The Zeitgeist – 4.23.2019

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

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


April 23, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Walmart stores get modernized [Mass Market Retailers]

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

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

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

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

You just can’t escape Mr. Handy!

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

US Labor Productivity Growth

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

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


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

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

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

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

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

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

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

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


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

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

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

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

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


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

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

Oh.

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

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

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


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


Elizabeth Warren Wants College to Be Free [The Atlantic]

My best tweet ever.

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

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

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



The Zeitgeist – 4.22.2019

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

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


April 22, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

How to Align Sales Compensation with Strategic Goals [Inc]

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

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

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

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

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

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

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

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

Excellent cartooning, unnamed Commerzbank employee.


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

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

But I didn’t hate this.

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

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


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

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

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

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


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

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

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

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

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

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


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

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

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

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

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

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

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


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

The Zeitgeist Weekend Edition – 4.20.2019

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

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


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

The Long, Hard Road [Cincinnati Enquirer]

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

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

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

Health care. Education costs. Inequality. Real issues.

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

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

The people keep suffering.


The Black Church and the Black Revolution [Medium]

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

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

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

The people keep suffering.

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

The enduring lesson of the Rwandan genocide [Press Enterprise]

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

The people keep suffering.


Fixing the ‘Other’ Georgia [Valdosta Times]

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

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


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

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

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

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

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

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

The COURAGE TO ACT is ALWAYS the thing.

The Zeitgeist – 4.19.2019

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

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


April 19, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

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

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

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

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

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

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

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


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

Good thing you didn’t short China.

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

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


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

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

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

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


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

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

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

Here’s an actual article quote:

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

Huzzah, market crisis averted! We’re saved!


DAX Subdued On Growth Concerns [RTT]

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

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

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


The Zeitgeist – 4.18.2019

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

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


April 18, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

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

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

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


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

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

Bob Pisani remembers!

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

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


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

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

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


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

I’m not making this up.


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

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

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

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

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


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

6 months?? I’m already there!

Good thing my office is on the ground floor.


The Zeitgeist – 4.17.2019

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

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


April 17, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

JPMorgan Chase’s Numbers Belie Recession Coming [Forbes]

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

Humble on Wall Street.”


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

Wonderful.

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

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

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


Veteran SPAC Sponsors Roll Out Fifth Vehicle [Deal Pipeline]

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

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

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

Source: Quid, Epsilon Theory

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

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

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


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

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

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

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


US Congressional Divide [Business Insider]

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

The Widening Gyre.

Source: Business Insider

The Zeitgeist – 4.16.2019

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

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


April 16, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

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

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

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

The dreaded hard-landing! LOL.

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


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

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

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


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

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


Goldman Sachs crushes earnings, hikes dividend [Business Insider]

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

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

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


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

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

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


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

Evergreen.


The Zeitgeist – 4.15.2019

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

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


April 15, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

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

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

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


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

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

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


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

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


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

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


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

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

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


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

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


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

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

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

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

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

The Zeitgeist Weekend Edition – 4.13.2019

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

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


The Future of Robots [New York Times]

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

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

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

How will automation influence how humans behave with other humans?


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

BMW Z1 blue images 24 830x553

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

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


The self-made man [Times Literary Supplement]

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

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


‘The Rise of Skywalker’ [Variety]

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

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

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

So is this:

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


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

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

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

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

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


The Google Blacklisting of The American Spectator [American Spectator]

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

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

You cannot get away.

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

The Zeitgeist – 4.12.2019

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

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


April 12, 2019 Narrative Map – US Equities


Gilead Sciences: Hitting Bottom [Seeking Alpha]

The last few years have been brutal for shareholders of Gilead Sciences (GILD). The biotech actually started healing Hep C patients causing a plunge in revenues from a key drug. The company has now shifted to a HIV growth machine and when combined with a reduced dependence on HCV drugs makes for a promising scenario where revenues have finally hit bottom setting the stock up for a rally.

I think of Gilead as a cautionary tale for the entire healthcare industry. Two things have crushed the stock over the past two years:

  • A couple of drugs saw their patent protection expire, so prices plunged as generics came into the market.
  • Hep C patients were effectively cured by a new drug regimen, crushing demand for the lucrative drugs that didn’t cure them but kept them alive.

The first point here is the smaller of the two and has been debated endlessly. It will be debated more endlessly still in the 2020 presidential campaign.

The second point, though, is by FAR the larger issue. Which means that NO ONE will talk about it.

The business of “healthcare” depends on people staying sick. So they will.

Cures are soooo 20th century.

The 21st century is all about “testing for” your disease and “living with” your disease.

Why?

Because that’s where the money lives.


Another Warning on Asia’s $4 Trillion Stock Rally Is Flashing [Bloomberg]

The wall of worry surrounding Asia’s double-digit stock market growth this year just got another impetus: equity ETFs inflows have dwindled.

Despite a 9 percent increase to $502 billion in assets under management for Asia equity exchange-traded funds so far this year, net inflows have been tapering off, according to data compiled by Citigroup Inc. On top of that, a monthly net outflow — the second time in more than two years — was recorded in March.

Two ET points to make here:

Walls of Worry are a good thing for asset prices, not a bad thing. You always climb the wall.

There are better ways to track money flows than eyeballing historical monthly data.

