What is the City doing whilst the the politiciams blunder?

I have been amazed this week as the sheer level of stupidity shown by some commentators on the left. Bad enough that they have long flung around phrases like 'Disaster Capitalism' - which can mean anything but overall just is a slang way of saying capitlists = bad people.


But in recent days they have cottoned on to the concept that hedge funds might short positions that will be at risk in a hard Brexit. Obvious things like shorting the Pound or backing the FTSE to fall. This is not evil and it is not willing a hard brexit - it is gambling their hunch will pay off in that scenario. Plus of course, another fund or investor is on the other side of the trade betting the exact opposite. Both won't be right and one will win and one will lose - there is literally no political element to this. So the Angela Eagle level conspiracy is jus the most baseless and ignorant nonsense possible.....and the remainers say the leavers are the uneducated and stupid ones.


Additionally, after ND added in his tuppence yesterday on the Energy market, I thought I would add in a summary of anecdata taken from many of my recent meetings in the City and West End.


The property market is in a bind, the resi market is vey weak at the top end and has been since the stamp duty rises of 2015. Many units in central London are coming to market with very few buyers, but also not yet the huge drops in price that would stimulate real demand - the issue being the cost of building was likely above the now demanded sale price - so profit warnings ahead for these developers. Luckily for the UK economy, most of those parted with their money for these developments are wealthy foreign wealth funds or high net worth families who eventually can and will take the losses. However, as with all markets, construction has dropped off in response so now with much reduced supply pipeline as compared to recent years it is likely that the market will start to move up again in the next few months and years - Brexit or not.


In the commercial market, there is a good reminder that Brexit is not everything. A wave of money rushed our of Hong Kong as problems there meant capital fled to traditional safe haves - even French Chateau's have been selling. There are a plethora of fund launches into fine wines and art - things that Asian investors are often very keen on, despite the risks. Money flows are also helped by Sterling weakness as assets are cheap. however, commercial markets are very toppy price wise and a sharp drop is expected- perhaps the Sterling fall means in reality this has already hit, but us domestics don't see it!


With cheap assets comes deals, so lawyers and bankers are busy. Cheap interest rates mean firms can refinance and high levels of foreign investment means lawyers and investment bankers have deals to do. There are not may quiet offices in the City with people panicking over Brexit. They just want it done one way or other (revoke very popular as ever). one area of worry is that Luxembourg will eat the market share of European funds work as London and the Crown dependencies struggle with uncertatinty.


So, against the usual talking down of everything thanks to our universally useless political class, the economy seems OK. Which is why is it not surprising to see high employment and wage growth against this background. What is different I outside of services, where manufacturing has had to stockpile and hoard resources due to the uncertainty and construction is weak, as per above. Overall I think IF we can either Brexit or not and reduce the uncertainty we may even pull off avoiding a recession for another year or two yet, driven by the continued funnel of Foreign Direct Investment into the economy.

Who do you think you are kidding, Mr Adviser?

“This morning the British Brexit delegation in Brussels handed the European negotiators a final note stating that, unless we heard from them by 11 o'clock, that they were prepared at once to grant the United Kingdom a satisfactory trade arrangement and accept our proposals for the Irish border, a state of trade war would exist between us.

I have to tell you now that no such undertaking has been received, and that consequently this country is now in a trade war with Germany”

 

The last, most fantastic piece of civil service hogwash was released a few days ago. When many thought Project Fear, an increasingly ineffective method of frightening voters to back a government decision, had already deployed its most doom-laden and apocalyptic visions of the terrors to come, the civil service Remain contingent, turned the dial up to eleven.

“In the second scenario, not even the worst, the port of Dover will collapse on day one. The supermarkets of Cornwall and Scotland will run out of food within a couple of days, and hospitals will run out of medicines within two weeks.”

So the Guardian was led to believe.

Now, even the Guardian was a bit embarrassed to be repeating such blatant falsehoods.  So much so it gave a voice to Brexiteers the next day. Without even hinting those Leavers might be wrong in their denunciations of the obviously unrealistic, exaggerated, hyperbolic amplifications of “possible” scenarios for “The No Deal report.”

So frightened are the mandarins who run the nation that such a terrible thing could even be countenanced, they were prepared to allow such blatant lies to be “leaked” to the press. To ensure the forthcoming vote on the Brexit amendments would be free from any talk of leaving without agreeing to remain in all but name.

That this was leaked deliberately to obtain the most negative possible press coverage for no deal is beyond doubt. That it was the civil service themselves, the Remain Cabinet Secretary cabal approving, the Remain ministers colluding, cannot be known for certain. But the hallmarks bear all the signs of the establishment at work.

The playbook says release a file with four or five possibilities scenarios. Ensure three are predicting a crisis the likes of which would make The Rapture more appealing. And the others with lots of doubt and gloomy language. Though nothing quite as fire and brimstone as the lead case study. The one the service knows full well the newspapers are going to run as a headline. 

How do we know the possible outcomes of medicines being non existent and food rationing being introduced immediately? 

Well, it’s simple.

WE AREN’T CHILDREN.

We have a modicum of understanding of the world. We know, for instance, that even somewhere such as Syria, today in the midst of a civil war killing hundreds of thousands, people can still get food.

We know also that in Venezuela even after five years of disastrous, economy killing, thousand percent inflation, and catastrophic government mismanagement, medicine is still, just, available.

