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Weekend reading: Deal or no deal we’ll do fine after Brexit says Capital Economics

Weekend reading: Deal or no deal we’ll do fine after Brexit says Capital Economics post image

What caught my eye this week.

Now we know that Russian bots were spewing nonsense about Brexit around the time of the EU Referendum, those harrowing days afterwards make a bit more sense.

Okay, so the level of involvement discovered so far seems modest. But wouldn’t it be nicer to believe that one reason most Leave voters found it so hard to articulate their reasoning was because they were native Russian speakers living in Volgograd?

Land of hope and folly

It’s no secret I think the decision to Leave was a huge mistake – especially weighed against the reasons many gave for voting that way.

Returning sole legislative authority to Parliament and reducing immigration were the only logical reasons to vote Leave. Everything else we still hear cited – inequality, the London-centric economy, globalization, the demise of ship building and mining, the bemoaning that there’s too many brown people on the High Street – won’t be solved by Brexit.

Yes, this is probably sour grapes on my part. Looking at the marvel that is the vaunted UK Parliament in action since the Referendum is almost enough to make me wish I’d voted Leave too.

How satisfying it must be to see our unshackled political leaders rally around at this time of great national need! To watch Britain bestride the European negotiations with Churchillian authority! To smirk at the perfidious and weak EU caving as predicted within mere days to our every demand!

Well no, none of that has happened. But we have had a Parliamentary sex scandal – and a nostalgic Carry On Cocking Up film is surely in the works for national release on Brexit Day.

A positive spin on Brexit

Enough of my cynicism. Food may lie rotting in the fields because immigrants are going home, banks may already be leasing office space in Frankfurt, and as a nation we may be clutching a red box containing £100 and a Tory intern’s photocopied mock-up of the new Blue British passport yet still desperately hoping the EU says ‘Deal’ – but not everyone is so gloomy.

Neil Woodford’s fund firm asked Capital Economics to produce a huge and hugely pro-Brexit piece of research entitled: Where Are We Now? and it’s a fairy tale for Brexiteers. A long one, too. It starts as an infographic but you can dig into a ton of sector-by-sector research.

I haven’t read every last page, but from what I’ve seen there isn’t a negative number inside. Except for a potential fall in net migration, of course.

To be fair Capital Economics is mostly looking at things from a ten-year view. As I’ve said before, I agree that on that sort of timescale the UK will appear to be doing okay. The economy will probably be smaller than it might have been – because free trade works – but there will be plenty of other things to blame. Both sides will probably be able to argue they were right.

But both sides won’t have been right.

Right now both sides were wrong. Remainers were wrong that the economy would crash – it hasn’t. Leavers were wrong that leaving would be a doddle – it’s a nightmare.

I hope Capital Economics has split the difference because the scenario it paints as its middle-case outcome is one I think most of us would bite the hand off a banker for right now.

From Monevator

Have you tried our new broker comparison tool? – Monevator

We now have two ways to help you to save money on platform fees – Monevator

From the archive-ator: A brief guide to the point of bonds – Monevator

News

Note: Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber.1

Household finances under strain as Nationwide warns of tough times ahead – Guardian

Chancellor urged to cut stamp duty in the Budget on Wednesday – ThisIsMoney

Mortgage costs would offset stamp duty cut, says study [Search result]FT

Homeowners with a mortgage end up with 15% lower private pensions – ThisIsMoney

Top of the market? A rediscovered Leonardo Da Vinci painting goes for $450m – BBC

Returns are almost never average – Vanguard blog

Products and services

Most banks have failed to pass on the 0.25% rate rise to their customers – ThisIsMoney

Number of untaxed vehicles in UK trebles after tax disc abolition – Guardian

Infrastructure fund investors spooked by Labour PFI plans [Search result]FT

If bitcoin were a country, its energy consumption would be 66th in the world – The Value Perspective

Criticism of index-tracking funds is ill-directed [Search result]The Economist

“I’m Hungarian and worked in the UK for eight years. Will I get a state pension or could I lose NI contributions after Brexit?”ThisIsMoney