For more, read this:


Op-Ed: Musings on the 737 MAX [Airways Magazine]

Consumer activist and former Presidential candidate Ralph Nader lost a grand niece in the Ethiopian Airlines, so naturally he is close to the issue.

He came out with a rather extreme claim that the 737 MAX as it stands needs to be treated as a faulty product and, in his words “recalled.”

Centering around the aerodynamic changes caused by engine placement, he argues that the “grandfathered” certification by the FAA was rash and that Boeing’s involvement in the certification process of its own plane was an example of regulatory capture.

Nader argues that trust is lost, the aircraft is fundamentally less safe than the aircraft before it.

My father owned a red Corvair almost exactly like this one. He loved that car. Almost died in it, too, when he was t-boned at an intersection on his way to work in Bessemer, Alabama. That was in 1966. I was two years old.

Ralph Nader wrote “Unsafe At Any Speed” in 1965. That book changed the US automotive industry forever, although I bet not 1 in 10 automotive sector analysts have ever heard of it, much less read it.

And I can guarantee you that not 1 in 100 aerospace sector analysts have ever heard of that book, much less read it.

The Boeing 737 MAX is our generation’s Chevy Corvair.

Or at least it should be.


Seward & Kissel New Hedge Fund Study: Funds Placing Premium on Strong Start [Press Release]


Twice as many companies paying zero taxes under Trump tax plan [CNBC]


Review: A Magnificent Road to Ruin in ‘The Lehman Trilogy’; Critic’s Pick [New York Times]

Though never stepping out of Katrina Lindsay’s original costumes — sharply tailored suits in shades of gray that bring to mind daguerreotype family portraits — the brothers Lehman transform themselves into an innumerable host of others. These include their descendants, spouses, colleagues, rivals and employees during more than 160 years.

The word “nothing” echoes throughout. Nothing is what the Lehman brothers say they come from; nothing is finally what’s left of all they’ve achieved. That’s what happens when money floats into the ether of latter-day Wall Street, unmoored by connection to substance.

Did you know that the Lehman Brothers – by which I mean THE Lehman Brothers – got their start in America by setting up shop in Montgomery, Alabama?

This is a long play … more than 3 hours, which is apparently way down from the original 5 hours staging … so not for the faint of heart. But seeing this is a bucket list item for me.


The Zeitgeist – 4.11.2019

Dick Fuld

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 11, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

How People Redirect Their Careers After Getting Laid Off [Harvard Business Review]

Leading off this morning on the Zeitgeist, an HBR article on “the career trajectories” and “mourning patterns” of former Lehman employees.

We call these two groups “Recreators” and “Repurposers.” Recreators tend to find similar positions, in comparable types of organizations and industries. For Lehman bankers, this meant securing jobs at other financial institutions, often as bankers. Repurposers, by contrast, typically leave organizational careers to pursue entrepreneurial opportunities, in finance or other fields. For Lehman bankers, this involved launching various types of new businesses, including for example travel, education, and e-commerce ventures.

I think we need a third category for the “mourning pattern” of Dick Fuld. I’m going to suggest Regrifter, but only because ET is a suitable-for-work publication.

Also, I made a promise to myself that whenever someone wrote an article about the Lehman collapse, I would reprint this:

If you don’t know what Repo 105 was, you should. If you do know what Repo 105 was, you should find someone who doesn’t and tell them about it.


Why Aren’t Markets Worried About Profit Warnings?: Taking Stock [Bloomberg]

One possible reason for the strength is that earnings-per-share expectations seem to be on the rise after several months of decline. After a rally driven by dovish central banks, easing trade tensions and signs of a bottom out in PMIs, companies may need to show some profit growth. At the moment, the expectation bar is still quite low.

BREAKING: 67% of S&P 500 Cos Beat Earnings Expectations in Q1

Tomorrow’s headlines today … just another service provided by the Daily Zeitgeist.


ECB statement after policy meeting [Press Release]

Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. We continue to expect them to remain at their present levels at least through the end of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2 percent over the medium term.

If you can only read one book on the end of an ancien regime and the magical thinking that ALWAYS takes place in its wake, you must read Ryszard Kapuscinski’s The Emperor. Kapuscinski chronicles the final years of Haile Selassie’s reign in Ethiopia from the inside out, interviewing dozens of courtiers to paint a first-hand portrait of an entire society lost in the fantasy world of Collective Solipsism.

Selassie and his Inner Party maintained the fantasy for years after it lost all connection with reality, so that a mighty fleet consisted of a single ship with a malfunctioning engine, promotions and medals were conflated with real-world power and influence, and bad people and bad ideas were constantly lauded and rewarded to keep hard questions from being asked.

The last years of Selassie’s rule are more than a parable for our times … they ARE our times.

Here’s the long-form ET note on all this …


A Deep Dive into Deep Learning [Scientific American]

Really good intro article. Read this and at least you’ll be able to nod sagely at your next cocktail party. Or the next Context hedge fund speed dating conference, which is really the same thing. I’ll highlight one quote:

It turns out that the learned features (outputs of neurons at the bottleneck) that emerge in this process are often useful. They can be used, for example, for building a supervised predictive model or for unsupervised clustering.

The network maps you see from our NLP partners at Quid are an example of unsupervised clustering. The investment applications we are building at Second Foundation Partners around, say, sector rotation are an example of a semi-supervised predictive model.

