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Weekend reading: Bored of Brexit? It’s only just begun

Weekend reading

Good reads from around the Web.

I am not going to waffle on for 5,000 words about Brexit today. Hallelujah! Even those of you who liked my articles (or who made them among the most shared we’ve ever published) deserve a breather. And the rest of you are due some respite.

But Brexit isn’t going anywhere, here or elsewhere. The potential implications are massive, the worst dire. Let’s hope we get the best.

Either way, the vote has exposed deep economic tensions in the UK that have been bubbling away for years.

A member of the FI London Facebook group kindly flagged up an old post of mine from 2012, in which I fretted:

I am sure something big is happening, and that people’s lack of faith in the economic system is more dangerous than just sour grapes in a downturn, but I struggle to say why.

Well, here we are.

You might have voted Leave for reasons of sovereignty, but for many voters and analysts, it’s the economy, stupid.

Financialisation and you

One thought-provoking article from Goldsmith’s PERC unit tied the Leave win to the rise of financialisation1 over the past 40 years.

This could explain the seemingly diametrically opposed circumstances of two big groups of Leave voters – and why one lot gets so angry if they think they’re being mistaken for the other.

As the PERC author writes:

While the underlying inequalities wrought by finance may not fall neatly into binary oppositions, they seem to have influenced the politics of Remain vs Leave in certain ways.

Leave voters consisted roughly of those who have already accumulated assets over their lives plus those who don’t feel they ever had any chance of doing so.

Remain voters consisted of those who still feel (for whatever reason) that they could make financialisation work for them, either because they’re young or because they’re rich and could become more so.

How will these tensions be resolved?

Things can only get different

Nobody knows what’s coming next. At the least a recession is probably putting on its going-out frock.

If that’s all we get: result.

As Kazuo Ishigaru argues below, almost anything might now happen – and that’s a distribution with a lot of nasty fat tails.

Enjoy the weekend (and well done Wales!)

Post-Brexit quarantine warehouse

  • Goodbye to all that – Bloomberg
  • A note to my friends who voted Leave – Jeff Lynn
  • Brexit tears hole in UK economy plans [Search result]FT
  • Britain’s flight signals end of optimism – New York Times
  • Kazuo Ishiguro’s fears for Britain after Brexit [Search result]FT
  • Tim Hartford fact checks Brexit, sounds despairing – Acast
  • We are the 48 and we want our country back [Search result]FT
  • Culturally constructed ignorance wins the day – Bloomberg
  • Brexit voters are not thick, not racist, just poor – The Spectator
  • How much does the EU need us? We’ll find out – Simon Lambert
  • The possibility of re-invention after Brexit – Stratechery
  • How people in the valleys feel after voting Leave – Wales Online
  • Professor A.C. Grayling’s letter to all 650 MPs – N.C.H.
  • Colossal current account deficit promises much weaker pound – P.S.L.
  • BOE’s Mark Carney says rate cut likely – Guardian
  • Don’t panic – yet. Pension funds rise after surprise result – Guardian
  • Those stock market rises ain’t real, guys – Simple Living in Suffolk
  • Brexitland vs Londonia – The Economist
  • London property deals worth £650m collapse [Search result]FT
  • Merry S-W: Positives within Brexit negativity [Search result]FT
  • Why did bank shares fall so far after Brexit? – ThisIsMoney
  • London bankers face Brexit choice: Lobby or leave – Reuters
  • Brexit and the City: Europe plots a bank heist [Search result]FT
  • More on banks: From folly to fragmentation  – The Economist
  • The Brexit affect: Signals amid the noise – Musings on Markets
  • Police log five-fold increase in hate crimes after Leave win – Guardian
  • The inevitable Hitler parody video – YouTube

From the blogs

Making good use of the things that we find…

Passive investing

Active investing

Other articles

Product of the week: With the plunging pound decimating holiday budgets, avoiding high fees when you withdraw foreign currency is even more worthwhile. ThisIsMoney rounds up the best debit and credit cards to help contain your costs.

Mainstream media money

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 of that site.2

Passive investing

  • Crisis? The best thing to do is to keep trudging along – Morningstar

Active investing

  • John Lee: Mortified, I shall keep calm and carry on [Search result]FT
  • The contrarian case for Tesla merging with Solar City – Vox
  • There’s an exodus from hedge fund-of-funds – CIO

A word from a broker

Other stuff worth reading

  • We’ve probably reached peak pensioner – Guardian
  • We’d save £20,000 in stamp duty by getting divorced – Telegraph
  • The outlook for the property market – Telegraph
  • How Amazon Inc is eating downtown Seattle – Bloomberg

Book of the week: Exiting from the EU will not enable Leave’s army of disgruntled white collar workers to return to the 1960s. Automation and AI is set to reshape our society anyway, argues Jerry Kaplan in Humans Need Not Apply.

Like these links? Subscribe to get them every week!

