It’s the vote that’s shocked the world and reverberations will be felt for years to come.  In many ways, I wonder why it was so close for the ‘Leave’ camp, which didn’t have to hit any hot buttons beyond national pride and self-determination. 

More than likely, the vote will eventually result in Scotland and Northern Ireland bolting the UK as well. Some think that the British Exit vote could lead to Texas and California leaving the union of the United States. 

It won’t, but the movement will sweep across Europe, and it’s doubtful that career politicians and bureaucrats will do anything to meet the angst of voters other than try to ride it out as a European version of the Arab Spring that fizzled out. 

Unless wages soar and migrant waves are turned back, those elitists will feel the earth move under their ivory towers.  I’ve seen this coming for years; I thought it would be Belgium that would have snapped into two separate countries (still see it happening).

As for its influence in America, there are many parallels, but also distinct differences in demographics that such an upheaval has to happen now or it never will.  The map of the United Kingdom voting isn’t unlike that of America with wide swathes of ‘red’ states between the coasts.  However, it’s not unreasonable to see that map changing with Texas, New Mexico, Arizona, and Florida becoming permanent ‘blue’ states within a decade. 

Don’t get me wrong; all segments of the population can get so fed up that it revolts together, which is essentially what happened during the primaries but there hasn’t been a unifying issue or leader to knit them together.  On the contrary, while alike in so many ways, voters are being pitted against each other. 

No wonder the bureaucrats were so cocky.

A new report shows that more than 50% of new births in America are non-white babies.  The great news is that America has been a melting pot that has encouraged assimilation and shared pride in the history of the country and its culture.  But, immigration and the changing face of America is a major factor in this year’s race for the White House.  I think the better political route is to focus on what all parents care about- opportunities for their children to have safe and prosperous lives.

It’s time for policies that make it possible.  It’s time to move the government out of the way and tear down the giant Welfare Utopia built on the false notion of fairness. 

Brexit Postmortem

Leave Voters Force for Evil
Multiculturalism	81%
Immigration	80%
Social Liberals	80%
Green Movement	78%
Feminism	74%
Globalism	69%
Internet	71%
Capitalism	51%
Lord Ashcroft Polls

It’s still kind of shocking; and now, there is the postmortem on what killed the relationship between the United Kingdom and the European Union (EU).  It was a bunch of things, although the media has focused largely on the immigration issue; even that narrative has been told incorrectly.

Yes, the recent terror attacks in western nations and America have added greater desire for nations to control their borders and in some cases, severely moderate immigration. However, the notion of cheap labor was probably a bigger issue in the UK.

Just as many in America point to the cheap labor that pours into the United States from our southern border, the same has been true for the United Kingdom.

In 2004, the EU allowed ten additional nations into the union…ten dubious nations with respect to their ability to add economic might or displaying economic discipline.

• Czech
• Estonia
• Hungary
• Latvia
• Lithuania
• Malta
• Poland
• Slovakia
• Slovenia
• Cyprus

These countries are not economic juggernauts by any stretch.  Their entry resulted in a flood of cheap labor and growing resentment.  Recent violence among Middle Eastern and Northern African migrants has only exacerbated the situation.

Economic Fallout

Last Friday was a tough session, but the U.S. market was still one of the best performing in the world.  The Dow was the best performing large indices as money flowed into quality names.  In fact, the NYSE sported 138 new highs and only 48 new lows.

Key equity indices closed right at important support points and must make a stand today.  Perhaps there weren’t enough people panicking over the weekend, but that will change without a stance today.

Global concerns sent the U.S. dollar soaring, which killed multinational stocks and pressured commodities.  In the longer-term, the dollar is still in a down-channel, but it’s at the top of the channel.

Of course, the U.S. dollar trades against other currencies, including the UK Pound, which may not be able to pull out its nosedive anytime soon.  In fact, the currency has been in a nosedive for decades with periodic rallies during moments of crises.

