Nowadays, it seems that coronavirus concerns have almost been forgotten. Covid-19 is out, war and energy concerns are in. Market turmoil is marked not by the number of infections but rather by geopolitics. We get the impression that we are in a game where a clash of ideologies dominates. In our humble opinion, we cannot discern the trajectory of the markets unless we understand the origins of that clash and extrapolate those into today’s global developments.
The clash of civilizations and ideologies started in 499 BCE when the Ionian cities revolted against tyrannical rule and reclaimed their freedom. The Ionian revolt began a war between the Greeks and the then superpower of Persia. It was a war that lasted almost 170 years. It was a year that defined international relations. Last May, we wrote that geopolitical alpha could be the determinant factor in the market trajectory. Less than a year later, we assess international relations and alliances, and we ponder if chemical or tactical nuclear weapons will be used and what the Day After the Ukrainian crisis would look like.
Fears of slower growth, if not an outright recession in the EU and the US, are the culprits of lower earnings expectations. However, downgraded earnings expectations are not yet reflected in market pricing, as shown below. We are having a price discovery problem if not a mispricing case itself, also reflected in the fear index (see discussion below).
What happens when a vision and a purpose are informed by moral consciousness? Very simply: The world changes. What happens then, when a state loses its moral compass like Athens did with its unjust war against Melos in 416 BCE? It jeopardizes its own existence. When Alexander the Great – who united the Greek states after devastating civil wars and fights among themselves (as described below) and who continued the saga of the war between east and west – raised his cup in the garden of Opis to offer a prayer for peace in the autumn of 324 BCE, it was a pivotal moment of world change and the culmination of a process that started in the middle of the first millennium BCE. Prior to 500 BCE, moral consciousness was an outlier in public affairs. All of sudden (historians still cannot agree on the main cause), in what we could call the fulfillment of time (kairos), civilizations from Asia, to the Middle East and the Mediterranean adopted a moral consciousness in their public affairs. The result since then has been that humanity is on a trajectory to discover a purpose in the workings of history.
Could and should the markets adopt a moral consciousness? Is the pursuit of ESG ranking part of that endeavor? Should the governments, the regulatory environment, and even competition work within the framework of a moral consciousness? As we contemplate those things and experience a market correction, with the Nasdaq even crossing into bear territory just a couple of weeks ago, we are “encouraged” and guided/misguided by lower multiples to reverse course without consideration of root causes, undercurrents, and discernment of what could be at stake. We feel overconfident and explore to conquer Melos which has nothing to do with the war at stake. That overconfidence can be seen below in the volatility/fear index that has fallen to a level lower than where it stood at the time of the Ukrainian invasion.
Whether we are exploring Lao-tzu, a.k.a. the “Old Master”, and his philosophy of Tao, the religious revival that the book of Deuteronomy brought to the two southern Israeli tribes around 620 BCE (the other ten tribes had disappeared since the Assyrians’ conquest around 721 BCE), the birth of Zoroastrianism in Iran (about three decades after the Israeli revival), Siddhartha Gautama a.k.a. Buddha in India, or Confucius in China, we are talking about a major switch in global affairs, a watershed period in human affairs that took place in the middle of the first millennium BCE and which left a permanent mark while changing civilizations and governments forever.
Half the way around the globe, in the Greek Ionian coastal cities (nowadays coastal cities in Turkey), philosophers like Heraclitus and Xenophanes were paving the way for Socrates, Plato, and Aristotle to articulate the question of living a life worthy of its ultimate purpose. At the same time, a contest of ideologies started emerging and international relations were born. In the Ionian cities, science, history, and arts started flourishing. Prose literature and theater brought partial fulfillment to intellectual pursuits. The “archaic smile” in sculpted faces was not just an intriguing expression, rather, it was suggesting a secret knowledge in the pursuit of happiness. Pindar’s lines are difficult to translate:
“Thing of a day! Such is man; a shadow in a dreamYet when god-given splendor visits himA bright radiance plays over him, and how sweet is life.”
The overconfidence reflected in the VIX, as well as by the absence of downgraded earnings, is surely in significant conflict with US and European indexes, as shown below, and which portray a picture of concern. Could this be reasonably explained as ahistorical market confusion of a world that is changing but we cannot comprehend yet where it is headed?
The clash of civilizations and ideologies that started in 499 BCE defined history. It was a war that defined regimes. It was a war between those who were informed and motivated by the principles and values of freedom and democracy, versus those who represented the despotic and tyrannical forces of oppression. It was a war between the will of liberty and the rule of law versus the will of a despot and the rule of a tyrant. Is it a coincidence that it started at about the same time that humanity was developing a moral compass? And what happens when that compass is lost?
