The Zeitgeist – 5.15.2019

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

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


May 15, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Stocks Stabilize as U.S.-China Trade War Enters New Stage [NY Times]

Still, the tone across financial markets was positive.

The original headline was ‘Stabilize’; it’s since been changed to ‘Rebound’.

You see this sort of revisionism a lot these days. Of course, if it had been anyone but the NYT, they would have used ‘Recover’ instead of ‘Stabilize’ and ‘Soar’ instead of ‘Rebound.

We’re only in the Denial stage of the market grief cycle regarding the potential death of a US-China trade deal.


The Pivot In U.S.-China Trade Policy May Herald Long-Term Tension [Seeking Alpha]

Additionally, and importantly, years of negotiating with China have left bipartisan scars in Washington. U.S. negotiators feel that many previous negotiations have played out in a similar fashion: lots of talk, promises of concessions, and perceived advancement, followed by equivocation and backpedaling when the time actually came for China to deliver. While other administrations have pursued a more patient approach, Trump (and many other policymakers in Washington) seems to have little tolerance for this now and is willing to take a more direct approach.

Lastly, China trade issues play well with Trump’s base politically, so keeping them in the headlines as the 2020 campaign season intensifies could have benefits for the president.

Not quite sure why PIMCO is now a Seeking Alpha contributor with 306 followers, but whatevs.

From a narrative perspective this is interesting to me because PIMCO is definitely a Missionary, and the more Missionaries who take this stance, the sooner we advance along the Kubler-Ross scale.


How Viable Are AOC’s Green New Deal Energy Proposals? Just Ask Europe [Fortune]

No country on Earth has tried to implement all the Green New Deal ideas at once—it’s a policy smorgasbord heaving with environmental, social and stimulus-related offerings. Critics have painted the resolution as radical, but many of its social elements are so common in Europe they’re almost taken for granted, such as universal healthcare. And two of its energy-related proposals have started to become reality there, too. Europe has, in essence, tested the viability of transitioning to renewable energy and making houses more energy efficient. And the results of those experiments are worth inspecting, particularly when it comes to timing and the question of jobs.

Honestly, I was expecting this article to be a fountain of Fiat News. It’s not. The simple fact is that we CAN implement many of the Green New Deal policies if we choose to do so, at the cost of structurally lower economic growth, higher taxes across the board, and greater political polarization.

It’s a political choice FOR a widening gyre.

Which is why I think it’s got legs. Because as much as we all tsk-tsk about the center not holding, we can’t take our eyes off the political entrepreneurs spinning us into oblivion.


Trump says he’ll meet with China’s Xi amid intensifying trade fight [CNN]

The article itself is nothing … a regurgitation of everything else you’ve read over the past few days. But I couldn’t stop staring at this picture of Larry Kudlow.

There’s a famous body of work on how serving as President ages you in office. Here are the three most recent ex-Presidents, with the photo on the left as they entered the White House and the photo on the right as they left.

My strong sense of the Trump White House is that The Donald will look exactly the same when he leaves as when he entered. It’s the people working for him that age in dog years.


Many Americans Will Need Long-Term Care. Most Won’t be Able to Afford It.; the new old age [NY Times]

The United States, unlike many Western democracies, has never created a broad public program covering long-term care. Medicare pays for doctors, hospitals, drugs and short-term rehab after hospitalization — not for independent or assisted living.

That could change one day — imagine a new Medicare Part LTC — but “that will be incredibly difficult to achieve politically,” Ms. Pearson said.

Ehh … not that difficult. Before it’s all said and done, the Boomers are going to pull forward every bit of national wealth for the next 100 years to service their needs.


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The Zeitgeist – 5.14.2019

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

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


May 14, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Trade-War Safety Zone Seen in Asian Cub Market Favored by Trump [Reuters]

Vietnam, deemed worthy of a special mention by Donald Trump Monday, is already proving an outperformer, with its stocks losing 2% compared with 5% for the broader emerging-market index last week. The U.S. president warned that unless China accedes to his demands, its trade will flow into Vietnam and other countries.

Brazil and Ukraine are also being sized up as beneficiaries of the standoff between the world’s two largest economies as investors pursue war-proof strategies and places to escape the worst weekly losses in global stocks since December.

This sort of blue sky projection lasts until China starts talking about devaluing its currency. Again.

And then all EMs will tank, especially these “Asian cubs”. Again.


