The people of Great Britain decided to shoot themselves in the foot and punch the rest of us in the face by leaving the European Union (Leave: 51.9%, or 17,410,742 votes, versus Remain: 48.1%, or 16,141,241). The movie is dubbed Brexit. As a result, the pound fell to its lowest levels in 31 years and global markets are down anywhere between 3% – 11% on the first day of trading after the vote.
This “black swan” event is another reminder why I prefer real estate over stocks. In real estate, there aren't so many random exogenous variables that pound your investment to bits. Rental income is sticky and there are things you can do to improve the value of your property.
Real estate is clearly less risky than stocks too. Despite lower returns, you can ironically get richer off real estate given you're willing to investment more in real estate.
Unless you are a multi-billionaire, being a minority investor with no say in your investment is just the way of life for equity investors. In this article, I'd like to discuss why Great Britain chose to exit the EU, and what may happen next.
Brexit: Why Great Britain Voted To Leave The EU
* Less fees. Britain’s exit would mean the UK could save roughly $9 billion in annual EU membership dues. Countries such as Germany and the UK have been subsidizing EU countries like Greece, Spain, and Portugal for their excessive spending. Eventually, you get sick of taking care of people who are unwilling to take care of themselves.
* Less regulations. The EU has strict environment and labor regulations. Difficulty laying people off is one of the main reasons why unemployment rates are so high in many EU countries. Why risk hiring someone who might be a virus for years?
* More control over migration. Brexit supporters feel the EU’s migration policy plans pose a threat to the UK’s sovereignty and safety. They don't want to be forced to accept migrants that may hate British values.
* Lower consumer good prices. The BBC reports an exit from the EU could lower prices in the UK by roughly 8 percent due to BREXIT.
At the end of the day, the British people want what everybody wants: the freedom to choose. I respect this a great deal.
How Much Is The Freedom To Choose Worth To You?
Freedom to choose is why I left Corporate America to start my own company. I was tired of not getting paid what I thought I was worth. And I didn't want to subsidize underperforming departments anymore.
So instead of complaining, I engineered my layoff to get a severance package. I knew my income would suffer for at least two years, but it was a sacrifice I was willing to make to be free. Four and a half years later, I do not regret leaving the mothership at all. Perhaps the same will be said by Brexit voters in the future as well.
On the negative side of Brexit, unemployment will rise as companies, domestic and foreign, move out of the UK. For companies that decide to stay, there will be hiring freezes due to uncertainty.
People nearing retirement will either have to delay retirement or live on less than they expected. Meanwhile, investors who are long UK-denominated assets will all lose money. The typical reaction to shocking events is to sell first and ask questions later.
On the positive side, a weaker pound should help exports and lighten the cost of visiting the UK. My 2nd round Wimbledon center court debenture tickets cost $1,300 each back in 2014 for goodness sake! I've also been looking to buy a Range Rover Sport for a while now, although it is owned by Tata Motors of India.
A free-falling economy will also cause home prices to drop, enabling those who had been priced out to potentially buy at an affordable price if they can keep their jobs. Finally, less wealth equals less congestion.
Brexit Bottom Line
Overall, Brexit is bad for short-term investors and good for folks who believe freedom is more important than money. Big government has slowly squeezed away our rights. The people have spoken against globalism.
What's Next After Brexit?
Now that the vote is done, Prime Minister Cameron, who is resigning, can either ignore the will of the people, or invoke Article 50 of the Lisbon Treaty to begin the formal legal process of leaving the EU. Under Article 50, a two-year notice is required to officially exit the EU. During this period many negotiations and agreements will have to be reached. The consultancy PWC estimates that it will be about four years after invoking Article 50 before the UK can officially exit.
Given everything is rational, there's still a good chance the UK could change its mind if things get bad enough during this 2-4 year period of exit negotiations. If the UK ends up not leaving, then we could have one of the best buying opportunities between now and 2018 if the markets continue to sell off. If it turns out the UK economy gains during this exit grace period, all will be fine.
