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Yeah, It’s Still Water (follow-up)

By Ben Hunt | November 1, 2019

You know, I was a big fan of stock buybacks back when I was running a fund, and I still think that most of the macro reasons to oppose stock buybacks are silly.

But when I look at it from a micro or individual company perspective, there is no doubt in my mind that stock buybacks have been totally hijacked by corporate management and boards over the past few years to sterilize exercised options and restricted stock units.

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Domino Theory

By Ben Hunt | October 15, 2019

I’m not THAT into dominoes, but I am into figuring out what’s next for changes in the Fed narrative and how that impacts markets.

More evidence that the Common Knowledge around the Fed has shifted dramatically, and more evidence for where this shows up next in markets …

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Coal Mine, Meet Canary

By Ben Hunt | October 8, 2019

I think these emergency actions in the repo market – and to be sure, these ARE emergency actions – and now the expansion of the balance sheet to get more cash into the system, are the clearest indications yet that the Fed has lost its fundamental credibility with Mr. Market.

THE FED IS CONCERNED ABOUT “MAINTAINING A FIRM GRIP” ON ITS CONTROL OVER THE PRICE OF MONEY.

As they say in the twitterverse, let that sink in.

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The Wages of Populism

By Ben Hunt | September 30, 2019

There are two necessary narratives for EM investing to work:

1) Yay, EM growth!
2) Yay, EM property rights!

Both of these narratives are broken, which means the *business* of EM investing is broken. Heads up: this is not a mean-reverting thing.

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The Old Man and the Sea

By Ben Hunt | September 25, 2019

The line between the anchor and the boat has been cut. The line between the fisherman and the fish has been cut.

Everyone knows that everyone knows that central bank actions have no connection to real economic outcomes. THIS is the new common knowledge, and I don’t know how or where or when, but I think it changes everything.

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Hello Darkness My Old Friend

By Ben Hunt | September 16, 2019

Our most impactful structural attribute of narrative is Attention – the level of “drum-beating” for a certain narrative relative to all of the OTHER narratives taking place.

So it matters that the Inflation narrative is close to all-time lows in its Attention score coming into September, while both the Central Bank narrative AND the Trade & Tariff narrative are at all-time highs in their Attention scores coming into September.

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The US Recession That Wasn’t

By Ben Hunt | September 10, 2019

I’ve never seen a US-oriented macro query that yielded more non-US narrative clusters.

Also, the past few days in markets have felt like 2008-2009, where the only thing that mattered for markets was risk-on/risk-off, and that “factor” swamped whatever else you were doing in your investment process. This isn’t as all-pervasive as risk-on/risk-off, but whatever it is (rates-on/rates-off?), it’s as impactful in the value/growth context.

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Two Things I Think I Think

By Ben Hunt | August 26, 2019

First, I think I think that the “cover story” for the Fed – that they act to help the real economy – has evaporated.

Second, I think I think Trump has lost the financial media over the Trade War in the same way that LBJ lost Walter Cronkite over the Vietnam War.

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I Was Shook

By Ben Hunt | August 14, 2019

The news about Jeffrey Epstein’s death on Saturday hit me hard, as did the escalation in the Hong Kong protests over the weekend, as did the collapse in Argentina’s currency and stock market on Monday. As the kids would say, I was shook. And I’m still trying to figure out what I think about all this, both as a citizen and as an investor.

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The Second Horseman

By Ben Hunt | August 5, 2019

The First Horseman was a tightening Fed, and markets suffered its wrath in Q4 last year.

Markets are now suffering the Second Horseman, as China “surprised” markets with a sharp devaluation of the yuan last night in response to higher/broader tariffs that Trump threatened to impose last week.

Here are the questions Rusty and I are asking now, along with our answers …

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The Dog That Didn’t Bark

By Ben Hunt | July 29, 2019

I’ve been looking at narrative maps for a long time now, and I don’t think I’ve ever seen as complacent a market narrative as what our Narrative Machine research is showing around US Fiscal Policy.

Here’s how we analyze this research.

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They’re. Not. Even. Pretending. Anymore.

By Ben Hunt | July 22, 2019

I’ve met Rick Rieder and Larry Fink a couple of times, but I don’t know them. At all. Maybe they’re decent guys. Maybe they really believe in their heart of hearts that it’s wise public policy for the ECB to buy equities. I truly don’t know.

But if it walks like a raccoon and talks like a raccoon …

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Get Up and Dance

By Ben Hunt | July 15, 2019

That line about dancing by Chuck Prince is the perfect quote for any age and any asset class where institutions intentionally take risks they know are foolish, but risks they believe are manageable because there’s a greater fool looking to get on the dance floor after them.

The greater fool theory is the driving force behind the bid for negative-yielding debt, whether it’s European government bonds or European investment grade corporate debt.

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You Are Here, June 2019

By Ben Hunt | July 8, 2019

Yes, we’re still in a zeitgeist of Central Bank Omnipotence, where deflationary shocks simply can’t take the market down for much or for long. That said, the Cohesion measure of both Trade & Tariffs and Central Bank Omnipotence is really breaking down, meaning that there is enormous narrative confusion over how the rate cut trajectory plays out … far more confusion than the 100% implied market odds of a cut would imply.

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ETNA Research Update

By Ben Hunt | July 1, 2019

The major update in today’s research deck is a simulation of a market neutral / absolute return strategy using our narrative-driven S&P 500 sector underweight/overweight signals. Prior to this we had presented simulations of an unconstrained “Beta1” portfolio (always 100% net long, but allowing leverage and short positions, roughly the equivalent of a 150/50 portfolio) and a constrained “Long-only” portfolio (always 100% net long AND 100% gross long, so no leverage and no short positions). Both of these strategies were designed to test for an excess return versus the S&P 500, essentially as generic long-equity replacements for S&P 500 exposure.

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Epsilon Theory Narrative Alpha (ETNA)

By Ben Hunt | June 18, 2019

US Sector Strategies Presentation Deck (downloadable PDF)

For ET Professional subscribers only.

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Narrative Monitors

Legacy Monitor Archive (Pre-January 2020)