Jockageddon Averted - Now It's England's Turn

Commentary and analysis from referendum observers is being produced by the bucket load, not all of it has substance. Here though are some salient points to note from friend Marcus Ashworth, Head of Fixed Income over at Espirito Santo, and he writes really, with no particular axe to grind..

"It was Crumble's Ma wot did it........ the silent majority came out in droves to register their understated desire to retain the Union, whereas in Glasgow the turnout was one of the lowest and 53.5/46.5% was not enough of a Yes vote to give Salmond a chance.  Despite all the puff he didn't get his vote out, and in what was probably the largest % turnout in a modern democracy ever (Aus doesn't count as semi-forced voting).  Bully boy tactics clearly backfired.

A double digit majority was what was required to put this issue to bed for now - though of course Salmond doesn't have that in his nature - "at this stage" was a particularly telling phrase in his most ungracious acceptance of defeat speech.  Evidently his only tactic left is to try and grab as much of the "vows" as possible.  However, Number 10 apparently has some other ideas and talk of Devo Max is being downplayed.

The chat from Downing St seeems to a swift volte face to try and redress the growing clamour from the Tory backbenches about what Gordy was allowed to promise in the final days?  For all the sense of panic it is evident that Gordy had this worked out many months ago but was only sanctioned to unleash the dogs of war in the final nail-biting furlong.  His last speech was apparently his best, though equally Cameron did his bit under unrelenting abuse.  The Better Together campaign was pretty much totally Scottish Labour led and Tory free, it is not the winner though.  Labour party conf in Manchester - Ed needs an even better speech this time - pref without that Disraeli one-nation blather.

The West Lothian question is the key piece of egregiousness that will have to be finally knocked on the head - something that Labour has conspicuously failed to do.  Scottish MPs will soon no longer be allowed to vote on England only matters - whilst of course English MPs have never been allowed to vote on Scottish matters.  This will pose a knotty one for Miliband because it could very well permanently emasculate Labour Govts if on budgetary matters there is not enough of an English-only MP backing.  The Barnett formula (which even its eponymous creator thinks should be scrapped) will stick in the craw.  If affords a permanent upward only subsidy of circa £1500 per person to Scotland over rest of UK.  This has not gone down well south of the border.  At all.

Cameron may have been knifed by Clegg on the Boundary Commission changes (which is the most outrageous breach of code for the so-called Mother of Parliaments) - but this way he may partly get his own back.  If he fails then he will really face the chop from the 1922 cmte.  Bear in mind Clacton by-election shortly will see a big slap for Cameron - and his image is very much of the "essay crisis".  Tricky times if he drops this ball on Constitutional change - especially if Salmond gets traction on any perceived signs of backsliding on the vows.

Labour has acted appallingly throughout this campaign being utterly self-serving and using every opportunity to try and turn a battle to save the Union into a call for a Labour Govt next May.  If Miliband fails to engage in a William Hague (as Leader of the House) overseen all-party talks, then it will be Labour who will carry the can for failing to deliver on the myriad of promises offered up by their last Prime Minister.

If only for that fact Cameron should emerge from this as the biggest winner and it's a 2nd big win for him after seeing off the Lib Dems on proportional representation, is he on a roll for winning in Europe as well?   OK that might be a leap of faith too far - still the gamble has largely paid off and the Tories can get to shape constitutional change whilst still in power.  That is a major, major difference from the expected situation that the next Labour Govt (as the polls still point to) would carve it up as they see fit.

........... welcome back Scotland

I find it hard to see (bar Gordy, Darling to some extent and of course the redoubtable Jim Murphy who will clearly get a Knighthood) who in Labour comes out of this with any accolades.  Miliband is a dead man walking - and he knows it.  It is one thing for Cameron to find it difficult to campaign in Scotland but for a Labour leader not to either basically bother to get up there until the last few moments and then not to be capable of walking through Edinburgh is a travesty of not just how the Yes campaign has been conducted but of Miliband's validity.  Clegg has proved that the Lib Dem vote has vaporised.  Question now is whether Salmond can survive, let's hope not as he allowed a very dirty campaign to get quite seriously out of hand - he deserves to go just for that alone.  Only Farage had the temerity to call him out for that."


