Adam Parry – A bit of nostalgia, and a rather ‘bored’ overview of the markets.
The first lockdown in the UK back in the spring was admittedly horrendous for anybody that was clammed up in a tower block in an inner city. But at least there was a plethora of good things to watch on the telly.
With no live sport to watch, both the BBC and ITV took the opportunity to show some old events of some magnitude. So I watched every game of Euro 96, especially the semi-final at Wembley between England and Germany, a game I attended with a couple of brokers and thus had never seen on the TV. Then I relived the whole of the Rugby World Cup in 2003, culminating with Johnny the God’s drop goal at Sydney. There was Gordon Greenidge’s double hundred at Lords in 1984 and Goochie’s 154 at Headingly seven years later. We had the Olympics. We had some fabulous FA Cup finals – surely 1979 was the best ever – and some golf.
If that was not enough, there was also plenty of other nostalgic television, even if you did not shell out for Netflix or Amazon Prime. Forces TV showed some classics like the Dukes of Hazard, Never the Twain or Battlestar Gallactica. On the food networks you could indulge in the travels of Rick Stein and Keith Floyd, while Ken Hom thrilled with his hot wok. And then the crème de la crème on Talking Pictures TV. Every episode of Catweazle. “Tell me the secrets of thy electrickery oh mighty wizard”
But there was one series that was missing. A series of such mind-enhancing brilliance that it defies belief. What could this be I hear you cry?
Well, it is a tale of four university students at a fine institution by the name of Scumbag College. Yes, I’m talking about The Young Ones.
Now for those of you who are far too young to remember the anarchy that took place on BBC2 in 1982, let me enlighten you.
The young ones were sociology student Rick, medical student Vyvyan Basterd, peace studies student Neil Wheedon Watkins Pye, and the charmer Mike the Cool Person. The lads stayed in a dreadful house owned by Jovski Balowksi.
Rick – spelt with a silent P according to Vyvyan – was a self-proclaimed anarchist and a massive fan of the legendary Cliff Richard. He was also the self-titled punk poet in the style of John Cooper Clarke. One of his efforts could well be the anthem for extinction rebellion loons.
“Pollution. All around. Sometimes up. Somnetimes down. But always arrrround. On buses pollution. But they all drink petrol. Pollution. Are you coming to my town?”
Vyvyan was a psychopathic, sociopathic mohicaned punk who was subservient to Mike but abused Rick and Neil horribly. Vyv also owned a talking hamster called Special Patrol Group and had a tendency to what he described as “extreme violence”.
Mike was the nominal leader of the group with a tendency to conduct profitable business to benefit himself to the detriment of the others.
Neil was a morose, pessimistic hippie who did all the chores around the house. This included the cooking, with one of his specialties being risotto or as Vyv soon realised snow. A proper recipe for risotto follows at the end of this nonsense.
There were some brilliant episodes and I urge those of you not to have seen them to get a DVD and settle in for a wet day to have hysterics. But for the sake of this week’s market summation, I am going to tap into the third episode of series one, which was first broadcast on November 23, 1982.
Despite the fact that there are roller skating vegetables in the kitchen sink and a televised siege spilling into their living room, the quartet are bored to exasperation. Even a visit to the pub in which Madness are singing House of Fun fails to alleviate their ennui. Neil even suggests that they could go to a lecture, a suggestion that is met with incredulity by the other three.
Vyv sums it up best by stomping around yelling “Bored, bored, bored, bored, bored, bored, bored” as he whacks Rick around the head with a cricket bat.
And to be honest, that really hits the nail on the head as far as the markets are concerned as we head toward the end of what has been a hugely traumatic 2020. Sure, we have the occasional points of interest – such as the sell-off in March – but in the main, we are stuck in a rut that has been in place for several years.
