EU has lost one of it’s strongest members. After many months of speculation, Brexit is finally here, and Britain, in time, will cease to be part of EU.
What does this mean for the typical investor? Everything!
I have no idea where to begin. Everywhere I look, I can think of ramifications of Brexit. In my mind, this cannot be a good thing for the British. Yet, immigration is a hot button topic everywhere. Xenophobia is understandable, and a very strong emotion. Even in Singapore we see that being a big factor in elections.
I am sure the Singaporean government will be taking notice too.
The 1st casualty is David Cameron, who has resigned. Suffice to say, I think it’s a mistake to even call for a referendum. Leadership is about making tough decisions that you think is good, then trying to bring the populace to your side. A referendum is basically about letting the masses make the decision: never a wise choice. Such a decision would always be the more popular one, but not necessarily the best. In fact, the best path is usually the least popular one.
The currency markets are in turmoil. Volatility is as crazy as it can be. I don’t intend to speculate in this though, as Fx is really not my expertise.
The British bonds are also probably another good hunting ground for those who are sharp enough, the prices will probably go through the roof, at least in the short term. (Yields will drop sharply as ppl move out of equities into bonds)
On a personal basis, I am fortunate to still have a small short position: just 3 puny lots of S&P put options. Well, it’s fortunate cos I was about to sell them off earlier but didn’t as the S&P rose.
Still, I expect a sea of red when the NYSE opens tonight. My portfolio will be affected like everyone else’s. I’m optimistic though, as my earlier divestments of Hock Lian Seng and partial divestment of Metro Holdings means I’m relatively cash rich, and as mentioned in earlier posts, am hunting for places to allocate capital.
This black swan event might just be the chance.
Although there’s no doubt that this is a huge momentous event, I think the markets will likely over react to the downside in the near term. I’m expecting today to be bad, and as the news gets hyped up and the analysts start coming in talking about doomsday scenarios over the weekend, next week will be worse.
People are going to panic over the weekend.
I’ll be looking to allocate capital next week. There’s a lot of work to be done.