Hargreaves Lansdown has hit the million customer mark – Hargreaves Lansdown

Comment and opinion

Saving rate and mortgage loan repayments – The Finance Buff

Every day is Black Friday for index fund investors – The Evidence-based Investor

If it doubled (quickly) then the US market might be in a bubble – The Brooklyn Investor

How to cynically raise $20 billion in the fund management business – The Reformed Broker

Saving for retirement: How much is enough? [Search result]FT

Even with low expectations, bonds still have their uses – Bloomberg

Chart crimes – The Irrelevant Investor

Dividends for life: 3 stocks you can trust [PDF]UK Value Investor

Guy Spier: How to build a career in money management [Video]YouTube

More (very lucid) thoughts on speculation versus investing – Gannon on Investing

Tesla’s truck is all about the journey – Bloomberg

Don’t worry about the flattening US yield curve [For nerds like me; you’ll need to zoom]Calafia Beach Pundit

Podcast Special

This is how a currency trader actually picks what to buy and sell [Podcast]OddLots

A selection of quality personal finance and investing podcasts – The FIREStarter

Talking of which, The Escape Artist is on the Choose FI podcast [Podcast]The Escape Artist

A chat with Robert Shiller, and various index fund matters [Podcast]Canadian Couch Potato

Meet the people who listen to podcasts at super-fast speeds – Buzzfeed

An intriguing interview with Claude Erb about markets, sequence of returns, gold, and much else [Podcast; sort of what I expect it to sound like when we pass the singularity and genius-level Artificial Intelligences appear on CNBC for a chat]Meb Faber

Off our beat

Manhattan retail: The new rust belt – Global Macro Monitor

On the (non) viability of start-up island nations [Search result]FT

Raze, rebuild, repeat: why Japan knocks down its houses after 30 years – Guardian

And finally…

“Most of the time the future is indeed like the past, and so extrapolation doesn’t do any harm. But at the important turning points, when the future stops being like the past, extrapolation fails and large amounts of money are either lost or not made.”
– Howard Marks, The Most Important Thing

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{ 54 comments… add one }
  • 1 The Investor November 17, 2017, 11:04 pm

    (Yes, these Weekend Reading link lists have become beasts again. I’m my own worst enemy! Hopefully something for everyone, anyway. Have a great weekend!)

  • 2 Mr Optimistic November 18, 2017, 7:53 am

    Radical transition is always going to be difficult and cause disruption and losses. Whether the subsequent situation is better or worse, in general, than the original condition remains to be seen, there will be winners and losers. Economic factors will force a new equilibrium, so if it becomes uneconomic to grow sprouts without subsidised cheap labour the land will be used for something else, even if the original farmer is forced off to make way for a new business model and maybe fewer workers are now employed but at higher wages, a wage that growing sprouts could sustain, hence the use of cheap labour dragged in from distant places. Of course the government could introduce other subsidies or price controls to retain the profit margin: who knows. Can’t say I am optimistic though, but it would be wrong to say it’s all to our disadvantage, though we could make it so with bad management and greatly extent the time to settle out of the transition.

  • 3 Ben November 18, 2017, 10:41 am

    Re “Homeowners with a mortgage end up with 15% lower private pensions”
    Was there a point i missed with this? Only a 15% loss sounds pretty good to me. I would expect any rent i was paying to require more than 15% of my income anyway.

  • 4 Neverland November 18, 2017, 1:29 pm

    You say the economy hasn’t crashed

    The uk hasn’t left the EU yet

    The uk economy looks pretty sickly already

    Lowest growth in OECD ex-Italy

    Out of control public and private debt levels

    Awful current account deficit

    Currency down about 20% against the dollar

    Sailing into a storm in a leaky boat rarely ends well

  • 5 Davy Down under November 18, 2017, 1:57 pm

    @neverland

    Hahaha “..record debt levels…poor
    Current account deficit…”

    Obviously decades of out of control spending on all sort of BS projects by governments were ok, but all one vote for something which has not even happened yet and brexit is the cause.

    You really are deluded.

    As you have obviously missed news story after news story with tremendous positive economic news, ill share it with you here.

    https://order-order.com/tag/despite-brexit/

  • 6 Learner November 18, 2017, 3:50 pm

    @Ben, I’m not sure either.
    Compared to people who paid cash and never had a mortgage? Well obviously the interest cost impacts savings. Compared to people who never bought a house? Sure, but they get to have a roof over their heads. 15% of average mortgage pot won’t pay for 30 years of average market rent.

