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The Phone Call Is Coming From Inside The House

By Ben Hunt | March 15, 2023

Last week I wrote that my spidey-sense was not tingling when it came to systemic risk for the banking system, that I just didn’t see the pervasive rot that would create a real worry about the stability of the *system*.

Today my spidey-sense is tingling like crazy.

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Book Value

By Ben Hunt | March 10, 2023

Over the past week we’ve had one bank fail (Silvergate) and another forced to raise new equity and start protesting-too-much about how there’s no slow-motion run on the bank (Silicon Valley Bank). The question, of course, is whether these two banks are canaries in the coal mine.

Has systemic risk returned to the banking system?

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ODTE Is the New Black

By Ben Hunt | February 24, 2023

ODTE stands for zero days to expiry, and it’s the catch-all phrase for options that expire the same day they are written.

ODTEs are all the rage, prompting questions on Wall Street like “are ODTEs the tail that wags the market dog?” and “are ODTEs a ticking time bomb for markets?”.

My answer: yes, kinda, but not in the way you think.

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Spidey Sense

By Ben Hunt | February 12, 2023

I’m 58 years old, and this is the greatest level of direct military confrontation between the world’s superpowers in my adult lifetime.

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Narrative Stability, Hanging by a Thread

By Ben Hunt | February 8, 2023

“Narrative Stability, Hanging by a Thread” is a badly mixed metaphor, but it conveys exactly what we’re seeing in narrative-world these days.

We are in a market where we are one inflation shock or one jobs shock (like the one last Friday) from broadly reshaping the narrative landscape. But for now it’s steady as she goes.

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Momo Destruction

By Ben Hunt | February 3, 2023

Nothing gets my spidey-sense tingling more than a market that looks benign enough, but has enormous carnage occurring just below the surface. And that’s exactly what’s happened so far in 2023, where risk assets in general and the US stock market in particular have been strong but momentum strategies have been absolutely destroyed.

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When Does The Story Break?

By Ben Hunt | January 20, 2023

Whether or not Blackstone and Starwood are successful in maintaining the Story of Adequate Liquidity and preserving their private REIT franchises through this storm depends on one thing and one thing only – how bad is the storm going to get? If it’s a “soft landing” or a “mild recession”, then they’ll sail through this fine. But if it’s a bad recession …

Unfortunately for private REIT managers and their LPs, I think the odds of a bad recession in 2023 went up substantially this week.

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Big Shift in January Narrative Monitors

By Ben Hunt | January 6, 2023

I expect Wall Street and financial media to trumpet the “soft landing” thesis pretty loudly over the next few weeks. Is this correct? Personally, I don’t think so. Six months from now, will we have a soft landing or a hard landing? Personally, I think it’ll be a hard landing.

But who cares what I think!

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This Is the Business We Have Chosen

By Ben Hunt | December 21, 2022

If you are responsible for Other People’s Money, you sever ties with your undercapitalized, overlevered broker before there’s a run on the bank. You get out when you suspect, not when you know for sure. And if your friends are unhappy about that … well, tough.

This is the business we have chosen.

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Sam Bankman-Fried and the FTX/Alameda Fraud (ET Pro edition)

By Ben Hunt | December 12, 2022

I believe quite strongly that Bankman-Fried should be questioned a) by professionals, b) under oath, and c) in a venue that allows for evidence to be presented, other witnesses to be called, and his testimony to be impeached.

Here’s the script for that!

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The Good, the Bad, and the Ugly

By Ben Hunt | November 7, 2022

A big change in our narrative monitors this month!

Also, some shocking (to me, anyway) data on how good some companies are with their stock buybacks, and how ugly and bad other companies are with theirs.

I think it’s going to be a long winter in tech-world.

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Mortgage Markets and History’s Rhymes

By Ben Hunt | October 21, 2022

In Q4 2007 – in the aftermath of the Bear Stearns MBS funds going out (June), the blow-up across most quant funds (August), and both autos and housing rolling over in the US – I got net short in my hedge fund and started looking for single stocks with business models that were levered to borrowing short and lending long in the structured mortgage product world.

