No Interest

I so despise the current markets where risk takers are being rewarded with puny returns relative to the HUGE risk they are taking, yet the common wisdom is that the risks are actually very small when central banks have your back.

I have never deleted as many macro market commentaries from my inbox, even the newspaper and my favourite blog sites cannot shake the malaise and contempt I feel for the markets and her participants.

I have been here before (a couple of times) and I know how quickly the inspiration and passion will return when I see/feel some sort of equilibrium return. I have no interest in changing the fabric of the tapestry I have designed as my capital world view.

I am a contrarian with a highly activated warrior archetype force-field. I write this feeling proud of this “affliction” but caution myself not to become too identified with such a polarizing force as it can be highly destabilizing.

Suffering has made me more connected

It dawned on me yesterday while talking things through with my guru that the suffering I have been going through the last few months has made me more connected to my creator.

No parent should see their child suffer, for me and my family the last 8 months has been a terribly painful experience that at times has felt like a never ending nightmare. To add to that I have encountered extreme volatility on the job front, with my income being sporadic to say the least.

However with all this negativity and dare I say it “suffering” I have consciously experienced and felt emotions on a very deep positive level; this is where Jung’s uniting of opposite’s plays an interesting role. By exploring my pain I have actually become more connected to its source and while the pain is still their I am able feel a deep level of acceptance at the same time.

When one is cruising through life and things are going swimmingly it is very hard to experience things on a deep level. Laughter, fun and frivolity are superficial experiences, there is nothing wrong with this, but it is very hard to grow in such an atmosphere.

On that philosophical note, I am more than happy for all the suffering to stop 🙂

Too Far Fetched

My wife and I recently approached Steven Spielberg and offered him the movie rights to our life story, he declined it because he said it sounds too far fetched.

The last 3.5 weeks have been off the charts crazy, I was approached by an international company to join them, flew to head office in Europe, took the job, worked in another city to the one I lived in for 2 weeks and then resigned last week. During this time my wife looked after our home with a seriously sick daughter. In short our lives were turned upside down.

One of the small benefits of the new job was the fact that I moved back home with my mom for 3 nights a week. My mother remarried after my father passed away, my poor stepfather probably had a heart attack when he heard his 44yr old step son was moving back home – LOL.

Hope to share many more stories of personal growth and insight from this way out experience.

Expertise and Judgement

As I have mentioned in a previous post, Sleeping beauty the difficulties associated with watching a loved one in pain and not being able to help. I have come to realize that whenever someone’s expertise is sought in no matter what field there is very little certainty the more complex the condition.

I am not referring to a case where there are scientific tests where a pathology report can give a confirmed diagnosis. I am talking about those complex mosaics where the diagnosis comes from looking at many different variables. I know this first hand as my step-father is a doctor and I have listened to him describe how one digs deep into their experience and look for an intuitive edge when trying to make a diagnosis of a complex condition. He always says medicine is an “art and part science”.

The other day a certain condition presented to the doctor looking after my daughter that prompted us to consult a good friend of ours who is a pediatric cardiologist. Following a lengthy consultation it appears we may have come up with a rare condition diagnosis that could explain my daughters hell over the last 6 months. However, it isn’t so clear cut as that. The team of doctors on my sleeping beauties case are not all convinced with this new diagnosis.

When I think of the markets and the economy I used to think as a young university student that the answers were clear-cut in black and white. It seemed so obvious if inflation was at x level and interest rates at y that the obvious solution would be z. As I got older I realized that the variables I was considering were only the main ones, however each main variable had their own derivative branch of visible or psychological variables making for an infinitely complex system, that NO ONE EXPERT has the solution for all the outcomes. At this point of my epistemological journey I realized that one has to apply considered judgement to the complex.

Last Sunday I spent a few hours on a very important communal committee which required deliberating on a policy that would have far reaching consequences. The person who made the largest contribution to the deliberations was an active Judge of the Supreme Court. I was really impressed by the process in which he unpacked and then approached the issue.

This got me thinking about how we deal with decisions and express expert opinion without absolute knowledge. Like a judge who wasn’t at the scene of the crime, there is no way of knowing with absolute certainty (excluding cases where there was video footage, like the blood test for a doctor) who did what exactly. Rather the expert is expected to consider all the evidence and apply a test for reasonableness. I think we need to really view ourselves like judges when making a judgement call on the markets.

Ignorance is Bliss and Insight is Torture

I have a friend, lets call him Zed, who despite being a lovely person, has always been afflicted by the “Keeping Up with the Jones’s” syndrome. In fact Zed says he is the Jones’s 🙂 .

