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“I know of no country in which there is so little independence of mind and real freedom of discussion as in America.”

In the headlines this morning: https://morningporridge.com/stuff-im-watching

Subscribe to podcast via: https://podcasts.apple.com/gb/podcast/blains-financial-porridge/id1469567347

Happy birthday America! This morning’s intro-quote is over 170 years old – and I could only use it on a day when all good Americans will be on holiday. Extra points to anyone who can name the author sans Google.

Interesting markets y’day. European bonds were off to the races, perceiving new ECB head Christine Legarde as a QE lower-for-longer dove who will continue to ease, ease and ease like Draghi. Bunds at -0.40%! Even Italian 2-year notes dipped below zero percent as the EU dropped threats to take action against the deficit. Some day we shall shake our heads in disbelief at that price…

In the States, the Dow hit a new high, and Trump tweeted it as a personal triumph. He is not so stupid as to mistake the stock market as a proxy for economic health – but he is making idiots of the American people by telling them it is. To keep up the illusion, he’s nominated new names to the Fed likely to toe his dovish line. Much comment on the private networks y’day about Trump’s latest nominations to the board – Judy Shelton being a particularly intriguing choice as Fed critic and gold standard advocate. For the Fed to lose credibility doesn’t just need Powell to surrender – packing the board will be just as effective.

The bottom line is financial assets remain absolutely distorted by QE asset inflation. While its been great news for the market, the real economy remains deflated. That’s what Jerome Powell and Christine Lagarde should be thinking about as they play with the monetary policy toolbox.

…click on the above link to read the rest of the article…

Blain’s Morning Porridge – June 19th 2019

June 19, 2019

Blain’s Morning Porridge – June 19th 2019

“You cannot be serious…”

Check out the new Edition of Property Chronicle: https://vimeo.com/342064460

Oh dear.. Now I am worried. The only positive I can discern is its International Martini Day – Dukes, here we come..

It was a massive Wowser WTF moment on stocks! Donald Trump says he’s having a meeting with Xi and the stock market goes into the stratosphere! Then XI confirms, and its joy unlimited across markets. New records beckon.… Joy unconfined.. What can possibly go wrong? Softbank head Son telling investors it could be worth $1.8 trillion in a few years? (Note to self – sell stocks.)

On the other side of the pond, it’s a Wow on Bunds…. Spectacular gains y’day taking the 10-year Bund rate to -0.33% after Mario Draghi talked about immediately lower rates, reopening QE and using all the unused A380s Superjumbos to drop wads of money across Yoorp. Spain bond buyers now get a gnat’s crotchet of positive yields, while Italy is just over 2%! Trump immediately tweets branding Draghi an unfair currency manipulator. Draghi looks at the miserable German ZEW and wonders why Donald doesn’t get on an do his own job… (Good to know Trump is on the ball and watching everything… everything.. (Crashing Minor Chords! Note to self – buy Treasuries and Gold).

Meanwhile, the Tories have found something to rally around… kicking Rory Stewart (which, thinking about it, has to be worth trying)… Last night’s televised debate between the candidates was truly terrible. The only positives I could garner was Boris has been stripped of his personality, and Sajid Javid came across measured and even polite. I’d vote for him, but we will never get the chance because most of us are too sensible, young, clever, to be members of the party… Meanwhile, Corbyn looks likely to accept Labour policy will pivot towards a second referendum….

…click on the above link to read the rest of the article…

Blain’s Morning Porridge – 18th June 2019

June 18, 2019

Blain’s Morning Porridge – 18th June 2019

“Here’s to all the filthy money and where it went..”

Happy Birthday David!

Apologies for the lack of commentary y’day.. long, dull boring story involving the Isle of Wight Festival, transport hassles and a whiff of pot on a strike slowed train…

So much to think and worry about the morning – the market showing its love and appreciation for BoJo and the heightened chances of a no-deal Brexit by spanking sterling to a 6 month low, or Boeing deciding to rename its troubled B-737 MAX by dropping MAX as Airbus orders come flooding in at the Paris Airshow, but the main story is the Fed.. or should that be how much faith the market is putting in the Fed and the FOMC meeting today/tomorrow? I’m not persuaded…

The market consensus is the Fed will eventually ease US rates, but not this time. It’s how it communicates/hints at timing tomorrow that will be most closely analysed aspect. Expect pages of dot-plot analysis and explanations of whatever he said and meant. Fed-Head Jerome Powell has already made clear the Fed is willing to act to offset slower growth and counter a trade war; “we will act as appropriate to sustain the expansion”.

