Blain’s Morning Porridge – Jan 23rd 2019 – Misery as a science

Blain’s Morning Porridge  – 23rd January  2019

“The Lord above gave man an arm of iron, but with a little bit of luck, someone else will do the work..”

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In the headlines this morning: https://morningporridge.com/stuff-im-watching

I’ve just seen the surest sign economic apocalypse lies around the corner: Holiday sales in the UK are up 5% on a like for like basis, confirming we are so miserable about the B-word and everything else that we’re going to collectively max out the credit cards on a few extra days in Torremolinos… Hurrah! Ole for Spain…

A quick glance at the markets – miserable.

A quick review of the Davos bullsh*t – miserable (although full points to David Attenborough and Mr Cambridge for daring to chat about the wretched mess we’re making of the planet… (I can guarantee a chum of mine at Morgan Stanley will send me a blistering riposte telling me Climate Change is fake..))

US-China trade talks – miserable.

US Housing market – miserable.

European Elections in May – miserably populist.

European numbers – miserable.

IMF global growth outlook – miserable.

Prospects for Japan – miserable.

US Government Shutdown – miserable.

B-Word compromise in UK – Miserable and NFC.

Outlook for bank earnings, and Deutsche Bank as investigators sniff round Danske Bank trades – Miserable.

Corporate earnings – miserable.

Tech sector – suicidal.

I’m sure you get the drift. It’s January and we are all miserably miserable. And since everyone is so miserable I shall be enthusiastic – from Feb 3rd when I get back from a Ski trip. Things are probably not as bad as they look. They never are.

On Brexit, we’ve got Angel Gurria, head of the OECD, saying a No-Deal would not be the end of the world. Gosh – that sounds like heresy! A member of the establishment saying its nothing more than a storm in tea-cup?? Surely not!

But it’s a view I’ve heard many times in recent weeks from many sensible city contacts (many of whom were remainers). They feel the panic and fear about a no-deal spelling the “end of everything” is parliamentary hysteria. They compare it to the Millenium Bug. Planes will not fall out the sky and ferries will keep running. Gurria dismissed trade fears at Davos: “A no-deal? WTO.. the whole world is running by WTO rules these days”, adding the OECD would [try] to ensure there was as little disruption as possible. Whoa – Don’t blame me for repeating what he said, but someone clearly forgot to sign up Mr Gurria for the Project Tear Team.

When it comes to the UK.. My learned colleague Ronnie Alder just pointed out: “The UK has essentially been without any kind of meaningful political process for months because of that which cannot be named… but guess what? The country still works.” Or does it? I am moderately concerned about the amount of stuff politicians are not addressing. For instance; UK infrastructure is in complete meltdown – article in the FT says major infrastructure investors have declared the country uninvestible. Oops.

Or the fact everyone except the Chinese has now walked away from building Nuclear Power stations for us – if a fraction of the dosh that’s been squandered on Nuclear had been spent on perfecting tidal technology to harness the completely predictable and reliable tides around this island set in a sea of plastic, we’d be in a much better place…   (Another angry letter will be winging its way from Morgan Stanley telling me tides are irrelevant..)

I have absolutely no ideas or scenarios to apply to the Brexit mess. Apparently – according to polls – a majority of Brits now favour a no-deal Brexit, but want to remain members of the Free Trade Zone. The Europeans don’t want to extend the deadline just in case the UK sends loads of hostile MEPs to Brussels if we stay. Nigel Farage has already announced he will stand if the UK gets the opportunity!

Meanwhile, I was interested to see the leaders of the EU nations meeting in Charlemagne’s ancient capital of Aachen to approve a new “foundation of co-operation between our countries” involving initiatives in Education, foreign policy and defence. The leaders committed to strengthening the European Union.

However, the leaders in question were Merkel and Macron. The rest of Europe’s political classes must be delighted their betters are so committed to the European dream. (For the record… French German military alliances don’t have a great track record… Aside from Nato, which France stalked out of because de Gaulle felt insulted, the only significant Franco/German alliance I can think of was during the Napoleonic Wars when German states defeated in 1806 allied themselves with the Grand Armee for the invasion of Russia six years later, although many then switched sides in 1813-14.)

I am afraid the Porridge will be a bit random next 7 days – I’m off Skiing at Interbourse, a “conference” of the globe’s leading stock exchanges and collective hangers on: bankers, portfolio managers, traders and pond life like myself. Experience teaches me that trying to write anything sensible after a day on the slopes and then an evening out with the other guests can be challenging…

Have a fun time…

Bill Blain

Strategist, Shard Capital