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Blain’s Morning Porridge (1) May Day 2020: Boeing – Marx Wins
Blain’s Morning Porridge (1) May Day 2020: Boeing – Marx Wins
“I fly because it releases my mind from the tyranny of petty things.”
There are going to be two porridge this morning… This is the ANGRY one.
Later I am going to post something on Sovereign Debt.. I thought I ought to separate them.. you will understand as you read on.
May 1st is the day we associate with the Workers of the World. Originally is was the Spring Festival: Maypole dancing and new life springing from hedgerow and field. Karl Marx and Communism tried to rebrand it as a Workers’ Holiday. That might actually be apt: how many of us were out on our balconies or streets last night clapping Our NHS (The UK’s Health Service), thanking the key workers and the services keeping us safe through this pandemic?
I’m writing two porridges this morning because I am deeply uneasy about what’s happening in financial markets. The Coronavirus has completely turned the global economy on its head. It will create the most profound changes to the way we live and our future prospects – we are all beginning to realise that. There is not going to be a V-Shaped recovery. Many lives will be shattered and ruined in its wake.
Yes, what I saw yesterday confirms two terrible truth we’ve long denied:
1) The system was already rotten to its very core before Coronavirus triggered the coming depression. This was coming and is overdue.
2) Those responsible for that rotten core will likely walk away richer, while the poor working men and women that struggle, scrimp and suffer spending their lives working for them will inevitably get poorer.
What has made me so angry?
Boeing.
…click on the above link to read the rest of the article…
Blain’s Morning Porridge – April 23 2002 – Avoiding Pension Crash
Blain’s Morning Porridge – April 23 2002 – Avoiding Pension Crash
“In a time of universal deceit – telling the truth is a revolutionary act”
Trump is not a complete fool. He knows enough to move oil prices up. Threaten to start a war in the Middle East. Works every time..! Sure enough stocks followed higher.
But, even St George would struggle to slay the microscopic dragon at the core of this unfolding crisis. Just a few months ago none of us foresaw just how deep the downturn the COVID virus triggered could possibly go. In early Feb I suggested we faced an economic hit similar to the SARs epidemic – a $40 bln hit to the global economy, and a 16% slide in markets. I massively underestimated.
There are a number of brutal realities:
1) We still don’t know how much deeper the Virus will dig. The news is very mixed – the first wave is apparently passing in Europe and US, but there are still doubts on subsequent waves, and uncertainty about renewed infections around the globe. Lockdowns are being extended. The social distancing and lockdowns that have trounced the global economy in the short-term aren’t going to end overnight. They are set to continue with only limited easing – for months, maybe through the year. We just don’t know – which means the real economic damage continues to escalate.
2) Don’t look to Global Markets for guidance – they are detached from the economic reality because of renewed financial distortions from QEI (QE Infinity) govt supports and bailouts. There is still an element of denial in markets – but sentiment is beginning to shift as the evidence mounts. A host of indicators such as the rate of downgrades to upgrades being nearly 10/1, central banks buying Fallen Angel junk, and mandatory dividend cuts – all point to rising crisis. (There are still sound investment opportunities out there – but prices are seriously distorted.) The number of recommendations to buy gold is soaring – a sure sign of trouble.
…click on the above link to read the rest of the article…
The very complex Jigsaw
The very complex Jigsaw
Blain’s Morning Porridge – 14 April 2020.
“If you try to take a cat apart to see how it works, the first thing you will have is a non-working cat.”
On Thursday I posted a note on the Fed doing exactly what I predicted – a programme to buy high-yield junk. A sniffy Wall Street trader called me an imbecile – which is quite a big word for a Wall St trader. He told me the Fed is not buying junk bonds, just ETFs related to junk and levered finance. He yelled at me to get it right. Really..? Go figure. Same difference. Its detail. I confidently predict the Central Banks will be buying equity ETFs soon enough – which is buying equity. End of.
