Resorting to Zen and the Art of Motorcycle Maintenance For An Explanation of The Markets

zen and the art of motorcycle maintenanceTidying up day and coming across some notes I cannot remember making 20 years back is like knowledge discovered for the first time.

Lets say those were slightly radical and idealistic days and I present an argument out of Zen and The Art of Motorcycle Maintenance which I had copied out.

“The term logos, the root word of “logic” refers to the sum total of our rational understanding of the world.
Mythos is the sum total of the early historic and prehistoric myths which preceded the logos.
Our rationality is shaped by these legends that our knowledge today is in relation to these legends as a tree is in relation to the shrub it once was…..
Each child is born as ignorant as any caveman. What keeps the world from reverting to Neanderthals with each generation is the continuing, ongoing mythos, transformed into logos but still  mythos, the huge body of common knowledge that unites our minds as cells are united in the body of man…..
There is only 1 kind of person who accepts or rejects the mythos in which he lives. To go outside the mythos is to become insane.”

All our thoughts are shaped by the events of past crises. Bernanke is a student of the Great Depression and since then, we have lived through countless scares and close calls. Throughout the entire time of the post crisis QE, before the crisis and into the impending Taper, there are critics and naysayers, there are also the advocates and proponents of more QE. And there is the silent and voiceless majority.

The new logic is shaped by the events to date. The logic of the infallibility of the system because it is too big to fail. That logos grows with each passing day even as faith wanes with new revelations each day of vulnerabilities and cracks. As the regulators target the manipulators and marauders and regulators retire to join the ranks of the manipulating agents, some of us get disillusioned. The rest look past it and hitch themselves firmly onto the trend and play along.

I feel sorry for Mauldin, Pritchard, Prechter, Satyajit, Faber and the rest who have the time, patience, resources and the ability to think independently.

Maudlin’s latest Thoughts from the Frontline echo a forlorn wail for market rationality and logic.

“Central banks around the world have engineered multiple bubbles over the last few decades, only to protest innocence and ask for further regulatory authority and more freedom to perform untested operations on our economic body without benefit of anesthesia. Their justifications are theoretical in nature, derived from limited-variable models that are supposed to somehow predict the behavior of a massively variable economy. The fact that their models have been stunningly wrong for decades seems to not diminish the vigor with which central bankers attempt to micromanage the economy.”

It is a long stretch for the normal human cognition to assimilate, let alone rationalise.

Because the new market logic has been shaped to follow the Fed and to believe wholeheartedly in the powerful central banks – the “Romantic” approach ala Zen and the art of motorcycle maintenance – when faced with a sophisticated new motorcycle, to hope for the best and rely on the professionals to fix it.