The Precedent to Brexit

am brit flagBefore there was “Brexit” there was another painful economic divorce, when the British citizens of the American colonies decided to “Amexit” the British Empire in the 1770s.  The Economist magazine took statistics from that era, including long-term government bond yields and stock prices, to see what the “Amexit” shock looked like from an economic standpoint in Britain.

It’s usually bad economic news when government bond yields rise dramatically.  It means that demand has gone down or investors are uncertain whether they’ll get paid back, and (in this case) the British government had to pay more to entice people to invest in the British empire during the time when its army was fighting to subdue the pesky rebels overseas.  Similarly, when stock prices go down, it usually means investor confidence is shaken—or, in the case of the accompanying graph, from the year 1770 through the year 1790—apparently shattered.

You can see some of the seminal events noted on the graph, including a downturn following the unrest associated with the Tea Act and the Boston Tea Party, and then a significant downturn in stocks (and upturn in bond rates) after the American rebels commenced what we on this side of the Atlantic call the Revolutionary War.

Perhaps the most interesting thing about the graph is the fact that normalcy was restored roughly the same time the U.S. finally got its government act together and created the Constitution.  Despite the fact that the British had lost a huge amount of territory and a very promising piece of their future economy, bond rates returned to normal, and the stock market settled down to a few points above where they had been when the whole American independence mess started.  In the end, from an investment standpoint, the “Amexit” proved to be a tempest in a teapot.

Source:

http://ritholtz.com/2016/07/amexit-sent-shockwaves-financial-markets/?utm_source=dlvr.it&utm_medium=twitter

 

About Objectively Speaking

Tom Batterman, founder of Vigil Trust & Financial Advocacy and Financial Fiduciaries, LLC is in the business of representing the best financial interests of his clients. Having provided objective, fee-only financial management services for over two decades, he specializes in managing the investment and related financial affairs of individuals and mutual insurance companies who do not have the time, interest or expertise to manage such matters on their own. As an objective, unbiased professional who takes on a fiduciary responsibility to his clients, he guides clients to the financial decisions they would make themselves if they had years of training and experience and the time and expertise to fully research and understand all of their options. Founded in 2010 as an outgrowth of Vigil Trust & Financial Advocacy, Financial Fiduciaries, LLC is a financial management solution for individuals and mutual insurance companies who recognize they do not have the time, interest or expertise to properly attend to their financial matters on their own. While there are many financial “advisors”, most of them have investment products to sell and the “advice” they provide is geared toward getting their clients to engage in a purchase. As one of the rare subset of advisors known as “fiduciary advisors”, Financial Fiduciaries does not sell any investment product so its guidance is not compromised by conflicts of interest which plague ordinary advisors. Prior to his employment in the financial industry in financial advocacy and trust positions, he worked at a private law practice in the Wausau area in the areas of estate planning, tax, retirement planning, corporate organizations and real estate. He is a graduate of the University of Wisconsin-Madison and the UW-Madison Law School and has during his career held Series 7, 24 and 65 securities licenses. A longtime resident of the Wausau, Wisconsin Area, Tom is active in the community. He enjoys golf, curling, skiing, fishing, traveling and spending time with his family.
This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s