Blain’s Morning Porridge 19th Dec 2025 – Destabilisation and Peak Exuberance

 “There are more things in Heaven and Earth, Horatio, than are dreamt of in your philosophy.”

 Markets are winding down for the holiday break, but the news flow continues to hint at rising destability and noise, hinting the future economic path will get more twisty and difficult. Lower rates and QE fuelled markets (but not growth) in the 2010s, but won’t work when there is a strong inflationary impulse in place!

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Unless something dramatic happens in the next two weeks, this is the last Morning Porridge of 2025. I will therefore wish everyone a very Merry Christmas, Solstice or whatever, and a Guid and Prosperous 2026. I have a massive pile of interesting books to read, a recovering wife to look after, friends to spend time with, and a damn smart dog, Dinnerjacket Wrigglebottom (DeeJay to his mates), who takes me out for long walks explaining me the economics of treats. Perfect… nothing to distract me for the next 2 weeks, baring interruptions…

I reckon the coming year is going to be more challenging than we expect – I don’t think we understand just how much the world changed in 2025, or how the consequences are yet to play out. Global uncertainty will remain a destabilising theme – every day there is something new, each of seemingly limited import, but which will add up to a mighty noise:

• Last night’s failure by Europe to act decisively by using seized Russian Assets to finance Ukraine for fear of Fitch Ratings (Who???) downgrading Euroclear, confirms the headless chicken dither in Yoorp over the necessity to take ownership of the War.
• The American President went on National TV for 20 minutes to rant at American voters how good the economy is – the WSJ fact checked him and announced 91% of his claims were bogus.
• The Bank of England narrowly voted to cut rates despite inflation fears… Angels on a pinhead…

 Regular readers of the Morning Porridge will know that as a dour Scotsman I am seldom mistaken for a ray of Sunshine. I’ve been bearish on overvalued stock markets and the market’s over-active speculation gland since 2010, the beginning of the QE Era. 16 years is a long time waiting for my negativity to finally fall into place – but who knows…. Maybe this time…

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Blain’s Morning Porridge 17th December 2025 – Bitcoin and Crypto Further Detach from Reality.

“If you don’t believe it, I’m not going to waste time trying to convince you.”

Global Markets surge ahead. Bitcoin has been left behind. Yet again the crypto bubble has popped. All that’s holding it up is buy-the-dip greater fools, hope and belief – none of which are strategies for success. Time for a reassessment of what Bitcoin is and isn’t, and why it’s time to stop wasting energy on it!

Christmas is traditionally a time of goodwill to all men – even the shills of the Crypto World.

I’ve been thinking what I can possibly do to help them at this time of festive joy? Should I give them a dopamine hit by telling them everything is fine, this is just a speed-bump -and not to worry because increasing global international adoption of crypto assets means eternal upside? Or should I gift them some tough love – by telling them the truth? How do you tell true believers they are worshipping false idols, and Crypto is all absolute bollchocks?

Bitcoin is down 20% on the year, and 30% down from its October peak. Trump’s memecon is worth a tad more than the square root of f***all. As it tumbles, the BTC Treasury concept pops, Gold rises, and stocks remain solid – it’s demonstrated, yet again, that Bitcoin does not store value, isn’t linked to the economy, and is not a digital safe haven. And don’t tell me its Energy – that’s utter bunkum.

The reality is Crypto is worth only what the market believes it’s worth – which isn’t as much as it was. And, in recent months the decline in its prices has confirmed Bitcoin is now wholly divorced from the direction of global markets.

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Blain’s Morning Porridge 16th December, 2025: The New Economics and Investibility of Defence

“The war was started by career soldiers, but will be finished by teachers, engineers and accountants.”

Ukraine has demonstrated massive changes in how future wars will be fought. Yet, the military bureaucracies of Western Nations are mired in the procurement-treacle of 80 years of peacetime spending. It’s time for radical overhaul, and an explosion of private-funding to build a stronger Western economy through aggressive deterrence. 

One of the big market themes I’ve been drawn to is the rising threat of conflict involving what is left of the now fracturing Western Alliance. That’s why I’m now an Advisor to Spitfire Strategic Capital – a highly innovative defence fund. If you had asked me if a general European War was likely 5-years ago, I would have laughed. Today – it’s a substantial economic risk that could swamp supply chains, economies and markets. The World changes faster than we think.

The most basic duty of any state is security. Europe and the UK are guilty of failure. As the USA retreats from foreign entanglements, it’s time for a massive European policy shift to be seen to be acting with purpose and alignment.  

