Interesting article in the Financial Times on Tuesday by Gideon Rachman, putting forward the theory that we may never leave the EU despite the out vote. The article points out that history has examples of countries rejecting the EU and remaining in. Denmark and the Maastricht Treaty in 1992, Ireland the Nice treaty in 2001 and the Lisbon treaty in 2008. Subsequently negotiating better deals for themselves in the future. Boris Johnson was quoted as saying “there is only one way to get the change we need — and that is to vote to go; because all EU history shows that they only really listen to a population when it says No.”
Germany seems to be leading the way in attempting to keep options open for the UK, Angela Merkel suggested that despite calls from other European leaders the leave should be swift, she says there is no need to rush. Wolfgang Schäuble talking about the idea of an associate membership for the UK. The article goes on to discuss how Cameron failed to negotiate a better deal that led to the current situation. However, the conclusion is that Britain is as important to the EU as the EU is to Britain. Before the decree absolute is issued perhaps Germany can take on the role of marriage guidance counselor and find a way the two parties might continue to live together for financial reasons, however in a more open relationship.
Equity markets don’t know what to make of it all, the pound has fallen but not possibly as much as some doomsters have suggested in the weeks leading up to the vote. The FTSE 100 remains above 6000 despite all the too and froing, the FTSE 250 has taken the brunt, falling around 10% from the start of the year, despite this it has still outperformed the FTSE 100 over the past 3 years.
Bird and Fortune produced a fantastic sketch on the 2008 crisis, when he talks about how markets are driven by sentiment. He starts by referring to the investment banking community as “sharp and sophisticated “, many may not agree. Markets are acting normally when one of these sophisticates suggests something awful is about to happen and you sell, sell, sell. A few days later the same sharp brain decides, perhaps things aren’t so bad after all, buy, buy, buy. It may well be that Bird and Fortune’s brilliant analysis of markets will be reflected over the coming days. Today we buy as we may not leave Europe, tomorrow perhaps sentiment changes and more panic takes over. Times like these bring opportunities, without the bear markets you can’t have the bull markets. Some will claim to make a great deal of money from these moves, others may not fare so well but are less likely to be vocal about it. These are times for cool heads.