Steen Jakobsen, Saxo Bank Chief Investment Officer, comments on the UK election, the British Pound, and the Euro in a recent email report.
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 freeze
On 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
Wise comment Mish. The young may love Corbyn and his magic money tree but will they actually go out and vote? The mature and the aged will be strenuously voting their pocket books, as ever. Meanwhile in France satirical paper Canard Enchaine already has Macron taped. Cartoons of him dressed as Louis 14th, the Sun King, and the title jupiterienne, little Jupiter. Nor would I give much for Merkel’s chances of outfacing Trump. Germany has been smoked out.
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Agree
I would add that Merkel desperately needs some distractions because her “leadership” is failing.
Merkel’s “decision” to pull Germany’s troops out of Turkey (more of a reaction after Turkey already banned German lawmakers from visiting a NATO base in Turkey) — reveals that NATO is already splintered…. and it goes way beyond whatever Trump says.
Obviously England does not have the same attachment to the EU after Brexit (even if Corbyn “wins”, England’s heart is not in the EU). It is also obvious that western Europe doesn’t trust Turkey.
Other than the USA — England is the only NATO power that can project power abroad. Turkey has the largest standing army (greatest number of troops) in NATO, plus a very critical geographic location.
Merkel has alienated England, Turkey and the USA — driving a huge wedge between critical NATO alliances. Most of it happened before Trump’s inauguration.
Doesn’t matter if one agrees with Turkey or England or Trump… or with Merkel — Merkel’s dumb policies drove a wedge into NATO.
Meanwhile Merkel’s capitulation to environmental groups after the Fukashima nuclear plant tsunami is making German energy much more dependent on Russian natgas. Merkel’s policies effectively turned Germany (EU’s most important economy) into a Gazprom annuity.
Not a track record the CDU wants take into Germany’s next elections. Merkel needs to distract German voters — she is desperate
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– One commentator (Steve Keen) even predicted that Mrs. May would be no longer prime minister within say 1 to 2 months. Even WHEN she would win (with a slim margin). She simply has botched the elections.
– I DO think Corbyn could win the elections (but only with a slim margin). And then all hell will break loose within the Conservative party. That would prove that the british population doesn’t care too much about Brexit. They’re simply not content with the way the british economy is faring. This has – IMO – NOTHING to do with Brexit. It’s simply a vote of “No confidence” for the/any current government/administration. And Steve Keen has an VERY good explanation. Is one MIsh interested in Keen’s explanation ?
– Watch the UKIP party. They seem to be “butchered” in the upcoming election, assuming my info is right/correct. It could be a tell tale sign of what the british REALLY voter thinks.
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http://denariifin.blogspot.co.uk/2017/06/how-do-you-explain-rise-of-corbyn.html
How do you explain the rise of Corbyn?
(or Sanders, Trump, Le Pen, Melenchon, Tsipras, PODEMOS, AfD, Wilders etc.)
General factors:
– People tired of the reflate wall street/ main street austerity framework post-08
– Career politicians bought off, incompetent, no reforms, policy inertia
– Main stream media are somewhat discredited vs independent media being available online
Specific factors:
– Corbyn was relatively unknown, ridiculed by media, but as he has been allowed a platform in this election people have listened to him, in the same way Andrea Ledsom was given prominence by the Brexit campaign
– He presented a programme of reform, investment, wage growth, benefiting most, while not being too aggressive on SME owners or global businesses
– May is a career politician with little or no policies to speak of
In France, Macron, a centrist, won vs the two alt candidates as he promised hope & reform without upheaval
Its not clear what the outcome of the UK election is, I would guess a hung parliament at the moment.
But what is clear is the process of electorates rejecting centrist, incumbent party career politicians at the first chance. They are voting in the candidates offering reform and who are usually alternative right or left candidates, outsiders. Seems clear that if you want to win an election now you have to have a substantial reform programme
If Tories get less than 311, they wont get a majority with the Ulster Unionist parties. Then it will be a Lab/ SNP coalition most likely.
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Last week Rex Tillerson and Boris Johnson did the advance work on trade. When President Trump meets Prime Minister May they can announce a substantive agreement. The British would eat better for less if US farm products replaced the French. Americans would enjoy fish from the North Sea.
