Much ado about Brexit!

Much ado about Brexit!

507020244If I were a betting person, I would put money on your being aware that the United Kingdom is quitting membership in the European Union. I am also reasonably sure that you do not know exactly what that means for the British, the rest of the European Union, or for us in the US. It is my opinion that in the longer term, this will be a good thing for the Brits and most of us involved in the global financial community.

Since nature abhors a vacuum and people abhor uncertainty, the reaction since last Friday morning has naturally been negative. Overall, people have sold stocks and bought bonds, the usual flight to safety. Yesterday produced an exception, a rise in values. Hopefully it will not be what some affectionately call a dead cat bounce.

The primary point to realize is that the UK is not going anywhere. It is still going to trade with the rest of Europe regardless of its membership or lack thereof. The leaving is all about its ability to control its borders, to make and enforce its own rules and regulations again, instead of having bureaucrats in Brussels hand out edicts that might fit well in France or Belgium, but not in England or Scotland.

George Friedman of Geopolitical Futures (https://geopoliticalfutures.com/) focused upon the language of the foreign ministers of Belgium, France, Germany, Italy, Luxembourg, and the Netherlands last Friday. The representatives of the founding members seem to be now ready to accept a new reality–there will not be any complete integration of the individual nations into a something like a United States of Europe.

Brian Wesbury of First Trust stresses why this is a buying opportunity. Like me, you might not realize that Norway and Switzerland are not full members of the EU. They voted in the first place not to be members. Therefore, the EU created a sort of social membership for them. They still have free trade within the zone, but they have never been subject to those rules and regulations such as concerning immigration. So life will go on. (https://ftportfolios.com/commentary/economicresearch/MMO.)

Since Britain is a greater economic entity than either Norway or Switzerland, there is little chance that the others will shun it or make it more difficult to buy German cars and French wine. This also could be a boon to the US because that same bureaucracy has made it more difficult for US trading with the Union on fair terms.

I have combed through some of the responses of the major financial vendors such as Vanguard. They emphasize the conventional wisdom which is, Take the long view, it may be harder in the short run to make more than a few percent from your investments, but this too shall pass. Of the latter phrase’s wisdom, I am certain. This too shall pass.

(Past performance is no guarantee of future results. Advice is intended to be general in nature.)

June 29th, 2016|Categories: Business, Economy, News & Events|