Boris’ Historic Election – Thank You EU

Congratulations to Boris! Now perhaps we can go back to having too much food, too much drink and too much indulgence over the Christmas break, without having politics upsetting us all?

Johnson this morning – photo from BBC

This huge victory will set the direction of politics for the next 10 years. Yes, we predict another term for BoJo starting in 2024. I am indebted to my older contact who has already pointed out that by December 2024, Labour will have only had one election-winning leader in 50 years. FIFTY YEARS!!! Step forward Tony Blair. You achieved the success that eluded Jim Callaghan, Michael Foot, Neil Kinnock, Gordon Brown, Ed Milliband and now Jeremy Corbyn. Oh, and John Smith too…… Did I miss any?

Jim Callaghan – never won
Michael Foot – never won
John Smith – never won (though to be fair he never tried)
Neil Kinnock – never won
Gordon Brown – never won
Ed Milliband – never won
Mr Corbyn – he didn’t win either (twice)
Tony Blair – the only one to win in 50 years – and yet they hate him!

And to what can we allocate this massive swing in the vote for the Tory Party? Why, the EU!! What a change for the European project to be assisting the blues! It was the disdainful response of Frau Merkel to David Cameron’s pleas for moderating change that set the ball rolling towards a leave vote. This was compounded by the EU inaction during the referendum campaign. Where were Messrs Junckers and Tusk during the lead up to the vote? They were not in UK sharing the vision and love were they? Their next mistake was to play hardball too much with Mrs May, forcing her on to the defensive at home. One has to surmise that they thought a Remainer-Parliament was their best hope of keeping the UK on board. But they overplayed their hand, sending Theresa back with too much of a surrender bill. This off-hand treatment was compounded by the humiliation and shunning that Mrs May received from the other EU leaders at Salzburg. So the scene was set for Parliament to respond to the lack of co-operation… which led to Boris becoming leader…. which led to the election. One has to hope that they will work with Boris as an equal!

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Boris to Win 43 Seat Majority Says Meta-Poll

You’ve heard of meta-analyses, where academics who can’t be bothered to do their own research just nick everyone else’s hard work, crunch the numbers a bit, and come out with a super-accurate result? Well here is our META-POLL. After much reading of the papers, surfing the net, and even talking to people, we have concluded that the Tory party will win. (Bet you saw that coming eh?)

Why do we think that?

  1. Farage folded, as predicted here recently, avoided splitting the leave vote, and crowned the Tories as winners

  2. The Labour manifesto was written to appeal to hard-line left wingers – who would have voted for Jeremy anyway. Only the naïve or those too young to remember the 1970s could think that nationalisation is the answer. (See our earlier report on rail user numbers pre- and post – nationalisation). The “free” broadband idea went down well, but the practicalities are horrible. By the time it is built, at five times the original cost, technology will have made it obsolete. And the big beneficiaries will be the farmers and isolated rural communities – who will not be voting Labour under any circumstances. Meanwhile, their fence-sitting on Brexit feels a bit like “Follow Me….. I don’t know where we are going, but Follow Me!”

  3. The Liberal Democrats have shown themselves to be neither liberal nor democratic. Their reverse Article 50 campaign can only appeal to the most die-hard europhiles. Meanwhile, Jo Swinson has not done well. Her claims to be PM in waiting invite the retort that she’ll be waiting a very long time.

  4. The Tories have avoided a May-style manifesto-suicide-note. Divisive figures such as Rees-Mogg have been kept out of the limelight. Boris himself has picked his battles carefully, with more to lose than win.

So what happens now?

There are still considerable risks for Mr Johnson. Will the left-leaning students be too busy recovering from their end-of-term parties to vote?

Students preparing to oversleep and miss voting

Just how many people were too embarrassed to tell pollsters that they would vote Tory (but will anyway)? Will tactical voting have any impact? Will Mr Trump try to intervene? He is not great at keeping his thoughts to himself is he? That could hurt Boris. In this last week, we expect the Tories to try to refocus on Brexit as the major issue – and Labour to try to talk about virtually anything else!

What does it all mean for Asset Prices?

