by Market Shadows - June 24th, 2016 10:35 pm
Financial Markets and Economy
Why Brexit Is So Bad for the Global Economy (The Atlantic)
Great Britain’s decision to extricate itself from the EU has consequences that are at once far-reaching and unknown. By Friday morning, no market was immune. Great Britain’s currency, the pound, had fallen to its lowest levels since 1985, and the FTSE (an index of the London stock exchange) and DAX (a German stock index) plummeted. In the U.S., markets opened in the red, gold (a commodity that many investors flee to at times of uncertainty) was up, and traders around the globe prepared for a volatile day amid the question of what the future will look like with the U.K. untethered from the European Union.
Global markets were plunged into turmoil after the UK voted to leave the EU, though the FTSE 100 was spared the worst of the pain by the time it closed in a roller-coaster session.
Hours after the UK voted to quit the European Union, investors put stocks on notice.
U.S. Politics Scares Overseas Investors (Bloomberg View)
Sometimes, an economic paper delivers such a disturbing result that you have no choice but to sit up and take notice. That was the case for me, when I saw this new study by Stony Brook University’s Marina Azzimonti. Azzimonti’s disquieting hypothesis is that political partisanship is deterring overseas investment in the U.S.
It is time for Project Grit. We warned over the final weeks of the campaign that a vote to leave the EU would be traumatic, and that is what the country now faces as markets shudder and Westminster is thrown into turmoil.
The stunning upset last night marks a point of rupture for the post-war European order.
Stocks Send an Inflation Signal (Wall Street Journal)
The message from the bond market this
by ilene - June 24th, 2016 10:29 pm
Courtesy of Michael Batnick at The Irrelevant Investor
The most important thing long-term investors need to see today is the market’s response to crisis, courtesy of Dimensional Funds.
The chart above should put the Brexit in perspective. Nobody knows yet what the implications will be, but I’m pretty confident that this is no more significant than any of the six events above. Now of course there are never any guarantees, that’s what risk means. And if you need the money in the next five years, you should not be subjecting it to the risk of the stock market anyhow.
I’m a believer in practicing what I preach, so today in my personal account, I added to the international side of my portfolio. This is definitely not a market call, I am not suggesting the bottom is in, but I also know not to look a gift horse in the mouth. When an entire index falls ten percent in a day, you hold your nose and hit the buy button. Investing is all about giving your future self a chance at a better life, and it’s days like today that determine whether or not you’ll be able to do so via the stock market.
I’m invoking article 50 and resurrecting a Warren Buffett quote, who had this to say when clients reached out to him after stocks fell in 1966:
After the Dow declined from 995 at the peak of February to about 865 in May, I received a few calls from partners suggesting that they thought stocks were going a lot lower. This always raises two questions in my mind: (1) if they knew in February that the Dow was going to 865 in May, why didn’t they let me in on it then and (2) if they didn’t know what was going to happen during the ensuing three months back in February, how do they know in May? There is also a voice or two after any hundred point or so decline suggesting we sell and wait until the future is clearer. Let me again suggest two points: (1) the future has never been clear to me (give us a call when the next few months are
by ilene - June 24th, 2016 9:06 pm
Courtesy of Zero Hedge
On a day full of tears, jeers, and fears for many, we thought a little humor might help…
What comes after Brexit?
Brexit. Grexit. Departugal. Italeave. Fruckoff. Czechout. Oustria. Finish. Slovakout. Latervia. Byegium.
