16th September 2014
They might already call Edinburgh the “Athens of the north”, but an independent Scotland would be at risk of becoming the next Greece, Alan Miller has warned.
Miller, who is chief investment officer of SCM, says there would be a surge in unemployment and tighter lending if Scotland votes “Yes” to independence.
He also beliees that retail prices would rise , while the average house price would fall by more than 15 per cent.
He says the Scottish financial sector would contract, impacting on 85,000 people directly, and a further 100,000 indirectly – around seven per cent of total Scottish employment.
Miller points out that the stock market will always discount potentially negative events as being much worse than they are statistically likely to be, which he says applies to the Scottish Referendum.
But he cautions against selling shares as a knee-jerk reaction. He says: “I’ve heard of fund managers selling equities because of uncertainty over the impact of the Scottish Referendum result but if you consider Scotland’s impact on global markets, profits, revenues or any other measure it is tiny – selling equities seems completely short-sighted on this basis.
“Whatever the result of the Scottish Referendum, investors have to look at overall fundamentals and sentiment – and that requires a long-term perspective.”
Those currently invested in the whole UK market, should ask themselves what they would end up with if Scotland followed almost every other country in the world and had its own stock market made up principally of financial stocks.
Remaining UK listed stocks would be little affected – drug stocks tend to be dominated by US sales and even home grown retailers like Tesco’s tend to be dominated by England, he says.
There is still complete uncertainty over what the currency of Scotland would be.
Plus he asks that if corporate and government debt were separated, would investors really want Scottish debt over UK debt? “It seems unlikely so no doubt the price of the Scottish debt will need to fall to reward investors. There could well be years more of wrangling over how devolution will work in detail.”
Miller says the various possible outcomes are almost impossible to predict and only a “complete idiot” would claim to be able to do so.
He says: “There is only one sensible solution in investment terms and that is to follow the Nobel Prize winner, William F. Sharpe and apply three principles, diversification, diversification and diversification. There will be winners and losers, there always are.”