The market had a lost year in 2019, with too much uncertainty. A Tory win is about 70% baked into the market, so we expect a moderate bounce on 13 December. This will be most pronounced for the likes of BT and other nationalisation victims. Despite longer term trading arrangements still being in the air, we feel that 2020 will turn into a log bull run for equities and commercial property, as investors get back to the serious business of making money.

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FTSE Forecast; Brexit Supports, World Economy Undermines

It is that time of the month when we ritually kick ourselves for making what turned out to be a stupid forecast six months ago – and then, without learning from our mistakes – we go on to make a crazy forecast for where FTSE will be in another half year.

Will go up, will go down, but not necessarily in that order

BUT this time, we weren’t so far wrong. Back on 15 April, we had failed to leave the EU on the second deadline, and a new exit-date of 31 October had been decreed. Wisely, or perhaps by luck, we guessed that on 15 October, Brexit might not be established, or the future might be rather worrying. Quote “So we will work on the basis that Brexit is still on-going by October.

Our forecast for 15 October was 7600, quite a reduction from the 8150 we had been predicting for September. Thus, we got the direction right, and a close of 7212 is pretty accurate by our standards.

The Next Six Months

Now for the next six months. British politics are somewhat unpredictable. We think that Boris might just pull it off and squeeze Brexit through tomorrow. The country (or at least 52%) will rejoice….. so there is no way the opposition will allow an election if Brexit goes ahead. Thus our central forecast is that Brexit happens, but then the minority government struggles on for several months until the demand for an election is overwhelming. This could easily be around our forecast date of 15 April 2020. However, a Brexit Deal will create an optimism and gentle release of pent up demand to support the UK economy over the next six months.  Lack of Government interference with new laws will also help!

However, no country is an island. Okay, well some countries are islands. Malta comes to mind. But economically, the future of UK based businesses, with our new, outward looking trade policy, cannot be but affected by the world economy. We foresaw the potential of a recession by year end, and the data published since then has done nothing to change that view. The global economy, from US to China to EU (in that order) is definitely looking soft.

Where does that leave us?

The UK domestic economy should have a surge, this will be countered by weak global growth.

Re-rating

The UK stockmarket, is at rather low multiples of income, given the interest rate environment. This morning, www.dividenddata.co.uk quotes the FTSE100 yield at 4.53%. If / When Brexit is settled, we see scope for yield compression – and hence price rises – justified by the reduced uncertainty and risk.

In summary, we think UK growth will be supportive, global economics will undermine, but an extra boost will be given by removal of the Brexit factor. From a close yesterday of 7182, we see FTSE100 at 7600 on 15 April. This is an increase from the 7200 we expected for Jan – Mar next year.

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What is Boris’s Plan for Brexit?

We are three weeks away from Brexit Day, and yet there is no clarity. This is starting to look eerily familiar!

Boris; buffoon or battler?

We have a PM who is trapped in office, but with no majority he is completely powerless. Meanwhile, the opposition is scared of an election, and is rather enjoying the discomfort of Boris.

It seems that the key date will be 19 October, a week on Saturday, the day when Boris is legally ordered by Parliament to write the letter asking for an extension.

Leo Varadker, Irish Taoiseach

Will he do it? We think not. Since the Benn Act (aka the Surrender Act) was rushed through, Boris has been at pains not to retreat from his ‘do or die’ message about 31 October. We can see why he would do that as background to his negotiations. If EU actually thought he could push through No Deal, then they would be much more keen to negotiate. This has to be true of Leo Varadker, Irish Taoiseach, who has most to lose from a No Deal. Clearly, they have not bought into that idea though.

 

How can these facts co-exist;-

  1. Boris claims we will leave on 31 October, deal or no deal,

  2. The Benn Act says he must ask for an extension in the event of no deal

  3. The Conservatives have stated that they will not break the law

  4. A deal looks extremely unlikely

  5. The EU will agree to any extension request

  6. Parliament will not let BoJo call a quick election?

It seems Boris must believe that there is a mechanism to spring free from the trap. Here is what we think could happen (yep, “could” implies our low level of confidence in our prediction).

The Queen’s Speech next week will essentially be the Conservative manifesto for an autumn election. It will get voted down, but still the opposition will not allow an election.

