Blain’s Morning Porridge – June 21st 2019 – Midsummer

Blain’s Morning Porridge – June 3rd 2019

“Its midsummer day, and I suppose we should be dancing naked round the stones – on second thoughts, probably not… looks like rain..

Check out for links to what I’m reading…

A host of things to think about as the week wends towards a weary close…. How about the potential of a hot-war in the Gulf as Iran squares up to the US. That’s not going to end well.. Or check out Brussels where the Eurocracy are divvying up the top jobs among themselves. And then there is a record high in US stocks on the back of “you’ve promised us a rate cut”! Gold looks increasingly the medium term winner..

But here in Blighty, the little wet island at the unfashionable end of Europe, get ready for a general election!

I reckon the UK looks cheap as chips, but we still face a few more months of fraxious uncertainty. I’d hold off from placing any big bets on sterling or UK yet. It will all get clearer… Let me try to explain:

It now looks inevitable Boris Johnson will be elected by members of the Conservative Party as the 61st prime minister of Great Britain. (actually, no one is quite sure on the number, as no one noticed when we had a first one.. who might have been Walpole..)  Boris will win because the UK electorate might be 48/52 on leaving Europe, but the conservative party is 90% certain we should move our whole Island and set it in a new silver sea some 30 degrees to the West.

Boris winning is no Big Deal. It changes nothing.

1)   It is extremely unlikely Boris will be able to secure a parliamentary majority to push through whatever Brexit wheeze he has concocted – the Tory remainers and the DUP will oppose him.

2)   There are a host of Tory Iagos he’s insulted, trashed and belittled over the years who will rejoice to see him humiliated. Michael Gove, his erstwhile friend and who is an honorable man, will haunt and stalk him… For Gove is an honorable man…

3)   Brussels is not going to let Boris tickle its tummy. They don’t like him. There is not going to be a renegotiation. They won’t consider new plans for the Irish border or vague comments about Free Trade.

How does Boris escape the trap he so willingly walked into? Few can escape what they have so long desired. Boris certainly can’t countenance a second referendum – his head would be on a stake on Tower Bridge in micro-seconds. He will likely conclude his best course of action is a General Election figuring he is popular, and betting the Brits still love a rogue. Lay on Corbyn, and damn’d be him that cries hold!

But an election won’t be about party politics. It will be about Brexit. What deal will Boris be forced to do with the Kerns and Gallowglasses of Farage’s Brexit Massive? Deputy Prime Minster Nigel perhaps? Or worse.. send him back to Brussels?

And does Boris have the strength and personality for what is to come? In recent weeks we’ve seen a fitter but curiously muted, dull and boring Boris. Perhaps it’s the influence of his new girlfriend – be nervous if she develops a compulsive need to be washing her hands.. Can Boris the serious former clown prince of politics win an election? A dull Boris is one thing, but he’s still the same big picture/short details Boris…

Continuing to mix my rather random mix my Shakespearean metaphors:  Who is going to be Fortinbras when the bodies of Boris, Gove, Hunt and others litter the cabinet-office? I’m think the Saj got out at the right time.. (Yep, I would vote for that..)

The Key Thing is – it doesn’t really matter. Brexit is and will remain messy, confusing and destabilizing, but Long-Term it’s just another speedbump. Sure, the UK will stumble from shooting itself between the eyes… but it will recover, and having reinvented itself be better placed in the new Global Economy.

I’m hoping to post this week’s Blain’s Financial Porridge Podcast later today, and it will include an interview with David Murrin, former trader, hedge fund manager and author of Breaking The Code of History.  Without taking a position on Brexit, his read on where the UK heads post exit is very interesting, and should be must listen to any long-term investors in the UK. Clue – he’s very positive.

Facebook and Libra

I promised I’d write something about Facebook launching its own “crypto-currency”. There is plenty of stuff across the Interweb about it.. and lots of questions and answers about how its not a crypto.. Blah, blah, blahbitty blah-blah..

Basically, it looks like Facebook is following the lead of Chinese Social Media platforms wants to extend its corporate shelf-live by morphing into a marketing and payments platform. No surprise. The regulatory pushback will be immense – how will suspicious transactions be reported, who vouches for sources of funds, etc. The bulk of comments suggest Facebook is the last place we should trust as a banking hub…  Facebook’s legions of lobbyists will ensure it gets approval, and will certainly push that it’s a “stable-crypto” linked to US short-bonds…

(If your internal alarm bells are not ringing… get yourself a reset..)

The thing that interests me most is the Timing. I’m fascinated by Modern Monetary Theory – and am attracted by its allure. But, if something is too good to be true, then it probably is.

QE failed because it simply proved a distorting boost to the price of financial assets. What’s not to like about MMT if it allows governments to forget about debt and provide a massive boost to the real economy through infrastructure spending, making education fit for purpose (and forgiving all student debt) and building new welfare and medical services?

Sounds fantastic!

Because it is. Put money into the hands of workers – and they deserve it – and as soon as they realize its free, they will want more. If we don’t need taxes, then everyone wants everything. I’ve been using cognitive chain theory to explore the multiple future scenarios – and most suggest the value of money crashes as hyperinflation booms.

That’s pretty much a tag line on all Crypto-currencies. When confidence in money breaks and real value is not in government fiat money?

Just wondering out loud what Zuck is really thinking, and does he own a Bond-villain style nuclear bunker out in the woods?

Finally.. Boeing and IAG

It’s been a decent Paris Airshow for Airbus, but at least Boeing picked up an order for the troubled B737 Max. IAG (or British Airways as we still like to think) stepped in and placed an order for $24 bln of new Max aircraft. Boeing are saved…

Of course, IAG isn’t paying anything like $24 bln.. rumours tell me they got a bargain basement “we will let you pay anything, just please give us an order” price around $11 bln. Wowser… (And its not actually an order.. just a letter of intent..)

Following the “order” IAG’s stock got whapped. The market must have decided the airline group was showing a remarkable lack of concern about its customers – putting them on death-trap aircraft is an exaggeration, but certainly passengers are going to be cautious about flying the type.

Tush and Nonsense.. the first BA 737 Maxs won’t deliver for years, and the problems will all be fixed by then. And, the fact they got such a great deal on the cost should not be missed… Does IAG look cheap?

I’ll be posting this week’s podcast later today – still a beta version, and please let me know what you think?

Out of time, have a great weekend…

Bill Blain

Shard Capital