What Could Possibly Go Wrong?

Everything seems fine in markets for now, both here in the UK and in the US; rather than speculating about what will stop this excellent run for investors, let us have a look at domestic politics to end the month.

Sadly, David Cameron seems to have attracted ire.

I have heard him called a born chancer, with negligible convictions of any sort, who rose to lead a major political party almost by chance.  Did he swim with any passing tide, and was he indifferent to the fate of party or country? To me he looked like the perfect palimpsest for the London media, at the very outset; a proto-Blair, all boyish charm and no bottom.

He apparently always saw, much it seems like Blair did (whose property empire is already large), party politics as a stepping stone to making big bucks from a grateful establishment. Nor did he rate the sinister ranks of either his own back benchers or civil servants, as anything but temporary impediments, instead he was forever dressing up his administration with apparently like-minded commercial types or plausible media darlings; no loyalty or political principles seem to have been needed.

So, while it would be nice to think that it was bad luck that he fell in with Lex and his boys, in truth he’d sold that pass years ago, in the perennial belief that quick, slick answers lie at hand to all the fuddy duddy laws of economics, and that reward has little to do with risk.

Was Brexit ever an Uncertainty?

On the other hand, I am not inclined to blame him for Brexit, which for many foes is his true crime. I recently read the excellent and painstaking work by Bob Worcester of Mori, who worked for Harold Wilson and spotted what his research had located, was gold dust. His tome (with Mortimore, Baines and Gill) “Explaining Cameron’s Catastrophe” sets out month by month what the British public thought of the EU, from the moment we joined. Suffice to say you needed to be lightning fast to find a sliver of time, when it was anything but deep loathing.

So, there was no gamble: unless he was a total idiot, he knew the score, if they bothered to ask, the public answer was always going to be “No”. The time for the nation to force that pass was a decade earlier, if Blair had thought he could finesse the Euro, that would have embedded us in Europe, not left the UK semi detached (and detachable). Blair saw the same polling data, and knew he could not muster the troops. The spurned Tory back benchers, eased aside by Cameron, again saw the same data, and that the fissure was clearly there, they just needed to drive the stake in.

So, Cameron played his poor hand as fast and as politely as he could and quit. The press may yet nail him for some sleaze, although I have seen no evidence of illegality; the knowledge that he had just become the pleading messenger boy for so shabby an outfit should be shameful enough.

Does it matter? Of course, but will any serious attempt be made to avoid such situations? I can’t see it, the problem with putting a pickaxe through the trough, is those swinging it must in so doing destroy their own retirement. Not going to happen – not with the media ensuring our politics is more facile, ephemeral, and poisonous than ever (and it applies in other Western democracies too).

Forthcoming Elections in the UK

We do have a stack of elections shortly so these faux pas might count. Although the general feel is that they don’t matter, or the electoral answer is obvious, which I broadly agree with.

The London Mayor should be important, but I think Boris gave up on London a while ago, besides he has little sway over the party there. The Birmingham Mayor looks safe, mainly by selectively distancing himself from the party, or at least its leader. Tory Associations are only dimly aware of local boundaries and take a good century or so to align with any geographical reality, so their grip is weak in the urban Midlands.

I sense the Shires, the Tory heartland, will be rocked a bit, as these seats were last fought just before Theresa May produced the daftest manifesto in many a long year, from her own absurd clique of sleazy imported magicians. So, the seats now being defended by Tories still reflect the landslide she never had, but that her local representatives did enjoy; from triumph to disaster in four short weeks.

So yes, the Cameron debacle will cost votes, but not enough to make much difference. You can see Labour are not going for it just yet, although the sight of Keir ambling past an open goal and telling himself it is too early to score (is it ever too early too score?) is most endearing. Still as Cameron ably showed, keep your powder dry, don’t get involved and almost anyone can be elected.

In the longer run, I see no sign of the Tories holding power at the next General Election; policies are still being sputtered out in a fairly random fashion, attempts at grass roots soundings seem pedestrian, and history does not suggest they can win again. It will be their third PM and fourth election in a row, you need a true implosion in the opposition to get that. Which seems a stroke of luck that is unlikely to be repeated. Still, it is a bit early to prognosticate even so.

And what about North of the Border?

I suspect what Cameron has done, is let Sturgeon off the hook. It is suddenly easy to say “they are all the same” with renewed conviction, and it makes it a little harder for the pro union parties to show any united front. So, I assume the Scottish Parliamentary elections will cause a slight raising of the temperature, and a lot of unwelcome noise, but I expect the SNP are still broadly happy to wait for Keir to come asking for a deal; it might be bad for the country, but good for him. I have not seen enough to doubt he will take the apple, if offered. 

Indeed, the pandemic has been an excellent crisis for Nationalists. Someone somewhere let both devolved Parliaments exploit the chaos over COVID to strike a very distinct national stance, as if the virus could read passports. They quickly erected de facto borders against the English; when political separation does come, don’t expect those fences to stay down for long. This sideshow can cause real damage.

Here incidentally, is what happened to the public sector jobs since 2000 – and what impact devolution has had on those numbers. I invite you to draw your own conclusions.

UK Public Sector Employment (constructed from a UK Govt data series published
on 23 March 2021)

So, will there be a setback to this rally?

So, I see no new political crisis brewing here, nor frankly in the US; Biden has overall had a pretty easy run so far, so I would look elsewhere for the setback to this rally.

We will get one, markets will shy at something before midsummer. We also note that once more the IPO frenzy is sucking a great deal of liquidity out of fund managers’ pockets.

Beyond that belief, looking for specific problems has been well enough covered by others.

In any event having had an early Easter, we will now be writing next after those same elections and perhaps on that very topic.

Charles Gillams

Monogram Capital Management Ltd