Hope (In ‘Snake Oil’ Quick Fixes) Is Not A Strategy

Authored by Bill Blain via MorningPorridge.com,

“Watch what you say or they’ll be calling you a radical, liberal, oh fanatical, criminal…”

It says it all when the market pays far more attention to a failed test of Gilead’s  drug Remdesivir than it does to the 4.4 million American workers who joined the 22 million already queuing on the unemployment lines.

4 little stories about hope: Spot the odd one out… 

i) The report on the Gilead drugs test – which was quickly pulled from the WHO website after being posted by “mistake” – indicated it doesn’t work as a treatment for Covid-19. Gilead were quickly on the case saying earlier tests elsewhere were more positive – you can read the story here: Gilead Tumbles After Latest Data Leak on Virus Drug Trials. Gilead has become one of the most talked about stocks on the market.

ii) UK headline news last night was the first vaccine test in the UK. Two volunteers got jabs – one got a control, the other got the vaccine. If it works (still a big if), the Government has said Britons will be prioritised – something other nations looking to protect their own key workers might not forget quickly should the British effort flounder. It’s a race, an all or nothing effort – UK Health Minister Matt Hancock said: “the upside of being the first country in the world to develop a successful vaccine is so huge that I am throwing everything at it.” No doubt some big American PE fund has already called Tory HQ demanding to invest….

iii) In Madagascar – yeah! lemurs and penguins (you sure about the penguins??) – the President has launched his own company “COVID-Organics” – marketing a herbal tea which prevents and cures the virus. Madagascar pupils expelled for refusing Covid-19 remedy distributed by president. Armed Troops are selling it door to door around the country. Surprisingly, Covid-organics is not attracting as much real money as Gilead. (US readers…. mild sarcasm alert.)

iv) Meanwhile millions of American’s, including the world’s smartest man, still believe you can cure C-19 with Hydroxychloroquine, a relatively effective anti-malaria drug. It’s completely unproven – but for full disclosure, President Trump does own stock in the manufacturer; Sanofi. 

Gilead, the UK vaccine and both snake oil stories neatly illustrate one driver of market sentiment: finding a quick fix! The investors who piled into Gilead’s drug and the column kilometres written about it, all support the narrative economies are going to reopen and get back to normal faster than expected. A quick cure, a miracle drug, a vaccine – they are all about hope. 

As I’ve said so many times Hope is Never A Strategy. 

I’m more concerned by the real news. The reality of deepening global recession.. How deep it goes depends on the virus. Can end lockdowns early or not. There is lots of conflicting news out there. They now reckon 20% of New Yorkers have been infected – meaning its closer to herd immunity, and the death rate was 0.5%. An Israeli team are claiming the virus has a limited shelf life – extinguishing itself after around 70 days. But other epidemologists are concerned how quickly the virus mutates – which may explain why some countries seem to have been hit by relatively mild flu-like versions, while others, including the UK have been hit by an all-in body-wrecker.

Boris Johnson is going back to work next week, but I hear Dominic Cummings is still bedridden. I have three close friends who have had the full-on virus. All three report the same things – they are still exhausted, their lungs are wrecked “going up a hill is impossible”, and 2 of them have kidney issues. The other has a constant headache. They’ve been told they will recover – but it could take months. 

The hope is we get back to normal faster – which is why the stock market rallies so hard on good news. The reality may yet be more shocks to come. 

My good chum David Murrin – a market commentator suffering the after effects of the virus – referred me to this story earlier this week in the South China Post – https://www.scmp.com/news/china/science/article/3080771/coronavirus-mutations-affect-deadliness-strains-chinese-study It is a must-read piece. It’s worth checking out his website – his charts tell him the rally has peaked, and we’re now poised for sharp downside. 

Yoorp Crisis kicked down road averted again.. 

I must admit to some concerns about Europe. They have agreed to fudge address the funding crisis in Italy and Spain via a new massive recovery fund linked to the newly agreed European Budget. EC President Ursula von der Leyen said “The budget is time tested. Everybody knows it. It is trusted by all member states.” Would that be the same budget that hasn’t been signed off by the auditors in years, and has a gaping hole which the British used to fill? 

