Bill Blain: "Maybe It's Time To Quietly Exit"

Tyler Durden's picture

By Bill Blain of Mint Partners

Blain’s Morning Porridge – May 15th 2017

“In yacht racing, there is no second.”

Ah the joy of a new week! What’s on the recipe today then?

My colleague Simon Denehy started the day by pointing out UK 2-year gilts yield 0.12% - (his description of that number was more colourful and expressive, but would have had me banned from ever blogging again) - while UK stocks yield an average dividend of 3.8%.

That imbalance between stocks and bonds goes some of the way to explaining why the FTSE has hit a new all-time high at 7445 (and up) this morning.. Perhaps it would be wrong to call it an “imbalance”. Stocks represent taking real risk on a company, while Gilts are sovereign bonds; as close as we can get to the risk-free cost of money.

But, there is clearly a disconnect between the risks of a company performance (and that it might not pay a dividend) and the price of stocks, which are about future performance and have taken off like a butcher’s dog with the sausages. Funny, but not a good thing. Its happening in stocks around the globe. This morning stocks are up because China is planning to boost market, last week it was improving global indices and numbers, and before that it was the “Trump-Jump” expectations.

Take a look at the chart of the FTSE (I’ve attached a Bloomberg) and there are a series of three very pronounced tops in 2000, 2007 and now… isn’t there something about 3 up-waves and two down waves (Elliot Wave sorcery).

Yet, I’m told Friday was about one of the most boring days in memory in terms of market activity (note below on what I was doing instead). Look at the volume numbers on that charts… daily volume is less than half what it was. For some reason it minds me of the old market adage: “sell in May and go-away”.

I’ve said many times before that the markets are being awfully complacent – why are they so high? Just because bond yields are so low is not a good answer.

Bond yields are low because of QE distortion artificially upping bond prices and thus keeping yields low – meaning if you believe that’s a good reason to buy stocks then you accept artificially low yields distorting all other financial asset prices is a good thing.

If global stocks aren’t close to all time highs because of expectations of future growth, profits to rise, and a generally strong sense the global economy is headed massively higher… then maybe its time to quietly exit. Take the cash, hide it in the mattress and wait for the next/coming storm to pass.

One interesting feature looking at a chart of the FTSE is the Black Tuesday crash of 1987 (I remember it well) and how fundamentally different it is to what has happened since. In Oct ‘87 the market tumbled almost overnight by 75% on an annualised basis, to a level 35% lower than the top. It took three years to recover. The crashes of 2000-3 (down 52% but 20% annually) and 2007-10 (down 49% but 19% annually), were more long-term taking 7-8 years to recover, while the crash of ’87 was a massive swift and sudden correction.

I idly wonder what the next crash is going to look like?

A modest correction of 20% like we saw between April 15 – Feb 16, something in line with the 00 and 07 “events”, or might it be a massive stock price “reset” in line with 1987? Place your bets ladies and gentlemen.. the laws of financial gravity and pointy lines on price charts cannot be denied! 

That blip in ’87 may look small and insignificant against today’s moves.. but in the context of the time…

Its like watching El Nino – how severe is it going to be..?

Moving on, or not if you happen to own a diesel (as I do). On the back of trying to ban Chelsea tractors from London, I’m struck by the number of articles and opinions emerging about the end of the combustion-engine automobile age. Get over it. It’s going to happen – which is why the global autos are in denial or change mode, and the tech giants are all developing transport groups.

If the 18th century was the age of burning wood, then the 19th century was the age of coal, the 20th century the age of oil, while the 21st century will be the age of capacitance – battery storage. It will be an industrial revolution to rank alongside anything so far – with massive implications across markets for absolutely everything.

With Britain now able to turn off all its coal-powered electric stations, we can now look at how to use stored energy to improve the human condition. Driverless electric cars and trucks have massive implications.

Meanwhile, my political dilemma continues to deepen.

I may now have to vote for Jeremy Corbyn just to avoid someone worse replacing him as Labour leader. Sudden front-runner in regards to the even worse than Corbyn position is Yvette Cooper.  She made a real Ed-Balls of Scotland’s chances of voting Labour when she tweeted something about keeping Scotland is to “persuade the Scots of the benefits of remaining English.” It was like hearing your grandma put a litter of cute fluffy kittens through the mangle…   

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Dr.Carl's picture

Excellent perspective here.  I am usually skeptical on ZeroHedge.  But some things are heating up in the world in ways I have not seen and I worked for over 50 years in the financial industry.  Time to be low profile for a while. 

mily's picture

The minute you spoke I knew you were from shitewave,

"Retired finance and economics professor and finance adviser"

getting less creative do we?

securitized-debt's picture

she was a waitress in a cocktail bar now she owns a jet...

CJgipper's picture

It's been that way for a decade.  






givadam's picture

When teased about his surname, Ed Balls' standard reply is "It's worse for my sister Ophelia".

DownWithYogaPants's picture

Why is this on ZH?  Nothing burger!

UncleChopChop's picture

couldn't agree more. everytime i see a bill blain article posted i wince a little. he must be paying them to get this drivel posted.

29.5 hours's picture

How to "quietly" exit? I know! Publish an article at ZeroHedge.


Dr.Carl's picture

Good point. The thing to remember is that the writer of the article has no money in the markets.  Kind of like the guy tellig me below I can make 18,000 a month. 

medium giraffe's picture

"Black Tuesday crash of 1987 (I remember it well)"


....apart from being on Monday.  Tuesday was '29.