For more, here’s the ET note …


Lyft’s stock slide casts long shadow on Uber’s IPO [Reuters]

Lyft shares ended on Wednesday down 11 percent at $60.12, well below their $72 IPO price. Lyft was the first in a string of technology IPOs expected this year, including food delivery service Postmates and smart exercise bike Peleton.

Lyft’s poor stock performance bodes ill for these IPOs, especially for companies like Uber with no profits to show.

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


The Zeitgeist – 4.10.2019

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

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


April 10, 2019 Narrative Map – US Equities


In Puerto Rico, Building a Disaster-Proof Business Is Part of Recovery [New York Times]

Wait … an article about Puerto Rico that’s not about tax shelters or bond defaults or crappy local government or Trump idiocy or crypto bros? … an article that’s about entrepreneurship and the sort of small businesses that are the life blood of a vibrant local economy? What the hell, New York Times?

Also, thank you.


Forget real estate – ‘art flipping’ is the latest way rich millennials are building wealth, and it’s an investment baby boomers largely ignored [Business Insider]

The most interesting part of this utterly non-interesting filler article, the type of article that makes me yearn for a Forbes.com “contributor” story where I can at least belittle the author, is the use of the word “millennial”.

I counted 24.

The separate hyperlink to “rich millennials” as opposed to just plain old “millennials” gives it away. These are invitations for rage engagement, where readers who just can’t wait to mock “rich millennials” go for a quickie.

It’s all part of the Game of You.


PagerDuty seeks $1.69 billion valuation in its upcoming IPO and raises its price range, even as Lyft falters on the public markets [Business Insider]

Another gem from BI today … these mythical “concerns” that Lyft might just “bring the whole market down” is a classic example of how financial media intentionally builds a wall of worry in order to create a “problem” that can be “solved”.


Walmart is doubling down on robot janitors. Here’s why [CNN]

The actual article here is pretty boring … all about how Walmart is rolling out 900 giant robots to mop the floors at facilities … so I thought I’d use this space to celebrate Mr. Handy from Fallout, a boon companion if there ever was one.

My strong sense is that Rusty plays a cooperative game of Fallout 4. You know … building workshops, protecting the good folk of settlements throughout the Commonwealth, joining the Minutemen … that kind of stuff.

Not me. Some men just want to watch the world burn.


The Deadbeat Billionaire: The Inside Story Of How West Virginia Gov. Jim Justice Ducks Taxes And Slow-Pays His Bills [Forbes]

As Above, So Below

That’s the tag line for the Epsilon Theory note that’s a manifesto for my life as a citizen – Things Fall Apart (Part 3) – Politics. Here’s the money quote.

“As Above, So Below” means that our social lives are organized as a fractal, that when there is disorder in the heavens or the seats of worldly power, so is there disorder in our communities, our families, and our personal lives. It means that when Pharaoh hardens his heart, whether he lives in a marble palace on the Nile or a white house on the Potomac, so do OUR hearts harden, as well.

It means that the widening gyre, which we can see represented most clearly on a national scale and in national elections, is no less potent and no less present in our everyday lives. It means that Things Fall Apart in ways both large and small. Always and in all ways.

How does Trump break us?

By emboldening human Grendels like freakin’ Jim Justice to crawl out from their Oligarch caves.

They’re everywhere now, at every level of social organization. They walk among us openly and celebratedly. As if they own the place.

Which they will if we let them.

Beowulf’s secret? A strong right arm is a good start, but it’s clear eyes and a full heart for the win.

And one more thing …

This is a great article by Chris Helman (@chrishelman), and it frankly makes me even angrier at Forbes for publishing their “contributor” and “brand partner” drivel so hard, because it detracts from the truly original work that professionals like Chris create for Forbes. Thanks for writing with clear eyes and a full heart, Chris!


The Zeitgeist – 4.9.2019

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

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


April 8, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Here’s what does (and doesn’t) drive mortgage rates [Bank Rate]

If I were a betting man (and I am), I’d put a significant wager on the proposition that a similar mortgage primer written pre-GFC would not have mentioned the Fed at all, or at least would have had the Fed way down on the list.

Whatever you think about the Fed’s real-world power, you can’t deny the Fed’s narrative-world power.

It’s the narrative of Central Bank Omnipotence – that ALL market outcomes, good or bad, are the result of Central Bank policy – and its growth over the past decade in narrative-world is unlike anything I’ve ever seen in a professional career of studying this stuff.

The Fed is now at the top of the American Gods pantheon. They’re a classic Sun God.


Impact Partners BrandVoice: The Truth About Indexed Annuities And Market Risk [Forbes]

This is not a comment about indexed annuities and market risk, as exciting as that might be to Ken Fisher. This is a comment about the fresh hell that is Forbes Brandvoice.

Apart from having creepy eyeballs in the imagery, the point of Brandvoice is to eliminate once and for all that pesky line between editorial content and commercial content.

If you pay Forbes money, they will present your commercial advertisement exactly as if it were researched news. Not kinda sorta like researched news, but EXACTLY like researched news. It’s all just “content” to Forbes, and reporters or analysts or advertisers or marketers … they’re all just “content creators”.

To keep going with the American Gods shtick, Fiat News is a classic Trickster God.

And Forbes is their high priest.


