This note is satire, not investment advice. If you are not already following the strategies it sets out, you are unlikely to make money by doing so now. But you ought to know what others are doing.
The Prime Minister said last month that a no-deal Brexit was a “massive economic opportunity.”
All serious analysts of the impact of a no-deal Brexit, including the Government itself and the Bank of England, believe that it would cause significant short-term disruption including to supplies of food and essential medicines, and inflict serious long-term damage on the economy.
So why are some people so keen? There are doubtless many who believe that all the experts are wrong, that big business is (for some mysterious reason) busy fearmongering about something that will have no negative effects and that, if we just believe hard enough, the sunlit uplands await. But some are much clearer-sighted, and what they see genuinely is opportunity – for them.
The process for making a killing out of Brexit is simple enough in principle, though a little trickier in practice. There are just three steps:
- Prepare for prosperity
- Profit from uncertainty
- Pounce while the dust is still settling.
1. Prepare for prosperity
This first step is critical, and you should ideally have taken it before Boris Johnson became Prime Minister. For those who have not yet prepared, the opportunity may be out of reach. There are three things you should have done:
- Make sure that you are plugged into the heart of the political process – you can do this either by being an influential politician yourself or by making large donations to the pro-Brexit lobby. You should also make sure that you can control the news-flow: this can be an engine of serious profit
- Move your capital out of the UK – as John Redwood recommended as long ago as 2017 – and out of sterling-denominated assets
- Make sure that you have cutting-edge trading and investment skills. It is best if you are a hedge-fund manager; if not, you need access to the right funds.
2. Profit from uncertainty
As soon as Johnson became Prime Minister, asset prices started to move. Initially, there was a ‘Boris bounce’, followed by a slump in both share prices and sterling.
For skilled investors, a slump can be a source of enormous profit: By selling shares short or buying put options, whose value rises as the price falls, you can make a very fast buck. But of course, you need to be careful: short-sellers can be squeezed painfully if prices rise, and option values can plummet. This is where your risk-management skills and political inside track will help to keep you safe.
3. Pounce while the dust is still settling
And, of course there is the critical deadline on 31st October when, if nothing changes, the UK will crash out of the EU. This is the biggest opportunity, and it comes in two parts:
- Short-term: Profit from the immediate reaction of the markets to the no-deal Brexit; or alternatively to the discovery of a last-minute deal or stand-still agreement
- Long-term: in the case of no-deal, buy up assets at greatly reduced prices.
Here is a simplified picture of how asset prices may move.
In the case of a last-minute deal, or a stand-still agreement that preserves the UK’s ability to trade, there will be an enormous positive surprise. It is likely that the markets will over-react to the good news. If you can control the news-flow in the days and hours before the announcement, so that the reaction comes against widespread expectations of disaster, the bounce will be even bigger, and you will be even better placed to profit. What happened on the day of the Brexit referendum is a case-study in how to maximise profit.
Conversely, if the Government really is set on a no-deal Brexit, it will be important both politically and in terms of your trading strategy, that hopes are raised until the last minute. You can then profit from the immediate slump in share prices and sterling and, using your dollar-based off-shore assets, over the longer term acquire assets of all kinds – shares, land, property – at a large discount to their recent prices. Some share prices will be much more resilient than others: many of the UK’s largest listed companies derive only a small percentage of their profits from their UK operations, so if their global profits hold up, they will seem much larger when translated back into sterling, and their share prices (in sterling terms) may actually rise as the pound falls. And, of course, you may want to make sure that you are not actually in the UK in the immediate aftermath of a no-deal Brexit: As Johnson says, “there may be some bumps in the road.”
Following these three simple steps means that you can share in the Johnsonian optimism and become one of the beneficiaries of Brexit.