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(Notes): on Artemis Capital Management piece ‘Volatility of an Impossible Object’.

Volatility of an Impossible Object Risk, Fear, and Safety in Games of Perception

The blivet portrays two irreconcilable perspectives at once, creating a “lost” layer between the top two rods, and an impossible extra, vanishing rod in between the bottom two.

A blivet, also known as an “impossible fork,” is an optical illusion and an impossible object. It appears to have three cylindrical prongs at one end which then mysteriously transform into two rectangular prongs at the other end. Often, upon first glance, the blivet looks entirely possible, but upon closer inspection quickly becomes undecipherable. (New World Encyclopedia:

Blivet-New World Encyclopedia

–> “Modern financial markets are a game of impossible objects.” – Chris Cole

M.C. Escher’s 1961 ‘Waterfall’. –> It is intended to be an artistic abstraction of the self-reflexive mechanics of modern monetary theory.

–> “In a capitalist cityscape the aqueduct begins at the waterwheel of monetary expansion churning out a torrent of boundless fiat current that streams through the dense metropolis. The river of money flows from the edge of the aqueduct into the waterfall of deflation and then over the waterwheel suspended in a never-ending cycle of monetary expansion and crisis. Beneath the city the fires of inflation burn threatening to one day consume the monetary mechanism. “

Mr. Cole poses a question to the reader, ” Is the reflexivity of flowing fiat currency the solution or the very source of the paradox?”

Answer: T.B.A

Cole continues on the new market reality.

Likewise how certain are we that the elevated two-dimensional prices of risk assets and low spot volatility have anything to do with fundamental three-dimensional reality? In this brave new world volatility is an important dimension of risk because it can measure investor trust in the market depiction of the future economy. The problem is that the abstraction of the market has become an economic reality unto itself. You can no longer play by the old rules since those rules no longer apply. ”

The rest of the paragraph I found inspiring to say the least.

” For the next decade this market is going to reward philosophers over students of business. Why? Because the modern investor must hold several contradictory ideas in his or her head at the same time and none of them really make any sense according to business school case studies. Welcome to the impossible market where…”

The next section, which reviews the resurgence of the Global Currency Wars that have been ignited by the United. States Federal Reserve by the announcement QE3. This easing plan comes in the…

“form of unlimited $40 billion monthly purchases of MBS , low – rates until “at – least mid 2015”, and the continuation of Operation Twist in an effort to stimulate job growth.”


Moreover, Mr. Cole continues by noting what Mr. Mario Draghi (the silver-tongued fox) and his crew have done to save off a Euro-Zone meltdown.


“across the pond the ECB also agreed to fund unlimited purchases of Euro – zone debt to tame the sell – off in Spanish debt.”

The ECB was on “ready 5” to correct any fallout from Greece’s parliamentary election in July 2012. Markets where expecting the outcome of the election to fuel an equity rally, but that’s not what happened.

From Business Insider,

“To recap, the pro-bailout, New Democracy party won the elections assuaging fears that Greece could soon exit the euro in a disorderly fashion.

However, yields on Spanish debt soared ever higher today.  The slump in ten-year notes pushed yields as high as 7.2850 percent, a euro-area record, before falling back.  Other issuances also hit fresh highs, with two- and five-year yields topping 5.577 and 6.723 percent, respectively.

Part of the concern sending borrowing costs to these heights is the threat that Spain could lose access to the debt markets as its banking sector wobbles and creditors worry they could be subordinated to bailout guarantors.

The 10-year bond finished the day at 7.1580 percent, forming a bizarre middle-finger-like pattern.

Perhaps this is the bond market’s way of saying that the elections solved nothing. ”


Mr. Cole points out how,

“Massive injections of monetary stimulus by the world’s two largest central banks have reignited another round of international currency w ars motivating central bank action from Japan to Turkey.”

Back in 2012, the current market conditions were flattering and with all Central Banks stepping into the void, every global assets class has rallied in perpetuity.




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