Ecstasy and Empathy [Forbes]

MDMA is currently being assessed in two Phase III trials as a treatment for post-traumatic stress disorder. The drug’s mechanism of action consists of eliciting release of the neurotransmitters serotonin, dopamine, and noradrenaline.

Have you seen Cell, the latest Stephen King story-to-movie adaptation? It’s a really terrible movie. I also can’t stop thinking about it.

The Nudging State and Nudging Oligarchy are coming for your neurotransmitters.

I think maybe they’ve already got ’em, but I also think that we ain’t seen nothing yet.


How Can I Teach My Great-Granddaughter to Be Charitable? [New York Times]

I have an 8-year-old great-grandchild. I would like to help her develop a sense of charity. If I were to give her $40 per year to donate, how should I present the options to her, without overwhelming her?

Were I to show her images of starving Yemeni children, homeless Americans, threatened wildlife, Syrian/Central American refugees and so on, I fear she wouldn’t be able to process such a burden of information.

I think Kwame Anthony Appiah does a great job with The Ethicist column in the NYT Magazine, and his advice here is no exception.

Charity begins at home.

So does politics and investing.


More Oil & Gas Consolidation Seen in MLP Sector [24/7 Wall Street]

Upon the transaction’s close, AmeriGas will no longer be classified as an MLP and it will become a wholly owned subsidiary of UGI.

I’ve been meaning to write about the MLP-as-an-asset-class narrative for a while now, and if I don’t hurry up I won’t have anything to write about. MLPs began their life in narrative-world as a tax play (it’s literally in the name), adopted the growth/shale narrative while that was hot, and now they’re trying to become a utility/infrastructure play. A deeper dive forthcoming …


Futures subdued as investors brace for tepid earnings season [Reuters]

NEW YORK (Reuters) – The S&P 500 and the Nasdaq edged into positive territory on Monday, with gains held in check by falling industrials as investors braced for what analysts now expect to be the first quarter of contracting earnings since 2016.

As I may have mentioned once or 200 times, I am a betting man. And I would make a very substantial wager that a month from now we will see a slew of articles celebrating the “news” that 70% of companies beat Q1 earnings expectations.


The Zeitgeist – 4.8.2019

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

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


April 8, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

How to Invest in Coffee Stocks [Motley Fool]

It isn’t until you start really digging into the meta-data of financial media on a daily basis that you realize just how dominated these channels are with book report-style articles which mix slightly dated facts and vanilla qualitative assessments with headlines that indicate that those things are guides on how to invest.

I know, I know, it’s Motley Fool, but there’s a reason this was such an interconnected topic. There is a lot of this kind of content out there, from a lot of publishers.


Whatever it takes, Part 2?: Five questions for the ECB [Reuters]

Anyone who caught the most recent ET Live!, and any ET Pro subscribers who have read our March monitors update know where Ben and I come out on this. The return of the central bank put is now part of common knowledge. We think a hawkish deviation on any of these questions would be treated as a meaningful surprise.


No, you don’t need 20 percent; How Chicago millennials are buying first homes with down payment programs [Chicago Tribune]

So stay with me here. We’re going to finance this customer in our sophisticated new lending structure, in which they’d just make the principal payments that would have been a down payment over time. No, no, it’s not a 100 LTV loan, it’s an 80 LTV loan, but where the down payment is made in installments over time…why are you looking at me like that, it’s genius!

More seriously, I am rarely certain how often the author of an article like this knows that their piece is just being used as an advertisement. This guy wants to open his origination funnel, and he found someone willing to print an ad without charging him for it. More power to him, I suppose.

Outside of the advertising portion of the piece, how about the meat of the topic? The intersection of student loan debt, housing prices and lifestyles available to Millennials relative to their parents’ generations is incredibly and consistently central to all media we review. Perhaps the only theme which weaves its way into more social, cultural and financial topics (other than pro- and anti-Trump politics) is health care and drug costs.


Namaste, Now Pay [New York Times]

This article scored near the top of our (1) list of interconnected financial services stories, (2) centrality ranking of Weekend Zeitgeist non-financial stories and (3) social engagement rankings of highly central stories over the last week. It really seems to touch a lot of nerves at once.

What I find most interesting, however, is that the response to discovering a MLM scheme is almost always the same: I can’t believe it would happen here, to something as pure as [Fill in the blank here]. Y’all, that’s the only way these things work in the first place. Can’t get your old high school friends to swallow their pride and hit you and rest of the class of 1994 up for money if they don’t believe in their heart-of-hearts that introducing you to this amazing new program is really an act of service to you.


Suspected Rhino Poacher Trampled by Elephants and Eaten by Lions in South Africa [Slate]

A white rhino is seen at the Kruger National Park on August 20, 2018.

Something, something, circle of life.


Ray Dalio: Wealth gap a “national emergency” [CBS News]

I know we are all supposed to hate billionaires now, and yes, I think it was just as big of a meta-game gaffe for Dalio to stick his head up at this place and time as I thought it was when Schultz did it.

But I like Ray. I like Howard, too, for that matter.

Still, you don’t get to argue for the easy money / easy credit policies necessary to facilitate a beautiful deleveraging, and then go on national television to decry the most direct result of those policies as a national emergency. I mean, you get to, but not if believability is something you still care about.

Principle 31.

