BREXIT – Aftermath of Britain leaveing the EU
Brexit has caused a huge shock in the global financial markets and as some say an opportunity to buy. The majority of the British people have used their democratic rights to leave Europe. However, this great nation is being treated by the main media and their allies like a third rate citizens who apparently were either too drunk or too stupid to vote correctly. How dare do a few so called Elites of continental Europe treat the majority of British people like European Mexicans. How dare do certain European leader threaten Europe with such harsh measures. If Brits are treated like European Mexicans the resentment against EU will grow more and more the financial uncertainty will spill over to political uncertainty and definite crisis and who knows what next. I therefore commend Mrs. Merkle’s words, who commented after the Brexit, to give the new government to gather its thought’s and come back to the table their proposals, in good time.
Due to the uncertainties in the future licensing of the financial products out of the UK, it is obvious that CAPEX will be reduced in the short term. And this shortfall will take place mainly in the financial markets, which are mainly cantered in the city of London. This being the reason why London, as a whole, had voted to stay in the EU. The question the majority of the European leaders should ask themselves should be “Is London representative of the entire England or the UK for that matter?”
According to the Financial Times (FT), the operational shit begins now and banks have taken action to shift their operations out of the UK. The big US Banks – JP Morgan Chase, Goldman Sachs, Bank of America, Citi group and Morgan Stanley, who have historically set up their regulated business out of Britain and used the right to “passport” in the EU bloc.
Today you can passport, as a financial services provider, in the United Kingdom and serve your clients throughout the rest of the European bloc. With leaving of the United Kingdom if this is right is to go away, major Financial Businesses will have to either migrate to European Mainland or set up a subsidiaries there for their right to “passport”, in order to service their clients in mainland Europe. Which means some of these financial institutions might have already started some of those discussions, in Brussels, in order to understand what it would mean to move their Euro clearing to the continental Europe.
And we have already seen how rapidly the situations can change. For example, UK EU’s Commissioner Lord Hill has already announced last weekend that he will step down, quoting “The voices that would be present at the table without Britain – the voices of French financial services industry, German industry, Dutch, Irish will clearly be heard and the nature and the shape of the financial services industry in France or in Germany, form the banking and other industrial point of view, is pretty different from what it is in the UK. And hence the direction of how policy will evolve will reflect those different voices, without the British voice in there to balance.” (source FT 27TH June 2016).
Having said all the above however, Mrs. Laggard and the rest of her colleagues in continental Europe should not adopt with their primitive policies in order to build a barrier against the United Kingdom, much like Mr. Trump’s allegation of building a wall against Mexicans. Such draconian trade barriers against the UK with the aim to cause its disintegration and disarray will not only hurt the UK but it can, in the long run damage Europe. Returning economic migrants will add to the strain of the unemployment in mainland Europe. According to FT, “East European states are ready to dig in over the migrant rights”. Therefore Britain will face a defensive Eastern Europe in their negotiations to exit the EU, as British voters’ have demanded to control immigration more tightly. Easter European States resisted Mr. Cameron’s demand to curtail benefit rights of EU migrant workers. Diplomates from Poland, Slovakia, Czech Republic and Hungary wold be likely to negotiate with Britain as a new bloc. More than 1.3 Million people from those four countries are said to be living in the UK. Brexit is not to take place tomorrow and the above number for the migrants might well top 1.5 Million before the definite exit of Britain for the EU, making it more and more difficult for those countries to absorb their returning workers. Only to become unemployed in their own countries.
Britain is still very much part of the Europe and despite global warming has not an inch drifted away from the continent physically and from its allies. And all the hectic caused by the main media is very counterproductive. And that not only against independent Europe but also for the democratic European citizens. The main media and all its allies should now realise that despite their one-sided forecasts, no one is actually convinced of their preaching. The main message from the people living in the UK is that Europe should change its business model. Building a trade walls, much like Trump’s Migrants Wall against Mexicans, will in the long run not help anyone and will be very damaging for Europe and Europeans as a whole. Brits are not European Mexicans. Cooperation with Europe will strengthen the remaining ties with Europe and can lead to the return of Britain, increasing confidence and solidarity for a strong Union and currency.
Easy money makes it hard to gauge the markets
Monetary policy is running out of room to manoeuvre, said Hyum-Song Shin, Head of research at the Band for International and Settlements (BIS), in an interview. It’s hence not clear how much further stimulus of the real economy can be accommodated using monetary policy tools alone. Without inviting unwanted distortion in the markets (source Bloombeg 26.06.2016).
Investors re-map post Brexit Strategies amid global markets upheaval
Ultimately, we have no experience in what will happen next, said Glen Capelo managing director at Mischler Financial Group Inc., who has spent the intervening years on various trading desks, said in a note to clients. Some 23 years of positions may need to be unwound now, he added in an e-mail.
Britain’s vote to leave the European Union almost a quarter of a century after its creation with the Maastricht treaty left Global Markets in a disarray on last Friday.
Quants, ETFs and Overweight Funds hang on the UK vote. One way to access how much pain looms for global stocks post Brexit is to Figure out who needs to sell. According to Bloomberg, Britain’s departure from the EU will unleash as much as USD 300 Billion of selling by quant programs in the already battered US stocks market, according to Marko Kolanovic, the JPMorgan Chase & Co. Derivatives strategist.
Effect of the Negative Rates and the FED hike (source Bloomberg 26.06.20156)
Ten10 year rates in Europe, last Friday:
Country Yield 1 Day
Swiss Government Bonds -0.49% -12
Japanese -0.17% -03
German Bund -0.05% -14
United Kingdom Gilt 1.08% -29
With these yields across Europe compared to the US 10 year Treasuries at 1.56% down 27 for the last month it is very unlikely for Mrs. Yellen to put up the short term rates in the United States in 2016.
Seen form the above chart and the continuous fall of the British Pound against the Swiss Franc, having the lowest or the most negative of the above shown rates, shows how strong the Swiss Economy is. Asset Management companies and Hedge funds can also profit from Swiss lower tax rates and more attractive regulatory environment, in order to license their financial products and services from Switzerland. They can also profit from the strong Swiss placing power and the banking network, in order to secure their placement of their products and client’s assets. There has never been a better time to move to Switzerland than now.
Enzo Caputo and partners offer a one-time opportunity and a one stop shop for all Financial providers, Hedge Funds as well as Independent Financial advisers and Asset Managers in order to acquire the appropriate licences for their operations in Switzerland.