  • 7 Neverland November 18, 2017, 3:54 pm

    @davy down under

    Denial is not a big river in egypt

  • 8 Dean Smith November 18, 2017, 4:51 pm

    While I’m on the fence about Brexit, (I am not convinced that its effects will be as big as people say, either way), commissioning Roger Bootle’s Capital Economics to do the report seems rather like asking Richard Dawkins to weigh up the pros and cons of religion. Bootle is one of the “Economists for Free Trade” group (née Economists for Brexit.)

  • 9 Wephway November 18, 2017, 6:34 pm

    @Davy Down under

    That website is hopelessly biased towards the Tories/The Sun/Daily Fail. You can obviously cherry pick the news if you want and say that everything is going great, but if you actually look at the main statistics – growth, inflation, productivity, sterling’s value – they all point the wrong way since the Brexit vote.

    And we haven’t even left the EU yet – if we end up with a no deal Brexit then I think this period we’re in now is just the (relative) calm before the storm.

    In other news this week I saw Grimsby want ‘free port’ status – despite voting 70% to leave the EU they now want to be exempt from paying tariffs – the rest of the UK will still have to pay of course.

  • 10 hosimpson November 18, 2017, 7:30 pm

    I know little to nothing about construction and life sciences and such, but I read the section on financial services. It’s all based on assumptions that are bullshit, bullshit and lies. Also, many of them are mutually exclusive.
    Here’s just one example:
    ” Brexit will open the possibility for Britain to gain a regulatory advantage over continental rivals and possibly to negotiate trade deals that are more inclusive of, and favourable towards, financial services.”
    while at the same time…
    “British firms may be granted equivalence status, allowing them to continue as before”
    If we gain a “regulatory advantage”, well then there’s no fucking equivalence, ok?
    oh, and also (wait for it)…
    “[British firms will be able to] set up a subsidiary in a member state while still carrying out the bulk of their activities in Britain”
    Well if we do that, then there’s no “regulatory advantage”, no “equivalence” and, we’ll have to duplicate some of the most expensive overheads, such as Exec, because we’ll need two boards, and the majority (more than 50%) of the directors at the EU sub will have to be EU nationals, also IT, because we’ll be operating in two different reg environments and the systems will have to cope with both, also legal, compliance, and probably some accounting. On top of that the EU sub will need to have at least some front office, because there’s no regulator in the developed world that will allow an FS firm to set up an operating sub on their turf with an “outsourced” front office. And the sub will have to pay tax in whatever jurisdiction it is registered.
    But the real cherry on top is the tiny little matter of capital. Who the fuck is going to capitalise this whole thing? All that this so-called research says on the matter of capital is that if an FS firm, after losing its passport, goes down the EU sub route, then it “may require separate capitalisation” the impact of which would be to “increase costs”. This is a joke, right? First, there’s no fucking “may” about it. And second, before we talk about the cost, let’s consider what happens if you haven’t got spare capital lying around collecting dust. If you haven’t got it, and can’t raise it (perhaps because you’ve already scraped whatever barrels were available to recapitalise the shop after 2008/9), then you can’t do it. And the effect of devaluing the GBP by 22% over the last two years (from EUR 1.43 in Nov ’15 to EUR 1.12 now) is that any capital that you did have lying around is now worth 22% less in the EU.

    I can’t. Really, I should to stop reading blog posts about Brexit – it’s bad for both my heart and my liver.

  • 11 Allan November 18, 2017, 8:04 pm

    @ TI
    I have just invested 20K in tracker funds in an IWeb ISA as per the suggestions of your blog (1/3 emerging markets, 1/3 global, 1/3 uk)
    I am already down 300£, I know I am supposed to stay as ice-cold as an experienced passive investor and think about the long term but with all the additional uncertainty due to Brexit, I keep on asking myself, should I have waited for the Brexit to be sorted and tried to time the market? Do you think the UK economy could kinda crash if no deal is found with the EU?

