Ying and Yang. Bonds Mature – Blain Doesn’t! Plus: Blain’s Market Mantras…

Blain’s Morning Porridge – March 19^th 2022: Ying and Yang. Bonds Mature – Blain Doesn’t! Blain’s Market Mantras…

“I’m a joker, I’m a smoker, I’m a midnight toker”

A very different Morning Porridge today..

This weekend I hit 60. I doubt I will disprove the old market adage: What’s the difference between a bond trader and a bond? Bonds mature…

Hitting 60 is something of a surprise. It only feels like a couple of years ago I was celebrating my 25^th birthday as a young banker in London. Things happen very fast when you are enjoying yourself…. and, I have enjoyed myself enormously right through a varied, dramatic yet unremarkable career in Finance. Yet… there are 35 years since that evening back in March 1987. 2 wonderful wives, 2 marvellous kids, multiple jobs, many, many great friends, and only a couple of mortal enemies later… Who would have thought it?

A lot of laughs, and an awful lot of learnt experiences.. but… a lot of foolish frippery as well. Whenever I earned decent money I pretty much blew it all on proverbial fast cars, fast boats and the 2 women referred to above. I happily squandered the rest (to be fair that includes my pension pot!) I’ve been betting you can’t take monetary assets with you, but great memories fill my dreams.

What’s the big secret of 60 years?

In all things we have naebody to blame but ourselves.

We need to accept responsibility and accountability for our actions. I learn’t the hard way divorce is the greatest financial mistake we can inflict upon ourselves. However, its less of a mistake than 2 people staying miserable to avoid financial consequences – when they can find joy elsewhere. Finance is just finance – it should not trump emotions and life. Regular readers will know I hit the jackpot in She-Who-is-Mrs-Blain – Nicky.

Personally, I’m delighted to have wasted so much of my life on the really important stuff like daddy dancing, getting lost in mountains, wondering why clouds are the shape they are, falling off paddleboards, painting bad seascapes, wandering along beaches, eating and drinking too much, great friends, singing in the pub, playing guitar like a scalded cat, skiing, watching rugby (but no longer much understanding it), not being able to learn the bagpipes, and my ultimate passion: Sailing.

If I could only do one thing, it would not be investment banking – although it might come second or third. Give me a tall ship and a star to steer her by, any day. Markets are the Ying to my Sailing Yang – or is it the other way around?

On the other hand, financial markets have been fulfilling and good to me. I’m extremely fortunate to actually enjoy what I do – meeting people, explaining markets and putting together complex financial transactions – which is extremely satisfying… when it comes off.

This morning, I would really like to say thank you to the many people who made it possible to spend 37 years doing stuff I like doing! As I write this my head is full of bankers, traders, lawyers, salespeople, clients, friends, bosses and folk who worked for me.

It’s unfair to pick them out, but Nick, Julian, Rowena, Barry, Doug, Padraig, Martin, Jonathon, Brett, Karen, Hugo, Chris, Jim, Richard, Prodi, and James… are just a random few from a list of thousands who made my “career” possible. They made me extraordinarily lucky. My “career” has been enabled by these many people who have given me opportunities, shared their knowledge and experience, and tried to teach me new things. I thank them for their efforts. I cherish the memories of every meeting and call. (Apparently one bank still keeps has a book of notable Blain quotes… when anything goes wrong they open it and look for the appropriate comment.)

I have been blessed by my market friends – thousands of them.

Let me share a few moments from my first 37 years in Markets…

• Spending 3 nights snatching sleep under my desk on working all night to finish a pitch, the next night finishing the deal telexes, and the third night collating the responses.
• Completely maxing out my credit cards in a posh London nightclub after my boss told me to buy a round of drinks to celebrate a deal, leaving me flat broke.
• Winning my first deal mandate – and blowing the profits on expensive deal gifts..
• Writing my first front page by-line story – about Credit Suisse’s swap desk ripping off The Republic of Italy.
• Being told writing “the bank refused to deny” wasn’t good journalism. It was.
• Taking a very, very important and serious Japanese Banker to visit clients in Africa – and discovering he was one of the funniest, most cultured and least self-important people I’d ever meet – and we won the deal! (He couldn’t be bothered with a boring conference, so we went on a road trip round Senegal instead and I taught him rude Scottish drinking songs..)
• Putting together a massively complex trade in NY and Europe involving more moving parts that the space-shuttle – and it actually working.
• Winning a karaoke contest on my 40^th Birthday in a Chinese bar in New York.
• Working out the how markets changed and how to exploit my knowledge.
• Finding my voice and confidence to say what I think.
• Not taking it personally when deals or my personal life collapsed. Jump back up and start again.
• Being sacked for being a threat to my boss – best thing that ever happened to me.

Yet, it’s also time to be honest: I have never been a very good banker or financial salesman. I am, at heart, a reporter, trying to explain things. If I’d been a better banker I’d have been less inquisitive, and focused my knowledge to get rich. I guess that’s why I have frustrated so many bosses.

I am happy being a financier rather than a journalist – as I have been. I hated the threat of approaching deadlines. Every morning I wake up and still find markets fascinating – because they are! There are so many stories I’d like to share, but one, from my early days in Fixed Income, sums it up.

