Doublethink

Mint – Blain’s Morning Porridge

Doublethink means the power of holding two contradictory beliefs in one’s mind simultaneously, and accepting both of them..

It’s difficult to get terribly excited about anything markets at the moment. Markets go up. Markets go down. Up, down and a wee bit sideways? In out and shake it all about?

With “Sell in May and Stay Away till St Ledger's Day” just days away, I’m tempted to just go with the flow.. but where would the fun be in that..? There are plenty of stories to trade in bond land – but none have any particular resonance – yields and spreads are just too low to get excited about. Fortunately, we’ve got plenty of nice sweet 6%+ deals to be looking at in the real uncorrelated alternative asset sector. Short dated “interesting” asset-backed securities play at 9% anyone? 

So, as I contemplate another day working the phones and my email digits.. what shall I do for fun?

Let’s see if I can figure out who am I going to fall out with today? How about telling the entire whole global industrial base they are doomed to the boot of Apple et al stamping on our faces for ever? Perhaps – many folk tell me traditional banking nemesis will come in the shape of Google, Amazon and Apple. Apparently we’re only moments away from us doing all our finance through the tech giants. And cars, planes, and everything else apparently. Apple are out there poaching Tesla’s electrical car geniuses.

I’m not going to worry. I suspect the New New Thing will come along and break the future for the anticipated Big Brothers. I rather suspect today’s industrial and services behemoths will become tomorrow’s minnows. (Which doesn’t bode well for my stock picks!)  

Or should I risk the ire of the House of Saud for suggesting their plan to move from 90% oil dependence to 25% by 2030 is somewhat optimistic? The “dynamic” young crown prince might have smelt the coffee, but how do you turn around a grounded tanker? Even with oil prices soaring into the stratosphere (well, $45 per barrel!) he’ll find it will take more than words.

I suspect it’s more likely Saudi will spiral into crisis as the long-term problems and limited real reform options cascade into wider geopolitical issues as the regional struggle with Iran deepens and bankrupts them.

Or perhaps I’ll peeve Credit Suisse if I rip their operational risk “catastrophe bond” capital dodge bonds to shreds? The whole point of a catastrophe bond is they address risks that are unexpected and surprising. Investors get paid a handsome coupon on the basis they are on the hook for something very unlikely to happen. But, what’s unexpected or surprising about a major Suisse bank being fined for regulatory shenanigans or an unexpected trading losses? I don’t see any alignment between debt-holders and equity holders on this – quite the reverse.

Or how about Yoorp (Europe)? There is a dull but worthy piece on Bloomberg saying France is the new sick man of Europe – yada yada yada… dismal numbers and a flolloping economy. It's uncompetitive, bureaucratic and suffering weak investment. Corporate profitability is crashing. Unemployment shows no signs of abating. Tell us stuff we don’t know.

And the one that got me giggling this morning is Ireland unable to agree a new Government as they wrangle about water bills. Yep, Ireland...the wettest place on the planet about to erupt in civil war over water bills.

There is a serious point though – over the past eight years of European austerity the whole of Europe has scrimped, saved and suffered. Vital infrastructure including medical, education and public utilities across the continent, is now stretched, and that’s a looming disaster when we consider any chance of recovery. These issues become long-term catch-up unfixables. Time for change..

Tomorrow I shall start the day with some happy pills and try to be positive about something.. anything.. (only kidding.. we’re all doomed.. doomed I say…)

Bill Blain

44 207 786 3877

Mint Partners