*********
After a glorious 4 days Easter staycation over the best April weekend in history, do I feel refreshed enough to face another week in markets? As analysts simultaneously forecast global depression and record stock markets by year end, are we are into the realms of financial insanity? I have some seriously dark dystopian forebodings about where this could go….
Get over it… Smile.
But before we talk ourselves into giving up.. REMEMBER – things are never as bad as you fear they might be. (It doesn’t mean they are looking particularly good either.) If you are prepared for the worst, then you are less likely to be disappointed if it happens…
Work out why the market is fooling itself. Markets are scared of change, with a default position things will revert to “as-they-were.” This time they will not. There are a number of dangerous narratives playing out in markets at present – all of which expect things to revert to “same-as”.
…click on the above link to read the rest of the article…
Blain’s Morning Porridge – April 9 2020 – C-19 is the McGuffin
Blain’s Morning Porridge – April 9 2020 – C-19 is the McGuffin
“And all I ask is a tall ship, and the wheel’s kick and the wind’s song and white sail’s breaking….”
Another day in lockdown begins. A moment of distraction, if I may…
4 days of Easter! Yay! I’m not going to open a newspaper, I’ll try to ignore the news, and dish emails about coronavirus. I’m going to focus on three of us here in the house, anticipate She-Who-Is-Mrs-Blain’s marvellous cooking, while she continues her efforts to teach No1 Son, Jack to cook. While his sister starves up in London, he is getting good. Last night’s mushroom pasta was superb.
The downside is I can’t go sailing – which is beginning to become an issue… I’m tense and nervous and I can’t relax…… Instead I am compiling a viewing plan of great Sailing Films. It my way of coping..
It started last night with Maiden, a wonderful tale how a young lady, Tracey Edwards, got peeved at Girls being denied the opportunity to race around the World. She formed her own crew of girls, restored an old yacht, and did very well, confounding critics who didn’t think a crew of girls would even get out the Solent. Practical Feminism! It’s well worth the watch – and I most strongly recommend it to all my City Female Friends for inspiration, and to everyone else, even if you don’t care a fig for boats.
Tonight, I am scheduling Wind, possibly the worst and best sailing film of all time.. Bring out the Whomper!
****
When they come to make the film of this crisis, it will quickly become apparent the Virus is just the McGuffin, the plot device behind the most massive economic calamity of all time.
…click on the above link to read the rest of the article…
Blain’s Morning Porridge – March 20 March 20 20! Missed than one!
Blain’s Morning Porridge – March 20 March 20 20! Missed than one!
“How beauteous mankind is! O brave new world that has such people in it..”
This is a very strange world we find ourselves in.
There is literally too much to write about in terms of how the Global Financial System is being roiled by the Coronavirus. It feels like everything I’ve ranted about over the last 12 years in the Morning Porridge is coming to roost. Another emergency rate cut. QE infinity plus 1. Oil prices everywhere. Massive
failure – Boeing is a great example: begging a bailout after years of greed and mismanagement, stock buybacks and failing to innovate better product – to the counter-intuitive assets moves we’ve seen in Gold and Government bonds. The credit markets are in lockdown and the bubble is blown on stocks.
I’m convinced we are at the beginning of a chaotic reconstruction of markets rather than passing through a simple predictable correction to the current order. If you don’t think so, can I interest you in this basket of junk bonds going chirpy chirpy cheep cheep? (Corporate Bonds are going to really, really hurt. Lots.)
