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We are where we are, clinging to the life raft of cliché

2 July 2016

9:00 AM

2 July 2016

9:00 AM

My column calling Brexit campaigners ‘hooligans’ and ending ‘Reader, I voted Remain’, caused quite a stir — coinciding as it did with The Spectator’s eloquent call for Leave. ‘Pathetic,’ spat a famous columnist encountered in the street. ‘Your words and Farage’s poster resonated so much that I (reluctantly) voted Remain,’ emailed a broadcaster who had previously given me a talking-to on the virtues of freedom. ‘I quite like being a hooligan,’ declared a Leaver on Facebook, alongside a selfie with the Boris-bus emblazoned ‘We send the EU £50 million a day.’

‘Did someone else write your last paragraph?’ growled a veteran politico a day before the poll. ‘We thought you were one of us.’ He had just described the great post-Brexit flowering of national energy he foresaw, but went on to say something un-expected: ‘I’ve bought 51 Remain 49 Leave in a sweepstake. I always buy the result I actually want.’ Like many others he turned out to be a protest voter, betting on an outcome that would put his cause in the ascendant without the pain of real separation.

Now his ilk has been swept to victory by an inchoate coalition of anti-immigrant, anti-Brussels and anti-politician resentment. And we’re clinging to the life raft of cliché: we are where we are and there’s a tough road ahead but stock markets exaggerate, ratings agencies are often wrong, a weak pound will boost exports, the world is our oyster, and at least we’re no longer shackled to the rotten sinking hulk of Europe — though of course we love our European neighbours and wish them all the best.

And let’s not forget, as the reader who liked being a hooligan told me before the vote: ‘To remain would be a much bigger leap into the dark.’ Oh really? Is that how you felt on Friday, my friend? The truth is we have no idea where Brexit will take us. The consequences, at home and abroad, are literally incalculable. ‘Taking back control’ is indeed a noble cause but the act of doing so was always going to unleash pandemonium, and that’s why I couldn’t vote for it.Brexiteers, I also wrote, are ‘believers that chaos can lead to something better’: we must all believe that now.

Winners and losers

I’m reminded again of a party hosted by the US investment bank Morgan Stanley in the depth of the 2008 financial crisis, at which one banker after another told me cataclysm was just an opportunity to make money out of volatile markets. Our columnist Louise Cooper advised Spectator Money readers hoping to profit from the referendum either way to ‘buy sterling volatility’ in the form of ‘a straddle or a strangle’ in the options market: when I asked her if we could explain that in a sentence, her advice was to insert ‘ask your broker’. One hedge fund reported to have found a winning volatility formula is Saba Capital of New York, run by Boaz Weinstein, who used a combination of equity put options and credit default swaps: again, ask your broker. But a simpler strategy was to go long on gold — always a safe-haven play when trouble looms — at $1,260 an ounce on Thursday and watch it rise to $1,330 after the result.

Both George Soros and his former sidekick Stanley Druckenmiller, who now manages family money elsewhere, are believed to have had big gold positions, including exchange-traded gold funds and mining shares. The prominent hedgie-Brexiteer Crispin Odey also stocked up on ingots, reportedly combined with short positions across several equity markets which saw his flagship fund roaring upwards on Friday. And Ladbrokes won big on Remain bets.

But in answer to my question last week, Soros denied punting against sterling as he famously did in 1992. Not so the many other traders who were chasing the pound down towards $1.30 earlier this week — presumably making money from those who chased it up from $1.40 to $1.50 before the vote. One-way market bets being self-fulfilling prophecies until the next big idea takes hold, the fall is likely to continue, some say as far as $1.10, and the Bank of England is unlikely to throw major resources at trying to stop it.

That means expensive holidays (hence a profit warning from easyJet) and expensive imports, including oil priced in dollars. It means a blip in inflation which if sustained will create pressure for higher interest rates, which the market thinks will be bad for banks and housebuilders, hence heavy selling of their shares this week. All of this will make it even tougher for pension funds to generate sufficient returns, creating more black holes. Combined with an exodus of Europeans it might take heat out of London house prices (hence a profit warning from Foxtons estate agency), but if mortgages are costlier it won’t make homes more affordable for working Londoners. So bully for the short-term winners, and the rest of us had better pour a whisky.

Deals undone

Can anyone think of a reason why French state energy giant EDF should still go ahead, against the will of its unions, with a high-risk investment in Hinkley Point nuclear power station; and if the French don’t back it, why would the Chinese? If the proposed merger between the London Stock Exchange and Deutsche Börse survives, why wouldn’t the Germans insist it is headquartered in Frankfurt rather than London? What chance of David Cameron pushing through a Heathrow (or Gatwick) runway decision before he departs? And what will Brexit do to HS2, which is already under attack from the National Audit Office for its unfeasible budgets?    Oh come on, I hear you say: who needs these grand projects anyway, and when have we ever really worried about a wobbling pound? Pour another whisky and point your binoculars towards the nimble, deregulated, free-trading, outward–looking, self-determining, socially progressive, at-ease-with-itself country we’re about to become. I will, I promise, as soon as I spot the sunlit uplands; but this week they’re shrouded in fog.

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