Starbucks Completes Issuance of Third and Largest Sustainability Bond [Press Release]

As with the two previously issued Sustainability Bonds, funds will support ethically sourced coffee. The scope includes purchasing coffee that is verified by Coffee and Farmer Equity (C.A.F.E.) Practices; the continued development and operation of Farmer Support Centers and agronomy research and development centers in coffee-growing regions around the world; and new and refinanced loans to coffee farmers made through Starbucks $50 million Global Farmer Fund.

The 30-year Sustainability Bond is part of a larger bond offering of $2 billion, with another $1 billion bond issued for general corporate purposes including the repurchase of common stock as part of the previously communicated $25 billion shareholder return target. The issuance is in line with Starbucks commitment to a leverage cap of 3x lease-adjusted EBITDAR and a minimum credit rating of BBB+Baa1.

I couldn’t find any information on pricing or the coupon associated with this $1 billion, 30-year note, although the prior 10-year $500 million offering went out at 2.45%.

ESG comes to corporate finance.


Cotton Drops by Exchange Limit as U.S.-China Tensions Escalate [Bloomberg]

The U.S. is the world’s top cotton shipper and more than three-quarters of the domestic crop goes into exports, which are heavily dependent on China. Escalations in the trade war come at a time when expanding production meant American inventories were forecast to reach a decade high.

Don’t worry, Mr. Cotton Farmer, I’m sure the USDA will designate you as a Patriot Farmer.


Goldman Says Trade-War Escalation to Drive U.S. Inflation Higher [Bloomberg]

President Donald Trump’s latest tariff increase on Chinese goods will drive up the Federal Reserve’s preferred measure of underlying inflation, and a further escalation of the trade war will have an even greater impact on prices as well as economic growth, according to Goldman Sachs Group Inc.

Will be proclaimed as “transitory” by the Fed.

So it doesn’t exist.


Cheaper drugs would lead to fewer new drugs [Albuquerque Journal]

You’re a wise and careful person, so you calculate your likely expenses and how much you can charge for your tender young lambs. The math says sheep farming will offer you a tidy little living. But just as you’re about to commit, the government announces price controls on lamb, which will eliminate your profits. Do you still open the sheep farm?

I get so depressed when self-styled libertarians (in this case the Washington Post’s Megan McArdle) shill for oligarchic corporate interests that have captured huge swaths of the regulatory state.

As if Big Pharma’s profit margins aren’t created and maintained by government policy in the first place.

I never know if they’re just mailing it in or if they’re on the make.


$1.2 trillion in stock market value lost so far from trade war sell-off with more expected [CNBC]

You never see how much was “added” to stock market value on a big up-day like today.

That’s intentional, of course, part and parcel of the creation of tiny-hurdles-of-worry.


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The Zeitgeist – 5.13.2019

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

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


May 13, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Farmer financial pain continues from trade fallout [Farm Futures]

A record crop of both corn and soybeans in 2018 has Bible left holding 20-25% of his 2018 corn crop, and 5% of soybeans. Yet going into 2019, he’s forward priced only about 20% of his soybeans and roughly the same amount for his corn.

Hindsight is always easier, as Bible said he should have mitigated risk a little bit better. However, based on the information he was getting from the administration he felt fairly confident that a deal was going to be reached with China by now. With reports that China would buy “tremendous” amounts of corn and soybeans being leveraged to help bring some equilibrium to the trade imbalance, he was hopeful. “When you’re getting that kind of information, you have confidence, whether right or wrong, that things are soon to be better. We’re not seeing that come to fruition unfortunately,” Bible said.

Cheer up, Farmer Bible! I’m sure that the crack team at USDA has a great plan in the works to buy up all your soybeans and corn and give it away to the poors.

Flounder: Will that work?

Otter: Hey, it’s gotta work better than the truth.


Goldman Sachs’ glitzy new trading floor; Billionaire real-estate investor Sam Zell says now is ‘the time to accumulate capital’ [Business Insider]

Goldman Sachs’ glitzy new London trading floor is the size of a soccer field — but traders worry they’ll be ‘caged in like battery hens’

Sounds fair.


Private equity’s allure poses big risks for the stock market and its investors in the next recession [CNBC]

The transition is already underway and according to asset manager AllianceBernstein, won’t be ending soon. In a note to clients this week, the firm outlined an upcoming decade in which the “main expression of active investing” is in private markets.

