brexit - What We're Reading - StockBuz2024-03-19T11:12:56Zhttp://stockbuz.ning.com/articles/feed/tag/brexitEight Reasons a Financial Crisis is Cominghttp://stockbuz.ning.com/articles/eight-reasons-a-financial-crisis-is-coming2018-10-24T18:17:35.000Z2018-10-24T18:17:35.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><header>
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<p>It's been about 10 years since the last financial crisis. FocusEconomics wants to know if another one is due.</p>
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<p>The short answer is yes.</p>
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<p>In the last 10 years not a single fundamental economic flaw has been fixed in the US, Europe, Japan, or China.</p>
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<p>The Fed was behind the curve for years contributing to the bubble. Massive rounds of QE in the US, EU, and Japan created extreme equity and junk bond bubbles.</p>
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<p>Trump's tariffs are ill-founded as is Congressional spending wasted on war.</p>
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<p><strong>Potential Catalysts</strong></p>
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<li>Junk Bond Bubble Bursting</li>
<li>Equity Bubble Bursting</li>
<li>Italy</li>
<li>Tariffs</li>
<li>Brexit</li>
<li>Pensions</li>
<li>Housing</li>
<li>China</li>
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<p>Many will blame the Fed. The Fed is surely to blame, but it is prior bubble-blowing policy, not rate hikes now that are the problem.</p>
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<p><strong>1. Junk Bonds</strong></p>
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<p>Many have labeled this an "everything bubble" which is not quite accurate. Yes, the Fed re-blew the housing bubble as well as an equity bubble. But the real standout is the bubble in junk bonds.</p>
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<p>Companies are borrowing money to buy back shares at absurd valuations.</p>
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<p>In the US, close to 15% of the companies in the S&P 500 only survive because they can roll over their debt. For discussion, please see <a href="https://moneymaven.io/mishtalk/economics/rise-of-the-zombie-corporations-percentage-keeps-increasing-bis-explains-why-vM3ziN9DHkuxDxzx6p5EHg/" target="_blank" rel="noopener">Rise of the Zombie Corporations: Percentage Keeps Increasing, BIS Explains Why</a>.</p>
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<p>I expect a junk bond crash and that will take equities lower with it.</p>
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<p><strong>2. Equity Bubbles</strong></p>
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<p>Stock valuations are stretched almost beyond belief. The CAPE - Shiller PE was only surpassed by the DotCom bubble. The CAPE PE on October 3 when I last wrote about it was 33.49.</p>
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<p>Meanwhile, <a href="https://moneymaven.io/mishtalk/economics/peak-earnings-companies-furiously-guide-earnings-estimates-lower-qeRCF-42xUeojUmui_HNEw/" target="_blank" rel="noopener">Companies are Furiously Guide Earnings Estimates Lower</a>.</p>
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<p>There will be few places to hide. <a href="https://moneymaven.io/mishtalk/economics/few-places-to-hide-gmo-forecasts-us-equity-losses-for-7-years-sZJ1AYxssEWf26F6i30iNg/" target="_blank" rel="noopener">GMO Forecasts US Equity Losses for 7 Years</a>.</p>
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<p>We may not see a "crash" per se, but if not, then expect a slow bleed over many years, Japanese style.</p>
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<p>In many ways, especially pension-related, a slow bleed will be worse than a crash. In a crash, there is often a sharp rebound, and one can use leverage. In a slowing declining setup, long leverage gets crushed.</p>
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<p><strong>3. Italy</strong></p>
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<p>Italy is <a href="https://moneymaven.io/mishtalk/economics/italy-openly-defiant-of-eurozone-stability-pact-deliberately-and-knowingly-Q4obVrMD_k24Md2P7wxQQQ/" target="_blank" rel="noopener">Openly Defiant of Eurozone Stability Pact, Deliberately and Knowingly</a>.</p>
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<p>The ECB's policy of "<a href="https://moneymaven.io/mishtalk/economics/one-size-fits-germany-math-impossibility-get-your-money-out-of-italy-now--F9tcMSEYkyzMoBoBKYEog/" target="_blank" rel="noopener">One Size Fits Germany</a>" does not work now and never did.</p>
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<p>The IMF says Italy has a currency that is 9% too high. Germany has a currency that is 11% too low. Since both are on the Euro, no matter what the ECB does, it is going to exacerbate one side of the problem or the other.</p>
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<p>Meanwhile, Target2 imbalances mount.</p>
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<p>Italy owes creditors nearly 500 billion euros, mostly to Germany. It is impossible for Italy to repay that debt.</p>
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<p>In an unprecedented move, <a href="https://moneymaven.io/mishtalk/economics/in-unprecedented-move-eu-rebukes-italy-s-budget-italy-politely-says-screw-you-b6lKlRZaHke0RzEz1myRZA/">EU Rebukes Italy's Budget: Italy Politely Says Screw You</a>.</p>
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<p><em>An Italy Eurozone exit looms. It will be accompanied by a currency crash</em>.</p>
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<p><strong>4. Tariffs</strong></p>
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<p>Trump believes "trade wars are good and easy to win". Smoot-Hawley strongly suggests otherwise.</p>