The big shifts in safe haven assets like government bonds and gold getting cheaper illustrate how we’re still in the first phase – when investors cover losses selling liquid assets. We’d don’t need to overly worry about government bonds: they will revert higher, fuelled by renewed flight to quality, and by the massive new QE programmes. Gilts and Bonds will trend through zero yields. But, what if the evil uncle, Inflation, turns up unexpectedly at the new world party? He may well do…
…click on the above link to read the rest of the article…
Blain’s Morning Porridge – 23rd Jan 2020; Plague, Famine, Trump
Blain’s Morning Porridge – 23rd Jan 2020; Plague, Famine, Trump
“Being a bully on the internet is a sure sign of insecurity and weakness…”
I glanced up at the screens y’day and caught a headline flashing across the screen: “No more boom bust cycle” said the talking head on the screen. Really? Go ask former Premier Gordon Brown how well that worked out for him…
The big news this morning is the frighteningly rapid escalation of the Wuhan Plague – the SARs like Coronavirus has now killed 17 (doubling overnight) and is spreading. Wuhan is in lockdown with trains and planes closed down, apparently overflowing hospitals, and restrictions being placed on citizens. It sounds scary, but “horse and stable door” springs to mind. Chinese stocks took a thumping – down 3.5%. Its all about uncertainty. Thus far it looks like the virus is most dangerous to the elderly and infirm, but until everything is known about the source and contagion, we really don’t know.. Fear is the mind killer…
Meanwhile..
Let me assure readers I regard Davos as a nonsense of preening inequality – but it does throw up interesting moments. Yesterday was no exception – from Prince Charles demanding proper Carbon taxing, and the EU agreeing – making excellent points. Carbon should be taxed. It’s going to happen. That will go down well with Trump, who earlier lambasted the gathering with his rejection of “alarmists” and the “prophets of doom”. The scientists respond their role is to simple provide the evidence – which they have done.
Who do you want to listen to? Donald or The Scientists?
Then we had the unpleasantness when the UK told America our priority is a trade deal with Europe.
…click on the above link to read the rest of the article…
Blain’s Morning Porridge – November 11th 2019
BLAIN’S FINANCIAL PORRIDGE – NOV 11TH 2019
“Johnny Turk he was ready, he primed himself well. He rained us with bullets and showered us with shell. In five minutes flat he’d blown us all to hell. . ”
Last week stock markets staged a spectacular rally off the back of the “improved” trade outlook. Bonds have reversed. But despite equities sitting at all-time highs, it’s time to step back and focus on where this goes next. Next few days will see the US impeachment hearings ratchet up – raising the prospect of market dislocation. I’ve been reading missives from Republican and Democrat supporting chums and the issue of either getting behind Trump (no matter how bad he is) to keep the Democrats out, or TINA to getting rid of Trump. It looks as polarising as Brexit has become in the UK. The threat of politics overtaking reality is worrying – and the market doesn’t seem that bothered about the implications for The US’ credibility, the Fed and the dollar. Are we bothered? Slightly.
Political instability remains the name of the game from the US, Hong Kong, The UK, and this morning, Spain. (And, add Italy and Germany to the list..)
One of the key factors driving stocks higher in the wake of a trade “accommodation” rather than a peace treaty is momentum – markets want to go higher, anticipating growth. But the market is equally driven by the volume of cash ready to be thrown at it. There is no shortage of ready liquidity – in this sense of too much easy money chasing too few assets, rather than liquidity: “who wants to buy this” conundrum. When there is too much cash around the market can remain irrational for longer…
…click on the above link to read the rest of the article…
November 4th, 2019… Back in the Real World…
November 4th, 2019… Back in the Real World…
Trawling through the market headlines this morning, I’m struck by the number of comments about how much better the investment environment looks. There is less likelihood of a global recession, corporate earnings aren’t as bad as expected, and jobs are growing. I am unconvinced. I see worrying connections across the wires. From my perspective – which admittedly has been from a train in the middle of nowhere – its feels we’ve reached the end of the something. Time has been called on this particular era of irrational market exhuberance.
My spidey senses are tingling due to manner in which events across markets, individual stocks, politics, geopolitics and gut-instinct are connected. I’m not predicting sudden or massive financial collapse – just a wake up and smell the coffee correction in Bonds (which feels underway), and selective deflation in over-optimistic sectors of the stock markets. As always, any reversal will set off wailing and despair, yet most of the critical lessons will be missed. Fear not – we will get another chance to relearn them in a few years time! (Blain’s Market Mantra No 2: The Market has no memory.)
