Britain surprised the world with a vote to leave EU after being part of it since 1973.
Honesty it was not a big surprise to me. Well it's not that I am bragging after the result is announced! “Very lame”, you may think, but there are several truths to it.
The uncertainty of the world and Brexit to a certain extent had led me to starting a series of Gold and Silver articles lately. Refer as follows:
Gold and Silver – A peek into history to understand its impact on the world monetary system (Part 2)
It is not to advocate any buying/selling, but to allow ourselves to understand the precious’s metals’ history and its impact on the world when uncertainty is looming.
Expect the unexpected these days!
Majority of people here are almost certain that Brexit is a myth and even speculated in stocks hoping to profit from the eventual result. It is not uncommon. It is like saying PAP will always win all Singapore elections. This is mainstream thinking and nothing wrong with that. Yet, counterintuitive to normal belief, the unexpected sometimes do take place! The world is apparently going through a stage of anomaly these days. Do not be surprise if Donald Trump is elected coming November. In fact, There should be no political rant here, but I seriously do not see much long term difference between whether Clinton or Trump being elected as the president of the United States.
Always understand both sides of the coin!
Recently, I read many articles and videos relating to the Brexit referendum and majority of the articles on papers are inclined towards "Remain". For a start, I was convinced about the benefits of staying too. Nonetheless, me being me, I usually will not allow myself to see or hear just one side of the story. I did some research on the opposite camp and come across a video as follows:
In another incident last year while having dinner with my former British boss, we discussed about the same topic. Back then, I was pretty sceptical about the viability of Brexit. My perception was jolted when ex-boss told me his side of the story about why Britain will be much better off in the long run to be out of the EU. It is always more convincing hearing from the horse mouth - a local Brit in his mid 50s who travelled widely and someone I look up to as always logical and sensible.
With that, my views are more balanced.
Do not be over-confident even with familiarity, it is not sufficient!
For many years now, I had worked with the Europeans. My current company also has hundreds of British employees. It is not unfamiliar for me to travel to UK and other countries in Europe, working with both internally and externally with British and Europeans. Considering that, and in addition to all the articles I read relating to Brexit, you may think that it's no surprise that I will consider myself knowing this referendum much better than the average people on the streets.
Nah.... absolute not!
The reason is clear. I am not a British, neither did I follow Britain closely as compared to China and USA. It is also more difficult for us to judge politically or socio-economically a country if you do not grow or stay there. This is despite the business aspect which I may have experience in. Hence if the only exposures we have are just by reading articles online, it is without a question – insufficient! With that in mind, I did not make any action speculating on stocks before the result, neither is it any easy to take sides.
Rolf's final thoughts
Many people thought a coin has two sides. Nope, it has three sides – head, tail and edge. I prefer to stand at the edge of the coin, rather than to take sides of head or tail if Brexit is the right decision.
Good for long term only if...
Nonetheless if you were to ask me for my truthful personal opinion, I believe that Brexit is actually GOOD for Britain in the long run. That is provided that the British citizens can stay strong and united to create a brighter Britain of their own just like centuries ago when they were such a dominant force. It is absolutely not necessary to be part of the bloc to become successful.
Didn't we Singapore survive after leaving Malaysia? There are countries like Norway and Switzerland who are doing relatively better than their rest of European counterpart being not part of the bloc as well.
Many believe that after Brexit, Britain will be on the way to decline. In my view, EU as a whole is already declining and even at a faster rate than Britain. Except for Germany who is doing relatively better, but yet also being heavily dragged down by the rest of Europe countries especially those in the south, I really cannot figure out what efficient and effective strategies EU will employ to stimulate the entire European economy. Perhaps there are only two things they will do.
1) More stimulus to the economy by means of printing more and more currency and continuing creating an absurd negative interest rate environment.
2) Heavily reliance on USA who already is a bigger ship with holes sinking.
So what make us think that UK can actually benefit from an already declining EU economy in the long term?
Britain has their own strengths
Britain has a long history of superpower being as an independent country. Being colonial masters of many Asian countries in the past, they are one European country who has not only good understanding of Asia but also great trading relationships today as well. I went to many local Asian countries before and they are generally always happy to do business with the British. In return, as from my experiences, the British are always more understanding to Asian cultures compared to the rest of the European countries. As I speak, London has also overtaken Singapore as the second-largest offshore yuan clearing centre in terms of payments processing volumes, just behind Hong Kong. This can spell great relationships with the Chinese without having the bureaucracy of EU who is also greatly influenced by the Americans in one way or another.
Short Term Pain
That said, this separation like any other divorces after so many years will be extremely painful in the short term. There will be problems like the need to find a new PM and formed a new cabinet, renegotiate trade deals with an EU who may bear grudge and make life difficult for the new British government. It is not unlikely that UK will need to endure one of their difficult few years ahead.
Not the best timing though
And worst of all, all the impending problems ahead of Britain is going to be worsened in a current deflating world economy. It is definitely one of the worst times to get into a Brexit. And this is the one major reason, why I will not vote for Brexit in a time like this! 3-4 years ago, it will be perfect when the economy is much more stable. It is just like for the Fed, 3-4 years ago, it will be better to raise interest rate.
In a nutshell
Brexit is good for long term depending on British people how they brace themselves, very bad in the short term and above all, taking place at the very wrong timing now! Good luck for the British!