Strato of Lampsacus stepped out of the boat that had just docked at the Alexandria, Egypt port. At that moment, he knew that this was the right place for the rejuvenation of Aristotle’s Lyceum that had lost its shine and influence in Athens. The proper study for the discovery of truth required two fundamental elements which Athens was falling behind in, namely: a vast collection of knowledge in all fields including science, and second, a patron with a passion for the discovery of truth. The former would become reality as he would be the instigator of Alexandria’s Museum/Library. That Library became the Hellenistic world’s equivalent of Oxford, MIT, Cambridge, and Harvard all rolled into one. The second requirement (that of a major patron) was none other than Ptolemy (Alexander’s general) who was ruling Egypt. As for the discovery of truth (which postmodernity and meta-modernity do not value as we are manufacturing our own truths), we could just mention, as a starting point, that Strato taught Aristarchus who, in turn, proposed a heliocentric theory where planets revolved around the sun, and the earth itself revolved every 24 hours around its axis. Unfortunately, it took the world another 2,000 years before they accepted that truth! Bertrand Russell simply called Aristarchus’s works “works of astonishing genius.”
And speaking of truth searching and being ahead of the time, how about Eratosthenes, another disciple of Alexandria’s Peripatetics who studied the voyager manuscripts drafted by Pytheas, and after he made some calculations, he proposed another “inhabited world” between the Pillars of Hercules (Gibraltar) and India. It was just about 1,750 years before Columbus discovered the New World! Oh, and I forgot to mention that Eratosthenes calculated that the earth’s diameter was 7,850 miles. He was off by less than 100 miles! Late last year, we thought that the investment landscape of 2022 could be decorated with a variety of thorns. Therefore, some significant portfolio restructuring might be necessary that required liquidity, and hence we started selling a number of holdings. We believe that roses could be found among the thorns, as long as they are properly cared for. The start of the new year could possibly signify the Day After that we have been focusing on with our summaries for the last several months. As for the thorns, the following list is indicative of a few economic/financial facts and of what is at hand:
- We are dealing with a reality of unprofitable tech companies (representing more than 50% of growth companies in the Russell 3000) with extreme valuations, as well as with asset classes whose intrinsic value can only be found in digital realities of algorithms.
- Sectoral bubbles created by unreasonable liquidity (which itself is boosted by monetary and fiscal handouts), and which have led to some market capitalizations (as a multiple of GDP), are not exactly normal.
- Lemming bandwagon mentality (including a frenetic options upswing) which underprices risk, and which does not care for fundamental truths, but rather is swayed by fads. That kind of momentum along with the central banks’ ultra-accommodative policies has been subverting the market’s capacity for balanced pricing.
- Inflationary pressures (the result of accommodative policies, supply constraints, and high demand) that may stay elevated for at least another few months and may plateau at a level above the previously accepted normal level of 2%.
- Rising yields and expected rising interest rates that may create more fear and concern than is necessary. Having said that, we cannot ignore the fact that higher rates will generate pains for fiscal budgets as well as for companies with limited profitability.
- Endemic Chinese economic and financial issues that could cascade into a sea of troubles from an economic slowdown to debt thorns, and from bankruptcies to rising discontent.
- Rising geopolitical tensions around the world (from Eurasia to Asia, and from Africa to Latin America) could undermine peaceful growth and the betterment of living standards.
- Rising debt levels around the globe. In just thirty years we have reached the point where 25 counties have a total debt level that exceeds 300% of their respective GDP. Since the pandemic hit us, global debt has increased by $36 trillion (according to the Institute of International Finance) and now stands close to $300 trillion dollars, representing an astonishing 350% of global GDP. If we add to that the notional debt generated by the derivatives (about $660 trillion), we can truly state that it is a “Brave New World” where people will be controlled not by the infliction of pain but rather by the infliction of pleasure generated by debt.
- A metaverse augmented reality that disregards the journey for discovering the truth, but rather opts for its own truths led not by the likes of astonishing geniuses but rather by what Kurt Andersen calls in his latest book “Evil Geniuses”.
- Policy miscalculations, execution risk, and corona virus mutations could make the above mix of thorns even more dangerous, especially if at the first instance of turmoil central banks cave in, open the monetary faucets again and not just re-enhance a mentality of bailouts but actually establish a regime of risk mispricing which is the ultimate ingredient of a financial crisis.
So, as the new year unfolds, we start looking at it as an internal struggle between Market Epicureans vs. Market Stoics. The Market Epicureans follow their founders’ recipe: Pursue pleasure and avoid pain. On the other hand, Market Stoics follow their founder Zeno who was preaching a doctrine of moral austerity under the porch/stoa in Athens (hence the name Stoics). Along that struggle, Market Cynics (following Antisthenes and Diogenes) and Market Skeptics are decorating the scenery with their cynicism and skepticism about valuation, debt sustainability, the affront to truth, and to democratic principles, and the “transitory” inflation.
Aristippus of Cyrene was the godfather of Epicureans. He, like Plato, was absent (according to Phaedo) from the final death scene in Socrates’s prison cell. However, Plato and Aristippus met again in Syracuse at the courtyard of Dionysius II, who asked them to dance in purple robes. Plato simply refused. Aristippus complied as his dogma was to enjoy a hedonistic life, no matter what. His disciple Epicurus systematized the philosophy into a doctrine that pushes its adherents into achieving a constant state of detached well-being. Welcome to the bubble-everything reality of accommodative policies whose purpose is crowd-pleasing. (I understand that Epicurus would raise an objection here as he would defend his position as an extension of the Aristotelian theory of knowledge based on our senses, but I humbly believe that such an extreme position would have horrified both Aristotle and his teacher Socrates). Epicureanism declared war on Aristotle’s Lyceum and, thus, the need for Stratos of Lampsacus to restart the Lyceum in Alexandria.