The threat is very real. Yesterday the new head of Britain’s MI6, Blaise Metreweli, warned Russia is deliberately prolonging the war in Ukraine, and has no intention of signing any peace deal. She described how the UK and Europe are in a grey area, caught between peace and war with “an aggressive, expansionist and revisionist” Russia as Putin tests the limits across Nato through cyber-attacks, sabotage and drone intrusions. The head of the UK’s defence staff, Air Chief Marshal Richard Knighton, later warned of coming conflict in Europe that will require similar sacrifices as were made in the second World War, and that the UK is woefully underprepared. 

 The war in Ukraine has taught many lessons. Everyone will be familiar with the leaps in drone technology. The new economics of warfare – the unsustainability of spending millions on an interceptor missile to shoot down a drone costing a few hundred of dollars when the enemy is mounting swarm attacks numbered in the thousands, and the entire inventory of missile inceptors is measured in dozens – is brutal. Ukrainian pop-up factories close to the frontlines churn out thousands of attack drones each day – but it takes months to build expensive interceptors.

 It's not just drone warfare that’s experienced a paradigm shift. The whole defence sector is unrecognisable from just a decade ago. Invention and innovation leap forward in times of war.

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Blain’s Morning Porridge Dec 15th 2025: Some Big themes for 2026?

“Santa Baby, one thing I forgot, a yacht and the deeds to a platinum mine…”

The Chinese curse about living in “interesting times” is a boon to anyone fascinated by markets. There is no shortage of excitement coming our way next year – everything from conflict threats, renewed inflation, the return of QE, to the Space X IPO. But the thing is… we really don’t know….. we never have!

Being a market commentator comes with a terrible cost – the numbing fear that strikes at 4 am that there is nothing to write about! Dull, boring, predictable markets might be great for bond investors – but they are the curse of the markets’ chattering classes who seek to describe what’s occurring.

Thankfully…. There is no shortage of stuff to write about these days.

There are so many different levels to markets – from the over-arching macro themes of geopolitics, economics, growth, commodities, liquidity and policy & politics, right down to the individual narratives driving individual stocks and bonds. Then there are the themes that weave across markets – like the “speculation on speculation” that drives the crypto markets, or the effects and consequences of how inflationary expectations will impact markets. And the capacity of people to fool themselves and others never ceases to surprise me.

We may be living in an age where General Artificial Intelligence is nearly upon us, when Quantum Computing may shortly crack the biggest problems of health, wealth and prosperity, and Energy is key to everything, but fundamentally…. We are still a bunch of primates recently (in geological terms) out the trees, whose brains are programmed to fight or flight a pride of lions or the hiss of a snake. We obey emotions triggered by dopamine, serotonin, and hormone FOMO – the most powerful force in the financial markets: the Fear of Missing Out. We crave love and companionship, but worship the crass greed of success.

We are not as clever as we think. On that basis… what to expect in 2026?

Blain’s Morning Porridge Dec 12th, 2025 – Outlook 2026: Conflict or Trade?

“The earth is littered with the ruins of empires that once believed they were eternal.”

2026 Outlooks contain rosy predictions for stock market upside, calmer bond markets, the triumph of AI, and even a few who still say Bitcoin will rule us all. But the major Macro risk will be global trade – what happens as China and the USA face off? Trump has fractured the Western Alliances even as China’s trade and military strength give it all the options. What will Emperor Xi choose to do?

It is the time of the year for guessing what might happen next….  

I have no crystal ball. All I can do is perceive the world through a glass, darkly – based on insights from friends and clients (who are often both). This morning I’m going to paint a Global Macro scenario that is already in play – triggered by Trump’s careless unravelling of the Western Alliances. If it plays through, it will utterly change markets.

It’s one I personally believe will set a tone of heightened market risk for the coming years. There are three critical ingredients to this outlook:

• China – Options
• Europe, Japan and Korea – Capacity, Intent and Deterrence
• Global Trade or Global Conflict

You will notice America does not feature. President Trump has played his hand and accelerated the coming economic and, perhaps, kinetic conflict. What matters now is how other nations now play the cards they’ve been dealt in the Great Game of Geopolitics.

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Blain’s Morning Porridge Dec 11th, 2025 – The US economy, Potemkin Markets and QE

“The IQ of a mob is the IQ of the dumbest member divided by the number of the crowd.”

Y’day we had yet another Judder Moment for markets as the Fed surrendered to Trump and prepares to juice the markets with renewed QE. Have we learnt nothing? No, I guess we have not. Pretend and keep pretending as we enter the Potemkin Economy era. This will not end well.

