Yes you heard me. The British pound is going HIGHER.
Let’s ignore the initial push lower, which is as much a product of pro-EU campaigns convincing fools that the Brexit can somehow be “bad for Britain” without also being “endgame for the EU”.
By signaling that they are exiting the EU, the UK is now closest comparable to the country of – wait for it – Switzerland. The UK has relative low debt loads, a free currency, and close proximity to the other countries.
With just minimal agreements put in place, the UK will quickly match the relationship that Switzerland has with the EU. Accordingly, they are the best reference for what the UK will look like in 10 years.
What is the real threat of the UK Brexit? Obviously, if it were just the UK leaving, which is already free from the euro, this would not be that big of a deal. What people are really worried about are OTHER nations who suddenly begin to hold referendums.
This would be a disaster for the euro; but more importantly for euro denominated financial instruments. This is the real threat here and why the rest of Europe is so pissed off.
But if the euro comes under pressure from a series of referendums, there will be a major flight to safety. And who is now the closest non-euro country with relatively cheap currency and financial assets?
The UK, geniuses.
When market players stop wetting the bed, they are going to eventually work this out. GBP will be high by Christmas.
In the meantime, the doomsayers (particularly businesses) who assured everyone they would not last a fortnight if the UK left the EU…assuming, I would imagine, that it wasn’t going to happen…are now backpedalling furiously. Apparently, with a gun against their heads, they are quite capable of making this work.
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This was such a great throwback post that I thought Jake gint would make an appearance.
According to Le Flys exquisite work ethic and brains, we learned Mr. G. Soros promised a 20% drop in GBP on the brexit. So, there is that.
I wonder if Soros bet on it again.
Mr. Cain Thaler – Long time no see. Glad to view a post from you again sir.
Which investment vehicle would you suggest? Some GBP fx on margin? GBP forwards? Calls/warrants on GBP?
An ETF or convertible bond denominated in Pounds?