It’s all been leading up to this.
We’re sharing the summary results of our core investment research project with the Narrative Machine.
If you’ve ever wondered, “Gosh, how DO you apply these cool narrative maps to an actual investment strategy?” … well, here’s your answer.
ET In Full
The Half-Happy Horror is the realization that pursuit of multiple objectives can end up with a baby split in two.
At best we give lip service to secondary or tertiary goals, all as part of some cartoon we’ve constructed about our “process”.
Yes, optimization is a scourge, and it hits every aspect of modern life. It hits the professional investor hardest of all.
The recent rally in U.S. equities is largely a result of market participants believing they can have their rate-cut cake and eat it, too.
ET contributor Pete Cecchini doesn’t think the Fed will cut rates proactively. Will they cut? Sure. But only if the real-world economic data deteriorates further. Which it probably will.
But don’t eat that cake just yet.
We are the human animal.
We are non-linear.
We ARE a song of ice and fire.
It’s a song that has built cathedrals and fed billions and taken us to the moon. It’s a song that can do all of that and more … far, far more … if only we remember the tune.
The Pack remembers.
Wage stagnation in 2016 was actually much worse than you were told. Did this make a difference in the Midwestern states that swung the election, in that actual labor conditions were worse than everyone thought they were? I think yes.
Wage growth in 2018 was actually much better than you were told. Did this make a difference in the current Fed/Wall Street/White House narrative that inflation is dead and the easy money punchbowl can be maintained without consequence? I think yes.
For a few days, we’re making this ET Professional note available to everyone to review. We think the ET Pro service is something that every portfolio allocation, wealth management and active investment team can find useful, particularly for risk management.
The student loan crisis is a Big Deal. And it is only a part of a Bigger Deal: the Myth of College.
This issue will be front-and-center in the upcoming elections. We will all be handed our very own ‘Yay, College’ signs to raise high. More often than not, we will be asked to raise them in service of market-distorting policies which will make our problems worse.
You don’t hate education, innovation, progress, equality and merit-based reward systems…do you?
ET contributor David Salem is back with five core tenets for achieving 5+% real returns over the next few decades.
It’s all a must-read, but I’m gonna highlight #4: “Favor equity investments in companies employing or serving primarily people with abundance as distinct from scarcity mindsets.”
This is the foundation for behavioral economics on a macro scale.
ET In Brief
“Oh, little Jimmy is going to 20-Years-Ago-This-Was-A-Second-Rate-University? I hear really good things about that school. Congratulations!”
“Thanks! We’re all very pleased. Everyone except my bank account, that is. Hahaha!”
It’s true, everyone is VERY pleased by the current system. Prestige university credentialing is a steam valve … \whispers\ just like elections.
It all started with the Maestro, Alan Greenspan, and his determination to create a Great Moderation. And it was all going so swimmingly, too, until the Great Disaster of 2008.
Now that there’s so little central banks can do, they are dead set on preventing another downturn before it even starts. So how does risk ‘price’ in capital markets when the cost of capital is constantly set too low? It doesn’t.
Everything about the Zeitgeist is working to steer promising minds toward cultivating the skills and temperament needed to succeed in a Fiat World. We are creating a generation of missionaries.
Just one small problem: a competitive game among missionaries is a stag hunt. The dominant strategy for each of us individually is bad for us all. So what the hell do we do?
The Nudging State and Nudging Oligarchy believe they are giving us a gift: Freedom from Choice.
Except that it is neither a gift nor freedom in any sense. Rejecting it isn’t always easy and it isn’t always costless. But it’s the only choice for anyone who would be free.
We are immersed 24/7 in a Fiat World, where we are TOLD that inflation does not exist, where we are TOLD that wealth inequality and meager productivity and negative savings rates just “happen”, where we are TOLD we must vote for ridiculous candidates and buy ridiculous securities and borrow ridiculous sums.
We’re not Flat Earthers. Ha Ha! Those guys are idiots! Can you imagine believing that stuff?
No, we’re not Flat Earthers. We are Fiat Earthers.
ET contributor Neville Crawley is simply one of the wisest people I know, and he outdoes himself in this killer Rabbit Hole note.
Come for the Amazon anecdote. Stay for the book recommendations.
Why are institutional investors in trouble with the new Zeitgeist of capital markets transformed into a political utility?
Because everything you think you know about portfolio diversification will fail. Because emerging markets are going to be crushed before this is over. Because everyone’s inflation-investing muscles have atrophied to the point of helplessness. Because you think long-vol and crisis-alpha are things.
The problem isn’t that we derive too much of our worth and value from work. The problem is that our jobs are becoming increasingly abstracted from work. Friends: Your work is holy.
Now that Jay Powell’s semi-annual Congressional testimony has finished up, it’s time for a brief walk down Memory Lane.
As with everything else in our Washington clown show, nothing really changes. This has all happened before.
The hobbyist farmer can afford to spread wildflower seeds to the wind and the elements. The professional farmer, on the other hand, doesn’t have this luxury. Neither do any of us as investors.