Dr.Carl's picture

I was going strong in NYC at that time. It panicked many of us but the smart saw it for what it was, a buying opportunity. 

NoDebt's picture

So you're the guy who invented BTFD.


Dr.Carl's picture

Sorry, I do not know what that means. 

Seal_Of_Approval's picture

Seal_Of_Approval approves this comment

NotAnotherRally's picture

I have been on here for a few months and the only analysts I have seen so far who actually does call market moves and in oil and gold is the analysis from Shepwave.  Cheap and they show the past charts. Hard to find in today's world if you ask me. 

medium giraffe's picture

Sheepshave? Oh yeah man, they're the best.  Shut up and take my money.  My mind was blown. literally. etc

Dr.Carl's picture

I think his comment was directed at actual traders. 

medium giraffe's picture

Nah, mug spam.  Gunking up the place.  Fucking Elliot, lol.

SlothHedge's picture

Most people who post on ZH are not traders.  Like this guy they are just spammers and potty mouths. 

Dr.Carl's picture

Based on consisrtency in track record of calls they are probably the ones with the best record. But I don't think they take any new clients. So no sense in wasting time discussing them here. They are old school and for elite more or less. If you have access keep it. 

medium giraffe's picture

" no sense in wasting time discussing them here."  

Fantastic, au revoir, auf wiedersehen, fuck off.

mily's picture

Shlepwave dude is getting desperate to get new faces to sign in to his "recommended broker account" in return they will receive "GS track record" shmelliot wave advice scam, fuck off somewhere else

medium giraffe's picture

Well, maybe the broker they are acting as introducing broker for through their Elliot tea leaves scam can provide us with details of their financial relationship (as they are legally obliged to) and we can post it here for everyone to see.

Xena fobe's picture

OK, show us.  Predict daily SPY movement for the next week.

UncleChopChop's picture

what good are charts in a completely manipulated market? 

GotAFriendInBen's picture

CB have infinite ink. If you can't say likewise, sit down and enjoy the show

Last of the Middle Class's picture

"coffin corner" of economics. Either way you're fucked.

overmedicatedundersexed's picture

support the jewwwallstreet..send them your yellen thanks you.

OCnStiggs's picture

I love the Brits but, where is the energy coming for these new electric cars?

The consortium of electric power companies are on record as saying that, if everybody had electric cars, our electric grid couldn't handle the load, even off peak at night when most commuters would be charging. For short-range inner city taxi service, driverless electric cars may have a niche. If you want to go on holiday with the tribe, forget electric vehicles. It will take a couple more evolutions of battery technology to make that remotely possible.

But still, we have to figure out where the electricity is coming from, and how to get it where its needed. Meanwhile, the E.U. is charging everyone a carbon tax which Algore gets a cut of as head of the London Board of Carbon Exchange.

Sorry but, I am scam sensitive...

Nunyadambizness's picture

Oh, the electricity will come from solar panels, I'm sure.  Now, we might need hectares of panels to generate enough electricity, but whatever.  That, and more wind turbines will do the trick.  They might eliminate the entire avian population in the process, but then one won't have to worry about bird crap on one's freshly washed car, right?  Oh, and there's wave energy too--we can cover the entire coastline with wave-energy transformers and get electricity that way.  Sucks if you're  a fisherman or want to go swimming, but hey--we'll have electricity for our cars.

The truth is, we have a LONG way to go before we get rid of the internal combustion engine, whether gas, diesel, or whatever.  I think biodiesel is probably the best option in the near term, but that's antother story for another time...

Stormtrooper's picture

Yes, lots of open space in all those public parks.  Close the gates and get started installing all of those solar panels.  And, maybe the Chinese will sell you a few trillion tons of their copper stocks so that you can distribute all of that "free" electricity.

RICKYBIRD's picture

And of course, those solar panels would never be trashed by thugs or stolen by thieves and sold on eBay (as has happened in the past).

RICKYBIRD's picture

The electrical energy for those battery cars comes from the wall outlet, of course. S/

HRH Feant2's picture

My concern is what are people going to do with all those batteries? Crack them open to make homemade meth using drain cleaner?

You would think all the Eco freaks would be lining up to point this out. First is the issue of mining to dig up the lithium and other components to make auto batteries. Once they are fabricated, how long does a hybrid auto battery last? Five to ten years? The things are HUGE! And expensive. Where do they go? At least when you change your oil it can be filtered and recycled without too much trouble. Same for glass bottles, paper, etc. So far I have not heard one word about how these hybrid auto batteries will be recycled. Not a peep which means they are sent to the nearest landfill to leak and leach chemicals and heavy metals into the groundwater for the next 100 years. That is a solution for environmental problems? Give me a break!

mily's picture

Shlepwave broker representative scam invasion this morning

Know shit's picture

What could possibly be the reason not to step out halfway a roller coaster ride?

Take care.

Oquities's picture

i'm no bull, but,

" Gilts are sovereign bonds; as close as we can get to the risk-free cost of money."

not true.  people clearly feel less risk in shares of companies than you gilts, because they prefer appreciation over depreciation.


"If global stocks aren’t close to all time highs because of expectations of future growth..."  

 they're not.  it's because they have more faith in overpriced stocks than digital fiat.