The battle in Thermopylae and the miracle victories in Marathon (490 BCE) and Salamis (480 BCE) represented the crown jewel and the triumph of European political beliefs versus those of oppression and the rule of one. The feud was indeed a clash of civilizations and the culmination of a battle of ideals and ideas: Freedom cannot be enslaved by the will of one. The question of course remains: Can freedom be enslaved by the will of the few who make the rules and have the power? Where is our freedom anchored?
The original triumph of the Greeks is only part of the story. In the second part, the Greek city-states fell apart and fought each other. The Persians stayed in the sidelines, encouraging the Greeks to self-destroy themselves. Herodotus describes an uplifting story where ordinary people rise up to their historic calling. Thucydides, on the other hand, describes a tragedy of a people who began on a civilized and admirable trajectory but who ended up losing their values and ideals. When the Athenians lost their ability to ask the hard questions about what constitutes a good life worth pursuing, and the even harder ones about the intersection of morality and politics, they lost their consciousness and eventually their freedom and their city-state.
The Athenians attacked Melos (416 BCE) without reason (just as a demonstration of power) and crowned themselves kings of unglorified actions. The crown jewel of the Athenians’ hubris was the Sicilian expedition (415 BCE) which was the turning point in the civil war with Sparta. That expedition marked the beginning of the end of the Athenian glory and power. Ten years later, Athens was defeated by Sparta. A decade later, Sparta was ruined by an Athenian commanding a Persian armada! The Spartans’ response? They betrayed the Greek cause to the Persians and Ionia was returned to Persia! Anyone said anything about moral consciousness? Is Putin repeating history by forcing alliances, loyalties, and setting the stage for betrayals?
The rising of credit spreads, as shown below, is another sign of concern which, in combination with the yield curve inversion, makes us skeptical of how solid the recent stock market rally is, especially when we take into account the changing geopolitical world order, the rising inflationary pressures, and the less-than-optimal performance of the Fed.
The time of Plato and Euripides (survivors of a defeated Athens) was a high-kairos marked by a reflection of persons who had the paideia to comprehend that people who live in a world without public conscience could be turned into animals. Their role was to foreshadow the times of forthcoming enlightened leaders (Alexander, Caesars) who will change history forever.
Erratic Markets and the Fulfillment of Kairos: Linear vs. Non-Linear Interpretation, Part II
Author : John E. Charalambakis
Date : April 5, 2022
Nowadays, it seems that coronavirus concerns have almost been forgotten. Covid-19 is out, war and energy concerns are in. Market turmoil is marked not by the number of infections but rather by geopolitics. We get the impression that we are in a game where a clash of ideologies dominates. In our humble opinion, we cannot discern the trajectory of the markets unless we understand the origins of that clash and extrapolate those into today’s global developments.
The clash of civilizations and ideologies started in 499 BCE when the Ionian cities revolted against tyrannical rule and reclaimed their freedom. The Ionian revolt began a war between the Greeks and the then superpower of Persia. It was a war that lasted almost 170 years. It was a year that defined international relations. Last May, we wrote that geopolitical alpha could be the determinant factor in the market trajectory. Less than a year later, we assess international relations and alliances, and we ponder if chemical or tactical nuclear weapons will be used and what the Day After the Ukrainian crisis would look like.
Fears of slower growth, if not an outright recession in the EU and the US, are the culprits of lower earnings expectations. However, downgraded earnings expectations are not yet reflected in market pricing, as shown below. We are having a price discovery problem if not a mispricing case itself, also reflected in the fear index (see discussion below).
What happens when a vision and a purpose are informed by moral consciousness? Very simply: The world changes. What happens then, when a state loses its moral compass like Athens did with its unjust war against Melos in 416 BCE? It jeopardizes its own existence. When Alexander the Great – who united the Greek states after devastating civil wars and fights among themselves (as described below) and who continued the saga of the war between east and west – raised his cup in the garden of Opis to offer a prayer for peace in the autumn of 324 BCE, it was a pivotal moment of world change and the culmination of a process that started in the middle of the first millennium BCE. Prior to 500 BCE, moral consciousness was an outlier in public affairs. All of sudden (historians still cannot agree on the main cause), in what we could call the fulfillment of time (kairos), civilizations from Asia, to the Middle East and the Mediterranean adopted a moral consciousness in their public affairs. The result since then has been that humanity is on a trajectory to discover a purpose in the workings of history.
