UK Referendum Thread [Moderator Sanctioned]

[HMS Vanguard]

A one or two year "stagnation" of low-ish but positive growth is a blip by definition.

[Lexten]

That's why I said the scaremongering was self-fulfilling. It reduced investor confidence in the pound, which reduced demand for it, which caused it's value to tank.

Falling investor confidence was because they did not believe putting their money in private capital would yield as high return anymore. I don't know about you but I think that's to do with the IOD, RBC, EEF, BBA, WTO, IMF ... etc all saying British (and, where applicable, their constituent) companies would likely suffer at least a squeeze in the short- to medium-term, not what the politicians had to say.

Stocks rose in value, so I'm not sure what you mean when you say 'they did not believe putting their money in private capital would yield as high return anymore'.

But it's those various sources that predicted a negative impact which caused a negative impact. If the sources had said that Brexit would have been good for the economy, confidence in the economy would have grown and Brexit would have been good for the economy.

When a doctor tell you your liver is going to shut down if you do something, your liver isn't then going to shut down because the doctor says so. It shut down because you did the thing.

That is a rather simplified version of explanation for you. These people that are pulling money out are doing so because we are now in a serious position of uncertainty. They're doing so because their best knowledge has said that's the best course of action to take because of the ramifications.

Those people said it would be bad for the economy because it would be bad for the economy. If they seriously thought being outside the EU would have been better for them, they would have said so.

Simplified, economics is supply and demand. Demand depends at least partly on investor and consumer confidence which is based on what these people hear in the media and from economists. If economists predict something bad is going to happen to the economh, investors bail and consumers save. Then something bad does happen to the economy. Self-fulfilling, like the placebo effect (to use a medical example).

The hysteria meant that the BofE had to cut interest rates (which it had been saying it would do for the past month) which also makes sterling less attractive.

Pound tanked long before BoFE even indicated it was cutting interest rates; and the customer confidence was above forecast in June - so why didn't the pound recover its original value based on hysteria theory? Further the BoFE highlights fall in both business and customer forecast, unless you're suggesting businesses are being run based on hysterics, how is significant drop in business confidence explained by hysteria theory?

Or alternatively, experts are actually experts in their field of study, businesses don't like uncertainty, Brexit has caused uncertainty and leave campaign had no plans to address that uncertainty, business stop investing like they said they'd to wait for certainty, economic outlook drops because investment is likely to drop, everyone can see that because everyone predicted that, traders flock to safer assets long before BoFE says anything.

The comment about interest rates explains why the pound has stayed at it's lower value. That and, according to Vassenor's article, the pound has been overvalued for quite some time.

And businesses aren't run by a robot somewhere, they're run by people who watch the news. And despite this, several businesses have announced that they are investing heavily into the UK.

[Great Nepal]

A one or two year "stagnation" of low-ish but positive growth is a blip by definition.

Where exactly are you getting the one or two years number from?
And again 0.5% is predicated on 'some reduction in openness' - so almost status quo wrt trade; what from leave campaign says this is what they're happy with?

[Great Nepal]

The comment about interest rates explains why the pound has stayed at it's lower value. That and, according to Vassenor's article, the pound has been overvalued for quite some time.

But pound had been at a lower value for over a month before rate cuts; and even if we say pound was overvalued, its current price reflects value for short period in 2009 recession after it dropped from 1.90; how's that a long term stable value?

And businesses aren't run by a robot somewhere, they're run by people who watch the news. And despite this, several businesses have announced that they are investing heavily into the UK.

And make business decisions based on information from more than the news, look at wider data - companies are much less likely to invest in the UK, and the reason they cite is the referendum.

[San Lumen]

this is pre-brexit. brexit has not happened. all this panic and damage is due to the mere idea it might happen.

loss = predicted_damage * brexit_probability

Granted that brexit_probability is less than 1.0, loss is 0.0, so unless brexit_probability is 0.0, so is predicted_damage.