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<p>In a letter to Trump, the Committee to Unleash Prosperity seeks zero tariffs. There were several notable letter signers.</p>
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<p>Steve Forbes, Arthur Laffer, Fred Smith, and Stephen Moore on the Committee to Unleash Prosperity ask Trump to seize the high ground and give U.S. firms an advantage.</p>
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<p>I discussed the letter in <a href="https://moneymaven.io/mishtalk/economics/forbes-laffer-ask-trump-for-zero-tariffs-zero-subsidies-and-zero-barriers-tBznbXYN4UG9H3ah9UL7SA/">Forbes, Laffer ask Trump for Zero tariffs, Zero Subsidies, and Zero Barriers</a>.</p>
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<p>Tariffs are a tax on consumers and importers of usable goods such as steel. If China is subsidizing steel it is to the benefit of US manufacturers who use steel as well as consumers who pay lower prices for goods.</p>
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<p>It is absolutely correct to reduce tariffs, regardless of what other nations do, on that basis alone.</p>
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<p><em>Trump's tariffs are staring to bite. Many US manufacturers are already complaining. Unfortunately, Trump is just getting started</em>.</p>
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<p><strong>5. Brexit</strong></p>
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<p>Short-term, a hard Brexit will be bad all around. But long-term it will be bad only for the EU.</p>
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<p>The German export machine depends on the UK far more than the other way around. Under a WTO, hard Brexit scenario, German exports are likely to crash. That will happen at a time when German de-industrialization is already underway dues to a shift to electric and self-driving vehicles.</p>
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<p>Surplus countries get killed in these scenarios.</p>
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<p>For discussion, please see <a href="https://moneymaven.io/mishtalk/economics/inevitable-de-industrialization-of-europe-RzORsnxliU6rXTQnA9mJuA/" target="_blank" rel="noopener">Inevitable De-Industrialization of Europe</a>.</p>
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<p><em>European demographics are also exceptionally poor. Even a "soft Brexit" will be bad for Europe</em>.</p>
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<p><strong>6. Pensions</strong></p>
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<p>US public pensions are woefully underfunded despite the historic ris in the stock market.</p>
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<p>When the crash or prolonged slowdown happens, boomers expecting pension payments either will not get them, or there will be massive tax hikes.</p>
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<p>Both options are economic poison.</p>
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<p><strong>7. Housing</strong></p>
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<p>It should now be pretty clear that housing has peaked this cycle: <a href="https://moneymaven.io/mishtalk/economics/existing-home-sales-drop-6th-consecutive-month--4d1DQ7qKkakSXROa9kj7Q/">Existing Home Sales Drop 6th Consecutive Month</a></p>
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<p>Yet, the Fed still has four more rate hikes penciled in.</p>
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<p>I doubt those hikes happen. Regardless, a key economic driver is already on the skids.</p>
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<p><strong>8. China</strong></p>
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<p>China's State Owned Enterprises (SOEs) are in huge financial trouble as is China's export machine coinciding with Trump tariffs.</p>
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<p>In 2007 conventional wisdom was that China would decouple from the global economy. It didn't, as I stated well before the bust.</p>
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<p>Today, conventional wisdom is the US will decouple from the global economy.</p>
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<p>It won't. Trump's tariffs will exacerbate problems in China and the US.</p>
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<p><strong>What's the Catalyst?</strong></p>
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<p>All of the above. Alternatively, none of the above.</p>
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<p>It does not matter what the catalyst is actually. And there might not be any catalyst other than simple exhaustion: The pool of greater fools in stocks, bonds, and housing simply ran out.</p>
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<p>Regardless, I expect all eight of the above discussion points to be in play when the crisis does hit.</p>
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<p><a href="https://moneymaven.io/mishtalk/economics/a-recession-is-coming-who-will-take-the-blame-jZu9OqYT1kKsUShDXkoEcw/">A Recession is Coming. Who Will Take the blame?</a></p>
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<p>Of course, nobody will volunteer to take any portion of the blame.</p>
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<p>Yet, fingers will be pointing.</p>
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<p>Scarcely anyone will blame fractional reserve lending, lack of a gold standard, Congressional stupidity, or central bank cheap money and their bubble blowing tactics.</p>
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<p>It is a given that mainstream media will not remotely come close to pointing a finger in the proper direction.</p>
<p>Courtesy of <a href="https://moneymaven.io/mishtalk/economics/eight-reasons-a-financial-crisis-is-coming-ZQOvhrkkSEKxlWOjxlG-xQ/" target="_blank" rel="noopener">Mish</a></p>
