Thoughts on Brexit

Unless you have been living under a rock, by now you probably have heard that Britain voted to leave the European Union on Thursday’s referendum. The result of the referendum sent markets tumbling all over the world on Friday. There are lots of uncertainties on what’s going to happen, so investors are fleeting equities and investing in “safer” assets like bonds and precious metals.

What do I think about Brexit and the market tumbles?

First I was shocked to see the referendum result. I knew it would be close but I didn’t think the “Brexit” group would actually win. When a referendum is this close, typically people that are borderline with their decisions will vote to remain status quo. BBC pointed out some interesting data. One data that surprised me is that those aged over 50 were the most likely age groups to want to leave the EU. The younger people wanted to remain in the EU. However, the low turnout in the younger age groups meant they lost out on this important referendum. Lessons learned? Always go out and vote, no matter how old you are. Your decision does matter! 

Screen Shot 2016-06-25 at 2.27.33 PMImage from BBC

 

I never imagined Britain would actually leave the EU. Clearly, the right wing groups won this time. This makes me very worried that Donald Trump might actually win the US election this November. That is one scary thought!!!

Before I turn this post into a political discussion… let’s take a closer look what the referendum result means to our investment portfolio and how it may affect our investment decisions.

Two simple words: Absolutely nothing.

Honestly, I don’t see why many investors are freaking out about the referendum result. I don’t see why our investment strategy and decisions should change based on an event. After all, we are investing for the long term, like 40+ years.

Time in market is more important than timing the market.

Looking at our dividend portfolio, I fail to see how the result of Referendum of the United Kingdom’s membership of the European Union affects these dividend paying companies.

People are still going to buy General Mills’ products.

People are still going to buy gas produced by Chevron, Suncor, Conocophillips, and BP.

People will continue to buy iPhones, Macs, iPods, and other Apple products.

People will continue to buy Tylenol, Band-Aid, Listerine, Reactine, and other Johnson & Johnson products.

People will continue eating at McDonald’s, drinking coka cola and Starbucks coffee.

Canadians are still going to use their cellphones on Telus, Rogers, and Bell networks.

Canadians are still going to buy dairy products from Sapputo.

People will continue needing Waste Management to pick up their garbage.

People will continue to buy insurance from Manulife and Intact Financial.

Sure there may be some negative effects on financial sectors but I believe they will be minor and short term.

As I mentioned in the 10 lessons I would give to my 23-year-old self, we need to take advantage of economic downturns. Since stock market has a tendency to go up over the long term. We should all take advantage of the stock tumbles due to the result of the UK referendum.

I will keep my eyes open for buying opportunities.

What do I have in mind?

Diego plc (DEO) if price drops to below $100.

Canadian National Railway (CNR.TO) if price drops to below $70.

Dream Global REIT (DRG.UN) if price drops to below $9.

Alphabets (GOOGL) if price drops to below $600 (yes it’s not a dividend payimg stock but I’m convinced that Alphabets will start paying dividends in the near future).

Unilever plc (UL) if price drops to below $40.

Target (TGT) if price drops to below $65.

Vodafone (VOD) if price drops below $28.

These are just some stocks I’m monitoring.

Let’s pray for the volatility to last a little longer so we can buy stocks on discount!

For now, Mrs. T and I will be working hard to save more money. Considering we’ve already purchased over $35,000 in dividend stocks this year, it would be totally awesome if that number can double by end of 2016. One can dream right? šŸ™‚

Dear readers, what are your thoughts on Brexit? Are you looking to add more dividend paying stocks?

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41 thoughts on “Thoughts on Brexit”

  1. Personally, I am hoping this is the needle that pricks the global asset bubbles….but that is for selfish reasons. This issue is much more political than economic. What would make things worse is if the EU decides to punish UK businesses(especially banks) on their way out the door…..or if other countries also vote to leave. Several other countries are talking about it….but talk is cheap. Either way, I have my wishlist also. We picked up a few shares of Lazard this morning. Watching Diageo and Berkshire Hathaway. I would love to see the rails collapse, so i could add more Union Pacific…..but that will require oil to collapse. Anyway, consider me an opportunistic bystander….just watching the commotion.

    Have a great week Tawcan.

