The Times They Are A-Changing
Earnings, Jobs, and Shifting Growth Drivers

by Jeffrey Miller, Partner, Eight Bridges Capital Management
June 24th, 2016
Boys, I got myself a pretty good bullshit detector, and I can tell when somebody’s peeing on my boots and telling me it’s a rainstorm.
Ed Earl, The Best Little Whorehouse in Texas

As you may have heard, the British decided to have their own Independence Day on Thursday. “Leave” voters are being derided by the press and the losing side as ignorant, foolish, intolerant, xenophobic – and those are the nice things. I call B.S. The Leave voters are none of these things.  They are just tired of being told that the EU is going to save them, when in reality most of the issues in the EU economies can be chalked up to an over-reaching regulatory state. The EU isn’t working.  The economies in it have been eviscerated over the past decade by the very institutions that the Remain people are now saying Britain needs.  Needs why?  As I heard one hardworking gentlemen state on BBC World News today (I know he’s hard working because he was interviewed while literally unloading a truck – how many of the posh bureaucrats in Brussels have ever worked a truck you think?) – “Great Britain has been around for a very, very long time, and we’ll be just fine.”  Good for him – he’s right.

Am I saying that Brexit won’t have an impact on the British economy. No. I’m saying I don’t know what the impact will be, but staying in the EU wasn’t going to be good. So after a long period of being tied to stagnating, at best, economies on the Continent, leaving to give it a go on their own isn’t so crazy. Think about it. The EU is a morass of poor performing economies – some of the worst in the world – led by career bureaucrats who think that the answer to every problem is more regulation, more government, more centralization of power, more Central Bank meddling in the economy.  And despite the fact that it has produced absolutely horrible growth (if there is any real growth at all), despite the fact that innovation outside of a few Nordic countries is basically non-existent in the EU (can someone point me to their Silicon Valley?  No?  Didn’t think so), despite the fact that the ECB has had to push rates negative across Europe in a blind leap of faith that maybe that will work where nothing else has, despite all this, it’s just crazy for Britain to say, eh, screw it, we’ll give this a try on our own. Who’s the crazy one? I’d say all those folks crying wolf that the EU is the only alternative. Because piss ain’t rain.

Don’t feel sorry for me. I started out poor, and I worked my way up to outcast.
Miss Mona, The Best Little Whorehouse in Texas

Oh, by the way, did you notice that the “uneducated masses” who voted for Leave managed to do what the “genius” PH.D.s running the central banks in Japan and Brussels have been trying to do for years without success?  They devalued their currency, and didn’t tank their stock market.  That’s right, the “crash” in the Sterling (and Sterling is just back to where it was on February 26, 2016 by the way) is exactly what Draghi and Aso have been trying without success to do to the Euro and the Yen. When they do it, it’s called monetary policy. When the Leave campaign does it, it’s called a disaster. Okey dokey.  Want to know which major stock market performed the best on Friday? (Asian markets closed before Leave vote was confirmed.) Great Britain’s. And it was up on the week. Nice trick, that.  So despite all the wailing about how this will be a disaster for Britain, the people who actually have to bet with their money disagree. I’d follow the money.


They want me to close her down, run her out of town. How can I ask her to leave when all I want her to do is stay?
Ed Earl, The Best Little Whorehouse in Texas

In fact, if you follow the money, Brexit isn’t bad for Britain – it’s bad for the EU. Check out those Italian and Spanish returns – they are the worst one day returns in the history of their markets. Apparently, some folks were expecting the British to take on some of the problems of Italy and Spain. Quoting Spiro Agnew, the “nattering nabobs of negativism” are talking their book – which is long all the bad loans on the Continent. Economically speaking, outside of losing some, but nowhere near all, finance jobs that must be done within the EU per regulation, this will prove to be a net benefit in the long run for Britain. It’s getting rid of the dead weight that is dragging down all the economies of the EU. It’s putting behind it the stagnation and regulation that’s killing innovation. One of the arguments for Remain was that leaving will require the unanimous agreement of the other 27 countries to any of the terms. I’d say that’s a great argument for Leave…  What are three of the strongest countries in Europe? Norway, Iceland, and Switzerland (you can throw in Liechtenstein if you want as well). None are in the EU.

Now I’m not saying there won’t be some issues to work out. Visa-free travel and the freedom to work anywhere in the EU were nice – but also part of the problem. At the end of the day, more than half of the British people decided that you know what, I don’t travel that much, and I want to stay and work in the town where I live now, so those things aren’t that important to me. They are important to the two groups that mainly voted to Remain – the young, and the international set in London. If you’re used to hopping over to Paris for a quick meeting, going through customs will be a bit of a drag. Welcome to the rest of the world. If you’re young and were hoping to spend a few years just roaming around the continent, working a bit here, loafing a bit there, well, you can’t anymore, and that sucks. But that’s the way democracy works sometimes, and lots of folks decided that unrestrained immigration from the Middle East wasn’t a thing they wanted to support.  Besides, Britain never really wanted to be a part of the EU in the first place. Just watch this video for (funny) proof.

The border between Ireland and Northern Ireland will be an issue. Right now, it’s open border, but not long ago it was a militarized flash point that cost many, many lives. Going back to that won’t be good, and solving the Irish issue won’t be easy. To me, this is the biggest looming problem from a societal standpoint, and I’m not sure what the right solution will be. Belfast is still a divided place, and could quickly devolve into violence. Hope isn’t a strategy, but it’s all we have there at the moment.

Ed Earl, I think the

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