  1. Basically seeing everything from jobs to homes to health through the prism of economic return. []
  2. Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. []

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{ 82 comments… add one }
  • 51 Nikolay July 3, 2016, 10:14 pm

    The referendum exposed inherent faults of the UK constitutional setup (or lack thereof). To start with, the UK is a quasi-federal country but the relationship between the central government and the federal units is not spelled out. In a normal federation the upper chamber of the federal parliament would represent the members of the federation (in UK’s case this would be England, Wales, Scotland and NI). Any change in the constitution or any treaty with foreign country would require a majority of the federal units to agree to it. In this case 2 of the 4 federal units are adamantly against this constitutional change. In a normal federation this would be the end of the story. In fact, some federations require supermajority (in the US constitutional changes require 2/3 majority of the states). The Lisbon treaty of the EU stipulates a 55% majority of the countries AND 65% majority of the population.

    Using a simple majority as is the case with the referendum means that a populous country like England can dictate its own terms on the smaller partners in the union. England is hardly unique in imposing an unbalanced union on its neighbours. In Europe there were many other unbalanced federations where one more populous country was, essentially, dictating what happens in the union – Czechoslovakia, Yugoslavia and the former Soviet Union come to mind.

    It is the discomfort of such asymmetrical unions which makes the EU appealing to many small nations in Europe. Montenegro voted to secede from Yugoslavia (by the way, by stipulating a supermajority of 55%) but is more than willing to join the EU. The same applies to other small countries which were previously in an unbalanced federation – Slovakia, the Baltic countries, the other ex-Yugoslav countries. In this context the Scottish preference for staying in the EU can easily be explained as an alternative (or counterweight) to the unbalanced and, ultimately, unjust union with England.

    There was a lot of gloating among some in the Brexit camp that UK’s leaving might be the death knell of the EU. What many don’t realise is that the EU existed for nearly 20 years before the UK joined (in fact it was the UK which was begging to get in for about a decade with France blocking UK’s application as de Gaulle was suspecting lack of commitment to an “ever closer union”. Turns out he was right). Thus, far from being the death knell of the EU Brexit might be, actually, the death knell of the UK. The lack of balance in the UK’s constitutional setup was made painfully obvious to everyone, not just to the Scottish electorate. So the UK would either have to – quickly – address this shortcoming (and subject major constitutional changes like Brexit to an approval by a majority of the constituent countries) or this will be its end.

    Unfortunately, the can has been kicked for too long – for such drastic constitutional change to happen the issue of the English parliament needs to be addressed. A federal upper chamber of the parliament in London would need to be created, too (perhaps abolishing in the process the unelected House of Lords). In brief, nothing short of a constitutional revolution would need to happen. I don’t believe this can happen in the current political environment. The two major political parties are engrossed in infighting and backstabbing. I can’t see anyone who would be in the position to champion such a radical constitutional change. Thus, I’m afraid, the most significant result from the referendum would be the end of the UK.

  • 52 Paul July 4, 2016, 1:58 am

    This is a list of some good things that the Brexit vote has given us so far:

    An increase in my wealth (FTSE 100 shares)
    A long overdue weaker pound that makes £ assets more attractive to foreign investors and boosts the competitiveness of British exporters.
    A promise of fiscal easing by the UK government to support economic growth
    A promise of Monetary easing by the Bank of England to support lending and boost stock prices.
    Early indications of important international trade partners wanting to arrange free trade agreements with post-Brexit UK
    A chance for British people to vote for and vote out the people who make laws that effect British people (wow imagine that).

    I guessed that all of these things would happen if we voted to leave the EU and I welcome them.

    Clearly the Remainers passionately disagree with us leaving the EU but it would be decent of them to at least recognise that there was a rational and progressive case for voting Leave even if this case relied on optimistic assumptions. Project Fear and Project Smear didn’t work. The demonisation of Leave voters as racist thickos whose votes can be ignored is symptomatic of specious groupthink in my opinion.

  • 53 Neverland July 4, 2016, 9:09 am


    Unless your total wealth, measured in sterling, has gone up by more than about 5-7% (a rough estimate of the effect of the pound’s fall on medium term inflation) your wealth has actually gone down

    On paper I’m c. £150k richer than I was before the referendum and I’m very sure I’m really poorer

    The leave voters expressing their views on the comments of this site aren’t exactly bowling me over with the brilliance of their insights…

  • 54 The Investor July 4, 2016, 9:50 am

    @Neverland — Curious and for clarity, when you say “it’s not too late to move assets out of the UK” are you referring to buying/owning UK-listed foreign assets (e.g. an emerging markets tracker fund) or are you thinking Swiss chalets, US rentals, gold in Japanese vaults etc (or something you feel more practical).

  • 55 Neverland July 4, 2016, 9:51 am

    Majoritarianism (as a theory), similar to democracy, has often been used as a pretext by sizable or aggressive minorities to politically oppress other smaller (or civically inactive) minorities, or even sometimes a civically inactive majority (see Richard Nixon’s reference to the “Silent Majority” that he asserted supported his policies).


