Market Judders As a Bleak Winter Begins

Did you feel markets judder when Powell spoke? The mood has changed as markets wake up to the danger Central Banks might just start doing their jobs. As Winter begins, Europe faces a bleak energy crisis of its own making. My solution? Buy a generator!

Blain’s Morning Porridge, 1st December 2021 – Market Judders As a Bleak Winter Begins

“Frosty wind made moan, Earth stood hard as iron, Water like a stone.”

This morning: Did you feel markets judder when Powell spoke? The mood has changed as markets wake up to the danger Central Banks might just start doing their jobs. As Winter begins, Europe faces a bleak energy crisis of its own making. My solution? Buy a generator!

Today marks the first day of meteorological winter, and the first day of Advent – which means its ok to quietly hum Christmas songs in the office, although the Lapland convention on Christmas dictates loud Xmas jumpers remain verboten till after the ides of the month. As your December First advent surprise from the virtual Blain’s Morning Porridge Advent Calendar, enjoy this virtual Tunnocks Caramel Wafer – Scotland’s National Biscuit.. Mmmmm, they’re delicious…


Lots to talk about this morning as Powell shifts the rules, bond markets get the heebie-jeebies, transitory inflation is consigned to junkpile, and markets wake up to the threat Central Banks might just start doing their jobs… A deep judder just ran down the spine of the market….

But first…

It’s the first day of winter, and surprisingly in this year of climate noise, extreme events and erratic weather patterns, its 0.4 degrees colder than the average of the last decade. That, of course is terrible news for the whole of Europe. The outlook from the UK Met Office is for a wet and windy early December with possible wintery spells, before it becomes more settled around Christmas with fog and frost. Again, terrible news.. (We pay attention to the Met Office because grousing about the weather is about the UK’s only definable social skill, and the Met Office has got the biggest computers…)

Why such bad news?

Cold winter days mean increased energy demand… Gas prices have never been so high, supply has never been so limited, and the sources of power are looking strained. I’ve been checking out the prices of generators – they are not cheap (even more so if you want them to cut in automatically), but they are distinctly preferable to the prospect of freezing to death through the festive jollities..

The big problem for Europe this year has been Wind. Governments have bet the shop on Wind as the simple, reliable, dependable, cheap source of renewable power over the last decade. We’ve seen our mountains sprout forests of turbines, and our oceans are now jagged with wind generators. Problem is… Europe has had a very unwindy year. Some estimates are 60% less wind than normal.

I’ve experienced that personally sailing this year – half a dozen regatta days where racing has been abandoned due to zero wind. Boats trying to race across the Atlantic in the “Transat” race have found little or no wind. And if it has not been “light and sh*te” as sailors say, it’s been blowing “Half-Pelicans” (apparently a Danish expression), or “dogs off chains”. Storm Arwen last week caused spectacular damage across the UK, but produced limited power – wind generators can’t cope with storms.

It means Europe is going to suffer a serious energy crisis this winter.

We’ve nobody to blame but ourselves. The politicians will blame Putin for using Europe’s energy crisis to threaten us, but who allowed Europe’s energy sovereignty to get to this perilous stage? The UK once held a massive Gas stockpile – but the largest facility at Rough in the North Sea was allowed to run down and close on the basis it would be cheaper not to repair it, and secure spot supplies on the global gas market.

Do you feel an “doh” moment coming on?

UK Govt minister Kwasi Kwarteng recently said he has no concerns about blackouts this winter – 50% of our needs come from domestic production, and 30% from Norway. When a minister says our energy supplies are secure.. well that’s why I’m buying a generator and a week’s supply of Diesel to run it. Basically, the UK has a strategic gas reserve on hand of a couple of days. If things get dicey this winter.. that generator will look a really smart idea.

Across Europe Gas reserves are around 70% of normal levels. Spot demand will depend entirely how Russia plays. Putin doesn’t need Europe to buy – he’s got a ready market in China (where state industries and power companies have been specifically instructed to secure energy supplies of gas and oil at “any cost”.)

Of course… if governments had woken up and smelt the coffee a few decades ago.. we’d now have modern Nuclear power stations on line – taking our base energy level up into the 60% non-fossil range. We’d have the luxury of unreliable renewables like Wind and Solar providing maybe 10% base load, and be reaping the rewards of years of development into reliable renewables like efficient heat pumps, tidal and hydro power and geothermal.