Zed is academically smart and he and his wife have solid professions, but not the type that you would associate with substantial wealth accumulation. However, that is not something that will stop a hungry, ambitious person with no knowledge of economic history, and a favourable interest rate cycle. In fact the most favourable interest rate cycle of all time.

You see 15 yrs ago Zed converted to the Australian religion of Property Only goes up. This myopic economic understanding has proven exceptionally profitable for Zed, as he now lives in a $5 million home with two luxury cars and two overseas holidays annually.

More recently the absurdity of Zed’s circumstances highlighted that we have seen this movie before. In fact it wasn’t a long time ago across the Pacific Ocean pond that we saw the US housing market collapse under the weight of bad loans. Here is the part that makes this story point come to life.

Zed just ordered a dream luxury sports car to bolster his material image. Ok we could forgive Zed if things on the business front were humming along. No, if only that were the case. Zed’s business is going down the toilet his turnover has been steadily dropping over the last few years and business is currently so bad that he is barely able to draw a reduced salary. But fear not, interest rates are so low and the growth in value of his residential property has provided him with a very nice equity cushion, which he happily draws down on. Gone are his interest rate fixes which might give one certainty for a few years in favour of milking every cent of the lower rates to finance his extravagant lifestyle.

According to Zed I am a dumbo and don’t understand the demographics and the fact that property has only gone up or sideways for the last 40 yrs. The fact that I have a Ph.D. in economics and spent more than 12 yrs as a senior executive in the property industry is lost on his cognitive bias, and financial need to be right.

Meanwhile I have absolutely no desire to lead the extravagant lifestyle my friend Zed “enjoys”, but I watch him increasing his debt against his inflated asset all the while knowing that long term consumption in substitute of investing in productive assets is a one way journey to poor street. I am witnessing Zed climb an ever higher diving board, but he doesn’t realize that not only is he diving into a shallow pond but the water in which he is diving into is leaking.

Knowing that there is only one way this will all end is absolute torture as I watch good people fall into the traps of materialism and to a lesser extent have to endure the ridicule of my circle telling me how I am so wrong. Remember the famous words, “this time is different” – Not!

Hoisted by Your Own Petard

I am sitting in my local coffee shop sitting behind a group of brash high school boys who instead of being in school at 10am are busy sipping coffee and ordering fancy breakfasts. There is however one young ring leader whose arrogance and self belief in my opinion is climbing off the charts, I hope this isn’t my own bias but a fair observation.

I don’t know enough about this kid to comment on whether he is a nice person. However I do know the family and know he comes from enormous wealth. He has been built up by his parents and their considerable influence as a tech genius. He knows nothing of my observation as I watch his feet tapping away with all this energy. He is banging away on his iPhone and his buddies are hanging on his every word. He has just come back from a trip to the US where he “interned” for some of the great companies and gained considerable media attention, all while still at school.

I end with my title line, not sure why that phrase came to mind but its meaning I think is quite apt. In many similar cases one creates a monster that lands up blowing up in ones own face.

Different types of Personality

I have been quiet of late. I feel a lack of energy personally when thinking about the markets, I think it relates to the fact that I am painfully integrating the fact that logic and common sense has very little if any place in a market engulfed in a “complex”.

What I want to write about today stems from two recent encounters where I experienced a completely different side to a particular persons personality. Lets start with a quote about a persons persona from Jung.

The persona is a complicated system of relations between individual consciousness and society, fittingly enough a kind of mask, designed on the one hand to make a definite impression upon others, and, on the other, to conceal the true nature of the individual. “The Relations between the Ego and the Unconscious” (1928). In CW 7: Two Essays on Analytical Psychology. P.305

In both the instances I am referring to the individuals are typically shy, quiet and reserved (introverted) yet placing them in a certain public setting their persona completely changes to the opposite and they become this outgoing, theatrical extrovert.

My experiencing of these two events at first seemed quite shocking but as I thought more about it in the moment I started smiling, as I realized I was witnessing a persona in a true state of consciousness.

Consciousness-opposites

I will end with the comment that I believe the markets themselves express these very same personality attributes. You see it in volatile markets (extrovert) or in quiet low volatile markets (introverts). The bottom line is we all need to express ourselves consciously and that includes the markets. We cannot be one dimensional it is important that we experience those opposites to fully integrate what we are feeling on the inside in our unconscious minds.

My understanding of market regime changes fits nicely with this observation in a social setting.