Good reads from around the Web.
Brexit started with a bang in June. The stock market plunged and a bloodbath unfolded at the top of the major political parties. We were all hooked [1].
But like a TV drama with a limited budget, things tailed off as we got bogged down in turgid mid-season plot building.
Theresa May’s appointment was reassuring but hardly a thriller, as the crazy Andrea Leadsom story line went nowhere. The Bank of England did its best to liven things up by cutting interest rates and warning of a greater chance of a recession [2], but more positive data kept coming in.
Even I had to admit – not without some relief – that I’d been wrong [3] about the initial impact of the Leave vote. I wondered aloud if commercial property in London [4] was now a buy.
Many viewers began switching off.
But in the past week, Brexit got back to its barmy best.
Not so much like Game of Thrones [5] as the early episodes, mind you. More The Man in the High Castle [6], as an alternative universe started to take shape around us.
The right kind of workforce
It all started when Prime Minister Theresa May announced [7] that she would trigger Article 50 this coming March. That sent the pound falling.
Later, she made it clear that curbing immigration rather than preserving the economy was her top priority. Pandering to fear and prejudice – the fantasy and lies of the Leave campaign – was more important than trying to maintain the profits and tax revenues that might actually help address the very real inequalities [8] that motivated a big chunk of the vote to Brexit, and that she identified in a conference speech [9] that otherwise had much to commend it.
As a result of this posturing, a ‘hard Brexit’ now seems firmly on the table, to the dismay of business [10] [search result]. The pound fell some more.
Then we had some sinister new plot twists. Talk from Jeremy Hunt [11] that the UK should be “self-sufficient” in doctors set the tone, but worse were the almost unbelievable plans [12] from Home Secretary Amber Rudd to force companies to publish the proportion of “international” staff on their books.
Rudd said [13] she wanted to “flush out” companies that she deemed to be harbouring an inappropriate number of (entirely legal) foreign workers.
This would “nudge them into better behaviour”. (Better as defined by Amber Rudd and the new order in Britain.)
It didn’t take an LBC radio presenter to point out where we’ve heard this kind of language before. Still, James O’Brien did an excellent job of drawing the parallels [14].
Ukip won the war, but it’s losing the plot
Before some bold Brexiteer turns up in the comments to tell me to calm down, it does seem Rudd may row back [15] on these plans.
But that is only because of the backlash from business and other commentators. Clearly they felt appropriate at the time her wonks drew them up.
Another sign of the times – we learned yesterday that foreign-born academics have apparently been barred [16]from giving the government official advice on the upcoming Brexit negotiations:
It is understood up to nine LSE academics specialising in EU affairs have been briefing the Foreign Office on Brexit issues, but the school has received an email informing it that submissions from non-UK citizens would no longer be accepted.
Relevant departments subsequently sent notes to those in the group, telling them of the instruction.
One of the group is understood to be a dual national, with citizenship of both the UK and another EU member state.
The Foreign Office was said to be concerned about the risk of sensitive material being exposed as article 50 negotiations over Britain’s exit from the EU – and subsequent talks on its future trade and other relations with the bloc – start to get under way.
Because, you know, being born in a country is the best way to judge a person’s trustworthiness and loyalty!
It’s frightening how quickly we’ve got to a point where our vibrant economy that attracts talent from across the EU and the world has become in the language of politics a cartel of unpatriotic gangmasters, shiftily employing Johnny Foreigners who hop over the border to steal our wages as well as our benefits.
As Ian Dunt, the editor of Politics.co.uk puts it [17], the Conservative party is arguably morphing into Ukip and the direction is disturbing.
Take the government’s ongoing refusal to guarantee the right to remain for all EU citizens living in Britain. Dunt writes of the logical conclusion:
Mass deportations. It sounds alarmist doesn’t it?
No, it wouldn’t involve Nazi officers banging on doors. It would all be very polite and English. A very polite but firm Home Office letter would come through the letter box and it would have a deadline.
If you don’t make that deadline – or if the authorities say they have reason to believe you won’t – the immigration enforcement vans come.
The sudden exodus of three million people from the UK. That is the suggestion. That is the threat.
That is what is implicit in Fox’s card game. It might be the most shameful policy Britain has considered in living memory. It is so shameful no-one dares say it out loud. They only imply it. But that is what he is proposing. That is the reality.
This is the great and final victory of Ukip. They have taken their economically catastrophic EU agenda, their bizarre sense of thin-skinned personal victimhood, and their culture-war poison over immigration and embedded it in the guts of the Tory party.
Do I think it’s likely that millions of EU citizens will ultimately be asked to leave the UK?
No, not particularly. Not yet.
Am I ashamed and dismayed that we’ve come to this in three short months?
Absolutely.
Thankfully, there was also a comic thread running through the latest episodes to lighten things up. It also came from Ukip – the cast of characters who by giving voice to the common man (or more specifically voice to his or her bigotry and fearfulness, rather than his or her better nature) seeded the germ that’s now eating us up.
This week we saw the leader step down [18] after 18 days at the helm and Nigel Farage come back from the political dead to resume his place as top dog. Then one of its MEPs was hospitalized [19] after confrontations with another Ukip MEP in the European Parliament.
Yep, funny alright. Albeit like a Tarantino movie is funny.
Investment implications
The pound is around $1.24 as I type – down from $1.30 before the Conservative conference, and around $1.50 in the moments before the Leave win was confirmed.