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</div>Banks Brexit Future Hinges On Passport Rights, Not Just The Fedhttp://stockbuz.ning.com/articles/banks-brexit-future-hinges-on-passport-rights-not-just-the-fed2016-10-22T18:23:59.000Z2016-10-22T18:23:59.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><div class="article-body__content">
<p><a href="http://storage.ning.com/topology/rest/1.0/file/get/1291312?profile=original" target="_self"><img src="http://storage.ning.com/topology/rest/1.0/file/get/1291312?profile=original" style="padding: 10px;" class="align-left" width="433" height="212"></a>As U.K.-based banks wait to see what life will be like after <a itemscope itemprop="StoryLink" href="http://www.bloomberg.com/news/articles/2016-10-18/will-brexit-trigger-exodus-of-banks-from-london-quicktake-q-a" title="Will Brexit Trigger Exodus of Banks From London?: QuickTake Q&A" data-tracker-action="click" data-tracker-category="recirc" data-tracker-label="inline_link.01">Brexit</a>, one word -- passporting -- will speak volumes. If Prime Minister Theresa May can maintain the passporting rights of City of London banks, the U.K. stands to retain its status as a hub of global finance. If not, hope isn’t lost, but the alternative to passporting requires an arduous approval process and provides no secure basis for long-term planning.</p>
<h3>1. What is passporting, anyway?</h3>
<p><a itemscope itemprop="StoryLink" href="https://bol.bna.com/the-heart-of-brexit-passporting-options-for-the-uk-perspective/" title="Bloomberg Law" target="_blank" data-tracker-action="click" data-tracker-category="nav" data-tracker-label="inline_link.02">Passporting</a> refers to the right of companies authorized in one country of the European Economic Area -- currently comprising the 28 EU states plus Iceland, Liechtenstein and Norway -- to sell their products and services throughout the bloc, accessing a $19 trillion integrated economy with more than 500 million citizens. There is not one financial passport, but rather a series of sector-specific agreements covering everything from banking to insurance and asset management. It’s why global firms such as Goldman Sachs or Morgan Stanley canhave the overwhelming bulk of their staff in London, with only satellite offices in other capitals like Paris and Frankfurt. </p>
<h3>2. What banking activities are involved?</h3>
<p>Passporting covers a range of activities, including deposit taking, derivatives trading, loan and bond underwriting, portfolio management, payment services, insurance and mortgage broking. A bank does not need a passport to conduct foreign exchange trading because that’s an unregulated activity.</p>
<h3>3. What does passporting mean for U.K. banks?</h3>
<p>London’s <a itemscope itemprop="StoryLink" href="http://www.bloomberg.com/news/articles/2016-06-27/brexit-boon-seen-for-european-cities-poaching-london-bankers" title="Brexit Boon Seen for European Cities Poaching From London (1)" data-tracker-action="click" data-tracker-category="recirc" data-tracker-label="inline_link.03">status</a> as the world’s preeminent financial hub is due in no small part to the access companies based in the U.K. have to the EU’s single market. Eighty-seven percent of U.S. investment banks’ EU staff live in the U.K., which also boasts 78 percent of the region’s capital markets activity, according to New Financial, a research group. Consulting firm Oliver Wyman <a itemscope itemprop="StoryLink" href="http://www.oliverwyman.com/content/dam/oliver-wyman/global/en/2016/oct/OW%20report_Brexit%20impact%20on%20Uk-based%20FS.pdf" title="Oliver Wyman" target="_blank" data-tracker-action="click" data-tracker-category="nav" data-tracker-label="inline_link.04">reckons</a> around a fifth of the U.K.’s banking sector’s annual revenue -- between 23 billion pounds and 27 billion pounds -- is based on passporting access.</p>
<h3>4. Is it just banks?</h3>
<p>No. The EU is also an important market for U.K.-based insurance companies and asset managers. About 28 percent of insurance exports go to the bloc, <a itemscope itemprop="StoryLink" href="http://openeurope.org.uk/wp-content/uploads/2016/10/161014_Financial-Services-paper-FINAL.pdf" title="Open Europe" target="_blank" data-tracker-action="click" data-tracker-category="nav" data-tracker-label="inline_link.05">according to</a> Open Europe. The Investment Association estimates 21 percent of assets managed in the U.K. are connected to EU clients. Financial firms and associated businesses employ more than 2 million people nationwide and paid 66 billion pounds in tax last year, more than any other sector. The Financial Conduct Authority estimates about 5,500 U.K. firms use passporting to do business on the continent, and that 8,000 companies based in Europe use it to access the U.K. So the EU, too, has an incentive to strike a deal.</p>
<h3>5. What would the loss of passporting mean?</h3>
<p>Banks with their European headquarters in London say they would <a itemscope itemprop="StoryLink" href="http://www.bloomberg.com/news/articles/2016-09-28/credit-suisse-ceo-says-no-passporting-risks-20-of-london-volume" title="Thiam Says Passport Loss Risks 20% of His Bank’s U.K. Volume (1)" data-tracker-action="click" data-tracker-category="recirc" data-tracker-label="inline_link.06">have to move</a> thousands of employees to new subsidiary offices on the continent. "If we are outside the EU, and we do not have what would be a stable and long-term commitment that we would have access to the single market, we would have to do a lot of things that we do from London somewhere inside the EU27," said Rob Rooney, chief executive officer of Morgan Stanley International, the Wall Street firm’s most senior banker in Europe.</p>
<h3>6. Who doesn’t benefit from passporting?</h3>
<p>One example: A Hong Kong-based bank with no subsidiary office in the EU could not make use of the passporting system to do business within the European Union.</p>
<h3>7. Will banks in the U.K. retain their passport?</h3>
