The world is a dangerous place and its too dangerous to trade
By Richard Matthews November
Sometimes, most often when I’m watching the News on TV, I sit with my head in my hands. Literally with my head in my hands, rocking back and forth muttering I can’t believe it. I’m know my father was the same , indeed I can remember when The Rolling Stones first appeared how outraged he was by their music , dress and in particular their hair. I of course laughed at the fuddy-duddy attitude but now I find this laughter comes back to haunt me. The News is often old news to those of us lucky enough to work in the markets and in reality the truth is that if it’s on TV or in the papers the markets know already and it can be a good indicator to reverse a position but none the less it’s often a head rocker.
I started rocking gently this week as the situation in Catalonia unfolded. I wrote recently about the dangers that were present in the Spanish government’s head on collision course with the independence movement. Why didn’t the Spanish government offer a legitimate referendum to the Catalans at some point in the not too distant future and offer concessions on some of the tax issues and in doing so avoid confrontation? Where were the great European leaders trying to resolve the problem? Abrogating responsibility or complicit? Hard to know. And as the story continues to unfold and words such as rebellion are bandied about I feel more uncomfortable but having lived in Spain, a country I deeply loved, I am not totally surprised by the intransigence of the people. What does surprise is that no one has suggested the use of Bitcoin as an alternative currency to the Euro in Catalonia or am I not alone in this thought as Bitcoin hits new trading highs?
Surely Bitcoin is the perfect solution for a newly independent country? I accept the fact that it is somewhat volatile on the markets and that the spreads are wide but wouldn’t that be the same for any new currency? With the CME announcing “Bitcoin futures “ any newly independent country would have a reference point for its currency which is a lot more than many could have hoped for or indeed many countries have . With hundreds of millions of dollars going into ICO’s in exchange for “tokens” it is understandable that the CME sees a market but it does feel premature, however if a newly independent country with good exchange flows adopted Bitcoin, or similar it could prove to be a very precipitous move .
Whether Bitcoin, Etherum , Ripple or some yet to be invented crypto-currency is adopted by a country is looking into the future and of course it raises the spectre of how Central Banks would react to a currency they can’t tax . Central Banks were once revered as the fonts of all knowledge even after pushing much of the Western World into several deep recessions in the last century and there is a case to be argued that perhaps an economy without their interference would be better and that is what you would get from a crypto currency. When you look at some of the interest rate moves, through hindsight, the over reactions are almost laughable. It now beggars belief that we worshipped slavishly at the feet of Volcker when he oversaw an economy, apparently interlinked with interest rates, that saw moves to 20% in 1980.In many ways it feels the reverse now where we have had the fool’s gold of QE and overly low interest rates imposed for almost a decade , creating zombie businesses and over inflating asset prices . Did nobody look at the dotcom bubble of 1997 to 2001?
Is the Sun setting so soon on President Macron?
Having recently been in the South of France where the asset inflation bubble has certainly affected restaurant and hotel prices, if nothing else, it was interesting to see how Macron, presented to the outside world as the saviour of France, was fairing. From the outside all is serene and as beautiful as ever but two little vignettes struck me. The first was on boarding the train at Cagnes-sur-Mer that there were metal detectors being installed at the entrances to the platform which was somehow incongruous with the faded charm of the station but coupled with security guards on the platforms made for a slight unease. For those not familiar with Cagnes’ location it lies between Nice and Marseille so perhaps these precautions are reflective of the perceived threat of terror. It’s so sad. The fact though which struck home was that having waited an hour for a local bus service we finally gave up and took a taxi back to the hotel and when we asked if the Bus had perhaps been involved in a crash we were told, with a classic Gallic shrug, that this was France and there are always strikes. Perhaps all is not quite as well as we are led to believe.
Are these domestic problems, by which I mean mainland European problems, at last, having an effect on Europe’s negotiating position with the UK which at last seems to be softening? It does feel like a sea change is happening and whether this was caused in part by May’s conciliatory speech in Florence or by the recent European Council meeting is not clear but there does seem light at the end of the tunnel which hopefully is not the proverbial Guerrilla with the flashlight. Mrs Merkel certainly seemed to be courting Mrs May at last and being the adept pragmatic German that she is it may well be that the penny has at last dropped that she has a tough choice – deal fairly with Mrs May or she faces Boris Johnson and the real possibility of a no deal walk away scenario which possibly hurts the Germans more than anyone else in Europe and in particular the car unions that support her.
As I write this I hear the news in the background where Catalan leaders are arrested, British Parliament is in chaos over a sex scandal and Donald Trump is under attack over purported links to Russia. In the meantime I am told that I shouldn’t ask people where they come from and to be honest I’m afraid every time a girl pushes past my gargantuan stomach on the tube in case I’m accused of sexual harassment . When I move my hands from my face into a more moose like position I see The UK, Europe and The US all with rebellious subjects, Rocket man with his finger on the button whilst stock markets hit new highs and there is talk of 16 year olds getting the vote, bonkers in my opinion. This all makes calling the markets really difficult as they are now politicised and currencies and stock markets are over reacting as a factor of a thin market and in these times the wisest move I am making is when I move my hands from my face I place them firmly under my backside and leave trading to the fools.