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Weekend reading: Still dithering our way to Brexit

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Before the link list, a Brexit update. If you don’t like the odd bit of politics here please do skip down to the articles – there’s plenty else to read this week!

Time heals most wounds – including the self-inflicted – but 15 months on from that vote, we’re still motoring ahead with our great populist mistake.

As Winston Churchill noted in The Grand Alliance Vol. 3:

Governments and peoples do not always take rational decisions. Sometimes they take mad decisions, or one set of people get control who compel all others to obey and aid them in folly.

For those who’ve not been keeping up, a quick recap:

  • Yes, we are going to pay a multi-billion bill before leaving the EU
  • No, there is no extra money for the NHS
  • Yes, subsequent post-vote reporting has confirmed that Brexit is a logistical nightmare, from Ireland to atoms
  • No, Frankfurt isn’t too terrible to play home to American bankers
  • Yes, the EU is united in dealing with our pathetic tantrum mighty negotiators
  • No, the Eurozone hasn’t collapsed. Rather, the economic cycle has continued to turn. (The EU is now growing faster than the UK.)
  • Yes, the EU has signed trade deals with Canada and Japan since the Referendum
  • No, the UK won’t get a better deal by being a smaller country with less bargaining power
  • Yes, clever EU citizens are already being tempted to leave the UK
  • No, the French didn’t vote in the fascists. (Our own rash decision – and the other one over the pond – probably gave them pause).
  • Yes, we are probably going to keep obeying EU regulations, including via the European Court of Justice, post-Brexit
  • No, scaring away skilled EU citizens hasn’t cut net immigration to the ‘tens of thousands’ yet (and Brexit won’t either, because much of net migration is from the non-EU and we never did anything about them before the vote)
  • Yes, it’s true our economy didn’t slump in the wake of the Referendum result. (I was wrong footed there, but my bigger fear is for the long-term hit anyway)
  • No, there has been no great export boom due to the cheap pound
  • Yes, future generations of UK citizens will be unable to live and work anywhere in Europe like their parents and grandparents could by right
  • No, there’s no evidence this curtailment will do anything for the disaffected and angry people in slow-growth provincial towns, except reduce the tax receipts that pay for aid and benefits

I could go on, but it’s too depressing. How often do rational people – as opposed to mobs on the streets – get together to decide to do something against their own interests? To negotiate a worse economic outcome? To cede power?

Perhaps in suicidal religious cults. Not much else springs to mind.

About the only good – if unsurprising – development is that things are going slowly. As Tim Hartford puts it in this week’s FT [Search result]:

The British people have dealt the British establishment an unplayable hand: a parliament strung out between several lunatic fringes, and a referendum result that is hard to interpret and even harder to deliver.

With the prime minister powerless, her ministers are showing signs of quiet realism.

Yes, the country is chugging towards a train-crash Brexit, but at least our politicians are tying fewer hostages to the tracks.

To return to the Churchill quote above, what rational people would conclude at this point is that we should get off the tracks.

But at the moment, the democratic symbolism foolishly placed in the Referendum – even by many Leavers – means the best version of getting off the tracks from here is probably some sort of fudge that looks like a Brexit, but that doesn’t walk or talk like one. A fake Brexit.

But who knows? Perhaps if we do drag it out for long enough it might never happen. Better than any alternative, as far as I’m concerned.

Matthew Parris for one says Brexit is dying:

“Brexit is in terrible trouble – and with every month that passes, the difficulties become clearer, and the Remain side of the argument becomes stronger.”

Fingers crossed.

Still crazy after all this year

Of course the fallout from not-Brexiting would now be terrible, too, especially if it was called off any time soon.

That’s because because enough angry people came to believe Brexit would solve problems that are in reality probably close to intractable.

I’ve come to understand over the past 12 months how the Brexit vote reflected genuine anger and disquiet among a chunk of the population who feel that the world isn’t going their way. (Almost inexplicably, in the case of the comfortably off Barry Blimps, unless you go down the identity politics rabbit hole).

But I’ve seen little to show it has much to do with the EU.

What I think took the vote from a minority of committed Eurosceptics to a winning majority were wider forces like globalization, technology, income inequality, urbanization, and fundamental terrorism.

And then was the misinformation campaign that’s been much debated in the subsequent year.

Happily, researchers have found that as we learn to cope better with social networks and their ability to distort reality (and as those networks get better at policing themselves) we might see fewer crazy years like 2016.

As Bloomberg reported concerning one academic deep dive:

The study does offer one positive conclusion: Broad awareness of fake news should tend to work against its success. Campaigns were much less successful when individuals in the model learned strategies to recognize falsehoods while being fully aware that purveyors were active.

