A happy coincidence

We realise that there is already more than enough commentary on what is now becoming the most overanalysed event in history, namely Thursday's vote. Staggering headlines on the front pages of leading papers that investors have withdrawn £17bn from assets preparing for a no vote, one finds that it is hard to think that this is credible. As much as opinion poll analysis keeps the journalist world occupied, it historically offers a limited insight to the outcome on the day. The opinion poll that rarely gets it wrong is the bookmakers poll. In this case there seems to be very little doubt as currently the odds on a no vote are 4/1 on and a yes vote 3/1 against, it seems pretty clear who they think will win.

The last word on the subject comes from an interview with Martin Gilbert, chief executive of Aberdeen Asset Management, in today's FT.  Mr Gilbert makes his position clear, he is not worried in the slightest about the referendum as his business is a global operation. This fact applies to many British companies, therefore one cannot see how ultimately Scotland becoming an independent country will have a material impact on these businesses in the long term.

On a completely different topic a lot has been made of the recent fall in the oil price, this fall has taken some by surprise as geopolitical tensions often lead to the opposite effect on the oil price as speculators anticipate supply disruptions.

Governments around the world have made very public their attempts to put pressure on Russia over Ukraine via economic sanctions. While this may be having some impact, what is probably having greater impact is the falling oil price. Oil accounts for 40% of Russian state revenues and according to Sergei Aleksashenko, a former Russian central banker, a $10 drop in the oil price robs the Russian economy of $20bn of revenue, representing 1% of GDP. Some local analysts estimate that a $10 drop in the oil price could hit GDP growth by to 4%. If one were of a slightly Machiavellian mind, one could say the fall in the oil price has come at a most convenient time for those wishing to put pressure on the Russian government.

Posted on September 16, 2014 .