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The Zeitgeist – 5.14.2019

Summary:
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 14, 2019 Narrative Map – US Equities Source: Quid, Epsilon Theory Vietnam, deemed worthy of a special mention by Donald Trump Monday, is already proving an outperformer, with its stocks losing 2% compared with 5% for the broader emerging-market index last week. The U.S. president warned that unless China accedes to his demands, its trade will flow into Vietnam and

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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 14, 2019 Narrative Map – US Equities

The Zeitgeist – 5.14.2019
Source: Quid, Epsilon Theory

Vietnam, deemed worthy of a special mention by Donald Trump Monday, is already proving an outperformer, with its stocks losing 2% compared with 5% for the broader emerging-market index last week. The U.S. president warned that unless China accedes to his demands, its trade will flow into Vietnam and other countries.

Brazil and Ukraine are also being sized up as beneficiaries of the standoff between the world’s two largest economies as investors pursue war-proof strategies and places to escape the worst weekly losses in global stocks since December.

This sort of blue sky projection lasts until China starts talking about devaluing its currency. Again.

And then all EMs will tank, especially these “Asian cubs”. Again.

The Zeitgeist – 5.14.2019

As with the two previously issued Sustainability Bonds, funds will support ethically sourced coffee. The scope includes purchasing coffee that is verified by Coffee and Farmer Equity (C.A.F.E.) Practices; the continued development and operation of Farmer Support Centers and agronomy research and development centers in coffee-growing regions around the world; and new and refinanced loans to coffee farmers made through Starbucks $50 million Global Farmer Fund.

The 30-year Sustainability Bond is part of a larger bond offering of $2 billion, with another $1 billion bond issued for general corporate purposes including the repurchase of common stock as part of the previously communicated $25 billion shareholder return target. The issuance is in line with Starbucks commitment to a leverage cap of 3x lease-adjusted EBITDAR and a minimum credit rating of BBB+Baa1.

I couldn’t find any information on pricing or the coupon associated with this $1 billion, 30-year note, although the prior 10-year $500 million offering went out at 2.45%.

ESG comes to corporate finance.


The U.S. is the world’s top cotton shipper and more than three-quarters of the domestic crop goes into exports, which are heavily dependent on China. Escalations in the trade war come at a time when expanding production meant American inventories were forecast to reach a decade high.

The Zeitgeist – 5.14.2019

Don’t worry, Mr. Cotton Farmer, I’m sure the USDA will designate you as a Patriot Farmer.

The Zeitgeist – 5.14.2019

President Donald Trump’s latest tariff increase on Chinese goods will drive up the Federal Reserve’s preferred measure of underlying inflation, and a further escalation of the trade war will have an even greater impact on prices as well as economic growth, according to Goldman Sachs Group Inc.

The Zeitgeist – 5.14.2019

Will be proclaimed as “transitory” by the Fed.

So it doesn’t exist.


You’re a wise and careful person, so you calculate your likely expenses and how much you can charge for your tender young lambs. The math says sheep farming will offer you a tidy little living. But just as you’re about to commit, the government announces price controls on lamb, which will eliminate your profits. Do you still open the sheep farm?

I get so depressed when self-styled libertarians (in this case the Washington Post’s Megan McArdle) shill for oligarchic corporate interests that have captured huge swaths of the regulatory state.

As if Big Pharma’s profit margins aren’t created and maintained by government policy in the first place.

I never know if they’re just mailing it in or if they’re on the make.


You never see how much was “added” to stock market value on a big up-day like today.

The Zeitgeist – 5.14.2019

That’s intentional, of course, part and parcel of the creation of tiny-hurdles-of-worry.


About Ben Hunt
Ben Hunt
He is the chief investment strategist at Salient, a $14 billion asset manager based in Houston and San Francisco, and the author of Epsilon Theory, a newsletter and website that examines markets through the lenses of game theory and history. Over 100,000 professional investors and allocators read Epsilon Theory for its fresh perspective into market dynamics.

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