Blain’s Morning Porridge – August 19th 2019
“Time flies by in the yellow and green, stick around and you’ll see what I mean..”
In the headlines this morning: https://morningporridge.com/stuff-im-watching
Charity Walk –https://www.justgiving.com/fundraising/bill-blain
She-who-is-now-Mrs-Blain and I were attacked, mugged and robbed on Saturday Night! Nicky’s delicate Welsh skin is covered head to foot in red welts the size of two-penny bits after they flew in our open windows and feasted upon us, stealing our blood for their satanic fertility rituals. For the first time in 10 years living beside our river, we were eaten alive by members of the Culicidae family of winged assassins.
We shall no doubt expire of some horrible arbovirus in the next few days! They reckon nearly a million people a year still die of disease spread by mosquitos, and that half of the people who have ever lived expired as a result of something horrendous spread by their poisonous bites. As Global Climate change accelerates – it’s time to buy shares in manufacturers of calamine lotion – about the only thing that stops the itching! I am sneezing and have a headache this morning which is obviously due to Nile Haemorrhagic fever caught from the little blighters… and nothing to do with the gallons of Lady Petrol drunk at Andrew and Faye’s party y’day… (Nicky is seriously unwell – massive allergic reaction to the bites.)
Back on Planet Market Insanity….
I should imagine the Danish Foreign Office is still in shock after Donald Trump offered to relieve them of the financial burden that is Greenland. Seriously? Did he just say that to shock and distract us, or are there White House staffers running around trying to work out how to gratify the toddler’s latest craving? It’s a bit scary sometimes. I wonder if Canada should post a counter offer, spiced up with promises about preserving unique
Danish/Greenland values in their multicultural society? Go On Justin! Do it.. It will really peeve the Donald..
Moving on… what have we got to look forward to this week? More trade war? More stuff about Argentina? Or maybe it will be a resumption of uncivility in Hong Kong. The world feels fraxious this morning.
A number of analysts are now moving into to Stock Market Apocalypse territory – predicting we’ve in for a massive correction on the back of recession, bubble pricing and a reset on expectations. I’m not convinced – and suspect we need something more to trigger a meltdown. But its clear sentiment is vulnerable. In this week’s Podcast I talk about 4 stocks I reckon could seriously destabilise markets if they get worse: HSBC, GE, Boeing and, of course, what the WeWork IPO will do to market confidence.
In bond markets, the pace of last week’s yield contractions was scary. How much will rates back up as the market becomes less scared? That’s why this week’s Central Bank meetings and comments will be so critical.
The big financial stories are likely to Fed Minutes explaining the last 25 bp ease – I’ll be fascinated to discover what they expected. The key issue will be economic expectations, and we should get a better picture this week. The Jackson Hole meeting is Friday, where Powell will no doubt explain what’s happening.. or not. We’ve also got the G7 meeting in Biarritz – a place dear to my heart – and the ECB meeting.
What is Boris planning to say to his new chums at the top table in Biarritz? The Germans are all set for him to do/say something bizarre, his “big moment”. I reckon he will be measured, a simple: “Give us a deal the UK Parliament can approve. They rejected your earlier offer. We can all benefit from a clean Brexit. If not, then it will be a dirty Brexit and economic war over the Irish border. It’s simple. Your call. Renegotiate or don’t.”
That might be a tad too complex for Europe’s political geniuses to grasp, but I suspect it will play rather well domestically. I’m a soft leaver – happy to exit Europe in a friendly way, and not too bothered about remaining linked by common trade agreements. If Europe decides to get nasty and damn us all to a no-deal – so be it. We’ve survived worse. Interestingly, I had dinner with a retired Irish banker on Saturday who emphatically told me there is absolutely no chance Europe will concede anything – the lines have been drawn…
Of course, Europe has to play hard. If the UK is seen to exit with a good deal, everyone else will try to arb the game. And that’s the basis of my big trade for this week: Italy.
I suggest shorting Italy bonds into Tuesday’s vote of confidence. When the government falls and the market goes to hell in the proverbial hand basket, start buying. As Italy bonds tumble on fears of the nation’s ungovernability and the likelihood of hard-anti-EU League new administration, keep buying. As Italy bond yield balloon wider on the anti-EU rhetoric Salvini and his crew harangue Brussels with, keep buying and buy some more. As Italy tumbles into the financial abyss and we hear dark muttering of imminent default – buy more and then buy even more…
Keep buying. Be secure and confident that no matter what Italy says or does, or that as a nation it no longer controls its own currency, that the EU and ECB will not call the bluff and will do “whatever-it-takes” to keep them schweet.. Italy yields will tighten and you will make off like the proverbial butcher’s dog with the sausages…
Please don’t forget about this year’s charity appeal. Next week I will be walking the South Downs Way to raise money for Wessex Heartbeat. Please check out my site: https://www.justgiving.com/fundraising/bill-blain – and make a donation!
Out of time and back to the day job!