Blain’s Morning Porridge 19^th June 2025 – Where’s the Recession? How big is Iran Risk?

“If King Croesus crosses the Halys River, a great empire will be destroyed…”

Trump described Fed Head Jay Powell as “stupid” for not easing rates – Powell is playing safe, waiting for the Trump impulse to play through the economy. The standoff in Iran looks likely to prove Trump’s pivotal moment: is he a risk taker, or just noise? The stakes are massive – the upside is consolidation of US power, the downside includes acute embarrassment and MAGA disillusionment in the Presidency.

But first… a rant..

Apologies for the lack of Morning Porridge yesterday, but I was stuck on a train that was stuck behind a train that was stuck behind another train that had broken down.. or something like that. Wednesday was a logistical nightmare. I’d foolishly scheduled 7 meetings in London across the day, but they involved flip-flopping between City and West End. There is nothing worse than trying to traverse London by Tube on a hot sticky day, when herds of tourists are meandering round at slow speed in the fast city.

Tourists, of course, are very welcome – but keep them out the way. To facilitate their enjoyment of the City, yet ensure growth and commerce is not adversely impacted, I have a modest proposal to allow London workers to carry tourist-prods to stop them congregating at the bottom of stairways, standing on the left side of escalators, or dithering around on pavements. The prod itself will be bright and cheery, and have Welcome to London and Have a Nice Day written in large friendly letters upon it. The electric charge would be limited to a very mild, even chummy, electric shock, except when the embedded AI recognises Americans, in which case it will be doubled, tripled if they are particularly girthy, and quadrupled if they are wearing a MAGA hat such as the f***wit blocking the steps at Green Park yesterday. Really…? We were not impressed.

To make it even more annoying, my train back home was delayed and delayed again. The excuses included… “the driver for this delayed service has been held up by earlier train disruptions.” I therefore raise a second modest proposal of taking the previous minister for rail and making him work as a guard on the most delayed routes in the country, taking the full ire of commuters, pour le encourage the current one to do better. Cruel and unusual punishment, perhaps… but it might work if Government understands responsibility and the costs of failure.

Meanwhile, back in the real world… Where is the recession…?

The world gets a little bit dafter with every passing moment. Thankfully we have Central Banks willing to stand and say… “well the consequences of hatstand trade and tariff polices have made the global economy a bit messy and unpredictable, but since all our models are screaming STAGFLATION as a very real probability, we’re not going to cut rates.” Trump predictably called Fed Head Jay Powell “stupid”. Which one of them has the better understanding of monetary issues?

In bonds there is truth – we shall see. Some investment banks are warning of just one Fed ease this year, that the Fed will wait to see exactly how deeply any tariff impulse moves through the economy, and what effect it may have. Stock markets, however, are still acting like rates and bonds are not a problem? What would it take to shake their complacency?

There is a growing number of market commentators asking where is the recession we were assured was coming as a result of Trump’s trade follies? Where is the inflation the Trump detractors told us was coming? While the World Bank is warning of lost growth, no one is paying much attention. A tidal wave viewed from afar might look massive, but when it finally breaks on the beach the only damage is some damp shoes…. (Blain’s Market Mantra No 2: Things are Never as Bad as we Fear, but Seldom as Good as we Hope.)

What if the current recovery in stocks is soundly based on what eventually proves to be a minor tariff “ripple” effect? Some of the recent data on trade suggests that far from the Tariff threat stopping US importers bringing goods into the country, Trump’s flip-flop on policy has actually encouraged firms to increase orders and load up on imports, increasing inventories, meaning the US is well placed to avoid supply driven price increases for longer than the Outlook Bears perceive. Many of the US investment strategists I’ve spoken to in recent weeks doubt Trump will re-impose high tariffs on any nations – except for punitive reasons. US trade policy will now switch to cooperation in signing trade deals. The stick was applied, not its time for the carrot…

Good things come to those who wait…bad things happen to those who fail to take action to avoid them…..

Iran – the straw that breaks the New Republicans?

Meanwhile, it would appear TACO Trump is in a dither on Iran. He says he might or might not attack. Some say he’s a bit like the pub drunk threatening to punch someone’s lights out, but the regulars just ignore him… they know it’s just noise. All this could be a problem as Trump’s indecisiveness is fracturing the MAGA/Trump movement, emboldening Republican politicians to remember a golden past when they served America’s interests (and their own goals of relection) first…..

According to the Guardian, Trump is holding off on striking Iran because no one is quite sure the massive GBU-57 Bunker Busters will be sufficiently penetrative to take out deeply buried Iranian nuclear facilities. While successful strikes would undeniably confirm US strength, anything less would be an embarrassment. He’s therefore leaning towards relying on threats undermining the Iran government.

Now, bearing in mind I might be suffering PTSD from yesterday’s antics in London… maybe, just maybe Donald Trump unleashing B2 deliver bunker-busters on Iran would be a good idea. So say some of my Republican chums in Washington. While not quite full Donald Rumsfeld “neocoms”, the militant financial powerbrokers of the HedgeFund/Tech faction of Trumpism are diametrically opposed to the MAGA/America-First stalwarts. That divide threatens to become deeply polarised. The Tech/Hedge Funders believe this is moment for the US to demonstrate the power and reach of the US, through short, sharp, brutal military efficiency.

Lets call them the TechBoys – they see Iran as an opportunity:

• The Middle East is divided primarily due to Iran’s desire to be top regional dawg, and its sponsorship of instability through Hamas, the Houthis and Hezbollah.
• Remove/break Iran’s theocracy – remove the root of regional conflict.
• Israel could be then be persuaded to stand down while Palestine is reordered.
• The normalisation of diplomatic relations with Saudi and the other Arab states could follow, resulting, in time, in the emergence of a functional, conflict free, regional economy – closely aligned with US tech rather than shifting towards China. (Big Win for US Tech Billionaires.)
• The Palestine “problem” then becomes a shared issue for Middle East states to jointly solve – with Israel aligned alongside the Arab states.
• Regime change in Iran presents many issues – Persians are not Arabs and will not accept Saudi regional hegemony easily.
• Devasting American precision strikes with low collateral damage would send a powerful message to Russia, as would Trumps veiled threat “kill” the Iran leader, doing so would send an even clearer message: You can’t hide. We know where you are.

In contrast, the MAGA wing of True Trump Believers and Isolationists want their president to avoid any foreign entanglements. If Israel and Iran want to destroy each other – their problem, not Americas’. What’s particularly interesting is how the very smart propagandists of MAGA – like Tucker Carlson and Steve Bannon – are now sniping Trump’s more intellectually-challenged minions in Congress and the Senate. (Just watch Carlson vs Ted Cruz..)

This US political picture is shaping up as a battle. Republican representatives need the Hedge Fund money and the MAGA votes. If they are forced to choose sides – on which side do they fall?

Why do American petty politics matter? Geopolitically what’s happening the Gulf just now will be hugely significant in terms of the emerging global order. It could be an opportunity for the USA to re-establish its primacy – demonstrating its might. But it’s a risk if the GBUs don’t work, and its dragged into yet another forever war. Whatever the outcome, it will have consequences on how global investors perceive US bonds and stocks..

All of which leads me back to my top line quote this morning from classical history. Can you guess what happened?

Watch this space.

Out of time, and back to the day job…

Bill Blain

Author of the Morning Porridge

Founder and CEO of Windshift Capital

Partner Shard Capital