We’d have a vibrant coal mining sector, producing the best metallurgical coal on the planet to make the premium steels that would be used to re-infrastucture our energy rich economy, and to build the next generation of fusion reactors.. We’d have invested in a diverse range of non-fossil, renewable power to ensure the resilience of the economy. Gas and oil power would be a memory…


The die is cast. It’s going to be a cold, miserable winter…

Meanwhile.. back in the USA

Jay Powell has dumped “transitory”. Inflation is expect to linger into “next year”. I am sending him one of my coveted “No Sh*t Sherlock” awards. His response will be a Hawkish early taper/reduction of the asset-purchase programme, which will be announced at the Dec 14-15 Fed Meeting.

Surging inflation, the new Omicron variant threat, higher rates and central banks waking up to reality – no wonder markets cratered yesterday.

Reality sucks and it bites. Witness carnage in bonds yesterday and illiquidity as markets went offered only. Its only just beginning – bond traders will be weighing up increased credit risks stemming from higher debt costs, the prospects of a renewed economic shut down on the Omicron variant, sustained supply chain dislocation, and falling corporate earnings as taxes and rates rise..  When bonds crash… in Bonds there is Truth..

Perfect storm” is a massively overused metaphor, but this might be it coming. Watch this space.

I’m afraid the Porridge might be a bit unreliable over the next few days due to my travel being reliant on UK trains, but I’m going to be figuring out the risks of a Christmas wobble.. They have risen…

Five Things To Read This Morning

FT – US Junk Bonds hit by sharpest sell-off in over a year

FT – Private equity fees: where are the customers’ jets?

WSJ – Powell Lays Groundwork for Faster End to Stimulus as Inflation Outlook Worsens

BBerg – Hawkish Powell Is a Force Markets Haven’t Faced In Three Years

Torygraph – Elon Must warns rocket trouble risks bankrupting SpaceX

Out of time, and back to the day job…


Bill Blain

Strategist, Shard Capital


  1. Interesting that you, along with many others, particularly those in Texas who endured last February’s freezathon, have been acquiring their own back up power plants. Here in hurricane prone Florida they are almost required. Problem is, so a lady in Dallas told me, they are hard to come by. She had to wait months for hers. I suppose there is a ship or two full of them stuck off California.

    Funny thing is NO ONE wants back up power from a wind turbine or solar panels. Roof top solar panels are popular in California ( wildfire smoke willing) and even in Florida but airconditioning here requires more power than they can deliver. For that you need fossil fuel power yet European governments seem to ignore what every homeowner who needs reliable power understands.

  2. Bonds? We don’t need no stinking bonds says the market. Well if you don’t, we do, says the fed and the rest of the central banks. The question in my mind is when does this really start blowing out the currencies.

  3. Hi Bill
    You’re going to need a seriously sized generator. At peak, you could be drawing up to 6/7 KW depending on your cooking methods and an average of 12-15KWh per day not including heating. That’s a serious investment and with the price of diesel, how much to run ?
    You’d also need to consider your neighbours attitude to noise and clouds of smelly diesel smoke 24 x 7.
    There would also be the cost of installation as you can’t just put that sort of power through bell wire.
    If you’re storing diesel in any sort of quantity, there are fire regulations to consider and the cost of a bunded tank and pumping equipment.

    Stick to financial matters please, you know much more in that field.


    • Fair comment – but opining on stuff I know very little about is my stock in trade! Being an economist is a licence to have an opinion on just about everything…

      Fortunately.. I have a brother who is everything I am not: practical, knowledgable of the real world, and a proper engineer to boot. Installation is a budgeted cost. I have not planned a scrubber unit for the exhaust tho.. There are generators with a 56 decibel noise rating.. and owning a boat means the storage of diesel is a known unknown…

  4. Horses for courses, it costs a minumum of £500 for a mains switch and installation, I had a look at our modest needs and got a new big name generator for less than that with electric start and dual fual – petrol or LPG, going to run our oil fired central heating, a frig or deep freeze, limited lighting plus putas direct on leads. Did buy a two ring camping stove as didn’t fancy running an electric cooker on generator even though technically it was possible.

    We’re rural but noise and fumes don’t seem to be a problem. Leant it out post Arwen, friends were off for two days and they’re suburban.

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