Hollow Men, Hollow Markets, Hollow World

Tyler Durden's picture

Submitted by Ben Hunt of Epsilon Theory

Kurtz: Did they say why, Willard, why they want to terminate my command?

Willard: I was sent on a classified mission, sir.

Kurtz: It's no longer classified, is it? Did they tell you?

Willard: They told me that you had gone totally insane, and that your methods were unsound.

Kurtz: Are my methods unsound?

Willard: I don't see any method at all, sir.

Kurtz: I expected someone like you. What did you expect? Are you an assassin?

Willard: I'm a soldier.

Kurtz: You're neither. You're an errand boy, sent by grocery clerks, to collect a bill.

It is my belief no man ever understands quite his own artful dodges to escape from the grim shadow of self-knowledge.
The question is not how to get cured, but how to live.

      Joseph Conrad (1857 – 1924)


Billions of dollars are flowing into online advertising. But marketers also are confronting an uncomfortable reality: rampant fraud.


About 36% of all Web traffic is considered fake, the product of computers hijacked by viruses and programmed to visit sites, according to estimates cited recently by the Interactive Advertising Bureau trade group.

      -- Wall Street Journal, “The Secret About Online Ad Traffic: One-Third Is Bogus”, March 23, 2014


Over the last decade, institutional management of equity portfolios has increased from 54% to 81%. …


Institutional buys and sells accounted for 47% of trading volume between 2001 and 2006, but only 29% of trading volume since 2008. …


One of the most significant results of the tension between fewer market participants and larger parent order sizes is that the share of ‘real’ trading volume has declined by around 40% in the last five years.

      -- Morgan Stanley QDS, “Real Trading Volume”, Charles Crow and Simon Emrich, April 11, 2012


Hollow Men, Hollow Markets, Hollow World

I first saw Apocalypse Now as a college freshman with two roommates, a couple of years after it had been released, and I can still recall the dazed pang of shock and exhaustion I felt when we stumbled out of the theatre. Nobody said anything on the drive back to campus. We were each lost in our thoughts, trying to process what we had just seen. Our focus was on Marlon Brando’s Col. Kurtz, of course, because we were 18-year old boys and he was a larger than life villain or anti-hero or superman or … something … we weren’t quite sure what he was, only that we couldn’t forget him.

When I reflect on the movie today, though, I find myself thinking less about Kurtz than I do about Martin Sheen’s Capt. Willard. Both Kurtz and Willard were self-aware. They had no illusions about their own actions or motivations, including the betrayals and murders they carried out. Both Kurtz and Willard saw through the veneer of the Vietnam War. They had no illusions regarding the essential hollowness of the entire enterprise, and they saw clearly the heart of darkness and horrific will that was left when you stripped away the surface trappings. So what made Willard stick with the mission? How was Willard able to navigate within a world he knew was playing him falsely, while Kurtz could not? I don’t want to say that I admire Willard, because there’s nothing really admirable there, and this isn’t going to be a web-lite note along the lines of “Three Things that Every Investor Should Learn from Apocalypse Now”. But there is a quality to Willard that I find useful in recalling whenever I am confronted with hard evidence that the world is playing me falsely. Or at least it helps keep me from shaving my head and going rogue.

The WSJ article cited above – where it now seems that more than one-third of all Web traffic is fake, generated by bots and zombies to create ad click-throughs and fake popularity – is a good example of what I’m talking about. One-third of all Web traffic? Fake? How is that possible? I mean … I understand how it’s technologically possible, but how is it possible that this sort of fraud has been going on for so long and to such a gargantuan degree that I don’t know about it or somehow feel it? I’m sure that anyone in e-commerce or network security will chuckle at my naïveté, but I was really rocked by this article. What else have I been told or led to believe about the Web is a lie?

