Blain: “I Was Going To Write A Brilliant, Insightful Note This Morning But Then Something Happened”

Blain’s morning porridge, submitted by Bill Blain

“They were just discussing what kind of shampoo they use on their beards.”

Great news re England in the World Cup Final, but a shame for Wales – that would have been a game indeed!  
Welcome to another week in the fascinating global markets.

I was going to write a cracking morning comment about how the major market risk is an economic surprise to the upside in the global economy – current economic signals suggest the feared global recession isn’t actually as bad as fear.  Wow.. Is that Blain being bullish? (Blain’s Market Mantra No 8 – “Things are never as bad as you think they are..”)  Well, not quite as good news as it sounds.  If the global economy isn’t as battered as the IMF and others have been scaring us, then central banks could put their easing plans aside, sending a shiver of fear through the bond markets, and it could trigger weakness across all markets. Markets would worry about the lack of further stimulus and lock up.

I was going to expand and explain how a correction would be a great time to pick up bargains, and pile into stock fundamental stories!  Reverse the index and disruptive Tech nonsense.  I’d spice it up with comments on how you should get as far away from credit/bond markets as possible. (Why you ask? Because in bonds there is truth.  Because credit markets are a huge bubble fuelled by easing expectations and on-going QE distortions, and when they snap, they will prove a chronic illiquidity trap.)

Then I was going to do an in-depth analysis of why slaying an ISIS leader like a “dog” does nothing to change the dismal scenarios Trump has painted in the Middle East – Nature abhors a vacuum. I was going to expand on Saudi instability vs a resurgent Iran (which faces its own mounting internal problems), and move on to a rash of stories about UAE weakness, giving me the opportunity to repeat my old joke about Dubai being a desert again within 50 years.

I would then have added a quick compare and contrast about current issues in China, where my sense is a new Tech Cold War is pretty much nailed on, with the Chinese prepared to go their own way as any kind of meaningful accommodation with the US is left hanging till Trump is gone. The question is can Xi keep the country generally stable for another 5 years without having to do something “outward bound” re Hong Kong or Taiwan in order to put his “patriot” card into play? That’s a close call – and has got to figure in tech investment decisions.

Next up this morning was going to be a critique of the Mario Draghi era at the ECB – top marks for getting keeping the patient alive through the crisis – anything it takes, but less good on the next 8 years in recovery. His legacy will an unresolved crisis of direction facing Christine Legarde when she takes over this week – clue: my insights were going to draw parallels between the current efforts of Boris Johnson to heard cats in the UK Parliament. Legarde faces a board split down national lines – she will need all her diplomatic skills to resolve it. She faces the problem of building a common European consensus – but the members represent state interests which are chronically opposed.

Next up would be HSBC’s dismal results. Quel Surprise! The biggest, and certainly the most complex bank on the planet, has stumbled badly. It’s largely a crisis of its own internal management structure – the bank’s leadership failed to evolve and lacks sufficiently diverse banking DNA to thrive in this modern age.  Every other business on the planet promotes on ability.  HSBC’s approach isn’t quite Buggin’s turn or skill at polishing the handle of the big brass door, but it’s not far from it, or remotely sensible. The previous CEO drowned in the detail and was sacked. I’m told by HSBC insiders his successor would probably make a very good job of running a branch network somewhere like Birmingham. Both were HSBC management lifers will little real world flair or experience. They shows clearly the dangers of internal overpromotion.

Current HSBC CEO Noel Quinn should be on a similar intellectual/thought-leadership level as a banker like JP Morgan’s Jamie Dimon. But I’m told he’s not. He’s apparently not even in same league as the perennial regulation zone Christian Sewing of Deutsche Bank – which is why the only response is to hack more jobs. HSBC faces massive risk/reputational exposures in Asia and particularly Hong Kong, and the lack of strategy should make is a classic business-risk case study.

But I am afraid I am not going to get round to writing anything like the brilliant, insightful porridge described above this morning: As always on a Monday morning, it’s the fault of South-West Rail.  Today, the train was on time – but 5 carriages instead of 10 meant lots of people traveling to London spent over an hour standing.  Its genius – the rail company is going to hit passengers with a 8% fare increase in January to reflect the heavy demand for the service!  They call that success.  Less service and minimal investment – and we get to pay more for it!
 
While the New Forest to London line hasn’t quite reached the Guy Fawkes masks, tear gas and full scale riots stage, but we’re not far from serious passenger insurrection. On a wider scale, there is an increasing sense life is ripping us off. Pitiful politicians, greedy businesses, evil bankers and declining services dominate the news. And when voters/consumers are getting increasingly discontented and frustrated – well, that’s when we get surprises..

And a surprise in the UK over the Brexit Bollchocks might just be on the cards. Cry havoc and unleash the hamsters of despair….