— Rahul Goma Phulore (@missingfaktor) June 21, 2016
In other words…
by ilene - June 24th, 2016 3:05 pm
Courtesy of Joshua M Brown
My friend and fave policy bear Peter Boockvar has some unanswered questions worth considering in the wake of the historic events of this week…
Ok, so let’s now deal with what’s next. I acknowledge the chaotic response and the shock on the part of many to what took place. The disruptions will be plentiful. For the UK, businesses will reign in investments and decision making may get paralyzed but I believe this would only be short term in nature. The UK will adjust, deals will get redone, lawyers will have a field day and at some point in coming years the UK will deal with the EU just as Switzerland and Norway do today. Of course what becomes of the EU in coming years is now the vital question. Is this the needed wake up call to a EU Parliament that has 40,000 employees doing god knows what except implementing rules and if some of those rules get broken, like debt and deficit limits, there are no consequences? Does this expose the European social welfare state as hitting its limits of excessive debt and too little growth? Does the ECB realize that all they’ve done was bought time and that time is now up? Will the poison of NIRP be revealed for what it really is, a tax on capital and a deprivation of yield that is damaging the entire European financial system. Will QE be revealed as a massive bubble blower of assets that will at some point reverse? Will Hollande and Renzi, to name a few, follow thru on their attempts to liberalize their economies? Will the onset of this potential crisis be the force that tells the bureaucracy that business as usual is over?
Managing Director and Chief Market Analyst
The Lindsey Group LLC
by ilene - June 24th, 2016 2:25 pm
Courtesy of Joshua Brown, The Reformed Broker
Good morning and welcome to the end of civilization as we knew it. Just kidding, but wow – what a stunning development in Europe. Even some of the people who voted for Brexit are telling reporters it was just to vent, they never thought it would actually happen. Welp…
Anyway, last August, with the markets in free-fall after the surprise devaluation of the yuan, I published the below and subsequently received an ocean of feedback from people who were helped by it. I actually did the Facebook and Netflix buys personally, at absurd prices, shortly after. This time around, who knows?
I republish My Little Trick for Coping with a Correction in full here today, hope it helps you too. It’s important to point out that today is merely day one, and things could get worse for awhile. Stay woke out there. – JB
It’s going to be bad this morning. China was down over 8% last night. Europe is down close to 5% this morning. As of this writing, the Dow Jones looks like it’s going to open down another 600 points, after losing 1000 points last week.
It’s official, we’re experiencing the 28th 10% correction since WWII.
How do you cope? There are some tricks.
The first is, you remind yourself that this is what diversification and strategy are for. But it’s too late to start thinking about this now. If you don’t have anything in place to mitigate the volatility of the stock market already, nothing you do today is going to make a difference.
But there is one thing that anyone can do right now that could be very helpful as a coping mechanism to get them through today and whatever is to come. It’s a psychological trick I picked up somewhere along the way during my 17 years trading and investing in the markets.
Before I lay this trick out, a standard disclaimer is in order: I do not know you personally nor do I know anything about your financial situation. I don’t dispense advice here on this site for exactly this reason. I share my thoughts and a bit about my own process, but I never tell strangers what they themselves ought to…
by stjeanluc - June 24th, 2016 11:23 am
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.
What bothers me the most was that some of the undertone of the Leave campaign had a certain xenophobic message that leaves a bad taste. I understand the frustration of people with the European structure but that undertone is what leads to the killing of the MP we saw there. Most of the congratulation messages coming in right now in Europe come from far right parties that also have that xenophobic undertone.
BTW, Trump seemed to be happy, but I wonder how he will feel if Scotland leaves the UK and applies to the EU again. His golf courses will be in the EU again!
by phil - June 24th, 2016 8:04 am
Wheeeeeee – what fun!
What do you want me to say? I could not possibly have warned you more, I couldn't possibly have said CASH!!! or "Cashy and Cautious" one more time without sounding like an idiot and I could not have given out more hedging ideas or better shorting lines on the Futures to save you from being "surprised" by the vote by the UK to leave the EU and the market repercussions we're seeing today. In fact, right in yesterday's morning post I told you:
Nice test of 2,100 on /ES, which is a good shorting line along with 17,8000 on /YM, 4,450 on /NQ and 1,160 on /TF and 16,600 on /NKD is ridiculous since the Dollar is down half a point (93.23) but safer to short the US indexes since the Dollar coming back would be good for /NKD.
