable), but in the long-term prospects of the first company to have success marketing an edible beefesque recipe of heavily processed pea protein, canola oil and laxatives. Even among the sell-side, there are those who believe the fledgling franchise ought to be valued in the same range as the largest long-time producer of America’s favorite protein.

But if you’re betting on growth, remember: you’re betting on IP or you’re betting on a brand. It makes more sense in tech-land, which is where you usually see these growth stories, where they can platforms that establish meaningful switching costs and capital-driven barriers to entry. Tyson gave the market a (very) little reminder that that kind of belief in the IP of processed packaged food is perilous. These are not hard-to-figure-out ingredients, folks. Beyond that, the last several years have given us frequent reminders that brand sometimes doesn’t mean what it used to among American food consumers. Somehow, the narrative for Beyond Meat seems to have survived these reminders thus far, perhaps because this is the trade that allows investors smitten with the idea of meat alternatives to view it through a lens of abstraction that makes the ‘idea’ investable as a single stock.

That doesn’t mean you have to be a skeptic on the idea of plant-based meat analogs, much less a fellow like the above-pictured Rick Wiles, who believes that the competing Impossible Burger is part of a satanic plot to create a race of soulless creatures. But if you choose to invest on the basis of a strong narrative – an entirely justifiable approach in many circumstances, we think – take care not talk to yourself into believing your own stories. The longer you dabble in this kind of speculation, the easier it becomes.

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Live from Potemkin

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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.


Social network under fire but staffers show no signs of pressure [Fox News]

Most Potemkin Villages are not about malicious deception.

In other words, most are not displays intended to convey a lie that is only recognized as such by one party, like the imaginary town of Rock Ridge, built to prevent the would-be atrocities of the Number 6 Dance later on. On the contrary, most of these elaborate set-pieces are lies constructed to maintain common knowledge that is convenient in one way or another to everyone. Everyone walks away getting to tell the story they want. It’s a sort of clear eyes / full hearts thing, but for pathological liars and politicians (your brain probably just inserted the Mark Twain quip that felt too on-the-nose to me here, so just pretend I wrote it).

But when that common knowledge starts to break down, you start seeing weird things. This article is a weird thing. The author flits effortlessly between genuine impressions that employees are ‘happy’ and skeptical side-eye at tough topics being brushed off. If the whole piece seems awfully confused about how much bullshit Facebook is shoveling and what can be surmised from that, well, that’s because it is.

I don’t know how the Big Tech narrative has changed since we observed that “FANG” had become a negatively tinged concept, although we will be spending more time on the topic. But in the widening gyre of 2019 US electoral politics, having one armed tied to the “biased opponents of free speech” narrative and another to the “excessively powerful corporations representing interests of the ultra-wealthy” narrative doesn’t sound like a recipe for a fun few years.

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The Most Valuable Commodity I Know

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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.


Commentary: Sell-side research struggles to show its worth   [Pensions & Investments]

It’s been more than a year since the European Union’s Markets in Financial Instruments Directive II regulation forced asset managers with EU interests to unbundle research payments from the trading commissions they pay to brokerages.

So far, what we’ve learned from the new transparent pricing model is that the availability of research significantly outweighs the buy side’s need for it. Look no further than BlackRock slashing its Europe, Middle East and Africa research budget by 60% in 2018, or the Financial Conduct Authority’s claim that MiFID II saved U.K. equity investors more than $200 million in its first year alone.

Now, the regulation is colonizing the United States. U.S. asset managers from Wellington Management, T. Rowe Price and Invesco — each responsible for about $1 trillion in assets — have lobbied U.S. regulators to bring MiFID II ashore.

What’s the most valuable commodity Gordon Gekko knows?

Information.

How valuable is Wall Street research? How much information does Wall Street research have?

LOL

The MIFID II regulations in force throughout Europe – which require banks to charge real money for their research and not allow them to “bundle” research with higher trading costs borne by the end client – have been as much of a disaster for the banks’ business models as negative interest rates. Well, maybe not THAT bad, but pretty darn disastrous. Every sell-side research department was always a loss-leader. Now they are loss-disasters, with zero positive externalities. Now they’re just an endless black hole of costs. So they’re being slashed to oblivion.

