Blain’s Morning Porridge May 16th 2025 – The Calm Before the Storm
“The greatest trick the devil played was convincing the world he doesn’t exist.”
The last 4 months has been exhausting coping with change, uncertainty and chaos – yet markets have emerged basically unchanged. Stocks are flat and bonds around the same. Nothing to worry about? Or… should we remain concerned as the consequences play out?
The word of the month should be wait.
Markets swooned on Trump mania, but recovered. Immediate crisis has apparently been averted. We are back into a speculative phase. Everyone is guessing what happens next. No body knows… Let’s wait and see what happens next. There is a rule in markets: consequences beget consequences……
Maybe there is a clue to how the next 3.5 years will play out in a fun story on Bloomberg: five crypto-loving chums scored themselves a cheap dinner with President Trump. They realised the president’s promise to host the 220 largest holders his MemeCoin $Trump for dinner was arbitrable. They simultaneously bought and shorted the meme-coin… creating the illusion of a large risk-on position, and thus scored their invites at zero risk. All it cost them were their transaction fees.
I suspect similar games are being played – arbitraging the markets with little real confidence or belief in the underlying asset. That’s trading for you – playing the market’s mood!
On the surface markets feel almost normal again. Despite all the two-steps-forward/three-steps-back Trump administrative and trade bluster these last 4 months, US Stocks have reversed their losses and the market now stands positive on the year. The US Treasury market has been under mild pressure – but US 10-yr yields are actually some 25pb lower than immediately following the inauguration. There are few signs of the potential debt/dollar meltdown many market watchers, including myself, believed could have occurred if the USA’s plunge into isolationism and stagflation hadn’t been slowed.
Phew! It would seem the madness has relented.
The reality is we are just adjusting our investment behaviours to the new reality which is one of noise. Thus, markets are doing what they’ve been doing best these last 17 years – ever since they came to believe someone will always bail them out – convincing themselves to move higher on the back of its nowhere-near-as-bad-as- we-expected FOMO.
My problem is I remain unconvinced, but that has always been what has made me such a poor market directional strategist. I rely too much on logic rather than understanding market sentiment. Common sense loses to emotion every time. Retail investors want to embrace the myth of American Exceptionalism. I want to make returns. In the long-run common sense wins out – but in the short-term (defined as any period shorter than the long-run) sentiment wins. (Go figure.)
Markets are not intelligent – they are voting machines, and thus the market’s sentiment, not common sense, is what to watch. As usual I find myself explaining my bad calls as being way too bearish in a market of optimistic, gullible fools who want to hear nothing but upside. Bah, humbug!
Even I am susceptible to the mood. I am now in that dangerous la-la-land of questioning my gut-feel that Trump is bad news for the economy and markets. I find myself wondering what I am missing and don’t understand about his popularity, cause and effect. Could he be the political genius he declares himself to be? Despite the sturm-et-drang of recent months, he’s now blessed with stable-ish looking markets. Threatened global trade meltdown into a deep US inflationary recession may now just be a minor downturn on the back of modest inflation and short-term supply chain disruptions.
One critical aspect of Trump’s survival is how markets have swiftly become indifferent and institutionalised to ignore the smoke and mirrors around what is happening. One hedge fund buddy told me they see Trump as nothing more than “background-static” to gaming the markets. He says to work out the effects of what he says and then does, and they usually cancel each other out as he flip/flops on friends and enemies, sacking the Fed Head, or imposing new tariffs on the left field, like films.
These details then become matters of earnest debate – and while we are utterly distracted by them, Trump is getting on with the real business of undermining and reshaping the whole basis of the governance of the USA. (Villainous music playing in background .. Mwhah, ha, ha, ha, hah!)
As we all know the US Constitution demands checks and balance between the executive, the legislature and the judiciary. In just 4 months, Trump has upended that paradigm. The US is no longer about what the Supreme Court decide or what Senators and Congressmen discuss. Its Trump’s agenda and Trump, Trump, Trump. He is becoming a Roman emperor in all but name! That’s what America voted for.
We sit in shock at the blatant corruption and self interest in plain sight. I suspect many traditional Republicans are pretending not to see it. The man simply does not care about the noise, figuring if he’s open about it – what is there to complain about? After listening to Trump supporting US chums repeatedly tell me for years how Hunter Biden’s laptop demonstrated the absolute corruption at the heart of the Biden regime…. what do Trump’s multiple assaults on democratic decency tell us?
