The Zeitgeist – 5.6.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


May 6, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory


Everything You Missed At This Weekend’s Berkshire Hathaway Meeting [Fortune]

Warren Buffett and his business partner Charles Munger held court for more than five hours at the Berkshire Hathaway annual meeting, fielding questions from shareholders and imparting their views with their usual wisdom, wit and down-to-earth personalities.

It’s like in Frank Herbert’s Dune books where Leto Atreides ultimately becomes a near-immortal sandworm.

The transformation of Warren Buffett into a near-immortal cartoon is now complete.


Coursera Gets $103M in Series E from New and Existing Investors [Press Release]

Since raising a Series D in June 2017, Coursera’s learner base has grown from 26 million to 40 million. The 3,200 courses and 310 Specializations available on the platform are increasingly stackable, enabling learners to acquire new skills and earn valuable credentials while also building a pathway towards a full degree. The portfolio of degrees on Coursera has also grown to 14 world-class degrees from the top universities in high-demand areas of business administration, data science, computer science, and public health.

The business model isn’t about knowledge, it’s about credentialing.


How To Solve America’s $100 Trillion Problem Of Wealth Inequality [Forbes]

It turns out that maximizing shareholder value as reflected in the current stock price was not only bad morally and socially: it was also bad economically and financially. It doesn’t work, even on its own terms.

Why have so many of the biggest and most respected companies in America gotten involved in wealth extraction on such a massive scale? Why is it still tolerated by regulators?

You’re going to see a lot more of this sort of stuff going into the 2020 elections. It’s all part of the Zeitgeist to transform capital markets into political utilities, and it’s all based on that final, chilling question: “Why is it still tolerated by regulators?”

As if the core small-l liberal ideals of free markets and free elections were things to be doled out from a central pot.

As if our liberty extends only as far as the State tolerates it.

You think that this is the path to defeating the Oligarchy, but I tell you it only makes it stronger.


IPOs bring tax jackpot for California; can lawmakers resist? [Fox Business]

The state has a projected $21 billion surplus in the first year of Newsom’s administration, and that’s without factoring in money from the IPO wave. Former Gov. Jerry Brown began his administration with a deficit, and he frequently clashed with fellow Democrats who wanted to spend more while he wanted to save it.

As he left office, with the California economy humming, Brown warned Newsom might have a tough time convincing the Legislature not to drastically increase spending.

Did you know that California has a budget surplus? I didn’t.

The American entrepreneurial spirit and its resulting productive growth can survive ANYTHING … even the doubleplusgood CalSocs in Sacramento … even the Insane Clown Posse in the White House … even the Mandarins at the Fed.

It’s the only thing that keeps me from slipping into political despondency, and the next subject of a long-form ET note, “A Song of Ice and Fire”.


Junk bond market rally turns Chinese borrowers more aggressive [Reuters]

A surge in junk-rated bonds has made Chinese borrowers more aggressive, with select ones succeeding in cutting their costs for repaying bonds early, a change from standard practice that worries some investors and bankers.

Welcome to the Cov-Lite World.

Resistance is futile.


Market Fallout in Charts: Investors React to U.S. Tariff Threat [Bloomberg]

Stocks Slump as Trump’s Threat of New Tariffs Scares Investors [New York Times]

US-China Trade Talks Tensions Escalate As Trump Threatens 25% Tariffs On $200B Goods [IB Times]

Here’s the tweet that got everyone so exercised.

Wait … you mean that’s not the tweet?

No, I’m pretty sure it is. Or rather, from an Epsilon Theory perspective this tweet about the Kentucky Derby is exactly the same thing as the tweet about China tariffs.

If you’re buying or selling the market because the China deal is on or because the China deal is off, you’re no different from everyone who had a ticket at the Derby.


The Weekend Zeitgeist – 5.4.2019

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. 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. 


May 4, 2019 Narrative Map – Non-Financial Articles

Source: Quid,. Epsilon Theory

The folly of raising the gas tax [Washington Times]

I think the reason that infrastructure is such a fascinating recurring topic – beyond the fact that it is relatable on an everyday basis – is that it’s so surprisingly subject to cartoonification, or at the very least oversimplification. It’s also (relatedly) a reasonably strong litmus test for your political affiliation. I give you the Parkway Postulate:

As the length of an infrastructure editorial approaches 1000 words…

  1. The probability that a progressive author / board will use the word “crumbling”;
  2. The probability that a libertarian author / board will use the expression “private roads”; and
  3. The probability that a conservative author / board will refer to “bike lanes”

All approach one.


The ‘Valley Girls’ of the Rio Grande [New York Times]

Immigration narratives are complicated and perilous, mostly because they call upon powerful memes. Safety! Liberty! Rule of law! Humanity!

When public personalities express an opinion on immigration in the United States, it is usually a way to signal to others which of those legitimately valuable principles they most wish to attach themselves to. There is little room for nuance. No one cares what your actual view is, because they’re going to auto-tune you into a few pre-set classifications anyway. In the Widening Gyre, it is politically useful to be able to pigeon-hole Americans into being either an Open-Borders Freak or a Closed-Borders Nationalist. Why else do you think this story rose to the top of the Zeitgeist, as one of the most linguistically interconnected of the more than 428,000 news / feature / opinion articles in our query this past week?

Yes, like most feature journalism, this NYT presentation is transparently Fiat News. But The Valley, like most land borders, IS one of the most unusual places in the world. You will drive down one road and feel unfailing optimism, and down another and feel an unbearable, oppressive weight. It’s not a place that allows you to keep a pigeon-holed view of anything for very long. Spend time there. Meet the rough and beautiful people who are building lives and families there. Meet some of the people who are trying to ease those burdens.

If you are anything like me, you’ll come away with greater love for immigrants AND a desire to bring far more into our country AND greater love for the rule of law concerning borders.

You will also come away with even more disdain than you can imagine for the politically convenient false dichotomy between these ideas.


Get the dirt on living in the country [VillageSoup of Knox County, Maine – I think]

Renewables to Become the Norm for the Caribbean [IPS]

Surround yourself with the calmness of the forest [Murfreesboro Post]

Kit Carson: The True Pathfinder of the Frontier [Tahoe Quarterly]

Black Canyon | The Whispers of the Lower Colorado [Adventure Sports Network]

Uh…guess it’s been one of those weeks, America? Need a break?


Bian: The trouble with the ‘identity politics’ accusation [Daily Northwestern]

A second Weekend Zeitgeist theory: As t approaches one semester, the probability that at least one editorial or opinion submission to a college newspaper will include the literal transcription of the dictionary definition of a word also approaches one.


The state of the chatbot market in 2019 [Clickz]

example of an AI chatbot

A 27% CAGR? Really? Someone find us whoever’s running the book on WeWork so that we can gin up something more interesting than that.


The Good and the Bad sides of the Fintech Industry [A Press Release? I honestly don’t know]

Yeah, OK, I have questions.

  • What is this thing? Is it a press release? It looks like a press release.
  • Why is this a thing? Who are we expecting to read this, and what is the action we are trying to provoke? To send them to a blog?
  • Who are the experts being quoted here? I googled like five of the phrases in this and came up bone dry. Did the author of this press release really write his own definition for a term and then phrase it as a quote from “experts?”

  • When did we decide that we were going to give fintech a definite article? I have archaic sensibilities, so I’m still on board with The Congo and The Crimea, even if we aren’t supposed to be, but The Fintech?
  • How did this get to the top of the Zeitgeist? Let’s zoom in to see all of the articles that are adjacent to it by language. It’s that bigger green dot in the center.

Ah. Well, there’s a pitfall to similarity-based language analysis. To some extent, it is gameable. The gobbledygook grab-bag we have in this…this…whatever this article is, is just the broadly distributed content equivalent of SEO.

Yet another thing to be aware of in our consumption of news.

The Zeitgeist – 5.3.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


May 3, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Fed Reverberations: Market Starts Coming To Terms With Lower Rate Cut Hopes [Forbes]


If actual volatility is the only thing that can save us from these melodramatic analogies from people who clearly have never had children who expect a snack, I’m ready.


Ask These 10 Questions Before Investing In A Company [Forbes]

I know we give the Forbes Contributors a hard time, but it’s also important to point out those times when an article ISN’T a weird advertisement to an unknown audience wrapped in a milquetoast listicle. I mean, to be clear, this isn’t one of those times, but I want to make sure you know we agree that it would be important to point out if it were.

The most universal observation about these pieces – and frankly a lot of other white-paper-lite style content and one-off corporate blogs – is that they never seem to have the foggiest idea who their audience is. Who out there is looking for ten pieces of advice on investing in a non-public company who need to get this as the culminating pearl:


Powell’s Gut Punch to Equities May Be a Belly Rub: Taking Stock [Bloomberg]

You could go with this, or you could go with that.


Asset Managers Are More Pessimistic Than Ever on the Swiss Franc [Bloomberg]

Ordinarily I think that survey levels of “asset manager” positioning are cartoons, representations of survey methodology and underlying universe biases more than anything. That may be (and probably is) the case here to some extent, but at least anecdotally, I’m aware of at least a few macro funds with this positioning.

Leaving aside whether the article is true or whether it matters, why did it rise to the top of the Zeitgeist like this?

Here’s why:

  • It connects European currency and fixed income discussions to a growing number of articles about EM Local yield-hogging, like this one.
  • It is also connected to articles referencing “extremes” in flows and investor behavior w/r/t fixed income and currencies across other markets, including articles like this one about US corporates.
  • It uses similar language to other “safety” asset stories referencing polls and surveys (i.e. similarities in both topical language and affected usage), like this one.

