The Epsilon Theory Archive

“History doesn’t repeat itself, but it often rhymes.” Mark Twain said that, or Abraham Lincoln depending on what corner of the internet you find yourself on any given day. Likewise, there are common themes, topics and subjects that run throughout the Epsilon Theory archive. All of our writing is categorized, tagged and organized to be easily accessible, but beware: your search for truth on one matter may very well lead you down any number of rabbit holes (and we hope that it does).

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The allure of a fundamental truth is powerful. Investors are hungry for that kind of clarity about markets, but it doesn’t exist. In the first in a series, Rusty discusses a framework for investing in a time of Icarus. Read more »

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The number one question investors ought to ask more often of a financial services company trying to sell them something is: “What is it, really?” If you don’t know what you’re investing in you’re liable to end up eating a lot of crunchy frogs. Read more »

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Most investors think that fundamentals are sound. Most investors think that other investors think that last week's correction was about vol-selling, vol-targeting and algos run amok. But neither of those is the real story. The real story is that everybody knows that everybody knows that inflation will change the way portfolios are built and managed. Read more »

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In a two-body market, the interactions of fundamental data and prices are generally predictable. In a three-body market, the epsilon — investor behaviors in response to narratives — exerts a powerful gravitational force which must be considered when building a portfolio. Read more »

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Costs in investing are one of the big "Things That Matter", but the decisions you make about risk, diversification and behavior are all going to impact your portfolio more than the expenses you are paying on funds or to your financial advisor. Read more »

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As we strive to truly be somebody in the world, we find ourselves forced into a Competitive Game that kills our ability to have a dialogue with one another. Rusty explains what keeps us there. Read more »

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Archetypes are everywhere in markets. In part two of why investor behavior is one of the Things that Matter, Rusty expands on the tendency for the temperament and behaviors of investors to coalesce around archetypes. Read more »

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In today’s public discourse, symbols — not facts — have become the center of gravity for almost every civic conflict and debate. Rusty reminds us that when we give in to symbolism, allegory and tribalism we abdicate our responsibility as Citizens. Read more »

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We’d like to believe that information and analysis can tell us the true value of something but the reality is that investment returns are always and everywhere a behavioral phenomenon. Read more »

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In the aftermath of Hurricane Harvey, Rusty discusses how we're shifting from a Collaborative to Competitive game and what this means for society. Read more »

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