DOUBLE Brexit with update
I’m flying back from France on the Sunday after Bloody Thursday, or as BoJo (Boris Johnson) titled it “Independence Day” although I believe that to be well beyond what will really occur. The FT headline of “Britain Breaks With Europe” might have been better as “Britain Breaks With the World.” Like all of us using Word, we had to add Brexit to our dictionary, and unfortunately we’ll all be writing about and likely lamenting about it for a decade (?) or longer. Such is the long-term impact and uncertainty from this shocking result.
Due to other commitments, I waited to update this until Monday and while I missed most of the Iceland (population approximately 330,000) versus England game and tuned in at the hour to see another ejection albeit not self-inflicted per se. Like Brexit, no headline writer, poll or punter expected this outcome. As Jimi Hendrix sang, “if 6 turned out to be 9” (http://www.lyricsfreak.com/j/jimi+hendrix/if+6+was+9_20071549.html), the English world has been turned upside down. Finally on this topic, the one goal England scored was on a penalty. Writers noted that England Euro Championship wins could possibly fuel the Leave campaign due to a resurgence of nationalism. While that may be the case now everyone, Leave; Remain; nonvoter; or non-football lover must now be quite depressed.
As a derivatives trader, I believed the polls, bond market estimates of such an act occurring and the betting markets: follow the money. But they – and most all of us – were wrong not willing to risk being wring and spending the $/£/ to hedge or take a position. Some were correct; George Soros while actually being long Sterling, who two decades ago benefited greatly from the Pound decline, has made a profit from other investments. Admittedly he stated for some time the risk was huge – and will be horribly bad — and it does appear he may be correct again.
As a marketing/branding person at heart, what Britain did was immeasurably worse than a New Coke or the Tylenol scare or even the current VW emissions debacle. Coke blinked and could – and quickly — brought back Old Coke. Tylenol sent us down the path to package security after the culprit was found. VW is working on its plan as we speak. But the Pandora’s Box of Brexit cannot be closed.
In my view this was totally unnecessary, but understandable because virtually NO ONE believed it would happen. Again this was a horrific miscalculation of the true mood of the people and hubris of those making political decisions.
Why is this?
- “We’re angry as hell and will not take it anymore.“ This was the famous line from the movie Network, made in 1976 and now quite properly reflects the mood of people in Western Societies. All of a sudden politicians and governments realize this. Surprise!
- Governments overreach.
- Governments seem to be largely incompetent in getting anything done and notably to drive/create/allow better economic growth.
- Governments make rules and over-regulate because that is their day job.
- Governments ALL have political agendas that reflect what they think versus what the people – even those electing them — want. Instead of Obamacare, could he have not undertaken tax reform that might have contributed to growth and his own popularity such that Democrats would have maintained the Senate and OCare could be done later?
- Political parties cannot work with each other and get anything done. In the US we yearn for the Tip O’Neil-Ronald Reagan days where they’d sit down, have a drink to hammer out a compromise.
- It’s Party against Country. Prima facie evidence: The premise of even having a Brexit vote.
- Governments are clueless.
- Governments vastly lag the marketplace in understanding, reacting to and making our lives better.
- See #1 and think about it for a long time. Then do something about it.
Next, how bad will it be? Well no one knows, but we ALL will be in for the ride. Bring a large bag for your discomfort.
How we remember it, of course, will depend as usual on the details of whatever plan is crafted and how good or how less bad it is. This will take time.
We will remember that David Cameron sealed his legacy as making possible dissolution of the United Kingdom who may compete in future sports events as England as they are were in the current Euro Football Championships. (Of course, for the short term we suspect that Wales will remain, but if Scotland and/or Northern Ireland leave, all bets are off).
We will remember Jeremy Corbyn as lacking any leadership and not assisting the Remain cause and it will likely result in his stepping down or being summarily tossed. Many voting to Leave may have changed their minds had Labour come out more passionately and directly to support remaining. Indeed as we left this morning, a number of Ministers had stepped down, called for him to do the same and the Shadow Foreign Minister sacked for publicly calling for his resignation. At last count 12 ministers had resigned and Jeremy was insisting he’d stay as leader. Back in the 70s, Mr C was a Eurosceptic and voted against the EU. (Apparently he has not changed his mind, matured or evolved with experience). But he too would not do the right thing, putting his own position and party above what was good for the UK. At the end of the day literally, both Tory and Labour leadership have been decapitated.
If I were a Scot given the previous Remain battle and Brexit, I’d want to leave now. What would have been a bad economic decision leaving a full, “healthy” UK may be different now. Of course, that depends on what kind of economic deal they can cut with the EU and what the people think; I bet I know the latter. Taking such an action will be far more challenging with oil at $30/40 versus $100 a year+ ago. We will all watch this train-wreck over the next few months.
Wither the EU? Will making life very difficult for the UK leave send a message to others contemplating the same? How does the EU make this as positive as possible, i.e., as minimally bad as possible balancing what they want the future relationship with the UK to be? How long will it take? Who will negotiate the deal as “leaders” and then which bureaucrats will do the work? (If I were currently a Brit working for the British or EU government would I want to continue?)
And now to Leave. I immediately saw an article claiming the Leave folks/leadership were already walking back the immigration reforms they said would be implemented. What else in their promises will be compromised? Who speaks for “Leave”, BoJo, Nigel, both? If I voted to Leave what exactly was I voting for if few/smaller/different policies are implemented? I would be highly furious and that would make it far worse than now. Many who voted to Leave will die before any tangible benefit is seen for them and perhaps their children.
That is truly a lose-lose proposition.
Who benefits other than those short Pound or other Index futures? Boris Johnson a primary Leave spokesperson certainly who likely will become the next Tory leader and possibly Prime Minister following his Eton and Oxford classmate. Does he really believe in Leaving or was he just another political opportunist? In February after Johnson made his speech announcing he was supporting that cause, Cameron, said in effect, what Boris supports will be what benefits Boris the most.
And the Chinese. And Putin. Both due to a less strong EU/UK/West. It does call for the US to move towards a more strident global leadership position than under the current Administration. Will Hillary take this path? Possibly? Will Trump? Gee, if he wants to neuter NATO and is urging the Japanese to develop nuclear capability, I think not.
And terrorists who have a less strong opposition.
Who are the biggest losers: the young. It used to be the young went to fight and die in battle. Nothing has changed except the nature of the fight.
Future aspects to be discussed in subsequent posts:
Personal views from conversations with British citizens
Wither Globalization?
Why all the dissatisfaction everywhere: lack of global growth and concomitant opportunities for most.
The New World Order
Will the US follow Britain down this path/Implications for the US Election