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

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 ^[1] 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 ^[2] 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

• A brief history of Smart Beta – Canadian Couch Potato ^[3]
• The US Vanguard 500 index fund turns 40 – The Reformed Broker ^[4]

Active investing

• Learn valuation with NYU’s Aswath Damodaran – Musings on Markets ^[5]
• One reason smart investors fail to beat the market – Dash of Insight ^[6]
• The S&P 500 looks a bit pricey – UK Value Investor ^[7]
• Why do you invest in stocks? – Howard Lindzon ^[8]
• Successful failure [Video on value investing] – The Value Perspective ^[9]
• The Fed: Myths vs reality – Investing Caffeine ^[10]

Other articles

• The power of ‘and’ – Retirement Investing Today ^[11]
• This sort of nonsense is why you want F.U. money – The FIREStarter ^[12]
• The financial independence community is wrong – Liberate Life! ^[13]
• 10 money revelations for a mid-30s guy – A Wealth of Common Sense ^[14]
• An attempt to use machine learning to find the safe withdrawal rate for retirement [Note: Geeky!] – StreetEye ^[15]

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 ^[16], which points to a two-year deal at 1.69% with £250 cashback from Yorkshire Building Society ^[17] 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 ^[18]

Passive investing

• Indexing is capitalism at its best – Bloomberg ^[19]
• Even if rates rose for 30 years, you could make money in bonds – Bloomberg ^[20]
• Hargreaves Lansdown customers flock to trackers [Search result] – FT ^[21]
• No signs of complacency at Vanguard – Morningstar ^[22]
• The evolution of Smart Beta ETFs – ETF.com ^[23]

Active investing

• Tactical allocation funds: Even worse than expected – Morningstar ^[24]
• How investors’ reading influences stock prices – Harvard Business Review ^[25]
• Swedroe: Are these ‘superstar’ returns likely to persist? – Advisor Perspectives ^[26]
• More Swedroe: Contrarian strategies can deliver – MutualFunds.com ^[27]
• What are the ‘ultimate stockpickers’ buying now? – Morningstar ^[28]
• September is a strangely bad month for stock markets – Telegraph ^[29]

A word from a broker

• Top tracker funds now in the Wealth 150 list – Hargreaves Lansdown ^[30]
• Who is in and out in the first post-Brexit FTSE reshuffle? – TD Direct ^[31]

Other stuff worth reading

• Capitalism and democracy: The strain is showing [Search result] – FT ^[32]
• John Lanchester: Shareholder activism as a literary game – The New Yorker ^[33]
• The state of the UK housing market in five graphs – Telegraph ^[34]
• The great pensions tax squeeze [Search result] – FT ^[35]
• Santander’s 123 account was costing it £1billion a year – ThisIsMoney ^[36]
• Should you self-insure your health? [Interesting costs data] – ThisIsMoney ^[37]
• Government consulting on £500 pension advice allowance – Guardian ^[38]
• Debt is now a way of life – Guardian ^[39]
• Finland is experimenting with a ‘basic income’ – Forbes ^[40]

Distraction of the week: I just finished – and guiltily enjoyed – Billions ^[41] 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 ^[42].

Like these links? Subscribe ^[43] to get them every week!

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”. [↩ ^[47]]