Today I’m getting the same funny feeling about the structured mortgage product world.

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Statistics and Narrative Creation (Shelter Inflation ed.)

By Ben Hunt | October 18, 2022

Everywhere you look today, you are seeing Wall Street and Washington missionaries using annualized month-over-month or quarter-over-quarter inflation statistics to “prove” their opinions that inflation is not embedded and – more importantly – their opinions that the Fed should stop hiking interest rates.

It’s a terribly flawed cartoon of reality, but a very powerful narrative weapon.

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Floating to the Surface

By Ben Hunt | October 5, 2022

My rule of thumb is that it takes about two months for the dead bodies of institutional investment firms that have been drowned by some macro turn of events to float to the surface. That’s a pretty gruesome way of making my point, and apologies for that, but it’s the best and truest analogy I could think of.

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Waiting for Godot

By Ben Hunt | September 21, 2022

The math that drives 2023 dovish hopes on Wall Street and the White House is this: string 12 months of constant +0.2% month-over-month CPI readings together, and your CPI will end up at 2.43%.

Here are 4 consequences of policy makers waiting and hoping this comes to pass.

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Lehman Moments, Tepper Moments, and German Economic Collapse

By Ben Hunt | August 23, 2022

Could the German situation get worse? Of course it could. Have we had a “Lehman moment” yet? No, we have not. But I don’t think we are that far away from a Lehman moment in Germany, after which further bets on the system breaking down become much less attractive as existential system risk grows much higher. I don’t think we are that far away from a Tepper moment in Germany, where risk/reward asymmetry becomes infinitely skewed to going long for those who are going to be wiped out if the system fails anyway.

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Hostage Situation

By Ben Hunt | August 9, 2022

In times of profound informational need – like today when we *really* need to know if inflation is embedded in the real economy – we are desperate for data that will allow us to act with conviction. But the nature of our macro data construction guarantees we will get less accurate results during these times where we need accuracy the most.

As the kids would say, it’s just math.

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A Tale of Two Inversions

By Ben Hunt | July 27, 2022

Multiple not-seen-in-a-quarter-century events have occurred over the past six weeks in rates-world. The lack of narrative attention is striking, as are the implications for the next few quarters across markets.

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One Narrative To Rule Them All

By Ben Hunt | July 7, 2022

I believe that it is impossible in a robust, ie, non-financialized and non-levered macroeconomic world, for a nation’s people to be a lot richer than their economy grows.

But that’s where we are.

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Weimar, War, and the Narrative of Central Bank Omnipotence

By Ben Hunt | June 21, 2022

It feels weird to be rooting for a Volcker-esque recession and long bear market as the best potential outcome for where we are today. But there are worse outcomes, like Weimar or war. And it feels like those much worse outcomes are squarely on the path of least political resistance.

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The Universe is Healing … or Going Nuts, Kinda Hard to Tell

By Ben Hunt | June 6, 2022

We have two new narrative signals here in June, both Bullish in direction, which is a welcome change from the largely uniform Bearish signals of April and May.

But both on the surface and beneath the surface, there is an enormous amount of conflict and churn happening in narrative-world. Time to trim the risk sails.

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Seems Like Old Times

By Ben Hunt | May 25, 2022

For a solid two years, call it early 2011 through early 2013, comparative euro-area gov’t bond yields was the first chart I’d look at in the morning and the last chart I’d look at in the evening.

Time to start doing that again.

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But The US Consumer Is Strong! ™

By Ben Hunt | May 10, 2022

If there’s one common knowledge narrative that I think can break over the coming months, it’s But The US Consumer Is Strong! ™.

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The Beatings Will Continue Until Morale Improves

By Ben Hunt | May 5, 2022

I’d like to tell you that our Narrative Monitors are not as bearish for May as they were for April.

Yep, I’d really like to tell you that.

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Narrative Monitors

Legacy Monitor Archive (Pre-January 2020)