Epsilon Theory Professional
In 2008, the market came roaring back after Bear Stearns was sold for parts to Jamie Dimon. Why? Because narrative. Because with Bear’s elimination, “systemic risk was off the table.”
That’s the question you need to ask yourself today. Is systemic risk off the table?
We provide an update on our thinking about narrative structure as of April 7, 2020. In short, there is an emerging “we flattened the curve” narrative. We think it has some meaningful implications.
I honestly have no idea what the world is going to look like in six months! I’m sure I’m not alone. And if you honestly have no idea what the world is going to look like in six months, are you going to live up to your commercial obligations (like a lease) over the next six months as if the world is still spinning as always on its axis?
We update our thinking based on the framework we published on 3/17, especially in two areas with active changes in narrative structure: fiscal and monetary policy responses.
After a few weeks of historic market volatility, we reexamine the framework we would use to think about the implications of Covid-19 and the mitigation response for multi-asset portfolios.
There’s a lot of first-level thinking going on, and navigating the transition from uncertain markets back to risky markets means avoiding their pitfalls in our portfolio and risk management processes.
All of our thinking about CV-19 is wrong and all of our decision-making about CV-19 is wrong because we believe we’re getting “information”, when actually all we’re getting is an irrelevant error distribution.
Quantitative analysis is all well and good, but when someone starts peddling you charts or measures when you KNOW that the underlying data is unknowable, you are dealing with a cargo cultist. When it comes to Covid-19, nobody has time for that.
As of February 27, even after a 10% drawdown, we believe the narrative about Covid-19 is complacent.
Not gonna lie … this virus got us in the first half.
But if we prepare and strengthen our healthcare systems NOW, particularly in cities like Jakarta, we can still win the game.
Legacy Monitor Archive (Pre-January 2020)