Mish's Global Economic Trend Analysis

---

• UK Election Shocker: Exit Polls Show Cameron's Tories Do Far Better Than Expected, 10 Short of Outright Majority
• Explaining UK's Dysfunctional Voting System; Where is British Politics Headed? Horse Trading
• Meet Yangyang Another Humanoid Robot
• UK National Elections Underway: Expected Outcome is Hung Parliament

UK Election Shocker: Exit Polls Show Cameron's Tories Do Far Better Than Expected, 10 Short of Outright Majority Posted: 07 May 2015 03:57 PM PDT An exit poll shocker shows Cameron's Tories Do Far Better Than Expected. Heading into the election, the Guardian made this projection: Conservatives 273 Labour 273 SNP 52 Liberal Democrats 27 Democratic Unionist party 9 UKIP 3 Paid Cymru 3 Greens 1 UKIP Here's a report in from South Thanet, the constituency that Farage is hoping to take off the Tories, from FT reporter Barney Thompson: Nigel Farage, Ukip leader, will be hoping dawn brings a similarly bright future as the new MP for South Thanet, where he stood unsuccessfully in 2005. But he is in a skintight race with the Conservative Craig Mackinley (a former Ukip deputy leader, in fact), with Labour breathing down both their necks. Rumour has it that Mr Farage will not appear at the count for several hours; instead, he will be monitoring Ukip's challenges in other parts of the south east: Clacton (a sure-fire win), Rochester & Strood (where Mark Reckless is trying to cling on) and Thurrock, another constituency that is too close to call. British Pound Reaction Coalition The likely coalition now is Tories plus Liberal Democrats and UKIP if needed. If Tories or Liberal Democrats do as much as one vote worse than exit polls show (assuming the gain is for Labour), the coalition will need UKIP. This was a rout of Labour and the Liberal Democrats vs. expectations. UKIP did better than expected. The FT's Gavin Jackson observes: "Ukip have done quite well in the seats that have declared so far. But these are safe Labour seats, for the overall result how they do in the marginals is more important - and at whose expense". Better than expected, even far better than expected may not translate into seats, but it does reflect important sentiment, especially when it's at Labour's expense. The range for UKIP now appears to be 1-4, with 1 a given. The Guardian pre-election poll for UKIP predicted 3, whereas two other polls suggested 1. The comments on Election live: The battle for Westminster tell the story. I am relatively happy with this outcome. If Cameron keeps his word there will be an up-down vote on UK exit of EU. A Labour victory would have been an outright disaster. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Explaining UK's Dysfunctional Voting System; Where is British Politics Headed? Horse Trading Posted: 07 May 2015 11:48 AM PDT Early this morning in UK National Elections Underway: Expected Outcome is Hung Parliament I noted the dysfunctional nature of the election. To recap, the expected outcome for the Scottish National Party (SNP) is 51 seats on 4-5% of the vote, while the expected outcome for Nigel Farage's UK Independence Party (UKIP) is one seat on as much as 16% of the vote. UKIP could win 25% of the vote and still potentially not win any seats. I expect UKIP to do a bit better than one seat, but I could easily be wrong. Indeed it is conceivable that not even Farage wins. This morning I said "What matters is how concentrated the votes are, not how many you get." Actually both matter, but concentration is the key to winning seats. SNP is likely to win nearly every Scottish seat because SNP dominates Scotland. It will get no votes elsewhere. Recall the platform of SNP was to break away from the UK. And 51 votes taken away from the Tories (Cameron's party - Conservatives) or Labour (Ed Milliband) is sufficient to result in a hung parliament. The UK The Labour Party is a full member of the Party of European Socialists and Progressive Alliance. They favor taxation as a means to achieve a "major redistribution of wealth and income". Lovely. Had Cameron simply granted UKIP the promised up-down vote on the UK remaining in the EU, the Tories would have had a better outcome. Where is British Politics Headed? Stratfor has a nice writeup today that explains Where British Politics Is Headed. For the second election in a row, the Labour Party and the Conservatives (or "Tories"), the two traditional heavyweights, probably will not muster the 323 seats needed to form a majority government. Whereas in 2010 the Tories were able to form a reasonably stable coalition government with the centrist Liberal Democrats, this time the numbers do not seem to support a two-party coalition. The person most likely to be smiling after the election results are revealed is Nicola Sturgeon, leader of the secessionist Scottish National Party — not just because disorder in Westminster strengthens her party, but also because her party looks set to increase its seat count from six to 53, with pollsters predicting a landslide in Scotland. By contrast, UKIP, another newly influential insurgent party with ambitions to extract the United Kingdom from the European Union, looks set to win just one seat. The Limitations of First Past the Post British elections, like those of many of its former colonies such as India and the United States, runs on a first-past-the-post system, in contrast to the more fashionable proportional voting system preferred by many European nations. Under first past the post, politicians compete for individual seats around the country, and at the end of the vote the party that has won the most total seats is judged to have won the election. Under proportional voting, the