But then I remember conversations I have with non-investor friends when I describe to them how little of trading volume today is real, i.e., between an actual buyer and an actual seller. I describe to them how as much as 70% of the trading activity in markets today – activity that generates the constantly changing up and down arrows and green and red numbers they see and react to on CNBC – is just machines talking to other machines, shifting shares around for “liquidity provision” or millisecond arbitrage opportunities. Even among real investors, individuals or institutions who own a portfolio of exposures and aren’t simply middlemen of one sort or another, so much of what we do is better described as positioning rather than investing, where we are rebalancing or tweaking a remarkably static portfolio against this generic risk or that generic risk rather than expressing an active opinion on the pros or cons of fractional ownership of a real-world company. Inevitably these non-investor friends are as slack-jawed at my picture of modern market structure as I am when I read this article about modern Web traffic structure. How can this be, they ask? I shrug. There is no answer. It just is.

My sense is that if you talk to a professional in any walk of life today, whether it’s technology or finance or medicine or law or government or whatever, you will hear a similar story of hollowness in their industry. The trappings, the facades, the faux this and faux that, the dislocation between public narrative and private practice … it’s everywhere. I understand that authenticity has always been a rare bird on an institutional or societal level. But there is something about the aftermath of the Great Recession, a something that is augmented by Big Data technology, that has made it okay to embrace public misdirection and miscommunication as an acceptable policy “tool”. It’s telling when Jon Stewart, a comedian, is the most authentic public figure I know. It’s troubling when I have to assume that everything I hear from any politician or any central banker is being said for effect, not for the straightforward expression of an honest opinion.

The question is not “Is it a Hollow World?”. If you’re reading Epsilon Theory I’m pretty sure that I don’t have to spend a lot of words convincing you of that fact. Nor is the question “How do we fix the Hollow World?”. Or at least that’s not my question. Sorry, but being a revolutionary is a young man’s game, and the pay is really bad. More seriously, I don’t think it’s possible to organize mass society in a non-hollow fashion without doing something about the “mass” part. So given that we are stuck in the world as it is, my question is “How do we adapt to a Hollow World?”. As Conrad wrote, the question is not how to get cured, but how to live. How do we make our way through the battlefield of modern economics and politics, a world that we know is hollow and false in so many important ways, without losing our minds and ending up in a metaphorical jungle muttering “the horror, the horror” to ourselves?

Two suggestions for adapting to the Hollow Market piece of a Hollow World, one defensive in nature and one for offense.

On defense, recognize that modern markets are, in fact, quite hollow and everything you hear from a public voice is being said for effect. But that doesn’t mean that the underlying economic activity of actual human beings and actual companies is similarly fake or bogus. The trick, I think, is to recognize the modern market for what it IS – a collection of socially constructed symbols, exactly like the chips in a casino, that we wager within games that combine a little skill with a lot of chance. There is a relationship between the chips and the real-world economic activity, but that relationship is never perfect and often exists as only the slimmest of threads. The games themselves are driven by the stories we are told, and there are rules to this game-playing that you can learn. But it’s a hard game to play, and it’s even harder to find a great game-player who will bet your chips on your behalf. A better strategy for most, I think, is to adopt an attitude of what I call profound agnosticism, where we assume that ALL of the stories we hear (including the narratives of economic science) are equally suspect, and we make no pretense of predicting what stories will pop up tomorrow or how the market will shape itself around them. What we want is to have as much connection to that underlying economic activity of actual human beings and actual companies as possible, and as little connection as possible to the game-playing and story-telling, no matter how strongly we’ve been trained to believe in this story or that. I think what emerges from this attitude can be an extremely robust portfolio supported by more-than-skin-deep diversification … a portfolio that balances historical risks and rewards rather than stories of risk and reward, a portfolio that looks for diversification in the investment DNA of a security or strategy as well as the asset class of a security or strategy.

On offense, look for investment opportunities where you have information that reflects an economic reality at odds with the public voices driving a market phenomenon. This is where you will find alpha. This is where you can generate potential returns when the economic reality is ultimately revealed as just that – reality – and the voices shift into some other story and the market matches what’s real. These opportunities tend to be discrete and occasional trades as opposed to long-standing strategies, because that’s the nature of the information beast – you will rarely capture it in a time and place where you can act on it. Almost by definition, if the information is being generated by a public voice it’s probably not actionable, or at the very least the asymmetric risk/reward will have been terribly muted. But when you find an opportunity like this, when you have a private insight or access to someone who does against a market backdrop of some price extreme … well, that’s a beautiful thing. Rare, but worth waiting for.

