Office Hours this Friday, 1/21, 2-3pm EST. Check out Forum for dial-in info

Epsilon Theory Professional

Epsilon Theory Professional

The content below is exclusive to Epsilon Theory Professional subscribers. To learn more about this content and how to subscribe, please click HERE. If you are already a member, please make sure you are logged in.

The Opposite of 2008

By Ben Hunt | February 27, 2021

I am increasingly thinking that both a Covid-recovery world AND a perma-Covid world are inflationary worlds, the former from a demand shock and the latter from a supply shock to the biggest and most important single asset market in the world – the US housing market.

Read more

We’re All Nigeria Now

By Ben Hunt | February 23, 2021

For the past 20+ years, the real-world model for economists to understand unexpected deflation was Japan.

If the risk today is unexpected inflation, what’s the real-world model for that?

Read more

Barking Dogs and Super Bowl Commercials

By Ben Hunt | February 5, 2021

No one thinks their Super Bowl commercial is a dud going into the game, but only one or two will come out as the commercial that everyone knows that everyone knows was really special and witty and effective.

It’s the same with Wall Street narratives.

Read more

The Zimbabwe Event

By Ben Hunt | January 25, 2021

The South African variant virus (501.V2) is not nearly 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,

Read more

Ireland Event Follow-up: Shockwave

By Ben Hunt | January 16, 2021

If B117 becomes the dominant SARS-CoV-2 strain in the United States, that is a profoundly deflationary, risk-off, dollar higher, flight to safety event.

I don’t believe that ANY of this is priced into markets.

Read more

The Ireland Event

By Ben Hunt | January 10, 2021

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.

Read more

What Does Inflation Mean For Your Portfolio?

By Ben Hunt | January 7, 2021

Right now, Wall Street is trying to identify which inflation narrative will be an investment thesis that makes lots of people nod their heads.

Recognizing THAT – and maybe even trying to get ahead of THAT – is how you play the game of markets successfully.

Read more

The Spice Must Flow

By Ben Hunt | December 22, 2020

This weekend’s regulatory news on Bitcoin is a big step forward in creating “flow” in the form of a highly liquid, easily transacted financial product that Wall Street can administer. But it’s a death knell for any “revolutionary” application for Bitcoin, as it becomes just another highly regulated game in the Wall Street casino.

Read more

A Disturbance in the Force

By Ben Hunt | December 8, 2020

We are seeing language in both the Central Bank and Security Analysis narrative regimes that would have been unthinkable even a few months ago, language that is market-negative. It’s not enough to change the market-positive narrative regimes in place today, but it’s definitely enough to make my risk antennae start to tingle.

Read more

The Bitcoin Metagame

By Ben Hunt | December 2, 2020

Wall Street is redefining Bitcoin to be an Inflation Hedge™ product.

This is how Wall Street creates flow. This is how Wall Street makes money. All that stands in the way is the unregulated nature of Bitcoin. So that’s gonna change.

Read more

Tyger, Tyger

By Ben Hunt | November 15, 2020

Three times in my professional life as an investor, I have felt a trade in my bones, by which I mean a certainty that there is a massive disjuncture between a real world poised for sharp secular decline and a market world at buoyant narrative highs. The first time was in the summer of 2008. The second time was in February of 2020. The third time is today.

In the summer of 2008 and February of 2020 I saw the trade to, yes, make money from those real world calamities. I do NOT see the trade here.

Read more

Schrödinger’s Price

By Ben Hunt | October 30, 2020

The insight of Schrödinger’s Cat is that the cat is alive AND the cat is dead before the box is opened. It’s not merely unknown whether the cat is alive or dead. The cat is actually alive AND actually dead at the same time.

In our real-life world of investing in markets, we frequently deal with real-life cats that are both alive AND dead at the same time. Like US Treasuries.

Read more

Fractures in the US Energy Independence Narrative

By Ben Hunt | October 20, 2020

Every once in a very rare while, we see what we call a Missionary statement (an action or a speech by a famous person or organization on a ubiquitous media platform) that has the potential to change the Common Knowledge (what everyone believes that everyone believes) about an important aspect of our investment lives.

Here’s one.

Read more

From Pillar to Post

By Ben Hunt | October 14, 2020

We are only given the world once. Usually that’s not a big deal from an investing standpoint, because the possible parallel universes aren’t that far apart in their market consequences. Over the next three weeks (and maybe longer than that!), the fact that we are only given the world once is a very big deal indeed.

Read more

The Best Hedge

By Ben Hunt | October 7, 2020

Markets happen at the margins. So does narrative impact on the market.

That’s important for understanding our semi-bearish narrative monitor signals here in October, as well as for understanding why they may not matter very much right now.

Read more

Cartoon Network

By Ben Hunt | September 29, 2020

This Friday’s jobs report could show a wage inflation “shock” as salaried Americans work fewer hours to help out their kids with a shattered school schedule.

Maybe it will end up being nothing, but there are plenty of algos that trade these releases immediately as they are reported, and this is classic example of how an algo can get really wrongfooted when the underlying ultra-stable data series goes haywire. Forewarned is forearmed.

Read more

Narrative Monitors

Legacy Monitor Archive (Pre-January 2020)