Viva la revolution! Futbol Libre! Futbol Libre!

Blain’s Morning Porridge – 19 April 2021: Viva la revolution! Futbol Libre! Futbol Libre!

“It can’t be much of a super-league if it includes Spurs?”

This morning: Football, the beautiful game, is anything but pretty this morning. Could the mass-revulsion trigger something fundamental in terms of the shift towards stakeholder capitalism? Meanwhile, markets remain on highs, but there are signs the madness has gone too far. Do cracks in cryptos and over-priced stocks mean a wobble is coming? And, as the Shanghai Motor Show gets headlines – how deep is Tesla’s Moat? Not very…

The only thing in the news this morning is the new European Super League Football proposal – greeted with unanimous hostility by just about absolutely everyone. I know diddly squat about football – I am a Heart of Midlothian supporter (a “Jambo”), which should explain why. I can understand why fans will be furious. Clubs may be owned by super-rich American owners who know even less about the beautiful game than I, but the clubs don’t belong to them.

Clubs belong to their fans – and maybe it’s about time the reality reflects that.

The fact disconnected and greedy owners intend to milk the football ecosystem for more, taking a larger slice of the small football pie by turning it into a US franchise operation is ugly capitalism in the extreme.

Perhaps the proposals sum up the last desperate days of the shareholder economy – where stupid entitled men hold pieces of paper conferring them with rights, but have absolutely no awareness or understanding that their “ownership” depends entirely on the good-will of their supporters, their players, their staff and the whole media industry that supports it. Football’s history and culture is worth more than that.

I may support Scotland’s worst excuse for a ‘fitba club, but my kids are Gunners and I doubt they will be impressed. There will be pushback. I would urge every hedge fund manager, investment banker, CIO, saver and fan to write to the chairmen of the major clubs and also JP Morgan (which is putting up the funding) and raise the issue as a travesty of their social duty (as in ESG) as it will take the money out of small clubs to feed to greedy behemoths, ensuring the death of the game in the medium term.

Maybe it’s time for something dramatic – like nationalise the bad-actor teams and hand them to their fans as aspects of our national culture worth preserving.. (And maybe just completely close down Chelsea pour le encourage les autres, a warning to the rest…?) Boris – you can have these ideas for free.

Enough about something I know absolutely nothing about….

Markets!

Going back to markets, there is – as always – lots going on in terms of noise. Will this be the week Russia vs Ukraine or China and Taiwan dials up the volume to 11? Or maybe it will a stock wobble on the back of a sentiment shift? It feels like the cybercurrency high tide occurred last week following the lacklustre Coinbase direct listing IPO – the subsequent slide in Buttcon and copycats was absolutely predictable. (My new diversified cybercurrency portfolio in my bright new Coinbase wallet-account is down 20%!)

The big question – if one bubble pops, do the others? When the ultimate joke, Dogecoin, is the only crypto to be rising in price, and a New York deli listed on the pink sheets (penny stocks), Hometown International, which operates a single store has a market cap of $105mm.. you just know someone up there is laughing.

Stock markets remain at all-time highs, anticipating things can only get better as pandemic recovery fuels a massive consumer spending binge-out. The question: isn’t that already priced in, and will it actually happen? Or will the divergence between the real world and financial markets continue to widen?

There was a fascinating article on Zerohedge over the weekend: “Stunning Divergence”: Latest Bank Data Reveals Something is Terminally Broken in the Financial System. What the piece spots is there is far more money coming into the financial system than is going out. Deposits are growing far faster than loans. ZH presents data from across US banks and they all show the same thing; surging deposits (that have to be invested), versus falling lending.

The result is simple – the surplus cash in the financial system is going into financial assets (stocks and shares) creating massive financial asset price inflation. But in the real world, we have chronic deflation as demand for lending to fund less-renumerative real world asserts declines. It’s a direct consequence of QE and ultra-low rates.

I shall let that thought fester for a while.

Auto companies

Meanwhile, have you read the articles about Mercedes’ all-new “Tesla Killer”? If you are a holder of Tesla stock you probably should be aware – but don’t panic. The Merc EQS is probably just the latest catch-up from an automotive dinosaur. Having never, ever, owned a “luxury” German car (a Golf 16v GTI 30 years ago doesn’t count) I don’t have any axe to grind on their behalf.

But what successive German EV launches, plus a host of other new manufacturers, means is that Tesla’s “Moat” – the technological market lead it garnered from “inventing” EVs” – is getting shallower. The new Merc EQE will have a 470 mile range – which would work for me if I was minded to buy a German car. It could do our longer trips up to Edinburgh or Snowdonia in Wales to see our Olds.

I am reliably informed Porche’s Taycan EV sports car drives and feels just like the “real” thing – except for the noise. It costs considerably more than the top-of-the-range Tesla, but Porsche is updating older models to the 2021 spec, and it looks like a proper sports car. Porsche has cachet. Even Ferrari is looking to launch an EV.

The new Merc EQS will compete with the venerable Tesla S in price point – around £90k. It will set benchmark “technical, design and quality” standards according to its advertising advisers, Deutche Bank.. ahem

Does it mean Merc is a screaming buy now that’s it’s a “leader in EV technology”? Of course not. It’s a buy because it sells cars and makes money. Merc remains primarily a great car company, offering luxury, brand, customer service. By pandering to public tastes by producing a top class EV it is simply evolving its core capability: high class luxury cars. Can it out compete the Tesla? For some folk, used to their S Class, yes.

There is plenty of information available on how all the established Car Makers will roll out new highly competitive models in coming years. Even more interesting is this week’s Shanghai Motor Show, where one of the biggest stands is China Evergrande’s New Energy Vehicle’s. The $87 bln market cap EV maker is bigger than Ford, hasn’t sold a single car yet, and has even less experience building them than you and I. According to BBerg, you can’t even look closely at the 9 cars on its stand.  There are now 400 Chinese companies, all competing for market share.

But, of course, I wont be buying Chinese or a German EV. I might, one day, buy a decent second-hand Tesla one day with a clapped out battery. I will stick it in a shed for 40 years and then sell it as to a filmmaker wanting to remake Back to the Future.

Five Things to Read This Morning

FT – Global savers $5.4 trln stockpile offers hope for post-covid spending

BBerg – Bitcoin’s Green Haven is Running Out of Surplus Electricity

Torygraph – If Sweden’s Covid strategy is such a disaster, why is it so popular?

WSJ – Bond Giant Pimco Attempts to Change its Culture

FT – Junk: The bright spot in strained bond markets

Out of time and back to the day job….

Bill Blain

Shard Capital

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