I’ll close with a few selected lines from TS Eliot’s The Hollow Men, because I’m always happy to celebrate a time when poets wore white-tie and tails, and because I think he’s got something important to say about information and communication, authenticity and deception.

Between the idea

And the reality

Between the motion

And the act

Falls the Shadow

What is the Shadow? I believe it’s the barrier that communication inevitably creates among humans, including the mental barriers that we raise in our own minds in our internal communications – our thoughts and self-awareness. Sometimes the Shadow is slight, as between two earnest and committed people speaking to each other with as much authenticity as each can muster, and sometimes the Shadow is overwhelming, as between a disembodied, mass-mediated crowd and a central banker using communication as “policy”. Wherever you find a Shadow you will find a hollowness, and right now the Shadows are spreading. This, I believe, creates both the greatest challenge and opportunity of our investment lives … not to pierce Eliot’s Shadows or to succumb to Conrad’s Heart of Darkness in our hollow markets, but to come to terms with their existence and permanence … to evade their influence as best we can, all the while looking for opportunities to profit from their influence on others.

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Latina Lover's picture

Even worse, the governments are dominated by hollow persons with hollow hearts, that can only be filled with illusory money.

Surly Bear's picture

The horror... the horror...

Almost Solvent's picture

"You're an errand boy, sent by grocery clerks, to collect a bill."


VISA: It's everywhere you want to collect a bill, or Priceless!

duo's picture

Never get out of the boat.

A Nanny Moose's picture

"Charlie didn't get much USO. He was dug in too deep or moving too fast. His idea of great R&R was cold rice and a little rat meat..."

SF beatnik's picture

Was it not the same year that "Kramer versus Kramer" won the big Academy awards?


Sad state of US culture. We're a bunch of retarded grocery clerks. 

A Nanny Moose's picture

Fuck the Motion Picture Academy. Use to do work for them. Perhaps the only orginazation on the planet with tighter security than The Federal Reseve.

Never trust anyone who works under the veil of such secrecy....at least they don't have all the guns.

illyia's picture

The horror is that no one cares. That's what is hollow.

No commitment, no real investment, no great passion, its all just show, nothing of import, who cares.

It's all a bad joke...

That is really tragic. Imagine that those guys in WWII died for this...

HA. Now where's the joke...

THX 1178's picture

No one cares? Yes- as of right now. When the Shit hits the fan, I think everyone all around the world will suddenly find more than just a passing interest in politcal and economic and monetary matters.

Snidley Whipsnae's picture

"That is really tragic. Imagine that those guys in WWII died for this..."

Yeah, once that line is crossed from experimental capitalist republic to empire there seems to be no way back... or, maybe a few have reigned it in, like England... most didn't.

We are in a long list of countries that have gone down this road.

Raging Debate's picture

Success leads to empire building and an ingrained behavior like the Romans: "We expand or we die!" England stayed intact by handing off the reigns of the global reserve currency to America. They cut there military to the bone which is what America is talking about doing and will. We also handed the infrastructure off to China who is becoming the next reaerve currency. The nation that holds the peg also is in charge of protecting global trade.

Why America did the job fairly well but became a bully. Less so than other empires like the British but still awful at it's end. There is no guarantee history has to repeat in world war but such transitions are always painful.

As budgets for defense and vote buying (entitlements) reach a certain point and the new host nation for reserve currency is set up, political insiders lott with abandon. America is getting it's house in order the most painful way but it is happening. Buy Yuan, it will begin to soar in the next 3-4 years.

The risk is geopolitical on return. Any major military would delay redemption so you may be holding it for a decade.

Of course, a nuclear war means all things reset to zero and for that risk, have a bug-out bag ready, food, water/purification like chlorine, matches wrapped in plastic, shotgun and scope, rope, thread/needles, heavy clothes, first aid kit, netting for bugs, knife, axe, fat such as crisco, compass and a wilderness survival manual.

I am going to keep trying to make money and make some more new friends and try to have fun. I love science and where as a species we're headed after whatever continuing readjustment occurs over the next several years.

Carpenter1's picture

Enjoy your pathetic, short life.


