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The UK attracted a record £137 bln order book for its £10 bln Green Gilt. But what does the Green Gilt achieve? Its marketing puff. It may disguise how ill-considered and ultimately self-defeating the Government’s rush to looking green has been. No matter how well intentioned a Green Gilt is – its style over substance, papering over the cracks in a confused and contradictory long-term climate-change mitigation strategy.

“Every decent con man knows a simple truth is more powerful than an elaborate lie..”

This morning: The UK attracted a record £137 bln order book for its £10 bln Green Gilt. But what does the Green Gilt achieve? Its marketing puff. It may disguise how ill-considered and ultimately self-defeating the Government’s rush to looking green has been. No matter how well intentioned a Green Gilt is – its style over substance, papering over the cracks in a confused and contradictory long-term climate-change mitigation strategy.

It fills my heart with joy and makes me proud to be British that the UK Government just received £137 billion of orders for its debut Green Bond – a record historical amount for any UK bond or Green Bond. (US Readers… disinterested sarcasm alert.)

Investors were apparently tumbling over themselves to place orders, but I can’t say many will be surprised or disappointed when they got less than 7% of their order. The £10 bln Green Gilt due in 2033 (12 year) will pay a 0.875% and was priced to yield 0.8721%… which is a bit more than the comparable 11year bond was paying at the time….

The proceeds of the new Green Gilt will specifically be earmarked to support green projects including zero-emission transport and offshore wind projects. I don’t quite understand how the spending programme will actually work…

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

Is Evergrande a symptom of deeper malaise?

September 22, 2021

Is Evergrande a symptom of deeper malaise?

Evergrande’s imminent default is rocking markets – but few believe the collapse of a Chinese property developer could trigger a global financial crisis. What if Evergrande is just a symptom of a deeper malaise within the Chinese economy and its political/business structures? Maybe there is more at stake than we realise? What if Emperor Xi decides he needs a distraction?

“If that’s true, we are very close to the China Syndrome ”

This Morning – Evergrande’s imminent default is rocking markets – but few believe the collapse of a Chinese property developer could trigger a global financial crisis. What if Evergrande is just a symptom of a deeper malaise within the Chinese economy and its political/business structures? Maybe there is more at stake than we realise? What if Emperor Xi decides he needs a distraction?

After yesterday’s market tumble Evergrande dominates thinking this morning. The early headlines say the risk is “easing”. Don’t be fooled. S&P are on the wires saying it’s on the brink of default and is unlikely to get govt support. It’s Asia’s largest junk-bond issuer. Anyone for the last few choc-ices then?

The market view on the coming Evergrande “event” is mixed. Some analysts are dismissing it as an internal “China event”, others reckon there may be some systemic risk but one Government can easily address. There is some speculation about “lessons” to be learnt… There are even China supporters who reckon its proof of robust China capitalism – the right to fail is a positive!

I’ve got a darker perspective.

The massive shifts we’ve seen in China’s political/business public persona over the past few years have been variously ascribed: a reaction to Trump’s protectionism, China taking its place as a leading nation, Xi flexing his military muscle, and now a clampdown on divisive wealthy businesses to promote common prosperity.

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

Inflation, Covid, Central Banks and Politics – about half the things to really worry about…

August 24, 2021

Inflation, Covid, Central Banks and Politics – about half the things to really worry about…

As markets shake off their summer slumbers, what should we be worrying about? Lots..! From real vs transitory inflation arguments, the long-term economic consequences of Covid, the future for Central Banking unable to unravel its Gordian knot of monetary experimentation, and the prospects for rising political instability in the US and Europe.

“How many divisions does the Pope have?”

This morning: As markets shake off their summer slumbers, what should we be worrying about? Lots..! From real vs transitory inflation arguments, the long-term economic consequences of Covid, the future for Central Banking unable to unravel its Gordian knot of monetary experimentation, and the prospects for rising political instability in the US and Europe.

Same as, same as….

Not an Apology

I’ve been told I should apologise for yesterday’s Porridge. A reader unsubscribed because I don’t treat Tesla seriously. (Shock, horror.. somehow I shall live with the pain of rejection…) Another commented: “hating Tesla must be a very difficult way to make a living.” Sure. I agree – it is. In my private Jihad versus Elon Musk I have missed massive market upside… but then again, it’s not my job to pump up illusory market valuations. It’s to paint the picture as I see it, and caution foolish markets about their gullibility. I will continue to characterise Tesla as an unjustifiably overpriced automaker, pretending to be something else, run by a narcissistic show-boater.

Meanwhile…

What should we really be worrying about?……

China?
US Politics in the wake of the Afghan Skedaddle?
Overpriced Markets and Asset Bubbles?
The future of Tech and ESG?
Central Banks trapped by the consequences of their own monetary experimentation?
Boom or Bust post Covid Economies?
Inflation, Deflation or Stagflation?

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

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

June 11, 2020

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 11th 2020 – Bond Triggers Tumble

May 11, 2020

Blain’s Morning Porridge – May 11th 2020 – Bond Triggers Tumble

“When this baby hits 88 miles per hour, you’re going to see some serious…. “

After last night’s Boris announcement on not reopening the economy, it clearly doesn’t need any further explanation.. (US Readers – complex sarcasm alert.)

Over the course of the lockdown, I’ve been brushing up on Quantum Entanglement Theory and almost accidently I’ve created a time machine. I’m not quite sure how it works – so I reckon that qualifies me a job in Whitehall – but I was able to download The Morning Porridge from May 2021…..

*********************

Blain’s Morning Porridge – May 2021

“Sell in May – oh don’t bother – you are already away…”

It’s just over a year since 20mm Americans lost their jobs in a single month and United Airline’s failed $2 bln bond issue in the first week of May 2020 became the unstable pebble that triggered the most devasting landslide in financial market history.

All around the globe, bond investors woke up to their doubts on just how much government QE programmes, miniscule yields, and the value of their collateral of unproductive obsolete economic assets could be. Equity holders caught the whiff of panic – figuring out rising P/E’s in a crashing global economy meant nothing – even if central banks were promising to intervene. Sovereign debt buyers went on immediate strike, citing concerns on debasement, inflation, and the implausible promises being made.

The result was the most precipitious tumble in history – everyone tried to exit the markets and discovered the truth: “there are many ways to buy, but only one exit marked sell.”

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

Blain’s Morning Porridge – April 23 2002 – Avoiding Pension Crash

April 23, 2020

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…

Blain’s Morning Porridge – Aug 13 – Argentina, Legarde and Europe

August 13, 2019

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 23rd 2019

July 23, 2019

Blain’s Morning Porridge – July 23rd 2019

“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 – 4th July 2019

July 4, 2019

Blain’s Morning Porridge – 4th July 2019

“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: 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: “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…

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