Quick note first – Axogen is getting added to the Russell 2000 index, which means that any ETFs that are supposed to mimic the RUT, as its called, will have to buy some Axogen. It doesn’t really change anything for us as investors in the company, but it is a small validation of the company and its stock. I’m still planning on trimming maybe 10% of this small position for me soon, if only to lock in some profits, but I haven’t yet. Now onto today’s report.

Is Brexit a game-changer? And if so, is it a good thing for the world’s economies or bad? That seems to be the only thing that matters right now, huh? So let’s step back for a moment, get some perspective and do some free-thinking, fresh, objective analysis of Brexit.

First off, let’s to imagine a world in which the UN sets trade, economic and immigration laws between all the countries that are a part of it and that the UN also controls the currencies for all its members except for the US and Britain. Imagine that it’s not just UN bureaucrats but also elected officials from each of its many member countries who get lobbied and who get the ideas for their trade/economic policies from corporate/giant bank economists and then force those policies down the throats of every US citizen.

Imagine that for fifteen or twenty years, the UN kept adding on new layers of regulation for everything from toasters to energy to who gets loans at what rates.

The policies include sending billions of dollars in welfare/subsidies/payments each year to corrupt global corporations including to the Swiss and German and Chinese banks which continually then have to pay a small fraction of those billions in welfare they receive back to the government every few months because the banks themselves continually break all the same laws they just lobbied for. The policies include open immigration among member nations.

(See Immigration and Brexit: “What does this have to do with the European Union? One of the EU’s core principles is freedom of movement: EU citizens have the right to live and work in any EU member state. When a number of countries in Eastern and central Europe joined the EU, most existing member states put temporary limits in place on the freedom of movement to ensure they wouldn’t experience a large and potentially disruptive influx of new arrivals.”

Eventually, after a decade and a half or two, the good citizens of the US revolt at the polls and force the politicians in the US to stop accepting the trade, economic and immigration laws from the UN.

The next day, the markets would tank and everybody would warn us that the stock market will crash, the economy will recede and there will be no more prosperity in our futures.

Do you really believe that would be the case? I don’t. More freedom and less central control of an economy always brings about more prosperity as it unleashes the forces of capitalism.

As Troy Vincent explains in this piece called Why All the Post Brexit Hysteria?:

“We need only consider what affords a national economy its productivity. The intellect of the talented people of the UK that create value, the infrastructure, the primary institutions, and the capital goods that allow individuals to turn their time into valuable outputs have not changed. It is not as if London’s financial district or the many manufacturing industries around the UK were decimated by a meteor and must be rebuilt from the ground up. Physically and intellectually the UK is the same today as it was the day before the vote to secede.”

He continues: “Trade deals can and would be struck between two mutually benefiting nations barring some greater despotic governmental force like the EU holding at ransom some other portion of their economy. Logically and economically speaking, if both Germany and the UK benefited from trading with one another last week, why wouldn’t they continue to trade with one another today? The only reason that this arrangement would not take place is if the cartel called the EU, of which Germany is a member, prohibited them from doing so.”

On the other hand, there’s clearly some perceived stress in the system right now, and that itself is probably a good thing. Brexit caused the Britain Pound vs most major currencies to crash, the EU vs the dollar to weaken and the Yen to rally strongly. Remember that we are in the midst of a global currency war that is essentially a race to devalue each of the developed world’s fiat currencies as quickly as each nation can.

With the exception of gold, which is starting to price in more of these global fiat currency devaluations in the face of Brexit, the US Central Bank, Japan, China and the EU all have yet more coverage to continue their easy money/QE/negative interest rates/bailout ways. Are easy money/QE/negative interest rates/bailout ways bullish for the stock market? At least for the near-to-mid-term, as we have seen since 2008, they sure can be.

In the near-term, yes, there’s uncertainty about what Britian’s future is, how secure the rest of the EU itself is, and therefore a lot of new uncertainty about the status quo in the economy and markets. Is that uncertainty going to amount to enough selling-begetting-more-selling in the stock markets to overcome continually improving employment numbers and, more importantly for the stock market, the likely continued growth of the US corporate earnings into year end? I don’t think so and I plan to continue to gently scale into more long exposure in some of my favorite Revolution Investing names if the markets get hit hard again in the next few days or weeks.

But maybe the real question is whether or not Brexit is a Black Swan event that will cause ripples and asset price crashes throughout the economy and markets like the Great Financial Crisis/Real Estate Bubble Pop of 2008 did? We shouldn’t overlook what the giant global banks based in Europe might be signaling with their crashed stock prices. From Credit Suisse to Barclays to Deutsche Bank, most of the giant European bank stocks are down 70-80% over the last twelve months. Goldman Sachs and Morgan Stanley are both down 40% from their highs twelve months ago and most every US bank stock is also at new 52-week lows in the face of Brexit.

I’ve long avoided the giant bank stocks as I’ve outlined how their record earnings for the last few years are at all-time highs as a percentage of GDP and are dependent upon continued government assistance, protection, subsidies, etc. So I’m obviously not I’m terribly surprised to see them get crushed when they lose control via the EU losing control.

Maybe there’s a few derivative currency bets at the major global banks that are now so huge that we’re going to hear some announcements about cross-party trade risks ie, the inability for the bank on the losing side of those currency bets to pay off the bet. And maybe there will be a new slew of giant banks that will actually be forced to under and recapitalize entirely since the world probably won’t allow for another round of outright bailouts ala 2008 if there are a bunch of risky currency derivative bet weapons of mass destruction that are currently going off in the global financial system. Last week, the Fed gave the TBTF banks in the US a passing grade in their “stress tests,” and it sure would be poetic if that marked the top in this eight year stability in the global financial system, wouldn’t it?

But over the long run, I think the US economy, stock market and each of our individual prosperity will all be much better off with fewer and less powerful central control centers running the global economy. Britain will see more prosperity in the next ten years than they ever would have as part of the EU. And so will most of the rest of the world’s economies and citizens.

In the end, while I recognize the increased near-term risks of Black Swans in the financial system, I still think the risk/reward lies most favorably with our current playbook and set-up. I remain net long overall, and have increased some of that long exposure in the last couple days just a bit, but I am less bullish today than I was in 2010-2012 when I had been aggressively net long with few shorts, lots of large long positions and the liberal use of longer-dated call options.

On the final hand, long-term readers of mine know well that I’m perfectly willing to get bearish when the economy, geopolitics, system stress and/or other Black Swans come along. So I’ll remain as vigilant, objective and hard-working as I can be to keep us in front of the risks, as always.