In 5th Century B.C., Zeuxis was a celebrated artist of good humor and unique style. His technique created volumetric illusion by manipulating shadow and light. Eventually his style influenced the artists that shaped the Italian Renaissance. His command of light and illusion continue to be legendary to this day, and yet there was one contest in which, even he was bested.
Chronicled by Pliny the Elder in his book, "Natural History" described an ultimate contest of artistic illusion that was staged to determine the greatest artist. Rivals; Timanthes, Eupompus, Parrhasius, Androcydes, and Zeuxis all produced illustrations that showed great skill.
According to Pliny the Elder, "Zeuxis produced a picture of grapes so dexterously represented that birds began to fly down to eat from the painted vine. Whereupon Parrhasius designed so lifelike a picture of a curtain that Zeuxis, proud of the verdict of the birds, requested that the curtain should now be drawn back and the picture displayed. When he realized his mistake, with a modesty that did him honor, he yielded up the palm, saying that whereas he had managed to deceive only birds, Parrhasius had deceived an artist."
It wasn't that long ago that President Obama was able to paint a picture of America in ways that didn't reflect her true beauty or nature, and that the masses would believe. People began to see with their mind's eye, while forgetting past greatness, and ignoring future potential that was promised as part of the pact of being an American. Instead, we were told oceans would stop rising and we could stop working, and all the wrongs of yesterday would be resolved. We were told not to dream, because in this world grapes grow everywhere and everyone is entitled.
Like birds flocking to Zeuxis' painting, the masses truly believed a master illusionist could wipe away the hunt for happiness and inner satisfaction, with free stuff and flowery language. It made for such a wonderful picture until it failed to sate our hunger...because it was never real. Now, Americans are like those fooled by Parrhasuis trying to pull back a curtain to see what's behind the facade. However, we keep finding out that it's all a facade. None of it has been real, except the disappointment, the frustration, and the lingering doubt about everything.
Words (and actions) to live by in 2014:
It looks like the word for 2014, will be turbulence closely followed by defiance.
The stock market set the stage stumbling out of the starting blocks, and tripping over a myriad of concerns as a reminder of the laws of gravity. Oddly, an early intervention might be coming from an unlikely source. A central bank that went against natural instincts and a dictator-like strongman might put the burgeoning emerging nation's currency crisis to rest-for the moment. Turkey's central bank hiked short-term lending rates to 12% from 7.75%, which is shocking - in a good way - the world, while agitating Prime Minister Recep Tayyip Erdogan.
Our central bank would never be so bold at the start of a crisis, and many don't think the new chairman of the Federal Reserve would make any significant decision without the counsel of the White House. This is why deflation could be a problem near term, and inflation will be a problem down the road. In the meantime, the Federal Reserve wraps up a two-day meeting today and there will not be any changes to policy, even as it looks like maybe they pulled the trigger too soon with respect to tapering. That is, if they thought we'd all live happily ever after. The fact is all accommodation should be pulled and the Federal Reserve should fold its tent.
Of course, that will never happen.
In the meantime, President Obama promises more executive orders and end-runs around Congress, and around the Constitution. I listened to the State of the Union address, hoping for at least a single moment that like Zeuxis, there would be the realization of a single mistake with modesty that would do us all honor. In the end, the biggest news last night came from the old Ottoman Empire that wants to be a real player in the modern world, that we will protect our currency, sending the right message to the world, and to its most powerful politician.
That overnight pop, via Turkey, faded after European markets opened and it was revealed that the move involves a fair amount of smoke and mirrors and the hike was really 225 bps not 425 bps (according to Goldman). Then there's the latest round of earnings where most companies beat but guidance, from a wide swath of names and industries, was widely disappointing.
This line from AT&T (NYSE:T) bothers me although it's a business that isn't the broad proxy it once was:
"Outlook 2014 assumes no lift from the economy..."
Boeing (NYSE:BA), which set full year records for revenue, earnings and backlog, sees FY14 earnings at the high end of $7.20 the street was looking for $7.48.
Canadian Pacific (NYSE:CP) sees FY14 earnings of $8.35 Canadian the street modeled $8.41.
EMC Corp. (EMC) sees earnings of $1.95 analysts figured it would be $2.04.
Praxair (NYSE:PX) says the high-end of earnings for this year would be $6.55; The Street came into the session looking for $6.65.
The key support points below held earlier in the week and remain a critical test for the market:
- S&P 1,750
- DJIA 15,739
- NASDAQ 4,000
While we don't expect news from the Fed, we suspect there is enough anxiety about a reversal in the tapering decision that the announcement moves the market in a major way. I think it could help reverse the selloff as a vote of confidence for the economic recovery: feeble but still intact.