Blain's Morning Porrige - June 27th 2018: Summer Markets, getting past the negative bais, is Ira

Blain’s Morning Porridge – June 27th 2018

“If they told you wolverines make good house pets, would you believe them?”

The Morning Porridge is unrestricted market commentary freely available to all investors on an unsolicited basis. It is not investment research.

ALERT – MINT acting as distribution agent on 7% 5-yr GBP ORB bond for Monaco Resources – (see below)

Sorry for lack of comment last few days. French Air Traffic Controllers made it “challenging”, and left me “Lost in France” these last few days. Suffice to say She-Who-Is-Now-Mrs-Blain and I gallantly battled our way back to Southampton y’day to discover UK railways were completely stuffed by the weather. Travel hassle in France is pleasant compared to the UK. One wonders how the trains work, and rails stay straight in properly hot countries? I’d humbly suggest a whole senior management layer at the railways is sacked – but government policy will probably remain to give them OBEs.

My situation in France might just have been made worse by my shirt selection. I was wearing a Scottish Rugby polo shirt. The Saltire (Scotland’s Flag) on the side and the Scotland Rugby Logo above my heart.. The problem was Scotland’s shirt sponsors – a well known Sportswear maker. Based on attitude of French workers at present – I really don’t suggest you risk travelling in France with “Macron” emblazoned on your shirt. Schoolboy error…

Back in the markets, it feels properly Summer. Monday’s dump became Tuesday’s buying. While stocks sometimes look precipitous – full bear mode in China, and struggling elsewhere with negativity - we’re seeing them bouncing off low MDAs – hinting at something to come. Up or down? On the other hand, summer liquidity is so thin its’ difficult to see where the pressure to really spike a crash would come from. On my PA account – I’m waiting for the moment to pile in if it looks cheap – but not convinced that summer is necessarily a good time to be convinced of anything.

The mood clearly isn’t helped by Trump-Uncertainty and whatever’s in his sights – be it cars, steel, tech, China or Iran. Fret Not - Its’ just noise. Playing the “Trump” is very much a matter of stripping out the negative bias news flow, working out what is real in negotiations, and assessing the real games being played in Geopolitics. Nothing is quite what it seems – for instance Japan is a major buyer of Iran oil, but can it be induced to buy Saudi instead? It’s even more difficult when looking at China, Iran’s major oil buyer.

Fret not about Turkey – it’s a mess and we know it. Perhaps, Iran is even more a threat? Destabilised by Trumps’ exit from the nuclear deal, the pressure to deal (actually to not deal) being put on other countries by the US, the internal economic slippage following the US triggering domestic uncertainty, while Washington whips up further pressure, and sells oil from the strategic reserve. Its’ no wonder we’re reading about increased internal dissent, while Washington briefs anyone willing to listen on the need for regime change. That’s what Trump wants us to think – does it become a self fulfilling event? Or, is the real situation in Iran very different? Who knows… the truth is whatever the truth is…

Interesting to note that Oil prices from 2004-2018 averaged $72.20. With Brent at $76 – we’re seeing revived oil revenues at $2.5 trillion plus – a level that more than justifies future energy investments, says my Macro Economist Martin Malone. He’s expecting further rises in oil.

I like the latest description of equity markets – “The Rolling-Bear Market” – from Morgan Stanley. They expect investors to progressively reassess market valuations sector by sector in coming months.

NEW ISSUE

Delighted to report Mint is acting as Distribution Agent on a new ORB bond: 5-yr 7% bonds issued by Monaco Resources, looking to raise up to £200mm. Our sister company Cantor Fitzgerald is the lead. Please call your Mint Salesman, or email myself for full details.

Monaco Resources is unrated, but is rapidly expanding as a diversified natural resources group across metals & minerals, agribusiness, energy, logistics and tech. Last year revenues grew 50% to Euro 656 mm. Essentially, the group services small to medium sized natural resource producers. Monaco is active in 37 countries, and is HQ’d in London and Monaco.

Don’t be put off by the ORB qualification – this means the bonds can be marketed through the LSE’s Order Book for Retail Bonds, designed to enable retail investors to access clearly explained bond issues. There are no reasons why institutional investors can’t also participate.

Back to the day job!

Bill Blain