Dismantling the European Union (EU)

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Dismantling the European Union (EU)

Hotep,

Since Britain's exit from the EU on Friday I've received numerous text, e-mails and calls about ... what does this mean, how does it effect my portfolio, what are my thoughts and what should I do now to protect my portfolio.  So, I decided to post my thoughts to kill three birds with one stone.  

But ... before I explain what I think, let's do what I always suggest when referencing what's in store for the future -- revisit the past.  So, let's take a walk back in HIS-story to see what exactly all this means and has it happened before ...

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On November 11, 1947, Winston Churchill, then ex-Prime Minister of the United Kingdom, rose to speak at a debate in the House of Commons:

“Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise.

 

Indeed, it has been said that democracy is the worst form of Government except all those other forms that have been tried from time to time; but there is the broad feeling in our country that the people should rule, continuously rule, and that public opinion, expressed by all constitutional means, should shape, guide, and control the actions of Ministers who are their servants and not their masters.”

This may be the perfect summation of what democracy is supposed to be.  And western nations-- particularly the US and UK-- have been champions of ‘democracy’ around the world (though they typically mean ‘republic’).

 

Now, Friday the voters of the United Kingdom went to the polls to decide whether or not their country should remain in the European Union.  This is about as democratic as it gets-- direct voting by the people to choose their fate.

 

Or so they claim.

 

In reality, each side has had a long, drawn out campaign to influence the outcome.  The ‘leave’ leadership had been scaring voters with horrific stories of evil brown people who will infiltrate the United Kingdom should the country remain in the EU.  I mean, I’ve seen more subtle propaganda coming out of North Korea.

 

Meanwhile the ‘remain’ side had been threatening eternal economic damnation and financial Armageddon.  Most of the political and media establishment falls in the ‘remain’ camp, so this is where the propaganda becomes painfully obvious.

 

The IMF, for example, published a report recently suggesting that Britain leaving the EU would permanently lower incomes in the United Kingdom.

 

Really? Permanently?

 

So if voters choose to leave the EU, then the UK, which traces its sovereignty back more than 1,000 years and once had an empire so vast they ruled the entire world, will never be able to recover forever and ever until the end of time…?

 

We’re honestly supposed to believe that a few decades within the European Union has irrevocably thwarted Britain’s 1,000 year history in being able to achieve economic growth independently?  Or that Iceland (not a member of the European Union) can do it, but the UK cannot?

 

Or that a bunch of IMF bureaucrats can see decades, let alone centuries into the future with 100% certainty?  This is such blatant scaremongering, they’re not even pretending to be professional and unbiased. And this is direct from one of the top financial agencies in the world.

 

Clearly these people truly love democracy and embrace the idea of voters independently determining their own fate.  The British government (firmly in the ‘remain’ camp) has been using taxpayer funds to support its cause, which is really bizarre when you think about it.

 

If you’re British, even if you want to vote ‘leave’, the government has been using your money to influence your vote in the other direction.  One of the most absurd scare tactics has been telling people that they’ll lose visa-free travel rights to the European continent if the UK leaves the EU.

 

This is completely absurd.

 

Nicaragua has visa-free travel to Europe. Paraguay has visa-free travel to Europe. Are we really supposed to believe that Brits will be shut off from the continent?  They’ve rolled out every possible threat, every human emotion, every celebrity they can find, to influence voters.

 

In fact, these people love democracy so much they even had Barack Obama fly in to explain to British voters why they should remain in the EU.  (Because, of course, Mr. Obama would willingly hand over US sovereignty to a pan-American political commission based in Mexico City…)

 

Whichever side wins, it’s clear that no one in power gives a damn what voters want.  Despite having waged wars in foreign lands to ‘make the world safe for democracy’ and despite all the song and bombastic speech about your freedom, they have no respect for your right to self-determination, or even their own electoral system.

