Friday, 29 May 2015

Referendum: Who Will Tell The Amazing Story?

What a tale to tell.  The intrigue, the diplomacy, the shuttling back and forth across the Channel and the channels; the rumours, the plots, the plot ...

Which of our famous political writers will take up their pens at the end of it all and give us the book?  All of them, probably.  But whose will be published, whose will sell?  Even if we know the outcome all along?

The characters.  Cameron, of Oxford.  Osborne, of Oxford.  Hammond, Johnson, May, Gove ...  Salmond and Sturgeon and Adams and Robinson.  Assorted 'businessmen' (or biznizmen as they say in Russia, it means something subtly different).  Celebrities, as they get enlisted for their endorsements before the vote.  Clerics too, in due course, we may be sure - they always try to be current, relevant.  

And the huge cast of shifty foreigners. 
French foreign minister Laurent Fabius warned that Paris would say no if the UK demanded a special status in the EU ...
(Did he, by God?   He might be reminded of how France adopted its 'special status' in NATO all those years, in but at the same time out.  How was this trick achieved?  Easy: NATO needed France - on its own terms - because Russia was a genuine threat.  Now, there's a thought ...)

The intrigue, the foreigners, the rumours, the plots, the plot (even if we know the outcome all along) ...  It has to be Hilary Mantel.


Thursday, 28 May 2015

How long wil lthe boom last?

Chart forFTSE 100 (^FTSE)

Predicting 9 of the last 3 recessions, as co-writer Blue Eyes often rightly criticises me for, it s mugs game. Even the informed writers here knew the 2008 crash was coming, but how deep and when eluded everyone - markets are just not predictable.

But when we look back at the FTSE all share, a very rough guide to the UK economy over the decades since 1984, we can discern some key pointers:

1. Thatcher and Major oversaw a huge strengthening of the economy from is weakest point which was probably around 1982/3 in terms of the post baby boomer period.

2. The 1990 recession slowed growth in share prices from 300% to 25% until around 1995. Although there is a clear upturn from 1993.

3. From 1995 the dotcom bubble really distorted the picture until the crash of late 2000/2001, which also cross over with 911. A min-recession took place in the real economy in the Tech and Travel and Hospitality sectors, but the rest of the country survived relatively unscathed - stock prices took a big dip as the effects of the dotcom bubble wore off. The indices returning to its pre-1997 levels.

4. Then we have the disastrous leverage boom of 2003-2007. How so much damage could be done so quickly is frightening. Still, stock prices bounceback within 18 months and have been steady ever since.

5. However, since 1999 there has been zero real growth in the FTSE, even allowing for the changes in constituents, the index has shown little growth.

6. Reflecting the UK's wider productivity issues remarkably well, the indices has been suffering from slow growth since 2011 - 4 years now of slow chugging up.

So what next? Well from 1984 it took until 1987 for a crash and then the overall recovery too to around 1993. This boom then last until 2001. So a 4 year expansion, then a 7 year recovery period, followed by a 7 year boom.

Then we have the dotcom crash, a 3 year downturn then another 4 year boom. Then a huge crash followed by a weaker 7 year recovery period.

On balance, this means we are likely due a 3-4 year boom phase before the next crash. Given property cycles are often cited as 18 years - then this would also match with the next big bust not due to the early 2020's in theory.

What seems unlikely now from a historical context is a huge recession in the next few years. It maybe that with technology changes and volume of interactions that phases are getting shorter - but still, its hard to be a bear even now.

Of course, event dear boy, events - an EU Grexit or Brexit or the final realisation of the massive Chinese bubble in printed money  and over-investment can jinx historical moves. But then again they always could.

Wednesday, 27 May 2015

Queen's Speech - Referendum moments

The real action today in the Queen's Speech is the move to put into law the referendum on EU membership. This it eh political action which will dominate the next 18 months and in many ways is the most dangerous Tory bill (for them!) to come to Parliament since the Maastricht treaty in 1997 - maybe even as dangerous as the Poll Tax bill of 1989.

The only competition it has really is the new Scotland act that also plays out the next stage of the Scottish 'neverendum'. The bill devolves huge powers to the Scottish Parlilament but also will be met by the SNP party as a 'betrayl of the Vow' given back in September. Whether it is or not is irrelavant to the politics of the situation. Parliament is about to find out how much fun it is going to be having nationalists who want their own Country sitting on the benches of the Government of the  Colonial masters.

As for the EU referendum, I think the Tories have a good chance of getting the outcome they want as long as they learn from the SNP playbook and play very nasty all round.

1. Agree to Referendum at end of 2016
2. Try to negotiate for 6 months from now
3. Announce in January that France, Germany et al have not given enough concessions and that Cameron is minded to back an 'Out' vote
4. Wait for the EU to fold as it sees subsidies and indeed its existential existence threatened (especially if Greece has exited Eurozone too, a distinct posibility)
5. Finally receive some small but meaningful concessions by summer 2016
6. Decide to campaign afte long and hard thought for a vote to stay in
7. Win the referendum, shoot the UKIP fox, be seen as great leader for the UK until Scotland leaves...

Sounds easy, requires real balls to execute - I doubt they can do it that well!