Blain's Morning Porridge - Euro 100mm Mrs May or else the puppies get it...

Blain’s Morning Porridge – May 3rd 2017

“I, for one, am opposed to authority. It is an egg of misery and oppression.”

I can just imagine Junker and Barnier asking for Euro 100 bln with their little fingers in the corner of thier mouths – just like Dr Evil. They can ask. What they get is the question….

I for one am shooting them a hard stare and the most violent gesture we Brits can make… a slightly raised eyebrow. (Forget Dodgy Davis immediately declaring war on Europe this morning…. he’s an excitable boy, they all say.)

Do you think the EU is trying to wind us up? Perhaps. The mindset revealed over recent days confirms the EU’s leadership default is to punish. These perfidious Brits can be cowed into apologising for their temerity at even daring to think we could leave Europe. Is the goal to bring us back crawling to Brussels in supplication for re-admittance?

Hmm. I suspect these bally foreigners haven’t been reading their history books. I would remind them: Nemo Me Impune Lacessit! and the rest..

I am conflicted on Europe. I don’t particularly want to leave – I love Europe and Europeans. I reject the underswell of racism and demands for border controls and immigration limits. But, I’m not convinced there is any point staying in an economically unfeasible Europe, becoming part of a damaging currency experiment, nor in becoming part of a single European polity. I’m quite happy to remain a Scotsman first, British second and associate European somewhere down the list.

I’m perfectly willing to support Europe becoming a homogenous political unity. I’m utterly convinced it will be our largest and most important trading partner – but that doesn’t mean we have to be part of it – just close to it.

But the EU leadership aren’t thinking that way. They fear, maybe rightly, if one country walks away, maybe others will.

Many writers are looking for historical parallels. The one that frightens me is America in 1860. Maybe that sounds like hyperbole… but..

Back to markets.

I am tempted to give up trying to analyse the Macro picture. It’s just too damn perfect and positive – or so say some of my contemporaries. Strip out the noise and its “the first global synchronous recovery in a decade”, says my Macro colleague, Martin Malone. He says the main drivers are politics and policy – and that markets are missing their importance.

I’ve got reports on my desk showing global growth estimates rising, monetary normalisation supporting renewed steady economic progress and investment flows, rising infrastructure spending, and a renewed global focus on trade and growth. I’ve a load of charts pointing up to the right hand corner. Long Term, the trend is your friend and I’m sure things get better.. It’s the gaps and downward spikes before the long-term that worry me..

Even the geopolitics looks better. The high-tide of populism has been crushed by the likely Macron win in France. Global leaders will solve stuff. Trump has finally learnt to say hello to foreigners, engaging with Japan, China, Europe/Germany and now agreeing to talk about talks on Syria with Putin, following recent Merkel/Putin discussions.

Right. All that makes it ok then?

Personally, I can’t help but think we’re sitting on a powderkeg of unintended consequences – ultra low rates, monetary experimentation, financial-asset price inflation to unsustainable levels, and increasing leverage across markets while everyone gets increasingly complacent? Huh.. but why worry. What would I know?

I can feel it in my bones… something is coming.

And with that.. out of time..

Fastnet Race Charity: http://www.sail4cancer.org/fastnet-2017-bill-blain