  • 56 Neverland July 4, 2016, 10:45 am


    No I’m talking about moving out of UK focused stocks, UK bonds and Sterling cash deposits

    Unfortunately being British passport holders and having a micro-business here, the Neverland family is kind of stuck in the UK and very exposed to what is looking very ugly in my opinion at least

    When you live in a country and earn there you are hugely exposed to a political catastrophe in that country

    I do genuinely regard Brexit as a potential political catastrophe

    The form of catastrophe will be wealth withering rather than life threatening, so personally I won’t be stocking up on shotgun shells or mini-gold bars from the post office

    Having significant investments overseas during a political catastrophe in your home country help, but they won’t reduce the pain that much

    In the land of the blind, the one eyed man is king…but he still has **** all depth perception

  • 57 The Investor July 4, 2016, 11:30 am

    Thanks for clarifying, for once we’re in close agreement. I’ve never been less exposed to UK economy. A chunk of this repositioning is from post-Brexit result firefighting, sadly, but you can’t win them all.

  • 58 Neverland July 4, 2016, 1:24 pm


    Chin-up. You may get that 2-bedroom palace in Shepherds Bush when the fat lady sings

  • 59 magneto July 4, 2016, 3:08 pm

    Interesting to see the debate now turning more to investment issues, and in particular whether we might all be underweight International?

    Elsewhere have noted others actively buying non-UK in anticipation of a better tomorrow thereby.
    While they may be heading in the right direction long-term, prices were more in their favour a few weeks back!
    Today a 10ish percent premium has been added!
    That hardly makes them more attractive price-wise!

    We can’t help peering into an opaque future and anticipating trends.
    This investor is only too guilty in this respect.

    But by forcing ourselves rightly or wrongly to focus on today’s pricing in £Sterling, we continue to reluctantly part-top-slice International positions again this week, thus allowing said International positions to apparently grow in £Sterling, while yet skimming off some of the illusory £Sterling gains..

    Now what will be interesting is to watch whether £Sterling mean reverts.
    Hardly likely it would seem!
    Carney and Osborne doing their best knowingly or unwittingly to talk £Sterling down.

    Eyeballing £/$ charts show some mean reversion over the mid-term, but a pronounced down trend over extensive decades. We discussed this earlier in another thread, remembering that in 1900 a Pound Sterling was worth in excess of $4.00 !

  • 60 Neverland July 4, 2016, 4:02 pm


    When sorrows come, they come not in single spies. But in battalions

  • 61 Tyro July 4, 2016, 7:35 pm

    @Paul (and FYI Northern Leaver)
    “A chance for British people to vote for and vote out the people who make laws that effect British people (wow imagine that).”

    Nothing has depressed me more about this whole farce than the people who claim we are getting democracy and sovereignty back but couldn’t in a month of Sundays describe the EU’s political system and the processes of decision-making within it – which means they’re not in a position to identify whether, and in which respects, it is undemocratic etc. So this may prove enlightening:

