The transcript from this week’s, MiB: Ben Hunt, co-founder Perscient, is below.

You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.

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Bloomberg Audio Studios, podcasts, radio News. This is Masters in business with Barry Riol on Bloomberg Radio

Barry Ritholtz: On the latest Masters in Business podcast. What a fascinating conversation. I sit down with Ben Hunt, he writes Epsilon Theory, but he is also the president and co-founder of Persuent. What a fascinating analytic story they’ve put together. They essentially take feeds of everything that’s published around the world, whether it’s in English or Chinese or Russian. They create these large language models and use artificial intelligence to identify rising narratives. In other words, they’re looking for the things that will become storylines, but haven’t quite hit that yet. I I found this conversation to be absolutely fascinating, and I think you will also, with no further ado, my conversation with Persuent Ben Hunt. Ben Hunt, welcome to Bloomberg.

Ben Hunt: Thanks for having me.

Barry Ritholtz: This is long. time coming

Ben Hunt: I love the intro. I gotta have you at all my events. It’s fantastic.

Barry Ritholtz: That’s right. I’m available for hire. I can introduce you at, at weddings bar Mitzvahs. Wherever you’re giving a toast, I’ll be happy to tee you up. This is long overdue. I’ve followed your work for so long. I’m fascinated by both what you put out in your blog, Epsilon Theory, thank you, and which is now a blog and a newsletter and, and the work you do at persuent. We’re going to get to that stuff, but before we do, I gotta ask PhD from Harvard. You were a tenured political science professor. Was academia the original career plan?

Ben Hunt: You know, it’s interesting, Barry. So I, academia was always a, I’ll call it a, a way station for me. It ended up being

Barry Ritholtz: A 10 year way station?

Ben Hunt: 10 years plus grad school.

Barry Ritholtz: That’s a little more than a way station. I

Ben Hunt: A little more than a waste station. But I bet this will be familiar for a lot of your listeners. I always had an entrepreneurial bug. You know, I started my first company when I was in grad school, started another one when I was, when I was a professor. And as I know, you know, a lot of your listeners, viewers know, it is, it is a bug. It’s not a feature.

Barry Ritholtz: Yes, for sure.

Ben Hunt: You can’t help yourself. And academia is not the place to be an aca,

Barry Ritholtz: So let me ask you a question about that.

Ben Hunt: An academia for sure. So I know why I’ve started a series of companies. I can’t work for other people. Why, why did you have that bug? What, what motivated you to say, I gotta get this out into the world?

Barry Ritholtz: I love playing games and solving problems.  I have a similar issue about working for other people, which fortunately, academia solves that to a large degree. I mean, you, you are working on your own stuff. You follow your own intellectual bliss in a way that I’ve really never rediscovered. The the problem with academia, of course, is, you know, it’s very, very low stakes. That’s why the academic fights are so vicious, because

Ben Hunt: There’s nothing at stake. Right, right. And, and that that is actually true. That’s actually true. And, and so you learn survival techniques and that kind of jungle where nothing is really at stake, at least monetarily, because the, the goal of any sort of academia conference or presentation, like, is to appear smart. Right? It’s not to actually be smart. You’re not actually listening to a presentation to listen to it. What you learn to do is you’re listening to the presentation the whole time. You’re trying to calculate your head. What’s the most devastating question I can ask?

00:04:07 [Speaker Changed] So you’re gonna rock this guy back on his heels with a devastating, a

00:04:11 [Speaker Changed] Devastating question. And boy, that gets old after a while, Barry, I gotta tell you. Yeah. It, it really does. I, I loved the teaching. I loved the, the research. ’cause like I say, nobody tells you what to work on, but the, the church of academia, the, the actual institution of academia, a it’s for the birds, even back when I was doing it. Right. And I think it’s gotten significantly worse.

00:04:40 [Speaker Changed] I can imagine. I can imagine what’s happening with that. So, but the question that this leads me to is, yeah, you’ve had all these jobs within the world of finance. How did your background in academia shape how you view investing? Risk management allocation?

00:04:57 [Speaker Changed] Barry, starting from academia and then getting into our business of investing, I think it was the best thing that could have happened for me for when I got into it, which was kind of later in life, right? Same, same. You know, after I left academia finally to start a software company. And it, after we sold that software company Yeah. A, a a buddy of mine that I think this happens a lot. A buddy of, you know, you have a buddy who’s in the

00:05:29 [Speaker Changed] Business, Hey, you seem to be pretty smart. How would you like to apply this to

00:05:32 [Speaker Changed] This? We’re always, we’re always talking about company X or technology Y why don’t, you know, why don’t you come in? Let’s, let’s give this a try. So that was my path, if you want to call it a path. And what really sold me on it was that markets, it’s the biggest game in the world

00:05:52 [Speaker Changed] For sure.

00:05:54 [Speaker Changed] And like I say, I’m a game player. I love games

00:05:57 [Speaker Changed] And a game theorist. Let’s, let’s, let’s work down that.

00:06:00 [Speaker Changed] Well, I, I don’t like to talk about that because, you know, because the,

00:06:03 [Speaker Changed] The real game theorists get angry.

00:06:05 [Speaker Changed] Yeah. Well, yes. And, and, and I, I understand I am a real one because that was, that was my field for a while. And it’s a real field and it’s a real thing. But it’s been so trivialized when some talking head will come on. Well, let’s look at the game theory of this. Right? And you just want to just, you know, right. Shoot yourself when somebody does this.

00:06:25 [Speaker Changed] So, so the other part of your research, the other part of your academic focus was on narrative theory. And so let’s talk about how did that focus develop? And, and we will talk a little later about what you do today at Persuent with the narrative machine. But what, and

00:06:46 [Speaker Changed] Believe it or not, believe it or not, it all ties together. I,

00:06:48 [Speaker Changed] I doesn’t don’t doubt that for a second. And,

00:06:50 [Speaker Changed] And it’s

00:06:51 [Speaker Changed] What initially led you down that rabbit hole.

00:06:54 [Speaker Changed] When we think about kind of who’s been an influence on you in your, in your life, had a very influential undergrad professor in political science. And then I had a very influential graduate advisor. Again, they don’t call it political science in, up at, up at Harvard. They call it government or something. Right? Something like that. But, but it’s political science. And, and the reason I say they were influential is that they really got me focused on the science side of political science

00:07:30 And that science side. Yes. It’s kind of some of the typical terrible stuff you see in all social sciences, like economics, where, you know, you’ve gotta learn how to deal with structured data. Right. And, and there was, there was a lot to learn. And I, it’s, it’s worth talking about because I see the same mistakes being made over and over again by people in our business who want to try to, well, you know, apply math to data and, and there are some real pitfalls and some, some real intellectual capital I think that you can achieve within academia that you can then bring in and apply to the, the, the investment world. What,

00:08:20 [Speaker Changed] What we’ve certainly seen amongst the quants, a very successful application of math theory to data. The, in fact, some of the best performing hedge funds are quantitatively driven. That’s not where you’re going.

00:08:37 [Speaker Changed] Well, it’s, it’s part of where I’m going. Right? So, so there, there, there’s a transition in all of all of the sciences, honestly, but certainly the, the social sciences where, where, yes, you start with numbers, structured numbers, right. Price over time, you know, things you can calculate and measure as those numbers. But what was clear immediately in politics, and I think has become increasingly clear in the world of investing, is that it’s not just the numbers that you get on your Bloomberg terminal, it’s also the words and the stories and the narratives that are told to us. Politicians have known this forever, right? So the story of politics is the story of people suggesting laws or policies and then having to present it in a way that gets them elected or keeps them in power or whatever that is. So there’s always been a focus, I’ll say more of a focus in political science than in economics with words. Economics is almost seen as a, as a sideline. Right? It, it’s somehow lesser than the numbers. Right. So what, what I was kind of early on was applying the same techniques that we have for understanding, you know, matrices and structured data, but applying it to unstructured data, which, you know, full circle, this is at the heart of all of the generative AI and the, the AI that we have today.

00:10:28 [Speaker Changed] Well, you’re, you’re getting way ahead of me now with generative ai. We’ll circle back to that. Yeah. But, but

00:10:32 [Speaker Changed] It’s all the, the math has not changed. Right. In 35 years since I started working with network math around unstructured data. I mean, we, we didn’t call it natural language processing back then, and we didn’t call it, you know, large language modeling, but that’s exactly what we were doing.

00:10:53 [Speaker Changed] So what was, what was the moment or the catalyst for you to say, Hey, I’m working in all these other areas, but the narratives continue to pop up over and over again on all sorts of different data sets. And I think in the financial markets, I can use a, a novel approach to identifying narratives and anticipate where the market’s going. What, what led to that sort of in insight,

00:11:25 [Speaker Changed] Not the, not the Great Recession, right? But the aftermath,

00:11:30 [Speaker Changed] Meaning the 2010s following the great financial crisis,

00:11:34 [Speaker Changed] Starting in, in, in 2009, and the recovery that we had out of 2009, and in particular when Win Ben Berke and the Federal Reserve move towards a very explicit effort to use their words to impact markets.

00:11:53 [Speaker Changed] So let’s talk a little bit about that. ’cause I have some really specific memories of the low, of the, the runup afterwards, all the noise Yeah. That was going on. Some of the phrases that have come out of that era, like financial repression and other such things are, are just the tip of the narrative iceberg. So, so walk us through your insight. It’s 2009. Yep. The market bottoms really kind of a v bottom and took off from that. What was that, March 9th, March 7th, something like that. Yep. Oh nine. And there was no turning back. What were you seeing? How were you integrating that into a concept of let’s identify narratives in order to anticipate market moves? Well,

00:12:47 [Speaker Changed] So I was co-founded a, a long short fund inside of a, a larger asset manager going back in oh five and oh 5, 0 6, 0 7. We did well, like everyone else did. Well. And then in oh eight we did great.

00:13:08 [Speaker Changed] Really? In oh eight, we did great. Oh eight, I think I wanna say s and p down 37% something. Yeah. We

00:13:12 [Speaker Changed] Were up 20 something net.

00:13:14 [Speaker Changed] Anything in the green, not in the red is

00:13:16 [Speaker Changed] Smith. Yeah. Amazing. And, and now I’ll tell you, and we can come back to this, like, the real question you should ask is that given what we believed, why wasn’t, why weren’t we up 40%? That, that’s actually, that, that’s actually a question you can ask. But

00:13:33 [Speaker Changed] I I’m, I’m gonna say a 47% relative price swing. I, I, I’ll take,

00:13:39 [Speaker Changed] Had a, had a, had a great year in oh eight and, and

00:13:42 [Speaker Changed] Did that continue in oh nine

00:13:45 [Speaker Changed] Flatlined.

00:13:46 [Speaker Changed] Alright.

00:13:47 [Speaker Changed] From oh nine, so from March of oh nine. So we did well in January 1st quarter, February and the first quarter, right. The rest from, from March of oh nine, our returns flatlined. So we never, we never lost money for our clients in our fund. But

00:14:01 [Speaker Changed] You didn’t catch that recovery. That

00:14:03 [Speaker Changed] V did not catch the recovery. Absolutely did not. And the, the recovery was interesting, right? You’re, you’re right. There was a v but there were, there were starts and stops to it. So the, the big move up from the bottom in late March going into April, it’s like, all right, that actually we caught a little bit of that and that that made sense, right? There was a second leg to the rally. Oh, for sure. April, may. And then in June, in June, June to October was a ferocious rally.

00:14:39 [Speaker Changed] Ferocious is the right word, but,

00:14:40 [Speaker Changed] But June in particular was a classic crap rally.

00:14:45 [Speaker Changed] Right. Meaning it was a low

00:14:46 [Speaker Changed] Quality, right. Low quality stuff. Right. The, the end of March going into April rally, it was Right. This makes sense, right? We bottomed fed the June rally. No, no, it was, we didn’t, we didn’t touch any Oh,

00:15:03 [Speaker Changed] That’s a, that’s fascinating. Go back,

00:15:05 [Speaker Changed] Go back and look at it. Right? I, and, and let me tell

00:15:07 [Speaker Changed] You, oh, I don’t, just so you know. Yeah. I, I have a vivid recollection of chatting with Jim Bianco about this, and we were both bullish, but for completely different reasons. To me, anytime US equity markets are cut in half, I’m a buyer and people say 1929, I’m like, great, you gotta go back a century to find the exception that proves the rule. But Jim was early on in the Tina trade, Hey, the Fed has made everything cash, trash bonds are, they’re forcing you into equities, which is what led my post, which everybody stole the line. This is the most hated bull market in history. Yeah, yeah. And I, I wrote that up. I send that out and I heard everybody borrow that. But I’m curious as to where the June rally took you. Well,

00:15:55 [Speaker Changed] This, and this is where I’m going about the role of forward guidance in Jim Bianco’s point about, because what the Fed did wasn’t just it’s policies around interest rates, you know, they took them to zero. And that’s where we stayed,

00:16:16 [Speaker Changed] Started buying mortgage backs and they did

00:16:19 [Speaker Changed] Qe, balance, balance sheet operations. Right, right.

00:16:22 [Speaker Changed] Quantitative easing,

00:16:23 [Speaker Changed] Actual, you know, actually, and I look, I, I think QE one, I think it saved the world. This

00:16:28 [Speaker Changed] Is what, right. And what was that? A trillion dollars something crazy.

00:16:31 [Speaker Changed] Something. Yeah, something something.

00:16:32 [Speaker Changed] 800 billion, something

00:16:33 [Speaker Changed] Something like 800 billion

00:16:34 [Speaker Changed] Unthinkable number.

00:16:35 [Speaker Changed] So I, I think that, so those were specific actions took, but, but even if you, people often say things when they’re leaving office. So, so Bernanke’s last speech is valedictory address.

00:16:48 [Speaker Changed] Right. More honest than intended.

00:16:51 [Speaker Changed] Much more so, and you see this all the time, right? George Washington leaving office.

00:16:55 [Speaker Changed] I was gonna say, I,

00:16:55 [Speaker Changed] I, I, Eisenhower Yeah.

00:16:57 [Speaker Changed] That’s a big,

00:16:57 [Speaker Changed] I mean, when, when, when, when freaking Eisenhower warns you against the defense industrial complex. You know, you might, you might. I’m just saying. No, I won’t listen.

00:17:06 [Speaker Changed] It’s general like to you. That’s

00:17:08 [Speaker Changed] Right. General, like to me, what Bernanke said when he is leaving his terms of office, he said, look, we had, we had two toolkits. One was traditional stuff, interest rates down to zero. At the time we didn’t know we could have negative interest rates. So, you know, that’s where we were. Right. Second were the balance sheet operations, large scale asset purchases, qe, quantitative easing. It said, you know, QE one was great. Did what we hoped it would do. QE two, eh, operation Twist, QE three, this is Bernanke saying, mind you. Yep. He says, I actually think that might have been a little counterproductive,

00:17:47 [Speaker Changed] Huh?

00:17:49 [Speaker Changed] They said, but we had another toolkit, and that was our communication policy. That was forward guidance, that we started using our words not to communicate to the market what we actually felt. We started using our words and coordinating our words to change the market, to change market behavior. This is what I mean about making a conscious effort to tell a story. And it, it’s not that it was necessarily lying, but they, they were using their words and choosing their words for effect

00:18:28 [Speaker Changed] To shape perception of their underlying

00:18:31 [Speaker Changed] Behavior to market, to, to shape market behavior. And he said, that worked better than we had any hope that it could. And that’s where we are now.

00:18:42 [Speaker Changed] So, so for the youngins listening, I have to point out, and you and I are old enough to remember back in the days where there were no minutes released there, there wasn’t an announcement, forget a press conference. You had to be watching the bond market to figure out what the Fed just did. Like today, there’s, we’re holding the, having this conversation. There was a fed the October meeting, a quarter point rate, cut a conversation about all sorts of stuff. I really didn’t pay a lot of attention to it. Yeah. Lack of clarity, no data, blah, blah, blah.

00:19:20 [Speaker Changed] Worse than that, Greenspan would be intentionally vague and obtuse.

00:19:25 [Speaker Changed] If you understood with you’re saying what I said then, then you misunders you misinterpreted it. Right? Exactly.

00:19:30 [Speaker Changed] Right.

00:19:30 [Speaker Changed] If you think you understand what I’m saying,

00:19:33 [Speaker Changed] You know, who led the committee to make all that change? Janet Yellen, she was vice chair. Yep.

00:19:39 [Speaker Changed] Back, back in, during the financial crisis. Yeah.

00:19:41 [Speaker Changed] So this was, it was a concerted effort. Bernanke Yellen to this is when they also started going, putting all the Fed Governors on a common calendar.

00:19:52 [Speaker Changed] Right?

00:19:53 [Speaker Changed] Follow all the, and assigning the fact, okay, you’re gonna speak this day, you’re gonna speak that day. That’s when all this started. It was an intentional effort. And again, this is something that politicians have known forever, right? Politicians craft the message and use their words. So I, I knew the, the tools to try to understand this, but what I wasn’t prepared for was how, and neither was Bernanke, was how powerful this would become to the point where today it’s not just central bankers using their words as their main policy toolkit, but it’s every CEO it’s every CEO Now, I mean, you go on this network or one of the other networks, and what makes for a good CEO is can you tell the story? Can you tell the narrative of your company to get a multiple, right? Because, because a multiple is a narrative. A multiple is a story.

00:20:52 [Speaker Changed] They’re

00:20:52 [Speaker Changed] All stories. Well look at,

00:20:53 [Speaker Changed] Look at some of the most successful CEOs throughout history. I would throw Jack Welch into that pile. ’cause he was a fabulous, fabulous. Yeah, he was a fabulous, fabulous. ’cause the stories he told were great, right? Up until the point where we found out that he was running a, a, a hedge fund with GE Capital, and they magically always beat by a penny.

00:21:17 [Speaker Changed] So I remember vividly when GE was coming to our shop, what they wanted was a fin a financial multiple, right? So they were making, they, they wanted,

00:21:33 [Speaker Changed] Even though they’re an old world industrial,

00:21:35 [Speaker Changed] Even though they’re an industrial, this, that this was, they wanted to tell a story that they should be seen as and get the multiple of a financial, that’s what GE was all about in those years leading up to the, the, the GFC. So a, my, my poster child for this is, is Mark Benioff Salesforce, because he’s pri you often see this with people who come out of sales like, like Mark did, right? But

00:22:08 [Speaker Changed] The way it’s all about storytelling.

00:22:10 [Speaker Changed] It’s all about storytelling. And

00:22:13 [Speaker Changed] What isn’t that true for go through the great, see, look, Steve Jobs, Reed Hastings, Larry Ellison at Oracle to some degree, Steve Ballmer at Microsoft, who wasn’t a great CEO, but he was a great cheerleader story, and a great storyteller, great

00:22:32 [Speaker Changed] Storyteller. What all of those companies have in common is that they’re great storytellers, and those are trillion dollar companies today. Right. What I would say to you is that you don’t remember or hear about the companies that did not have CEOs who are great storytellers.

00:22:51 [Speaker Changed] Well, Ken Lay was a great storyteller until you found out that it was all nonsense. And you could say the same thing about folks like Bernie Madoff.

