The UK Fire Sale Highlights National Value, And Time For Change to Monetise Our Value!

Blain’s Morning Porridge October 6th 2022 – The UK Fire Sale Highlights National Value, And Time For Change to Monetise Our Value!

“We import two thirds of our cheese. That. Is. A. Dis. Grace.”

This morning: The UK is not bust or broke. Smart investors are actively looking for bargains in the wake of the Trusster**ck. Its time for change to monetise the value of the UK for the UK!.  

Are you familiar with the Haynes Manuals on how to fix your car? I am thinking of asking if I can write an Owners Workshop Manual To The UK Economy. It will contain helpful hints on how Gilts markets work, why fighting inflation with rate hikes while flooring the tax cut accelerator will flood the engine, and how regularly checking levels of Political Competency, Currency Stability and Bond Market Sustainability should keep it running smoothly for decades. I shall dedicate it to Liz and Kwasi.

This morning the World is trying to work out exactly what Saudi Arabia and OPEC siding with Russia to hoik Oil Prices means for the Global Economy – full thoughts on that tomorrow.

Back on a small island at the unfashionable end of Yoorp, today’s UK financial headlines are still all about the hundreds of billions of market value single-handedly destroyed by Liz Truss, Goldman Sach’s plundering the illiquid asset books of collapsing UK pension funds, financial bargains galore in the UK fire-sale, and the dismal future prospects for the country.

Get over it. Relax. Breathe.

Frankly, it’s been fun but we are getting to the stage where we have to move on from seal-clubbing the chronically ill-favoured Liz Truss government, and look to the reality. The UK is actually a damn fine country! We have enormous potential – which is why investment firms are scouring the nation for investment opportunities. We are a smart (tho oft misguided) people, and we are not about to disappear in a puff of national fiscal ineptitude and bankruptcy. When we do things well.. we do them extraordinarily well.

I would not wish to live anywhere else! Although Liz Truss will not be getting my vote any time soon, I am not Anti-Growth either.

All governments and political lives are doomed to failure. The last 12 years of Conservative Government have been extraordinary in terms of the UK’s political failure, and for that I absolutely and unreservedly blame the Labour Party.

The job of the opposition party is to look clever and be electable enough to force the Government to actually do its job well and competently. Labour’s chronic failure to address the failings of the fractured Conservative Party through the Corbyn years is therefore perhaps the greatest political evil perpetrated on the Land. Shame on Labour! Cameron, May, Boris and the new girl failed because Labour failed to challenge them… or something along these lines. (US Readers – mild sarcasm alert.)

12 years is about the right length of time for a competent democratic government to be in power. 12 years should be enough time to cycle through complete fundamental reforms across the economy encompassing industrial policy, business growth, the welfare state, education, health and defence. How much better is the UK as result of the last 12 years? Well… at least we got Brexit..  Let’s not go elsewhere…. Wasted decade etc, etc…

Incompetent governments deserve less time and should be replaced at the earliest opportunity. This new one is a case in point. Mistakes have been made, and its cost the country billions – but the reality is the political damage to the markets has now been done and it happened before we woke up to the Kwarteng/Truss nightmare. Markets have largely factored Truss/Kwarteng incompetence into their pricing models.

The big unknown is what happens next? How long will this splintered government cling on to power, unable to deliver policies or change? At a time of national energy crisis, looming stagflation and further interest rate hikes to come…. When should we have an election?

The Tory strategists will be considering this carefully. Unlike politicians, strategists think past the next vote cycle. They know to call an election now will lose them the country. The upside is the economic reality is likely to get worse, which means being able to blame the next government at the next election. If they hang on (as Labour did in 1978) it likely the declining economic outlook means and even bigger wipeout at the polls. Or do they hang on hoping things get better. Hope is never a strategy.

An election is coming. The Labour party needs to be out there engaging with markets and the City now, and clearly differentiating itself with a fully costed and workable plan to create growth, improve productivity, stabilise and grow the economy – recreating the UK’s virtuous sovereign trinity of political competency, currency stability and bond market sustainability. That means a programme to support company foundation, new funding for SMEs, support for industry, proper regional growth strategies – and don’t call it levelling up, while simultaneously addressing welfare, health and the rest.

