Blain’s Morning Porridge, Dec 18 2020: – Jingle Bell Rock
“How do you spell Chanukah?”
This is my final appeal to support this year’s charity project: Walking Home For Christmas. Myself and Nicky have now completed our 3 Charity Hikes for ex-Military suffering mental health issues. Please donate to Team Morning Porridge. (We know the PayPal function is “poor”, but please persevere with it!)
A Hopeful Christmas and a Brave New Year!
Well folks, this is it for 2020! This is your final nutritious serving of Morning Porridge till the New Year! Let’s look forward to a great 2021.
I shall be working the next two weeks, but on a specific funding project. Instead of leaping out of bed like a coiled spring bursting with an urgent need to jot down my latest financial thinking and fresh opinions, I’m going to be basking in some long soft mornings, a decent breakfast and a nice long walk to our temporary office to rationalise and wrangle pages and pages of raw data and numbers into a deal.
Yesterday I asked readers for their thoughts on what their highlight missed trades of 2020 were. There were some great comments – and lots of folk kicking themselves for missing all kinds of opportunities from the big recovery that began in March, to buying the “wrong” Zoom early in lockdown.
My own big mistake was not investing in Scotch Eggs. These delicious eggy “substantial meals” allow folk to go to the pub – and sales are up 10x since the government said so!
However, my CEO, Toby Raincock – clearly peeved at how I wiped him on our Shard Christmas quiz – pointed out the downright obvious: “The way to have made fantastic returns in 2020 is simple: invest in everything Bill hates.”
Toby is thinking of setting up a new fund; RBI – Reverse Blain Investments. I shall put in £100k. Some wag is bound to offer me leverage by lunchtime…
Sadly, Toby is right. I make no secret that I regard Bitcoin as a speculative nonsense, yet it is up 200% on the year. My other pet peeve is Tesla, and it is up 660%. Had you invested in both I commend your luck and wish you good fortune. I am apparently doomed to remain a Cassandra like figure, my warnings ignored and ridiculed – but ultimately Troy burns. (Just like WeWork last year – which I called correctly.)
For the first investment into the RBI fund in 2021 I suggest Toby looks at SPACs. I am slightly concerned 193 SPACs launched this year still have $63 bln in equity capital looking to go spend on M&A. When I read they are buying companies that rent out dogs on a monthly lease that are valued in excess of $1 bln, I reach for my hard hat. Special Purpose Acquisition Companies are fuelled by investors who can’t think of anything to do with their cash, so they give it to guys who might, who are incentivised to act by having 2 years to lose it or use it. That’s not a great business premise.
However, I don’t hate everything. Another colleague – who just happens to be somewhat French – has suggested I am virulently anti-Gallic in the Porridge. Really? I hadn’t realised… The CAC 40 is up 47% from its low compared to a lethargic 31% recovery in the FTSE. (For the record… I love France. It’s just Paris I have a problem with. Who doesn’t?) Next year, we have a superb investment opportunity in corporate France to show investors…
In the grand scheme of things Bitcoin is a rounding error. Telsa is just one of many companies – but with a particularly insane investor following. I think of it as the K-Pop boy-band of the investment world; hordes of fanatical fans chucking their knickers at it – in a few years time they will have grown up, and the Tesla will be recording Christmas MOR albums.
The trick to successful investing is making money long-term.
It’s not gambling – it’s a series of rational decisions based on understanding the dynamics of complex markets: rates, relative rates, diversification, risk, correlation, demand, supply, money, central banks, governments, politics and 1001 other factors. After 35 years I am scratching the surface and still make lots of mistakes. The fact I missed how powerful the speculative drivers, including FOMO, behind BC and Tesla has been is my bad this year. I am wrong about them? Time will tell.
This year has been made more complex by the hordes of ravaging RobinHood retail traders who know better and have driven up the FOMO quotient on markets. When they drive the market, experience apparently counts for zip.
From reader comments yesterday its clear the big regret was not understanding what happened in March this year when governments and central banks counter-attacked the Coronavirus with unlimited stimulus and QE infinity. It was a pivotal moment. If you missed it then, you probably hesitated through the spring and summer and sat blinking in the headlights of the market’s stimulus rally unable to process the rally versus the virus recession. There have been plenty of precedent for such distortions moving markets over the last 20 years. Learn from that lesson.
Aside from missing Tesla (in which I do have a modest position) and BC, it’s been a good year for the Blain Pension Fund. The US big Tech stocks on my list delivered well. I unwound some of my February switch into Gold, Gilts and Cash early with a shift back into increased allocations in Tech and Fundamental stocks. I’m sticking heavy on Gold, but I’ve also put more cash into areas like the Hydrogen economy.
My major concern is relative value and the scarcity of returns – bonds yield nothing and stocks are inflated. I’m looking to diversify much more into alternatives and 2021 is going to be about finding the right alternative fund structures. I’m looking for ideas to build a diversified portfolio of de-correlated assets next year, so if anyone has any great alternative funds I should be looking at.. let me know.
I’m looking for more mainstream fundamentals for next year as global recovery sets in – but I don’t think it will be clear cut or “normal”. Recovery will be…. Mixed.
I’ve come to the conclusion our faith in Big Tech is not infinite – alongside the threat of regulation, that’s something useful to lock away for next year. One of my priorities for early next year is to rebuild the Morning Porridge Website.
I’ve given up on Go-Daddy… their promises are underwhelming in terms of the dismal reality of a firm that could not give a fig about customers. Last week they called to ask if I was happy and I gave them both barrels with the problems of repressed emails, cancelled campaigns and being hacked. I asked to speak to a senior manager. Some nobody called me back and asked what I hoped to achieve from such a call, and I told him an apology would be helpful. I never got the call. Word Press here we come – GoCrappy are making the transition as difficult as possible.
My faith in the internet is tested. Fake news is one thing. The market may be convinced the world is migrating at an accelerated rate to home delivery and online shopping, but I’ve made myself a promise to shop local and on high streets whenever possible. A backlash is coming. Yesterday I discovered the critical present ordered for a godchild from Lookagain was not only delayed, but they unilaterally cancelled the order. I called to ask why and was told they “no longer stocked the item” as if that explained anything.
Otherwise, over the next two weeks we have to move out of our home and let the builders complete the rebuild. She-who-is-Mrs-Blain has got the budget under control to such an extent some mission creep in terms of the new kitchen and a garden spa is emerging. I planned to read through the pile of books I’ve accumulated since the summer – it’s a pile I know will grow higher.
Christmas is a time to look back and figure what was good and bad about the passing year. It was unique. We’ve been exceptionally lucky in financial services – most of us can work for home and we’ve found new ways to work together. My own firm, Shard Capital, has done a superb job pulling the firm closer and we’re massively enthusiastic about next year.
Others have been less lucky. A friend who owns a bar is being aggressively pressed for repayment by his bank – he’s levered up to meet the restrictions, and then had the door slammed. The bank smells blood and is circling him. That tale is being repeated around the country. I look forward to our lives reopening and I intend to go out and use the hospitality sector to the max.
So sit back, enjoy the holiday and I will be back to rant at markets and the peculiar madness of crowds in January.
Aw Ra Best
Bill Blain
Shard Capital