00:23:00 [Speaker Changed] There are a lot of stories that get told that are not true. Right? What, and and I think even today, people think of this word narrative. They have a pejorative sense to it. It’s like,

00:23:15 [Speaker Changed] Oh, really? Really? That’s interesting. I didn’t think of it that

00:23:17 [Speaker Changed] Way. Oh, for, for, for, for for sure. That’s just your narrative, man. You know, the Big Lebowski, you know, that’s, that’s the, and it’s not that a story is a lie. It’s that the story is constructed for effect. It’s, it’s not, and it’s presented to you as if this is my true and inner thoughts, but the construction of the, the intentionality behind these stories, phenomenal. Benioff, for example, you know, created the metrics by which he wanted Salesforce to be judged. Not metrics of profitability, but metrics of what he called proforma, net revenue growth, whatever the hell that means. Right? Right. And because if you can construct the story, you can construct it in a way that, yes, I can beat and raise pretty much every quarter. So there was, there were three, I think, big changes that happened to make the role of narrative overwhelming as it is today. Whereas before, it’s always been there. To your point, it’s always been there today, it’s overwhelming. And, and I think it’s, it’s not just the success that first central bankers and then CEOs. I mean, wall Street’s the greatest copying machine. We Wall Street copies what works. Sure. So when you see that something’s working, oh, they’re, they’re getting a multiple by telling the story and going on Kramer, you know, four times a

00:24:50 [Speaker Changed] Year. It’s endless. It’s endless iteration. You’re just constantly tweaking it, doing works. And if it works, do more of it. And if it doesn’t, toss it out. So

00:24:58 [Speaker Changed] It was the, the fact that it works to tell a story and people got good at telling stories. It’s the growth of 24 7. I’m gonna use air quotes here and I’m glad we’re taping this news. Well,

00:25:11 [Speaker Changed] It’s media, social media news right

00:25:13 [Speaker Changed] Now.

00:25:14 [Speaker Changed] News, like news light.

00:25:16 [Speaker Changed] That wasn’t the case.

00:25:18 [Speaker Changed] So I wanna I wanna annotate what you said slightly. Okay. Because I think CEOs have always been storytellers, but they were storytellers to their boards, to their employees, to their shareholders. Correct. They always, the, you’re hitting now on the modern world of 24 7. Media telling a story in a boardroom is very different than sitting in a TV studio and talking about, Hey, here’s why our new chip is gonna catch up to Nvidia. Yep. And it’s the greatest thing ever. Yep. That’s a different skillset. It

00:25:52 [Speaker Changed] It changes the time horizon. It is a very different skillset because you’re not telling the story of, oh, I’m getting another, you know, turn of leverage in our operations, or, you know, our capacity utilization in this factory went up by 5%. Which are the kind of stories you would tell even on earnings call or certainly to a board. Now, this is the story where got a

00:26:16 [Speaker Changed] Gotta gotta

00:26:17 [Speaker Changed] A little bit. You, you’re, you’ve got a segment, you’re going on, Kramer, you got four you minutes and say bye bye bye. You got at most four minutes. Right? Right. How are you gonna tell that story that sings to that audience? Enormous change, change, structural change in our media, both quote unquote news media, but also financial news media. The Wall Street Journal today is a 24 7 news, financial news organization. Right.

00:26:47 [Speaker Changed] What, what isn’t It’s printed New York Times, Bloomberg, the Washington Post. Exactly. They all have websites that get updated around the clock.

00:26:54 [Speaker Changed] And here’s the thing, there’s not enough hard news to fill the time or to fill the space. So what takes the space opinion

00:27:04 [Speaker Changed] Story you were channeling

00:27:05 [Speaker Changed] Story takes the place of

00:27:06 [Speaker Changed] The hard, you were channeling Michael Creon from 25 years ago. Most of what you see in the media is speculation, opinion, and theory, not news. I,

00:27:18 [Speaker Changed] I’ve written so much about Creighton and his

00:27:21 [Speaker Changed] I know. That’s why I threw that back to

00:27:22 [Speaker Changed] You. He says he, he was, he was so far ahead

00:27:25 [Speaker Changed] This quarter century ahead of what, of what took place.

00:27:28 [Speaker Changed] And there’s a third piece though,

00:27:31 [Speaker Changed] Give us the third piece before we go to our next segment. Third

00:27:34 [Speaker Changed] Piece has changed. Everything is our smartphones

00:27:37 [Speaker Changed] That you walking around with. Right? Not only a studio, but a, a a a, a dopamine device that you’re constantly playing.

00:27:46 [Speaker Changed] It’s my dopamine machine, right. And I, we do it to ourselves. It’s not that someone forces us to hear these stories over and over again. We do it to ourselves. I mean, I get a little nervous if I, you know, pat, where’s my phone? Where’s my phone? That’s right. That’s right. I, I get a little nervous. And it’s a, it’s, it is absolutely a neurotransmitter addiction. I think it’s so important to keep that from our kids. That’s a whole nother thing.

00:28:17 [Speaker Changed] There’s a whole depression situation with teenagers today, and it all traces back to the phone and social media.

00:28:22 [Speaker Changed] These are three, I think, real secular changes we’ve had. Markets become this political utility, the success of constructing a story, structural changes in social media, and the devices that we insist on caring with our ourselves all the time,

00:28:46 [Speaker Changed] Huh. Absolutely Fascinating. Coming up, we continue our conversation with Ben Hunt, president and co-founder of Perent, explaining how he’s using AI to identify narratives in real time. I’m Barry Ltz. You’re listening to Masters in Business on Bloomberg Radio. I am Barry Ritholtz. You are listening to Masters in Business on Bloomberg Radio. My special guest this week is Ben Hunt. He is a academic fund manager, risk manager, entrepreneur, tech startup person. He is currently co-founder and president at persent, which applies AI tools to map and measure market narratives in real time. It’s really more than market mar narratives. It’s politics, it’s economics, it’s markets. You cover a whole lot of stuff. A

00:29:51 [Speaker Changed] Hundred percent. So what we’re able to do today, and this is the crazy change in the world back from when I was doing this on microfiche back in

00:30:02 [Speaker Changed] The

00:30:02 [Speaker Changed] 1980s. Yeah, exactly. We get, we have access to everything that’s published publicly in the world. And there are a couple of big data aggregators, Dow Jones, one LexiNexis another, everything that gets published in the world, all these languages, it’s available to you. And it’s, it’s not cheap, but it’s not crazy expensive like it used to be. And it’s always getting cheaper. So we’re able to take everything in the world that gets published, all the newspapers, all the websites, all the transcripts, everything that’s published publicly, we can pull in and then we can process it, process it with really, it’s the same math that I was using 30 years ago. Nobody’s invented cold fusion here,

00:30:55 [Speaker Changed] But the software tools are faster, stronger, better,

00:30:59 [Speaker Changed] And infinite. So the, the, the calculations here are not particularly complicated, but you have to do them at enormous scale.

00:31:08 [Speaker Changed] It’s, it’s a ton of volume. So,

00:31:10 [Speaker Changed] I mean, it’s crazy. The, the, just the, the scale of

00:31:15 [Speaker Changed] The numbers. Petabytes, terabytes just crazy.

00:31:17 [Speaker Changed] I mean, yeah. In the last couple of months we’ve processed over 200 billion tokens. Billion,

00:31:25 [Speaker Changed] Right. And a token is how much

00:31:26 [Speaker Changed] A, a token is like a word or a phrase. Okay. And so that’s the kind of the unit that you talk about when you’re putting through, when you’re putting something through a linguistic calculator. So 200, which is, which is what all of the, the

00:31:41 [Speaker Changed] LLMs,

00:31:41 [Speaker Changed] All the LLMs are, they’re linguistic calculators. And so, you know, we’ve processed, you know, several hundred billion tokens. Again, it’s not complex, but it is at scale. And what, what we’re doing with that is we’re reading the world’s news to understand the world’s stories and narratives. And you’re right, it’s, it’s much bigger than, or it’s much more focused that we have much higher resolution than just saying, oh, I’m bullish on financials. I mean, that’s a, that’s a narrative. Sure. Right.

00:32:20 [Speaker Changed] But

00:32:21 [Speaker Changed] There are 20 different variations of that. You’re, you’re bullish on financials. Why?

00:32:27 [Speaker Changed] So wait, let me, let me, you,

00:32:28 [Speaker Changed] And we can track all those, we can track all those stories and how they wax and wane over time. That’s really cool. So

00:32:32 [Speaker Changed] Let, really cool me roll back to, I want you to explain what Perent is. Who are the clients? I don’t mean names, but No, sorry. What type of of clients do you have and, and what do they do with Persian’s output?

00:32:47 [Speaker Changed] So we started Persent in 2018. My partner from, we were at a, a asset manager spun out there to take the, the technology that I’ve been working on for years and, and really been writing about with Epsilon theory. So we started that in 2018 to do the, the basic research into processing enormous amounts of financial news data and to track the stories and how they rise and fall and wax and wane over time. Is that, that was, that was the story. That was the

00:33:25 [Speaker Changed] Goal. So I, I love that description because there are a lot of trades going on where the storyline changes on a regular basis. Probably the Mac daddy of that is crypto first. It’s, Hey, you know, there’s fiat currency, this is outside of the system, it’s defi, then it’s a hedge for deflation, then it’s a hedge for inflation. Now it’s scarcity and,

00:33:51 [Speaker Changed] And digital gold. Right? Digital

00:33:53 [Speaker Changed] Gold.

00:33:53 [Speaker Changed] It’s, it’s, there are no fundamentals, right? With, with, with crypto. And I people will say there are, but there aren’t. Right? It’s, it’s driven by the waxing and waning of stories. And do, do they find purchase? Do they or do they kind of, people get tired of them?

00:34:11 [Speaker Changed] Well, they got tired of the defi story. And then once JP Morgan and BlackRock started creating, like, the Ibit is the fastest ETF to a hundred billion dollars. And so the old story of Defi is gone. And the new story is, oh no, this is an asset class at Wall Street’s embracing. That’s why you have to own it.

00:34:32 [Speaker Changed] That story, that story was, and very, that was a very similar story by the way, or a transition story from physical gold to GLD when that ETF came out. Right. Which was a very similar pattern because once it became a Wall Street, a, a table at the Wall Street Casino, right? Then it takes on a different meaning specifically around gold. Gold changed from being, okay, something that you bury in your backyard or you’re having your vault, you know, along with ammo and seeds for when the, the, the hard times come

00:35:11 [Speaker Changed] Bottled water, right? Bottled meals ready to eat, right, gold and lead. It

00:35:15 [Speaker Changed] Becomes a security. And its meaning changes from that, you know, apocalyptic bottled water. Right? And the meaning of gold today is as an insurance policy, a security against central bank error or government error. That’s the meaning of gold today.

00:35:35 [Speaker Changed] And is that the dominant narrative that you’re identifying as gold rallied over through 4,000? Ab

00:35:41 [Speaker Changed] Ab Absolutely. So, I mean, we’ve really been able to track that one in

00:35:46 [Speaker Changed] Specifically. So, so here’s the really big, here’s the million dollar or trillion dollar question. How do you identify a narrative and say, oh, gold is gonna double from here based on this narrative? Or, or are we not there yet?

00:36:00 [Speaker Changed] No, you, you identify the narratives. ’cause the narrative, the stories don’t ever change, right? So the, the story that leave gold aside for a while, think about you we’re talking about your bullish on company X, Y, Z because there are about, I don’t know, depending on how, again, how finely you want to resolve that. There are only about a dozen stories for why you’re bullish on something, right? They can be management change, top line growth, opportunity consolidation in the industry,

00:36:35 [Speaker Changed] Upcoming catalyst,

00:36:36 [Speaker Changed] Catalyst. So, so every catalyst story, new

00:36:38 [Speaker Changed] Products, new product, FDA’s gonna prove the new mo, new drug, new molecule.

00:36:43 [Speaker Changed] So that story, you just change the name. That’s the same story that’s repeated over and over again about any pharma or, or, or biotech company. The stories, we think that they’re amorphous and variable. The fact is that the, the core of the story, what we call the semantic signature, the meaning of a story, they’re amazingly constant over time. So what we’re looking for is for, and it’s, it could be dormant for a long time, but what you want to know is when that story starts picking up again, when someone starts playing that story, when it appears on Kramer and starts happening in the financial press, that’s the stuff we can pick up with real precision. So it’s both the stories that are starting to fade,

00:37:41 [Speaker Changed] But,

00:37:42 [Speaker Changed] But the, I think the really interesting stories are the stories that have been dormant for a long time and they start picking up again,

00:37:48 [Speaker Changed] You, you are reminding me of Campbell’s hero’s journey, that there’s only so many

00:37:54 [Speaker Changed] My hero, right? There are only so many stories Right. In the, in, in the world. And that, that’s a now I like to talk about in Hollywood, famously there are only like five scripts.

00:38:08 [Speaker Changed] That’s right. Right?

00:38:10 [Speaker Changed] Tolstoy is supposedly Tolstoy. He said there were only two stories that a man goes on a journey or a stranger comes to town. Those are the only two stories in the world. And

00:38:20 [Speaker Changed] Not quite, but he’s, he’s

00:38:21 [Speaker Changed] Not quite but you on, he’s pretty close. You’re on the right track.

00:38:23 [Speaker Changed] Right? Right. The

00:38:24 [Speaker Changed] The point is, there’s a finite number of stories, right? You can drill down. So you can get a couple of dozen about any sector you want to talk about or like, but it’s, it’s a finite number. And so what we do, and what I think is really interesting is to track that finite number of stories. And you’re right, it’s not just around markets. We track several thousand of these stories today.

00:38:50 [Speaker Changed] How so? Let’s, let’s delve into that. Yeah. So, so how do you, you have this massive database you’re sucking in every news feed. Yep. Everything magazine, newspaper, everything. Anything that you could quantify and, and run into a linguistics model. What’s the process for analyzing this? How to use artificial intelligence to, to go through this, and how do you make sense out of that heap of how do you find signal amidst all that noise?

00:39:23 [Speaker Changed] The crucial thing is you can’t just ask AI an open-ended question. Say, what are the narratives in Right? This comp for this company or for this sector? Don’t do that. Right? And this is a mistake that people make all the time. They ask open-ended questions of chat, GPT or or or whoever. The problem is chat, GPT will give you an answer.

00:39:45 [Speaker Changed] Just not a good one.

00:39:47 [Speaker Changed] Not a good one. It’ll hallucinate a lot. Yeah. Right. It’ll go out, it’ll find its own data. The, the secret to to using AI successfully is to take this magic genie because it’s a magic genie and you stuff it into that bottle, right? You do not let it out. You constrain it dramatically. You don’t let it go out and find data. You give it the data crucial thing. You don’t allow it to think. You tell it how to think. So the, the most important step that we do is we don’t ask ai what are the narratives that you look at? We tell it this is human direction. You have to have human control.

00:40:31 [Speaker Changed] So I’m hearing dataset is controlled by you as well as the thinking prompts. The seman.

00:40:39 [Speaker Changed] Yes. And it’s more than prompt, right? So the, it it, it includes prompt. But the, the phrase that’s used in this world is called not prompt engineering, but context engineering.

00:40:53 [Speaker Changed] Okay. That makes sense.

00:40:54 [Speaker Changed] So you want to, you want to control everything around the ai because you want to limit it to being that linguistic calculator. You want it to be your operating system. That’s really the way, the thing. And, and if you do that, then it will give you the same answer twice for the same inputs and the same question. That’s the crucial thing. So it’s

00:41:18 [Speaker Changed] Consistent

00:41:18 [Speaker Changed] For this to be true for, for it to be consistent, for it to be real signal. So this is a human directed process. You can’t ask AI an open-ended question. You have to control all the inputs. You have to control the output, meaning you judge it, you run it back through a different AI system to say, how’d they do? Did they go off the rails here? But the most important thing is you have to give it the scaffolding. You have to give it the, the skeleton. You have to tell it. These are the thoughts you are allowed to think about. You know what, and those are the, those are the, the signatures.

00:41:53 [Speaker Changed] I, I’ve kind of learned, I have to avoid asking questions that have a, a, a human emotional subtext. Like, tell me what was most surprising about this? Doesn’t know what a surprise is. Tell me what was most interesting about this. It does, it’s not able to do that. You really have to treat it like it’s a dumb machine.

00:42:18 [Speaker Changed] Well, that’s right. This is why, I mean, you treat it, you, you need to treat it as an operating system. You need to constrain every bit about it, particularly in how you allow it to think because it wants to please you so badly, right? It does. So if you ask it, what’s interesting, it will look back at its history of communication with you, and it’ll think, what will Barry find interesting? And it will give that answer to you. And if it can’t find it easily, it’ll make it up. It’ll make up an answer that you will find interesting.

00:42:48 [Speaker Changed] I, I find when I, I, I try and prompt, Hey, tell me about Ben Hunt’s background and gimme the timeline of his career that it’s good at. Hey, what was Ben Hunt really good at? It has, has got no idea.

00:43:04 [Speaker Changed] So what, what you’re able to do, if you’re able to, again, put the genie in the bottle, tell it how to think about a problem, is you’re able to identify, and this does go back to the work from 35 years ago, the type of stories we tell that we humans tell the, the about stocks or politics. We tell two types of stories. We tell descriptive stories. Oh, the, you know, the fed cut rates by 25 basis points today. A descriptive story. But, and we can also tell the description of the, you know,

00:43:45 [Speaker Changed] It’s the because clause, because we’re seeing slowing increasing layoffs and slowing consumer terms.

00:43:53 [Speaker Changed] And, and that’s high resolution and dec and, and very descriptive, right? The, the Powell was surprisingly hawkish today. And he was, that’s a description. There’s another type of story we tell Barry. And that’s prescriptive,

00:44:13 [Speaker Changed] Meaning,

00:44:13 [Speaker Changed] Meaning the Fed should be hawkish. The Fed should cut by 25 basis points. Those are the stories that are indicative of an effort being made to move public opinion in a certain direction.

00:44:33 That’s like the forward guidance that the Fed still does, right? Using their words for effect. They’re using words to nudge you and how you should think about the world, how to think about the world. So the crucial thing when we’re doing these, when we’re asking the AI to here’s, here’s all the text in the world, here are the stories that we want you to identify. We can also boil that down into identify the stories that are trying to tell the reader how they should think or how policy should go that we find has a lot of predictive capability to it.

00:45:18 [Speaker Changed] So you are in the business of analyzing the world’s narratives every day. How is that even possible? It seems like that is an impossible

00:45:29 [Speaker Changed] Test. That’s seem crazy.

00:45:30 [Speaker Changed] Crazy, right?

00:45:31 [Speaker Changed] And, and, and it used to be, it used to be crazy. I, I mean, Barry, I I really do remember my, in the academic days, I would literally hire grad students and give them a cup of dimes. So they go down to the microfiche machine.

00:45:46 [Speaker Changed] I remember those machines in the library. You

00:45:47 [Speaker Changed] Remember those

00:45:48 [Speaker Changed] Machines? Yes.

