Blain: “Markets Remain Caught In The Headlights”

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Blain’s Morning Porridge, submitted by Bill Blain

What’s that rumbling noise coming from the East?  It’s the sound made by the Eurocracy in Brussels p*ssing themselves with laughter at UK Politics.  What chance of a face-saving and mutually beneficial compromise with Brussels now?  It’s all become too insane for any chance of a rationale decision.  Excellent. (I shall explain below…..)

Back on Planet Earth, its officially the start of the new financial season.  The US Labor Day holiday is behind us.  Everyone is back at their desks and has got oodles of readies to invest.  Expect to see a deluge of new Eurobonds hit the market as the bond buying frenzy continues – right up till it bursts!  Traders are taking a sanguine view of the latest Trade War shots, and largely discounting the counter-barrages.  Analysts are looking for bias confirmation in this week’s data slew – signs the world has already tipped into recession to fuel the bond rally and that Central Banks will wade into to rescue stocks on any sign of a wobble. 

The short-term is about trading the next tick up or down in line with Tweets.  The medium term is about when Powell will be forced to ease again.  On the basis I hope someone is managing my funds for my long and happy retirement, I do hope someone is thinking longer-term.

What we really should be thinking about is where does global trade settle in a new world of 3D printing, nano-tech, AI and robotics.  Which nations have the innovatory skills, the educated workforces and the ambition to rise above global trade based on cheapest to produce manufacturing model?  It’s unravelling in front of us!  That’s the stuff we should be talking about… but markets remain caught in the headlights.

When I try to find out about long-term investment perspectives, what I find is very disappointing.  I’ve read lots of stuff about “the decline of the American empire” and how this naturally hands dominance to the next emerging power – clearly China.  Each article is largely the same: characterising how the US matches the usual stages of growth, accumulation, the ascendency of empire followed by decline and fall.  Often the UK is the case that proves the rule.  (Hey, we ain’t dead yet!)  Its apparently an unchallengeable rule all great powers crumble to dust.

Bollchocks.  What the simplistic model doesn’t account for is the number of challengers that fall before they overtake the dominant empire. From Carthage onwards we’ve seen innumerable challengers rise and disappear without ever becoming top dog.  Even Sweden looked a contender a couple of times.  So was Germany.  Don’t write off the US and UK yet!  And China ain’t won either. 

But we really do need to talk about the UK.  It’s not looking good… is it? 

Faced with the current political muppetry, no wonder Sterling is at a low, UK equities look forlorn, and the prospects for the UK economy have never looked bleaker.  The mood looks unbelievably fraxious!  We’ve never seen such division.  Excellent – These are great reasons to get ready to buy.  Get your buying boots ready. 

I have no idea what the next few days will bring.  I’ve voted Labour all my life, but if there is a snap election… then it’s time to change.  I’ll be delighted if Boris can get a deal, but I don’t believe in the tooth fairy either.

UK Politicians?  If ever a stable needed cleaning out, its Westminster at the present time.   Even calm rational me is infuriated by what I’m watching.  My TV has never come to close to getting a boot kicked through it as this morning as a disgrace of a Tory MP sanctimoneofied about why he was voting against Boris, while the awful Labour Shadow Attorney-General compared our Prime minister to Nazis Thugs and dramatized the sacking of an (apparently) disloyal aide as a “young woman of colour frog-marched out of Downing Street at the point of a gun.” 

Step back a moment – when looking at what the Westminster Clustersh*tf**k means for UK investment possibilities, view it over the long view.  Firstly, it’s a complete game.  The Great British Political FUBAR has been amplified and driven by the media desperate to give us their opinions.  Its not real. It’s a circus, to which too many media-greedy politicians have proved very happy to juggle knives while mono-cycling over pools of hungry sharks.  MP’s crave the opportunities the BBC et al hand them to seem statesman-like.  Such a shame most of them come across as *****.

Step Back and Figure it Out.  The nations “representatives” may have succeeded in making themselves a laughing stock, but this is long-term.  I read a fascinating piece by David Murrin (Emergent Asset Management) last night: “The Brexit Wars – The Final Battle”.  He looks at today’s likely battle in parliament as part of a longer-term process.  Well worth a read to put the political sh*tstorm thus far into context.  The possibilities from here on it are legion…

In terms of market opportunities in the UK.. its getting very close to the bottom.  Buying boots ready..

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