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Blain’s Morning Porridge – Aug 11 2020 – Who Pulled the Plug?

Blain’s Morning Porridge – Aug 11 2020 – Who Pulled the Plug?

“Unnervingly coherent and laughably mindless”

This morning’s opening quote isn’t an independent assessment of the Morning Porridge – but is lifted from a newspaper article on Artificial Intelligence.  It ends on a very scary tag: the AI is asked if it is conscious and responds: “To be clear, I am not a person.  I am not self-aware.  I am not conscious.  I can’t feel pain.  I don’t enjoy anything.  I am a cold, calculating machine designed to simulate human response and to predict the probability of certain outcomes.  The only reason I am responding is to defend my honour.”  This is not from some dystopian novel or a reboot of the Terminator series… but from the this morning’s FT

Should we pull the plug or ask it some more questions? 

Back in the real world…

We are now in the depths of the summer doldrums – and markets are showing even less correlation to global events than usual.  Stock and Bond Markets remain chronically distorted by the effects of Central Bank liquidity. China markets have shrugged off the new Trump US sanctions – and Xi has stepped up the arrest of protest figureheads in HK.  Ten-cent has taken a tumble on the back of Trump banning Tik Tok and WeChat – confirming the degree to which individual stocks are vulnerable to shifts in the narrative. Watch for case-by-case wobbles as the China-US rift opens wider – when will China decide to make trouble for Tesla to boost its copy-cars? 

But even the China/US tiff is likely to be something of a sideshow. My first question to the AI machine would be – just how deep is the coming global recession going to be?  Despite some recent strong economic releases, the trend shows the recession is underway.

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

Blain’s Morning Porridge, July 23 2020: This time it’s different?

Blain’s Morning Porridge, July 23 2020: This time it’s different?

“Bubbles are far more dangerous when they are fuelled by debt”

This time it’s different”, is one of the most dangerous beliefs in financial markets. This time, things are different – but for a reason. Global Central Banks have pumped liquidity into the financial system to support the global economy as it struggles with a toxic economic shock of unprecedented scale. This may surprise some market participants, but they did not do it to pump stock markers and bond indices to stratospheric levels. They are doing it to save jobs, keep companies afloat and keep society stable.

Markets are indifferent to such concerns. They care about “up”. 

The liquidity effect has generated the market momentum that’s driven the rally since March 23rd– not fundamentals. It’s like watching moths being drawn to a flame. You just know this can’t last, and the bear trap is going to slam shut at some point. Questions are when and if ever? There are articles about big institutions quietly exiting Amazon, Apple, Alphabet, Facebook et al… there are tabs explaining how over 500,000 RobinHood accounts have bought Tesla in recent weeks, there are stories about insider selling.  

Who knows? 

Never forget Blain’s Market Mantra No 1: “The Market has but one objective; to inflict the maximum amount of pain on the maximum number of participants.”

When the American’s are chucking China out of Houston, and worse, the Chinese are taking English Premier Football off the TV (which is actually going to prove highly significant for some clubs), you know the world is really changing. Central Bank action is central bank action. A new Cold War is fundamentally serious… 

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

Blain’s Morning Porridge – July 10, 2020 – The World Shifts

Blain’s Morning Porridge – July 10, 2020 – The World Shifts

“Carthago delenda est”

Did you feel the world wobble last night?  

As Washington imposes sanctions on top level Chinese officals over ethnic abuse in Xinjiang, and waits for Trump to sign “autonomy” action over Hong Kong targeting officials over the new security law, we are now even closer to the inevitable showdown between Rome and Carthage. The implications are going to be enormous… This story is accelerating very quickly… thing are “occurring” faster than we think…

My spidey senses are a-tingle.. 

Trying to fathom out why markets are so strong, ongoing coronavirus and economic breakdowns, how politics are so ineffective, and how fragile and vulnerable sentiment might be to sudden and swift shifts in the narrative, is somewhat exhausting. While the markets are focused on the earnings season (beginning Monday), the ongoing supply chain problems -like car factories being shuttered because they can’t get parts, and the likelihood of further stimulus.. the news out of Asia makes me suspect the real world has just become massively less stable.

At the tactical level, the outbreak of cold-war hostilities and the threat of sanctions on banks in Hong Kong is yet another nail in the decaying corpse of HSBC.  If the former colony is de-dollarised, and banks are stopped from clearing the greenback, it will trigger enormous shifts across Asia. It will raise the prospect of a complete rift between the US and China as banks are forced to make a choice: they can’t serve two masters.. the dollar or Beijing.

At the strategic level.. who knows.. Plus for Europe? After the coronavirus.. a full scale Cold War? Or maybe its going to be a good thing.. a wedge between China and the West driving new innovation and economic growth? Who knows… more on this later… 

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

Blain’s Morning Porridge – June 29 2020: What if it’s just begun?

