Blain’s Morning Porridge May 19^th, 2026 – Why are politics so broken when markets are so strong?

“The only thing that scares me is Keyser Soze.”

Why are markets so high when the global outlook, trade and domestic politics look so vulnerable? Is it because investors perceive that corporates hold such power in the economy, they now set the agenda? What the global economy may need is a reset, but at present there are few signs the problem of power and wealth inequality will be reversed or addressed.

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What a curious world we live in. The US president has made himself a billionaire through astute insider trading he’ll never be touched for, and just made a trip to Beijing, surrounded by other billionaires – billionaires representing what America has now become. Look at our strength. Look at our wealth. Look at our power. If that’s what The Emperor Xi saw, he didn’t show it as he provided guidance to Trump on the decline of the American age.

I am not sure Markets know what to make of it. On one hand they are putting a premium on corporate strength and profits stretching into infinity. On the other they see broken politics, rising populism, insurmountable debt, and broken public services. Any fool knows that successful economies need consumption and confidence to drive them – and that inequality spells social crisis.

There is no reliable forecasting service to tell us what is coming – just the guesswork of strategists, chartists, and market watchers trying to connect the dots. The recent sharp market moves, and numbers and data flashing multiple yellow warnings (the ones that might turn red) about the multiple known-unknows: inflation, jobs, bond yields, liquidity, supply chains, oil, energy, trade, growth and potential conflict are trying to tell us something about the risks of a market correction, crash, or even a boom.

We do know markets suffer periodic collapses when expectations get ahead of themselves. Such crashes are the opportunity for a reset – an opportunity to correct whatever was out of balance, and generally the upwards path resumes – which is why the best money is made on calling the bottom of a correction or crash.

Every so often, however, we experience a deep and meaningful correction – like the Crash of 1929. Occasionally we have economic breakdown, like the fall of the Roman Empire leading to the Dark ages. (We know many ancient civilisations fell as a result of the economic consequences of changing weather on agriculture.)

But today? The Western Economy is not some Mesopotamian City-State. Even so, it feels a terrible mess. Something is out of kilter – unbalanced. Our political systems are stuttering. Techtreprenuers are blithely talking of millions of jobs being replaced. Debt is a crisis at every level of society. Inequality is stark, and nations are turning inwards to protect themselves. And when was the last time anyone thought about climate change?

What has gone wrong with Western Economies? For the last 250 years Adam Smith’s tome, The Wealth of Nations, defined the advantages (and the risks) of the market capitalist system. He warned about crony capitalism, rent seeking behaviours, unequal legal systems that favour wealth over justice, and corruption. He argued for progressive taxation and that the rich should pay more for their privilege.

Generally, Smith’s capitalism has worked well – creating growth, health, wealth and prosperity on the back of justice, trade and equality. Suddenly it feels like it’s not working any more.

Why?

“The greatest trick the Devil ever pulled was convincing the world he didn’t exist.”

Take a look at what the populists blame real politics and governments for: the massive debt quantums faced by western economies, the breakdown in public services, and the threats the government is not addressing – today its immigration, picking something scared folk can unite around and blame incumbent government for.

The instability in government is blamed on the incumbents – the UK Labour Party has failed to deliver (that’s a fact), but the problems it has to solve go back 30, 40, 50-years and longer. Long term problems require long-term solutions. (And will require cross-party agreement on long-term plans to mitigate.)

Yet, the root of these problems often lie not in government, but in the economy and its cost structures. One of the things I noted in my new book, The Battle for Hamble is how property developers have weaponised the use of NIMBY (Not In My BackYard) to attack objectors to their planning applications – they have turned the word into a demeaning  insult and badge of foolishness. Yet local stakeholders should have every right to defend their lifestyles and property values from bad planning decisions.

Take a look at the failure of privatised public services in the UK, like Rail and Water. Despite the enormous dividends private owners have ripped from the economy (and their subsequent under-investment) it’s the regulators that got blamed for the crises that are now emerging – from the actions of private industry.

Let’s be blunt. Much of the crisis in Western Democracies boil down to private enterprise. Yet we seldom talk about it. Governments are terrified to criticise business in case they move, which why they will always threaten to invest elsewhere. You can hold publicly listed firms to limited account by becoming a shareholder, but there is literally nothing you can do versus the private equity owners of the UK’s public utilities, except hope that underfunded and under-resourced state regulators will act. In many respects they are considered above the law when it comes to equality and social justice.

