Where finance and media intersect with reality


Spot Markets Live Transcript: 28/09/22

Screenshot 2022-09-28 at 13.24.59

Today’s Spot Markets live session is with Neil Collins, co-host of the A Long Time in Finance podcast and former City Editor of the Daily Telegraph for 19 years.  

Comments directed at audience members are highlighted in bold.

Izabella Kaminska 11:57

Hello and welcome to Spot Markets Live, the real-time markets chat that takes you on a whirlwind tour of the markets.

(2 mins early, by design)

(eat your heart out Paul Murphy)

Neil Collins 11:58

Hello, and a particular welcome to holders of index-linked gilts. They offer protection against inflation, don’t they? What a comfort in these difficult times!

Izabella Kaminska 11:58

Neil Collins 11:59

Oh dear.

Izabella Kaminska 11:59

That’s the UK 2016 Index Linked Gilt Price.

Neil Collins 11:59

I’ve an idea, though.

Izabella Kaminska 11:59

(yes tin hats at the ready)

Neil Collins 11:59

The UK government should offer to swap them for conventionals

Izabella Kaminska 11:59

(Neil has already trademarked Elizabeth bonds to save the UK)

Neil Collins 12:00

say £50 for each £100 nominal. Think of the impact on the National Debt

Izabella Kaminska 12:00

Yes, it’s quite the John Law scheme.

Neil Collins 12:00

A literary allusion

Izabella Kaminska 12:00

That’s the 2028 gilt yield

Neil Collins 12:01

Peter: considering the tiny coupons, the yield will still be pretty small

It shouldn’t be a shock, really, because history shows that conventional and linkers move in tandem, rather than in opposite directions

Izabella Kaminska12:03

Btw – for those who don’t know Neil is the former editor of well, everywhere in financial media in his time.

He is now fronting the “A long time in finance” podcast.

Neil it’s good to have someone with us today with your pedigree and memories of the war 😜

Neil Collins 12:03

I’m afraid so. I can remember the FT30 index reaching 145 in 1974

Izabella Kaminska 12:03

This is the sort of expertise you just won’t get on Reddit.

Neil Collins 12:04

And you just can’t buy (although I’m prepared to consider offers)

Izabella Kaminska 12:04

But do you know what interest rates were during the vast majority of WW2?

Neil Collins 12:04

That’s a trick question. Interest rates were administered by the government

Izabella Kaminska 12:05

Well exactly. Fake rates to go with fake news. And they averaged about 2% but were entirely meaningless really as Neil points out

So the question we want answering is: IS THE UK A BANANA REPUBLIC OR IS SOMETHING ELSE GOING ON?

Neil Collins 12:05

Yes, we have no bananas today

Izabella Kaminska 12:06

We’ve already unveiled Neil’s genius plan to save the world. Elizabeth bonds…

Have you changed your stance?

Neil Collins 12:06

Here’s the plan. National Savings administers them, and we all rush to buy, in memory of our dear queen

I reckon on the right terms, they could raise 20 or 30 billion. Holders could get a tax break for holding long term

Izabella Kaminska 12:07

I think it’s a great idea personally.

Neil Collins 12:08

There would be none of this “relying on the kindness of strangers” nonsense since the buyers would be UK individuals

Izabella Kaminska 12:09

Indeed. Unlike us who are still reliant on the kindness of people with Bloomberg terminals and access to investment research.

Neil Collins 12:09

Please give generously

Izabella Kaminska 12:09

Now that the rabble has been rallied… a quick round-up of what’s going on.

FTSE is down about 1.8% …

S&P 500 closed at its lowest since November 2020

The dollar is sweeping to a 20-year high, sterling on the ropes again

And the IMF is back trash-talking Britain.

Only green on the CNBC board is now Russia

Is it the end of the west?

Neil Collins 12:10

Blood in the streets is always a buy signal

Sterling is now absurdly undervalued, as it was last it traded at this price

Izabella Kaminska 12:11

(This is what crypto gets right. Bitcoin investors would of course be now rallying everyone to HODL and buy the dip.)

