Blain’s Morning Porridge – July 29th 2019
“I’ve seen things you people wouldn’t believe. Attack ships on fire off the shoulder of Orion. I watched C-beams glitter in the dark near the Tannhäuser Gate. All those moments will be lost in time, like tears in rain. Time to die.”
In the headlines this morning: https://morningporridge.com/stuff-im-watching
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The UK is a curious place. Boris Johnson’s feel-good drive and the numerous plots being arrayed against him, received rather less attention over the weekend than the Minister for the 18th Century’s rather ponderous style guide. Jacob Rees-Mogg, Esquire, has banned a host of words, outlawed clichés, demands double spaces after full-stops, insisted on imperial measures (Kilometers, Kilos and grams are banned), and has made the incorrect use of apostrophes a capital offence. Readers will know my grasp of punctuation, spelling and grammar is nebulous at best – so if I disappear suddenly you can assume the Extreme Grammar-Nazi wing of the Conservative Party has got me!
Back in the real world, this week is largely about tomorrow. Worry not about what’s going on in Hong Kong, the Gulf, or even how bad European economic data might be. The only real question is what will the US Federal Reserve do? It’s not a question of will they ease rates, but by how much- 20% change they may go for 50 bp!
Perhaps the question should be – why ease rates at all?
It may be the depths of a thin summer, but a 25 bp cut will be enough to please the market. The economy won’t change because of a quarter point reduction in ridiculously low rates, but stocks will rally and the market will be properly ecstatic! Donald Trump will tweet to his followers about what a great job he’s doing and how its confirmed by the strength of the stock market. That is a sh*t reason for cutting rates. It worries me the Fed is prepared to pander to Trump and the stock market.
The Fed will say it’s because of uncertainty and trade weakness. Horse fertiliser! After 10-years of lethargic economic growth, the only place you find real inflation in the US is in financial asset prices. Stock market prices are bloated by cheap money – which fuelled stock buybacks and hasn’t contributed to productivity gains, new factories, or infrastructure. Plenty of jobs have been created, but many of them are low value. A rate cut isn’t going to boost the economy – but it may well juice stock prices. Despite what Trump Tweets, they are not the same thing!
Meanwhile, the fact this week’s resumption of US/China trade discussions is unlikely to go anywhere significant will barely concern the market. But, if you want to juice the Global economy, then global trade and not rate cuts would be the way to do it. And once the market get’s the 25bp ease out the way it can go back to worrying about this week’s earnings (Apple and GE will be the ones to watch), and the payroll data on Friday.
Meanwhile, let us return to Camelot (currently in Administration)….
The political forecast here in Dear Old Blighty now says: “A strong probability of Bluff and Bluster across the country, outbreaks of Speaking Loudly and very Slowly to Foreigners to the East, while a sustained low of Furious Indignation will remain in the North”.
Let’s speculate about Boris Johnson, Esquire. The feel-good he’s generated in just a few days has been extraordinary. His speeches have caught the mood. He smashed it at the dispatch box. Across the country, folk are sagely pontificating about an imminent European surrender now he’s so clearly delivering the message to Brussels – give us the deal we want or else. His new chief advisor, the frightening Dominic Cummings, Esquire, simply bites the heads off anyone who dares to question the Brexit Brexit Brexit strategy. Nothing else matter except to loudly and repeatedly proclaim it’s going to happen – no ifs, buts or maybes.
(This week’s Financial Porridge podcast includes an interview with serial entrepreneur and member of the leave campaign Martin Banbury, Esquire. We talked about Cummings. Unfortunately, Martin’s choicer comments about Cummings were too bleepy bleepy to use, but I did keep the one about how it might be a mistake to give Cummings a Kalashnikov and let him wander the corridors of power. This morning the Torygraph carries a leaked memo about Cummings threatening ministerial advisors with “one strike and you are out”!)
We are told an early general election is not on the cards – because it would distract from the Brexit Brexit Brexit First and Foremost strategy. Yet, the Tories are up 7% since Boris became Prime Minister, and they now hold a lead over Labour. Boris now comfortably outpolls Corbyn on nearly every aspect of leadership – and that’s confirmed in polls published in the left-leaning Guardian.
But can Boris’ bluff and bluster gamble work? The numbers still look dire. In a few weeks it’s likely he will have a parliamentary majority of one. There are swirling rumours of high-level defections to the Liberals. A gang of remoaner malcontents are apparently determined to stop a no-deal Brexit. Boris is sitting at the top of very wobbly greasy pole.
What could possibly be worse?
Being a Labour MP? That’s probably a much worse place to be. Corbyn was buried by Boris in Parliament and looks the tired old man he is. I’m not entirely sure I care where or what Labour policy is any more – Corbyn’s “settled” line of supporting a referendum on whatever the Tories comes up with is supporting a second referendum – which will likely prove divisive electoral suicide. Supporting a second neferendum will play wonderfully well in all these Labour seats that voted to leave. I’m not entirely sure Labour gets the fact the electoral question has changed: IN or Out is as important as choice of Party.
The new politics is great for the Liberals. They are the party of remain. And if you are committed Tory or Labour voter, but want to remain, then it’s not so hard for vote for them. Is it…?
The only thing we can say with any certainty is the UK is still uncertain!
Out of time and back to the day job…
Bill Blain, Esquire