The Weekend Zeitgeist (3.31 – 4.6.2019)

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


Narrative Map – All US Non-Markets Stories (3.31.2019 – 4.6.2019)


The Times Can’t Let Go [Patriot Post]

I suppose it shouldn’t be surprising that the most interconnected story to the narratives permeating all non-financial news is an opinion piece from a right-wing site about the Mueller Report. It could just as easily have been a left-wing opinion piece from, say, Mother Jones.

I hope you aren’t sick of them yet, because, unfortunately, these “the real story in the Mueller investigation” pieces aren’t going anywhere. They are the perfect fodder for the Widening Gyre because their contentions cannot be proved or disproved. The political right can and will contend that the entire affair was a media-fueled failure, and that the unwillingness of the media to own up to its role is the ‘real story’. The political left can and will contend that the investigation uncovered enough to make Trump unelectable, that there was collusion, even if the scope of the investigation couldn’t be definitive about it, that it’s really about the cover-ups and unwillingness to make all the materials public, etc. etc.

I’m not offering an opinion on the truth of either contention, just the observation that deeply-held, tribe-identifying, non-falsifiable claims are almost impossible to root out.


Echoes from under the stadium [BYU-Idaho Scroll]

Echoes from under the stadium

Why is this so interconnected? Well, if you can cram discussions of college football, religion, music and language (singing hymns in Spanish) into a short article, you’re going to find yourself connected to a lot of different topics.

I’ve told the story before of a man – Dr. Eph Ehly – who guest conducted a large choir I sang with in Texas. Dr. Ehly believed that the American folk song was fading from our cultural memory. He lamented it. His lament was for the loss of everyday musicality, the idea that singing was a thing people did when they worked, when they traveled, when they gathered socially. It was also a lament for the idea of a working cultural common knowledge, songs and poems and texts we all knew and expected that others would know (and know we knew).

Dr. Ehly made us learn and memorize about a dozen of those songs. As it happens, a number of years later I found myself in an inn in Austria where some local musicians and a bit too much wine all around ended with me trying to teach a group of marginal English speakers a couple verses of Oh, Shenandoah. It was only 15, 20 years ago that this happened – and yes, it really happened (hooray, cask wine!) – but it’s hard to imagine this kind of familiar/foreign experience happening today.

Hymns are a sacred thing, but they ARE the folk songs of a lot of American sub-cultures. I suspect that the knowledge of Amazing Grace, How Great Thou Art, and most spirituals are going the way of secular folk tunes. Would 25% of Americans know a verse by heart? Fewer? Still, this isn’t a “good old days” thing. I’d be positively thrilled with cultural common knowledge of something modern, something popular! But as it happens, I know only two examples of what I mean by a true Folk Song, a true Hymn, a holy, cultural, musical thing that has stuck around in spite of it all:

The first are Christmas carols.

The second? Pick a random little town in Texas, and go to the high school football stadium on a Friday night. Stand up in the bleachers whenever you feel like it, and shout out as loud as you can, “The stars at night are big and bright.”


How the Left Embraced Elitism [New York Times]

ALL populism leads to power vested in a political elite, David.

Let us not pretend that a sitting president pressuring the head of an ‘independent’ central bank to explicitly buttress asset prices is somehow exerting less concentrated power than a goofy environmental plan that will never get off the ground (and won’t even be the defining issue of 2020, which I increasingly expect will be health care / health insurance).

Number 9

The influence of the influencer [UMASS Daily Collegian]

Another college paper!

I don’t have much to say about the intent of the article itself, but the influencer is not a surprising interconnected topic. It touches the intersection of technology, media and business. As I’ve observed – and as part of our media and NLP research, researched – influential social media presences, I’ve discovered two things that were surprising, at least to me:

  1. The remarkable advertising revenue-generation potential of a successful social media-based influencer.
  2. The similarly remarkable difficulty (for those who have tried) faced by most social media-based influencers seeking to convert that marketing influence into more traditional forms of influence and power (e.g. corporate, political, etc.). Still very different signaling/credentialing worlds with different governing narratives.

The Evolution Continues: The Platformization of Marketing [CIO Review]

Sorry, that’s as far as I got before my Buzzword Bingo card was full. I’m gonna take my winnings and go play the nickel slots.


Seeking Tomorrow’s Masterpieces [Pittsburgh Post-Gazette]

Ben and I have written about and are fascinated by art curation, despite the horrors of our art knowledge relative to other topics. Below are our trivia scores by category on Learned League, which I provide utterly without any authorization from Ben. I’m on the left, and he’s on the right. At least in the trivia world, we are uncultured swine. Third column gives our correct answers percentage. Brutal.

But we are still fascinated by the topic because of its credentialing structures, its missionaries, and the fact that the value of a painting, the designation of something as a masterpiece is a complete narrative construction. This is an entire industry built upon foundations of common knowledge and narratives!

To me there is so much that investors can and should learn from those who assess the value and marketability of visual art. While there are still some aesthetically minded folks like me who look at that blue clay bowl up there and say, like the uncultured swine we are, that it looks like something we made in elementary school art class, by and large art is an industry brokered by people who are much more aware and less embarrassed that they are playing a common knowledge game and not just ‘evaluating the artistic value’ of each piece. Everyone knows that it’s about convincing the right people and creating the right buzz and the right story about why something ought to be valuable.

