The Zeitgeist – 4.15.2019

4+

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.


April 15, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

Investors Joining Saudi Stocks’ Big Moment Have to Pay a Premium [Bloomberg]

We rightfully emphasize the supreme importance of our asset allocation decisions. Yet as a group, we investors tend to apply an uncritical eye to asset classes, and accept them as they come to us. Questions we rarely ask in more than a perfunctory manner: Do they refer to any sensible organization of securities with similar underlying traits? Are they subject to features at the arbitrary power of an organization deciding where they belong? Does Saudi being moved from one index to another matter (yes!). Should it (no!)?

We will be writing a lot more in the coming months about how we think untethering from index provider-based constructs for asset classes will be an increasingly important asset allocation tool in the emerging Zeitgeist.


PG&E, BlueMountain in Talks Over Board Composition [Reuters]

I’m on record saying that one of my bigger manager diligence whiffs was not investing with ValueAct for what seemed to me to be good reasons at the time (i.e. small cap specialist with mission creep into mid- and big-caps, a very right-sounding story). They have done very nice work for their investors.

But I will never not hear of a nomination of Jeff Ubben to a board without playing the game I call “Jeff Ubben or Aaron Eckhart from Thank You For Smoking?”


Deutsche Bank-Commerzbank Deal May Rest on a Mountain of ‘Badwill’ [Dow Jones]

Yes, this is all very stupid, but look, ensuring the stability and liquidity of the most critical bank in the most important European economy DOES fall pretty squarely within the mandate of the ECB. As ridiculous as this sounds on paper, it is frankly a lot less ridiculous than some other things being considered. Still, ‘can we immediately capitalize the fact that the market knows we’re going to piss away the ‘value’ of these assets over time into a gain to help our capital ratios’ is a pretty bold move, Cotton.


Will Wall Street Lose Faith in Eager-to-Please Fed? [New York Times]

I believe this is the first use of ‘[The Fed] is out of bullets’ in a major publication in 2019. It is truly a red-letter day. Those of you in God’s Country may discharge your firearms in the air in celebration. The rest of you may non-threateningly wave a knife or other sharp object of less than 5″ in total blade length.


Europe putting venture capital back in the game [P&I]

We have covered the ebullient narratives about private equity and venture capital at some length over the last few months, especially in comparison to those no-good scoundrels in hedge funds. The Billions-Silicon Valley Effect, if you will (sorry, but except for punching that guy who drove your kid drunk, you’ve done hedge funds no favors, Captain Winters). It is easy to look at a story like this and conclude that it’s a secondary effect of too much capital chasing too few remaining opportunities. Everyone wants to get their big unicorn pop before it’s too late to make a career off of it.

And yet I will tell you this: If you want a dependable canary in the coal mine for what other big state, municipal and government pensions will do, you can do far worse than to watch what OMERS does. There is about a trillion of US pension money that relies on the freedom granted by OMERS’s management company structure (and that of a few similarly situated peers) to provide ‘legitimacy’ cover for things they want to do but can’t be the first.


Goldman Economists Say Trump Re-Election More Likely Than Not [Bloomberg]

If this were a live feature, I would allow you to select from an economist joke, a Goldman joke, or a Trump joke in this place. Instead, in the spirit of greatest movie celebrating the very in-the-current-Zeitgeist game of golf, you’ll get nothing and like it.


Everyone’s Income Taxes Should Be Public [New York Times]

Appelbaum’s arguments in favor of destroying the last vestiges of privacy in America all boil down to the same very dumb argument: ‘But think of what we could do with all the data!’

It’s the same reason that free Facebook exists, and free Twitter, and every other service in which you, dear reader, ARE the product because of the value of your data. But instead of advertisers, the consumers of the Product of You in Appelbaum’s world are academia, special interest groups, pitchfork mobs, employers, neighbors with grudges, University admissions offices, lending institutions and journalists who have run out of Twitter posts from random accounts to build feature stories around. Think you get a lot of junk mail and robo-calls now? Think bigotry in lending, housing and admissions is a problem now? Think gerrymandering and selective doling out of local resources is a problem now? Think politically motivated use of the IRS and other government investigative agencies is a problem now? Think widespread depression and anxiety are problems now? Think political races go petty, personal and dirty now? Think the number of political and social ideas to engineer a society in one group’s image is dangerous now? Think the way in which missionaries work to divide us is perilous now?

If the hilariously predictable outcomes were not enough, the justification provided is even flimsier. “Income taxation is an act of government.” Please. If that were the nexus that justified public disclosure, then we ought to disclose the detailed records of every health service, diagnosis and prescription by individual affected by an ‘act of government’. Same for the transcripts and disciplinary records of every student at a public school or school receiving public funding. Hell, those would be GREAT datasets!

