Category Archives: Risk

Brexit – consequences for investors

BREXIT and the consequences for global investors

The markets (and pollsters) got the BREXIT all wrong last week and Britain did indeed decide to unshackle itself from increased Federalization – and an external Federalization at that. The magnitude of the exit vote surprised even the exit-vote camp, and global markets sharply turned south as investors were seen paring risk and ploughing into safe havens (Treasuries and the like). This was an expected reaction because markets had to pause and catch their breath from the unexpected turnout and assess the outcomes from a future independent UK. (In the days since, a good part of the risk-taking has resumed from the initial knee-jerk reaction)

While some reports may characterize the exit vote as being “anti-trade”, I feel it is more to do with dislike for Federalization and increased bureaucracy, especially that imposed from outside UK’s borders. Immigration was a contention, say others but that too dovetails into the Federalization argument since the Immigration decision was taken by the EU for all member countries. With that as a backdrop, the timing is two years for the UK to formally exit from the EU. A possible new UK Government is expected now that Cameron is stepping down. Along with that is the question of what exit agreements the EU and UK hammer out. It is possible that punitive actions may be taken by the EU to discourage other member nations with exit ambitions. Or it could be that the trade imbalance with Germany (positive for Germany) may dictate a softer, comradely stand.

In any case, we are talking political and trade uncertainty here and uncertainty stretched out in time – a combination that is unpalatable to markets. That should spell increased volatility in risk assets and a general favor towards risk-free assets, however rich they may be. Expect the dust to slowly settle as investors get comfortable with the tone from EU and the new UK Government and they assess the longer term winners and losers (sectors). But aside from this, what can further deepen the damage could be anti-establishment forces increasing in other EU countries as they take UK’s exit vote as a comfort tonic to rev up their anti-EU engines. The keyword therefore is volatility.

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(BN) Fed Officials Saw Global Slowdown Among Risks to Outlook (1)

Low rates forever? Looks like a world of watered-down currencies globally, with investors chasing returns and not really creating organic growth anywhere within the G-8. Cannot end well.

Slay the risk management mandarins!

Probably the best article I have seen that delineates risk management systems from people who actually know their stuff (and guess who they are? Hint: not the risk managers). It is shocking how risk management has evolved into a bureaucracy of people that don’t understand markets and systems that are just tools Aladdin