Real estate, alternative real assets and other diversions

Blain’s Morning Porridge

The Macro View

Why did the Fed Ease?

Last night’s Fed decision was anything but unanimous with 10 of the 17 members dissenting – views ranging from no cut to a larger ease.  Powell described a “solid outlook” for the US economy but warned of “weakness in global growth and trade policy”.  On balance, it looks like a slightly hawkish Fed (which is why stocks wobbled), making the gesture of easing to an unimpressed market.  The question is now – will they ease again?  Consensus seems to be for a further ease in December.  Much could change by then.  While Powell mumble-swerved about remaining data dependent, Trump immediately weighed in with: “Powell and Fed fail again! No guts, no sense, no vision.” 

More Green

Apologies for writing again about Green Investments, but I got a massive response and lots of emails from readers y’day.  There was 100% agreement the environment and climate change is the most critical issue in terms of long-term investments, but also 90% agreement that Green investment labels are distractions. 

Among the many comments was one from the CFO of one of the world’s largest debt issuers.  He told me he expected to be forced to issue Green bonds in the future, even though: “A fancy green bond at a premium to my regular borrowing costs is simply a gift from our shareholders to some fund manager looking for a higher return.”  A fund manager told me he’s stopped going to Green conferences because they’ve been “hijacked by consultants, advisors and other parasites”.

But perhaps the most worrying response came from an old chum of mine – he got into serious Economics, and is now a very senior professor in a proper US university.  He mailed me y’day to say he was at the OECD conference and was “terrified” by what the engineers and scientists are demonstrating to be fact.  It puts Greta Thunberg’s comments to Congress y’day into sharp relief. She told them – “If you want advice for what you should do, invite scientists, ask scientists for their expertise. We don’t want to be heard. We want the science to be heard.”

To give the Green bonds credit, they have raised awareness among the investment community of the need to do something.  Bloomberg writes often about Green Bonds. A recent article seemed to be equivalating rising Green bond issuance with turning back climate change.  They cite the growing number of investment banks that have set up “sustainable finance teams” to “find ways to address demand”… which means “to make money by inventing a whole new market segment we can persuade clients to issue and invest in”.  Cynical, but that’s the way investment banking works.  I know. I did it for years… and I was good at persuading issuers they had to tap some new (and largely imaginary) new investor base.

Perhaps a better way of greening finance would be for investors to work the other way around – turn down or demand higher returns from investments in anything non-green, taking positive actions against polluters rather than investing based on labels. (Of course, such action might just push up returns for funds deliberately making investments decisions based on how much Bad Stuff borrowers do!) 

According to BBerg numbers, HSBC dominates the issue of green bonds – its’ “sustainable finance team” is leading the league tables, and its’ head describes it as “a new battleground” in finance.  It certainly is.  Mighty battalions of “sound-bite” armed salesmen are persuading investors to buy – “look, how beautifully green it is.”  (Great quote on Bloomberg: “I’ve looked at deals that claim to be green, and I would just say they are less brown.”)

Despite their being no agreement on what constitutes a green bond, the issuance of so-called Green bonds has quadrupled over the past five years, according to Bloomberg, hitting $135 bln in 2018.   The French government has issued over €4 bln of green bonds this year…  Give them a coconut..

Telecoms companies are at the forefront of Green issuance, saying their green financing will allow them to reduce energy consumption. (Really? In what way would normal financing disallow them from controlling energy costs?) Other corporates are finding a ready market for their Green Bonds as Chief Investment Officers look to tick their ESG and Green boxes to show their investors what environmentally aware investors they are. Aw, bless them..

Problem is – it largely bollchocks.  It’s the “let them eat cake” moment.

For all the Green Bonds that have been issued… in science there is truth:






The Macro View, zLead Article, zNewsletter

About Bill Blain

Bill Blain

Bill Blain is Strategist for Shard Capital, a leading investment firm. Bill is a well known broadcaster and commentator, with over 30-years experience working for leading investment banks and brokerages at senior levels. He's been closely involved in the growth and development of the global fixed income markets, and pioneered complex financial products including capital, asset-backed securities and private placements. Increasingly, he's involved in the Real and Alternative Assets sector seeking to explain their complexity, how to generate decorrelated returns, and create liquidity in non-listed assets. Bill is a passionate sailor, talentless painter, plays guitar badly, is learning the bagpipes, and built a train-set in his attic.

Articles by Bill Blain

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