Catflap While The Dance Band on the Titanic Plays On

Blain’s Morning Porridge Oct 15 2025 – Catflap While The Dance Band on the Titanic Plays On

“ Damn the Torpedoes, full steam…. Boom. gurgle gurgle..”

 There is no stopping a market believing what it wants to believe. Tariffs, Trade Wars, Credit Cockroaches, BTC delusions, this market has it all, yet everyone is still dancing. Best thing to do might be to “Catflap” – walking away without saying anything to anyone.

I am told the art of the “Catflap” is now a critical skill among young people. Disappearing without a word, sign or signal. I am thinking it’s something to think about now in these markets…

Euphoric markets have a habit of watching all the wrong things. As I’ve written many times, markets are not clever – they demonstrate a remarkable ability to fool themselves and believe multiple improbable and conflicting things all at the same time. Blain’s Market Mantra No 3 states that: “Markets are not clever – they simply reflect the weighted stupidity of participants.”

So, if you are not watching or listening to the warning sounds, enjoy what’s left of the party. I am often accused of being an overcautious bear, but I’ve already Catflapped and am waiting to catch a taxi home.

Let me share some points of approaching friction:

It’s becoming clear from price rises that tariff effects and consequences will be long-term – they will not be one off. The inflationary effects are only now hitting the US economy. A critical one is Coffee – no nation can survice without Coffee and its up 16%! Companies were letting prices rise slowly to diminish tariff shocks on consumers. The reality is everything from widgets to coffee is getting more expensive – and will continue to do so.
Trade volatility may be about to get dramatically worse after Trump reversed yesterday’s soothing words about no trade problem with China, with a new Tweet about a cooking oil conflict! An escalating chaotic and destabilising trade war.. just what the market needs. (Or maybe the market will just let it ride, assuming it’s all just bluff and bluster – it might be right, but I suspect China (for China holds all the cards) will keep ratcheting up the pressure, focusing on what will annoy Trump the most!
The First Brands credit collapse saga makes frightening reading – (as does auto-lender Tricolor). It reveals how an overleveraged and over-expanded corporate was able to fool the banks and accountants by jiggling its stretched finances, fooling the banks, and getting away with exactly the same kind of funding shenanigans that have characterised credit busts for millennia.
(I have to giggle when I read that one of the charges against the firm alleges missing funds from factoring and invoice funding may have involved and been arranged by a firm called Raistone, which was founded by David Skirzenski, a former employee of Greensill – the UK/OZ invoice factoring scam that imploded a few years back in a gloop of bad practice, contributing to the demise of CS and other funds!)
Big banks nursing big losses on First Brands say… no problem. A sure signal there is. (Banking is about confidence, not accountants.)
Jamie Dimon was on the wires last night warning when you spot one cockroach in credit – First Brands and Tricolor – there are bound to be others. Yet credit spreads remain as tight as tight can be. Perhaps because so much money is now chasing yield!
Private credit markets are attracting unwelcome attention for just how much they have lent to the AI bubble. Everything from “second-hand” chips for rent to unbuilt datacentres are securing lending to firms yet to turn a profit and who will need trillions more funding before they do so.
Financial stupidity is uncommonly common. This years NFT / SPAC / Memecoin improbably route to riches has been the Bitcoin Treasury play, where flolloping companies suddenly decide to stop managing hotels (or whateva) and borrow loads to buy Bitcoin. Now we Bitcoin Treasury Companies trading at a discount to NAV – which is entirely Bitcoin. If you still reckon holding Saylor’s Strategy at a NAV premium makes any sense when he intends to pay current investors by borrowing more (Ponzi, Ponzi) think again.

At the moment the market’s biggest perceived risk is the AI bubble. The issues have been written to death in recent weeks with the multiple risks analysed, expanded, expounded upon, and yet the market has blithely ignored most of the points; how burgeoning (and somewhat incestuous and circular) infrastructure spending is unsustainable in light of costs and a likely shift towards open-weight AI, the failure of AI in businesses to actually achieve the promised savings, and the sheer bubble that occurs when 60% of all private capital market funding (VC, PE and Private Credit) is now invested in AI pipedreams.

Nothing fuels confidence like confidence. The price of AI hyperscalers (The Mag7) and AI stocks are rising about 3 times the rate of the rest of the market. Blackrock attracted nearly $ 1 trillion in new money to “manage” in the past quarter – mainly from Joe-Retail piling into indices that are already overweight Nvidia, Alphabet, Meta, MS and Oracle. And now the private capital markets are pushing to allow retail to buy their products in ETF format – the business of managing risk in a market like this is the art of pushing risk to next greater fool.

The market is utterly determined to believe AI is the future and that all the puff-filled pitch-decks (written by AI) are going to deliver trillions from “carrying out an undertaking of great advantage, but nobody to know what it is.” (That’s from a stock-sale satire from the 18th Century at the time of the South-Sea-Bubble.) All hail the blind pool undertaking.. course it makes sense.

To those of us with experience, who’ve read about 1929, and worked though the crashes of the 1980s, 90s, Dot.Com and the GFC… we’ve seen it before. Its 17 years since Lehman Brothers collapsed. It was not my first rodeo. The lesson? Ask questions. When the market believes without reason, ask more questions. “Why?” is the most hated word among shysters and shills.

Expectations about the future profitability the AI market which has effectively driven the stock market strength which has sustained US market confidence this year. A whole raft of side bars have pushed up the mood – Crypto is a good example. Be dispassionate about Crypto, and think about what it would be worth if the hype about Trump making the USA the Crypto Leader, or how the “Genius Act” has provided a veneer to suck in retail investors – they are cited as proof of institutional adoption, but are they?

The US market’s confidence has been sustained on the back of these narratives and high expectations. And it’s occurred despite the whole Basis of the American Consumer Dream that has sold USA Inc across the globe – from Coke to Apple Pie – being overturned in a single year.

I spent Monday at the Society of Professional Economists conference in London. It was hosted by Bloomberg – and their talking heads featured over-prominently on the speaker list, but the chat off the floor was all about how to outlook the global economy when The Trump regime has upended America’s USP (Unique Selling Proposition). Previously, the USA’s global reputation, which enhanced it attraction for investment and consumers was founded upon a nation devoted to free-trade, remaining the arsenal of democracy, founded in truth, justice and freedom.

Not any more. Today you need to factor in how the New America’s First and Only transactionalism, and what the apparent disinterest in good corporate governance at the highest levels, means for future dealings with the USA. Yes, global firms have promised to invest, but will they? Who really wants to build a plant in the USA if “grab-what-you-can corruption” spreads from Washington and every local politician decides to get in on the act. We all know how that ends.

Out of time, and back to the day job…

Bill Blain

CEO – Windshift Capital

Author – The Morning Porridge

Partner – Shard Capital