This suggests that public information campaigns can work, as Facebook’s seemed to do ahead of the French election in May.

In other words, fake news is like a weaponized infectious agent. Immunization through education can help, but it might not be a comprehensive defense.

Either way, it’s too late for Britain, which could be sliding towards a situation where even the food chain is disrupted.

That’s not me being a doomster – it’s the supermarkets:

Failure to find an agreement on free trade within Europe before Brexit day is likely to result in gaps on UK supermarket shelves, increased waste and higher prices, retailers have warned.

More than three-quarters of food imported by the UK comes from the European Union, but if the UK does not agree on a transitional period or a deal when it leaves the bloc in March 2019, World Trade Organisation rules will apply.

This means that goods coming from the EU will be subject to the same custom checks, tariffs and regulations currently in place with the US, with some 180,000 extra firms drawn into customs declarations for the first time.

Let’s hope that a shortage of Werther’s Originals leaves a sour taste in the mouths of the legions of Brexit-voting pensioners – hundreds of thousands of whom have already left this Earth and their mess for us to clean up.

Harsh? Perhaps, but as Ian McEwan said when he seconded my own observation that the Leave vote was probably literally dying:

“Truly, Brexit has stirred something not heroic or celebratory or generous in the nation, but instead has coaxed into the light from some dark, damp places the lowest human impulses, from the small-minded to the mean-spirited to the murderous.”

Yet on we dawdle, into the pointless maw.

Note: As usual I’ll be deleting anything I arbitrarily and personally happen to think is overly nasty, racist, or intolerant (on both sides) so please watch your words if you’d like to comment. And if you don’t like the sound of that, no worries, there are other places to chat on the Internet. This is a benign dictatorship, not a democracy. 🙂

From Monevator

Using the Rule of 300 to estimate your retirement pot needs – Monevator

From the archive-ator: Don’t forget your financial freedom goals – Monevator


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

Non-doms pay an average £105,000 in tax; £9 billion a year in total [Search result]FT

Does a £7,600 a year service charge for a 3-bed above a shop seem fair to you? – Guardian

First signs of rising rents as buy-to-let investors pass on higher tax [Dubious!] Telegraph

Gun-shy private equity firms are sitting on nearly $1 trillion in cash – Bloomberg

Products and services

An Islamic bank is offering the highest return on cash, at 1.7% – Telegraph

Tax rule changes and low rates prompt collapse in cash ISA totals – Guardian

Pensioners hit as annuity rates drop by 10% in two years [Search result]FT

The new PPI deadline advert staring Arnie is pretty compelling – FCA via Twitter

British banks had to contribute £30m towards that PPI advert – Telegraph

The ‘secret trick’ that enables you to transfer part of your pension – Telegraph

Why people are waiting longer to upgrade their smartphones – Guardian

We don’t cover it much, but the cryptocurrency space looks bubbly – Techcrunch

Creating a set of cryptocurrency benchmark indices – Bletchley Indexes

Comment and opinion

The dumbest call of the era – The Reformed Broker

What do the best investors do that the rest don’t? – Behavioral Investing

Want a house price crash? Be careful what you wish for – Guardian

Have equity income funds had their day? [Search result]FT

The worst case scenario for passive investing: Part 1 [Debate!]Bloomberg

The Analyst on Monevator’s 1-page investing philosophy – Todd Wenning via Twitter

Tobacco stocks could be damaging to your wealth – The Value Perspective

The market is high. Beware of portfolio drift – New York Times

Decisions, decisions – A Wealth of Common Sense

Time to buy gold? – The Irrelevant Investor

How time perspective influences portfolio decisions – Portfolio Charts

Jason Calcanis on how to invest in technology start-ups [Podcast]Meb Faber

Forecasting: How to map the future [Video]BBC

Do Spanish pensioners have it much better than Polish workers? – SexHealthMoneyDeath

There is always some clown with a bigger boat – The Escape Artist

Just buy the cheapest stocks [Research, wonky]Alpha Architect

Off our beat

Overcoming your demons [Recommended]Morgan Housel

Why we should stop trying to contact aliens – Big Think

How to save money on gardening: An A-Z – Backyard Boss

How milk became the go-to beverage of the alt-right – The Conversation

What working from home does to your brain, apparently – Mel

And finally…

“Try to imagine the calamity of that: Zack, age twenty-eight, with no management experience, gets training from Dave, a weekend rock guitarist, on how to apply a set of fundamentally unsound psychological principles as a way to manipulate the people who report to him.”
– Daniel Lyons, Disrupted: My Misadventure in the Start-Up Bubble

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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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{ 69 comments… add one }
  • 51 The Borderer September 5, 2017, 8:03 am

    Regarding your post regarding the FT article.
    Have a look at Sir Nicholas Henderson’s valedictory despatch written on his retirement as ambassador to Bonn and Paris. As you will know such despatches were traditionally written without ‘fear or favour’ as being his true opinion.

