FEEL THE RHYTHM: MUSIC AND THE MARKET

Zarathustra stood there like one drunken: his glance dulled, his tongue faltered and his feet staggered. And who could divine what thoughts then passed through Zarathustra's soul? Apparently, however, his spirit retreated and fled in advance and was in remote distances, and as it were "wandering on high mountain-ridges," as it standeth written, "'twixt two seas,--Wandering 'twixt the past and the future as a heavy cloud… It carrieth me away, my soul danceth. Day's-work! Day's-work! Who is to be master of the world?

 (Freidrich Nietzche, LXXIX. The Drunken Song, ‘Thus Spake Zarathustra’)

As long as the music’s playing, you’ve got to get up and dance (Chuck Prince, Citigroup)

Models currently in use are based on the misconception that markets can only foreshadow events, they cannot shape them. My approach recognizes that financial markets can also precipitate or abort future events (George Soros, ‘The Alchemy of Finance’)

"The symphony must be like the world. It must embrace everything" (Gustav Mahler)

• The market - property, commodities, foreign exchange - follows the rhythm of music. 

• This applies especially to the stock market.

• The stock market is a million different instruments and tones comprised of market participants and speculators together in a national orchestra. (With the merger of the Singapore exchange and ASX, we have a much larger symphony).

• The conductors of Australia’s well-managed companies, the cream of business, drive the market but, as with any great conductor, they must anticipate it also.

• For as Gustav Mahler wrote, “a Symphony is the World”.

• Mahler further observed that “Tradizion ist schlamperei”: tradition is sludge. This requires any great conductor to observe the orchestra members and the group and inner dynamic and react accordingly. Conventional dictates, though parasitic to traditional risk management, can retard performance.

• Indeed, the late great Australian conductor Charles Mackerras emphasised ‘Australlung’, or emanation. Conductors and market leaders need to seek ‘360’-degree hindsight and foresight to beat the S&P 200.

• They aim to adjust their institutional or individual investment performance/portfolio to rising and falling indices as well as wider political and socio-economic events.

• Hence, master investors such as Warren Buffet and George Soros are able to anticipate, if not exactly predict, trending toward leading market events: the OPEC Crisis, Volcker-led unravelling of inflation and the eminence of Reagan’s Imperial Circle, the rise of a Super-Bubble fuelled by credit expansion and growing commodity prices, the Brady Bond/Latin American Debt Crisis and the Swedish Banking Crisis. (Cf. ROGOFF and KRUGMAN). Perhaps they did not expect the Asian and Russian debt crises, but they were waiting for the GFC.

• Anticipation and rhythmic attuning to the savage despondencies and euphoric joys of the Market – in all its forms – as well as to the atomic mechanics of daily market performance improves, or at the very least, cultivates hindsight and foresight: the ‘360 approach’.

• In the final analysis, one must watch how the numbers dance.