    Also I have a suggestion: one commentator wrote about trying to mimic the Vanguard Lifestyle but with cheaper funds, would you be interested in having a go? your long term passive portfolio project contains too many vanguard funds to my taste (I think you wrote elsewhere they were not really covered by the FSCS but by the irish equivalent)

    PS: I m no russian bot

  • 12 The Rhino November 18, 2017, 8:56 pm

    @allan

    Your down 1.5%. If that makes you feel ill there’s a strong argument you shouldn’t be 100% in equities?

  • 13 xeny November 18, 2017, 10:07 pm

    @Allan

    If you’re conerned about Brexit, why hold anything in the UK? Also to be blunt 1.5% in a short period is essentially “noise” -it’s a fact of life of equity investing.

  • 14 Davy Down under November 18, 2017, 10:23 pm

    Wephway

    Of course it’s biased, however that does not change the fact that it’s referring to news stories in all range of sources and the stories themselves show the positive side of life after brexit.

    To blindly assume that current U.K. deficits are the result of brexit is simply wrong. That’s all I was pointing out.

  • 15 The Rhino November 18, 2017, 10:31 pm

    @xeny

    good point.

    I’ve assumed Allan is 100% in equities and the 20k is his whole portfolio.

    I’ve got a far less aggressive portfolio than that. Looking at my unitised monthly returns +-1.5% is commonplace. So I wouldn’t worry. Especially if this marks the start of a lengthy accumulation phase..

  • 16 Allan November 19, 2017, 12:17 am

    Sorry for the confusion.
    I also have 120K in a work pension which is 60% equity and 40% bond and my mortgage is finished in a year.
    That is why I thought I could go for 100% equity in my new ISA.
    I am really new to investment.

  • 17 xeny November 19, 2017, 7:26 am

    You can go for 100% equity – depending on your time horizon it may well be the perfectly rational thing to do. It’s more that it is the nature of investment values to vary up and down.

    If they didn’t have a degree of uncertainty/volatility/risk, why would anyone use savings accounts?

  • 18 The Borderer November 19, 2017, 9:13 am

    @Hosimpson. Capital Economics do appear a little ‘conflated’ regarding Financial Services, as you say, but perhaps even more confused regarding Construction: “…With an extremely small traded component, construction is fairly insulated from changes in the trading relationship between Britain and the EU…”

    From Table 15, Monthly Statistics of Building Materials and Components – February 2017 we see:-
    £ Million (% of total trade in italics)
    All Building Materials & Components
    EU Imports – £9,554 m 62%
    Non-EU Imports – £5,944 m 38%
    EU Exports – £3,869 60%
    Non-EU Exports – £2,577 40%

    A little concerning that they are so footloose and fancy free with facts, I think.

  • 19 The Rhino November 19, 2017, 9:20 am

    In that case you could create a spreadsheet that tracks net worth including your house, pension and ISA. Then worry about how that fluctuates. The house and pension should bring the % monthly movements right down. Different frame of reference to help you sleep at night?

  • 20 Barn Owl November 19, 2017, 9:40 am

    @TI To summarise your post, both the brexit and remain camp were wrong, the brexit decision was driven by Russian bots, the government is in disarray and we are heading for a nightmare brexit. How is this helpful? I would prefer a discussion on Brexit that actually focusses on the issues and what can be done about them.

  • 21 Neverland November 19, 2017, 10:26 am

    @barn owl

    That’s actually nine words:

    Move all possible assets out of UK and sterling

    …apart from Ireland and a few tax havens no other countries will be that much affected by Brexit

  • 22 The Rhino November 19, 2017, 10:35 am

    @BO – there is a general theme to the Monevator brexit posts and that isn’t a pragmatic ‘whats to be done about it?’ angle.

    TI is the proverbial moth to the brexit candle. But that’s all good if it is in some way cathartic.

    I did read that Denmark will be happy to have us if we fancy jumping ship so potential options and all that?

  • 23 The Investor November 19, 2017, 11:16 am

    we are heading for a nightmare brexit.

    This conclusion let’s down your summary of my views @Barn Owl. 🙂

    This is what I wrote:

    As I’ve said before, I agree that on that sort of timescale the UK will appear to be doing okay. The economy will probably be smaller than it might have been – because free trade works – but there will be plenty of other things to blame.