What MIFID II revealed is that sell-side research just isn’t worth much. It’s just not. And now it’s inexorably coming to the US market, which means that every sell-side analyst on the Street today needs to be polishing their resume.

As if they weren’t already.

Why is sell-side research valueless? As Gordon Gekko would tell you, because it contains no information. See, there are two and only two buy-side use cases for sell-side research.

  1. To crib the spreadsheet model and put it in your own report.
  2. To get access to management at conferences and site trips.

That’s it.

So now that I can download a spreadsheet model for every company from FactSet or Bloomberg … now that management has zero desire to appear, much less say something with information, at investment conferences … well, you see where we’re going here.

Oh, you thought someone cared about the OPINION of the sell-side research analyst? You thought someone cared about the ANALYSIS of the sell-side research analyst?

Bwaahahahahahahaha. Hoo-boy, that’s a good one.

As the old (and correct) buy-side saying goes: In a bull market you don’t need an analyst, and in a bear market they’ll kill you.

What is the function of sell-side analysts today? To create stories that drive trading volume. To support those stories by maintaining a suitable media presence. It’s a miserable job. Because you are sooooo replaceable. And you’re a cost-center for the mothership, no different than the IT support department. Which you may have noticed was outsourced years ago.

Sorry, guys, but it’s going to get worse – a LOT worse – when MIFID II comes to New York. Which it is.

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Americans Rely on Public Restrooms

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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.


Americans Rely on Public Restrooms  [Press Release]

This is among the weirdest press releases I’ve ever seen. Any time you kick it off with stats about the relative public bathroom proclivities of different demographics, you’ll make the list.

So why publish a press release like this? Like any other PR piece – even one as weird as this – the entire aim is to create common knowledge, to make the reader change what he or she believes everyone else knows about a topic by presenting something as news. And yes, that’s true for the non-bathroom things people do in the bathroom, too. This manufacturer of commercial bathroom fixtures wants everyone to know that everyone else knows that people like to go to the bathroom and cry sometimes.

All that being said, I will leave you, dear reader, to consider why crying in a bathroom stall is so connected to financial news.

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Big Tech Has Lost Control of Its Cartoon

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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.


Calls to break up Amazon, Google, Facebook and Apple get louder    [c|net]

These corporate behemoths, which are all among the most valuable companies in the world, are now facing a much greater threat that they’ll be broken up. Facebook could be forced to get rid of Instagram and WhatsApp, Amazon might divest Zappos and Whole Foods, Google may lose YouTube, and Apple could part with its App Store.

When I say “this is happening”, I mean that it’s happening in narrative-world. For anything to happen in real-world, you’ll have to fight your way through the phalanx of lobbyists on K Street and the legion of sleeper cells in every Congressional staff and administrative agency.

But there are two narrative structures that have grown to a size and a level of cohesion that makes them impossible to be politically ignored.

One is the student loan “crisis”. The other is the Big Tech “monopoly”.

And yes, I’m putting those words in air-quotes, because the first isn’t really a crisis and the second isn’t really a monopoly. But if you’ve learned anything from Epsilon Theory over the years, I hope you’ve learned this …

The power to name things is the most awesome power in human society. In Biblical terms, it’s logos … it’s the Word. In modern terms, it’s narrative … it’s the Cartoon.

Big Tech has been named. It’s been named by astute political entrepreneurs who know the power of naming. That name is “monopoly”.

And we all know what you do with monopolies, right?

Put another way … Big Tech has lost control of its own cartoon, just like Hillary did in 2016. And we all know how that turned out.


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Vanguard Doesn’t Care About Your Trade War

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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.


China’s Ant Financial, Vanguard form Shanghai-based venture: government records    [Reuters]

“Even though no one knows specifically what they’re going to do, I think it stands to reason that Vanguard will bring their expertise in running passive portfolios and Ant will bring their expertise in placement and distribution,” he added.

Vanguard isn’t waiting around for a Chinese trade “deal”.

Vanguard isn’t clutching their pearls about Chinese IP “theft”.

