Skip to main content

Brexit -- the cost

The EU has been rather adamant that the UK will pay a very steep price for exiting the European Union.  In fact, requiring that the UK pay for everything.  The figure could be anywhere between Euro 60 billion and Euro 200 billion.  In effect, the EU has asked all its institutions to create a list of demands -- like a divorce, the demands can (will) be outrageous, because if you don't ask, you certainly will not get.

How the whole thing plays out is a different story.  There is no doubt that the EU wants its cake and to eat it too!  The UK has the same problem, of course its not about "cash" rather is about access to markets and ability of British National to travel freely within Europe.  The Ft this morning indicated that the UK will need to negotiate more than 700 treaties with various countries over various issues (so lots of work there).

How all this plays out is dependent on many factors:

(1) British Elections:

This morning the worse possible news for Theresa May, she may lose her parliamentary majority -- a richly deserve outcome at a particularly poorly run campaign, when Ms May though she had a 20 point lead in the opinion polls.  Her party's platform was mean (a la Trump) and she seem the relish the idea that she could do anything.  She had her platform demolished by various journalists -- in particular by Jeremy Paxton -- who demonstrated that Ms May had a poor understanding of what she was offering her country...

(2) Italy:

Now, all this could go away if Italy become the spoiler in this whole game.  It seems that the 2018 elections may actually occur in 2017, as the risk of a non-confidence vote escalate.  The reality is that within Italy's parties the vast majority are against remaining in Europe (and the Euro) because the country is facing dire problems with its banking system.  This could really upset the European apple cart.  Time will tell

(3) Greece

The key to Greece are the German Election in the autumn, the problem for Greece is that it has payment obligations in July -- on which it may default (it simply cannot repay the loans).  As the risk of default rises, there is a feeling among European that the Greek problem could play a major roll in the future of Europe, not because its important but because it too may exit the EU, and as such provide a blueprint for the UK -- after all the rules cannot be harsher for one player than for the other!  

(4) Trump

There is no doubt that Trump's European tour was a catalyst for European unity in the face of a a poorly informed bully.  His "planned announcement" to quit the Paris Accord, his non-support for Article 5 of the North Atlantic, and his clear pleasure at paling around with dictators -- Philipies, Saudi Arabia Russia -- he's event hinted that 

Comments

Popular posts from this blog

Trucker shortage? No a plan to allow driverless rigs

There are still articles on how America is running out of truckers -- and that its a huge problem, except its not a problem, if it was a problem salaries would rise to so that demand would clear. Trucking is one of those industry where the vast majority of participants are owner/operators and therefore free agents.

Salaries and cost are extremely well know, "industry" complains that there are not enough truckers, yet wages continue to fall... Therefore there are still too many truckers around, for if there was a shortage of supply prices would rise, and they don't.

What there is though is something different; there is a push to allow automatic rigs to "operate across the US", so to encourage the various authorities to allow self driving rigs you talk shortage and hope that politicians decided that "Well if people don't want to work, lets get robots to do the work" or words to that effect.

This has nothing to do with shortage of drivers, but every…

Every punter says oil prices are on the rise: Oil hits $48/bbl -- lowest since September 2016

What the hell?

How could this be, punters, advisors, investment bankers all agreed commodity prices  in general and oil prices in particular are on the rise...its a brave new era for producers and exporters -- finally the world is back and demand is going through the roof, except not so much!

What happened?  Well energy is complicated, the world operates in a balance -- 30 days of physical reserves is about all we've got (seriously) this is a just in time business.  So the long term trend always gets hit by short term variations.

Global production over the past 12 months has risen by somewhat less than 1.5% per annum.  As the world market changes production becomes less energy intensive (maybe), but the reality is that the world is growing more slowly -- America Q4 GDP growth was around 1.9% (annualized) Europe is going nowhere fast (the GDP growth in Germany is overshadowed by the lack of growth in France, Italy, Spain (lets say 27 Euro members generated a total GDP growth of 1.2…

Paying for research

This morning I was reading that CLSA -- since 2013 proudly owned by CITIC -- was shutting down its American equity research department -- 90 people will be affected!

Now the value of a lot of research is limited, that is not to say that all research is bad. In fact, I remember that GS's Asia Aerospace research was considered the bible for the sector.  Granted, there was little you could do with the research since the "buy" was for Chinese airlines...that were state owned.  Still it was a vey valuable tool in understanding the local dynamics.  It seems that the US has introduced new legislation that forces brokers to "sell" their research services!  Figures of $10,000 an hour have been mentioned...

Now, research can be sold many times; if GS has 5000/6000 clients they may sell the same research 300x or 400x (I exaggerate) but this is the key -- Those who buy the research are, I presume, prohibited from giving it away or selling it, at the same time the same rese…