At least that is what the markets are saying.

the UK is going to leave the EU.

[Lexten]

The comment about interest rates explains why the pound has stayed at it's lower value. That and, according to Vassenor's article, the pound has been overvalued for quite some time.

But pound had been at a lower value for over a month before rate cuts; and even if we say pound was overvalued, its current price reflects value for short period in 2009 recession after it dropped from 1.90; how's that a long term stable value?

There were rumours of rate cuts almost immediately after the brexit vote and an overwhelming majority of investors expected the BofE to cut rates. Furthermore, the pound has been nowhere near $1.90 for seven years, the IMF report the article mentions obviously means that the pound was overvalued when it was worth much less than that.

And businesses aren't run by a robot somewhere, they're run by people who watch the news. And despite this, several businesses have announced that they are investing heavily into the UK.

And make business decisions based on information from more than the news, look at wider data - companies are much less likely to invest in the UK, and the reason they cite is the referendum.[/quote]

I can't read your link as it's behind a pay wall, but this article answers your complaints well enough:
http://blogs.spectator.co.uk/2016/07/bu ... t-britain/

[Vassenor]

loss = predicted_damage * brexit_probability

Granted that brexit_probability is less than 1.0, loss is 0.0, so unless brexit_probability is 0.0, so is predicted_damage.

At least that is what the markets are saying.

the UK is going to leave the EU.

And with it the Single Market. Meaning UK-based businesses will lose the ability to conduct tariff-free trade with EU nations.

[Arkolon]

Falling investor confidence was because they did not believe putting their money in private capital would yield as high return anymore. I don't know about you but I think that's to do with the IOD, RBC, EEF, BBA, WTO, IMF ... etc all saying British (and, where applicable, their constituent) companies would likely suffer at least a squeeze in the short- to medium-term, not what the politicians had to say.

Stocks rose in value, so I'm not sure what you mean when you say 'they did not believe putting their money in private capital would yield as high return anymore'.

Both the FTSE 100 and 250 fell markedly on the announcement of the referendum, and the FTSE 250 only recovered to pre-Brexit levels before the turn of August. The FTSE 100 contains multinational companies that deal primarily in foreign currency so the weakness of the pound appeared to make corporate profits greater in £ terms. Adjust FTSE 100 to be denominated in USD and see for yourself if gross corporate valuation rose.

As for a general idea of what a portfolio reshuffling is useful for, especially to be more bond-oriented post-Brexit, I've written about that before.

[Vassenor]

In short what we've had is a lot of unqualified people pointing at insignificant things as proof that the economy has already recovered and every negative prediction is wrong.

[Great Nepal]

There were rumours of rate cuts almost immediately after the brexit vote and an overwhelming majority of investors expected the BofE to cut rates. Furthermore, the pound has been nowhere near $1.90 for seven years, the IMF report the article mentions obviously means that the pound was overvalued when it was worth much less than that.

Sure but firstly those expectations were marked for end of 2017, and secondly that'd mean when bank announced it wasn't lowering it in July, pound'd be expected to go up on 14th but there's no evidence of that beyond daily fluctuation at that time.

From: https://www.ft.com/content/cb7489d7-c27 ... 6efb1dac03

On the second point, I haven't seen the IMF report - but the exchange rate after the 2009 crash, has never gone below 1.43; and frankly in the ten year view - it's been quite stable hovering between 1.43 to 1.7; after Brexit it hit 1.29 and now its around 1.30. That really can't be attributed to pound being over valued - especially since before the referendum pound was at the trough not the peak. But please do link the IMF report.