    1. The body which has the supreme authority for making laws in the EU is the Council of Ministers, which is composed of all of the ministers in the governments of the member states. (Obviously they don’t sit all together – there would be hundreds of them in the room – so they meet in different formations as functional committees, e.g. the environment ministers meet to make environmental laws, the finance ministers meet on financial matters, etc.) Yes, UK government ministers are sitting with their counterparts in Brussels, making EU laws, throughout the year.
    2. Anything too ‘political’ to be decided by government ministers meeting in this way is kicked up to the formation that brings together the prime ministers (or presidents, depending on each state’s internal arrangement of roles), and this formation of the Council of Ministers has its own name – the European Council. This body includes the UK PM and when it decides an EU law then the UK PM has participated in making it.
    2. The average length of time it takes for a law to be made from its first proposal is around two years (although this can vary widely, so that some take much longer, the procedure doesn’t allow for them to take very short periods of time).
    3. During this time it will go through various stages of development and re-drafting on the basis of submissions made and amendments sought from a variety of actors, including national parliaments, who have various means of throwing a spanner in the works if there is something they really object to.
    3. The UK House of Commons has a lamentable record when it comes to exercising its right to consider and participate in the making of EU law. Hardly any MPs ever turn up to debates, when they are held, and many of them have not bothered to grasp even the basics of the EU political process so are oblivious to the powers they could wield, if they chose, to affect EU laws. (The House of Lords, by contrast, has a very highly-regarded committee that produces reports that are influential throughout the EU.)
    4. During the years in which a law is being crafted working groups of relevant experts from all member states, including the UK, drawn from industry bodies, trades unions, consumer groups, academia and so on get to have their input, sometimes repeatedly as it goes through the various drafts. When it works properly this can filter out the elements of the draft law that are daft or unnecessarily contentious. Of course it does depend on those who have a particular objection to something in the draft getting their act together to raise the objection during the drafting process – if nobody else knows that there’s some cultural norm in your country that means the draft law is unsuited to you they can hardly redraft it to fix your problem with it unless you tell them what the problem is. Again, the UK could do better here.
    5. The process is largely ‘owned’ by a body called COREPER, a.k.a. the Committee of Permanent Representatives of the Member States. Each member state sends an Ambassador to the EU, but they are called Permanent Representatives. The PRs have staffs (diplomats) drawn from their foreign ministries, and they conscript civil servants from the relevant ministries in their home states. So for example while a proposed EU environmental law is in process, there will be a team from the UK’s DEFRA involved in preparing it alongside similar teams from those ministries in other states who have responsibility for environmental matters. All this is done in situ in Brussels, which is why you have armies of UK-employed civil servants living in Brussels or flying out there weekly.
    6. The European Commission is NOT the legislator that makes laws in the EU. In contrast to COREPER and the legions of diplomats, national civil servants, and experts it uses, the EU is a tiny bureaucracy – some years ago an academic with expertise on the EU wrote that it was about the size of Hampshire County Council, and I don’t think it has grown massively since. Most of its employees are translators/interpreters or support staff. It is headed by a college of Commissioners, one nominated by each member state, and each oversees the operation of an area of activity that the Council of Ministers has agreed should be under the EU’s remit (or ‘competence’ in the jargon). It is a kind of multinational civil service. It also functions as a referee – the member states agreed to create the institution and give it the task of holding each member state to the agreements it had freely signed up to, so that each member state would have the assurance that every other member state would abide by its commitments. (Those of you who’ve taken Political Theory 101 should now be thinking of Hobbes.) True, the Commission has the exclusive right to propose legislation – but as I’ve tried to outline above, the proposal soon leaves its hands for those of elected politicians. Besides which, the only academic study I know of that looked at how the Commission came to propose anything discovered that over 90% of its proposals were made at the behest of a member state.
    7. Most EU laws are decided using a procedure called ‘co-decision’, meaning that the law depends on agreement between the Council of Ministers and the European Parliament. We elect UK MEPs to the European Parliament, just as we elect the UK MPs who are members of the Council of Ministers. If we don’t like the EU laws our UK ministers and our UK MEPs have participated in making, we can throw these politicians out.
    8. Some decisions/laws are made in the Council of Ministers by unanimity, which means each state has a veto.
    9. Some are made by qualified majority voting (qmv), under a complicated arithmetical system designed to ensure that large states cannot dominate small states. Here the name of the game for ministers is to try to form a winning coalition for decisions they favour, or a blocking coalition for decisions they want to prevent, or if there’s not much at stake for them either way on the particular issue at stake they can trade off their ‘vote’ for a reciprocal favour from another member state somewhere down the line. Not much sensible about all this can be said here, save to say that this is a decision-making process requiring a lot of political skill and states that do well in it are those who can create and maintain the goodwill of other states. Also (and this will surprise a lot of people) although formally laws falling under the qmv procedure require a vote, in actuality the ministers virtually never need to actually hold a vote. They already know where the balance of the vote has settled, i.e whether a winning coalition or a blocking coalition has succeeded in being formed. How the UK fares in all this is down to how skilful our ministers (and their teams) are. If we think our ministers aren’t up to the job, it’s up to us to do whatever we need to do to send a better team.
    10. The laws require a court to adjudicate them. The EU’s main court is the European Court of Justice (ECJ), based in Luxembourg. It has jurisdiction over those areas of activity that member states have decided should be part of the EU’s remit, principally the Single Market. The ECJ is not at all the same thing as the European Court of Human Rights, based in Strasbourg. The Strasbourg court adjudicates the European Convention of Human Rights. This Court and Convention have nothing to do with the EU – they are associated with a different intergovernmental organisation, the Council of Europe, set up at the end of the 1940s, and of which we are also a member. (Incidentally Churchill was a prime mover in setting up the Council of Europe, and the European Convention on Human Rights was largely written by British lawyers. Ironic given the calls by sections of the Conservative Party for us to withdraw from the Convention and thus the jurisdiction of the ECtHR.) Leaving the EU will not remove our obligations under the European Convention of Human Rights nor will it mean we are no longer under the jurisdiction of the European Court of Human Rights (which is what I think a lot of Leavers believe, and part of what they mean when they say ‘we want our country back’).
    11. The UK freely agreed to place itself under the jurisdiction of these courts, and did so for good reasons. You cannot have laws without an impartial arbiter to adjudicate them, else each party would be judge and jury in its own case. Moreover, British judges sit on them.

    My main aim in making these points is to scotch the myth that seems to have grown up amongst an alarmingly large proportion of the UK electorate that EU laws are made at the drop of a hat by a bunch of foreigners under the command of the dictator Juncker and then imposed on us hapless Brits against our will. That’s just stupid, stupid, stupid, tosh. Sure, there are specific criticisms to be made about the democratic quality of the EU’s political process, and also specific criticisms to be made about the ECJ (and indeed the ECtHR, though as I’ve explained that’s off-topic since it has nothing to do with the EU). Academics have been making these criticisms for years. But they do so against a backdrop of understanding that all political and legal systems are criticisable, and there’s no particular reason to think that the EU is especially outrageous. As it happens one (eminent) expert on the EU political process, Andy Moravcsik, even claimed some years ago that the EU is more democratic than its member states – see: http://www.esiweb.org/enlargement/?cat=92.

