'..Among the many things they’ve all taught, and stood for, is that the person we might call our adversary is another human being, suffering in a way that we may not understand - perhaps from hatred, ignorance, fear, or perceptions of injustice - and that the only path to reconciliation is to encourage each to understand and address the suffering of the other. It’s always possible to do that in a way that is consistent with our own security.'<Blockquote>'While human beings tend to be very eager to extrapolate existing conditions, and even enlarge them in their imagination, they are less apt to envision what isn’t already happening. The problem with the future, quite simply, is that it hasn’t happened yet. To see the future, one has to look deeply at the seeds that are already there in the present, but simply haven’t come to the surface. One has to recognize the interconnectedness of things - the fact that nothing has a separate self, but is instead the manifestation of a whole set of causes and conditions. A “cause” is a seed. A “condition” is a circumstance that allows the seed to grow.
For example, overvaluation can be thought of as the cause of market collapses, but the aversion of investors toward risk is a condition that allows the cause to manifest. Steep market losses are inherent in extreme overvaluation, but historically, a risk-seeking attitude among investors (demonstrated by a combination of uniformly favorable market internals and the absence of overbought market action and overbullish sentiment) has enabled continued speculation.
As I’ve regularly noted, in the face of the Federal Reserve’s zero-interest rate policies, speculation continued even after “overvalued, overbought, overbullish” extremes were reached, something we hadn’t seen in prior market cycles. One had to wait for dispersion across market internals for the market to become vulnerable to losses. Part of the reason we cannot rule out a market collapse here is that both the causes and conditions that have historically enabled market collapses are now present. The conditions may change in a way that defers a collapse for a while, and we’ll monitor market action to gauge that possibility. But given the valuation extremes that are already established, the cause will not go away.
I view steep financial market losses to be inevitable over the completion of this cycle. Still, we know how to deal with that risk. My concerns have frankly become much broader in recent weeks, particularly in the direction our nation is taking. It strikes me that because the U.S. is a relatively young nation, we are less inclined to recognize seeds that can grow into abuse of power, because the worst examples we recall across history have been in other nations. The progression thus far rhymes more than I’d like. I think it would be wrong to abandon vigilance and scrutiny, particularly where various proposals could have the effect of weakening the separation of powers between the legislative, executive, and judicial branches. Already, the inclinations to waive Congressional rules, to deride and offer selective access to the press, and to weaken ethics oversight are of concern. Recalling Thomas Jefferson, “The only security of all is in a free press. The force of public opinion cannot be resisted, when permitted freely to be expressed. The agitation it produces must be submitted to.” Another concern is the embellished focus on external threats. As James Madison wrote, “If tyranny and oppression come to this land, it will be under the guise of fighting a foreign enemy. The means of defense against a foreign danger historically have become the instruments of tyranny at home.”
I woke the other night thinking about the coming years; in the markets, in our country, and in our world. I reached over in the dark to the stack of 3 x 5 cards on the table next to me, composed these words, and went back to sleep:
To recognize the future in the seeds of the present
is to cry before sorrow falls, and to laugh before joy arrives'
On PeaceThose of you who know me well know that I’ve had three mentors in my life; two of them, Jimmy Carter and my teacher Thich Nhat Hanh, who I’ve been blessed to call my friends; and Dr. King, who our nation rightly celebrates this week (and who, to close the circle, long ago nominated Thich Nhat Hanh for the Nobel Peace Prize). Among the many things they’ve all taught, and stood for, is that the person we might call our adversary is another human being, suffering in a way that we may not understand - perhaps from hatred, ignorance, fear, or perceptions of injustice - and that the only path to reconciliation is to encourage each to understand and address the suffering of the other. It’s always possible to do that in a way that is consistent with our own security.
My sense is that the peace of our world, and the civility of our nation, is at risk because people don’t really trust that idea. They’ve come to believe that an adversary is someone to be insulted, and attacked, and ultimately destroyed. That’s the behavior that they see modeled for them; encouraged to ignore our interconnectedness - that all of us are empty of a separate self, and full of causes and conditions that are common to our humanity. We become a stronger nation and a better world when each of us feels heard - and I don’t mean just when “we” feel heard and respected, but also when whomever we call “they” also feel heard and respected.