Syria; So What?

Camera's in Westminster; Press Are On The Start Line Then

"UK Politicians . People who don't hesitate to bomb other countries on the flimsiest of evidence but spend years worrying over whether to implement a badger cull . " Army Rumour Web Site

Our Nobel Peace Prize winning President used to think in 2007; Obama:  "The President does not have power under the Constitution to unilaterally authorize a military attack in a situation that does not involve stopping an actual or imminent threat to the nation."  With Boehner tearing off a letter signed by 118 Congressmen, (18 Democrats), making it clear that keeping the legislature in the dark is not going to cut it - the UN Sec Gen throwing up obstacles - and now his chief ally Britain having difficulties in going straight to war..... then Barry is taking his time for good reason.  And we should be thankful for his reticence in foreign matters, even if it is indecision.  When Russia and China start sounding reasonable it is time to think again.

We are now in a phase where all involved, on all sides, will seek to confuse, confound and mislead. This is all part of the disinformation and deception campaign which of course, makes perfect tactical sense. This will inevitably create a lot of market noise and markets will ebb and flow with each wave of news, regardless of its veracity. That is, right up until we wake up to hear on the news that Tomahawks are jinking down downtown Damascus.

Surprisingly, Milliband has for once caught the national mood and suddenly become the hate figure in Westminster as a government source tells the Times, 

“No 10 and the Foreign Office think Miliband is a f****** c*** and a copper-bottomed s***. The French hate him now and he’s got no chance of building an alliance with the US Democratic Party”

Why? Here is where things stand this morning. Miliband’s threat to oppose the government means the PM doesn’t have the numbers for military action. Today’s vote will now not authorise intervention, there will have to be a second vote next week if Cameron wants war.” Guido

 

UKIP Says No To War In Syria

As one chum put it "I never like to see that snivelling millipede score a point but someone had to stop Cameron".  Labour were very close to forcing a major defeat on the Govt which resulted in the motion being moved to one of principle today; but we should expect the Mother of all Parliaments to put on a fine display of calm reason.  Open goal for UKIP as well as Nigel Farage echoes the fine words of Lord Tebbit. (Does Cameron really want to lose his summer of easy victories over Labour and the virtual disappearance of UKIP all in one fell swoop?).

" It was not the Assad government which declared war on the Syrian people. Over the years the Assads, father and son, had been authoritarians but by the standards of the Middle East they had respected minorities, not least the Christians. It would be a gross oversimplification of the very complex religious and tribal and ethnic divisions within Syria to blame the Islamists alone, but it was the more extreme Islamists who became increasingly restive at the deviant tolerance of the Assads and they who incited an undeclared war against it and Assad.

What the British and American governments have to ask themselves is who would be strengthened most by any proposed warlike action. If it were to be designed to weaken Assad, would it be a coalition of the moderates of all shades who might find a peaceful way forward, or the extremists who would more likely want to impose a far harsher regime than that of Assad before the uprising? And if despite the first wave of military action the Assad govt survived but became more & not less intransigent towards the rebels of all shades, what then?"

Of course, Sarin itself has a short shelf life once the precursor chemicals are mixed, and so Saddam theories are discountable. Production of Sarin has been a schedule 1 war crime offence since 1993....so by forensic thought, we need to find a supplier with a chemical industry that produces organophosphates...such as sheep dip. That opens out the suspects......"

 

Syrian and US Assets (Bloomberg)

For the moment the Middle East Peace Envoy Tony Bliar (oh the irony -stop it), his press spokesman of old Alistair Campbell and it seems Sam Cam are the main proponents of the school of bomb them back into the middle ages. They might want to just check the above out as this will not be a Libyan style push over.