I think the A/B note is absolutely right, and it’s part and parcel of a core change in the investment Zeitgeist, as capital markets are transformed into political utilities.

But this isn’t a “risk” for the stock market, and the rationales trotted out in this CNBC article (vanishing liquidity! more volatility!) make zero sense and have even less connection to the point of the original A/B note.


Can the Racial Wealth Gap Be Closed Without Speaking of Race? [NY Times]

Elizabeth Warren wants to offer down-payment assistance to home buyers in formerly “redlined” neighborhoods where the federal government once denied access to mortgages. Cory Booker would like to create “baby bonds” that would be worth more to children in poorer families, helping them one day to buy houses or other assets.

Both presidential candidates say their proposals would aid in narrowing the enduring black-white wealth gap in America. But neither policy attempts to do that in the most direct way possible — by steering benefits to African-Americans.

Their ideas, along with several others that scholars advocate, are facing a tricky problem today. There’s growing momentum on the left to address the racial wealth gap. But the prospects for race-based policies before the Supreme Court are unpromising, and that’s unlikely to change with five conservative justices.

If there is a more Fiat News-loaded term than “scholars”, I am unaware what it might be.


Uber falls more than 7% in disappointing Wall Street debut [CNN]

After that mad dash to overhaul its business and go public, Uber ran into a different problem: the Week from Hell.

On Sunday, President Trump surprised investors by threatening to impose higher tariffs on China in a tweet. The market swung wildly amid concerns of an escalating trade war between the United States and China.

Then on Tuesday, Lyft reported its first earnings report since going public, which revealed more than $1 billion in losses during the first three months of this year. Lyft stock continued its decline the day after.

Uber picked a bad week to stop being private.


It’s Time to Break Up Facebook [NY Times]

Mark is a good, kind person. But I’m angry that his focus on growth led him to sacrifice security and civility for clicks. I’m disappointed in myself and the early Facebook team for not thinking more about how the News Feed algorithm could change our culture, influence elections and empower nationalist leaders. And I’m worried that Mark has surrounded himself with a team that reinforces his beliefs instead of challenging them.

The government must hold Mark accountable. 

Like every other oh-so-earnest opinion piece you see in the NYT, the author and the editor and the publisher think they’re being effective advocates for their preferred policy outcomes.

They’re not.

I’m VERY sympathetic to the idea that antitrust law should be used like a flamethrower against Big Tech and Big Banking, but this article made me throw up in my mouth a little bit.

There are good reasons to apply antitrust law to Facebook. None of them have anything to do with Mark Zuckerberg.


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The Weekend Zeitgeist – 5.11.2019

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Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories. On the weekend, we leave finance to cover the last week or so in other shifting parts of the Zeitgeist – namely, politics and culture. It’s not a list of best articles or articles we think are most interesting … often far from it.

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


May 11, 2019 Narrative Map – Non-Financial Articles

Source: Quid, Epsilon Theory

Commentary: Capitol Hill hearing takes up the war between the needy and the greedy: The future of payday loan regulation [Winston-Salem Chronicle]

This topic was at the top of our Friday Zeitgeist, too, so I won’t spend too much time talking about it. But one of the responses I’ve gotten in a couple places has been: “Why can’t people talk about this issue in good faith? It’s just policy.” This is why.

Once an issue has been moved to the world of abstraction, once it’s about something else other than itself to a meaningful portion of the population, it is far more difficult to have a good faith discussion with anyone who has absorbed the abstraction into their framework of thinking about the issue. The participants in most of these discussions are simply engaged in a complex soliloquy about their own particular abstracted version of the topic.

Still, make no mistake – the people committed to good faith can’t wait for the rest to catch up. That’s an argument I’ve made before, too. Payday lending is a topic of its own – different even from the very high rates of standard unsecured / auto lending. I’ve got a lot of opinions about it, too, but it’s the weekend, and I’ll spare you those. This one sits at the top of the Zeitgeist, and it’s not going anywhere for a while.


The Double-Edged Sword of the Justice System [Chronicle of Social Change]

Criminal justice and the state of the US prison system have been frequent visitors to the Zeitgeist, too. If you see it here, expect to see it in policy discussions. If you don’t know what you think about those issues, now’s the time to do your research and thinking, before the content you’ll find becomes dominated by Fiat News that will tell you how to think about it.