The government has all kinds of ideas to improve the resilience of the community, but these policies are often badly delivered – enabling smart private enterprise to arbitrage them to achieve their goals. That’s what happened with the Hamble Quarry – the landowner will destroy the local community and economy, costing 6000 jobs, but is winning because their lawyer fees are tax-deductible, there were stupid rules in place, and by repurposing the gravel quarry as a Landfill site they could make millions. As an investment it makes sense – but as social justice it’s a disgrace.

Take a look at the quantum of government debt. Why is it so high? Following the expensive bailouts following the Global Financial Crisis of 2008, and quantitative easing till the early 2020s, then the borrowings to pay for Covid, massive amounts of public money raised through debt (a form of money printing) was cycled into the private sector directly through loans, and indirectly from the plentiful liquidity ultra-low interest rates created. We now know that did not feed into new growth, but was invested in stock-buybacks, executive bonuses and massive stock value inflation.

That’s why nations are now broke, and voters are wondering what they got out of it. The rich are richer, and they are poorer because meagre pay rises did not match inflation. The spawned populism – finding someone else to blame, like Europe during the Brexit vote, and now immigration for stealing jobs. Populism may identify the problems that stem from inequality – but where are the solutions?

Today, Western economies face stark choices – cut debt, or rising interest rates will flatten bond markets. And who will suffer? Austerity so the people can pay back the debt raised to make corporates richer, and recession benefits no one, but when the next crisis comes its likely corporate taxes will be cut faster than personal taxes.

So, when is the crash going to come?

No matter how hard the strum et drang of the current “wall of misery” news-flow, markets seem determined to believe things can only better. FOMO remains the strongest force in the financial markets – fear of missing out. The investors piling into the new opportunities may be right. There are laws about mean reversion, and one of my key market mantras is “things are never as bad as we fear, but seldom as good as we hope.”

Personally, I would relax till June 12^th – the date of the SpaceX IPO. Some analysts are speculating the $80 bln float will value the firm at $1.5 trillion. I will not be a buyer – even though Elon Musk has the luck and persuasive savvy of the Devil himself. I have been predicting the market will wake up, smell the coffee, and see through Musk for nearly decade – and it hasn’t. It utterly believes in the value of Tesla and wonderous value of yet undelivered robotaxis and optimus robots, and it will buy the SpaceX story of datacentres in space and the infinite value of Starlink.

And those of us watching competition as other firms eat Musk’s lunch, will wonder how he gets away with it. More people suffer from Musk-Related FOMO than read the Morning Porridge.

Meanwhile, folk are busily speculating on the no-see-ums. There are all kinds of speculations in play at present.

Yesterday I had some American chums telling me there is about to be a popular revolution in Iran. I read their stuff – it’s based on propaganda put out by Iranian groups outside the country. It’s a classic Jack’s Nappy: hope expressed as irrefutable fact. Following the slaughter of the last wave of protests, (buoyed by Trump’s comment he “had their backs”), who is going to risk going up against the increasingly fraxious, backs-to-the-wall IRGC? If there was a populist revolution, who would take power? Some say the MEK or Reza Pahlavi (the son of the deposed Shah)? Or will Iran fractionalise into multiple revolts as minorities like the Kurds and others break up the nation and make it essentially even less governable. (To be blunt – claims Iran is on the verge of people’s revolution sounds like one of Trump’s social media posts.)

At the other end of the scale are the possible risks following last week’s inconclusive Beijing Summit between Trump and Xi. Trump has dutifully made all the right noises – telling Taiwan not to declare independence, thinking he’s preserving the USA’s ambiguous neutrality on the issue. Some reckon Xi will now seek to press Trump harder, perhaps even threatening a blockade of the “rebellious” province – triggering absolute chaos in global chip supply chains – unless Trump cancels the current arms deal and makes clear its support for Taiwan is limited. Some analysts believe that’s already in play – which would put the whole AI infrastructure build out (at least the US closed-weight, LLM datacentre model) at risk.

And then there is politics. No, the UK is not going to disappear in a puff of smoke because we now go through Prime Ministers faster than Italy. But there is clearly something wrong at the core of politics when a party with a massive majority self-immolates in front of an electorate wound up with the promises of populist politics.

I would say more… but,

Out of time, and back to the day job…

Bill Blain

Author of the Morning Porridge
CEO Windshift Capital
Advisor – Spitfire Strategic Capital

The Battle For Hamble is a proper grown-up examination of how bureaucracy has failed: a tale of Greedy Corporates, Bad Planning and Economic Illiteracy. It explains how a wholly unnecessary Gravel Quarry will be dug in middle of a prosperous village – putting 6000 jobs at risk. The truth is no one wants gravel, and the quarry company understands it’s not what you dig out, but what you stuff back into a hole in the ground that matters. Gravel sells for £30 a tonne – Landfill earns £150 a tonne to bury. Go figure.