SocGen’s stronger showing on capital offsets profit fall [Reuters]

Image result for snl change bank

Paul McElroy: A lot of people don’t realize that change is a two-way street. You can come in with sixteen quarters, eight dimes, and four nickels – we can give you a five-dollar bill. Or we can give you five singles. Or two singles, eight quarters, and ten dimes. You’d be amazed at the variety of the options you have…

All the time, our customers ask us, “How do you make money doing this?” The answer is simple: Volume. That’s what we do.

– First Citiwide Change Bank, Saturday Night Live (10.8.1988)


150 years ago, 12 men in Cincinnati took a chance on baseball and changed the world [USA Today]

At the very least, they changed the US, Latin America and East Asia. Although, as always, there are efforts to export and import American-born sports to new markets. The NFL has tried aggressively with the UK, for example, and the NBA has been quite successful in exporting basketball to China. But MLB has been less aggressive, and (oddly, in my judgment) less visibly interested in developing a more global audience for our one-time national pastime.

Leave it to a fan in the UK to take that burden on himself. If you haven’t been following Joey Mellows’s tour of major and minor league stadiums across the United States, I highly recommend you do so – @BaseballBrit on Twitter.


Beyond Meat opens at $46 in market debut, after pricing at $25 per share [CNBC]

So much of narrative abstraction – especially of growth narratives – is the simple act of declaration – I declare that this thing is actually THIS.

I declare that Salesforce.com is not just a UI slapped on a basic database, but a disruption in the very way America does business! How? Oh, I could give you an answer, but the only ones who’d understand it would be you and me. And that includes your teacher.

I declare that WeWork is not in the business of renting office space, but the pure and disruptive distillation of the essence of the spirit of community, now available in a convenient securitized format for your convenience.

I declare that Tesla is NOT REALLY a car company, but a…I don’t know, are we still doing the Tesla thing, guys? Guys?

It’s the same thing with Beyond Meat, which I declare is absolutely NOT in the business of selling processed, pre-packaged food products.

In a Three-Body Market, knowing what something really is is still important. Knowing that what it really is isn’t the only thing that matters is even more important.

The Zeitgeist – 5.2.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


May 2, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Facebook’s privacy push puts Messenger in the spotlight – but pitfalls abound [Fast Company]

Messaging apps are by nature places for more private interactions than open social networks. But will users trust Facebook to facilitate those experiences? And will Wall Street let it?

No and no. #SavedYouAClick


VEON Reports Good Q1 2019 Results [Press Release]

Best. Press. Release. Headline. Ever.


Building Unlisted Infrastructure Into Your Portfolio – Overcoming 4 Key Obstacles [Seeking Alpha]

Obstacles to investing in unlisted infrastructure

We see four categories of challenges that investors face throughout the lifecycle of creating and managing a private infrastructure allocation:

Constructing a diversified portfolio

Maintaining exposure

Handling the ongoing operational burden

Investing with discipline and flexibility


Each of these obstacles introduces execution risk and requires specialized capabilities to get right. Some investors have sufficient resources and skills in-house, but for those who don’t, leaning on the private-markets capabilities of an experienced third party may make sense. A skilled third party can streamline these challenges to establishing and maintaining a fully invested, diversified portfolio that is managed in real-time.

I wonder if Russell Investments is a skilled third party that can streamline these challenges for me?

Serious question, and I know that ET has a lot of readers at the asset management firms that place this sort of “content” … does this idiocy work? Ever? Does it generate a single new client or a dime in new revenue?

I’ve come to believe that hiring a team of “content specialists” and publishing claptrap like this is an intentional inefficiency. It signifies that you are such an important and well-established asset manager that you can afford to waste money publishing material that NO ONE reads or cares about.

Content placement is like the elaborate plumage of the male frigate bird. It is SO wasteful and extravagant that – in an economically perverse way – it demonstrates your evolutionary fitness.

I honestly think that’s the reason this stuff exists.


Apple eyes $1 trillion valuation as strong services, revenue forecast fuel comeback [Fox Business]


Top Apple analyst: The surge in services is not enough because 75% of Apple’s business likely to decline [CNBC]

Ditto for why the sell-side still cares about II ratings and “who’s the ax?” and all that stuff that hasn’t mattered for 20 years.

It’s plumage.


The Deadly African Virus That’s Killing China’s Pigs [Washington Post]

A deadly swine disease is spreading across eastern Asia, infecting thousands of pigs and threatening the world’s largest hog industry. Since emerging in China in August, African swine fever has been detected in neighboring Mongolia and Vietnam, increasing the chances of transmission to other countries. The first outbreak in Cambodia was reported in early April in backyard pigs, about 10 kilometers (6 miles) from the Vietnam border.

Related image

That’s through November 2018.

And this is not just a China and Vietnam thing. Here’s an August 2018 map of outbreaks in Central Europe. It’s worse now.

Related image

This is the way the world ends
This is the way the world ends
This is the way the world ends
Not with a bang but a whimper.


The Zeitgeist – 5.1.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


May 1, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Americans are spending on their dogs and cats like children. That’s a boon for Chewy [CNN]

Americans’ obsession with their pets is lifting Chewy, the online pet food and supply company.Chewy announced on Monday that it will go public. It chose a good time for its IPO: Chewy pulled in $3.5 billion in 2018, around a 65% increase from the year prior.

The Pets.com IPO in February, 2000 came to symbolize the tech bubble, and for good reason. This was a bullshit company to take public … negative gross margins, total sales of $7 million (that is not a typo) in its 12 months of operation. By November, 2000 the company was in liquidation.

Lots of people have forgotten that Jeff Bezos built Pets.com and was responsible for pushing this abomination onto the public.

I haven’t.


Wealthy California couple expected to plead guilty in college admissions scandal [USA Today]

Bruce and Davina Isackson … who have apologized publicly for their actions, have accepted deals with prosecutors pleading guilty to conspiracy to commit mail fraud and honest services mail fraud. Bruce Isackson, the head of a Bay-area real estate firm called WP Investments, has also agreed to plead guilty to money laundering and conspiracy to defraud the U.S. for deducting the payments from their taxes as charitable contributions. 

Bruce and Davina Isackson love their children. Bruce and Davina Isackson would do anything for their children. Bruce and Davina Isackson get the joke. Bruce and Davina Isackson are rich.

The problem for Bruce and Davina Isackson is that they aren’t rich enough.


Equifax survey reveals saving is a challenge for most consumers [Press Release]

Equifax Inc. (NYSE: EFX), a global data, analytics and technology company, today released the results of its annual Financial Literacy Survey, in which nearly half of surveyed adults indicated they do not have enough savings to cover at least three months of living expenses. This percentage has increased 35 percent from 2018 among respondents ages 45 to 59 – with six in 10 consumers in this age group responding they lack an emergency fund.

In addition to lacking an emergency fund and enough savings to cover at least three months of living expenses, more than half of surveyed consumers (56 percent) said they don’t have any money left over at the end of the month. And while slightly more than 62 percent of surveyed consumers have created a budget over the past year, 35 percent of surveyed consumers admitted they are not saving for retirement – up from 29 percent last year.


Texas company Tellinga turns your life into a comic [San Antonio Express-News]

Combining the fun of a comic strip with the anticipation of waiting for something special to arrive in the mail, Tellinga (as in “telling a…”) bills itself as a way to turn personal stories into unique gifts.

I actually think this looks like a cute product. But here is where we are in 2019 business plans … snail-mail delivery is now a feature rather than a bug, as it creates “the anticipation of waiting for something special to arrive in the mail.”

Tom Sawyer was a piker.


Technisys raises $50 million to continue empowering banks with disruptive tech [Press Release]

It’s hard to win Buzzword Bingo in a 10-word headline, but here you go.


Warren Buffett gets in the middle of oil bidding war [CNN]

Occidental said Berkshire Hathaway would receive 100,000 shares of preferred stock that pay a sizable dividend of 8% a year [on $10 billion]. That compares with a roughly 5% dividend on Occidental’s common stock.

Existing Occidental shareholders could have their positions watered down because Berkshire would receive warrants to purchase up to 80 million shares of common stock. The warrants have an exercise price of $62.50, compared with the current price of about $59.

I think I saw that the preferreds can’t be bought back by Oxy for something like 10 years. LOL

What is shadow banking? THIS.

Not that there’s anything wrong with it. Hey, this is Uncle Warren’s true face, and I’m a fan of authenticity in all its forms and ways. But if you think poorly of a guy like, say, Ken Griffin because you think Citadel was “bailed out by the US taxpayer”, and you don’t think EXACTLY the same about Warren Buffett and Berkshire Hathaway … then you’ve been played.


The Zeitgeist – 4.30.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


April 30, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Market `Melt-Up’ Exposes Investor Gap, Bernstein Quants Say [Bloomberg]

Part of the reason behind our narrative research effort was our observation that most investment applications of NLP boiled down to sentiment scraping. We think it’s really tough to find a lot of value in most measures of sentiment alone, and the popularity of “most hated rally = future volatility” takes over the last few years has been a testament to that.

Far more tiresome, however, are the articles which exist to give you the “you could go with this, or you could go with that treatment.” Henceforth, when they show up in the Zeitgeist, they will receive the Christopher Walken treatment.


Flagship Argentine Airline Cancels Tuesday Flights Due to Strike [US News]

If you’ve been following along, you will have seen that labor disputes and labor costs have popped up with some regularity in our network graphs, both in the Zeitgeist and in our ET Pro monitors. In most cases, they are highly connected stories because of Fiat News techniques like the above, which selectively and casually attach issues like this to politics and elections.

What’s the key to spotting the technique? “As”

Yeah, it’s an innocent word in most usage, but it’s also a word which allows the author to juxtapose two concepts, events or statements in a way that isn’t wrong or non-factual or fake news, but which is clearly meant to communicate the author’s opinion about the relationship by forced proximity. Textbook Fiat News.


