by Mish
Dear All,
Please find my almost final version of the UK election presentation:
Main Points
Conservatives and PM May have executed a terrible campaign – she has done ALL the mistakes of Clinton and the establishment:
Safe pair of hands
Not committing to anything
Talking about energy regulation
No committing to tax freezeOn the other hand, Labour has been able to reframe.
What kind of Brexit do you want? To what kind of country do you want?
Classic tax & spend, but this time the classic middle class is safe, while “rich” & “corporates” needs to pay more….
Wild promises free lunch and education, 250 billion GBP infrastructure program
No commitment on Brexit
*Corbyn policy is economically naïve but he is getting the young voters.*My final call:
The election will end with Tories having EXACTLY the same majority as now – hence a lost election and a muddy BREXIT mandate.
*Prime Minister May is the de facto loser independently of the final results as her “management” has been poor and rudderless leaving more doubt than the clear vision needed – hence the title: Unintended consequences (May getting weaker mandate and populous empty promises still attracting voters.)*Market calls:
If correct in my call… GBPUSD should correct 1-2% but overall the next major level is 1.3500 (& 1.4000 in 2018 based on credit impulse, weak dollar and terms of trade improvement & the better trade is probably to be long EURGBP towards parity (EU growth > UK growth, EUR undervalued, EU Current Account surplus vs. UK Current Account)
Steen Jakobsen
UK Polls
A new set of UK polls is in.
Election Blowout?
If the latest poll is accurate, the election may be the slaughter that many envisioned all along. I suspect the election will provide a substantial pickup for the Tories, but short of an absolute blowout.
Long the Pound
I am long the pound vs the US dollar and have been for some time.
Near-term, Steen may very well be correct the better play is to be long the Euro vs the Pound. However, the euro is a far riskier play. Any number of events with Italy or Greece could impact the Euro.
The consensus opinion is the UK has more to lose in Brexit. I disagree with that consensus.
Will French President Emanuel Macron achieve anything, even if his party “en Marche” wins a majority of French parliament? Color me skeptical.
For now, a sinking dollar (I believe the dollar has peaked this cycle) stands to benefit the Euro and the Pound.
Disruptions due to Italy, Portugal, or Greece are a substantial worry for those considering the Euro.
Mike “Mish” Shedlock