 

All they care about is getting their own way.  And they’re willing to engage in the most vile propaganda and blatant manipulation to do so.  This is a pitiful excuse for the democracy they claim to love so much.

 

And I’m not sure how long a road it is from here, to how Josef Stalin was quoted in his former secretary’s 1982 memoirs:

“Comrades, you know,” said Stalin, “I think that it’s totally irrelevant who votes, and how they vote. It’s extremely important who counts the votes, and how they’re counted.”

  

How Does this Effect Your Portfolio? 

The markets were clearly caught off guard: The decision immediately sent futures, currencies and commodities gyrating. And the Dow and S&P 500 both closed down more than 3% on Friday. On the other hand, gold soared more than 5% during the day as investors flocked to the safe-haven metal — great news for our gold positions, which I’ll speak more about in a moment.

Britain’s unexpected “leave” vote is an event that will continue to send aftershocks around the globe, and as investors it’s of upmost importance for us to follow how this plays out. In a nutshell, to answer all the correspondences I have received this past weekend, here is what happended and possibly what to expect in the future:

The majority of Brits voted to flee the European Union — and it stunned the world.

But that’s only because the world wasn't paying attention. The Brexit vote posed a greater risk to global well-being than the media and investors assumed. A Brexit exodus is sure to rip across the globe because even though Britain might be an island, the fallout isn't going to be contained singularly to its shores. 

As the ripples of Brexit spread across the world, a number of things happened on Friday: The dollar rallied more than 2%. The pound fell to levels not seen since 1985. The yen (a haven currency) sank below 100 to the dollar at one point, a sharp appreciation versus the buck. And Asian markets got slammed because of expectations that the strong dollar would create the environment that could lead to a currency crisis. Japan was down 8% at one point.

All of that happened overnight, and we can expect more to come. To name a few:

1. There's a very good chance that Brexit will do what Greece's debt crisis couldn't: tear apart the European Union. Far-right extremists, spurred by this decision, are now in pursuit of Frexit (in France), Italxit (in Italy) and Nexit (in the Netherlands). Germany’s right-wingers are sure to call for a split as well.
2. If nothing else, the dismantling of the United Kingdom is assured. Scotland, solidly in the “remain” camp, will, I guarantee, seek a new referendum on sovereignty, and it will succeed by a substantial margin. Northern Ireland will follow suit, and for the first time since 1921, the Irish isle will be unified. 
3. With the EU’s structural integrity in question, the euro’s very existence is now at risk.
4. The euro’s demise would mean the dollar has no peers — and investors the world over have no interest in holding a terminally incurable currency. They would rush into the dollar.
5. And a strong dollar would rip apart the American economy.

That’s a general overview of what we can expect, and it illuminates a clear path for the Federal Reserve. See, once the dominoes fall, the American economy will be in shambles. So now the probability of a rate cut here in America is much greater than a rate hike.

As for how your portfolio is handling the news, only you know, but those who are GGIS Portfolio subscribers ..we're in the green and are up since Fridays news and geared to profit even more as Britain's exodus from the EU continues to rip havoc around the world.  We’ve been positioning ourselves against fear in the markets for quite some time, and it’s put us in an excellent place to benefit as investors.  

If you aren't positioned as such in your portfolio ... what are you waiting on?  Become a GGIS subscriber YESTERDAY!!!

As always…feel free to pass this information on to anyone you think is interested in increasing their tax & financial IQ.

If you need a one-on-one consultation to learn how to implement these investments or any other tax or financial strategy mentioned in these newsletters, feel free to contact my office to setup an appointment.

Good Investing!

Ankh Uja Snb (Life, Health & Strength)
Asar Maa Ra Gray
Tax & Financial Consultant
G&G Associates
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          J. Carter


LEGAL NOTICE: This work is based on what I’ve learned as a financial researcher and analyst based SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. It may contain errors and you should not base investment decisions solely on what you read here.  It’s your money and your responsibility.  Nothing herein should be considered personalized investment advice.