Make your mind up time

Mint – Blain’s Morning Porridge

You gotta speed it up, and then you gotta slow it down…

This is the last day to make my mind up. This time tomorrow, I’ll have voted. By this time Friday...we will know (the result of the UK vote on European Union membership). In/Out or shake it all about?

I’m going to stick with my call it’s likely to be around a 45/55 Remain Vote on the basis the majority of the roughly 10-13% undecided are going to vote for the status quo. (The undecided are probably bigger than thought – many folk are scared to admit they simply don’t know.) But, it is slightly disconcerting to read market blogs from Asia and Australia all confidently predicting a remain vote. What do they know we don’t?

The fly in the ointment might be the weather tomorrow. Thunderstorms and rain could keep folk away from the polls… and that’s a positive for the Leave camp. But since God loves Europe...let’s assume the sun will shine…

What’s the consensus trade on Remain? Sterling up? Stocks higher? It's happened already. The big news will be the end of the bond new-issue drought as the flood gates open. We’ve seen market supply slow to a trickle ahead of the vote! Sterling is the most liquid and simple way to game the number – so that’s what we will watch tomorrow night.

A big sell-off in risk-on risk-free assets like bunds and treasuries? The beginning of the big bond unravel? I suppose they may all happen.

But, just in case we do get a shock Leave vote.. well don’t worry. Angela Merkel and Francois Hollande are poised and ready to unleash a unity offensive...or maybe not…

One factor that really concerns me is the number of smart, sensible folk with senior jobs in finance who are still wavering. Strip out all the political nonsense, threats and unpleasantness, and it boils down to two things: 1) do you Remain on the basis it’s a free option? (we can always pull out later), or 2) do we Leave Europe on the basis it’s dragging us down? 

My worry is that putting our eggs in the euro nest might prove an economic mistake. Our trade with the rest of the world, and North America in particular, is growing faster while Europe is slipping. Now and but...if we upset the global balance by leaving Europe...will we remain attractive? Does the global community trade with the UK because we’re seen to be a pragmatic entry point to Europe? I suspect there may be an element of that… which means… argghh!

Forget all the nonsense about the perceived loss of sovereignty, the hordes of immigrants who will overrun the country, or that we’ll become a minor part of some indivisible European super-state. Forget the tosh about emergency budgets, millions of city jobs being transferred to Paris or Frankfurt.. Vote for however you perceive a better future.

And, relax it will all be fine-ish.

I’m relatively confident the sun will come up on Friday morning…

Meanwhile… The German constitutional court backs the European Central Bank to do absolutely anything they fancy to save Europe.. Jolly good. I’m thinking this time next week we’ll be back to the normal drudgery of Federal Reserve, bonds, stocks and whatevers..

Bill Blain

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