00:45:48 [Speaker Changed] Yes. You remember those machines? I would code, hand code the, or hand record the coded data. I would type it into remote access for a digital equipment mini frame. And the next day, you know, something would churn out for me. Right? Today it’s, I say we are, we’re processing hundreds of billions of tokens. We get millions of documents overnight like that.

00:46:16 [Speaker Changed] Is there there

00:46:17 [Speaker Changed] Any, is there infinite computing resources available to us? I,

00:46:20 [Speaker Changed] Is there anything you can’t access that you wish you had access to any data source?

00:46:28 [Speaker Changed] So one of the things that’s happened on Wall Street is that the banks and the sell side have become very jealous of their publications because they tend to think in their wrong that they’re good at it. Right? They’re that they’re good at analysis. I personally don’t think they are. Well,

00:46:49 [Speaker Changed] Let, let’s just say some are better than others. Some

00:46:52 [Speaker Changed] Are better than others, but, but none of ’em are really, if if they were, if there was, I’ll call it kind of significant alpha there, they wouldn’t be a bank.

00:47:04 [Speaker Changed] They’d be a hedge fund.

00:47:05 [Speaker Changed] Yeah. They wouldn’t be a ba on the, on the sell side. Now, so I’m interested in reading the sell side research, not because I think there’s some nugget of truth in there, but because I wanna see what they’re all talking about,

00:47:17 [Speaker Changed] Right? It’s reflective of, if not a consensus. Yeah. Certainly a a popular set of ideas.

00:47:24 [Speaker Changed] And, and this is a crucial thing to talk about what we do. I I don’t know what the truth is, right? I have

00:47:31 [Speaker Changed] No idea. Does it matter?

00:47:32 [Speaker Changed] And I don’t think it matters. I I want to provide this information to people who do have a view on the truth. Let’s say you’re a, you’re a value investor, right? You’re running a fund, you’ve got your views, you’ve done a, your homework, you’ve done your research,

00:47:47 [Speaker Changed] You’ve got a good back test. Yeah.

00:47:49 [Speaker Changed] You, yeah, yeah. You’ve got, so I’d say I’ve got, here are the companies where I think I’ve identified something special, something that’s valuable that the market does not recognize. And so I wanna buy it, and then I’m just gonna wait. I gotta wait until one day the market realizes the market comes to their senses and says, oh, wow, that should trade at a higher multiple or a higher price. Because that special thing that you saw, that source of value, the rest of the world comes to see that. Well, what I can think I can show you is when the rest of the world starts to wake up to whatever it is you’re looking for.

00:48:31 [Speaker Changed] So you’re catching the early lift off the bottom. That’s the

00:48:35 [Speaker Changed] Goal. I see. When the, when, when a value investment only works, when the market recognizes it. And we are tracking when something like that gets discovered by the market.

00:48:46 [Speaker Changed] So before Nvidia is 5 trillion, when it, when it starts ramping up to 500 billion, hey, something’s going on here.

00:48:57 [Speaker Changed] What I have found in my experience as an investor is that you make the most money on a trade during what I call the discovery phase of a trade. When the rest of the world wakes up to something that you had noticed and identified before, that’s when the money is made. Once it gets out there,

00:49:19 [Speaker Changed] Then it’s reflect then the, the market be ev is eventually efficient.

00:49:23 [Speaker Changed] It’s a different, it is a different risk and reward profile. Let me, let me put it that way. Fair. You, you, you get, you get a lot more ups and downs post that discovery phase than you do when you’re enjoying the discovery phase. It’s a lot harder. Once you have the, now you may say, oh, but there’s gonna be this other catalyst. And then say, well,

00:49:45 [Speaker Changed] But that, that discovery phase is, I’m gonna quote Doug, Cass, that’s the, there’s a phrase he uses it, it’s like a, a contrarian perspective. A variant perspective where a perspective, you have some insight that is not widely held. Right. And the market being mostly kind of sorta of eventually efficient if there’s a truth or at least a good story in your variant perspective, all

00:50:15 [Speaker Changed] It is a story, right? All it takes is a story. It’s

00:50:17 [Speaker Changed] Gotta be a good story though. Yeah.

00:50:19 [Speaker Changed] It’s gotta be a, well, I’ll call it, it’s gotta be a compelling story, right? Right. And that’s, that’s why you are looking for a CEO who can tell that compelling story. You’re looking for the ability to tell a compelling story, because that is what gives you a multiple. So let me multiple is story.

00:50:37 [Speaker Changed] So let me ask you a few more questions on, on Perent before we go into a few other areas. Sure. So first, you, you’ve been doing this for seven years. What are you doing today? That was unimaginable 4, 5, 6, 7 years ago.

00:50:54 [Speaker Changed] I, I tell you something that was unimaginable really two years ago. That’s amazing. And that is the ai. So what we were doing in our early days, we were basically doing small language models. We were making the language models essentially by hand. And, you know, we did our first models and our first versions of this, and we licensed it to some big banks. And here’s the problem, Barry. We, we had constructed a net and it was a pretty good net. I mean, when we would dip it into a data stream, we’d catch a fish meaning a signal. And the signal, oh, that, that signal works. You know, good, good. Hit on the, the signal that we put up. The problem was we were missing too many damn fish, right? Our, our net was too small. And we’d say, oh, we got this one. And then we’d look back at whatever it was.

00:51:46 We were designing the model. So we say, well, how did we miss all these other fish? And the answer was the small language model we were constructing. It’s incredibly complex if you are building these models without the probabilistic approach that modern LLMs allow you to take, right? So this is the whole notion of embedding. So that there are a million ways to say I’m bullish about the management change at company X, Y, Z. There are a million ways you can say that. And if you’re in the business as we were of kind of handcrafting, let’s write down all the ways you can say that. Oh, really? You miss a lot. Yeah. You’ve made a small net and what you’re trying to, to, to,

00:52:33 [Speaker Changed] And a and a small data set, and it’s

00:52:35 [Speaker Changed] A pretty small data set. So we, we rebuilt all of our software, again, using AI as an operating system context, engineering control, how you dole out the text data, how you test it, how you allow it to think. And we thought, all right, you know what? We’re building a bigger net. I bet we see five, maybe even six x improvement in our signal

00:53:05 [Speaker Changed] Catching. And what did you end up with over

00:53:06 [Speaker Changed] A hundred x?

00:53:07 [Speaker Changed] That’s unbelievable.

00:53:08 [Speaker Changed] Over a hundred x, it’s over. And now it’s, we’ve had a multiple of that. Again, it’s, it’s, it is hard to describe in, in the, in the, the expansion of the net is in so many different directions. Everything we were doing before was just English language,

00:53:23 [Speaker Changed] Right? So now you’re global and how many languages are you pulling into the,

00:53:29 [Speaker Changed] Anything, anything that an AI has been trained on, we read it and we can say we can,

00:53:35 [Speaker Changed] Is that 40 languages? Is that like how many languages? Well, there

00:53:38 [Speaker Changed] Are only a, you know, there are about a dozen languages that are useful in markets. So

00:53:43 [Speaker Changed] It’ll be Japanese, Chinese, a variety of European languages. So

00:53:47 [Speaker Changed] We can, we can

00:53:48 [Speaker Changed] Tell Indian,

00:53:49 [Speaker Changed] Here’s the, here’s a story here. The story about Chinese domestic markets. There’s a western story, western narrative,

00:53:57 [Speaker Changed] And there’s a domestic Chinese story. And the domestic

00:53:59 [Speaker Changed] Chinese story,

00:54:00 [Speaker Changed] Which is very different.

00:54:01 [Speaker Changed] Often it’s very different. So we were able, for example, picking up, we were able to pick up way before it, it, it got picked up in Western press. The demand for luxury goods in China went off a cliff.

00:54:19 [Speaker Changed] Cliff, yeah.

00:54:21 [Speaker Changed] In last November.

00:54:23 [Speaker Changed] Listen, you can’t go from a double digit GDP to like, low to mid single digits and not have it affect, especially in a country like that. Well,

00:54:31 [Speaker Changed] And, and, but, but it’s interesting, right? Because, because they’ve had, you know, ups and downs on business cycle before, but this is the first time where you saw consumer behavior that really was kind of similar to what you might find in a Western consumer behavior point being you didn’t hear that from LVMH or the Macau gaming guys until February. And we were picking that up in, in, in November from the domestic Chinese media.

00:54:58 [Speaker Changed] So, so that raises a, a really interesting question. You know, at the end of the day, clients want to be able to make money on your research. How are people putting this to work? How, how does what you are building help your clients generate alpha?

00:55:15 [Speaker Changed] What we think we’ve discovered is an entirely new source of data. And what we’re confident is that we’ve built the systems that are very different from what you see with this sort of analytics that are out there from anyone else. Right? So this is not sentiment, right? We’re not tracking or using mean words or nice words. By

00:55:37 [Speaker Changed] The way, that was a big thing, I dunno, was that 10 years ago we’re s we’re scanning Twitter to identify investor sentiment. Oh

00:55:44 [Speaker Changed] My god. I mean I, but I was just looking today and not to pick on Bloomberg, but you know, it was their live coverage of the Fed statement, right? Were at those meeting, they were analyzing the sentences and the fed statement for hawkish and dovish sentiment,

00:56:02 [Speaker Changed] How it changed from the last meeting. And,

00:56:05 [Speaker Changed] And

00:56:05 [Speaker Changed] So, so so you’re saying there’s not a whole lot of signal there.

00:56:08 [Speaker Changed] Hmm. I wanna be careful with what I say, right? Which is that there are a number of, I’ll call ’em high frequency stat arb guys, where if it’s important for you to note the difference in word choice on a millisecond level, I think there, I think you can get something outta that. I do. And so there are firms that can do that very well. That’s not our game, right? This is not the, what we’re trying to, to identify is not just sentiment, not just word choice. This is not Google trends and how many times did they mention AI in the earnings report, right? There’s, we’re able to track the actual stories that drive behavior.

00:56:54 [Speaker Changed] So that, that’s the next question. And, and I’m gonna give Dave not a credit for asking this. Does every narrative turn into a decision? How do you know when something is merely noisy versus where there’s a, a significant tradable signal?

00:57:14 [Speaker Changed] I don’t. Right. So this is, my goal is not to, oh, you know, do the trades. My goal is Mr. Hedge fund guy, Mr. Asset, allocator, you’ve got a, you know China, right? You know your companies, you know your commodities. Here is data that I think you’ll find useful. The efficacy of it though is up to you. I don’t know what you would, what, what you wanna do with it. I want to sell the picks and shovels honestly for this vast new data set that we all know is important. But we haven’t been able to measure it in a very predictive way before.

00:57:59 [Speaker Changed] So let’s talk about a few things related to that. Can I say one more

00:58:02 [Speaker Changed] Thing? Sure. And it’s not just about using this for investment. So we have a product for financial advisors, right? Which is your clients coming in, you’ve got a portfolio. You need to be able to say, what, what is, what is my client? What, what are they worried about? What are they nervous about? What are they hopeful for? What are the stories they’re reading?

00:58:26 [Speaker Changed] And you are pulling this out of the flow of media and

00:58:29 [Speaker Changed] We can tell you exactly for of, for the portfolio you’ve got for that client, here’s what they’re gonna be asking about, worried about. And here are the answers you can give them to show this is when has happened before, when this story has come up. Stay the course, it’s gonna be fine. This is the sort of stuff we can do for financial advisors. Huh.

00:58:46 [Speaker Changed] That’s really interesting. I would, I would love to see some of that. It’s not just

00:58:49 [Speaker Changed] In markets. Barry, I gotta tell you, the

00:58:53 [Speaker Changed] Policy makers, corporate executives, bankers,

00:58:56 [Speaker Changed] Policy. So we did a, you know, we did before in the run up to the Russian invasion of Ukraine and we published this on Epsilon Theory. And this is my old academic work, right? The book Getting to War before a country starts a war, they mobilize public opinion, right? And so we were looking at domestic Russian media looking at and saying, friends, this isn’t gonna li be a limited thing.

00:59:22 [Speaker Changed] This is happening.

00:59:23 [Speaker Changed] This is happening. It’s gonna be a full scale invasion. Because that was the messaging in domestic Russian media to the Russian people.

00:59:31 [Speaker Changed] Wow.

00:59:32 [Speaker Changed] So brands, right? So you are, you know, we’re working with some, some it sounds, but pro sports teams, you want to tell a story to

00:59:44 [Speaker Changed] Your fan

00:59:45 [Speaker Changed] Base, build a stadium,

00:59:46 [Speaker Changed] Sell some tickets to sell some

00:59:47 [Speaker Changed] Stadium. Yeah. Sell tickets, build a stadium, gimme some examples of people who have told good stories and how did that work for them? How can we do the same thing? So let’s,

00:59:56 [Speaker Changed] Let’s just start looking

00:59:57 [Speaker Changed] At storytelling.

00:59:58 [Speaker Changed] If Jeff Bezos was a subscriber to this back when he was trying to build a tax funded HQ on the Hudson, had he had your data and you were crunching all the New York City news stories about this, might you have been able to give him advice that he

01:00:19 [Speaker Changed] Suffered? A percent

01:00:20 [Speaker Changed] Suffered such a backlash. Because you

01:00:22 [Speaker Changed] Know what we have today? We have polls. Right? Right. Because,

01:00:24 [Speaker Changed] Which are terrible,

01:00:26 [Speaker Changed] Terrible, terrible. Right. Which are mostly terrible now, you know, and, and I love the poly market stuff and other things where you try to get as many people as possible to put money on something. Right?

01:00:34 [Speaker Changed] So, you know, when you ask a person a question, you’re asking them, Hey, what do you think you think? And what do you think you’re gonna do in the future when we know people are terrible at both of those things?

01:00:45 [Speaker Changed] Terrible at both of those things.

01:00:45 [Speaker Changed] But if you put a little money on it, alright, maybe they might be a little more circumspect that,

01:00:50 [Speaker Changed] That, that helped. That helps a ton. So, so in places where you can have a make a bet, I think that improves the kind of information you can get. It still lends itself to a lot of manipulation. Sure. And a lot of,

01:01:02 [Speaker Changed] They’re not issues around it, poly markets and cashie and all those things. It’s not the bond market. It’s not a hundred and something trillion dollars. It’s a couple of bucks on each of these. And sometimes that’s right, a million dollars moves a half a million dollars can move a market.

01:01:17 [Speaker Changed] But for a lot of things, let’s say you’re polling for a political candidate, right? You can’t ask them to put money down on something. Right? Right. You, but, but you really wanna know the, these, these policies that my candidate is thinking about taking on, is that popular? Does it resonate? Is it a compelling story? We can absolutely see if that is true by looking at local media, local social media, all of that. So it’s, it’s pretty wild there. I mean, once you start looking at how important stories are and once you’ve got a tool where you can actually measure them and visualize them, it’s like, it’s like, I feel like it was like when they invented whoever was Lovin Hook or whoever invented the microscope when you’re actually to see something that we all know is there,

01:02:05 [Speaker Changed] Well now we do back then. Right? Like remember germ theory took what a century to catch on it.

01:02:10 [Speaker Changed] It took a century. Yeah. And it takes, it takes seeing it, right? It takes the instrument to actually measure it before you actually believe in it. And so I, I, I feel like that’s kind of where we are right now. It’s these early days. But to actually see and measure the storytelling at this level of resolution, this magnification is pretty freaking cool.

01:02:29 [Speaker Changed] So, so we’re having this conversation with market at all time highs, and you’ve written about the ravine. Yep. Tell us a little bit about what is the ravine, how does, does your data identify that? Tell us what this means.

01:02:46 [Speaker Changed] Well there’s, there’s, there’s clearly been a change in policy regime out of, of Washington and

01:02:53 [Speaker Changed] New administration, and a radically different,

01:02:56 [Speaker Changed] Radically different

01:02:57 [Speaker Changed] Approach, even from the first Trump presidency,

01:02:59 [Speaker Changed] Even from the, the, the first presidency. And so what we’re able to, to measure, really measure is how does that, I’ll say play, but also what comes, narratives never happen in a vacuum. There’s always a counter story. For every bull story, there’s a bear story. And they, they, they, you can almost kind of see the battlefield of ideas, the battlefield of stories and how it emerges. So my strong sense, Barry, is that we are going towards politically in this country towards trench warfare, greater and greater, I’ll call it narrative violence. And it, if you look historically how that plays out in countries, it doesn’t, it doesn’t play out well.

01:03:56 [Speaker Changed] Civil war, domestic political violence, things like that.

01:04:01 [Speaker Changed] Sadly. Yes. Exactly like that. Exactly like that. So there’s that element. And so that’s a, that’s a sad one, you know, or a, a very troubling one and trying to, well, how do we navigate that? But even when in, in markets, and I alluded to this earlier, how capital markets have become a political utility and the, the role of markets in our society, you can really see how that changes in the stories we tell ourselves about the role of markets, what it’s there for. And I

01:04:38 [Speaker Changed] End of day options and speculation, what else is it supposed to be there for?

01:04:43 [Speaker Changed] But that, but that’s kind of what I’m getting at, Gary, right? You, you can see an enormous change in the meaning of markets. And it connects with a, yes, they’ll call it the speculation layer, but it also connects with financial nihilism, yolo, it, it, it leads to a very, I think, less attractive future for how we think about money and the role of markets and the role of capitalism

01:05:20 [Speaker Changed] Coming up. We continue our conversation with Ben Hunts, president and co-founder of persuent, discussing how money managers use their output to generate alpha. I’m Barry Ritholtz, you, you’re listening to Masters in Business on Bloomberg Radio. I am Barry Ritholtz. You are listening to Masters in Business on Bloomberg Radio. My extra special guest today is Ben Hunt. He is president and co-founder of Persuent, a data analytics narrative, storytelling, large language model, using artificial intelligence to find some signal amongst the noise firm. Their clients range everything from large money managers to hedge funds to academics and corporate America. So you write Epsilon Theory and some of it is for subscribers. Some of it is public. A lot of

01:06:35 [Speaker Changed] It’s public. Yeah.

01:06:36 [Speaker Changed] One of the things you wrote is absolutely my favorite item from the first few months of the Trump presidency because I like to talk in probabilities. ’cause I don’t know what’s gonna happen. Yep. But here’s the best case scenario. Here’s the worst case. Here’s all the middle scenarios. You wrote a piece, the end of Pax Americana that I thought was the most cogent, imaginative, well thought out. Hey, here’s the worst case scenario, and we are becoming dangerously flirting with this possible outcome. And I use that as all right, so here’s what I think is high probability. Yep. Here’s the best case. But if you really want to think about how this can go off the rails, check out what Ben wrote. And so tell us a little bit about how did Perent inform the end of Pax Americana? Because I, I get the sense that domestically that wasn’t really where a lot, what, how a lot of people were thinking. But I got the sense from overseas that was a much more common thought. Tell, tell us a little bit about both the piece and, and how the data informed it.