The fact that one is forced by threat of imprisonment into a transaction with the state doesn’t inherently warrant public disclosure. Nor does the usefulness of that data. Render your taxes unto Caesar – but keep the data about them to yourself.

4+

The Daily Zeitgeist

We Didn’t Say it WASN’T a Press Release

By Rusty Guinn | June 24, 2019 | 1 Comment

It isn’t just that cannabis always seems to make the top of the Zeitgeist. It’s why – and sometimes the answer is, “Because people are paying for it to be at the top.”

Read more

The ANDs of Asylum

By Rusty Guinn | June 23, 2019 | 0 Comments

In the midst of a complicated issue, an article from a small regional outlet manages to remind us of the power of AND in storytelling and connecting the understanding of those across the widening gyre.

Read more

Zeitgeist Narrative Map – Week of June 16 in Review

By Rusty Guinn | June 22, 2019 | 0 Comments

This is our graph of the narrative structure of the last full week in financial markets news.

Read more


That Time I Bought Blockbuster Debt

By Ben Hunt | June 20, 2019 | 0 Comments

Management is not lying to you. It’s probably a really good turn-around plan. It could probably work out fine … IF they are given enough time. But they won’t be. Particularly when it’s the second turn-around plan.

Secularly declining companies ALWAYS run out of time.

It was one of the most expensive lessons of my investing career. And worth every penny.

Read more

Democracy Dies with Dancing

By Rusty Guinn | June 18, 2019 | 0 Comments

There’s a critical, indispensable feature of a free nation we call a free press. And then there’s the meme of free press!. The latter is a pure narrative construction, and a thing well supplied in the DC market.

Read more

The Not-So-Much War

By Rusty Guinn | June 17, 2019 | 0 Comments

A tug-of-war is only a tug-of-war if both sides, y’know, are capable of pulling on the rope.

Read more

9
Leave a Reply

Please Login to comment
  Subscribe  
newest oldest
Notify of
Demonetized
Member
Demonetized

Re: asset allocation, one of the things I have become more attuned to lately is how our conception of asset classes is influenced by the type of exhibit used to visualize the allocation. If you put categories on a page, and make them appear finite and distinct, people will think of them as finite and distinct, regardless of whether that distinction is borne out in the behavior of those securities. E.g. you can say Small Cap US Equity is a thing or SMID Cap US Equity is a thing. Is that distinction at all meaningful in terms of the ultimate drivers of risk and return in the portion of the allocation? I would argue no.

When I think about the stereotypical diversified wirehouse or RIA portfolio, for example, it basically rolls up into US Equity beta (MAYBE Global Equity beta if the FA is a glutton for punishment) plus Duration beta plus Credit beta. The fancy allocation exhibits are just window dressing.

3+
Mark Kahn
Member
Mark Kahn

Agreed. And as Ben said in an ET note I love “Don’t Fear the Reaper:”

“I think that there is enormous room for improvement in constructing smart portfolios if we can stop staring at surface appearances and start focusing on the investment DNA of securities and strategies.”

Deeply thinking about the “DNA of securities and strategies” is one way to meaningfully improve your performance. I’d go further and say you’ve been committing portfolio malpractice if you haven’t always been doing this.

Regarding Deutsche Bank, etc., how is it that Europe’s only strong economy hasn’t any strong banks (of any significant size)? Is the economy not really strong or did something go wrong in the German approach to banking?

Regarding Goldman’s call: I will not read, listening to or allow to penetrate my consciousness any calls on “who will win in 2020” for, at least, another year and, then, I’ll hate myself for doing so.

Regarding tax returns being made public: besides the arrogantly obnoxious loss of privacy, is there any sentient being that doesn’t see that as a way to widen the gyre to the breakpoint – which just might be the reason as, to quote the Joker from the best superhero movie ever made, “Some men just want to watch the world burn.”

1+
Landvermesser
Member
Landvermesser

Facebook : dairy farmer ::
Facebook user : cow ::
Advertiser : dairy customer ::
Personal information : milk

Public tax returns is a whole other thing. Might need analogies with the Matrix.

1+
cartoox
Member
cartoox

this is hilarious !! excellent analogy

0
cartoox
Member
cartoox

Re : the NYT public declaration of taxes :So we have China with its Social Capital score and aggressive use of big data to monitor and influence all aspects of its citizens lives – resulting in a “Caesar” that has all the power and knows everything about you to keep you in line.
And in the US /developed world we have “Big Data” and all this so called “information for the good of the Public “ – allowing the “Caesars” to monitor and influence all aspects of their citizens lives….
Could just be me but it feels like both routes, rooted in supposedly opposing political and socio-economic philosophies, end up in the same destination?

0
DISCLOSURES

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.