<p>It’s highly unlikely. Under current EU rules, the U.K. would have to become a member of the European Economic Area for British firms to retain unfettered access to the region’s single market. EEA membership comes at a price May might not be prepared to pay: contributing to the EU budget and following its rules, including the <a itemscope itemprop="StoryLink" href="http://www.bloomberg.com/news/articles/2016-10-16/swiss-immigration-fig-leaf-won-t-satisfy-hard-brexit-believers" title="Swiss Immigration Fig Leaf Won’t Sate Hard-Brexit Believers (3)" data-tracker-action="click" data-tracker-category="recirc" data-tracker-label="inline_link.07">free movement of workers</a>, while having no voice in making them.</p>
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<h3>8. What does the government say?</h3>
<p>In July, Foreign Secretary Boris Johnson <a itemscope itemprop="StoryLink" href="http://www.reuters.com/article/britain-eu-johnson-idUSL1N1A81G7" title="Reuters" target="_blank" data-tracker-action="click" data-tracker-category="nav" data-tracker-label="inline_link.08">said he expected</a> the U.K. would keep its passporting rights. May says she will seek "to give British companies the maximum freedom to trade with and operate in the single market, and let European businesses do the same here," though not if that means giving up "control of immigration." Prior to becoming chancellor of the exchequer, Philip Hammond said, “I know and understand the importance of passporting.” He’s since retreated to pledging to aim for the “best” deal.</p>
<h3>9. Is there a Plan B?</h3>
<p>Maybe. If passporting is off the table, the U.K. may have to fall back on regulatory <a itemscope itemprop="StoryLink" href="http://openeurope.org.uk/today/blog/understanding-regulatory-equivalence-an-effective-fall-back-option-for-uk-financial-services-after-brexit/" title="Open Europe" target="_blank" data-tracker-action="click" data-tracker-category="nav" data-tracker-label="inline_link.09">“equivalence,”</a> which allows companies based outside the EU privileged, if targeted, market access. It would require the European Commission to recognize that the U.K.’s rules and oversight of specific business lines are as tough as -- equivalent to -- its own. The EU utilizes equivalence to reduce overlaps and capital costs for EU companies that must comply with rules in other countries. Most EU financial-services acts contain provisions for equivalence, including the updated markets rules known as <a itemscope itemprop="StoryLink" href="http://www.bloombergview.com/quicktake/mifid-making-markets-fair" title="MiFID’s Mission to Renew Trust in Markets Irks Banks: QuickTake" data-tracker-action="click" data-tracker-category="recirc" data-tracker-label="inline_link.10">MiFID II</a>, which come into effect in 2018. Equivalence is also possible for some purposes in the EU’s bank capital rules and in Solvency II, which governs the insurance industry.</p>
<h3>10. How might equivalence work in practice?</h3>
<p>Take the recent <a itemscope itemprop="StoryLink" href="http://www.bloomberg.com/news/articles/2016-09-28/eu-banks-eye-5-billion-capital-reprieve-as-sec-votes-on-rules" title="EU Banks Closer to $5 Billion Respite With SEC Clearing Rule (2)" data-tracker-action="click" data-tracker-category="recirc" data-tracker-label="inline_link.11">agreement</a> the commission struck with the U.S. Commodity Futures Trading Commission on central counterparty clearing. EU law, in this case the European Market Infrastructure Regulation, allows companies based outside the bloc to provide clearing services in the EU on two main conditions. First, the commission has to determine that the country’s legal and supervisory systems are an “effective equivalent” to those in the EU; second, the companies must be recognized by the bloc’s markets regulator. The deal with the CFTC enabled companies such as Chicago-based CME Group Inc. to continue providing services to EU firms. Without it, traders would have faced higher EU capital requirements to clear swaps, futures and other derivatives in the U.S.</p>
<h3>11. Why isn’t equivalence as good as passporting?</h3>
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<p>Passporting is a right, while equivalence is a privilege that can be unilaterally withdrawn by the European Commission at short notice. Also, equivalence doesn’t cover some core banking activities such as deposit taking and cross-border lending. Firms may have to endure a long period of uncertainty as the U.K. negotiates with the EU to have rules deemed equivalent. It took the EU four years to negotiate the CFTC deal.</p>
<h3>12. Where does this leave the banks?</h3>
<p>Facing an uncertain future with no clarity on what access they will have to the single market after Brexit, banks are lobbying May and EU leaders to strike an <a itemscope itemprop="StoryLink" href="http://www.bloomberg.com/news/articles/2016-10-16/u-k-needs-to-give-banks-clarity-on-brexit-future-or-face-exodus" title="U.K. Needs to Give Banks Clarity on Brexit Future or Face Exodus" data-tracker-action="click" data-tracker-category="recirc" data-tracker-label="inline_link.12">interim agreement</a> which would allow them to continue to provide services across the EU from London beyond the end of the two-year negotiation period. In the meantime they are planning for the worst and accelerating plans to move thousands of employees and operations to the continent.</p>
