The shock and horror at the Brexit vote has been loud and vociferous. Some seem to be revelling in the uncertainty that the referendum result has provoked. The pound falling in value, a downturn in markets – it lends credence to the establishment’s claims before the referendum that a Leave vote would lead to economic Armageddon.
But there are plenty of reasons to reject the consensus that Brexit will be costly to the UK’s economy. Even though markets appear stormy in the immediate aftermath of the vote, the financial market reaction to date has more characteristics of a seasonal storm than of a major catastrophe.
We were told that the consensus of economic experts were overwhelmingly opposed to a Brexit. Lauded institutions – from the IMF, OECD to the Treasury and London School of Economics – produced damning forecasts that ranged from economic hardship to total disaster if the UK leaves the EU. Yet 52% percent of the British electorate clearly rejected their warnings.
Something that my professional experience has taught me is that when an “accepted consensus” is presented as overwhelming, it is a good time to consider the opposite. Prime examples of this are the millennium bug, the internet stock frenzy, the housing bubble, Britain exiting the European exchange rate mechanism (ERM) and Britain not joining the euro. In each of these examples, the overwhelming establishment consensus of the time turned out to be wrong. I believe Brexit is a similar situation.
The economic models used to predict the harsh consequences of a Brexit are the tools of my profession’s trade. Used properly, they help us to better understand how systems work. In the wrong hands they are also downright dangerous. The collapse of the hedge fund Long-Term Capital Management in 1998 and the mispricing of mortgage backed securities leading up to the 2008 financial crisis are just two of many examples of harmful consequences arising from the abuse of such models.
The output of these often highly sophisticated models depends entirely upon the competence and integrity of the user. With miniscule adjustment, they can be tweaked to support or contradict more or less any argument…
Fed Chair Janet Yellen Takes Her Seat at an Open Meeting of the Federal Reserve Board of Governors on November 30, 2015 to Vote on a New Bailout Rule
Today, at 4:30 p.m., the Federal Reserve is scheduled to release the second leg of its annual stress tests of 33 banks holding $50 billion or more in total consolidated assets. The first leg of the tests was released last Thursday with all 33 banks getting a passing grade in terms of meeting the minimum capital cushion required. Today’s final round, called the Comprehensive Capital Analysis and Review (CCAR), will determine whether the banks are allowed to continue or increase dividend payments, conduct share buybacks or issue secondary stock offerings. This is the sixth annual round of stress tests conducted by the Fed since the financial crash in 2008.
In addition to the regular stress tests, eight large banks with significant trading and/or clearing operations are required to show losses if a major counterparty defaulted. Those banks are: Bank of America, Citigroup, Bank of New York Mellon, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street Corp. and Wells Fargo.
In the data released last Thursday, the Fed showed a total loss of $52.6 billion at all eight banks combined on derivatives, securities lending, and repurchase agreement activities should a major counterparty default. Wall Street veterans are highly skeptical that $52.6 billion captures the reality of the problem when those same banks are holding hundreds of trillions of dollars in notional amounts of derivatives and the tally has grown since the epic crash of 2008.
It’s tough to believe that $52.6 billion would cover the tab because at the big insurer AIG, which received a $185 billion taxpayer bailout in the crash, over half of that amount went out the back door as a stealth bailout of the big banks. A total of $93.2 billion was paid by AIG to Wall Street and foreign banks for their derivative bets and securities loan transactions.
Since the size of the derivative exposure has grown and become more interconnected, why would the losses be expected to diminish in the next crash?
Attack in Istanbul --> The BBC: "A gun and bomb attack on Istanbul's Ataturk airport has killed 41 people, at least 13 of them foreigners, and injured more than 230, officials say. Three attackers arrived in a taxi and began firing at the terminal entrance late on Tuesday. They blew themselves up after police fired back."
Turkish officials were quick to say that ISIS appears to be behind the attack. Reuters: "Two U.S. counterterrorism officials familiar with the early stages of investigations said Islamic State was at the top of the list of suspects even though there was no evidence yet."
Benghazi… again --> After years of investigating Hillary Clinton for personal wrongdoing related to the 2012 attack on the American consulate in Benghazi, Libya, Republicans on the House Select Committee on Benghazi issued their allegedly final report yesterday, "finding no new evidence of culpability or wrongdoing by Hillary Clinton…"
This follows a report by Democrats on Monday tallied up Republicans' spending on the partisan investigation and came up with a price tag to taxpayers of $7 million.
