Anyone planning on making money through Brexit?

Pussyhands

With currency taking hits and fluctuating due to news, you'd think there'd be an opportunity somehow (note: I am not the man with the ideas)

Any smart folk have theories on how to capitalise on brexit?

adam88

Pussyhands wrote: »

With currency taking hits and fluctuating due to news, you'd think there'd be an opportunity somehow (note: I am not the man with the ideas)

Any smart folk have theories on how to capitalise on brexit?

If you have euros, buy sterling. Sit on them and sell them when this mess gets sorted.

metricspaces

adam88 wrote: »

If you have euros, buy sterling. Sit on them and sell them when this mess gets sorted.

What makes you think it's likely a profit can be made by buying Sterling now and selling after Brexit?

adam88

metricspaces wrote: »

What makes you think it's likely a profit can be made by buying Sterling now and selling after Brexit?

Cause the exchange rate will stabilise.

homer911

I was wondering about buying shares in shipping companies serving Ireland from the continent - especially smaller ones such as Irish Ferries..

metricspaces

adam88 wrote: »

Cause the exchange rate will stabilise.

And how will the stabilised exchange rate between Sterling and Euro give you a profit?

Dardania

In theory, Brexit should be positive from some exporters in Britain due to the inevitable devaluation of Sterling. But in practice, I'm not so sure of that, as the cost to import their goods around the world may rise due to being out of the EU's free trade type agreements.
Possible opportunities would be replacing services provided by British suppliers to the EU. Maybe some financial services?

Peregrinus

adam88 wrote: »

Cause the exchange rate will stabilise.

Yes, but if it stabilises at a lower level than it is now you're stuffed, aren't you?

The truth is there is uncertainty about how the Brexit kerfuffle will end up. Sterling dropped sharply when the referendum result was announced, and hasn't yet recovered. If, when the dust settles, Brexit has been cancelled, or the UK ends up with a very soft Brexit, in the Customs Union, in the Single Market, etc, etc, then sterling will probably recover to something like its pre-referendum value. On the other hand, if there's a crash-out Brexit, sterling will decline to a much lower level than it is now at. Whether and how far it recovers from that will depend on what happens after the crash-out Brexit.

dickface

I plan on losing money

ArthurG

A number of the higher-profile Brexiteers certainly seem to be planning on it:

https://www.irishtimes.com/business/financial-services/jacob-rees-mogg-s-group-launches-second-irish-fund-1.3573675

daheff

ArthurG wrote: »

A number of the higher-profile Brexiteers certainly seem to be planning on it:

https://www.irishtimes.com/business/financial-services/jacob-rees-mogg-s-group-launches-second-irish-fund-1.3573675

I heard about this about a week ago. Apparently it was set up because he’s hedging his bets Incase financial companies inside I’m cannot offer services to Europe post brexit

metricspaces

Dardania wrote: »

the inevitable devaluation of Sterling.

What makes you think further devaluation is inevitable? Is there any rationale or it is a pure guess?

Sterling has weakened massively against the euro over the last three years already. Would they really devalue significantly further after Brexit?

UK imports more from EU than it exports to EU. Over 50% of UK imports are from EU. They aren't going to replace those trade deals overnight after Brexit so why would they devalue significantly further, increasing the cost of their imports even further?

Dardania

metricspaces wrote: »

Dardania wrote: »

the inevitable devaluation of Sterling.

What makes you think further devaluation is inevitable? Is there any rationale or it is a pure guess?

Sterling has weakened massively against the euro over the last three years already. Would they really devalue significantly further after Brexit?

UK imports more from EU than it exports to EU. Over 50% of UK imports are from EU. They aren't going to replace those trade deals overnight after Brexit so why would they devalue significantly further, increasing the cost of their imports even further?

My theory is just a guess (and no-one can predict the future) based on: https://en.wikipedia.org/wiki/United_Kingdom_national_debt

If the UK is going to have lower economic activity, it may not have enough tax income to be able to service it's debts to external bondholders. That will encourage the UK to devalue it's currency to try make the debt manageable.

