Epsilon Theory In Brief

 

Daily short-form pieces for those without the time (or attention span) for classic Epsilon Theory notes. Look out for regular features like the subscriber mailbag and guest contributions from within the Epsilon Theory network.

ET Podcast #9 – Make, Protect, Teach

By Ben Hunt | April 22, 2021 | 0 Comments

How do we change the world? Not through corporations and political parties from the top-down, but through free-thinking citizens from the bottom-up. Not as an alienated flock, but as a cooperative pack. Not with abstractions and transactions, but with making, protecting and teaching.

Let’s gooooooo!

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ET Podcast #8 – Leverage and Its Discontents

By Ben Hunt | April 2, 2021 | 3 Comments

Three blow-ups in three months: Archegos, Greensill, and Melvin Capital.

What do they have in common? Insane leverage employed to maximize private gain while socializing potential losses.

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A Conversation with Howard Marks

By Brent X. Donnelly | March 17, 2021 | 5 Comments

ET contributor Brent Donnelly talks with Howard Marks about why traditional value investing is likely permanently impaired as a strategy and why Growth vs. Value is a false dichotomy. Boomshakalaka!

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ET Podcast #7 – Inflation Investing

By Ben Hunt | March 11, 2021 | 3 Comments

We’re going to Pack-source a slate of investment strategies for an inflationary world. Here are five tentpoles to organize and support that effort.

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The Best Way to Rob a Bank

By Ben Hunt | March 9, 2021 | 11 Comments

I think that the collapse of Greensill Capital has a lot of systemic risk embedded within it, particularly as the fraudulent deals between Greensill and its major sponsors – Softbank and Credit Suisse – come to light.

This is the first Big Fraud I’ve seen in 13 years with the sheer heft and star power to ripple through markets in a systemic way. Not since Madoff.

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A Freaky Circle

By Rusty Guinn | March 9, 2021 | 3 Comments

Excessive complexity in a deal or structure isn’t necessarily nefarious, but it also isn’t a good sign. The distraction and confusion you and I feel reading about these deals is usually not the problem.

It is the point.

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The Fed’s Kryptonite

By Peter Cecchini | March 4, 2021 | 4 Comments

An in-depth look at the interdependence of inflation, Treasury supply, and the Fed reaction function.

Bottom line: inflation is the Fed’s kryptonite.

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ET Podcast #6 – The Business of Wall Street

By Ben Hunt | February 25, 2021 | 0 Comments

Very little investing today is buying and selling shares of common stock in individual companies. Instead, we buy and sell what Wall Street calls “products” – mutual funds, ETFs, options, REITs, SPACs, etc.

Dave Nadig, who literally wrote the book on ETFs, helps us understand the history and future of the business of Wall Street.

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The Third Rail Switch

By Rusty Guinn | February 23, 2021 | 21 Comments

In the same way that narrative shaped a conversation about the role of police going forward in 2020, narrative can shape a conversation about the role of teacher unions and public sector unions more broadly. My money is still on the status quo, but I’ve been wrong before.

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ET Podcast #5 – Gnostic Nationalism

By Ben Hunt | February 16, 2021 | Comments Off on ET Podcast #5 – Gnostic Nationalism

Every political movement has a political philosophy, and for Trumpism and MAGA it’s the Dominion theology of the charismatic/Pentecostal church.

Neither the rise of Donald Trump nor the attack on our Capitol can be understood without an examination of this faith and its constructed political narratives.

Believe it or not.

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ET Podcast #4 – Hunger Games

By Ben Hunt | February 5, 2021 | 1 Comment

What’s happening with Reddit and Gamestop and Robinhood is a revolution, but not the revolution you think.

This isn’t a “democratization” of Wall Street. You were played. Again.

It’s a revolution in Common Knowledge. And that changes everything. Again.

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When Does the Game Stop?

By Peter Cecchini | February 1, 2021 | 6 Comments

What’s happening now in equity markets isn’t the product of some paradigmatic democratization of finance. It’s just another bubble that will end badly.

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Portrait of a Very Serious Investor

By Demonetized | January 29, 2021 | 3 Comments

The Very Serious Investor is quite disturbed by recent goings-on in illiquid, small cap stocks with high short interests. These happenings represent an assault not only on the Very Serious Investor’s livelihood, but his entire cosmology. People placing profitable discretionary trades in the financial markets when they lack even a single Ivy League degree. Imagine!

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The Invulnerable Hero*

By Rusty Guinn | January 28, 2021 | 15 Comments

No, the real story here probably isn’t about a revolution against Wall Street. But that doesn’t mean that there isn’t an opportunity to build a movement – right now – to transform it toward fair, free and open markets.

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The Zimbabwe Event

By Ben Hunt | January 27, 2021 | 9 Comments

The South African variant virus (501.V2) is not the immediate threat to the United States as the UK variant virus (B117). But 501.V2 has the potential to create a far more powerful narrative – vaccine resistance – that can have a greater market impact than the more pressing issues of B117.

More and more, I think the variant viruses create a tradeable event for markets.

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Off Wall Street and Off-Off Wall Street

By Brent X. Donnelly | January 22, 2021 | 10 Comments

Everything you always wanted to know about r/Wallstreetbets and Gamestop*

*but were afraid to ask

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UK-Variant SARS-CoV-2 Update

By Ben Hunt | January 20, 2021 | 13 Comments

The spread of B117 in a Covid-fatigued country like the US is a profoundly deflationary, risk-off, dollar higher, flight to safety event in real-world.

Does it matter to market-world?

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ET Podcast #3 – The Ireland Event

By Ben Hunt | January 14, 2021 | 4 Comments

In episode #3 of the Epsilon Theory podcast, Rusty and I discuss the spike in Covid cases in Ireland and the risk of seeing a similar “Ireland Event” here in the US.

The time to act is NOW, not with indiscriminate lockdowns, but with strong restrictions on international and domestic air travel to contain the UK-variant virus while we accelerate vaccine delivery.

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The Ireland Event

By Ben Hunt | January 12, 2021 | 26 Comments

I believe there is a non-trivial chance that the United States will experience a rolling series of “Ireland events” over the next 30-45 days, where the Covid effective reproductive number (Re not R0) reaches a value between 2.4 and 3.0 in states and regions where a) the more infectious UK-variant (or similar) Covid strain has been introduced, and b) Covid fatigue has led to deterioration in social distancing behaviors.

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Reap the Whirlwind

By Rusty Guinn | January 11, 2021 | 50 Comments

There is a brief window where I think we have the opportunity to commit to building a common national identity together. Seizing this opportunity will mean leaving a lot of anger we will feel is entirely justified at the door.

Not seizing it, I fear, will mean that we all reap the whirlwind.

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