PetSmart’s Online Pet Company Chewy Files For IPO [IB Times]

No, I’m not going to make the obvious Pets.com joke. I respect the ET audience more than that.

I will, however, allow you to delight with me in the determination by a team of financial writers and editors that it was newsworthy to note that the offering would be “made only by means of a prospectus.” Hard hitting stuff.


IPO documents filed by WeWork, shared office space giant [Fox Business]

Yes, IPOs have been a familiar face on the Zeitgeist, although WeWork has not gotten nearly the attention of Uber or Lyft in financial media, probably because it doesn’t sell a product directly to consumers in the same way.

Except in San Francisco, where this kind of thing is normal (h/t NickatFP).


Nokia: Another Ugly Quarter, But Is The Story Over? [Seeking Alpha]

Every once in a while, I am delighted to be reminded that both Nokia and Blackberry still exist (yes, I know that both companies have carved out different niches from their pre-iPhone, pre-Android identities, please don’t @ me).

But I couldn’t figure out why, exactly, Nokia was showing up as being so closely related to the overall network. Was it a topical relationship or a relationship of meaning? So here are some of the stories linked most closely by language to this one, the ones that are within a degree of ‘adjacency’ in the matrix used to construct the graph. Interpretations are my judgements:

  1. Coca-Cola and Pepsi: Endgame [Seeking Alpha] – Related because of the “story over” language, the general similarity in structure and language in Seeking Alpha-sourced pieces, and the comparable language relating Coca-Cola’s restructuring and where Nokia is as a company.
  2. Tradeweb Shares Slide as Wall Street Weighs in With Caution [Bloomberg]- Related because of some of the “fundamental value” and “unique asset” language and various sections conveying similar sentiments from analyst writeups.
  3. AMD’s Outlook Needs to be Better than its Results [Motley Fool] – Related both by meaning in its negative treatment of recent results, where the structure of the article is to tell the story, “It’s bad, but will it stay bad?”, as well as the retail-geared language that Motley Fool and Seeking Alpha share.

In short, my take is that the prevalence of this specific flavor of pieces – and those from professional analysts, as in the Bloomberg note – in the Zeitgeist is the nature of the “next big trade” being pitched right now. What is that next big trade/rotation being pushed? “Long high quality stuff that got hurt in the recent mixed earnings or which hasn’t fully participated in the 2019 bounce back.”


Profitable Giants Like Amazon Pay $0 in Corporate Taxes. Some Voters Are Sick of It. [New York Times]

This is a lede on a beautiful case study in Fiat News – a New York Times feature piece that reads like it was ghostwritten by a speechwriter for Bernie. Don’t gloat, Fox News fans. There’s a reason the Motley Fool / Fox Business always ends up on its own Zeitgeist cluster over in Cloud Cuckoo Land, too.

The most important thing we can demand from our media of all political persuasions is bright lines around opinion journalism. Feature journalism like this is where it first became commonplace to present opinions, judgments and subjective emotional responses to topics as facts.

The Zeitgeist – 4.29.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


April 29, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

DealBook Briefing: Uber Wants to Be the Next Amazon [New York Times]

Yay, swineherding!

Below is an extended quote from “Horsepower“, an ET note I wrote in August 2017, about the triumph of driving-as-a-service (Uber) and shopping-as-a-service (Amazon). Because it’s not that Uber wants to be the next Amazon. Uber already is an Amazon. They are everywhere today.

Why is productivity growth so miserable?

The first explanation is that we are measuring productivity all wrong today, that the glories of modern technology have succeeded in improving our quality of life even if they are not directly benefitting our gross national product. Put satellite position-tracking technology together with mobile telephony devices and electronic payment networks and voila! … on-demand driving services like Uber magically appear, making transportation a breeze. We’re not buying more cars, but we’re able to consume more driving. It’s what I’ll call “experiential consumption”, and it’s at the heart of all of these on-demand business models that absolutely dominate the modern economy, from transportation to education to food to retail to entertainment to politics. Yes, politics. Think about how you consume the experience of politics today, how it’s served up to you on a plate in on-demand fashion without requiring you to go out and actually participate in a political activity. If you don’t recognize that this is a conscious business model, no different than how Domino’s serves up pizzas in on-demand fashion, then I don’t know what to tell you.

The second (and related) explanation for productivity loss is that job growth since the depths of 2009 has been robust in low value-added sectors like healthcare services or leisure & hospitality, but meager in high value-added sectors like IT or financial services. By value-added we mean how much revenue or profits a human being, driving whatever “tractors” are common in that sector, can add to the firm’s coffers. A new hire in a software company or a bank, armed with all the leverage-increasing technologies and processes available in those fields, can add north of $300,000 to that company’s revenues. Unfortunately, there are fewer people working in IT today than there were in 2007 (!), and essentially no growth in financial services. On the other hand, a new hire in the leisure & hospitality sector adds only $50,000 or so to the hiring company’s revenues, but there are 20% more employees in that sector today than there were in 2007 (value added data from U.S. Commerce Dept. and job change data from U.S. Labor Dept.). The same phenomenon holds true for small business creation over the past decade, which has been dominated by low value-added gigs and personal services. It’s what I’ll call “experiential production”, and it’s at the heart of all the personal training and personal shopping and personal tutoring and “lifestyle” businesses that have cropped up after the Great Recession like mushrooms after a spring rain.

Over the past eight years we have thrown our money into relatively unproductive activities (experiential consumption), and we have thrown our bodies into relatively unproductive jobs (experiential production).

It’s as if we’ve intentionally returned to the recommended farming practices of Cato the Elder in 200 BC, where instead of a tractor with a 43 horsepower engine to get the work done, we’ve got “a foreman, a foreman’s wife, ten laborers, one ox driver, one donkey driver, one man in charge of the willow grove, and one swineherd”. Because god forbid we miss out on the experience of being a swineherd. Hey, with modern technology, you can drive for Uber herd swine whenever you like. Just imagine the personal satisfaction, not to mention all that extra cash, that comes with “being your own boss” as an on-demand swineherd.

It’s as if we’ve intentionally returned to the recommended farming practices of Cato the Elder because it IS intentional.

There is a very stable political equilibrium to be found in convincing a citizenry to trade, in Biblical terms, their birthright for a mess of pottage, or, in early 20th century terms, their townhouse for a string of pearls, or, in early 21st century terms, their sense of self-worth and self-actualization for the meme of “being your own boss” as an on-demand swineherd. There is a very stable political equilibrium to be found in convincing a citizenry to value experience and identity over stuff.

And yeah, I know this is coming across as all materialistic and crass. I know it’s rank heresy to say that it’s better to buy a tractor than to take your family on “the vacation of a lifetime”, that it’s better to stay an extra hour at work crunching on a project than to “take a little me-time” at the yoga studio. I know that it’s social suicide in red states to say that fighting over gender identity and who can use what bathroom is stupidity incarnate, just as it’s social suicide in blue states to say that diversity isn’t even a top three goal of anything that matters, much less an end-all-and-be-all goal, and by the way you’re bonkers if you think the Russians altered the 2016 election by one iota. These are all intentionally manufactured diversions of the first order, combined with a preening overconfidence generated by the wealth effect of intentionally inflated financial assets, creating a politically stable Western society of division, diversion, and debt. Yeah, that’s my heresy.


The Neighborhood’s Black. The New Home Buyers? White. [New York Times]

Longtime residents who have remained now fear that the area’s sudden reinvention will erase the last remaining signs of its history.

“We don’t want to feel like everything is so bad you’ve got to tear it down,” said Lonnette Williams, 72, who lives in an elegant two-story home built by her godfather’s family in 1922. “We want people to value our neighborhood.”

In the frenzy, a real estate agent once told Rosalind Blair Sanders that she wasn’t using her land to its full potential. She runs a child development center on the edge of downtown.

“Everyone has a price,” she was told.

She is baffled over the math of what the children are worth.

Elders in their elegant homes feeling sad … caregivers baffled by cruel modernity’s impact on the children. Not the children!

Here’s a thought experiment. Reverse the race of everyone in the anecdotes and interviews peppering this story and see how it reads.

And you wonder why Amazon isn’t coming to NYC.


In a trade deal with China, the US may get an empty shell [CNBC]

Oh, please. We’ve got the A team hammering this agreement out.


Biggest market risk is an earnings setback that’ll lead to a correction [CNBC]

Blackstone’s Joseph Zidle is warning investors earnings season could go awry.

With almost half of S&P 500 companies reporting quarterly earnings so far, Zidle believes a lot could still go wrong. He lists an earnings setback as the most legitimate risk that would spark a correction.

Must … build … tiny … hurdles … of … worry.

An “earnings recession” is not a thing. Neither is “cyclically-adjusted GDP”.

They are narrative constructions used by both BAWs like David Rosenberg and the levered-long crew at Blackstone to support their business models.


Meet Matt Calkins: Billionaire, Board Game God And Tech’s Hidden Disruptor [Forbes]

“You are what you did at your last game,” he says. “Don’t tell us who you are. Just sit down and show it.”

Such a fun article. And such a great quote.

In the immortal words of Bill Parcells, “You are what your record says you are.”


The Zeitgeist Weekend Edition – 4.27.2019

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. 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. 


April 27, 2019 Narrative Map – Non-Financial Articles

Source: Quid, Epsilon Theory

A couple observations:

  • A word of warning to those campaigning: Other people don’t care as much about the Mueller Report as you probably think they do.
  • Same thing on NBA playoffs (sorry, Jeremy).
  • The most central topics to our non-financial Zeitgeist are: Crime, Fine Arts and Food / Restaurants. Do with that what you will.

