None shall pass
November 8, 2017

Mint - Blain's Morning Porridge

"None Shall Pass"

"I have no quarrel with you, good Sir Knight, but I must cross this bridge."

"Then you shall die…"

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

Napoleon once said: "I would rather have a general who was lucky than one who is good." Theresa May would not be getting her Marshal's Baton. Her government is such a wobbly jelly, it would be divine mercy if Mr May's name were to be found in the Paradise Papers – forcing her resignation.

It's more than just the lack of political judgment exhibited by Boris Johnson, Priti Patel and others, the sexual peccadilloes of certain MPs, the apparently institutionalized acceptance of harassment and bullying, or the unparalleled ability of her government to mess up absolutely everything on a truly monumental scale. At least, that's the impression her dithering government achieves – right or wrong it's damaging conference while impacting domestic and international sentiment towards the UK.

Does that spell opportunity? Indeed it does. This morning's FT front page alleges Wall Street's "pre-eminent" banks have been warning they will pull thousands of jobs out the City unless they get clarity from the Maybe-Might Administration on Brexit. It would seem to sum up how perilous the situation is.

The media is full of scaremongering about how dire our chances are. A serious Brexit deal with Europe by December looks a poor call – they say. There is a headline on Bloomberg: "The UK is Such a Mess, Not Even Analysts Can Agree What's Going On!" Doh. Of course they don't.. that's the whole point of analysts – they reach independent conclusions, thus tend not to agree…but to be fair the article lists a series of discernible threats that could make a very bad situation very much worse. 

Doom and gloom indeed… but, hah, we're Brits and we've had it much worse. From the days of Arthurian legend, our 1000-year unpleasantness with the French, five million Scots like me to the North, and saving global civilization (twice) last century. Do your worst… we'll get over it...I mean, we had John Major as Prime Minister… And we didn't collectively flatline!

It's important to have an opinion when it comes to predicting how politics will influence/impact markets. More often than not the market political pundits get it seriously wrong; overestimating the power of populism, the costs of incompetence, the secondary effects of SNAFUs, and overweighting the influence of political personages.

While the UK is a bucketful of political nonsense at present, it's not the end of the world. Sure, there are problems, but the economy is fundamentally sound and finances are solid. Get over it. 

Theresa May will probably stumble on for a while yet because of the absolute lack of any political successor. Her government could fall if she loses her majority. Some intense political bargaining would proceed such a move – and I'm pretty certain the Scots would walk away happy at the prospect of more Westminster cash in return for not pressing the nuclear button of Neverendum II.

A new general election is a long shot, and may well see Labour leader Jeremy Corbyn in power – but he'll find himself as hobbled and hogtied over Brexit as May and constrained by the more centrist parts of Labour. More likely is a hung parliament and government by default. 

It's not as big a problem as some imagine – the Germans are still struggling towards a compromise coalition and is it a problem? In terms of the real problems – it's pretty clear Brexit is not the issue the press and worriers have us believe. It's a matter of agreeing the divorce settlement and the trade agreement is there to be signed. 

All of which convinces me that although the UK is in trouble, it's not the end of the World. "Tis but a scratch", said the Black Knight after his arm was chopped off. If it wobbles and looks cheap, it's a buying opportunity….

Meanwhile, back on Planet Reality…I sense growing disturbance in the force.

Last night it was Mo-El Erian telling an interviewer about his fears on how calmly "normalization" is being handled by markets. The mentality of stock markets making repeated record highs, and minimal drawdowns clearly worries him. He said the flattening yield curve, caused by quantitative easing and duration extension is "underestimating the synchronized pick-up that's going on". He's worried about productivity, wages, and inflation dynamics – admitting we don't understand the mechanisms. Data dependency and short-termism dominate.

It's a concern when the great and the good are questioning where we are going. (Fools like me just keep asking: "are we there yet?").

I am reminded by Paul Cohen and Simon Ballard of Bloomberg that is a year since Donald Trump so pleasantly surprised us by winning the US election. Since then high-yield debt has tightened 142 basis points in the US and 155bps in Europe. With the market pumping out more and more supply every day, and the European Central Bank clearly mumble-swerving how long to keep up its pretence...can someone please justify why yield compression continues so strongly when the global economy is on the cusp of normalization? 

Just asking…

Back to day job….