I can't read your link as it's behind a pay wall, but this article answers your complaints well enough:

That's weird, FT always works fine for me and I've never paid; maybe student account... What the page is basically about is report on corporate spending from Credit Suisse: significant proportion of companies are saying they foresee reduction in their UK spending; in same vein half the companies claimed they'd postpone hiring until Brexit clarity, which isn't forthcoming.

http://blogs.spectator.co.uk/2016/07/business-confidence-returning-brexit-britain/

From the link:

The Bank of England’s assessment of business activity in the month since the referendum reports ‘business as usual’, with firms hiring, borrowing and investing as normal

BoFE actually says "weaker medium-term outlook for activity largely reflects a downward revision to the economy’s supply capacity, near-term weakness in demand is likely to open up a margin of spare capacity, including an eventual rise in unemployment"; definitely not business as usual.

There were fears that growth would grind to a halt ahead of the referendum, as fear of the unknown stopped firms investing. But as we know now, growth accelerated.

...I dont even know what to say here... we're discussing growth of negative or just over 0%. We were looking at 2%.

[Marcurix]

When a doctor tell you your liver is going to shut down if you do something, your liver isn't then going to shut down because the doctor says so. It shut down because you did the thing.

That is a rather simplified version of explanation for you. These people that are pulling money out are doing so because we are now in a serious position of uncertainty. They're doing so because their best knowledge has said that's the best course of action to take because of the ramifications.

Those people said it would be bad for the economy because it would be bad for the economy. If they seriously thought being outside the EU would have been better for them, they would have said so.

Economic prospects are not governed by objective fact that are 100% true. It's based on opinions that feed into confidence. If you have a doctor tell you you have liver disease 99.9 times out of 100 you have liver disease, it is also a diagnosis that can't be fulfilled by a self fulfilling diagnosis. Economists are however more often wrong and economic conditions can be worsened or improved by events that can become self fulfilling.

You undersell economic accuratcy and oversell medical accuracy. Doctors are human, able only to make analysis based upon the information they can receive.

As much as the pro-Brexit side was really eager to point out experts can make mistakes, because of course they do, that does not dismiss their positions.

Economics are often lessons from history, given models that we can put numbers into and calculate. These often form a big part in predictions that in turn inform confidence. Often we don't have all the numbers, but there a good chance of getting it in the ballpark.

I could, for example, make a fairly accurate prediction of the effects a price ceiling would have on the London housing market and tell you how long it would take the market to recover form the introduction of such and the wider consequences because we've seen similar situations before.

My broad point was that most people would be pretty willing to listen to an equally complex subject from an expert at face value - despite the fact they're prone to the same constraints and tendency for failure as any other - but seem perfectly willing to question or dismiss others simply because they do not fit within their preferred view.

This is to say blaming the economists for doing there job is a poor way of trying to shift the blame.

Edit: That aside, it also grossly undersells the autonomy of the hundreds of thousands of companies involved in this that take detailed local looks and what the proposed meant for their bottom line. It's not like they all stand around the tv waiting to hear from any economist and base their decisions soley on that.

[Salandriagado]

What you consider doesn't matter. It is insider trading.

It is exactly "manipulating the markets in favour of Leave politicians".

Well I don't consider it insider trading and it shouldn't be illegal. Banks should have refused to sell to prevent the pound from crashing. I don't consider it fraud and collusion to save investors from panic selling and and outright stupidity and childish behavior. I would have refused to sell and every other bank should have done the same or they could have simply stopping trading and prevented selling on the pound.

You realise that banks ceasing to sell currency is pretty much the hallmark of total economic collapse, right? As far as stopping trading goes: take a look at how well that goes for China every damned time they try it (spoiler: everything just crashes harder as soon as trading resumes).

Especially when it was made clear this is what would happen. Repeatedly.

Or this just because you can't write it off as scaremongering now?

But the scaremongering is what led to the pound crashing. It was a self-fulfilling prophecy.

No, uncertainty is. Investors don't generally like uncertain investments, so anything unpredictable will cause drops like what we saw.