01:07:55 [Speaker Changed] I’ll start with the, I’ll call it the, the international dimension. I wanna come back to the domestic dimension because I, I think we’ve got some really interesting data recently to, to, to share. It goes back to this, yeah. Again, I, I cringe what I was talking about, but, but, but it is, it is game theory, right? And all game theory is, is strategic interaction. It’s that the, the United States, yes. Is the most powerful player on the world stage, but every country has some degrees of freedom and some autonomy in their, in the policies that they, that, that they implement this. There is not a dominant strategy, meaning an outcome. An equilibrium outcome. Again, I hate using these words, but I’ll use them anyway. All an equilibrium means is, it’s a balancing point where both parties, let’s call ’em the United States and a European country, where do they end up? Where they all say, okay, I can live with this, where I can live with this and the America first set of policies, and it’s all these set of policies. What you end up with is less potential economic growth, trade, all all of these things,

01:09:12 [Speaker Changed] All the things that we enjoyed post World War ii, that realignment, that imbued to our benefits so greatly,

01:09:20 [Speaker Changed] Enormously to our, to our, to our, to our advantage. Our advantage, yeah. Enormously to our advantage. It, it goes by the name of a soft power and you know, the dollar system, the bread, Bretton wood system, all of this

01:09:30 [Speaker Changed] Reserve currency on and off

01:09:32 [Speaker Changed] The reserve currency to finance our deficit. All of this is enormously to our advantage. And yes, there are free riders on that system. Yes, there are cost to that, particularly on defense and some other, some other areas. Tariffs are in other area where there’s absolutely free riders on that. So there’s improvement that can be made in that system, for sure. Right. But this is not, this is a different system. This is a different set of rules of the road. And it leads to a different strategic interaction between, between countries. So that’s what the note was about. And it’s, it’s, I’m not trying to predict, I’m just, I’m just trying to observe that. And which is a great line actually by George Soros, which is, you know, I’m, I’m not predicting, I’m observing, which I love that as a line I’m not. And our technology is not there to try to predict the future is trying to tell you what is true in the present today.

01:10:30 [Speaker Changed] I, I’m amazed how many people think they can forecast the future when they have no idea what’s happening. Right. I

01:10:36 [Speaker Changed] Wanna, I want to now cast what I want do. That’s exactly, yeah. Not, not forecast. I want to now cast. And that gets the, I wanted to talk about kind of domestic. So we started tracking the different narratives around immigration policy early last year and what you saw in some of the kind of simp

01:10:59 [Speaker Changed] This is during the run up to the election.

01:11:01 [Speaker Changed] Yes, exactly. And what you saw, and really going back, ’cause we can take, we take this stuff back for a decade or more. And what you absolutely saw up to last October, there’s a, there was an event from last October, not the election, but an event from last October. You see a steady increase in, regardless of your political affiliation. You know what immigration isn’t working for us isn’t as, as Americans saw a steady increase starting with the, they’re eating the, the cats.

01:11:37 [Speaker Changed] They’re eating the cats, they’re eating their dogs. They’re

01:11:40 [Speaker Changed] Eating the dogs. When you saw one, the, the Columbus mo when you, that, that moment,

01:11:45 [Speaker Changed] One of the most, that’s where things, the real moments in debate history.

01:11:49 [Speaker Changed] And we see very clearly in our media data, and this is, this is not mainstream media. This is everything that we’re pulling up. We’ve seen an, a really significant decline in the volume and density of, oh my God, immigration is a problem. We need mass deportations. On the contrary, we’ve seen an enormous increase, again, regardless of political affiliation, including Republicans. No, immigration is a good thing for this country. Huh? This is the stories of America that are pro-immigrant and immigration. Now, you would not believe that if you were looking at the policies that the White House has implemented during these first, you know, 10 months of the administration.

01:12:38 [Speaker Changed] So, wait, when did you first notice that? Regardless of policy, we think immigration is a net benefit to America. When did that first start showing up?

01:12:49 [Speaker Changed] It started changing right? In October because it, following

01:12:52 [Speaker Changed] The dogs,

01:12:53 [Speaker Changed] Cats, it was too far. It was, it was like, this is just silly stupid. This is silly and stupid. And it’s been a steady increase. You know? And you wouldn’t, you wouldn’t believe that if you were I immersed in Twitter stuff. But, but,

01:13:06 [Speaker Changed] So this

01:13:07 [Speaker Changed] Is, our country is actually quite pro-immigrant. I know that sounds cr

01:13:13 [Speaker Changed] But we are a nation of immigrants here. Here’s another data point that’s kind of mind blowing. We were talking about a different data point in, in the entirety of the US history, 2025 looks like the first year where the US population will decrease. Yeah, yeah, yeah. So it’s a decrease in legal immigrants. Not, not only illegal immigrants, but legal immigrants. Add that with the deportations and just people staying away.

01:13:41 [Speaker Changed] Well, this, this gets back to the, the, the economic picture and from other, so what, what you’ve had is a clear, and again, we, we, we see this in our data from other countries. There’s a clear effort to repatriate assets and funds away from the us. There’s been a clear effort outside the us You see this with central banks, but also with

01:14:03 [Speaker Changed] Cor hence gold. The big and gold. Gold. Correct.

01:14:07 [Speaker Changed] Treasuries used to be a safe haven asset. Right?

01:14:11 [Speaker Changed] No

01:14:11 [Speaker Changed] More. That’s, that’s, it’s, it’s,

01:14:13 [Speaker Changed] Do you understand how significant that charge is? That you’re making, you’re basic, enormous, basically accusing the president, well, of submarining one of the single greatest assets America halts. Well,

01:14:26 [Speaker Changed] That it’s a, it is built up to such a, an extent, right? That the way I think of this is an iceberg that is melting, but it is melting. What we do not see, we do not see capital flight.

01:14:40 [Speaker Changed] Right? We, we saw it for like a week in April, and then that was quickly

01:14:44 [Speaker Changed] Reversed. That was it. So there’s, there, there is, there’s no capital flight there, there are no,

01:14:47 [Speaker Changed] But there was some fear US

01:14:48 [Speaker Changed] Investors that leaving the country that there were fears, and we can track it. If that starts to happen, we’ll see it immediately. That’s not happening. Repatriation continues to happen.

01:15:00 [Speaker Changed] Slowly measured, balanced,

01:15:01 [Speaker Changed] Melting iceberg. Right? Because there are limits to, if you’re a Bermuda reinsurer, I mean, you’re kind of, you’re, you’re stuck with treasuries, right? Right. I mean that, that

01:15:11 [Speaker Changed] You’re, you could buy some gold to offset it, but you can’t sell a hundred billion dollars worth of treasuries. No, you

01:15:16 [Speaker Changed] Can’t. You can’t. So it’s a melting iceberg. But we can clearly see that the dog is not barking yet and maybe never will is capital flight. What we see in politically domestically is that actually, and this was validated by a Gallup poll they’ve been doing 20 years, which also showed what we had saw, started seeing a lot earlier where immigration as a thing is actually pretty darn popular in the United States.

01:15:47 [Speaker Changed] Yeah. But so are, so is restricting assault rifles and we can’t get any change on that. I that’s 75, 80% or the actual

01:15:57 [Speaker Changed] Large. I, I gotta tell you, I gotta tell you that depends very much in how that question is asked.

01:16:01 [Speaker Changed] Well, that’s true for all polling. Well,

01:16:04 [Speaker Changed] This is the benefit of what I’m trying. So, so when, when we’re doing these seman, we call the semantic signatures, it has nothing to do with how you’re phrasing the question. We’re not doing polling. We’re seeing what people are actually the meaning of what they’re talking about in, in media.

01:16:20 [Speaker Changed] So how does that play out if people are legitimately saying no immigration is a good thing for America. Is there an impact on population and the economy? Is there an impact on markets? Is there an impact on policy and politics?

01:16:35 [Speaker Changed] I think there’s an impact on the election, the midterms next year.

01:16:40 [Speaker Changed] So we’re talking, we’re talking literally 12 months from now.

01:16:45 [Speaker Changed] Yeah. ’cause that’s how this, the stuff gets ca on the political front narratives and opinions. They get cashed out in elections. Right. Mark are different. You, you cash stuff out every day. The right, the market’s

01:16:59 [Speaker Changed] Open every day. The feedback loop is so rapid with markets.

01:17:02 [Speaker Changed] Ex Exactly. Politics is a different story. So Right. It gets cashed out in the elections.

01:17:08 [Speaker Changed] If you were to ask me before this conversation, what’s the most significant impact on the midterm elections? There was just a Gallup poll yesterday, GOP questions on the economy. They were plus 14% two years ago. They’re minus 4% this year. Yeah, I,

01:17:26 [Speaker Changed] I saw that.

01:17:27 [Speaker Changed] And, and that’s an amazing swing. And I’m, I’m saying to myself, you know, listen, the out of power party usually picks up, you know, 10, 15 seats. Yeah. You have the redistricting question, which may blunt that. But if, if the most important question during the election was on the economy, and that’s an 18% swing, this is looking like a pretty substantial shift. What I’m hearing from you is, hey, this isn’t just about the economy.

01:17:55 [Speaker Changed] It’s not,

01:17:56 [Speaker Changed] It’s not what, so it’s the economy, it’s immigration. What else? What else are you seeing? That’s interesting. That’s

01:18:01 [Speaker Changed] It. That’s, that’s pretty. Now there are other aspects though, where the, the stories, it, this is, this is people talking about immigration as a thing. Now, whether, now whether that gets translated into a political party position. ’cause I gotta tell you, the Democratic party I is enormous enough. But there, there are no, there are no narratives that are being put forward by the Democrats that are powerful. Or, or, or, or popular. So I

01:18:31 [Speaker Changed] I I don’t, other than the mayoral contest in New York. Yeah,

01:18:34 [Speaker Changed] Yeah.

01:18:35 [Speaker Changed] Right. That what I, that’s this

01:18:36 [Speaker Changed] One. What I’m saying is that the, is that the many of the policies that are being presented by this administration are unpopular, not just with the Democrats, but with Republicans. And increasingly so immigration being one of them. I think economy being another one,

01:18:58 [Speaker Changed] Tariffs aren’t really popular amongst, but people perceive that as a tax increase or, or a pressure on small business

01:19:07 [Speaker Changed] Government shut down. Right? So both also not popular. And also in this, it, it’s, it’s that ’cause the, the question, oh, well, the Democrats will get blamed. Well, that’s not really true. That’s not what’s happening now. How that all

01:19:19 [Speaker Changed] Pay, pay and by the out and listeners should know. It is a long way off. You are not a hard, you’re not a Democrat. Oh my

01:19:25 [Speaker Changed] God. No.

01:19:26 [Speaker Changed] Like, like I know you and your politics and the stuff you’re saying, I, I could hear people shrugging and saying, oh, that Ben Hunt is just a liberal Democrat. I’m like, no, no, no. That’s not who Ben is.

01:19:37 [Speaker Changed] No, no, it’s not.

01:19:39 [Speaker Changed] You are just talking about here’s what I see in the data.

01:19:42 [Speaker Changed] I’m saying I’m observing. I don’t, I’m observing. And I think that a lot of times, if we are like me very online and on Twitter too much, right? You,

01:19:53 You don’t see the broader picture of what is happening on blog posts and local newspapers and, and, and everything else. So I think having the ability to read everything and track these stories that, you know, they don’t, they, they, like I say, they wax and wane, but they don’t, they don’t ever go away. The, it’s, it’s, it’s something we’re very excited about to track the stories of America. I’ll, I’ll give you another one. And this one actually, I don’t know what to do with this. One of the stories of America is that America has raised the world’s wealth, right? That, that that

01:20:48 [Speaker Changed] Global standard of living,

01:20:49 [Speaker Changed] Global standard of living, that, that America has been this powerful force to, and, and capitalism and America have been this powerful force to raise people outta poverty. That’s a story that in other periods of time has been out, has been prominently talked

01:21:08 [Speaker Changed] About. Very resonant.

01:21:09 [Speaker Changed] That story is non-existent today.

01:21:11 [Speaker Changed] Well, you cut things like HIVA few million dollars to inoculate all of Africa from HIV. That’s gonna have repercussions.

01:21:21 [Speaker Changed] Well, it, it’s, it’s not just that, that that has the con those those repercussions that you’re describing. Right. What I’m saying is that the story that would support that, it’s gone.

01:21:37 [Speaker Changed] Is it gone forever? Has no, has

01:21:39 [Speaker Changed] No, that’s, these things are never gone. These stories, stories have, they never die. Right? They’re, they’re, they’re waiting for a new force to give them life.

01:21:49 [Speaker Changed] The next version of it, if us is not seen as a force for raising people out of poverty around the world, do people see China as that force?

01:22:00 [Speaker Changed] Haven’t looked at that. We’ve been looking at the, the US store. But I, but I I, my my personal sense is, is that we’ve essentially seeded the field

01:22:09 [Speaker Changed] CEDD with a C not

01:22:10 [Speaker Changed] An S Yeah. With a C. Not in s particularly in South Asia and Africa to, to, to China. I, I mean, that, that seems, that seems pretty,

01:22:20 [Speaker Changed] You know, pretty clear. This is, I’m glad I asked the question about the end of Pax Americana. ’cause I, I, I’ve just found that piece so insightful and so useful, and I could keep you here talking about this stuff for hours. But out of deference and respect for our listeners’ time, I’m gonna jump to our favorite questions that I ask. Oh, sure, sure. All of our cl all of our guests. But before I do, there’s a question that I, I have to pose to you, which is, so you get to see things before they sort of bubble up into the mainstream before they become a well understood narrative. What’s a narrative that you are just starting to sniff out? That most of the world, or most of the country, or most of Wall Street and finance hasn’t seen yet?

01:23:15 [Speaker Changed] It’s a story that people are talking about since tricolor and first brands went out,

01:23:23 [Speaker Changed] Right? The, the,

01:23:24 [Speaker Changed] So it’s the story on, on credit, story of credit, and

01:23:29 [Speaker Changed] I mean, first brands is legitimate. It sounds like felonies were happening there. So we’ll have to see what, how that plays out. I

01:23:37 [Speaker Changed] Probably try color as, as as well. But my point is that every day you have a new bank, CEO come out and say, no, no, everything’s fine. Right? So yesterday it was David Solomon at Goldman Sachs saying, no, no, it’s fine. Today I was hearing the Brookfield guy saying, no, no, it’s fine. For every story, every interview, the guy says it’s fine. You’re getting two articles in the ft or the journal saying ain’t fine. So

01:24:09 [Speaker Changed] The, you think thou death protested too much. Is it that

01:24:12 [Speaker Changed] Well, I’m, I am I, all I’m saying is I am observing. I’m not predicting, I am observing the level of volume for Hmm. Alternative asset managers, their exposure to private credit. This is problematic. Oh, I’m wondering what’s gonna happen when the music stops. Oh, I think that these, this blows back into the commercial banking system. Those stories, those narratives are higher by an order of magnitude than they’ve been at any point in the last 10 years. Hmm. At any point, including during COVID during when you had similar concerns over, oh my god, private credits.

01:24:51 [Speaker Changed] I was easy to rationalize everything. Hey, listen, we’re all frozen. Just ignore it.

01:24:55 [Speaker Changed] But I, this is a story that has legs. It is growing in a way that I rarely see. And once a story like this grows, it doesn’t just go away. And it’s not fixed by Bernanke saying, oh, subprime is contained. Right.

01:25:13 [Speaker Changed] It’s immediately what I thought of as soon as you

01:25:15 [Speaker Changed] Mentioned it. Absolutely. It does not get fixed by people saying, don’t worry, there’s no problem.

01:25:21 [Speaker Changed] Jim Grant said he was right. It was contained to Earth. Yes. Yes. The rest of the solar system was fine. Which turned out to be a very witty and clever observation. This

01:25:31 [Speaker Changed] Story, this worry, this concern absolutely has legs. And we’re seeing no signs of it easing off in financial media and press. So

01:25:43 [Speaker Changed] The, the big question is, is it systemic? Or I don’t, is it the specific, like

01:25:49 [Speaker Changed] I say, I, I don’t know the truth, right? I don’t know reality. All I can tell you is

01:25:55 [Speaker Changed] We’re seeing more of this.

01:25:56 [Speaker Changed] Well, we’re seeing this is, this is the story.

01:25:59 [Speaker Changed] Huh. Really, really interesting. Let, let’s jump to our favorite questions, starting with who are your mentors who helped shape your career?

01:26:09 [Speaker Changed] Hmm. That’s good. Well, I, you know, I mentioned that the people both in undergrad and graduate school, who turned to me on to the science part of political science. And in particular in graduate school, Gary King, who runs the whole social science research center up there at Harvard and has for a long time now. He wrote the original, really the book on inference. You hear about inference all the time now.

01:26:34 [Speaker Changed] Well, Cialdini, of course.

01:26:36 [Speaker Changed] So the, the notion of inference taking large data sets and pulling out,

01:26:41 [Speaker Changed] Oh, inference. I thought you said influence. No, no, no, no. Inference. Inference.

01:26:46 [Speaker Changed] So the science of inference, the, I learned that from Gary, you know, 30 years ago. And it’s so interesting to see that come full circle because that’s at the core of, you know, Jensen Wong’s always talking about it and the whole notion of AI to that inference spend. They talk about, I was there at the beginning for how you, what inference is and why it is so powerful. That was a huge influence on me.

01:27:14 [Speaker Changed] Let’s talk about books. What are you reading now? What are some of your favorites?

01:27:19 [Speaker Changed] I’m a science fiction guy.

01:27:21 [Speaker Changed] Okay. I really am. You’re talking to another sci-fi guy. So let’s, so I I I give us something new and something classic. Well,

01:27:27 [Speaker Changed] Something classic would be Lu Hin and the Three Body Problem. Right.

01:27:32 [Speaker Changed] By the way, the Netflix show on that was surprisingly watchable.

01:27:36 [Speaker Changed] I thought it was excellent before that. And you know, I named the company after him was the Foundation Trilogy

01:27:44 [Speaker Changed] Asimov with

01:27:44 [Speaker Changed] Asimov. Those books hold up Less well, honestly. And I thought the, the series was, it had its moments. I

01:27:50 [Speaker Changed] Didn’t love the series. Yeah.

01:27:51 [Speaker Changed] It was, it was so pretty soso to me. Current science fiction. Rebecca goes, she goes by RF kwong and she wrote a book called Babel, and she’s got a new one out two B or

01:28:07 [Speaker Changed] One BBAB.

01:28:08 [Speaker Changed] Like Tower of Babel. Right. B-A-B-E-L. And she’s got a new one out Caba I think it is, but science fiction dealing with language and linguistics. I love that stuff.

01:28:19 [Speaker Changed] That, that, I love that stuff. That sounds like that’s right in your, your sweet spot. Let’s talk about streaming. What are you watching or listening today? Podcasts or Netflix or whatever? So,

01:28:29 [Speaker Changed] Honestly, I don’t listen to any podcasts. Isn’t that terrible to admit?

01:28:31 [Speaker Changed] Well, if you host, I will say this. If you host a podcast, you’re either preparing for a podcast Yeah. Doing a podcast or ordering a podcast. Alright. Right. So it’s like, all right. That’s three or four.

01:28:43 [Speaker Changed] That’s all it is. Yeah.