The knee-jerk reaction everyone seems to have is to buy the dip. But seldom do markets reverse course after only one day of correction. What investors should be thinking about is what will Germany do? Germany subsidizes Greece and Portugal even more than the UK. What will become of Spain, Italy, Ireland, and other EU countries if they eventually need a bailout? As the principle stakeholder in the EU's well-being, Germany's reaction will go far towards either calming fears or fanning flames. Let's hope other countries like France don't consider leaving as well.
The world is highly interconnected. The main fears are uncertainty regarding trade, currency, investments in Britain, British investments abroad, and what happens to the rest of the EU. All these issues will take plenty of time to work themselves out. In the meantime, we've got to review our investment game plan.
Brexit Forces You To Review Your Financial Game Plan
Brexit is a black swan even just like the global pandemic that began in 2020 was a black swan event. As a result, it's always good to review your finances and ensure you have proper asset allocation of stocks and bonds. You must also make sure you have proper net with exposure as well.
We've been aggressively saving our money, refinancing our mortgages (10-year yield now at ~1.7%), and paying down debt to prepare for a rollover.
I recommend everyone do the following:
1) Review your portfolio. Go through all your positions and ask yourself whether they fit your objectives. If they do, carry on. If they don't, rebalance your positions to fit your risk criteria by adding more or selling. It's important to assess your European, Asian, and US exposure as well. Europe alone went down 10% in one day the day after Brexit compared to “only” 3% in the US. Portfolios have a sneaky way of going out of proportion if you don't review and rebalance them at least once a quarter.
2) Review all your cash positions. During times of market volatility cash is king. You should not only review your cash positions in your pre-tax retirement portfolios (401k, IRA, Roth IRA, etc), you should also review your cash positions in your post tax portfolios (online brokerage, wealth management accounts) and your day-to-day savings accounts. Make sure you have enough fire power to take advantage of potential future sell-offs. Also make sure you have enough cash where you feel comfortable lasting for 6 – 12 months in case your income takes a hit.
3) Review your net worth allocation. Once you've gone through your portfolios and cash positions, it's time to take a holistic view of your overall net worth. Do you have at least 5% of your net worth in risk-free assets like cash, CDs, and Treasury bonds? If not, better get going. Are you risking more than 60% of your net worth in any one asset class? If so, try and diversify more. You don't want to be the typical American who lost their shirt when the housing market collapsed or the dotcom bubble burst. Make sure you have a mix of offensive and defensive positions that also provide an income stream.
4) Run your financials through a retirement planner. It's important to make sure your assets and income projections are on track. Good retirement planners are great at highlighting your income shortfalls or spending excesses because it uses your real data. It's harder to fudge your numbers as people so often like to do. Once you know your shortfalls, you can take steps to improve your situation.
I've spent time reviewing my investment portfolios, cash positions, and retirement cash flow projections. The results have me deploying 35% of my cash holdings into US index ETFs like VYM and DVY from my rollover IRA, SEP IRA, and Solo 401k.
My retirement portfolios have ~30% cash weightings on average. I won't be deploying any of my cash sitting in my bank account before 100% of my retirement cash is invested. Amazingly, Brexit is still going on almost 5 years later. You can follow moe detailed news about Brexit via the BBC coverage.
But now, we have to deal with new Democratic policies that may or may not hurt the rebound.
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Hey Sam. Italy is a net contributor to the EU budget. It pays nearly as much as the UK.
https://www.statista.com/statistics/316691/european-union-eu-budget-share-of-contributions/
Italy is not subsidized by Germany in any way, shape or form. It was never bailed out, like Greece or Spain were. Every year it puts into the EU budget more money than it gets back.
I reiterate: Italy and the UK spend about the same. Just look at the stats.
Granted, Italy is a mess anyway (high youth unemployment, rampant corruption, falling wages, declining living standards, huge state debt, almost no GDP growth, etc.), but in terms of its relationship with the EU, things are not nearly as bad as American media and commentators erroneously report.
The Germans and the other “northerners” don’t hate on Italy nearly as much as they do on the likes of Greece and Portugal. Which makes perfect sense, considering we are NOT a burden of them (yet).