Whether you have $5 or $5,000,000 doesn't make the slightest difference in the end. It all will return to dust, since that's all it ever was to start with. 



chinoslims's picture


illyia has me thinking now.  With the current state of our society, government, and economy, why did the poor souls die in WWII on both sides?  Are all of us just Captain Willards?


Canoe Driver's picture

And even more amusing, illyia, is that your thesis is essentially the same as Adolf's.

El Diablo Rojo's picture

The Best line in this article supports your statements illyia.

"Sorry, but being a revolutionary is a young man’s game, and the pay is really bad."

MeMongo's picture

"I was given a miision, and for my sins they gave me one".

Canoe Driver's picture

Hey look, Latina, we have basically the same avatar.

ILLILLILLI's picture

"The Los Angeles Times suspended the blog of one of its top columnists last night, saying he violated the paper's policy by posting derogatory comments under an assumed name.

The paper said in an online editor's note that Michael Hiltzik, a Pulitzer Prize winner who writes the Golden State column, had admitted posting remarks on both his Times blog and on other Web sites under names other than his own. The Times said it is investigating the matter. Editor Dean Baquet declined comment, and Hiltzik said he could not comment."



Nick Jihad's picture

Click-baiting, by trolling his own articles?  Post an incendiary comment to your own article, then link to it from say, HuffPo, saying "this LAT blog has enraged the Teanazi-party!!!".

monkman's picture

gee, no mention of the obvious, eh?

The introduction from The Shadow radio program "Who knows what evil lurks in the hearts of men? The Shadow knows!" spoken by actor Frank Readick Jr., has earned a place in the American idiom. These words were accompanied by an ominous laugh and a musical theme, Camille Saint-Saëns' Le Rouet d'Omphale ("Omphale's Spinning Wheel", composed in 1872). At the end of each episode The Shadow reminded listeners that, "The weed of crime bears bitter fruit. Crime does not pay... The Shadow knows!"

fonzannoon's picture

This is a lot of words to say btfd.

kaiserhoff's picture

Yeah, this Dude needs to buy a dog.

stant's picture

Never get off the boat

TheMeatTrapper's picture

I love the smell of napalm in the morning. 


It smells like...victory.


One day this war's gonna end....

NoDebt's picture

So, everything's actuallty OK, then?

Buy stawks.  Got it.

10mm's picture

My top movie of all time. COL KURTZ ROCKS. The horror, the horror.

PaJoad's picture

All I wanted was some fucking mangoes....

magpie's picture

I think that's racist...

Ckierst1's picture

Jon Stewart???  That phony interview ambushed Judge Napolitano with some 5 other shitheads and botched the job.  Not hollow?

fonzannoon's picture

I have brought this up on here before and been ridiculed for it. Jon Stewart has emerged as "the truth in media". I am not saying I endorse this view. Just that it is becoming widely accepted. Stewart is more than your average useful tool.

agstacks's picture

His interview with Alan Greespan (below) was pretty awesome.   He's not perfect, but with the media we have his brand of comedy is as close to investigative jounalisrm as there is.




TheRedScourge's picture

Jon and his socialist A/V club claim to be strong supporters of raising the minimum wage, meanwhile they use unpaid interns almost exclusively.

Ghordius's picture

lol. I know what you mean, yet JN looked quite pleased to be cast in the role of the ambushed, the underdog, in my eyes

Stewart is quite reasonable, as long you don't touch what he holds as dear and holy. Judge Napolitano too

and there is their appeal

christofay's picture

Good quote from Conrad.


What is this Epsilon theory? I did the lazy way to research on wikipedia & amazon and didn't find anything that will quickly help me understand that


undertowed's picture

Kurtz is no different than your average bank exec. INSANE.  This is the end, my friend. 

Snidley Whipsnae's picture

"Kurtz is no different than your average bank exec. INSANE. "

Kurtz simply adopted the methods of the VC that his superiors sent him to fight. But, his methods were unacceptable to his superiors so he "was to be terminated with extreme prejudice." 

