Submitted by Bill Blain of Mint Partners
Mint - Blain’s Morning Porridge – August 23rd 2017
“Out on the road today, I saw a deadhead stick on a Cadillac.. A little voice inside my head said, “Don’t look back. You can never look back.””
Interesting start to the last week of summer: a nasty dose of considered North Korean provocation, disbelief at what Hurricane Harvey is doing to Texas, handbags betwixt UK and EU on “negotiating seriously” over Brexit, and all these before we even get a whiff of this week’s EU data and US payrolls on Friday. I won’t even bother about Jackson Hole last week – yawn – we’ll talk about Central banks come September.
The market reaction to the latest North Korean missile flight tells us everything we need to know: Risk Off. Equities wobble, gold up, bond yields down and gold higher. Markets understand the reality: the Trump Jump is now well and truly over – Treasury yields are right back down there, the dollar is down 10%, stock markets have gone short, yet the US populace. But if there was a snap election tomorrow….. Don’t even think about it..
Deliberately firing a missile on a trajectory over Northern Japan sends clear messages from the Kim Jong Un regime: 1) we are able to do it, and 2) but, we didn’t fire it in the direction of US Guam. Although the ballistics would have been well understood (ie it wasn’t going to hit Japan), it ratcheted up the fear by triggering alerts. It demands a US response – which will keep markets on tenterhooks. Firing the rocket from a site near downtown Pyongyang’s airport also sends the US a clear challenge about limits on what a “measured” response might mean.
So much for the Northerners wanting to negotiate – as the Americans were telling us just last week. You’d almost think the N Koreans were trying to wind up Trump?
They are waving a red flag in the Bull’s face to force a reaction. The S Koreans have already sent a couple of bombers to aggressively practice bomb drops – calm and measured. What will Donald do? After last week’s “Fire and Fury” rant, the N Koreans are expecting him to fulminate, look stupid, make some further angry comments – in short more bluster. They will continue to goad him into doing something “angry”… at which point America gets the blame, and China can step in as peacemaker.
Exactly how this plays out is going to keep markets guessing. Add it to the general head-shaking re US market prospects.
Meanwhile, Tropical Storm Harvey is proving another difficult challenge for Donald.
The storm is circling back, powering up again over the warm Gulf waters, and could well prove a double whammy if/when it hits the coast again on Wednesday. $20 bln insurance hit. However, I’m told not to worry about oil supply disruption – ports, pipes and refineries are simple to fix and reopen, and there is plenty of oil in store. Houston is a big place – and much more than just an oil city – its probably the number one centre re Medicine. The costs and the dislocation to a major part of the US economy are bound to have a short-term impact on the economic data, and sting the insurers, but these Texans are a resilient bunch.
What’s potentially more interesting is what Donald now says about Global Warming. Historically big storms flatten the Gulf Coast on a predictable basis – Houston has been flattened before – but sea temperatures are rising, making storms more violent and difficult to predict and prepare for. Maybe it will take a big one hitting the White House South to persuade his Donaldness that Climate Change is a serious matter..?
Back this side of the pond…
Having spent the weekend in France and getting less than 1 Euro to the pound out the cashline machine, I am increasingly worried about the outlook for the UK. The EU is “exasperated” by the UK approach to Brexit – which is triggering all kinds of doom and gloom. Meanwhile, the Labour Party has adopted a policy on Brexit… whatever it might be. They are making the assumption the Europeans would be willing to accept transitions agreements.. but, hey, if it makes Theresa look more isolated, its worth pursuing..
Meanwhile, Dodgy’s Brexit Team has presented Brussels with a whole series of position papers (ah, the persuasive power of Powerpoint), and proposals calling for flexibility and pragmatism and giving us what we ask for. The EU say the proposals are “light” on details and sequencing. Brussels has a clear agenda and isn’t prepared to accept any ambiguity in the process.
Either we Brits are being geniuses in our approach, or it’s another example of how we simply don’t understand Europe. If we were dealing with 27 individual countries, then sure; each one would come to mutually beneficial agreements on new trade arrangements.
But we aren’t dealing with 27 countries.
We are dealing with One.
We are dealing with the unelected, unrepresentative representative of these countries; the self-perpetuating nomenklatura of the EU. It would be a massive mistake for our negotiators to assume the will of the EU somehow represents the collective will of the member countries. (I really should have used the “One ring to bind them all” quote from LoTRs as my quote-line this morning…)
I have a sneaking suspicion this won’t end well. While individual countries and leaders may be sympathetic to the UK, they won’t be in meeting where Sauron, sorry Junkers/Barnier, hold the floor and Macron is juggling for European hegemony with a French accent.
Finally, at last a crypto-currency I understand.
The Whoppercoin allows you to save and trade cyber tokens earned when you buy the burger (but only in Russia thus far). Forget Bitcoin mining or such nonsenses.. buy lunch, wallet the digital token, and expect the Whoppercoin to appreciate 500% by tea-time… isn’t that what all crypto-currencies do?
Back to the day job…