Blain’s Morning Porridge 1st March 2026 – AI, Politics and Populism, Luddites and Social Revolution

“You say you want a revolution, well, you know we all wanna change the world..”

As the US and Israel attack Iran, confirming the Fire Horse threat of escalating conflict risks, do we also face a second social threat from AI triggering widespread social and wealth-inequality protests? Does 2026 risk becoming a double whammy hit on market sentiment and confidence?

I am cheating this morning. This morning’s Porridge was written on Saturday – before I jumped on a plane for a week on Sunday morning to go skiing in Italy. As War has broken out in the Middle East I’ll have the full laptop suite with me in case it gets hairier than Trump expects… First thing to note is Bitcoin crashed on higher risk.

I warned a few weeks ago how “Fire Horse Years” (according to the Chinese Zodiac) can be volatile and explosive, this one occurring in conjunction with a 2K (2 Kondratieff Cycle) period of hegemonic challenge – and the elevated likelihood of associated conflict as the USA and China square off. The rising tide of conflict in the Middle East highlights the risks.

But, what if we are also going through an acute societal shift, which could trigger social unrest?

There is an apocryphal story set in the near future where a starship built around a super-AI is crewed by three humans and a dog. The ship traverses the vastness of the galaxy to explore strange new worlds, to seek out new life and new civilizations, to go boldly where no dog has gone before. (No split infinitives in the Morning Porridge!)

The humans are there to feed and exercise the dog.

How is AI going to change the world? Do we face civilisational erasure as a result of its’ quadratically expanding god-like power? Will we be replaced or become pods in some Matrix like future. Or will AI’s phenomenal access to information and our intellect lead to a fulfilling partnership between Man and Machine. 

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Blain’s Morning Porridge Fed 25th, 2026: What is the US Yield Curve Really Telling Us?

“When there is a lack of honour in government, the morals of the whole people are poisoned.”

Does the steepness of the US yield curve tell us the US Economy is about to boom, or inflation is about to sink the Treasury markets? To figure out which, you need to interrogate the witnesses and look at what the evidence is telling us.

My ambition is to keep learning new stuff. Like this morning’s quote – from Herbert Hoover.

One of the things I enjoy most is sharing my experience of how markets work in practice. Aside from my careless Desmond (a Tutu) in Economics, my only qualifications to do so are gleaned from surviving 40 years in financial markets. My great delight is my honorary professorship at the Edinburgh Business School (which I suspect was because they felt I deserved a B+ for effort), but I have few academic chops as a great thinker or as a theoretical economist.

However, I do think markets, economics, and politics make a curious kind of sense, and if you dig deep enough…. it’s even possible to explain them and figure them out!

Yesterday I had the great pleasure to give a guest lecture on the bond markets to a classroom of American PhD Students at Brown University in New England (via Zoom). They are taking a class on the International Political Economy of Global Finance. It’s a fascinating course, run by my great chum, fellow-Scot, and genuine academic thinker, Professor Mark Blyth.

Mark is a guy who takes a deep interest in how complex things work. He picks them apart and asks difficult questions like why? He’s now applying that intellectual curiosity to take students deep into the foundations, architecture and plumbing of international finance. I’ve looked at the syllabus and if I had the time, I’d take the course myself – because it’s good to see ourselves as other see us, and wonder if there are better ways to think about the world, and how to action it.

The fact I got asked a lash of questions following my lecture was an added bonus.

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Blain’s Morning Porridge Feb 24th, 2026: Iran could be the flashpoint for market dislocation

“Do not defy the fates and bring shame on Rome.”

Markets aren’t much concerned about Iran. US Military might is expected to prevail, cowing the Ayatollahs into acceptance of Trump’s maximalist demands. What could possibly go wrong? Trump is no student of history, and may not understand the gamut of military, logistical and geopolitical risks aligned against him.

Does the markets’ fixation on AI mean they are missing what might be main event? 

In 53 BC Marcus Licinius Crassus, the senior member of the Roman Triumvirate (and richest man in Rome) was nervous of Caesar’s rising popularity from his military successes in Gaul. Crassus led the 7 legions of the Eastern Army into the desert to restore and enhance his own military lustre – incidentally a move made without the approval of the Senate and People of Rome (“SPQR”).  His army was annihilated by Persian heavy cavalry and horse archers at the Battle of Carrhae. 

