A strange and curious day

Mint – Blain’s Morning Porridge  October

Into the jaws of death, into the mouth of hell, Rode the six hundred...

A strange and curious day yesterday with everyone watching and waiting.. What for? The Federal Reserve, the European Central Bank or what? Or the latest revelation and tape with Trump saying something sickeningly outrageous. (I’m reliably informed another will be released on Friday that will be a gamestopping shocker!) The market feels less committed than it should be – which is braced for something.. whatever that something might be?

But is it possible we are overthinking all this? A rising dollar and a crashing pound. Stocks up on higher oil prices – higher because Russia says it might play ball on production? Really? Banks that were predicting a crash to US$15 per barrel oil now say $60!

Check sterling linkers – inflation-linked bonds are rising as inflation expectations rise. Oil is a major factor in the UK. Rising inflation will trigger a whole series of unintended consequences – including the removal of any further justification for Bank of England quantitative easing.

At the moment the whole of the sterling corporate bond market hangs upon and is fixated by what’s on the BoE’s buy list. But if the Old Lady of Threadneedle Street were to stop.. well then.. sounds of discordant crashing chords.. Not only will the unlimited demand crutch be removed, but the prospect of higher rates will cause bonds to tumble. Double whammy to UK bonds and greater pain as the last greatest fool to buy the sterling bond market is left holding the ticking parcels.

Doubts on Brexit and how the process will develop continue to eat away at the post referendum confidence. Even one of the office closet UKippers admitted to some worries yesterday. Nice to see Tory politicians demanding we stick firm to “Brexit means Brexit”.. Right through the line they broke.. rode the 600..

Meanwhile, I was figuratively pimp-slapped by a good chum yesterday – a portfolio manager based in Luxembourg who rounded on me and my “utterly wrong” European perspectives. He reminded me Anglo-Saxons have been 100 percent wrong about everything we have thought and said about Europe thus far.

Through the financial crisis, the euro sovereign debt crisis, the Spain, Italy, Ireland and Greece near disasters and the following euro debt rally, London analysts have confidently and repeatedly predicted the imminent breakup of the European Union and the euro and the exit of nearly every single country.

How many times have we read calls for the single currency’s collapse and explanations given in careful but loud tones (so the uncivilised tribes in Yoorp [Europe] can understand) why Europe’s made-up confounded currency can’t possibly survive? The list of articles explaining in minute detail why the ECB doesn’t work is as long as those explaining why bumblebees can’t fly.

The London-based institutions have written erudite articles and analysis explaining in detail why European politics and the European superstate can’t possibly co-exist. We lament the rafts of young unemployed European youth whose careers have been sacrificed to keep the Brussels nomenklatura in jobs. We earnestly explain how the Target 2 imbalances inevitably mean Europe will end up an asset on Germany’s balance sheet and how it’s Germany, not other European states that should be on the receiving end of EU fines for “not playing the game.”

My European chum explained how we Anglo-Saxons (actually I am pure-blooded Celt making me more European than absolutely anyone else.. except possibly the Basques and the Finns) simply don’t understand the simple truth: Europeans are very keen on Europe.

He does not expect any other European states will even consider any form of referendum or exit. “Why would they?” he asks when they see what’s going to happen to the UK. He is confident the European financial markets will move from London to Europe. I asked about the Greek unpleasantness last year – special circumstances he explained. When I raised movements in Italy and Holland, he explained why both nations are committed to the euro project.

For all the times top-notch financial analysts have predicted “This is the End”, it simply isn’t going to happen… says my chum. In the background the chords of “Ode to Joy” are soaring skywards…

Away from Yoorp… I am very glad I rejoined the Apple fold earlier this year. The choice was between the iPhone, or the Samsung time bomb. I was on a plane last week and thought they were being a bit precious when the stewardess told passengers with the Samsung 7 they must switch it off completely and not touch it during the flight.

In terms of positive customer experience… it's not very positive. And looks like my decision to stick with Apple stock might have come right as well… But no interest in switching to iPhone 7 or the Apple Watch, which means what for the stock price medium term? Show me something really new and innovative.. bring on a new bright shiney thing!

Back to the day job!

Bill Blain

Head of Capital Markets/Alternative Assets

Mint Partners