Home » Posts tagged 'ben hunt'

Tag Archives: ben hunt

Olduvai
Click on image to purchase

Olduvai III: Catacylsm
Click on image to purchase

Post categories

Ben Hunt: Inflation Ahead!

Ben Hunt — highly respected fund manager, author, and former professor/entrepreneur/venture capitalist — says that to be successful in managing your wealth, there’s only one question that matters:

Are we entering a deflationary future, or an inflationary one?

The strategies and appropriate investment targets for each are extremely different, so you’d better answer correctly.

Though Hunt says as long as you identify the trend “roughly” right, you should do fine. You don’t have to be brilliant with the exact investments you put your capital into. As long as they benefit from the secular trend, its massive scale and momentum will do the heavy lifting.

So which kind of future are we entering?

Hunt thinks we’re at a very important inflection point. That after decades of deflation (e.g., chronically declining interest rates), we’re now transitioning into an era of secular inflation.

The $trillions in monetary and fiscal stimulus so far, and the near-certainty of much more to come, are certainly a big step in that direction.

And with asset prices completely distorted from reality, a struggling global economy, and an inflationary outlook, Hunt thinks the coming years will be extremely rocky for investors. Lots of cross-currents, with the only guarantee being that the majority of investment predicts will be foiled — as there remain very few active investors alive who have any experience managing capital in an inflationary environment.

Which is why Hunt is emphatic that now, more than ever, is the time to partner with a financial advisor who understands the risks in play, can craft an appropriate portfolio strategy for you given your needs, and apply sound risk management protection where appropriate:

…click on the above link to read the rest of the article…

“Don’t Test, Don’t Tell!”

“Don’t Test, Don’t Tell!”

I believe that a healthy society should not have only one voice.

– Li Wenliang, Wuhan physician, born October 12, 1986, died February 7, 2020.

Last night, I received a Twitter DM that included screenshots of an email that went out to staff at the UC Davis Medical Center. After checking for authenticity, I posted the screenshots in a tweet of my own.

And that’s when, as the kids would say, it blew up.

I want to highlight a couple of quotes from this email.

Since the patient did not fit the existing CDC criteria for COVID-19, a test was not immediately administered. UC Davis Health does not control the testing process.

The facts here are pretty clear. Patient comes in from another hospital on Wednesday, Feb. 19 – this is one week ago – already intubated and on a ventilator, and the doctors at UC Davis – who have treated other COVID-19 cases – IMMEDIATELYsuspect COVID-19.

But the CDC refuses to test for COVID-19.

Why? Because it didn’t fit their “criteria” for testing. They didn’t know for sure that the patient was in mainland China within the past 14 days, and they didn’t know for sure that the patient was in close contact with another confirmed case, so BY DEFINITION this patient can’t possibly have COVID-19. No test for you!

This is “Don’t Test, Don’t Tell” and it is the single most incompetent, corrupt public health policy of my lifetime.

And it’s happening all over the country.

Here, take a look at yesterday’s press conference from Nassau County, Long Island.


WATCH: Nassau County Executive Curran and Health Commissioner Eisenstein provide updates and guidance on #coronavirus.https://www.pscp.tv/w/cSaiRDFyYWpab1JxTGxZRXp8MXpxS1Zsbk5PekxKQuBQR5kXfNMJdTV1mFA7sEnBdBwEuSETqvhGEFlPBVjF?t=7s …Eyewitness News @ABC7NYCoronavirus Concern: Nassau County issues advisorypscp.tv


…click on the above link to read the rest of the article…

When Was I Radicalized? (Boeing edition)

When Was I Radicalized? (Boeing edition)


Dick Fuld
That’s Dick “Gorilla” Fuld, former CEO of Lehman Brothers, who oversaw a criminal fraud conspiracy that went by the name of Repo 105. 

Dick Fuld never saw a courtroom, much less a jail cell.

When was I radicalized?

When Dick Fuld walked away scot-free from Lehman with half a billion dollars in cash comp and stock sales during his tenure.

