Bill Blain On This Morning's European Euphoria

From today's "Morning Porridge" by Bill Blain of Mint Partners

Mint – Blain’s Morning Porridge – March 16th 2017

What a fascinating world of possibilities opened up y’day, but let’s start with a simple game. Without thinking about it too much; name 5 famous European politicians of the last 30 years.

I bet none of them were Dutch.

Why? It’s a great country with a functional consensual political system biased towards compromise and coalition. Generally it works. The country works.

Yet this morning the European markets are Risk-ON in frothy celebration because Right-Wing demagogue Gert Wilders “apparently” lost the election and won’t dominate the coalition process. All the anti-pollsters who predicted a higher Wilders vote due to polling bias were proved wrong. The Populist bogeyman was overcome by Dutch common-sense. We can relax as the same-old, same-old Dutch right-of-centre social democracy sits in the comfy chair.

Nothing for Europe to worry about….

Except for the fact that Holland – one of the most successful Euro member economies with a growth rate faster than Germany and less than 7% unemployement – still gave the Extreme populist Right Wing 25% more seats while the ruling VVD (a most unpleasant sounding name for a party) lost about the same amount!

Mark Rutte, (the Dutch Premier – you were probably wondering), says the Dutch said “No to wrong sort of populism”. Yet, Wilders extreme Islamophobia still got him a massively increased share of seats. 

Let’s extend that thinking to the looming French, Italian and German votes: France not only suffers from a version of anti-immigrant racism populism, but has a large minority blaming Europe and the Euro for its economic woes. Holland: single Immigration Whammy. France: Double Whammy. Italy: Triple Whammy.

I don’t for one moment expect Le Pen to win the Presidency, and the likelihood is we get the least worst alternative. It will be a Le Pan vs Macron’s En Marche! In the second round Macron will win, and whatever anyone says about French recovery… it will be same as, same as..

All of which probably means the Winter of Europe’s Political Discontent is only just beginning… One vote in a backwater like Holland doesn’t mean populism is buried. Don’t be fooled by better market sentiment.

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To lighten the mood, let’s head across Le Manche to Westminster – where the declining quality of UK parliamentary democracy becomes more acute by the day.

Phil the Spreadsheet Hammond was pimp-slapped and left flollopping like a naughty schoolboy caught doing something unspeakable behind the bike sheds. Hi enforced smile was cringeworthy. He was forced to U-Turn on his plans to hike taxes (NI) on the Self-Employed, his political career is, apparently, in the balance. Therese May might be for turning, but she didn’t spare him a thought as she sacrificed him. Was that courageous or pragmatic?

The only thing saving him is the lack of any alternative. Jeremy Corbyn missed the chance to deliver a killer blow and fluffed his lines.

The only winners were the women. The BBC’s Laura Kuenssberg gets my vote for spotting the gap between manifesto pledges and Hammond’s budget speech.

The other is Yvette Cooper: Labour’s most effective parliamentarian, and wife of Twinkletoes Ed Balls. Cooper’s brilliant put down of May for her £4bln U-turn hints the Labour party might be seeing the long awaited emergence of a potential leader - except for the fact the Labour party structures outlaw common sense and ever winning another election….

* * *

And, back to the real world..

The Fed’s expected quarter point rise in US rates caught no one by surprise. Fed hikes and the stock market rallies…. Er? Really.. Yes.. because it was so well headlined.. Yellen says she will remain accommodative and inflation can “temporarily overshoot”. Nothing to worry bout then..?

But, folk are always looking for negativity, and must have been reading my comments about the return of cyclicality earlier this week based on the number of notes worrying about the consequences of the hike.

There are notes worrying about the Fed having to play catch up by hiking more aggressively later this year. I read on one blog that Morgan Stanley is calling for 6 hikes this year! Yet, there are others wondering if global stock markets look overvalued and a due an October Reset – triggering an early end to the upside.

I love Bill Gross’s thoughts (quoted widely this morning): “Our Highly Leveraged financial system is like a truckload of nitroglycerin on a bumpy road. Don’t be allured by the Trump mirage of 3-4% growth and the magical benefits of tax cuts and deregulation…. This is a year to hold onto your money, not to seek returns..”

On that happy note, out of time.