However, anti-EU sentiment is getting stronger and stronger in Italy. I estimate 1/3 to half of the population wants to leave as of now.
Thank you for the correction. Appreciate your perspective.
No, the vote to leave EU doesn’t surprise me. A country is made up of 2 classes, workers and the rich. I live in Michigan and have watch auto plants, solar plants close up and travel to Mexico. Mexico opens up new plants and employ 1000s of low wage Mexican employees at each plant. Meanwhile every plant that closes in the USA (lays off) fires 1000s of medium wage American employees. My city is dead with little activity and little spending. Lots of for sale signs on houses and buildings.
The rich are:
Professors (>$200,000 annual salary) get more dumb 17, 18 year old kids enrolled because the kids think a university degree will get them a medium wage job (especially when no more Big 3 automaker plants, solar plants exists in the city). Politicians (>$200,000 annual salary) switch careers into working for the big companies later in their lives, and corporation are all too eager to hire them. Rich business men (>$300,000 annual salary) know that there is no difference in physical work performance in 8 hr shifts coming from a white American or Mexican. The only difference is the hourly salary paid.
The law making politicians always put themselves ahead of the workers. It’s only human nature to put oneself before others.
The workers are:
jobless because only fast food, restaurants, supermarkets are hiring for 30 to 35hrs a week so no employee benefits or overtime is ever paid out. The plants have all closed down 5 to 10 years ago, and moved to Mexico.
How is Brexit a “black swan” event?
In the two-week run-up to the vote it was a close race between Remain and Leave, with a difference of only several percentage points.
This just goes to show that a large majority of “professional market participants”, who somehow were sure that Remain would prevail, don’t know that they are talking about and are subject to the same biases that a regular Joe Shmoe is.
Because the FTSE 250 dived 12%. If it wasn’t a “black swan” or shocking event, the market would have traded in a normal range. A 12% dive is a 2+ standard deviation event.
Were you shorting the market before the vote? I’d love to know your investment background. Thx
Hi
I’m unsure I would consider brexit a black swan event. The Flash crash of 87, crash of 29, credit crisis etc would be closer to the definition of a “black swan” as these events were very hard to predict and the causes leading up to the event were largely unknown. Only research after the event really exposed the causes.
Brexit on the other hand was closely monitored by the world.
From google:
“An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult to predict”
I’m trying to keep an open-minded view of Brexit, but it’s difficult to see how this isn’t a self-inflicted gunshot wound. This deliberately spins the country into a recession, and with Scotland and Northern Ireland now threatening to secede, it undoes 2000 years of English conquest, reducing the UK to basically the size of my desk.
That being said, I think everyone’s missing the part where Article 50 hasn’t actually been triggered yet, yet all the economic effects are already being felt. When the next general election gets called, it will act as Brexit Vote 2.0, and the Leavers who now realize what they’ve done will switch and call the whole thing.
Hey Sam
First off, splendid post and very thorough. You really touched on some things here that I hadn’t considered, such as all of the positives behind the exit.
I’ve got two questions for you after reading this post.
1) I’ve noticed in some of your other comments you’ve said “Britain is almost certainly going into recession.” With all of exotic monetary policy being deployed worldwide right now (NIRP, ZIRP, QE and people even talking of helicopter money), do you think the Bank of England is going to be creative in their approach moving forward?
2) With the US election coming up so soon, do you think that the dramatic political mood behind Brexit will fuel the fire of Trump supporters? There are lots of people here (Canada) that think this may be the case.
Looking forward to hearing from you and again, great post.
1) All the Bank of England can do is lower interest rates or institute aggressive fiscal expansion. The problem is who is going to pay for the spending now that a recession is inevitable? Tax payers who are going to lose their jobs? Interest rates are already so low.
2) Absolutely. Trump should is a ~25% favor to win. Brexit should help bump him up to 30% or more I would think. Still an underdog, but I wouldn’t count him out. And if he wins, the US stock market and probably global stock markets will plummet 10-20% as well. Hence, best to be conservative this year and save lots of cash.