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What should we make of yesterday’s Fed Meeting? A cut in Fed Funds to 3.50-3.75%. Huzzah! Ah, the madness of crowds… “Oh no, here we go again” said the bowl of petunias.

What we witnessed at yesterday’s Fed meeting was extraordinary. A bunch of academics debating angels on a pinhead while under the presidential cosh? Were they thinking about their role as the guardians of price stability and job security.. or were they focused on the political trend. Lots of talk about elevated risks to inflation and jobs.. but lots of what looked like dither and analysis paralysis.

In the ongoing absence of tangible and real data, and current politics.… lots to argue about. It’s clear what the president wants – lower rates to keep juicing the stock market into the Mid-Terms in 11 months time.. A strong stock market looks like a strong America. Simple As.
Welcome to the Potemkin Political Economy…

Blain’s Morning Porridge Dec 9th, 2025 – What does new US Security Strategy mean for Markets and Outlook?

“For he on honey-dew hath fed, and drunk the milk of Paradise.”

The new US National Security Strategy (NSS) revealed last week confirms just how much the world has changed. It was a kick in the teeth for Europe and leaves the door ajar on Taiwan. It’s unlikely to foster stability. It increases the pressure on Europe to swiftly rearm, and unify its defence and deterrence capabilities. For America – it raises fundamental questions about its declining power, strength, might and economic outlook.

A number of Porridge Readers asked yesterday why I hadn’t commented on President Trump’s new US National Security Strategy (NSS) yesterday. The Strategy was released last Thursday, but given my close involvement with Spitfire Strategic Capital, the hybrid PE/Defence Fund, I held off till I’d discussed it with the Fund Principals.(For the record: The comments below are entirely my own, and don’t represent the views of the Fund.)

The US NSS puts the recent launch of the Spitfire Fund into an even more urgent context. As others have commented, “it could have been authored by Putin.” Europe now has even less time to rebuild its defensive capabilities and prepare itself for decades of crisis. The only way it will survive is through deterrence and being prepared against multiple threats – Russia is the immediately obvious one. Others will be coming.

Sadly, I am utterly unconvinced European governments collectively appreciate the urgency and scale of the threat facing them. They are still failing to prioritise the urgency of new defence spending.

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Blain’s Morning Porridge Dec 8th, 2025 – Markets, TheGlobal Economy and the ‘26 US Midterms.

 “It’s all about the economy, stupid…”

This week will see the Fed ease rates, stocks will rally on happyretail buying any dip, and everyone will go into the holidays joyful… Except they won’t. There is so much still bubbling under the hood of the US economy that can go “bang”. Don’t watch the USA – watch China for clues.

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Blain’s Morning Porridge Dec 4th, 2025 – Hans-Jeorge Rudloff could teach us much about markets…

“When the Eurobond market exploded, it made London the centre of the world…”

This is not an obituary – but a story about markets. Hans-Jeorge Rudloff, who passed away earlier this week, was the dominant figure of the Eurobond market. His insights and vision were extraordinary – understanding how marketsworked, how to dominate them, and setting the foundations for today’s $120 trillion global market!

Yesterday one of my chums and market mentors called me with the news Hans-Jeorge Rudloff, one of the founding fathers of the Euromarkets, had passed away on Monday. Between us, my friend and I must have over 90 years of market experience, but we both owe our careers and success to the market that Rudloffand a small number of others created. 

In 1985 – when I first started bothering my betters in finance - the Eurobond market funded around $165 bln in new debt. It was young and developing - the rules were being made up as it developed, but it was tremendously exciting. In its first 2 decades (from 1963) the Euro-market had grown from zero to 10% of global market debt capacity of a couple of trillion dollars!

Today, the Global bond markets are a $120 trillion plus phenomena! There are multiple subsets of the fixed income markets – most of which thrive. Asia is set to overtake the USA as the largest component of fixed income flows later this decade.

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Blain’s Morning Porridge Dec 3rd, 2025 – Pantomime, King Rat, and Outrageous Predictions

 "It’s behind you, oh no it isn’t!”

 What’s not to like about Panto? Saxo Bank’s excellent Outrageous Predictions for 2026 are out.. Lets dig into why Sir Keir Starmer might consider rejoining Europe to peeve Nigel Farage, how China will dominate trade through Tech and a gold-linked Yuan, and why SpaceX is unlikely to be the first $1 trillion IPO.

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