01:28:44 [Speaker Changed] Right. Every now and then I’ll, I’ll catch something. ’cause I wanna either listen to this, a specific guest, like IWI will not listen to any podcasts that you are on before we do our podcast. Right. ’cause I don’t wanna steal anybody else’s Yeah. Or narrative or questions or line of thinking. So I, that’s purposeful. But every now and then, so I listen to, the things I listen to are like John Pirelli’s Radio Deluxe. Yeah, yeah. Which is sort of like a podcast slash music series. Something

01:29:17 [Speaker Changed] A little different. Yeah, exactly Right. What,

01:29:20 [Speaker Changed] What about streaming? What are you watching? Well,

01:29:22 [Speaker Changed] You, you and I are both Big Godfather fans. So we love all the, the mobster. I Have you seen Mob Land yet? With, with No. Alright. Worth your time. Okay. Pierce Brosnan eats up every scene. Tom Hardy is awfully good. I just love him in anything. If you, I don’t know if you ever saw Peaky Blinders, right. Started as a modern

01:29:40 [Speaker Changed] Version of Pinky Blinders. I started, I kind of fall, so couldn’t get into it. So my issue is I have to watch something that my wife tolerates. Like I have, I have friends

01:29:49 [Speaker Changed] That’s a struggle

01:29:50 [Speaker Changed] Who, like, he goes into this room, she goes into that room, they don’t watch anything together. Like, I don’t know how that works. Like it’s, she’ll watch some stuff without me. I will watch some stuff without her. Right.

01:30:02 [Speaker Changed] You gotta have your own space.

01:30:02 [Speaker Changed] But 80% of what we watch, so I have fallen that’s hard down the British upstairs. Downstairs Gilded Age. Yeah. So we watched The Crown, we watched the Gilded Age. We finally, let

01:30:15 [Speaker Changed] Me give you one, lemme lemme

01:30:16 [Speaker Changed] Give you one. We went back to Downton Abbey, which I missed when I first rolled out.

01:30:20 [Speaker Changed] Check out. So my guilty pleasure, and I do watch this with my wife, is a diplomat.

01:30:25 [Speaker Changed] Ju the new series, just the new season just dropped new season. Yeah. And that’s teed up for this weekend. I’m looking forward to that. Excellent. That the first, was this season two or season three? The first season was great.

01:30:36 [Speaker Changed] Yeah.

01:30:37 [Speaker Changed] Yeah. And I’m gonna give you, if you like that. So my wife finds these really interest. She got me into Killing Eve, which was a little more spy fair than diplomacy. And if you get a chance to watch Slow Horses, oh,

01:30:52 [Speaker Changed] That’s the one I’ve gotta see. Yeah.

01:30:54 [Speaker Changed] It’s really, that’s the one. So the first season is great and people have told me the most recent season, it, it, some people will say, I don’t like the second kinds in the middle. I, I know people who loved it all the way through. But it’s, it’s really, it, it’s really an interesting well told beautiful cast. Just fantastic. Yeah. You’ll, you’ll love that. Our final two questions. Yeah. What sort of advice would you give a recent college grad interested in either investing or working with large language models, working with narrative analysis and artificial intelligence? Hmm.

01:31:35 [Speaker Changed] Don’t, and I, I say that tongue in cheek. I I,

01:31:41 [Speaker Changed] You had a lot of fits and starts going back seven, eight years

01:31:44 [Speaker Changed] For, for sure. And I, I tell you what I, I think’s I important you have to, what, what you, what I think you can accomplish in academia, either in grad school or whatever it is, is you build your intellectual capital. And so I think a lot of times when you get out of college, you say, okay, I’m just ready to kind of live my life and start something. And you haven’t built that intellectual capital yet. The the issue is though, is that once you enter, particularly the investment world where particularly if you’re responsible for managing other people’s money, brother, that’s it. Right? I mean, you’re, you’re, there’s, there’s not, you’ve, that’s got to be your, your total focus. You are spending your intellectual capital, you’re not gaining intellectual capital once you take on a role like that. So I, my first advice is find a a path where, and that’s often in, in, in academia where you’re building intellectual capital. Because once you leave that environment,

01:33:02 [Speaker Changed] Then you’re spending it down.

01:33:03 [Speaker Changed] You’re spending it down.

01:33:05 [Speaker Changed] Makes sense. You’re spending it down. Our, our final question. What do you know about the world of, fill in the blank in investing data analytics? Narrative storytelling today would’ve been helpful 25, 30 years ago

01:33:22 [Speaker Changed] In investing. I wish, I wish I had understood the role of, lemme step back a second. I, I think that whether you’re talking about data or whether you’re talking about investing, and I’ll speak for myself, but I think there are a lot of people like me. We think there’s an answer with a capital A right there in the, in the numbers. And if you just look hard enough, and if you work hard enough, you’ll find that answer. Right? You’ll find the secret, the secret formula.

01:34:00 [Speaker Changed] And you have learned since then,

01:34:03 [Speaker Changed] Ain’t no such thing. Right now, there is magic and there are patterns, but it’s, it’s, it’s not in the structured data, it’s not in the numbers, it’s actually in the error. It’s in the probabilities, it’s in, we’re calling, you know, the stochastic element, right? The, the, the role of chance and understanding that there are patterns and there’s real magic in understanding that I didn’t get that when I was either starting with data analysis or with investing. I was looking for the answer with a capital A as opposed to a process with a capital

01:34:43 [Speaker Changed] PII love that answer because, so my exercise in confirmation bias is I love the fact that you looking back, we all have the benefit of hindsight. Yeah. And unfortunately, that can be a bias to certain people. But when you’re looking back at it, you know how it happens at the moment when you don’t know what the outcome is, thinking about it, probabilistically is a much healthier approach than saying, here’s a binary up or down, yes or no. And I’m either right or wrong, and I see people struggle with that constantly,

01:35:21 [Speaker Changed] Constantly. When I first started in the investing world, again late, I got two pieces of good advice, right? One was never go all in. Right?

01:35:31 Which is, which is really interesting because it’s this, this business of investing. It’s a wonderful life. You were solving puzzles, we meet interesting people. We get to have these sort of conversations. It’s a, it’s a career for a lifetime. And the two pieces of advice are really, it never go all in. And also, reputation is absolutely the most important thing. And again, especially when you’re young, you think, oh, well that’s not the most important thing. You know, being right’s the most important thing. It ain’t, it’s playing the long game here, which you want to, it’s never go all in. And the reput reputation

01:36:16 [Speaker Changed] Is never go all in by never go in. You mean never put everything at risk so that if it doesn’t work out, you’re, you’re outta the game. You’re done, you’re out.

01:36:25 [Speaker Changed] Stay in the

01:36:25 [Speaker Changed] Game was the Gerald Loeb’s book, the Battle for Investment Survival? Stay

01:36:29 [Speaker Changed] In the Game, avoid that risk of ruin You, you, you just, or don’t ever risk ruin.

01:36:36 [Speaker Changed] That makes sense, right?

01:36:37 [Speaker Changed] Because once

01:36:37 [Speaker Changed] You, people don’t think in those terms, but that’s really, they don’t, they don’t all in means risk of ruin.

01:36:42 [Speaker Changed] It’s the risk of ruin. And it also connects with reputation because once you,

01:36:50 [Speaker Changed] Once you blow up, it’s tough to go back

01:36:53 [Speaker Changed] And you start saying, oh, I can fix it by taking this shortcut or doing this other thing. Right? And once you do that never ends Well, it never ends well. Right? And you tell yourself, oh, just this one time. It’s never this one time,

01:37:07 [Speaker Changed] Ben, this has been absolutely delightful. I’m so glad we’ve finally me too gone around to doing this. I, I I’m just entranced by your thought process. Some of the things like, I love reading stuff of yours that I totally disagree with. And then ’cause it forces me to say, well, he’s not just making this up. I know how you, your brain works. And it’s like, all right, if Ben is saying this, then I’m gonna make this my worst case than I’m, ’cause it’s easy to dismiss it. Everybody gets out seeking, confirming information and rather than being dismissive of it, alright, you claim to think probabilistically, where does this fit into the range of probabilities? And once you start thinking in those terms, it’s like, oh. So the worst case scenario is worse than my worst case scenario. I gotta move the bottom of my range down further. ’cause if this goes off the rails, this is really bad. That’s what your Pax Americana piece did with me. Well, thank you. And it really, it really helped me figure out how to think about, especially in that week between April 2nd and ninth, where everyone was losing their mind. It’s like, oh no. So they’re losing their mind. ’cause hey, this could happen. But maybe something good comes out of it. Trying

01:38:26 [Speaker Changed] To avoid tunnel vision. I think it’s so important in our business or any business, but especially our