Neil Collins 12:11

You buy bitcoin if you want. I even prefer the Bank of England.

Izabella Kaminska 12:11

Yeah yeah. I meant the spirit of bitcoin. Not to actually buy bitcoin.

In stocks…

Rolls Royce, Ocado, and L&G leading the losers….

hearing generally that there is some stress in the LDI market

Know anything about that Neil?

Neil Collins 12:12


Izabella Kaminska 12:12

It’s not an area I know well.

Neil Collins 12:13

The question is what and where is L&G’s liability?

Izabella Kaminska 12:13

Yeah, another shout-out for the kindness of strangers then.

One thing I’ve heard, but I’m only the messenger

Turns out they matched their liabilities by buying BBB US corporate debt!

If anyone knows anything about that do say. This forum is all about leveraging the wisdom of smart minds.

Neil Collins 12:14

Are L&G seriously matching liabilities with BBB US debt?

Izabella Kaminska 12:14

No idea, but I might go and take a closer look at the financials later today. And school up.

Sounds like it could be a big deal

Meanwhile in the corporate debt world…

That’s the itraxx crossover chart, courtesy of some dude on twitter.

Some speculation that marks are not being handled properly

but I think it might still be a question of moral hazard.

@robert that is the assertion. But it’s single sourced.

Neil Collins 12:16

The rabble is getting exercised about the Bank’s losses on its gilt holdings

and Robert says there is an explicit govt guarantee for the Bank. I think he’s right

The then Gov insisted on it at the start of QE

However, since we are the shareholder in the Bank, guess who pays in the end?

Izabella Kaminska 12:18

Yes… quite.

But nobody wants to know about corporate news today. 😜

What I want to ask the rabble is how many of you have had friends and family approach you in the last few days about mortgage advice?

Because we have had to open a mortgage clinic.

Neil Collins 12:18

Oh no!

Izabella Kaminska 12:19

Are you not getting the same thing?

As I wrote in today’s Blind Spot Wrap:

The mood feels very similar to the weeks just before Covid lockdown. You will remember, we all knew something big was coming. But we were panicking because we couldn’t yet imagine how we could fund or maintain self-isolation. And then… out of the blue, Rishi Sunak introduced a whole new concept and word to us: furlough.

Neil Collins 12:19

You’re not suggesting another government bailout, are you?

Izabella Kaminska 12:20

kind of

It’s worse I think

There will have to be some sort of mass mortgage holiday instituted. One need only look to Ukraine and Poland for clues about what’s coming.

The evidence from Poland is particularly indicative

Neil Collins 12:20

That would make this week’s move in the gilts market look like stability

Izabella Kaminska 12:20

Poland (technically not at war) has already introduced a broad-brush credit holiday for mortgage borrowers underpinned by a law that that will force banks to suspend mortgages or be fined. New mortgages have since collapsed. Ukraine, meanwhile, suspended mortgages when martial law was announced in February. The debt freeze funding that suspension was only finalised with international creditors on September 14.

Neil Collins 12:21

Has Poland just had a giveaway Budget?

Izabella Kaminska 12:21

Not sure actually. But I know the mortgage market is completely frozen.

lots of people taking up the offer, and their inflation is worse than ours.

Neil Collins 12:21

The EU can afford to carry Poland, to keep the goodwill over Ukraine.

Izabella Kaminska 12:21

Doesn’t stop Radek Sikorski from being happy about this…

Neil Collins 12:22

What if someone tosses a match into the whirlpool?

Nice one, Carlo

Izabella Kaminska 12:22


They’re restarting QE it looks like.

Neil Collins 12:23


Izabella Kaminska 12:23

The Bank of England has been forced to step into bond markets amid market turmoil that has sent government borrowing costs soaring.

The central bank has delayed plans to sell bonds and will start buying them instead to stabilise what it described as “dysfunctional markets”.

It said: “Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability.”

The Bank didn’t give a figure on the size of the purchases but said they will be carried out on “whatever scale is necessary”.

Neil Collins 12:23

Please don’t call it panic stations

Izabella Kaminska 12:24

Also, just before we started.