  • 52 PC September 5, 2017, 12:33 pm

    @TheBorderer thanks for the link. This is how I remember the UK in the 70s – until we joined the EU ..

  • 53 Pete September 5, 2017, 1:51 pm

    I think you are over-estimating the impact of Brexit. Businesses want to trade and they will find a way to do it. There is absolutely no way there will be any impact to the food supply chain.

  • 54 HK Expat September 5, 2017, 2:06 pm

    The Borderer
    Interesting that on the future section, and back in 1979, his comment was:
    “There is certainly an acute problem ahead over our net budgetary contribution to the community. We have been hardly done by here. We are not going to find an easy solution whatever we do. So far as money is concerned the community is imbued with a spirit of grasp and take.”
    How little things change!

  • 55 ermine September 5, 2017, 3:34 pm

    @ The Borderer a fascinating glimpse – nearly all the problems from 1979 seem to still exist now in Britain’s troubled relationship with the EU. preserved in aspic across nearly forty years. Perhaps the Brexit vote is an expression of the national character rather than a convulsion of sticking it to the elites. Verhofstedt was right in saying that it was never a passionate love affair, and de Gaulle has been proved right when he observed in 1963 that England

    “has, in all her doings, very marked and very original habits and traditions. In short, England’s nature, England’s structure, England’s very situation differs profoundly from those of the Continentals.”

    I recall my German grandmother coming to pre-EU London in the late 1960s and early 1970s and wondering why the place was so run down and so many old bangers still on the roads. Twenty years later I went to Germany in the early 1990s and wondered why the place looked so run down as they absorbed the DDR.

    I suspect in the years to come people from Germany will have the same feeling about Britain as my late grandmother.

  • 56 The Investor September 5, 2017, 4:17 pm

    @Pete — Well, it’s not me over-estimating it really, it’s the supermarkets raising the potential impact. I am merely citing their warnings, and I believe they are well-placed to know about the food supply chain. I agree with you businesses want to trade. Unfortunately Brexit has disrupted our relationship with our key trading partner. In the worst case it will introduce genuine and permanent obstacles and costs to that trade. In the best case, it will be slightly worse (because there is no way it will be as good as the deal we have now — it’s not about “punishing” us, it’s because that’s the reason people join free trade communities). We may in 10-20 years have some ex-EU deals that somehow make up for this permanent diminishment. I wouldn’t hold your breathe. But as I keep saying, it won’t be collapse, just likely a general worse-off situation in perpetuity. For hardcore constitutional Leavers that may be a price worth paying, and fair enough. I suspect for most people, including most Leave voters, it wouldn’t be.

    @The Borderer @ermine — Excellent read! I have been reading up a lot on revolutions and similar recently (historical) and it’s made me re-appreciate that a huge chunk of Brexit-voting is probably people wanting a myth of an alternative Britain to believe in, and hang the practical consequences. And I suppose some Remainers like me believe in a similar mission of progress and international cooperation that they would call a myth. (Well, and we also believe in the fact that we’ve done much better for being in the Eurozone than when we were out of it. But you know, facts…)

  • 57 hosimpson September 5, 2017, 4:51 pm

    I think Stephen Hawking also has said we should stop broadcasting our location to the Universe. I’ve put the Three-Body Problem series on my reading list. Thanks for the link 🙂

  • 58 Gadgetmind September 5, 2017, 5:05 pm

    The Three Body Problem is worth sticking with. Some of the writing (by the translator?) annoyed me, and some parts are a little slow, but it really works as a trilogy.

  • 59 e17jack September 6, 2017, 9:21 am

    The Economist link makes for sobering reading and outlines a depressing litany of missed opportunities.

    This from the conclusion (the community being Europe):

    “There is also a task of explaining the community to the British public rather than making it the scapegoat for our ills.”

    How prescient, and what a terrible shame that nobody has risen to that task in the last 38 years (my lifetime!)

  • 60 The Rhino September 6, 2017, 10:17 am

    This link leading on from your reformed broker link is worth a look:



  • 61 Gizzard September 6, 2017, 11:59 am

    “Let’s hope that a shortage of Werther’s Originals leaves a sour taste in the mouths of the legions of Brexit-voting pensioners – hundreds of thousands of whom have already left this Earth and their mess for us to clean up.”
    Since an increasing number of these silly old codgers are no longer around, it could be argued that their reasons for voting the way they did was for reasons other than for their own benefit. As these same doddery old/dead folk were eligible to vote in the 1975 referendum (which resulted in a 2:1 majority in favour of remaining a member) something must have transpired in the intervening 40+ years to change their opinion.

