Blain’s Morning Porridge – Oct 22nd 2018

Blain’s Morning Porridge  – 22nd October 2018

“I sincerely believe that banking establishments are more dangerous than standing armies, and the principal of spending money to be paid by future posterity, is but swindling futurity on a large scale.”

Deja vu all over again this morning as Southern Rail cancels all the trains up from Southampton. Short comment as I’m so late..

In the Headlights this morning – see for some of the stories I’m watching

The Perverse Nature of Markets: After last week’s concerns on China and Friday’s Italy downgrade you might have thought its bad news. But, this morning everything in China is rosy as stocks rise on Government Support – Xi loves the stock market. Despite the Italy downgrade, the fact it wasn’t left on negative watch means Italian banks have caught a bid. Stronger China market great for markets, not convinced on Italy where spending plans and government look dangerously disconnected from reality.. but onwards and up/downwards.

Saudi – the news-flow becomes less and less believable… and Turkey says it is set to reveal to the truth. While governments seem to be point scoring and chasing agendas, it’s becoming increasingly difficult for global businesses to justify dealing with Saudi. Coming clean quickly would have been much better idea. There are serious threats here, not least Saudi realignment with Russia – which is effectively already happened in Oil. Much talk about MbS being replaced, but he has absolute control of the apparatus of state.

Trump – the Midterms next month look increasingly interesting. The consensus was the Democrats would take control of the house, but the numbers suggest they are losing their leads in the key battleground seats. They need 23 gains – it now looks they could get considerably less. Trumps approval ratings are rising and now stand approx 50/50. It appears the American public are beginning to realise the shocking truth: loathe him or loath him, Trump is delivering. Republicans might be caught on the hop, but are benefiting. Don’t plan on Democrats restoring the do-nothing status quo.

Floating rate notes – Everyone loves FRNs. Leveraged loan and high yield market are now moving to Floating Rate.. Not sure that’s positive? Companies that have barely survived because of ultra-low rate borrowing will hit crisis very quickly as their rate repayments edge up. Fixing debt at low rates was a boon for debt-zombies. Floating rate will finally put the stake through them.. (or is that vampires?) Rising default rates anyone?

The Sheer Misery of Modern Life 

Markets are about lots of things – geopolitics, trends, fashions and sentiment. The mood can swing from positive to negative swiftly. Unhappy consumers don’t spend – triggering recessions… I’m normally a very happy chappy, but this morning near broke me.

I tried to write this morning’s porridge on a packed and freezing local commuter train designed for midgets – the seats are  about 2/3 the size of my posterior, the folding table opened into my stomach and isn’t as wide as my laptop, but, the rail company can boast about adding more seats. My fellow Southern rail commuters face a week of strikes.

On the way to the station I was listening to Radio 4 present the bitter choices for UK companies dealing with Saudi. The front pages are all about the complete and utter clusterf**k that is Brexit and the imploding politics of the conservative party. The only positive is the knowledge the media has to sell its news, so most of it is probably exaggerated, made-up, and may therefore be safely ignored. Things are probably not as bad as we think.

Are things about to get worse? Over Sunday night dinner with friends we were discussing food supply and the changes occurring in consumption patterns – a major consumer shift that may be as significant as electric and driverless cars, and the current revolution in medial services.

The stunning summer was a crop disaster. Its going to push up prices – and we’re likely to face shelves of blighted potatoes, wonky carrots and smaller parsnips. It amused me to hear about the latest health fad because importing tons of coconut oil is just tickets-boo in terms of airmails killing the planet that little bit faster. Still, rising food prices might make my “ski-fit” diet a bit easier…

Having got all that off my chest – what about markets? Tomorrow..