Bill Blain: "We Are Approaching Levels Of Optimism Last Seen In The Days Of The Dot.Com Bubble"

"Blain’s Morning Porridge", Submitted by Bill Blain of Mint Partners

“Comrades come rally, let the last fight let us win….. for though they offer us concessions, change will not come from above..”

Paradise or not, how much hotter can markets get?

Divided opinion here in the office this morning.. Stirring the pot is the BBC’s coverage of the “Paradise Papers”, purporting to demonstrate widespread tax avoidance by the international elites.

Tax evasion is illegal. But… It would appear most of these tax avoidance schemes the papers uncover are perfectly legal – raising the issue of what right do Journalists have to pry into the affairs of people sticking to the law simply trying to avoid double taxation and manage their estates legally and efficiently? Of course, the question remains – why the secrecy giving the appearance of shady dealings around anyone feeling the need to “optimise/avoid” by paying tax offshore?

As the last card carrying Communist in the City of London, I remain confident I will live to see the revolution before I retire to my pile down by the sea.. Therefore arise ye starveling masses from your slumbers, let’s have the overthrow of the rentier classes and the dictatorship of the proletariat (as long as I can keep my yacht please..)

Aside from it earning trillions for the accountancy and banking firms involved, I doubt the celebs like Cheryl Cole know much about the schemes they’re involved in. This might sound cynical, but choosing a tax scheme laid out before them by their “financial advisors” is probably less a focus than choosing which bank pays most interest.

On the other hand, I suspect Her Majesty will not be best pleased to find her name on the perfectly legal but tax avoiding charge sheet – knowing absolute straight dealing is front and centre. I wonder if a few advisors are about to spend some very unpleasant time in the Tower perhaps?

Here in the office, at least one of the “Capitalist Running Dogs”, (let’s just call him “My Boss”), is swearing he’ll never watch the BEEB anymore and wants to stop paying his BBC Licence Fee: “it’s a democracy and I want to exercise my democratic right to close them down..” On the other hand the young Trotskyites on the Govie Desk are wondering how quickly this will get Corbyn elected so they can write off their student loans..

All we need now is to find Theresa Might’s Husband’s name on the papers and it’s game over…

Back in the real world.. every single market is up! What can possibly go wrong?

Its Risk-On full throttle across the credit markets as spreads compress and everyone thinks it’s all just perfect. As I read about the investment banks hiring again at massively inflated salaries and inflated bonus pools and expectations across the trading desks, I feel just like the Bowl of Petunias in HHGTTG: “Oh no, here we go again.”

Oil at its highest level since May 2015! In my book that means we’re going to see US Fracking operations ramp up and open more marginal wells, keeping prices down. But, I must note the comments of my BCG colleague Ara Levonian who said yesterday: “The real risk to the global economy is rising oil prices exasperated by a volatile Middle East and a debt laden West finding it was too comfortable with low oil prices and benign inflation. We’ve been here before (1970s) and really not much has changed!”

Ara is a smart chap. And the Middle East looks something of a crisis nexus. I had a number of very interesting discussions with clients about Saudi yesterday – the consensus is Iran is the rising power in the region while there are significant doubts whether the mercurial Crown Prince Salman can deliver long-term stability in Saudi. I was reminded a couple of times yesterday, this is a young prince who announced he was slashing civil service jobs and salaries the same day he paid a Russian Oligarch $500mm for a new Luxury Yacht.. (Huh, yachts.. well, we’ve something in common then..) Our EM desk is actively trading Saudi debt.

Meanwhile, my stock picking guru Steve Previs is shaking his head in disbelief after another 8 day rally – wondering when we are going to see a down day! He says this morning “we’re approaching the levels of optimism we saw back in the days of the bubble”. The laws of financial gravity are immutable: “What goes up comes down and mean reversion is the force holding the financial universe together!”

On the other hand: “Markets can stay irrational longer than you can stay solvent.”

Also in the papers is the dramatic rise in the Nikkei in recent months. Many years ago in the late 1980s, there was myself, Doug and Barry busily doing financial alchemy with Nikkei options to create highly levered plays for Japanese Insurance companies to “smooth” investment earnings (in other words: they’s lost billions, and on the basis the Nikkei could only ever go higher, they bought highly levered Nikkei linked notes with strikes in the 40k zone.) It did not end well – although Barry (by dint of remaining married to his lovely wife) has now retired, Doug just ran the NY Marathon, and I’m still slaving away at the porridge every morning..


Easyp Tue, 11/07/2017 - 06:26 Permalink

OK re the dotcom bust big investors like Dr Doom spent years predicting the dotcom bust and missed out on gains to the point where they were fired.  At the same time in among the dotcom con were businesses like Microsoft and Apple 

MillionDollarBonus_ BabaLooey Tue, 11/07/2017 - 06:30 Permalink

The Trump Bump is a complete fantasy. This thing is going to blow up so spectacularly - you watch. Trump's policies are creating the illusion of a thriving economy, while undoing all ob Obama's good work. Trump will go down as the most economically irresponsible president in history.Satirical Writers Infiltrate and Mock the Left to Take Down Progressivism

In reply to by BabaLooey

Endgame Napoleon Five Star Tue, 11/07/2017 - 08:16 Permalink

And people who think there is no inflation are usually 1) the beneficiaries of unearned income through an inherited house that removes their main expense in life, 2) a spousal income that takes care of the major bills, a child support check that covers rent or 4) welfare that covers rent and groceries and child-tax-credit bonus checks at tax time between $3,337 and $6,269.

