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Articles by Demonetized

The End of the Beginning

May 20, 2020

“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” Winston Churchill

I have not written much since the coronavirus outbreak blew up. Not because I’m not thinking about things. But I simply haven’t had much to say. I have no unique perspective to add regarding epidemiology or public health policy. Sometimes the best thing to do is simply hang back and reflect. This post contains some thoughts on where we’ve been, and where we might be headed.

One indisputable consequence of this pandemic is that we have quickly transitioned from a disinflationary or even (I would argue) mildly stagflationary regime to a deflationary economic regime. The duration of this new regime is an open question. Policymakers, particularly

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Hyakujos Fox

December 3, 2019

Once when Hyakujo delivered some Zen lectures an old man attended them, unseen by the monks. At the end of each talk when the monks left so did he. But one day he remained after they had gone, and Hyakujo asked him: `Who are you?’The old man replied: `I am not a human being, but I was a human being when the Kashapa Buddha preached in this world. I was a Zen master and lived on this mountain. At that time one of my students asked me whether the enlightened man is subject to the law of causation. I answered him: “The enlightened man is not subject to the law of causation.” For this answer evidencing a clinging to absoluteness I became a fox for five hundred rebirths, and I am still a fox. Will you save me from this condition with your Zen words and let me get out of a fox’s body?

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On The Great Jihad And Other Possible Futures

September 26, 2019

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“He had seen two main branchings along the way ahead—in
one he confronted an evil old Baron and said: “Hello, Grandfather.” The thought
of that path and what lay along it sickened him.

The other path held long patches of gray obscurity except
for peaks of violence. He had seen a warrior religion there, a fire spreading
across the universe with the Atreides green and black banner waving at the head
of fanatic legions drunk on spice liquor […]

He found that he could no longer hate the Bene Gesserit
or the Emperor or even the Harkonnens. They were all caught up in the need of
their race to renew its scattered inheritance, to cross and mingle and infuse
their bloodlines in a great new

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What You Call Love

August 7, 2019

Don Draper: What you call love was invented by guys like me. To sell Nylons.

In certain circles, it’s fashionable to assert that “words
are violence.” That is to say, certain language is used to perpetuate and
reinforce existing (typically oppressive) social power structures, and this is
a form of coercion on par with physical violence. For brevity, I’m going to
lump everyone who espouses these beliefs together under the broad umbrella of

In other circles, it’s fashionable to ridicule postmodern
ideas and the oft-ridiculous policies they inspire.

However, to the extent postmodern thought keys in on
narrative, and particularly the role of symbolic abstraction in shaping
individual and group identities, I’d argue there’s plenty of analytical utility
to it.

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Every Shot Must Have a Purpose

July 11, 2019

I rather enjoy playing golf. But there’s no denying golf is infested with raccoons trying to sell you stuff. Swing trainers. Special clubs. Systems “guaranteed” to lower your handicap.

This ranges from the oversold…

…to the utterly ridiculous.

Not to mention a fair bit of coattail riding on anyone with
an aerospace engineering background.

Golf’s a lot like investing that way. And a lot like life,
for that matter. Once I realized this, I began to enjoy the game much more, as
an exercise in both mental and physical discipline.

Any progress I’ve made on that front, I credit first and foremost to the book Every Shot Must Have a Purpose, by Pia Nilsson, Lynn Marriott and Ron Sirak. It’s rather critical of current methods of golf instruction and

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The Life Aquatic

May 17, 2019

In his note, This Is Water, Ben described the fourth pillar of the current zeitgeist. That pillar is financialization.

Financialization is squeezing more earnings from a dollar of sales without squeezing at all, but through tax arbitrage or balance sheet arbitrage.Financialization is the zero-sum game aspect of capitalism, where profit margin growth is both pulled forward from future real growth and pulled away from current economic risk-taking.Financialization is the smiley-face perversion of Smith’s invisible hand and Schumpeter’s creative destruction. It is a profoundly repressive political equilibrium that masks itself in the common knowledge of “Yay, capitalism!”.

This is a note about living and investing in the waters of
the current zeitgeist: the life aquatic.