What sent the pound crashing - or rather what sent the value of the dollar to the pound spiking - is investors converting their currencies to buy (especially safe) assets out of the country. This sent bond yields and share indices falling as well since investors took money out of things that would presumably provide lower return (perhaps leaving the EU meant lower profits) compared to bonds. While it is true that it's a bit premature - nothing has legally been changed yet so at most it's confidence that's been shaken - it's very telling that GBPUSD is still at around the 1.30 mark, lower than it was just after the referendum, meaning the money that left is still reluctant about returning into GBP.

Right, the only thing that's changed is investors confidence in the pound. The only reason that investors are less confident in the pound is because of the scaremongering about what would happen in the case of Brexit.

No. Investors (or rather, the algorithms used by investors, because there are no humans actually managing significant investment funds directly any more) are not notably effected by such things. They are effected by hard data: specifically, any significant change increases uncertainty, and hence leads to such a drop.

If traders are making bad investment based on public hysteria and haven't invested heavily in apparently undervalued currency for last month+, clearly they don't know what they're doing.

The hysteria meant that the BofE had to cut interest rates (which it had been saying it would do for the past month) which also makes sterling less attractive.

Erm, no. Up until the referendum, it was broadly predicted that interest rates would rise in the near future.

When a doctor tell you your liver is going to shut down if you do something, your liver isn't then going to shut down because the doctor says so. It shut down because you did the thing.

That is a rather simplified version of explanation for you. These people that are pulling money out are doing so because we are now in a serious position of uncertainty. They're doing so because their best knowledge has said that's the best course of action to take because of the ramifications.

Those people said it would be bad for the economy because it would be bad for the economy. If they seriously thought being outside the EU would have been better for them, they would have said so.

Simplified, economics is supply and demand. Demand depends at least partly on investor and consumer confidence which is based on what these people hear in the media and from economists. If economists predict something bad is going to happen to the economh, investors bail and consumers save. Then something bad does happen to the economy. Self-fulfilling, like the placebo effect (to use a medical example).

Stock trading, and especially currency trading, is not done by humans to any real degree: it's done by computers. Humans are entirely irrelevant to the whole equation. Computers very rarely react to scaremongering in the tabloids.

Pound tanked long before BoFE even indicated it was cutting interest rates; and the customer confidence was above forecast in June - so why didn't the pound recover its original value based on hysteria theory? Further the BoFE highlights fall in both business and customer forecast, unless you're suggesting businesses are being run based on hysterics, how is significant drop in business confidence explained by hysteria theory?

Or alternatively, experts are actually experts in their field of study, businesses don't like uncertainty, Brexit has caused uncertainty and leave campaign had no plans to address that uncertainty, business stop investing like they said they'd to wait for certainty, economic outlook drops because investment is likely to drop, everyone can see that because everyone predicted that, traders flock to safer assets long before BoFE says anything.

The comment about interest rates explains why the pound has stayed at it's lower value. That and, according to Vassenor's article, the pound has been overvalued for quite some time.

And businesses aren't run by a robot somewhere, they're run by people who watch the news. And despite this, several businesses have announced that they are investing heavily into the UK.

Erm, actually, the businesses that matter to stock and currency prices (those that trade large quantities of stocks and currency on a daily basis) are run by computers, to all practical intents and purposes.

[The Nihilistic view]

"Yeah staying would have totally wiped the debt with no need to pay anything"

I don't recall making such a claim, so please try again darling.

You want me to try and pretend you said something clever instead of something really really stupid?

[Grave_n_idle]

Especially when it was made clear this is what would happen. Repeatedly.

Or this just because you can't write it off as scaremongering now?

But the scaremongering is what led to the pound crashing. It was a self-fulfilling prophecy.

Nope. The markets were buoyant right up until it became obvious that the UK had voted to leave. It was, in fact, the exact opposite of scare-mongering. The markets were hyped by belief that exit was unlikely and that the status quo was preserved.

When it became clear that the UK was going to exit the EU, investors realised that the stable markets they gamble on had been removed. The pound crashed because of a variety of things - uncertainty about markets, unclear status of existing investments in a changed market, general nervousness about significant change, and a newly unstable currency - but scaremongering was not one of them.