Remember when Kurtz related the story of the children of a village being inoculated against a disease? The VC came behind the American doctors and cut off all the arms of those inoculated children and left them in a pile in the village. Kurtz knew, in that instant, that to win he would have to adopt the same methods, or more brutal, as the VC, and he did. 

Having to employ those tactics over a few years would probably drive any rational man to insanity... imo.

Conrad did write some funny yarns in his collection of short stories "Tales of Land and Sea"... Most are much lighter and filled with irony...and humor.

Then there is 'Nostromo'... which I believe was also the name of the mining space ship in 'Alien'. Coincidence?

A Nanny Moose's picture

"We train young men to drop fire on people, but their commanders won't allow them to write "fuck" on their airplanes because it's obscene!"

What's so Civil about War anyway? "Winning" frequently requires adopting more brutal methods than your enemy.

TrustWho's picture

I think this article is much too kind to the current situation. We live in a time ruled by lies and fraud by our leaders. I think this is why Putin has struck a chord with many. Here is a leader willing to take action based on his understanding of the truth and defend his position in a debate or on the battlefield. Is any political leader a good man who defends the defenseless before his back pocket?

Redneck Hippy's picture

Putin is a gangster and a kleptocrat, not to mention a former KGB agent.  Anybody who's into Putin right now should consider from whence his love of authoritarians springs.


Errol's picture

Redneck, you are correct that Putin is a gangster; after the collapse of the Soviet Union previously-existing organized crime groups saw their opportunity and siezed it.  It took a Capo di tutti Capi to stop the disorder and establish a respected hierarchy.

Some non-Russians admire Putin for his foriegn policy experience, bare-knuckles rise thru VERY competitive ranks to a position of leadership, and committment to Russia first (not a shadowy group of "Multinationals").

Compare and contrast with the US narcicist-in-chief who never led any organization larger than the crew in the Choom Wagon, who lacks any foreign policy experience, and is house servant to a group of Multinationals.  Hint: "multinationals", as the name suggests, don't have allegience to any nation - only to self-continuation and accumulation of unlimited wealth.

Nick Jihad's picture

WTF? Admire Putin because he's more competent than Obama?  Sure, and I admired Kim Jong Il because he wasn't as batshit crazy as Pol Pot.

ramacers's picture

and none other than that hollow man, yellen, knows judging from today's panic button push.

Tinky's picture

"I remember when I was with Special Forces... seems a thousand centuries ago. We went into a camp to inoculate some children. We left the camp after we had inoculated the children for polio, and this old man came running after us and he was crying. He couldn't see. We went back there, and they had come and hacked off every inoculated arm. There they were in a pile. A pile of little arms. And I remember... I... I... I cried, I wept like some grandmother. I wanted to tear my teeth out; I didn't know what I wanted to do! And I want to remember it. I never want to forget it... I never want to forget. And then I realized... like I was shot... like I was shot with a diamond... a diamond bullet right through my forehead. And I thought, my God... the genius of that! The genius! The will to do that! Perfect, genuine, complete, crystalline, pure. And then I realized they were stronger than we, because they could stand that these were not monsters, these were men... trained cadres. These men who fought with their hearts, who had families, who had children, who were filled with love... but they had the strength... the strength... to do that. If I had ten divisions of those men, our troubles here would be over very quickly. You have to have men who are moral... and at the same time who are able to utilize their primordial instincts to kill without feeling... without passion... without judgment... without judgment! Because it's judgment that defeats us."

eddiebe's picture

Yes might is right in this world. Their judgement to cut off all those arms sure defeated those little kids. Fucking humans are all insane.

Snidley Whipsnae's picture

Tinky, I posted above before I saw your post... sorry.

When the slaughter of Russians began during operation Barbarosa (German invasion of Russia) German SS troops were being used to shoot the Russians standing in their mass graves.

It wasn't long before the SS troops had to be replaced by local villagers that worked for pay, to save their own lives, or simply to settle old scores and steal the property of those being shot. 

So, even hardened and loyal SS troops broke down under this type of duty after a few weeks or months.

Himmler traveled to the Eastern front and shot one Russian and became violently ill... and quickly returned to his search for the Holy Grail... or some other proof to German superiority.

Citxmech's picture

Check out the movie "The Act of Killing."