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Sorry but we dont want American ‘meat products’
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From what I have read about U.S. military stationed in GB during WW2, your women seemed to enjoy American meat. Possibly explains the reason why some Brits now have decent teeth.
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Or just free orthodontics. Tell me this. How on earth are most Americans so fat? Its takes real dedication to pack on 100-200lbs of pure blubber. Its not happening by accident.
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It’s the bovine growth hormone/anti-biotics that makes their way through the food chain!
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I think it has something to do with the fact Americans actually season food and present something on a table that you actually want to eat. Although Brit food is better since it became Indian and Arab food.
I do agree though, the weight thing is out of control in the USA. A few weeks ago I was looking at class group photos from when I was around 10-11 and there wasn’t one fat kid in the class. The kid we used to call “the fat kid” looked like a stick compared to what I see today, wasn’t even pudgy but the rest of us were stick thin.
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Have you ever been to America, Rob? The restaurants serve way too much food. If you want small portions you have to stop after the appetizer. Also our food is too cheap and plentiful compared to other countries. Our wine & beer is also cheaper, which helps pack on the calories.
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I believe the obesity rates in the UK are nearly what they are in the US, so that’s the pot calling the kettle black.
I suspect high fructose corn syrup is the problem: throws the brain off on it’s notion of whether you’ve eaten enough. I’m not saying that’s the only thing, of course, but I’m being to think that’s a huge factor. Replace HFCS with sugar and even though people would still eat too much processed food I think you’d fix a large part of the problem.
lack of physical exercise (computer games) is also a big problem….
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On one of the netflix docus like fork before knife or fat sick and nearly dead; basically American processed food is calorie rich, nutrient poor. So after eating a days calories in one meal the body is still starved of nutrients and craves more. So the people eating this food end up super dosing calories to get the bare minimum of nutrients.
An ex colleague of mine was a wealthy German. She said when she worked with our US team they could come in in the morning and talk about where they had eaten the night before, eg olive garden or cheesecake factory, and then with a look of disgust on her face she remarked that ‘they talk about it like its delicious gourmet food we well!’. Ill never forget that.
Or I went into a town in the Amalfi coast one holiday, and there was a cruise ship having disembarked the people. Man I have never seen so many out of control fat people. All Americans. They were buying huge ice creams in the midday sun and not going beyond the main square.
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There are numerous reasons why Americans are overweight. My relatives in Finland call Americans “the fat people”. But they come to visit here with empty suitcases and fill them with much cheaper American consumer goods.
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As a UK resident have to say sorry but Mr Steen way too pessimistic as are many of the people commenting. Will be a Conservative majority of 80 + or minus 20
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Well, the choice for the British people is obvious. A big banker who doesn’t want Brexit because it would upset his big bank, you must vote labor to correct the government direction and go back, docile in attitude and humble in gratitude for the great wisdom of big bankers, and rejoin the rest of the slaves of the EU. It is your destiny. And by the way, you need to take several million more refugees this year. Oh master, I hear and obey.
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https://hat4uk.wordpress.com/2017/06/04/sunday-shocker-slog-to-stand-as-utp-candidate-in-ukge2017/
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This guy is demented. He has no friends and operates out of a pigsty in France.
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Theresa May’s proposal to censor the internet probably cost her a true win on Thursday. If the British government really believed internet sites prompted the attacks — it implies that MI5 were watching said websites. If so, why the &*)$ didn’t they stop the attacks? If they didn’t know, then how would England censor internet sites they don’t know about?
May’s party policy has been to censor porn websites — that was the case months before the Manchester attack. That is what her internet power grab is about… she wants a giant militarized police state that can censor what the British read. No one really cares if porn sites get banned — we all know self-righteous “church ladies” like Theresa May are the ones who do things that make porn stars blush. The broader censorship question (everything the PM doesn’t want Brits to see besides porn) that brings up troubling government corruption problems.
