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Weekend reading: Brexit so far. No pain. No gain.

Weekend reading

Good reads from around the Web.

I warned in the aftermath of the EU Referendum that I wouldn’t be letting the subject of Brexit go in the months ahead.

And sadly for my ego – though happily for the country – that means it’s time to eat a bit of humble pie.

Because… so far, so meh.

Don’t get me wrong, I still believe there will probably be a long-term economic price to pay for any true Brexit. I can’t see much in economic theory that allows for anything else.

I repeatedly stressed I wasn’t forecasting an economic catastrophe – but that I did think in 20 years the economy will likely be smaller and more unequal than if we’d stayed in Europe. I haven’t changed my mind on that.

As for the cultural and social issues, I will remain a Remainer even if Brexit ultimately boosts our economy. I’ve seen how Brexit has made many people feel first hand, and I’ve read reports of far worse. Brexit is, for me, a step backwards for our society.

But with those caveats out of the way, I’ve got to admit that the big economic shock I expected in the aftermath of the result simply isn’t materializing.

Consumers are still spending. Manufacturing is expanding. Company directors who said they were fearful in the aftermath of Brexit have changed their mind. Most housebuilders report no change in demand following the vote. Early PMI readings looked terrible, but they increasingly seem to reflect panic rather than predicting the near-future of the economy. Employment has held up well.

I would link to articles citing all the latest data and reversals, but to be honest at this point the evidence is pretty much universal.

What went right?

For me, the tone began to change the minute Theresa May formed her new government. You could feel confidence returning. If we’d still been in the midst of a Conservative leadership battle, as initially planned, things might be different.

I also suspect the Bank of England’s decision to act dramatically has – contrary to the claims of many Brexiteers – made things better, and indeed risked derailing its own forecasts of a dramatic slowdown. (A sort of bittersweet result one imagines for BoE insiders…)

Carney’s quick actions mean liquidity has continued to flood into an economy that wasn’t doing badly anyway. It has kept the banks willing to lend. Forcing down interest rate expectations has helped keep the pound low, which has only been good for the economy so far.

True, imported inflation from a lower pound will take a while to come through.

There are signs, too, that the housing market is softening despite the wall of money being thrown at it (though to be honest this seems to be down to the stamp duty hikes and BTL tax treatment changes as much as Brexit.)

And then there’s the elephant in the room – we haven’t actually Brexit-ed.

Our economy – which contrary to Leave’s claims was doing perfectly well in Europe before the vote – has surely continued to motor on partly because nothing has yet changed in terms of trade deals, market access, or regulation.

If Brexit really does mean Brexit, that cannot last.

Strong voter, swing trader

I improved as an active investor when I learned to admit my mistakes quickly, change my thinking, and cut my losses.

And the reality is I expected the massive uncertainty introduced by the Brexit vote to shock the economy. It hasn’t.

None of this means I now believe the EU Referendum was a good idea, let alone that I should have voted Leave.

Far from it. I still consider it was a dangerous gamble, that there will be long-term harm, and that in general the motivations behind the vote to Leave are the antithesis of the sort of society I’d prefer to live in.

But so far, so wrong, from an economic standpoint anyway.

For the sake of the country I hope my confounding continues.

Have a great weekend!

From the blogs

Making good use of the things that we find…

Passive investing

Active investing

Other articles

Product of the week: In the weird world of near-zero interest rates, High Street banks have reacted to the Bank of England lowering its Bank Rate by quietly increasing their margins on tracker mortgages. Stick with fixed rates, advises The Telegraph, which points to a two-year deal at 1.69% with £250 cashback from Yorkshire Building Society as the best fixed rate on the market.

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.1

Passive investing

  • Indexing is capitalism at its best – Bloomberg
  • Even if rates rose for 30 years, you could make money in bonds – Bloomberg
  • Hargreaves Lansdown customers flock to trackers [Search result]FT
  • No signs of complacency at Vanguard – Morningstar
  • The evolution of Smart Beta ETFs – ETF.com

Active investing

A word from a broker

  • Top tracker funds now in the Wealth 150 list – Hargreaves Lansdown
  • Who is in and out in the first post-Brexit FTSE reshuffle? – TD Direct

Other stuff worth reading

  • Capitalism and democracy: The strain is showing [Search result]FT
  • John Lanchester: Shareholder activism as a literary game – The New Yorker
  • The state of the UK housing market in five graphs – Telegraph
  • The great pensions tax squeeze [Search result]FT
  • Santander’s 123 account was costing it £1billion a year – ThisIsMoney
  • Should you self-insure your health? [Interesting costs data]ThisIsMoney
  • Government consulting on £500 pension advice allowance – Guardian
  • Debt is now a way of life – Guardian
  • Finland is experimenting with a ‘basic income’ – Forbes

Distraction of the week: I just finished – and guiltily enjoyed – Billions on Sky Atlantic. The drama pits dreamy hedge fund manager with dark secrets Damian Lewis against law-breaking prosecutor Paul Giamitti. Think The Dark Knight Rises shot by CNBC. Now on pre-order at Amazon.

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  1. 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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Comments on this entry are closed.

  • 51 The Investor September 4, 2016, 12:39 pm

    @green_as_grass — Agreed, of course I’m prone to those biases.

    But you’re reading an article that let’s not forget has me saying “Yes, I was wrong about the initial impact of Brexit.”

    I’m not expecting a medal for it, but in my experience most people rarely change their mind about anything. In contrast I try to be a learning machine.

