Brexit: opinions on the pound and views in general from a Gordon Gekko wanna be
In my days as a foreign exchange broker in the fast paced city of London, AKA “The square mile”, I worked specifically in the area of commercial transactions.
I would be advising clients through the labyrinth of the foreign exchange and financial markets who ranged from small to medium sized companies in the main, making wholesale prices of international currency for other brokers and even for high-net-worth, or not so, high-net-worth-individuals, on occasion. Transaction sizes varied from as little as $10,000 to multi-millions of dollars (or equivalent currency), depending on the requirement of the customer.
All transactions were for actual delivery, meaning the customer, often required to put up a deposit prior to securing a foreign exchange deal with me, would send their funds to the financial institution/broker that I worked for, often taking a day or two before clearing and the funds would then be exchanged to the currency they purchased at the pre-determined rate agreed by us over the telephone in a verbal contract for onward delivery to their required world-wide destination.
When I started out, I was a determined and ambitious salesman, working at a small boutique broking house on Regent Street in London. I started out in the ‘boiler room’, with eighty or so of us, shoulder to shoulder, on the phones cold-calling companies and Financial Directors and high net worth individuals, surrounded by ticker screens (price monitors with prices moving around frantically). The noise in the room was intense with a squawk box just about being heard over junior brokers making hundreds of phones calls per day pitching all day long with huge energy until exhaustion by the end of the day. The atmosphere was always electric and needed to be so, ensured by the overlooking sales-floor manager — There was no basic salary, and no contract — you sank or you swam, usually made to walk the plank as it goes. A recent movie starring Leonardo Dicaprio, “The Wolf of Wall Street” depicted exactly how it was actually.
Some of us were standing on our desks and chairs while pitching, others under the table trying to block out the noise to catch every word or ‘negative’ that their prospective customer was saying in order to turn them around and get them to sign up with the firm and do a foreign exchange transaction with their ‘big-shot’ trader in the trading room who the junior broker would pass the client to for the trader to do the business.
I actually did pretty well as a junior, but never made it to trader as the firm took a bad bet on the Australian dollar and subsequently went bust. All within just a few months of me starting out in the City, I witnessed just how cruel the financial markets can be and the subsequent effects it can do to not just a business, but how it ultimately affects real everyday and ordinary people, like you and I. I was just a lad, I had no responsibilities apart from a small debt borrowed from a bank that funded my gap year travels around Asia.
My only disappointment is that I was about to be promoted to a trader, and that meant the possibility to make huge sums of money that would have paid my debt off in a days work, and of course having to find another job before my next monthly payment on my loan was due was a worry, let alone wanting to move out of my parents home having been free travelling the world for the previous months, returning to England with not so much as a penny in my pocket and a poorly designed handmade suit I bought in Bangkok with the intention of finding a job in London when I returned home. For me, it was an early learning experience of how the City worked.
However, for others in the company, it was devastating. I was watching grown men crying in the pub that day after when it had been announced by our director to the staff earlier in the same day in that very same room that was once electric, now more like a morgue, that we were in fact being shut down. There had been some whispers leading up to these announcements, but it was very much still business as usual until the final hour.
For me, however, it all worked out nicely in the end. A team of the traders joined and started up a desk at a reputable regulated market makers in the heart of the City. I had been chosen by them, which was rather flattering given I had only been at the firm a few months and no idea that I had actually made an impact on the traders and had stood out to them amongst the other junior traders in the firm. I had to take financial exams and pass them first time to qualify for the position,and that took me a few months of study. However, from there on, my career took-off and I became the foreign exchange dealer that I had always wanted to be, inspired by movies such as Wall Street and Gordon Gekko, Michael Douglas.
However, to this day, I know that there is very little humanity in the financial markets, and in fact, even co-workers in the industry, especially in the foreign exchange market, can be inhumane to one-another at times, despite being able to forgive and forget about it all in the city bars at the end of a days work, so long as money nor any blood was lost that is.
In fact, that is about as humane as it gets, at the close of business and staff gather in the local bars to wind-down before going home to the family or friends, whether it was a good or bad day, it’s usually always a stressful day — But that just becomes the norm and only until I left the square mile did I realize just how stressful working in the financial markets had been. If you are successful, it means you have put in at least ten-fifteen years and have done well and most will then be able to move on if they can, otherwise they will remain in their position until they can climb up and move into a more comfortable roll within the industry and carry on making as much money as they can in a senior role.
For all of those years I had worked in medium sized banks or on trading floors or with boutique brokers I had never really been affected by the markets in a negative way. Even in the financial crisis of 2007/08 I was able to do well. Markets thrive on volatility and for many it is an opportunity to make money. The pound has always been a volatile currency, especially against the Yen and the US dollar. Take this current scenario for example.