Its impossible for Scotland Yard to block terrorism websites unless they know the links (technically they need to know the IP addresses). But if they know that, why isn’t scotland yard monitoring the sites and preventing attacks? If they don’t know the IP addresses, they can’t block them. Are we supposed to believe the terrorists put meta tags on their websites to label themselves terrorists?
Does England really want to jettison an unelected bureaucracy in Brussels for one in London?
I think May’s party will still win the UK election (because the alternative), but she won’t win by the margins she hoped for. Her police state censorship proposal shows she is part of the problem.
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“Theresa May are the ones who do things that make porn stars blush”
Did not need to start my day with that thought.
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1000 apologies still seems not enough… but her church lady obsession with porn seems a little too self righteous. Judge not lest ye be judged, etc
The bigger censorship issue bugs me — censorship is a tool used by dictatorships, not representative governments
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Begrudgingly accepted. 🙂
…and one would think that with all the internet surveillance government would have learned to leave porn alone. As Marx (who you love) put so eloquently, “Porn is the opiate of the masses.”
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I don’t know if you watch too much porn, or not enough. Whichever the case, its a discussion you should have with your significant other — not with the prime minister (any prime minister).
As for censorship and militarized police forces and mass surveillance — if Theresa May doesn’t trust the people of England, than the people of England should not trust her either
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One reason to censor Internet is to stop the brainwashing and propaganda.
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Or, maybe to limit internet viewing to the preferred brainwashing and propaganda.
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… but is what you are saying propaganda?
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May’s entire statement on the massacre was a stupid disaster…Fortunately for her, Corbyn and Labor aren’t any better….
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Predict nothing.
I read up the “reasons” for Brexit, dissatisfaction etc and can say with some certainly most are 1 dimensional and don’t cover anywhere near all the moving parts that are age, geography, race and political allegiance related.
Supposedly – 65% of the electorate now want the government to make a move on with Brexit. That 65% includes people voting remain.
The EU will trundle along as it has and will for many years. Expanding into the Balkans and pushing as far east as they can.
Tax freezes etc – forget it. Too many variables for anyone with any sense to guarantee anything. As much flexibility as possible is needed on tax, spend etc.
We can say there is a generational re-balance that the aged don’t like – hence the wobble in Tory voting characteristics. Tories (sensibly and honestly) have said the pension triple lock will have to go along with some other benefits for the aged. Old folk, often Tory orientated, bitch and hence the voting wobble.
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Brexit is essential, because the EU plans to tax the British financial markets, and import more muslim immigrants, both unacceptable. It is also in the UK’s interest, negotiating bilateral trade agreements and saving tens of billions….
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Here is an incredible article from El Pais front page, calling Brexit voters as stupid and recommending Khan as PM.
http://internacional.elpais.com/internacional/2017/06/06/actualidad/1496761675_107643.html
I know El Paise leans left, but this is delusional.
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Our world has become so self centered that the idea of shared sacrifice isn’t really understood. A global symptom of this is how many entities feel that they give more than they get or that they are somehow a victim. As this mentality starts to boil over social contracts and social bonds are being voluntarily withdrawn. In portfolio theory its the correlation effect running into diminishing returns. No benefit to diversify when everything is correlated. So we have a system where the pervasive demands on it are so much greater than the ability to supply them. Participants are sensing this and trying to “get theirs”
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On taxation. Tithing was accepted practice for many years and there is no reason why it could not work now. Only thing, Governments would have to cut their cloth to suit. What a dream.
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“For now, a sinking dollar (I believe the dollar has peaked this cycle)”
…
I guess you need to define cycle.
I think usd still in trend of higher highs and higher lows. Just need another crisis for King Dollar to become safe haven again. China or Europe? Who blows up first??
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– Mrs. May is also haunted by “The Trumpster”. She invited him to come to the UK. But Trump’s tweets are alienating even May’s own Conservative Party. The Tories now want to “un-invite” Trump.
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The big question: Has Jakobsen ever been right?
(I know the company he works for is a POS retail trading platform whose entire model is built upon stealing money from their clients via “dealer” games–the part the client doesn’t see. In other words, probably safer to gamble your money at the Indian reservation. Don’t believe me? Google Saxo’s reputation. Saxo built their empire in the very sketchy FX trading world.)
Just saying….
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