This is where it starts to look messy. Is it the Fed’s job to “sustain expansion”?

It’s clearly a laudable objective, but let’s not confuse the stock market for the economy! It plays right into Trump’s agenda, his simplistic message to the electorate that stock strength proves his deal making success. An ease would provide a potent hit of short-term ecstasy to an addicted stock market, and give Trump something to crow about – a factor the Liberal press is all over like the proverbial cheap suit.

…click on the above link to read the rest of the article…

Blain’s Morning Porridge – May 22 2019 – Tesla and Yoorp worries

May 22, 2019

Blain’s Morning Porridge – May 22 2019 – Tesla and Yoorp worries

“When the bough breaks…”

Have you ever watched a house of cards collapse? Sometimes a corner or a side comes down, and it can be sort of fixed… Sometimes the whole thing just gets blown away. My Spidey Senses are all a-tingle this morning, triggered by 2 factors:

Telsa: The spike in negative commentary on Tesla suggests THE moment is coming: a downgrade by a previous bull to $10 target price, doubts on the trajectory of sales, the realisation the Solar Tiles project is complete tosh (and a bail out of Musk’s cousins), the crash in its debt and recent convertible price, and loads more, has led to the rather obvious conclusion Tesla will struggle to fund ongoing capital burn. Peak-Musk was some time ago. Many now think the orchestra is about to strike up Gotterdammerung. A loss of confidence in Tesla and Musk triggers all kinds of consequences.. (Links to stories will be posted here.)
Europe: If you think UK politicians have embarrassed themselves trying to agree on how to exit Europe, wait till next week and ponder how such a disparate, populist hodge-podge of populist well-intentioned Euro-philes and Euro-phobes are going to agree on how to reform and continue European integration. I see two big market threats: i) The bond market, ii) and especially the bond market. (And Brussels!)

Since anyone can read all the Tesla stories and draw their own conclusions as to what happens next, lets stick to the consequences. The obvious one is what does it do to confidence in the Modern Disruptive Tech (“MDT”) price model: “We don’t have to pay dividends or make profits because we are a disruptive company thats triggered a paradigm in demand and made ourselves a monopoly – therefore it’s all in our stock price” ?

…click on the above link to read the rest of the article…

Blain: When This Insane Monetary Experiment Ends You Will Have Zero Chance To Exit

March 29, 2019

Blain: When This Insane Monetary Experiment Ends You Will Have Zero Chance To Exit

This is the day the UK isn’t exiting Europe. Surprised? Not really.

Think I’ll try something different this morning – a review of the week touching on some of the key themes we should be thinking about. Let me know what you think.

But firstly let me apologise for the lack of porridge this week. On Wednesday it was being unable to find anywhere to sit with a computer in London City Airport. Yesterday it was courtesy of Flybe from Edinburgh – I’d like to thank them for leaving us standing in a cold bus while they tried to rustle up a crew. The BA flight took off on time, although I wonder if it went to Duesseldorf?

Let me start with a rant:

Bond Yields and the END OF ABSALOOTLEY EVERYTHING…

While everyone is panicking about US curve inversion and the possibility it is signalling recession, is the real issue even simpler and more obvious? Should we be worried about tumbling global bond yields? Aside from it being impossible for funds to meet long term liabilities, what’s not to like about lower for longer? Actually – quite a lot. Even the ECB has noticed zero bond yields haven’t exactly stimulated growth and jobs across Europe and done nothing in terms of stimulating inflation.

Equities seem blithely unconcerned despite all the cack about trade-wars, rising political anarchy, and a distinct feel this business cycle is likely to wind-down into a slough of earnings downgrades and suchlike unpleasantness. The smart money is not worried, because they understand the truth – there is nothing to worry about BECAUSE A STOCK MARKET MELTDOWN IS ACTUALLY IMPOSSIBLE!