I thought of Dick Fuld today when I saw this picture and read this article.


Prosecutors Face Complex Path to Charging Boeing Over 737 MAX   [Wall Street Journal]

To bring a successful criminal case against Boeing itself, prosecutors would have to show that executives repeatedly concealed or ignored the 737 MAX’s engineering problems, experts said. 

And there is a larger economic and political component: A corporate indictment and potentially huge sanctions must be balanced against the economic and national-security risks of incapacitating the country’s second-biggest defense contractor.


That’s Boeing CEO Dennis Muilenburg, about to testify before Congress about the 737 MAX.

The article is correct, of course. There’s no way that the Justice Dept. will ever bring a criminal case against Boeing, not one that hits top management or really shackles the company.

And I know that Boeing said today that Muilenburg won’t get a bonus or (more) stock grants until the 737 MAX is flying again, but this article got Radical Me thinking … 

I wonder how much money Muilenburg and his management team and his board of directors have pocketed since he took over as CEO in 2015 and Chairman in 2016?

I wonder if executive compensation practices have changed over that span since … you know … Boeing started buying back nine billion dollars of stock every year?

 …click on the above link to read the rest of the article…

Yeah, It’s Still Water

Yeah, It’s Still Water


Back in April, I wrote This Is Water

There are these two young fish swimming along and they happen to meet an older fish swimming the other way, who nods at them and says “Morning, boys. How’s the water?” And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes “What the hell is water?”

David Foster Wallace (2005) 

It’s a note about financialization … the zombiefication of our economy and the oligarchification of our society.

Financialization is profit margin growth without labor productivity growth.

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!”.

What does Wall Street get out of financialization? A valuation story to sell.

What does management get out of financialization? Stock-based compensation.

What does the Fed get out of financialization? A (very) grateful Wall Street.

What does the White House get out of financialization? Re-election.

What do YOU get out of financialization?

You get to hold up a card that says “Yay, capitalism!”.


So anyway, there I was yesterday, minding my own business, and I saw a tweet about Texas Instruments (TXN) and how they were getting slammed after a difficult earnings call. Sometimes I can’t help myself, so I wrote this:


What is financialization? This.

Profit margin growth without labor productivity growth, driven by artificially low price of money. Corporate mgmt and uber-rich cash in … 99.9% can suck it.

And yes, this is why the world is burning.

https://twitter.com/michaellebowitz/status/1187023978927398912 


 …click on the above link to read the rest of the article…

Ben Hunt: Prepare To Get Burned

Ben Hunt: Prepare To Get Burned

Society is pretending its actions don’t have consequences. It’s badly mistaken.

History teaches us that there is no free lunch, reminds Dr. Ben Hunt, publisher of EpsilonTheory.com.

And science informs us that even the most simple systems become nearly impossible to predict or control with 100% precision as time and variables change.

But our society today is ignoring these lessons. It’s betting that the increasingly excessive distortions required to keep the status quo continuing will succeed, and come at no cost.

That’s a losing bet, warns Hunt:

Society burns itself on a really hot stove every three or four generations.

I think we’re at that point where the Millennials coming of age who are having to wrestle with what the Baby Boomers have done to the world. They’re going to end up burning themselves on this hot stove. The hot stove of looking to government as the answer for everything that ails you. Of looking towards your political leaders as somehow able to provide never-ending exponential growth in comfort and standard of living.

And ultimately, they’ll burn themselves — there’s no such thing as a free lunch. You’ve got pay for these things in one way or another — in terms of resource extraction, in terms of taxation, in the form of sacrifice of individual liberties.

There’s a price to be paid, though. That’s the hot stove that I’m talking about. That hot stove can manifest itself in war. That’s certainly happened in the past. It could manifest itself in the subordination or forfeit of individual liberties. That’s certainly happened in the past.

There are any number of ways in which that burning on the hot stove could happen.

