Variant Perception

We set out to create tools that were robust, repeatable, and scalable that do not depend on any one-off insights from gurus.

Our journey

We set up Variant Perception in 2009 to solve our own investing needs. Most investment strategy and economic research we read was highly idiosyncratic and dependent on a guru or some strategist with a crystal ball.

While they occasionally got some big calls right, they also missed others and their process was opaque or non-existent. We set out to create tools that were robust, repeatable, and scalable that do not depend on any one-off insights from gurus.

- Jonathan Tepper

Emeritus Founder

2009
2012
2013
2014
2015
2016
2018
2019
2020
2021
2022
2023

2009

Spain: The Hole In Europe’s Balance Sheet

The report that started it all.

“...Spain = Japan 2.0. Banks are hiding losses. Spain is in deflation. When a debtor can’t pay, the creditor suffers. Germany, France and others will need to cope with recapitalizing the periphery and Spain...”

2012

A Primer on the Euro Breakup (Wolfson Prize Runner Up)

“...The euro is not a good currency area and is like a modern day gold standard where the burden of adjustment falls on weaker countries. The breakup of the euro would be an historic event, but it would not be the first currency breakup...

“...The mechanics of a currency breakup are surprisingly straightforward; the real problems for Europe are overvalued real effective exchange rates and extremely high debt...”

2013

VP Leading Indicator Watch – Initial Suite of VP Country Leading Indicators

A foundational piece for VP’s investment framework. We utilize leading indicators of growth, inflation and liquidity as a first principles approach to understanding business cycles.

2014

The Shale Treadmill: Running to Stand Still

“...Fracking has led to a record production of oil and gas, but the decline in wells is severe, and most drillers are caught on a drilling treadmill. Shale companies have extremely negative free cash flow, and they have financed their capex and drilling through record issuance of debt...

“...Some wells are extraordinary, but not all acres of land are equal, and many shale companies are hyping bad land and promoting their stock so they can sell to outsiders...”

VP Debt and Currency Crisis Framework

“...Using the knowledge gained from studying previous crises, we have formalized our insights into a suite of indicators that reliably predict which countries will face crises. Debt levels matter...

“...Current account deficits matter and are one of the most important measures to follow. The structure of the balance sheet also matters, and owing money in a foreign currency is disastrous. The composition of the investor base matters: foreign bondholders are easier to default on...”

2015

The Biotech Bubble

“...The biotechnology index is a big bubble, much like the technology bubble in the late 1990s. The biotechnology revolution, like the internet revolution, is real and will change the way we live...

“...There will be many winners in the biotechnology revolution, but there will be a large proportion of losers. Fraud is rampant in the biotech sector. The majority of companies are frauds and “promotes” that exist to enrich insiders and promoters...”

2016

I Know a Guy Who Can Get Things Done (Australian Housing)

“...Australia now has one of the biggest housing bubbles in history. Variant Perception has returned from an in-depth fact finding tour of Australia to document the bubble. In conjunction with John Hempton from Bronte Capital, we spent a week visiting mortgage brokers, real-estate agents, property experts, banks and government officials. We witnessed a mania in all its crazy excess...”

Helicopter money: why, what and how

“...The next generation of monetary policy is upon us. In 5,000 years of their existence, there has been no recorded instance of negative nominal interest rates. By seeking to bolster confidence by the erosion of capital, it is the same skewed logic as “destroying the village in order to save it”...

“...Monetary financing – helicopter money – is likely to follow negative interest rates as the policy of last resort...”

2018

VP Capital Cycle Framework

“...Variant Perception has created tools using leading data to identify industries with outsized high or low returns on a relative basis. Capital Return Analysis shows the visual correlation between the longer term nature of the investment cycle versus forward performance...”

2019

VP Single Stock Framework – Improving Stock Selection

“...Unlike height or IQ, stock returns are not normally distributed and a few stocks account for almost all stock-market returns...

“...The skewed distribution in favour of a few stocks has important implications for investors. Investors can either be completely agnostic and buy index funds they can try to identify long-term winners in advance...”

2020

Commodity Supercycle

“...Why commodities are on the cusp of a new supercycle: Inflation risks at 50-year highs, Investors vastly underweight real assets, Supply destruction...

“...What to buy? We home in on the most capital scarce sectors, as these will deliver superior returns in the supercycle: Energy (oil and gas, coal), Gold and Silver, Copper...”

Portfolio for the High Seas (inflation regime shift)

“...Inflation operates in regimes. Today, inflation is in the process of shifting from the “Lake Regime” to the “Ocean Regime”. In the Lake Regime conditions for inflation are generally calm and benign, and inflation is easy to keep under control...

“...In the Ocean Regime, conditions can change rapidly and become very turbulent. Lake going vessels are not suitable for ocean travel, and similarly many portfolios are not prepared for a potentially more inflationary environment...”

2021

2021: A SPAC Odyssey

“...2020 was the year of the SPAC, seeing a spectacular rise in the number and value of new SPACs formed. Very simply they are a company created solely to acquire another company...”

“...Lessons from previous bubbles show that SPACs are helping to sow the seeds of a wider bubble in markets. The boom in SPACs alongside other frothy parts of the market are a symptom of abundant liquidity matched with high-growth expectations. Too much SPAC money chasing too few opportunities will likely see many SPACs liquidate, which would point to a market top...”

2022

LPPL trading signals & VP Tactical Cookbook

“...This model was popularized by Didier Sornette in his book “Why Stock Markets Crash”. Tops and bottoms tend to occur soon after an LPPL Climax...”

The Age of Scarcity

Theme #1: The inflationary impact of government spending: Buy real assets

Theme #2: Peak financial deregulation = end of the age of abundance: Profit and cash flow are sexy again.

Theme #3: Capex Supercycle: Aged asset base + large infrastructure spending gap + negative real financing costs (financial repression) = Capex Supercycle.

VP Portal Launched

Variant Perception's investment portal gives you real time access to our entire arsenal of proprietary models as well as over a decade of written research.

2023

The Hierarchy of Money Framework

“...Inspired by Perry Mehrling's “Hierarchy of Money”, we take a first principles approach to define liquidity - its level, price, and the rate of change...”

“...We introduce the VP “Mehrling” Multiplier to measure the “margin of safety” embedded in liquidity. Just as low price-to-earnings ratios can offer equity investors a greater “margin of safety”, the VP “Mehrling” Multiplier measures the margin of safety embedded in the monetary system...”

Our team

We enjoy figuring out problems, often from scratch. A variant perception is only useful if it is right more often than it is wrong. This means one must be open-minded, willing to push limits and be passionate about their work. This is the fuel that drives our team.

If you want to know more about our team you can visit our LinkedIn page.