<p>Courtesy of <a href="http://www.bloomberg.com/news/articles/2016-10-19/u-k-banks-brexit-hopes-boil-down-to-one-word-quicktake-q-a?utm_content=brexit&utm_campaign=socialflow-organic&utm_source=twitter&utm_medium=social&cmpid%3D=socialflow-facebook-brexit" target="_blank">Bloomberg</a></p></div>Is Brexit Truly The End Of The EU Itself?http://stockbuz.ning.com/articles/is-brexit-truly-the-end-of-the-eu-itself2016-06-28T13:12:41.000Z2016-06-28T13:12:41.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p>The vote has come and gone. A major European nation has <a target="_blank" href="http://email.mauldineconomics.com/wf/click?upn=QYXXyRQK8bIZVfnjfEZLNO4sX2UuVNM0zAC9bX9Gn-2BVqZY5E55Fwv3J2GjUTAoKloLmovRROtAOJ1TA-2Bo3lFFw-3D-3D_JKLR1FBU0q0IqxJGrTtbPy0jh07eeWdb9hfaEUCFT-2BLlMg0KEgsk8E0gvLKfJB7Mg8-2BYZrxdFxu6mch0cRAk0rSneEVAWxIwPfylfiq-2Fr5RHLabcOEWXXqL9oaZAEKK5Jqxj3svQVk-2BJW6RWrhJGwKYIp8fytcTQu-2F7I-2BGlWMNlSuMcLY0V5R58TmiMHzAElD0VbfBc-2Bu9h7VFW3JBrFN-2FGPOkbLYKXMHWVZYSVZtRT2kUPGO3WgbWOGMIeukHOTxuZV7YHdjKBPYvxSAotNtA-3D-3D">chosen to leave the EU</a>. The markets have had their obligatory decline. A weekend has passed. It is time to think about <a target="_blank" href="http://email.mauldineconomics.com/wf/click?upn=QYXXyRQK8bIZVfnjfEZLNO4sX2UuVNM0zAC9bX9Gn-2BUovslopIjHPDXN06VHaRi09f1IOiDijbh-2BpsgkDtsFGAmrdIq8G4AGGxP5vyYbzrl-2BRLm4kXHDOzTyO6PTuEb2_JKLR1FBU0q0IqxJGrTtbPy0jh07eeWdb9hfaEUCFT-2BLlMg0KEgsk8E0gvLKfJB7MDWVrOT9euTBOQ49kwr8LkCSoICPmQl2CFuQojy6dd0VHooQ8gwambU5EemYYmhG7yWAX-2FA4kgAvGQVSoo4sgt59-2BBWYZxergY9e69niRpaA-2FC5HebCv-2FVx2mjuhi58Z1eT2Fx6df9ZwAPXeJn9qJFnYD-2BgbL0k5BVRfdGaSRG9DjQ4xE28jmz5BBKozzcOA1kDDFeEszg7pT2C2I0wfo1Q-3D-3D">what exactly has happened</a>… and what it means, if anything.</p>
<p>The real drive to leave had little to do with economics. It had a great deal to do with immigration. The EU’s economy has been in wretched condition since 2008.</p>
<p>The EU has been unable to forge a plan that would fix dire unemployment in southern Europe and revive the stagnant economy. The EU’s founding treaty promised prosperity. It has failed. Germany has the healthiest economy in Europe, but even it struggles to grow.</p>
<p>The case for staying in the EU was that leaving would ruin the British economy. This assumed, of course, that staying in a broken union would help the economy. The logic of that escaped me. It is hard to see any economic benefits that would be lost. As I put it in my book <em>Flashpoints</em>, “Britain will avoid the destabilization in Europe by pulling away from the EU and closer to the United States.”</p>
<h3>The EU, Not Britain, Is the Weaker Player</h3>
<p>The UK is Germany’s third-largest export market. It is the fifth-largest for France and Italy. It is absurd to think these countries would stop selling to Britain or put tariffs on British exports. The British would respond in kind, and Europe cannot afford a trade war even if it feels insulted. The EU did not create the existing trade patterns. They were already in place. The EU’s members will not allow Brussels to disrupt them.</p>
<p>Nor did the EU create the patterns of investment. Britain’s banks channel global capital and are a huge source of investment for the Continent. The EU is hardly going to hamper that flow by blocking investments.</p>
<p>As for regulations that could force EU banks to relocate jobs and resources to Frankfurt, this misses a number of points. Given Europe’s weakness, the burden is on the EU to show continuity. It needs the flow of capital.</p>
<p>Further, it is the clients who will determine the world’s banking hubs. London has been a traditional banking center preferred by foreign clients. New York—not Frankfurt—is the alternative to London. If clients had wanted to bank in Frankfurt, they would have already done so.</p>
<p>Obviously, <a target="_blank" href="http://email.mauldineconomics.com/wf/click?upn=QYXXyRQK8bIZVfnjfEZLNO4sX2UuVNM0zAC9bX9Gn-2BWsGXxgKcYnjy0fUfDVuDDHzWXcFQ3KLPSrfOtkuCNXYA-3D-3D_JKLR1FBU0q0IqxJGrTtbPy0jh07eeWdb9hfaEUCFT-2BLlMg0KEgsk8E0gvLKfJB7MiDI6M7FVVrIy-2FI7qsOajVJoFcxdaLtgQHv5j97ECF3fdY1tkohaJGYs4c-2BNCV8JjdezF7dWOOozQs4iCrYkGP4lBcaIN5fq8poZz3-2FbZX75mOBNkVG8qxvQEWn2JRD8-2FIFlbSJPNlYn-2BPjLYZiWWCoscPnpcoG9ib5Soz5yvtClEYkyL-2BE74C1-2B8WUy50UJCPp9zZxa8MfFv0ejTlbCm7A-3D-3D">nothing will happen in the immediate future</a>. But it is not clear to me that there will be any real economic blowback. The UK is not Greece. Attempting to shun the British carries heavy potential consequences. Anything imposed on the British will resonate on the Continent. And Germany—which gets almost 50% of its GDP from exports—is not likely to let anyone hinder that trade.</p>
<p>The economic impact of the UK leaving the EU is minimal because the EU—not Britain—is the weak player. The EU is fighting with Poland over political changes… has criticized Hungary on human rights… is still engaged in the Greece disaster… has an emerging Italian banking crisis. Additionally, Finland is in grave economic trouble, and <a target="_blank" href="http://email.mauldineconomics.com/wf/click?upn=QYXXyRQK8bIZVfnjfEZLNO4sX2UuVNM0zAC9bX9Gn-2BWMdU0NYiM8MCPqsjWDD-2FgW3AyeXX-2B6W3fRf-2Bh1zoUO0w7ZYVpVNKbdCqsN-2F9fUWhFIU3n0SW9anXiE99obi5c0_JKLR1FBU0q0IqxJGrTtbPy0jh07eeWdb9hfaEUCFT-2BLlMg0KEgsk8E0gvLKfJB7MoO7PME4dAZoe1F9EwSnXjByojzUTWVJujdNHGWEPONldRr7-2FeqRFKDfmauRsOFcRwgLHhp6VpjyGZZo6y2b7RCOtukeRrOaG0hs7OMVl5eHtA-2FiF-2F8wxK8IB5-2FNn-2BHMG82m4AG6IAqDIvIdBhwPT5c-2BRNjF0A3WD9ZqMVX0k4BuVB3Nbl4DOzY1SKrZ0QBM2BB8qWB6nP7EKmIuQFdwt-2Bw-3D-3D">anti-EU parties</a> are gaining strength in several member states.</p>
<p>The EU has so many internal issues they are hard to count. Its retaliation is the last thing Britain should fear.</p>
<h3>Immigration Seen as Loss of National Self-Determination</h3>
<p>As troubling as Europe’s economy is, it was not the prime mover in the referendum. The contentious immigration debate holds that honor. And immigration itself was not really the issue. Britain was quite comfortable with immigrants until Brussels began making demands.</p>
<p>The EU dictating the rules was the problem. It was a <a target="_blank" href="http://email.mauldineconomics.com/wf/click?upn=QYXXyRQK8bIZVfnjfEZLNO4sX2UuVNM0zAC9bX9Gn-2BWUE1xzOK4YVFcn09SMtzGs5nOcIA-2B-2FbBmBL0tCXUCOK5h82AGvF1fBGHPpO9o9azc-3D_JKLR1FBU0q0IqxJGrTtbPy0jh07eeWdb9hfaEUCFT-2BLlMg0KEgsk8E0gvLKfJB7MFvANPg3lM0NxAUEB3i-2BmF3QI3ef7RXk7Q7CwWf9uAHFZkW3EL-2FnCklNLUxqiceZWIFcDs05aiOAzgSMm-2FQ103Z1-2BxjZBdthXs1ufOkXhFx-2BqUjQ-2BWHFA-2Bh3xOzh1FtW3tfZmnDsr5qNTyhN5H-2FPt9HEtdf4-2Bp6oh5YoCNMF9SwbqfBl-2BglL3glmZ5EIk-2FLlfsJ6cSkkAl9CF0Y-2Feb40gug-3D-3D">question of sovereignty</a>. That the EU could make decisions that would change the character of Britain was not okay.</p>