 …click on the above link to read the rest of the article…

Peter Schiff: The Bigger the Boom, the Bigger the Bust (Video)

Peter Schiff: The Bigger the Boom, the Bigger the Bust (Video)

During the New Orleans Investment Conference, Peter Schiff participated in a panel discussion with Ben Hunt and Mike Larson. They talked about bubbles, booms and busts.

Hunt called it the “bubble of everything.” But he said the “gravitational force” created by all of the assets central banks have purchased over the last year have changed the “bubble-popping process.” That makes it hard to predict when things will actually start to deflate. He said it will take something the undermines the market confidence that central banks can bail us out. Hunt said inflation was possibly the pin that could prick the bubble.

Larson called it the “uber-bubble,” and he said he already sees some of the background concerns that have been simmering for  a long time are starting to “bubble over.” (Pun intended.) He said the last two bubbles were high in amplitude, but limited to certain parts of the economy (dot-coms and housing). The current bubble isn’t as high in amplitude, but it’s broader-based. We see bubbles in stocks, high-yield bonds, housing (again), and commercial real estate, along with a lot of other assets you don’t hear as much about – such as art and comic books.

I think the process of unwinding this is already beginning.”

Peter focused in on the cause of the bubbles.

When you see rampant, wide-scale bad decisions, generally a central banker is behind it, and they have made a bad decision to create too much money and to artificially manipulate interest rates down.”

This creates distortions in the economy because interest rates are really nothing more than price signals.

And like all prices, they need to be determined by the free market.”

Whenever the government – and central banks are really an extension of governments – price fixes something, it creates big distortions and malinvestments. 

…click on the above link to read the rest of the article…


Fiat World

Fiat World


That’s a still photo from the Netflix documentary “Behind the Curve”, a really good movie about the Flat Earth movement. I’ll come back to this in a minute.

But first … I was going to save this email for the Mailbag, but couldn’t resist using it now.

Hey There Ben    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. Then see if the tenor of future essays will have changed. Who knows, maybe action speaks louder than words. — By the way, the idea of Joining a Pack is very unappealing. — Anyway, Cheers and Aloha from the North Shore, Charles

I mean, Charles is an ass. But he’s not wrong.

And then I came across this gem (h/t Bloomberg Radio’s Lisa Abramowicz):

https://www.bloomberg.com/news/articles/2019-03-05/u-s-credit-card-debt-closed-2018-at-a-record-870-billion

Sixty percent of that record credit card debt (per this survey) is for daily expenses (food, utilities, rent, etc.) and retail purchases. When asked what they would be willing to give up to get out of debt, only 6% would give up their smartphone. Of course, 13% said they would give up their right to vote. [Pro tip: you already have.]

I thought about this record credit card debt, mostly comprised of food and rent and clothes, when I paid $4.99 per lb for organic, boneless/skinless chicken breasts at Stop and Shop last night, because it was the cheapest chicken breasts they had for sale. I am not making this up.

 …click on the above link to read the rest of the article…

But We Need the Eggs

But We Need the Eggs

ALVY SINGER: This guy goes to a psychiatrist and says, “Doc, my brother’s crazy; he thinks he’s a chicken.” And the doctor says, “Well, why don’t you turn him in?” The guy says, “I would, but I need the eggs.” Well, I guess that’s pretty much how I feel about relationships; y’know, they’re totally irrational, and crazy, and absurd … but, I guess we keep going through it because most of us … need the eggs. Annie Hall (1977)

I realize that we must un-person Woody Allen today, but Annie Hall is a great movie regardless. That’s Duane Hall in the picture above, Annie’s brother, as he drives Alvy and Annie to the airport after confessing to Alvy that his secret fantasy is to slam the car into the oncoming headlights. No one does crazy better than Christopher Walken.

We’re all passengers in the backseat of the State-driven car, and we all suspect that our drivers might be high-functioning lunatics, and we’re all terrified about what they might do next.

But we need the eggs.

We need a stock market that only goes up. 

