Blain's Morning Porridge - Nov 29th 2017 - Brexit Smexit... get on with it.. and if we can't
Blain’s Morning Porridge – November 29th 2017
“If Charlie wants to tangle now they’ll have two to dodge….”
For the avoidance of doubt – the Morning Porridge is unrestricted market commentary freely available to all qualified investors on an unsolicited basis. It is not investment advice…
Euro 50bln or thereabouts for the Brexit Bill? While some folk say Nigel Farage and Boris Johnston should cover it personally, over 40-years it’s a rounding error on the national accounts. So can we please get over it, kiss and make up and get on with real stuff? Now we just need to solve the Irish Border problem… wait a few years and it will solve itself one way or another…
Does a Brexit breakthough spell a buying moment in UK Inc? Couple of blogs screaming buy banks, buy banks! (On the basis they have suffered most from the uncertainty.) There is still a deal of uncertainty on what will actually be agreed, but its consequences that matter - especially in terms of the political fallout any deal (no matter how good) will create for Theresa Maybe-might. She is being accused of a craven surrender to Europe’s bully-boys – but it’s a practical solution (even though we’ve wasted loads of time.) How much has the number been “camouflaged”? Is a new UK election on the cards? (And if it’s a divorce – then my own experience suggests a “practical proposal” turned out to be the start of the real problems!)
I spent yesterday in Frankfurt at the superb Ishka aviation conference – meeting a number of German lessors, investors and banks. I learnt an enormous amount – which I shall be delighted to share with readers interested in the aviation markets (send me an email), and made a number of new contacts. I spent a large part of the day talking about A380s – where it’s a mixed picture – but not nearly as uncertain as some papers suggest.
Aviation still strikes me as one of the most interesting of the new Alternative uncorrelated asset classes – and its evolving quickly into a highly investible market. I’m thinking about issues such as indexing, openness and transparency, and how to address smaller investors without larger in-house teams of aviation experts – it’s the knowledge “gap” about the underlying assets and credit, and the relationship between them that is keeping many folk out the market.
Unsurprisingly, it’s another area where MiFID – designed to create open and transparent markets – is going to do exactly the opposite by forcing smaller investors to buy in unquantifiable research, which is more likely to keep them out the asset class. Again.. we have a solution.. which might mean going to jail, but it will be worth it!
Elsewhere I’ve got to say I’m worried.
When a colleague greets me in the lift telling me about how marvellous the latest Nigerian deal is…. When US bank and Insurance stocks soar on the back of new Fed-Head Powell comments about lighter banking regulation… When stock markets continue on their upwards trajectory while El Norte Korean’s pop off another missile and no-one bats an eyelid at the blip on the threat radar, you have to wonder what’s going on.
Prospects for US tax reform are driving the giddy sentiment in stocks – which are supported by the ongoing rosy company results and economic releases. What’s not to like about the pre-Christmas rally?
Which is when I suddenly had an epiphany moment…
I was out on Monday night with two very smart clients. One of the used to be CEO of a major UK tech firm. I was complaining about the ongoing signalling problems at Waterloo before we started talking about US Tech Stocks. Perhaps it was the rather good wine – but it suddenly struck us.
Trains only do one of three things: they either sit there motionless, they go forwards, or they go backwards and it all happens on very simple tracks that allow no deviation. In the 170 years since Waterloo Station first opened we still haven’t perfected the systems to make railway lines work flawlessly.
Skip forward to today and everyone is invested in driverless trucks and cars. Some folk think the problem might be luddites: irrational humans blocking the driverless system– especially if they are one of the 15 million truck drivers likely to left jobless in the US or China?
I think the real problem is more basic. My millennials tell me a driverless transport system is fool-proof. They assure me the controlling systems will be able to compute and handle literally trillions of information bytes on other vehicles moving over an infinity of vectors. Will they? If we can’t control 19th century tech moving in 2 vectors how will the future look? When I was 20 I expected to hover-board into the office each and every day…
That said, I am convinced by some of it..
Back to the day job!
Bill Blain