Blain’s Morning Porridge – Dec 9 2020: Outrageous Predictions

“Eureka! The formula for success is letting others do the work, and then take all the credit!”

This is the last week of this year’s charity appeal – raising money for Walking With The Wounded, helping ex-military with mental health issues. My wife and I are Team Morning Porridge. Please read about the charity and make a donation.

The excellent Saxo “Outrageous Predictions”, and Tesla Does It Again!

Investment managers dread the approach of the Christmas holidays. They get deluged in a ton of turgid year-end outlooks which are unified in only one thing – their utter unreadability. I suspect many Bank year-end outlooks are written primarily to get past the desk of the compliance gauleiter overseeing them, to impress their bosses, and only then, maybe, to interest customers.

There is one exception, and much as hurts to congratulate a competitor in the “scribbler” market, the brilliant Steen Jakobsen of Saxo Bank’s “outrageous” predictions for 2021 are about the best thing when it comes to Christmas outlooks.  They are so good, because they are so plausible… and therefore possible. They make you think – which is always a good thing.

This year’s SaxoStrats Outrageous Predictions are as good as ever:

1.  I absolutely agree the Covid-19 vaccines could well prove a company killer – as I wrote yesterday, the start of the vaccination programme may mark the high-point of the rally as the recovery reality becomes clearer. Economies will V-Shape, leading to the unwind of stimulus and QE support as the economy “overheats”, triggering rising rates and the end of many zombie struggling companies – led by the retail high street. Recovery will precipitate crisis.

2.  Amazon buying Cyprus is a bit out there – but why not? Amazon redomiciles its EU HQ to a beautiful island and resets its own tax rules? It could trigger an enormous backlash and harmonisation of taxation across Europe – spelling danger for Ireland.

3.  Germany bailing out France is a schweet thought, but unlikely. (Or is it….?)

4.  The innovation of blockchain source-checking on fake-news by the major social media platforms to block  is a very timely suggestion – allowing news to be checked and the source veracity validated. If it’s really possible this really could be someone at last finding something distributed ledgers are good for! (Rather than just driving idle crypto-frauds).

5.  China’s new digital Yuan takes over capital markets! It could make China far more open to foreign investment at the expense of the US.

6.  A new AI run Fusion energy source creates massive energy abundance and solves absolutely everything ushering in a new age of plenty? Lovey idea, but everyone knows fusion power is always, always 10-years down the road.

7.  Universal Basic Income, mass unemployment, working from home decimates cities and moves life back to the country – it’s happening. Society is changing!

8.  Silver price rises on soaring solar power demand. Why Not?

9.  The idea of a Disruption Dividend Citizens Tech fund in response to rising inequality is an interesting idea – moving/transferring assets from the wealthy to the general population in order to rebalance work/life. I like the idea…

10.  A new tech revolution, including satellite based systems, drone tech and new batteries, new ways of making things and an acceleration in productivity from AI and robotics, and automation across whole sectors will create a new industrial revolution!  I reckon its already underway, and will have ramifications across the global economy and society.

The thing about all these predictions from Saxo is they are all investible – but for some of them only to a limited number of investors able to take illiquid, not-regulated positions – for instance in Frontier and Venture Capital.

Doing anything in Financial Assets at present is fraught with risk because of just how hyper-inflated stock and bond prices have become. You can’t make meaningful real returns in liquid assets and it’s difficult to buy the higher return Private Debt and Private Equity deals that do promise substantial returns. Therefore, you need to take risk to make returns.

Yesterday I highlighted a Venture Capital deal we’re financing through our Alternative Assets desk here at Shard Capital. I neglected to mention the deal is very much targeted at institutional investors only, but it turns out the “Morning Porridge” is very widely read on sites like Zerohedge that I got deluged in emails from retail investors wanting to know more. Unfortunately, the rocket deal – in its current format – is not for them.

One of the things I intend to do next year is work with my investment colleagues at Shard to identify some of the more interesting alternative issue strategies that we can put in place for knowledgeable, well informed, smaller investors to access. For a start, if you are looking for an entrée to new tech, check out or Sure Valley Fund.

Meanwhile… Tesla does it again!

Two years ago the bet driving the shorts was Tesla would go bust before it could possibly succeed. It was racing to build 500k cars per annum while trying to avoid going down. The numbers all suggested it was skinny on cash and likely to face a solvency crisis. It dodged, dived and pulled the wool as many times as possible.

Not any more. Tesla has raised $7 bln from equity markers already this year, and yesterday its coming back to market for a further $5 bln of effectively free money, building a cash pile big enough to do all kind of interesting things with. Here was me thinking Tesla might get acquired by a big auto player. Silly me… its Tesla that may be the predator in the room.

Its extraordinary… Tesla is heading towards becoming one of the most valuable, cash rich firms on the planet, powered solely by investor belief! Tesla now has over $14 bln cash at hand. GM produces a multiple number of cars profitably, but trades on 8x earnings. Tesla makes no money selling cars and trades on 1400x. Yet…

If anyone else thinks that’s hatstand.. let me know..

Meanwhile, for all the hype about what a great guy Musk is, and what a wonderful company it is… check out this story about how shabbily Tesla treated a female engineer. All that glitters is not gold.

Five Things To Read This Morning

BBerg – Hedge Funds Love SPACs But You Should Watch Out

FT – Future of the City: How London’s reach will shrink after Brexit

FT – Sterling traders brace for volatility as Eu-UK deal hangs in the balance

Bberg – Johnson Heads into Brussels Showdown Over Brexit Trade Deal

Garunaid – Ineos boss opts to build “British” heir to Land Rover Defender in France

(That last story has really wrecked my day…. Landcruiser here I come…)

Out of time and back to the day job…

Bill Blain

Shard Capital