Bill Blain

Head of Capital Markets/Alternative Assets

Mint Partners





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Mint - Blain's Morning Porridge

"None Shall Pass"

"I have no quarrel with you, good Sir Knight, but I must cross this bridge."

"Then you shall die…"

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

Napoleon once said: "I would rather have a general who was lucky than one who is good." Theresa May would not be getting her Marshal's Baton. Her government is such a wobbly jelly, it would be divine mercy if Mr May's name were to be found in the Paradise Papers – forcing her resignation.

It's more than just the lack of political judgment exhibited by Boris Johnson, Priti Patel and others, the sexual peccadilloes of certain MPs, the apparently institutionalized acceptance of harassment and bullying, or the unparalleled ability of her government to mess up absolutely everything on a truly monumental scale. At least, that's the impression her dithering government achieves – right or wrong it's damaging conference while impacting domestic and international sentiment towards the UK.

Does that spell opportunity? Indeed it does. This morning's FT front page alleges Wall Street's "pre-eminent" banks have been warning they will pull thousands of jobs out the City unless they get clarity from the Maybe-Might Administration on Brexit. It would seem to sum up how perilous the situation is.

The media is full of scaremongering about how dire our chances are. A serious Brexit deal with Europe by December looks a poor call – they say. There is a headline on Bloomberg: "The UK is Such a Mess, Not Even Analysts Can Agree What's Going On!" Doh. Of course they don't.. that's the whole point of analysts – they reach independent conclusions, thus tend not to agree…but to be fair the article lists a series of discernible threats that could make a very bad situation very much worse. 

Doom and gloom indeed… but, hah, we're Brits and we've had it much worse. From the days of Arthurian legend, our 1000-year unpleasantness with the French, five million Scots like me to the North, and saving global civilization (twice) last century. Do your worst… we'll get over it...I mean, we had John Major as Prime Minister… And we didn't collectively flatline!

It's important to have an opinion when it comes to predicting how politics will influence/impact markets. More often than not the market political pundits get it seriously wrong; overestimating the power of populism, the costs of incompetence, the secondary effects of SNAFUs, and overweighting the influence of political personages.

While the UK is a bucketful of political nonsense at present, it's not the end of the world. Sure, there are problems, but the economy is fundamentally sound and finances are solid. Get over it. 

Theresa May will probably stumble on for a while yet because of the absolute lack of any political successor. Her government could fall if she loses her majority. Some intense political bargaining would proceed such a move – and I'm pretty certain the Scots would walk away happy at the prospect of more Westminster cash in return for not pressing the nuclear button of Neverendum II.

A new general election is a long shot, and may well see Labour leader Jeremy Corbyn in power – but he'll find himself as hobbled and hogtied over Brexit as May and constrained by the more centrist parts of Labour. More likely is a hung parliament and government by default. 

It's not as big a problem as some imagine – the Germans are still struggling towards a compromise coalition and is it a problem? In terms of the real problems – it's pretty clear Brexit is not the issue the press and worriers have us believe. It's a matter of agreeing the divorce settlement and the trade agreement is there to be signed. 

All of which convinces me that although the UK is in trouble, it's not the end of the World. "Tis but a scratch", said the Black Knight after his arm was chopped off. If it wobbles and looks cheap, it's a buying opportunity….

Meanwhile, back on Planet Reality…I sense growing disturbance in the force.

Last night it was Mo-El Erian telling an interviewer about his fears on how calmly "normalization" is being handled by markets. The mentality of stock markets making repeated record highs, and minimal drawdowns clearly worries him. He said the flattening yield curve, caused by quantitative easing and duration extension is "underestimating the synchronized pick-up that's going on". He's worried about productivity, wages, and inflation dynamics – admitting we don't understand the mechanisms. Data dependency and short-termism dominate.

It's a concern when the great and the good are questioning where we are going. (Fools like me just keep asking: "are we there yet?").

I am reminded by Paul Cohen and Simon Ballard of Bloomberg that is a year since Donald Trump so pleasantly surprised us by winning the US election. Since then high-yield debt has tightened 142 basis points in the US and 155bps in Europe. With the market pumping out more and more supply every day, and the European Central Bank clearly mumble-swerving how long to keep up its pretence...can someone please justify why yield compression continues so strongly when the global economy is on the cusp of normalization? 

Just asking…

Back to day job….

Bill Blain

Head of Capital Markets/Alternative Assets

Mint Partners



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