Blain's Financial Porridge

The Federal Reserve caught between the rock of Donald Trump and the hard place of a Stock market addicted to easy money, the long-term outlook for the UK post-Brexit, Boris Johnson and inevitability of a UK election, and what is Facebook anticipating by launching its own Cryptocurrency

Bill Blain discusses G20 Meeting, Trump and Xi agreeing to resume trade discussions, but the war will rumble on. Then we look at Global Commodities. Who will be the next European Leaders, how do the solve the low interest rate conundrum and put Fiscal policy on table. Finally, what will Apple be without Jony Ives?

Bill Blain discusses Market Liquidity following the gating of Woodford funds, the problems experienced by some funds in illiquid private placement bonds, speaks to leading bond broker Alex Bridport about market liquidity and Switzerland vs Europe, before taking about whether the Fed needs to raise US rates, and just how unhappy stocks and Trump will be if it doesn't. Finally he talks about new ECB President elect Christine Lagarde and how she may be positive for Europe.

This week Bill Blain looks at the divergence between Stock market optimism and bond markets misery, Trump's tweets about the Dow hitting 27k, the chances of any kind of Brexit overcoming the gloom in UK markets, and why Boeing might be a stock to watch for its potential to trigger a major market downturn. Finally Bill talks about the background to his new book, The Fifth Horseman - How to destroy the Global Economy, and why the unintended consequences of QE, Regulatory Overkill, Austerity and Populism continue to cause uncertainty! 

This week's Porridge Podcast looks at politics and markets. We start off with thin markets and the wake up moments provided by weaker than expected Chinese growth and poor Netflix numbers - which could change the way markets think about Tech stocks. We also consider the implications of Donald Trump's racist tweets and how that plays to US credibility. Then we consider the economic and market prospects of the major global economic blocks we're watching in terms of politics. China comes top while the UK is at the bottom. Finally, its a tough life for Central Bankers and how important they are for the stability of global markets. 

Bill Blain talks through the current markets: Why Tesla's poor numbers and 10% stock crash might mean its a bad car maker today, but its changed the world and creates a massive problem for the current automotive dinosaurs. Overpriced today but undervalued for tomorrow? Then in an an interview with Serial Entrepreneur and Leave Campaigner Martin Banbury we look at the Boris Johnson feel-good effect as he becomes new UK prime minister - can it be sustained? The Tech Sector giants like Amazon, Facebook and Apple have driven stock prices higher, but how dangerous is over-regulation? And finally, how attractive will Europe look if it can solve Fiscal Policy!  Next week its going to be about the Federal Reserve! 

Bill Blain looks at the Trump Tweet volatility in global stocks, trade wars and the flight to safety trade in government bonds, and wonders if its building for an unexpected shock if the underlying economy improves. HSBC was in the news this week after the sudden departure of its CEO - which is a symptom of a bank in more serious trouble than the market knows. After years of monetary experimentation and QE distortion are we about to discover financial sanity through new fiscal spending and is it an opportunity for long-term government/market led investments in both economic and social infrastructure. Finally, lets look at Brexit - the odds say no deal, but any deal would be better! 

Bill Blain talks through the current market volatility triggered by trade wars, recessionary threats, inverted yield curves, equity crashes and geopolitics. Its dangerous out there, but we are in thin summer markets. Bill picks 4 stocks that could trigger systemic and deeper market shocks.  Global bond markets have moved from madness into the "Euphoric" stage, begging questions about how vulnerable to correction they are, and can governments use bond markets to reflate economies in the face of investor concerns. Bonds look unbalanced!  Confidence in Argentina collapsed last week on the back of a market friendly government enacting IMF polices failing at the polls. Are there lessons from Argentina's experience for former IMF head Christine Legarde to bring to her new role heading the ECB?  Finally trade wars are pushing the world into recession, but China is demonstrating resilience to Trump. Perhaps he has to find someone else to bully? Look out Germany and Europe! 