For all who must survive on the pay alone in underemployed America, rent eats up half or more of monthly wages. All do not benefit from cheaper, plastic strollers or discounted kids’ clothes at big-box retailers. Those are the kind of deflationary items that benefit the same people who have unearned income streams for womb productivity.

Except gasoline—which even at its height in price was about 7 or 8 times less than the monthly cost of housing—the big expenses in life have gone up astronomically for those who lack womb-related, unearned income from spouses or exes.

Big Government takes care of the low-income immigrant households with a sole, male breadwinner and the single mommas, giving them welfare/taxfare for working the welfare-reform minimum of 20 hours per week to stay below the less-than-$1,000-per-month [earned] income limit for welfare in the Era of Fake Feminism.

This lowers wages and hours for people who lack unearned income, providing employers with a stream of workers who have an incentive to accept low pay. Automation-based underemployment and welfare-bolstered, mass immigration contribute to the misery, as does offshore production and outsourcing. These cumulative forces will likely collapse the system at some point.

Those who invested mostly in other countries with low-cost labor will have greatly contributed to the demise. Regardless of legalities, people often wonder why they don’t move with their families to the countries with dictatorships and an endless sea of low-cost workers where they invest their capital. What they seem to be doing is exploiting the cheap human labor and lax financial regulations offshore, while enjoying the regulated and, historically, safer environment in the West to build their homes.

Unfortunately, when widespread prosperity erodes enough via a predatory model of globalist investment in foreign countries, once middle-class democracies and Republics lose their stability.

In reply to by Five Star

JRobby Tue, 11/07/2017 - 06:36 Permalink

The elite make the laws that lawyers only they can afford use to structure avoidance.Taxes are for the masses to pay.The same old brainwashing under the title of Democratic political process.Same as it ever was.

Dutti JRobby Tue, 11/07/2017 - 06:55 Permalink

+100 JRobbyFor decades the Bermudas, BVI's etc. have been known to exist - and they still do.Now everybody is surprised?In the meantime, even within the EU things work out nicely for the big Boys like Amazon, Nike, Apple etc. by using newer, completely legal structures in the Netherlands, Malta, Ireland etc.The bureaucrats in Brussels pretend to be helpless but they are rather uninterested to pursue the big money - instead they raise taxes on every corner for the sheeple, that's easy.

In reply to by JRobby

Crazy Or Not JRobby Tue, 11/07/2017 - 07:24 Permalink

>The elite make the laws that lawyers only they can afford use to structure avoidance....OK - most have got that here (or at least I hope so).Question. How is it that movies like Zeitguiest I, II, and IIIOr Chris Martenson's Crash Course Four Horsemen, Everything is a Richman's Tricketc have been out for years, and accumulate millions of viewers... yet still folk wander straight back into stupidville...????Stupid is as Stupid does????

In reply to by JRobby

Fireman Tue, 11/07/2017 - 06:38 Permalink

As bankrupt USSA crumbles on the brink of civil war, mired in corruption of every kind yet the zero 1% filth in Washing town imagine they are running the world.It doesn't get any more ridiculous than that.

new game Tue, 11/07/2017 - 06:38 Permalink

yup, trump is the master of the markets. l-o-l. trump is in control of the world and has influence over all the worlds markets. trump is the earths money god and he has said let there be prosperity to all the 1 percenters,and it was done...

Cautiously Pes… Tue, 11/07/2017 - 06:58 Permalink

Markets (and I have a hard time referring to what we have now using this term) are unfazed by pretty much anything these days.  Almost nothing scares them.  Combine that with Plunge Protection Teams standing by, in the rare event they do genuinely get spooked, and there is no direction for them to go but .... up.  Good times.....good times I tell ya!   

GreatUncle Tue, 11/07/2017 - 07:10 Permalink

Not another down day?Does the debt ever shrink? Not the deficit.Well when the only growth in town is the stock market and you have fully transferred Keynes into stocks.WTF DID YOU THINK YOU WERE GOING TO GET.The requal question is what is the limit for stocks now? At what point can they never pass?When earnings go negative?

wmbz Tue, 11/07/2017 - 07:14 Permalink

This fellow is out of touch completely!We are far, far past any level of "optimisum" like back in the days.We have entered the world of total insanity!

Jtrillian Tue, 11/07/2017 - 08:24 Permalink

By many measures, we are already beyond it.  What is different this time is the massive Central Banking stimulus that continues to this day. Hyperinflation to infinity and beyond and the plebs will cheer it right until the moment they march over the cliff...

VW Nerd Tue, 11/07/2017 - 09:32 Permalink

Jiveass Jim Cramer is back with his "Buy high, sell higher!" meme.  This alone says more that a 10,000 word article on current market risk.