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The Equitymaster Research Digest

What Is Your Trade of the Decade?
Jun 28, 2016

  • Revisiting market crashes...
  • Our trade of the decade
  • Six meetings in four cities

In the midst of Brexit and market turmoil, you may have come across this funny - and troubling - bit of news last weekend:

  • The British are frantically Googling what the EU is, hours after voting to leave it.

It is not just the British. But the impact of a modern world moving from globalisation to localisation is yet to dawn on most of us.

History can help investors better estimate the impact.

Take the case of the recent 30-year plunge in the British pound. This is not the currency's first crisis.

George Soros has been called 'the man who broke the Bank of England'. He made a name for himself when he banked US$1 billion in a single day in 1992 shorting the pound.

Soros borrowed US$10 billion to bet against the pound, which pushed down the value of the currency. The Bank of England's best efforts couldn't arrest the fall. It unpegged the pound from the German Deutschemark (a fixed-currency arrangement called the European Exchange Rate Mechanism).

Soros' fund made US$7 billion in profit. He personally pocketed US$1 billion.That 'Black Wednesday' experience soured a generation of British on the idea of joining a single European currency. It is said to have contributed to the current anti-EU sentiment in the country - 24 years later.

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