That means that the games played are one level deeper into the Keynsian Newspaper Beauty Contest than what most people are playing in markets. It also means that the visible games in the art world look much more like the games played in finance that we prefer to imagine we are keeping a secret. You mean you own that stock in part because you believe other investors will begin appreciating some trait about it and buying into its Story? You rebel!

In other words, if you want to see what investors are doing in secret, watch what art investors do in the open.


Marvin Gaye: You’re the Man [All About Jazz]

Marvin Gaye: You're the Man

Why is the review of a previously unreleased 1972 album from Marvin Gaye connected to everything else in media in the last week?

Give the thing a listen and find out for yourself. Most (all?) of the songs were familiar to me and have been released on anthologies, but as a single composition the album is very fine. You could do worse on a Saturday in spring than listen to one of the finest voices ever recorded.

The Zeitgeist – 4.5.2019

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

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

We thought we’d post the underlying Narrative Maps for the Zeitgeist today. Let us know if you find this feature a) interesting or b) distracting !

April 5, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

April 5, 2019 Narrative Map – Selected Articles

Source: Quid, Epsilon Theory

Preferred Securities: Still Attractive Despite Modestly Higher Prices [Seeking Alpha]

Schwab pitching preferreds today. And every day. Just another example of an advertisement presented as “analysis” … the ubiquitous commercial version of Fiat News.

Two observations …

  1. When I was running a hedge fund, whenever I read a sell-side report that said a security was “still attractive for long-term investors”, I would immediately get a borrow and short the hell out of it.
  2. Fannie Mae preferreds. Never forget. Although everyone has.

Target Raises Its Minimum Wage to $13 an Hour [The Street]

March wage growth came in at 3.2% today, which is being described by everyone in financial media as “muted”.

Kinda like the Disney flacks telling us that Blue Will Smith is “fine”. A different genie, but still.

As the immortal line in The Outlaw Josey Wales would have it, “Don’t piss down my back and tell me it’s raining.”


Natixis US Trends Report: Bonds Make Comeback Acting as Portfolio Ballast in Turbulent 2018 [PR]

As volatility continues? What the hell are you talking about?

Oh, I see … it’s the Natixis report on 2018 “trends”, pushed on BusinessWire (A Berkshire Hathaway Company ™) in April 2019.

It’s a variation on The Prediction Polka, a great little note that Rusty wrote in December.


Value Versus Noise In Emerging Markets [Forbes]

As the legendary money manager Peter Lynch used to say, “If you spend more than 13 minutes analyzing economic and market forecasts, you’ve wasted ten minutes.” No one can predict the economy, the markets, or the direction of currencies. Only a charlatan would pretend to. Yet if you click on your financial news most days, that’s all anyone is trying to do. Pundits rarely invoke the wisdom of Socrates: “I know that I know nothing.”

Author then proceeds to compare the earnings yield of Emerging Markets ™ with the earnings yield of The Dow ™ and calls this Value ™.

You know, just like Peter Lynch used to do. Gag.


CalPERS not alone on private equity shift; A growing list of investors act to enhance returns, lower fees [P&I]

If you’ve been reading Epsilon Theory for more than a nano-second, you know what we think about this … greater allocations to private equity isn’t stupid, it’s NECESSARY as all capital markets (including private capital markets) become public utilities.


Global Stocks Edge Up as Trump Signals Trade Progress [Morningstar]

I just can’t write another blurb about the China Trade narrative. Just can’t do it.


The Zeitgeist – 4.4.2019

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


They Had It Coming [The Atlantic]

Actor Felicity Huffman leaves the federal courthouse, April 3, 2019.

Sweet Christ, vindication!

How long has it been? Years? No, decades. If hope is the thing with feathers, I was a plucked bird. Long ago, I surrendered myself to the fact that the horrible, horrible private-school parents of Los Angeles would get away with their nastiness forever.

Schadenfreude is the second most powerful other-regarding emotion, just a tad less overwhelming than jealousy, and you’ve seen a lot of it in the aftermath of the celebrity college admissions scandal. But rarely in as pure a form as this Atlantic article. I’m not going to act holier-than-thou on this. But I will say that schadenfreude and jealousy are the primary tools of the Nudging Oligarchy and the Nudging State. You’re being played.

Here’s the ET note on other-regarding emotions, Sheep Logic:

And here’s the ET note on how I think we should try to think about the college admissions scandal, The Ministry of Rites and the Compassionate Man:

Clear Eyes and Full Hearts, my friends.


Jeffrey Skilling, Former Enron Chief, Released After 12 Years in Prison [New York Times]

True story. I graduated from Vanderbilt in 1986 and had an offer from McKinsey to join one of their practices. You know, the two-years-and-then-we’ll-pay-for-biz-school-gig. They gave me a list of practices and asked where I wanted to go. My brother was in college at Rice at the time, so I bizarrely said that Houston was my first choice, even though 1986 Houston was … well, let’s just say it was a far cry from 2016 Houston, which is actually a great city.

So I had an offer letter and a plane ticket to Hobby Field when I got a letter from the NSF that I had won a graduate school fellowship good for any school that would take me. Figuring that McKinsey could wait, I nixed the job offer and never took that flight to Houston.

For those of you who don’t know the Enron back story, Jeff Skilling was the lead partner in that Houston McKinsey practice in 1986. Skilling started consulting for Enron in 1987, developing one of the first forwards markets in nat gas, and he left McKinsey in 1990 to be the CEO of Enron Finance Corp. The rest, as they say, is history.

