Comment by verbify | Hacker News Reader

Comment by verbify | Hacker News Reader

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The prices haven't moved relative to the pound, which has dropped sharply. If you're a US investor, and you made an investment the day before the referendum, the exchange rate alone has seen you lose 14% of your investment. 14% is a large drop.

The pound is at a historical prolonged low - except compared to the miners strike during 1984-5.

But it's interesting how the markets did not predict that remain could lose:

* On the 28th of May 2015, the EU referendum act was introduced. One pound in dollars was 1.46.

* It came into force on the 1st of Feb 2016, one pound in dollars was 1.42.

* On the 22nd of June 2016, the day before the referendum, one pound in dollars was 1.46 USD.

* By the 30th of June 2016, one pound in dollars was at 1.33, and it's stayed around the 1.30 mark for a long time.

* Right now it's only dropped to 1.28.

So I ask you:

If the markets foresaw the referendum (which the polls showed was always pretty close 51-49), why did the price of pounds not drop further before the referendum? Surely they knew there was a risk of 'leave' winning? Some people claim it was already 'priced in', however we can't see a significant drop between the legislation being announced, and the polls showing the election is close.

The conclusion I draw is that the markets aren't rational. Until the 'apocalyptic event' happens, people don't believe it will happen.

So that's why the pound didn't drop _before_ the referendum. Similarly, the pound will not drop before the UK drops out with no deal (despite it being a real possibility), because these things don't get priced-in in advance.

However, if there is no deal, we should probably see very large market movements.

> The conclusion I draw is that the markets aren't rational. Until the 'apocalyptic event' happens, people don't believe it will happen.

I think that's a fair assessment. Perhaps no-one wants to be the first to move.

From what I’ve read in various discussions, I think the general consensus amongst investors is that the worst case scenario is so utterly mind-boggling unbelievably horrifically apocalyptic that essentially none of them believe anyone could possibly let it happen.

Either that or they see an angle to make money from it, but that’s a minority.

Well, it's always the case that the worst case scenario is apocalyptic (I don't think the superlatives add much, it's already The End).

You could invest in the UK, and tomorrow there could be a political revolution that kills half the population, or bombs could start flying, or whatever else completely unrelated to Brexit.

People don't take that in to account not because their fingers are in their ears or whatever, but because its' likelihood is essentially nil.

Things can get worse without it being The End.

Mass starvation because of trade friction (not blockades!) is a possible outcome of no-deal — at least, it genuinely looks like one to me.

That’s one point I’m making.

That outcome is so severe that it’s considered “don’t be silly, they would never allow it” territory, and the single reason I have for treating it otherwise myself is the observation that many who campaigned for Brexit publicity denounce much smaller losses as “just project fear”.

A worse point is that I have twice seen it suggested the UK makes use of its nuclear arsenal to get a more favourable outcome. The first of those named the city I now live in (Berlin) as the target.

How does that make sense in any scenario?

The profit available to a party that shipped food in at double the cost would be utterly insane.

That's just one possibility.

The poorest in the UK can’t pay double. They can already barely afford food reliably, as evidenced by the growth of food banks.

Fresh food doesn’t survive long arbitrary delays, either in the field (there are already labour shortages in UK fruit farms) or in transit (if the customs process takes longer on average after extra staff have been accounted for, as that leads to ever-growing queues to cross the border — something which is very much an “it’s complicated” scenario because while the UK can in principle unilaterally decline to check things coming in, the consequence of doing so is being compelled to choose between doing so for all nations or face action in the WTO).

The question of affordability is only made more extreme by the decline in the value of GBP.

Note that this is not something I consider to be an inevitable consequence of Brexit itself, merely the spectacular arrogance of the people running the show, as the UK could’ve planned to hire enough extra customs inspectors and build inspections ports, but didn’t.

They should’ve started with no-deal as the base scenario and worked up to the best possible improvement, but they’ve started with a self-contradicting mess of aspirations and had massive internal arguments every time they had to decide which part to give up on.

I think the more interesting scenario would be a revolt as people choose to pay for food over rent (food banks act more as an indirect subsidy on landlords).

Maybe it'll happen. I won't be holding my breath.

This is also a possibility. Again, the only thing I am sure of is my inability to assign probabilities any more accurately than the most naïve way possible. Unfortunately if the problem is with the supply, no amount of money will prevent caloric deficiency — rationing might be sufficient, don’t know, devil in the details as well as the broad type of outcome.

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