The New ‘Stop Resisting’ [Lew Rockwell]

Three thoughts:

  1. I’m as surprised as you to see a Lew Rockwell blog popping to the top of the Zeitgeist. I have no clever explanation for this (except #3 below).
  2. I had to look up AGW (no, Urban Dictionary, I don’t think it’s that), until I realized that it was assumed in the article that we would get it from the use of the expression “armed government worker.” The emergence of niche community language is fascinating. More on this later.
  3. There’s a wonderful nexus between parts of the left and right on the issue of government-sponsored violence and skepticism of the motivations of, well, armed government workers – never better explained than in this SNL sketch from a few years back.

The Government Shouldn’t Keep the Public in the Dark Just Because Private Companies Ask It to [ACLU Blog]

When it rains, it pours, I guess.

There is some relationship between this topic and one that came up on the regular Zeitgeist about two weeks ago. The earlier article was an opinion piece which argued for the public disclosure of every American’s federal taxes. This one from the ACLU advocates shutting down the tool commonly used by private entities to thwart FOIA-based efforts to disclose data about their government relationships.

Similar, but different.

From a principles (i.e. non-legal) perspective, entering into a voluntary commercial relationship with the government, unlike the involuntary relationship involved in paying taxes under threat of imprisonment, seems to justify public disclosure of much of the nature of that relationship. There is still a Take Back Your Data argument to be made here, but in my opinion it leads toward ‘Be really, really sure before you do business with your government.’


Might be worth reviving the role of the dairyman [Marietta Daily Journal]

Yes, it’s the environmental angle that pushed this one up the list – plastic-bashing is very on-Zeitgeist – but let’s take a moment to sit and appreciate the national treasure that is opinion writing in local newspapers.


Countries buying the most weapons from the US [MSN]

Seems fine.


Beyond the Troll Bridge [Dirtrag]

Source: Brett Rothmeyer, Dirtrag Magazine

I am always reassured when I see discussions of nature, beauty, food, beer and good company rise to the top of the Zeitgeist. It’s hard to feel the pull of the Widening Gyre when you are spending your time and energy on tangible things, things that can’t be abstracted outside of how we describe them after the fact.

This is a travel blog, a trip seen through the eyes and experience of a mountain biking enthusiast, and worth the 5-10 minutes it will take you to read.


It was the perfect solution to The Banks music venue. Until the neighbors found out. [Cincinnati Enquirer]

Feature journalism is always perilous.

Feature pieces are, in a way, the original form of Fiat News. The idea behind a piece like this is to present news in an engaging narrative format that isn’t necessarily expressing opinions directly, but which also doesn’t necessarily purport to take the objective tone we’d expect from standard news reporting. In other words, the GOAL of these pieces is to take us on an emotional journey.

It was the case for this same media outlet’s piece on working class lives in Cincinnati suburbs that popped up in a prior Zeitgeist, and it’s the case here.

The civic problem – and this is true for Explainers and Analysis journalism, too – is that the lines between these pieces and news reporting are fading, or have already faded. I don’t think a reader or consumer of this piece would know, except by vigilance, that they were reading a piece of feature journalism which the author has very clearly structured to tell a particular story he favors. Indeed, the masthead highlights the section in which the article lives. This story is explicitly marked as a part of their news coverage.

The verdict? Yeah, even this harmless-sounding regional fare is Fiat News.


Broadway Revival of Beauty and the Beast in the Works [Playbill]

I saw the original Beauty and the Beast on Broadway coming up on two decades ago. I thought – and still think – it was the worst thing I’d ever seen.

Don’t get me wrong. I liked the movie as a kid. I celebrate Tim Rice’s entire catalog. But the actor playing the Beast sang with the most affected, melodramatic, wide-as-a-Mack-truck vibrato I’d ever heard. It was so silly, such a caricature that I initially thought he was joking. I choked back a laugh when I looked around and saw that everyone else was on the edge of their seats. Rapt.

I had taken my mother and sister, and fully expected that we would all talk about Beast and his ridiculously over-the-top singing style after the end of the show. Before I could open my mouth, I could see that they were in tears, overwhelmed by the beauty of the whole affair. So like any decent human being, I shut my damn mouth.

I told my wife this story later, and with a bit of googling she discovered that the guy playing the role when I took in the show was…super famous. Like, THE guy associated with some of the biggest roles on Broadway.

Friends, the languages we speak – I mean actual languages, the languages of value or growth investing, the languages of liberty and equality, and yes, stylistic languages like the peculiar Broadway style of singing – are powerful forces of both affinity and alienation, depending on our proficiency with them. There’s nothing wrong with liking to see the world through the particular lens of abstraction that is your favored language, but if I learned anything from the Worst Show I Ever Saw, it’s that unchecked cynicism about other languages is neither a source of happiness nor a sign of sophistication.

The Zeitgeist – 4.26.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


April 26, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

American IRA Discusses Does Volatility in the Stock Market Demonstrate the Value of the Self-Directed IRA? [Press Release]

“The stock market is a powerful vehicle for wealth creation,” said Jim Hitt, CEO of American IRA. “But it’s not the only vehicle. Why should an investor trust all of their eggs in the basket of the public stock market when there are so many different avenues for building a powerful retirement portfolio? There may even be other options for them, such as using leverage with real estate, that they did not know they could do with a retirement account. These methods help produce wealth that lasts even when the stock market is down.”

Yeah, we’re at that point in the cycle where you will be told about all the wonderful opportunities provided by levered private REITS.

For your IRA.

Because of all this craaaazy volatility in the stock market.


Snap Surges as Android Improvements Driver User, Revenue Growth in First Quarter [The Street]

Download Now: Get Jim Cramer’s Top 5 Mergers & Acquisitions Candidates for 2019 Special Report. Get special report

I’d tell you more about the Very Exciting News from Snap, but first I had to wade through these “special reports” from Jim Cramer.

It’s the Rule of Five.

Top Ten lists don’t work in a TL;DR world, and Top Three … well, you clearly aren’t getting value if you’re only getting three of anything.


Google Announces More Policy Changes After Employee Protests [Bloomberg]

Google unveiled another round of policy changes to address employee concerns about misconduct at the world’s largest internet search company.

Staff can now lodge complaints and concerns about harassment and other misconduct at work via a new website. During meetings related to investigations, workers will have more freedom to bring along colleagues to support them. There’s also a new program to provide better care for employees during and after investigations, the company said Thursday.

First I was going to write something about how you start off by creating a corporate culture, but then sometimes the corporate culture turns around and creates you.

And then I was going to write some reference to The Culture sci-fi books by one of my all-time fave authors, Iain M. Banks.

But finally I was struck by something else entirely.

Google is the new Ma Bell.


One Big Argument for Dollar Strength: It’s Expensive to Short [Bloomberg]


Something Has Spooked the Currency Markets [Bloomberg]

The world’s largest market isn’t buying the feel-good narrative that investors have embraced this week with global stocks sitting on the cusp of setting a record high and the riskiest corporate bonds soaring like the world economy is back in synchronized growth mode. But traders in the $5 trillion-a-day foreign-exchange market are flocking to the dollar, yen and Swiss franc, which is a bit odd since those “haven” currencies normally outperform when the outlook is worsening, not improving.

What’s spooked the fx markets?

It’s every DM central bank for itself today, ladies and gents, so if you’re an EM currency you should be afraid. Be very afraid.


Wealth hitting all-time highs, unemployment rate reaching all-time lows under President Trump [Fox Business]

That’s Kevin Hassett, Chair of the Council of Economic Advisers, describing for reporters the President’s preferred level of Fed independence. Or maybe he’s describing optimal interest rate policy … I get it mixed up.

Hassett’s previous claim to fame before becoming Donald Trump’s CHEIF ECONOMIC ADVISUR was writing the not-at-all silly book “Dow 36,000” back in 1999.


The Zeitgeist – 4.25.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.

Source: Quid, Epsilon Theory

April 25, 2019 Narrative Map – US Equities

What ‘Junk’ tells us about America’s tangled relationship with debt [Washington Post]

“Playwright Ayad Akhtar explores Wall Street in the greedy ’80s.” – Washington Post review

I recently saw the play “Junk,” a retrospective of the 1980s, when Wall Street junk-bond kings were revered and then reviled.

It was a time when financial wunderkinds figured out how to use massive amounts of debt to go on buying sprees, leaving a path of devastation. Think of a plague of locusts swarming companies while wearing business suits and ties.

What is the only true superpower? The power to name things.

We name Milken and Boesky as junk-bond kings. We name their actions as a spree. We name their outcomes as devastation. We name their instrument as debt.

Today we name it balance sheet expansion.

Everyone talks about how we’ve privatized gains and socialized losses, especially for the Big Banks. And I suppose that’s true.

But even more pernicious is the socialization of debt. We’re all junk-bond kings today.

Every man a king!


China could help push ‘Avengers: Endgame’ to a billion dollar weekend [CNN]

The plot of Lysistrata, first staged in Athens in 411 BC, is that the women of Athens and Sparta agree to withhold sex from the men of Athens and Sparta until they stop fighting the interminable Peloponnesian War.

Want to end the interminable US-China trade war? Stop making superhero movies.

I mean, no one has sex these days, so that’s not a credible threat. We’re too busy watching Netflix.


Cannabis Operators To Create National Brands Through M&A [Forbes]

Once US federal legalization happens, Brent Johnson, managing partner of the Hoban Law Group, a full-service firm that specializes in cannabis, said he expects many companies with US operations that touch the plant and are listed on the Canadian Securities Exchange and OTC Markets Group to move to the NYSE, Nasdaq and Toronto Stock Exchanges. Currently, companies that have US operations that touch the plant cannot list on those three exchanges.

