Blain's Morning Porridge, submitted by Bill Blain
I’m wondering if the political breakdown we’re currently seeing develop across nation states is something inevitable in terms of economic evolution – a response to new technology and the changing demands societal change creates. It’s not necessarily a disastrous outlook… but its challenging to find the right investment responses to how our economies are developing.
In terms of global markets, I’ve come to the conclusion we’re currently passing through the end of one cycle – the Era of Globalisation. We’re likely to see more turmoil as the current economic and political foundations continue to crumble. The next cycle is going to be very different in terms of implications of trade, growth, utility, and the way in which society works – or doesn’t. A new form of capitalism perhaps? A new society? I have some ideas – which make me some kind of Neo-Keynsian… Happy to discuss anytime.
What did I miss in markets? For a whole week I didn’t open the FT, trawl Bloomberg, sneak a look at Zerohedge, or open any emails with attachments. I’ll spend today playing catch up – but the main issues remain the same:
- Where does China vs US Trade War take us in the short-term?
- What are the long-term implications of the end of the Globalisation Era – who will be winners and losers? (This is a massive topic – I will put some thots out later this week.)
- What is the outlook for Europe – and is it relevant?
- When does the UK become investible again?
- What’s the right portfolio mix for a market is flux?
- And, most immediately - How noisy will be the bursting of the current bond bubble be? (Some of the recent central bank comments surprised me, and inflation is on the horizon.)
Answers to these questions and a billion more will be written on the cold dead pages of financial history, but today we can only guess and offer opinions on what they might be.
I suspect the China story is about to become more complex because of Hong Kong. I reckon we’re heading towards a tragedy that will only widen the divisions between East and West. If the UK was truly smart we’d be offering the 170,000 Hong Kong people hold British Overseas passports UK residency rights.
Realistically, the protestors have zero chance of achieving democracy, and they must know that. The protests are impressive, but poking a hornet’s nest is never smart. Eventually China will clamp down or the Hong Kong economy becomes irrelevant. The cynical position for the US is a win/win: Pro-democracy protests will ultimately undermine Xi’s authority, while precipitous action by China will allow the US to claim the moral high-ground. But the protestors will be very mistaken if they expect the US to bail them out. ...