Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Saturday, 25 June 2016

Auf Wiedersehen, Pet!

Brexit stage left

Well, well. It's all aboard the Brexit flotilla!

Britons stunned pollsters and financial markets by voting a decisive 51.9 per cent (17.4 million votes) to 48.1 per cent (16.1 million votes) to leave the European Union (EU) leading to instant currency carnage, the British pound experiencing unprecedented declines to hit its lowest level in three decades. 

The vote started surprisingly badly for the "Bremain" campaign, with the Geordies voting to remain, but unconvincingly so, and then the Mackems voting to leave by an enormous margin before gannin' on the hoy (or whatever it is they do in Sunderland these days).

In truth, nobody would have been that surprised to see some of the more deprived areas voting to leave the EU.

But once South Buckinghamshire - which is, like, Beaconsfield! - voted to leave you just knew it was all over red rover. 

In the event Northern Ireland, Scotland, Gibraltar, and London voted to remain, but much of the remainder of England and Wales voted to leg it.

The Scots will in all likelihood demand a second referendum now, and maybe there will be calls for unification in Ireland.

And who knows what might follow?

What a shemozzle!

Polls suggested that generally it was the more privileged, higher educated, and younger folk - the ones who will have to live with the decision - voting to remain, but older types and lower socio-demographic classes voted to do one.

Outstanding analysis from the Guardian here shows how a sense of disenfranchisement and real or perceived lack of opportunity and wages growth may have led folk to vote out.

Immigration was doubtless also a major driver of votes for an exit.

Perhaps this will prove to be harsh on the younger generations who will no longer have the right to live and work in 27 other European countries.

Markets react

Down Under the Aussie dollar got absolutely walloped, down to a 73 handle before rebounding quite strongly, while bond yields fell to record lows.

Commodity prices generally sold off, although gold spiked. 

Aussie shares initially took a bit of a thrashing, eventually closing down by 3.17 per cent. Not that big a hit in the grand scheme of things. 

There were also predictions of the UK FTSE 100 losing the will to live, but in the event the market closed down only 3.15 per cent to be back where it was just a few days ago at 6,138.69. 

Potentially a momentous decision, though, with Britain set to lose its Prime Minister.

In keeping with true British tradition, this so-termed class war revolt will in all likelihood see one Etonian replaced by another. 

Nobody really seems to know the implications of what this might all mean for Britain over the next few years.

A contraction of economic growth, certainly. A recession, maybe.

But it will be a good long while before anyone really knows...