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Blain’s Morning Porridge – 17 Feb 2020: Virus pain and Softbank
Blain’s Morning Porridge – 17 Feb 2020: Virus pain and Softbank
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“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.
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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…
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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…
Blain’s Morning Porridge – July 29th 2019
Blain’s Morning Porridge – July 29th 2019
“I’ve seen things you people wouldn’t believe. Attack ships on fire off the shoulder of Orion. I watched C-beams glitter in the dark near the Tannhäuser Gate. All those moments will be lost in time, like tears in rain. Time to die.”
The UK is a curious place. Boris Johnson’s feel-good drive and the numerous plots being arrayed against him, received rather less attention over the weekend than the Minister for the 18th Century’s rather ponderous style guide. Jacob Rees-Mogg, Esquire, has banned a host of words, outlawed clichés, demands double spaces after full-stops, insisted on imperial measures (Kilometers, Kilos and grams are banned), and has made the incorrect use of apostrophes a capital offence. Readers will know my grasp of punctuation, spelling and grammar is nebulous at best – so if I disappear suddenly you can assume the Extreme Grammar-Nazi wing of the Conservative Party has got me!
Back in the real world, this week is largely about tomorrow. Worry not about what’s going on in Hong Kong, the Gulf, or even how bad European economic data might be. The only real question is what will the US Federal Reserve do? It’s not a question of will they ease rates, but by how much- 20% change they may go for 50 bp!
Perhaps the question should be – why ease rates at all?
It may be the depths of a thin summer, but a 25 bp cut will be enough to please the market. The economy won’t change because of a quarter point reduction in ridiculously low rates, but stocks will rally and the market will be properly ecstatic! Donald Trump will tweet to his followers about what a great job he’s doing and how its confirmed by the strength of the stock market. That is a sh*t reason for cutting rates. It worries me the Fed is prepared to pander to Trump and the stock market.
…click on the above link to read the rest of the article…
Blain’s Morning Porridge – July 11 2019 – Man on the Moon Day!
Blain’s Morning Porridge – July 11 2019 – Man on the Moon Day!
“The Sky is not the limit – there are footprints on the Moon.”
So many choices for this morning’s quote. The classic Armstrong “One Step” was too obvious. I did think about “To infinity and beyond”. But the one I chose is perhaps the best. Points if you can name who said it. Only four of the 12 men who walked on the Moon are still with us. It was a long time ago, but last night my wife, son and I were out to dinner in the West End. As we walked back past the Lego Store inn Leicester Square – look what was in the window! I’m going back to buy it later today!
It took me back 50 years – July 11 1969. I was in the back garden in Fox Covert, Edinburgh, staring excited at the moon, asking Dad where the spaceship was. He tried to explain how far away it was and since it was only the size of a car, I’d not be able to see it. It was a terribly exciting day – the BBC showed the film of HG Well’s First Men on the Moon. Then came the iconic music; Also Sprach Zarathustra, which defined the whole Apollo era. Patrick Moore and James Burke explained what was going on. James Burke is still making sense today! We waited and waited and then the words. At some point I must have fallen asleep because I woke up in bed with my Action man lying on the floor in his (Gemini) spacesuit.
It would be a terrible pity if we don’t go back to the Moon. Does it make commercial sense for us to go further?
…click on the above link to read the rest of the article…
Blain’s Morning Porridge – July 10 – Will Boeing trigger Crash?
Blain’s Morning Porridge – July 10 – Will Boeing trigger Crash?
“Ignite blue touch paper and step back. Do not let Children play with Fireworks.”
All eyes on what Powell tells Washington today, but a number of Porridge Readers called to tell me I’m wrong about summer risks! They think my expectation for a long worried nervous but stable summer before markets are bailed out by accommodative central banks in late Q3 is way too optimistic.
A number feel markets are ripe for a sudden and painful rollover in bonds and stocks – and much sooner than I think. What they did agree with was my assessment the likely trigger for a market shock will be a “no-see-em”, something so obviously hidden in plain sight it catches us completely and painfully by the short and curlies.
And “Plane” sight might be a good way to put it. I’m wondering if Boeing might be the trigger! (See what I did there..?)
Hang on? We all know the next market collapse isn’t booked till October? Well maybe not. What if someone tries to start the market apocalypse early? That would shock the many market participants who think the perception of a Global Central Bank put means there is nothing to worry about. Complacency is a terrible thing.
Smart bond gurus are shouting bubble! Although US junk bonds have not tightened as much as treasuries through the last uptick, they are still at incredibly tight spreads. European sub-investment grade is rallying in the expectation a tide of new ECB investment grade purchases will lift all boats. Yet, with yields so low as to completely discourage any dealer inventory (which is too high a capital cost anyway), liquidity has never been so thin.
…click on the above link to read the rest of the article…
Blain’s Morning Porridge – June 19th 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 – May 22 2019 – Tesla and Yoorp worries
Blain’s Morning Porridge – May 22 2019 – Tesla and Yoorp worries
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“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” ?
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Blain’s Morning Porridge – May 21st 2019
Blain’s Morning Porridge – May 21st 2019
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“He knew everything about literature, except how to enjoy it…”
Waves of negative news headlines battering markets. Might have to wear a hat..
Huawei – Trade War Threat Level Rises
The Huawei embargo raises the trade war threat from undeclared to imminent shooting match. While it’s not quite “bullets fired at Archduke’s car”, it’s getting close. It feels like there is something of a tedious inevitability developing – a bellicose Trump realises his political future depends on winning, and the Chinese refuse to lose face. Is it already too late to rein back?
Huawei being effectively barred from Occidental markets has triggered all kinds of market fears: a “digital iron-curtain”, the threat of an economic cold tech war, broken global supply chains, and knock-on effects we can only begin to imagine. It’s the End of Globalisation – scream the media. The Chinese hint at reprisals. The “temporary exemptions” granted last night by the US are just that – temporary: they won’t undo the sudden need of millennials to dump their Huawei phones. The damage has been done. Who will the Chinese punish in return?
Markets are now rife with speculation about “ripple” effects damaging tech dependent initiatives from autonomous cars, streaming, digitisation, and booking apps, triggering all kinds of real-world economic pain in sectors like tourism and luxury goods. While the market is fretting about how America will shod itself as tariffs are slammed on shoes made in China, it might be time to reassess market sectors where we expected long-term and ongoing China expansion, rising domestic consumption and demand to drive growth – I’m think areas from aviation, autos, machinery and plant, and energy. And, what are the implications for the UK – where the Chinese are building our nuclear power stations?
This doesn’t end well…
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Blain’s Morning Porridge – 11th February 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…