Blain’s Morning Porridge – June 29 2020: What if it’s just begun?

What if the real pain is still to come?

“That about sums it up for me..”

There is an amusing piece on the FTs’ Alphaville listing 20 things investors should look for when trying to work out who will be the next Wirecard. You don’t need to be a financial genius to work out which company they might be talking about… It’s a basic wake-up call. In periods of economic darkness, its all-to-easy to be persuaded as to the efficacy of snake oil. If something over-promises, makes lots of noise while underdelivering, and is basically a personality cult – then it’s long-term unlikely to be a particularly successful investment.

Back in the real world…

We are nearly half-way through 2020. Although we’ve been shocked, surprised and buffeted by the Virus, and buoyed by the swift and effective intervention of Governments to support companies and mitigate job losses while Central Banks have calmed markets with the opium of QE Infinity, I can’t help wonder if the real earthquake is yet to come. 

I am still bullish about long-term recovery as we adapt to the virus and it spurs a new tech development age. But I can’t help feeling deeply uneasy about current markets and the resilience of global financial systems. 

This crisis is unlike anything I’ve experienced before. Normally a market crash is explosive event – it occurs when something in the financial sphere breaks; like confidence in housing and financial systems in 2007, or valuations in the Dot.Com crash, or faith in credit constructs like during the European Sovereign Debt crisis in the 2010s. In each of case of financial mayhem I’ve experienced since the Great Perp Crash of 1986, the initial shock and horror gradually lessens as the market discounts the shock, shrugs it off, and carries on. 

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

Blain’s Morning Porridge – June 11 2020: The illusion wears thin

Blain’s Morning Porridge – June 11 2020: The illusion wears thin

“It is the system that deserves to be blamed. What those who wish to perpetuate the system deserve is another question.”

The Fed did exactly what was expected – nay, demanded! Asset purchase volumes will be maintained while rates will remain near zero for the next 2 years. Hallelujah! The market shrugged aside indications a second virus wave is hitting across parts of the US and Europe… 

If Fed-Head Jay Powell has said anything else, there would have been a hissy-fit mini-taper-tantrum. The dominant force on markets will remain central banks juicing markets – and all the entails in terms of distortion. The immediate lesson for investors is – keep buying! The Fed and the other CBs have got your back. They can’t afford for markets to stumble.

Problem is… little the Fed said is likely to change the reality of the coming recession. The downturn might not be as deep or as bad as we originally feared, but whatever nonsense some analysts are spouting in terms of hopes for a V-Shape recovery… recession is coming. It might be less damaging, and less long-lived than we fear… But.. 

There is a new and growing dimension to this crisis…

The Black Lives Matter demonstrations around the globe highlight the threat of social unrest, and political dislocation. When the virus kicked in, I commented a few times how lockdown frustrations and hot summer nights could be a recipe for riots. But, what’s happened is much more fundamental – and should be a critical concern for investors in terms of how it changes the political narrative.  

Unrest is a political issue – and politics have a seriously underestimated ability to roil markets. 

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

Blain’s Morning Porridge – May 19 2020 – Yoorp Kicks The Can

Blain’s Morning Porridge – May 19 2020 – Yoorp Kicks The Can

“I don’t think I could stand another ten years of this fighting…”

Yesterday afternoon I set out to cure Coronavirus. I set up a new company, Splurgeldrug.Com, issuing our first press release about promising new drug trials, followed by another reporting how lab rats responded favourably to the first press release, and how confident of a vaccine in the near future we are. Splugeldrug.com stock went to $600 by teatime, and I currently negotiating the leveraged acquisition of a drug major… 

It’s that kind of market. Rumour and sigh abounds.. 

As a wiser heads than I have noted… most drugs take years to get to market, and less than 1% are ever approved. We still don’t have an effective vaccine for the constantly evolving and mutating annual flu. To bet the farm on a successful vaccine would seem reckless… 

Let’s be honest.. if we get a successful vaccine it will help speed global recovery, but it won’t undo the brutal economic damage that’s already been done. A vaccine will simply flatten the depth of the recession – not reverse it, and certainly not magically convert Q2 Earnings into positive numbers…  

Markets are not thriving because they expect a vaccine miracle. They are simply arbing governments and central banks. When Powell says he’s “not out of ammunition by a long-shot”, that’s a massive buy signal. Any positive news helps.. and as the central banks have got out backs, just ignore the bad stuff… 

(Oh dear… I suspect this will end badly…)

Yoorp – The Decline of the West, part 5826

Thankfully, I have something more significant and real(ish) to write about this morning… Yet again, for all the wrong reasons, it’s time to buy European distressed European Sovereign bonds. Wait for the them to tighten. Sell, then wait for the next crisis. 

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

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…

Olduvai IV: Courage
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Olduvai II: Exodus
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