FRIDAY RANT TIME – Blain Blain versus the Financial Media

As its Friday, I have contractually entitled myself to a rant about something.. Today I hope my chums in the financial media won’t be too offended if I express a degree of unhappiness at the Fourth Estate. 

Earlier this week I wrote a piece about Fixed Income ETFs. It was highly critical of an article in the FT about how ETFs saved the bond market. A good number of replies to the Porridge on Wednesday said I’d nailed it – agreeing it was the prospect of QEI (QE Infinity) of investment grade and junk by central banks that pulled bonds from the edge of a credit meltdown. I might have been a bit blunt when I wrote it read like puff for ETF sponsors and promoters.  

Later a reader alerted me to the FT comments page on the story. There were about 60 comments, and most (80% plus) agreed with my take that the article was wrong. Someone had posted a link to the Morning Porridge on the page – which is excellent. The journalist, Robin Wigglesworth, personally responded to it. 

He defended himself vigorously – as it his right. He also got personal.  

Mr Wigglesworth described the Morning Porridge as a “bit of a dogs dinner” – which, to be honest could pass as fair comment. I write the Morning Porridge fresh every morning, and I don’t have an army of sub-editors at my command to correct and edit it. I don’t spend the rest of the day figuring what to write next or which press release to rewrite – I literally have a day job in alternative assets which more than fills the hours. 

Mr Wigglesworth went on to tell readers I don’t understand ETFs, and accused me of lying when I said it was impossible to gets bids on some ETFs during the crisis in March. Because I raised the “old trope” about the relative numbers of asset managers with experience of previous crisis, he wrote that I’m the comical “grizzled expert” who regards anyone with less experience as a “callow child”. To finish me off he accused me of intellectual dishonesty because of my stance on ETFs.

Whoa… I am not an “ETF hater”. I am personally invested – including in a high yield ETF I could not sell in March. (Holding it has proved profitable.) I am many things, (and at this pre-shave moment, that includes grizzled), but I am not dishonest nor unprofessional. To accuse me of being dishonest Mr Wigglesworth, gets an invite to Shooters Hill – old London’s premier duelling site. 

Or maybe.. we don’t need to get overly dramatic.

Over the past few years trolls have called me just about everything on comment pages – there is a great one up there on a recent Shard Lite-Bite YouTube video calling me: “Blain the Bland Bloviating Fat Lefty Socialist know-nothing”.  What a marvellous word – bloviating! 

I am more than happy to receive direct criticism of the Morning Porridge. I welcome  readers to post comments – good or bad. Please use the comment section on the Porridge or email me direct. Any feedback is constructive. I accept being called an idiot to my face by clients and competitors. 

I don’t have any problem with ETFs – but its fair comment to be critical if someone states something as outrageous as “they saved the bond market”.  I certainly don’t have a problem with the FT. It’s the first thing I read each day. Some of writers and features are superb. My two impossible dreams are being on Desert Island Discs and doing Lunch with the FT! 

I don’t want to pick a fight with the FT – I know who would lose….

But I am disappointed at the journalist. Many years ago, a much younger Bill Blain was a financial journalist – Euromoney and Bloomberg.  The experience and what I learnt proved critical to my subsequent career back in fixed income – and made me a better financier. I might have been young and naïve, but as a journalist, I’m pretty sure my first reaction to hearing about someone disagreeing with a story would have been to phone them, listen, and attempt to convert them into a contact.  

Bottom line is no harm really done, and I’d welcome a dialog with Wigglesworth or any other journalist who thinks I write nonsense… I don’t always get it right, and I’d like to learn what I’m doing wrong from them. 

There is a lot to report and comment on in Finance. It worries me that regulations, including MiFid, restrict access. It worries me that the thoughts and comments of the large incumbent Investment Banks, the largest assets managers and the wealthiest hedge fund managers always take precedence to anyone below them in the financial food chain the media thinks exists.

That’s potentially a problem – big financial firms are compromised by their relationships. They can’t say anything without first checking they’re not restricted by client relationships. 

The one thing I can guarantee you about the Porridge is complete independence. I say and write it exactly as I see it. I don’t need to pull or hold my comments because “relationships” might be at risk. Unlike my bigger rivals – I can offend everyone!