All These Things Are Possible!

Yesterday Liz Truss laid out the list of Enemies of the State: the anti-growth coalition that’s really responsible for taking the UK down (ie, her “it wasn’t me” list): her “enemies of enterprise” included “Labour, the Liberal Democrats, The SNP, the militant unions, the vested interests dressed up as think tanks, the talking heads, the Brexit deniers, Extinction Rebellion, etc, etc,” I loved the one about “Taxis from North London townhouses to the BBC studios to dismiss anyone challenging the status quo”.

Yep, I guess I am one of them. I want to restore the status quo – growth and government competency.

I was highly amused by a Tweet from John Redwood MP yesterday. Redwood is one of the last Tory dinosaurs from the previous century, fulminating about how: “The pound rises 11% in nine days and the stock market surges. Why no media stories on this huge vote of confidence in UK economic policy when they were so ready to blame the government alone for the falls two weeks ago?”

Doh. “It’s not us! Its them! They all hate us, and it’s their fault, not ours.” I quess that’s what enrages me so much about the Tories these days – their screaming rightness about everything, and their point blank refusal accept they might be just as wrong as the rest of us. They must think we are idiots.

Meanwhile… Pipelines and Russian Energy – Is It All A Distraction?

Whoever blew up the Nordstream Pipelines, and their motivations, its likely to go down as one of the great environmental crimes of all time. As of Monday October 3rd, when the pipes were surveyed by the Swedes, Nordstream 1 had stopped leaking methane, but Nordstream 2 was still bubbling away – dumping as much methane into the atmosphere as Denmark emits in a year.

The big question is sabotaged the pipe? Who stands to gain? Why would the Russian’s put their leverage over Europe’s Gas Supplies at risk?

Moscow is pointing angry fingers denouncing the Americans and Brits, accusing them of wrecking the pipes to impose their Capitalist hegemony over Europe. By their unprovoked attacks on the peaceful financial assets of the USSR Russia, Washington and London are consigning European workers to a winter of economic destitution. European nations are being driven to the edge of an economic precipice by their capitalist masters, and the war the Americans and Brits started through their support for Ukrainian Nazis is being dragged on at a time when peace is within the grasp of everyone – if we all just agree mineral rich Eastern Ukraine is Russian, just as the people voted for.

Russia is a peace loving nation and wants nothing more than confraternity with European nations whose co-prosperity with Russia has been cruelly denied the opportunity to agree a peace deal in Ukraine and for Russia’s gas to save them from recession and gas rationing this winter. (US Readers – Sarcasm Alert.)

Which is, of course, rather blunt Maskirovka: the Russian art of distraction and deception.

The Brits and Americans certainly have the military sophistication and skill sets to take out Russian undersea cables, so pipelines should not have been a problem. And, such a move would forcibly demonstrate to Europe the need for energy security not involving Russia..

And then I read in New Scientist: despite the massive damage and methane emissions, Gazprom – while angrily denouncing the Americans for the attack – has quietly suggested Nordstream 2’s second operational pipe could be put back into service. Interesting. A massive series of explosions takes out Russian Gas to Europe, and then… well we can still supply you… What’s the next line? The cost will have risen – and we aint talking just dollars.

Don’t be surprised if in the depths of European Winter Energy Crisis and rising industrial unrest this winter, and the war continuing to go badly for the Reds in Ukraine, that the Russians offer to swiftly repair the pipelines in return for concessions.

(Top Tip – New Scientist – not only a good distracting read from the sheer misery of markets, but a top source of ideas and insights.)

Five Things to Make a Bad Day Worse

BBerg – “Uninvestable” UK Market Lost £300 Billion in Truss’s First Month

FT – Goldman Sachs pursues asset purchases in UK Pensions Fire Sale

The Atlantic – Warning Signs About the First Post-Pandemic Winter

Washington Post – The Saudi-Russian Oil Axis Snubs Biden with Production Cut

BBerg – Here’s What Goldman to UBS Say About Oil After Big OPEC+ Cut

Out of time, and back to the day job…

Bill Blain

Strategist – Shard Capital