The Bulgarian city reversing the brain drain [MSN]

There hasn’t really been an active narrative – in the US, I mean – about eastern Europe since the early days after the fall of communism and the dissolution of the Warsaw Pact. At that time, and in many eastern European nations, the growth – in terms of both freedom and in more tangible economic terms – was remarkable.

Except that didn’t really happen in Bulgaria. As it happens, Bulgaria’s first free elections put the communists right back in power. Its economy grew in fits and starts throughout the 1990s, unlike the Baltics and states of the former Czechoslovakia. Serbia had a similar experience, but it was a special case in a lot of ways – thanks to Tito, probably not a true part of the Eastern Bloc during the Yugoslav days despite its communist government, and thanks to Milosevic, subject to some, shall we say, other sources of economic malaise in the late 1990s. By the mid-2000s, Bulgaria had recovered enough to become a more integral part of Europe, and stabilized.

Even so, that a country that has sat at the crossroads of the world – culture, religion, peoples – for so many centuries could lose citizens at this rate is still surprising to me. Maybe a little bit heartbreaking.


‘New economics’: the way to save the planet? [Reuters]

Here’s the lede:

Here’s the internet masthead categorizing the article as “World News.”

Here’s the footer characterizing what took place in the article as “Reporting.”

I’m sure you don’t care, Directors of Thomson Reuters Founders Share Company, but your news staff is using your Trust Principles as a dishrag.

Do better.


Let the sunshine in at the Federal Reserve [WND]


You know, Stephen, you could have just gone on Glassdoor and left a brutal review like any normal person does after bombing an interview.


The lost art of the mixtape [Schenectady Daily Gazette]

The headline on this article was changed after the fact, which is a shame, because Googling the “lost art of the mixtape” provides some powerful evidence of our nostalgia for this relic of the 1980s and 1990s. I still remember fashioning the perfect mix of songs for my 7th Grade girlfriend Vanessa. It was the ultimate low-tech labor of love, sitting in my bed at night with the radio playing on my tape player, waiting for one of the songs I knew I wanted to come on, finger on the Record button. It was the work of dozens of hours, culminating in a cassette with a strip of masking tape that would allow me to write my title. Never actually given because I was a cowardly 12-year old.

I was about to write about my frustration with the conflation of “playlists” with this experience in the linked article and in these Google results, but then I realized that I’m 36 years old and not ready to yell at the kids to get off my lawn just yet.


The bird that came back from the dead [CNN]

The white-throated rail colonized the Aldabra Atoll in the Indian Ocean -- twice.

We end with a short, interesting article about a sort of convergent evolution that, well, ain’t, as it were.

But the real story here, if you ask me, is this goofy-looking bird. It looks like a wingless, arthritic duck, and it probably shouldn’t exist.

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The Zeitgeist – 5.10.2019

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

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


May 10, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Coworking Ecosystem & Crowdfunding Platform Announce Partnership [Press Release]

Digital Asset Monetary Network Co-Founds Marketing Services Firm for Reg A and Crowdfunding Ventures [Press Release]

Back in the distant past when there were people in our industry called value investors (if you’re under 30, you’ll have to ask a coworker born before 1990), it was common to hear them wax eloquent about companies which had found an ecological niche inside the coverage gaps of larger industries and fully scaled competitors. It wasn’t whether your hedge fund was long a dental supply company, you see, it was whether you liked PDCO or HSIC more.

Coworking and crowdfunding occupy exactly those kinds of ecological niches, emergent in response to the resource availability-skewing dominance of commercial real estate and DCM/ECM/VC conventions. These are not realistic scale plays. By any historical analog, they should be very interesting, higher-than-big-cap-comp ROIC businesses, maybe even trading at interesting valuations.

That was, of course, until we discovered the cost-of-capital reducing magic of riding the valuation coat-tails of venture tech narratives. This now trendy tactic is, perhaps, irritating to those nostalgia-porn addicted stalwarts who still call ourselves value investors, but it may be the only benign influence of the zeitgeist-transformation of capital markets into public utilities. With obvious exceptions, the people who have been pushed out on the risk curve, who are now taking even more insane risks in entrepreneurial ventures on the basis of these narratives – or occasionally on the basis of some fundamental belief in actual disruption – are the people who can most afford to bear them. It’s a good thing. Even if we think what they are doing is stupid, the people who sink their effort, reputations, capital and time into an entrepreneurial venture make the whole system work. It’s the other side of the coin from our concerns about financialization and the lack of incentive for public companies to reinvest in growth.

