Blain’s Morning Porridge – July 10, 2020 – The World Shifts

Blain’s Morning Porridge, July 10th 2020 – The World Shifts

“Carthago delenda est”

Did you feel the world wobble last night?

As Washington imposes sanctions on top level Chinese officals over ethnic abuse in Xinjiang, and waits for Trump to sign “autonomy” action over Hong Kong targeting officials over the new security law, we are now even closer to the inevitable showdown between Rome and Carthage. The implications are going to be enormous… This story is accelerating very quickly… thing are “occurring” faster than we think…

My spidey senses are a-tingle..

Trying to fathom out why markets are so strong, ongoing coronavirus and economic breakdowns, how politics are so ineffective, and how fragile and vulnerable sentiment might be to sudden and swift shifts in the narrative, is somewhat exhausting. While the markets are focused on the earnings season (beginning Monday), the ongoing supply chain problems -like car factories being shuttered because they can’t get parts, and the likelihood of further stimulus.. the news out of Asia makes me suspect the real world has just become massively less stable.

At the tactical level, the outbreak of cold-war hostilities and the threat of sanctions on banks in Hong Kong is yet another nail in the decaying corpse of HSBC.  If the former colony is de-dollarised, and banks are stopped from clearing the greenback, it will trigger enormous shifts across Asia. It will raise the prospect of a complete rift between the US and China as banks are forced to make a choice: they can’t serve two masters.. the dollar or Beijing.

At the strategic level.. who knows.. Plus for Europe? After the coronavirus.. a full scale Cold War? Or maybe its going to be a good thing.. a wedge between China and the West driving new innovation and economic growth? Who knows… more on this later…

I was expecting to see Asia’s financial business shift to Singapore, but talking to chums out there it seems the City State is trying to keep itself neutral. Apparently, it’s making it harder for Western financiers to obtain residency status and discouraging firms from moving Hong Kong operations lock, stock and barrel to the city, demanding they hire locals instead. Perversely, the major beneficiary of Hong Kong’s inevitable decline is likely to be Tokyo.  Which… will be great news for London..

However, the main issue for me this morning is… I was in the Pub last night!

Fantastic, but my head hurts…

There is nothing quite so wonderful as solving all the problems of the globe over an excellent tomahawk steak, too much red wine, and bantering with mates – despite the landlady’s very best efforts to keep us all socially distanced. So please excuse if this morning’s porridge meanders somewhat. It would be fair to say there is a pink elephant on the balcony in front of me this morning….

How stimulating human company is.

A good friend from the City had joined us for the evening. He’s a chap who has eschewed trying to guess where stocks are headed next, and invested his time, effort and considerable intellect in working out how tech and big data can solve the issue of generating alpha for funds.

I completely understood everything right up till the third or fourth bottle of most excellent claret mysteriously emptied itself. As I said… Hamble’s King and Queen is a very good pub.. but the glass of Kraken rum for the road was definitely a mistake..

This morning…. Not so good…

I do remember we tried to solve the problem of the NHS.

My contention is we can make the NHS so much better through the application of tech. I suggested, and grandly gesticulated my solution.. If we all owned our medical data – stored on our phones, or even a sub-cutaneous chip, and kept that information updated with the results of every test, blood sample and readings from our wearable tech, then medical AI would quickly be able to work out what our symptoms mean and instead of clinicians searching for the needle in haystack of what might be wrong with us…. The AI would be able to suggest immediately the cause.

Imagine if the same AI was able to learn from the data from all us… we’d very quickly have a focused, targeted, effective NHS. We’d be able to sort the logistical mess the NHS has become as a result of too many layers of bureaucracy, and invest more money in direct medical resources in terms of doctors, nurses and therapists, targeted treatments, and understand more fully the efficacy of drugs and therapies..

Edward laughed at me.

Apparently, we already have the capacity to do most of it. The problem is governments asked/allowed big tech to collate the data. Now Google owns it. They’ve already written the algorithms to predict our health. They expect to be able to monetise it.

If we want to solve the world by the implementation of big data…. How much are we willing to pay the Tech behemoths to buy our own data back…?

As the wine poured… we went on to solving the issues of supply chains, automation and 3 D printing. Sure, it will be simple to refocus production back to nation states. It would already be cheaper to make widgets locally, but to do so we need more programmers and engineers.. and since most Generation Z’s expect, nay demand, highly paid jobs in cupcake design and applied wokeness… that’s potentially a problem..

I could continue… but by the time we concluded our symposium… my brain was pretty full… I might have to have a snooze later this morning…

Five Things to Read Today

WSJ – Elon Musk Gloats as Rally Drives Tesla Shares to New Heights

FT – Banks in Hong Kong Audit clients for exposure to US sanctions

FT – Crunch time for long/short funds after Lansdowne calls it quits

WSJ – Tyson Turns to Robot Butchers, Spurred by Coronavirus Outbreaks

BBerg – A CoCo Bond That Wants to Save the World

Out of time, and back to the day job.. I’m off racing yachts all weekend, (Joy!) and then out on Monday and my colleagues and I strategize (on the boat) how we are going to take over global finance…. Have a great weekend…

Bill Blain

Shard Capital