    Final point: in democracies citizens have duties and responsibilities too. Looking after the quality of political life is not just the job of the politicians. Citizens have the duty to their fellow-citizens to take the trouble to find out whatever they need to know in order to be able to debate intelligently and rationally with others and to arrive at reasoned judgements about matters of collective concern. Contributing to massively important decisions on the basis of ignorance, misconception, prejudice,and impulse makes those who do it unworthy of their vote and harmful to the rest of us. I don’t direct this final comment to that miniscule percentage of Leave voters who know a great deal about the nitty-gritty of the EU, also understand modern domestic and international politics and democratic theory, and can put together a reasoned and coherent argument favouring Brexit. (I likely wouldn’t agree with you, but at least we’d be in the zone of reasonable disagreement.)

  • 62 The Investor July 4, 2016, 7:49 pm

    @Tyro — Superb. Thank you for sharing that here.

  • 63 SemiPassive July 4, 2016, 7:56 pm

    @Richard, depends on your mortgage rate to a degree. If it’s 2% vs a Cash ISA rate of about 1% (and about to get lower) or gilts at sub-1% then overpaying your mortgage is about the highest risk-free rate possible.

    I’ve just finished Lars’ excellent Investing Demystified but my one gripe is the minimal risk asset class is short-dated bonds/treasury ETFs which return basically nothing after fees. OK so there is no interest rate risk on them, but I’ve come to the conclusion you may as well sit in cash within your pension rather than incur the trading fees which wipe out any return.

    In comparison equity funds yielding dividend income of 3-4% still look tempting even if the main indices stay fairly flat.
    But with these bond markets pricing in deflation you’re not an idiot if you want to clear down a chunk of mortgage as part of your risk-free allocation. Otherwise you’re effectively borrowing money at 2% to invest in (some) assets paying less than 1%, and some others which might average 4-5% over the next 20 years.

  • 64 Neverland July 4, 2016, 9:32 pm


    I think people in this country have had enough of experts

  • 65 FI Warrior July 4, 2016, 10:09 pm

    It seems that the majority of the population are more motivated to put any effort they have into the choice of their daily takeaway than fact-checking claims that decide their future and that of everything they hold precious. (like their children’s futures, to take one random example)

    But, as many here have pointed out, it is what it is now and you can’t fight reality. Ok, so what is within our power to control? Accept that living in an era of unprecedented access to knowledge hasn’t made much difference in the wisdom of the crowd from when decisions were made by reading the entrails of sacrificed goats, suspected witches were eliminated on a no-win no matter what outcome basis and the earth was believed to be flat.

    The evidence is irrefutable, democracy is easily manipulated against those who need it most. Anyone capable of thinking for themselves then would be best served by assuming they are in a tiny minority and planning meticulously. If emigrating to somewhere pleasant like Oz is difficult for some reason, then work out how you can get an EU passport by other means. Whatever happens, don’t assume it’ll all work out because the politicos here and in the EU will have to see sense and do a deal rather than use each others populations in their territories as political footballs. The outright statements from serious contenders for the throne don’t give much comfort on that score, they aren’t even ashamed to be blatant about it, bigotry is the new black.

  • 66 Richard July 4, 2016, 10:40 pm

    What I think is more interesting is how many of those who voted remain would have voted leave if not for the economic threats. Image there was a guarantee that’s economically we would be no worse off leaving than remaining – economically. What would the result have looked like then? I would guess even more in favour of leave. I think the Brits really struggle to see themselves as Europeans.

    @ SemiPassive – my morgatage rate is a few percent higher than savings rates. Even more when tax is taken into account. I am thinking of hitting the pension still due to the tax uplift but then rather than the ISA going for the morgatage. Unless stocks really bottom out but need to keep an eye on currency as well. Hopefully rates will drop when my fix ends and I can get a great deal. Knowing my luck that will be Just when they hit 15%…..

  • 67 Paul July 4, 2016, 10:52 pm

    Thanks for trying but you have failed in your mission to persuade people such as me that the EU legislative process is democratic.

    I think this is the most important line from your text:

    “True, the Commission has the exclusive right to propose legislation – but as I’ve tried to outline above, the proposal soon leaves its hands for those of elected politicians”.

    So, the unelected Commissioners have the exclusive right to propose legislation. This is key to the argument that the EU is undemocratic.
    There is also something important to say about this that you haven’t addressed….YES the proposal then leaves the hands of commissioners to be approved by elected politicians (The Council of Ministers) but crucially these politicians can only block proposed legislation, they cannot repeal EXISTING laws.
    So you were expecting me and other Leave voters to accept a system of EU law making where elected representatives cannot repeal existing laws and have no right to initiate new laws.
    Think about it. Would we find it acceptable if British MPs didn’t have the power to overturn British laws or initiate new laws? No, surely we wouldn’t accept this so let’s not pretend that this lack of democracy is okay at EU level either.