Overnight the pound fell to $1.14 in a flash crash [20] that was blamed on robots (there being no Romanians or Poles nearby to take the blame [21], presumably).
The precipitous fall in the pound is making our country and its citizens poorer. That’s true however much you personally are managing to offset the declines with your investments in a Vanguard global tracker fund, or however much you believe Blackpool and Skegness can beat anything a fancy pants foreign holiday has to offer.
The FT has a big piece on the winners and losers [22] from the pound’s decline [search result]. So far foreign tourists are the biggest beneficiaries. Quelle ironie!
If the fall in the pound is followed by a decline in overseas investment and a widening of our current account deficit, then all bets really are off again. The least we can now expect is an inflation shock. We import far too much for sterling’s collapse not to show up in our grocery bills.
The iShares index-linked Gilt fund is 23% higher since Brexit day. That had seemed like a crazy move. Now it’s looking prescient.
It will also be interesting to see where Theresa May’s opinion that low interest rates [23] may now be causing more problems than they’re worth fits into the picture.
Some onlookers say a political intervention to reverse low rates is being signaled. I think it’s more likely cover for a big fiscal push in the Autumn Statement.
Get with the programme
Investing aside, I hope the more reasonable end of the Brexit voting spectrum will be as dismayed as me that what was (wrongly) dismissed as a xenophobic fringe element during the EU Referendum campaign is alive and kicking in the mainstream body politic.
If I was that kind of reasonable Leave voter, then rather than downplaying every lurch to the right in the rhetoric, I would be speaking out against it.
Millions of people who came to the UK with the best of intentions – and who we welcomed in, employed, worked alongside, and enjoyed the company of for years – now find themselves the subject of a bogus political scrutiny.
Even if it all comes to nothing, damage has been done on a personal level, and perhaps soon enough on an economic one [24].
We need to avoid worse.
Making good use of the things that we find…
Passive investing
- Using buffers to become a better investor – Cordant Wealth [25]
- Investors are even more impatient with Smart Beta – Abnormal Returns [26]
- How Jack Bogle made his lawyer rich – The Irrelevant Investor [27]
Active investing
- Is Deutsche Bank now a buy? – Musings on Markets [28]
- Reasons not to fear change in the US – Investing Caffeine [29]
- How things have evolved in 50 years on Wall Street – A Wealth of Common Sense [30]
- A discussion of the equity risk premium [PDF] – Norges Bank [31]
Other articles
- Life lessons from Jesse Livermore – A Teachable Moment [32]
- Using a ‘bond tent’ to navigate the retirement danger zone – Kitces [33]
- Things you miss when you get a job – SexHealthMoneyDeath [34]
- Walking and thinking [Podcast with Morgan Housel] – The Investor’s Field Guide [35]
- I bought an electric car – Mr Money Mustache [36]
- To gain an edge, run up stairs – The Investor’s Field Guide [37] [Again!]
- It’s more important to be useful than happy – Darius Foroux [38]
Product of the week: Santander will cut the interest paid on its 123 account in November, and now it has emerged that new customers will no longer be able to get its popular 123 cashback credit card, says ThisIsMoney [39]. Instead they’ll be offered the All In One card, which pays 0.5% cashback and comes with a £3 monthly fee. If you like cashback you might instead consider the Platinum Cashback Card from American Express [40]. It pays 1.25% cashback after a three-month 5% period. There’s a £25 annual fee.
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 [41]
Passive investing
- Dilbert shares our pain – Dilbert [42]
- Indexing in less-efficient markets [US but relevant] – Morningstar [43]
- Investors are turning to simple passive bond funds – Bloomberg [44]
- Here’s how much the ETF industry makes – ETF.com [45]
Active investing
- Questor is building a UK dividend income portfolio – Telegraph [46]
- Fisher: The joyless bull market has longer to run [Search result] – FT [47]
- Bottom-feeding stock picker in Japan crushes the market – Bloomberg [48]
- Shiller’s market indicator is sending a false signal [Search result] – WSJ [49]
- Hard Brexit could be a huge buying opportunity (for foreigners…) – MarketWatch [50]
A word from a broker
- Houses cost 10x earnings in a third of England and Wales – Hargreaves Lansdown [51]
- What does OPEC’s oil production cut talk mean for investors? – TD Direct Investing [52]
Other stuff worth reading
- Why low interest rates are probably here to stay – Bloomberg [53]
- Seven pieces of conventional money wisdom to question – MarketWatch [54]
- Born lucky? Children of the ’60s, ’70s, and ’80s on buying a home – Guardian [55]
- How your spending changes as you approach 100 – Telegraph [56]
- One firm created a town of accidental millionaires – Our State [57] [via Mike [58]]
- Three steps to reinventing your career – Quartz [59]
- The economics of dining as a couple – Bloomberg [60]
- 91-year-old who dumped chemo for road-trip adventure dies – CBS [61]
Book of the week: Brexit got you down? It could be worse. We could already be living in the The Age of Em [62]. I listened to an interview with the author – futurologist Robin Hanson – in which he implied that it would be churlish for any humans surviving in his AI/robot dominated future to look on the amazing world of their super descendants with anything but pride – sighing wistfully before returning to scavenging about in the gaps for something to eat. Very Silicon Valley. But it’s an interesting read, and I’d at least take on board Hanson’s advice to make sure you are the owner of a few ems (crossbred Einstein-level geniuses on a chip) before the Age of Em dawns.
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- 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”. [↩ [67]]