Cheers
I believe that Brexit is a fine choice for Great Britain, but it’s tough to see how the other countries will manage to stay in the EU long term. I’m particularly nervous about Germany choosing to leave because they have money, and powerful armed forces, and I think they may eventually choose to align themselves with Russia rather than the EU which would be bad news.
We can always hope that Britain decides to go for a “Norway” relationship, but I don’t know that it will happen.
I suppose that a new equilibrium in Europe will take at least 5 years to reach, and over a decade if war ends up being the result.
“I’m particularly nervous about Germany choosing to leave because they have money, and powerful armed forces, and I think they may eventually choose to align themselves with Russia rather than the EU which would be bad news.”
Just curious. Why would you think that?
“I’m particularly nervous about Germany choosing to leave because they have money, and powerful armed forces, and I think they may eventually choose to align themselves with Russia rather than the EU which would be bad news.”
No. Do you know what happened during world war 2?
The good news is that the perception of lower rates going forward should help our real estate investments.
Indeed. The 10-year has collapsed to 1.37%, yet the US stock markets have all rebounded back to all-time highs. Amazing!
The market found an excuse for a much needed correction. I don’t live in the UK so I don’t understand the issues involved except for what we hear on the news. That is no substitute for local knowledge.
I have always thought that the EU was a concept that looked great on paper but doesn’t work well in the real world.
My suspicion is that the UK will come through this well intact. I don’t think this is a harbinger of things to come in the US although our trade deals in the future are going to be much tougher no matter who is elected.
Great to read a voice from outside the UK Sam! For me, this was a vote against the politicians of both the UK and Europe for their complete failure to address anything that lies outside of the comfortable, liberal and affluent world they live within. In many ways, I think it’s similar to what many Americans feel and why Trump is doing so well, although it is pretty ironic that he’s seen as anti-Establishment. I feel America could vote him in as the next President for the same reason Brits voted for Brexit. Millions are desperate for change and see no sign of it. What are governments doing for them? So many people are absolutely fed up that the rich are getting richer while paying lip service to liberal policies that actually feather their own nests. In a perverse way, I’m proud that Britain has voiced a howl of rage against the machine that might make others pause and think about the route we’re heading down.
Hi Jim, nice to hear from you. In America, we call this limousine liberals. I really do not like politicians because their egos are so massive and their desire for power is all they really want.
Brexit is probably making Hillary Clinton really nervous. She is part of the dynasty and the establishment. I really wish you wouldn’t sound like a robot who is what reading from a script. She seems very qualified, but she also seems disingenuous.
What is happened in Great Britain is encouraging to all citizens who live in democracies. This whole issue is just the beginning, which is why I am going to save money like it’s a precious resource!
Voting for Hillary Clinton is voting for Bill Clinton’s third presidential term. The constitution prohibits a president from being elected to the office for more than two terms and at the time this was amended into law after Roosevelt, I doubt anyone foresaw scenario where a spouse of former two term president running for the same office. Trump’s campaign is race baiting, scapegoating and turning a blind eye to bigotry, but the Clinton’s have no problem with exploiting loopholes with existing laws and pushing the boundaries of ethics. What did America do to deserve these two most disliked candidates as their two choices in 2016?
Sam, found your article to be very balanced and reasonable.
The people have spoken against globalism indeed. Or rather, the people want the benefits of globalism, without having the globe in their communities. Much like in the U.S., the areas far outside the large cosmopolitan cities are terrified of an immigrant/muslim “menace”. The EU is not only a regulatory framework but also a symbol of the interconnectedness of the European continent. Very selfish for UK to pull out of the EU, but eventually we all make selfish decisions without considering how that might affect others and eventually ourselves as a result in the long term. The most likely result is Britain will lose influence and decision making power with it’s EU neighbors, but will still be able to execute FTA with EU provided they abide by EU regulations. Will be interested to see if N. Ireland and Scotland try to forcibly break away from the UK now.
It is interesting that the question of whether to be in or out of the EU is determined by majority vote. Imagine if American constitutional amendments were subject to ad-hoc elections every 4 or 5 years rather than requiring greater than 2/3 approval and multiple chambers of congress.
