Blain’s Morning Porridge – 6 Jan 2021: Georgia on my mind

Blain’s Morning Porridge – 6 Jan 2021: Georgia on my mind.

“The Devil went down to Georgia, he was looking for a soul to steal..”

We are only three days into the New Year and the narrative is changing fast. First up is politics, and then it’s the virus. 

Georgia on My Mind

For markets, the immediate matter is the Georgia election result. As it became clear the Republicans were losing the Georgia race, early this morning I was pinged awake by an American chum: “This is bad in so many ways that people don’t yet realise. America’s second civil war has now officially begun.” This is from a senior Republican not given to hyperbole.

As I write the Democrats have won one seat and may take the second, giving them the possibility of the much feared (by Republicans at least) Blue wave and an effective senate majority. It will be the end of everything as the USA falls to a hard-core Communist Cadre intent on collectivisation, taxing the rich till the pips squeak, replacing the police with worker soviets, pogroms against tech, while a tumbril will be set up in Black Lives Matter Square in Martin Luther City DC where police chiefs, billionaires, and Republicans will be publicly executed.

Which, of course… is not going to happen. 

Yet, the markets are shocked and surprised as stocks dipped and Treasuries “soared” to 1%!

For the past few months the American version of “Project Fear” has been underway. The Republicans saw just how successfully Boris Johnson deflected his own defects by pointing out how much worse a Jeremy Corbyn Labour win would be. So the Yanks deflected Trump’s obvious failings by painting Joe as a mere puppet with arch-communist Bernie pulling the strings and drowning the country in debt.

The reality is that in any other reality a Biden presidency would probably bumble along much like anything else within the Beltway. AOC and her cohort of young, ambitious, driven representatives will push hard for change and will be pushed back a bit. In the next election cycle – in just 18 months, it will all change again. 

What markets should really be scared about is how the bedrock of American politics has utterly changed and shattered in just 2 months since November. Democracy looks crushed in the wake of the election by the repeated assertions of fraud and ballot stuffing. As Trump supporters explode in fury in their belief their election win was stolen, the US will be even more deeply riven. 

The next few days will likely demonstrate conclusively just how more polarised the nation has become as tensions rise to a new level. Division will poison the future prospects for any new administration. Put aside the risks of what a Democratic regime may or may not do in terms of policy. Let’s hope they get the US together versus the virus. 

Instead, look to the emotions and the prospect of deeper conflict within the US. Longer term Negativity versus the dollar and Treasuries is far more likely to stem from the fervid emotions stirred up and stoked by Trump. Give the man credit – his post-election performance has been brilliant. It was never about holding onto the Whitehouse – it was about tightening his grip on the Republican Party. 

If we see the anticipated riots from Trump supporters – that’s the real news. He has proved that if you shout it loud enough then enough people will listen – giving his fake news a spurious reality.

There was plenty of time to have avoided this after Nov 3rd. The political analysts warned that swift and definite results were vital. They shouted that real proof of fraud – rather than unfounded accusations – mattered. They cautioned that giving credence to Trump’s spurious accusations of fraud would undermine the political structure. The media were told by senior republicans, to give it time and it would all be sorted via process and courts. 

The courts have dismissed every single accusation of fraud, yet Trump’s party still stands by him, granting him credibility. Trump was never going to hold the White House, but the last 2 months has strengthened his grip on HIS electorate and thus the GOP. 

This is time for all good men and true… 

By not immediately distancing themselves from Trump, the GOP s allowed the lies to take hold – and that’s going to prove disastrous in the long-term. 13 Republican senators will likely vote against certification of the November results later today in the hope their loyalty to Trump will be rewarded. They want anointed as worthy successors to get hold of his voter base. They look willing to pay price for Trump’s patronage – including, as the FT highlights this morning, trade away US businesses. That’s a bad thing. 

I suspect they are wasting their time pandering to Donald – Trump runs a family business.


The Pandemic narrative has also utterly changed – far from a victory lap to celebrate the end of the crisis as vaccines save the day, we’re now caught in a desperate race to get vaccine logistics in place before health services are swamped. The world feels more depressed by the hour. Even Sunak promising another £4.6 bln to protect business doesn’t lift our spirits much.

I must admit to feeling more than a little concerned. The virus is striking hard. Yesterday I learnt that one of my own local cohort, a fellow sailor around my age, and certainly much fitter and healthier than myself, passed away after a very short battle with Covid. In London both my kids are playing a care role to their flatmates who are all badly sick with the virus. (Neither of them is sick, but one of Jenny’s chums is in hospital in her 20s with the disease!) One in 30 Londoners now has the virus.

The stories about how much more infectious and how much higher viral loads the new mutations are inflicting are frightening. 

It feels like we might be moving from an orderly and patient queue for the vaccine lifeboat towards something more brutally pragmatic. I suspect it’s only a matter of time before this turns much darker and we hear that older patients are being triaged on the Covid Wards and sent home. Or that the vaccination policies are shifting to inoculate younger citizens, and telling the elderly and sick to stay home and isolate. 

The result is a struggling UK will struggle even more. Resilience goes only so far. Firms are exhausted by the on-off costs, expenses and efforts of lockdown and closure. Many are simply giving up. One of our local pubs didn’t bother to reopen last time. I am hearing rumours another one is being looked at by property developers. It feels like we’re now heading for a triple dip recession rather than the interrupted recovery. 

Not a lot to be happy about this morning…

Five Things To Read Today

FT – Swiss Franc shrugs off being put on naughty step by US

WSJ – Gold’s Climb Adds Momentum to Year End Rally

BBerg – UK Businesses Enter New Lockdown With Dwindling Cashflows

Thunderer – Millions more coronavirus vaccines on the way, says Boris…

BBerg – Hedge Funds Turning Doubtful on Staying Power of Recovery Trade

Out of time… and back to the day job..

Bill Blain

Shard Capital