Brexit, Schmexit! Part 5: The Aftermath

What a week! The Brexit win took everybody by surprise, including yours truly. Even those who voted leave were surprised at the result.  I thought it to be a done deal – especially after hearing Nigel Farage concede defeat the night before, went to sleep and when I woke up, the wold was collapsing around me…

Pound Sterling at 30 year lows; Asian, European, and American indices significantly lower; gold hitting 52-week highs; and to spice things up a bit, throw in a Prime-Ministerial resignation, an opposition coup, and threats from Scotland and Northern Ireland to leave the United Kingdom. And it all happened within 24 hours of the polls closing.  But how come nobody called it?

The polls where all over the place, but the small difference between the in and the out votes meant it was all within the margin of error.  The bookies however, failed miserably: on average, their odds were giving the remain a 75% chance of winning. Their flaw was to take the total amount of money betted, as opposed to the actual number of bets.  Other people simply assumed the people would, in the last minute, opt for the status quo.

The morning after, well… All hell broke loose! The cable dropped to $1.32 before settling at $1.34, a lower level than when it was withdrawn the ERM in 1992, commonly known as black Wsdnesday. The FTSE 100 dropped nearly 9% at the open, but then Recovered to be the ‘best’ performing index in Europe. Germany and France lost 6.8% and 8% respectively, while Spain and Italy gave up around 12% of their value.

The only stocks on the FTSE that were green the whole day were Rolls Royce, Randgold Resources and Fresnillo. The gold miners were up as a consequence of the gold price spiking, but Rolls Royce is a UK manufactured product that investors feel will have an opportunity as a result of brexit. As the day progressed the pharmaceuticals and other sectors recovered. Banks got hammered across the board, and across the world. Over the weekend the news sank in, and Monday witnessed a further sell-off across the world.  The Dow has lost nearly 900 points in two days.

Now Britain needs to get its act together, set up a brexit committee to lead the negotiations, find a replacement for David Cameron, trigger Article 50 (or better yet, not trigger it) and start sorting itself out to get the best possible deal.  While the EU will try to make it as hard as possible, to prevent other smaller countries from getting any ideas.

So, just when you thought it was all over, it’s going to be at least 2 more years.  You can’t make this stuff up.  The next couple of years will be very interesting.

 

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