We need to consume more healthcare. We need to consume more education. We need to consume more travel. We need to consume more Netflix on more devices. We need to consume more social media. We need to consume more “experiences”.

And we need the credit to do all of that NOW.

I was thinking about that Annie Hall scene a lot in the past week, what with the Green New Deal ™ and the Modern Monetary Theory ™ proposals in the news, replacing the Tax Cuts ™ and Supply-Side Economic Theory ™ of just last year.

If there’s one oldie-but-goodie ET note I’d want everyone to read, it’s Magical Thinking, published in September 2016.

 …click on the above link to read the rest of the article…

Foundation and Empire

Foundation and Empire

Thomas Cole, “The Consummation of Empire” (1836)

Every vice of the Empire has been repeated in the Foundation. Inertia! Our ruling class knows one law; no change. Despotism! They know one rule; force. Maldistribution! They know one desire; to hold what is theirs.

That quote is the narrative crux of Isaac Asimov’s second book of the Foundation trilogy, Foundation and Empire (1952). It’s the fatal flaw of the Foundation, formed originally as a noble form of galactic government, but now no better than (and easy pickings for) the Empire.

Hold that thought.

The narrative crux of the second note of the Things Fall Apart trilogy, Things Fall Apart (Part 2), can be found in the following chart. It’s the relationship between U.S. household net worth (how rich we are) versus U.S. GDP (how much our economy has grown) from 1951 through today.

Both data sets are in nominal dollars (meaning neither is adjusted for inflation), both are compiled by the same people (the Fed) using the same methodology, and both are normalized at 100 to show growth rates. It’s an apples-to-apples comparison, so don’t @ me about semi-log charting – it adds nothing here.

For 46 years, from 1951 to 1997, we were no more and no less rich than our economy grew. Which makes sense. That’s the neutral vision of monetary policy, where you’re not trying to pull forward future growth through leverage and easy money in order to create more wealth today.

For the past 20 years, however, we have had a series of wealth bubbles – first the Dot-Com bubble, then the Housing Bubble, and today the Financial Asset Bubble – that have made us richer than our economy grows. Each of these bubbles was intentionally “blown” by the Fed through monetary policy.

Reflections on Late-Stage Inflation

Without a doubt, we are in a period of late-stage inflation. But how long can it last?

A few days ago I noted that “inflation expectations” were the same or nearly the same for every period from seven years through thirty.

Actually, the thirty-year expectation was slightly less than the 10-year expectation. For discussion, please see Traders Expect Less Inflation Over a 30-Year Period than a 10-Year Period.

I do not think much of inflation expectations but the Fed strongly believes in them, and so do some others.

Pater Tenebrarum at the Acting Man blog commented “I agree . It is typical for the late stage of the business cycle, you get price inflation going, but it cannot last long. Note though that at some point (depending on central bank actions in response to the next bust and contingent circumstances) there could be a tipping point toward another stagflation period.”

Tenebrarum emailed two links where he discussed the setup.

Part 1 Snips

Ben Hunt, author of Epsilon Theory and chief risk officer of Salient Partners, mentioned a specific narrative that has accompanied quantitative easing for almost a decade now (even longer, if we take Japan into account). At first glance it appeared reasonable enough: central bankers argued that QE would help increase “inflation”. This is of course unequivocally true in terms of monetary inflation, but they referred to consumer price inflation. Alas, both CPI and inflation expectations obviously failed to respond appreciably to their ministrations. Ben posits that this narrative may be set to falter in a rather unexpected manner, by continuing to defy widespread expectations.

…click on the above link to read the rest of the article…

Inflation or Employment

  • Inflationary fears are growing and US rates continue to rise
  • Employment has become more flexible since the crisis of 2008/2009
  • Commodity prices have risen but from multi-year lows
  • During the next recession job losses will rapidly temper inflationary pressures

Given the official policy response to the Great Financial Recession – a mixture of central bank balance sheet expansion, lower for longer interest rates and a general lack of fiscal rectitude on the part of developed nation governments – I believe there are two factors which are key for stock markets over the next few years, inflation and employment. The fact that these also happen to be the two mandated targets of the Federal Reserve – full employment and price stability – is more than coincidental. My struggle is in attempting to decide whether demand-pull inflation can survive the impact of a rapid rise in unemployment come the next recession.