Or in other words, as is so often the case, Taleb’s not wrong. He’s just an asshole.

Image result for you're not wrong walter

Wall Street Dusts Off Trade-War Battle Plan Now All Bets Are Off [Bloomberg]

When I say that the ol’ fire your guns at the ground and tell ’em to dance bit is one of the oldest tropes in the book, I mean that literally. It comes straight out of one of the earliest, most influential, most ‘anatomically modern’ films ever made: 1903’s Great Train Robbery.

And that’s exactly what this is.

Dusting off the battle plans? Hell, these hedging strategies, baskets and tactical trading approaches haven’t even been moved from that folder on our desktop to our personal network storage drives in the monthly purge we do so that IT doesn’t bark at us. You may not know the odds of the Game of Chicken that is the US/China Trade & Tariffs war, but I hope you know the odds that financial media will do their part to support the ecosystem that feeds on our collective aversion to inaction in the face of incalculable odds.


Investors pull more than $20 billion from stocks on ‘trade deal trauma’: BAML [Reuters]

Trauma! So we’re breaking out the big guns on language after we’ve had a couple days of completely normal volatility. I guess that means it’s time to play our favorite game: Who’s Going to Blame Risk Parity First?

The winner usually comes in the week following the volatility, but since it has become such a popular game, triggers have gotten a bit looser. So do we have a winner yet? Did someone jump the gun?

Yes! Two people!

Our search of the Newsdesk database shows a number of articles referring to “risk parity”, “risk targeting” or “vol targeting” this week, most of which are reprintings of comments made by AQR’s Cliff Asness about factor investing performance. The first of the two articles which mention it in context of volatility-blaming comes from Justina Lee at Bloomberg; however, her article shoots down the theory. So by default, the award this drawdown goes to Nomura’s Charlie McElligott, whose Wednesday morning note got picked up by ZeroHedge.

Congratulations! You Blamed Risk Parity First!

Trophy

My Cousin Was My Hero. Until the Day He Tried to Kill Me.; Feature [NY Times]

I don’t have much to say about this article, although I’ll leave you to consider why this scored so high on its interconnectedness to the language in all financial markets news stories from the last day.

What I do have to say is that I’m glad the NY Times has started flagging its articles as Features, at least in its database feed. Press insiders who care about its integrity and the critical role it must play in a free society should be demanding the clear, unequivocal marking of opinion, analysis and feature journalism by all outlets. It doesn’t go anywhere near fixing the problem of Fiat News, but it’s a good step.


How Today’s Tech I.P.O.s Differ From Those of the Dot-Com Boom [NY Times]

This is not a terrible piece in the aggregate, but the statement above is not something that belongs in a news report. It’s a near-verbatim parroting of the right-sounding cartoon that’s being promoted by the management teams and banks running these processes. They have had more runway to figure out how to get BIGGER, and all of these parties have an interest in us equating that abstraction with “figuring out sustainable business models.”

Unless we’re all capital-markets-as-utilities advocates now, and “continue to raise capital at shockingly low costs ad nauseam to finance profitless top-line growth” IS a sustainable business model. From a founder’s perspective, maybe there’s not a difference.


Fair Isaac Is Profitable, But Its Debt Is Climbing And It’s Expensive [Seeking Alpha]

So meta.

Part of the reason this piece – a pretty standard Seeking Alpha blog – is more connected to the aggregate narrative right now is the broader discussion about progressive politicians’ proposals to institute usury-style caps on chargeable rates.

It’s an issue that Ben and I disagree on from a practical (read: policy) perspective. But we sit in agreement on the core problem.

If you wandered into an off-brand car dealership in 2004 or 2005 and had a sub-600 FICO, chances are that one of the rates offered to you came from my desk. Well, the buy rate did, anyway. The finance guy at the dealership probably bought it up 100-200bp without telling you. There’s one exception: if you lived in Arkansas, you probably didn’t get a rate from me. Why?

Because the Arkansas Constitution wouldn’t let us charge as much as we felt we needed to to compensate us for the credit risk (and as years that followed would indicate, even what we were charging probably wasn’t enough). There is no doubt in my mind that the market-clearing, risk-appropriate price for unsecured – or kinda/sorta secured, like auto – debt for many consumers is well into the high 20s and above. My libertarian predisposition is to say, ‘Let people be adults and burn their hands if they want to.’