Populist movements are on the march in Europe, and Trump is 50/50 to be our president come November (!?!). Crazy things are happening and the world looks totally alien to me. This must be what approaching middle age looks like. Maybe I should put down the newspaper now and get myself a drink.
“Much like in the U.S., the areas far outside the large cosmopolitan cities are terrified of an immigrant/muslim “menace”. ”
You must mean smaller cities like Orlando and San Bernardino, Big cities like Boston know there is no need to fear radical Muslims.
They were us born citizens. Who legally purchased firearms for private use. Perhaps your criticism should be of the easy availability of high caliber weaponry and body armor that goes far beyond the intent of “a well regulated militia”.
Oh sure, and while we are at it, considering the Twin Towers in New York, let’s ban tall buildings and airliners. Oh, and no more funny shaped buildings like the Pentagon either, they seem to anger some folks.
US born means that US citizenship was “given” to them by virtue of the fact their parent was in the US at their time of their birth, it does not mean they have assimilated and embraced American values and way of life, or ever will.
Bill,
My wife is a first-generation Afghan who fled the Soviet invasion in the 80s with her family. I suppose you could consider my infant son, like the Orlando shooter, a second-generation Afghan. I consider us all Americans.
I find your attitude particularly disturbing. Neither my wife or I are practicing Muslims but her family is. We are after all a nation of immigrants.
Technically, all nations are a nation of immigrants if you go back on a long enough time line. For some reason, the only countries of the world that don’t recognize national borders for themselves are Western countries. Ironically, Mexico has VERY strict border secure along its southern border, for example.
Immigration is good, but it does need to be controlled, the people ultimately need to mostly assimilate (sounds like your wife has) and it does need to be people we want to be here in the US rather than just anyone (preferably those that are educated, those with wealth, and those with no criminal background). Islam to me seems to be about where Christianity was in the 1300 – 1500s. Largely peaceful, but still a large number of extremists who think murder in the name of God is fine that the majority of the non-extremists don’t find that particularly cringe worth or do anything/much to self-police.
Immigration is also a tougher sell when wages are so stagnant. In the 90s when the economy was booming and real median household income increased quickly, no one was particularly worried about immigration. After 17 years of declining/stagnant real median household income and record levels not in the work force, I think that sentiment has hit a boiling point. I actually think our free trade with China, etc has hurt median wages more than immigration but people see immigrants but not the factory worker on the other side of the globe so it gets disproportionate attention. Same with terrorism. It’s right in your face with the news media even though its just a very small fraction of murders, much less overall deaths in the US.
JMHO.
The polls say Trump only has a ~30% – 35% chance of being president. But what has happened in Great Britain should embolden the Trump campaign.
At the very least, establishment and whoever becomes president should wake the hell up and listen to the people. And hopefully the people will feel embolden to Vote and do something about all the shenanigans in politics.
And another point. Brits voted leave to preserve their national character. When you go as a tourist to Europe are you going to see the cultures of England, Scotland, Wales, France, Italy, Greece, etc or are you going to see “European” culture? What’s that??? They are not the same and leave Brits do not want to lose their history, language and culture.
As someone with British family living in the UK and other family members living elsewhere on the continent I can assure you that people thought long and hard before going in to cast their ballot to #leave. After months of intimidation, fear mongering and endless accusations of being racist or Nazis they voted their conscience and not necessarily their pocket book. They want a nation with borders. They want to walk the streets without fear. They want to be able to access the National Health Service without waiting like American vets at the VA. They were willing to watch their currency value plummet because they know it’s been in a bubble. The bottom line is people want to be free to decide their own affairs. Those crying the loudest over the leave are those, like accountants and lawyers, whose profits derived from the EU. There is likely to be more leave activity as there is deep dissatisfaction all over the continent. So buy low. And know that the Brits didn’t “punch you in the face” with their vote. They voted for a GREAT Britain, not a slave one.
I definitely don’t know whether leaving or staying in the EU would be better for Britain and the world, but it will be interesting to see what happens.
I pretty much agree this is a good opportunity to buy stocks, but I’m not going all-in. I think the big drop today was a bit of an overreaction, but I think we are due for a downturn, like you said.
