Time and Patience
April 10, 2018

Mint - Blain's Morning Porridge

The strongest of all these warriors are these two – Time and Patience.

The Morning Porridge is unrestricted market commentary freely available to all investors on an unsolicited basis. It is not investment research. 

Delusional escalation or a well played poker hand? I guess we won't know till someone blinks on the trade game with China. Or, how will Putin respond to Trump's bellicosity on Syria after the coiffured one simultaneously trashed the Russian stock market? Imagine what the papers would be saying if Russian economic action caused a 10 percent nosedive on the FTSE.. Overused phrase of the day is "Return to the Cold War".

It's the stability of the market's mindset that worries me – how fragile and fractious is sentiment? How frayed is the market's collective nerve? Although all the fundamentals for global growth remain strong – and we can show literally thousands of data sets to support that - the sweet melody of synchronous growth is being (literally) trumped by the discordant noise of protectionism, clashing chords of populism, and market jitters over the threat of out-of-tune central bank unco-ordinated monetary policy.

Looking at the stock charts – they look topsy-turvy. Yesterday looks a complete bubble – steadily up in the morning, but a parabolic tumble in the afternoon. This morning, the futures are saying stronger again. It does not look strong. It looks reactive. One read is that we're setting up for a further test of the lows.

Nipping outside our usual safe comfort zone of bonds, currencies and stocks, I've been wondering about other signals of potential nervous market exhaustion. Last week one of my horse racing chums was expressing fears after low prices at English bloodstock auctions – his gut feel was this was indicative of broader concerns across money, wealth and investments.

Yesterday I asked my macroeconomist Martin Malone to take a look and he produced a RICH chart looking at the prices of fine wine, art and luxury watches – proxies we've chosen for how comfortable wealth feels. I can't help but wonder if we're sitting on top of a volcano?

Meanwhile, back in the real world… Deutsche Bank. Deutsche (DB) is just another thread in the much bigger and complex tapestry of financial evolution. Once, DB was Europe's leading investment bank. Its only real rival was Barclays. Today, it looks set to become a footnote in market history. Their decision to exit investment banker John Cryan as Chief Executive Officer and give the job to a DB lifer says it all. Christian Sewing has been parachuted in with unseemly haste after it became clear the all-powerful Paul Achlleitner was out of patience. Sewing is a commercial banker who started as an apprentice, had a career in risk management, was elevated to the board and finally into the CEO's shoes. The read is it confirms the end of the bank's ambitions as a premier investment bank.  

But, where does DB go from here? Most of the banking analysts point out there are very limited options. There is lots of underperforming wood to prune – like US operations, its London investment banking hub, trading and fixed income. It could slash risky investment banking and cut risk to lower value at risk (VaR) and capital costs. Many think it's still in recovery after last year's brush with confidence. However, what would be left if it self prunes is a German-focused commercial and retail bank operations, which are low return on equity operations.

Over the past 32 years I've seen many mighty institutions come and go. There was a time when there were half-a-dozen German market contenders: DB was clearly in the top division, while names like WestLB, Dresdner and Commerz were strong in the second league, and smaller players like Vereinsbank, DZ and other Landesbanks had solid local relationships. Same was true across Europe. France, Scandinavia, Benelux all had strong and influential banks in market terms. Now?

Name me a single European bank active across the whole of Europe? There is not one. The rules mean no external bank can consider it – they would need to submit not only to European Central Bank supervision, but move to Frankfurt! (or worse..). Will European banking union create European superbanks? Perhaps, but I doubt it will be German. I'll be putting my money on a French name instead.

And why not… back to the day job!

Bill Blain

Head of Capital Markets/Alternative Assets

Mint Partners





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Mint - Blain's Morning Porridge

The strongest of all these warriors are these two – Time and Patience.

The Morning Porridge is unrestricted market commentary freely available to all investors on an unsolicited basis. It is not investment research. 

Delusional escalation or a well played poker hand? I guess we won't know till someone blinks on the trade game with China. Or, how will Putin respond to Trump's bellicosity on Syria after the coiffured one simultaneously trashed the Russian stock market? Imagine what the papers would be saying if Russian economic action caused a 10 percent nosedive on the FTSE.. Overused phrase of the day is "Return to the Cold War".

It's the stability of the market's mindset that worries me – how fragile and fractious is sentiment? How frayed is the market's collective nerve? Although all the fundamentals for global growth remain strong – and we can show literally thousands of data sets to support that - the sweet melody of synchronous growth is being (literally) trumped by the discordant noise of protectionism, clashing chords of populism, and market jitters over the threat of out-of-tune central bank unco-ordinated monetary policy.

Looking at the stock charts – they look topsy-turvy. Yesterday looks a complete bubble – steadily up in the morning, but a parabolic tumble in the afternoon. This morning, the futures are saying stronger again. It does not look strong. It looks reactive. One read is that we're setting up for a further test of the lows.

Nipping outside our usual safe comfort zone of bonds, currencies and stocks, I've been wondering about other signals of potential nervous market exhaustion. Last week one of my horse racing chums was expressing fears after low prices at English bloodstock auctions – his gut feel was this was indicative of broader concerns across money, wealth and investments.

Yesterday I asked my macroeconomist Martin Malone to take a look and he produced a RICH chart looking at the prices of fine wine, art and luxury watches – proxies we've chosen for how comfortable wealth feels. I can't help but wonder if we're sitting on top of a volcano?

Meanwhile, back in the real world… Deutsche Bank. Deutsche (DB) is just another thread in the much bigger and complex tapestry of financial evolution. Once, DB was Europe's leading investment bank. Its only real rival was Barclays. Today, it looks set to become a footnote in market history. Their decision to exit investment banker John Cryan as Chief Executive Officer and give the job to a DB lifer says it all. Christian Sewing has been parachuted in with unseemly haste after it became clear the all-powerful Paul Achlleitner was out of patience. Sewing is a commercial banker who started as an apprentice, had a career in risk management, was elevated to the board and finally into the CEO's shoes. The read is it confirms the end of the bank's ambitions as a premier investment bank.  

But, where does DB go from here? Most of the banking analysts point out there are very limited options. There is lots of underperforming wood to prune – like US operations, its London investment banking hub, trading and fixed income. It could slash risky investment banking and cut risk to lower value at risk (VaR) and capital costs. Many think it's still in recovery after last year's brush with confidence. However, what would be left if it self prunes is a German-focused commercial and retail bank operations, which are low return on equity operations.

Over the past 32 years I've seen many mighty institutions come and go. There was a time when there were half-a-dozen German market contenders: DB was clearly in the top division, while names like WestLB, Dresdner and Commerz were strong in the second league, and smaller players like Vereinsbank, DZ and other Landesbanks had solid local relationships. Same was true across Europe. France, Scandinavia, Benelux all had strong and influential banks in market terms. Now?

Name me a single European bank active across the whole of Europe? There is not one. The rules mean no external bank can consider it – they would need to submit not only to European Central Bank supervision, but move to Frankfurt! (or worse..). Will European banking union create European superbanks? Perhaps, but I doubt it will be German. I'll be putting my money on a French name instead.

And why not… back to the day job!

Bill Blain

Head of Capital Markets/Alternative Assets

Mint Partners



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