The Most Valuable Commodity I Know


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.

Commentary: Sell-side research struggles to show its worth   [Pensions & Investments]

It’s been more than a year since the European Union’s Markets in Financial Instruments Directive II regulation forced asset managers with EU interests to unbundle research payments from the trading commissions they pay to brokerages.

So far, what we’ve learned from the new transparent pricing model is that the availability of research significantly outweighs the buy side’s need for it. Look no further than BlackRock slashing its Europe, Middle East and Africa research budget by 60% in 2018, or the Financial Conduct Authority’s claim that MiFID II saved U.K. equity investors more than $200 million in its first year alone.

Now, the regulation is colonizing the United States. U.S. asset managers from Wellington Management, T. Rowe Price and Invesco — each responsible for about $1 trillion in assets — have lobbied U.S. regulators to bring MiFID II ashore.

What’s the most valuable commodity Gordon Gekko knows?


How valuable is Wall Street research? How much information does Wall Street research have?


The MIFID II regulations in force throughout Europe – which require banks to charge real money for their research and not allow them to “bundle” research with higher trading costs borne by the end client – have been as much of a disaster for the banks’ business models as negative interest rates. Well, maybe not THAT bad, but pretty darn disastrous. Every sell-side research department was always a loss-leader. Now they are loss-disasters, with zero positive externalities. Now they’re just an endless black hole of costs. So they’re being slashed to oblivion.

What MIFID II revealed is that sell-side research just isn’t worth much. It’s just not. And now it’s inexorably coming to the US market, which means that every sell-side analyst on the Street today needs to be polishing their resume.

As if they weren’t already.

Why is sell-side research valueless? As Gordon Gekko would tell you, because it contains no information. See, there are two and only two buy-side use cases for sell-side research.

  1. To crib the spreadsheet model and put it in your own report.
  2. To get access to management at conferences and site trips.

That’s it.

So now that I can download a spreadsheet model for every company from FactSet or Bloomberg … now that management has zero desire to appear, much less say something with information, at investment conferences … well, you see where we’re going here.

Oh, you thought someone cared about the OPINION of the sell-side research analyst? You thought someone cared about the ANALYSIS of the sell-side research analyst?

Bwaahahahahahahaha. Hoo-boy, that’s a good one.

As the old (and correct) buy-side saying goes: In a bull market you don’t need an analyst, and in a bear market they’ll kill you.

What is the function of sell-side analysts today? To create stories that drive trading volume. To support those stories by maintaining a suitable media presence. It’s a miserable job. Because you are sooooo replaceable. And you’re a cost-center for the mothership, no different than the IT support department. Which you may have noticed was outsourced years ago.

Sorry, guys, but it’s going to get worse – a LOT worse – when MIFID II comes to New York. Which it is.


The Daily Zeitgeist

The Only Winning Move

By Rusty Guinn | July 19, 2019 | 2 Comments

It’s privacy and big tech again in today’s Zeitgeist, which is all about mutually assured surveillance. And for Epsilon Theory, it hits home. I think it will hit home for you, too.

Read more

We’re Gonna Need a Bigger Boat

By Ben Hunt | July 15, 2019 | 0 Comments

Financialization is not a mean-reverting phenomenon. It’s too good of a gravy train for Wall Street, corporate management and the White House to stop now. So they won’t. Like any self-respecting Great White shark, the Nudging State and the Nudging Oligarchy never stop swimming. They never stop eating.

Want to survive these financialized waters if you’re potential shark food? You’re gonna need a bigger boat.

Read more

When Did You Stop Beating Your Wife?

By Ben Hunt | July 12, 2019 | 1 Comment

“De Blasio’s ‘pay parity’ hypocrisy” is a feature article in today’s NY Post, and a central article in today’s media Zeitgeist.

Dig a little deeper into the “scandal”, and you learn that the “evidence” is complete horseshit.

It’s an article specifically designed to manipulate someone like me … someone who is VERY predisposed to believe the worst about Bill de Blasio because I dislike his politics SO MUCH.

It’s a rage engagement, one of two primary forms of Fiat News used to win the Game of You.

Read more

The Upside Down

By Ben Hunt | July 9, 2019 | 1 Comment

Everything is topsy-turvy in the Upside Down of Stranger Things. That’s the Big Baddie in the picture above, known as the Mind Flayer.

Financial media is a Mind Flayer, too, especially when it comes to coverage of crypto and tech companies.

Read more

Raking it in

By Rusty Guinn | July 8, 2019 | 0 Comments

A few months ago, we noted how important it had become for public figures and corporations to control their own cartoon, lest someone control it for them. Well, now that advice has itself become the narrative. Don’t say you weren’t warned.

Read more

Here We Go Again

By Ben Hunt | July 2, 2019 | 1 Comment

“You just recently hours ago met with the Chinese president, Xi Jinping,” Carlson said. “Are you closer, do you think after that meeting, to a trade deal?”

“I think so,” Trump replied. “We had a very good meeting. He wants to make a deal. I want to make a deal. Very big deal, probably, I guess you’d say the largest deal ever made of any kind, not only trade.”

He just can’t help himself. And neither can we.

Read more

Leave a Reply

Please Login to comment
Notify of

This commentary is being provided to you as general information only and should not be taken as investment advice. The opinions expressed in these materials represent the personal views of the author(s). It is not investment research or a research recommendation, as it does not constitute substantive research or analysis. Any action that you take as a result of information contained in this document is ultimately your responsibility. Epsilon Theory will not accept liability for any loss or damage, including without limitation to any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Consult your investment advisor before making any investment decisions. It must be noted, that no one can accurately predict the future of the market with certainty or guarantee future investment performance. Past performance is not a guarantee of future results.

Statements in this communication are forward-looking statements. The forward-looking statements and other views expressed herein are as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements, and there is no guarantee that any predictions will come to pass. The views expressed herein are subject to change at any time, due to numerous market and other factors. Epsilon Theory disclaims any obligation to update publicly or revise any forward-looking statements or views expressed herein. This information is neither an offer to sell nor a solicitation of any offer to buy any securities. This commentary has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Epsilon Theory recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.