Welcome to The Narranomist, an irreverent narrative economic note from James McKeough.

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James McKeough has been a research analyst of public and private companies since 1993 at First Marathon Securities, Deans Knight Capital Management, HSBC Asset Management, and Onward Capital until focusing in 2010 on macro behavioral research at Pavilion Global Markets.

In 2017, he started a Masters in Cognitive and Decision Science at University College London, completing a thesis project on the impact of uncertainty in financial language on investment decision-making. This research is the foundation of applied narrative economics, which defines and quantifies repetitive linguistic patterns as predictive signals in financial markets.

Born and raised in Canada, Mr. McKeough holds a BA in Political Science from the University of British Columbia. He is a Commodity Trading Advisor and a Certified Management Accountant.

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January 14, 2025
Mike

Do You Want to Sound Smart or Make Money?

That’s so crass, isn’t it? Sorry, it’s meant to shock. It’s a twist on the classic trading axe (not axiom) ...
January 14, 2025
Mike

Keep learning*

*is always the sign-off on these notes, and I should explain why. If we trained our NLP pattern recognition algorithms ...
January 14, 2025
Mike

The Narranomist Narrative

Welcome aboard, and thank you for reading this introduction to The Narranomist. I’m a portfolio manager and founding partner of ...

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Do You Want to Sound Smart or Make Money?

That’s so crass, isn’t it? Sorry, it’s meant to shock. It’s a twist on the classic trading axe (not axiom) do you want to be right or make money?

Don’t get anchored to a position. Admit you’re wrong and live to fight another day. Love small losses.

All good advice. But there’s a broader, and I think better, interpretation. First, let’s de-crassify it:

Do you want to sound smart or get better results?

Sounding smart has never been more accessible. Information is everywhere and presentable in the most glittering formats you can imagine. The data viz biz was booming even before AI took it to another level. Now you can sound smarter than a human!

It usually involves beautiful decks visualizing reams of data plumped and pumped by really smart people (the right schools, letters, and designer eyeglasses) whose primary goal is pleasing clients (trust me, I’ve been there – at least the pleasing clients part).

The games we played in school – show your work – is carried over. More work, presented brilliantly, shows that smart people have covered every angle. Every tree in the forest is tagged. Lights flicker when the models are run. 

What convinces is conviction, President LBJ used to say, and sounding smart people have it in spades.

They can make you feel smart because they sound smart. Throw in a relatable anecdotal story (‘my Pilates instructor just bought a Tesla too’) and a few witty, unassailable quotes (e.g., from Oscar Wilde or Oprah), and everyone gets what they want. Everyone is reassured that the process, the process, the process (chanting now) is robust, tested, and repeatable.

But what if all this smartiness leads to a bad decision and you don’t make money?

The position blows up. The project fails. The plant closes. The candidate loses.

Were you just trying to sound CYA smart so that a bad outcome would seem less bad?

When you stop asking that question before, during, and after a decision-making process, you’re losing the plot – or worse.

Said no sounding smart person, ever:

  • We’ll figure this out as we go along.
  • We’ll write out potential narratives and react to the reaction.

Investment decision-making is noisy, messy, alienating, and often utterly random because there are no precedents, let alone data sets. Smart is optimizing for decision-making with empirical data to maximize variable adjustable weights and probabilistic outcomes.

The former is the ruthless purity of being marked to market every day. The latter is best suited for being judged by judges, like in figure skating or powerpointing.

Keep learning,

McQ