No, Vanguard is going to do what they always do … they’re going to obliterate their competition with the pricing power that comes from collaboration with every government’s intense desire to transform active capital markets into a passive political utility.

Vanguard is the Killer Rabbit. And yes, there’s an Epsilon Theory note about that.


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Are You Now, or Have You Ever Been Pro-China?

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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.


Bannon: Biden must release tax returns to address China connections   [NY Post]

“We have to see Joe Biden’s tax returns because we have to see if Joe Biden was a financial consultant to [the fund] or an adviser. Biden has got to answer some basic questions: if he’s been compromised by the Chinese Communist Party? What was his involvement during the Obama administration?” 

I know, I know … it’s impossible for a thinking human being to believe that a Trumpkin would demand that a politician must show their tax returns.

I know, I know … it’s impossible for a thinking human being to believe that a Trumpkin would accuse a politician of harboring secret financial ties to a hostile foreign country.

Well, believe it.

What’s next? I’ll tell you what’s next. Bannon and the rest of the America First brigade (which includes a LOT of bedfellows you see all the time on CNBC, like Kyle Bass) are going to go full-McCarthy. They’re going to have a “list”. They’re going to accuse anyone and everyone of “treason”.

This is part and parcel of the China narrative transformation that Rusty and I have been talking about for a month now: the US-China narrative is now a national security narrative, not an economic trade narrative, and you can’t walk that narrative back until after the 2020 election.

It’s not a secret plan.

“The Democrats, the longer they talk about identity politics, I got ‘em. I want them to talk about racism every day. If the left is focused on race and identity, and we go with economic nationalism, we can crush the Democrats.”
Steve Bannon, from his August 16 exit interview with Robert Kuttner in The American Prospect.

That’s from Always Go To The Funeral. It’s how Nixon and Agnew got away with this crap in the 1972 re-election campaign, and it’s how Trump and Bannon will get away with this crap in the 2020 re-election campaign.


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Sucker.

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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.


Harvard Course Teaches Rich Millennials How to Do Good (and Make Money)   [Bloomberg]

On a crisp morning last October, a few dozen students with wildly diverse backgrounds and expertise filed into the red-brick building of Harvard University’s Kennedy School. Three things united them: they were young, they wanted to do good and they were all staggeringly wealthy.

The group was attending a joint course run by Harvard and the University of Zurich, in collaboration with the World Economic Forum, called “Impact Investing for the Next Generation.” In this context, that generation means the heirs to some of capitalism’s greatest fortunes. Participants had to pass an interview before paying up to $12,000 for a week of classes in the U.S. and Switzerland, not including airfares and board. A more intensive related course costs $58,000.

The program has barely been advertised since its founding in 2015 and word is spread through old-money networks and among European royalty. Alumni include Chung Kyungsun, grandson of Hyundai Group’s founder, and Antonis Schwarz, who came into his fortune aged 16 when the drugmaker his grandfather founded was sold for 4.4 billion euros ($5 billion).

“Alumni”.

LOL.

True story – when I was a grad student at Harvard in the 1980s I started a company called University Seminars, where I sold week-long “Leadership Conferences” to East Asian CEOs and rich kids like the Hyundai scion pictured here. I’d hire HBS profs at $3k per afternoon to give a talk they’d given 1,000 times before and toss in another $2k if they showed up for a dinner. I’d rent a block of rooms at the Boston Ritz and get some tour buses lined up. I’d charge $25,000 for the week (airfare not included) and split the profits with whatever degree-granting school or department was hard up for cash.

It wasn’t a degree, of course, but if you can grant a degree you can also grant a “certificate”. Both have an official Harvard seal, so …

Congratulations on graduating from the Leadership Conference at the Harvard School of Education! Of course it’s signed by the Dean! Yes, certainly you should put this on your wall and your resume!

And yes, I had an “Alumni Club” in four countries.

See, the Harvard budgetary motto is “every tub on its own bottom”, which means that non-professional schools like the School of Education are forced to scrape for every dime, while the professional schools – Harvard Business, Harvard Law, and the Kennedy School – live as large as they wanna live. It’s a structural engine that creates haves and have-nots within the walls of a university edifice that looks to an outsider like it’s uniformly well-heeled. It’s not.