Inflation and the Central Bankers response is clearly the new narrative of the financial markets. In his latest essay, Ben Hunt of Salient Partners makes some fascinating observations – Epsilon Theory: The Narrative Giveth and The Narrative Taketh Away:-

This market, like all markets, cares about two things and two things only — the price of money and the real return on invested capital. Or, as they are typically represented in cartoon form, interest rates and growth.

…This market, like all markets, needs a positive narrative on risk (the price of money) or reward (the real return on capital) to go up. Any narrative will do! But when neither risk nor reward is represented with a positive narrative, this market, like all markets, will go down. And that’s where we are today. 

…click on the above link to read the rest of the article…

Too Clever By Half


The smartest animals on my farm aren’t my bees (although they possess the genius of the algorithm). It’s not the horses or the goats or even the dogs. The barn cat is pretty smart, but only in fairly limited circumstances, and the house cats are useless. Obviously it’s not the sheep or the chickens. Nope, the smartest animals on my farm aren’t really on my farm at all. They’re the coyotes who live in the woods.

My favorite example? We have a really big invisible fence for the dogs … covers about five acres. Yes, my farm is a great place to be a dog. For those of you who aren’t familiar with the technology of the invisible fence, it’s a buried wire that transmits a signal to a receiver placed on your dog’s collar. When the dog gets close to the wire, the receiver starts to beep, and when the dog gets all the way to the “fence” boundary, the receiver generates a small electric zap. I know, I know … it’s negative reinforcement and it’s a shock collar and all that. Don’t care. It’s fantastic for us and our dogs. But whether it’s a smart dog like Maggie the German Shepherd or a … shall we say … “special” dog like Sam the Sheltie, after a few weeks (Maggie) or a few hours (Sam) they will forget where the fence exists if they stop wearing the collar.

Not so the coyotes.

The coyotes know *exactly* where the invisible fence begins and ends, without the benefit of *ever* wearing a shock collar. How do I know? Because they intentionally leave their scat on their side of the invisible fence, creating a demilitarized zone as precise and as well-observed as anything on the Korean peninsula.

…click on the above link to read the rest of the article…

Global Debt Investors: The Silence of the Lambs

Global Debt Investors: The Silence of the Lambs

More haunting even than the terrified screams of lambs being led was the silence that followed their slaughter.

Such was the searing pain of relentless recollection for FBI agent Clarice Starling, the tortured lead played to Oscar perfection by Jodie Foster. In an agonizingly whispered scene that has forever left its imprint on the minds of horrified audiences, we hear the bleating of Starling’s long-dead tormentors.

Clarice’s hushed revelations to Hannibal reveal a desperate act by her young orphaned self. Unable to bear the horror, she’s running away from the bloodbath of spring lambs being slaughtered and her cousin’s sheep ranch. Desperate to do something, anything, she struggles to drive them from their pens to freedom: “I tried to free them…I opened the gate of their pen – but they wouldn’t run. They just stood there confused. They wouldn’t run…”

A recent, reluctant re-viewing of the film, only the third in history to win the “Big Five” Oscars, Best Picture, Actor, Actress, Director and Screenplay, fed fresh food for thought. The image of captives rejecting their freedom brought to mind another flock of corralled and stunned lambs — bond market investors. They too have been given the opportunity to escape their fate. But so many choose instead to stay. Such is the reality of a world devoid of options, with time ticking ruthlessly by.

Against the cynical backdrop of bulls and bears manipulating data to plead their case, Salient Partners’ Ben Hunt’s insights stand out for their indisputability. In his latest missive he points to one chart that’s incapable of being “fudged,” to borrow his term – that of U.S. household net worth over time vis-à-vis U.S. nominal gross domestic product. Suffice it to say we’re farther off trend than we were even during the dotcom and housing manias.

