Blain’s Morning Porridge – 14th January 2019
“You miss 100% of the shots you don’t take..”
In the headlines this morning: https://morningporridge.com/stuff-im-watching
Unfortunately… I suppose I should comment about the B word. I shall start by admitting – like everyone else – I really don’t have a clue where we’re go from here. The political maths doesn’t work. There are no apparent solutions. There are multiple scenarios to game – but none of them seem to lead anywhere positive.. The only thing I’m completely sure of: tomorrow, as MPs finally vote on the UK/EU divorce bill, we will hear lots of UK politicians spouting pointless blustering pompous nonsense moving us forward not a jot.
But, I also sniff great market opportunity.
If you could afford to magically remove all UK chips from the table, you probably would… But you can’t. Where else would you invest? If you think British politics is crazy… tell me where isn’t? Yep, better to spread your bets across a globe of dysfunctional politics – for that is the reality of the new Trumpist populist age.
The second issue for UK Inc is more fundamental. Alongside our bafflement at the amateur blundering ineptitude of the UK political system leading us to this place of befuddlement, I can’t help but wonder if we’re missing some fundamental positives about UK Inc, that the pros and cons of Brexit have been massively overexaggerated, and this is the time to buying? What if things are NOT really so fundamentally hopeless and bad as the hyped-up political rhetoric and verbiage suggests? What if Brexit isn’t so bad, or a good compromise can be found?
In the next few days I think I can confidently predict a complete and utter clusterf**k in parliament, the absolute disintegration of political common sense, unprecedented journalistic hyperbole, and profound disbelief across the economy. Confidence will collapse, the tinned goods shelves at the supermarkets will be empty. End of the world.. again.
It will be the perfect moment to scoop up UK Inc.
Is UK housing really so over-priced? Are consumers about to stop consuming? Are the prospects for our world class aerospace, auto and computing industries really so limited? I would not for one moment try to argue Brexit will be painless. There will be damage, a loss of trust, and division. Leaving the EU will be costly. But, so would staying in. Pros and cons, but the UK voted to leave, without understanding how. It’s also more likely we’ll find a compromise.. somewhere? There are good comprises that will benefit both the UK and Europe to be found.
The Remainers assure us everything can and will be fixed if we reject Brexit, vote again, and embrace Europe. Sure… but nonsense. That won’t a restore a single job at Land Rover – which is losing money because of ill-executed diesel legislation. It won’t save Jaguar workers – sorry, but they don’t build cars folk want to buy.
The bottom line is any economy has great intrinsic value if producers are producing goods folk want to buy, and folk have the resources to buy. The UK is not going to switch off overnight on whatever Brexit vote is finally (dis)agreed. Trade will find its own level. The UK has historically been rich in inventive, commercial and legislative skills – these provide a base (not perfect, but functional) that makes UK Inc worth far more than the zero value some now ascribe to it.
Its interesting to hear Brexiteer fund managers – like Crispin Odey, reversing bets against the pound. The FT reports he’s long sterling, and said: “Markets have already decided.. Brexit isn’t going to happen.. The pound should rally; its very oversold.” He’s also being buying retail stocks like Dixons. A soft-Brexit (much like the one on the table for tomorrow) would be massively sterling positive.
Sure, the whole Brexit thing has been deeply flawed since the get-go. Tough. Let’s get over it. And staying in Europe doesn’t mean Europe would be fixed. I have a lot of sympathy for the perspective of being a small cog in a functional global economy than a big cog in a barely working Europe. Personally, I just don’t think Europe works – its imbalanced in favour of the few.
To give an example: tomorrow I’ll be in Vienna, taking part in a debate on how much damage Global Trade wars will do to the economies of Central and Eastern Europe. I’ll be arguing its inevitable they will suffer because they have become little more than manufacturing floors for German industry – if Deutschland’s autos sniffle, these economies will be in extremis.
But, it doesn’t have to be that way: rather than being straightjacketed into servitor nation status, they could follow more lucrative value-added paths based not just on innovation and entrepreneurship, but on stronger national platforms where corporate governance, politics, judiciary, and trade are reinforced across these economies. However, that would require investment in education, law and order – which is impossible while austerity is the EU enforced rule, and austerity results in populist national governments.
I should imagine a few emails on that comment – that EU austerity has caused populist politics. Its certainly contributed to the political phenomena that’s occurred across Occidental economies.. Worth bearing in mind..
Out of time, and back to day job.
If you are looking for ways to invest in UK Inc, lets chat!