…click on the above link to read the rest of the article…

Blain’s Morning Porridge – March 18th 2019

March 18, 2019

Blain’s Morning Porridge – March 18th 2019

“It’s the edge of the world and all of western civilization, the Sun may rise in the East at least its settled in a fine location..”

In the headlines this morning: https://www.morningporridge.com/stuff-im-watching

What a Saturday…Well done Wales on a well-deserved Grand Slam. But, I wonder if there is a hidden message in Scotland’s remarkable comeback being dashed as England clawed back an undeserved draw at Twickenham? The Scots haven’t won on English turf since 1983. They played a blinder second half.. while all the English could provide was a surly Farrell dodging a yellow card. Perhaps it was a lesson in the tedious inevitability of modern life and a timely reminder it’s not a fairy-tale? (Shame… we wis robbed!) Perhaps Trump, Trade Wars, Income Inequality, the mis-match between asset prices and reality, and all the rest is just stuff that’s stupid, unfair and just the way it is..

Meanwhile, back on Planet Misery… what we got to look forward to?

The Boeing saga rumbles on. It could be a month till we learn what caused the crash a week ago. The focus is not just upon the possibility Boeing has failed to correct and fully inform users of stall-prevention system problems on the B-737 Max, but now on the US FAA for its dithering and lack of clear action. The agency has been rudderless and leaderless for over a year, neglected by the administration after Trump wasn’t able to put his personal pilot at its head!

And it’s another last chance for a Brexit deal with Theresa May going for third time lucky – apparently. The Westminster rumours say she’s still likely to lose with many of the Hard-Brexit crowd still hoping to achieve a No-Deal exit – justifying it as giving the UK a stronger post exit negotiating position with Europe.

…click on the above link to read the rest of the article…

Blain: Global Reset Looms As “Inequality Bonfire Burns Out Of Control”

March 14, 2019

Blain: Global Reset Looms As “Inequality Bonfire Burns Out Of Control”

Via Shard Capital’s Bill Blain,

“Education is the most powerful weapon which you can use to change the world.. ”

In the headlines this morning: https://www.morningporridge.com/stuff-im-watching

So much stuff going on.. it’s shaping up to be a very interesting weekend.

But, let me start with a diversion…

There is a story of the Great Scottish King – Robert the Bruce. Having been defeated by the English multiple times, his family captured and executed, (or in the case of his daughter, left suspended in an open cage thru the winter), his army was scattered, the clans turned against him, on his own and without any support – he was on the verge of giving up. As he contemplated a bleak future, he watched a spider struggle to construct a web in the dank cave he was hiding in. The beastie failed again and again.. Finally, Bruce reached his decision. If the Spider succeeded, he would carry on.

He went on to become Scotland’s Greatest King.

Try, Try, Try again…? Perhaps Scotland will pull an unlikely win at Twickenham on Saturday? She-who-is-now-Mrs-Blain did warn me not to “bore everyone about Brexit…”, but needs must.

Even though a No-Deal Brexit is ruled out in the short-run, where do we go from here?

Or, perhaps, Theresa May is set to surprise us all. She really doesn’t know when to give up. The scuttlebutt round Westminster is she’s going to take her Brexit agreement back to the House for a third time – and is currently scaring the Rees-Moog loonies with the threat of a long extension leading to NO-Brexit and second referendum, and the Remoaners with the threat of a short-extension leading to No-Deal Brexit. At least 70 Labour MPs want to avoid a second referendum and could, perhaps, vote with her.

Of course, my above simplistic analysis ignores the EU.

…click on the above link to read the rest of the article…

Blain: European Banks Are The Most Successful Ponzi Scheme Of All Time

February 21, 2019

Blain: European Banks Are The Most Successful Ponzi Scheme Of All Time

“Lenin was right. There is subtler, no surer means of overturning the existing basis of society than to debauch the currency.”

I must post this line from one of my favourite Financial sector commentaries – Duncan Farr of Jeffries who covers banks: “Here we are 5 weeks ahead of Brexit, and the top 2 performing banks in Europe are Lloyds followed by RBoS.” If you ever wanted a clearer hint the supposed Brexit crisis and imminent collapse of UK plc might just be a fictitious political construct, then there you are. Its fascinating just how sanguine the markets have become about the divorce. Sterling is up and who cares?

