A Mistaken Notion About Brexit That Occurred to Me Over the Weekend...
We've laid low these last couple of weeks and basically turned off our financial media feeds. Everything just got so soaked with Brexit, it was hard to wade through the swamp of blather created by the overwrought, spittle-flecked commentary, especially that emerging from the vested interests in continuing the EU "as is," i.e., with the UK firmly ensconced. That's why we posted our last (and only) piece these past few weeks on the much more real tragedy unfolding in Venezuela. At least something you could point to as truly bad was happening, without two sides making counter-claims.
But now that the "Leave" vote officially prevailed, there may be a mistaken notion about this expression of the British public. All the reporting assumes the UK leaving the EU is a done deal. It may; but the vote doesn't assure that. You see, the vote is an "advisory" vote. It has no legal power. It's now up to the UK government and the EU powers that be in Brussels to agree on separation. They also need to work out the details. So far none of this has been clarified - at least nothing I've seen or heard.
And so we await specifics, assuming both sides agree on separation: How long will complete separation take? Of what will the separation process consist? What if both sides don't agree on the details? That could drag things out for a long time, adding yet another layer of "uncertainty" into already spooked markets.
Of course, we'd be shocked if the UK government refused to do "the peoples'" bidding, or if the EU told the UK it "can't" leave. On the other hand, it was rather a surprise when the "Leave" votes were counted more than "Remain." Markets had already priced "Remain" as victor. And markets are never wrong, right? I mention this because however markets settle after this initial bout of panic, it's not a sure thing that the market's direction will provide any sure insight into the ultimate consequence of either the vote or - if it's implemented - the actual removal of the UK from the EU.
So a lot remains up for grabs this Monday morning. And we haven't even mentioned the push in France, Italy, and the Netherlands for similar "advisory" referendums. One thing that doesn't remain up for grabs is the U.S. Federal Reserve raising interest rates any time soon. That drama's been pushed off center stage for the time being.
But now that the "Leave" vote officially prevailed, there may be a mistaken notion about this expression of the British public. All the reporting assumes the UK leaving the EU is a done deal. It may; but the vote doesn't assure that. You see, the vote is an "advisory" vote. It has no legal power. It's now up to the UK government and the EU powers that be in Brussels to agree on separation. They also need to work out the details. So far none of this has been clarified - at least nothing I've seen or heard.
And so we await specifics, assuming both sides agree on separation: How long will complete separation take? Of what will the separation process consist? What if both sides don't agree on the details? That could drag things out for a long time, adding yet another layer of "uncertainty" into already spooked markets.
Of course, we'd be shocked if the UK government refused to do "the peoples'" bidding, or if the EU told the UK it "can't" leave. On the other hand, it was rather a surprise when the "Leave" votes were counted more than "Remain." Markets had already priced "Remain" as victor. And markets are never wrong, right? I mention this because however markets settle after this initial bout of panic, it's not a sure thing that the market's direction will provide any sure insight into the ultimate consequence of either the vote or - if it's implemented - the actual removal of the UK from the EU.
So a lot remains up for grabs this Monday morning. And we haven't even mentioned the push in France, Italy, and the Netherlands for similar "advisory" referendums. One thing that doesn't remain up for grabs is the U.S. Federal Reserve raising interest rates any time soon. That drama's been pushed off center stage for the time being.
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