    -Bryan

    Reply
  2. Shock and awe.
    The 52% were duped. It is a sad situation driven in large part by the search for a quick answer to an important problem (Immigration) that won’t be fixed quickly. The British have made their bed and they better get ready to be comfortable lying in it. I am a Brit by birth, now carry dual citizenship for both the US and UK. It pains me to watch what is going on over there. Terribly disappointed that my home country of Scotland saw the wise move to remain yet have been let down by much of the rest of the U.K.

    Keep calm and invest on. No change to our strategy and not being tempted by international. Sticking to our game plan.

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  3. Yup, I’m also waiting for the right time. I was excited when the market continued to fall today. I’m slowing purchasing more oil company stocks, and bank stocks based in UK. I’m also a big fan of the Keg, Pizza Pizza,Boston Pizza but their prices are just so solid!

    Leon

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  4. Overall – I am very uneducated when it comes to Brexit and what it ultimately means. That being said, it doesn’t play a role in my investment decisions at all, except that I may slightly increase my dollar cost averaging if the volatility keeps up. I try to keep my investments the same no matter the circumstances and not planning on changing that now.

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  5. Great thoughts! Like you, I don’t think this will have a major impact on the world long-term. In the short term there is some uncertainty and volatility, but nothing to worry about.

    If we can get good prices for assets, we’ll be buying more too!

    Reply
        • Yes, this referendum isn’t binding. It still has to be approved by Parliament, and then someone needs to initiate Article 50. Cameron has stepped down as PM, and it won’t be him. Whoever does it knows as soon as they do, Scotland will probably move for independence since they voted heavily to remain, Ireland too.

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          • It’ll be interesting to see whether everything goes through. The referendum isn’t binding as msterslm pointed out. Lots uncertainties ahead that’s for sure.

  6. Although this event might not be the one to setup the next financial crisis, I am no where near educated enough to try and presume I know what will happen next… I have no idea what kind of consequences might result b/c of last Friday’s referendum.

    I do know that the European banks are selling off right now, and I don’t think I’ve ever seen a 1 year chart as ugly as DB! If Brexit somehow sets off something else, that will be the black swan event that nobody saw coming…

    It’s late, late, late innings of this over exhausted bull market… When it comes to general equities, I feel far more comfortable sitting on the sidelines, but best of luck to those who are out looking for deals… Prices definitely look more appealing today than they did last Thursday.

    All the best!

    Reply
    • We will have to wait and see what happens next. I assume more volatility will come in the near term. Maybe this will be the double dip that people have been talking about for ages.

      Reply
  7. Agree, long term investors shouldn’t be bothered by Brexit. It is always good to have a reminder that we are in it for the long haul and not to get caught up in the excitement of short term market volatility.

    Reply
  8. Here’s hoping to get in on some nice discounts while the markets overreact to the brexit news. There’s some stocks that are starting to look nice, the banking sector has been hit particularly hard so keep an eye out there. I’m a bit surprised to see UL up today however. I was not expecting to see that.

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  9. I was totally surprised and saddened that the “leave” side won. As you said, it’s terrifying to think that that sentiment could translate so broadly, and it should make every American who doesn’t want to see Donald Trump as our next president sit up and take notice! A sad, sad day for the world. As for the volatility, we’re just riding it out. None of the losses are real if we don’t sell! šŸ™‚

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  10. hi, tawcan,

    I think the brexit is a good buying oportunity.
    Maybe I will add some shares of my favorite company, disney šŸ™‚

    On the other hand the high volatility is also a good oportunity to sell some options and generate more premium šŸ™‚

    thanks for sharing your thoughts!

    best regards

    Reply
  11. Hi Tawcan,

    It’s really interesting as a Brit to read blogs from overseas to see what the general opinion is from outside of the country, thanks for writing this post.

    I voted last Thursday and have to say was also utterly shocked and dismayed by the result. Having seen the backlash on social media I can now say that it looks like about 90% of my friends had the same opinion as me, so it’s interesting for me to learn that my demographic is clearly far removed from the slight majority of the rest of the UK who voted for Leave (well I should say England and Wales really because Scotland and N. Ireland voted Remain).

    It feels like scary times in our country right now. The uncertainty levels (and therefore panic levels) are through the roof, not helped by the fact that no-one (from either side of the campaign) appeared to have a plan in the eventuality of a Leave result. I would have hoped that those vehemently supporting the Leave campaign would have given this more thought before expending so much energy on persuading the masses.

