“IT’S NOT ALL OVER ‘TIL THE FAT LADY SINGS!” MARKET REACTION

“IT’S NOT ALL OVER ‘TIL THE FAT LADY SINGS!”

 

Well it looks as though the market believes the Daily Mail’s poll today putting the REMAIN campaign 3% in the lead.  With bookmakers have widened their price to 3/1 from 13/8, equity punters duly filled their boots today taking the FTSE 100 up 160 points – up 2.65%.  The Pound has bounced out of the traps up from $1.4250 to $1.4590 as I speak. The yield on 10-year gilts has rallied from 1.14 to 1.20% – hardly a move that suggests an interest rate hike, predicted by the Chancellor a couple of weeks ago in the event of BREXIT.

 

Few can be proud of some of the terrifying and preposterous exaggerations by ‘the establishment’ of the damage that would be inflicted by BREXIT – from the PM to the Chancellor to BOE to Treasury to IMF to OECD to IFS (quite a compendium of influential luminaries).  As we know the government and BOE have a duty of care to advise us as to the volatility than could manifest itself, but to virtually suggest Armageddon is just PLAIN DAFT!  Conversely some of the immigration twaddle trotted out as well as comments on Turkey leaves a little to be desired. Nonetheless I remain passionate that the UK should be on its bike.  Before giving reasons let’s just pause for a few moments and consider a few issues that have affected markets that investors, punters and the establishment have chosen to conveniently plead a dose of amnesia over.

 

Let’s be candid UK GDP has fallen quite sharply in recent months from 2.4% to 2% and could be as low as 1.8% by the end of the year.  China has quietly drifted down from previous dizzy heights.  Japan’s economy is in rags and the EU has made a modest recovery from severely trashed levels. The last US earnings season was no more than average resulting in a modest correction.  So it is absolutely twaddle to suggest that the fall in European equity values is entirely down to BREXIT.  BREXIT has contributed to in part to the volatility and let there be no ambiguity in stating that ‘the powers that be has poured’ gallons of inflammable fuel on the fire with apocalyptic levels of hysteria. The Government CANNOT afford to lose this referendum so their vituperative stance is wholly understandable, but slightly distasteful. Since November the Pound has fallen 7% in value (9% as from last Friday).  What happens with a ‘REMAIN VOTE’ on Friday?  I doubt the market would expect the FTSE to make much more progress. If it does I think punters will sell in to it. A ‘LEAVE VOTE’ may see some selling, but remember 65% of the FTSE earnings are Dollar related.  Since everyone thinks that Sterling will fall out of bed the outcome should eventually be favourable.

 

From my own perspective I can find many reasons for wishing the UK to part company from the EU.  However immigration is not a card I would be playing to get my point across. On the whole immigration has been very good for growth in the UK. We just need more control than we currently have as to who comes and who doesn’t.

 

The EU REFERENDUM is wholly about political power. To vote REMAIN would mean continuing to yield up powers to the EU institutions and the formation of an EU state in which Britain will be a subordinate part.

 

There is nothing illogical or dishonourable in this. One can believe in a European Federal State for big power reasons to counter other big powers or because one believes it can help avoid inter-European wars or because one believes in a supranational multi-national ‘superstate.’ But the EU Government is not formed by a Parliament or even by a vote. Its rulers cannot be kicked out by the electorate. Its legislation is initiated by officials. Its Law Courts are seated in Luxembourg, override that of any elected democracy.

 

If one votes LEAVE  one is voting in the belief that all Britain’s laws should be made by the elected British Parliament which cannot be overruled by the EU Commission, or by the EU Council of Ministers comprising 27 other countries, or by the European Court of Justice. These comments have been plagiarised from comments made to me by Peter Semple – most succinctly put!  I wholly endorse these sentiments. I also want to embrace every European country and add them to a portfolio of 165 other countries that we do insufficient business with. The world is our oyster. The EU serves no useful purpose to me. I am confident that the UK will prove to be a areal pioneering spirit in a world that is dominated by FREE MARKETS.  I also repudiate allegations that the City will be stuck in the passport mire. 70 years of infrastructure will never be surrendered to Frankfurt, Paris Dublin or any other Mickey Mouse financial centre.  Those banks that want to try the culture – fill your boots as you will return refreshed and satisfied that London is the place where it’s at!

In closing I make the following observation on immigration. Whoever wins will have a major problem on their hands – pandering both to those who are disappointed that ‘REMAIN’ won as well as to ‘LEAVE’, whom I very much hope will be victorious on Thursday for reasons set out above.  They will have to deliver on their migration policies and it won’t be easy. I very much side with Michael Gove’s well thought out initiatives on this sensitive issue, which is likely to fester for some years.

 

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