Blain’s Morning Porridge – November 5th 2019
“Threescore barrels, laid below. To prove old England’s overthrow..”
November 5th 2019
Tonight the UK celebrates a plot in 1605 to blow up the King and Parliament. If only… most porridge readers are probably thinking. We now associate the Gunpowder plot with Guy Fawkes – a hired mercenary. The leaders of the plot were a small group of disenfranchised Catholic minor aristocracy who saw it as their duty to overthrow the new Protestant Stewart (and Scottish) Monarchy, replacing them with someone more Catholic, and preferably with a taste for burning Protestants. The UK has never been short of unhappy entitled idiots who assume it’s their duty to upset everyone else – NSS! It’s as true today as it ever was.
Its Fawkes’ visage everyone now identifies as the face a symbol of global protest. Climate Change protestors, Hong Kong Demonstrators and simple bank robbers wear the mask. Terrorist or freedom fighter?
And…. Since we are talking about UK politics, let me refer everyone to a rather insightful note from last week. William Dinning, CIO of Waverton, sees a large political risk discount applied to UK assets and sterling. He’s writen a rather incisive take on the election for markets and given me permission to share it all with you: UK Election: What to Look For in the Next Six Weeks.
The UK Opinion polls are going to be fascinating.. but after trying to watch Michael Gove and Kier Starmer on Brek Drek.. I’ve lost the will to even think about it. Actually.. I’m not sure if it was them I objected to, or the interviewer’s technique? Bottom line.. how does anyone win an election when everyone is already too bored to listen to Politicians?
Back in the Real World….
Most blogs reckon Trump is making noises about scaling back tariffs on China to deflect from the deepening Slough of Despond the impeachment case threatens to become.
Did he, didn’t he? Well of course he did – but is it worth polarising the US Electorate over it? If Trump wins, the US lurches further towards something further away from the founding fathers’ dream. If he is defeated at the ballot box – democracy is proved. If he loses in the courts, democracy will find itself in the dock in Nov 2020. Trump wins if the Democrats don’t get their act together, coalesce around an electable leader and offer the electorate policies that appeal.
I wonder… Trump could not have planned it better – with one hand keep the Democrats angry and furious and focused on him, while the other bedazzles his part of the electorate with his trade statesmanship. (Pass me a bucket.)
Both China and Trump are now making positive noises about a trade agreement. Are the likely to achieve something meaningful, or enough to justify the new record levels we’re seeing in global stocks? I wonder what’s really going on. It’s not recession we are seeing – its changing global trade flows. That is going to create winners and losers.
There is some really interesting stuff in the papers raising issues about why the Global Economy is really shifting. One strand of thinking is the shift in the Global Car industry – as the end of the combustion age approaches, the flows have shifted to Electric Vehicles. Three stories worth reading for each side of that trade are:
Together these stories can pretty much explain why Germany’s superb quality and tech led automotive industries are being squeezed, while the US and China are both set to benefit. Another strand of the same theme – changing supply chains – is the US Military Build-up finding itself tied to global supply chains that ultimately leave it reliant on Russia and China for supplies, just a new Cold War threatens layer a strategic dimension to changing global trade. Never underestimate the capacity of the US Military Industrial complex to juice the US economy. It’s happened before, and can happen again.
I had an interesting argument with a reader yesterday. He was lightly joshing me when I predicted the next six months would see a fundamental shift in the medium-term global outlook. I explained the Morning Porridge doesn’t hold with any of that Kondratieff nonsense about 50 year cycles (although it may be worth thinking about in terms of the parallels between Cold War cycles and the Themistocles Trap.) I explained the current market perspective is:
Markets are about taking views on the future:
- Short-term: What can I eat now?
- Medium-term: What’s for lunch?
- Long-Term: Where are we going for dinner?
There is a fundamental shift going on – and it moves us into a new economic cycle. Some economies look strong going into it: the US and China, which will lead to them squaring off. But others, like Europe, are entering this phase of economic redefinition starting in recession, facing massive internal issues, and without a unified approach. (Read below how Christine Lagarde’s first day as head girl went..) I wonder if that means an effective long-term strategy will be to buy the Anglo-Saxon economies and sell Yoorp? I suspect so..
The other big theme in the press this morning I can’t ignore is Softbank. Its got a massive target on its forehead. I can’t help but think the pressure of media attention is sweeping it towards the death spiral zone. Try this podcast: The Investor That Spend $1 Billion a Week or WSJ – WeWork Ins’t the Only Stumble For Softbank’s Vision Fund.
Five more things to read this morning:
Out of time, back to the day job..