On the other hand, Stoics endeavored into an indifference – if not renunciation – of all worldly goods. Strict sense of virtue and faithfulness to upholding one’s duties (rather than indulgence in pleasure) became the motto of Zenon and the Stoics. Famous Stoics like Seneca and Epictetus set examples crowned with exemplary lives. After all, Zeno arrived in Athens to study at Plato’s Academy in order to articulate the concept of an all-powerful Logos who gives life to the universe and animates the World Soul as the latter discussed in Plato’s Timaeus. Market Stoics nowadays, while looking at what has transpired in the last twenty-five years, also borrow a little bit from Antisthenes’s cynicism regarding useless market distractions, and from Eleatic and Socratic Skepticism, to state that a re-evaluation of where we are headed and what our portfolios need is a must, as the Day After is dawning upon us.
Investment Landscape 2022: Market Epicureans vs. Market Stoics
Author : John E. Charalambakis
Date : January 10, 2022
Strato of Lampsacus stepped out of the boat that had just docked at the Alexandria, Egypt port. At that moment, he knew that this was the right place for the rejuvenation of Aristotle’s Lyceum that had lost its shine and influence in Athens. The proper study for the discovery of truth required two fundamental elements which Athens was falling behind in, namely: a vast collection of knowledge in all fields including science, and second, a patron with a passion for the discovery of truth. The former would become reality as he would be the instigator of Alexandria’s Museum/Library. That Library became the Hellenistic world’s equivalent of Oxford, MIT, Cambridge, and Harvard all rolled into one. The second requirement (that of a major patron) was none other than Ptolemy (Alexander’s general) who was ruling Egypt. As for the discovery of truth (which postmodernity and meta-modernity do not value as we are manufacturing our own truths), we could just mention, as a starting point, that Strato taught Aristarchus who, in turn, proposed a heliocentric theory where planets revolved around the sun, and the earth itself revolved every 24 hours around its axis. Unfortunately, it took the world another 2,000 years before they accepted that truth! Bertrand Russell simply called Aristarchus’s works “works of astonishing genius.”
And speaking of truth searching and being ahead of the time, how about Eratosthenes, another disciple of Alexandria’s Peripatetics who studied the voyager manuscripts drafted by Pytheas, and after he made some calculations, he proposed another “inhabited world” between the Pillars of Hercules (Gibraltar) and India. It was just about 1,750 years before Columbus discovered the New World! Oh, and I forgot to mention that Eratosthenes calculated that the earth’s diameter was 7,850 miles. He was off by less than 100 miles! Late last year, we thought that the investment landscape of 2022 could be decorated with a variety of thorns. Therefore, some significant portfolio restructuring might be necessary that required liquidity, and hence we started selling a number of holdings. We believe that roses could be found among the thorns, as long as they are properly cared for. The start of the new year could possibly signify the Day After that we have been focusing on with our summaries for the last several months. As for the thorns, the following list is indicative of a few economic/financial facts and of what is at hand:
So, as the new year unfolds, we start looking at it as an internal struggle between Market Epicureans vs. Market Stoics. The Market Epicureans follow their founders’ recipe: Pursue pleasure and avoid pain. On the other hand, Market Stoics follow their founder Zeno who was preaching a doctrine of moral austerity under the porch/stoa in Athens (hence the name Stoics). Along that struggle, Market Cynics (following Antisthenes and Diogenes) and Market Skeptics are decorating the scenery with their cynicism and skepticism about valuation, debt sustainability, the affront to truth, and to democratic principles, and the “transitory” inflation.
Aristippus of Cyrene was the godfather of Epicureans. He, like Plato, was absent (according to Phaedo) from the final death scene in Socrates’s prison cell. However, Plato and Aristippus met again in Syracuse at the courtyard of Dionysius II, who asked them to dance in purple robes. Plato simply refused. Aristippus complied as his dogma was to enjoy a hedonistic life, no matter what. His disciple Epicurus systematized the philosophy into a doctrine that pushes its adherents into achieving a constant state of detached well-being. Welcome to the bubble-everything reality of accommodative policies whose purpose is crowd-pleasing. (I understand that Epicurus would raise an objection here as he would defend his position as an extension of the Aristotelian theory of knowledge based on our senses, but I humbly believe that such an extreme position would have horrified both Aristotle and his teacher Socrates). Epicureanism declared war on Aristotle’s Lyceum and, thus, the need for Stratos of Lampsacus to restart the Lyceum in Alexandria.
On the other hand, Stoics endeavored into an indifference – if not renunciation – of all worldly goods. Strict sense of virtue and faithfulness to upholding one’s duties (rather than indulgence in pleasure) became the motto of Zenon and the Stoics. Famous Stoics like Seneca and Epictetus set examples crowned with exemplary lives. After all, Zeno arrived in Athens to study at Plato’s Academy in order to articulate the concept of an all-powerful Logos who gives life to the universe and animates the World Soul as the latter discussed in Plato’s Timaeus. Market Stoics nowadays, while looking at what has transpired in the last twenty-five years, also borrow a little bit from Antisthenes’s cynicism regarding useless market distractions, and from Eleatic and Socratic Skepticism, to state that a re-evaluation of where we are headed and what our portfolios need is a must, as the Day After is dawning upon us.