Blain's Morning Porridge - Article 50, Scotland and Soft Drinks, and time to buy Sterling?
Blain’s Morning Porridge – March 29th 2017
“This, my sweet, is a letter from my solicitor telling you that your husband has filed a petition for divorce. It also tells you to get yourself a solicitor pretty damn quick.”
I suppose there are lots of things like US politics and tax reform, the outlook for banking, or what’s happening in South Africa, but today the UK hands Europe the Article 50 papers that will detach the Continent from the UK…. At least till we discover we need each other..…..
No doubt Europe will react accordingly….
However, my concerns this morning are about Scotland. Y’day did we see the final straw that will push Scotland out of the Union and into the “welcoming” arms of Europe?
No.. I’m not thinking about Nicola Krankie winning a meaningless vote in Scotland’s “parliament”.
At least we now know why Scotland has a parliament. How else would Nationalists maintain the oxygen of publicity and the illusion of relevancy? Its a little bowl for small fish who think they are bigger than they are.
Aside from granting salaries to feckless parasites who wouldn’t survive Westminster, and another level of bureaucracy for Scotland’s tax receipts to cover, I was wondering what Holyrood is actually for? Does it serve any function or purpose? It might be better if Scotland’s MSPs spent their time sorting out a budget or addressing Scotland’s once brilliant but now sordid education record. It could… but while the Nationalists are in power, it’s a one trick haggis. Like Goldfish, the Nationalists have trouble remembering there might be more to running a country than blaming the English…
Of course the arguments why Scotland should stay in the union are well rehearsed. Oil prices bankrupting the remaining industry, the budget deficit, the fact trade is mostly bilateral with England….
Or how about Moody’s cutting them to Junk if they leave? That’s not a pretty picture. It’s not quite Greece, but where would a Scotland bond trade relative to Gilts?
That’s a very interesting question… and one that I know the answer to!
Currently Scottish Debt (yes – there is such a thing) is a direct obligation of Her Majesty, but is at a significant spread over gilts reflecting the risk of independence and succession. If you want to know more… give me a shout.. Weigh up the risks and wonder if a triple digit spread over Gilts is a bargain…
But Scotland’s debt and parliament are not my worry this morning. There are far more ominous portents of trouble up North..
AG Barr – the Scottish Soft Drinks Company – has announced the price of IRN BRU will rise to cover the costs associated with the weaker pound. Clearly the fault of these damn pernicious Englishmen. For those of you who might be unaware of the Scotland’s Other National Drink.. IRN BRU is a pale orange fizzy drink with about 10x as many e-numbers and more sugary nastiness than Coke Ultra-Fat.
IRN BRU contains a secret ingredient known to only three employees. Interestingly, I believe none of these three drink the stuff. Its marketing line used to be “Drink more than 50 gallons a day and you will rust.” In its favour, IRN BRU is the world’s most effective hangover cure – it works by shunting your body from loathing self-pity for your self-inflicted misery to desperate survival mode following a single swig of the stuff.
Its proof a spoonful of sugar really can ruin your day… That said, there is always an emergency bottle in the fridge.
And, despite all the pundits saying Article 50 inevitably means 2 years of Sterling crashing, I doubt it. I expect the pound will likely rise, (meaning IRN BRU will get cheaper, the Scots might finally smile about something, and Scottish Debt looks a bargain!)
Even ahead of the next 2 years of Brexit gamesmanship, Sterling’s sell-off looks overplayed. We’re now looking at real numbers – higher rates as a recovery takes hold and UK sentiment continues to improve.
Does that mean Sterling is a screaming buy? There is lots of execution risk in Brexit which will make for a volatile road. But Europe is going to remain challenging while the dollar looks to have done with the magic. And, as we’ve seen over the last few years.. if you say something is going to be desperately bad when some expected event occurs.. the market often goes the other way!
Over the next 2 years I don’t think the UK’s exit will be Europe’s over-riding concern. Their issue will be debate between the Germans arguing extraordinary monetary policy is no longer necessary, while the rest of Europe scrabbles for budget exemptions and some dosh for a bit of fiscal expansion. A smart UK will be making positive noises, offering a “same as, same as” reciprocal open-access to UK markets, and support for all things European and Euro – without actually being part of it.
Of course, what the UK really needs is something to remind Europe of just how important a strong and resolute UK will be…. Step forward the Russians making some awkward noises and it’s the perfect opportunity for the UK to remind Europe of the importance of Nato and our role within it.
Europe is more than just the Brusselsocracy…
On with the day job…
Fastnet Race Charity: http://www.sail4cancer.org/fastnet-2017-bill-blain
Bill Blain