Mint – Blain’s Morning Porridge
The early bird may get the worm, but the second mouse gets the cheese…
I always thought the point in Europe was open markets and borders. Isn't that what we just fought a referendum about? The UK government's customs and excise guidance says we can bring back food and wine from any EU member countries. Specifically the guidance says we can bring back Cheese!
Yet, at Limoges Airport last night, a very angry unfriendly (and decidedly short) French security guard and his colleagues confiscated my cheese. The temerity of the man. They searched every single UK passenger, confiscated all food stuffs - according to the lady next to me she'd just spent EUR 50 buying local produce in the Deli right next to the airport! He gruffly told us it was the law as he "aggressively and with attitude" chucked my cheese in the bin. We went to war with Spain in 1739 over less!
I am not happy. So…. and let this be a lesson to them..we shall do without French smelly fromage and their garlic-fouled sausages. I shall forthwith champion the Cheeses of this Island Jewel set in a Silver Sea.. Bring me Stinking Bishop, Gallybagger, Yarg, Barkham Blue and Perl Las. Give me honest Cheddar or death! (Which begs the question: How do you handle an angry Welsh cheese? Caerphilly... (US readers: think about it.))
More to the point... Why is the UK still paying into the EU, the founding purpose of which was funding French farmers whose products we're apparently no longer able to consume? I am thinking...the sooner Ms May presses the button on Europe the better.....
There are many things we still don’t know and can’t predict about Brexit effect… yet if Brexit is going to boil down to a cheese war... then the doomsayers might yet be right about the damage it will do the economy... I suggest the new UK Chancellor, Spread-Sheet Hammond, quickly triggers a massive fiscal programme to build out dairy infrastructure to ensure we're not caught short in the coming Guerre'd'Fromage...
Europe fiddles. Meanwhile... Back on planet Earth...If European Central Bank member Coeure really believes there is nothing abnormal or extraordinary about negative interest rates...we have a problem. I begin to see a common thread re the problems of the global economy if it’s considered normal that money has negative time value by central banks. Think about investment rationale. Why invest if returns are negative? Unless they are likely to get more negative…which is what’s happening.
Friday's speech from Yellen has been read as hawkish - so everyone is now weighing up the prospects for a September cut.. Let's say 40%, or 70% likely in December. It will, of course, be data dependent, so this Friday's payrolls number assumes a deal of additional significance. Every piece of data means something...as does every Federal Reserve Head comment – like Fischer later today.
Yet markets haven’t collapsed on the looming Fed moves. What would a rate hike do to bond markets? Less than you might think. US treasuries will remain strongly supported by the strength of the dollar, and by the amount of US money market fund money being sucked back into the short end by new "don't break the buck" US money market rules. On the basis there is apparently nothing to worry about...perhaps we should be very scared?
There was an interesting note in the Financial Times suggesting friction between economists and market strategists over the obvious failures of monetary policy to create global growth versus market tacticians still calling investors to buy into assets so obviously distorted by the same policies. Nothing wrong with such inconsistency. Short term vs long term. Distortions pay this week’s bills...sensible economics will hopefully pay our pensions.
What am I watching this week? Banks, banks and banks..
Out of time and back to the day job..
Head of Capital Markets / Alternative Assets