<p>Granted, there was a large vote for staying. The British media have been eager to point out that <a target="_blank" href="http://email.mauldineconomics.com/wf/click?upn=QYXXyRQK8bIZVfnjfEZLNO4sX2UuVNM0zAC9bX9Gn-2BXipyOimMzLF9HUYwDWGgAUShiK047lSqXRXqFDQPSkZFJj86kF7jFFWizGJLI25Hxec37XYxZlzwuyLDU0FuYH_JKLR1FBU0q0IqxJGrTtbPy0jh07eeWdb9hfaEUCFT-2BLlMg0KEgsk8E0gvLKfJB7M1jgRmNPi9GG13cvjQHjNC0ryTgwrUwsdtCq6n2uAxQ5V6svwKHg6M-2BdzxYsOzwy8eSRLQQ0hPWP-2B4hq-2FxabB9EKSFb83bnHu8neOzjl-2F-2Bm-2FTOZg2Am99nNCB-2BK79-2FNTwPlg-2BFSxHZjPX89-2FGpxfueGC2WejIhQgaoOVfKJ2Il9YrG49Iynw7PyWQFihgwclKfx2TKVpZ0-2F0Sdi-2BUFCUtdQ-3D-3D">those who voted to leave were less educated</a>, had lower incomes, and so on. They were also most likely to be affected by immigration.</p>
<p>Immigration is socially destabilizing. There is always friction between older residents and immigrants. I immigrated to the US as a small child. The buffeting of that experience on both sides is burned into my memory.</p>
<p>But, better educated and wealthier individuals normally don’t experience this element of immigration. The tension on the streets rarely enters the halls of academia, senior civil service, or banking.</p>
<p>Not surprisingly, the question of sovereignty wasn’t critical to this class. Just as large-scale immigration did not concern them. Immigrants like my family would not be moving into their neighborhoods.</p>
<p>We moved to the Bronx in New York because that was all we could afford. We lived next to other people who settled there because it was all they could afford. The older residents had a sense of ownership of the neighborhood. As my family and others moved in, that ownership was threatened. They had little else to claim as their own.</p>
<p>In Britain, the immigrant issue was critical and created a sense of powerlessness. First, Britain was not in control of its immigration policy. Second, the British who were for it, to a large extent, did not feel the profound social costs of immigration.</p>
<p>That fee was going to be paid by those who—again with many exceptions—voted for leaving. So it was a revolt against the British establishment and the EU. As with most things, it was much more complex than it seemed.</p>
<h3>When All Else Fails, Acknowledge the Obvious</h3>
<p><a target="_blank" href="http://email.mauldineconomics.com/wf/click?upn=QYXXyRQK8bIZVfnjfEZLNO4sX2UuVNM0zAC9bX9Gn-2BUYmWmf-2Bw3dj-2FTpbVH55wKz6D1sXET1Dd1UNFBf-2FVACRg-3D-3D_JKLR1FBU0q0IqxJGrTtbPy0jh07eeWdb9hfaEUCFT-2BLlMg0KEgsk8E0gvLKfJB7MiE-2BetgxSGIwTlG4exNjiUw2-2BwFXuU5efs-2BhHCQ1GYcKSuwrL6bgyseZiwPGy4HWSzU-2BJaL7HeOHB3G0pCWSEj6P3uGRB3Y3yM9XfdR3V8bXvzHYRnJb9Kk4TmkLQS0npyLcCa07LHbNn5JaiYi0rJQY-2BwLanPXD32-2Fwin8eLCq1OdkJAMo25uQ4vnW6oDQH5SjxisYmGKor-2FH7eryEFDLg-3D-3D">The EU has already responded.</a> This statement from the foreign ministers of Belgium, France, Germany, Italy, Luxembourg, and the Netherlands, defines the future:</p>
<p style="margin-left: .5in;"><em>We will continue in our efforts to work for a stronger and more cohesive European Union of 27 based on common values and the rule of law<strong>. It is to that end that we shall also recognize different levels of ambition amongst Member States when it comes to the project of European integration. While not stepping back from what we have achieved, we have to find better ways of dealing with these different levels of ambition so as to ensure that Europe delivers better on the expectation of all European states…. However, we are aware that discontent with the functioning of the EU as it is today is manifest in parts of societies. We take this very seriously and are determined to make the EU work better for all our citizens.</strong></em></p>
<p>This was the EU’s answer to Brexit. They recognized that not everyone wants the same level of integration and will respect that. They are aware that many are discontent with the EU.</p>
<p>In other words, after the British vote, they acknowledge the obvious. This is a unique evolution. It is not clear what they are going to do, but they are not going to punish Britain. They can’t afford to.</p>
<p>At the same time, there is a bit of humor in the statement. The EU has 27 member states and, apparently, only six foreign ministers met and drafted this response. Poland wasn’t there. Neither was Spain. Nor were the other 19 members. The new “inclusionary” EU has met and promised to do something. We’ll see if anything actually happens.</p>
<p>We will have much, much more to say on Wednesday when we release our <em>Deep Dive</em> into the future of Europe.</p>
<p>Courtesy of <a href="http://email.mauldineconomics.com/wf/click?upn=U8GusXYvzQrI-2BTfpBInOiw4cuS1SqQfCbK1N-2BAM97HF4HBtCmtnDwx9x1mIfsnDeKt4MZKUuddYvlbRf3pzsZw-3D-3D_JKLR1FBU0q0IqxJGrTtbPy0jh07eeWdb9hfaEUCFT-2BLlMg0KEgsk8E0gvLKfJB7M8W8gpaKNV8tA6VbwraA8AQ1O2HmAtbKOhwCeg5hTHlyyrhdnsadiMgAsr39MLmi8H2kAATHlxLBBQ7hfkBCKAbqN6OIxOzmIzDxkF-2FZxM52FoDKjutgCNPCSUYw289DrYOEnhBM0UkF7FwcXVotaWVVvQA9TSL0oIis-2FfK8dJw5k7mdEnNE3E2u5eSn9VMTiMLopwaNbz6rFwVget3gyZQ-3D-3D" target="_blank">George Freidman</a></p>
</div>Seven Ways To Trade The Brexit Votehttp://stockbuz.ning.com/articles/seven-ways-to-trade-the-brexit-vote2016-06-14T00:41:06.000Z2016-06-14T00:41:06.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p>Next week will be a historical one for both the United Kingdom and the global economy. On June 23<sup>rd</sup> the British people will decide whether to leave or stay in the European Union. Polls have been mixed over the last couple months, but the latest out show momentum for leaving, which is scaring the markets.</p>
<p>Loss of British sovereignty is the fundamental reason for leaving the EU, as many supporters want to take back control of U.K. borders in order to curb immigration. Those that wish to stay in the EU say there are severe short-term economic consequences that would make trade difficult and slow the economy. Even President Obama recently said that if there is a Brexit, the U.K. would go to the “back of the queue” in American trade deals.</p>
<p>While debate and speculation is running rampant, markets are watching the British Pound closely. Last week U.S. indices tracked and moved with the Pound tick for tick, showing that traders are very concerned about the upcoming vote.</p>