Sky: Kwarteng to Ask Financiers Not to Bet Against Pound

Neil Collins 12:24

“It’s so unfair to pick on us because we’ve screwed up”

Izabella Kaminska 12:25

What the BoE takes away with one hand, it gives back with the other.

But I’m going to be a contrarian on this. I don’t think it’s the end of Britain. I think Britain is just the first domino to fall, and the IMF is being a bit overreactive … because it too might find itself out of a job soon.

Because I’m sticking to the line this is a slow adjustment to a war economy. And that means it’s private-public partnerships from now on. On all fronts. And appeals to public sentiment will actually be quite normal – in line with the Clap for the NHS mentality.

Neil Collins 12:26

That may be true, but has the public noticed they are all poorer than they thought they were?

Izabella Kaminska 12:26

No, not yet

Neil Collins 12:26

As far as I can see, we haven’t moved beyond “the government will step in and pay”

Izabella Kaminska 12:27

Yes, but that’s kind of how the adjustment to a war economy goes.

If I’m right, what the IMF is saying about Britain DOESN’T matter.

The IMF hails from a post-war consensus on monetary systems.

But if we are in a transition to more of a West vs East + Neutrals system, then the economic crash is not the economic crash you think it is.

Markets are going to move into a permanent public+private partnership.

Neil Collins 12:27

What do you mean?

Izabella Kaminska 12:28

I mean that we are going into a general suspension of laissez-faire peacetime economics. And it’s because we are basically at war with Russia, it’s just that nobody has cared to mention it to the British people. (Or the Europeans)

I know what I’m saying sounds nuts but, clearly, somebody thinks I offer some valuable commentary:

It’s for a panel with Adam Tooze FYI, who I might have had a bit of a confrontation with on Twitter not long ago about net zero policy. Though, I have to admit, his books are truly excellent (FYI, that’s how you do an olive branch Vlad).

Sadly can’t go as already committed to something in Amsterdam.

But I will also exclusively share with this chat here that ████████████████████ around June.

So it could have been me being the face of UK decline.

Neil Collins 12:31

Sounds like a lucky escape to me

Izabella Kaminska 12:31


Remember going into the last crisis the IMF was almost out of business itself.

This time it’s an entirely different situation.

Which is why we need to view the Nordstream sabotage from this point of view:

After sanctions, came sabotage

And speaking of appeals to the nation:

Neil Collins 12:32

Carlo: if that’s right, they are even more out of touch than we thought

As we were saying, they should buy in the linkers and turn a book profit. Unfortunately, there’s nobody on the MPC with any real grasp of markets. It’s stuffed with academic economists

Izabella Kaminska 12:34

The pound is going a bit nuts tho

Doesn’t know quite what to do

We are all cryptocurrency now.

This is not specifically finance news, but it’s a worthwhile snippet nonetheless…

The annual meeting of the UN agency for nuclear stuff opened on Tuesday in Vienna.

Take a gander at the exhibitors

News reaches us that the Ukrainian and Russian stands are about 20m apart.

Neil Collins 12:37

Have the Russian invaded the Ukrainian stand yet?

Izabella Kaminska 12:37

Everyone is staying 3 meters away from the Russian stand, except the usual suspects (Chinese delegation, Iranian…)

I just love the idea there’s a small nuclear simulation going on at the UN through exhibit stand wars.

Just wait until they start throwing paper airplanes at each other.

Neil Collins 12:38

The Russians will have many more planes, but they will all miss

Izabella Kaminska 12:38

Neil – anything else on your mind?

You’ve looked in detail into the 1992 Black Wednesday crisis in your last podcast

any insights you didn’t appreciate at the time?

(ie what did it take you 30 years to learn)

Neil Collins 12:40

We did. I think the thing that struck me most from our contributors to the podcast was the admission that the civil servants couldn’t prepare any contingency plan

Because if something was in the manifesto (eg stick with the ERM) then that would happen. The smarter people had to prepare a samizdat paper, risking being fired if the politicians discovered it

I doubt whether much has changed since then.

It would certainly explain why policies seem to have had so little thought put into them before launch

Izabella Kaminska 12:42

That’s amazing Neil.