Glancing through the stock market commentaries this morning the noise is all about the end of the first soft “industrial” age; the collapse in software stocks – dinosaurs replaced by evolved AI. Investors are wondering how much more damage AI will inflict upon businesses. Every firm that employs folk to actually think is at risk. How the global economy evolves as a result of AI will have profound market implications tomorrow – but today the imminent threat might be elsewhere. 

Markets are often blind. Analysts are pitching investment strategies bar-belling the soft side of the economy in terms of hyperscalers and industrials for the hard stuff, while shorting the soft middle. Next up in the tumbril for the AI guillotine will be banks and investment managers, because AI is going to do it all so much better. Quite who the AI Revolution is going to leave in a job, earning enough money to actually consume anything in this new economy, is…. unclear.

Maybe put that stuff aside for a moment.  

Today? Buy missile producers, buy tank makers, buy weapons. We might be about to get a thumping great lesson in logistical facts, economic reality, and geopolitical shifts. 

Let me explain in a word: Iran.

Blain’s Morning Porridge Feb 23rd, 2026 – Private Credit and Treasury Wobbles... Relax….

“Apart from that Mrs Lincoln, did you enjoy the show?”

Sometimes you just have to laugh. The Tariff Judgement against Trump raises elevated Chaotic Tantrum risks in Treasuries, while markets fear what wobbles in private credit might conceal. Everything in markets are connected – when something cracks in credit, someone somewhere else will start screaming!

An interesting week’s play in prospect for global markets this Monday morning. There was a distinct judder moment on Friday after the US Supreme Court declared Trump’s emergency tariffs were unconstitutional. He didn’t react well. The markets shrugged and wondered… Where do we go from here?

I suspect the driving theme for the week with be elevated fears on bonds and credit markets, and how swiftly risks and concerns are jumping the gap to cross-contaminate between bond and equity markets.

• How will markets react to Trump’s tariff SNAFU? Weren’t tariffs going to pay off the USA’s $38 trillion debt? (No – they were not!)
• How will markets react to the wobble-signs from the private credit markets as Blue Owl acts to control retail redemptions on certain funds – while sharks, in the guise of SABA (Boas Weinstein) get ready to pounce with a 35% discount offer to NAV. Could private credit trigger a credit/liquidity crunch?
• The fact lending to software companies (hammered by AI threats) is at the core of the Blue Owl lending concerns highlights the circularity of markets and that credit lending is as much about risk as equities!
• How will these forces inter-relate with all market noise around geopolitics, AI, liquidity, politics, Iran and the growing sense of instability that seems to pervade everything? Cheer up – as I’ll scribble at the end of this Porridge, Life is Still Good.

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Blain’s Morning Porridge, Jan 20th, 2026: Corruption and Justice – Action Required.

“America may be blind, but the world will see who is involved and complicit.”

The difference between successful democratic economies and autocracy is that the rule of law works better. Autocracies trend towards corruption and inefficiency. Insider dealing and corruption is a fact of the financial markets – punishing it is a matter of the enforcement of justice and the willingness to do so. Europe is acting over Epstein. What’s happening in the USA?  

Friday is rant day. I can say what has to be said. Over the weekend I’ll be digging into the implications of Blue Owl gating its Alternative funds, and if that’s the Bear Stearns Moment warning of ructions ahead for Private Credit markets.

Investment is an exceptionally complex business. There are multiple considerations in terms of the risk/reward profile of any deal. The probabilities of success versus the likelihood of misadventure must be checked and reconciled against contracts, credit and data. Analysts dissect company accounts, statements and information on the parties to the trade. Lawyers have become MVPs (most valuable players) because successful investments are built upon a framework of law and order. 

While a gentleman’s word may be worth something in terms of the credibility to open doors, and trust is fundamental in any deal discussions, without the backing of sound contracts, strong legal systems, and the enforcement of justice – you are just gambling versus human avarice. The strength of the judicial system is a critical support and consideration in any deal.

History shows the economies of nations with strong and fair judicial systems tend to perform more strongly than autocratic states, where the old adage absolute power corrupts absolutely oft proves the case, leading to widespread corruption and underperformance across the whole economy.

Yesterday was a WTF day in the UK. It’s not every day a Prince of the Blood is hauled off thru Traitor’s Gate.

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Blain’s Morning Porridge Feb 19th, 2026 – Tariffs hoist Trump on his own Petard

“And I would have gotten away with it, if it wasn’t for these pesky kids...”

