I was about to fill out my ballot at an early voting station last Friday when Homer nudged me: “Do you recall the island of Ismarus?”
“Of course, I do”, I replied. It was after leaving Troy. “Didn’t the troops sack the city in Ismarus and take the spoils for themselves? Didn’t Odysseus warn them to leave, but they wanted to take it all in and enjoy the feast by the beach? Didn’t they barely escape once the men of the island regrouped and attacked?”
“That’s right,” Homer replied, only to add “And what happened next?” It took me a minute, but the answer came quickly: “Oh, yes, Odysseus and the troops landed on the sleepy isle of the lotus-eaters.” “Was any of those landings a walk in the park?” Homer rhetorically asked.
“How could that be? In Ismarus the troops almost lost their lives because of hubris. In the sleepy isle of the lotus-eaters, they almost lost their identity and purpose, forgetting Ithaca as the mission, let alone the guides of aidos, nemesis, and xenia.
”The elections tomorrow may point to the historical juncture of a people enjoying the lotus of the land (market profits, the economy’s health, liberties, etc.), but forgetting Ithaca and what it stands for. Ithaca was the mission/destiny: the land of justice, merit, virtue, and order. Aidos reigned supreme in that land. Aidos as the daughter of Prometheus instilled in the people a sense of honor, restraint, respect, and shame. Aidos was the internal force of reverence that prevented the wrong from reigning supreme.
“Fill out your ballot with a sense of aidos,” Homer said, only to add “Where is the market’s sense of aidos?”
Could it be that it was aidos that made Warren Buffett decide to hold $325 billion in cash and another $288 billion in Treasury Bills (TBs)? Berkshire at this point holds $93 billion more in TBs than the Fed. Most certainly, only aidos could have made him hold the buybacks of his own stock!
What happens when people’s consciousness as well as the market consciousness lose their sense of aidos?
“You speak of aidos and consciousness, but what painting could actually capture today’s prevailing electoral and market reality?” Hans Pfitzner (whose opera titled Palestrina may reflect today’s political and market conditions more accurately than any other opera) asked.
“None other than Caspar David Friedrich’s The Wanderer above a Sea of Fog,” Homer said, and our minds jumped to that famous painting.
The more I start thinking about Pfitzner’s question, the more I realize that indeed our political, geopolitical, and market environments, are most accurately represented by that unknown wanderer who has turned his back on us and views the landscape with the sense of a consciousness that is neither circular nor evolutionary. It seems that his sense of consciousness is about the summit ahead, but the fog doesn’t allow him to see whether the landscape in front of him is filled with an ocean or insurmountable mountain-type dangers. Market participants seem to be preparing for significant swings this election week. In the last five weeks, the yield on the 10-year Treasury has increased by more than 20% (from 3.60% to 4.38%), while precious metals keep rising despite the higher real yields. In a landscape of negative real yields (right-hand scale in the graph below), and especially when that landscape is initiated and designed (late 2000s/early 2010s), it makes sense to experience higher prices in precious metals as the opportunity cost of holding gold and silver becomes negligible. However, our current landscape shows us that as real yields (nominal yield minus inflation) rise, gold prices keep rising too, defying the traditional negative correlation and co-movement between the two asset classes. (Real yield is elevated as the nominal rate remains above 4.5%, while central banks and investors keep buying precious metals and the flow into gold and silver ETFs keeps rising due to fears of rising deficits and geopolitical instability).
An election outcome that will be perceived as significantly inflationary and deficit-boosting, could potentially be accompanied by bond market turmoil, especially with the prospect of a weaker dollar. The foggy landscape nowadays is not about negative or low real yields (after all a truly independent Fed could choose not to lower rates if it foresees uncontrollable deficits that could lead to higher inflationary pressures), a peace dividend (as the case was in the early 1990s), and thus deficit spending could be offset either by higher real rates, a rising productivity growth rate, a very strong dollar that defies gravity, or a combination of those three options.
Individual consciousness is achieved through perspective when we comprehend how insignificant we are. Historical consciousness is achieved when the dust of revolutions settles (1776, 1789, mid-19th century, World Wars, collapse of the Soviet Union). Market consciousness is reached when market fundamentals are awakened. An ability to shift between humility and mastery of the landscape through distillation and adopting through improvisation (the Machiavellian arbiter) while recalling historical lessons, marks the winning strategy and signifies the winners.
In a foggy landscape, the wanderer investor strategizes in abstraction, i.e. in the absence of a contextual framework. It’s no longer Jan van Eyck’s perspective that we are dealing with (where every detail is painted like in a photo taken). It’s a Picasso perspective where everything has been stripped away.
