All of our thinking about CV-19 is wrong and all of our decision-making about CV-19 is wrong because we believe we’re getting “information”, when actually all we’re getting is an irrelevant error distribution.

Not gonna lie … this virus got us in the first half.

But if we prepare and strengthen our healthcare systems NOW, particularly in cities like Jakarta, we can still win the game.

Two narratives jumped sharply in structural attention scores over the past few months.

One is something we’ve already written a lot about – Inflation.

The other is something we’re writing a lot about now – China is lying with its nCov2019 data.

The use of central banks to monetize vast new fiscal spending programs in every developed nation on Earth – under the guise of CB-financed Green Bonds for left-leaning governments and CB-financed Infrastructure Bonds for right-leaning governments – is the biggest economic story of, not just the next year, but the next decade.

This is how the Fourth Horseman of the Investment Apocalypse – inflation – rides into town, and it will challenge everything we think we know about investing and asset allocation.

Media attention to an inflation narrative turned dramatically in December, and I see signs of it continuing to accelerate to the upside here in January, particularly in sell-side analysis and reports.

This a classic “Emerging Narrative” set-up. We are a couple of CNBC Missionary statements away from everyone knowing that everyone knows that inflation is off and running.

We’re relaunching a Debt and Credit narrative Monitor on ET Pro, as we’ve made some advances in formulating search queries to capture a meaningful signal from all the noise. If you’re involved in FI or credit markets, you’ll want to check this out.

Also, the 2019 Cohesion Crash in macro narratives continues to accelerate, with (I think) important implications for asymmetric trade opportunities.

The heart of narrative-world is quivering without a stable rhythm of beat of any sort. It’s an expansion of the Silly Season I wrote about in November, with zero investable narratives to be found.

Last month I asked a question: At what point, if ever, do political narratives about Inflation and Fiscal Policy become market narratives about Inflation and Fiscal Policy?

I’ve got an answer now, but you’re not going to like it.

There’s something weird happening in narrative-world, and I’ve been trying to figure out what it means since we published our monthly Narrative Monitors update last week (attached to this email). I still can’t figure it out, but instead of continuing to wrestle in silence, I’m going to tell you what I find odd and ask what you think it means … if anything.

There are two necessary narratives for EM investing to work:

1) Yay, EM growth!
2) Yay, EM property rights!

Both of these narratives are broken, which means the *business* of EM investing is broken. Heads up: this is not a mean-reverting thing.

The line between the anchor and the boat has been cut. The line between the fisherman and the fish has been cut.

Everyone knows that everyone knows that central bank actions have no connection to real economic outcomes. THIS is the new common knowledge, and I don’t know how or where or when, but I think it changes everything.

Our most impactful structural attribute of narrative is Attention – the level of “drum-beating” for a certain narrative relative to all of the OTHER narratives taking place.

So it matters that the Inflation narrative is close to all-time lows in its Attention score coming into September, while both the Central Bank narrative AND the Trade & Tariff narrative are at all-time highs in their Attention scores coming into September.

I’ve never seen a US-oriented macro query that yielded more non-US narrative clusters.

Also, the past few days in markets have felt like 2008-2009, where the only thing that mattered for markets was risk-on/risk-off, and that “factor” swamped whatever else you were doing in your investment process. This isn’t as all-pervasive as risk-on/risk-off, but whatever it is (rates-on/rates-off?), it’s as impactful in the value/growth context.

First, I think I think that the “cover story” for the Fed – that they act to help the real economy – has evaporated.

Second, I think I think Trump has lost the financial media over the Trade War in the same way that LBJ lost Walter Cronkite over the Vietnam War.

The news about Jeffrey Epstein’s death on Saturday hit me hard, as did the escalation in the Hong Kong protests over the weekend, as did the collapse in Argentina’s currency and stock market on Monday. As the kids would say, I was shook. And I’m still trying to figure out what I think about all this, both as a citizen and as an investor.

The First Horseman was a tightening Fed, and markets suffered its wrath in Q4 last year.

Markets are now suffering the Second Horseman, as China “surprised” markets with a sharp devaluation of the yuan last night in response to higher/broader tariffs that Trump threatened to impose last week.

Here are the questions Rusty and I are asking now, along with our answers …

I’ve been looking at narrative maps for a long time now, and I don’t think I’ve ever seen as complacent a market narrative as what our Narrative Machine research is showing around US Fiscal Policy.

Here’s how we analyze this research.

I’ve met Rick Rieder and Larry Fink a couple of times, but I don’t know them. At all. Maybe they’re decent guys. Maybe they really believe in their heart of hearts that it’s wise public policy for the ECB to buy equities. I truly don’t know.

But if it walks like a Raccoon and talks like a raccoon …

That line about dancing by Chuck Prince is the perfect quote for any age and any asset class where institutions intentionally take risks they know are foolish, but risks they believe are manageable because there’s a greater fool looking to get on the dance floor after them.

The greater fool theory is the driving force behind the bid for negative-yielding debt, whether it’s European government bonds or European investment grade corporate debt.