The Benedictine Anselm addresses the atheist. You are capable of conceiving, he tells him, that thing than which nothing greater can be thought. God, therefore, is in your intellect. What you deny, then, is only that God exists in external reality. But if it is as you say, then you are in contradiction, because you implicitly admit that a God existing in external reality would be greater (since he really exists) than what you thought, which is therefore not the greatest. The truly greater Being must therefore also exist. This lightning argument, for which Anselm of Aosta will be proclaimed Doctor Magnificus by Clement XI in 1720, is contained in the Proslogion of 1077. Descartes, Spinoza, Leibniz and Hegel will make it theirs, Hume and Kant will try to refute it. The atheist Bertrand Russell, in the twentieth century, will define it admirable, famous and worthy of great respect. Deriving being from the thought of being, reversing the order of daily experience, also distinguishes the equity bull markets in the maturity stage.
In the first phase, in fact, the stock market rise runs after reality and tries to reflect it late. In the second phase it is the reality that must chase the rise in the stock market and become worthy of it. In the winter of 1999-2000 the markets had a vision (with obvious hallucinatory features) in which a new era of spectacular technological acceleration would bring, in addition to universal welfare, profit margins of milk and honey where, for the moment , there was just an immense bonfire of wealth. A decade later a religious studies enthusiast, Robert Geraci, will publish a book entitled Apocalyptic Artificial Intelligence and will highlight the mystical, alchemical, golemic and apocalyptic roots of singularitarian and transhumanist theories which have been the ideological basis of the Internet bubble and which they still inspire influential Silicon Valley figures today. As we well know, the utopian and messianic thought of 1999-2000 failed to produce a reality worthy of it. As had happened after the four Great Religious Awakenings experienced by America in the past two centuries, the fever of the New Era was succeeded by a period of depression. The 2003-2008 stock rally soothed the disappointment but was completely devoid of mystical inspiration. It was and was experienced as the mere product of expansive monetary policies and a by now mature globalization. It rewarded prosaic and earthy sectors such as housing, mining and energy and continued to punish the storming of Internet 1.0. The crash of 2008 was a classic banking crisis, magnified by excess leverage in the system. Great, great phenomenon, but not great.
Today, after the fifth birthday of the hike, we find ourselves in a psychological situation halfway between 1999-2000 and 2003-2008. Internet 2.0 makes us dream again and Facebook spends 19 billion to buy an app and the 50 people behind it. The multiples of 3D printers, electric cars, social networks and retail and business exchange platforms are once again stellar, while mining, steel and the sectors of the first industrial revolution (railways excluded) are once again suffering. It is 1998, but without emphasis, in a minor tone and with companies that sometimes also make profits, or at least seriously intend to make them.
It is a 1998, and not a 1999, also because everything happens between institutions. Individual investors are not yet in the market except through funds. There is no unhealthy and feverish atmosphere of the arcade. Those who have a job hold onto it tightly and do not abandon it to devote themselves to trading from home. M&A activity is brisk enough but, with the exception of limited areas of Internet 2.0, remains strictly within the bounds of common sense. Banks recapitalize and reduce assets. Mortgages are virtually nationalized in America and wiped out in Europe. We are scandalized by the booming car loans (which have already ended) because there is nothing more serious to be scandalized about. The analogy with the second part of the 2003-2008 increase, on a psychological level, lies instead in the fact that the market, at this point, feels, as it did then, fully entitled to remain at the level it is at, however high this may appear. The difference is in the justification of this attitude. Starting from 2005 and up to the crash of 2008, the increase is rationalized by looking at the past. It is the theory of the Great Moderation. We learned once and for all, we repeat ourselves every day in those years, to grow without inflation and without excessive public deficits. Since moderation is here to stay, we will not have the classic warming phenomena that traditionally end an expansionary cycle. So economic growth and equity rally will last until an exogenous shock interrupts them.
Today rationalization is done by looking to the future and no longer thinking of a stable and nirvanic state like that of the Great Moderation but assuming a dynamic path of redemption and rebirth. We have suffered, we are told, under the weight of deleveraging and austerity, we have gone through these years detoxifying ourselves with difficulty from the excesses of the last decade (the one in which we felt so moderate). Now the atonement phase is coming to an end and we can enjoy the fruit of these sacrifices in the coming years. Global growth is about to accelerate synchronously (with the exception of some emerging markets and with a few flaws in China) and without inflation. The best, therefore, is yet to come. The market believes so much in the synchronized acceleration thesis that it refuses to consider dangerous the US slowdown this quarter, the European fragility evident in some recent data and the short but intense recession that Japan will experience in the second quarter. Not even the Ukrainian issue, the typical potential exogenous shock, shakes certainties with the sole exception, so far, of the German stock exchange. In short, the thesis of acceleration is so beautiful, solid and perfect that it must necessarily have the dignity of existence, Anselmo would have said, even in external reality. Are we then facing a blind and arrogant market that will inevitably face bitter disappointments? Not necessarily. For once we think structurally and rationally. The ingredients for acceleration are all there, starting with a large global creation of liquidity also in 2014. Then there are less restrictive fiscal policies that really suggest an acceleration in aggregate demand for this year and for the next.
On the other hand, the solid awareness of one's right to remain at high altitude does not correspond, on the stock exchanges, to a euphoric attitude. The SP 500 is up 4 percent year-to-date, the Dax is down 9 and the Nikkei is down 70. As for Ukraine, the escalation of the confrontation between the West and Russia is likely to peak next week. After the referendum in Crimea and the introduction of mutual sanctions, it will stop. Going further will in fact be too expensive and risky for everyone. Putin will keep Crimea and the West will keep a Finnishized Ukraine with a strong degree of autonomy for Russian-speaking regions. An agitated surface, therefore, and calm deep waters. Going further down, however, the underlying tectonic plate, the one that moves very slowly but has tremendous energy, is moving inertially in the wrong direction. The Bank for International Settlements, which monitors the plate as its institutional task, reminds us that the global debt has risen from 100 to XNUMX trillion since the crisis. The next earthquake is still far off, sure, but let's remember from time to time that we haven't become invincible.
From Fugnoli's blog