    I feel like the shock is somewhat passing for me now, as for many others, with a movement taking shape who are calling not only for calm and an end to the bickering about the result, but rather a feeling of it being time to pull together, settle our differences and understand what has caused the country to become so divided. In short, we need a plan for what to do next and importantly we need strong leadership to take the helm and steer us through the unsettled waters ahead.

    In terms of investing, I’m pretty new to it having only begun in earnest earlier this year. I plan to be a “steady Eddie” and continue pressing ahead with the regular investment plan I have decided upon (making use of the Vanguard Lifestrategy fund).

    Reply
    • Hi organisedredhead,

      It is scary time for Britain right now, especially after England is now out of Euro Cup.

      It will be interesting to see if the government goes ahead with the referendum result and send in withdraw application to the European Union. The country seems very divided and hopefully this doesn’t start upraising anywhere.

      Reply
      • Seeing as you mentioned the Euro Cup, Tawcan, I’m probably weird in that I feel more upset about England being beaten by Iceland (well done!) than I do about Brexit!

        Ok, so I voted Leave but I don’t feel victorious because the country is split. Some of my friends voted Remain, others Leave. I hate all the panicking and recriminations right now.

        As a second generation immigrant, of course I didn’t vote Leave because of immigration. Unfortunately, this is all that the gutter press picks up on.

        If Remain had won, how would the Remainers feel about the Leavers wanting to ignore the result, to demand a second referendum? You can’t keep on voting until you get the result you want…

        I was not a strong Leaver, I was Undecided for a long time, pretty much up to when I voted.

        What swung it in the end was Juncker’s admission that there would be no reform for the UK even if we were to remain, and that followed the disastrous attempt by Cameron for renegotiation earlier in the year. I felt that changes needed to be made and what we were going to get was same old, same old, maybe worse.

        What we have now is maybe a different kind of worse, but also maybe something new and better, in the long run. That’s the hope.

        Investing wise, my plan is to do nothing different – unfortunately, I don’t have spare capital to take advantage of any cheap stocks. My portfolio the day after Brexit was announced was actually 2% up so I guess I’m suitably diversified

        Anyway, us Brits need to do what we do best – roll our sleeves up and sort things out (in between having cups of tea!). It’ll be all right in the end.

        Reply
  12. Well Brexit was bad news for me. On Thursday I had just entered the double comma club, when my investment portfolio reached just over $1MM Canadian. But withe Brexit, the drop in EUR/CAN rates, and dip in global equity prices I got kicked out after 1 day! However, I continue to buy VHYL on the dips and hope to be back in the club next month! Happy buying everyone.

    Reply
  13. I like your stocks that you are looking at Tawcan. The beauty of being a long term investor, and even more a dividend investor, is that these are times to pick up stocks if they fall to acceptable levels. In the short term the markets may take a dip but in the long run I think it will be more than fine. I picked up some financials and healthcare stocks so far but got money on the side as market levels are still very high right now.

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  14. Alphabet will probably due another stock buy back before paying a dividend hopefully this buy back is north of 10 billion.
    I’m holding out on hoping they will pay a dividend as I have both class a and class c shares the first one to go north of 750 a share I’m selling and putting into dividend stocks.

    As far as Brexit the dirty hedge fund broker Soros was for remain anything he is for people should be against. Those that fail to remember he personally crashed the economy of England in 92 and bragged about it for years
    His hedge fund had 15 some billion riding on a crash of the pound. It took awhile for England to recover

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  15. Hey Tawcan,

    I think there are a lot more people who have thoughts like Weenie, who have non-racist thoughts about the EU, whereas perhaps a lot more of Trump’s supporters are thinking along those lines. (See my comment on Mr PIE’s topic for a lot of other reasons why people wanted to leave, to do with sovereignty etc). I think it’s doing a bit of a disservice to over half of the voters to paint the reason they voted that way, for one reason, even if the media are (perhaps wrongly? You’d need to ask every leave voter) picking that as the winning factor.

    We’ll have to see what happens, if it gets through Parliament, if the UK is better or worse off in the long run.

    You hit the nail on the head: invest for the long term and ignore the noise šŸ™‚

    We did a post on the effects on Australia from Brexit too..could be good for us.

    Tristan

    Reply
    • Hi Tristan,

      I totally get why Brits would want to vote to leave, I also get why some wanted to stay. It’s not an easy question to answer. I just think given how integrated the EU is, it will be a lot of things that UK needs to iron out before actually leaving the EU.

      Reply

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