    What I am not going to be swayed by is phony rhetoric that was wrong before the vote, and is just as wrong after it.

  • 52 Duncurin September 4, 2016, 12:47 pm

    One might expect Leavers to be magnanimous about their victory, but instead they seem prickly and intolerant of criticism. I suppose if my vote had led to a wave of hate crime I would be keen to let everyone know that I wasn’t personally racist.

    For my part I regard the decision as unwise and uncivilised, and agree with zxspectrum48k’s comments about the need for countries to work together rather than singly. I make no criticism of Leave voters, no least because the more their position is criticised the more they will defend it.

    I think the situation now is a bit like the Phoney War of 1939/40. Brexit has been declared but nothing obvious has happened. Mother Theresa’s comforting words about negotiating a special deal with the EU are designed to keep the markets, businesses and voters thinking that all will be well. But the EU-27 will be intransigent about freedom of movement, and sometime in 2017 it will become clear that we are going to leave the single market. At that point banks and foreign businesses will start acting on their plans to move to the Continent and things will start to become interesting.

    It is hard to tell what will happen. Will there be a functioning Opposition in Parliament to hold the Tories responsible for the developing economic consequences of leaving the single market? Will things get sufficiently uncomfortable for a large number of Leave voters to change their minds? If opinion in the country changes, will it then be possible to remain in the EU, and on what terms?

    We live in interesting times.

  • 53 Neverland September 4, 2016, 12:49 pm


    “real issue is the inability of a large part of the population to accept and adapt to the inevitable process of globalization”

    You lack a sense of historical perspective. There is nothing inevitable about gloablisation. I suggest you look at the c. fifty years leading up to WW2 to see exactly how a globalised world economy can build-up and then be broken down through nationalism enacted partly though a democratic mandate. We had two world wars, Hitler, the great depression and comunisim … incidentally that’s also why the EU was formed

    “They are rather like Cnut”

    Is that like when Robert McNaughtie introduced our esteemed Health Secretary as Jeremy C**t?

  • 54 Gregory September 4, 2016, 1:03 pm

    An excellent article by Jason Zweig. Even without active stock picking managers the markets can be efficient. Ben Carlson is right: ETFs are the new stocks. http://blogs.wsj.com/moneybeat/2016/09/02/a-bored-investor-is-a-dangerous-thing/
    Nihil novi sub sole

  • 55 Neverland September 4, 2016, 1:26 pm


    There’s actually no need for countries to work together

    Look at Asia as an example. Good economic growth, lots of nationalism, not much cooperation

    Military spending in particular is booming

    Obviously we need to decouple from the dead corpse of Europe, drag the UK by tug boat into into the East China Sea and sell weapons to all these countries

    (PS I’m being sarcastic for any leave voters reading)

  • 56 Green_as_grass September 4, 2016, 1:55 pm

    Duncurin said:

    “Will things get sufficiently uncomfortable for a large number of Leave voters to change their minds? If opinion in the country changes, will it then be possible to remain in the EU, and on what terms?”

    Regret and recrimination is one possibility, and quite likely (although a full scale U-turn and a let’s kiss and make up scenario is pushing it), but there is also the possibility of an opposite reaction. If negotiations get bogged down and things become heated and we get a protracted demonstration of everything about the EU that even Remainers dislike then the general mood might conceivably turn from one of concern about the outcome to one of relief that we’re done with them. A bit like a messy divorce. As you say, interesting times.

  • 57 Neverland September 4, 2016, 2:26 pm


    As it will be a cold day in hell before this remainer lines up with you

    Frankly I would rather enjoy a scalding hot chocolate enema

    Meantime in the real world, at Theresa May’s inaugural G20, President Obama announces he will prioritise trade deals with the EU over the UK in front of Theresa May:


    Japanese government commission clearly lays out the consequences for existing investments in the UK by Japanese companies if Brexit doesn’t mean what the Japanese want:


    But its okay maybe we can get a free trade deal with Australia (population 23m):


  • 58 Green_as_grass September 4, 2016, 3:48 pm


    Of course, the US – EU trade deal is progressing swimmingly as well.

  • 59 Martyn September 4, 2016, 7:19 pm

    @Chris Evans

    His Blog, he’s entitled to his view, but I note he has gives it as an article of faith, there is no evidence to support the view and such indications as have so far emerged have been contrary to his expectations, this will carry on.

    I on the other hand am willing to take any argument remain can deploy and destroy it. Before deciding how to vote I did exactly this, I objectively weighed everything up and in the final analysis leaving was decisively the right answer.

    It was the biggest vote in my lifetime, it was beholden upon me to coldly work out what was best for the future of this country.

    I did so. How many remainers can truthfully say the same.

    Case in point.

    @PC The EU is not about globalisation, quite the contrary it is about uniting all the EU countries into creating a single country with a single tax system, single Government, single army, single foreign policy, etc and then protecting that super country at the expense of other nations. You voted for something you clearly do not understand. They do not keep their goals a secret either, remainers that do understand the EU just argue that it won’t happen. That would seem to me a risky assumption, especially as a remain vote would have been seen as the UK electorate approving of this goal.

  • 60 The Investor September 4, 2016, 8:12 pm

    @Martyn — I’ve articulated all my views before. I can’t do it every time someone turns up and starts going on about “fiscal waterboarding” and other such rhetoric.

    See: http://monevator.com/tag/brexit/