So who does this crisis help?  Apart from the obvious Sunni/Shia  push and shove; 

1. Obama as he may get his budget/debt ceiling through as Republicans may have to back down in all decency, (ok unlikely but may help if we are being really cynical) 

2. He gets to rig the FOMC again and wave Summers through (again bit of a stretch).

3. Israel as they won't have to be quite so nice to Palestinians in upcoming talks (though I think Netanyahu is right on everyone's case regarding Iran and setting easy precedents)

4. New boy in Iran can't play the peace card to western media and look all normal and nice - which by the way they have in condemning use of chemical weapons.  Unfortunately, they went on to warn Iran will attack and "burn" Israel if Syria is attacked - expect Iran to retaliate via unconventional methods e.g kidnappings via Hezbollah etc

 5.  Erdogan, Hollande and several others with "local difficulties" can divert attention.  As Rahm Emanuel allegedly said never let a good crisis go to waste - always an opportunity.

Meanwhile the US government  are leaking news of impending action on high value targets. The message being delivered to the media and to a public fatigued by war, is that strikes will be limited to high value targets. The last thing Washington wants is regime change because that would create the need for massive resources for a nation building clean-up, involvement in another civil war, another $1tr, probably 5,000 casualties etc etc etc

Obama is due in Sweden on Sep 3rd and then Russia for the G20 on the 5th-6th, the suggestion being that he’d like it all tied up by then, ie limited strike, (Stratfor).

However, other countries are quickly putting the brakes on incl the UK, (above), who at the moment, will struggle to get a vote through parliament without the report from the UN inspectors producing verification, (its not even finished). An attack without clear legal authority would be politically damming both here and in the US and that is thus far, also subject to the UN report. As time passes, domestic opposition here is growing and coalescing across an unlikely collective across the political spectrum.

There is an outside chance that the Russians might cooperate and help remove Assad. Russia still has a large presence in Syria and removing the head but leaving the body in place, (Army, security, intelligence & government), would avoid creating a power vacuum that would allow extremists to flourish. On current form, Putin is unlikely to acquiesce but you never know. For the moment, Russia has announced it is “adjusting” its Naval group in the Med, with Interfax reporting that  they’re sending an additional anti-submarine ship and missile cruiser. Putin and Iranian president, Hassan Rouhani, announced they had a telephone conversation yesterday in which they stressed the need to settle the conflict by political and diplomatic means. Meanwhile, the French have dispatched the anti aircraft frigate Chevalier Paul “in the direction of Syria,” which probably means to Corsica for lunch given their parliamentary debate isn’t until next Wednesday. We meanwhile are sending six Tornadoes to Cyprus. Getting crowded down there though and accidents do, unfortunately happen.

Conspiracy theorists may wish to consider this disturbing article.

With regard to markets, an enormously complex geopolitical, religious and civil conflict is not going to be easier to understand over coming days. Markets will continue to trade in an erratic fashion with obvious sensitivity to headlines. Markets will however, want to believe in the “clean and limited,” strike and I tend to the feeling that shares will want to rally short term from here. Having recalibrated down in a somewhat disorderly way they now need to find their levels and re-establish their value based relationships with one another.

However, any rally would have to be quite powerful indeed to overcome the new intermediate downtrend which has taken hold. Much technical damage has been done. In S&P terms, be very cautious if we break down through 1627; above 1640-1643 would probably ignite a short bull run but the dizzy heights of the 1670-80 zone would make me very cautious again. I believe rallies will be sold and the debt ceiling talks, Asian contagion and Europe will all contribute to headwinds for equities. (Europe is the bad boy no one is pricing and crude will impact us all; crude especially is a tax on producers and consumers and spikes in the crude px have usually preceded shares being hammered, (1987, 1999-00, 2005, 2007,).

War lust antidote here.

In summary, the hopes of a clean and limited strike to deliver a bloody nose to the school ground bully but with no fall-out remains possible but is getting ever so more complicated with each day that passes. When I was a young officer cadet we were taught to ask the question “So what?” to every potential action, and then “So what?” to each outcome until we exhausted the process to come to a conclusion. So what? There are an awful lot of “So what?” strands to this wee planning and political challenge. 

Firage Nails It Again!