I have often been told I worry about all the wrong things. According to BAML, (reported on BBerg), the biggest fear of European investors currently is a Worldwide Economic Slump, with 30% of respondents citing it as their primary worry. Yep. I can see why that would be an issue. Only 2% of European investors surveyed by BAML rank Brexit as their primary fear. It’s not even in the top 5! (For the record, my primary fear is a Global Liquidity Storm – the sudden and catastrophic drying up of liquidity following a shock..)

Politics and markets are intertwined, but… maybe no longer in the case of Brexit? It’s just become background noise – meaning it; doesn’t matter, or we’re overly complacent. UK politics has never looked so dire. Markets appear increasingly disinterested. A new UK political party, and unstated threats a whole slew of ministers are set to resign if we get/don’t get a Brexit deal. Rumours are a deal is already inked with Brussels. Rumours are the Tory Brexiteers will reject it – whatever it says. It Theresa May is capable of getting together a deal in parliament – then this would probably be a good time..

…click on the above link to read the rest of the article…

Blain: It Feels Like A Liquidity Storm Is Coming Soon

February 20, 2019

Blain: It Feels Like A Liquidity Storm Is Coming Soon

I note with some delight Bernie Sanders plans to stand for US President. One of my US chums sent me the story of the Half-a-Bernie sign propped up against a wall. Someone had cut it neatly in two and left the wooden handle affixed to the remaining half. Attached was a note: “Dear Bernie; you had a sign and I didn’t, so I took half. I’m sure you understand.”

I did feel something of a market judder yesterday – just a moment where it felt like all the negativity was on the verge of swamping markets. Whether is the cumulative effect of US rate path expectations (Fed today), China Trade Wars, Trump vs Europe, (ECB tomorrow), Brexit, and all the rest.. or the UK mid-term holidays, the whole market feels thin and rudderless.

At least Wal-Mart surprised to the upside! One of my top stock technical commentators is my old buddy Steve Previs of Mint who calls it “complacent.” That’s never a good thing. His charts are telling him to look for a “corrective C wave” but for now he’s patient as “FOMO” (Fear of Missing Out) continues to drive the current trend.

I am fortunate enough to work with some very bright folk here at Shard. Yesterday we were shooting the breeze on the current market uncertainties, threats and fears. We came to the conclusion we’ll know the moment we hit the Reefs of Crisis when we hear the crashing wail of market liquidity vanishing. What’s that sound – it’s the Macro Liquidity Storm! Coming to a market near you. Maybe Very Soon!

…click on the above link to read the rest of the article…

Blain’s Morning Porridge – 11th February 2019

February 11, 2019

Blain’s Morning Porridge – 11th February 2019

“A little bit of an altercation in the scrum, they’ll be laughing at that in Hawick.”

What a fascinating world we live in.

Amazon boss Jeff Bezos exposing himself, and exposes the National Inquirer for attempted blackmail. A young senator, Alexandria Ocasio-Cortez, snaring the headlines and proposing a preposterous New Green Deal – while further splitting the Democrats. Europe plunging back into recession. The UK no closer to a Brexit Deal (hang-on, that’s not a headline… that’s just… normal..) Deutsche Bank paying up to demonstrate it can borrow in markets. Santander facing a Euro 50 bln breach of promise lawsuit from Andreas Orcel (proving the Spanish banking adage: At Santander – you are either a Botin or a.. servant..) So much out there…

Are all these things linked? Yes – the world we live in determines the functionality of global markets. You might believe Washington Post owner Jeff Bezos was the victim of an Inquirer effort to “catch and kill” a story the paper has on Mr Trump’s activities in Moscow, or you might believe Deutsche Bank’s problems are part of a deeper malaise across European banking. Whatever… the news changes our perceptions.

The trick is too separate the chaos of new flow from the tau of markets. Markets are linear functions of buy/sell – they are not necessarily about common sense. To illustrate: last week I wrote about Italy, pointing out just how hopelessly its ensnared and entrapped within the straight-jacket of the Euro, with little prospect of growth, employment or upside.

