Monday, 27 June 2016

Brexit Bullet Points

A scatter gun approach to many thoughts.

Manic Monday - The weekend has seen the addition to the unknown of Brexit the unknown of who is leading the UK. Both main UK political parties are, or nearly are, headless. I am expecting GBP to take a hit and FTSE too. Global contagion will follow but should be faded first. Oh, and I cannot believe that this will be a real global crisis because it could be easily solved.--- This was written Sunday night. The Asia open was messy but the bounce back into European open has been fierce and shows the fear factor is being overcome by rational value seeking. I would feel sorry for the media who had their 'market crash/panic headlines ready, but instead will laugh.

If the UK is sailing off into uncharted waters it needs strength of guidance on the bridge. The UK has seen its captain jump overboard and the rest of the crew are drunk and fighting.

OK. I've Just made up a bad joke - "Whats the difference between a battery and the UK political hierarchy. A battery can take charge".

The Remainers are revolting. There is a petition for another referendum. The petition in itself is a referendum and so is of no worth unless it exceeds the total of votes to leave. i.e. 17million. If this is taken seriously before that point them it becomes a never ending circle of possibility for each subsequent losing side. The petition should be looked upon as a book of condolence only and as such  an important part of the grieving process. It's otherwise useless.

The only path to not leaving is the Government turning against the plebiscite and suffering a constitutional crisis. However. with both parties decapitated is that such a big deal for them? Kitchen sink the constitutional crisis on the past incumbent and say you are resetting the counter back to a time of previous normality and starting again.

Scotland. Sturgeon trying to sound stateswoman like going 'carpe diem’ but she doesn’t stand a cat in hell's chance of stopping the whole of UK exitting through existing process so it them comes down to Scotland leaving and trying to rejoin the EU. During the Scottish independence issue the EU said 'No, you will have to reapply’ so the same will apply now and that process will take years. My feeling is that Sturgeons 'not resting until all avenues are exhausted’ is already very near exhaustion.

Longer term. If Scotland were to leave then someone should remind them that they will not be attracting all the banks and finance business from London to a EU domiciled anglo alternative for the same reason that Dublin will fail, namely the EU will insist that a country hosting a bank should be able to bail it out upon failure. Scotland will not have the balance sheet to do this.

London's Sadiq Khan. No way London goes independent from the UK, even with regards to EU. Forget this now. As an aside, more Londoners voted to leave EU than voted for Khan. More noise.

David Cameron went down with a trader's lethal disease. He thought he was bigger than the market.

I would like to announce that my house is going to become part of the Seychelles because all its inhabitants like the Seychelles.

The Youth vote - The outcry that the young who have to endure the decision longer than anyone voted 75% to remain would cut more mustard if more than 36% of them had decided to vote (meaning 27% of them having voted remain) but what is this new idea that votes are life expectancy weighted? Do I get a vote from the grave if they decide to overturn something I voted upon after my death? If you are going to go down that route only 40yr olds should be allowed to vote as they are of the average age.

Bankers leaving London. The rumour of 2000 Morgan Stanley staff departing for the continent was denied but methinks there is a whiff of PAST truth about it, yet no senior banker I know wants to go to Europe. Frankfurt doesn't have the infrastructure or cultural appeal of London and Paris is taxtastic. Both centres relish bonus caps too. A more sensible route is to follow the example of UK manufacturing companies. Keep all the high value idea generation in the UK and outsource the basic grunt work offshore. Thus the EU could well end up with all the cash settlement and transactional business, whose value is collapsing through e-business anyway, leaving the high value decision makers and financial designers in the low tax, low regulated UK. Result.

EU behaviour. On one hand they want the UK out asap. Much like the drunk at the wedding who has dirt on the bride and has hit the groom they don t want them to be heard by anyone else with doubts and off the premises before they can cause trouble. However, Merkel is playing a more lenient hand wirth regards to timing. I doubt it’s through generosity but more because she thinks that extending time might give the UK time to sort it’s mess out and decide to stay.

Racist behaviour after the vote. Dear overseas readers. the UK is no more full of racist scum than the US is of gun toting mass murderers.

Markets. US stocks. A buy soon, before they scream to new highs. They will not melt on Brexit to the point of threatening the health of the US because the US will lean on EU and UK to sort something out ( c.f. that odd 2am Monday morning meeting between Merkel and Tsipras that saw his knees crumble and an agreement reached).

Italy. Signs of solidarity between core EU, but I still love running short Italian debt. Italy you are not out of the doo doo yet, despite the northerns being nice to you during Brexit. Is that your bank you dropped Signor?

Spanish elections. Sorry I have been really remiss on all of this and don't know what to make of it all. But assume that Brexit polarity is helping Spanis polarity.

Anyone noticed Tsipras tooling around in the recent EU Brexit meetings like he's now a big boy? Mate, you are their fag (UK Public School term for lower year boy forced to perform menial tasks for the older boys).

Bank of England rate rises halting housing?  Forget it. There will be cuts and QE on a collapse not rises. Inflation caused by FX is not due to excess demand of goods so monetary policy not an acceptable response. It does more damage.

UK house prices. Conjecture is on a fall but isn't a fall what everyone wanting to buy a house is demanding. Housing is great media fodder as any price move, up or down, is a pain to someone.

1992 when UK fell out of the ERM was the start of the 2nd UK renaissance.

I have just won a contract for a US client beating a US supplier based on the fall in cable. This is a manufacturing contract too that I will be giving to a UK company. This has occurred due to the fall in the pound on Brexit.

Market trades. Going long SPX on its first momentum pause on a fall sub 2000. Same idea with Cable (gbp/usd to the newbies) 1.2500. And selling more BTPs because there is only so much shit the Germans can back via the ECB.

Is the Bank of England now going to give up its 13% capital key in the ECB?

I am completely bored with 'not since the last time' statements, They are of absolutely no predictive power whatsoever so just stop it.

Circular arguments abound based on starting points of assumption. If this were physics, these circular currents would make Fleming's thumb 'fear'.

My final comment -
The UK is full of some very clever people who know what to do in crisis. Don’t confuse them with those in charge.


JohnL said...

I think watching the ugly step sisters DB, CS, RBS will give us lots of clues on wither or not what we should be faded this move or not.
To me it looks like the CB's are starting to loss their grip and when they do the market will run them over it has happened before and it will happen again.

Hotairmail said...

One of your best. Shot from the hip, so much to say - can't find anything to disagree.

Time to build some boats!

Anyway re the poll - I'm sure they will sort out this migration thing by just keeping job subsidies (tax credits and housing benefits) for UK citizens. This will stop the unintended consequence of businesses creating limitless numbers of low value added jobs drawing upon all of our resources in the process, whilst keeping uk citizens busy with the pride of work. Should businesses create higher value added, self financing work, then they would be free to attract the right skills. This would work to protect those at the bottom of the pile enabling them to compete with transient cheap labour, whilst keeping the opportunities for young, highly educated people and allow businesses to grow 'good' work.