So what you are saying is that there is a civil servant deep state.

that has to prepare for when the official teams fail

Neil Collins 12:44

…while pretending they are not.

Dario: exactly

Izabella Kaminska 12:45

So. We have 15 mins still to go. Rabble feel free to direct us. Otherwise, I will just point out that Burberry is the top gainer on the FTSE

They’ve appointed an English fashion designer as chief creative officer, which I guess means they get paid in sterling 😜. Which must be good for the stock.

I also liked this snap from the Kremlin

Claims Russia Sabotaged Nord Stream Are ‘Stupid’. Nord Stream Situation Requires Dialog, Cooperation.

Neil, people are asking about gold? What’s your take on that? If we’re in a john law economy, that should be a good trade?

Neil Collins 12:47

Ah yes, the ancient relic

Izabella Kaminska 12:47

$1,627 per troy ounce,

Neil Collins 12:48

I found that predicting the gold price is rather harder than the 3.30 at Newmarket. In theory, inflation should be good, as people lose faith in paper currency. In practice, there seems little correlation over time.

Izabella Kaminska 12:48

(I’m actually on an LBMA panel thing in October I think, so I will bring more gold insight from that)

Neil Collins 12:49

Instead, we could talk about house prices

Could the great British public really stand a bear market?

Izabella Kaminska 12:50

based on my mortgage clinic, the answer is definitely no.

Neil Collins 12:50

Bruce; quite right

Izabella Kaminska 12:50

And no, it’s not like in the 70s.

because the nominal sums are so much bigger, so the percentages are generating much larger nominal increases, and average wages – despite all the talk about negative real yields – are not generating the same scale of returns.

5% of a large number is much much bigger than 5% of a small number in nominal terms.

Neil Collins 12:53

That only works if you don’t run out of money while waiting for inflation to destroy the capital liability

Izabella Kaminska 12:53

@bruce I really think some sort of mortgage holiday is going to have be executed.

And of course, if the govt does that, then what the BoE dishes out in higher interest rates to curb inflation, is offset immediately by the government’s move to stop people from going bankrupt.

So it’s a wash

And inflation won’t get any better

Neil Collins 12:54

This government is capable of almost anything – the markets are the only restraint

Peter: absolutely right

Izabella Kaminska 12:56

Before we wrap up, have you heard of Tellurian?

Neil Collins 12:56

It sounds like a lighter version of kryptonite

Izabella Kaminska 12:57

Not far off. It’s a gas company. It was supposed to be the next great LNG savior for Europe.

They were supposed to be developing a big new field on the Louisana Coast called the Driftwood project.

But nothing has come of it. They’ve lost financing and Shell and Vitol have suddenly pulled out.

It’s mysterious because on paper it should be a no-brainer.

The LNG arbitrage window to Europe is clearly open, and if now isn’t a time to invest in US LNG it’s hard to know when is.

But the group is not having a good time

It was founded in 2016 by Charif Soukif formerly of Cheniere Energy.

He’s the man who first spotted and executed on the opportunity of the US turning from net gas importer to net exporter.

But Carl Icahn ousted him in a boardroom coup before the group even delivered its first cargo.

Anyway, might be one to watch.

On that cheery note (because Neil seems to be inundated with amazon packages) …

Is it wood? or is it cans of baked beans?

Neil Collins 13:01


Izabella Kaminska 13:01

Great for the apocalypse

Neil Collins 13:01

Sold by my wife as Collins & Green

Izabella Kaminska 13:01

Ah, very nice plug.

Thank you all for joining me. Remember we are only as good as our sources so do be sure to keep us posted on anything you want to talk about. Especially if it requires prior research or calls.

Neil Collins 13:02

Don’t forget to listen to A Long Time In Finance, a new edition every Friday

Izabella Kaminska 13:02

I’m on [email protected]

And I can pass stuff on to Neil as well.

We will be back on Monday with Anjuli. Hopefully, the gilt market will still be standing.

It’s goodbye from me!

Neil Collins 13:03

and goodbye from him

Izabella Kaminska 13:03


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