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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,

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

The Beachball Theory of Volatility

By Ben Hunt | September 23, 2020

No matter how hard you try to keep a beach ball underwater … pushing it, sitting on it, laying on top of it … it seems to have the mind of a trapped animal, turning and spinning to get to the surface at all costs.

I think exactly the same thing is true when it comes to volatility in markets.

Adventures in Hollow Market – SoftBank

By Ben Hunt | September 7, 2020

I don’t know if this is what SoftBank did.

But this is how I would do it.

Although I wouldn’t because I think it’s probably illegal.

September Monitors and Election Risk

By Ben Hunt | September 2, 2020

My take on the “massive” VIX election premium? Not massive enough.

This isn’t a “fiscal cliff” we’re talking, which was about as manufactured a “crisis” as I’ve seen. This is an honest to god non-trivial chance that we have an intractably disputed election and Constitutional crisis in the United States, against a backdrop of widespread violence in American cities. If that sounds like a VIX of 30 to you … well, bless your heart.

The Inflationary Shock Recipe

By Ben Hunt | August 27, 2020

Massive real-world household formation growth + positively correlated stock and bond prices + ZIRP forever and ever amen = an inflationary shock to your portfolio.

I don’t know when, and I don’t think it happens before the election, but this is the recipe.

The time to start preparing your portfolio for an inflationary shock and the havoc it will wreak on what you think is a well-diversified portfolio of stocks and bonds is NOW.

Webinar on Security Analysis Narrative Monitor

By Ben Hunt | August 26, 2020

We think we can identify the periods where market participants are primarily focused on either multiples, fundamentals, or technicals in the way they talk and think about investing.

Each of these narrative regimes – multiples-focused, fundamentals-focused, and technicals-focused – generates a powerful signal of subsequent market dispersion (cross-sectional volatility) and subsequent market performance.

A Banner Day

By Ben Hunt | August 3, 2020

It’s a big day for us here at Epsilon Theory, as we launch a new monthly narrative monitor – Security Analysis Methods.

That’s a mouthful and it sounds boring, but I promise you it’s anything but. Even more so than the Central Banks monitor, I think this is the most powerful investment application we’ve developed yet.

Extend and Pretend

By Ben Hunt | July 27, 2020

As the kids would say, I’m old enough to remember Charles Keating and Neil Bush.

I’m old enough to remember the slow-burning dumpster fire that was the S&L Crisis of the late 1980s, when politically connected bankers used their influence to enrich themselves and secure regulatory forbearance for their crappy loans.

It’s happening again.

Is This The Real Life?

By Ben Hunt | July 22, 2020

The more I see these midday mysterious reversals in the growth/value relationship, the more I think that there is a Common Knowledge shift happening and not just a month-by-month shift in the Wall Street drum-beating for this sector or that sector.

A shift in Wall Street drum-beating is good for a trade. A shift in Common Knowledge, though … that’s a Big Deal.

The New Monitors Are Here!

By Ben Hunt | July 16, 2020

I don’t expect everyone to be as excited about the arrival of the new ET Professional Narrative Monitors as Steve Martin was about the arrival…

Another Brick in the Wall

By Ben Hunt | June 16, 2020

The Fed completes its transformation of the credit market into a political utility, the EU tops the US in economic growth prospects for the first time in living memory, and Americans are losing faith in “America”.

The PPP Narrative for Asset Managers

By Ben Hunt | May 28, 2020

A narrative backlash is developing against RIAs and other asset managers that took PPP money.

Fair or not, this narrative is pure red meat for anti-Wall Street sentiment, particularly in an election season and particularly as the stock market goes up even as the real economy suffers.

Narrative Monitors

February 2024

January 2024

December 2023

November 2023

October 2023

September 2023

August 2023

July 2023

June 2023

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April 2023

March 2023

February 2023

January 2023

December 2022

November 2022

October 2022

September 2022

August 2022

July 2022

June 2022