But I’ve also seen – no, built – the economic models supporting this kind of lending. You do not enter in with the expectation that you will be paid back principal. You enter into the average loan with a significant portion of your expected return in the form of recoveries. You are pricing in the dear cost of brutal collections and servicing agents. It is an inherently ugly and cruel practice, entered into with the one-sided expectation that it will very likely end in ugliness and cruelty.

Is it uglier or crueler than denying the availability of that credit by statute? I still come out to “No.” I can’t stomach denying capital to anyone who wants to bet on themselves. I think Ben comes out to “Yes”, and he’s got damn good reasons for it. After all, the cruelty of this kind of lending isn’t a theoretically possible outcome – it’s embedded as a fundamental component of the model. But Ben and I are really close friends, and we trust the other’s heart and mind implicitly. We can talk about this stuff.

Outside those circles? Well, like the Myth of College, this is an issue made almost impossible to discuss and debate in good faith by the Widening Gyre.

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The Zeitgeist – 5.9.2019

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Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories 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 9, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

China Backtracked on Nearly All Aspects of U.S. Trade Deal [NY Times]

Process stories (what’s happening behind the scenes at the campaign / the White House / the locker room / the negotiations) are the original Fiat News. They are designed to make you angry and further the aims of whoever sourced the “reporting”.

Who benefits from making you angry at China and their “reneging” on a deal that never existed in the first place? Who benefits from a narrative of the Lying Enemy Abroad?

Think about that before you engage in your Two Minute Hate.

Oceania has always been at war with Eastasia. Or was it Eurasia? I don’t seem to remember so well these days.

The NYT is running hard with this story because they think it reflects badly on Trump. LOL. It’s HIS story.

More evidence that the NYT is the worst metagame player in the history of the world.


Trade Talks Have Two Key Implications for Markets [Bloomberg]

Each Word of Trump’s Tariff Tweets Wiped $13 Billion Off Stocks [Bloomberg]

How To Trade The China Trade War [Forbes]

Once more with feeling …

THERE ARE NO ODDS IN A GAME OF CHICKEN.

It’s not 50/50. It’s not 60/40. It’s not whatever you think they are. You have no edge and there are no odds in the China trade talks. Just stop it.


Delays to Brazil’s Pension Overhaul Raise Economic Concerns [Dow Jones]

“My costs have increased 20% [in two years] because of the stronger dollar,” Mr. Carvalhal said in a bare-bones office in his sprawling warehouse stocked with Argentine wine, German beer, Spanish cheese and other imports. “How can I pass that along to the consumer if the economy is tanking?”

The only bright spot for him and millions of other businesspeople and consumers comes from Brazil’s central bank, which on Wednesday is expected to hold its benchmark interest rate, known as the Selic rate, at the historic low of 6.5% where it has been at since March, 2018.

The dollar is now stronger than it was when the world was going to end in January 2016.

What do you think the odds are for a Shanghai Accord today? LOL.


Dimon Says Yields `Extraordinarily Low’, 4% Wouldn’t Be Bad [Bloomberg]

My president.


Lyft’s stock is plunging, flirting with a record low after its first public earnings report fails to impress investors [Business Insider]

I’m old enough to remember when a company wouldn’t go public until it was ready to rock with a stellar first public earnings report to confirm all those sell-side firms initiating coverage with a Strong Buy.


Business Genius Trump Lost More Money Than Anyone in America Between 1985-1994 [Rolling Stone]

Oooh, they’ve got him now! Burn … sick burn!

Yawn.


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The Zeitgeist – 5.8.2019

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

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


May 8, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Renewed China trade fears send U.S. markets tumbling [UPI]

Futures fall on U.S.-China trade uncertainty [Reuters]

Global stocks slip, bonds rally as U.S.-China trade fears grow [Reuters]

Frequent readers will be familiar with our three recurring trade and tariffs arguments:

  1. The narrative on tariffs has been complacent for the last several months – coherent and positive. Investors who have a contrarian (read: negative) view of outcomes could benefit from the resulting asymmetry.
  2. If it ends up as a major market event, it is likely that traditional diversification techniques continue to work like they have historically (i.e not a ‘new’ zeitgeist).
  3. We don’t think anyone should be in the business of having those contrarian OR consensus views on the topic, because it’s a GAME OF CHICKEN. You don’t know the odds, because there aren’t any.

None of that has stopped financial media from updating their assessments of the odds on a daily basis, of course.

These are the sectors that worry Wall Street analysts the most if there’s a US-China trade war [CNBC]

None of that has stopped the sell side from pushing new ways to play the odds, either.