  • 68 Paul July 4, 2016, 11:16 pm


    You’ve just assumed that the post-referendum devaluation of sterling is necessarily going to cause inflation in the UK. It may not.
    The UK devalued its currency significantly in 1992 when it left the ERM. Stocks rose strongly in the months following the devaluation but the weaker pound did not cause inflation!

  • 69 The Investor July 4, 2016, 11:54 pm

    The evidence is irrefutable, democracy is easily manipulated against those who need it most.

    By coincidence, over the course and aftermath of the Brexit campaign I’ve been reading my way through the history of Rome’s bloody transition from somewhat democratic Republic to despotic Empire. It would be hyperbolic to stretch the analogy too far, but the echoes are concerning, particularly when it comes to populism and also the wilful trouncing or negligent forgetting of why certain safeguards or procedures were put in place.

    Certainly I’ll never wonder “how on earth did the people let them say that or let that happen” when reading history again.

  • 70 Richard July 5, 2016, 7:29 am

    As I understand it though, all safeguards and checks were in place. The referendum bill went before parliament. It was debated and overwhelming passed (only the SNP opposed it, labour dropped their opposition). It then went to the Lords and finally for royal assent. Our elected representatives could have stopped it dead here. They didn’t.

    The refurrendum itself is not binding and any changes are highly likely to follow the same process.

  • 71 The Investor July 5, 2016, 7:56 am

    @Richard — Agreed, I don’t think the Referendum itself was illegal, just ill-advised. I think we’re at the “crass populism” end of the wedge.

    I was thinking about this last night — how annoying it must be to be a principled Leave voter hearing people like me bleat on about the illegitimacy of the campaign, the distortions and untruths and so on. I’ve certainly been frustrated with losing sides complaining after elections in that vein before.

    But I really do think this is fundamentally different. I cannot recall in my lifetime such a near-consensus of informed opinion (not fully, but very near it) that a political decision has been made through distortion and untruth. Tim Hartford, for example, who I linked to earlier, has regularly debunked the exaggerations etc of both political parties during an election campaign and barely seemed ruffled. Listen to that podcast and he sounds despairing.

    Hopefully as you say the system that is in place will now limit the damage, but it’s a wake-up call.

  • 72 Richard July 5, 2016, 8:10 am

    @TI – agreed. You would have thought the powers that be would have realised the possible outcome just by looking at the rise of UKIP in the general election – from an almost nothing party to holding ~15% of the national vote. I think the conservatives got their majority partly by stealing UKIP policies. Perhaps the thing they were trying to kill turned around and killed them

    There is one possible benefit of the outcome of this referendum. If the country continued its lurch to the right with UKIP gaining more and more power then leaving the EU may have been inevitable. This way we kill the far right parties and have moderates in control of the exit. Obviously I don’t believe this, but it is a possible future and we are seeing it all over the world. Maybe we have stolen a march on the far right.

    At least until people find the next scapegoat for their problems.

  • 73 magneto July 5, 2016, 9:32 am

    “I’ve just finished Lars’ excellent Investing Demystified but my one gripe is the minimal risk asset class is short-dated bonds/treasury ETFs which return basically nothing after fees. OK so there is no interest rate risk on them, but I’ve come to the conclusion you may as well sit in cash within your pension rather than incur the trading fees which wipe out any return. ” SemiPasive

    Yes you may have noted this subject was touched on
    I.E. Fixed Income/Bonds in comment 40 above.
    Perhaps we could pick this up and develop more meaningfully later, in a less political thread?

    Maybe TA’s update on the Slow & Steady Portfolio?
    The S&S update should be intriguing for the last quarter!

    Meantime take a look at IS15 (Short-Term IG Corps) and see what you think, esp volatility/correlation-wise.

    All Best

  • 74 Northern Leaver July 5, 2016, 10:32 am

    @The Investor – whats the books name?
    @Paul – well said sir
    @Tyro – A good rule to follow in life is that the more complicated a scheme someone tries to sell you is, the more likely that they are are about to rip you off.

    For my pennies worth, while I’m inclined to accept you know the inner workings of the system, i respectfully suggest you step back and look at it from a distance. I’m not the BBC’s stereotypical Leaver, I consider myself to have done pretty well being FI mid 40’s.

    To add to Pauls comment, the democratic process revolves around the council of ministers voting for the president. As there are 28 member states, most of whom take out far more then they put in. Therefor the President is always going to be voted in by those poorer member states.

    Its like asking 20 foxes and 8 chickens to vote on whats for dinner.

    The President then APPOINTS the council, his chums to do his bidding.
    He can hire and fire council members at will to ensure what ever legislation he wishes is passed.

    Many a politician has made very disparaging comments about the EU, however the closer they get to the center of power then their tone changes. Remember John Major being paraded by the BBC with that other fine statesman Tony Blair espousing the benefits of the EU?

