A winter of discontent will replace the glorious summer – and why railways matter!

As summer wends towards its end, a winter of populist discontent from left and right will make Europe increasingly fraxious. While the US economy will likely be on path to recovery – Europe will still be trending down.

Blain’s Morning Porridge, August 26 2022 – A winter of discontent will replace the glorious summer – and why railways matter!

“Bang, Bang, on the door.. we can’t hear you”

This morning: As summer wends towards its end, a winter of populist discontent from left and right will make Europe increasingly fraxious. While the US economy will likely be on path to recovery – Europe will still be trending down.

Today the market is on tenterhooks, waiting to hear words of wisdom from Jerome Powell and his thoughts on Life, Death, the Meaning of Everything, and US interest rates. (The answer, BTW, is probably 42.) Every market player, watcher, and fretter is set to make a nuanced response to whatever he says. Simples – rates go up, but only till we’ve licked inflation, or something similar. Next week we will know..

Yawn… Can I hold my attention long enough to listen to a day of Jackson Hole? There is a mellow mist on the river, burning off as the sun rises. It’s the end of a long hot summer. We have a bank holiday in the UK on Monday, and next week is Labour Day in the US.. We should enjoy it while we can. I would skive off for a swim, sail or paddleboard – but I’ve scored a winning lottery ticket!

Yep, I’ve got an actual, real, proper 10 min consultation with my GP this morning – to notionally check my dodgy ticker. He will look up and nod as I come in, tell me to lose weight, and scribble something on his screen. Most importantly, he will hopefully sign a referral to go see a private cardiac consultant. It will be the same consultant I would see under the NHS, but with the advantage I will get to speak to him this decade. I am a fortunate.

Life and markets are going to get terribly serious in the next few months. Winter is Coming, social unrest approaches, White Walkers and Putin’s Energy Games promise us a Fimblewinter of stress before the ultimate Ragnarök of economic crisis. (Overly dramatic perhaps.)

I’m wondering if it’s even worth planting spring bulbs this autumn….

(OK – I admit it – a few too many Game of Thrones quotes this week. That’s because I watched the new House of the Dragon… and thought it ok. Anything with Dragons  is likely to be good. Opinion does seem divided on Matt Smith, former Dr Who and Prince Philip (from The Crown). He looks the part of an inbred mad prince, but is he villainous enough? We shall see..)

Meanwhile, back in the fantasy world of Yoorp…

There is a very scary comment in the Times about how Germany is set for an outbreak of radical protest this autumn – “Extremists plan “autumn of rage” to exploit cost of living crisis in Germany.” Speaking to a French chum yesterday, he was warning me to stay clear of Paris – the Gillet Jaune are being superseded by a far more radical left and younger protest base. The German protests have been infiltrated by the extreme right. The French by the left. You can just imagine what happens when they clash. You have to wonder, what hand Moscow has played in fermenting crisis and revolt across social media – it can’t be underestimated as a threat.

All the signs point to escalating unrest across Europe this autumn into Winter. Inflation, cost of living, energy costs, power outages, cold snaps, recession, jobs, immigration, populist politics, the failure of conventional politics, and overlay it all with increasing Russian fake-news and Kremlin Troll-bots… something is going to break this winter. The Times thinks it will be East Germany as the Epicentre. My Paris chum says Paris. I reckon Eastern Europe.

The politics of Autumn in Europe could be a massive no-see-um market shock.

There are a couple of things to make me fear it’s going to be even worse than we fear..

Liz Truss is going to start her UK Presidency by declaring war on Europe over the Northern Ireland protocols, and picking President Macron of France as her first target. I am assured she is also thinking about the other stuff, like addressing the consumer cost of living crisis, or government support on stratospheric energy bills, but the advantage of blaming the EU for the Norn Irn confustabilation is: it looks tough, considered, and Maggie-like – or so Lord Mogg has told her. I despair.

Meanwhile, there may be some hope. Some politicians have been thinking outside the box. Surprisingly, it was in Germany.

The Germans, curiously, actually tried to do something about the miserable state of their economy this summer. Through August they slashed the price of rail transport to Euro 9 per month for unlimited train and bus travel – and it was a stunning, spectacular success. Naturally, being Germans, they are now abandoning the policy.

The monthly season ticket giveaway resulted in a huge number of Germans jumping on trains to go see their country. I know German trains – anything is better than UK trains – and they are good if not perfect. The cheap tickets resulted in over 30 mm Germans travelling, many catching a train for the first time. There were inevitable problems – many trains were packed, causing consternation for regular travellers. Some say car use actually increased to get people to stations!