This morning I called longs on our indexes in a 3:38 am Alert to our Members and we caught a nice move up and I'm not even going to talk about how profitable yesterday's Futures shorting ideas were since it seems like crazy, unrealistic money when you catch a 5% correction and, anyway, if you missed it – it's not like these happen every day, week, month or year.
That's why I was making such a big deal about it – how often are we able to get ourselves ahead of a major market correction? As I have been saying, the RISK of the market making new highs and us regretting missing a bit of a move higher were/are nothing compared to the REWARD we now have from flipping short and moving to CASH!!!, where we now get to go bargain-hunting on all those stocks people are panicking out of.
We're in no hurry to do anything, however – let the chips fall where they may over the weekend and we'll see how sentiment is running over the weekend. Our morning longs have already stopped out and, on the whole, the S&P…
by Market Shadows - June 24th, 2016 2:50 am
Financial Markets and Economy
Global markets buckled as Britain’s vote on European Union membership infected every asset class.
The pound plunged by a record and the euro slid by the most since it was introduced in 1999 as the BBC projected a victory for the "Leave" campaign with most votes counted in Britain’s referendum on membership of the European Union. South Africa’s rand led slides among the currencies of commodity-exporting nations as oil sank to about $47 a barrel and industrial metals slumped. The yen surged and gold soared with sovereign debt as investors piled into haven assets. European and U.S. futures tumbled as Asian stocks dropped by the most in five years.
Britain's exit will affect the British economy, immigration policy, and lots more. It will take years for the full consequences to become clear. But here are some of the most important changes we can expect in the coming months.
The process of leaving the EU will take years
A Brexit vote is not legally binding, and there are a few ways it could theoretically be blocked or overturned. However, as the BBC notes, "it would be seen as political suicide to go against the will of the people as expressed in a referendum."
A dangerous 'confluence of forces' is threatening the US economy (Business Insider)
The International Monetary Fund released a preliminary report on Wednesday that predicted the US economy will grow 2.2% this year, and 2.5% in 2017.
US stock futures are getting slammed after early Brexit surprises (Business Insider)
After early surprises in the UK's EU referendum, US stock futures have turned negative.
U.K. index futures fell as the initial results of the referendum on European Union membership signaled a closer race than expected.
by ilene - June 23rd, 2016 5:20 pm
Courtesy of Joshua M Brown
Financial scams are rolling off the assembly line double-time these days, as clients are sold products and services appealing to their post-crisis fears of volatility rather than their now-chastened esprit de greed.
Investors (and their advisors) are targeted easily by people promising “non-correlated” returns without market exposure or sophisticated hedges that will “protect” them from swings in the market. As though a market swing were a risk on par with a total loss of capital…and, of course, it is not.
The deadly assumptions investors make are myriad, but two classic ones came to the fore in this week’s headlines.
The first deadly assumption we’ll look at today:
The guy belongs to my church / temple / country club / ethnic group, of course he’ll look out for me.
Maybe he will, but is affinity a good enough reason to trust a financial advisor?
Journeyman quarterback Mark Sanchez found out the hard way that this sort of thinking can easily lead one into the arms of a predator…
Former New York Jets quarterback Mark Sanchez and other professional athletes said they were cheated out of millions of dollars in a Ponzi-like scheme orchestrated by an investment advisor who appealed to their Christian faith.
Sanchez and Major League Baseball pitchers Jake Peavy and Roy Oswalt were defrauded out of about $30 million, according to a recently unsealed U.S. Securities and Exchange Commission lawsuit in Dallas federal court. The athletes all used the same broker, Ash Narayan, formerly of RGT Capital Management. The advisor gained their trust through religion and their interest in charitable works, the SEC said.
The complaint alleges that the “advisor” steered client money into a private venture that he controlled, and when they balked or expressed concern, he forged documents to steer even more into the collapsing company:
In mid-2011, Sanchez agreed to make a $100,000 investment in TTR. Instead, Narayan forged documents and directed more than $7 million of Sanchez’s money to the ticket company, the SEC said. In total, Narayan transferred more than $33 million from all investors to TTR, earning almost $2 million in