In that stripped contextual perspective Hans Pfitzner wrote in 1917 his opera Palestrina, attempting to honor the legendary composer Giovanni Pierluigi da Palestrina, who in the midst of the foggy environment of the Counter-Reformation was tasked by Cardinal Borromeo to compose a new Mass. Palestrina was experiencing three losses at that time: He had lost his beloved wife Lucrezia. He sensed that the world was losing classical composition to the new musical trend emerging in Florence. Finally, he was losing his freedom after refusing to obey the Cardinal.
Historical consciousness is awakened in the opera when Palestrina refuses to obey but heends up – like in a dream – composing a masterpiece that bridges together the old classical tradition and the new merging trend in composition. . Like in a vision, his beloved Lucrezia appears by his side encouraging him to compose. An angelic chorus gives him the strength that he needs to keep composing. Finally, divine grace takes his hand and completes the masterpiece, but he falls asleep. No one knows that he has completed the task in an environment of unfreedom and threats. At dawn, his son (Ighino) and his student (Silla) discover the masterpiece and deliver it to the Cardinal, who in turn proudly presents it to the Council of Trent. (For Palestrina, this is not a world of justice, reconciliation, and spirituality. It is rather a world of pomp, deceit, self-interest, conflict, and violence. For Palestrina, the Council is neither interested in the aesthetic qualities of the new Mass nor is sensitive to the need for an awakened spirituality, but rather it’s a ploy to combat the forces of rising Protestantism).
Palestrina’s masterpiece not only receives the accolades of Cardinal Borromeo, the Council of Trent, and the people of Rome, but also of the Pope himself who comes to Palestrina’s home to congratulate and thank him for his masterpiece. Palestrina, however, remained impervious to all honors. Pfitzner imputes Palestrina the faithful spirit of aidos, nemesis, and xenia, as his masterpiece redeems reality and clears the foggy landscape.
“Where does this leave you with regards to filling out your ballot?” Homer asks. “Oh, I know well what comes next dear Homer,” was my response. “The land of Cyclopes is awaiting us,” and with that, I cast my vote.
US Elections and a Market Allegory through the Eyes of Homer and Palestrina
Author : John E. Charalambakis
Date : November 4, 2024
I was about to fill out my ballot at an early voting station last Friday when Homer nudged me: “Do you recall the island of Ismarus?”
“Of course, I do”, I replied. It was after leaving Troy. “Didn’t the troops sack the city in Ismarus and take the spoils for themselves? Didn’t Odysseus warn them to leave, but they wanted to take it all in and enjoy the feast by the beach? Didn’t they barely escape once the men of the island regrouped and attacked?”
“That’s right,” Homer replied, only to add “And what happened next?” It took me a minute, but the answer came quickly: “Oh, yes, Odysseus and the troops landed on the sleepy isle of the lotus-eaters.” “Was any of those landings a walk in the park?” Homer rhetorically asked.
“How could that be? In Ismarus the troops almost lost their lives because of hubris. In the sleepy isle of the lotus-eaters, they almost lost their identity and purpose, forgetting Ithaca as the mission, let alone the guides of aidos, nemesis, and xenia.
”The elections tomorrow may point to the historical juncture of a people enjoying the lotus of the land (market profits, the economy’s health, liberties, etc.), but forgetting Ithaca and what it stands for. Ithaca was the mission/destiny: the land of justice, merit, virtue, and order. Aidos reigned supreme in that land. Aidos as the daughter of Prometheus instilled in the people a sense of honor, restraint, respect, and shame. Aidos was the internal force of reverence that prevented the wrong from reigning supreme.
“Fill out your ballot with a sense of aidos,” Homer said, only to add “Where is the market’s sense of aidos?”
Could it be that it was aidos that made Warren Buffett decide to hold $325 billion in cash and another $288 billion in Treasury Bills (TBs)? Berkshire at this point holds $93 billion more in TBs than the Fed. Most certainly, only aidos could have made him hold the buybacks of his own stock!
What happens when people’s consciousness as well as the market consciousness lose their sense of aidos?
“You speak of aidos and consciousness, but what painting could actually capture today’s prevailing electoral and market reality?” Hans Pfitzner (whose opera titled Palestrina may reflect today’s political and market conditions more accurately than any other opera) asked.
“None other than Caspar David Friedrich’s The Wanderer above a Sea of Fog,” Homer said, and our minds jumped to that famous painting.