[Lexten]

There were rumours of rate cuts almost immediately after the brexit vote and an overwhelming majority of investors expected the BofE to cut rates. Furthermore, the pound has been nowhere near $1.90 for seven years, the IMF report the article mentions obviously means that the pound was overvalued when it was worth much less than that.

Sure but firstly those expectations were marked for end of 2017, and secondly that'd mean when bank announced it wasn't lowering it in July, pound'd be expected to go up on 14th but there's no evidence of that beyond daily fluctuation at that time.

From: https://www.ft.com/content/cb7489d7-c27 ... 6efb1dac03

1)'The Bank of England is likely to cut interest rates over the summer to combat a post-Brexit vote slowdown, the Bank's Governor, Mark Carney said today.'

2) 'The Bank of England’s inaction triggered explosive scenes on financial markets. The pound surged by more than 2pc to $1.3480 against the dollar, its highest level since June 30, while it spiked to €1.2045 against the euro.'

On the second point, I haven't seen the IMF report - but the exchange rate after the 2009 crash, has never gone below 1.43; and frankly in the ten year view - it's been quite stable hovering between 1.43 to 1.7; after Brexit it hit 1.29 and now its around 1.30. That really can't be attributed to pound being over valued - especially since before the referendum pound was at the trough not the peak. But please do link the IMF report.

'Pound is between 5pc and 15pc overvalued, says International Monetary Fund.'

I can't read your link as it's behind a pay wall, but this article answers your complaints well enough:

That's weird, FT always works fine for me and I've never paid; maybe student account... What the page is basically about is report on corporate spending from Credit Suisse: significant proportion of companies are saying they foresee reduction in their UK spending; in same vein half the companies claimed they'd postpone hiring until Brexit clarity, which isn't forthcoming.

http://blogs.spectator.co.uk/2016/07/business-confidence-returning-brexit-britain/

From the link:

The Bank of England’s assessment of business activity in the month since the referendum reports ‘business as usual’, with firms hiring, borrowing and investing as normal

BoFE actually says "weaker medium-term outlook for activity largely reflects a downward revision to the economy’s supply capacity, near-term weakness in demand is likely to open up a margin of spare capacity, including an eventual rise in unemployment"; definitely not business as usual.

https://www.theguardian.com/business/20 ... referendum

There were fears that growth would grind to a halt ahead of the referendum, as fear of the unknown stopped firms investing. But as we know now, growth accelerated.

...I dont even know what to say here... we're discussing growth of negative or just over 0%. We were looking at 2%.

The quote refers to UK growth before the referendum (which is actually quantifiable unlike predictions) which accelerated despite numerous claims that firms were waiting until after the referendum to invest.

But the scaremongering is what led to the pound crashing. It was a self-fulfilling prophecy.

No, uncertainty is. Investors don't generally like uncertain investments, so anything unpredictable will cause drops like what we saw.

What sent the pound crashing - or rather what sent the value of the dollar to the pound spiking - is investors converting their currencies to buy (especially safe) assets out of the country. This sent bond yields and share indices falling as well since investors took money out of things that would presumably provide lower return (perhaps leaving the EU meant lower profits) compared to bonds. While it is true that it's a bit premature - nothing has legally been changed yet so at most it's confidence that's been shaken - it's very telling that GBPUSD is still at around the 1.30 mark, lower than it was just after the referendum, meaning the money that left is still reluctant about returning into GBP.

Right, the only thing that's changed is investors confidence in the pound. The only reason that investors are less confident in the pound is because of the scaremongering about what would happen in the case of Brexit.

No. Investors (or rather, the algorithms used by investors, because there are no humans actually managing significant investment funds directly any more) are not notably effected by such things. They are effected by hard data: specifically, any significant change increases uncertainty, and hence leads to such a drop.[/quote]

Which is why growth accelerated in the run-up to the referendum.

