Blain’s Morning Porridge – October 23rd 2019
“Win or lose, sometimes you learn.”
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October 23rd 2019
As we wake up to another day of Brexit uncertainty – Joy! – what else is happening in the World? I am absolutely fascinated by what’s going on politically across the pond, but it would churlish of me to criticise a young, still immature democracy like the USA struggling to cope with Trump and Giuliani when the Mother of All Parliaments is so wobbly.
Both Brexit and Bidden-gate are distracting from the real stuff – just how much is the global economy slowing. And that’s the critical thing: the trade war fears are not triggering a recession, just a slow down, and that has massive implications for Central Bank policy. It’s the direction of Central Bank policy that’s going to be critical for markets. If central banks start to dial down the accommodative rhetoric, the negative implications for a grossly inflated bond market could be horrible. And the knock-on effects into stocks will likely spell a stock correction. This is the time to be hedging – and that means a more defensive market into year-end.
The next few weeks are going to be fascinating – what should Central Banks be doing to avoid market meltdowns in the wake of overly easy policy? Entirely their fault, but markets problem to resolve.
But first… we have to talk about Brex-zit.
This sterling roller-coaster is a marvellous thing. We love volatility. Wouldn’t it wonderful if you could predict it?
Well, you can! For the benefit of foreign readers of the Morning Porridge, let me explain exactly how this is going to play out and what the fundamentals driving what passes for decision making in The Houses of Parliament are, here in the UK.
You might have noticed that last night, Boris Johnson – our blonde mop-topped prime minister – lost a vote that he won. Clever – eh?
Please don’t be confused; it’s just the way it works according to our unwritten rules. He is who is first is last and all that mumbo-jumbo. Just like Mornington Crescent, the rules of the Westminster game are really quite simple. All you really need is to understand the players, the make-up and forces active within Parliament. Let’s not confuse it at this point by adding the complexity of what the Speaker does – suffice to say he’s a bit of a quaffle, and he gets to double-track cross.
As I say, it’s really quite simple.
- There are 650 MPs.
- The Scottish Nationalists are a power block of 35 MPs who sport blue-woad bottoms and can pretty much be relied upon to complain about everything in terms of being the fault of the pernicious English. There are 14 other Scottish MPs – who like in constant fear – even though the SNP only have between 40-50% of the Scottish Vote. The number of SNP MPs elected by Scotland is a function of how unlikeable the Prime Minister is. Scotland hates Boris.
- There are 20 Old Etonians. These partially grown-up public schoolboys are united by their unshakeable belief in their own superiority and intense dislike of each other. Their motivations stem entirely from their objective of dislodging other Old Etonians and becoming Head Boy themselves. (For a full examination of the English public school system there is an excellent programme by documentary film maker Michael Palin explaining how they work.)
- Other lesser public schools (some of which actually educate their pupils) contribute the majority of lesser MPs sitting in parliament, including the leader of the socialist Labour Party Jeremy Corbyn.
- There are 10 Norn Iron Taliban (called the DUP) – feck knows what they want – and 7 Sein Fein Irish Nationalists who refuse to sit in Westminster.
- There are 19 Liberals. It’s a small but very noisy number who rejoice in stridently telling the British Public how silly they were to vote for Brexit. I don’t think they have any other discernible purpose. They tend to whinge a lot. Never invite liberals to dinner parties as they are really dull.
- There are 532 Tory and Labour MPs. 470 of them aren’t particularly motivated or engaged. They know enough when to bray and cheer in Parliament. Although they might think remaining in Europe or getting out is pretty much a good idea, they probably don’t want the hassle a second referendum would entail and/or want Brexit done and dusted – but they won’t speak up in fear they get deselected from their parliamentary seat, and have to go and get a real job (for which they are profoundly unsuited).
- That leaves about 60 odd mal-adjusted MPs who think their opinions matter and even worse, think its very important to express these opinions. These MPs will now scream about the need for a no-deal Brexit, to approve the present deal, or to examine very closely and minutely every detail of the current deal they agreed to last night so they can change it. They think they are representing their constituents who love thier dilligence. Their constituents generally hate them.
These 60 MPs are the ones to watch.
It will be very interesting to see how they now seek to transform the House’s agreement to the Brexit deal last night, and amend it to require a second referendum and Boris Johnson as the first Brit to be sent to Mars.
Now you are probably wondering why Boris does not simply call an election. Well he can’t. By law the government is supposed to stay in power till 2022. It would take 2/3rds of the House (434 MPs) to approve a new election – and that’s unlikely because many of the Labour MPs worrying about their next jobs know they will get booted out because Labour promised to support Brexit, but now doesn’t.
Boris may be able to play a “blodger” and get a “notwithstanding the Fixed-Term Parliaments Act” amendment to enable an election on a simple majority vote – but since any vote would come just before Christmas, and we are thoroughly peeved with politics, its possibly not a great option.
If Boris were to get a general election he will win it. Hurrahs and a rejoicing all round. He will therefore confirm his position as Eton Head Boy, and all the Etonians will then rally round him… meaning he will be able to lead a strong parliament and can pass whatever Brexit Deal he wants. I confidently expect at that point some dodgy photos of Mr Johnson in an inexplicably embarrassing position with a young lady which arrive at the Editor’s office of the Sun. The whole thing will kick off again, and Michael Gove will “reluctantly” become Prime Minister… while hiding his ear-to-ear grin at how well his plan has worked…..
The bottom line…? Well Brexit will happen. Eventually… who knows when…
Out of time and back to the day job..
Five things to read today:
Thunderer – Fruit pickers fight back at Italian mafia “slave farms”
FT – Fed steams back into US Treasury Bill Market
FT – Global growth downgrade masks underlying economic strength
BBerg – For a Strategy Left for Dead, Value Stocks sure do return a lot
WSJ – Diplomat Says Trump Tied Ukraine Aid to Probes Into Biden, Alleged Election Interference
Bill Blain
Shard Capital