But: That doesn't mean the investigation didn't succeed in saddling Clinton with baggage. Donovan Slack for USA Today: "The National Rifle Association’s political arm is launching its first ad campaign of the 2016 presidential race, with a survivor of the terror attack in Benghazi urging viewers to vote for Donald Trump. The ad, which the NRA Political Victory Fund is backing with more than $2 million, is the group’s first campaign in the presidential race and one of the larger expenditures by an outside group on behalf of the presumptive Republican nominee."
And: The Hillary Clinton email story, which just won't die, also emerged out of the Benghazi investigations.
Soliciting foreign money --> Adam Weinstein for Fusion: "In recent days, as the U.K. pondered its future in the European Union and presumptive GOP presidential nominee Donald Trump waded in with a press conference on his Scottish golf course, the Scottish National Party’s 54 members of the British Parliament received multiple emails from…
The June 27 issue of Barron’s has done it again. With thousands of fund managers to pick from, columnist Leslie Norton chose to spotlight Bruce Geller, CEO of Dalton Greiner Hartman Maher and the firm's GDKM All-Cap Value (DGHMX) mutual fund.
Norton noted that the highlighted fund has trailed its peers in recent years, but it had outperformed its selected benchmark, the Russell 3000, in this year’s first quarter. Yippee!
How many of us really care how our portfolios measure up to that less-than-major index? Do three months of okay results outweigh years of less-than-average total return?
In his interview, Geller touted specific micro-caps, which he then picked or panned. His general love of micro-caps was tied to research data which state that the smallest-cap stocks returned 11.6% since 1926 versus large-caps, which brought in 9.4% annualized.
Did the fund's All-Cap approach manage to harness excess alpha on "under-researched and inefficiently priced" micro-cap shares?
Marion Post Wolcott Coal miner waiting for lift home, Capels, West Virginia 1938
George Osborne declared on Monday that the UK “is in a position of strength” (he meant the economy, not the football team). No, it is not. That’s why he and his ilk lost the vote. But Osborne’s actually thick enough to look in the mirror and tell himself he did a good job. Utterly blind to the people he keelhauled over the past 6 years.
And no doubt while he’s at it, he’s at least tempted to label all 17 million Britons who voted ‘Leave’, uneducated racists. George’s well-to-do friends may be in “a position of strength”, but the British people who paid for these friends of George’s to be comfortable, are nowhere near “a position of strength”.
The only way to protest the wringer they have been put through was to vote against anything Osborne and Cameron represent. And so they did.
Most of the “Brexit is the end of the world” claims that have followed Friday’s referendum result are as stunning as Osborne’s blind spot for this own people (who he doesn’t even see as ‘his own’). And most of them come from people who until recently claimed to detest ‘Gideon’.
In the eyes of a vast majority of commentators, all hell is busy imminently breaking loose in UK society and its economy because those 17 million dumb racists voted No to the EU, which was in reality simply a No to Osborne and Cameron -and Juncker et al-, and all they stand for, something just about entirely overlooked; for most of these voters, it was not a Yes to anyone else, just a NO!.
At the same time the Leave campaign claims endless streams of milk and honey are in the offing, an equally unlikely proposition (is it perhaps an idea to not only talk about money or race; how about physics?).
Fact is nobody knows where Brexit will lead, for the simple reason that there are no precedents or other comparisons. Everybody on all sides just makes things up. Since most of the media outlets that have any pretense left of serious journalism are on the Remain train, it would be easy to be fooled by them.
The whole ‘discussion’ -it’s more an endless parade of…
The correct answer is either Bernie Sanders, Donald Trump, or Hillary Clinton.
34 Statements – Who Made Them?
I do not believe in unfettered free trade. I believe in fair trade which works for the middle class and working families.
I will take on corporations that take their jobs to China.
I think NAFTA has been a disaster.
Instead of passing such trade deals again and again, we must develop trade policies which demand that American corporations create jobs here, and not abroad.
TPP is a death blow for American manufacturing.
I’m for free and fair trade.
We need to bring manufacturing jobs back home where they belong.
Globalization has torn down the barriers that have formerly separated the national from the international markets.
The top priority of any trade deal should be to help American workers.
I heard it about NAFTA. I heard it about CAFTA. I heard it about permanent normal trade relations with China. Here is the fact. Since 2001, we have lost almost 60,000 factories and millions of good-paying jobs.
Maybe we should have a trade policy which represents the working families of this country, that rebuilds our manufacturing base, not than just representing the CEOs of large multinational corporations.
We must end our disastrous trade policies (NAFTA, CAFTA, PNTR with China, etc.) which enable corporate America to shut down plants in this country and move to China and other low-wage countries.
This wave of globalization has wiped out our middle class.
NAFTA was the worst trade deal in history, and China’s entrance into the World Trade Organization has enabled the greatest jobs theft in history.
