Blain’s Morning Porridge 4 March: Letting the Side Down on Sanctions, and Blain’s Financial Stupidity Index
“And, if your head explodes with dark forebodings too….”
This Morning: Some investment banks are picking up cheap Russian assets – which negates the purpose and aims of sanctions, and will simply fuel Putin’s propaganda machine. Meanwhile, Blain’s stupidity index is only down 38% – which shows there are still greater fools out there…
Sincerest apologies, I would like to blog less about Ukraine, economic warfare and sanctions. It’s all I’ve written about these last 8 days. I will stop – as you will read below there is other “stuff” going on. The reality is no one knows how Ukraine is going to play out. We can only guess. Only one man has a clue what happens next and he, Putin, does not control the outcomes or consequences of his actions. The entire commentariat is expressing opinions – but no one knows anything real. As I’ve written before; “no point worrying about stuff today we’re going to have to worry about tomorrow.” (Thanks to the great Jim St Johnson for that particular bon mot.)
One issue that does stands out is a Bloomberg story how Wall Street’s “finest” are already snapping up Russian bargains. It does not surprise me, but are they completely blind? I agree with the investment thesis – in the event Putin is dispatched and a new cold war is avoided, then Russian firms and assets will be tremendous value, especially if/as they re-engage economically with Europe – but to buy Russia now is an appalling and insensitive breach of decency and the intent of Sanctions. It gives succour to our enemies.
These Wall Street pillocks undermine the economic fightback. The signal JP Morgan, Goldman and I am sure others, are sending by scooping up distressed bonds, crashed corporate credit and beat-up Russian companies is shocking. That they seek to profit from the war and sanctions is a grey area at best.
Who are the Ukrainians fighting for – certainly not for Wall Street.
It’s how Putin will exploit the story that matters: manipulating it to illustrate to Russians how the Capitalist West has engineered the War and Sanctions to steal their country from under them. It’s a cry the thousands of right-wingers who admire Putin will echo – confirming their hatstand conspiracies about the whole war as a plot by the “Davos Elite” to destroy plucky Moscow. It will weaken the effectiveness of sanctions. It will become another rallying cry of Putin’s Chekist revolution.
To be fair, I would love to buy some Russian distressed positions – but I will not. Although I expect Russian assets to soar when Putin inevitably falls – it would be utterly wrong. It would be immoral. And I can guarantee there is absolutely no way Shard’s compliance team would allow me to breach the intent of sanctions and to be supporting sanctioned enemy firms.
Clearly my small firm has hired better people with their hearts in the right place. From what cesspits do the Yankee Banks recruit? And how did their compliance teams let them do it?
Questions should be asked. Heads should roll.
Instead of questioning the morality of demon-spawned US investment banks… let’s start the weekend by revisiting Blain’s Financial Stupidity Index – BFSI.
BFSI is simple sentiment weighted index (cooked up in the pub on a napkin) comprising Tesla (a successful company but hopelessly overvalued), ARK (a great idea but hopelessly executed), and Bitcoin (a bad idea idea that relies on fooling enough people to make it work..)
Just to remind readers; the BFSI index components are performing as follows:·
- Tesla – Down 30% from its high in Nov 2021
- Ark – Down 57% from its high in Feb 2021
- Bitcoin – Down 27% from High Nov 2021
- If there was an NFT index I could use as proxy for that particular example of the madness of crowds – it would be down as well. According to BBerg trade in NFTs is down 83% and prices (except for the BAYC dross) have collapsed. Really? Quel surprise
These “Tech” loses aren’t actually as bad as some others… 70% of Tech stocks on NASDAQ are in bear territory – down 20% or more. I’ve written many times about the “irrational exuberance” and downright stupidity of markets many time – most recently introducing my 35-year market stupidity cycle – the DJay Wave.