The big day will be 19 October, in the special Saturday Parliamentary session called by the Government. We see the following votes;-

  1. A vote to lift the Benn Act and allow a No Deal to happen. This will be designed and phrased in terms of progressing or overturning the referendum result, to try to make the opposition look like it is ignoring the plebiscite. Narrowly, we think this will be voted down.

  2. A vote to call a General Election. This will be designed to make the opposition look like it is scared of facing the electorate, especially given that they have earlier voted to “ignore the referendum”.

  3. This is when Boris Johnson resigns as Prime Minister, and where he states that he will not do the usual caretaking role until a new one is appointed. We feel that BoJo has too much political capital tied up to write that letter. It would be interesting if Parliament voted to make him personally write a letter in which he does not  believe. If he does not resign, I see him taking a jail sentence as less politically damaging than writing a letter.

  4. If we have no Prime Minister – and hence no Government – then there will inevitably be a court case as to who can write the letter.

  5. Then there is 14 days for a new Government to be formed. We do not think Mr Corbyn could attract enough support, as the LibDems will see little advantage of positioning themselves as Labour’s poodle.

  6. A government of “National Unity”, which even the media have Christened “National Remainers” also seems unlikely, given how the various factions of the remainers struggle to agree on anything.

  7. Another Conservative would be the natural choice, as they have the largest party…. could that be dragged out for the remaining 12 days?

  8. So we drift towards 31 October……. no Prime Minister, no Government, political chaos.

  9. Away from Westminster, the negative respect for the political classes plumbs new depths.

When the referendum result was declared, the best outcome would have been a clear, firm date three years (or even five years) ahead, for which everyone could plan and prepare, leading to the most seamless transition possible. Instead of which the political classes in London, Brussels and Dublin have screwed it up right royally. By their constant bickering and game-playing, we are now in the worst possible situation. It is no wonder that the general public is coming to despise politicians.

 

Oh, and as for the details of Boris’s Plan, we don’t know.  We’re not even sure that he knows……

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Judges In The Dock

Doesn’t the legal profession look decidedly dodgy? A Scottish High Court decides one thing, an English High Court decides the opposite, and the Supreme Court has to jump one way or the other. Having had their verdict so completely reversed, shouldn’t these foolish English High Court judges be called upon to resign? After all, the next level up found them to be completely wrong!

Though for the record, we think that the English decision was the correct one; proroguing Parliament is a political decision, and not a suitable arena for a court to intervene.

Also, more clarity is required from Lady Hale. Click here for the summary judgement. All of the press has quoted her conclusion, that “The decision to prorogue Parliament was unlawful.” So which law exactly did Boris break? He is said to have misled the Queen, but in what way? The process is totally ceremonial. When a Prime Minister asks for Parliament to be prorogued, the Queen doesn’t think a little, scratch her chin and say yes or no, depending on what advice she has heard. She is going to agree. Proroguing Parliament was always in the gift of the PM, and so it remains. To state that he can only choose a time with no political impact is worse than naïve.

Lady Hale has suggested that there is too much going on for Parliament to be stopped – but in reality, Parliament has already prevented No-Deal – and any putative Deal will only come back from the EU summit on 17 October, when Parliament would have already reconvened in time to reconsider it. So what exactly does Lady Hale think could have happened in the meantime, apart from the usual shouting and point-scoring?

To us, this judgement has;-

a) Highlighted that different judges make completely diametrically opposite decisions based on the same facts.

b) The senior judiciary seem to have entered the political fray, supporting the anti-Brexit, elite, establishment side of the argument.

Both of these facts diminish the judiciary.

Additionally, the judges seem to have decided that a PM can only prorogue Parliament when “things are quiet”, and for a less time than 6 days of sitting. There is no precedent for these views, and so the Judges, rather than applying the democratically determined law, seem desperate to make up their own version of what seems sensible. This highlights their unaccountability.