On that note, investors have to consider owning American-Centric names, including the following names:

• Tractor Supply Company (TSCO)
• Six Flags Entertainment (SIX)
• AutoZone Inc. (AZO)

Moreover, keep in mind that because so many stocks are oversold, there are several ways to go in this market.

Today’s Session

As painful as equity futures appear right now, these are the kind of sessions that the market must make its move.  Big money is champing at the bit, and surprisingly, so are many individual investors that continuously miss bottoms and turns.  The key is that singular reversal day.  This year, it was February 11^th when the market freefall saw important support points shattered during the session- but held when the closing bell rang.

The markets had peaked on December 1, 2015, but thereafter began to roll downhill morphing from a snowball to a boulder as 2016 got off to the worst start in the history of the market.

Date	DOW	S&P 500	NASDAQ
Dec 1, 2015	17,888	2,102	5,156
Feb 11, 2016 low point	15,503	1,810	4,309
Feb 11, 2016 close	15,660	1,829	4,366
Feb 26, 2016	16,623	1,948	4,590
10-Days off Bottom	+7.2%	+7.6%	+9.1%

I do not see this as an economic calamity, and in fact, in the long run, it could be great.  Moreover, maybe market weakness separates the wheat from the chaff.  While some names will go unscathed, the carnage in some areas will be more than others, and that’s very telling.

• RBS -25%
• BCS -24%
• CS -10%
• DB -9%

 

 

Comments

Thanks as always for the wise and level headed commentary. The good news is we were surprisingly strong, and it appears to me that the global currency battles again are doing the Feds work. Probably no need for a rate increase before well into 2017 if not later. Quality in advice and holdings will prevail as it always does. Thanks Charles! Ray Weldon on 6/27/2016 9:45:17 AM

I have felt for a long time that the U.S. is increasingly two nations being governed as one. Part of the nation values freedom and limited government. It wants our constitutional republic to be restored. Part is quite is content to let the ruling class continue with the crony capitalism as long as they can wallow in dependence and lack of personal responsibility. Can the ship still be righted? To a great extent, probably. A lot is riding on the coming election and the electorate has never been so ignorant. Can and will the nation split? Probably not. People deserve the government they get, but I have to tell you, if socialists win another four years, this nation as we know it will likely be headed down a path to failure and disintegration. Patricia Hampton on 6/27/2016 10:33:26 AM

I see this election as critical on tipping into socialistic policy in part by selecting supreme court justices and in part via laws locking in Obamacare etc. Add in demographics too bad Frank Cantor on 6/27/2016 11:09:27 AM

Patricia, I believe you have hit the NAIL on the HEAD. I, as a political science grad, firmly believe the American electorate are a bunch of lemmings...RUSHING to the governmental sea...ready to elect Hillary for the continuation of the "Great American Demise." I listened intently to Ms. Clinton's campaign manager on FOX News Sunday and could NOT believe my EARS when I heard him say, "There has never been anyone more aptly prepared to be our Commander In Chief than Hillary Clonton!" EXXXXXcuuuuuse ME? Has this millenial ever heard of Dwight David Eisenhower? I suppose NOT and if viewers/listeners continue to BELIEVE this kind of hogwash, we are destined to 8 MORE years of economic and social deterioration here in America. God Help Us ALL !! James Allan on 6/27/2016 12:24:45 PM

One might see a resurgence in efforts to establish the state of Jefferson. Northern California would never follow Southern California into succession. In fact Northern California would like to succeed from Southern California, merge with Southern Oregon and form the state of Jefferson. This ideas was to go before Congress but then WW II started and the timing was gone. In recent years there has once again been great interest as the liberal areas of California and Oregon silence the voices of the conservative north and south of the state respectively. Most people don't realize that the natural resources of Northern Cal. keep the California a float as the north ships them water, electricity, timber, wine, and seafood. I think it is time for the state of Jefferson and for the conservative people of California and Oregon to have a voice in the governing of their area. Alissa Tanner on 6/27/2016 6:01:53 PM

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