    I’ve said this many times. How is this a “Brexit nightmare”?

    People don’t seem to read what is written, which is why I repeat myself — unlike readers I’ll still be here in five years, and I want to be hung for the right sheep… 😉

    Again, my view:

    A hard Brexit would be very likely to lurch us into recession (unless perhaps it also ushered in Corbyn and he turned on the spending spigots which might temporarily juice the economy).

    But beyond that I don’t think we’re not going to be in a “Brexit nightmare”. Once any shock is over, I think we’ll either:

    (a) grow more slowly indefinitely (I’d guess for 10-20 years) until the economy re-orientates and we finally perhaps have equivalent trading advantages with the world

    (b) “do a Singapore” and growth will bounce back far sooner and perhaps even in 5-10 years stronger, but this will be at the expense of incompatible aspects of our current state (we’d have to curb relatively high taxes, relatively high welfare, perhaps even some social freedoms etc).

    Scenario (a) doesn’t sound terrible, but remember compound interest. If I’m right the economy will be smaller for those sub-par two decades, and hence we’ll be structurally less well off forever than we would have been.

    Think Italy versus Germany (just in terms of dynamism, not saying Brexit=become Italy). Still plenty of rich Italians, still an economy that generally grows, but Germany is the stronger economy, has a generally higher standard of living (excluding the weather!) etc.

    Scenario (b) probably doesn’t sound so terrible to many either, especially the more right-leaning Tory types. I have some sympathy with the theory of it, at least. But it would change the UK, and it would be the opposite of what many Brexit voters voted for.

    There’s also a (c) I suppose, which is as I say Corbyn gets in on a wave of disgruntlement and we try the 70s again for a bit. Which would at least have a poetic justice.

    And in reality it will be (d) or (e) etc. I am not claiming some great perfect prescience, just my point of view.

    So I stress again, because even regulars like @Rhino don’t seem to have got it — I am not claiming “nightmare”. I am predicting slightly poorer, forever (which will add up but won’t be ruinous) or more Singapore, which economically could be good but will alter our society for good or ill.

    Life will go on either way.

    It’s also interesting to think about all the more important things we could be getting on with if the entire apparatus of state and media weren’t devoted to this shambles of a white elephant.

    It still bemuses me that readers were saying after a fortnight “let it go, you lost”. It was the clearest proof you could want that most had little idea of politics, or the complexity of what their vote had ushered in. Brexit will still be the first/second news item agenda in 2-3 years, and probably still in the news in five years. 😐

    And all for very little, compared to the real issues (environmental collapse, globalization and inequality caused by structural network effects, AI and robots, transitioning to a world more driven by the economies of the East etc).

  • 24 old_eyes November 19, 2017, 1:55 pm

    I went straight for the trade section to see if it made sense. It shows a severe attack of rose-tinted spectacles. Everything will be fine providing we get a trade deal with EU more or less the same as now, all the EU trade deals we are party to get grandfathered in so we end up on the same footing with the major economies, we take the opportunity to strike new deals that are more advantageous than where we are now ‘cos everyone wants to trade with us on our terms.

    That is not analysis, that is seeking evidence to support the position you have already reached.

    It might turn out that way of course, but I ain’t holding my breath.

  • 25 Barn Owl November 19, 2017, 2:26 pm

    @TI Thanks for the clarification and summary of your views.
    Regarding reading what you have written how should we interpret the sentence:
    “Leavers were wrong that leaving would be a doddle – it’s a nightmare.”
    I don’t want to nit pick. This is an excellent blog and I have learnt a lot from it – thanks so much to you and @TA for that.

    I voted remain and I agree that Brexit is an unnecessary distraction for very little benefit. I still hope the process might fall apart somehow. In any event we will lose years solving issues caused by Brexit that really didn’t need to arise. It’s not just government, I spent time last week trying to recruit an excellent candidate from mainland Europe who may well not make the move due to Brexit fears. That’s not good.

  • 26 The Investor November 19, 2017, 2:41 pm

    @Barn Owl — Ah, fair enough. I meant the process of leaving / disentangling ourselves from existing arrangements but I can see why it could be read as life after Brexit too.