Tomorrow’s headlines today – Trump will propose federal cannabis legalization, and his primary argument will be how “unfair” the status quo is for American exchanges.


Emerging-market currencies hit by strong dollar; stocks fall [Reuters]

We write a lot about the dollar and EM on Epsilon Theory Professional. Here’s the money quote from a recent note:

Bottom line: I don’t think that the narrative around central banks is weakening, but I do think it is evolving. I think it is evolving in a way that’s good for some small-e emerging markets and bad for others, but eliminates a coherent, investable narrative around big-E Emerging Markets. 


The Daily 202: Trump looks to defuse trade wars as 2020 nears, deploying Pence to Michigan and Mnuchin to China [Washington Post]

President Trump waits with his trade team for a meeting with Chinese Vice Premier Liu He

The most venal collection of talent that has ever been gathered together at the White House, with the possible exception of when Ulysses Grant dined alone.


The Zeitgeist – 4.24.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


April 24, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Wall Street Analyst Sentiment Stays in a Funk, but Earnings Trends Still Positive in Q1 2019: 361 Capital Wall Street Mood Monitor [Press Release]

“Since September of last year, sell-side research analysts made more negative revisions to earnings estimates than positive ones,” said John Riddle, CFA, chief investment officer for 361 Capital. “While the mood remains gloomy, the good news is that earnings trends, as measured by surprises versus disappointments, were on balance positive.”

Wait … you mean that companies beat their pro forma non-GAAP performance targets? Whaaaaat?


Russell Wilson gifts entire Seahawks offensive line Amazon stock after signing new contract [CBS Sports]

With Amazon being the conglomerate that it is, the gifts have the potential to keep growing. Amazon shares are currently valued at just under $2,000 ($1,926.29) as of Tuesday morning.

Every sports article I’ve read about Russell Wilson’s gift to his O-line (six shares of Amazon stock each) has mentioned that the gift “could get larger over time” as Amazon’s stock continues its inexorable climb higher.

18 months ago this is the coverage that a gift of Bitcoin would have received.

You don’t see this at the bottom.


Stocks are at an all-time high. Here’s what stopped the last 12 bull runs [CNN]

How much longer can the good times roll?

It’s anyone’s guess, but bull markets and economic expansions don’t die of old age. Credit crunches, political uncertainty, wars and rampant speculation have ended previous bull markets.

Bull markets end when easy money stops being so easy. #SavedYouAClick


Twitter is surging and the rally shows no signs of slowing, chart analyst says [CNBC]

This quarter will be the last for which Twitter will report Monthly Active Users (MAUs), the company announced during its last earnings report. As a replacement, Twitter began to report what it calls monetizable daily active users (mDAUs) last quarter, which it said would better reflect its audience. This metric includes “Twitter users who log in and access Twitter on any given day through Twitter.com or our Twitter applications that are able to show ads,” according to the company.

Say what you will about @jack, but he understands the necessary and sufficient condition for being a successful CEO today: create a Wall Street-supported non-GAAP narrative to describe your company’s financial results.

Tired: the MAU narrative.

Wired: the mDAU narrative.


The Biggest Threat to Endowment and Foundation Portfolios [Institutional Investor]

The biggest threat to endowment and foundation investment portfolios is a slowdown in global growth, according to a survey by consulting firm NEPC.

Narrator: this was not the biggest threat.


The Zeitgeist – 4.23.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


April 23, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Walmart stores get modernized [Mass Market Retailers]

The company also plans to offer a grocery pickup option. This service gives customers the convenience of shopping online and the ease of quickly picking up groceries without having to leave their cars at no additional cost.

The company said it expects to finish the current year with about 2,140 grocery pickup sites nationwide, and it plans to boost that number to about 3,100 by the end of fiscal 2020.

Other improvements call for pickup towers, which are 16-feet tall, high-tech vending machines capable of fulfilling a customer’s online order in less than a minute once they arrive at the store.

The retailer will also be adding autonomous shelf scanners. These scanners use automation to scan shelves and help identify where in-stock levels are low, prices are wrong or labels are missing.

You just can’t escape Mr. Handy!

But here’s the thing. I would place a significant wager that this automation and robotification of Walmart won’t cut the human headcount or hours worked by a lot. Why not? Because you need humans to staff the grocery pick-up and online pick-up services.

US Labor Productivity Growth

Technology isn’t giving us more production or more services per hour of labor.

It’s pushing our labor down the foodchain into jobs that the robots don’t want to do.


New S&P 500 ESG Index Threatens Valuations Of Ineligible Utilities [Seeking Alpha]

S&P Dow Jones Indices has announced a new index focusing on ESG – environment, social, and governance – values for S&P 500 companies.

Nine utility stocks in the S&P 500 Index have been deemed ineligible for inclusion in the new S&P 500 ESG Index.

Long-term utility investors need to consider whether they should include ESG-ineligible stocks in their portfolios.

Hey, this was the topic for Demonetized’s first ET contribution!

It’s also the topic for a great piece Rusty wrote for ET Pro.

For one day only … I’ve taken Rusty’s note off ET Pro and made it free to read.

Check out ET Pro when you get a chance. It’s the only way to get direct access to our narrative research.


Indonesia, Malaysia Rail Projects May Give China More Deals [New York Times]

According to a draft communique seen by Reuters, participants at this week’s summit will agree to project financing that respects global debt goals and promotes green growth.

Of the total $6 billion cost, China’s Development Bank will provide a $4.5 billion loan at 2 percent interest, according a project prospectus seen by Reuters. The remaining 25 percent of the project cost will be funded by equity provided by the consortium.

The Belt and Road Initiative (BRI) is a for-profit Marshall Plan for Asia and Africa. It’s not stopping. It’s accelerating. OF COURSE Indonesia is going to take 2% non-recourse financing on a high-speed railway “to the textile hub of Bandung”. OF COURSE everyone is going to say something-something-green and something-something-sensible-debt. OF COURSE the Indonesian Oligarchy and State are going to skim 40% of this.

Welcome to modernity with Chinese characteristics. Same as it ever was.


IPOs: Considerations When Investing In Newly Public Companies [Benzinga]

Try to avoid confusing a company’s popular brand with its business. You may love a particular product, but that doesn’t mean you have to love the stock, too. The financials of a company are ultimately what matters for investors.

Oh.

And there are people who seriously propose that accredited investor restrictions on private placements should be abolished. Because, you know, how else are you going to buy this hot new narrative before it goes to the moon?

At least it’s harder to lose ALL of your money in public markets. Liquidity and all that boring jazz.

For every raccoon in public markets, there are a dozen in private markets.


Here’s what to know about Elizabeth Warren’s higher education plan [Boston Informer]


Elizabeth Warren Wants College to Be Free [The Atlantic]

My best tweet ever.

At least Warren isn’t asking what you’ll do with all the extra money you’re getting from a subsidized college education. Yet. Because that IS the idea.

Here’s the Truth. College education consumption is going up. It’s now your “right”. College is the new healthcare. And you think tuition costs will go down? LOL.

If you don’t see that our deflationary world is becoming an inflationary world, you’re just not paying attention.



The Zeitgeist – 4.22.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


April 22, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

How to Align Sales Compensation with Strategic Goals [Inc]

Did this intro whet your appetite for more, or what?

I think executives in the investment industry spend more time engaging consultants and bending the ear of friends and former colleagues about sales compensation structures than they do on any other topic. The advice always looks something like this article: excessively general, descriptive and non-prescriptive. Or, alternatively, extremely circumstantial and non-transferable.

The problem is that visions of incentivization, cost variability and scale in sales are generally right-sounding nonsense. In other words, you don’t get real downside protection when sales just aren’t happening for one reason or another. You’re going to have to come up with non-commission bonuses, equity or other incentives to fill the gap or people will leave. And it’ll be your best salespeople who leave first. Always.

Two pieces of advice from my experience on sales compensation for fund management companies:

  • You will always be upset with what you have to pay salespeople, and they will always be upset with how you pay them. This will be true no matter how many glitteringly general Inc articles you read.
  • You will always be forced to raid margins to pay a baseline commission to keep people in bad times. Better to pre-negotiate this and get something for it (reducing top-end commission levels, shrinking trail percentages) than to do it for free when it inevitably becomes a necessity. If anyone tells you that salespeople who desire downside protection are adversely selected, feel free to tell them that I personally told them they were full of crap.

Merger Talks of Deutsche Bank and Commerzbank Roil Emotions [New York Times]

This story continues to sit at the top of the Zeitgeist. I suspect it will stay for a while. Why? Well, banks, for one. Because ECB influence remains at a high attention level, for another. But also because it has taken on an increasingly employee stakeholder-oriented emphasis in media coverage. I would guess that employee and job cuts language play a more significant role in the narrative of DB/CBK in financial media today than the basic stability of the European financial system.

And with signs as good as that, it’s no wonder. It’s good in English, but if there really is a literal German version of the English expression “blue bloods”, you’ve also got a possible blut/tut/gut rhyme that makes it work on a lot of levels.

Excellent cartooning, unnamed Commerzbank employee.


Improving investor behavior: Managing your time like money [Denver Post]

When it comes to finance columns that rise to the top of our Zeitgeist measures, I’m usually dual wielding snark cannons.

But I didn’t hate this.

What I didn’t realize when I had no money was how much the use of money beyond a certain point is almost exclusively to regain time. A financial adviser who has the kind of relationship with a client that allows them to begin to discuss wealth in functional terms is doing their job well.

And I do think there is a rising “What the hell am I doing with all my time?” ennui in the Zeitgeist that has contributed to the placement of this article in our little list. It should place it similarly in the minds of financial advisers looking for better conversations with their clients.