It’s just as well we aren’t heading for the deep prolonged global recession so many naysayers have been predicting thru 2019. Slowdown yes. Trade is going to remain a problem. But growth drivers were changing anyway. Tech will change the world’s trade roads. China’s furious growth spurt of the last 20 years is over. India might be growing, but it lacks the state momentum to drive global growth the way China did. And climate change will prove deeply significant in the future as consumers are persuaded to believe food miles and imports matter.
…click on the above link to read the rest of the article…
Blain’s Morning Porridge – September 18th 2019
Blain’s Morning Porridge – September 18th 2019
“There is no equilibrium, we invest into unstable constantly changing markets. ”
Why so Calm?
Even as the Fed meeting pondered raising rates by a smidge, it had to intervene to pump money into the short-term US financial system for the first time since the 2008 crisis. That’s a clear sign of financial dislocation – but markets seem utterly unconcerned. (The wires all quote issues such as tax payments and an imbalance between new funding and low redemptions to explain the sudden lack of cash, but none of my money market chums are convinced. They fear something else, a big No-See-Em is underway.)
The last crisis started in money markets. Add that to the ongoing WTF-happened questions about the Saudi bombings, and there seems to be a curious sense of false calm in markets. No vol, no concern, and gold hardly moving. I can’t help but think of ducks; serenely floating upstream while their legs are furiously paddling below the surface. Something is happening, and we don’t know what it is..
Since I don’t know either, today is the day to take a pop at the Green Puritan movement:
There is a great comment from Bill Gates in the FT – Fossil fuel divestment has “zero” climate impact, says Bill Gates. Worth a read, and maybe get yourself thinking about what damage ESG/Green group-think nonsense is doing? Its distorting the global economy and voiding perfectly sane investment strategies. As regular readers will know, I absolutely believe Climate Change is The Big Threat – but I’m more and more convinced that much of the ESG / Green Investment bandwagon is utter bollchocks!
…click on the above link to read the rest of the article…
Blain’s Morning Porridge – Sept 5th 2019
Blain’s Morning Porridge – Sept 5th 2019
“Slipping down Raki and reading Maynard Keynes…”
We really should focus on the signals emanating from bond markets. Forget the current political madness – yesterday saw a number of key moments for bond markets: UK Chancellor Sajid Javid hitting the spend button in the UK (whether it actually happens is a moot point), another $30 bln new issuance day in the US, BAWAG launching a 10-year negative yield Covered Bond, Spain about to launch a 50 year issue at a smidge over nothing, and Christine Lagarde lecturing the European Parliament about the need for Fiscal Policy initiatives.
It really feels like we are at something of a nexus for bonds and fiscal spending. Central Bankers and politicians are tinkering with new ideas (ie: old ones rehashed) about Monetary policy – because nothing they tried re QE and zero rates really worked the last 10-years. I can’t help but feel it’s like something out of The Walking Dead – the Neo-Keynesians have suddenly risen and now stalk the Earth. (Queue Thriller on the turntable…)
Politicians now see low interest rates as a phenomenal opportunity to sort out the bleak mess of the last 10-years of Austerity driven under-investment, and spend economies back into growth. It looks attractive. And, if they’d started 10-years ago.. then we’d probably not be where we are today…
Of course, corporates would be mad not to take advantage of current ultra-low rates to borrow. But what are they going to spend the money on? More distorting stock buy-backs and dividend recharges back to private equity owners? Should investors be worried about the growing leverage? If the crunch comes – well, 5% of issuers might default, but the rest will be fine… ish. Meanwhile, ultra-low rates are great for stocks. Not because companies are inherently more profitable, but largely because low rates make stocks relatively more attractive compared to low-yielding bonds, and encourage corporate buy-backs which further push up prices!