Bill Blain talks through the current markets. First up this week is Brexit - the increasingly beleaguered prime minister Boris Johnson looks trapped in a No No-deal/cant call an election quandry! How will he wriggle his way out? Can he? Or is the central character in some Shakespearian tragedy? Meanwhile, global bond yields have never been so low. Most of the global bond markets yield less than zero, and many analysts think they will go lower. Could the massive $115 trillion market already have passed "Peak Bond"? And what would a crash, a rise in rates and rising defaults do the markets? Bill reckons Bond markets will be the root of the next financial crisis.   China is front and centre this week. Although markets are still betting on trade war resolution, it looks increasingly unlikely. More likely is increased polarisation between East and West. Trump and the West want completely different things than China. The two are unlikely to meet. Expect China to become increasingly cut off and put in a cold war box. That has massive long-term implications for global growth.  Finally we look at We Work's IPO - likely to confirm the end of the era of irrational exhuberence in Tech Stocks. The valuation has been slashed from $47 bln to $20 bln leaving early investors embarrassed. There are still many questions about its business model, its profitability and leadership. 

This week Bill Blain looks at the problems facing Saudi Arabia in the wake of the Houthi oil bombings, investor disinterest in the Aramaco IPO, and news Saudi ruler MBS is exhorting money from rich Saudi's to buy it. How much does it raise regional risks and a Saudi insurgency?  Next up is the US economy - despite the Fed making a 25 bp cut, the economy looks in good shape - whatever Trump tweets.  Stocks have some issues for unicorn Tech companies: WeWork's failed IPO has burst that bubble. But bond yields look a serious problem. After Greta Thunberg told Congress to go listen to scientists, green investments have come to the forefront. But to stop global warming is now impossible, and it can only be mitigated. That doesn't mean ending global growth, but finding new ways to grow while addressing a very new environment.  Finally, Europe. It looks as if a Brexit Solution may be yet another last minute EU triumph.. but as the UK wanders off on its own, how will Europe face up to fiscal and political union when they can't agree what Fiscal Stimulus might mean?  

Bill Blain's Morning Porridge Podcast October 6h 2019 This week Bill look's at the changing pattern of risk across markets:  October is often considered to be one of the most dangerous months for stocks. As we enter the final quarter of the year, investors are either too cautious trying to protect the year's gains, or too desperate to make returns after losses.  Stock prices are still high but its worth considering a cautious and selective market entry. The Unicorn disruptive tech sector is still likely to struggle after the We-Work debacle, but dividend yields from strong, profitable well managed firms are better than bonds. The problem is to balance the risks.  Global politics looks more uncertain than ever with Brexit dominating the UK, impeachment in the US, while China faces Hong Kong, recession and Taiwan in China. These could all damage market sentiment, plus an oil shock from Saudi would nail on recession. Why has it gotten so bad and confused? How much worse can it get? While stocks are looking more fair priced, the Global debt markets look more dangerous - the bulk of Sovereign bonds are trading with negative yields. Investors are increasingly concerned as doubts about the economic wisdom of Negative Rates rise. The High-Yield Junk Bond market is likely to prove the canary in the coal mine in terms of a liquidity lock down that could impact all global markets - when (not if) it goes badly wrong!  So where to put money in these markets? Gold? Cash? or Alternatives?  Real Assets that produce dull, boring and predictable returns and a uncorrelated from financial assets look at much more promising market in times of global uncertainty. 

Bill Blain looks at the Extinction Rebellion protests and considers what it means for Green Investments to address Climate Change. His conclusion is its potentially the most exciting investment opportunity we've ever seen. The ability of the markets to drive technical solutions to the threat presented by the changing environment, and to steward our planet better, will surprise us all. Invention, innovation and implementation of new green tech through the 2020s could be as big as the disruptive tech boom of the 2010s! The big threat to the current economy remains uncertainty, and much of its is being driven by one man - Donald Trump. His fingers are all over Trade War, and now war in Syria. What will he do or say next? The clues are in his approach to his electorate - bread and circuses. If you want to predict what he will do next look to the key US swing states in the next election: Florida, Ohio, Arizona, Pennsylvania, Michigan and Wisconsin.  Stock markets have seen a blazing bull market since the collapse of Lehman in 2018. Is it coming to an end, or pausing for a breather? The collapse of the We-Work IPO, and increasing concerns about competition on companies like Netflix and Uber diminishing the likelihood they can ever be profitable is putting the Unicorn growth assumptions under pressure. As Unicorns and Tech has pulled the stock markets higher, maybe its time to doubt index trades - a rising stock market tide pulled all stocks higher, but maybe now its time to return to Value Investing, and re-read Ben Graham's Intelligent Investor.  

