Interesting week that was…

Blain’s Morning Porridge – 23 April 2021:   Interesting week that was…

“Never judge another knight without first knowing the strength and cunning of the dragons he fights…” 

This morning: The successful mass pushback on the European Super League may seem a minor issue contained in the sports arena, but it highlights growing voter dissatisfaction with politics, wealth inequality, questions who will pay for funding recovery, and just how much longer the speculative bubbles can continue as the world changes.

 Tis seldom a Scotsman will say this, but Happy St George’s Day

As another weary weeks wends to its close, it might actually have been one of the most significant for months. Lots has happened under the surface – a host of seemingly unrelated events that all seem to be moving in a common direction – mass political pushback.

The collapse of the breakaway European Super League was a slap in the face to the sport barons, but a more general warning to corporate rentiers they can’t take their customers for granted. The strength of public reaction against the hopes of the club owners to monetise their teams was surprising in the terms of passion and vehemence. It’s been warning on corporate “over-reach” and a useful reminder to politicians who they answer to. Not the bosses, but the voters.

Here in the UK, the government immediately sided with the football fans, distracting newsflow from a party mired in allegations of political sleaze – from VIP PPE contracts to the ease with which rich entrepreneurs have apparently been able to tap-up government for favors and contracts. Greensill is a case in point – although I suspect the Labour Party is wasting its time trying to connect dots on their allegations about James Dyson and his offer to supply ventilators at the depth of the first-wave corona-crisis.

The general feeling remains politicians have got a mite too close to corporate wealth. The public are appalled at the way in which failed politicians have jumped into exceedingly well paid sinecures; ex-chancellor George Osbourne joining exclusive investment bank Robey Washaw, former deputy-prime minister Nick Clegg moving to Facebook, while ex-Labour Chuka Umunna joined JP Morgan (as head of ESG!)

There is a knock-back coming. Politicians are being reminded no matter what they may “owe” for business donations and support, they don’t own votes. (Well, not yet.)

Meanwhile, corporates are being punished. JP Morgan’s ESG rating has been “slashed” by an CRS ratings agency Standard Ethics to “non-compliant” and “contrary to sustainability best practices” as a result of its willingness to fund the ESL project. Let that be a lesson to them… I suspect more pain is coming their way.

Meanwhile, Biden’s tax proposals on corporates and the wealthy have spooked the… wealthy. Markets are roiled. This surely isn’t the way the US government is supposed to act… clearly its role should be to pump trillions into markets to artificially inflate stock prices, making the rich richer…? This is dangerous territory. New fangled notions like the rich should pay taxes commensurate with their wealth could be something of a game changer. No doubt Biden’s foolishness spells the end of absolutely everything. Sell now and head for the hills.

Seriously though, our CIO at Shard Capital, Mike Hollings observed, “while everyone is cheering the massive fiscal stimulus, it’s abundantly clear governments now need to address how they pay for it”. Politically, wealth inequality is going to be front and centre when it comes to paying the costs of pandemic. Over the next few years, its going to dominate discussion. Mike added: “The fiscal tailwind of deficit financing is destined, in due course, to meet the fiscal headwinds of higher taxes..” Twas ever thus.

Mike is expecting a shift away from the sectors that have seen the largest gains as investors seek to crystalise Capital Gains Taxes now, ahead of them being hiked. There are games to be played in tax-arbitraging gains versus re-positioning in under-performing assets.

Which leads us to a third theme: the concept Government might actually start to tax the windfall earnings of the last decade has already put a dampner on gamblers investors playing speculative stocks.

A lesson in just how badly wrong it might be comes from Turkey, where over 390,000 Bitcoin investors have been left penniless after a 27 year old crypto-exchange founder absconded with over $2 billion of their money. Really? Quel surprise.. who could possibly have expected that? The Turkish savers had been parking money in Buttcon on the basis it was much safer than leaving it in the discredited Turkish lire. That’ll teach them…

And I have to giggle after listening into a discussion about Non Fungible Tokens yesterday. (I’ve changed the story to protect the guilty, but basically….) As we all know, NFTs are the next big, big thing… but one investor is terribly disappointed. He paid 100 Noexistiums for a digital doodle in January and just sold it for 103 Noexistiums. He’s millennially furious people don’t see the value of the nascent digital art-market. Yet’s its made him a gazillionaire; from Jan to April, the Noexistium has risen from 0.03 to 33.00 vs the dollar.

Meanwhile, I am delighted to report that the bright shiny new Coinbase account I opened last week, putting together a carefully chosen diverse portfolio of cryptocurrencies (the names of which I could spell) is now down 24.7%. Yay! Confirms the success of my Reverse Blain Investment Strategy.

Gosh.. who would have thought cryptocurrencies could be this much fun. I am going to award myself a Greater Fool medal for funding the very top of the crypto scam.

Subscriptions to the Morning Porridge.

If you signed up for Bronze, from next week you will have to find your own way to the Morning Porridge. You can find it on Twitter and Linked-in, but if you want to receive it on email, freshly published, then you need to sign up for the Silver Subscription. (Gold is for institutional investors).

To show that I am in touch with the digital age, I going to let you pay your subscriptions in my own ground-breaking digita-nalogue currency. From the day after tomorrow, you should be able to pay for your Morning Porridge in Zonks. Zonks are a blickchain based cryptologue digital currency that has been peer reviewed in active field trials by highly qualified experts in commercial transaction testing. (Last night, in the King & Queen…) At present one Zonk will buy you a month’s subscription to the Porridge, and… it will only cost you £10.00..

(NB – Blickchain is a new user-friendly approach to blockchain tech involving the use of Excel, a pencil and lined paper. It works. Sort of)

Five Things to Read This Morning

Torygraph – Chuka Umunna in line of fire after JP Morgan’s spectacular own goal

Bberg – Turkish Crypto Exchange Goes Bust as Founder Flees Country

FT – The worrisome 1999 vibe to markets

WSJ – Dogecoin is a Joke, but it’s no laughing matter

Capex – The big danger of the Brussels bond bonanza

Have a great weekend – out of time and back to the day job!

Bill Blain

Shard Capital