Like Parliament voting against every Brexit alternative, the Judges have not outlined what would have been acceptable practice, merely striking down what they see as unacceptable. How can this be? Since there is no accepted precedent on how long or under what circumstances proroguing can take place, the judges have effectively made up the law. This is unacceptable, and illustrates what a dangerous step the Supreme Court has taken. To avoid highlighting the fact that the judiciary now thinks it can make up the law, they have not clarified when or under what circumstances Parliament can be prorogued, and for how long. Would BoJo have been okay if he had made it for 4 weeks and 6 days rather than 5 weeks? Or if he had prorogued it for the whole summer when they were all on recess anyway? Brexit has been going on for three years now. When would it have been acceptable to have a new Parliament? If the Supreme Court had made these clarifications, it would have made them look as if they saw themselves above Parliament, but without such explanations, they look to be just making a political statement.

Going forward, a wise government will codify these precedents, and start to work on a written constitution, to include who can prorogue Parliament, for how long and under what circumstances. This would at least have the benefit of preventing judges making random interpretations of  what is or is not acceptable. At that time, all sorts of anomalies will need to be addressed, such as our unelected upper chamber and the West Lothian question.  What a can of worms! Woohoo! Politics is going to be fun for years to come!

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Brexit! Where is the Cummings Plan, Baldrick?

Parliament has been prorogued! And the important news for word-puzzle fans is that this ‘new’ verb is indeed in the Collins Scrabble Dictionary.

But one has to ask, why did they do it? (I mean Boris, not Collins) And why in such a half-hearted manner? Conference season is coming up, so despite the headline “FIVE WEEK SUSPENSION”, in reality the proroguesion (Nope, that one isn’t a Scrabble word. Anyone got a number for Collins?) only made a few days difference to the actual sitting of Parliament. More importantly, the timing was such that Parliament had time to push through the no-deal bill that was always in prospect, and so the closing of Parliament had no real impact at all.

Boris; buffoon or battler?

To us, this high-profile political act was all about Team Boris tweaking Parliament’s tail, and continuing the theme of showing Parliament being against the referendum result and Boris battling manfully to enable what the people chose: Boris and the people versus Parliament if you like.

The two attempts by Boris to provoke a general election should be seen in the same light. The opposition parties saw a trick in that should an election have been called, selection of the date is in Boris’ gift, and hence he could choose a date after Brexit. However, forcing a second vote on the same issue gives the game away. The vote was for public consumption, designed to show the lengths to which Boris will go to deliver Brexit – even risk losing power – and the determination of the other parties to stop it. The subtlety of it being a no-deal Brexit that was stopped will be air-brushed over. This will be shown as Labour being determined to ignore the result of the referendum – and being frightened to face the electorate.

The third piece of evidence, m’lud, is Boris’s stated promise never to request an extension to Article 50, despite the eeyores of this world threatening him with prison. How much of a martyr would that make him? I note with surprise that ex-cons are allowed to stand as MP’s, so even if he was imprisoned, it would not prevent his comeback as a hero.

So, dear reader, you have a choice to make. Do you think that the current administration is ricocheting wildly from one crisis to another? This would not be out of alignment with the public image Boris has cultivated over many years.

Dominc Cummings – master strategist?

Or is this all a careful scheme, planned as the best option to cope with an unfavourable parliament? Boris is setting himself up as the people’s champion, fighting to the death (figuratively rather then literally we hope) to enact the referendum, and being frustrated at every turn by the self-important knuckle-heads in Parliament. Then when the inevitable election comes, Boris emerges with a very strong message. Dominic Cummings is a master at this kind of game…… we see a very Cummings plan Baldrick!

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Brexit Election Double Bluff Could Avoid No-Deal

Cripes, doesn’t Boris love poking the hornets’ nest with a sharp stick?

Boris – back on the front foot

The reality of his decision to close this Parliamentary session and arrange a Queen’s Speech to initiate a new Parliament is relatively small. Instead of Parliament having a recess for three and a half weeks over the party conference season, the break is five weeks. However, it has acted as a lightning rod for all of the pent up frustration and anger of the Remainers. Suddenly, they can see their case is lost. It was lost before, but now they can no longer pretend to themselves that they still have a chance.

Guy Verhofstadt, with name label to prove it

The greatest endorsement came from Guy Verhofstadt, Chief EU Brexit Negotiator, who branded it a ‘sinister development’. Clearly, many in Brussels have been relying on the Remainers to weaken the UK position. The strength of Boris’s move is reflected in their dislike of it.