    “The often unspoken fear of many people – we should address it honestly and clearly and examine it–is that Europe might develop into a super-state, an overarching Government with no national veto, no control over our own borders, prescriptive decisions, a single currency imposed and the nation state retreating to a wholly subordinate role. That fear exists out there… and we should recognise the fact that it exists… I for one would find such a Europe wholly unacceptable for this country. I do not believe that it is remotely likely, but, if that were to be the future, it would not be a future that would be suitable for this country.”–

    [John Major, Official Report, 1 March 1995; Vol. 255, c. 1062.]

    The EU has hardly been good for the UK

    – Cadbury moved factory to Poland 2011 with EU grant.
    – Ford Transit moved to Turkey 2013 with EU grant.
    – Jaguar Land Rover has recently agreed to build a new plant in Slovakia with EU grant, owned by Tata, the same company who have trashed our steel works and emptied the workers pension funds.
    -Peugeot closed its Ryton (was Rootes Group) plant and moved production to Slovakia with EU grant.
    – British Army’s new Ajax fighting vehicles to be built in SPAIN using SWEDISH steel at the request of the EU to support jobs in Spain with EU grant, rather than Wales.
    – Dyson gone to Malaysia, with an EU loan.
    – Crown Closures, Bournemouth (Was METAL BOX), gone to Poland with EU grant, once employed 1,200.
    – M&S manufacturing gone to far east with EU loan.
    – Hornby models gone. In fact all toys and models now gone from UK along with the patents all with with EU grants.
    – Gillette gone to eastern Europe with EU grant.
    – Texas Instruments Greenock gone to Germany with EU grant.
    – Indesit at Bodelwyddan Wales gone with EU grant.
    – Sekisui Alveo said production at its Merthyr Tydfil Industrial Park foam plant will relocate production to Roermond in the Netherlands, with EU funding.
    – Hoover Merthyr factory moved out of UK to Czech Republic and the Far East by Italian company Candy with EU backing.
    – ICI integration into Holland’s AkzoNobel with EU bank loan and within days of the merger, several factories in the UK, were closed, eliminating 3,500 jobs.
    – Boots sold to Italians Stefano Pessina who have based their HQ in Switzerland to avoid tax to the tune of £80 million a year, using an EU loan for the purchase.

    If you wish to be part of an EU superstate then great, however to think the UK is better of IN the EU then you are either on the receiving end of the massive envelopes of cash flying round Brussels machine or simply do not understand what the EU is actually about.

    Quote from Jean Monet – One of the founders of the EU:
    “Europe’s nations should be guided towards the superstate without their people understanding what is happening. This can be accomplished by successive steps, each disguised as having an economic purpose but which will irreversibly lead to federation.”

    Right, Im off to play squash then feed my high horse. Thanks to Monevator for this fine space to vent.

  • 75 Neverland July 5, 2016, 10:49 am


    I’m laughing at your selective reading of history 🙂

    When sterling left the ERM in 1992 interest rates dropped from a peak of I think 13-14% to 5%. This is what caused the stock market to go up

    Now when Britain leaves the EU interest rates are 0.5% and Bank Of England owns about a third of all the government’s issued debt

    There isn’t really scope to do the same trick

    You do have a point that inflation may be muted in a recession. But then your wealth gets creamed by the recession…

    ..its like saying “Aha I have escaped being hanged!” while tied to a stake and being burnt alive

    I just wish this was an economics lesson I was seeing from a greater distance than my own front door…

  • 76 Tyro July 5, 2016, 11:15 am

    @ Neverland: you’re being ironic, right? If not, let me invite you to have your plane piloted by the passenger wearing the nicest outfit next time you go on holiday.

    @ Paul. In response to your first point, you perhaps missed the bit where I wrote that virtually all legislation is proposed by the Commission at the request of a member state (i.e. the Comissioners don’t just dream up these things by themselves) and I’d be amazed if some of them hadn’t been suggested to the Commission by a UK Government. As to your point about repealing EU laws, it’s just plain wrong. It’s a normal part of EU operations for laws to be repealed or allowed to expire – this happened to 10,974 EU laws in the years 1997-2008 (I got these figures from a UK Houses of Parliament briefing paper, not from the EU).
    @ Northern Leaver:
    “A good rule to follow in life is that the more complicated a scheme someone tries to sell you is, the more likely that they are are about to rip you off.”
    Well, I’m generally with you on this one. But it’s also true to say that when it comes to political institutions in complex societies, complication is a price of democracy. (And bear in mind here that our majoritarian first-past-the-post political system is not, outside the UK, universally thought to be fantastically democratic. Its chief merit is that compared to other systems it ranks highly for accountability; its chief defect is that it ranks poorly on democratic representation.) The EU’s political system is complicated, but a large part of the reason why is that it tries to build in opportunities for every affected political actor (states’ governments, national parliaments, sub-regional governments – many of its member states have devolved or autonomous regions – affected interests, citizens, uncle Tom Cobbleigh and all) to have some input. If the EU was less democratic it could be less complicated. But then perhaps you’d be moaning about that.