Stock Investors Reluctant to Return to Japan Despite Rally [Bloomberg]

If you’ve been reading Epsilon Theory long enough, then your “cartoon” alarm bell was going off when you read the headline, and long before you got to the real piece de resistance.

This is an entire article built on conclusions, quotes and second-degree projections that purport to be about ‘Japan’, but which are really about the methodology used to create this ‘gauge.’ It is a poll of managers. It adds adds up how many say they’re overweight Japan vs. how many say they’re underweight. The difference in those values is the gauge.

If your delusion that this cartoon tells you anything about anything other than the methodology employed persists for more than 6 hours, please call a doctor.


Friendable Enters into Agreement to Restructure Some $6.3 Million of Convertible Debt [Press Release]

I have no idea what Friendable is, but it sounds like a dating app. I’m…I’m still not sure. It’s either a dating app or an app that allows four late 20s strangers to ride bicycles together.

Source: The background on the Company’s website. Is this a date? This is a weird date. Do you have to swipe right on all of the bicylists or like, is 2 out of 3 enough?

I am not sure what it means that this is as highly connected to the rest of the financial markets narrative as it is.

I am also not sure who is advising a firm whose most likely exit is an acquisition to issue a press release announcing a restructuring and reduction of debt. But then I saw their prior press release on the company website, and it simply must be presented in all of its meta-game-less glory:

What possible purpose could publishing this press release serve? Whose idea was this?


Kona Grill Warns of Ch. 11 Possibility [Food News Feed]

I’m not knowledgeable enough about the restaurant business to tell a casual dining chain to start salting its pasta water, but I know enough to know that the above excerpt is pretty, pretty…pretty bad.

If you know anything else about Kona Grill, however, I doubt that this comes as a huge surprise to you. They built their model as an upscale (sic) casual alternative to fast food options at shopping malls, inclining in particular toward the “village square” type outdoor malls that popped up in wealthier suburban areas.

Funny thing is, I don’t know anyone who has ever been in a Kona Grill, a Bonefish Grill, a Black Walnut Cafe or any of the other fancy-signage casual chains accessible from faux cobblestone promenades in these outdoor malls. Don’t take this as casual suburban chain snobbery either. You’re reading from someone who has ordered from every page on the Cheesecake Factory menu, who can deftly navigate the balance between beer orders and Endless Shrimp refills at Red Lobster to ensure that the store comes out in the red on every such engagement. My preference for mediocre chicken parm that at least hasn’t been turned into a sloppy, soggy mess in a hotel pan at an ‘authentic’ Italian restaurant once single-handedly kept a Macaroni Grill location in business.

The death of the Kona Grills of the world, however it inevitably happens, will probably be a positive case of creative destruction. It is one of very few afforded to us recently by policymakers’ helicopter parenting, one of the many ways in which the prioritization of smoothing financial market outcomes – a primary aim of the transformation of capital markets into utilities – is destroying future economic value.

Source: The Company’s Website and also my personal hell

On the other hand, there’s enough anecdata from this Zeitgeist to convince me we ARE entering a bear market for late 20s commercial models who specialize in smiling at stuff that they shouldn’t be smiling at. Y’all all have full drinks. This new red concoction should not be exciting to you. It belongs to someone else at the bar. It means NOTHING to you.


This article from Deadspin didn’t actually make the top of the Zeitgeist. I just thought it was hilarious.

The Zeitgeist Weekend Edition – 4.20.2019

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. 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. 


Full disclosure this week – these are not the explicit most-connected stories, but they are all among the top 20 out of about 433,000. Close enough for government work, I think. In any case, I found their similarities in subject matter striking, so I hope you’ll forgive me a bit of poetic license on the weekend.

The Long, Hard Road [Cincinnati Enquirer]

Maybe I was the only one who was reminded of Hillbilly Elegy when reading this piece, probably because it takes place in J.D. Vance’s hometown of Middletown, OH. Interestingly, Middletown was in some ways presented in that book as a kind of juxtaposition to the spirit of poverty present in the Kentucky hills that Vance’s family came from.

That text above isn’t from the Cincinnati Enquirer piece, but from a review of Vance’s book by Kevin Williamson. Like Williamson, I do believe that Vance’s 2016 book wasn’t really the story of poverty per se, but the story of the spirit of poverty, this suffocating force that crosses economic classes to drive people into unhappy lives through learned helplessness. The spirit of poverty is a real thing AND the effect of narrative missionaries who capitalize on the bitter realities of true poverty by politicizing it and abstracting it into oblivion. The inevitable result is the redefinition of poverty into the evil influence of outside forces, and never as even the partial result of bad luck, choices and mistakes. The only difference among the parties is who you picked as your outside forces – in the usual case, soulless corporations and unbridled capitalism, on the one hand, or foreign workers or minorities on the other.

This effect is worse in our permanently competitive political Zeitgeist. So, too, are some of the facts about poverty and the middle class, what with expanding corporate margins and all of the very real effects displayed in the excerpts from the Cincinnati Enquirer piece above. Things really aren’t great for the poor and the middle class in a lot of places, and for a hell of a lot of reasons. Not even in Vance’s Middletown, OH. But if what we are seeing in the world of narratives is any indication, our cycle of turning these people and their lives into props for our political plays is only going to get worse.

Health care. Education costs. Inequality. Real issues.

But you’re not going to hear about those things. You’re going to hear about how each politician and journalist wants you to think about those things. You’re going to hear about the policy idea which you will be expected to treat as synonymous with that issue, or else you clearly don’t care about it. It’s a damn shame, because we DO need to talk about all of this. Even those of us – like me – who think that state-designed solutions are nearly never the answer, who believe that a small group of really smart people thinking of solutions is inferior to allowing the emergence of undesigned orders – need to talk about it.

In the widening gyre, the suffering of the people is transformed through narrative into political power.

The people keep suffering.


The Black Church and the Black Revolution [Medium]

I am not going out on a limb, I think, to suppose that a middle-aged white guy with libertarian localist tendencies is not the intended audience for this Medium piece. I’d be lying if I told you I grokked much of what the author – a self-described Marxist-Leninist-Maoist – was getting at. But there are two things I thought worthy of note:

  1. Out of more than 433,000 articles in the NewsDesk database published over the last week that weren’t about financial markets, this was among the 10 most interconnected in terms of language. That means something.
  2. The long-term effects of the replacement of the Protestant Work Ethic with the Prosperity Gospel in huge swaths of the churchgoing community in the US have yet to be fully comprehended. My opinion? I think I know where much of the spirit of poverty in both Vance’s world and on the Long, Hard Road comes from, and the exploitation of these people by teachers of the mealy-mouthed, milquetoast non-gospel of prosperity is, in fact, among its causes.

In the widening gyre, the suffering of the people is transformed through narrative into political power.

The people keep suffering.

PHOTOS: Social media reacts to city honoring Joel Osteen's church for its Harvey recovery efforts 
Minister Joel Osteen holds >>See social media's reaction to news that the city was honoring Osteen's efforts  Photo: Elizabeth Conley/Houston Chronicle">

The enduring lesson of the Rwandan genocide [Press Enterprise]

In the widening gyre, the suffering of the people is transformed through narrative into political power.

The people keep suffering.


Fixing the ‘Other’ Georgia [Valdosta Times]

The media should be our agent. They should be cutting off the oxygen to narratives built in service of manipulating people’s real problems in exchange for political power. Instead, they too often behave like principals, believing it is their job to build a particular strain of common knowledge. There is no better way to tell us to think than to tell us what “many people” think.

I’m not even sure what I think about what’s going on in The Other Georgia, because this journalist didn’t respect me or anyone else enough to let us decide for ourselves.


‘The Blackest Cloud’ [The Post-Journal (Jamestown, NY]

Ben wrote the below note about markets and investing, but its applicability is much broader.

Specifically, it is a reminder that the idea is not the thing. The courage to act is the thing.

In an existential trade, the COURAGE TO ACT is the thing. It’s the only thing.

How to Live Safely in a Wall Street Universe, by Ben Hunt (2019)

I think the same thing is true for our political, cultural and social lives. It’s what we mean when we say to Make America Good Again. It’s what we mean when we say to have Clear Eyes about those who would transform our fears and concerns about our fellow man into hatred and blame for The Other. It’s what we mean when we say to live with the kind of Full Heart that sends an army of volunteers with chainsaws, food and hands ready to work in a town devastated by a tornado.

The COURAGE TO ACT is ALWAYS the thing.

The Zeitgeist – 4.19.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


April 19, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Debate rages over practicality of modern monetary theory [P&I]

General “Buck” Turgidson: Doctor, you mentioned the ratio of ten women to each man. Now, wouldn’t that necessitate the abandonment of the so-called monogamous sexual relationship, I mean, as far as men were concerned?

Dr. Strangelove: Regrettably, yes. But it is, you know, a sacrifice required for the future of the human race. I hasten to add that since each man will be required to do prodigious… service along these lines, the women will have to be selected for their sexual characteristics which will have to be of a highly stimulating nature.

Ambassador de Sadesky: I must confess, you have an astonishingly good idea there, Doctor.

That’s actually not a quote from the Pensions & Investments article, but it’s a pretty good approximation of the MMT “debate” when it’s held on MMT turf … meaning when the discussion accepts the language and terminology of MMT as its starting point and moves onto questions of practicality.

It’s what Socrates called sophistry, and he knew a thing or two about debates.

Here’s the Epsilon Theory effort to call MMT by its proper name:


China Stimulus Not Good Enough. Beijing Planning Even More. [Forbes]

Good thing you didn’t short China.

No, you didn’t short China, but if you are an active EM portfolio manager, you are almost certainly underweight China.