01:38:31 [Speaker Changed] Business. In our business in particular. Well, thank you for being so generous with your time. We have been speaking with Ben Hunts. He is the co-founder and president of Prescient. And you can find his writing at Epsilon Theory. If you enjoy this conversation, well check out any of the 593 we’ve done over the past 11 and a half years. You can find those at Bloomberg, iTunes, Spotify, YouTube, wherever you find your favorite podcasts. Be sure and check out my new book, how Not to Invest the ideas, numbers, and behaviors that destroy wealth and how to avoid them at your favorite bookseller. I would be remiss if I did thank the Crack staff that helps put these conversations together each week. Alexis Noriega is my video producer. Sean Russo is my researcher. Anna Luke is my podcast producer. Short Sage Bauman is the head of podcasts here at Bloomberg. I’m Barry Riol. You’ve been listening to Masters in Business on Bloomberg Radio.

~~~

 

 

 

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The post The Billionaires and the November Election appeared first on CEPR.

My morning train reads:

• Bill Pulte: Agent of Chaos: In an administration hardly known for competence, coherence and subtlety, Pulte stands out. When Treasury Secretary Scott Bessent reportedly threatened to punch Pulte “in your fucking face” and to “fucking beat your ass”, it was mostly notable for how many people both inside and outside the administration were seemingly #TeamBessent. (Financial Times)

• Is the Iranian Regime About to Collapse? Five conditions determine whether revolutions succeed. For the first time since 1979, Iran meets nearly all of them. (The Atlantic) see also Weakened by War, Iran’s Regime Faces Its Toughest Challenge Yet: Iranian leaders’ last claim to legitimacy was shattered in the war with Israel (Wall Street Journal) see also Death Toll in Iran May Already Be in the Thousands: To account for what it called a “significant” death toll, the Islamic Revolutionary Guard Corps on Sunday raised the specter of ISIS, claiming in a statement that slain protesters were terrorists hired by Israel and the U.S. (Time)

• How Google Got Its Groove Back and Edged Ahead of OpenAI: After ChatGPT dominated early chatbot market, Google staged comeback with powerful AI model; biggest search-engine overhaul in years. (Wall Street Journal)

• GE’s CEO Has Saved the House That Jack Welch Built: Shares of General Electric Co. have jumped out of the gate this year faster than the gains of the S&P 500 Index. That doesn’t sound like a stellar achievement unless you consider that the stock has already surged sixfold in the last three years. The fact that GE’s turnaround still has legs is testament to the talent of Chief Executive Officer Larry Culp, who took over a legendary company that was in deep trouble in 2018 and rescued it. (Bloomberg)

• Big Oil Knows That Trump’s Venezuela Plans Are Delusional: The president’s thinking is stuck in the 1980s. (The Atlantic)

• Americans Predict Challenging 2026 Across 13 Dimensions: Only the stock market evokes optimism from a majority in the U.S. (Gallup)

• Why Trump wants Greenland and what’s standing in his way: Denmark’s leader warned that any use of force by Washington to seize Greenland, as Trump officials have suggested, would render the postwar NATO alliance defunct. (Washington Post)

• My Playdate With the Watch Nerds: 48 Hours at the Watch Convention: A Casio man in a Rolex world crashes the convention where guys trade six-figure grails for fun. (The Cut)

• Grok Is Generating Sexual Content Far More Graphic Than What’s on X: A review of outputs hosted on Grok’s official website shows it’s being used to create violent sexual images and videos, as well as content that includes apparent minors. (Wired)

• How Amy Poehler’s ‘Good Hang’ broke through celebrity podcast fatigue: The market was saturated with stars chatting with other stars. But the ‘SNL’ veteran channeled the old magic of late-night TV talk shows. Now she’s a favorite in a new Golden Globe category. (Washington Post)

Be sure to check out our Masters in Business interview this weekend with Ben Hunt, founder of Perscient, a firm that studies how narratives and stories shape markets, investing, and social behavior through the lens of information theory, game theory, and unstructured data analysis. His work analyzes the language, story arcs, and viral spread of explanations in media.

 

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Eastern Mediterranean Geopolitics Are Becoming More Complex

Authored by Andrew Korybko,

Tensions are growing between Turkiye-Pakistan and Israel-Cyprus-Greece...

Stability in the Eastern Mediterranean can no longer be taken for granted as a result of three recent developments:

1) the growing Turkish-Israeli rivalry in post-Assad Syria;

2) Israel’s reported plans to establish a rapid response force with Cyprus and Greece; and

3) Turkish ally Pakistan’s new military ties with Eastern Libya’s General Khalifa Haftar. The aforesaid are unfolding amidst Israel’s plans for an underwater EastMed gas pipeline to Greece and Turkiye’s maritime claims that cut right across its route.

The reported rapid response force could accordingly be assembled to defend the EastMed if construction on it were to begin while Pakistan might establish a military presence in Eastern Libya under the cover of training Haftar’s forces for complementing Turkiye’s in Western Libya so as to help Ankara counter this. Unaware observers should review this article here to learn more about the rapprochement between Turkiye and Haftar, previously enemies, which advances the former’s abovementioned maritime claims.

The Turkish-Pakistani Tandem (TPT) might not directly clash with Israel over the EastMed, at least not at first, since it’s much more likely that Turkiye would initially pressure it in Syria while Pakistan stirs trouble on its behalf at sea (perhaps with drones) through its potential military presence in Eastern Libya. The purpose would be to keep tensions manageable and “plausibly deniable”. That would be difficult to do if they targeted NATO member Greece, however, which could backfire by rallying the bloc around it.

For that reason, TPT would probably employ low-level and “plausibly deniable” hybrid provocations against Israel in the first stage, though Israel would be expected to call them out on this if it happens. It’s not possible to accurately forecast what might follow but it’s sufficient to predict that Israel likely wouldn’t back down since it rarely does so under military pressure. A conventional escalation might therefore be in the cards and that could in turn set the entire region aflame if it spirals out of control.

Turkiye’s interest in involving Pakistan in this dispute wouldn’t just be to diffuse responsibility for any escalation over its maritime claims but to have the support of the only Muslim nuclear power in order to deter Israel from responding in a way that risks a war between them. For its part, Pakistan would probably be happy to saber-rattle against Israel since this would play well domestically, but it understandably wouldn’t want Israel to force its hand into fighting a conventional war or backing down.

Any serious escalation between TPT and Israel would assuredly lead to an American diplomatic intervention given that all three are its close partners. Which side the US would support, however, remains unclear. While Israel is one of its most special partners, the EastMed pipeline could challenge the US’ newfound energy hegemony over the EU, so the argument can be made that it might prefer to impose a compromise whereby Israel supplies Turkiye with gas just like it’s poised to supply Egypt.

If Syria joins the Abraham Accords, then a pipeline could be built across its territory from Israel to Turkiye, while Lebanon could be involved as well if it too signs onto the accords. Even without that happening, an underwater pipeline could connect Israel’s offshore gas fields with Turkiye, which would strengthen their complex interdependence for reducing the risk of conflict.

That would be the best-case scenario from the US’ perspective for resolving Turkish-Israeli tensions in the Eastern Mediterranean.

Tyler Durden Tue, 01/13/2026 - 05:00

Le Pen's Political Future Hangs In The Balance As Appeal Begins This Week

The political future of Marine Le Pen hinges on a crucial appeal in Paris this week that will determine whether she can run in the 2027 presidential election, after she was barred from public office over misusing 4 million euros of EU funds. 

Marine Le Pen, pictured in Dec. 2024 at her party's offices in the National Assembly. (via El Pais)

Le Pen, who leads France's populist National Rally (RN) party, was sentenced to four years in prison (two suspended, two under house arrest which are on hold during her appeal) and banned from political office for five years, effectively disqualifying her from the 2027 election. She was also fined €100,000. In last March's ruling, Le Pen and her co-defendants were convicted of using funds meant for the European Parliament to pay staff that were working for RN.

RN is the largest opposition party in France, which poses a major threat to President Emmanuel Macron in next year's election - as the party enjoys widespread support throughout the country due to a pendulum shift back to conservative policies and anti-immigration views. 

Le Pen's appeal is scheduled to run from January 13th through February 12th, with a final ruling expected by this summer. If unsuccessful, Le Pen says her protege, 30-year-old party president Jordan Bardella, will run in her place. 

US President Donald Trump and senior members of his administration have voice support for Le Pen following her conviction, who will undoubtedly use her as an example of a weaponized judicial system in Europe that seeks to unfairly block right-wing politicians who oppose immigration from taking power. 

German magazine Der Spiegel claims that the Trump administration held internal discussions about sanctioning French prosecutors and judges involved in barring Le Pen, however US Under Secretary of State Sara B. Rogers denied the report as a "fake story."

Understand that this fake story is making the rounds in France, so I thought I’d do my part to counter foreign “misinformation”: the purported leak is stale and false. https://t.co/ixAzJY06mF

— Under Secretary of State Sarah B. Rogers (@UnderSecPD) January 7, 2026

That said, Reuters notes that "over the past year, the U.S. has imposed sanctions against 11 International Criminal Court judges involved in cases against Israel.

Le Pen has accused the judiciary of politically motivated targeting, telling French TV channel TF1 at the time "In the country of human rights, judges have implemented practices that we thought were reserved for authoritarian regimes."

Meanwhile, the European Parliament's lawyer Patrick Maisonneuve says he hopes Le Pen and her co-defendants' convictions would be upheld, including over 3 million in euro awarded in damages to the European Parliament. RN was also ordered to pay a 2 million fine, with half of the amount having been suspended. 

Tyler Durden Tue, 01/13/2026 - 04:15

EU Official Plotted To 'Organize Resistance' Against Hungary's Orban, Files Show

Authored by Kit Klarenberg via The GrayZone,

A senior European Union official has been secretly seeking to remove Hungarian President Viktor Orban since at least 2019, according to leaked documents reviewed by The Grayzone. The files show in January 2019, the EU’s International Coordinator for the Directorate-General for Migration and Home Affairs, Marton Benedek, authored a “project proposal” aimed at “developing a permanent coordination forum to organize resistance against the Orban regime.” In addition to his role at the European border control agency, Benedek currently heads Brussels’ “cooperation” with Libya.

The impetus for Benedek’s plot was “an unprecedented set of anti-regime demonstrations in Hungary and among expat Hungarians” over controversial proposed legislation allowing businesses to compel employees to work overtime, and delay payment of their wages for an extended period. Thousands took to the streets before and after its implementation.

According to Benedek, outrage over what he referred to as “the slave law” had “compelled a small group of some 30 political, trade union and civic leaders to coordinate their activities, agree on a set of minimum objectives and funding principles, and jointly plan future action.” This had given birth to “an ad hoc coordination forum… which could develop, over time, into an incipient political coordinating body that could credibly challenge” Orban’s rule.

Benedek’s proposal to harness resistance to the so-called “slave law” and bring its opponents into a single political movement was likely a reaction to the pro-sovereignty positions pursued by Orban and his Fidesz party, which has consistently sought to maintain national veto power for member states and to prevent the bloc from enlarging further, to the great chagrin of Brussels.

Participating in the “ad hoc coordination forum” were a variety of NGOs, many of which have been acccused of receiving funds from George Soros’ Open Society Foundations. OSF relocated its Hungarian office to Berlin in April 2018, due to Orban’s government undertaking numerous measures to curb the activities and influence of foreign-financed NGOs locally. OSF activities in Budapest have been a closely-guarded secret ever since. Nonetheless, the most recent available figures indicate Soros’ personal regime change operation pumped $8.9 million into Hungary in 2021 alone.

The source who obtained the files told The Grayzone that the proposal was submitted to Open Society Foundations, although they were unable to furnish proof that the Soros-led organization received the documents or signed off on them.

In the document, Benedek wrote that he hoped “to develop a few ideas to transform this forum into a potent entity capable of planning and executing collective action” ahead of elections that would be held in Hungary in 2019 and 2022. Benedek stressed the need for expansive financing to “deliver results” not least as organizing a single “large demonstration in Budapest” cost roughly $11,000. The then-ongoing demonstrations relied on crowdfunding, and Hungarian political parties – which receive state funding – to cover “gaps” in “project management.”

Among Benedek’s “proposed lines of action” was the creation of “a non-profit entity, registered in Hungary (for operational activities) and a financial vehicle potentially registered in Austria.” A board comprising political party representatives, trade unions and NGOs “could provide the political steer for future action.”

Benedek sought to maintain as broad of an anti-Orban coalition as possible, warning against “rapidly proceeding to controversial projects,” for instance uniting opposition parties to contest European elections. As these votes are “contested in a fully proportional system,” it was “quite rational” for parties “to run individual party lists.”

Instead, Benedek looked ahead to “organizing collective action” and “sustained opposition to the Orban regime” over contentious domestic political issues ahead of Hungary’s 2019 local and 2022 national elections. The operation would involve “primary campaigns, information campaigns, mobilisation campaigns, electoral debates and joint fundraising activities,” he wrote.

The senior EU functionary concluded by suggesting his proposed organization would ultimately morph into a shadow government that could seize power from the Hungarian president. “In the longer run, the proposed non-profit entity could also… develop the policy foundations (and shadow cabinet) of a united political front against the Orban regime.”

A failed test-run for toppling Orban?

By this point, Benedek had been intimately involved in anti-Orban activism in Hungary for many years, while also working in a variety of senior EU posts related to bloc enlargement and relations between aspiring member states. An official profile reveals he “led the European Commission’s visa liberalization dialogue” with the breakaway statelet of Kosovo, “oversaw rule of law reforms in the Western Balkans,” and coordinated “the EU’s internal security policies during Hungary’s EU Council Presidency” in 2011.

Benedek’s determined plotting against Orban clearly constitutes a conflict of interest. In October 2012 – the year that Orban’s disputes with Brussels significantly intensified – Benedek co-founded a party called Együtt, or Together. A progressive liberal party, it sought to forge an extremely broad political coalition in Hungary. Együtt’s explicit objective was to seize power and undo all reforms enacted by Fidesz since taking office two years prior. Its leaders urged parties of every ideological extraction to join their cause.

Read Benedek’s anti-Orban project proposal here.

Despite much initial media hype framing Együtt as Hungary’s premier opposition entity, and therefore a threat to Orban’s grip on power, the party failed miserably. Having been flatly rejected by the country’s right-wing, it formed a coalition with a quartet of green, liberal and social democratic parties. This was sufficient to elect three MPs to Budapest’s 199-seat parliament in 2014, although four years later that figure fell to just one. The lone lawmaker promptly defected to another party, and Együtt folded.

Despite the cataclysmic results, and Együtt’s chiefs being forced to pay back close to half a million dollars in state funding they received for campaigning activities due to abysmal electoral performance, Benedek was undeterred. In a 2017 interview, he branded allegations that his family had improperly profited from his mother’s senior position within the EU as a “Fidesz lie.” The fact that he was reaping a sizable salary from Brussels for sensitive, high-level work, while simultaneously playing opposition politician at home, was left unmentioned by his interviewers.

This matter should’ve been a source of significant critical interest and inquiry, however. Under formal rules, EU civil servants are supposed to be impartial and politically neutral. Officials must declare any personal or political interests that could compromise their independence, and obtain permission from superiors before engaging in external activity. One might think Benedek engaging in nakedly partisan political campaigning, both covert and overt, would be prohibited – unless of course it was signed off upon at the bloc’s highest levels.

In the leaked 2019 “project proposal,” Benedek boasted that “an online community that yours truly set up” was part of the anti-Orban “coordination forum.” That group, “Hazajöttünk túlórázni” (“We came home for overtime”), had attracted the interest of thousands of Hungarian emigres, which were drawn together when it “organised demonstrations against the Orban regime in 35 cities in Europe, North America, Asia and Australia.” How these actions were funded, and whether the EU played any role in bankrolling them, remains unclear.

While Együtt’s crusade to dislodge Orban crashed and burned, the experience offered clear lessons for future contenders. The first of these was that Hungarians are overwhelmingly right-wing, dooming virtually any explicitly progressive, liberal movement to failure. Second, and equally important, as Benedek noted in his “project proposal,” was that European parliament votes are conducted under proportional representation, making it much easier for smaller parties to break through in Brussels than in national elections. Recent political developments suggest Együtt’s contemporaries learned from their efforts, and adapted accordingly.

EU 'resistance' ambitions fulfilled by Tisza?

In March 2024, a little-known figure named Peter Magyar exploded onto Budapest’s political scene when he released secret recordings of his ex-wife, former Justice Minister Judit Varga, revealing that senior government figures attempted to sabotage the prosecution of a state official for corruption. Varga had resigned the previous month along with Hungarian President Katalin Novak, for signing off on the pardon of the deputy director of an orphanage who was implicated in covering up pedophilia.

Ever since, Varga has repeatedly claimed Magyar was physically abusive, and that she made the incriminating statements under duress. She has variously alleged Magyar locked her in a room without her consent, violently shoved her into a door while she was pregnant, and stormed around their shared residence menacing her with a knife. In April 2024, a police report was released exposing how Magyar attempted to forcibly seize custody of the pair’s children, while making a variety of threats to Varga. He denies the report’s authenticity.

These revelations have fallen almost entirely on deaf ears, however, while Magyar’s star has grown inexorably. Magyar became chief of the Tisza (Respect and Freedom) party almost overnight, and was immediately bestowed the title of “opposition leader” by mainstream media. While founded in 2020, Tisza had not previously competed in any elections or ever publicly campaigned. However, in the June 2024 European parliament election, Tisza garnered almost 30% of the vote, and seven seats. Today, the party enjoys a significant lead over Orban’s Fidesz in many national opinion polls.

From the very inception of Magyar’s stratospheric ascent, his political activities have been of intense interest to Western news outlets, with protests he routinely leads generating saturation coverage. At no point have obvious questions been asked as to whether Magyar’s abrupt emergence as Hungary’s leader-in-waiting was an organic phenomenon, or how his activities have been funded. Despite repeated promises, Magyar has yet to provide the public with any detailed financial statements. Instead, he claims Tisza relies on “micro-donations” from average citizens, and the largesse of popular local anti-government actor Ervin Nagy.

Immediately after Magyar assumed leadership over Tisza, he barnstormed through towns and villages across the country. The spectacular campaign often saw him addressing crowds from large stages featuring concert-ready audio equipment, along with videographers and professional security. Magyar has also been supported by highly sophisticated PR and social media efforts, as well as a liberal-leaning local mainstream media ecosystem which seems increasingly desperate to market him to right-wing voters.

In 2024, Hungarian academic Zsolt Enyedi published a typical profile of Magyar’s party, marvelling at Tisza’s “meteoric” and “unprecedented” rise, while acknowledging that its “ideological profile” is “amorphous” – which is quite an understatement.

Though he claims to be conservative, Magyar’s positions on many issues are unclear. For example, he has visited Ukraine and branded Moscow the proxy war’s “aggressor,” while Tisza has voted for European Parliament resolutions calling for more weapons for Kiev. The party’s representatives performatively donned Ukrainian flag t-shirts as they cheered Volodymyr Zelensky’s November 2024 address to the chamber.

Magyar has also promised to adopt the EU’s ban on Russian energy imports, a position opposed by the overwhelming majority of Hungarians. Adding to the confusion, Tisza supports the government’s refusal to send weapons to Kiev, as well as Ukraine’s EU accession. Magyar has admitted he avoids taking concrete positions on Ukraine, as the topic is “divisive” among domestic constituents. Pointed questions about his penchant for flip-flopping have prompted Tisza’s leader to storm out of live TV interviews.

Hungary on the verge of EU subjugation?

Nonetheless, one policy area in which Magyar is consistent, unequivocal, and in stark opposition to Fidesz, is the EU. Defining himself as avidly pro-European, he supports adoption of the Euro, as well as greater EU integration and federalism. If he comes to power, Budapest will no longer be an irritant to Brussels’ designs. It is likely to back the Ukrainian proxy war “for as long as it takes,” as EU chief Ursula von der Leyen has repeatedly pledged, and to eliminate the remaining vestiges of sovereignty from the bloc’s members.

Since late 2022, the EU has withheld billions of euros from Hungary due to “rule of law concerns.” Accessing these vast sums would require Fidesz to undertake major reforms in eight separate policy areas. However, Magyar has claimed once he takes office and Budapest is “a fully-fledged member of the EU,” the funds will instantly be unfrozen – a key Tisza pledge, which has propelled the party’s surging popularity ahead of Hungary’s national elections in April.

If current polling trends hold, Marton Benedek’s clandestine scheme to “organize resistance” and “credibly challenge” Orban may finally be fulfilled.

Tyler Durden Tue, 01/13/2026 - 03:30

China–EU EV Conflict Nears Resolution As New Pricing Framework Emerges

China and the EU took a significant step Monday toward easing their long-running electric vehicle trade dispute after Brussels released rules that could allow Chinese exporters to replace punitive tariffs with negotiated pricing commitments, according to the South China Morning Post.

The European Commission said companies may submit price undertakings that must be “adequate to eliminate the injurious effects of the subsidies and provide equivalent effect to duties”. Exporters are encouraged to include shipment limits and future EU investments, with assessments conducted under WTO rules. If accepted, the EU would revise its existing regulations.

The conflict dates back to the EU’s 2023 anti-subsidy probe, which resulted in 2024 duties of 7.8% to 35.3% for five years. China responded with investigations into European cognac, dairy and pork. While the tariffs technically remain, the new framework could replace them with minimum import prices.

China’s Ministry of Commerce welcomed the move, saying “the progress fully reflects the spirit of dialogue and the outcomes of consultations between China and the EU.” It added: “It shows that both China and the EU have the ability and willingness to properly resolve differences through dialogue and consultation under the framework of WTO rules and maintain the stability of automotive industrial and supply chains in China, the EU and the whole world,” calling it “conducive not only to ensuring the healthy development of China-EU economic and trade relations, but also to safeguarding the rules-based international trade order.”

SCMP writes that negotiations gained momentum after the EU began reviewing a price undertaking offer in December from Volkswagen’s Chinese joint venture. Economist Alicia Garcia-Herrero of Natixis called the potential shift from tariffs to price floors a major development.

China’s chamber of commerce in the EU described the move as a “soft landing” and “a constructive step forward for China–EU trade and investment cooperation, as well as for the broader bilateral relationship”, adding: “The consensus and arrangements reached will significantly strengthen business confidence, [and] create a more stable and predictable environment for Chinese electric vehicle manufacturers and related supply-chain companies investing and operating in Europe.”

Cui Hongjian of Beijing Foreign Studies University cautioned the change remains largely technical, noting that “At present, both sides are grappling with a certain lack of confidence [in each other].” Garcia-Herrero warned the scheme could weaken EU trade enforcement, raise costs for European buyers, and deepen Europe’s reliance on Chinese investment.

Tyler Durden Tue, 01/13/2026 - 02:45

