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Something Bad Happened Last Night

Who needs a hug?
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Perhaps you’d noticed….

World stocks saw more than $2 trillion wiped off their value on Friday as Britain's vote to leave the European Union triggered 5-10 percent falls across Europe's biggest bourses and a record plunge for sterling.

So they really did it. And somehow caught everyone bysurprise in doing it, not least soon-to-be-former Prime Minister David Cameron, the James Buchanan of British history. Cue appropriate music.

Now that we’ve set the mood, let’s talk about what it really means for those who really matter—you, our dear readers—other than a rather unpleasant summer Friday. To begin with, let’s just acknowledge that no one really knows.

The world map has been redrawn with the rules of commerce across Europe, the largest marketplace on earth. Britain’s vote on Thursday to leave the European Union has set in motion an unprecedented and unpredictable process that threatens turbulence and potential crisis — for Britain, for Europe and for the global economy.

Which is not to say that we’re totally in the dark. For instance, we know that a Fed rate hike is now about as unlikely as the thought of the U.K. leaving the EU was before it did. We know that Scotland and Northern Ireland probably want out. We know that Donald Trump is happy. And we know that real-estate brokers in Frankfurt, Dublin, Paris and Luxembourg will be very happy indeed.

A number of large companies, particularly banks, are likely to pack up at least some of their workers and move them out of London now that the U.K. has voted to exit the EU. In all, the city that has long been considered the financial capital of Europe could lose as many as 40,000 workers in the wake of Brexit.

Of course, no one’s announcing anything just yet, at least not without issuing a swift denial. But Team Jamie Dimon might want to start pricing property in Dublin.

JP Morgan became the first big institution to warn of positions moving from the UK after the vote to leave the European Union, with a memo to staff saying "the location of some roles" may need to move "in the months ahead"….

The bank had previously said that a vote for the UK to leave the EU could result in 1,000 to 4,000 roles moving from the UK.

Now, the news isn’t all bad. Gold is finally doing that thing that John Paulson’s been waiting for. Traveling to either side of the English Channel just got a lot cheaper on the ground. Oh yea, and David Cameron won’t be prime minister anymore. Plus, it could have (and has) been worse. I mean, probably not for British people. But for the rest of us.

Neither the change in the VIX nor its absolute level would make a mark in the record books—not even close. If it were to remain as high by the close of trading in New York, it only would be 1,600th highest reading….

By contrast, on 9/11 the VIX spiked to nearly 50. Ditto for the collapse of Long Term Capital Management in 1998. The all-time intraday peak was a little under 90 during the 2008 financial crisis when things looked far bleaker than today. And, in nearly all of these cases, realized volatility in the S&P 500 was markedly less than what the price of protection implied.

World stocks routed as Britain votes for EU exit [Reuters]
Turbulence and Uncertainty for the Market After ‘Brexit’ [NYT]
As Word Spreads, a Grim Mood in London’s Financial District [NYT]
Cameron resigns after Brexit defeat [Times]
With a British adieu to EU, it’s farewell to a Fed rate hike for now [Reuters]
Sturgeon demands independence vote before UK leaves EU [Times]
EU referendum result: Sinn Fein’s Martin McGuinness calls for border poll on united Ireland after Brexit [Independent]
Trump praises ‘fantastic’ result as he arrives in UK [Times]
London to Lose Tens of Thousands of Jobs After Brexit [Fortune]
Morgan Stanley denies moving 2,000 London jobs to Dublin and Frankfurt [Independent]
JPMorgan: Roles may move out of UK ‘in the months ahead’ [Financial News]
Gold Soars as Investors Seek Haven Following Brexit [WSJ]
Sterling Crash Just the Start of Brexit Market Fallout [WSJ]
Why ‘Brexit’ Is No Lehman [WSJ]



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