An influential and cultured member of the Sanhedrin, Nicodemus follows Jesus by night and hides his reborn faith by day. Fifteen centuries later, in Europe that began to tear itself apart in a religious conflict that would last a hundred years, Calvin condemned as nicodemites the Protestants who lived in Catholic lands, outwardly conforming to official religious practices and following their true faith only in pectore to avoid the charge of heresy. Martyrdom is better, says Calvino. No, primum vivere, instead the Socinians would say quoting Athanasius from De Fuga in Persecutione and the Spanish theologian Juan de Valdés would take the same position. Coming from a family of Jews who converted to Christianity in order not to be expelled from Spain and subsequently persecuted and burned at the stake with the accusation of having secretly converted to Judaism, Valdés, secret valet of Pope Clement VII, sympathizes with Erasmus and Luther but he kept his convictions to himself and a small circle of followers and thus managed to die a natural death in 1541.
In the tradition that goes from Machiavelli to Leo Strauss and Kojève, today's market nicodemite must apply a reticent way of expressing himself to the economy and the stock market. It must outwardly pay homage to the dominant paradigm, that of global acceleration and the long-lasting equity bull market (with a strong summer rally just starting), it must be overweight in equities in its portfolio and it can farm overnight, with closed markets and with some trusted friend, doubts and perplexities. And so during the day, for example, it joins the uninterrupted chorus of voices that affirm that the rise will last precisely because there is a lot of skepticism around. At night, by the light of a candle, he comments that perhaps there isn't all this skepticism around if everyone, absolutely everyone, says with disapproval that it exists. During the day, the Nicodemite pays homage to the strong recovery that has already begun in Europe and exhibits a dutifully rich portfolio of banks and Mediterranean securities. As evening falls, he meditates on the severe words of Otmar Issing, according to whom Germany is rapidly dismantling the structural reforms of the last decade and is losing competitiveness. As for the continent as a whole, aside from the fiscal easing Merkel granted last year to nearly every eurozone partner, it fails to see major growth drivers, not only at the macro level but also in listed company earnings. . During the day he adheres convinced to the idea of a big relaunch coming thanks to the measures that the ECB is preparing. In the evening, the influential Adam Posen commented, stating from the ECB seminar in Sintra that the rate cut will have a very limited effect and that the euro will not fall much below current levels. During the day he declares his confidence in the recovery measures decided by the Chinese authorities to reach 7.5% growth again this year. In the evening, he rereads Nomura's Zhiwei Zhang, who notes how these measures are increasingly frantic, a sign of the government's nervousness about growth which, in reality, is still slowing down. By day she proclaims his confidence in the recovery of productive investment in America. With all the cash they have, with a high cash flow and with such low interest rates, it is impossible for companies not to take advantage of it to buy new machinery and new software.
In the evening, however, he notices that nothing significant is yet to be seen and that the companies, harassed by the activist raiders, are trying to reduce their liquidity by buying shares of their own or of companies to be acquired, not machinery. During the day, the Nicodemite adheres to the official theory according to which the great American acceleration began in the summer of 2013, suffered a temporary arrest in the first quarter due to the Arctic vortex and is now solidly on its way to confirming and surpassing the brilliant results of the second half of the 'Last year. In the evening, with the blinds closed, he reads and comments on Richard Koo who wonders if the exception, instead of the weak first quarter, was not by chance the two strong quarters that preceded it, driven by an anomalous inventory cycle and from a real estate recovery that has already deflated. By day, he says he believes bonds will soon begin to decline, as befits when there is a strong global recovery. In the evening, he can't help but notice yet another rise in Treasuries and Bunds, certainly encouraged by the overabundant liquidity, but also by the Fed's fears about real estate. By day he says he is confident that central banks will be able to manage a painless exit from QE in the coming years and thus ensure many more years of global growth and equity bull markets. In the evening he rereads William White of the OECD, who notes how we will move by trial and error into totally new territory, with a high risk, at the very least, of volatility. And it is always White who points out that, in the next recession, the world will have 30 percent more debt than it had in 2007. This double standard, day and night, is not that difficult to manage. We are in a phase in which the dominant paradigm is very strong. It is simple, it is approved and disseminated by policy makers and it is also very attractive, because it makes all those who have the money to follow it get richer. Its sturdiness is proven by the willingness of the market to store all the disturbing elements in the drawer. It will take not just one, but a series of particularly disappointing events to get everyone, if any, to return to the blackboard to work out another paradigm.
Since at the moment we see only isolated negative elements or, like the rise in official rates, still a long way off, there is no reason not to take advantage of the state of grace of all markets, including bonds. Our thesis is simply that we can be adult optimists who enjoy the upside without trusting us and without hiding our problems. Rationalizing the rise by thinking that it is inevitably due to a better world out there can be dangerous because it can gradually make you lose your sense of risk and limit. And while it is likely that we are really only halfway through the expansionary cycle, it is almost certain that the second half will be more erratic and volatile than the first. Invest yourself, therefore, but do not blind yourself. Positive, but with a cold head. Nicodemus, the anti-hero, was eventually proclaimed a saint. His feast day is August 31st.