I’d like to think that I wouldn’t have become a Jeff Skilling acolyte. I’d like to think that even if I had become a Jeff Skilling acolyte and followed him to Enron, that I wouldn’t have followed him down the path of fraud and perdition.

I’d like to think that, but it’s not true. I know who I was when I was 22 years old, and there is no doubt in my mind that I would have burned myself on this stove. Burn? I mean incinerate.

Our lives are defined by the roads we avoid as much as by the roads we take. And more often than not, sheer blind luck is responsible for the difference.

I think about that a lot these days, especially as I watch my children grow into adulthood.


Lyft plunges below IPO price in second day [Washington Post]

I’m old enough to remember the Facebook IPO.


Netflix prices are going up [CNN]

The streaming service sent emails this week to US subscribers about a price increase that starts in their next billing cycle. It’s an increase some Netflix customers have already seen.

Netflix (NFLX) announced the price hikes in January, and said at the time that the increased revenue would help itadd more television shows and movies. The company has been rolling out the price increases over the last few months, based on billing cycles.

There’s a word for “price increases and higher wages”. But it’s a word that the Fed says doesn’t exist, so … you know … I guess it doesn’t.


How Rupert Murdochs Empire of Influence Remade the World [New York Times]

David Byrne called it.

Same as it ever was. Same as it ever was. Same as it ever was.


The Zeitgeist – 4.3.2019

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

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


Data Sheet: Lessons From the Kardashians for All Kinds of Businesses [Forbes]

Kendall Jenner is NOT apologetic about promoting the Fyre Festival on Instagram for $250k, she’ll have you know.

And Fortune is NOT apologetic about promoting Kendall Jenner in DataSheet, “Fortune’s daily newsletter on the top tech news“, this article will have you know, because we can all learn valuable lessons from the Kardashians.

Agreed!

So naturally I headed over to Webfluential to see how much I could charge on Twitter for my social media promotes, “to make the dream of becoming a Social Influencer (and getting paid), a reality“.

The answer: $120-$145 per tweet. Not chump change!

But then I saw what @ReformedBroker could make. C’mon, Josh, get with the program!


U.S. disaster aid won’t cover crops drowned by Midwest floods [Reuters]

Just the latest blow from the other-worldly flooding in the Midwest, coupled with “trade wars are good, and easy to win” policy from the DC clown posse.

I must have missed the CNN and Fox anchors doing live shots to cover this horrific disaster.


50 Cent Or Two Cents? Rapper’s Mansion Sells At A Loss For $2.9 Million [Forbes]

Was the 52-room mansion’s sale jinxed by its infamous reputation? Maybe. Were stripper poles, gun-toting gangsta murals and the monumental cathedral atrium excessive? Yes. Was the  marbleized  mansion too customized to the rapper’s extravagant taste? Definitely.

Welcome to bucolic Farmington, Connecticut! There’s no jumping allowed from the old trestle bridges that dot this pastoral landscape, not even if your name is Curtis Jackson.

You know who gets the last laugh here? Mike Tyson’s ex, Monica Turner, who got the house in their divorce and sold it to Fiddy for $4.1 million in 2004. It’s a funny old world, innit?


Jerome Powell, John Legend to attend Dem retreat [Politico]

Wait … Chrissy Teigen is married to John Legend? How did I not know that? She’ll be addressing the caucus, too. Sadly, though, John Legend is not expected to perform.

Recode editor Kara Swisher will talk to members about the economy and its shift toward automation. John Yang of Asian Americans Advancing Justice and Fernando Garcia of the Border Network for Human Rights will speak during a session about immigration. And the leaders of major labor unions, including SEIU’s Mary Kay Henry, Lee Saunders of AFSCME and Sara Nelson from Flight Attendants – CWA, will also address members.

Oh … and Jay Powell will talk about something or another.


Closing the border with Mexico could bring the auto industry to a halt, say experts [NBC News]

Top men, Dr. Jones. Top men.


The Zeitgeist – 4.2.2019

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

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


Veggie Grill Expanding Despite The Scarcity of People Who Are Vegetarians And Vegans [Forbes]

The snippy tone of this interview is exactly as implied by the article title: what kind of an idiot are you to launch a veggie-only casual dining chain when only x% of people are vegetarian?

The answer, of course, is exactly what the co-founder says here. They’re not selling to vegetarians or vegans, they’re selling to people who want to FEEL like vegetarians or vegans.

Love it.

In the immortal words of Maya Angelou … people will forget what you said, people will forget what you did, but people will never forget how you made them feel.

Or in our business, people will never forget what you did for their personal account.


German Factory Slump Leaves Euro Area as Global Economic Laggard [Bloomberg]

And this is why Draghi and the ECB will do MOAR. Gotta get the Euro to USD parity …

We are smack in the middle of the Silver Age of the Central Banker, with Bronze just around the corner.


Larry Kudlow has a point in calling for an immediate Fed rate cut, strategist says [CNBC]

Friends don’t let friends reify the yield curve.

Yeah, it’s a $10 word. It means that the yield curve is not a thing in itself. Seriously, it’s not. Stop treating it like it is. You look like an idiot.


Let’s Not Stress About the Next U.S. Recession [Bloomberg]

It’ll be about this big.

