Submitted by Bill Blain of Mint Partners
Iceland, Rising worries about immigration, trade and oil prices... whatever next.
“A free man can live on fish. Independence is better than meat.”
Today, its’ all about Iceland! The giant-killing demi-gods of football slaughtered Argentina in a 1-all draw! [Think Led Zep riff : Da da da dada!] What other mere team can possibly match them? The population of Edinburgh is 100k people bigger than the whole of Iceland! And, since the Icelanders are pretty much Scots according to their DNA, I’m now a fanatical fan! I’ve ordered my Iceland shirt, the Black-Death Brennavin, fermented shark and sheep’s wobbly bits for the next game on Friday when they will take down Nigeria in Stalingrad! (I shall be supporting England this afternoon – I guess I’ve gone soft after so many years amongst them… Who are they playing btw?)
Meanwhile…. Back in the markets, so much to worry about.
I suppose the challenge is to figure out what the looming German political implosion over immigration policy, the likely splatter effects across Europe, trade war worries and US high-tech sanctions on China, turmoil in OPEC, and the light comic relief provided by the UK Brexit shenanigans, are collectively going to do to sentiment. Germany without Merkel? A full scale trade war? They are not unimaginable!
Or, I could worry about what I’m going to say at tomorrow’s Euromoney Global Borrowers and Investors Conference…
Or, I could worry about this week’s big Central Bank gab-fest. I would love to be a fly on the wall in Portugal… I can picture Jay Powell sitting there with a smug smile talking about the normalised US economy at full employment while Draghi tries to put some kind of gloss on Europe’s stunning 1% growth quantum and his difficulties balancing his “independent” central bank with national vs EU political imperatives – you have to admire the man for trying. The US is pretty much the only normalised economy on the planet – average interest rates are still below 1%, inflation is where?, and central bank balance sheets remain at record levels. What is “synchronous” about that?
There seem to be two economic outlooks in fashion at the moment. I) that normalisation and synchronous growth will drive the global economy much higher therefore buy buy and buy some more, versus the alternative II) that years of intervention, distortion and regulatory bluster leave markets weaker and more vulnerable than ever before. I suppose that’s going to be the gist of my debate at the Euromoney conference tomorrow… I guess I’ll be talking about “irrational complacency” and “delusional exuberance”…
The big issue is likely to be the OPEC meeting where the Iran axis will try to block the Russia/Saudi pact from increasing production. My stock picking chart-analyst Steve Previs cast his technical eye over the recent charts of oil price action. He concludes we’re looking at a likely slide back towards $60 BBl in the near term despite bullish oil speculators. The US ramping up production and the Russia/Saudi pact looking to sell more – the prospects for an oil glut look high. So much for oil prices driving inflation?
Let’s wait and see what direction sentiment takes…