The fact of the matter is that while every program and school at Harvard (and every other university I’ve ever been associated with) is on the make to some degree, at least the non-professional schools have some sense of shame about the whole certificate program endeavor. They see it as a necessary evil to keep up with the Joneses.

The professional schools on the other hand … they ARE certificate programs. Pimping out Harvard’s reputation to maximize revenue isn’t a shameful secret for HBS. It’s their entire business model.

What happened to University Seminars? The HBS prof running their “executive education program” in Indonesia got wind of me talking with some Djakarta CEOs about a non-biz school certificate program, and he sounded the alarm. A month later the HBS dean met with the Ed School dean in Derek Bok’s office, where HBS agreed to pay the Ed School a (small) slice of the HBS certificate program revenues if the Ed School shut their leadership program down. Internal to HBS, all of the moonlighting profs were read the riot act and told to keep their executive ed lectures on the HBS side of the river.

And that was that. It was a good gig while it lasted, and a great lesson in the way of the world.

BTW, the World Economic Forum … you know, the group that organizes the Davos conference and co-sponsors this Kennedy School program on “Impact Investing” … Klaus Schwab started WEF in 1987, the same year I started University Seminars. You’ll read on Wikipedia that Schwab started this as a non-profit and had glorious altruistic motives from the outset.

LOL.

If you haven’t read my note on the credentialing value (and abuse) of the modern higher education system, it’s worth your time.

And if you haven’t read Rusty’s note on the Myth of College, it’s really worth your time.

Clear eyes and full hearts, friends.


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The Weekend Zeitgeist – 6.9.2019

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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. 

The Puzzle [The Players’ Tribune]

It is encouraging to see a piece that doesn’t treat strength and vulnerability as dichotomous at the top of the Zeitgeist.


From the Greeks to Instagram: The Secret History of the Flower Crown [Jezebel]

I am not the target audience for this piece, or perhaps much that gets published at the blog that, like Deadspin, was among the Gawker properties that survived (sort of) the wrath of Peter Thiel and Hulk Hogan (if “Peter Thiel and Hulk Hogan” sounds like the start to a decent joke instead of something you remember from a few years back, consider Googling it).

Still, it is an interesting brief aside into the history of one particular symbol. It highlights the capacity of the arts and entertainment to provide long-term support to narratives, the necessity of the occasional iconclasm, and the inevitable co-option of particularly effective symbols to serve even more abstracted ideas. Not deep, not broad, but an interesting weekend read.

As to why it sits at the top of our Weekend Zeitgeist – the most linguistically connected articles published in the world in the past week? Gender and sex – and the language used to discuss them – are integral to the Zeitgeist in 2019. Here is our map of their connectedness to all non-financial news in the last week alone. They are both central and connected to almost all other topics and language/meaning-based clusters.

Source: Quid, Epsilon Theory

Walter Carpenter: The workers behind the tourism dollars [VT Digger]

Since the Reagan Revolution, certain words have been banished from the American political lexicon, tarnished as they were with associations with communism or socialist policies. Among the simplest, and most powerful?

Workers.

It’s not a word even Obama used all that much. He preferred ‘folks.’

Trump and most others adopted less socialism! meme-sensitive variants like ‘hard-working Americans’ or ‘blue collar Americans’ or ‘regular, everyday Americans.’

Why was this connected to so many articles? Why did it sit at the top of the Zeitgeist? Because the language of socialism, of talking very specifically about workers and their lives, is no longer off-limits. Sure, editorials like this would have found their way into plenty of Vermont newspapers in the past.But there’s no way in hell they would have been among the top 5 most connected to all published articles by language.

Here are the socialism-related articles (in bold) against the full network of non-financial articles.

Source: Quid, Epsilon Theory

For more about what we are observing here, be sure to keep up with the ET Election Index.


The Democrats Discover the Supreme Court [The Atlantic]

Despite its third foundational principle (in which it rather delightfully claims to be the organ of no party or clique), the Atlantic probably sits on the periphery of the 10 most influential missionaries of left-leaning politics in the US. Like many similar publications, it is an essay, analysis and opinion journal. Ordinarily I’d call this paragraph an exercise in Fiat News, but the article is obviously just a collection of the author’s opinions, and if you expected otherwise, it’s probably your own damn fault.

