Understanding today’s trends, yields a better tomorrow!

Brexit Three Months Later

Three months later and none of the fear tactics came to be. The EU needed Britain not the other way around. Case in point and is the reason why all the political fear mongering originated from to begin with. Politicians always knew this. and fear was their only weapon.

Three months later and none of the fear tactics came to be. The EU needed Britain not the other way around. Case in point and is the reason why all the political fear mongering originated from. Politicians always knew this. Fear was their only weapon.

We’re currently receiving the side effects of Hurricane Matthew. As Matthew continues to progress along its course we’re receiving some welcomed rains. Since there’s not much I can do outside I thought it might be a good time to furnish another short article, but about what? For the immediate moment the subject remained a mystery, it still remained looming in the dark.

Still pondering over what I thought might represent some useful information, I opened my computer and shuffled over to my documents. That’s where I have my fail safe plan B for subject matter, under future posts. Found it! I had some prior notes regarding the need to follow up on how things have progressed since the Brexit vote passed on June 23rd 2016.

In the long run nothing can stop natural progression. Manipulation of anything is a short term venture.

In the long run nothing can stop natural progression. Manipulation of anything is a short term venture.

About 4 months prior I wrote a couple of pieces pertaining to what might actually materialize if Britain were to leave the EU. In these commentaries I made some rather bold statements most of which radically opposed the majority of so called professional economists. Most economists of today are self-proclaimed experts who will know tomorrow why the things they predicted yesterday didn’t happen today. It’s a modern day version of Chicken Little if ever there was one. The sky is always falling!

Remember Obama’s warning “The UK will be at the back of the queue” remark?  The IMF alleged back in April 2016 that a British exit from the EU would risk “causing severe global damage”. May 2016 Mark Carney of the Bank of England (BOE) stated “a vote to leave the EU could have material economic effects on the exchange rate, on demand and on the economy’s supply potential that could affect the appropriate setting of monetary policy”.

I couldn’t help but notice the classy verbiage being used when Carney states “could affect the appropriate setting of monetary policy” Me I’m not so classy I just say bullshit when its bullshit. The markets affect the appropriate setting of monetary policy and in the long run always will. In fact the IMF admits UK is fastest growing G7 economy in 2016, despite all the fear based post-Brexit recession warnings being issued by so called financial experts and Governments.  Talk about back peddling!

Most of these fear tactics are being used for one purpose only. It’s a last ditch effort to save a dying currency, the Euro. All this political fear mongering was and still is used with one underlying truth. The underlying truth rests in understanding that if Britain leaves the EU the EU topples quicker. In those previous posts I clearly mentioned and in no uncertain terms it’s the EU that needs Britain not the other way around.

Another subject I had a strong difference of opinion on, had to do with what would happen to the Pound should Britain decide to exit. Not only did most economists error, most Governments mirrored their inaccuracy, although I still maintain was for a completely different reason. Let’s have a look what’s transpired since the vote.

Mid-day June 23rd the pound vs the dollar stood at 1.4819 US Dollars per Pound. As did most economists, I mentioned if the vote was to leave over the next week to ten days there would be an initial sharp drop that may exceed 10%. One week later on June 30th the pound closed at 1.3346.

Three and a half months later the pound closed at 1.2982. Since the vote there’s been roughly a 13.5% difference when compared to the Dollar. Since June of 2016 all currencies have lost ground against the dollar.

Running the same comparison but against the Euro we come up with the following.  June 23 the Euro traded at 1.3048 against the pound. Once again following suit the pound promptly dropped and one week later found itself trading at 1.2034 by the close of the day. Currently we find the number at 1.1578 or a 7.7% reduction.

Retail sales in Britain are up for the months of July and August. Unemployment currently remains at an 11 year low. In spite of their best efforts the scare tactics promoted by Obama, Merkel, Lagarde and Draghi failed. It’s these same tactics that always revert back to us using our primary fears against ourselves only this time it failed.

Prior to the Brexit vote we all remember hearing the opposition recite “If Britain were to leave the EU” then continue off in some direction that always ended up with a worse possible outcome for Britain. Take the following example. An example that was actually used during their efforts of deception. “If Britain were to leave the EU” no one will consider them a reliable source to trade with or to do business with. Britain would find its self alone.

Really so why is the FTSE 100 at a near all-time high? Since the go vote won the FTSE 100 is up an impressive 12% rebounding from a short slump that occurred right after the vote. The FTSE 100 is considered a major stock index that includes some of the largest companies listed in the UK.  Dutch Shell, HSBC, Glencore and Barclays are few key players that make up the team.

But ask a simple question “WHY would Business have to change for Britain if they left the EU” and you won’t receive an answer much beyond “because it would”.

Prior to the exit I remember mentioning their stock market will recover and fast. WHY because people like bargains and are always ready to buy if there’s a perception of value. When there’s blood in the water the sharks are never far behind.

I want to sidebar for a moment and bring up the following statement one more time. Especially for my western friends. It is the strong dollar that will eventually be the cause of fracturing the western economies. I still go on record stating that the dollar will continue to strengthen. For the next while some may even call it a run but for how long?  That’s the real question you need to be asking… the question which all bets are placed on.

This is one of several reasons why foreign investment ought to look pretty good right about now. Buying in dollars then converting into Yuan or Euro and yes even into Pesos you’ll be gaining on the exchange while diversifying your portfolio at the same time.

Most of my readers should at least be considering this move while the dollar remains strong. Nothing lasts forever. It’s not until something similar to Gresham’s law begins to take effect when “there is a tendency for money of lower intrinsic value to circulate more freely than money of higher intrinsic and equal nominal value”. In other words “Bad money drives out good” and all of that “bad money” starts returning back to where it was printed from. WHY because no one else wants it any longer. When that money starts returning home is when your in big trouble if you’re still holding onto it. End of sidebar.

While there’s no doubt Britain will experience some serious side effects from the Brexit in the long run, Britain will benefit by leaving the EU. A choice to leave the EU certainly is not an easy one and as such will have both short and long term effects. What’s intriguing to me is up to this point none of the foreboding effects that were to occur if Britain voted to exit have evolved. They just haven’t come to pass.

Britain is a nation that once ruled the world. They have a currency that’s well recognized. Retail sales are up since voting to leave. Both July and August are up. Other countries are already beginning to make future trade deals with Britain… deals no longer needing SWIFT for exchange. Think about that for a moment.

Russia, China, Europe and even the US are beginning to realize things just don’t seem to work the same way that they used to. It’s all different than just a few short decades ago. Yes it’s my belief Britain will favor well in the long run, but not without facing its share of rough seas throughout the process. As far as the rest of the EU well that’s quite a different story. Seen how Merkel looks lately? One thing still bothers me though. I can’t fathom how so many economists missed the target so badly. Until next time.

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