  • 27 The Rhino November 19, 2017, 4:20 pm

    Just been reading this:

    https://www.moneysavingexpert.com/savings/flexible-ISAs

    Does anyone know which platforms offer flexible S&S ISAs?

    I can envisage certain scenarios where that functionality could be *extremely* valuable.

    I half remember Ermine taking about this a while back..

  • 28 The Rhino November 19, 2017, 4:32 pm

    At the risk of committing the faux pas of the double post, a little digging has found that the share centre offer it as default. Haven’t found any others yet..

  • 29 xeny November 19, 2017, 4:42 pm
  • 30 FI Warrior November 19, 2017, 7:04 pm

    @hosimpson: since it’s a laugh-or-cry situation, keep updated on the leaderships’ moves via the Guardian’s John Crace (author of I, Maybot) articles. Since they change regularly, it breaks the monotony of this groundhog day, limbo situation of hurtling towards the cliff edge with no deal, so reassures that in one way time is not standing still. But, I’d also hone your financial parachute for when we go over; I for one am a lot heavier than Wiley Coyote.

  • 31 The Rhino November 19, 2017, 7:31 pm

    @TI – well now you put it like that I think I get it. Said no one in an internet forum ever.

    I like your brexit articles. They’re entertaining and always generate good backlash.

    I would be interested to know if MV readers have made brexit specific changes to their portfolios. I personally haven’t.

  • 32 Matt November 19, 2017, 7:31 pm

    Well, there will be winners and losers from Brexit. And as we all know from blog posts on behavioural economics, the losers will notice much more than the winners! My pick for winners will be UK manufacturing, particularly the high end stuff. The factories I have anything to do with (aerospace, luxury automotive) can’t keep up with demand. We’ve increased production since the vote, bought new equipment and taken on more staff.

  • 33 Matt November 19, 2017, 7:35 pm

    The only changes I made were to rebalance my portfolio! I switched from gold to UK smaller companies immediately after the vote and then had to sell some of the UK smaller companies a year later after they went up in value. All as per Monevator’s advice, of course!

  • 34 Grislybear November 19, 2017, 9:44 pm

    @The Rhino regarding making Brexit specific changes to your portfolio you could take the advice of the Chief Global Strategic for Charles Stanley a Mr John Redwood and sell all your UK etfs before the economy hits the brakes and invest the proceeds in another country. https://www.forbes.com/sites/francescoppola/2017/11/12/british-lawmaker-advises-investors-to-take-their-money-out-of-the-uk/#6b3d14134c1e

  • 35 hosimpson November 19, 2017, 10:50 pm

    @The Borderer & FI Warrior – indeed, it would be funny if it weren’t so pathetic.
    @The Rhino – I have re-interpreted my bond allocation from “UK gov’t debt” to “AAA-AA rated gov’t debt” (SAAA), which includes the UK, for now. The absolute value of my fixed income allocation is pretty small though. As for shares, I haven’t sold any of my UK holdings, but then again, I haven’t specifically bought any since the referendum, either. Have been stashing money into VWRL; it includes a relatively small UK element, which is fine by me.

  • 36 The Rhino November 19, 2017, 11:01 pm

    Salient advice GB

    I’ll be on to my broker in the morning

  • 37 The Borderer November 19, 2017, 11:47 pm

    @The Rhino
    Now 18% GB – but this is mainly comprised of HY (NG, LLOY).
    And BRSC which I don’t have the courage to sell (yes I know before everyone tut tuts…)

  • 38 FI Warrior November 19, 2017, 11:51 pm

    @ hosimpson: disturbingly, maybe autocratic regimes have a good point, in that even a real democracy would still be limited by the wisdom of the crowd. And with the clever use by elites, of referenda, it’s clear that even raising the level of education and forcibly providing it free for generations hasn’t improved civilizational outcomes since the parable of Jesus vs Barabus.

    Still, a small consolation (if you enjoy morbid humour) perhaps is that the UK could still best the US at something, recovering its former hegemony for a short while, by seizing the Darwin award offa dem by our robot brexiting our economy below the waterline faster than their sunburned baboon can torpedo theirs in tax-back for those of their rich who still don’t know how to hide money in paradise.