…click on the above link to read the rest of the article…

Anthem!

salient-epsilon-theory-ben-hunt-anthem-october-14-2016-alien

Ash: You still don’t understand what you’re dealing with, do you? Perfect organism. Its structural perfection is matched only by its hostility.
Lambert: You admire it.
Ash: I admire its purity. A survivor … unclouded by conscience, remorse, or delusions of morality.
Parker: Look, I am … I’ve heard enough of this, and I’m asking you to pull the plug.
[Ripley goes to disconnect Ash, who interrupts]
Ash: Last word.
Ripley: What?
Ash: I can’t lie to you about your chances, but… you have my sympathies.
― “Alien” (1979)

salient-epsilon-theory-ben-hunt-anthem-october-14-2016-alien-nation

Det. ‘George’ Francisco: You humans are very curious to us. You invite us to live among you in an atmosphere of equality that we’ve never known before. You give us ownership of our own lives for the first time and you ask no more of us than you do of yourselves. I hope you understand how special your world is, how unique a people you humans are. Which is why it is all the more painful and confusing to us that so few of you seem capable of living up to the ideals you set for yourselves.
 “Alien Nation” (1988)

salient-epsilon-theory-ben-hunt-anthem-october-14-2016-karl-marx

The less you eat, drink, buy books, go to the theatre or to balls, or to the pub, and the less you think, love, theorize, sing, paint, fence, etc., the more you will be able to save and the greater will become your treasure which neither moth nor rust will corrupt—your capital. The less you are, the less you express your life, the more you have, the greater is your alienated life and the greater is the saving of your alienated being.

 Karl Marx on Alienation, “Economic Manuscripts” (1844)

 

 

…click on the above link to read the rest of the article…

My Passion is Puppetry

Campaign
Company
Launch Date
epsilon-theory-progressive-insurance-1 “Flo” Progressive Insurance 2008
epsilon-theory-geico-2 “Rhetorical Question”
“Happier Than A … ”
“Did You Know?”
“It’s What You Do”
GEICO 2009
2012
2013
2014
epsilon-theory-allstate-3 “Mayhem” Allstate 2010
epsilon-theory-farmers-ins-4 “University of Farmers” Farmers Insurance 2010
epsilon-theory-state-farm-5 “Magic Jingle” State Farm 2011
2011
epsilon-theory-esurance-6 “That’s Not How It Works” Esurance 2014
epsilon-theory-nationwide-7 “Chicken Parm You Taste So Good” Nationwide 2014

We are supposedly living in the Golden Age of television. Maybe yes, maybe no (my view: every decade is a Golden Age of television!), but there’s no doubt that today we’re living in the Golden Age of insurance commercials. Sure, you had the GEICO gecko back in 1999 and the caveman in 2004, and the Aflac duck has been around almost as long, but it’s really the Flo campaign for Progressive Insurance in 2008 that marks a sea change in how financial risk products are marketed by property and casualty insurers. Today every major P&C carrier spends big bucks (about $7 billion per year in the aggregate) on these little theatrical gems.

This will strike some as a silly argument, but I don’t think it’s a coincidence that the modern focus on entertainment marketing for financial risk products began in the Great Recession and its aftermath. When the financial ground isn’t steady underneath your feet, fundamentals don’t matter nearly as much as a fresh narrative. Why? Because the fundamentals are scary. Because you don’t buy when you’re scared. So you need a new perspective from the puppet masters to get you to buy, a new “conversation”, to use Don Draper’s words of advertising wisdom from Mad Men. Maybe that’s describing the price quote process as a “name your price tool” if you’re Flo, and maybe that’s describing Lucky Strikes tobacco as “toasted!” if you’re Don Draper. Maybe that’s a chuckle at the Mayhem guy or the Hump Day Camel if you’re Allstate or GEICO.

…click on the above link to read the rest of the article…

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
Click on image to purchase