My chum David Murrin describes it as PPPE – Trump’s Personal Presidential Profit Engine. He’s managed to double his net worth on the basis of leveraging the presidency – and the most visible success has been through Truth Social (his social media platform) and Liberty World Financial – the family crypto business. They represent a triumph of self-interest over collective purpose – which is broadly analogous to MAGA’s America First principals.
Who really cares about the Qatar gift of a $400mm Jumbo? Or how his supporters, like Elon Musk, have used his presidency to further their own goals? Or how Jared Kushner leveraged his status as Son-in-law to garner billions to invest from Middle East sovereign wealth funds..? In any world it would be called sordid. In Trump’s America it’s called business.
It’s in the world of crypto that Trump has shown the least reticence. James Eagle of Eeagli spotted how favoured early buyers of the Trump and Melania memecoins were able to buy the coins ahead of their public launch, and dump them into the marks that followed: “On 19 January, sixty-four seconds before Melania Trump announced the $MELANIA token, one wallet spent $681,000 buying the coin. Within a day it held $43 million. It was not alone. Twenty-four addresses grabbed $2.6 million of tokens pre-announcement, reaping a collective $99.6 million. Analysts call such wallets “snipers” – accounts that pounce on liquidity the instant a new coin appears, often tipped off in private chats.”
While crypto is essentially unregulated, thus no wrong-doing is actually wrong in the eyes of the law, the morality around Trump’s activities is hardly touched upon. Crypto watchers and shills know the most likely upside for Crypto will come from Trump’s lips. The billions he’s reaped from foolish retail buyers of his memecoins says it all. Trump is praised for his prowess. The marks get invited to dinner.
The biggest beneficiary of Trump’s crypto games has been BitCoin. Regular readers will know I am not a BitCoin fan – I simply see too many inconsistencies in its origin narrative, the ecosystem its spawned around itself, and the number of self-proclaimed “experts” who preach absolute bollchocks and variations of HODL.. I accept that because something makes no sense to me.. doesn’t mean it makes no sense to others.
If you believe BitCoin is real money, in its scarcity value, and that it’s “liberation” money free from govt interference and distortion, then you will likely accept it’s an inflation proof asset. For all its’ success, BitCoin fund Strategy is just a levered play on Bitcoin. Its CEO, Michael Saylor, says he will never sell any Bitcoin, so where will the cash come from to pay the interest rate of 8% on its new prefs? That looks a classic Ponzi, using new money to pay off existing investors in its debt stack. When I watch Saylor speak I can’t help thinking he’s making a massive bet on Trump continuing to boost Bitcoin – he playing sentiment!
And what happens if Bitcoin doesn’t keep fooling more of the people more of the time and tumbles – again? Saylor says the fund will continue and will prosper. I doubt it. A recent FT video described it as a cult. Perhaps..
BitCoin is essentially very simple, if enough people believe it in.. its real. As soon as they don’t…. it disappears in a puff of logic.
Puff… and nonsense..
Have a great weekend…
Bill Blain
Author of the Morning Porridge
Founder Windshift Capital
Partner Shard Capital
One Comment
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Bill,
In 2016 my brother went apoplectic regarding the death of American governing. My response was, if our system is so weak that it cannot withstand a (insert here all your preferred characterizations) then it doesn’t deserve to exist. I never allowed myself the delusion of thinking more highly of any government official, elected or not, than I would of a telemarketer. Maybe that’s an insult to telemarketers, but having she-who-is-Mrs-McIlraith confused by someone claiming to be from Comcast and trying to get $500.00, has made me more angry and suspicious at humanity in general.
As for Michael Saylor and Bitcon, I am with you. A few years ago I listened to an interview of him by Sven Henrich (Northman Trader) and it was fascinating. One thing that sticks in my mind is his analogy between crypto and yachts. Yachts are bought and sold all over the place, and if someone earns wealth in a country that doesn’t allow monetary transfer directly out of the country, you buy a yacht, drive it to the place you want to have the money at, and sell it locally. He went on to describe crypto as just such an instrument, which leads me to believe his belief in crypto has less to do with it as a store of value, but a means of wealth transfer. In other words, he already has wealth (probably assets all over the place) and crypto is just a way to balance his checkbook, so to speak. Touting crypto as an asset, well, that’s telemarketing. As far as paying his 8%, or, whatever, again, he has other real assets, I’d bet, so it’s just another cost of doing business. So his “I will never sell bitcoin” is a bit of a dodge, in my mind.