Blain's Morning Porridge - April 5th 2018: Playing Poker with markets...
Blain’s Morning Porridge – 5th April 2018
“For a bunch of hairless apes, we managed to invent some pretty incredible things..”
The Morning Porridge is unrestricted market commentary freely available to all investors on an unsolicited basis. It is not investment research.
So what happened that changed everything yesterday as the US stock market staged a steady sustained rally? Has spring finally sprung? Sorry, but it is not the beginning of a new remorseless rise. It was just another wave on the tide of the current cycle – yesterday was driven by short-covering. Simple as. My stock picking guru and chartist wizard, Steve Silver Fox Previs, says the market still has to complete a corrective phase – meaning we’ve still got pain to come before a new real rally resumes.. and then.. who knows..? He say’s sentiment is buoyant, but not as optimistic as saw last year.
Everything feels like a poker game at the moment. On the trade front, we’ve got Trump’s yes-men talking up the prospects for Peace in Our Time with China through a coordinated “these are not the droids you are looking for” spiel about it not surprising anyone and promising a negotiated solution. Kudlow, Ross and Munchin? Are they purveyors of meaningless noise and economic snake-oil, or might they actually be on to something? Time will tell.
In market’s we have a substantial rally, but on tiny volume? What does it mean. Steve says the low volume is a clear “Tell”.. that giveaway facial tick that tells you your poker opponent is bluffing. Low volume is a clear signal buyers are not utterly convinced. Low levels of conviction are not a screaming buy signal. When it comes to the geopolitics of the trade war, it would be easy to make the old joke about: “How do you know when Trump is lying…?” but I’ll resist the temptation to say “because his lips are moving…”. In fact, Trump does appear to holding a rather strong hand… but he’s up against players who play the game exceedingly well..
Personally, I think Chine massively upped the ante when they put Soyabean and Aircraft on the tariff list. $14 bln of soyabean customs are going to thump the Trump heartlands. They may have misjudged it – the Midwest Soyabelt wont blame Trump.. they’ll rally to him! (Not so worried about Aircraft – China needs thousands of new aircraft, and their own COMAC C919 is at least 20 years behind the technological curve and likely to prove late on its deliveries at a time when the Asian middle class is tripling in size – clue: Boeing’s slide y’day was a snapback over-reaction.)
Next thing to worry about is probably Facebook again – the wobble we’re seen thus far about Cambridge Analytica might just be a mild tremblor compared to what comes next as it becomes clear user’s information has been systemically and surgically harvested and scraped across the board.. We’re talking 2 billion users…. Governments need to be seen to react, fulminated their righteous anger, and whip someone… Step up Zuck. Its going to hurt. And in his wake, a lash of new regulation, a focus on taxation, and the model changes… the Tech route is not over yet.
I did like the rumour Jeff Bezos is buying Twitter, and his first action will be to suspend Trump’s account. He should have thought of that years ago… oh, he probably did..
All of which leads me to last night’s film. She-who-is-now-Mrs-Blain and I went to see Spielberg’s Ready Player One last night. We loved it – probably because it’s a nod back to the 1970s and 80s. This is not a film for our Millennial and Generation Y kids – this is a film for us. I was brilliant at Space Invaders but sucked at Asteriod! Tron on Steroids! It’s full of references, the music and the vibe of our youth, so I loved it. Its even got a De Lorean FFS! But, interesting but utterly confused view of the future dominated by gaming and all global economic activity focused upon it. I don’t suppose it will ever be a classic, but any film with Mark Rylance in it is bound to be utterly brilliant…
Better get back to the day job… got some excellent stuff to do in aircraft!
Bill Blain