The Nuclear Option

So now the Remainers have only one option left – win a vote of No Confidence next week and force an election before the end of October. This would be welcomed by the Boris team, as discussed yesterday, who have developed a suite of policies on which to campaign, and have clearly judged that such a poll would be winnable.

Our view is that;-

  1. The Remainers will not be able to win a vote of No Confidence

  2. It is far from clear that Mr Corbyn will even dare to call one (see 1. above)

  3. The EU will have to sit up and realise that the Remainers will not postpone Brexit

  4. The EU needs to avoid blame for No-Deal, and so see a deal as necessary.

 

Suddenly, to us, a No-Deal Brexit seems less likely than it did 24 hours ago.

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Brexit Election Bluff or Double Bluff

We enjoyed the great mutterings in the press since the weekend about whether the Tories secretly want to have an election BEFORE Brexit day on Halloween.

It appears to have been started by Tim Shipman in the Sunday Times, who suggested that the Government would quite like to have an election on 17 October. However, recognising voter-fatigue, they want Labour to take the hit from the Brenda-of-Bristols who are annoyed at “Not Another One”. The thinking goes that Boris is far ahead in the polls, and so could attend the Euro summit the next day with more power to his elbow, and really give the EU leaders what-for!

The polite word to describe these rumours is bunkum. (The less-polite word also begins with B and has two syllables.) There are two major flaws with the plan. The first is that 18 October is way too close to Brexit day, and so no matter how much power there is at Boris’s elbow (or anywhere else on his anatomy) there just isn’t time for a deal to be pulled together and approved in all the places in which it needs to be passed. Also, two weeks before B-day is just about the worst time to be holding an election – project fear will be in full swing and the media will be full of the impending doom. Boris and his team certainly need to be planning on how to win the peace after B day at that point, but the public may have more pressing matters on their minds.

The Anti-Brexit Forces Are Too Split to Perform

Another week and another proposal from the anti-Brexit brigade. Part of their problem is that they all have agendas so different that they cannot agree on a shared approach.

Mr Corbyn has dreams of No 10

Last week, it was J Corbyn’s dream of rounding up support to propel him into No 10. That wasted another 7 days of precious time. However, putting Mr Corbyn into No 10 was a suitable objective for only Mr Corbyn.

This week, the rebels seem to have dropped the idea of an early no-confidence motion. So perhaps the Sunday papers’ double bluff about the Tories wanting such a thing was successful after all? The latest plan is to take control of Parliament and pass legislation to force Mr Johnson to extend Brexit. The trouble is, all of the people involved are playing politics, working out whether such a step helps their own person ambitions. However, despite Mr Bercow’s self-belief, the Government controls order papers, and can easily string out any arguments about procedure – perhaps reminding Parliament that they are not in the business of dis-obeying instructions from the electorate.

Frau Merkel in better health

Meanwhile, Frau Merkel’s sarcastic comment to Boris suggesting he should try to solve the Irish backstop in 30 days (when it hasn’t been closed down in over 30 months) has held open the prospect of a last minute deal, taking away some fire from the stop-No-deal faction of the anti-Brexit rabble.

 

 

What Will Happen?

In our view – remember, we are almost as clueless as the next person, depending on who that next person happens to be – Boris has got B-day in the bag for 31 October. It feels like there will be too much egg-on-face for the EU to renegotiate, and so a No-deal Brexit seems the most likely outcome. However, this time there has been ample warning, and so trade will keep flowing, people will continue to travel, and most of the strain will happen behind the scenes. This is kind of the inverse of the fig-leaf Brexit we forecast in the spring, when we thought a net-curtain of a deal would happen to save face. Now it looks like both sides will rush towards No-Deal, for the message that will send to their own electorates, but behind the scenes everything will function!

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Corbyn for PM – The Ultimate Silly Season Story

Corbyn the great statesman

Hahahahahahahhahahahahha. Hats off to whoever thought of proposing Jeremy Corbyn to be Prime Minister. Perhaps the most fundamental question about having the Labour leader in charge of a “Government of National Unity” to solve the Brexit dilemma is, does anybody know what Mr Corbyn’s ideal Brexit would look like? So far the only clear Labour policy has been to oppose whatever Mrs May tried to get through Parliament. That was opportunistic politics, not conviction-based positioning. It is widely believed that Jeremy himself is in favour of Brexit, but it appears from the sketchy plans seen so far that the National Unity Government would actually be a Parliamentary Unity Government whose sole purpose was to delay Brexit and call a General Election. It is tough to see how frustrating again the 52% of leavers would lead to any unity within the country.

