Riding the Cyclone

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Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


A $1,800 Drop in Minutes: Bitcoin Volatility on Full Display    [Yahoo Finance]

Bitcoin soared as much as 39% this week to $13,852, the highest since January 2018. But it hit a brick wall around 4:30 p.m. New York time Wednesday, plunging more than $1,800 within about 10 minutes. Moments later, prominent cryptocurrency exchange Coinbase Inc. reported an outage on its consumer site, which was resolved in under an hour.

Swings continued Thursday, with the coin anywhere from down 15% to up 4.8%. It was down 15% to $11,111 as of 12:23 p.m. in New York. Volatility in Bitcoin is near the highest levels since early 2018, when the bubble was bursting.

Analysts said this was likely a sign of things to come.

Sorry, just couldn’t help myself when I grabbed this photo of the Cyclone rollercoaster. Had to isolate these two gents, not to diss but out of respect. This is authentic joy, in a world where that can be mighty hard to come by.

Hey, I’m Big Lou … I’m just like you. Except rollercoasters make me too dizzy to ride these days.

The rollercoaster nature of Bitcoin is a feature, not a bug.

It is not to be wished away or adulterated. It is to be celebrated. It is an integral and authentically joyful part of the experiential or performance art that IS Bitcoin.

People always think I’m trolling or dissing when I call bitcoin a work of art, but they couldn’t be more wrong. It is my highest praise. The creation of good art is – in my opinion – what we are put on this earth to do. It is our highest calling.

I’m totally serious about that, btw.

There is lasting value in good art, because it is a very scarce thing and it never gets used up. The notion that Bitcoin would ever “go to zero” is ludicrous. Good art is always worth something.

But how do we measure that something … how do we put a price on the value of good art at this particular moment in time? It’s a REALLY tough question.

Why? Because we don’t have a toolkit for it.

We have plenty of toolkits for measuring cash flows, both current and prospective. We have plenty of toolkits for measuring the “fundamentals” of this thing or that thing that we want to buy or sell. We can argue about whether the price we ask for this collection of fundamental metrics is too high, or whether the price we bid for this collection of fundamental metrics is too low, but there IS a shared conception – a common knowledge – for the process of pricing the value of “fundamentals”.

But there are no cash flows to art. There are no fundamentals to art. There is no common knowledge – what everyone knows that everyone knows – on valuation metrics for art.

There is only story. There is only narrative. There is only how story and narrative make us FEEL.

Again, I don’t say this as a put-down. I say this in awe.

The price of Bitcoin, like the price of any great work of experiential or performance art, is entirely based on narratives.

The price of Bitcoin is entirely based on how these narratives make us FEEL.

Gold, too.

Over the past few months, we’ve developed a new toolkit for measuring stories and narratives, for moving beyond conditioning attributes like sentiment and identifying structural attributes like attention and cohesion.

It’s a major advance in what we call the Narrative Machine.

We first wrote about this new toolkit here, with an application to stock market sectors:

And most recently here, with the results of our test of that application:

We’re now ready to turn this toolkit on Bitcoin and gold, to see what the Narrative Machine can tell us about the price of both.


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Christopher Beirn
Member
Christopher Beirn

Summer plans:

Buy Bitcoin

Tug on Superman’s cape

Spit into wind

Winter plans:

Invade Russia

Bring knife to gunfight

Piss on third rail

Double-down on Bitcoin

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Rafa Mayer
Member
Rafa Mayer

Ben, Ben, Ben…

You are hanging out on the wrong side of the art world. The viewers of art have no idea how to value art. The artists, art dealers and auction houses are all well steeped in the fundamentals of supply and demand, scarcity value and how to maximize the amount paid at auction through one of the most impressive behavioral bag of tricks known to humankind. They know exactly how to raise the value of art through emotional trickery.

(As an aside, I once had an opportunity to meet Jack Binyan, casino billionaire. He explained to me his business as the manufacture of an emotional experience for the bettor that was designed to encourage sloppy gambling that favored the House. Jack doesn’t drink. When I once asked him why, he smiled impishly and said “casino rules: liquor is only for the customers”.)

The buying and selling of art, to me, is one of the greatest con jobs of our time! The art “investor” is truly the patsy at the table in this game.

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The Daily Zeitgeist

Narrative is not a Disease. Narrative is Us.

By Ben Hunt | September 16, 2019 | 3 Comments

Robert Shiller’s new book, “Narrative Economics”, will be out soon, and the publicity effort is kicking into gear. I am SO HAPPY that the rigorous study of narratives is finally being taken seriously, and grateful to Shiller for making that happen.

I am also SO DEPRESSED about how Shiller’s central metaphor, that narrative = infectious disease, will be used against us. Because the “cure” is the Nudge.

Read more

Sparks, Arcs and Trademarks

By Rusty Guinn | September 13, 2019 | 0 Comments

I’m not sure if electric buses are really a national security risk. Even if they are, I’m not sure characterizing them that way is really an escalation of the trade war into existential rhetoric land.

But it’s worth watching.

Read more

When Meta-Analysis Goes Meta

By Rusty Guinn | September 9, 2019 | 4 Comments

What does it mean when it becomes common knowledge that other investors are focused on evaluating common knowledge?

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I’ve Got a Secret

By Ben Hunt | September 6, 2019 | 8 Comments

Is there a bubble in passive investing? Honestly, I’m not even sure what that question is asking.

I DO think there’s a bubble in markets today – a behavioral bubble I’ll call ABB.

Always. Be. Buying.

And the Common Knowledge around passive investing is what blows this bubble. That’s MY secret.

Read more

The Industrially Necessary Egg

By Ben Hunt | September 5, 2019 | 1 Comment

In modern farming and in modern investing, we have become prisoners of the monoculture. It’s efficient. It’s necessary for a mass society of ever-increasing Desire.

But here’s the thing …

In the investment monoculture, you’re not the farmer.

Read more

Gell-Mann Gravity

By Rusty Guinn | September 3, 2019 | 0 Comments

It’s the Monday Zeitgeist, including all known lanthanides and actinides.

Read more

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