<p>So how can you profit off the news when it hits? Below I show seven different ETF/ETNs to buy in anticipation of either a “Yes or a “No” vote.  </p>
<p><strong>Volatility</strong></p>
<p>When markets are faced with uncertainty, volatility rises. The VIX is a fear gauge that measures how much fear there is in the markets at the current moment. Traders will buy VIX instruments to hedge against panic or bet on a move lower in the market. One of the most popular VIX instruments is the <strong>iPath SP 500 VIX Short-Term Futures ETN (<acronym class="ticker">VXX</acronym>). </strong> This ETN provides investors with exposure to short-term VIX futures. Essentially, when the market goes down and fear increases, it will go higher.</p>
<p>The chart below shows VXX over the last month versus the S&P 500. As Brexit fears have increase over the last week, we have seen the VIX shoot higher and the market soften. Investors can expect volatility to remain firm into the vote and surge higher if the vote is yes. However, if the vote is no, expect volatility to fall apart and VXX to go right back to the June lows.</p>
<p><em>The Trade:</em> If you believe it’s a yes vote buy VXX or UVXY (2x long VIX). If you believe it’s a no vote buy SVXY (Short VIX).</p>
<p><img alt="" src="https://staticx-tuner.zacks.com/images/blogs/7e/1465833743_scaled_624.jpg" style="width: 624px; height: 263px;" /></p>
<p><strong>Yes Vote</strong></p>
<p><strong>SPDR Gold Trust (<acronym class="ticker">GLD</acronym>)</strong> seeks to reflect the performance of gold bullion. The Trust holds gold bars and from time to time, issues Baskets in exchange for deposits of gold and distributes gold in connection with redemptions of Baskets.</p>
<p>In times of uncertainty gold thrives. A Brexit would create uncertainty about the euro zone economy, the stability of the EURO and would set a precedent for other countries to leave the EU.</p>
<p>Gold has already been very strong this year with the ECB and Bank of Japan experimenting with negative interest rates. A yes vote could push gold much higher as currency fears force traders to buy the yellow metal.</p>
<p><img alt="" src="https://staticx-tuner.zacks.com/images/blogs/e8/1465833764_scaled_624.jpg" style="width: 624px; height: 259px;" /><strong>Guggenheim Currency Shares Japanese Yen ETF (<acronym class="ticker">FXY</acronym>)</strong> is an investment that seeks to track the Japanese Yen. Traders will buy the Yen in expectation that it will rise against the Euro, the Pound and the Dollar. Yen momentum has been a concern and a risk-off type scenario could give the currency an extra push higher as global markets head lower.</p>
<p><strong>Direxion</strong> <strong>Daily Financial Bear 3x (<acronym class="ticker">FAZ</acronym>)</strong> is an investment that seeks daily investment results, before fees and expenses, of 300% of the inverse of the performance of the Russell 1000® Financial Services Index,</p>
<p>This is a good play, not only on a Brexit yes vote, but also the Feds reaction to the Brexit. Yellen has mentioned that the vote is a concern and a yes vote will most likely create turmoil that would prevent any fed rate hike until December. Low rates are killing banks, expect FAZ to head higher on the expectation on more delays on any rate hike, plus heightened fear of economic turmoil.</p>
<p><em>The Trade:</em> Long GLD, FXY, and FAZ if trader believes “Yes” vote is coming.</p>
<p><strong>No Vote</strong></p>
<p><strong>Guggenheim Currency Shares British Pound Sterling (<acronym class="ticker">FXB</acronym>)</strong> is a currency ETF that reflects the British pound and its daily movements. The Pound has come under pressure this year in anticipation of this vote. While some of the move might be priced in, there could be a lot more room to go lower if there is a Yes vote. However, if they stay in the EU, there will be a massive rally in the pound and FXB will shoot higher.</p>
<p><strong>iShares MSCI United Kingdom (<acronym class="ticker">EWU</acronym>)</strong> is an investment that seeks to track the investment results of the MSCI United Kingdom Index. The fund will at all times invest at least 90% of its assets in the securities of its underlying index and in depositary receipts representing securities in its underlying index.</p>
<p>Expect U.K. stocks to rally if there is no Brexit. The risk has held the index down so far this year and if that risks goes away we could see money flow into U.K. stocks.</p>
<p><img alt="" src="https://staticx-tuner.zacks.com/images/blogs/8e/1465833778_scaled_624.jpg" style="width: 624px; height: 263px;" /></p>
<p><strong>Direxion</strong> <strong>Daily Small Cap Bull 3x</strong><strong>(<acronym class="ticker">TNA</acronym>)</strong> is a way to play U.S. stocks through the Brexit vote. Expect a large rally if there is a no vote and the best performing stocks to be the riskier or small cap stocks. TNA gives an investor triple exposure to this idea so they can profit of a big move in the Russell 2000 index.</p>
<p><em>The Trade:</em> Long FXB, EWU, and TNA if trader believes a “No” vote is coming.</p>
<p><strong>In Summary</strong></p>
<p>It’s hard to speculate which way the British people will go as the polls have been all over the place. Expect the market to remain volatile as new polls and headlines come out. When the final vote is known there will be a violent move in response to the vote, with a Yes being bearish and NO being bullish for stocks.  Use the above stocks to trade your opinion and even protect your portfolio for that June 23<sup>rd</sup> vote.</p>
<p>Courtesy of <a href="https://mrtopstep.com/7-ways-to-trade-the-brexit-vote/" target="_blank">MrTopStep</a></p>
</div>Brits Would Leave Given A Votehttp://stockbuz.ning.com/articles/brits-would-leave-given-a-vote2016-05-10T15:51:07.000Z2016-05-10T15:51:07.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div>This must be worrying many and France is right behind them.