As usual, it’s hard to say what’s going to happen.
Freedom is a powerful motivator. Nobody likes being ordered around.
I believe the financial fears of a coming recession in the UK are way overblown.
I also believe the EU will become much more flexible in negotiating with nation states.
That’s my two cents from a Yank.
UK has a Parliament composed of two Chambers: the Commons and the Lords.
The Lords is the chamber that reviews laws from the Commons and ammends them before ratifying them.
The Lords is a “by appointment only” Chamber, with 4 positions hereditary members(so if you’re born in the right family, you are part of the Parliament by default), 20 something members of the Church and the rest of 600 or so positions filled from among the peerage (lords and ladies) by appointment of the Queen, with input from the Prime Minister of the time. Their Prime Ministers have most of them been educated in just one college, Eton.
Rich people have tried/succeeded in buying their peerage with party donations for years. (https://en.wikipedia.org/wiki/Cash_for_Honours)
Until 2009 the Lords essentially filled the position of last court of appeal (like the Supreme Court).
https://en.wikipedia.org/wiki/House_of_Lords
It’s not Brussels that’s their problem and it’s not Brexit that will set them free.
Thoughts on both Johnson and Solange bowing out after leading their people to Brexit? Doesn’t seem very honorable not to do the hardest of work now, no?
Johnson and Farage are unscrupulous politicians that do not give a damn about “the common people”. They wipped up a frenzy of racist and xenophobia during the campaign. They now have won, they have no plan of how to deal with the whole shamble and so they have wisely (for their own skin) decided to p*ss of into the sunset, so that when the recession hits, they won’t be anywhere near it.
I was going to take my mother to visit the UK. It’s her 60 years aniversary this year and she has never travelled for pleasure outside her own country. It was supposed to be an adventure, fine dining, museums and all the good things in life. We are 2 women travelling alone. Racist attacks have been on the rise in UK after the referendum. I don’t think it’s safe for us to travell there anymore. I’ve paid for the plane tickets, but now that I have to pay for the accomodations, I’m really not entirely sure I can stomach going through with it. We will see.
I can’t quite believe you actually wrote this article mr Samurai.
1. Less fees – true overall but GB receives billions in subsidies from the EU as well.
Especially the lesser of counties which ironically voted to leave.
I blame media/politicians for failing to inform them.
2. Less regulation – LOL are you serious? Go ask the Norwegians/Swiss/Turks etc.
All of them including GB rely heavily on exports to the EU and guess what, in order
to export they need to meet all EU-demands but being ‘out’ have no say in these regulations
Do believe me? Read the interview with the Norwegian prime minister today.
3. More control of regulation – technically true. But they are not in Schengen in the first place.
Many of the ‘yellow/brown/black’ people the brexiters hated didn’t arrive from the EU.
These are people that GB will still have to take in because they are forced by International
Humanitarian laws. The only immigrants they will see less of are Poles/Bulgarians etc. but
instead of ‘taking UK-jobs’ they are actually taking UK-jobs that Britains are too lazy to do.
4. Lower consumer prices – would not be to sure about that. UK farming relies heavily on
EU-subsidies. A large amount of its oil supplies come from Scotland (which is now seriously
considering holding yet another referendum). Plus many of those consumer goods come from
the mainland which prices will increase due to costum-tarifs.
Of course in the long term there are just too many variables to be able to say now that Brexit is a disaster/blessing but a thought you article needed in little nuance.
And please don’t call me a hater. All my comments so far have been grateful/positive. And just recently I offered to show you around during your stay in Europe. Just felt that this needed to be said, because your post felt a bit like the Fox news ‘UK leaves the UN’ article today.
I think you miss the overall larger point. GB (or at least more than half of its citizens) do not want to be controlled by Brussels. They would rather be in control of their own destiny. You are getting too lost in the weeds.
Yes I get that they had this political upperclass right? Guess what the GB-elite is no different from the one in Brussels.
Too bad I can’t “like” your posts because I like them all. Feelings are running pretty high.