As the Euro train wreck heads toward the cliff, the great and good of Europe continue to insist that all is well and they are just suffering from the passing inconveniance of a minor delay. Unfortunately, the transfer of wealth and influence to the German industrial and political complex doesn't suit all of Europe's citizens. Those same citizens will have to take a measure of pain resulting from their leveraged borrowing but it's odd that others such as the bondholders in banks appear to be protected from losses by governments.

Nigel Firage nails it in one...............(he really is the only man in the nation who speaks for us....... a sort of poor mans Prince Phillip).

"Good morning Mr. van Rompuy, you’ve been in office for one year, and in that time the whole edifice is beginning to crumble, there’s chaos, the money’s running out, I should thank you - you should perhaps be the pinup boy of the euroskeptic movement. But just look around this chamber this morning, look at these faces, look at the fear, look at the anger. Poor Barroso here looks like he’s seen a ghost. They’re beginning to understand that the game is up. And yet in their desperation to preserve their dream, they want to remove any remaining traces of democracy from the system. And it’s pretty clear that none of you have learned anything.


When you yourself Mr. van Rompuy say that the euro has brought us stability, I supposed I could applaud you for having a sense of humor, but isn’t this really just the bunker mentality.


We had the Greek tragedy earlier on this year, and now we have the situation in Ireland. I know that the stupidity and greed of Irish politicians has a lot to do with this: they should never, ever have joined the euro. They suffered with low interest rates, a false boom and a massive bust. But look at your response to them: what they are being told as their government is collapsing is that it would be inappropriate for them to have a general election. In fact commissioner Rehn here said they had to agree to a budget first before they are allowed to have a general election.


Just who the hell do you think you people are. You are very, very dangerous people indeed: your obsession with creating this European state means that you are happy to destroy democracy, you appear to be happy with millions and millions of people to be unemployed and to be poor. Untold millions will suffer so that your euro dream can continue. Well it won’t work, cause its Portugal next with their debt levels of 325% of GDP they are the next ones on the list, and after that I suspect it will be Spain, and the bailout for Spain will be 7 times the size of Ireland, and at that moment all the bailout money will is gone - there won’t be any more.


But it’s even more serious than economics, because if you rob people of their identity, if you rob them of their democracy, then all they are left with is nationalism and violence. I can only hope and pray that the euro project is destroyed by the markets before that."

 

Well Played Nigel!

These are dark days for Middle England. The economy is going to hell in a basket and however bad you may think things are, I'm afraid that for the average family they are going to get a good deal worse. Now and again though, the odd thing comes along which, while not improving the lot of the average man in the street, brightens the day and makes living under this loathsome and incompetent government slightly more tolerable.

My all time favourite pick-me-up is the well known, "Letter from the British Ambassador to Moscow," written from wartime Russia in 1943. To remind you and add some colour to your day here is the masterpiece in measured understatement:

"Lord Pembroke
The Foreign Office
London

6th April 1943

My Dear Reggie,

In these dark days man tends to look for little shafts of light that spill from Heaven. My days are probably darker than yours, and I need, my God I do, all the light I can get. But I am a decent fellow, and I do not want to be mean and selfish about what little brightness is shed upon me from time to time. So I propose to share with a tiny flash that has illuminated my sombre life and tell you that God has given me a new Turkish colleague whose card tells me that he is called Mustapha Kunt.

We all feel like that, Reggie, now and then, especially when spring is upon us, but few of us would dare to put it on our cards. It takes a Turk to do that.

Sir Archibald Clerk Kerr,
H.M. Ambassador."

It's wonderful that no matter how big or bad the crisis, the national DNA pool throws up an individual who's time has come. When we look across the Channel, for example,  to the the bowl of sick that is the EU, you could be forgiven for feeling somewhat dismayed at the wanton vandalism that has been wrought on our shores by those meddling and mendacious, interfering bureaucrats. Step forward Nigel Farage, former UKIP leader, who has put EU President, Herman Van Rompuy in his place in a manner that has cheered me up no end.

Farage said, "that he possessed all the charisma of a damp rag and the appearance of a low-grade bank clerk."

Well played Nigel. Just a pity that the Tories approach is somewhat more facile.

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