Blain's Very Late Morning Porridge - Nov 6th. Things going badly wrong: Trains, the UK and Saudi
Blain’s Very Late Morning Porridge – November 6th 2017
“I never travel without my diary. One should have something sensational to read on the train.”
For the avoidance of doubt – the Morning Porridge is unrestricted market commentary, it is not investment advice…
From the The New York Times:
Britain is embracing “an introverted irrelevance.” That’s the view of the New York Times’ departing bureau chief, Steven Erlanger. Britain is a “modest-size ship on the global ocean.” It is “it is unmoored, heading to nowhere, while on deck, fire has broken out and the captain – poor Theresa May – is lashed to the mast, without the authority to decide whether to turn to port or to starboard.” Renowned for its “pragmatism, its common sense, its political stability and its unabashed devotion to small business,” Britain is now “unrecognizable to its European allies.”
The NYT has a point. I reckon my increasingly fraught weekly commute up to London is the clearest proof yet of the possibility of shocking electoral surprise and chronic market uncertainty in the UK sooner than markets expect. It’s just taken 3 hours to travel a one-hour route.
I’m intrigued to know what’s happened to South-West rail’s Southampton-Waterloo line. For many years it functioned fine, but now my Monday morning trip up to the Smoke has become a lottery - how slow can you go and trains crawling to London because of perpetual “signaling faults”, or this morning which began with a “broken-down” train on the line, then dumped us at Woking to find alternative ways into London, while excusing the lack of service with a derailment and later a host of increasingly contradictory tales.
It feels endemic of a wider UK economic malaise - it just doesn’t seem possible to get anything done any more in this country. UK politicians’ crow about the success rebuilding London stations, but what use are lots more platforms if the middle management jobsworths running the railways aren’t arsed to make them work properly? (Or a now-homeward bound minister boasting our Aircraft Carrier is the envy of the world - when it’s not going to have any aircraft for the foreseeable future... and even then we can’t man it or afford it. It’s just a very expensive flat deck with a figurative bull’s-eye painted on it!)
It’s not just across rail - try asking anyone to do anything these days and you can be pretty sure there will be some sort of “computer says no” excuse. Even the “sensible” parts of the economy are buried under tons of bumf - regulators desperately keen to regulate by demanding instant data they will never ever figure out. So don’t ask your local bank for a loan - they are far too busy responding to the latest “must do” proclamation on MiFid to actually do any business..
It’s no wonder it all feels so pointless....
They say fish rot from the head down…
When parliament is discredited by the activities of the entitled serial gropers among the Self-Servatives, the rest of the country takes its lead from them. A loss of faith in politics, Brexit remorse and the central heating breaking down just as the cold begins.... its enough to make you cry!
The day of reckoning may be coming - before the Wi-Fi on the train broke down, I was reading about the Tory plans for by-elections to get rid of the worst abusers. Guess what - they will likely lose, and Theresa Might‘s majority will vanish.
Jeremy Corbyn anyone?
Back in the real world, and we’re watching oil prices rise as the headlines out of Saudi Arabia play on. A luxury hotel is now a luxury prison, while a helicopter containing 8 prominent figures and a minister crashes? How convenient. Is the Crown Prince Mohammed Bin Salman simply cementing his power base by removing rivals, or will he succeed to build firm foundations for a solid future economy, solve the crisis created by chronic inequality by freeing up the economy, or are we entering the Saudi end-game as the state consumes itself?
Lots of differing views - but I suspect the Aramco IPO is already about 10-years past its sell by date. Turning around Saudi is a massive task, and may not play out the way many in the West expect – with the emergence of a more liberal Saudi. In the fact the opposite is also possible – some Middle East watchers are predicting a more repressive and theocratic Wahabi ascendency as a possibility. The most interesting arrest over the weekend is Prince Alwaleed bin Talal – hinting at a change in the way Saudi deals with the west. Will Salman open up the economy or close down the kingdom?
Its 100 years since the Russian revolution and I think I’ll read up on Kerensky’s attempts to liberalise the economy – he was years too late and we all know what happened next..
Our EM desk is actively trading Saudi debt this morning – call and I’ll put you directly in touch with them..
Venezuela is the other big EM axe this morning, and we’re hearing all kinds of plays being suggested re financial engineering solutions, and playing debt vs debt. Again – happy to put you straight through to desk.
And the third big story this week is Greece, where the restricting bond deal looks like being a winner – and illiquid bond curve becomes an investible market. Great story by Marcus Ashworth of Bloomberg - https://www.bloomberg.com/gadfly/articles/2017-11-06/greece-moves-closer-to-getting-some-euro-zone-respect well worth a read! And yes, our guys are trading GGBs – we reckon we’re a top firm in the market!
And finally, I better get on with the day job!