Henry James described the story of an artist who devoted his entire life to a single painting as “The Madonna of the Future.” Yet, at his death, they found the easel in his studio with just a blank canvas. The market trajectory under current circumstances could be the greatest story that is yet to be written, but alas may never be written.
Lord Acton represents one of the most eloquent advocates of the modern liberal spirit. Lord Acton described faith in liberty as the ultimate human destiny since it frees us from enslaving ideas and enables us to reconcile historically-tested doctrines with the modern doctrine of liberalism. Lord Acton’s history of liberty has been described as “the greatest book that was never written”, hence his history of liberty is also known as “The Madonna of the Future.”
Could we understand today’s market turmoil apart from the pandemic? How about explaining it apart from the massive monetary and fiscal infusions of the last fourteen years as a response to a collapsing and unsustainable system of rehypothecations with questionable collateral?
Where does the misjudgment of transitory inflation, and the fact that central banks lost control of the money supply, fit into this picture?
Can we comprehend it apart from the revival of great power rivalry, the madness of Putin, and the authoritarianism of Xi?
Could we envision its solution apart from the pitiful partisan politics practiced by politicians who fail to put country first?
The market turmoil is the modern “Madonna of the Future” as it culminates and reflects a turning point in history when unprecedented forces (monetary, fiscal, geopolitical, energy, trade, demographic, demand, and supply-driven) move simultaneously and underwrite an environment of uncertainty when uncharted scenarios could deploy the world war machine.
The fact that the markets (including bonds, as shown below) are in bear territory is not news, as they were there earlier this year. An emerging currency turmoil in European currencies – especially with the UK’s sterling – along with the decline in Asian currencies makes the picture more troublesome as it exacerbates inflationary pressures, adds fiscal risks (in terms of bond market volatility), complicates mortgage markets, while also advancing a risk-off approach for equities.
Source: Koyfin
“The Madonna of the Future” possibly precludes the illusion of a soft landing as recessionary fears tend to become a self-fulfilling prophecy in the face of rising rates, declining confidence, and increasing geopolitical turmoil. When we hear that global markets have lost more than $25 trillion in September (see graph below) and smaller markets (relative to the US, such as the UK markets) have lost $500 billion in just two weeks – while energy markets are weaponized and sabotaged – we can do nothing but embrace the idea that the risk of price swings makes markets more volatile. In turn, such risk impacts all markets negatively, including commodities (oil, grains, lumper, etc.).
Therefore, while an earnings recession is not visible on the horizon, the bearish sentiment makes us start thinking that the market’s bottom – unless a cataclysmic event takes place – for this financial cycle (ending in late December) may be approaching. We could possibly try to validate this when quarterly earnings reports start coming in during the next two-three weeks.
Could it be, then, that like in Plato’s Allegory of the Cave we are chained prisoners of shadows and perceptions? When we free ourselves, we can understand that the shadows seen are not the real objects, however the light outside the cave hurts our vision and we are inclined to go back into the cave. If we are dragged and forced out of the cave, our sight will adjust to the sunlight, and eventually we will be able to see the real objects clearly. The problem is that for the rest of the prisoners, the only known reality is the perception they get from the shadows. When the freed prisoner returns to the cave to announce the good news of the true reality outside the cave, he is perceived as blind given that the change in scenery (from light to darkness) portrays him to be such. The prisoners prefer their “reality” rather than escaping the cave.
Could it be, then, that the markets are prisoners in a cave where shadows of objects are perceived as reality but they are actually searching for Lord Acton to finally complete the story of their liberation?
Market Turmoil, Plato’s Cave, and Lord Acton: Searching for the “Madonna of the Future”
Author : John E. Charalambakis
Date : September 27, 2022
Henry James described the story of an artist who devoted his entire life to a single painting as “The Madonna of the Future.” Yet, at his death, they found the easel in his studio with just a blank canvas. The market trajectory under current circumstances could be the greatest story that is yet to be written, but alas may never be written.
Lord Acton represents one of the most eloquent advocates of the modern liberal spirit. Lord Acton described faith in liberty as the ultimate human destiny since it frees us from enslaving ideas and enables us to reconcile historically-tested doctrines with the modern doctrine of liberalism. Lord Acton’s history of liberty has been described as “the greatest book that was never written”, hence his history of liberty is also known as “The Madonna of the Future.”
Could we understand today’s market turmoil apart from the pandemic? How about explaining it apart from the massive monetary and fiscal infusions of the last fourteen years as a response to a collapsing and unsustainable system of rehypothecations with questionable collateral?
Where does the misjudgment of transitory inflation, and the fact that central banks lost control of the money supply, fit into this picture?
Can we comprehend it apart from the revival of great power rivalry, the madness of Putin, and the authoritarianism of Xi?
Could we envision its solution apart from the pitiful partisan politics practiced by politicians who fail to put country first?
The market turmoil is the modern “Madonna of the Future” as it culminates and reflects a turning point in history when unprecedented forces (monetary, fiscal, geopolitical, energy, trade, demographic, demand, and supply-driven) move simultaneously and underwrite an environment of uncertainty when uncharted scenarios could deploy the world war machine.
The fact that the markets (including bonds, as shown below) are in bear territory is not news, as they were there earlier this year. An emerging currency turmoil in European currencies – especially with the UK’s sterling – along with the decline in Asian currencies makes the picture more troublesome as it exacerbates inflationary pressures, adds fiscal risks (in terms of bond market volatility), complicates mortgage markets, while also advancing a risk-off approach for equities.
“The Madonna of the Future” possibly precludes the illusion of a soft landing as recessionary fears tend to become a self-fulfilling prophecy in the face of rising rates, declining confidence, and increasing geopolitical turmoil. When we hear that global markets have lost more than $25 trillion in September (see graph below) and smaller markets (relative to the US, such as the UK markets) have lost $500 billion in just two weeks – while energy markets are weaponized and sabotaged – we can do nothing but embrace the idea that the risk of price swings makes markets more volatile. In turn, such risk impacts all markets negatively, including commodities (oil, grains, lumper, etc.).
Therefore, while an earnings recession is not visible on the horizon, the bearish sentiment makes us start thinking that the market’s bottom – unless a cataclysmic event takes place – for this financial cycle (ending in late December) may be approaching. We could possibly try to validate this when quarterly earnings reports start coming in during the next two-three weeks.
Could it be, then, that like in Plato’s Allegory of the Cave we are chained prisoners of shadows and perceptions? When we free ourselves, we can understand that the shadows seen are not the real objects, however the light outside the cave hurts our vision and we are inclined to go back into the cave. If we are dragged and forced out of the cave, our sight will adjust to the sunlight, and eventually we will be able to see the real objects clearly. The problem is that for the rest of the prisoners, the only known reality is the perception they get from the shadows. When the freed prisoner returns to the cave to announce the good news of the true reality outside the cave, he is perceived as blind given that the change in scenery (from light to darkness) portrays him to be such. The prisoners prefer their “reality” rather than escaping the cave.
Could it be, then, that the markets are prisoners in a cave where shadows of objects are perceived as reality but they are actually searching for Lord Acton to finally complete the story of their liberation?