Goldman Sachs – Hardline Retail Stocks

UBS – Softline Retail Stocks

Cowen – Chemical Stocks

Credit Suisse – Auto Parts Stocks

Bank of America – Automobile Stocks

Needham – Semiconductor Stocks

Baird – Chemical Stocks

Let’s get trading, fellow muppets!


Data Gumbo Secures $6M in Series A Funding from Venture Arms of Leading International Oil & Gas Companies [Press Release]

HOUSTON–(BUSINESS WIRE)–Data Gumbo Corp., a Houston-based technology company that has developed a Blockchain-as-a-Service (BaaS) platform to streamline smart contracts management for industrial customers, announced today completing a $6M Series A equity funding round co-led by Saudi Aramco Energy Ventures, the venture subsidiary of Saudi Aramco, and Equinor Technology Ventures, the venture subsidiary of Equinor, Norway’s leading energy operator.

Wait, what?


Sysco’s Earnings Beat Estimates but Revenue Comes Up Shy [The Street]

I wonder why this perfunctory note scored so high on the Zeitgeist.


Americans mimic Russian disinformation tactics ahead of 2020 [The Hill]

The widening gyre is only beginning.

And this is how it widens – as always, with the best intentions.


AIG Unit Rebounds After an Overhaul [WSJ]

What is dead may never die.


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The Zeitgeist – 5.7.2019

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

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


May 7, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

May’s Market Outlook: It’s Too Quiet Out There [The Street]

Investment markets can be confusing. To try to cut through the chatter and investment slang, we present this monthly view to you. We want to give you a 50,000-foot view of market conditions updated as our view evolves. Currently, our Investment Climate Indicator remains at Stormy. Stormy means that bear market rules apply, and we believe could be a period of wealth destruction.

I used to watch Ernest Angley on Sunday morning TV in Birmingham, Alabama. Laying on hands, curing the sick, healing the lame … I’d call him a raccoon, but somehow that seems too kind. A raccoon’s raccoon.

Buffett is no raccoon. He’s a coyote. A coyote’s coyote, even. But there was something about this picture that triggered me.

I haven’t made the hajj to Omaha yet.

As for The Street … raccoons just as far as the eye can see.


Vanguard Fund Investors Get Control of Paying Taxes [Bloomberg]

Ever wonder why you don’t ever get hit with a year-end taxable gain from ETFs like you do with mutual funds?

But thanks to an obscure loophole in the tax code, ETFs almost always avoid incurring taxable gains.

The rule says that a fund can avoid recognizing taxable gains on an appreciated stock if the shares are used to pay off a withdrawing investor. The rule applies to both ETFs and mutual funds, but mutual funds rarely take advantage of it because their investors almost always want cash.

ETFs use it all the time, because they don’t transact directly with regular investors. Instead, they deal with Wall Street middlemen such as banks and market makers. It’s those firms, not retail investors, that expand the ETF by depositing assets or shrink it by withdrawing. These transactions are usually done with stocks rather than cash. The middlemen, in turn, trade with regular investors who want to buy and sell ETF shares.

Trading with middlemen presents ETFs a tax-cutting opportunity. Whenever one of these firms makes a withdrawal request, an ETF can deliver its oldest, most appreciated stocks, the ones most likely to generate a tax bill someday.

If the ETF wants to cut its taxes further, it can generate extra withdrawals just to harvest the tax break. A heartbeat is when an ETF asks a friendly bank or market maker to deposit some stock in the fund for a day or two, then take different stock out. Some critics call these trades an abuse of the tax code. But with the help of heartbeats, most stock ETFs, even ones that change holdings frequently, are able to cut their capital-gains taxes to zero.

Now Vanguard is using the same in-kind redemption / heartbeat trade to avoid taxable gains on most of their mutual funds.

How? By pairing the mutual funds with a sister ETF where they can do these legal (for now) variations-on-a-wash-trade.

But wait, there’s more. They’ve filed a patent on this.

So amazing that I’m not even mad.

This is the ET note on Vanguard. It’s a good read.


Why Investors Love Singapore’s Struggling Malls [The Straits Times]

Singaporeans aren’t spending like they used to, at least not in malls. There are too many already, and more are being built. But investors still have good reasons to back mall owners.