    In this patriotic Ealing comedy, we just need a G. W. Bush sub to smirk to the camera and deliver the line ”ain’t we Lucky the Germans don’t have a word for Shadenfreude”. I have my money on The BJ, our goodwill emissary for the world. Straight outta ‘How to make friends and influence people’, I reckon he can always offend people others couldn’t reach.

  • 39 Marked November 20, 2017, 10:23 am

    Great comments.
    I’m looking forward to the hard brexit analysis that the Right Honourable (really?) MP David Davies is trying to delay. Why would you delay it? In my view there is only one reason to delay it being publicly available – it weakens your negotiating hand with the EU. And if that is the reason, then the analysis can’t be as rose tinted as the Brexit spouting MP’s think/thought.

    Either way, let’s just look at the simple logic. As a business you’re not going to invest in the UK until the path forward is known – that would be any investment. As a small investor you’d not (actively anyway) invest in something where the future had unanswered questions. Why would you do it as a business (unless completely UK centric like holiday homes in Cornwall that appear to be going up 20% per year – sadly – I like Cornwall!!)?

    Everyone in this country has lost money since June 23rd 2016 due to the dollar being the currency of choice for oil. Those £1.20 prices you see now would be £1.10 without the currency loss. Ironically the people that have done well out of Brexit are those weighted to foreign shares or indexes – no one else really. A small % of the population thus far have benefited from Brexit.

    Meanwhile both sides of the House of Commons are showing themselves to be unable to handle the complexities of divorce in an effective manner (I’m trying to be polite).

  • 40 theFIREstarter November 20, 2017, 10:27 am

    Thanks for the link through as usual!

    And for creating the automatic broker comparison tool, that thing is absolutely amazing!!!!

    Loving the bit about the podfasters… I’ve tried listening at 1.5x before and it was really quite manageable, so might give 2x a go and double my “productivity”. I need to find an app that will let me do downloaded stuff at higher speed as I usually always download mine first via wifi to save my data allowance 🙂

    Cheers

  • 41 Marked November 20, 2017, 10:48 am

    @The Rhino

    Changes in portfolio after Brexit? Nope – but mainly because it’s passive spread around the globe in world trackers – although I don’t like the fact USA is 30% of the fund from an exposure perspective. That said I can’t see Trump affecting corporate America, just any morals that nation may have.
    That said my kids JISA’s are with a company that is costly for index funds such as VRWL and may move those to another provider.

  • 42 ermine November 20, 2017, 10:59 am

    @TheRhino Charles Stanley’s ISA most definitely is flexible, I have battle tested it – the money I took out to float the house purchase is back there and doing regular purchases, and I still have £20k ISA allowance left for TY 17/18. I will probably use that with iWeb, to break up my ISA provider exposure. I did ask CS before this stunt if that would be okay and they agreed than I could take money out of the flexible ISA, put it back and allocate this year’s allowance to another provider as long as I did not pay a single penny in over the amount I took out.

    Flexible ISAs or not could be a worthwhile addition to the broker comparison, the only other one to CS I know of is the share centre. For people who don’t have an income, I think having part of your ISA estate in a flexible provider, probably based on index funds is a good idea.

  • 43 The Rhino November 20, 2017, 11:55 am

    @ermine – potential float for future house purchase is exactly same use case I had in mind. Thanks for the details.

    Another interesting link:

    http://www.telegraph.co.uk/investing/funds/exactly-happens-invest-money-tracker-fund/

    Loving the funds under management per employee at vanguard. Wonder if any of them ever had an office space moment?

  • 44 ermine November 20, 2017, 12:27 pm

    @The Rhino apparently IG Index is another big flexible ISA provider I missed. Surprised how few of them are flexible, though – some of the big platforms like HL and others huff and puff about you shouldn’t really be doing that with your S&S ISA. I kind of see their point, and elective purchases like house purchases are probably the most relevant for that sort of borrowing. Index funds don’t usually skyrocket, it’s more a slow and steady grind up over time, whereas even indexes can plummet rapidly. So it’s fair enough to borrow from your ISA at a time of your choosing, whereas if you suddenly need a load of wedge at a market crash then you will likely hurt your future self rather badly.

