Blain’s Morning Porridge – July 24th 2019
“These are my principles, and if you don’t like them… well I have others.“
In the headlines this morning: https://morningporridge.com/stuff-im-watching
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My Generation Z daughter texted from Sydney: “Oh my God, Boris Johnston is Prime Minister? That must be bad, but how bad? What does it mean? Will my Irish Passport get me back in? LoL.” My first suggestion was she marries a rich Australian: “Stay in Oz Buba-Jen!” (If any wealthy Australian readers have a son of marriageable age, please get in touch… quickly.. her visa runs out in January!)
But, seriously. How bad can it be?
Boris gave an engaging, amusing, self-depreciating and curiously reassuring rallying-call to the troops y’day when he won the vote. It sounded good. It looked good. Smiling Tory Big-Wigs on the front row. When Boris is on form, that’s what Boris does. He amuses, enthuses and wins the room very quickly. “Make ‘em laugh” works for Boris. It’s the personality we saw yesterday that people like about Boris. When he’s on form we forgive the lies, the naked ambition, the lack of detail. How difficult can it possibly be to deliver Brexit, Unite the country and slay Corbyn? Easy peasy… only three impossible things before breakfast.
Bollchocks! If you were thinking the UK might be in for a period of stability and look investible again.. Hold on. This is just beginning. For AT LEAST the next 99 days, the UK is going to be a swirling political battleground.
Don’t be fooled by yesterday’s congratulatory mood. The challenge for Boris is enormous. If you were a gambler, you would probably be betting against him. Over the next 99 days Boris is going to be fighting a war simultaneously on three fronts, and he needs to win them all. It’s a massive political ask. Can he:
i) Win his own party?
ii) Win the Country in Parliament and (probably) at the ballot box?
iii) Win in Europe?
He’s apparently promised there won’t be an early election, but the parliamentary numbers willing to support soft or hard Brexit, and his wafer thing parliamentary majority, suggests he can’t avoid one in the short-term. He still faces a Remainer backlash within the party. The list of ministers who’ve stepped down continues to grow – providing a core of malcontents. There is uncertainty on which of the big guns, including Jeremy Hunt, will join his cabinet. He certainly doesn’t have time for a root-and-branch party purge to get Remainer MPs deselected before he will need to call an election. An electoral pact with Farage will be a divisive option – but possibly the only realistic one. (And Farage has made clear he will listen if a no-deal clean break is on the cards.)
There is even talk senior Tory mandarins are willing to countenance total parliamentary failure by Boris, pin the blame on him and accept a few years out in the cold as the only way to remove the taint of Brexit from the party. They figure it’s better to let Labour take the blame for a fracturing UK, and the likelihood of a bitterly contested and divisive second referendum. As strategies go – its not a bad one.
And all these issue above are just Boris’ internal domestic political challenges!
The second impossible challenge is to win the Country.
In normal circumstance, it would be tough but not unreasonable for Boris to win a two-front war against a rejuvenated Liberal Party and (a tired) Labour Party – especially when part of his energies are directed internally. This time the question isn’t left, right or centre. Its Leave or Remain (which is why he wants to avoid an election.) Boris will have a very limited honeymoon period with the electorate, especially as the Liberals have elected a very nice sensible, but quite angry, young woman to lead them whose name my brain absolutely refuses to register. She seems absolultely determined the Brits will keep voting on the EU till they get it right. 48% of the electorate apparently agree with her – which makes her very important. (OK – her name is Jo Swinson, and if she wasn’t so shouty she might make some sense..)
Plus there is the additional challenge of Scotland. The SNP are smiling as now they perceive a fantastic chance for Indy Ref 2. They have 35 MPs today, and expect to win back most of the 13 the Tories now hold in Scotland in a general election. That makes them very powerful – and open to a deal with Labour. The Scots collectively have little time for Boris. The New Statesman recently wrote: “Johnson represents precisely the kind of uber-privileged, arrogant, pompous Englishman that has historically antagonised most Scots…. David Cameron was passively disliked but the fervent abreaction to Johnson is unprecedented.” It’s not because Boris is a Tory – the Scottish Conservative leader, Ruth Davidson, is extremely popular in Alba. She can’t stand him. (For foreign readers, Alba is the Gaelic name for Scotland.)
And the third impossible task facing Boris is winning Brussels.
He still faces a Brussels nomenklatura determined not to give any concessions. Barnier has already said he expects Boris to “facilitate the ratification of the withdrawl agreement”, making clear new negotiations aren’t on his agenda. On the other hand, it does sound like EU national leaders – with the exception of Macron, who already warned BoJo the EU will not budge – are willing to be “constructive” for a good agreement.
As a financial strategist I should be non-judgemental about Boris. What does Europe think? Tagesspiegel says he is: “A premier without a plan”, adding; “the theatre Johnson offers is an expression of the increasing infantilisation in politics.” Le Figaro charts his rise as “ambition riddled with controversies,” while Liberation says he is a “liar, egocentric, obsessed with money, but appreciated for his eccentricity and self-deprecation”. That Donald Trump immediately congratulated him as a Mini-Me says a bundle – and didn’t help.
What do these foreign-johnnies know? Nothing! They said Churchill was overly partial to Pol Roger and Lloyd-George was a priapic old goat.
I sincerely hope Boris pulls its off. If he doesn’t… I can perceive years and years of internal battle with the UK over the EU, pulling apart much of the rationale for UK investment. The sad thing is it’s all so utterly unimportant and pointless. Boris summed it up yesterday quite well with his comments about close and meaningful relationships with Europe across trade, security and defence, and our own parliamentary democracy. Is it really so difficult?
Today will be all about Boris’ coronation. Theresa May will be flattered and feted at her final PM questions before being dumped into the dustbin of failed parliamentarians. She will say goodbye to Her Majesty, and as soon as she is gone Boris will appear and ask permission to form his government. Then he will give the whole country a speech setting out his plans, trying desperately to unite us.
There is an old market adage: “No point in worrying about how bad something is today when it will probably be worse tomorrow.” So let us not panic, but move with purpose and alacrity into the new Boriosian Age.. I am thinking he might surprise us… (Careful what we wish for…)
This is going to be interesting… Tomorrow I will get back to markets… Today is about UK politics.
Back to the day job..
Bill Blain
Shard Capital