Currency Gains and Capital Gains Combined
Did you notice it too? The change in narrative?
Probably not, from where you’re sitting. But here in the UK, the news coverage of Brexit radically shifted this week.
Brexit debates used to be about how disastrous Brexit would be. Or wouldn’t be.
Now they’re about how disastrous UK government policy would be after Brexit. Or how wonderful.
The change confirms my suspicions about what happens next for Brexit Britain. I first wrote to you about it two months ago. But now, the buy signal is drawing near.
If you’re interested, I’m putting together a Brexit Boom Portfolio for Strategic Intelligence. More on that below.
But first, here are some examples of what’s changed in the media.
What’s changed in the Brexit narrative
A story about the wine industry is the simplest illustration. The Financial Times has the details, although I reshuffled the paragraphs to make them more coherent:
‘Wine drinkers will be temporarily spared as much as 10p extra on a bottle whether the UK leaves the EU with or without a deal after the government decided to delay imposing costly red tape on the industry.
‘The sector is facing costs of up to £70m a year under plans by ministers to introduce new import certification requirements for wines from the EU, which involve additional forms and laboratory tests.
‘After Brexit, EU wines would be subject to the same import certification requirements as bottles from countries outside the bloc, such as Australia or the US.
‘However, the government confirmed to the wine industry last week that the requirements would be waived in the nine months after any no-deal Brexit.
‘The association is calling on the government to reform import rules for all wines, whatever their origin.’
It’s that last bit which is key. How many stupid regulations will Britain get rid of because leaving the EU will highlight how stupid they are?
The threat of having to treat EU wine as badly as Australian wine highlights how stupidly Britain has been treating Australian wine all along.
The EU’s wine producers are complaining about getting a taste of their own medicine — what their countries dish out to Aussie wine producers who want to sell in the EU.
The story also shows how EU rules on wine imports are bad for Britain — why the country should get rid of them. Not just for EU wine, but all wine. And Brexit makes that possible.
When Europeans see goods from around the world entering Britain at cheaper costs, how will they respond? They’ll demand access to the same stuff.
Then again, those who die because life-saving medicines are not available inside the EU won’t have much to say at all. But their families might get rather annoyed about the EU regulation which stopped life-saving medicines from reaching their loved ones. The Telegraph explains what I’m on about:
‘EU rules placing “unreasonable burdens” on drug licencing risk making cancer deaths more likely, two top scientists have warned.
‘Angus Dalgleish, professor of oncology at the University of London, and Professor Keith Lewis, director of science and technology consultancy Sciovis, have criticised the EU’s Clinical Trial Directive saying it has “killed academic research” by making trials so “horrendously expensive” that only the largest pharmaceutical companies can afford to get new products registered.
‘In their joint report, Let’s Embrace World-Class Scientific Collaboration, the professors claim the directive is pushing up the cost of treatment for UK taxpayers with cancer drugs now costing an average of £5,000 a month.
‘The report states: “Patients suffer from [EU] directives. The Clinical Trial Directive was put forward in the spirit of harmonisation but was, in fact, a mechanism to make trials so horrendously expensive that only Big Pharma could afford to get their products registered.”
‘This conveniently made it extremely difficult for smaller companies and generics to compete. Unfortunately, at a stroke, this killed clinical academic research into innovative treatments that could be applied rapidly to the clinic.’
Those medicine shortages we keep hearing about under Brexit are a permanent feature of EU membership…
But if Britain leaves, it could let in life-saving medicine. The best from all over the world.
And it could develop the best future medicines too.
What about funding that research? Doesn’t the money come from the EU? And isn’t the research done inside Europe?
The Telegraph continues:
‘The UK receives the lowest science funding from the EU’s R&D structural funding programme – less than half of what Germany receives, less than a third of Italy’s total and less than a quarter of Poland’s income.
‘The report adds: “After we leave, only one of the top ten research universities in Europe will be in an EU country (Sweden), as eight of them are in the UK.”’