The city state has 6.1 million sq m of retail space, of which 8.7 per cent is vacant. Yet, companies are forecast to add a further 364,000 sq m, with the biggest chunk hitting the market this year. This is when online shopping is catching on, retailers such as Crabtree and Evelyn are closing physical stores, and rents are scraping the bottom.

Two years ago, the median tenant was shelling out $9.76 per sq m in the main shopping district of Orchard Road, when the going rate for category 1 offices was $8.65. Now, office rentals have zoomed to $10.18 – 30 cents more than top-grade retail space – while prospects for a spending recovery aren’t great. CapitaLand Mall Trust, the island’s biggest shopping mall landlord, classifies its tenants in 17 categories, out of which 11 – including supermarkets and department stores – saw sales fall for the first quarter from a year earlier. Telecommunications, home furnishings and music and video led with big double-digit declines.

Okay, I give up. What is the good reason for investors to back Singapore mall REITS?

Paradoxically, real estate investment trusts (Reits) that own malls are outperforming the benchmark Straits Times Index. Interest rates may be a part of the story. With global rates expected to stay lower for longer, a 5 per cent dividend yield on CapitaLand Mall’s shares implies a near 3 percentage point spread on 10-year Singapore government bond yields.

Wheeeeee!


As Public Pensions Pile on More Risk, Returns Don’t Follow [Bloomberg]

Pro-tip: when a financial reporter uses the phrase “so-called alternatives” in the lede, it’s always a train wreck.


TA Associates Closes Thirteenth Flagship Private Equity Fund with $8.5 Billion of Commitments [Press Release]

TA Associates,a leading global growth private equity firm, today announced the first and final closing of TA XIII with total commitments at its hard cap of $8.5 billion. Launched in the first quarter of 2019, TA XIII was oversubscribed and exceeded its original $7.5 billion target.

Wheeeeee!


Blackstone Hires Goldman Alum for New Social Good Initiative [Bloomberg]

Blackstone Group LP hired Tanya Barnes, a former managing director at Goldman Sachs Group Inc., to lead a new impact investing strategy, as pension plans and other institutions seek to put money into more businesses with social and environmental benefits.

Blackstone’s impact initiative will fall under its Strategic Partners group, run by Verdun Perry, and focus on investments advancing health and well-being, financial access, sustainable communities and green technologies, according to the New York-based firm. Along with direct investments, the strategy will include co-investing with other managers making socially conscious bets, Barnes said.

Ah, to live in a world where the phrase “socially conscious bets” can be uttered without a shred of embarrassment. Glorious!


Trump’s Tariff Tweets Do the Markets a Big Favor [Bloomberg]

President Donald Trump’s threat on Sunday to levy additional tariffs on Chinese goods because of the slow pace of trade talks sent the S&P 500 Index down by as much as 1.61 percent before it recovered to end lower by a less jarring 0.45 percent on a report that a delegation of Chinese officials still plan to travel to Washington this week to talk trade. The initial decline was painful, for sure, but cathartic as well, in that it should act as a sort of reset and make the market healthier following a nearly unimpeded trek upward this year. 

I wonder if today was a “healthy pause”, too.

Every now and then my old firm would hire an analyst who would tell me that he was “glad” the stock we owned (and he covered) was down, because now “we could buy more”.

There’s only one proper response to this.

“Not counting today, how long have you worked here?”


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The Zeitgeist – 5.6.2019

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

But 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.


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The Weekend Zeitgeist – 5.4.2019

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Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories. On the weekend, we leave finance to cover the last week or so in other shifting parts of the Zeitgeist – namely, politics and culture. It’s not a list of best articles or articles we think are most interesting … often far from it.

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


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.

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The Zeitgeist – 5.3.2019

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

But 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.

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The Zeitgeist – 5.2.2019

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

But 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.


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The Zeitgeist – 5.1.2019

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

But 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.


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The Zeitgeist – 4.30.2019

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

But 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.

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The Zeitgeist – 4.29.2019

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

But 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.”


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The Zeitgeist Weekend Edition – 4.27.2019

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Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories. On the weekend, we leave finance to cover the last week or so in other shifting parts of the Zeitgeist – namely, politics and culture. It’s not a list of best articles or articles we think are most interesting … often far from it.

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


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.

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The Zeitgeist – 4.26.2019

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

But 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.


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The Zeitgeist – 4.25.2019

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

But 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.


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The Zeitgeist – 4.24.2019

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

But 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.


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The Zeitgeist – 4.23.2019

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

But 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.



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