Source: Library of CongressHistory never repeats itself, but the Kaleidoscopic combinations of the pictured present often seem to be constructed out of the broken fragments of antique legends.The Gilded Age: A Tale of To-Day, by Mark Twain (1874)

Winston Churchill has probably since eclipsed him in this regard, but for decades Mark Twain was the person to whom you attributed a quotation if you didn’t know who said it.

That whole bit he did about history rhyming but not repeating? It’s probably apocryphal, too, but at least Twain actually did write the thing that spawned the briefer expression. Strangely, it comes from what is probably his worst book, an attempted collaboration with another author that never really works. Yet even the title of this forgettable novel managed to

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As the core COVID-19 narrative shifts from the mixture of human and economic tolls that dominated news over the past few weeks to the coverage of lockdown relaxation across the United States, we are starting to observe other topics and language creeping back into the Zeitgeist for the first time.

Unsurprisingly, most of them have still been tangentially related to the pandemic.

For example, we are observing a lot of shared language in the ether about direct sales and e-commerce (a term I thought had gone out of vogue years ago, to be honest). The framing of these

If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem. Attributed to J. Paul Getty in The Five Rules for Successful Stock Investing

I don’t know how much life wisdom it is possible to extract from the life of J. Paul Getty.

On the one hand, Getty became fabulously wealthy by taking actual risk and doing things (like, say, learning Arabic) that no one else was willing to do at the time. On the other hand, he famously bartered for the life of his abducted grandson, seeking to whittle down the ransom demands to an amount that would be fully tax-deductible. Gee thanks, Gramps.

The Ridley Scott film chronicling this affair is a pretty fascinating story in its own right. Filmed and nearly ready for distribution right before

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If there is one defining feature of high attention narrative structures, it is the crowding out of off-narrative topics and language. Since mid-March, financial media has been all-coronavirus, all-the-time. That is, with the exception of the occasional diversion into the nightmarish adjacent world of oil and gas.

In the last week or so, however, we have observed a surge in “how the world will be different” language across financial media. We have observed that language in pieces nominally about other things, like earnings, guidance or the fortunes of various

Source: CalPERSLast week, when Ben and I published our assessment and response to the institutional failures revealed by the COVID-19 pandemic, it didn’t take long for some other suggestions to roll in. I have been thinking about one of the first one someone suggested to me ever since.

Bloomberg’s Eric Schatzker covered it first, I think, or at least it was the first article sent to me. Leanna Orr at Institutional Investor published a good follow-up the next day. The issue was this: CalPERS, the largest pension fund in the United States, had a tail risk portfolio that was meant to defend some portion of its massive portfolio against, well, really bad market events. Among other things, no doubt, they had hired two external managers to construct portfolios of instruments that

Epsilon Theory PDF Download (paid subscription required): First the People

In all countries, the First World War weakened old orthodoxies and authorities, and, when it was over, neither government nor church nor school nor family had the power to regulate the lives of human beings as it had once done. The Germans, by Gordon A. Craig (1991)

Some of us still recall World War I, which awakened our generation to the fact that history was not a matter of the past, as a thoughtless philosophy of the hundred years’ peace would have us believe. And once started, it did not cease to happen…However, it is not a balance of our experiences, achievements and omissions that stands to question; nor am I scanning the horizon for a mere break. The time has come to take note of a much bigger

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

Since last week, we have received a number of requests to amplify our views on certain provisions of the CARES Act. Rather than opine on individual public shareholder bailouts likely to be executed under this act and its likely successor bills in 2020, we determined it would be easier to provide an easy-to-follow decision chart that will tell you in advance what our opinion will be.

Thank you for your understanding.

To receive a free full-text email of The Zeitgeist whenever we publish to the website, please sign up here. You’ll get two or three of these emails every week, and your email will not be shared with anyone. Ever.

Miracle Max: Don’t rush me, sonny. You rush a miracle man, you get rotten miracles. You got money?Inigo Montoya: Sixty-five.Miracle Max: Sheesh! I never worked for so little. Except once, and that was a very noble cause.Inigo: This is noble sir. His wife is… crippled. The children are on the brink of starvation.Miracle Max: Are you a rotten liar!Inigo: I need him to help avenge my father, murdered these twenty years.Miracle Max: Your first story was better.The Princess Bride (1987)

We have published fewer Zeitgeist notes in the last few weeks. The reason won’t be

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

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

Ten days ago we asked the Pack for the organizations they believed would step in the gap for the unique, cascading needs of certain especially vulnerable parts of our community as part of the Covid-19 pandemic and the policy response.

