Meta Information

As Virus Spread, Reports of Trump Administration’s Private Briefings Fueled Sell-Off (NY Times)

Hours after he had boasted on CNBC that the virus was contained in the United States and “it’s pretty close to airtight,” Mr. Kudlow delivered a more ambiguous private message.

Mr. Callanan reported that numerous Trump administration officials — Mr. Kudlow, Secretary of State Mike Pompeo and economists at the Council of Economic Advisers, who had given the presentation at the White House on Feb. 24 — expressed a greater degree of alarm about the coronavirus than the administration was saying publicly.

To many of the investors who received or heard about the memo, it was the first significant sign of skepticism among Trump administration officials about their ability to contain the virus. It also provided a hint of the fallout that was to come, said one major investor who was briefed on it: the upending of daily life for the entire country.

“Short everything,” was the reaction of the investor, using the Wall Street term for betting on the idea that the stock prices of companies would soon fall.

We write a lot about the metagame at Epsilon Theory, which is ten-dollar word for seeing the forest rather than the trees. The metagame is the game of games. The metagame is the non-myopic repeated play of many individual games. The metagame is the long-term game of life or investing or business success or whatever you are playing a long game for.

This is an epic metagame fail, btw.

Every single bit of Facebook and Twitter’s response to the NY Post hatchet job on Hunter Biden has been a metagame fail of gigantic proportions. Whatever aspirations Rudy Giuliani and his insane clown posse might have had in the planting of this story … whatever dreams of political impact they might have had … well, they’ve been exceeded by a factor of ten through this bonkers effort by the crack Facebook and Twitter comms team to “fact check” the NY Post and “temporarily reduce distribution” as part of their “standard process”. LOL.

I’ve written a long piece on this, if you’re interested. The problem is not Facebook and Twitter’s “political bias”. The problem is Facebook and Twitter’s business model.

Facebook delenda est.

But the point of this note isn’t about the metagame fail we’re seeing play out right now in social media companies, but about a different sort of meta and the grifts it inspires: meta information.

When I tweeted about this NY Times article that lays out how White House insiders like Larry Kudlow were saying one thing about Coronavirus fears in public and quite another in private, and how – quelle surprise! – these private conversations were immediately funneled to hedge fund managers like David Tepper, I got a whole series of Twitter replies like this:

The grift here (in the lingo, tipping material non-public information) by Kudlow and his pals is not the statements that Kudlow et al made directly in these private conversations. It’s not the information within those private statements itself.

The material non-public information that Kudlow tipped was the knowledge that what the White House said in public about Covid’s impact on the American economy was not what the White House truly believed about Covid’s impact on the American economy.

The grift was the difference in the private statements and the public statements.

The grift was the information about the information.

THAT is meta information.

What is meta information?

Meta information is the wink.

Of course, meta information is also edge.

Meta information is also a legal source of alpha in public markets, maybe the only legal source of alpha left. Which leads me to the following rather important question:

Do you have to sell your soul … do you have to hobnob with the Larry Kudlows and Peter Navarros of the world and participate in their endless sea of grift and influence peddling in order to have ANY edge in investing today?

I think there’s another way. God, I hope there’s another way.

The Epsilon Theory narrative research program – where we try to identify the structure of market-moving narratives – is all about discovering the tells of Wall Street without being part of their wink-wink old boy’s club. It’s all about trying to identify novel information ABOUT information by being smarter instead of slimier. Is it as direct and certain as getting a briefing from the White House on what they really think about the world? Nope. But it sure is easier to sleep at night.

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  1. If any sort of company should be good at metagame, “social media” companies should. That they seem to be pandering to the party they expect to be gaining power says a lot about how much they more fear regulatory scrutiny.

  2. *more they fear… Sigh.

  3. Avatar for Kevin Kevin says:

    Ben, I love this article, the layman’s concept of metagame is great. I also can’t help but notice that it’s promoting ET Pro (both directly and in the linked article “The Epsilon Strategy”).

    I’m a loyal subscriber to ET – but ET Pro is not in my budget right now. So I’m curious, how much more time/focus by you and Rusty is spent on ET Pro subscribers vs regular ET?

  4. I am more inclined to believe that in their vast accumulation of social / personal information, they realized that the state is light-years ahead, and started operating out of fear of becoming the next Snowden / Assange. Their good early intentions of supporting a political side, for the same reason as having office scooters and ping pong, paved their pathway. Taking the bit in their mouth, they made themselves every bit as useful as any propaganda machine or defense contractor.
    The current administration has been relatively adept at grabbing one side of reigns for now. And no matter who else is holding on, that’s all you need to turn a horse. Must be frustrating to know so much about so many, likely including very dark secrets about very powerful people, yet be unable to use it to gain personal autonomy.

  5. Avatar for bhunt bhunt says:

    It’s all one research/publishing effort, and there’s no budget for time/focus on the different offerings. We’re a registered investment advisor, and so we cannot legally publish much of our market and security-specific research to a universal audience. Also, that market and security-specific research is something that people are willing to pay more money for.

    We are not communists.

  6. Thank you Don Vito…after all WE are not communists…

  7. Avatar for robh robh says:

    Of course, one of the suppositions of the NYT article is that everyone doesn’t know that every single time Kudlow gets on CNBC he is 100% full of shit.

  8. S&P 500 Futures gapped down 100 points into the open on February 24th. Cash market followed. What time was the White House briefing? I’m not sure the hedge funds needed to be tipped, the exponential rise into the February high was very similar to the January 2018 run and rising VIX was stopping out futures positions in volatility targeting funds. The initial sell-offs were structurally identical. VIX inversion after new highs starts robotic selling. A correction was due. I was going to sell on the open on Feb 24 & still sold despite the gap down.

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