My head trader went to lunch and told me to try not to buy a particular corporate bond while he was out. Moments later a client called looking for a bid. I told him we really didn’t like the bond and the best I could bid was 101. The client was disappointed and said he’d hold. When my trader got back I told him – he laughed and immediately called the client, and said.. “Young Blain’s an idiot. I love these bonds. I want these bonds. I want your bonds, and I am sooooo excited I will bid you 100.00 for them.” The delighted client immediately sold them – a point lower because they got caught in the enthusiastic narrative.

What have I still got to look forward to?

I hope I still have many more years in Finance – 60 is the new 40! I still wake up enthused and excited. I hate Sunday nights because I will dream about work and wake up early with a list of things to do. I reckon I’ve still got the sneaky market smarts to make things happen…. I am working with a great crowd of like-minded folk at Shard – there is nothing the big banks can do that we can’t do better.

At the moment I am working on one of the most exciting deals I’ve ever been involved in. Its big and its challenging – elephant hunting. There are lots of moving parts to solve. It’s the reason I’m jumping back on a plane to the Gulf on Sunday. I will be delighted to write it all up when it’s done and dusted.

The reason I started writing the Porridge 15 years ago was to have something to talk to clients about – it still works… There is so much to write about: Monetary policy, stagflation, ESG, market distortions, Geopolitics, politics and so much more. I am never short of things to write about each morning.

But I do think the business of finance needs to change.

Although I rant against how ESG distorts markets, and how regulations get in the way (and end up being arbitraged anyway), I am increasingly concerned by bad market behaviours and how to make bad actors accountable. I get seriously angry when I read corporate lies and b*llsh*t, nonsense about crypto, or conspiracy rubbish. I sincerely believe there are some companies – like the UK’s Persimmon or Boeing in the US – that are outright bad, exploitive and a menace to society.

The headlines this morning are about P&O sacking its entire workforce on cross-channel ferries, and replacing them with cheap foreign sailors. It’s owned by a Dubai company and happened even as Boris was asking the UAE to turn on the oil spigots. Not only will it worsen already rickety UK supply chains, but raises substantial strategic risk if, heaven forbid, the Chunnel was to be closed…  There is something despicable and underhand at work here in the way 800 citizens saw their lives upturned yesterday.

Getting angry about inequality and injustice runs in my veins. It’s a Scottish thing. I’m probably unique in the City of London for having resigned from the Labour Party 40 years ago – they were about to sling me out – because it wasn’t left wing enough. I even hung out with the Socialist Party of Great Britain for a while… and they thought Lenin was a softie. I have mellowed – as a great economist chum said.. “We are all recovering Marxists…”

I know my innate Scottish sense of lefty injustice and calls for equality don’t sit easy with all Porridge readers. Yet, what slightly worries me more is I have more friends and contacts in the Conservative Party than I do in Labour or the SNP.

If there is one factor in modern finance I think will utterly crush our current markets – it won’t be Putin or Xi, a Tech crash or inflation – it’s going to be inequality and injustice. These imbalances in society need to be addressed because what we now have is obscene. But, that will be a topic for another morning…

As my birthday present to all Morning Porridge readers.. time for an update of Blain’s Market Mantras:

• The Market has but one objective: To inflict the maximum amount of pain on the maximum number of participants.
• Things are never as bad as you fear, but seldom as good as you hope.
• Hope is never a strategy.
• The market is just a voting machine and will always overreact as the crowd figures out what new news means.
• Trade what the market believes. Invest on what you know.
• The Market has no memory – and neither do buyers…
• Why worry today about stuff you will have to worry about tomorrow?
• The moment to buy/sell an asset is some point before you first think about it.
• Walking out first is better than crawling out last – The first cut is the cheapest!
• In a wobbly market a bid is a bid is a bid! And you should hit it harder and faster than the proverbial red-headed step-child.
• Set strict Investment rules and strictly adhere to them – until it’s time to do something else.
• Facts change. Don’t stand still.
• The incredible thing about the Euro is the number of people who actually believe in it..
• The incredible thing about the Dollar is the number of people who actually don’t believe in it..
• Bitcoin is proof of mass delusional credulity.
• Investment rules, capital regulations and ESG imperatives lead to lazy investment allocations and unwise asset optimisation.
• Buy companies and countries with positive politics and reform agendas. Sell countries using someone else’s currency, and companies where the management are wearing new shoes.
• If a financial institution is building a new corporate headquarters in the glitzy part of town – sell.
• If a country looks, feels, and smells bust.. it probably is.
• Ratings are someone else’s expensive opinion.
• Opinions are like bottoms. Everyone has one.
• Central bankers have mothers too…
• On Banks: The only thing worse than too little capital is too much.. 
• The worst time to raise new capital is when you need it
• Mis-management is never a one off event – serial offenders remain offenders.

I think that’s about it… If you want to give me a birthday present back go buy a subscription to the Morning Porridge.. !

Aw Ra best

Bill Blain

Strategist – Shard Capital

Author – The Morning Porridge