Blain's Morning Porridge - Consequences and Scotland... things to anticipate...
Blain’s Morning Porridge – March 13th 2017
“I’m still only in Saigon… Every time I think I’m gonna wake up back in the jungle...”
Superb rugby it was, but it’s not quite so enjoyable when it was my team, Scotland, on the receiving end of a Baby Seal-Clubbing by England..
What are the big issues to consider this week? It’s all about consequences…
The set piece event is Wednesday's US Fed meeting where a rate hike seems nailed on following the recent data. It’s largely expected, but are the future consequences fully priced in by exuberant markets? I suspect more to come in terms of conflicted expectations as equity markets and the bond curve figure what the future paths may hold.
Then we have the Dutch elections - vicious Islamophobia obscured by the Turkey newsflow noise. I fear the right wing loonies of the Party for Freedom will become a festering pustule on the face of European politics. It will add to the fraxious political uncertainty facing European markets. Consequences, its all about consequences – great headline on BBerg: “Europe’s Political Circus has SNB [Swiss National Bank] bracing for stronger franc..”
The UK is going to get interesting. Apparently it’s going to be Article 50 week here in the UK. The risks of complacency are balanced against sterling jitters. As the UK becomes a prime target for global M&A, how much cheaper will Sterling get?
I suspect the rebellious Scots to figure big in the looking uncertainty. As the prime minister gives formal notice we're divorcing Europe, expect all kinds of unpleasantness from Wee Nicola Sturgeon across the border in Scotland. Although the last referendum was a once-in-a-generation event, the UK's democratic decision to exit Europe apparently means the question has to be asked again.
Hang on...
Scotland made a democratic decision to remain part of the UK on Sept 14th 2014. By remaining part of the single indivisible United Kingdom Scotland accepted the democratic will of the whole polity. Yet wee Nicola Krankie makes the convoluted argument that since Scotland incidently voted to stay in Europe in last year's Brexit referendum, then the whole nation of the UK's democratic choice is subordinated to the democratic choice of a small part of the polity.
Really?
By the same argument, I could argue the democratic decision of the Blain household is not to pay any more tax to the discredited Tory government. Does my personal democratic decision outweighs any decision the rest of you agree? Nope.
In Sept 2014 Scotland took the democratic decision to remain part of the democratic UK. End of argument. Nicola.. STFU.…
This morning the camera crews were up in Edinburgh where some eejits were saying Brexit means independence. C’mon… As a Scotsman I can assure them as much as they dislike the English, they will dislike the Germans even more..
Meanwhile, a well-spoken concerned housewife was asking why England can't have Brexit while Scotland remains in. Stop. There is absolutely no way, ever, that Europe will allow Scotland to join - to do so would legitimise independence for Catalonia, could trigger the de-Risorgimento of Italy into a separate North and South, and even trigger a partial breakup of France.
And, just in case the SNP haven’t spotted it - the move in Oil Prices since 2014 means the economic rationale for an independent Scotland has become darker than the deepest depths of the North Sea. Will the US shale industry adjusting to long-term prices below $50 and becoming a net energy exporter, while the Saudi's are forced to desperately sell whatever oil they can at whatever price they can get, there is simply no way in the medium term that oil prices justify the reinvigoration of the defunct Scottish Oil base.
Sure, Scotland has the brightest and best people in Europe... but most of us head down to London or elsewhere...
And speaking of Scots...
Hats off to Douglas Flint - the retiring Chairman of HSBC (The Home for Scottish Bank Clerks) who leaves later this year. For the first time HSBC has bowed to pressure to fill the chairman’s shoes externally... suggesting the bank's in-house promotion policies haven't delivered and it needs an infusion of fresh blood. That's a wee bit unfair to Flint - one of the sharpest minds I ever met, and a classic Scots banker to boot.
In normal times Flint would have been feted among the leading bankers of his generation just for his sense of calm. He deserves credit after inheriting the HSBC chairmanship in the wake of crisis, keeping the bank ahead of vengeful regulators, while being sucked into problems generated by others.
Yet, the bank has pandered to the received wisdom success will follow from bringing on-board strong external leaders.
I'm not convinced – almost despite itself, HSBC's strong in-house culture is one of the reasons it’s a top performing financial. I've watched other institutions swing and sway under newly parachuted-in financial geniuses with few positive gains. While some say there more culture in a pot of yoghurt than across banking - HSBC has something special that should be preserved.
I have to declare I hold HSBC stock - but I'm waiting to see what happens next (especially in how the throw is shaping up to replace CEO Stuart Gulliver next year) before I add or sell.
My concerns are simple. I'm not sure any new external CEO - no matter how strong - can successfully integrate with the firm or be able to effectively manage. They will face the monolithic HSBC "way of doing things" (especially in Asia where the firm isn't half as well established as it likes us to think), and the old-boy network of HSBC Lifers across the key middle management positions who will be reluctant to shift. They don't like outsiders.. I know.. If an outside gets the CEO job – then I fear distraction will set the UK’s top bank on a downward course..
Out of time..
Fastnet Race Charity: http://www.sail4cancer.org/fastnet-2017-bill-blain
Bill Blain