Bored. Let us first take a look at the Dow Jones going back 10 years. After the sub-prime shake out in March 2009, we saw a meteoric rise in the index from 6,500 up to over 11,000 a year later and from then on we have not really looked back, with the index currently on the cusp of 30,000. Now every year there have been some pull-backs, normally in February and March on some profit taking in the wake of euphoric end of year rallies and early January optimism. And as we have mentioned a couple of times, we have also seen a few October shakeouts. But in the main, it has been one way traffic.
And that is because of the mantra that has pervaded throughout the stock markets over the last decade as the zombies chant “Buy the dip, buy the dip” despite fundamentals telling those of us that have not been indoctrinated into that cult that stocks are massively overbought. Bored.
Bored. With the artificially inflated levels of global bond markets. I say artificially inflated because without all the interventions of the global central banks over the last decade, there is no way we would be in a negative rate environment. But we are, and for the banks and large investors, QE has been little more than a gravy train.
Market Makers at the major investment banks underwrite these auctions, which in the old days was something of a risk. Not now. Since the various QE programmes have come into existence, market makers have been able to sell their auction stock back to the central banks a couple of weeks after the auction date. So hedge them up, lend them out in the repo market for short dates, hoover in the repo interest and sell them back to the Bank – almost certainly at a premium to the market price – and wear diamonds. Bored.
Bored. Bored, Bored. Of the new issue market, where the headless chickens flock to buy anything with a bit of yield no matter what the fundamentals of the corporate on offer, especially if they are eligible for central bank buy-back schemes. Investors flock to what are perceived as hot deals, which become massively over-subscribed and driving grey market valuations north. Just look at that EU ESG bond if you need evidence of how these new issues can fly. Bored.
Bored. Of the credit indices, which indicate all is hunky dory in corporate world despite the fact that every single day the media brings us tales of woe from many sectors. As we have said before, the Crossover index currently prices in a default probability of less than 25% of any one of its mainly junk constituents over the next six months.
So where does all that leave us? Well, the reality of the matter is that the last decade tells us one thing. You cannot go against the thundering herd, because you – and your P/L – will be flattened if you take a contrary view. Might as well go with it.
We have seen the October shakeout, and now we have the Biden Bid accelerated by the Vaccine VavaVoom. And that means that we are set fair for another major end of year rally in stocks and credit. Anybody for yet more new record highs in many indices before we get to 2021. Bored.
Anyway, what is not boring is cooking, and here is this week’s recipe for a smoked haddock and leek risotto.
Take undyed – do not use that radioactive yellow stuff – smoked haddock and poach it in milk with a bayleaf and a few peppercorns until just cooked. Remove and place on a clean J-cloth. In a large pan, gently fry sliced leeks in butter until softened but not coloured. Add a handful of Arborio rice per person and coat the grains in butter. Add a glass of decent white wine and stir until the rice has absorbed all the liquid. Then add chicken stock a ladleful at a time, continually stirring the rice until the starch has been released and the risotto has a creamy consistency. Just before the final ladle of stock is added, flake the haddock and add to the risotto. Check the seasoning and serve. The rice should be oozing on the plate with no liquid left. Garnish with crisp, fried black pudding and a poached duck egg on top for extra luxury.
Enjoy and as ever, have a great week.
On the Agenda this week:
- Tuesday: Retail Sales; Import/Export Price Index; Industrial Production; NAHB Housing Market.
- Wednesday: Housing Starts and Building Permits.
- Thursday: Initial Jobless Claims; Philly Fed; Existing Home Sales.
- Wednesday: Area wide CPI.
- Thursday: ECB Current Account.
- Friday: German PPI; Italian Industrial Orders; Area Wide Consumer Confidence.
- Wednesday: PPI.
- Friday: GfK Consumer Confidence; Public Sector Net Borrowing; Retail Sales.
Monday: Vice Chair Clarida makes a speech at 7pm GMT.
- Tuesday: Lagarde speaks at Bloomberg New Economy Forum.
- Thursday: Lagarde in European Parliament Hearing.
- Tuesday: Bailey at The CityUK’s National Conference.
- Wednesday: Bailey fireside chat with Congressman Langevin at the Carnegie Institute for World Peace.