The Zeitgeist – 5.17.2019

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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.


May 17, 2019 Narrative Map – US Equities

Source: Quid, Epsilon Theory

FEDS 2019-036: Optimal Inflation Target with Expectations-Driven Liquidity Traps [The Fed]

Our main finding is that even a very small probability of expectations-driven liquidity traps (LTs) nontrivially lowers the optimal inflation target. Under various calibrations of the model, a 0.1 percent (quarterly) probability of falling into expectations-driven LTs typically lowers the optimal inflation target by more than 1 percentage point. With a 0.5 percent probability of expectations-driven LTs, the optimal inflation target is typically slightly negative.

How about if you’re already in an expectations-driven liquidity trap?

This is most interesting and important Fed paper I’ve read in years. I know, I know … a low bar, and of course it’s written in the guild cant of academic economics, which is to say it’s barely readable at all.

But FINALLY we are giving the drivers of financialization a name.

Good and important work from Taisuke Nakata and Philip Coyle.

Me, today.


Lighter Capital Closes Over 500 Rounds of Revenue-Based Financing for Tech Startups [Press Release]

“Revenue-Based Financing is popular with entrepreneurs because it combines the best aspects of debt and equity,” said BJ Lackland, CEO of Lighter Capital. “Like equity, there’s a deep alignment between the investor and entrepreneur toward growth. However, the difference with this funding model is the entrepreneur doesn’t give up control or ownership in the same way they would to angels and VCs. This provides entrepreneurs greater options as they continue to grow their businesses.”

Lighter Capital’s fintech platform pulls in 6,500 data points to analyze startups quickly and reduce entrepreneurs’ time to raise funds by over 90%. The company uses proprietary algorithms to determine a credit rating and data science to predict a startup’s revenue growth, with 97% accuracy, on average. By using objective, data-driven practices, Lighter Capital provides $50K-$3M in funding to a broad array of tech startups, promoting diversity of ideas, perspectives and leaders — ensuring that strong, creative thinkers have access to the resources they need, when they need them.

The “best of debt and equity” AND “proprietary algorithms”. It’s a Mister Wonderful bot!

File this under Things You Only See At A Top.


Farmers turning to bankruptcy must consider options [Farm Progress]

Chapter 12 offers relief from a critical issue for many farms — capital gains taxes. Back in the 1980s, when farm values fell, selling land didn’t bring much of a tax burden as a farm “rightsized.” Today, land values are up, and a farmer who bought land at $1,500 per acre could see values as high as $10,000 per acre for that ground. To sell some under bankruptcy would mean a capital gains tax bill on that $8,500 difference, which put farmers under significant pressure. That was rectified in 2017, and if a farm can file under Chapter 12, the capital gains tax on land sold can be deprioritized and discharged as unsecured credit. That can provide a soft landing for a farm trying to get its balance sheet back in order.

But that $4.411 million debt ceiling to filing is a hindrance. Swanson, the Wisconsin attorney, notes that the nature of dairies has changed over the years. A 500-cow operation is considered a smaller family farm. Yet with that many animals, as well as the parlors and crop-raising equipment it takes to run that farm, crossing the debt limit isn’t hard. “You look at what a tractor costs, or 100 acres or a good parlor,” Swanson observes.

Peiffer explains that the U.S. House and Senate are working on a measure that would raise that limit to $10 million, which would be a boon to some farms that right now would have to file under different bankruptcy chapters. “Half the farmers that come into my office are too big to qualify for Chapter 12, but they’re still family farms in my mind,” he says.

I was going to write another snarky Animal House riff, but changed my mind.

Email your House Rep. Call your Senators. Raise the limit on Chapter 12.


Dismantling the Myth of ‘The Heartland’ [New York Times]

In the end, Hoganson is not overturning the heartland myth to demonstrate that Midwesterners are cultivated citizens of the world, but rather to prove that they are, and always have been, “agents of empire.”

If the Midwest was once a place to indulge in fantasies of innocence and escapism, it is now regarded as the locus of our worst tendencies as a country, a dead zone to offshore national guilt. It is the place we turn to in our darkest hours, to discover what lies in our own hearts.

LOL. NYT gonna NYT.

Bill de Blasio winning those Midwestern hearts and minds one camo-wearing diner patron at a time.


Whataburger exploring sale, company confirms after hire of Morgan Stanley [Dallas Morning News]

Citing a source, Reuters reported that the privately held company’s value could top $6 billion.

The Business Journal reported that Whataburger posted sales of more than $2.2 billion in 2017, citing trade publication QSR. The figure placed the chain 22nd among QSR’s 50 biggest limited-service restaurants based on sales, above others such as Hardee’s, Carl’s Jr. and Five Guys.

If you’re not part of the Whataburger Revolution, you have no idea what you’re missing.


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Riggo44
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Riggo44

Ugh and there’s Tom Vilsack. From opiods to Shirley Sherrod he is, as Charles Barkley might say, “turrible.”

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The Daily Zeitgeist

The Common Knowledge of Inflation

By Ben Hunt | October 11, 2019 | 3 Comments

“Until an hour before the Devil fell, God thought him beautiful in Heaven.”

That’s my fave Arthur Miller quote, from The Crucible.

Our Devil is inflation, and today we think him beautiful in Heaven. You’re not ready for the Fall.

Read more

In Chinese, the Emphasis is on the Second Syllable

By Ben Hunt | October 9, 2019 | 4 Comments

Every US company with Chinese consumer-facing products is going to be forced to make a choice. Do you want to preserve your authenticity and your brand, or do you want to preserve your earnings guidance and share price?

Choose one. You can’t have both.

No one will believe me when I say this, but it’s the truth: this is bigger than tariffs.

Read more

Imagine That.

By Ben Hunt | October 7, 2019 | 6 Comments

They keep us sick, you know.

They keep us hooked on this framing of something-something Republicans vs. Democrats.

The cure? Take back your distance.

You’ll find your local library to be the perfect place to start.

Read more

Fear Factor

By Ben Hunt | October 4, 2019 | 3 Comments

Yeah, yeah … I know that the Deep State is a powerful adversary. Or at least that’s what my MAGA buddies on twitter keep shouting at me.

But I’ll take the Deep State as an enemy any day compared to Steve Schwarzman and the rest of the Private Equity Tong looking to keep their carried interest tax treatment.

I bet Elizabeth Warren feels the same way.

Read more

When the Product is Free, You’re the Product

By Ben Hunt | October 2, 2019 | 3 Comments

This isn’t a note about Facebook. It’s a note about online brokerage fees. And it’s a note about Facebook.

As a consumer … don’t cry for Argentina, and don’t cry for the online brokerages who are taking their commission fees down to zero. As an investor in or an employee of ANY financial services company, on the other hand … maybe it’s time for a good cry and a hard look at your future prospects.

“Yay, free!”

Read more

The Emerging Market Zeitgeist is Broken

By Ben Hunt | September 30, 2019 | 2 Comments

Yes, Deadwood is the greatest HBO series ever. Don’t @ me. I’m not having it. David Milch is MY President.

And while Al Swearengen is the greatest character of that greatest show, the fact is that it’s another character – George Hearst – who drives the narrative arc for the entire series (and movie).

You see, Deadwood is a show about property rights.

So is the Argentina – IMF show.

Read more

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