Why thanks! But trust me, you will find a post of mine that you hate and will never want to come back again. But I hope that you do come back and share your thoughts :)
Does this mean you will no longer show me around town?
Why debate the reasons why people vote the way they do when the boat is already happened?
You ever read the story about a bully? He feels OK bullying some other boy, but as soon as some other boy bullies his boy, he becomes protective. It’s OK to get controlled and regulated by someone or set of people, so long as the people voted for them. The freedom to make our own mistakes is all we’ve ever wanted.
No how about them bank stocks?! The bank I used to work for is no trading at 45% less than during the 2009 financial crisis! Holy crap.
No of course not, you are welcome any time. Still think you blog is by far the best one I have ever found. Just wanted to make sure people knew I disagreed but was not hating.
1. Why debate the reasons why people vote the way they do when the boat is already happened?
The EU consists of 27 other members. Analyzing why the majority of GB has voted to leave it seems essential to me in predicting the future of the EU. Just like GB has UKIP many other countries, including my own, have EU-sceptic parties. I the EU wishes to survive this century it needs to find a way to reach out to the people it has lost on the way.
2. No but I like the bully-story. However it is not really applicable. Yes the European Commission lacks in democratic founding. However the EU-parlement doesn’t yet the UK voter turnout for it was below 35%. Brexiteers wanting out should have used the opportunity to influence EU-policy instead of staying at home complaining.
3. This will be interesting to watch in the coming years. Is London really going to lose its large financial position to Frankfurt. UK-banks have threatened to leave but we will have to wait and see.
For now what is really hurting GB is the uncertainty. Until GB invokes article 50 of Lisbon and the 2 years following that will be a volatile period. With a crashing pound a cheap holiday is an opportunity but investing in a business (not knowing how tough the EU is going to negotiate) not so much.
Clarification: all those who voted to leave realized the economic destruction leaving would cause right? If so, is it possible they all went into cash or shorted the market in anticipation and they really didn’t get negatively impacted?
Also, what are the chances this get so bad that another referendum takes place to vote “just kidding”?
Haha great questions. But given that ‘what is the EU’ and ‘what are the consequences of leaving the EU’ were both the highest searched questions on Google the first one doesn’t seem very likely. Although I’m sure there is some smart-money out there who did.
Regarding the second question – there is a petition with 3 million signatures in just a few days calling for a new referendum. GB-parliament is legally obligated to discuss the topic. However D. Cameron has already ruled it out.
Hope for the sake of the British people they will find a way to get back together again. I have a roommate from London who scans twitter every night. It is still not looking pretty. With arguments within families – and more scarier xenophobic acts against ‘foreigners’.
I have a strong belief that voters to Leave couldn’t be that stupid to not know what the EU is and the consequences! Everything is rational in the end. Or maybe politicians are brilliant at manipulating the masses to do what they want. Hmmm.
@Lieftinck
28 members, not 27. Croatia joined recently.
Unless you mean 27 now that the UK is out lol.
First of all, my congratulations to all friends in UK – freedom is the best you can have. Believe me, I came from a communist country.
As FS have said, this decision will hurt all of us in short-term, but for those, who are playing long term and has minimum debt, it will be blessing rather than curse.
A lot of my friends have started selling stocks, funds, everything; I’m not sure about this decision and prefer to keep my investment in place, just because I aim long term.
And the fact that I don’t have debt gives me peace in this situation
I haven’t really been following the Brexit, but the age differences in the voting is concerning. The only thing that I’ve really noticed in the news is that those that were most vocal in the Brexit look incredibly eccentric. I’m all for being eccentric, but if I lived in Britain and those were the people spearheading the movement, I’d think twice and really do my homework.
You should have a think about how Europeans perceive Trump!
Oh, I’m sure their thoughts are similar to my own! His hair alone makes me cringe……
How the different age groups voted sure is interesting. I was pretty surprised that Brexit actually came out winning. Typically when the vote is so close, people in the middle will vote to stay status quo.
Good time to visit UK I suppose. :)
@ Tawcan, the “middle” is tired of the status quo. Don’t you watch the news? Bernie is not status quo, Trump is not status quo, exiting EU is not status quo. Your world is going to be hurting in a few years after all the status quo is whipped away.
