Mason Stevens
Macro & Markets
19 Nov, 2021

Both geopolitics and investment management are about philosophy and strategy, where both incorporate at least some degree of forecasting or signalling of future events.

The consideration of our relationship to the future and the way we think about such things are couched in language, where forecasts differ through translation as well as by thought.

For example, some forecasts or perspectives may only make sense under a certain context, or in a specific language.

How many times have you heard someone say that a certain expression or experience is only relatable to certain people?

The idiom that a person is “at sixes and sevens” is an English phrase used to describe a condition of confusion and disarray, though is likely to make no sense to someone who does not have the context or the cultural background.

Likewise, the Australian expression to “beat around the bush” or the Spanish idiom “se formo tremendo arroz con mango” don’t translate well to foreigners or non-speakers of the dialect.

The former refers to a discussion that doesn’t come to a point, while the latter directly translates to “This turned into a serious bowl of rice with mango” but is interpreted to mean “this is now a big deal”.

This dynamic is humbling as when writing strategy or forecasts we’re expressing hubris that we understand current events and can to some degree interpret the likely form the future will take, often to our folly.

In a way, it’s our job to make these economic or geopolitical occurrences banal, as opposed to extraordinary, surprising or beautiful.

This avoids the impression that the world can be vast and overwhelming, as that would imply our inability to glimpse its directionality.

On the Topic of Poetry

In March this year, I told my team that I reserve the right to write one note this year about whatever I want to write about, that it wouldn’t need to convey investible ideas directly or indirectly but would likely be relevant to investing in general.

Today’s note is that note.

I’ve always been inspired by poetry’s ability to capture social mood and genre, sometimes galvanising opinion and establishing common knowledge.

Reading poetry requires slow contemplation of the universe, where it is undesirable to read through poetry quickly, lest we miss nuance and subtlety embedded in text.

The tricky part is deciphering when poetry establishes mood, or when mood establishes poetry.

Take for example Heinrich Heine, a German-Jewish poet who wrote in the mid-1800s.

On the topic of Germany’s future, he quilled:

“Thought proceeds action as lightning precedes thunder. German thunder is of true Germanic character it is not nimble but rumbles along ponderously. Yet, it will come and when you hear a crashing such as never before has been heard in the world’s history, then you know that the German thunderbolt has fallen at least. At that uproar the eagles of the air will drop dead, and lions in the remotest deserts of Africa will hide in their royal dens. A play will be performed in Germany which will make the French Revolution look like an innocent idyll.”

Heine was aware of the German mood that was forming decades before the Nazi German “thunderbolt”.

He sensed and summarised the German collective energy, rage and pride that was the precepts of the changes the nation-state underwent in the 1900s.

In a similar way, Rudyard Kipling also prophesised the fate of the British Empire:

“Far-called, our navies melt away;

On dune, and headland sinks the fire:

Lo, all our pomp of yesterday

Is one with Nineveh and Tyre!

Judge of the Nations, spare us yet,

Lest we forget – Lest we forget!”

Kipling was keenly aware that the British empire was a small island that projected power via its world-class navy through the world’s oceans, and if the navy was to deteriorate, the Empire’s status would diminish.

Kipling warned of a nation drunk with power (pomp), and of the hubris of self-congratulation.

In both poet’s cases, they saw the pride that often leads to destruction as the prideful don’t listen.

In economics we call this a “Minsky Moment”, named after renowned economist Hyman Minsky, who’s seminal works detailed how stability leads to fragility and complacency which begets panic and economic crash.

Having studied both poetry and economics, I can see why the poetic representations will likely be remembered for longer in history than economic theories, as more accessible lenses for viewing the world – though both are equally valid.

Love and Hate

Nathaniel Hawthorne, the American author wrote:

“It is a curious subject of observation and inquiry, whether hatred and love be not the same thing at bottom. Each, in its utmost development, supposes a high degree of intimacy and heart-knowledge; each renders one individual dependent for the food of his affections and spiritual life upon another; each loves the passionate lover, or the no less passionate hater, forlorn and desolate by the withdrawal of his object.”

Hawthorne wrote that we cannot have love without hate, as each is tied to each other and our ability to feeling one establishes ability to feel the other.

I share this writing as it wasn’t poetry in its pure form, though is yet again a lens to view the American psyche, and the forces at play.

Understanding Sentiment

At the very heart of our investment process, we have embedded sentiment and positioning as key criteria to assess when building portfolios or investing in specific securities.

If anything, we’re luckier than our poet forebears in that we can quantify sentiment, build neural networks and review custody and exchange data to assess market positioning.

It’s one thing to know the general mood and common knowledge of a company, country, thematic or concept, but it’s also another to gauge if people are acting upon this sentiment.

Homer Was (Partially) Wrong

Homer, author of the Iliad and the Odyssey, foundational works of ancient Greek literature wrote:

“Any moment might be our last.

Everything is more beautiful because we’re doomed.

You will never be lovelier than you are now.

We will never be here again.”

Many of you may be more familiar with that line as it’s said by Brad Pitt as he portrays Achilles, saying it to Rose Byrne as she plays Briseis, in the 2004 movie, Troy.

While Homer captured much of the hedonic qualities of the human character, he did miss that we do strive to make the world a better place, that while we may never be as lovely as we are, living, at the height of our lives, we can ensure the world is more lovely after we leave it.

Truly, understanding this may be paramount to forecasting the mega-trend of ESG, decarbonisation and impact investment; but also, the shapes and forms that geopolitics, trade negotiations and investment flows take on.

Similarly to Homer, but in modern times in Australia, we recite Dorothea MacKellar’s 1908 poem titled “My Country”:

“I love a sunburn country, A land of sweeping plains,

Of ragged mountain ranges, Of droughts and flooding rains.

I love her far horizons, I love her jewel-sea,

Her beauty and her terror – The wide brown land for me!”

This may not seem to be connected to nuclear-powered submarines, or a Chinese invasion of Taiwan, inflation, equity market valuation, US mid-term elections…. but I assure you, it is.

Once the mood is understood, the rest seems to follow.

The views expressed in this article are the views of the stated author as at the date published and are subject to change based on markets and other conditions. Past performance is not a reliable indicator of future performance. Mason Stevens is only providing general advice in providing this information. You should consider this information, along with all your other investments and strategies when assessing the appropriateness of the information to your individual circumstances. Mason Stevens and its associates and their respective directors and other staff each declare that they may hold interests in securities and/or earn fees or other benefits from transactions arising as a result of information contained in this article.