Unanchored - Epsilon Theory

"I am not pining for ye good old days here. My point with all this is that there is a cascading series of societal shifts happening and these have implications for trading and investing."

Passive index flows rarely consider price or valuation. And now, the stock market is not where insiders go to raise money, it’s where they go to cash out."

"Ben Hunt’s canonical essay “Snip!” from 2019 is one of my favorite short reads of all time. It’s a prescient look at the seismic shifts that will occur as the cord that once connected taxes and spending is cut. Read the piece later, but for now just know that it outlines the enormous real and psychological impact of renouncing the most important m... See more

Once you cut the cord, old meanings disappear, and new ones form. Taxes find new meaning as social justice tools, or as windfall gains for prized constituents."

How it’s going: Now, in the most extreme instances, GME and AMC for example, stocks are gambling tokens or crowd attention barometers and have almost no relationship to the underlying company or business. Valuation is totally irrelevant to the bull thesis and overvaluation attracts shorts that fuel further rallies. Discount rate matters but not muc... See more

"How it started: DCF and other methods were once important tools used to calculate the value of individual equities. Equity markets were a place companies went to raise money for expansion and investment.