Honest to god, I was sure this was an April Fool’s prank. But no.


Bitcoin Surges as Cryptocurrency Market Suddenly Springs to Life [Bloomberg]

Meanwhile, the idea for his next script slowly forms for Jordan Peele.


The Zeitgeist – 4.1.2019

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

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


Building Trust In The Trustless: Blockchain’s Best Asset Is Holding It Back [Forbes]

There are a few gags that are like candy to journalists. The “lack of trust in a trustless system” bit is one. It is like truffle oil to a gastropub restaurateur. Like 808 to a hip hop producer. Like saying “taking things one day at a time” to a professional coach. Like a purple cape to a LARPer.

Indispensable, irresistible and after a certain point, a little bit irritating.


More managers make move to mobile homes [P&I]

Private equity has been heavily targeted in financial media and public asset manager commentary lately, mostly in the form of shock at the continued success PE funds have had raising new money – and the asset owners who have continued to move capital there. Still, the glowingly positive industry narrative around private equity which we monitor has barely moved since Q4 2018.

To me, however, far more than even private equity (if obviously not in scale), there is only one bucket in most big institutional portfolios where hope always seems to spring eternal, regardless of outcomes, evidence or narrative: value-added real estate. I have no explanation for this, other than a belief that most institutional boards consist of people who – because of their own professional successes – much more intuitively understand making money by buying-and-improving than by temporarily owning a fractional listed share of an operating company.


Investors getting better ways to gauge risk-parity success [P&I]

In most cases, I would (obviously) caution skepticism about what fund managers and consultants are telling you about how to benchmark what they are selling you, and would usually take the side of asset owners. Not here. I’m with the fund managers.

The question behind benchmarking – or really any data-driven oversight process – has to boil down to this: What am I going to do with this data? It’s easy enough to answer for long-only equity or fixed income managers, even if most institutions aren’t very good at doing the right things with those answers. Likewise, I can think of all sorts of things you can do to oversee a risk parity portfolio with an index-based benchmark, but almost all of those things are bad.

Risk parity managers are not, for the most part, trying to produce alpha. The differences between them are structural. In general order of importance, they will differ by:

  • The quantity of risk they target;
  • The methodology whereby risk buckets subject to equalization or balancing are defined (e.g. regimes, categories, etc.)
  • The assets / premia they include in their universe;
  • The instruments they use to express those assets / premia
  • The risk estimation and rebalancing methodology (e.g. decay horizon, etc.)

If you want to be in the business of measuring performance deviations of risk parity strategies against a benchmark, know that you will be in the business of evaluating whether you should change your comfort level with one of the above structural decisions. And if that’s a business you want to be in, there are a hell of a lot better ways to perform ongoing diligence on those structural decisions than the weak-as-hell proxy of performance against the generic set of structuring assumptions built into an index.

Decide if you believe in risk parity or not, test the risk efficiency assertions over long periods, and measure managers internally to confirm they are doing what they say they do. Beyond that, if you think that benchmark-related performance monitoring is going to be part of your ongoing diligence, just sell them now and save yourself the trouble of firing them after a surprisingly bad year for their rates buckets.

By the by, I STILL think there is utility for RP indices (my old business used to run one of the first!), but mostly to help asset owners think about portfolio construction and the uses and traits of the strategy more generally.


Sports Direct Considers Bid for Debenhams [Reuters]

When we updated our internal narrative analysis of the private equity industry, as noted above, we didn’t see much shift. There were, however, three oddly negative clusters that stood out:

  • Private equity executives and bankers/lawyers from noteworthy financial sponsors practices caught up in #MeToo scandals;
  • The same, except college admission bribery scandals; and
  • UK Retailing.

The third issue was meaningfully connected to the rest of the network and seems worthy of ongoing notice. Then again, I’ve been burned by UK retail before (Hello, DRTY/Kesa/Comet), so it’s possible I’m projecting here.


Hacking firm NSO battles abuse claims with PR and Google ads [Fast Company]

I’m always somewhat fascinated when the whole MacGuffin of an article is a total fantasy. In this case, the conceit is the implication that the company in question purchased ads with specific bad-sounding search terms to soften its image in the face of the most negative claims about it. It paints a clear picture in your mind, doesn’t it? And without a single explicitly false statement.

There’s just one thing:

I’ve got nothing to say about the company or situation – I don’t know enough to do so, although I think we’ve been pretty consistent in our views about the panoptistate. But it’s when we agree most with what we’re reading that we need to be most careful about what appear to be selective facts chosen to promote a particular interpretation that the author prefers.


In This Tech I.P.O. Wave, Big Investors Grab More of the Gains [New York Times]

The article is fine (although of course it has a pretty transparent Fiat News angle), but the missing piece here is this: the utilitization of markets has hit private markets every bit as much as public markets. Guess what happens when plentiful, cheap capital remains available to you in those markets?


What Happens When Women Stop Leading Like Men [New York Times]

We have pointed it out in some of our prior analyses of sector-level narratives: the representation of women in leadership roles is a very cohesive, highly connected topic, especially in financial services. Ignore it at your peril.


What Are Fat Fingers and Why Don’t They Go Away? [Washington Post]

Simple answer? Because order management system software is, generally speaking, hot garbage water, and because the pressure desks get from clients to remove or loosen fat-finger limits is more profitable and interesting than the pressure they get from credit or compliance.