Rusty discussed this at length on our last ET Live! webcast. Join us next Weds at 2p EDT and I’ll make sure he covers this again.


What Moore And Cain Would Bring To The Federal Reserve Board [Forbes]

Cain’s greatest contribution to the Fed would be his business perspective. Historically, Fed governors have been academics and finance professionals. Main Street is absent. Cain, in contrast, has large corporation experience (in Minneapolis) and worked with pizza franchisees, which are mostly small businesses. Having a good handle on the challenges that small businesses face is a plus.

TFW … you’re a “Leadership Strategy” Forbes.com contributor and you’ve got to say something to get on the Weekly Traffic Report.

Being a Forbes.com contributor is the new being an adjunct professor at a community college.


Pinterest and Zoom Debuts Point to ‘Bull Market’ for IPOs [Fortune]

I have no idea where Lyft goes from here. Maybe up, maybe down … I really have no idea. But I will tell you that this is classic wall-of-worry narrative creation to set up a resolvable “crisis” for the overall market.

That’s actually not a quote from this Fortune puff piece, either, but from an ET Zeitgeist last week.

Here’s an actual article quote:

The new IPOs are “great for the capital markets, which need high-tech growth companies,’’ Santosh Rao, head of research at Manhattan Venture Partners, said in an interview. “The market is yearning for growth stocks. These companies are very good, very disruptive.”

Huzzah, market crisis averted! We’re saved!


DAX Subdued On Growth Concerns [RTT]

German stocks were subdued on Thursday ahead of the Easter holiday break. Most European markets will remain closed on Friday and Monday for the Easter holiday.

European markets are closed for 4 days, and judging by volumes on Thursday they might as well have been closed yesterday, too. Fair enough. But what always surprises me is that when European markets are closed, senior European investment professionals don’t work. At all. They don’t come into the office. They don’t catch up on work from home. They just don’t work. It’s a degree of separation from work that is literally unthinkable for senior American investment professionals, all of whom are absolutely working from home today.

I’m not saying that this difference is good or bad. I’m just saying that it IS, and the difference is not mean-reverting over time.


The Zeitgeist – 4.18.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


April 18, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

S&P 500 Faces Headwinds But May Avoid Profit Recession: Oxford Economics [IB Times]

The S&P 500 companies may escape a profit recession in 2019 as the resilience in the U.S. economy, easing trade tensions and an expected weakness in the U.S. dollar improve confidence, Lydia Boussour, senior U.S. economist at Oxford Economics, said.

TFW … a wall of worry is just too much work.


Remembering the start of CNBC, 30 years later [CNBC]

Is CNBC still relevant? Sure is. Let me tell you why: The baby boomers are in terrible shape. I mean financially. The oldest baby boomer is now 73, the youngest is 55. Half are already in retirement. And they need our help and the help of everyone in the financial journalism community.

Bob Pisani remembers!

Everyone writes LOL these days, even when they don’t actually make a sound. Not me. I laughed like a banshee when I read this.

CNBC “helps” the investment behavior of retirees in exactly the same way that Fox and CNN “help” their political behavior.


Coal in AOC’s stocking: GOP lawmaker withdraws invite to visit Kentucky mine [NBC News]

“GOP’s getting scared that up close, their constituents will realize I’m fighting harder for their healthcare than their own Reps,” she goaded them on Twitter.

AOC is the Bo Jackson of modern American politics. More raw ability and talent than any human I’ve ever seen. 2024 will be here before you know it.


These Are the Winners and Losers in the Apple-Qualcomm Settlement [Fortune]

I’m not making this up.


Mick Mulvaney’s Master Class in Destroying a Bureaucracy From Within [NY Times Magazine]

The C.F.P.B. was created to protect Americans from predatory lenders after the financial crisis. President Trump’s new chief of staff took it apart on his way to White House.

Two of my biggest and most successful thematic shorts in my hedge fund days were for-profit schools and pay-day lenders. I did all the work during the Bush years, then put the positions on in the Obama years. Pretty much the only shorts that worked from March 2009 on.

Both of these “industries”, and you can add for-profit prisons to the list, are pure parasites on the public body. Not only are their business models based on intentionally screwing as many poor people as they possibly can, but they exist profitably ONLY because federal laws allow them to exist profitably. When those laws shift (or more typically, the enforcement and interpretation of those laws shift) these companies work (or don’t).

I always tried to keep my personal feelings and emotions out of the investments I made, long and short. But I couldn’t hide my satisfaction from seeing these companies get crushed then, and it bums me the hell out that they are resurgent under the Insane Clown Posse administration.


Stock futures edge higher on robust China data; chipmakers rise [Reuters]

6 months?? I’m already there!

Good thing my office is on the ground floor.


The Zeitgeist – 4.17.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


April 17, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

JPMorgan Chase’s Numbers Belie Recession Coming [Forbes]

If you liked this, you’ll love the Marty’s 1975 financial markets classic…

Humble on Wall Street.”


AdvisorShares Launches Pure Cannabis ETF (Ticker: YOLO) [Press Release]

Wonderful.

And yes, we had one of these yesterday, too. Cannabis articles punch way above their weight in narrative land. But whereas yesterday’s fund from Horizon went with a firm format ticker (HMUS should be a Near-East Staples Sector ETF), AdvisorShares went for the gusto with this one (pun withheld).

I previously favored Cambria’s registration of TOKE, but YOLO has just the right 2012 vibe to really make it sing for me.

And as Ben wrote yesterday, why the string of thematic ETFs? Because fees.


Veteran SPAC Sponsors Roll Out Fifth Vehicle [Deal Pipeline]

I actually don’t have a link to this article. The Deal routinely makes its full text available to LexisNexis Newsdesk, but doesn’t have a public-facing Google-searchable link for this one.

What I will do is show you the Quid network map of SPAC articles since the start of our news dataset in August 2013. A disconnected mess. In general, financial media don’t understand, don’t care, and don’t write about these things, except to dutifully cover the IPO if it has a noteworthy person attached.

I can think of several reasons why SPACs would contain language that connected them broadly to the Zeitgeist, and none of those reasons are especially good.

Source: Quid, Epsilon Theory

A Deep Dive Into Chevron’s Fundamentals For Dividend Investors [Seeking Alpha]

One of the things that manifests clearly in the similarities between financial media articles over time, whether it’s professional publishers or Seeking Alpha contributions like this, is a pronounced orientation toward dividend and yield investing. Not only are they very common – broad media seeks an expansive retail base, after all – but extremely cohesive. Clusters of articles about dividend and dividend growth investing are almost always among the most internally consistent.

People know how to sell yield, and the ways that have always worked continue to work.


LACERA launches factor-based, bank loan searches totaling nearly $5 billion [P&I]

I don’t want to fall prey to Gell-Mann Amnesia here – I’ve been on the wrong end of inaccurate, misleading or incomplete coverage of public pension decisions before. With all that in mind, I will admit that this seems odd.

If I’ve learned anything over the years, it is that slow maybes are nearly always the worst way to make investment decisions. I know why, in my experience, someone would suggest a ‘paper portfolio’ trial period. Maybe the manager was small or new and an investment committee or Board member wanted to see more ‘live’ evidence before pulling the trigger. Maybe someone was on the fence and just needed a little more data to move them. I don’t know this firm, although the people are all FX Concepts alums, and anyone who hired hedge funds in the 90s or early aughts knew them. They were the kings of overlay, until, well, they weren’t.

But I can’t conceive of a world in which 6 months of data on the performance of a paper cash overlay strategy could do anything but deliver false comfort or false fear. A 6-month paper portfolio period is a process which institutionalizes randomness. Still, I don’t have all the details, and if there’s anything to be learned from our awareness of Fiat News, it’s that we very often are not getting all the relevant information. Maybe there’s a more sensible explanation.


US Congressional Divide [Business Insider]

This one didn’t come through the Quid analysis, but was brought to our attention by subscriber Matthew M. It’s a Mauro Martino visualization – very similar to the calculation and display methodology of our Quid network maps – of voting patterns in the US Congress.

The Widening Gyre.

Source: Business Insider

The Zeitgeist – 4.16.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


April 16, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Fading fears of a ‘hard landing’ for China’s economy could push stocks higher, strategist predicts [CNBC]

China increasingly appears set to avoid a dreaded “hard landing” and that could help push the country’s stock markets higher the rest of this year, says Stefan Hofer, chief investment strategist at LGT Bank in Hong Kong.

Hofer said investors have been focused on whether China can sidestep that scenario, which he said has hung over the market as “one of the more frightening tail risks.”

The dreaded hard-landing! LOL.

It’s not even a wall of worry any more. More like tiny little speed hurdles that we set up to clear by a mile.


All Aboard the Brand Carousel! Companies Spin Off Brands at Accelerating Pace [Forbes]

Let’s take a look at a few recent cases of companies reaching for and getting rid of rings or brands that they no longer wanted. The carousel took a big spin when last week Campbell Soup Co. sold Bolthouse Farms to Los Angeles-based private equity company Butterfly Equity for $510 million. That’s about one-third of the $1.55 billion that Campbell paid for the company in 2012. Butterfly saw the brand come spinning by at a price it liked and grabbed it.

It literally took me a few minutes to find the text of this article because Forbes has now passed the event horizon of ad placements … known in the scientific parlance as the Zerohedge Limit.


Horizons ETFs to Launch World’s First U.S.-Focused Marijuana ETF [Press Release]

Thematic ETFs are all the rage. Why? Because fees.


Goldman Sachs crushes earnings, hikes dividend [Business Insider]

Stocks slip after lackluster earnings from Goldman Sachs and Citigroup [CNBC]

Stocks close slightly lower amid lackluster Goldman, Citi earnings [Marketwatch]

From “crushes” to “lackluster” … all in a day’s work for the Fiat News machine.


