The arcane mechanisms of the European Union are about as interesting as watching paint dry or reading the small print of a share document. But for anybody wanting to know how the Brexit - Britain's failing attempt to leave the EU - will turn out, it is important to pay attention.
Last night there was a vital development. The President of the EU Council, the body that brings together the 28 EU leaders, Donald Tusk, recommended that the UK only be granted an extension to the Brexit beyond the March 29th final deadline if - and only if - its parliament agrees on the exit deal that it has twice rejected by a huge majority.
You might be tempted to say: OK, so that means no deal is possible and the UK automatically leaves on March 29th. That's true, except that if the UK went back to the EU-27 next week - when an emergency summit is already proposed - with a referendum proposal on the table then the EU Council would certainly jump at it.
New second Brexit referendum
Parliament has the power to amend its vote next week to include that referendum, and that will be its only practical other alternative if it does not want to be thrown out of the EU on March 29th without a deal. There is no secret that every member of that Council, except the UK so far, would like a second referendum on the Brexit.
Why? Because they don't want Britain to leave the economic bloc after 46 years of membership, causing significant economic and political harm to the European Union for nationalistic reasons of dubious economic benefit to the UK. They would hope that British citizens, tired to death of listening to this interminable debate would vote Brexit out, thereby killing the whole idea for good.
The latest YouGov opinion poll showed at least 57 percent would vote against the Brexit in a fresh plebiscite (depending on how the question is phrased), against the 48 percent who voted against it almost three years ago.
The public is broadly split down the middle over whether to hold this poll. But there is reason to question the mandate of a three-year-old referendum result as an enormous amount of additional discussion and information has emerged since then. Have a look at the YouGov polling data above if you want to see just how hard it is to understand the options on this issue. You might ask how many members of the public would understand this either; I could not possibly comment.
What would this mean for international investors? Certainly the pound sterling would benefit. It's become the dog of the forex world since the original Brexit vote and is anything up to 20 percent below where it would otherwise be. This is the most obvious place to make money on the termination of Brexit.
For UK stocks, you need to be more selective. Those public companies with large international earnings - and that's half the FTSE 100 - are vulnerable to a rise in the sterling that devalues their overseas revenue. More domestically-orientated shares, however, ought to benefit from a relief rally with a double bonus for those quick enough to buy them with US dollars now while the greenback is still on a high (which it looks about to lose).
Then there is the continent of Europe itself. German car manufacturers in particular will get a lift once the black shadow of Brexit is removed. The euro should also surge on this news. There could be an arbitrage out of US assets and into Europe, with the former looking overvalued and the other very cheap by comparison.
Yesterday the Federal Reserve chairman Jerome Powell cited the slowdown in China and Europe as the two main reasons for not raising US interest rates again this year.
The Brexit is a key reason for European weakness. If it gets thrown out in a second referendum - and the onus will be to get this over quickly - then that's one less problem for the global economy. It's also a change that macro investors ought to take onboard just as soon as they are convinced it is happening.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.