Scottish independence: The new worry for equities. It always amazes me that equity traders tend not to pay attention to events until they are staring them in the face.
We have known about the Scottish independence referendum for over a year, but no one has paid any attention to it.
Until now. With 10 days to the vote on independence in Scotland, my email has filled up over the weekend about the new worry over Scottish independence.
What's the problem? To be fair, traders didn't pay attention because it looked like Scottish voters would vote to stay with the UK. But over the weekend, a respected poll (YouGov) showed a slim 51 to 49 percent "Yes" vote, with those saying they were undecided excluded.
This has driven the pound down against the dollar, with UK stocks weaker.
Why the worry? There is a lot of uncertainty here:
- Banks like RBS and Lloyds Banking are Scottish banks, they were bailed out by the UK government. What happens to them? How is this going to be settled?
- What about the North Sea oil? Chevron, Total and others have fields that conceivably could be claimed by Scotland. How will those taxes be divided?
- What happens to the debt? Scotland is about a quarter of the UK economy; if it leaves, should it assume 25 percent of the debt?
- Scotland has a high concentration of lawmakers belonging to the left-wing opposition Labour Party. If the country votes for independence, what's left of the U.K. would shift to the right, consolidating the power of the ruling Conservative "Tory" Party. Tory voters tend to be suspicious of the European Union and there will be more pressure for the UK to distance itself even more from the mainland.
See what I mean? Uncertainty.
What really concerns traders is the momentum...the undecided votes seem to be breaking toward the "Yes" camp.
And remember: This is not like the Catalonian debate about leaving Spain. This is already being negotiated with the UK government, so it is much more "kosher" than other separatist movements.
Fortunately, this may all go away. The UK government is preparing a package that will give the Scots more control over taxes, public spending and social policy. That may sway the undecided votes.
But there are other worries out there: The big macro picture is disappointing. Look at the currencies. The dollar is at new highs, the Euro and the Yen are at or near yearly lows against the Dollar.
What's driving this is not just better news in the U.S., but bad news in the ECB and Japan.
The Fed is going to be shrinking its balance sheet, but the ECB and the Bank of Japan are expanding theirs.
The ECB's decision to begin widespread asset-backed securities (ABS), announced last week (it didn't announce details), was an amazing admission that the Eurozone economy is not getting enough traction.
I can testify to that personally: I get an earful from Venetian shopkeepers, hoteliers and restauranteurs during my week there. They bitterly complained about high taxes, high costs and tourists who don't spend nearly as much as they used to.
Meantime, disappointing GDP data out of Japan is certainly not helping the Yen: GDP was down 7.1 percent for Q2 year-over-year, worse than expected. Demand is just not materializing, not from the domestic side or from the international side.
China also reported a decline in imports.
Bottom line: There is less doubt that the U.S. is getting better, but there is more doubt that the rest of the world is improving.
--By CNBC's Bob Pisani.
Clarification: The section on voting tendencies in the U.K. has been updated.