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The Funnel

April 19, 2019

Lately I’ve been thinking about the mechanics of fiat news. By now we know what fiat news is: the presentation of opinion as fact. We know what fiat news looks like (pop on over to Vox and skim a few stories). But lately I’m more and more interested in how fiat news works.

The metaphor I like best is the medieval wolf trap.

Ben described the wolf trap in his note, Hot Rocks.

[W]olves expect to hunt and track their prey. By establishing a longer trail that must be navigated successfully the wolf becomes more committed to the trap the farther he goes. Third and most importantly, the design prevents the wolves from seeing each other until they get to the end of the blood trail, at which point it’s too late to escape what they now know is a trap.

Here’s the modern

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The Ants and the Grasshopper

March 29, 2019

One bright day in late autumn a family of Ants were bustling about in the warm sunshine, drying out the grain they had stored up during the summer, when a starving Grasshopper, his fiddle under his arm, came up and humbly begged for a bite to eat.

“What!” cried the Ants in surprise, “haven’t you stored anything away for the winter? What in the world were you doing all last summer?”

“I didn’t have time to store any food,” whined the Grasshopper; “I was so busy making music that before I knew it the summer was gone.”

The Ants shrugged their shoulders in disgust.

“Making music, were you?” they cried. “Very well; now dance!” And they turned their backs on the Grasshopper and went on with their work.

I admit I’m quite fond of this fable. It promotes

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The Grand Inquisition

March 11, 2019

A live look in on the morose and whiny Epsilon Theory crew.The rough idea for this note has been kicking around in my
head for a while now. But it was our recent correspondent, “Charles from the
North Shore”, who finally brought it together for me. If you haven’t yet read
Ben’s excellent Fiat World
note, Charles observed the following:

You and your contributors seem to be continuously complaining, whining and expressing a kind of morose discontentment. Why are you all so unhappy and dissatisfied? Maybe take a few of your intellectually earned dollars and buy yourself and each of your contributors a surfboard, mountain bike, snowboard, and climbing gear, with the proviso, all must be put to use.

I must admit, I’m a bit bewildered by any characterization of Epsilon Theory as

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The Alchemy of Narrative

February 18, 2019

[Ed. note: I’m often asked what authors have influenced me, or who they can read to get another perspective on narrative in markets. Top of the list should be Chancellor Palpatine George Soros, and the first book to read is "The Alchemy of Finance”. So glad to see ET contributor Demonetized rediscovering Soros with this note!

I revisited some of George Soros’s writing on reflexivity over the weekend (thanks Ben!). In doing so, I realized my initial reading, years ago, had been extremely superficial. Back then, I focused on feedback loops as amplifying the usual cognitive and emotional biases we point to in investment writing. Things like confirmation bias and loss aversion and overconfidence. This reading of Soros wasn’t necessarily wrong. But it was narrow and

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They Live!

February 11, 2019

This is the second note from Demonetized, a new guest contributor. No, that isn’t his real name. Rather atypically, this guest contributor is anonymous. To you, anyway – we know who he is. But even before we did, we were admirers of his approach and many shared point of views. We don’t and won’t always agree, but we’re very happy that he’s doing some pieces for us here. We think you will be, too.

[Dollar Note with subliminal message]: THIS IS YOUR GOD They Live (1988)

If ever you find
yourself struggling to keep the difference between Narrative and narrative
straight, think of John Carpenter’s 1988 sci-fi action flick, They Live.
No doubt it’s a goofy movie. The basic premise will be familiar to anyone who’s
seen movies like Dark City or The Matrix. Reality, as we perceive

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Kobayashi Maru

January 29, 2019

From Ben and Rusty: With this note, we welcome Demonetized, a new guest contributor. No, that isn’t his real name. Rather atypically, this guest contributor is anonymous. To you, anyway – we know who he is. But even before we did, we were admirers of his approach and many shared point of views. We don’t and won’t always agree, but we’re very happy that he’s doing some pieces for us here. We think you will be, too.

In geekdom, the phrase “Kobayashi Maru” is synonymous with “no-win scenario.” It comes from a training exercise shown in the second Star Trek movie. The exercise presents a cadet with a crippled freighter, the Kobayashi Maru, broadcasting an SOS from restricted space. The cadet can either enter the restricted Neutral Zone and trigger an unwinnable space battle, or

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