But even that doesn’t speak to the carnage in select sectors and assets.
European banks were an epic disaster, with U.S.-traded ADRs like Deutsche Bank (DB), HSBC Holdings (HSBC), UBS Group (UBS), Barclays PLC (BCS), and Royal Bank of Scotland (RBS) crashing anywhere from 4.2% to 20.9% today alone. Martin Weiss discussed many of the fundamental problems facing these stocks earlier, and the Brexit-induced selling is only making things worse …
The British pound tumbled another four-and-a-half cents against the U.S. dollar, bringing its two-day losses to a whopping 14%. That’s virtually unheard of for developed-world currencies, and it leaves the pound at its lowest level in 31 years …
Bond yields continued to plummet as well, with the yield on the 30-year Treasury falling to as low as 2.28% and with the yield on the 10-year dropping to 1.46%. That puts U.S. government bond yields within a whisker of their all-time lows.
What’s behind this financial bloodbath? The Brexit vote is the immediate trigger, obviously. Wall Street went into Thursday’s close ecstatic about the “Remain” vote they were confident was coming … only to get completely blindsided when “Leave” won. So investors were caught massively offsides, and have been scrambling ever sense to sell and/or hedge in order to get in better position.
|Markets are in turmoil since last week’s Brexit vote.|
It’s much more than that, though. European politicians and global central bankers are running around trying to figure out what to do, holding panicked meetings, teleconferences, and conversations on both sides of the Atlantic and Pacific.
But as I asked the other day, what more can they really do? They’ve already slashed interest rates more than 650 times. They’ve already bought more assets than ever before, artificially inflating virtually every market on the planet in the process. And they’ve already pledged to do “whatever it takes” more times than I can count.
But none of their medicine actually worked for the real economy — and in fact, it’s now actually hurting more than helping. That’s forcing more investors to finally accept what I have told you for many, many months: Central bankers have lost control of the markets!
|“If you don’t take steps to protect yourself, you’re doing your portfolio a grave disservice.”|
I don’t know exactly where this selloff will take us. With us getting more and more oversold in the short term, we may also see a bounce at any time. But that’s near-term stuff. The most important thing I can tell you about the long-term outlook is the same thing I have shouted from the rooftops again and again since last summer:
The credit cycle has turned …
The “Unseen Hand” has gone from help to hindrance for stocks …
And if you don’t take steps to protect yourself (and for that matter, profit), you’re doing your portfolio a grave disservice.
Just one example: I recommended subscribers in my All Weather Trader to peel off one position into this morning’s panic selling. I estimate they pocketed a profit of a whopping 412% as a result – in just two weeks!
Not every trade works out so well, of course, and losses can and do happen with any aggressive trading service..
Now, it’s your turn to sound off. Do you think this selloff is almost over, or is there more pain to come? What are you buying or selling given the increasing volatility? How do you think central banks and politicians will respond, and will it have any noticeable impact? Please weigh in below when you get a chance.
Meanwhile, I was determined to get you my analysis of the shocking Brexit vote as early as possible on Friday. I didn’t include a comment recap section in my column as a result. But several of you still took the time to share your thoughts about recent events, so let’s get right to them.
Reader Bill and others suggested the vote was equivalent to a popular revolution – a wake-up call to the elites and politicians. His take:
“It’s obvious that Brussels and London were out of touch with the citizens and England’s sovereignty. The same thing is happening with our states and the American public. Wrong solutions for the wrong reasons and no improvement.”
Reader Tired added: “Maybe it’s time the so-called leadership of the United States take note. People here are tired of not being heard. The middle class is squeezed more in the corner every day. Printing money endlessly will not end well.”
Finally, Reader Howard said: “The people didn’t listen to the threats from the ‘Remain’ campaign because ruling politicians and the bureaucracies have not responded to declining middle class wealth, lousy interest rates, and stupid decisions on border security, among others.
“People are sick of the privileged classes telling them what to do. It is not a national issue. It is a global issue. Uncertainty will prevail until the lies and useless politicians are dumped in favor of reform.”
Reader JDW was pleased with how the vote turned out, saying: “I am very happy to see the Brits have regained their common sense and national pride. It is true we all need each other, but we need to be independent and sovereign. The Brits have a long history of being a world power and not a lackey for a self-serving EU that dictates what they want. I wish the Brits well and as an American I hope they do well.”
Lastly, Reader Wiseguy advocated keeping calm in the wake of the news and the resulting stock market plunge. His take: “Even though everything is seemingly turning down into deflation, the U.S. stock market will soar since it is the best investment in the world now. In all the uncertainty, the U.S. is relatively certain. These are panic reactions we’ve seen and although it’s not necessarily over, it’s definitely overhyped.”
I appreciate everyone jumping into this very important discussion. Like I said earlier, I believe Brexit is just one of many threats facing this market – the vast majority of which stem from the major, ongoing turn in the credit and economic cycles. When easy money morphs into tighter money, all kinds of problems that previously remained below the surface rise to it … and markets suffer as a result.
Any other comments you want to share? Great. You can use the comment section at the bottom of this page.
Private equity firms aggressively snapped up troubled mortgages, mortgage companies, and thousands of homes in the wake of the financial crisis, in part because regulated banks were being forced to dump them at fire sale prices. But according to the New York Times, those firms are abusing borrowers, losing paperwork, and otherwise doing many of the same bad things their bank predecessors did. Is this a case of “The more things change, the more they stay the same”?
With interest rates plunging even further, now could be a time to hold physical cash in vaults in many countries rather than to keep buying their bonds as safe havens. At least, that’s the conclusion that a handful of German insurers and other observers have come to, according to Bloomberg.
A Singapore Airlines 777 airplane was forced to turn around a few hours into its flight to Italy Monday. When it landed back at Changi Airport, the plane’s engine burst into flame – but fortunately, all 222 passengers and 19 crew members were evacuated safely.
Finally, Chile won the Copa America soccer tournament last night. It beat Argentina, who had previously knocked the U.S. out of the tournament, 4-2 in a penalty kick shootout. The two teams battled through regular and extra time without scoring.
What do you think of the latest mortgage scandal? How about the idea that some banks and insurers may choose to store physical banknotes in vaults to avoid the financial hit of negative interest rates? Any thoughts on this summer’s international soccer tournaments, including the UEFA 2016 that’s still going on? You know where to put them.
Until next time,