Change will not come from above
November 7, 2017

Mint - Blain's Very Late Morning Porridge

Comrades come rally, let the last fight let us win….. for though they offer us concessions, change will not come from above..

For the avoidance of doubt – the Morning Porridge is unrestricted market commentary, it is not investment advice…

Divided opinion here in the office this morning.. Stirring the pot is the BBC (British Broadcasting Corporation)'s coverage of the "Paradise Papers", purporting to demonstrate widespread tax avoidance by the international elites. 

Tax evasion is illegal. But…It would appear most of these tax avoidance schemes the papers uncover are perfectly legal – raising the issue of what right do journalists have to pry into the affairs of people sticking to the law simply trying to avoid double taxation and manage their estates legally and efficiently? Of course, the question remains – why the secrecy giving the appearance of shady dealings around anyone feeling the need to "optimize/avoid" by paying tax offshore?

As the last card-carrying Communist in the City of London, I remain confident I will live to see the revolution before I retire to my pile down by the sea. Therefore arise ye starving masses from your slumbers, let's have the overthrow of the rentier classes and the dictatorship of the proletariat (as long as I can keep my yacht please..)

Aside from it earning trillions for the accountancy and banking firms involved, I doubt the celebs like Cheryl Cole know much about the schemes they're involved in. This might sound cynical, but choosing a tax scheme laid out before them by their "financial advisors" is probably less of a focus than choosing which bank pays most interest.

On the other hand, I suspect Her Majesty will not be best pleased to find her name on the perfectly legal but tax-avoiding charge sheet – knowing absolute straight dealing is front and centre. I wonder if a few advisors are about to spend some very unpleasant time in the Tower perhaps?

Here in the office, at least one of the "Capitalist Running Dogs", (let's just call him "My Boss"), is swearing he'll never watch the BEEB anymore and wants to stop paying his BBC licence fee: "it's a democracy and I want to exercise my democratic right to close them down.." On the other hand the young Trotskyites on the government bond desk are wondering how quickly this will get Corbyn elected so they can write off their student loans..  

All we need now is to find Theresa Might's husband's name on the papers and it's game over…

Back in the real world.. every single market is up! What can possibly go wrong? Its risk-on full throttle across the credit markets as spreads compress and everyone thinks it's all just perfect. As I read about the investment banks hiring again at massively inflated salaries and inflated bonus pools and expectations across the trading desks, I feel just like the bowl of petunias in HHGTTG (Hitch-Hiker's Guide to the Galaxy): "Oh no, here we go again."

Oil at its highest level since May 2015! In my book that means we're going to see US fracking operations ramp up and open more marginal wells, keeping prices down. But, I must note the comments of my BCG colleague Ara Levonian who said yesterday: "The real risk to the global economy is rising oil prices exasperated by a volatile Middle East and a debt-laden west finding it was too comfortable with low oil prices and benign inflation. We've been here before (1970s) and really not much has changed!"

Ara is a smart chap. And the Middle East looks something of a crisis nexus. I had a number of very interesting discussions with clients about Saudi yesterday – the consensus is Iran is the rising power in the region while there are significant doubts whether the mercurial Crown Prince Salman can deliver long-term stability in Saudi. I was reminded a couple of times yesterday, this is a young prince who announced he was slashing civil service jobs and salaries the same day he paid a Russian oligarch US$500 million for a new luxury yacht.. (Huh, yachts.. well, we've something in common then..) Our emerging markets desk is actively trading Saudi debt.

Meanwhile, my stockpicking guru Steve Previs is shaking his head in disbelief after another eight-day rally – wondering when we are going to see a down day! He says this morning "we're approaching the levels of optimism we saw back in the days of the dot.com bubble". The laws of financial gravity are immutable: "What goes up comes down and mean reversion is the force holding the financial universe together!"

On the other hand: "Markets can stay irrational longer than you can stay solvent."

Also in the papers is the dramatic rise in the Nikkei in recent months. Many years ago in the late 1980s, there was myself, Doug and Barry busily doing financial alchemy with Nikkei options to create highly levered plays for Japanese insurance companies to "smoothe" investment earnings (in otherwords: they lost billions, and on the basis the Nikkei could only ever go higher, they bought highly levered Nikkei linked notes with strikes in the 40k zone.) It did not end well – although Barry (by dint of remaining married to his lovely wife) has now retired, Doug just ran the New York Marathon, and I'm still slaving away at the Porridge every morning..

The Nikkei is just passing 23k – still well short of the record 39k – but has surpassed the 1990 level in terms of market cap. Everyone agrees it's going higher. How to play it? One play I like is the Japan Synthetic Warrant Fund – giving a geared play on Japan equity market, and returns in excess of anything else Japan-gocused. Providing a 10.7 percentreturn through September in US$, it's well worth a look. If you want details – give me a shout or email and I'll make the intros. 

And finally, I'm going out with a first look at something new in the aviation space – something short-dated risk and senior, but with some very attractive features that should very appeal to investors looking for safety in the aviation sector. If you think you might be interested, but aren't on our aviation call list...give me a shout!

On with the day job!