You came through with 13 more great recommendations from around the country – and in the UK. Thank you!

We have another request.

We want to hear stories about how you and people you know are helping. Have you or others been giving? Tell us about it. Are you or someone you know a health care professional on the front lines? Tell us about it. Are you in food service? Working grocery lines, keeping our supply chains going or otherwise keeping all of us warm and fed? Tell us, so that we can tell everyone else and prod them to action. If you’re a

Our work is based on a pretty simple premise: humans have a capacity for telling, listening to and responding to stories.

Sometimes – most of the time – our work criticizes a nudging oligarchy in politics, media and business that weaponizes these stories to influence our behavior in ways that benefit their personal aims. And yes, sometimes we celebrate the way in which story-telling brings us closer together as people.

Today is different. Today, we are asking for a story. Now is the time to tell us the story of how we get out of this.

Now is the time to tell the world our Escape Story.

We have observed in our institutional research that we believe there is now a cohesive narrative about the depth of the recession that Covid-19 and our mitigation response will induce.

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

There are two cartoons which lead both investors and nations to ruin.

The first kind treats a false measure as a true one.

The second kind treats a model of reality as if it were reality.

Both cartoons are perilous in the face of uncertainty. The first, the measurement cartoon, empowers actions based on a false confidence about the current state of a thing. The second, the model cartoon, empowers actions based on a false confidence about the future behavior of a thing.

Yet while both are perilous, their perils are not equal.

When we pretend our measurement cartoons tell us true things to guide our response to uncertain events, unless we are protected by a shield of time, law, arcane GAAP rules or an iron-clad, authoritarian grip on information, truth will

It has been a long week.

I am hopeful that an optimistic Friday close – or better yet, some time with family and (er, appropriately small) groups of friends – has allowed you to put some of it in perspective.

I suspect that perspective won’t be entirely pleasant. Yes, realizing that those we love are what matter may assuage the anxieties of one of the most volatile weeks in US financial markets history. But it also means that a lot of the real anxiety, frustration and pain is still ahead of us. We are on the front end of whatever Covid-19 curve we end up experiencing. At long last, we are making plans to look more like Singapore and less like Italy, but the speed, competence and consistency with which we execute those plans will determine whether that is, in fact, what

PDF Download (paid subscription required): First-Level Foolishness

“I’d like to first repeat what I said last week, and that is that over 90% of the value of a stock is due to its profits more than one year into the future. So as bad as this year can be…we could really have a short quick recession, the long-term value is not significantly impaired…let’s face it, this is mostly going to be a demand-induced slowdown.” Dr. Jeremy Siegel to CNBC (March 2, 2020)

In a severe pandemic, infrastructure can be disrupted at a national level, such as healthcare, transportation, commerce, and utilities. This is due partly to risk mitigation measures but also potentially higher rates of patients on sick leave, employees taking care of children or other family members, or general population

Some browsers require you to refresh the page before the video will start. If you do not see video by 2:01 PM, please refresh the page. Vimeo – our livestream service provider – now requires the creation of a Vimeo login if you wish to participate in the chat during our conversation.
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I am writing this at home because I can.

I will guess that many of you are reading it at home because you can, too. The effects of tail events are not perfectly distributed, the burdens not equally shared.

Since some of you are also probably reading this during an NYSE-instituted circuit-breaker timeout, it is entirely reasonable to wonder where we are in the market’s digestion of the coronavirus. What seems clearer is that we are still in the early innings of the disease as a public health and household economic issue. Maybe summer heat or a miraculous change in US policy give us some relief from the more dire potential public health outcomes. Maybe they don’t. Either way, many of the economic outcomes have already been crystallized. Why?

