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Mailbag: Life in Trumpland

Posted on March 6, 2017

The best part about this job, other than being recognized in random bars by 50-year old financial advisors who are always good to buy me a drink (hey, you take your celebrity where you can), is the correspondence with readers. I began writing Epsilon Theory 3+ years ago and from the outset I started getting emails from really smart people, truth-seekers all, making their way in this world of mendacity and inauthenticity without succumbing to it, and it’s given me — if not an optimism — then at least the occasional absence of despair about the world my daughters will inherit. I’m going to make a regular habit of what I always found to be the most enjoyable part of Bill Simmons’ Sports Guy blog — the reader Mailbag. I got more than the usual quota of great emails from my most recent note “The Evolution of Competition,” my take on the political and social polarization running rampant in Trumpworld. So without further ado…

I’m Not Predicting, I’m Observing

Posted on March 1, 2017

George Soros has a great line, one that I’ve stolen many times: “I’m not predicting. I’m observing.” We really don’t have a crystal ball, and it really is a dumb idea to pretend that we do. But what’s not dumb is to keep your eyes and ears open, observing both what the world is telling you (playing the cards) and what other market participants are telling you (playing the players), and reacting accordingly. That’s the heart of tactical investing.

The Evolution of Competition

Posted on February 7, 2017

The Trump presidency is breaking us. Not because of the specifics of his policies or whether they’re right or wrong or anything like that. It’s breaking us because we now routinely talk past or yell at our friends, family, and fellow citizens, despite vast common ground on the really big ideas of what it means to be Americans or, more fundamentally still, a good human being. Game theory can’t solve this growing discordance or reverse the evolution of competition, but it can identify the issue and maybe, just maybe, show us ways to mitigate the damage.

American Hustle

Posted on November 17, 2016

epsilon-theory-american-hustle-november-17-2016-the-stingThree questions to answer today: what did the Narrative Machine tell us about the market immediately before and immediately after the November 8 election, what am I preparing for now as an investor, and what am I preparing for now as a citizen? I’m giddy about the first, quietly confident about the second, and pretty darn depressed about the third. Could be worse, I suppose.

  1. The Narrative Machine gave clear, actionable, and non-consensus signals prior to the U.S. election last week.
  2. Yes, the Trump reform and infrastructure Growth Narrative is a tailwind for stocks and a headwind for bonds for the next four years. And yes, the overwhelmingly negative constraints that massive global debt places on global growth is still a headwind for stocks and a tailwind for bonds for the next four years.
  3. Trump breaks our political culture. Politics is no longer a “marketplace of ideas” when you think the other side is comprised of bad guys. Politics becomes a zero-sum Competitive Game of self-defense, which means that anything — anything! — goes.

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