Irving Rosenfeld:   Did you ever have to find a way to survive and you knew your choices were bad, *but* you had to survive? – “American Hustle” (2013)


Only when I wake up in the morning. Nothing but caper movie quotes today. Seems appropriate.

Doyle Lonnegan: I put it all on Lucky Dan; half a million dollars to win.
Kid Twist: To win? I said *place*! “Place it on Lucky D-” That horse is gonna run second!
Doyle Lonnegan: [There is a pause, and Lonnegan runs horrified to the betting booth] There’s been a mistake! Gimme my money back!
? “The Sting” (1973)

 

I suspect there were more than a few Doyle Lonnegan moments in Silicon Valley and the Hamptons last Tuesday night. Here, for example, is Lady Gaga looking particularly distraught, as photographed in her Rolls Royce. No, really.

Wanda: [after Otto breaks in on Wanda and Archie in Archie’s flat and hangs him out the window] I was dealing with something delicate, Otto. I’m setting up a guy who’s incredibly important to us, who’s going to tell me where the loot is and if they’re going to come and arrest you. And you come loping in like Rambo without a jockstrap and you dangle him out a fifth-floor window. Now, was that smart? Was it shrewd? Was it good tactics? Or was it stupid?
Otto West: Don’t call me stupid.
Wanda: Oh, right! To call you stupid would be an insult to stupid people! I’ve known sheep that could outwit you. I’ve worn dresses with higher IQs. But you think you’re an intellectual, don’t you, ape?
Otto West: Apes don’t read philosophy.
Wanda: Yes they do, Otto. They just don’t understand it. Now let me correct you on a couple of things, OK? Aristotle was not Belgian. The central message of Buddhism is not “Every man for himself.” And the London Underground is not a political movement. Those are all mistakes, Otto. I looked them up.
? “A Fish Called Wanda” (1988)

 

Gonna be lots of Ottos in this administration. I count three in cabinet-level appointments so far.

Lilly Dillon: You’re working some angle, and don’t tell me you’re not because I wrote the book!
Roy Dillon: What about you? You still handling playback money for the mob?
Lilly Dillon: THAT’s me. That’s who I am. You were never cut out for the rackets, Roy.
Roy Dillon: How come?
Lilly Dillon: You aren’t tough enough.
Roy Dillon: Not as tough as you, huh?
Lilly Dillon: Get off the grift, Roy.
Roy Dillon: Why?
Lilly Dillon: You haven’t got the stomach for it.
? “The Grifters” (1990)

Anjelica Huston’s best work. Worth watching just for Bobo and the oranges, hands down one of the most psychologically horrific scenes in American cinema. John Cusack plays Lily’s son, and she’s right: he doesn’t have the stomach for this line of work. Neither do a lot of portfolio managers.

Randolph Duke: Exactly why do you think the price of pork bellies is going to keep going down, William?
Billy Ray Valentine: Okay, pork belly prices have been dropping all morning, which means that everybody is waiting for it to hit rock bottom, so they can buy low. Which means that the people who own the pork belly contracts are saying, “Hey, we’re losing all our damn money, and Christmas is around the corner, and I ain’t gonna have no money to buy my son the G.I. Joe with the kung fu grip! And my wife ain’t gonna f… my wife ain’t gonna make love to me if I got no money!” So they’re panicking right now, they’re screaming “SELL! SELL!” to get out before the price keeps dropping. They’re panicking out there right now, I can feel it.
Randolph Duke: [on the ticker machine, the price keeps dropping] He’s right, Mortimer! My God, look at it!
? “Trading Places” (1983)

 

Like any good trader, Billy Ray has internalized the Common Knowledge Game.

Louis Winthorpe III: Randolph. Mortimer.
Mortimer Duke: Winthorpe, my boy, what have you got for us?
Louis Winthorpe III: Well, it’s that time of the month again. Payroll checks for our employees, which require your signatures. And no forgetting to sign the big ones!
Mortimer Duke: We seem to be paying some of our employees an awful lot of money.
Louis Winthorpe III: [laughs] Can’t get around the old minimum wage, Mortimer.
? “Trading Places” (1983)

 

Europeans take racial differences and put them on the dimension of class. Americans take class differences and put them on the dimension of race. Randolph and Mortimer do both.

Angela: She said you were a bad guy. You don’t seem like a bad guy.
Roy: That’s what makes me good at it.
Roy: For some people, money is … money is a foreign film without subtitles.
? “Matchstick Men” (2003)

Nicolas Cage can act. When he wants to. Ridley Scott can direct. Always. To paraphrase Woody Allen, 90% of alpha is just showing up.

 

Linus Caldwell: Um, all right, let’s go over the list again. Ah, “Swinging Priest”?
Basher Tarr: Not enough people.
Linus Caldwell: “Crazy Larry”?
Turk Malloy: Not enough people.
Linus Caldwell: “Soft Shoulder”?
Basher Tarr: Not enough people.
Linus Caldwell: “Baker’s Dozen”?
Basher Tarr: No woman
[pause]
Basher Tarr: and not enough people.
Turk Malloy: “Hell in a Handbasket”?
Linus Caldwell: [sigh] We can’t train a cat that quickly
[pause]
 Linus Caldwell:  and…
All: Not enough people.
? “Ocean’s 12” (2004)

 

This is my new go-to line for every business or policy challenge: we can’t train a cat that quickly.

Basher Tarr: You don’t run the same gag twice … you run the next gag.
? “Ocean’s 13” (2007)

 

The only question that matters for surviving the next four years: what’s the gag they’re running on us? What’s the narrative they’re constructing? Behold Steve Bannon, gag-meister extraordinaire.

Rusty Ryan: Turn the machine off guys.
Turk Malloy: It is off.
Rusty Ryan: Are you kidding?
Turk Malloy: Does it sound like I’m laughing, sweetheart?
? “Ocean’s 13” (2007)

 

Sometimes when you fire up an earthquake machine, you get a real earthquake.

There are three questions I’d like to answer in this Epsilon Theory note: 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.

On the first question, the Narrative Machine gave clear, actionable, and non-consensus signals prior to the U.S. election last week. For readers who aren’t familiar with what I mean by the Narrative Machine, I’ll refer you to this note by the same title. In a nutshell, I’m using a technology called Quid to take Big Data snapshots of large numbers of financial media articles. These snapshots show the connectivity and influence of each article to every other article, constructing a neural network or “star map” of the narratives and meaning clusters that link the articles. By looking at measures of sentiment and connectivity associated with the network, I think that I can get a good sense of market complacency around events like a Trump victory, as well as the likely direction and magnitude of market moves if

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