electorate votes for their favored party, and when the votes are counted the seats are then apportioned to each party based on how many votes they received. The upshot of the first-past-the-post system is that a niche party is unlikely to win influence in government, since in order to gain sufficient seats it would need to be the dominant party in several constituencies. In a proportional voting system, such a party would find that its presence in government would rise as its popularity increased, even if that support was scattered around the country. It has also frustrated insurgent parties — a famous example being the Social Democrat Party that, in an alliance with the Liberal Democrats in the 1987 elections, managed to amass 22.6 percent of the vote and win just 3 percent of the seats. Herein lies the catch with first past the post: It might keep insurgent parties at bay when they are based on ideology, but it struggles to contain a party that is specifically tied to a region with highly concentrated supporters in the manner of the Scottish National Party. Consequently, the Scottish National Party is positioned to become the third most influential party in the new government with just 4 percent of the overall vote. Meanwhile, UKIP, which is surfing an anti-immigration wave, looks set to find its winnings limited to a handful of seats (at most) off the support of a considerably larger section of the electorate. In its newfound position of influence within Westminster, the Scottish National Party will no doubt set about doing its best to represent Scotland's interests. These include the support of the Barnett Formula, a controversial temporary convention from the 1970s that has been neither reversed nor made into law. The formula calls for more public money being spent on Scotland, Northern Ireland and Wales than on the United Kingdom's English citizens. In 2011, the British public voted against changing the electoral system to alternative vote, in which the voter ranks the candidates in order of preference. This time, six parties are involved, 34 percent of voters are likely to vote for a party outside the main two, coalition talks probably will last much longer than five days, and any deal is likely to result in a weak and unstable government. These conditions are likely to change the thinking about the current British electoral system. Electoral reform will be undertaken, shifting the British system to something more closely resembling its European neighbors'. As a result, the Scottish National Party and other regional parties will find their newfound influence on Westminster to be short-lived. But as one door closes, another opens, and a proportional voting system would usher in new opportunities for UKIP and any future parties built upon a similar model to gain a substantial foothold in British politics. Whatever the case, the future looks increasingly bleak for the United Kingdom's establishment parties. UK's Two Party System is Effectively Over To rein in SNP, the UK may go to a proportional vote. But to do that, UKIP will gain prominence, and likely far more than it would have otherwise. Why? Because many people did not want to "waste their vote" on a party that would get few, if any seats. Then again, if Cameron manages to hold on long enough to grant the promised up-down vote on the UK staying in the EU, and then if that vote is "no" much of the reason for UKIP will go away. Expect an unstable coalition out of this. Cameron staying in power might even depend on UKIP winning a handful of seats more than expected. Once again here is the Final Projection from the Financial Times. Note that Labour could merge with SNP and the Liberal Democrats to get a majority. Indeed it is likely that Labour and SNP merge. However, Liberal Democrats are a better fit with the Conservatives. Yet, Conservatives plus Liberal Democrats will not throw them over the top. The Guardian projects ... Conservatives 273 Labour 273 SNP 52  Liberal Democrats 27  Democratic Unionist party 9  UKIP 3  Paid Cymru 3  Greens 1 Horse Trading We will have the results of the election soon. But projections suggest that's when the horse trading really begins. Are there enough horses to go around? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Meet Yangyang Another Humanoid Robot Posted: 07 May 2015 09:57 AM PDT A female humanoid robot "Yangyang", named and modeled after her creator, has a variety of realistic facial expressions.  "Yangyang" wows visitors at Beijing's Global Mobile Internet Conference. The robot is modeled on one of the researchers who helped develop the technology. She can blink, smile, shake hands and even hug her human doppelganger. Yangyang is the fourth robot produced by Shanghai Shenqing Industry. The robots are controlled remotely and are made of a special type of silica gel that feels like human skin. Researcher Song Yang saying (Mandarin): "This is the first one inside China. At present this robot has the most features, she has 43 degrees of freedom across her whole body, most of them are concentrated on the face, because of this, her expressions can be very varied." The team behind Yangyang believe future robots like her could be used as sales assistants, or body doubles for celebrities. One of the researchers has already used his body double to deliver lectures on his behalf. But the robot isn't foolproof, it couldn't answer any of the student's questions. Yangyang Click on link above to play video. Also consider "Ham" the Humanoid Robot. Ham reacts to facial expressions, can engage in conversation and make eye contact. "Ham" meet "Yangyang". I believe she is your type. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

