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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 – 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…

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 – 17 Feb 2020: Virus pain and Softbank

Blain’s Morning Porridge – 17 Feb 2020: Virus pain and Softbank

“Lord, give me strength to deal with London cyclists…”  

A quiet day’s play in prospect with a US holiday, and its UK mid-term holiday all week. The Covid19 Coronavirus is likely to remain the dominant issue to worry the markets. Infections continue to increase, the Chinese are pumping funds into struggling regions, and passengers are being “rescued” from Cruise liners. But there is lots of other stuff to worry about: like what happens when bonds are downgraded to junk (see Kraft story), where the UK is heading, the fact Italy and Greek bonds yield about the same, and a host of other stuff I’ve already forgotten about this morning.

The Virus is what we’re watching first. As a result of desperate efforts by the authorities, the narrative is beginning to shift – we’re likely to see the discussion move from potential infection scenarios and containment, and into the realms of economic reality as real cause and effect economic reality stories emerge. Evidence of creaking global supply chains is fast emerging. China home sales have tumbled. JCB, manufacturers of the eponymous digger, are shuttering production because of a lack of parts from China. Large swathes of Chinese industry never reopened after the lunar New Year holiday because migrant workers stayed in the home villages. Chinese shoppers, the mainstay of shopping villages like Bicester, are said to be conspicuous by their absence. 

There is less talk about end of the world epidemic scenarios, and the story is now being pushed off the front pages. Yet it’s scary just how little we yet know for sure about the virus in terms of just how infectious, dangerous and mutable it might be. The only thing we know for absolute sure – it’s going to have massive real economic consequences – which means it’s a genuine Black Swan, rather than some nebulous “Grey” event some pundits have been talking about. 

…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 – October 21st 2019

Blain’s Morning Porridge  – October 21st 2019 

“If you wake up on a Casper mattress, work out with a Peloton before breakfast, Uber to your desk at a WeWork, order DoorDash for lunch, take a Lyft home, and get dinner through Postmates, you’ve interacted with seven companies that will collectively lose nearly $14 billion this year.”

It’s a big week for markets with the ECB meeting, some critical Q3 stock numbers and a host of things to worry about in terms of economic releases and the continuing slowing of the Chinese economy. Its all critical stuff for the bond market – which I reckon is a ticking time-bomb. But more about that later… For stock markets, the quote this morning sums it up – the mood is changing: forget the disruptive tech unicorns and focus on fundamentals. But, first up we really can’t ignore the Brexit mess in the UK.  Saturday’s SNAFU gives investors another chance to load up on Sterling.  At some point Brexit will be fixed.  It might be messy. 

Brexxxxxxiiiiitttt….. 

I am sure foreign readers are wondering how the Mother of All Parliaments is making such a Horlicks of the Brexit negotiations.  It really doesn’t look good does it?   On the other hand, it does show the vibrancy of our political process, and the fact individuals can force it to change. It’s just a shame so many of these individuals seen to be self-seeking egotistical numpties of the worst kind – but even Oliver Letwin has a mother that probably loves him.  

The reason Brexit is so messy is simple. It boils down to weak government – which is a recent thing here in the UK. 

 …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…

Olduvai IV: Courage
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Olduvai II: Exodus
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