Across the SPAC, Tech IPO and NASDAQ thematic there has been slaughter. It is no longer the fashionable part of the market. Nobody bats an eyelid when a company that promised a technological paradigm shift delivers a slightly less efficient way to shift pet-food suffers a massive price tumble.. The bubble is burst… But that means there is opportunity.
The world still wants new ideas, new tech. In 2000 the dot.com crash smashed the market, but allowed the emergence of the internet at the core of modern commerce. From the destruction of the 2021 Tech Bubble will emerge new themes – where 2nd generation companies with more solid business propositions offering fundamentally better valuation points will emerge.
Ark is a name I have been watching for some time. I’ve been expecting it to crash and become one of this year’s big horror stories. I would recommend everyone to read the FT’s piece from yesterday: Ark Invest CEO Cathie Wood on everything from deflation to Elon Musk. It’s a great article and begs a series of questions… and pretty much explains how they had a great idea and got it so badly wrong.
It would seem employing a bunch of very clever, thoughtful, but financially naïve young millennials to explore and advise on the profitability and business propositions of future technology plays wasn’t actually such a great idea. Hunches and enthusiasm proved no substitute for proper stock research, valuation methodologies, and due diligence of the scope of the potential opportunity and market. Not one single stock on Cathie’s list of investments carries a positive mark at present.
There are other ways to invest in the tech future, and will just quickly mention a success from my own firm Shard Capital. This week Sure Valley Ventures, one of our funds, completed an £85m first close of a £95m UK software technology fund. It includes a cornerstone £50m investment from the British Business Bank through its Enterprise Capital Funds (ECF) programme, which aims to increase the supply of equity capital to high-potential, early-stage UK companies in Metaverse (e.g. Augmented Reality (AR), Virtual Reality (VR) and Web 3 decentralized technologies), Artificial Intelligence (AI) and Cybersecurity. Our first Sure Valley fund has been a massive success – by dint of doing what Ark did badly, well!
Elsewhere on my stupidity index, Bitcoin was on a minor roll on the basis Russians are escaping Sanctions by transacting in crypto. I don’t actually believe it – it’s more hype and fake news posted by crypto shills, who are quite happy to support Putin if it suits their imagined libertarian monetary paradise.. I simply wonder how an average Russian pays or receives dollars if he/she buys/sells buttcon? On their Coinbase account? C’mon. If it’s true – expect crypto to be regulated. If it’s not, don’t worry… crypto will be regulated.
This morning Buttcon is being battered by news the Russians are bombing nuclear power plants. Not because of the threat to the planet such madness entails, but because it will further push up power costs to mine the insanely useless fake asset. Apparently, some of the wealthiest Oligarchs are loading up their crypto-wallets – which is great news as the Americans have demonstrated they can trace holders through the crypto blockchains.… and can probably steal them. Check out this if you think your cryptobillions are safe.
Moving on, things ain’t great for Tesla either. The consumer watchdog organisation, “Which”, tests products and says EVs are proving less reliable and take longer to fix than Internal Combustion Engine cars. And guess which firm is the worst EV maker – shock, horror.. its Telsa. Multiple product recalls, its popular cybertruck nowhere near launch, Key Man Risk with Elon Musk spread over all his multiple projects and facing an SEC investigation… Is anyone still expecting Full Self Drive this year? Yet the market still believes its worth a multiple of the rest of the autosector? But at least it is making profits. Very small profits in relation to its stock price.
But rather that simple tell you what investments are now demonstrably crap.. What is good..? Guess what.. bad things dominate the top performing lists…
- Oil and Gas
- Defence Stocks
Ouch – but surely no one is investing in these because they are ESG no-go sectors? (US readers: Sarcasm Alert.) No.. we’re relearning some fundamentals… I shall get round to taking a pop at how ESG investment – though highly laudable, has turned into farce in recent months… sometime next week.
Five Things to take your mind off you-know-what This Morning
Finance Monthly – Meta; Moving Fast, and Broken?
Out of time, and have a great weekend..
Strategist – Shard Capital