I think corporate America has to start investing in this country and create decent paying jobs here.
It is a lot cheaper for the American companies to set up plants in China, hire Chinese workers at 50 cents an hour, 75 cents an hour, whatever it is, and have them build the product for the Chinese markets than it is to pay American workers $15 an hour, $20 an hour, provide health insurance, deal with the union, deal with the environment.
Connect the dots. Our current trade deficit is causing the loss of over 2 million jobs. Over the last 20
Nick Murray once said “if you want to suppress volatility, you will suppress returns.” This definitely applies to many investors who either try to time the market on their own, or turn to complex and often times dangerous strategies designed to deliver stock like returns with bond like risk. Such a strategy by definition, cannot deliver on its promise. Look no further than the Merrill Lynch structured notes that lost 95% of its value. And although complex products almost never live up to their promise, there are simple ways to lower volatility without losing your shirt.
Consider a strategy that is over the top in its simplicity; if the S&P 500 is higher than it was one year ago, own the index. If the S&P 500 is below where it was one year ago, switch to one-month t-bills. You can see in the chart below that this simple model did significantly better than the S&P 500.
The trend model also experienced less severe drawdowns. It would not have saved investors from every dip, but it did okay- falling just 13% in the tech wreck versus 46% for the S&P 500, and 11% in the financial crisis versus 53% for the S&P 500. Furthermore, the standard deviation of the trend model was 12.4%, compared with 18.8% for the S&P 500.
Much of the advantage earned by the trend strategy came in the first few years by avoiding some of The Great Depression. If we change the start date to 1935, the picture looks much different. This time, the gap between the buy and hold strategy and the trend model shrinks dramatically.
But of course, as you’re already probably thinking, price appreciation doesn’t tell the whole story. The return of the S&P 500 total return index from 1928-today is 2838% higher than just the price return. So, if used the S&P 500 total return index, buy and hold actually did better than the trend model. Any downside that the trend strategy avoided was more than offset by the dividends they missed while not invested in stocks.
Similarly with the first example, if we begin in 1935
The pound rose for the first time since the U.K.’s vote to leave the European Union, as a recovery in investor appetite for higher-yielding assets seeped through currency markets and sapped demand for the dollar and the yen as havens.
Surprise, surprise. Workers in Britain, many of whom have seen a decline in their standard of living while the very rich in their country have become much richer, have turned their backs on the European Union and a globalized economy that is failing them and their children.
And it’s not just the British who are suffering. That increasingly globalized economy, established and maintained by the world’s economic elite, is failing people everywhere. Incredibly, the wealthiest 62 people on this planet own as much wealth as the bottom half of the world’s population — around 3.6 billion people. The top 1 percent now owns more wealth than the whole of the bottom 99 percent. The very, very rich enjoy unimaginable luxury while billions of people endure abject poverty, unemployment, and inadequate health care, education, housing and drinking water.
Could this rejection of the current form of the global economy happen in the United States? You bet it could.
During my campaign for the Democratic presidential nomination, I’ve visited 46 states. What I saw and heard on too many occasions were painful realities that the political and media establishment fail even to recognize.
In the last 15 years, nearly 60,000 factories in this country have closed, and more than 4.8 million well-paid manufacturing jobs have disappeared. Much of this is related to disastrous trade agreements that encourage corporations to move to low-wage countries.
Despite major increases in productivity, themedian male worker in America today is making $726 dollars less than he did in 1973, while the median female worker is making $1,154 less than she did in 2007, after adjusting for inflation.
Nearly 47 million Americans live in poverty. An estimated 28 million have no health insurance, while many others are underinsured. Millions of people are struggling with outrageous levels of student debt. For perhaps the first time in modern history, our younger generation will probably have a lower standard of living than their parents. Frighteningly, millions of
A trio of suicide bombers struck Istanbul’s biggest airport on Tuesday killing at least 36 people and wounding many more, Binali Yildirim, Turkey’s prime minister said.
The interior ministry initially said that two explosions took place at the entrance to the international departures terminal at Ataturk international airport at about 9.50pm local time.
Security guards opened fire to try to halt the attackers as they approached a security checkpoint but they blew themselves up, one official said.
No group claimed responsibility for the attack but Mr Yildrim said the initial findings pointed to Isis as the culprits.
The attack is the fourth deadly bombing to hit Istanbul in just six months.
The bombings came little more than 24 hours after Turkey officially announced a rapprochement with Israel, ending a six-year diplomatic freeze after the killing of 10 Turkish activists by Israeli forces as they tried to take a flotilla of aid to Gaza in 2010.
Mr Erdogan also moved to repair ties with his Russian counterpart, Vladimir Putin, on Monday, expressing regret for Turkey’s shooting down of a Russian Su-24 jet in November.
