Blain's Morning Porridge, submitted by Bill Blain

“And a real famous cat all dressed up in red, and he spends the whole year working out on his sled! ”

New "House of Cards" to be set in London

This morning I’d like to write about the Fed, the implications for corporate bonds, and the chances for bonds to outperform next year, or Trade Wars, or the implications US govt shutdown, but there is an Elephant in the Room and its just shat all over my hopes to write about anything else.

A vote of confidence in Theresa May? If it was a script for a TV series, it would have been thrown out months ago as just too improbable and obvious a plot device designed to add dramatic tension to an already unbelievable plot. The significance for UK markets should be immense. Confidence is perhaps the most important reason to invest in anything…. And that curious sound like a strangled cat you just heard was it disappearing out the window…

I am struggling to see where the UK goes from here – because I have close to zero confidence in what might come next.

On the other hand, the UK just announced wages rising at fastest pace in years, more people in work that ever, and even with the Brexit effect, I’d still bet on UK growth vs Europe. Once we get this behind us… everything will be ok… won’t it??

I’d like to blame Europe. Heck.. maybe I can? Some say… Theresa May has made such an awful hash of Brexit and being Prime Minister because she’s actually a double agent… placed here by the EU to ensure the UK remains part of the Evil Empire, Europe! Lots of otherwise sane people now believe she’s always been a Closet Remainer, and deliberately screwed up Brexit to force a Remain vote in a second, third or fourth neferendum.. But no.. She’s as British as they come… We’ve nobody to blame but ourselves…

And the Conservative Party…

They elected her. They put her in charge to be accountable and responsible for the implementation of the biggest decision this country has taken in decades. Their subsequent lack of discipline, the sniping, the attacks, the lack of common cause, direction and objectives showed them to be a diverse band of crass political careerists each focused on their own chance at the main game. Which, I am sure, the big noises of the Party shall demonstrate in spades through today.

As investors in UK Inc, we’ve bought into a management we considered sound and able to deliver. What do we do when it doesn’t? We sell. We might buy it back cheaper when we discern signs its likely to be fixed… I see few such signs the management is likely to get any better – not with this crowd in power… And to even consider the alternative (despite being a lifelong Labour supporter – its genetic), would be a mistake. For the time being at least.

It’s not my role to comment on politics, but on markets. But we’ve now got to think seriously on what the Curious Case of Theresa May is doing to the value of UK Inc. To understand how the UK gets out of this political quagmire, we need to understand how we got there in the first place. Whoever takes over has much to rectify. Consider the timeline:

Although Theresa looked the part as a ghoulish home secretary, she was pretty ineffective and stalled in the headlights of immigration. Even then, she looked promoted well past her competence level. She made premier because of Cameron’s spectacular mistake calling the referendum, Boris and Gove self-combusting, and literally being the last person standing. She was a poor compromise candidate, a straw figure the big dogs of the party thought they could fight (each other) behind. The Brexit process spiralled out of her control behind her back, as she allowed Article 50 to be triggered in a rush without a plan, a team, a clear identification of the threats and pitfalls, or a clear set of objectives. She never managed the process. She tried to make it the Brexit side’s problem – demonstrating a woeful lack of responsibility. She then threw away her parliamentary majority in a spectacularly ill-conceived snap election with no comprehension of how her party stood. It demonstrated profound misjudgement and absolute lack of political common sense. The only way out was her abject bribery of the Northern Irish Taliban – which is working out oh so well… Its increasingly clear she failed to direct the Brexit negotiations, never understood the entirety of the problems, entrusted the game to wrong-uns, and didn’t make any effort to explain the need for compromise till it was too late. 2 years were squandered and then compressed into a few weeks. Because she was a compromise, she does not have real support from her colleagues. The fact she then tried to hide legal advice, got crushed in Commons procedural votes, blinked when confronted with likely defeat, and now wants to play the game down to the wire, confirm how beleaguered they left her.

If the CEO of a company you were invested in did the same… you would demand their resignation. But that assumes there would be someone to replace her… Who?

As we approach the March Brexit endgame, who would possibly want to take the job, enter into impossible negotiations with the EU? Some Tory idiot will be telling their supporters that Europe will be forced to deal with a new empowered Prime Mininster. No they wont.

If May is dethroned later today. Sell.

If she survives, nothing changes. Sell.

Where is David Miliband when you need him?