We are not too long from giving up on the “peaceful exchange” of power in this and other countries. There are many in the current administration, including the democratic nominee for President who actually belong in jail. Read history. If you do not think it can happen, you don’t know history.
The older generations decided the fate of the younger generations of UK regardless of the outcome. Youngsters, you need to really vote for change.
Well, the younger generation backed the ill fated campaign of Bernie Sanders, regardless of the outcome. Perhaps the younger generation doesn’t have enough life experience to make a wise choice or is it because they have not amassed much in the way of assets, therefore having very little “skin” in the game? Essentially nothing to lose.
Being a part time conspiracy theorist, I appreciate this news because I feel the closer we get to a single currency for the world the less control we will have over our lives. Even though the markets are generally unpredictable, they very predictably dropped this morning. I’m always amazed at how knee jerk the markets are. Great news for me since I invest at regular intervals for the long term. Stocks on sale!
you know who loves this uncertainty?…..the US Government and fed reserve because this event just allowed them to keep printing more money cheaply as this event just created large “slight to safety move” in buying up Treasuries(and people will buy hard assets in USA like real estate……Everyone wants their assets in USD…The USA stock market will keep moving up because of this
onward and upward to $20trillion in US debt
You are correct. The US dollar and US debt our big winners during global uncertainty.
Everybody with the mortgage needs to refinance their mortgage. Everybody with credit card needs to call the credit card company and push for a lower interest rate. Everybody with student loans should also refinance down their loans.
People need to be in the habit of thinking what’s bad around the world could be good for us here in the US through lower interest rates. It should be automatic thinking.
I’m still scratching my head why investors run to the “safety” of the US Treasury when the printing machine is out of control and the FED balance sheets are ballooning.
It’s like having a mother addicted to shopping and entrust our credit card to her.
I carry on scratching my head.
Everything is relative in finance. We are relatively the more stable currency and more stable nation. Furthermore, it is exactly because we can print money that we can inflate ourselves out of problems. The world has excepted the US dollar more than any other currency in the world.
If you are an American who has never lived overseas, things will feel weird that other people see us so stable. But once you go to Asia, Europe, Africa and the Middle East and realize how unstable the world is, People will realize how incredibly amazing the United States is in comparison.
I haven’t been paying attention and I’m surprised it passed. The voting differences between age groups are striking. I’m also bearish, but I might put a little money in stock with the dip. I just sold some corporate bonds and have a little cash sitting around.
Good time to visit the UK? :)
I’m definitely with you on preferring real estate over the market, which is pretty much a house of cards. Unfortunately, I have an unlimited match on my 401(k) which is hard to pass up. But I’ve contemplated stopping contributions to my Roth and putting that extra money toward my real estate purchase fund.
That said, I do have some cash sitting in my Roth right now that I might be using if there are some good sale prices today.
— Jim
The problem is that real estate is just as inflated as equities. There’s no good place to put cash at the moment.
I do hear ya… I’m using the opportunity to build up funds right now for the real estate market to drop which shouldn’t be that far out based on regular real estate cycles.
— Jim
Sounds smart to me. After doing a thorough review of my investments and net worth, I am only deploying 25% of my cash and from my pretax investment accounts.
My cash sitting in the bank will continue to sit and accumulate to buy real estate in 2018 or just create one massive emergency fund.
This creates so much uncertainty. I feel bad for what Britain’s citizens just did to their economy, but I’m upset at what they’ve done to the world. I’m with you and think this is the harbinger of a few years (at least) of a global recession. The US will have to negotiate all our treaties with Britain (and maybe Scotland and N. Ireland) and our multinationals there are going to suffer. I hope it is shorter-lived than I fear, but I’m just going to keep my head down and continue with the plan.
As an amateur history buff, I find this story fascinating. If I had extra money just laying around, I probably would be investing more right now, but alas! I’m trying to use my money to build up my woefully small emergency savings fund and pay down debt. I’m not in a position to gamble right now, and I prefer known outcomes to unknown ones given my current situation (-81k in debt).