Blain’s Morning Porridge, October 28 2020: Time to buy the Virus?

“Bands won’t play no more.. too much fighting on the dance floor..”

I made my first proper trip up to London in months yesterday. It was just like old times.  SouthWest Trains proudly boast that they have tweaked train timetables to enable better social distancing. In the case of London trains, this means cancelling many of them – which I guess meets their criteria. The train I aimed to catch was scrubbed – no one knew why – while the next one had been “de-scheduled because of the pandemic”. Ho hum… The next one was on time. It was empty. I guess nobody wanted to go to London or they’d given up?

Unfortunately, I didn’t make it into the City – being 1.5 hours late I had to cancel the coffee I’d been looking forward to. But the West End was fascinating.  Empty and a bit UB40. I walked in the rain to Mayfair for a chat before strolling to Belgravia for a proper lunch.  It was cathartic. I then made the mistake of jumping in a taxi – which took at least three time as long as walking because of traffic.  Ah.. these are the times I feared we’d only dream about… Taxi driver calling Boris a you-know-what, swearing about cyclists and trying to tell me West Ham play football. Rubbish of course, but Schweet.  Blissful.  Happy.

I know it’s terribly inconsiderate of me in terms of coronavirus risks, but if anyone wants to meet up for “vital business discussions” on economic strategy, politics, which current takeover are complete scam-jobs, or who is going to go bust next, over coffee, tea, proper lunch or beer driven discussions on the pros and cons of economic suicide pacts… let me know. We could even talk about buying some of my current alternatives deals?

I am going to try and make at least one trip a week up to London.  I miss the place. I’m going to be on my Brompton Bike so don’t expect me to be wearing a business suit (jacket maybe..) Seeing people yesterday was cathartic!

Back to markets… 

More seriously, the deepening Coronavirus rash across Europe looks more and more like a second recession has already been triggered. Tumbling markets, soaring unemployment. Confidence levels collapsing. I read an excellent comment in papers about this not being a V-Shaped, Nike-Tick, K-Shape or even a double dipping asymmetric W-Shape recovery.

Nope, this is now officially a WTF Recovery… (And that’s why I don’t appear on the BBC or Bloomberg anymore..)

Abandon all hope ye who enter here.. The bug is going to get you! All around the globe the Pandemic threat is rising.  France, Germany, Spain and Italy are all looking at further economic contraction… which must mean the UK is doomed… Doomed..

From a market timing perspective.. Excellent!

When all around are beginning to panic and lose their heads… I think it’s time to think about whether it’s time to buy the depressed markets in Europe and the UK? The FTSE is down 25% from Jan, but 13% up on its low point. The CAC is similar. Germany isn’t quite the same undervalued tale: the Dax is only 11% down from its high, but is 40% up from its May low!

There are couple of reasons I’m increasingly positive.

After reading a deal about the virus y’day waiting in stations, what struck me is few observers now expect a massive second spike in death rates of similar shape but greater magnitude than Spring 2020. The consensus now is pointing to a more likely long-drawn out level of high infections through the winter as the virus continues to cut its way through the population. I’m going to take the bet better therapies, triage and treatments will cope with high levels of patients in the hospital systems. They will be busy, deaths will tragically remain high, but a collapse or service failure crisis will be contained.

The critical issue is watching how the Coronavirus numbers change the agenda. Infection rates are shooting higher, but hospital admissions and death rates don’t match – confirming many of the expected trends and how widespread it has become. It can’t be avoided, but we now have a much stronger knowledge of how dangerous it is – less than feared.

The upshot of hospitals and front-line medical staff stemming crisis will be increasing confidence the economy can cope with the virus. Rather than the bludgeoning blows of total lockdowns and regional shutdowns, the response to infections could become more nuanced, subtle, measured, delicate and localised – allowing businesses to open and function again. We’re seeing that develop with tiered and local approaches. Increasingly containing the virus will become more nuanced and effective. The emphasis will shift from: “Don’t Do That” to “How Do We Make It Happen”.

Its already happening. The renewed lockdowns are not as absolute as before. More shops, building sites and businesses are staying open. I was able to get to London y’day.

That’s an important shift in the narrative. Maybe I’m being daft, but could common sense overtake fear? Could we see a more reasoned and less panicked government response? Even cooperation?  Let’s be honest, across the West, governments have not handled crisis well. Even politicians have the capacity to learn from their mistakes. (Well, some of them…)

That’s something Boris has a great talent to miss here in the UK. He chose “the wrong hill to die on” by refusing to support free holiday school meals.  When it comes to Marcus Rashford vs Boris.. In fact… if it comes to a Punch in the eye or Boris, it’s black eyes all round. I suspect the current round of vitriol directed at Chancellor Rishi Sunak’s bazillionsin his Blind Trust might just be driven from close to his number 11 home. Sunak was getting a mite too popular compared to our Bumbling Blonde Blusterer.. (Just saying… don’t slam a superinjuction on me for suggesting it….)

The virus narrative and response could shift. It depends on how constructive politicians are willing to be. Economically the change is already happening. We’ve seen from recent bank numbers and other data that although there has been enormous economic thump, its not be as awful as predicted. That fits in with the usual market model, best expressed in one of my Market Mantras: “Things are never as bad as you fear, but never as good as you hope.”

However, the other side of the coin is confidence. National economies and consumer confidence has been thwapped by the virus. A second W-shaped downturn will further batter already fragile sentiment. Banks are battening down on lending – which means for all the money government is throwing at the crisis, the economy is struggling to recover. (I know this personally – trying to get a bank loan to redevelop the house has been like getting blood out the proverbial stone!)

The sense of crisis might even deepen as furlough schemes end and a replaced by less generous support. And the risks of policy mistakes are mounting – as I’ve highlighted a number of times on my comments about traditional Conservatives trying to reign back spending, impose austerity and tax-rises.

So.. Is it time to lace up the buying boots? Or should we continue to wait? (And note.. I have not mentioned the hopes a vaccine is on the horizon and will save us all.. I ain’t basing my market strategy on Hopes…)


I was roundly pilloried on the comments pages of Zerohedge yesterday for my temerity writing about the US election. How very dare I! One aspect that particularly infuriated the readership was my opening quote: “In America, anyone can become President. That’s the Problem.” There are two sources for that quote – Comic George Carlin, but also Democratic Presidential candidate back in the 1950s; Adlai Stevenson. Both Americans.

I take perverse pride in the number of Zerohedge readers telling me to “have sex, travel very far and expire…” yesterday. Some of the comments on the article are hilarious.

Away from Zerohedge I was told many times yesterday how wrong the US polls are and that Trump is going to win by a landslide. Ok.

If you believe Trump will win I am happy to bet $1 against your $3 dollars. Your size is my size.

Any takers? Thot not. (The only provision on this bet is I have to personally know you…)


WSJ – Microsoft’s Earnings Continue to Ride Pandemic-Fuelled Demand for Cloud, Videogaming

WSJ – Deutsche Bank Swings to Profit, Lowers Bad-loan Provisions

BBerg – Deutsche Bank Plans Bonus Increases for Top Investment Bankers

FT – Investors probe ESG Credentials of Bond Sellers on “greenwashing” fears

Garuniad – Heathrow overtaken as Europe’s largest airport by Charles de Gaulle

I was going to write about Deutsche Bank.. but the two headlines above say it all without even reading the stories…. Out of time and back to the day job..

Bill Blain

Shard Capital