    Having said that I was out of the market between April and say October and the index fund I used rose about 5% between then, so while I am my own lender of last resort the blighter charged about 10% p.a for the duration of the loan! Having said that, I shouldn’t bee too hard on my lender – arranging a bridging loan can see you hit with up front costs of 2% and 1% a month. So five months of that would have been 7%. Plus they probably wouldn’t give me one, because the last payslip I can show them is from 2012 😉

  • 45 FlyByNight November 20, 2017, 1:44 pm

    I wasn’t planning on changing my portfolio because of Brexit…but on reading some of the comments – I’d be interested on thoughts on Bonds. My entire allocation is in UK Government Bonds, while my equity allocation is diversified globally.

    I’m wondering whether I should be diversifying the bond element of my portfolio… any thoughts / suggestions would be appreciated…

  • 46 AncientI November 20, 2017, 2:10 pm

    So investing in the UK is rather bleak at the moment? Looking at tracker funds the US and japan stock markets have done much better than UK over last 5 year and that was before brexit so I think its only going to get worse for the UK?

    I think under Trump the US is going to continue to rally heavily.

  • 47 The Rhino November 20, 2017, 4:22 pm

    @ermine – the calculation spinning round in my head was the additional tax I would have to pay on income generated over the decade+ it would take me to get the funds back into an ISA and that is what the flexible ISA would do away with. I need to knock up a spreadsheet to model it really.

    But the comparison with a bridging loan is another important consideration for sure but the problem you have there is just a time out of the market issue which is the same for a flexible or a normal ISA.

    In a perfect world you pull the stunt in a brutal bear market and make a killing when you rebuy a few months down the line.

    I can guarantee that won’t happen though due to Murphy’s law

    @FS – re bond allocation, yes hosimpsons post made me think about that too. As ever, when I’m not too sure I will employ the mantra ‘don’t just do something – sit there..’. The majority of my bond holdings are tied up inside life strategy funds and i think they’re reasonably diverse but need to double check

    @AI – insightful analysis..

  • 48 The Investor November 21, 2017, 12:46 am

    Careful making hasty judgements regarding UK equity exposure. Listed UK equity is not a proxy for the UK economy. 🙂

    There’s already been at least three big swings regarding Brexit and UK shares — first a huge boom in many FTSE 100 companies and other multinationals (because of their foreign earning exposure and the boost to profits when translated back into the weak pound) and a coincident knock-down in the valuations of those with a lot of UK exposure who can’t escape (e.g. Lloyds, the London focussed REITs). And then in 2017 there’s been a boom in many small cap UK shares (small cap UK investment trusts are up 20% or more this year!) partly again because of the foreign exposure for those that are exporters, partly because they were beaten down so much in 2016, and partly because the expected post-Brexit vote recession never happened.

    To repeat the same old message: The market is discounting all this stuff day by day. I’ve got nothing against anyone choosing to watch the markets, do their valuations, take a position, be active if you want to. That’s what I do. 🙂 But I don’t recommend it for most.

    In particular I’d strongly suggest that if you’re a passive investor (or an active investor who isn’t intimately acquainted with all these sorts of moves and many more) then you’re better off not trying to make such calls and rather diversifying widely and getting on with life.

    That said perhaps one exception I’d make currently is to hedge out some foreign equity exposure by using currency-hedged ETFs, as I discussed back at the start of the year: http://monevator.com/currency-hedged-etfs/

    Normally the case for such hedging is much more compelling for global bonds than for equities, for reasons I need to get to in a follow up post.

    But with the pound still so weak, if you’re running a diversified passive portfolio and a substantial portion of your wealth is in global equities — and hence a substantial portion of your wealth is effectively in a foreign currency — I think reducing that foreign currency exposure by 15-30% say, with the pound still very weak, using hedged ETFs, is a defensible defensive response to try to dampen volatility and so forth.

  • 49 The Rhino November 21, 2017, 9:10 am

    @TI – slightly more insightful analysis

  • 50 Malcolm Beaton November 21, 2017, 10:12 am

    Hi All
    Is this the Trump/Brexit effect now come to Germany? What is a long term investor to do?
    Get globally diversified in low cost index trackers-bonds and equities (Bonds hedged preferably) and hang on for the ride?
    Plus make sure you have an Asset Allocation you can live with!
    I am off out to get a life
    xxd09

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