Brexit back and forth

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.