  • 62 windinthefens September 6, 2017, 9:44 pm

    As a long term lurker here, and unashamed remainer, I’d be interested to know whether anyone else has taken similar action to me. I had all my low-risk element of my passive portfolio in UK gilts. I’ve now moved nearly half to a Global Government bond ETF (AA-AAA rated) which is hedged back to Sterling. I never really imagined the UK Government could default in the pre-Brexit era, and I still think it unlikely, but less unlikely now.
    Thanks TI for the best financial site out there, and for expressing my exact feelings a lot more succinctly than I ever could!

  • 63 FI Warrior September 7, 2017, 1:09 pm

    There is no shortage of tax havens in the world today, more commonly known in the jargon as ‘business-friendly markets/countries’, but investors only have money because they are smart in the first place. As such they will notice that the establishment here is overtly hostile to foreigners; (first they came for the Poles) the fig-leaf of scapegoating only Europeans wont fool capitalists who’ll simply hunt for the highest yield elsewhere.

    In the free-market competition that is our interconnected planet, countries are constantly optimising their incentives to inward investment, so if there is a burst of xenophobia in one domain, foreign investors will simply avoid it. Witness the premium that has to then be offered by the likes of Russia to external investors to have any effect, since it was shunned when worries about the general rule of law applying surfaced.

    Similarly, if bigotry in the UK is seen as rising, easily assumed from the efforts of the media on a daily basis, investors will inevitably see this as an increased risk. (the more extreme the perception of the country the more the assumed risk, who invests in Zimbabwe today despite its potential?) So given the ever increasing dependence of the UK on the generosity of foreign investment to balance its books, what with the annual deficit as it can’t earn its lifestyle today, this antipathy towards said foreigners is a gamble.

  • 64 The Investor September 7, 2017, 1:33 pm

    @windinthefens — Thanks for the kind words, glad you enjoy the site. My portfolio/strategy will not at all be reflective of most readers’ (or perhaps even of what it should be!) due to my active foibles, but with that said I for one have been making greater use of currency-hedged ETFs in both equities and fixed income since the start of the year. That isn’t because of a perceived credit risk of UK gilts for me though; rather I thought the pound had already been pretty heavily pummeled and wanted to take some of that off the table.

    See this article (and yes, I should have written part two by now!): http://monevator.com/currency-hedged-etfs/

    Personally I think the chances of the UK State technically defaulting are extremely low, given our ability to print our own money. What would probably happen instead if things got so extreme would be deliberate and excessive inflation, and further devaluation of the pound. In that case currency-hedging back to a depreciating sterling might backfire.

    My feeling is one should avoid all-this-or-that bets at this time, and rather spread risk around (as indeed you’ve been doing with a c.50% allocation) given the very wide range of outcomes we conceivably now face as a result of this ill-advised Brexit.

    Time will tell.

    (Obviously this is not personal advice, as I’m not qualified to give it and don’t know your circumstances etc anyway. Just food for thought. 🙂 )

  • 65 Matthew September 7, 2017, 1:35 pm

    @ FI warrior – why would xenophobia (almost put xeroxphobia!) put investors off when sin stock doesn’t? There’s a danger in overreading into this, at the end of the day there is still the UK consumer to serve

  • 66 Gadgetmind September 7, 2017, 2:08 pm

    I’m over exposed to sterling currently as I’ve “life styled” my pension to about 40% bonds to avoid sequence of returns risk in early retirement. Oh, and our ISAs are also cash heavy as I’ve agreed to lend someone £400k for “a few months” as a house bridging loan. Boy, do I need that back by April 5th!

  • 67 Steve September 8, 2017, 8:50 pm

    The Brexit vote has really depressed me. Yes, I know Leave only “won” because they ran two campaigns with mutually incompatible promises (as has since been made very clear in the negotiations waffle). Yes, I know you cannot blame folk for thinking ill of the EU (and its far from perfect) when so many daily papers decided to boost their sales with outrageous statements about how evil Brussels. Still, a mature democracy should have seen through all that – and Britain failed to do so.

  • 68 The Rhino September 14, 2017, 7:03 pm

    What is this mature democracy you speak of? The country containing it has so far managed to elude me.

  • 69 Gadgetmind September 14, 2017, 7:13 pm

    He meant mature as in old rather than wise. You know, like the in laws.

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