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The Zeitgeist – 5.17.2019

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 17, 2019 Narrative Map – US Equities Source: Quid, Epsilon Theory 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

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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

The Zeitgeist – 5.17.2019
Source: Quid, Epsilon Theory

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.

The Zeitgeist – 5.17.2019

Me, today.


“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!

The Zeitgeist – 5.17.2019

File this under Things You Only See At A Top.


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.


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.

The Zeitgeist – 5.17.2019

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


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.

The Zeitgeist – 5.17.2019

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


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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