The numbers of Russian tourists, who in past years flocked to Turkey’s Mediterranean coast, have fallen dramatically after a diplomatic row with Russia triggered when Turkey shot down a Russian jet near the border with Syria in November. Official figures released on Tuesday showed a 35 per cent fall year-on-year in visitors last month, with Russians down 92 per cent.
Please recall that German Chancellor Angela Merkel wants to give 80 million Turks visa free access to the EU.
How smart is that?
Also recall that migration issues fueled the vote for Brexit.
A curious result of the splintering of Europe coupled with fears over terrorists is a move by Turkey to make amends with Russia.
Earlier today French president Francois Hollande insisted that the UK would need to abide by EU migration rules if it works out a Norway-style arrangement for access to the EU.
In our time to be truthful is to be provocative. To write provocatively leaves little room for error or mistatement as today’s euphemism terms it. I could shill for the establishment and be wrong 98% of the time and nothing ever would be said about it. But there is no forgiveness for a provocative truth-teller.
You have open inquiring minds and you want to know. Your motives are not to protect your illusions and de...
Randi Weingarten is the president of the American Federation of Teachers, and is a name that hedge fund managers and those on Wall Street are beginning to learn quite well.
About a decade ago, some liberals joined conservatives in pushing to expand charter schools. As the WSJ reports, those efforts received financial support from hedge fund managers including Dan Loeb, Paul Singer and Paul Tudor Jones, who together kicked in millions of do...
Here is an advance preview of the monthly moving averages we track after the close of the last business day of the month. At this point, before the close on the last day of the month, all three S&P 500 strategies are signaling "invested" — unchanged from last month's triple "invested" signal. Four of five Ivy Portfolio ETFs — Vanguard Total Stock Market ETF (VTI), iShares' Barclays 7-10 Year Treasury (IEF), PowerShares DB (DBC) and Vanguard REIT Index ETF (VNQ), — are signaling "invested", changed from last month's all invested signal.
By Jacob Wolinsky. Originally published at ValueWalk.
Shares of TESARO Inc (NASDAQ:TSRO) are super hot today today on Ovarian Cancer results and the rally could continue to be hot until phase 3 results in the fall. The stock is up at the time of this written by over $40, 110%, destroying the shorts (at least for today). The sell side are panicing to play catch up with price targets here is what they are saying.
This morning TESARO Inc (NASDAQ:TSRO reported long-waited Ph3 NOVA data, showing s.s. PFS benefits in both cohorts; plans to file for U.S. & EU approval in 4Q16. Contrary to our cautious stance on non-gBRCAm/HRD+ arm following experts’ discussions, this arm also showed s.s clinically meaningful PFS benefits of ~9mo. AE profile was consistent with Ph1 data (most common Gr3/4 AEs thrombocytopenia, anemia & neutropenia). Full data to b...
The media seems to be focused on the Brexit issue, with most of the coverage suggesting it was a negative event. Regardless of the media’s focus, prices are attempting to do something in Europe, that could be bullish and surprise a few investors.
CLICK ON CHART TO ENLARGE
The FTSE 100 Index remains in a long-term bullish trend (lower highs and higher highs) over the past 5-years. The bottom of the rising channel (A) was hit in Fe...
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I have mixed feelings about Brexit today. Clearly the European institution need reforming. The addition of so many countries in the last 20 years has created a top heavy administration. The Euro adds more complexities to the equation as the ECB policies cannot fit every country's problem. On the other hand, a unified Europe has advantages as well – some countries have benefited from the integration.
For Britain, it's hard to say what the final price will be. My guess is that Scotland might now vote for independence as they supported staying in Europe overwhelmingly. Northern Ireland might be tempted to leave as well so possibly RIP UK in the long run. I was talking to some French people and they were saying that now there might be no incentive for France to stop immigrants from crossing over to the UK like they do now and simply allow for travel there and let the UK deal with them. The end game is not clear to anyone at the moment....
One week ago, when bitcoin first crossed above $700 on the seemingly insatiable Chinese buying which we forecast last September (when bitcoin was trading at $230) would take place as a result of China's capital controls (to much pushback by the "mainstream" financial media), we tried to predict what may happen next. We said that "it could go much higher. That said, anyone who bought last September when the digital currency was trading at $230 may be advised to take some profits, and at least make...
After a three-year bull run that more than quadrupled its value by its peak last July, IBD’s Medical-Biomed/Biotech Industry Group plunged 50% by early February, hurt by backlashes against high drug prices and mergers that seek to lower corporate taxes.
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at firstname.lastname@example.org with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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