There is no doubt that we have seen a significant event over the last week.
The decision makes us all consider what will happen next and hence what to buy, what to sell and where to invest our money.
The following is a personal view, which you may wish to take into account when making your decisions. It is not Financial Advice.
What does this mean for the whole of Europe?
Chaos Volatility Calm Chaos Volatility Calm Chaos Volatility Calm
There are a number of parties who want to vent anger about the outcome of the Brexit referendum. A number of these parties wish to reverse or at least disrupt the current process. They will use their skills and powers to influence the outcome.
We are now seeing parties saying this was only an anti-immigration vote. The rest of the EU is fine. This is an oversimplification.
Be prepared for a very unusual period in the markets.
Do NOT get lulled into complacency, simply because matters have become more normal. Expect the unexpected in the next 4 months.
The answers to the following questions will give us an idea of how this will play out.
· Will the UK Parliament ratify the Poll and take the steps to withdraw from Europe?
· Will Northern Ireland and Scotland seek withdrawal from the United Kingdom and seek to stay in Europe?
· Will a new Conservative leader have the support of all the conservative MPs and be able to get a sensible deal through?
· Will the big banks take this lying down and accept this? or will they cause a crisis in the financial markets, thereby forcing the politicians hand?
· Will Labour drop it’s “luke-warm” leader and seek a more charismatic leader?
· Will David Cameron create a circumstance where he stays on because of circumstances, such as market turmoil etc. require stability?
· Will the Conservatives call a snap general election, with Labour in disarray? Big money would be willing to fund the moderates in the current Brexit as well as the maybes. Scotland and Northern Ireland would likely also support this.
· Will the upcoming elections in Italy, as well as next year in France, and the EU fear of these countries following Britain, cause Europe to be more accommodating of UK concerns and therefore be more willing to address some of the immigration issues?
· Have any Institution(s) been “wounded “(incurred financial loss) by this result, because their assets or liabilities positions have been compromised by the movements in the market?
· Has any major investor made a fortune? Mr. Soros? Lost a fortune? (the betting agencies seem to have lost)
· SOME Investors make money in any type of market. There will always be winners and losers.
· Volatile markets are like the Casino, there can be unbelievable profits (and losses). These can occur at random. Anything can happen.
· Investment rules go out of the window when such events occur. Financial principles of N.T.A. return on equity, DPS, P/E, EPS, etc. etc. simply have less relevance.
· Each country has the same number of mouths to feed. The same number of cars. The same amount of land. The same number of schools, Universities, hospitals, bridges, buildings, ports, airports, planes, ships as it had last week.
· The only thing that has changed is whether the UK is dominated by its relationship with Europe as it has had in the last 25 years.
· The mood of voters that the status quo is not acceptable. There are too many people in the UK and Europe who feel left behind and want change.
· Globalisation and free trade agreements will be under pressure from this result and Donald Trump’s attitudes to TTP. Expect a massive PR campaign to promote the benefits.
· Businesses and Banks still need customers so they can sell their products and services. They will adapt whatever the outcome.
· The investors expectations may be lower now, but confidence will restore the unrealistic expectations.
· The United Kingdom is now the 6th largest economy in the world. The UK economy will not collapse, but it will get “knocked around”
· Asia will not be significantly affected by this event.
· The opening of the “New Silk Road for China to Europe will have far more effect. China will be the beneficiary of this, as it has developed strong relationships with all of the countries on the way.
· Life will go on. In due course this event will be of minor impact, but it will be unsettling in the short term. The new norm may not be good, but probably better than the old norm.
· Markets always recover, never as quick as we like, but they recover.
· Buying companies with good businesses when their prices are driven down is normally profitable.
· Focusing on lower risk, stable companies will give consistent returns.
· Companies that are going to need to raise cash will get smashed! Avoid unless you are prepared to” double down “ i.e. to keep investing as the company needs cash.
· Companies trading with Asia will be less affected.
· Buying great companies tend to return value over time irrespective of the time in the cycle. Obviously the less you pay, the better (but a good stock is a good stock)
· If you can’t afford the volatility then sell the investments with high risk /volatility
· Find Bonds issued by companies with strong underlying businesses if you want regular income. The yields have been dropping but they are generally “locked-in.”.
What you MUST do.
· Review all assets, particularly Investments to ensure they are able to stand the volatility
· Speak to a trusted Adviser about each investment.
· Ensure you understand the characteristics of each Investment. How will they react to this market? Will the markets for the investments become less liquid (i.e. difficult to sell). Will your Investments need additional capital?
Take a close interest in your investments. Don’t just close your eyes and hope!
Make sure the underlying assets are in YOUR NAME.
Not just in a trusted associate’s name.
They are your assets.
Don’t let anyone have control over your assets at this time.
Whether you want assistance or not, you should consult an Investment Advisor you trust. It is like consulting a Doctor. You need input and advice.
If in doubt get a second opinion.
No one person knows (but all have an opinion).
Taking good advice will give you the maximum chance of riding out this uncertainty.
Take control of your future as soon as possible.
Good Luck with your investments.
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Chairman & CEO of
King Capital & Investment Corporation Ltd
Equity Investment Advisers Ltd
Investment Research Group Ltd.