UK National Elections Underway: Expected Outcome is Hung Parliament Posted: 07 May 2015 12:15 AM PDT I frequently comment on major elections, but here we are with voting for UK prime minister now in progress, and I have not chimed in yet. Unlike in Greece where I was confident Syriza would poll better than expected (and it did), I have no particular feeling of confidence on what is likely to be a a very important election. Voting Booths are just now open as of 1:00AM US central where I reside. Here are the Final Polls. Note that UKIP is in third place. How do you think that will translate into parliamentary representation? Here is a Final Projection from the Financial Times. Note the apparent silliness of it all. What matters is how concentrated the votes are, not how many you get. On a guess the revolt vote is underestimated, I am going to go out on a limb and suggest UKIP will win 7-10 seats. Hung Parliament The most likely outcome is there will not be a winner. The Guardian reports General election 2015: Britain heading for hung parliament. When the Guardian's poll projection, an average of all the polls made public, is updated to take account of the new ICM data, it places both the Conservatives and Labour on 273 seats – neither anywhere near the 326 required for an absolute majority. But the huge anti-Tory SNP bloc of 52 gives Miliband the stronger position in the battle to negotiate for control of No 10. The cabinet secretary, Sir Jeremy Heywood, is on hand to prepare for talks, but will not press Cameron to leave Downing Streeet, since it will be his right as prime minister to decide whether to test the opinion of the Commons on a Queen's Speech. ICM pressed voters on the government they would prefer. The single most popular choice – picked by 25% – was a Conservative overall majority, followed by a Labour majority, which 23% preferred. A Conservative-led administration in which the Tories have to strike deals with others is the choice of 22%, while a Labour-led government that had to strike deals was picked by only 19%, a possible sign of success for the Conservative warnings about a SNP-backed "coalition of chaos" installing Miliband in Downing Street. The public also envisages the Lib Dems outperforming most polls by achieving 14%, and Ukip underperforming somewhat, with 10%. Elusive Outcome If this sounds confusing, it is because it is confusing. Bloomberg highlights the issues in U.K. Votes in Unprecedented Election With Outcome Elusive. Polls suggest that neither Conservative Prime Minister David Cameron nor his Labour opponent Ed Miliband will come close to getting enough seats in Parliament to govern alone. Instead, they face days or even weeks of talks to try to win over enough smaller parties to command a majority. The uncertainty attached to the electoral outcome in a Group of Seven nation is beginning to play out in markets, with volatility buffeting the pound and gilts. One reason is the political risks even once a government is formed: If Cameron manages to stay in office, he'll hold a referendum on leaving the European Union. If Miliband gets in, it will be with the support of the Scottish National Party, which will be looking for opportunities to further the cause of independence. While the Labour and Tory campaigns have failed to inspire the electorate -- the polls have stubbornly refused to budge since the beginning of the year -- other parties have engaged voters who have been sidelined for decades. The SNP looks set to win at least six times as many seats as it took in 2010. At the other end of the country, the anti-EU U.K. Independence Party may win seats for the first time at a general election. Rich First Miliband has returned repeatedly to the future of the state-funded National Health Service as a campaign theme, arguing that the Tories are bent on its privatization. He's accused Cameron of pursuing policies that only favor the rich. "I'm not simply asking you to reject the Conservatives but to reject their plan to put the rich and powerful first," Miliband told a rally in northwest England on Wednesday. "I'm asking you to reject a plan to double the cuts next year and devastate our NHS. I'm asking you to reject a plan for a recovery that only reaches the City of London." Red Lines Clegg has set out six "red lines" that he'll demand as the price of joining a new coalition, including higher education and health spending and pay increases for public-sector workers. Cameron has made it clear that the holding of an EU referendum represents his own red line. Clegg has not ruled out accepting that demand. Arithmetic suggests Labour and the SNP may have enough seats together for a majority. While Miliband said last week he'd rather not be prime minister than do a deal with SNP leader Sturgeon, he doesn't need to. If the numbers add up, Miliband could form a minority government, safe in the knowledge that the SNP has pledged to support it in any confidence vote and oppose a Tory-led administration. He also has the option to do a deal with the Liberal Democrats Still Confused? I thought so. This is one of the most complicated elections ever. I have no love of David Cameron. Yet I am rooting for him because of his promised up-down vote on the UK remaining in the EU. Although there is no reason to believe Cameron will keep his word, there will not be a vote for certain if Labour wins. Such is the sorry state of politics. How about a vote for "none of the above"? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot  Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

You are subscribed to email updates from Mish's Global Economic Trend Analysis To stop receiving these emails, you may unsubscribe now.	Email delivery powered by Google
Google Inc., 1600 Amphitheatre Parkway, Mountain View, CA 94043, United States