Brexit offered a clear opportunity to buy gold and sell the pound, no matter what the outcome of the negotiation was, gold was always going to be a buy and the pound was always going to be volatile and offer opportunities to day traders who made money by buying and selling with big movements so long as they managed their positions carefully. Worst case, you might have made a few losing trades, but if managed correctly, with mechanisms that brokers offer you to manage your positions and protect you against violent and sudden moves, you can limit your losses and try to catch the next big move, be it up or down that would have exceeded those small fractional losses.
However, that’s just the markets. What does Brexit mean fundamentally to you and yours fundamentally, in everyday life, whether you are living abroad as a UK passport holder or expat or if you are in the UK , staying as either foreigner on a working visa or as a Brit? Well, the sad fact of reality is that no one seems to have the faintest idea.
However, here are some facts and possibilities though, and to me, I feel some are overly concerned about fictional ramifications, but we all are entitled to our own opinions …
- The forex forecasts predict that the the pound is weak and will stay weak for the foreseeable future. If the GBPUSD rallies, buy some!
- The economy will be hit and the UK could be headed for a technical recession — but no worse than what we have seen before and what Britain cannot get through. Recessions come around anyway, it is a fact of capitalistic economic cycles and Britain has been barely been producing GDP above 0% anyway for many years. If anything, this could be the clear out that is needed in order to kick start an improved economy for the future.
- The Bank of England had planned for a Brexit and they will do all they can to support the economy, likely by flooding the market with pounds through QE, making the pound weaker. That is good for exports, bad for imports, but will at least keep interest rates down for the near term and help consumer confidence.
- There will be negotiations taking place with the EU but Britain is still part of the EU.
- On an official Brexit, sovereignty will come back to Westminster and to the UK House of Elected Representatives when/if Britain leaves the EU.
- The UK will still, geographically, be part of Europe. Non political organizations aligned to Europe will still extend membership to the UK (I.e. sports governing bodies, and so on).
- Brits will still be able to travel to Europe, and visa versa. The UK has always maintained stricter border and passport controls than many EU members. This will not change. You will still use a passport to go on holiday and you will still be allowed entry to countries in Europe.
- Medical and science research will not simply stop. The UK pays into the EU to then get money back in the form of funding. The UK will now be in control of this money and can choose to fund whatever UK based medical, science, art or other research it chooses.
- Farming will not lose money because of EU funding being cut. The UK negotiated a rebate of some monies that the UK pays to the EU, in order to subsidise UK farmers. Instead of asking for our money back, we can give it straight to farmers. No change there.
- Human right laws are not affected. The EU Convention and European Court of Human Rights are not part of the EU. Until parliament passes a new bill of rights for the UK, these will still apply, as will precedents already passed down to UK courts from Brussels.
- The UK is already outside of the Schengen zone and so migrant workers needed to enter the UK with a valid passport before the June 23rd and will continue to need to do so, that will not change.
- British borders maintain full control of who comes and goes. Should someone have the skills to apply to work in the NHS, then they will still be permitted travel and given an opportunity to apply for a job. Worst case, points based assessment, like the US, Canada and Australia use, these will come into effect.
- The UK is likely to negotiate freedom of labor movement though, in exchange for freedom of goods movement.
- Jobs and production could leave the UK, but the EU had already actually helped fund the move of Ford Transit production from the UK to Turkey prior, as an example. The EU actually helped give UK jobs to people in Turkey by giving Ford a loan of £80m with very generous terms.
For me, I now live in the Central Americas and Caribbean, running an NGO called Think Twice, and also working as an editor and analyst for FXStreet, at the forefront of forex rates analysis. From my foreign exchange station here, I am looking on from a distance, but I am British and I’m compelled to the daily events taking place, with having friends and family that are living far and wide-spread across Europe, the EU and Britain of course. One thing I do know about the Brits, is that they will be alright in the end, and if you are living either as a foreigner or as a Brit, you can be assured that the people of Britain will come together and find a way to make it work, whether that is in the EU or out of it.
It is not a time to ponder on negative consequences in leaving the EU, but to find a way that Britain can move forward as part of Europe and an ever increasingly closer world. It is indeed a time to reflect, but to be inspired that the people of Britain had a vote and spoke out to the establishment for the better and within a democratic society — that speaks volumes.
For too long their voices went unheard and now it is time that the establishment address the desires of the people, because, after all, they are those that in fact made Britain great.
“Everything will be okay in the end. If it’s not okay, it’s not the end”, the late John Lennon.