Germany's Mittelstand Succession Crisis: Who Will Take the Reins?

Submitted by Thomas Kolbe

Germany faces a massive wave of business transfers. The decline in entrepreneurship and self-employment has multiple causes; blaming the young generation’s supposed obsession with work-life balance belongs more to the realm of fables.

When a productive and market-successful company exits the competition, productive capital is lost irretrievably. Jobs vanish, supply chains collapse, and established customer relationships dissolve. Often, foreign competitors step in to occupy the freed market niches. Value creation is lost for the domestic economy.

KfW Panel Shows the Numbers

A recent survey by the KfW Mittelstand Panel shows that Germany confronts exactly this fundamental problem. A demographically driven succession crisis is emerging: over 57% of Mittelstand business owners are now over 55. According to KfW, around 1.1 million business transfers or closures will occur by 2029 due to age. The survey of 13,000 firms also shows that about one in four companies at risk is considering a full shutdown because no suitable successor or buyer is available to fill the vacancy.

Mathematically, the situation is stark: in coming years, roughly 114,000 business closures are expected annually, while only about 109,000 orderly successions occur. The net balance is negative. New business formation would be required to close the gap—an endeavor naturally difficult in Germany. The succession problem spans all sectors and company sizes, from small craft shops or bakeries to classic industrial Mittelstand companies. The pool of potential business transferors grows due to demographics, while the pool of successors continues to shrink—a classic demographic gap.

The Ifo Institute paints an equally sobering picture: around 42% of family businesses cannot find an internal successor. Young people increasingly avoid taking over existing companies, preferring well-paid employment with social security and avoiding the substantial risks tied to entrepreneurship.

A New Reality

What drives the growing succession problem in Germany? Just a few years ago, aging society and rising closures could be cited alongside productivity trends and a shrinking domestic market as natural reasons for a contraction in the economy’s supply side.

Today, however, Germany’s population has grown by several million in a few years due to migration policies. With shrinking economic output, Germans are increasingly trapped in a spiral of scarcity. Alongside eroding productivity and industrial decline, massive redistribution programs benefiting those who have never contributed productively push the country’s productive class into economic tight spots.

And honestly: who wants to take entrepreneurial responsibility in such an anti-business climate? A country where leading officials, from Lars Klingbeil to Bärbel Bas, even the Chancellor, openly attack entrepreneurs depending on the day’s mood—while a compliant press gives them carte blanche for all manner of rhetorical nonsense.

It begs the question: how has self-employment, once a cornerstone for innovation, family traditions, risk capital, and breaking stagnant markets, decayed so profoundly?

In principle, anyone pursuing a serious entrepreneurial vision pays little attention to political chatter or bureaucratic whim—but in Germany, beyond demographics and a lack of successors, politically engineered realities make takeovers and sales extraordinarily difficult.

Structural Obstacles

Inheritance law, nearing another reform, targets the substance of Mittelstand firms—more than a mere deterrent. In many cases, succession becomes economically unviable. Complex, multi-heir transfers are costly, liquidity-straining, and bureaucratically labyrinthine. Potential inheritors or buyers face an entire economic crisis environment, alongside internal cultural shocks in companies tied closely to their founders.

Succession processes often end in frustration because tax, inheritance, and corporate law link transfers to complex conditions, deadlines, and exceptions monitored for years. Restructuring, investment, or personnel decisions can jeopardize tax benefits and trigger retroactive liabilities. The economy shrinks, fiscal pressures rise annually—most recently via CO₂ levies and commercial tax hikes to cover municipal deficits. No recovery is in sight. Germany is only at the beginning of deindustrialization and structural collapse.

The Green Deal looms—a future-destroying program for the next generation, who will one day see “Fridays for Future” protests and climate activists as symptoms of a severe societal illness no one restrained.

Cultural Retreat

Zooming out, the social and cultural climate reveals another key issue: society has largely abandoned family traditions. The collapse of reproduction rates reflects even in entrepreneur families. Passing a business to children and integrating them early into operations is increasingly the exception.

This is symptomatic of a deeper problem: belief in economic futures has eroded. Prosperity was once a promise for achievement; today it is often merely a state-managed allocation problem—via subsidies or a welfare apparatus consuming about a third of GDP. Society appears frozen. State institutions and parties shield themselves from criticism by framing entrepreneurs as greedy.

Current discourse demonstrates that conservative values, generational thinking, and meritocratic consensus are essential for national economic advancement. Change will occur when society realizes that wealth cannot be printed or centrally planned; it requires individuals willing to invest creativity, diligence, and courage into innovative products and services demanded by free markets.

In short: the turning point comes when Germany sheds the rotten patina of state control and recommits to bourgeois values of freedom, family, and economic ascent. That is the pivot.

* * *

About the author: Thomas Kolbe is a Gerrman is a graduate economist. For over 25 years, he has worked as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination.

Tyler Durden Tue, 01/13/2026 - 02:00

A Paleoconservative Rips Apart Trump's Venezuela Overthrow

Authored by Terry Cowan via Substack

There is no way to put a pretty face on our most recent regime-change adventure. It is pig-ugly, and not defendable on any level, or from any angle or perspective. The reality of it all is plain to see. The Administration boldfacedly asks, as the old saying goes, Who are you going to believe; me or your lying eyes?. Only a political toad like, say, Prime Minister Keir Starmer, would respond that they needed more information to get the "full picture" before they could possibly comment on America's action against the sovereign government of Venezuela.

I carry no water for the Chavez/Maduro regime. I am about as ambivalent towards the Venezuelan government as a person could be. This is for two reasons: 1) I am not a Cuban-American who, at least politically, are obsessesed with anything even tangentially connected to Castro’s Cuba, and 2) Maduro is their business, not ours-it is for them to sort out. The silly charge of narcoterrorism is the WMD of this generation.

At this point, it is not exactly clear what the Administration has accomplished. The Presidential couple has been surgically extracted from Caracas. The blockade is still in place, but then so is the Venezuelan government under Delcy Rodriquez, who is decidedly off-script. (I do find the tangential side-lining of the the ever-so-eager recent Nobel "Peace" Prize winner to be extremely satisfying. She has learned the hard way what many others before her have so learned. Her support in Venezuela is apparently so minimal that she does not even rise to the level of a useful puppet for Rubio.) I suppose that, in time, we will have a show trial in New York City for the Maduros, its outcome fore-ordained; the very thing we condemned the Soviets for back in the bad old days. But then, this should not be surprising in what I have heard called our "post-Constitutional" age.

I am fascinated by the logistics of this admittedly extraordinary and ruthlessly efficient covert attack. From what I can gather, these forces never engaged the Venezuelan army directly. Maduro relied on 22 Cuban bodyguards and a Security Detail, both operating outside of army channels. The U.S. had an army of covert CIA operatives and assets in Caracas, all trained in the fine art of engineering protests, demonstrations, color revolutions, and regime-change. These spooks were able to bribe his Security Detail. The commandos dropped in, while the Security Detail stood back as they killed the 22 Cubans and extracted the Maduros. The Russians were on the way, but arrived just after the completion of the mission. When they discovered who had been bribed to do this, it is my understanding that he was executed.

And there it is. No need to cue-up Lee Greenwood here. I recently read an accusation against someone as "being against everything this country stands for." That is a loaded statement, to be sure. What does our country stand for anymore? One thing for certain is that we stand for is regime change. Dr. Lindsey O’Rourke’s Covert Regime Change: America’s Secret Cold War documents 70 such regime changes between 1947 and 1989 (excellent interview, here).

Dr. Jeffrey Sachs states that that number is now right at 100, which he characterizes as an addiction, overthrowing countries left and right when we wants something they have: Iraq in 2003, Libya in 2011, Syria in 2011-2025, Ukraine in 2014-present, etc.

As he often does, Dr. Sachs recently addressed the UN Security Council, commenting this time on the situation in Venezuela. A few points:

• The core of the UN Charter is Article 2 Section 4 which upholds the sovereignty of nations.

• The job of the Security Council is not to judge Maduro's fitness as a leader, but to try to offer some protection to countries.

• Sachs then presented the Security Council was a brief outline of recent U.S./Venezuelan history, reminding them that the U.S. had been trying to topple the Chavez/Maduro regime since 2002.

• In 2007, a great tragedy befell Venezuela when it was discovered that they were sitting atop the largest oil reserves in the world.

• In 2014, a CIA/NGO color revolution was attempted.

• In 2015, Obama placed sanctions on Venezuela.

• In 2016, following orders, he declared the country to be a "threat to our national security."

• In 2017, DJT wondered aloud to two Latin American Presidents why he could not just go in and capture Venezuela.

• He was informed of the danger in this, so he upped the sanctions to crush the Venezuelan oil industry. By 2020, production had fallen 75% and personal GDP had collapsed by 65% in Venezuela, according to the IMF.

• And then about the same time, his administration announced that the hitherto unknown Juan Guido was the real President of Venezuela. Many of our European vassal states went along meekly; in fact, you can hear echoes of that in Macron’s reaction now.

• He then asked the Security Council, “Do we have International Law, or do we have anarchy?”

The answer to the last question is pretty obvious. Threats have been made to six countries since the Venezuelan attack: Mexico, Columbia, Denmark, Nigeria, Cuba, and Iran. A great champion of the United Nations, Dr. Sachs claims that it is not dead, but it is on life-support. Any commitment for international law is certainly not coming from us. In fact, we are rushing back to the world of great power politics and spheres of influece, with all that that implies in terms of war and aggression. Dr. Sachs describes the situation as dire, given the nuclear age that we are all lulled into forgetting: being led by a "completely impulsive out of control ill-informed manipulable and manipulative individual atop the Deep State." Dr. Sachs has a fearless aspect to his commentary. May he survive for many years yet.

I was in South America when we attacked Venezuela. I saw coverage on the Asuncion news channels, and spoke briefly to a couple of Paraguayans about it. They shrugged in resignation, and basically said that when America wants something, what can you do? Perhaps someday someone will do something. But in the meantime, I dug a Spanish phrase out of my memory: lo siento.

* * *

Who can buy a government so cheap?
Change a cabinet without a squeak?

...Who can get a budget that's so great?
Who will be the 51st state?

Tyler Durden Mon, 01/12/2026 - 23:25

Day 1,419: The Russia-Ukraine Conflict Just Surpassed Soviet War With Nazi Germany

This week has marked another grim milestone in the nearly four-year long Russia-Ukraine war. The conflict has just entered its 1,419th day - which means it has officially surpassed the entirety of the historic Soviet campaign against invading Nazi Germany, which lasted 1,418 days from June 1941 to May 1945.

Red Army forces eventually drove Nazi troops back from the Volga River all the way to Berlin, before seizing the German capital. But in today's war, the 1,419th day is just another in a long one in a tragic and grinding war of attrition, where it is believed each side has lost literally hundreds of thousands.

Source: Cover art from The History of Russia Ukraine War: How Putin & Zelensky reached this stage

Russia definitely has the upper hand and momentum on the battlefield, but it's been a slow and deadly slog, with The Times of London reporting Monday that despite prolonged combat, Russian advances in the Donetsk region amount to roughly 30 miles from their original positions.

Ukraine's armed forces have in large part been propped up by many billions in weapons, training, and funds poured in by NATO and Western backers of Zelensky.

A recent study by the BBC's Russian service and Mediazona - both largely anti-Putin outfits, found that at least 160,000 Russian soldiers have been killed, but the true figure may be significantly higher. It could also be lower, as Western sources have incentive to exaggerate for propaganda purposes (just as Russia would have incentive to underestimate).

At the same time, most international reports and war monitors say Ukraine's casualties could be many times that figure. On both sides, a whole generation of young men is being wiped out.

Efforts to achieve peace by the Trump administration have so far failed, but at least the lines of communications are still open between Washington and Moscow. 

Ukrainian officials have warned that Russian troops are preparing renewed offensives in the north, including areas near the city of Sumy, at a moment the conflict is still only at the legal level of 'special military operation' in the Kremlin's eyes, and not a full state of war which could require societal mobilization.

Over in Ukraine, the war has created the single biggest army in Europe, as recent analysis in The Wall Street Journal detailed: 

When the war with Russia eventually ends, Ukraine will be left with a military larger and with more recent experience than any of its European backers’.

Whether it can outlast Russia’s long-term designs in the event of any peace deal is a question for the entire continent, which now sees Ukraine as a bulwark against Moscow’s ambitions. 

Finding the money and personnel to maintain 800,000 troops and piles of equipment while devising new capabilities will be among the Ukrainian government’s hardest tasks in the immediate aftermath of the war. European Union leaders recently said they would lend Ukraine 90 billion euros, around $105 billion, fending off a looming cash crunch in Kyiv and helping the Ukrainian army keep fighting as Russian leader Vladimir Putin and Ukrainian President Volodymyr Zelensky compete for President Trump’s ear.

Western leaders have meanwhile constantly reiterated their support for Ukraine while accusing Moscow of dragging out the conflict, and yet few have still recognized that Russia is genuine and legitimate in saying constant NATO expansion has led to this.

Trump has at times hinted he understands Moscow's grievances, but has still seemed to escalate behind the scenes, such as authorizing US intelligence assistance to Ukrainian drone attacks deep inside Russian territory.

Tyler Durden Mon, 01/12/2026 - 23:00

Money And Power: Fiat Currency, Monetary Corruption, & The Architecture Of Extraction

Authored by Justin Pak via The Mises Institute,

Money is often described as neutral, technical, or merely instrumental—a passive medium facilitating exchange within an otherwise political society. This view is not only mistaken; it is profoundly misleading. Money is the hidden constitution of every political order. It determines which actions are possible, which institutions survive, which risks are rewarded, and which failures are forgiven. While constitutions proclaim rights and legislatures debate policy, money silently governs outcomes.

For this reason, the structure of a monetary system is never merely economic. It is moral, political, and civilizational.

From the perspective of Austrian and heterodox political economy, the modern fiat monetary system represents not a refinement of earlier monetary forms but a radical departure from them—one whose defining feature is the removal of constraint. Historically, money emerged as a market phenomenon rather than a state creation. Carl Menger demonstrated that money arises organically as the most saleable commodity within an economy, a process driven by voluntary exchange rather than decree. Ludwig von Mises later formalized this insight through the regression theorem, showing that money must originate in a good valued for its non-monetary uses in order to acquire exchange value at all. Gold and silver did not become money because states declared them so; states declared them money because markets already had.

Fiat money reverses this logic. It does not arise from scarcity or market selection but from legal privilege. Its acceptance depends not on earned trust but on enforcement through legal tender laws, taxation, and institutional inertia. What presents itself as sovereign currency is, in practice, state credit circulating as money. This distinction is not semantic. It marks the difference between a system disciplined by external reality and one governed by discretion.

That discretion is concentrated in the institution of central banking. Central banks are often portrayed as neutral guardians of stability, technocratic referees standing above politics. In reality, they function as cartel managers for the financial system, coordinating outcomes that could not survive under competitive conditions. By suppressing interest rates, guaranteeing liquidity, and acting as lenders of last resort, central banks shield privileged institutions from failure while preserving the appearance of market order. Failure is not abolished; it is postponed. And because it is postponed, it accumulates, growing larger and more destructive with each cycle.

This structure produces an inversion of capitalist discipline. In genuine markets, profit and loss serve as signals, rewarding foresight and penalizing error. Under central banking, profits remain private during credit-fueled expansions, while losses are declared systemic during contractions and transferred to the public through bailouts, inflation, and monetary debasement. Risk-taking is rewarded precisely because it is underwritten; prudence is punished through negative real interest rates and competitive disadvantage. Institutions that restrain leverage are displaced by those that exploit it. What remains is not capitalism but state-protected finance, sustained by political necessity rather than economic viability.

The manipulation of interest rates lies at the heart of this transformation. In classical theory, interest rates coordinate time preferences across society, balancing present consumption against future uncertainty. They are prices, emerging from the interaction of savers and borrowers. In modern fiat systems, interest rates are no longer prices at all. They are policy signals, imposed to achieve macroeconomic targets defined by central planners. This substitution of administrative judgment for market coordination creates a profound monetary hierarchy.

Those closest to the source of money creation enjoy the lowest borrowing costs. Sovereign governments finance deficits cheaply, substituting monetary expansion for taxation. Large banks access central liquidity directly. Major corporations issue debt at compressed spreads, insulated from true risk. As one moves farther from the issuance point, costs rise. Small businesses face higher rates and tighter conditions. Households absorb inflation and credit costs simultaneously. Peripheral nations borrow in foreign currencies, exposed to exchange risk they cannot control. Proximity to money creation becomes a determinant of survival. Access replaces productivity as the primary economic advantage.

Because money enters the economy unevenly, monetary expansion always entails political choice. There is no neutral increase in the money supply. Every expansion selects beneficiaries. The era of quantitative easing made this impossible to deny. Liquidity flowed overwhelmingly into financial assets—equities, bonds, and real estate—while wages lagged and productive investment stagnated. This outcome was publicly justified as a “wealth effect,” the belief that rising asset prices would stimulate broader economic activity. In practice, it functioned as asset patronage, enriching those who already owned capital while widening the gap between financial wealth and earned income.

The productive economy increasingly gave way to financial engineering. Growth appeared robust on balance sheets even as real capacity hollowed out. The illusion of prosperity was sustained by rising asset prices rather than rising productivity. What was described as stabilization was, in reality, a redistribution of claims on future output toward those nearest the monetary spigot.

Creation, however, is only one side of the monetary cycle. Fiat systems must also retrieve money, and they do so through inflation, interest, and dependency. Inflation silently erodes savings, punishing deferred consumption and rewarding leverage. Interest extracts future labor, binding individuals to obligations denominated in a currency whose purchasing power is systematically diluted. Debt concentrates ownership, converting missed payments into asset transfers and accelerating consolidation during downturns. Citizens are increasingly compelled to borrow not to expand opportunity but to survive—to obtain housing, education, healthcare, or even the means to start a business. Debt becomes a mechanism of behavioral control. Default becomes a tool of dispossession.

This system depends on opacity for its survival. Modern monetary regimes are deliberately complex. Emergency facilities are disclosed after the fact. Beneficiaries are obscured. Balance sheets are framed as technical artifacts rather than political instruments. Language is abstracted to discourage scrutiny. Inflation becomes “accommodation.” Bailouts become “liquidity support.” As Murray Rothbard observed, complexity functions as camouflage. A system that cannot withstand transparency relies on obscurity to preserve legitimacy.

The corruption of fiat money does not end at national borders; dollar hegemony globalizes it. Because the US dollar functions as the world’s reserve currency, Federal Reserve policy becomes global monetary policy by default. Foreign states must hold dollars to stabilize trade, borrow in dollars to access capital, and absorb the consequences of US monetary decisions over which they have no control. When the Fed eases, capital floods into emerging markets, inflating bubbles and encouraging dollar-denominated debt. When the Fed tightens, currencies collapse, debts become unpayable, and crises erupt. What appears as domestic stabilization at the center manifests as devastation at the periphery.

This arrangement constitutes a form of seigniorage imperialism. The issuing state acquires real goods, labor, and assets in exchange for liabilities it can expand at will. The costs are exported through exchange-rate volatility, debt crises, and externally imposed austerity. Fiat corruption thus scales globally, transforming monetary dominance into an instrument of geopolitical power.

History offers abundant confirmation. From the credit expansion of the 1920s and the deepening of the Great Depression through intervention, to the abandonment of gold convertibility in 1971 and the explosion of debt that followed, to the 2008 financial crisis and its aftermath of bailouts and consolidation, the pattern repeats. Each crisis is framed as exceptional. Each intervention becomes precedent. Each rescue increases fragility. The pandemic-era monetary expansion merely accelerated a trajectory already in motion, normalizing levels of creation once reserved for war.

From a Rothbardian perspective, such a system cannot be reformed. Monopoly over money inevitably produces abuse, not because individuals are uniquely corrupt, but because unchecked discretion always is. The problem is not mismanagement; it is structural. Fiat money—insulated from competition and constraint—transforms money from a medium of exchange into an instrument of hierarchy.

A free society cannot rest on a monetary foundation that requires ignorance to function. Constraint is not the enemy of prosperity; it is its precondition. Without it, prices lie, capital misallocates, and responsibility dissolves. Fiat money does not merely finance power. It becomes power. And when money itself is corrupted, everything built upon it follows.

The ultimate question, then, is not how to manage fiat money more skillfully, but whether liberty can coexist with a monetary order insulated from consent, competition, and consequence. History suggests it cannot.

Tyler Durden Mon, 01/12/2026 - 22:35

Behind The Utter Failure Of Russian Anti-Air Systems In Venezuela

There are reports that during the Trump-ordered military raid on Venezuela to oust and capture President Nicolás Maduro, at least one US helicopter was hit by surface fire or possibly small missile, but the chopper managed to keep flying - with the pilot wounded - and the damaged aircraft made it back from the mission safely.

But this raised the question: what happened to Venezuela's Russian-supplied anti-air defenses, including S-300 and Buk-M2 surface-to-air missile systems purchased in 2009?

While at this point it is well understood that the US military and CIA had help from inside the Venezuelan government - making it essentially a US-backed coup topped off with a special forces nab and grab against Maduro and his wife, there's still the question of whether the entire Venezuelan armed forces were ordered to stand down, or else that their defense systems simply didn't work or were inactive.

S-300VM system, file image

The New York Times says it was actually more the latter scenario - Russian-built air defense systems stationed in Venezuela were mostly inoperable and did not react to the major initial US strikes which paved the way for the ground operation in Caracas.

When American military aircraft entered Venezuelan airspace on Jan. 3, the missile systems were not even linked to radar, according to US officials privy to the mission to The New York Times.

The publication further explained the systems were not integrated with one another and may have actually been unusable for several years. Satellite imagery and photographs further suggest that critical elements of the air defense systems were being kept in storage rather than deployed.

Interestingly the Ukraine war has played a role, after early in the conflict US defense officials said they would support and supply the Zelensky government in order to 'weaken' Russia by bogging it down in a proxy war.