    ” … the democratic process revolves around the council of ministers voting for the president. As there are 28 member states, most of whom take out far more then they put in. Therefor the President is always going to be voted in by those poorer member states.”

    What? This is such garbage I hardly know where to begin. The Council of Ministers does not vote for its president; the Presidency of the Council revolves automatically around the member states – they each take a turn for 6 months. The prime minister or president of whichever country holds the EU presidency during that 6 month period becomes the ‘President’ of the Council of Ministers (after all, they need somebody to co-ordinate and chair the meetings). After that, the presidency moves on to the next member state in alphabetical order and its PM or president takes on the mantle for 6 months. And so on. The UK has held the EU Presidency several times.

    “The President then APPOINTS the council, his chums to do his bidding.
    He can hire and fire council members at will to ensure what ever legislation he wishes is passed.”

    Again, no, no, no. I can only assume you didn’t actually read my initial post. The President of the Council of Ministers doesn’t appoint the members of the Council. Those members are the ministers of the governments of the governments of the member states. David Cameron’s cabinet ministers – Osborne, May, Greening, Hunt, Gove, Hammond, Fallon and all – are members of the Council of Ministers. The President of the Council can neither hire nor fire them because each set of ministers is appointed on election by the citizens of their country. The citizens of each member state are the only ones who can hire or fire members of the Council of Ministers.

  • 77 Richard July 5, 2016, 11:39 am

    FPTP arguably meant UKIP got 1 seat as opposed to 85 seats. Conceivably the conservatives would then have had to form a coalition with them, to prevent a labour led coalition taking power. That would have been interesting – not enough to force us to leave the EU through parlement but starting to look scary. Though if I was UKIP I wouldn’t want a refurrendum under such circumstances. I would look to increase my power base for 2020. Of course if it looks like I was going out of office in 2020 then I would push for last ditch refurrendum.

  • 78 Northern Leaver July 5, 2016, 12:58 pm

    Tyro, are you either writing a book or work for the EU?

    Maybe Im wrong, maybe the the council are selected based on their opposition to the endless laws. Maybe all the Eurosceptic Mps and MEP and every other sceptic people are wrong, Maybe John Major didnt mean it when he said the EU could “…develop into a super-state, an overarching Government with no national veto, no control over our own borders, prescriptive decisions, a single currency imposed and the nation state retreating to a wholly subordinate role”

    Maybe the 50% unemployed youth in the southern EU countries think, wow thank god they have such a complex fair and balanced political system that you describe, or else they could really be in trouble!

    Whichever way you skin this, the number of countries now fed up of the EU policies damaging their own economies is growing.

    Unless there is stitch up and Brexit is not implemented, maybe the Brexit decision is a catalyst for change and a reformed EU might be acceptable. There are many good things that came of the EU, its not all bad, but enough is enough and lets move on, both as a country and on this blog. Over and out….

  • 79 FI Warrior July 5, 2016, 1:27 pm

    @ Tyro, ”You’re being ironic, right? If not, let me invite you to have your plane piloted by the passenger wearing the nicest outfit next time you go on holiday”

    Please don’t even make these suggestions, put to a referendum here, the majority vote would always be for the most beautiful person on the plane. I can see it now, a new reality TV show ‘Who wants to fly a plane?’ Then the dazed survivors on the ground after the crash saying to the camera ”Maybe taking back control of the plane wasn’t such a good idea, perhaps they had a point when they said only experts should do the actual flying part, even if some of them were different in any way to us”

    I am being ironic, but it doesn’t feel like humour, it’s more like a laugh-or-cry situation. What the triumphant bare-majority don’t realise just because the economy hasn’t obviously been destroyed within a week is that it has just only begun, it’ll work more like a slow puncture. It’s like the wreckers on the coast in centuries past who preyed off salvaging the debris of those ships; destruction can only ever reap diminishing returns.

  • 80 John B July 5, 2016, 1:47 pm

    Interesting to see that commercial property funds are suspending trading as their cash reserves can’t match the outflows. It shows just how the granularity of the property market makes liquidity hard. I guess a property investment trust doesn’t have the same problems, as you are investing in the company, but I’m still glad I don’t invest in that segment

  • 81 Learner July 5, 2016, 5:54 pm

    FPtP is also the reason the opposition party is currently imploding. Voters know their vote is wasted on smaller parties – they don’t get representation in proportion to the vote – so they try to alter the major party instead, which resists, and here we are. But the election reform battle was fought and lost in 2011 (against a similar campaign of outright lies, funnily enough).

  • 82 Paul July 5, 2016, 9:21 pm

    I said that elected politicians have no power to repeal existing EU laws. That’s a fact. Of course they can ask the Commission to repeal a particular law but the unelected Commissioners are not obliged to take any action.

    I think you are just assuming the worse. Moodys for example have made a call that the UK will not experience a Brexit recession. We shall see. I stand by my point that any inflation we experience won’t necessarily erase gains in the stock market caused by sterling weakness.

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