Peregrinus

metricspaces wrote: »

What makes you think further devaluation is inevitable? Is there any rationale or it is a pure guess?

Sterling has weakened massively against the euro over the last three years already. Would they really devalue significantly further after Brexit?

UK imports more from EU than it exports to EU. Over 50% of UK imports are from EU. They aren't going to replace those trade deals overnight after Brexit so why would they devalue significantly further, increasing the cost of their imports even further?

They didn't choose to devalue their currency just after the refernendum; the market made that choice.

The price of sterling is set by supply and demand, not by government decision. There are things the government can do to try and influence the price, but they are not cost-free things.

Basically, if lots of people want to buy your currency and few people want to sell it, the price goes up. The rising price reduces demand for the currency, while at the same time encouraging those who are holding it to sell it, until supply and demand come into balance. That's the theory, anyway.

If the goverment wants to, say, raise the price they can (a) go into the market themselves and buy up lots of their own currency, using their reserves of dollars, euros, gold, whatever to do so, or (b) they can raise the rate of intereset they pay on government borrowings, thus encouraging more people to buy sterling in order to lend it to the UK government, attracted by the higher interest rate. Obviously, these are things they don't do lightly; they cost a lot of money, plus they have knock-on effects which may be unwelcome - e.g. if the government raises interest rates in order to prop up the currency, all interest rates rise, and mortgageholders and other borrowers suffer from that.

Right. What ultimately drives demand for sterling, or any other currency? If you have a pound sterling, all you can really do with it is buy goods or services from sterling-land. Sure, you can sell it to someone else, but all he can ultimately do with it is buy goods or services from sterling-land. So, ultimately - management techniques, currency manipulation, price support efforts etc aside - the fundamental factor that affects the price of any countries currency is the appetite the rest of the world has for buying goods and services from that country. If the country makes nothing that anybody wants to buy, then nobody wants to buy their currency, because what would you do with it once you had it?

Obviously, again, there's a self-correcting mechanism built in there. If the price of sterling falls, then goods and services produced in sterling-land become cheaper (to the rest of the world) and therefore more competitive, so people want to buy them again, so the price stops falllng.

Sterling fell after the Brexit referendum because people expected the effect of the decision would be to reduce the UK's international trade. There would be tarffs or trade barriers or both between the UK and the EU-27, and bewteen the UK and other countries that have EU trade deals from which the UK would be dropping out; the UK would sell less abroad; less people would want sterling to buy stuff from the UK; the price of sterling drops.

But there's uncertainty about how much damage Brexit will do to UK trade. The current price of sterling reflects that uncertainty; some people may be taking an optimistic view; others a pessimistic view. But if it become clear that the UK is heading for a crash-out Brexit then everybody will take a pessimistic view, and sterling will fall further.

Peregrinus

Dardania wrote: »

My theory is just a guess (and no-one can predict the future) based on: https://en.wikipedia.org/wiki/United_Kingdom_national_debt

If the UK is going to have lower economic activity, it may not have enough tax income to be able to service it's debts to external bondholders. That will encourage the UK to devalue it's currency to try make the debt manageable.

The UK's national debt (unlike ours) is mostly held by UK residents and UK institutions. So devaluing the currency may improve the goverment's financial position, but it disimproves the counrtry's financial position, since the government securities that they are holding either directly or (much, much more) through insurance policies, pension rights etc are now worth less in real terms. This has adverse affects, both political and economic.

Other countries can do a "with one bound he was free" trick on government debt by allowing the currency to devalue, but the scope for that in the UK is much more limited.

adam88

metricspaces wrote: »

And how will the stabilised exchange rate between Sterling and Euro give you a profit?

But low, sell high. Profit

metricspaces

adam88 wrote: »

But low, sell high. Profit

What makes you think it will go higher?

Peregrinus

metricspaces wrote: »

What makes you think it will go higher?

One of the two currencies is certainly going to rise against the other. Buy that one. Simples!