The hysteria meant that the BofE had to cut interest rates (which it had been saying it would do for the past month) which also makes sterling less attractive.

Erm, no. Up until the referendum, it was broadly predicted that interest rates would rise in the near future.

The interest rate cut is one of the reasons that the pound stayed low after the referendum.

Simplified, economics is supply and demand. Demand depends at least partly on investor and consumer confidence which is based on what these people hear in the media and from economists. If economists predict something bad is going to happen to the economh, investors bail and consumers save. Then something bad does happen to the economy. Self-fulfilling, like the placebo effect (to use a medical example).

Stock trading, and especially currency trading, is not done by humans to any real degree: it's done by computers. Humans are entirely irrelevant to the whole equation. Computers very rarely react to scaremongering in the tabloids.

Humans make the decisions, that's why traders exist.

The comment about interest rates explains why the pound has stayed at it's lower value. That and, according to Vassenor's article, the pound has been overvalued for quite some time.

And businesses aren't run by a robot somewhere, they're run by people who watch the news. And despite this, several businesses have announced that they are investing heavily into the UK.

Erm, actually, the businesses that matter to stock and currency prices (those that trade large quantities of stocks and currency on a daily basis) are run by computers, to all practical intents and purposes.

The decisions are made by humans, that's why Ceo's exist. And I was replying to the assertion that business confidence had fallen, which has nothing to do with computers.

Stocks rose in value, so I'm not sure what you mean when you say 'they did not believe putting their money in private capital would yield as high return anymore'.

Both the FTSE 100 and 250 fell markedly on the announcement of the referendum, and the FTSE 250 only recovered to pre-Brexit levels before the turn of August. The FTSE 100 contains multinational companies that deal primarily in foreign currency so the weakness of the pound appeared to make corporate profits greater in £ terms. Adjust FTSE 100 to be denominated in USD and see for yourself if gross corporate valuation rose.

As for a general idea of what a portfolio reshuffling is useful for, especially to be more bond-oriented post-Brexit, I've written about that before.

Adjusting the FTSE to be denominated in dollars makes no sense as the value of the dollar has risen. Looking at the FTSE in terms of pounds does make sense as, you know, the FTSE is based in the UK, where pounds are used.

[Vassenor]

Property prices in the City are falling.

[Dooom35796821595]

Property prices in the City are falling.

Office buildings, you made it sound like house prices were falling. Which I'm sure they are.

And this isn't a bad thing.

[Vassenor]

Property prices in the City are falling.

Office buildings, you made it sound like house prices were falling. Which I'm sure they are.

And this isn't a bad thing.

Pretty sure "the City" implies office space.

[Freefall11111]

A one or two year "stagnation" of low-ish but positive growth is a blip by definition.

Remind me what chapter of macro 101 has the definition for a blip?

[Vassenor]

Norway may block UK return to European Free Trade Association

[Ifreann]

Norway may block UK return to European Free Trade Association

Those accursed penguins.

[Dooom35796821595]

Norway may block UK return to European Free Trade Association

Yeah, because having the second largest economy in Europe won't give the Etfa a lot more power and ability to change it for the better.

[Vassenor]

Norway may block UK return to European Free Trade Association

Yeah, because having the second largest economy in Europe won't give the Etfa a lot more power and ability to change it for the better.

But I thought the whole point was that everyone was going to bend over backwards to give us whatever we want.

[Imperializt Russia]

Norway may block UK return to European Free Trade Association

Yeah, because having the second largest economy in Europe won't give the Etfa a lot more power and ability to change it for the better.

Probably not. Quintupling its size probably won't do the other nations in it many favours.

[Dooom35796821595]

Yeah, because having the second largest economy in Europe won't give the Etfa a lot more power and ability to change it for the better.

But I thought the whole point was that everyone was going to bend over backwards to give us whatever we want.

The point is to work for mutual intrests.