Brexit, Housing, Stocks And The Unyielding Gold

When the UK launched this Brexit thing, it seemed like they had a plan and then big gaping holes started to show up. UK citizens who thought that Brexit was just about being autonomous from Europe learnt that it wasn’t as easy as that and that things could actually become worse for them if they exit the European Union. Too little, too late and now the politicians can’t agree on the exit plan.

Ten years ago, the UK’s central bank cut interest rates to a record low of 0.5% and launched quantitative easing (QE) and had fun printing new money as a solution to the global crisis. The United States was doing it, so what would be the harm, right? Just a little quantitative easing to get over a crisis. That is just another example of the UK taking monumental decisions and putting the repercussions of those decisions aside and deciding to come up with a plan to cross any bridge only when they get to it.

Why did Brexit even come to be? Most people claim that the people living in the UK were so frustrated and resentful of the lack of economic progress under the EU that 51.9% of the electorate wanted to quit the EU and go back to the way things were. Brexit was being sold as a revolt against the EU’s elitist policies. That percentage was pretty slim though and you would have hoped the government would hold off and wait a year or two for another’s referendum just to ensure that people understood what they were voting for.

So, what has changed since the UK announced its Brexit move? The property prices in London fell incredibly low and at a faster rate since the financial crisis. But with quantitative easing stripping the pound sterling of its value, it’s getting harder to afford a mortgage. So more people are switching to renting. This has been a boon for property investors who can afford to build property empires. However, those who own their own homes find themselves with property that is worth much less that it was a few years ago.

Politics aside let’s look at Brexit and QE from a practical viewpoint :

If you are looking to make money by selling your house or protect what you have, you’ll discover how hard you have to struggle.

Everyone needs a home and aren’t we always saying people should invest and save more? The UK housing prices and the stock market are at an all-time high, but so is the price of gold. What Brexit and QE have taught us is that currencies can be inflated and rendered obsolete. Gold on the other hand is a great safe haven because it really does nothing. Unlike the currencies we use, gold is a yardstick that can never inflate or destroy. Gold does not change and its status is society has not changed much either. There was a time when gold was more than a store of value but actual money. The great thing about it though is that it retains the same value whether you are selling it in London or the US or Australia, India – there is one spot price that can be converted to pretty much any currency in the world.

You can cut down through the noise of say a mortgage by taking the price of 1 ounce of gold and use it to divide the house price or the FTSE Share Index. This way you’ll know how far you can go with your gold.

Why talk about the FTSE index? Well since the 1960, the FTSE and the average UK real estate price dropped when inflation rose. These two have been linked through the 89’s rally to the 90’s surge and the back and forth whipping of the new millennium. The co-movement of gold and stocks has been consistent and it is represented by the FTSE/gold index.

Today with the frustrating no-deal or with-deal Brexit the UK house prices and stocks are both low. Either way, property investors and FTSE Index investors. Things look on the up and up. If you are looking for more than just money, but value too, then look to gold it is an unyielding safe haven for those with gold. With Brexit delayed, UK Prices low and the stock market uncertain, there is one thing you can be sure of – gold.

Sources:

https://www.investopedia.com/hard-soft-on-hold-or-no-deal-brexit-outcomes-explained-4584439

https://www.bbc.com/news/business-46862790