Brexit: Investors need to wait for the bleeding

Brexit: Investors need to wait for the bleeding.

Article updated: 23 November 2018 12:00pm Author: Michael Baxter

“Buy, when there is blood on the street.” It was during a time of a French revolution, not ‘The French Revolution’ and Lord Rothschild said it was a time to buy. “But the streets of Paris are covered in blood” said his trusty lieutenant. “The time to buy is when there is blood on the streets, even when some of the blood is yours,” replied the lord.

Investors differ from most others in one key respect: times of crisis presents opportunity, you just need to wait for the moment of maximum misery.

Alas, we are not at that moment yet. Things will get worse before they get better.

Brexit troubles

I am no fan of Brexit, but I do think there are bigger worries.

Why we have not yet had a second referendum is beyond me. There is nothing undemocratic about voting twice: indeed a true democracy demands it.

Truth is, Brexit voters voted to Leave for multiple reasons; but a good chunk of those voters believed the ‘have your cake and eat it argument.’ That the EU would bend over backwards to do a deal, that the EU needed the UK more than the UK needed the EU. That we could have the advantages of free trade with the EU, without being subservient to EU rules.

We now know that this narrative was a lie. Many Brexit supporting politicians have been disingenuous with the truth.

There is a mood within the UK now that Theresa May was dealt an impossible hand of cards. A large proportion of the Brexit voting electorate are furious with the snake in the grass, hard Brexit peddling politicians — the public’s memory of what was said pre-referendum is still fresh, even if the increasingly inept BBC has forgotten.

Mrs May has, amazingly, become popular, drawing the sympathy vote.

That is why we need another referendum, if her deal is as bad as the hard Brexiteers say, then the country needs to decide: stay, the May deal, or hard Brexit. Then people should have a second choice. So, in the event that no one option gets more than 50 per cent of votes, the second choice from people whose first choice came third, is added in.

The Brexit camp don’t want this, they hide behind tears about the will of the people, but the tears are of the type that crocodiles weep. Truth is, they know a second referendum will create a resounding vote for Remain.

Economy

From a UK economy point of view, Theresa May’s deal is not so bad — not as good as Remain, but it will probably be enough to safeguard London’s position as one of the world’s most dynamic, wealth creating cities in the world.

And I am not just talking London and finance, it’s Europe’s major tech hub too.

But Mrs May’s immigration policy makes no sense. Those that worry about immigration, cite pressure on the NHS, but how will that most venerable of institutions cope when only migrant workers who earn more than £30,000 a year are allowed in?

Had such a rule been imposed during Victorian times (allowing for inflation) then a lowly migrant called Michael Marks would never have arrived on these shores and he would never have met John Spencer.

Bigger fish

But there is something bigger than Brexit.

We are seeing the return of nationalism across the world. Nationalism will be followed by fascism, and its bed fellow ‘hate.’

A reversal of globalisation, as the nationalists demand, will be followed by inflation and surging interest rates. All those zombie firms saved by quantitative easing will be left with nowhere to go.

The 1929 crash was followed swiftly by economic depression then war.

The 2008 crash was followed by zero — or near zero — interest rates and quantitative easing, but all that such policies have done is delay the inevitable.

Baby boomers angst and technology rage

But immigration is not the cause of our woes, nor is globalisation; instead it is technology.

It has already hollowed out labour markets, devastating well paid jobs in manufacturing and replacing them with minimum wage jobs in warehouses or in delivery services. The gig economy is creating discontent, the end of a job for life has given way to the end of a career for life.

And older workers — the baby boomers and the generation behind — are terrified of becoming irrelevant.

They lash out at the generation that understands tech, and calls it names — millennials are snowflakes. An absurd description. But tech does not throw names, instead it throws sticks and stones — or disruption — at the old way of doing things.

As for investors

The markets still haven’t grasped how dangerous all this is. There will be a lot more blood yet.

But just as technology creates unrest and danger, it creates opportunity — huge opportunity.

Look at the areas I have waxed lyrical about here: techs, especially AI: That is where hope, as well as danger, lies. 


These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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