Could and should the markets adopt a moral consciousness? Is the pursuit of ESG ranking part of that endeavor? Should the governments, the regulatory environment, and even competition work within the framework of a moral consciousness? As we contemplate those things and experience a market correction, with the Nasdaq even crossing into bear territory just a couple of weeks ago, we are “encouraged” and guided/misguided by lower multiples to reverse course without consideration of root causes, undercurrents, and discernment of what could be at stake. We feel overconfident and explore to conquer Melos which has nothing to do with the war at stake. That overconfidence can be seen below in the volatility/fear index that has fallen to a level lower than where it stood at the time of the Ukrainian invasion.
Whether we are exploring Lao-tzu, a.k.a. the “Old Master”, and his philosophy of Tao, the religious revival that the book of Deuteronomy brought to the two southern Israeli tribes around 620 BCE (the other ten tribes had disappeared since the Assyrians’ conquest around 721 BCE), the birth of Zoroastrianism in Iran (about three decades after the Israeli revival), Siddhartha Gautama a.k.a. Buddha in India, or Confucius in China, we are talking about a major switch in global affairs, a watershed period in human affairs that took place in the middle of the first millennium BCE and which left a permanent mark while changing civilizations and governments forever.
Half the way around the globe, in the Greek Ionian coastal cities (nowadays coastal cities in Turkey), philosophers like Heraclitus and Xenophanes were paving the way for Socrates, Plato, and Aristotle to articulate the question of living a life worthy of its ultimate purpose. At the same time, a contest of ideologies started emerging and international relations were born. In the Ionian cities, science, history, and arts started flourishing. Prose literature and theater brought partial fulfillment to intellectual pursuits. The “archaic smile” in sculpted faces was not just an intriguing expression, rather, it was suggesting a secret knowledge in the pursuit of happiness. Pindar’s lines are difficult to translate:
“Thing of a day! Such is man; a shadow in a dreamYet when god-given splendor visits himA bright radiance plays over him, and how sweet is life.”
The overconfidence reflected in the VIX, as well as by the absence of downgraded earnings, is surely in significant conflict with US and European indexes, as shown below, and which portray a picture of concern. Could this be reasonably explained as ahistorical market confusion of a world that is changing but we cannot comprehend yet where it is headed?
The clash of civilizations and ideologies that started in 499 BCE defined history. It was a war that defined regimes. It was a war between those who were informed and motivated by the principles and values of freedom and democracy, versus those who represented the despotic and tyrannical forces of oppression. It was a war between the will of liberty and the rule of law versus the will of a despot and the rule of a tyrant. Is it a coincidence that it started at about the same time that humanity was developing a moral compass? And what happens when that compass is lost?
The battle in Thermopylae and the miracle victories in Marathon (490 BCE) and Salamis (480 BCE) represented the crown jewel and the triumph of European political beliefs versus those of oppression and the rule of one. The feud was indeed a clash of civilizations and the culmination of a battle of ideals and ideas: Freedom cannot be enslaved by the will of one. The question of course remains: Can freedom be enslaved by the will of the few who make the rules and have the power? Where is our freedom anchored?
The original triumph of the Greeks is only part of the story. In the second part, the Greek city-states fell apart and fought each other. The Persians stayed in the sidelines, encouraging the Greeks to self-destroy themselves. Herodotus describes an uplifting story where ordinary people rise up to their historic calling. Thucydides, on the other hand, describes a tragedy of a people who began on a civilized and admirable trajectory but who ended up losing their values and ideals. When the Athenians lost their ability to ask the hard questions about what constitutes a good life worth pursuing, and the even harder ones about the intersection of morality and politics, they lost their consciousness and eventually their freedom and their city-state.
The Athenians attacked Melos (416 BCE) without reason (just as a demonstration of power) and crowned themselves kings of unglorified actions. The crown jewel of the Athenians’ hubris was the Sicilian expedition (415 BCE) which was the turning point in the civil war with Sparta. That expedition marked the beginning of the end of the Athenian glory and power. Ten years later, Athens was defeated by Sparta. A decade later, Sparta was ruined by an Athenian commanding a Persian armada! The Spartans’ response? They betrayed the Greek cause to the Persians and Ionia was returned to Persia! Anyone said anything about moral consciousness? Is Putin repeating history by forcing alliances, loyalties, and setting the stage for betrayals?
The rising of credit spreads, as shown below, is another sign of concern which, in combination with the yield curve inversion, makes us skeptical of how solid the recent stock market rally is, especially when we take into account the changing geopolitical world order, the rising inflationary pressures, and the less-than-optimal performance of the Fed.
The time of Plato and Euripides (survivors of a defeated Athens) was a high-kairos marked by a reflection of persons who had the paideia to comprehend that people who live in a world without public conscience could be turned into animals. Their role was to foreshadow the times of forthcoming enlightened leaders (Alexander, Caesars) who will change history forever.