Market Strategist Bill Blain looks at critical themes in the global markets.  This week, Boeing is one of the stocks that worries the market most. The discredited B-737 Max remains grounded, and the aircraft maker is seeing sales fall. Investors are losing faith in its management.  The issues are multiple, but its not just facing crisis today. Its going to be long-term weak because its failed to invest in developing new products, like a new replacement modern aircraft for the 50 year old B-737 Design. Instead it spent its revenues on stock buybacks instead - to push up the price of its equity which got executives bigger bonuses. As a result, its seriously damaged its future prospects. And its the not the only firm that's made the same mistake. If you want a great book to read, try the Billion Dollar Whale, the story of how a Malaysian Development fund 1MDB was raided by kleptocrats and playboys. What is worrying is the involvement of Goldman Sachs. It earned massive fees raising money for the fund. They might not be guilty themselves of the Fraud, but their systems never spotted what was going on - and thats a massive fail! Even as Goldman looks likely to get away with substantial fines, 2 British bankers have been extradited to the US to face trial for "Libor Fixing" which will likely see them jailed - its a non-crime.  Finally, lets talk about Brexit. Its a failure of British Politics. At then end of the day the UK leaving the European Community will become a footnote in the history books. It won't be the end of the World. Yet it dominates everything in the UK. We are now trapped in a strange limbo with no majority leadership and no signs of an election any time soon. Can we please just get on with it! 

Bill Blain looks at some of the major issues facing global financial markets.  The prospects of a Chaos Moment seem to be rising. Although there is nothing specific to say a crash is coming, lots of signals point to crisis events; it maybe the sudden collapse of the myth behind We-Work morphing into fears about the Softbank Vision Fund, or it might be fears about how politics could trigger a chaos moment. The speed at which problems evolve into chaotic market moves can be overwhelming - and it can happen suddenly at any time. Global central banks used to be bastions of trust and stability, but after 10-years of monetary experimentation and ultra-low interest rates, are we right to trust them anymore? QE and low rates have triggered all kinds of unintended consequences and market distortions, and the credibility of global central banks is under question. The degree to which they are politically independent, and what they can do next to address a global slowdown is debatable. Donald Trump is a divisive figure - but to what extent will his impeachment trial destabilise markets? The potential disruption is enormous - right the way up to breaking confidence in the dollar and the US' dominant global position. Its critical the impeachment process is seen to clear, clean, transparent and open - or else it could backfire badly on the US and markets.  The UK election has finally been called. Its not a slam-dunk for Boris Johnson's conservative party. If he has overestimated the willingness of Labour Leave seats to vote for him, then there is a distinct possibility of a Liberal/Labour coalition. Everyone thinks its about Brexit - what if it is not? 

In this edition of the Financial Porridge Podcast, veteran Market Commentator Bill Blain examines critical market themes driving markets.    Although he’s written about markets for a large part of his 35 year market career, seldom has one man been so much in the frame. While Barak Obama attracted occasional comment, Donald Trump’s interventions on tax, trade wars, climate change and everything else confirm he is the great disruptor.    Much of the globe seems desperately unhappy these days. Demonstrations in Hong Kong. Riots in Chile. Polarisation and dismal politics in the UK. Impeachment in the US. Everyone is miserable. Why? Increased income inequality is one reason – and its due to bad central bank and political policies pushing too much money into the hands of the rich in terms of financial asset inflation, while the rest of the poor people suffer from Austerity. It’s a recipe for populism if not outright revolution. Its driving markets.   But its not all bad news. Climate Change is seen as massive threat by existing industry and its lobbyists. It should not be. Its an opportunity to create new growth, raise incomes, stabilise society and drive sustainable growth in a cleaner environment through new renewable and climate cure technologies. Although scientists say its happening, there are still deniers. Its time to ask why. Climate Change does not need to remain a threat – it should be seen as a challenging opportunity.    Unless a new smoking gun emerges Donald Trump will likely survive impeachment.  US republican senators would have to vote against him, and they don’t want to risk being seen supporting a Democrat plot. It will be left to the US electorate to opine on his guilt or otherwise in Nov 2020.  Its an election for him to lose – can the Democrats put up a credible candidate and opposition?    Trump’s trade wars are being blamed for global slowdown – but its due to changing economies. China was the great growth driver as it dramatically expanded for 30 years. Now it is slowing as it focuses on domestic consumption. That slows everyone else. Its also about tech change – and its not just petrol being replaced by Electric. The changing global economy will be lower for longer. 

