The Zeitgeist – 5.16.2019

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.

JPMorgan App Draws Millennial Investors With Lure of Free Trades [Bloomberg]

From the headline, I thought they were going Full Robinhood, but no, it looks like your usual gym-bag-and-a-toaster kind of offer.

There has been a clear, concerted effort – with click-hungry financial media happy to oblige – by missionaries of banking to make the narrative about US banks a modern, fintech-oriented technology story. There’s a reason these stories routinely sit at the top of the Zeitgeist – because banks want to be conflated with these much more exciting, growthier sounding, less LOL-whoops-we-almost-broke-the-system-through-sheer-avarice sounding ideas. And like this free trades offer – which is a modestly expanded version of what has been offered by brokerage firms for decades – most of those stories are part of that Cartoon.

High Velocity Retail – Why The World Retail Congress 2019 Was A Breath Of Fresh Air [Forbes]

Quote the first:

Quote the second:


If you pay much attention to the network maps we post with our Daily Zeitgeist, you’ll know that retailing and consumer products routinely command a highly connected cluster within them. Part of that is because financial and markets-focused media know that even professional consumers of their content are more interested in stores and stuff they buy themselves than they are with utilities companies, or, say, fabricators of high-temperature, high-strength alloys for use in furnaces at petrochemical facilities.

So it’s not a surprise that stories like this rise with some frequency.

It also shouldn’t be a surprise that happy-clappy all-is-well stories like this find their way to the top. Even when the industry in question is tire fire territory, financial media are cheerleaders, publishing news which is almost universally more positive in sentiment and affect than any other major form of news – certainly more positive than political news, at any rate.

Ready Or Not, The Food Of The Future Is Coming [Forbes]

Oh, look. It’s another one.

Anyone who has ever been to an industry conference like this knows that this is ALWAYS the reaction. The early afterglow is always some variant of “Wow, for the first time, we are finally speaking the truth about what’s going on in our industry! What a change from all the old conferences where it was just more of the same.”

Every industry’s conferences are exactly the same. Why? Because saying we’re going to do something in front of a group of people is how we give ourselves the moral license not to do anything.

A New ETF To Refresh The Value Factor [Benzinga]

Most of the keywords that led to this article’s connections are in this paragraph. Just my opinion from looking at the narrative data every day, but it certainly feels like the sell-side and financial media drums are back to beating “value rotation.”

Tobias is one of those weird remaining ‘value guys’. We like him and wish him success.

Trump Tells Pentagon Chief He Does Not Want War With Iran [NY Times]

Four things:

  1. Well, that’s reassuring.
  2. Remember, ‘according to several administration officials’ means ‘intentionally leaked by the White House.’ Why am I reading this NOW?
  3. “Clerical-led” and not “cleric-led?” That turn of phrase feels bad in the brain and worse on the tongue.
  4. Life imitates the Simpsons.

Selling because of the trade war turbulence could cost you a lot of money over the long term [CNBC]

I usually find these “if you miss the 10 best days” pieces a bit tiresome, but the core idea here is right. For most people, betting on the non-existent odds of a game of chicken would take the form of selling, and going underweight equities vs. their long-term allocation or policy.

We’ve been suggesting that’s the wrong idea since December, and we’re still suggesting that overweight or underweight bets driven by trade and tariffs views are little more than a flip of a coin, with a seller taking on a negative expected payoff to boot.

What would make us start to re-examine that? Signs of explicit messaging that the Trump administration views crashing the tractor / going off the trade war cliff as an acceptable outcome in service of another (i.e. political/electoral) game. The characterization of the trade dispute as a matter of national security, something we’ve seen some seeds of in the last couple days, is one way that could take place.


  1. For almost every single retail investor, there is no - none, not any at all - difference between free trades and $5 (or there about) trades at least if they are investing the way retail investors should be investing.

    The growth story is not sounding great now, so the value-rotation story is all they have. Like every good retailer, you sell what you have on the shelf.

