I am staggered, I am speechless. It has been one hell of a night and one during which history is in the course of being made. Whether good or bad will be determined over the coming years or even decades but most certainly not in one day’s trading and even less on the last Friday before quarter-end.
I spent a significant amount of time yesterday rehearsing my lines to assess the aftermath of the inevitable Remain victory. It was all going to be about how the heart said go and the head said stay and how, despite a majority of British people voting to remain, the larger part would probably have been more comfortable to be out. Little did I, or pretty much anybody else for that matter, bookies included, expect this outcome.
On my way home from dinner last night I heard Nigel Farage, the highly controversial leader of UKIP, suggest that the Remain camp might sneak it and then Angela Eagle, the Labour MP, revelling in what she took to be Farage’s concession. It was not to be and today we wake up not to a brave new world but to a very insecure and scared one. I have spent the past seven and a half years being mightily underwhelmed by the current US president but perhaps it is time for me to borrow one of his own political slogans, “Yes We Can”.
From just after 5:00am this morning the phone has been going with various members of the financial and the political press asking me for my opinion on what happens next. My instinct is to take the markets’ big knee-jerk reactions to political events and to trade against them. I don’t know how many out there will remember how, the morning after Saddam’s Iraq invaded Kuwait, hydrocarbon markets went absolutely nuts, only to creep back over the following weeks. If my memory serves me correctly, by the time “Stormin’ Norman” Schwarzkopf led the coalition forces into Kuwait in Operation Desert Storm, the oil price was back where it had been before Saddam had begun his fateful adventure. But to be perfectly honest, I haven’t got a clue where we go from here.
Don’t panic
What I do think is that the initial reaction of seeing the FTSE down by over 8% or 9% and the pound dragged off to the woodshed at $1.3550 could well be overdone. If the tactic is “if in doubt, get out”, then I can understand some dramatic cashing out of risk assets but I don’t see the world suddenly going to hell in a hand cart.
Over the past months I have often questioned why we have never heard any of the foreign dignitaries who have spoken up, least of all the Muppet in Chief, Jean-Claude Juncker, make one single suggestion as to how they proposed to accommodate Britain, were its people to vote to leave. From O’Bama’s threat to put us at the back of the queue when it comes to negotiating a trade agreement – I understand that at the moment there is no queue so even at the back we are at the front – through to Juncker’s “out means out” rant which was quoted in the papers yesterday, I have yet to hear a single voice congratulating this country for having paid more than just benign lip-service to the democratic process and wishing to help it on its way. Funnily enough, it would appear that the voters’ response to the doomsday scenarios being proffered by the likes of the US president ended up being one of defiance over retreat. Enter, stage left, King Henry V.
The UK of course remains part of the EU until the exit negotiations are complete. The single market remains as open to Britain today as it was yesterday except that exporters can, in the short term at least, benefit from a significantly weaker pound and that they will be able to do for a long time to come.
I don’t know what will happen to all the British civil servants who are working in Brussels and who will initially be out of a job although I’d expect many of them to find employment at the city’s British embassy and the British consulate where the UK will be in need of some heavyweight representation.
We certainly have leapt off a cliff on a moonless night but so did Christopher Columbus. As President Kennedy said in September 1962 when he announced the plans to put an American on the moon: “We choose to go to the Moon in this decade and do the other things, not because they are easy, but because they are hard; because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one we intend to win …“
We will be swamped today with invitations to conference calls and links to podcasts which will endeavour to tell us how to interpret last night’s events and the coming months and years. In truth nobody had really expected an “out” vote and I’d suggest that nobody has much of a realistic clue what to do and why.
Although most of us didn’t expect to find ourselves on the way out today, that is where we are and we will adapt. Funnily enough, I get the feeling that the leaders of the Leave campaign are as shocked and awed as the rest of us and don’t quite know what to do.
Dave “You may now call me Dunce” Cameron is stepping down at Number 10. Osborne, once such a bright prospect, is toast, as is I suspect Boris. In fact, anybody who has played a prominent role in splitting the country is now probably a spent force. I have suggested before that I think that Theresa May, the Home Secretary who has been notably absent from the mud-slinging of the past months, could prove to be a unifying force. We’ll just have to wait and see.
Finally, the Scottish question. The Scots voted by about two thirds to one third to remain. So did London. Will Nicola Sturgeon now be kind enough to support a referendum for London to disaffiliate itself from the rest of England too? As far as I know, the right to hold another referendum on Scottish independence is taken by the parliament of the United Kingdom and not by the Scottish Assembly so this might be a good time for her to keep her own counsel.
It is now time to bury talk of the problems which the Brexit vote might or might not bring with it and to get on with working on the solutions.
My suggestion, from a trading perspective, is not to panic, to scale into the selloff and to remember that if a week is a long time in politics, two years is an eternity. As the Chinese have it, may you live in interesting times. That, my friends, is exactly what we are doing.