Sometimes you have to laugh. Tariffs have been the cornerstone of Trump’s economic miracle, allowing him to deflect, discombobulate and distract voters from economic truths. Now the NY Fed says tariffs are a consumption tax – even MAGA voters will be worried as the Mid-Terms approach.

I reckon a fair number of Porridge Readers will remember Scooby-Do….

Donald Trump is the evil financial-economic genius planning the ultimate political heist. His cunning plan to ensure a MAGA landslide in the Mid-Terms, just 8 months away, was utterly brilliant. Slap tariffs on everything and tell the American the people the economy was booming because of them. Keep telling them that till they believed it. The bigger the lie, the better it sounds. Brag about big foreign investments. Boast about new factories – as yet unbuilt. I particularly admired the brazen promise to increase US defence spending by 50% on the back of the unlimited bounty off tariff income.

Then wait. And in March, just as the political campaign season kicks into high gear, he’s going to tell the people tariffs have been so successful and so biggly restored global respect for the USA that he’s able to cancel them. By removing what is a massive consumption tax on the US economy he will generate a deflationary spike and an economic boom that will peak around election day. Foreign leaders will praise his munificence.

As I said – genius of the highest order… If it wasn’t for the pesky kids at the New York Fed…

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Blain’s Morning Porridge Feb 18th, 2026 – Defence Spending, Resilience and Growth

“To save the village it was necessary to destroy it.”

The Russians have captured the FT, apparently! The headline that Gilts are about to crash because the Government will borrow more to increase defence spending is Pravda 101. The reality is Gilts should rally on increasing the strategic deterrence that defence spending will create.

If you wish for peace, be prepared for war. Strategic Deterrence is the most valuable form of infrastructure a nation can possess.

There is a worrying story in the FT this morning – “Gilt investors warn about “ruse” to fund higher UK defence spending.” It goes on to describe a potential backlash and “self-defeating” rise in borrowing costs if the Government tries to spend more on defence by issuing more debt. I had to check the byline – has the Pink-Un been bought by one of Putin’s oligarchs?

The story caught my interest for a number of reasons. I guess the journalists needed a story to counter UK Premier Sir Keir Starmer saying something sensible. Yesterday, he said he’s going to move faster to increase defence spending – wow, I’ve always believed Starmer means well, so it’s great to see him do something right. (But, as a chum said last night; give him a few months to fret about how to increase defence spending to 3% by 2029 without upsetting the bond market and Labour’s left-wing, and spending might even decline!)

The FT article cites a “leading investor” saying “I’m not the sure the bond market would like it.” Another said the market would be “sceptical about a carve-out”. Beats me how these guys are sitting in senior investment management roles – surely, they realise their investments in Gilts and the UK are likely to be made more secure by spending that discourages the Russians (or whomever else) attacking us? Perhaps not….  (I’ll come back to that below.)

A few weeks ago, one of my chums in the Labour Party let slip the Government’s 10-year Defence Investment Plan is being delayed in the hope of peace in Ukraine. The thinking is simple; if Trump can force a “ceasefire”, then the immediate need for rearmament diminishes, putting less pressure on Treasury to find money immediately for guns, and giving Starmer some funds to placate the left-wingers clamouring for more on the butter of welfare spending!

One of the most basic duties of any state is defence. It’s a complex two-part problem that goes beyond the guns or butter paradox:

• The first is paying for defence – which the UK is currently failing. Not because we don’t spend enough, but because we spend it badly!
• The second issue is making sure the nation is prepared to defend itself by being willing to fight. That’s more nuanced.

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Blain’s Morning Porridge Feb 17th, 2026: Munich, AI and The Year of the Fire Horse.

“We must build our hard power, for that is the currency of the age.”

The future will be set not just by the defence and deterrence discussions last weekend in Munich, but by how global markets react to competition. New Chinese AI drops from DeepSeek and Qwen may challenge US hyperscalers and challenge expectations of global demand and markets.  

Happy Chinese Lunar New Year. Good luck and good fortune to all readers of the Porridge in The Year of the Fire Horse.