You Think You Didn’t Get a Tax Cut, but You’re Probably Wrong [New York Times]

If you’re an American taxpayer, you probably got a tax cut last year. And there’s a good chance you don’t believe it.

Weird, right? Hard to understand how Team Elite could spend the better part of a year Vox-splaining why the tax cuts were only going to those gosh darn bazillionaires and mega-corporations, and then it turns out that people believe the tax cuts only went to those gosh darn bazillionaires and mega-corporations.


Asian shares buoyed by optimism on U.S.-China trade talks [Reuters]

Evergreen.


The Zeitgeist – 4.15.2019

Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


April 15, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Investors Joining Saudi Stocks’ Big Moment Have to Pay a Premium [Bloomberg]

We rightfully emphasize the supreme importance of our asset allocation decisions. Yet as a group, we investors tend to apply an uncritical eye to asset classes, and accept them as they come to us. Questions we rarely ask in more than a perfunctory manner: Do they refer to any sensible organization of securities with similar underlying traits? Are they subject to features at the arbitrary power of an organization deciding where they belong? Does Saudi being moved from one index to another matter (yes!). Should it (no!)?

We will be writing a lot more in the coming months about how we think untethering from index provider-based constructs for asset classes will be an increasingly important asset allocation tool in the emerging Zeitgeist.


PG&E, BlueMountain in Talks Over Board Composition [Reuters]

I’m on record saying that one of my bigger manager diligence whiffs was not investing with ValueAct for what seemed to me to be good reasons at the time (i.e. small cap specialist with mission creep into mid- and big-caps, a very right-sounding story). They have done very nice work for their investors.

But I will never not hear of a nomination of Jeff Ubben to a board without playing the game I call “Jeff Ubben or Aaron Eckhart from Thank You For Smoking?”


Deutsche Bank-Commerzbank Deal May Rest on a Mountain of ‘Badwill’ [Dow Jones]

Yes, this is all very stupid, but look, ensuring the stability and liquidity of the most critical bank in the most important European economy DOES fall pretty squarely within the mandate of the ECB. As ridiculous as this sounds on paper, it is frankly a lot less ridiculous than some other things being considered. Still, ‘can we immediately capitalize the fact that the market knows we’re going to piss away the ‘value’ of these assets over time into a gain to help our capital ratios’ is a pretty bold move, Cotton.


Will Wall Street Lose Faith in Eager-to-Please Fed? [New York Times]

I believe this is the first use of ‘[The Fed] is out of bullets’ in a major publication in 2019. It is truly a red-letter day. Those of you in God’s Country may discharge your firearms in the air in celebration. The rest of you may non-threateningly wave a knife or other sharp object of less than 5″ in total blade length.


Europe putting venture capital back in the game [P&I]

We have covered the ebullient narratives about private equity and venture capital at some length over the last few months, especially in comparison to those no-good scoundrels in hedge funds. The Billions-Silicon Valley Effect, if you will (sorry, but except for punching that guy who drove your kid drunk, you’ve done hedge funds no favors, Captain Winters). It is easy to look at a story like this and conclude that it’s a secondary effect of too much capital chasing too few remaining opportunities. Everyone wants to get their big unicorn pop before it’s too late to make a career off of it.

And yet I will tell you this: If you want a dependable canary in the coal mine for what other big state, municipal and government pensions will do, you can do far worse than to watch what OMERS does. There is about a trillion of US pension money that relies on the freedom granted by OMERS’s management company structure (and that of a few similarly situated peers) to provide ‘legitimacy’ cover for things they want to do but can’t be the first.


Goldman Economists Say Trump Re-Election More Likely Than Not [Bloomberg]

If this were a live feature, I would allow you to select from an economist joke, a Goldman joke, or a Trump joke in this place. Instead, in the spirit of greatest movie celebrating the very in-the-current-Zeitgeist game of golf, you’ll get nothing and like it.


Everyone’s Income Taxes Should Be Public [New York Times]

Appelbaum’s arguments in favor of destroying the last vestiges of privacy in America all boil down to the same very dumb argument: ‘But think of what we could do with all the data!’

It’s the same reason that free Facebook exists, and free Twitter, and every other service in which you, dear reader, ARE the product because of the value of your data. But instead of advertisers, the consumers of the Product of You in Appelbaum’s world are academia, special interest groups, pitchfork mobs, employers, neighbors with grudges, University admissions offices, lending institutions and journalists who have run out of Twitter posts from random accounts to build feature stories around. Think you get a lot of junk mail and robo-calls now? Think bigotry in lending, housing and admissions is a problem now? Think gerrymandering and selective doling out of local resources is a problem now? Think politically motivated use of the IRS and other government investigative agencies is a problem now? Think widespread depression and anxiety are problems now? Think political races go petty, personal and dirty now? Think the number of political and social ideas to engineer a society in one group’s image is dangerous now? Think the way in which missionaries work to divide us is perilous now?

If the hilariously predictable outcomes were not enough, the justification provided is even flimsier. “Income taxation is an act of government.” Please. If that were the nexus that justified public disclosure, then we ought to disclose the detailed records of every health service, diagnosis and prescription by individual affected by an ‘act of government’. Same for the transcripts and disciplinary records of every student at a public school or school receiving public funding. Hell, those would be GREAT datasets!

The fact that one is forced by threat of imprisonment into a transaction with the state doesn’t inherently warrant public disclosure. Nor does the usefulness of that data. Render your taxes unto Caesar – but keep the data about them to yourself.

The Zeitgeist Weekend Edition – 4.13.2019

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. 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 Future of Robots [New York Times]

If Ben were to add a fourth leg to his Changing Zeitgeist stool, I think that automation would be a strong candidate – not because I necessarily think that it will be the thing-that-changes-the-very-fabric-of-society that is so often hypothesized, but because the specter of its influence is so daunting that it lends itself perfectly to narrative construction.

It is a narrative shield for the oligopolist in defense of capital’s rising share of income. It is a narrative sword for the social engineer in public office to spur the masses into democratically voting for central planning.

In a sense, it it a sub-set of the transition to competition games. Ceteris paribus, having robots do things for us is a Good Thing. But in the same way that it is how humans will behave with one another in the presence of AI, rather than the direct actions of AI or the behavior of AI toward humans that interests me, the most interesting question to me is this:

How will automation influence how humans behave with other humans?


The BMW Z1 was everything great about the ’80s [BMW Blog]

BMW Z1 blue images 24 830x553

I had a girlfriend in high school whose father (a retired 60-ish IRS agent) drove a Z3. It promptly killed stone dead the short-lived infatuation I developed for BMW roadsters after the Z8 from The World is Not Enough. I will admit to its near-perfect proxy power for the ridiculous excesses of the 80s, however.

You can almost feel the JNKBNDS license plate that certainly adorned this car at one time.


The self-made man [Times Literary Supplement]

Frederick Douglass was a man who controlled his own damn cartoon.

If you’re making a Top 10 Americans list and Douglass doesn’t occupy a proud position on it, what are you even doing?


‘The Rise of Skywalker’ [Variety]

Disney has had a hell of a week – a big pop on announcing a thing that everyone knew would happen, where the only real surprise was setting a fabulously low price at which they won’t make any money. Which qualifies as a good thing in 1999 2019. Then they drop a Star Wars trailer.

For the most part, what Disney has done with the Star Wars property ought not to be a surprise to anyone who has watched what they did with Marvel. ‘Fatigue’ is just a thing that allows people to complain to other parents on Facebook about the 50th watching of Frozen, or for non-parents to go on Insta or Twitter to pretend they aren’t going to see Endgame because they’re so done with the tired superhero genre.

Rian Johnson’s Episode VIII was a cinematic disappointment. It turned the villain of VII into a pointless prop plucked out of the ether as a MacGuffin. It made a laughing-at-you joke of continuity tropes and fan service. The key characters – Rey, Finn and Poe – are all marvelous. But even if they weren’t, we are at the point where it doesn’t really matter. A Star Wars film is now an opportunity for a mirror or rage engagement.

So is this:

V | IV | VII | III | VI | VIII | II | I


The Moroccan Exception in the Arab World [New York Times]

It is 2019, and anti-Semites are still attacking synagogues.

It is 2019, and Coptic Churches in Egypt are being torched by the dozens.

It is 2019, and the Chinese government is functionally operating a regional concentration camp that they call the Xinjiang Uygur Autonomous Region, in which a million Uighur Muslims are being subjected to constant surveillance, arbitrary detention, cultural destruction and reeducation.

It’s nice to see that the leaders of Morocco are charting a different path. At the same time, it is sad that they estimate that only 2,500 Jewish citizens remain within the kingdom.


The Google Blacklisting of The American Spectator [American Spectator]

Look, I don’t know how much fire there is to the smoke of Google’s parameterization and manipulation of search results, rankings and the like, especially in news. I suspect that it happens with some frequency, and yes, I think it is likely that certain political perspectives are more susceptible to this treatment, usually through an abstraction layer or two so that it isn’t transparent – the political equivalent of setting buy rates on car loans by purchaser zip code.

Still, I couldn’t help but get a chuckle out of this. Yes, that IS the kind of ad you see when you are Rusty, but the point is that this is being served up on their site by Google. Just perfect.

You cannot get away.

Still, we still aren’t seeing a lot of momentum around Google and Amazon trust-busting narratives. I think part of the reason – ironically – is that the current Republican president and the candidates of the Democratic party agree on whether Amazon, in particular, ought to be cut down to size. That may be the oddest reality of the widening gyre – that the lack of incentive to worry about issues that don’t produce political division means that policy actions with significant cross-party agreement are the ones that don’t happen.