Regardless of how you feel about this policy idea in particular, there’s one word that should always trigger your “Why am I reading this now?” impulse. whether you see it in true news or opinion pieces: moderate. Conservative journals usually prefer the term mainstream to validate and imply the accepted nature of their opinions – National Review used the term in 320 articles in the last year alone. The trigger should be the same. There is rarely a case in which these words will be used, especially as much as moderate is in this piece, that is not intended to shape common knowledge about what everyone thinks everyone thinks. And it usually means that the thing or policy about which the word is being used, well, ain’t, although it’d sure be nice if everyone thought everyone thought it was.


The Anti-College Is on the Rise [New York Times]

Regular readers will not be surprised that this is at the top of the Zeitgeist. We’ve written about related issues, too.

The problem is the same problem faced by the federal reserve and by portfolio managers and just about everyone else. When you optimize for two objectives, you will usually solve for one…or none at all. The post-secondary system has tried to solve for producing rich, broad, civil-minded liberal education on the one hand, and vocational training on the other, the latter becoming a marketing necessity throughout the 20th century. What they ended up with was neither, and a powerful credentialing cartel.

For my part, initiatives like the above are interesting, and seem to be searching for reproduction of a purely educational mission. I have no aversion to them, because that is a thing that a healthy liberal society should make available to its citizens. I also have no faith that they will do anything to tear down the credentialing problem embedded in university education.

But I suppose not everything has to. Optimizing for one objective – and achieving it – is rare thing worthy of admiration.

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The Existential Narrative

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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.


How Our China Trade War Could Become a War War   [Bloomberg]

Echoes of D-Day in the China-U.S. Conflict

Seventy-five years ago today, Allied troops landed in France, beginning a campaign to destroy Nazi Germany. It’s a decent moment to consider how such a situation came to be and how something like it might happen again.

Noah Smith points out that, just 34 years before D-Day, Britain and Germany were such close trading partners that war between the two was almost unthinkable. World War I happened shortly thereafter, and out of the ashes of that nightmare grew the Nazis and World War II. Today the relevant players are the U.S. and China, seen as so close economically they could never go to actual war. But the current trade conflict could be the start of a long process driving the two countries into separate economic spheres, Noah writes, making armed conflict likelier.

For some time now, we’ve been saying that any shift in the Trade narrative away from economic issues and toward national security issues would be highly problematic for a market-friendly resolution in US-China negotiations. Why? Because the political stakes are much higher for both Trump and Xi in a national security game of Chicken than they are in an economic game of Chicken. It is much easier to be “the chicken” in an economic game and claim some sort of face-saving feature than in an national security game, so the latter is almost always a protracted affair of brinksmanship and high stress.

It’s happening.


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Send Lawyers, Guns and Money

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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.


Tech Giants Amass a Lobbying Army for an Epic Washington Battle   [New York Times]

Catlin O’Neill, right, listening to Facebook’s chief executive, Mark Zuckerberg, testify before a House committee on the protection of user data last year. Ms. O’Neill is now director of United States public policy for Facebook after serving as Speaker Nancy Pelosi’s chief of staff.

Yes, you’re reading that right.

Nancy Pelosi’s former chief of staff just signed on as Facebook’s chief lobbyist.

Last month, the industry lobbying group, the Internet Association, which represents Amazon, Facebook and Google, awarded its Internet Freedom Award to Ivanka Trump, the president’s daughter and White House senior adviser.

Yes, you’re reading that right.

Big Tech just gave their highest “award” to Ivanka Trump.

The head of the Justice Department’s antitrust division, Makan Delrahim, was paid as a contract lobbyist by Google in 2007. He is facing pressure to recuse himself if the department pursues an investigation of the company.

Yes, you’re reading that right.

The head of the DOJ’s antitrust division is a former Google lobbyist.

I’ve written this 100 times so far this year. Looks like I’ll write it 1,000 times more.

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


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