This is just the sort of debate we simply haven’t heard until now. It’s a new phenomenon for the mainstream media here inside Britain.
Until now, journalists, economists, and politicians had only compared Britain inside the EU with Britain outside the EU, but with the EU’s continued bad policies.
Now that we’re looking at how diverging UK policy from the EU’s could hurt or benefit Britain, things are going to get far more interesting.
It’s exposing that the EU’s protectionism is a cost, not a benefit. And Brexit is shining a lot of disinfectant into the EU’s corners of regulatory chaos. By threatening to make EU exports subject to the EU’s own stupid rules.
But I’m not just talking about regulation. The nature of politics in Britain is about to radically shift alongside the media narrative. In a way that foreign observers won’t pick up on. And so foreign investors will miss it too.
Given that more than half of the UK stock market is foreign owned, that’s crucial. And it could give early investors in Britain a crucial advantage.
Here’s what has changed in UK politics: I think the result of the next election is already a done deal. The Brexit backers have a massive advantage. Well, anyone backing remaining in the EU has a disadvantage.
The trouble for remain politicians is simple. Now that the nature of the debate has changed, they are only undermining themselves by campaigning to remain in the EU.
Once the debate is about future UK government policy, instead of Brexit itself, the question at hand becomes very different. If you answer the question ‘what should British government policy be?’ with ‘it should be made in the EU’, you look rather stupid.
It suggests you’d lose an election, govern badly yourself, or that the EU would do a better job than remain politicians could. None of the three is an election-winning proposition.
‘Vote for me so I can outsource government to the EU’ will not win many votes.
The range of promises that can be made by the two sides is even more revealing. Imagine comparing two manifestos…
One which includes policies for immigration from the EU, trade deals with Commonwealth countries, better medical research policy with better funding, cheaper wine from Australia, and many more policies that can only be made under Brexit.
And the other manifesto says nothing about such policies, because they’d be made by the EU Commission. The range of promises which remain campaigning politicians can make will be far smaller than their Brexit competition in the coming election.
Which has the advantage to win over swing voters?
I think Brexiteers have captured a fascinating edge in the upcoming election, especially for a country sick of Brexit and desperate for other policies.
But only the change in narrative has made that shift possible. If Britons still talked about Brexit itself, instead of Britain’s future policy, the nature of remain politicians’ positions would not be so obvious.
When Britain holds its next general election, the Brexit favouring side will win strongly because it will be running for something. A long list of policies.
The remain side will be running against that manifesto. But, more importantly, it won’t have much to counter with. Because its position to remain in the EU does not allow it to propose much policy — the EU makes much of that policy.
In the battle for post-Brexit Britain, anyone who favours remain is starting with a heavy disadvantage.
What does this mean for you?
Well, Britain is emerging as a buying opportunity. Brexit fear has held back the country. Unleashed from all the uncertainty, and from the EU, the country could boom.
I’m putting together a report for Strategic Intelligence subscribers on how to profit. But if you’re impatient, you need to keep one thing in mind. You need to avoid the simple mistake most British investors are making right now.
Most UK investors buy FTSE100 stocks — the blue chips listed on the London Stock Exchange.
But most of the large companies in the UK’s FTSE100 index are not very British at all. They’re global companies that source most of their revenue from around the world. In foreign currencies.
Buying multinational companies’ shares does not expose an investor to the UK economy much. It exposes you to the global economy.
Worse still, if Britain booms and the pound rises as a result, then the value of the profits those FTSE100 companies earn will fall. They’ll be worth less in terms of pounds, because of the rising pound.
In other words, most British investors will miss out on any Brexit boom. The stocks they hold in their portfolios will get ‘pounded’ by the rising pound. Undermined by the exchange rate.
And most foreign investors who buy FTSE100 stocks hoping to profit from Brexit will miss out too. They’ll make currency gains, but not stock capital gains, as the pound holds back the FTSE100 index.
If you want to profit from a post-Brexit boom, you need to choose your stocks carefully.
I’ll show you how soon.
Until next time,