It was also costly – €14 bln per annum, the Government said. So, they closed the initiative after a month. They are going to spend the money on “modernising Germany’s crumbling rail network and expanding capacity” says the FT, quoting some German politician.

The German experiment is fascinating. Yes, the trains were packed, busy and difficult for a month – but the entertainment/novelty value would soon wear off. It would be good to see how long-term cheap fares would impact the German economy. Would a €14 bln Government ticket subsidy increase economic activity in terms of long-term increased domestic travel and spend, or from increased commuting to work?

Regular readers here in the UK will know rail is my ultimate bug-bear…

My commute used to be a doddle. When first I moved out of London many years ago, the train from Southampton to London was 1 hour, reliable and very comfortable. I wrote the Porridge sitting at a nice comfy table, arriving refreshed into Waterloo. I was happy spending 2 hours working on the train each day – there and back. Not a problem. It was expensive – £400 per month, but it was a decent trade off to live out of London.

Then we bought a flat in London. Commuted up on a Monday and back on Friday. Then it became back on a Thursday, and eventually three days a week in London.. And I missed the weekdays at home. Living in a London flat – even though it overlooked the river was limiting. Here, I can go for walks, sail, swim and all the good stuff. In London I could go for a walk and get mugged. It’s just easier not living in London.

Post pandemic I am commuting again. But the train service is a travesty. In order “to improve the customer experience” the one-hour train is now one-hour twenty minutes. It’s no longer an express, but stops, meaning it gets very busy. It’s no longer comfortable seats with tables – its tiny little seats my arse doesn’t fit. And it now costs me over £80 per day for a return ticket. The two hours I used to write the Porridge in are now 3 hours of travelling purgatory on rolling stock almost my age, and pot-luck whether the air-con works.

Forget about improving the service, or improving the infrastrucuture – there is no government interest or incentive to improve trains. Which means the potential economic benefits of expanding the London commuter belt with comfortable, green transport to boost its commercial mass is simply never going to happen. I am never going back to live in London – even though I know my business would benefit from being in London more often. It was possible 10 years ago, but neglect and underinvestment mean’s it’s impossible today.

Enough ranting about rail, but think about it this way.. Planned government infrastructure spending could benefit the economy long term and short-term stimulate recovery. If we can’t make the railways work because of bureaucratic and government disinterest… how are we going to fix the NHS, the broken education system, our broken power infrastructure, the leaking public water utilities (owned by US private equity)? etc etc..

And on that note.. its just over a week till the next Tory premier takes power… My guess is Liz Truss will embark on an all-out series of populist give-aways before an early election. It will probably work because the UK opposition Labour party looks about as organised as a Russian invasion…

Five Things To Read This Morning

BBerg – Korea Shatters Its Own Record for World’s Lowest Fertility Rate

BBerg – The Trouble with Comparing Next-Gen Car Batteries

FT – Germany needs its very own Marshall Plan

WSJ – Treasury Yields Rise on Bet Recovery Will Last Longer

Torygraph – Liz Truss faces an unenviable decision over when to call a general election

Out of time, and have a great weekend…

Bill Blain

Strategist – Shard Capital


  1. Thank you for taking the time to write the articles, these are fun to read and also give insights into financial implications of different things happening in the world.

  2. The better half and I plan on toddling off to “merry ol'” sometime after her second new knee, probably about a year from now. She wants to spend all the time in Hay on Wye using her new walkablilty going from bookshop to bookshop and I would like to glimpse a bit of my mom’s family’s crofter past tidied up for us on Colonsay Isle. A coworker warned against staying in London as he thought it was less British than McDonalds and the food, while abundant, was less than palatable. He liked France better, “every intersection has some lovely bistro to choose from and the food is amazing.” But then my other coworker said the French never bathe and she liked Spain much more, then they all agreed the best place to go was Greece. I’m not sure what to think. Maybe we’ll get a Eurail pass (if they still exist), and do The Grand Tour from Wales to Samos with a stop in Vienna.

    Hopefully a second Iron Curtain will not have fallen….

