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ARP Observations

Extraordinary Times

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See all articlesThe Absolute Return Letter

Just as we thought the situation here in the UK around Brexit couldn’t get any messier, look what happened yesterday (3rd September). Earlier in the day, the ruling Tory party lost its majority in Parliament when Phillip Lee defected to the Lib Dems and, last night, 21 Tory MPs voted with Labour to support a motion that will force Parliament to vote for a bill that will, if implemented, delay Brexit further.

The Bill states that, unless (a) a deal is reached with the EU or (b) Parliament approves a no-deal Brexit by October 19th, Boris Johnson would be required to write to the EU, seeking an extension to Article 50 until the 31st January next year. Under the terms of the motion, the debate on the Bill will begin today (4th September).

These are truly extraordinary times. I have certainly never seen anything like it before. But, not being a Brit affords me the luxury of putting emotions aside and look at things purely from a national interest point-of-view.

A few observations:

Firstly, and probably most importantly, whatever the final outcome, the damage has already been done. Most voters are so entrenched in their views that no sound arguments have any impact anymore. The country is so deeply polarised that it will take at least a generation for all wounds to heal. How that will affect the investment climate in the UK remains to be seen, but it is not easy to remain optimistic.

Secondly, about the only thing a clear majority of MPs seem to agree on is that a no-deal Brexit should be avoided at all cost, and that is precisely what caused last night’s events to unfold. Even if I don’t agree, I respect that a majority of the electorate want, or at least wanted, a future outside the EU, but they certainly didn’t vote for calamity. They voted for all the empty promises made. Calamity? Yes! When nearly half of British exports go to the rest of the EU, a no-deal outcome can only result in calamity.

Thirdly, it has been a struggle for me to respect an outcome that was built on lies (as the Brexit campaign was). Even worse, when those lies are exposed, Remainers like me are accused of being anti-democratic because we think it is only fair that the electorate have a chance to change their vote when the truth is out.

Having said that, I am not sure a different outcome in a second referendum will make things any better. Actually, I am pretty sure they will not. As I said earlier, the damage has been done already.

About the Author

Niels Clemen Jensen founded Absolute Return Partners in 2002 and is Chief Investment Officer. He has over 30 years of investment banking and investment management experience and is author of The Absolute Return Letter.

In 2018, Harriman House published The End of Indexing, Niels' first book.