Two cities with snow still on the mountain tops and one with more sun than rain

April was a client focused month involving a road-trip to Geneva and Madrid.  Not much new to say about Geneva except that it has gone from wildly expensive to insanely expensive since the Swiss Franc/Euro peg broke.  For the average office worker the answer must be to live in France while commuting across the border.  For those lucky enough to own a large Swiss Franc bank account the rest of the world is now on offer at a discount. 

One sign of the times came at breakfast, a strong point of the Bristol Hotel.  Apart from an excellent buffet, the Bristol must be one of the last hotels left that features a live harpist starting from 7.30 am.  In any case my point relates to the composition of the crowd : almost all Asians; by which I mean over 80%.  Most of them from what I could tell were Thais.  So here we are in the centre of Geneva, a place since the last currency turmoil where almost no one can afford to go, and the hotel is full.  Yet the visitors have a very different make up from the composition one would have seen just a year or two ago.  That chimes with what I saw in Panzano the week before.  It is no longer a case of the Asians are coming.  They are here; and thank goodness as Europe needs every single tourist dollar.  

In Madrid the weather was beautiful - like May except it was April.  I got there on a Sunday in time to spend a couple of hours in the Prado, truly one of the world’s great museums: a visit made that much better by the lack of the other visitors.  So I was able to stand at just the right distance from Tiepolo’s Madonna to appreciate her sublime beauty and with not one other person around.  Even the room containing Goya’s masterpieces, the duo of May 2nd and May 3^rd, was almost empty.

I had forgotten what a truly magnificent collection of Titian portraits had found their way here.  The other surprise was that the Prado owns the most extensive collection of Rubens in the world.  One can only speculate as to quite why his most Catholic Majesty Philip IV was such a fan.  It would be hard to find more of a contrast between the voluptuous nudes that populate so many of these colourful canvases, and the austere clerical dominated Spain of the mid C17th. 

As a bonus there was a special showing of Picasso on loan from their home in Basle.  Picasso is not really my cup of tea, but it was fascinating to track the progression from early traditional to most coveted cubist artist.  Picasso led and others followed, but I have to wonder why these works are worth so much money, or indeed whether they will attract quite so much reverence a hundred years from now.  Master or con-artist, or perhaps a bit of both?

After Geneva, Madrid was a bargain basement.  My hotel, the Catalonia, was first class, with twice the size of room at half the price, along with free breakfast versus $38 and friendly staff.  A location in the old town, just a couple of blocks from the Prado was convenient.  Its bed was among the most comfortable I have encountered on my travels.  If voyaging takes you to Madrid you should give it a try.

A huge hot chocolate at an outside café cost the equivalent of around $3, versus over $7 for a smaller less luxurious cup in Geneva.  Dinner ditto.  My excellent bottle from the Priorat was less than one third the price of a comparable quality Portuguese wine drunk in the Swiss capital at a similar style of establishment.  I so enjoyed dining at the Fuente La Fama that I feel compelled to recommend a visit.  Located on an unpromising and busy street, just two doors down from a sex shop, I thought at first I might have got the address mixed up; but inside was an unpretentious old style Spanish restaurant.  No dainty amuse bouche; rather a Madrid speciality of meat and chickpeas, the most delicious Jamon Iberico, and then roast suckling pig that melted in the mouth along with skin that crackled.  The ambience and décor may not have matched world famous Botin, but in a blind tasting you could not slip a piece of fine paper between the quality of the food; yet the price here was around 60% of the more esteemed establishment and the service pitched just right.  I need to find good reason to go back to Madrid.

I am not sure if it was the weather but the mood in Madrid seemed a tad more upbeat than a year ago; though there is still plenty of room for improvement.  Conversations – and realtor indices – both suggest house prices are at last rising again.  Salaries too are starting to creep back up; but employment for the young remains problematic, and wages for many in work came a long way down from peak - 25% for some in the private sector; naturally a lot less for those in government jobs – only around a 5% haircut for those funded by the tax payers.  Yet these are the very same people who protest most about austerity.

The mess in Greece has taken a little air out of the Podemos balloon, but yet another bribery and fraud scandal involving a former economy minister makes depressing reading for the government.  Politics and graft just do seem to go together, like tapas and sherry.  Provided politicians do not get in the way, recovery in Spain is underway : something the stock market has already spotted.  Thus earnings growth for the next three years seems largely baked into current share prices.  That does not leave much for a value investor to do: slim pickings in equity land and fixed income options may be even less attractive.  So forget the financial markets.  Go to Madrid for the culture and the food.

Over in England and trying to talk about financial markets was a lost cause as the only thing anyone wanted to discuss was the forthcoming election.  Of course we now know the result and it delivered one surprise and one nasty.  The nasty of course is the deluge of SNP parasites who may be in Westminster as temporary visitors but seem certain to disrupt proceedings.  The Scots sadly seem to plunge themselves into self-destructive actions periodically throughout history.  Becoming a one party state is one such example, especially when the philosophy of that party is Tartan-Marxism.  If the Scots ever opt for full independence, it would be an interesting bet as to how long it would take for the country to get into the same sort of mess as Greece.  The financial policies of the SNP are nothing if not a massive sinkhole. 

In addition to SEXIT, an outcome that an increasing number of people in London seem to favour, we now also have to consider BREXIT.  The establishment will be out in force to support whatever fig leaf David Cameron comes back with from Brussels to pretend that the EU made sufficient concessions that the UK should stay.  The campaign will be nasty.  Facts will disappear into a welter of propaganda and scare mongering.  There is no established group that supports exit and you can come up with frightening scenarios about what might happen to the UK if it leaves.  Of course we should all be petrified of having an economy like Norway or Switzerland. 

The best analysis and possibly the only well researched and balanced piece on the impact of the BREXIT can be found in recent book by Roger Bootle of Capital Economics titled the Trouble with Europe.  This book is worth reading or you can look up the recent Money Week interview.  He concludes that exit would be messy and disruptive, and probably cause problems in the short run; but in the long run whether it is a success or not depends upon what sort of government you get in the UK (or possibly England).  If it is a sensible administration with an understanding of business and wealth creation, then England outside the EU would be better off in the medium and long term.  If you get a self-destructive nihilist left wing government a la Ed Miliband, an outcome fortunately we have avoided for now, it is conceivable that being outside the EU could actually be worse because even the bureaucrats in Brussels are one step up from someone who may well be intelligent, but who is economically illiterate and exceptionally naive. 

After avoiding one potential disaster let us hope the electorate finds the right answer to the next big problem confronting the country.  In the meantime as you would expect, UK asset values moved up a bit post the election as did the currency.  I think we can expect more positive moves from the UK Stock Market, but wonder about the next move for the currency.  Of course if Greece goes, or is pushed, then the Euro is likely to rise, if perhaps after a brief hiccough : and that is precisely why Germany does not want them to leave.  Of all the currency manipulators in the world today, Germany is by far the biggest; and the clever part of their cunning plan is that they do not even get blamed for doing it!  All you have to do is link your strong currency to a bunch of losers and lo and behold you become a global export powerhouse.  I know it is more complicated than that, but Greece being part of the Euro helps German industry.

Now would it not be a wonderful coincidence for the pro-EU lobby in the UK if somehow a sterling currency crisis could be engineered and blamed on the possibility that Britain might leave the EU as a warning shot across the bow of voters tempted to support exit.  Anyone who is intrigued by this scenario should go to Amazon and buy my book, The Yo-Yo Conspiracy.  This is a work of fiction but does seem to be rather relevant to the current situation, albeit written 11 years ago.  I would be interested in comments from any of my followers after they have read it.  Much more fun than Bootle.