  3. It’s true that Russia misunderstood Zelensky’s ego and his desire for a place in history. Russia’s ill-fated plan to surround Kiev and force a regime change did not go as expected. Instead, and with promises of backing from the West, rather than cede the Donbass and end the attempted genocide of the ethnic Russians by the Kiev-backed Azov Battalion (who look like Nazis, quack like Nazis, but according to the MSM aren’t Nazis), Zelensky chose a war of attrition from which the Ukraine will likely never recover, economically indebted to the the West at best, but more likely have its industries and farms outright owned by Western interests, that is, in the unlikely event that Russia was to somehow lose the war.

    Russia’s assertion that the USA will fight to the last Ukrainian is spot on. Militarily this costs the West very little. Already we’ve seen Europe dumping all its outdated Soviet era weapons there. Lately we’re seeing the Ukraine becoming a test bed for new weapons on both side. It’s just another way for the ruling class to transfer the wealth of a nation into their own pockets via the Military Industrial Complex.

    Frankly, I’m surprised by Russia’s restraint so far. If the USA was fighting this war, I have no doubt that they would have already gone full-Dresden on Kiev and/or Odessa. Obviously Russia still thinks it can preserve these cities, but as the war drags on, as the Ukraine obtains better and longer range weapons, Russia may lose patience.

    To me it’s actually absurd that in the middle of a war we get these foreign politicians and celebrity clowns swanning around Kiev for a photo op. Such is Russian restraint that they have allowed Kiev to be a relatively safe place to visit this summer. I’m sure if they wanted to they could make it a lot less inviting.

    To Europe, and winter in Europe in particular, it’s the people who will suffer, and the most vulnerable will suffer the most. If there are gas shortages, and that appears likely at this stage, the electrical grid will be overloaded in countries like Germany when it starts getting really cold. It’s looking like Russia will also cut Europe off from Europe’s largest nuclear power plant in Zaporizhzhia. According to some reports, around 600,000 electric heaters have been sold in Germany from January through June. Good luck turning all those extra heaters on simultaneously during an energy crisis! But so long as Europe is okay with old people freezing to death in their homes because they can’t afford the energy or collect wood, then I’m sure it will all work out just fine.

    The world is going to need Russian energy for a long time to come. If the West isn’t buying then Asia will. There are more than a couple of billion people in China and India alone who are happy to take Russian energy unwanted by ~450 million Europeans. The flow of energy will change, not so much the amount. Europe will just pay more and become less economically competitive. The USA is self-sufficient and should do well as it rebuilds its manufacturing industry in preparation for the inevitable Chinese annexation of Taiwan. It’s hard to see how Europe, run by unelected autocrats, gets out of this mess. The coalition of the willing has already lost Boris and Mario. And the people aren’t even cold or hungry yet. Winter is coming…

  4. Mr. Blain,

    Whilst I agree with nearly everything you have said, please remember the advice of a wise markets veteran:

    “Things are never as bad as you fear, but seldom as good as you hope.”

    Enjoy your holiday and think a bit about geothermal.

    For a punt look at DroneShield, an Aussie company (DRO:AU). Premier organization creating tools to mitigate the threat of drone attacks. It has working products and pending sales globally. Quoted at 21p Australian on the ASE. I have an overweight position…since 2017…

  5. Life is not simple. But Europe is. Without getting into disagreement territory as to why and who, Russian oil and gas is gone. It is not coming back. Russia would rather give it away to Asia, than sell if to countries who arm their enemies. Europe had access to cheap and dependable energy. No longer. Europe’s cost of production will be higher than everyone else’s. This is why the politicians are gabbling nonsense about price caps. And the ESG “Green” loons will destroy any industry left.

  6. The Russians really don’t need to do anything to stir up the popular anger in Europe … several prominent European politicos have recently made very Marie Antoinnete-type remarks essentially telling people they can expect worse. BoJo joined the “let them eat cake” part too. It’s going to be a rough winter inEurope and the UK, and the response of the politicians is not to find some actual way to ameliorate the conditions faced by the populace, rather it is to tell the people to buck up while at the same time pumping up domestic intel and further militarise riot police.

    BTW, the German train deal was only on local (stopping) services, so it would be much like your commute to London nowadays.

  7. I do love some Hitchhikers quotes in the morning. This one also seems appropriate.

    “Since we decided a few weeks ago to adopt the leaf as legal tender, we have, of course, all become immensely rich.”

  8. Your Parisian friend is way behind the times (or bien dépassé as they say over there). The anarchists in France have being doing this for many years already, why was there always major fighting and destruction of property at the end of the gilet jaunes manifestations?

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