<p><a href="https://www.statista.com/chart/4807/brits-would-leave-the-eurovision-if-there-was-a-vote/" title="Infographic: Brits Would Leave The Eurovision If There Was A Vote | Statista"><img src="https://d28wbuch0jlv7v.cloudfront.net/images/infografik/normal/chartoftheday_4807_brits_would_leave_the_eurovision_if_there_was_a_vote_n.jpg" alt="Infographic: Brits Would Leave The Eurovision If There Was A Vote | Statista" style="width: 100%; height: auto !important; max-width: 960px; -ms-interpolation-mode: bicubic;" /></a><br />
You will find more statistics at <a href="http://www.statista.com/">Statista</a></p>
</div>The Global Economy: April 2016http://stockbuz.ning.com/articles/the-global-economy-april-20162016-04-26T19:47:31.000Z2016-04-26T19:47:31.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p>The global economy has regained some composure, according to asset management firm Schroders. In their view, markets have regained a risk appetite following action by central banks, the normalization of commodity prices, and a lack of materialization for tail risks such as a U.S. recession or a Chinese hard-landing:</p>
<div style="clear: both;"><a target="_blank" href="http://www.visualcapitalist.com/global-economy-pictures-april-2016/"><img class="align-full" src="http://2oqz471sa19h3vbwa53m33yj.wpengine.netdna-cdn.com/wp-content/uploads/2016/04/economic-infographic-apr-2016.jpg" /></a></div>
<div style="clear: both;">
<p>While volatility is indeed near its YTD low with the benchmark VIX down 32% since the start of the year, we would point out that this is potentially some calm before the storm.</p>
<p><strong>Here are some upcoming waves, and we’ll see how they break:</strong></p>
<p><strong>Earnings and Buybacks:</strong> The blended earnings decline for the S&P 500 so far in 2016 Q1 is -8.9%, according to <a href="http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_4.22.16">Factset</a>. When earnings season is done and if this stays on target, it will mark the first time the index has seen four consecutive quarters of year-over-year declines in earnings since Q4 2008 through Q3 2009. That said, companies are doing whatever they can to stifle these declines via share buybacks. S&P Dow Jones says that nearly one-third of S&P 500 companies have cut their share counts by at least 4% in Q1 of 2016.</p>
<p>Will investors continue to be “impressed” by this financial engineering, or will the reality of declining earnings finally hit?</p>
<p><strong>U.S. Recession Watch:</strong> The Atlanta Fed’s <a href="https://www.frbatlanta.org/cqer/research/gdpnow.aspx?panel=1">GDPNow</a> model forecasts U.S. growth at just 0.4%.</p>
<p><strong>Brexit:</strong> While the margin has widened on the Brexit vote in favor of the “remain” camp, one in five have <a href="http://www.telegraph.co.uk/news/2016/04/26/pic-and-pub-with-one-in-five-still-not-sure-how-theyll-vote-its/">still not decided</a> how they are voting. This means Brexit is still in play, especially if there is any voter complacency as the referendum draws closer. A “leave” decision could have significant impact: Britain makes up 15% of the EU GDP, 17% of EU domestic demand, and 13% of EU population. This previous post shows why Brexit could be a <a href="http://www.visualcapitalist.com/why-a-brexit-could-be-a-losing-proposition-for-everyone/">losing proposition for everyone</a>.</p>
<p><strong>Debt:</strong> The amount of debt is also hitting center stage. In the U.S. auto loans and student debt are two separate $1 trillion debt markets. Credit cards is getting there as well, and 62% of Americans now live paycheck to paycheck. Sovereign debt will close in on <a href="http://www.washingtontimes.com/news/2015/nov/1/obama-presidency-to-end-with-20-trillion-national-/?page=all">$20 trillion</a> by the end of Obama’s tenure.</p>
<p>Things in China don’t look so good, either. <a href="http://www.ft.com/intl/cms/s/0/acd3f2fc-084a-11e6-876d-b823056b209b.html#axzz46xR2ouar">Experts are warning</a> that the country’s 237% debt-to-GDP, the highest in emerging markets, could lead to a American-style financial crisis or Japan-style malaise.</p>
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<div>Courtesy of: <a href="http://www.visualcapitalist.com">Visual Capitalist</a></div>
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