Great Britain voting in favor of the Brexit from the European Union took a lot of people by surprise. Much of the discussion in the aftermath of the Brexit vote has been experts saying that Brexit is bad and they have no idea what is going to happen. While this is normal in the case of any market dislocation, as Active Investors, we want to figure out where is the best place for us to look for opportunities.
In 2012 or so, London surpassed New York City as the Global Financial Capital. This is why Great Britain opting to remove themselves from the Global Financial system, will have continued impact on the markets for the near term as well as over the next several years. Being that Global Finance is based on trust, the Brexit vote basically violated the trust of all who had been relying on Great Britain as the Global Financial Capital.
Even as there is talk of alternative outcomes, the Brexit vote will freeze transactions and will definitely remove London as the Global Financial Capital. While normally the fall of number 1 is good for number 2, New York has such strong ties with London linked with the impending US Presidential election I think there will be a reluctance to rush into New York for Global Financial transactions. Hong Kong (#3) and Singapore (#4) look well positioned to take over much of London’s lost Global Financial business. Also look for less established cities like Dubai and others to assert themselves as Global players in financial services supported by technology and growth in the Pacific Rim.
Knowing that Great Britain is the number one foreign investor in US based companies and real estate, anticipate that some of these British investors will be feeling a cash crunch and need to liquidate their US based holdings just to pay the bills back home. As Active Investors, research US based companies with investors from Great Britain and start evaluating potential acquisition targets. Also identify US based real estate that is owned by British investors which may be attractive investments for you.
Great Britain has served as a conduit for US manufacturers to export into the European Union. As the companies that support this will effectively be shut out, you may want to look to establish your own import-export business into the European Union. Estonia provides virtual residency for companies that want access to the European Union so may be a good business opportunity now that established relationships will be broken with British companies.
Another outcome of the Brexit vote is that the dollar is strengthening as investors flee from the British Pound and Euro. As your US Dollars strengthen over the next 3 to 6 months, you will have opportunities to buy distressed companies, real estate and currencies. This provides you with opportunities to convert your dollars into assets denominated in other currencies which provide a hedge in the event the US dollar reasserts its macro-trend and weakens as it has for much of the 21st century.
Due to the Brexit vote, there will be great opportunities for Active Investors to invest in companies, real estate and currencies over the next several months. What opportunities are you most excited about as an Active Investor?