US officials explained to the Times that Venezuela (and presumably other Russian defense allies) has faced ongoing difficulties maintaining its Russian-made air defenses because of limited access to Russian technicians and spare parts - all of which have had to be diverted to support Russia's 'special military operation' in Ukraine.

Much of the initial US strikes appeared to focus on areas where Buk missile systems had been positioned or stored, and locations close to the capital.

"The Venezuelan armed forces were practically unprepared for the U.S. attack," Yaser Trujillo, a military analyst in Venezuela, told The New York Times.

"Their troops were not dispersed, the detection radar was not activated, deployed or operational. It was a chain of errors that allowed the United States to operate with ease, facing a very low threat from the Venezuelan air defense system," Trujillo added.

And a separate source concludes: 

Venezuela’s much-touted antiaircraft systems were essentially not connected when U.S. forces entered the skies over Venezuela’s capital, and they may not have been working for years, former officials and analysts said.

"After years of corruption, poor logistics and sanctions, all those things would have certainly degraded the readiness of Venezuela’s air defense systems," said Richard de la Torre, a former C.I.A. station chief in Venezuela who now runs Tower Strategy, a Washington-based lobbying firm.

The below OSINT account predicted this outcome back in mid-November:

For some context to those who haven’t been following for a while.
This is Venezuelas S-300 system and its storage at Captain Manuel Rios airbase in Guarico.
The missiles for the unit are stored just 100m away from the vehicles in a hangar.#Venezuela https://t.co/ka06CDPnVt pic.twitter.com/PqlCOZurqS

— CNW (@ConflictsW) November 15, 2025

The report throws open another interesting possibility, with two former US officials stating their view that Moscow may have permitted the systems it sold to Venezuela to fall into disrepair in order to avoid escalating tensions with Washington.

Tyler Durden Mon, 01/12/2026 - 22:10

10 Commandment Displays Became Law In Texas, Then The Lawsuits Came

Authored by Darlene McCormick Sanchez via The Epoch Times (emphasis ours),

Melissa Martin, a veteran Texas educator with some 30 years of experience, was thrilled when the state passed a law in 2025 that required the state’s 9,000 public schools to post the Ten Commandments in classrooms.

Lorne Liechty poses with a copy of the Ten Commandments in Rockwall, Texas, on Jan. 8, 2026. Bobby Sanchez for The Epoch Times

For Martin, it was a bright spot—a swing back toward classical education rooted in Western civilization in an otherwise liberal teaching environment.

Her excitement quickly turned to disappointment at the Houston-based public charter school in which she works.

“I was real surprised when they didn’t jump at putting the Ten Commandments up,” she told The Epoch Times.

​Texas’ Senate Bill 10 has sparked the nation’s largest state-led effort to put the Ten Commandments into schools—and it is facing concerted legal challenges. A hearing on the constitutionality of the new law is scheduled before the Fifth U.S. Circuit Court of Appeals this month.

The Ten Commandments, fundamental to both Judaism and Christianity, are credited with influencing Western values and are the basis for laws against killing, theft, adultery, and perjury.

Martin believes public schools have ignored the significance of foundational works such as the Ten Commandments and their role in preserving “our democratic Republic for future generations.”

She said she is retiring this month, fed up in general with a public education system that she feels has failed students.

As a board member of Innovative Teachers of Texas, an alternative to liberal teacher unions, Martin hopes to spend her time establishing a Christian classical school.

Christopher Rhoades, a minister and math teacher in the Alvin Independent School District south of Houston, told The Epoch Times he believes the law is a positive change but worries it could open Pandora’s box.

“I mean, it definitely returns us to a point of values,” he said. “You know, my concern is always with whatever precedent is set. What does it open the door to that I wouldn’t like if someone else was in power?”

Melissa Martin, a veteran educator and board member of Innovative Teachers of Texas, supports displaying the Ten Commandments in classrooms, citing their influence on Western civilization. Courtesy of Jessica Tucker

The law says public schools “shall display” a poster or framed copy of the Ten Commandments in a conspicuous place in each classroom. Schools must accept donated posters that meet the law’s specifications but aren’t required to purchase them.

Critics of the law argue that requiring the Ten Commandments to be hung in every classroom violates the separation of church and state and offers little educational value.

Teacher Rachael Preston testified against the bill in Austin last spring.

“I’m curious about how displaying the Ten Commandments … is relevant enough to the teaching of mathematics to be displayed in a math room,” she told state lawmakers.

Sarah Morrison, who taught in public school for 15 years before becoming a math instructor at Paris Junior College, told The Epoch Times via text that she believes the law is unconstitutional.

“As both a Christian and an educator, I believe that requiring the Ten Commandments goes against the First Amendment of the United States Constitution and treats Christian faith as the state’s preferred religion instead of recognizing the diversity I see in my classroom every day,” she said.

The American Civil Liberties Union (ACLU) and its Texas chapter quickly challenged the law by filing two lawsuits. Two federal district judges blocked the 25 school districts named in the lawsuits from displaying the posters.

The civil rights organizations filed a third lawsuit in December 2025. This time, the federal class-action lawsuit names another 16 districts and seeks to block all Texas school districts from displaying the Ten Commandments.

Sarah Morrison, math instructor at Paris Junior College in Texas, said she believes the law requiring the Ten Commandments to be hung in every classroom is unconstitutional. Courtesy of Skyler Wilkins

Legal observers believe the issue will likely end up before the Supreme Court.

A case related to a similar Louisiana law and one of the Texas cases are scheduled to be heard by the full Fifth U.S. Circuit Court of Appeals on Jan. 20, according to the ACLU.

Wider Efforts

The Texas law is part of a larger state effort that has focused on putting God back into schools—a move grassroots conservatives in the red state applaud.

Texas passed a law in 2021 requiring public schools to display the national motto, “In God We Trust.” In late 2024, the Texas State Board of Education approved the “Bluebonnet Learning” curriculum, which integrates Bible stories and Christian values into K-5 language arts lessons.

In the town of Rockwall, just east of Dallas, attorney Lorne Liechty and his family purchased Ten Commandments posters for their local school district, which serves some 19,000 students. The posters were hung in classrooms before the ACLU filed its lawsuit; they now sit in storage as the issue winds its way through the courts.

Liechty, who had two children attend Rockwall schools, said that besides being good rules to live by, the Ten Commandments are foundational to America and its history.

Liechty, also a Rockwall County Commissioner, said prayer was allowed in school until the early 1960s; and he vividly recalls when his third-grade teacher told him it was outlawed.

“The Ten Commandments, Bible verses, and prayer were taken out of the schools,” he told The Epoch Times. “So I had a chance to try and restore them. I wanted to do that.”

Lawsuits Either Way

The Ten Commandments controversy has left some Texas schools in a quandary.

School districts outside Austin, Dallas, Houston, and San Antonio were named in the lawsuits and have been forced to remove Ten Commandments posters.

Meanwhile, Texas Attorney General Ken Paxton sued school districts in Galveston, Leander, and Round Rock for failing to display donated posters.

“America is a Christian nation, and it is imperative that we display the very values and timeless truths that have historically guided the success of our country,” Paxton said in a news release.

North of Houston, Shepherd Independent School District, which serves about 2,000 students, didn’t need an extra push to post the Ten Commandments.

Rebecca Nix, an administrator with Shepherd schools and a former teacher, said the posters have sparked classroom discussions.

“It’s been good fodder for conversation in some of the high school English classes,” she told The Epoch Times.

Read the rest here...

Tyler Durden Mon, 01/12/2026 - 21:35

New Documents Detail Jack Smith's $20K Bribe To Informant

In 2023, then-Special Counsel Jack Smith’s office approved a shady $20,000 payment to a confidential human source for information in the controversial FBI probe, code-named Arctic Frost, which investigated efforts by President Donald Trump and his supporters to challenge the 2020 election results, according to documents FBI Director Kash Patel turned over to Congress this week.

The documents outline the scope and methods of the investigation. An email shows that prosecutorial approval was communicated by Counselor to the Special Counsel, Raymond Hulser, on June 2, 2023. 

The memo states the payment "was discussed by Raymond Hulser and Assistant Special Counsel Julia Gegenheimer with Special Counsel Jack Smith." An FBI agent reached out to Smith's office that same day, writing: "As discussed, request your office's concurrence in our proposed payment of $20,000 for CHS' provision of information in support of the investigation." Hulser's response was brief: "Concur, thank you."

Patel told Just the News that the revelation of the shady payment is the latest proof that the Arctic Frost investigation was an “egregious abuse of power and violation of the law.”

The records show the FBI went all-in trying to make Trump himself a “subject” of the Arctic Frost probe, though that plan was ultimately shot down. The documents also reveal the bureau leaned heavily on liberal media reporting to build its case.

The number of people in Trump’s orbit that were targeted by the investigation is also staggering. Phone data analysis extended to nine Trump allies in Congress, plus his lawyers and outside advisers. TV host Steve Bannon made an FBI list of at least 16 Trump associates whose long-distance phone records underwent scrutiny. Bill Stepien, Sidney Powell, Jenna Ellis, Cleta Mitchell, and the late former NYPD Commissioner Bernie Kerik also appeared on that list. Kerik had led a team of investigators focused on alleged irregularities in the 2020 election.

One memo shows the FBI analyzed calls from "more than 50 White House-issued cell phones," not counting Trump's and Vice President Mike Pence's personal devices. Arctic Frost secured an order from U.S. District Judge Boasberg allowing Smith's office to obtain phone records of eight U.S. senators and one congressman. That same order swept up information from hundreds of conservative figures and groups, expanding the scope far beyond the initial targets.

At least two members of Congress have vowed to sue the Justice Department. Sen. Lindsey Graham of South Carolina and Sen. Marsha Blackburn of Tennessee say the investigation violated their congressional privilege and privacy protections under the separation of powers. Other Republican lawmakers describe Arctic Frost's data collection as overly broad and insufficiently tailored. Critics in Congress say the probe resembled a fishing expedition rather than a narrowly targeted investigation, raising Fourth Amendment concerns.

FBI Director Kash Patel explained that the document release is part of a broader FBI effort to make public and available to congressional oversight evidence of law-enforcement misconduct and weaponization, after years of being withheld by previous directors.

"Under my leadership, the FBI is producing documents at record speed to get the facts straight to the American people. What occurred in the Arctic Frost matter was an egregious abuse of power and violation of the law. This FBI is committed to restoring accountability and public trust," he said.

Two former Trump lawyers called the revelations disturbing. Jenna Ellis said the government’s targeting of private citizens for representing Trump “blatantly ignores the Fourth Amendment” and accused Jack Smith’s Arctic Frost probe of crossing a constitutional red line, calling for accountability. 

Cleta Mitchell condemned the use of confidential informants against her and the election integrity movement she has led for five years. She called the surveillance “absolutely shocking” but unsurprising, saying Biden officials repeatedly showed disdain for the Constitution and its protections, and insisted the actions merit investigation.

Ellis and Mitchell urged Attorney General Pam Bondi to launch an immediate investigation. 

President Trump responded to the revelations on his Truth Social platform. "Deranged Jack Smith should be sitting in prison for all that he has done to disgrace our Country!" he posted. 

Thank God this isn't the Epstein files or we'd never know about it! 

Tyler Durden Mon, 01/12/2026 - 21:00

"The Globalist Deep State Is In Panic Mode" After Trump's Cash Cut-Off

Via Greg Hunter’s USAWatchdog.com,

Journalist Alex Newman, author of the popular book “Deep State” (which is soon to be massively updated and re-released), thinks evil powers trying to overthrow America are distraught because their money and plans are drying up. 

Newman says, “I think the globalist Deep State is in panic mode, and I think the Left is as well..."

"The operation against Maduro sent a massive shock wave through the global Left.  

I see the global Left as a tentacle of the global Deep State.  It runs right through Venezuela, and it runs right through Minneapolis. 

Let’s not forget what happened in 2020. . .. The so-called uprising was organized by Rockefeller front groups, and these are paid professional revolutionaries.  

Yes, they are useful idiots . . . but they have huge money at their disposal.”

In late November, Newman warned “Leftist Marxists Preparing Now to Take Over America.”  Then, Venezuela President Nicholus Maduro was arrested, and that threw a cold bucket of water on those plans.  Newman points out,

“Venezuela was the cash cow that was funding this entire subversive movement through drugs and oil. 

Donald Trump, in one fell swoop, took out that massive piece of their architecture, and they are pooping bricks. 

They are absolutely terrified about what may come next.”

We already know the payments in the so-called Somali welfare fraud have been cut off by the federal government.  Treasury Secretary Scott Bessent is also cutting off billions of dollars of more fraud by changing money transfer rules.  On top of that, Newman says Trump has given a huge blow to the globalist UN climate treaty that also is cutting off big money.  Newman says, 

“The UN Framework Convention on Climate Change (UNFCCC), this is the foundation of the UN climate regime and Donald Trump just utterly obliterated it.  This is some of the best news we have heard in a very long time.  The UN is very mad, and their chief spokesman is saying the US has a legal obligation to keep paying them.” 

That is not going to happen, which means more cash cut from evil people trying to destroy America.  Newman adds,

“This is just the beginning, and they have done a yearlong review of UN agencies that are useless, anti-American and wasteful.  The first 66 just dropped, and we expect more.  This is Earth shattering news.  This is huge news and really significant.”

The other really significant thing about Venezuela is the voter fraud that has rigged elections in the Western hemisphere for many years.  Newman says, “In Caracas, with Cuban help, they created lots of tools to steal elections..."

" It was not just in Latin America but here in the United States.  There are a lot of people in the Trump Administration who know about this.  I think this was one of the big things on Trump’s mind when he started thinking about what do we do with Venezuela?  We have had multiple whistleblowers come out and confirm almost all of this involvement in voter fraud. 

The big take away here is . . . they created software to rig and steal elections in Latin America and here in the United States, and the Trump Administration knows about it.”

There is much more in the 60-minute interview.

Join Greg Hunter of USAWatchdog as he goes One-on-One with hard-hitting journalist Alex Newman, founder of LibertySentinel.org, where he talks about the increasing violence by the globalist Deep State to take down America and why they are prepping for civil war now.  Newman is also the author of the newly released book “Woke and Weaponized.”  This is a stark warning for all parents about the communist plan to control and brainwash the next generation in our public schools for 1.10.26.

Tyler Durden Mon, 01/12/2026 - 19:45

DoJ Charges Venezuelan Illegal Over Border Patrol Vehicle Ramming Attack

Fox News reporter Bill Melugin reports that the Department of Justice has charged a Venezuelan national, who was shot by Border Patrol in the Portland metro area last Thursday, with aggravated assault on a federal officer with a deadly weapon after allegedly using his red pickup truck to ram a federal vehicle. This follows the recent ICE shooting in Minneapolis that left one far-left activist dead. Additionally, attacks on federal agents are on the rise.

Melugin further explained how the DoJ arrived at the charges and provided additional color about the ramming attack carried out by the illegal, who is allegedly tied to the Tren de Aragua (FTO designation):

DOJ has just charged the Venezuelan illegal alien shot by Border Patrol in Portland on Thursday with 18 USC 111 (aggravated assault of a federal officer w/ a deadly weapon), and they've provided photos of the badly damaged BP vehicle they say he rammed several times during the targeted arrest. According to DOJ, LUIS NINO-MONCADA, allegedly affiliated with Tren de Aragua, admitted to intentionally using a red pickup truck to ram the federal vehicle, said he knew they were immigration agents, and said "fuck ICE" while having a tourniquet applied to his gunshot wound by medics. DOJ says MONCADA was ordered deported by an immigration judge in Denver, CO in November 2024.

According to the criminal complaint, the actual target of Border Patrol's operation was MONCADA's female associate, Yorlenys Betzabeth Zambrano-Contreras, a Venezuelan illegal alien and suspected TdA associate who was caught and released at the Texas border by the Biden administration in September 2023. She was ordered to check in at an ICE officer after release, but never did, making her subject to immigration arrest. DOJ says she is also believed to be involved with a Tren de Aragua prostitution ring, and was connected to a July 2025 shooting in Washington County during a prostitution deal that went bad.

FOX is told that Zambrano-Contreras is also now in federal custody, and is being charged by DOJ in the Western District of Texas with 8 USC 1325, illegal entry by an alien (yes, crossing the border illegally is a federal crime).

BREAKING: DOJ has just charged the Venezuelan illegal alien shot by Border Patrol in Portland on Thursday with 18 USC 111 (aggravated assault of a federal officer w/ a deadly weapon), and they've provided photos of the badly damaged BP vehicle they say he rammed several times… pic.twitter.com/3Ciy1EZd35

— Bill Melugin (@BillMelugin_) January 12, 2026

Melugin posted a snippet of the DoJ federal complaint:

From the DOJ federal complaint as to what happened when Border Patrol initiated a traffic stop to make the arrest. pic.twitter.com/BkIc7LIEoD

— Bill Melugin (@BillMelugin_) January 12, 2026

"He should NEVER have been in our country to begin with, and we will ensure he NEVER walks free in America again," Attorney General Pamela Bondi wrote on X.

Anyone who crosses the red line of assaulting law enforcement will be met with the full force of this Justice Department.

According to a newly unsealed complaint, Luis Nino-Moncada — an illegal alien in Portland, Oregon with ties to Tren de Aragua — is alleged to have repeatedly… pic.twitter.com/uC6rk4Uode

— Attorney General Pamela Bondi (@AGPamBondi) January 12, 2026

Related:

• Minneapolis ICE Shooting Shows Left Wing's Protest Industrial Complex Wants Another 'George Floyd'-Type Riot

The Venezuelan illegal alien with ties to TdA is exactly the type of person the Democratic Party is protecting. The party’s left wing has made it clear it puts everyone except American citizens first.

Tyler Durden Mon, 01/12/2026 - 19:20

The post Donald Trump, Mineral Man, vs. Sodium Batteries appeared first on CEPR.

The post Three Bad Items and Three Good Items in the December Jobs Report appeared first on CEPR.

South Korea To Lift Ban On Corporate Crypto Investment: Report

Authored by Martin Young via CoinTelegraph.com,

South Korea’s Financial Services Commission (FSC) is reportedly updating its guidelines to allow corporations to invest in digital assets after a nine-year ban. 

Listed companies and professional investors will be able to invest up to 5% of their equity capital in crypto assets, reported local news outlet Seoul Economic Daily on Sunday. 

According to the report, a senior FSC official familiar with the matter said the authorities will “release the final guidelines in January [or] February and allow virtual currency transactions for investment and financial purposes by legal entities.”

The move overturns a nine-year ban on corporate crypto investment dating back to 2017, when financial authorities banned institutional participation amid concerns over money laundering.

However, investments will be limited to the top 20 crypto assets by market capitalization and can only be made on Korea’s five largest regulated exchanges. 

The inclusion of dollar-pegged stablecoins such as Tether’s USDT is still being discussed, the report noted. 

The FSC shared the latest guidelines with its crypto working group on Jan. 6 and first announced plans for a phased approach to easing rules for corporate crypto investments in February 2025.  

Potential bullish impact on Korean markets 

The move could bring tens of trillions of won into crypto markets. South Korean internet giant Naver, which has 27 trillion won ($18.4 billion) in equity capital, could theoretically buy 10,000 BTC, according to the report. 

It added that the launch of a national stablecoin and spot Bitcoin exchange-traded funds is also expected to be accelerated once the corporate investment capacity is secured. Support for crypto ETFs has been building across the country, but regulatory approval remains stalled. 

The move could also result in an expansion of local crypto companies, blockchain startups, and digital asset treasuries (DATs) while boosting domestic investment in digital assets. 

Large South Korean companies have been forced to invest overseas to avoid local restrictions, it added. 

CBDC and stablecoins focus of the economic strategy

The outlet reported on Friday that the South Korean government announced an ambitious digital currency strategy with a primary goal of executing 25% of all national treasury funds through a central bank digital currency (CBDC) by 2030.

The initiative, which is part of the 2026 Economic Growth Strategy, also involves introducing a licensing system for stablecoin issuers, such as Tether, requiring 100% reserve asset backing and legally guaranteeing users’ redemption rights. 

Tyler Durden Mon, 01/12/2026 - 18:55

Mexico Reports Positive Conversation With Trump On Security, Drug Trafficking

Mexican President Claudia Sheinbaum said on Jan. 12 that she had a productive dialogue with President Donald Trump on efforts to combat drug trafficking and other issues of mutual concern.

“We had a very good conversation with the President of the United States, Donald Trump,” Sheinbaum wrote in a post on X on Monday.

“We discussed various topics, including security, with respect for our sovereignty, reducing drug trafficking, trade, and investment. Collaboration and cooperation within a framework of mutual respect always yield results.”

As The Epoch Times' Ryan Morgan reports, the conversation between the two heads of state comes as Trump has raised pressure on Mexico and other Latin American states to increase cooperation with the United States, particularly in efforts to curb drug trafficking.

After U.S. forces captured Venezuelan leader Nicolás Maduro in a pre-dawn raid on Jan. 3, Trump said Mexico needs to “get its act together” when dealing with drug cartels and reiterated offers to send U.S. forces to assist in such efforts.

On Jan. 8, Trump raised the stakes further, suggesting U.S. military strikes could focus on land-based cartel targets in Mexico in the future.

Thus far, Sheinbaum has been opposed to U.S. military action in Mexico.

Speaking with reporters at a Monday press conference, Sheinbaum said she and Trump again discussed a U.S. force deployment to Mexico and said Trump was understanding as she reiterated her opposition to such a move.

“He didn’t insist either; rather, it was in the tone of, ‘If you want us to help you more with our forces in Mexico,’ I told him, ‘Well, no, I’ve already told you several times that that’s not on the table,’ but we continue to collaborate within the framework of our sovereignties,” Sheinbaum recounted of the conversation.

The Epoch Times reached out to the White House for comment on the call between Trump and Sheinbaum but did not receive a response by the time of publication.

U.S. Secretary of State Marco Rubio held a separate call with Mexican Foreign Secretary Juan Ramón de la Fuente on Jan. 11.

State Department spokesman Tommy Pigott said the two discussed “the need for stronger cooperation to dismantle Mexico’s violent narcoterrorist networks and stop the trafficking of fentanyl and weapons.”

“Secretary Rubio reaffirmed the United States’ commitment to stopping narcoterrorism and stressed the need for tangible results to protect our homeland and hemisphere.”

Colombia and Cuba also face increased pressure from a Trump administration emboldened by the Maduro raid.

Trump and Colombian President Gustavo Petro have traded barbs in recent weeks, with the U.S. president faulting his Colombian counterpart for not cooperating closely enough on efforts to stamp out Colombia’s cocaine production.

Last week, Trump reported a productive phone conversation with Petro and indicated plans to host him at the White House in the near future.

U.S. pressure on Cuba remains high.

Trump, in a post on Truth Social on Sunday, said he had cut Cuba off from Venezuela’s oil supply.

“There will be no more oil or money going to Cuba—zero! I strongly suggest they make a deal, before it is too late,” Trump wrote in mostly all caps.

The United States has limited its engagement with the Cuban leadership for decades, after the Caribbean island nation came under communist control following Fidel Castro’s 1959 revolution.

In a press statement following Trump’s latest comments, Cuban leader Miguel Díaz-Canel Bermúdez said U.S.-Cuba relations “must be based on International Law rather than on hostility, threats, and economic coercion.”

Tyler Durden Mon, 01/12/2026 - 18:30