Soon after Cuba booted out the Batista government in the late 1950's, the USA imposed total sanctions on that Island. Cuba's trade with the USA was 65% of all their trade. And it ended virtually at once. Cuba is still there. They haven't all died.

The UK had its lowest ever level of recorded food self sufficiency in 1939. Just 33% of total consumed foodstuffs were grown or reared in the UK. And a few months later an economic blockade of U-boats and Luftwaffe aircraft began. Merchant shipping fled UK waters for fear of being sunk. A full scale European War was on so a huge rearmament project was undertaken at the expense of consumer goods. To make matters worse a military conscription was instituted. Severely limiting the availability of workers to make those military machines. Or grow the food that was suddenly, overnight, required. 

AND..to make a bad situation worse,  the 1939/1940 winter was the coldest one for 45 years.

AND..worse, the nation still had not recovered from the Great Depression. Was almost bankrupt, despite being a Great Power of Empire. There really was 'no money left.'
And the tiny amount that was left was required for fuel, food and weapons with nothing left over for anything else.

AND.. to make a terrible situation even more unbearable, as the British Empire and French Empire had failed to repay their war loans of 14-18, ALL goods that now needed to be purchased on an unimaginable scale from the New World, were required, by US Law, to be paid for in cash. And shipped in Empire and French empire ships that were currently being sunk by bomb, torpedo and mines.
The USSR would not supply the western democracies. They had done a deal with our enemies. There was no G8. There was a G5. China was an agricultural warlord run country. Already at war with one of the other great powers. And able to supply the UK with nothing at all. 
And not as today, able and willing if necessary to replace as much of the EU trade as we wish.

AND..as if it couldn't get any worse, Southern Ireland refused to have anything to do with the UK. So only UK ports and airfields could be used for shipping. And any planes landing on those airfields arrived totally empty as cargo carrying aircraft had not yet the range to reach the UK from the USA.

AND..the port of Dover, that, remember, could apparently be shut down overnight by a no trade deal, was under air, artillery and missile attack from the fall of France in 1940 until the end of 1944.

AND .. UK transport was primarily rail and sea. Even when those ports and stations and rail junctions and electricity hubs were not being bombed with high explosives and incendiaries there were very lengthy load/unload times. There were no container ports. There were no containers. There were about to be fewer dockers and railway workers too. As men volunteered or were called up the hundred's of thousands.

AND ..AND..the Nazi war machine wasn't just bombing airfields and tank parks and dockyard cranes. It was bombing cities. 

Its odd that a nation that is going to run out of medicines just 14 days after a 'no deal' with only the Eu countries, managed to treat 1,000,000, additional civilian injuries between 1940 and 1944. That's 1,000,000 war related injuries. 87,000 additional life threatening injuries. On top of all the other injuries that were going on anyway in a very less health and safety at work conscious, health conscious, only semi-mechanised country. 
While those same civilian killing bombs {45,000 deaths in 1940-1941 alone}, killing doctors and nurses and landing on hospitals and cutting power and restricting ambulances etc. Without the benefits of modern medicines, vaccines, antibiotics and so on.
 AND ..there wasn't even an NHS bureaucracy to oversee all this mayhem! 
There wasn't even an NHS.

Somehow, within the memory of our grandparents, this country that is prophesied to fall to pieces within 48 hours of nothing more critical than a failure to agree something other than using existing world trade organisation rules, survived a total war that came with limited warning at at one of the most inopportune moments in our nation's history.
Not just survived that total, global war. But played a major role in winning it.

So, in that spirit, I call Total Bullshit on that most slanted of reports about this nation's capacity to withstand sudden change.

London still top financial market #despitebrexit

In not very surprising news, the authoritative survey on financial markets that is out today shows only a slight fall in London in its rating as a Financial Services hub. There is a bigger fall for New York which comes second, only distant Frankfurt gets a better rating.


Really, whatever puffery appears in the press, this is not that surprising. The City is made up mainly of FX Brokers, for whom Brexit means nothing except profits due to volatile markets; insurance, which is a global business not really affected by Brexit - the US hurricanes are a much bigger worry this year; legal and accounting services - for whom Brexit is a payday in terms of advisory work...and then maybe Banking/Mergers and Acquisitions/IPO's.


The bit everyone gets excited about is the least important bit, just because it is understandable and full of alpha-male noisy vessels it gets the most press. The latter piece is also most affected by technology change and so Brexit, as discussed previously, provides a great fig leaf to cover for inevitable salary cuts, redundancies and moving to cheaper jurisdictions.


Brexit I feel though is having an effect, business seems to be slowing as the heat in the political argument grows - and boy is this growing. The main news channels and media are loving the Remainer moaning and indeed, given the believe it themselves, are keen to keep promoting this line. This aspect is definitely making overseas investors nervous and FX market makers are following trend and marking down the pound.


On balance, this is no bad thing as the economy in the UK is badly over-heated as it contains some very large asset bubbles, with no monetary or fiscal tools in place to try and limit these - as such a slow down in activity and consumer spending will at least act as a brake on pumping more air into the bubble. Certainly, weakness in the pound is useful for slowly re-kindling exports and reducing external investment further in favour of increasing inbound investment, even though it makes holidays less fun than they were for many.