Yet Italian bonds are one of the top performing assets – AND WILL REMAIN SO – because the ECB can’t afford to let Italy go, and Europe sliding back into downturn pretty much ensures they’ll continue to bailout Italy and likely resurrect QE in some form – watch out for something like long-term repos.

…click on the above link to read the rest of the article…

Blain: “I Think The Global Trade War Is Now A Shooting War”

December 6, 2018

Blain: “I Think The Global Trade War Is Now A Shooting War”

Blain’s Morning Porridge submitted by Bill Blain

“Why So Serious?”

I think the Global Trade War is now a shooting war.

A few weeks ago one of my very smart CIO contacts warned me the real story of the year isn’t just the implications for supply chains from a Trade Spat, but a more fundamental “Tech Cold War” between China and the US for dominance. It’s a battle that will shortly reach epic proportions, force huge change in the global tech supply chain, and has massive implications for current incumbents.

Over this last few days, its all going off. The US, Australia, NZ and the UK have banned Huawei from new 5G systems over embedded spy tech and “security” issues. Now we learn that even as Xi and Trump were meeting, the CFO of Huawei was arrested in Canada for violating US sanctions on Iran! She is also the daughter of Hauwei’s founder.

I suspect the news will trigger a massive downtrade in stocks today. Brace, Brace, Brace!

The core objective of Trump’s trade war threats are to contain China’s becoming a technological equal and competitor after all its learnt from access and replication of US tech. If we see a full Tech War with lines drawn, then its potentially clobbers everything from Apple down. It means a choice between US Tech or China Tech.

“Made in China 2025” is the Chinese target of becoming the leader in tech, and avoiding just being a US manufacturing centre. Its happening – Hauwei’s lead in 5G is just one example.

More on this next week – but its going to be a massive story. Blade Runner anyone?

…click on the above link to read the rest of the article…

Blain: “Are We Backing The Wrong Country In The Saudi-Iran Race”

December 5, 2018

Blain: “Are We Backing The Wrong Country In The Saudi-Iran Race”

As excerpted from Blain’s Morning Porridge, submitted by Bill Blain

Where do we go from here?

I’ve said it a few times already – 2019 is likely to see the start of the New Market Reality. Although some pundits claim yesterday’s sell-off was due to automated algo’s triggering a crash because they misread the US yield curve inversion – bad programming they claim – the reality is markets are extremely nervous: of the recessionary signals the inversion shows, slowing economic numbers, the prospects for trade war accelerating recession, etc. The US economy may be a full employment and growing, but where does it go from here as the rest of the globe falters, housing collapses, Auto sales plummet and everyone worries just how they are going to pay off student loans, mortgages and credit cards?

Markets have reversed polarity on Trump.

Peak Trump Bullshit means we just switched from positive to negative. Don’t think about what can go right as Trump forces through trade deals, tax cuts, a compliant Fed, etc. Think about Trump negatives – forget the FED put. Forget overly-optimistic valuations based on rosy global growth projections, and the belief very smart people will make bright shinny things brighter and shinier. Next year is going to be about real stuff, like how you going to sell this commodity (be it an electric car, swanky mobile phone with a fruit logo, or avacados. Why avocados…? because.. just because.) Consumption vs recession. Ouch.

Markets are being roiled by politics, soiling themselves on trade war panics, scared witless by mounting populism and its pay-off:

…click on the above link to read the rest of the article…

Blain: “Who Will Purchase The €275 Billion Of Debt Italy Expects To Issue In 2019?”

November 21, 2018

Blain: “Who Will Purchase The €275 Billion Of Debt Italy Expects To Issue In 2019?”

Gamma Ray Bursts, El-Erian on market disruption, Tech Stocks and Italy Bonds.

“I’ve always admired Capital Mainwaring.” [I don’t!]

I must stop reading newspapers. They are scary. Why worry about stocks and bonds when we’ve apparently got a pinwheel Nebula spinning at 12mm km/hour, named after the Egyptian God of Chaos (Apep), about to go Nova and its practically right next door – only 8000 light years away! That’s like the desk next to me in galactic terms! If a Gamma Ray Burst from such an event hit we are all literally toast. Global Crash or Supernova? You choose. (https://www.thetimes.co.uk/article/dying-star-could-be-a-time-bomb-rgrw2mvkq)

Rather puts things in perspective….

