Brexit Happens

Brexit came and went, and the immediate consequences were bad. In overnight trading, hundreds of billions of dollars were lost, as Global markets plunged between 4 percent (United States) to 10 percent (Germany, UK), with billions more projected if Britain enters recession.
Although I agree to some extent with the cause, I disagree with the implementation, and Brexit may cause more problems for Britain than many may have bargained for. An argument against immigration is not necessarily an argument for Brexit.

Before the votes were counted, the bookies posted odds of ‘remain’ winning as high as 70%….how wrong they were, and I was right to not heed the consensus, in my own investing decisions:

On the subject of predictions, as for Brexit, I have no idea haw the vote is going to turn out. The bookies favor ‘remain’ winning, but I’m not so optimistic. Again and again, whether it’s multi-billion dollar funds lagging the S&P 500, billionaire hedge fund manger George Soros in 2013 buying puts in a bull market and losing his investment as the market kept going up, wealthy politicians failing to win (Jeb Bush), or huge companies failing to displace smaller more nimble competitors, more money does not mean smarter money. In many instances, the rich are just as clueless, if not more, as everyone else at many things. But if the S&P 500 falls a lot due to ‘exit’ winning, it will be a great buying opportunity. That I do know with certainty.

Not only bookies, but many commentators also seemed confident about ‘remain’ winning. At one point, as the votes were beginning to be counted, Nigel Farage conceded (prematurely) that ‘remain’ had likely won. The dominant narrative is sometimes wrong.

In anticipation of a bad outcome, I had shorted Germany a couple days earlier, exiting with a modest profit after covering on Friday. I was also long 10-year treasury bonds (which did well after the crash). I bought a weekly S&P 500 ‘put’ contract on Thursday night, as things started to turn south, for a very small amount and sold for a large profit hours later when the markets were down 4%, but I wish I had bought more of them. Overall, ended the day flat.

In agreement with James Altucher, for long-term US investors, Brexit doesn’t mean anything (it may actually be a positive), and I remain optimistic about the US stock market going forward. Brexit will not prevent Facebook and Google from earnings billions of dollars in ad clicks, nor stop people from shopping on Amazon, going to Disneyland, or eating at McDonald’s.

The parallels between ‘exit’, Trump, and the rise of nationalism, have already been covered by the media. Everyone is tired of the ‘status quo’, and seeks a ‘system’ that is different, and these frustrations especially pertain to immigration, whether it’s immigrants coming into America or Muslim immigrants flooding Europe as a consequence of the Syrian Civil War.