There cannot be many Tory MPs who want an election: and there must be even fewer who would want to face even their constituency party, let alone the electorate, after putting a Marxist in No 10. Then there is the difficult issue of Scottish Nationalism. Would Corbyn and Co be prepared to sanction another Scottish referendum as the price of SNP support? That would make the £1bn bung to Northern Ireland to buy DUP support look rather cheap. Even with the SNP, there is zero chance of Mr Corbyn building a parliamentary majority. Even some of his own MPs wouldn’t back him.

What is most revealing about this whole farrago is that St Jeremy bought into the idea hook, line and sinker. He truly believed it could work. Like a first year schoolboy persuaded by the sixth form to stand for Head Boy, he seemed to genuinely hope that it could happen. Oh yes, come to think of it, that’s how he became Labour leader – the outsider added to the ballot paper for a laugh.

 

Silly Season Story No.2 – Ken Clarke for PM

Ken Clarke after 49 years in Parliament

Come on Ken, surely you must have seen that one coming through the cigar smoke? At least you had the nous to claim no involvement until the fuss died down. Thus you saved some of your dignity.

 

Silly Season Story No. 3 – Donald Trump Wants to Buy a Country

Leader of the Free World

Well it would be the real-estate deal of the century – and you know what, he could still pull it off. Going public may well be a tactic to soften up the Danish people into selling off an asset they cannot exploit to someone who can!

Hey….. wait a minute. If Donald J wants to buy a rugged, freezing, mountainous country with too much snow and ice…… well we know he loves Scotland! Call Boris, I’ve got an idea!!

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A Bleak-Midwinter Brexit Recession By Christmas

Oo-er, suddenly the UK economy ain’t looking so good!

The news media are full of speculation about Brexit, and not many of the stories are looking forward to how wonderful the country will be once/if Brexit happens. We can expect more of the same for the next twelve weeks until Halloween.

Are we heading for No-Deal?

At the moment, both sides are digging in, trying to create a tough stance for the benefit of their populations (I hesitate to use the word electors when we are discussing the EU, but you know what I mean). Behind the scenes, it can be assumed that the diplomats and civil servants will see themselves as the grown-ups in the room, and thus be at least looking for common ground.

However, it seems unlikely that a comprehensive new Withdrawal Agreement will be crafted by October. But we can expect enough co-operation to keep the world turning.

So what’s the problem?

The problem is that investment is collapsing. The worst thing for businesses in uncertainty. Life has enough risks when it comes to business investment, without an unseeable future being only 12 weeks away. Similarly, house-buying and car buying are likely to miss out on their usual autumn surges this year.

And after Brexit day, will there suddenly be clarity and light? Nope. There will be hysteria in the media for a few weeks as every little shortage and business malady is blamed on you-know-what. And the effect of this – more hand-sitting and less spending.

What else is happening?

Leader of the Free World

The US is starting to suffer from Mr Trump’s tariffs, to the extent that Jerome Powell has cut interest rates despite full employment. Meanwhile, China is suffering a marked slowdown from the trade war. This has now spread to Europe, which is also teetering on the edge of recession.

Conclusion

The UK is heading for recession – and it is difficult to see when it could end. Domestically, we’ll probably pull out next spring…. but that depends on what the rest of the global economy does. If things keep softening elsewhere, it could be a big one!

PS. The slowdown in Q2 announced today was no surprise, given the stockpiling in Q1 for the original Brexit day, and the factory shutdowns brought forward to April in case of Brexit delays.

Theresa the Timid

PPS. The coming recession will be a direct result of Mrs May’s and Parliament’s timidity over Brexit. If they had gone ahead on 29 March, we’d be pulling out of it by now. The delay to October has just increased the uncertainty and halted the economy for 7 months, tipping us into a recession we need never have had.

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