  2. But, as a millennial, I don’t have a large “nest egg”. After maxing my 401k, I have $300 to $500 a month that I want to invest. $5 is at least 1%, or up to 5%, on the size of the purchases I make.

    With limited funds to invest, I understand why free trades are appealing to millennials and my coworkers who buy stocks use Robin Hood.

    Are suggesting that for people where $5 makes a difference, they probably shouldn’t be buying stocks? Based on my performance, that’s the conclusion I have reached. :slight_smile:

  3. Avatar for nick nick says:

    Whenever I think about Robinhood now the quote that comes immediately to mind is this:

    “The spice must flow.”

    Robinhood is interesting to me because they have been extremely effective at cultivating a millennial-friendly “disruptor” image when in reality they are in the business of selling order flow. All that matters to any broker is that the spice (orders) continues to flow. Of course, the same principle applies to investment banking services and sell-side research, as Ben and Rusty Often observe.

    I suppose these brokers can actually say they are empowering small investors with a straight face… the whole idea is to give people sophisticated or otherwise clever-looking tools so they have THE CONFIDENCE and THE DESIRE to trade.

    The Power of ‘And’ applies here: Robinhood is both a great platform for small investors from a cost perspective AND run kind of like a casino.

    Know your metagame!

  4. Evan, hi, after almost three decades of public writing, I’ve learned the power of never making a one-hundred percent definitive statement as there will always - absolutely always (note the irony) - be someone or some situation that is the exception, as you might be in this case.

    Hence, I said, “For ‘almost’ every single retail investor.” That said, there is a question as to whether or not individual trades for your $300 - $500 a month are the best approach for your investing. Maybe, I’d need to know more about your stagey and situation: to wit, are there no-load funds that might be better - maybe? But it’s quite possible you are one of the small number of exceptions that will truly benefit from a free versus $5 fee - hence, my use of “almost.”

    Nevertheless, I’ll stand my my statement that for almost every single retail investor, a $5 fee shouldn’t make a difference as he or she shouldn’t be actively trading and, in most cases, the $5 fee will be a de minimis amount versus the principal invested.

    Two other quick thoughts. One, I agree with Demonitize’s comments around the true drive of Robinhood’s business model, which means that retail investors should be very careful as they (their order flows anyway) are the real product Robinhood is selling - like Facebook’s real product isn’t its platform for its users, it’s the users themselves. And when that’s the case, an investor has to wonder about bid-offer spread, best execution, etc. as “free” can get pretty expensive versus other firms that charge a fee but deliver better results on those metrics.

    And the other thought - kudos to you for starting young, being disciplined in your savings and engaged in learning about investing. Those efforts will pay off for you in the long run.

  5. Two comments. Selling down-spikes is invariably an error. Using the spread between the daily close and the 200 day moving average as a measuring stick, in the modern era (1954 on), on those days when the market (S&P 500) closed 12.5% below the 200 day MA, roughly 570 trading days, what happened 252 trading days in the future? On a 9 to 1 ratio you made money, usually in the teens. December 24, 2018 was a spread of -14.6%. Major down-spikes hit in secular bears. There are 141 days in 65 years when the spread was -22.5% or greater. When you looked 252 trading days into the future, if you bought or held, you made money 100% of the time, usually in the real of 20% or better. This includes 2008/9.

    The second comment is quite frankly rude. How did the US allow itself to get into a position where the administration is exercising sovereign authority without any oversight? This should be a major issue on both sides of the widening gyr. How can you convince the next generation to participate in their civil duties when it is obvious that their representatives have no authority. This is not about whether you like #45 or not, it is about structure that has somehow allowed an imperial presidency.

    As a Canadian I can say we are not currently enjoying the reign of Trudeau the 2nd. I hope you never have to experience the reign of President X, the second. Sorry, forgot about the Bush family.

Continue the discussion at the Epsilon Theory Forum


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