…click on the above link to read the rest of the article…
Blain’s Morning Porridge – Aug 13 – Argentina, Legarde and Europe
Blain’s Morning Porridge – Aug 13 – Argentina, Legarde and Europe
“I’m going down to Yasgur’s farm, gonna join me a rock and roll band.…”
Global Credibility Under Pressure – We’ve been Tangoed!
This morning’s headlines are screaming how Argentina and President Mauricio Macri have precipitated yet another crisis upon the stressed geopolitical battlefront… Relax. We are more than used to dealing with Argentina defaults… But, its far more complex than that. The latest Argentina Dance Macabre is all about Global Credibility. It’s another Massive Fail!
What does it say about the credibility of Global Institutions and Policy when Argentina’s whole market collapsed following a primary for an election in December? Ex-IMF president, and soon to be head of the ECB, Christine Lagarde personally staked her support for President Mauricio Macri’s pro-market government when she steamrollered through the IMF’s biggest ever bailout of $56 billion for Argentina last year.
It now looks an extremely poor call on Lagarde’s part. Macri won a mere 32% of the vote, while former president Cristina Fernandez de Kirchner won 47%. Don’t Cry for Me Argentina indeed… Domestic Argentine Politics have left the IMF looking stupid.
There are three major issues to consider here:
First there is the absolute predictability of what’s just happened in Argentina:
In return for the 2018 Bailout, the IMF demanded its usual pound of flesh policies: Austerity, Austerity and Austerity, spiced with inflation-targeted monetary policy, fiscal tightening, currency controls, and the keys to the Peso printing presses. Give Lagarde some credit – she did give lip service to the people with a smattering of minor austerity mitigants in terms of gender equality and social provision. But, essentially the IMF’s answer to yet another predictable Argentinian crisis was more of the same programme. You know the definition of madness…
…click on the above link to read the rest of the article…
Blain’s Morning Porridge – July 29th 2019
Blain’s Morning Porridge – July 29th 2019
“I’ve seen things you people wouldn’t believe. Attack ships on fire off the shoulder of Orion. I watched C-beams glitter in the dark near the Tannhäuser Gate. All those moments will be lost in time, like tears in rain. Time to die.”
The UK is a curious place. Boris Johnson’s feel-good drive and the numerous plots being arrayed against him, received rather less attention over the weekend than the Minister for the 18th Century’s rather ponderous style guide. Jacob Rees-Mogg, Esquire, has banned a host of words, outlawed clichés, demands double spaces after full-stops, insisted on imperial measures (Kilometers, Kilos and grams are banned), and has made the incorrect use of apostrophes a capital offence. Readers will know my grasp of punctuation, spelling and grammar is nebulous at best – so if I disappear suddenly you can assume the Extreme Grammar-Nazi wing of the Conservative Party has got me!
Back in the real world, this week is largely about tomorrow. Worry not about what’s going on in Hong Kong, the Gulf, or even how bad European economic data might be. The only real question is what will the US Federal Reserve do? It’s not a question of will they ease rates, but by how much- 20% change they may go for 50 bp!
Perhaps the question should be – why ease rates at all?
It may be the depths of a thin summer, but a 25 bp cut will be enough to please the market. The economy won’t change because of a quarter point reduction in ridiculously low rates, but stocks will rally and the market will be properly ecstatic! Donald Trump will tweet to his followers about what a great job he’s doing and how its confirmed by the strength of the stock market. That is a sh*t reason for cutting rates. It worries me the Fed is prepared to pander to Trump and the stock market.
…click on the above link to read the rest of the article…
Blain’s Morning Porridge – July 23rd 2019
Blain’s Morning Porridge – July 23rd 2019
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“Caught in the chaos of the market square, I don’t know what, I don’t know why, but something’s wrong down there… “
As we are about to find out… Jokes aren’t so funny when you find yourself to be the butt.