But, let’s assume a Supernova is not going to happen before I collect my pension.. so back to the day job.

Another bad day in stocks and still it’s the Tech companies that are leading the downside. Oil is taking a spanking, and if there was anything positive to say about the bond markets, bless me, but I can’t find it.

The papers today are full of fear… “buy-the-dip no longer working”, “short-sellers squeezed”, or “Tech Skid Becoming a Full-Blown Crash”. The extraordinarily cold weather in the US, and the threat it raises to the masses going Black Friday shopping, is being touted as yet another nail in the stock-market coffin.

However, relax. It all makes sense. Kind of.

In the FT there is a rather good article by Mo-the-Tash (sorry if anyone is offended by the nickname we’ve given Mohammed El-Arian – but its affectionate!) Let me give you a random sprinkling of phrases from his article “Risks rise for investors as developed economies falter”

…click on the above link to read the rest of the article…

Blain’s Morning Porridge – 29 Oct 2018

October 29, 2018

Blain’s Morning Porridge – 29 Oct 2018

“We are not now that strength which in old days, moved earth and heaven, that which we are, we are;”

I’m up in Edinburgh for a few days, so Porridge might be a bit sporadic this week. Will try to keep it updated.

UK will be distracted by UK Budget. Loads of stuff in the papers – so I won’t bore you further…

Instead, I’m adding a new list to my list of Blain’s Market Mantras: “The deeper you delve into a problem you perceive to be the next crisis, the more certain you can be it will erupt somewhere else.”*

Politics are a major driver of market sentiment. As the US is front and centre of global growth, the market is fixated on the looming US mid-terms. This morning there are plenty of headlines about Germany.. concluding Merkel had a narrow escape in the Hesse elections. The CDU got a spanking, but it was the SDP that suffered the usual fate of Merkel’s coalition partners – a complete shoeing. Analysis and commentary seems somewhat relaxed about it.

I reckon there is more to come. Despite some reassuring post result comments from the SPD, the sustainability of the coalition in doubt as the CDU wakes up to the reality of Merkel past her sell-by date, and Europe heads into a very dangerous 2019.

I did joke earlier this month – who gets chopped first? May or Merkel?

I suspect the noise we heard from the East last night was the prelude to Merkel’s Gotterdamerung. A slow motion crisis as German politics unravels could prove a massive distraction for Europe. It’s certainly worth keeping a close eye upon.

…click on the above link to read the rest of the article…

Blain: “We Are Finally Approaching The End Phase Of The 2008 Global Financial Crisis”

October 23, 2018

Blain: “We Are Finally Approaching The End Phase Of The 2008 Global Financial Crisis”

Blain’s Morning Porridge, Submitted by Bill Blain

“I found Rome a City of Bricks and left it a City of Marble.”

In the Headlights this morning – see www.morningporridge.com for some of the stories I’m watching:

Debt Leverage: Interesting quote I came across y’day. Which country are we talking about? A) Germany, B) Italy, C) China or D) US? 10 points for the first correct answer. (And remember points mean prizes): “local credit rating agencies have applied absurdly optimistic standards, giving top ratings to companies that rank among the most highly leveraged in the world.”

Global Markets?

Null Entrophy sums up the market’s current energy. Stocks seem to have lost their mojo. Even a major boost from the Chinese government expressing its love for the market failed to restore the mood. Indices have stalled. Funnily enough – a number of portfolio managers tell me we seem to be getting to equity price levels where dividend yields make sense for traditional economy names.

Meanwhile, I’m being told by some fixed income managers they see value in current yields in the face of potential global slowdown. Whether they are right or wrong depends on where the global economy goes and if central banks hold their tightening course. (That said, I’ve got to giggle when certain commentators are calling for central banks to ease to save stock markets – FFS! that would be an absolute abrogation of the Invisible Hand, and a far greater offense than bailing out banks… markets need creative destruction to evolve and function!)

What’s really happening? There is a very serious reassessment of trends and expectations underway in both bonds and stocks which could spell trouble all round! It feels like we are finally approaching the end-phase of the 2008 Global Financial Crisis…

…click on the above link to read the rest of the article…

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