Monday, June 27, 2016

Brexit Recap

Sorry there was no weekly review this week despite all the big news out of Europe. This was apparently quite the shocker as Britain voted to leave.  I'm expecting the markets to be pretty wild for at least a couple weeks as players reset their books.

Now I have heard and read the referendum isn't 100% binding, and that this whole ordeal can take up to two years to completely pan out as all the processes are followed. Don't quote me on the accuracy of the information, but I wouldn't be surprised to see some type of political gimmicks to try and keep Britain in the EU.  Either way I feel the people of Britain will get what they want, and if that's to leave then so be it. I would not doubt an American would feel differently in this situation if trying to regain independence themselves. People want to be free and that can only be contained for so long.

It was interesting to note on Friday that German and France's market actually ended the day worse than Britain's. I know it was my personal opinion that there was no win-win situation here. Although long term this will be better for Britain if they leave, and bad for the EU. Also there was a large drop in European financials. This has been a risky sector all through the Great Recession and continues to be. With bank failures and bank bail-ins seemingly on the cusp every year I'd continue to stay from this area like a foul smelling skunk. 

I believe there will be some real opportunities in well run European companies, albeit with a lot more risk than normal as the next few years are starting to look a lot shakier.  One thing I noticed is it seems higher quality names and a flight to safety in bonds is definitely gaining even more momentum.  In other words the best blue chip stocks, their debt, and the best government debt are holding up relatively better than other assets.  That's expected when uncertainty is abound. 

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