How is a whole country going to feel? I’ve never felt so inclined to punch the TV as when watching an oiky spotty brat boasting to camera in plummy Eton tones about how his vote for Boris will save the UK. Retching noises…
Moving on…
Fascinating article in FT this morning written by BlackRock’s head of global fixed-income, Rick Rieder: ECB can boost growth across Europe by buying stocks. Er, I how do I tell the world’s largest investor that’s about the stupidest idea I’ve heard in a long time? I completely agree Europe needs to urgently address and formulate policy to solve long-term and especially youth unemployment – but not through more distorting Monetary Experimentation by Central Banks. Yeah, cos that’s been a massive success..
The danger of a central bank pumping money into financial markets by buying stocks is simple – money invested in financial assets (stocks and shares) stays in financial assets. That’s the clear lesson we’ve seen over past 10 years. Trillions of QE cash has caused massive inflation in financial assets, but barely grazed the real economy. If you want a full explanation, then buy my book: The Fifth Horseman – How to Destroy the Global Economy, for the full theory.
Even Mr Rieder makes the point the US has created many $1 bln tech unicorns without having to rely to central bank largesse to create and fund them. Why can’t Europe? Clue: it’s not because the ECB isn’t buying stocks!!
…click on the above link to read the rest of the article…
Blain’s Morning Porridge – July 11 2019 – Man on the Moon Day!
Blain’s Morning Porridge – July 11 2019 – Man on the Moon Day!
“The Sky is not the limit – there are footprints on the Moon.”
So many choices for this morning’s quote. The classic Armstrong “One Step” was too obvious. I did think about “To infinity and beyond”. But the one I chose is perhaps the best. Points if you can name who said it. Only four of the 12 men who walked on the Moon are still with us. It was a long time ago, but last night my wife, son and I were out to dinner in the West End. As we walked back past the Lego Store inn Leicester Square – look what was in the window! I’m going back to buy it later today!
It took me back 50 years – July 11 1969. I was in the back garden in Fox Covert, Edinburgh, staring excited at the moon, asking Dad where the spaceship was. He tried to explain how far away it was and since it was only the size of a car, I’d not be able to see it. It was a terribly exciting day – the BBC showed the film of HG Well’s First Men on the Moon. Then came the iconic music; Also Sprach Zarathustra, which defined the whole Apollo era. Patrick Moore and James Burke explained what was going on. James Burke is still making sense today! We waited and waited and then the words. At some point I must have fallen asleep because I woke up in bed with my Action man lying on the floor in his (Gemini) spacesuit.
It would be a terrible pity if we don’t go back to the Moon. Does it make commercial sense for us to go further?
…click on the above link to read the rest of the article…
Blain’s Morning Porridge – July 10 – Will Boeing trigger Crash?
Blain’s Morning Porridge – July 10 – Will Boeing trigger Crash?
“Ignite blue touch paper and step back. Do not let Children play with Fireworks.”
All eyes on what Powell tells Washington today, but a number of Porridge Readers called to tell me I’m wrong about summer risks! They think my expectation for a long worried nervous but stable summer before markets are bailed out by accommodative central banks in late Q3 is way too optimistic.
A number feel markets are ripe for a sudden and painful rollover in bonds and stocks – and much sooner than I think. What they did agree with was my assessment the likely trigger for a market shock will be a “no-see-em”, something so obviously hidden in plain sight it catches us completely and painfully by the short and curlies.
And “Plane” sight might be a good way to put it. I’m wondering if Boeing might be the trigger! (See what I did there..?)
Hang on? We all know the next market collapse isn’t booked till October? Well maybe not. What if someone tries to start the market apocalypse early? That would shock the many market participants who think the perception of a Global Central Bank put means there is nothing to worry about. Complacency is a terrible thing.
Smart bond gurus are shouting bubble! Although US junk bonds have not tightened as much as treasuries through the last uptick, they are still at incredibly tight spreads. European sub-investment grade is rallying in the expectation a tide of new ECB investment grade purchases will lift all boats. Yet, with yields so low as to completely discourage any dealer inventory (which is too high a capital cost anyway), liquidity has never been so thin.
…click on the above link to read the rest of the article…