History tells us things can get fruity in Fire Horse years – which occur every 60 years on the Chinese Zodiac. That’s a significant measure of time: a single 60-year Kondratieff long-term economic cycle encompasses the incredible economic change, tech evolution and growth we’ve seen since the 1960s. Periods of hegemonic challenge (which raise substantial conflict risks) typically occur every 100-120 years – the 2K cycle - which is pretty much where the timeline also is today as the USA and China butt against each other.

China has become the most significant challenge to the USA’s era as the undisputed global hegemon and economic superpower. It happens at a time of increased political instability as Western economies struggle with inequalities and the rise of populism (including the challenges of Donald Trump’s second presidency), the consequence of underinvestment in deterrence, but also at a time of acute social change and external challenges (climate change, migration, et al), and all during a time when competition in global markets is reaching fever pitch.

Hegemonic change doesn’t have to happen in terms of war and conflict but also occurs when previously dominant powers see their economic position challenged, and their industrial/business base surpassed. Tired economies define most end of empire scenarios – and explains why Great Britain gradually faded away after the First World War.

Put all these random bits together; political ineffectiveness and polarisation, rising social grievances and tension arounds jobs, housing, and inequality (of income, opportunity and justice),  and the dramatic competitive technology and economic shifts (which may increase social division by dispensing with jobs) that are occurring. Then sprinkle the risks of war on top of that… and it’s a not a pretty world we live in.

Of course, it hasn’t helped that Trump’s vision for America has necessarily called for a reduction in the costs of its global responsibilities – hence the bust-up with Europe. It could have been done better and without the angst.

What’s done is done…  

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Blain’s Very Late Morning Porridge Feb 16th 2026 – Sliding, Jambos and Rugby, Sports that matter

“He’s kicked that one so high it’s come down with a touch of frost on it..”

The world may be going to hell in a handbasket, and tomorrow is the start of the Year of the Fire-Horse (the most volatile of the 60-year Chinese zodiac cycle) but what a fantastic weekend of sports we just had. It’s all positive stuff… Let’s enjoy it while we can.

Apologies for the very late Morning Porridge this morning after a very early flight back from Edinburgh. Tomorrow there will be a full breakdown on the market implications of ‘who-said-what-but-meant-that” at the Munich Security Conference and what’s afoot in AI stocks, but this morning… let’s enjoy the good things in life and talk about sports, their influence and importance, whether it be in Olympic gold in Skeleton, Football, or Scotland’s magnificent win on Saturday in the 6 Nations Rugby at Murrayfield.

Sports matter – not just in terms of the potential opportunities to monetise sporting success (of which there are many), but also in terms of concepts such as soft power and belief, and how that can influence sentiment and growth. After Saturday’s win I was a one-man economic boom-time in Edinburgh’s hostelries on Saturday. Might oak-trees stem from little acorns, and small sporting successes can make small nations mightier yet.

Blain’s Morning Porridge Feb 11th, 2026 – The Munich Conference and Global Threats 

“What do you worry about?” … “Events, dear boy, events.”

There are times when the course of history takes on a momentum of its own, most often in periods of conflict around hegemonic change – as exist today. This year’s Munich Security Conference will address stressed and fractured global alliances – while markets should be figuring out how conflict risks have risen and potential outcomes worsened. 

Wolfgang Ischinger, chairman of the Munich Security Conference (which opens later this week) is a former German Ambassador to the USA. He doesn’t pull any punches in its 2026 report; “Under Destruction”. (Use the link to read it – it’s blunt, to-the-point and highly informative.)  

The report defines how “wrecking-ball politics” have favoured the destruction of current institutions and alliances, and trampled opportunities for reform. It pulls no punches blaming Donald Trump’s new America for the destabilisation of long-term alliances. In many ways it’s a response to JD Vance’s arrogance at last year’s conference where he slammed Europe as anti-democratic while failing to call out Russia’s aggression in Ukraine.  

In the space of just over a year the World has utterly changed. Confidence in NATO, the transatlantic economy, and global order have been overturned. Apologists for Trump – and there will be plenty of wealthy American businessmen, financiers and technologists in attendance who have nailed their colours to his mast – will say Trump has achieved great things by forcing Europe to take responsibility for its own defence, and rumours of the death of the alliance are over exaggerated.

They are not.

These apologists have less to say about the long-term consequences for the global economy and markets from Trump’s disregard for the rules of law, his threats to allies, his autocratic bent and his appeasement of Putin. In 12 months, he has destroyed (I was going to write undermined but why pull punches) the previous faith and confidence Europe had in America.

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