It’s often imagined that peace is the result of sufficiently crushing one’s opponent; of inflicting so much injury and suffering that they surrender. There’s little doubt that conflicts can be ended in this way, but only at terrific cost, and with deep scars that feed later hatreds and conflicts. Others somehow come to imagine that waging peace requires one to lay down defenseless. It’s just not so. Peace doesn’t mean that one doesn’t defend oneself, or refrain from criticism. Peace doesn’t demand the absence of strength. It asks each side to see and understand the suffering of the other, whether that suffering is rooted in reality or misperception. It asks us to refrain from needlessly provoking the adversary, or to insult them in order to boost our pride. It asks us to look to address their suffering in ways that are consistent with our own security. If peace demands anything from us, it is to refrain from being infected by hatred. Dr. King recognized that:
"Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that. I have decided to stick with love. Hate is too great a burden to bear."Even in the midst of a fight, one can still remember that the goal is reconciliation. As the revered martial artist Morihei Ueshiba wrote:
“To injure an opponent is to injure yourself. To control aggression without injury is the Art of Peace. In the Art of Peace, we never attack. An attack is proof that one is out of control. Never run away from any kind of challenge, but do not try to suppress or control an opponent unnaturally. When an opponent comes forward, move in and greet him; if he wants to pull back, send him on his way. If your heart is large enough to envelop your adversaries, you can see right through them and their attacks. And once you envelop them, you will be able to guide them along a path indicated by you, by heaven and earth. Enter deeply into an attack and neutralize it as you draw that misdirected force into your own sphere. Even the most powerful human being has a limited sphere of strength. Draw him outside of that sphere and into your own, and his strength will dissipate. The Way of the Warrior, the Art of Politics, is to stop trouble before it starts. It consists of defeating your adversaries by making them realize the folly of their actions. The way of a Warrior is to establish harmony. Aiki is not a technique to fight with or defeat the enemy. It is a way to reconcile the world and make human beings one family.”Study carefully the moments of peace that came without intolerable violence, and you’ll find that the common denominator was the recognition by each side of their common humanity.'
- John P. Hussman, Ph.D.,
Cassandra's Song, January 16, 2017</blockquote>
'..Yet for going on nine years (incredible or what?) instabilities have been harnessed by the powerful triad of low borrowing costs, central bank electronic printing presses and literally Trillions of “money” with apparently no other purpose than to inflate securities and asset prices. Moreover, monetary disorder on such an unprecedented global scale has been around for so long that it passes as normal..'<blockquote>'Bubble analysis for a while now has highlighted the divergence between inflating securities prices and deflating economic prospects. A case could be made these days that this gap is in the process of narrowing. I would counter that economic prospects have brightened only due to prolonged extraordinary global monetary inflation and resulting asset inflation.
It’s an especially challenging period to put into perspective. From the Bubble (global government finance – Granddaddy of All Bubbles) perspective, all the pieces are fitting into place. Things certainly do turn crazy near the end – and 2016 was consistent with such a thesis. Record stock prices were spurred by central bank responses to early-2016 market fragilities. Brexit and the Trump phenomenon arose from deep public dissatisfaction. Today’s confidence may have notable breadth, yet I question its depth.
Global markets are unstable, economies are unstable, societies are unstable, democracies are unstable and the geopolitical backdrop is unstable. Yet for going on nine years (incredible or what?) instabilities have been harnessed by the powerful triad of low borrowing costs, central bank electronic printing presses and literally Trillions of “money” with apparently no other purpose than to inflate securities and asset prices. Moreover, monetary disorder on such an unprecedented global scale has been around for so long that it passes as normal. And with so much uncertainty in the world the only thing certain is that global central banks will soldier on with QE and near zero rates. That’s been enough for the markets, trumping myriad uncertainties and fragilities.'
- Doug Noland,
Off to an Interesting Start, January 14, 2017</blockquote>
Context<blockquote>
Loving Your Enemies - By Martin Luther King, JrMorihei UeshibaThich Nhat HanhUS Financial Markets – Alarm Bells are Ringing, January 18, 2017
(Haptopraxeology) - Students of Civilization'..benefits have been diverted, via money-supply inflation, from workers and savers to the holders of financial assets.'</blockquote>