Markets getting another breath higher this morning. The bears/shorts were sure Brexit was the next bear market catalyst. Still might be, but not this morning.
Join me right now for this week’s Live Q&A Chat at 2pm EST at https://twc.scutify.com/members/ or on the Trading With Cody app. You can also just hit reply on this email or email firstname.lastname@example.org to ask a question to me directly and we’ll include it in the transcript.
No trades for me today so far. Still not 100%, but pushing full speed anyway today. See you at the Chat!
In the meantime, I wanted to share with you some of the back and forth about Brexit and my long form report and analysis from yesterday about it. Here’s an interesting email from a Trading With Cody subscriber based in Germany:
Cody – two remarks:
- London will suffer in the way that all EU-regulated financial products will no longer be managed out of the city. This business will migrate to Frankfurt, Paris or Amsterdam, so in the end no global issue. Just wondering what will be left for a de-industrialised country like England (slightly exaggerating here).
- As a (proud) EU citizen and (currently less proud) German citizen: The EU is about more than regulation, it is essentially about free movement of people, goods and money (and originally about preventing WW3). One of the three would not work without the other two. It was a mistake to grow the EU from 12 to 28/27 in such a short time and Brexit is a result of it. But it would be helpful from an US perspective to rather consider the EU as a setup very similar to the US: some state legislation and some federal; highly differing economic power; highly differing political standpoints.
And I shared some snippets of my big Brexit write up yesterday on Scutify and got some interesting perspectives from US and EU-based folks there too:
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. @HelgerH @LunaticTrader
@HelgerH As we saw during the 2008 financial crisis, the powers-that-be typically try to convince the world that everything is kosher when things are crashing in hopes that they can somehow create a reflexive cycle. They don’t warn of crashes and crisis if they really are worried about crashes and crises, which I think is what @LunaticTrader is getting at.
this could’ve been a much worse dollar spikenot to mention every central bank providing billions in emergency liquidity at the onset of Brexithttps://next.ft.com/content/e3…