In this edition of the Financial Porridge Podcast, veteran Market Commentator Bill Blain examines some of the critical market themes driving markets.    While the World frets about how much damage the China/US trade spat is doing to the Global Economy, the place to watch is Hong Kong. Only two things matter: What will China do? And, how will the West react? The consequences of an all out Trade war and Economic Cold War will be highly damaging. However, rather than a bloody blow against demonstrators, the Chinese are more likely to employ their surveillance state and the kind of polices they’ve used elsewhere to marginalize dissent in order to preserve the advantages of Hong Kong as a Financial Centre. The Chinese will be quite happy for the protestors to go elsewhere.    Aviation has been very successful for the last 50 years, but now growth is slowing in line with economic slowdown – which we’ve seen before, but also a new factor  Flight Shaming over the carbon emissions generated by flights. That spells a period of change in expectations for the number of flights, but also in the way airlines run and finance their fleets.  This is critical when the global manufacturing duopoly of Boeing and Airbus is wondering how to react.    The Environment and Climate Cure pose a host of problems for investors in terms not only of tech risks, but also how they get paid. It’s a classic Public Good. Ocean cleanup tech is a good example – extracting plastic from the oceans will benefit everyone, but who will pay for processing plastic and how to encourage investment. These things are happening – the tech exists and it will get done.   Politics seems to get more fraxious every day with more and more outlandish threats and claims about policies and who said what and where, every day. Does it actually matter – sadly it does. The trick is to try and see beyond the political nonsense and work out what is really going on. 

In this edition of the Financial Porridge Podcast, veteran Market Commentator Bill Blain examines some of the critical market themes driving markets.    If you simply invested fully into stocks and bonds, then 2019 was a great year. As markets wind down, investors are largely concerned with holding onto their gains. Higher stocks and bonds is  unusual – normally a strong bond market suggests a lack of inflation and a weakening economy, while a strong stock market suggests a very buoyant growth scenario. What’s happening is that central banks are still boosting markets through cheap rates. The big themes of 2019 were i) trade wars, ii) recession/downturn, iii) the end of the unicorn era, iv) the rise of ESG investment rules, and v) politics.  They will likely continue to develop over the coming decade.    UK Property markets have been shaken by the gating of an M&G fund. The problems of the commercial property market are very specific – its about the death of the high street, empty shopping malls and credit concerns on lessees.  However, the real problem with funds is liquidity – its madness to expect daily liquidity on property investments.  Commercial property is an attractive real asset, its not a listed stock or bond.    Corporate debt is another sector that could experience a liquidity trap. The market has evolved and grown dramatically, but has become less liquid and less credit worthy with far more issuers on the very cusp of junk. What happens if there is a downturn or interest rate hikes could trigger a wave of contagion crisis on the corporate bond market.    Politics has been the biggest force moving markets through 2019. Another French revolution is brewing. Hong Kong remains a powderkeg. The UK election is the nastiest on record, and Donald Trump will face an impeachment trial – which he will win.

Bill Blain's Financial Porridge - Dec 23rd 2019  This week Bill outlines his big themes for the coming decade. You can read the whole report on the www.morningporridge.com website. 7 major themes for the 2020s and two market moving narratives are set to dominate the next 10-years: (https://morningporridge.com/outlook-for-the-2020s)   1)    Market Distortion – how long can central banks keep juicing the party? 2)    New Opportunities – how with a new industrial revolution in tech, pharma, health and climate cure change markets? 3)    Politics will continue to dominate – what are the risks of political failure? 4)    Debt Crisis Risks 5)    Geopolitical Risks increasing 6)    ESG and Sustainability 7)    Climate Change   The two big market narratives will revolve around: ·      Can the market distortions of the last 10-years be unwound without triggering an even greater crisis – are we trapped in repressed markets?  ·      Global Debt Crisis looks increasingly likely as governments step up borrowing and corporates look to paydown the debt binge of the 2010s. The final crisis may come from personal debt.     Follow the Link to Open the Outlook file:  https://morningporridge.com/outlook-for-the-2020s