Bill Blain

Head of Capital Markets/Alternative Assets

Mint Partners





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Mint - Blain's Very Late Morning Porridge

Comrades come rally, let the last fight let us win….. for though they offer us concessions, change will not come from above..

For the avoidance of doubt – the Morning Porridge is unrestricted market commentary, it is not investment advice…

Divided opinion here in the office this morning.. Stirring the pot is the BBC (British Broadcasting Corporation)'s coverage of the "Paradise Papers", purporting to demonstrate widespread tax avoidance by the international elites. 

Tax evasion is illegal. But…It would appear most of these tax avoidance schemes the papers uncover are perfectly legal – raising the issue of what right do journalists have to pry into the affairs of people sticking to the law simply trying to avoid double taxation and manage their estates legally and efficiently? Of course, the question remains – why the secrecy giving the appearance of shady dealings around anyone feeling the need to "optimize/avoid" by paying tax offshore?

As the last card-carrying Communist in the City of London, I remain confident I will live to see the revolution before I retire to my pile down by the sea. Therefore arise ye starving masses from your slumbers, let's have the overthrow of the rentier classes and the dictatorship of the proletariat (as long as I can keep my yacht please..)

Aside from it earning trillions for the accountancy and banking firms involved, I doubt the celebs like Cheryl Cole know much about the schemes they're involved in. This might sound cynical, but choosing a tax scheme laid out before them by their "financial advisors" is probably less of a focus than choosing which bank pays most interest.

On the other hand, I suspect Her Majesty will not be best pleased to find her name on the perfectly legal but tax-avoiding charge sheet – knowing absolute straight dealing is front and centre. I wonder if a few advisors are about to spend some very unpleasant time in the Tower perhaps?

Here in the office, at least one of the "Capitalist Running Dogs", (let's just call him "My Boss"), is swearing he'll never watch the BEEB anymore and wants to stop paying his BBC licence fee: "it's a democracy and I want to exercise my democratic right to close them down.." On the other hand the young Trotskyites on the government bond desk are wondering how quickly this will get Corbyn elected so they can write off their student loans..  

All we need now is to find Theresa Might's husband's name on the papers and it's game over…

Back in the real world.. every single market is up! What can possibly go wrong? Its risk-on full throttle across the credit markets as spreads compress and everyone thinks it's all just perfect. As I read about the investment banks hiring again at massively inflated salaries and inflated bonus pools and expectations across the trading desks, I feel just like the bowl of petunias in HHGTTG (Hitch-Hiker's Guide to the Galaxy): "Oh no, here we go again."

Oil at its highest level since May 2015! In my book that means we're going to see US fracking operations ramp up and open more marginal wells, keeping prices down. But, I must note the comments of my BCG colleague Ara Levonian who said yesterday: "The real risk to the global economy is rising oil prices exasperated by a volatile Middle East and a debt-laden west finding it was too comfortable with low oil prices and benign inflation. We've been here before (1970s) and really not much has changed!"

Ara is a smart chap. And the Middle East looks something of a crisis nexus. I had a number of very interesting discussions with clients about Saudi yesterday – the consensus is Iran is the rising power in the region while there are significant doubts whether the mercurial Crown Prince Salman can deliver long-term stability in Saudi. I was reminded a couple of times yesterday, this is a young prince who announced he was slashing civil service jobs and salaries the same day he paid a Russian oligarch US$500 million for a new luxury yacht.. (Huh, yachts.. well, we've something in common then..) Our emerging markets desk is actively trading Saudi debt.

Meanwhile, my stockpicking guru Steve Previs is shaking his head in disbelief after another eight-day rally – wondering when we are going to see a down day! He says this morning "we're approaching the levels of optimism we saw back in the days of the dot.com bubble". The laws of financial gravity are immutable: "What goes up comes down and mean reversion is the force holding the financial universe together!"

On the other hand: "Markets can stay irrational longer than you can stay solvent."

Also in the papers is the dramatic rise in the Nikkei in recent months. Many years ago in the late 1980s, there was myself, Doug and Barry busily doing financial alchemy with Nikkei options to create highly levered plays for Japanese insurance companies to "smoothe" investment earnings (in otherwords: they lost billions, and on the basis the Nikkei could only ever go higher, they bought highly levered Nikkei linked notes with strikes in the 40k zone.) It did not end well – although Barry (by dint of remaining married to his lovely wife) has now retired, Doug just ran the New York Marathon, and I'm still slaving away at the Porridge every morning..

The Nikkei is just passing 23k – still well short of the record 39k – but has surpassed the 1990 level in terms of market cap. Everyone agrees it's going higher. How to play it? One play I like is the Japan Synthetic Warrant Fund – giving a geared play on Japan equity market, and returns in excess of anything else Japan-gocused. Providing a 10.7 percentreturn through September in US$, it's well worth a look. If you want details – give me a shout or email and I'll make the intros. 

And finally, I'm going out with a first look at something new in the aviation space – something short-dated risk and senior, but with some very attractive features that should very appeal to investors looking for safety in the aviation sector. If you think you might be interested, but aren't on our aviation call list...give me a shout!

On with the day job!

Bill Blain

Head of Capital Markets/Alternative Assets

Mint Partners



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