Blain's Morning Porridge - the impossibility of a new Brexit cliche, the ECB reverses, and whate
Blain’s Morning Porridge – March 29th 2017
“Why have Europe when you can have the World?”
Month end and its likely to be quiet… ish…
After trying to sell Scotland Debt y’day, this morning’s impossible task is to come up with a new unique cliché to explain yesterday’s Brexit events.
Unfortunately, the combined intellects of the world’s press have pretty much mangled every possible angle. There has been a feeding frenzy of politicians ready to express meaningless platitudes about whatever insane take they have on either the beginning or the end of everything. The next two years might have profound effects on life and markets, but its become utterly boring already.
The bottom line is the UK is not being held hostage, Europe is not imploding, millions of workers are not about to be sacrificed, the NHS will never get the money Brexiters promised, the entire City of London is not about to move to some godforsaken suburb of Frankfurt, and the mass repeal of Brussels legislation won’t happen overnight… and aside from UK banana’s being a little bit curvier than those in Europe… it will make very little difference to our already miserable lives..
Lets stop being introspective and worrying about Europe…
As a few other bloggers mention this morning, the real issue for the UK isn’t so much how it worries about the past as it exits Europe and negotiates new arrangements, but how it raises its appeal to the rest of the world, creating new markets, relationships and opportunities that will raise the UK up to a new level. Hey, we’re good at that! Looking outwards is a very positive vision for the future, and why I’m more bullish than the many naysayers lamenting Brexit y’day. Up the pound and UK prospects..
Enough…
I love the ECB quotes to Reuters y’day referring to the mild panic the last meeting engendered: “The message was way over-interpreted..” they said, and that would be: “we wanted to communicate reduced tail-risk, but the market took it as a step to exit..” Or make sense on how: “a small change in wording can easily be blown out of proportion. There is a communication risk and I would argue for stability”.
All of which means: expect the ECB to back down on tighter policy.
As my colleague Kevin Humphreys (BGC money markets) said recently: “with each and every ECB policy decision, markets have been well-guided and led ahead of implementation. Right now, with the crucial nature of even the slightest shift in direction clear to all, all we can expect is even clearer, calculated, well-advanced hand holding to take place..
All of which means they are now going into reverse… nothing to worry about then.
Back in the real world..
European banking stocks might be on an upwards run, but I am indebted to a chum who sent me a fascinating article from Institutional Investor – The Incredible Shrinking Bank. http://www.institutionalinvestor.com/Article.aspx?ArticleId=3667635&utm_medium=email&utm_campaign=Essential+II+Daily+3292017&utm_content=Essential+II+Daily+3292017+CID_8307f7c409e3e1408e2599ea76aadf2d&utm_source=CampaignMonitorEmail&utm_term=Credit+Suisse+the+Incredible+Shrinking+Bank&p=2#.WNy1IW_ytpg
Regular readers will know I’ve been a tad sceptical of Credit Suisse’s CEO Tidjane Thiam’s efforts to create a new higher yielding safe institution. I’ve been equally harsh about other behemoths of European banking, and what’s happening and going wrong at CS is pretty much mirrored elsewhere. When I was a young banker Credit Suisse First Boston, then its derivatives group CSFP, were investment banking powerhouses. Today, what was once the more exciting of Switzerland’s two meaningful financial institutions seems to be sinking into a parody of other countries models and tired old strategies.
Now Dull, Boring and Predictable is good in banking… but… I can’t help but feel the reinvention of CS does not appear to be working. The shares remain distressed and I’m wondering how relevant the bank remains? Who still wants dull boring Swiss Private Banking when Family Offices are the rage for the mega wealthy Asians the bank is now targeting? What global business wants to rely on a banking relationship that seems shy of relationships and is no longer perceived to be in the top leagues?
CS has faced the same challenges as other institutions including a surfeit of regulation and regulatory breach raids on its performance in mortgages and other issues. But, there is a telling quote in the article: “Thaim launched with a bunch of targets that were just ridiculous, dramatically off, and the market has got more and more cynical.” The rest of the article gives some hope he can still turn it around – but really? Has it already missed the boat?
Its not just Credit Suisse… there are many equally challenged banks flolloping around, looking for the strategies that not only will restore their numbers but also make them relevant again.
Back to the day job…
Fastnet Race Charity: http://www.sail4cancer.org/fastnet-2017-bill-blain
Bill Blain