The more I start thinking about Pfitzner’s question, the more I realize that indeed our political, geopolitical, and market environments, are most accurately represented by that unknown wanderer who has turned his back on us and views the landscape with the sense of a consciousness that is neither circular nor evolutionary. It seems that his sense of consciousness is about the summit ahead, but the fog doesn’t allow him to see whether the landscape in front of him is filled with an ocean or insurmountable mountain-type dangers.
Market participants seem to be preparing for significant swings this election week. In the last five weeks, the yield on the 10-year Treasury has increased by more than 20% (from 3.60% to 4.38%), while precious metals keep rising despite the higher real yields. In a landscape of negative real yields (right-hand scale in the graph below), and especially when that landscape is initiated and designed (late 2000s/early 2010s), it makes sense to experience higher prices in precious metals as the opportunity cost of holding gold and silver becomes negligible. However, our current landscape shows us that as real yields (nominal yield minus inflation) rise, gold prices keep rising too, defying the traditional negative correlation and co-movement between the two asset classes. (Real yield is elevated as the nominal rate remains above 4.5%, while central banks and investors keep buying precious metals and the flow into gold and silver ETFs keeps rising due to fears of rising deficits and geopolitical instability).
An election outcome that will be perceived as significantly inflationary and deficit-boosting, could potentially be accompanied by bond market turmoil, especially with the prospect of a weaker dollar. The foggy landscape nowadays is not about negative or low real yields (after all a truly independent Fed could choose not to lower rates if it foresees uncontrollable deficits that could lead to higher inflationary pressures), a peace dividend (as the case was in the early 1990s), and thus deficit spending could be offset either by higher real rates, a rising productivity growth rate, a very strong dollar that defies gravity, or a combination of those three options.
Individual consciousness is achieved through perspective when we comprehend how insignificant we are. Historical consciousness is achieved when the dust of revolutions settles (1776, 1789, mid-19th century, World Wars, collapse of the Soviet Union). Market consciousness is reached when market fundamentals are awakened. An ability to shift between humility and mastery of the landscape through distillation and adopting through improvisation (the Machiavellian arbiter) while recalling historical lessons, marks the winning strategy and signifies the winners.
In a foggy landscape, the wanderer investor strategizes in abstraction, i.e. in the absence of a contextual framework. It’s no longer Jan van Eyck’s perspective that we are dealing with (where every detail is painted like in a photo taken). It’s a Picasso perspective where everything has been stripped away.
In that stripped contextual perspective Hans Pfitzner wrote in 1917 his opera Palestrina, attempting to honor the legendary composer Giovanni Pierluigi da Palestrina, who in the midst of the foggy environment of the Counter-Reformation was tasked by Cardinal Borromeo to compose a new Mass. Palestrina was experiencing three losses at that time: He had lost his beloved wife Lucrezia. He sensed that the world was losing classical composition to the new musical trend emerging in Florence. Finally, he was losing his freedom after refusing to obey the Cardinal.
Historical consciousness is awakened in the opera when Palestrina refuses to obey but heends up – like in a dream – composing a masterpiece that bridges together the old classical tradition and the new merging trend in composition. . Like in a vision, his beloved Lucrezia appears by his side encouraging him to compose. An angelic chorus gives him the strength that he needs to keep composing. Finally, divine grace takes his hand and completes the masterpiece, but he falls asleep. No one knows that he has completed the task in an environment of unfreedom and threats. At dawn, his son (Ighino) and his student (Silla) discover the masterpiece and deliver it to the Cardinal, who in turn proudly presents it to the Council of Trent. (For Palestrina, this is not a world of justice, reconciliation, and spirituality. It is rather a world of pomp, deceit, self-interest, conflict, and violence. For Palestrina, the Council is neither interested in the aesthetic qualities of the new Mass nor is sensitive to the need for an awakened spirituality, but rather it’s a ploy to combat the forces of rising Protestantism).
Palestrina’s masterpiece not only receives the accolades of Cardinal Borromeo, the Council of Trent, and the people of Rome, but also of the Pope himself who comes to Palestrina’s home to congratulate and thank him for his masterpiece. Palestrina, however, remained impervious to all honors. Pfitzner imputes Palestrina the faithful spirit of aidos, nemesis, and xenia, as his masterpiece redeems reality and clears the foggy landscape.
“Where does this leave you with regards to filling out your ballot?” Homer asks. “Oh, I know well what comes next dear Homer,” was my response. “The land of Cyclopes is awaiting us,” and with that, I cast my vote.