Because among corporate,

We’re talking about things that are going to change the world and change the way people listen to music and that’s not going to happen with people blogging on the internet…There’s too much technology available. I’m sure, as far as music goes, it would be much more interesting than it is today. Elton John, Interview with The Sun (2007)

The records I used to listen to and still love, you can’t make a record that sounds that way. Brian Wilson, he made all his records with four tracks, but you couldn’t make his records if you had a hundred tracks today. We all like records that are played on record players, but let’s face it, those days are gone. You do the best you can, you fight that technology in all kinds of ways, but I don’t know anybody who’s made a record that sounds decent

In the South Seas there is a Cargo Cult of people.  During the war they saw airplanes land with lots of good materials, and they want the same thing to happen now.  So they’ve arranged to make things like runways, to put fires along the sides of the runways, to make a wooden hut for a man to sit in, with two wooden pieces on his head like headphones and bars of bamboo sticking out like antennas—he’s the controller—and they wait for the airplanes to land.  They’re doing everything right.  The form is perfect.  It looks exactly the way it looked before.  But it doesn’t work.  No airplanes land.  So I call these things Cargo Cult Science, because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential, because the planes

Second Foundation Partners builds technologies to research narratives, the stories we tell one another about the world, from financial markets to political news to daily life. We write about those narratives. We consult with companies, investors and governments about narratives. We build investment models based on narratives.

Second Foundation is growing. We are now hiring a Senior Project Manager to work directly with Ben and Rusty to lead the expansion of the data and computational infrastructure underlying our narrative analysis efforts.

What We Need:

We need someone
who knows a lot about best practices and tools for ingestion, metadata
extraction, metadata enrichment, indexing and querying of pretty substantial
quantities of unstructured data. We need someone
who has

Sometimes it’s best to go straight for the trident.To receive a free full-text email of The Zeitgeist whenever we publish to the website, please sign up here. You’ll get two or three of these emails every week, and your email will not be shared with anyone. Ever.

I have been under withering (if modestly deserved) friendly fire recently for posing a riddle and sitting on the answer. It is with some hesitation that I pose another.

Relax. I won’t make you wait for the answer this time.

What is every marginally competent CEO AND every financial journalist on the Coronavirus beat planning right now?

Kitchen sinking it.

Let me show you what I mean. Here are three of the top five most linguistically connected financial and market news articles published a couple days

The most interesting person I know died on Saturday.

I met John Blaisdell in 2008. Salient, where he was CEO, wanted to replace a local financial institution that had participated in a first leg of growth for their fund-of-funds business. I was an associate at a private equity firm that existed to do deals like this. Our brilliant idea was that we’d pay a sub-equity multiple for a self-amortizing share of revenues, which is a fancy way of saying it just goes away after a certain number of years. Did I say brilliant? I meant terrible. Yes, the idea was to produce nice, clean transitions for asset-light, founder-owned investment businesses. The problem was that we always got outbid on the best companies and ended up with too many adversely selected ones – firms who did a deal with

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Source: Chris Arnade, via MediumTo receive a free full-text email of The Zeitgeist whenever we publish to the website, please sign up here. You’ll get two or three of these emails every week, and your email will not be shared with anyone. Ever.

In full disclosure, we didn’t identify today’s article in our NLP-driven screen of political and financial markets news. Medium posts don’t make our database. But it felt like part of our Zeitgeist to me. I think it will to you, too.

We have mentioned Dignity and its author Chris Arnade in our livestream feature on a few occasions. Why? First, because it’s a lovely book and worthy of your time. Second, Chris is a former markets professional, which makes a lot of what he has to say relevant for a big part of our audience. He

By the rivers of Babylon, there we sat down, yea, we wept, when we remembered Zion.We hanged our harps upon the willows in the midst thereof.For there they that carried us away captive required of us a song; and they that wasted us required of us mirth, saying, Sing us one of the songs of Zion.Psalms 137:1-3

Each year around this time we make the journey back home to Texas.

It’s an opportunity to see family. It’s an opportunity to surrender our bodies to enchiladas. It’s an opportunity to take our youngest son to check in with the neurosurgeon who took his skull apart and the plastic surgeon who made sure it came back together correctly.

OK, I’m being a bit dramatic.

The procedure he underwent has remarkable success rates, and in expert hands has pretty low risk.

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

The decline in the strength of the Q4 narrative of a risk of “collapse” in credit markets continued in January.Uniquely among our macronarratives, cohesion actually dropped for debt and credit market narratives.We think that the heightened attention on the coronavirus outbreak and generally positive news about the China Trade War were largely absent from the leveraged loan and private credit-focused discussions that dominated in late Q3 and early Q4.We don’t think that these markets are as mass media-driven as equity markets and asset allocation / macro – so while we would generally argue that this has created a complacent narrative, we don’t counsel establishing any active positions on that basis. Narrative Map

Source: Quid, Epsilon TheoryNarrative Sentiment Map

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